<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 11, 1998
REGISTRATION NO. 333-53921
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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NEXTEL COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)
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DELAWARE 4812 36-3939651
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
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1505 FARM CREDIT DRIVE
MCLEAN, VIRGINIA 22102
(703) 394-3000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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THOMAS J. SIDMAN, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
NEXTEL COMMUNICATIONS, INC.
1505 FARM CREDIT DRIVE
MCLEAN, VIRGINIA 22102/(703) 394-3000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPIES TO:
LISA A. STATER, ESQ.
JONES, DAY, REAVIS & POGUE
3500 ONE SUNTRUST PLAZA/303 PEACHTREE STREET
ATLANTA, GEORGIA 30308
(404) 521-3939
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable following the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED JUNE 11, 1998
NEXTEL COMMUNICATIONS, INC.
OFFER TO EXCHANGE
9.95% SENIOR SERIAL REDEEMABLE DISCOUNT NOTES
DUE 2008
FOR
ANY AND ALL OUTSTANDING
9.95% SENIOR SERIAL REDEEMABLE DISCOUNT NOTES
DUE 2008
AND
OFFER TO EXCHANGE
11.125% SERIES E EXCHANGEABLE PREFERRED STOCK
MANDATORILY REDEEMABLE 2010
(EXCHANGEABLE AT THE OPTION OF NEXTEL)
FOR
ANY AND ALL OUTSTANDING
11.125% SERIES E EXCHANGEABLE PREFERRED STOCK
MANDATORILY REDEEMABLE 2010
(EXCHANGEABLE AT THE OPTION OF NEXTEL)
EACH OF THE EXCHANGE OFFERS
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME
ON JULY 16, 1998 UNLESS EXTENDED, IN EACH CASE
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Nextel Communications, Inc., a Delaware corporation ("Nextel" or the
"Company"), hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal (the
"Letter of Transmittal"), (i) to exchange (the "Senior Note Exchange Offer") its
9.95% Senior Serial Redeemable Discount Notes due 2008 (the "Exchange Senior
Notes"), which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), for an equal principal amount at maturity of its
outstanding 9.95% Senior Serial Redeemable Discount Notes due 2008 (the "Private
Notes"), of which $1,627,000,000 in principal amount at maturity was issued on
February 11, 1998 and is outstanding on the date hereof and (ii) to exchange
(the "Preferred Stock Exchange Offer") its 11.125% Series E Exchangeable
Preferred Stock (the "Exchange Preferred Stock"), which has been registered
under the Securities Act, for an equal number of its outstanding shares of
11.125% Series E Exchangeable Preferred Stock (the "Old Preferred Stock"). The
form and terms of the Exchange Senior Notes are identical in all material
respects to those of the Private Notes, except for certain transfer restrictions
and registration rights relating to the Private Notes and except for certain
interest provisions related to such registration rights. The form and terms of
the Exchange Preferred Stock are identical in all material respects to those of
the Old Preferred Stock, except for certain transfer restrictions and
registration rights relating to the Old Preferred Stock and except for certain
dividend provisions related to such registration rights. The Exchange Senior
Notes will evidence the same indebtedness as the Private Notes (which they
replace) and will be entitled to the benefits of an Indenture dated as of
February 11, 1998, governing the Private Notes and the Exchange Senior Notes
(the "Senior Notes Indenture"). The Exchange Senior Notes and the Private Notes
are sometimes referred to collectively as the "Notes." The Exchange Preferred
Stock will be entitled to the benefits of the Certificate of Designation, filed
with the Secretary of State of the State of Delaware on February 10, 1998
governing the Old Preferred Stock and the Exchange Preferred Stock (the
"Certificate of Designation"). The Exchange Preferred Stock and the Old
Preferred Stock are sometimes referred to herein as the "Preferred Stock." The
Private Notes and the Old Preferred Stock are sometimes referred to herein
collectively as the "Old Securities," and the Exchange Senior Notes and the
Exchange Preferred Stock are sometimes referred to herein collectively as the
"New Securities." The Senior Note Exchange Offer and the Preferred Stock
Exchange Offer are sometimes collectively referred to herein as the "Exchange
Offers." Each of the Senior Note Exchange Offer and the Preferred Stock Exchange
Offer is separate and distinct and is not conditioned upon the other.
Accordingly, the Company may take any permissible action with respect to one of
the Exchange Offers without taking similar action with respect to the other.
(continued on next page)
SEE "RISK FACTORS" COMMENCING ON PAGE 16 FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFERS AND AN INVESTMENT IN
THE EXCHANGE SENIOR NOTES AND EXCHANGE PREFERRED STOCK.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this Prospectus is June 11, 1998.
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(continued from previous page)
The Exchange Senior Notes will mature on February 15, 2008. Cash interest
will not accrue on the Exchange Senior Notes prior to February 15, 2003 and will
be payable on February 15 and August 15 of each year, commencing August 15,
2003, at a rate of 9.95% per annum. See "Description of Exchange Senior Notes"
and "Certain United States Federal Income Tax Considerations." The Exchange
Senior Notes will be redeemable, at the option of the Company at any time, in
whole or in part, on or after February 15, 2003, at the redemption prices set
forth herein, plus accrued and unpaid interest, if any, to the date of
redemption. See "Description of Exchange Senior Notes -- Optional Redemption."
In addition, in the event of one or more sales by the Company prior to February
15, 2001 of at least $125.0 million of its Capital Stock (as defined in
"Description of Exchange Senior Notes -- Certain Definitions"), up to a maximum
of 35% of the aggregate Accreted Value (as defined in "Description of Exchange
Senior Notes -- Certain Definitions") of outstanding Notes may be redeemed at
the Company's option within 180 days after such sale from the net cash proceeds
thereof at 109.95% of such Accreted Value to the date of redemption. Upon a
Change of Control (as defined in "Description of Exchange Senior
Notes -- Certain Definitions"), the Company will be required to make an offer to
purchase the Exchange Senior Notes at 101% of the Accreted Value thereof, or, in
the case of any such repurchase on or after February 15, 2003, 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of repurchase. There can be no assurance that the Company will have the
financial resources necessary to repurchase the Exchange Senior Notes upon a
Change of Control.
The Exchange Senior Notes will be senior unsecured indebtedness of the
Company, will rank pari passu in right of payment with all unsubordinated,
unsecured indebtedness of the Company, and will be senior in right of payment to
all subordinated indebtedness of the Company. As of March 31, 1998, after giving
pro forma effect to certain transactions described herein, the Company would
have had approximately $3,744.0 million of indebtedness outstanding (excluding
(i) guaranties of subsidiary indebtedness of $1,000.0 million (such guaranty
obligations would rank pari passu in right of payment with the Exchange Senior
Notes but the underlying guaranteed indebtedness is assumed to be satisfied from
the assets of the primary obligors), and (ii) trade payables and other accrued
liabilities) that ranks pari passu in right of payment with the Exchange Senior
Notes. The Company is a holding company that conducts substantially all of its
business through subsidiaries. The Exchange Senior Notes will be obligations of
the Company only, and its operating subsidiaries will have no obligation to pay
amounts due pursuant to the Exchange Senior Notes. The Exchange Senior Notes
will be effectively subordinated to all liabilities of the Company's
subsidiaries, including trade payables and other accrued liabilities. As of
March 31, 1998, after giving pro forma effect to certain transactions described
herein, the Company's subsidiaries would have had approximately $2,032.8 million
of indebtedness outstanding, excluding trade payables and other accrued
liabilities. The Company and its subsidiaries are expected to incur substantial
additional indebtedness in the next several years. See "Risk Factors -- Risk
Factors Relating to Nextel -- Nextel to Require Additional Financing," "The
Exchange Offers," and "Description of Exchange Senior Notes."
Dividends on the Exchange Preferred Stock will be cumulative from the date
of issuance and from the last dividend payment on the Old Preferred Stock, if
applicable, and are payable quarterly in cash or, on or prior to February 15,
2003, at the sole option of Nextel, in additional shares of Exchange Preferred
Stock, on each February 15, May 15, August 15, and November 15. Nextel is
required to redeem the Exchange Preferred Stock at the liquidation preference of
$1,000 per share, plus accrued and unpaid dividends, on February 15, 2010. The
Exchange Preferred Stock will be redeemable in whole or in part, at the option
of Nextel, at any time after December 15, 2005, and, in certain circumstances,
after February 15, 2003 at the redemption prices set forth herein. The Exchange
Preferred Stock will be exchangeable, in whole but not in part, at the option of
Nextel at any time after December 15, 2005 and in certain circumstances sooner,
into 11.125% Senior Subordinated Debentures due 2010 (the "Exchange Debentures")
of Nextel. If issued, the Exchange Debentures will be redeemable, in whole or in
part, at the option of Nextel, at any time on or after February 15, 2003, at the
redemption prices set forth herein. In addition, in certain circumstances, up to
35% of the then outstanding Exchange Preferred Stock or Exchange Debentures may
be redeemed on or prior to February 15, 2001, at the option of Nextel, at
111.125% of the liquidation preference or principal amount
(ii)
<PAGE> 4
thereof, as the case may be, plus accrued and unpaid dividends or interest, as
the case may be, from the proceeds of one or more sales of Nextel's common
stock.
The Company will accept for exchange any and all Old Securities which are
properly tendered in the Exchange Offers and not withdrawn prior to 5:00 p.m.,
New York City time, on July 16, 1998, (such date if and as it may be extended,
the "Expiration Date"). The Company may, in its sole discretion, extend the
Expiration Date of or terminate either of the Exchange Offers without extending
the Expiration Date of or terminating the other. Tenders of Old Securities may
be withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date. In the event the Exchange Offers are terminated, the Old
Securities not accepted for exchange will be returned without expense to the
tendering holders as promptly as practicable thereafter. See "The Exchange
Offers."
Based on a previous interpretation by the staff of the Securities and
Exchange Commission (the "Commission") set forth in no-action letters to third
parties, including "Exxon Capital Holdings Corporation" (available May 13,
1988), "Morgan Stanley & Co. Incorporated" (available June 5, 1991) (the "Morgan
Stanley Letter"), "Mary Kay Cosmetics, Inc." (available June 5, 1991), "Warnaco,
Inc." (available October 11, 1991), and "K-III Communications Corp." (available
May 14, 1993), the Company believes that the New Securities issued pursuant to
the Exchange Offers in exchange for the Old Securities may be offered for
resale, resold, and otherwise transferred by a holder thereof (other than (i) a
broker-dealer who purchased such New Securities directly from the Company or
(ii) a person that is an affiliate of the Company (within the meaning of Rule
405 under the Securities Act)), without compliance with the registration and
prospectus delivery requirements of the Securities Act; provided, that the
holder is acquiring the New Securities in the ordinary course of its business
and is not participating, does not intend to participate, and has no arrangement
or understanding with any person to participate, in the distribution of the New
Securities. Holders of Old Securities wishing to accept the Exchange Offers must
represent to the Company that such conditions have been met. Holders of Old
Securities who tender their Old Securities in the Exchange Offers with the
intention to participate in a distribution of the New Securities may not rely
upon the Morgan Stanley Letter or other similar letters.
Each broker-dealer that receives New Securities for its own account
pursuant to the Exchange Offers must acknowledge that it will deliver a
prospectus in connection with any resale of such New Securities. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act, in connection with such resales of New Securities
received in exchange for Old Securities where such Old Securities were acquired
by such broker-dealer as a result of market-making activities or other trading
activities. Nextel has agreed, subject to certain conditions, that, for a period
of 90 days after the Expiration Date, it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
Nextel believes that none of the registered holders of the Old Securities
is an affiliate (as such term is defined in Rule 405 under the Securities Act)
of Nextel. Prior to these Exchange Offers, there has been no public market for
the Old Securities. The Old Securities have traded on the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") market. Nextel does
not intend to list the New Securities on any securities exchange. There can be
no assurance that an active market for the New Securities will develop. To the
extent that a market for the New Securities does develop, the market value of
the New Securities will depend on market conditions (including yields on
alternative investments), general economic conditions, Nextel's financial
condition and other conditions. Such conditions may cause the Exchange Senior
Notes, to the extent actively traded, to trade at a significant discount from
their accreted value. Nextel has not entered into any arrangement or
understanding with any person to distribute the New Securities to be received in
the Exchange Offers.
Holders of Old Securities whose Old Securities are not tendered and
accepted in the Exchange Offers will continue to hold such Old Securities.
Following consummation of the Exchange Offers, the holders of Old Securities
will continue to be subject to the existing restrictions upon transfer thereof,
and the Company will
(iii)
<PAGE> 5
have no further obligation to such holders to provide for the registration under
the Securities Act of the Old Securities held by them.
The Company will not receive any proceeds from, and has agreed to bear all
registration expenses of, the Exchange Offers. No underwriter is being used in
connection with the Exchange Offers. See "The Exchange Offers -- Resale of New
Securities."
(iv)
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TABLE OF CONTENTS
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AVAILABLE INFORMATION....................................... vii
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE........... vii
SUMMARY..................................................... 1
The Company............................................... 1
The Exchange Offers....................................... 3
The Exchange Senior Notes................................. 6
The Exchange Preferred Stock.............................. 8
The Exchange Debentures................................... 10
No Cash Proceeds to the Company........................... 12
Risk Factors.............................................. 12
Summary Financial Data.................................... 13
RISK FACTORS................................................ 16
Risk Factors Relating to Nextel........................... 16
Risk Factors Related to New Securities and Exchange
Offers................................................. 27
Forward Looking Statements................................ 32
THE EXCHANGE OFFERS......................................... 33
Purpose and Effect of the Exchange Offers................. 33
Resale of the New Securities.............................. 33
Terms of the Exchange Offers.............................. 34
Expiration Date; Extensions; Amendments................... 35
Conditions................................................ 36
Procedures for Tendering.................................. 36
Book-Entry Transfer....................................... 39
Guaranteed Delivery Procedures............................ 39
Withdrawal of Tenders..................................... 39
Termination of Certain Rights............................. 40
Note Exchange Agent; Preferred Exchange Agent............. 40
Fees and Expenses......................................... 41
Consequences of Failure to Exchange....................... 41
Accounting Treatment...................................... 42
Tax Consequences.......................................... 42
DESCRIPTION OF EXCHANGE SENIOR NOTES........................ 42
Certain Definitions....................................... 42
General................................................... 56
Optional Redemption....................................... 57
Change of Control......................................... 57
Certain Covenants......................................... 58
Events of Default......................................... 63
Defeasance and Covenant Defeasance........................ 64
Modification and Waiver................................... 65
No Personal Liability of Incorporators, Stockholders,
Officers, Directors or Employees....................... 65
Concerning the Trustee.................................... 65
Book-Entry; Delivery and Form............................. 66
Certificated Notes........................................ 67
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(v)
<PAGE> 7
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DESCRIPTION OF EXCHANGE PREFERRED STOCK..................... 67
General................................................... 67
Ranking................................................... 68
Dividends................................................. 68
Optional Redemption....................................... 69
Mandatory Redemption...................................... 70
Change of Control......................................... 70
Liquidation Preference.................................... 71
Voting Rights............................................. 71
Certain Definitions....................................... 73
Certain Covenants......................................... 86
Exchange.................................................. 91
Book-Entry; Delivery and Form............................. 93
Certificated Exchange Preferred Stock..................... 94
DESCRIPTION OF EXCHANGE DEBENTURES.......................... 94
The Exchange Debentures................................... 94
General................................................... 94
Subordination............................................. 95
Optional Redemption....................................... 96
Change of Control......................................... 97
Certain Covenants......................................... 97
Events of Default......................................... 103
Defeasance and Covenant Defeasance........................ 104
Modification and Waiver................................... 105
No Personal Liability of Incorporators, Stockholders,
Officers, Directors or Employees....................... 105
Concerning the Trustee.................................... 105
TERMS OF EXISTING NEXTEL PREFERRED STOCK.................... 105
General................................................... 105
Class A Preferred Stock................................... 106
Class B Preferred Stock................................... 107
Class C Preferred Stock................................... 107
Series D Preferred Stock.................................. 107
Series E Preferred Stock.................................. 107
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS..... 107
Exchange Offers........................................... 108
Taxation of U.S. Holders.................................. 108
Taxation of Non-U.S. Holders.............................. 118
PLAN OF DISTRIBUTION........................................ 121
LEGAL MATTERS............................................... 121
EXPERTS..................................................... 122
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(vi)
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (collectively, the "Exchange Act") and, in accordance therewith,
files reports, proxy statements, and other information with the Commission. The
reports, proxy statements, and other information filed by the Company with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549, and at the Commission's Regional Offices at 65
Park Place, Room 1288, New York, New York 10017, and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
also may be obtained by mail from the Public Reference Section of the
Commission, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Additionally, the Commission maintains a Web site on the
Internet (located at http://www.sec.gov.) that contains reports, proxy and
information statements, and other information regarding registrants that file
electronically with the Commission.
The Company has filed with the Commission a Registration Statement on Form
S-4 (including the exhibits and amendments thereto, the "Registration
Statement") pursuant to the requirements of the Securities Act with respect to
the New Securities offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement, certain portions of which
are omitted in accordance with the rules and regulations of the Commission and
to which reference is hereby made. Statements made in this Prospectus as to the
contents of any contract, agreement, or other document referred to herein are
not necessarily complete. With respect to each such contract, agreement, or
other document filed or incorporated by reference as an exhibit to the
Registration Statement or as an exhibit to documents incorporated by reference
in this Prospectus (see "Incorporation of Certain Information By Reference"),
reference is made to the respective exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. Copies of the Registration Statement together with
exhibits may be inspected at the office of the Commission in Washington, D.C.
without charge, and copies thereof may be obtained therefrom upon payment of a
prescribed fee.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES IN ANY JURISDICTION TO OR
FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION
IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THIS PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE)
ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON TO WHOM THIS PROSPECTUS IS DELIVERED
UPON WRITTEN OR ORAL REQUEST. REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO
NEXTEL COMMUNICATIONS, INC., 1505 FARM CREDIT DRIVE, MCLEAN, VIRGINIA 22102,
ATTENTION: INVESTOR RELATIONS, TELEPHONE: (703) 394-3500. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY JULY 9, 1998.
The information in the following documents filed by the Company with the
Commission (File No. 0-19656) pursuant to the Exchange Act is incorporated by
reference in this Prospectus:
(i) Annual Report on Form 10-K for the year ended December 31, 1997
filed with the Commission on March 30, 1998;
(ii) Quarterly Report on Form 10-Q for the quarter ended March 31,
1998 dated and filed with the Commission on May 13, 1998;
(vii)
<PAGE> 9
(iii) Current Reports on Form 8-K: (a) dated and filed with the
Commission on February 2, 1998, (b) dated and filed with the Commission on
February 9, 1998 and (c) dated and filed with the Commission on February
12, 1998; and
(iv) Proxy Statement, dated as of April 10, 1998, filed in definitive
form on April 10, 1998 with the Commission with respect to the information
required to be included herein by Items 401 (management), 402 (executive
compensation), 403 (beneficial ownership) and 404 (certain relationships
and related transactions) of Regulation S-K promulgated under the
Securities Act and the Exchange Act.
All documents filed by Nextel pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the Exchange Offers shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents.
Any statements made herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document that is also incorporated or deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The information relating to Nextel contained in this Prospectus should be
read together with the information in the documents incorporated by reference.
(viii)
<PAGE> 10
SUMMARY
The following summary should be read in conjunction with, and is qualified
in its entirety by, the more detailed information and financial statements,
including the notes thereto, included or incorporated by reference into this
Prospectus.
On July 28, 1995, NEXTEL Communications, Inc., a corporation organized
under the laws of the State of Delaware in 1987 ("Old Nextel"), was merged with
ESMR, Inc. ("ESMR"), until then a wholly owned subsidiary of Motorola, Inc.
("Motorola"). ESMR was the surviving corporation in the merger (the "Motorola
Transaction") and succeeded to Old Nextel's assets and liabilities. ESMR changed
its name to Nextel Communications, Inc.,("Nextel" or the "Company") effective
upon 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 Nextel are intended to include Nextel
Communications, Inc. and its consolidated subsidiaries.
Information contained herein gives effect to the acquisition of
approximately 1,220,000 shares of Nextel's Class A Common Stock, par value
$0.001 per share (the "Common Stock"), by Digital Radio L.L.C. (the "McCaw
Investor") on April 5, 1995, an additional acquisition of 8,163,265 shares of
Nextel's Class A Convertible Redeemable Preferred Stock, par value $0.01 per
share (the "Class A Preferred Stock"), and 82 shares of Nextel's Class B
Convertible Preferred Stock, par value $0.01 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 with
and into Nextel on July 28, 1995, the consummation of the Motorola Transaction
on July 28, 1995, the merger of a subsidiary of Nextel with American Mobile
Systems Incorporated on July 31, 1995, the merger of Dial Page, Inc. with and
into Nextel on January 30, 1996, and the merger of a subsidiary of the Company
with Pittencrieff Communications, Inc. on November 12, 1997.
THE COMPANY
OVERVIEW
Nextel provides a wide array of digital and analog wireless communications
services throughout the United States. The Company offers a differentiated,
integrated package of digital wireless communications services under the Nextel
brand name, primarily to business users, and as of March 31, 1998, provided
service to approximately 1,641,500 digital subscriber units in the United
States. The Company's digital network constitutes one of the largest integrated
wireless communications systems utilizing a single transmission technology in
the United States. At March 31, 1998, the Company's digital network provided
coverage in or around 78 of the top 100 metropolitan statistical areas ("MSAs")
in the United States. In addition to its digital networks, Nextel also operates
analog wireless networks which provide analog specialized mobile radio ("SMR")
services throughout the continental United States and in Hawaii to approximately
493,600 analog SMR subscriber units as of March 31, 1998. Nextel has significant
SMR spectrum holdings in and around every major business and population center
in the country, including all of the top 50 MSAs in the United States. Nextel's
digital network in the United States has been developed to replace its remaining
traditional analog SMR systems with advanced mobile communications systems
employing digital technology with a multi-site configuration permitting
frequency reuse ("Digital Mobile network"). Since 1994, the number of digital
subscriber units in service has increased significantly, reflecting the
commencement of Digital Mobile network service in certain markets, increased
sales in markets in which Digital Mobile network services are provided and, to a
limited extent, acquisitions. The following table summarizes the approximate
number of digital subscriber units in service in the United States at the dates
indicated:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------------------- ---------
1994 1995 1996 1997 1998
------ ------ ------- --------- ---------
<S> <C> <C> <C> <C> <C>
Digital subscriber units................ 13,500 85,000 300,300 1,270,700 1,641,500
</TABLE>
1
<PAGE> 11
A customer using Nextel's Digital Mobile network is able to access mobile
telephone services, two-way dispatch (which provides instant conferencing
capabilities and is marketed as Nextel's "Direct Connect"(SM) service), paging
and alphanumeric short-messaging service and, in the future, is expected to be
able to access data transmission. Nextel is implementing its Digital Mobile
network utilizing digital technology developed by Motorola (such technology is
referred to as the "integrated Digital Enhanced Network" or "iDEN"(TM)).
In addition, the Company operates or has investments in international
wireless companies through its indirect, wholly owned subsidiary Nextel
International, Inc. (formerly known as McCaw International, Ltd.; "Nextel
International"). Nextel International's subsidiaries or other entities in which
Nextel International holds equity or equivalent interests own and operate
wireless communications systems in Latin America, Asia and Canada and (together
with Nextel's domestic Digital Mobile network operations) provide service in
twelve of the world's 25 largest cities. The Company's consolidated financial
statements include financial information reflecting the assets, liabilities and
results of operations relating to Nextel International and its consolidated
subsidiaries as of the relevant dates or for periods indicated therein.
Additional, more detailed and focused information relating to Nextel
International may be found in the periodic and other reports filed by Nextel
International with the Commission pursuant to rules under the Exchange Act.
Except as noted above and as otherwise expressly indicated herein, the
description of the Company's business herein refers to the Company's United
States operations.
Nextel's principal executive and administrative facility is located at 1505
Farm Credit Drive, McLean, Virginia 22102, and its telephone number is
(703)394-3000.
1998 BUSINESS PLAN
In early 1997, Nextel finalized and began implementing a business plan (the
"1997 Plan") for the period from March 31, 1997 through December 31, 1998 (the
"Plan Period") that contemplated an accelerated build-out of its Digital Mobile
network in the United States incorporating the modified version of the iDEN
technology ("Reconfigured iDEN"). During 1997, Nextel achieved a significant
expansion of its Digital Mobile network and experienced a large increase in the
number of digital subscriber units in service and system minutes of use. This
growth resulted in greater capital expenditures and net cash used in Digital
Mobile network operations in the final three quarters of 1997 than estimated for
purposes of developing the 1997 Plan. The Company has updated and revised its
business plan for its domestic operations, as it relates to 1998, in light of
its results and experience in building out and commercializing its Digital
Mobile network in 1997 (the "1998 Plan"). Nextel's 1998 Plan contemplates
further expansion of the Company's Digital Mobile network in a manner that is
directed at achieving additional penetration in its business customer target
base in markets where the Digital Mobile network is currently operating, at
selecting and prioritizing additional markets for expansion of Digital Mobile
network coverage by Nextel during 1998, and at enhancing the quality and
performance of its Digital Mobile wireless services offerings to maintain and
strengthen Nextel's competitive position relative to other existing and emerging
providers of digital wireless services in the United States.
The increased funding requirements reflected in the 1998 Plan include (i) a
$1,050.0 million increase in total system infrastructure and capital costs over
the $1,450.0 million in such costs that were contemplated by the 1997 Plan for
the Plan Period and (ii) a $500.0 million increase in non-system capital
expenditures and operating losses over the $1,050.0 million of such expenditures
and losses that were contemplated by the 1997 Plan for the Plan Period. The 1998
Plan contemplates that the Company's funding requirements for system and
non-system capital expenditures for 1998 will be approximately $1,496.0 million
as compared to the approximately $1,452.5 million in funding used for such
purposes during 1997. Such actual and contemplated capital expenditures exclude
capital expenditures relating to international operations and capitalized
interest relating to the Company's domestic and international operations for the
respective periods. During the quarter ended March 31, 1998, capital
expenditures relating to the Company's domestic operations (excluding
capitalized interest) were approximately $490.1 million. The level of domestic
capital expenditures during such quarter was consistent with the 1998 Plan. The
levels of capital expenditures that will be incurred by the Company in the
remainder of 1998 are subject to certain risks and uncertainties identified or
referred to
2
<PAGE> 12
elsewhere in this Prospectus. See "Risk Factors -- Risk Factors Relating to
Nextel -- Nextel to Require Additional Financing" and "-- Forward Looking
Statements."
THE EXCHANGE OFFERS
THE SENIOR NOTE EXCHANGE
OFFER.................... The Company is offering to exchange Exchange Senior
Notes for an equal principal amount at maturity of
Private Notes that are properly tendered and
accepted in the Senior Note Exchange Offer. The
Company will issue Exchange Senior Notes on or as
promptly as practicable after the Expiration Date.
As of the date hereof, $1,627,000,000 in principal
amount at maturity of Private Notes is outstanding.
See "The Exchange Offers."
THE PREFERRED STOCK
EXCHANGE OFFER........... The Company is offering to exchange one share of
Exchange Preferred Stock for each share of Old
Preferred Stock that is properly tendered and
accepted in the Preferred Stock Exchange Offer. The
Company will issue the Exchange Preferred Stock on
or as promptly as practicable after the Expiration
Date. There are currently 771,786 shares of Old
Preferred Stock outstanding. See "The Exchange
Offers."
RESALE OF NEW SECURITIES... Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to
third parties, including "Exxon Capital Holdings
Corporation" (available May 13, 1988), the Morgan
Stanley Letter, "Mary Kay Cosmetics, Inc."
(available June 5, 1991), "Warnaco, Inc."
(available October 11, 1991), and "K-III
Communications Corp." (available May 14, 1993), the
Company believes that New Securities issued
pursuant to the Exchange Offers in exchange for Old
Securities may be offered for resale, resold or
otherwise transferred by any holder thereof (other
than any such holder that is an "affiliate" of the
Company within the meaning of Rule 405 under the
Securities Act) without compliance with the
registration and prospectus delivery provisions of
the Securities Act, provided that such New
Securities are acquired in the ordinary course of
such holder's business and that such holder has no
arrangement or understanding with any person to
participate in the distribution of such New
Securities. Holders of Old Securities who tender
their Old Securities in the Exchange Offers with
the intention to participate in a distribution of
the New Securities may not rely upon the Morgan
Stanley Letter or other similar letters. In the
event that the Company's belief regarding resale is
inaccurate, holders of New Securities who transfer
New Securities in violation of the prospectus
delivery provisions of the Securities Act and
without an exemption from registration thereunder
may incur liability thereunder. The Company does
not assume or indemnify holders against such
liability. The Exchange Offers are not being made
to, nor will Nextel accept surrenders for exchange
from, holders of Old Securities (i) in any
jurisdiction in which the Exchange Offers or the
acceptance thereof would not be in compliance with
the securities or blue sky laws of such
jurisdiction or (ii) if any holder is engaged or
intends to engage in a distribution of the New
Securities. Each broker-dealer that receives New
Securities for its own account in exchange for Old
Securities, where such Old Securities were acquired
by such broker-dealer as a result of market-making
activities or other trading activities, must, among
other things, acknowledge that it
3
<PAGE> 13
will deliver a prospectus in connection with any
resale of such New Securities. The Company has not
entered into any arrangement or understanding with
any person to distribute the New Securities to be
received in the Exchange Offers. See "The Exchange
Offers -- Resale of the New Securities" and "Plan
of Distribution."
TERMINATION OF CERTAIN
RIGHTS................... On February 11, 1998, the Private Notes were sold
by the Company to Morgan Stanley & Co.
Incorporated, Chase Securities Inc., TD Securities
(USA) Inc., J.P. Morgan Securities Inc. and
NationsBanc Montgomery Securities LLC, as placement
agents for the offering of the Private Notes (the
"Private Note Placement Agents") and the Old
Preferred Stock was sold by the Company to Morgan
Stanley & Co. Incorporated, Donaldson, Lufkin &
Jenrette Securities Corporation and Credit Suisse
First Boston Corporation, as placement agents for
the offering of the Old Preferred Stock (the "Old
Preferred Stock Placement Agents" and, collectively
with the Private Note Placement Agents, the
"Placement Agents") pursuant to respective
Placement Agreements, dated February 6, 1998 (the
"Placement Agreements"), by and among the Company
and the Placement Agents. Pursuant to the Placement
Agreements, the Company and the Placement Agents
entered into the related Registration Rights
Agreements dated February 11, 1998 (the
"Registration Rights Agreements"). All rights under
the Registration Rights Agreements accorded to
holders of Old Securities will terminate upon the
consummation of the Exchange Offers except with
respect to the Company's duty to keep the
Registration Statement effective until closing of
the Exchange Offers and, subject to certain
conditions, for a period not to exceed 90 days
after the Expiration Date, to provide copies of the
latest version of the Prospectus to any
broker-dealer that requests copies for use in
connection with resales of New Securities acquired
for its own account as a result of market-making or
other trading activities. See "The Exchange
Offers -- Termination of Certain Rights."
EXPIRATION DATE............ The Exchange Offers will expire at 5:00 p.m., New
York City time, on July 16, 1998, unless the
Exchange Offers are extended by the Company in its
sole discretion, in which case the term "Expiration
Date" shall mean the latest date and time to which
the Exchange Offers are extended. The Company may,
in its discretion, extend the Expiration Date of or
terminate either of the Exchange Offers without
extending the Expiration Date of or terminating the
other. See "The Exchange Offers -- Expiration Date;
Extensions; Amendments."
CONDITIONS TO THE EXCHANGE
OFFERS................... The Company may terminate either of the Exchange
Offers if it determines that its ability to proceed
with such exchange offer would be materially
impaired due to any legal or governmental action,
any new law, statute, rule or regulation, any
interpretation by the staff of the Commission of
any existing law, statute, rule or regulation, or
the failure to obtain any necessary approvals of
governmental agencies or holders of the applicable
Old Securities. The Company does not expect any of
the foregoing conditions to occur, although there
can be no assurance that such conditions will not
occur. See "The Exchange Offers -- Conditions."
4
<PAGE> 14
PROCEDURES FOR TENDERING
PRIVATE NOTES AND OLD
PREFERRED STOCK.......... Each holder of Old Securities wishing to accept the
Exchange Offers must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with such Private Notes or such Old Preferred
Stock, as the case may be, and any other required
documentation to Harris Trust and Savings Bank, as
exchange agent for the Notes (the "Note Exchange
Agent"), or to First Chicago Trust Company of New
York, as exchange agent for the Preferred Stock
(the "Preferred Exchange Agent"), at the addresses
set forth herein. By executing the Letter of
Transmittal, the holder will represent to and agree
with the Company that, among other things, (i) the
New Securities to be acquired by such holder of Old
Securities in connection with the Exchange Offers
are being acquired by such holder in the ordinary
course of its business, (ii) such holder is not
participating, does not intend to participate and
has no arrangement or understanding with any person
to participate in a distribution of the New
Securities and (iii) such holder is not an
"affiliate," as defined in Rule 405 under the
Securities Act, of the Company. If the holder is a
broker-dealer that will receive New Securities for
its own account in exchange for Old Securities that
were acquired as a result of market-making or other
trading activities, such holder will be required to
acknowledge in the Letter of Transmittal that such
holder will deliver a prospectus in connection with
any resale of such New Securities; however, by so
acknowledging and by delivering a prospectus, such
holder will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities
Act. See "The Exchange Offers -- Procedures for
Tendering."
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS........ Any beneficial owner whose Old Securities are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender such Old Securities in the
Exchange Offers should contact such registered
holder promptly and instruct such registered holder
to tender on such beneficial owner's behalf. If
such beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to
completing and executing the Letter of Transmittal
and delivering such owner's Old Securities, either
make appropriate arrangements to register ownership
of the Old Securities in such owner's name or
obtain a properly completed bond or stock power
from the registered holder. The transfer of
registered ownership may take considerable time and
may not be able to be completed prior to the
Expiration Date. See "The Exchange
Offers -- Procedures for Tendering."
GUARANTEED DELIVERY
PROCEDURES............... Holders of Old Securities who wish to tender their
Old Securities and whose Old Securities are not
immediately available or who cannot deliver their
Old Securities, the Letter of Transmittal or any
other documentation required by the Letter of
Transmittal to the Note Exchange Agent or the
Preferred Exchange Agent, as the case may be, prior
to the Expiration Date, must tender their Old
Securities according to the guaranteed delivery
procedures set forth under "The Exchange
Offers -- Guaranteed Delivery Procedures."
5
<PAGE> 15
ACCEPTANCE OF THE OLD
SECURITIES AND DELIVERY OF
THE NEW SECURITIES....... Upon consummation of the Exchange Offers, the
Company will accept for exchange any and all Old
Securities that are properly tendered and not
withdrawn in the Exchange Offers prior to 5:00
p.m., New York City time, on the Expiration Date.
See "The Exchange Offers -- Terms of the Exchange
Offers."
FEES AND EXPENSES.......... Nextel will not receive any proceeds from, and has
agreed to bear the expenses of, the Exchange
Offers. The Company will also pay certain transfer
taxes applicable to the Exchange Offers. See "The
Exchange Offers -- Fees and Expenses."
EFFECT OF NOT TENDERING OLD
SECURITIES FOR
EXCHANGE................. Old Securities that are not tendered or that are
not properly tendered will, following the
expiration of the Exchange Offers, continue to be
subject to the existing restrictions upon transfer
thereof. The Company will have no further
obligations to provide for the registration under
the Securities Act of such Old Securities and such
Old Securities will, following the expiration of
the Exchange Offers, bear interest or accrue
dividends, as the case may be, at the same rate and
in the same manner as the New Securities.
WITHDRAWAL RIGHTS.......... Tenders of Old Securities may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the
Expiration Date. See "The Exchange
Offers -- Withdrawal of Tenders."
CERTAIN FEDERAL TAX
CONSIDERATIONS........... For a discussion of certain United States federal
income tax considerations relating to the Exchange
Offers and the ownership and disposition of the New
Securities, see "Certain United States Federal
Income Tax Considerations."
NOTE EXCHANGE AGENT........ Harris Trust and Savings Bank is serving as the
Note Exchange Agent. The address and telephone
number of the Note Exchange Agent are set forth in
"The Exchange Offers -- Note Exchange Agent;
Preferred Exchange Agent." Harris Trust and Savings
Bank also serves as trustee (the "Trustee") under
the Senior Notes Indenture.
PREFERRED EXCHANGE AGENT... First Chicago Trust Company of New York is serving
as the Preferred Exchange Agent. The address and
telephone number of the Preferred Exchange Agent
are set forth in "The Exchange Offers -- Note
Exchange Agent; Preferred Exchange Agent." First
Chicago Trust Company of New York also serves as
transfer agent for the Preferred Stock.
THE EXCHANGE SENIOR NOTES
NOTES OFFERED.............. $1,627,000,000 principal amount at maturity of
Senior Serial Redeemable Discount Notes due 2008.
MATURITY DATE.............. February 15, 2008.
YIELD AND INTEREST......... 9.95% per annum (computed on a semi-annual bond
equivalent basis) calculated from February 11,
1998. Cash interest will not accrue on the Notes
prior to February 15, 2003. Thereafter, cash
interest on the Notes will be payable at a rate of
9.95% per annum, semi-annually in arrears on each
February 15 and August 15 (each, an "Interest
Payment Date"),
6
<PAGE> 16
commencing August 15, 2003. Cash interest on the
Exchange Senior Notes shall accrue from the most
recent Interest Payment Date with respect to the
Private Notes to which interest was paid or duly
provided for, or if no interest has been paid or
duly provided for, from February 15, 2003. For
United States federal income tax purposes, U.S.
Holders (as defined herein) of the Notes will be
required to include amounts in gross income in
advance of the receipt of the cash payments to
which the income is attributable. See "Certain
United States Federal Income Tax Considerations."
OPTIONAL REDEMPTION........ On or after February 15, 2003, the Notes are
redeemable at the option of Nextel at any time, in
whole or in part, at the redemption prices set
forth herein, plus accrued and unpaid interest, if
any, to the redemption date. In the event of one or
more sales by the Company on or prior to February
15, 2001 of at least $125.0 million of its Capital
Stock (as defined herein) (other than Redeemable
Stock (as defined herein)), the Company may redeem
up to a maximum of 35% of the aggregate Accreted
Value (as defined herein) of the Notes at a
redemption price equal to 109.95% of such Accreted
Value on the date of redemption; provided that such
redemption occurs within 180 days after the
consummation of any such sale. See "Description of
Exchange Senior Notes -- Optional Redemption."
RANKING.................... The Exchange Senior Notes will be senior, unsecured
indebtedness of the Company, will rank pari passu
in right of payment with all unsubordinated,
unsecured indebtedness of the Company (including
the Private Notes, the five issues of Nextel's
Senior Redeemable Discount Notes outstanding prior
to 1997 (the "Old Senior Notes") and the two issues
of Nextel's Senior Redeemable Discount Notes issued
in 1997 (the "1997 Notes" and collectively with the
Old Senior Notes, the "Nextel Notes")) and will be
senior in right of payment to all subordinated
indebtedness of the Company. At March 31, 1998,
after giving pro forma effect to certain
transactions described herein, the Company would
have had approximately $3,744.0 million of
indebtedness outstanding (excluding (i) guaranties
of subsidiary indebtedness of $1,000.0 million
(such guaranty obligations would rank pari passu in
right of payment with the Notes but the underlying
guaranteed indebtedness is assumed to be satisfied
from the assets of the primary obligors) and (ii)
trade payables and other accrued liabilities) that
would rank pari passu in right of payment with the
Exchange Senior Notes. The Company is a holding
company that conducts substantially all of its
business through subsidiaries. Certain of the
Company's existing debt agreements restrict the
ability of its subsidiaries to pay dividends to
enable the Company to pay interest on the Notes.
The Notes will be effectively subordinated to all
current and future liabilities of the Company's
subsidiaries, including trade payables and other
accrued liabilities. Substantially all of such
subsidiary indebtedness presently is, and is
expected to be, secured by the assets of the
Company's subsidiaries and/or guaranteed by the
Company and its subsidiaries. At March 31, 1998,
after giving pro forma effect to certain
transactions described herein, the Company's
subsidiaries would have had approximately $2,032.8
million of indebtedness outstanding, excluding
trade payables and other accrued liabilities. Over
the next several years, the Company and its
subsidiaries expect to incur substantial additional
indebtedness.
7
<PAGE> 17
See "Risk Factors -- Risk Factors Relating to
Nextel -- Nextel to Require Additional Financing,"
" -- Risk Factors Related to New Securities and
Exchange Offers -- Dependence of Company on
Subsidiaries for Cash to Pay Dividends and
Interest, to Redeem Preferred Stock and for
Repayment of Notes and Exchange Debentures" and
" -- Effect of Holding Company Structure" and
"Description of Exchange Senior Notes -- Certain
Covenants -- Limitation on Consolidated Debt."
ORIGINAL ISSUE DISCOUNT.... The Private Notes were issued with an original
issue discount for United States Federal income tax
purposes. The Exchange Senior Notes should be
treated as a continuation of the Private Notes.
Consequently, U.S. Holders of Exchange Senior Notes
generally will be required to include amounts in
advance of receipt of the cash payments to which
the income is attributable for United States
federal income tax purposes. See "Certain United
States Federal Income Tax Considerations."
CERTAIN COVENANTS.......... The Senior Notes Indenture contains certain
covenants which, among other things, restrict the
ability of the Company and its restricted
subsidiaries to: (i) incur additional indebtedness;
(ii) pay dividends or make distributions in respect
of their capital stock, other than dividend,
penalty or other mandated payments on or in respect
of any class or series of the Company's currently
authorized and designated preferred stock (i.e.,
the Class A Preferred Stock, Class B Preferred
Stock, Nextel's Class C Convertible Redeemable
Preferred Stock, par value $.01 per share ("Class C
Preferred Stock"), Nextel's 13% Series D Preferred
Stock (the "Series D Preferred Stock") and the
Preferred Stock); (iii) make investments or make
certain other restricted payments; (iv) enter into
certain transactions with stockholders or
affiliates; and (v) consolidate, merge or sell all
or substantially all of its assets. See
"Description of Exchange Senior Notes -- Certain
Covenants."
CHANGE OF CONTROL.......... Upon a Change of Control (as defined herein),
Nextel will be required to make an offer to
purchase the Notes at a purchase price equal to
101% of the Accreted Value thereof, or, in the case
of any such purchase on or after February 15, 2003,
101% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the date of
purchase. There can be no assurance that the
Company will have sufficient funds available at the
time of any Change of Control to make any required
debt repayment (including repurchases of the
Notes). See "Description of Exchange Senior
Notes -- Change of Control."
THE EXCHANGE PREFERRED STOCK
SHARES OFFERED............. 771,786 shares of 11.125% Series E Exchangeable
Preferred Stock.
DIVIDENDS.................. Dividends are cumulative at 11.125% per annum, and
are payable quarterly in cash or, on or prior to
February 15, 2003, at the sole option of Nextel, in
additional shares of Preferred Stock, on each May
15, August 15, November 15 and February 15.
Dividends on the Exchange Preferred Stock will
accrue and be cumulative from the date of issuance
thereof and from the last dividend payment on the
Old Preferred Stock, if applicable. For United
States federal income tax purposes, distributions
with respect to the Exchange Preferred Stock are
not expected to qualify as dividends and will be
treated as a return of capital until Nextel has
earnings and profits as determined under applicable
United States
8
<PAGE> 18
federal income tax principles. See "Certain United
States Federal Income Tax Considerations."
LIQUIDATION PREFERENCE..... $1,000 per share, plus accrued and unpaid
dividends.
VOTING..................... Holders of the Exchange Preferred Stock will have
no voting rights except as provided by law and as
provided in Nextel's Restated Certificate of
Incorporation (the "Certificate of Incorporation")
or in the Certificate of Designation. In the event
that dividends are not paid for four consecutive
quarters or six quarters (whether or not
consecutive) or upon certain other events
(including failure to pay the mandatory redemption
price when due), then the number of directors
constituting Nextel's Board of Directors will be
adjusted to permit the holders of a majority of the
then outstanding Preferred Stock, voting separately
as a class, to elect two directors. See
"Description of Exchange Preferred Stock -- Voting
Rights."
MANDATORY REDEMPTION....... Nextel is required to redeem the Exchange Preferred
Stock on February 15, 2010 (subject to the legal
availability of funds therefor) at a redemption
price equal to the liquidation preference, plus
accrued and unpaid dividends to the redemption
date. See "Description of Exchange Preferred
Stock -- Mandatory Redemption."
OPTIONAL REDEMPTION........ After December 15, 2005 (the "Optional Redemption
Date"), the Exchange Preferred Stock is redeemable,
at the option of Nextel, in whole or in part;
provided that if prior to the Optional Redemption
Date the Company's Old Senior Notes are redeemed,
repurchased or repaid in full, the Exchange
Preferred Stock may be redeemed, subject to
contractual and other restrictions and compliance
with covenants contained in the indentures pursuant
to which the 1997 Notes were issued (the "1997
Indentures") and in the Senior Notes Indenture,
after February 15, 2003, at the redemption prices
set forth herein, plus accrued and unpaid dividends
to the redemption date. In addition, if the
Company's Old Senior Notes are redeemed,
repurchased or repaid in full, up to 35% of the
then outstanding Preferred Stock may be redeemed,
subject to compliance with covenants contained in
the 1997 Indentures and in the Senior Notes
Indenture, on or prior to February 15, 2001, at the
option of Nextel, at 111.125% of the liquidation
preference thereof, plus accrued and unpaid
dividends to the redemption date, with the proceeds
of one or more sales of its Common Stock; provided
that such redemption occurs within 180 days of any
such sale. See "Description of Exchange Preferred
Stock -- Optional Redemption."
RANKING.................... The Exchange Preferred Stock will rank (i) senior
to all common stock of Nextel and to all other
capital stock of Nextel (except as described in
clause (ii) below) unless the terms of such stock
expressly provide that it ranks senior to or on a
parity with the Exchange Preferred Stock; (ii) on a
parity (except for contingent dividend payment
amounts and a $25.0 million lump sum cash amount
constituting certain "Special Payments" on the
Company's Class A Preferred Stock and Class B
Preferred Stock, respectively, as described under
"Terms of Existing Nextel Preferred Stock") with
Nextel's currently outstanding classes of preferred
stock (and any other classes or series of Nextel
preferred stock into which such shares may be
converted or for which such shares may be
exchanged) and with any capital stock of Nextel the
terms of which expressly provide
9
<PAGE> 19
that it will rank on a parity with the Exchange
Preferred Stock; and (iii) junior to all preferred
stock of Nextel the terms of which expressly
provide that such stock will rank senior to the
Exchange Preferred Stock. As of the date hereof,
all outstanding common stock of Nextel ranks junior
to the Exchange Preferred Stock and all outstanding
preferred stock of Nextel ranks on a parity with
the Exchange Preferred Stock (except in the case of
the Special Payments, as to which the Exchange
Preferred Stock will rank junior). See "Description
of Exchange Preferred Stock -- Ranking."
OPTIONAL EXCHANGE
FEATURE.................. The Exchange Preferred Stock is exchangeable into
Exchange Debentures at any time at the option of
Nextel, in whole but not in part, after the
Optional Redemption Date, or earlier following the
redemption, repurchase or repayment of the Old
Senior Notes in full, subject to (i) such exchange
being permitted under Nextel's other instruments
and agreements governing indebtedness and (ii) the
conditions described therefor in the Certificate of
Designation being satisfied. See "Description of
Exchange Preferred Stock -- Exchange" and
"Description of Exchange Debentures."
CERTAIN COVENANTS.......... The Certificate of Designation contains certain
covenants which, among other things, restrict the
ability of the Company and its restricted
subsidiaries to: (i) incur additional indebtedness;
(ii) pay dividends or make distributions in respect
of their capital stock; (iii) make investments or
make certain other restricted payments; (iv) enter
into certain transactions with stockholders or
affiliates; (v) incur senior subordinated
indebtedness; and (vi) consolidate, merge or sell
all or substantially all of its assets. See
"Description of Exchange Preferred Stock -- Certain
Covenants."
CHANGE OF CONTROL.......... Upon a Change of Control (as defined herein to
occur no sooner than the Optional Redemption Date
or, if earlier, the day after the repurchase,
redemption or repayment of the Old Senior Notes in
full), Nextel will be required to make an offer to
purchase the Exchange Preferred Stock at a purchase
price equal to 101% of the liquidation preference
thereof, plus accrued dividends to the date of
purchase. See "Description of Exchange Preferred
Stock -- Change of Control."
THE EXCHANGE DEBENTURES
EXCHANGE DEBENTURES........ 11.125% Senior Subordinated Debentures due February
15, 2010 in an aggregate principal amount equal to
the aggregate liquidation preference of, and
accrued but unpaid dividends on, the Preferred
Stock outstanding on the Exchange Debenture Issue
Date (as defined herein).
INTEREST; INTEREST PAYMENT
DATES.................... Each Exchange Debenture will bear interest at the
dividend rate in effect with respect to the
Preferred Stock on the date the Exchange Debentures
are issued (the "Exchange Debenture Issue Date")
from the Exchange Debenture Issue Date or from the
most recent interest payment date to which interest
has been paid or provided for. Interest will be
payable semi-annually in cash (or, on or prior to
February 15, 2003, in additional Exchange
Debentures, at the option of the Company) in
arrears on each February 15 and August 15,
commencing with the first such date to occur after
the Exchange Debenture Issue Date. See "Certain
United
10
<PAGE> 20
States Federal Income Tax
Considerations -- Taxation of U.S.
Holders -- Exchange Debentures."
OPTIONAL REDEMPTION........ On or after February 15, 2003, the Exchange
Debentures are redeemable at the option of Nextel,
in whole or in part, at the redemption prices set
forth herein, plus accrued and unpaid interest to
the redemption date. In addition, at any time, or
from time to time, on or prior to February 15,
2001, Nextel may, at its option, redeem the then
outstanding Exchange Debentures having an aggregate
principal amount equal to up to 35% of the then
outstanding principal amount of the Exchange
Debentures at a redemption price equal to 111.125%
of the principal amount thereof, plus accrued and
unpaid interest to the redemption date, with the
proceeds of one or more sales of Common Stock;
provided that such redemption occurs within 180
days of any such sale. See "Description of Exchange
Debentures -- Optional Redemption."
RANKING.................... The Exchange Debentures will be senior subordinated
indebtedness of Nextel, (i) subordinated to the
prior payment when due of the principal of, and
premium, if any, and accrued and unpaid interest
on, all existing and future Senior Debt (as defined
herein) of Nextel (including indebtedness under
Nextel's existing bank credit facility, the Nextel
Notes, the Notes and any extension, refinancing or
replacement of any of such Senior Debt), (ii)
senior in right of payment to the prior payment
when due of the principal of, and premium, if any,
and accrued and unpaid interest on, all
indebtedness of Nextel, if any, that, by its terms,
provides that it is subordinated to the prior
payment when due of the principal of, and premium,
if any, and accrued and unpaid interest on, the
Exchange Debentures, and (iii) on a parity with all
other senior subordinated indebtedness of Nextel,
including, if issued, the subordinated debentures
into which the Series D Preferred Stock is
exchangeable (the "Series D Exchange Debentures").
See "Risk Factors -- Risk Factors Related to New
Securities and the Exchange Offers -- Ranking of
Preferred Stock and Exchange Debentures."
CERTAIN COVENANTS.......... The indenture under which the Exchange Debentures
will be issued (the "Exchange Indenture") will
contain certain covenants which, among other
things, will restrict the ability of the Company
and its restricted subsidiaries to: (i) incur
additional indebtedness; (ii) pay dividends or make
distributions in respect of their capital stock;
(iii) make investments or make certain other
restricted payments; (iv) enter into certain
transactions with stockholders or affiliates; (v)
incur senior subordinated indebtedness; and (vi)
consolidate, merge or sell all or substantially all
of its assets. See "Description of Exchange
Debentures -- Certain Covenants."
REGISTRATION
REQUIREMENTS............. The Exchange Debentures may not be issued unless
such issuance is registered under the Securities
Act or is exempt from registration.
CHANGE OF CONTROL.......... Upon a Change of Control (as defined herein),
Nextel will be required to make an offer to
purchase the Exchange Debentures at a purchase
price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest to the
date of purchase. See "Description of Exchange
Debentures -- Change of Control."
11
<PAGE> 21
NO CASH PROCEEDS TO THE COMPANY
The Company will not receive any proceeds from the issuance of the New
Securities offered hereby. The form and terms of the Exchange Senior Notes and
the Exchange Preferred Stock are identical in all material respects to the form
and terms of the Private Notes and the Old Preferred Stock, respectively, except
as otherwise described herein under "The Exchange Offers -- Terms of the
Exchange Offers." The Private Notes surrendered in exchange for Exchange Senior
Notes will be retired and canceled and cannot be reissued. Accordingly, issuance
of the Exchange Senior Notes will not result in any increase in the outstanding
indebtedness of the Company.
RISK FACTORS
See "Risk Factors," immediately following this Summary, for a discussion of
certain factors to be considered in evaluating Nextel, its business and an
investment in the New Securities.
12
<PAGE> 22
SUMMARY FINANCIAL DATA
The summary financial data set forth below for the periods indicated should
be read in conjunction with the consolidated financial statements, related notes
and other financial information appearing in Nextel's Annual Report on Form 10-K
for the year ended December 31, 1997 and Nextel's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1998, incorporated herein by reference. The
financial information for the fiscal year ended March 31, 1994, the nine months
ended December 31, 1994, and the years ended December 31, 1995, 1996 and 1997
have been derived from the audited consolidated financial statements of Nextel.
The report of Deloitte & Touche LLP, independent auditors, for each of the three
years in the period ended December 31, 1997 has been incorporated by reference.
See "Experts." The financial information for the three months ended March 31,
1997 and 1998 is derived from the unaudited financial statements of Nextel and,
in the opinion of Nextel, includes all adjustments, consisting only of normal
recurring accruals, considered necessary for the fair presentation of such
information. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year. See "Incorporation
of Certain Information By Reference."
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS THREE MONTHS ENDED
ENDED ENDED YEAR ENDED DECEMBER 31, MARCH 31,
MARCH 31, DECEMBER 31, ------------------------------------------ ---------------------------
1994 1994(1) 1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
(2):
Revenues................ $ 67,928 $ 74,857 $ 171,703 $ 332,938 $ 738,897 $ 110,676 $ 327,134
Cost of operations...... 28,666 51,406 151,718 247,717 284,549 58,161 102,428
Selling, general and
administrative
expenses.............. 41,107 85,077 193,321 330,256 865,791 132,376 329,739
Expenses related to
corporate
reorganization(3)..... -- -- 17,372 -- -- -- --
Depreciation and
amortization.......... 58,398 94,147 236,178 400,831 526,377 110,203 184,495
----------- ------------ ------------ ------------ ------------ ------------ ------------
Operating loss.......... (60,243) (155,773) (426,886) (645,866) (937,820) (190,064) (289,528)
Interest (expense),
net................... (18,101) (41,454) (89,509) (206,480) (378,032) (71,285) (131,027)
Other income (expense),
net(4)(5)............. 3 33 (15,372) (10,866) 6,511 1,063 53
Income tax (provision)
benefit............... 21,437 71,345 200,602 307,192 (258,726) 39,436 33,640
----------- ------------ ------------ ------------ ------------ ------------ ------------
Loss before
extraordinary item.... (56,904) (125,849) (331,165) (556,020) (1,568,067) (220,850) (386,862)
Extraordinary item...... -- -- -- -- (45,787) -- --
Preferred dividends..... -- -- -- -- (29,119) -- (28,088)
----------- ------------ ------------ ------------ ------------ ------------ ------------
Loss attributable to
common stockholders... $ (56,904) $ (125,849) $ (331,165) $ (556,020) $ (1,642,973) $ (220,850) $ (414,950)
=========== ============ ============ ============ ============ ============ ============
Basic and diluted loss
per share attributable
to common
stockholders:
Loss before
extraordinary item.... $ (0.73) $ (1.25) $ (2.31) $ (2.50) $ (6.41) $ (0.93) $ (1.53)
Extraordinary item...... -- -- -- -- (0.18) -- --
----------- ------------ ------------ ------------ ------------ ------------ ------------
Net loss per share
attributable to common
stockholders.......... $ (0.73) $ (1.25) $ (2.31) $ (2.50) $ (6.59) $ (0.93) $ (1.53)
=========== ============ ============ ============ ============ ============ ============
Number of shares used in
computations(6)....... 78,439,000 100,639,000 143,283,000 222,779,000 249,320,000 237,496,000 270,385,000
=========== ============ ============ ============ ============ ============ ============
OTHER FINANCIAL DATA:
Ratio of earnings to
fixed charges and
preferred stock
dividends(7).......... -- -- -- -- -- -- --
</TABLE>
13
<PAGE> 23
<TABLE>
<CAPTION>
AS OF
MARCH 31, 1998
AS OF ------------------------
AS OF DECEMBER 31, PRO FORMA
MARCH 31, ------------------------------------------------- AS
1994 1994 1995 1996 1997 ACTUAL ADJUSTED(8)
----------- ---------- ---------- ---------- ---------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents(9)........ $ 483,483 $ 301,679 $ 340,826 $ 139,681 $ 301,601 $1,505,289 $ 764,498
Marketable securities(10)........... 426,113 172,313 68,443 5,012 131,404 8,123 8,123
Current assets...................... 921,983 504,248 504,661 309,097 839,597 1,974,178 1,233,387
Intangible assets, net.............. 889,912 1,451,780 3,549,622 4,076,300 4,699,746 4,733,507 4,733,507
Total assets........................ 2,229,832 2,918,985 5,547,256 6,472,439 9,227,801 11,007,560 10,247,442
Long-term debt(11).................. 1,113,268 1,193,096 1,687,829 2,783,041 5,038,250 6,396,799 5,769,906
Redeemable preferred stock(12)...... -- -- -- -- 529,119 1,307,197 1,307,197
Stockholders' equity................ 846,304 1,268,575 2,945,141 2,808,138 1,912,420 1,522,713 1,389,488
</TABLE>
- ---------------
(1) Effective December 31, 1994, Nextel changed its fiscal year end from March
31 to December 31. Accordingly, the income statement data is presented for
the transition period from April 1, 1994 to December 31, 1994.
(2) See Note 2 to the Notes to Nextel's consolidated financial statements for
the year ended December 31, 1997, for a description of acquisitions.
(3) See Note 2 to the Notes to Nextel's consolidated financial statements for
the year ended December 31, 1997.
(4) Other expense in 1996 primarily reflects equity in the losses of certain
foreign investments accounted for under the equity method. See Note 2 to
the Notes to Nextel's consolidated financial statements for the year ended
December 31, 1997.
(5) Other expense in 1995 includes a $15.0 million write-down of the investment
in Communicaciones Nextel de Mexico S.A. de C.V. as a result of the
devaluation of the Mexican peso.
(6) Weighted average number of shares of Common Stock outstanding during the
respective periods.
(7) For the purpose of computing the ratio of earnings to fixed charges and
preferred stock dividends, earnings consist of loss before income taxes,
income (loss) from equity method investments and loss (income) attributable
to minority interests. Fixed charges and preferred stock dividends consist
of (i) interest on all indebtedness, amortization of deferred financing
costs and amortization of original issue discount, whether expensed or
capitalized; (ii) that portion of rental expense which the Company believes
to be representative of interest; and (iii) preferred stock dividends. The
deficiency of earnings to cover fixed charges and preferred stock dividends
for the fiscal year ended March 31, 1994 was $86.1 million, for the nine
months ended December 31, 1994 was $218.5 million, for the years ended
December 31, 1995, 1996 and 1997 was $562.8 million, $884.9 million and
$1,377.6 million, respectively, and for the three months ended March 31,
1997 and 1998 was $271.4 million and $458.8 million, respectively.
(8) Giving pro forma effect to the acquisition of the 11.50% Senior Redeemable
Discount Notes due 2003 (the "2003 Notes") and 12.25% Senior Redeemable
Discount Notes due 2004 (the "2004 Notes"; and together with the 2003
Notes, the "Targeted Notes") tendered for purchase in the tender offer and
related consent solicitation therefor completed April 6, 1998, as if such
acquisition had occurred on March 31, 1998. Approximately $307.6 million in
principal amount at maturity of the 2003 Notes and $422.8 million in
principal amount at maturity of the 2004 Notes, which had carrying values
of approximately $294.2 million and $332.7 million, respectively, were
validly tendered in the tender offer. Pursuant to the terms of the tender
offer and consent solicitation the Company paid approximately $740.8
million for the tendered Targeted Notes (representing both the purchase
price of the tendered Targeted Notes and related consent fees) utilizing a
portion of the proceeds of the Private Notes. As a result of the early
retirement of the tendered Targeted Notes, in the second quarter of 1998,
the Company will recognize an extraordinary loss of approximately $133.2
million, representing the sum of (i) the excess of the purchase price for
such tendered Targeted Notes over the sum of carrying values of such
tendered Targeted Notes and (ii) the write-off of the associated
unamortized deferred financing costs of approximately $19.3 million
(9) Includes approximately $463.4 million in cash and cash equivalents held by
Nextel International and its subsidiaries as of March 31, 1998, which are
not available to fund any of the cash needs of Nextel's
14
<PAGE> 24
domestic Digital Mobile and analog SMR businesses due to restrictions
contained in (i) the indenture relating to the 10-year discount notes (the
"1997 NI Notes") issued by Nextel International in March 1997 and (ii) the
indenture relating to the 10-year discount notes (the "1998 NI Notes")
issued by Nextel International in March 1998.
(10) Includes approximately $5.2 million in marketable securities held by Nextel
International and its subsidiaries as of March 31, 1998, which are not
available to fund any of the cash needs of Nextel's domestic Digital Mobile
and analog SMR businesses due to restrictions contained in (i) the
indenture (the "1997 NI Indenture") relating to the 1997 NI Notes and (ii)
the indenture (the "1998 NI Indenture") relating to the 1998 NI Notes.
(11) Excludes the current portions of long-term debt. See Note 6 to the Notes to
Nextel's consolidated financial statements for the year ended December 31,
1997.
(12) See Note 10 to the Notes to Nextel's consolidated financial statements for
the year ended December 31, 1997.
15
<PAGE> 25
RISK FACTORS
An investment in the New Securities offered hereby involves a high degree
of risk. The specific factors set forth below, as well as the other information
included and incorporated by reference in this Prospectus, should be considered
when evaluating an investment decision in the New Securities. See also
"-- Forward Looking Statements."
RISK FACTORS RELATING TO NEXTEL
History of and Future Expectations of Losses and Negative Cash Flow
The activities of Nextel since its inception in 1987 have been concentrated
on the acquisition and operation of SMR businesses and the development of the
Company's Digital Mobile network. Nextel has incurred net losses since its
inception, including losses attributable to common stockholders of approximately
$1,643.0 million for the year ended December 31, 1997 and approximately $415.0
million for the three months ended March 31, 1998. Nextel had an accumulated
deficit totaling approximately $3,136.0 million at March 31, 1998. In addition,
Nextel has experienced significant negative net cash flows since its inception.
Nextel anticipates that it will continue to experience significant net losses
and significant negative net cash flow during the ongoing deployment of its
Digital Mobile network over the next several years. Nextel's ability to arrange
sufficient equity and/or debt financing or to generate sufficient revenue to
cover its operating and capital needs is subject to a number of risks and
contingencies. Accordingly, there can be no assurance as to whether or when
Nextel's operations will become profitable. See "-- Nextel to Require Additional
Financing" and "-- Forward Looking Statements."
Risks of Implementation of Digital Mobile Network
The implementation of the Company's Digital Mobile network involves systems
design, site procurement, construction, electronics installation, receipt of
necessary Federal Communications Commission ("FCC") and other regulatory
approvals, channel recovery (freeing a certain number of 800 MHz frequencies
from SMR analog traffic) and initial systems optimization prior to commencing
commercial service. Each stage can take from several weeks to several months and
involves various risks and contingencies, the outcome of which cannot be
predicted. There can be no assurance that Nextel will be able to implement its
Digital Mobile network (where such network is not already in commercial
operation) in any particular market in accordance with its current plans and
schedules. See "-- Forward Looking Statements."
Implementation of Digital Mobile Network Subject to Risks of Developing
Technology
Currently, there are three principal digital technology formats that are
being assessed or proposed for deployment or have been deployed by providers of
cellular telephone service or certain entities that have been awarded personal
communications services ("PCS") licenses to provide wireless communications
services in the United States. Such formats are known as Time Division Multiple
Access ("TDMA") digital transmission technology, Code Division Multiple Access
("CDMA") digital transmission technology and GSM-PCS, which is an updated,
upbanded PCS version of the TDMA-based digital transmission technology format
known as Global System for Mobile Communications ("GSM"). Although TDMA, CDMA
and GSM-PCS are digital transmission technologies, and thus share certain basic
characteristics and areas of contrast to analog transmission technology, TDMA,
CDMA and GSM-PCS are not compatible or interchangeable with each other.
