<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
<TABLE>
<S> <C>
Date of Report (Date of earliest event reported): February 2, 1998 (January 22, 1998)
-----------------------------------------
</TABLE>
NEXTEL COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 0-19656 36-3939651
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
1505 FARM CREDIT DRIVE, MCLEAN, VA 22102
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (703) 394-3000
----------------------------
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 5. OTHER EVENTS.
RECENT DEVELOPMENTS
Proposed Offering. Nextel Communications, Inc. ("Nextel" or the "Company")
proposes to offer 500,000 shares of Series E Exchangeable Preferred Stock (the
"Preferred Stock") which are mandatorily redeemable in 2010 with a liquidation
preference of $1,000 per share, and concurrently therewith, proposes to offer
$800 million gross proceeds of Senior Serial Redeemable Discount Notes due 2008
(the "Senior Notes"). Each such offering is proposed to be effected as a private
placement pursuant to and in accordance with Rule 144A under the Securities Act
of 1933, as amended (the "Securities Act"), and there can be no assurance that
either or both of such offerings will be consummated. Additionally, the
consummation of the Senior Notes offering is conditioned upon the completion of
the Preferred Stock offering. Nextel intends to use the net proceeds from such
Offerings for general corporate purposes, including principally to redeem or
otherwise refinance all of Nextel's outstanding 11.5% Senior Discount Notes due
2003 and 12.25% Senior Redeemable Discount Notes due 2004 (collectively, the
"Targeted Notes"), and to satisfy a portion of the cash needs relating to its
1998 Plan (See "1998 Business Plan"). The Senior Notes and Preferred Stock have
not been registered under the Securities Act and may not be offered or sold in
the United States absent an effective registration statement or an applicable
exemption from the registration requirements of such Act. This announcement
shall not constitute an offer to sell or the solicitation of an offer to buy
either of the Preferred Stock or the Senior Notes.
Additional Bank Commitment. At December 31, 1997, the Company had drawn
$1,021.0 million of the $1,905.0 million available under its secured credit
facility with certain banks (the "Bank Credit Facility"), $150.0 million of the
$395.0 million available under its secured credit facility with Motorola and
certain other lenders (the "Vendor Credit Facility"; and together with the Bank
Credit Facility, the "Bank and Vendor Credit Facilities") and none of the $200.0
million available under an additional secured term facility from Motorola (the
"Second Secured Borrowings"), leaving an aggregate undrawn amount of
approximately $1,329.0 million of the $2,500.0 million available under such
facilities. On January 22, 1998, Nextel obtained a commitment from certain of
the lenders under the Bank Credit Facility to increase the available borrowings
under such facility by $1,095.0 million (the "Additional Bank Borrowings") and
to extend the maturity of such facility. The commitment contemplates that
borrowings under the Bank Credit Facility, as amended, will be used to repay the
indebtedness outstanding under the Vendor Credit Facility and that such facility
as well as the agreement relating to the Second Secured Borrowings (the "Second
Vendor Financing Agreement") will be terminated. Accordingly, assuming the
Company obtains access to the Additional Bank Borrowings, its total available
secured financing will increase from $2,500.0 million to $3,000.0 million
(disregarding any limitations imposed on the Company's access to such funds
pursuant to the indentures (the "Old Indentures") pursuant to which Nextel's
five issues of senior redeemable discount notes ("Old Senior Notes") were
issued prior to 1997. Availability of the Additional Bank Borrowings is subject
to a number of conditions including the negotiation and execution of definitive
agreements. The terms of the proposed amendments to the existing Bank Credit
Facility in connection with the Additional Bank Borrowings are set forth in a
commitment letter dated January 22, 1998 (and attached term sheet) attached
hereto as Exhibit 99.1, which information is incorporated herein by reference.
There can be no assurance that Nextel will be able to reach suitable definitive
agreements with all necessary parties to allow such financing to be put in
place, or, if such agreements are reached, that the terms of such financing will
be in all material respects as contemplated in Exhibit 99.1
800 MHz SMR Auction. The Company submitted bids totalling approximately
$88.8 million representing the highest bids for 475 of the 525 Economic Area
("EA") licenses being awarded by the FCC in the 800 MHz "upper 200 SMR" channel
auction, which concluded on December 8, 1997. Although Nextel successfully bid
for rights to almost 10 MHz of spectrum in areas covering all 50 states and
approximately 98% of the United States' population, the FCC has not yet granted
these licenses to Nextel. Such license grants can occur only after the FCC has
placed the license applications on public notice and provided the public an
opportunity to file petitions to deny their grant. Once granted the licenses,
Nextel can gain full use of these licenses only if the Company relocates certain
incumbent licensees to other portions of the 800 MHz band pursuant to
established FCC rules or otherwise obtains the agreement of such incumbent
licensees to Nextel's use of the relevant frequencies.
Exchange Offers. The Company issued shares of its 13% Series D
Exchangeable Preferred Stock ("Series D Preferred Stock"), and debt securities
in the form of its 10.65% Senior Redeemable Discount Notes due September 15,
2007 (the "September Notes") and its 9.75% Senior Serial Redeemable Discount
Notes due October 31, 2007 (the "October Notes" and together with the September
Notes, the "1997 Senior Notes") in separate private placement transactions
consummated in July, September and October, respectively, of 1997. The Company
satisfied certain obligations to complete registered offerings to exchange such
securities for substantially identical securities of equivalent value on
December 18, 1997, in the case of the Series D Preferred Stock, and on January
14 and January 22, 1998, in the case of the September Notes and the October
Notes, respectively.
- 2 -
<PAGE> 3
1998 Business Plan. In early 1997, Nextel finalized and began implementing
a business plan for the period from March 31, 1997 through December 31, 1998
that contemplated an accelerated nationwide build-out of its advanced mobile
communications systems employing digital technology with a multi-site
configuration permitting frequency reuse ("Digital Mobile network")
incorporating the second generation digital technology developed by Motorola,
Inc. known as "Reconfigured iDEN" (the "1997 Plan"). During 1997, Nextel
achieved a significant expansion of its Digital Mobile network and experienced a
large increase in the number of subscriber units and system minutes of use. In
particular:
- Digital subscriber units increased from 300,300 to 1,270,700;
- Total net system minutes of use increased from 94 million in January to
403 million in December;
- Approximately 2100 digital cell sites were placed in service; and
- Reconfigured iDEN coverage expanded from 6 to 75 of the top 100
metropolitan statistical areas ("MSAs").
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, 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"). Specifically, 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 needs
resulting from the greater than expected operating growth and expenditures,
including those assumed in developing the 1998 Plan, are set forth below.
<TABLE>
<CAPTION>
ESTIMATED FUNDING NEEDS FOR THE PERIOD FROM
MARCH 31, 1997 TO DECEMBER 31, 1998
--------------------------------------------
1997 PLAN 1998 PLAN INCREASE
--------- --------- --------
(IN MILLIONS)
<S> <C> <C> <C>
System infrastructure and capital costs................ $ 1,450 $2,500 $1,050
Non-system capital expenditures, operating losses and
other................................................ 1,050 1,550 500
------ ------- -------
$ 2,500 $ 4,050 $1,550
====== ======= =======
</TABLE>
By implementing the 1998 Plan, Nextel expects to further increase the
capacity of its Digital Mobile network to accommodate higher future growth in
subscribers and higher future system usage levels than previously anticipated,
to improve system performance and to continue to expand geographic coverage.
Approximately one half of the increase in system capital expenditures during the
period referred to in the above table relates to adding capacity to the Digital
Mobile network to accommodate increases in the number of subscribers and higher
levels of system usage. Approximately one quarter of the increase in system
capital expenditures is associated with enhancements to produce improvements in
system performance, e.g. the construction of additional cell sites and the
deployment of additional base radios to produce greater "in building" coverage.
The balance of the increase in system capital expenditures arises from various
sources, particularly spending for additional switching and dispatch processing
capacity associated with higher anticipated system loads as well as systems
operations and management software upgrades and enhancements to improve network
performance.
The increase in non-system capital expenditures is largely associated with
the acquisition, construction or improvement of business information and
back-office systems required to meet billing, customer care and
other business management and tracking activities associated with the growth of
the customer base and increased system usage. In addition to such system and
non-system capital expenditures, a significant amount of the incremental funding
requirements under the 1998 Plan is tied to increased working capital needs and
opportunistic uses of funds, such as discretionary acquisitions of additional
spectrum in privately negotiated transactions or FCC auctions, which in certain
instances may be deferred or eliminated if sufficient cash is not available to
pursue such uses. The incremental funding requirements reflected in the 1998
Plan also result in part from the more accurate cost data and estimates
derived from the Company's actual experience during 1997.
The 1998 Plan focuses on Nextel capturing an increased share of its
targeted customer population in markets where its Digital Mobile network is
currently operating (or is expected to be placed in operation during 1998).
Nextel believes that, assuming the Company successfully develops a sufficient
customer base in those markets, it will be positioned to compete effectively
against other wireless communications service providers. Although Nextel will
continue to focus on the deployment of its Digital Mobile network in additional
markets throughout the United States, Nextel will do so selectively and will
prioritize its new build opportunities in comparison to the potential commercial
returns from enhancing or expanding coverage and increasing capacity of its
Digital Mobile network in operating markets.
Financing Plan; Proposed Preferred Stock and Senior Notes Offerings; Use of
Proceeds. To implement the 1998 Plan, Nextel currently estimates that the
external funding required to meet the anticipated cash needs of the Company's
domestic business activities during 1998, including the purchase, redemption or
refinancing of the Targeted Notes as described below, will total approximately
$2,970.0 million, of which approximately $1,335.0 million is expected to
represent system infrastructure and other system capital costs planned to be
incurred in 1998 to further build, enhance or expand Nextel's Digital Mobile
network.
- 3 -
<PAGE> 4
\ The net proceeds assumed to be received by the Company, after deducting
estimated expenses, from the proposed sale of the Senior Notes and the Preferred
Stock are expected to be among the principal sources of funding for the
financing plan described below, which is designed to meet the Company's expected
external cash funding requirements during 1998 of approximately $2,970.0
million. Nextel's expected funding sources and estimated uses with respect to
its 1998 Plan are as follows:
<TABLE>
<CAPTION>
SOURCES
- -------------------------------------------
(in millions)
<S> <C>
Assumed gross proceeds from the
offerings of the Preferred Stock
and the Senior Notes............ $1,300
Bank Credit Facility.............. 884
Additional Bank Borrowings........ 322(1)
New Option Proceeds............... 420(2)
Available cash, cash equivalents
and marketable securities in
restricted companies at
December 31, 1997............... 44
-------
Total: $2,970
========
USES
- -------------------------------------------
Repayment of 11.5% Senior
Redeemable Discount Notes
due 2003........................ $ 319(3)
Repayment of 12.25% Senior
Redeemable Discount
Notes due 2004.................. 327(3)
Digital system capital
expenditures.................... 1,335
Non-system capital expenditures,
operating losses, fees, expenses
and other corporate purposes.... 989
-------
Total: $2,970
========
</TABLE>
- ---------------
(1) Gives effect to an assumed repayment of borrowings under the Company's
Vendor Credit Facility and to the assumed repurchase or redemption of the
Targeted Notes. The amount remaining available for borrowing under the Bank
Credit Facility, assuming implementation of the Additional Bank Borrowings,
would total approximately $620.5 million. Until the Targeted Notes have been
purchased, redeemed or otherwise refinanced, a portion of such borrowing
availability may not be accessible. See "Certain Financing Risks Associated
With The 1998 Plan," below.
