EXHIBIT 99.2
MEMORANDUM OF UNDERSTANDING
This Memorandum of Understanding is between Digital Radio, L.L.C.
("Digital Radio") and Nextel Communications, Inc. ("Nextel"), and is dated as
of April 11, 1997.
I. Current Status.
A. Digital Radio has the right, pursuant to an Option Agreement dated
as of July 28, 1995, to purchase up to 15 million shares of common stock of
Nextel at an exercise price of $15.50 per share ("Option").
B. The Option described above must be exercised on or before
6:00 p.m. New York local time, July 28, 1997.
C. The total price for the Nextel shares to be acquired upon
exercise of the Option, at the relevant exercise price of $15.50 per share, is
$232,500,000.
II. Option Exercise Transaction.
A. Digital Radio commits to exercise its Option to purchase shares in
Nextel from Nextel to the extent of a total purchase price of $232,500,000.
Notwithstanding that Digital Radio's commitment shall be fixed as of the date of
the comprehensive documentation contemplated by Section V hereof, closing of the
Option exercise and transfer of funds shall occur on Monday, July 28, 1997 (the
"Closing").
B. In consideration of Digital Radio's early exercise commitment set
forth in the foregoing paragraph A, Nextel will enter into a Contingent Equity
Instrument ("CEI") and issue and deliver, in exchange for a cash payment of One
Hundred Sixty-One Dollars ($161.00), such CEI to Digital Radio at the time of
execution and delivery of the comprehensive documentation contemplated by
Section V hereof. The CEI will provide
that it shall be convertible, at Digital Radio's election at any time at or
after the Option exercise and transfer of funds contemplated in the foregoing
paragraph A until July 28, 1999, without the payment of any additional amount by
Digital Radio, into a number of fully paid and non-assessable shares of Nextel
common stock given by the formula shown on Annex A attached hereto.
C. The purchase price for each share of Nextel common stock acquired
pursuant to exercise of the Option at the Closing shall be $15.50, resulting in
an issuance of 15,000,000 Nextel shares to, and the payment of an aggregate cash
purchase price of $232,500,000 by, Digital Radio at the Closing.
D. The transactions contemplated by this Section II shall be
conditioned upon Nextel obtaining the required consents of the holders of each
outstanding issue of Nextel's public notes (the "Notes") to amendments to the
indentures governing the Notes (the "Indentures") that would permit Nextel to
incur additional borrowings. Such amendments shall be on terms and conditions
reasonably satisfactory to Digital Radio and shall allow Nextel (i) to incur
debt evidenced by unsecured notes issued on or prior to December 31, 1997 for
which Nextel will receive gross proceeds of up to $350 million, (ii) to incur
additional debt in an aggregate amount up to two times the aggregate net
proceeds received by Nextel from the issuance of certain qualifying equity
securities (excluding the proceeds received in connection with the exercise by
Digital Radio of the Option), and (iii) to incur certain additional categories
of permitted debt in an aggregate amount of up to $2.5 billion.
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III. Concurrent Undertakings
A. Digital Radio will agree to lend up to $50,000,000 to
Nextel, in satisfaction of the related condition pertaining to the Tranche E
Senior Secured Loans referred to in that certain Term Sheet for Debt Financing,
dated as of March 26, 1997, between Nextel and Motorola, Inc. ("Motorola"),
filed as Exhibit 10.37 to Nextel's Form 10-K Report for the Fiscal Year ended
December 31, 1996 (the "Motorola Term Sheet"), under the following conditions
(and any other conditions applicable to the Tranche E Senior Secured Loans
referred to in the Motorola Term Sheet):
1. The loan facility will parallel the terms and
conditions of the Motorola Tranche E Senior Secured Loan facility in the amount
of $200,000,000;
2. Digital Radio will receive (on the date of the first dollar
drawdown of such loan and regardless of the amount of the drawdown or the total
drawdown) warrants to purchase 250,000 shares of Nextel common stock at an
exercise price equal to the average of the closing prices for Nextel shares on
the NASDAQ on each of the 20 days preceding the first dollar drawdown of the
loan and with an expiration date five years from the date thereof in
consideration of the financing;
3. Digital Radio debt will rank pari passu with the Motorola
Tranche E Senior Secured debt;
4. Nextel will exercise its good faith, best efforts to locate
an investor or investors to contribute at least an additional $400,000,000 of
equity. The amount of the Digital Radio landing commitment is reduced by $20 for
every $100 of equity raised by Nextel. For purposes of the first sentence of
this subparagraph A.4., all equity proceeds received by Nextel upon issuance of
its equity securities shall be counted toward such $400 million objective other
than equity proceeds received in respect of exercises by (i)
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Digital Radio of the options for an aggregate of 35 million shares of Nextel
common stock held by Digital Radio on the date hereof (the "Existing DR
Options") and (ii) by Motorola or its assignees of the options for an aggregate
of 3 million shares of Nextel Common Stock originally issued to Motorola in
connection with the equipment purchase and financing arrangements between Nextel
and Motorola entered in to in 1991 ("Motorola Options"). For purposes of this
subparagraph A.4, all equity proceeds received from Digital Radio or any of its
controlled or controlling affiliates, upon exercise of the Existing DR Options,
and any equity proceeds received upon exercise of the Motorola Options from any
controlling or controlled affiliates of Motorola, shall not be taken into
account in reducing the lending commitment of Digital Radio hereunder.