Motorola's proprietary Reconfigured iDEN digital transmission technology is
currently being deployed in Nextel's Digital Mobile network. Although
Reconfigured iDEN is based on the TDMA technology format, it 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.
In the future, a digital transmission technology other than TDMA may gain
acceptance sufficient to adversely affect the resources devoted by third parties
in developing or improving TDMA-based technologies
16
<PAGE> 26
and the market acceptance of TDMA-based technologies such as iDEN. Moreover,
currently existing digital cellular technology formats cannot be utilized on
Nextel's present SMR spectrum holdings. Accordingly, if any improvements were to
be made to such currently existing digital cellular technology formats, the
prospect of achievement of parallel improvements in the TDMA-based iDEN
technology presently utilized by Nextel is not certain. See "-- Forward Looking
Statements."
Customer acceptance of the services offered by Nextel will be affected by
technology-based differences and also by the operational performance and
reliability of system transmissions on Nextel's Digital Mobile network. Nextel
encountered certain technology and system performance issues with respect to
system reliability (the percentage of time the system is operating), system
access (how often a user can gain access to the system) and various
characteristics affecting voice transmission quality of mobile telephone
services utilizing Nextel's Digital Mobile network prior to the second quarter
of 1996 in those markets where Nextel's Digital Mobile network had been launched
using the first generation iDEN technology. Nextel and Motorola took actions to
address system performance issues in general, and voice transmission quality
concerns in particular, which the Company believes successfully resolved such
issues and concerns. However, similar actions and other measures, most of which
can be categorized as systems optimization, are expected to be ongoing
activities connected with Nextel's operation of its Digital Mobile network.
Moreover, Nextel expects that systems optimization, software loading and planned
maintenance activities will be ongoing components of its operation of the
Digital Mobile network that will periodically require the scheduled turndown of
selected subsystems in Nextel's Digital Mobile network during periods of very
low system traffic, typically at night or on weekend days. See "-- Forward
Looking Statements." Moreover, the satisfactory resolution of certain system
performance issues in a particular market or at a particular stage of operation
will not necessarily preclude the need to address those issues again, for
example, as a result of a significant increase in the number of subscribers
using the Digital Mobile network, and future upgrades or modifications to the
Digital Mobile network may have unexpected adverse effects on performance issues
previously addressed and resolved. Each of Motorola and Nextel believes,
however, that a large portion of the hardware and software adjustments developed
in the course of system development and technology optimization activities to
address particular issues, and the resulting system performance improvements
realized, should be applicable to similar issues in different markets.
Nevertheless, as is often the case in the deployment of wireless communications
networks, it should be expected that there will be market-specific
characteristics, such as local terrain, topography, the number of licensed
frequencies, the utilization of adjacent radio frequencies and other factors,
that will require customized optimization activities to address related system
performance issues successfully. See "-- Forward Looking Statements."
Any future inability to address and resolve satisfactorily performance
issues that affect customer acceptance of Digital Mobile network service could
delay or adversely affect the further successful commercialization of the
Digital Mobile network and could adversely affect the business and financial
prospects of Nextel. If Nextel for any reason is unable to implement its Digital
Mobile network as currently contemplated to be deployed and provide service to
its target customers that is competitive with the services of other wireless
communications providers, Nextel would be unable, utilizing its analog SMR
technology and systems, to provide mobile telephone services comparable to those
provided by other cellular and PCS wireless communications services providers or
to achieve significant further subscriber growth. 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 and enhancement of its Digital Mobile network, operating expenses
relating both to the Digital Mobile network and to its analog SMR business,
potential acquisitions (including the acquisition of rights to spectrum through
the recently concluded 800 MHz auction, acquisition of Local Multipoint
Distribution Service ("LMDS") spectrum through the Company's joint venture with
NextLink Communications, Inc. (which is controlled by Craig O. McCaw (see
"-- Nextel Susceptible to Control by Significant Stockholders") conducted
through NextBand Communications, L.L.C. ("NextBand") in the recently concluded
LMDS spectrum auction and any future auctions of spectrum by the FCC), debt
17
<PAGE> 27
service requirements and other general corporate expenditures. Nextel
anticipates that its cash utilization for capital expenditures and other
investing activities and operating losses will continue to exceed its cash flows
from operating activities over the next several years. During the year ended
December 31, 1997, Nextel's average monthly cash utilization rate for investing
activities (principally attributable to capital expenditures for the build-out
of the Company's Digital Mobile network and acquisitions) was approximately
$160.2 million, and its average monthly net cash used in operating activities
was approximately $30.2 million. Such average monthly amounts are not
necessarily representative of Nextel's anticipated future experience in such
areas, but are expected to continue to be at significant levels during 1998 in
connection with the implementation of Nextel's 1998 Plan and the related
build-out, expansion and enhancement of its Digital Mobile network. In
connection with the Company's implementation of its 1998 Plan, Nextel has
estimated that the external funding required to meet the cash needs of its
domestic business activities during 1998, including principally the funding
required for the purchase or redemption of the Targeted Notes, the funding of
anticipated capital expenditures and acquisitions (including the remaining
balance due for acquisitions of licenses in the FCC's 800 MHz spectrum auction
concluded in December 1997 but excluding amounts to acquire LMDS licenses), and
operating losses, will be approximately $2,970.0 million, which includes
approximately $1,335.0 million of system infrastructure and other system capital
costs relating to Nextel's Digital Mobile network expected to be incurred in
1998. Such estimates are based in part on the Company's experience in 1997 and
on a number of significant assumptions, including assumptions regarding
continued subscriber growth and increased demand for the Company's wireless
services and enhancements to existing Digital Mobile network system
infrastructure to expand and improve systems coverage and performance to address
competitive pressures faced or anticipated by the Company in its domestic
markets. Additionally, the 1998 Plan does not include amounts required to
acquire LMDS licenses or to pursue LMDS or other new business opportunities or
other potential transactions or investments that are not part of Nextel's
domestic digital and analog SMR wireless communications businesses and assets
and related corporate support services, personnel and overhead. See
"Summary -- The Company -- 1998 Business Plan." The telecommunications industry
is rapidly evolving and there can be no assurance that the Company will not
experience levels of demand for its services or competitive pressures that
differ from those experienced in 1997 and the first quarter of 1998 and those
assumed in developing the Company's 1998 Plan, which could cause an increase in
the Company's need for additional financing. See "-- Forward Looking
Statements."
Nextel, Nextel Finance Company, a wholly owned subsidiary of Nextel
("NFC"), and certain other subsidiaries of Nextel entered into definitive
agreements, which became effective on March 13, 1998, with respect to a secured
credit facility (the "Bank Credit Facility"), which replaced a prior credit
facility initially arranged on September 30, 1996, as amended (the "Old Bank
Credit Facility"). The credit agreement relating to the Bank Credit Facility
(the "Bank Credit Agreement") currently provides for up to $3.0 billion of
secured financing consisting of a $1.5 billion revolving loan and $1.5 billion
in term loans, subject to the satisfaction or waiver of applicable borrowing
conditions which are secured by liens on assets of Nextel's subsidiaries that
are "restricted" subsidiaries under the indentures related to the Nextel Notes
(the "Nextel Indentures") and the Senior Notes Indenture. Of such financing,
$1.0 billion of term loan financing was drawn as of March 31, 1998. Nextel
contemplates accessing the Bank Credit Facility to finance investments and
acquisitions, to fund capital expenditures and for working capital and general
corporate purposes. Borrowings under the Bank Credit Facility are secured by
liens on assets of Nextel's subsidiaries that are "restricted" subsidiaries
under the terms of the Nextel Indentures and the Senior Notes Indenture and bear
interest payable quarterly at an adjustable rate calculated based either on the
prime rate or LIBOR. The Nextel Indentures and the Senior Notes Indenture
contain provisions that operate to limit the amount of borrowings available
under the Bank Credit Facility in certain circumstances. Based on (i) the amount
of equity issuances (including the issuances of the Series D Preferred Stock and
the Old Preferred Stock) completed since June 1, 1997 (the relevant date for
purposes of determining debt capacity that is based on equity issuances under
the Nextel Indentures and the Senior Notes Indenture), and (ii) the Company's
outstanding debt at March 31, 1998 (but giving effect to the purchase of the
tendered Targeted Notes with the proceeds from the issuance of the Private
Notes) the Company may access the entire $3.0 billion available under the Bank
Credit Facility in compliance with the debt incurrence requirements contained in
the Nextel Indentures and the Senior Notes Indenture. See "-- Forward Looking
Statements." The maturity date of the $1.5 billion
18
<PAGE> 28
revolving loan and a $500.00 million portion of the term loans is March 31,
2006. The maturity date of the remaining $1.0 billion portion of the term loans
is September 30, 2006. Notwithstanding the foregoing, (i) the maturity of the
revolving credit facility and the $500.0 million term loan facility will be
accelerated to the date that is six months prior to the earliest maturity date
for the then outstanding Old Senior Notes unless the aggregate principal amount
at maturity of all Old Senior Notes is less than $1.0 billion and (ii) the
maturity of the $1.0 billion term loan facility, will be accelerated to the date
that is three months prior to the earliest maturity date for the then
outstanding Old Senior Notes unless the aggregate principal amount at maturity
of all outstanding Old Senior Notes is less than $1.0 billion. Access to the
Bank Credit Facility is required for Nextel to implement the 1998 Plan. See
"-- Forward Looking Statements."
Assuming that it has access to all of the available funds under the Bank
Credit Facility, Nextel believes that such amounts, coupled with the Company's
available cash and cash equivalents, including the proceeds from the financing
transactions completed in 1998 remaining after completion of the tender offer
for the Targeted Notes, will provide funds that in the aggregate are expected to
be more than sufficient to implement the Company's 1998 Plan and meet the other
currently anticipated cash needs of the domestic business activities
contemplated by the 1998 Plan through the end of 1998, as well as the payment of
the Company's current funding obligation in connection with the recent
acquisition of LMDS spectrum by NextBand. Thereafter, Nextel may require
substantial additional financing to fund further deployment, expansion and
enhancement of its Digital Mobile network, to fund operating losses and for
other general corporate purposes, including pursuit of LMDS or other business
opportunities that are not part of the 1998 Plan. To the extent the Company's
existing financing sources are insufficient to meet such needs, the Company may
seek to raise additional capital from public or private equity or debt sources.
See "-- Forward Looking Statements."
The availability of borrowings pursuant to the Bank Credit Facility is
subject to certain conditions, and there can be no assurance that such
conditions will be met. The Bank Credit Facility, the Nextel Indentures, the
Senior Notes Indenture and the terms of the Certificate of Designation and of
the certificate of designation for the Series D Preferred Stock (the "Series D
Certificate") contain and will continue to contain provisions that operate to
limit the amount of borrowings that may be incurred by Nextel. The Bank Credit
Agreement also requires Nextel and its relevant subsidiaries at specified times
to maintain compliance with certain operating and financial covenants or ratios
including certain covenants and ratios specifically related to leverage, which
may become more stringent over time. 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
network, the amount and timing of Nextel's capital expenditures and operating
losses and the market price of 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 uncertainty of legal
challenges lodged against the 800 MHz SMR auction that was completed on December
8, 1997; (ii) the uncertainty of legal challenges to Nextel's applications for
licenses on which Nextel was the high bidder at the 800 MHz auction; (iii) the
amounts that will be required to accomplish retuning or acquisition of 800 MHz
incumbent channels in spectrum blocks for which Nextel was the high bidder at
the 800 MHz auction; (iv) the possibility that Nextel will be able to obtain
geographic area licenses on the lower 800 MHz channels through an FCC auction;
(v) the potential commercial opportunities and risks associated with
implementation of Nextel's 1998 Plan; and (vi) the net impact on Nextel's
capital plan 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 its Digital Mobile network in such markets, the
additional capital needed for more extensive construction of the Digital Mobile
network in additional market areas acquired or that may be acquired in the
future, the additional capital needed to produce more robust coverage or to
support higher system utilization rates in existing and new Nextel Digital
Mobile network markets, additional capital required to pursue new
telecommunications service offerings or business opportunities (including LMDS
spectrum acquisitions), and the expenditures associated with analog SMR station
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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 including reductions pursuant to
the Second Equipment Agreement Amendment (as defined herein) and subsequent
agreements, alternative and more economical means for increasing system
capacity, other than constructing additional cell sites and/or installing
additional base radios, such as use of so-called "smart antennas," mini-cells
and software-driven and/or system design performance enhancements). Many of the
foregoing involve elements wholly or partially beyond Nextel's control or
influence. Other considerations in addition to the factors identified above may
significantly affect Nextel's decisions to seek additional financing, including
general economic conditions, conditions in the telecommunications and/or
wireless communications industry and the feasibility and attractiveness of
structuring particular financings for specific purposes (e.g., separate
capital-raising activities with respect to international activities and
opportunities). See "-- Forward Looking Statements."
Nextel has had and may in the future have discussions with third parties
regarding potential equity investments and debt financing arrangements to
satisfy actual or anticipated financing needs. Pursuant to the Motorola
Transaction, Nextel has agreed, under certain circumstances, not to grant
superior governance rights to any third-party investor without Motorola's
consent, which may make securing equity investments more difficult. The ability
of Nextel to incur additional indebtedness (including, in certain circumstances,
indebtedness incurred under the Bank Credit Agreement) is and will be limited by
the terms of the Nextel Indentures, the Senior Notes Indenture, the Certificate
of Designation, the Series D Certificate and the Bank Credit Agreement.
At present, other than the existing equity or debt financing arrangements
that have been consummated and/or disclosed herein, Nextel has no commitments or
understandings with any third parties to obtain any material amount of
additional equity or debt financing. Moreover, no assurances can be made that
Nextel will be able to obtain any such additional financing in the amounts or at
the times such financing may be required, or that, if obtained, any such
financing would be on acceptable terms. Nextel also anticipates that it will
continue to experience significant operating losses and negative net cash flows
during the ongoing build-out phase of the Digital Mobile network 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 Credit Facility, and the
impact of Reconfigured iDEN and other matters discussed above, there can be no
assurance that Nextel will have adequate capital, or will be able to
successfully structure acceptable arrangements with third parties, to implement
the contemplated expansion and enhancement of its Digital Mobile network.
Failure to obtain such financing could result in the delay or abandonment of
some or all of the Company's acquisition, development and expansion plans and
expenditures which could have a material adverse effect on its business,
financial condition and prospects. See "-- Forward Looking Statements."
Success of Nextel Is Dependent on its Ability to Compete
Nextel's success depends on its Digital Mobile network's ability to compete
with other wireless communications systems in each relevant market and the
Company's ability to successfully market integrated wireless communications
services. Nextel is continuing to focus its marketing efforts on attracting
customers from its previously identified targeted groups of potential
subscribers, chiefly its existing analog SMR subscribers and other business
users, including current users of multiple wireless communications services and
those new users who may be attracted to the combination of services made
possible by its Digital Mobile network.
Nextel's Digital Mobile network competes with established and future
wireless communications operators to attract customers to its service in each of
the markets in which the Company operates such Digital Mobile network. Nextel's
ability to compete effectively with other wireless communications service
providers depends on a number of factors, including the continued satisfactory
performance of iDEN technology, the
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establishment and maintenance of roaming service among the Company's market
areas and the further development of cost effective direct and indirect channels
of distribution for the Company's Digital Mobile network products and services.
Although Nextel has made significant progress in these areas to date, no
assurance can be given that such objectives will be completely achieved.
Moreover, Nextel must compete with current cellular communications providers and
current or potential wireless communication service providers, many of which
have financial resources, subscriber bases and name recognition greater than
Nextel. See "-- Ability to Manage Growth" and "-- Forward Looking Statements."
While Nextel believes that the mobile telephone service currently being
provided on its Digital Mobile network utilizing the Reconfigured iDEN
technology is similar in function to and achieves performance levels competitive
with those being offered by other current wireless communications service
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. Nextel currently offers its mobile telephone customers the ability to
"roam" among Nextel's existing Digital Mobile network market areas. Accordingly,
Nextel will not be able to provide roaming service comparable to that currently
available from cellular and certain PCS system operators, which have roaming
agreements covering each other's markets throughout the United States, unless
and until a nationwide Digital Mobile network build-out is substantially
completed. In addition, if either PCS or cellular operators provide two-way
dispatch services in the future, Nextel's competitive advantage may be impaired.
Subscriber units on the Company's Digital Mobile network are not compatible
with those employed on cellular or PCS systems, and vice versa. This lack of
interoperability may impede Nextel's ability to attract cellular or PCS
subscribers or those new mobile telephone subscribers that desire the ability to
access different service providers in the same market. Nextel currently markets
a multi-function subscriber unit that is (and is likely to remain) significantly
more expensive than analog handsets and is (and is likely to remain) somewhat
more expensive than digital cellular or PCS handsets that do not incorporate a
comparable multi-function capability. Accordingly, the prices expected to be
charged to Nextel for the subscriber handsets to be used by Nextel's Digital
Mobile network 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. However, Nextel believes that its multi-function
subscriber units currently are competitively priced compared to multi-function
(mobile telephone service and alphanumeric short-text messaging) digital
cellular and PCS handsets. During the transition to digital technology, certain
participants in the United States cellular industry are offering subscriber
units with dual mode (analog and digital) compatibility. Additionally, certain
analog cellular system operators that directly or through their affiliates also
are constructing and operating digital PCS systems have made available to their
customers dual mode/dual band (800 MHz cellular/1900 MHz PCS) subscriber units,
to combine the enhanced feature set available on digital PCS systems within
their digital service coverage areas with the broader wireless coverage area
available on the analog cellular network. Nextel does not have comparable hybrid
subscriber units available to its customers.
Additionally, there can be no assurances that existing analog SMR customers
will be willing to invest in new subscriber equipment necessary to migrate to
the Company's Digital Mobile network, nor can there be any assurance that a
sufficient number of customers or potential customers of Nextel's Digital Mobile
network will be willing to accept system coverage limitations as a trade-off for
the enhanced multi-function wireless communications package provided by the
Company on its nationwide Digital Mobile network. Over the past several years as
the number of wireless communications providers in Nextel's market areas has
increased, the prices of such providers' wireless service offerings to customers
in those markets have generally been decreasing. The Company may encounter
further market pressures to reduce its Digital Mobile network service offering
prices or to restructure its Digital Mobile network service offering packages to
respond to particular short term, market specific situations (such as special
introductory pricing or packages that may be offered by new providers launching
their service in a market) or to remain competitive in the event that
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wireless service providers generally continue to reduce the prices charged to
their customers. Moreover, because many of the cellular operators and certain of
the PCS operators in Nextel's markets have substantially greater financial
resources than Nextel, such operators may be able to offer prospective customers
equipment subsidies or discounts that are substantially greater than those, if
any, that could be offered by Nextel and may be able to offer services to
customers at prices that are below prices that Nextel is able to offer for
comparable services. Thus, Nextel's ability to compete based on the price of its
Digital Mobile network subscriber units and service offerings will be limited.
Nextel cannot predict the competitive effect that any of these factors, or any
combination thereof, will have on Nextel. See "-- Forward Looking Statements."
Cellular operators and certain PCS operators and entities that have been
awarded PCS licenses each control more spectrum than is allocated for SMR
service in each of the relevant market areas. Each cellular operator is licensed
to operate 25 MHz of spectrum and certain PCS licensees have been licensed for
30 MHz of spectrum in the markets in which they are licensed, while no more than
21.5 MHz is available in the 800 MHz band to all SMR systems, including Nextel's
systems, in those markets. The control of more spectrum gives cellular operators
and such PCS licensees the potential for more system capacity, and, therefore,
more subscribers, than SMR operators, including Nextel. Nextel believes that it
generally has adequate spectrum to provide the capacity needed on its Digital
Mobile network currently and for the reasonably foreseeable future. See
"-- Forward Looking Statements."
The Company has been increasing over time the proportion of its Digital
Mobile network customers that it obtains through its indirect distributor
network, and Nextel currently anticipates that it will rely more heavily on
indirect distribution channels to achieve greater market penetration for its
digital wireless service offerings. As the Company expands its retail subscriber
base through increased reliance on indirect distribution channels, and as price
competition in the wireless industry intensifies, the average revenue per
subscriber unit is expected to decrease and the churn rate is expected to
increase. See "-- Forward Looking Statements."
Ability to Manage Growth
As a result of the commencement of Digital Mobile network service in
certain markets and increased sales in markets in which Digital Mobile network
services are provided and, to a limited extent, acquisitions, the number of
subscriber units in service on Nextel's Digital Mobile network has increased
substantially over the past several years.
The ability of Nextel to continue to increase the number of subscribers on
its Digital Mobile network is dependent on a variety of factors. Among the more
important of such factors is Nextel's ability to successfully plan for
additional system capacity at levels adequate to accommodate anticipated new
subscribers and the related increases in system usage. One important factor
influencing system capacity is the amount of spectrum available to Nextel in a
particular market area. Although Nextel continues to pursue opportunities to
acquire additional SMR spectrum, Nextel believes that its present holdings of
800 MHz spectrum are generally adequate for the current and reasonably
foreseeable operation of its Digital Mobile network.
An important factor influencing the ability to increase the number of
subscribers is the availability of a sufficient quantity of cell sites, system
infrastructure equipment and subscriber units, of the appropriate models and
types, to meet the demands and preferences of potential subscribers to the
Digital Mobile network. To date, Nextel has been able to secure sufficient cell
sites at appropriate locations in its markets to meet planned system coverage
and capacity targets, and also has been able to obtain adequate quantities of
base radios and other system infrastructure equipment from Motorola and other
suppliers, and adequate volumes and mix of subscriber units and related
accessories from Motorola, to meet subscriber and system loading rates. See
"-- Reliance on One Principal Supplier in Implementation of Digital Mobile
Network" and "-- Forward Looking Statements."
Other factors affecting Nextel's ability to successfully add customers on
its Digital Mobile network include (i) the adequacy and efficiency of its
information systems, business processes and related support functions; (ii)
reducing the length of time from customer order to commencement of service (the
"activation cycle") on the Digital Mobile network so that the Company's
activation cycle is comparable to that typically
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encountered for "off the shelf" cellular and PCS wireless service offerings; and
(iii) improving the efficiency and speed of the processes for the Company's
customer service and accounts receivable collection functions to adequately
respond to the needs of a growing customer base on the Digital Mobile network
and the increasing amounts of billed digital service and equipment revenue.
Customer reliance on Nextel's customer service functions may increase as more
Digital Mobile network customers are added through indirect distribution
channels.
Although the Company has taken steps to refine, improve, and scale-up its
back-office and support systems and processes, there can be no assurance that
such systems and processes will achieve levels of capacity, or improvements in
speed and efficiency, sufficient to meet customer and network growth and
demands, or will be able to do so on a timely basis. Any inability of the
Company to (i) timely meet Digital Mobile network capacity needs, (ii) have
access to suitable cell sites and infrastructure and subscriber equipment in any
one or more of its market areas, or (iii) develop when and as required
improvements or expansions to its systems and processes adequate to meet desired
levels of customer activation and increased levels of usage and demand for
wireless services on the Digital Mobile network could decrease or postpone
subscriber growth, or delay or otherwise impede billing and collection of
amounts owed, thereby adversely affecting Nextel's revenues, business and
prospects. See "-- Forward Looking Statements."
Reliance on One Principal Supplier in Implementation of Digital Mobile Network
Pursuant to existing equipment purchase agreements first entered into in
1991, as subsequently amended (such equipment purchase agreements, as amended,
being referred to herein as the "Equipment Purchase Agreements"), between Nextel
and Motorola, Motorola provides the iDEN infrastructure and subscriber handset
equipment to Nextel throughout its markets. Nextel expects that it will need to
rely on Motorola for the manufacture of a substantial portion of the equipment
necessary to construct its Digital Mobile network and handset equipment for the
foreseeable future. The Equipment Purchase Agreements include a commitment from
Nextel to purchase from Motorola a significant amount of system infrastructure
equipment. Nextel has, among other things, agreed (subject to certain
conditions) to purchase and install iDEN equipment during the four-year and
six-year periods beginning on August 4, 1994 sufficient to cover 70% and 85%,
respectively, of the United States population. In addition, subject to the
applicable terms and conditions under the second amendment to the Equipment
Purchase Agreements entered into in connection with the McCaw Transaction (the
"Second Equipment Agreement Amendment"), Nextel has agreed to deploy
Reconfigured iDEN technology and, until August 4, 1999 and subject to certain
conditions, to purchase from Motorola at least 50% of the base radios Nextel
purchases in any calendar year. See "-- Success of Nextel is Dependent on its
Ability to Compete" and "-- Forward Looking Statements." Such commitments are in
addition to amounts purchased from Motorola or for which Nextel or companies
acquired by Nextel had placed orders with Motorola prior to August 4, 1994.
The Second Equipment Agreement Amendment limits Nextel's ability to deploy
a "Switch in Technology" which, under the Second Equipment Agreement Amendment,
is defined to mean a decision by Nextel before August 4, 1999 to install and use
digital radio frequency technology as an alternative to iDEN on more than 25% of
its SMR channels in the 806-824 MHz band in one or more of its top 20 domestic
markets, or the utilization by Nextel of any of its SMR channels for voice
interconnect on certain United States cellular and/ or PCS radio telephony
standards. Nextel may not implement such a Switch in Technology unless (1)
Nextel determines that the iDEN or Reconfigured iDEN equipment fails to meet
certain performance specifications established in the Second Equipment Agreement
Amendment, which failure materially adversely affects the commercial viability
of the technology to provide reliable services as intended by Motorola and
Nextel, and Motorola does not cure such failure within six months after
receiving notice thereof, or (2) Nextel or the McCaw Investor offers to acquire
the remainder of Motorola's shares of Common Stock at a per share price of at
least 110% of the average of the closing prices of the Common Stock over the 30
trading days preceding the public announcement by Nextel of the decision to
implement such a Switch in Technology. In either case, if Motorola manufactures
(or elects to manufacture) the alternate technology Nextel elects to deploy,
Nextel must purchase 50% of its infrastructure requirements and 25% of its
subscriber equipment requirements from
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Motorola for three years, provided such equipment is competitive in price and
performance to the equipment utilizing or incorporating such alternate
technology then offered by other manufacturers.
It is expected that for the next few years of Digital Mobile network
operations by Nextel, Motorola and competing manufacturers who are licensed by
Motorola will be the only manufacturers of subscriber equipment that is
compatible with Nextel's Digital Mobile network. 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 provide for the licensing by Motorola of
interfaces relating to infrastructure and subscriber equipment and of additional
manufacturers for subscriber equipment. In connection with the Second Equipment
Agreement Amendment, Motorola further agreed to negotiate to enter into licenses
with at least one alternative manufacturer of iDEN infrastructure equipment.
Currently, however, there are no arrangements in effect with any additional
manufacturers to supply Nextel with alternative sources for either iDEN system
infrastructure or subscriber equipment.
Should Nextel choose to deploy a technology other than iDEN or Reconfigured
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. Due to the considerable present uncertainty
surrounding the factors that might affect such a decision, including the
additional capital requirements associated with the deployment of an alternative
technology, the performance characteristics and customer perceptions of
Reconfigured iDEN, or of competing digital technologies and possible future
improvements in the Reconfigured iDEN technology platform, it is impossible to
predict if or when such a decision could be made. See "-- Forward Looking
Statements."
Nextel's Prospects Are Dependent on Governmental Regulation
The licensing, operation, acquisition and sale of Nextel's SMR businesses
are regulated by the FCC. FCC regulations have undergone significant changes
during the last three years and continue to evolve as new FCC rules and
regulations are adopted pursuant to the Omnibus Budget Reconciliation Act of
1993 and the Telecommunications Act of 1996. Nextel's ability to conduct its
business is dependent, in part, on its compliance with FCC rules and
regulations. Future changes in regulation or legislation affecting Digital
Mobile network service and Congress' and the FCC's continued allocation of
additional Commercial Mobile Radio Services spectrum could materially adversely
affect Nextel's Digital Mobile network business. See "--Forward Looking
Statements."
Nextel Susceptible to Control by Significant Stockholders
Based on securities ownership information relating to Nextel as of April
30, 1998, and giving effect (on such date) to the conversion of the outstanding
shares of Nextel's preferred stock and Class B Non-Voting Common Stock, par
value $0.01 per share (the "Non-Voting Common Stock") and the exercise in full
of (i) two separate options held by the McCaw Investor exercisable for periods
of four and six years, respectively, from July 28, 1995, to acquire an aggregate
of up to 15.0 million shares of Common Stock at exercise prices ranging from
$18.50 to $21.50 per share, (ii) the option held by Eagle River, Inc., an
affiliate of the McCaw Investor ("Eagle River"), to purchase an aggregate of 1.0
million shares of Common Stock at an exercise price of $12.25, which vests over
a five-year period from April 4, 1995 (the "Incentive Option"), (iii) the option
(the "New Option") issued to an affiliate of Mr. McCaw to acquire 15.0 million
shares of Common Stock at $16.00 per share and 10.0 million shares of Common
Stock at $18.00 per share, in each case on or prior to July 28, 1998, (iv) the
options granted on July 28, 1995 to the McCaw Investor by Motorola to purchase
up to approximately 5.4 million shares of Common Stock over a six-year period
and (v) a warrant held by Motorola to purchase approximately 2.9 million shares
of Common Stock, entities controlled by Mr. McCaw would hold approximately 24.2%
and Motorola would hold approximately 15.0% of the Common Stock that would be
outstanding as of such date.
In connection with the consummation of the McCaw Transaction and pursuant
to the Securities Purchase Agreement dated as of April 4, 1995, as amended,
among Nextel, the McCaw Investor and
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Mr. McCaw (the "McCaw Securities Purchase Agreement"), the McCaw Investor has
the right to designate not less than 25% of the Board of Directors of Nextel.
Additionally, the McCaw Investor is entitled to have a majority of the members
of the Operations Committee of the Board of Directors selected from the McCaw
Investor's representatives on the Board of Directors. The Operations Committee
has the authority to formulate key aspects of Nextel's business strategy,
including decisions relating to the technology used by Nextel (subject to
existing equipment purchase agreements), acquisitions, the creation and approval
of operating and capital budgets and marketing and strategic plans, approval of
financing plans, endorsement of nominees to the Board of Directors and
committees thereof and nomination and oversight of certain executive officers.
As a result, based upon the McCaw Investor's stock ownership position, as well
as its ability to designate at least 25% of the members of the Board of
Directors and control the Operations Committee, the McCaw Investor is in a
position to exert significant influence over Nextel's affairs. The Board of
Directors retains the authority to override actions taken or proposed to be
taken by the Operations Committee, subject, in certain circumstances, to certain
financial consequences. The creation and existence of the Operations Committee
does not change the normal fiduciary duties of the Board of Directors, including
fiduciary duties in connection with any proposal to override any action of or to
terminate the Operations Committee, whether or not such action would give rise
to such financial consequences. Motorola is entitled to nominate two directors
to the Board of Directors of Nextel. Pursuant to an amendment to the Agreement
and Plan of Contribution and Merger dated as of April 4, 1995, by and among
Nextel, Motorola and certain subsidiaries of Motorola, Motorola has agreed to
support the decisions and recommendations of the Operations Committee and to
vote the shares of Common Stock held by it accordingly, subject to (1) the right
of any Motorola-designated Nextel directors to vote in a manner consistent with
their fiduciary duties and (2) the right of Motorola to vote its shares as it
determines necessary with respect to issues that conflict with Motorola's
corporate ethics or that present conflicts of interest, or in order to protect
the value or marketability of the shares of Common Stock held by it.
Based upon their respective ownership positions, if the McCaw Investor and
Motorola chose to act together, such parties could have a sufficient voting
interest in Nextel, among other things, to (1) exert effective control over the
approval of amendments to the Certificate of Incorporation, mergers, sales of
assets or other major corporate transactions as well as other matters submitted
for stockholder vote, (2) defeat a takeover attempt and (3) otherwise control
whether particular matters are submitted for a vote of the stockholders of
Nextel. Although Motorola has made certain commitments as described in the last
sentence of the preceding paragraph, Nextel is not aware of any current
agreements among the McCaw Investor and Motorola with respect to the ownership
or voting of Common Stock and neither Motorola nor the McCaw Investor has
indicated to Nextel that it has any present intention to seek to exercise such
control. Pursuant to the McCaw Securities Purchase Agreement, the McCaw Investor
has agreed that it will not vote for any nominee to the Board of Directors other
than persons it is entitled to designate under the terms of the securities it
owns or of the McCaw Securities Purchase Agreement. Upon request of Nextel, the
McCaw Investor has also agreed to cause shares of Common Stock, the voting of
which is controlled by it or its affiliates, to be voted in a manner
proportionate to the votes of other holders of Common Stock in the election of
directors so designated by the Board of Directors.
Each of the McCaw Investor and Motorola has and (subject to the terms of
applicable agreements between such parties and Nextel) may have an investment or
interest in entities that provide wireless 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 Corp. ("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.
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Commitments to Issue Additional Common Stock May Impair Ability to Raise
Capital
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 Common Stock. The shares that are subject to such issuance
commitments, to a large degree, either will be issued in registered transactions
and thus will be freely tradeable or will be subject to grants of registration
rights which, if and when exercised, would result in such shares becoming freely
tradeable. Nextel has also granted registration rights with respect to a
significant number of its outstanding shares, including shares of Common Stock
issuable upon conversion of securities issued in the Motorola Transaction and
the McCaw Transaction. The exercise of registration rights by persons entitled
thereto would permit such persons to sell such shares without regard to the
limitations of Rule 144 under the Securities Act. An increase in the number of
shares of Common Stock that will become available for sale in the public market
may adversely affect the market price of Common Stock and, as a result, could
impair Nextel's ability to raise additional capital through the sale of its
equity securities.
Potential Conflict of Interest Relationship with Motorola
Motorola and its affiliates have and currently are engaged in wireless
communications businesses, and may in the future engage in additional such
businesses, which are or may be competitive with some or all of the services
offered by Nextel's Digital Mobile network, although the Motorola Land Mobile
Products Sector ("Motorola LMPS") may not, prior to July 28, 1998, make use
(with certain limited exceptions) of the customer lists conveyed by Motorola to
ESMR in connection with the Motorola Transaction to solicit subscribers for any
800 MHz SMR commercial mobile voice business owned or managed by Motorola LMPS
in the continental United States. Pursuant to the Second Equipment Agreement
Amendment, Motorola has agreed that until July 1998, Motorola LMPS will not
solicit other iDEN customers and neither Motorola LMPS nor Motorola's credit
corporation subsidiary will make any equity investment in, or provide
equipment/vendor financing to, certain iDEN customers with respect to purchases
of iDEN equipment.
Although Nextel believes that its equipment purchase relationship with
Motorola has been structured to reflect the realities of purchasing 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 supplier,
also creates potential conflicts of interest, particularly with regard to
significant transactions. See " -- Forward Looking Statements."
Concerns About Mobile Communications Health Risk May Affect Prospects of
Nextel
Allegations have been made, but not proven, that the use of portable mobile
communications devices may pose health risks due to radio frequency emissions
from such devices. Studies performed by wireless telephone equipment
manufacturers have investigated these allegations, and a major industry trade
association and certain governmental agencies have stated publicly that the use
of such phones poses no undue health risk. The actual or perceived risk of
mobile communications devices could adversely affect Nextel through a reduced
subscriber growth rate, a reduction in subscribers, reduced network usage per
subscriber or through reduced financing available to the mobile communications
industry.
Dependence on Key Personnel
In early 1996, Nextel added a number of key personnel to its senior
management team. The Company's business plans and strategies contemplating an
accelerated nationwide build-out, expansion and enhancement of its Digital
Mobile network and related aggressive advertising and marketing campaigns
largely have been developed by, and are expected to be implemented with, the
active involvement and participation of many members of the Company's senior
management team, including particularly each of Messrs. Daniel F. Akerson, Chief
Executive Officer, Timothy M. Donahue, President and Chief Operating Officer,
Steven M. Shindler, Vice President and Chief Financial Officer, Barry West, Vice
President and Chief Technology Officer, Thomas Kelly, Vice
President -- Marketing and Thomas J. Sidman, Vice President and General Counsel.
The loss of the services of any of these individuals could have a material
adverse effect on the Company.
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Risks Associated with Foreign Operations
Because the Company owns interests in and operates international wireless
companies through Nextel International, it is subject to the risks inherent in
such foreign operations including: (i) political, economic and social conditions
in the foreign countries in which such operations are conducted; (ii) currency
risks and exchange controls; (iii) potential inflation in the applicable foreign
economies; (iv) the impact of import duties on the cost and/or prices of
infrastructure equipment and subscriber handsets; and (v) foreign taxation of
earnings and payments received by Nextel International from its operating
subsidiaries. Although the risks associated with the foreign operations
conducted through Nextel International have not adversely impacted the Company's
operating results to date, there can be no assurance that they will not do so in
the future, particularly as such operations expand in scope, scale and
significance. See "-- Forward Looking Statements."
RISK FACTORS RELATED TO NEW SECURITIES AND EXCHANGE OFFERS
Ability of Nextel to Pay Cash Dividends or Cash Interest
Cash dividends on the Preferred Stock are payable quarterly beginning in
2003 and cash interest on the Notes will accrue beginning February 15, 2003,
thereafter payable semi-annually on each February 15 and August 15, commencing
August 15, 2003. Under the Nextel Indentures and the Senior Notes Indenture,
Nextel may pay cash dividends and make other distributions on or in respect of
the Preferred Stock only if certain financial tests are met. Currently, the
restrictions contained in the Nextel Indentures and the Senior Notes Indenture
would prohibit Nextel from paying dividends on the Preferred Stock other than
dividends payable in additional shares of Preferred Stock and also would
prohibit the issuance of the Exchange Debentures in exchange for the Preferred
Stock. In addition, the terms of the Bank Credit Facility limit the amount of
cash available to make dividends, loans and cash distributions to Nextel from
Nextel's subsidiaries that operate the Digital Mobile network in Nextel's
markets, and provisions contained in certain financing arrangements to which
Nextel International and its subsidiaries are parties operate to restrict
transfers of funds between Nextel International and its subsidiaries and the
Company, so that, while such restrictions are in place, any profits generated by
such subsidiaries will not be available to Nextel for, among other purposes,
payment of dividends on the Preferred Stock, payment of cash interest on the
Exchange Debentures or payment of cash interest on the Notes. There can be no
assurance that Nextel's existing or future financing agreements will permit
Nextel to pay cash dividends on the Preferred Stock or cash interest on the
Exchange Debentures or the Notes when required. In the event that any of
Nextel's financing agreements limit Nextel's ability to pay cash dividends on
the Preferred Stock or cash interest on the Exchange Debentures or the Notes
when required, Nextel will need to refinance amounts outstanding under such
agreements to make such cash dividend or interest payments. There can be no
assurance that Nextel will be able to refinance amounts outstanding under such
financing agreements. The failure of Nextel to pay cash dividends on the
Preferred Stock or cash interest on the Exchange Debentures or the Notes when
required could result in a Voting Rights Triggering Event (as herein defined)
with respect to the Preferred Stock or a Default (as herein defined) under the
Senior Notes Indenture or Exchange Indenture, and could also result in parallel
defaults under the Nextel Indentures and Nextel's other debt agreements,
including the Bank Credit Agreement. Several key factors are expected to have a
significant impact on the Company's ability to meet its dividend and interest
requirements. Those factors include, among other things,: (i) the Company's
ability to successfully implement its 1998 Plan and related strategy, including
the accelerated build-out, expansion and enhancement of its Digital Mobile
network; (ii) the Company's ability to obtain and retain a significant number of
Digital Mobile network subscribers and thereby increase market share; and (iii)
the Company's ability to achieve significant and sustained growth in its Digital
Mobile network revenues and earnings from operations. There can be no assurance
that the Company will be able to successfully implement its strategy or that the
Company will generate sufficient cash flow to meet its dividend and interest
requirements. If sufficient funds to pay such dividends or interest are not
generated by the Company's operations, Nextel may need to seek additional
financing or refinance the Preferred Stock, the Exchange Debentures or the
Notes. There can be no assurance that the Company will be able to obtain such
financing or refinancing on acceptable terms, or at all. See " -- Dependence of
Company on Subsidiaries for Cash to Pay Dividends and Interest, to Redeem
Preferred Stock
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<PAGE> 37
and for Repayment of Notes and Exchange Debentures," "Description of Exchange
Preferred Stock -- Voting Rights" and "Description of Exchange Senior Notes."
Under Delaware law, cash dividends on capital stock may only be paid from
"surplus" or if there is no "surplus," from the corporation's net profits for
the then current or the preceding fiscal year. Until Nextel achieves
profitability, the ability of Nextel to pay cash dividends on the Preferred
Stock will require the availability of adequate "surplus," which is defined as
the excess, if any, of Nextel's net assets (total assets less total liabilities)
over its capital (generally the par value of its issued capital stock). As a
result, there can be no assurance that adequate surplus will be available to pay
cash dividends on the Preferred Stock or that, even if such surplus is
available, Nextel will have sufficient cash to pay dividends on the Preferred
Stock. In addition, under Delaware law, the Preferred Stock cannot be redeemed
if the redemption will cause any impairment of the capital of Nextel.
Ranking of Preferred Stock and Exchange Debentures
The Preferred Stock will rank junior in right of payment to all present and
future indebtedness and other liabilities of the Company and, with respect to
dividend rights and rights on liquidation, winding-up and dissolution, will rank
senior to all classes of common stock of the Company and on a parity (except for
certain "Special Payments" on the Company's Class A Preferred Stock and Class B
Preferred Stock, as to which the Preferred Stock will rank junior) with all
other currently outstanding preferred stock of Nextel. In the event of the
bankruptcy, liquidation or reorganization of the Company, the assets of the
Company will be available to pay obligations on the Preferred Stock only after
all then outstanding indebtedness and other liabilities of the Company have been
paid in full, and there may not be sufficient assets remaining to pay amounts
payable on any or all of the Preferred Stock then outstanding, particularly
because a majority of Nextel's assets are intangible assets. At March 31, 1998,
the Company had approximately $8.2 billion of liabilities and indebtedness
outstanding (on a pro forma basis reflecting the Company's repurchase of
Targeted Notes on April 6, 1998, the Company would have had approximately $7.6
billion of liabilities and indebtedness outstanding). See "Description of
Exchange Preferred Stock -- Ranking."
If the Preferred Stock is exchanged for the Exchange Debentures, the
Exchange Debentures will be subordinated in right of payment to all Senior Debt
(as defined under "Description of Exchange Debentures -- Subordination") of the
Company, including the indebtedness under the Notes, the Nextel Notes and the
Bank Credit Facility, and senior in right of payment to all future indebtedness
of the Company, if any, that by its terms provides that it is subordinated to
the Exchange Debentures. In the event of the bankruptcy, liquidation or
reorganization of the Company, the assets of the Company will be available to
pay obligations on the Exchange Debentures only after all Senior Debt has been
paid in full, and there may not be sufficient assets remaining to pay amounts
due on any or all of the Exchange Debentures then outstanding. The Preferred
Stock, the Exchange Debentures and the agreements relating to Nextel's existing
debt permit the incurrence of a substantial amount of additional indebtedness.
As of March 31, 1998, the Company and its subsidiaries had approximately $5.4
billion of Senior Debt outstanding and an additional $2.0 billion available for
secured borrowing pursuant to the Bank Credit Facility. The Notes also
constitute Senior Debt. See
" -- Risk Factors Relating to Nextel -- Nextel to Require Additional Financing."
Dependence of Company on Subsidiaries for Cash to Pay Dividends and Interest,
to Redeem Preferred Stock and for Repayment of Notes and Exchange Debentures
Because substantially all of the operations of the Company are conducted
through subsidiaries, the Company's cash flow and, consequently, its ability to
pay dividends and interest in cash and to redeem the Preferred Stock and to
service debt, including the Notes and the Exchange Debentures, is dependent upon
the cash flow of its subsidiaries and the payment of funds by those subsidiaries
in the form of loans, dividends or otherwise. The subsidiaries are separate and
distinct legal entities and will have no obligation, contingent or otherwise, to
pay any amounts due pursuant to the terms of the Notes, the Preferred Stock, the
Exchange Debentures or to make cash available for such purpose. The Bank Credit
Agreement currently imposes significant limits on, and is expected to continue
to significantly limit, the amount of cash available to pay dividends or make
loans and cash distributions to Nextel from Nextel's subsidiaries that operate
the Digital
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Mobile network in Nextel's market areas in the United States. Similarly, the
1997 NI Indenture and the 1998 NI Indenture (collectively, the "NI Indentures")
and certain vendor and bank financing arrangements entered and to be entered
into by Nextel International and the entities in which Nextel International
holds investments contain and are expected to contain certain restrictive
covenants that impose restrictions on dividends, loans, advances and other
payments to Nextel by Nextel International and such subsidiaries. Accordingly,
while such limitations are in place, profits generated by such subsidiaries may
not be available to Nextel (whether in the form of loans, dividends or
otherwise) for, among other purposes, the payment of cash interest on the Notes,
cash dividends on the Preferred Stock, cash interest on the Exchange Debentures,
or any amounts due pursuant to the terms of the Notes, Preferred Stock or the
Exchange Debentures. The Senior Notes Indenture, the Certificate of Designation
and the Exchange Indenture permit the Company and its subsidiaries to enter into
financing arrangements in the future, which may impose restrictions on
dividends, loans, advances and other payments by those subsidiaries. The Bank
Credit Agreement, the Nextel Indentures, the Senior Notes Indenture, the
Exchange Indenture, the Series D Certificate and the Certificate of Designation
each contain certain restrictive covenants applicable to the Company and certain
of its subsidiaries, such as a limitation on debt that may be incurred by the
Company and its restricted subsidiaries, that may limit the Company's ability to
borrow funds to pay any amounts due pursuant to the Notes, the Preferred Stock
or the Exchange Debentures and certain of such agreements also contain
limitations on certain defined "restricted payments" (which term would include
any payment of cash dividends on the Preferred Stock and the exchange of the
Preferred Stock for Exchange Debentures), which may operate to restrict or
prohibit cash dividends that the Company may pay on the Preferred Stock, even if
sufficient funds for that purpose are held or could be borrowed by the Company.
See "-- Effect of Substantial Existing and Additional Indebtedness; Refinancing
Risk."
Effect of Holding Company Structure
Because the Company is a holding company that conducts its business through
its subsidiaries, all existing and future liabilities of the Company's
subsidiaries, including borrowings under the Bank Credit Facility, indebtedness
evidenced by the 1997 NI Notes and the 1998 NI Notes (collectively, the "NI
Notes") and trade payables, will be effectively senior to the Notes, the
Preferred Stock, and the Exchange Debentures, if issued. As of March 31, 1998,
the Company's subsidiaries had outstanding indebtedness and other trade payables
and other accrued liabilities of approximately $2.8 billion. Borrowings under
the Bank Credit Facility are secured by liens on assets of Nextel's restricted
subsidiaries. Borrowings by Nextel International or its subsidiaries or
affiliates under any bank or vendor credit facilities that such entities may
enter from time to time likewise may be secured by liens on assets of Nextel
International or of such subsidiaries and affiliates and may be guaranteed by
such entities as well. See " -- Risk Factors Relating to Nextel -- Nextel to
Require Additional Financing."
The Senior Notes Indenture, the Certificate of Designation and the Exchange
Indenture each permit the incurrence of additional indebtedness by the Company
and its subsidiaries. Additional indebtedness of the Company will rank senior to
the Preferred Stock, may rank pari passu with or subordinate to the Notes and
may rank senior to, pari passu with or subordinate to the Exchange Debentures,
while additional indebtedness of the Company's subsidiaries effectively will
rank senior to the Notes and the Exchange Debentures. The Company's subsidiaries
will have no obligation to pay amounts due under the Notes or the Exchange
Debentures. Earnings generated by any of the Company's subsidiaries, as well as
the existing assets of such subsidiaries, will be used by such subsidiaries to
fulfill their own direct debt service requirements, particularly because the
agreements relating to such subsidiaries' debt may restrict their ability to pay
dividends or to make loans, advances or other distributions to the Company or
because the debt of such subsidiaries may be secured by their assets. See
"-- Dependence of Company on Subsidiaries for Cash to Pay Dividends and
Interest, to Redeem Preferred Stock and for Repayment of Notes and Exchange
Debentures" and "-- Effect of Substantial Existing and Additional Indebtedness;
Refinancing Risk."
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Effect of Substantial Existing and Additional Indebtedness; Refinancing Risk
At March 31, 1998, on a pro forma basis giving effect to the purchase of
the tendered Targeted Notes, the Company had approximately $5.8 billion of
long-term debt, including current portion, of which approximately $3.7 billion
is represented by the Notes and the Nextel Notes (after adjusting for the
repurchase of Targeted Notes on or prior to April 6, 1998 of the Targeted
Notes). The accretion of original issue discount on the Notes and the Nextel
Notes (excluding such repurchased Targeted Notes) will cause an increase in
recorded liabilities from March 31, 1998 of approximately $1.5 billion. Cash
interest payments currently are scheduled to commence with respect to the Old
Senior Notes beginning in 1999 and will commence on the 1997 Notes in 2003. The
Bank Credit Agreement, the Certificate of Designation, the Series D Certificate,
the Nextel Indentures, the Exchange Indenture, the NI Indentures and Senior
Notes Indenture each limit, but do not prohibit, the incurrence of additional
indebtedness by the Company and/or certain of its subsidiaries. The Company
anticipates that it and its subsidiaries will incur substantial additional
indebtedness in the future in connection with the further build-out, expansion
and enhancement of its Digital Mobile network and funding cash flow deficits,
including additional borrowings pursuant to the terms of the Bank Credit
Agreement. See "-- Risk Factors Relating to Nextel -- Nextel to Require
Additional Financing."
The level of the Company's and its subsidiaries' indebtedness could have
important consequences to the holders of the Notes, the Preferred Stock and
Exchange Debentures, including the following: (i) the debt service requirements
of any additional indebtedness could make it more difficult for the Company to
make payments of cash interest on the Notes, cash dividends on the Preferred
Stock and cash interest on the Exchange Debentures; (ii) a substantial portion
of the Company's cash flow from operations, if any, must be dedicated to the
payment of principal and interest on its indebtedness and other obligations, and
will not be available for use in its business; (iii) the level of indebtedness
and related cash debt service needs could limit the Company's flexibility in
planning for, or reacting to, changes in its Digital Mobile network business;
(iv) the Company is expected to be more highly leveraged than some of its
competitors, which may place it at a competitive disadvantage; and (v) the
Company's high degree of indebtedness and related cash debt service needs will
make it more vulnerable in the event of a downturn in its Digital Mobile network
business.
The Nextel Notes, the NI Notes and the Bank Credit Facility will mature
prior to the maturity of the Notes and prior to the mandatory redemption date of
the Preferred Stock or the maturity of the Exchange Debentures, and the Series D
Preferred Stock will be mandatorily redeemable prior to the mandatory redemption
date of the Preferred Stock and the maturity of the Exchange Debentures. In
addition, cash interest on the Old Senior Notes and 1997 Notes is currently
scheduled to be paid beginning in 1999 and 2003, respectively, and cash
dividends on the Series D Preferred Stock and the Preferred Stock must be paid
beginning in 2002 and 2003, respectively. The Company expects that it may be
necessary to refinance the Nextel Notes, the NI Notes, the Bank Credit Facility,
and, if issued, any Series D Exchange Debentures and any Exchange Debentures at
their respective maturities and the Series D Preferred Stock and the Preferred
Stock at their respective mandatory redemption dates. The Company's ability to
refinance its indebtedness and such preferred stock will depend, among other
factors, on its financial condition at the time of the refinancing, the
restrictions contained in the instruments governing its other indebtedness then
outstanding and other factors beyond the Company's control, including market
conditions. There can be no assurance that the Company will be able to refinance
any of such obligations. If the Nextel Notes, the NI Notes, the Bank Credit
Facility or the Series D Preferred Stock cannot be refinanced, it may cause a
default under the Exchange Indenture, the Senior Notes Indenture or the
Company's other outstanding indebtedness or a Voting Rights Triggering Event
under the Preferred Stock, and the Company may not, in such circumstances, be
able to meet its obligations under the Notes, the Senior Notes Indenture, the
Exchange Debentures, the Exchange Indenture or the Preferred Stock.
Certain United States Federal Income Tax Consequences for Holders of Senior
Notes, Preferred Stock or Exchange Debentures and the Company
The Private Notes were issued at a substantial discount from their
principal amount at maturity. The Exchange Senior Notes should be treated as a
continuation of the Private Notes. Consequently, holders of the Exchange Senior
Notes should be aware that, although cash interest will not accrue on the
Exchange Senior
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Notes prior to February 15, 2003, and there will be no periodic payments of cash
interest on the Exchange Senior Notes prior to August 15, 2003, original issue
discount ("OID") will accrue from the issue date of the Private Notes and will
be includible as interest income periodically (including for periods ending
prior to February 15, 2003) in a holder's gross income for United States federal
income tax purposes in advance of receipt of the cash payments to which the
income is attributable.
Distributions of cash or, to the extent of their issue price, distributions
of additional shares of Preferred Stock on the Preferred Stock, will be treated
as dividends taxable as ordinary income to holders thereof to the extent of
Nextel's current and accumulated earnings and profits as determined under United
States federal income tax principles. Nextel presently does not have any current
or accumulated earnings and profits as determined under United States federal
income tax principles and it is unlikely to have current or accumulated earnings
and profits in the foreseeable future. As a result, until such time as Nextel
does have earnings and profits, distributions of cash and additional Preferred
Stock on the Preferred Stock will be treated as a nontaxable return of capital
and will be applied against and reduce the adjusted tax basis (but not below
zero) in the hands of each holder of the shares of Preferred Stock on which such
distribution is made, thus increasing the amount of any gain (or reducing the
amount of any loss) which would otherwise be realized by such holder upon the
sale or other disposition of such shares of Preferred Stock. In the case of
distributions of additional Preferred Stock, however, such basis reduction
largely should be offset on an overall standpoint by a corresponding amount of
tax basis for a holder in the additional Preferred Stock. Further, until such
time, distributions with respect to the Preferred Stock will not be treated as
dividends for United States federal income tax purposes and, thus, will not
qualify for any dividends received deduction generally available to United
States corporate holders. U.S. holders would recognize gain to the extent that
any distribution were to exceed current or accumulated earnings and profits and
basis in the Preferred Stock.
Upon a redemption of Preferred Stock in exchange for Exchange Debentures,
the holder generally will have capital gain or loss equal to the difference
between the issue price of the Exchange Debentures received and the holder's
adjusted basis in the Preferred Stock redeemed, except to the extent all or a
portion of the Exchange Debentures received is treated as a dividend payment.
Because of Nextel's option through February 15, 2003 to pay interest on the
Exchange Debentures by issuing additional Exchange Debentures, any Exchange
Debentures issued prior to that date likely will be treated as issued with OID
for United States federal income tax purposes, unless under special rules for
interest holidays the amount of OID is treated as de minimis. The holder would
have to accrue all such OID into income over the term of the Exchange
Debentures, but would not treat the receipt of stated interest on the Exchange
Debentures as interest income for United States federal income tax purposes.
Exchange Debentures issued after such date may also bear OID.
The Exchange Debentures may be subject to the rules for "applicable high
yield discount obligations" ("AHYDOS"), in which case Nextel's deduction for OID
on such Exchange Debentures will be substantially deferred, while a portion of
such deduction may be disallowed.
For a discussion of these and other tax issues, see "Certain United States
Federal Income Tax Considerations."
If a bankruptcy case is commenced by or against Nextel under the United
States Bankruptcy Code after the issuance of the Exchange Senior Notes or the
Exchange Debentures, the claim of a holder of Exchange Senior Notes or of
Exchange Debentures with respect to the principal amount thereof may be limited
to an amount equal to the sum of (i) the initial offering price and (ii) that
portion of the OID which is not deemed to constitute "unmatured interest" for
purposes of the United States Bankruptcy Code. Any OID that was not amortized as
of any such bankruptcy filing would constitute "unmatured interest."
Absence of Public Market
The Exchange Senior Notes and the Exchange Preferred Stock are, and the
Exchange Debentures (if issued) will be, new issues of securities for which
there is currently no active trading market. If any such securities are traded
after their initial issuance, they may trade at a discount from their initial
offering price, depending upon the liquidity of such securities, the market for
similar securities and other factors, including
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general economic conditions and the financial condition, performance of, and
prospects for the Company. The Private Notes and the Old Preferred Stock were
sold pursuant to an exemption from registration under applicable securities laws
and are subject to transfer restrictions; accordingly, no public trading market
for the Private Notes and the Old Preferred Stock has developed.
Failure to Exchange Old Securities
The New Securities will be issued in exchange for Old Securities only after
timely receipt by the Notes Exchange Agent or the Preferred Exchange Agent, as
the case may be, of such Old Securities, a properly completed and duly executed
Letter of Transmittal and all other required documents. Therefore, holders of
Old Securities desiring to tender such Old Securities in exchange for New
Securities should allow sufficient time to ensure timely delivery. Neither the
Notes Exchange Agent or Preferred Exchange Agent, as the case may be, nor the
Company are under any duty to give notification of defects or irregularities
with respect to tenders of Old Securities for exchange. Old Securities that are
not tendered or that are tendered but not accepted will, following consummation
of the Exchange Offer, continue to be subject to the existing restrictions upon
transfer thereof and will not retain any rights to registration. See "The
Exchange Offers -- Consequences of Failure to Exchange." In addition, any holder
of Old Securities who tenders in the Exchange Offer for the purpose of
participating in a distribution of the New Securities will be required to comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Each broker-dealer who holds Old
Securities acquired for its own account as a result of market-making or other
trading activities and who receives New Securities for its own account in
exchange for such Old Securities pursuant to the Exchange Offers must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Securities. To the extent that Old Securities are tendered and accepted
in the Exchange Offers, the trading market for untendered and tendered but
unaccepted Old Securities could be adversely affected due to the limited number
of Old Securities that are expected to remain outstanding following the Exchange
Offers. See "Plan of Distribution" and "The Exchange Offers."
FORWARD LOOKING STATEMENTS
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995: A number of the matters and subject areas discussed in the foregoing
"Risk Factors" section and elsewhere herein 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 that Nextel is targeting for its Digital Mobile network service, the
availability of adequate quantities of system infrastructure and subscriber
equipment and components to meet Nextel's service deployment and marketing plans
and customer demand, the success of efforts to improve and satisfactorily
address any issues relating to the Company's Digital Mobile network performance,
the continued successful performance of the Reconfigured iDEN technology being
deployed in the Company's various market areas, the ability to achieve market
penetration and average subscriber revenue levels sufficient to provide
financial viability to the Company's Digital Mobile network business, the
Company's ability to timely and successfully accomplish required scale-up of its
billing, collection, customer care and similar back-room operations to keep pace
with customer growth, increased system usage rates and growth in levels of
accounts receivables being generated by the Digital Mobile network customer
base, 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 and, with specific
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reference to risk factors relating to international operations, in Nextel
International's reports, filed with the Commission including the Annual Reports
on Form 10-K for the year ended December 31, 1997 and the Quarterly Reports on
Form 10-Q for the quarter ended March 31, 1998 of Nextel and Nextel
International, respectively.
THE EXCHANGE OFFERS
PURPOSE AND EFFECT OF THE EXCHANGE OFFERS
On February 11, 1998, the Company sold $1,627,000,000 in principal amount
at maturity of the Private Notes and 750,000 shares of Old Preferred Stock in a
private placement through the Placement Agents to a limited number of "Qualified
Institutional Buyers" (as such term is defined under the Securities Act) and to
persons outside the United States (collectively, the "Purchasers").
Additionally, on May 15, 1998, 21,786 additional shares of Old Preferred Stock
were issued as dividends on the then outstanding shares of Old Preferred Stock.
In connection with the sale of the Old Securities, the Company and the Placement
Agents entered into the Registration Rights Agreements that require the Company,
among other things, to use its best efforts to file with the Commission a
registration statement under the Securities Act covering the offer by the
Company to exchange all of the Old Securities for the New Securities and to
cause such registration statement to become effective under the Securities Act.
The Company is further obligated, upon the effectiveness of that registration
statement, to offer each holder of the Private Notes and each holder of the Old
Preferred Stock the opportunity to exchange such securities for an equal
principal amount at maturity of Exchange Senior Notes or an equal number of
shares of Exchange Preferred Stock. Copies of the Registration Rights Agreements
have been filed as exhibits to the Registration Statement of which this
Prospectus is a part. Such Registration Statement has been filed with the
Commission, and the Exchange Offers are being made pursuant to the Registration
Rights Agreements to satisfy the Company's obligations thereunder. The term
"Holder" with respect to the Exchange Offers means any person in whose name any
Old Securities are registered on the Company's books or any other person who has
obtained a properly completed assignment thereof from the registered Holder.
In order to participate in the Exchange Offers, a Holder must represent to
the Company, among other things, that (i) the New Securities being acquired
pursuant to the Exchange Offers are being obtained in the ordinary course of
business of the person receiving such New Securities, whether or not such person
is the Holder, (ii) neither the Holder nor any such other person is engaging in
or intends to engage in a distribution of such New Securities, (iii) neither the
Holder nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such New Securities, and (iv)
neither the Holder nor any such other person is an "affiliate" (as defined in
Rule 405 of the Securities Act) of the Company. In exchange for properly
tendered Old Securities, the New Securities will be issued without a restrictive
legend and may be reoffered and resold by the Holder without restrictions or
limitations under the Securities Act.
RESALE OF THE NEW SECURITIES
Based on a previous interpretation by the staff of the Commission set forth
in no-action letters issued to third parties, including "Exxon Capital Holdings
Corporation" (available May 13, 1988), the Morgan Stanley Letter, "Mary Kay
Cosmetics, Inc." (available June 5, 1991), "Warnaco, Inc." (available October
11, 1991), and "K-III Communications Corp." (available May 14, 1993), the
Company believes that the New Securities issued pursuant to the Exchange Offers
may be offered for resale, resold, and otherwise transferred by any Holder of
such New Securities (other than any such Holder that is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Securities are acquired in the ordinary
course of such Holder's business and such Holder has no arrangement or
understanding with any person to participate in the distribution of such New
Securities. Any Holder who tenders in the Exchange Offers with the intention of
participating in a distribution of the New Securities cannot rely on such
interpretation by the staff of the Commission as set forth in the Morgan Stanley
Letter and other similar letters and must comply
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with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale transaction. In the event that the
Company's belief regarding resale is inaccurate, Holders of the New Securities
who transfer New Securities in violation of the prospectus delivery provisions
of the Securities Act and without an exemption from registration thereunder may
incur liability thereunder. The Company does not assume, or indemnify Holders
against, such liability. The Exchange Offers are not being made to, nor will the
Company accept surrenders for exchange from, Holders of Old Securities in any
jurisdiction in which the Exchange Offers or the acceptance thereof would not be
in compliance with the securities or blue sky laws of such jurisdiction. Each
broker-dealer that receives New Securities for its own account in exchange for
Old Securities, where such Old Securities were acquired by such broker-dealer as
a result of market-making activities or other trading activities ("Participating
Broker-Dealers"), must acknowledge that it will deliver a prospectus in
connection with any resale of such New Securities. In order to facilitate the
disposition of New Securities by Participating Broker-Dealers, the Company has
agreed, subject to certain conditions, to make this Prospectus, as it may be
amended or supplemented from time to time, available for delivery by
Participating Broker-Dealers to satisfy their prospectus delivery obligations
under the Securities Act. The Company is obligated to deal with only one entity
representing Participating Broker-Dealers (the "Representative"), which shall be
Morgan Stanley & Co. Incorporated unless it elects not to act as the
Representative. Accordingly, any Holder that is a Participating Broker-Dealer
must notify the Representative at the telephone number set forth in the Letter
of Transmittal and comply with the procedures for Participating Brokers-Dealers.
Among other things, the Representative is required to confirm with the Company
on a weekly basis that the Prospectus is available. Accordingly, Participating
Broker-Dealers will be required to confirm such availability with the
Representative on a weekly basis. Pursuant to the Registration Rights
Agreements, the Company is not required to amend or supplement the Prospectus
for a period exceeding 90 days after the Expiration Date except in certain
circumstances involving the suspension of the use thereof by the Company. The
Company has not entered into any arrangement or understanding with any person to
distribute the New Securities to be received in the Exchange Offers. See "Plan
of Distribution."
TERMS OF THE EXCHANGE OFFERS
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old
Securities validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date.
As of the date of this Prospectus, $1,627,000,000 in principal amount at
maturity of the Private Notes and 771,786 shares of the Old Preferred Stock are
outstanding. This Prospectus, together with the Letter of Transmittal, is being
sent to all registered Holders of the Old Securities on the date hereof. There
will be no fixed record date for determining registered Holders of the Old
Securities entitled to participate in the Exchange Offer; however, Holders of
the Old Securities must tender their certificates therefor or cause their Old
Securities to be tendered by book-entry transfer prior to the Expiration Date to
participate.
