SCHEDULE 14A INFORMATION
PROXY STATEMENT
PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other then the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14c-5(d)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to SECTION 240.14a-11(c) or SECTION 240.14a-12
NEXTLINK COMMUNICATIONS, INC.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(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): N/A
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[ ] Fee paid previously with preliminary materials.
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paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: N/A
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(4) Date Filed: N/A
[LOGO]
July 27, 1999
Dear NEXTLINK Stockholder:
It is my pleasure to invite you to NEXTLINK Communications' 1999 Annual
Meeting of Stockholders. This year's meeting will be held at the Doubletree
Hotel Bellevue, 300 - 112(th) Avenue SE, Bellevue, Washington 98004 on
Wednesday, August 25, 1999, at 10:00 a.m.
The formal notice of the meeting follows on the next page. It lists the two
items of business for the meeting:
- the election of nine directors, and
- the approval of an amendment to NEXTLINK's Certificate of Incorporation to
increase the number of authorized shares of common stock, which is
necessary to accommodate a proposed two-for-one stock split.
We were pleased to announce the stock split a few weeks ago, and to effect
the split we encourage you to vote for this proposal, as well as for the
election of each of our nine directors.
Enclosed with this proxy statement are your proxy card and a copy of the
NEXTLINK Communications 1998 Annual Report.
Your vote is important. Whether or not you plan to attend the meeting, you
may vote your shares by signing, dating and mailing the enclosed proxy card in
the postage-paid envelope provided. Instructions for voting are contained on the
proxy card. If you attend the meeting and prefer to vote in person, you may do
so.
I look forward to seeing you at the meeting.
Sincerely,
[LOGO]
Steven W. Hooper
Chairman and Chief Executive Officer
[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of NEXTLINK Communications, Inc. will be
held on Wednesday, August 25, 1999, at 10:00 a.m., at the Doubletree Hotel
Bellevue, 300 - 112(th) Avenue SE, Bellevue, Washington 98004 for the following
purposes:
1. to elect nine directors;
2. to consider and vote upon a proposed amendment to NEXTLINK's Certificate of
Incorporation to increase the authorized common stock from 154,467,600 to
460,000,000, as described more fully in the accompanying proxy statement;
and
3. to transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on July 19, 1999 are
entitled to notice of and to vote at the Annual Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, WE URGE YOU TO VOTE YOUR
SHARES BY SIGNING, DATING AND MAILING THE ENCLOSED PROXY CARD IN THE ENVELOPE
PROVIDED.
By Order of the Board of Directors
[LOGO]
R. Bruce Easter, Jr.
Secretary
Bellevue, Washington
July 27, 1999
TABLE OF CONTENTS
INFORMATION ABOUT THE ANNUAL MEETING.................................................. 3
Information About Attending the Annual Meeting........................................ 3
Information About This Proxy Statement................................................ 3
Information About Voting.............................................................. 3
Information for NEXTLINK Employees Who Are Stockholders............................... 3
Quorum Requirement.................................................................... 4
Information About Votes Necessary for Action to be Taken.............................. 4
Other Matters......................................................................... 4
PROPOSAL 1: ELECTION OF DIRECTORS..................................................... 4
MEETINGS AND COMMITTEES OF THE BOARD.................................................. 7
DIRECTOR COMPENSATION................................................................. 8
NEXTLINK COMMON STOCK OWNERSHIP....................................................... 9
EXECUTIVE COMPENSATION................................................................ 12
Summary Compensation Table............................................................ 12
Option Grants in Last Fiscal Year..................................................... 13
Aggregated Option Exercises and Fiscal Year-End Option Values......................... 13
Employment Agreements and Other Arrangements.......................................... 13
Certain Relationships and Related Transactions........................................ 14
Report of the Compensation Committee of the Board of Directors........................ 15
Performance Graph..................................................................... 17
PROPOSAL 2: APPROVAL OF AN AMENDMENT TO NEXTLINK'S CERTIFICATE OF INCORPORATION....... 17
Purposes of Proposed Increase in the Number of Authorized Shares of Common Stock and
Proposed Two-for-One Common Stock Split............................................. 18
Effects of Proposed Increase in the Number of Authorized Shares of Common Stock....... 18
Effects of Proposed Two-for-One Common Stock Split.................................... 18
Tax Effect of the Two-for-One Stock Split............................................. 19
Effective Date of Proposed Amendment and Issuance of Shares for Stock Split........... 19
Amendment to Certificate of Incorporation............................................. 19
OTHER INFORMATION..................................................................... 20
Independent Public Accountants........................................................ 20
Section 16(a) Beneficial Ownership Reporting Compliance............................... 20
Stockholder Proposals for the 1999 Annual Meeting..................................... 20
NEXTLINK's Form 10-K.................................................................. 20
Expenses of Solicitation.............................................................. 20
2
NEXTLINK COMMUNICATIONS, INC.
500 - 108(TH) AVENUE NE, SUITE 2200
BELLEVUE, WASHINGTON 98004
------------------------
INFORMATION ABOUT THE ANNUAL MEETING
------------------------
INFORMATION ABOUT ATTENDING THE ANNUAL MEETING
Our Annual Meeting will be held on Wednesday, August 25, 1999 at 10:00 a.m.,
at the Doubletree Hotel Bellevue, 300 - 112(th) Avenue SE, Bellevue, Washington
98004.
INFORMATION ABOUT THIS PROXY STATEMENT
We have sent you these proxy materials because NEXTLINK's Board of Directors
is soliciting your proxy to vote your shares at the Annual Meeting. This proxy
statement summarizes information that we are required to provide to you under
the rules of the Securities and Exchange Commission and is designed to assist
you in voting your shares. On July 27, 1999, we began mailing these proxy
materials to all stockholders of record as of the close of business on July 19,
1999.
INFORMATION ABOUT VOTING
Stockholders can vote in person at the Annual Meeting or by proxy. To vote
by proxy, sign, date and mail the enclosed proxy card.
If you vote by proxy, the individuals named on the card (your proxies) will
vote your shares in the manner you indicate. You may specify whether your shares
should be voted for all, some or none of the nominees for director and whether
your shares should be voted for or against each of the other proposals. If you
sign and return the card without indicating your instructions, your shares will
be voted for the election of the nine nominees for directors and for the
approval of the amendment to NEXTLINK's Certificate of Incorporation.
You may revoke or change your proxy at any time before it is exercised by
sending a written revocation to NEXTLINK's Secretary, R. Bruce Easter, Jr., by
providing a later dated proxy or by voting in person at the meeting.
Each share of NEXTLINK Class A common stock has the right to one vote and
each share of NEXTLINK Class B common stock has the right to ten votes. Shares
of NEXTLINK's 14% Senior Exchangeable Redeemable Preferred Stock and 6 1/2%
Cumulative Convertible Preferred Stock are not entitled to vote at the Annual
Meeting. As of July 1, 1999, there were 36,484,992 shares of Class A common
stock outstanding and 29,453,275 shares of Class B common stock outstanding. The
Class A and Class B common stock generally vote together on all matters as a
single class. However, the Class A common stock and Class B common stock are
entitled to vote as separate classes on the amendment to NEXTLINK's Certificate
of Incorporation.
INFORMATION FOR NEXTLINK EMPLOYEES WHO ARE STOCKHOLDERS
If you participate in and own NEXTLINK stock through the 401(k) Plan Savings
and Retirement Plan, or the 401(k) Plan, you are entitled to direct the 401(k)
Plan trustee how to vote the shares allocated to your account. If you
participate in the 401(k) Plan and you do not return a proxy with respect to
401(k) Plan shares, your 401(k) Plan shares will be voted by the 401(k) Plan
trustee in the
3
same proportion as shares held by the 401(k) Plan trustee for which voting
instructions have been received.