(2) Represents $420.0 million in proceeds (the "New Option Proceeds") from the
assumed exercise of an option to purchase at any time through July 28, 1998,
shares of Common Stock at prices ranging from $16.00 to $18.00 per share
(the "New Option") held by an affiliate of Craig O. McCaw.
(3) Accreted value at December 31, 1997 after giving effect to open market
repurchases in 1997.
- 4 -
<PAGE> 5
Following the assumed completion of the offerings of the Preferred Stock
and the Senior Notes, the Company would intend to commence a tender offer for
the Targeted Notes. In the event that all of the Targeted Notes are not
tendered, the Company also could retire the balance through open market or
privately negotiated purchases, redemption of the Targeted Notes pursuant to
their terms, or any combination thereof. Pending the uses described in the table
above, any net proceeds from the offerings of the Preferred Stock and the Senior
Notes could be applied to repay a portion of the borrowings outstanding under
the Bank Credit Facility (including the Additional Bank Borrowings), to the
extent the amounts so repaid would be available for future borrowings
thereunder.
The Company believes that the sources described above will provide funds
that in the aggregate are expected to be sufficient to implement the Company's
1998 Plan and meet the other currently anticipated cash needs of its domestic
business activities through 1998. Additionally, receipt of all $420.0 million of
New Option Proceeds would support additional incurrences of debt in accordance
with the Old Indentures ranging from $945.0 million (if such New Option Proceeds
were to be received on or prior to March 31, 1998) to $840.0 million (if such
New Option Proceeds were to be received during the period from April 1, 1998 to
July 28, 1998). If, among other things, Nextel's plans change, its assumptions
regarding its funding needs associated with the further build-out, expansion and
enhancement of its Digital Mobile network prove to be inaccurate, it consummates
acquisitions or investments in addition to those currently contemplated or at
prices higher than currently contemplated, it experiences growth in its business
or subscriber base greater than that which was anticipated in developing its
1998 Plan, it experiences unanticipated costs or competitive pressures, it is
unable to access the Additional Bank Borrowings, the New Option is not exercised
in full and the New Option Proceeds are not received, or any net proceeds from
the proposed offerings of the Preferred Stock and the Senior Notes, together
with the proceeds from the other sources referred to above, otherwise prove to
be insufficient to meet such cash needs through 1998, the Company would be
required to seek additional capital. The Company will also require significant
additional capital in subsequent years to fund further build-out, expansion and
enhancement of its Digital Mobile network, to fund operating losses and for
other purposes. To the extent the Company's existing financing sources are
insufficient to meet such needs, the Company may seek to raise such additional
capital from public or private equity or debt sources. There can be no assurance
that the Company will be able to raise such capital on satisfactory terms, if at
all.
Certain Financing Risks Associated With The 1998 Plan. Nextel anticipates
that, for the foreseeable future, it will be utilizing significant amounts of
its available cash for capital expenditures for the build-out, expansion 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 and any future auctions of spectrum by the
FCC), debt service requirements and other general corporate expenditures. Nextel
anticipates that its cash utilization for capital expenditures and other
investing activities and operating losses will continue to exceed its cash flows
from operating activities over the next several years. During the nine months
ended September 30, 1997, Nextel estimates that its 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 $132.7 million, and its average monthly net cash
used in operating activities was approximately $32.9 million. Such average
monthly amounts are not necessarily representative of Nextel's anticipated
experience in such areas and are expected to increase 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. During 1997, Nextel
raised an aggregate of $1,946.2 million in proceeds of debt and equity
offerings, increased the available borrowings under the Bank Credit Facility by
an additional $250.0 million and the available borrowings under its Vendor
Credit Facility by $50.0 million and entered into the Second Vendor Financing
Agreement, which permits borrowings of up to $200.0 million to support the
implementation of its business plan and the purchase of system infrastructure
and other equipment for the build-out of its Digital Mobile network. In 1998,
Nextel contemplates renegotiating and replacing the existing Bank and Vendor
Credit Facilities and the Second Secured Borrowings with new credit arrangements
that will make an aggregate of $3.0 billion available for borrowing thereunder.
During the ongoing build-out phase of its Digital Mobile network, Nextel expects
that it will continue to utilize its existing cash and funding from outside
sources to meet its cash needs resulting from such activities and losses.
Nextel's estimated aggregate cash, cash equivalents and marketable securities at
December 31, 1997 totaled approximately $441.9 million (however, approximately
$288.4 million of such amount represents cash, cash equivalents and marketable
securities held by Nextel's unrestricted subsidiary, Nextel International and,
Inc. ("NI") and its subsidiaries, which items are not available to fund any of
the cash needs of Nextel's domestic businesses due to restrictions contained in
certain of NI's debt instruments and agreements.
- 5 -
<PAGE> 6
The Company is currently implementing its 1998 Plan which focuses on the
expansion of coverage and enhancement of service capabilities of its existing
Digital Mobile network to meet increased customer demands while continuing the
deployment of its Digital Mobile network in additional domestic markets during
1998. Nextel's estimates of the total external funding required to meet the cash
needs of its domestic business activities during 1998, including principally the
purchase or redemption of the remaining Targeted Notes, the funding of
anticipated capital expenditures, acquisitions (including the remaining balance
due for acquisitions of licenses in the FCC's 800 MHz spectrum auction concluded
in December 1997) and operating losses 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
infrastructure to expand and improve coverage and performance to address
competitive pressures faced or anticipated by the Company. 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 from 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."
In order to repurchase or redeem the remaining Targeted Notes and to fully
implement the build-out, expansion and enhancement of its Digital Mobile network
as contemplated in the 1998 Plan, Nextel would need to obtain additional amounts
of debt or equity financing beyond that available under the existing Bank Credit
Facility, the Vendor Credit Facility and the Second Vendor Financing Agreement
currently in place. The agreement related to the Bank Credit Facility (the "Bank
Credit Agreement") currently provides for up to $1,905.0 million of secured
financing, the agreement related to the Vendor Credit Facility (the "Vendor
Credit Agreement") currently provides for up to $395.0 million of secured
financing and the Second Vendor Financing Agreement currently provides for up to
$200.0 million in Second Secured Borrowings, for an aggregate availability of
$2,500.0 million, subject in each case to the satisfaction or waiver of
applicable borrowing conditions. The remaining funds available for borrowing
under the Bank and Vendor Credit Facilities may be drawn prior to the final
maturity date of such facilities in 2003, although the amount available under
such facilities will be reduced to reflect scheduled amortization commencing in
2001. The $200.0 million in additional funds available under the Second Vendor
Financing Agreement may be drawn as term loans prior to March 31, 1999 and will
mature in 2003. The modifications to the Bank Credit Facility in connection with
the Additional Bank Borrowings, if implemented, would increase Nextel's total
available secured financing to $3.0 billion (disregarding any limitations
imposed on Nextel's access to such funds pursuant to the Old Indentures) and
would permit borrowings to be drawn prior to the final extended maturity date of
the Bank Credit Facility in 2006, although scheduled amortization and the
reduction of amounts available thereunder commences in 2001.
- 6 -
<PAGE> 7
The availability of all of the above-described existing and contemplated
additional financing is subject to Nextel's satisfying certain requirements
under the Old Indentures, which require Nextel to issue new equity for cash as a
condition to obtaining access to all amounts not constituting "permitted debt"
(as such term is defined in the Old Indentures) under the Bank Credit Facility
(including any modifications thereto to implement the Additional Bank
Borrowings), the Vendor Credit Facility and the Second Vendor Financing
Agreement. The Company's (i) assumed receipt of approximately $500 million in
proceeds from the offering of the Preferred Stock, (ii) the receipt in July 1987
of approximately $482.0 million in proceeds from the offering of the Series D
Preferred Stock (the "Series D Preferred Stock Proceeds"), and (iii) the net
proceeds received from issuances of qualifying equity, including from the
exercise of certain options and warrants, after June 1, 1997 (the "Exercise
Proceeds") would enable the Company, pursuant to the debt incurrence formulas
set forth in the Old Indentures, to incur approximately $2.2 billion in
indebtedness (classified as incurrence debt). Such incurrence debt, combined
with additional amounts constituting "permitted debt" under such Old Indentures,
represents a combined amount of approximately $4.1 billion in debt that the
Company may incur in compliance with the Old Indentures in addition to the
outstanding debt evidenced by the Old Senior Notes (and any other outstanding
debt incurred to refinance any of such Old Senior Notes). As of December 31,
1997, approximately $920.0 million in debt constituting incurrence debt had been
incurred by the Company. Based solely on the additional debt incurrence capacity
associated with the Company's assumed receipt of approximately $500 million
proceeds from the offering of the Preferred Stock, the Series D Preferred Stock
Proceeds, and the Exercise Proceeds, and assuming that the modifications to the
Bank Credit Facility relating to the Additional Bank Borrowings are implemented,
the issuance of the Senior Notes will have the effect of restricting the
Company's ability to access, on approximately a dollar for dollar basis (to the
extent the Company receives gross proceeds from the issuance of Senior Notes in
excess of approximately $180 million), the amount of the Additional Bank
Borrowings that would be available until either (i) the proceeds from the
issuance of the Senior Notes are applied to refinance the Targeted Notes or
other Old Senior Notes in accordance with the Old Indentures (in which case, to
the extent the proceeds received from the issuance of the Senior Notes are
applied to effect such refinancing, such Senior Notes would constitute
"permitted debt" under the Old Indentures that would not reduce the amount of
Additional Bank Borrowings available) or (ii) the Company issues additional
equity for cash that would support additional incurrence debt. That portion of
the proceeds from the issuance of the Senior Notes that is not applied to
repurchase, redeem or otherwise refinance Targeted Notes or other Old Senior
Notes may be utilized to meet the Company's funding requirements for the
implementation of its 1998 Plan and therefore may replace a portion of the
Additional Bank Borrowings, to the extent the Company's ability to incur such
borrowings is limited by the Old Indentures.