The form and terms of the New Securities will be the same as the form and
terms of the Old Securities except that the New Securities will be registered
under the Securities Act and hence will not bear legends restricting the
transfer thereof. Following consummation of the Exchange Offers, all rights
under the Registration Rights Agreements accorded to Holders of Old Securities,
including the right to receive additional incremental interest on the Private
Notes and additional dividends on the Old Preferred Stock, to the extent and in
the circumstances specified therein, will terminate.
The Company intends to conduct the Exchange Offers in accordance with the
provisions of the Registration Rights Agreements and the applicable requirements
of the Securities Act and the rules and regulations of the Commission
thereunder. Old Securities that are not tendered for exchange under the Exchange
Offers will remain outstanding and will be entitled to the rights as set forth
in the Senior Notes Indenture, in the case of the Private Notes, and the
Certificate of Designation, in the case of the Old Preferred Stock. Any Old
Securities not tendered for exchange will not retain any rights under the
Registration Rights Agreements and will remain subject to certain transfer
restrictions. See "-- Consequences of Failure to Exchange."
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<PAGE> 44
The Company shall be deemed to have accepted validly tendered Old
Securities when, as and if the Company shall have given oral or written notice
thereof to the Note Exchange Agent or the Preferred Exchange Agent, as the case
may be. The Note Exchange Agent or the Preferred Exchange Agent, as the case may
be, will act as agent for the tendering Holders for the purposes of receiving
the New Securities from the Company. If any tendered Old Securities are not
accepted for exchange because of an invalid tender, the occurrence of certain
other events set forth herein, or otherwise, certificates for any such
unaccepted Old Securities will be returned (or, in the case of Old Securities
tendered by book-entry transfer, such unaccepted Old Securities will be credited
to an account maintained with The Depository Trust Company ("DTC")), without
expense, to the tendering Holder thereof as promptly as practicable after the
Expiration Date. See "-- Procedures for Tendering."
Holders who tender Old Securities in the Exchange Offers will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange pursuant
to the Exchange Offers. The Company will pay all charges and expenses, other
than certain applicable taxes described below, in connection with the Exchange
Offers. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date," shall mean 5:00 p.m., New York City time on
July 16, 1998, unless the Company, in its sole discretion, extends the Exchange
Offers, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offers is extended. The Company may, in its sole
discretion, extend the Expiration Date of or terminate either of the Exchange
Offers without extending the Expiration Date of or terminating the other.
In order to extend the Exchange Offers, the Company will notify the Note
Exchange Agent and the Preferred Exchange Agent of any extension by oral or
written notice prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date and will make a public
announcement thereof.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Securities, to extend the Exchange Offers or to terminate the
Exchange Offers if any of the conditions set forth below under "-- Conditions"
shall not have been satisfied by giving oral or written notice of such delay,
extension, or termination to the Note Exchange Agent and the Preferred Exchange
Agent or (ii) to amend the terms of the Exchange Offers in any manner consistent
with the Registration Rights Agreements. Any such delay in acceptances,
extension, termination, or amendment will be followed as promptly as practicable
by oral or written notice thereof to the registered Holders. If the Exchange
Offers are amended in a manner determined by the Company to constitute a
material change, the Company will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered Holders, and
the Company will extend the Exchange Offers for a period of five to ten business
days, depending upon the significance of the amendment and the manner of
disclosure to the registered Holders, if the Exchange Offers would otherwise
expire during such five to ten business day period.
Without limiting the manner in which the Company may choose to make a
public announcement of any delay, extension, amendment, or termination of the
Exchange Offers, the Company shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency.
Upon satisfaction or waiver of all the conditions to the Exchange Offers,
the Company will accept, promptly after the Expiration Date, all Old Securities
properly tendered and will issue the New Securities promptly after acceptance of
the Old Securities. See "-- Conditions" below. For purposes of the Exchange
Offers, the Company shall be deemed to have accepted properly tendered Old
Securities for exchange when, as and if the Company shall have given oral or
written notice thereof to the Note Exchange Agent or the Preferred Exchange
Agent, as appropriate.
In all cases, issuance of the New Securities for Old Securities that are
accepted for exchange pursuant to the Exchange Offers will be made only after
timely receipt by the Note Exchange Agent or the Preferred
35
<PAGE> 45
Exchange Agent, as the case may be, of certificates for such Old Securities or a
timely confirmation of book-entry transfer (a "Book-Entry Confirmation") of such
Old Securities into the Note Exchange Agent's or the Preferred Exchange Agent's
accounts, as appropriate, at DTC, a properly completed and duly executed Letter
of Transmittal, and all other required documents; provided, however, that the
Company reserves the absolute right to waive any defects or irregularities in
the tender of Old Securities or in the satisfaction of conditions of the
Exchange Offers by a Holder(s). If any tendered Old Securities are not accepted
for any reason set forth in the terms and conditions of the Exchange Offers, if
the Holder withdraws such previously tendered Old Securities, or if Old
Securities are submitted for a greater principal amount of Private Notes or
greater number of shares of Old Preferred Stock than the Holder desires to
exchange, then such unaccepted, withdrawn or portion of non-exchanged Old
Securities, as appropriate, will be returned as promptly as practicable after
the expiration or termination of the Exchange Offers (or, in the case of Old
Securities tendered by book-entry transfer, such unaccepted, withdrawn or
portion of non-exchanged Old Securities, as appropriate, will be credited to an
account maintained with DTC) without expense to the tendering Holder thereof.
CONDITIONS
Notwithstanding any other term of the Exchange Offers, the Company will not
be required to exchange any New Securities for any Old Securities and may
terminate the Exchange Offers before the acceptance of any Old Securities for
exchange, if:
(i) any action or proceeding is instituted or threatened in any
court or by or before any governmental agency with respect to the
Exchange Offers which, in the Company's reasonable judgment, might
materially impair the ability of the Company to proceed with the
Exchange Offers; or
(ii) any law, statute, rule or regulation is proposed, adopted or
enacted, or any interpretation of any existing law, statute, rule or
regulation is issued by the staff of the Commission, which, in the
Company's reasonable judgment, might materially impair the ability of
the Company to proceed with the Exchange Offers; or
(iii) any governmental approval or approval by Holders of the Old
Securities has not been obtained, which approval the Company shall, in
its reasonable judgment, deem necessary for the consummation of the
Exchange Offers as contemplated hereby.
If the Company determines in its sole discretion that any of these
conditions are not satisfied, the Company may (i) refuse to accept any Old
Securities and return all tendered Old Securities to the tendering Holders (or,
in the case of Old Securities tendered by book-entry transfer, credit such Old
Securities to an account maintained with DTC), (ii) extend the Exchange Offers
and retain all Old Securities tendered prior to the expiration of the Exchange
Offers, subject, however, to the rights of Holders who tendered such Old
Securities to withdraw their tendered Old Securities, or (iii) waive such
unsatisfied conditions with respect to the Exchange Offers and accept all
properly tendered Old Securities that have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offers, the Company will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered Holders, and the Company will extend the Exchange
Offers for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
Holders, if the Exchange Offers would otherwise expire during such five to ten
business day period. Each of the Senior Note Exchange Offer and the Preferred
Stock Exchange Offer is separate and distinct and is not conditioned upon the
other. Accordingly, the Company may take any permissible action with respect to
one of the Exchange Offers without taking similar action with respect to the
other.
PROCEDURES FOR TENDERING
To tender in the Exchange Offers, a Holder must complete, sign and date the
Letter of Transmittal, or facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile to the Note Exchange Agent
or the Preferred Exchange Agent, as the case may be, prior to the Expiration
Date. In addition, either (i) certificates for such
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<PAGE> 46
Old Securities must be received by the Note Exchange Agent or the Preferred
Exchange Agent, as the case may be, along with the Letter of Transmittal, or
(ii) a timely Book-Entry Confirmation of such Old Securities, if such procedure
is available, into the Note Exchange Agent's or Preferred Exchange Agent's
account at DTC pursuant to the procedure for book-entry transfer described below
must be received by the Note Exchange Agent or the Preferred Exchange Agent, as
the case may be, prior to the Expiration Date, or (iii) the Holder must comply
with the guaranteed delivery procedures described below. To be tendered
effectively, the Letter of Transmittal and other required documents must be
received by the Note Exchange Agent or the Preferred Exchange Agent, as the case
may be, at the address set forth below under "-- Note Exchange Agent; Preferred
Exchange Agent" prior to the Expiration Date.
The tender by a Holder of Old Securities that is not withdrawn prior to the
Expiration Date will constitute an agreement between such Holder and the Company
in accordance with the terms and subject to the conditions set forth herein and
in the Letter of Transmittal.
THE METHOD OF DELIVERY OF OLD SECURITIES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE NOTE EXCHANGE AGENT OR PREFERRED EXCHANGE
AGENT, AS THE CASE MAY BE, IS AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF
DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND
DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE NOTE EXCHANGE AGENT OR PREFERRED EXCHANGE
AGENT, AS THE CASE MAY BE, BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL
OR OLD SECURITIES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR
RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, OR NOMINEES TO
EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Securities are registered in the name of a
broker, dealer, commercial bank, trust company, or other nominee and who wishes
to tender its Old Securities should contact the registered Holder promptly and
instruct such registered Holder to tender such Old Securities on such beneficial
owner's behalf. If such beneficial owner wishes to tender its Old Securities on
such owner's own behalf, such owner must, prior to completing and executing the
Letter of Transmittal and delivering such owner's Old Securities, either make
appropriate arrangements to register ownership of the Old Securities in such
owner's name or obtain a properly completed assignment from the registered
Holder. The transfer of registered ownership of Old Securities may take
considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined herein)
unless the Old Securities tendered pursuant thereto are tendered (i) by a
registered Holder who has not completed the box entitled "Special Payment
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantor must be a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the U.S. or an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Exchange Act (each, an "Eligible
Institution").
If the Letter of Transmittal is signed by a person other than the
registered Holder of any Old Securities listed therein, such Old Securities must
be endorsed or accompanied by a properly completed bond or stock power, signed
by such registered Holder as such registered Holder's name appears on such Old
Securities.
If the Letter of Transmittal or any Old Securities or bond or stock powers
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
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<PAGE> 47
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Securities, and withdrawal of tendered Old
Securities will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Old Securities not properly tendered or any Old Securities
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Old Securities. The
Company's interpretation of the terms and conditions of the Exchange Offers
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Securities must be cured within such time as the
Company shall determine. Although the Company intends to notify Holders of
defects or irregularities with respect to tenders of Old Securities, none of the
Company, the Note Exchange Agent, the Preferred Exchange Agent or any other
person shall incur any liability for failure to give such notification. Tenders
of Old Securities will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Securities received by the
Note Exchange Agent or the Preferred Exchange Agent, as the case may be, that
are not properly tendered and as to which the defects or irregularities have not
been cured or waived will be returned by the Note Exchange Agent or the
Preferred Exchange Agent, as the case may be, to the tendering Holders, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
In addition, the Company reserves the right, in its sole discretion, to
purchase or make offers for any Old Securities that remain outstanding
subsequent to the Expiration Date or, as set forth above under "-- Conditions,"
to terminate the Exchange Offers and, to the extent permitted by applicable law
and the terms of its agreements relating to its outstanding indebtedness,
purchase Old Securities in the open market, in privately negotiated transactions
or otherwise. The terms of any such purchases or offers could differ from the
terms of the Exchange Offers.
By tendering, each Holder will represent to the Company that, among other
things, (i) the New Securities being acquired pursuant to the Exchange Offers
are being obtained in the ordinary course of business of the person receiving
such New Securities, whether or not such person is the Holder, (ii) neither the
Holder nor any such other person is engaging in or intends to engage in a
distribution of such New Securities, (iii) neither the Holder nor any such other
person has an arrangement or understanding with any person to participate in the
distribution of such New Securities, and (iv) neither the Holder nor any such
other person is an "affiliate" (as defined in Rule 405 of the Securities Act) of
the Company. If the Holder is a Participating Broker-Dealer that will receive
New Securities for such Holder's own account in exchange for Old Securities that
were acquired as a result of market-making activities or other trading
activities, such Holder will be required to acknowledge in the Letter of
Transmittal that such Holder will deliver a prospectus in connection with any
resale of such New Securities and otherwise agree to comply with the procedures
described above under "-- Resale of the New Securities"; however, by so
acknowledging and delivering a prospectus, such Holder will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
In all cases, issuance of New Securities pursuant to the Exchange Offers
will be made only after timely receipt by the Note Exchange Agent or the
Preferred Exchange Agent, as the case may be, of certificates for such Old
Securities or a timely Book-Entry Confirmation of such Old Securities into the
Note Exchange Agent's or the Preferred Exchange Agent's account at DTC, a
properly completed and duly executed Letter of Transmittal, and all other
required documents. If any tendered Old Securities are not accepted for any
reason set forth in the terms and conditions of the Exchange Offers or if Old
Securities are submitted for a greater principal amount of Private Notes or
greater number of shares of Old Preferred Stock than the Holder desires to
exchange, such unaccepted or portion of non-exchanged Old Securities will be
returned as promptly as practicable after the expiration or termination of the
Exchange Offers (or, in the case of Old Securities tendered by book-entry
transfer into the Note Exchange Agent's or Preferred Exchange Agent's account at
DTC pursuant to the book-entry transfer procedures described below, such
unaccepted or portion of non-exchanged Old Securities will be credited to an
account maintained with DTC) without expense to the tendering Holder thereof.
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<PAGE> 48
BOOK-ENTRY TRANSFER
Each of the Note Exchange Agent and the Preferred Exchange Agent will make
a request to establish an account with respect to the Old Securities at DTC for
the purposes of the Exchange Offers within two business days after the date of
this Prospectus, and any financial institution that is a participant in DTC's
systems may make book-entry delivery of Old Securities by causing DTC to
transfer such Old Securities into the Note Exchange Agent's or the Preferred
Exchange Agent's account at DTC in accordance with DTC's procedures for
transfer. However, although delivery of Old Securities may be effected through
book-entry transfer at DTC, the Letter of Transmittal or facsimile thereof, with
any required signature guarantees and any other required documents, must, in any
case, be transmitted to and received by the Note Exchange Agent or the Preferred
Exchange Agent, as the case may be, at the address set forth below under
"-- Note Exchange Agent; Preferred Exchange Agent" on or prior to the Expiration
Date (unless the Holder complies with the guaranteed delivery procedures
described below).
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Securities and (x) whose Old
Securities are not immediately available or (y) who cannot deliver their Old
Securities, the Letter of Transmittal, or any other required documents to the
Note Exchange Agent or the Preferred Exchange Agent, as the case may be, prior
to the Expiration Date, may effect a tender if:
(i) The tender is made through an Eligible Institution;
(ii) Prior to the Expiration Date, the Note Exchange Agent or the
Preferred Exchange Agent, as the case may be, receives from such Eligible
Institution a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by the Company (by facsimile
transmission, mail or hand delivery) setting forth the name and address of
the Holder, the certificate number(s) of such Old Securities and the
principal amount of Private Notes or the number of shares of Old Preferred
Stock tendered and stating that the tender is being made thereby and
guaranteeing that, within three New York Stock Exchange trading days after
the Expiration Date, the Letter of Transmittal (or facsimile thereof)
together with the certificate(s) representing the Old Securities in proper
form for transfer or a Book-Entry Confirmation, as the case may be, and any
other documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Note Exchange Agent or the Preferred
Exchange Agent, as the case may be; and
(iii) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Old Securities in proper form for transfer and other documents required by
the Letter of Transmittal are received by the Note Exchange Agent or the
Preferred Exchange Agent, as the case may be, within three New York Stock
Exchange trading days after the Expiration Date.
Upon request to the Note Exchange Agent or the Preferred Exchange Agent, as
the case may be, a Notice of Guaranteed Delivery will be sent to Holders who
wish to tender their Old Securities according to the guaranteed delivery
procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Securities may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To withdraw a tender of Old Securities in the Exchange Offers, a written or
facsimile transmission notice of withdrawal must be received by the Note
Exchange Agent or the Preferred Exchange Agent, as the case may be, at its
respective address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Securities to be withdrawn (the
"Depositor"), (ii) identify the Old Securities to be withdrawn (including the
certificate number(s)), (iii) be signed by the Holder in the same manner as the
original signature on the Letter of Transmittal by which such Old Securities
were tendered (including any required signature
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<PAGE> 49
guarantees) or be accompanied by documents of transfer sufficient to have the
Note Exchange Agent, with respect to Private Notes, or Preferred Exchange Agent,
with respect to Old Preferred Stock, register the transfer of such Old
Securities in the name of the person withdrawing the tender, and (iv) specify
the name in which any such Old Securities are to be registered, if different
from that of the Depositor. All questions as to the validity, form, and
eligibility (including time of receipt) of such notices will be determined by
the Company, whose determination shall be final and binding on all parties. Any
Old Securities so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offers, and no New Securities will be issued with
respect thereto unless the Old Securities so withdrawn are validly retendered.
Any Old Securities that have been tendered but that are not accepted for payment
will be returned to the Holder thereof (or, in the case of Old Securities
tendered by book-entry transfer, will be credited to an account maintained with
DTC), without cost to such Holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offers. Properly withdrawn
Old Securities may be retendered by following one of the procedures described
above under "-- Procedures for Tendering" at any time prior to the Expiration
Date.
TERMINATION OF CERTAIN RIGHTS
All rights under the Registration Rights Agreements accorded to Holders of
Old Securities will terminate upon the consummation of the Exchange Offers
except with respect to the Company's duty to keep the Registration Statement
effective until the closing of the Exchange Offers and, for a period not to
exceed 90 days after the Expiration Date, to provide copies of the latest
version of this Prospectus to any broker-dealer that requests copies of such
Prospectus for use in connection with any resale by such broker-dealer of New
Securities received for its own account pursuant to the Exchange Offers in
exchange for Old Securities acquired for its own account as a result of
market-making or other trading activities, subject to the conditions described
above under "-- Resale of the New Securities."
NOTE EXCHANGE AGENT; PREFERRED EXCHANGE AGENT
Harris Trust and Savings Bank has been appointed Note Exchange Agent for
the Senior Note Exchange Offer. Questions and requests for assistance, requests
for additional copies of this Prospectus or the Letter of Transmittal, and
requests for copies of the Notice of Guaranteed Delivery with respect to the
Private Notes should be addressed to the Note Exchange Agent as follows:
<TABLE>
<S> <C>
By Hand or Overnight Courier: By Registered or Certified Mail:
Harris Trust and Savings Bank Harris Trust and Savings Bank
c/o Harris Trust Company of New York c/o Harris Trust Company of New York
88 Pine Street P.O. Box 1010
19th Floor Wall Street Station
New York, New York 10005 New York, New York 10268-1010
</TABLE>
By Telephone (to confirm receipt of facsimile):(212) 701-7624
By Facsimile (for Eligible Institutions only): (212) 701-7636
First Chicago Trust Company of New York has been appointed Preferred
Exchange Agent for the Preferred Stock Exchange Offer. Questions and requests
for assistance, requests for additional copies of this Prospectus or the Letter
of Transmittal and requests for copies of the Notice of Guaranteed Delivery with
respect to the Old Preferred Stock should be addressed to the Preferred Exchange
Agent as follows:
40
<PAGE> 50
<TABLE>
<S> <C>
By Mail: By Overnight Courier:
First Chicago Trust Company First Chicago Trust Company
of New York of New York
Suite 4660 Suite 4680
P.O. Box 2569 14 Wall Street
Jersey City, New Jersey 07303-2569 8th Floor
New York, New York 10005
By Hand: By Facsimile (For Eligible
First Chicago Trust Company Institutions Only):
of New York 201-222-4720
Tenders & Exchanges or
c/o The Depository Trust Company 201-222-4721
55 Water Street
DTC TAD By Telephone (To Confirm Receipt of
Vietnam Veterans Memorial Plaza Facsimile):
New York, New York 10041 201-222-4707
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders in connection with the Exchange Offers
will be paid by the Company. The principal solicitation is being made by mail;
however, additional solicitation may be made by telecopier, telephone, or in
person by officers and regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offers and will not make any payments to broker-dealers or others
soliciting acceptances of the Exchange Offers. The Company, however, will pay
the Note Exchange Agent and the Preferred Exchange Agent reasonable and
customary fees for their services and will reimburse them for their reasonable
out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offers
will be paid by the Company and are estimated in the aggregate to be
approximately $450,000. Such expenses include registration fees, fees and
expenses of the Note Exchange Agent and the Preferred Exchange Agent, accounting
and legal fees, and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of the Old Securities pursuant to the Exchange Offers. If, however, certificates
representing Old Securities not tendered or accepted for exchange are to be
delivered to, or are to be issued in the name of, any person other than the
registered Holder of Old Securities tendered, or, if tendered, the certificates
representing Old Securities are registered in the name of any person other than
the person signing the Letter of Transmittal, or if a transfer tax is imposed
for any reason other than the exchange of the Old Securities pursuant to the
Exchange Offers, then the amount of any such transfer taxes (whether imposed on
the registered Holder or any other persons) will be payable by the tendering
Holder. If satisfactory evidence of payment of such transfer taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering Holder and the New
Securities need not be delivered until such transfer taxes are paid.
CONSEQUENCES OF FAILURE TO EXCHANGE
Participation in the Exchange Offers is voluntary. Holders of the Old
Securities are urged to consult their financial and tax advisors in making their
own decisions on what action to take.
Old Securities that are not exchanged for the New Securities pursuant to
the Exchange Offers will not retain any rights under the Registration Rights
Agreements and will remain "restricted securities" within the meaning of Rule
144(a)(3)(iv) of the Securities Act. Accordingly, such Old Securities may not be
offered, sold, pledged, or otherwise transferred except (i) to Nextel or any
subsidiary thereof, (ii) to a "Qualified Institutional Buyer" within the meaning
of Rule 144A under the Securities Act purchasing for its own account or for the
account of a qualified institutional buyer in a transaction meeting the
requirements of Rule 144A,
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<PAGE> 51
(iii) in an offshore transaction complying with Rule 904 of Regulation S under
the Securities Act, (iv) pursuant to an exemption from registration under the
Securities Act provided by Rule 144 thereunder (if available), (v) to
"Institutional Accredited Investors" in a transaction exempt from the
registration requirements of the Securities Act, or (vi) pursuant to an
effective registration statement under the Securities Act, and, in each case, in
accordance with all other applicable securities laws.
ACCOUNTING TREATMENT
For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offers. The New Securities will be recorded at the same
carrying value as the Old Securities, as reflected in the Company's accounting
records on the date of the exchange. The expenses of the Exchange Offers will be
amortized over the term of the New Securities.
TAX CONSEQUENCES
For a description of certain United States federal income tax consequences
to holders of Old Securities tendering in the Exchange Offers, see "Certain
United States Federal Income Tax Consequences."
DESCRIPTION OF EXCHANGE SENIOR NOTES
The Private Notes were, and the Exchange Senior Notes will be, issued under
the Senior Notes Indenture, dated as of February 11, 1998, between the Company,
as issuer, and Harris Trust and Savings Bank, as Trustee. The form and terms of
the Exchange Senior Notes will be the same as the form and terms of the Private
Notes except that the Exchange Senior Notes will be registered under the
Securities Act and hence will not bear legends restricting the transfer thereof.
Following consummation of the Senior Note Exchange Offer, all rights under the
Registration Rights Agreement accorded to holders of Private Notes, including
the right to receive additional incremental interest on the Private Notes, to
the extent and in the circumstances specified therein, will terminate. The terms
of the Exchange Senior Notes include those stated in the Senior Notes Indenture
and those made part of the Senior Notes Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Exchange
Senior Notes will be subject to all such terms, and prospective holders of the
Exchange Senior Notes are referred to the Senior Notes Indenture and the Trust
Indenture Act for a statement of such terms. The following summary of certain
provisions of the Senior Notes Indenture does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the Trust
Indenture Act and to all of the provisions of the Senior Notes Indenture,
including the definitions of certain terms therein and those terms made a part
of the Senior Notes Indenture by reference to the Trust Indenture Act. The
Senior Notes Indenture has been previously filed with the Commission and is
incorporated herein by reference.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Exchange Senior Notes and Senior Notes
Indenture. Reference is made to the terms of the Notes and Senior Notes
Indenture for the full definitions of all such terms as well as any other
capitalized terms used herein for which no definition is provided.
Whenever the Notes or the Senior Notes Indenture requires that a particular
ratio or amount be calculated with respect to a specified period after giving
effect to certain transactions or events on a pro forma basis, such calculation
will be made as if the transactions or events occurred on the first day of such
period, unless otherwise specified. All accounting terms not otherwise defined
in the Notes or the Senior Notes Indenture will have the meanings ascribed to
them in accordance with generally accepted accounting principles (whether or not
such is indicated in the Notes or the Senior Notes Indenture) and, except as
otherwise expressly provided in the Notes or the Senior Notes Indenture, the
term "generally accepted accounting principles," with respect to any computation
required or permitted by the Notes or the Senior Notes Indenture shall mean such
accounting principles as are generally accepted at the date of such computation.
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"Accreted Value" of any outstanding Note as of or to any date of
determination means an amount equal to the sum of (i) the issue price of such
Note as determined in accordance with Section 1273 of the Code plus (ii) the
aggregate of the portions of the original issue discount (the excess of the
amounts considered as part of the "stated redemption price at maturity" of such
Note within the meaning of Section 1273(a)(2) of the Code or any successor
provisions, whether denominated as principal or interest, over the issue price
of such Note) that shall theretofore have accrued pursuant to Section 1272 of
the Code (without regard to Section 1272(a)(7) of the Code) from the date of
issue of such Note (a) for each six-month or shorter period ending February 15
or August 15 prior to the date of determination (each a "Semi-Annual Accrual
Date") and (b) for the shorter period, if any, from the end of the immediately
preceding six-month or shorter period, as the case may be, to the date of
determination, plus (iii) accrued and unpaid interest to the date such Accreted
Value is paid (without duplication of any amount set forth in (ii) above), minus
all amounts theretofore paid in respect of such Note, which amounts are
considered as part of the "stated redemption price at maturity" of such Note
within the meaning of Section 1273(a)(2) of the Code or any successor provisions
(whether such amounts paid were denominated principal or interest).
"Acquired Debt" means Debt of a Person existing at the time such Person
becomes a Restricted Subsidiary or assumed by the Company or a Restricted
Subsidiary in connection with the acquisition of assets from such Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. "Affiliate" shall be deemed to include, but only for
purposes of the "Transactions with Affiliates" covenant and without limiting the
application of the preceding sentence for the purpose of such or any other
section, any Person owning, directly or indirectly, (i) 10% or more of the
Company's outstanding Common Stock or (ii) securities having 10% or more of the
total voting power of the Company's Voting Stock. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing. No individual shall be deemed to be controlled by
or under common control with any specified Person solely by virtue of his or her
status as an employee or officer of such specified Person or of any other Person
controlled by or under common control with such specified Person.
"Annualized Operating Cash Flow" means, for any fiscal quarter, the
Operating Cash Flow for such fiscal quarter multiplied by four.
"Average Life" means, at any date of determination with respect to any
Debt, the quotient obtained by dividing (i) the sum of the products of (a) the
number of years from such date of determination to the dates of each successive
scheduled principal payment of such Debt and (b) the amount of such principal
payment by (ii) the sum of all such principal payments.
"Beneficial Owner" means a beneficial owner as defined in Rules 13d-3 and
13d-5 under the Exchange Act (or any successor rules), including the provision
of such Rules that a person shall be deemed to have beneficial ownership of all
securities that such person has a right to acquire within 60 days, provided that
a person shall not be deemed a beneficial owner of, or to own beneficially, any
securities if such beneficial ownership (1) arises solely as a result of a
revocable proxy delivered in response to a proxy or consent solicitation made
pursuant to, and in accordance with, the Exchange Act and the applicable rules
and regulations thereunder and (2) is not also then reportable on Schedule 13D
(or any successor schedule) under the Exchange Act.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors (unless the context specifically requires that such resolution be
adopted by a majority of the Disinterested Directors, in which case by a
majority of such directors) and to be in full force and effect on the date of
such certification and delivered to the Trustee.
"Capital Lease Obligations" of any Person means the obligations to pay rent
or other amounts under lease of (or other Debt arrangements conveying the right
to use) real or personal property of such Person
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which are required to be classified and accounted for as a capital lease or a
liability on the face of a balance sheet of such Person determined in accordance
with generally accepted accounting principles and the amount of such obligations
shall be the capitalized amount thereof in accordance with generally accepted
accounting principles and the stated maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of stock of, or other
ownership interests in, such Person.
"Change of Control" means the occurrence of any of the following events:
(a) any person (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act and the regulations thereunder) is or becomes the
Beneficial Owner, directly or indirectly, of more than 50% of the total
Voting Stock or Total Common Equity of the Company; provided that no Change
of Control shall be deemed to occur pursuant to this clause (a) (x) if the
person is a corporation with outstanding debt securities having a maturity
at original issuance of at least one year and if such debt securities are
rated Investment Grade by S&P or Moody's for a period of at least 90
consecutive days, beginning on the date of such event (which period will be
extended up to 90 additional days for as long as the rating of such debt
securities is under publicly announced consideration for possible
downgrading by the applicable rating agency), or (y) if the person is a
corporation (1) that is not, and does not have any outstanding debt
securities that are, rated by S&P, Moody's or any other rating agency of
national standing at any time during a period of 90 consecutive days
beginning on the date of such event (which period will be extended up to an
additional 90 days for as long as any such rating agency has publicly
announced that such corporation or debt thereof will be rated), unless
after such date but during such period debt securities of such corporation
having a maturity at original issuance of at least one year are rated
Investment Grade by S&P or Moody's and remain so rated for the remainder of
the period referred to in clause (x) above and (2) that, when determined as
of the Trading Day immediately before and the Trading Day immediately after
the date of such event, has Total Common Equity of at least $10 billion
(provided that, solely for the purpose of calculating Total Common Equity
as of such later Trading Day, the average Closing Price of the Common Stock
of such person shall be deemed to equal the Closing Price of such Common
Stock on such later Trading Day, subject to the last sentence of the
definition of "Total Common Equity"); or
(b) the Company consolidates with, or merges with or into, another
Person or sells, assigns, conveys, transfers, leases or otherwise disposes
of all or substantially all of its assets to any Person, or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other
property, other than any such transaction where (i) the outstanding Voting
Stock of the Company is converted into or exchanged for (1) Voting Stock
(other than Redeemable Stock) of the surviving or transferee Person or (2)
cash, securities and other property in an amount which could be paid by the
Company as a Restricted Payment under the Senior Notes Indenture and (ii)
immediately after such transaction no person (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act and the regulations
thereunder) is the Beneficial Owner, directly or indirectly, of more than
50% of the total Voting Stock or Total Common Equity of the surviving or
transferee Person; provided that no Change of Control shall be deemed to
occur pursuant to this clause (b), (x) if the surviving or transferee
Person or the person referred to in clause (b)(ii) is a corporation with
outstanding debt securities having a maturity at original issuance of at
least one year and if such debt securities are rated Investment Grade by
S&P or Moody's for a period of at least 90 consecutive days, beginning on
the date of such event (which period will be extended up to 90 additional
days for as long as the rating of such debt securities is under publicly
announced consideration for possible downgrading by the applicable rating
agency), or (y) if the surviving or transferee Person or such other person
is a corporation (1) that is not, and does not have any outstanding debt
securities that are, rated by S&P, Moody's or any other rating agency of
national standing at any time during a period of 90 consecutive days
beginning on the date of such event (which period will be extended up to an
additional 90 days for as long as any such rating agency has
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publicly announced that such corporation or debt thereof will be rated),
unless after such date but during such period debt securities of such
corporation having a maturity at original issuance of at least one year are
rated Investment Grade by S&P or Moody's and remain so rated for the
remainder of the period referred to in clause (x) above and (2) that, when
determined as of the Trading Day immediately before and the Trading Day
immediately after the date of such event, has Total Common Equity of at
least $10 billion (provided that, solely for the purpose of calculating
Total Common Equity as of such later Trading Day, the average Closing Price
of the Common Stock of such person shall be deemed to equal the Closing
Price of such Common Stock on such later Trading Day, subject to the last
sentence of the definition of "Total Common Equity"); or
(c) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors (together with
any directors who are members of the Board of Directors on February 11,
1998 and any new directors whose election by such Board of Directors or
whose nomination for election by the stockholders of the Company was
approved by a vote of 66 2/3% of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors then in office.
Any event that would constitute a Change of Control pursuant to clause (a)
or (b) above (i) but for the proviso thereto shall not be deemed to be a Change
of Control until such time (if any) as the conditions described in such proviso
cease to have been met and (ii) if and to the extent resulting from any
restructuring transaction or any sale or assignment of all or substantially all
of the assets and liabilities of the Company to, or merger or consolidation of
the Company with, any Person (any such transaction, a "Restructuring
Transaction") effected at substantially the same time as and in connection with
any of the Permitted Transactions described in clause (i) of the definition of
the term "Permitted Transactions" shall not constitute a Change of Control so
long as the Persons who, immediately prior to the closing of such Restructuring
Transaction and the particular Permitted Transaction being consummated at
substantially the same time and in connection therewith (the "Restructuring
Closing"), were the Beneficial Owners, directly or indirectly, of more than 50%
of the total Voting Stock and more than 50% of the Total Common Equity of the
Company would remain, immediately after such Restructuring Closing (and after
taking into account all issuances of securities in such Restructuring
Transaction and related Permitted Transaction), the Beneficial Owners, directly
or indirectly, of more than 50% of the total Voting Stock and more than 50% of
the Total Common Equity of the Company (or the surviving transferee Person, as
the case may be); provided that, immediately after any transaction or
combination of transactions described in this clause (ii), no person (as such
term is used in Sections 13(d) and 14(a) of the Exchange Act and the regulations
thereunder) is the ultimate Beneficial Owner of more than 50% of the total
Voting Stock or more than 50% of the Total Common Equity of the Company (or the
surviving transferee Person, as the case may be) unless such person (as so
defined) was the Beneficial Owner of more than 50% of the total Voting Stock and
more than 50% of the Total Common Equity of the Company immediately before such
transaction or combination of transactions.
"Closing Date" means February 11, 1998, the date on which the Private Notes
were originally issued under the Senior Notes Indenture.
"Closing Price" on any Trading Day with respect to the per share price of
any shares of Capital Stock means the last reported sale price regular way or,
in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the New
York Stock Exchange or, if such shares of Capital Stock are not listed or
admitted to trading on such exchange, on the principal national securities
exchange on which such shares are listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on the Nasdaq
Stock Market or, if such shares are not listed or admitted to trading on any
national securities exchange or quoted on the Nasdaq Stock Market but the issuer
is a Foreign Issuer (as defined in Rule 3b-4(b) under the Exchange Act) and the
principal securities exchange on which such shares are listed or admitted to
trading is a Designated Offshore Securities Market (as defined in Rule 902(a)
under the Securities Act), the average of the reported closing bid and asked
prices regular way on such principal exchange, or, if such shares are not listed
or admitted to trading on any national securities exchange or quoted on the
Nasdaq Stock Market and the issuer and principal securities
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exchange do not meet such requirements, the average of the closing bid and asked
prices in the over-the-counter market as furnished by any New York Stock
Exchange member firm of national standing that is selected from time to time by
the Company for that purpose.
"Code" means the Internal Revenue Code, as amended from time to time, and
the rules and regulations thereunder.
"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Consolidated Adjusted Net Income" and "Consolidated Adjusted Net Loss"
mean, for any period, the net income or net loss, as the case may be, of the
Company and its Restricted Subsidiaries for such period, all as determined on a
Consolidated basis in accordance with generally accepted accounting principles,
adjusted, to the extent included in calculating such net income or net loss, as
the case may be, by excluding without duplication (a) any after-tax gain or loss
attributable to the sale, conversion or other disposition of assets other than
in the ordinary course of business, (b) any after-tax gains resulting from the
write-up of assets and any loss resulting from the write-down of assets, (c) any
after-tax gain or loss on the repurchase or redemption of any securities
(including in connection with the early retirement or defeasance of any Debt),
(d) any foreign exchange gain or loss, (e) all payments in respect of dividends
on shares of Preferred Capital Stock of the Company, (f) any other
extraordinary, non-recurring or unusual items incurred by the Company or any of
its Restricted Subsidiaries, (g) the net income (or loss) of any Person acquired
by the Company or any Restricted Subsidiary in a pooling-of-interests
transaction for any period prior to the date of such transaction and (h) all
income or losses of Unrestricted Subsidiaries and Persons (other than
Subsidiaries) accounted for by the Company using the equity method of accounting
except, in the case of any such income, to the extent of dividends, interest or
other cash distributions received directly or indirectly from any such
Unrestricted Subsidiary or Person.
"Consolidated Adjusted Net Income (Loss)" means, for any period, the
Company's Consolidated Adjusted Net Income or Consolidated Adjusted Net Loss for
such period, as applicable.
"Consolidated Debt to Annualized Operating Cash Flow Ratio" means, as at
any date of determination, the ratio of (i) the aggregate amount of Debt of the
Company and the Restricted Subsidiaries on a Consolidated basis outstanding as
at the date of determination to (ii) the Annualized Operating Cash Flow of the
Company for the most recently completed fiscal quarter of the Company.
"Consolidated Interest Expense" of any Person means, for any period, the
aggregate interest expense and fees and other financing costs in respect of Debt
(including amortization of original issue discount and non-cash interest
payments and accruals), the interest component in respect of Capital Lease
Obligations and any deferred payment obligations of such Person and its
Restricted Subsidiaries, determined on a consolidated basis in accordance with
generally accepted accounting principles and all commissions, discounts, other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing and net costs (including amortizations of discounts) associated with
interest rate swap and similar agreements and with foreign currency hedge,
exchange and similar agreements and the amount of dividends paid in respect of
Redeemable Stock.
"Consolidated Net Income" and "Consolidated Net Loss" mean, for any period,
the net income or net loss, as the case may be, of the Company and its
Restricted Subsidiaries for such period, all as determined on a Consolidated
basis in accordance with generally accepted accounting principles, adjusted, to
the extent included in calculating such net income or net loss, as the case may
be, by excluding without duplication (a) any after-tax gain or loss attributable
to the sale, conversion or other disposition of assets other than in the
ordinary course of business, (b) any after-tax gains resulting from the write-up
of assets and any loss resulting from the write-down of assets, (c) any
after-tax gain or loss on the repurchase or redemption of any securities
(including in connection with the early retirement or defeasance of any Debt),
(d) any foreign exchange gain or loss, (e) all payments in respect of dividends
on shares of Preferred Capital Stock of the Company, (f) any other
extraordinary, non-recurring or unusual items incurred by the Company or any of
its Restricted
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Subsidiaries, (g) the net income (or loss) of any Person acquired by the Company
or any Restricted Subsidiary in a pooling-of-interests transaction for any
period prior to the date of such transaction, (h) all income or losses of
Unrestricted Subsidiaries and Persons (other than Subsidiaries) accounted for by
the Company using the equity method of accounting except, in the case of any
such income, to the extent of dividends, interest or other cash distributions
received directly or indirectly from any such Unrestricted Subsidiary or Person
and (i) the net income (but not net loss) of any Restricted Subsidiary which is
subject to restrictions which prevent the payment of dividends or the making of
distributions to the Company but only to the extent of such restrictions.
"Consolidated Net Income (Loss)" means, for any period, the Company's
Consolidated Net Income or Consolidated Net Loss for such period, as applicable.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a Consolidated basis in accordance with
generally accepted accounting principles, less amounts attributable to
Redeemable Stock of such Person; provided that, with respect to the Company, no
effect shall be given to adjustments following the Closing Date to the
accounting books and records of the Company in accordance with Accounting
Principles Board Opinions Nos. 16 and 17 (or successor opinions thereto) or
otherwise resulting from the acquisition of control of the Company by another
Person.
"Consolidation" means the consolidation of the accounts of each of the
Restricted Subsidiaries with those of the Company, if and to the extent that the
accounts of each such Restricted Subsidiary would normally be consolidated with
those of the Company in accordance with generally accepted accounting
principles; provided, however, that "Consolidation" shall not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of the Company or any Restricted Subsidiary in any Unrestricted Subsidiary shall
be accounted for as an investment. The term "Consolidated" has a correlative
meaning.
"Credit Facility" means any credit facility (whether a term or revolving
type) of the type customarily entered into with banks, between the Company
and/or any of its Restricted Subsidiaries, on the one hand, and any banks or
other lenders, on the other hand (and any renewals, refundings, extensions or
replacements of any such credit facility), which credit facility is designated
by the Company as a "Credit Facility" for purposes of the Senior Notes
Indenture, and shall include all such credit facilities in existence on the
Closing Date whether or not so designated, to the extent that the aggregate
principal balance of Debt that is Incurred and outstanding under all Credit
Facilities at any time does not exceed $3.0 billion.
"Debt" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or not
contingent, (i) every obligation of such Person for money borrowed, (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations Incurred in connection with the acquisition
of property, assets or businesses, (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business which are not overdue or which are being contested
in good faith), (v) every Capital Lease Obligation of such Person, (vi) the
maximum fixed redemption or repurchase price of Redeemable Stock of such Person
at the time of determination plus accrued but unpaid dividends, (vii) every
obligation of such Person under interest rate swap or similar agreements or
foreign currency hedge, exchange or similar agreements of such Person, and
(viii) every obligation of the type referred to in clauses (i) through (vii) of
another Person and all dividends of another Person the payment of which, in
either case, such Person has Guaranteed or is responsible or liable, directly or
indirectly, as obligor, Guarantor or otherwise. The amount of Debt of any Person
issued with original issue discount is the face amount of such Debt less the
unamortized portion of the original issue discount of such Debt at the time of
its issuance as determined in conformity with generally accepted accounting
principles, and money borrowed at the time of the Incurrence of any Debt in
order to pre-fund the payment of interest on such Debt shall be deemed not to be
"Debt."
"Default" means an event that is, or after notice or passage of time, or
both, would be, an Event of Default.
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"Default Amount" means in respect of any Note (i) as of any particular date
prior to February 15, 2003, the Accreted Value of the Note as of such date or
(ii) as of any particular date on and after February 15, 2003, 100% of the
principal amount payable in respect of the Note at the Stated Maturity thereof.
"Digital Mobile" means a radio communications system that employs digital
technology with a multi-site configuration that will permit frequency reuse as
described in that certain Offering Memorandum dated February 6, 1998, pursuant
to which the Private Notes were offered.
"Digital Mobile-SMR Operating Cash Flow" means, for any fiscal quarter, (i)
the net income or loss, as the case may be, of the Company and its Restricted
Subsidiaries from its Digital Mobile and Specialized Mobile Radio businesses and
related activities and services for such fiscal quarter, plus (ii) depreciation
and amortization charged with respect thereto for such fiscal quarter, all as
determined on a Consolidated basis in accordance with generally accepted
accounting principles, adjusted, to the extent included in calculating such net
income or loss, by excluding (a) any after-tax gain or loss attributable to the
sale, conversion or other disposition of assets other than in the ordinary
course of business, (b) any gains resulting from the write-up of assets and any
loss resulting from the write-down of assets, (c) any gain or loss on the
repurchase or redemption of any securities (including in connection with the
early retirement or defeasance of any Debt), (d) any foreign exchange gain or
loss, (e) any other extraordinary, non-recurring or unusual items and (f) all
income or losses of Persons (other than Subsidiaries) accounted for by the
Company using the equity method of accounting, except, in the case of any such
income, to the extent of dividends, interest or other cash distributions
received directly or indirectly from any such Person, plus (iii) all amounts
deducted in calculating net income or loss for such fiscal quarter in respect of
interest expense and other financing costs and all income taxes, whether or not
deferred, applicable to such fiscal quarter, all as determined on a Consolidated
basis in accordance with generally accepted accounting principles.
"Directed Investment" by the Company or any of its Restricted Subsidiaries
means any Investment for which the cash or property used for such Investment is
received by the Company from the issuance and sale (other than to a Restricted
Subsidiary) on or after June 1, 1997 of shares of its Capital Stock (other than
the Series D Preferred Stock and Redeemable Stock), or any options, warrants or
other rights to purchase such Capital Stock (other than the Series D Preferred
Stock and Redeemable Stock) designated by the Board of Directors as a "Directed
Investment" to be used for one or more specified investments in the
telecommunications business (including related activities and services) and is
so designated and used at any time within 365 days after the receipt thereof;
provided that the aggregate amount of any such Directed Investments may not at
any time exceed fifty percent (50%) of the aggregate amount of such cash or
property received by the Company on or after June 1, 1997 from any such issuance
and sale or capital contribution; and provided further that any proceeds from
any such issuance or sale may not be used for such an Investment if such
proceeds were, prior to being designated for use as a Directed Investment, (x)
used to make a Restricted Payment or (y) used as the basis for the Incurrence of
Debt under clause (i) of the "Limitation on Consolidated Debt" covenant unless
and until the amount of any such Debt (I) is treated as newly issued Debt and
could be Incurred in accordance with the "Limitation on Consolidated Debt"
covenant (other than under clause (i) thereof) or (II) has been repaid or
refinanced with the proceeds of Debt Incurred in accordance with the "Limitation
on Consolidated Debt" covenant (other than under clause (i) thereof) or (III)
has otherwise been repaid and, in the circumstances described in clauses (I) and
(II), the Company delivers to the Trustee a certificate confirming that the
requirements of such clauses have been met.
"Disinterested Director" means, with respect to any proposed transaction
between the Company and an Affiliate thereof, a member of the Board of Directors
who is not an officer or employee of the Company, would not be a party to, or
have a financial interest in, such transaction and is not an officer, director
or employee of, and does not have a financial interest in, such Affiliate. For
purposes of this definition, no person would be deemed not to be a Disinterested
Director solely because such person holds Capital Stock of the Company.
"Existing Indentures" means the indentures relating to the Existing Senior
Notes.
"Existing Senior Notes" means the Company's $525,855,000 principal amount
at maturity of 11 1/2% Senior Redeemable Discount Notes Due 2003, $1,126,435,000
principal amount at maturity of 9 3/4% Senior Redeemable Discount Notes Due
2004, $541,830,000 principal amount at maturity of 12 1/4% Senior
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Redeemable Discount Notes Due 2004, $111,165,000 principal amount at maturity of
10 1/4% Senior Redeemable Discount Notes Due 2005, $409,876,000 principal amount
at maturity of 10 1/8% Senior Redeemable Discount Notes Due 2004, $840,000,000
principal amount at maturity of 10.65% Senior Redeemable Discount Notes Due 2007
and $1,129,100,000 principal amount at maturity of 9 3/4% Senior Serial
Redeemable Discount Notes Due 2007.
"Fair Market Value" means, for purposes of clause (i) of the "Limitation on
Consolidated Debt" covenant, the price that would be paid in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined in
good faith by the Board of Directors, whose determination shall be conclusive if
evidenced by a Board Resolution; provided that (x) the Fair Market Value of any
security registered under the Exchange Act shall be the average of the closing
prices, regular way, of such security for the 20 consecutive trading days
immediately preceding the sale of Capital Stock and (y) in the event the
aggregate Fair Market Value of any other property received by the Company
exceeds $10 million, the Fair Market Value of such property shall be (i) so long
as such a Fair Market Value determination of such property is required to be
made pursuant to the Certificate of Designation for the Series D Preferred Stock
or pursuant to the terms of the Series D Debenture Indenture, the Fair Market
Value as so determined, which shall be set forth in an Officer's Certificate
delivered to the Trustee, and (ii) otherwise, such Fair Market Value shall be as
determined in good faith by the Board of Directors, including a majority of the
Disinterested Directors who are then members of such Board of Directors, which
determination shall be conclusive if evidenced by a Board Resolution.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person guaranteeing any Debt of any other Person (the "primary obligor") in
any manner, whether directly or indirectly, and including any obligation of such
Person, (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or to purchase (or to advance or supply funds for the
purchase of) any security for the payment of such Debt, (ii) to purchase
property, securities or services for the purpose of assuring the holder of such
Debt of the payment of such Debt, or (iii) to maintain working capital, equity
capital or other financial statement condition or liquidity of the primary
obligor so as to enable the primary obligor to pay such Debt (and "Guaranteed",
"Guaranteeing" and "Guarantor" shall have meanings correlative to the
foregoing); provided, however, that the Guarantee by any Person shall not
include endorsements by such Person for collection or deposit, in either case,
in the ordinary course of business.
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by conversion, exchange or otherwise), assume (pursuant
to a merger, consolidation, acquisition or other transaction), Guarantee or
otherwise become liable in respect of such Debt or other obligation or the
recording, as required pursuant to generally accepted accounting principles or
otherwise, of any such Debt or other obligation on the balance sheet of such
Person (and "Incurrence" and "Incurred", shall have meanings correlative to the
foregoing); provided, however, that a change in generally accepted accounting
principles that results in an obligation of such Person that exists at such time
becoming Debt shall not be deemed an Incurrence of such Debt; provided further,
however, that the accretion of original issue discount on Debt shall not be
deemed to be an Incurrence of Debt. Debt otherwise Incurred by a Person before
it becomes a Subsidiary of the Company shall be deemed to have been Incurred at
the time it becomes such a Subsidiary.
"Investment" by any Person means any direct or indirect loan, advance or
other extension of credit or capital contribution to (by means of transfers of
cash or other property to others or payments for property or services for the
account or use of others, or otherwise), or purchase or acquisition of Capital
Stock, bonds, notes, debentures or other securities or evidence of Debt issued
by, any other Person or the designation of a Subsidiary as an Unrestricted
Subsidiary; provided that a transaction will not be an Investment to the extent
it involves (i) the issuance or sale by the Company of its Capital Stock (other
than Redeemable Stock), including options, warrants or other rights to acquire
such Capital Stock (other than Redeemable Stock) or (ii) a transfer, assignment
or contribution by the Company of shares of Capital Stock (or any options,
warrants or rights to acquire Capital Stock), or all or substantially all of the
assets of, any Unrestricted Subsidiary of the Company to another Unrestricted
Subsidiary of the Company.
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"Investment Grade" means a rating of at least BBB--, in the case of S&P, or
Baa3, in the case of Moody's.
"Licenses" means SMR licenses granted by the FCC that entitle the holder to
use the radio channels covered thereby, subject to compliance with FCC rules and
regulations, in connection with its SMR business.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement, encumbrance, preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
on or with respect to such property or assets (including any conditional sale or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"Marketable Securities" means:
(1) securities either issued directly or fully guaranteed or insured
by the government of the United States of America or any agency or
instrumentality thereof having maturities of not more than six months;
(2) time deposits and certificates of deposit, having maturities of
not more than six months from the date of deposit, of any domestic
commercial bank having capital and surplus in excess of $500 million and
having outstanding long-term debt rated A or better (or the equivalent
thereof) by S&P or Aaa or better (or the equivalent thereof) by Moody's;
and
(3) commercial paper rated A-1 or the equivalent thereof by S&P or P-1
or the equivalent thereof by Moody's, and in each case maturing within six
months.
"Moody's" means Moody's Investors Service, Inc. or, if Moody's Investors
Service, Inc. shall cease rating debt securities having a maturity at original
issuance of at least one year and such ratings business shall have been
transferred to a successor Person, such successor Person; provided, however,
that if Moody's Investors Service, Inc. ceases rating debt securities having a
maturity at original issuance of at least one year and its ratings business with
respect thereto shall not have been transferred to any successor Person, then
"Moody's" shall mean any other national recognized rating agency (other than
S&P) that rates debt securities having a maturity at original issuance of at
least one year and that shall have been designated by the Company by a written
notice given to the Trustee.
"October Notes" means the Company's 9 3/4% Senior Serial Redeemable
Discount Notes due 2007.
"Offer to Purchase" means a written offer (the "Offer") sent by the Company
by first class mail, postage prepaid, to each holder at his address appearing in
the security register maintained by the Trustee (the "Security Register") on the
date of the Offer offering to purchase the Notes at the purchase price specified
in such Offer (as determined pursuant to the Senior Notes Indenture). Unless
otherwise required by applicable law, the Offer shall specify an expiration date
(the "Expiration Date") of the Offer to Purchase which shall be, subject to any
contrary requirements of applicable law, not less than 30 days or more than 60
days after the date of such Offer and a settlement date (the "Purchase Date")
for purchase of Notes within five Business Days after the Expiration Date. The
Company shall notify the Trustee at least 15 days (or such shorter period as is
acceptable to the Trustee), prior to the mailing of the Offer of the Company's
obligation to make an Offer to Purchase, and the Offer shall be mailed by the
Company or, at the Company's request, by the Trustee, in the name and at the
expense of the Company. The Offer shall contain information concerning the
business of the Company and its Subsidiaries which, at a minimum, shall include
(i) the most recent annual and quarterly financial statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained in the documents required to be filed with the Trustee pursuant to the
Senior Notes Indenture (which requirements may be satisfied by delivery of such
documents together with the Offer), (ii) a description of material developments
in the Company's business subsequent to the date of the latest of such financial
statements referred to in clause (i) (including a description of the events
requiring the Company to make the Offer to Purchase), (iii) if required under
applicable law, pro forma financial information concerning, among other things,
the Offer to Purchase and the events requiring the Company to make the Offer to
Purchase and (iv) any other information required by applicable law to be
included therein. The Offer
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shall contain all instructions and materials necessary to enable such holders to
tender their Notes pursuant to the Offer to Purchase. The Offer shall also
state:
(1) the section of the Senior Notes Indenture pursuant to which the
Offer to Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount at Stated Maturity of the
outstanding Notes offered to be purchased by the Company pursuant to the
Offer to Purchase (the "Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000
principal amount at Stated Maturity of Notes accepted for payment (as
specified pursuant to the Senior Notes Indenture) (the "Purchase Price");
(5) the holder may tender all or any portion of the Notes registered
in the name of such holder and that any portion of Notes tendered must be
tendered in an integral multiple of $1,000 of principal amount at Stated
Maturity;
(6) the place or places where the Notes are to be surrendered for
tender pursuant to the Offer to Purchase;
(7) that interest, if any, on any Notes not tendered or tendered but
not purchased by the Company pursuant to the Offer to Purchase will
continue to accrue;
(8) that on the Purchase Date the Purchase Price will become due and
payable upon each Note being accepted for payment pursuant to the Offer to
Purchase;
(9) that each holder electing to tender Notes pursuant to the Offer to
Purchase will be required to surrender such Notes at the place or places
specified in the Offer prior to the close of business on the Expiration
Date (such Notes being, if the Company or the Trustee so requires, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by the holder
thereof or his attorney duly authorized in writing);
(10) that holders will be entitled to withdraw all or any portion of
the Notes tendered if the Company (or its Paying Agent) receives, not later
than the close of business on the Expiration Date, a facsimile transmission
or letter setting forth the name of the holder, the principal amount at
Stated Maturity of the Notes the holder tendered, the certificate number of
the Notes the holder tendered and a statement that such holder is
withdrawing all or a portion of his tender;
(11) that the Company shall purchase all such Notes duly tendered and
not withdrawn pursuant to the Offer to Purchase; and
(12) that in the case of any holder whose Notes are purchased only in
part, the Company shall execute, and the Trustee shall authenticate and
deliver to the holder of such Notes without service charge, new Notes of
any authorized denomination as requested by such holder, in an aggregate
principal amount at Stated Maturity equal to and in exchange for the
unpurchased portion of the aggregate principal amount at Stated Maturity of
the Notes so tendered.
Any Offer to Purchase shall be governed by and effected in accordance with
the Offer for such Offer to Purchase.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, the President or Vice President, and by the Treasurer, an Assistant
Treasurer, the Secretary, or an Assistant Secretary, of the Company, and
delivered to the Trustee.
"Operating Cash Flow" means, for any fiscal quarter, (i) the Company's
Consolidated Adjusted Net Income (Loss) plus depreciation and amortization in
respect thereof for such fiscal quarter, plus (ii) all amounts deducted in
calculating Consolidated Adjusted Net Income (Loss) for such fiscal quarter in
respect of interest expense and other financing costs, including dividends paid
in respect of Redeemable Stock, and all
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income taxes, whether or not deferred, applicable to such income period, all as
determined on a Consolidated basis in accordance with generally accepted
accounting principles. For purposes of calculating Operating Cash Flow for the
fiscal quarter most recently completed prior to any date on which an action is
taken that requires a calculation of the Operating Cash Flow to Consolidated
Interest Expense Ratio or Consolidated Debt to Annualized Cash Flow Ratio, (1)
any Person that is a Restricted Subsidiary on such date (or would become a
Restricted Subsidiary in connection with the transaction that requires the
determination of such ratio) will be deemed to have been a Restricted Subsidiary
at all times during such fiscal quarter, (2) any Person that is not a Restricted
Subsidiary on such date (or would cease to be a Restricted Subsidiary in
connection with the transaction that requires the determination of such ratio)
will be deemed not to have been a Restricted Subsidiary at any time during such
fiscal quarter and (3) if the Company or any Restricted Subsidiary shall have in
any manner acquired (including through commencement of activities constituting
such operating business) or disposed (including through termination or
discontinuance of activities constituting such operating business) of any
operating business during or subsequent to the most recently completed fiscal
quarter, such calculation will be made on a pro forma basis on the assumption
that such acquisition or disposition had been completed on the first day of such
completed fiscal quarter.
"Operating Cash Flow to Consolidated Interest Expense Ratio" means, as at
any date of determination, the ratio of (i) the Operating Cash Flow of the
Company for the most recently completed fiscal quarter of the Company to (ii)
the Consolidated Interest Expense of the Company and its Restricted Subsidiaries
for the most recently completed fiscal quarter of the Company.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Notes on behalf of the
Company.
"Permitted Debt" means:
(i) any Debt (including Guarantees thereof) outstanding on the Closing
Date (including the Notes) and any accretion of original issue discount and
accrual of interest with respect to such Debt;
(ii) any Debt outstanding under a Credit Facility;
(iii) any Vendor Financing Debt or any other Debt Incurred to finance
the cost (including the cost of design, development, construction,
improvement, installation or integration) of equipment, inventory or
network assets acquired by the Company or any of its Restricted
Subsidiaries after the Closing Date;
(iv) Debt (A) to the Company or (B) to any Restricted Subsidiary;
provided that any event which results in any such Restricted Subsidiary
ceasing to be a Restricted Subsidiary or any subsequent transfer of such
Debt (other than to the Company or another Restricted Subsidiary) shall be
deemed, in each case, to constitute an Incurrence of such Debt not
permitted by this clause (iv);
(v) Debt (A) in respect of performance, surety or appeal bonds
provided in the ordinary course of business, (B) under foreign currency
hedge, interest rate swap or similar agreements; provided that such
agreements (a) are designed solely to protect the Company or its Restricted
Subsidiaries against fluctuations in foreign currency exchange rates or
interest rates and (b) do not increase the Debt of the obligor outstanding
at any time other than as a result of fluctuations in foreign currency
exchange rates or interest rates or by reason of fees, indemnities and
compensation payable thereunder; and (C) arising from agreements providing
for indemnification, adjustment of purchase price or similar obligations,
or from Guarantees or letters of credit, surety bonds or performance bonds
securing any obligations of the Company or any Restricted Subsidiary
pursuant to such agreements, in any case Incurred in connection with the
disposition of any business, assets or Restricted Subsidiary (other than
Guarantees of Debt Incurred by any Person acquiring all or any portion of
such business, assets or Restricted Subsidiary for the purpose of financing
such acquisition), in a principal amount not to exceed the gross proceeds
actually received by the Company or any Restricted Subsidiary in connection
with such disposition;
(vi) renewals, refundings or extensions of any Debt referred to in
clause (i) or (iii) above or Incurred pursuant to clause (ii) of the
"Limitation on Consolidated Debt" covenant and any renewals, refundings or
extensions thereof, plus (A) the amount of any premium reasonably
determined by the
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Company as necessary to accomplish such renewal, refunding or extension and
(B) such other fees and expenses of the Company reasonably incurred in
connection with the renewal, refunding or extension, provided that such
renewal, refunding or extension shall constitute Permitted Debt only (a) to
the extent that it does not result in an increase in the aggregate
principal amount (or, if such Debt provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration of the maturity thereof, in an amount not greater than such
lesser amount) of such Debt (except as permitted by clause (A) or (B)
above), and (b) to the extent such renewed, refunded or extended Debt does
not have a mandatory redemption date prior to the mandatory redemption date
of the Debt being renewed, refunded or extended or have an Average Life
shorter than the remaining Average Life of the Debt being renewed, refunded
or extended; and
(vii) Debt payable solely in, or mandatorily convertible into, Capital
Stock (other than Redeemable Stock) of the Company;
(viii) Debt (in addition to Debt permitted under clauses (i) through
(vii) above) in an aggregate principal amount outstanding at any time not
to exceed $450 million.
"Permitted Distribution" of a Person means (x) the exchange by such Person
of Capital Stock (other than Redeemable Stock) for outstanding Capital Stock;
(y) the redemption, repurchase, defeasance or other acquisition or retirement
for value of Debt of the Company that is subordinate in right of payment to the
Notes, in exchange for (including any such exchange pursuant to the exercise of
a conversion right or privilege in connection with which cash is paid in lieu of
the issuance of fractional shares or scrip), or out of the proceeds of a
substantially concurrent issue and sale (other than to a Restricted Subsidiary)
of, either (a) Capital Stock of the Company (other than Redeemable Stock) or (b)
Debt of the Company that is subordinate in right of payment to the Notes on
subordination terms no less favorable to the holders of the Notes in their
capacities as such than the subordination terms (or other arrangement)
applicable to the Debt that is redeemed, repurchased, defeased or otherwise
acquired or retired for value, provided that, in the case of this clause (b),
such new Debt does not mature prior to the Stated Maturity or have a mandatory
redemption date prior to the mandatory redemption date of the Debt being
redeemed, repurchased, defeased or otherwise acquired or retired for value or
have an Average Life shorter than the remaining Average Life of the Debt being
redeemed, repurchased, defeased or otherwise acquired or retired for value; and
(z) dividend, penalty or other mandated payments, including mandatory
repurchases, on or in respect of any class or series of the Company's Preferred
Capital Stock that is authorized and designated on the Closing Date (i.e., the
Class A Preferred Stock, Class B Preferred Stock, Class C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock of the Company).
"Permitted Investment" means any Investment in Marketable Securities.
"Permitted Transaction" means (i) any transaction pursuant to agreements
(whether or not definitive, and regardless of whether binding or non-binding)
existing on the Closing Date and described in or incorporated by reference into
that certain Offering Memorandum dated February 6, 1998, pursuant to which the
Private Notes were offered and (ii) any transaction or transactions with any
vendor or vendors of property or materials used in the telecommunications
business (including related activities and services) of the Company or any
Restricted Subsidiary, provided (x) such transactions are in the ordinary course
of business and (y) such vendor does not beneficially own more than 50% of the
voting power of the Voting Stock of the Company.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Preferred Capital Stock," as applied to the Capital Stock of any Person,
means Capital Stock of such Person of any class or classes (however designated)
that ranks prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Redeemable Stock" of any Person means any Capital Stock of such Person
that by its terms or otherwise is (i) required to be redeemed prior to the
Stated Maturity of the Notes, (ii) redeemable at the
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option of the holder thereof 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 Debt 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 a "change of control" occurring prior to the Stated Maturity of
the Notes shall not constitute Redeemable Stock if the "change of control"
provisions applicable to such Capital Stock are no more favorable to the holders
of such Capital Stock than the provisions contained in the "Change of Control"
covenant described herein and such Capital Stock specifically provides that such
Person will not repurchase or redeem any such stock pursuant to such provision
prior to the Company's repurchase of such Notes as are required to be
repurchased pursuant to the "Change of Control" covenant described below; and
further provided that the Series D Preferred Stock and the Series E Preferred
Stock of the Company shall not be considered to constitute Redeemable Stock.
"Required Consent" means except as otherwise expressly provided in the
Senior Notes Indenture with respect to matters requiring the consent of each
holder of Notes affected thereby, (i) the consent of holders of not less than a
majority in aggregate principal amount at Stated Maturity of the Notes for any
action to (x) direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any power conferred upon such
Trustee, or (y) consent to or waive, on behalf of the holders of all the Notes,
any past default and its consequences, and (ii) with respect to all other
actions requiring the consent of holders of the Notes, the consent of either (x)
a majority in aggregate principal amount at Stated Maturity of the Notes or (y)
a majority in aggregate principal amount at Stated Maturity of (I) the Notes,
(II) the 1997 Notes, if the holders of the 1997 Notes are being requested to
consent to such action with respect to the terms of the 1997 Notes and (III) any
other issue of unsubordinated, unsecured notes issued by the Company, if such
notes or the indenture pursuant to which such notes were issued both (A) require
the consent of the holders of such notes to such action and (B) provide that the
holders thereof will vote with the holders of the Notes with respect to such
action.
"Restricted Subsidiary" means any Subsidiary of the Company, whether
existing on the Closing Date or created subsequent thereto, designated from time
to time by the Board of Directors as (or otherwise deemed to be) a "Restricted
Subsidiary" in accordance with the "Restricted Subsidiaries" covenant described
below.
