<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 16, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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NEXTEL COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
DELAWARE 36-3939651
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
</TABLE>
2001 EDMUND HALLEY DRIVE
RESTON, VIRGINIA 20191
(703) 433-4000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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THOMAS J. SIDMAN, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
NEXTEL COMMUNICATIONS, INC.
2001 EDMUND HALLEY DRIVE
RESTON, VIRGINIA 20191
(703) 433-4000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
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Copies to:
LISA A. STATER, ESQ.
JONES, DAY, REAVIS & POGUE
3500 SUNTRUST PLAZA
303 PEACHTREE STREET
ATLANTA, GEORGIA 30308-3242
(404) 521-3939
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time following the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED UNIT(1) PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
5 1/4% Convertible Senior Notes due
2010.................................... $1,150,000,000 100% $1,150,000,000 $303,600
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Class A Common Stock, par value $.001 per
share, underlying the convertible
notes................................... (2) (2) (2) (3)
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(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(i) under the Securities Act of 1933.
(2) The number of shares of common stock to be issued upon conversion of the
convertible notes based on an initial conversion price of $148.80 per share
is 7,728,495. In addition, the amount to be registered includes an
indeterminate number of shares issuable upon conversion of the convertible
notes, as such amount may be adjusted due to stock splits, stock dividends
and anti-dilution provisions, and otherwise in accordance with the
indenture.
(3) Pursuant to Rule 457(i) under the Securities Act of 1933, no additional
registration fee is required in connection with the registration of the
Registrant's common stock issuable upon conversion of the convertible notes.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE. THE SELLING SECURITY
HOLDERS MAY NOT SELL OR OFFER THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS DECLARED
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES.
NEITHER NEXTEL NOR THE SELLING SECURITY HOLDERS ARE SOLICITING AN OFFER
TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED MAY 16, 2000
PROSPECTUS
$1,150,000,000
NEXTEL COMMUNICATIONS, INC.
5 1/4% CONVERTIBLE SENIOR NOTES DUE 2010
---------------------
This prospectus relates to the offering of our 5 1/4% convertible senior
notes due 2010 or the shares of our common stock issued upon conversion of the
convertible notes (7,728,495 shares at the current conversion price). The
selling security holders may offer the securities at fixed prices, at prevailing
market prices at the time of sale, at varying prices or negotiated prices. We
will not receive any cash proceeds from the selling security holders' sales of
these securities.
The Convertible Notes
- Interest is payable on the convertible notes on each January 15 and July
15.
- Holders may convert the convertible notes into our common stock at any
time before January 15, 2010 or the earlier redemption or repurchase of
the convertible notes, at a conversion price of $148.80 per share,
subject to adjustment in specified events. Changes in the conversion
price, if any, and the number of shares issuable upon conversion as a
result of any change, will be set forth in a supplement to this
prospectus.
- On or after January 18, 2003, we may redeem any of the convertible notes
at the redemption prices listed in this prospectus, plus accrued
interest.
- There is currently no established market for trading in the convertible
notes.
The Common Stock
- Our common stock is listed on the Nasdaq National Market under the symbol
"NXTL."
- On , 2000, the last reported sale price of our common stock
was $ .
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AS A PROSPECTIVE PURCHASER OF THESE SECURITIES, YOU SHOULD CAREFULLY
CONSIDER THE DISCUSSION OF "RISK FACTORS" THAT BEGINS ON PAGE 5 OF THIS
PROSPECTUS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE CONVERTIBLE NOTES OR COMMON STOCK TO BE DISTRIBUTED
UNDER THIS PROSPECTUS, NOR HAVE ANY OF THESE ORGANIZATIONS DETERMINED THAT THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus is , 2000
<PAGE> 3
REFERENCES TO ADDITIONAL INFORMATION
As used in this prospectus, "Nextel", "we", "us" and "our" refer to Nextel
Communications, Inc. and its consolidated subsidiaries, except where the context
otherwise requires or as otherwise indicated. This prospectus incorporates
important business and financial information about us that is not included in or
delivered with this prospectus. You may obtain documents that we file with the
Securities and Exchange Commission and incorporate by reference into this
prospectus in writing or by telephone from:
Nextel Communications, Inc.
2001 Edmund Halley Drive
Reston, Virginia 20191
Attention: Investor Relations
Telephone: (703) 433-4000
See "XII. Where You Can Get More Information."
"Nextel", "Nextel Direct Connect", Nextel Online" and "Nextel Worldwide"
are trademarks or service marks of Nextel. "Motorola", "iDEN", "i1000plus",
"i500plus", "i700plus" and "i2000" are trademarks or service marks of Motorola,
Inc.
ii
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TABLE OF CONTENTS
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<S> <C> <C>
I. SUMMARY..................................................... 1
A. Nextel.................................................. 1
B. Use of Proceeds......................................... 2
C. The Convertible Notes................................... 2
D. Summary Consolidated Financial Information.............. 3
II. RISK FACTORS................................................ 5
A. Risk Factors Relating to Nextel......................... 5
B. Risk Factors Relating to the Convertible Notes.......... 14
C. Our Forward-Looking Statements Are Subject to a Variety
of Factors That Could Cause Actual Results to Differ
Materially from Current Beliefs......................... 17
III. USE OF PROCEEDS............................................. 18
IV. SELLING SECURITY HOLDERS.................................... 18
V. DESCRIPTION OF THE CONVERTIBLE NOTES........................ 20
A. General................................................. 20
B. Form, Denomination and Registration..................... 21
C. Conversion of the Convertible Notes..................... 22
D. Optional Redemption by Nextel........................... 25
E. Repurchase at the Option of the Holder.................. 25
F. Events of Default; Notice and Waiver.................... 26
G. Modification of the Indenture........................... 27
H. Information Concerning the Trustee...................... 28
I. Notices................................................ 28
VI. DESCRIPTION OF CAPITAL STOCK................................ 28
A. General................................................. 28
B. Common Stock............................................ 28
C. Preferred Stock......................................... 30
D. Relevant Provisions of Our Certificate of Incorporation,
Our By-laws and Delaware Law................................ 33
VII. DILUTION.................................................... 34
VIII. UNITED STATES FEDERAL INCOME TAX CONSEQUENCES............... 35
IX. PLAN OF DISTRIBUTION........................................ 39
X. LEGAL MATTERS............................................... 40
XI. EXPERTS..................................................... 40
XII. WHERE YOU CAN GET MORE INFORMATION.......................... 40
A. Available Information................................... 40
B. Incorporation of Documents by Reference................. 40
</TABLE>
iii
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I. SUMMARY
This summary highlights basic information about Nextel and the securities
offered by the selling security holders, but does not contain all information
important to you. You should read the more detailed information and consolidated
financial statements and the related notes appearing elsewhere and incorporated
by reference in this prospectus.
A. NEXTEL
We provide a wide array of digital wireless communications services
throughout the United States. We offer a differentiated, integrated package of
digital wireless communications services under the Nextel brand name, primarily
to business users. Our digital mobile network constitutes one of the largest
integrated wireless communications systems utilizing a single transmission
technology in the United States. This digital technology, developed by Motorola,
Inc., is referred to as the integrated Digital Enhanced Network, or iDEN,
technology.
A customer using our digital mobile network is able to access:
- digital mobile telephone service;
- digital two-way radio dispatch service, which provides instant
conferencing capabilities and is marketed as "Nextel Direct Connect"
service;
- the Internet and new digital two-way mobile data services, marketed as
"Nextel Online" service;
- paging; and
- short-messaging service.
We refer to the handset device on which we deliver these services as a
subscriber unit. As of March 31, 2000:
- we provided service to about 5,056,000 digital subscriber units in the
United States; and
- our digital mobile network or the compatible digital mobile network of
Nextel Partners, Inc., a joint venture in which we are a participant, was
operational in areas in and around 96 of the top 100 metropolitan
statistical areas in the United States.
On April 25, 2000, we commercially launched our Nextel Online service
offering in 43 major markets, including more than 750 cities across the United
States, for Internet capable subscriber units developed and manufactured by
Motorola, the "i1000plus," the "i500plus" and the "i700plus." These new handsets
are the first in a product line that incorporates micro-browsers and enables
wireless Internet services, by supplying web-based applications and content
directly to our subscribers.
On April 3, 2000, we launched our Nextel Worldwide service offering with
the introduction of the i2000 subscriber unit. The i2000, being manufactured by
Motorola, is a dual mode subscriber unit that operates on both the iDEN
technology used by Nextel and the Global System for Mobile Communications
digital wireless technology that has been established as the current digital
cellular communications standard in Europe and elsewhere. The i2000 allows
digital roaming in more than 65 countries worldwide with the convenience of one
phone, one number and one bill.
In addition to our domestic operations, we have ownership interests in
international wireless companies through our substantially wholly owned
subsidiary, Nextel International, Inc. Nextel International, through its
subsidiaries and affiliates, provides wireless communications services in and
around various major metropolitan market areas in Latin America, Asia and
Canada. As of March 31, 2000, along with Nextel International, we provided our
service in ten of the world's 25 largest cities.
Our principal executive and administrative facility is located at 2001
Edmund Halley Drive, Reston, Virginia 20191, and our telephone number is (703)
433-4000.
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B. USE OF PROCEEDS
We will not receive any cash proceeds from the sale of the securities being
offered by the selling security holders.
C. THE CONVERTIBLE NOTES
SECURITIES OFFERED......... $1,150,000,000 principal amount of 5 1/4%
convertible senior notes due January 15, 2010. See
"V. Description of the Convertible Notes."
INTEREST................... 5 1/4% per year on the principal amount, payable
semi-annually in arrears in cash on January 15 and
July 15 of each year, beginning July 15, 2000. The
first interest payment will include interest from
January 26, 2000.
CONVERSION................. The convertible notes will be convertible into our
common stock at the option of the holder at any
time before redemption, repurchase or maturity at a
conversion price of $148.80 per share, subject to
adjustment in specified events. See "V. Description
of the Convertible Notes -- C. Conversion of the
Convertible Notes."
OPTIONAL REDEMPTION........ At any time on or after January 18, 2003, we may
redeem the convertible notes. The initial
redemption price is 103.500% of the principal
amount, plus accrued interest. The redemption price
will decline on January 15 of each year, beginning
on January 15, 2004, as set forth in "V.
Description of the Convertible Notes -- D. Optional
Redemption by Nextel."
FUNDAMENTAL CHANGE......... Upon the occurrence of any "Fundamental Change," as
described in this prospectus, and before the
maturity or redemption of the convertible notes,
each holder will have the right to require us to
repurchase all or any part of that holder's
convertible notes at a price equal to 100% of the
principal amount of the convertible notes being
repurchased, plus accrued interest. See "V.
Description of the Convertible Notes -- E.
Repurchase at the Option of the Holder."
SINKING FUND............... None.
RANKING.................... The convertible notes will rank:
- equally with all of our other unsubordinated,
unsecured indebtedness;
- junior to all of our secured indebtedness;
- junior to all liabilities of our subsidiaries
At March 31, 2000, we had $6.6 billion of
indebtedness, and our subsidiaries had $7.0 billion
of indebtedness and current liabilities.
NASDAQ SYMBOL FOR COMMON
STOCK.................... NXTL.
RISK FACTORS............... You should read the "Risk Factors" section
beginning on page 5 of this prospectus, as well as
the other cautionary statements throughout the
entire prospectus, to ensure that you understand
the risks associated with an investment in the
convertible notes and the common stock.
2
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D. SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The financial information below for the years ended December 31, 1995,
1996, 1997, 1998, and 1999 has been derived from our audited consolidated
financial statements. The financial information for the three months ended March
31, 1999 and 2000 has been derived from our unaudited financial statements and
reflects only normal recurring adjustments necessary for the fair presentation
of this information. You should not expect the results of operations of interim
periods to be an indication of results for a full year. This information is only
a summary and should be read in conjunction with our historical financial
statements contained in reports filed with the Securities and Exchange
Commission. See "XII. Where You Can Get More Information -- A. Available
Information."
Acquisitions. Our results were affected by business combinations,
acquisitions and investments involving both domestic and international
companies. In July 1995, we completed the acquisition of substantially all of
Motorola's 800 MHz specialized mobile radio licenses in the continental United
States and mergers with OneComm Corporation and American Mobile Systems,
Incorporated. In January 1996, we completed a merger with Dial Page, Inc.
Additional information regarding acquisitions completed in 1997, 1998 and 1999
can be found in note 2 to the consolidated financial statements in our Annual
Report on Form 10-K for the year ended December 31, 1999.
Income Tax Provision. As a result of operating results and the change in
useful lives of some intangible assets, we increased our valuation allowance for
deferred tax assets resulting in a tax provision of about $259 million in 1997.
Ratio of Earnings to Fixed Charges. For the purpose of computing the ratio
of earnings to fixed charges, earnings consist of loss before income taxes plus
fixed charges less capitalized interest and less income (loss) from equity
method investments and loss (income) attributable to minority interests. Fixed
charges consist of:
- interest on all indebtedness and amortization of deferred financing costs
and amortization of original issue discount; and
- that portion of rental expense which we believe to be representative of
interest.
The deficiency of earnings to cover fixed charges for the year ended
December 31, 1995 was $563 million; for the year ended December 31, 1996 was
$885 million; for the year ended December 31, 1997 was $1,342 million; for the
year ended December 31, 1998 was $1,771 million; for the year ended December 31,
1999 was $1,290 million; for the three months ended March 31, 1999 was $464
million; and for the three months ended March 31, 2000 was $270 million.
You should review notes 12 and 13 to the consolidated financial statements
in our Annual Report on Form 10-K for the year ended December 31, 1999 for a
detailed discussion of our capital stock.
3
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<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------------- ---------------
1995 1996 1997 1998 1999 1999 2000
------ ------ ------- ------- ------- ------ ------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues.............. $ 172 $ 333 $ 739 $ 1,847 $ 3,326 $ 664 $1,079
Cost of revenues................ 152 248 289 516 697 163 214
Selling, general and
administrative................ 194 330 862 1,551 2,094 466 637
Expenses related to corporate
reorganization................ 17 -- -- -- -- -- --
Depreciation and amortization... 236 401 526 832 1,004 228 280
------ ------ ------- ------- ------- ------ ------
Operating loss................ (427) (646) (938) (1,052) (469) (193) (52)
Interest expense, net........... (90) (206) (378) (622) (782) (194) (195)
Other (expense) income, net..... (15) (11) 7 (37) (47) (62) (40)
Income tax benefit
(provision)................... 201 307 (259) 192 28 10 8
------ ------ ------- ------- ------- ------ ------
Loss before extraordinary
item.......................... (331) (556) (1,568) (1,519) (1,270) (439) (279)
Extraordinary item -- loss on
early retirement of debt, net
of tax of $0.................. -- -- (46) (133) (68) -- (104)
Mandatorily redeemable preferred
stock dividends............... -- -- (29) (149) (192) (46) (52)
------ ------ ------- ------- ------- ------ ------
Loss attributable to common
stockholders.................. $ (331) $ (556) $(1,643) $(1,801) $(1,530) $ (485) $ (435)
====== ====== ======= ======= ======= ====== ======
Loss per share attributable to
common stockholders, basic and
diluted:
Loss before extraordinary item
attributable to common
stockholders................ $(2.31) $(2.50) $ (6.41) $ (5.98) $ (4.58) $(1.66) $(0.89)
Extraordinary item............ -- -- (0.18) (0.48) (0.21) -- (0.28)
------ ------ ------- ------- ------- ------ ------
$(2.31) $(2.50) $ (6.59) $ (6.46) $ (4.79) $(1.66) $(1.17)
====== ====== ======= ======= ======= ====== ======
Weighted average number of
common shares outstanding..... 143 223 249 279 319 292 371
====== ====== ======= ======= ======= ====== ======
OTHER FINANCIAL DATA:
Ratio of earnings to fixed
charges (see discussion
above)........................ -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 2000
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(IN MILLIONS)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents, including restricted portion..... $ 5,200
Intangible assets, net...................................... 4,549
Total assets................................................ 19,596
Long-term debt, including current portion................... 11,875
Mandatorily redeemable preferred stock...................... 1,751
Stockholders' equity........................................ 2,562
</TABLE>
4
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II. RISK FACTORS
You should carefully consider the specific factors listed below, as well as
the other information included and incorporated by reference in this prospectus,
before making an investment decision.
A. RISK FACTORS RELATING TO NEXTEL
1. WE HAVE A HISTORY OF NET LOSSES AND NEGATIVE CASH FLOW AND MAY NOT BE ABLE
TO SATISFY OUR CASH NEEDS FROM OPERATIONS.
We have never been profitable and have experienced negative cash flow since
our start in 1987. We had losses attributable to common stockholders of about
$1.5 billion during 1999 and about $435 million for the three months ended March
31, 2000. Our accumulated deficit was about $6.1 billion at March 31, 2000. We
expect that losses will continue over the next several years. We cannot know
when, if ever, net cash generated by our internal business operations will
support our growth and continued operations.
2. WE WILL NEED SUBSTANTIAL AMOUNTS OF ADDITIONAL FINANCING.
a. REASONS WE WILL NEED CASH.
We anticipate that we will need substantial amounts of cash for:
- capital expenditures to build and enhance our digital mobile network,
including those to construct or modify network elements required for
Nextel Online or to enable wireless Internet connectivity and other
digital two-way mobile data applications;
- operating expenses relating to our digital mobile network;
- potential acquisitions, including negotiated acquisitions of spectrum
from third parties and any future Federal Communications Commission or
other government-sponsored auctions of spectrum;
- debt service requirements; and
- other general corporate expenditures.
We expect our cash needs will exceed our cash flows from operating
activities through 2000. In addition, we may need to revise our business plan to
respond to competitive and other factors, so our need for cash may increase.
b. OUR CURRENT FINANCING AGREEMENTS ARE LIMITED AND CONTAIN RESTRICTIONS ON
ADDITIONAL FINANCINGS THAT MAY RESTRICT GROWTH AND ADVERSELY AFFECT
OPERATIONS.
Our long-term cash needs may be much greater than our cash on hand and
availability under our existing financing agreements. As a result, in the future
we may have to raise substantial amounts of additional funds, in the form of
equity or debt, to support any significant acquisitions of additional spectrum,
as well as our currently expected growth and operations. If we are unable to do
so, we may not be able to pursue or consummate potential significant spectrum
acquisitions or to expand the coverage and capacity of our network to meet the
demands of our anticipated growth. Our inability to achieve contemplated levels
of growth or to acquire additional spectrum required to support or provide
contemplated "third generation" or "3G" mobile wireless service offerings could
adversely affect our financial results and may adversely affect the value of the
convertible notes and the common stock.
Our bank credit facility as in effect on March 31, 2000 provided for total
secured financing capacity of up to $6.0 billion from our bank lenders, provided
that we satisfy financial and other conditions. As of March 31, 2000, we had
borrowed about $3.7 billion of this secured financing. The availability of
additional financing under our bank credit facility is also subject to the
satisfaction of covenants under
5
<PAGE> 10
indentures relating to our public notes. Our access to additional funds may be
limited by the terms of our existing financing agreements, including:
- covenants that restrict the amount of additional borrowings, including
additional borrowings under existing financing arrangements;
- covenants that restrict our grant of liens on assets, which affects our
ability to obtain new secured financing; and
- existing debt service requirements.
c. FUNDING REQUIREMENTS FOR OUR INTERNATIONAL OPERATIONS AND GROWTH MAY
CAUSE EVEN GREATER CASH NEEDS, WHICH MAY RESULT IN LESS FUNDING
AVAILABLE FOR OUR DOMESTIC GROWTH AND OPERATIONS.
