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Nextel Communications Inc – ‘DEF 14A’ for 5/29/03

On:  Friday, 4/25/03, at 12:54pm ET   ·   Effective:  4/25/03   ·   For:  5/29/03   ·   Accession #:  950133-3-1493   ·   File #:  0-19656

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

 4/25/03  Nextel Communications Inc         DEF 14A     5/29/03    1:660K                                   Bowne - DC/FA

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 1: DEF 14A     DEF 14A for Nextel Communications, Inc.             HTML    354K 

Table of Contents

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:

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Proxy Statement

Nextel Communications, Inc.

April 24, 2003

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

      We will hold the annual meeting of stockholders of Nextel Communications, Inc. on May 29, 2003 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 4, 2003 can vote at the annual meeting. This proxy statement, the accompanying proxy card and the 2002 annual report to stockholders are being mailed or otherwise distributed to you on or about April 28, 2003. 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

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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 2006, (2) for ratification of the appointments of Messrs. McCaw and Weibling as directors, for terms ending 2004 and 2005, respectively, (3) for approval of an amendment to our certificate of incorporation, (4) for ratification of Deloitte & Touche as our independent auditors, and (5) 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 4, 2003 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 991,888,538 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. The amendment of the certificate of incorporation requires approval by the holders of a majority of the outstanding shares of class A common stock. All other matters will require the approval of a majority of the votes cast 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 11 members and is divided into three classes, with each class having a number of directors as nearly equal as possible. 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 William E. Conway, Jr., Morgan E. O’Brien and Stephanie M. Shern, each of whom is an incumbent director, for reelection to the board for three-year terms ending 2006. J. Timothy Bryan, originally appointed as a designee of Digital Radio, L.L.C., is not standing for reelection, and as a result there will be 10 members of the board of directors after the annual meeting.

      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 William E. Conway, Jr., Morgan E. O’Brien and Stephanie M. Shern.

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BOARD OF DIRECTORS

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

Nominees for election as directors to hold 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 a director 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 Vice Chairman of our board of directors. 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

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

Director not standing for reelection

J. Timothy Bryan

      Mr. Bryan has served as one of our directors since September 2001. Since June 2001, Mr. Bryan has been vice president and chief financial officer of Eagle River, Inc., a company formed to make strategic investments in telecommunications ventures. From July 1999 until April 2001, Mr. Bryan served as a telecommunications consultant. From 1996 until 1999, Mr. Bryan served as the president and chief financial officer of United Pan-Europe Communications N.V. and the chief financial officer of UnitedGlobalCom, Inc.

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

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 NII Holdings, Inc., 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 C-SPAN and 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, Handspring, Inc. and Dex Media East, LLC.

Dennis M. Weibling

      Mr. Weibling has served as one of our directors since July 1995. Mr. Weibling currently serves as vice chairman of Eagle River. From 1993 until December 2001, Mr. Weibling served as president of Eagle River. Mr. Weibling is also a director of Nextel Partners, Inc.

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

Directors holding office until the 2004 annual meeting of stockholders

Keith J. Bane

      Mr. Bane has served as one of our directors since July 1995. Since November 2002, Mr. Bane has been a private investor. From May 2000 until November 2002, Mr. Bane served as executive vice president and president, global strategy and corporate development of Motorola, Inc. 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., Progressive Insurance Company and Dean Foods, Inc.

Craig O. McCaw

      Mr. McCaw has served as one of our directors since July 1995. Since 1994, Mr. McCaw has been chairman of the board of directors and chief executive officer of Eagle River. Since 1995, Mr. McCaw has been chairman of the board of directors of Digital Radio, a company formed for the purpose of making equity investments in Nextel. From 1974 to September 1994, Mr. McCaw served as chairman of the board of directors and chief executive officer of McCaw Cellular Communications, Inc., which was sold to AT&T Corp. in August 1994.