"S&P" means Standard & Poor's Ratings Services or, if Standard & Poor's
Ratings Services shall cease rating debt securities having a maturity at
original issuance of at least one year and such ratings business shall have been
transferred to a successor Person, such successor Person; provided, however,
that if Standard & Poor's Ratings Services ceases rating debt securities having
a maturity at original issuance of at least one year and its ratings business
with respect thereto shall not have been transferred to any successor Person,
then "S&P" shall mean any other nationally recognized rating agency (other than
Moody's) that rates debt securities having a maturity at original issuance of at
least one year and that shall have been designated by the Company by a written
notice given to the Trustee.
"September Notes" means the Company's 10.65% Senior Redeemable Discount
Notes due 2007.
"September Indenture" means the indenture relating to the September Notes.
"Series D Preferred Stock" means the 13% Series D Exchangeable Redeemable
Preferred Stock of the Company issued on July 21, 1997 and any shares of
Preferred Capital Stock issued in exchange therefor or as payment in kind
dividends thereon.
"Series D Debenture Indenture" means an indenture (having terms and
conditions substantially as summarized in that certain Registration Statement
No. 333-39411, dated November 12, 1997), prepared in connection with the
issuance by the Company of shares of Series D Preferred Stock in exchange for
outstanding shares of Series D Preferred Stock, pursuant to which certain
exchange debentures may be issued by the Company (the "Series D Exchange
Debentures") in exchange for outstanding shares of Series D Preferred Stock.
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"Series E Preferred Stock" means the 11.125% Series E Exchangeable
Redeemable Preferred Stock of the Company issued on February 11, 1998 and any
shares of Preferred Capital Stock issued in exchange therefor or as payment in
kind dividends thereon.
"Specialized Mobile Radio" or "SMR" means a mobile radio communications
system that is operated as described in that certain Offering Memorandum dated
February 6, 1998, pursuant to which the Private Notes were offered.
"Stated Maturity", when used with respect to any Debt security or any
installment of interest thereon, means the date specified in such Debt security
as the fixed date on which the principal of such Debt security or such
installment of interest is due and payable.
"Subsidiary" of any Person means (i) a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof or (ii) any other Person (other than a
corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority ownership and power to direct the policies,
management and affairs thereof.
"Total Common Equity" of any Person means, as of any day of determination
(and as modified for purposes of the definition of "Change of Control"), the
product of (i) the aggregate number of outstanding primary shares of Common
Stock of such Person on such day (which shall not include any options or
warrants on, or securities convertible or exchangeable into, shares of Common
Stock of such Person) and (ii) the average Closing Price of such Common Stock
over the 20 consecutive Trading Days immediately preceding such day. If no such
Closing Price exists with respect to shares of any such class, the value of such
shares for purposes of clause (ii) of the preceding sentence shall be determined
by the Board of Directors in good faith and evidenced by a Board Resolution.
"Total Market Value of Equity" of the Company means, as of any day of
determination, the sum of (1) the product of (i) the aggregate number of
outstanding primary shares of Common Stock of the Company on such day (which
shall not include any options or warrants on, or securities convertible or
exchangeable into, shares of Common Stock of the Company) and (ii) the average
Closing Price of such Common Stock over the 20 consecutive Trading Days
immediately preceding such day, plus (2) the liquidation value of any
outstanding shares of Preferred Capital Stock of the Company on such day. If no
such Closing Price exists with respect to shares of any such class, the value of
such shares for purposes of clause (ii) of the preceding sentence shall be
determined by the Board of Directors in good faith and evidenced by a Board
Resolution.
"Trading Day" with respect to a securities exchange or automated quotation
system means a day on which such exchange or system is open for a full day of
trading.
"Trustee" means the trustee under the Senior Notes Indenture.
"U.S. Government Obligation" means (i) any security which is (a) a direct
obligation of the United States of America for the payment of which the full
faith and credit of the United States of America is pledged or (b) an obligation
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 of the United
States of America, which, in either case, is not callable or redeemable at the
option of the issuer thereof, and (ii) any depository receipt issued by a bank
(as defined in the Securities Act) as custodian with respect to any U.S.
Government Obligation and held by such bank for the account of the holder of
such depository receipt, or with respect to any specific payment of principal of
or interest on any U.S. Government Obligation which is so specified and held,
provided that (except as 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 principal or interest evidenced
by such depository receipt.
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"Unrestricted Subsidiary" means Unrestricted Subsidiary Funding Company and
any other Subsidiary that is not a Restricted Subsidiary and includes any
Restricted Subsidiary that becomes an Unrestricted Subsidiary in accordance with
the "Restricted Subsidiaries" covenant described below.
"Vendor Financing Debt" means any Debt owed to (i) a vendor or supplier of
any property or materials used by the Company or its Restricted Subsidiaries in
their telecommunications business, (ii) any Affiliate of such a vendor or
supplier, (iii) any assignee of such a vendor, supplier or Affiliate of such a
vendor or supplier, or (iv) a bank or other financial institution that has
financed or refinanced the purchase of such property or materials from such a
vendor, supplier, Affiliate of such a vendor or supplier or assignee of such a
vendor or supplier; provided that the aggregate amount of such Debt does not
exceed the sum of (w) the purchase price of such property or materials
(including transportation, installation, warranty and testing charges, as well
as applicable taxes paid, in respect of such property or materials), (x) the
cost of design, development, site acquisition and construction, (y) any interest
or other financing costs accruing or otherwise payable in respect of the
foregoing, and (z) the cost of any services provided by such vendor, supplier or
Affiliate of such vendor or supplier.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly Owned Restricted Subsidiary" of the Company means a Restricted
Subsidiary all of the outstanding Capital Stock of which (other than directors'
qualifying shares) shall at the time be owned by the Company or by one or more
Wholly Owned Restricted Subsidiaries or by the Company and one or more Wholly
Owned Restricted Subsidiaries.
GENERAL
The Exchange Senior Notes will be general, unsecured obligations of the
Company, will be limited in aggregate principal amount to $1,627,000,000 and
will mature on February 15, 2008. The Exchange Senior Notes will be issued in
fully registered form only in denominations of $1,000 and integral multiples
thereof. The Exchange Senior Notes will be senior, unsecured indebtedness of the
Company, will rank pari passu in right of payment with all unsubordinated,
unsecured indebtedness of the Company, including, without limitation, the
indebtedness evidenced by the Existing Senior Notes, and will be senior in right
of payment to all subordinated indebtedness of the Company. The Exchange Senior
Notes will be effectively subordinated to all current and future indebtedness of
the Company's subsidiaries, including trade payables and other accrued
liabilities. Substantially all of such subsidiary indebtedness presently is, and
is expected to be, secured by the assets of the Company's subsidiaries and/or
guaranteed by the Company and its subsidiaries.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be presented for registration of transfer or exchange, at the
office of the Paying Agent and Registrar. At the Company's option, interest, to
the extent paid in cash, may be paid by check mailed to the registered address
of holders of the Notes as shown on the register for the Senior Notes. The
Trustee is the Note Exchange Agent and will initially act as Paying Agent and
Registrar. The Company may change any Paying Agent and Registrar without prior
notice to holders of the Notes. Holders of the Notes must surrender Notes to the
Paying Agent to collect principal payments.
Cash interest will not accrue on the Notes prior to February 15, 2003, and
will be payable at a rate of 9.95% per annum, semi-annually in arrears on each
February 15 and August 15, commencing August 15, 2003 to holders of record of
such Notes at the close of business on the February 1 and August 1 next
preceding the Interest Payment Date (each a "Regular Record Date"). Cash
interest will accrue from the most recent Interest Payment Date to which
interest has been paid or duly provided for or, if no interest has been paid or
duly provided for, from February 15, 2003. Cash interest will be computed on a
basis of a 360-day year of twelve 30-day months. Accretion of OID will be
computed on a basis of a 360-day year of twelve 30-day months, compounded
semi-annually. Certain of the Company's existing debt agreements restrict the
ability of Nextel's subsidiaries to pay dividends to enable the Company to pay
interest on the Notes.
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The Notes are not subject to any sinking fund.
OPTIONAL REDEMPTION
The Notes may be redeemed at any time on or after February 15, 2003, at the
Company's option, in whole or in part, upon not less than 30 or more than 60
days' prior written notice mailed by first class mail to each holder's last
address as it appears in the Security Register, at the redemption prices
(expressed as a percentage of the principal amount at maturity thereof) set
forth below, plus an amount in cash equal to all accrued and unpaid interest to
the redemption date, if redeemed during the twelve-month period beginning
February 15 of each of the years set forth below.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2003........................................................ 104.9750%
2004........................................................ 103.3167
2005........................................................ 101.6583
2006 and thereafter......................................... 100.0000
</TABLE>
In addition, in the event of one or more sales by the Company on or prior
to February 15, 2001 of at least $125 million of its Capital Stock (other than
Redeemable Stock), the Company may redeem up to 35% of the aggregate Accreted
Value of the Notes originally issued at a redemption price equal to 109.95% of
such Accreted Value on the date of redemption; provided that such redemption
occurs within 180 days after consummation of any such sale.
Selection
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee in compliance with the requirements 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, on a
pro rata basis, by lot or by such other method as the Trustee in its sole
discretion shall deem to be fair and appropriate; provided that no Notes of
$1,000 in principal amount or less shall be redeemed in part. If any Notes are
to be redeemed in part only, the notice of redemption relating to such Notes
shall state the portion of the principal amount thereof to be redeemed. A new
Note in principal amount equal to the unredeemed portion thereof will be issued
in the name of the holder thereof upon cancellation of the original Note.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required to
make an Offer to Purchase to each holder of Notes to repurchase all or any part
of such holder's Notes at a cash purchase price equal to 101% of the Accreted
Value thereof on any purchase date prior to February 15, 2003 or 101% of the
principal amount thereof, plus accrued and unpaid interest to the date of
purchase on or after February 15, 2003 (the "Change of Control Payment"). The
Offer to Purchase must be made within 30 days following a Change of Control,
must remain open for at least 30 and not more than 60 days and must comply with
the requirements of Rule 14e-1 under the Exchange Act and any other applicable
securities laws and regulations.
None of the provisions in the Senior Notes Indenture relating to a purchase
upon a Change of Control are waivable by the Board of Directors. The Company
could, in the future, enter into certain transactions, including certain
recapitalizations of the Company, that would not constitute a Change of Control,
but would increase the amount of indebtedness outstanding at such time. If a
Change of Control were to occur, the Company would be obligated to offer to
purchase outstanding shares of the Series D Preferred Stock and the Series E
Preferred Stock, as well as to purchase all Debt which then would be entitled to
receive a comparable offer to purchase by reason of such Change of Control, in
addition to making an offer to repurchase Notes. There can be no assurance that
the Company would have sufficient funds to pay the purchase price for all Notes
that the Company would be required to purchase if a Change of Control were to
occur. In the event that the Company were required to purchase outstanding Notes
pursuant to an Offer to Purchase, the Company expects that it would need to seek
third-party financing to the extent it does not have available funds to meet
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its purchase obligations. However, there can be no assurance that the Company
would be able to obtain such financing. In addition, the Company's ability to
purchase the Notes may be limited by other then-existing agreements.
CERTAIN COVENANTS
Limitation on Consolidated Debt
The Company shall not, and shall not permit any Restricted Subsidiary to,
Incur any Debt (including Acquired Debt), other than Permitted Debt, unless (i)
with respect to Debt Incurred under this clause (i), the Debt so Incurred and
outstanding is in an aggregate principal amount that does not exceed 2.25 times,
with respect to Capital Stock sales after June 1, 1997 and on or prior to March
31, 1998, or 2.00 times, with respect to Capital Stock sales after March 31,
1998, the aggregate amount of net cash proceeds (or 80% of the Fair Market Value
of property other than cash) received by the Company after June 1, 1997 from the
issuance and sale (other than to a Restricted Subsidiary) of shares of its
Capital Stock (other than Redeemable Stock), or any options, warrants or other
rights to purchase such Capital Stock (other than Redeemable Stock), other than
(x) proceeds applied for use as a Directed Investment (unless such designation
has been revoked by the Board of Directors and the Company either abandons its
plans to make such Investment or is able to make such Investment pursuant to the
"Limitation on Restricted Payments" covenant (other than as a Directed
Investment)) and (y) proceeds which have been included in the computation of the
amounts available for Restricted Payments pursuant to clause (c)(2) of the
"Limitation on Restricted Payments" covenant, to the extent the inclusion
thereof was necessary to allow a subsequent Restricted Payment to be made, or
(ii) on the date of such Incurrence, after giving effect to the Incurrence of
such Debt (or Acquired Debt) and the receipt and application of the net proceeds
thereof (and, if the net proceeds of such new Debt are used to acquire a Person
that becomes a Restricted Subsidiary or an operating business of the Company or
a Restricted Subsidiary, to all terms of such acquisition) on a pro forma basis,
the Operating Cash Flow to Consolidated Interest Expense Ratio would equal or
exceed 1.75 to 1.
Limitation on Restricted Payments
The Company shall not, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to the
holders of, any shares of its Capital Stock (other than dividends or
distributions payable solely in its Capital Stock (other than Redeemable
Stock) or in options, warrants or other rights to purchase any such Capital
Stock (other than Redeemable Stock));
(ii) purchase, redeem or otherwise acquire or retire for value, or
permit any Restricted Subsidiary to, directly or indirectly, purchase,
redeem or otherwise acquire or retire for value (other than value
consisting solely of Capital Stock of the Company that is not Redeemable
Stock or options, warrants or other rights to acquire such Capital Stock
that is not Redeemable Stock), any Capital Stock of the Company (including
options, warrants or other rights to acquire such Capital Stock);
(iii) redeem, repurchase, defease or otherwise acquire or retire for
value, or permit any Restricted Subsidiary to, directly or indirectly,
redeem, repurchase, defease or otherwise acquire or retire for value (other
than value consisting solely of Capital Stock of the Company that is not
Redeemable Stock or options, warrants or other rights to acquire such
Capital Stock that is not Redeemable Stock), prior to any scheduled
maturity, scheduled repayment or scheduled sinking fund payment, any Debt
that is subordinate (whether pursuant to its terms or by operation of law)
in right of payment to the Notes; or
(iv) make, or permit any Restricted Subsidiary, directly or
indirectly, to make, any Investment (other than any Permitted Investment)
in any Person (other than in a Restricted Subsidiary or a Person that
becomes a Restricted Subsidiary as a result of such Investment);
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<PAGE> 68
(each of the foregoing actions set forth in clauses (i) through (iv), other than
any such action that is a Permitted Investment or a Permitted Distribution,
being referred to as a "Restricted Payment") unless, at the time of such
Restricted Payment, and after giving effect thereto:
(a) no Default or Event of Default shall have occurred and be
continuing;
(b) except with respect to Investments, after giving effect, on a
pro forma basis, to such Restricted Payment and the Incurrence of any
Debt the net proceeds of which are used to finance such Restricted
Payment, the Consolidated Debt to Annualized Operating Cash Flow Ratio
would not have exceeded 7.0 to 1; and
(c) after giving effect to such Restricted Payment on a pro forma
basis, the aggregate amount of all Restricted Payments made on or after
February 15, 1994 shall not exceed:
(1) 50% of the Consolidated Net Income (or, in the case of a
Consolidated Net Loss, minus 100% of such deficit) of the Company for
the period (taken as one accounting period) from April 1, 1994 to the
last day of the last fiscal quarter preceding the date of the
proposed Restricted Payment, plus
(2) the aggregate net proceeds, including the fair market value
of property other than cash (as determined by the Board of Directors,
whose good faith determination shall be conclusive and evidenced by a
Board Resolution), received by the Company from the issuance and sale
(other than to a Restricted Subsidiary) on or after February 15, 1994
of shares of its Capital Stock (other than Redeemable Stock), or any
options, warrants or other rights to purchase such Capital Stock
(other than Redeemable Stock), other than (x) (except for purposes of
determining whether an Investment under clause (iv) above is
permitted) shares of Capital Stock or options, warrants or other
rights to purchase Capital Stock (or shares issuable upon exercise
thereof) issued or sold in the PowerFone Merger, Questar/AMI Share
Exchanges, Motorola Transaction and NTT transactions as defined and
described in the Company's prospectus, dated February 9, 1994,
relating to the Company's Senior Redeemable Discount Notes due 2004
and (y) shares of Capital Stock or options, warrants or other rights
to purchase Capital Stock (or shares issuable upon exercise thereof),
the proceeds of the issuance of which is used (A) to make a Directed
Investment (unless such designation has been revoked by the Board of
Directors and the Company is able to make such Investment pursuant to
this "Limitation on Restricted Payments" covenant (other than as a
Directed Investment)) or (B) to Incur Debt under clause (i) of the
"Limitation on Consolidated Debt" covenant (unless and until the
amount of any such Debt (I) is treated as newly issued Debt and could
be Incurred in accordance with the "Limitation on Consolidated Debt"
covenant (other than under clause (i) thereof) or (II) has been
repaid or refinanced with the proceeds of Debt Incurred in accordance
with the "Limitation on Consolidated Debt" covenant (other than under
clause (i) thereof) or (III) has otherwise been repaid), plus
(3) the aggregate net proceeds, including the fair market value
of property other than cash (as determined by the Board of Directors,
whose good faith determination shall be conclusive and evidenced by a
Board Resolution), received by the Company from the issuance or sale
(other than to a Restricted Subsidiary) after February 15, 1994 of
any Capital Stock of the Company (other than Redeemable Stock), or
any options, warrants or other rights to purchase such Capital Stock
(other than Redeemable Stock), upon the conversion of, or exchange
for, Debt of the Company or a Restricted Subsidiary.
The foregoing limitations in this "Limitation on Restricted Payments"
covenant do not limit or restrict the making of any Permitted Distribution,
Permitted Investment or Directed Investment, and none of a Permitted
Distribution, Permitted Investment or Directed Investment shall be counted as a
Restricted Payment for purposes of clause (c) above. In addition, the foregoing
limitations do not prevent the Company from (I) paying a dividend on Capital
Stock of the Company within 60 days after the declaration thereof if, on the
date when the dividend was declared, the Company could have paid such dividend
in accordance with the
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<PAGE> 69
provisions of the Senior Notes Indenture, (II) repurchasing Capital Stock of the
Company (including options, warrants or other rights to acquire such Capital
Stock) from employees or former employees of the Company or any Subsidiary
thereof for consideration not to exceed $500,000 in the aggregate in any fiscal
year (with repurchases pursuant to this clause (II) not being counted as
Restricted Payments for purposes of clause (c) above) or (III) the repurchase,
redemption or other acquisition for value of Capital Stock of the Company to the
extent necessary to prevent the loss or secure the renewal or reinstatement of
any license or franchise held by the Company or any of its Subsidiaries from any
governmental agency; or (IV) Investments in Unrestricted Subsidiary Funding
Company so long as (x) such Investments are invested in Nextel International and
(y) Nextel International is a Subsidiary of the Company.
Notwithstanding the foregoing limitations in this "Limitation on Restricted
Payments" covenant, the Company is permitted to make any Investment in a Person
that is not (either before or after giving effect thereto) a Subsidiary of the
Company, provided that, immediately after giving effect thereto, the amount
equal to (a) the aggregate amount of all Investments made pursuant to this
paragraph minus (b) all cash received by the Company or any Restricted
Subsidiary from the sale, transfer or other disposition to a Person that is not
a Subsidiary of the Company of any such Investment (or portion thereof) included
in such aggregate amount (with the amount of cash to be counted for this purpose
not to exceed the amount of such Investment (or portion thereof) so included),
shall not exceed the greater of (i) $250 million and (ii) 2% of the Total Market
Value of Equity of the Company as of such time. For purposes of determining the
aggregate amount of Investments referred to in clause (a), the amount of any
Investment shall be deemed to equal the cash portion thereof plus the fair
market value of any non-cash portion thereof (to the extent such portion
constitutes an Investment) at the time such Investment is made, as determined by
the Board of Directors (whose good faith determination shall be conclusive and
evidenced by a Board Resolution).
Notwithstanding the foregoing, no Investment in a Person that immediately
thereafter would be a Restricted Subsidiary will be a Restricted Payment. In
addition, if any Person in which an Investment is made, which Investment
constitutes a Restricted Payment when made, thereafter becomes a Restricted
Subsidiary, all such Investments previously made in such Person shall no longer
be counted as Restricted Payments for purposes of calculating the aggregate
amount of Restricted Payments pursuant to clause (c) of the third preceding
paragraph or the aggregate amount of Investments pursuant to clause (a) of the
immediately preceding paragraph, in each case to the extent such Investments
would otherwise be so counted.
For purposes of clause (c)(3) above, the net proceeds received by the
Company from the issuance or sale of its Capital Stock either upon the
conversion of, or exchange for, Debt of the Company or any Restricted Subsidiary
shall be deemed to be an amount equal to (a) the sum of (i) the principal amount
or accreted value (whichever is less) of such Debt on the date of such
conversion or exchange and (ii) the additional cash consideration, if any,
received by the Company upon such conversion or exchange, less any payment on
account of fractional shares, minus (b) all expenses incurred in connection with
such issuance or sale. In addition, for purposes of clause (c)(3) above, the net
proceeds received by the Company from the issuance or sale of its Capital Stock
upon the exercise of any options or warrants of the Company or any Restricted
Subsidiary shall be deemed to be an amount equal to (a) the additional cash
consideration, if any, received by the Company upon such exercise, minus (b) all
expenses incurred in connection with such issuance or sale.
For purposes of this "Limitation on Restricted Payments" covenant, if a
particular Restricted Payment involves a non-cash payment, including a
distribution of assets, then such Restricted Payment shall be deemed to be an
amount equal to the cash portion of such Restricted Payment, if any, plus an
amount equal to the fair market value of the non-cash portion of such Restricted
Payment, as determined by the Board of Directors (whose good faith determination
shall be conclusive and evidenced by a Board Resolution).
Restricted Subsidiaries
The Company shall not designate any Restricted Subsidiary as an
Unrestricted Subsidiary, and shall not itself, and shall not permit any
Restricted Subsidiary to, sell, convey, transfer or otherwise dispose of any
assets, other than in the ordinary course of business, to any Unrestricted
Subsidiary or any Person that becomes an Unrestricted Subsidiary as part of such
transaction, unless, after giving effect to any such action,
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<PAGE> 70
the assets (not including any assets so sold, conveyed, transferred or otherwise
disposed of, other than in the ordinary course of business, to any Unrestricted
Subsidiary or any Person that becomes an Unrestricted Subsidiary as part of such
transaction) and business of the Company and its remaining Restricted
Subsidiaries generated at least 90% of Digital Mobile-SMR Operating Cash Flow in
the fiscal quarter of the Company most recently completed prior to the date of
such action.
The Board of Directors may designate any existing Unrestricted Subsidiary
or any Person that is about to become a Subsidiary of the Company as a
Restricted Subsidiary if, after giving effect to such action (and, if such
designation is made in connection with the acquisition of a Person or an
operating business that is about to become a Subsidiary of the Company, after
giving effect to all terms of such acquisition) on a pro forma basis, on the
date of such action, the Debt, if any, of such Unrestricted Subsidiary or Person
outstanding immediately prior to such designation would have been permitted to
be Incurred (and shall be deemed to have been Incurred) for all purposes of the
Senior Notes Indenture.
Subject to the second preceding paragraph and compliance with the
"Limitation on Restricted Payments" covenant, the Board of Directors may
designate any Restricted Subsidiary as an Unrestricted Subsidiary.
The designation by the Board of Directors of a Restricted Subsidiary as an
Unrestricted Subsidiary shall, for all purposes of the "Limitation on Restricted
Payments" covenant (including clause (b) thereof), be deemed to be a Restricted
Payment of an amount equal to the fair market value of the Company's ownership
interest in such Subsidiary (including, without duplication, such indirect
ownership interest in all Subsidiaries of such Subsidiary), as determined by the
Board of Directors in good faith and evidenced by a Board Resolution.
Notwithstanding the foregoing provisions of this "Restricted Subsidiaries"
covenant, the Board of Directors may not designate a Subsidiary of the Company
to be an Unrestricted Subsidiary if, after such designation, (a) the Company or
any of its other Restricted Subsidiaries (i) provides credit support for, or a
Guarantee of, any Debt of such Subsidiary (including any undertaking, agreement
or instrument evidencing such Debt) or (ii) is directly or indirectly liable for
any Debt of such Subsidiary, (b) a default with respect to any Debt of such
Subsidiary (including any right which the holders thereof may have to take
enforcement action against such Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Debt of the Company or any Restricted
Subsidiary to declare a default on such other Debt or cause the payment thereof
to be accelerated or payable prior to its final scheduled maturity or (c) such
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, any Restricted Subsidiary which is not a Subsidiary of the Subsidiary to be
so designated.
The Board of Directors, from time to time, may designate any Person that is
about to become a Subsidiary of the Company as an Unrestricted Subsidiary, and
may designate any newly-created Subsidiary as an Unrestricted Subsidiary, if at
the time such Subsidiary is created it contains no assets (other than such de
minimis amount of assets then required by law for the formation of corporations)
and no Debt. Subsidiaries of the Company that are not designated by the Board of
Directors as Restricted or Unrestricted Subsidiaries shall be deemed to be
Restricted Subsidiaries. Notwithstanding any provisions of this "Restricted
Subsidiaries" covenant, all Subsidiaries of an Unrestricted Subsidiary shall be
Unrestricted Subsidiaries. The Board of Directors shall not change the
designation of a Subsidiary of the Company more than twice in any period of five
years.
Transactions with Affiliates
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, enter into any transaction (including the purchase,
sale, lease or exchange of any property or the rendering of any service) or
series of related transactions with any Affiliate of the Company on terms that
are less favorable to the Company or such Restricted Subsidiary, as the case may
be, than those which might be obtained at the time of such transaction from a
Person that is not such an Affiliate; provided, however, that this "Transactions
with Affiliates" covenant shall not limit, or be applicable to, (i) any
transaction between Unrestricted Subsidiaries not involving the Company or any
Restricted Subsidiary, (ii) any transaction between the
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Company and any Restricted Subsidiary or between Restricted Subsidiaries or
(iii) any Permitted Transactions. In addition, any transaction or series of
related transactions, other than Permitted Transactions, between the Company or
any Restricted Subsidiary and any Affiliate of the Company (other than a
Restricted Subsidiary) involving an aggregate consideration of $5 million or
more must be approved in good faith by a majority of the Company's Disinterested
Directors (of which there must be at least one) and evidenced by a Board
Resolution. For purposes of this "Transactions with Affiliates" covenant, any
transaction or series of related transactions between the Company or any
Restricted Subsidiary and an Affiliate of the Company that is approved by a
majority of the Disinterested Directors (of which there must be at least one)
and evidenced by a Board Resolution shall be deemed to be on terms as favorable
as those that might be obtained at the time of such transaction (or series of
transactions) from a Person that is not such an Affiliate and thus shall be
permitted under this "Transactions with Affiliates" covenant.
Activities of the Company and Restricted Subsidiaries
The Company shall not, and shall not permit any Restricted Subsidiary to,
engage in any business other than the telecommunications business and related
activities and services, including such businesses, activities and services as
the Company and the Restricted Subsidiaries were engaged in on the Closing Date.
Provision of Financial Information
Whether or not the Company is subject to Section 13(a) or 15(d) of the
Exchange Act, or any successor provision thereto, the Company shall file with
the Commission the annual reports, quarterly reports and other documents which
the Company would have been required to file with the Commission pursuant to
such Section 13(a) or 15(d) or any successor provision thereto if the Company
were subject thereto, such documents to be filed with the Commission on or prior
to the respective dates (the "Required Filing Dates") by which the Company would
have been required to file them. The Company shall also in any event (a) within
15 days of each Required Filing Date (i) transmit by mail to all holders, as
their names and addresses appear in the Security Register, without cost to such
holders, and (ii) file with the Trustee copies of the annual reports, quarterly
reports and other documents which the Company would have been required to file
with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act or
any successor provisions thereto if the Company were subject thereto and (b) if
filing such documents by the Company with the Commission is not permitted under
the Exchange Act, promptly upon written request supply copies of such documents
to any prospective holder. The Trustee's receipt of such reports, information
and documents shall not constitute constructive notice of any information
contained therein or determinable from information contained therein.
Merger, Sale of Assets, Etc.
The Company (x) shall not, in any transaction or series of related
transactions, merge or consolidate with or into, or sell, assign, convey,
transfer, lease or otherwise dispose of its properties and assets substantially
as an entirety to, any Person, and (y) shall not permit any of its Restricted
Subsidiaries to enter into any such transaction or series of transactions if
such transaction or series of transactions, in the aggregate, would result in a
sale, assignment, conveyance, transfer, lease or other disposition of the
properties and assets of the Company and its Restricted Subsidiaries, taken as a
whole, substantially as an entirety to any Person, unless, in each case (x) or
(y), at the time and after giving effect thereto (i) either: (A) if the
transaction or series of transactions is a consolidation of the Company with or
a merger of the Company with or into any other Person, the Company shall be the
surviving Person of such merger or consolidation, or (B) the Person formed by
any consolidation with or merger with or into the Company, or to which the
properties and assets of the Company or the Company and its Restricted
Subsidiaries, taken as a whole, as the case may be, substantially as an entirety
are sold, assigned, conveyed, leased or otherwise transferred (any such
surviving Person or transferee Person referred to in this clause (B) being the
"Surviving Entity"), shall be a corporation, partnership or trust organized and
existing under the laws of the United States of America, any state thereof or
the District of Columbia and shall expressly assume by a supplemental indenture
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Company under the Notes and the Senior Notes
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Indenture and, in each case, the Senior Notes Indenture, as so supplemented,
shall remain in full force and effect, and (ii) immediately before and
immediately after giving effect to such transaction or series of transactions on
a pro forma basis (including any Debt Incurred or anticipated to be Incurred in
connection with or in respect of such transaction or series of transactions), no
Default or Event of Default shall have occurred and be continuing, and (iii) the
Consolidated Net Worth of the Company or the Surviving Entity, as the case may
be, shall be equal to or greater than that of the Company immediately prior to
such transaction or series of transactions; provided, however, that the
foregoing requirements shall not apply to any transaction or series of
transactions involving the sale, assignment, conveyance, transfer, lease or
other disposition of the properties and assets by any Restricted Subsidiary to
any other Restricted Subsidiary, or the merger or consolidation of any
Restricted Subsidiary with or into any other Restricted Subsidiary.
In connection with any consolidation, merger, sale, assignment, conveyance,
transfer, lease or other disposition contemplated by the foregoing provisions,
the Company shall deliver, or cause to be delivered, to the Trustee, in form and
substance reasonably satisfactory to the Trustee, an Officers' Certificate
stating that such consolidation, merger, sale, assignment, conveyance, transfer,
lease or other disposition and the supplemental indenture in respect thereof
(required under clause (i)(B) of the preceding paragraph) comply with the
requirements of the Senior Notes Indenture and an opinion of counsel stating
that the conditions of the Senior Notes Indenture have been complied with. Each
such Officers' Certificate shall set forth the manner of determination of the
Consolidated Net Worth in accordance with clause (iii) of the preceding
paragraph.
For all purposes of the Senior Notes Indenture and the Notes (including the
provisions described in the two immediately preceding paragraphs and the
"Limitation on Consolidated Debt" and "Restricted Subsidiaries" covenants),
Subsidiaries of any Surviving Entity will, upon such transaction or series of
transactions, become Restricted Subsidiaries or Unrestricted Subsidiaries as
provided pursuant to the "Restricted Subsidiaries" covenant and all Debt of the
Surviving Entity and its Subsidiaries that was not Debt of the Company and its
Subsidiaries immediately prior to such transaction or series of transactions
shall be deemed to have been Incurred upon such transaction or series of
transactions.
EVENTS OF DEFAULT
The following will be Events of Default under the Senior Notes Indenture:
(i) failure to pay principal of (or premium, if any on) any Notes when due; (ii)
failure to pay any interest on any Notes when due, continued for 30 days; (iii)
default in the payment of principal of, and premium and interest, if any, on
Notes required to be purchased pursuant to an Offer to Purchase as described
under "Change of Control" when due and payable, or failure to make an Offer to
Purchase as required thereunder; (iv) failure to perform or comply with the
provisions described under "Merger, Sale of Assets, Etc."; (v) failure to
perform any other covenant or agreement of the Company under the Senior Notes
Indenture or the Notes continued for 60 days after written notice to the Company
by the Trustee or holders of at least 25% in aggregate principal amount of
outstanding Notes; (vi) failure to pay when due (subject to any applicable grace
period) the principal of, or acceleration of, any Debt of the Company or any
Restricted Subsidiary having an outstanding principal amount of at least $25
million, individually or in the aggregate; (vii) the rendering of a final
judgment or judgments against the Company or any Restricted Subsidiary in an
amount in excess of $25 million which remains undischarged or unstayed for a
period of 60 days after the date on which the right to appeal has expired; and
(viii) certain events of bankruptcy, insolvency or reorganization affecting the
Company or any Restricted Subsidiary.
If an Event of Default (other than an Event of Default described in clause
(viii) above) shall occur and be continuing, either the Trustee or the holders
of at least 25% in aggregate principal amount at Stated Maturity of the
outstanding Notes may accelerate the Accreted Value of all Notes; provided
however that after such acceleration, but before a judgment or decree based on
acceleration, the holders by Required Consent may, under certain circumstances,
rescind and annul such acceleration if all Events of Default, other than the
nonpayment of the Accreted Value of the Notes, have been cured or waived as
provided in the Senior Notes Indenture. If an Event of Default specified in
clause (viii) above occurs, the Accreted Value of the
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outstanding Notes will ipso facto become immediately due and payable without any
declaration or other act on the part of the Trustee or any holder. For
information as to waiver of defaults, see "Modification and Waiver."
Subject to the provisions of the Senior Notes Indenture relating to the
duties of the Trustee in case an Event of Default shall occur and be continuing,
the Trustee will be under no obligation to exercise any of its rights or powers
under the Senior Notes Indenture at the request or direction of any of the
holders, unless such holders shall have offered to the Trustee reasonable
security or indemnity. Subject to such provisions for the indemnification of the
Trustee, the holders by Required Consent will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee.
No holder of any Notes will have any right to institute any proceeding with
respect to the Senior Notes Indenture or for any remedy thereunder, unless such
holder shall have previously given to the Trustee written notice of a continuing
Event of Default and unless also the holders of at least 25% in aggregate
principal amount at Stated Maturity of the outstanding Notes shall have made
written request, and offered reasonable security or indemnity, to the Trustee to
institute such proceeding as trustee, and the Trustee shall not have received
from the holders of a majority in aggregate principal amount at Stated Maturity
of the outstanding Notes a direction inconsistent with such request and shall
have failed to institute such proceeding within 60 days. However, such
limitations do not apply to a suit instituted by a holder of a Note for
enforcement of payment of the principal of, premium and interest, if any, on
such Note on or after the respective due dates expressed in such Note.
The Company will be required to furnish to the Trustee annually a statement
as to the performance by it of certain of its obligations under the Senior Notes
Indenture and as to any default in such performance.
DEFEASANCE AND COVENANT DEFEASANCE
The Company may elect, at its option at any time, to have the provisions of
the Senior Notes Indenture relating to defeasance and discharge of indebtedness
or the provisions relating to defeasance of certain restrictive covenants in the
Senior Notes Indenture, applied to the outstanding Notes (as a whole and not in
part).
Defeasance and Discharge. The Senior Notes Indenture provides that, upon
the Company's exercise of its option to have the provisions relating to
defeasance and discharge applied to the outstanding Notes, the Company will be
discharged from all its obligations with respect to the Notes (except for
certain obligations to exchange or register the transfer of Notes, to replace
stolen, lost or mutilated Notes, to maintain paying agencies and to hold moneys
for payment in trust) upon the deposit in trust for the benefit of the holders
of such Notes of money or U.S. Government Obligations, or both, which, through
the payment of principal and interest in respect thereof in accordance with
their terms, will provide money in an amount sufficient to pay the principal of
and any installment of interest on such Notes on the respective Stated
Maturities thereof in accordance with the terms of the Senior Notes Indenture
and the Notes. Such defeasance or discharge may occur only if, among other
things, the Company has delivered to the Trustee an opinion of counsel to the
effect that the Company has received from, or there has been published by, the
Internal Revenue Service (the "IRS") a ruling, or there has been a change in tax
law, in either case to the effect that holders of such Notes will not recognize
gain or loss for federal income tax purposes as a result of such deposit,
defeasance and discharge and will be subject to federal income tax on the same
amount, in the same manner and at the same times as would have been the case if
such deposit, defeasance and discharge were not to occur.
Defeasance of Certain Covenants. The Senior Notes Indenture provides that,
upon the Company's exercise of its option to defease certain restrictive
covenants applied to the outstanding Notes, the Company may omit to comply with
certain restrictive covenants, including those described under "Covenants" and
clause (iii) under "Merger, Sale of Assets, Etc.," and the occurrence of certain
Events of Default, which are described above in clause (iv) (with respect to
such clause (iii)), clause (e) (with respect to such restrictive covenants),
clause (vi) and clause (vii) under "Events of Default," will be deemed not to be
or result in an Event of Default, in each case with respect to such Notes. The
Company, in order to exercise such option, will be required to deposit, in trust
for the benefit of the holders of such Notes, money or U.S. Government
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Obligations, or both, which, through the payment of principal and interest in
respect thereof in accordance with their terms, will provide money in an amount
sufficient to pay the principal of and any installment of interest on such Notes
on the respective Stated Maturities thereof in accordance with the terms of the
Senior Notes Indenture and the Notes. The Company will also be required, among
other things, to deliver to the Trustee an opinion of counsel to the effect that
holders of such Notes will not recognize gain or loss for federal income tax
purposes as a result of such deposit and defeasance of certain obligations and
will be subject to federal income tax on the same amount, in the same manner and
at the same times as would have been the case if such deposit and defeasance
were not to occur. In the event the Company exercised this option with respect
to the outstanding Notes and such Notes were declared due and payable prior to
their Stated Maturity because of the occurrence of any Event of Default or
become payable on any redemption date at the option of the Company, the amount
of money and U.S. Government Obligations so deposited in trust would be
sufficient to pay amounts due on such Notes at the time of their respective
Stated Maturities but may not be sufficient to pay amounts due on such Notes
upon such acceleration or redemption. In such case, the Company would remain
liable for such payments.
MODIFICATION AND WAIVER
Modifications and amendments of the Senior Notes Indenture may be made by
the Company and the Trustee with Required Consent; provided, however, that no
such modification or amendment may, without the consent of each holder of Notes
affected thereby, (i) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, (ii) reduce the principal amount of,
premium, if any, or interest on, any Note, (iii) change the place or currency of
payment of principal or premium, if any, or interest on, 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 the Senior Notes
Indenture, (vi) waive a default in the payment of principal of, premium, if any,
or interest on, the Notes, (vii) reduce the percentage of aggregate principal
amount of outstanding Notes the consent of whose holders is necessary for waiver
of compliance with certain provisions of the Senior Notes Indenture or for
waiver of certain defaults, (viii) modify any provisions of the Senior Notes
Indenture relating to the calculation of Accreted Value of the Notes or (ix)
following the mailing of an Offer to Purchase, modify the provisions of the
Senior Notes Indenture with respect to such Offer to Purchase in a manner
adverse to such holders.
NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS, DIRECTORS OR
EMPLOYEES
The Senior Notes Indenture provides that 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 the
Senior Notes Indenture or in any of the Notes, or because of the creation of any
Debt represented thereby, shall be had against any incorporator or past, present
or future stockholder, officer, director, employee or controlling person of the
Company. Each holder, by accepting such Notes, waives and releases all such
liability.
CONCERNING THE TRUSTEE
The Senior Notes Indenture provides that, except during the continuance of
an Event of Default, the Trustee will perform only such duties as are
specifically set forth in the Senior Notes Indenture. If an Event of Default has
occurred and is continuing, the Trustee will exercise those rights and powers
vested in it under such Senior Notes Indenture and use the same degree of care
and skill in its exercise of such rights and powers as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
The Senior Notes Indenture and provisions of the Trust Indenture Act,
incorporated by reference in the Senior Notes Indenture, contain limitations on
the rights of the Trustee thereunder, should it become a creditor of the
Company, to obtain payment of claims in certain cases or to realize on certain
property received by it in respect of any such claims, as security or otherwise.
The Trustee is permitted to engage in other
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transactions; provided, however, that if it acquires any conflicting interest,
it must eliminate such conflict or resign.
BOOK-ENTRY; DELIVERY AND FORM
The Exchange Senior Notes will initially be issued in the form of one
global certificate (the "Global Exchange Senior Note"). The Global Exchange
Senior Note will be deposited on the date of the consummation of the Senior Note
Exchange Offer (the "Exchange Offer Closing Date") with or on behalf of DTC and
registered in the name of DTC or its nominee.
The Company understands that DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "Clearing Agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its participants
and facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and may include certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
So long as DTC, or its nominee, is the registered owner or holder of the
Global Exchange Senior Note, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the Exchange Senior Notes represented by
such Global Exchange Senior Note for all purposes under the Senior Notes
Indenture. The Company understands that pursuant to procedures established by
DTC (i) upon deposit of the Global Exchange Senior Note, DTC will credit the
accounts of participants exchanging the Private Notes for Exchange Senior Notes
in amounts proportionate to the respective beneficial interests in the principal
amount of the Global Exchange Senior Note and (ii) ownership of the Exchange
Senior Notes evidenced by the Global Exchange Senior Note will be shown on, and
the transfer of ownership thereof will be effected only through, records
maintained by DTC (with respect to the interests of DTC's participants), DTC's
participants and DTC's indirect participants. No beneficial owner of an interest
in the Global Exchange Senior Note will be able to transfer that interest except
in accordance with DTC's applicable procedures, in addition to those provided
for under the Senior Notes Indenture.
Payments made with respect to the Global Exchange Senior Note will be made
to DTC or its nominee, as the case may be, as the registered owner thereof. The
Company will have no responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in the
Global Exchange Senior Note or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payments
made with respect to the Global Exchange Senior Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the amount of such Global Exchange Senior Note as shown on the
records of DTC or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in such Global Exchange Senior
Note held through such participants will be governed by standing instructions
and customary practices, as is now the case with securities held for the
accounts of customers registered in the names of nominees for such customers.
Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds.
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in the Global Exchange Senior Note among
participants of DTC, they are under no obligation to perform or continue to
perform such procedures, and such procedures may be discontinued at any time.
The Company
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will have no responsibility for the performance by DTC or its respective
participants or indirect participants of its respective obligations under the
rules and procedures governing their operations.
CERTIFICATED NOTES
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Exchange Senior Note and a successor depositary is not appointed by
the Company within 90 days, the Company will issue a physical certificate for
such Notes ("Certificated Notes") in exchange for the Global Exchange Senior
Note. In addition, if there is an Event of Default under the Notes, DTC may
exchange the Global Exchange Senior Note for Certificated Notes and distribute
such Certificated Notes to its participants. Finally, beneficial owners whose
interests are represented by the Global Exchange Senior Note may request a
physical certificate.
DESCRIPTION OF EXCHANGE PREFERRED STOCK
The Old Preferred Stock and the Exchange Preferred Stock are each
authorized and created pursuant to the Certificate of Designation. The form and
terms of the Exchange Preferred Stock will be the same as the form and terms of
the Old Preferred Stock except that the Exchange Preferred Stock will be
registered under the Securities Act and hence will not bear legends restricting
the transfer thereof. The Exchange Preferred Stock will evidence the same
rights, privileges and obligations as the Old Preferred Stock. Following
consummation of the Preferred Stock Exchange Offer, all rights under the
Registration Rights Agreement accorded to holders of the Old Preferred Stock,
including the right to receive additional dividends on the Old Preferred Stock
to the extent and in the circumstances specified therein, will terminate.
The summary contained herein of certain provisions of the Exchange
Preferred Stock does not purport to be complete and is qualified in its entirety
by reference to the provisions of the Certificate of Designation, which has been
previously filed with the Commission and is incorporated herein by reference.
The definitions of certain terms used in the Certificate of Designation and in
the following summary are set forth under "-- Certain Definitions."
GENERAL
Pursuant to the Certificate of Incorporation, the Company has the authority
to issue 613,883,948 shares of capital stock, divided into six classes as
follows: (i) 515,000,000 shares of Class A Common Stock, (ii) 35,000,000 shares
of Non-Voting Common Stock, (iii) 26,941,933 shares of Class A Preferred Stock,
(iv) 82 shares of Class B Preferred Stock, (v) 26,941,933 shares of Class C
Preferred Stock, (vi) 1,600,000 shares of Series D Preferred Stock, (vii)
2,200,000 shares of the Preferred Stock, and (viii) 6,200,000 shares of
preferred stock (the "Undesignated Preferred Stock"). The Certificate of
Incorporation of the Company authorizes the Board of Directors to issue
preferred stock from the Undesignated Preferred Stock from time to time in one
or more series, with such designations, voting powers, preferences and relative,
participating, optional or other special rights, qualifications, limitations or
restrictions as may be determined by the Board of Directors. The Certificate of
Designation authorizes the issuance of up to 2,200,000 shares of 11.125% Series
E Preferred Stock, with a liquidation preference of $1,000 per share. The
authorized Series E Preferred Stock consists of the 750,000 shares of the Old
Preferred Stock originally issued, plus additional shares of Old Preferred Stock
used to pay dividends on the Old Preferred Stock, the Exchange Preferred Stock
offered hereby and additional shares of Exchange Preferred Stock which may be
used to pay dividends on the Exchange Preferred Stock (collectively, the
"Preferred Stock"). The Preferred Stock is exchangeable, at the option of the
Company, into the Exchange Debentures, at any time after December 15, 2005, or
in certain circumstances, earlier, subject to the satisfaction of certain
conditions. See "-- Exchange" below. The Preferred Stock, when issued by the
Company in the Preferred Stock Exchange Offer or to pay dividends on the
Preferred Stock, will be fully paid and nonassessable. Holders of Preferred
Stock do not have any subscription or preemptive rights related thereto. First
Chicago Trust Company of New York is the Preferred Exchange Agent and initially
will act as transfer agent (the "Transfer Agent") and registrar (the
"Registrar") for the Preferred Stock.
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RANKING
The Preferred Stock will, with respect to dividend distributions and
distributions upon the liquidation, winding-up and dissolution of the Company,
rank: (i) senior to (A) all classes of common stock of the Company and to (B)
each other class of capital stock or series of preferred stock (other than the
Class C Preferred Stock) established after the Closing Date, the terms of which
do not expressly provide that it ranks senior to or on a parity with the
Preferred Stock as to dividend distributions and distributions upon the
liquidation, winding-up and dissolution of the Company (collectively referred
to, together with all classes of common stock of the Company, as the "Junior
Securities"); (ii) on a parity with (A) the Class A Preferred Stock (except with
respect to the Special Payments (as defined below)), the Class B Preferred Stock
(except with respect to the Special Payments), the Class C Preferred Stock and
the Series D Preferred Stock; and (B) any class of capital stock or series of
preferred stock issued by the Company after the Closing Date, the terms of which
expressly provide that such class or series will rank on a parity with the
Preferred Stock as to dividend distributions and distributions upon the
liquidation, winding-up and dissolution of the Company (collectively referred to
as "Parity Securities"); (iii) junior with respect to the dividend accruals and
payments on the Class A Preferred Stock and the $25 million cash payment on the
Class B Preferred Stock that are described under "Terms of Existing Nextel
Preferred Stock," which are required under the terms of the Class A Preferred
Stock and the Class B Preferred Stock upon certain occurrences (such payments
and dividend rights of the Class A Preferred Stock and Class B Preferred Stock,
the "Special Payments"); and (iv) subject to Preferred Stockholder Approval
Rights (as defined herein), junior to each class of capital stock or series of
preferred stock issued by the Company and established after the Closing Date,
the terms of which expressly provide that such class or series will rank senior
to the Preferred Stock as to dividend distributions and distributions upon
liquidation, winding-up and dissolution of the Company (collectively referred to
as "Senior Securities"). The Company may not issue any new class or series of
Senior Securities without Required Consent except that the Company does not need
the approval of such holders to issue shares of Senior Securities (1) in respect
of any dividend or payment obligations that constitute Special Payments or (2)
in exchange for, or the proceeds of which are used to redeem or repurchase, any
or all shares of Preferred Stock then outstanding or Debt of the Company (such
approval rights, herein referred to as "Preferred Stockholder Approval Rights");
provided that, solely in the case of Senior Securities issued in exchange for,
or the proceeds of which are used to redeem or repurchase, less than all shares
of Preferred Stock then outstanding, (a) the aggregate liquidation preference of
such Senior Securities shall not exceed the aggregate liquidation preference of,
premium and accrued and unpaid dividends on, and expenses in connection with the
refinancing of, the shares of Preferred Stock so exchanged, redeemed or
repurchased, (b) such Senior Securities shall not be Redeemable Stock and (c)
such Senior Securities shall not be entitled to the payment of cash dividends
prior to February 15, 2003. At the date hereof, the only outstanding preferred
stock (other than the 771,786 shares of Old Preferred Stock previously issued)
is the Class A Preferred Stock, the Class B Preferred Stock and the Series D
Preferred Stock which (except in the case of Special Payments with respect to
the Class A Preferred Stock and Class B Preferred Stock) is on a parity with the
Preferred Stock. Under certain circumstances, shares of Class A Preferred Stock
can be converted into shares of Class C Preferred Stock, which would rank on a
parity with the Preferred Stock, but neither the issuance nor any exchange of
shares of Class C Preferred Stock would require any vote by holders of the
Preferred Stock. See "Risk Factors -- Risks Related to New Securities and
Exchange Offers -- Ranking of Preferred Stock and Exchange Debentures" and
"-- Effect of Holding Company Structure."
DIVIDENDS
Holders of Preferred Stock will be entitled to receive, when, as and if
declared by the Board of Directors, out of funds legally available therefor,
dividends on the Preferred Stock at a rate per annum equal to 11.125% of the
liquidation preference per share of Preferred Stock, payable quarterly. All
dividends will be cumulative, whether or not earned or declared, on a daily
basis from the date to which dividends have been paid on the Old Preferred Stock
and will be payable quarterly in arrears on May 15, August 15, November 15 and
February 15 of each year. The Company elected to pay the first quarterly
dividend on the Old Preferred Stock in kind, resulting in the issuance of an
additional 21,786 shares of Old Preferred Stock on May 15, 1998. On and before
February 15, 2003, the Company may pay dividends, at its option, in cash or in
additional fully paid and
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nonassessable shares of Exchange Preferred Stock having an aggregate liquidation
preference equal to the amount of such dividends. After February 15, 2003,
dividends may be paid only in cash. However, the Existing Indentures and the
Senior Notes Indenture restrict the payment of cash dividends by the Company,
and future agreements may provide for restrictions on the payment of cash
dividends. In addition, the Bank Credit Agreement limits the amount of cash
available to make dividends, loans and cash distributions to the Company from
its restricted subsidiaries and provisions contained in the NI Indentures and in
other loan documents to which Nextel International or its subsidiaries are
parties operate to restrict transfers of funds or value between Nextel
International and its subsidiaries and the Company and its Restricted
Subsidiaries. See "Risk Factors -- Risks Related to New Securities and Exchange
Offers -- Ability of Nextel to Pay Cash Dividends or Cash Interest" and
"-- Dependence of Company on Subsidiaries for Cash to Pay Dividends and
Interest, to Redeem Preferred Stock and for Repayment of Exchange Debentures and
Notes." If any dividend (or portion thereof) payable on any dividend payment
date after February 15, 2003 is not declared or paid in full in cash on such
Dividend Payment Date, the amount of such dividend that is payable and that is
not paid in cash on such date will accrue interest at the dividend rate then
applicable to the Preferred Stock, compounding quarterly, until declared and
paid in full.
Other than any amount constituting Special Payments, no full dividends may
be declared or paid or funds set apart for the payment of dividends on any
Parity Securities for any period unless full cumulative dividends have been or
contemporaneously are declared and paid in full or declared and, if payable in
cash, a sum in cash is set apart for such payments on the Preferred Stock for
all Dividend Periods terminating on or prior to the date of payment of such full
dividends on such Parity Securities. The making of Special Payments will not, in
and of itself, require that any dividend be declared or any dividend or other
amount be paid or accrued in respect of the Preferred Stock. Except as noted in
the case of Special Payments, if dividends are not fully paid, the Preferred
Stock will share dividends pro rata with the Parity Securities. No dividends may
be paid or set apart for such payment on Junior Securities (except dividends on
Junior Securities in additional shares of Junior Securities) and no Junior
Securities or Parity Securities may be repurchased, redeemed or otherwise
retired nor may funds be set apart for payment with respect thereto (except
under certain limited circumstances to permit the redemption of Junior
Securities owned by certain employees of the Company or its subsidiaries) if
full cumulative dividends shall not have been paid on the Preferred Stock.
OPTIONAL REDEMPTION
The Preferred Stock may be redeemed (subject to the restrictions described
below, contractual and other restrictions with respect thereto existing on the
Closing Date, compliance with covenants contained in the Existing Indentures and
the legal availability of funds therefor) at any time after the Optional
Redemption Date, at the Company's option, in whole or in part, upon not less
than 30 nor more than 60 days' prior written notice mailed by first-class mail
to each holder's registered address, at a redemption price equal to the amount
of the liquidation preference thereof, plus an amount equal to all accumulated
and unpaid dividends (including an amount in cash equal to a prorated dividend
for the period from the dividend payment date immediately prior to the
redemption date to the redemption date); provided, however, that in the event
that the Old Senior Notes are repurchased, redeemed or repaid in full prior to
the Optional Redemption Date, the Preferred Stock may be redeemed (subject to
the restrictions described below, contractual and other restrictions thereto
existing on the Closing Date, compliance with covenants contained in the
Existing Indentures and the legal availability of funds therefor) at any time on
or after February 15, 2003, at the Company's option, in whole or in part, upon
not less than 30 or more than 60 days' prior written notice mailed by first
class mail to each holder's registered address, at the redemption prices
(expressed as a percentage of the liquidation preference thereof) set forth
below, plus an amount in cash equal to all accrued and unpaid dividends to the
redemption date (including an amount in cash equal to a prorated dividend for
the period
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from the dividend payment date immediately prior to the redemption date to the
redemption date), if redeemed during the 12-month period beginning February 15
of each of the years set forth below.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003........................................................ 105.5625%
2004........................................................ 103.7083
2005........................................................ 101.8542
2006 and thereafter......................................... 100.0000
</TABLE>
In addition, on or prior to February 15, 2001, in the event that the Old
Senior Notes are repurchased, redeemed or repaid in full (subject to the
restrictions described below, contractual and other restrictions with respect
thereto, compliance with covenants contained in the 1997 Indentures and in the
Senior Notes Indenture and the legal availability of funds therefor), the
Company may redeem shares of Preferred Stock having an aggregate liquidation
preference of up to 35% of the aggregate liquidation preference of all issued
and outstanding Old Preferred Stock originally issued, at a redemption price
equal to 111.125% of the liquidation preference, plus an amount in cash equal to
a prorated dividend for the period from the dividend payment date immediately
prior to the redemption date to the redemption date (subject to the right of
holders of Preferred Stock on relevant record dates to receive dividends due on
relevant dividend payment dates), with the proceeds of any sale of its common
stock, provided that such redemption date occurs within 180 days after
consummation of such sale.
No optional redemption of any shares of Preferred Stock may be authorized
or made unless prior thereto full unpaid cumulative dividends shall have been
paid or a sum set apart for such payment on the Preferred Stock.
In the event of partial redemptions of Preferred Stock, the shares to be
redeemed will be determined pro rata or by lot, as determined by the Company,
except that the Company may redeem such shares held by any holder of fewer than
100 shares without regard to such pro rata redemption requirement. If any
Preferred Stock is to be redeemed in part, the notice of redemption that relates
to such Preferred Stock shall state the portion of the liquidation preference to
be redeemed. New shares of Preferred Stock having an aggregate liquidation
preference equal to the unredeemed portion will be issued in the name of the
holder thereof upon cancellation of the original certificate and, unless the
Company fails to pay the redemption price on the redemption date, after the
redemption date, dividends will cease to accrue on the shares of Preferred Stock
called for redemption. The Existing Indentures contain provisions that operate
to limit the Company's ability to effect an optional redemption of the Preferred
Stock. Additionally, provisions in the Company's Bank Credit Agreement, in the
NI Indentures and in other loan documents to which Nextel International or its
subsidiaries are parties operate to limit the funds available to the Company
from its restricted and unrestricted subsidiaries. See "Risk Factors -- Risks
Related to New Securities and Exchange Offers -- Ability of Nextel to Pay Cash
Dividends or Cash Interest" and "-- Dependence of Company on Subsidiaries for
Cash to Pay Dividends and Interest, to Redeem Preferred Stock and for Repayment
of Exchange Debentures and Notes."
MANDATORY REDEMPTION
The Preferred Stock will be subject to mandatory redemption (subject to the
legal availability of funds therefor but without regard to any contractual or
other restrictions with respect thereto) in whole on February 15, 2010 at a
price, payable in cash, equal to the liquidation preference thereof plus all
accrued and unpaid dividends to the date of redemption.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required
(subject to any contractual and other restrictions with respect thereto existing
on the Closing Date and the legal availability of funds therefor) to make an
Offer to Purchase to each holder of Preferred Stock to repurchase all or any
part of such holder's Preferred Stock at a cash purchase price equal to 101% of
the liquidation preference thereof, plus accrued and unpaid dividends (if any)
to the date of purchase (the "Change of Control Payment"). The Offer
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to Purchase must be made within 30 days following a Change of Control, must
remain open for at least 30 and not more than 40 days and must comply with the
requirements of Rule 14e-1 under the Exchange Act and any other applicable
securities laws and regulations.
None of the provisions in the Certificate of Designation relating to a
purchase upon a Change of Control are waivable by the Board of Directors. The
Company could, in the future, enter into certain transactions, including certain
recapitalizations of the Company, that would not constitute a Change of Control,
but would increase the amount of indebtedness outstanding at such time. In
addition, under the definition of Change of Control, no Change of Control will
be deemed to occur until the day after the Optional Redemption Date, or sooner
if the Company had repurchased, redeemed or repaid all Old Senior Notes. There
can be no assurance that the Company would have sufficient funds to pay the
purchase price for all Preferred Stock that the Company would be required to
purchase if a Change of Control with respect to the Preferred Stock is deemed to
occur. In the event that the Company were required to purchase outstanding
Preferred Stock pursuant to an Offer to Purchase, the Company expects that it
would need to seek third-party financing to the extent it does not have
available funds to meet its purchase obligations. However, there can be no
assurance that the Company would be able to obtain such financing. In addition,
the Company's ability to purchase the Preferred Stock may be limited by other
then-existing agreements and by restrictions imposed by Delaware law.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding-up of
the Company, holders of Preferred Stock will be entitled to be paid, out of the
assets of the Company available for distribution to its stockholders, $1,000 per
share of Preferred Stock, plus an amount in cash equal to accumulated and unpaid
dividends thereon to the date fixed for liquidation, dissolution or winding-up
(including an amount equal to a prorated dividend for the period from the last
dividend payment date to the date fixed for liquidation, dissolution or
winding-up), before any distribution is made on any Junior Securities,
including, without limitation, Common Stock of the Company. However, neither the
merger, consolidation or sale of all or substantially all of the assets of the
Company shall be deemed to be a liquidation, dissolution or winding-up of the
Company. If, upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Company, the amounts payable with respect to the Preferred
Stock and all other Parity Securities are not paid in full, the holders of the
Preferred Stock and the Parity Securities will share equally and ratably
(subject to the preference of the holders of Class A Preferred Stock and Class B
Preferred Stock to receive any Special Payments then due and not paid in full)
in any distribution of assets of the Company in proportion to the full
liquidation preference and accumulated and unpaid dividends to which each is
entitled. After payment of the full amount of the liquidation preference and
accumulated and unpaid dividends to which they are entitled, the holders of
Preferred Stock will not be entitled to any further participation in any
distribution of assets of the Company.
The Certificate of Designation does not contain any provision requiring
funds to be set aside to protect the liquidation preference of the Preferred
Stock, although such liquidation preference is substantially in excess of the
par value per share of such Preferred Stock. In addition, the Company is not
aware of any provision of Delaware law or any controlling decision of the courts
of the State of Delaware (the state of incorporation of the Company) that
requires a restriction upon the surplus of the Company solely because the
liquidation preference of the Preferred Stock will exceed its par value. The
fact that the liquidation preference of the Preferred Stock exceeds its par
value does not restrict the Company's use of surplus, and, except in connection
with the liquidation of the Company, no remedies are available to holders of the
Preferred Stock before or after the payment of any dividend if the dividend
would reduce the surplus of the Company to an amount less than the difference
between the liquidation preference of the Preferred Stock and its par value.
VOTING RIGHTS
The holders of Preferred Stock will have no voting rights except as
provided by law or as set forth in the Certificate of Designation. The
Certificate of Designation provides that if (i) dividends on the Preferred Stock
are in arrears and unpaid (and if, after February 15, 2003, such dividends are
not paid in cash) for four consecutive quarterly periods or six quarterly
periods (whether or not consecutive), (ii) the Company fails to
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discharge any redemption obligation with respect to the Preferred Stock, (iii)
the Company fails to make an Offer to Purchase (and complete such purchase)
following a Change of Control, if such Offer to Purchase is required by the
provisions set forth above under the caption "-- Change of Control," (iv) a
breach or violation of the provisions described under the caption "-- Certain
Covenants" occurs and such breach or violation continues for a period of 60
consecutive days or more after notice thereof to the Company by holders of 25%
or more of the then outstanding shares of Preferred Stock or (v) the Company
fails to pay when due (subject to any applicable grace period) the principal of,
or if there is an acceleration of, any Debt of the Company or any Restricted
Subsidiary having an outstanding principal amount of at least $25.0 million,
individually or in the aggregate, then the number of directors constituting the
Board of Directors will be adjusted to permit the holders of the majority of the
then outstanding shares of Preferred Stock, voting separately as a class, to
elect two directors. Such voting rights and the term of office of such elected
directors will continue until such time as all dividends in arrears on the
Preferred Stock are paid in full (and, in the case of dividends payable after
February 15, 2003, paid in cash) and any failure, breach or default referred to
in clause (ii), (iii), (iv) or (v) is remedied, at which time the term of any
directors elected pursuant to the provisions of this paragraph shall terminate.
For the purpose of determining the number of quarterly periods for which accrued
dividends have not been paid, any accrued and unpaid dividend that is
subsequently paid shall not be treated as unpaid. Each such event described in
clauses (i) through (v) above is referred to herein as a "Voting Rights
Triggering Event." Within 15 days of the time the Company becomes aware of the
occurrence of any default referred to in clause (iv) or (v) above, the Company
shall give written notice thereof to holders of the Preferred Stock.
The Certificate of Designation provides that, upon the occurrence of a
Voting Rights Triggering Event, the number of directors constituting the Board
of Directors will be increased by two directors, whom the holders of the
Preferred Stock are entitled to elect. Whenever the right of the holders of the
Preferred Stock to elect directors shall cease, the number of directors
constituting the Board of Directors will be reduced to the number necessary to
reflect the termination of the right of the holders of the Preferred Stock to
elect directors. Any vacancy occurring in the office of a director elected by
the holders of Preferred Stock may be filled by the remaining director elected
by such holders unless and until such vacancy shall be filled by such holders.
The provisions of the Company's Certificate of Incorporation provide that
generally, the Operations Committee must approve a variety of matters that would
otherwise be put before the Board of Directors. The directors elected by the
holders of the Preferred Stock have no right to sit on the Operations Committee
or any other committee of the Board of Directors. The holders of the Class A
Preferred Stock are entitled to elect that number of directors (rounded up to
the nearest whole number) equal to 25% of the entire Board of Directors. In the
event the holders of Preferred Stock are entitled to elect two directors, the
McCaw Investor may be entitled to elect an additional director.
The Certificate of Designation also provides that, except as stated above
under "-- Ranking," the Company will not authorize any class of Senior
Securities without Required Consent. The Certificate of Designation also
provides that the Company may not amend the Certificate of Designation so as to
affect adversely the specific rights, preferences, privileges or voting rights
of holders of shares of the Preferred Stock, or increase the authorized number
of shares of Preferred Stock, without the affirmative vote or consent of the
holders of at least a majority of the outstanding shares of Preferred Stock,
voting or consenting, as the case may be, separately as one class. Compliance
with any provision of the Certificate of Designation may be waived by Required
Consent. The Certificate of Designation also provides that, except as set forth
above, (i) the creation, authorization or issuance of any shares of Junior
Securities, Parity Securities or Senior Securities or (ii) the increase or
decrease in the amount of authorized capital stock of any class, including any
other class or series of preferred stock, shall not require the consent of the
holders of Preferred Stock and shall not be deemed to affect adversely the
rights, preferences, privileges or voting rights of the holders of Preferred
Stock.
Under Delaware law, the holders of Preferred Stock are entitled to vote as
a class upon a proposed amendment to the Certificate of Incorporation, whether
or not entitled to vote thereon by the Certificate of Incorporation, if the
amendment would increase or decrease the par value of the shares of such class,
or alter or change the powers, preferences or special rights of the shares of
such class so as to affect them adversely.