QUORUM REQUIREMENT
A quorum is necessary to hold a valid meeting. For purposes of the election
of directors, a quorum will exist if holders of shares of common stock
representing a majority of the outstanding votes entitled to be cast at the
meeting are present in person or by proxy. For purposes of the amendment to the
NEXTLINK Certificate of Incorporation, a quorum will exist if holders of shares
of common stock representing a majority of the outstanding votes entitled to be
cast at the meeting are present in person or by proxy, if holders of a majority
of the outstanding shares of Class A common stock are present in person or by
proxy, and if holders of a majority of the outstanding shares of Class B common
stock are present in person or by proxy. Abstentions and broker non-votes are
counted as present for establishing a quorum. A broker non-vote occurs when a
broker votes on some matter on the proxy card but not on others because the
broker does not have the authority to do so.
INFORMATION ABOUT VOTES NECESSARY FOR ACTION TO BE TAKEN
Nine directors will be elected at the meeting by a plurality of all the
votes cast at the meeting, meaning that the nine nominees for director with the
most votes will be elected. In an uncontested election for directors, the
plurality requirement is not a factor. Abstentions and broker non-votes will
have no effect on the vote on the election of directors.
Approval of the proposed amendment to our Certificate of Incorporation
increasing our authorized shares will require the affirmative vote of a majority
of the votes entitled to be cast by holders of (a) our Class A common stock,
voting as a separate class, (b) our Class B common stock, voting as a separate
class, and (c) both classes of our common stock, voting together as a single
class. Abstentions will not be counted either in favor of or against the
proposal, but will have the same effect as a vote against the proposal. Brokers
holding stock for the accounts of their clients who have not been given specific
voting instructions as to a matter by their clients may vote their clients'
proxies in their own discretion.
OTHER MATTERS
The Board of Directors does not know of any other matter that will be
presented at the Annual Meeting other than the proposals discussed in this proxy
statement. Under our Bylaws, generally no business besides the proposals
discussed in this proxy statement may be transacted at the meeting. However, if
any other matter properly comes before the Annual Meeting, your proxies will act
on such matter in their discretion.
PROPOSAL 1: ELECTION OF DIRECTORS
NEXTLINK's Board of Directors consists of nine directors. Directors are
elected annually and each Director elected at the Annual Meeting will serve a
one-year term. We do not have a staggered board. Each Director will hold office
until the first meeting of stockholders immediately following expiration of his
or her term of office and until his or her successor is qualified and elected.
All of the nominees are currently directors. Gregory J. Parker was elected
to the Board by the other directors on June 4, 1998, and Nicolas Kauser was
elected to the Board by the other directors on February 4, 1999.
Although the Board anticipates that all of the nominees will be available to
serve as NEXTLINK directors, if any of them does not accept the nomination, or
otherwise is unwilling or unable to serve, your proxies will vote for the
election of a substitute nominee or nominees designated by the Board.
4
NOMINEES FOR DIRECTOR
The names, ages and positions with NEXTLINK of the nominees for director are
listed below.
NAME AGE POSITION
- ---------------------------------- --- ------------------------------------------------------------------------
Steven W. Hooper.................. 46 Chief Executive Officer, Chairman of the Board of Directors
Wayne M. Perry(1)................. 49 Vice Chairman of the Board of Directors
William A. Hoglund(1)(3).......... 45 Director
Nicolas Kauser.................... 59 Director
Craig O. McCaw.................... 49 Director
Sharon L. Nelson(2)............... 52 Director
Gregory J. Parker(2).............. 42 Director
Jeffrey S. Raikes................. 41 Director
Dennis Weibling(1)(2)(3).......... 48 Director
- ------------------------
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
Brief biographies of NEXTLINK directors are set forth below.
STEVEN W. HOOPER. Mr. Hooper has been Chief Executive Officer of NEXTLINK
since March 1999 and Chairman of the Board of Directors since July 1997. From
December 1997 to July 1999, he was Co-Chief Executive Officer with Craig O.
McCaw of Teledesic Corporation, a satellite telecommunications company. From
January 1995 to June 1997, Mr. Hooper was President and Chief Executive Officer
of AT&T Wireless Services, Inc. From January 1993 to January 1995, he served as
Chief Financial Officer of AT&T Wireless Services. This was preceded by five
years as Regional President for McCaw Cellular Communication Inc.'s Pacific
Northwest/Rocky Mountain region, where his responsibilities included managing
the cellular operations in six western states and Alaska.
WAYNE M. PERRY. Mr. Perry has been Vice Chairman of NEXTLINK since June
1997. From July 1997 to March 1999, Mr. Perry was Chief Executive Officer of
NEXTLINK. From September 1994 to July 1997, Mr. Perry was also Vice Chairman of
AT&T Wireless Services, Inc., following the merger with McCaw Cellular. From
June 1989 to September 1994, he served as Vice Chairman of the Board of McCaw
Cellular, and from December 1985 to June 1989, served as President. From 1976 to
1985, Mr. Perry served as Executive Vice President and General Counsel of McCaw
Cellular. From 1990 to 1994, Mr. Perry was Vice Chairman of the Board of LIN
Broadcasting Corporation. He also served as Chairman of the Board of Directors
of the Cellular Telecommunications Industry Association, the nationwide wireless
industry association, for the 1993/94 term.
WILLIAM A. HOGLUND. Mr. Hoglund has been a director of NEXTLINK since
January 1997 and, prior to that, had been Executive Vice President of NEXTLINK
since February 1996. Mr. Hoglund has also been Vice President and Chief
Financial Officer of Eagle River, Inc. since January 1996. Prior to joining
Eagle River, Inc., Mr. Hoglund was Managing Director of J.P. Morgan & Co. in its
investment banking group. Mr. Hoglund was employed by J.P. Morgan & Co. from
1977 through 1995, focusing for the last nine of those years on clients in the
telecommunications, cable and media industries.
NICOLAS KAUSER. Mr. Kauser has been a director of NEXTLINK since January
1999. Until September 1, 1998, Mr. Kauser was an Executive Vice President and
Chief Technology Officer for AT&T Wireless Services. As Chief Technology
Officer, Mr. Kauser was responsible for all aspects of engineering and
technology projects, network operations and long-range planning and evolution of
the network and the supporting technologies for AT&T Wireless Services. As a
member of the leadership
5
team, he also had significant input to product development. Prior to his joining
AT&T Wireless Services in 1990, Mr. Kauser was Vice President of Engineering and
subsequently Senior Vice President Operations at Cantel, the Canadian nationwide
cellular provider based in Toronto, Canada. As one of the earliest employees at
Cantel, he assumed responsibility for all facets of the initial design,
equipment selection, service introduction and network operation. He spent the 20
years prior to joining Cantel in Venezuela, the first six years of which working
for the National Telephone Co. (CANTV). Subsequently, he co-founded two
companies, one specializing in telephone central office equipment installation
and the other in the sale, installation and support of office telecommunications
and automation products. In May 1998, Mr. Kauser received the prestigious Gold
Prize awarded by the Carnegie Mellon Institute and American Management Systems
for excellence in the application of information technology.
