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Nextel Communications Inc – ‘DEF 14A’ for 5/27/04

On:  Tuesday, 4/6/04, at 1:02pm ET   ·   Effective:  4/6/04   ·   For:  5/27/04   ·   Accession #:  950133-4-1298   ·   File #:  0-19656

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 4/06/04  Nextel Communications Inc         DEF 14A     5/27/04    1:576K                                   Bowne - DC/FA

Document/Exhibit                   Description                      Pages   Size 

 1: DEF 14A     Notice & Proxy                                      HTML    332K 

SCHEDULE 14A INFORMATION

Nextel Communications, Inc.

Payment of Filing Fee (Check the appropriate box):

      x No fee required.

      o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

      (1) Title of each class of securities to which transaction applies:

      (2) Aggregate number of securities to which transaction applies:

      (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):

      (4) Proposed maximum aggregate value of transaction:

      (5) Total fee paid:

      (1) Amount Previously Paid:

      (2) Form, Schedule or Registration Statement No.:

      (3) Filing Party:

      (4) Date Filed:

Proxy Statement

Nextel Communications, Inc.

April 2, 2004

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

      We will hold the annual meeting of stockholders of Nextel Communications, Inc. on May 27, 2004 at 10:00 a.m. local time at The Hyatt Regency Reston, 1800 Presidents Street, Reston, Virginia 20190 (703-709-1234).

      The purpose of the annual meeting is to consider and take action on the following:

      Stockholders of record as of April 2, 2004 can vote at the annual meeting. This proxy statement, the accompanying proxy card, the 2003 annual report to stockholders and our annual report on Form 10-K for the year ended December 31, 2003 are being mailed or otherwise distributed to you on or about April 16, 2004. Please vote before the annual meeting in one of the following ways:

         By order of the Board of Directors,

	William E. Conway, Jr.
	Chairman of the Board of Directors

TABLE OF CONTENTS

GENERAL INFORMATION ABOUT PROXIES AND VOTING

Solicitation, Use and Revocation of Proxies

      Our board of directors solicits the accompanying proxy for use at the annual meeting. Giving your proxy means that you authorize the persons indicated on the proxy card to vote your shares at the annual meeting in the manner you direct. If you sign, date and return the enclosed proxy card but do not specify how to vote, your shares will be voted (1) for the election of the nominees designated below to serve for three-year terms ending 2007, (2) for ratification of Deloitte & Touche as our independent auditors for 2004, (3) for approval of the Nextel Communications, Inc. Amended and Restated Associate Stock Purchase Plan, and (4) at the discretion of the persons indicated on the proxy card, on all other matters that may properly come before the annual meeting. You may revoke your proxy at any time before it is voted at the annual meeting by:

      Stockholders whose shares are registered in the name of a bank or brokerage firm may be eligible to vote through the Internet or by telephone. The enclosed proxy card provides instructions for eligible stockholders. Stockholders not wishing to vote through the Internet or by telephone or whose proxy card does not mention information about Internet or telephone voting should complete the enclosed paper proxy card and return it in the enclosed postage-paid envelope. Signing and returning the proxy card or submitting the proxy via the Internet or by telephone does not affect your right to revoke your proxy or to vote in person at the annual meeting.

      Your attendance at the annual meeting by itself does not constitute revocation of your proxy. Before the annual meeting, any written notice of revocation should be sent to Nextel Communications, Inc., 2001 Edmund Halley Drive, Reston, Virginia 20191, Attention: Corporate Secretary. Any notice of revocation that is delivered at the annual meeting should be hand delivered to our Corporate Secretary before a vote is taken. You may be asked to present documents for the purpose of establishing your identity as a Nextel stockholder.

Record Date, Voting Rights and Outstanding Shares

      Our board of directors has established the close of business on April 2, 2004 as the record date for determining stockholders entitled to receive notice of and to vote on proposals at the annual meeting or any adjournment or postponement of the annual meeting. Only holders of record of our class A common stock on the record date are entitled to vote at the annual meeting. Holders of the class A common stock on the record date are entitled to one vote per share on each matter voted upon at the annual meeting. As of the record date, there were 1,073,169,015 shares of class A common stock outstanding.

Quorum, Voting Requirements and Effect of Abstentions and Non-Votes

      A quorum is necessary for the transaction of business at the annual meeting. A quorum exists when holders of a majority of the total number of outstanding shares of class A common stock that are entitled to vote at the annual meeting are present in person or by proxy. At the annual meeting, inspectors of election will determine the presence of a quorum and tabulate the results of the voting by stockholders. The inspectors will treat valid proxies marked “abstain” or proxies required to be treated as “non-votes” as present for purposes of determining whether there is a quorum at the annual meeting. A “non-vote” occurs when a broker or nominee holding shares for a beneficial owner votes on one proposal, but does not vote on another proposal because the broker or nominee does not have discretionary voting power and has not received instructions from the beneficial owner of the shares. Abstentions and non-votes with respect to any matter will have the same effect as a vote against that proposal.

      The nominees for director for three-year terms who receive a plurality of the votes cast by the holders of the class A common stock will be elected. All other matters will require the approval of a majority of the votes cast at the annual meeting by the holders of the outstanding shares of class A common stock.

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PROPOSAL 1

ELECTION OF DIRECTORS

      Our board of directors consists of eight members and is divided into three classes, with each class having a number of directors as nearly as equal as possible. When we add new directors, we place them in classes to meet this objective. The three-year terms of each class are staggered so that the term of one class expires at each annual meeting.

      The board of directors has nominated Keith J. Bane and V. Janet Hill, each of whom is an incumbent director, for reelection to the board for three-year terms ending 2007. If any nominee is unable to serve as a director, the persons named in the enclosed proxy reserve the right to vote for a lesser number of directors or for a substitute nominee designated by our board of directors, to the extent consistent with our certificate of incorporation and our by-laws. We do not expect that any nominee will be unable to serve.

