<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY , 1996
REGISTRATION NO. 33-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
----------------
NEXTLINK COMMUNICATIONS, L.L.C.
NEXTLINK CAPITAL, INC.
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTER)
WASHINGTON 4813 91-1678465
WASHINGTON 4813 91-1716062
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
----------------
155 108TH AVENUE N.E., 8TH FLOOR, BELLEVUE, WASHINGTON 98004, (206) 519-8900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF THE REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
----------------
R. BRUCE EASTER JR., ESQ.
155 108TH AVENUE N.E., 8TH FLOOR
BELLEVUE, WASHINGTON 98004 (206) 519-8900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
BRUCE R. KRAUS, ESQ.
WILLKIE FARR & GALLAGHER
ONE CITICORP CENTER
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022
(212) 821-8000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED OFFER TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
----------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS TO BE OFFERING AGGREGATE REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT(1) OFFERING PRICE FEE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12 1/2% Senior Notes Due
April 15, 2006......... $350,000,000 100% $350,000,000 $120,690
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
----------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C.
NEXTLINK CAPITAL, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER LOCATION IN PROSPECTUS
-------------------- ----------------------
<S> <C>
1.Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus...... Forepart of the Registration Statement and
2. Inside Front and Outside Back Outside Front Cover Page of Prospectus
Cover Pages of Prospectus..... Inside Front and Outside Back Cover Pages
of Prospectus
3. Risk Factors, Ratio of Earn-
ings to Fixed Charges and
Other Information............. Summary; Business Selected Consolidated Fi-
nancial and Operating Data; Risk Factors
4. Terms of the Transaction...... Summary; Risk Factors; The Exchange Offer;
Description of the Notes; Plan of Distri-
bution
5. Pro Forma Financial Informa-
tion.......................... Summary; Selected Consolidated Financial
and Operating Data
6. Material Contracts with the
Company Being Acquired........ Not Applicable
7. Additional Information
Required for Reoccurring by
Persons and Parties Deemed to
be Underwriters............... Not Applicable
8. Interests of Named Experts and
Counsel....................... Not Applicable
9. Disclosure of Commission Posi-
tion on Indemnification for
Securities Act Liabilities.... Not Applicable
10. Information with Respect to S-
3 Registrants................. Not Applicable
11. Incorporation of Certain
Information by Reference...... Not Applicable
12. Information with Respect to S-
2 or S-3 Registrants.......... Not Applicable
13. Incorporation of Certain
Information by Reference...... Not Applicable
14. Information with Respect to
Registrants Other than S-3 or
S-2 Registrants............... Summary; Risk Factors; Use of Proceeds;
Business; Capitalization; Selected Consol-
idated Financial and Operating Data; Man-
agement's Discussion and Analysis of Fi-
nancial Condiition and results of Opera-
tions
15. Information with Respect to S-
3 Companies................... Not Applicable
16. Information with Respect to S-
2 or S-3 Companies............ Not Applicable
17. Information with Respect to
Companies Other Than S-3 or S-
2 Companies................... Not Applicable
18. Information if Proxies, Con-
sents or Authorizations are to
be Solicited.................. Not Applicable
19. Information if Proxies, Con-
sents or Authorizations are
not to be Solicited or in an
Exchange Offer................ Summary; Management; Certain Relationships
and Related Transactions; Security Owner-
ship of Certain Beneficial Owners and Man-
</TABLE> agement
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 24, 1996
PROSPECTUS
NEXTLINK COMMUNICATIONS, L.L.C.
NEXTLINK CAPITAL INC.
OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF 12 1/2% SENIOR NOTES DUE APRIL
15, 2006 FOR EACH $1,000 IN PRINCIPAL AMOUNT OF OUTSTANDING 12 1/2% SENIOR
NOTES DUE APRIL 15, 2006 THAT WERE ISSUED AND SOLD IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
NEXTLINK Communications, L.L.C., a Washington limited liability company (the
"Company" or "NEXTLINK"), and NEXTLINK Capital, Inc., a Washington corporation
and a wholly owned subsidiary of the Company ("Capital" and, together with the
Company, the "Issuers"), hereby offer to exchange (the "Exchange Offer")
$350,000,000 in aggregate principal amount of their 12 1/2% Senior Notes Due
April 15, 2006 (the "Exchange Notes") for $350,000,000 in aggregate principal
amount of their outstanding 12 1/2% Senior Notes Due April 15, 2006 that were
issued and sold in a transaction exempt from registration under the Securities
Act of 1933, as amended (the "Senior Notes" and, together with the Exchange
Notes, the "Notes"). There will be no cash proceeds to the Issuers from the
Exchange Offer.
The terms of the Exchange Notes are the same in all respects (including
principal amount, interest rate, maturity and ranking) as the terms of the
Senior Notes for which they may be exchanged pursuant to the Exchange Offer,
except that the Exchange Notes have been registered under the Securities Act
and therefore will not be subject to certain restrictions on transfer
applicable to the Senior Notes and will not be entitled to registration rights.
The Exchange Notes will be issued under the indenture governing the Senior
Notes. The Exchange Notes will be, and the Senior Notes are, senior obligations
of the Issuers, will rank pari passu in right of payment with all existing and
future senior obligations of the Issuers and will rank senior in right of
payment to any future subordinated obligations of the Issuers. Holders of
secured obligations of the Issuers will, however, have claims that are prior to
the claims of the holders of the Notes with respect to the assets securing such
secured obligations. The Notes will be effectively subordinated to all existing
and future indebtedness of the Issuers' subsidiaries. As of December 31, 1995,
after giving pro forma effect to the issuance of the Senior Notes and the
application of the net proceeds from that issuance, (i) the total amount of
outstanding consolidated liabilities of the Issuers, including trade payables,
would have been approximately $363.9 million, $89,000 of which would have been
secured obligations and (ii) the total amount of outstanding liabilities of the
Issuers' subsidiaries, including trade payables, would have been $9.2 million,
$89,000 of which would have been secured obligations. For a complete
description of the terms of the Exchange Notes, see "Description of the Notes".
The Exchange Notes will bear interest from and including their respective dates
of issuance. Holders whose Senior Notes are accepted for exchange will receive
accrued interest thereon to, but not
(Cover continued on following page.)
SEE "RISK FACTORS" ON P. 12 FOR A DESCRIPTION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is , 1996.
<PAGE>
including, the date of issuance of the Exchange Notes, such interest to be
payable with the first interest payment on the Exchange Notes, but will not
receive any payment in respect of interest on the Senior Notes accrued after
the issuance of the Exchange Notes.
The Senior Notes were originally issued and sold on April 25, 1996 in a
transaction not registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon the exemption provided in Section 4(2) of,
and Rule 144A and Regulation S under, the Securities Act (the "Offering").
Accordingly, the Senior Notes may not be reoffered, resold or otherwise
pledged, hypothecated or transferred in the United States unless so registered
or unless an applicable exemption from the registration requirements of the
Securities Act is available. Based upon their view of interpretations provided
to third parties by the Staff of the Securities and Exchange Commission (the
"Commission"), the Issuers believe that the Exchange Notes issued pursuant to
the Exchange Offer in exchange for the Senior Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any holder
which is (i) an "affiliate" of the Issuers within the meaning of Rule 405
under the Securities Act, (ii) a broker-dealer who acquired Senior Notes
directly from the Issuers or (iii) a broker-dealer who acquired Senior Notes
as a result of market making or other trading activities) without compliance
with the registration and prospectus delivery provisions of the Securities Act
provided that such Exchange Notes are acquired in the ordinary course of such
holders' business and such holders are not engaged in, and do not intend to
engage in, and have no arrangement or understanding with any person to
participate in, a distribution of such Exchange Notes. Each broker-dealer who
receives Exchange Notes for its own account pursuant to the Exchange Offer
must acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes. The Letter of Transmittal that is filed as an
exhibit to the Registration Statement of which this Prospectus is a part (the
"Letter of Transmittal") states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. Broker-dealers who
acquired Senior Notes as a result of market making or other trading activities
may use this Prospectus, as supplemented or amended, in connection with
resales of the Exchange Notes. The Issuers have agreed that it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale for a period ending on the earlier of the 90th day after the Exchange
Offer has been completed or such time as broker-dealers no longer own any
Registrable Securities (as defined in the Registration Rights Agreement,
defined below). Any holder that cannot rely upon such interpretations must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction.
The Senior Notes and the Exchange Notes constitute new issues of securities
with no established public trading market. The Senior Notes, however, have
traded on the National Association of Securities Dealers, Inc.'s PORTAL
Market. Any Senior Notes not tendered and accepted in the Exchange Offer will
remain outstanding. To the extent that Senior Notes are tendered and accepted
in the Exchange Offer, a holder's ability to sell untendered, and tendered but
unaccepted, Senior Notes could be adversely affected. Following consummation
of the Exchange Offer, the holders of Senior Notes will continue to be subject
to the existing restrictions on transfer thereof and the Issuers will have no
further obligation to such holders to provide for the registration under the
Securities Act of the Senior Notes except under certain limited circumstances.
See "Description of the Notes--Registration Covenant; Exchange Offer". No
assurance can be given as to the liquidity of the trading market for either
the Senior Notes or the Exchange Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Senior Notes being tendered or accepted for exchange. The Exchange
Offer will expire at 5:00 p.m., New York City time, on , 1996, unless
extended (the "Expiration Date"). The date of acceptance for exchange of the
Senior Notes (the "Exchange Date") will be the first business day following
the Expiration Date, upon surrender of the Senior Notes. Senior Notes tendered
pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date; otherwise such tenders are irrevocable.
<PAGE>
AVAILABLE INFORMATION
The Issuers have filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement", which term shall include all amendments,
exhibits, annexes and schedules thereto) pursuant to the Securities Act, and
the rules and regulations promulgated thereunder, covering the Exchange Notes
being offered hereby. This Prospectus does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Statements made
in this Prospectus as to the contents of any contract, agreement or other
document referred to in the Registration Statement are necessarily summaries
of those documents, and, with respect to each such contract, agreement or
other document filed as an exhibit to the Registration Statement, reference is
made to the exhibit for a more complete description of the matter involved,
and each such statement shall be deemed qualified in its entirety by such
reference.
Upon consummation of the Exchange Offer, the Issuers will become subject to
the periodic reporting and other informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"). Periodic reports, proxy statements
and other information filed by the Issuers with the Commission may be
inspected at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, or at its regional
offices located at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and Seven World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material can be obtained from the Company
upon request.
The Issuers are required by the terms of the indenture dated as of April 25,
1996 by and among the Issuers and United States Trust Company of New York, as
trustee (the "Trustee"), under which the Senior Notes were issued, and under
which the Exchange Notes are to be issued (the "Indenture"), to furnish the
Trustee with annual reports containing consolidated financial statements
audited by their independent certified public accountants and with quarterly
reports containing unaudited condensed consolidated financial statements for
each of the first three quarters of each fiscal year.
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR
MADE SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE ISSUERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONS THAT
THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN
THE AFFAIRS OF THE ISSUERS SINCE THE DATE HEREOF.
NOTICE TO NEW HAMPSHIRE RESIDENTS ONLY
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED
STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS
EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE
CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY
DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER
ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A
SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY
WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO,
ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE
MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION
INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY.................................................................. 1
RISK FACTORS............................................................. 12
Consequences of Exchange and Failure to Exchange....................... 12
Negative Cash Flow and Operating Losses; Limited History of Opera-
tions................................................................. 12
Significant Future Capital Requirements; Substantial Indebtedness...... 13
Holding Company Structure; Effective Subordination of the Notes........ 13
Risk Associated with Implementation of Growth Strategy................. 14
Need to Obtain and Maintain Permits and Rights-of-Way.................. 14
Competition............................................................ 15
Regulation............................................................. 15
Dependence on Large Customers.......................................... 16
Rapid Technological Changes............................................ 16
Dependence on Key Personnel............................................ 16
Variability of Quarterly Operating Results............................. 16
Control by Mr. Craig O. McCaw; Potential Conflicts of Interests........ 16
Absence of a Public Market for the Notes; Possible Volatility of Note
Price................................................................. 17
USE OF PROCEEDS.......................................................... 17
THE EXCHANGE OFFER....................................................... 18
Purpose of the Exchange Offer.......................................... 18
Terms of the Exchange.................................................. 18
Expiration Date; Extensions; Termination; Amendments................... 19
How to Tender.......................................................... 19
Terms and Conditions of the Letter of Transmittal...................... 21
Withdrawal Rights...................................................... 22
Acceptance of Senior Notes for Exchange; Delivery of Exchange Notes.... 22
Conditions to the Exchange Offer....................................... 22
Exchange Agent......................................................... 23
Solicitation of Tenders; Expenses...................................... 23
Appraisal Rights....................................................... 24
Federal Income Tax Consequences........................................ 24
Other.................................................................. 24
CAPITALIZATION........................................................... 25
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA....................... 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS........................................................... 28
Acquisitions and Network Development................................... 28
Results of Operations.................................................. 30
Liquidity and Capital Resources........................................ 32
Effects of Newly Issued Accounting Standards........................... 33
Impact of Inflation.................................................... 33
BUSINESS................................................................. 34
Overview............................................................... 34
Market Opportunity..................................................... 34
Business Strategy...................................................... 35
Network Development.................................................... 37
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Network Architecture.................................................... 38
Implementation of Local Telecommunications.............................. 40
Telecommunications Services............................................. 40
Sales and Customer Care................................................. 42
Regulatory Overview..................................................... 43
Competition............................................................. 47
Purchasing and Distribution............................................. 48
Properties.............................................................. 48
Employees............................................................... 48
Trademarks and Trade Names.............................................. 49
Legal Proceedings....................................................... 49
MANAGEMENT................................................................ 50
Summary Compensation Table.............................................. 53
Option Grants in Last Fiscal Year....................................... 55
Employment Agreement.................................................... 56
Equity Option Plan...................................................... 56
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................ 57
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............ 58
DESCRIPTION OF THE NOTES.................................................. 60
General................................................................. 60
Ranking................................................................. 61
Form, Denomination, Book-Entry Procedures and Transfer.................. 61
Optional Redemption..................................................... 64
Mandatory Redemption; Sinking Fund...................................... 64
Security................................................................ 64
Registration Covenant; Exchange Offer................................... 65
Covenants............................................................... 67
Mergers, Consolidations and Certain Sales of Assets..................... 76
Certain Definitions..................................................... 77
Events of Default....................................................... 88
Satisfaction and Discharge of the Indenture............................. 89
Defeasance.............................................................. 90
Modification and Waiver................................................. 90
No Personal Liability of Members, Managers, Officers, Employees and
Stockholders........................................................... 91
Governing Law........................................................... 91
The Trustee............................................................. 91
PLAN OF DISTRIBUTION...................................................... 91
LEGAL MATTERS............................................................. 92
EXPERTS................................................................... 93
GLOSSARY.................................................................. A-1
</TABLE>
<TABLE>
<S> <C>
INDEX TO FINANCIAL STATEMENTS............................................... F-1
</TABLE>
ii
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in this
Prospectus. Reference is made to, and this Summary is qualified in its entirety
by, the more detailed information, including the Company's Consolidated
Financial Statements and notes thereto, contained herein. Unless the context
otherwise requires, references to "NEXTLINK" or the "Company" are to NEXTLINK
Communications, L.L.C., a Washington limited liability company and its
consolidated subsidiaries. Capitalized terms used in this Prospectus, which are
not otherwise defined herein, have the respective meanings ascribed to them in
the Glossary included as Annex A hereto.
NEXTLINK was founded in 1994 by Mr. Craig O. McCaw, its Chief Executive
Officer and principal equity owner, to be a premier provider of local
facilities-based telecommunications services, focused on serving commercial
customers. NEXTLINK's goal is to become the principal competitor to the
incumbent local exchange carrier ("ILEC") for commercial customers in each of
the metropolitan areas served by the Company. The Company intends to achieve
this goal by initially targeting small and medium sized businesses and by
offering a single source for local, long distance and enhanced communications
services.
Since the Company's inception, Mr. McCaw has invested approximately $55
million of equity capital to fund the development of NEXTLINK's business. The
Company currently has operations in 10 metropolitan areas, and provides
commercial customers with dedicated transmission services in seven of these
areas. To date, the Company has installed approximately 500 route miles of high
capacity fiber-optic cable in its networks. In addition, in April 1996, the
Company became a 40% member in a joint venture that currently provides
competitive access services in Las Vegas, Nevada, over a 200 mile fiber-optic
network. NEXTLINK also offers enhanced voice communications services, including
a series of interactive voice response ("IVR") products and a virtual
communications center for mobile professionals and workgroups. By July 1996,
the Company intends to begin providing switched local, long distance and
enhanced communications services to end-users in six of its markets, and to
provide those services in its five remaining markets by early 1997. In
addition, the Company expects to expand to other metropolitan areas by
"clustering" future growth in areas close to those it currently serves, as well
as by entering attractive markets in other regions.
To date, NEXTLINK has built and acquired networks in mid-sized markets. The
Company designs and builds its networks to encompass the principal downtown and
suburban concentrations of businesses in each area it serves, focusing on
direct connections to end-user locations and ILEC central offices. The Company
constructs its networks utilizing high capacity fiber-optic cable, with a
backbone density generally ranging from 72 to 240 fibers, and self-healing
SONET transmission equipment. In addition, the Company has developed a uniform
technology platform that it is implementing in each of its networks that is
based on the Northern Telecom Limited ("Nortel") DMS-500 local and long
distance switching system.
The Company currently markets a number of enhanced communications services,
which utilize either an IVR platform or a virtual communications center. The
IVR platform supports a variety of customer service, marketing and database
applications for clients such as NIKE, Inc., PepsiCo, Inc. and The GAP, Inc.,
as well as businesses in the areas where the Company has networks. The virtual
communications center provides mobile professionals and workgroups with a
variety of ubiquitous communications services including enhanced call
forwarding, voice messaging, paging, facsimile and teleconferencing, through a
personal telephone number. The Company believes that its enhanced
communications services will accelerate the addition of commercial customers in
the areas served by its networks.
1
<PAGE>
MARKET OPPORTUNITY
Industry sources estimate that in 1994, total revenues from local and long
distance telecommunications services were approximately $164 billion, of which
approximately $97 billion was represented by local exchange services and
approximately $67 billion was represented by long distance services. Although
the market for the provision of long distance service has been open to
competition since 1984, the market for local exchange services has until
recently been virtually closed to competition. The Company believes that the
recently enacted Telecommunications Act of 1996 (the "Telecom Act") will result
in a fundamental change in the competitive structure of the local exchange
market, greatly accelerating changes that have been under way for several years
as a result of FCC policy initiatives and ongoing deregulatory trends at the
state level. The Company believes that these developments will result in
significant opportunities for new entrants offering local exchange services.
Efforts to open the local exchange market began in the late 1980s on a state-
by-state basis when Competitive Access Providers ("CAPs") began offering
dedicated private line transmission and access services. These types of
services together account for less than 10% of the total local exchange market.
CAPs were restricted from providing the other, more frequently used services
such as basic dial tone and switched services, which account for approximately
90% of local exchange revenues. As a result of the Telecom Act and continuing
deregulatory trends at the state level, the Company has, or will soon have, the
right to offer the full range of local and long distance services in any U.S.
market it elects to enter.
NEXTLINK believes that the provisions of the Telecom Act requiring the ILECs
to cooperate on a technical level with competitors are as significant as the
provisions eliminating legal barriers to competition. Under the Telecom Act,
the FCC and state regulators are required to ensure that ILECs implement:
. Interconnection--provides competitors with the right to connect to the
ILEC's networks at any technically feasible point as well as obtain
access to its rights-of-way, thereby enabling the Company to provide
seamless local exchange service;
. Unbundling of the Local Loop--allows competitors to access components of
the ILEC's network selectively, thereby potentially reducing capital and
operating costs, and permitting the Company to choose between expanding
its own network or utilizing a portion of the ILEC's network to serve a
particular area;
. Reciprocal Compensation--establishes a framework for determining pricing
to be charged by competing local exchange carriers for the use of one
another's networks; and
. Number Portability--allows ILEC customers to become customers of NEXTLINK
without changing their current telephone numbers, thereby removing a
significant source of resistance for customers to change local service
providers.
In addition, the Telecom Act provides that ILECs that are subsidiaries of
Regional Bell Operating Companies cannot combine long distance services with
the local services they offer until they have demonstrated that (i) they face
facilities-based local exchange competition in their markets and (ii) they have
satisfied a 14-element checklist designed to ensure that the ILEC is offering
access and interconnection to all local exchange carriers on competitive terms.
The Company believes it will have an opportunity to gain significant market
share by combining local and long distance services in a single offering to its
customers before the ILEC is permitted to do so.
2
<PAGE>
BUSINESS STRATEGY
The Company has built a locally oriented, customer-focused organization
dedicated to providing a broad range of products and services at competitive
prices, with the objective of becoming a major participant in the
telecommunications services business. The key components of the Company's
strategy to achieve this objective are the following:
High Capacity Networks with Broad Market Coverage. NEXTLINK approaches
network design with a long-term view, and focuses on three key elements.
First, the Company designs and builds its networks to provide extensive
coverage of principal business concentrations in its metropolitan areas,
featuring direct physical connection with a high percentage of the
businesses in these markets. This broad coverage will result in a higher
proportion of traffic that is both originated and terminated on the
Company's networks, which should provide higher long-term operating
margins. Second, the Company constructs high capacity networks that utilize
large fiber bundles capable of carrying very high volumes of voice, data,
video and Internet traffic as well as other high bandwidth services. This
should prevent significant "overbuild" costs and provide added network
flexibility. It also positions the Company as a backbone provider for
wireless and long distance carriers. Third, the Company is implementing a
uniform technology platform based on Nortel DMS-500 switches and ancillary
transmission technologies enabling the Company to quickly deploy features
and functions in all of its networks and expand switching capacity in a
cost effective manner.
Focus on Small and Medium Sized Businesses. The Company will initially
focus its marketing efforts on small and medium sized businesses in the
metropolitan areas that it serves. The Company's market research indicates
that these customers would prefer a single source and single bill for all
of their telecommunications services. In addition, the Company believes
that the gross margins on services provided to small and medium sized
businesses are generally higher than for larger businesses, where the ILEC
is more competitive. The Company expects to attract small and medium sized
business customers by offering: (i) bundled local and long distance
services, as well as the Company's enhanced communications services; (ii) a
10% to 15% discount to comparable pricing by the ILEC, depending on the
individual market; and (iii) customer service and support provided on a
local level.
Rapid Market Entry. The Company intends to be early to market providing
competitive local services in all of its markets. The Company is installing
four Nortel DMS-500 switches which will serve six markets where the Company
plans to provide local and long distance services by July 1996, and intends
to install Nortel DMS-500 switches and provide these services in its other
markets by early 1997. To complement its efforts to attract local exchange
customers, the Company plans to gain visibility and develop customer
relationships through the marketing of its enhanced communications
services.
Market Expansion. The Company currently operates or is constructing
networks in 11 metropolitan areas in six states. These areas, in the
aggregate, have approximately 1.5 million addressable business lines, which
represent the current market potential for the Company. By the end of 1997,
the Company's goal is to increase the number of areas it serves in order to
expand its market potential to approximately 2.3 million addressable
business lines. NEXTLINK believes that there are substantial advantages to
operating its networks in clusters, including economies of scale in
management, marketing, sales and network operations. Clustering networks
will also enable the Company to capture a greater percentage of regional
traffic and to develop regional pricing plans, because the Company believes
that a significant level of traffic terminates within 300 miles of its
origination. The Company may also expand into new geographic areas as
opportunities arise either through building new networks or acquiring
existing networks.
3
<PAGE>
Enhanced Communications Services Offering. NEXTLINK offers customers
value-added services beyond the transmission of telephone traffic. Its IVR
services provide an interface between NEXTLINK's clients and their
customers for a variety of applications. NEXTLINK's virtual communications
center allows mobile professionals and workgroups access to a suite of
commonly used communications services from any telephone in the public
switched network. Since these services are not dependent on the Company's
local facilities, the Company can offer these services in a market and
thereby establish a customer base in advance of the Company constructing
network facilities in that market. The Company plans to focus the marketing
of its enhanced communications services in all of its facilities-based
markets, as well as in areas of planned network expansion. This will
increase the Company's visibility, develop customer relationships and
assist the Company in attracting local exchange customers when it operates
networks in these markets.
Direct Sales Force and Customer Care. NEXTLINK is building a highly
motivated and experienced direct sales force and customer service
organization. The Company recruits salespeople with experience in selling
competitive telecommunications services in the markets where they will be
based. Salespeople are incentivized through a commission structure with a
target of 50% of a salesperson's compensation to be based on performance.
To ensure customer satisfaction, each customer will have a single point of
contact for customer care who will be responsible for solving problems and
responding to customer inquiries. Management believes that the quality of
its growing sales force and customer care organization will provide a
competitive advantage in competing with the ILEC in the local exchange
market.
A critical factor in the successful implementation of the Company's strategy
is the quality of its management team and their extensive experience in the
telecommunications industry. The Company has built a management team that it
believes is well suited to challenge the dominance of the ILECs in the local
exchange market. Mr. Craig O. McCaw, the Company's Chief Executive Officer, and
Mr. James F. Voelker, the Company's President, each has in excess of 17 years
experience in leading companies in competitive segments of the
telecommunications industry. In addition, each of the presidents of the
Company's operating subsidiaries has had extensive experience in building and
leading telecommunications companies. Many of the Company's mid-level and
senior managers were associated with Mr. McCaw during the early years at McCaw
Cellular Communications, Inc. (now known as AT&T Wireless Services, Inc.),
where the organizational themes included an unyielding focus on the customer,
developing a first class differentiated product offering, decentralized
management decision-making and building a high capacity system. In addition,
the Company has hired a number of mid-level and senior managers, including Mr.
Voelker, who were previously associated with U.S. Signal, one of the first
companies to compete directly with an ILEC for the provision of local exchange
services, and also from the highly competitive long distance industry. Mid-
level and senior managers are incentivized through a compensation structure
that provides for a target of 40% of a manager's compensation to be payable
upon both the individual manager and the Company achieving certain identified
performance goals.
4
<PAGE>
THE EXCHANGE OFFER
Issuers..................... NEXTLINK Communications, L.L.C. and NEXTLINK
Capital, Inc. ("Capital"). The Notes (as defined
herein) are the joint and several obligations of
the Issuers. In serving as co-issuer, Capital is
acting as an agent of NEXTLINK. Capital has
nominal assets, does not conduct any operations
and will not provide additional security for the
Notes. The principal offices of the Issuers are
located at 155 108th Avenue, N.E., 8th Floor,
Bellevue, Washington 98004, and their telephone
number at that address is (206) 519-8900.
The Exchange Offer.......... The Issuers are offering to exchange up to
$350,000,000 aggregate principal amount of 12
1/2% Senior Notes Due April 15, 2006 (the
"Exchange Notes") for up to $350,000,000
aggregate principal amount of their outstanding
12 1/2% Senior Notes Due April 15, 2006 that were
issued and sold on April 25, 1996 in a
transaction (the "Offering") exempt from
registration under the Securities Act (the
"Senior Notes" and, collectively with the
Exchange Notes, the "Notes"). The terms of the
Exchange Notes are substantially identical in all
respects (including principal amount, interest
rate, maturity and ranking) to the terms of the
Senior Notes for which they may be exchanged
pursuant to the Exchange Offer, except that the
Exchange Notes have been registered under the
Securities Act and therefore will not be subject
to certain restrictions on transfer except as
provided herein (see "The Exchange Offer--Terms
of the Exchange" and "--Terms and Conditions of
the Letter of Transmittal") and will not be
entitled to registration rights.
Exchange Notes issued pursuant to the Exchange
Offer in exchange for the Senior Notes may be
offered for resale, resold and otherwise
transferred by holders thereof (other than any
holder which is (i) an Affiliate of the Issuers,
(ii) a broker-dealer who acquired Senior Notes
directly from the Issuers or (iii) broker-dealers
who acquired Senior Notes as a result of market
making or other trading activities) without
compliance with the registration and prospectus
delivery provisions of the Securities Act
provided that such Exchange Notes are acquired in
the ordinary course of such holders' business and
such holders are not engaged in, and do not
intend to engage in, and have no arrangement or
understanding with any person to participate in,
a distribution of such Exchange Notes.
Minimum Condition........... The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Senior
Notes being tendered for exchange.
5
<PAGE>
Expiration Date............. The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1996 unless extended
(the "Expiration Date").
Exchange Date............... The first date of acceptance for exchange for the
Senior Notes will be the first business day
following the Expiration Date.
Conditions to the Exchange The obligation of the Issuers to consummate the
Offer....................... Exchange Offer is subject to certain conditions.
See "The Exchange Offer--Conditions to the
Exchange Offer". The Issuers reserve the right to
terminate or amend the Exchange Offer at any time
prior to the Expiration Date upon the occurrence
of any such condition.
Withdrawal Rights........... Tenders may be withdrawn at any time prior to the
Expiration Date. Any Senior Notes not accepted
for any reason will be returned without expense
to the tendering holders thereof as promptly as
practicable after the expiration or termination
of the Exchange Offer.
Procedures for Tendering
Senior Notes............... See "The Exchange Offer--How to Tender".
Federal Income Tax
Consequences............... The exchange of Senior Notes for Exchange Notes
by holders will not be a taxable exchange for
federal income tax purposes, and holders should
not recognize any taxable gain or loss or any
interest income as a result of such exchange. See
"The Exchange Offer--Federal Income Tax
Consequences".
Effect on Holders of Senior As a result of the making of this Exchange Offer,
Notes....................... and upon acceptance for exchange of all validly
tendered Senior Notes pursuant to the terms of
this Exchange Offer, the Issuers will have
fulfilled a covenant contained in the terms of
the Exchange and Registration Rights Agreement
(the "Registration Rights Agreement") dated as of
April 25, 1996 among the Company, Capital, and
Goldman, Sachs & Co., Bear Stearns & Co. Inc.,
Salomon Brothers Inc and Toronto Dominion
Securities (USA) Inc. (collectively, the
"Purchasers") and, accordingly, the holders of
the Senior Notes will have no further
registration or other rights under the
Registration Rights Agreement, except that under
certain limited circumstances, the Issuers shall
file with the Commission a shelf registration
statement on an appropriate form under Rule 415
under the Securities Act (the "Shelf Registration
Statement"). See "Description of the Notes--
Registration Covenant; Exchange Offer". Holders
of the Senior Notes who do not tender their
Senior Notes in the
6
<PAGE>
Exchange Offer will continue to hold such Senior
Notes and will be entitled to all the rights and
limitations applicable thereto under the
Indenture. All untendered, and tendered but
unaccepted, Senior Notes will continue to be
subject to the restrictions on transfer provided
for in the Senior Notes and the Indenture. To the
extent that Senior Notes are tendered and
accepted in the Exchange Offer, the trading
market, if any, for the Senior Notes could be
adversely affected. See "Risk Factors--
Consequences of Failure to Exchange".
TERMS OF THE NOTES
The Exchange Offer applies to $350,000,000 aggregate principal amount of the
Senior Notes. The form and terms of the Exchange Notes are the same as the form
and terms of the Senior Notes except that the Exchange Notes have been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof. The Exchange Notes will evidence the same
debt as the Senior Notes and will be entitled to the benefits of the Indenture.
See "Description of the Notes".
Notes Offered............... $350,000,000 principal amount of 12 1/2% Senior
Notes due April 15, 2006.
Maturity.................... April 15, 2006.
Interest.................... The Notes accrue interest at the rate of 12 1/2%
per annum from April 25, 1996, payable semi-
annually in arrears on October 15 and April 15,
commencing October 15, 1996.
Ranking..................... The Senior Notes are, and the Exchange Notes will
be, senior obligations of the Issuers, will rank
pari passu in right of payment with all existing
and future senior obligations of the Issuers and
will rank senior in right of payment to any
future subordinated obligations of the Issuers.
Holders of secured obligations of the Issuers
will, however, have claims that are prior to the
claims of the holders of the Notes with respect
to the assets securing such obligations. The
Notes are effectively subordinated to all
indebtedness and other liabilities and
commitments (including trade payables) of the
Issuers' subsidiaries. As of December 31, 1995,
on a pro forma basis (giving effect to the
Offering and the application of the net proceeds
thereof), (i) the total amount of outstanding
consolidated liabilities of the Issuers,
including trade payables, would have been
approximately $363.9 million, $89,000 of which
would have been secured obligations and (ii) the
total amount of outstanding liabilities of the
Issuers' subsidiaries, including trade payables,
would have been $9.2 million, $89,000 of which
would have been secured obligations. See
"Covenants" below.
7
<PAGE>
Security.................... At the closing of the Offering, the Company used
$117.7 million of the net proceeds to purchase a
portfolio of securities, initially consisting of
U.S. government securities (including any
securities substituted in respect thereof, the
"Pledged Securities"), to pledge as security for
payment of interest on the Notes through April
15, 1999 and, under certain circumstances, as
security for repayment of the principal of the
Notes. Proceeds from the Pledged Securities may
be used by the Company to make interest payments
on the Notes through April 15, 1999. The Pledged
Securities are being held by the Trustee under
the Pledge Agreement (as defined herein) pending
disbursement. See "Description of the Notes--
Security."
Optional Redemption......... The Notes are redeemable at the option of the
Company, in whole or in part, at any time on or
after April 15, 2001 at the redemption prices set
forth herein plus accrued and unpaid interest, if
any, to the date of redemption. In the event
that, on or before April 15, 1999, the Company
receives net proceeds from a sale of its Common
Equity (as defined in the Indenture), up to a
maximum of 33 1/3% of the aggregate principal
amount of the Notes originally issued will, at
the option of the Company, be redeemable from the
net cash proceeds of such sale at a redemption
price equal to 112.50% of the stated principal
amount thereof, plus accrued and unpaid interest,
if any, to the date of redemption, provided,
however, that Notes in an aggregate principal
amount equal to at least $175.0 million remain
outstanding after such redemption.
Change of Control........... In the event of a Change of Control, holders of
the Notes have the right to require the Company
to purchase their Notes, in whole or in part, at
a price equal to 101% of the stated principal
amount thereof, plus accrued and unpaid interest,
if any, thereon to the date of purchase.
Covenants................... The indenture pursuant to which the Notes have
been issued (the "Indenture") contains certain
covenants that, among other things, limits the
ability of the Company and its subsidiaries to
incur additional indebtedness, issue stock in
subsidiaries, pay dividends or make other
distributions, repurchase equity interests or
subordinated indebtedness, engage in sale and
leaseback transactions, create certain liens,
enter into certain transactions with affiliates,
sell assets of the Company and its subsidiaries,
and enter into certain mergers and
consolidations. The Indenture contains provisions
that allow for the modification and amendment of
the covenants contained in the Indenture by a
vote of holders owning a majority of the
Outstanding Notes (as defined in the Indenture),
including the covenant relating to a Change of
8
<PAGE>
Control, except during the pendency of an Offer
to Purchase. In addition, the holders of a
majority in aggregate principal amount of the
Outstanding Notes, on behalf of all holders of
Notes, may waive compliance by the Issuers with
certain restrictive provisions of the Indenture.
See "Description of the Notes--Modification and
Waiver".
For additional information regarding the Notes, see "Description of the
Notes".
RISK FACTORS
Holders and prospective purchasers of Senior Notes should carefully consider
the matters set forth under the caption "Risk Factors". See "Risk Factors".
9
<PAGE>
SUMMARY FINANCIAL AND OPERATING INFORMATION
($ IN THOUSANDS)
The selected consolidated financial data presented below (other than the pro
forma data) as of and for the period from inception (September 16, 1994) to
December 31, 1994 and for the year ended December 31, 1995 are derived from and
qualified by reference to the audited Consolidated Financial Statements of the
Company contained elsewhere in this Prospectus. The Company's Consolidated
Financial Statements as of December 31, 1994 and 1995, for the period from
inception (September 16, 1994) to December 31, 1994, and for the year ended
December 31, 1995, have been audited by Arthur Andersen LLP, independent public
accountants. The selected financial data presented below as of and for the
three-month periods ended March 31, 1995 and 1996, have been derived from
unaudited consolidated financial statements of the Company. In the opinion of
management, the unaudited financial statements have been prepared on the same
basis as the audited financial statements and include all adjustments, which
consist only of normal recurring adjustments, necessary for a fair presentation
of the financial position and the results of operations for these periods.
Operating results for the three months ended March 31, 1995 and 1996 are not
necessarily indicative of the results that may be expected for the full year.
The operating data presented below are derived from the Company's records. All
of the data should be read in conjunction with and are qualified by reference
to "Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the Consolidated Financial Statements of the Company and notes
thereto contained elsewhere in the Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(SEPTEMBER 16, THREE MONTHS ENDED
1994) TO YEAR ENDED MARCH 31,
DECEMBER 31, DECEMBER 31, --------------------
1994 1995 1995 1996
-------------- ------------ --------- ---------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue...................... $ -- $ 7,552 $ 399 $ 5,370
Costs and expenses:
Operating.................. 106 6,618 638 4,696
Selling, general and admin-
istrative................. 232 9,938 753 5,514
Depreciation and amortiza-
tion...................... 14 3,458 612 1,829
----- -------- --------- ---------
Loss from operations......... (352) (12,462) (1,604) (6,669)
Interest expense............. -- 499 -- 496
----- -------- --------- ---------
Loss before minority inter-
est......................... (352) (12,961) (1,604) (7,165)
Minority interest............ 3 230 43 49
----- -------- --------- ---------
Net loss..................... $(349) $(12,731) $(1,561) $(7,116)
===== ======== ========= =========
OTHER DATA:
EBITDA(1).................... $(338) $ (9,004) $ (992) $(4,840)
Capital expenditures,
including acquisitions of
businesses (net of cash
acquired)................... 600 49,230 18,284 24,144
Ratio of earnings to combined
fixed charges(2)............ -- -- -- --
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, MARCH 31,
---------------- ------------------------
PRO FORMA
1994 1995 1996 AS ADJUSTED(3)
------ -------- -------- --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......... $ 25 $ 1,350 $ 15,250 $237,075
Working capital.................... 14 (6,233) (29,725) 192,101
Total assets....................... 690 53,461 104,314 454,314
Long-term debt and capital lease
obligations, less current por-
tion.............................. -- 1,589 7,010 357,010
Members' equity:
Contributed capital and units is-
sued............................ 1,021 49,799 65,527 65,527
Accumulated deficit.............. (349) (13,080) (20,196) (20,196)
------ -------- -------- --------
Total members' equity.............. 672 36,719 45,331 45,331
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996(4)
-----------------------
<S> <C>
OPERATING DATA (UNAUDITED):
Metropolitan areas in operation......................... 7
Metropolitan areas under development.................... 3
Route miles(5).......................................... 496
Fiber miles(6).......................................... 39,681
Buildings connected..................................... 206
Switches(7)............................................. 6
Employees............................................... 255
</TABLE>
- --------
(1) EBITDA consists of earnings (loss) before interest expense, minority
interests, depreciation and amortization. EBITDA is commonly used in the
telecommunications industry to analyze companies on the basis of operating
performance, leverage and liquidity. EBITDA is not intended to represent
cash flow for the periods. See "Consolidated Statement of Cash Flows".