To the extent any of the aforementioned proceeds from equity issuances or
financing arrangements are not available or are not sufficient to meet Nextel's
funding needs, it will be necessary for Nextel to obtain alternate sources of
financing. See "-- Forward Looking Statements." Assuming (i) that the proposed
Offerings of the Preferred Stock and the Senior Notes are completed; (ii) that
Nextel secures access to all of the available funds under the Bank Credit
Facility, including at least $322.0 million of the Additional Bank Borrowings
(giving effect to the related termination of the Vendor Credit Facility and the
Second Vendor Financing Agreement), or such funds are replaced in part with
proceeds of the offering of the Senior Notes (as described above) and (iii) that
the New Option is exercised and Nextel receives the $420.0 million in New Option
Proceeds, the Company believes that such amounts, coupled with the Company's
available cash and cash equivalents, will provide funds that in the aggregate
are expected to be sufficient to implement the Company's 1998 Plan and meet the
other currently anticipated cash needs of its domestic business activities
through the end of 1998. Thereafter, Nextel will require substantial additional
financing to fund further build-out, expansion and enhancement of its Digital
Mobile network, to fund operating losses and for other purposes. 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, the
Vendor Credit Facility and the Second Vendor Financing Agreement is, and the
availability of the Additional Bank Borrowings is expected to be, subject to
certain conditions, and there can be no assurance that such conditions will be
met. Moreover, there can be no assurance that the New Option will be exercised
and that Nextel will receive the proceeds therefrom, or that any other
outstanding options will be exercised or that the proposed offerings of the
Preferred Stock or the Senior Notes will be consummated or will raise the amount
of proceeds being sought by the Company. The Bank Credit Facility (and, if
executed, the terms of the agreements relating to the Additional Bank
Borrowings), the Vendor Credit Facility, the Second Vendor Financing Agreement,
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. 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 the Common Stock. See "-- Forward Looking Statements."
- 7 -
<PAGE> 8
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 possibility that other parties may challenge 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 uncertainty with respect to the success and/or
timing of continuing development and deployment activities relating to the
Reconfigured iDEN technology format and, assuming successful and timely
completion of such efforts, the uncertainty with respect to the success of
commercial introduction and customer acceptance of Nextel's Digital Mobile
network services in new market areas using such technology; (vi) the potential
commercial opportunities and risks associated with implementation of Nextel's
1998 Plan; and (vii) 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 in existing and new Nextel Digital Mobile network
markets, any additional capital required to pursue new telecommunications
service offerings or business opportunities, and the expenditures associated
with analog SMR station construction requirements under the currently effective
FCC 800 MHz channel licensing approach) that may be offset (whether wholly or
partially) by other developments anticipated to (or to have the potential to)
reduce capital needs (e.g., co-location of antenna and/or transmitter sites with
other providers of wireless services in the relevant markets, reductions in
infrastructure and subscriber unit prices obtained from Motorola including
reductions pursuant to the Second Equipment Agreement Amendment, 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. Nextel has agreed with Motorola,
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 (including, if relevant, the Additional Bank
Borrowings), the Vendor Credit Agreement and/or the Second Vendor Financing
Agreement) is and will be limited by the terms of the Nextel Indentures, the
indenture under which the Senior Notes will be issued (the "Senior Notes
Indenture"), the Certificate of Designation of Nextel for the Preferred Stock,
(the "Certificate of Designation"), the Series D Certificate, the Bank Credit
Agreement (including any modifications thereto to implement the Additional Bank
Borrowings), the Vendor Credit Agreement and the Second Vendor Financing
Agreement. The Bank Credit Agreement (including any modifications thereto to
implement the Additional Bank Borrowings), the Vendor Credit Agreement and the
Second Vendor Financing Agreement also require (or are expected to require)
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 become more
stringent over time.
At present, other than the proposed offerings of the Preferred Stock and
the Senior Notes,and the existing equity or debt financing arrangements that
have been consummated and/or disclosed, Nextel has no commitments or
understandings with any third parties to obtain any material amount of
additional equity or debt financing. Moreover, no assurances can be made that
Nextel will be able to obtain any such additional financing in the amounts or at
the times such financing may be required, or that, if obtained, any such
financing would be on acceptable terms. Nextel also anticipates that it will
continue to experience significant operating losses and negative net cash flows
during the ongoing 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
(including any modifications thereto to implement the Additional Bank
Borrowings), the Vendor Credit Facility and the Second Vendor Financing
Agreement, and the impact of Reconfigured iDEN and other matters discussed
above, there can be no assurance that Nextel will have adequate capital, 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 financial business prospects. See "Forward Looking Statements."
- 8 -
<PAGE> 9
Fourth Quarter Results. Nextel's digital subscriber units in service
increased by approximately 324,100 during the fourth quarter of 1997. During
1997 Nextel added more than 970,000 digital units, ending the year with
approximately 1,270,700 digital units in service, representing an increase of
323% over the 300,300 digital units in service at year end 1996 and a 34%
increase over the 946,600 digital units in service at the end of the third
quarter of 1997. During 1997, approximately 2,100 cell sites were added for a
total of more than 4,000 cell sites in service at year end.
Monthly average revenue per digital unit in service was approximately $68
for the fourth quarter of 1997, an increase of 21% over the 1996 fourth quarter
monthly average revenue per digital unit in service of approximately $56.
Nextel's average monthly subscriber churn rate for the fourth quarter of 1997
was approximately 1.4% and for the entirety of 1997 was below 1.3%.
Accounting Matters. Effective October 1, 1997, the Company changed the
estimated useful lives of certain intangible assets including FCC licenses and
the excess of purchase price over fair value of net assets acquired from 20 to
40 years. The change in the estimated useful lives of these intangible assets
had the effect of decreasing amortization expense by approximately $28.0 million
for the quarter and the year ended December 31, 1997. This change was made to
better reflect the period over which the economic benefits of such assets will
be realized.
In connection with preparing the year end financial statements, the Company
has completed an analysis of the valuation allowance related to its net
operating losses ("NOLs"). The Company recorded substantial deferred tax
liabilities related to its FCC licenses. As a result of the change in estimated
useful lives, a large portion of such deferred tax liabilities will now reverse
after current NOLs expire. After considering the effect of this change and other
factors, such as recent operating results, the Company expects to record a
charge of approximately $384.0 million in the fourth quarter of 1997 to increase
its valuation reserve.
During the fourth quarter of 1997, the Company purchased $166.2 million
book value of its 11.5% Senior Redeemable Discount Notes due 2003 and $81.8
million book value of its 12.25% Senior Redeemable Discount Notes due 2004 at a
cost in excess of related carrying amounts. Accordingly, the Company will record
in the fourth quarter of 1997 an extraordinary loss of approximately $45.8
million related to the early retirement of debt. The extraordinary loss was
comprised of the difference between the purchase price and the book value of the
notes on the date of purchase plus unamortized debt issuance costs. Following
the completion of the offering of the Senior Notes and the Preferred Stock, the
Company intends to commence a tender offer for the outstanding Targeted Notes.
Upon the repurchase or redemption of the Targeted Notes, the Company will record
an extraordinary loss in the amount of the difference between the price paid to
redeem or repurchase the Targeted Notes and the then current book value of the
Targeted Notes plus the unamortized debt issuance costs attributable to such
notes.
The Company estimates that it will recognize an aggregate of approximately
$55 million in bad debt expense for the twelve months ended December 31, 1997.
The Company believes that such anticipated bad debt experience during 1997 was
the result of a number of factors, including principally delay in the billing of
amounts due on purchases of digital network subscriber equipment and the rapid
growth of the Company's customer base. As a result, the Company instituted a
more comprehensive and aggressive program for the collection of past due
receivables in the latter part of 1997 and increased its bad debt reserve, which
resulted in increased bad debt expenses. Nextel believes that it is pursuing
appropriate activities and already has taken a number of measures that it
expects to result in the gradual improvement of its billing and accounts
receivable collection effectiveness in 1998. Nextel does not anticipate that the
percentage of bad debt expenses as compared to total revenues will increase in
1998, although with the anticipated growth of the revenues, the absolute dollar
amount of such expenses may increase. Accordingly, the amount of bad debt
expense estimated to be recognized by the Company during 1997 should not be
viewed as indicative of either the amount or level of bad debt expense that the
Company may recognize in future periods. See "Forward Looking Statements".
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 this Current Report that are not historical or current facts
deal with potential future circumstances and developments. The discussion of
such matters and subject areas is qualified by the inherent risks and
uncertainties surrounding future expectations generally, and also may materially
differ from Nextel' 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 this Current Report, including, but not limited to, general
economic conditions in the geographic areas and occupational market segments
that Nextel is targeting for its Digital Mobile network service, the
availability of adequate quantities of system infrastructure and subscriber
equipment and components to meet Nextel's service deployment and marketing plans
and customer demand, the success of efforts to improve and satisfactorily
address any issues relating to Digital Mobile 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, Nextel'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 and
increased system usage rates, growth in levels of accounts receivable 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 filed
with the Commission, including the Annual Report on Form 10-K for the fiscal
year ended December 31, 1996 and the Quarterly Report on Form 10-Q for the
quarters ended March 31, 1997, June 30, 1997 and September 30, 1997.
- 9 -
<PAGE> 10
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Not applicable.
(b) PRO FORMA FINANCIAL INFORMATION.
Not applicable.
(c) EXHIBITS.
<TABLE>
<CAPTION>
Exhibit No. Exhibit Description
----------- -------------------
<S> <C>
99.1 Commitment Letter dated January 22, 1998 between Nextel, The Chase Manhattan Bank,
Chase Securities Inc., Morgan Guaranty Trust Company of New York, J.P. Morgan
Securities Inc., The Toronto-Dominion Bank, TD Securities (USA), Inc., Barclays Bank
PLC, Barclays Capital, the investment banking division of Barclays Bank PLC,
NationsBank of Texas, N.A. and NationsBanc Montgomery Securities LLC (and attached
term sheet).
</TABLE>
- 10 -
<PAGE> 11
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NEXTEL COMMUNICATIONS, INC.
Date: February 2, 1998 By: /s/ Thomas J. Sidman
------------------------------------
Thomas J. Sidman
Vice President and General Counsel
- 11 -
<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Description
----------- -------------------
<S> <C>
99.1 Commitment Letter dated January 22, 1998 between Nextel, The Chase
Manhattan Bank, Chase Securities Inc., Morgan Guaranty Trust Company
of New York, J.P. Morgan Securities Inc., The Toronto-Dominion Bank, TD
Securities (USA), Inc., Barclays Bank PLC, Barclays Capital, the investment
banking division of Barclays Bank PLC,
NationsBank of Texas, N.A. and NationsBanc
Montgomery Securities LLC (and attached term sheet).