Based on Nextel International's assessment of the business activity and
related cash needs of its subsidiaries and affiliates that are controlled by or
that rely substantially on Nextel International for further funding, Nextel
International believes that it will have to rely on external sources of funding
to supply the cash needed to implement its business plan and continue its
operations through 2000. These external sources primarily include borrowings
under Nextel International's existing bank and vendor credit lines and issuances
of its securities, including to us or our other subsidiaries. We, therefore,
currently expect that we may need to fund a significant portion of Nextel
International's cash needs in 2000. This would increase our own cash needs,
which could result in a lesser amount of cash available to us for domestic use.
d. TO OBTAIN ADDITIONAL SPECTRUM, INCLUDING SPECTRUM THAT MAY BE AWARDED IN
GOVERNMENT-SPONSORED AUCTIONS, WE MAY BE REQUIRED TO RAISE ADDITIONAL
CAPITAL.
If we were to acquire additional spectrum, including through participation
as a bidder or member of a bidding group in government-sponsored auctions of
spectrum, we may need to raise significant amounts of additional capital for
these purposes, as well as to finance the pursuit of any new business
opportunities associated with our acquisitions of additional spectrum. The
Federal Communications Commission has publicly stated that specified personal
communication services spectrum licenses initially awarded to affiliates of
NextWave Communications, Inc. had automatically canceled and will be included in
a re-auction of spectrum scheduled to occur in July 2000. The Federal
Communications Commission also has publicly announced additional spectrum
auctions scheduled to occur in 2000.
We cannot assure you:
- that any or all of these spectrum auctions will occur or, if so, on their
currently announced schedules;
- in which auctions we will participate, alone or as a member of a bidding
group;
- whether we or any bidding group in which we are a participant will be a
successful bidder and will be awarded spectrum licenses in any of these
auctions; or
- what amounts would be required to be bid to prevail in any of these
auctions.
We cannot assure you that we will be able to accomplish any spectrum
acquisition or that the necessary additional capital for that purpose will be
available to us on acceptable terms, or at all. If sufficient additional capital
is not available, we may be unable to complete any spectrum acquisition or the
amount of funding available to us for our existing businesses would be reduced.
6
<PAGE> 11
e. OTHER FACTORS MAY ADVERSELY AFFECT OUR ACCESS TO ADDITIONAL FINANCING,
AND WE MAY HAVE TO CURTAIL OUR BUSINESS IF WE CANNOT ACCESS ADDITIONAL
FINANCING.
Our access to additional funds also may be limited by:
- general market conditions that adversely affect the availability or cost
of financings;
- market conditions affecting the telecommunications industry in general;
and
- specific factors affecting our attractiveness as a borrower or investment
vehicle, including:
(1) the terms of our arrangements with Motorola that relate to
Motorola's ownership interest in us, and the terms of options and
warrants issued to others, that may make equity financings more
difficult;
(2) the ability to relocate current spectrum licensees from some
frequencies in order to remove them from spectrum as to which we
were the highest bidder at an auction;
(3) the potential commercial opportunities and risks associated with
implementation of our business plan;
(4) the market's perception of our performance and assets; and
(5) the actual amount of cash we need to pursue our business strategy.
f. FUNDING FOR OUR CAPITAL NEEDS IS NOT ASSURED, AND WE MAY HAVE TO CURTAIL
OUR BUSINESS IF WE CANNOT FIND ADEQUATE FUNDING.
We currently have no legally binding commitments or understandings with any
third parties to obtain any material amount of additional equity or debt
financing. We cannot assure you that we will be able to obtain any additional
financing in the amounts or at the times that we may require the financing or,
if we do obtain any financing, that it would be on acceptable terms. As a
result, we cannot assure you that we will have adequate capital to implement
future expansions and enhancements of our digital mobile network, to maintain
our current levels of operation or to pursue strategic acquisitions or other
opportunities to increase our spectrum holdings. Our failure to obtain
sufficient additional financing could result in the delay or abandonment of some
or all of our development, expansion and acquisition plans and expenditures,
which could have an adverse effect on us and on the value of the convertible
notes and the common stock.
3. OUR FUTURE PERFORMANCE WILL DEPEND ON OUR ABILITY TO SUCCEED IN THE HIGHLY
COMPETITIVE WIRELESS COMMUNICATIONS INDUSTRY.
Our ability to compete effectively with established and prospective
wireless communications service providers depends on many factors, including:
- IF OUR WIRELESS COMMUNICATIONS TECHNOLOGY DOES NOT PERFORM IN A MANNER
THAT MEETS CUSTOMER EXPECTATIONS, WE WILL BE UNABLE TO ATTRACT AND RETAIN
CUSTOMERS, WHICH WOULD ADVERSELY AFFECT US. Customer acceptance of the
services we offer is and will continue to be affected by technology-
based differences and by the operational performance and reliability of
system transmissions on our digital mobile network. If we are unable to
address and resolve satisfactorily performance or other transmission
quality issues as they arise, or if these issues limit our ability to
expand our network coverage or capacity as currently planned, or if these
issues were to place us at a competitive disadvantage to other wireless
service providers in our markets, we may have difficulty attracting and
retaining customers, which would adversely affect us and the value of the
convertible notes and the common stock.
- IF WE CANNOT EXPAND, PROVIDE AND MAINTAIN OUR SYSTEM COVERAGE, THEN OUR
GROWTH AND OPERATIONS, AS WELL AS THE VALUE OF YOUR INVESTMENT, WOULD BE
ADVERSELY AFFECTED. We will not be able to provide roaming system
coverage comparable to that currently available through roaming
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arrangements from cellular and some personal communication services
operators, unless and until a nationwide digital mobile network build-out
is substantially completed. This places us at a competitive disadvantage,
as some other providers currently have roaming agreements that provide
coverage of each other's markets throughout the United States, including
areas where our network, or that of Nextel Partners, has not been or will
not be built. In addition, some of our competitors provide their
customers with subscriber units with both digital and analog capability,
which expands their coverage, while we have only digital capability. We
cannot assure you that we, either alone or together with Nextel Partners,
will be able to achieve sufficient system coverage or that a sufficient
number of customers or potential customers will be willing to accept
system coverage limitations as a trade-off for the enhanced
multi-function wireless communications package we provide on our
nationwide digital mobile network.
- WE DO NOT HAVE THE EXTENSIVE DIRECT AND INDIRECT CHANNELS OF DISTRIBUTION
FOR OUR DIGITAL MOBILE NETWORK PRODUCTS AND SERVICES THAT SOME OF OUR
COMPETITORS HAVE, WHICH MAY ADVERSELY AFFECT OUR OPERATING RESULTS AND
THE VALUE OF YOUR INVESTMENT. Many of our competitors have established
extensive networks of retail locations and multiple distribution
channels, and so enjoy a competitive advantage over us in these areas. We
have increased the proportion of our digital mobile network customers
that we obtain through our indirect distributor network, and we currently
anticipate that we will continue to rely heavily on indirect distribution
channels to achieve greater market penetration for our digital wireless
service offerings. However, as we expand our retail subscriber base
through increased reliance on indirect distribution channels, as price
competition in the wireless industry intensifies and as our product and
service offerings begin to attract increasing numbers of individual and
non-business users, our average revenue per digital subscriber unit may
decrease and our customer retention may be adversely affected.
- OUR INABILITY TO MAINTAIN PRICING PACKAGES ATTRACTIVE TO CUSTOMERS MAY
ADVERSELY AFFECT OPERATING RESULTS, WHICH COULD ADVERSELY AFFECT THE
VALUE OF YOUR INVESTMENT.
a. SOME OF OUR COMPETITORS ARE FINANCIALLY STRONGER THAN WE ARE,
WHICH ALLOWS THEM TO PRICE THEIR SERVICE PACKAGES AT LEVELS
BELOW THOSE THAT WE CAN OR ARE WILLING TO MATCH.
Our ability to compete based on the price of our digital subscriber units
and service offerings will be limited. This could adversely affect our growth.
b. OUR EQUIPMENT IS MORE EXPENSIVE THAN SOME COMPETITORS, WHICH
MAY ADVERSELY AFFECT OUR GROWTH AND OPERATING RESULTS.
We currently market multi-function digital subscriber units. Our subscriber
units are, and are likely to remain, significantly more expensive than analog
subscriber units and are, and are likely to remain, somewhat more expensive than
digital cellular or personal communication services subscriber units that do not
incorporate a comparable multi-function capability. Although we believe that our
multi-function subscriber units currently are competitively priced compared to
multi-function digital cellular and personal communication services subscriber
units, the higher cost of our equipment may make it more difficult or less
profitable to attract customers who do not place a high value on our unique
multi-service offering. This may reduce our growth opportunities or
profitability and may adversely affect the value of the convertible notes and
the common stock.
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c. WE MAY FACE CONTINUING PRESSURE TO REDUCE PRICES, WHICH COULD
ADVERSELY AFFECT OPERATING RESULTS AND THE VALUE OF YOUR
INVESTMENT.
Over the past several years, as the number of wireless communications
providers in our market areas has increased, our competitors' prices in these
markets have generally decreased. We may encounter further market pressures to:
- reduce our digital mobile network service offering prices;
- restructure our digital mobile network service offering packages to
offer more value;
- respond to particular short term, market specific situations, for
example, special introductory pricing or packages that may be offered
by new providers launching their service in a particular market; or
- remain competitive if wireless service providers generally continue to
reduce the prices charged to their customers.
- OUR EFFORTS TO KEEP PACE WITH TECHNOLOGICAL CHANGE MAY BE UNSUCCESSFUL,
WHICH COULD ADVERSELY AFFECT OPERATING RESULTS AND THE VALUE OF YOUR
INVESTMENT. Our digital technology could become obsolete. We rely on
digital technology that is not compatible with, and competes with, other
forms of digital and non-digital voice communication technology.
Competition among these differing technologies can:
- segment the user markets, which could reduce demand for specific
technologies, including our technology;
- reduce the resources devoted by third party suppliers, including
Motorola, which supplies all of our current digital technology, in
developing or improving the technology for our systems; and
- adversely affect market acceptance of our services.
We cannot assure you that our digital technology will successfully compete
with the other forms of digital and non-digital communication systems. Further,
new digital or non-digital communication transmission technology may develop
that will cause our existing technology to be obsolete or otherwise impair
market acceptance of our technology.
- OUR GROWTH MAY EXCEED THE CAPABILITIES OF OUR SYSTEMS, HURTING OUR
PERFORMANCE AND THE VALUE OF YOUR INVESTMENT.
a. WE FACE LIMITATIONS ON OUR ABILITY TO INCREASE SUBSCRIBERS,
WHICH CAN LIMIT OUR GROWTH AND PERFORMANCE.
Our ability to continue to increase the number of subscribers on our
digital mobile network depends on a variety of factors, including:
- the ability to successfully plan for additional system capacity at
levels needed to meet anticipated new subscribers and the related
increases in system usage;
- the ability to obtain additional radio spectrum when and where
required; and
- the availability of a sufficient quantity of cell sites, system
infrastructure equipment and subscriber units, of the appropriate
models and types, to meet the demands and preferences of potential
subscribers to the digital mobile network.
b. WE MAY FACE LIMITATIONS ON AVAILABILITY OF CELL SITES AND
EQUIPMENT, WHICH CAN LIMIT OUR GROWTH AND PERFORMANCE.
Although we believe we have secured sufficient cell sites at appropriate
locations in our markets to meet planned system coverage and capacity targets,
we cannot assure you that we will meet those needs in
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the future. We generally have been able to obtain adequate quantities of base
radios and other system infrastructure equipment from Motorola and other
suppliers, and adequate volumes and mix of subscriber units and related
accessories, to meet subscriber and system loading rates, but we cannot assure
you that quantities will be sufficient in the future. Additionally, we have
contractual arrangements with Nextel International and Nextel Partners that
contemplate that, in the event of shortages of that equipment, available
supplies would be allocated proportionately among us and those entities.
c. WE HAVE POTENTIAL SYSTEMS LIMITATIONS ON ADDING CUSTOMERS,
WHICH CAN LIMIT OUR GROWTH AND PERFORMANCE.
Even if our system is technically functional, other factors may affect our
ability to successfully add customers to our digital mobile network, including:
- the adequacy and efficiency of our information systems, business
processes and related support functions;
- the length of time between customer order to activation of service on
the digital mobile network, which currently is longer than that of
some of our competitors; and
- our ability to improve the efficiency and speed of the processes for
our customer service and accounts receivable collection functions.
Customer reliance on our customer service functions may increase as we add
digital mobile network customers through indirect distribution channels and
through direct sales channels not involving direct face-to-face contact with a
sales representative, for example, phone order sales or sales through our
website, nextel.com. Our inability to timely and efficiently meet the demands
for our services could decrease or postpone subscriber growth, or delay or
otherwise impede billing and collection of amounts owed, which would adversely
affect our growth and performance.
- IF COMPETITORS PROVIDE TWO-WAY RADIO DISPATCH SERVICES, WE WILL LOSE A
COMPETITIVE ADVANTAGE. Our two-way radio dispatch services are currently
not available through traditional cellular or personal communication
services providers; however, if either personal communication services or
cellular operators provide two-way radio dispatch or comparable services
in the future, our competitive advantage may be impaired.
We cannot predict the competitive effect that any of these factors, or any
combination of these factors, will have on us, or whether we will compete
successfully in the future.
4. REGULATORY AND OTHER FACTORS COULD DELAY OR PREVENT US FROM OFFERING
SERVICES IN NEW MARKET AREAS, WHICH COULD ADVERSELY AFFECT THE VALUE OF
YOUR INVESTMENT.
Before fully implementing our digital mobile network in a new market area
or expanding coverage in an existing market area, we must complete systems
design work, find appropriate sites and construct necessary transmission
structures, receive regulatory approvals, obtain and free up frequency channels
now devoted to non-digital transmissions and begin systems optimization. These
processes take weeks or months to complete, and may be hindered or delayed by
many factors, including unavailability of antenna sites at optimal locations,
land use and zoning controversies and limitations of available frequencies. We
cannot know when, if ever, our digital technology will be available for
commercial use in new markets or can be expanded in existing markets.
5. WE RELY ON MOTOROLA FOR SUBSTANTIALLY ALL OF OUR EQUIPMENT AND TECHNOLOGY,
AND ANY FAILURE OF MOTOROLA TO PERFORM WOULD ADVERSELY AFFECT OUR OPERATING
RESULTS AND THE VALUE OF YOUR INVESTMENT.
There is a risk that the failure by Motorola to deliver necessary
technology improvements and enhancements and system infrastructure and
subscriber equipment on a timely, cost-effective basis would
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have an adverse effect on our growth and operations. Motorola is currently our
sole source for the digital mobile network and subscriber unit equipment we use
throughout our markets. We expect to rely principally on Motorola for the
manufacture of a substantial portion of the equipment necessary to construct,
enhance and maintain our digital mobile network and subscriber unit equipment
for the next several years. If Motorola does not provide the necessary equipment
to us, then we may not be able to service our existing subscribers or add new
subscribers. We expect that for the next few years, Motorola and competing
manufacturers who are licensed by Motorola will be the only manufacturers of
subscriber equipment that is compatible with our digital mobile network. In late
1999, we entered into a memorandum of understanding with Kyocera Corporation of
Japan with the intent of having Kyocera supply us with a subscriber unit
compatible with our digital mobile network. It is anticipated that Motorola will
license its technology to Kyocera to enable Kyocera to supply those subscriber
units. However, we cannot predict when or whether Kyocera and Motorola will
enter into an appropriate license agreement or that we and Kyocera will be able
to negotiate a mutually acceptable definitive agreement for Kyocera's supply and
our purchase of those subscriber units.
6. AGREEMENTS WITH MOTOROLA REDUCE OUR OPERATIONAL FLEXIBILITY AND MAY
ADVERSELY AFFECT OUR GROWTH OR OPERATING RESULTS, WHICH COULD ADVERSELY
AFFECT THE VALUE OF YOUR INVESTMENT.
Our agreements with Motorola impose limitations and conditions on our
ability to use other technologies. These terms may operate to delay or prevent
us from employing new or different technologies that perform better or are
available at a lower cost because of the additional economic costs and other
impediments to change arising under the Motorola agreements. For example, our
equipment purchase agreement with Motorola provides that we must provide
Motorola with notice of our determination that Motorola's technology is no
longer suited to our needs at least six months before publicly announcing or
entering into a contract to purchase an alternate technology.
In addition, if Motorola manufactures, or elects to manufacture, the
alternate technology that we elect to deploy, we must give Motorola the
opportunity to supply 50% of our infrastructure requirements for the alternate
technology for three years. Finally, if after a switch to an alternate
technology we do not maintain operational Motorola infrastructure equipment at
the majority of our cell sites that are deployed at the date the switch to an
alternate technology is first publicly announced, Motorola may require that all
financing provided by Motorola to us be repaid.
7. OUR INTERESTS MAY CONFLICT WITH THOSE OF MOTOROLA. ANY CONFLICT COULD
ADVERSELY AFFECT OUR GROWTH, OPERATING RESULTS OR STRATEGIC FLEXIBILITY AND
THE VALUE OF YOUR INVESTMENT.
Motorola and its affiliates engage in wireless communications businesses,
and may in the future engage in additional businesses, which do or may compete
with some or all of the services we offer through our digital mobile network.
Although we believe that our relationship with Motorola reflects the realities
of purchasing from a competitor, we cannot assure you that the potential
conflict of interest will not adversely affect us in the future. Motorola's
right to nominate two people for election to our board of directors could give
them additional leverage in the event any conflict of interest were to arise. In
addition, Motorola is one of our significant stockholders, which creates
potential conflicts of interest, particularly with regard to significant
transactions.
8. SINCE WE OPERATE IN A REGULATED INDUSTRY, WE MAY BE ADVERSELY AFFECTED BY
GOVERNMENTAL REGULATION.
The Federal Communications Commission regulates the licensing, operation,
acquisition and sale of our specialized mobile radio businesses. Future changes
in regulation or legislation and Congress' and the Federal Communications
Commission's continued allocation of additional commercial mobile radio
services, which include specialized mobile radio, cellular or personal
communication services, spectrum could impose significant additional costs on us
either in the form of direct out of pocket costs or additional compliance
obligations. These regulations can also have the effect of introducing
additional competitive entrants to the already crowded wireless communications
marketplace.
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Nextel International's operations are subject to similar effects caused by
operating in a regulated industry, since its operations are regulated by the
foreign countries in which its business is conducted and are also subject to
regional and local regulation.
9. WE HAVE SIGNIFICANT INTANGIBLE ASSETS, WHICH MAY NOT BE ADEQUATE TO SATISFY
OUR OBLIGATIONS IN THE EVENT OF A LIQUIDATION.
If we default on debt or if we were liquidated, the value of our assets may
not be sufficient to satisfy our obligations, including our obligations in
respect of the convertible notes. We have a significant amount of intangible
assets, such as licenses granted by the Federal Communications Commission. The
value of these licenses will depend significantly upon the success of our
digital mobile network business and the growth of the specialized mobile radio
and wireless communications industries in general. We had a net tangible book
value deficit of about $2.3 billion as of March 31, 2000.