CRAIG O. MCCAW. Mr. McCaw has been a director of NEXTLINK since September
1994 and was Chief Executive Officer of NEXTLINK from September 1994 to July
1997. Since 1993, Mr. McCaw has been Chairman and Chief Executive Officer of
Eagle River, a company formed and owned by Mr. McCaw to make strategic
investments in telecommunications ventures. Mr. McCaw was the founder, Chairman
and Chief Executive Officer of McCaw Cellular, the nation's leading provider of
wireless communications services, until the company was sold to AT&T in August
1994. Prior to entering the cellular telephone business in 1983, Mr. McCaw was
requested by his family to assume responsibility for the daily operations of a
small cable television operation in Centralia, Washington, that he and his three
brothers owned. The one-system operation serving 4,000 subscribers eventually
grew to be the nation's 20th largest cable operator serving 450,000 subscribers.
In 1974, the cable company's services expanded by entering the paging and
conventional mobile telephone industries. The company eventually became the
fifth largest paging operator in the country, serving approximately 320,000
subscribers in 13 states. In 1981, the company began to develop broad-based
cellular telephone services. Later, McCaw Cellular became the nation's largest
cellular telephone operator, with cellular system positions in more than 100
U.S. cities, representing more than 100 million potential customers. The company
also had interests in wireless data transmissions, personal communications
services, air-to-ground phone systems and satellite communications at the time
of its sale to AT&T. Mr. McCaw is Chairman and one of the principal owners of
Teledesic Corporation, which in March 1994 announced plans for a worldwide
satellite-based telecommunications system. Mr. McCaw is indirectly a significant
stockholder, a director and Chairman of the Operating Committee of Nextel
Communications, Inc., a provider of wireless telecommunications services, and is
also director of Nextel International, Inc.
SHARON L. NELSON. Ms. Nelson has been director of NEXTLINK since September
1997. From 1985 to 1997 she was Chairman of the Washington Utilities and
Transportation Commission, or WUTC. Prior to serving on the WUTC, Ms. Nelson
served as staff coordinator for the Washington State Legislature's Joint Select
Committee on Telecommunications (1983 to 1985), an attorney in private practice
(1982 to 1983), legislative counsel to the Consumers Union of the United States
(1978 to 1981), staff counsel to the Commerce Committee of the U.S. Senate (1976
to 1978) and secondary school teacher of history and anthropology (1969 to
1973). Ms. Nelson is also the former president of the National Association of
Regulatory Utility Commissioners. Ms. Nelson also served on the Federal-State
Joint Board on Universal Service created under the Telecommunications Act of
1996 and as one of the 20-member negotiating team appointed by the Governors of
Washington, Idaho, Oregon and Montana to review the Northwest electric power
system. Since January 1998, Ms. Nelson has been a member of the Advisory Board
of Covad Communications Group, Inc.
GREGORY J. PARKER. Mr. Parker has been a director of NEXTLINK since June
1998. Since August 1998, he has been President of Ampersand Holdings, Inc. From
February 1998 to August 1998, he was Vice President and Chief Operating Officer
of Ampersand Holdings. From 1990 to 1998, he was a partner of the law firm of
Seed, Mackall & Cole LLP, where his practice emphasized financing, capital
investment and real estate matters. From 1994 to 1997, he was Managing Partner
of the firm.
6
Mrs. Wendy P. McCaw and Mr. Craig O. McCaw are parties to a NEXTLINK Stock
Distribution Agreement effective as of November 3, 1997, entered into in
connection with a portion of the settlement of a divorce action between Mr. and
Mrs. McCaw. Under the Stock Distribution Agreement, Mrs. McCaw is entitled to
designate one member of NEXTLINK's Board of Directors. Eagle River Investments
and Mr. McCaw have agreed to vote, and to cause Mr. McCaw's affiliates to vote
all of their respective shares of NEXTLINK stock to support the election to the
Board of Directors of Mrs. McCaw's designee. Mr. Parker is Mrs. McCaw's designee
to the NEXTLINK Board of Directors under the Stock Distribution Agreement.
JEFFREY S. RAIKES. Mr. Raikes has been a director of NEXTLINK since
September 1997. He is also a member of the Executive Committee and the Group
Vice President, Sales and Marketing of Microsoft Corporation. As Group Vice
President, Mr. Raikes has responsibility for Microsoft's worldwide customer
units as well as sales, marketing, support and service in the United States and
Canada. Prior to joining the Executive Committee in July 1996, Mr. Raikes was
Senior Vice President of Microsoft North America since 1993. Prior to serving as
Senior Vice President of Microsoft North America, from 1990, Mr. Raikes was Vice
President of Office Systems, where he was responsible for the development and
marketing of word processing, workgroup applications and pen computing. From
1984 to 1990, Mr. Raikes was the Director of Applications Marketing, where he
was the chief strategist behind Microsoft's graphical applications for the Apple
Macintosh and Microsoft Windows as well as leading the product strategy and
design of Microsoft Office. Mr. Raikes is also a member of the University of
Nebraska Foundation and a Trustee of the Washington State University Foundation
of Directors.
DENNIS WEIBLING. Mr. Weibling has been a director of NEXTLINK since January
1997. From September 1994 to January 1997, he was Executive Vice President of
NEXTLINK. Since 1993, Mr. Weibling has been President of Eagle River, Inc. Since
1994, Mr. Weibling has been a member of Nextel Communications Inc.'s Board of
Directors and its operating, audit and compensation committees. Mr. Weibling is
also a member of the Board of Directors of Nextel International, Inc. and serves
on its audit and plan administration committees of Nextel International, Inc. He
also is a member of the Board of Directors of Nextel Partners, Inc. and serves
on its audit committee. Since 1993, Mr. Weibling has been a member of the Board
of Directors and has served on the executive and compensation committees of
Teledesic Corporation. A licensed certified public accountant in Washington, Mr.
Weibling is a member of the American Society of Certified Public Accountants and
the Washington Society of Certified Public Accountants. In addition, Mr.
Weibling is a licensed attorney in Ohio and a member of the American Bar
Association and Ohio State Bar Association.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL OF THE NOMINEES.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors met three times during in 1998. In addition to
meetings of the full Board, directors also attended meetings of Board
committees. All of the directors, except Mr. McCaw, attended at least 75% of all
the meetings of the Board and those committees on which he or she served during
1998. The Board of Directors has standing audit, compensation and executive
committees. There is no standing nominating committee. In 1998, the Audit
Committee met two times and the Compensation Committee met nine times. The
Executive Committee did not meet in 1998. In addition to attending meetings,
directors discharge their responsibilities by review of company reports to
directors, visits to company facilities, and correspondence and telephone
conferences with company executive officers and other employees regarding
matters of interest and concern to NEXTLINK.
Ms. Nelson, Mr. Parker and Mr. Weibling serve on the Audit Committee. The
Audit Committee is responsible for reviewing the services provided by NEXTLINK's
independent auditors on audits and proposed audits of NEXTLINK and reviewing the
need for internal auditing procedures and the
7
adequacy of internal controls. Messrs. Hoglund and Weibling serve on the
Compensation Committee. The Compensation Committee determines executive
compensation and stock option awards. Messrs. Hoglund, Perry and Weibling serve
on the Executive Committee. The Executive Committee exercises all powers of the
Board between meetings of the Board, to the maximum extent permitted by law,
except those functions assigned to specific committees or the Board as a whole.
DIRECTOR COMPENSATION
Each director is entitled to reimbursement for out-of-pocket expenses
incurred for each Board or Committee meeting attended. Mr. Hooper received
$8,023 in 1998 for services as Chairman of the Board. No other compensation was
paid to any directors in 1998.