</TABLE>
- 12 -
<PAGE> 1
BARCLAYS BANK PLC
THE CHASE MANHATTAN BANK
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
NATIONSBANK OF TEXAS, N.A.
THE TORONTO-DOMINION BANK
January 22, 1998
Nextel Finance Company
Senior Secured Credit Facilities
Commitment Letter
Nextel Finance Company
1505 Farm Credit Drive
Suite 100
McLean, Virginia 22102
Attention: Steven Shindler
Vice President
and Chief Financial Officer
Ladies and Gentlemen:
You have advised Barclays Bank PLC ("Barclays"), Barclays
Capital, the investment banking division of Barclays ("Barclays Capital"), The
Chase Manhattan Bank ("Chase"), Chase Securities Inc. ("CSI"), Morgan Guaranty
Trust Company of New York ("Morgan"), J.P. Morgan Securities Inc. ("JPMSI"),
NationsBank of Texas, N.A. ("NationsBank"), NationsBanc Montgomery Securities
LLC ("NMS"), The Toronto-Dominion Bank ("Toronto Dominion" and, together with
Barclays, Chase, Morgan and NationsBank, the "Initial Lenders") and TD
Securities (USA), Inc. ("TDSI" and, together with Barclays Capital, CSI, JPMSI
and NMS, the "Arrangers") that Nextel Finance Company (the "Borrower"), a
Delaware corporation and a wholly-owned subsidiary of Nextel Communications,
Inc. ("NCI"), requires senior secured credit facilities in an aggregate
principal amount of up to at least $3,000,000,000 (the "Senior Facilities") (i)
to extend, renew or refinance existing indebtedness of the Borrower outstanding
under (a) the Credit Agreement dated as of September 27, 1996, as amended (the
"Existing Credit Agreement") between NCI, the Borrower, the Restricted
Companies named therein, the lenders named therein, Toronto Dominion (Texas)
Inc., as Administrative Agent, and Chase, as Collateral Agent, (b) the Amended,
Restated and Consolidated Credit Agreement dated as of September 27, 1996, as
amended (the "Vendor Financing Agreement") between NCI, the Borrower and the
Vendors named therein and (c) the Second Secured Vendor Financing Agreement
dated as of August
<PAGE> 2
- 2 -
22, 1997, as amended (together with the Vendor Financing Agreement, the "Vendor
Credit Agreements"), (ii) to refinance outstanding public notes issued by NCI
(subject to certain limitations), (iii) to make certain investments and
acquisitions, (iv) to make capital expenditures and (v) for working capital and
other general corporate purposes. In that connection, you have requested that
the Arrangers agree to structure, arrange and syndicate the Senior Facilities,
and that each of the Initial Lenders commits to provide a portion of the Senior
Facilities.
The Arrangers are pleased to advise you that they are
willing to act as the exclusive advisors and arrangers for the Senior
Facilities.
Furthermore, each of the Initial Lenders is pleased to
advise you of (a) its respective commitment to provide up to $500,000,000 (for
an aggregate of $2,500,000,000) of the Senior Facilities, and (b) its agreement
to use best efforts, in conjunction with you the Arrangers and the other
Initial Lenders, to assemble a syndicate of financial institutions identified
by the Arrangers and the Initial Lenders identified by us and approved by you,
which approval shall not be unreasonably withheld (together with the Initial
Lenders, the "Lenders"), to provide the balance of the necessary commitments
for the Senior Facilities, in each case upon the terms and subject to the
conditions set forth or referred to in this commitment letter (the "Commitment
Letter"), in the Summary of Terms and Conditions attached hereto as Exhibit A
(the "Term Sheet") and in the Fee Letters referred to below. It is a condition
to each of the Initial Lenders' commitments hereunder that the portion of the
Senior Facilities not being provided by the Initial Lenders shall be provided
by the other Lenders referred to above. The Initial Lenders shall be relieved
of their obligation to provide the Senior Facilities to the extent that you
accept the offers of Lenders other than the Initial Lenders to provide a
portion of the Senior Facilities that the Initial Lenders have offered to
commit to provide.
It is agreed that the Arrangers will have the right to
adjust the allocation of the total amount of the Senior Facilities among the
Revolving Credit Facility (as defined in the Term Sheet), the Term Loan A
Facility (as defined in the Term Sheet) and the Term Loan B Facility (as
defined in the Term Sheet) based on market demand; provided that the aggregate
amount of the Term Loan B Facility (as defined in the Term Sheet) shall not
exceed $850,000,000 and the aggregate amount of the Revolving Credit Facility
(as defined in the Term Sheet) shall not be reduced to below $1,500,000,000, or
except as otherwise agreed to by you and the Arrangers.
It is agreed that the Arrangers will act as the sole and
exclusive advisors and arrangers for the Senior Facilities, and each will, in
such capacities, perform the duties and exercise the authority customarily
performed and exercised by them in such roles. You agree that no other agents,
co-agents or arrangers will be appointed, no other titles will be awarded and
no compensation (other than that expressly contemplated by the Term Sheet and
the Fee
<PAGE> 3
- 3 -
Letters referred to below) will be paid in connection with the Senior
Facilities unless you and we shall so agree.
The Arrangers intend to commence syndication efforts
promptly upon the execution of this Commitment Letter, and you agree to use
commercially reasonable efforts to assist the Arrangers in completing a
syndication satisfactory to them and to you. Such assistance shall include (a)
your using commercially reasonable efforts to ensure that the syndication
efforts benefit materially from your existing lending relationships, (b) direct
contact between senior management and advisors of the Borrower and the proposed
Lenders, (c) assistance in the preparation of a Confidential Information
Memorandum and other marketing materials to be used in connection with the
syndication and (d) the hosting, with the Arrangers, of one or more meetings of
prospective Lenders.
The Arrangers, in consultation with you, will manage all
aspects of the syndication, including decisions as to the selection of
institutions to be approached and when they will be approached, when their
commitments will be accepted, which institutions will participate, the
allocations of the commitments among the Lenders and the amount and
distribution of fees among the Lenders. To assist the Arrangers in their
syndication efforts, you agree promptly to prepare and provide to the Arrangers
and the Initial Lenders all information with respect to the Borrower and the
transactions contemplated hereby, including all financial information and
projections (the "Projections"), as we may reasonably request in connection
with the arrangement and syndication of the Senior Facilities. You hereby
represent and covenant, except as expressly stated otherwise with respect to
particular Information (defined below) furnished or made available by you or
your representatives, that (a) all information other than the Projections (the
"Information") that has been or will be made available to any of the Initial
Lenders or the Arrangers by you or any of your representatives, taken together
with information contained in NCI's public filings made with the Securities and
Exchange Commission pursuant to the Securities and Exchange Act of 1934, as
amended, does not or will not, when furnished, contain any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements contained therein not materially misleading in light of the
circumstances under which such statements are made and (b) the Projections that
have been or will be made available to any of the Initial Lenders or the
Arrangers by you or any of your representatives have been or will be prepared
in good faith based upon reasonable assumptions. You understand that in
arranging and syndicating the Senior Facilities we may use and rely on the
Information and Projections without independent verification thereof. The
Arrangers and the Initial Lenders agree that the provisions of Section 10.12 of
the Existing Credit Agreement with respect to the confidential treatment of
information shall be applicable to the Information and the Projections.
As consideration for the respective commitments hereunder
of the Initial Lenders and the agreements of the Arrangers to perform the
services described herein, you agree to pay and to cause the Borrower to pay to
each of the Initial Lenders and the other parties described therein the
nonrefundable fees set forth in the respective Fee Letter dated the
<PAGE> 4
- 4 -
date hereof and delivered herewith to which the Initial Lenders and such other
parties are party (the "Fee Letters") in accordance with their respective
terms.
The commitment hereunder of each of the Initial Lenders
and the agreement of each Arranger to perform the services described herein are
subject to (a) there not occurring or becoming known to us any material adverse
condition or material adverse change in or affecting the business, operations,
property, condition (financial or otherwise) or prospects of the Borrower and
its subsidiaries, taken as a whole, (b) our not becoming aware after the date
hereof of any information or other matter affecting the Borrower or the
transactions contemplated hereby which is inconsistent in a material and
adverse manner with any such information or other matter disclosed to us prior
to the date hereof, (c) there not having occurred a material disruption of or
material adverse change in financial, banking or capital market conditions
that, in our judgment, could materially impair the syndication of the Senior
Facilities, (d) our satisfaction that prior to and during the primary
syndication of the Senior Facilities there shall be no competing offering,
placement or arrangement of any debt securities or bank financing by or on
behalf of you, the Borrower or any of your controlled affiliates other than (i)
any offering or placement of unsecured debt or equity securities by NCI or (ii)
any offering, placement or arrangement of any bank or equipment financing by
Nextel International, Ltd. or its controlled affiliates, (e) the negotiation,
execution and delivery on or before March 31, 1998 of definitive documentation
with respect to the Senior Facilities satisfactory to the Initial Lenders and
their counsel, (f) the other conditions set forth or referred to in the Term
Sheet, (g) the payment when due of the fees or other compensation provided for
by the Fee Letters and (h) the satisfaction of all of the conditions to each
Initial Lender's obligations set forth herein or in the Term Sheet. The terms
and conditions of the commitments hereunder of the Initial Lenders and of the
Senior Facilities are not limited to those set forth herein and in the Term
Sheet. Those matters that are not covered by the provisions hereof and of the
Term Sheet are subject to the approval and agreement of the Initial Lenders,
the Arrangers and the Borrower.
You agree (a) to indemnify and hold harmless the Initial
Lenders, the Arrangers, their affiliates and their respective officers,
directors, employees, advisors, and agents (each, an "indemnified person") from
and against any and all losses, claims, damages, liabilities and related
expenses (collectively "Recoveries") to which any such indemnified person may
become subject arising out of or in connection with this Commitment Letter, the
Senior Facilities, the use of the proceeds thereof, the transactions
contemplated hereby or any related transaction or any claim, litigation,
investigation or proceeding relating to any of the foregoing, regardless of
whether any indemnified person is a party thereto, and to reimburse each
indemnified person upon demand for any legal or other expenses incurred in
connection with investigating or defending any of the foregoing, provided that
the foregoing indemnity will not, as to any indemnified person, apply to
Recoveries to the extent (i) they are found by a final, non-appealable judgment
of a court to arise from the willful misconduct or gross negligence of such
indemnified person or (ii) they arise from a settlement with respect to which
you have admitted liability or from an admission of liability on the part of
the indemnified person in either case entered into without your prior written
consent, which shall not be unreasonably withheld or delayed, and (b) to
reimburse the Initial Lenders, the
<PAGE> 5
- 5 -
Arrangers and their affiliates on demand for all out-of-pocket expenses
(including due diligence expenses, syndication expenses, travel expenses, and
reasonable fees, charges and disbursements of counsel) incurred in connection
with the Senior Facilities and any related documentation (including this
Commitment Letter, the Term Sheet, the Fee Letters and the definitive financing
documentation) or the administration, amendment, modification or waiver
thereof. No indemnified person shall be liable for any indirect or
consequential damages in connection with its activities related to the Senior
Facilities.