(2) For the period from inception (September 16, 1994) to December 31, 1994,
for the year ended December 31, 1995, and for the three months ended March
31, 1995 and 1996, earnings were insufficient to cover fixed charges during
the periods presented by the amount of loss before minority interests of
$352, $12,961, $1,604 and $7,165, respectively.
(3) As adjusted to give effect to the Offering of the Notes as if the Offering
had occurred on March 31, 1996. Working Capital excludes the portion of
Pledged Securities maturing in one year to satisfy current year interest
payments. See "Use of Proceeds".
(4) Excludes operations of NEXTLINK Nevada in which the Company became a 40%
member in April 1996. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Acquisitions and Network
Development."
(5) Route miles refers to the number of miles of the telecommunications path in
which the Company-owned or leased fiber-optic cables are installed.
(6) Fiber miles refers to the number of route miles installed along a
telecommunications path, multiplied by the Company's estimate of the number
of fibers along that path.
(7) Represents four Nortel DMS-500 switches that have been delivered and are
currently being installed and tested by the Company as well as two Siemens
EWSD switches which were included as part of the Company's acquisition of
its Ohio operations.
11
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, before
tendering their Senior Notes for the Exchange Notes offered hereby, holders of
Senior Notes should consider carefully the following factors, which (other
than "Consequences of Exchange and Failure to Exchange" and "Absence of Public
Market") are generally applicable to the Senior Notes as well as the Exchange
Notes:
CONSEQUENCES OF EXCHANGE AND FAILURE TO EXCHANGE
Holders of Senior Notes who do not exchange their Senior Notes for Exchange
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Senior Notes as set forth in the legend
thereon as a consequence of the issuance of the Senior Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Senior Notes may not be offered or sold, unless registered under
the Securities Act and applicable state securities laws, or pursuant to an
exemption therefrom. Except under certain limited circumstances, the Issuers
do not intend to register the Senior Notes under the Securities Act. In
addition, any holder of Senior Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes may be deemed
to have received restricted securities and, if so, will be required to comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with any resale transaction. To the extent Senior Notes are
tendered and accepted in the Exchange Offer, the trading market, if any, for
the Senior Notes could be adversely affected. See "The Exchange Offer" and
"Description of the Notes--Registration Covenant; Exchange Offer".
NEGATIVE CASH FLOW AND OPERATING LOSSES; LIMITED HISTORY OF OPERATIONS
The development of the Company's businesses and the installation and
expansion of its networks require significant expenditures, a substantial
portion of which must be made before any revenues may be realized. Certain of
the expenditures are expensed as incurred, while certain other expenditures
are capitalized. These expenditures, together with the associated early
operating expenses, result in negative cash flow and operating losses until an
adequate revenue base is established. There can be no assurance that an
adequate revenue base will be established for any of the Company's networks.
Since inception, the Company's operations have resulted in losses before
interest, minority interest, depreciation and amortization of $0.3 million for
the period from September 16, 1994 through December 31, 1994, $9.0 million for
the year ended December 31, 1995 and $4.8 million for the three months ended
March 31, 1996. The Company will continue to incur significant expenditures in
the future in connection with the acquisition, development and expansion of
its networks, services and customer base. There can be no assurance that the
Company will achieve or sustain profitability or generate sufficient positive
cash flow to service the Notes.
The Company was formed in September 1994. A significant portion of the
Company's revenue for the year ended December 31, 1995 was derived from the
operations of the Company's interactive voice response enhanced service
offering, which was acquired by the Company in September 1995. Prospective
investors, therefore, have very limited historical financial information about
the Company upon which to base an evaluation of the Company's performance and
an investment in the Notes. Although the Company generates revenues from its
current operations, the Company will not commence operations as a single
source provider of local, long distance and enhanced communications services,
which it intends to make the principal focus of its business, until July 1996.
Given the Company's limited operating history, there is no assurance that it
will be able to compete successfully in the telecommunications business and to
generate sufficient cash flow to service the Notes.
12
<PAGE>
SIGNIFICANT FUTURE CAPITAL REQUIREMENTS; SUBSTANTIAL INDEBTEDNESS
Expansion of the Company's existing networks and services and the
development and acquisition of new networks and services will require
significant capital expenditures. The Company estimates that the cash required
to fund its current business plan for 1996 and 1997 (including the funding of
operating losses) will approximate $250 million. The Company's planned growth
subsequent to 1997 will require substantial additional capital. The Company
will also continue to evaluate additional revenue opportunities in each of its
markets and, as and when attractive additional opportunities develop, the
Company plans to make additional capital investments in its networks that
might be required to pursue such opportunities. The Company expects to meet
its additional capital needs with the proceeds from credit facilities and
other borrowings, the proceeds from sales of additional debt securities, the
sale or issuance of equity securities and through joint ventures. There can be
no assurance, however, that the Company will be successful in raising
sufficient additional capital on terms that it will consider acceptable or
that the Company's operations will produce positive cash flow in sufficient
amounts to service the Notes. Failure to raise and generate sufficient funds
may require the Company to delay or abandon some of its planned future
expansion or expenditures, which could have a material adverse effect on the
Company's growth and its ability to compete in the telecommunications services
industry. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources".
The Company expects to incur substantial additional indebtedness (including
secured indebtedness) during the next few years to finance the acquisition,
construction and expansion of networks, the purchase of additional switches,
the offering of local dial tone and Centrex services and the introduction of
other new service offerings. The debt service requirements of any additional
indebtedness could make it more difficult for the Company to make principal
and interest payments on the Notes.
The future funding requirements discussed above are based on the Company's
current estimates. There can be no assurance that actual expenditures and
funding requirements will not be significantly higher or lower.
HOLDING COMPANY STRUCTURE; EFFECTIVE SUBORDINATION OF THE NOTES
The Company is a holding company which derives substantially all of its
revenues from its subsidiaries. The Company intends to lend or contribute
substantially all of the net proceeds from the sale of the Notes to certain of
its subsidiaries.
The Notes are not secured by any of the assets of the Company or Capital
(other than the Pledged Securities). The Indenture permits certain
indebtedness of the Company to be secured, including, among other things,
purchase money indebtedness, which the Indenture will permit the Company to
incur in unlimited amounts, and indebtedness up to $125 million under secured
credit facilities. Holders of any secured indebtedness of the Company or
Capital will have claims that are prior to the claims of the holders of the
Notes with respect to the assets securing such other indebtedness. In
addition, the Notes will be effectively subordinated to indebtedness and other
liabilities and commitments (including trade payables) of the Company's
subsidiaries. See "Description of the Notes--Covenants--Limitation on
Consolidated Debt" and "--Limitation on Debt and Preferred Stock of Restricted
Subsidiaries".
The Company's subsidiaries were formed as limited liability companies and a
limited partnership, each of which is treated as a partnership for federal,
state and local income tax purposes. The Company will be dependent upon
payments from its subsidiaries to generate the funds necessary to meet its
obligations, including the payment of principal of, and interest on, the
Notes. The ability of the Company's subsidiaries to make such payments will be
subject to, among other things, the availability of sufficient cash and may be
subject to restrictive covenants in future debt agreements. The
13
<PAGE>
Company's subsidiaries are party to certain capital lease obligations and the
Company may borrow funds at the subsidiary level in the future.
RISK ASSOCIATED WITH IMPLEMENTATION OF GROWTH STRATEGY
The expansion and development of the Company's operations (including the
construction and acquisition of additional networks) will depend on, among
other things, the Company's ability to assess markets, identify, finance and
complete suitable acquisitions, design fiber-optic network backbone routes,
install fiber-optic cable and facilities, including switches, and obtain
rights-of-way, building access rights and any required government
authorizations, franchises and permits, all in a timely manner, at reasonable
costs and on satisfactory terms and conditions. As a result, there can be no
assurance that the Company will be able to expand successfully its existing
networks or acquire or develop new networks in a timely manner in accordance
with its strategic objectives. The Company's growth strategy also involves the
following risks:
Switch Installation. An essential element of the Company's current strategy
is the provision of dial tone service. To provide dial tone service, the
Company is installing and currently testing four Nortel DMS-500 switches.
There can be no assurance, however, that the installation of the required
switches will be completed on time or that, during the testing of these
switches, the Company will not experience technological problems that cannot
be resolved. The failure of the Company to have its switches operational could
have a material adverse effect upon the Company's ability to enter rapidly the
telecommunications market as a single source provider of telecommunications
services.
Interconnection Agreements. The Company is currently negotiating agreements
for the interconnection of its networks with the network of the ILEC in each
metropolitan area in which NEXTLINK either has or is constructing a network.
There can be no assurance that the Company will successfully negotiate these
agreements for interconnection with the ILEC. The failure to negotiate the
interconnection agreements could have a material adverse effect upon the
Company's ability to enter rapidly the telecommunications market as a single
source provider of telecommunications services.
Products and Services. The Company expects to continue to enhance its
systems in order to offer its customers switched, local dial tone, Centrex and
other enhanced products and services in all of its networks as quickly as
practicable and as permitted by applicable regulations. The Company believes
its ability to offer, market and sell these additional products and services
will be important to the Company's ability to meet its long-term strategic
growth objectives, but is dependent on the Company's ability to obtain the
needed capital, additional favorable regulatory developments and the
acceptance of such products and services by the Company's customers. No
assurance can be given that the Company will be able to obtain such capital or
that such developments or acceptance will occur.
Acquisitions. The Company intends to use the net proceeds of the Offering to
expand its networks and service offerings through internal development and
acquisitions. See "Use of Proceeds". Such acquisitions, if made, could divert
the resources and management time of the Company and would require integration
with the Company's existing networks and services. There can be no assurance
that any such acquisitions will occur or that any such acquisitions, if made,
would be on terms favorable to the Company or would be successfully integrated
into the Company's operations.
NEED TO OBTAIN AND MAINTAIN PERMITS AND RIGHTS-OF-WAY
In order to acquire and develop its networks the Company must obtain local
franchises and other permits, as well as rights to utilize underground conduit
and pole space and other rights-of-way from entities such as ILECs and other
utilities, railroads, long distance companies, state highway authorities,
local governments and transit authorities. There can be no assurance that the
Company will be able
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to maintain its existing franchises, permits and rights or to obtain and
maintain the other franchises, permits and rights needed to implement its
business plan on acceptable terms. Although the Company does not believe that
any of the existing arrangements will be canceled or will not be renewed as
needed in the near future, cancellation or non-renewal of certain of such
arrangements could materially adversely affect the Company's business in the
affected metropolitan area. In addition, the failure to enter into and
maintain any such required arrangements for a particular network, including a
network which is already under development, may affect the Company's ability
to acquire or develop that network. See "Business--Network Architecture".
COMPETITION
In each of the cities served by the Company's networks, the services offered
by the Company compete principally with the services offered by the ILEC
serving that area. ILECs are established providers of local telephone services
to all or virtually all telephone subscribers within their respective service
areas. ILECs also have long-standing relationships with regulatory authorities
at the federal and state levels. While recent FCC administrative decisions and
initiatives provide increased business opportunities to telecommunications
providers such as the Company, they also provide the ILECs with increased
pricing flexibility for their private line and special access and switched
access services. In addition, the FCC recently proposed a rule that would
provide for increased ILEC pricing flexibility and deregulation either
automatically or after certain competitive levels are reached. If the ILECs
are allowed by regulators to lower their rates for access and private line
services, engage in aggressive volume and term discount pricing practices for
their customers, and/or seek to charge competitors excessive fees for
interconnection to the ILECs' networks, the income of competitors to the
ILECs, including the Company, could be materially adversely affected. If
future regulatory decisions afford the ILECs increased pricing flexibility or
other regulatory relief, such decisions could also have a material adverse
effect on competitors to the ILEC, including the Company.
The Company also faces, and expects to continue to face, competition from
other current and potential market entrants, including CAPs, AT&T Corp.
("AT&T"), MCI Communications Corporation ("MCI"), Sprint Corporation
("Sprint"), GTE Corporation ("GTE") and other long distance companies, cable
television companies, electric utilities, microwave carriers, wireless
telephone system operators and private networks built by large end-users. In
addition, a continuing trend toward combinations and strategic alliances in
the telecommunications industry could give rise to significant new
competitors. The Telecom Act includes provisions which impose certain
regulatory requirements on all local exchange carriers, including competitors
such as the Company, while granting the FCC expanded authority to reduce the
level of regulation applicable to any or all telecommunications carriers,
including ILECs. The manner in which these provisions of the Telecom Act are
implemented and enforced could have an adverse effect on the Company's ability
to successfully compete against ILECs and other telecommunications service
providers.
The Company also competes with equipment vendors and installers, and
telecommunications management companies with respect to certain portions of
its business. Many of the Company's current and potential competitors have
financial, personnel and other resources substantially greater than those of
the Company, as well as other competitive advantages over the Company.
REGULATION
The Company is subject to varying degrees of federal, state and local
regulation. The Company is not currently subject to price cap or rate of
return regulation, nor is it currently required to obtain FCC authorization
for the installation, acquisition or operation of its network facilities.
However, the FCC has determined that non-dominant carriers, such as the
Company and its subsidiaries, are required to file interstate tariffs on an
ongoing basis. The Telecom Act grants the FCC the authority to eliminate these
tariff obligations, although it has yet to do so. The Company's subsidiaries
that provide or will provide
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intrastate services are also generally subject to certification and tariff
filing requirements by state regulators. Although passage of the Telecom Act
should result in increased opportunities for companies that are competing with
the ILECs, no assurance can be given that changes in current or future
regulations adopted by the FCC or state regulators or other legislative or
judicial initiatives relating to the telecommunications industry would not
have a material adverse effect on the Company. In addition, although the
Telecom Act provides incentives to the ILECs that are subsidiaries of Regional
Bell Operating Companies ("RBOCs") to enter the long distance service market,
there can be no assurance that these ILECs will negotiate quickly with
competitors such as the Company for the required interconnection of the
competitor's networks with those of the ILEC. See "Business--Regulatory
Overview".
DEPENDENCE ON LARGE CUSTOMERS
To date the Company has been dependent on certain large customers, the loss
of one or more of which could have a material adverse effect on the Company.
NEXTLINK's 10 largest customers accounted for approximately 66% of NEXTLINK's
1995 revenues. The Company does not have service contracts with all of these
customers. The Company will continue to be dependent upon a small number of
customers for the majority of its revenues until such time as the Company
generates substantial revenues from the provision of switched local and long
distance communications services.
RAPID TECHNOLOGICAL CHANGES
The telecommunications industry is subject to rapid and significant changes
in technology. The effect of technological changes, including changes relating
to emerging wireline and wireless transmission and switching technologies, on
the businesses of the Company cannot be predicted.
DEPENDENCE ON KEY PERSONNEL
The Company's businesses are managed by a small number of key executive
officers, the loss of certain of whom could have a material adverse effect on
the Company. The Company believes that its future success will depend in large
part on its ability to develop a large and sophisticated sales force and its
ability to attract and retain highly skilled and qualified personnel. Three of
the presidents of the Company's operating subsidiaries have employment
agreements.
VARIABILITY OF QUARTERLY OPERATING RESULTS
As a result of the significant expenses associated with the expansion and
development of its networks and services and the variability of the level of
revenues generated through the sale of NEXTLINK's interactive voice response
enhanced communications service, the Company anticipates that its operating
results could vary significantly from period to period.
CONTROL BY MR. CRAIG O. MCCAW; POTENTIAL CONFLICTS OF INTERESTS
Mr. Craig O. McCaw, through his majority ownership and control of Eagle
River Investments, L.L.C., a Washington limited liability company ("Eagle
River"), controls approximately 88% of the Company's total voting power. As a
result, Mr. McCaw will have the ability to control the direction and future
operations of the Company. In addition to his investment in the Company
through Eagle River, Mr. McCaw has significant investments in other
communications companies, including Nextel Communications, Inc., Teledesic
Corporation and AT&T, some of which could compete with the Company as a single
source provider of telecommunications services or act as a supplier to the
Company of certain telecommunications services. The Company does not have a
noncompetition agreement with either Mr. McCaw or Eagle River. In addition,
although Mr. McCaw is the Company's Chief Executive Officer, Mr. McCaw devotes
only a portion of his time to the business of the Company.
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ABSENCE OF A PUBLIC MARKET FOR THE NOTES; POSSIBLE VOLATILITY OF NOTE PRICE
The Exchange Notes are new securities for which there is currently no
market. The Company does not intend to apply for listing of the Exchange Notes
on any securities exchange or for the inclusion of the Exchange Notes in any
automated quotation system. Although the Company has been advised by the
Purchasers that, following completion of the Offering, the Purchasers intended
to make a market in the Notes, they are not obligated to do so and any such
market making activities may be discontinued at any time without notice.
Accordingly, there can be no assurance as to the development or liquidity of
any market for the Exchange Notes. If a market for the Exchange Notes were to
develop, the Exchange Notes could trade at prices that may be higher or lower
than their initial offering price depending upon many factors, including
prevailing interest rates, the Company's operating results and the markets for
similar securities. Historically, the market for non-investment grade debt has
been subject to disruptions that have caused substantial volatility in the
prices of securities similar to the Exchange Notes. There can be no assurance
that, if a market for the Exchange Notes were to develop, such a market would
not be subject to similar disruptions.
USE OF PROCEEDS
There will be no proceeds to the Issuers from the Exchange Offer.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The sole purpose of the Exchange Offer is to fulfill the obligations of the
Issuers with respect to the Registration Rights Agreement.
The Senior Notes were originally issued and sold on April 25, 1996 (the
"Issue Date"). Such sales were not registered under the Securities Act in
reliance upon the exemption provided by Section 4(2) of, and Rule 144A and
Regulation S under, the Securities Act. In connection with the sale of the
Senior Notes, the Issuers agreed to file with the Commission a registration
statement relating to an exchange offer (the "Exchange Offer Registration
Statement") pursuant to which another series of senior notes of the Issuers
covered by such registration statement and containing the same terms as the
Senior Notes, except as set forth in this Prospectus, would be offered in
exchange for Senior Notes tendered at the option of the holders thereof.
TERMS OF THE EXCHANGE
The Issuers hereby offer to exchange, upon the terms and subject to the
conditions set forth herein and in the Letter of Transmittal accompanying this
Registration Statement of which this Prospectus is a part (the "Letter of
Transmittal"), $1,000 in principal amount of Exchange Notes for each $1,000 in
principal amount of Senior Notes. The terms of the Exchange Notes are
identical in all respects to the terms of the Senior Notes for which they may
be exchanged pursuant to this Exchange Offer, except that (i) the Exchange
Notes will generally be freely transferable by holders thereof and (ii) the
holders of the Exchange Notes will not be entitled to registration rights
under the Registration Rights Agreement. See "Description of the Notes--
Registration Covenant; Exchange Offer". The Exchange Notes will evidence the
same debt as the Senior Notes and will be entitled to the benefits of the
Indenture. See "Description of the Notes".
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Senior Notes being tendered or accepted for exchange.
Based on their view of interpretations set forth in no-action letters issued
to third parties by the Staff (the "Staff") of the Commission, the Issuers
believe that Exchange Notes issued pursuant to the Exchange Offer in exchange
for the Senior Notes may be offered for resale, resold and otherwise
transferred by holders thereof (other than any holder which is (i) an
"affiliate" of the Issuers within the meaning of Rule 405 under the Securities
Act (an "Affiliate"), (ii) a broker-dealer who acquired Senior Notes directly
from the Issuers or (iii) a broker-dealer who acquired Senior Notes as a
result of market making or other trading activities) without compliance with
the registration and prospectus delivery provisions of the Securities Act
provided that such Exchange Notes are acquired in the ordinary course of such
holders' business, and such holders are not engaged in, and do not intend to
engage in, and have no arrangement or understanding with any person to
participate in, a distribution of such Exchange Notes. Each broker-dealer who
receives Exchange Notes pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. The Letter of Transmittal states that by so acknowledging, and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. Broker-dealers
who acquired Senior Notes as a result of market making or other trading
activities may use this Prospectus, as supplemented or amended, in connection
with resales of the Exchange Notes. The Issuers have agreed that it will make
this Prospectus available to any broker-dealer for use in connection with any
such resale for a period ending on the earlier of the 90th day after the
Exchange Offer has been completed or such time as such broker-dealers no
longer own any Registrable Securities (as defined in the Registration Rights
Agreement). Any holder that cannot rely upon such interpretations must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with a secondary resale transaction.
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Tendering holders of Senior Notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Senior Notes
pursuant to the Exchange Offer.
The Exchange Notes will bear interest from and including their respective
dates of issuance. Holders whose Senior Notes are accepted for exchange will
receive accrued interest thereon to, but not including, the date of issuance
of the Exchange Notes, such interest to be payable with the first interest
payment on the Exchange Notes, but will not receive any payment in respect of
interest on the Senior Notes accrued after the issuance of the Exchange Notes.
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer will expire on the Expiration Date. The term "Expiration
Date" means 5:00 p.m., New York City time, on , 1996 unless the Issuers
in their sole discretion extends the period during which the Exchange Offer is
open, in which event the term "Expiration Date" means the latest time and date
on which the Exchange Offer, as so extended by the Issuers, expires. The
Issuers reserve the right to extend the Exchange Offer at any time and from
time to time prior to the Expiration Date by giving written notice to United
States Trust Company of New York (the "Exchange Agent") and by timely public
announcement communicated by no later than 5:00 p.m. on the next business day
following the Expiration Date, unless otherwise required by applicable law or
regulation, by making a release to the Dow Jones News Service. During any
extension of the Exchange Offer, all Senior Notes previously tendered pursuant
to the Exchange Offer will remain subject to the Exchange Offer.
The initial Exchange Date will be the first business day following the
Expiration Date. The Issuers expressly reserve the right to (i) terminate the
Exchange Offer and not accept for exchange any Senior Notes for any reason,
including if any of the events set forth below under "--Conditions to the
Exchange Offer" shall have occurred and shall not have been waived by the
Issuers and (ii) amend the terms of the Exchange Offer in any manner, whether
before or after any tender of the Senior Notes. If any such termination or
amendment occurs, the Issuers will notify the Exchange Agent in writing and
will either issue a press release or give written notice to the holders of the
Senior Notes as promptly as practicable. Unless the Issuers terminate the
Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date,
the Issuers will exchange the Exchange Notes for the Senior Notes on the
Exchange Date.
If the Issuers waived any material condition to the Exchange Offer, or amend
the Exchange Offer in any other material respect, and if at the time that
notice of such waiver or amendment is first published, sent or given to
holders of Senior Notes in the manner specified above, the Exchange Offer is
scheduled to expire at any time earlier than the expiration of a period ending
on the fifth business day from, and including, the date that such notice is
first so published, sent or given, then the Exchange Offer will be extended
until the expiration of such period of five business days.
This Prospectus and the related Letter of Transmittal and other relevant
materials will be mailed by the Issuers to record holders of Senior Notes and
will be furnished to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on the lists of holders for subsequent
transmittal to beneficial owners of Senior Notes.
HOW TO TENDER
The tender to the Issuers of Senior Notes by a holder thereof pursuant to
one of the procedures set forth below will constitute an agreement between
such holder and the Issuers in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
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General Procedures. A holder of a Senior Note may tender the same by (i)
properly completing and signing the Letter of Transmittal or a facsimile
thereof (all references in this Prospectus to the Letter of Transmittal shall
be deemed to include a facsimile thereof) and delivering the same, together
with the certificate or certificates representing the Senior Notes being
tendered and any required signature guarantees (or a timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") pursuant to the procedure
described below), to the Exchange Agent at its address set forth on the back
cover of this Prospectus on or prior to the Expiration Date or (ii) complying
with the guaranteed delivery procedures described below.
If tendered Senior Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Notes to be issued in exchange therefor
are to be issued (and any untendered Senior Notes are to be reissued) in the
name of the registered holder, the signature of such signer need not be
guaranteed. In any other case, the tendered Senior Notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to the
Issuers and duly executed by the registered holder and the signature on the
endorsement or instrument of transfer must be guaranteed by a bank, broker,
dealer, credit union, savings association, clearing agency or other
institution (each an "Eligible Institution") that is a member of a recognized
signature guarantee medallion program within the meaning of Rule 17Ad-15 under
the Exchange Act. If the Exchange Notes and/or Senior Notes not exchanged are
to be delivered to an address other than that of the registered holder
appearing on the note register for the Senior Notes, the signature on the
Letter of Transmittal must be guaranteed by an Eligible Institution.
Any beneficial owner whose Senior Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender Senior Notes should contact such holder promptly and instruct such
holder to tender Senior Notes on such beneficial owner's behalf. If such
beneficial owner wishes to tender such Senior Notes himself, such beneficial
owner must, prior to completing and executing the Letter of Transmittal and
delivering such Senior Notes, either make appropriate arrangements to register
ownership of the Senior Notes in such beneficial owner's name or follow the
procedures described in the immediately preceding paragraph. The transfer of
record ownership may take considerable time.
Book-Entry Transfer. The Exchange Agent will make a request to establish an
account with respect to the Senior Notes at The Depository Trust Company (the
"Book-Entry Transfer Facility") for purpose of the Exchange Offer within two
business days after receipt of this Prospectus, and any financial institution
that is a participant in the Book-Entry Transfer Facility's systems may make
book-entry delivery of Senior Notes by causing the Book-Entry Transfer
Facility to transfer such Senior Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's procedures for transfer. However, although delivery of Senior Notes
may be effected through book-entry transfer at the Book-Entry Transfer
Facility, the Letter of Transmittal, with any required signature guarantees
and any other required documents, must, in any case, be transmitted to and
received by the Exchange Agent at the address specified on the back cover page
of this Prospectus on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
THE METHOD OF DELIVERY OF SENIOR NOTES AND ALL OTHER DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER INSURANCE BE
OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION
DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION
DATE.
Guaranteed Delivery Procedures. If a holder desires to accept the Exchange
Offer and time will not permit a Letter of Transmittal or Senior Notes to
reach the Exchange Agent before the Expiration Date, a tender may be effected
if the Exchange Agent has received at its office listed on the back cover
hereof on or prior to the Expiration Date a letter, telegram or facsimile
transmission from an Eligible
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Institution setting forth the name and address of the tendering holder, the
principal amount of the Senior Notes being tendered, the names in which the
Senior Notes are registered and, if possible, the certificate numbers of the
Senior Notes to be tendered, and stating that the tender is being made thereby
and guaranteeing that within three New York Stock Exchange trading days after
the date of execution of such letter, telegram or facsimile transmission by
the Eligible Institution, the Senior Notes, in proper form for transfer, will
be delivered by such Eligible Institution together with a properly completed
and duly executed Letter of Transmittal (and any other required documents).
Unless Senior Notes being tendered by the above-described method (or a timely
Book-Entry Confirmation) are deposited with the Exchange Agent within the time
period set forth above (accompanied or preceded by a properly completed Letter
of Transmittal and any other required documents), the Issuers may, at their
option, reject the tender. Copies of a Notice of Guaranteed Delivery which may
be used by Eligible Institutions for the purposes described in this paragraph
are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Senior Notes (or a timely Book-Entry Confirmation) is
received by the Exchange Agent. Issuances of Exchange Notes in exchange for
Senior Notes tendered pursuant to a Notice of Guaranteed Delivery or letter,
telegram or facsimile transmission to similar effect (as provided above) by an
Eligible Institution will be made only against deposit of the Letter of
Transmittal (and any other required documents) and the tendered Senior Notes
(or a timely Book-Entry Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Senior Notes will be
determined by the Issuers, whose determination will be final and binding. The
Issuers reserve the absolute right to reject any or all tenders not in proper
form or the acceptances for exchange of which may, in the opinion of counsel
to the Issuers, be unlawful. The Issuers also reserve the absolute right to
waive any of the conditions of the Exchange Offer or any defect or
irregularities in tenders of any particular holder whether or not similar
defects or irregularities are waived in the case of other holders. Neither the
Issuers, the Exchange Agent nor any other person will be under any duty to
give notification of any defects or irregularities in tenders or shall incur
any liability for failure to give any such notification. The Issuers'
interpretation of the terms and conditions of the Exchange Offer (including
the Letter of Transmittal and the instructions thereto) will be final and
binding.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Senior Notes for exchange (the "Transferor") exchanges,
assigns and transfers the Senior Notes to the Issuers and irrevocably
constitutes and appoints the Exchange Agent as the Transferor's agent and
attorney-in-fact to cause the Senior Notes to be assigned, transferred and
exchanged. The Transferor represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the Senior Notes and to
acquire Exchange Notes issuable upon the exchange of such tendered Senior
Notes, and that, when the same are accepted for exchange, the Issuers will
acquire good and unencumbered title to the tendered Senior Notes, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim. The Transferor also warrants that it will, upon request,
execute and deliver any additional documents deemed by the Issuers to be
necessary or desirable to complete the exchange, assignment and transfer of
tendered Senior Notes. The Transferor further agrees that acceptance of any
tendered Senior Notes by the Issuers and the issuance of Exchange Notes in
exchange therefor shall constitute performance in full by the Issuers of their
obligations under the Registration Rights Agreement and that the Issuers shall
have no further obligations or liabilities thereunder (except in certain
limited circumstances). All
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authority conferred by the Transferor will survive the death or incapacity of
the Transferor and every obligation of the Transferor shall be binding upon
the heirs, legal representatives, successors, assigns, executors and
administrators of such Transferor.
By tendering Senior Notes and executing the Letter of Transmittal, the
Transferor certifies that it is not an Affiliate of the Issuers within the
meaning of Rule 405 under the Securities Act, that it is not a broker-dealer
that owns Senior Notes acquired directly from the Issuers or an Affiliate of
the Issuers, that it is acquiring the Exchange Notes offered hereby in the
ordinary course of such Transferor's business and that such Transferor has no
arrangement with any person to participate in the distribution of such
Exchange Notes.
WITHDRAWAL RIGHTS
Senior Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date.
For a withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Exchange Agent at its address set
forth on the back cover of this Prospectus prior to the Expiration Date. Any
such notice of withdrawal must specify the person named in the Letter of
Transmittal as having tendered Senior Notes to be withdrawn, the certificate
numbers of Senior Notes to be withdrawn, the principal amount of Senior Notes
to be withdrawn, a statement that such holder is withdrawing his election to
have such Senior Notes exchanged, and the name of the registered holder of
such Senior Notes, and must be signed by the holder in the same manner as the
original signature on the Letter of Transmittal (including any required
signature guarantees) or be accompanied by evidence satisfactory to the
Issuers that the person withdrawing the tender has succeeded to the beneficial
ownership of the Senior Notes being withdrawn. The Exchange Agent will return
the properly withdrawn Senior Notes promptly following receipt of notice of
withdrawal. All questions as to the validity of notices of withdrawal,
including time of receipt, will be determined by the Issuers, and such
determination will be final and binding on all parties.
ACCEPTANCE OF SENIOR NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Senior Notes validly tendered and not withdrawn and
the issuance of the Exchange Notes will be made on the Exchange Date. For the
purposes of the Exchange Offer, the Issuers shall be deemed to have accepted
for exchange validly tendered Senior Notes when, as and if the Issuers have
given written notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Senior
Notes for the purposes of receiving Exchange Notes from the Issuers and
causing the Senior Notes to be assigned, transferred and exchanged. Upon the
terms and subject to the conditions of the Exchange Offer, delivery of
Exchange Notes to be issued in exchange for accepted Senior Notes will be made
by the Exchange Agent promptly after acceptance of the tendered Senior Notes.
Senior Notes not accepted for exchange by the Issuers will be returned without
expense to the tendering holders (or in the case of Senior Notes tendered by
book-entry transfer into the Exchange Agent's account at the Book-Entry
Transfer Facility pursuant to the procedures described above, such non-
exchanged Senior Notes will be credited to an account maintained with such
Book-Entry Transfer Facility) promptly following the Expiration Date or, if
the Issuers terminate the Exchange Offer prior to the Expiration Date,
promptly after the Exchange Offer is so terminated.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Issuers will not be required to issue Exchange
Notes in respect of any properly tendered
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Senior Notes not previously accepted and may terminate the Exchange Offer (by
oral or written notice to the Exchange Agent and by timely public
announcement, unless otherwise required by applicable law or regulation, by
making a release to the Dow Jones News Service) or, at their option, modify or
otherwise amend the Exchange Offer, if (a) there shall be threatened,
instituted or pending any action or proceeding before, or any injunction,
order or decree shall have been issued by, any court or governmental agency or
other governmental regulatory or administrative agency or commission,
(i) seeking to restrain or prohibit the making or consummation of the Exchange
Offer or any other transaction contemplated by the Exchange Offer, (ii)
assessing or seeking any damages as a result thereof, or (iii) resulting in a
material delay in the ability of the Issuers to accept for exchange or
exchange some or all of the Senior Notes pursuant to the Exchange Offer; (b)
any statute, rule, regulation, order or injunction shall be sought, proposed,
introduced, enacted, promulgated or deemed applicable to the Exchange Offer or
any of the transactions contemplated by the Exchange Offer by any government
or governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority,
agency or court, domestic or foreign, that in the sole judgment of the Issuers
might directly or indirectly result in any of the consequences referred to in
clauses (a)(i) or (ii) above or, in the sole judgment of the Issuers, might
result in the holders of Exchange Notes having obligations with respect to
resales and transfers of Exchange Notes which are greater than those described
in the interpretations of the Commission referred to on the cover page of this
Prospectus, or would otherwise make it inadvisable to proceed with the
Exchange Offer; or (c) a material adverse change shall have occurred in the
business, condition (financial or otherwise), operations, or prospects of the
Issuers.
The foregoing conditions are for the sole benefit of the Issuers and may be
asserted by them with respect to all or any portion of the Exchange Offer
regardless of the circumstances (including any action or inaction by the
Issuers) giving rise to such condition or may be waived by the Issuers in
whole or in part at any time or from time to time in their sole discretion.
The failure by the Issuers at any time to exercise any of the foregoing rights
will not be deemed a waiver of any such right, and each right will be deemed
an ongoing right which may be asserted at any time or from time to time. In
addition, the Issuers have reserved the right, notwithstanding the
satisfaction of each of the foregoing conditions, to terminate or amend the
Exchange Offer.
Any determination by the Issuers concerning the fulfillment or non-
fulfillment of any conditions will be final and binding upon all parties.
In addition, the Issuers will not accept for exchange any Senior Notes
tendered and no Exchange Notes will be issued in exchange for any such Senior
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Exchange Offer Registration Statement of which this Prospectus
constitutes a part or qualification of the Indenture under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act").
EXCHANGE AGENT
United States Trust Company of New York has been appointed as the Exchange
Agent for the Exchange Offer. Letters of Transmittal must be addressed to the
Exchange Agent at its address set forth on the back cover page of this
Prospectus.
Delivery to an address other than as set forth herein, or transmissions of
instructions via a facsimile or telex number other than the ones set forth
herein, will not constitute a valid delivery.
SOLICITATION OF TENDERS; EXPENSES
The Issuers have not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The
Issuers will, however, pay the Exchange Agent reasonable
23
<PAGE>
and customary fees for its services and will reimburse it for reasonable out-
of-pocket expenses in connection therewith. The Issuers will also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding tenders for their
customers. The expenses to be incurred in connection with the Exchange Offer,
including the fees and expenses of the Exchange Agent and printing, accounting
and legal fees, will be paid by the Issuers and are estimated at approximately
$398,000.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those
contained in this Prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by the
Issuers. Neither the delivery of this Prospectus nor any exchange made
hereunder shall, under any circumstances, create any implication that there
has been no change in the affairs of the Issuers since the respective dates as
of which information is given herein. The Exchange Offer is not being made to
(nor will tenders be accepted from or on behalf of) holders of Senior Notes in
any jurisdiction in which the making of the Exchange Offer or the acceptance
thereof would not be in compliance with the laws of such jurisdiction.
However, the Issuers may, at their discretion, take such action as it may deem
necessary to make the Exchange Offer in any such jurisdiction and extend the
Exchange Offer to holders of Senior Notes in such jurisdiction. In any
jurisdiction the securities laws or blue sky laws of which require the
Exchange Offer to be made by a licensed broker or dealer, the Exchange Offer
is being made on behalf of the Issuers by one or more registered brokers or
dealers which are licensed under the laws of such jurisdiction.
APPRAISAL RIGHTS
HOLDERS OF SENIOR NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL RIGHTS
IN CONNECTION WITH THE EXCHANGE OFFER.
FEDERAL INCOME TAX CONSEQUENCES
The exchange for Exchange Notes by holders of Senior Notes will not be a
taxable exchange for federal income tax purposes, and such holders should not
recognize any taxable gain or loss or any interest income as a result of such
exchange.