      Our board of directors recommends a vote “FOR” incumbent directors Keith J. Bane and V. Janet Hill.

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BOARD OF DIRECTORS

From left to right: Keith J. Bane, V. Janet Hill

Nominees for election as directors to hold office until the 2007 annual meeting of stockholders

Keith J. Bane

      Mr. Bane has served as one of our directors since July 1995. Mr. Bane retired in November 2002 as executive vice president and president, global strategy and corporate development of Motorola, Inc., a position that he had held since May 2000. From March 1997 until May 2000, Mr. Bane served as executive vice president and president, Americas region of Motorola. From 1973 to August 1997, Mr. Bane held various senior management positions with Motorola.

V. Janet Hill

      Mrs. Hill has served as one of our directors since November 1999. Since 1981, Mrs. Hill has been vice president of Alexander & Associates, Inc., a corporate consulting firm in Washington, D.C. Mrs. Hill also serves as a director of Wendy’s International, Inc. and Dean Foods, Inc.

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From left to right: William E. Conway, Jr., Morgan E. O’Brien, Stephanie M. Shern

Directors holding office until the 2006 annual meeting of stockholders

William E. Conway, Jr.

      Mr. Conway has served as Chairman of our board of directors since February 2001 and as one of our directors since February 1997. Mr. Conway is a founder, and since 1987 has been a managing director, of The Carlyle Group, a private global investment firm. From 1984 until 1987, Mr. Conway served as senior vice president and chief financial officer of MCI Communications Corporation. Mr. Conway was a vice president of MCI from 1981 to 1984. Prior to joining MCI, Mr. Conway served in a variety of positions for almost ten years with First National Bank of Chicago in the areas of corporate finance, commercial lending, workout loans and general management. Mr. Conway currently serves as the chairman of United Defense Industries, Inc.

Morgan E. O’Brien

      Mr. O’Brien has served as one of our directors since co-founding Nextel in 1987. Since March 1996, Mr. O’Brien has served as our Vice Chairman, although he resigned from his employment with us in November 2003. From 1987 to March 1996, Mr. O’Brien served as Chairman of our board of directors. From 1987 to October 1994, Mr. O’Brien also served as our General Counsel.

Stephanie M. Shern

      Mrs. Shern has served as one of our directors since March 2003. From 2001 until February 2002, Mrs. Shern served as senior vice president of Kurt Salmon Associates, a retail consulting and business advisory firm. From 1969 until July 2001, Mrs. Shern held various positions with Ernst & Young, LLP, including vice chair. Mrs. Shern also serves as a director of GameStop Corp. and The Scotts Company.

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From left to right: Timothy M. Donahue, Frank M. Drendel, William E. Kennard

Directors holding office until the 2005 annual meeting of stockholders

Timothy M. Donahue

      Mr. Donahue has served as our Chief Executive Officer since July 1999. Mr. Donahue has served as our President since joining us in February 1996 and also served as our Chief Operating Officer from February 1996 until July 1999. Mr. Donahue has served as one of our directors since June 1996. From 1986 to January 1996, Mr. Donahue held various senior management positions with AT&T Wireless Services, Inc., including regional president for the northeast. Mr. Donahue serves as a director of Nextel Partners, Inc. and Eastman Kodak Company.

Frank M. Drendel

      Mr. Drendel has served as one of our directors since August 1997. Mr. Drendel has served as chairman and chief executive officer of CommScope, Inc., a manufacturer of coaxial cable and supplier of high-performance electronics cables, since 1976. Mr. Drendel is also a director of the National Cable Television Association.

William E. Kennard

      Mr. Kennard has served as one of our directors since May 2001. Mr. Kennard has served as a managing director of The Carlyle Group since May 2001. From 1997 until January 2001, Mr. Kennard served as chairman of the Federal Communications Commission. From 1993 until 1997, Mr. Kennard served as general counsel of the Federal Communications Commission. Mr. Kennard also serves as a director of The New York Times Company and Dex Holdings, LLC.

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BOARD COMMITTEES

Board and Committee Meetings held in 2003 and Membership Roster As of March 15, 2004

      Until March 26, 2003, we had a nominating committee, which we merged with the corporate governance committee and renamed the corporate governance and nominating committee.

      Until March 5, 2003, Dennis M. Weibling, one of our former directors, served on the audit, compensation and interested party committees.

      The board has determined that Messrs. Conway, Drendel and Kennard, and Mrs. Hill and Mrs. Shern each are independent under Nasdaq Marketplace Rule 4200(a)(15).

Audit

      The audit committee primarily reviews our financial reporting and accounting practices and internal control functions. Among other responsibilities, the audit committee:

      The audit committee is authorized to engage or consult from time to time, as appropriate, at our expense, independent legal counsel and other experts and advisors it considers necessary, appropriate or advisable in the discharge of its responsibilities.

      A current copy of the audit committee’s charter is available to stockholders on our website at http://www.nextel.com in the “Corporate Governance” section of the “About Nextel” tab. All of the members of the audit committee are independent, as independence for audit committee members is defined by the Nasdaq Marketplace Rules. In addition, the board of directors has determined that each of Mr. Conway and Mrs. Shern is an “audit committee financial expert” as such term is defined in applicable regulations of the Securities and Exchange Commission.

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Compensation

      The compensation committee:

      The compensation committee administers and makes all ongoing determinations concerning matters relevant to our incentive equity plan, our associate (employee) stock purchase plan and our cash compensation deferral plan. The compensation committee is authorized to engage or consult from time to time, as appropriate, at our expense, consultants, independent legal counsel and other experts and advisors it considers necessary, appropriate or advisable in the discharge of its responsibilities.