10. WE ARE SUSCEPTIBLE TO CONTROL BY SIGNIFICANT STOCKHOLDERS.
Motorola and entities controlled by Craig O. McCaw hold significant blocks
of our outstanding stock. In addition, an affiliate of Mr. McCaw may designate
at least one fourth of our board of directors and may select, from these McCaw
representatives on the board of directors, a majority of the operations
committee of our board of directors, which has significant authority relating to
our business strategy, budgets, financing arrangements and in the nomination and
oversight of specified executive officers. As a result, Mr. McCaw may exert
significant influence over our affairs. Presently, three of the ten members of
our board of directors are designees of Mr. McCaw's affiliates. In addition,
Daniel F. Akerson, formerly one of our executive officers, currently holds
positions with NEXTLINK Communications, Inc., which is controlled by Mr. McCaw.
Mr. Akerson continues to serve as chairman of our board of directors and as a
member of the operations committee of the board, but he is not a designee of Mr.
McCaw's affiliates. Under its agreements with us, Motorola may nominate two
directors to our board of directors. In addition, Motorola has agreed to support
the decisions and recommendations of the operations committee and to vote its
shares of common stock accordingly, subject to specified limitations.
If Mr. McCaw and Motorola choose to act together, they could have a
sufficient number of members on our board of directors and voting interest in us
to exert significant influence over, among other things:
- approval of amendments to our certificate of incorporation, mergers,
sales of assets or other major corporate transactions as well as other
matters submitted for stockholder vote;
- any takeover attempt; and
- whether particular matters are submitted for a vote of our stockholders.
Mr. McCaw and his affiliates have and, subject to the terms of applicable
agreements, may acquire an investment or other interest in entities that provide
wireless telecommunications services that could potentially compete with us.
Under the relevant agreements, Mr. McCaw and his controlled affiliates may not,
for one year after the termination of the operations committee, participate in
other two-way terrestrial-based mobile wireless communications systems in any
part of North America or South America unless these opportunities have first
been presented to and waived or rejected by us.
11. OUR COMMITMENTS TO ISSUE ADDITIONAL COMMON STOCK MAY ADVERSELY AFFECT THE
MARKET PRICE OF OUR COMMON STOCK AND MAY IMPAIR OUR ABILITY TO RAISE
CAPITAL.
We currently have outstanding commitments in various forms, including
warrants, options and convertible securities, to issue a substantial number of
new shares of our common stock. The shares subject to these issuance
commitments, to some degree, will be issued in transactions registered with the
Securities and Exchange Commission and thus will be freely tradable. In many
other instances, these shares are subject to grants of registration rights that,
if and when exercised, would result in those shares becoming freely tradable. We
have also granted registration rights with respect to a significant number of
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our outstanding shares, including shares of common stock issuable upon
conversion of securities issued in some transactions. The exercise of
registration rights by persons holding those shares would permit those persons
to sell those shares without regard to the limitations of Rule 144 under the
Securities Act of 1933. An increase in the number of shares of our common stock
that will become available for sale in the public market may adversely affect
the market price of our common stock and, as a result, could impair our ability
to raise additional capital through the sale of our equity securities or
convertible securities.
12. CONCERNS ABOUT HEALTH RISKS RELATING TO THE USE OF PORTABLE HANDSETS MAY
AFFECT OUR PROSPECTS AND THE VALUE OF YOUR INVESTMENT.
Portable communications devices have been alleged to pose health risks,
including cancer, due to radio frequency emissions from these devices. Studies
performed by wireless telephone equipment manufacturers have investigated these
allegations, and additional studies are ongoing. The actual or perceived risk of
portable communications devices could adversely affect us through a reduced
subscriber growth rate, a reduction in subscribers, reduced network usage per
subscriber or through reduced financing available to the mobile communications
industry.
13. RISKS RELATING TO OUR JOINT INVESTMENTS MAY ADVERSELY AFFECT OUR GROWTH
AND OPERATING RESULTS AND THE VALUE OF YOUR INVESTMENT.
We have entered into a contractual joint venture regarding our ownership
interests in and arrangements with Nextel Partners, and may enter into other
joint ventures or similar arrangements in the future. Outside the United States,
several of our international operations are conducted through entities having
one or more third-party owners, and some of these entities are not controlled by
us. There are risks in participating in arrangements of these types, including
the risk that the other participants may at any time have economic, business or
legal interests or goals that are inconsistent with our goals or those of the
joint enterprise. There also is the risk that a participant may be unable to
meet its economic or other obligations to the joint enterprise and that we may
be required to fulfill some or all of those obligations. We also may be or
become obligated to acquire all or a portion of the ownership interest of some
or all of the other participants in these joint enterprises. In addition, to the
extent that we participate in international arrangements of these types, we will
be subject to various additional risks not present in domestic joint
enterprises.
14. RISKS RELATING TO OUR FOREIGN OPERATIONS MAY ADVERSELY AFFECT OUR GROWTH
AND OPERATING RESULTS AND THE VALUE OF YOUR INVESTMENT.
We currently own interests in and operate international wireless companies
through Nextel International. The risks that relate to these foreign operations
include:
- political, economic and social conditions in the foreign countries where
we conduct operations;
- currency risks and exchange controls;
- potential inflation in the applicable foreign economies;
- the impact of import duties on the cost or prices of infrastructure
equipment and subscriber units;
- foreign taxation of earnings and payments received by Nextel
International from its subsidiaries and affiliates; and
- regulatory changes affecting the telecommunications industry and wireless
communications.
We cannot assure that the risks associated with our foreign operations will
not adversely affect our or Nextel International's operating results or
prospects, particularly as these operations expand in scope, scale and
significance.
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15. OUR NEXTEL ONLINE SERVICES OFFERING IS A NEW SERVICE AND MAY NOT BE
SUCCESSFUL.
Although we are satisfied with the performance of the Nextel Online
services offering during its pre-commercialization testing phase, and are
encouraged by the interest shown in this offering in controlled preliminary
customer trials, we cannot assure you that the Nextel Online services offering
will perform satisfactorily in full scale commercial usage, or that we will not
encounter delays or difficulties in effecting the commercial launch of this
offering during 2000, or that this offering will produce the levels of cost
reduction or of customer acceptance and incremental revenue that we hope to
achieve. We have devoted considerable time and resources to the development of
the Nextel Online suite of wireless Internet services and data applications with
several purposes in mind. First, we expect to use the resulting wireless data
capability and Internet connectivity to allow us to perform fulfillment and
other customer support services more economically, thereby reducing our cost of
conducting business. Second, we believe that our Nextel Online services offering
will provide us with another important point of differentiation from our
competitors, thereby helping us to attract and retain more customers. Finally,
we are looking to this new offering to be a source of future incremental revenue
to counter the impact of increasing competition in our markets on the pricing of
our basic wireless voice services packages.
We may not realize some or all of the benefits that we expected in
constructing and commercializing our Nextel Online services offering:
- if we are unable to commercially implement and maintain this new services
offering;
- if this new services offering produces adverse impacts on the performance
or reliability of our digital mobile network;
- if we or third party developers fail to develop successfully value added
data applications for our customers;
- if a sufficient portion of our customer base is not attracted to this new
services offering; or
- if it otherwise does not achieve a satisfactory level of customer
acceptance.
Any resulting customer dissatisfaction, or failure to realize cost
reductions or incremental revenue, could have an adverse impact on our results
of operations, future growth prospects and perceived value, as well as value of
your investment.
B. RISK FACTORS RELATING TO THE CONVERTIBLE NOTES
1. WE MAY BE UNABLE TO PAY INTEREST ON OR REPAY THE CONVERTIBLE NOTES.
a. WE ARE A HOLDING COMPANY AND OUR SUBSIDIARIES HAVE NO OBLIGATIONS TO THE
HOLDERS OF THE CONVERTIBLE NOTES.
We conduct substantially all of our business through our subsidiaries. Our
cash flow and, consequently, our ability to pay interest in cash and to service
our debt, including the convertible notes, are dependent upon the cash flow of
our subsidiaries and the payment of funds by those subsidiaries in the form of
loans, dividends or otherwise. Our subsidiaries are separate and distinct legal
entities and will have no obligation, contingent or otherwise, to pay any
amounts due on the convertible notes or to make cash available for that purpose.
b. OUR SUBSIDIARIES HAVE RESTRICTIONS ON WHAT THEY CAN PAY TO US.
We and our subsidiaries have entered into financing agreements that impose
significant limits on, and are expected to continue to significantly limit, the
amount of cash available to pay dividends or make loans and cash distributions
to us from our subsidiaries that operate the digital mobile network in our
market areas in the United States. Similarly, financing arrangements and
indentures entered and to be entered into by Nextel International and the
entities in which Nextel International holds investments contain and are
expected to impose restrictions on dividends, loans, advances and other payments
to us by Nextel International and its subsidiaries. As long as these limitations
are in place, money generated by these
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subsidiaries may not be available to us for the payment of interest on the
convertible notes or to repay the convertible notes. If our financing
arrangements limit our ability to pay interest on the convertible notes when
required, we will need to refinance amounts outstanding under those arrangements
to make interest payments. We cannot assure you that we will be able to
refinance this debt. Our failure to pay interest on the convertible notes when
required could result in defaults under some of our debt agreements. We may
enter into financing arrangements in the future that could impose additional
restrictions on dividends, loans, advances and other payments by our
subsidiaries. Some of our existing financing arrangements contain restrictive
covenants applicable to us and some of our subsidiaries, including a limitation
on the amount of debt that we may incur, that may limit our ability to borrow
funds to pay any amounts due under the convertible notes. Finally, some of these
agreements also contain limitations on some "restricted payments," which could
represent amounts we would need to receive to meet our cash interest and debt
service obligations, including those relating to the convertible notes.
2. THE SUCCESSFUL IMPLEMENTATION OF OUR STRATEGY IS NECESSARY FOR US TO MEET
OUR DEBT SERVICE REQUIREMENTS.
The successful implementation of our strategy, including the continuing
build-out, expansion and enhancement of our digital mobile network, obtaining
and retaining a significant number of subscribers and increasing market share
and achieving significant growth in revenues and earnings, is necessary for us
to be able to meet our working capital, capital expenditure and debt service
requirements.
3. THE LIABILITIES OF OUR SUBSIDIARIES AND UNDER OUR SECURED DEBT ARE
EFFECTIVELY SENIOR TO THE CONVERTIBLE NOTES.
As of March 31, 2000, our subsidiaries had outstanding indebtedness and
current liabilities of about $7.0 billion, including trade payables. Assets of
some of our operating subsidiaries secure some of our senior borrowings.
Borrowings by Nextel International or its subsidiaries or affiliates under any
bank or vendor financing agreements that may be entered into from time to time
likewise may be secured by liens on assets of Nextel International or of those
subsidiaries and affiliates and may also be guaranteed by those entities, as
well.
We and our subsidiaries may incur additional debt, subject to limitations,
and that additional debt may be secured. Our secured debt and debt of our
subsidiaries will be effectively senior to the convertible notes. Our
subsidiaries have no obligation to pay amounts due on the convertible notes.
These subsidiaries may use the earnings they generate, as well as their existing
assets, to fulfill their own direct debt service requirements, particularly
because the agreements relating to their debt may restrict their ability to pay
dividends or to make loans, advances or other distributions to us or because the
debt of these subsidiaries may be secured by their assets.
4. OUR HIGH LEVEL OF INDEBTEDNESS COULD ADVERSELY AFFECT OUR ABILITY TO REPAY
THE CONVERTIBLE NOTES.
At March 31, 2000, we had about $11.9 billion of long term debt, including
the current portion. Furthermore, subject to restrictions in the indenture for
the convertible notes and in our other financing agreements, we, along with our
subsidiaries, may incur additional indebtedness from time to time to finance
further deployment of our digital mobile network, provide for working capital or
capital expenditures or for other purposes.
We anticipate that we and our subsidiaries will incur substantial
additional indebtedness in the future in connection with the further build-out,
expansion, and enhancement of our digital mobile network and funding cash flow
deficits, including principally additional borrowings under the terms of the
bank financing agreements.
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Our high level of indebtedness could have important consequences to holders
of the convertible notes, including, but not limited to, the following:
- limiting our ability to obtain additional financing for acquisitions,
working capital, capital expenditures or other purposes;
- limiting our ability to use operating cash flow in other areas of our
business because we must dedicate a substantial portion of these funds to
make cash interest payments and fund required principal payments on our
debt;
- limiting our ability to borrow additional funds or to dispose of assets;
- limiting our ability to compete with others in our industry who are not
as highly leveraged; and
- limiting our ability to react to changing market conditions, changes in
our industry and economic downturns.
5. IF WE ARE UNABLE TO REFINANCE OUR EXISTING INDEBTEDNESS, THERE WOULD BE AN
ADVERSE EFFECT ON YOUR INVESTMENT.
We currently have substantial debt obligations that will mature before the
maturity of the convertible notes. In addition, we have preferred stock that we
are required to redeem before the maturity of the convertible notes. We have
begun payment of cash interest on some of our public notes and also must begin
to pay cash interest on some other outstanding debt and cash dividends on some
outstanding shares of preferred stock before the maturity of the convertible
notes. We may not be able to generate sufficient funds from operations to repay
all of those obligations as they are currently scheduled to become due.
Accordingly, it will be necessary to refinance some of those obligations at or
before their respective maturities or mandatory redemption dates. In addition,
if we are prohibited under the terms of any of our debt from paying dividends on
our preferred stock, we will have to refinance that debt or (to the extent
permitted under the terms of our debt) refinance the preferred stock prior to
the time the dividends would need to be paid. Our ability to refinance these
obligations will depend on, among other factors, our financial condition at the
time of the refinancing, the restrictions contained in our remaining financing
agreements and market conditions. We cannot assure you that we will be able to
refinance those obligations. If we are unable to refinance those obligations, or
unable to obtain satisfactory terms, there could be an adverse effect on us,
including on our ability to pay cash interest, and make scheduled principal
repayments on our indebtedness, including the convertible notes. This risk
compounds the risks associated with our need for additional financing in order
to maintain our growth.
6. WE MAY BE UNABLE TO REPURCHASE YOUR CONVERTIBLE NOTES UPON A FUNDAMENTAL
CHANGE.
If we experience a Fundamental Change, as defined in the indenture, holders
of the convertible notes may require us to repurchase the convertible notes at
100% of their face amount plus any accrued and unpaid interest. The term
Fundamental Change is limited to specified transactions and may not include
other events that might adversely affect our financial condition, nor would the
requirement that we offer to repurchase the convertible notes upon the
occurrence of a Fundamental Change necessarily afford holders of the convertible
notes protection if we undertake a reorganization, merger or similar transaction
in which we incur substantial additional debt. Similar events, some of which do
not represent a Fundamental Change for purposes of the convertible notes, may
also trigger similar repurchase obligations under some of our other financing
arrangements. We may not be able to pay you the required price for the
convertible notes you present to us at the time of a Fundamental Change because
we may not have enough funds at that time or the terms of our other financing
agreements may prevent us from making those payments.
7. THERE IS NO PUBLIC MARKET FOR THE CONVERTIBLE NOTES AND IF A MARKET
DEVELOPS, TRADING PRICES MAY BE LOWER THAN THE OFFERING PRICE.
There is no existing trading market for the convertible notes. We cannot
assure you that any public market for the convertible notes will develop. If a
market does develop, the convertible notes could trade
16
<PAGE> 21
at prices that may be lower than their initial offering price depending on many
factors, including the market price of the common stock into which the
convertible notes are convertible, prevailing interest rates, our operating
results and the market for similar securities.
8. VOLATILITY IN THE PRICE OF OUR COMMON STOCK COULD RESULT IN A LOWER TRADING
PRICE THAN YOUR CONVERSION OR PURCHASE PRICE.
The market price of our common stock has fluctuated over a wide range since
it began trading publicly in 1992. In addition, the stock market in recent years
has experienced significant price and volume fluctuations that have often been
unrelated to the operating performance of companies. These fluctuations have
particularly affected the market prices of the stocks of telecommunications
companies. The market price of our common stock may continue to fluctuate in the
future. Negative fluctuations in the market price of our common stock could
adversely impact the trading price of the convertible notes.
C. OUR FORWARD-LOOKING STATEMENTS ARE SUBJECT TO A VARIETY OF FACTORS THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM CURRENT BELIEFS
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995: Some of the statements made in, or incorporated by reference into, this
prospectus are not historical or current facts, but deal with potential future
circumstances and developments. They can be identified by the use of
forward-looking words such as "believes," "expects," "plans," "may," "will,"
"would," "could," "should" or "anticipates" or other comparable words, or by
discussions of strategy that involve risks and uncertainties. We warn you that
these forward-looking statements are only predictions, which are subject to
risks and uncertainties including financial variations, changes in the
regulatory environment, industry growth and trend predictions. We have attempted
to identify, in context, some of the factors that we currently believe may cause
actual future experience and results to differ from our current expectations
regarding the relevant matter or subject area. The operation and results of our
wireless communications business also may be subject to the effect of other
risks and uncertainties in addition to the other qualifying factors identified
in the above "Risk Factors" section and elsewhere in this prospectus, including,
but not limited to:
- general economic conditions in the geographic areas and occupational
market segments that we are targeting for our digital mobile network
service;
- the availability of adequate quantities of system infrastructure and
subscriber equipment and components to meet our service deployment and
marketing plans and customer demand;
- the success of efforts to improve and satisfactorily address any issues
relating to our digital mobile network performance;
- the continued successful performance of the technology being deployed in
our various market areas and the success of technology deployed in
connection with our Nextel Online services offering;
- market acceptance of our new service offerings, including Nextel Online
and Nextel Worldwide;
- the ability to achieve and maintain market penetration and average
subscriber revenue levels sufficient to provide financial viability to
our digital mobile network business;
- our ability to timely and successfully accomplish required scale-up of
our billing, collection, customer care and similar back-room operations
to keep pace with customer growth, increased system usage rates and
growth in levels of accounts receivables being generated by the digital
mobile network customer base;
- access to sufficient debt or equity capital to meet our operating and
financing needs;
- the quality and price of similar or comparable wireless communications
services offered or to be offered by our competitors, including providers
of cellular and personal communication services;
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<PAGE> 22
- successful implementation of any year 2000 solutions in systems that are
critical to our business operations;
- future legislation or regulatory actions relating to specialized mobile
radio services, other wireless communications services or
telecommunications generally; and
- other risks and uncertainties described from time to time in our reports
and, with specific reference to risk factors relating to international
operations, in Nextel International's reports, filed with the Securities
and Exchange Commission, including the Annual Reports on Form 10-K for
the year ended December 31, 1999 and the Quarterly Reports on Form 10-Q
for the quarter ended March 31, 2000.
III. USE OF PROCEEDS
All sales of the convertible notes or the common stock issuable upon
conversion of the convertible notes will be by or for the account of the selling
security holders listed in the following section of this prospectus. We will not
receive any cash proceeds from these sales of the convertible notes or the
common stock issuable upon conversion of the convertible notes.
IV. SELLING SECURITY HOLDERS
All of the convertible notes and shares of common stock issued upon
conversion of the convertible notes are being offered by the selling security
holders listed in the table below. Only those shares of common stock issued upon
conversion of the convertible notes may be offered by the selling security
holders. We issued the convertible notes in a private placement transaction
exempt from registration under the Securities Act of 1933.