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BOARD COMMITTEES

Board and Committee Membership Roster As of March 14, 2003 and Meetings held in 2002

      Our board also had an operations committee, which was formed on July 31, 1995 in connection with Digital Radio’s investment in Nextel. On March 5, 2003, the members of that committee acted to terminate that committee. In addition, we were required to have a nominating committee so long as we had an operations committee. The operations committee had the authority to formulate key aspects of our business strategy, including certain decisions relating to our technology; acquisitions; certain budgets and marketing, strategic and financing plans; nomination, supervision and oversight of some of our executive officers; and endorsement of nominees proposed by the nominating committee to serve on our board of directors and its committees. All nominees to serve as directors or on committees of our board of directors, other than nominees of Digital Radio or Motorola, were required to be presented by the nominating committee to the operations committee for its endorsement before the submission of the nominations to our board of directors. The operations committee, which met once during 2002, was comprised of Messrs. Bryan, McCaw, O’Brien and Weibling. The nominating committee was merged on March 26, 2003 with the corporate governance committee, which was renamed the corporate governance and nominating committee. After the merger, the members of the committee include Messrs. Conway, Drendel and Kennard and Mrs. Hill. Also, until March 5, 2003, Mr. Weibling served on the audit, compensation and interested party committees. As a result of these changes, each of our audit, compensation and corporate governance and nominating committees is comprised solely of independent directors.

Audit

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

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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 employee stock purchase plan and our cash compensation deferral plan. The compensation committee is, and is expected to remain, composed entirely of directors who are not our employees. 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.

      Compensation Committee Interlocks and Insider Participation: The members of the compensation committee are Messrs. Drendel and Conway and Mrs. Hill. Until March 5, 2003, Mr. Weibling also served on this committee. Mr. Weibling currently serves as vice chairman of Eagle River. We incurred costs of $200,000 plus $21,736 of expenses in 2002 under our management support agreement with Eagle River. During 2002, Mr. Weibling was a director of XO Communications, Inc. During 2002, we paid $70 million to XO Communications for telecommunications services. Mr. Weibling is also a director of Nextel Partners. During 2002, we paid Nextel Partners $40 million for roaming services net of roaming revenues earned and charged them $52 million under a switch sharing agreement and $6 million for administrative services. At December 31, 2002, we had a net receivable due from Nextel Partners of $16 million. 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 will consider nominees recommended by stockholders, but it has not established procedures for that purpose. 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.

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. 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.

Meeting Attendance

      During 2002, 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.

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DIGITAL RADIO AND MOTOROLA DIRECTORSHIPS

      In connection with investments by Digital Radio and Motorola in Nextel, we granted each of them the right to nominate persons for election to our board of directors.

      Until March 5, 2003, Digital Radio, as the sole holder of the class A preferred stock, was entitled to elect three directors or such greater number as was necessary to cause the total number of directors elected by the holder of the class A preferred stock to equal 25% of the total number of members of our board of directors. Messrs. Bryan, McCaw and Weibling were originally elected as directors pursuant to these rights. Digital Radio is no longer entitled to elect any directors. See Proposal 2 — Ratification of Directors.

      Mr. Bane’s directorship is connected with Motorola’s investment in Nextel. Subject to specified conditions, as long as Motorola owns 5% or more of our outstanding shares of class A common stock and class B non-voting common stock, Motorola is entitled to nominate two persons for election as members of our board of directors. Motorola has currently elected to exercise this right only with respect to one nominee.

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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, in 2002, we granted our non-affiliate directors options to purchase shares of class A common stock, as detailed in the table below. Our non-affiliate directors during 2002 were those directors who were neither employees nor nominated by Digital Radio or Motorola. All of these grants expire after ten years from the grant date and were on terms substantially identical to grants made to our employees, except that the non-affiliate directors received grants with a three-year vesting schedule, instead of a four-year vesting schedule.

2002 Non-affiliate Director Option Grants

      Beginning after the 2003 annual meeting, the Chairman of the Board will receive, in lieu of all other compensation, options to purchase 62,500 shares of common stock granted quarterly which vest at the next quarterly grant date. The other non-affiliate directors will receive an annual compensation package as follows:

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      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.

PROPOSAL 2

RATIFICATION OF DIRECTORS

      In connection with Digital Radio’s original investment in Nextel in 1995, Nextel, Digital Radio and Mr. McCaw entered into certain arrangements regarding our governance. Among other things, Digital Radio acquired shares of our series A preferred stock which entitled it to elect at least three directors to our board.