8
NEXTLINK COMMON STOCK OWNERSHIP
The following table sets forth information, as of July 1, 1999, with respect
to the beneficial ownership of NEXTLINK's capital stock by (1) NEXTLINK's Board
of Directors, (2) NEXTLINK's Chief Executive Officer and each of the Named
Executive Officers, and (3) all directors and executive officers as a group. In
general, "beneficial ownership" includes those shares a director or executive
officer has the power to vote, or the power to transfer, and stock options that
are exercisable currently or become exercisable within 60 days. Except as
otherwise noted, the persons named in the table below have sole voting and
investment power with respect to all shares shown as beneficially owned by them.
SHARES BENEFICIALLY OWNED(1)
----------------------------------------------------
PERCENT OF PERCENT
TOTAL OF
TITLE AMOUNT AND PERCENT SHARES TOTAL
OF NATURE OF OF OUTSTANDING VOTING
NAME CLASS OWNERSHIP CLASS (%) (%) POWER (%)
- ------------------------------------------------------------ ------- -------------- --------- ----------- ---------
Steven W. Hooper............................................ Class A 156,409(2) *
Class B 58,825 * * *
Wayne M. Perry.............................................. Class A 258,383(3) *
Class B 58,825 * * *
William A. Hoglund.......................................... Class A 8,400(4) *
Class B 0 0 * *
Nicolas Kauser.............................................. Class A 0 0
Class B 0 0 * *
Craig O. McCaw.............................................. Class A 6,620 *
Class B 19,407,156(5) 65.89 29.44 58.63
Sharon L. Nelson............................................ Class A 5,516 *
Class B 0 0 * *
Gregory Parker.............................................. Class A 2,000 *
Class B 9,722,649(6) 33.01 14.75 29.37
Jeffrey S. Raikes........................................... Class A 55,516 *
Class B 0 0 * *
Dennis Weibling............................................. Class A 1,500 *
Class B 18,871,787(7) 64.07 28.62 57.01
George M. Tronsrue III...................................... Class A 131,420 *
Class B 0 0 * *
Kathleen H. Iskra........................................... Class A 84,190 *
Class B 0 0 * *
R. Gerard Salemme........................................... Class A 40,675 *
Class B 0 0 * *
Jan Loichle................................................. Class A 157,047 *
Class B 0 0 * *
James F. Voelker(8)......................................... Class A 968,214(9) 2.61
Class B 144,858(10) * 1.66 *
All directors and executive officers as a group (19 Class A 1,066,664(11) 2.85
persons)..................................................
Class B 29,247,455(11) 98.82 45.26 88.06
- ------------------------
(1) In accordance with Commission rules, each beneficial owner's holdings have
been calculated assuming full exercise of outstanding options exercisable by
such owner within 60 days after July 1, 1999, but no exercise of outstanding
options held by any other person.
9
(2) Includes 21,000 shares of Class A common stock held by Mr. Hooper as trustee
of trusts for the benefit of his children and 25,000 shares of stock Class A
Common Stock of irrevocable trusts for the benefit of Mr. Perry's four
children, for which Mr. Perry exercises no voting or investment control.
(3) Includes 3,640 shares of Class A common stock held by Mr. Perry's children.
Mr. Perry disclaims beneficial ownership of such shares.
(4) Includes 3,250 shares of Class A Common Stock that Mr. Hoglund holds as
trustee of trusts for the benefit of his children. Mr. Hoglund disclaims
beneficial ownership of such shares.
(5) Includes 18,871,787 shares of Class B Common Stock held beneficially by Mr.
McCaw as a result of his ownership interests in Eagle River. Pursuant to the
terms of the Stock Distribution Agreement between Mr. and Mrs. McCaw, Mr.
McCaw holds a proxy to vote the number of shares of NEXTLINK stock held by
Mrs. McCaw that, when added to all NEXTLINK capital stock held by Mr. McCaw
or any of his affiliates or over which they have voting rights, are
necessary for Mr. McCaw to hold 51% of the voting power of NEXTLINK. No
shares owned or controlled by Mrs. McCaw are included in the beneficial
holdings of Mr. McCaw.
(6) Mr. Parker is a member of Ampersand Telecom, LLC. Mr. Parker disclaims
beneficial ownership of such shares, except to the extent of his pecuniary
interest therein.
(7) Mr. Weibling, who is President of Eagle River, Inc., an affiliate of Eagle
River, disclaims beneficial ownership in all securities held by Eagle River,
except to the extent of his pecuniary interest therein. Mr. Weibling is a
member of Eagle River.
(8) Effective July 17, 1998, Mr. Voelker resigned from NEXTLINK's Board of
Directors and as President of NEXTLINK.
(9) Includes 90,000 shares of Class A common stock that Mr. Voelker holds as
trustee of trusts for the benefit of his children.
(10) Represents shares of Class B common stock that are eligible for acquisition
upon exercise of a currently exercisable stock option, which has been
exercised in part, resulting in the issuance of 1,431,314 shares (all of
which have been converted into Class A common stock).
(11) See notes above.
* Less than 1%.
10
The following table sets forth information, as of July 1, 1999, with respect
to the beneficial ownership of NEXTLINK's capital stock of persons known to
NEXTLINK to be the beneficial owners of more than five percent of a class of
NEXTLINK common stock (other than officers and directors):
SHARES BENEFICIALLY OWNED
-----------------------------------------------------
PERCENT OF
TOTAL PERCENT OF
AMOUNT AND PERCENT SHARES TOTAL
NAME AND ADDRESS OF TITLE OF NATURE OF OF OUTSTANDING VOTING
BENEFICIAL OWNER CLASS OWNERSHIP CLASS (%) (%) POWER (%)
- --------------------------------------------------- --------- ------------ ----------- ------------- -----------
BWP, Inc. ......................................... Class A 1,969,900 5.40
707 S.W. Washington, 8(th) Floor Class B 0 0 2.99 *
Portland, OR 97205
Eagle River Investments, LLC(1) ................... Class A 0 0
2300 Carillon Point Class B 18,871,787 64.07 28.62 57.01
Kirkland, WA 98033
Ampersand Telecom, LLC ............................ Class A 0 0
1332 Anacapa, Suite 200 Class B 9,722,649 33.01 14.75 29.37
Santa Barbara, CA 93101
The Ampersand Telecom Trust(2) .................... Class A 0 0
1332 Anacapa, Suite 200 Class B 9,722,649 33.01 14.75 29.37
Santa Barbara, CA 93101
Wendy P. McCaw(3) ................................. Class A 0 0
1332 Anacapa, Suite 200 Class B 9,722,649 33.01 14.75 29.37
Santa Barbara, CA 93101
- ------------------------
(1) Eagle River has pledged substantially all of its shares of NEXTLINK stock to
secure a credit arrangement.
(2) The Ampersand Telecom Trust is the Managing Member of Ampersand Telecom LLC
and has sole right to vote on all matters affecting Ampersand Telecom, LLC.
(3) Mrs. McCaw is the sole beneficiary of The Ampersand Telecom Trust, a
revocable trust. The trustee of the Trust, Gregory Parker, may exercise his
duties under the trust only pursuant to the written directions of Mrs.
McCaw.
* Less than 1%.
11
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the fiscal years ended December 31,
1998, 1997 and 1996, individual compensation information for the Chief Executive
Officer of NEXTLINK, and each of the four most highly compensated executive
officers of NEXTLINK who were serving as executive officers at December 31,
1998, and any former executive officer who was not an executive officer at
December 31, 1998, but was one of the four most highly compensated individuals
at NEXTLINK during 1998 (the "Named Executive Officers").