      A current copy of the compensation committee’s charter is available to stockholders on our website at http://www.nextel.com in the “Corporate Governance” section of the “About Nextel” tab. All of the members of the compensation committee are independent, as defined by the Nasdaq Marketplace Rules.

      Compensation Committee Interlocks and Insider Participation: The members of the compensation committee currently are Messrs. Drendel and Conway and Mrs. Hill. Until March 5, 2003, Mr. Weibling also served on this committee. Mr. Weibling is a director of Nextel Partners. During 2003, we received $15 million for the sale of FCC licenses and network assets to Nextel Partners. In November 2003, Nextel Partners redeemed its 12% nonvoting mandatorily redeemable preferred stock that we held for $39 million. Under our roaming agreement with Nextel Partners, we were charged $51 million during 2003 for our customers roaming on Nextel Partners’ network, net of roaming revenues earned. We also provide telecommunications switching services to Nextel Partners under a switch sharing agreement, for which we earned $44 million in 2003. We charged Nextel Partners $11 million in 2003 for administrative services provided under a services agreement. We also earned $4 million in 2003 in royalty fees. We had a net receivable due from Nextel Partners of $16 million as of December 31, 2003. Until December 1, 2003, Mr. Weibling served as vice chairman of Eagle River Investments, L.L.C. In 2003, we incurred costs of about $86,000 under our management support agreement with Eagle River. Mr. Weibling also served as our acting Chief Executive Officer from October 1995 until March 1996. See “Certain Relationships and Related Transactions.”

Corporate Governance and Nominating

      The corporate governance and nominating committee:

      The corporate governance and nominating committee considers candidates for board membership suggested by its members and other board members and management, as well as stockholders. The corporate governance and

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      Stockholders who want to recommend a director candidate may do so in accordance with Regulation 14A under the Securities Exchange Act of 1934 and our Amended and Restated By-Laws, which require advance notice to us and certain other information. In general, under the Amended and Restated By-Laws, a written nomination solicitation notice must be received by our Corporate Secretary at our principal executive office not less than 90 nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting. The written nomination solicitation notice must contain:

      The corporate governance and nominating committee’s policy with respect to the consideration of director candidates recommended by stockholders is that it will consider such candidates on the same basis as it considers all director candidates. In considering director candidates, the corporate governance and nominating committee will consider such factors as it deems appropriate to assist in developing a board and committees that are diverse in nature and comprised of experienced and seasoned advisors. These factors may include judgment, skill, diversity (including factors such as race, gender or experience), integrity, experience with businesses and other organizations of comparable size, the interplay of the candidate’s experience with the experience of other board members, and the extent to which the candidate would be a desirable addition to the board and any committees of the board.

      The corporate governance and nominating committee is authorized to engage or consult from time to time, as appropriate, at our expense, consultants, independent legal counsel and other experts and advisors it considers necessary, appropriate or advisable in the discharge of its responsibilities.

      A current copy of the corporate governance and nominating committee’s charter is available to stockholders on our website at http://www.nextel.com in the “Corporate Governance” section of the “About Nextel” tab. All of the members of the committee are independent, as independence for nominating committee members is defined in the Nasdaq Marketplace Rules.

Finance

      The finance committee was formed to review and, if appropriate, authorize us to pursue potential opportunities to raise funding through the incurrence of indebtedness, the issuance of equity securities, the repurchase or exchange of outstanding debt securities or mandatorily redeemable preferred stock for cash and/or the issuance of equity or

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Interested Party

      Pursuant to our agreements with Motorola, as long as Motorola has the right to nominate at least one person for election to our board of directors, Motorola’s nominee(s) will serve as members of the interested party committee. Motorola is not currently exercising its nomination right, and the chairperson position of this committee currently is open. The interested party committee has the authority to review certain proposed transactions between us and affiliated persons or entities, other than subsidiaries or other affiliated entities controlled by us. This authority is in addition to the audit committee’s responsibility to review and approve proposed transactions with related parties pursuant to applicable Nasdaq Marketplace Rules. The interested party committee was not required to meet during 2003 pursuant to the terms of our agreements with Motorola.

Meeting Attendance and Communications

      During 2003, all current directors attended at least 75% of the meetings of the board of directors and the committees on which they served. In addition to attending meetings, directors also discharge their responsibilities by attending, in person or telephonically, sessions at which they are briefed about the status of particular matters, by review of our reports to directors, by visits to our facilities, and by correspondence and telephone conferences with our executive officers and others regarding matters of interest and concern to us. We encourage our directors to attend the annual meeting of stockholders. In 2003, all but one director attended the annual meeting.

      Stockholders may send written communications to the board, committees of the board and individual directors by mailing those communications to our Corporate Secretary at Nextel Communications, Inc., 2001 Edmund Halley Drive, Reston, Virginia 20191, who will forward all such communications to the addressee(s).

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MOTOROLA DIRECTORSHIPS

      In connection with investments by Motorola in Nextel, subject to specified conditions, as long as Motorola owns 5% or more of our outstanding shares of class A common stock (assuming conversion of the shares of class B non-voting common stock held by Motorola into shares of class A common stock), Motorola is entitled to nominate two persons for election as members of our board of directors. Until January 1, 2004, Mr. Bane was nominated by Motorola pursuant to these rights, at which time Mr. Bane resigned from this position and our board of directors elected him to fill a vacant board seat that was not subject to Motorola’s board nomination rights. Since this time, Motorola has not exercised its board nomination rights.