      On March 5, 2003, we modified these arrangements, and the class A preferred stock was converted into class A common stock. In addition, Messrs. McCaw, Weibling and Bryan resigned as class A preferred directors elected pursuant to Digital Radio’s nominating rights. Our board immediately reelected Mr. McCaw as a director for a term ending 2004, Mr. Weibling as a director for a term ending 2005, and Mr. Bryan for a term ending 2003, the terms they would have served as directors elected pursuant to Digital Radio’s nominating rights. Since Mr. Bryan is not standing for reelection, his term will end at the annual meeting. The board reelected Messrs. McCaw and Weibling to serve their original terms, as the board believes their continued service is in the best interests of Nextel and its stockholders. However, their election was conditioned upon receipt by Nextel of an undated letter of resignation which can be accepted by the board if stockholders do not ratify their appointments at the annual meeting.

      Biographical information for Messrs. McCaw and Weibling is contained under Proposal 1 — Election of Directors. In addition, under Proposal 1, you will find information concerning the other members of our board, the composition of our board, the classes of our board, and other board and committee information.

      Although there is no requirement that our stockholders ratify the appointments of Messrs. McCaw and Weibling, the board is submitting their appointments to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the appointments, the board will accept the resignations of Messrs. McCaw and Weibling.

      The ratification of the appointments of Messrs. McCaw and Weibling will require the approval of a majority of the votes cast by the holders of the class A common stock.

      Our board of directors recommends a vote “FOR” ratification of the appointments of Messrs. McCaw and Weibling as directors.

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PROPOSAL 3

AMENDMENT TO CERTIFICATE OF INCORPORATION

      On March 26, 2003, our board of directors approved and recommended for submission to our stockholders an amendment to our certificate of incorporation to eliminate the three classes of Nextel’s preferred stock that were created in connection with Digital Radio’s original equity investment in Nextel in 1995. The purpose of the amendment is to simplify our certificate of incorporation by removing the terms of the class A convertible redeemable preferred stock, the class B convertible preferred stock and the class C convertible redeemable preferred stock. There are no longer any shares of the class A preferred stock or class B preferred stock outstanding. There have never been any shares of the class C preferred stock outstanding.

      The proposed amendment will not change any of the existing rights or powers of holders of class A common stock. By removing the terms of these three classes of preferred stock, the proposed amendment will reduce the number of shares of capital stock that Nextel is authorized to issue under our certificate of incorporation. It will not make any other change in our current capital structure. Our board will still have the ability in the future, without stockholder approval, to create and issue additional series of preferred stock from the currently existing undesignated preferred stock.

      The proposed amendment also makes other minor changes to the certificate of incorporation. These other changes will not affect any of the existing rights or powers of holders of class A common stock. The proposed amendment removes an unnecessary reference to the reclassification of Nextel’s common stock that was outstanding in July 1995 into the class A common stock and the class B non-voting common stock. The proposed amendment also conforms the provision in our certificate of incorporation regarding election of directors to the provision in our bylaws regarding election of directors and eliminates an unnecessary reference to a merger that occurred in 1995, but does not change any of the rights of the stockholders regarding election of directors.

      Adoption of the proposed amendment to the certificate of incorporation will require the approval of a majority of the outstanding shares of class A common stock.

      A copy of the proposed amended certificate of incorporation appears as Annex B to this proxy statement.

      Our board of directors recommends a vote “FOR” the proposed amendment to our certificate of incorporation.

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PROPOSAL 4

RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE,

      Deloitte & Touche have been our independent auditors for many years. The audit committee has recommended that Deloitte & Touche audit our consolidated financial statements for 2003. Our board of directors believes that stockholders should be given an opportunity to express their views on the subject. While 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.

      The following is a summary of the aggregate fees billed to us, and NII Holdings when it was our consolidated subsidiary, for 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

          Financial Information Systems Design and Implementation Fees

          All Other Fees

      The audit committee has determined that the provision of financial information systems design and implementation services and other non-audit services to us by Deloitte & Touche is compatible with maintaining their independence.