LONG TERM
COMPENSATION
--------------
AWARDS
--------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
-------------------------- UNDERLYING COMPENSATION
SALARY ($) BONUS ($)(1) OPTIONS (#)(2) ($)(3)
----------- ------------- -------------- -------------
Wayne M. Perry ................................... 1998 8,023 -- 75 --
Chief Executive Officer(4) 1997 -- -- 441,336 --
1996 -- -- -- --
George M. Tronsrue III ........................... 1998 247,115 223,000 75 5,152
President, Chief Operating Officer 1997 43,535 70,000 255,000 --
1996 -- -- -- --
Kathleen H. Iskra ................................ 1998 180,077 92,874 190,075 8,000
Vice President, Chief Financial Officer and 1997 126,923 68,100 31,777 6,130
Treasurer 1996 121,233 62,250 67,745 1,575
R. Gerard Salemme................................. 1998 212,885 410,000(5) 112,500 8,000
Senior Vice President External Affairs 1997 126,154 -- 66,200 --
and Industry Relations 1996 -- -- -- --
Jan Loichle ...................................... 1998 180,077 92,874 180,075 8,000
Vice President, Chief Integration Officer(6) 1997 123,424 65,938 31,777 6,476
1996 109,075 32,040 37,514 5,498
James F. Voelker(7)............................... 1998 284,615 250,000 250,000 10,000
1997 218,509 225,000 1,686,506 8,641
1996 160,600 200,000 15,000 6,523
- ------------------------------
(1) Includes bonuses for the corresponding fiscal years that were paid
subsequent to the stated calendar year end.
(2) Represents options to acquire shares of Class A and Class B Common Stock.
Effective January 31, 1997, NEXTLINK Communications, L.L.C. was merged with
and into NEXTLINK Communications, Inc. The information for 1996 presented in
this table reflects the grant of options for the purchase of Class A Common
Stock under NEXTLINK's Stock Option Plan and Class B Common Stock in
substitution for options granted previously pursuant to the Amended and
Restated Equity Option Plan of NEXTLINK Communications, L.L.C.
(3) Represents contributions made by NEXTLINK on behalf of the executive officer
under NEXTLINK's 401(k) Plan.
(4) Mr. Perry became Chief Executive Officer of NEXTLINK on July 21, 1997. Prior
to that date, Mr. Perry was a Director of NEXTLINK since June 1997. For
information regarding Mr. Perry's annual compensation, see the "Report of
the Compensation Committee" of the Board of Directors. In March 1999, Mr.
Perry resigned as Chief Executive Officer, although retained his position as
Vice Chairman of the Board of Directors. Steven W. Hooper, NEXTLINK's
Chairman of the Board of Directors, filled the position of Chief Executive
Officer that was vacated by Mr. Perry.
(5) Includes a signing bonus paid in 1998 at Mr. Salemme's one-year anniversary.
(6) Effective June 9, 1999, Ms. Loichle was appointed Vice President, Chief
Integration Officer. Prior to that date, Ms. Loichle was Vice President,
Chief of Local Exchange Operations.
(7) Effective July 17, 1998, Mr. Voelker resigned as President and from
NEXTLINK's Board of Directors, but he remains an employee of NEXTLINK
through December 31, 1999. The Board of Directors elected George M. Tronsrue
III, who had been serving as NEXTLINK's Chief Operating Officer, to fill the
position of President vacated by Mr. Voelker.
12
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
------------------------------------------------------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES IN EXERCISE OR FOR OPTION TERMS ($)
OPTIONS FISCAL YEAR BASE PRICE --------------------------------
NAME GRANTED (#) (%) ($/SH) EXPIRATION DATE 0% 5% 10%
- ---------------------------------- ----------- -------------- ----------- ----------------- --------- --------- ----------
Wayne M. Perry.................... 75 * 22.56 December 16, 2008 0 1,064 2,697
George M. Tronsrue III............ 75 * 22.56 December 16, 2008 0 1,064 2,697
Kathleen H. Iskra................. 100,000 1.30 24.50 January 21, 2008 0 1,540,792 3,904,669
70,000 0.91 36.00 August 14, 2008 0 1,470,792 3,834,669
75 * 22.56 December 16, 2008 0 1,064 2,697
20,000 0.26 22.56 December 16, 2008 0 283,789 719,176
R. Gerard Salemme................. 100,000 1.30 21.25 October 1, 2008 0 1,153,150 3,094,907
12,500 0.16 22.56 December 16, 2008 0 177,368 449,485
Jan Loichle....................... 105,000 1.36 24.50 January 21, 2008 0 1,617,831 4,099,902
55,000 0.71 36.00 August 14, 2008 0 1,155,622 3,012,954
75 * 22.56 December 16, 2008 0 1,064 2,697
20,000 0.26 22.56 December 16, 2008 0 283,789 719,176
James F. Voelker.................. 250,000 3.24 24.50(1) July 15, 2008 2,500,000 7,924,216 16,246,029
- ------------------------------
* Represents 0.0009875% of total options granted to employees in 1998.
(1) Market value on the date of grant was $34.50 per security.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES VALUE FISCAL YEAR-END (#) FISCAL YEAR-END ($)
ACQUIRED ON REALIZED -------------------------- --------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ------------- ----------- ----------- ------------- ----------- -------------
Wayne M. Perry................. -- -- 110,409 331,002 2,256,215 6,767,336
George M. Tronsrue III......... 63,750 1,036,416 51,075 140,250 1,043,131 2,867,411
R. Gerard Salemme.............. -- -- 16,550 162,150 338,365 1,800,251
Kathleen H. Iskra.............. 10,851 327,075 18,178 234,088 279,378 1,750,083
Jan Loichle.................... 2,206 41,034 25,664 222,068 515,497 1,664,998
James F. Voelker............... 362,609 9,378,616 676,210 424,329 19,064,689 5,254,045
EMPLOYMENT AGREEMENTS AND OTHER ARRANGEMENTS
On October 7, 1997, we entered into an employment agreement with George M.
Tronsrue III, expiring on October 6, 2001, subject to earlier termination. The
agreement provides for a base salary of $235,000 and $255,000 for the first and
second years of employment, respectively, and no less than $255,000 for each
year thereafter, subject to negotiation. The agreement also provides for a bonus
payment of $140,000 in the first year of employment, and bonuses thereafter to
be determined based upon the performance of Mr. Tronsrue and NEXTLINK. In the
event that NEXTLINK terminates Mr. Tronsrue's employment without cause, he is
entitled to receive his then-effective base salary for a period of 12 months,
and, in the event that NEXTLINK makes a material adverse change in Mr.
Tronsrue's duties, he is entitled to receive his then-effective base salary for
the remainder of the term of the agreement. In addition, in connection with the
execution of this employment agreement, NEXTLINK granted Mr. Tronsrue options to
purchase 255,000 shares of Class A Common Stock, 25% of which vested immediately
and the remainder of which vest in tranches over the four years following Mr.
Tronsrue's employment date. The options have an exercise price of $7.93 per
share. Mr. Tronsrue's employment agreement also contains confidentiality
provisions.
13
On July 19, 1998, we entered into an employment agreement with James F.
Voelker, former NEXTLINK President, expiring on December 31, 1999, subject to
earlier termination under certain conditions. Under this agreement, Mr. Voelker
receives a base salary at a rate equivalent to an annual salary of $275,000 from
July 16, 1998 to December 31, 1999. Mr. Voelker will also receive an annual
bonus of $250,000 for 1999. In the event that NEXTLINK terminates Mr. Voelker's
employment without cause, he is entitled to his salary and bonus for the
remainder of the term of the agreement. All stock options which had been granted
to Mr. Voelker prior to the date we entered into the employment agreement will
continue to vest according to their original vesting schedules through December
31, 2000. On December 31, 2000, all unvested options will then immediately vest.