No offer or sale under this prospectus may be made by a holder of the
convertible notes or of the shares of common stock issued upon conversion of the
convertible notes unless that holder is listed in the table below or until that
holder has notified us and a supplement to this prospectus has been filed or an
amendment to the registration statement has become effective. We will supplement
or amend this prospectus to include additional selling security holders upon
request and upon provision of all required information to us.
The selling security holders may offer and sell, from time to time, any or
all of their convertible notes or common stock issued upon conversion of the
convertible notes. Because the selling security holders may offer all or only
some portion of the convertible notes and shares of common stock listed in the
table, no estimate can be given as to the amount or percentage of these
convertible notes and shares of common stock that will be held by the selling
security holders upon termination of the offering.
The following table lists:
- the name of each selling security holder;
- the amount of each type of security beneficially owned by that holder
before the offering; and
- the amount of securities being offered for sale by that selling security
holder.
The information in the table reflects the most recent information furnished
to us by the identified selling security holder. Unless otherwise disclosed in
the footnotes to the table, no selling security holder has indicated that it has
held any position, office or other material relationship with us or our
affiliates during the past three years.
<TABLE>
<CAPTION>
CONVERTIBLE NOTES
--------------------------- COMMON STOCK
PRINCIPAL PRINCIPAL ---------------------
AMOUNT OF AMOUNT OF NUMBER OF NUMBER OF
CONVERTIBLE CONVERTIBLE SHARES SHARES
NAME OF SELLING SECURITY HOLDER NOTES OWNED NOTES OFFERED OWNED OFFERED
------------------------------- ----------- ------------- --------- ---------
<S> <C> <C> <C> <C>
</TABLE>
18
<PAGE> 23
On January 26, 2000, we and the initial purchaser of the convertible notes
entered into a registration rights agreement. That agreement requires that we
make this prospectus available to the selling security holders, subject to the
exceptions described below, until the earliest of:
- the expiration of the period referred to in Rule 144(k) of the Securities
Act of 1933 with respect to those securities held by persons that are not
affiliates of Nextel;
- the time when all of the securities have been sold under this prospectus;
- the time when none of the securities remain outstanding; and
- January 26, 2002.
This time period is referred to as the effectiveness period.
We may require the selling security holders to suspend the sales of the
securities offered by this prospectus upon the occurrence of any event that
makes any statement in this prospectus or the related registration statement
untrue in any material respect or that requires the changing of statements in
these documents in order to make statements in those documents not misleading.
We will be permitted to suspend the use of this prospectus:
- in connection with pending corporate developments, public filings with
the Securities and Exchange Commission and similar events, for a period
not to exceed 30 days in any three month period or an aggregate of 90
days, whether or not consecutive, in any twelve month period, or
- in connection with any pending or potential acquisitions, financings or
similar transactions, for a period not to exceed 60 days in any three
month period or 90 days, whether or not consecutive, in any twelve month
period.
In the event that:
- before the end of the effectiveness period, this prospectus is
unavailable for periods in excess of those set forth in the preceding
paragraph;
- we fail to file amendments to the registration statement or supplements
to this prospectus necessary to permit sales of the convertible notes or
shares of common stock issued upon conversion of the convertible notes
within five business days of receipt of all required documents from the
prospective selling security holder; or
- we fail to cause any required post-effective amendment to the
registration statement to be declared effective within 45 days of its
filing;
(each of these is deemed to be a registration default) then we will pay
liquidated damages to the holders of the securities entitled to be sold under
this prospectus that are affected by the registration default. For the period
beginning from and including the date of the registration default to but
excluding the date on which the registration default is cured, these liquidated
damages will accrue:
- in respect of the convertible notes, at a rate per year equal to 0.5% of
the principal amount of the affected convertible notes; and
- in respect of each share of common stock issued upon conversion of the
convertible notes, at a rate per year equal to 0.5% of the product of the
number of shares of common stock affected by the registration default
multiplied by the then applicable conversion price.
Persons purchasing securities in this offering will not be entitled to
liquidated damages.
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<PAGE> 24
V. DESCRIPTION OF THE CONVERTIBLE NOTES
Nextel issued the convertible notes under an indenture dated as of January
26, 2000, between Nextel Communications, Inc. and Harris Trust and Savings Bank,
as trustee; Bank of New York, as successor to Harris Trust and Savings Bank, is
the current trustee. You may request a copy of the indenture and the
registration rights agreement relating to the convertible notes from the
trustee.
Nextel has summarized portions of the indenture below. The summary is not
complete. You should read the indenture, because it defines your rights as a
holder of the convertible notes. In this section, "Nextel" refers only to Nextel
Communications, Inc. and its successors under the indenture and not to any of
its subsidiaries.
A. GENERAL
The convertible notes are unsecured general obligations of Nextel and will
be convertible into common stock of Nextel as described under "-- C. Conversion
of the Convertible Notes." The convertible notes are limited to $1,150,000,000
aggregate principal amount and will mature on January 15, 2010 unless earlier
converted, redeemed at the option of Nextel or repurchased at the option of the
holder upon a Fundamental Change, as defined below.
The indenture does not contain any financial covenants or restrictions on
the payment of dividends, the incurrence of indebtedness, or the issuance or
repurchase of securities by Nextel. The indenture contains no covenants or other
provisions to afford protection to holders of the convertible notes in the event
of a highly leveraged transaction or a change in control of Nextel except to the
extent described below under "-- E. Repurchase at the Option of the Holder."
The convertible notes will bear interest at the annual rate of 5 1/4% from
January 26, 2000, or from the most recent payment date to which interest has
been paid or duly provided for, payable semi-annually in arrears on January 15
and July 15, beginning on July 15, 2000, to holders of record at the close of
business on the preceding January 1 and July 1, respectively, except:
- that the interest payable upon redemption or repurchase, unless the date
of redemption or repurchase is an interest payment date, will be payable
to the person to whom principal is payable; and
- in the case of any convertible note, or portion of any convertible note,
that is converted into common stock of Nextel during the period from, but
excluding, a record date for any interest payment date to, but excluding,
that interest payment date either:
- if the convertible note, or portion of the convertible note, has been
called for redemption on a redemption date that occurs during that
period, or is to be repurchased in connection with a Fundamental Change
on a Repurchase Date, as defined below, that occurs during that period,
Nextel will not be required to pay interest on that interest payment
date in respect of any convertible note, or portion of any convertible
note, that is so redeemed or repurchased; or
- if otherwise, any convertible note or portion of any convertible note
that is not called for redemption is submitted for conversion during
that period must be accompanied by funds equal to the interest payable
on that interest payment date on the principal amount so converted.
See "-- C. Conversion of the Convertible Notes."
Interest will be payable at the office maintained by Nextel for these
purposes in the Borough of Manhattan, the City of New York, which is presently
an office or agency of the trustee and may, at Nextel's option, be paid either:
- by check mailed to the address of the person entitled to the interest as
it appears in the convertible note register, provided that a holder of
convertible notes with an aggregate principal amount in
20
<PAGE> 25
excess of $10 million will be paid by wire transfer in immediately
available funds if the holder files a written election with the trustee
on or before the relevant record date; or
- by transfer to an account maintained by that person located in the U.S.;
provided, however, that payments to the Depository Trust Company, New
York, New York, which is referred to as "DTC", will be made by wire
transfer of immediately available funds to the account of DTC or its
nominee.
Interest will be computed on the basis of a 360-day year composed of twelve
30-day months.
B. FORM, DENOMINATION AND REGISTRATION
Nextel issued the convertible notes in fully registered form, without
coupons, in denominations of $1,000 principal amount and integral multiples of
$1,000.
Global Note, Book-Entry Form. The convertible notes that were sold to
"qualified institutional buyers," or QIBs, as defined in Rule 144A under the
Securities Act of 1933, are evidenced by one or more global notes, which were
deposited with, or on behalf of, DTC and registered in the name of Cede & Co. as
DTC's nominee. Except as set forth below, a global note may be transferred, in
whole or in part, only to another nominee of DTC or to a successor of DTC or its
nominee.
QIBs that are participants in DTC may hold their interests in a global note
directly through DTC. Transfers between participants will be effected in the
ordinary way in accordance with DTC rules and will be settled in clearing house
funds. The laws of some states require that specified persons take physical
delivery of securities in definitive form. Consequently, the ability to transfer
beneficial interests in the global note to those persons may be limited.
QIBs that are not participants may beneficially own interests in a global
note held by DTC only through participants, or specified banks, brokers,
dealers, trust companies and other parties that clear through or maintain a
custodial relationship with a participant, either directly or indirectly. So
long as Cede, as the nominee of DTC, is the registered owner of a global note,
Cede for all purposes will be considered the sole holder of the global note.
Except as provided below, owners of beneficial interests in a global note will
not be entitled to have certificates registered in their names, will not receive
or be entitled to receive physical delivery of certificates in definitive
registered form, and will not be considered the holders of the global note.
Payment of interest on and the redemption or repurchase price of a global
note will be made to Cede, the nominee for DTC as the registered owner of the
global note, by wire transfer of immediately available funds on each interest
payment date or the redemption or repurchase date, as the case may be. None of
Nextel, the trustee or any paying agent will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in a global note or for maintaining,
supervising or reviewing any records relating to those beneficial ownership
interests.
Nextel has been informed by DTC that, with respect to any payment of
interest on, or the redemption price or repurchase price of, a global note,
DTC's practice is to credit participants' accounts on the relevant interest,
repurchase or redemption payment date with payments in amounts proportionate to
their respective beneficial interests in the principal amount represented by a
global note as shown on the records of DTC, unless DTC has reason to believe
that it will not receive payment on that payment date. Payments by participants
to owners of beneficial interests in the principal amount represented by a
global note held through that participant will be the responsibility of that
participant, as is now the case with securities held for the accounts of
customers registered in "street name."
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants and specified banks, the ability of a person
having a beneficial interest in the principal amount represented by the global
note to pledge that beneficial interest to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of that
beneficial interest, may be affected by the lack of a physical certificate
evidencing that beneficial interest.
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<PAGE> 26
None of Nextel, the trustee, or any registrar, paying agent or conversion
agent under the indenture, will have any responsibility for the performance by
DTC or its participants or indirect participants of their respective obligations
under the rules and procedures governing their operations. DTC has advised
Nextel that DTC will take any action permitted to be taken by a holder of
convertible notes, including, without limitation, the presentation of
convertible notes for exchange as described below, only at the direction of one
or more participants to whose account with DTC interests in the global note are
credited, and only in respect of the principal amount of the convertible notes
represented by the global note as to which the participants have given
direction.
DTC has advised Nextel that DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "clearing agency" registered under the provisions of
Section 17A of the Securities Exchange Act of 1934. DTC was created to hold
securities for its participants and to facilitate the clearance and settlement
of securities transactions between participants through electronic book-entry
changes to the accounts of its participants, which eliminates the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and may include
specified other organizations. Some of these participants, or their
representatives, together with other entities, own DTC. Indirect access to the
DTC system is available to others such as banks, brokers, dealers and trust
companies that clear through, or maintain a custodial relationship with, a
participant, either directly or indirectly.
Although DTC has agreed to the above procedures in order to facilitate
transfers of interests in a global note among participants, it is under no
obligation to perform or continue to perform these procedures, and these
procedures may be discontinued at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
Nextel within 90 days, Nextel will cause the convertible notes to be issued in
definitive registered form in exchange for global notes.
Certificated Notes. QIBs may request that certificated notes be issued in
exchange for convertible notes represented by a global note. Furthermore,
certificated convertible notes may be issued in exchange for convertible notes
represented by a global note if no successor depositary is appointed by Nextel
within 90 days.
C. CONVERSION OF THE CONVERTIBLE NOTES
Any registered holder of convertible notes may, at any time until the close
of business on the business day before the date of repurchase, redemption or
final maturity of the convertible notes, as appropriate, convert the principal
amount of any convertible notes or portions of convertible notes, in
denominations of $1,000 or integral multiples of $1,000, into common stock of
Nextel, at an initial conversion price of $148.80 per share of common stock,
subject to adjustment as described below. Except as described below, no payment
or other adjustment will be made upon conversion of any convertible notes for
interest accrued on the convertible notes or for dividends on any common stock
issued upon conversion of the convertible notes. If any convertible notes not
called for redemption are converted between a record date and the next interest
payment date, those convertible notes must be accompanied by funds equal to the
interest payable on the next interest payment date on the principal amount so
converted. Nextel is not required to issue fractional shares of common stock
upon conversion of the convertible notes and, instead, will at its election
either pay a cash adjustment based on the market price of common stock on the
last business day before the date of conversion or round the number of shares of
common stock issued upon conversion of the convertible notes up to the nearest
whole share. In the case of convertible notes called for redemption or tendered
for repurchase, conversion rights will expire at the close of business on the
business day preceding the day fixed for redemption or repurchase, unless Nextel
defaults in the payment of the redemption or repurchase price. A convertible
note that the holder has elected to be repurchased upon a Fundamental Change may
be converted only if the holder withdraws its election to have its convertible
notes repurchased in accordance with the terms of the indenture before the close
of business on the business day before the repurchase date.
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<PAGE> 27
The initial conversion price of $148.80 per share of common stock is
subject to adjustment upon specified events, including:
(1) the issuance of common stock of Nextel as a dividend or
distribution on the common stock;
(2) the issuance to all holders of common stock of rights or warrants
to purchase or subscribe for common stock at less than the Current Market
Price, as defined in the indenture;
(3) specified subdivisions and combinations of the common stock;
(4) the distribution to all holders of common stock of capital stock,
other than common stock, or evidences of indebtedness of Nextel or of
assets, including securities, but excluding those rights, warrants,
dividends and distributions referred to above or paid in cash;
(5) distributions with respect to shares of common stock consisting of
cash, excluding any quarterly cash dividend on the common stock to the
extent that the aggregate cash dividend per share of common stock in any
quarter does not exceed the greater of:
(x) the amount per share of common stock of the next preceding
quarterly cash dividend on the common stock to the extent that the
preceding quarterly dividend did not require an adjustment of the
conversion price under this clause (5), as adjusted to reflect
subdivisions or combinations of the common stock, and
(y) 3.75% of the average of the last reported sale price of the
common stock during the ten trading days immediately before the date of
declaration of that dividend,
and excluding any dividend or distribution with respect to the common stock
in connection with the liquidation, dissolution or winding up of Nextel. If
an adjustment is required to be made as set forth in this clause (5) as a
result of a distribution that is a quarterly dividend, that adjustment
would be based on the amount by which the distribution exceeds the amount
of the quarterly cash dividend permitted to be excluded under this clause
(5). If an adjustment is required to be made as set forth in this clause
(5) as a result of a distribution that is not a quarterly dividend, that
adjustment would be based on the full amount of the distribution;
(6) payment in respect of a tender offer or exchange offer by Nextel
or any subsidiary of Nextel for the common stock, other than any tender
offer or exchange offer that is made and consummated for any and all shares
of common stock, to the extent that the cash and value of any other
consideration included in the payment per share of common stock exceeds the
Current Market Price per share of common stock on the trading day next
succeeding the last date on which tenders or exchanges may be made under
the tender or exchange offer; and
(7) payment in respect of a tender offer or exchange offer for the
common stock, other than any tender offer or exchange offer that is made
and consummated for any and all shares of common stock, by a person other
than Nextel or any subsidiary of Nextel in which, as of the closing date of
the offer, the board of directors is not recommending rejection of the
offer. The adjustment referred to in this clause (7) will only be made if:
(x) the tender offer or exchange offer is for an amount that
increases the offeror's ownership of common stock to more than 25% of
the total shares of common stock outstanding; provided, that in the case
of any offeror whose ownership percentage of the common stock is 15% or
more before the commencement of the tender offer or exchange offer, this
requirement would not be met unless the tender offer or exchange offer
would increase the offeror's ownership of common stock by more than 10%
of the total shares of common stock outstanding;
(y) the cash and value of any other consideration included in the
payment per share of common stock exceeds the Current Market Price per
share of common stock on the business day next succeeding the last date
on which tenders or exchanges may be made under the tender or exchange
offer; and
23
<PAGE> 28
(z) the average of the daily Closing Price, as defined in the
indenture, per share of the common stock for the 10 consecutive Trading
Days, as defined in the indenture, ending ten Trading Days before the
public announcement of the tender offer or exchange offer (the "Pre-
Offer Reference Price") exceeds 105% of the average of the daily Closing
Price per share of the common stock for the ten Trading Days commencing
ten Trading Days following the last day tenders or exchanges may be made
in connection with the tender offer or exchange offer (the "Post-Offer
Reference Price"). The adjustment referred to in this clause (7) will
generally not be made, however, if, as of the closing of the offer, the
offering documents with respect to that offer disclose a plan or an
intention to cause Nextel to engage in a consolidation or merger of
Nextel or a sale of all or substantially all of Nextel's assets. The
conversion price will be adjusted under this clause (7) based on the
difference between the Pre-Offer Reference Price and the Post-Offer
Reference Price.
In the case of:
- any reclassification of the common stock, or
- a consolidation, merger or combination involving Nextel or a sale or
conveyance to another person of the property and assets of Nextel as an
entirety or substantially as an entirety, in each case as a result of
which holders of common stock will be entitled to receive stock, other
securities, other property or assets, including cash, with respect to or
in exchange for all shares of common stock,
then the holders of the convertible notes then outstanding will generally be
entitled after these events to convert their convertible notes into the kind and
amount of shares of stock, other securities or other property or assets,
including cash, which they would have owned or been entitled to receive upon the
reclassification, consolidation, merger, combination, sale or conveyance if the
convertible notes had been converted into common stock immediately before that
reclassification, consolidation, merger, combination, sale or conveyance
assuming, that a holder of convertible notes would not have exercised any rights
of election as to the stock, other securities or other property or assets,
including cash, receivable in connection with that transaction.
If Nextel makes a taxable distribution to holders of common stock or in
specified other circumstances requiring an adjustment to the conversion price,
the holders of convertible notes may, in specified circumstances, be deemed to
have received a distribution subject to U.S. income tax as a dividend; in
specified other circumstances, the absence of such an adjustment may result in a
taxable dividend to the holders of common stock. See "VIII. United States
Federal Income Tax Consequences."
Nextel may, from time to time, and to the extent permitted by law, reduce
the conversion price by any amount for any period of at least 20 days, in which
case Nextel will give at least 15 days' notice of the reduction, if Nextel's
board of directors has made a determination that the reduction would be in
Nextel's best interests, which determination will be conclusive. Nextel may, at
its option, make any reductions in the conversion price, in addition to those
set forth above, as Nextel's board of directors deems advisable to avoid or
diminish any income tax to holders of common stock resulting from any dividend
or distribution of stock, or rights to acquire stock, or from any event treated
as dividends or distributions of, or rights to acquire, stock for income tax
purposes. See "VIII. United States Federal Income Tax Consequences."
No adjustment in the conversion price will be required unless that
adjustment would require a change of at least 1% in the conversion price then in
effect; provided that any adjustment that would otherwise be required to be made
will be carried forward and taken into account in any subsequent adjustment.
Except as stated above, the conversion price will not be adjusted for the
issuance of common stock or any securities convertible into or exchangeable for
common stock or carrying the right to purchase any common stock or any
securities convertible into or exchangeable for common stock.