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DIRECTOR COMPENSATION

      Directors are reimbursed for direct expenses relating to their activities as members of our board of directors. In order to attract and retain the most qualified candidates, and to align the interests of these candidates most closely with those of our stockholders, as part of their compensation, we have granted our non-affiliate directors interests in our class A common stock, as described below. Our non-affiliate directors are those directors who are neither employees of Nextel nor serving on the board pursuant to any contractual rights.

      Beginning after our 2003 annual meeting, which was held on May 29, 2003, our Chairman of the Board began to receive each quarter, in lieu of all other compensation, options to purchase 62,500 shares of common stock, which expire 10 years after the date of grant and have terms substantially identical to grants made to our employees, except that such options become fully vested on the grant date of the following quarterly non-affiliate director stock option grants.

      Beginning after our 2003 annual meeting, the other non-affiliate directors began to receive the following compensation:

      In connection with their annual retainers, on May 30, 2003, we granted 3,336 deferred shares to Mr. Drendel and 2,001 deferred shares to each of Mrs. Hill, Mr. Kennard and Mrs. Shern.

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      In 2003, we granted the non-affiliate directors options to purchase shares of our class A common stock, as follows:

      In addition, our board of directors has established stock ownership guidelines requiring directors to hold at least $200,000 of our equity, subject to the board’s consideration of individual circumstances. Directors are expected to achieve this ownership level by the later of five years from the date of their first election to the board and November 14, 2007.

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PROPOSAL 2

RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE LLP

      Deloitte & Touche LLP has been our independent auditors for many years. The audit committee has determined to engage Deloitte & Touche to audit our consolidated financial statements for 2004. Our board of directors believes that stockholders should be given an opportunity to express their views on the subject. Although not binding on the audit committee, the failure of the stockholders to ratify the appointment of Deloitte & Touche as our independent auditors would be considered by the audit committee in determining whether to continue the engagement of Deloitte & Touche. Representatives of Deloitte & Touche will attend the annual meeting to answer appropriate questions and make a statement if they desire.

Independent Auditor Fees

      The following is a summary of the aggregate fees billed to us for 2003 and 2002 by Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates, including Deloitte Consulting, which are collectively referred to below as Deloitte & Touche.

     • Audit Fees

     • Audit-Related Fees

     • Tax Fees

     • All Other Fees

      The audit committee has determined that the provision of financial information systems design and implementation services to us during 2002 and 2003 and the provision of other non-audit services to us by Deloitte & Touche is compatible with maintaining their independence. In 2002, Deloitte & Touche had announced plans to separate its consulting practice from its audit practice. We had continued to use Deloitte & Touche for certain consulting work as permitted by the Sarbanes-Oxley Act of 2002 and rules of the Securities and Exchange Commission, based in part, on the expectation the separation would take place. Deloitte & Touche since has abandoned plans to separate the practices. We made the decision in 2003 that, going forward, with the exception of projects finishing in 2003, we would not utilize any management consulting services provided by Deloitte & Touche’s consulting practice as long as that consulting practice remains associated with Deloitte & Touche LLP and Deloitte & Touche continues to serve as our independent auditors.

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Policy on Pre-Approval of Audit and Permissible Non-Audit Services of the Independent Auditors

      The audit committee has adopted a policy for the pre-approval of services provided by the independent auditors. The audit committee pre-approves all audit and permissible non-audit services, as defined by applicable Securities and Exchange Commission regulations, provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services. The policy sets forth particular permitted services that the audit committee pre-approved for 2003, and requires that the audit committee pre-approve any permitted service not set forth in the policy. As part of its pre-approval process, the audit committee considers whether such services are consistent with the rules of the Securities and Exchange Commission on auditor independence. The policy delegates to a designated member of the audit committee the authority to address any requests for pre-approval of services between audit committee meetings, and the designated member must report any pre-approval decisions to the audit committee at its next scheduled meeting. The policy does not delegate to management the audit committee’s responsibility to pre-approve permitted services of the independent auditors. The policy provides that it will be reviewed annually by the audit committee.

      Our board of directors recommends a vote “FOR” the ratification of the appointment of Deloitte & Touche as our independent auditors.

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PROPOSAL 3

APPROVAL OF THE NEXTEL COMMUNICATIONS, INC.

      In 1996, our board of directors adopted, and the stockholders approved, the Nextel Communications, Inc. Associate Stock Purchase Plan, which provides for the granting to eligible employees of us and our subsidiaries of rights to purchase shares of our class A common stock from us at a discount from the market price. Of the 10,000,000 shares originally available under the plan, less than 200,000 shares remain available for issuance as of March 15, 2004. On March 26, 2004, our board of directors approved the Nextel Communications, Inc. Amended and Restated Associate Stock Purchase Plan to (a) increase from 10,000,000 to 20,000,000 the number of shares of our class A common stock that may be issued under the plan and (b) allow the board to designate those of our subsidiaries whose employees may participate in the plan. The amended and restated plan is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code of 1986, as amended, or the Code, and is intended to advance Nextel’s interests and those of our stockholders by strengthening our ability to attract and retain employees who have the training, experience and ability to enhance our profitability and to reward our employees and employees of our designated subsidiaries upon whose judgment, initiative and effort the successful conduct and development of their businesses largely depend. The following summary description of the plan is qualified in its entirety by reference to the plan, which is attached to this proxy statement as Annex A.

Description of the Stock Purchase Plan

      Eligible Employees. All of our employees and employees of our designated subsidiaries who are customarily employed for more than 20 hours per week are eligible to elect to participate in the plan. Section 423 of the Code, however, prohibits participation by any employee who, upon exercise of his or her right, would own stock possessing five percent or more of the total combined voting power or value of all classes of our stock. For purposes of the foregoing, shares of stock that are subject to outstanding options or other vested or contingent rights to acquire the same are deemed to be owned by the participant. Substantially all of our over 17,000 employees as of February 27, 2004 were eligible to participate in the plan.