OTHER
Participation in the Exchange Offer is voluntary, and holders should
carefully consider whether to accept the Exchange Offer and tender their
Senior Notes. Holders of the Senior Notes are urged to consult their financial
and tax advisors in making their own decisions on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Senior Notes pursuant to the terms of this Exchange Offer,
the Issuers will have fulfilled a covenant contained in the terms of the
Registration Rights Agreement. Holders of the Senior Notes who do not tender
their certificates in the Exchange Offer will continue to hold such
certificates and will be entitled to all the rights, and subject to all the
limitations applicable thereto, under the Indenture, except for any such
rights under the Registration Rights Agreement, which by their terms terminate
or cease to have further effect as a result of the making of this Exchange
Offer. See "Description of the Notes--Registration Covenant; Exchange Offer".
All untendered Senior Notes will continue to be subject to the restriction on
transfer set forth in the Indenture. To the extent that Senior Notes are
tendered and accepted in the Exchange Offer, the trading market, if any, for
the Senior Notes could be adversely affected. See "Risk Factors--Consequences
of Failure to Exchange".
The Issuers may in the future seek to acquire untendered Senior Notes in the
open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The Issuers have no present plan to acquire any Senior
Notes which are not tendered in the Exchange Offer.
24
<PAGE>
CAPITALIZATION
($ IN THOUSANDS)
The following table sets forth at March 31, 1996, the actual capitalization
of the Company and the pro forma capitalization of the Company as adjusted to
reflect the issuance of the Notes pursuant to the Offering. This table should
be read in conjunction with the Selected Consolidated Financial Data and the
Consolidated Financial Statements and notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF
MARCH 31, 1996
---------------------------------
ACTUAL PRO FORMA AS ADJUSTED
----------- ---------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
12 1/2% Senior Notes due April 15, 2006..... $ -- $350,000(1)
Other long-term debt and capital lease
obligations, less current portion ......... 7,010 7,010
-------- --------
Total long-term debt.................... 7,010 357,010
-------- --------
Minority interests(2)....................... 540 540
Members' equity:
Contributed capital and units issued...... 65,527 65,527
Accumulated deficit....................... (20,196) (20,196)
-------- --------
Total members' equity................... 45,331 45,331
-------- --------
Total capitalization........................ $ 52,881 $402,881
======== ========
</TABLE>
- --------
(1) Of the net proceeds from the Offering, approximately $117.7 million will
be utilized to purchase Pledged Securities at the closing of the Offering.
See "Description of the Notes--Security".
(2) Minority interests represent a 1% cash investment in each of the Company's
subsidiaries in existence as of March 31, 1996 by a company that is wholly
owned by Mr. Craig O. McCaw.
25
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
($ IN THOUSANDS)
The selected consolidated financial data presented below (other than the pro
forma data) as of and for the period from inception (September 16, 1994) to
December 31, 1994 and for the year ended December 31, 1995 are derived from
and qualified by reference to the audited Consolidated Financial Statements of
the Company contained elsewhere in this Prospectus. The Company's Consolidated
Financial Statements as of December 31, 1994 and 1995, for the period from
inception (September 16, 1994) to December 31, 1994, and for the year ended
December 31, 1995, have been audited by Arthur Andersen LLP, independent
public accountants. The selected financial data presented below as of and for
the three-month periods ended March 31, 1995 and 1996, have been derived from
unaudited consolidated financial statements of the Company. In the opinion of
management, the unaudited financial statements have been prepared on the same
basis as the audited financial statements and include all adjustments, which
consist only of normal recurring adjustments, necessary for a fair
presentation of the financial position and the results of operations for these
periods. Operating results for the three months ended March 31, 1995 and 1996
are not necessarily indicative of the results that may be expected for the
full year. The pro forma and operating data presented below are derived from
the Company's records. All of the data should be read in conjunction with and
are qualified by reference to "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the Consolidated Financial
Statements of the Company and notes thereto contained elsewhere in the
Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(SEPTEMBER 16, THREE MONTHS ENDED
1994) TO YEAR ENDED MARCH 31,
DECEMBER 31, DECEMBER 31, --------------------
1994 1995 1995 1996
-------------- ------------ --------- ---------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue...................... $ -- $ 7,552 $ 399 $ 5,370
Costs and expenses:
Operating.................. 106 6,618 638 4,696
Selling, general and
administrative............ 232 9,938 753 5,514
Depreciation and
amortization.............. 14 3,458 612 1,829
----- -------- --------- ---------
Loss from operations......... (352) (12,462) (1,604) (6,669)
Interest expense............. -- 499 -- 496
----- -------- --------- ---------
Loss before minority inter-
est......................... (352) (12,961) (1,604) (7,165)
Minority interest............ 3 230 43 49
----- -------- --------- ---------
Net loss..................... $(349) $(12,731) $ (1,561) $ (7,116)
===== ======== ========= =========
OTHER DATA:
EBITDA(1).................... $(338) $ (9,004) $ (992) $ (4,840)
Capital expenditures,
including acquisitions of
businesses (net of cash
acquired)................... 600 49,230 18,284 24,144
Ratio of earnings to combined
fixed charges(2)............ -- -- -- --
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, MARCH 31,
---------------- ------------------------
PRO FORMA
1994 1995 1996 AS ADJUSTED(3)
------ -------- -------- --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......... $ 25 $ 1,350 $ 15,250 $237,075
Working capital.................... 14 (6,233) (29,725) 192,101
Total assets....................... 690 53,461 104,314 454,314
Long-term debt and capital lease
obligations, less current
portion........................... -- 1,589 7,010 357,010
Members' equity:
Contributed capital and units
issued.......................... 1,021 49,799 65,527 65,527
Accumulated deficit.............. (349) (13,080) (20,196) (20,196)
------ -------- -------- --------
Total members' equity.......... 672 36,719 45,331 45,331
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996(4)
-----------------------
<S> <C>
OPERATING DATA (UNAUDITED):
Metropolitan areas in operation......................... 7
Metropolitan areas under development.................... 3
Route miles(5).......................................... 496
Fiber miles(6).......................................... 39,681
Buildings connected..................................... 206
Switches(7)............................................. 6
Employees............................................... 255
</TABLE>
- --------
(1) EBITDA consists of earnings (loss) before interest expense, minority
interests, depreciation and amortization. EBITDA is commonly used in the
telecommunications industry to analyze companies on the basis of operating
performance, leverage and liquidity. EBITDA is not intended to represent
cash flow for the periods. See "Consolidated Statement of Cash Flows".
(2) For the period from inception (September 16, 1994) to December 31, 1994,
for the year ended December 31, 1995, and for the three months ended March
31, 1995 and 1996, earnings were insufficient to cover fixed charges
during the periods presented by the amount of loss before minority
interests of $352, $12,961, $1,604 and $7,165, respectively.
(3) As adjusted to give effect to the Offering of the Notes as if the Offering
had occurred on March 31, 1996. Working Capital excludes the portion of
Pledged Securities maturing in one year to satisfy current year interest
payments. See "Use of Proceeds".
(4) Excludes operations of NEXTLINK Nevada in which the Company became a 40%
member in April 1996. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Acquisitions and Network
Development".
(5) Route miles refers to the number of miles of the telecommunications path
in which the Company-owned or leased fiber-optic cables are installed.
(6) Fiber miles refers to the number of route miles installed along a
telecommunications path, multiplied by the Company's estimate of the
number of fibers along that path.
(7) Represents four Nortel DMS-500 switches that have been delivered and are
currently being installed and tested by the Company as well as two Siemens
EWSD switches which were included as part of the Company's acquisition of
its Ohio operations.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's audited Consolidated Financial Statements and the notes thereto
appearing elsewhere in this Prospectus.
OVERVIEW
Since its inception in 1994, the Company has executed a strategy of
constructing and acquiring fiber-optic networks, and acquiring related
telecommunications businesses. These activities have provided the Company with
the foundation to become a full service provider of local facilities-based
telecommunications services. Over this period, the Company has begun
construction of, or acquired and expanded, telecommunications networks in 10
metropolitan areas in five states. Currently, revenues are being generated
from the Company's networks in Tennessee (Memphis and Nashville); Pennsylvania
(Allentown, Harrisburg and Reading/Lancaster); Ohio (Columbus) and Washington
(Spokane), the most significant and mature of which is located in Memphis. In
addition, in April 1996, the Company became a 40% member in a joint venture
that currently provides competitive access services in Las Vegas, Nevada, over
a 200 mile fiber-optic network. The Company is also generating revenues from
the provision of enhanced communications services. The Company anticipates
that its networks in Ohio (Akron and Cleveland) and Utah (Salt Lake City),
will begin generating revenues during 1996.
The Company owns and operates subsidiaries that offer various components of
local facilities-based telecommunications services. For example, the Company's
Memphis network offers traditional competitive access services, including
dedicated private lines, long distance carrier access, high speed data
transmission, and video-conferencing. In Spokane, Washington, the Company
resells local exchange services. In addition, to augment its local facilities-
based services, the Company offers two types of enhanced communications
services: (i) interactive voice response services, which include interactive
call and information management, automated order entry and related services;
and (ii) a virtual communications center which offers a suite of products for
mobile professionals and workgroups.
By July 1996, the Company expects to commence the offering of local, long
distance and enhanced communications services in six of its markets, and to
provide those services in its five remaining markets by early 1997. The
Company also plans to acquire and build networks in new areas, expand its
current networks, and also explore the acquisition of other enhanced
communications services providers. These efforts should allow the Company to
increase its presence in the marketplace, and facilitate providing a single
source solution for the telecommunications needs of its customers. While the
Company currently operates in metropolitan areas with a total of approximately
1.5 million addressable business lines, which the Company believes represent
its current market potential, the Company plans to expand its market potential
to approximately 2.3 million addressable business lines by the end of 1997.
The development and expansion of the Company's business and networks require
significant expenditures, a substantial portion of which are incurred before
the realization of revenues. The Company has made the strategic decision to
build high capacity networks with broad market coverage, which initially
increases its level of capital expenditures and operating losses. The Company
believes that over the long term this will enhance the Company's financial
performance by increasing the traffic flow over the Company's networks.
However, the Company anticipates that most markets will not reach positive
EBITDA until approximately 24 to 30 months after the offering of switched
services commences. Thereafter, the Company believes that operating margins
should improve as the incremental cost of adding customers declines.
The Company is a Washington limited liability company, which is treated as a
partnership for federal and state income tax purposes. Accordingly, the
Company does not maintain a provision for income taxes in its Consolidated
Financial Statements.
28
<PAGE>
ACQUISITIONS AND NETWORK DEVELOPMENT
Facilities-Based Services
Tennessee. In January 1995, the Company acquired from City Signal, Inc. an
extensive and fully operational network in Memphis, Tennessee and another
network then under development in Nashville, Tennessee for $17.5 million.
Since the date of acquisition, the Memphis network has provided dedicated
private line services, long distance carrier access services, high speed data
transmission, and video conferencing. The Company's Memphis network currently
is the most mature and extensive of the Company's networks and provides a
model for the route design of the networks the Company envisions for the other
areas it serves. In Nashville, the network was completed in December 1995, and
the Company now provides services to customers in this area. As of December
31, 1995, the Company had invested an additional $8.9 million in expanding and
increasing the capacity of the Memphis and Nashville networks. The Company
plans to provide switched local and long distance services utilizing these
networks by the end of July 1996.
Pennsylvania. In April 1995, the Company began construction of an extensive
regional fiber-optic network connecting Harrisburg, Reading/Lancaster, and
Allentown, Pennsylvania. The 151-mile backbone network connecting these three
areas and covering 21 counties was completed and fully tested in the first
quarter of 1996. The Company plans to provide switched local and long distance
service utilizing this network by the end of July 1996. The Company believes
that this network provides it with the foundation for significant regional
service offerings. As of December 31, 1995, $7.1 million had been invested by
the Company in the Pennsylvania network.
Washington. In April 1995, the Company acquired a local exchange service
reseller located in Spokane, Washington for $1.2 million. Currently serving
approximately 600 business customers with approximately 4,200 lines throughout
Spokane, the Company is constructing a fiber-optic ring in the downtown area
in order to provide facilities-based local telecommunications services
directly to these customers. The Company anticipates migrating its current
resale customers to the fiber-optic network upon its completion. Through
December 31, 1995, the Company has invested $462,000 in building and expanding
this system. The Company plans to provide switched local and long distance
services utilizing this network by the end of July 1996.
Ohio. In January 1996, the Company acquired existing fiber-optic networks
and switching facilities in Cleveland, Columbus and Akron, Ohio for $9.6
million in cash, the issuance of Company Class A Units of $652,000 and the
assumption of a capital lease obligation of $6.1 million for switches and
equipment. The Company's recently acquired networks in Ohio currently are
limited to the downtown cores, but the Company plans to significantly expand
the route and fiber miles of each of these networks during 1996. The Company
anticipates that it will begin offering switched local and long distance
services in each of these metropolitan areas during the first quarter of 1997.
Utah. In March 1996, the Company admitted a 10% member to the subsidiary
conducting the Company's operations in Utah, which member will provide access
to its rights-of-way, franchises, and other valuable services in order for the
Company to commence the construction of a fiber-optic network in Salt Lake
City and the Wasatch Valley. Construction of the downtown fiber-optic ring is
scheduled to begin in the second quarter of 1996 with switched local and long
distance service starting during the first quarter of 1997.
Las Vegas. In April 1996, the Company became a 40% member in, and manager
of, a joint venture that will provide local telecommunications services in Las
Vegas. The Company has provided a license to the joint venture to operate
under the name NEXTLINK Nevada.
The joint venture currently provides competitive access services over a
fiber-optic network covering over 200 route miles throughout Las Vegas.
Through a newly formed subsidiary, NEXTLINK
29
<PAGE>
Management Services, LLC, the company will provide strategic planning and
management of the business for a ten year period. In order to expand the
current competitive access business and begin offering local exchange service,
the Company committed to fund $8 million for future construction and
development of the network, including a Nortel DMS-500 switch over the next
three years. The investment in this joint venture will be accounted for under
the equity method and the initial carrying value of the investment is $1
million.
Enhanced Communications Services
During 1995, the Company completed two acquisitions that enable it to
provide enhanced communications services. These businesses allow the Company
to offer value added products in the metropolitan areas where the Company
either has networks in place or is constructing networks. Since the delivery
of these services does not require the construction of local facilities, these
services also provide substantial business opportunities outside of those
areas with significantly less capital expenditures than the facilities-based
businesses.
In June 1995, the Company acquired certain enhanced communications services
assets for $617,000 from City Signal, Inc. These assets are used by the
Company to offer a virtual communications center for mobile professionals and
workgroups. This center provides a suite of communications services to end-
users including Follow-me calling, voice mail, paging, Caller ID, and fax
services, which services can be described as creating a virtual office for the
mobile user. These services are made available through a personal telephone
number called a "Magic Number(TM)".
In September 1995, the Company acquired a fully operational interactive
voice response business for $12.2 million. The Company offers high volume
enhanced telecommunications services including interactive call and
information management, automated order entry and related services.
RESULTS OF OPERATIONS
Three months ended March 31, 1996 vs. three months ended March 31, 1995.
Revenues increased to $5.4 million in the three months ended March 31, 1996,
compared to $399,000 in the first quarter of 1995. The increase was due to
expansion of the competitive access and dedicated line service business in
Tennessee and additional revenue generated from companies acquired in the
latter part of 1995. Of the first quarter 1996 revenues, $1.7 million were
derived from competitive access and dedicated line services, $500,000 from
local exchange resale services, and $3.2 million from enhanced services.
Expenses increased from $2.0 million in first quarter of 1995 to $12.0
million in 1996. This increase is due to the acquisitions described above and
expansion of the business. Operating expenses increased from $638,000 in the
first quarter 1995 to $4.7 million in the comparable period in 1996 due
primarily to the increase in salaries and benefits, consultant fees, and local
and long distance service costs.
Selling, general and administrative expenses ("SG&A") increased from
$753,000 in the three months ended March 31, 1995 to $5.5 million in the three
months ended March 31, 1996. SG&A increased substantially as a result of
acquisitions and development of the Company's business to commence local
exchange service in July 1996. Salaries and benefits, marketing, consulting
and legal fees, property taxes and facilities expenses increased in 1996
compared to the first quarter of 1995.
Depreciation increased from $130,000 in the three months ended March 31,
1995 to $1.1 million in comparable period in 1996 due to the added equipment
as a result of acquisitions and expansion of the networks. Amortization of
intangible assets increased from $482,000 in the first quarter of 1995 to
$752,000 in the first quarter of 1996 due to increase in intangible assets as
a result of acquisitions.
30
<PAGE>
Net interest expense was $496,000 for the three months ended March 31, 1996
and related to advances from Eagle River and additional capital lease
obligations.
Period from Inception (September 16, 1994) to December 31, 1994 vs. 1995.
From inception through December 31, 1995, the Company acquired certain
operating assets and one company. These acquisitions have been accounted for
utilizing the purchase method of accounting, and accordingly, the Company's
Consolidated Financial Statements include the results of operations of these
acquisitions from the dates of acquisition. The acquired assets and
liabilities were recorded at their estimated fair value on the acquisition
dates, and appropriate amounts were allocated to intangible assets, including
goodwill.
The Company generated its first revenues, a total of $7.6 million, in 1995.
Of these revenues, $3.2 million were derived from competitive access and
dedicated line services, $1.0 million from local exchange resale services and
$3.4 million from interactive voice response services.
As reflected in the Consolidated Financial Statements, expenses increased
from $352,000 in 1994 to $20.0 million in 1995. This increase is due to the
acquisitions described above and expansion of the business. Operating expenses
increased from $106,000 in 1994 to $6.6 million in 1995. Operating expenses
consist of costs directly related to providing facilities-based network and
enhanced communications services and includes salaries and benefits, right-of-
way fees and local and long distance service costs.
SG&A increased from $232,000 in 1994 to $9.9 million in 1995. SG&A includes
salaries and benefits, sales and marketing, consulting and legal fees,
property taxes, facilities expense and billing and systems development costs.
SG&A increased substantially as a result of acquisitions and the development
of the Company's systems and structure to support the anticipated growth of
its business.
Depreciation increased from $6,500 in 1994 to $1.1 million in 1995 due to
the added property, plant and equipment as a result of the acquisitions and
expansion of the networks completed in 1995. Amortization of intangible assets
increased from $7,000 in 1994 to $2.3 million in 1995 due to the acquisitions
and the resulting increase in intangible assets.
Interest expense was $499,000 in 1995 and related primarily to a note to
Eagle River that was subsequently converted to contributed capital on December
1, 1995.
Minority interest in net losses increased from $3,000 in 1994 to $230,000 in
1995, due to increases in losses and the addition of minority members'
interest in certain of the Company's acquired subsidiaries. The net loss
before minority interest was $13.0 million and the net loss was $12.7 million
in 1995 compared to $352,000 and $349,000, respectively for 1994.
Quarterly Information
The following table presents the unaudited operating results for the third
quarter of 1994 through the fourth quarter of 1995. The Company believes that
all necessary adjustments, consisting of only normal recurring adjustments,
have been included in the amounts stated below to present fairly the
31
<PAGE>
quarterly results when read in conjunction with the Consolidated Financial
Statements and notes thereto. Results of operations for any particular quarter
are not necessarily indicative of results of operations for a full year or
predictive of future periods.
<TABLE>
<CAPTION>
1994 1995
----------- ----------------------------------
3RD 4TH 1ST 2ND 3RD 4TH
---- ----- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenue....................... $-- $ -- $ 399 $ 1,000 $ 2,825 $ 3,328
Loss from operations.......... (47) (305) (1,604) (2,290) (2,446) (6,122)
Other income (expense)........ 1 2 43 36 (95) (253)
Net loss...................... (46) (303) (1,561) (2,254) (2,541) (6,375)
EBITDA(1)..................... (46) (292) (992) (1,623) (1,672) (4,717)
</TABLE>
- --------
(1) EBITDA consists of earnings (loss) before interest, minority interest,
depreciation and amortization. EBITDA is commonly used in the
telecommunications industry to analyze companies on the basis of operating
performance, leverage and liquidity. EBITDA is not intended to represent
cash flow for the periods. See Consolidated Statement of Cash Flows.
Revenues have increased every quarter from the first quarter through the
fourth quarter of 1995, due to an increasing customer base that has resulted
from the acquisition and installation of new networks and enhanced
communications services. Additional increases in revenue resulted from the
September 1995 acquisition of the interactive voice response business.
The increased loss in the fourth quarter 1995 resulted primarily from costs
incurred in developing the local telecommunications networks. The increase
reflects primarily the costs of additional employees, increase in SG&A costs,
facilities expenses and development costs. The Company incurred costs related
to evaluating and establishing new markets; building systems engineering and
information technology functions; and developing marketing and sales programs.
In addition, depreciation and amortization increased due to the 1995
acquisitions and continued expansion of the Company's networks.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations have required substantial capital investment for
the acquisition of companies and assets, the purchase of additional
telecommunications equipment, and the design and development of the Company's
networks.
Since inception, the Company has funded approximately $55.0 million of its
expenditures through cash equity investments from two entities that are
controlled by Mr. Craig O. McCaw. In addition, the Company has issued $10.5
million of member units for the acquisition of certain assets as well as the
issuance of member units in a recapitalization of the Company and four of the
Company's operating subsidiaries, as a result of which each of these
subsidiaries is owned 99% by the Company and 1% by a corporation that is
wholly owned by Mr. McCaw (the "Recapitalization"), and assumed or incurred
approximately $12.7 million of debt obligations. Mr. McCaw, through Eagle
River, has made advances to the Company primarily to fund the Company's
capital expenditures (excluding acquisitions) and operating losses between
January 1996 and April 1996. These advances of approximately $32.2 million,
including accrued interest, will be repaid using a portion of the net proceeds
of the Offering.
On April 25, 1996, the Company executed a purchase agreement pursuant to
which investors committed to purchase the Senior Notes with interest due semi-
annually. The Company used $117.7 million of the proceeds to purchase U.S.
government securities, representing funds sufficient to provide for payment in
full of interest on the Senior Notes through April 15, 1999 and $32.2 million
to repay the advances and accrued interest from Eagle River.
32
<PAGE>
The Company expects to use the remaining proceeds (approximately $190
million net of transaction costs) in connection with (i) further construction
and expansion of the Company's existing networks, including the installation
of additional switches and switch peripherals, (ii) design, construction and
development of networks in adjacent or new geographic areas, (iii) connection
of additional buildings and customers to the Company's networks, (iv) further
development of the Company's enhanced communications services and (v)
acquisitions and the development of acquired businesses.
The Company estimates that the capital expenditures for the period from
January 1996 through December 1997 will be approximately $200 million. Beyond
1997, the Company's planned growth will require substantial additional capital
to fund capital expenditures, working capital and any future operating losses.
The Company will continue to evaluate additional revenue opportunities in each
of its metropolitan areas and, as and when attractive additional opportunities
develop, the Company plans to make additional capital investments in its
networks that might be required to pursue such opportunities. The Company
expects to meet its additional capital needs with the proceeds from credit
facilities and other borrowings, sales of additional debt securities, sales or
issuance of equity securities and through joint ventures. There can be no
assurance, however, that the Company will be successful in raising sufficient
additional capital on terms that it will consider acceptable or that the
Company's operations will produce positive consolidated cash flow in
sufficient amounts to service the Notes. Failure to raise and generate
sufficient funds may require the Company to delay or abandon some of its
planned future expansion or expenditures, which could have a material adverse
effect on the Company's growth and its ability to compete in the
telecommunications services industry.
EFFECTS OF NEWLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board has recently issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of". This statement requires that long-lived assets and
certain identifiable intangible assets be reviewed to determine whether the
carrying amount is recoverable based on estimated future cash flows expected
from the use of the assets and cash to be received upon disposal of the
assets. The Financial Accounting Standards Board has also recently issued
Statement No. 123 "Accounting for Stock-Based Compensation". This statement
affects the valuation and disclosure of stock-based transactions with
employees. The Company plans to use the pro forma disclosure alternative. The
Company does not anticipate any material effect on the financial position,
results of operations or cash flow of the Company upon adoption of these
standards in the first quarter of 1996.
IMPACT OF INFLATION
Inflation has not had a significant impact on the Company's operations over
the past two years.
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BUSINESS
OVERVIEW
NEXTLINK was founded in 1994 by Mr. Craig O. McCaw, its Chief Executive
Officer and principal equity owner, to be a premier provider of local
facilities-based telecommunications services, focused on serving commercial
customers. NEXTLINK's goal is to become the principal competitor to the ILEC
for commercial customers in each of the metropolitan areas served by the
Company. The Company intends to achieve this goal by initially targeting small
and medium sized businesses and by offering a single source for local, long
distance and enhanced communications services.
Since the Company's inception, Mr. McCaw has invested approximately $55
million of equity capital to fund the development of NEXTLINK's business. The
Company currently has operations in 10 metropolitan areas, and provides
commercial customers with dedicated transmission services in seven of these
areas. To date, the Company has installed approximately 500 route miles of
high capacity fiber-optic cable in its networks. In addition, in April 1996,
the Company became a 40% member in a joint venture that currently provides
competitive access services in Las Vegas, Nevada, over a 200 mile fiber-optic
network. NEXTLINK also offers enhanced voice communications services,
including a series of interactive voice response ("IVR") products and a
virtual communications center for mobile professionals and workgroups. By July
1996, the Company intends to begin providing switched local, long distance and
enhanced communications services to end-users in six of its markets, and to
provide those services in its five remaining markets by early 1997. In
addition, the Company expects to expand to other metropolitan areas by
"clustering" future growth in areas close to those it currently serves, as
well as by entering attractive markets in other regions.
To date, NEXTLINK has built and acquired networks in mid-sized markets. The
Company designs and builds its networks to encompass the principal downtown
and suburban concentrations of businesses in each area it serves, focusing on
direct connections to end-user locations and ILEC central offices. The Company
constructs its networks utilizing high capacity fiber-optic cable, with a
backbone density generally ranging from 72 to 240 fibers, and self-healing
SONET transmission equipment. In addition, the Company has developed a uniform
technology platform that it is implementing in each of its networks that is
based on the Nortel DMS-500 local and long distance switching system.
The Company currently markets a number of enhanced communications services,
which utilize either an IVR platform or a virtual communications center. The
IVR platform supports a variety of customer service, marketing and database
applications for clients such as NIKE, Inc., PepsiCo, Inc. and The GAP, Inc.,
as well as businesses in the areas where the Company has networks. The virtual
communications center provides mobile professionals and workgroups with a
variety of ubiquitous communications services including enhanced call
forwarding, voice messaging, paging, facsimile and teleconferencing, through a
personal telephone number. The Company believes that its enhanced
communications services will accelerate the addition of commercial customers
in the areas served by its networks.
MARKET OPPORTUNITY
Industry sources estimate that in 1994, total revenues from local and long
distance telecommunications services were approximately $164 billion, of which
approximately $97 billion was represented by local exchange services and
approximately $67 billion was represented by long distance services. Although
the market for the provision of long distance service has been open to
competition since 1984, the market for local exchange services has until
recently been virtually closed to competition. The Company believes that the
recently enacted Telecom Act will result in a fundamental change in the
competitive structure of the local exchange market, greatly accelerating
changes that have been under way for several years as a result of FCC policy
initiatives and ongoing deregulatory trends at the state level. The Company
believes that these developments will result in significant opportunities for
new entrants offering local exchange services.
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Prior to 1984, AT&T dominated both the local exchange and long distance
marketplace by owning the operating entities that provided both local exchange
and long distance services to most of the U.S. population. While long distance
competition began to emerge in the late 1970s, the critical event triggering
the growth of long distance competition was the breakup of AT&T and the
separation of its local and long distance businesses as mandated by the
Modified Final Judgment (the "MFJ") in 1984. To foster competition in the long
distance market, the MFJ prohibited AT&T from acting as a single source
provider of telecommunications services.
The Company believes that a similarly critical event occurred this year with
the passage of the Telecom Act. In most locations throughout the United
States, the ILEC has operated with a virtual monopoly over the provision of
most local exchange services. However, just as competition slowly emerged in
the long distance business prior to the MFJ, competitive opportunities also
have slowly emerged over the last 10 years at the local level.
Efforts to open the local exchange market began in the late 1980s on a
state-by-state basis when CAPs began offering dedicated private line
transmission and access services. Competitive access is a limited service that
allows customers with a high volume of long distance traffic to utilize a
CAP's network to bypass the ILEC (and the ILEC's relatively high access
charges) to connect to the customer's long distance carrier. Initially, CAPs
could only compete for high capacity, dedicated access services to customers
connected to the CAP's privately owned or leased network. The FCC's
Interconnection Decisions in 1992 and 1993 granted CAPs the right to
interconnect their private networks to the ILEC networks to provide collocated
special access and switched access transport services, which enabled CAPs to
access new customers and new markets without physically expanding their
networks.
The total market scope of CAPs, however, has remained limited. Even with
these FCC decisions, CAPs were limited to offering services that account for
approximately 15% of the total local exchange market. The portion of the total
telecommunications services market that these service providers were unable to
address (that is, local dial tone, associated switched services and intraLATA
toll) account for approximately 85% of the local exchange market.
As a result of the passage of the Telecom Act, competitors to the ILEC are
now permitted to offer all local telecommunications to their customers as well
as combine local and long distance services in a single product offering.
Pursuant to the Telecom Act, ILECs that are also subsidiaries of RBOCs are not
permitted to offer a combined local and long distance service product until
such time as the ILEC can demonstrate that a facilities-based provider, such
as NEXTLINK, is present in its market. Although it is uncertain when these
ILECs will be able to offer combined local and long distance services, the
Company believes that until they are able to do so, the Company will have a
competitive advantage to gain market share and to provide a combined service
package before the ILEC is permitted to do so.
The Company expects that continuing pro-competitive regulatory changes,
together with increasing customer demand, will create more opportunities for
competitors to the ILEC, such as NEXTLINK, to introduce additional services,
expand their networks and address a larger customer base. The Company believes
that these regulatory and competitive changes afford competitors to the ILEC
the potential to grow significantly over the next several years.
BUSINESS STRATEGY
The Company has built a locally oriented, customer-focused organization
dedicated to providing a broad range of products and services at competitive
prices, with the objective of becoming a major
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participant in the telecommunications services business. The key components of
the Company's strategy to achieve this objective are the following:
High Capacity Networks with Broad Market Coverage. NEXTLINK approaches
network design with a long-term view, and focuses on three key elements.
First, the Company designs and builds its networks to provide extensive
coverage of principal business concentrations in its metropolitan areas,
featuring direct physical connection with a high percentage of the
businesses in these markets. This broad coverage will result in a higher
proportion of traffic that is both originated and terminated on the
Company's networks, which should provide higher long-term operating
margins. Second, the Company constructs high capacity networks that utilize
large fiber bundles capable of carrying very high volumes of voice, data,
video and Internet traffic as well as other high bandwidth services. This
should prevent significant "overbuild" costs and provide added network
flexibility. It also positions the Company as a backbone provider for
wireless and long distance carriers. Third, the Company is implementing a
uniform technology platform based on Nortel DMS-500 switches and ancillary
transmission technologies enabling the Company to quickly deploy features
and functions in all of its networks and expand switching capacity in a
cost effective manner.
Focus on Small and Medium Sized Businesses. The Company will initially
focus its marketing efforts on small and medium sized businesses in the
metropolitan areas that it serves. The Company's market research indicates
that these customers would prefer a single source and single bill for all
of their telecommunications services. In addition, the Company believes
that the gross margins on services provided to small and medium sized
businesses are generally higher than for larger businesses, where the ILEC
is more competitive. The Company expects to attract small and medium sized
business customers by offering: (i) bundled local and long distance
services, as well as the Company's enhanced communications services; (ii) a
10% to 15% discount to comparable pricing by the ILEC, depending on the
individual market; and (iii) customer service and support provided on a
local level.
Rapid Market Entry. The Company intends to be early to market providing
competitive local services in all of its markets. The Company is installing
four Nortel DMS-500 switches which will serve six markets where the Company
plans to provide local and long distance services by July 1996, and intends
to install Nortel DMS-500 switches and provide these services in its other
markets by early 1997. To complement its efforts to attract local exchange
customers, the Company plans to gain visibility and develop customer
relationships through the marketing of its enhanced communications
services.
Market Expansion. The Company currently operates or is constructing
networks in 10 metropolitan areas in five states. These areas, in the
aggregate, have approximately 1.5 million addressable business lines, which
represent the current market potential for the Company. By the end of 1997,
the Company's goal is to increase the number of areas it serves in order to
expand its market potential to approximately 2.3 million addressable
business lines. NEXTLINK believes that there are substantial advantages to
operating its networks in clusters, including economies of scale in
management, marketing, sales and network operations. Clustering networks
will also enable the Company to capture a greater percentage of regional
traffic and to develop regional pricing plans, because the Company believes
that a significant level of traffic terminates within 300 miles of its
origination. The Company may also expand into new geographic areas as
opportunities arise either through building new networks or acquiring
existing networks.
Enhanced Communications Services Offering. NEXTLINK offers customers
value-added services beyond the transmission of telephone traffic. Its IVR
services provide an interface between NEXTLINK's clients and their
customers for a variety of applications. NEXTLINK's virtual communications
center allows mobile professionals and workgroups access to a suite of
commonly used communications services from any telephone in the public
switched network. Since these services are not dependent on the Company's
local facilities, the Company can offer
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these services in a market and thereby establish a customer base in advance
of the Company constructing network facilities in that market. The Company
plans to focus the marketing of its enhanced communications services in all
of its facilities-based markets, as well as in areas of planned network
expansion. This will increase the Company's visibility, develop customer
relationships and assist the Company in attracting local exchange customers
when it operates networks in these markets.
Direct Sales Force and Customer Care. NEXTLINK is building a highly
motivated and experienced direct sales force and customer service
organization. The Company recruits salespeople with experience in selling
competitive telecommunications services in the markets where they will be
based. Salespeople are incentivized through a commission structure with a
target of 50% of a salesperson's compensation to be based on performance.
To ensure customer satisfaction, each customer will have a single point of
contact for customer care who will be responsible for solving problems and
responding to customer inquiries. Management believes that the quality of
its growing sales force and customer care organization will provide a
competitive advantage in competing with the ILEC in the local exchange
market.
NETWORK DEVELOPMENT
The Company has executed a strategy of (i) acquiring fully or partially
constructed fiber-optic networks, (ii) designing and constructing high
capacity fiber-optic networks with broad coverage, and (iii) acquiring related
enhanced communications services. The Company is constantly evaluating
metropolitan areas as locations for expansion of the Company's current
networks and the development of additional networks.
The decision to build or acquire an existing network is not based on any
single factor, but on a combination of a number of factors including:
. demographic, economic, competitive and telecommunications demand
characteristics of the area;
. availability of rights-of-way;
. actual and potential competitors;
. potential for the Company to cluster additional networks in the region;
and
. demand for traditional CAP services such as special access and switched
access transport services.
If a particular metropolitan area targeted for development is deemed to
present an attractive market opportunity, the Company determines whether
acquisition opportunities are available. In some cases a large network can be
acquired, and in other cases a small existing network can serve as a starting
point for market entry. If the Company decides to build a new network, or
substantially expand a small acquired system, the Company designs a proposed
new or expanded network that can connect a large number of businesses, long
distance carriers points of presence and the ILEC's principal central offices
in the area to be served, utilizing existing rights-of-way and/or rights-of-
way that the Company will construct. Concurrently, the Company's corporate
development personnel visit the location of the proposed network to begin
discussions with city officials, right-of-way providers, potential end-users
and long distance companies.
Based on the data developed during these preliminary studies and visits, the
Company develops detailed financial estimates of the costs of constructing a
network, including the cost of fiber-optic cable, transmission and other
electronic equipment, as well as costs related to switching, engineering,
building entrance requirements and right-of-way acquisition. If the financial
estimates are satisfactory to the Company, the Company's corporate development
personnel prepare a detailed business and financial plan for the proposed
network, including competitive, regulatory and right-of-way analyses. Based
upon its review of these analyses the Company determines whether to proceed.
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The Company anticipates continuing the expansion of its networks into new
metropolitan areas utilizing the market development analysis described above.
For example, in April 1996 the Company completed negotiation of the formation
of a joint venture through which a subsidiary of the Company will manage and
operate a network in Las Vegas, Nevada. The Company will contribute an
aggregate of $8.0 million to the joint venture over three years. The Company
will seek to continue to expand its operations in states where it has
established one or more networks, by continuing to construct or acquire
networks in adjacent areas to leverage its existing networks, switches and
telecommunications equipment, thereby establishing a cost effective and
operationally efficient cluster of networks in various geographic regions.
NETWORK ARCHITECTURE
Design
The Company's decision to build or acquire fiber-optic networks is based on
the Company's belief that, in the long term, facilities-based full service
telecommunications companies that have networks directly connected to their
customers will have the ability to respond quickly to customer needs for
capacity and services, and to develop a knowledgeable cooperative relationship
with the customer in providing new services and other telecommunications
solutions in the rapidly evolving telecommunications arena and should result
in higher long-term operating margins.
The Company believes that the future telecommunications market will be an
interconnected network of networks. No single network will continue to
dominate the marketplace, with the majority of customers originating and
terminating calls on a single network. The Company believes that calls will
flow between local networks, with customers selecting their service provider
based on high quality and differentiated products, responsive customer
service, and price. In some circumstances, depending in part upon regulatory
conditions, the Company will utilize its own network for one portion of a call
and resell the services of another carrier for the remaining portion of a
call. In other instances, both the origination and termination of calls will
take place on the Company's networks. The Company's networks are designed to
maximize connectivity directly with significant numbers of business end-users,
and to easily interconnect and provide a least-cost routing flow of traffic
between the Company's network and other networks in the marketplace.
