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This excerpt taken from the NIHD 10-K filed Mar 22, 2006. Related
Party Transactions
Transactions with Nextel Communications,
Inc. Following Nextel Communications’
sale of 18,000,000 shares of our common stock on
November 13, 2003, Nextel Communications owned
24,712,128 shares of our common stock, either directly or
indirectly, which represented approximately 17.9% and 17.7% of
our issued and outstanding shares of common stock as of
December 31, 2003 and 2004, respectively.
Following Nextel Communications’ sale of
10,000,000 shares of our common stock on September 7,
2005, Nextel Communications owned, as of December 31, 2005,
either directly or indirectly, 14,712,128 shares of our
common stock, which represents approximately 9.7% of our issued
and outstanding shares of common stock.
The following are descriptions of other significant transactions
consummated with Nextel Communications on November 12, 2002
under our confirmed plan of reorganization. See
“Item 13. — Certain Relationships and
Related Transactions — Transactions with Nextel
Communications” for additional information.
New
Spectrum Use and Build-Out Agreement
On November 12, 2002, we and Nextel Communications entered
into a new spectrum use and build-out agreement. Under this
agreement, certain of our subsidiaries committed to complete the
construction of our network in the Baja region of Mexico, in
exchange for cash proceeds from Nextel Communications of
$50.0 million. We recorded the $50.0 million as
deferred revenues and we are recognizing the revenue ratably
over 15.5 years, the then remaining useful life of our
licenses in Tijuana. As of December 31, 2005 and 2004, we
had recorded $42.5 million and $45.7 million,
respectively, of deferred revenues related to this agreement, of
which $39.3 million and $42.5 million are classified
as long-term, respectively. We commenced service on our network
in the Baja region of Mexico in September 2003. As a result,
during the years ended December 31, 2005, 2004 and 2003, we
recognized $3.2 million, $3.5 million and
$0.8 million, respectively, in revenues related to this
arrangement.
Tax
Cooperation Agreement with Nextel Communications
We had a tax sharing agreement with Nextel Communications, dated
January 1, 1997, which was in effect through
November 11, 2002. On November 12, 2002, we terminated
the tax sharing agreement and entered into a tax cooperation
agreement with Nextel Communications under which Nextel
Communications and we agreed to retain, for 20 years
following the effective date of our plan of reorganization,
books, records, accounting data and other information related to
the preparation and filing of consolidated tax returns filed for
Nextel Communications’ consolidated group.
Amended
and Restated Overhead Services Agreement with Nextel
Communications
We had an overhead services agreement with Nextel Communications
in effect through November 11, 2002. On November 12,
2002, we entered into an amended and restated overhead services
agreement, under which Nextel Communications will provide us,
for agreed upon service fees, certain (i) information
technology services, (ii) payroll and employee benefit
services, (iii) procurement services, (iv) engineering
and technical services, (v) marketing and sales services,
and (vi) accounts payable services. Either Nextel
Communications or we can terminate one or more of the other
services at any time with 30 days advance notice. Effective
January 1, 2003, we terminated Nextel Communications’
payroll and employee benefit services, procurement services and
accounts payable services. Effective October 15, 2004, we
terminated all other services with the exception of engineering
and technical services and marketing and sales services. In
addition, effective February 15, 2006, we terminated in its
entirety the overhead services agreement with Nextel
Communications.
Third
Amended and Restated Trademark License Agreement with Nextel
Communications, Inc.
On November 12, 2002, we entered into a third amended and
restated trademark license agreement with Nextel Communications,
which superseded a previous trademark license agreement. Under
the new agreement,
Nextel Communications granted to us an exclusive, royalty-free
license to use within Latin America, excluding Puerto Rico,
certain trademarks, including but not limited to the mark
“Nextel.” The license agreement continues indefinitely
unless terminated by Nextel Communications upon 60 days
notice if we commit any one of several specified defaults and
fail to cure the default within a 60 day period. Under a
side agreement, until the sooner of November 12, 2007 or
the termination of the new agreement, Nextel Communications
agreed not to offer iDEN service in Latin America, other than in
Puerto Rico, and we agreed not to offer iDEN service in the
United States.