24
<PAGE> 29
D. OPTIONAL REDEMPTION BY NEXTEL
The convertible notes are not entitled to any sinking fund. At any time on
or after January 18, 2003, Nextel may redeem the convertible notes on at least
30 days' notice as a whole or, from time to time, in part at the following
prices, expressed as a percentage of the principal amount, together with accrued
interest to, but excluding, the date fixed for redemption:
- if redeemed during the period beginning January 18, 2003 and ending on
January 14, 2004, at a redemption price of 103.500%;
- if redeemed during the 12-month period beginning January 15:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---- ----------------
<S> <C>
2004................................................ 102.917%
2005................................................ 102.333%
2006................................................ 101.750%
2007................................................ 101.167%
2008................................................ 100.583%
</TABLE>
- if redeemed at or after January 15, 2009, at a redemption price of 100%,
provided that any accrued interest becoming due on the date fixed for
redemption will be payable to the holders of record on the relevant
record date of the convertible notes being redeemed.
If less than all of the outstanding convertible notes are to be redeemed,
the trustee will select the convertible notes to be redeemed in principal
amounts of $1,000 or integral multiples of $1,000 by lot or by another method
the trustee considers fair and appropriate. If a portion of a holder's
convertible notes is selected for partial redemption and that holder converts a
portion of that holder's convertible notes, the converted portion will be deemed
to be of the portion selected for redemption.
Nextel may not give notice of any redemption of convertible notes if a
default in payment of interest or premium on the convertible notes or any other
Event of Default, as defined below, has occurred and is continuing.
E. REPURCHASE AT THE OPTION OF THE HOLDER
If a Fundamental Change, as defined below, occurs at any time before the
maturity or redemption of the convertible notes, each holder of convertible
notes will have the right, at the holder's option, to require Nextel to
repurchase any or all of that holder's convertible notes on the date (the
"Repurchase Date") that is 30 days after the date of Nextel's notice of the
Fundamental Change. The convertible notes will be repurchased in multiples of
$1,000 principal amount.
Nextel will repurchase these convertible notes at a price equal to 100% of
the principal amount to be repurchased plus accrued interest on the repurchased
convertible notes to, but excluding, the Repurchase Date; provided that, if the
Repurchase Date is an interest payment date, then the interest payable on that
date will be paid to the holder of record of the convertible notes on the
relevant record date.
Nextel will mail to all holders of record of the convertible notes a notice
of the occurrence of a Fundamental Change and of the repurchase right arising as
a result of the Fundamental Change on or before the tenth day after the
occurrence of the Fundamental Change. Nextel is also required to deliver the
trustee a copy of that notice. To exercise the repurchase right, a holder of
convertible notes must deliver, on or before the 30th day after the date of
Nextel's notice of a Fundamental Change (the "Fundamental Change Expiration
Time"), written notice of the holder's exercise of the repurchase right,
together with the convertible notes to be so repurchased, duly endorsed for
transfer, to Nextel, or an agent designated by Nextel for this purpose. Payment
for convertible notes surrendered for repurchase and not withdrawn before the
Fundamental Change Expiration Time will be made promptly following the
Repurchase Date.
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The term "Fundamental Change" means the occurrence of any transaction or
event in connection with which all or substantially all of our common stock is
exchanged for, converted into, acquired for or constitutes solely the right to
receive, consideration, whether by means of an exchange offer, liquidation,
tender offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise, but does not include a transaction or event in
which at least 90% of that consideration is common stock listed, or which will
be listed, upon consummation of or immediately following the transaction or
event, on a U.S. national securities exchange or approved for quotation on the
Nasdaq National Market or any similar U.S. system of automated dissemination of
quotations of securities prices.
Nextel will comply with the provisions of Rule 13e-4 and any other tender
offer rules under the Securities Exchange Act of 1934 to the extent then
applicable in connection with the repurchase rights of the holders of
convertible notes in the event of a Fundamental Change.
The repurchase rights of the holders of convertible notes could discourage
a potential acquiror of Nextel. The Fundamental Change repurchase feature,
however, is not the result of management's knowledge of any specific effort to
obtain control of Nextel by means of a merger, tender offer, solicitation or
otherwise, or part of a plan by management to adopt a series of antitakeover
provisions. The term Fundamental Change is limited to specified transactions and
may not include other events that might adversely affect the financial condition
of Nextel, nor would the requirement that Nextel offer to repurchase the
convertible notes upon a Fundamental Change necessarily afford the holders of
the convertible notes protection in the event of a highly leveraged transaction,
reorganization, merger or similar transaction involving Nextel.
If a Fundamental Change were to occur, Nextel cannot assure you that it
would have sufficient funds to pay the repurchase price for all the convertible
notes tendered by the holders. Nextel's existing credit agreement contains, and
any future credit agreements or other agreements relating to other indebtedness
to which Nextel becomes a party may contain, restrictions or prohibitions on
Nextel's ability to repurchase convertible notes or may provide that an
occurrence of a Fundamental Change constitutes an event of default under, or
otherwise requires payment of amounts borrowed under, those agreements. See "II.
Risk Factors -- B. Risk Factors Relating to the Convertible Notes -- 4. Our High
Level of Indebtedness Could Adversely Affect Our Ability to Repay the
Convertible Notes." If a Fundamental Change occurs at a time when Nextel is
prohibited from repurchasing the convertible notes, Nextel could seek the
consent of its then existing lenders to the repurchase of the convertible notes
or could attempt to refinance the borrowings that contain the prohibition. If
Nextel does not obtain such a consent or repay the borrowings, Nextel would
remain prohibited from repurchasing the convertible notes. In that case,
Nextel's failure to repurchase tendered convertible notes would constitute an
Event of Default under the indenture and may constitute a default under the
terms of other indebtedness that Nextel may enter into from time to time.
F. EVENTS OF DEFAULT; NOTICE AND WAIVER
An "Event of Default" is defined in the indenture as being:
- a default in payment of the principal of, or any premium on, the
convertible notes upon redemption, repurchase or otherwise;
- a default for 30 days in payment of any installment of interest,
including any liquidated damages, on the convertible notes;
- a default by Nextel for 60 days after notice in the observance or
performance of any other covenants in the indenture; or
- specified events involving bankruptcy, insolvency or reorganization of
Nextel or any of its significant subsidiaries, as defined in the
indenture.
The indenture provides that the trustee may withhold notice to the holders
of the convertible notes of any default, if the trustee considers it to be in
the interest of the holders of the convertible notes to do so,
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except for defaults in payment of principal or any premium or interest,
including any liquidated damages, with respect to the convertible notes.
The indenture provides that if an Event of Default has occurred and is
continuing, the trustee or the holders of not less than 25% in principal amount
of the convertible notes then outstanding may declare the principal of, any
premium, and accrued interest, including any liquidated damages, on the
convertible notes to be due and payable immediately. In the case of specified
events of bankruptcy or insolvency of Nextel, the principal of, any premium, and
accrued interest, including any liquidated damages, on the convertible notes
will automatically become and be immediately due and payable. However, if Nextel
cures all defaults, except the nonpayment of principal of, any premium, and
interest, including any liquidated damages, on any of the convertible notes that
have become due by acceleration, and specified other conditions are met, with
specified exceptions, the declaration may be canceled and past defaults may be
waived by the holders of a majority of the principal amount of the convertible
notes then outstanding.
The indenture provides that any payment of principal, any premium, or
interest, including any liquidated damages, that is not made when due will
accrue interest, to the extent legally permissible, at an annual rate of 5 1/4%
from the date on which the payment was required under the terms of the indenture
until the date of payment.
The holders of a majority in principal amount of the convertible notes then
outstanding will have the right to direct the time, method and place of
conducting any proceedings for any remedy available to the trustee, subject to
limitations specified in the indenture.
The indenture provides that no holder of the convertible notes may pursue
any remedy under the indenture, except for a default in the payment of
principal, any premium, including upon redemption, or interest, including any
liquidated damages, on the convertible notes, unless that holder has previously
given to the trustee written notice of a continuing Event of Default, and the
holders of at least 25% in principal amount of the outstanding convertible notes
have made a written request, and offered reasonable indemnity, to the trustee to
pursue the remedy, and the trustee has not received from the holders of a
majority in principal amount of the outstanding convertible notes a direction
inconsistent with the request and failed to comply with the request within 60
days after receipt of the request.
G. MODIFICATION OF THE INDENTURE
The indenture contains provisions permitting Nextel and the trustee, with
the consent of the holders of a majority in principal amount of the convertible
notes at the time outstanding, to modify the indenture or any supplemental
indenture or the rights of the holders of the convertible notes, except that
these modifications may not:
- extend the fixed maturity of any convertible note;
- reduce the rate or extend the time for payment of interest on the
convertible notes;
- reduce the principal amount of the convertible notes, or any premium on
the convertible notes;
- reduce any amount payable upon redemption of the convertible notes;
- after the occurrence of a Fundamental Change, change the obligation of
Nextel to repurchase any convertible note because of that Fundamental
Change in a manner adverse to the holders of the convertible notes;
- impair the right of a holder to institute suit for the payment of any
convertible note;
- change the currency in which the convertible notes are payable; or
- impair the right to convert the convertible notes into common stock
subject to the terms set forth in the indenture;
without the consent of each holder of a convertible note so affected. Also,
Nextel may not reduce the percentage of convertible notes whose holders are
required to consent to any modifications of the indenture
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or any supplemental indenture without the consent of the holders of all of the
convertible notes then outstanding. The indenture provides that Nextel will not
be obligated to repurchase any convertible notes upon the occurrence of a
Fundamental Change if, before the occurrence of that Fundamental Change, the
holders of at least a majority in principal amount of the outstanding
convertible notes have waived Nextel's obligation to repurchase any convertible
notes as a result of that Fundamental Change. The indenture also provides for
specified modifications of its terms without the consent of the holders of the
convertible notes.
H. INFORMATION CONCERNING THE TRUSTEE
Bank of New York is trustee under the indenture and paying agent,
conversion agent, registrar and custodian with regard to the convertible notes.
Bank of New York acts as trustee for other outstanding notes of Nextel.
I. NOTICES
Nextel will give notice concerning any optional redemption, repurchase or
Fundamental Change by release made to Reuters Economic Services and Bloomberg
Business News.
VI. DESCRIPTION OF CAPITAL STOCK
The following summary is not complete and is subject to, and qualified in
its entirety by, our certificate of incorporation and by-laws.
A. GENERAL
Under our certificate of incorporation, we have the authority to issue
613,883,948 shares of capital stock, which are currently divided into nine
classes or series as follows:
- 515,000,000 shares of class A common stock, par value $0.001 per share
(referred to in this prospectus as the "common stock");
- 35,000,000 shares of class B nonvoting common stock, par value $0.001 per
share (referred to in this prospectus as the "nonvoting common stock");
- 26,941,933 shares of class A convertible redeemable preferred stock,
stated value $36.75 per share (referred to in this prospectus as the
"class A preferred stock");
- 82 shares of class B convertible preferred stock, stated value $1.00 per
share (referred to in this prospectus as the "class B preferred stock");
- 26,941,933 shares of class C convertible redeemable preferred stock,
stated value $36.75 per share (referred to in this prospectus as the
"class C preferred stock");
- 1,600,000 shares of series D preferred stock;
- 2,200,000 shares of series E preferred stock;
- 800,000 shares of zero coupon convertible preferred stock; and
- 5,400,000 shares of undesignated preferred stock.
Equiserve LLP acts as transfer agent and registrar for the common stock.
B. COMMON STOCK
1. VOTING
Except as required by law with respect to shares of each of class A
preferred stock, class B preferred stock and class C preferred stock, and except
with respect to matters as to which shares of a class or series of preferred
stock vote separately as a class, the holders of common stock are entitled to
one vote per
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share on all matters to be voted on by our stockholders. The holders of the
nonvoting common stock have no right to vote on any matters to be voted on by
the stockholders, except as follows and as otherwise required by law. The
holders of the nonvoting common stock do have the right to vote as a separate
class, with each share having one vote, on:
- any merger, consolidation, reorganization or reclassification of our
company or our shares of capital stock;
- any amendment to our certificate of incorporation; or
- any liquidation, dissolution or winding up of our company;
(each of these events being a "Class B Fundamental Change") in which shares of
the nonvoting common stock would be treated differently than shares of the
common stock, other than a Class B Fundamental Change in which the only
difference in the treatment is that the holders of the common stock would be
entitled to receive equity securities with full voting rights and the holders of
the nonvoting common stock would be entitled to receive equity securities which
have voting rights substantially identical to the voting rights of the nonvoting
common stock and are convertible in connection with any Voting Conversion Event,
as defined below, on a share for share basis, into the voting securities to
which the holders of the common stock are entitled. Our certificate of
incorporation does not provide for cumulative voting in the election of
directors.
2. DIVIDENDS
Subject to the declaration and payment of dividends upon our preferred
stock at the time outstanding, to the extent of any preference to which that
preferred stock is entitled, and after the provision for any sinking or purchase
fund or funds for any series of the preferred stock has been complied with, our
board of directors may declare and pay dividends on the common stock and the
nonvoting common stock, payable in cash or other consideration, out of funds
legally available. If dividends are declared on the common stock that are
payable in shares of common stock, then dividends payable at the same rate in
shares of nonvoting common stock must be declared on any outstanding shares of
nonvoting common stock.
We have not paid any cash dividends on our common stock and do not plan to
pay any cash dividends on our common stock for the foreseeable future.
3. LIQUIDATION, SUBDIVISION OR COMBINATION
In the event of any liquidation, dissolution or winding up of our company
or upon the distribution of our assets, all assets and funds remaining after
payment in full of our debts and liabilities, and after the payment to the
holders of the then outstanding preferred stock of the full preferential amounts
to which they were entitled, would be divided and distributed among the holders
of the common stock and nonvoting common stock ratably. In no event will either
common stock or nonvoting common stock be split, divided or combined unless the
other is proportionately split, divided or combined.
4. CONVERTIBILITY OF NONVOTING COMMON STOCK INTO COMMON STOCK
Upon the actual or expected occurrence of any Voting Conversion Event, as
defined below, each share of nonvoting common stock which is being or has been
distributed, disposed of or sold, or is expected to be distributed, disposed of
or sold, in connection with that Voting Conversion Event will be convertible at
the option of the holder into one fully paid and nonassessable share of common
stock. If any shares of nonvoting common stock are converted into shares of
common stock in connection with a Voting Conversion Event, however, and any of
those shares of common stock are not actually distributed, disposed of or sold
according to the Voting Conversion Event, those shares of common stock that are
not distributed, disposed of or sold will be promptly converted back into the
same number of shares of nonvoting common stock.
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A "Voting Conversion Event" means:
- any public offering or public sale of our securities, including a public
offering registered under the Securities Act of 1933 and a public sale
under Rule 144 of the Securities and Exchange Commission or any similar
rule then in force;
- any sale of securities to a person or group of persons, within the
meaning of the Securities Exchange Act of 1934, if, after that sale, that
person or group of persons would in the aggregate own or control
securities that possess in the aggregate the ordinary voting power to
elect a majority of our board of directors, provided that the sale has
been approved by our board of directors or any authorized committee;
- any sale of securities to a person or group of persons, within the
meaning of the Securities Exchange Act of 1934, if, after that sale, that
person or group of persons in the aggregate would own or control
securities, excluding any nonvoting common stock being converted and
disposed of in connection with the Voting Conversion Event, that possess
in the aggregate the ordinary voting power to elect a majority of our
board of directors;
- any sale of securities to a person or group of persons, within the
meaning of the Securities Exchange Act of 1934, if, after that sale, that
person or group of persons would not, in the aggregate, own, control or
have the right to acquire more than two percent of the outstanding
securities of any class of our voting securities; and
- any distribution, disposition or sale of any of our securities to a
person or group of persons, within the meaning of the Securities Exchange
Act of 1934, in connection with a merger, consolidation or similar
transaction if, after that transaction, that person or group of persons
will own or control securities that constitute in the aggregate the
ordinary voting power to elect a majority of the surviving corporation's
directors, provided that the transaction has been approved by our board
of directors or any authorized committee.
C. PREFERRED STOCK
Under the terms of the securities purchase agreement dated as of April 4,
1995, as amended, among Nextel, Digital Radio L.L.C. and Craig O. McCaw, we
issued to Digital Radio about 8.2 million shares of class A preferred stock (of
which about 7.9 million were outstanding on March 31, 2000), each with a stated
value of $36.75 per share, and 82 shares of class B preferred stock. These
shares of class A preferred stock are convertible, in specified circumstances,
into an equal number of shares of class C preferred stock. The currently
outstanding shares of class A preferred stock and any shares of class C
preferred stock issued upon conversion are convertible into about 23.7 million
shares of common stock in the aggregate, and the class B preferred stock is
convertible into 82 shares of common stock. In addition, we have issued shares
of the series D preferred stock, the series E preferred stock and the zero
coupon convertible preferred stock. Some of the significant terms of each class
and series of preferred stock are summarized below.
1. CLASS A PREFERRED STOCK
The class A preferred stock is the primary mechanism for providing Digital
Radio with the economic benefits and corporate governance rights contemplated by
the securities purchase agreement entered into with Mr. McCaw. Holders of class
A preferred stock, voting separately as a class, are entitled to elect three
members of the board of directors or, if greater than three, the number of
directors, rounded up to the nearest whole number, equal to 25% of the entire
board of directors, referred to as the "class A directors", subject to the
termination of these rights if Digital Radio's equity interest in us falls below
specified levels. For so long as the operations committee of our board of
directors is in existence, Digital Radio is entitled to have a majority of the
members of the operations committee represented by class A directors or
directors designated by Digital Radio under the terms of the class B preferred
stock or the securities purchase agreement. With respect to matters other than
the election of directors, shares of
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class A preferred stock vote together as a class with shares of common stock and
each share of class A preferred stock is entitled to a number of votes equal to
the number of shares of common stock into which that share is convertible.
The operations committee consists of five members, three of whom are
entitled to be selected from among Digital Radio's representatives on the board
of directors, as described above. The operations committee has the authority to
formulate key aspects of our business strategy, including decisions relating to
the technology we use, subject to existing equipment purchase agreements;
acquisitions; the creation and approval of operating and capital budgets and
marketing and strategic plans; approval of financing plans; endorsement of
nominees to the board of directors; and nomination and oversight of specified
executive officers. The board of directors, by a majority vote, may override
actions taken or proposed by the operations committee, although doing so would
give rise to a $25 million liquidated damages payment to Digital Radio and the
commencement of accrual of a 12% dividend payable on the stated value of all
outstanding shares of class A preferred stock, with an aggregate stated value of
about $291 million. However, the board of directors, by a defined super-majority
vote, retains the power to override actions taken or proposed by the operations
committee without triggering these consequences. In addition, the board of
directors also may act to terminate the operations committee, although this
action by the board of directors would, in specified circumstances, result in
the obligation to make the $25 million liquidated damages payment and result in
the commencement of the 12% dividend accrual. The securities purchase agreement,
our certificate of incorporation, and our by-laws also delineate a number of
circumstances, chiefly involving or resulting from specified events with respect
to Digital Radio or Mr. McCaw, in which the operations committee could be
terminated but the liquidated damages payment and dividend accrual would not be
required. Except for the accrual of the 12% dividend in the circumstances
described above, shares of class A preferred stock are entitled to dividends
only to the extent declared or paid with respect to common stock, in amounts
equal to the amounts that would be received had the class A preferred stock been
converted into common stock. Upon liquidation, dissolution or winding up of our
company, the holders of class A preferred stock are entitled to receive a
liquidation preference equal to the stated value of the class A preferred stock
plus any accrued but unpaid dividends.