This Commitment Letter shall not be assignable by you
without the prior written consent of each of the Initial Lenders and the
Arrangers (and any purported assignment without such consent shall be null and
void), is intended to be solely for the benefit of the parties hereto and is
not intended to confer any benefits upon, or create any rights in favor of, any
person other than the parties hereto. This Commitment Letter, including the
Term Sheet, may not be amended or waived except by an instrument in writing
signed by each of you, the Initial Lenders and the Arrangers. This Commitment
Letter may be executed in any number of counterparts, each of which shall be an
original, and all of which, when taken together, shall constitute one
agreement. Delivery of an executed signature page of this Commitment Letter by
facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof. This Commitment Letter and the Fee Letters are the only
agreements that have been entered into among us with respect to the Senior
Facilities and set forth the entire understanding of the parties with respect
thereto. Nothing in this Commitment Letter shall be deemed to constitute an
amendment or modification of the terms of the Existing Credit Agreement. This
Commitment Letter shall be governed by, and construed in accordance with, the
laws of the State of New York.
This Commitment Letter is delivered to you on the
understanding that neither this Commitment Letter, the Term Sheet or the Fee
Letters nor any of their terms or substance shall be disclosed, directly or
indirectly, to any other person except (a) to your officers, agents and
advisors who are directly involved in the consideration of this matter or (b)
as may be compelled in a judicial or administrative proceeding or as otherwise
required by law (in which case you agree to inform us promptly thereof),
provided, that the foregoing restrictions shall cease to apply (except in
respect of the Fee Letters and its terms and substance) after this Commitment
Letter has been accepted by you, and the Initial Lenders and the Arrangers
hereby consent to NCI's public announcement of the existence of this Commitment
Letter in, and the inclusion of a copy of this Commitment Letter and of the
related Term Sheet as an exhibit to, reports that NCI is required to file with
the Securities and Exchange Commission.
The compensation, reimbursement, indemnification and
confidentiality provisions contained or referred to herein and in the Fee
Letters shall remain in full force and effect regardless of whether definitive
financing documentation shall be executed and delivered and notwithstanding the
termination of this Commitment Letter or the respective commitments hereunder
of the Initial Lenders hereunder, except, in the case of such compensation and
reimbursement provisions only, if such termination is made by the Initial
Lenders in violation of the provisions of this Commitment Letter.
<PAGE> 6
- 6 -
The Initial Lenders and the Arrangers shall have the right
to review and approve all public announcements and filings relating to the
Senior Facilities that refer to the Initial Lenders, the other Lenders or the
Arrangers before they are made or filed.
The obligations of the Initial Lenders and the Arrangers
hereunder are several and not joint.
If the foregoing correctly sets forth our agreement,
please indicate your acceptance of the terms hereof and of the Term Sheet and
the Fee Letters by returning to us executed counterparts hereof and of the Fee
Letters, not later than 5:00 p.m., New York City time, on January 22, 1998. The
respective commitments of the Initial Lenders and the agreements of the
Arrangers herein will expire at such time in the event that the Initial Lenders
have not received such executed counterparts in accordance with the immediately
preceding sentence.
<PAGE> 7
- 7 -
The Initial Lenders and the Arrangers are pleased to have
been given the opportunity to assist you in connection with this important
financing.
Very truly yours,
BARCLAYS BANK PLC BARCLAYS CAPITAL, the
investment banking division
of Barclays Bank PLC
By: /s/ James K. Downey By: /s/ James K. Downey
--------------------- ---------------------
Name: J. K. Downey Name: J. K. Downey
Title: Associate Director Title: Associate Director
THE CHASE MANHATTAN BANK CHASE SECURITIES INC.
By: /s/ Tracey A. Navin By: /s/ James R. Kuster
--------------------- ---------------------
Name: Tracey A. Navin Name: James R. Kuster
Title: Vice President Title: Managing Director
MORGAN GUARANTY TRUST J.P. MORGAN SECURITIES INC.
COMPANY OF NEW YORK
By: /s/ Maria D. Kratsios By: /s/ Jessica Laxman
--------------------- ---------------------
Name: Maria D. Kratsios Name: Jessica Laxman
Title: Vice President Title: Vice President
<PAGE> 8
- 8 -
NATIONSBANK OF TEXAS, N.A. NATIONSBANC MONTGOMERY
SECURITIES LLC
By: /s/ W.H. McClendon IV By: /s/ W.H. McClendon IV
----------------------------- -----------------------------
Name: W.H. McClendon IV Name: W.H. McClendon IV
Title: Senior Vice President Title: Senior Vice President
THE TORONTO-DOMINION BANK TD SECURITIES (USA), INC.
By: /s/ Brian O'Reilly By: /s/ Brian O'Reilly
----------------------------- -----------------------------
Name: Brian O'Reilly Name: Brian O'Reilly
Title: Managing Director Title: Managing Director
Accepted and agreed to
as of the date first
written above by:
NEXTEL FINANCE COMPANY
By: /s/ Steven Shindler
-------------------------
Name: Steven Shindler
Title: CFO
<PAGE> 9
EXHIBIT A
NEXTEL FINANCE COMPANY
SUMMARY OF TERMS AND CONDITIONS
JANUARY 22, 1998
Terms used in these Summary of Terms and Conditions have
the respective meanings assigned to them in the Commitment Letter to which
these Summary of Terms and Conditions are attached.
BORROWER: Nextel Finance Company ("Nextel" or the
"Borrower")
ADMINISTRATIVE AGENT: Toronto-Dominion (Texas) Inc.
COLLATERAL AGENT: The Chase Manhattan Bank
ARRANGERS: Barclays Capital, the investment banking
division of Barclays Bank PLC, Chase Securities
Inc., J.P. Morgan Securities Inc., NationsBanc
Montgomery Securities LLC, and TD Securities
(USA), Inc.
LENDERS: Syndicate of banks acceptable to the Borrower
and the Arrangers (the "Lenders")
SENIOR FACILITIES: Revolving Credit Facility - A $1,500,000,000
Senior Secured Reducing Revolving Credit
Facility ("Revolving Credit Facility").
Term Loan A Facility - A $750,000,000 Senior
Secured Multi-Draw Term Loan Facility ("Term
Loan A Facility").
Term Loan B Facility - A $750,000,000 Senior
Secured Single-Draw Term Loan Facility ("Term
Loan B Facility").
ARRANGING AGENTS'
COMMITMENTS: The five Initial Lenders will each commit
$500,000,000. Commitments will be pro-rata
across the Senior Facilities
INCREMENTAL FACILITIES: Incremental Facility - An Incremental Facility
which may be in an aggregate amount up
to $500,000,000 ("Incremental Facility").
Loans made under the Incremental Facility may
be revolving credit loans. The Incremental
Facility will be governed by the loan
documents, will have an average life later
than the combined average life of the Revolving
Credit Facility, Term Loan A Facility and the
Term Loan B Facility and will require the
consent of the Required Lenders. Loans made
under the Incremental Facility will mature no
earlier than six months after the maturity of
the loans made under the Term Loan B Facility.
<PAGE> 10
- 2 -
MATURITY: Revolving Credit Facility - March 31, 2006
Term Loan A Facility - March 31, 2006
Term Loan B Facility - September 30, 2006
Notwithstanding the foregoing, (i) in the case
of the Revolving Credit Facility and the Term
Loan A Facility, the Lenders will be entitled
to accelerate the maturity to the date that is
six months prior to the earliest maturity date
for the then outstanding Public Notes that
mature in 2003 through 2005 (the "Old NCI
Notes") unless the aggregate principal amount
of all outstanding Old NCI Notes is less than
$1,000,000,000 and (ii) in the case of the Term
Loan B Facility, the Lenders will be entitled
to accelerate the maturity to the date that is
three months prior to the earliest maturity
date for the then outstanding Old NCI Notes
unless the aggregate principal amount of all
outstanding Old NCI Notes is less than
$1,000,000,000.
PURPOSE: REVOLVING CREDIT FACILITY AND TERM LOAN A
FACILITY
To extend, renew or refinance indebtedness
under the Existing Credit Agreement, the Vendor
Credit Agreements and the Old NCI Notes
(subject to certain limitations), to finance
investments and acquisitions, to finance
capital expenditures and for working capital
and other general corporate purposes. The
portion of the loans used to refinance Old NCI
Notes may not exceed the sum of $500,000,000
plus the aggregate amount of Additional Equity.
TERM LOAN B FACILITY
To extend, renew or refinance indebtedness
under the Existing Credit Agreement and the
Vendor Credit Agreements.
AVAILABILITY: The full amount of the Senior Facilities will
be available at closing, subject to compliance
with conditions precedent to drawdown; the Term
Loan A Facility will remain available for a
period of 180 days from the Closing Date; the
Term Loan B Facility must be drawn in full at
closing. A portion of the Revolving Credit
Commitments will be available for letters of
credit consistent with the Existing Credit
Agreement.
CLOSING DATE: No later than March 31, 1998.
REPAYMENT/
COMMITMENT REDUCTIONS: The Senior Facilities shall amortize quarterly
beginning on September 30, 2001 and ending on
the respective maturity date for the relevant
Facility (except as otherwise indicated, the
percentages set forth below being the aggregate
percentage of the total outstanding loans
under the relevant Facility to be paid in each
calendar year indicated below) as follows:
<PAGE> 11
- 3 -
<TABLE>
<CAPTION>
ANNUAL REPAYMENT
REVOLVING CREDIT FACILITY
PERIOD & TERM LOAN A FACILITY TERM LOAN B FACILITY
------ ---------------------- --------------------
<S> <C> <C>
2001 5% .50%
2002 10% 1%
2003 20% 1%
2004 25% 1%
2005 30% 1%
3/31/2006 10% .25%
6/30/2006 --- .25%
9/30/2006 --- 95%
</TABLE>
The Incremental Facility will amortize as
provided above under "Incremental Facility".
PREPAYMENT: OPTIONAL
Prepayments are permitted without penalty at
the option of Nextel, subject to applicable
notice provisions. Nextel shall bear any
unwinding costs associated with early breakage
of LIBOR contracts.