In general, the Company seeks to build wide or expansive networks, rather
than a simple core ring in a downtown metropolitan area. This construction
focus is one factor that distinguishes the Company from traditional CAPs,
which primarily focus on connecting high volume long distance users with their
selected long distance carrier. Because the Company's product focus is much
broader, its construction efforts reflect the Company's goal of connecting to
a greater number of customers, including those without particularly high long
distance traffic volumes. The Company believes that this type of broad
coverage of the markets in which it operates will result in:
. an increased number of buildings that can be directly connected to the
Company's network, which should maximize the number of businesses to
which the Company can offer its services;
. a higher volume of telecommunications traffic both originating and
terminating on the Company's network, which should result in improved
operating margins;
. the ability to leverage its investment in high capacity switching
equipment and electronics; and
. the opportunity for the Company's network to provide backhaul carriage
for other telecommunications service providers such as long distance and
wireless carriers.
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The Company seeks to build high capacity networks using a backbone density
ranging between 72 and 240 strands. A single pair of glass fibers on the
Company's networks can currently transmit 32,256 simultaneous voice
conversations, whereas a typical pair of copper wires can currently carry a
maximum of 24 digitized simultaneous voice conversations. Although the ILECs
commonly use copper wire in their networks, the ILECs are currently deploying
fiber-optic cable to upgrade portions of their copper-based networks. The
Company believes that installing high count fiber strands will allow the
Company to offer a higher volume of voice and broadband services without
incurring additional construction costs.
Construction
The construction period of a new network varies depending upon the scope of
the activities, such as the number of backbone route miles to be installed,
whether the construction is underground or aerial, whether the conduit is in
place or requires construction, the initial number of buildings targeted for
connection to the network backbone and the general configuration for
deployment of the network backbone. After installing the network backbone,
extensions to additional buildings and expansions to other areas of a
metropolitan area are evaluated, based on detailed assessments of market
potential.
The Company's network backbones are installed in conduits that are either
owned by the Company or leased from third parties. The Company leases conduit
or pole space from entities such as utilities, railroads, long distance
carriers, state highway authorities, local governments and transit
authorities. These arrangements are generally for multi-year terms with
renewal options, and are nonexclusive. The availability of these arrangements
is an important part of the Company's evaluation of a market. Cancellation of
any of the Company's material right-of-way agreements could have an adverse
effect on the Company's business in that area and could have a material
adverse effect on the Company.
Office buildings are connected primarily by network backbone extensions to
one of a number of physical rings of fiber-optic cable, which originate and
terminate at the Company's central node. Alternatively, the Company may access
an end-user's location through interconnection with the ILEC's central office.
Signals are generally sent through a network backbone to the central node
simultaneously on both primary and alternate protection paths. Most buildings
served have a discrete Company presence (referred to as a "remote hub")
located in the building. Within each building, Company-owned internal wiring
connects the remote hub to the customer premises. Customer equipment is
connected to Company-provided electronic equipment generally located in the
remote hub where customer transmissions are digitized, combined and converted
to an optical signal. The traffic is then transmitted through the network
backbone to the Company's central node where originating traffic can be
reconfigured for routing to its ultimate destination.
Uniform Technology Platform
In building its extensive networks, the Company is implementing a consistent
technology platform based on the Nortel DMS-500 switch. Unlike a traditional
long distance or local switch, the Nortel DMS-500 switch will enable the
Company to provide local and long distance services from a single platform.
The Company believes that having a standardized switch platform will enable it
to offer consistent products and services and cost-effectively implement new
services. In addition, the scalability and capacity of these switches will
allow the Company to switch calls from more than one metropolitan area, which
enhances the Company's ability to use a clustered approach to the building of
its networks.
The Company also is establishing a uniform transmission technology utilizing
SONET design and standardized Tellabs, Inc. ("Tellabs") digital access and
cross connect systems ("DACS"). DACS provide the ability to aggregate and
disaggregate capacity along the fiber-optic network. Using the
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DACS, the capacity of 24 DS-0s can be aggregated to form a DS-1 and, again
through the DACS, 28 DS-1s can be aggregated to form a DS-3.
The Company is in the process of establishing a test site that will house a
fully functional Nortel DMS-500 switch in a configuration that simulates the
working environment of the Company's production switches. This test site,
which will be referred to as NEXTLAB, will operate separate and apart from the
Company's operational switches. NEXTLAB will be used by the Company to test
new software, and services and service configurations prior to their release
on the Company's networks. Over time, NEXTLAB is expected to evolve into a
service and product development center which will provide the Company with an
opportunity to design new services prior to implementation.
IMPLEMENTATION OF LOCAL TELECOMMUNICATIONS
A Company preparing to offer local exchange services not only requires an
installed switch, but also must have numerous network and routing arrangements
in place. NEXTLINK has established or is currently negotiating to establish
all of these arrangements for Pennsylvania, Tennessee, and Washington by the
end of July 1996. These key elements include:
Interconnection. In Pennsylvania, Tennessee and Washington the Company is
in ongoing negotiations with respect to both the technical aspects and
underlying business relationships with the ILEC in each metropolitan area
where the Company intends to operate. The Company expects to have
interconnection arrangements in place in each location by July 1996.
Telephone Numbers. The Company has been offered interim number
portability arrangements by the ILEC in each of its markets, and the
Company also is engaged in industry negotiations to establish permanent
number portability. Number portability will allow customers to retain their
telephone numbers when changing local exchange service carriers. In
addition, the Company has been allocated blocks of 10,000 telephone numbers
for each of its Memphis, Nashville and Spokane networks for use in
assigning new numbers to its customers. These numbers, known as NXX
numbers, are the first three digits of a customer's seven digit local phone
number. In each of these cases, the NXX is fully loaded into the Local
Exchange Routing Guide or LERG, which instructs ILECs and other carriers to
send a call using a NEXTLINK NXX to the appropriate NEXTLINK switch, for
delivery to the NEXTLINK customer. In Pennsylvania, NEXTLINK has applied
for an NXX number block, which should be assigned once the Company receives
local exchange carrier authority.
SS7 Point Codes. For each of the Company's switches, the Company has been
assigned Point Codes for use with the advanced signaling system known as
SS7. SS7 is a separate or "out of band" communications channel used between
telecommunications carriers to set up and control traffic on and between
networks. The Company has designed its network to fully utilize SS7
signaling, which improves call processing times and frees capacity for
voice, data, and video transmissions. The Company currently is negotiating
an agreement with a routing and transmission services vendor, which will
provide the Company with nationwide coverage for SS7 signaling, and expects
to complete that agreement prior to July 1996.
TELECOMMUNICATIONS SERVICES
Local and Long Distance Services
By July 1996, the Company expects to commence the offering of local and long
distance services in six metropolitan areas and to provide these services in
five additional areas by early 1997. The Company intends to initially focus
its sales efforts on small and medium sized businesses. The Company
anticipates that pricing, which will be determined and implemented by the
Company's operating subsidiary in each local market, will generally be 10% to
15% lower than the pricing for
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comparable local services from the ILEC. The Company's initial product
offering to these customers will include:
. Standard dial tone, including touch tone dialing, 911, and operator
assisted calling;
. Multi-trunk services including direct inward dialing (DID) and direct
outward dialing (DOD);
. Long distance service (via the resale of a facilities-based long distance
carrier's services);
. Voice messaging with personalized greetings, send, transfer, reply and
remote retrieval capabilities;
. Directory listings and assistance; and
. Centrex (expected Fall 1996).
Data services that are currently offered by the Company, and will continue
to be offered after July 1996, include Ethernet, TOKEN rings, and Fiber
Distributed Data Interface (FDDI). In addition, the Company will offer
dedicated access and CAP services in each of its markets, focusing on long
distance carriers and the private line needs of high volume customers.
The Company's special access and private line telecommunications services,
which are used as both primary and back-up circuits, fall into three principal
categories: (i) special access circuits that connect end-users to long
distance carriers; (ii) special access circuits that connect long distance
carriers' facilities to one another; and (iii) private line circuits that
connect several facilities owned by the same end-user.
Traditional competitive access services are provided at a variety of
standardized transmission speeds over dedicated circuits. The standard circuit
capacity classifications include DS-0, DS-1 and DS-3 service. Each of these
transmission services can be provided using the same type of fiber-optic
cable, but offer different bandwidth (that is, capacity), depending upon the
individual needs of the end-user. A DS-0 is a dedicated circuit that is
considered to meet the requirements of usual business communications, with
transmission capacity of up to 64 kilobits of bandwidth per second (that is, a
voice grade equivalent circuit). This service offers a basic low capacity
dedicated digital line for connecting telephones, fax machines, personal
computers and other telecommunications equipment. A DS-1 is a high speed
circuit typically linking high volume customer locations to long distance
carriers or other customer locations. Typically utilized for voice
transmissions as well as the interconnection of Local Area Networks ("LANs"),
DS-1 service accommodates transmission speeds of up to 1.544 megabits per
second, which is the equivalent of 24 voice grade equivalent circuits. DS-3
service provides a very high capacity digital circuit with transmission
capacity of 45 megabits per second, which is equivalent to 28 DS-1 circuits or
672 voice grade equivalent circuits. This is a digital service used by long
distance carriers for central office connections and by some large commercial
users to link multiple sites.
In addition to these local exchange and CAP services, the Company's
subsidiary in Washington is a fully certified provider of local exchange
services and currently serves over 600 customers in Spokane, Washington, with
approximately 4,200 lines in service, through the resale of the services of
the ILEC. As this subsidiary constructs its own fiber-optic network in the
area, the Company expects to migrate these customers to the local exchange
service provided directly by the Company and to continue to provide long
distance services on a resale basis.
Enhanced Communications Services
NEXTLINK's interactive voice response platform allows a consumer to dial
into a computer-based system using a toll-free number and a touch tone phone,
and, by following a customized menu, to access a variety of information and
simultaneously to leave a profile of the caller behind, for use by
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either NEXTLINK or its clients. Currently, NEXTLINK provides four types of
interactive voice response services:
. LeaveWord--prompts the consumer to leave messages of any length or
complexity, ranging from catalog requests and contest entries to specific
product questions and surveys;
. Dealer Locator--helps a consumer to locate the nearest dealer of the
client's products by instantly identifying the consumer's area and
responding with the names, addresses and phone numbers of the client's
locations within any desired mileage radius;
. Automated Order Entry--allows consumers to purchase products using the
interactive phone service 24-hours a day, with real-time order and credit
card confirmation as well as arranging for delivery of the new item to
the consumer's desired address; and
. Interactive Call Center--provides the consumer with a menu of selections
that include Dealer Locator, Automated Order Entry, receiving a catalog,
registering the warranty of a product, contest entry and an option for
callers to be forwarded to a live operator.
NEXTLINK also provides a virtual communications center for mobile
professionals and workgroups, which offers a suite of personal communications
services. These services are made available through a specialized personal
telephone number marketed as a "Magic Number(TM)". The key services provided
by this center are the following:
. Follow-Me--which instructs the communications center to forward any calls
to a Magic Number to a particular local telephone number;
. Voice Messaging--allows subscribers to receive, send, keep, transfer,
instantly reply to or request future delivery for voice messages;
. Call-out--enables subscribers to make calls from the communications
center without hanging up between calls or dialing another PIN number;
. Paging--notifies subscribers via pager of new and urgent messages;
. Caller ID--captures the telephone number of anyone who calls the
subscriber, which is also displayed on the subscriber's pager;
. Fax Messaging--stores the incoming fax and delivers it to the nearest fax
machine when the subscriber calls in to retrieve it; and
. Teleconferencing--handles all teleconferencing needs through a
teleconferencing operator.
The Company anticipates that it will continue to explore other enhanced
communications services opportunities and may acquire additional service
providers in the future that support its overall business and marketing
strategies.
SALES AND CUSTOMER CARE
Overview
The Company will utilize a two-pronged sales strategy in each of its
markets. First, initial sales efforts for local and long distance services
will be focused on small and medium sized businesses. The Company's market
research indicates that these customers would prefer a single source and
single bill for their telecommunications services. The Company intends to
attract these customers through a direct sales effort offering combined local
and long distance services at a 10% to 15% discount from the ILEC. This will
provide the Company's customers a level of convenience that has been generally
unavailable since the break-up of AT&T. Second, the Company is marketing its
enhanced communications services via a separate direct sales force in each
market, which is expected to increase the number of customers for all of
NEXTLINK's telecommunications services in that market
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at a faster rate. In addition, the Company is continuing its sales efforts for
traditional CAP services to long distance carriers and large commercial users.
Sales Force
The Company is building a highly motivated and experienced direct sales
force and customer service organization. The Company recruits salespeople with
experience in selling competitive telecommunications services in the
metropolitan areas where they will be based. Salespeople are incentivized
through a commission structure with a target of 50% of a salesperson's
commission to be based upon performance.
With respect to traditional CAP services, the Company currently utilizes a
national sales force to establish and expand long distance company access
service sales. Sales efforts for long distance carriers are centralized in
order to provide a single point of contact for these customers. This yields a
more efficient and cost effective operational environment.
The Company anticipates that its enhanced communications services will
continue to be sold across the country by the existing national sales force
for these services. The Company has also augmented these efforts with a
separate, targeted, locally based sales force in each of its facilities-based
markets. The Company believes that this two-pronged approach to each market
will provide revenue incremental to facilities-based operations.
Customer Care
The Company intends to augment its direct sales approach with superior
customer care and support through locally based, customer care
representatives. Each customer will have a single point of contact for
customer care who will be responsible for solving problems and responding to
customer inquiries. The Company will seek to provide a customer care group
that will have the ability and resources to respond to and resolve customer
problems as they arise. The Company believes that these representatives will
be most effective if they are based in the community in which the Company is
offering services.
REGULATORY OVERVIEW
Overview
The Company's services are subject to varying degrees of federal, state and
local regulation. The FCC exercises jurisdiction over all facilities of, and
services offered by, telecommunications common carriers to the extent those
facilities are used to provide interstate or international communications. The
state regulatory commissions retain jurisdiction over the same facilities and
services to the extent they are used to originate or terminate intrastate
communications. Local governments sometimes impose franchise or licensing
requirements on CAPs and local exchange carriers and regulate street opening
and construction activities.
The Telecom Act imposes on ILECs certain interconnection obligations that,
taken together, grant competitive entrants such as the Company what is
commonly referred to as "co-carrier status." In addition, the Telecom Act
generally preempts state or local legal requirements that prohibit or have the
effect of prohibiting any entity from providing telecommunications service.
The Telecom Act allows state regulatory authorities to continue to impose
competitively neutral requirements designed to promote universal service,
protect public safety and welfare, maintain quality of service and safeguard
the rights of consumers. The Telecom Act also preserves the ability of state
and local authorities to manage and require compensation for the use of public
rights-of-way by telecommunications providers including CAPs and other
competitors to the ILECs in the local market.
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<PAGE>
It is anticipated that co-carrier status and the preemption of state and
local prohibitions on entry could permit the Company to become a full service
provider of switched telecommunications services anywhere in the United
States. The following table summarizes the interconnection rights granted by
the Telecom Act that are most important to the achievement of this goal and
the Company's beliefs as to the anticipated effect of the new requirements, if
properly implemented.
<TABLE>
<CAPTION>
ISSUE DEFINITION ANTICIPATED EFFECT
----- ---------- ------------------
<S> <C> <C>
Interconnection Efficient network Allows competitive
interconnection to transfer telecommunications provider
calls back and forth between to service and terminate
ILECs and competitive calls to customers not
networks (including 911, 0+, directly connected to its
directory assistance, etc.) networks
Local Loop Allows competitors to Reduces the capital and
Unbundling selectively gain access at operating costs of a
cost-based rates to ILEC competitive
wires from central offices telecommunications provider
to customer premises to serve customers not
directly connected to its
networks
Reciprocal Mandates reciprocal Improves the competitive
Compensation compensation for local telecommunications
traffic exchange between provider's margins for local
ILECs and competitors service
Number Portability Allows customers to change Allows customers to switch
local carriers without to competitive
changing numbers; true telecommunications
portability allows incoming provider's local service
calls to be routed directly without changing phone
to a competitor. Interim numbers
portability allows incoming
calls to be routed through
the ILEC to a competitor at
the economic equivalent of
true portability
Access to Phone Mandates assignment of new Allows competitive
Numbers telephone numbers to telecommunications providers
competitive to provide telephone numbers
telecommunications to new customers on the same
provider's customers basis as the ILEC
</TABLE>
While the interconnection rights established in the Telecom Act are a
necessary prerequisite to the introduction of full local competition, they
must be properly implemented to be effective. Significant implementation
issues remain to be resolved before the barriers to entry into the local
telephone business are sufficiently lowered to permit widespread competitive
entry. See "Federal Legislation" below for a more complete explanation of the
potential effect of the Telecom Act on the Company's business.
Federal Regulation
The FCC has adopted a "forbearance" policy for non-dominant carriers, such
as the Company and its subsidiaries, under which no prior approval is needed
for network construction or acquisition, and only minimal tariff and reporting
requirements are in effect. The Telecom Act now gives the FCC
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<PAGE>
the authorization to eliminate tariff and reporting requirements as well. As a
result of the Interconnection Decisions, the Company is able to offer
interstate collocated special access and collocated switched access transport
services to virtually every business, government and institutional end-user in
the cities in which the Company provides services without being directly
connected to such customers. The Interconnection Decisions enabled CAPs to
compete for transport of switched long distance calls between ILEC central
offices and long distance companies' POPs. At the same time the ILECs were
granted greater pricing flexibility for those services. Certain aspects of the
Interconnection Decisions were subsequently overturned as a result of court
appeals by the ILECs. In particular, the FCC was not allowed to insist that
the ILECs offer actual physical interconnection of CAP facilities in the ILEC
central offices. Instead, in February 1994, the FCC modified its decision to
permit either such physical interconnection or "virtual" interconnection in
which ILECs own, install, maintain and lease to CAPs the equipment to
interconnect the CAP networks with the ILEC facilities. The Telecom Act,
however, now requires that ILECs provide CAPs with physical collocation on
rates, terms and conditions that are just and reasonable, unless the ILEC can
demonstrate to state regulators that physical collocation is not practical.
The Company believes that either physical or virtual collocation of its
facilities in a timely fashion for appropriate rates and terms will
accommodate its purposes.
In July 1995, the FCC took two actions related to the assignment of
telephone numbers, first mandating that over the course of the next year
responsibility for administering and assigning local telephone numbers be
transferred from the BOCs and a few other ILECs to a neutral entity and
second, proposing a regulatory structure under which a wide range of number
portability issues would be resolved.
In September 1995, the FCC issued a Notice of Proposed Rulemaking which
proposes rules that, among other things, would increase ILEC pricing
flexibility and deregulation either automatically or as competition increases.
Federal Legislation
The Telecom Act, enacted on February 8, 1996, substantially revised the
Communications Act of 1934. The Telecom Act establishes a regulatory framework
for the introduction of local competition throughout the United States. Among
other things, the Telecom Act preempts any state or local government from
prohibiting any entity from providing telecommunications service. This
provision sweeps away prohibitions on entry found in almost half of the states
in the country at the time the Telecom Act was passed.
The Telecom Act also establishes a dual federal-state regulatory scheme for
eliminating other barriers to competition faced by CAPs, competitors to the
ILECs and other new entrants into the local telephone market. Specifically,
the Telecom Act imposes on ILECs certain interconnection obligations to be
implemented by FCC regulations. The Telecom Act contemplates that states will
apply the federal regulations as they oversee interconnection negotiations
between ILECs and competitors to the ILECs, CAPs and other new entrants.
While the Telecom Act will probably accelerate the introduction of rules
promoting local competition, it is still far from certain what form the rules
will take and how effective those rules will be. The FCC has significant
discretion in the manner in which the Telecom Act will be implemented. The
details of the rules adopted by the FCC implementing the Telecom Act
requirements, particularly those relating to number portability and reciprocal
compensation, will have a significant effect in determining the extent to
which barriers to competition in local services are removed, as well as the
time frame within which such barriers are eliminated. The FCC may also grant
ILECs increased pricing flexibility
45
<PAGE>
to enable them to respond to competition. To the extent such pricing
flexibility is granted, the Company's ability to compete for certain services
may be adversely affected.
Furthermore, the Telecom Act provides specific guidelines under which ILECs
that are subsidiaries of RBOCs may provide interLATA or long distance service
to customers in their regions. Specifically, these ILECs are generally not
permitted to enter the in-region, interLATA business in a particular state
until the FCC has determined that they have complied with a list of
requirements designed to encourage local competition.
Finally, in overseeing interconnection negotiations, the approach adopted by
particular state regulatory authorities may significantly affect the
effectiveness of the Telecom Act in promoting competition in local services.
In states that fail to facilitate local competition, it may prove difficult,
without preemptive action by the FCC, for the Company to obtain adequate
interconnection agreements.
State Regulation
A small percentage of the Company's current circuits may be classified as
intrastate and therefore subject to state regulation. However, the Company
expects that as its business and product lines expand, the Company will offer
more intrastate service. In all states where certification as a common carrier
is currently required, the Company's operating subsidiaries are certificated
or have applied for certification. State authorizations historically have
varied in the scope of the intrastate services permitted. However, under the
Telecom Act, states may no longer prohibit competitive supply of any
telecommunications service although states may require prior certification and
certain qualification thresholds as a precondition to gaining certification.
In most states, the Company is required to file tariffs setting forth the
terms, conditions and prices for services which are classified as intrastate.
In some states, the Company's tariff can list a range of prices for particular
services, and in others, such prices can be set on an individual customer
basis. The Company is not subject to price cap or to rate of return regulation
in any state in which it currently provides services.
As noted above, states retain a significant regulatory role under the
Telecom Act. The Telecom Act allows state regulatory authorities to continue
to impose competitively neutral requirements designed to promote universal
service, protect public safety and welfare, maintain quality of service and
safeguard the rights of consumers. The Telecom Act also preserves the ability
of state and local authorities to manage and require compensation for the use
of public rights-of-way by telecommunications providers including CAPs and
other competitors to the ILECs in the local market. The Telecom Act also
grants state regulators the authority to mediate or arbitrate disputes that
arise during interconnection negotiations. Finally, the Telecom Act requires
state approval of interconnection agreements.
Local Government Authorizations
In certain locations, the Company is required to obtain local franchises,
licenses or other operating rights and street opening and construction permits
to install and expand its fiber-optic networks. In some of the areas where the
Company provides network services, the Company's subsidiaries pay license or
franchise fees based on a percentage of gross revenues or on a per linear foot
basis. There is no assurance that certain cities that do not impose fees will
not seek to impose fees, nor is there any assurance that, following the
expiration of existing franchises, fees will remain at their current levels.
Under the Telecom Act, state and local governments retain the right to manage
the public rights-of-way and to require fair and reasonable compensation from
telecommunications providers, on a competitively neutral and nondiscriminatory
basis for use of public rights-of-way.
46
<PAGE>
If any of the Company's existing franchise or license agreements were
terminated prior to its expiration date and the Company was forced to remove
its fiber from the streets or abandon its network in place, such termination
would have a material adverse effect on the Company's subsidiary in that area
and could have a material adverse effect on the Company. The Company believes
that the provisions of the Telecom Act barring state and local requirements
that prohibit or have the effect of prohibiting any entity from providing
telecommunications service should be construed to preclude any such action.
However, there can be no assurance that one or more local authorities will not
attempt to take such action. Nor is it clear that the Company would prevail in
any judicial or regulatory proceeding to resolve such a dispute.
COMPETITION
As noted above, the regulatory environment in which the Company operates is
changing rapidly. The passage of the Telecom Act combined with other actions
by the FCC and state regulatory authorities continues to promote competition
in the provision of telecommunications services.
ILECs
In each city served by its networks, the Company faces, and expects to
continue to face, significant competition from the ILECs, which currently
dominate their local telecommunications markets.
The Company expects to compete with the ILECs in its markets for local
exchange services on the basis of product offerings, reliability, state-of-
the-art technology, price, route diversity, ease of ordering and customer
service. However, the ILECs have long-standing relationships with their
customers and provide those customers with various transmission and switching
services that the Company, in many cases, does not currently offer. The
Company has sought, and will continue to seek, to achieve parity with the
ILECs in order to become able to provide a full range of local
telecommunications services. See "Regulatory Overview" for additional
information concerning the regulatory environment in which the Company
operates. Existing competition for private line and special access services is
based primarily on quality, capacity and reliability of network facilities,
customer service, response to customer needs, service features and price, and
is not based on any proprietary technology. As a result of the comparatively
recent installation of the Company's fiber-optic networks, its dual path
architectures and the state-of-the-art technology used in its networks, the
Company may have cost and service quality advantages over some currently
available ILEC networks.
Other Competitors
The Company also faces, and expects to continue to face, competition from
other potential competitors in certain of the markets in which the Company
offers its services. In addition to the ILECs and other CAPs, potential
competitors capable of offering private line and special access services
include long distance carriers, cable television companies, electric
utilities, microwave carriers, wireless telephone system operators, and
private networks built by large end-users.
The Company believes that the Telecom Act as well as a recent series of
completed and proposed transactions between ILECs and long distance companies
and cable companies increase the likelihood that barriers to local exchange
competition will be removed. The Telecom Act states that introduction of such
competition will allow ILECs to provide long distance services. When ILECs are
permitted to provide such services, they will be in a position to offer single
source service. On March 4, 1996, AT&T announced that it had completed filings
to offer local telephone service in all 50 states and that it hoped to begin
negotiations with local phone companies by the middle of March on terms for
interconnection. In addition, on March 4, 1996, GTE announced that it had
begun offering long distance service to its
47
<PAGE>
local phone service customers in Michigan and Minnesota and expects to offer
long distance service in all 28 states where it currently offers local service
by the end of 1996.
In some cases, cable television companies are upgrading their networks with
fiber optics and installing facilities to provide fully interactive
transmission of broadband voice, video and data communications. In addition,
under the Telecom Act, electric utilities may install fiber-optic
telecommunications cable and may facilitate provision of telecommunications
services by electric utilities over those networks if granted regulatory
authority to do so.
Cellular and PCS providers may also be a source of competitive local
telephone service. However, the Company believes these operators will be large
users of CAP access services to transport their calls among their radio
transmitter/receiver sites through networks that avoid the ILECs with whom
they compete.
The Company also competes with equipment vendors and installers, and
telecommunications management companies, with respect to certain portions of
its business.
A continuing trend toward business combinations and alliances in the
telecommunications industry may create significant new competitors to the
Company. Many of the Company's existing and potential competitors have
financial, personnel and other resources significantly greater than those of
the Company.
With respect to the Company's enhanced communications services, there are
several competitors that provide interactive voice response services. Of
these, the most significant from a volume of call processing standpoint is
Call Interactive, located in Omaha, Nebraska. Call Interactive focuses on
large volume customers. Another competitor, Telemedia, which is owned by
Sprint, also offers significant call volume capacity. With respect to the
Company's virtual communications center, there are numerous competitors with
product offerings that include some or all of the services offered by the
Company's communications center.
PURCHASING AND DISTRIBUTION
With respect to the Company's fiber-optic networks, which constitute the
Company's most significant capital investments, the Company has entered into
general purchase agreements with key equipment suppliers for fiber and fiber-
optic transmission equipment, Nortel for telecommunications switches, and
other suppliers for various other components of each system. These agreements
provide the basic framework under which purchase orders for these system
components will be made. The specific purchases made for each network depend
upon the configuration and other factors related to the network, such as the
prospective customer base and location and the services to be offered over the
network. Once these factors are established, purchase orders for the
appropriate fiber and selected equipment types are placed under the general
purchase agreements.
PROPERTIES
Neither the Company nor any of its subsidiaries owns any real property. The
Company leases space for, among other things, offices, equipment rooms,
collocation sites and general storage space.
EMPLOYEES
As of March 31, 1996, the Company employed approximately 255 people,
including full-time and part-time employees. The Company considers its
employee relations to be good. None of the employees of the Company is covered
by a collective bargaining agreement.
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<PAGE>
TRADEMARKS AND TRADE NAMES
The Company uses the name "NEXTLINK" as its primary business name. In July
1995, the Company filed for federal trademark protection of this name. In
addition, filings have been made to register Magic Number and related marks as
protected trademarks under federal law. These filings all are pending. The
Company has no assurance that they will be granted.
LEGAL PROCEEDINGS
The Company is not currently the party to any legal proceedings, other than
regulatory proceedings that are in the normal course of its business.
49
<PAGE>
MANAGEMENT
In a manager managed limited liability company such as NEXTLINK, there is no
board of directors. Pursuant to the terms of the LLC Agreement, management of
the Company is vested in two Managing Members, Eagle River and a corporation
that is wholly owned by Mr. Craig O. McCaw. Eagle River owns approximately 88%
of the Company's Class A Units and, therefore, effectively exercises control
over the Company's affairs. The Managing Members have authorized the following
persons to hold the positions designated below and to assist in the
administration of the day-to-day operational matters of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Craig O. McCaw..................... 45 Chief Executive Officer
James F. Voelker................... 45 President
Kathleen H. Iskra.................. 39 Vice President, Chief Financial
Officer and Treasurer
R. Bruce Easter, Jr. .............. 38 Vice President, Secretary and General
Counsel
Charles P. Daniels................. 39 Vice President and Chief Marketing
Officer
Gordon Sileo....................... 49 Vice President and Chief Information
Officer
Phillip F. Thompson................ 49 Vice President--Engineering and
Operations
J. Scott Bonney.................... 39 Vice President--Regulatory Affairs
</TABLE>
The following persons are officers of Eagle River and additionally serve as
advisory officers to NEXTLINK in the following capacities:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Dennis Weibling.............................. 44 Executive Vice President
Scot Jarvis.................................. 35 Executive Vice President(1)
C. James Judson.............................. 51 Executive Vice President
William A. Hoglund........................... 42 Executive Vice President
</TABLE>
- --------
(1) Effective April 30, 1996, Mr. Jarvis resigned as an officer of Eagle
River, but continues to serve as an advisory officer of the Company.
The following persons are the presidents of the Company's operating
subsidiaries:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Greg Green........................... 32 President of NEXTLINK Washington,
L.L.C.
Don Hillenmeyer...................... 50 President of NEXTLINK Tennessee,
L.L.C.
Jan Loichle.......................... 48 President of NEXTLINK Solutions,
L.L.C.
Robert Kingery....................... 42 President of NEXTLINK Interactive,
L.L.C.
Gary Rawding......................... 44 President of NEXTLINK Pennsylvania,
L.P.
Dwayne Nielson....................... 41 President of NEXTLINK Utah, L.L.C.
</TABLE>
All of the persons identified above serve at the discretion of the Managing
Members of the Company. There are no family relationships between any person
identified above. The following are brief biographies of persons identified
above and other senior management of the Company:
Craig O. McCaw has been Chief Executive Officer of NEXTLINK since September
1994. Mr. McCaw is also 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 Communications, Inc. ("McCaw Cellular"),
the nation's leading provider of wireless communications services, until the
company was
50
<PAGE>
sold to AT&T in August 1994. Prior to entering the cellular telephone business
in 1973, Mr. McCaw took over daily operation of a small cable television
operation in Centralia, Washington, that he and his three brothers owned.
Under his leadership, this one-system operation serving 4,000 subscribers
eventually grew to be the nation's 20th largest cable operator serving 450,000
subscribers. In 1974, he expanded the cable company's services by entering the
paging and conventional mobile telephone industries and eventually became the
fifth largest paging operator in the country, serving approximately 320,000
subscribers in 13 states. In 1981, Mr. McCaw saw the revolutionary potential
of wireless communications and committed the company to developing 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 one of the two
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.
James F. Voelker has been the President of NEXTLINK since April 1995 and is
responsible for developing the overall vision and direction for the company.
Mr. Voelker has 17 years of experience in the telecommunications industry, in
a variety of executive positions. As the Vice President of Sales, Marketing
and Customer Service of Lexitel Corporation, a 1981 entrant into the long
distance market, Mr. Voelker directed growth from zero to $60 million in
revenues. As a co-founder of Digital Signal Inc. ("Digital Signal"), Mr.
Voelker served as Chief Operating Officer and Chief Executive Officer from
1985 through the company's sale to SP Telecom in 1990. Digital Signal supplied
capacity, engineering, provisioning, and operational support for their
customers. Mr. Voelker continued through 1991 as an executive vice president
and director of SP Telecom. In 1992, Mr. Voelker assumed the role of Vice
Chairman of City Signal Inc., a CAP, which constructed and operated networks
in six markets. Subsequently, Mr. Voelker added the title of Chief Executive
Officer as it merged with Teledial America (its sister company), to form U.S.
Signal, one of the first competitive local exchange companies in the country.
Mr. Voelker has also served as Vice Chairman of ALTS, the industry association
for competitive access providers. Mr. Voelker was also a director of Phoenix
Network, Inc., a publicly held long distance company.
Kathleen H. Iskra has been Vice President, Chief Financial Officer and
Treasurer of NEXTLINK since January 1996. Prior to that, she was President and
Chief Executive Officer of Horizon Air, a wholly owned subsidiary of Alaska
Air Group. Prior to her appointment at Horizon Air, Ms. Iskra served as staff
vice president of finance and controller of Alaska Airlines and Alaska Air
Group. Ms. Iskra's service with Alaska began in 1987, when she was appointed
Controller. Prior to joining Alaska, she was an audit manager with Arthur
Andersen & Co.
R. Bruce Easter, Jr. has been Vice President, General Counsel and Secretary
of NEXTLINK since January 1995. From 1986 to December 1994, Mr. Easter was an
associate and then partner in the law firm of Davis Wright Tremaine in
Seattle, Washington, where he focused on communications law and media matters.
Prior to joining Davis Wright Tremaine, Mr. Easter was a legal assistant at
Home Box Office, Inc. from 1980 through 1986.
Charles P. Daniels joined NEXTLINK as Vice President and Chief Marketing
Officer in November 1995. Mr. Daniels is responsible for Marketing, Market
Development, Product Development, and Engineering. From 1992 to 1995, Mr.
Daniels worked for MCI where he was the founder and Program Manager of the
network MCI Developers Lab. Mr. Daniels was also a founding member of MCI's
Advanced Technology Group. Prior to joining MCI, Mr. Daniels worked for
Manufacturers Hanover Trust from 1989 to 1992 as Vice President/Strategic
Technology & Research, where he was
51
<PAGE>
responsible for evaluating and implementing new technologies that either
reduced costs or generated new revenue.
Gordon Sileo joined NEXTLINK as the Chief Information Officer in August
1995. Mr. Sileo is responsible for designing and implementing the NEXTLINK
information technology, corporate communications and infrastructure. Prior to
joining NEXTLINK, Mr. Sileo was Vice President of Information Services for US
Signal from June 1994 to July 1995. From September 1991 to July 1993, Mr.
Sileo was Vice President of Management Information Services for SP Telecom.
Phillip F. Thompson has been Vice President, Engineering and Technical
Operations, of NEXTLINK since December 1994. Mr. Thompson is responsible for
designing, engineering, and implementing the NEXTLINK network platform. Prior
to joining NEXTLINK in December 1994, Mr. Thompson served as Vice President of
Operations and Engineering for STSJ Telephone Company responsible for system
design, bid and budget responsibility for various projects. Prior to this,
Mr. Thompson held the position of Vice President of Product Development and
Vice President, MIS, at SP Telecom. Prior to SP Telecom, Mr. Thompson held the
position of Vice President of Operations, Engineering and MIS at Digital
Signal, Inc. from 1986 to 1990.
J. Scott Bonney has been Vice President of Regulatory and External Affairs
for NEXTLINK since November 1994. He is responsible for implementing
NEXTLINK's regulatory and industry affairs initiatives. Prior to joining
NEXTLINK, from November 1992 to November 1994, Mr. Bonney was Vice President
of Regulatory and External Affairs for Ameritech in Illinois, where he was
responsible for implementing Ameritech's competitive network unbundling plan.
Prior to joining Ameritech, Mr. Bonney served as Director of Regulatory
Affairs for Teleport Communications Group one of the original competitors for
local phone service.
The following individuals act in an advisory capacity for the Company.
Dennis Weibling has been Executive Vice President of NEXTLINK since
September 1994 and President of Eagle River, Inc., a manager of Eagle River
since October 1993. Prior to joining Eagle River, Inc., Mr. Weibling was a
shareholder at Clark, Nuber & Co., P.S., a public accounting firm in Bellevue,
Washington, where he was responsible for corporate and individual tax
planning, specializing in estate planning, personal tax planning, financial
projections, retirement plans and deferred compensation arrangements. Mr.
Weibling also serves on the Executive Committee of Teledesic Corporation.
Prior to joining Clark, Nuber & Co. in July 1981, Mr. Weibling was with the
accounting firm Arthur Andersen & Co. in Columbus, Ohio.
Scot Jarvis has been Executive Vice President of NEXTLINK since September
1994 and Vice President of Eagle River, Inc. from October 1994 through April
1996 and was the acting President of the Company from September 1994 to April
1995. Prior to joining Eagle River, Inc., Mr. Jarvis served as Vice President
of McCaw Development Corporation from 1993 to 1994 and of McCaw Cellular since
1988. During his tenure at McCaw Cellular, Mr. Jarvis served in the positions
of General Manager from 1990 to 1993, Vice President of Acquisitions and
Development from 1988 to 1990 and Assistant Vice President from 1985 to 1988.
Mr. Jarvis also recently served on the Board of Directors or executive
committees of: Horizon Cellular Group, Los Angeles Cellular Telephone Company,
Cellular 2000 Partnership, Cybertel Cellular Telephone Company (St. Louis),
Northwest Cellular Partnership, and Movitel del Noroeste (Mexico Region). Mr.
Jarvis has also served as the President of the Iberia Cellular Telephone
Company from 1991 to 1994.
C. James Judson has been Executive Vice President of NEXTLINK since February
1995 and Vice President and General Counsel of Eagle River, Inc. since January
1995. Prior to joining Eagle River,
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<PAGE>
Inc., Mr. Judson was a partner in the law firm of Davis Wright Tremaine where
he focused his practice primarily in the areas of corporation law and
taxation.