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CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Certificate of Designation and Exchange
Indenture. Reference is made to the Certificate of Designation and Exchange
Indenture for the full definitions of all such terms as well as any other
capitalized terms used herein for which no definition is provided.
Whenever the Certificate of Designation or the Exchange Indenture requires
that a particular ratio or amount be calculated with respect to a specified
period after giving effect to certain transactions or events on a pro forma
basis, such calculation will be made as if the transactions or events occurred
on the first day of such period, unless otherwise specified. All accounting
terms not otherwise defined in the Certificate of Designation will have the
meanings ascribed to them in accordance with generally accepted accounting
principles (whether or not such is indicated in the Certificate of Designation)
and, except as otherwise expressly provided in the Certificate of Designation,
the term "generally accepted accounting principles," with respect to any
computation required or permitted by the Certificate of Designation shall mean
such accounting principles as are generally accepted at the date of such
computation.
"Acquired Debt" means Debt of a Person existing at the time such Person
becomes a Restricted Subsidiary or assumed by the Company or a Restricted
Subsidiary in connection with the acquisition of assets from such Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. "Affiliate" shall be deemed to include, but only for
purposes of the "Transactions with Affiliates" covenant and without limiting the
application of the preceding sentence for the purpose of such or any other
purpose, any Person owning, directly or indirectly, (i) 10% or more of the
Company's outstanding common stock or (ii) securities having 10% or more of the
total voting power of the Company's Voting Stock. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing. No individual shall be deemed to be controlled by
or under common control with any specified Person solely by virtue of his or her
status as an employee or officer of such specified Person or of any other Person
controlled by or under common control with such specified Person.
"Annualized Operating Cash Flow" means, for any fiscal quarter, the
Operating Cash Flow for such fiscal quarter multiplied by four.
"Average Life" means, at any date of determination with respect to any
Debt, the quotient obtained by dividing (i) the sum of the products of (A) the
number of years from such date of determination to the dates of each successive
scheduled principal payment of such Debt and (B) the amount of such principal
payment by (ii) the sum of all such principal payments.
"Beneficial Owner" means a beneficial owner as defined in Rules 13d-3 and
13d-5 under the Exchange Act (or any successor rules), including the provision
of such Rules that a person shall be deemed to have beneficial ownership of all
securities that such person has a right to acquire within 60 days, provided that
a person shall not be deemed a beneficial owner of, or to own beneficially, any
securities if such beneficial ownership (i) arises solely as a result of a
revocable proxy delivered in response to a proxy or consent solicitation made
pursuant to, and in accordance with, the Exchange Act and the applicable rules
and regulations thereunder and (ii) is not also then reportable on Schedule 13D
(or any successor schedule) under the Exchange Act.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors (unless the context specifically requires that such resolution be
adopted by a majority of the Disinterested Directors, in which case by a
majority of such directors) and to be in full force and effect on the date of
such certification and delivered to the Transfer Agent, with respect to the
Preferred Stock, or the Trustee, with respect to the Exchange Debentures.
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"Capital Lease Obligations" of any Person means the obligations to pay rent
or other amounts under lease of (or other Debt arrangements conveying the right
to use) real or personal property of such Person which are required to be
classified and accounted for as a capital lease or a liability on the face of a
balance sheet of such Person determined in accordance with generally accepted
accounting principles and the amount of such obligations shall be the
capitalized amount thereof in accordance with generally accepted accounting
principles and the stated maturity thereof shall be the date of the last payment
of rent or any other amount due under such lease prior to the first date upon
which such lease may be terminated by the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of stock of, or other
ownership interests in, such Person.
"Change of Control" means the occurrence of any of the following events:
(a) any person (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act and the regulations thereunder) is or becomes the
Beneficial Owner, directly or indirectly, of more than 50% of the total
Voting Stock or Total Common Equity of the Company; provided that no Change
of Control shall be deemed to occur pursuant to this clause (a) (x) if the
person is a corporation with outstanding debt securities having a maturity
at original issuance of at least one year and if such debt securities are
rated Investment Grade by S&P or Moody's for a period of at least 90
consecutive days, beginning on the date of such event (which period will be
extended up to 90 additional days for as long as the rating of such debt
securities is under publicly announced consideration for possible
downgrading by the applicable rating agency), or (y) if the person is a
corporation (1) that is not, and does not have any outstanding debt
securities that are, rated by S&P, Moody's or any other rating agency of
national standing at any time during a period of 90 consecutive days
beginning on the date of such event (which period will be extended up to an
additional 90 days for as long as any such rating agency has publicly
announced that such corporation or debt thereof will be rated), unless
after such date but during such period debt securities of such corporation
having a maturity at original issuance of at least one year are rated
Investment Grade by S&P or Moody's and remain so rated for the remainder of
the period referred to in clause (x) above and (2) that, when determined as
of the Trading Day immediately before and the Trading Day immediately after
the date of such event, has Total Common Equity of at least $10 billion
(provided that, solely for the purpose of calculating Total Common Equity
as of such later Trading Day, the average Closing Price of the Common Stock
of such person shall be deemed to equal the Closing Price of such Common
Stock on such later Trading Day, subject to the last sentence of the
definition of "Total Common Equity"); or
(b) the Company consolidates with, or merges with or into, another
Person or sells, assigns, conveys, transfers, leases or otherwise disposes
of all or substantially all of its assets to any Person, or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other
property, other than any such transaction where (i) the outstanding Voting
Stock of the Company is converted into or exchanged for (1) Voting Stock
(other than Redeemable Stock) of the surviving or transferee Person or (2)
cash, securities and other property in an amount which could be paid by the
Company as a Restricted Payment under the Exchange Indenture and (ii)
immediately after such transaction no person (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act and the regulations
thereunder) is the Beneficial Owner, directly or indirectly, of more than
50% of the total Voting Stock or Total Common Equity of the surviving or
transferee Person; provided that no Change of Control shall be deemed to
occur pursuant to this clause (b), (x) if the surviving or transferee
Person or the person referred to in clause (b)(ii) is a corporation with
outstanding debt securities having a maturity at original issuance of at
least one year and if such debt securities are rated Investment Grade by
S&P or Moody's for a period of at least 90 consecutive days, beginning on
the date of such event (which period will be extended up to 90 additional
days for as long as the rating of such debt securities is under publicly
announced consideration for possible downgrading by the applicable rating
agency), or (y) if the surviving or transferee Person or such other person
is a corporation (1) that is not, and does not have any outstanding debt
securities that are, rated by S&P, Moody's or any other rating agency of
national
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standing at any time during a period of 90 consecutive days beginning on
the date of such event (which period will be extended up to an additional
90 days for as long as any such rating agency has publicly announced that
such corporation or debt thereof will be rated), unless after such date but
during such period debt securities of such corporation having a maturity at
original issuance of at least one year are rated Investment Grade by S&P or
Moody's and remain so rated for the remainder of the period referred to in
clause (x) above and (2) that, when determined as of the Trading Day
immediately before and the Trading Day immediately after the date of such
event, has Total Common Equity of at least $10 billion (provided that,
solely for the purpose of calculating Total Common Equity as of such later
Trading Day, the average Closing Price of the Common Stock of such person
shall be deemed to equal the Closing Price of such Common Stock on such
later Trading Day, subject to the last sentence of the definition of "Total
Common Equity"); or
(c) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors (together with
any directors who are members of the Board of Directors on February 11,
1998 and any new directors whose election by such Board of Directors or
whose nomination for election by the stockholders of the Company was
approved by a vote of 66 2/3% of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors then in office.
Any event that would constitute a Change of Control pursuant to clause (a)
or (b) above (i) but for the proviso thereto shall not be deemed to be a Change
of Control until such time (if any) as the conditions described in such proviso
cease to have been met and (ii) if and to the extent resulting from any
restructuring transaction or any sale or assignment of all or substantially all
of the assets and liabilities of the Company to, or merger or consolidation of
the Company with, any Person (any such transaction, a "Restructuring
Transaction") effected at substantially the same time as and in connection with
any of the Permitted Transactions described in clause (i) of the definition of
the term "Permitted Transactions" shall not constitute a Change of Control so
long as the Persons who, immediately prior to the closing of such Restructuring
Transaction and the particular Permitted Transaction being consummated at
substantially the same time and in connection therewith (the "Restructuring
Closing"), were the Beneficial Owners, directly or indirectly, of more than 50%
of the total Voting Stock and more than 50% of the Total Common Equity of the
Company would remain, immediately after such Restructuring Closing (and after
taking into account all issuances of securities in such Restructuring
Transaction and related Permitted Transaction), the Beneficial Owners, directly
or indirectly, of more than 50% of the total Voting Stock and more than 50% of
the Total Common Equity of the Company (or the surviving transferee Person, as
the case may be); provided that, immediately after any transaction or
combination of transactions described in this clause (ii), no person (as such
term is used in Sections 13(d) and 14(a) of the Exchange Act and the regulations
thereunder) is the ultimate Beneficial Owner of more than 50% of the total
Voting Stock or more than 50% of the Total Common Equity of the Company (or the
surviving transferee Person, as the case may be) unless such person (as so
defined) was the Beneficial Owner of more than 50% of the total Voting Stock and
more than 50% of the Total Common Equity of the Company immediately before such
transaction or combination of transactions. Notwithstanding anything to the
contrary contained in the Certificate of Designation, no Change of Control shall
be deemed to occur under the Certificate of Designation until the earlier of the
day after (x) the Optional Redemption Date and (y) the date all Old Senior Notes
are repurchased, redeemed or repaid in full, and if any Old Senior Notes are
outstanding at the time of an occurrence of an event set forth in (a), (b) or
(c) above, such occurrence shall not be deemed to be a Change of Control under
the Certificate of Designation until such Old Senior Notes are repurchased,
redeemed or repaid in full, in which case the day after the date on which all
Old Senior Notes are so repaid, redeemed or repurchased will be deemed to be the
date on which such Change of Control occurred.
"Closing Date" means February 11, 1998, the date on which the Old Preferred
Stock was originally issued under the Certificate of Designation.
"Closing Price" on any Trading Day with respect to the per share price of
any shares of Capital Stock means the last reported sale price regular way or,
in case no such reported sale takes place on such day, the
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average of the reported closing bid and asked prices regular way, in either case
on the New York Stock Exchange or, if such shares of Capital Stock are not
listed or admitted to trading on such exchange, on the principal national
securities exchange on which such shares are listed or admitted to trading or,
if not listed or admitted to trading on any national securities exchange, on the
Nasdaq Stock Market or, if such shares are not listed or admitted to trading on
any national securities exchange or quoted on the Nasdaq Stock Market but the
issuer is a Foreign Issuer (as defined in Rule 3b-4(b) under the Exchange Act)
and the principal securities exchange on which such shares are listed or
admitted to trading is a Designated Offshore Securities Market (as defined in
Rule 902(a) under the Securities Act), the average of the reported closing bid
and asked prices regular way on such principal exchange, or, if such shares are
not listed or admitted to trading on any national securities exchange or quoted
on the Nasdaq Stock Market and the issuer and principal securities exchange do
not meet such requirements, the average of the closing bid and asked prices in
the over-the-counter market as furnished by any New York Stock Exchange member
firm of national standing that is selected from time to time by the Company for
that purpose.
"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Consolidated Adjusted Net Income" and "Consolidated Adjusted Net Loss"
mean, for any period, the net income or net loss, as the case may be, of the
Company and its Restricted Subsidiaries for such period, all as determined on a
Consolidated basis in accordance with generally accepted accounting principles,
adjusted, to the extent included in calculating such net income or net loss, as
the case may be, by excluding without duplication (i) any after-tax gain or loss
attributable to the sale, conversion or other disposition of assets other than
in the ordinary course of business, (ii) any after-tax gains resulting from the
write-up of assets and any loss resulting from the write-down of assets, (iii)
any after-tax gain or loss on the repurchase or redemption of any securities
(including in connection with the early retirement or defeasance of any Debt),
(iv) any foreign exchange gain or loss, (v) all payments in respect of dividends
on shares of Preferred Capital Stock of the Company, (vi) any other
extraordinary, non-recurring or unusual items incurred by the Company or any of
its Restricted Subsidiaries, (vii) the net income (or loss) of any Person
acquired by the Company or any Restricted Subsidiary in a pooling-of-interests
transaction for any period prior to the date of such transaction and (viii) all
income or losses of Unrestricted Subsidiaries and Persons (other than
Subsidiaries) accounted for by the Company using the equity method of accounting
except, in the case of any such income, to the extent of dividends, interest or
other cash distributions received directly or indirectly from any such
Unrestricted Subsidiary or Person.
"Consolidated Adjusted Net Income (Loss)" means, for any period, the
Company's Consolidated Adjusted Net Income or Consolidated Adjusted Net Loss for
such period, as applicable.
"Consolidated Debt to Annualized Operating Cash Flow Ratio" means, as at
any date of determination, the ratio of (i) the aggregate amount of Debt of the
Company and the Restricted Subsidiaries on a Consolidated basis outstanding as
at the date of determination to (ii) the Annualized Operating Cash Flow of the
Company for the most recently completed fiscal quarter of the Company.
"Consolidated Interest Expense" of any Person means, for any period, the
aggregate interest expense and fees and other financing costs in respect of Debt
(including amortization of original issue discount and non-cash interest
payments and accruals), the interest component in respect of Capital Lease
Obligations and any deferred payment obligations of such Person and its
Subsidiaries, determined on a consolidated basis in accordance with generally
accepted accounting principles and all commissions, discounts, other fees and
charges owed with respect to letters of credit and bankers' acceptance financing
and net costs (including amortizations of discounts) associated with interest
rate swap and similar agreements and with foreign currency hedge, exchange and
similar agreements and the amount of dividends paid in respect of Redeemable
Stock.
"Consolidated Net Income" and "Consolidated Net Loss" mean, for any period,
the net income or net loss, as the case may be, of the Company and its
Restricted Subsidiaries for such period, all as determined on a Consolidated
basis in accordance with generally accepted accounting principles, adjusted, to
the extent
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included in calculating such net income or net loss, as the case may be, by
excluding without duplication (a) any after-tax gain or loss attributable to the
sale, conversion or other disposition of assets other than in the ordinary
course of business, (b) any after-tax gains resulting from the write-up of
assets and any loss resulting from the write-down of assets, (c) any after-tax
gain or loss on the repurchase or redemption of any securities (including in
connection with the early retirement or defeasance of any Debt), (d) any foreign
exchange gain or loss, (e) all payments in respect of dividends on shares of
Preferred Capital Stock of the Company, (f) any other extraordinary,
non-recurring or unusual items incurred by the Company or any of its Restricted
Subsidiaries, (g) the net income (or loss) of any Person acquired by the Company
or any Restricted Subsidiary in a pooling-of-interests transaction for any
period prior to the date of such transaction, (h) all income or losses of
Unrestricted Subsidiaries and Persons (other than Subsidiaries) accounted for by
the Company using the equity method of accounting except, in the case of any
such income, to the extent of dividends, interest or other cash distributions
received directly or indirectly from any such Unrestricted Subsidiary or Person
and (i) the net income (but not net loss) of any Restricted Subsidiary which is
subject to restrictions which prevent the payment of dividends or the making of
distributions to the Company but only to the extent of such restrictions.
"Consolidated Net Income (Loss)" means, for any period, the Company's
Consolidated Net Income or Consolidated Net Loss for such period, as applicable.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a Consolidated basis in accordance with
generally accepted accounting principles, less amounts attributable to
Redeemable Stock of such Person; provided that, with respect to the Company, no
effect shall be given to adjustments following the Closing Date to the
accounting books and records of the Company in accordance with Accounting
Principles Board Opinions Nos. 16 and 17 (or successor opinions thereto) or
otherwise resulting from the acquisition of control of the Company by another
Person.
"Consolidation" means the consolidation of the accounts of each of the
Restricted Subsidiaries with those of the Company, if and to the extent that the
accounts of each such Restricted Subsidiary would normally be consolidated with
those of the Company in accordance with generally accepted accounting
principles; provided, however, that "Consolidation" shall not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of the Company or any Restricted Subsidiary in any Unrestricted Subsidiary shall
be accounted for as an investment. The term "Consolidated" has a correlative
meaning.
"Credit Facility" means any credit facility (whether a term or revolving
type) of the type customarily entered into with banks, between the Company
and/or any of its Restricted Subsidiaries, on the one hand, and any banks or
other lenders, on the other hand (and any renewals, refundings, extensions or
replacements of any such credit facility), which credit facility is designated
by the Company as a "Credit Facility" for purposes of the Certificate of
Designation and the Exchange Indenture, as applicable, and shall include all
such credit facilities in existence on the Closing Date whether or not so
designated, to the extent that the aggregate principal balance of Debt that is
Incurred and outstanding under all Credit Facilities at any time does not exceed
$3.0 billion.
"Debt" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or not
contingent, (i) every obligation of such Person for money borrowed, (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations Incurred in connection with the acquisition
of property, assets or businesses, (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business which are not overdue or which are being contested
in good faith), (v) every Capital Lease Obligation of such Person, (vi) the
maximum fixed redemption or repurchase price of Redeemable Stock of such Person
at the time of determination plus accrued but unpaid dividends, (vii) every
obligation of such Person under interest rate swap or similar agreements or
foreign currency hedge, exchange or similar agreements of such Person, and
(viii) every obligation of the type referred to in clauses (i) through (vii) of
another Person and all dividends of another Person the payment of which, in
either case,
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such Person has Guaranteed or is responsible or liable, directly or indirectly,
as obligor, Guarantor or otherwise. The amount of Debt of any Person issued with
original issue discount is the face amount of such Debt less the unamortized
portion of the original issue discount of such Debt at the time of its issuance
as determined in conformity with generally accepted accounting principles, and
money borrowed at the time of the Incurrence of any Debt in order to pre-fund
the payment of interest on such Debt shall be deemed not to be "Debt."
"Default" means, (a) with respect to the Preferred Stock, any event that
is, or after notice or passage of time, or both, would be, a Voting Rights
Triggering Event, and (b) with respect to the Exchange Indentures, an event that
is, after notice or passage of time, or both, would be an Event of Default.
"Digital Mobile" means a radio communications system that employs digital
technology with a multi-site configuration that will permit frequency reuse as
described in that certain Offering Memorandum dated February 6, 1998, pursuant
to which the Old Preferred Stock was offered.
"Digital Mobile-SMR Operating Cash Flow" means, for any fiscal quarter, (i)
the net income or loss, as the case may be, of the Company and its Restricted
Subsidiaries from its Digital Mobile and Specialized Mobile Radio businesses and
related activities and services for such fiscal quarter, plus (ii) depreciation
and amortization charged with respect thereto for such fiscal quarter, all as
determined on a Consolidated basis in accordance with generally accepted
accounting principles, adjusted, to the extent included in calculating such net
income or loss, by excluding (a) any after-tax gain or loss attributable to the
sale, conversion or other disposition of assets other than in the ordinary
course of business, (b) any gains resulting from the write-up of assets and any
loss resulting from the write-down of assets, (c) any gain or loss on the
repurchase or redemption of any securities (including in connection with the
early retirement or defeasance of any Debt), (d) any foreign exchange gain or
loss, (e) any other extraordinary, non-recurring or unusual items and (f) all
income or losses of Persons (other than Subsidiaries) accounted for by the
Company using the equity method of accounting, except, in the case of any such
income, to the extent of dividends, interest or other cash distributions
received directly or indirectly from any such Person, plus (iii) all amounts
deducted in calculating net income or loss for such fiscal quarter in respect of
interest expense and other financing costs and all income taxes, whether or not
deferred, applicable to such fiscal quarter, all as determined on a Consolidated
basis in accordance with generally accepted accounting principles.
"Directed Investment" by the Company or any of its Restricted Subsidiaries
means any Investment for which the cash or property used for such Investment is
received by the Company from the issuance and sale (other than to a Restricted
Subsidiary) on or after June 1, 1997 of shares of its Capital Stock (other than
the Series D Preferred Stock and Redeemable Stock), or any options, warrants or
other rights to purchase such Capital Stock (other than the Series D Preferred
Stock and Redeemable Stock) designated by the Board of Directors as a "Directed
Investment" to be used for one or more specified investments in the
telecommunications business (including related activities and services) and is
so designated and used at any time within 365 days after the receipt thereof;
provided that the aggregate amount of any such Directed Investments may not at
any time exceed fifty percent (50%) of the aggregate amount of such cash or
property received by the Company on or after June 1, 1997 from any such issuance
and sale or capital contribution; and provided further that any proceeds from
any such issuance or sale may not be used for such an Investment if such
proceeds were, prior to being designated for use as a Directed Investment, (x)
used to make a Restricted Payment or (y) used as the basis for the Incurrence of
Debt under clause (i) of the "Limitation on Consolidated Debt" covenant unless
and until the amount of any such Debt (I) is treated as newly issued Debt and
could be Incurred in accordance with the "Limitation on Consolidated Debt"
covenant (other than under clause (i) thereof) or (II) has been repaid or
refinanced with the proceeds of Debt Incurred in accordance with the "Limitation
on Consolidated Debt" covenant (other than under clause (i) thereof) or (III)
has otherwise been repaid and, in the circumstances described in clauses (I) and
(II), the Company delivers to the Transfer Agent, with respect to the Preferred
Stock, or the Trustee, with respect to the Exchange Debentures, a certificate
confirming that the requirements of such clauses have been met.
"Disinterested Director" means, with respect to any proposed transaction
between the Company and an Affiliate thereof, a member of the Board of Directors
who is not an officer or employee of the Company, would
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not be a party to, or have a financial interest in, such transaction and is not
an officer, director or employee of, and does not have a financial interest in,
such Affiliate. For purposes of this definition, no person would be deemed not
to be a Disinterested Director solely because such person holds Capital Stock of
the Company.
"Existing Indentures" means the indentures relating to the Existing Senior
Notes.
"Existing Senior Notes" means the Company's $525,855,000 principal amount
at maturity of 11 1/2% Senior Redeemable Discount Notes Due 2003, $1,126,435,000
principal amount at maturity of 9 3/4% Senior Redeemable Discount Notes Due
2004, $541,830,000 principal amount at maturity of 12 1/4% Senior Redeemable
Discount Notes Due 2004, $111,165,000 principal amount at maturity of 10 1/4%
Senior Redeemable Discount Notes Due 2005, $409,876,000 principal amount at
maturity of 10 1/8% Senior Redeemable Discount Notes Due 2004, $840,000,000
principal amount at maturity of 10.65% Senior Redeemable Discount Notes due
September 15, 2007, $1,129,100,000 principal amount at maturity of 9 3/4% Senior
Serial Redeemable Discount Notes due 2007, and $1,627,000,000 principal amount
at maturity of 9.95% Senior Serial Redeemable Discount Notes due 2008.
"Fair Market Value" means, for purposes of clause (i) of the "Limitation on
Consolidated Debt" covenant, the price that would be paid in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined in
good faith by the Board of Directors, whose determination shall be conclusive if
evidenced by a Board Resolution; provided that (x) the Fair Market Value of any
security registered under the Exchange Act shall be the average of the closing
prices, regular way, of such security for the 20 consecutive trading days
immediately preceding the sale of Capital Stock and (y) in the event the
aggregate Fair Market Value of any other property received by the Company
exceeds $10 million, such Fair Market Value shall be as determined in good faith
by the Board of Directors, including a majority of the Disinterested Directors
who are then members of such Board of Directors, which determination shall be
conclusive if evidenced by a Board Resolution.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person guaranteeing any Debt of any other Person (the "primary obligor") in
any manner, whether directly or indirectly, and including any obligation of such
Person, (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or to purchase (or to advance or supply funds for the
purchase of) any security for the payment of such Debt, (ii) to purchase
property, securities or services for the purpose of assuring the holder of such
Debt of the payment of such Debt, or (iii) to maintain working capital, equity
capital or other financial statement condition or liquidity of the primary
obligor so as to enable the primary obligor to pay such Debt (and "Guaranteed",
"Guaranteeing" and "Guarantor" shall have meanings correlative to the
foregoing); provided, however, that the Guarantee by any Person shall not
include endorsements by such Person for collection or deposit, in either case,
in the ordinary course of business.
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by conversion, exchange or otherwise), assume (pursuant
to a merger, consolidation, acquisition or other transaction), Guarantee or
otherwise become liable in respect of such Debt or other obligation or the
recording, as required pursuant to generally accepted accounting principles or
otherwise, of any such Debt or other obligation on the balance sheet of such
Person (and "Incurrence" and "Incurred", shall have meanings correlative to the
foregoing); provided, however, that a change in generally accepted accounting
principles that results in an obligation of such Person that exists at such time
becoming Debt shall not be deemed an Incurrence of such Debt; provided further,
however, that the accretion of original issue discount on Debt shall not be
deemed to be an Incurrence of Debt. Debt otherwise Incurred by a Person before
it becomes a Subsidiary of the Company shall be deemed to have been Incurred at
the time it becomes such a Subsidiary.
"Investment" by any Person means any direct or indirect loan, advance or
other extension of credit or capital contribution to (by means of transfers of
cash or other property to others or payments for property or services for the
account or use of others, or otherwise), or purchase or acquisition of Capital
Stock, bonds, notes, debentures or other securities or evidence of Debt issued
by, any other Person or the designation of a Subsidiary as an Unrestricted
Subsidiary; provided that a transaction will not be an Investment to the extent
it involves (i) the issuance or sale by the Company of its Capital Stock (other
than Redeemable Stock),
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including options, warrants or other rights to acquire such Capital Stock (other
than Redeemable Stock) or (ii) a transfer, assignment or contribution by the
Company of shares of Capital Stock (or any options, warrants or rights to
acquire Capital Stock), or all or substantially all of the assets of, any
Unrestricted Subsidiary of the Company to another Unrestricted Subsidiary of the
Company.
"Investment Grade" means a rating of at least BBB-, in the case of S&P, or
Baa3, in the case of Moody's.
"Licenses" means SMR licenses granted by the FCC that entitle the holder to
use the radio channels covered thereby, subject to compliance with FCC rules and
regulations, in connection with its SMR business.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement, encumbrance, preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
on or with respect to such property or assets (including any conditional sale or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"Marketable Securities" means:
(1) securities either issued directly or fully guaranteed or insured
by the government of the United States of America or any agency or
instrumentality thereof having maturities of not more than six months;
(2) time deposits and certificates of deposit, having maturities of
not more than six months from the date of deposit, of any domestic
commercial bank having capital and surplus in excess of $500 million and
having outstanding long-term debt rated A or better (or the equivalent
thereof) by S&P or Aaa or better (or the equivalent thereof) by Moody's;
and
(3) commercial paper rated A-1 or the equivalent thereof by S&P or P-1
or the equivalent thereof by Moody's, and in each case maturing within six
months.
"Moody's" means Moody's Investors Service, Inc. or, if Moody's Investors
Service, Inc. shall cease rating debt securities having a maturity at original
issuance of at least one year and such ratings business shall have been
transferred to a successor Person, such successor Person; provided, however,
that if Moody's Investors Service, Inc. ceases rating debt securities having a
maturity at original issuance of at least one year and its ratings business with
respect thereto shall not have been transferred to any successor Person, then
"Moody's" shall mean any other national recognized rating agency (other than
S&P) that rates debt securities having a maturity at original issuance of at
least one year and that shall have been designated by the Company by a written
notice given to the Transfer Agent with respect to the Preferred Stock, or the
Trustee, with respect to the Exchange Debentures.
"October Notes" means the Company's 9 3/4% Senior Serial Redeemable
Discount Notes due 2007.
"Offer to Purchase" means a written offer (the "Offer") sent by the Company
by first class mail, postage prepaid, to each Holder at his registered address
on the date of the Offer offering to purchase up to the liquidation preference
of Preferred Stock or principal amount of Exchange Debentures specified in such
Offer at the purchase price specified in such Offer (as determined pursuant to
the Certificate of Designation or Exchange Indenture, as the case may be).
Unless otherwise required by applicable law, the Offer shall specify an
expiration date (the "Expiration Date") of the Offer to Purchase which shall be,
subject to any contrary requirements of applicable law, not less than 30 days or
more than 60 days after the date of such Offer and a settlement date (the
"Purchase Date") for purchase of shares of Preferred Stock or Exchange
Debentures within three Business Days after the Expiration Date. The Company
shall notify the Transfer Agent or Trustee, as applicable, at least 15 days (or
such shorter period as is acceptable to the Transfer Agent or Trustee, as
applicable), prior to the mailing of the Offer of the Company's obligation to
make an Offer to Purchase, and the Offer shall be mailed by the Company or, at
the Company's request, by the Transfer Agent or Trustee, as applicable, in the
name and at the expense of the Company. The Offer shall contain information
concerning the business of the Company and its Subsidiaries which, at a minimum,
shall include (i) the most recent annual and quarterly financial statements and
"Management's Discussion and Analysis of Financial
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Condition and Results of Operations" contained in the documents required to be
filed with the Transfer Agent pursuant to the Certificate of Designation or the
Trustee pursuant to the Exchange Indenture, as applicable, (which requirements
may be satisfied by delivery of such documents together with the Offer), (ii) a
description of material developments in the Company's business subsequent to the
date of the latest of such financial statements referred to in clause (i)
(including a description of the events requiring the Company to make the Offer
to Purchase), (iii) if required under applicable law, pro forma financial
information concerning, among other things, the Offer to Purchase and the events
requiring the Company to make the Offer to Purchase and (iv) any other
information required by applicable law to be included therein. The Offer shall
contain all instructions and materials necessary to enable such Holders to
tender their shares of Preferred Stock or Exchange Debentures pursuant to the
Offer to Purchase. The Offer shall also state:
(1) the section of the Certificate of Designation or the Exchange
Indenture pursuant to which the Offer to Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate liquidation preference of the outstanding shares of
Preferred Stock or principal amount of the outstanding Exchange Debentures
offered to be purchased by the Company pursuant to the Offer to Purchase
(the "Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000
aggregate liquidation preference of Preferred Stock or $1,000 principal
amount of Exchange Debentures accepted for payment (as specified pursuant
to the Certificate of Designation or the Exchange Indenture) (the "Purchase
Price");
(5) the Holder may tender all or any portion of the Preferred Stock or
Exchange Debentures registered in the name of such Holder and that any
portion of Preferred Stock or Exchange Debentures tendered must be tendered
in an integral multiple of $1,000 of liquidation preference or principal
amount, as the case may be;
(6) the place or places where the shares of Preferred Stock or
Exchange Debentures are to be surrendered for tender pursuant to the Offer
to Purchase;
(7) that dividends on any shares of Preferred Stock and interest on
any Exchange Debentures not tendered or tendered but not purchased by the
Company pursuant to the Offer to Purchase will continue to accrue;
(8) that on the Purchase Date the Purchase Price will become due and
payable upon each share of Preferred Stock or Exchange Debentures being
accepted for payment pursuant to the Offer to Purchase;
(9) that each Holder electing to tender shares of Preferred Stock or
Exchange Debentures pursuant to the Offer to Purchase will be required to
surrender such Preferred Stock or Exchange Debentures at the place or
places specified in the Offer prior to the close of business on the
Expiration Date (such Preferred Stock or Exchange Debentures being, if the
Company or the Transfer Agent or Trustee so requires, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Transfer Agent or Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing);
(10) that Holders will be entitled to withdraw all or any portion of
the Preferred Stock or Exchange Debentures tendered if the Company (or its
Paying Agent) receives, not later than the close of business on the
Expiration Date, a facsimile transmission or letter setting forth the name
of the Holder, the liquidation preference of the Preferred Stock or
principal amount of the Exchange Debentures the Holder tendered, the
certificate number of the Preferred Stock or Exchange Debentures the Holder
tendered and a statement that such Holder is withdrawing all or a portion
of his tender;
(11) that the Company shall purchase all such shares of Preferred
Stock or Exchange Debentures duly tendered and not withdrawn pursuant to
the Offer to Purchase; and
(12) that in the case of any Holder whose shares of Preferred Stock or
Exchange Debentures are purchased only in part, the Company shall execute,
and the Transfer Agent or Trustee shall authenticate
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and deliver to the Holder of such Preferred Stock or Exchange Debentures
without service charge, new shares of Preferred Stock or new Exchange
Debentures, as the case may be, of any authorized denomination as requested
by such Holder, in an aggregate liquidation preference or principal amount
equal to and in exchange for the unpurchased portion of the aggregate
liquidation preference or principal amount of the Preferred Stock or
Exchange Debentures so tendered.
Any Offer to Purchase shall be governed by and effected in accordance with
the Offer for such Offer to Purchase.
"Old Senior Notes" means the Company's $525,855,000 principal amount at
maturity of 11 1/2% Senior Redeemable Discount Notes Due 2003, $1,126,435,000
principal amount at maturity of 9 3/4% Senior Redeemable Discount Notes Due
2004, $541,830,000 principal amount at maturity of 12 1/4% Senior Redeemable
Discount Notes Due 2004, $111,165,000 principal amount at maturity of 10 1/4%
Senior Redeemable Discount Notes Due 2005, and $409,876,000 principal amount at
maturity of 10 1/8% Senior Redeemable Discount Notes Due 2004.
"Operating Cash Flow" means, for any fiscal quarter, (i) the Company's
Consolidated Adjusted Net Income (Loss) plus depreciation and amortization in
respect thereof for such fiscal quarter, plus (ii) all amounts deducted in
calculating Consolidated Adjusted Net Income (Loss) for such fiscal quarter in
respect of interest expense and other financing costs, including dividends paid
in respect of Redeemable Stock, and all income taxes, whether or not deferred,
applicable to such income period, all as determined on a Consolidated basis in
accordance with generally accepted accounting principles. For purposes of
calculating Operating Cash Flow for the fiscal quarter most recently completed
prior to any date on which an action is taken that requires a calculation of the
Operating Cash Flow to Consolidated Interest Expense Ratio or Consolidated Debt
to Annualized Cash Flow Ratio, (1) any Person that is a Restricted Subsidiary on
such date (or would become a Restricted Subsidiary in connection with the
transaction that requires the determination of such ratio) will be deemed to
have been a Restricted Subsidiary at all times during such fiscal quarter, (2)
any Person that is not a Restricted Subsidiary on such date (or would cease to
be a Restricted Subsidiary in connection with the transaction that requires the
determination of such ratio) will be deemed not to have been a Restricted
Subsidiary at any time during such fiscal quarter and (3) if the Company or any
Restricted Subsidiary shall have in any manner acquired (including through
commencement of activities constituting such operating business) or disposed
(including through termination or discontinuance of activities constituting such
operating business) of any operating business during or subsequent to the most
recently completed fiscal quarter, such calculation will be made on a pro forma
basis on the assumption that such acquisition or disposition had been completed
on the first day of such completed fiscal quarter.
"Operating Cash Flow to Consolidated Interest Expense Ratio" means, as at
any date of determination, the ratio of (i) the Operating Cash Flow of the
Company for the most recently completed fiscal quarter of the Company to (ii)
the Consolidated Interest Expense of the Company and its Restricted Subsidiaries
for the most recently completed fiscal quarter of the Company.
"Permitted Debt" means:
(i) any Debt (including Guarantees thereof) outstanding on the Closing
Date and any accretion of original issue discount and accrual of interest
with respect to such Debt;
(ii) any Debt outstanding under a Credit Facility;
(iii) any Vendor Financing Debt or any other Debt Incurred to finance
the cost (including the cost of design, development, construction,
improvement, installation or integration) of equipment, inventory or
network assets acquired by the Company or any of its Restricted
Subsidiaries after the Closing Date;
(iv) Debt (A) to the Company or (B) to any Restricted Subsidiary;
provided that any event which results in any such Restricted Subsidiary
ceasing to be a Restricted Subsidiary or any subsequent transfer of such
Debt (other than to the Company or another Restricted Subsidiary) shall be
deemed, in each case, to constitute an Incurrence of such Debt not
permitted by this clause (iv);
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(v) Debt (A) in respect of performance, surety or appeal bonds
provided in the ordinary course of business, (B) under foreign currency
hedge, interest rate swap or similar agreements; provided that such
agreements (a) are designed solely to protect the Company or its Restricted
Subsidiaries against fluctuations in foreign currency exchange rates or
interest rates and (b) do not increase the Debt of the obligor outstanding
at any time other than as a result of fluctuations in foreign currency
exchange rates or interest rates or by reason of fees, indemnities and
compensation payable thereunder; and (C) arising from agreements providing
for indemnification, adjustment of purchase price or similar obligations,
or from Guarantees or letters of credit, surety bonds or performance bonds
securing any obligations of the Company or any Restricted Subsidiary
pursuant to such agreements, in any case Incurred in connection with the
disposition of any business, assets or Restricted Subsidiary (other than
Guarantees of Debt Incurred by any Person acquiring all or any portion of
such business, assets or Restricted Subsidiary for the purpose of financing
such acquisition), in a principal amount not to exceed the gross proceeds
actually received by the Company or any Restricted Subsidiary in connection
with such disposition;
(vi) renewals, refundings or extensions of any Debt referred to in
clause (i) or (iii) above or Incurred pursuant to clause (ii) of the
"Limitation on Consolidated Debt" covenant and any renewals, refundings or
extensions thereof, plus (A) the amount of any premium reasonably
determined by the Company as necessary to accomplish such renewal,
refunding or extension and (B) such other fees and expenses of the Company
reasonably incurred in connection with the renewal, refunding or extension,
provided that such renewal, refunding or extension shall constitute
Permitted Debt only (a) to the extent that it does not result in an
increase in the aggregate principal amount (or, if such Debt provides for
an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the maturity thereof, in an amount not
greater than such lesser amount) of such Debt (except as permitted by
clause (A) or (B) above), and (b) to the extent such renewed, refunded or
extended Debt does not mature prior to the Stated Maturity or have a
mandatory redemption date prior to the mandatory redemption date of the
Debt being renewed, refunded or extended or have an Average Life shorter
than the remaining Average Life of the Debt being renewed, refunded or
extended; and
(vii) Debt payable solely in, or mandatorily convertible into, Capital
Stock (other than Redeemable Stock) of the Company;
(viii) Debt (in addition to Debt permitted under clauses (i) through
(vii) above) in an aggregate principal amount outstanding at any time not
to exceed $950 million.
"Permitted Distribution" of a Person means (i) with respect to the
Preferred Stock, the redemption, repurchase, defeasance or other acquisition or
retirement for value of Junior Securities of the Company, in exchange for
(including any such exchange pursuant to the exercise of a conversion right or
privilege in connection with which cash is paid in lieu of the issuance of
fractional shares or scrip), or out of the proceeds of a substantially
concurrent issue and sale (other than to a Restricted Subsidiary) of Junior
Securities of the Company (other than Redeemable Stock) and (ii) with respect to
the Exchange Debentures, (x) the exchange by such Person of Capital Stock (other
than Redeemable Stock) for outstanding Capital Stock and (y) the redemption,
repurchase, defeasance or other acquisition or retirement for value of Debt of
the Company that is subordinate in right of payment to the Exchange Debentures,
in exchange for (including any such exchange pursuant to the exercise of a
conversion right to privilege in connection with which cash is paid in lieu of
the issuance of fractional shares or scrip), or out of the proceeds of a
substantially concurrent issue and sale (other than to a Restricted Subsidiary)
of, either (a) Capital Stock of the Company (other than Redeemable Stock) or (b)
Debt of the Company that is subordinate in right of payment to the Exchange
Debentures on subordination terms no less favorable to the holders of the
Exchange Debentures in their capacities as such than the subordination terms (or
other arrangement) applicable to the Debt that is redeemed, repurchased,
defeased or otherwise acquired or retired for value, provided that, in the case
of this clause (b), such new Debt does not mature prior to the Stated Maturity
or have a mandatory redemption date prior to the mandatory redemption date of
the Debt being redeemed, repurchased, defeased or otherwise acquired or retired
for value or have an Average Life shorter than the remaining Average Life of the
Debt being redeemed, repurchased, defeased or otherwise acquired or retired for
value.
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"Permitted Investment" means any Investment in Marketable Securities.
"Permitted Transaction" means (i) any transaction pursuant to agreements
(whether or not definitive, and regardless of whether binding or non-binding)
existing on the Closing Date and described in or incorporated by reference into
that certain Offering Memorandum dated February 6, 1998, pursuant to which the
Old Preferred Stock was offered; and (ii) any transaction or transactions with
any vendor or vendors of property or materials used in the telecommunications
business (including related activities and services) of the Company or any
Restricted Subsidiary, provided (x) such transactions are in the ordinary course
of business and (y) such vendor does not beneficially own more than 50% of the
voting power of the Voting Stock of the Company.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Preferred Capital Stock," as applied to the Capital Stock of any Person,
means Capital Stock of such Person of any class or classes (however designated)
that ranks prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Redeemable Stock" of any Person means any Capital Stock of such Person
that by its terms or otherwise is (i) required to be redeemed prior to the
mandatory redemption date of the Preferred Stock or Stated Maturity of the
Exchange Debentures, (ii) redeemable at the option of the holder thereof at any
time prior to the mandatory redemption date of the Preferred Stock or Stated
Maturity of the Exchange Debentures or (iii) convertible into or exchangeable
for Capital Stock referred to in clause (i) or (ii) above or Debt having a
scheduled maturity prior to the mandatory redemption date of the Preferred Stock
or Stated Maturity of the Exchange Debentures; provided that any Capital Stock
that would not constitute Redeemable Stock but for provisions thereof giving
holders thereof the right to require such Person to repurchase or redeem such
Capital Stock upon the occurrence of a "change of control" occurring prior to
the mandatory redemption date of the Preferred Stock or Stated Maturity of the
Exchange Debentures shall not constitute Redeemable Stock if the "change of
control" provisions as applicable to such Capital Stock are no more favorable to
the holders of such Capital Stock than the provisions contained in the "Change
of Control" covenant described herein and such Capital Stock specifically
provides that such Person will not repurchase or redeem any such stock pursuant
to such provision prior to the Company's repurchase of such shares of Preferred
Stock or Exchange Debentures as are required to be repurchased pursuant to the
"Change of Control" covenant described below.
"Required Consent" means (1) for actions requiring the consent of holders
of the Preferred Stock, except as otherwise expressly provided in the
Certificate of Designation with respect to matters requiring the consent of each
holder of Preferred Stock affected thereby, (i) the consent of the holders of a
majority of the then outstanding shares of Preferred Stock to elect directors
upon a Voting Rights Triggering Event, and (ii) with respect to all other
actions requiring the consent of the holders of Preferred Stock, the consent of
the holders of either (x) a majority of the shares then outstanding of Preferred
Stock, (y) a majority of the shares then outstanding of (I) the Preferred Stock,
(II) the Series D Preferred Stock, if the holders of the Series D Preferred
Stock are being requested to consent to such action with respect to the terms of
the Series D Preferred Stock, and (III) any other issue of pari passu preferred
stock issued by the Company, if such preferred stock or the certificate of
designation pursuant to which such preferred stock was issued both (A) require
the consent of the holders of such preferred stock to such action and (B)
provide that the holders thereof will vote with the holders of the Preferred
Stock with respect to such action and (2) for actions requiring consent of
holders of Exchange Debentures, except as otherwise expressly provided in the
Exchange Indenture with respect to matters requiring the consent of each holder
of Exchange Debentures affected thereby, (i) the consent of holders of not less
than a majority in then outstanding principal amount of the Exchange Debentures
for any action to (x) direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any power
conferred upon such Trustee, or (y) consent to or waive, on behalf of the
holders of all the Exchange Debentures, any past default and its consequences,
and (ii) with respect to all other actions requiring the consent of holders of
the Exchange Debentures, the
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consent of either (x) a majority in then outstanding principal amount of the
Exchange Debentures or (y) a majority in then outstanding principal amount of
(I) the Exchange Debentures, (II) Series D Exchange Debentures, if the holders
of the Series D Exchange Debentures are being requested to consent to such
action with respect to the terms of the Series D Exchange Debentures, and (III)
any other issue of senior subordinated, unsecured notes issued by the Company,
if such notes or the indenture pursuant to which such notes were issued both (A)
require the consent of the holders of such notes to such action and (B) provide
that the holders thereof will vote with the holders of the Exchange Debentures
with respect to such action.
"Restricted Subsidiary" means any Subsidiary of the Company, whether
existing on the Closing Date or created subsequent thereto, designated from time
to time by the Board of Directors as (or otherwise deemed to be) a "Restricted
Subsidiary" in accordance with the "Restricted Subsidiaries" covenant described
below.
"S&P" means Standard & Poor's Ratings Services or, if Standard & Poor's
Ratings Services shall cease rating debt securities having a maturity at
original issuance of at least one year and such ratings business shall have been
transferred to a successor Person, such successor Person; provided, however,
that if Standard & Poor's Ratings Services ceases rating debt securities having
a maturity at original issuance of at least one year and its ratings business
with respect thereto shall not have been transferred to any successor Person,
then "S&P" shall mean any other nationally recognized rating agency (other than
Moody's) that rates debt securities having a maturity at original issuance of at
least one year and that shall have been designated by the Company by a written
notice given to the Transfer Agent, with respect to the Preferred Stock, or the
Trustee, with respect to the Exchange Debentures.
"Specialized Mobile Radio" or "SMR" means a mobile radio communications
system that is operated as described in that certain Offering Memorandum dated
February 6, 1998, pursuant to which the Old Preferred Stock was offered.
"Stated Maturity", when used with respect to any Debt security or any
installment of interest thereon, means the date specified in such Debt security
as the fixed date on which the principal of such Debt security or such
installment of interest is due and payable.
"Subsidiary" of any Person means (i) a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof or (ii) any other Person (other than a
corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority ownership and power to direct the policies,
management and affairs thereof.
"Total Common Equity" of any Person means, as of any day of determination
(and as modified for purposes of the definition of "Change of Control"), the
product of (i) the aggregate number of outstanding primary shares of Common
Stock of such Person on such day (which shall not include any options or
warrants on, or securities convertible or exchangeable into, shares of Common
Stock of such Person) and (ii) the average Closing Price of such Common Stock
over the 20 consecutive Trading Days immediately preceding such day. If no such
Closing Price exists with respect to shares of any such class, the value of such
shares for purposes of clause (ii) of the preceding sentence shall be determined
by the Board of Directors in good faith and evidenced by a Board Resolution.
"Total Market Value of Equity" of the Company means, as of any day of
determination, the sum of (1) the product of (i) the aggregate number of
outstanding primary shares of Common Stock of the Company on such day (which
shall not include any options or warrants on, or securities convertible or
exchangeable into, shares of Common Stock of the Company) and (ii) the average
Closing Price of such Common Stock over the 20 consecutive Trading Days
immediately preceding such day, plus (2) the liquidation value of any
outstanding shares of Preferred Capital Stock of the Company on such day. If no
such Closing Price exists with respect to shares of any such class, the value of
such shares for purposes of clause (ii) of the preceding sentence shall be
determined by the Board of Directors in good faith and evidenced by a Board
Resolution.
"Trading Day" with respect to a securities exchange or automated quotation
system means a day on which such exchange or system is open for a full day of
trading.
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"Trustee" means the trustee under the Exchange Indenture.
"Unrestricted Subsidiary" means Unrestricted Subsidiary Finance Company and
any other Subsidiary that is not a Restricted Subsidiary and includes any
Restricted Subsidiary that becomes an Unrestricted Subsidiary in accordance with
the "Restricted Subsidiaries" covenant described below.
"Vendor Financing Debt" means any Debt owed to (i) a vendor or supplier of
any property or materials used by the Company or its Restricted Subsidiaries in
their telecommunications business, (ii) any Affiliate of such a vendor or
supplier, (iii) any assignee of such a vendor, supplier or Affiliate of such a
vendor or supplier, or (iv) a bank or other financial institution that has
financed or refinanced the purchase of such property or materials from such a
vendor, supplier, Affiliate of such a vendor or supplier or assignee of such a
vendor or supplier; provided that the aggregate amount of such Debt does not
exceed the sum of (w) the purchase price of such property or materials
(including transportation, installation, warranty and testing charges, as well
as applicable taxes paid, in respect of such property or materials), (x) the
cost of design, development, site acquisition and construction, (y) any interest
or other financing costs accruing or otherwise payable in respect of the
foregoing, and (z) the cost of any services provided by such vendor, supplier or
Affiliate of such vendor or supplier.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly Owned Restricted Subsidiary" of the Company means a Restricted
Subsidiary all of the outstanding Capital Stock of which (other than directors'
qualifying shares) shall at the time be owned by the Company or by one or more
Wholly Owned Restricted Subsidiaries or by the Company and one or more Wholly
Owned Restricted Subsidiaries.
CERTAIN COVENANTS
Limitation on Consolidated Debt
The Company shall not, and shall not permit any Restricted Subsidiary to,
Incur any Debt (including Acquired Debt), other than Permitted Debt, unless (i)
with respect to Debt Incurred under this clause (i), the Debt so Incurred and
outstanding is in an aggregate principal amount that does not exceed 2.25 times,
with respect to Capital Stock sales after June 1, 1997 and on or prior to March
31, 1998, or 2.0 times, with respect to Capital Stock sales after March 31,
1998, the aggregate amount of net cash proceeds (or 80% of the Fair Market Value
of property other than cash) received by the Company after June 1, 1997 from the
issuance and sale (other than to a Restricted Subsidiary) of shares of its
Capital Stock (other than the Preferred Stock and Redeemable Stock), or any
options, warrants or other rights to purchase such Capital Stock (other than
Redeemable Stock), other than (x) proceeds applied for use as a Directed
Investment (unless such designation has been revoked by the Board of Directors
and the Company either abandons its plans to make such Investment or is able to
make such Investment pursuant to the "Limitation on Restricted Payments"
covenant (other than as a Directed Investment)) and (y) proceeds which have been
included in the computation of the amounts available for Restricted Payments
pursuant to clause (c)(2) of the "Limitation on Restricted Payments" covenant,
to the extent the inclusion thereof was necessary to allow a subsequent
Restricted Payment to be made, or (ii) on the date of such Incurrence, after
giving effect to the Incurrence of such Debt (or Acquired Debt) and the receipt
and application of the net proceeds thereof (and, if the net proceeds of such
new Debt are used to acquire a Person that becomes a Restricted Subsidiary or an
operating business of the Company or a Restricted Subsidiary, to all terms of
such acquisition) on a pro forma basis, the Operating Cash Flow to Consolidated
Interest Expense Ratio would equal or exceed 1.75 to 1.
Limitation on Restricted Payments
The Company shall not, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to the
holders of, any Junior Securities (other than dividends or distributions
payable solely in its Junior Securities (other than Redeemable
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Stock) or in options, warrants or other rights to purchase Junior
Securities (other than Redeemable Stock));
(ii) purchase, redeem or otherwise acquire or retire for value, or
permit any Restricted Subsidiary to, directly or indirectly, purchase,
redeem or otherwise acquire or retire for value (other than value
consisting solely of Junior Securities of the Company that are not
Redeemable Stock or options, warrants or other rights to acquire Junior
Securities that are not Redeemable Stock), any Junior Securities of the
Company (including options, warrants or other rights to acquire Junior
Securities); or
(iii) make, or permit any Restricted Subsidiary, directly or
indirectly, to make, any Investment (other than any Permitted Investment)
in any Person (other than in a Restricted Subsidiary or a Person that
becomes a Restricted Subsidiary as a result of such Investment);
(each of the foregoing actions set forth in clauses (i) through (iii), other
than any such action that is a Permitted Investment or a Permitted Distribution,
being referred to as a "Restricted Payment") unless, at the time of such
Restricted Payment, and after giving effect thereto:
(a) no Default shall have occurred and be continuing;
(b) except with respect to Investments, after giving effect, on a
pro forma basis, to such Restricted Payment and the Incurrence of any
Debt the net proceeds of which are used to finance such Restricted
Payment, the Consolidated Debt to Annualized Operating Cash Flow Ratio
would not have exceeded 7.0 to 1; and
(c) after giving effect to such Restricted Payment on a pro forma
basis, the aggregate amount of all Restricted Payments made on or after
February 15, 1994 shall not exceed:
(1) 50% of the Consolidated Net Income (or, in the case of a
Consolidated Net Loss, minus 100% of such deficit) of the Company for
the period (taken as one accounting period) from April 1, 1994 to the
last day of the last fiscal quarter preceding the date of the proposed
Restricted Payment, plus
(2) the aggregate net proceeds, including the fair market
value of property other than cash (as determined by the Board of
Directors, whose good faith determination shall be conclusive and
evidenced by a Board Resolution), received by the Company from the
issuance and sale (other than to a Restricted Subsidiary) after February
15, 1994 of its Junior Securities (other than Redeemable Stock), or any
options, warrants or other rights to purchase such Junior Securities
(other than Redeemable Stock), and from the issuance and sale, prior to
the Closing Date, of the Class A Preferred Stock and the Class B
Preferred Stock, other than (x) (except for purposes of determining
whether an Investment under clause (iii) above is permitted) Junior
Securities or options, warrants or other rights to purchase Junior
Securities (or shares issuable upon exercise thereof) issued or sold in
the PowerFone Merger, Questar/AMI Share Exchanges, Motorola Business
Acquisition and NTT transactions described in the Company's prospectus,
dated February 9, 1994, relating to the Company's Senior Redeemable
Discount Notes due 2004, and (y) Capital Stock or options, warrants or
other rights to purchase Capital Stock (or shares issuable upon exercise
thereof), the proceeds of the issuance of which is used (A) to make a
Directed Investment (unless such designation has been revoked by the
Board of Directors and the Company is able to make such Investment
pursuant to this "Limitation on Restricted Payments" covenant (other
than as a Directed Investment)) or (B) to Incur Debt under clause (i) of
the "Limitation on Consolidated Debt" covenant (unless and until the
amount of any such Debt (I) is treated as newly issued Debt and could be
Incurred in accordance with the "Limitation on Consolidated Debt"
covenant (other than under clause (i) thereof) or (II) has been repaid
or refinanced with the proceeds of Debt Incurred in accordance with the
"Limitation on Consolidated Debt" covenant (other than under clause (i)
thereof) or (III) has otherwise been repaid), plus
(3) the aggregate net proceeds, including the fair market
value of property other than cash (as determined by the Board of
Directors, whose good faith determination shall be conclusive and
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evidenced by a Board Resolution), received by the Company from the
issuance or sale (other than to a Restricted Subsidiary) after February
15, 1994 of any Junior Securities of the Company (other than Redeemable
Stock), or any options, warrants or other rights to purchase such Junior
Securities (other than Redeemable Stock), upon the conversion of, or
exchange for, Debt of the Company or a Restricted Subsidiary.
The foregoing limitations in this "Limitation on Restricted Payments"
covenant do not limit or restrict the making of any Permitted Distribution,
Permitted Investment or Directed Investment, and none of a Permitted
Distribution, Permitted Investment or Directed Investment shall be counted as a
Restricted Payment for purposes of clause (c) above. In addition, the foregoing
limitations do not prevent the Company from (I) paying a dividend on Junior
Securities of the Company within 60 days after the declaration thereof if, on
the date when the dividend was declared, the Company could have paid such
dividend in accordance with the provisions of the Certificate of Designation,
(II) repurchasing Junior Securities of the Company (including options, warrants
or other rights to acquire such Junior Securities) from employees or former
employees of the Company or any Subsidiary thereof for consideration not to
exceed $500,000 in the aggregate in any fiscal year (with repurchases pursuant
to this clause (II) not being counted as Restricted Payments for purposes of
clause (c) above) or (III) the repurchase, redemption or other acquisition for
value of Junior Securities of the Company to the extent necessary to prevent the
loss or secure the renewal or reinstatement of any license or franchise held by
the Company or any of its Subsidiaries from any governmental agency; or (IV)
Investments in Unrestricted Subsidiary Funding Company so long as (x) such
Investments are invested in Nextel International and (y) Nextel International is
a Subsidiary of the Company.
Notwithstanding the foregoing limitations in this "Limitation on Restricted
Payments" covenant, the Company is permitted to make any Investment in a Person
that is not (either before or after giving effect thereto) a Subsidiary of the
Company, provided that, immediately after giving effect thereto the amount equal
to (a) the aggregate amount of all Investments made pursuant to this paragraph
minus (b) all cash received by the Company or any Restricted Subsidiary from the
sale, transfer or other disposition to a Person that is not a Subsidiary of the
Company of any such Investment (or portion thereof) included in such aggregate
amount (with the amount of cash to be counted for this purpose not to exceed the
amount of such Investment (or portion thereof) so included), shall not exceed
the greater of (i) $250 million and (ii) 2% of the Total Market Value of Equity
of the Company as of such time. For purposes of determining the aggregate amount
of Investments referred to in clause (a), the amount of any Investment shall be
deemed to equal the cash portion thereof plus the fair market value of any
non-cash portion thereof (to the extent such portion constitutes an Investment)
at the time such Investment is made, as determined by the Board of Directors
(whose good faith determination shall be conclusive and evidenced by a Board
Resolution).
Notwithstanding the foregoing, no Investment in a Person that immediately
thereafter would be a Restricted Subsidiary shall be a Restricted Payment. In
addition, if any Person in which an Investment is made, which Investment
constitutes a Restricted Payment when made, thereafter becomes a Restricted
Subsidiary, all such Investments previously made in such Person shall no longer
be counted as Restricted Payments for purposes of calculating the aggregate
amount of Restricted Payments pursuant to clause (c) of the third preceding
paragraph or the aggregate amount of Investments pursuant to clause (a) of the
immediately preceding paragraph, in each case to the extent such Investments
would otherwise be so counted.
For purposes of clause (c)(3) above, the net proceeds received by the
Company from the issuance or sale of its Junior Securities either upon the
conversion of, or exchange for, Debt of the Company or any Restricted Subsidiary
shall be deemed to be an amount equal to (a) the sum of (i) the principal amount
or accreted value (whichever is less) of such Debt on the date of such
conversion or exchange and (ii) the additional cash consideration, if any,
received by the Company upon such conversion or exchange, less any payment on
account of fractional shares, minus (b) all expenses incurred in connection with
such issuance or sale. In addition, for purposes of clause (c)(3) above, the net
proceeds received by the Company from the issuance or sale of its Junior
Securities upon the exercise of any options or warrants of the Company or any
Restricted Subsidiary shall be deemed to be an amount equal to (a) the
additional cash consideration, if any, received by the Company upon such
exercise, minus (b) all expenses incurred in connection with such issuance or
sale.
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For purposes of this "Limitation on Restricted Payments" covenant, if a
particular Restricted Payment involves a non-cash payment, including a
distribution of assets, then such Restricted Payment shall be deemed to be an
amount equal to the cash portion of such Restricted Payment, if any, plus an
amount equal to the fair market value of the non-cash portion of such Restricted
Payment, as determined by the Board of Directors (whose good faith determination
shall be conclusive and evidenced by a Board Resolution).
Restricted Subsidiaries
The Company shall not designate any Restricted Subsidiary as an
Unrestricted Subsidiary, and shall not itself, and shall not permit any
Restricted Subsidiary to, sell, convey, transfer or otherwise dispose of any
assets, other than in the ordinary course of business, to any Unrestricted
Subsidiary or any Person that becomes an Unrestricted Subsidiary as part of such
transaction, unless, after giving effect to any such action, the assets (not
including any assets so sold, conveyed, transferred or otherwise disposed of,
other than in the ordinary course of business, to any Unrestricted Subsidiary or
any Person that becomes an Unrestricted Subsidiary as part of such transaction)
and business of the Company and its remaining Restricted Subsidiaries generated
at least 90% of Digital Mobile-SMR Operating Cash Flow in the fiscal quarter of
the Company most recently completed prior to the date of such action.
The Board of Directors may designate any existing Unrestricted Subsidiary
or any Person that is about to become a Subsidiary of the Company as a
Restricted Subsidiary if, after giving effect to such action (and, if such
designation is made in connection with the acquisition of a Person or an
operating business that is about to become a Subsidiary of the Company, after
giving effect to all terms of such acquisition) on a pro forma basis, on the
date of such action, the Debt of such Unrestricted Subsidiary outstanding
immediately prior to such designation would have been permitted to be Incurred
(and shall be deemed to have been Incurred) for all purposes of the Certificate
of Designation.
Subject to the second preceding paragraph and compliance with the
"Limitation on Restricted Payments" covenant, the Board of Directors may
designate any Restricted Subsidiary as an Unrestricted Subsidiary.
The designation by the Board of Directors of a Restricted Subsidiary as an
Unrestricted Subsidiary shall, for all purposes of the "Limitation on Restricted
Payments" covenant (including clause (b) thereof), be deemed to be a Restricted
Payment of an amount equal to the fair market value of the Company's ownership
interest in such Subsidiary (including, without duplication, such indirect
ownership interest in all Subsidiaries of such Subsidiary), as determined by the
Board of Directors in good faith and evidenced by a Board Resolution.
Notwithstanding the foregoing provisions of this "Restricted Subsidiaries"
covenant, the Board of Directors may not designate a Subsidiary of the Company
to be an Unrestricted Subsidiary if, after such designation, (a) the Company or
any of its other Restricted Subsidiaries (i) provides credit support for, or a
Guarantee of, any Debt of such Subsidiary (including any undertaking, agreement
or instrument evidencing such Debt) or (ii) is directly or indirectly liable for
any Debt of such Subsidiary, (b) a default with respect to any Debt of such
Subsidiary (including any right which the holders thereof may have to take
enforcement action against such Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Debt of the Company or any Restricted
Subsidiary to declare a default on such other Debt or cause the payment thereof
to be accelerated or payable prior to its final scheduled maturity or (c) such
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, any Restricted Subsidiary which is not a Subsidiary of the Subsidiary to be
so designated.
The Board of Directors, from time to time, may designate any Person that is
about to become a Subsidiary of the Company as an Unrestricted Subsidiary, and
may designate any newly-created Subsidiary as an Unrestricted Subsidiary, if at
the time such Subsidiary is created it contains no assets (other than such de
minimis amount of assets then required by law for the formation of corporations)
and no Debt. Subsidiaries of the Company that are not designated by the Board of
Directors as Restricted or Unrestricted Subsidiaries shall be deemed to be
Restricted Subsidiaries. Notwithstanding any provisions of this "Restricted
Subsidiaries" covenant, all Subsidiaries of an Unrestricted Subsidiary shall be
Unrestricted Subsidiaries. The Board of
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Directors shall not change the designation of a Subsidiary of the Company more
than twice in any period of five years.
Transactions with Affiliates
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, enter into any transaction (including the purchase,
sale, lease or exchange of any property or the rendering of any service) or
series of related transactions with any Affiliate of the Company on terms that
are less favorable to the Company or such Restricted Subsidiary, as the case may
be, than those which might be obtained at the time of such transaction from a
Person that is not such an Affiliate; provided, however, that this "Transactions
with Affiliates" covenant shall not limit, or be applicable to, (i) any
transaction between Unrestricted Subsidiaries not involving the Company or any
Restricted Subsidiary, (ii) any transaction between the Company and any
Restricted Subsidiary or between Restricted Subsidiaries or (iii) any Permitted
Transactions. In addition, any transaction or series of related transactions,
other than Permitted Transactions, between the Company or any Restricted
Subsidiary and any Affiliate of the Company (other than a Restricted Subsidiary)
involving an aggregate consideration of $5 million or more must be approved in
good faith by a majority of the Company's Disinterested Directors (of which
there must be at least one) and evidenced by a Board Resolution. For purposes of
this "Transactions with Affiliates" covenant, any transaction or series of
related transactions between the Company or any Restricted Subsidiary and an
Affiliate of the Company that is approved by a majority of the Disinterested
Directors (of which there must be at least one) and evidenced by a Board
Resolution shall be deemed to be on terms as favorable as those that might be
obtained at the time of such transaction (or series of transactions) from a
Person that is not such an Affiliate and thus shall be permitted under this
"Transactions with Affiliates" covenant.
Activities of the Company and Restricted Subsidiaries
The Company shall not, and shall not permit any Restricted Subsidiary to,
engage in any business other than the telecommunications business and related
activities and services, including such businesses, activities and services as
the Company and the Restricted Subsidiaries were engaged in on the Closing Date.
Provision of Financial Information
Whether or not the Company is subject to Section 13(a) or 15(d) of the
Exchange Act, or any successor provision thereto, the Company shall file with
the Commission the annual reports, quarterly reports and other documents which
the Company would have been required to file with the Commission pursuant to
such Section 13(a) or 15(d) or any successor provision thereto if the Company
were subject thereto, such documents to be filed with the Commission on or prior
to the respective dates (the "Required Filing Dates") by which the Company would
have been required to file them. The Company shall also in any event (i) within
15 days of each Required Filing Date (A) transmit by mail to all Holders at
their registered addresses, without cost to such Holders, and (B) file with the
Transfer Agent copies of the annual reports, quarterly reports and other
documents which the Company would have been required to file with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act or any successor
provisions thereto if the Company were subject thereto and (ii) if filing such
documents by the Company with the Commission is not permitted under the Exchange
Act, promptly upon written request supply copies of such documents to any
prospective Holder. The Transfer Agent's receipt of such reports, information
and documents shall not constitute constructive notice of any information
contained therein or determinable from information contained therein.