Each share of class A preferred stock is convertible at the election of the
holder into three shares of common stock, subject to specified adjustments. Upon
the occurrence of specified events, the shares of class A preferred stock are
automatically converted into shares of common stock. In addition, shares of
class A preferred stock are automatically converted into shares of class C
preferred stock on a one-for-one basis upon the occurrence of specified events,
including the reduction of Digital Radio's ownership interest below specified
levels and foreclosure by a secured party upon shares of class A preferred stock
pledged to that secured party. Shares of class A preferred stock are also
redeemable at our option upon the occurrence of specified events constituting a
change in control, as defined in the terms of our certificate of incorporation,
at a redemption price equal to the stated value of the class A preferred stock
plus the amount of any accrued or declared but unpaid dividends on the class A
preferred stock.
2. CLASS B PREFERRED STOCK
The purpose of the class B preferred stock is to provide a protection for
Digital Radio's right to proportionate representation on the board of directors,
to the extent not provided by Digital Radio's ownership of class A preferred
stock, and to establish a mechanism for the payment of the $25 million
liquidated damages payment contemplated by the securities purchase agreement if
the board of directors takes specified actions with respect to the operations
committee that give rise to this payment. Shares of class B preferred stock are
automatically converted on a one-for-one basis to shares of common stock if
Digital Radio's equity interest in us falls below specified levels or if
specified transfers of class B preferred stock occur.
3. CLASS C PREFERRED STOCK
The purpose of the class C preferred stock is to protect the economic
attributes of the class A preferred stock if specified events resulting in the
termination of the corporate governance rights associated
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with the class A preferred stock occur. The terms of the class C preferred stock
are substantially the same as the terms of the class A preferred stock except
that holders of class C preferred stock have no special voting rights in the
election of directors, including the appointment of directors to the operations
committee, and are not entitled to the 12% dividend in the circumstances in
which shares of class A preferred stock would be entitled to that dividend.
4. SERIES D PREFERRED STOCK
The series D preferred stock ranks equally with the series E preferred
stock and the zero coupon convertible preferred stock in all respects, and ranks
equally with the class A preferred stock, the class B preferred stock and the
class C preferred stock in all respects except two. First, the series D
preferred stock is junior with respect to accruals and payments of the special
12% dividends on the class A preferred stock discussed above. Second, the series
D preferred stock is junior with respect to the $25 million cash payment on the
class B preferred stock discussed above. The circumstances under which these
payments must be made are described above. Dividends on the series D preferred
stock are cumulative at 13% per year and are payable quarterly in cash or, on or
before July 15, 2002, at our sole option, in additional shares of series D
preferred stock. The series D preferred stock is mandatorily redeemable on July
15, 2009. It may be redeemed at specified prices in whole or in part at our
option after December 15, 2005 and, in specified circumstances, after July 15,
2002. The series D preferred stock is also exchangeable, in whole but not in
part, at our option at any time after December 15, 2005, and sooner in some
circumstances, into subordinated exchange debentures.
5. SERIES E PREFERRED STOCK
The series E preferred stock ranks equally with the series D preferred
stock and the zero coupon convertible preferred stock in all respects, and ranks
equally with the class A preferred stock, the class B preferred stock and the
class C preferred stock in all respects except two. First, the series E
preferred stock is junior with respect to accruals and payments of the special
12% dividends on the class A preferred stock discussed above. Second, the series
E preferred stock is junior with respect to the $25 million cash payment on the
class B preferred stock discussed above. The circumstances under which these
payments must be made are described above. Dividends on the series E preferred
stock are cumulative at 11.125% per year and are payable quarterly in cash or,
on or before February 15, 2003, at our sole option, in additional shares of
series E preferred stock. The series E preferred stock is mandatorily redeemable
on February 15, 2010. It may be redeemed at specified prices in whole or in part
at our option after December 15, 2005 and, in specified circumstances, after
February 15, 2003. The series E preferred stock is also exchangeable, in whole
but not in part, at our option at any time after December 15, 2005, and sooner
in some circumstances, into subordinated exchange debentures.
6. ZERO COUPON CONVERTIBLE PREFERRED STOCK DUE 2013
The zero coupon convertible preferred stock ranks equally with the series D
preferred stock and the series E preferred stock in all respects, and ranks
equally with the class A preferred stock, the class B preferred stock, and the
class C preferred stock in all respects except two. First, the zero coupon
convertible preferred stock is junior with respect to accruals and payments of
the special 12% dividends on the class A preferred stock discussed above.
Second, the zero coupon convertible preferred stock is junior with respect to
the $25 million cash payment on the class B preferred stock discussed above. The
circumstances under which these payments must be made are described above. The
zero coupon convertible preferred stock had an initial liquidation preference of
$253.675 per share. No dividends are payable with respect to the zero coupon
convertible preferred stock; however, the liquidation preference accretes from
the issuance date at an annual rate of 9.25% compounded quarterly. The zero
coupon convertible preferred stock is convertible at the option of the holders
before redemption or maturity into common stock at a conversion rate of 9.7441
shares of common stock per share of zero coupon convertible preferred stock,
subject to adjustment upon the occurrence of specific events. The zero coupon
convertible preferred stock is redeemable at our option beginning December 23,
2005 and may be tendered by the
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holders for acquisition by us on December 23, 2005 and 2008. The zero coupon
convertible preferred stock is mandatorily redeemable on December 23, 2013 at
the fully accreted liquidation preference of $1,000 per share. We may elect,
subject to the satisfaction of specific requirements, to pay any redemption or
tender price with common stock.
D. RELEVANT PROVISIONS OF OUR CERTIFICATE OF INCORPORATION, OUR BY-LAWS AND
DELAWARE LAW
Our certificate of incorporation and our by-laws contain provisions that
could make more difficult the acquisition of our company by means of a tender
offer, a proxy contest or otherwise. These provisions are expected to discourage
specific types of coercive takeover practices and inadequate takeover bids and
to encourage persons seeking to acquire control of our company to first
negotiate with us. Although these provisions may have the effect of delaying,
deferring or preventing a change in control of our company, we believe that the
benefits of increased protection of our potential ability to negotiate with the
proponent of an unfriendly or unsolicited proposal to acquire or restructure us
outweigh the disadvantages of discouraging these proposals because, among other
things, negotiation of these proposals could result in an improvement of their
terms. The description below is intended as a summary only and is qualified in
its entirety by reference to our certificate of incorporation and our by-laws.
1. BOARD OF DIRECTORS
Our certificate of incorporation provides that the board of directors is
divided into three classes of directors, with each class having a number of
directors as nearly equal as possible and with the term of each class expiring
in a different year. Our by-laws provide that the board of directors will
consist of one or more members, and that the number of directors will be
determined by resolution of the board of directors or by the stockholders at
their annual meeting or a special meeting. We are a party to agreements with
some of our stockholders that entitle specified stockholders to name specified
nominees to be elected to the board of directors; the agreements might require
us to increase the size of the board of directors. Additionally, the holders of
class A preferred stock, voting separately as a class, are entitled to elect a
specified number of members of the board of directors. Under the terms of the
securities purchase agreement with Mr. McCaw, we cannot increase the size of the
board of directors to be greater than sixteen (16) members without the consent
of Digital Radio. The board of directors currently consists of ten directors.
Subject to any rights of holders of preferred stock, a majority of the board of
directors then in office has the sole authority to fill any vacancies on the
board of directors. Under Delaware law, stockholders may remove members of a
classified board only for cause.
2. STOCKHOLDER ACTIONS AND SPECIAL MEETINGS
Our certificate of incorporation provides that stockholder action can be
taken only at an annual or special meeting of stockholders and prohibits
stockholder action by written consent instead of a meeting. Our by-laws provide
that, subject to the rights of holders of any series of preferred stock, special
meetings of stockholders may be called only by our president, at the request of
a majority of the board of directors or at the request of stockholders owning a
majority of our entire capital stock issued and outstanding and entitled to
vote.
3. ANTI-TAKEOVER STATUTE
Section 203 of the Delaware General Corporation Law, referred to as the
"DGCL", is applicable to corporate takeovers in Delaware. Subject to specified
exceptions listed in this statute, Section 203 of the DGCL provides that a
corporation may not engage in any business combination with any "interested
stockholder" for a three-year period following the date that the stockholder
becomes an interested stockholder unless:
- before that date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
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- upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction began, excluding specified shares; or
- on or after that date, the business combination is approved by the board
of directors of the corporation and by the affirmative vote of at least
66 2/3% of the outstanding voting stock that is not owned by the
interested stockholder.
Except as specified in Section 203 of the DGCL, an interested stockholder
is defined to include any person that is:
- the owner of 15% or more of the outstanding voting stock of the
corporation,
- an affiliate or associate of the corporation and was the owner of 15% or
more of the outstanding voting stock of the corporation at any time
within three years immediately before the relevant date, and
- the affiliates and associates of the above.
Under specific circumstances, Section 203 of the DGCL makes it more
difficult for an "interested stockholder" to effect various business
combinations with a corporation for a three-year period, although the
stockholders may, by adopting an amendment to the corporation's certificate of
incorporation or bylaws, elect not to be governed by this section, effective
twelve months after adoption. Our certificate of incorporation and by-laws do
not exclude us from the restrictions imposed under Section 203 of the DGCL. It
is anticipated that the provisions of Section 203 of the DGCL may encourage
companies interested in acquiring us to negotiate in advance with the board of
directors since the stockholder approval requirement would be avoided if a
majority of the directors then in office approve either the business combination
or the transaction that resulted in the stockholder becoming an interested
stockholder.
VII. DILUTION
The following table provides information concerning net tangible book value
and pro forma dilution as of March 31, 2000. The net tangible book value deficit
of the common stock as of March 31, 2000 was about $2.3 billion or $6.10 per
share. Net tangible book value deficit per share represents the amount of our
stockholders' equity, less intangible assets, divided by the 378,933,212 shares
of common stock outstanding on March 31, 2000, after giving effect to the
conversion of the outstanding shares of our non-voting common stock.
For purposes of the following table, net tangible book value dilution per
share represents the difference between $148.80, which is the initial conversion
price of the convertible notes, and the pro forma net tangible book value
deficit per share of common stock as of March 31, 2000. After giving effect to
the conversion of the convertible notes and assuming conversion of all of the
convertible notes and taking into account our expenses, our net tangible book
value deficit per share as of March 31, 2000 would have been $3.00. The
following table illustrates this pro forma per share dilution:
<TABLE>
<S> <C> <C>
Initial conversion price of the convertible notes........... $148.80
Net tangible book value deficit per share before
conversion............................................. $(6.10)
Increase per share attributable to conversion of the
convertible notes...................................... $ 3.10
------
Pro forma net tangible book value deficit per share after
conversion of the convertible notes....................... $ (3.00)
-------
Dilution of net tangible book value per share to holders of
the convertible notes..................................... $151.80
-------
</TABLE>
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VIII. UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Jones, Day, Reavis & Pogue, the following are the
material United States federal income tax consequences relating to the purchase,
ownership and disposition of the convertible notes and of the common stock into
which the convertible notes may be converted. For purposes of this discussion,
the Internal Revenue Service is referred to as the "IRS."
This discussion:
- does not purport to be a complete analysis of all the potential tax
consequences that may be material to an investor based on his or her
particular tax situation;
- is based on the provisions of the Internal Revenue Code of 1986, as
amended, which is referred to in this discussion as the "Code;" the
applicable Treasury Regulations promulgated or proposed under the Code,
which are referred to in this discussion as the "Treasury Regulations;"
and judicial authority and current administrative rulings and practice,
all of which are subject to change, possibly on a retroactive basis;
- deals only with the beneficial owner, or "holder," of a convertible note
that will hold convertible notes and Nextel common stock into which the
convertible notes may be converted as "capital assets," within the
meaning of Section 1221 of the Code;
- does not address tax consequences applicable to holders that may be
subject to special tax rules, such as banks, tax-exempt organizations,
pension funds, insurance companies, dealers in securities or foreign
currencies, traders who elect to mark to market their securities, persons
that will hold convertible notes as a position in a hedging transaction,
"straddle" or "conversion transaction" for tax purposes, or persons that
have a "functional currency" other than the U.S. dollar; and
- does not address the tax consequences to persons other than U.S. holders,
as defined below.
Nextel has not sought any ruling from the IRS with respect to the
statements made and the conclusions reached in the following discussion, and
Nextel cannot assure you that the IRS will agree with those statements and
conclusions. In addition, the IRS may not be precluded from successfully
adopting a contrary position. This discussion does not consider the effect of
any applicable foreign, state, local or other tax laws.
INVESTORS CONSIDERING THE PURCHASE OF CONVERTIBLE NOTES SHOULD CONSULT
THEIR OWN TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE UNITED STATES
FEDERAL INCOME AND ESTATE TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY
TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING
JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
As used in this prospectus, the term "U.S. holder" means a beneficial owner
of a convertible note or of common stock into which a convertible note is
converted that is, for United States federal income tax purposes:
- an individual who is a citizen or resident, as defined in Section 7701(b)
of the Code, of the United States;
- a corporation or partnership created or organized under the laws of the
United States or a political subdivision of the United States;
- an estate the income of which is subject to United States federal income
taxation regardless of its source; or
- in general, a trust subject to the primary supervision of a United States
court and the control of one or more United States persons.
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<PAGE> 40
PAYMENT OF INTEREST
Interest on a note generally will be includable in the income of a U.S.
holder as ordinary income at the time the interest is received or accrued,
according to the holder's method of accounting for United States federal income
tax purposes. Nextel is obligated to pay liquidated damages to holders of the
convertible notes in circumstances described under "IV. Selling Security
Holders." According to Treasury Regulations, the possibility of an additional
payment on the convertible notes will not affect the amount of interest income
recognized by a holder, or the timing of this recognition, if the likelihood of
the additional payment is remote as of the date the debt obligations are issued.
Nextel believes that the likelihood of the payment of liquidated damages is
remote and does not intend to treat this possibility as affecting the yield to
maturity of any convertible note. Notwithstanding the above, if liquidated
damages are paid, the payments will be treated by Nextel as interest income when
received. Similarly, Nextel intends to take the position that the likelihood of
a redemption or a repurchase upon a Fundamental Change is remote under the
Treasury Regulations, and likewise does not intend to treat the possibility of
such a redemption or repurchase as affecting the yield to maturity of any
convertible note.
MARKET DISCOUNT
If a U.S. holder purchases a convertible note for an amount less than its
principal amount, then the difference will be treated as market discount. Under
the market discount rules, a U.S. holder will be required, subject to a de
minimis exception, to treat any principal payment on a convertible note or any
gain on the sale, exchange, retirement or other disposition of a convertible
note, as ordinary income to the extent of the market discount which has not
previously been included in income and which is treated as having accrued on
that convertible note at the time of that payment or disposition. If a
convertible note with accrued market discount is converted into common stock of
Nextel under the conversion feature, the amount of the accrued market discount
generally will be taxable as ordinary income upon the disposition of the common
stock. In addition, the U.S. holder may be required to defer, until the maturity
of the convertible note or its earlier disposition in a taxable transaction, the
deduction of all or a portion of the interest expense on any indebtedness
incurred or continued to purchase or carry such convertible note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the convertible note,
unless the U.S. holder elects to accrue on a constant interest method. A U.S.
holder of a convertible note may elect to include market discount in income
currently as it accrues (on either a ratable or constant interest method), in
which case the rule described above regarding deferral of interest deductions
will not apply. This election to include market discount in income currently,
once made, applies to all market discount obligations acquired on or after the
first day of the first taxable year to which the election applies and may not be
revoked without the consent of the IRS.
AMORTIZABLE BOND PREMIUM
If a U.S. holder purchases a convertible note for an amount in excess of
its stated principal amount, plus accrued interest, the holder generally will be
considered to have purchased the convertible note with "amortizable bond
premium." A U.S. holder generally may elect to amortize this premium from the
purchase date to the convertible note's maturity date under a constant yield
method. Amortizable bond premium generally is treated as an offset to interest
income on the convertible note and not as a separate deduction.
Amortizable bond premium, however, will not include any premium
attributable to the convertible note's conversion feature. The premium
attributable to the conversion feature is the excess, if any, of the convertible
note's purchase price over what the convertible note's fair market value would
be if there was no conversion feature. Also, because the convertible notes may
be redeemed at the option of Nextel at a price in excess of their principal
amount, a holder may be required to amortize any premium based on an earlier
call date and the call price payable at that time. An election to amortize
amortizable bond premium on a constant yield method, once made, generally
applies to all debt obligations held or
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<PAGE> 41
subsequently acquired by the holder on or after the first day of the first
taxable year to which the election applies and may not be revoked without the
consent of the IRS.
SALE, EXCHANGE OR REDEMPTION OF THE CONVERTIBLE NOTES
Except as described below under "-- Conversion of the Convertible Notes,"
upon the sale, exchange or redemption of a convertible note, a U.S. holder
generally will recognize capital gain or loss equal to the difference between:
- the amount of cash proceeds and the fair market value of any property
received on the sale, exchange or redemption, except to the extent the
amount is attributable to accrued interest on the convertible note not
previously included in income, which is taxable as ordinary interest
income, and
- the holder's adjusted tax basis in the convertible note.
A U.S. holder's adjusted tax basis in a convertible note generally will
equal the cost of the convertible note to the holder, less any principal
payments on the convertible note previously received by the holder. The capital
gain or loss will be long-term if the holder's holding period is more than one
year and will be short-term if the holding period is equal to or less than one
year. In the case of specified noncorporate taxpayers, including individuals,
long-term capital gains are taxed at a maximum rate of 20% and short-term
capital gains are taxed at a maximum rate of 39.6%. Corporate taxpayers are
subject to a maximum regular tax rate of 35% on all capital gains and ordinary
income. The deductibility of capital losses is subject to specified limitations.
CONSTRUCTIVE DIVIDENDS ON THE CONVERTIBLE NOTES
Under specified circumstances, a change in the conversion price of the
convertible notes under the antidilution provisions or otherwise may result in
taxable dividends to U.S. holders under Section 305 of the Code.
For example, if at any time:
- Nextel makes a distribution of cash or property to its stockholders or
purchases common stock and that distribution or purchase would be taxable
to those stockholders as a dividend for United States federal income tax
purposes (e.g. distributions of evidences of indebtedness or assets of
Nextel, but generally not stock dividends or rights to subscribe for
common stock) and, under the anti-dilution provisions, the conversion
price of the convertible notes is reduced, or
- the conversion price of the convertible notes is reduced at the
discretion of Nextel,
the reduction in the conversion price may be deemed to be the payment of a
taxable dividend, to the extent of Nextel's current or accumulated earnings and
profits, to holders of convertible notes under Section 305 of the Code. The
holders of convertible notes could therefore have taxable income as a result of
an event pursuant to which they received no cash or property. Further, in other
circumstances, the failure to decrease the conversion price may result in a
taxable dividend to U.S. holders of Nextel common stock acquired upon conversion
of a convertible note or otherwise. While Nextel believes it currently does not
have any current or accumulated earnings and profits, the actual amount of
earnings and profits at any time will depend upon the actions and financial
performance of Nextel.