William A. Hoglund has been Executive Vice President of NEXTLINK since
February 1996 and Vice President and Chief Financial Officer of Eagle River,
Inc. since January 1996. Prior to joining Eagle River, Inc., Mr. Hoglund was a
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 past nine years on clients in the telecommunications, cable and media
industries.
The following individuals are the senior management of the Company's
subsidiaries.
Greg Green has been the President of NEXTLINK Washington since March 1995.
Mr. Green was the founder and former President of Tel-West Communications,
Inc. ("Tel-West") until the Company's acquisition of certain of the assets of
that company. At Tel-West, Mr. Green provided overall management of business
development, sales and customer service. Mr. Green successfully negotiated
with the Washington State Utilities and Transportation Commission to become
the second competitive local exchange carrier in Washington State's history
and the first in the city of Spokane.
Don Hillenmeyer has been the President of NEXTLINK Tennessee since March
1995. Prior to joining NEXTLINK in March of 1995, Mr. Hillenmeyer was
president of MCMG, Inc., a Nashville-based wireless communications management
consulting and operations firm specializing in running Rural Service Area
(RSA) for independent cellular telephone owners. Before founding MCMG, Inc.,
Mr. Hillenmeyer held various senior management positions at McCaw Cellular and
was responsible for 13 southern states from August 1986 to February 1990.
Jan Loichle has been the President of NEXTLINK Solutions (the virtual
communications center) since July 1995. Prior to joining NEXTLINK, Ms. Loichle
was Executive Vice President at U.S. Signal in Detroit and Grand Rapids,
Michigan from April 1993 to July 1995. At U.S. Signal Ms. Loichle led the
development of an enhanced service platform (Magic Number) from concept
through production system and implementation. From 1990 to 1993, Ms. Loichle
was Assistant Vice President of Finance for SP Telecom in San Francisco. Prior
to that, Ms. Loichle was Vice President of Financial Operations for
Lexitel/Allnet/ALC in Birmingham, Michigan from December 1980 to October 1989.
Robert Kingery has been the President of NEXTLINK Interactive (the
interactive voice response provider) since joining the Company in August 1995.
Prior to joining NEXTLINK, Mr. Kingery was the President and Chief Executive
Officer of Sound Response Corporation, an interactive voice services business
he co-founded in 1991.
Gary Rawding has been President of NEXTLINK Pennsylvania since September
1994. Prior to founding Penns Light Communications, Inc., certain assets of
which were acquired by the Company in September 1994, he served as Vice
President of Sales & Marketing at Eastern TeleLogic Corporation from 1989
until 1993. Prior to joining Eastern TeleLogic, Mr. Rawding held various
positions with Bell Atlantic Corporation.
Dwayne Nielson has been President of NEXTLINK Utah since February 1996.
Prior to joining NEXTLINK, Mr. Nielson was Assistant Vice President, Consumer
and Small Business Market, at Sprint Corporation from October 1994 to February
1996. Prior to that, from August 1985 through October 1994, Mr. Nielson held a
variety of sales and marketing positions at Sprint and United Telephone.
SUMMARY COMPENSATION TABLE
The following table sets forth, for the fiscal year ended December 31, 1995,
individual compensation information for the Chief Executive Officer of the
Company and each of the four other
53
<PAGE>
most highly compensated executive officers of the Company who were serving as
executive officers at December 31, 1995 (the "Named Executive Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------
OTHER SECURITIES
NAME AND PRINCIPAL ANNUAL UNDERLYING ALL OTHER
POSITION FISCAL YEAR SALARY ($) BONUS ($) COMPENSATION ($) OPTIONS(#)(1) COMPENSATION(2)
------------------ ----------- ---------- --------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Craig O. McCaw, Chief
Executive Officer...... 1995 -0- -0- -0- -0- -0-
James F. Voelker,
President.............. 1995 89,405 87,000 11,542(3) 1,000,000 -0-
Gary Rawding(4),
President of NEXTLINK
Pennsylvania........... 1995 110,000 50,000 -0- -0- 4,275
Robert Kingery(4),
President of NEXTLINK
Interactive............ 1995 65,589 88,082 -0- 98,347(5) -0-
R. Bruce Easter, Jr.
Vice President and
General Counsel........ 1995 93,666 50,000 -0- 125,000 2,499
</TABLE>
- --------
(1) Represents Class B membership units subject to compensatory equity option
plan options granted during 1995.
(2) Represents contributions made by the Company on behalf of the executive
officer under the Company's 401(k) Plan.
(3) Of this amount, $11,238 was allocated to temporary housing expenses.
(4) Mr. Kingery and Mr. Rawding are both active in the management of the
Company.
(5) This represents the number of Company unit options to acquire Class B
units pursuant to the Recapitalization of the Company and its
subsidiaries. Prior to the Recapitalization, this executive held options
to acquire membership interests in one of the Company's subsidiaries.
54
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM(1)
------------------- ----------------------------------
NUMBER OF
SECURITIES % OF TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
NAME AND PRINCIPAL OPTIONS EMPLOYEES IN FISCAL BASE PRICE EXPIRATION 5% 10%
POSITION GRANTED(#) YEAR(%) ($/SH) DATE(2) ($) ($)
------------------ ---------- ------------------- ----------- ------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Craig O. McCaw, Chief
Executive Officer...... -0- -0- -0- N/A -0- -0-
James F. Voelker,
President.............. 1,000,000 31.0 .01 April 10, 2010 -0- -0-
Gary Rawding, President
of NEXTLINK
Pennsylvania........... -0- N/A N/A N/A -0- -0-
Robert Kingery,
President of NEXTLINK
Interactive............ 98,347 3.0 .01 September 1, 2010 -0- -0-
R. Bruce Easter, Jr.,
Vice President and
General Counsel........ 125,000 3.9 .01 January 9, 2010 -0- -0-
</TABLE>
- --------
(1) The dollar amounts under the 5% and 10% columns are the result of
calculations required by the rules of the Commission and, therefore, are
not intended to forecast possible future appreciation, if any, of the
Company's Class B member units. The Class B option values are based upon
the increase in appreciation of the Company's Class A member units as
reflected in the following formula. The amounts shown reflect the
difference between (a) the appreciation of each Class A member unit at the
SEC's assumed annual rates of appreciation through the fifteenth
anniversary of the date of the grant based on an initial $1.00 per Class A
member unit valuation and (b) the sum of (i) payment of the exercise
price, (ii) the return of capital to the Class A unit holders, and (iii)
the payment of a preferred return to the Class A unit holders. Pursuant to
the Company's limited liability company agreement, the Class A unit
holders are entitled to a preferred return on their capital contributions
equal to the prime rate plus 2%. The Company utilizes the prime rate of
Bank of America Northwest d/b/a Seafirst Bank for this purpose. The bank's
average annual prime rate for 1995 was 8.75% and the Company has used this
rate in calculating the above returns under the SEC's assumed rates of
return.
(2) The options for Mr. Voelker, Mr. Kingery and Mr. Easter were one-fifth
vested at December 31, 1995 and vest in additional one-fifth increments on
each anniversary of the date of initial grant.
55
<PAGE>
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, DECEMBER 31,
1995(#) 1995($)(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Craig O. McCaw ............. -0- -0- -0- -0-
James F. Voelker ........... 200,000 800,000 85,480 341,920
Gary Rawding................ 54,150 81,224 23,144 34,715
Robert Kingery ............. 19,669 78,678 8,407 33,627
R. Bruce Easter, Jr. ....... 25,000 100,000 10,685 42,740
</TABLE>
- --------
(1) Reflects the difference between the exercise price and a valuation of
$0.4374 per unit. Because there is no public market for the Company's
membership units, pursuant to the Equity Option Plan, the Plan's
Administrative Committee determines the value of the Class B options at
least as often as the end of each fiscal year. The valuation set forth
above reflects the Administrative Committee's determination of per unit
valuation at December 31, 1995.
EMPLOYMENT AGREEMENT
NEXTLINK Pennsylvania, L.P., an operating subsidiary of the Company, has
entered into an employment agreement with Gary A. Rawding, its President, for
a term expiring on September 15, 1997, subject to automatic month-to-month
extensions unless either party gives 30 days notice not to renew. The
agreement provides for a base salary of $110,000, with a total bonus of
$50,000 for the five-quarter period ended December 31, 1995 based on the
attainment of goals and milestones outlined in the agreement and $10,000 per
quarter thereafter. If NEXTLINK Pennsylvania, L.P. fails to renew the
agreement or if employment is terminated due to the cessation of its business,
NEXTLINK Pennsylvania, L.P. must pay Mr. Rawding his then-current monthly
salary until one year after termination. The agreement also contains non-
compete, non-solicitation and confidentiality provisions.
EQUITY OPTION PLAN
The Company has adopted an Amended and Restated Equity Option Plan (the
"Option Plan"). Pursuant to the Option Plan, the Company may grant any
employee of the Company or its Affiliates (as defined in the Option Plan) the
right to acquire Class B membership interests ("Equity Interests") in the
Company (an "Option"). The Option Plan is administered by a committee
comprised of three members (the "Administrative Committee"). Two of the
members are appointed by Eagle River, the primary member of the Company, and
the third is the President of the Company. The Administrative Committee has
sole and unfettered discretionary authority to administer the Option Plan and
to alter, modify, change or terminate the Option Plan at any time.
An Option granted under the Option Plan must be evidenced by a written
agreement between the Company and the employee. Such agreement will set forth
the quantity of Equity Interests with respect to which the Option is granted,
the Option price, the date the Option is granted, and such other terms,
conditions, and restrictions as the Company deems advisable and which are not
inconsistent with the terms of the Option Plan. The holder of an Option (an
"Option Holder") does not acquire any voting or other rights in the Company or
in management of the Company upon the grant of an Option. In addition, the
holder of an Equity Interest obtained upon exercise of an Option will not have
voting or other management rights in the Company.
An Option may be exercised, in whole or in part, at any time after December
31, 1996 and within a 15-year period following the date the Option is granted,
subject to ratable vesting of the Option over
56
<PAGE>
four Years of Service (as defined in the Option Plan) and provisions in the
Option Plan relating to early termination of the Option in the case of
termination of employment. Any portion of an Option that is not exercised by
the end of the 15-year term shall terminate unless extended by the Company.
The Company has the right to purchase an Option from an Option Holder (or
his or her trustee, personal representative, guardian, executor or
administrator) (collectively the "Transferee") at a purchase price equal to
the then Fair Market Value (as defined in the Option Plan) of the Option upon
the occurrence of (a) the bankruptcy of the Transferee (b) an adjudication by
a court that the Transferee is insane or incompetent; (c) any general
assignment by the Transferee for the benefit of his creditors; (d) the death
of the Transferee; (e) the termination, for any reason, of the Transferee's
employment with the Company or an Affiliate (as defined in the Option Plan);
or (f) any other event which would cause an interest in the Company to be
sold, assigned, awarded, confirmed, or otherwise transferred, for
consideration or otherwise, to any person, whether voluntarily, involuntarily
or by operation of law.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 15, 1994, the Company lent $100,000 to Gary A. Rawding,
President of NEXTLINK Pennsylvania, L.P. This loan is unsecured and is due
September 15, 2004, or upon the sale of more than one-half of his interest in
NEXTLINK Pennsylvania, L.P. This loan bears interest at the prime rate and
requires annual payments on September 15.
On August 18, 1995, the Company lent $93,141 to James F. Voelker, the
Company's President, in connection with his relocation to Washington. This
loan bears interest at the prime rate and principal and interest are due the
earlier of December 31, 1996 or the sale of Mr. Voelker's former residence.
On September 1, 1995, the Company agreed to pay $3.0 million to BWP, Inc. in
connection with the acquisition of certain assets of Sound Response
Corporation. Payments of $1.5 million are due on September 1, 1996 and
September 1, 1997, respectively.
On January 31, 1995, Eagle River lent NEXTLINK $3.3 million in connection
with the acquisition of certain assets from City Signal, Inc. The note is
unsecured and bears interest at the prime rate plus 2%. The note will be
repaid with the proceeds of the Offering. The Company's principal equity
owner, Mr. Craig O. McCaw, through Eagle River has made advances to the
Company primarily to fund the Company's capital expenditures (excluding
acquisitions) and operating losses between January 1996 and April 1996. These
advances of approximately $32.2 million, including accrued interest, will be
repaid using a portion of the net proceeds of the Offering.
During 1995, Eagle River lent the Company $7.3 million in connection with
asset acquisitions and operating expenses. The note bore interest at the prime
rate plus 2% and, on December 1, 1995, was converted to equity.
During 1995, the Company incurred expenses for administrative services
provided by U.S. Signal, a minority member of the Company, pursuant to
temporary agreements related to the acquisitions of certain assets from City
Signal, Inc. The Company recorded expenses in connection with fees to this
affiliate of $1.5 million in 1995.
On April 15, 1996, a subsidiary of the Company lent to BWP, Inc., a member
of the Company, $121,342 to pay certain taxes incurred by the subsidiary prior
to its purchase by the Company from BWP, Inc. The loan is unsecured, matures
on October 15, 1996 and bears interest at the prime rate plus 1%.
57
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company. The following table sets forth certain information as of May
21, 1996, with respect to the beneficial ownership of the Company's member
interests by (i) each person known by the Company to own beneficially 5% or
more of the outstanding member interests, (ii) the Company's Managing Members,
(iii) the Company's Chief Executive Officer and each of the Named Executive
Officers and (iv) all executive officers as a group.
CLASS A MEMBER UNITS(1)
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENTAGE OF CLASS
BENEFICIAL OWNER OWNERSHIP (%)
------------------- -------------------- -------------------
<S> <C> <C>
Eagle River 53,938,354 84.06
Investments, L.L.C.
2300 Carillon Point
Kirkland, WA 98033
BWP, Inc. 4,411,941 6.88
707 S.W. Washington,
8th Fl.
Portland, OR 97205
NEXTLINK, Inc. 820,388 1.28
155 108th Ave. N.E.,
Suite 810
Bellevue, WA 98004
Craig O. McCaw 54,327,235(2) 84.67
2300 Carillon Point
Kirkland, WA 98033
Dennis Weibling 53,938,235(3) 84.06
2300 Carillon Point
Kirkland, WA 98033
James F. Voelker 2,664,072 4.15
155 108th Avenue N.E.
8th Floor
Bellevue, WA 98004
All executive officers as a 57,491,307 89.60
group (16 persons)
CLASS B MEMBER UNITS(4)
James F. Voelker 400,000 30.35
155 108th Avenue N.E.
8th Floor
Bellevue, WA 98004
Gary Rawding 54,150 4.11
2675 Morgantown Road
Suite 2100
Reading, PA 19607
Robert Kingery 19,669 1.49
707 Southwest
Washington, 8th Floor
Portland, OR 97205
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENTAGE OF CLASS
BENEFICIAL OWNER OWNERSHIP (%)
------------------- -------------------- -------------------
<S> <C> <C>
R. Bruce Easter, Jr. 50,000 3.79
155 108th Avenue N.E.
8th Floor
Bellevue, WA 98004
All executive officers 822,386 62.40
as a group (16 persons)
</TABLE>
- --------
(1) These units are all Class A member units.
(2) Represents Class A member units held beneficially by Mr. McCaw as a result
of his ownership interests in Eagle River and NEXTLINK, Inc.
(3) 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.
(4) Represents fully-vested options, granted under the Company's Amended and
Restated Equity Option Plan (the "Option Plan"), to acquire Class B
membership interests in the Company.
* Less than 1%.
Eagle River. The following table sets forth certain information as of May
22, 1996, with respect to the beneficial ownership of Eagle River's member
interests by (i) each person known by Eagle River to own beneficially 5% or
more of the outstanding member interests, (ii) Eagle River's Managing Members,
and (iii) Eagle River's Chief Executive Officer.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENTAGE OF CLASS
BENEFICIAL OWNER OWNERSHIP(1) (%)
------------------- -------------------- -------------------
<S> <C> <C>
Craig O. McCaw 105,000(2) 99.1
2300 Carillon Point
Kirkland, WA 98033
Dennis Weibling 944 *
2300 Carillon Point
Kirkland, WA 98033
</TABLE>
- --------
(1) Represents Class A member units.
(2) Represents Class A member units held beneficially by Mr. McCaw as a result
of his ownership interests in Eagle River and Eagle River, Inc.
* Less than 1%.
59
<PAGE>
DESCRIPTION OF THE NOTES
The Exchange Notes, like the Senior Notes, are to be issued under an
Indenture, dated as of April 25, 1996 (the "Indenture"), between the Company
and Capital, as joint and several obligors (collectively, the "Issuers"), and
United States Trust Company of New York, as trustee (the "Trustee"). The
statements under this caption relating to the Notes and the Indenture are
summaries and do not purport to be complete, and are subject to, and are
qualified in their entirety by reference to, all the provisions of the
Indenture, including the definitions of certain terms therein. The Indenture
is by its terms subject to and governed by the Trust Indenture Act of 1939, as
amended. Unless otherwise indicated, references under this caption to
sections, "(S)" or articles are references to the Indenture. Where reference
is made to particular provisions of the Indenture or to defined terms not
otherwise defined herein, such provisions or defined terms are incorporated
herein by reference. Copies of the Indenture and the Registration Rights
Agreement referred to below (see "--Registration Covenant; Exchange Offer")
are available at the corporate trust office of the Trustee and may also be
obtained from the Company (see "Additional Information" below). For purposes
of the description of the Notes, the term "Company" refers to NEXTLINK
Communications, L.L.C. and does not include its subsidiaries except for
purposes of financial data determined on a consolidated basis.
GENERAL
The Senior Notes are, and the Exchange Notes will be, senior obligations of
the Issuers, will be limited to $350.0 million aggregate principal amount and
will mature on April 15, 2006. In serving as a co-issuer of the Notes, Capital
is acting as an agent of the Company. NEXTLINK has received all of the net
proceeds of the Offering of the Senior Notes. Capital has nominal assets, does
not conduct any operations and will not provide additional security for the
Notes. The Notes bear interest at the rate per annum shown on the front cover
of this Prospectus, payable semi-annually on October 15 and April 15 of each
year, commencing October 15, 1996, to the Person in whose name the Note (or
any predecessor Note) is registered at the close of business on the preceding
September 15 or March 15, as the case may be. Interest on the Notes, other
than Special Interest, if any, is computed on the basis of a 360-day year of
twelve 30-day months. ((S)(S)301, 307 and 310)
The Issuers have agreed to file and cause to become effective a registration
statement of which this Prospectus is a part, relating to an exchange offer
for the Senior Notes, or, in lieu hereof, to file and cause to become
effective a resale shelf registration statement for the Senior Notes. If such
exchange offer or shelf registration statement is not filed or is not declared
effective, or if such exchange offer is not consummated, within the time
periods set forth herein, Special Interest (as defined below) will accrue and
be payable on the Senior Notes either temporarily or permanently. See "--
Registration Covenant; Exchange Offer" below.
Principal of and premium, if any, and interest (including Special Interest)
on the Notes will be payable, and the Notes may be presented for registration
of transfer and exchange, at the office or agency of the Issuers maintained
for that purpose in the Borough of Manhattan, The City of New York provided
that at the option of the Issuers, payment of interest (including Special
Interest) on the Notes may be made by check mailed to the address of the
Person entitled thereto as it appears in the Note Register. Until otherwise
designated by the Issuers, such office or agency will be the corporate trust
office of the Trustee, as Paying Agent and Registrar. ((S)(S)301, 305 and
1002)
The Notes are issuable only in fully registered form, without coupons, in
denominations of $1,000 and integral multiples thereof. ((S)302) No service
charge will be made for any registration of transfer or exchange of Notes, but
the Issuers may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. ((S)305)
60
<PAGE>
RANKING
The Senior Notes are, and the Exchange Notes will be, senior obligations of
the Issuers, will rank pari passu in right of payment with all existing and
future senior obligations of the Issuers and will rank senior in right of
payment to all future subordinated obligations of the Issuers. Holders of
secured obligations of the Issuers, however, will have claims that are prior
to the claims of the holders of the Notes with respect to the assets securing
such other obligations.
The Company's principal operations are conducted through its Subsidiaries,
and the Company is therefore dependent upon the cash flow of its Subsidiaries
to meet its obligations. The Company's Subsidiaries other than Capital will
have no obligation to guarantee or otherwise pay amounts due under the Notes.
Therefore, the Senior Notes are, and the Exchange Notes will be, effectively
subordinated to all indebtedness and other liabilities and commitments
(including trade payables) of the Company's Subsidiaries. Any right of the
Company to receive assets of any of its Subsidiaries upon any liquidation or
reorganization of such Subsidiary (and the consequent right of holders of the
Notes to participate in those assets) will be effectively subordinated to the
claims of the Subsidiary's creditors, except to the extent that the Company
itself is recognized as a creditor of the Subsidiary. Any recognized claims of
the Company as a creditor of the Subsidiary would be subordinate to any prior
security interest held by any other creditor of the Subsidiary and obligations
of the Subsidiary that are senior to those owing to the Company.
As of December 31, 1995, on a pro forma basis after giving effect to the
Offering, (i) the total amount of outstanding consolidated liabilities of the
Company and its Subsidiaries, including trade payables, would have been
approximately $363.9 million, $89,000 of which would have been secured
obligations and (ii) the total amount of outstanding liabilities of the
Company's Subsidiaries, including trade payables, would have been $9.2
million, of which $89,000 represented secured obligations.
FORM, DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER
The Exchange Notes will be issued only in fully registered form, without
interest coupons, in denominations of $1,000 and intergral multiples thereof,
in the form of a permanent global certificate in fully registered form (the
"Global Note") and deposited with the Trustee as custodian for The Depository
Trust Company ("DTC"), in New York, New York, and registered in the name of
DTC or its nominee, in each case for credit to an account of a direct or
indirect participant in DTC as described below.
So long as DTC, or its nominee, is the registered owner or holder of the
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Exchange Notes represented by such Global Note for
all purposes under the Indenture and the Exchange Notes. No beneficial owner
of an interest in the Global Note will be able to transfer that interest
except in accordance with DTC's applicable procedures, in addition to those
provided for under the Indenture.
Except as set forth below, the Global Note may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Note may not be exchanged for
Notes in certificated form except in the limited circumstances described
below. See "--Exchange of Book-Entry Notes for Certificated Notes."
Depository Procedures. DTC has advised the Issuers that DTC is a limited-
purpose trust company created to hold securities for its participating
organizations (collectively, the "Participants") and to facilitate the
clearance and settlement of transactions in those securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Participants include securities brokers and dealers
(including the Purchasers), banks, trust companies, clearing corporations and
certain other organizations. Access to DTC's system is also available to other
entities such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial
61
<PAGE>
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may
beneficially own securities held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership interest and transfer
of ownership interest of each actual purchaser of each security held by or on
behalf of DTC are recorded on the records of the Participants and Indirect
Participants.
The Issuers expect that, pursuant to procedures established by DTC, (i) upon
issuance of the Global Note, DTC will credit the respective principal amount
of Exchange Notes of the individual beneficial interests represented by such
Global Note to the accounts of Participants and (ii) ownership of such
interests in the Global Note will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by DTC (with respect
to the Participants) or by the Participants and the Indirect Participants
(with respect to other owners of beneficial interests in the Global Note).
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Note to such persons may be limited
to that extent. Because DTC can act only on behalf of Participants, which in
turn act on behalf of Indirect Participants and certain banks, the ability of
a person having beneficial interests in a Global Note to pledge such interests
to persons or entities that do not participate in the DTC system, or otherwise
take actions in respect of such interests, may be affected by the lack of a
physical certificate evidencing such interests. For certain other restrictions
on the transferability of the Notes, see "--Exchange of Book-Entry Notes for
Certificated Notes".
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTE WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of (and premium, if any) and interest
on a Global Note registered in the name of DTC or its nominee will be payable
by the Trustee to DTC or its nominee in its capacity as the registered holder
under the Indenture. Under the terms of the Indenture, the Issuers and the
Trustee will treat the persons in whose names the Notes, including the Global
Note, are registered as the owners thereof for the purpose of receiving such
payments and for any and all other purposes whatsoever. Consequently, none of
the Issuers, the Trustee nor any agent of the Issuers or the Trustee has or
will have any responsibility or liability for (i) any aspect of DTC's records
or any Participant's or Indirect Participant's records relating to or payments
made on account of beneficial ownership interests in the Global Note, or for
maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in the Global Note, or (ii) any other matter relating to
the actions and practices of DTC or any of its Participants or Indirect
Participants.
DTC has advised the Issuers that its current practice, upon receipt of any
payment in respect of securities such as the Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security
such as the Global Note as shown on the records of DTC unless DTC has reason
to believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will
not be the responsibility of DTC, the Trustee or the Issuers. None of the
Issuers or the Trustee will be liable for any delay by DTC or any of its
Participants in identifying the beneficial owners of the Notes, and the
Issuers and the Trustee may conclusively rely on and will be protected in
relying on instructions from DTC or its nominee as the registered owner of the
Notes for all purposes.
62
<PAGE>
Interests in the Global Note will trade in DTC's Same-Day Funds Settlement
System and secondary market trading activity in such interests will therefore
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and its participants.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. If a holder requires
physical delivery of a Certificated Note for any reason, including to sell
Exchange Notes to Persons in states which require physical delivery of such
Exchange Notes or to pledge such Exchange Notes, such holder must transfer its
interest in the Global Note in accordance with the normal procedures of DTC
and the procedures set forth in the Indenture.
Subject to compliance with the transfer restrictions applicable to the Notes
described herein, cross-market transfers between the Participants in DTC, on
the one hand, and Euroclear or CEDEL participants, on the other hand, will be
effected through DTC in accordance with DTC's rules on behalf of Euroclear or
CEDEL, as the case may be, by its respective depository; however, such cross-
market transactions will require delivery of instructions to Euroclear or
CEDEL, as the case may be, by the counterparty in such system in accordance
with the rules and procedures and within the established deadlines (Brussels
time) of such system. Euroclear or CEDEL, as the case may be, will, if the
transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf
by delivering or receiving interests in the Global Note in DTC, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and CEDEL participants
may not deliver instructions directly to the depositories for Euroclear or
CEDEL.
DTC has advised the Issuers that it will take any action permitted to be
taken by a holder of Exchange Notes only at the direction of one or more
Participants to whose account with DTC interests in the Global Note are
credited and only in respect of such portion of the aggregate principal amount
of the Exchange Notes as to which such Participant or Participants has or have
given such direction. However, if there is an Event of Default (as defined
below) under the Notes, DTC reserves the right to exchange the Global Note for
Exchange Notes in certificated form, and to distribute such Exchange Notes to
its Participants.
The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that the Issuers
believe to be reliable, but the Issuers take no responsibility for the
accuracy thereof.
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures to
facilitate transfers of interests in the Notes among participants in DTC,
Euroclear and CEDEL, they are under no obligation to perform or to continue to
perform such procedures, and such procedures may be discontinued at any time.
None of the Issuers or the Trustee will have any responsibility for the
performance by DTC, Euroclear or CEDEL or their respective participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
Exchange of Book-Entry Notes for Certificated Notes. A Global Note is
exchangeable for definitive Exchange Notes in registered certificated form if
(i) DTC (x) notifies the Issuers that it is unwilling or unable to continue as
Depository for the Global Note and the Issuers thereupon fail to appoint a
successor depository or (y) has ceased to be a clearing agency registered
under the Exchange Act, (ii) the Issuers, at their option, notify the Trustee
in writing that they elect to cause the issuance of the Exchange Notes in
certificated form or (iii) there shall have occurred and be continuing a
Default or an Event of Default with respect to the Notes. In addition,
beneficial interests in a Global Note may be exchanged for certificated
Exchange Notes upon request but only upon at least 20 days prior written
notice given to the Trustee by or on behalf of DTC in accordance with its
customary procedures. In all cases, certificated Exchange Notes delivered in
exchange for any Global Note or
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beneficial interests therein will be registered in the names, and issued in
any approved denominations, requested by or on behalf of the Depositary (in
accordance with its customary procedures).
OPTIONAL REDEMPTION
The Notes will be subject to redemption, at the option of the Company, in
whole or in part, at any time on or after April 15, 2001 and prior to
maturity, upon not less than 30 nor more than 60 days' notice mailed to each
Holder of Notes to be redeemed at such Holder's address appearing in the Note
Register, in amounts of $1,000 or an integral multiple of $1,000, at the
following Redemption Prices (expressed as percentages of the principal amount)
plus accrued interest (including Special Interest) to but excluding the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date to receive interest due on an Interest Payment Date that
is on or prior to the Redemption Date), if redeemed during the 12-month period
beginning April 15 of the years indicated:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2001.......................................................... 106.250%
2002.......................................................... 104.167%
2003.......................................................... 102.083%
2004 and thereafter........................................... 100.000%
</TABLE>
((S)(S) 203, 1101, 1105 and 1107)
The Notes will be redeemable prior to April 15, 2001 only in the event that
on or before April 15, 1999 the Company receives net proceeds from the sale of
its Common Equity, in which case the Company may, at its option, use all or a
portion of any such net proceeds to redeem Notes in a principal amount of up
to an aggregate amount equal to 33 1/3% of the original principal amount of
the Notes, provided, however, that Notes in an aggregate principal amount
equal to at least $175 million remain outstanding after such redemption. Such
redemption must occur on a Redemption Date within 90 days of such sale and
upon not less than 30 nor more than 60 days' notice mailed to each Holder of
Notes to be redeemed at such Holder's address appearing in the Note Register,
in amounts of $1,000 or an integral multiple of $1,000 at a redemption price
of 112.50% of their principal amount plus accrued and unpaid interest
(including Special Interest) to but excluding the Redemption Date (subject to
the right of Holders of record on the relevant Regular Record Date to receive
Special Interest due on an Interest Payment Date that is on or prior to the
Redemption Date).
If less than all the Notes are to be redeemed, the Trustee shall select, on
a pro rata basis, by lot or by such other method as the Trustee shall deem
fair and appropriate, the particular Notes to be redeemed or any portion
thereof that is an integral multiple of $1,000. ((S) 1104)
MANDATORY REDEMPTION; SINKING FUND
Except as set forth under "Covenants--Limitation on Asset Sales" and
"Covenants--Change of Control" below, neither the Company nor Capital is
required to purchase or make mandatory redemption payments or sinking fund
payments with respect to the Notes.
SECURITY
The Indenture provides that upon the closing of the Offering, the Company
must purchase and pledge to the Trustee for the benefit of the holders of the
Notes the Pledged Securities in such amount as will be sufficient upon receipt
of scheduled interest and principal payments of such securities, in the
opinion of a nationally recognized firm of independent public accountants
selected by the Company, to provide for payment in full of the first six
scheduled interest payments (excluding Special Interest) due on the Notes. The
Company used $117.7 million of the net proceeds of the Offering to acquire the
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Pledged Securities. The Pledged Securities have been pledged by the Company to
the Trustee for the benefit of the holders of Notes pursuant to the Pledge
Agreement and are held by the Trustee in the Pledge Account. Pursuant to the
Pledge Agreement, immediately prior to an interest payment date on the Notes,
the Company may either deposit with the Trustee from funds otherwise available
to the Company cash sufficient to pay the interest scheduled to be paid on
such date or the Company may direct the Trustee to release from the Pledge
Account proceeds sufficient to pay interest then due. In the event that the
Company exercises the former option, the Company may thereafter direct the
Trustee to release to the Company proceeds or Pledged Securities from the
Pledge Account in like amount. A failure by the Issuers to pay interest on the
Notes in a timely manner through April 15, 1999 will constitute an immediate
Event of Default under the Indenture, with no grace or cure period.
Interest earned on the Pledged Securities will be added to the Pledge
Account. In the event that the funds or Pledged Securities held in the Pledge
Account exceed the amount sufficient, in the opinion of a nationally
recognized firm of independent public accountants selected by the Company, to
provide for payment in full of the first six scheduled interest payments
(excluding Special Interest) due on the Notes (or, in the event an interest
payment or payments have been made, an amount sufficient to provide for
payment in full of any interest payments remaining, up to and including the
sixth scheduled interest payment) the Trustee will be permitted to release to
the Company at the Company's request any such excess amount. The Notes are
secured by a first priority security interest in the Pledged Securities and in
the Pledge Account and, accordingly, the Pledged Securities and the Pledge
Account will also secure repayment of the principal amount of the Notes to the
extent of such security. At any time while the Pledge Agreement is in force
the Company may substitute Marketable Securities (as defined in the Indenture)
for the U.S. government securities originally pledged as collateral; provided,
however that the Marketable Securities so substituted must have a value
(measured at the date of substitution), in the opinion of a nationally
recognized firm of independent public accountants selected by the Company, at
least equal to 125% of the amount of any of the first six scheduled interest
payments on the Notes that are unpaid (or the pro rata portion of such
interest payments equal to the percentage of such interest payments to be
secured by such Marketable Securities) as of the date such Marketable
Securities are proposed to be substituted as security for the Company's
obligation under the Pledge Agreement.
Under the Pledge Agreement, assuming that the Issuers make the first six
scheduled interest payments on the Notes in a timely manner, all of the
Pledged Securities will have been released from the Pledge Account and
thereafter the Notes will be unsecured.
REGISTRATION COVENANT; EXCHANGE OFFER
The Issuers have entered into an Exchange and Registration Rights Agreement
(the "Registration Rights Agreement") pursuant to which the Issuers agree, for
the benefit of the Holders of the Senior Notes, (i) to file with the
Commission, within 30 days following the Closing, a registration statement
(the "Exchange Offer Registration Statement") under the Securities Act
relating to this Exchange Offer pursuant to which notes substantially
identical to the Senior Notes (except that such notes will not contain terms
with respect to the Special Interest payments described below or transfer
restrictions) (the "Exchange Notes") would be offered in exchange for the then
outstanding Senior Notes tendered at the option of the holders thereof and
(ii) to use their reasonable best efforts to cause the Exchange Offer
Registration Statement to become effective as soon as practicable thereafter.
The Issuers have further agreed to commence the Exchange Offer promptly after
the Exchange Offer Registration Statement has become effective, hold the offer
open for at least 30 days, and exchange Exchange Notes for all Senior Notes
validly tendered and not withdrawn before the expiration of the offer.
Under existing Commission interpretations, the Exchange Notes would in
general be freely transferable after the Exchange Offer without further
registration under the Securities Act, except that broker-dealers
("Participating Broker-Dealers") receiving Exchange Notes in the Exchange
Offer will
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be subject to a prospectus delivery requirement with respect to resale of
those Exchange Notes. The Commission has taken the position that Participating
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to the Exchange Notes (other than a resale of any unsold allotment from the
original sale of the Notes) by delivery of the prospectus contained in the
Exchange Offer Registration Statement. Under the Registration Rights
Agreement, the Issuers are required to allow Participating Broker-Dealers and
other persons, if any, subject to similar prospectus delivery requirements to
use the prospectus contained in the Exchange Offer Registration Statement in
connection with the resale of such Exchange Notes. The Exchange Offer
Registration Statement will be kept effective for a period ending on the
earlier of the 90th day after the Exchange Offer has been completed or such
time as such broker-dealers no longer own any Registrable Securities (as
defined in the Registration Rights Agreement). Each Holder of the Senior Notes
(other than certain specified Holders) who wishes to exchange such Senior
Notes for Exchange Notes in the Exchange Offer will be required to represent
that any Exchange Notes to be received by it will be acquired in the ordinary
course of its business, that at the time of the commencement of the Exchange
Offer it has no arrangement with any person to participate in the distribution
(within the meaning of the Securities Act) of the Exchange Notes and that it
is not an Affiliate of the Issuers.
However, if on or before the date of consummation of the Exchange Offer the
existing Commission interpretations are changed such that the Exchange Notes
would not in general be freely transferable on such date, the Issuers will, in
lieu of effecting registration of Exchange Notes, use their reasonable best
efforts to cause a registration statement under the Securities Act relating to
a shelf registration of the Senior Notes for resale by Holders (the "Resale
Registration") to become effective and to remain effective for a period of up
to three years after the Closing. The Issuers will, in the event of the Resale
Registration, provide to the Holders of the Senior Notes copies of the
prospectus that is a part of the registration statement filed in connection
with the Resale Registration, notify such Holders when the Resale Registration
for the Senior Notes has become effective and take certain other actions as
are required to permit unrestricted resales of the Senior Notes. A Holder of
Senior Notes that sells such Senior Notes pursuant to the Resale Registration
generally would be required to be named as a selling securityholder in the
related prospectus and to deliver a prospectus to purchasers, will be subject
to certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Rights Agreement that are applicable to such a Holder (including
certain indemnification obligations).
Although the Issuers have filed the Exchange Offer Registration Statement,
there can be no assurance that such registration statement will become
effective. In the event that (i) the Exchange Offer Registration Statement
(or, if applicable, the Resale Registration) has not become effective within
120 days following the Closing, (ii) the Exchange Offer has not been
consummated within 30 business days after the effective date of the Exchange
Offer Registration Statement or (iii) any registration statement required by
the Registration Rights Agreement is filed and declared effective but shall
thereafter cease to be effective (except as specifically permitted therein)
without being succeeded immediately by an additional registration statement
filed and declared effective (any such event referred to in clauses (i)
through (iii), a "Registration Default"), then interest will accrue (in
addition to the stated interest on the Senior Notes) at the rate of 0.25% per
annum on the principal amount of the Senior Notes, for the period from the
occurrence of the Registration Default until such time as no Registration
Default is in effect. Such additional interest (the "Special Interest") will
be payable in cash semiannually in arrears on each October 15 and April 15.
For each 90-day period that the Registration Default continues, the per annum
rate of such Special Interest will increase by an additional 0.25%, provided
that such rate shall in no event exceed 1.0% per annum in the aggregate.
Special Interest, if any, will be computed on the basis of a 365 or 366 day
year, as the case may be, and the number of days actually elapsed.
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The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which will be available upon request to the Company.
The Senior Notes and the Exchange Notes will be considered collectively to
be a single class for all purposes under the Note Indenture, including,
without limitation, waivers, amendments, redemptions and Offers to Purchase,
and for purposes of this Description of the Notes all references herein to
"Notes" shall be deemed to refer collectively to the Senior Notes and any
Exchange Notes, unless the context otherwise requires.
COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Consolidated Debt
The Company may not, and may not permit any Restricted Subsidiary of the
Company to, Incur any Debt unless either (a) the ratio of (i) the aggregate
consolidated principal amount of Debt of the Company outstanding as of the
most recent available quarterly or annual balance sheet, after giving pro
forma effect to the Incurrence of such Debt and any other Debt Incurred since
such balance sheet date and the receipt and application of the proceeds
thereof to (ii) Consolidated Cash Flow Available for Fixed Charges for the
four full fiscal quarters next preceding the Incurrence of such Debt for which
consolidated financial statements are available, determined on a pro forma
basis as if any such Debt had been Incurred and the proceeds thereof had been
applied at the beginning of such four fiscal quarters, would be less than 5.5
to 1 for such four-quarter periods ending on or prior to December 31, 1999 and
5.0 to 1 for such periods ending thereafter, or (b) the Company's Consolidated
Capital Ratio as of the most recent available quarterly or annual balance
sheet, after giving pro forma effect to the Incurrence of such Debt and any
other Debt Incurred since such balance sheet date and the receipt and
application of the proceeds thereof, is less than 2.0 to 1.
Notwithstanding the foregoing limitation, the Company and any Restricted
Subsidiary may Incur the following:
(i) Debt under any one or more Bank Credit Agreements or Vendor Financing
Facilities in an aggregate principal amount at any one time not to exceed
$125 million, and any renewal, extension, refinancing or refunding thereof
in an amount which, together with any principal amount remaining
outstanding or available under all Bank Credit Agreements and Vendor
Financing Facilities of the Company and its Restricted Subsidiaries, plus
the amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of any Bank Credit Agreement so
refinanced plus the amount of expenses incurred in connection with such
refinancing, does not exceed the aggregate principal amount outstanding or
available under all such Bank Credit Agreements and Vendor Financing
Facilities of the Company and its Restricted Subsidiaries immediately prior
to such renewal, extension, refinancing or refunding;
(ii) Purchase Money Debt Incurred to finance the construction,
acquisition or improvement of Telecommunications Assets, provided that the
net proceeds of such Purchase Money Debt do not exceed 80% of the cost of
construction, acquisition or improvement price of the applicable
Telecommunications Assets;
(iii) Debt owed by the Company to any Wholly-Owned Restricted Subsidiary
of the Company or Debt owed by a Restricted Subsidiary of the Company to
the Company or a Wholly-Owned Restricted Subsidiary of the Company;
provided, however, that upon either (x) the transfer or other disposition
by such Wholly-Owned Restricted Subsidiary or the Company of any Debt so
permitted to a Person other than the Company or another Wholly-Owned
Restricted Subsidiary of the Company or (y) the issuance (other than
directors' qualifying shares), sale, lease, transfer or other
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disposition of shares of Capital Stock (including by consolidation or
merger) of such Wholly-Owned Restricted Subsidiary to a Person other than
the Company or another such Wholly-Owned Restricted Subsidiary, the
provisions of this clause (iii) shall no longer be applicable to such Debt
and such Debt shall be deemed to have been Incurred at the time of such
transfer or other disposition;
(iv) Debt Incurred to renew, extend, refinance or refund (each, a
"refinancing") Debt outstanding at the date of the Indenture or Incurred
pursuant to the preceding paragraph or clause (ii) of this paragraph or the
Notes in an aggregate principal amount not to exceed the aggregate
principal amount of and accrued interest on the Debt so refinanced plus the
amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of the Debt so refinanced or the amount
of any premium reasonably determined by the Company as necessary to
accomplish such refinancing by means of a tender offer or privately
negotiated repurchase, plus the amount of expenses of the Company incurred
in connection with such refinancing; provided, however, that Debt the
proceeds of which are used to refinance the Notes or Debt which is pari
passu to the Notes or debt which is subordinate in right of payment to the
Notes shall only be permitted if (A) in the case of any refinancing of the
Notes or Debt which is pari passu to the Notes, the refinancing Debt is
made pari passu to the Notes or subordinated to the Notes, and, in the case
of any refinancing of Debt which is subordinated to the Notes, the
refinancing Debt constitutes Subordinated Debt and (B) in either case, the
refinancing Debt by its terms, or by the terms of any agreement or
instrument pursuant to which such Debt is issued, (x) does not provide for
payments of principal of such Debt at the stated maturity thereof or by way
of a sinking fund applicable thereto or by way of any mandatory redemption,
defeasance, retirement or repurchase thereof by the Company (including any
redemption, retirement or repurchase which is contingent upon events or
circumstances, but excluding any retirement required by virtue of
acceleration of such Debt upon any event of default thereunder), in each
case prior to the time the same are required by the terms of the Debt being
refinanced and (y) does not permit redemption or other retirement
(including pursuant to an offer to purchase made by the Company) of such
debt at the option of the holder thereof prior to the final stated maturity
of the Debt being refinanced, other than a redemption or other retirement
at the option of the holder of such Debt (including pursuant to an offer to
purchase made by the Company) which is conditioned upon a change
substantially similar to those described under "--Change of Control" or
which is pursuant to provisions substantially similar to those described
under "--Limitation on Asset Dispositions";
(v) Debt consisting of Permitted Interest Rate and Currency Protection
Agreements;
(vi) Debt outstanding under the Notes;
(vii) Subordinated Debt invested by (a) a group of employees of the
Company, which includes the Chief Executive Officer of the Company, who
own, directly or indirectly, through an employee stock ownership plan or
arrangement, shares of the Company's Capital Stock or (b) any other Person
that controls the Company (i) on the Issue Date or (ii) after a Change of
Control, provided that the Company is not in default with respect to its
obligations described under "--Change of Control" below;
(viii) Debt consisting of performance and other similar bonds and
reimbursement obligations Incurred in the ordinary course of business
securing the performance of contractual, franchise or license obligations
of the Company or a Restricted Subsidiary, or in respect of a letter of
credit obtained to secure such performance; and
(ix) Debt not otherwise permitted to be Incurred pursuant to clauses (i)
through (viii) above, which, together with any other outstanding Debt
Incurred pursuant to this clause (ix), has an aggregate principal amount
or, in the case of Debt issued at a discount, an accreted amount
(determined in accordance with generally accepted accounting principles) at
the time of Incurrence not in excess of $10 million at any time
outstanding.
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For purposes of determining compliance with this "Limitation on Consolidated
Debt" covenant, in the event that an item of Debt meets the criteria of more
than one of the types of Debt the Company is permitted to incur pursuant to
the foregoing clauses (i) through (ix), the Company shall have the right, in
its sole discretion, to classify such item of Debt and shall only be required
to include the amount and type of such Debt under the clause permitting the
Debt as so classified. For purposes of determining any particular amount of
Debt under such covenant, Guarantees or Liens with respect to letters of
credit supporting Debt otherwise included in the determination of a particular
amount shall not be included. ((S) 1007)
Limitation on Debt and Preferred Stock of Restricted Subsidiaries
The Company may not permit any Restricted Subsidiary of the Company (other
than a Restricted Subsidiary that has fully and unconditionally Guaranteed the
Notes on an unsubordinated basis) to Incur or suffer to exist any Debt or
issue any Preferred Stock except:
(i) Debt or Preferred Stock outstanding on the date of the Indenture
after giving effect to the application of the proceeds of the Notes;
(ii) Debt Incurred or Preferred Stock issued to and held by the Company
or a Wholly-Owned Restricted Subsidiary of the Company (provided that such
Debt or Preferred Stock is at all times held by the Company or a Wholly-
Owned Restricted Subsidiary of the Company);
(iii) Debt Incurred or Preferred Stock issued by a Person prior to the
time (A) such Person became a Restricted Subsidiary of the Company, (B)
such Person merges into or consolidates with a Restricted Subsidiary of the
Company or (C) another Restricted Subsidiary of the Company merges into or
consolidates with such Person (in a transaction in which such Person
becomes a Restricted Subsidiary of the Company), which Debt or Preferred
Stock was not Incurred or issued in anticipation of such transaction and
was outstanding prior to such transaction;
(iv) Debt consisting of Permitted Interest Rate and Currency Protection
Agreements;
(v) Debt or Preferred Stock of a Joint Venture;
(vi) Debt under any one or more Bank Credit Agreements or Vendor
Financing Facilities (and renewals, extensions, refinancings or refundings
thereof) which is permitted to be outstanding under clause (i) of the
"Limitation on Consolidated Debt";
(vii) Debt consisting of Guarantees of the Notes;
(viii) Debt or Preferred Stock which is exchanged for, or the proceeds of
which are used to refinance, refund or redeem, any Debt or Preferred Stock
permitted to be outstanding pursuant to clauses (i) and (iii) hereof (or
any extension or renewal thereof) (for purposes hereof, a "refinancing"),
in an aggregate principal amount, in the case of Debt, or with an aggregate
liquidation preference, in the case of Preferred Stock, not to exceed the
aggregate principal amount of the Debt so refinanced or the aggregate
liquidation preference of the Preferred Stock so refinanced, plus the
amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of the Debt or Preferred Stock so
refinanced or the amount of any premium reasonably determined by the
Company as necessary to accomplish such refinancing by means of a tender
offer or privately negotiated repurchase, plus the amount of expenses of
the Company and the Restricted Subsidiary incurred in connection therewith
and provided the Debt or Preferred Stock incurred or issued upon such
refinancing by its terms, or by the terms of any agreement or instrument
pursuant to which such Debt or Preferred Stock is Incurred or issued, (x)
does not provide for payments of principal or liquidation value at the
stated maturity of such Debt or Preferred Stock or by way of a sinking fund
applicable to such Debt or Preferred Stock or by way of any mandatory
redemption, defeasance, retirement or repurchase of such Debt or Preferred
Stock by the Company or any Restricted Subsidiary of the Company (including
any redemption, retirement or repurchase which is contingent upon events or
circumstances, but excluding any retirement required by virtue of
acceleration of such Debt upon
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an event of default thereunder), in each case prior to the time the same
are required by the terms of the Debt or Preferred Stock being refinanced
and (y) does not permit redemption or other retirement (including pursuant
to an offer to purchase made by the Company or a Restricted Subsidiary of
the Company) of such Debt or Preferred Stock at the option of the holder
thereof prior to the stated maturity of the Debt or Preferred Stock being
refinanced, other than a redemption or other retirement at the option of
the holder of such Debt or Preferred Stock (including pursuant to an offer
to purchase made by the Company or a Restricted Subsidiary of the Company)
which is conditioned upon the change of control of the Company pursuant to
provisions substantially similar to those contained in the Indenture
described under "--Change of Control" or which is pursuant to provisions
substantially similar to those described under "--Limitation on Asset
Dispositions", and provided, further, that in the case of any exchange or
redemption of Preferred Stock of a Restricted Subsidiary of the Company,
such Preferred Stock may only be exchanged for or redeemed with Preferred
Stock of such Restricted Subsidiary; and
(ix) Debt not otherwise permitted to be incurred pursuant to clauses (i)
through (viii) above, which, together with any other outstanding Debt
incurred pursuant to this clause (ix), has an aggregate principal amount
(or, in the case of Debt issued at a discount, an accreted amount
(determined in accordance with generally accepted accounting principles) at
the time of incurrence) not in excess of $10 million at any time
outstanding. ((S) 1008)
Limitation on Restricted Payments
The Company (i) may not, directly or indirectly, declare or pay any
dividend, or make any distribution, in respect of its Capital Stock or to the
holders thereof (in their capacity as such), excluding any dividends or
distributions payable solely in shares of its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to acquire its
Capital Stock (other than Disqualified Stock); (ii) may not, and may not
permit any Restricted Subsidiary to, purchase, redeem, or otherwise retire or
acquire for value (a) any Capital Stock of the Company or any Related Person
of the Company; or (b) any options, warrants or rights to purchase or acquire
shares of Capital Stock of the Company or any Related Person of the Company or
any securities convertible or exchangeable into shares of Capital Stock of the
Company or any Related Person of the Company; (iii) may not make, or permit
any Restricted Subsidiary to make, any Investment in, or payment on a
Guarantee of any obligation of, any Person, other than the Company or a
Restricted Subsidiary of the Company, except for Permitted Investments; and
(iv) may not, and may not permit any Restricted Subsidiary to, redeem,
defease, repurchase, retire or otherwise acquire or retire for value, prior to
any scheduled maturity, repayment or sinking fund payment, Debt of the Company
which is subordinate in right of payment to the Notes (each of clauses (i)
through (iv) being a "Restricted Payment") if: (1) a Default or an Event of
Default shall have occurred and is continuing; or (2) upon giving effect to
such Restricted Payment, the Company could not Incur at least $1.00 of
additional Debt pursuant to the terms of the Indenture described in the first
paragraph of "--Limitation on Consolidated Debt" above; or (3) upon giving
effect to such Restricted Payment, the aggregate of all Restricted Payments
from the date of the Indenture exceeds the sum of: (a) 50% of cumulative
Consolidated Net Income (or, in the case Consolidated Net Income shall be
negative, less 100% of such deficit) since the end of the last full fiscal
quarter prior to the date of the Indenture through the last day of the last
full fiscal quarter ending immediately preceding the date of such Restricted
Payment; plus (b) $5 million; plus (c) 100% of the net reduction in
Investments in any Unrestricted Subsidiary resulting from payments of interest
on Debt, dividends, repayments of loans or advances, or other transfers of
assets, in each case to the Company or any Restricted Subsidiary of the
Company from such Unrestricted Subsidiary (except to the extent that any such
payment is included in the calculation of Consolidated Net Income) or from
redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries;
provided that the amount included in this clause (c) shall not exceed the
amount of Investments previously made by the Company and its Restricted
Subsidiaries in such Unrestricted Subsidiary; provided, further, that the
Company or a Restricted Subsidiary of the Company may make any Restricted
Payment with the aggregate net proceeds
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received after the date of the Indenture, including the fair value of property
other than cash (determined in good faith by the Managing Member, as
conclusively evidenced by a certificate of the Managing Member filed with the
Trustee), as capital contributions to the Company or from the issuance (other
than to a Restricted Subsidiary) of Capital Stock (other than Disqualified
Stock) of the Company and warrants, rights or options on Capital Stock (other
than Disqualified Stock) of the Company and the principal amount of Debt of
the Company that has been converted into Capital Stock (other than
Disqualified Stock and other than by a Restricted Subsidiary) of the Company
after the date of the Indenture.
Notwithstanding the foregoing, the Company may (i) pay any dividend on
Capital Stock of any class within 60 days after the declaration thereof if, on
the date when the dividend was declared, the Company could have paid such
dividend in accordance with the foregoing provisions; (ii) repurchase any
shares of its Common Equity or options to acquire its Common Equity from
Persons who were formerly officers or employees of the Company, provided that
the aggregate amount of all such repurchases made pursuant to this clause (ii)
shall not exceed $2 million, plus the aggregate cash proceeds received by the
Company since the date of the Indenture from issuances of its Common Equity or
options to acquire its Common Equity to members, officers, managers and
employees of the Company or any of its Subsidiaries; (iii) the Company and its
Restricted Subsidiaries may refinance any Debt otherwise permitted by clause
(iv) of the second paragraph under "--Limitation on Consolidated Debt" above;
(iv) so long as no Event of Default shall have occurred and be continuing, and
so long as the Company is treated as a partnership for U.S. federal income tax
purposes, make distributions in respect of members' or partners' income tax
liability in an amount not to exceed the Tax Amount; and (v) the Company and
its Restricted Subsidiaries may retire or repurchase any Capital Stock of the
Company or of any Restricted Subsidiary of the Company in exchange for, or out
of the proceeds of the substantially concurrent sale (other than to a
Restricted Subsidiary of the Company) of, Capital Stock (other than
Disqualified Stock) of the Company. If the Company makes a Restricted Payment
which, at the time of the making of such Restricted Payment, would in the good
faith determination of the Company be permitted under the Indenture, such
Restricted Payment shall be deemed to have been made in compliance with the
Indenture notwithstanding any subsequent adjustments made in good faith to the
Company financial statements affecting Consolidated Net Income for any period.
((S) 1009)
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
The Company may not, and may not permit any Restricted Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary of the Company (i) to pay dividends (in cash or
otherwise) or make any other distributions in respect of its Capital Stock
owned by the Company or any other Restricted Subsidiary of the Company or pay
any Debt or other obligation owed to the Company or any other Restricted
Subsidiary; (ii) to make loans or advances to the Company or any other
Restricted Subsidiary; or (iii) to transfer any of its property or assets to
the Company or any other Restricted Subsidiary. Notwithstanding the foregoing,
the Company may, and may permit any Restricted Subsidiary to, suffer to exist
any such encumbrance or restriction (a) pursuant to any agreement in effect on
the Issue Date; (b) pursuant to an agreement relating to any Acquired Debt,
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person so acquired and its
Subsidiaries; (c) pursuant to any one or more Bank Credit Agreements or Vendor
Financing Facilities (and renewals, extensions, refinancings or refundings
thereof) which is permitted to be outstanding under clause (i) of the
"Limitation on Consolidated Debt", provided that such restriction is
consistent with, and not materially more restrictive (as conclusively
determined in good faith by the Chief Financial Officer of the Company), taken
as a whole, than, comparable provisions included in similar agreements or
facilities extended to comparable credits engaged in the Telecommunications
Business; (d) pursuant to an agreement effecting a
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renewal, refunding or extension of Debt Incurred pursuant to an agreement
referred to in clause (a) or (b) above or (e) below, provided, however, that
the provisions contained in such renewal, refunding or extension agreement
relating to such encumbrance or restriction are not materially more
restrictive (as conclusively determined in good faith by the Chief Financial
Officer of the Company), taken as a whole, than the provisions contained in
the agreement the subject thereof; (e) in the case of clause (iii) above,
restrictions contained in any security agreement (including a Capital Lease
Obligation) securing Debt of the Company or a Restricted Subsidiary otherwise
permitted under the Indenture, but only to the extent such restrictions
restrict the transfer of the property subject to such security agreement; (f)
in the case of clause (iii) above, customary nonassignment provisions entered
into in the ordinary course of business in leases and other agreements; (g)
any restriction with respect to a Restricted Subsidiary of the Company imposed
pursuant to an agreement which has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of such
Restricted Subsidiary, provided that consummation of such transaction would
not result in a Default or an Event of Default, that such restriction
terminates if such transaction is not consummated and that such consummation
or abandonment of such transaction occurs within one year of the date such
agreement was entered into; (h) pursuant to applicable law or regulations; (i)
pursuant to the Indenture and the Notes; or (j) any restriction on the sale or
other disposition of assets or property securing Debt as a result of a
Permitted Lien on such assets or property. ((S) 1010)
Limitation on Liens
The Company may not, and may not permit any Restricted Subsidiary of the
Company to, Incur or suffer to exist any Lien on or with respect to any
property or assets now owned or hereafter acquired to secure any Debt without
making, or causing such Restricted Subsidiary to make, effective provision for
securing the Notes (x) equally and ratably with (or prior to) such Debt as to
such property for so long as such Debt will be so secured or (y) in the event
such Debt is Debt of the Company which is subordinate in right of payment to
the Notes, prior to such Debt as to such property for so long as such Debt
will be so secured.
The foregoing restrictions shall not apply to: (i) Liens existing on the
Issue Date and securing Debt outstanding on the Issue Date or securing the
Notes or Liens securing Debt Incurred pursuant to any Bank Credit Agreement or
Vendor Financing Facility (whether or not such Bank Credit Agreement or Vendor
Financing Facility was outstanding on the Issue Date); (ii) Liens securing
Debt in an amount which, together with the aggregate amount of Debt then
outstanding or available under the Bank Credit Agreement and the Vendor
Financing Facility (or under refinancings or amendments of such agreements),
does not exceed 1.5 times the Company's Consolidated Cash Flow Available for
Fixed Charges for the four full fiscal quarters preceding the Incurrence of
such Lien for which consolidated financial statements are available,
determined on a pro forma basis as if such Debt had been Incurred and the
proceeds thereof had been applied at the beginning of such four fiscal
quarters; (iii) Liens in favor of the Company or any Wholly-Owned Restricted
Subsidiary of the Company; (iv) Liens on real or personal property of the
Company or a Restricted Subsidiary of the Company acquired, constructed or
constituting improvements made after the Issue Date to secure Purchase Money
Debt which is Incurred for the construction, acquisition and improvement of
Telecommunications Assets and is otherwise permitted under the Indenture,
provided, however, that (a) the net proceeds of any Debt secured by such a
Lien does not exceed 100% of such purchase price or cost of construction or
improvement of the property subject to such Lien; (b) such Lien attaches to
such property prior to, at the time of or within 180 days after the
acquisition, completion of construction or commencement of operation of such
property; and (c) such Lien does not extend to or cover any property other
than the property (or identifiable portions thereof) acquired, constructed or
constituting improvements made with the proceeds of such Purchase Money Debt
(it being understood and agreed that all Debt owed to any single lender or
group of lenders or outstanding under any single credit facility shall be
considered a single Purchase Money Debt, whether drawn at one time or from
time to time); (v) Liens to secure
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Acquired Debt, provided, however, that (a) such Lien attaches to the acquired
asset prior to the time of the acquisition of such asset and (b) such Lien
does not extend to or cover any other asset; (vi) Liens to secure Debt
Incurred to extend, renew, refinance or refund (or successive extensions,
renewals, refinancings or refundings), in whole or in part, Debt secured by
any Lien referred to in the foregoing clauses (i), (ii), (iv) and (v) so long
as such Lien does not extend to any other property and the principal amount of
Debt so secured is not increased except as otherwise permitted under clause
(iv) of "--Limitation on Consolidated Debt"; (vii) Liens securing Debt not
otherwise permitted by the foregoing clauses (i) through (vi) in an amount not
to exceed 5% of the Company's Consolidated Tangible Assets determined as of
the most recent available quarterly or annual balance sheet; and (viii)
Permitted Liens. ((S) 1011)
Limitation on Sale and Leaseback Transactions
The Company may not, and may not permit any Restricted Subsidiary to, enter
into any Sale and Leaseback Transaction unless (i) the Company or such
Restricted Subsidiary would be entitled to Incur a Lien to secure Debt by
reason of the provisions described under "--Limitation on Liens" above, equal
in amount to the Attributable Value of the Sale and Leaseback Transaction
without equally and ratably securing the Notes; or (ii) the Sale and Leaseback
Transaction is treated as an Asset Disposition and all of the conditions of
the Indenture described under "--Limitation on Asset Dispositions" (including
the provisions concerning the application of Net Available Proceeds) are
satisfied with respect to such Sale and Leaseback Transaction, treating all of
the consideration received in such Sale and Leaseback Transaction in the same
manner as consideration received in respect of an Asset Disposition for
purposes of such covenant. ((S) 1012)
Limitation on Asset Dispositions
The Company may not, and may not permit any Restricted Subsidiary to, make
any Asset Disposition in one or more related transactions occurring within any
12-month period unless: (i) the Company or the Restricted Subsidiary, as the
case may be, receives consideration for such disposition at least equal to the
fair market value for the assets sold or disposed of as determined by the
Managing Member in good faith and evidenced by a certificate of the Managing
Member filed with the Trustee, which determination shall be conclusive; (ii)
at least 75% of the consideration for such disposition consists of (1) cash or
readily marketable cash equivalents or the assumption of Debt of the Company
(other than Debt that is subordinated to the Notes) or of the Restricted
Subsidiary and release from all liability on the Debt assumed; (2)
Telecommunications Assets; or (3) shares of publicly-traded Voting Stock of
any Person engaged in the Telecommunications Business in the United States;
and (iii) all Net Available Proceeds, less any amounts invested within 360
days of such disposition in new Telecommunications Assets, are applied within
360 days of such disposition (1) first, to the permanent repayment or
reduction of Debt then outstanding under any Bank Credit Agreement or Vendor
Financing Facility, to the extent such agreements would require such
application or prohibit payments pursuant to clause (2) following, (2) second,
to the extent of remaining Net Available Proceeds, to make an Offer to
Purchase outstanding Notes at 100% of their principal amount plus accrued
interest (including Special Interest) to the date of purchase and, to the
extent required by the terms thereof, any other Debt of the Company that is
pari passu with the Notes at a price no greater than 100% of the principal
amount thereof plus accrued interest (including Special Interest) to the date
of purchase and (3) third, to the extent of any remaining Net Available
Proceeds following the completion of the Offer to Purchase, to the repayment
of other Debt of the Company or Debt of a Restricted Subsidiary of the
Company, to the extent permitted under the terms thereof. To the extent any
Net Available Proceeds remain after such uses, the Company and its Restricted
Subsidiaries may use such amounts for any purposes not prohibited by the
Indenture. ((S)1013) Notwithstanding the foregoing, these provisions shall not
apply to any Asset Disposition which constitutes a transfer, conveyance, sale,
lease or other disposition of all or substantially all of the Company's
properties or assets as described under "--Mergers, Consolidations and Certain
Sales of Assets".
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Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries
The Company may not, and may not permit any Restricted Subsidiary of the
Company to, issue, transfer, convey, sell or otherwise dispose of any shares
of Capital Stock of a Restricted Subsidiary of the Company or securities
convertible or exchangeable into, or options, warrants, rights or any other
interest with respect to, Capital Stock of a Restricted Subsidiary of the
Company to any person other than the Company or a Wholly-Owned Restricted
Subsidiary of the Company except (i) in a transaction consisting of a sale of
Capital Stock of such Restricted Subsidiary owned by the Company or any
Restricted Subsidiary of the Company and that complies with the provisions
described under "--Limitation on Asset Dispositions" above to the extent such
provisions apply; (ii) if required, the issuance, transfer, conveyance, sale
or other disposition of directors' qualifying shares; (iii) in a transaction
in which, or in connection with which, the Company or a Restricted Subsidiary
acquires at the same time sufficient Capital Stock of such Restricted
Subsidiary to at least maintain the same percentage ownership interest it had
prior to such transaction; (iv) constituting the issuance of Preferred Stock
permitted by the provisions described under "--Limitation on Debt and
Preferred Stock of Restricted Subsidiaries" above; and (v) Disqualified Stock
issued in exchange for, or upon conversion of, or the proceeds of the issuance
of which are used to redeem, refinance, replace or refund shares of
Disqualified Stock of such Restricted Subsidiary, provided that the amounts of
the redemption obligations of such Disqualified Stock shall not exceed the
amounts of the redemption obligations of, and such Disqualified Stock shall
have redemption obligations no earlier than those required by, the
Disqualified Stock being exchanged, converted, redeemed, refinanced, replaced
or refunded. ((S) 1014)
Transactions with Affiliates and Related Persons
The Company may not, and may not permit any Restricted Subsidiary of the
Company to, enter into any transaction (or series of related transactions)
with an Affiliate or Related Person of the Company (other than the Company or
a Wholly-Owned Restricted Subsidiary of the Company), including any
Investment, but excluding transactions pursuant to employee compensation
arrangements approved by the Managing Member of the Company, either directly
or indirectly, unless such transaction is on terms no less favorable to the
Company or such Restricted Subsidiary than those that could be obtained in a
comparable arm's-length transaction with an entity that is not an Affiliate or
Related Person and is in the best interests of such Company or such Restricted
Subsidiary. For any transaction that involves in excess of $1 million but less
than or equal to $5 million, the Chief Executive Officer of the Company shall
determine that the transaction satisfies the above criteria and shall evidence
such a determination by a certificate filed with the Trustee. For any
transaction that involves in excess of $5 million, the Company shall also
obtain an opinion from a nationally recognized expert with experience in
appraising the terms and conditions, taken as a whole, of the type of
transaction (or series of related transactions) for which the opinion is
required stating that such transaction (or series of related transactions) is
on terms and conditions, taken as a whole, no less favorable to the Company or
such Restricted Subsidiary than those that could be obtained in a comparable
arm's-length transaction with an entity that is not an Affiliate or Related
Person of the Company, which opinion shall be filed with the Trustee. This
covenant shall not apply to Investments by an Affiliate or a Related Person of
the Company in the Capital Stock (other than Disqualified Stock) of the
Company or any Restricted Subsidiary of the Company. ((S) 1015)
Change of Control
Within 30 days of the occurrence of a Change of Control, the Company will be
required to make an Offer to Purchase all Outstanding Notes at a purchase
price equal to 101% of their principal amount plus accrued and unpaid interest
(including Special Interest) to the date of purchase. A "Change of Control"
will be deemed to have occurred at such time as either (a) any Person or any
Persons acting together that would constitute a "group" (a "Group") for
purposes of Section 13(d) of the Securities
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Exchange Act of 1934, or any successor provision thereto (other than Eagle
River, Mr. Craig O. McCaw and their respective Affiliates or an underwriter
engaged in a firm commitment underwriting on behalf of the Company), shall
beneficially own (within the meaning of Rule 13d-3 under the Exchange Act, or
any successor provision thereto) more than 50% of the aggregate voting power
of all classes of Voting Stock of the Company; or (b) neither Eagle River nor
any Affiliate of Mr. Craig O. McCaw or Eagle River shall be a Managing Member
of the Company. ((S) 1016)
Except as described above with respect to a Change of Control, the Indenture
does not contain provisions that permit the Holders of the Notes to require
that the Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar restructuring.
Restrictions in the Indenture described herein on the ability of the Company
and its Restricted Subsidiaries to incur additional Indebtedness, to grant
Liens on its or their property, to make Restricted Payments and to make Asset
Sales may also make more difficult or discourage a takeover of the Company,
whether favored or opposed by the management of the Company. Consummation of
any such transaction in certain circumstances may require redemption or
repurchase of the Notes, and there can be no assurance that the Company or the
acquiring party will have sufficient financial resources to effect such
redemption or repurchase. Such restrictions and the restrictions on
transactions with Affiliates may, in certain circumstances, make more
difficult or discourage any leveraged buyout of the Company or any of its
Subsidiaries by the management of the Company or other Persons. While such
restrictions cover a variety of arrangements which have traditionally been
used to effect highly leveraged transactions, the Indenture may not afford the
Holders of Notes protection in all circumstances from the adverse aspects of a
highly leveraged transaction, reorganization, restructuring, merger or similar
transaction.
The Company does not currently have adequate financial resources to effect a
repurchase of the Notes upon a Change of Control and there can be no assurance
that the Company will have such resources in the future. The inability of the
Company to repurchase the Notes upon a Change of Control would constitute an
Event of Default.
In addition, there may be restrictions contained in instruments evidencing
Indebtedness incurred by the Company or its Restricted Subsidiaries permitted
under the Indenture which restrict or prohibit the ability of the Company to
effect any repurchase required under the Indenture in connection with a Change
of Control.
In the event that the Company makes an Offer to Purchase the Notes, the
Company intends to comply with any applicable securities laws and regulations,
including any applicable requirements of Section 14(e) of, and Rule 14e-1
under, the Exchange Act.
Provision of Financial Information
The Company has agreed that, for so long as any Notes remain outstanding, it
will furnish to the holders of the Notes and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act. In addition,
prior to the effectiveness of the Exchange Offer Registration Statement, the
Company will file with the Trustee and furnish to the holders of the Notes the
quarterly and annual financial statements and related notes and an
accompanying Management's Discussion and Analysis of Financial Condition and
Results of Operations in the format that would be required to be included in
the Company's periodic reports filed with the Commission if the Company were
required to file such reports with the Commission. The Company will furnish
such information to the Trustee and the holders of the Notes within 15 days
after the date on which the Company would have been required to file the same
with the Commission. Following the effectiveness of the Exchange Offer
Registration Statement (or earlier if the Company becomes obligated to file
reports with the Commission), the Company will file with the
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Trustee within 15 days after it files them with the Commission copies of the
annual and quarterly reports and the information, documents, and other reports
that the Company is required to file with the Commission pursuant to Section
13(a) or 15(d) of the Exchange Act ("SEC Reports"). In the event the Company
shall cease to be required to file SEC Reports pursuant to the Exchange Act,
the Company will nevertheless continue to file such reports with the
Commission (unless the Commission will not accept such a filing) and the
Trustee. The Company will furnish copies of the SEC Reports to the holders of
Notes at the time the Company is required to file the same with the Trustee
and will make such information available to investors who request it in
writing. ((S) 1017)
Limitations on Conduct of Business of Capital
Capital will not hold any operating assets or other properties or conduct
any business other than to serve as an Issuer and co-obligor with respect to
the Notes and will not own any Capital Stock of any Person to the extent that
such ownership would cause such Person to be deemed a Subsidiary of Capital.
((S) 1018)
MERGERS, CONSOLIDATIONS AND CERTAIN SALES OF ASSETS
The Company may not, in a single transaction or a series of related
transactions, (i) consolidate with or merge into any other Person or permit
any other Person to consolidate with or merge into the Company (other than the
consolidation or merger of a Wholly-Owned Restricted Subsidiary organized
under the laws of a State of the United States into the Company), or (ii)
directly or indirectly, transfer, sell, lease or otherwise dispose of all or
substantially all of its assets (determined on a consolidated basis for the
Company and its Restricted Subsidiaries taken as a whole and provided that the
creation of a Lien on or in any of its assets shall not in and of itself
constitute the transfer, sale, lease or disposition of the assets subject to
the Lien), unless: (1) in a transaction in which the Company does not survive
or in which the Company sells, leases or otherwise disposes of all or
substantially all of its assets to any other Person, the successor entity to
the Company is organized under the laws of the United States of America or any
State thereof or the District of Columbia and shall expressly assume, by a
supplemental indenture executed and delivered to the Trustee in form
satisfactory to the Trustee, all of the Company's obligations under the
Indenture; (2) immediately after giving pro forma effect to such transaction
as if such transaction had occurred at the beginning of the last full fiscal
quarter immediately prior to the consummation of such transaction with the
appropriate adjustments with respect to the transaction being included in such
pro forma calculation and treating any Debt which becomes an obligation of the
Company or a Subsidiary as a result of such transaction as having been
Incurred by the Company or such Subsidiary at the time of the transaction, no
Default or Event of Default shall have occurred and be continuing; (3)
immediately after giving effect to such transaction, the Consolidated Net
Worth of the Company (or other successor entity to the Company) is equal to or
greater than that of the Company immediately prior to the transaction; (4) if,
as a result of any such transaction, property or assets of the Company would
become subject to a Lien prohibited by the provisions of the Indenture
described under "Covenants--Limitation on Liens" above, the Company or the
successor entity to the Company shall have secured the Notes as required by
said covenant; (5) the Issuers have delivered to the Trustee an Opinion of
Counsel to the effect that the holders of the Notes will not recognize gain or
loss for Federal income tax purposes as a result of such transaction; and (6)
certain other conditions are met. ((S) 801)
In the event of any transaction (other than a lease) described in and
complying with the immediately preceding paragraph in which the Company is not
the surviving person and the surviving person assumes all the obligations of
the Company under the Notes and the Indenture pursuant to a supplemental
indenture, such surviving person shall succeed to, and be substituted for, and
may exercise every right and power of, the Company, and the Company will be
discharged from its obligations under the Indenture and the Notes; provided
that solely for the purpose of calculating amounts described in clause (3)
under "Covenant--Limitations on Restricted Payments", any such
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surviving person shall only be deemed to have succeeded to and be substituted
for the Company with respect to the period subsequent to the effective time of
such transaction, and the Company (before giving effect to such transaction)
shall be deemed to be the "Company" for such purposes for all prior periods
((S)801)
The meaning of the phrase "all or substantially all" as used above varies
according to the facts and circumstances of the subject transaction, has no
clearly established meaning under relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances, there may be a degree
of uncertainty in ascertaining whether a particular transaction would involve
a disposition of "all or substantially all" of the assets of the Company, and
therefore it may be unclear whether the foregoing provisions are applicable.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided. ((S)101)
"Acquired Debt" means, with respect to any specified Person, (i) Debt of any
other Person existing at the time such Person merges with or into or
consolidates with or becomes a Restricted Subsidiary of such specified Person
and (ii) Debt secured by a Lien encumbering any asset acquired by such
specified Person, which Debt was not Incurred in anticipation of, and was
outstanding prior to, such merger, consolidation or acquisition.
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Asset Disposition" by any Person means any transfer, conveyance, sale,
lease or other disposition by such Person or any of its Restricted
Subsidiaries (including a consolidation or merger or other sale of any such
Restricted Subsidiary with, into or to another Person in a transaction in
which such Restricted Subsidiary ceases to be a Restricted Subsidiary of the
specified Person, but excluding a disposition by a Restricted Subsidiary of
such Person to such Person or a Wholly-Owned Restricted Subsidiary of such
Person or by such Person to a Wholly-Owned Restricted Subsidiary of such
Person) of (i) shares of Capital Stock or other ownership interests of a
Restricted Subsidiary of such Person, other than as permitted by the
provisions of the Indenture described above under the Caption "--Limitation on
Debt and Preferred Stock of Restricted Subsidiaries") or pursuant to a
transaction in compliance with the covenant described under "--Mergers,
Consolidations and Certain Sales of Assets" above, (ii) substantially all of
the assets of such Person or any of its Restricted Subsidiaries representing a
division or line of business (other than as part of a Permitted Investment) or
(iii) other assets or rights of such Person or any of its Restricted
Subsidiaries other than (A) in the ordinary course of business or (B) that
constitutes a Restricted Payment which is permitted under the covenant "--
Limitation on Restricted Payments" above; provided that a transaction
described in clauses (i), (ii) and (iii) shall constitute an Asset Disposition
only if the aggregate consideration for such transfer, conveyance, sale, lease
or other disposition is equal to $5 million or more in any 12-month period.