MANDATORY
i) 100% of net proceeds from any sale or
disposition by any of the Restricted
Companies of any material assets
(other than Non-Core Assets or in the
ordinary course) that are not
reinvested in like assets within 12
months of the receipt thereof shall
be applied ratably (according to
amount of respective total
commitments under each applicable
facility) to reduce the Senior
Facilities pro rata in order of
maturity.
100% of net proceeds from sales of
accounts receivable and/or customer
lease contracts (and related rental
payments) to facilitate "off balance
sheet" or other secured financing of
such assets (either as part of or
outside the Senior Facilities) will
be applied to prepay outstanding
revolving credit Loans (without
reduction of commitments).
ii) Not later than the date 135 days
after the end of each fiscal year and
commencing with Excess Cash Flow for
the year ending 12/31/99, 50% of
Excess Cash Flow for the immediate
preceding fiscal year shall be
applied ratably (according to the
amount of respective total
commitments under each applicable
Facility) to reduce the Senior
Facilities pro rata in order of
maturity; prepayments will be
required to the extent that, after
any such reduction, outstandings
shall exceed the relevant commitment.
RATES OF INTEREST: At the Borrower's option, any advance under
the Senior Facilities will be available at the
rates and for the interest periods stated
below, plus an applicable margin as follows:
<PAGE> 12
- 4 -
REVOLVING CREDIT FACILITY/TERM LOAN A FACILITY:
Applicable Margin based on the ratio of Total
Debt to Annualized Operating Cash Flow for the
most recent fiscal quarter for which
information is available:
<TABLE>
<CAPTION>
- ----------------------------------------------------------
LESS THAN BUT GREATER
OR EQUAL TO THAN BASE RATE + LIBOR +
- ----------------------------------------------------------
<S> <C> <C> <C>
(1) 1.500% 2.500%
- ----------------------------------------------------------
(2) 1.250% 2.250%
- ----------------------------------------------------------
(3) 10.00x 1.000% 2.000%
- ----------------------------------------------------------
10.00x 9.00x 0.875% 1.875%
- ----------------------------------------------------------
9.00x 8.00x 0.750% 1.750%
- ----------------------------------------------------------
8.00x 7.00x 0.500% 1.500%
- ----------------------------------------------------------
7.00x 6.00x 0.375% 1.375%
- ----------------------------------------------------------
6.00x 5.00x 0.125% 1.125%
- ----------------------------------------------------------
5.00x 4.00x 0.000% 0.875%
- ----------------------------------------------------------
4.00x 0.000% 0.750%
==========================================================
</TABLE>
(1) Combined latest quarter gross revenues for the Restricted Companies
times 4 is less than or equal to $475,000,000
(2) Combined latest quarter gross revenues for the Restricted Companies
times 4 exceeds $475,000,000
(3) Annualized Operating Cash Flow is positive.
TERM LOAN B FACILITY: Base Rate plus 1.750% or
LIBOR plus 2.750%
BASE RATE OPTIONS: Interest shall be at the
greater of i) the Administrative Agent's Prime
Rate or ii) the Federal Funds Rate plus 1/2 of 1%.
Interest shall be payable quarterly in arrears and
calculated on basis of a 365/6-day year (360-day
year in the event the Base Rate is determined with
reference to the Federal Funds Rate).
LIBOR OPTION: Interest shall be determined for
periods of 1, 2, 3, 6, or 12 months the latter
subject to the consent of each Lender of the
relevant Facility. Interest shall be paid at the
end of each Interest Period or quarterly in
arrears, whichever is earlier, and will be
calculated on the basis of a 360 day year. LIBOR
shall be adjusted for Regulation D reserve
requirements.
POST-DEFAULT INTEREST: 2% over the greater of the Base Rate plus the
Applicable Margin or the applicable LIBOR
Rate plus the Applicable Margin, upon the
occurrence of specified defaults.
<PAGE> 13
- 5 -
COMMITMENT FEE: Based on the Ratio of Total Debt to
Annualized Operating Cash Flow and payable on the
unused Commitments quarterly in arrears based on a
360 day year, as indicated in the table below:
<TABLE>
<CAPTION>
RATIO COMMITMENT FEE
----- --------------
<S> <C>
greater than 7.00x 0.500%
less than or equal to 7.00x 0.375%
</TABLE>
SECURITY: All Loans will be ratably secured; and consistent
with the Existing Credit Agreement, the
loan documentation will provide for:
- A first priority pledge of all of the
shares of stock of the Restricted
Companies' direct and indirect
Subsidiaries.
- Liens on substantially all of the
Restricted Companies' assets (including
all system operating leasehold interests
in the U.S. and on all system
infrastructure equipment owned by the
Restricted Companies' in the U.S.)
- A pledge of the capital stock of any
newly formed Subsidiary of a Restricted
Company.
- A negative pledge of the assets of the
Restricted Companies (subject to
exceptions provided for herein for
Non-Core Assets and in connection with
subscriber equipment financing, and
other exceptions to be agreed upon).
- A concentration account, pledged to the
Collateral Agent on terms consistent
with those contained in the Existing
Credit Agreement.
GUARANTEES: Consistent with the Existing Credit Agreement the
loan documentation will provide for:
- Guarantees from all Restricted Companies
(including Subsidiaries holding the SMR
licenses).
- An unsecured guarantee from NCI. NCI
would agree to deliver financial
statements for NCI and its Subsidiaries,
not to grant liens on any assets (unless
the guarantee is equally and ratably
secured), not to agree to any amendments
or waivers to the Public Notes that
would have the effect of making any
provision thereof more restrictive on
NCI and its Subsidiaries without consent
of Lenders and to invest proceeds of
planned option exercises in the
Restricted Companies.
<PAGE> 14
- 6 -
CONDITIONS PRECEDENT TO
INITIAL DRAWDOWN: Including but not limited to the following:
i) Compliance certificate showing no
default after giving effect to the
drawdown (including compliance with
applicable debt-incurrence tests under
each Senior Notes' indenture);
ii) All security and documentation in place;
iii) Completion of satisfactory due
diligence, including, but not limited to
comfort with the current business plan;
iv) No material adverse change;
v) Truth of representations and warranties;
and
vi) Favorable legal opinion from (a) counsel
for the Arrangers and (b) counsel for
the Borrower.
REPRESENTATIONS AND
WARRANTIES: The loan documents will contain representations
and warranties consistent with those in the
Existing Credit Agreement and customarily found in
loan agreements for similar financings, as well as
those deemed appropriate for this transaction.
DOCUMENTATION: The loan agreement will be based upon the Existing
Credit Agreement (and, if deemed appropriate by
the Arrangers and the Borrower, may be an
amendment and restatement of the Existing Credit
Agreement), but will in any event incorporate
usual representations and warranties, events of
default, and covenants for a financing of this
nature, including but not limited to the
following:
i) LIMITATIONS ON ADDITIONAL INDEBTEDNESS
other than:
a) Indebtedness of the Borrower
in respect of interest rate
swaps;
b) Structurally subordinated
indebtedness of NCI (the
"Subordinated Debt"),
including the existing Public
Notes and, subject to the
conditions specified below, an
additional $1,600,000,000 of
Public Notes, so long as the
terms applicable to such
Indebtedness are not more
restrictive than the NCI Notes
due 2004. Subject to the
conditions specified below,
extensions, renewals and
refinancings of the Public
Notes shall also be permitted,
so long as (i) any such
extension, renewal and
<PAGE> 15
- 7 -
refinancing does not increase
the outstanding stated
principal amount of the Public
Notes being extended, renewed
or refinanced plus reasonable
premiums and expenses incurred
in connection with the
extension, renewal or
refinancing, (ii) the maturity
date of such extension,
renewal or refinancing is
later than the maturity date
of the Public Notes being
extended, renewed or
refinanced and (iii) the terms
and conditions of such
extension, renewal or
refinancing (other than in
respect of interest, which
shall not be restricted), are
no less favorable to NCI, the
Restricted Companies, the
Lenders and the administrative
agent and the collateral agent
than the terms and conditions
of the Public Notes due 2004.
During the period when Stage 1
Financial Covenants are in
effect, current-pay notes may
be issued in excess of
$500,000,000 principal amount
only if the aggregate amount
of cash-pay interest accruing
on the Public Notes during the
12 month period following such
issuance of current-pay notes
does not exceed the aggregate
amount of cash-pay interest
accruing during the 12 month
period on the Public Notes
immediately prior to such
issuance of current-pay notes
(giving effect to any
refinancings or redemption of
such Public Notes with the
proceeds of any such
current-pay notes).
c) Extensions, renewals
and refinancings of existing
indebtedness of the Restricted
Companies, so long as (i) such
extension, renewal and
refinancing does not increase
the outstanding principal
amount of the indebtedness
being extended, renewed or
refinanced plus reasonable
premiums and expenses
incurred in connection
with the extension, renewal or
refinancing, (ii) the average
life to maturity of the
indebtedness so extended,
renewed or refinanced shall
not be shorter than the
average life to maturity of
the indebtedness being
extended, renewed or
refinanced, (iii) at the time
of such extension, renewal or
refinancing, and after giving
effect thereto, no Default
shall have occurred and be
continuing and (iv) the terms
and conditions of such
Indebtedness as so extended,
renewed or refinanced (other
than in respect of interest,
which shall not be restricted)
are no less
<PAGE> 16
- 8 -
favorable to the Restricted
Companies, the Lenders and the
administrative agent and the
collateral agent than the
terms and conditions of the
Senior Facilities;
d) Indebtedness of any
Restricted Company to any
other Restricted Company;
e) Indebtedness under the
Incremental Facility;
f) Other indebtedness of the
Restricted Companies in an
aggregate principal amount not
exceeding $75,000,000 at any
time outstanding; and
g) Other unsecured indebtedness
of NCI in an aggregate
principal amount not exceeding
$10,000,000 at any time
outstanding.
ii) LIMITATIONS ON LIENS, ENCUMBRANCES AND
LEASES - Negative pledge on all assets
of the Restricted Companies (subject to
exceptions provided for herein for
Non-Core Assets and in connection
subscriber equipment financing and other
exceptions to be agreed upon consistent
with the Existing Credit Agreement).
iii) OWNERSHIP/CHANGE IN CONTROL - Consistent
with the Existing Credit Agreement, the
authority of the operations committee of
NCI shall be terminated or materially
modified (including through the
occurrence of a "Trigger Event" as
defined in NCI's Certificate of
Incorporation) or, in certain
circumstances, Craig O. McCaw shall
cease to be entitled to designate a
majority of the members of the
operations committee.
iv) LIMITATIONS ON MERGERS - Mergers
involving NCI and the Restricted
Companies will be permitted consistent
with the terms of the Existing Credit
Agreement.