Mr. Voelker's employment agreement also contains non-competition and
confidentiality provisions.
The vesting of certain options granted to some Named Executive Officers
accelerate under certain circumstances. The vesting of an option to purchase
441,336 shares of Class A common stock granted to Mr. Perry in June 1997, an
option to purchase 255,000 shares of Class A Common Stock granted to Mr.
Tronsrue in September 1997, an option to purchase 66,200 shares of Class A
Common Stock granted to Mr. Salemme in June 1997, and an option to purchase
100,000 shares of Class A Common Stock granted to Mr. Salemme in October 1998
accelerates in the event that Craig O. McCaw, or an entity or entities he
controls, no longer has control of a majority of the votes of NEXTLINK. In
addition, the option to purchase 255,000 shares of Class A Common Stock granted
to Mr. Tronsrue and the option to purchase 100,000 shares of Class A Common
Stock granted to Mr. Salemme in October 1998 each provide for acceleration of
vesting upon the happening of certain mergers, sales of substantially all of
NEXTLINK's assets, acquisitions of voting power of NEXTLINK, and changes in the
composition of NEXTLINK's Board of Directions, or upon liquidation or
dissolution of NEXTLINK. In all other cases, these options become fully vested
over four years.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 18, 1995, NEXTLINK lent $93,141 to James F. Voelker, former
President of NEXTLINK, in connection with his relocation to Washington. Interest
on the loan accrued at the prime rate. In April 1997, $25,000 in principal
amount of this loan was paid as part of payment of Mr. Voelker's 1996 bonus. The
balance of the loan was repaid in March 1999.
On August 26, 1997, NEXTLINK lent Mr. Voelker and R. Bruce Easter, Jr., Vice
President, General Counsel and Secretary of NEXTLINK, $2.2 million and $79,000,
respectively, in connection with the payment of income taxes incurred upon the
exercise of stock options. These loans (i) bear interest at a fixed rate of
7.70%, and (ii) are secured by shares of Class A Common Stock with a market
value equal to 2.5 times the amount of the loan. Mr. Voelker and Mr. Easter paid
the remaining balance on their loans in March 1999.
In October 1998, NEXTLINK lent $1.5 million to George M. Tronsrue III,
President. Interest accrued on the loan at rate of 7.31% per year. Principal and
interest on the loan had been repaid as of December 31, 1998.
In March 1999, a wholly owned subsidiary of NEXTLINK acquired all of the
ownership interest of Falcon Administration, LLC, a Washington limited liability
company, from Bruce R. McCaw, brother of Craig O. McCaw, a director and
beneficial owner of NEXTLINK. Falcon Administration's primary asset is a Falcon
50 aircraft. NEXTLINK acquired Falcon Administration for approximately $14.7
million, which was paid upon closing of the transaction. The purchase price paid
by NEXTLINK approximated the amount paid by Bruce R. McCaw to acquire Falcon
Administration plus capital contributions made to Falcon Administration for debt
retirement, improvements and fees associated with the Falcon 50 aircraft. Bruce
R. McCaw purchased Falcon Administration from Craig O. McCaw in November 1997
for $3.6 million. Capital contributions made by Bruce O. McCaw since that time
total approximately $11.0 million. NEXTLINK considers the purchase price of
Falcon Administration to
14
be comparable to the fair value of the assets acquired, based on independent
sale specifications of comparable aircraft.
In June 1999, we acquired the 50% interest that Nextel Communications, Inc.
held in NEXTBAND, L.L.C., a joint venture that we and Nextel formed in January
1998. Craig McCaw has a significant investment in Nextel. Prior to the
acquisition, NEXTBAND was owned 50% each by us and Nextel. NEXTBAND owns LMDS
licenses in 42 markets throughout the U.S. The purchase price for Nextel's
interest in NEXTBAND was approximately $137.7 million in cash. We and Nextel
determined the purchase price based on a formula derived from the purchase price
paid in our April 1999 acquisition of WNP Communications, Inc., which also owned
LMDS licenses. NEXTLINK received an opinion from the investment banking firm of
Salomon Smith Barney stating that the acquisition was on financial terms and
conditions no less favorable to NEXTLINK than those that could be obtained in a
comparable arm's-length transaction.
In June 1999, NEXTLINK acquired a corporation wholly-owned by Craig McCaw by
means of a merger with NEXTLINK in exchange for 525,369 shares of NEXTLINK's
Class B common stock. Prior to the merger, this corporation owned 266,466 shares
of Class B common stock and minority interests in ten of NEXTLINK's operating
subsidiaries. Acquisition of this corporation results in NEXTLINK obtaining 100%
ownership of these subsidiaries, thereby eliminating additional accounting, tax,
reporting and corporate issues. NEXTLINK received an opinion from the investment
banking firm of Salomon Smith Barney stating that the acquisition was on
financial terms and conditions no less favorable to NEXTLINK than those that
could be obtained in a comparable arm's-length transaction.
Each shareholder of NEXTLINK's Class B Common Stock has the option, at any
time, to convert each share of Class B common stock owned into one share of
Class A Common Stock. Certain holders of Class B common stock have the right to
require NEXTLINK to register, under the Securities Act of 1933, shares of Class
A common stock acquired by the holders. The holders also have the right to
include shares of Class A common stock held by them in certain NEXTLINK
registration statements.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
NEXTLINK's compensation program is designed to attract and retain qualified
employees and to ensure that they have a continuing stake in the long-term
success of NEXTLINK. NEXTLINK offers its employees a competitive compensation
package that includes a salary, incentives based upon individual and company
performance and health and other benefits. In addition, the Board of Directors
currently believes that NEXTLINK's success is effectively promoted through a
stock option program in which substantially all employees are eligible to
participate.
NEXTLINK's compensation policy for executive officers is similar to that for
other employees, and is designed to promote continued performance and attainment
of individual and company goals. The Compensation Committee determined and
administered the compensation of NEXTLINK's executive officers during 1998. The
Committee is currently comprised of two non-employee directors, Messrs. William
Hoglund and Dennis Weibling, and also included Mr. Scot Jarvis until his
resignation from the Board in January 1999.
EXECUTIVE OFFICER COMPENSATION PHILOSOPHY. NEXTLINK believes that
compensation of executive officers should be directly and materially linked to
NEXTLINK's operating performance and the interests of its stockholders. To
implement this philosophy, NEXTLINK combines base compensation with incentive
awards.
NEXTLINK sets executive officer salaries in line with the duties and scope
of responsibilities of each officer's position and the salaries paid to
comparable officers by competitors in the telecommunications industry. NEXTLINK
periodically reviews executive officer salaries and makes adjustments to reflect
individual performance.
15
NEXTLINK has designed an incentive program for executive officers. Each
officer is eligible to receive a discretionary bonus of up to 20% to 99%, except
in certain circumstances as determined by the Board of Directors, of his or her
salary based upon individual and company-wide performance goals. For 1998, the
Committee established revenue, lines installed, earnings and other financial and
operating measures as an incentive for individual and company performance. The
Committee also recognized various qualitative factors, such as demonstrated
leadership ability.
NEXTLINK believes that stock option grants to executive officers and other
employees promote Company success by aligning the financial interests of
officers and other employees with the long-term interests of the stockholders.