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

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AUDIT COMMITTEE REPORT

      The board of directors has adopted a written audit committee charter, which is attached as Annex A. All members of our audit committee are independent, as defined in Rule 4200 of the Nasdaq Stock Market’s listing standards. Until March 5, 2003, Mr. Weibling served as a member of the audit committee. Mr. Weibling may not be considered independent since he currently serves as vice chairman of Eagle River, and during 2001 he served as president of Eagle River and Digital Radio, both of which may be or have been considered our affiliates. However, in accordance with Rule 4350(d)(2)(B) of the Nasdaq Stock Market’s listing standards, our board of directors determined that membership on the audit committee by Mr. Weibling was required by the best interests of Nextel and its stockholders for the following reasons:

      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 2002. The audit committee has also discussed with our independent auditors the matters required to be discussed pursuant to Statement on Auditing Standards No. 61, “Communication with Audit Committees.”

      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 2002 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 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 2002, 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

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      The compensation committee has 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 are 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 an interim cash payout was made since certain performance goals for the period from January 1, 2002 to December 31, 2002 were met. Any remaining awards under the plan for the entire performance period may be paid, at the compensation committee’s election, either in cash or 50% 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. Mr. Donahue’s bonus compensation 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 to the formula bonus of $1,250,000, the compensation committee determined to award Mr. Donahue a supplemental bonus of $250,000 in further recognition of his leadership and Nextel’s significant operating results in 2002. In addition, Mr. Donahue received $675,000 as his interim payout under the long term incentive plan.

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 2002, 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 2002, 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 2002 as well as a former executive officer, collectively referred to as the “named executive officers.”

Summary Compensation Table

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2002 OPTION GRANTS

      The table below sets forth information about options to purchase our class A common stock that were granted in 2002 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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2002 OPTION EXERCISES AND LONG TERM INCENTIVE PLAN

      The table below lists information concerning the exercise by the named executive officers of options to purchase our class A common stock during 2002 and the unexercised options to purchase our class A common stock held by the named executive officers as of December 31, 2002.

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

Long Term Incentive Plan — Awards In Last Fiscal Year

      In 2002, we adopted a long term incentive plan designed to reward key members of our management for achieving specific performance goals over a two-year period commencing January 1, 2002. This plan offers management the opportunity to receive a cash-based payment, or a combination of cash and stock-based payments at the discretion of the compensation committee of the board of directors, if Nextel achieves certain objectives over the two-year period that are deemed critical to our long term success. A special interim payout occurred based on performance with respect to the one-year period from January 1, 2002 to December 31, 2002. The awards earned under the plan are determined based on our actual performance versus approved targets. The primary performance targets are operating cash flow (as defined under the plan) and net subscriber additions.

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EMPLOYMENT AGREEMENTS

Mr. Donahue

      In 1996, we entered into an employment agreement with Mr. Donahue that provided for his employment through February 1, 1999, and continued after that date unless terminated upon twelve months notice, for an annual base salary of $275,000, which we may increase annually, and for an annual bonus payable as determined by our board of directors at their discretion. The employment agreement with Mr. Donahue also provides:

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 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.

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 his base salary

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Other Named Executive Officers

      The employment of the other named executive officers is not subject to any written agreement. On September 19, 2002, we entered into a separation and non-competition agreement with Mr. Mooney. Under the terms of this agreement, Mr. Mooney received $550,000 in accordance with our severance benefits plan; $708,750 in lieu of any annual bonus under the 2002 bonus plan; and forgiveness of the $2,000,000 balance of a loan. In addition, he received $1,286,250 in exchange for non-competition and non-solicitation agreements, $643,125 of which was paid immediately and $321,562.50 of which is payable on each of March 31, 2003 and March 31, 2004. In addition, all of his unvested deferred shares and stock options were forfeited and terminated upon the separation date.

Severance Benefits

      Each of our named executive officers participates 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 will 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.

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 addition, if we terminate an executive officer’s employment without cause (as defined in the plan) within one year after a change in control of Nextel, or the executive officer terminates his employment during this period for good reason (as defined in the plan), then that executive officer will receive an amount equal to 200% of that individual’s base salary and 200% of that individual’s target bonus for the year, and the individual’s insurance and medical benefits will be continued for two years from termination.

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SECURITIES OWNERSHIP

      The table below lists, as of March 14, 2003, 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 directors, (2) each of our named executive officers who continued to serve on that date, (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 14, 2003. 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.