"Attributable Value" means, as to any particular lease under which any
Person is at the time liable other than a Capital Lease Obligation, and at any
date as of which the amount thereof is to be determined, the total net amount
of rent required to be paid by such Person under such lease during the initial
term thereof as determined in accordance with generally accepted accounting
principles,
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discounted from the last date of such initial term to the date of
determination at a rate per annum equal to the discount rate which would be
applicable to a Capital Lease Obligation with like term in accordance with
generally accepted accounting principles. The net amount of rent required to
be paid under any such lease for any such period shall be the aggregate amount
of rent payable by the lessee with respect to such period after excluding
amounts required to be paid on account of insurance, taxes, assessments,
utility, operating and labor costs and similar charges. In the case of any
lease which is terminable by the lessee upon the payment of penalty, such net
amount shall also include the lesser of the amount of such penalty (in which
case no rent shall be considered as required to be paid under such lease
subsequent to the first date upon which it may be so terminated) or the rent
which would otherwise be required to be paid if such lease is not so
terminated. "Attributable Value" means, as to a Capital Lease Obligation, the
principal amount thereof.
"Bank Credit Agreement" means any one or more credit agreements (which may
include or consist of revolving credits) between the Company or any Restricted
Subsidiary of the Company and one or more banks or other financial
institutions providing financing for the business of the Company and its
Restricted Subsidiaries.
"Capital Lease Obligation" of any Person means the obligation to pay rent or
other payment amounts under a lease of (or other Debt arrangements conveying
the right to use) real or personal property of such Person which is required
to be classified and accounted for as a capital lease or a liability on the
face of a balance sheet of such Person in accordance with generally accepted
accounting principles (a "Capital Lease"). The stated maturity of such
obligation shall be the date of the last payment of rent or any other amount
due under such lease prior to the first date upon which such lease may be
terminated by the lessee without payment of a penalty. The principal amount of
such obligation shall be the capitalized amount thereof that would appear on
the face of a balance sheet of such Person in accordance with generally
accepted accounting principles.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock or
other equity participations, including partnership interests, whether general
or limited, of such Person.
"Common Equity" of any Person means Capital Stock of such Person that is not
Disqualified Stock, and a "sale of Common Equity" includes any sale effected
by private sale or public offering.
"Consolidated Capital Ratio" of any Person as of any date means the ratio of
(i) the aggregate consolidated principal amount of Debt of such Person then
outstanding to (ii) the aggregate consolidated Capital Stock (other than
Disqualified Stock) and paid-in capital (other than in respect of Disqualified
Stock) of such Person as of such date.
"Consolidated Cash Flow Available for Fixed Charges" for any period means
the Consolidated Net Income of the Company and its Restricted Subsidiaries for
such period increased by the sum of (i) Consolidated Interest Expense of the
Company and its Restricted Subsidiaries for such period, plus (ii)
Consolidated Income Tax Expense of the Company and its Restricted Subsidiaries
for such period, plus (iii) the consolidated depreciation and amortization
expense included in the income statement of the Company and its Restricted
Subsidiaries for such period plus (iv) any non-cash expense related to the
issuance to employees of the Company or any Restricted Subsidiary of the
Company of options to purchase Capital Stock of the Company or such Restricted
Subsidiary, plus (v) any charge related to any premium or penalty paid in
connection with redeeming or retiring any Debt prior to its stated maturity;
provided, however, that there shall be excluded therefrom the Consolidated
Cash Flow Available for Fixed Charges (if positive) of any Restricted
Subsidiary of the Company (calculated separately for such Restricted
Subsidiary in the same manner as provided above for the Company) that is
subject to a restriction which prevents the payment of dividends or the making
of distributions to the Company or another Restricted Subsidiary of the
Company to the extent of such restriction.
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"Consolidated Income Tax Expense" for any period means the consolidated
provision for income taxes of the Company and its Restricted Subsidiaries for
such period calculated on a consolidated basis in accordance with generally
accepted accounting principles.
"Consolidated Interest Expense" means for any period the consolidated
interest expense included in a consolidated income statement (excluding
interest income) of the Company and its Restricted Subsidiaries for such
period calculated on a consolidated basis in accordance with generally
accepted accounting principles, including without limitation or duplication
(or, to the extent not so included, with the addition of), (i) the
amortization of Debt discounts; (ii) any payments or fees with respect to
letters of credit, bankers' acceptances or similar facilities; (iii) fees with
respect to interest rate swap or similar agreements or foreign currency hedge,
exchange or similar agreements; (iv) Preferred Stock dividends of the Company
and its Restricted Subsidiaries (other than dividends paid in shares of
Preferred Stock that is not Disqualified Stock) declared and paid or payable;
(v) accrued Disqualified Stock dividends of the Company and its Restricted
Subsidiaries, whether or not declared or paid; (vi) interest on Debt
guaranteed by the Company and its Restricted Subsidiaries; and (vii) the
portion of any Capital Lease Obligation paid during such period that is
allocable to interest expense.
"Consolidated Net Income" for any period means the consolidated net income
(or loss) of the Company and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with generally accepted
accounting principles; provided that there shall be excluded therefrom (a) the
net income (or loss) of any Person acquired by the Company or a Restricted
Subsidiary of the Company in a pooling-of-interests transaction for any period
prior to the date of such transaction, (b) the net income (or loss) of any
Person that is not a Restricted Subsidiary of the Company except to the extent
of the amount of dividends or other distributions actually paid to the Company
or a Restricted Subsidiary of the Company by such Person during such period,
(c) gains or losses on Asset Dispositions by the Company or its Restricted
Subsidiaries, (d) all extraordinary gains and extraordinary losses, (e) the
cumulative effect of changes in accounting principles, (f) non-cash gains or
losses resulting from fluctuations in currency exchange rates, (g) any non-
cash gain or loss realized on the termination of any employee pension benefit
plan and (h) the tax effect of any of the items described in clauses (a)
through (g) above; provided, further, that for purposes of any determination
pursuant to the provisions described under "Covenants--Limitation on
Restricted Payments," there shall further be excluded therefrom the net income
(but not net loss) of any Restricted Subsidiary of the Company that is subject
to a restriction which prevents the payment of dividends or the making of
distributions to the Company or another Restricted Subsidiary of the Company
to the extent of such restriction.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
generally accepted accounting principles, less amounts attributable to
Disqualified Stock of such Person; provided that, with respect to the Company,
adjustments following the date of the Indenture to the accounting books and
records of the Company in accordance with Accounting Principles Board Opinions
Nos. 16 and 17 (or successor opinions thereto) or otherwise resulting from the
acquisition of control of the Company by another Person shall not be given
effect to.
"Consolidated Tangible Assets" of any Person means the total amount of
assets (less applicable reserves and other properly deductible items) which
under generally accepted accounting principles would be included on a
consolidated balance sheet of such Person and its Restricted Subsidiaries
after deducting therefrom all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles, which in
each case under generally accepted accounting principles would be included on
such consolidated balance sheet; provided that, with respect to the Company,
adjustments following the date of the Indenture to the accounting books and
records of the Company in accordance with Accounting Principles Board Opinions
Nos. 16 and 17 (or successor opinions
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thereto) or otherwise resulting from the acquisition of control of the Company
by another Person shall not be given effect to.
"Debt" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or
not contingent, (i) every obligation of such Person for money borrowed, (ii)
every obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, including any such obligations Incurred in connection
with the acquisition of property, assets or businesses, (iii) every
reimbursement obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of such
Person, (iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (including securities repurchase
agreements but excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business which are not overdue or which are being
contested in good faith), (v) every Capital Lease Obligation of such Person,
(vi) all Receivables Sales of such Person, together with any obligation of
such Person to pay any discount, interest, fees, indemnities, penalties,
recourse, expenses or other amounts in connection therewith, (vii) all
obligations to redeem Disqualified Stock issued by such Person, (viii) every
obligation under Interest Rate and Currency Protection Agreements of such
Person and (ix) every obligation of the type referred to in clauses (i)
through (viii) of another Person and all dividends of another Person the
payment of which, in either case, such Person has Guaranteed. The "amount" or
"principal amount" of Debt at any time of determination as used herein
represented by (a) any Debt issued at a price that is less than the principal
amount at maturity thereof, shall be the amount of the liability in respect
thereof determined in accordance with generally accepted accounting
principles, (b) any Receivables Sale, shall be the amount of the unrecovered
capital or principal investment of the purchaser (other than the Company or a
Wholly-Owned Restricted Subsidiary of the Company) thereof, excluding amounts
representative of yield or interest earned on such investment, (c) any
Disqualified Stock, shall be the maximum fixed redemption or repurchase price
in respect thereof, (d) any Capital Lease Obligation, shall be determined in
accordance with the definition thereof, or (e) any Permitted Interest Rate or
Currency Protection Agreement, shall be zero. In no event shall Debt include
any liability for taxes.
"Default" means an event that with the passing of time or the giving of
notice or both shall constitute an Event of Default.
"Disqualified Stock" of any Person means any Capital Stock of such Person
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of such Person, any
Restricted Subsidiary of such Person or the holder thereof, in whole or in
part, on or prior to the final Stated Maturity of the Notes; provided,
however, that any Preferred Stock which would not constitute Disqualified
Stock but for provisions thereof giving holders thereof the right to require
the Company to repurchase or redeem such Preferred Stock upon the occurrence
of a Change of Control occurring prior to the final Stated Maturity of the
Notes shall not constitute Disqualified Stock if the change of control
provisions applicable to such Preferred Stock are no more favorable to the
holders of such Preferred Stock than the provisions applicable to the Notes
contained in the covenant described under "Covenants--Change of Control" and
such Preferred Stock specifically provides that the Company will not
repurchase or redeem any such stock pursuant to such provisions prior to the
Company's repurchase of such Notes as are required to be repurchased pursuant
to the covenant described under "Covenants--Change of Control".
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent
in foreign currency, whose debt is rated "A-3" or higher, "A-" or higher or
"A-" or higher according to Moody's Investors Service, Inc., Standard & Poor's
Ratings Group or Duff & Phelps Credit Rating Co. (or such similar equivalent
rating by at least one "nationally recognized statistical rating organization"
(as defined in Rule 436 under the Securities Act)) respectively, at the time
as of which any investment or rollover therein is made.
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"Event of Default" has the meaning set forth under "Events of Default"
below.
"Exchange Act" means the Securities Exchange Act of 1934, as amended (or any
successor act) and the rules and regulations thereunder.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which
obligations or guarantee the full faith and credit of the United States is
pledged and which have a remaining weighted average life to maturity of not
more than one year from the date of Investment therein.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person guaranteeing, or having the economic effect of guaranteeing, any
Debt of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, and including, without limitation, any obligation of
such Person, (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or to purchase (or to advance or supply
funds for the purchase of) any security for the payment of such Debt, (ii) to
purchase property, securities or services for the purpose of assuring the
holder of such Debt of the payment of such Debt, or (iii) to maintain working
capital, equity capital or other financial statement condition or liquidity of
the primary obligor so as to enable the primary obligor to pay such Debt (and
"Guaranteed", "Guaranteeing" and "Guarantor" shall have meanings correlative
to the foregoing); provided, however, that the Guarantee by any Person shall
not include endorsements by such Person for collection or deposit, in either
case, in the ordinary course of business; and provided further, that the
incurrence by a Restricted Subsidiary of the Company of a lien permitted under
clause (iv) of the second paragraph of the "Limitation on Liens" covenant
shall not be deemed to constitute a Guarantee by such Restricted Subsidiary of
any Purchase Money Debt of the Company secured thereby.
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Debt or other
obligation including by acquisition of Subsidiaries or the recording, as
required pursuant to generally accepted accounting principles or otherwise, of
any such Debt or other obligation on the balance sheet of such Person (and
"Incurrence", "Incurred", "Incurable" and "Incurring" shall have meanings
correlative to the foregoing); provided, however, that a change in generally
accepted accounting principles that results in an obligation of such Person
that exists at such time becoming Debt shall not be deemed an Incurrence of
such Debt and that neither the accrual of interest nor the accretion of
original issue discount shall be deemed an Incurrence of Debt; provided,
further, however, that the Company may elect to treat all or any portion of
revolving credit debt of the Company or a Subsidiary as being Incurred from
and after any date beginning the date the revolving credit commitment is
extended to the Company or a Subsidiary, by furnishing notice thereof to the
Trustee, and any borrowings or reborrowings by the Company or a Subsidiary
under such commitment up to the amount of such commitment designated by the
Company as Incurred shall not be deemed to be new Incurrences of Debt by the
Company or such Subsidiary.
"Interest Rate or Currency Protection Agreement" of any Person means any
forward contract, futures contract, swap, option or other financial agreement
or arrangement (including, without limitation, caps, floors, collars and
similar agreements) relating to, or the value of which is dependent upon,
interest rates or currency exchange rates or indices.
"Investment" by any Person means any direct or indirect loan, advance or
other extension of credit or capital contribution (by means of transfers of
cash or other property to others or payments for property or services for the
account or use of others, or otherwise) to, or purchase or acquisition of
Capital Stock, bonds, notes, debentures or other securities or evidence of
Debt issued by, any other Person, including any payment on a Guarantee of any
obligation of such other Person, but excluding any loan, advance or extension
of credit to an employee of the Company or any of its Restricted
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Subsidiaries in the ordinary course of business, accounts receivables and
other commercially reasonable extensions of trade credit.
"Issue Date" means the date on which the Notes are first authenticated and
delivered under the Indenture.
"Joint Venture" means a corporation, partnership or other entity engaged in
one or more Telecommunications Businesses as to which the Company (directly or
through one or more Restricted Subsidiaries) exercises managerial control and
in which the Company owns (i) a 50% or greater interest, or (ii) a 40% or
greater interest, together with options or other contractual rights,
exercisable not more than seven years after the Company's initial Investment
in such Joint Venture, to increase its interest to not less than 50%.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, Receivables Sale, deposit
arrangement, security interest, lien, charge, easement (other than any
easement not materially impairing usefulness or marketability), encumbrance,
preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever on or with respect to such property or assets
(including, without limitation, any conditional sale or other title retention
agreement having substantially the same economic effect as any of the
foregoing).
"Managing Member" means Eagle River, NEXTLINK, Inc. or their respective
successors as Managing Members under the Company's Limited Liability Company
Agreement.
"Marketable Securities" means: (i) Government Securities; (ii) any time
deposit account, money market deposit and certificate of deposit maturing not
more than 270 days after the date of acquisition issued by, or time deposit
of, an Eligible Institution; (iii) commercial paper maturing not more than 270
days after the date of acquisition issued by a corporation (other than an
Affiliate of the Company) with a rating, at the time as of which any
investment therein is made, of "P-1" or higher according to Moody's Investors
Service, Inc., "A-1" or higher according to Standard & Poor's Ratings Group or
"A-1" or higher according to Duff & Phelps Credit Rating Co. (or such similar
equivalent rating by at least one "nationally recognized statistical rating
organization" (as defined in Rule 436 under the Securities Act)); (iv) any
banker's acceptances or money market deposit accounts issued or offered by an
Eligible Institution; (v) repurchase obligations with a term of not more than
7 days for Government Securities entered into with an Eligible Institution;
and (vi) any fund investing exclusively in investments of the types described
in clauses (i) through (v) above.
"Net Available Proceeds" from any Asset Disposition by any Person means cash
or readily marketable cash equivalents received (including by way of sale or
discounting of a note, installment receivable or other receivable, but
excluding any other consideration received in the form of assumption by the
acquiror of Debt or other obligations relating to such properties or assets)
therefrom by such Person, net of (i) all legal, title and recording tax
expenses, commissions and other fees and expenses Incurred and all federal,
state, provincial, foreign and local taxes (including taxes payable upon
payment or other distribution of funds from a foreign subsidiary to the
Company or another subsidiary of the Company) required to be accrued as a
liability as a consequence of such Asset Disposition, (ii) all payments made
by such Person or its Restricted Subsidiaries on any Debt which is secured by
such assets in accordance with the terms of any Lien upon or with respect to
such assets or which must by the terms of such Lien, or in order to obtain a
necessary consent to such Asset Disposition or by applicable law, be repaid
out of the proceeds from such Asset Disposition, (iii) all distributions and
other payments made to minority interest holders in Restricted Subsidiaries of
such Person or joint ventures as a result of such Asset Disposition, (iv)
appropriate amounts to be provided by such Person or any Restricted Subsidiary
thereof, as the case may be, as a reserve in accordance with generally
accepted accounting principles against any liabilities associated with such
assets and
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retained by such Person or any Restricted Subsidiary thereof, as the case may
be, after such Asset Disposition, including, without limitation, liabilities
under any indemnification obligations and severance and other employee
termination costs associated with such Asset Disposition, in each case as
determined by a Managing Member, in its reasonable good faith judgment
evidenced by a certificate of such Managing Member filed with the Trustee;
provided, however, that any reduction in such reserve within twelve months
following the consummation of such Asset Disposition will be treated for all
purposes of the Indenture and the Notes as a new Asset Disposition at the time
of such reduction with Net Available Proceeds equal to the amount of such
reduction, and (v) any consideration for an Asset Disposition (which would
otherwise constitute Net Available Proceeds) that is required to be held in
escrow pending determination of whether a purchase price adjustment will be
made, but amounts under this clause (v) shall become Net Available Proceeds at
such time and to the extent such amounts are released to such Person.
"Offer to Purchase" means a written offer (the "Offer") sent by the Company
by first class mail, postage prepaid, to each holder at his address appearing
in the Note Register on the date of the Offer offering to purchase up to the
principal amount of Notes specified in such Offer at the purchase price
specified in such Offer (as determined pursuant to the Indenture). Unless
otherwise required by applicable law, the Offer shall specify an expiration
date (the "Expiration Date") of the Offer to Purchase which shall be, subject
to any contrary requirements of applicable law, not less than 30 days or more
than 60 days after the date of such Offer and a settlement date (the "Purchase
Date") for purchase of Notes within five Business Days after the Expiration
Date. The Company shall notify the Trustee at least 15 Business Days (or such
shorter period as is acceptable to the Trustee) prior to the mailing of the
Offer of the Company's obligation to make an Offer to Purchase, and the Offer
shall be mailed by the Company or, at the Company's request, by the Trustee in
the name and at the expense of the Company. The Offer shall contain
information concerning the business of the Company and its Subsidiaries which
the Company in good faith believes will enable such holders to make an
informed decision with respect to the Offer to Purchase (which at a minimum
will include (i) the most recent annual and quarterly financial statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in the documents required to be filed with the Trustee
pursuant to the Indenture (which requirements may be satisfied by delivery of
such documents together with the Offer), (ii) a description of material
developments in the Company's business subsequent to the date of the latest of
such financial statements referred to in clause (i) (including a description
of the events requiring the Issuers to make the Offer to Purchase), (iii) if
applicable, appropriate pro forma financial information concerning the Offer
to Purchase and the events requiring the Issuers to make the Offer to Purchase
and (iv) any other information required by applicable law to be included
therein). The Offer shall contain all instructions and materials necessary to
enable such holders to tender Notes pursuant to the Offer to Purchase. The
Offer shall also state:
a. the Section of the Indenture pursuant to which the Offer to Purchase
is being made;
b. the Expiration Date and the Purchase Date;
c. the aggregate principal amount of the Outstanding Notes offered to be
purchased by the Company pursuant to the Offer to Purchase (including, if
less than 100%, the manner by which such has been determined pursuant to
the Indenture provision requiring the Offer to Purchase) (the "Purchase
Amount");
d. the purchase price to be paid by the Company for each $1,000 aggregate
principal amount of Notes accepted for payment (as specified pursuant to
the Indenture) (the "Purchase Price");
e. that the holder may tender all or any portion of the Notes registered
in the name of such holder and that any portion of a Note tendered must be
tendered in an integral multiple of $1,000 principal amount;
f. the place or places where Notes are to be surrendered for tender
pursuant to the Offer to Purchase;
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g. that interest (including Special Interest) on any Note not tendered or
tendered but not purchased by the Company pursuant to the Offer to Purchase
will continue to accrue;
h. that on the Purchase Date the Purchase Price will become due and
payable upon each Note being accepted for payment pursuant to the Offer to
Purchase and that interest (including Special Interest) thereon shall cease
to accrue on and after the Purchase Date;
i. that each holder electing to tender a Note pursuant to the Offer to
Purchase will be required to surrender such Note at the place or places
specified in the Offer prior to the close of business on the Expiration
Date (such Note being, if the Company or the Trustee so requires, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the holder
thereof or his attorney duly authorized in writing);
j. that holders will be entitled to withdraw all or any portion of Notes
tendered if the Company (or their Paying Agent) receive, not later than the
close of business on the Expiration Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the holder, the principal
amount of the Note the holder tendered, the certificate number of the Note
the holder tendered and a statement that such holder is withdrawing all or
a portion of his tender;
k. that (a) if Notes in an aggregate principal amount less than or equal
to the Purchase Amount are duly tendered and not withdrawn pursuant to the
Offer to Purchase, the Company shall purchase all such Notes and (b) if
Notes in an aggregate principal amount in excess of the Purchase Amount are
tendered and not withdrawn pursuant to the Offer to Purchase, the Company
shall purchase Notes having an aggregate principal amount equal to the
Purchase Amount on a pro rata basis (with such adjustments as may be deemed
appropriate so that only Notes in denominations of $1,000 or integral
multiples thereof shall be purchased); and
l. that in the case of any holder whose Note is purchased only in part,
the Company shall execute, and the Trustee shall authenticate and deliver
to the holder of such Note without service charge, a new Note or Notes, of
any authorized denomination as requested by such holder, in an aggregate
principal amount equal to and in exchange for the unpurchased portion of
the Note so tendered.
Any Offer to Purchase shall be governed by and effected in accordance with the
Offer for such Offer to Purchase.
"Permitted Interest Rate or Currency Protection Agreement" of any Person
means any Interest Rate or Currency Protection Agreement entered into with one
or more financial institutions in the ordinary course of business that is
designed to protect such Person against fluctuations in interest rates or
currency exchange rates with respect to Debt Incurred and which shall have a
notional amount no greater than the payments due with respect to the Debt
being hedged thereby and not for purposes of speculation.
"Permitted Investment" means (i) any Investment in a Joint Venture
(including the purchase or acquisition of any Capital Stock of a Joint
Venture), provided the aggregate amount of all outstanding Investments
pursuant to this clause (i) in Joint Ventures in which the Company owns,
directly or indirectly, a less than 50% interest shall not exceed $25 million,
(ii) any Investment in any Person as a result of which such Person becomes a
Restricted Subsidiary or, subject to the proviso to clause (i) of this
definition, becomes a Joint Venture of the Company, (iii) any Investment in
Marketable Securities, (iv) Investments in Permitted Interest Rate or Currency
Protection Agreements, and (v) Investments made as a result of the receipt of
noncash consideration from an Asset Disposition that was made pursuant to and
in compliance with the covenant described under "Covenants--Limitation on
Asset Dispositions" above.
"Permitted Liens" means (a) Liens for taxes, assessments, governmental
charges or claims which are not yet delinquent or which are being contested in
good faith by appropriate proceedings, if a
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reserve or other appropriate provision, if any, as shall be required in
conformity with generally accepted accounting principles shall have been made
therefor; (b) other Liens incidental to the conduct of the Company's and its
Restricted Subsidiaries' business or the ownership of its property and assets
not securing any Debt, and which do not in the aggregate materially detract
from the value of the Company's and its Restricted Subsidiaries' property or
assets when taken as a whole, or materially impair the use thereof in the
operation of its business; (c) Liens with respect to assets of a Restricted
Subsidiary granted by such Restricted Subsidiary to the Company to secure Debt
owing to the Company; (d) pledges and deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of statutory obligations (including to secure government
contracts); (e) deposits made to secure the performance of tenders, bids,
leases, and other obligations of like nature incurred in the ordinary course
of business (exclusive of obligations for the payment of borrowed money); (f)
zoning restrictions, servitudes, easements, rights-of-way, restrictions and
other similar charges or encumbrances incurred in the ordinary course of
business which, in the aggregate, do not materially detract from the value of
the property subject thereto or interfere with the ordinary conduct of the
business of the Company or its Restricted Subsidiaries; (g) Liens arising out
of judgments or awards against the Company or any Restricted Subsidiary with
respect to which the Company or such Restricted Subsidiary is prosecuting an
appeal or proceeding for review and the Company or such Restricted Subsidiary
is maintaining adequate reserves in accordance with generally accepted
accounting principles; (h) any interest or title of a lessor in the property
subject to any lease other than a Capital Lease; and (i) any statutory
warehousemen's, materialmen's or other similar Liens for sums not then due and
payable (or which, if due and payable, are being contested in good faith and
with respect to which adequate reserves are being maintained to the extent
required by generally accepted accounting principles).
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof or any other entity.
"Pledge Account" means an account established with the Trustee pursuant to
the terms of the Pledge Agreement for the deposit of the Pledged Securities
purchased by the Company with a portion of the net proceeds from the Offering.
"Pledge Agreement" means the Collateral Pledge and Security Agreement, dated
as of the date of the Indenture, by and between the Trustee and the Company,
governing the disbursement of funds from the Pledge Account.
"Pledged Securities" means the securities purchased by the Company with a
portion of the net proceeds from the Offering, which shall initially consist
of Government Securities, to be deposited in the Pledge Account.
"Preferred Dividends" for any Person means for any period the quotient
determined by dividing the amount of dividends and distributions paid or
accrued (whether or not declared) on Preferred Stock of such Person during
such period calculated in accordance with generally accepted accounting
principles, by 1 minus the maximum statutory income tax rate then applicable
to the Company (expressed as a decimal).
"Preferred Stock" of any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding up of such Person, to shares
of Capital Stock of any other class of such Person.
"Purchase Money Debt" means (i) Acquired Debt Incurred in connection with
the acquisition of Telecommunications Assets and (ii) Debt of the Company or
of any Restricted Subsidiary of the
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Company (including, without limitation, Debt represented by Capital Lease
Obligations, Vendor Financing Facilities, mortgage financings and purchase
money obligations) Incurred for the purpose of financing all or any part of
the cost of construction, acquisition or improvement by the Company or any
Restricted Subsidiary of the Company or any Joint Venture of any
Telecommunications Assets of the Company, any Restricted Subsidiary of the
Company or any Joint Venture, and including any related notes, Guarantees,
collateral documents, instruments and agreements executed in connection
therewith, as the same may be amended, supplemented, modified or restated from
time to time.
"Receivables" means receivables, chattel paper, instruments, documents or
intangibles evidencing or relating to the right to payment of money in respect
of the sale of goods or services.
"Receivables Sale" of any Person means any sale of Receivables of such
Person (pursuant to a purchase facility or otherwise), other than in
connection with a disposition of the business operations of such Person
relating thereto or a disposition of defaulted Receivables for purpose of
collection and not as a financing arrangement.
"Related Person" of any Person means any other Person directly or indirectly
owning (a) 10% or more of the Outstanding Common Equity of such Person (or, in
the case of a Person that is not a corporation, 10% or more of the equity
interest in such Person) or (b) 10% or more of the combined voting power of
the Voting Stock of such Person.
"Restricted Subsidiary" of the Company means any Subsidiary, whether
existing on or after the date of the Indenture, unless such Subsidiary is an
Unrestricted Subsidiary.
"Sale and Leaseback Transaction" of any Person means an arrangement with any
lender or investor or to which such lender or investor is a party providing
for the leasing by such Person of any property or asset of such Person which
has been or is being sold or transferred by such Person more than 365 days
after the acquisition thereof or the completion of construction or
commencement of operation thereof to such lender or investor or to any person
to whom funds have been or are to be advanced by such lender or investor on
the security of such property or asset. The stated maturity of such
arrangement shall be the date of the last payment of rent or any other amount
due under such arrangement prior to the first date on which such arrangement
may be terminated by the lessee without payment of a penalty.
"Significant Subsidiary" means a Restricted Subsidiary that is a
"significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under
the Securities Act and the Exchange Act.
"Subordinated Debt" means Debt of the Company as to which the payment of
principal of (and premium, if any) and interest and other payment obligations
in respect of such Debt shall be subordinate to the prior payment in full of
the Notes to at least the following extent: (i) no payments of principal of
(or premium, if any) or interest on or otherwise due in respect of such Debt
may be permitted for so long as any default in the payment of principal (or
premium, if any) or interest on the Notes exists; (ii) in the event that any
other default that with the passing of time or the giving of notice, or both,
would constitute an Event of Default exists with respect to the Notes, upon
notice by 25% or more in principal amount of the Notes to the Trustee, the
Trustee shall have the right to give notice to the Company and the holders of
such Debt (or trustees or agents therefor) of a payment blockage, and
thereafter no payments of principal of (or premium, if any) or interest on or
otherwise due in respect of such Debt may be made for a period of 179 days
from the date of such notice or for the period until such default has been
cured or waived or ceased to exist and any acceleration of the Notes has been
rescinded or annulled, whichever period is shorter (which Debt may provide
that (A) no new period of payment blockage may be commenced by a payment
blockage notice unless and until 360 days have elapsed since the effectiveness
of the immediately prior notice, (B) no nonpayment default that existed or was
continuing on the date of delivery of any payment blockage notice to such
holders
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<PAGE>
(or such agents or trustees) shall be, or be made, the basis for a subsequent
payment blockage notice and (C) failure of the Company to make payment on such
Debt when due or within any applicable grace period, whether or not on account
of such payment blockage provisions, shall constitute an event of default
thereunder); and (iii) such Debt may not (x) provide for payments of principal
of such Debt at the stated maturity thereof or by way of a sinking fund
applicable thereto or by way of any mandatory redemption, defeasance,
retirement or repurchase thereof by the Company (including any redemption,
retirement or repurchase which is contingent upon events or circumstances, but
excluding any retirement required by virtue of acceleration of such Debt upon
an event of default thereunder), in each case prior to the final Stated
Maturity of the Notes or (y) permit redemption or other retirement (including
pursuant to an offer to purchase made by the Company) of such other Debt at
the option of the holder thereof prior to the final Stated Maturity of the
Notes, other than a redemption or other retirement at the option of the holder
of such Debt (including pursuant to an offer to purchase made by the Company)
which is conditioned upon a change of control of the Company pursuant to
provisions substantially similar to those described under "Covenants--Change
of Control" (and which shall provide that such Debt will not be repurchased
pursuant to such provisions prior to the Company's repurchase of the Notes
required to be repurchased by the Company pursuant to the provisions described
under "Covenants--Change of Control").
"Subsidiary" of any Person means (i) a corporation more than 50% of the
combined voting power of the outstanding Voting Stock of which is owned,
directly or indirectly, by such Person or by one or more other Subsidiaries of
such Person or by such Person and one or more Subsidiaries thereof or (ii) any
other Person (other than a corporation) in which such Person, or one or more
other Subsidiaries of such Person or such Person and one or more other
Subsidiaries thereof, directly or indirectly, has at least a majority
ownership and power to direct the policies, management and affairs thereof.
"Tax Amount" means for each fiscal year of any Person (a) the aggregate
amount of income or gain of such Person over the aggregate amount of loss,
deduction or expense of such Person multiplied by (b) the maximum marginal
federal and applicable state income tax rates.
"Telecommunications Assets" means all assets, rights (contractual or
otherwise) and properties, whether tangible or intangible, used or intended
for use in connection with a Telecommunications Business.
"Telecommunications Business" means the business of (i) transmitting, or
providing services relating to the transmission of, voice, video or data
through owned or leased transmission facilities, (ii) creating, developing or
marketing communications related network equipment, software and other devices
for use in a Telecommunication Business or (iii) evaluating, participating or
pursuing any other activity or opportunity that is primarily related to those
identified in (i) or (ii) above and shall, in any event, include all
businesses in which the Company or any of its Subsidiaries are engaged on the
Issue Date; provided that the determination of what constitutes a
Telecommunications Business shall be made in good faith by the Managing Member
of the Company, which determination shall be conclusive.
"Unrestricted Subsidiary" means (1) any Subsidiary of the Company designated
as such by the Managing Member as set forth below where (a) neither the
Company nor any of its other Subsidiaries (other than another Unrestricted
Subsidiary) (i) provides credit support for, or Guarantee of, any Debt of such
Subsidiary or any Subsidiary of such Subsidiary (including any undertaking,
agreement or instrument evidencing such Debt) or (ii) is directly or
indirectly liable for any Debt of such Subsidiary or any Subsidiary of such
Subsidiary, and (b) no default with respect to any Debt of such Subsidiary or
any Subsidiary of such Subsidiary (including any right which the holders
thereof may have to take enforcement action against such Subsidiary) would
permit (upon notice, lapse of time or both) any holder of any other Debt of
the Company and its Restricted Subsidiaries to declare a default on such other
Debt or cause the payment thereof to be accelerated or payable prior to its
final scheduled
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<PAGE>
maturity and (2) any Subsidiary of an Unrestricted Subsidiary. The Managing
Member may designate any Subsidiary to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any
property of, any other Subsidiary of the Company which is not a Subsidiary of
the Subsidiary to be so designated or otherwise an Unrestricted Subsidiary,
provided that either (x) the Subsidiary to be so designated has total assets
of $1,000 or less or (y) immediately after giving effect to such designation,
the Company could incur at least $1.00 of additional Debt pursuant to the
first paragraph under "Covenants--Limitation on Consolidated Debt" above and
provided, further, that the Company could make a Restricted Payment in an
amount equal to the greater of the fair market value and the book value of
such Subsidiary pursuant to the covenant described under "Covenants--
Limitation on Restricted Payments" and such amount is thereafter treated as a
Restricted Payment for the purpose of calculating the aggregate amount
available for Restricted Payments thereunder. The Managing Member may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary, provided
that, immediately after giving effect to such designation, the Company could
incur at least $1.00 of additional Debt pursuant to the first paragraph under
"Covenants--Limitation on Consolidated Debt" above.
"Vendor Financing Facility" means any agreements between the Company or a
Restricted Subsidiary of the Company and one or more vendors or lessors of
equipment to the Company or any of its Restricted Subsidiaries (or any
affiliate of any such vendor or lessor) providing financing for the
acquisition by the Company or any such Restricted Subsidiary of equipment from
any such vendor or lessor.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons
performing similar functions) of such Person, whether at all times or only so
long as no senior class of securities has such voting power by reason of any
contingency.
"Wholly-Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person 99% or more of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person or by one or more Wholly-Owned
Restricted Subsidiaries of such Person or by such Person and one or more
Wholly-Owned Restricted Subsidiaries of such Person.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a) failure to
pay principal of (or premium, if any, on) any Note when due; (b) failure to
pay any interest (including Special Interest) on any Note when due, as to any
interest payment date falling on or prior to April 15, 1999, and any such
failure continued for 30 days as to any interest payment date thereafter; (c)
default in the payment of principal and interest (including Special Interest)
on Notes required to be purchased pursuant to an Offer to Purchase as
described under "Covenants--Change of Control" when due and payable; (d)
failure to perform or comply with the provisions described under "Mergers,
Consolidations and Certain Sales of Assets"; (e) failure to perform any other
covenant or agreement of the Issuers under the Indenture or the Notes
continued for 60 days after written notice to the Issuers by the Trustee or
Holders of at least 25% in aggregate principal amount of Outstanding Notes;
(f) default under the terms of any instrument evidencing or securing Debt of
the Company or any Significant Subsidiary having an outstanding principal
amount of $10 million individually or in the aggregate which default results
in the acceleration of the payment of such Debt or constitutes the failure to
pay such Debt when due; (g) the rendering of a final judgment or judgments
(not subject to appeal) for the payment of money against the Company or any
Significant Subsidiary in an aggregate amount in excess of $10 million which
remains undischarged or unstayed for a period of 45 days after the date on
which the right to appeal all such judgments has expired; and (h) certain
events of bankruptcy, insolvency or reorganization affecting the Issuers or
any Significant Subsidiary. ((S)501) Subject to the provisions of the
Indenture
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relating to the duties of the Trustee in case an Event of Default (as defined)
shall occur and be continuing, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request or
direction of any of the Holders, unless such Holders shall have offered to the
Trustee reasonable indemnity. ((S)603) Subject to such provisions for the
indemnification of the Trustee, the Holders of a majority in aggregate
principal amount of the Outstanding Notes will have the right to direct the
time, method and place of conducting any proceeding for any remedy available
to the Trustee or exercising any trust or power conferred on the Trustee. The
Trustee may refuse, however, to follow any direction that the Trustee, in its
sole discretion, determines may be unduly prejudicial to the rights of another
holder or that may subject the Trustee to any liability or expense if the
Trustee determines, in its sole discretion, that it lacks indemnification
against such loss or expense. ((S)512)
If an Event of Default (other than an Event of Default described in Clause
(h) above with respect to the Issuers) shall occur and be continuing, either
the Trustee or the Holders of at least 25% in aggregate principal amount of
the Outstanding Notes may accelerate the maturity of all Notes; provided,
however, that after such acceleration, but before a judgment or decree based
on acceleration, the Holders of a majority in aggregate principal amount of
Outstanding Notes may, under certain circumstances, rescind and annul such
acceleration if all Events of Default, other than the non-payment of
accelerated principal, have been cured or waived as provided in the Indenture.
If an Event of Default specified in Clause (h) above occurs with respect to
the Issuers, the Outstanding Notes will ipso facto become immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder. ((S)502) For information as to waiver of defaults, see "Modification
and Waiver".
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder
shall have previously given to the Trustee written notice of a continuing
Event of Default (as defined) and unless also the Holders of at least 25% in
aggregate principal amount of the Outstanding Notes shall have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee, and the Trustee shall not have received from the
Holders of a majority in aggregate principal amount of the Outstanding Notes a
direction inconsistent with such request and shall have failed to institute
such proceeding within 60 days. ((S)507) However, such limitations do not
apply to a suit instituted by a Holder of a Note for enforcement of payment of
the principal of and premium, if any, or interest (including Special Interest)
on such Note on or after the respective due dates expressed in such Note.
((S)508)
The Indenture provides that if a Default occurs and is continuing, generally
the Trustee must, within 90 days after the occurrence of such Default, give to
the Holders notice of such Default. The Trustee may withhold from Holders of
the Notes notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal of, premium,
if any or interest (including Special Interest)) if it determines that
withholding notice is in their interest; provided however, that in the case of
any default of a character specified in Clause (e) above, no such notice to
holders shall be given until at least 30 days after the occurrence thereof.