Senior Subordinated Debt
So long as any Preferred Stock is outstanding, the Company shall not Incur
any Debt, other than the Exchange Debentures, that is expressly made
subordinated in right of payment to any Senior Debt (as defined in the Exchange
Indenture) unless such Debt, by its terms and by the terms of any agreement or
instrument pursuant to which such Debt is outstanding, is expressly made pari
passu with, or subordinate in right of payment to, the Exchange Debentures
pursuant to provisions substantially similar to those contained in the Exchange
Indenture; provided that the foregoing limitations shall not apply to
distinctions between categories
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of Senior Debt that exist by reason of any Liens or Guarantees arising or
created in respect of some but not all Senior Debt.
Merger, Sale of Assets, Etc.
The Company (x) shall not, in any transaction or series of related
transactions, merge or consolidate with or into, or sell, assign, convey,
transfer, lease or otherwise dispose of its properties and assets substantially
as an entirety to, any Person, and (y) shall not permit any of its Restricted
Subsidiaries to enter into any such transaction or series of transactions if
such transaction or series of transactions, in the aggregate, would result in a
sale, assignment, conveyance, transfer, lease or other disposition of the
properties and assets of the Company and its Restricted Subsidiaries, taken as a
whole, substantially as an entirety to any Person, unless, in each case (x) or
(y), at the time and after giving effect thereto (i) either: (A) if the
transaction or series of transactions is a consolidation of the Company with or
a merger of the Company with or into any other Person, the Company shall be the
surviving Person of such merger or consolidation, or (B) the Person formed by
any consolidation with or merger with or into the Company, or to which the
properties and assets of the Company or the Company and its Restricted
Subsidiaries, taken as a whole, as the case may be, substantially as an entirety
are sold, assigned, conveyed, leased or otherwise transferred (any such
surviving Person or transferee Person referred to in this clause (B) being the
"Surviving Entity"), shall be a corporation, partnership or trust organized and
existing under the laws of the United States of America, any state thereof or
the District of Columbia and the Preferred Stock shall be converted into or
exchanged for and shall become shares of such Surviving Entity having in respect
of such Surviving Entity substantially the same powers, preferences and relative
participating, optional or other special rights and the qualifications,
limitations or restrictions thereon that the Preferred Stock had immediately
prior to such transaction, and (ii) immediately before and immediately after
giving effect to such transaction or series of transactions on a pro forma basis
(including any Debt Incurred or anticipated to be Incurred in connection with or
in respect of such transaction or series of transactions), no Default shall have
occurred and be continuing, and (iii) the Consolidated Net Worth of the Company
or the Surviving Entity, as the case may be, shall be equal to or greater than
that of the Company immediately prior to such transaction or series of
transactions; provided, however, that the foregoing requirements shall not apply
to any transaction or series of transactions involving the sale, assignment,
conveyance, transfer, lease or other disposition of the properties and assets by
any Restricted Subsidiary to any other Restricted Subsidiary, or the merger or
consolidation of any Restricted Subsidiary with or into any other Restricted
Subsidiary.
In connection with any consolidation, merger, sale, assignment, conveyance,
transfer, lease or other disposition contemplated by the foregoing provisions,
the Company shall deliver, or cause to be delivered, to the Transfer Agent, an
Officers' Certificate stating that such consolidation, merger, sale, assignment,
conveyance, transfer, lease or other disposition complies with the requirements
of the Certificate of Designation, and an opinion of counsel that the conditions
of the Certificate of Designation have been complied with. Each such Officers'
Certificate shall set forth the manner of determination of the Consolidated Net
Worth in accordance with clause (iii) of the preceding paragraph.
For all purposes of the Certificate of Designation and the Preferred Stock
(including the provisions described in the two immediately preceding paragraphs
and the "Limitation on Consolidated Debt" and "Restricted Subsidiaries"
covenants), Subsidiaries of any Surviving Entity shall, upon such transaction or
series of transactions, become Restricted Subsidiaries or Unrestricted
Subsidiaries as provided pursuant to the "Restricted Subsidiaries" covenant and
all Debt of the Surviving Entity and its Subsidiaries that was not Debt of the
Company and its Subsidiaries immediately prior to such transaction or series of
transactions shall be deemed to have been Incurred upon such transaction or
series of transactions.
EXCHANGE
The Company may, at the sole option of the Board of Directors (subject to
the legal availability of funds therefor), at any time after the Optional
Redemption Date, or at any time prior to the Optional Redemption Date in the
event the Old Senior Notes are repurchased, redeemed or repaid in full, exchange
all, but not less than all, of the outstanding shares of Preferred Stock,
including any shares of Preferred Stock issued as
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payment for dividends, into Exchange Debentures, subject to the conditions set
forth in the next succeeding paragraph. Presently, the exchange of the Preferred
Stock for Exchange Debentures would be restricted by covenants in the Existing
Indentures and in the Senior Notes Indenture. There can be no assurance that the
conditions in such covenants for the exchange of Preferred Stock for Exchange
Debentures will be satisfied or that the exchange will occur or that future Debt
of the Company would not also restrict an exchange. In order to effect such
exchange, the Company shall (i) if necessary to satisfy the condition set forth
in clause (B) in the following paragraph based upon the written advice of
counsel to the Company, file a registration statement with the Commission
relating to the exchange, and (ii) if a registration statement is filed with the
Commission pursuant to clause (i), use its best efforts to cause such
registration statement to be declared effective as soon as practicable by the
Commission unless the opinion referred to in clause (B) in the following
paragraph shall have been subsequently delivered.
In order to effectuate such exchange, the Company shall send a written
notice of exchange by mail to each holder of record of Preferred Stock, which
notice shall state (i) that the Company is exchanging the Preferred Stock into
Exchange Debentures pursuant to the Certificate of Designation, (ii) the date
fixed for exchange (the "Exchange Date"), which date shall not be less than 15
days nor more than 60 days following the date on which such notice is mailed
(except as provided in the last sentence of this paragraph), (iii) that the
Holder is to surrender for exchange, in the manner specified in the notice, such
Holder's certificate or certificates representing the Preferred Stock to be
exchanged, (iv) that dividends on the shares of Preferred Stock to be exchanged
shall cease to accrue on the Exchange Date whether or not certificates for
shares of Preferred Stock are surrendered for exchange on the Exchange Date
unless the Company shall default in the delivery of Exchange Debentures, and (v)
that interest on the Exchange Debentures shall accrue from the Exchange Date
whether or not certificates for shares of Preferred Stock are surrendered for
exchange on the Exchange Date. On the Exchange Date, if the conditions set forth
in clauses (A) through (F) below are satisfied, the Company shall issue Exchange
Debentures in exchange for the Preferred Stock as provided in the next
paragraph, provided that on the Exchange Date: (A) there shall be legally
available funds sufficient therefor (including, without limitation, legally
available funds sufficient therefor under Delaware law); (B) a registration
statement relating to the Exchange Debentures shall have been declared effective
under the Securities Act prior to such exchange and shall continue to be
effective on the Exchange Date or the Company shall have obtained a written
opinion of counsel that an exemption from the registration requirements of the
Securities Act is available for such exchange and that upon receipt of such
Exchange Debentures pursuant to such exchange made in accordance with such
exemption, each holder of an Exchange Debenture that is not an Affiliate of the
Company will not be subject to any restrictions imposed by the Securities Act
upon the resale of such Exchange Debenture, and such exemption is relied upon by
the Company for such exchange; (C) the Exchange Indenture shall have been duly
executed by the Company and the trustee thereunder (the "Trustee") with
irrevocable instructions to authenticate the Exchange Debentures necessary for
such exchanges; (D) the Exchange Indenture and the Trustee shall have been
qualified under the Trust Indenture Act; (E) immediately after giving effect to
such exchange, no Default or Event of Default (each as defined in the Exchange
Indenture) would exist under the Exchange Indenture; and (F) the Company shall
have delivered to the Trustee under the Exchange Indenture a written opinion of
counsel, dated the date of exchange, regarding the satisfaction of the
conditions set forth in clauses (A), (B), (C) and (D). In the event that (i) the
issuance of the Exchange Debentures is not permitted on the Exchange Date or
(ii) any of the conditions set forth in clauses (A) through (F) of the preceding
sentence are not satisfied on the Exchange Date, the Company shall use its best
efforts to satisfy such conditions and effect such exchange as soon as
practicable thereafter.
Upon any exchange pursuant to the preceding paragraph, the holders of
outstanding shares of Preferred Stock will be entitled to receive a principal
amount of Exchange Debentures for shares of Preferred Stock, the liquidation
preference of which, plus the amount of accumulated and unpaid dividends
(including a prorated dividend for the period from the immediately preceding
dividend payment date to the Exchange Date) with respect to which, equals such
principal amount; provided that the Company at its option may pay cash for any
or all accrued and unpaid dividends in lieu of issuing Exchange Debentures in
respect of such dividends. The Exchange Debentures will be issued in registered
form, without coupons. Exchange Debentures issued in exchange for Preferred
Stock will be in principal amounts of $1,000 and integral multiples thereof to
the
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extent practicable, and will also be issued in principal amounts less than
$1,000 so that each holder of Preferred Stock will receive certificates
representing the entire principal amount of Exchange Debentures to which its
shares of Preferred Stock entitle it, provided that the Company may, at the sole
option of the Board of Directors, pay cash in lieu of issuing an Exchange
Debenture in a principal amount less than $1,000. On and after the date of
exchange, dividends will cease to accrue on the outstanding shares of Preferred
Stock, and all rights of the holders of Preferred Stock (except the right to
receive the Exchange Debentures, an amount in cash, to the extent applicable,
equal to the accrued and unpaid dividends to the Exchange Date, and, if the
Company so elects, cash in lieu of any Exchange Debenture which is in an amount
that is not an integral multiple of $1,000) will terminate. The person entitled
to receive the Exchange Debentures issuable upon such exchange will be treated
for all purposes as the registered holder of such Exchange Debentures.
The Company will comply with the provisions of Rule 13e-4 promulgated
pursuant to the Exchange Act in connection with any exchange, to the extent
applicable.
BOOK-ENTRY; DELIVERY AND FORM
The Exchange Preferred Stock will initially be issued in the form of one
global certificate (the "Global Exchange Preferred Stock Certificate").
So long as DTC, or its nominee, is the registered owner or holder of the
Global Exchange Preferred Stock Certificate, DTC or such nominee, as the case
may be, will be considered the sole owner or holder of the Exchange Preferred
Stock represented by such Global Exchange Preferred Stock Certificate for all
purposes under the Certificate of Designation and the Exchange Preferred Stock.
No beneficial owner of an interest in a Global Exchange Preferred Stock
Certificate will be able to transfer that interest except in accordance with
DTC's applicable procedures, in addition to those provided for under the
Certificate of Designation.
Payments made with respect to the Global Exchange Preferred Stock
Certificate will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. The Company will have no responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests in the Global Exchange Preferred Stock
Certificate or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payments
made with respect to the Global Exchange Preferred Stock Certificate, will
credit participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the amount of such Global Exchange Preferred
Stock Certificate as shown on the records of DTC or its nominee. The Company
also expects that payments by participants to owners of beneficial interest in
such Global Exchange Preferred Stock Certificate held through such participants
will be governed by standing instructions and customary practices, as is now the
case with securities held for the accounts of customers registered in the names
of nominees for such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds.
The Company understands that DTC will take any action permitted to be taken
by a holder of Exchange Preferred Stock (including the presentation of Exchange
Preferred Stock for exchange as described below) only at the direction of one or
more participants to whose account the DTC interests in the Global Exchange
Preferred Stock Certificate is credited and only in respect of such portion of
the aggregate liquidation preference of Preferred Stock as to which such
participant or participants has or have given such direction.
The Company understands that DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "Clearing Agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its participants
and facilitate the clearance and settlement of securities transactions between
participants through electronic Book-Entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and
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dealers, banks, trust companies and clearing corporations and may include
certain other organizations. Indirect access to the DTC system is available to
others such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly ("indirect participants").
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in the Global Exchange Preferred Stock
Certificate among participants of DTC, it is under no obligation to perform or
continue to perform such procedures, and such procedures may be discontinued at
any time. The Company will have no responsibility for the performance by DTC or
its respective participants or indirect participants of its respective
obligations under the rules and procedures governing their operations.
CERTIFICATED EXCHANGE PREFERRED STOCK
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Preferred Stock Certificate and a successor depositary is not
appointed by the Company within 90 days, the Company will issue Certificated
Exchange Preferred Stock in exchange for the Global Exchange Preferred Stock
Certificates.
DESCRIPTION OF EXCHANGE DEBENTURES
The summary contained herein of certain provisions of the Exchange
Debentures does not purport to be complete and is qualified in its entirety by
reference to the provisions of the Exchange Indenture, the form of which is
filed with the Commission as an exhibit to the Registration Statement of which
this Prospectus is a part and is incorporated herein by reference. The
definitions of certain terms used in the Exchange Debentures and the Exchange
Indenture and in the following summary are set forth above under "Description of
Exchange Preferred Stock -- Certain Definitions."
THE EXCHANGE DEBENTURES
The Exchange Debentures, if issued, will be issued under the Exchange
Indenture. The terms of the Exchange Debentures include those stated in the
Exchange Indenture and those made part of the Exchange Indenture by reference to
the Trust Indenture Act. The Exchange Debentures will be subject to all such
terms, and prospective holders of the Exchange Debentures are referred to the
Exchange Indenture and the Trust Indenture Act for a statement of such terms.
The following summary of certain provisions of the Exchange Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Trust Indenture Act and to all of the provisions of the
Exchange Indenture, including the definitions of certain terms therein and those
terms made a part of the Exchange Indenture by reference to the Trust Indenture
Act.
GENERAL
The Exchange Debentures will be unsecured obligations of the Company, will
be limited in aggregate principal amount to the aggregate liquidation preference
of the Preferred Stock (including any Preferred Stock issued in payment of
dividends), plus accrued and unpaid dividends, on the date of exchange of the
Preferred Stock into Exchange Debentures (plus any additional Exchange
Debentures issued in lieu of cash interest as described herein). The Exchange
Debentures will be issued in fully registered form only in denominations of
$1,000 and integral multiples thereof (other than as described in "Description
of Exchange Preferred Stock -- Exchange" or with respect to additional Exchange
Debentures issued in lieu of cash interest as described herein). The Exchange
Debentures will be senior subordinated obligations of the Company, subordinated
to all existing and future Senior Debt of the Company and senior to all
subordinated obligations of the Company other than senior subordinated
obligations.
Principal of, premium, if any, and interest on the Exchange Debentures will
be payable, and the Exchange Debentures may be presented for registration of
transfer or exchange, at the office of the Paying Agent and Registrar. At the
Company's option, interest, to the extent paid in cash, may be paid by check
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mailed to the registered address of holders of the Exchange Debentures as shown
on the register for the Exchange Debentures. The Trustee will initially act as
Paying Agent and Registrar. The Company may change any Paying Agent and
Registrar without prior notice to holders of the Exchange Debentures. Holders of
the Exchange Debentures must surrender Exchange Debentures to the Paying Agent
to collect principal payments.
The Exchange Debentures will mature on February 15, 2010. Each Exchange
Debenture will bear interest at the same rate in effect with respect to the
Preferred Stock on the Exchange Debenture Issue Date or from the most recent
interest payment date to which interest has been paid or provided for. Interest
will be payable semi-annually in cash (or, on or prior to February 15, 2003, in
additional Exchange Debentures, at the option of the Company) in arrears on each
February 15 and August 15 commencing with the first such date to occur after the
Exchange Debenture Issue Date. Interest on the Exchange Debentures will be
computed on the basis of a 360-day year of twelve 30-day months and the actual
number of days elapsed.
Because of the Company's option through February 15, 2003 to pay interest
on the Exchange Debentures by issuing additional Exchange Debentures, any
Exchange Debentures issued prior to that date will be treated as issued with
OID, unless under special rules for interest holidays the amount of OID is
treated as de minimis. See "Certain United States Federal Income Tax
Considerations."
SUBORDINATION
The Exchange Debentures will be senior subordinated Debt of the Company,
subordinated to the prior payment when due of the principal of, and premium, if
any, and accrued and unpaid interest on, all existing and future Senior Debt of
the Company (including indebtedness under the Bank Credit Facility, the Notes,
the Existing Senior Notes and any extension, refinancing or replacement of such
Senior Debt) and senior in right of payment to the prior payment when due of the
principal of, and premium, if any, and accrued and unpaid interest on, all
subordinated Debt of the Company other than senior subordinated Debt. In
addition, the Exchange Debentures will be effectively subordinated to all
liabilities of Nextel's subsidiaries.
Upon (a) any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property or
(b) an assignment for the benefit of creditors or any marshaling of the
Company's assets and liabilities, the holders of Senior Debt shall be entitled
to receive payment in full of all obligations ("Obligations") due in respect of
such Senior Debt (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Debt) before holders
of the Exchange Debentures shall be entitled to receive any payment with respect
to the Exchange Debentures. Until all Obligations with respect to Senior Debt
are paid in full, any distribution to which holders of the Exchange Debentures
would be entitled shall be made to holders of Senior Debt. Notwithstanding the
foregoing, holders of the Exchange Debentures may receive securities that are
subordinated, at least to the same extent as the Exchange Debentures, to Senior
Debt and any securities issued in exchange for Senior Debt.
In addition, the Company may not make any payment upon or in respect of the
Exchange Debentures (except in such subordinated securities) if (a) a default in
the payment of any principal, premium, if any, interest or other Obligations
with respect to any Designated Senior Debt occurs and is continuing beyond any
applicable grace period (whether upon maturity, as a result of acceleration or
otherwise) or (b) any other default occurs and is continuing with respect to any
Designated Senior Debt that permits holders of such Designated Senior Debt to
accelerate its maturity, and the Company and the Trustee receive a notice of
such default (a "Payment Blockage Notice") from the holders, or from the
trustee, agent or other representative of the holders, of any such Designated
Senior Debt. Payments on the Exchange Debentures may and shall be resumed upon
the earlier of (i) the date upon which the default is cured or waived or (ii) in
the case of a default referred to in clause (b) above, 179 days after the date
on which the applicable Payment Blockage Notice is received, unless the maturity
of any Designated Senior Debt has been accelerated. No new period of payment
blockage may be commenced within 360 days after the receipt by the Trustee of
any prior Payment Blockage Notice. No nonpayment default that existed or was
continuing on the date of delivery of any
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Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice unless such default shall have been cured or
waived for a period of not less than 180 days.
"Designated Senior Debt" under the Exchange Indenture is defined to mean
the Debt specified in clause (i) of the definition of Senior Debt and any Debt
constituting Senior Debt that, at the date of determination, has an aggregate
principal amount of at least $25 million and that is specifically designated by
the Company in the instrument creating or evidencing such Senior Debt as
"Designated Senior Debt."
"Senior Debt" means (i) Debt of the Company under the Existing Senior Notes
and the Existing Indentures and the Bank Credit Facility and all fees, expenses
and indemnities payable in connection with any of the foregoing and (ii) all
other Debt of the Company (other than the Exchange Debentures), including
principal and interest on such Debt, unless such Debt, by its terms or by the
terms of any agreement or instrument pursuant to which such Debt is issued, is
pari passu with, or subordinated in right of payment to, the Exchange
Debentures; provided that the term "Senior Debt" shall not include (a) any Debt
of the Company that, when Incurred and without respect to any election under
Section 1111(b) of the United States Bankruptcy Code, was without recourse to
the Company, (b) any Debt of the Company to a Subsidiary of the Company or to a
joint venture in which the Company has an interest, (c) any Debt of the Company,
to the extent not permitted by the "Limitation on Consolidated Debt" or the
"Senior Subordinated Debt" covenants described below, (d) any repurchase,
redemption or other obligation in respect of Redeemable Stock, (e) any Debt to
any employee of the Company or any of its Subsidiaries, (f) any liability for
federal, state, local or other taxes owed or owing by the Company or (g) any
trade payables. Senior Debt will also include interest accruing subsequent to
events of bankruptcy of the Company at the rate provided for in the document
governing such Senior Debt, whether or not such interest is an allowed claim
enforceable against the debtor in a bankruptcy case under federal bankruptcy
law.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, holders of the Exchange Debentures may recover
less ratably than other creditors of the Company. The Company is expected to
incur substantial amounts of additional indebtedness in the future.
OPTIONAL REDEMPTION
The Exchange Debentures may be redeemed at any time (subject to contractual
and other restrictions with respect thereto existing on the Closing Date and
compliance with covenants contained in the Existing Indentures) on or after
February 15, 2003 at the Company's option, in whole or in part, upon not less
that 30 or more than 60 days' prior written notice mailed by first class mail to
each holder's last address as it appears in the Security Register, at the
redemption prices (expressed as a percentage of the principal amount thereof)
set forth below, plus an amount in cash equal to all accrued and unpaid interest
to the redemption date, if redeemed during the 12-month period beginning
February 15 of each of the years set forth below.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2003........................................................ 105.5625%
2004........................................................ 103.7083
2005........................................................ 101.8542
2006 and thereafter......................................... 100.0000
</TABLE>
In addition, on or prior to February 15, 2001 (subject to contractual and
other restrictions with respect thereto existing on the Closing Date and
compliance with covenants contained in the Existing Indentures), the Company
may, at its option, redeem Exchange Debentures having an aggregate principal
amount equal to up to 35% of the then outstanding principal amount of the
Exchange Debentures at a redemption price equal to 111.125% of the principal
amount thereof, plus accrued and unpaid interest to the redemption date, out of
the net proceeds of any sale of its common stock, provided that such redemption
occurs within 180 days after consummation of such sale.
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Selection
In the case of any partial redemption, selection of the Exchange Debentures
for redemption will be made by the Trustee in compliance with the requirements
of the principal national securities exchange, if any, on which the Exchange
Debentures are listed or, if the Exchange Debentures are not listed on a
national securities exchange, on a pro rata basis, by lot or by such other
method as the Trustee in its sole discretion shall deem to be fair and
appropriate; provided that no Exchange Debenture of $1,000 in principal amount
or less shall be redeemed in part. If any Exchange Debenture is to be redeemed
in part only, the notice of redemption relating to such Exchange Debenture shall
state the portion of the principal amount thereof to be redeemed. A new Exchange
Debenture in principal amount equal to the unredeemed portion thereof will be
issued in the name of the holder thereof upon cancellation of the original
Exchange Debenture.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required
(subject to any contractual or other restrictions with respect thereto existing
on the Closing Date and compliance with covenants contained in the Existing
Indentures) to make an Offer to Purchase to each holder of Exchange Debentures
to repurchase all or any part of such holder's Exchange Debentures at a cash
purchase price equal to 101% of their principal amount, plus accrued and unpaid
interest to the date of purchase (the "Change of Control Payment"). The Offer to
Purchase must be made within 30 days following a Change of Control, must remain
open for at least 30 and not more than 40 days and must comply with the
requirements of Rule 14e-1 under the Exchange Act and any other applicable
securities laws and regulations.
None of the provisions in the Exchange Indenture relating to a purchase
upon a Change of Control are waivable by the Board of Directors. The Company
could, in the future, enter into certain transactions, including certain
recapitalizations of the Company, that would not constitute a Change of Control,
but would increase the amount of indebtedness outstanding at such time. If a
Change of Control were to occur, the Company would be obligated to purchase all
Debt which would prohibit an Offer to Purchase prior to making an offer to
repurchase Exchange Debentures, and there can be no assurance that the Company
would have sufficient funds to pay the purchase price for all Exchange
Debentures that the Company would be required to purchase if a Change of Control
were to occur. In the event that the Company were required to purchase
outstanding Exchange Debentures pursuant to an Offer to Purchase, the Company
expects that it would need to seek third-party financing to the extent it does
not have available funds to meet its purchase obligations. However, there can be
no assurance that the Company would be able to obtain such financing. In
addition, the Company's ability to purchase the Exchange Debentures may be
limited by other then-existing agreements.
CERTAIN COVENANTS
Limitation on Consolidated Debt
The Company shall not, and shall not permit any Restricted Subsidiary to,
Incur any Debt (including Acquired Debt), other than Permitted Debt, unless (i)
with respect to Debt Incurred under this clause (i), the Debt so Incurred and
outstanding is in an aggregate principal amount that does not exceed 2.25 times,
with respect to Capital Stock sales after June 1, 1997 and on or prior to March
31, 1998, or 2.00 times, with respect to Capital Stock sales after March 31,
1998, the aggregate amount of net cash proceeds (or 80% of the Fair Market Value
of property other than cash) received by the Company after June 1, 1997 from the
issuance and sale (other than to a Restricted Subsidiary) of shares of its
Capital Stock (other than the Series D Preferred Stock and Redeemable Stock), or
any options, warrants or other rights to purchase such Capital Stock (other than
Redeemable Stock), other than (x) proceeds applied for use as a Directed
Investment (unless such designation has been revoked by the Board of Directors
and the Company either abandons its plans to make such Investment or is able to
make such Investment pursuant to the "Limitation on Restricted Payments"
covenant (other than as a Directed Investment)) and (y) proceeds which have been
included in the computation of the amounts available for Restricted Payments
pursuant to clause (c)(2) of the "Limitation on Restricted Payments" covenant,
to the extent the inclusion thereof was necessary to allow a subsequent
Restricted Payment to be made, or (ii) on the date of such Incurrence, after
giving effect to the
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Incurrence of such Debt (or Acquired Debt) and the receipt and application of
the net proceeds thereof (and, if the net proceeds of such new Debt are used to
acquire a Person that becomes a Restricted Subsidiary or an operating business
of the Company or a Restricted Subsidiary, to all terms of such acquisition) on
a pro forma basis, the Operating Cash Flow to Consolidated Interest Expense
Ratio would equal or exceed 1.75 to 1.
Limitation on Restricted Payments
The Company shall not, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to the
holders of, any shares of its Capital Stock (other than dividends or
distributions payable solely in its Capital Stock (other than Redeemable
Stock) or in options, warrants or other rights to purchase any such Capital
Stock (other than Redeemable Stock));
(ii) purchase, redeem or otherwise acquire or retire for value, or
permit any Restricted Subsidiary to, directly or indirectly, purchase,
redeem or otherwise acquire or retire for value (other than value
consisting solely of Capital Stock of the Company that is not Redeemable
Stock or options, warrants or other rights to acquire such Capital Stock
that is not Redeemable Stock), any Capital Stock of the Company (including
options, warrants or other rights to acquire such Capital Stock);
(iii) redeem, repurchase, defease or otherwise acquire or retire for
value, or permit any Restricted Subsidiary to, directly or indirectly,
redeem, repurchase, defease or otherwise acquire or retire for value (other
than value consisting solely of Capital Stock of the Company that is not
Redeemable Stock or options, warrants or other rights to acquire such
Capital Stock that is not Redeemable Stock), prior to any scheduled
maturity, scheduled repayment or scheduled sinking fund payment, any Debt
that is subordinate (whether pursuant to its terms or by operation of law)
in right of payment to the Exchange Debentures; or
(iv) make, or permit any Restricted Subsidiary, directly or
indirectly, to make, any Investment (other than any Permitted Investment)
in any Person (other than in a Restricted Subsidiary or a Person that
becomes a Restricted Subsidiary as a result of such Investment);
(each of the foregoing actions set forth in clauses (i) through (iv), other than
any such action that is a Permitted Investment or a Permitted Distribution,
being referred to as a "Restricted Payment") unless, at the time of such
Restricted Payment, and after giving effect thereto:
(a) no Default or Event of Default shall have occurred and be
continuing;
(b) except with respect to Investments, after giving effect, on a
pro forma basis, to such Restricted Payment and the Incurrence of any
Debt the net proceeds of which are used to finance such Restricted
Payment, the Consolidated Debt to Annualized Operating Cash Flow Ratio
would not have exceeded 7.0 to 1; and
(c) after giving effect to such Restricted Payment on a pro forma
basis, the aggregate amount of all Restricted Payments made on or after
February 15, 1994 shall not exceed:
(1) 50% of the Consolidated Net Income (or, in the case of a
Consolidated Net Loss, minus 100% of such deficit) of the Company for
the period (taken as one accounting period) from April 1, 1994 to the
last day of the last fiscal quarter preceding the date of the
proposed Restricted Payment, plus
(2) the aggregate net proceeds, including the fair market value
of property other than cash (as determined by the Board of Directors,
whose good faith determination shall be conclusive and evidenced by a
Board Resolution), received by the Company from the issuance and sale
(other than to a Restricted Subsidiary) on or after February 15, 1994
of shares of its Capital Stock (other than Redeemable Stock), or any
options, warrants or other rights to purchase such Capital Stock
(other than Redeemable Stock), other than (x) (except for purposes of
determining whether an Investment under clause (iv) above is
permitted) shares of Capital
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Stock or options, warrants or other rights to purchase Capital Stock
(or shares issuable upon exercise thereof) issued or sold in the
PowerFone Merger, Questar/AMI Share Exchanges, Motorola Transaction
and NTT transactions as defined and described in the Company's
prospectus, dated February 9, 1994, relating to the Company's Senior
Redeemable Discount Notes due 2004 and (y) shares of Capital Stock or
options, warrants or other rights to purchase Capital Stock (or
shares issuable upon exercise thereof), the proceeds of the issuance
of which is used (A) to make a Directed Investment (unless such
designation has been revoked by the Board of Directors and the
Company is able to make such Investment pursuant to this "Limitation
on Restricted Payments" covenant (other than as a Directed
Investment)) or (B) to Incur Debt under clause (i) of the "Limitation
on Consolidated Debt" covenant (unless and until the amount of any
such Debt (I) is treated as newly issued Debt and could be Incurred
in accordance with the "Limitation on Consolidated Debt" covenant
(other than under clause (i) thereof) or (II) has been repaid or
refinanced with the proceeds of Debt Incurred in accordance with the
"Limitation on Consolidated Debt" covenant (other than under clause
(i) thereof) or (III) has otherwise been repaid), plus
(3) the aggregate net proceeds, including the fair market value
of property other than cash (as determined by the Board of Directors,
whose good faith determination shall be conclusive and evidenced by a
Board Resolution), received by the Company from the issuance or sale
(other than to a Restricted Subsidiary) after February 15, 1994 of
any Capital Stock of the Company (other than Redeemable Stock), or
any options, warrants or other rights to purchase such Capital Stock
(other than Redeemable Stock), upon the conversion of, or exchange
for, Debt of the Company or a Restricted Subsidiary.
The foregoing limitations in this "Limitation on Restricted Payments"
covenant do not limit or restrict the making of any Permitted Distribution,
Permitted Investment or Directed Investment, and none of a Permitted
Distribution, Permitted Investment or Directed Investment shall be counted as a
Restricted Payment for purposes of clause (c) above. In addition, the foregoing
limitations do not prevent the Company from (I) paying a dividend on Capital
Stock of the Company within 60 days after the declaration thereof if, on the
date when the dividend was declared, the Company could have paid such dividend
in accordance with the provisions of the Exchange Indenture, (II) repurchasing
Capital Stock of the Company (including options, warrants or other rights to
acquire such Capital Stock) from employees or former employees of the Company or
any Subsidiary thereof for consideration not to exceed $500,000 in the aggregate
in any fiscal year (with repurchases pursuant to this clause (II) not being
counted as Restricted Payments for purposes of clause (c) above) or (III) the
repurchase, redemption or other acquisition for value of Capital Stock of the
Company to the extent necessary to prevent the loss or secure the renewal or
reinstatement of any license or franchise held by the Company or any of its
Subsidiaries from any governmental agency; or (IV) Investments in Unrestricted
Subsidiary Funding Company so long as (x) such Investments are invested in
Nextel International and (y) Nextel International is a Subsidiary of the
Company.
Notwithstanding the foregoing limitations in this "Limitation on Restricted
Payments" covenant, the Company will be permitted to make any Investment in a
Person that is not (either before or after giving effect thereto) a Subsidiary
of the Company, provided that, immediately after giving effect thereto, the
amount equal to (a) the aggregate amount of all Investments made pursuant to
this paragraph minus (b) all cash received by the Company or any Restricted
Subsidiary from the sale, transfer or other disposition to a Person that is not
a Subsidiary of the Company of any such Investment (or portion thereof) included
in such aggregate amount (with the amount of cash to be counted for this purpose
not to exceed the amount of such Investment (or portion thereof) so included),
shall not exceed the greater of (i) $250 million and (ii) 2% of the Total Market
Value of Equity of the Company as of such time. For purposes of determining the
aggregate amount of Investments referred to in clause (a), the amount of any
Investment shall be deemed to equal the cash portion thereof plus the fair
market value of any non-cash portion thereof (to the extent such portion
constitutes an Investment) at the time such Investment is made, as determined by
the Board of Directors (whose good faith determination shall be conclusive and
evidenced by a Board Resolution).
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Notwithstanding the foregoing, no Investment in a Person that immediately
thereafter would be a Restricted Subsidiary will be a Restricted Payment. In
addition, if any Person in which an Investment is made, which Investment
constitutes a Restricted Payment when made, thereafter becomes a Restricted
Subsidiary, all such Investments previously made in such Person shall no longer
be counted as Restricted Payments for purposes of calculating the aggregate
amount of Restricted Payments pursuant to clause (c) of the third preceding
paragraph or the aggregate amount of Investments pursuant to clause (a) of the
immediately preceding paragraph, in each case to the extent such Investments
would otherwise be so counted.
For purposes of clause (c)(3) above, the net proceeds received by the
Company from the issuance or sale of its Capital Stock either upon the
conversion of, or exchange for, Debt of the Company or any Restricted Subsidiary
shall be deemed to be an amount equal to (a) the sum of (i) the principal amount
or accreted value (whichever is less) of such Debt on the date of such
conversion or exchange and (ii) the additional cash consideration, if any,
received by the Company upon such conversion or exchange, less any payment on
account of fractional shares, minus (b) all expenses incurred in connection with
such issuance or sale. In addition, for purposes of clause (c)(3) above, the net
proceeds received by the Company from the issuance or sale of its Capital Stock
upon the exercise of any options or warrants of the Company or any Restricted
Subsidiary shall be deemed to be an amount equal to (a) the additional cash
consideration, if any, received by the Company upon such exercise, minus (b) all
expenses incurred in connection with such issuance or sale.
For purposes of this "Limitation on Restricted Payments" covenant, if a
particular Restricted Payment involves a non-cash payment, including a
distribution of assets, then such Restricted Payment shall be deemed to be an
amount equal to the cash portion of such Restricted Payment, if any, plus an
amount equal to the fair market value of the non-cash portion of such Restricted
Payment, as determined by the Board of Directors (whose good faith determination
shall be conclusive and evidenced by a Board Resolution).
Restricted Subsidiaries
The Company shall not designate any Restricted Subsidiary as an
Unrestricted Subsidiary, and shall not itself, and shall not permit any
Restricted Subsidiary to, sell, convey, transfer or otherwise dispose of any
assets, other than in the ordinary course of business, to any Unrestricted
Subsidiary or any Person that becomes an Unrestricted Subsidiary as part of such
transaction, unless, after giving effect to any such action, the assets (not
including any assets so sold, conveyed, transferred or otherwise disposed of,
other than in the ordinary course of business, to any Unrestricted Subsidiary or
any Person that becomes an Unrestricted Subsidiary as part of such transaction)
and business of the Company and its remaining Restricted Subsidiaries generated
at least 90% of Digital Mobile-SMR Operating Cash Flow in the fiscal quarter of
the Company most recently completed prior to the date of such action.
The Board of Directors may designate any existing Unrestricted Subsidiary
or any Person that is about to become a Subsidiary of the Company as a
Restricted Subsidiary if, after giving effect to such action (and, if such
designation is made in connection with the acquisition of a Person or an
operating business that is about to become a Subsidiary of the Company, after
giving effect to all terms of such acquisition) on a pro forma basis, on the
date of such action, the Debt of such Unrestricted Subsidiary outstanding
immediately prior to such designation would have been permitted to be Incurred
(and shall be deemed to have been Incurred) for all purposes of the Exchange
Indenture.
Subject to the second preceding paragraph and compliance with the
"Limitation on Restricted Payments" covenant, the Board of Directors may
designate any Restricted Subsidiary as an Unrestricted Subsidiary.
The designation by the Board of Directors of a Restricted Subsidiary as an
Unrestricted Subsidiary shall, for all purposes of the "Limitation on Restricted
Payments" covenant (including clause (b) thereof), be deemed to be a Restricted
Payment of an amount equal to the fair market value of the Company's ownership
interest in such Subsidiary (including, without duplication, such indirect
ownership interest in all Subsidiaries of such Subsidiary), as determined by the
Board of Directors in good faith and evidenced by a Board Resolution.
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Notwithstanding the foregoing provisions of this "Restricted Subsidiaries"
covenant, the Board of Directors may not designate a Subsidiary of the Company
to be an Unrestricted Subsidiary if, after such designation, (a) the Company or
any of its other Restricted Subsidiaries (i) provides credit support for, or a
Guarantee of, any Debt of such Subsidiary (including any undertaking, agreement
or instrument evidencing such Debt) or (ii) is directly or indirectly liable for
any Debt of such Subsidiary, (b) a default with respect to any Debt of such
Subsidiary (including any right which the holders thereof may have to take
enforcement action against such Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Debt of the Company or any Restricted
Subsidiary to declare a default on such other Debt or cause the payment thereof
to be accelerated or payable prior to its final scheduled maturity or (c) such
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, any Restricted Subsidiary which is not a Subsidiary of the Subsidiary to be
so designated.
The Board of Directors, from time to time, may designate any Person that is
about to become a Subsidiary of the Company as an Unrestricted Subsidiary, and
may designate any newly-created Subsidiary as an Unrestricted Subsidiary, if at
the time such Subsidiary is created it contains no assets (other than such de
minimis amount of assets then required by law for the formation of corporations)
and no Debt. Subsidiaries of the Company that are not designated by the Board of
Directors as Restricted or Unrestricted Subsidiaries shall be deemed to be
Restricted Subsidiaries. Notwithstanding any provisions of this "Restricted
Subsidiaries" covenant, all Subsidiaries of an Unrestricted Subsidiary shall be
Unrestricted Subsidiaries. The Board of Directors shall not change the
designation of a Subsidiary of the Company more than twice in any period of five
years.
Transactions with Affiliates
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, enter into any transaction (including the purchase,
sale, lease or exchange of any property or the rendering of any service) or
series of related transactions with any Affiliate of the Company on terms that
are less favorable to the Company or such Restricted Subsidiary, as the case may
be, than those which might be obtained at the time of such transaction from a
Person that is not such an Affiliate; provided, however, that this "Transactions
with Affiliates" covenant shall not limit, or be applicable to, (i) any
transaction between Unrestricted Subsidiaries not involving the Company or any
Restricted Subsidiary, (ii) any transaction between the Company and any
Restricted Subsidiary or between Restricted Subsidiaries or (iii) any Permitted
Transactions. In addition, any transaction or series of related transactions,
other than Permitted Transactions, between the Company or any Restricted
Subsidiary and any Affiliate of the Company (other than a Restricted Subsidiary)
involving an aggregate consideration of $5 million or more must be approved in
good faith by a majority of the Company's Disinterested Directors (of which
there must be at least one) and evidenced by a Board Resolution. For purposes of
this "Transactions with Affiliates" covenant, any transaction or series of
related transactions between the Company or any Restricted Subsidiary and an
Affiliate of the Company that is approved by a majority of the Disinterested
Directors (of which there must be at least one) and evidenced by a Board
Resolution shall be deemed to be on terms as favorable as those that might be
obtained at the time of such transaction (or series of transactions) from a
Person that is not such an Affiliate and thus shall be permitted under this
"Transactions with Affiliates" covenant.
Activities of the Company and Restricted Subsidiaries
The Company shall not, and shall not permit any Restricted Subsidiary to,
engage in any business other than the telecommunications business and related
activities and services, including such businesses, activities and services as
the Company and the Restricted Subsidiaries are engaged in on the Closing Date.
Provision of Financial Information
Whether or not the Company is subject to Section 13(a) or 15(d) of the
Exchange Act, or any successor provision thereto, the Company shall file with
the Commission the annual reports, quarterly reports and other documents which
the Company would have been required to file with the Commission pursuant to
such Section 13(a) or 15(d) or any successor provision thereto if the Company
were subject thereto, such
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documents to be filed with the Commission on or prior to the respective dates
(the "Required Filing Dates") by which the Company would have been required to
file them. The Company shall also in any event (i) within 15 days of each
Required Filing Date (A) transmit by mail to all holders, as their names and
addresses appear in the Security Register, without cost to such holders, and (B)
file with the Trustee copies of the annual reports, quarterly reports and other
documents which the Company would have been required to file with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act or any successor
provisions thereto if the Company were subject thereto and (ii) if filing such
documents by the Company with the Commission is not permitted under the Exchange
Act, promptly upon written request supply copies of such documents to any
prospective holder. The Trustee's receipt of such reports, information and
documents shall not constitute constructive notice of any information contained
therein or determinable from information contained therein.
Senior Subordinated Debt
So long as any Exchange Debentures are outstanding, the Company will not
Incur any Debt that is expressly made subordinated in right of payment to any
Senior Debt unless such Debt, by its terms and by the terms of any agreement or
instrument pursuant to which such Debt is outstanding, is expressly made pari
passu with, or subordinate in right of payment to, the Exchange Debentures
pursuant to provisions substantially similar to those contained in the Exchange
Indenture; provided that the foregoing limitations shall not apply to
distinctions between categories of Senior Debt that exist by reason of any Liens
or Guarantees arising or created in respect of some but not all Senior Debt.
Merger, Sale of Assets, Etc.
The Company (x) shall not, in any transaction or series of related
transactions, merge or consolidate with or into, or sell, assign, convey,
transfer, lease or otherwise dispose of its properties and assets substantially
as an entirety to, any Person, and (y) shall not permit any of its Restricted
Subsidiaries to enter into any such transaction or series of transactions if
such transaction or series of transactions, in the aggregate, would result in a
sale, assignment, conveyance, transfer, lease or other disposition of the
properties and assets of the Company and its Restricted Subsidiaries, taken as a
whole, substantially as an entirety to any Person, unless, in each case (x) or
(y), at the time and after giving effect thereto (i) either: (A) if the
transaction or series of transactions is a consolidation of the Company with or
a merger of the Company with or into any other Person, the Company shall be the
surviving Person of such merger or consolidation, or (B) the Person formed by
any consolidation with or merger with or into the Company, or to which the
properties and assets of the Company or the Company and its Restricted
Subsidiaries, taken as a whole, as the case may be, substantially as an entirety
are sold, assigned, conveyed, leased or otherwise transferred (any such
surviving Person or transferee Person referred to in this clause (B) being the
"Surviving Entity"), shall be a corporation, partnership or trust organized and
existing under the laws of the United States of America, any state thereof or
the District of Columbia and shall expressly assume by a supplemental indenture
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Company under the Exchange Debentures and the Exchange
Indenture and, in each case, the Exchange Indenture, as so supplemented, shall
remain in full force and effect, and (ii) immediately before and immediately
after giving effect to such transaction or series of transactions on a pro forma
basis (including any Debt Incurred or anticipated to be Incurred in connection
with or in respect of such transaction or series of transactions), no Default or
Event of Default shall have occurred and be continuing, and (iii) the
Consolidated Net Worth of the Company or the Surviving Entity, as the case may
be, shall be equal to or greater than that of the Company immediately prior to
such transaction or series of transactions; provided, however, that the
foregoing requirements shall not apply to any transaction or series of
transactions involving the sale, assignment, conveyance, transfer, lease or
other disposition of the properties and assets by any Restricted Subsidiary to
any other Restricted Subsidiary, or the merger or consolidation of any
Restricted Subsidiary with or into any other Restricted Subsidiary.
In connection with any consolidation, merger, sale, assignment, conveyance,
transfer, lease or other disposition contemplated by the foregoing provisions,
the Company shall deliver, or cause to be delivered, to the Trustee, in form and
substance reasonably satisfactory to the Trustee, an Officers' Certificate
stating that such consolidation, merger, sale, assignment, conveyance, transfer,
lease or other disposition and the
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supplemental indenture in respect thereof (required under clause (i)(B) of the
preceding paragraph) comply with the requirements of the Exchange Indenture and
an opinion of counsel stating that the conditions of Article Eight of the
Exchange Indenture have been complied with. Each such Officers' Certificate
shall set forth the manner of determination of the Consolidated Net Worth in
accordance with clause (iii) of the preceding paragraph.
For all purposes of the Exchange Indenture and the Exchange Debentures
(including the provisions described in the two immediately preceding paragraphs
and the "Limitation on Consolidated Debt" and "Restricted Subsidiaries"
covenants), Subsidiaries of any Surviving Entity will, upon such transaction or
series of transactions, become Restricted Subsidiaries or Unrestricted
Subsidiaries as provided pursuant to the "Restricted Subsidiaries" covenant and
all Debt of the Surviving Entity and its Subsidiaries that was not Debt of the
Company and its Subsidiaries immediately prior to such transaction or series of
transactions shall be deemed to have been Incurred upon such transaction or
series of transactions.
EVENTS OF DEFAULT
The following will be Events of Default under the Exchange Indenture: (i)
failure to pay principal of (or premium, if any on) any Exchange Debenture when
due; (ii) failure to pay any interest on any Exchange Debenture when due,
continued for 30 days; (iii) default in the payment of principal of, and premium
and interest, if any, on Exchange Debentures required to be purchased pursuant
to an Offer to Purchase as described under "Change of Control" when due and
payable, or failure to make an Offer to Purchase as required thereunder; (iv)
failure to perform or comply with the provisions described under "Merger, Sale
of Assets, Etc."; (v) failure to perform any other covenant or agreement of the
Company under the Exchange Indenture or the Exchange Debentures continued for 60
days after written notice to the Company by the Trustee or holders of at least
25% in aggregate principal amount of outstanding Exchange Debentures; (vi)
failure to pay when due (subject to any applicable grace period) the principal
of, or acceleration of, any Debt of the Company or any Restricted Subsidiary
having an outstanding principal amount of at least $25 million, individually or
in the aggregate; (vii) the rendering of a final judgment or judgments against
the Company or any Restricted Subsidiary in an amount in excess of $25 million
which remains undischarged or unstayed for a period of 60 days after the date on
which the right to appeal has expired; and (viii) certain events of bankruptcy,
insolvency or reorganization affecting the Company or any Restricted Subsidiary.
If an Event of Default (other than an Event of Default described in clause
(viii) above) shall occur and be continuing, either the Trustee or the holders
of at least 25% in aggregate principal amount of the outstanding Exchange
Debentures may accelerate all Exchange Debentures; provided, however, that after
such acceleration, but before a judgment or decree based on acceleration, the
holders by Required Consent may, under certain circumstances, rescind and annul
such acceleration if all Events of Default, other than the nonpayment of the
Exchange Debentures, have been cured or waived as provided in the Exchange
Indenture. If an Event of Default specified in clause (viii) above occurs, the
principal of and interest on the outstanding Exchange Debentures will ipso facto
become immediately due and payable without any declaration or other act on the
part of the Trustee or any holder. For information as to waiver of defaults, see
"Modification and Waiver."
Subject to the provisions of the Exchange Indenture relating to the duties
of the Trustee in case an Event of Default shall occur and be continuing, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Exchange Indenture at the request or direction of any of the holders,
unless such holders shall have offered to the Trustee reasonable security or
indemnity. Subject to such provisions for the indemnification of the Trustee,
the holders by Required Consent will have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee.
No holder of any Exchange Debenture will have any right to institute any
proceeding with respect to the Exchange Indenture or for any remedy thereunder,
unless such holder shall have previously given to the Trustee written notice of
a continuing Event of Default and unless also the holders of at least 25% in
aggregate principal amount of the outstanding Exchange Debentures shall have
made written request, and offered
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reasonable security or indemnity, to the Trustee to institute such proceeding as
trustee, and the Trustee shall not have received from the holders of a majority
in aggregate principal amount of the Exchange Debentures a direction
inconsistent with such request and shall have failed to institute such
proceeding within 60 days. However, such limitations do not apply to a suit
instituted by a holder of an Exchange Debenture for enforcement of payment of
the principal of, premium and interest, if any, on such Exchange Debenture on or
after the respective due dates expressed in such Exchange Debenture.
The Company will be required to furnish to the Trustee annually a statement
as to the performance by it of certain of its obligations under the Exchange
Indenture and as to any default in such performance.
DEFEASANCE AND COVENANT DEFEASANCE
The Company may elect, at its option at any time, to have the provisions of
the Exchange Indenture relating to defeasance and discharge of indebtedness or
the provisions relating to defeasance of certain restrictive covenants in the
Exchange Indenture, applied to the outstanding Exchange Debentures (as a whole
and not in part).
Defeasance and Discharge. The Exchange Indenture provides that, upon the
Company's exercise of its option to have the provisions relating to defeasance
and discharge applied to the outstanding Exchange Debentures, the Company will
be discharged from all its obligations with respect to the Exchange Debentures
(except for certain obligations to exchange or register the transfer of Exchange
Debentures, to replace stolen, lost or mutilated Exchange Debentures, to
maintain paying agencies and to hold moneys for payment in trust) upon the
deposit in trust for the benefit of the holders of such Exchange Debentures of
money or U.S. Government Obligations, or both, which, through the payment of
principal and interest in respect thereof in accordance with their terms, will
provide money in an amount sufficient to pay the principal of and any
installment of interest on such Exchange Debentures on the respective Stated
Maturities thereof in accordance with the terms of the Exchange Indenture and
the Exchange Debentures. Such defeasance or discharge may occur only if, among
other things, the Company has delivered to the Trustee an opinion of counsel to
the effect that the Company has received from, or there has been published by,
the IRS a ruling, or there has been a change in tax law, in either case to the
effect that holders of such Exchange Debentures will not recognize gain or loss
for federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to federal income tax on the same amount, in the
same manner and at the same times as would have been the case if such deposit,
defeasance and discharge were not to occur.
Defeasance of Certain Covenants. The Exchange Indenture provides that,
upon the Company's exercise of its option to defease certain restrictive
covenants applied to the outstanding Exchange Debentures, the Company may omit
to comply with certain restrictive covenants, including those described under
"Covenants" and clause (iii) under "Merger, Sale of Assets, Etc.", and the
occurrence of certain Events of Default, which are described above in clause
(iv) (with respect to such clause (iii)), clause (v) (with respect to such
restrictive covenants), clause (vi) and clause (vii) under "Events of Default,"
will be deemed not to be or result in an Event of Default, in each case with
respect to such Exchange Debentures. The Company, in order to exercise such
option, will be required to deposit, in trust for the benefit of the holders of
such Exchange Debentures, money or U.S. Government Obligations, or both, which,
through the payment of principal and interest in respect thereof in accordance
with their terms, will provide money in an amount sufficient to pay the
principal of and any installment of interest on such Exchange Debentures on the
respective Stated Maturities thereof in accordance with the terms of the
Exchange Indenture and the Exchange Debentures. The Company will also be
required, among other things, to deliver to the Trustee an opinion of counsel to
the effect that holders of such Exchange Debentures will not recognize gain or
loss for federal income tax purposes as a result of such deposit and defeasance
of certain obligations and will be subject to federal income tax on the same
amount, in the same manner and at the same times as would have been the case if
such deposit and defeasance were not to occur. In the event the Company
exercised this option with respect to the outstanding Exchange Debentures and
such Exchange Debentures were declared due and payable prior to their Stated
Maturity because of the occurrence of any Event of Default or become payable on
any redemption date at the option of the Company, the amount of money and U.S.
Government Obligations so deposited with in trust would be sufficient to pay
amounts due on such Exchange Debentures at the time of their respective Stated
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Maturities but may not be sufficient to pay amounts due on such Exchange
Debentures upon such acceleration or redemption. In such case, the Company would
remain liable for such payments.
MODIFICATION AND WAIVER
Modifications and amendments of the Exchange Indenture may be made by the
Company and the Trustee with Required Consent; provided, however, that no such
modification or amendment may, without the consent of each holder affected
thereby, (i) change the Stated Maturity of the principal of, or any installment
of interest on, any Exchange Debenture, (ii) reduce the principal amount of,
premium, if any, or interest on, any Exchange Debenture, (iii) change the place
or currency of payment of principal of premium, if any, or interest on, any
Exchange Debenture, (iv) impair the right to institute suit for the enforcement
of any payment on or after the Stated Maturity (or, in the case of a redemption,
on or after the Redemption Date) of any Exchange Debenture, (v) modify the
subordination provisions in a manner adverse to the holders in any material
respect, (vi) reduce the above-stated percentage of outstanding Exchange
Debentures the consent of whose holders is necessary to modify or amend the
Exchange Indenture, (vii) waive a default in the payment of principal of,
premium, if any, or interest on, the Exchange Debentures or (viii) reduce the
percentage of aggregate principal amount of outstanding Exchange Debentures the
consent of whose holders is necessary for waiver of compliance with certain
provisions of the Exchange Indenture or for waiver of certain defaults.
NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS, DIRECTORS OR
EMPLOYEES
The Exchange Indenture will provide that no recourse for the payment of the
principal of, premium, if any, or interest on, any of the Exchange Debentures,
or for any claim based thereon or otherwise in respect thereof, and no recourse
under or upon any obligation, covenant or agreement of the Company contained in
the Exchange Indenture or in any of the Exchange Debentures, or because of the
creation of any Debt represented thereby, shall be had against any incorporator
or past, present or future stockholder, officer, director, employee or
controlling person of the Company. Each holder, by accepting such Exchange
Debenture, waives and releases all such liability.
CONCERNING THE TRUSTEE
The Exchange Indenture will provide that, except during the continuance of
an Event of Default, the Trustee will perform only such duties as are
specifically set forth in the Exchange Indenture. If an Event of Default has
occurred and is continuing, the Trustee will exercise those rights and powers
vested in it under such Exchange Indenture and use the same degree of care and
skill in its exercise of such rights and powers as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
The Exchange Indenture and provisions of the Trust Indenture Act,
incorporated by reference in the Exchange Indenture, contain limitations on the
rights of the Trustee thereunder, should it become a creditor of the Company, to
obtain payment of claims in certain cases or to realize on certain property
received by it in respect of any such claims, as security or otherwise. The
Trustee is permitted to engage in other transactions; provided, however, that if
it acquires any conflicting interest, it must eliminate such conflict or resign.
TERMS OF EXISTING NEXTEL PREFERRED STOCK
GENERAL
Pursuant to the terms of the McCaw Securities Purchase Agreement, Nextel
issued to the McCaw Investor approximately 8.2 million shares of Class A
Preferred Stock, each with a stated value of $36.75 per share, which shares are
convertible into an equal number of shares of Class C Preferred Stock (such
shares of Class A Preferred Stock and any shares of Class C Preferred Stock
issued upon conversion being convertible into approximately 24.5 million shares
of Common Stock in the aggregate), and 82 shares of Class B Preferred Stock,
convertible into an equal number of shares of Common Stock. In addition, Nextel
has issued shares of the Series D Preferred Stock and the Preferred Stock.
Certain of the significant terms of each class of preferred stock are summarized
below.
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CLASS A PREFERRED STOCK
The Class A Preferred Stock is the primary mechanism for providing the
McCaw Investor with the economic benefits and corporate governance rights
contemplated by the McCaw Securities Purchase Agreement. Holders of Class A
Preferred Stock, voting separately as a class, are entitled to elect three
members of the Board of Directors or, if greater than three, that number of
directors (rounded up to the nearest whole number) equal to 25% of the entire
Board of Directors (the "Class A Directors"), subject to the termination of such
rights if the McCaw Investor's equity interest in Nextel falls below specified
levels. For so long as the Operations Committee is in existence, the McCaw
Investor is entitled to have a majority of the members of the Operations
Committee be Class A Directors or directors designated by the McCaw Investor
pursuant to the terms of the Class B Preferred Stock or the McCaw Securities
Purchase Agreement. With respect to matters other than the election of
directors, shares of Class A Preferred Stock vote together as a class with
shares of Common Stock and each such share of Class A Preferred Stock is
entitled to a number of votes equal to the number of shares of Common Stock into
which such share is convertible.
Each share of Class A Preferred Stock is convertible at the election of the
holder thereof into three shares of Common Stock, subject to certain
adjustments. Upon the occurrence of certain events, the shares of Class A
Preferred Stock are automatically converted into shares of Common Stock. In
addition, shares of Class A Preferred Stock are automatically converted into
shares of Class C Preferred Stock on a one-for-one basis upon the occurrence of
certain events including certain reductions in the McCaw Investor's ownership
interest below specified levels and foreclosure by a secured party upon shares
of Class A Preferred Stock pledged to such secured party. Shares of Class A
Preferred Stock are also redeemable at the option of Nextel upon the occurrence
of certain events constituting a Change in Control (as defined in the terms of
the Certificate of Incorporation creating and authorizing issuance of the Class
A Preferred Stock) at a redemption price equal to the stated value of the Class
A Preferred Stock plus the amount of any accrued or declared but unpaid
dividends thereon.
The Operations Committee consists of five members, three of whom are
entitled to be selected from among the McCaw Investor's representatives on the
Board of Directors as described above. The Operations Committee has the
authority to formulate key aspects of Nextel's business strategy, including
decisions relating to the technology used by Nextel (subject to existing
equipment purchase agreements), acquisitions, the creation and approval of
operating and capital budgets and marketing and strategic plans, approval of
financing plans, endorsement of nominees to the Board of Directors and
nomination and oversight of certain executive officers. The Board of Directors,
by a majority vote, may override actions taken or proposed by the Operations
Committee, although doing so would give rise to a $25.0 million 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 $290.5 million) and
the immediate vesting of the Incentive Option. However, the Board of Directors,
by a defined super-majority vote, retains the power to override actions taken or
proposed by the Operations Committee without triggering the obligation to make a
liquidated damages payment, or to commence dividend accruals with respect to the
Class A Preferred Stock or to accelerate the vesting of the Incentive Option. In
addition, the Board of Directors also may act to terminate the Operations
Committee, although such action by the Board of Directors would, in certain
circumstances, result in the obligation to make such a liquidated damages
payment and result in the commencement of such dividend accrual and the
accelerated vesting of the related options. The McCaw Securities Purchase
Agreement, the Certificate of Incorporation and the Nextel By-laws also
delineate a number of circumstances, chiefly involving or resulting from certain
events with respect to the McCaw Investor or Mr. McCaw, in which the Operations
Committee could be terminated but such liquidated damages payment, dividend
accrual and vesting of options would not be required. Except for the accrual of
the 12% dividend in the circumstances described above, shares of Class A
Preferred Stock are entitled to dividends only to the extent declared or paid
with respect to Common Stock in amounts equal to the amounts that would be
received had the Class A Preferred Stock been converted into Common Stock. Upon
liquidation, dissolution or winding up of Nextel, the holders of Class A
Preferred Stock are entitled to receive a liquidation preference equal to the
stated value of the Class A Preferred Stock plus any accrued but unpaid
dividends thereon.
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CLASS B PREFERRED STOCK
The purpose of the Class B Preferred Stock is to provide a protection for
the McCaw Investor's right to proportionate representation on the Board of
Directors (to the extent not provided by the McCaw Investor's ownership of Class
A Preferred Stock) and to establish a mechanism for the payment of the $25.0
million liquidated damages payment contemplated by the McCaw Securities Purchase
Agreement in the event that the Board of Directors takes certain actions with
respect to the Operations Committee that give rise to such payment. Shares of
Class B Preferred Stock are automatically converted on a one-for-one basis to
shares of Common Stock if the McCaw Investor's equity interest in Nextel falls
below specified levels or if certain transfers of Class B Preferred Stock occur.
CLASS C PREFERRED STOCK
The purpose of the Class C Preferred Stock is to protect the economic
attributes of the Class A Preferred Stock in the event that certain events
resulting in the termination of the corporate governance rights associated with
the Class A Preferred Stock occur. The terms of the Class C Preferred Stock are
substantially the same as the terms of the Class A Preferred Stock except that
holders of Class C Preferred Stock have no special voting rights in the election
of directors (including the appointment of directors to the Operations
Committee) and are not entitled to the 12% dividend in the circumstances in
which shares of Class A Preferred Stock would be entitled to such dividend.
SERIES D PREFERRED STOCK
The Series D Preferred Stock ranks on a parity with the Class A Preferred
Stock, the Class B Preferred Stock, the Class C Preferred Stock and the
Preferred Stock, except that Series D Preferred Stock is junior with respect to
dividend accruals and payments on the Class A Preferred Stock and the $25.0
million cash payment on the Class B Preferred Stock that are described above,
which are required upon certain occurrences. Dividends on the Series D Preferred
Stock are cumulative at 13% per annum and are payable quarterly in cash or, on
or prior to July 15, 2002, at the sole option of Nextel, in additional shares of
Series D Preferred Stock. The Series D Preferred Stock is mandatorily redeemable
on July 15, 2009 and may be redeemed at the option of Nextel in whole or in part
after December 15, 2005 and, in certain circumstances, after July 15, 2002 at
specified redemption prices. The Series D Preferred Stock is also exchangeable,
in whole but not in part, at the option of Nextel at any time after December 15,
2005 and in certain circumstances sooner, into Series D Exchange Debentures.
SERIES E PREFERRED STOCK
The Old Preferred Stock was issued in a private placement completed on
February 11, 1998. The Old Preferred Stock and the Exchange Preferred Stock
offered hereby have identical terms, except that the Exchange Preferred Stock
will be registered under the Securities Act and will not bear legends
restricting the transfer thereof. See "Description of Exchange Preferred Stock."
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of the principal United States
federal income tax consequences of the Exchange Offers and the purchase,
ownership and disposition of the Notes, the Preferred Stock and the Exchange
Debentures by initial purchasers thereof. This discussion does not purport to be
a complete analysis of all of the potential tax effects of such purchase,
ownership or disposition. This summary deals only with Notes, Preferred Stock
and Exchange Debentures held as "capital assets" within the meaning of Section
1221 of the Internal Revenue Code of 1986, as amended (the "Code"). It does not
address all aspects of the United States federal income tax consequences of
purchasing, holding, or disposing of the Notes, the Preferred Stock or the
Exchange Debentures that may be relevant to a particular investor in the context
of such investor's individual investment circumstances or to investors in
special situations, such as life insurance companies, financial institutions,
tax-exempt organizations, traders or dealers in securities or currencies,
persons holding Notes, Preferred Stock or Exchange Debentures as a part of a
hedging or conversion transaction or a straddle
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or U.S. Holders whose "functional currency" is not the United States dollar.
This summary also does not discuss tax consequences under state, local, or
foreign tax laws. Persons considering the purchase of the Notes or the Preferred
Stock should consult their own tax advisors concerning the application to their
particular situation of changes in United States federal income tax laws, as
well as the laws of any state, local or foreign taxing jurisdiction.
Furthermore, the discussion below is based upon the provisions of the Code and
existing and proposed Treasury regulations, administrative rulings and judicial
decisions thereunder as of the date hereof, and such authorities may be
repealed, revoked or modified, possibly with retroactive effect, so as to result
in United States federal income tax consequences different from those discussed
below.
As used herein, a "U.S. Holder" is a beneficial owner that is (i) an
individual citizen or resident of the United States; (ii) a corporation created
or organized in or under the laws of the United States or any State thereof;
(iii) an estate the income of which is subject to United States federal income
taxation regardless of its source; (iv) a trust over which a court within the
United States is able to exercise primary supervision and as to which one or
more United States persons have the authority to control all substantial
decisions; or (v) a partnership or other entity that is created or organized in
or under the laws of the United States or of any State thereof and that is
properly classified as a United States entity. An individual may, subject to
certain exceptions, be deemed to be a resident (as opposed to a non-resident
alien) of the United States for certain purposes by virtue of being present in
the United States on at least 31 days in the calendar year and for an aggregate
of at least 180 days during a three-year period ending in the current calendar
year (counting for such purposes all of the days present in the current year,
one-third of the days present in the immediately preceding year, and one-sixth
of the days present in the second preceding year). A "Non-U.S. Holder" is a
beneficial owner other than a U.S. Holder.
ALL PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE EXCHANGE
OFFERS AND OWNERSHIP AND DISPOSITION OF THE NOTES, THE PREFERRED STOCK OR THE
EXCHANGE DEBENTURES.
EXCHANGE OFFERS
Neither the exchange of Private Notes for Exchange Senior Notes nor the
exchange of Old Preferred Stock for Exchange Preferred Stock should be treated
as a taxable transaction for United States federal income tax purposes. Rather,
the Exchange Senior Notes or Exchange Preferred Stock, as the case may be,
received should be treated as a continuation of the Private Notes or Old
Preferred Stock surrendered in exchange. As a result, there should be no
material United States federal income tax consequences to holders exchanging
Private Notes for Exchange Senior Notes or Old Preferred Stock for Exchange
Preferred Stock.
TAXATION OF U.S. HOLDERS
Notes
Original Issue Discount. Because the Private Notes were issued at a
discount from their "stated redemption price at maturity," the Exchange Senior
Notes will have OID for United States federal income tax purposes and U.S.