      Shares Covered. The aggregate number of shares of class A common stock that may be issued under the plan is 20,000,000, assuming stockholder approval of the amended and restated plan at the annual meeting. Those shares may be newly issued shares or shares held in treasury or a combination thereof, subject to adjustment in the event of stock dividends, stock splits, combinations of shares or other changes in our capital structure.

      Terms of Rights. The price per share payable upon exercise of rights granted under the plan is an amount equal to 85 percent of the lesser of (i) the fair market value of a share of class A common stock on the date of grant or (ii) the fair market value of a share of class A common stock on the date of exercise. For purposes of the plan, “fair market value” means the closing price of the class A common stock on the Nasdaq National Market on the last trading date preceding the date of the grant or the date of exercise, as the case may be. The closing price of the class A common stock on the Nasdaq National Market on March 31, 2004, was $24.66.

      The purchase price is payable by the participant on the date of exercise with funds accumulated through payroll withholding over the applicable term of the right or, at the discretion of the compensation committee of our board of directors, with funds paid to us by the participant in a lump sum on or before the date of exercise. A participant may elect to have not less than 1 percent and not more than 10 percent of his or her “basic compensation,” which includes base salary and any commissions paid pursuant to an ongoing sales incentive compensation program but does not include cash bonuses or any form of noncash compensation, withheld from payroll and applied to the purchase of class A common stock upon the exercise of rights granted under the plan.

      The maximum number of shares of class A common stock that a participant may purchase upon exercise of a right granted under the plan is equal to 10 percent of his or her basic compensation divided by an amount equal to 85 percent of the lesser of (i) the fair market value of a share of class A common stock on the date of grant or (ii) the fair market value of a share of common stock on the date of exercise, subject to further limitations imposed by Section 423 of the Code. Section 423 of the Code provides that, among other things, the right of a participant to

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      Rights granted under the plan may have terms of not less than three months and not more than one year, as determined by the compensation committee in its sole discretion, provided that all rights granted pursuant to any particular offering under the plan must have the same term for all participants. The first day of the relevant term of a right granted under the plan is the grant date with respect to such right, and the date of exercise of a right granted under the plan is the last day of its term. No right granted under the plan may be transferred by the participant.

      Administration. The plan is administered by the compensation committee, which may establish such policies or procedures and adopt such rules for the operation and administration of the plan as it deems appropriate. As permitted by the plan, we have engaged the services of a professional plan administrator, on terms and conditions deemed appropriate by the compensation committee, for the purposes of establishing and maintaining custodial accounts and holding shares of class A common stock acquired by employees upon the exercise of rights granted under the plan and otherwise operating the plan. The compensation committee has, among other things, the authority to (i) determine, within the parameters described above imposed by the plan, the length of the terms of rights granted under the plan and (ii) make such adjustments in the aggregate number of shares of class A common stock that may be issued and sold upon the exercise of rights granted under the plan and the number of shares of class A common stock covered by, and the purchase price per share payable upon exercise of, outstanding rights granted under the plan as the compensation committee may deem appropriate in order to prevent the dilution or expansion of the rights of participants in the event of a stock dividend, stock split, combination of shares or other change in the capital structure or in the event of any merger, consolidation or similar corporate transactions involving us. The compensation committee also has the authority to fix a maximum number of shares of class A common stock that may be issued or transferred upon the exercise of rights granted pursuant to any particular offering under the plan. The compensation committee also has the authority to promulgate terms and conditions (to the extent not inconsistent with the terms and conditions prescribed in the plan) applicable to grants made under the plan, including, without limitation, holding periods for shares of class A common stock purchased upon the exercise of a right granted under the plan beyond those required to obtain favorable tax treatment under Section 423 of the Code and sanctions for failing to comply with the terms and conditions applicable to particular grants (in addition to those otherwise imposed by law or the terms of the plan).

      Term and Termination; Amendment. The plan will terminate on March 26, 2014, the tenth anniversary of the adoption of the amended and restated plan by the board of directors, unless sooner terminated by the board, and no rights will thereafter be granted thereunder. The plan may be amended from time to time by our board of directors, but without further approval by our stockholders, no such amendment may (i) increase the aggregate number of shares of class A common stock covered by the plan, except for adjustments to reflect the effects of stock dividends, stock splits, combinations of shares or other changes in our capital structure, (ii) permit the granting of rights under the plan to persons other than our employees and employees of our designated subsidiaries who are customarily employed for more than 20 hours per week, (iii) cause rights granted under the plan to fail to satisfy any of the conditions of Section 423 of the Code or (iv) cause Rule 16b-3 under Section 16(b) of the Exchange Act (or any successor rule to the same effect) to cease to be applicable to the plan.

New Stock Purchase Plan Benefits

      Since participation in the plan is entirely voluntary on the part of eligible employees, the benefits that will be received by any individual executive or employee or any group of those persons are not determinable.

Federal Income Tax Consequences

      The following is a brief summary of certain federal income tax consequences of certain transactions under the plan based on federal income tax laws in effect on January 1, 2004. This summary is not intended to be exhaustive and does not describe state or local tax consequences. The federal income tax consequences applicable to our employees and us with respect to rights granted under the plan are determined, in general, under Sections 421 and

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      If an employee should die owning stock acquired under the plan, he or she will be deemed to have disposed of his or her shares on the date of his or her death and will realize ordinary income to the extent of the ordinary income component described in the preceding paragraph, but no capital gain will result until the time of a subsequent sale of the stock.