CONVERSION OF THE CONVERTIBLE NOTES
A U.S. holder generally will not recognize any income, gain or loss upon
conversion of a convertible note into common stock of Nextel, except to the
extent the common stock is considered attributable to accrued interest not
previously included in income, which is taxable as ordinary income, or with
respect to cash received instead of a fractional share of common stock. The
holder's tax basis in Nextel common stock received upon conversion of a
convertible note will be the same as the holder's adjusted tax basis of
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<PAGE> 42
the convertible note at the time of conversion, reduced by any basis allocable
to a fractional share interest, and the holding period for the common stock
received upon conversion generally will include the holding period of the
convertible note converted. However, a holder's tax basis in shares of Nextel
common stock considered attributable to accrued interest as described above
generally will equal the amount of the accrued interest included in income, and
the holding period for those shares will begin as of the date of conversion of
the convertible notes.
Cash received instead of a fractional share of Nextel common stock upon
conversion will be treated as a payment in exchange for the fractional share of
common stock. Accordingly, the receipt of cash instead of a fractional share of
Nextel common stock generally will result in capital gain or loss, measured by
the difference between the cash received for the fractional share and the
holder's adjusted tax basis in the fractional share.
DIVIDENDS ON COMMON STOCK
Generally, distributions will be treated first as a dividend, subject to
tax as ordinary income, so long as and to the extent that Nextel has current or
accumulated earnings and profits, and then as a tax-free return of capital to
the extent of the U.S. holder's tax basis in the Nextel common stock, and after
that as a gain from the sale or exchange of the stock. The portion of any
distribution treated as a non-taxable return of capital will reduce the holder's
tax basis on the common stock.
In general, a distribution on Nextel common stock that qualifies as a
dividend because Nextel has earnings and profits may qualify for the 70%
dividends received deduction to a corporate holder if the holder owns less than
20% of the voting power and value of Nextel's stock, other than any non-voting,
non-convertible, non-participating preferred stock, and specified other
requirements are satisfied. A corporate holder that owns 20% or more of the
voting power and value of Nextel's stock, other than any non-voting,
non-convertible, non-participating preferred stock, generally may qualify for an
80% dividends received deduction. While Nextel believes it currently does not
have any current or accumulated earnings and profits, the actual amount of
earnings and profits at any time will depend upon the actions and financial
performance of Nextel.
SALE OF COMMON STOCK
Upon the sale or exchange of Nextel common stock, a U.S. holder generally
will recognize capital gain or loss equal to the difference between:
- the amount of cash and the fair market value of any property received
upon the sale or exchange, and
- the holder's adjusted tax basis in the common stock.
This capital gain or loss will be long-term if the holder's holding period
is more than one year and will be short-term if the holding period is equal to
or less than one year. In the case of specified non-corporate taxpayers,
including individuals, long-term capital gains are taxed at a maximum rate of
20% and short-term capital gains are taxed at a maximum rate of 39.6%. A U.S.
holder's basis and holding period in Nextel common stock received upon
conversion of a convertible note are determined as discussed above under
"-- Conversion of the Convertible Notes." Corporate taxpayers are subject to a
maximum regular tax rate of 35% on all capital gains and ordinary income. The
deductibility of capital losses is subject to specified limitations.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
In general, information reporting requirements will apply to payments of
principal, any premium, and interest on a convertible note, payments of
dividends on common stock, payments of the proceeds of the sale of a convertible
note and payments of the proceeds of the sale of common stock to specified
holders,
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<PAGE> 43
unless an exception applies. Further, the payer will be required to withhold
backup withholding tax at the rate of 31% if:
- the payee fails to furnish a taxpayer identification number, or "TIN," to
the payer or establish an exemption from backup withholding;
- the IRS notifies the payer that the TIN furnished by the payee is
incorrect;
- there has been a notified payee under-reporting with respect to interest,
dividends or original issue discount described in Section 3406(c) of the
Code; or
- there has been a failure of the payee to certify under the penalty of
perjury that the payee is not subject to backup withholding under the
Code.
Some U.S. holders, including corporations, will be exempt from this backup
withholding. Any amounts withheld under the backup withholding rules from a
payment to a holder will be allowed as a credit against the holder's United
States federal income tax and may entitle the holder to a refund, provided that
the required information is furnished to the IRS.
Treasury Regulations that are generally effective with respect to payments
made after December 31, 2000 modify the currently effective information
reporting and backup withholding procedures and requirements, and provide
presumptions regarding the status of holders when payments to the holders cannot
be reliably associated with appropriate documentation provided to the payer.
With respect to payments made after December 31, 2000, these "Final Withholding
Regulations" will require holders to provide certifications, if applicable, that
conform to the requirements of the Final Withholding Regulations. Because the
application of the Final Withholding Regulations will vary depending on the
holder's particular circumstances, holders are urged to consult their tax
advisors regarding the application of the Final Withholding Regulations.
IX. PLAN OF DISTRIBUTION
The securities being offered by this prospectus may be sold from time to
time to purchasers directly by the selling security holders listed in the table
set forth in "IV. Selling Security Holders" or, alternatively, through
underwriters, broker-dealers or agents. The selling security holders may offer
the securities at fixed prices, at prevailing market prices at the time of sale,
at varying prices or at negotiated prices. These sales may be effected in
transactions, which may involve crosses or block transactions:
- on any national securities exchange or quotation service on which the
convertible notes or common stock may be listed or quoted at the time of
sale;
- in the over-the-counter market;
- in transactions otherwise than on an exchange or over-the-counter market;
and
- through the writing of options.
In connection with sales of the securities, the selling security holders
may enter into hedging transactions with broker-dealers, who may in turn engage
in short sales of the securities and deliver them to close out the short
positions, or loan or pledge the securities to broker-dealers that in turn may
sell them.
The selling security holders and any of their brokers, dealers or agents
who participate in the distribution of the securities may be deemed to be
"underwriters", and any profits on the sale of the securities by them and any
discounts, commissions, or concessions received by any brokers, dealers or
agents might be deemed to be underwriting discounts and commissions under the
Securities Act of 1933.
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<PAGE> 44
To the best of our knowledge, there are currently no plans, arrangements or
understandings between any selling security holders and any broker, dealer,
agent or underwriter regarding the sale of the securities by the selling
security holders.
At any time a particular offer of the securities is made, a revised
prospectus or supplement, if required, will be distributed that will set forth
the aggregate amount and type of securities being offered and the terms of the
offering, including the name or names of any underwriters, dealers or agents,
any discounts, commissions and other items constituting compensation from the
selling security holders and any discounts, commissions or concessions allowed
or reallowed or paid to dealers. Any supplement and, if necessary, a
post-effective amendment to the registration statement, of which this prospectus
is a part, will be filed with the Securities and Exchange Commission to reflect
the disclosure of additional information with respect to the distribution of the
securities. In addition, the securities covered by this prospectus may be sold
in private transactions or under Rule 144 rather than under this prospectus.
We have agreed to indemnify the selling security holders against specified
liabilities under the Securities Act of 1933 and to pay substantially all of the
expenses incidental to the registration, offering and sale of the securities to
the public other than commissions, fees and discounts of underwriters, brokers,
dealers and agents.
X. LEGAL MATTERS
Jones, Day, Reavis & Pogue, Atlanta, Georgia, will pass upon the validity
of the securities offered by this prospectus.
XI. EXPERTS
The consolidated financial statements and related financial statement
schedules of Nextel that are incorporated in this prospectus by reference from
Nextel's Annual Report on Form 10-K for the year ended December 31, 1999, have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
XII. WHERE YOU CAN GET MORE INFORMATION
A. AVAILABLE INFORMATION
We file reports, proxy statements and other information with the Securities
and Exchange Commission. You may read and copy this information at the public
reference facilities maintained by the Commission at the Commission's Public
Reference Room, which is located at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549.
You may obtain information on the operation of the Public Reference Room by
calling the Commission at 1-800-SEC-0330. Our filings are also available on the
Commission's web site on the Internet at http://www.sec.gov.
Statements in this prospectus concerning the contents of any contract,
agreement or other document are not necessarily complete. If we filed as an
exhibit to any of our public filings any of the contracts, agreements or other
documents referred to in this prospectus, you should read the exhibit for a more
complete understanding of the document or matter involved.
B. INCORPORATION OF DOCUMENTS BY REFERENCE
We have incorporated information into this prospectus by reference. This
means we have disclosed information to you by referring you to another document
we filed with the Commission. We will make those documents available to you
without charge upon your oral or written request. Requests for these
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<PAGE> 45
documents should be directed to Nextel Communications, Inc., 2001 Edmund Halley
Drive, Reston, Virginia 20191, Attention: Investor Relations, telephone: (703)
433-4000.
The information in the following documents we filed with the Commission
(File No. 0-19656) is incorporated by reference in this prospectus:
- Annual Report on Form 10-K for the year ended December 31, 1999, dated
and filed with the Commission on March 30, 2000;
- Current Reports on Form 8-K:
- dated and filed with the Commission on January 21, 2000;
- dated and filed with the Commission on January 26, 2000;
- dated and filed with the Commission on February 3, 2000;
- dated and filed with the Commission on February 22, 2000;
- dated and filed with the Commission on February 28, 2000;
- dated and filed with the Commission on March 15, 2000;
- dated and filed with the Commission on April 26, 2000; and
- dated and filed with the Commission on May 5, 2000;
- Quarterly Report on Form 10-Q for the quarter ended March 31, 2000, dated
and filed with the Commission on May 15, 2000;
- Proxy Statement, dated as of April 17, 2000, filed with the Commission in
definitive form on April 17, 2000, with respect to the information
required by Items 401 (management), 402 (executive compensation), 403
(securities ownership) and 404 (specified relationships and related
transactions) of Regulation S-K promulgated under the Securities Act of
1933 and the Securities Exchange Act of 1934; and
- The description of the common stock contained in the registration
statement on Form 8-A dated January 16, 1992 including the information
incorporated by reference into that registration statement from the
registration statement on Form S-1, as amended, dated as of January 27,
1992.
We are also incorporating by reference additional documents we may file
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 after the date of this prospectus and before the termination of the
offering. This additional information is a part of this prospectus from the date
of filing of those documents.
Any statements made in this prospectus or in a document incorporated or
deemed to be incorporated by reference in this prospectus will be deemed to be
modified or superseded for purposes of this prospectus to the extent that a
statement contained in this prospectus or in any other subsequently filed
document which is also incorporated or deemed to be incorporated by reference in
this prospectus modifies or supersedes the statement. Any statement so modified
or superseded will not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
The information relating to us contained in this prospectus should be read
together with the information in the documents incorporated or deemed to be
incorporated by reference. In addition, some of the information, including
financial information, contained in this prospectus or incorporated or deemed to
be incorporated in this prospectus by reference should be read in conjunction
with documents filed with the Commission by Nextel International, Inc.
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<PAGE> 46
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses and costs to be
incurred by Nextel Communications, Inc. in connection with the sale and
distribution of the securities offered hereby, other than underwriting discounts
and commissions which will be borne by the selling security holders. All the
amounts shown are estimated except the Securities and Exchange Commission
registration fee.
<TABLE>
<S> <C>
Securities and Exchange Commission filing fee............. $303,600
Printing expenses......................................... $ 45,000
Legal fees and expenses................................... $ 50,000
Accounting fees and expenses.............................. $ 15,000
Trustee fees and expenses................................. $ 3,500
Miscellaneous expenses.................................... $ 2,900
--------
Total........................................... $420,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Set forth below is a description of certain provisions of the Restated
Certificate of Incorporation, as amended (the "Nextel Charter"), of Nextel
Communications, Inc. ("Nextel"), the Amended and Restated By-laws of Nextel (the
"Nextel By-laws"), and the Delaware General Corporation Law (the "DGCL"). This
description is intended as a summary only and is qualified in its entirety by
reference to the Nextel Charter, the Nextel By-laws, and the DGCL.
Elimination of Liability in Certain Circumstances. The Nextel Charter
provides that, to the full extent provided by law, a director will not be
personally liable to Nextel or its stockholders for or with respect to any acts
or omissions in the performance of his or her duties as a director. The DGCL
provides that a corporation may limit or eliminate a director's personal
liability for monetary damages to the corporation or its stockholders, except
for liability (1) for any breach of the director's duty of loyalty to such
corporation or its stockholders, (2) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3) for
paying a dividend or approving a stock repurchase in violation of Section 174 of
the DGCL or (4) for any transaction from which the director derived an improper
personal benefit.
While Article 7 of the Nextel Charter provides directors with protection
from awards for monetary damages for breaches of the duty of care, it does not
eliminate the directors' duty of care. Accordingly, Article 7 will have no
effect on the availability of equitable remedies such as an injunction or
rescission based on a director's breach of the duty of care. The provisions of
Article 7 as described above apply to officers of Nextel only if they are
directors of Nextel and are acting in their capacity as directors, and do not
apply to officers of Nextel who are not directors.
Indemnification and Insurance. Under the DGCL, directors and officers as
well as other employees and individuals may be indemnified against expenses
(including attorneys' fees), judgments, fines, and amounts paid in settlement in
connection with specified actions, suits, or proceedings, whether civil,
criminal, administrative, or investigative (other than an action by or in the
right of the corporation as a derivative action) if they acted in good faith and
in a manner they reasonably believed to be in or not opposed to the best
interest of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful.
Article 6 of the Nextel Charter and Article VII of the Nextel By-laws
provide to directors and officers indemnification to the full extent provided by
law, thereby affording the directors and officers of Nextel the protections
available to directors and officers of Delaware corporations. Article VII of the
Nextel By-laws also provides that expenses incurred by a person in defending a
civil or criminal action,
II-1
<PAGE> 47
suit or proceeding by reason of the fact that he or she is or was a director or
officer shall be paid in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he or she
is not entitled to be indemnified by Nextel as authorized by relevant Delaware
law. Nextel has obtained directors and officers liability insurance providing
coverage to its directors and officers.
On September 12, 1991, the Board of Directors of Nextel unanimously adopted
resolutions authorizing Nextel to enter into an Indemnification Agreement (the
"Indemnification Agreement") with each director of Nextel. Nextel has entered
into an Indemnification Agreement with each of its directors and officers.
One of the purposes of the Indemnification Agreements is to attempt to
specify the extent to which persons entitled to indemnification thereunder (the
"Indemnitees") may receive indemnification under circumstances in which
indemnity would not otherwise be provided by the DGCL. Pursuant to the
Indemnification Agreements, an Indemnitee is entitled to indemnification as
provided by Section 145 of the DGCL and to indemnification for any amount which
the Indemnitee is or becomes legally obligated to pay relating to or arising out
of any claim made against that person because of any act, failure to act, or
neglect or breach of duty, including any actual or alleged error, misstatement,
or misleading statement, which that person commits, suffers, permits, or
acquiesces in while acting in the Indemnitee's position with Nextel. The
Indemnification Agreements are in addition to and are not intended to limit any
rights of indemnification which are available under the Nextel Charter or the
Nextel By-laws, any policy of insurance or otherwise. Nextel is not required
under the Indemnification Agreements to make payments in excess of those
expressly provided for in the DGCL in connection with any claim against the
Indemnitee:
(1) which results in a final, nonappealable order directing the
Indemnitee to pay a fine or similar governmental imposition which Nextel is
prohibited by applicable law from paying; or
(2) based upon or attributable to the Indemnitee gaining in fact a
personal profit to which he was not legally entitled including, without
limitation, profits made from the purchase and sale by the Indemnitee of
equity securities of Nextel which are recoverable by Nextel pursuant to
Section 16(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and profits arising from transactions in publicly traded
securities of Nextel which were effected by the Indemnitee in violation of
Section 10(b) of the Exchange Act or Rule 10b-5 promulgated thereunder.
In addition to the rights to indemnification specified therein, the
Indemnification Agreements are intended to increase the certainty of receipt by
the Indemnitee of the benefits to which he or she is entitled by providing
specific procedures relating to indemnification.
The Indemnification Agreements are also intended to provide increased
assurance of indemnification by prohibiting Nextel from adopting any amendment
to the Nextel Charter or the Nextel By-laws which would have the effect of
denying, diminishing or encumbering the Indemnitee's rights pursuant thereto or
to the DGCL or any other law as applied to any act or failure to act occurring
in whole or in part prior to the effective date of such amendment.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
4.1.1 -- Restated Certificate of Incorporation of Nextel (filed on
July 31, 1995 as Exhibits No. 4.1.1 and 4.1.2 to Nextel's
Post-Effective Amendment No. 1 on Form S-8 to
Registration Statement No. 33-91716 on Form S-4 (the
"Nextel S-8 Registration Statement") and incorporated
herein by reference).
</TABLE>
II-2
<PAGE> 48
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
4.1.2 -- Certificate of Designation of the Powers, Preferences and
Relative, Participating, Optional and Other Special
Rights of 13% Series D Exchangeable Preferred Stock and
Qualifications, Limitations and Restrictions Thereof
(filed on July 21, 1997 as Exhibit 4.1 to the Current
Report on Form 8-K dated on July 21, 1997 and
incorporated herein by reference).
4.1.3 -- Certificate of Designation of the Powers, Preferences and
Relative, Participating, Optional and Other Special
Rights of 11.125% Series E Exchangeable Preferred Stock
and Qualifications, Limitations and Restrictions Thereof
(filed on February 12, 1998 as Exhibit 4.1 to the Current
Report on Form 8-K dated on February 11, 1998 (the
"February 11 Form 8-K") and incorporated herein by
reference).
4.1.4 -- Certificate of Designation of the Powers, Preferences and
Relative, Participating, Optional and Other Special
Rights of Zero Coupon Convertible Preferred Stock due
2013 and Qualifications, Limitations and Restrictions
Thereof (filed on February 10, 1999 as Exhibit 4.16 to
Nextel's Registration Statement on Form S-4 (the
"February 1999 Form S-4") and incorporated herein by
reference).
4.2 -- Amended and Restated By-laws of Nextel (filed on July 31,
1995 as Exhibit No. 4.2 to the Nextel S-8 Registration
Statement and incorporated herein by reference).
4.3.1 -- Indenture for Senior Discount Notes due 2007, dated as of
March 6, 1997, between McCaw International, Ltd. (now
known as Nextel International) and The Bank of New York,
as Trustee (filed on March 31, 1997 as Exhibit 4.24 to
Nextel's Annual Report on Form 10-K for the year ended
December 31, 1996 (the "1996 Form 10-K") and incorporated
herein by reference).
4.3.2 -- Warrant Agreement, dated as of March 6, 1997, between
Nextel International, Inc. and The Bank of New York
(filed on March 31, 1997 as Exhibit 4.26 to the 1996 Form
10-K and incorporated herein by reference).
4.4 -- Indenture dated September 17, 1997 between Nextel and
Harris Trust and Savings Bank, as Trustee, relating to
Nextel's 10.65% Senior Redeemable Discount Notes due 2007
(filed on September 22, 1997 as Exhibit 4.1 to Nextel's
Current Report on Form 8-K dated September 22, 1997 and
incorporated herein by reference).
4.5 -- Indenture dated as of October 22, 1997 between Nextel and
Harris Trust and Savings Bank, as Trustee, relating to
Nextel's 9.75% Senior Serial Redeemable Discount Notes
due 2007 (filed on October 23, 1997 as Exhibit 4.1 to
Nextel's Current Report on Form 8-K dated October 23,
1997 and incorporated herein by reference).
4.6 -- Indenture dated as of February 11, 1998, between Nextel
and Harris Trust and Savings Bank, as Trustee, relating
to Nextel's 9.95% Senior Serial Redeemable Discount Notes
due 2008 (filed on February 12, 1998 as Exhibit 4.2 to
the February 11 Form 8-K and incorporated herein by
reference).