v) LIMITATIONS ON PERMITTED ACQUISITIONS -
Acquisitions will be permitted
so long as (i) for cash consideration
(up to an aggregate of $275,000,000 for
all acquisitions during the term of the
Senior Facilities), (ii) for equity
capital of NCI, (iii) consisting of any
future planned 800MHz SMR spectrum
auction or (iv) consisting of
acquisitions (up to a limit to be agreed
upon) designed to create contiguous
spectrum blocks for the Restricted
Companies. In the case of any
acquisition consummated after the
Closing Date of the Senior Facilities
involving cash or equity in an amount
greater than $50,000,000, the amount of
subscribers and most recent quarter's
revenue
<PAGE> 17
- 9 -
(multiplied by 4) of the assets or
business being acquired (as determined
on the date of such acquisition) shall
thereafter be deducted from the
determination of any future compliance
with the minimum network subscriber
units and minimum annualized revenue
tests.
vi) LIMITATION ON INVESTMENTS - Restrictions
on investments other than (i)
investments in cash equivalents; (ii)
receivables in the ordinary course of
business; (iii) investments in
affiliates (in any amount if the equity
interest is in an entity holding
Non-Core Assets or collateral for
subscriber equipment financing and
otherwise in an amount to be
determined); (iv) investments among
Restricted Companies; and (v)
investments of up to $500,000,000 in the
Unrestricted Companies (including Nextel
International), such amount to be
increased by any amount of equity
proceeds received by the Restricted
Companies other than the proceeds of
planned option exercises.
vii) RESTRICTIONS ON ASSET SALES (not
including swap transactions for
like-kind assets of comparable value)
other than:
a) The sale of assets in the
ordinary course of business;
b) The sale of assets for cash
and for fair value (the net
cash proceeds of which are
applied as described under
"Mandatory Prepayments" above)
so long as i) no default is in
existence or would result
therefrom, ii) after giving
effect thereto, the Restricted
Companies would be in pro
forma compliance, and iii)
cumulative sales do not exceed
$250MM during the term of the
deal;
c) Sales/transfers of Non-Core
Assets in exchange for
non-cash consideration
(including equity
interests in entities formed
to construct/operate Non-Core
Systems) through direct
transfers of the Non-Core
Assets by the Restricted
Companies or distribution of
Non-Core Assets to NCI
followed by transfers of such
assets by NCI to a
minority-owned joint venture
or unrestricted subsidiary
(the value of Non-Core Assets
sold or transferred will not
be included for purposes of
the asset sales "basket" (set
forth above) or asset sales
prepayment requirements);
<PAGE> 18
- 10 -
d) The sale of minority interests
in restricted subsidiaries
that own and operate Non-Core
Systems; and
e) The sale (and related release
of security interests
in) accounts receivable and/or
customer lease contracts (and
related rental payments) to
facilitate "off balance sheet"
or other secured financing of
such assets (either as part of
or outside the Senior
Facilities); provided that any
such financing would be
structured in a manner
consistent with the Public
Notes and in a manner not to
adversely affect the existing
covenant structure with
respect to the Senior
Facilities; provided further
that the aggregate amount of
such financing would be
limited to $150,000,000 during
the period when Stage 1
Financial Covenants are in
effect and $250,000,000
thereafter.
viii) RESTRICTED PAYMENTS AND DISTRIBUTIONS
shall not be permitted except:
a) To the extent necessary to
make required tax
distributions (as set forth
in a tax sharing agreement
satisfactory to the Lenders);
b) To the extent necessary to
service the Public Notes as
outlined in the indentures,
subject to covenant compliance
under the loan agreement;
c) Once leverage is below 5.00x
and after giving effect to the
Excess Cash Flow Recapture,
funds can be distributed
subject to the Facility being
repaid by an amount equal to
such distribution;
d) Distributions to NCI for the
purchase or redemption of the
Public Notes; provided that
the aggregate amount of such
distributions may not exceed
the sum of $500,000,000 plus
Additional Equity;
e) Distributions to NCI of
Non-Core Assets; and
f) other Restricted Payments
permitted under the Existing
Credit Agreement.
<PAGE> 19
- 11 -
In the case of dividends and restricted
payments, such restrictions would be
structured in a manner to be consistent
with the requirements of the Public
Notes.
ix) HEDGING REQUIREMENTS - Nextel will
ensure that within 90 days of closing
and at the end of such fiscal quarter
thereafter, at least 50% of Total Debt
is either fixed rate debt or effectively
hedged through satisfactory hedging
arrangements. Swaps will be secured
pari passu with the Senior Facilities
if effected by participating banks.
x) AFFILIATES. Limitation of transactions
with Affiliates (including NCI and
Unrestricted Companies) except:
a) New transactions with vendors
or amendments of existing
agreements with vendors
(including the "Vendor
Equipment Agreements" as
defined in the Existing Credit
Agreement) so long as the new
transaction or amendment is in
the ordinary course of
business and the respective
vendor does not own more than
50% of the voting power of
NCI's voting stock;
b) Sales and transfers of
Non-Core Assets and operating
agreements between Restricted
Companies and entities that
acquire such Non-Core Assets
to construct Non-Core Systems;
provided that NCI and its
controlled affiliates hold 50%
or less of the equity
interests in such other party;
c) The ownership and operation by
unrestricted subsidiaries of
Non-Core Systems that are
integrated with Restricted
Company systems; and
d) Permitted affiliate
transactions consistent with
the Existing Credit Agreement.
xi) FINANCIAL COVENANTS: NCI and Restricted
Companies (as applicable) must meet the
following financial tests at the end of
each fiscal quarter:
<PAGE> 20
- 12 -
STAGE 1 FINANCIAL COVENANTS
a) Minimum Network Subscriber
Units test for Restricted
Companies:
<TABLE>
<CAPTION>
PERIOD NUMBER
------ ------
<S> <C>
3/31/98 1,300,000
6/30/98 1,500,000
9/30/98 1,700,000
12/31/98 2,000,000
3/31/99 2,400,000
</TABLE>
Minimum Network Subscriber
Units will be defined as all
reported digital subscriber
units in service multiplied
by a fraction, the numerator
of which is the total
accounts receivable arising
from such subscribers net of
the aggregate amount of such
accounts receivable that are
more than 90 days past due,
and the denominator of which
is such total accounts
receivable.
b) Minimum Annualized Revenue
test for Restricted
Companies:
<TABLE>
<CAPTION>
PERIOD MINIMUM REVENUE
------ ---------------
<S> <C>
3/31/98 $ 900,000,000
6/30/98 $1,100,000,000
9/30/98 $1,300,000,000
12/31/98 $1,500,000,000
3/31/99 $1,750,000,000
</TABLE>
c) The ratio of Secured
Indebtedness to Annualized
Revenue shall not exceed
2.50x at 3/31/98, 2.25x at
6/30/98 and 2.00x at any
time thereafter through
3/31/99.
STAGE 2 FINANCIAL COVENANTS
d) The ratios of Secured
Indebtedness and Total
Indebtedness to Annualized
Operating Cash Flow shall
not exceed:
<TABLE>
<CAPTION>
SECURED TOTAL
PERIOD DEBT/CF DEBT/CF
------ ------- -------
<S> <C> <C>
6/30/99 - 9/29/99 10.00x 17.50x
9/30/99 - 12/30/99 7.00x 13.00x
12/31/99 - 3/30/00 5.00x 10.00x
3/31/00 - 9/29/00 4.00x 7.50x
9/30/00 - 3/30/01 4.00x 6.00x
3/31/01 and after 3.00x 5.00x
</TABLE>
<PAGE> 21
- 13 -
e) The ratio of Annualized
Operating Cash Flow to cash
interest expense ("Interest
Coverage Ratio") for the four
fiscal quarters most recently
completed must be at least
the following:
<TABLE>
<CAPTION>
PERIOD MINIMUM RATIO
------ -------------
<S> <C>
6/30/99 1.10
9/30/99 - 12/31/99 1.50
3/31/00 and after 2.00
</TABLE>
f) Pro-Forma Debt Service Ratio
must be at least 1.00x at
all times on or after
12/31/00.
g) Fixed Charges Ratio for the
most recently completed four
fiscal quarters, must be at
least 1.00x at all times on
or after 12/30/00.
xi) EVENTS OF DEFAULT: Customary for
transactions of this type but in any
case consistent with the Existing Credit
Agreement
GENERAL: Including but not limited to the following:
i) Nextel shall be responsible for
reasonable fees of the Arrangers'
counsel in preparation of documentation
and for any reasonable out of pocket
expenses;
ii) Nextel shall provide quarterly unaudited
financial statements with respect to the
Restricted Companies within 60 days of
quarter's end and annual audited
financial statements with respect to the
Restricted Companies within 120 days of
fiscal year's end, quarterly operating
reports, and any other information which
may be reasonably requested from time to
time;
iii) All loan documents shall be governed by
the laws of the State of New York; and
iv) Indemnification of the Arrangers and the
Lenders and their respective affiliates,
officers, directors, employees, agents
and advisors for any claims, damages,
losses, liabilities and expenses
(including, without limitation,
reasonable fees and expenses of counsel)
arising out of or in connection with the
Facility, the transactions contemplated
thereby or the use of proceeds.
ASSIGNMENTS AND
PARTICIPATIONS: Lenders will be permitted to assign and
participate the Facility (i) on a collateral
basis to any Federal Reserve Bank and (ii) subject
to the consent of the Borrower and the
<PAGE> 22
- 14 -
Administrative Agent, which consent will not be
unreasonably withheld, to any bank, or other
financial institution (including funds).
Assignments pursuant to clause (ii) of the
preceding sentence will be in minimum amounts of
$5,000,000. Voting rights to participants will be
limited to an increase in principal amount,
reduction of rates of interest or fees,
postponement of the scheduled payments of any
principal, interest or fees, changes to required
reductions of the commitment or release of any
material collateral. Assignments will be subject to
the payment by the assigning Lender of a service
fee (to be determined) to the Administrative Agent.
YIELD PROTECTION: The loan documents will contain yield
protection provisions, customary for
telecommunications facilities of this nature,
protecting the Lenders in the event of
unavailability of funding, losses, reserve and
capital adequacy requirements.
COUNSEL TO THE
ARRANGERS: Milbank, Tweed, Hadley & McCloy
EXPENSES: The Borrower shall reimburse the Arrangers for all
reasonable out-of-pocket expenses (including
reasonable fees and expenses of outside counsel for
the Arrangers, including FCC Counsel) incurred by
them in the negotiation, syndication and execution
of the Facility. Such expenses shall be reimbursed
by the Borrower upon presentation of a statement of
account, regardless of whether the transaction
contemplated is actually completed or the loan
documents are signed.