      If stock acquired under the plan is sold, exchanged or otherwise disposed of before the end of the required holding periods described above, the participant will usually realize ordinary income at the time of disposition equal to the excess of the amount received on disposition over the purchase price paid by the participant. To the extent that a participant realizes ordinary income in the circumstances described in the preceding sentence, we or our subsidiary would be entitled to a corresponding deduction in the year in which the disposition occurs, provided that, among other things, such income meets the test of reasonableness, is an ordinary and necessary business expense and is not subject to the annual compensation limitation set forth in Section 162(m) of the Code. Otherwise, no deduction is allowable to us or our subsidiary with respect to rights granted under the plan.

      Our board of directors recommends a vote “FOR” approval of the Nextel Communications, Inc. Amended and Restated Associate Stock Purchase Plan.

Equity Compensation Plan Information

      The following table sets forth, as of December 31, 2003, information regarding securities authorized for issuance under all of our equity compensation plans.

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AUDIT COMMITTEE REPORT

      The board of directors has adopted a written audit committee charter, a current copy of which is available to stockholders on our website at http://www.nextel.com in the “Corporate Governance” section of the “About Nextel” tab. All of the current members of the audit committee are independent, as independence for audit committee members is defined by the Nasdaq Marketplace Rules.

      The audit committee has reviewed and discussed with our management and Deloitte & Touche, our independent auditors, our audited financial statements contained in our annual report on Form 10-K for 2003. The audit committee has also discussed with our independent auditors the matters required to be discussed pursuant to Statement on Auditing Standards, or SAS, No. 61, “Communication with Audit Committees,” as amended by SAS No. 84 and SAS No. 90, and Rule 2-07, Communication with Audit Committees, of Securities and Exchange Commission Regulation S-X.

      The audit committee has received and reviewed the written disclosures and the letter from Deloitte & Touche required by Independence Standards Board Standard No. 1, “Independence Discussions with Audit Committees,” and has discussed with Deloitte & Touche their independence.

      Based on the review and discussions referred to above, the audit committee recommended to our board of directors that the audited financial statements be included in our annual report on Form 10-K for 2003 filed with the Securities and Exchange Commission.

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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

      The compensation committee believes that the compensation levels of our executive officers, who provide leadership and strategic direction for us, should consist of (1) base salaries that are commensurate with executives of other comparable telecommunications companies, (2) cash bonuses based on achievement of objectives set by the compensation committee for our Vice Chairman and our President and Chief Executive Officer, and set by our President and Chief Executive Officer in consultation with the compensation committee for our other executive officers, and (3) long term incentive compensation, which may consist of both cash and deferred stock, as described more fully below. The compensation committee also believes that it is important to provide our executive officers with significant equity-based incentive compensation, which increases in value in direct correlation with improvement in the performance of our class A common stock, thereby aligning management’s interests with those of our stockholders.

      The compensation committee considers the following factors, ranked in order of importance, when determining compensation of our executive officers:

      Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to a publicly-held company for compensation in excess of $1 million paid to its chief executive officer and its four other most highly compensated executive officers, unless the plan and awards under which any portion of the compensation is paid meet specified requirements. Neither our incentive equity plan nor our long term incentive plan meets those requirements, and the compensation committee has determined that meeting these requirements may not necessarily be in our best interest. Accordingly, the compensation committee has decided not to recommend any amendment to our incentive equity plan or our long term incentive plan to satisfy those requirements at this time.

Cash Compensation

      The salaries of some of our executive officers were initially set by their respective employment agreements, which provide that we may increase their base salary throughout the term or any renewal term of their employment agreement. As stated above, the compensation of executive officers is also based in part upon individual performance and comparative industry compensation levels. Early in each year, a performance plan is established. Each annual performance plan establishes overall goals we wish to achieve. For 2003, the overall goals were to:

      The base salaries of each of our executive officers identified below were either set by, or determined by reference to, their employment agreements (see “Executive Compensation — Employment Agreements”) or, if they did not have an employment agreement, were determined by reference to officers’ salaries at similarly situated companies as established by a report prepared by an independent third party compensation consultant. Bonus compensation for

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      The compensation committee adopted a long-term incentive plan intended to reward key members of Nextel’s management for achieving specific performance goals relating to operating cash flow and net subscriber additions over a two-year period commencing January 1, 2002. Awards under the plan were set by the compensation committee for our President and Chief Executive Officer, and set by our President and Chief Executive Officer in consultation with the compensation committee for other participants. Under this plan, we made an interim payout in 2003 based on satisfaction of the performance goals for 2002 and a further payout was approved by the compensation committee and has been made in 2004 based on satisfaction of the performance goals for the period from January 1, 2002 to December 31, 2003. The compensation committee elected to pay 50% of this payout in cash and 50% in shares of deferred stock.

      The base salary of Timothy M. Donahue, our President and Chief Executive Officer, was based upon his historical compensation amounts as well as by reference to the report discussed above and, with respect to the period beginning on July 1, 2003, based on terms of the employment agreement between us and Mr. Donahue. Mr. Donahue’s bonus compensation of $2,760,000 and equity awards were based upon the achievement of most of the goals set forth above, as well as in recognition of his leadership, contributions and attraction and retention of key executive talent, taking into consideration Nextel’s accomplishments in the highly competitive telecommunications and technology industries. In addition, for 2003, Mr. Donahue received a $4,725,000 payout under our long term incentive plan, 50% of which was paid in cash and 50% of which was in the form of shares of deferred stock. Effective July 1, 2003, we entered into an employment agreement with Mr. Donahue. See “— Employment Agreements — Mr. Donahue.”