4.7 -- Indenture dated as of November 4, 1998 between Nextel and
Harris Trust and Savings Bank, as Trustee, relating to
Nextel's 12.0% Senior Serial Redeemable Notes due 2008
(filed on February 10, 1999 as Exhibit 4.13.1 to the
February 1999 S-4 and incorporated herein by reference).
4.8 -- Indenture for 12.125% Senior Discount Notes due 2008,
dated March 12, 1998 between Nextel International, Inc.
and The Bank of New York (filed on May 14, 1998 as
Exhibit 4.1 to Nextel International Inc.'s Quarterly
Report on Form 10-Q for the quarter ended March 31, 1998
and incorporated herein by reference).
</TABLE>
II-3
<PAGE> 49
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
4.9 -- Indenture, dated as of June 16, 1999, between Nextel and
Harris Trust and Savings Bank, as Trustee, relating to
Nextel's 4.75% Convertible Senior Notes due 2007 (filed
on June 23, 1999 as Exhibit 4.1 to the Current Report on
Form 8-K dated and filed with the Commission on June 23,
1999 and incorporated herein by reference).
4.10 -- Indenture, dated as of November 12, 1999, by and between
Nextel and Harris Trust and Savings Bank, as Trustee,
relating to Nextel's 9.375% Senior Serial Redeemable
Notes due 2009 (filed as Exhibit 4.1 to the Quarterly
Report on Form 10-Q for the quarter ended September 30,
1999 (the "1999 Third Quarter 10-Q") and incorporated
herein by reference).
4.11 -- Indenture, dated as of January 26, 2000, between Nextel
and Harris Trust and Savings Bank, as Trustee, relating
to Nextel's 5.25% Convertible Senior Notes due 2010
(filed on January 26, 2000 as Exhibit 4.1 to the Current
Report on Form 8-K dated as of January 26, 2000 and
incorporated herein by reference).
4.12 -- Amended and Restated Credit Agreement, dated as of
November 9, 1999, among Nextel, Nextel Finance Company
and the other Restricted Companies party thereto, the
Lenders party thereto, Toronto Dominion (Texas) Inc., as
Administrative Agent and The Chase Manhattan Bank, as
Collateral Agent (filed as Exhibit 4.3 to the 1999 Third
Quarter 10-Q and incorporated herein by reference).
4.13 -- Tranche D Term Loan Agreement dated March 15, 2000 among
Nextel, Nextel Finance Company, the other Restricted
Companies party thereto, the Lenders Party thereto,
Toronto Dominion (Texas) Inc., as Administrative Agent,
and The Chase Manhattan Bank, as Collateral Agent (filed
as Exhibit 4.1 to the Current Report on Form 8-K dated as
of March 15, 2000 and incorporated herein by reference).
4.14 -- Amendment No. 1 dated April 26, 2000 to the Amended and
Restated Credit Agreement dated November 9, 1999 among
Nextel, Nextel Finance Company, the other Restricted
Companies party thereto, the Lenders party thereto,
Toronto Dominion (Texas) Inc., as Administrative Agent,
and the Chase Manhattan Bank, as Collateral Agent (filed
as Exhibit 4.1 to the Current Report on Form 8-K dated as
of May 5, 2000 and incorporated herein by reference).
4.15 -- Registration Rights Agreement, dated January 26, 2000,
between Nextel and Morgan Stanley & Co. Incorporated
relating to Nextel's 5.25% Convertible Senior Notes due
2010 (filed on January 26, 2000 as Exhibit 10.1 to the
Current Report on Form 8-K dated as of January 26, 2000
and incorporated herein by reference).
*5 -- Form of Opinion of Jones, Day, Reavis & Pogue regarding
validity.
*8 -- Form of Opinion of Jones, Day, Reavis & Pogue regarding
certain tax matters.
*12 -- Statement regarding computation of earnings to fixed
charges.
23.1 -- Consent of Jones, Day, Reavis & Pogue (included in
Exhibits 5 and 8).
*23.2 -- Consent of Deloitte & Touche LLP.
*24 -- Powers of Attorney.
*25 -- Statement of Eligibility of Trustee on Form T-1.
</TABLE>
- ---------------
* Filed herewith.
II-4
<PAGE> 50
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) (sec. 230.424(b) of this
chapter) if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
Provided, however, That paragraphs (a)(1)(i) and (a)(1)(ii) of this
Section do not apply if the registration statement is on Form S-3
(sec. 239.13 of this chapter), Form S-8 (sec. 239.16b of this chapter) or
Form F-3 (sec. 239.33 of this chapter), and the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-5
<PAGE> 51
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF RESTON, IN THE COMMONWEALTH OF VIRGINIA, ON MAY 15,
2000.
NEXTEL COMMUNICATIONS, INC.
By: /s/ THOMAS J. SIDMAN
----------------------------------
Thomas J. Sidman
Senior Vice President and General
Counsel
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
* Chairman of the Board and Director
- -----------------------------------------------------
Daniel F. Akerson
* President, Chief Executive Officer
- ----------------------------------------------------- and Director
Timothy M. Donahue
* Executive Vice President and Chief
- ----------------------------------------------------- Financial Officer (Principal
Steven M. Shindler Financial Officer)
* Vice President and Controller
- ----------------------------------------------------- (Principal Accounting Officer)
William G. Arendt
* Vice Chairman of the Board and
- ----------------------------------------------------- Director
Morgan E. O'Brien
* Director
- -----------------------------------------------------
Keith J. Bane
* Director
- -----------------------------------------------------
William E. Conway
* Director
- -----------------------------------------------------
Frank M. Drendel
* Director
- -----------------------------------------------------
William A. Hoglund
Director
- -----------------------------------------------------
Craig O. McCaw
* Director
- -----------------------------------------------------
Dennis M. Weibling
</TABLE>
II-6
<PAGE> 52
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
* Director
- -----------------------------------------------------
Janet Hill
/s/ THOMAS J. SIDMAN Attorney-in-fact May 15, 2000
- -----------------------------------------------------
Thomas J. Sidman
</TABLE>
II-7
<PAGE> 53
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
*5 -- Form of Opinion of Jones, Day, Reavis & Pogue regarding
validity.
*8 -- Form of Opinion of Jones, Day, Reavis & Pogue regarding
certain tax matters.
*12 -- Statement regarding computation of earnings to fixed
charges.
23.1 -- Consent of Jones, Day, Reavis & Pogue (included in
Exhibits 5 and 8).
*23.2 -- Consent of Deloitte & Touche L.L.P.
*24 -- Powers of Attorney.
*25 -- Statement of Eligibility of Trustee on Form T-1.
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 1
EXHIBIT 5
Form of Opinion
JONES, DAY, REAVIS & POGUE
3500 SunTrust Plaza
303 Peachtree Street
Atlanta, Georgia 30308-3242
(404) 521-3939
May __, 2000
Nextel Communications, Inc.
2001 Edmund Halley Drive
Reston, Virginia 20191
Re: Registration Statement for 5 1/4% Convertible Senior Notes due 2010
Dear Sirs:
We have acted as counsel to Nextel Communications, Inc., a Delaware
corporation (the "Company"), and in such capacity have examined the Company's
registration statement on Form S-3 (the Form S-3, including any amendments and
supplements thereto, is referred to collectively herein as the "Registration
Statement") filed by the Company with the Securities and Exchange Commission
(the "Commission") on May __, 2000 under the Securities Act of 1933, as amended.
The Registration Statement relates to the proposed registration for resale by
certain selling security holders identified in the Registration Statement (the
"Selling Security Holders") of up to $1,150,000,000 aggregate principal amount
of the Company's 5 1/4% Convertible Senior Notes due 2010 (the "Notes") and the
shares of Class A Common Stock, par value $.001 per share (the "Common Stock"),
issuable upon conversion of the Notes.
As counsel for the Company and for purposes of this opinion, we have
made those examinations and investigations of legal and factual matters we
deemed advisable and have examined originals or copies, certified or otherwise
identified to our satisfaction as true copies of the originals, of those
corporate records, certificates, documents, and other instruments which, in our
judgment, we considered necessary or appropriate to enable us to render the
opinions expressed below, including the Company's Certificate of Incorporation,
as amended to date; the Company's Bylaws, as amended to date; and the minutes of
meetings of the Company's Board of Directors and other corporate proceedings
relating to the authorization and issuance of the Selling Security Holders'
securities. We have assumed, without independent verification, the genuineness
and authorization of all signatures and the conformity to the originals of all
copies submitted to us or inspected by us as certified, conformed or photostatic
copies.
We express no opinion concerning the laws of any jurisdictions other
than the laws of the United States of America and the General Corporation Law of
the State of Delaware as in effect on the date hereof, and also express no
opinion with respect to the blue sky or securities laws of any state, including
Delaware.
<PAGE> 2
Based upon the foregoing, we are of the opinion that (i) the aggregate
principal amount of Notes being registered for resale by the Registration
Statement are validly issued and outstanding obligations of the Company,
entitled to the benefits of the indenture and (ii) to the extent that shares of
Common Stock are issued upon conversion of the Notes, such shares of Common
Stock will be duly authorized, validly issued, fully paid, and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us with respect to this opinion
under the heading "Legal Matters" in the prospectus which is part of the
Registration Statement.
Very truly yours,
<PAGE> 1
EXHIBIT 8
Form of Opinion
JONES, DAY, REAVIS & POGUE
3500 SunTrust Plaza
303 Peachtree Street, NE
Atlanta, Georgia 30308-3242
(404) 521-3939
May ____, 2000
Nextel Communications, Inc.
2001 Edmund Halley Drive
Reston, Virginia 20191
Re: Registration Statement for 5 1/4% Convertible Senior Notes Due 2010
Dear Sirs:
We have acted as counsel to Nextel Communications, Inc. (the "Company")
in connection with the registration statement on Form S-3 (the "Registration
Statement"), to which this opinion appears as Exhibit 8, which includes the
prospectus of the Company relating to the offering by the selling security
holders named therein of the Company's 5 1/4% Convertible Senior Notes Due 2010
(the "Notes") and the Class A Common Stock, par value $.001 per share, issuable
upon conversion of the Notes.
We hereby confirm that the opinion expressed in "United States Federal
Income Tax Consequences" is our opinion.
We hereby consent to the filing with the Securities and Exchange
Commission of this opinion as an exhibit to the Registration Statement and to
the reference to this firm in the prospectus constituting part of the
Registration Statement.
Very truly yours,
<PAGE> 1
EXHIBIT 12
NEXTEL COMMUNICATIONS INC. AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS
TO FIXED CHARGES
(dollars in millions)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1995 1996 1997
---------------- ---------------- ----------------
<S> <C> <C> <C>
Loss from continuing operations before income tax benefit $ (532) $ (863) $ (1,309)
Add:
Fixed charges 164 286 487
Less:
Interest capitalized 31 33 43
Less:
Equity in losses of unconsolidated affiliates - (11) (13)
Losses attributable to minority interests - - 3
---------------- ---------------- ----------------
Earnings as adjusted $ (399) $ (599) $ (855)
================ ================ ================
Fixed charges:
Interest expense on indebtedness (including amortization of
debt expense and discount and interest capitialized) $ 146 $ 261 $ 451
Portion of rent expense representative of interest (30%) 18 25 36
---------------- ---------------- ----------------
Fixed charges $ 164 $ 286 $ 487
================ ================ ================
Ratio of earnings to fixed charges (2.43) (2.09) (1.76)
================ ================ ================
Deficiency of earnings to cover fixed charges $ 563 $ 885 $ 1,342
================ ================ ================
----------------------------------
1998 1999
---------------- ----------------
<C> <C>
Loss from continuing operations before income tax benefit $ (1,711) $ (1,298)
Add:
Fixed charges 766 993
Less:
Interest capitalized 55 46
Less:
Equity in losses of unconsolidated affiliates (12) (73)
Losses attributable to minority interests 17 19
---------------- ----------------
Earnings as adjusted $ (1,005) $ (297)
================ ================
Fixed charges:
Interest expense on indebtedness (including amortization of
debt expense and discount and interest capitialized) $ 711 $ 924
Portion of rent expense representative of interest (30%) 55 69
---------------- ----------------
Fixed charges $ 766 $ 993
================ ================
Ratio of earnings to fixed charges (1.31) (0.30)
================ ================
Deficiency of earnings to cover fixed charges $ 1,771 $ 1,290
================ ================
Three Months Ended
March 31,
----------------------------------
1999 2000
---------------- ----------------
<C> <C>
Loss from continuing operations before income tax benefit $ (449) $ (287)
Add:
Fixed charges 222 312
Less:
Interest capitalized 9 15
Less:
Equity in losses of unconsolidated affiliates (6) (35)
Losses attributable to minority interests 12 3
---------------- ----------------
Earnings as adjusted $ (242) $ 42
================ ================
Fixed charges:
Interest expense on indebtedness (including amortization of
debt expense and discount and interest capitialized) $ 207 $ 293
Portion of rent expense representative of interest (30%) 15 19
---------------- ----------------
Fixed charges $ 222 $ 312
================ ================
Ratio of earnings to fixed charges (1.09) 0.13
================ ================
Deficiency of earnings to cover fixed charges $ 464 $ 270
================ ================
</TABLE>
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in this Registration Statement of
Nextel Communications, Inc. on Form S-3 of our report dated February 25, 2000
(March 28, 2000 as to paragraphs 21, 23 and 26 of Note 8 and paragraph 3 of Note
18) appearing in the Annual Report on Form 10-K of Nextel Communications, Inc.
for the year ended December 31, 1999, and to the reference to us under the
heading "Experts" in the Prospectus, which is part of this Registration
Statement.
DELOITTE & TOUCHE LLP
McLean Virginia
May 15, 2000
<PAGE> 1
EXHIBIT 24
DIRECTOR AND/OR OFFICER OF
NEXTEL COMMUNICATIONS, INC.
REGISTRATION STATEMENT ON FORM S-3
POWER OF ATTORNEY
The undersigned director and/or officer of Nextel Communications, Inc., a
Delaware corporation (the "Corporation"), hereby constitutes and appoints Steven
M. Shindler, Thomas J. Sidman and Timothy M. Donahue, and each of them, with
full power of substitution and resubstitution, as attorneys-in-fact or
attorney-in-fact of the undersigned, for him or her and in his or her name,
place and stead, to sign and file with the Securities and Exchange Commission
under the Securities Act of 1933 (the "Securities Act") one or more Registration
Statement(s) on Form S-3 relating to the registration of the Corporation's 5.25%
Convertible Senior Notes due 2010, with any and all amendments, supplements and
exhibits thereto, including pre-effective and post-effective amendments or
supplements or any additional registration statement filed pursuant to Rule 462
promulgated under the Securities Act, with full power and authority to do and
perform any and all acts and things whatsoever required, necessary or desirable
to be done in the premises, hereby ratifying and approving the act of said
attorneys and any of them and any such substitute.
EXECUTED as of May 14, 2000.
/s/ TIMOTHY M. DONAHUE /s/ STEVEN M. SHINDLER
- --------------------------------------- -----------------------------------
Timothy M. Donahue Steven M. Shindler
President, Chief Executive Officer, Executive Vice President
and Director and Chief Financial Officer
(Principal Executive Officer) (Principal Financial Officer)
/s/ DANIEL F. AKERSON /s/ MORGAN E. O'BRIEN
- --------------------------------------- -----------------------------------
Daniel F. Akerson Morgan E. O'Brien
Chairman of the Board Vice Chairman of the Board
and Director
/s/ WILLIAM G. ARENDT
- --------------------------------------- -----------------------------------
William G. Arendt Craig O. McCaw
Vice President and Controller Director
(Principal Accounting Officer)
/s/ KEITH J. BANE /s/ WILLIAM E. CONWAY, JR.
- --------------------------------------- -----------------------------------
Keith J. Bane William E. Conway, Jr.
Director Director
/s/ FRANK M. DRENDEL /s/ WILLIAM A. HOGLUND
- --------------------------------------- -----------------------------------
Frank M. Drendel William A. Hoglund
Director Director
/s/ DENNIS M. WEIBLING /s/ JANET HILL
- --------------------------------------- -----------------------------------
Dennis M. Weibling Janet Hill
Director Director
<PAGE> 1
EXHIBIT 25
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
------------
Nextel Communications, Inc.
(Exact name of obligor as specified in its charter)
Delaware 36-3939651
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
2001 Edmund Halley Drive
Reston, Virginia 20191
(Address of principal executive offices) (Zip code)
-------------
5-1/4% Convertible Senior Notes due 2010
(Title of the indenture securities)
========================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains
the authority to commence business and a grant of powers to
exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to
Form T-1 filed with Registration Statement No. 33-6215, Exhibits
1a and 1b to Form T-1 filed with Registration Statement No.
33-21672 and Exhibit 1 to Form T-1 filed with Registration
Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
-2-
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 12th day of May, 2000.
THE BANK OF NEW YORK
By: /s/ MICHAEL CULHANE
---------------------------
Name: MICHAEL CULHANE
Title: VICE PRESIDENT
-3-
<PAGE> 4
EXHIBIT 7 TO FORM T-1
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1999, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
In Thousands
<S> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin....................... $3,247,576
Interest-bearing balances................................................ 6,207,543
Securities:
Held-to-maturity securities.............................................. 827,248
Available-for-sale securities............................................ 5,092,464
Federal funds sold and Securities purchased under agreements to resell...... 5,306,926
Loans and lease financing receivables:
Loans and leases, net of unearned
income...............37,734,000
LESS: Allowance for loan and
lease losses............575,224
LESS: Allocated transfer risk
reserve........................13,278
Loans and leases, net of unearned income, allowance, and reserve......... 37,145,498
Trading Assets.............................................................. 8,573,870
Premises and fixed assets (including capitalized leases).................... 723,214
Other real estate owned..................................................... 10,962
Investments in unconsolidated subsidiaries and associated companies......... 215,006
Customers' liability to this bank on acceptances outstanding................ 682,590
Intangible assets........................................................... 1,219,736
Other assets................................................................ 2,542,157
Total assets................................................................ $71,794,790
LIABILITIES
Deposits:
In domestic offices...................................................... $27,551,017
Noninterest-bearing............................................11,354,172
Interest-bearing...............................................16,196,845
In foreign offices, Edge and Agreement subsidiaries, and IBFs............ 27,950,004
Noninterest-bearing...............................................639,410
Interest-bearing...............................................27,310,594
Federal funds purchased and Securities sold under agreements to repurchase.. 1,349,708
Demand notes issued to the U.S.Treasury..................................... 300,000
Trading liabilities......................................................... 2,339,554
Other borrowed money:
With remaining maturity of one year or less.............................. 638,106
With remaining maturity of more than one year through three years........ 449
With remaining maturity of more than three years......................... 31,080
Bank's liability on acceptances executed and outstanding.................... 684,185
Subordinated notes and debentures........................................... 1,552,000
Other liabilities........................................................... 3,704,252
------------
Total liabilities........................................................... 66,100,355
============
EQUITY CAPITAL
Common stock................................................................ 1,135,284
Surplus..................................................................... 866,947
Undivided profits and capital reserves...................................... 3,765,900
Net unrealized holding gains (losses) on available-for-sale securities...... ( 44,599)
Cumulative foreign currency translation adjustments......................... ( 29,097)
------------
Total equity capital........................................................ 5,694,435
------------
Total liabilities and equity capital........................................ $71,794,790
============
</TABLE>
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<PAGE> 5
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Renyi
Alan R. Griffith Directors
Gerald L. Hassell
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