Stock option grants are based on various subjective factors primarily relating
to the responsibilities of each officer and employee and to his or her expected
future contribution. Although the Committee considers the number of options
previously awarded to and held by executive officers and other employees, they
were not determinative factors in setting the size of 1998 option grants.
As noted above, NEXTLINK's compensation program is performance based. Under
Section 162(m) of the Internal Revenue Code, NEXTLINK may not deduct
nonperformance-based compensation in excess of $1 million paid to any Named
Executive Officer. The Committee currently believes that NEXTLINK will be able
to continue to manage its compensation program for Named Executive Officers so
as to preserve related federal income tax deductions.
CHIEF EXECUTIVE OFFICER COMPENSATION. In setting the compensation of Wayne
M. Perry, NEXTLINK's Vice Chairman and Chief Executive Officer for 1998, the
Committee took into account the option to purchase 441,336 shares of NEXTLINK
Class A Common Stock granted to Mr. Perry at the time he assumed the role of
Chief Executive Officer in July 1997. The Committee also focused on Mr. Perry's
superior leadership in managing the business, experience in leading companies in
competitive segments of the telecommunications industry, as well as NEXTLINK's
financial and operating performance.
COMPENSATION COMMITTEE
William A. Hoglund
Dennis Weibling
16
PERFORMANCE GRAPH
The following graph depicts NEXTLINK's Class A common stock from September
26, 1997, the date on which quotations for the Class A common stock first
appeared on the Nasdaq National Market, through December 31, 1998, relative to
the performance of the S&P 400 and a self-constructed peer group of
communications companies. This group includes the following companies: Qwest
Communications International, Level 3 Communications, Inc., McLeod, Inc., ICG
Communications, Inc. and Intermedia Communications. All indicies shown in the
graph have been reset to a base of 100 as of September 26, 1997, and assume an
investment of $100 on that date and the reinvestment of cash dividends, if any,
paid since that date. NEXTLINK has not paid cash dividends on its common stock.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
NXLK S&P 400 Peer Index
September-1997 $100 $100 $100
December-1997 $83 $100 $115
December-1998 $110 $133 $171
PROPOSAL 2: APPROVAL OF AN AMENDMENT TO
NEXTLINK'S CERTIFICATE OF INCORPORATION
On July 14, 1999, NEXTLINK's Board of Directors approved a two-for-one stock
split of the NEXTLINK Class A and Class B common stock, to be effected in the
form of a 100% stock dividend. Under Delaware law, NEXTLINK cannot effect the
stock split until it increases the number shares of common stock that it is
authorized to issue under its Certificate of Incorporation. Consequently, in
connection with the stock split, the Board of Directors approved, declared
advisable, and is recommending to the stockholders for approval at the annual
meeting, an amendment to the first paragraph of Article 3 of NEXTLINK's
Certificate of Incorporation to:
- increase the total number of shares of common stock that the Company is
authorized to issue from 154,467,600 to 460,000,000,
- increase the number of these 460,000,000 authorized shares designated as
Class A common stock from 110,334,000 to 400,000,000, and
- increase the number of these 460,000,000 authorized shares designated as
Class B common stock from 44,133,600 to 60,000,000.
The full text of the proposed amendment to the Certificate of Incorporation
is set forth below. NEXTLINK is currently authorized to issue 25,000,000 shares
of preferred stock and the proposed amendment will not affect this
authorization.
17
PURPOSES OF PROPOSED INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
AND PROPOSED TWO-FOR-ONE COMMON STOCK SPLIT
The Board of Directors believes it is desirable to increase the number of
shares common stock that NEXTLINK is authorized to issue to:
- accomplish the proposed two-for-one stock split, and
- provide NEXLINK with adequate flexibility to complete financings, other
stock splits or stock dividends, and acquisitions.
Except for the proposed stock split, NEXTLINK has no present commitments or
agreements to issue additional shares of common stock, other than with respect
to currently reserved shares, in connection with transactions in the ordinary
course of NEXTLINK's business, or shares which may be issued under NEXTLINK's
stock option, stock purchase, and other existing employee benefit plans.
NEXTLINK, however, periodically reviews various transactions, and is always
alert to business opportunities, that could result in the issuance of additional
shares of common stock.
The Board of Directors anticipates that the increase in the number of
outstanding shares of NEXTLINK common stock resulting from a two-for-one stock
split will place the market price of the Class A common stock in a range more
attractive to investors, particularly individuals, and may result in a broader
market for the shares. The Class A common stock is listed for trading on The
Nasdaq Stock Market's National Market, and NEXTLINK will apply for listing of
the additional shares of Class A common stock to be issued in the event the
proposed stock split is effected.
EFFECTS OF PROPOSED INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The additional 289,666,000 shares of Class A common stock would be a part of
the existing Class A common stock and, if and when issued, would have the same
rights, powers and privileges as the shares of Class A common stock presently
issued and outstanding. Likewise, the additional 15,866,400 shares of Class B
common stock would be a part of the existing Class B common stock and, if and
when issued, would have the same rights, powers and privileges as the shares of
Class B common stock presently issued and outstanding. As of July 1, 1999, there
were 36,484,992 shares of Class A common stock outstanding and 29,453,275 shares
of Class B common stock outstanding.
The proposed amendment would enable the Board of Directors to issue
additional shares of Class A common stock up to the new 400,000,000 maximum.
Issuances by the Board would not require further action or authorization by
stockholders (except as may be required in a specific case by law or rules of
The Nasdaq Stock Market). The holders of NEXTLINK's common stock are not
entitled to preemptive rights or cumulative voting. Accordingly, the issuance of
additional shares of common stock might dilute, under certain circumstances, the
relative ownership and voting power of stockholders. The proposed increase in
the number of shares of common stock that NEXTLINK is authorized to issue is not
intended to inhibit a change in control of NEXTLINK. Following the stock split,
Craig McCaw, NEXTLINK's founder and principal stockholder, will still control
shares of common stock with a majority of the total voting power of all shares
of outstanding common stock. Nevertheless, the availability for issuance of
additional shares of common stock could discourage, or make more difficult,
efforts to obtain control of NEXTLINK. For example, the issuance of shares of
common stock in a public or private sale, merger, or similar transaction would
increase the number of outstanding shares, thereby possibly diluting the
interest of a party attempting to obtain control of NEXTLINK. NEXTLINK is not
aware of any pending or threatened efforts to acquire control of it.
EFFECTS OF PROPOSED TWO-FOR-ONE COMMON STOCK SPLIT
If the proposed amendment is approved by the stockholders, each holder of
Class A common stock of record at 5:00 p.m., eastern time, on August 18, 1999,
would be the record owner of, and entitled to receive, a certificate
representing one additional share of Class A common stock for each share of
Class A common stock then owned of record by such stockholder. Likewise, if the
proposed amendment is adopted, each holder of Class B common stock of record at
5:00 p.m., eastern time, on August 18, 1999, would be the record owner of, and
entitled to receive, a certificate representing one
18
additional share of Class B common stock for each share of Class B common stock
then owned of record by such stockholder. In addition, certificates representing
shares of common stock would continue to represent the same number of shares of
common stock. Consequently, stockholders should retain their certificates
representing shares of common stock, and they should not return these
certificates to NEXTLINK or to its transfer agent.
If effected, the proposed stock split will result in certain adjustments to
NEXTLINK's stock option and other employee incentive plans, and to the terms of
NEXTLINK's 6 1/2% Cumulative Convertible Preferred Stock. Holders of 6 1/2%
Cumulative Convertible Preferred Stock will be separately notified of those
adjustments.