Standstill
Agreement
As part of our Revised Third Amended Joint Plan of
Reorganization, we, Nextel Communications and certain of our
noteholders entered into a Standstill Agreement, pursuant to
which Nextel Communications and its affiliates agreed not to
purchase (or take any other action to acquire) any of our equity
securities, or other securities convertible into our equity
securities, that would result in Nextel Communications and its
affiliates holding, in the aggregate, more than 49.9% of the
equity ownership of us on a fully diluted basis, which we refer
to as the “standstill percentage,” without prior
approval of a majority of the non-Nextel Communications members
of the Board of Directors. We agreed not to take any action that
would cause Nextel Communications to hold more than 49.9% of our
common equity on a fully diluted basis. If, however, we take
action that causes Nextel Communications to hold more than 49.9%
of our common equity, Nextel is required to vote all shares in
excess of the standstill percentage in the same proportions as
votes are cast for such class or series of our voting stock by
stockholders other than Nextel Communications and its affiliates.
During the term of the Standstill Agreement, Nextel
Communications and its controlled affiliates have agreed not to
nominate to our Board of Directors, nor will they vote in favor
of the election to the Board of Directors, any person that is an
affiliate of Nextel Communications if the election of such
person to the Board of Directors would result in more than two
affiliates of Nextel Communications serving as directors. Nextel
Communications has also agreed that if at any time during the
term of the Standstill Agreement more than two of its affiliates
are directors, it will use its reasonable efforts to cause such
directors to resign to the extent necessary to reduce the number
of directors on our Board of Directors that are affiliates of
Nextel Communications to two.
We also bill Nextel Communications for roaming charges for their
customers’ use of our digital mobile networks in our
markets.
Transactions with Motorola,
Inc. Through September 2004, we considered
Motorola to be a related party.
On November 12, 2002, as part of our plan of
reorganization, we entered into a new master equipment financing
agreement and a new equipment financing agreement with Motorola
Credit Corporation. In July 2003, we entered into an agreement
to substantially reduce our indebtedness under the international
equipment facility to Motorola Credit Corporation. Under this
agreement, in September 2003, we prepaid, at face value,
$100.0 million of the $225.0 million in outstanding
principal under this facility. Concurrently, we entered into an
agreement with Motorola Credit Corporation to retire our
indebtedness under the Brazil equipment facility. In connection
with this agreement, in September 2003, we paid
$86.0 million in consideration of all of the
$103.2 million in outstanding principal as well as
$5.5 million in accrued and unpaid interest under the
Brazil equipment facility.
In February 2004, in compliance with our international equipment
facility credit agreement we prepaid, at face value,
$72.5 million of the $125.0 million in outstanding
principal to Motorola Credit Corporation using proceeds from a
convertible note offering made in January 2004. In July 2004, we
paid the remaining $52.6 million in outstanding principal
and related accrued interest under our international equipment
facility. Under the terms of the international equipment
facility and related agreements, Motorola Credit Corporation was
a secured creditor and held senior liens on substantially all of
our assets, as well as the assets of our various foreign and
domestic subsidiaries and affiliates. As a result of the
extinguishment of this facility, Motorola Credit Corporation
released its liens on these assets, all restrictive covenants
under this facility were terminated and all obligations under
this facility were discharged. We did not recognize any gain or
loss as a result of either of these transactions.
In addition, prior to the extinguishment of our international
equipment facility, Motorola Credit Corporation owned one
outstanding share of our Special Director Preferred Stock, which
gave Motorola Credit Corporation the right to nominate, elect,
remove and replace one member of our board of directors.
Mr. Charles F. Wright, one of the directors on our board,
was elected by Motorola through these rights under the Special
Director Preferred Stock. In connection with the extinguishment
of our international equipment facility and
Mr. Wright’s resignation as a member of our board of
directors on September 13, 2004, Motorola Credit
Corporation lost this right to elect one member of our board of
directors and is no longer considered to be a related party.
We continue to have a number of important strategic and
commercial relationships with Motorola. We purchase handsets and
accessories and a substantial portion of our digital mobile
network equipment and related software from Motorola. Our
equipment purchase agreements with Motorola govern our rights
and obligations regarding purchases of digital mobile network
equipment manufactured by Motorola. We have purchase targets
under these agreements that, if not met, may result in us being
required to pay higher prices for this equipment. We also have
various equipment agreements with Motorola. We and Motorola have
agreed to warranty and maintenance programs and specified
indemnity arrangements. We also pay Motorola for handset service
and repair and training and are reimbursed for costs we incur
under various marketing and promotional arrangements.
Other Relationship. On
February 14, 2006, we elected Mr. John Donovan,
President and Chief Executive Officer of inCode, a wireless
business and technology consulting company, to our Board of
Directors in order to fill a vacancy. InCode has performed
various consulting services for us in the past.
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