Holders of Exchange Senior Notes will be subject to special tax accounting
rules, as described in greater detail below. U.S. Holders of Exchange Senior
Notes should be aware that they generally must include OID in gross income for
United States federal income tax purposes on an annual basis under a constant
yield accrual method regardless of their method of accounting. As a result, U.S.
Holders will include OID in income in advance of the receipt of cash
attributable to such income. However, U.S. Holders of Exchange Senior Notes
generally will not be required to include separately in income cash payments
received on such notes, even if denominated as interest, to the extent such
payments do not constitute qualified stated interest (as defined below).
The amount of OID on a debt instrument is the excess of its "stated
redemption price at maturity" over its "issue price," subject to a statutorily
defined de minimis exception. The "stated redemption price at maturity" of a
debt instrument is the sum of its principal amount plus all other payments on
such instrument, other than payments of "qualified stated interest." For this
purpose, "qualified stated interest" generally means
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stated interest that is unconditionally payable in cash or in property (other
than in the debt instruments of the issuer), at least annually at a single fixed
rate during the entire term of the debt instrument that appropriately takes into
account the length of intervals between payments. Because no cash interest will
be paid on the Notes until 2003, the interest payments on the Notes will not
constitute qualified stated interest, and thus will be included along with
principal in the stated redemption price at maturity of the Notes. As a result,
each Note will bear OID in an amount equal to the excess of (i) the sum of its
principal amount and all stated interest payments, over (ii) its issue price.
Because the Exchange Senior Notes should be treated as a continuation of the
Private Notes, the issue price of the Exchange Senior Notes will be the first
price to the public (excluding bond houses and brokers or similar persons acting
in the capacity of underwriters, placement agents or wholesalers) at which a
substantial amount of Private Notes was sold.
The amount of OID includible in income by a U.S. Holder of a Note is the
sum of the "daily portions" of OID with respect to the Note for each day during
the taxable year or portion of the taxable year in which such U.S. Holder holds
such Note ("accrued OID"). The daily portion is determined by allocating to each
day in any "accrual period" a pro rata portion of the OID allocable to that
accrual period. The "accrual period" for a Note may be of any length and may
vary in length over the term of the Note, provided that each accrual period is
no longer than one year and each scheduled payment of principal or interest
occurs on the first day or final day of an accrual period. The amount of OID
allocable to any accrual period is an amount equal to the product of the Note's
adjusted issue price at the beginning of such accrual period and its yield to
maturity (determined on the basis of compounding at the close of each accrual
period and properly adjusted for the length of the accrual period). OID
allocable to a final accrual period is the difference between the amount payable
at maturity (other than a payment of qualified stated interest) and the adjusted
issue price at the beginning of the final accrual period. Special rules will
apply for calculating OID for an initial short accrual period. The "adjusted
issue price" of a Note at the beginning of any accrual period is equal to its
issue price increased by the accrued OID for each prior accrual period
(determined without regard to the amortization of any acquisition premium, as
described below) and reduced by any payments made on such Note on or before the
first day of the accrual period.
Optional Redemption. Notes may be redeemed prior to their stated maturity
at the option of Nextel. For purposes of computing the yield of such
instruments, Nextel will be deemed to exercise or not exercise its option to
redeem the Notes in a manner that minimizes the yield on the Notes. It is not
anticipated that Nextel's ability to redeem prior to stated maturity would
affect the yield of a Note.
Nextel's option to redeem the Notes at any time on or after February 15,
2003 at a percentage of par plus accrued but unpaid interest would be treated as
a "call option" within the meaning of the income tax regulations. However,
because by utilizing the date of exercise of the call option as the maturity
date and the amount for which the Notes could be redeemed in accordance with the
terms of the redemption feature, plus interest which, under the terms of the
Notes, would have been paid as of such redemption date, as the stated redemption
price at maturity, the yield on the Notes would not be lower than such yield
would be if the option were not exercised, Nextel will not be presumed to
exercise its option to redeem the Notes.
In addition, on or prior to February 15, 2003 Nextel will have the right to
redeem up to 35% in aggregate Accreted Value of the outstanding Notes out of the
net cash proceeds of any one or more sales of at least $125 million of its
Capital Stock. Furthermore, holders will have the right to tender Notes to
Nextel for redemption should Nextel experience a Change of Control and be
required to make an Offer to Purchase the Notes. Such optional redemption rights
should not affect, and will not be treated by Nextel as affecting, the
determination of the yield or maturity of the Notes.
Market Discount on Notes. If a U.S. Holder acquires a Note for an amount
less than its revised issue price, the amount of the difference will be treated
as "market discount" for United States federal income tax purposes, unless such
difference is less than a specified de minimis amount. The Code provides that,
for these purposes, the revised issue price of a Note generally equals its issue
price, increased by the amount of any OID that has accrued on the Note. Under
the market discount rules, a U.S. Holder will be required to treat any principal
payment on a Note or any gain on the sale, exchange, retirement or other
disposition of a Note as ordinary income to the extent of the market discount
which has not previously been included in income and is
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treated as having accrued on such Note at the time of such payment or
disposition. In addition, the U.S. Holder may be required to defer, until the
maturity of the Note or its earlier disposition in a taxable transaction, the
deduction of all or a portion of the interest expense on any indebtedness
incurred or continued to purchase or carry such Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the U.S.
Holder elects to accrue on a constant interest method. A U.S. Holder of a Note
may elect to include market discount in income currently as it accrues (on
either a ratable or constant interest method), in which case the rule described
above regarding deferral of interest deductions will not apply. This election to
include market discount in income currently, once made, applies to all market
discount obligations acquired on or after the first taxable year to which the
election applies and may not be revoked without the consent of the Internal
Revenue Service ("IRS").
Acquisition Premium. A U.S. Holder that is treated as acquiring a Note for
an amount that is greater than its adjusted issue price but equal to or less
than the sum of all amounts payable on the Note after the purchase date, other
than qualified stated interest, will be considered to have purchased such Note
at an "acquisition premium." Under the acquisition premium rules, the amount of
OID, if any, which such U.S. Holder must include in its gross income with
respect to such Notes for any taxable year will be reduced by the portion of
such acquisition premium properly allocable to such year.
A U.S. Holder may elect to treat all interest on any Note as OID and
calculate the amount includible in gross income under the constant yield method
described above. For the purposes of this election, interest includes stated
interest, acquisition discount, OID, de minimis OID, market discount, de minimis
market discount and unstated interest, as adjusted by any amortizable bond
premium or acquisition premium. The election is to be made for the taxable year
in which the U.S. Holder acquired the Note, and may not be revoked without the
consent of the IRS. U.S. HOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS
ABOUT THIS ELECTION.
Redemption, Sale or Exchange of Notes. In general, upon the redemption,
sale or exchange of a Note, a U.S. Holder will recognize gain or loss equal to
the difference between the amount realized upon the redemption, sale or exchange
(less any accrued qualified stated interest not previously taken into account,
which will be taxable as such) and the adjusted tax basis of the Note. The
adjusted tax basis of a U.S. Holder in Notes will, in general, initially equal
the cost of the Notes to such U.S. Holder, increased by OID and market discount
previously included in income by the U.S. Holder and reduced by any cash
payments on the Notes other than qualified stated interest received by such U.S.
Holder. Except with respect to accrued market discount, such gain or loss will
be a capital gain or loss. For certain noncorporate holders (including
individuals), the rate of taxation of capital gains will depend on (i) the
holder's holding period for the Notes at the time of redemption, sale or
exchange of the Notes (with the lowest rate available for Notes held more than
18 months) and (ii) the holder's marginal tax rate for ordinary income.
Preferred Stock
Distributions on the Preferred Stock. Distributions of cash or, under
Section 305(b)(4) of the Code, of additional shares of Preferred Stock on the
Preferred Stock will be treated as dividends taxable as ordinary income to U.S.
Holders to the extent of Nextel's current and accumulated earnings and profits
as determined under United States federal income tax principles. The amount of a
distribution of additional shares of Preferred Stock will equal the fair market
value of the shares of Preferred Stock distributed as of the date of such
distribution. To the extent that the amount of a distribution on the Preferred
Stock exceeds Nextel's current and accumulated earnings and profits, such
distribution will be treated as a nontaxable return of capital and will be
applied against and reduce the adjusted tax basis of such Preferred Stock in the
hands of each U.S. Holder (but not below zero), thus increasing the amount of
any gain (or reducing the amount of any loss) which would otherwise be
recognized by such U.S. Holder upon the sale or other taxable disposition of
such Preferred Stock. The amount of any such distribution which exceeds the
adjusted tax basis of the Preferred Stock in the hands of the U.S. Holder will
be treated as capital gain and taxed as indicated under the caption "-- Sale or
Exchange Treatment." The initial tax basis of additional Preferred Stock in the
hands of a
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holder who received such additional Preferred Stock as a distribution on
Preferred Stock will equal the fair market value of such additional Preferred
Stock at the time of distribution.
Nextel presently does not have any current or accumulated earnings and
profits as determined under United States federal income tax principles and it
is unlikely to have current or accumulated earnings and profits in the
foreseeable future. As a result, until such time as Nextel does have earnings
and profits, distributions of cash and additional Preferred Stock on the
Preferred Stock will be treated as a nontaxable return of capital and will be
applied against and reduce the adjusted tax basis (but not below zero) in the
hands of each holder of the shares of Preferred Stock on which such distribution
is made, thus increasing the amount of any gain (or reducing the amount of any
loss) that would otherwise be recognized by such holder upon the sale or other
taxable disposition of such shares of Preferred Stock. In the case of
distributions of additional Preferred Stock, such basis reduction should be
offset on an overall standpoint by a corresponding amount of tax basis for a
holder in the additional Preferred Stock. Further, until such time,
distributions with respect to the Preferred Stock will not be treated as
dividends for United States federal income tax purposes and, thus, will not
qualify for any dividends-received deduction generally available to United
States corporate holders as described below. U.S. Holders would recognize gain
to the extent that any distribution were to exceed current or accumulated
earnings and profits and basis in the Preferred Stock.
Under Section 243 of the Code, corporate U.S. Holders generally will be
able to deduct 70% of the amount of any distribution qualifying as a dividend.
There are, however, many exceptions and restrictions relating to the
availability of such dividends-received deduction. For example, Section 246A of
the Code reduces the dividends-received deduction allowed to a corporate U.S.
Holder that has indebtedness "directly attributable" to its investment in
portfolio stock, and Section 246(c) of the Code requires that, in order to be
eligible for a deduction for any dividends received, a corporate U.S. Holder
generally must hold the shares of Preferred Stock for a 46-day minimum holding
period during the 90-day period beginning on the date which is 45 days before
the ex-dividend date (or, in certain circumstances, a 91-day minimum holding
period during the 180-day period beginning on the date which is 90 days before
the ex-dividend date). A taxpayer's holding period for these purposes is
suspended during any period in which a U.S. Holder has certain options or
contractual obligations with respect to the same or substantially identical
stock or holds one or more other positions with respect to the same or
substantially identical stock that diminishes the risk of loss from holding the
Preferred Stock.
Under Section 1059 of the Code, a corporate U.S. Holder is required to
reduce its tax basis (but not below zero) in the Preferred Stock by the
non-taxed portion of any "extraordinary dividend" if such stock has not been
held for more than two years before the earliest of the date such dividend is
declared, announced or agreed to. Generally, the non-taxed portion of an
extraordinary dividend is the amount excluded from income by operation of the
dividends-received deduction provisions of Section 243 of the Code. An
extraordinary dividend on the Preferred Stock generally would be a dividend that
(i) equals or exceeds 5% of the corporate U.S. Holder's adjusted tax basis in
the Preferred Stock, generally treating all dividends received by the U.S.
Holder and having ex-dividend dates within an 85-day period as one dividend, or
(ii) exceeds 20% of the corporate U.S. Holder's adjusted tax basis in such
Preferred Stock, generally treating all dividends received by the U.S. Holder
and having ex-dividend dates within a 365-day period as one dividend. In
determining whether a dividend paid on the Preferred Stock is an extraordinary
dividend, a corporate U.S. Holder may elect to substitute the fair market value
of the Preferred Stock for such U.S. Holder's tax basis for purposes of applying
these tests, provided such fair market value is established to the satisfaction
of the Secretary of Treasury (the "Secretary") as of the day before the
ex-dividend date. An extraordinary dividend also includes any amount treated as
a dividend in the case of a redemption that is non-pro rata as to all
stockholders, is in partial liquidation of the redeeming corporation or would
not have been treated as a dividend in the absence of the option attribution
rule, regardless of the stockholder's holding period and regardless of the size
of the dividend. If any part of the non-taxed portion of an extraordinary
dividend is not applied to reduce the corporate U.S. Holder's tax basis as a
result of the limitation on reducing such basis below zero, such part will be
treated as gain from the sale or exchange of the Preferred Stock for the taxable
year in which the extraordinary dividend is received. Special rules exist with
respect to extraordinary dividends for "qualified preferred dividends." A
qualified preferred dividend is any fixed dividend payable with respect to any
share of
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stock which (i) provides for fixed preferred dividends payable not less
frequently than annually and (ii) is not in arrears as to dividends at the time
the U.S. Holder acquired such stock. A qualified preferred dividend does not
include any dividend payable with respect to any share of stock if the actual
rate of return of such stock exceeds 15%. Section 1059 does not apply to
qualified preferred dividends if the corporate stockholder holds such stock for
more than five years. If the stockholder disposes of such stock before it has
been held for more than five years, the amount subject to extraordinary dividend
treatment with respect to qualified preferred dividends is limited to the excess
of the actual rate of return over the stated rate of return. Actual or stated
rates of return are the actual or stated dividends expressed as a percentage of
the lesser of (i) the stockholder's tax basis in such stock or (ii) the
liquidation preference of such stock. Because the fair market value of
additional shares of Preferred Stock issued as dividends on the Preferred Stock
may vary, it is unclear whether dividends on the Preferred Stock constitute
qualified preferred dividends. ALTHOUGH NEXTEL DOES NOT HAVE ANY CURRENT OR
ACCUMULATED EARNINGS AND PROFITS, CORPORATE U.S. HOLDERS ARE URGED TO CONSULT
THEIR TAX ADVISORS WITH RESPECT TO THE POSSIBLE APPLICATION OF SECTION 1059 TO
THEIR OWNERSHIP AND DISPOSITION OF THE PREFERRED STOCK.
A corporate U.S. Holder's liability for alternative minimum tax may be
affected by the portion of the dividends received which such corporate U.S.
Holder deducts in computing taxable income. This results from the fact that
corporate stockholders (other than certain small business corporations that are
not subject to the alternative minimum tax) are required to increase alternative
minimum taxable income by 75% of the excess of the current earnings and profits
(with certain adjustments) over alternative minimum taxable income (determined
without regard to earnings and profit adjustments or the alternative tax net
operating loss deduction).
Redemption Premium. Under Section 305 of the Code and the applicable
Treasury regulations thereunder, if the redemption price of Preferred Stock
exceeds its issue price, the difference ("redemption premium") may be treated as
a constructive distribution of additional Preferred Stock to the U.S. Holder
(treated as a dividend to the extent of Nextel's current and accumulated
earnings and profits and otherwise subject to the treatment described above for
distributions) over a certain period.
Because the Preferred Stock provides for optional rights of redemption by
Nextel at prices in excess of the issue price, U.S. Holders could be required to
recognize such redemption premium under a constant yield method similar to that
described below for accruing OID (see "Exchange Debentures -- Original Issue
Discount") if, based on all of the facts and circumstances, the optional
redemption is more likely than not to occur. If stock may be redeemed at more
than one time, the time and price at which such redemption is most likely to
occur must be determined based on all of the facts and circumstances. Applicable
Treasury regulations provide a "safe harbor" under which a right to redeem will
not be treated as more likely than not to occur if (i) the issuer and the holder
are not related within the meaning of the Treasury regulations; (ii) there are
no plans, arrangements or agreements that effectively require or are intended to
compel the issuer to redeem the stock (disregarding, for this purpose, a
separate mandatory redemption); and (iii) exercise of the right to redeem would
not reduce the yield of the stock, as determined under the Treasury regulations.
Further, the Treasury regulations provide that such redemption premium is not
taxable as a constructive distribution if it is solely in the nature of a
penalty for premature redemption. A redemption premium is solely in the nature
of a penalty for premature redemption if it is paid as a result of changes in
economic or market conditions over which neither the issuer nor the holder has
control. Regardless of whether the optional redemption is more likely than not
to occur, or whether the redemption premium is solely in the nature of a penalty
for premature redemption, constructive dividend treatment will not result if the
redemption premium does not exceed a de minimis amount. Based on the Treasury
regulations, Nextel intends to take the position that the existence of Nextel's
optional redemption rights do not result in a constructive distribution to the
U.S. Holders.
Further, because the Preferred Stock provides for an optional right of the
U.S. Holders to require Nextel to acquire the Preferred Stock at a price equal
to 101% of the liquidation value upon a Change in Control, U.S. Holders could be
required to recognize such redemption premium under the constant yield method
discussed above unless, very generally, the likelihood of redemption is remote.
Here, too, regardless of whether the likelihood of redemption is remote,
constructive dividend treatment will not result if the redemption
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premium does not exceed a de minimis amount of 1/4 of 1% of the stated
redemption price at maturity multiplied by the number of complete years to
maturity. Nextel intends to take the position that the existence of U.S.
Holders' optional redemption right does not result in a constructive
distribution to the Holders.
Moreover, the Preferred Stock provides for a mandatory redemption at a
redemption price equal to the liquidation value of the Preferred Stock, plus
accrued and unpaid dividends. If at the time of issuance of preferred stock,
there is no intention for dividends to be paid currently, the IRS may treat the
payment of such dividends on redemption as disguised redemption premium subject
to the constant yield rules discussed above. Dividends on the Preferred Stock
are payable in cash or, on or prior to February 15, 2003, in additional shares
of Preferred Stock. Nextel intends to pay all such dividends currently. Thus,
while the appropriate treatment of unpaid cumulative dividends has not yet been
addressed in Treasury regulations and no assurance can be given as to the
outcome of such guidance, Nextel intends to take the position that the terms of
the mandatory redemption should not result in a constructive distribution to the
U.S. Holders.
Finally, in the event that additional Preferred Stock is distributed on the
Preferred Stock and such additional Preferred Stock has a fair market value at
the time of distribution that is less than its redemption price, such additional
Preferred Stock would have a redemption premium that may be taxable as a
constructive distribution of additional stock to a U.S. Holder (treated as a
dividend to the extent of Nextel's current and accumulated earnings and profits)
under the constant yield method over the term of such additional Preferred
Stock.
Exchange or Distribution Characterization. The sale of the Preferred Stock
by a U.S. Holder will be a taxable transaction. Likewise, a redemption of shares
of the Preferred Stock for cash or an exchange of the Preferred Stock for
Exchange Debentures will be a taxable transaction. For United States federal
income tax purposes, the exchange of the Preferred Stock for Exchange Debentures
will be treated as if Nextel made a distribution of the Exchange Debentures in
redemption of the Preferred Stock. Under Section 302(b) of the Code, such a
redemption for cash or the Exchange Debentures will be treated as a sale or
exchange transaction on which a U.S. Holder generally will recognize capital
gain or loss (except to the extent of amounts received on the exchange that are
attributable to declared dividends, which will be treated in the same manner as
distributions described above) provided that the redemption (i) results in
complete termination of the holder's stock interest in Nextel under Section
302(b)(3) of the Code; (ii) is "substantially disproportionate" with respect to
the stockholder under Section 302(b)(2) of the Code or (iii) is not "essentially
equivalent to a dividend" under Section 302(b)(1) of the Code because it results
in a "meaningful reduction" in a U.S. Holder's stock interest in Nextel. Whether
a redemption will result in a meaningful reduction depends on the particular
holder's facts and circumstances. In determining whether any of these tests have
been met, the holder is deemed, under the constructive ownership rules of
Sections 302(c) and 318 of the Code, to own any shares of Nextel stock that are
owned, or deemed owned, by certain related persons and entities and any shares
that such holder, or related person or entity, has the right to acquire by
exercise of an option. Corporate U.S. Holders are urged to consult with their
tax advisors with respect to the option attribution rule and Section 1059 of the
Code.
Distribution Treatment. If the redemption of the Preferred Stock does not
result in a complete termination or meaningful reduction and is not
substantially disproportionate, the transaction will be treated as a
distribution of cash or Exchange Debentures, as the case may be. The amount of
such distribution will be measured by the amount of cash received by the U.S.
Holder or the "issue price," as defined below, of the Exchange Debentures
received by the U.S. Holder, and such distribution will be treated in the same
manner as distributions described above. Corporate U.S. Holders should be aware
that to the extent such distribution is treated as a dividend it may be treated
as an extraordinary dividend under Section 1059 of the Code. A U.S. Holder's
aggregate tax basis in the Exchange Debentures will be equal to the issue price
of the Exchange Debentures received by the U.S. Holder.
Sale or Exchange Treatment. If a U.S. Holder sells the Preferred Stock, or
the redemption of the Preferred Stock results in a complete termination or
meaningful reduction or is substantially disproportionate, the capital gain or
loss recognized on such sale or exchange generally will be equal to the
difference between the amount realized by the U.S. Holder and such U.S. Holder's
adjusted tax basis in the Preferred Stock
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surrendered. In the case of a sale or redemption for cash, the amount realized
will be the amount of cash received on such sale or redemption. In the case of
an exchange of Preferred Stock for Exchange Debentures, the amount realized on
receipt of the Exchange Debenture will be equal to the "issue price" of the
Exchange Debenture (other than amounts received with respect to declared
dividends). Generally speaking, if, as of the exchange date, the Exchange
Debentures or the Preferred Stock are traded on an established securities market
on or at any time during the 60-day period ending 30 days after the exchange
date, the issue price of an Exchange Debenture would be equal to the fair market
value of the traded instrument as of the exchange date. If neither the Preferred
Stock nor the Exchange Debentures are so traded, the issue price of the Exchange
Debentures would be the stated principal amount of the Exchange Debentures
provided that the yield on the Exchange Debentures is equal to or greater than
the "applicable federal rate" in effect at the time the Exchange Debenture is
issued. If the yield on the Exchange Debentures is less than such applicable
federal rate, its issue price under Section 1274 of the Code would be equal to
the present value, as of the issue date, of all payments to be made on the
Exchange Debentures, discounted at the applicable federal rate. It cannot be
determined at the present time whether the Preferred Stock or the Exchange
Debentures will be, at the relevant time, traded on an established securities
market within the meaning of the Treasury regulations applicable to OID
instruments or whether the yield on the Exchange Debentures will equal or exceed
the applicable federal rate, as discussed above. However, Nextel does not expect
a public market for the Preferred Stock (or the Exchange Debentures) to develop
in the foreseeable future. A U.S. Holder's adjusted tax basis in the Preferred
Stock will equal the amount paid for such stock plus the fair market value of
any distributions of additional Preferred Stock and any amount included in gross
income as a constructive distribution of redemption premium, in each case under
Section 305 of the Code, as described in "-- Distributions on the Preferred
Stock" and "-- Redemption Premium," and reduced by the amount of any
distribution treated as a nontaxable return of capital that reduced the adjusted
tax basis of the Preferred Stock, as described in "-- Distributions on the
Preferred Stock." For certain noncorporate holders (including individuals), the
rate of taxation of capital gains will depend on (i) the holder's holding period
for the Preferred Stock at the time of redemption, sale, exchange or retirement
of the Preferred Stock (with the lowest rate available for Preferred Stock held
more than 18 months) and (ii) the holder's marginal tax rate for ordinary
income.
Depending upon a U.S. Holder's particular circumstances, the tax
consequences of holding Exchange Debentures may be less advantageous than the
tax consequences of holding Preferred Stock because, for example, payments of
interest on the Exchange Debentures will not be eligible for any
dividends-received deduction that may be available to corporate U.S. Holders and
because the Exchange Debentures may be issued with OID as described below.
Exchange Debentures
The tax treatment of the Exchange Debentures will turn on whether or not
they are issued with OID. Exchange Debentures issued on or before February 15,
2003 likely will be treated as having been issued with OID. Exchange Debentures
issued after February 15, 2003 will not be issued with OID unless, generally,
their stated redemption price at maturity, as defined below, exceeds their issue
price, as defined above. Exchange Debentures issued with OID will be referred to
as "OID Notes." PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS AS TO THE CONSEQUENCES OF OWNING EXCHANGE DEBENTURES.
Stated Interest. Payments of stated interest on a debt instrument
generally will be includible in a U.S. Holder's income as ordinary income under
the holder's method of accounting for United States federal income tax purposes.
However, because Nextel has the option through February 15, 2003 to pay stated
interest on the Exchange Debentures by issuing additional Exchange Debentures,
stated interest on Exchange Debentures issued prior to that date would not be
treated as interest for United States federal income tax purposes, but instead
will be treated as giving rise to OID under the rules described below. If
Exchange Debentures were not issued with OID, then interest on such Exchange
Debentures generally would be includible in a U.S. Holder's income as ordinary
income under the U.S. Holder's method of accounting for United States federal
income tax purposes. Exchange Debentures issued after February 15, 2003 may also
be issued with OID.
Original Issue Discount. U.S. Holders of OID Notes should be aware that
they generally must include OID in gross income for United States federal income
tax purposes on an annual basis under a constant yield
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accrual method regardless of their method of accounting. As a result, U.S.
Holders will include OID in income in advance of the receipt of cash
attributable to such income. However, U.S. Holders of OID Notes generally will
not be required to include separately in income cash payments received on such
notes, even if denominated as interest, to the extent such payments do not
constitute qualified stated interest (as defined below).
The amount of OID, if any, on a debt instrument is the excess of its
"stated redemption price at maturity" over its "issue price," subject to a
statutorily defined de minimis exception. The "stated redemption price at
maturity" of a debt instrument is the sum of its principal amount plus all other
payments on such instrument, other than payments of "qualified stated interest."
For this purpose, "qualified stated interest" generally means stated interest
that is unconditionally payable in cash or in property (other than in the debt
instruments of the issuer), at least annually at a single fixed rate during the
entire term of the debt instrument that appropriately takes into account the
length of intervals between payments. The "issue price" of an Exchange Debenture
will be determined as described under "-- Preferred Stock -- Sale or Exchange
Treatment."
As noted above, because Nextel has the option through February 15, 2003 to
pay interest on Exchange Debentures by issuing additional Exchange Debentures,
any Exchange Debentures issued prior to that date will be treated as OID Notes,
and none of the stated interest on such OID Notes will be treated as qualified
stated interest (unless, under special rules for interest holidays, the amount
of OID is treated as de minimis). Any OID Notes so issued would be treated as
having been issued with OID equal to the excess of their stated redemption price
at maturity (which will be equal to the sum of the principal amount plus all
payments of stated interest) over their issue price. Any additional OID Notes
issued in lieu of cash would not be treated as debt instruments separate from
the OID Notes upon which they were issued, but instead would be aggregated with
such OID Notes for OID purposes.
The right to issue additional Exchange Debentures in lieu of paying cash
interest through February 15, 2003 is treated for purposes of the OID provisions
of the Code as an option to defer interest payments on the Exchange Debentures.
Treasury regulations provide that in the case of a debt instrument that provides
the issuer with an unconditional option or options exercisable during the term
of the debt instrument that, if exercised, require payments to be made on the
debt instrument under an alternative payment schedule, the yield and maturity of
such debt instrument for purposes of calculating OID are determined by assuming
the issuer exercises or does not exercise the option in a manner that minimizes
the yield on the debt instrument.
If the issue price of the Exchange Debentures is at least equal to their
principal amount, then the yield to maturity of the Exchange Debentures, if the
option to pay interest with additional Exchange Debentures is exercised, will be
no less than the yield to maturity would be, if the option is not exercised.
Accordingly, for purposes of calculating OID, it would be assumed that Nextel
will not exercise the option because exercise of the option will not minimize
the yield of the Exchange Debentures. If the option was in fact subsequently
exercised and additional Exchange Debentures were issued by Nextel in lieu of
cash, such additional Exchange Debentures would be aggregated with the Exchange
Debentures upon which they were issued, and OID would be calculated for the
remainder of the term of the Exchange Debentures based upon an adjusted issue
price that includes the principal amount of the additional Exchange Debentures.
As a result of such exercise, U.S. Holders of Exchange Debentures would include
OID in income in advance of the receipt of cash, regardless of such U.S.
Holders' regular methods of accounting.
If the issue price of the Exchange Debentures is less than their principal
amount, the yield to maturity of the Exchange Debentures, if the option to pay
interest with additional Exchange Debentures is exercised, will be less than the
yield to maturity, if the option is not exercised. Accordingly, for purposes of
calculating OID, it would be assumed that Nextel will exercise the option
because to do so will minimize the yield. If Nextel does in fact exercise its
option and issues additional Exchange Debentures in lieu of cash, U.S. Holders
of Exchange Debentures will include OID in income in advance of the receipt of
cash, regardless of such U.S. Holders' regular method of accounting. If Nextel
makes a cash payment instead of exercising its option of issuing an additional
Exchange Debenture, the cash payment made will be treated as a prepayment of the
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Exchange Debentures, partially retiring such Exchange Debentures on a pro rata
basis on the date of such payment. Such retirement would be a taxable event to a
U.S. Holder of the Exchange Debenture.
In the case of Exchange Debentures issued after February 15, 2003, Nextel
will not have the option to pay interest with additional Exchange Debentures. In
such event, (i) all interest payments on such an Exchange Debenture would be
qualified stated interest, (ii) the stated redemption price at maturity of any
Exchange Debenture will be equal to its principal amount, and (iii) such an
Exchange Debenture will therefore be issued with OID only to the extent its
principal amount exceeds its issue price (provided that such excess is not de
minimis). As described under "-- Preferred Stock -- Sale or Exchange Treatment"
above, however, the issue price of the Exchange Debentures cannot be determined
at the present time.
The amount of OID includible in income by an initial U.S. Holder of an OID
Note is the sum of the "daily portions" of OID with respect to the OID Note for
each day during the taxable year or portion of the taxable year in which such
U.S. Holder holds such note ("accrued OID"). The daily portion is determined by
allocating to each day in any "accrual period" a pro rata portion of the OID
allocable to that accrual period. The "accrual period" for an OID Note may be of
any length and may vary in length over the term of the OID Note, provided that
each accrual period is no longer than one year and each scheduled payment of
principal or interest occurs on the first day or final day of an accrual period.
The amount of OID allocable to any accrual period is an amount equal to the
excess, if any, of (i) the product of the OID Note's adjusted issue price at the
beginning of such accrual period and its yield to maturity (determined on the
basis of compounding at the close of each accrual period and properly adjusted
for the length of the accrual period) over (ii) the sum of any qualified stated
interest allocable to the accrual period. OID allocable to a final accrual
period is the difference between the amount payable at maturity (other than a
payment of qualified stated interest) and the adjusted issue price at the
beginning of the final accrual period. Special rules will apply for calculating
OID for an initial short accrual period. The "adjusted issue price" of an OID
Note at the beginning of any accrual period is equal to its issue price
increased by the accrued OID for each prior accrual period (determined without
regard to the amortization of any acquisition premium or amortizable bond
premium, as described below) and reduced by any payments made on such note
(other than qualified stated interest) on or before the first day of the accrual
period.
Exchange Debentures may be redeemed prior to their stated maturity at the
option of Nextel. For purposes of computing the yield of such instruments,
Nextel will be deemed to exercise or not exercise its option to redeem the OID
Notes in a manner that minimizes the yield on the OID Notes. It is not
anticipated that Nextel's ability to redeem prior to stated maturity would
affect the yield of an OID Note. In addition, holders will have the right to
tender Exchange Debentures for redemption should Nextel experience a Change of
Control and be required to make an Offer to Purchase the Exchange Debentures.
Such right should not affect, and will not be treated by Nextel as affecting,
the determination of the yield or maturity of the Exchange Debentures.
Market Discount on Exchange Debentures. If a U.S. Holder acquires an
Exchange Debenture (other than an OID Note) for an amount less than its stated
redemption price at maturity or, in the case of an OID Note, for an amount that
is less than its revised issue price, the amount of the difference will be
treated as "market discount" for United States federal income tax purposes,
unless such difference is less than a specified de minimis amount. The Code
provides that, for these purposes, the revised issue price of an OID Note
generally equals its issue price, increased by the amount of any OID that has
accrued on the OID Note. Under the market discount rules, a U.S. Holder will be
required to treat any principal payment on an Exchange Debenture, or any gain on
the sale, exchange, retirement or other disposition of, an Exchange Debenture as
ordinary income to the extent of the market discount which has not previously
been included in income and is treated as having accrued on such Exchange
Debenture at the time of such payment or disposition. In addition, the U.S.
Holder may be required to defer, until the maturity of the Exchange Debenture or
its earlier disposition in a taxable transaction, the deduction of all or a
portion of the interest expense on any indebtedness incurred or continued to
purchase or carry such Exchange Debenture.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Exchange Debenture,
unless the U.S. Holder elects to accrue on a constant interest
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method. A U.S. Holder of an Exchange Debenture may elect to include market
discount in income currently as it accrues (on either a ratable or constant
interest method), in which case the rule described above regarding deferral of
interest deductions will not apply. This election to include market discount in
income currently, once made, applies to all market discount obligations acquired
on or after the first taxable year to which the election applies and may not be
revoked without the consent of the IRS.
Acquisition Premium; Amortizable Bond Premium. A U.S. Holder that is
treated as acquiring an Exchange Debenture with OID for an amount that is
greater than its adjusted issue price but equal to or less than the sum of all
amounts payable on the Exchange Debenture after the purchase date, other than
qualified stated interest, will be considered to have purchased such Exchange
Debenture at an "acquisition premium." Under the acquisition premium rules, the
amount of OID, if any, which such U.S. Holder must include in its gross income
with respect to such Exchange Debenture for any taxable year will be reduced by
the portion of such acquisition premium properly allocable to such year.
If immediately after the time the Preferred Stock is exchanged for Exchange
Debentures or immediately after the time a subsequent U.S. Holder acquires
Exchange Debentures, the U.S. Holder's tax basis in any such Exchange Debenture
exceeds the sum of all amounts payable on the Exchange Debenture after the
exchange date or purchase date, other than qualified stated interest, such
excess may constitute "premium" and such U.S. Holder will not be required to
include any OID in income.
If, at the time of an exchange of the Preferred Stock for Exchange
Debentures, the issue price of such Exchange Debentures exceeds the amount
payable at maturity (or earlier call date, if appropriate) of the Exchange
Debentures, the Exchange Debentures will be considered to have been acquired
with "amortizable bond premium" in an amount equal to such excess. Such a holder
may elect (in accordance with applicable Code provisions) to amortize such
premium by offsetting against the interest otherwise required to be included in
income in respect of the Exchange Debentures during any taxable year the
allocable portion of such premium, determined under the constant yield method
over the term of the Exchange Debenture (taking into account earlier call dates,
as appropriate). In such case, a U.S. Holder's basis in an Exchange Debenture
will be reduced by the amount of bond premium offset against interest. The
election to amortize bond premium applies to all obligations owned or
subsequently acquired by a holder and may not be revoked without the consent of
the IRS.
U.S. Holders may elect to treat all interest on any Exchange Debenture as
OID and calculate the amount includible in gross income under the constant yield
method described above. For the purposes of this election, interest includes
stated interest, acquisition discount, OID, de minimis OID, market discount, de
minimis market discount and unstated interest, as adjusted by any amortizable
bond premium or acquisition premium. The election is to be made for the taxable
year in which the U.S. Holder acquired the Exchange Debenture, and may not be
revoked without the consent of the IRS. U.S. HOLDERS SHOULD CONSULT WITH THEIR
OWN TAX ADVISORS ABOUT THIS ELECTION.
Redemption, Sale or Exchange of Exchange Debentures. In general, upon the
redemption, sale or exchange of an Exchange Debenture, a U.S. Holder will
recognize gain or loss equal to the difference between the amount realized upon
the redemption, sale or exchange (less any accrued qualified stated interest not
previously taken into account, which will be taxable as such) and the adjusted
tax basis of the Exchange Debenture. The adjusted tax basis of a U.S. Holder who
received Exchange Debentures in exchange for Preferred Stock will, in general,
be equal to the issue price of such Exchange Debentures, increased by OID and
market discount previously included in income by the U.S. Holder and reduced by
any amortized premium and any cash payments on the Exchange Debentures other
than qualified stated interest received by such U.S. Holder. Except with respect
to accrued market discount any such gain or loss will generally be capital gain
or loss, the tax consequences of which are indicated under the caption
"Preferred Stock -- Sale or Exchange Treatment."
Applicable High Yield Discount Obligations
If (x) the term of the OID Notes is more than five years, (y) the
yield-to-maturity of the OID Notes, computed as of their issue date, equals or
exceeds the sum of (A) the "applicable federal rate" (as determined
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under Section 1274(d) of the Code) in effect for the month in which the notes
are issued (the "AFR") and (B) 5%, and (z) the OID on such notes is
"significant," the respective Notes or OID Notes will be considered "applicable
high yield discount obligations" ("AHYDOS") under Section 163(i) of the Code.
OID is significant if the aggregate amount includible in gross income for
periods before the close of any accrual period ending more than five years after
the issue date exceeds the sum of the aggregate amount of interest to be paid
before the close of such accrual period plus the product of the issue price and
the yield to maturity. If the OID Notes are AHYDOS, Nextel would not be allowed
to take a deduction for OID accrued on such Notes for United States federal
income tax purposes until such time as Nextel actually paid such OID in cash or
in other property (other than stock or debt of Nextel or a person deemed to be
related to Nextel under Section 453(f)(l) of the Code).
Moreover, if the yield to maturity on the OID Notes were to exceed the sum
of the AFR and 6% (such excess shall be referred to hereinafter as the
"Disqualified Yield"), the deduction for OID accrued on such notes would be
permanently disallowed for United States federal income tax purposes (regardless
of whether Nextel actually paid such OID in cash or in other property) to the
extent such OID is attributable to such Disqualified Yield ("Dividend-Equivalent
Interest"). For purposes of the dividends-received deduction, such
Dividend-Equivalent Interest will be treated as a dividend to the extent it is
deemed to have been paid out of Nextel's current or accumulated earnings and
profits.
Information Reporting and Backup Withholding
In general, information reporting requirements will apply to certain
payments of dividends, principal, interest, OID, and premium and to the proceeds
of sales of Notes, Exchange Debentures and Preferred Stock made to U.S. Holders
other than certain exempt recipients (such as corporations). A 31% backup
withholding tax will apply to such payments if the U.S. Holder fails to provide
a correct taxpayer identification number or certification of exempt status or,
with respect to certain payments, the U.S. Holder fails to report in full
dividend and interest income and the IRS notifies the payor of such
underreporting.
Any amounts withheld under the backup withholding rules will be allowed as
a credit against such U.S. Holder's United States federal income tax liability
and may entitle such U.S. Holder to a refund, provided the required information
is furnished to the IRS.
TAXATION OF NON-U.S. HOLDERS
Notes and Exchange Debentures
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(a) payments of principal, interest (including OID) and premium on a
Note or Exchange Debenture by the Company or its paying agent to any
Non-U.S. Holder will not be subject to United States federal withholding
tax, provided that, in the case of interest, (i) such Holder does not own,
actually or constructively, 10% or more of the total combined voting power
of all classes of stock of the Company entitled to vote, is not a
controlled foreign corporation related, directly or indirectly, to the
Company through stock ownership, and is not a bank receiving interest
described in Section 881(c)(3)(A) of the Code and (ii) the certification
requirement set forth in Section 871(h) or Section 881(c) of the Code has
been fulfilled with respect to such Non-U.S. Holder, as discussed below;
(b) a Non-U.S. Holder will not be subject to United States federal
income tax on gain realized on the sale, exchange or other disposition of a
Note or Exchange Debenture, unless (i) such Non-U.S. Holder is an
individual who is present in the United States for 183 days or more in the
taxable year of the disposition, and certain other conditions are met, or
(ii) such gain is effectively connected with the conduct by such Non-U.S.
Holder of a trade or business in the United States; and
(c) a Note or Exchange Debenture held by an individual who is not a
citizen or resident of the United States at the time of his death generally
will not be subject to United States federal estate tax as a result of such
individual's death, provided that the individual does not own, actually or
constructively,
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10% or more of the total combined voting power of all classes of stock of
the Company entitled to vote and, at the time of such individual's death,
payments with respect to such Note or Exchange Debenture would not have
been effectively connected to the conduct by such individual of a trade or
business in the United States.
The certification requirement referred to in paragraph (a)(ii) will be
fulfilled if the Non-U.S. Holder referred to therein certifies on IRS Form W-8,
under penalties of perjury, that it is not a United States person and provides
its name and address, and (i) such beneficial owner files such Form W-8 with the
withholding agent or (ii) in the case of a Note or Exchange Debenture held by a
securities clearing organization, bank or other financial institution holding
customers' securities in the ordinary course of its trade or business and
holding the Note or Exchange Debenture on behalf of such Non-U.S. Holder, such
financial institution files with the withholding agent a statement that it has
received the Form W-8 from such Non-U.S. Holder and furnishes the withholding
agent with a copy thereof. With respect to a Note or Exchange Debenture held by
a foreign partnership, under current law, the Form W-8 may be provided by the
foreign partnership. However, for interest (including OID) and disposition
proceeds paid with respect to a Note or Exchange Debenture after December 31,
1999, unless the foreign partnership has entered into a withholding agreement
with the IRS, a foreign partnership will be required, in addition to providing
an intermediary Form W-8, to attach an appropriate certification by each
partner. Prospective investors, including foreign partnerships and their
partners, should consult their tax advisers regarding possible additional
reporting requirements.
If a Non-U.S. Holder is engaged in a trade or business in the United
States, and if interest (including OID) on the Note or Exchange Debenture is
effectively connected with the conduct of such trade or business, the Non-U.S.
Holder, although exempt from the federal withholding tax discussed in the
preceding paragraphs, will generally be subject to regular United States federal
income tax on interest (including OID) on, and on any gain realized on the sale,
exchange or other disposition of, a Note or Exchange Debenture in the same
manner as if it were a U.S. Holder. See "Taxation of U.S. Holders" above. In
lieu of the certificate described in the preceding paragraph, such a Non-U.S.
Holder will be required to provide to the withholding agent a properly executed
IRS Form 4224 (or, after December 31, 1999 subject to certain transition rules,
a Form W-8) to claim an exemption from United States federal withholding tax. In
addition, if such Non-U.S. Holder is a foreign corporation, it may be subject to
a 30% branch profits tax (unless reduced or eliminated by an applicable treaty)
on its effectively connected earnings and profits for the taxable year, subject
to certain adjustments. For purposes of the branch profits tax, interest
(including OID) on, and any gain recognized on the sale, exchange or other
disposition of, a Note or Exchange Debenture will be included in the effectively
connected earnings and profits of such Non-U.S. Holder if such interest or gain,
as the case may be, is effectively connected with the conduct by the Non-U.S.
Holder of a trade or business in the United States.
Preferred Stock
Distributions received by a Non-U.S. Holder in respect of the Preferred
Stock (whether in cash or additional shares of Preferred Stock), to the extent
considered dividends for United States federal income tax purposes (see
"-- Taxation of U.S. Holders -- Preferred Stock -- Distributions on the
Preferred Stock"), generally will be subject to United States federal
withholding tax at a 30% rate (or a lower rate prescribed by an applicable
income tax treaty) unless such dividends are effectively connected with a trade
or business carried on by the Non-U.S. Holder within the United States and, if
an income tax treaty applies, are attributable to a permanent establishment
maintained by the Non-U.S. Holder within the United States. In the event that
withholding tax is collected on distributions that are not considered dividends
because the Company has no earnings and profits, Non-U.S. Holders may obtain a
refund of any excess amounts withheld by timely filing an appropriate claim for
refund. For purposes of obtaining a reduced rate of withholding under an income
tax treaty, a Non-U.S. Holder may be required (and, after December 31, 1999,
will be required) to provide certain information concerning such holder's
country of residence and entitlement to income tax treaty benefits. A Non-U.S.
Holder that is eligible for a reduced rate of United States federal withholding
tax pursuant to an income tax treaty may obtain a refund of any excess amounts
currently withheld by timely filing an appropriate claim for refund.
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Dividends effectively connected with a United States trade or business and,
if a treaty applies, attributable to a United States permanent establishment
generally will not be subject to the United States federal withholding tax
provided that the Non-U.S. Holder provides appropriate certifications (currently
Form 4224, and after December 31, 1999, subject to certain transition rules,
Form W-8) to the Company or its paying agent. Such effectively connected income
instead will be subject to United States federal income tax on a net income
basis in the same manner as if the Non-U.S. Holder were a U.S. Holder. In
addition, if such Non-U.S. Holder is a foreign corporation, such effectively
connected income may be subject to a branch profits tax equal to 30% (or such
lower rate as specified by an applicable income tax treaty) of its effectively
connected earnings and profits for the taxable year, subject to certain
adjustments.
Constructive distributions on the Preferred Stock (see "-- Taxation of U.S.
Holders -- Redemption Premium") may be subject to United States federal
withholding tax in each of the years in which the distributions are deemed to
have occurred and in advance of the receipt of cash attributable to such
distributions. Prospective investors are urged to consult their own tax advisors
with respect to the application of the withholding tax rules to constructive
distributions on the Preferred Stock.
Sale or Disposition of Preferred Stock
Any gain or income realized upon the sale, exchange, retirement or other
disposition of the Preferred Stock generally will not be subject to United
States federal income tax unless (i) such gain or income is effectively
connected with a trade or business in the United States of the Non-U.S. Holder
and, if a treaty applies, attributable to a United States permanent
establishment maintained by the Non-U.S. Holder, or (ii) in the case of an
individual who is a Non-U.S. Holder, such individual is present in the United
States for 183 days or more in the taxable year of such sale, exchange,
retirement or other disposition and certain other conditions are met.
Backup Withholding and Information Reporting
Under current United States federal income tax law, backup withholding tax
of 31% will not apply to payments by the Company on a Note, a share of Preferred
Stock, or an Exchange Debenture if appropriate certifications of the payee's
foreign status are received, provided in each case that the Company or its
paying agent, as the case may be, does not have actual knowledge that the payee
is a United States person. However, information reporting requirements may apply
to certain payments of dividends (other than dividends paid prior to January 1,
1999 to an address of a Non-U.S. Holder outside the United States), interest,
OID and premium paid on a Note, a share of Preferred Stock or an Exchange
Debenture, except in the case of certain exempt recipients (such as
corporations).
Under current Treasury regulations, payments on the sale, exchange or other
disposition of a Note, a share of Preferred Stock, or an Exchange Debenture made
to or through a foreign office of a broker generally will not be subject to
backup withholding. However, if such broker is (i) a United States person, (ii)
a controlled foreign corporation for United States federal income tax purposes,
(iii) a foreign person 50 percent or more of whose gross income is effectively
connected with a United States trade or business for a specified three-year
period, or (iv) (in the case of payments made after December 31, 1999) a foreign
partnership with certain connections to the United States, then information
reporting will be required unless the broker has in its records documentary
evidence that the beneficial owner is not a United States person and certain
other conditions are met or the beneficial owner otherwise establishes an
exemption. Backup withholding may apply to any payment that such broker is
required to report if the broker has actual knowledge that the payee is a United
States person. Payments to or through the United States office of a broker will
be subject to backup withholding and information reporting unless the Holder
certifies, under penalties of perjury, that it is not a United States person or
otherwise establishes an exemption.
Non-U.S. Holders should consult their tax advisers regarding the
application of information reporting and backup withholding in their particular
situations, the availability of an exemption therefrom, and the procedure for
obtaining such an exemption, if available. Any amounts withheld from a payment
to a Non-U.S. Holder under the backup withholding rules will be allowed as a
credit against such holder's United States
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federal income tax liability and may entitle such holder to a refund, provided
that the required information is furnished to the IRS.
THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF UNITED STATES FEDERAL
INCOME TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER OF NOTES, PREFERRED
STOCK AND EXCHANGE DEBENTURES IN LIGHT OF ITS PARTICULAR CIRCUMSTANCES AND
INCOME TAX SITUATION. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES THAT WOULD RESULT FROM THEIR EXCHANGE AND OWNERSHIP
AND DISPOSITION OF THE NOTES, THE PREFERRED STOCK AND THE EXCHANGE DEBENTURES,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS
AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
PLAN OF DISTRIBUTION
Except as described below, a broker-dealer may not participate in the
Exchange Offers in connection with a distribution of the New Securities. Each
broker-dealer that receives New Securities for its own account pursuant to the
Exchange Offers must acknowledge that it will deliver a prospectus in connection
with any resale of such New Securities. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Securities received for its own account in exchange for Old
Securities where such Old Securities were acquired as a result of market-making
activities or other trading activities. The Company has agreed that for a period
of 90 days after the Expiration Date, it will make this Prospectus, as amended
or supplemented, available to any broker-dealer for use in connection with any
such resale subject to the conditions described under "The Exchange
Offers -- Resale of the New Securities."
The Company will not receive any proceeds from any sale of New Securities
by broker-dealers. New Securities received by broker-dealers for their own
account pursuant to the Exchange Offers may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Securities or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices, or negotiated prices. Any such resale
may be made directly to purchasers or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Securities. Any broker or
dealer that participates in a distribution of such New Securities may be deemed
to be an "underwriter" within the meaning of the Securities Act, and any profit
on any such resale of New Securities and any commissions or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the Exchange Offers
other than commissions or concessions of any brokers or dealers and expenses of
counsel for the holders of the New Securities and will indemnify the holders of
the New Securities (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
The legality of the New Securities offered hereby will be passed upon for
Nextel by Jones, Day, Reavis & Pogue, Atlanta, Georgia.
121
<PAGE> 131
EXPERTS
The consolidated financial statements and related financial statement
schedules of Nextel incorporated in this Prospectus by reference from Nextel's
Annual Report on Form 10-K for the year ended December 31, 1997, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
122
<PAGE> 132
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Set forth below is a description of certain provisions of the Restated
Certificate of Incorporation, as amended (the "Nextel Charter"), of Nextel
Communications, Inc. ("New Nextel," and, together with "Old Nextel," its
predecessor corporation of the same name, "Nextel"), the Amended and Restated
By-laws of Nextel (the "Nextel By-laws"), and the Delaware General Corporation
Law (the "DGCL"). This description is intended as a summary only and is
qualified in its entirety by reference to the Nextel Charter, the Nextel
By-laws, and the DGCL.
Elimination of Liability in Certain Circumstances. The Nextel Charter
provides that, to the full extent provided by law, a director will not be
personally liable to Nextel or its stockholders for or with respect to any acts
or omissions in the performance of his or her duties as a director. The DGCL
provides that a corporation may limit or eliminate a director's personal
liability for monetary damages to the corporation or its stockholders, except
for liability (i) for any breach of the director's duty of loyalty to such
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
paying a dividend or approving a stock repurchase in violation of Section 174 of
the DGCL, or (iv) for any transaction from which the director derived an
improper personal benefit.
While Article 7 of the Nextel Charter provides directors with protection
from awards for monetary damages for breaches of the duty of care, it does not
eliminate the directors' duty of care. Accordingly, Article 7 will have no
effect on the availability of equitable remedies such as an injunction or
rescission based on a director's breach of the duty of care. The provisions of
Article 7 as described above apply to officers of Nextel only if they are
directors of Nextel and are acting in their capacity as directors, and does not
apply to officers of Nextel who are not directors.
Indemnification and Insurance. Under the DGCL, directors and officers as
well as other employees and individuals may be indemnified against expenses
(including attorneys' fees), judgments, fines, and amounts paid in settlement in
connection with specified actions, suits, or proceedings, whether civil,
criminal, administrative, or investigative (other than an action by or in the
right of the corporation as a derivative action) if they acted in good faith and
in a manner they reasonably believed to be in or not opposed to the best
interest of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful.
Article 6 of the Nextel Charter and Article VII of the Nextel By-laws
provide to directors and officers indemnification to the full extent provided by
law, thereby affording the directors and officers of Nextel the protections
available to directors and officers of Delaware corporations. Article VII of the
Nextel By-laws also provides that expenses incurred by a person in defending a
civil or criminal action, suit, or proceeding by reason of the fact that he or
she is or was a director or officer shall be paid in advance of the final
disposition of such action, suit, or proceeding upon receipt of an undertaking
by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by
Nextel as authorized by relevant Delaware law. Nextel has obtained directors and
officers liability insurance providing coverage to its directors and officers.
On September 12, 1991, the Board of Directors of Nextel unanimously adopted
resolutions authorizing Nextel to enter into an Indemnification Agreement (the
"Indemnification Agreement") with each director of Nextel. Nextel has entered
into an Indemnification Agreement with each of its directors and officers.
One of the purposes of the Indemnification Agreements is to attempt to
specify the extent to which persons entitled to indemnification thereunder (the
"Indemnitees") may receive indemnification under circumstances in which
indemnity would not otherwise be provided by the DGCL. Pursuant to the
Indemnification Agreements, an Indemnitee is entitled to indemnification as
provided by Section 145 of the DGCL and to indemnification for any amount which
the Indemnitee is or becomes legally obligated to pay relating to or arising out
of any claim made against such person because of any act, failure to act, or
neglect or
II-1
<PAGE> 133
breach of duty, including any actual or alleged error, misstatement, or
misleading statement, which such person commits, suffers, permits, or acquiesces
in while acting in the Indemnitee's position with Nextel. The Indemnification
Agreements are in addition to and are not intended to limit any rights of
indemnification which are available under the Nextel Charter or the Nextel
By-laws, any policy of insurance or otherwise. Nextel is not required under the
Indemnification Agreements to make payments in excess of those expressly
provided for in the DGCL in connection with any claim against the Indemnitee:
(i) which results in a final, nonappealable order directing the
Indemnitee to pay a fine or similar governmental imposition which Nextel is
prohibited by applicable law from paying; or
(ii) based upon or attributable to the Indemnitee gaining in fact a
personal profit to which he was not legally entitled including, without
limitation, profits made from the purchase and sale by the Indemnitee of
equity securities of Nextel which are recoverable by Nextel pursuant to
Section 16(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and profits arising from transactions in publicly traded
securities of Nextel which were effected by the Indemnitee in violation of
Section 10(b) of the Exchange Act or Rule 10b-5 promulgated thereunder.
In addition to the rights to indemnification specified therein, the
Indemnification Agreements are intended to increase the certainty of receipt by
the Indemnitee of the benefits to which he or she is entitled by providing
specific procedures relating to indemnification.
The Indemnification Agreements are also intended to provide increased
assurance of indemnification by prohibiting Nextel from adopting any amendment
to the Nextel Charter or the Nextel By-laws which would have the effect of
denying, diminishing or encumbering the Indemnitee's rights pursuant thereto or
to the DGCL or any other law as applied to any act or failure to act occurring
in whole or in part prior to the effective date of such amendment.
ITEM 21. EXHIBITS.
Pursuant to Item 601 of Regulation S-K, 17 C.F.R.
sec. 229.601(b)(4)(iii)(A), Nextel has excluded from Exhibit No. 4 instruments
defining the rights of holders of long-term debt with respect to debt that does
not exceed 10% of the total assets of Nextel. Nextel agrees to furnish copies of
such instruments to the Commission upon request.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <C> <S>
4.1.1 -- Restated Certificate of Incorporation of Nextel (filed on
July 31, 1995 as Exhibits No. 4.1.1 and 4.1.2 to Nextel's
Post-Effective Amendment No. 1 on Form S-8 to Registration
Statement No. 33-91716 on Form S-4 (the "Nextel S-8
Registration Statement") and incorporated herein by
reference).
4.1.2 -- Certificate of Designation of the Powers, Preferences and
Relative, Participating, Optional and Other Special Rights
of 13% Series D Exchangeable Preferred Stock and
Qualifications, Limitations and Restrictions Thereof (filed
on July 21, 1997 as Exhibit 4.1 to the Current Report on
Form 8-K dated on July 21, 1997 and incorporated herein by
reference).
4.1.3 -- Certificate of Designation of the Powers, Preferences and
Relative, Participating, Optional and Other Special Rights
of 11.125% Series E Exchangeable Preferred Stock and
Qualifications, Limitations and Restrictions Thereof (filed
on February 12, 1998 as Exhibit 4.1 to the Current Report on
Form 8-K dated on February 11, 1998 (the "February 11 Form
8-K") and incorporated herein by reference).
4.2 -- Amended and Restated By-laws of Nextel (filed on July 31,
1995 as Exhibit No. 4.2 to the Nextel S-8 Registration
Statement and incorporated herein by reference).
4.3.1 -- 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 4.13 to Old Nextel's
Registration Statement No. 33-73388 on Form S-4 and
Incorporated herein by reference).
4.3.2 -- Form of Note issued pursuant to the August Indenture
(included in Exhibit No. 4.3.1).
</TABLE>
II-2
<PAGE> 134
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <C> <S>
4.3.3 -- Supplemental Indenture, dated as of June 30 1995, to the
August Indenture between 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 (the "November 14 Form 10-Q") and
incorporated herein by reference).
4.3.4 -- Second Supplemental Indenture, dated as of July 28, 1995, to
the August Indenture between ESMR, Inc. (now known as
Nextel), as Successor by Merger to Nextel and The Bank of
New York (relating to the August Indenture) (filed on
November 14, 1995 as Exhibit 4.3 to the November 14 Form
10-Q and incorporated herein by reference).
4.3.5 -- Third Supplemental Indenture, dated as of June 13, 1997, to
the August Indenture between Nextel Communications, Inc. and
The Bank of New York, as Trustee (filed on June 17, 1997 as
Exhibit 4.1 to the Current Report on Form 8-K dated June 13,
1997 (the "June 13 Form 8-K") and incorporated herein by
reference).
4.3.6 -- Fourth Supplemental Indenture, dated March 24, 1998, to the
August Indenture between Nextel Communications, Inc. and The
Bank of New York, as Trustee (filed on May 13, 1998 as
Exhibit 4.3 to Nextel's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1998 (the "May 13 Form 10-Q")
and incorporated herein by reference).
4.4.1 -- 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 4.1 to Old
Nextel's Current Report on Form 8-K dated February 16, 1994
and incorporated herein by reference).
4.4.2 -- Form of Note issued pursuant to the February Indenture
(included in Exhibit 4.4.1).
4.4.3 -- Supplemental Indenture dated as of June 30, 1995 to the
February Indenture between Old Nextel and The Bank of New
York (filed on November 14, 1995 as Exhibit 4.2 to the
November 14 Form 10-Q and incorporated herein by reference).
4.4.4 -- Second Supplemental Indenture, dated as of July 28, 1995, to
the February Indenture 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 the November 14 Form
10-Q and incorporated herein by reference).
4.4.5 -- Third Supplemental Indenture, dated as of June 13, 1997, to
the February Indenture between Nextel Communications, Inc.,
and The Bank of New York, as Trustee (filed on June 17, 1997
as Exhibit 4.2 to the June 13 Form 8-K and incorporated
herein by reference).
4.5.1 -- Indenture for Senior Redeemable Discount Notes due 2004,
dated as of January 13, 1994, between OneComm Corporation
(formerly called CenCall Communications Corp.) and The Bank
of New York (the "OneComm Indenture") (filed on June 7, 1995
as Exhibit 99.2 to Nextel's Registration Statement No.
33-93182 on Form S-4 (the "OneComm S-4 Registration
Statement") and incorporated herein by reference).
4.5.2 -- Form of Note issued pursuant to the OneComm Indenture
(included in Exhibit 4.5.1).
4.5.3 -- Supplemental Indenture, dated as of June 30, 1995, to the
OneComm Indenture between OneComm Corporation (formerly
called CenCall Communications Corp.) and The Bank of New
York (filed on November 14, 1995 as Exhibit 10.12 to the
November 14 Form 10-Q and incorporated herein by reference).
4.5.4 -- Second Supplemental Indenture, dated as of July 28, 1995, to
the OneComm Indenture between Nextel (formerly known as
ESMR, Inc.), as successor to OneComm Corporation and The
Bank of New York (filed on November 14, 1995 as Exhibit
10.13 to the November 14 Form 10-Q and incorporated herein
by reference).
4.5.5 -- Third Supplemental Indenture, dated as of June 13, 1997, to
the OneComm Indenture between Nextel and The Bank of New
York (filed on June 17, 1997 as Exhibit 4.5 to the June 13
Form 8-K and incorporated herein by reference).
</TABLE>
II-3
<PAGE> 135
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <C> <S>
4.6.1 -- Indenture for Senior Redeemable Discount Notes due 2004,
dated as of April 25,1994, between Dial Call Communications,
Inc. and The Bank of New York (the "Dial C all 2004
Indenture") (filed on June 7, 1995 as Exhibit 99.4 to the
OneComm S-4 Registration Statement and incorporated herein
by reference).
4.6.2 -- Form of Note issued pursuant to the Dial Call 2004 Indenture
(included in Exhibit 4.6.1).
4.6.3 -- Supplemental Indenture, dated as of August 7, 1995, to the
Dial Call 2004 Indenture between Dial Call Communications,
Inc. 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).
4.6.4 -- Second Supplemental Indenture, dated as of January 30, 1996,
to the Dial Call 2004 Indenture between Dial Page, Inc. (as
successor to Dial Call Communications, Inc.) and The Bank of
New York (filed on April 1, 1996 as Exhibit 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).
4.6.5 -- Third Supplemental Indenture, dated as of January 30, 1996,
to the Dial Call 2004 Indenture between Nextel (as successor
to Dial Page, Inc.) and The Bank of New York (filed on April
1, 1996 as Exhibit 4.27 to the 1995 Form 10-K and
incorporated herein by reference).
4.6.6 -- Fourth Supplemental Indenture, dated as of June 13, 1997, to
the Dial Call 2004 Indenture between Nextel and The Bank of
New York (filed on June 17, 1997 as Exhibit 4.3 to the June
13 Form 8-K and incorporated herein by reference).
4.6.7 -- Fifth Supplement Indenture, dated March 24, 1998, to the
Dial Call 2004 Indenture between Nextel and The Bank of New
York (filed on May 13, 1998 as Exhibit 4.4 to the May 13
Form 10-Q and incorporated herein by reference).
4.7.1 -- Indenture for Senior Discount Notes due 2005, dated as of
December 22, 1993, between Dial Call Communications, Inc.
and The Bank of New York (the "Dial Call 2005 Indenture")
(filed as Exhibit 99.3 to the OneComm S-4 Registration
Statement and incorporated herein by reference).
4.7.2 -- Form of Note issued pursuant to the Dial Call 2005 Indenture
(included in Exhibit 4.7.1).
4.7.3 -- Supplemental Indenture, dated as of April 25, 1994, to the
Dial Call 2005 Indenture between Dial Call Communications,
Inc. and The Bank of New York (filed on April 1, 1996 as
Exhibit 4.29 to the 1995 Form 10-K and incorporated herein
by reference).
4.7.4 -- Supplemental Indenture, dated as of June 30, 1995, to the
Dial Call 2005 Indenture between Dial Call Communications,
Inc. 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).
4.7.5 -- Third Supplemental Indenture, dated as of January 30, 1996,
to the Dial Call 2005 Indenture between Dial Page Inc. (as
successor to Dial Call Communications, Inc.) and The Bank of
New York (filed on April 1, 1996 as Exhibit 4.31 to the 1995
Form 10-K and incorporated herein by reference).
4.7.6 -- Fourth Supplemental Indenture, dated as of January 30, 1996,
to the Dial Call 2005 Indenture between Nextel (as successor
to Dial Page, Inc.) and The Bank of New York (filed on April
1, 1996 as Exhibit 4.32 to the 1995 Form 10-K and
incorporated herein by reference).
4.7.7 -- Fifth Supplemental Indenture, dated as of June 13, 1997, to
the Dial Call 2005 Indenture between Nextel and The Bank of
New York (filed on June 17, 1997 as Exhibit 4.4 to the June
13 Form 8-K and incorporated herein by reference).
4.8.1 -- Indenture for Senior Discount Notes due 2007, dated as of
March 6, 1997, between McCaw International, Ltd. (now known
as Nextel International) and The Bank of New York, as
Trustee (the "NI 2007 Indenture") (filed on March 31, 1997
as Exhibit 4.24 to Nextel's Annual Report on Form 10-K for
the year ended December 31, 1996 (the "1996 Form 10-K") and
incorporated herein by reference).
4.8.2 -- Form of Note issued pursuant to the NI 2007 Indenture
(included in Exhibit 4.8.1).
</TABLE>
II-4
<PAGE> 136
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <C> <S>
4.8.3 -- Warrant Agreement, dated as of March 6, 1997, between McCaw
International, Ltd. and The Bank of New York (filed on March
31, 1997 as Exhibit 4.26 to the 1996 Form 10-K and
incorporated herein by reference).
4.9.1 -- Indenture dated September 17, 1997 between Nextel
Communications, Inc. and Harris Trust and Savings Bank, as
Trustee (the "September 1997 Indenture"), relating to
Nextel's 10.65% Senior Redeemable Discount Notes due 2007
(filed on September 22, 1997 as Exhibit 4.1 to Nextel's
Current Report on Form 8-K dated September 22, 1997 and
incorporated herein by reference).