5. No drawdown is permitted outside the commitment
period applicable to the Motorola Tranche E Senior Secured Loans.
6. No Digital Radio financing is required unless prior
to drawdown:
a. All bank financing under current $1.655 billion
credit arrangement must be fully drawn down;
b. All debt under the current $345 million Vendor
Financing Agreement must be fully drawn down;
c. Nextel must borrow an additional $250 million under
the Amended Credit Agreement;
d. Motorola must provide an additional $50 million of
financing under the Amended Vendor Financing Agreement;
e. Nextel must borrow all of Tranche D financing $200
million from Motorola;
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f. Nextel must access capital markets for an additional
$250 million of high-yield debt;
g. All other terms and conditions will be consistent
with the Motorola Tranche E loan.
7. The parties recognize that certain actions involving
Digital Radio and/or its controlled or controlling affiliates (including without
limitation, Digital Radio's designees to the Nextel Board, in their capacities
as directors and as members of any Board Committee) may be required or
contemplated to satisfy or bring about the satisfaction of certain
conditions to the Motorola Tranche E Senior Secured Loan Financing and/or
the related $50 million Digital Radio Financing. It is understood that,
to the extent such conditions are not satisfied by reason of any action or
failure to act on the part of Digital Radio or such controlling or controlled
affiliates thereof, Digital Radio shall be deemed to have waived satisfaction
of such conditions as they relate to Digital Radio's obligation to provide the
$50 million of debt financing contemplated above.
IV. Additional Condition for Digital Radio Undertakings.
The Lock-Up Period provided in Section 8.3(g) of the Securities
Purchase Agreement shall terminate as of the Closing.
V. Future Documentation.
The parties hereto and their respective representatives and advisors
will use their best efforts in good faith to prepare and finalize appropriate
definitive documentation as soon as is practicable to implement the undertakings
and related matters contemplated by this Memorandum of Understanding. Such
definitive documentation shall be in all respects consistent with the terms and
conditions set forth herein, shall contain representations and warranties as
indicated in Section IV below and such other
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representations, warranties, covenants and other terms and conditions as are
customary and appropriate for transactions of this type and otherwise shall be
reasonably acceptable to each of the parties. The parties each shall use their
respective best efforts in good faith to obtain all necessary governmental,
judicial and third party consents required to implement any of the matters
contemplated herein, and agree that such parties' mutual objective is enter
into definitive documentation (subject to the matters discussed above) as soon
as is practicable.
VI. Representations and Warranties
A. Nextel shall make reasonable representations and warranties as to
the current status of its business and as to other matters reasonably requested
by Digital Radio; no such representations and warranties (other than on "basic"
matters, such as due incorporation, due authorization and execution of
definitive documents, number and type of authorized shares of capital stock and
the like) shall be "brought down" to Closing.
B. Digital Radio shall make representations as to its authority
and power, and such other representations as may reasonably be requested by
Nextel.
C. The final documentation shall provide that, assuming
compliance with any relevant federal or state securities and antitrust laws,
the option exercise commitment of Digital Radio set forth in Section I. hereof
and the lending commitment of Digital Radio set forth in Section III.A. hereof
(as to the latter, subject to the conditions set forth in the final
documentation as contemplated in Section III.A.), shall be irrevocable and
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unconditional, and shall not be subject to the need to seek or obtain any
consent or approval of, or to make any notice to or filing with, any third party
or any governmental agency, court or similar governmental or judicial body.
NEXTEL COMMUNICATIONS, INC.
By: /s/Xxxxxx Xxxxxxxx
Its: Xxxxxx Xxxxxxxx, Senior Vice President & CFO
DIGITAL RADIO, L.L.C.
By: /s/Xxxxxx Xxxxxxxx
Its: President
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ANNEX A
[TO EARLY COMMITMENT MOU]
The contingent Exercise Instrument ("CEI") shall be exchangeable for a
number of shares of Nextel Common Stock ("N") determined in accordance with the
following formula:
(a) if X is $14.00 or less, N equals 1,607,143 shares;
(b) if X is $15.50 or more, N equals zero shares; and
(c) in any other case, N equals the number of shares resulting
from the equation [D multiplied by 15,000,000], divided by X,
where X is the average closing price for a share of Nextel Common Stock on the
NASD-National Market during the 20 trading days immediately preceding the date
of the Closing, and D is the result of subtracting X from $15.50. By way of
example, if X is $14.50, then N (determined in accordance with clause (c) above)
would be 1,034,483 shares (rounded up to the nearest whole share) i.e., 1.00
times 15,000,000 = 15,000,000 DIVIDED BY 14.50 = 1,034,482.76