Equity Compensation

      The compensation committee administers and authorizes grants and awards to our executive officers made under our incentive equity plan. Periodically, the compensation committee authorizes grants of options to purchase class A common stock under our incentive equity plan to all employees who have been with us for a specified length of service. The compensation committee also authorizes awards for certain new employees as incentives to join us and awards for special recognition of existing employee achievements. In determining whether and in what amount to grant stock options or other equity compensation to our executive officers in 2003, the compensation committee considered the amount and date of vesting of currently outstanding incentive equity compensation granted previously to each of our executive officers. The compensation committee believes that continued grants of equity compensation to key executives is an important tool to retain and motivate exceptionally talented executives who are necessary to achieve our long term goals, especially at a time of significant growth and competition in the wireless communications industry.

      During 2003, the compensation committee granted equity compensation to all our executive officers named in the Summary Compensation Table below and approved grants of equity compensation to other of our executive officers, consistent with the compensation committee’s overall policy of granting equity compensation to key executives and to our employees in general.

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EXECUTIVE COMPENSATION

      The table below summarizes the compensation for the years indicated of our Chief Executive Officer and each of our four other most highly compensated executive officers during 2003 as well as a former executive officer, collectively referred to as the “named executive officers.”

Summary Compensation Table

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2003 OPTION GRANTS

      The table below sets forth information about options to purchase our class A common stock that were granted in 2003 to the named executive officers.

Option Grants in Last Fiscal Year

      Our stock options are nontransferable, except to family members or by will, or as otherwise provided in our incentive equity plan. The actual value of the stock options that an employee may realize, if any, will depend on the excess of the market price on the date of exercise over the exercise price.

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2003 OPTION EXERCISES AND YEAR-END VALUES

      The table below lists information concerning the exercise by the named executive officers of options to purchase our class A common stock during 2003 and the unexercised options to purchase our class A common stock held by the named executive officers as of December 31, 2003.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

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EMPLOYMENT AGREEMENTS

Mr. Donahue

      In 1996, we entered into an employment agreement with Mr. Donahue that provided the terms of his employment until July 1, 2003, at which time we entered into a new employment agreement with Mr. Donahue with an initial term of three years. On the third anniversary of the effective date, and on each subsequent anniversary of the date of the agreement, the employment term shall be extended for an additional year unless twelve months prior thereto either party gives the other notice of non-renewal.

      Mr. Donahue’s employment agreement currently provides for an annual salary of $1,000,000, which may be increased by our compensation committee but may not be decreased, a minimum annual target bonus equal to 150% of his base salary, and a minimum target award under our long-term incentive plan of $2,700,000. Under the agreement, in August 2003, we granted Mr. Donahue 1,000,000 shares of deferred stock, one-third of which vest and become nonforfeitable on each of the first three anniversaries of the effective date of the agreement. Under the agreement, Mr. Donahue also is entitled to be granted an option to purchase 250,000 shares of our class A common stock in 2004, which will vest over two years from the date of grant, the second half of which will vest no later than June 30, 2006, and an option to purchase 250,000 shares of our class A common stock in 2005, which will vest one year from the date of grant, but no later than June 30, 2006. In addition, Mr. Donahue is entitled to participate in incentive plans and to other benefits generally available to our other senior executives.

      In the event of Mr. Donahue’s death or permanent disability during the employment term, we will pay an amount equal to Mr. Donahue’s existing base salary for a period of twelve months and a pro rata portion of his bonus and long-term incentive awards, will make all benefit payments on his behalf for a period of twelve months (in the event of disability) and the vesting of his incentive equity awards will be accelerated. In the event Mr. Donahue is terminated without cause (as defined in the agreement) or terminates his employment for good reason (as defined in the agreement), then we will pay Mr. Donahue an amount equal to his then-current base salary, bonus and benefits for a period of two years and his target award under our long-term incentive plan, and his options and deferred share grants will vest. Mr. Donahue is subject to specific confidentiality and non-competition restrictions during his employment term and for a period of two years after the termination of his employment term.

Mr. Saleh

      We entered into an employment agreement with Mr. Saleh in August 2001, which provides for an annual salary of $475,000, which may be increased by our board of directors but may not be decreased. The agreement also provided for:

      The 2001 agreement also provided for a $200,000 interest free loan, which will be forgiven on a pro rata quarterly basis over a three-year period, unless Mr. Saleh terminates his employment with Nextel. The employment agreement with Mr. Saleh further provides that in the event of separation from Nextel under certain circumstances in the first three years of his employment, we will pay an amount equal to Mr. Saleh’s then-current base salary, bonus and benefits for a period of two years. Thereafter, Mr. Saleh would receive the amounts called for under our severance benefits plan. Under the agreement, Mr. Saleh also is subject to specific confidentiality and non-competition restrictions during his employment term and for a period of two years after the termination of his employment term.

      In April 2004, we entered into a new employment agreement with Mr. Saleh, the terms of which are summarized below.

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Mr. Kennedy

      We entered into an employment agreement with Mr. Kennedy effective January 1, 2001 that provides for his employment for an initial term ending December 31, 2003 and continuing after that date unless terminated upon 30 days notice and for an annual base salary of $375,000, which can be increased by our board of directors but which may not be decreased. The agreement also provides for:

      In addition, to the extent Mr. Kennedy is awarded an annual bonus, his target bonus equals 50% of his base salary, which can be increased by our board of directors but which may not be decreased. Further, the agreement contains a two-year non-competition covenant. However, in the event Mr. Kennedy is terminated without cause (as defined in the agreement) or terminates his employment for good reason (as defined in the agreement), then generally the non-competition covenant will be reduced to a one-year term and he will be entitled to an amount equal to his base salary and target bonus for one year and his options and deferred share grants described above will vest. In either of those circumstances or in the event of a constructive termination (as defined in the agreement) following a change of control (as defined in our incentive equity plan), then all options granted to Mr. Kennedy will vest. Lastly, in the event of Mr. Kennedy’s disability, we will pay an amount equal to his base salary for one year and continue to provide his benefits and his options will vest and remain exercisable for one year unless terminated earlier in accordance with their terms.