Stockholders should note that, if they dispose of their shares after the
stock split, they may pay higher brokerage commissions on the same relative
interest in NEXTLINK because that interest is represented by a greater number of
shares. Stockholders may wish to consult their brokers to ascertain the
brokerage commission that would be charged for disposing of the greater number
of shares. If the proposed amendment is adopted, NEXTLINK's stockholders' equity
accounts would not change, but the number of outstanding shares of common stock
would double.
TAX EFFECT OF THE TWO-FOR-ONE STOCK SPLIT
NEXTLINK has been advised by counsel that the proposed stock split, which
will be effected through a dividend of one share of common stock for each share
of common stock held by a stockholder, will result in no realization of income,
gain or loss for federal income tax purposes to owners of common stock under
existing United States federal income tax laws. Following the stock dividend,
the basis for federal income tax purposes of each retained share of common stock
and each corresponding new share of common stock will be equal to one-half of
the basis for federal income tax purposes of the original share immediately
preceding the stock dividend. In addition, the holding period for federal income
tax purposes of each additional share issued pursuant to the stock dividend will
be deemed to be the same as the holding period for the corresponding original
share of common stock. The laws of jurisdictions other than the United States
may, in certain cases, impose income taxes on the issuance of the additional
shares and stockholders are urged to consult their tax advisors.
EFFECTIVE DATE OF PROPOSED AMENDMENT AND ISSUANCE OF SHARES FOR STOCK SPLIT
The proposed amendment to the first paragraph of Article 3 of NEXTLINK's
Certificate of Incorporation, if approved by the required vote of stockholders,
will become effective at 5:00 p.m., eastern time, on August 25, 1999. Please do
not destroy or send your present common stock certificates to NEXTLINK. If the
proposed amendment is adopted, those certificates will remain valid for the
number of shares shown thereon, and should be carefully preserved by you.
NEXTLINK expects that the additional shares will be distributed on or about
August 27, 1999, by book-entry in NEXTLINK's records. Stockholders will be
entitled to receive physical stock certificates upon request.
AMENDMENT TO CERTIFICATE OF INCORPORATION
If approved, the first paragraph of Article 3 of NEXTLINK's Certificate of
Incorporation would be amended and restated as follows:
The Corporation shall have authority to issue Four Hundred
Sixty Million (460,000,000) shares of common stock (the "Common
Stock"), which shall be divided into two classes, Four Hundred
Million (400,000,000) shares of Class A Common Stock, par value
$0.02 per share (the "Class A Common Stock"), and Sixty Million
(60,000,000) shares of Class B Common Stock, par value $0.02 per
share (the "Class B Common Stock"). The Corporation shall have
authority to issue Twenty-Five Million (25,000,000) shares of
preferred stock, par value $.01 per share (the "Preferred Stock").
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENT TO THE
NEXTLINK CERTIFICATE OF INCORPORATION.
19
OTHER INFORMATION
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has audited NEXTLINK's financial statements for the year
ended December 31, 1998. The Board has selected Arthur Andersen LLP as
independent public accountants for NEXTLINK for the year ending December 31,
1999. A representative of Arthur Andersen is expected to be present at the
Annual Meeting and will have the opportunity to make a statement if he or she
desires to do so. The Arthur Andersen representative also is expected to be
available to respond to appropriate questions.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires NEXTLINK's
directors, executive officers and any person who owns more than 10% of
NEXTLINK's Common Stock (the "Reporting Persons") to file with the Securities
and Exchange Commission reports of ownership and reports of changes in ownership
of NEXTLINK's Common Stock. Under SEC rules, we receive copies of all Section
16(a) forms that these Reporting Persons file. We have reviewed copies of these
reports and written representations from the Reporting Persons. We believe all
Reporting Persons complied with their Section 16(a) reporting obligations during
1998, except for the following individuals who had late filings: Charles P.
Daniels, who had two late filings with respect to the purchase of shares under
the NEXTLINK Stock Purchase Plan, Kathleen H. Iskra, who had one late Form 4
filing to report a sale of Class A Common Stock, Scot Jarvis, a former director
who had two late Form 4 filings, one for the sale of Class A Common Stock and
the other for the conversion of Class B Common stock into Class A Common Stock,
and Jan Loichle, who had three late Form 4 filings, two with respect to
purchases under the NEXTLINK Employee Stock Purchase plan and one for the
exercise of stock options.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
In order for proposals of stockholders to be included in the proxy materials
for presentation at the 2000 Annual Meeting of Stockholders, they must be
received by NEXTLINK's Secretary no later than March 28, 2000.
NEXTLINK'S FORM 10-K
We will furnish without charge to each person whose proxy is being
solicited, upon written request of any such person, a copy of the NEXTLINK's
Annual Report on Form 10-K for the year ended December 31, 1998, as filed with
the SEC, including the financial statements and schedules thereto. Requests
should be directed to the Director, Investor Relations, NEXTLINK Communications,
Inc., 500 108th Avenue N.E., Bellevue, Washington 98004.
EXPENSES OF SOLICITATION
NEXTLINK will pay all expenses of solicitation of proxies. Solicitation will
be by mail. There also may be telegraph, telephone or personal solicitations by
NEXTLINK directors, officers, and employees, which will be made without paying
them any additional compensation. In addition, NEXTLINK will request banks and
brokers to solicit proxies from their customers and will reimburse those banks
and brokers for reasonable out-of-pocket costs for this solicitation.
[LOGO]
R. Bruce Easter, Jr.
SECRETARY
Bellevue, Washington
July 27, 1999
20
PROXY
FOR ANNUAL MEETING OF THE STOCKHOLDERS OF
NEXTLINK COMMUNICATIONS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Steven W. Hooper, Kathleen H. Iskra and R.
Bruce Easter, Jr., and each of them, as proxies, each with full power of
substitution, to represent and vote for and on behalf of the undersigned the
number of shares of Class A common stock and Class B common stock of NEXTLINK
Communications, Inc. (the "Company") that the undersigned would be entitled
to vote if personally present at the annual meeting of stockholders to be
held on August 25, 1999, and at any adjournment or postponement thereof. The
undersigned directs that this Proxy be voted as directed on the reverse side.
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and at any adjournment or
postponement thereof. This Proxy, when properly executed, will be voted in
the manner directed herein by the undersigned. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED "FOR" ALL NOMINEES IN ITEM 1 AND "FOR" ITEM 2.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
/X/ Please mark your votes as indicated in this example.
WITHHOLD
FOR all Nominees AUTHORITY
(except as indicated (to vote for all
to the contrary below) nominees listed below)
1. ELECTION
OF DIRECTORS: / / / /
William A. Hoglund, Steven W. Hooper, Nicolas Kauser, Craig O. McCaw, Sharon
L. Nelson, Gregory J. Parker, Wayne M. Perry, Jeffrey S. Raikes, Dennis
Weibling
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ONE OR MORE INDIVIDUAL
NOMINEES, PRINT THAT NOMINEE'S NAME IN THE FOLLOWING SPACE:
- --------------------------------------------
FOR ABSTAIN AGAINST
2. Approval of a proposed amendment
to NEXTLINK's Certificate of Incorporation
to increase the authorized common stock
from 154,467,600 to 460,000,000 / / / / / /
Note -- such other business as may properly come before the meeting or any
adjournment thereof.
YOUR VOTE IS IMPORTANT. PLEASE SIGN AND RETURN THIS PROXY CARD PROMPTLY.
- ---------------- ----------------------------
Signature Signature if held jointly Date , 1999
------------
When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee, or guardian, please give full
title as such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by an authorized person.