DEFINITIONS: Unless otherwise indicated, all cash flow, income
and expense calculations include only the
Restricted Companies (as defined below), and
exclude Unrestricted Companies.
"Additional Equity" means the aggregate amount of
additional equity capital contributed by NCI to the
Borrower in cash after the effectiveness of
Amendment No. 5 to the Existing Credit Agreement
(net of such contributions previously distributed
back to NCI).
"Annualized Operating Cash Flow" means, as at any
day, Operating Cash Flow for the fiscal quarter
ending on or most recently ended prior to such day
multiplied by four (4).
"Annualized Revenue" means, as at any day, gross
revenues of the Restricted Companies (determined on
a combined basis without duplication in accordance
with GAAP) for the period of three complete
calendar months ending on, or most recently ended
prior to, such day multiplied by four (4).
"Availability" means that portion of the Senior
Facilities that is undrawn.
<PAGE> 23
- 15 -
"Capital Expenditures" means those expenditures
defined per GAAP as capital in nature that are used
exclusively to construct wireless
telecommunications systems, excluding any portion
thereof financed with the proceeds of debt or
equity.
"Debt Service" means all principal, cash interest
expense and fees paid or payable on Indebtedness.
"Excess Cash Flow" means, for any fiscal year, the
amount (if any) by which (a) Operating Cash Flow
for such fiscal year exceeds (b) the sum of (i)
Debt Service for such fiscal year plus (ii) the
aggregate amount of Capital Expenditures made by
the Restricted Companies during such fiscal year
plus (iii) cash income taxes paid for such fiscal
year plus (iv) $10,000,000.
"Fixed Charges" for any fiscal quarter means the
sum of a) all Debt Service, b) Capital
Expenditures, and c) cash income taxes paid for
that quarter.
"Fixed Charge Ratio" for any fiscal quarter means
the ratio of Annualized Operating Cash Flow plus
Availability and cash-on-hand at the beginning of
the period tested to Fixed Charges.
"Interest Coverage Ratio" means, as at any day, the
ratio of Annualized Operating Cash Flow as at such
day to cash interest expense for the period of four
fiscal quarters ending on or most recently ended
prior to such day.
"Non-Core Assets" means (1) any 900MHz licenses and
related assets, as those licenses and related
assets are owned or managed by Nextel or any of its
Affiliates or held for use in any U.S. market and
(ii) 800MHz licenses and related assets located in
any U.S. market outside of the key markets set
forth in Schedule I to this Summary of Terms and
Conditions; provided that such 800MHz licenses
shall not cover in excess of 15% of total U.S.
pops. The 15% limit on the Non-Core Assets
consisting of 800MHz licenses and related assets
may be increased with the consent of the Required
Lenders
"Non-Core Systems" means minority-owned joint
ventures or unrestricted subsidiaries formed to
construct wireless systems using Non-Core Assets.
"Operating Cash Flow" for any period, the sum, for
the Restricted Companies (determined on a combined
basis without duplication in accordance with GAAP)
of the following: (a) Net Income for such period
plus a) income tax expense, b) interest expense for
that period, c) depreciation, amortization, and
other non-cash charges for that period, (adjusted,
in each case, for extraordinary items and non-cash
minority interest payments and receipts, all
determined in accordance with GAAP, consistently
applied).
<PAGE> 24
- 16 -
"Pro-Forma Debt Service" for any fiscal quarter
means projected cash interest expense and scheduled
principal repayments for the immediately following
four fiscal quarters.
"Pro-Forma Debt Service Ratio" for any fiscal
quarter means the ratio of Annualized
Operating Cash Flow to Pro-Forma Debt Service.
"Public Notes" refers to the public notes issued by
NCI that are currently outstanding and any
additional public notes issued by NCI.
"Required Lenders" means 51% of the Lenders as
determined by commitment amount or outstandings, as
applicable.
"Restricted Companies" means Nextel and all U.S.
SMR operating subsidiaries of NCI or Nextel plus
any other existing or to be created restricted
subsidiaries pursuant to the Public Notes.
"Secured Indebtedness" means, as of any date of
determination, all secured indebtedness for
borrowed money, of the Restricted Companies
including capital lease obligations and contingent
liabilities such as guarantees and obligations
under letters of credit and including all
indebtedness under the Senior Facilities.
"SMR Systems" means all analog and digital
Specialized Mobile Radio networks in the United
States, utilizing 800 Mhz and 900 Mhz SMR licenses
issued by the FCC.
"Total Debt" means Secured Indebtedness plus all
other indebtedness for borrowed money (including
secured interest) of NCI and the Restricted
Companies including money borrowed by NCI.
"Unrestricted Companies" means any subsidiary of
NCI other than the Restricted Companies.
<PAGE> 25
SCHEDULE I
Schedule of Key Markets
<PAGE> 26
- -------------------------------------------------
MSA
- -------------------------------------------------
Los Angeles-Long Beach, CA
New York, NY
Chicago, IL
Boston-Wrcstr-Lwrnce-Lowll-Brcktn, MA-N
Philadelphia, PA-NJ
Washington, DC-MD-VA-WV
Detroit, MI
Houston, TX
Atlanta, GA
Dallas, TX
Riverside-San Bernardino, CA
Minneapolis-St. Paul, MN-WI
Phoenix-Mesa, AZ
San Diego, CA
Nassau-Suffolk, NY
Orange County, CA
St. Louis, MO-IL
Baltimore, MD
Pittsburgh, PA
Cleveland-Lorain-Elyria, OH
Oakland, CA
Seattle-Bellevue-Everett, WA
Tampa-St. Petersburg-Clearwater, FL
Miami, FL
Newark, NJ
Denver, CO
Portland-Vancouver, OR-WA
Kansas City, MO-KS
San Francisco, CA
New Haven-Brdgprt-Stmfrd-Dnbry-Wtrbry,C
Cincinnati, OH-KY-IN
San Jose, CA
Norfolk-Virginia Bch-Newport News, VA-N
Fort Worth-Arlington, TX
San Antonio, TX
Indianapolis, IN
Sacramento, CA
Milwaukee-Waukesha, WI
Columbus, OH
Orlando, FL
Fort Lauderdale, FL
Charlotte-Gastonia-Rock Hill, NC-SC
New Orleans, LA
Bergen-Passaic, NJ
Salt Lake City-Ogden, UT
Las Vegas, NV-AZ
Greensboro-Winston Salem-High Point, NC
Nashville, TN
Hartford, CT
Middlesex-Somerset-Hunterdon, NJ
Memphis, TN-AR-MS
Monmouth-Ocean, NJ
Austin-San Marcos, TX
Page 1
<PAGE> 27
- -------------------------------------------------
MSA
- -------------------------------------------------
Oklahoma City, OK
Raleigh-Durham-Chapel Hill, NC
Grand Rapids-Muskegon-Holland, MI
West Palm Beach-Boca Raton, FL
Jacksonville, FL
Dayton-Springfield, OH
Richmond-Petersburg, VA
Providence-Warwick-Pawtucket, RI
Birmingham, AL
Greenville-Spartanburg-Anderson, SC
Honolulu, HI
Fresno, CA
Tucson, AZ
Tulsa, OK
Ventura, CA
El Paso, TX
Akron, OH
Albuquerque, NM
Tacoma, WA
Knoxville, TN
Bakersfield, CA
Gary, IN
Allentown-Bethlehem-Easton, PA
Toledo, OH
Youngstown-Warren, OH
Springfield, MA
Baton Rouge, LA
Wilmington-Newark, DE-MD
Jersey City, NJ
Stockton-Lodi, CA
Charleston-North Charleston, SC
Sarasota-Bradenton, FL
Mobile, AL
Ann Arbor, MI
Wichita, KS
Vallejo-Fairfield-Napa, CA
Columbia, SC
Colorado Springs, CO
Fort Wayne, IN
Augusta-Aiken, GA-SC
Melbourne-Titusville-Palm Bay, FL
Daytona Beach, FL
Kalamazoo-Battle Creek, MI
Lakeland-Winter Haven, FL
Lansing-East Lansing, MI
Flint, MI
Santa Rosa, CA
Modesto, CA
Canton-Massillon, OH
Saginaw-Bay City-Midland, MI
Spokane, WA
Madison, WI
Santa Barbara-Santa Maria-Lompoc, CA
Page 2
<PAGE> 28
- -------------------------------------------------
MSA
- -------------------------------------------------
Fort Myers-Cape Coral, FL
Newburgh, NY-PA
Davenport-Moline-Rock Island, IA-IL
Visalia-Tulare-Porterville, CA
Rockford, IL
Reading, PA
Salinas, CA
Peoria-Pekin, IL
Appleton-Oshkosh-Neenah, WI
Atlantic-Cape May, NJ
Trenton, NJ
Salem, OR
Montgomery, AL
Hamilton-Middletown, OH
Hickory-Morganton-Lenoir, NC
Provo-Orem, UT
Eugene-Springfield, OR
Reno, NV
Fayetteville, NC
Fort Pierce-Port St. Lucie, FL
Erie, PA
Boulder-Longmont, CO
Dutchess County, NY
South Bend, IN
Portland, ME
New London-Norwich, CT
Galveston-Texas City, TX
Santa Cruz-Watsonville, CA
Ocala, FL
Fort Collins-Loveland, CO
San Luis Obispo-Antascadro-Paso Rbles,C
Brazoria, TX
Yakima, WA
Asheville, NC
Waco, TX
Olympia, WA
Merced, CA
Springfield, IL
Chico-Paradise, CA
Naples, FL
Racine, WI
Richland-Kennewick-Pasco, WA
Mansfield, OH
Mansfield, OH
Elkhart-Goshen, IN
Lafayette, IN
Las Cruces, NM
Topeka, KS
Redding, CA
Benton Harbor, MI
Tuscaloosa, AL
St. Cloud, MN
Wheeling, WV-OH
Page 3
<PAGE> 29
- -------------------------------------------------
MSA
- -------------------------------------------------
Lima, OH
Jackson, MI
Greeley, CO
Bellingham, WA
Janesville-Beloit, WI
Yolo, CA
Rocky Mount, NC
Bloomington-Normal, IL
Kenosha, WI
Santa Fe, NM
Yuba City, CA
Athens, GA
Vineland-Millville-Bridgeton, NJ
Pittsfield, MA
Pueblo, CO
Punta Gorda, FL
Hagerstown, MD
La Crosse, WI-MN
Florence, SC
Glens Falls, NY
Wausau, WI
Anniston, AL
Muncie, IN
Sheboygan, WI
Sumter, SC
Gadsden, AL
Jackson, TN
St. Joseph, MO
Lawrence, KS
Cheyenne, WY
Page 4