      In April 2004, we entered into a new employment agreement with Mr. Kennedy, the terms of which are summarized below.

Other Named Executive Officers

      On November 11, 2003, we entered into a resignation and non-competition agreement with Mr. O’Brien. Under the terms of this agreement, Mr. O’Brien will continue to serve as our Vice Chairman until the 2006 annual meeting of stockholders. In addition, for a period of two years, Mr. O’Brien will receive periodic payments equal to his $520,000 annual base salary in effect as of his resignation date and will be entitled to continue to participate in our health care plans, on the same basis as our other senior executives. The agreement also provides that he will receive full payment of any bonus award for the bonus year ending December 31, 2003 and a $520,000 bonus award for each of 2004 and 2005, and full payment of any remaining target award opportunity under our long-term incentive plan effective for the years 2002 and 2003. In addition, the agreement provides that most options to purchase shares of our class A common stock will remain outstanding and continue to vest during the remainder of Mr. O’Brien’s current term as a member of our board of directors or, in the event of his death prior thereto, will vest immediately. In addition, in the event that we treat any portion of the payments or benefits under the agreement as an “excess parachute payment” within the meaning of Section 280G of the Code and such payment or benefit would be subject to an excise tax, we will pay Mr. O’Brien an amount equal to such tax. Under the agreement, Mr. O’Brien is subject to specific confidentiality, non-competition and non-solicitation restrictions for a period at least two years from the effective date of the agreement.

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      In April 2004, we entered into employment agreements with Messrs. Kelly, Saleh, West and Kennedy, each with a term of three years. On the third anniversary of the effective date, and on each subsequent anniversary, the employment term shall be extended for an additional year unless twelve months prior thereto either party gives the other notice of nonrenewal. The agreements provide for the following compensation:

      Under the terms of each agreement, each executive’s current base salary may be increased by our compensation committee but may not be decreased. Under each agreement, the awards of shares of deferred stock will vest over various periods such that all awards shall be fully vested on the third anniversary of each applicable agreement. Each agreement provides that, upon a change of control (as defined in our incentive equity plan), any unawarded deferred shares under such agreement shall be made and the unvested portions of all deferred share awards under the agreement shall become fully vested. Under each agreement, each applicable executive also is entitled to participate in our long-term incentive plan.

      Under the terms of each agreement, in the event of the death or permanent disability of the executive during his employment term, we will pay such executive an amount equal to his existing annual base salary and a pro rata portion of such executive’s bonus and long-term incentive awards, will make all benefit payments on his behalf for a period of twelve months (in the event of disability) and the vesting of certain of his incentive equity awards will be accelerated. Each agreement also provides that, in the event the executive is terminated without cause (as defined in the agreement) or terminates his employment for good reason (as defined in the agreement), then we will pay such executive an amount equal to his then-current base salary, bonus and benefits for a period of two years (or one year in the event of good reason termination due to relocation) and at least a pro rata portion of his minimum target award under our long-term incentive plan, his options and deferred share grants will vest, and he will receive certain outplacement services (except in the event of a good reason termination due to relocation). Under the terms of each agreement, each executive is subject to specific confidentiality and non-competition restrictions during his employment term and for a period of two years after the termination of his employment term.

Severance Benefits

      In 2003, each of our named executive officers participated in our severance benefits plan. Under this plan, in the event of a specified involuntary separation of employment that is intended to be permanent, as defined in the plan, each executive officer would receive severance pay equal to nine months annual earnings, as defined in the plan, plus one month of annual earnings for each full or partial year of service to us, up to a maximum of 12 months annual earnings. In addition, these executives would receive a payment equal to any annual bonus payment that is unpaid for the previous fiscal year and an additional payment equal to the prorated portion of the annual bonus payment for the period ending on that executive’s termination. Certain restrictions apply to receiving such specified payments including completion of a release of claims. For years subsequent to 2003, under the terms of each named executive’s employment agreement described above, amounts paid by us under such agreement in the event that we terminate such executive without cause or such executive resigns for good reason are in full satisfaction of any amounts to which such executive may be entitled to under our severance benefits plan.

Change of Control Retention Bonus and Severance Pay Plan

      Each of our named executive officers participates in our change of control retention bonus and severance pay plan. Under this plan, in the event of a change of control of Nextel (as defined in the plan), each executive officer will receive a retention bonus if he continues his employment with us through the closing of the change of control transaction and the one-year period after the closing, or if we terminate his employment without cause (as defined in the plan) before the closing or before the end of this one-year period. The amount of the retention bonus for the named executive officers is 150% of the base salary and target bonus for the year in which the transaction occurs. In

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SECURITIES OWNERSHIP

      The table below lists, as of March 15, 2004, the amount and percentage of shares of each class of our capital stock that are deemed under the rules of the Securities and Exchange Commission to be “beneficially owned” by (1) each of our current directors, (2) each of our named executive officers, (3) all of our directors and executive officers as a group and (4) each person or group known by us to beneficially own more than 5% of each class of our common stock, as indicated in the table. Under the rules of the Securities and Exchange Commission, a person is deemed to be the beneficial owner of a security if that person, directly or indirectly, has or shares the power to vote or direct the voting of that security or the power to dispose or direct the disposition of that security. A person is also deemed to be a beneficial owner of a security if that person has the right to acquire beneficial ownership of that security within 60 days of March 15, 2004. Accordingly, more than one person may be deemed to be a beneficial owner of the same security. Unless otherwise specified, the persons indicated have sole voting and investment power over the securities shown.