4.9.2 -- Form of Note issued pursuant to the September 1997 Indenture
(included in Exhibit 4.9.1).
4.10.1 -- Indenture dated as of October 22, 1997 between Nextel
Communications, Inc. and Harris Trust and Savings Bank, as
Trustee (the "October 1997 Indenture"), relating to Nextel's
9.75% Senior Serial Redeemable Discount Notes due 2007
(filed on October 23, 1997 as Exhibit 4.1 to Nextel's
Current Report on Form 8-K dated October 23, 1997 and
incorporated herein by reference).
4.10.2 -- Form of Note issued pursuant to the October 1997 Indenture
(included in Exhibit 4.10.1).
4.11.1 -- Indenture dated as of February 11, 1998, between Nextel
Communications, Inc. and Harris Trust and Savings Bank, as
Trustee, (the "February 1998 Indenture") relating to
Nextel's Senior Serial Redeemable Discount Notes due 2008
(filed on February 12, 1998 as Exhibit 4.2 to the February
11 Form 8-K and incorporated herein by reference).
4.11.2 -- Form of Note issued pursuant to the February 1998 Indenture
(included in Exhibit 4.11.1).
4.12 -- Credit Agreement dated as of March 12, 1998 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 as Exhibit 4.12 to Nextel's Annual
Report on Form 10-K for the year ended December 31, 1997 and
incorporated by reference herein).
+4.13 -- Registration Rights Agreement dated February 11, 1998
between Nextel, Morgan Stanley & Co., Incorporated, Chase
Securities, Inc., TD Securities (USA) Inc., J. P. Morgan
Securities, Inc. and NationsBank Montgomery Securities LLC.
+4.14 -- Registration Rights Agreement dated February 11, 1998
between Nextel, Morgan Stanley & Co. Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation and
Credit Suisse First Boston Corporation.
+4.15 -- Form of Indenture related to the Exchange Debentures.
+5 -- Opinion of Jones, Day, Reavis & Pogue regarding validity.
+8 -- Opinion of Jones, Day, Reavis & Pogue regarding tax matters.
+12 -- Statement regarding computation of earnings to fixed charges
and preferred stock dividends.
23.1 -- Consent of Jones, Day, Reavis & Pogue (included in Exhibits
5 and 8).
*23.2 -- Consent of Deloitte & Touche LLP.
+24 -- Powers of Attorney.
+25 -- Statement of eligibility under the Trust Indenture Act of
1939 on Form T-1.
*99.1 -- Letter of Transmittal (Notes).
*99.2 -- Letter of Transmittal (Preferred Stock).
</TABLE>
- ---------------
* Filed herewith.
+ Previously filed.
II-5
<PAGE> 137
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed with or furnished to the Commission
by the registrant pursuant to Sections 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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<PAGE> 138
(d) The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-7
<PAGE> 139
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to its registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of McLean, in
the Commonwealth of Virginia, on the 10th day of June, 1998.
NEXTEL COMMUNICATIONS, INC.
By: /s/ THOMAS J. SIDMAN
------------------------------------
Thomas J. Sidman
Vice President and General Counsel
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed below by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
* Chairman of the Board, Chief
- ----------------------------------------------------- Executive Officer and Director
Daniel F. Akerson (Principal Executive Officer)
* Vice President and Chief
- ----------------------------------------------------- Financial Officer (Principal
Steven M. Shindler Financial Officer)
* Vice President and Controller
- ----------------------------------------------------- (Principal Accounting Officer)
William G. Arendt
* Vice Chairman of the Board and
- ----------------------------------------------------- Director
Morgan E. O'Brien
* President, Chief Operating
- ----------------------------------------------------- Officer and Director
Timothy M. Donahue
* Director
- -----------------------------------------------------
Keith J. Bane
* Director
- -----------------------------------------------------
Craig O. McCaw
* Director
- -----------------------------------------------------
Keisuke Nakasaki
* Director
- -----------------------------------------------------
Masaaki Torimoto
* Director
- -----------------------------------------------------
Dennis M. Weibling
* Director
- -----------------------------------------------------
William E. Conway, Jr.
</TABLE>
II-8
<PAGE> 140
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
* Director
- -----------------------------------------------------
Frank M. Drendel
* /s/ THOMAS J. SIDMAN Attorney-in-fact June 10, 1998
- -----------------------------------------------------
Thomas J. Sidman
</TABLE>
II-9
<PAGE> 141
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE
- ------- ----------------------- ----
<C> <S> <C> <C>
+4.13 -- Registration Rights Agreement dated February 11, 1998
between Nextel, Morgan Stanley & Co., Incorporated, Chase
Securities, Inc., TD Securities (USA) Inc., J. P. Morgan
Securities, Inc. and NationsBank Montgomery Securities
LLC.........................................................
+4.14 -- Registration Rights Agreement dated February 11, 1998
between Nextel, Morgan Stanley & Co. Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation and
Credit Suisse First Boston Corporation......................
+4.15 -- Form of Indenture related to the Exchange Debentures........
+5 -- Opinion of Jones, Day, Reavis & Pogue regarding validity....
+8 -- Opinion of Jones, Day, Reavis & Pogue regarding tax
matters.....................................................
+12 -- Statement regarding computation of earnings to fixed charges
and preferred stock dividends...............................
23.1 -- Consent of Jones, Day, Reavis & Pogue (included in Exhibits
5 and 8)....................................................
*23.2 -- Consent of Deloitte & Touche LLP............................
+24 -- Powers of Attorney..........................................
+25 -- Statement of eligibility under the Trust Indenture Act of
1939 on Form T-1............................................
*99.1 -- Letter of Transmittal (Notes)...............................
*99.2 -- Letter of Transmittal (Preferred Stock).....................
</TABLE>
- ---------------
* Filed herewith.
+ Previously filed.
II-10
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-53921 of Nextel Communications, Inc. on Form S-4
of our report dated March 13, 1998, appearing in the Annual Report on Form 10-K
of Nextel Communications, Inc. for the year ended December 31, 1997, and to the
references to us under the headings "Summary Financial Data" and "Experts" in
the Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
McLean, Virginia
June 10, 1998
<PAGE> 1
- --------------------------------------------------------------------------------
THE SENIOR NOTE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON JULY 16, 1998
UNLESS EXTENDED (THE "EXPIRATION DATE").
- --------------------------------------------------------------------------------
LETTER OF TRANSMITTAL
OFFER TO EXCHANGE
9.95% SENIOR SERIAL REDEEMABLE DISCOUNT NOTES DUE 2008,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
FOR ANY AND ALL OUTSTANDING
9.95% SENIOR SERIAL REDEEMABLE DISCOUNT NOTES DUE 2008
OF
NEXTEL COMMUNICATIONS, INC.
Deliver to:
HARRIS TRUST AND SAVINGS BANK, NOTE EXCHANGE AGENT
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Hand or Overnight Delivery: Facsimile Transmission Number:
Harris Trust and Savings Bank Harris Trust and Savings Bank (For Eligible Institutions
c/o Harris Trust Company c/o Harris Trust Company Only)
of New York of New York (212) 701-7636
P.O. Box 1010 88 Pine Street
Wall Street Station 19th Floor Confirm Receipt of Facsimile
New York, NY 10268-1010 New York, NY 10005 by Telephone:
(212) 701-7624
</TABLE>
Delivery of this instrument to an address other than as set forth above or
transmission of instructions via a facsimile number other than the one listed
above will not constitute a valid delivery. The instructions accompanying this
Letter of Transmittal should be read carefully before this Letter of Transmittal
is completed. THIS INSTRUMENT SHOULD NOT BE DELIVERED TO THE COMPANY.
The undersigned acknowledges that the undersigned has received and reviewed
the Prospectus dated June 11, 1998 (the "Prospectus") of Nextel Communications,
Inc. (the "Company") and this Letter of Transmittal (the "Letter of
Transmittal"), which together constitute (i) the Company's offer (the "Senior
Note Exchange Offer") to exchange $1,000 in principal amount at maturity of its
newly issued 9.95% Senior Serial Redeemable Discount Notes due 2008 (the
"Exchange Senior Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Statement of
which the Prospectus is a part, for $1,000 in principal amount at maturity of
its outstanding 9.95% Senior Serial Redeemable Discount Notes due 2008 (the
"Private Notes"), of which $1,627,000,000 in principal amount at maturity are
issued and outstanding. Other capitalized terms used but not defined herein have
the meaning given to them in the Prospectus.
This Letter of Transmittal is to be completed by a Holder (as defined
herein) of Private Notes either (i) if certificates are to be forwarded herewith
or (ii) if a tender of certificates for Private Notes, if available, is to be
made by book-entry transfer to the account maintained by the Note Exchange Agent
at the Depository Trust Company (the "DTC") pursuant to the procedures set forth
in "The Exchange Offers -- Procedures for Tendering" section of the Prospectus.
Holders of Private Notes whose certificates are not immediately available, or
who are unable to deliver their certificates or confirmation of the book-entry
tender of their Private Notes into the Note Exchange Agent's account at DTC (a
"Book-Entry Confirmation") and all other documents required by this Letter of
Transmittal to the Note Exchange Agent on or prior to the Expiration Date, must
tender their Private Notes according to the guaranteed delivery procedures set
forth in "The Exchange Offers -- Guaranteed Delivery Procedures" section of the
Prospectus. See Instruction 1. Delivery of documents to DTC does not constitute
delivery to the Note Exchange Agent.
The term "Holder" with respect to the Senior Note Exchange Offer means any
person in whose name Private Notes are registered on the books of the Company or
any other person who has obtained a properly completed bond power from
<PAGE> 2
the registered Holder. The undersigned has completed, executed, and delivered
this Letter of Transmittal to indicate the action the undersigned desires to
take with respect to the Senior Note Exchange Offer. Holders who wish to tender
their Private Notes must complete this Letter of Transmittal in its entirety.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE PROVIDING ANY
INFORMATION BELOW. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL
MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES
OF THE PROSPECTUS AND LETTER OF TRANSMITTAL SHOULD BE DIRECTED TO THE NOTE
EXCHANGE AGENT AT (212) 701-7624 OR AT ITS ADDRESS SET FORTH ABOVE.
List below the Private Notes to which this Letter of Transmittal relates.
DESCRIPTION OF PRIVATE NOTES
<TABLE>
<CAPTION>
NAME(S) AND ADDRESSES(ES) AGGREGATE PRINCIPAL
OF REGISTERED HOLDERS AMOUNT OF PRIVATE NOTES PRINCIPAL AMOUNT
(PLEASE COMPLETE, IF REPRESENTED BY OF PRIVATE NOTES
BLANK) CERTIFICATE NUMBER(S) CERTIFICATE(S) TENDERED*
- ------------------------- --------------------- ----------------------- ----------------
<S> <C> <C> <C>
Total
</TABLE>
- ---------------
* Unless indicated in the column labeled "Principal Amount of Private Notes
Tendered," any tendering Holder of Private Notes will be deemed to have
tendered the entire principal amount of Private Notes represented by the
column labeled "Aggregate Principal Amount of Private Notes Represented by
Certificate(s)."
If the space provided above is inadequate, list the certificate numbers and
principal amount of Private Notes on a separate signed schedule and affix the
list to this Letter of Transmittal.
[ ] CHECK HERE IF TENDERED PRIVATE NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE NOTE EXCHANGE AGENT WITH DTC
AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS (AS HEREINAFTER
DEFINED) ONLY):
NAME OF TENDERING INSTITUTION:
------------------------------------------------
ACCOUNT NUMBER:
---------------------------------------------------------------
TRANSACTION CODE NUMBER:
------------------------------------------------------
[ ] CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING
(FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
NAME(S) OF REGISTERED HOLDER(S) OF PRIVATE NOTES:
-----------------------------
------------------------------------------------------------------------------
2
<PAGE> 3
Date of Execution of Notice of Guaranteed Delivery:
Window Ticket Number (if available):
Name of Institution that Guaranteed Delivery:
Account Number (if delivered by book-entry transfer):
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 4, 5 and 6)
To be completed ONLY (i) if certificates for Private Notes not tendered, or
Exchange Senior Notes issued in exchange for Private Notes accepted for
exchange, are to be issued in the name of someone other than the undersigned, or
(ii) if Private Notes tendered by book-entry transfer that are not exchanged are
to be returned by credit to an account maintained at DTC.
Issue Certificate(s) to:
Name:
-------------------------------------------------
(Please Print)
Address:
----------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
(Include Zip Code)
- ------------------------------------------------------
(Taxpayer Identification or Social Security Number)
(Please Also Complete Substitute Form W-9)
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 4, 5, and 6)
To be completed ONLY if certificates for Private Notes not tendered, or
Exchange Senior Notes issued in exchange for Private Notes accepted for
exchange, are to be sent to someone other than the undersigned, or to the
undersigned at an address other than that shown above.
Mail and deliver Certificate(s) to:
Name:
-------------------------------------------------
(Please Print)
Address:
----------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
(Include Zip Code)
3
<PAGE> 4
Ladies and Gentlemen:
Subject to the terms and conditions of the Senior Note Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of Private Notes
indicated above. Subject to and effective upon the acceptance for exchange of
the principal amount of Private Notes tendered in accordance with this Letter of
Transmittal, the undersigned sells, assigns, and transfers to, or upon the order
of, the Company all right, title and interest in and to the Private Notes
tendered hereby. The undersigned hereby irrevocably constitutes and appoints the
Note Exchange Agent as its agent and attorney-in-fact (with full knowledge that
the Note Exchange Agent also acts as the agent of the Company) with respect to
the tendered Private Notes with full power of substitution to (i) deliver
certificates for such Private Notes, or transfer ownership of such Private Notes
on the account books maintained by DTC, to the Company and deliver all
accompanying evidences of transfer and authenticity to, or upon the order of,
the Company, and (ii) present such Private Notes for transfer on the books of
the Company and receive all benefits and otherwise exercise all rights of
beneficial ownership of such Private Notes, all in accordance with the terms of
the Senior Note Exchange Offer. The power of attorney granted in this paragraph
shall be deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, sell, assign, and transfer the Private Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges, and encumbrances
and not subject to any adverse claim, when the same are acquired by the Company.
The undersigned hereby further represents that (i) any Exchange Senior Notes
acquired in exchange for Private Notes tendered hereby will have been acquired
in the ordinary course of business of the person receiving such Exchange Senior
Notes, whether or not such person is the undersigned, (ii) neither the
undersigned nor any such other person is engaging in or intends to engage in a
distribution of the Exchange Senior Notes, (iii) neither the Holder nor any such
other person has an arrangement or understanding with any person to participate
in the distribution of such Exchange Senior Notes, and (iv) neither the Holder
nor any such other person is an "affiliate" (as defined in Rule 405 under the
Securities Act) of the Company.
The undersigned also acknowledges that the Senior Note Exchange Offer is
being made in reliance upon interpretations contained in letters issued to third
parties by the staff of the Securities and Exchange Commission (the "SEC") that
the Exchange Senior Notes issued in exchange for the Private Notes pursuant to
the Senior Note Exchange Offer may be offered for resale, resold, and otherwise
transferred by Holders thereof (other than any such Holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Senior Notes are
acquired in the ordinary course of such Holder's business and such Holder is not
engaging in and does not intend to engage in a distribution of the Exchange
Senior Notes and has no arrangement or understanding with any person to
participate in a distribution of such Exchange Senior Notes. If the undersigned
is not a broker-dealer, the undersigned represents that it is not engaged in,
and does not intend to engage in, a distribution of Exchange Senior Notes. If
the undersigned is a broker-dealer that will receive Exchange Senior Notes for
its own account in exchange for Private Notes that were acquired as a result of
market-making activities or other trading activities (a "Participating
Broker-Dealer"), it acknowledges that it will deliver a prospectus in connection
with any resale of such Exchange Senior Notes; however, by so acknowledging and
by delivering a prospectus, the undersigned will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. If the undersigned
is a Participating Broker-Dealer, it acknowledges that during the 90-day period
following the Expiration Date (or such longer applicable period if use of the
Prospectus has been suspended by the Company) it will contact counsel to the
Placement Agents at (212) 848-7961 on a weekly basis to confirm the availability
of the Prospectus for delivery in connection with such resales.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Note Exchange Agent or the Company to be necessary or
desirable to complete the assignment, transfer, and purchase of the Private
Notes tendered hereby.
4
<PAGE> 5
For purposes of the Senior Note Exchange Offer, the Company shall be deemed
to have accepted validly tendered Private Notes when, as and if the Company has
given oral or written notice thereof to the Note Exchange Agent.
If any tendered Private Notes are not accepted for exchange pursuant to the
Senior Note Exchange Offer for any reason, certificates for any such unaccepted
Private Notes will be returned, without expense, to the undersigned at the
address shown below or at a different address as may be indicated herein under
"Special Delivery Instructions" or, in the case of Private Notes tendered by
book-entry transfer, such unaccepted Private Notes will be credited to an
account at DTC, as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors, and assigns.
The undersigned understands that tenders of Private Notes pursuant to the
procedures described under the caption "The Exchange Offers -- Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Senior Note Exchange Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the certificates representing the Exchange Senior Notes issued in exchange
for the Private Notes accepted for exchange and return any Private Notes not
tendered or not exchanged in the name(s) of the undersigned. Similarly, unless
otherwise indicated under "Special Delivery Instructions," please send the
certificates representing the Exchange Senior Notes issued in exchange for the
Private Notes accepted for exchange and any certificates for Private Notes not
tendered or not exchanged (and accompanying documents, as appropriate) to the
undersigned at the address shown below the undersigned's signature(s). In the
event that both "Special Payment Instructions" and "Special Delivery
Instructions" are completed, please issue the certificates representing the
Exchange Senior Notes issued in exchange for the Private Notes accepted for
exchange in the name(s) of, and return any Private Notes not tendered or not
exchanged and send said certificates to, the person(s) so indicated. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Payment Instructions" and "Special Delivery Instructions" to transfer
any Private Notes from the name of the registered Holder(s) thereof if the
Company does not accept for exchange any of the Private Notes so tendered.
Holders of Private Notes who wish to tender their Private Notes and (i)
whose Private Notes are not immediately available, or (ii) who cannot deliver
their Private Notes, this Letter of Transmittal or any other documents required
hereby to the Note Exchange Agent prior to the Expiration Date (or who cannot
comply with the book-entry transfer procedures on a timely basis), may tender
their Private Notes according to the guaranteed delivery procedures set forth in
the Prospectus under the caption "The Exchange Offers -- Guaranteed Delivery
Procedures." See Instruction 1 regarding the completion of this Letter of
Transmittal.
5
<PAGE> 6
PLEASE SIGN HERE WHETHER OR NOT
PRIVATE NOTES ARE BEING PHYSICALLY TENDERED HEREBY
- ------------------------------------------------------------
--------------------------------------
(Date)
- ------------------------------------------------------------
--------------------------------------
Signature(s) of Registered Holder(s) (Date)
or Authorized Signatory
Area Code and Telephone Number(s):
----------------------------------------------
Tax Identification or Social Security Number(s):
--------------------------------
The above lines must be signed by the registered Holder(s) of Private Notes
as their name(s) appear(s) on the certificate for the Private Notes or by
person(s) authorized to become registered Holder(s) by a properly completed bond
power from the registered Holder(s), a copy of which must be transmitted with
this Letter of Transmittal. If Private Notes to which this Letter of Transmittal
relates are held of record by two or more joint Holders, then all such Holders
must sign this Letter of Transmittal. If signature is by trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, then such person must
(i) set forth his or her full title below and (ii) unless waived by the Company,
submit evidence satisfactory to the Company of such person's authority so to
act. See Instruction 4 regarding the completion of this Letter of Transmittal.
<TABLE>
<S> <C>
Name(s):
------------------------------------------------------------
------------------------------------------------------------
(Please Print)
Capacity:
------------------------------------------------------------
Address:
------------------------------------------------------------
------------------------------------------------------------
(Include Zip Code)
Signature(s) Guaranteed by an Eligible Institution (as
hereinafter defined):
(If required by Instruction 4)
------------------------------------------------------------
(Authorized Signature)
------------------------------------------------------------
(Title)
------------------------------------------------------------
(Name of Firm)
</TABLE>
Dated , 1998
-------------------
6
<PAGE> 7
PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW.
PAYOR'S NAME: HARRIS TRUST AND SAVINGS BANK
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT ----------------------------
SUBSTITUTE AND CERTIFY BY SIGNING AND DATING BELOW. SOCIAL SECURITY NUMBER
FORMW-9
OR
----------------------------
EMPLOYER IDENTIFICATION NUMBER
----------------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE PART 2 -- CERTIFICATION -- UNDER PENALTIES OF PART 3 --
PERJURY, I CERTIFY THAT: AWAITING TIN [ ]
(1) THE NUMBER SHOWN ON THIS FORM IS MY CORRECT TIN
(OR I AM WAITING FOR A NUMBER TO BE ISSUED TO ME)
AND
(2) I AM NOT SUBJECT TO BACKUP WITHHOLDING BECAUSE
(A) I AM EXEMPT FROM BACKUP WITHHOLDING, OR (B) I
HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE
SERVICE ("IRS") THAT I AM SUBJECT TO BACKUP
WITHHOLDING AS A RESULT OF FAILURE TO REPORT ALL
INTEREST OR DIVIDENDS, OR (C) THE IRS HAS
NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP
WITHHOLDING.
----------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- YOU MUST CROSS OUT ITEM (2) IN THE BOX ABOVE IF YOU
PAYER'S REQUEST FOR HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE CURRENTLY SUBJECT TO BACKUP WITHHOLDING
TAXPAYER IDENTIFICATION BECAUSE OF UNDERREPORTING INTEREST OR DIVIDENDS ON YOUR TAX RETURN.
NUMBER ("TIN")
CERTIFICATION SIGNATURE __________ DATE __________ , 1998
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF PAYMENTS MADE TO YOU PURSUANT TO THE SENIOR NOTE EXCHANGE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I CERTIFY UNDER PENALTIES OF PERJURY THAT A TAXPAYER IDENTIFICATION NUMBER HAS NOT BEEN ISSUED TO ME, AND
EITHER (A) I HAVE MAILED OR DELIVERED AN APPLICATION TO RECEIVE A TAXPAYER IDENTIFICATION NUMBER TO THE
APPROPRIATE INTERNAL REVENUE CENTER OR SOCIAL SECURITY ADMINISTRATION OFFICE OR (B) I INTEND TO MAIL OR
DELIVER AN APPLICATION IN THE NEAR FUTURE. I UNDERSTAND THAT IF I DO NOT PROVIDE A TAXPAYER IDENTIFICATION
NUMBER WITHIN SIXTY (60) DAYS, 31% OF ALL REPORTABLE PAYMENTS MADE TO ME THEREAFTER WILL BE WITHHELD UNTIL I
PROVIDE A NUMBER.
------------------------------------------------------------------- ------------------------------
Signature Date
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE
SENIOR NOTE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND PRIVATE NOTES. The tendered
Private Notes or a Book-Entry Confirmation, as well as a properly completed and
duly executed copy of this Letter of Transmittal or facsimile hereof and any
other documents required by this Letter of Transmittal must be received by the
Note Exchange Agent at its address set forth herein prior to 5:00 p.m., New York
City time, on the Expiration Date. THE METHOD OF DELIVERY OF THE TENDERED
PRIVATE NOTES, THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO
THE NOTE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER AND, EXCEPT AS
OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY
RECEIVED OR CONFIRMED BY THE NOTE EXCHANGE AGENT. INSTEAD OF DELIVERY BY MAIL,
IT IS RECOMMENDED THAT THE HOLDER USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE NOTE
EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR PRIVATE
NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE
BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, OR NOMINEES TO EFFECT THE
ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Holders who wish to tender their Private Notes and (i) whose Private Notes
are not immediately available, or (ii) who cannot deliver their Private Notes,
this Letter of Transmittal, or any other documents required hereby to the Note
Exchange Agent prior to the Expiration Date, or (iii) who are unable to complete
the procedure for book-entry transfer on a timely basis, must tender their
Private Notes according to the guaranteed delivery procedures set forth in the
Prospectus. Pursuant to such procedure: (i) such tender must be made by or
through an Eligible Institution (as hereinafter defined); (ii) prior to the
Expiration Date, the Note Exchange Agent must have received from the Eligible
Institution a properly completed and duly executed Notice of Guaranteed Delivery
(by facsimile transmission, mail or hand delivery) setting forth the name and
address of the Holder of the Private Notes, the certificate number or numbers of
such Private Notes and the aggregate principal amount of Private Notes tendered,
stating that the tender is being made thereby and guaranteeing that, within
three New York Stock Exchange trading days after the Expiration Date, this
Letter of Transmittal (or facsimile hereof) together with the certificate(s)
representing the Private Notes or a Book-Entry Confirmation and any other
required documents will be deposited by the Eligible Institution with the Note
Exchange Agent; and (iii) such properly completed and executed Letter of
Transmittal (or facsimile thereof), as well as all other documents required by
this Letter of Transmittal and the certificate(s) representing all tendered
Private Notes (or a Book-Entry Confirmation) in proper form for transfer, must
be received by the Note Exchange Agent within three New York Stock Exchange
trading days after the Expiration Date, all as provided in the Prospectus under
the caption "The Exchange Offers -- Guaranteed Delivery Procedures." Any Holder
of Private Notes who wishes to tender his Private Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Note
Exchange Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m.,
New York City time, on the Expiration Date. Upon request of the Note Exchange
Agent, a Notice of Guaranteed Delivery will be sent to Holders who wish to
tender their Private Notes according to the guaranteed delivery procedures set
forth above.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Private Notes, and withdrawal of tendered
Private Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Private Notes not properly tendered or any Private Notes
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right to waive any
irregularities or conditions of tender as to particular Private Notes. The
Company's interpretation of the terms and conditions of the Senior Note Exchange
Offer, including the instructions in this Letter of Transmittal and those set
forth in the Prospectus under the caption "The Exchange Offers -- Conditions,"
shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders
8
<PAGE> 9
of Private Notes must be cured within such time as the Company shall determine.
Neither the Company, the Note Exchange Agent nor any other person shall be under
any duty to give notification of defects or irregularities with respect to
tenders of Private Notes, nor shall any of them incur any liability for failure
to give such notification. Tenders of Private Notes will not be deemed to have
been made until such defects or irregularities have been cured or waived. Any
Private Notes received by the Note Exchange Agent that are not properly tendered
and as to which the defects or irregularities have not been cured or waived will
be returned by the Note Exchange Agent to the tendering Holders of Private
Notes, unless otherwise provided in this Letter of Transmittal, as soon as
practicable following the Expiration Date.
2. TENDER BY HOLDER. Only a Holder of Private Notes may tender such
Private Notes in the Senior Note Exchange Offer. Any beneficial holder of
Private Notes who is not the registered Holder and who wishes to tender should
arrange with the registered Holder to execute and deliver this Letter of
Transmittal on his behalf or must, prior to completing and executing this Letter
of Transmittal and delivering his Private Notes, either make appropriate
arrangements to register ownership of the Private Notes in such Holder's name,
or obtain a properly completed bond power from the registered Holder. The
transfer of registered ownership of Private Notes may take considerable time.
3. PARTIAL TENDERS. If less than the entire principal amount of Private
Notes represented by a certificate is tendered, the tendering Holder should fill
in the aggregate principal amount tendered in the third column of the box
entitled "Description of Private Notes" above. The entire principal amount of
Private Notes set forth on the certificate delivered to the Note Exchange Agent
will be deemed to have been tendered unless otherwise indicated. If the entire
principal amount of all Private Notes is not tendered, then a Private Notes
certificate for the principal amount of Private Notes not tendered and a
certificate or certificates representing Exchange Senior Notes issued in
exchange for any Private Notes accepted will be sent to the Holder at his or her
registered address, unless a different address is provided in the appropriate
box on this Letter of Transmittal, promptly after the Private Notes are accepted
for exchange, or in the case of Private Notes tendered by book-entry transfer,
such untendered Private Notes and Exchange Senior Notes issued in exchange for
any Private Notes accepted will be credited to accounts at DTC.
4. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or facsimile hereof) is
signed by the record Holder(s) of the Private Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the Private
Notes without alteration, enlargement, or any change whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders of Private Notes tendered and the certificate or
certificates for Exchange Senior Notes issued in exchange therefor are to be
issued (or if certificates representing the principal amount of Private Notes
not tendered are to be reissued) to the registered Holder, the said Holder need
not and should not endorse any tendered Private Notes, nor provide a separate
bond power. In any other case, such Holder must either properly endorse the
Private Notes tendered or transmit a properly completed separate bond power with
this Letter of Transmittal, with the signatures on the endorsement or bond power
guaranteed by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered Holder or Holders of any Private Notes listed, such
Private Notes must be endorsed or accompanied by appropriate bond powers, in
each case signed as the name of the registered Holder or Holders appears on the
Private Notes.
If this Letter of Transmittal (or facsimile hereof) or any Private Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations, or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, evidence satisfactory to the Company of their
authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Private Notes or signatures on bond powers required by this
Instruction 4 must be guaranteed by an Eligible Institution.
9
<PAGE> 10
Except as otherwise provided below, all signatures on this Letter of
Transmittal must be guaranteed by a participant in a Recognized Signature
Guarantee Medallion Program (an "Eligible Institution"). Signatures on this
Letter of Transmittal need not be guaranteed if (i) this Letter of Transmittal
is signed by the registered Holder(s) of the Private Notes tendered herewith and
such Holder(s) have not completed the box set forth herein entitled "Special
Payment Instructions" or the box entitled "Special Delivery Instructions," or
(ii) if such Private Notes are tendered for the account of an Eligible
Institution.
5. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. Tendering Holders should
indicate, in the applicable box or boxes, the name and address to which Exchange
Senior Notes or substitute Private Notes for the principal amount of Private
Notes not tendered or not accepted for exchange are to be issued or sent, if
different from the name and address of the person signing this Letter of
Transmittal. In the case of issuance in a different name, the taxpayer
identification or social security number of the person named must also be
indicated.
6. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Private Notes pursuant to the Senior Note Exchange
Offer. If, however, certificates representing Exchange Senior Notes or Private
Notes (for any principal amount of Private Notes not tendered or accepted for
exchange) are to be delivered to, or are to be registered or issued in the name
of, any person other than the registered Holder of the Private Notes tendered
hereby, or if tendered Private Notes are registered in the name of any person
other than the person signing this Letter of Transmittal, or if a transfer tax
is imposed for any reason other than the exchange of Private Notes pursuant to
the Senior Note Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered Holder or on any other persons) will be
payable by the tendering Holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with this Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
Holder and no Exchange Senior Notes are required to be delivered to or at the
direction of such tendering Holder until such transfer taxes are paid.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Private Notes listed in this Letter of
Transmittal.
7. FORM W-9. Any Holder who tenders his Private Notes is required to
provide the Note Exchange Agent with a correct Taxpayer Identification Number
("TIN") on the Form W-9 which is enclosed herewith. If such Holder is an
individual, the TIN is his or her social security number. Failure to provide the
information on the Form W-9 may subject the surrendering Holder to 31% Federal
income tax withholding on certain payments made to Holders of the Exchange
Senior Notes. Exempt Holders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. For additional information in this regard, please refer
to the enclosed Guidelines for Certification of TIN on Substitute Form W-9. In
order to satisfy the Note Exchange Agent that a foreign individual qualifies as
an exempt recipient, the Holder must submit a Form W-8, signed under penalties
of perjury, attesting to that individual's exempt status. A Form W-8 may be
obtained from the Note Exchange Agent.
8. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive, or modify specified conditions in the Senior Note Exchange Offer, set
forth in the Prospectus under the caption "The Exchange Offers -- Conditions,"
in the case of any Private Notes tendered.
9. MUTILATED, LOST, STOLEN OR DESTROYED PRIVATE NOTES. Any tendering
Holder whose Private Notes have been mutilated, lost, stolen, or destroyed
should contact the Note Exchange Agent at the address indicated herein for
further instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Note Exchange Agent at the address
specified in the Prospectus. Holders may also contact their broker, dealer,
commercial bank, trust company, or other nominee for assistance concerning the
Senior Note Exchange Offer.
10
<PAGE> 11
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GUIDE THE
PAYER. -- Social Security Numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer Identification Numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the number
to give the payer.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
1. An individual's account. The individual
2. Two or more individuals (joint account) The actual owner of the account or, if combined funds,
the first individual on the account(1)
3. Custodian account of a minor (Uniform Gift to Minors The minor(2)
Act)
4. a. The usual revocable savings trust account (grantor The grantor-trustee(1)
is also trustee)
b. So-called trust account that is not a legal or The actual owner(1)
valid trust under State law
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
6. A valid trust, estate, or pension trust The legal entity (Do not furnish the identifying
number of the personal representative or trustee
unless the legal entity itself is not designated in
the account title)(4)
7. Corporate account The corporation
8. Religious, charitable, or educational organization The organization
account
9. Partnership The partnership
10. Association, club, or other tax-exempt organization The organization
11. A broker or registered nominee The broker or nominee
12. Account with the Department of Agriculture in the name The public entity
of a public entity (such as a State or local
government, school district, or prison) that receives
agricultural program payments
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a Social Security Number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's Social Security Number.
(3) Show the name of the owner. You may also enter your business name. You may
use your Social Security Number or Employer Identification Number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
11
<PAGE> 12
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a Taxpayer Identification Number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on broker transactions
include the following:
- A corporation.
- A financial institution.
- An organization exempt from tax under Section 501(a), an individual
retirement plan, or a custodial account under Section 403(b)(7), if the
account satisfies the requirements of Section 401(f)(2).
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A dealer in securities or commodities required to be registered in the
United States, the District of Columbia, or a possession of the United
States.
- A real estate investment trust.
- A futures commissions merchant registered with the Commodity Futures Trading
Commission.
- A common trust fund operated by a bank under Section 584(a).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
- A person registered under the Investment Advisors Act of 1940 who regularly
acts as a broker.
Payments of dividends not generally subject to backup withholding include the
following:
- Payments to nonresident aliens subject to withholding under Section 1441.
- Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments described in Section 404(k) made by an employee stock ownership
plan.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct Taxpayer Identification Number to the payer.
- Payments of tax-exempt interest (including tax-exempt interest dividends
under Section 852).
- Payments described in Section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under Section 1451.
- Payments made by certain foreign organizations.
- Payments of mortgage interest to you.
Exempt payees described above should file Substitute Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND
DATE THE FORM AND RETURN IT TO THE PAYER.
PRIVACY ACT NOTICE -- Section 6109 requires most recipients of dividend,
interest, or other payments to give Taxpayer Identification Numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a Taxpayer Identification Number to a payer. Certain penalties may
also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your Taxpayer Identification Number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE IRS.
12
<PAGE> 13
(DO NOT WRITE IN SPACE BELOW)
CERTIFICATE PRIVATE NOTES PRIVATE NOTES
SURRENDERED TENDERED ACCEPTED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Delivery Prepared by:
---------------------------------------
Checked by:
-------------------------------------------------
Date:
-------------------------------------------------------
13
<PAGE> 1
- --------------------------------------------------------------------------------
THE PREFERRED STOCK EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON JULY 16, 1998
UNLESS EXTENDED (THE "EXPIRATION DATE").
- --------------------------------------------------------------------------------
LETTER OF TRANSMITTAL
OFFER TO EXCHANGE
11.125% SERIES E EXCHANGEABLE PREFERRED STOCK MANDATORILY REDEEMABLE 2010
(EXCHANGEABLE AT THE OPTION OF NEXTEL)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
FOR ANY AND ALL OUTSTANDING
11.125% SERIES E EXCHANGEABLE PREFERRED STOCK MANDATORILY REDEEMABLE 2010
(EXCHANGEABLE AT THE OPTION OF NEXTEL)
OF
NEXTEL COMMUNICATIONS, INC.
Deliver to:
FIRST CHICAGO TRUST COMPANY OF NEW YORK, PREFERRED EXCHANGE AGENT
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
First Chicago Trust Company First Chicago Trust Company First Chicago Trust Company of
of New York of New York New York
Suite 4660 Suite 4680 Tenders & Exchanges
P.O. Box 2569 14 Wall Street c/o The Depository Trust Company
Jersey City, New Jersey 07303-2569 8th Floor 55 Water Street
New York, New York 10005 DTC TAD
Vietnam Veterans Memorial Plaza
New York, New York 10041
</TABLE>
Delivery of this instrument to an address other than as set forth above
will not constitute a valid delivery. The instructions accompanying this Letter
of Transmittal should be read carefully before this Letter of Transmittal is
completed. THIS INSTRUMENT SHOULD NOT BE DELIVERED TO THE COMPANY.
The undersigned acknowledges that the undersigned has received and reviewed
the Prospectus dated June 11, 1998 (the "Prospectus") of Nextel Communications,
Inc. (the "Company") and this Letter of Transmittal (the "Letter of
Transmittal"), which together constitute (i) the Company's offer (the "Preferred
Stock Exchange Offer") to exchange its newly issued 11.125% Series E
Exchangeable Preferred Stock, par value $.01 per share (the "Exchange Preferred
Stock"), which has been registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a Registration Statement of which the
Prospectus is a part, for its outstanding 11.125% Series E Exchangeable
Preferred Stock, par value $.01 per share (the "Old Preferred Stock"), of which
771,786 shares are issued and outstanding, on a share for share basis. Other
capitalized terms used but not defined herein have the meaning given to them in
the Prospectus.
<PAGE> 2
This Letter of Transmittal is to be completed by a Holder (as defined
herein) of Old Preferred Stock either (i) if certificates are to be forwarded
herewith or (ii) if a tender of certificates for Old Preferred Stock, if
available, is to be made by book-entry transfer to the account maintained by the
Preferred Exchange Agent at the Depository Trust Company (the "DTC") pursuant to
the procedures set forth in "The Exchange Offers -- Procedures for Tendering"
section of the Prospectus. Holders of Old Preferred Stock whose certificates are
not immediately available, or who are unable to deliver their certificates or
confirmation of the book-entry tender of their Old Preferred Stock into the
Preferred Exchange Agent's account at DTC (a "Book-Entry Confirmation") and all
other documents required by this Letter of Transmittal to the Preferred Exchange
Agent on or prior to the Expiration Date, must tender their Old Preferred Stock
according to the guaranteed delivery procedures set forth in "The Exchange
Offers -- Guaranteed Delivery Procedures" section of the Prospectus. See
Instruction 1. Delivery of documents to DTC does not constitute delivery to the
Preferred Exchange Agent.
The term "Holder" with respect to the Preferred Stock Exchange Offer means
any person in whose name Old Preferred Stock is registered on the books of the
Company or any other person who has obtained a properly completed stock power
from the registered Holder. The undersigned has completed, executed, and
delivered this Letter of Transmittal to indicate the action the undersigned
desires to take with respect to the Preferred Stock Exchange Offer. Holders who
wish to tender their Old Preferred Stock must complete this Letter of
Transmittal in its entirety.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE PROVIDING ANY
INFORMATION BELOW. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL
MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES
OF THE PROSPECTUS AND LETTER OF TRANSMITTAL SHOULD BE DIRECTED TO THE PREFERRED
EXCHANGE AGENT AT (800) 251-4215 OR AT ITS ADDRESS SET FORTH ABOVE.
List below the shares of Old Preferred Stock to which this Letter of
Transmittal relates.
<TABLE>
<C> <C> <S> <C>
- -----------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD PREFERRED STOCK
- -----------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESSES(ES) AGGREGATE NUMBER
OF REGISTERED HOLDERS OF SHARES
(PLEASE COMPLETE, IF REPRESENTED BY NUMBER OF SHARES
BLANK) CERTIFICATE NUMBER(S) CERTIFICATE(S) TENDERED*
- -----------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Unless indicated in the column labeled "Number of Shares Tendered," any
tendering Holder of Old Preferred Stock will be deemed to have tendered the
entire aggregate number of shares represented by the column labeled "Aggregate
Number of Shares Represented by Certificate(s)."
If the space provided above is inadequate, list the certificate numbers and
number of shares on a separate signed schedule and affix the list to this Letter
of Transmittal.
[ ] CHECK HERE IF TENDERED OLD PREFERRED STOCK IS ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED OLD PREFERRED STOCK IS BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE PREFERRED EXCHANGE AGENT WITH
DTC AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS (AS
HEREINAFTER DEFINED) ONLY):
NAME OF TENDERING INSTITUTION:
--------------------------------------------------
2
<PAGE> 3
ACCOUNT NUMBER:
-----------------------------------------------------------------
TRANSACTION CODE NUMBER:
--------------------------------------------------------
[ ] CHECK HERE IF TENDERED OLD PREFERRED STOCK IS BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING
(FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered Holder(s) of Old Preferred Stock:
-------------------------
- --------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
-----------------------------
- --------------------------------------------------------------------------------
Window Ticket Number (if available):
--------------------------------------------
- --------------------------------------------------------------------------------
Name of Institution that Guaranteed Delivery:
-----------------------------------
- --------------------------------------------------------------------------------
Account Number (if delivered by book-entry transfer):
---------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY (i) if certificates for Old Preferred Stock not tendered,
or Exchange Preferred Stock issued in exchange for Old Preferred Stock accepted
for exchange, are to be issued in the name of someone other than the
undersigned, or (ii) if Old Preferred Stock tendered by book-entry transfer that
is not exchanged is to be returned by credit to an account maintained at DTC.
Issue Certificate(s) to:
Name
--------------------------------------------------
(PLEASE PRINT)
Address
-----------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
(INCLUDE ZIP CODE)
- ------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(PLEASE ALSO COMPLETE SUBSTITUTE FORM W-9)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5, AND 6)
To be completed ONLY if certificates for Old Preferred Stock not tendered, or
Exchange Preferred Stock issued in exchange for Old Preferred Stock accepted for
exchange, are to be sent to someone other than the undersigned, or to the
undersigned at an address other than that shown above.
Mail and deliver Certificate(s) to:
Name
-------------------------------------------------
(PLEASE PRINT)
Address
----------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
(INCLUDE ZIP CODE)
- -----------------------------------------------------
3
<PAGE> 4
Ladies and Gentlemen:
Subject to the terms and conditions of the Preferred Stock Exchange Offer,
the undersigned hereby tenders to the Company the number of shares of Old
Preferred Stock indicated above. Subject to and effective upon the acceptance
for exchange of the number of shares of Old Preferred Stock tendered in
accordance with this Letter of Transmittal, the undersigned sells, assigns, and
transfers to, or upon the order of, the Company all right, title and interest in
and to the Old Preferred Stock tendered hereby. The undersigned hereby
irrevocably constitutes and appoints the Preferred Exchange Agent as its agent
and attorney-in-fact (with full knowledge that the Preferred Exchange Agent also
acts as the agent of the Company) with respect to the tendered Old Preferred
Stock with full power of substitution to (i) deliver certificates for such Old
Preferred Stock, or transfer ownership of such Old Preferred Stock on the
account books maintained by DTC, to the Company and deliver all accompanying
evidences of transfer and authenticity to, or upon the order of, the Company,
and (ii) present such Old Preferred Stock for transfer on the books of the
Company and receive all benefits and otherwise exercise all rights of beneficial
ownership of such Old Preferred Stock, all in accordance with the terms of the
Preferred Stock Exchange Offer. The power of attorney granted in this paragraph
shall be deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, sell, assign, and transfer the Old Preferred
Stock tendered hereby and that the Company will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges, and
encumbrances and not subject to any adverse claim, when the same are acquired by
the Company. The undersigned hereby further represents that (i) any Exchange
Preferred Stock acquired in exchange for Old Preferred Stock tendered hereby
will have been acquired in the ordinary course of business of the person
receiving such Exchange Preferred Stock, whether or not such person is the
undersigned, (ii) neither the undersigned nor any such other person is engaging
in or intends to engage in a distribution of the Exchange Preferred Stock, (iii)
neither the Holder nor any such other person has an arrangement or understanding
with any person to participate in the distribution of such Exchange Preferred
Stock, and (iv) neither the Holder nor any such other person is an "affiliate"
(as defined in Rule 405 under the Securities Act) of the Company.
The undersigned also acknowledges that the Preferred Stock Exchange Offer
is being made in reliance upon interpretations contained in letters issued to
third parties by the staff of the Securities and Exchange Commission (the "SEC")
that the Exchange Preferred Stock issued in exchange for the Old Preferred Stock
pursuant to the Preferred Stock Exchange Offer may be offered for resale,
resold, and otherwise transferred by Holders thereof (other than any such Holder
that is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange Preferred
Stock is acquired in the ordinary course of such Holder's business and such
Holder is not engaging in and does not intend to engage in a distribution of the
Exchange Preferred Stock and has no arrangement or understanding with any person
to participate in a distribution of such Exchange Preferred Stock. If the
undersigned is not a broker-dealer, the undersigned represents that it is not
engaged in, and does not intend to engage in, a distribution of Exchange
Preferred Stock. If the undersigned is a broker-dealer that will receive
Exchange Preferred Stock for its own account in exchange for Old Preferred Stock
that was acquired as a result of market-making activities or other trading
activities (a "Participating Broker-Dealer"), it acknowledges that it will
deliver a prospectus in connection with any resale of such Exchange Preferred
Stock; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. If the undersigned is a Participating
Broker-Dealer, it acknowledges that during the 90-day period following the
Expiration Date (or such longer applicable period if use of the Prospectus has
been suspended by the Company) it will contact counsel to the Placement Agents
at (212) 848-7961 on a weekly basis to confirm the availability of the
Prospectus for delivery in connection with such resales.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Preferred Exchange Agent or the Company to be necessary
or desirable to complete the assignment, transfer, and purchase of the Old
Preferred Stock tendered hereby.
For purposes of the Preferred Stock Exchange Offer, the Company shall be
deemed to have accepted validly tendered Old Preferred Stock when, as and if the
Company has given oral or written notice thereof to the Preferred Exchange
Agent.
If any tendered Old Preferred Stock is not accepted for exchange pursuant
to the Preferred Stock Exchange Offer for any reason, certificates for any such
unaccepted Old Preferred Stock will be returned, without expense, to the
undersigned at the address shown below or at a different address as may be
indicated herein under "Special Delivery Instructions" or,
4
<PAGE> 5
in the case of Old Preferred Stock tendered by book-entry transfer, such
unaccepted Old Preferred Stock will be credited to an account at DTC, as
promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors, and assigns.
The undersigned understands that tenders of Old Preferred Stock pursuant to
the procedures described under the caption "The Exchange Offers -- Procedures
for Tendering" in the Prospectus and in the instructions hereto will constitute
a binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Preferred Stock Exchange Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the certificates representing the Exchange Preferred Stock issued in
exchange for the Old Preferred Stock accepted for exchange and return any Old
Preferred Stock not tendered or not exchanged in the name(s) of the undersigned.
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please send the certificates representing the Exchange Preferred Stock issued in
exchange for the Old Preferred Stock accepted for exchange and any certificates
for Old Preferred Stock not tendered or not exchanged (and accompanying
documents, as appropriate) to the undersigned at the address shown below the
undersigned's signature(s). In the event that both "Special Payment
Instructions" and "Special Delivery Instructions" are completed, please issue
the certificates representing the Exchange Preferred Stock issued in exchange
for the Old Preferred Stock accepted for exchange in the name(s) of, and return
any Old Preferred Stock not tendered or not exchanged and send said certificates
to, the person(s) so indicated. The undersigned recognizes that the Company has
no obligation pursuant to the "Special Payment Instructions" and "Special
Delivery Instructions" to transfer any Old Preferred Stock from the name of the
registered Holder(s) thereof if the Company does not accept for exchange any of
the Old Preferred Stock so tendered.
Holders of Old Preferred Stock who wish to tender their Old Preferred Stock
and (i) whose Old Preferred Stock is not immediately available, or (ii) who
cannot deliver their Old Preferred Stock, this Letter of Transmittal or any
other documents required hereby to the Preferred Exchange Agent prior to the
Expiration Date (or who cannot comply with the book-entry transfer procedures on
a timely basis), may tender their Old Preferred Stock according to the
guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offers -- Guaranteed Delivery Procedures." See Instruction 1
regarding the completion of this Letter of Transmittal.
5
<PAGE> 6
PLEASE SIGN HERE WHETHER OR NOT
OLD PREFERRED STOCK IS BEING PHYSICALLY TENDERED HEREBY
<TABLE>
<S> <C>
- ------------------------------------------------ ------------------------------------------------
(Date)
- ------------------------------------------------ ------------------------------------------------
Signature(s) of Registered Holder(s) (Date)
or Authorized Signatory
Area Code and Telephone Number(s):
- --------------------------------------------------------------------------------------------------
Tax Identification or Social Security Number(s):
- --------------------------------------------------------------------------------------------------
</TABLE>
The above lines must be signed by the registered Holder(s) of Old Preferred
Stock as their name(s) appear(s) on the certificate for the Old Preferred Stock
or by person(s) authorized to become registered Holder(s) by a properly
completed stock power from the registered Holder(s), a copy of which must be
transmitted with this Letter of Transmittal. If Old Preferred Stock to which
this Letter of Transmittal relates is held of record by two or more joint
Holders, then all such Holders must sign this Letter of Transmittal. If
signature is by trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, then such person must (i) set forth his or her full title below and
(ii) unless waived by the Company, submit evidence satisfactory to the Company
of such person's authority so to act. See Instruction 4 regarding the completion
of this Letter of Transmittal.
<TABLE>
<S> <C>
Name(s):
------------------------------------------------------------
------------------------------------------------------------
(Please Print)
Capacity:
------------------------------------------------------------
Address:
------------------------------------------------------------
------------------------------------------------------------
(Include Zip Code)
Signature(s) Guaranteed by an Eligible Institution (as
hereinafter defined):
(If required by Instruction 4)
------------------------------------------------------------
(Authorized Signature)
------------------------------------------------------------
(Title)
------------------------------------------------------------
(Name of Firm)
</TABLE>
Dated
- ------------------------ , 1998
6
<PAGE> 7
PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW.
PAYOR'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND ----------------------------
SUBSTITUTE CERTIFY BY SIGNING AND DATING BELOW. SOCIAL SECURITY NUMBER
FORMW-9
OR
----------------------------
EMPLOYER IDENTIFICATION NUMBER
---------------------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE PART 2 -- CERTIFICATION -- UNDER PENALTIES OF PERJURY, I PART 3 --
CERTIFY THAT: AWAITING TIN [ ]
(1) THE NUMBER SHOWN ON THIS FORM IS MY CORRECT TIN (OR I
AM WAITING FOR A NUMBER TO BE ISSUED TO ME) AND
(2) I AM NOT SUBJECT TO BACKUP WITHHOLDING BECAUSE (A) I
AM EXEMPT FROM BACKUP WITHHOLDING, OR (B) I HAVE NOT
BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE ("IRS")
THAT I AM SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF
FAILURE TO REPORT ALL INTEREST OR DIVIDENDS, OR (C)
THE IRS HAS NOTIFIED ME THAT I AM NO LONGER SUBJECT TO
BACKUP WITHHOLDING.
---------------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- YOU MUST CROSS OUT ITEM (2) IN BOX ABOVE IF YOU HAVE BEEN
PAYER'S REQUEST FOR NOTIFIED BY THE IRS THAT YOU ARE CURRENTLY SUBJECT TO BACKUP WITHHOLDING BECAUSE OF
TAXPAYER IDENTIFICATION UNDERREPORTING INTEREST OR DIVIDENDS ON YOUR TAX RETURN.
NUMBER ("TIN")
CERTIFICATION SIGNATURE _____ DATE __________ , 1998
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF PAYMENTS MADE TO YOU PURSUANT TO THE PREFERRED STOCK EXCHANGE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I CERTIFY UNDER PENALTIES OF PERJURY THAT A TAXPAYER IDENTIFICATION NUMBER HAS NOT BEEN ISSUED TO ME, AND
EITHER (A) I HAVE MAILED OR DELIVERED AN APPLICATION TO RECEIVE A TAXPAYER IDENTIFICATION NUMBER TO THE
APPROPRIATE INTERNAL REVENUE SERVICE CENTER OR SOCIAL SECURITY ADMINISTRATION OFFICE OR (B) I INTEND TO MAIL
OR DELIVER AN APPLICATION IN THE NEAR FUTURE. I UNDERSTAND THAT IF I DO NOT PROVIDE A TAXPAYER IDENTIFICATION
NUMBER WITHIN SIXTY (60) DAYS, 31% OF ALL REPORTABLE PAYMENTS MADE TO ME THEREAFTER WILL BE WITHHELD UNTIL I
PROVIDE A NUMBER.
----------------------------------------------------- --------------------------- , 1998
Signature Date
- --------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF
THE PREFERRED STOCK EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD PREFERRED STOCK. The
tendered Old Preferred Stock or a Book-Entry Confirmation, as well as a properly
completed and duly executed copy of this Letter of Transmittal or facsimile
hereof and any other documents required by this Letter of Transmittal must be
received by the Preferred Exchange Agent at its address set forth herein prior
to 5:00 p.m., New York City time, on the Expiration Date. THE METHOD OF DELIVERY
OF THE TENDERED OLD PREFERRED STOCK, THIS LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE PREFERRED EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE PREFERRED EXCHANGE
AGENT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT THE HOLDER USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE PREFERRED EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR OLD PREFERRED STOCK SHOULD BE SENT TO THE
COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES, OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH
HOLDERS.
Holders who wish to tender their Old Preferred Stock and (i) whose Old
Preferred Stock is not immediately available, or (ii) who cannot deliver their
Old Preferred Stock, this Letter of Transmittal, or any other documents required
hereby to the Preferred Exchange Agent prior to the Expiration Date, or (iii)
who are unable to complete the procedure for book-entry transfer on a timely
basis, must tender their Old Preferred Stock according to the guaranteed
delivery procedures set forth in the Prospectus. Pursuant to such procedure: (i)
such tender must be made by or through an Eligible Institution (as hereinafter
defined); (ii) prior to the Expiration Date, the Preferred Exchange Agent must
have received from the Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand
delivery) setting forth the name and address of the Holder of the Old Preferred
Stock, the certificate number or numbers of such Old Preferred Stock and the
number of shares of Old Preferred Stock tendered, stating that the tender is
being made thereby and guaranteeing that, within three New York Stock Exchange
trading days after the Expiration Date, this Letter of Transmittal (or facsimile
hereof) together with the certificate(s) representing the Old Preferred Stock or
a Book-Entry Confirmation and any other required documents will be deposited by
the Eligible Institution with the Preferred Exchange Agent; and (iii) such
properly completed and executed Letter of Transmittal (or facsimile thereof), as
well as all other documents required by this Letter of Transmittal and the
certificate(s) representing all tendered Old Preferred Stock (or a Book-Entry
Confirmation) in proper form for transfer, must be received by the Preferred
Exchange Agent within three New York Stock Exchange trading days after the
Expiration Date, all as provided in the Prospectus under the caption "The
Exchange Offers -- Guaranteed Delivery Procedures." Any Holder of Old Preferred
Stock who wishes to tender his Old Preferred Stock pursuant to the guaranteed
delivery procedures described above must ensure that the Preferred Exchange
Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York
City time, on the Expiration Date. Upon request of the Preferred Exchange Agent,
a Notice of Guaranteed Delivery will be sent to Holders who wish to tender their
Old Preferred Stock according to the guaranteed delivery procedures set forth
above.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Preferred Stock, and withdrawal of tendered
Old Preferred Stock will be determined by the Company in its sole discretion,
which determination will be final and binding. The Company reserves the absolute
right to reject any and all Old Preferred Stock not properly tendered or any Old
Preferred Stock the Company's acceptance of which would, in the opinion of
counsel for the Company, be unlawful. The Company also reserves the right to
waive any irregularities or conditions of tender as to particular Old Preferred
Stock. The Company's interpretation of the terms and conditions of the Preferred
Stock Exchange Offer, including the instructions in this Letter of Transmittal
and those set forth in the Prospectus under the caption "The Exchange
Offers -- Conditions," shall be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Old Preferred Stock
must be cured within such time as the Company shall determine. Neither the
Company, the Preferred Exchange Agent nor any other person shall be under any
duty to give notification of defects or irregularities with respect to tenders
of Old Preferred Stock, nor shall any of them incur any liability for failure to
give such notification. Tenders of Old Preferred Stock will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any Old Preferred Stock received by the Preferred Exchange
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Agent that is not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Preferred
Exchange Agent to the tendering Holders of Old Preferred Stock, unless otherwise
provided in this Letter of Transmittal, as soon as practicable following the
Expiration Date.
2. TENDER BY HOLDER. Only a Holder of Old Preferred Stock may tender such
Old Preferred Stock in the Preferred Stock Exchange Offer. Any beneficial holder
of Old Preferred Stock who is not the registered Holder and who wishes to tender
should arrange with the registered Holder to execute and deliver this Letter of
Transmittal on his behalf or must, prior to completing and executing this Letter
of Transmittal and delivering his Old Preferred Stock, either make appropriate
arrangements to register ownership of the Old Preferred Stock in such Holder's
name, or obtain a properly completed stock power from the registered Holder. The
transfer of registered ownership of Old Preferred Stock may take considerable
time.
3. PARTIAL TENDERS. If less than the entire number of shares of Old
Preferred Stock represented by a certificate is tendered, the tendering Holder
should fill in the number of shares tendered in the third column of the box
entitled "Description of Old Preferred Stock" above. The entire number of shares
of Old Preferred Stock set forth on the certificate delivered to the Preferred
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
If the entire number of shares of all Old Preferred Stock is not tendered, then
an Old Preferred Stock certificate for the number of shares of Old Preferred
Stock not tendered and a certificate or certificates representing Exchange
Preferred Stock issued in exchange for any Old Preferred Stock accepted will be
sent to the Holder at his or her registered address, unless a different address
is provided in the appropriate box on this Letter of Transmittal, promptly after
the Old Preferred Stock is accepted for exchange, or in the case of Old
Preferred Stock tendered by book-entry transfer, such untendered Old Preferred
Stock and Exchange Preferred Stock issued in exchange for any Old Preferred
Stock accepted will be credited to accounts at DTC.
4. SIGNATURES ON THE LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or facsimile hereof) is
signed by the record Holder(s) of the Old Preferred Stock tendered hereby, the
signature must correspond with the name(s) as written on the face of the Old
Preferred Stock without alteration, enlargement, or any change whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders of Old Preferred Stock tendered and the certificate
or certificates for Exchange Preferred Stock issued in exchange therefor are to
be issued (or if certificates representing the number of shares of Old Preferred
Stock not tendered are to be reissued) to the registered Holder, the said Holder
need not and should not endorse any tendered Old Preferred Stock, nor provide a
separate stock power. In any other case, such Holder must either properly
endorse the Old Preferred Stock tendered or transmit a properly completed
separate stock power with this Letter of Transmittal, with the signatures on the
endorsement or stock power guaranteed by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered Holder or Holders of any Old Preferred Stock listed,
such Old Preferred Stock must be endorsed or accompanied by appropriate stock
powers, in each case signed as the name of the registered Holder or Holders
appears on the Old Preferred Stock.
If this Letter of Transmittal (or facsimile hereof) or any Old Preferred
Stock or stock powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations, or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and, unless waived by the Company, evidence satisfactory to the Company
of their authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Old Preferred Stock or signatures on stock powers required
by this Instruction 4 must be guaranteed by an Eligible Institution.
Except as otherwise provided below, all signatures on this Letter of
Transmittal must be guaranteed by a participant in a Recognized Signature
Guarantee Medallion Program (an "Eligible Institution"). Signatures on this
Letter of Transmittal need not be guaranteed if (i) this Letter of Transmittal
is signed by the registered Holder(s) of the Old Preferred Stock tendered
herewith and such Holder(s) have not completed the box set forth herein entitled
"Special Payment Instructions" or the box entitled "Special Delivery
Instructions," or (ii) if such Old Preferred Stock is tendered for the account
of an Eligible Institution.
5. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. Tendering Holders should
indicate, in the applicable box or boxes, the name and address to which Exchange
Preferred Stock or substitute Old Preferred Stock for the number of shares of
Old Preferred Stock not tendered or not accepted for exchange are to be issued
or sent, if different from the name and
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address of the person signing this Letter of Transmittal. In the case of
issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated.
6. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Preferred Stock pursuant to the Preferred
Stock Exchange Offer. If, however, certificates representing Exchange Preferred
Stock or Old Preferred Stock (for any number of shares of Old Preferred Stock
not tendered or accepted for exchange) are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered Holder
of the Old Preferred Stock tendered hereby, or if tendered Old Preferred Stock
is registered in the name of any person other than the person signing this
Letter of Transmittal, or if a transfer tax is imposed for any reason other than
the exchange of Old Preferred Stock pursuant to the Preferred Stock Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered Holder or on any other persons) will be payable by the tendering
Holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with this Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering Holder and no shares of Exchange
Preferred Stock are required to be delivered to or at the direction of such
tendering Holder until such transfer taxes are paid.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Old Preferred Stock listed in this
Letter of Transmittal.
7. FORM W-9. Any Holder who tenders his Old Preferred Stock is required to
provide the Preferred Exchange Agent with a correct Taxpayer Identification
Number ("TIN") on the Form W-9 which is enclosed herewith. If such Holder is an
individual, the TIN is his or her social security number. Failure to provide the
information on the Form W-9 may subject the surrendering Holder to 31% Federal
income tax withholding on certain payments made to Holders of the Exchange
Preferred Stock. Exempt Holders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. For additional information in this regard, please refer
to the enclosed Guidelines for Certification of TIN on Substitute Form W-9. In
order to satisfy the Preferred Exchange Agent that a foreign individual
qualifies as an exempt recipient, the Holder must submit a Form W-8, signed
under penalties of perjury, attesting to that individual's exempt status. A Form
W-8 may be obtained from the Preferred Exchange Agent.
8. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive, or modify specified conditions in the Preferred Stock Exchange Offer, set
forth in the Prospectus under the caption "The Exchange Offers -- Conditions,"
in the case of any Old Preferred Stock tendered.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD PREFERRED STOCK. Any tendering
Holder whose Old Preferred Stock has been mutilated, lost, stolen, or destroyed
should contact the Preferred Exchange Agent at the address indicated herein for
further instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Preferred Exchange Agent at the
address specified in the Prospectus. Holders may also contact their broker,
dealer, commercial bank, trust company, or other nominee for assistance
concerning the Preferred Stock Exchange Offer.
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GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GUIDE THE
PAYER.-- Social Security Numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer Identification Numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
<S> <C> <C>
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GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -----------------------------------------------------------
1. An individual's account. The individual
2. Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, the
first individual on
the account(1)
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. a. The usual revocable savings The grantor-trustee
trust account (grantor is (1)
also trustee)
b. So-called trust account The actual owner(1)
that is not a legal or valid
trust under State law
5. Sole proprietorship account The owner(3)
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</TABLE>
<TABLE>
<CAPTION>
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GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
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<S> <C> <C>
6. A valid trust, estate, or The legal entity (Do
pension trust not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself is
not designated in the
account title.)(4)
7. Corporate account The corporation
8. Religious, charitable, or The organization
account educational
organization
9. Partnership The partnership
10. Association, club or other The organization
tax-exempt organization
11. A broker or registered nominee The broker or nominee
12. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
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</TABLE>
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a Social Security Number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's Social Security Number.
(3) Show the name of the owner. You may also enter your business name. You may
use your Social Security Number or Employer Identification Number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number
will be considered to be that of the first name listed.
OBTAINING A NUMBER
If you don't have a Taxpayer Identification Number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
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PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on broker transactions
include the following:
- A corporation.
- A financial institution.
- An organization exempt from tax under Section 501(a), an individual
retirement plan, or a custodial account under Section 403(b)(7), if the
account satisfies the requirements of Section 401(f)(2).
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A dealer in securities or commodities required to be registered in the
United States, the District of Columbia, or a possession of the United
States.
- A real estate investment trust.
- A futures commissions merchant registered with the Commodity Futures Trading
Commission.
- A common trust fund operated by a bank under Section 584(a).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
- A person registered under the Investment Advisors Act of 1940 who regularly
acts as a broker.
Payments of dividends not generally subject to backup withholding include the
following:
- Payments to nonresident aliens subject to withholding under Section 1441.
- Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments described in Section 404(k) made by an employee stock ownership
plan.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct Taxpayer Identification Number to the payer.
- Payments of tax-exempt interest (including tax-exempt interest dividends
under Section 852).
- Payments described in Section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under Section 1451.
- Payments made by certain foreign organizations.
- Payments of mortgage interest to you.
Exempt payees described above should file Substitute Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND
DATE THE FORM AND RETURN IT TO THE PAYER.
PRIVACY ACT NOTICE -- Section 6109 requires most recipients of dividend,
interest, or other payments to give Taxpayer Identification Numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a Taxpayer Identification Number to a payer. Certain penalties may
also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER -- If you fail
to furnish your Taxpayer Identification Number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE IRS.
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(DO NOT WRITE IN SPACE BELOW)
<TABLE>
<S> <C> <C>
CERTIFICATE OLD PREFERRED STOCK OLD PREFERRED STOCK
SURRENDERED TENDERED ACCEPTED
</TABLE>
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Delivery Prepared by:
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Checked by:
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Date:
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