((S)602)
The Company will be required to furnish to the Trustee quarterly a statement
as to the performance by the Company of certain of its obligations under the
Indenture and the Company is required upon becoming aware of any Default or
Event of Default to deliver to the Trustee a statement specifying such Default
or Event of Default. ((S)1019)
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture will cease to be of further effect as to all outstanding Notes
(except as to (i) rights of registration of transfer and exchange and the
Issuers' right of optional redemption, (ii) substitution of apparently
mutilated, defaced, destroyed, lost or stolen Notes, (iii) rights of Holders
to receive payment of principal of and premium, if any, and interest
(including Special Interest) on the Notes, (iv)
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rights, obligations and immunities of the Trustee under the Indenture and (v)
rights of the Holders of the Notes as beneficiaries of the Indenture with
respect to any property deposited with the Trustee payable to all or any of
them), if (x) the Issuers will have paid or caused to be paid the principal of
and premium, if any, and interest (including Special Interest) on the Notes as
and when the same will have become due and payable or (y) all outstanding
Notes (except lost, stolen or destroyed Notes which have been replaced or
paid) have been delivered to the Trustee for cancellation. ((S) 401)
DEFEASANCE
The Indenture provides that, at the option of the Issuers, (a) if
applicable, the Issuers will be discharged from any and all obligations in
respect of the Outstanding Notes or (b) if applicable, the Issuers may omit to
comply with certain restrictive covenants, and that such omission shall not be
deemed to be an Event of Default under the Indenture and the Notes, in either
case (a) or (b) upon irrevocable deposit with the Trustee, in trust, of money
and/or U.S. government obligations which will provide money in an amount
sufficient in the opinion of a nationally recognized firm of independent
certified public accountants to pay the principal of and premium, if any, and
each installment of interest, if any, on the Outstanding Notes on the Stated
Maturity. With respect to clause (b), the obligations under the Indenture
other than with respect to such covenants and the Events of Default other than
the Events of Default relating to such covenants above shall remain in full
force and effect. Such trust may only be established if, among other things
(i) with respect to clause (a), the Issuers have received from, or there has
been published by, the Internal Revenue Service a ruling or there has been a
change in law after the Issue Date, which in the Opinion of Counsel provides
that holders of the Notes will not recognize gain or loss for Federal income
tax purposes as a result of such deposit, defeasance and discharge and will be
subject to Federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such deposit, defeasance and
discharge had not occurred; or, with respect to clause (b), the Issuers have
delivered to the Trustee an Opinion of Counsel to the effect that the holders
of the Notes will not recognize gain or loss for Federal income tax purposes
as a result of such deposit and defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such deposit and defeasance had not occurred; (ii)
no Default or Event of Default shall have occurred or be continuing; (iii) the
Issuers have delivered to the Trustee an Opinion of Counsel to the effect that
such deposit shall not cause the Trustee or the trust so created to be subject
to the Investment Company Act of 1940, as amended; and (iv) certain other
customary conditions precedent are satisfied. ((S) 1201)
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Issuers and
the Trustee with the consent of the holders of a majority in aggregate
principal amount of the Outstanding Notes; provided, however, that no such
modification or amendment may, without the consent of the holder of each
Outstanding Note affected thereby, (a) change the due date of the principal
of, or any installment of interest on, any Note, (b) reduce the principal
amount of, or the premium or interest on, any Note, (c) change the place or
currency of payment of principal of, or premium or interest on, any Note, (d)
impair the right to institute suit for the enforcement of any payment on or
with respect to any Note, (e) reduce the above-stated percentage of
Outstanding Notes necessary to modify or amend the Indenture, (f) reduce the
percentage of aggregate principal amount of Outstanding Notes necessary for
waiver of compliance with certain provisions of the Indenture or for waiver of
certain defaults, (g) modify any provisions of the Indenture relating to the
modification and amendment of the Indenture or the waiver of past defaults or
covenants, except as otherwise specified, or (h) following the mailing of any
Offer to Purchase and until the Expiration Date of that Offer to Purchase,
modify any Offer to Purchase for the Notes required under the "Limitation on
Asset Dispositions" and the "Change of Control" covenants contained in the
Indenture in a manner materially adverse to the Holders thereof. ((S) 902)
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Notwithstanding the foregoing, without the consent of any holder of Notes,
the Issuers and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to holders of Notes or that does not adversely affect the
legal rights under the Indenture of any such holder, or to comply with
requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act or to effect the
Exchange Offer. ((S)901)
The holders of a majority in aggregate principal amount of the Outstanding
Notes, on behalf of all holders of Notes, may waive compliance by the Company
with certain restrictive provisions of the Indenture. ((S)1019) Subject to
certain rights of the Trustee, as provided in the Indenture, the holders of a
majority in aggregate principal amount of the Outstanding Notes, on behalf of
all holders of Notes, may waive any past default under the Indenture, except a
default in the payment of principal, premium or interest (including Special
Interest) or a default arising from failure to purchase any Note tendered
pursuant to an Offer to Purchase. ((S)513)
NO PERSONAL LIABILITY OF MEMBERS, MANAGERS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS
No member, manager, director, officer, employee, incorporator or stockholder
of either Issuer, as such, shall have any liability for any obligations of
either Issuer under the Notes, the Indenture or the Registration Rights
Agreement or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such waiver is against public policy.
GOVERNING LAW
The Indenture and the Notes will be governed by the laws of the State of New
York.
THE TRUSTEE
The Trustee's current address is 114 West 47th Street, New York, New York
10036.
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the
Trustee will exercise such rights and powers vested in it under the Indenture
and use the same degree of care and skill in its exercise as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs. ((S)601)
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of either Issuer, to obtain payment of claims in certain
cases or to realize on certain property received by it in respect of any such
claim as security or otherwise. The Trustee is permitted to engage in other
transactions with the Issuers or any Affiliate, provided, however, that if it
acquires any conflicting interest (as defined in the Indenture or in the Trust
Indenture Act), it must eliminate such conflict or resign. ((S)(S)608, 613)
PLAN OF DISTRIBUTION
Based on interpretations by the Staff set forth in no-action letters issued
to third parties, the Issuers believe that Exchange Notes issued pursuant to
the Exchange Offer in exchange for the Senior Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any
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holder which is (i) an Affiliate of the Issuers, (ii) a broker-dealer who
acquired Senior Notes directly from the Issuers or (iii) a broker-dealer who
acquired Senior Notes as a result of market-making or other trading
activities) without compliance with the registration and prospectus delivery
provisions of the Securities Act provided that such Exchange Notes are
acquired in the ordinary course of such holders' business, and such holders
are not engaged in, and do not intend to engage in, and have no arrangement or
understanding with any person to participate in, a distribution of such
Exchange Notes; provided that Participating Broker-Dealers receiving Exchange
Notes in the Exchange Offer will be subject to a prospectus delivery
requirement with respect to resales of such Exchange Notes. To date, the Staff
has taken the position that Participating Broker-Dealers may fulfill their
prospectus delivery requirements with respect to transactions involving an
exchange of securities such as the exchange pursuant to the Exchange Offer
(other than a resale of an unsold allotment from the sale of the Senior Notes
to the Purchasers) with the prospectus contained in the Exchange Offer
Registration Statement. Pursuant to the Registration Rights Agreement, the
Issuers have agreed to permit Participating Broker-Dealers and other persons,
if any, subject to similar prospectus delivery requirements to use this
Prospectus in connection with the resale of such Exchange Notes. The Issuers
have agreed that it will make this Prospectus, and any amendment or supplement
to this Prospectus, available to any broker-dealer that requests such
documents in the Letter of Transmittal.
Each holder of the Senior Notes who wishes to exchange its Senior Notes for
Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company as set forth in "The Exchange Offer--Terms and
Conditions of the Letter of Transmittal". In addition, each holder who is a
broker-dealer and who receives Exchange Notes for its own account in exchange
for Senior Notes that were acquired by it as a result of market-making
activities or other trading activities, will be required to acknowledge that
it will deliver a prospectus in connection with any resale by it of such
Exchange Notes.
The Issuers will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or at negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer and/or the purchasers of any such Exchange Notes.
Any broker-dealer that resells Exchange Notes that were received by it for its
own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
The Issuers have agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act, as set forth in
the Registration Rights Agreement.
LEGAL MATTERS
The validity of the Exchange Notes will be passed upon for the Issuers by
Willkie Farr & Gallagher, New York, New York.
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EXPERTS
The audited consolidated financial statements of the Company, Capital, Sound
Response Corporation and Tel-West Central Services, Inc. included in this
Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
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INDEX TO FINANCIAL STATEMENTS
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Consolidated Balance Sheets at March 31, 1996 and December 31, 1995..... F-2
Consolidated Statements of Operations For the Three Months Ended March
31, 1996 and 1995...................................................... F-3
Consolidated Statements of Changes in Members' Equity For the Three
Months Ended March 31, 1996............................................ F-4
Consolidated Statements of Cash Flows For the Three Months Ended March
31, 1996 and 1995...................................................... F-5
Notes to Consolidated Financial Statements.............................. F-6
AUDITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Public Accountants................................ F-7
Consolidated Balance Sheets at December 31, 1995 and 1994............... F-8
Consolidated Statements of Operations For the Year Ended December 31,
1995 and From Inception (September 16, 1994) to December 31, 1994 ..... F-9
Consolidated Statements of Changes in Members' Equity For the Year Ended
December 31, 1995 and From Inception (September 16, 1994) to December
31, 1994............................................................... F-10
Consolidated Statements of Cash Flows For the Year Ended December 31,
1995 and From Inception (September 16, 1994) to December 31, 1994...... F-11
Notes to Consolidated Financial Statements.............................. F-13
NEXTLINK CAPITAL, INC.
Report of Independent Public Accountants................................ F-19
Balance Sheet at March 31, 1996......................................... F-20
Note to Balance Sheet................................................... F-21
SOUND RESPONSE CORPORATION
Report of Independent Public Accountants................................ F-22
Balance Sheets at August 31, 1995, December 31, 1994 and December 31,
1993................................................................... F-23
Statements of Operations For the Eight Months Ended August 31, 1995 and
For the Years Ended December 31, 1994 and 1993......................... F-24
Statements of Changes in Shareholders' Equity For the Eight Months Ended
August 31, 1995 and For the Years Ended December 31, 1994 and 1993..... F-25
Statements of Cash Flows For the Eight Months Ended August 31, 1995 and
For the Years Ended December 31, 1994 and 1993......................... F-26
Notes to Financial Statements........................................... F-27
TEL-WEST CENTRAL SERVICES, INC.
Report of Independent Public Accountants................................ F-30
Balance Sheets at March 31, 1995 and September 30, 1994 and 1993........ F-31
Statements of Operations For the Six Months Ended March 31, 1995 and For
the Years Ended September 30, 1994 and 1993............................ F-32
Statements of Changes in Shareholders' Equity For the Six Months Ended
March 31, 1995 and For the Years Ended September 30, 1994 and 1993..... F-33
Statements of Cash Flows For the Six Months Ended March 31, 1995 and For
the Years Ended September 30, 1994 and 1993............................ F-34
Notes to Financial Statements........................................... F-35
</TABLE>
F-1
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................... $ 15,249,777 $ 1,349,557
Accounts receivable, net............................ 5,232,782 3,563,016
Other............................................... 851,217 745,747
------------ -----------
Total current assets.............................. 21,333,776 5,658,320
PROPERTY AND EQUIPMENT, net........................... 53,078,511 29,664,095
GOODWILL, net......................................... 23,227,987 12,137,205
CUSTOMER CONTRACTS, net............................... 1,891,923 2,363,528
OTHER ASSETS, net..................................... 4,781,538 3,637,480
------------ -----------
$104,313,735 $53,460,628
============ ===========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Bank overdraft...................................... $ -- $ 1,373,124
Accounts payable.................................... 14,174,543 4,314,490
Accrued expenses.................................... 2,510,350 1,266,383
Payable to affiliates............................... 34,373,597 4,937,332
------------ -----------
Total current liabilities......................... 51,058,490 11,891,329
LONG-TERM LIABILITIES:
Capital lease obligation............................ 5,324,677 --
Other............................................... 2,059,855 1,964,227
------------ -----------
Total liabilities................................. 58,443,022 13,855,556
MINORITY INTEREST..................................... 540,082 2,886,179
MEMBERS' EQUITY....................................... 45,330,631 36,718,893
------------ -----------
$104,313,735 $53,460,628
============ ===========
</TABLE>
See accompanying notes to unaudited consolidated interim financial statements.
F-2
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1996 1995
------------ -----------
<S> <C> <C>
REVENUE........................................ $ 5,369,630 $ 399,135
------------ -----------
COST AND EXPENSES:
Operating.................................... 4,696,143 638,245
Selling, general and administrative.......... 5,513,498 753,273
Depreciation................................. 1,077,000 130,000
Amortization of intangible assets............ 752,495 482,008
------------ -----------
12,039,136 2,003,526
------------ -----------
LOSS FROM OPERATIONS........................... (6,669,506) (1,604,391)
INTEREST EXPENSE, net.......................... 495,820 --
------------ -----------
LOSS BEFORE MINORITY INTEREST.................. (7,165,326) (1,604,391)
MINORITY INTEREST IN LOSS OF CONSOLIDATED
SUBSIDIARIES.................................. 49,057 43,260
------------ -----------
NET LOSS....................................... $ (7,116,269) $(1,561,131)
============ ===========
</TABLE>
See accompanying notes to unaudited consolidated interim financial statements.
F-3
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
<TABLE>
<S> <C>
BALANCE, DECEMBER 31, 1995......................................... $36,718,893
Contributed capital.............................................. 9,502,021
Issuance of units for NEXTLINK Ohio acquisition.................. 651,933
Impact of recapitalization and merger of affiliates.............. 5,574,053
Net loss......................................................... (7,116,269)
-----------
BALANCE, MARCH 31, 1996............................................ $45,330,631
===========
</TABLE>
See accompanying notes to unaudited consolidated interim financial statements.
F-4
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss......................................... $ (7,116,269) $ (1,561,131)
------------ ------------
Adjustments to reconcile net loss to net cash
provided by
(used in) operating activities:
Depreciation and amortization.................. 1,829,495 612,008
Minority interest in loss of consolidated sub-
sidiaries..................................... (49,057) (43,260)
Changes in operating assets and liabilities:
Accounts receivable, net..................... (1,669,767) (405,646)
Other current assets......................... (105,470) --
Other assets................................. (1,086,827) (1,118,385)
Accounts payable............................. 1,896,347 821,317
Accrued expenses............................. 334,049 1,022,659
Other noncurrent liabilities................. -- --
------------ ------------
1,148,770 888,693
------------ ------------
Net cash used in operating activities...... (5,967,499) (672,438)
------------ ------------
INVESTING ACTIVITIES:
Purchase or acquisition of:
NEXTLINK Ohio, L.L.C. ......................... (9,598,000) --
NEXTLINK Tennessee, L.L.C. .................... -- (11,389,777)
Property and equipment......................... (7,790,535) (793,188)
------------ ------------
Net cash used in investing activities...... (17,388,535) (12,182,965)
------------ ------------
FINANCING ACTIVITIES:
Capital contributions............................ 9,871,607 12,882,742
Proceeds from payable to affiliates.............. 28,531,265
Bank overdraft................................... (1,373,124)
Other noncurrent liabilities..................... 226,506 --
------------ ------------
Net cash provided by financing activities.. 37,256,254 12,882,742
------------ ------------
NET INCREASE IN CASH............................... 13,900,220 27,339
CASH, beginning of year............................ 1,349,557 25,229
------------ ------------
CASH, end of period................................ $ 15,249,777 $ 52,568
============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid during the period for interest......... $ 256,011 $ --
</TABLE>
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES:
In the three months ended March 31, 1996, the Company recognized $2,907,428
of goodwill and additional members' equity relating to a recapitalization and
merger of companies holding minority equity interests in the subsidiaries, who
exchanged these interest for membership units of the Company.
In addition, the Company accrued $905,000 related to a tax settlement to
certain members in connection with the NEXTLINK Interactive acquisition. This
resulted in an increase in goodwill and reduced the cash received from the
acquisition.
See accompanying notes to unaudited consolidated interim financial statements.
F-5
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION:
The financial statements contained herein have been prepared in accordance
with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. The
unaudited condensed consolidated statements should be read in connection with
the audited consolidated financial statements and footnotes as of December 31,
1995.
2. NEW MARKETS
UTAH. In March 1996, the Company admitted a minority member to its
subsidiary conducting the Company's operations in Utah. This minority member
will provide access to its right-of-way, franchises and other valuable
services in exchange for a 10% interest in the subsidiary. The Company plans
to commence the construction of a downtown fiber-optic ring in Salt Lake City
in the second quarter of 1996.
LAS VEGAS. In April 1996, the Company became a 40% member in, and manager
of, a joint venture that will provide local telecommunication services in Las
Vegas. NEXTLINK Nevada which will be licensed by the Company to operate under
the NEXTLINK trade name.
The joint venture currently provides competitive access services over a
fiber-optic network covering over 200 route miles throughout Las Vegas.
Through a newly formed subsidiary, NEXTLINK Management Services, LLC, the
Company will provide strategic planning and management of the business for a
ten year period. In order to expand the current competitive access business
and begin offering local exchange service, the Company committed to fund $8
million for future construction and development of the network, including a
NorTel DMS-500 switch over the next three years. The investment in this joint
venture will be accounted for under the equity method and the initial carrying
value of the investment is $1 million.
3. FINANCING
On April 25, 1996, the Company executed a purchase agreement pursuant to
which investors committed to purchase $350 million of 12.5% of Senior Notes
due April 15, 2006 (the "Notes"), with interest due semi-annually. The Company
used $117.7 million of the proceeds to purchase U.S. government securities,
representing funds sufficient to provide for payment in full of interest on
the Notes through April 15, 1999 and $32.2 million to repay advances and
accrued interest from Eagle River. The Company will use the remaining proceeds
(net of transactions costs) to (i) expand existing networks, (ii) acquire new
networks or other complementary businesses, (iii) build networks in new
markets, and (iv) fund negative operating cash flow.
In May 1996 the Company formed an unrestricted subsidiary, capitalized with
$5.0 million in cash, which will be used for the purpose of making future
investments as are permitted for unrestricted subsidiaries under the Indenture
related to the Notes.
During the first quarter of 1996, the Company assumed capital lease
obligations of $6.1 million for switches and equipment in conjunction with
acquisition of assets in Ohio. The lease expires in November 2000.
During the first quarter of 1996, the Company has been principally funded by
its majority member through advances. These advances bear interest at prime
plus 2% and are due the earlier of July 1, 1996 or the date upon which the
Company receives the proceeds of a debt financing. On April 26, 1996, advances
and accrued interest totaling $32.2 million were repaid to Eagle River.
F-6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Members of NEXTLINK Communications, L.L.C.:
We have audited the accompanying consolidated balance sheets of NEXTLINK
Communications, L.L.C. (a Washington limited liability company) and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of operations, changes in members' equity and cash flows for the
year ended December 31, 1995 and the period from inception (September 16,
1994) to December 31, 1994. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NEXTLINK Communications,
L.L.C. and subsidiaries as of December 31, 1995 and 1994, and the results of
their operations and their cash flows for the year ended December 31, 1995 and
the period from inception (September 16, 1994) to December 31, 1994 in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Seattle, Washington,
February 23, 1996
F-7
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash................................................... $ 1,349,557 $ 25,229
Accounts receivable.................................... 3,563,016 --
Other.................................................. 745,747 --
----------- --------
Total current assets................................. 5,658,320 25,229
PROPERTY AND EQUIPMENT, net.............................. 29,664,095 133,672
GOODWILL, net of accumulated amortization (1995,
$366,906)............................................... 12,137,205 --
CUSTOMER CONTRACTS, net of accumulated amortization
(1995, $1,736,472)...................................... 2,363,528 --
OTHER ASSETS............................................. 3,637,480 531,230
----------- --------
$53,460,628 $690,131
=========== ========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Bank overdraft......................................... $ 1,373,124 $ --
Accounts payable....................................... 4,314,490 --
Accrued expenses....................................... 1,266,383 11,171
Payable to affiliates.................................. 4,937,332 --
----------- --------
Total current liabilities............................ 11,891,329 11,171
OTHER NONCURRENT LIABILITIES............................. 1,964,227 --
----------- --------
Total liabilities.................................... 13,855,556 11,171
COMMITMENTS AND CONTINGENCIES (Note 6)
MINORITY INTEREST........................................ 2,886,179 6,432
MEMBERS' EQUITY.......................................... 36,718,893 672,528
----------- --------
$53,460,628 $690,131
=========== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-8
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND
FROM INCEPTION (SEPTEMBER 16, 1994) TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
1995 1994
------------ ---------
<S> <C> <C>
REVENUE.............................................. $ 7,551,726 $ --
------------ ---------
COST AND EXPENSES:
Operating.......................................... 6,617,505 106,594
Selling, general and administrative................ 9,938,153 231,727
Depreciation....................................... 1,125,164 6,543
Amortization of intangible assets.................. 2,333,552 7,050
------------ ---------
20,014,374 351,914
------------ ---------
LOSS FROM OPERATIONS................................. (12,462,648) (351,914)
INTEREST EXPENSE..................................... 498,536 --
------------ ---------
LOSS BEFORE MINORITY INTEREST........................ (12,961,184) (351,914)
MINORITY INTEREST IN LOSS OF CONSOLIDATED
SUBSIDIARIES........................................ 230,195 3,137
------------ ---------
NET LOSS............................................. $(12,730,989) $(348,777)
============ =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1995 AND
FROM INCEPTION (SEPTEMBER 16, 1994) TO DECEMBER 31, 1994
<TABLE>
<S> <C>
BALANCE, INCEPTION (SEPTEMBER 16, 1994): $ --
Contributed capital............................................. 1,021,305
Net loss........................................................ (348,777)
------------
BALANCE, DECEMBER 31, 1994........................................ 672,528
Contributed capital............................................. 44,365,413
Issuance of units for NEXTLINK Interactive acquisition.......... 4,411,941
Net loss........................................................ (12,730,989)
------------
BALANCE, DECEMBER 31, 1995........................................ $ 36,718,893
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND
FROM INCEPTION (SEPTEMBER 16, 1994) TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
1995 1994
------------ ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss............................................ $(12,730,989) $(348,777)
------------ ---------
Adjustments to reconcile net loss to net cash used
in operating activities--
Depreciation and amortization .................... 3,458,716 13,593
Minority interest in loss of consolidated
subsidiaries..................................... (230,195) (3,137)
Changes in assets and liabilities, net of effects
from acquistions:
Accounts receivable............................. (2,528,854) --
Other current assets............................ (638,683) --
Other assets.................................... (500,646) (78,555)
Accounts payable................................ 2,162,999 --
Accrued expenses................................ 1,212,221 11,170
Other noncurrent liabilities.................... 375,000 --
------------ ---------
3,310,558 (56,929)
------------ ---------
Net cash used in operating activities......... (9,420,431) (405,706)
------------ ---------
INVESTING ACTIVITIES:
Purchase or acquisition of--
NEXTLINK Pennsylvania L.P......................... -- (459,726)
NEXTLINK Tennessee, L.L.C......................... (11,389,777) --
NEXTLINK Washington, L.L.C. (excluding cash
acquired)........................................ (952,628) --
NEXTLINK Solutions (excluding cash acquired)...... (617,130) --
NEXTLINK Interactive (excluding cash acquired).... (4,679,262) --
Property and equipment............................ (17,778,331) (140,214)
------------ ---------
Net cash used in investing activities......... (35,417,128) (599,940)
------------ ---------
FINANCING ACTIVITIES:
Capital contributions............................... 37,091,495 1,021,305
Proceeds from payable to affiliates................. 7,457,491 --
Bank overdraft...................................... 1,373,124 --
Other noncurrent liabilities........................ 239,777 9,570
------------ ---------
Net cash provided by financing activities..... 46,161,887 1,030,875
------------ ---------
NET INCREASE IN CASH.................................. 1,324,328 25,229
CASH, beginning of year............................... 25,229 --
------------ ---------
CASH, end of year..................................... $ 1,349,557 $ 25,229
============ =========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid during the year for interest.............. $ 16,372 $ --
Conversion to equity of payables to affiliates...... 7,273,918 --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE>
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING AND INVESTING ACTIVITIES:
In 1995, the Company purchased certain assets of various companies through
the subsidiaries named below. In connection with these acquisitions, equity
units of the Company issued and liabilities assumed are as follows:
<TABLE>
<CAPTION>
NEXTLINK NEXTLINK NEXTLINK
TENNESSEE, L.L.C. WASHINGTON, L.L.C. INTERACTIVE
----------------- ------------------ -----------
<S> <C> <C> <C>
Fair value of tangible assets
acquired.................... $ 8,677,098 $ 565,898 $ 2,256,915
Fair value of intangible
assets acquired............. 8,813,882 585,327 9,936,121
----------- ---------- -----------
$17,490,980 $1,151,225 $12,193,036
=========== ========== ===========
Cash paid for assets......... $11,389,777 $ 952,628 $ 4,679,262
Deferred purchase
consideration............... -- -- 3,000,000
Equity units issued:
Company units issued....... -- -- 4,411,943
Subsidiary units and
options issued............ 2,847,444 -- --
Liabilities assumed.......... 3,253,759 198,597 101,831
----------- ---------- -----------
$17,490,980 $1,151,225 $12,193,036
=========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and Principles of Consolidation
The consolidated financial statements include the accounts of NEXTLINK
Communications, L.L.C., a Washington limited liability company, and its
majority-owned subsidiaries (the "Company"). The Company, through predecessor
entities, was formed September 16, 1994 and is principally engaged in the
ownership and operation of telecommunications services and enhanced or
intelligent communications services. The Company is a majority-owned
subsidiary of Eagle River Investments, L.L.C.
The Company's consolidated financial statements include 100% of the assets,
liabilities and results of operations of subsidiaries (both limited liability
companies and a partnership) in which the Company has a controlling interest
of greater than 50%. The ownership interests of the other members or partners
is reflected as minority interests. All significant intercompany accounts and
transactions have been eliminated.
Limited Liability Company Agreement
The Company has been organized and operated under a limited liability
company agreement. The agreement provides, among other things, specific
allocation of net profits and losses to each member, allocations and
distributions to members, and a preferred return to members on their
respective cash contributions invested in the Company, as well as a return of
their respective investments in the Company. Each subsidiary company also has
an obligation to pay a preferred return on the cash contributions invested in
such subsidiary company by the Company or minority interest.
The Company's limited liability company agreement provides that the Company
shall remain in existence until December 31, 2025, unless it is earlier
dissolved in accordance with the terms of the agreement.
Revenue Recognition
The Company recognizes revenue on telecommunications and enhanced
communications services in the period that service is provided.
Property and Equipment
Property and equipment are stated at cost. Provisions for depreciation are
computed using the straight-line method over estimated useful lives (from 3 to
20 years) beginning in the month an asset is put into service. Leasehold
improvements are amortized using the straight-line method over the terms of
the leases.
Intangible Assets
Intangible assets primarily represent costs allocated in acquisition to
customer contracts, software and related intellectual property and goodwill.
Customer contracts are amortized using the straight-line method over the term
of the contracts. Intellectual property and goodwill are amortized over
estimated useful lives from 5 to 20 years using the straight-line method.
Significant Customers
The Company had three customers whose revenue each represented approximately
12-14% of the Company's 1995 revenue.
Income Taxes
The Company has been organized and operated under a limited liability
company agreement structured in a manner that is intended to result in the
classification of the Company as a partnership for federal income tax
purposes. Accordingly, no provision for income taxes has been made.
F-13
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
Financial Instruments
Financial instruments which potentially subject the Company to concentration
of credit risk consist principally of accounts receivable. Concentrations of
credit risk with respect to accounts receivable are limited due to the
dispersion of the Company's customer base among different industries and
geographic areas and remedies provided by terms of contracts and statutes.
Estimates Used in Financial Statement Presentation
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
2. ACQUISITIONS:
In January 1995, the Company acquired certain assets of City Signal, Inc.
(which is also known as U.S. Signal) through NEXTLINK Tennessee, L.L.C.
NEXTLINK Tennessee, L.L.C. provides fiber-optic telecommunications networks
and is currently providing services as well as constructing fiber-optic
telecommunications systems for the Memphis and Nashville, Tennessee,
metropolitan markets. The total cost of the acquisition was approximately
$17,491,000. Included in the cost of the acquisition are 2,847,444 units and
related options of NEXTLINK Tennessee, L.L.C. valued at $2,847,444.
In April 1995, the Company acquired the telecommunications business of Tel-
West Central Services, Inc. through acquisition of the ownership units of
NEXTLINK Washington, L.L.C. NEXTLINK Washington, L.L.C. currently operates a
local exchange service business in Spokane, Washington, and is constructing
fiber-optic telecommunications networks in this region. The total cost of the
acquisition was approximately $1,151,000.
In May 1995, the Company acquired certain assets of City Signal, Inc. and
Teledial America, Inc. relating to the Magic Number service, through NEXTLINK
Solutions, L.L.C. NEXTLINK Solutions, L.L.C. provides nationwide Magic Number
services, an enhanced communication service. The total cost of the acquisition
was approximately $617,000.
In September 1995, the Company acquired certain assets of Sound Response
Corporation and immediately contributed the assets to NEXTLINK Interactive,
L.L.C. NEXTLINK Interactive, L.L.C. provides interactive nationwide voice
response and debit card services. The total cost of the acquisition was
approximately $12,193,000. Included in the cost of the acquisition are
4,411,941 units of the Company valued at $4,411,941, and $3,000,000 of
deferred purchase consideration payable to BWP, Inc. (formerly known as Sound
Response Corporation). In addition, the Company may make a distribution to
BWP, Inc. in 1996 to satisfy certain liabilities in connection with the
acquisition. Management does not expect this to have a material impact on the
Company's financial position or results of operations.
In September 1994, the Company acquired certain assets of Penns Light
Communications, Inc. through NEXTLINK Pennsylvania, L.P. NEXTLINK
Pennsylvania, L.P., is currently constructing fiber-optic telecommunications
systems in Pennsylvania. The total cost of the acquisition was approximately
$460,000.
These acquisitions have been accounted for as purchases and accordingly, the
acquired assets and liabilities have been recorded at their estimated fair
values at the date of the acquisition, and the results of operations have been
included in the accompanying financial statements since the dates of
F-14
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
acquisition. The total purchase price in excess of the fair market value of
the net assets acquired was recorded as goodwill.
The following unaudited pro forma information presents the results of the
Company as if the acquisitions occurred as of the beginning of 1995. These
results include certain adjustments consistent with the Company's accounting
policies. These results are not necessarily indicative of the results that
actually would have been attained if the acquisitions had been in effect at
the beginning of 1995 or which may be attained in the future.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Revenue.................................................... $16,128,000
Net loss................................................... 11,285,000
</TABLE>
3. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
1995 1994
----------- --------
<S> <C> <C>
Telecommunications networks........................... $15,357,466 $ --
Furniture, office equipment and other................. 3,710,360 64,231
----------- --------
19,067,826 64,231
Less accumulated depreciation......................... (1,125,164) (6,543)
----------- --------
17,942,662 57,688
Network construction in progress...................... 11,721,433 75,984
----------- --------
$29,664,095 $133,672
=========== ========
</TABLE>
4. OTHER ASSETS:
<TABLE>
<CAPTION>
1995 1994
---------- --------
<S> <C> <C>
Intellectual property.................................. $2,577,552 $ --
Organization costs..................................... 309,667 39,291
Noncompete agreements.................................. 108,227 --
Other noncurrent assets................................ 872,208 498,989
---------- --------
3,867,654 538,280
Less accumulated amortization.......................... (230,174) (7,050)
---------- --------
$3,637,480 $531,230
========== ========
</TABLE>
5. RELATED PARTY TRANSACTIONS:
During 1995, a Company member loaned the Company approximately $7,200,000 at
an interest rate of prime plus 2%. On December 1, 1995, the note payable and
accrued interest were converted to equity.
Included in other current and noncurrent assets in 1995 are loans to two
officers of the Company in the amounts of $93,141 and $100,000, respectively.
The notes bear interest at prime and are due December 31, 1996 and September
15, 2004, respectively.
Included in payable to affiliates is $1,500,000 and in other noncurrent
liabilities is an additional $1,500,000 payable to a Company member in
conjunction with the NEXTLINK Interactive acquisition. The amounts are due
September 1, 1996 and September 1, 1997, respectively.
F-15
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
Included in payable to affiliates is a short-term note payable and accrued
interest of approximately $3,437,000 at an interest rate of prime plus 2%. The
note is due March 31, 1996.
The Company incurred expenses provided by an affiliate and minority member
for administrative services as a result of a temporary agreement related to
certain acquisitions. The Company recorded expenses in connection with fees to
this affiliate of approximately $1,496,000 in 1995.
6. COMMITMENTS AND CONTINGENCIES:
The Company is leasing premises under various operating leases which, in
addition to rental payments, require payments for insurance, maintenance,
property taxes and other executory costs related to the leases. The lease
agreements have various expiration dates and renewal options through 2015.
Future minimum payments required under operating leases and agreements that
have an initial or remaining noncancellable lease term in excess of one year
at December 31, 1995 are summarized below:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1996............................................................ $1,145,000
1997............................................................ 1,123,000
1998............................................................ 1,008,000
1999............................................................ 960,000
2000............................................................ 760,734
Thereafter...................................................... 3,279,063
</TABLE>
Total rent expense amounted to approximately $579,000 and $18,000 in 1995
and 1994, respectively.
7. EMPLOYEE BENEFIT PLAN:
The Company offers a 401(k) Plan to eligible employees as part of a 401(k)
Plan which is administered by an affiliate and Company member. All employees
who have worked at least 1,000 hours and have attained the age of 21 are
eligible to participate in the plan. Company contributions to the plan totaled
$50,000 in 1995.
8. EQUITY OPTION PLANS:
The Company and certain of its subsidiaries provided for grants of equity
option interests ("EO Interests") during 1994 and 1995. The various option
plans are considered compensatory and the Company recognizes compensation
expense over the vesting period based on the excess of the fair market value,
as determined by the Company's Administrative Committee, over the exercise
price of the option.
Effective January 1, 1996, the various option plans mentioned above were
replaced by the Company's Amended and Restated Equity Option Plan. The Equity
Option Plan ("EOP") provides for the grant of EO Interests in the Company. All
options expire 15 years from the date of grant and vest 25% at the end of each
of the next four years. Previously granted options continue to vest under
their previous schedule which, in most cases, vested 20% at employment and 20%
at the end of each subsequent year.
F-16
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
Information regarding the Company's EOP is summarized below:
<TABLE>
<CAPTION>
NUMBER EXERCISE
OF UNITS PRICE
--------- --------
<S> <C> <C>
Balance, inception (September 16, 1994).................. --
Granted................................................ 685,000 $0.01
---------
Balance, December 31, 1994............................... 685,000 $0.01
Granted................................................ 3,424,076 $0.01
Canceled............................................... (375,000) $0.01
---------
Balance, December 31, 1995............................... 3,734,076 $0.01
=========
</TABLE>
9. QUARTERLY SUMMARY OF OPERATIONS (UNAUDITED):
The financial information presented below reflects all adjustments
(consisting of normal recurring adjustments) which are, in the opinion of
management, necessary to a fair presentation of the results for the interim
periods.
Summarized quarterly financial data for 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1995
--------------------------------------------------
1ST 2ND 3RD 4TH
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue................. $ 399,135 $ 999,719 $ 2,824,742 $ 3,328,130
Cost and expenses....... 2,003,526 3,289,294 5,270,513 9,451,041
----------- ----------- ----------- -----------
Loss from operations.... (1,604,391) (2,289,575) (2,445,771) (6,122,911)
Other income (expense),
net.................... 43,260 36,275 (94,943) (252,933)
----------- ----------- ----------- -----------
Net loss................ $(1,561,131) $(2,253,300) $(2,540,714) $(6,375,844)
=========== =========== =========== ===========
<CAPTION>
1994
--------------------------------------------------
1ST 2ND 3RD 4TH
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue................. $ -- $ -- $ -- $ --
Cost and expenses....... -- -- 46,560 305,354
----------- ----------- ----------- -----------
Loss from operations.... -- -- (46,560) (305,354)
Other income, net....... -- -- 371 2,766
----------- ----------- ----------- -----------
Net loss................ $ -- $ -- $ (46,189) $ (302,588)
=========== =========== =========== ===========
</TABLE>
10. SUBSEQUENT EVENTS:
Recapitalization
In the first quarter of 1996, the Company merged four of the five operating
subsidiaries with newly formed entities owned by the Company. As a result of
these mergers, the entities and individuals holding minority interests in the
subsidiaries exchanged these interests for membership units of the Company.
NEXTLINK Washington, L.L.C. did not participate in the merger.
In addition, the current holders of equity option interests in the
subsidiaries received Class B equity options in the Company, issued pursuant
to the Company's Amended and Restated Equity Option Plan.
F-17
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
Acquisition
Effective January 1, 1996, the Company acquired certain assets of FoneNet,
Inc. and U.S. Network, Inc. through NEXTLINK Ohio, L.L.C. NEXTLINK Ohio,
L.L.C. provides fiber-optic telecommunications networks and is currently
constructing fiber-optic telecommunications systems for the Ohio region. The
cash portion of the purchase price was funded by a capital contribution from
the majority member.
The assets acquired and consideration given were as follows:
<TABLE>
<S> <C>
Fair value of tangible assets acquired.......................... $ 8,837,707
Fair value of intangible assets acquired........................ 7,515,943
-----------
$16,353,650
===========
Cash paid for assets............................................ $ 9,598,000
Equity units issued............................................. 651,933
Liabilities assumed............................................. 6,103,717
-----------
$16,353,650
===========
</TABLE>
The following unaudited pro forma balance sheet shows the Company's position
as though the mergers and the acquisition had occurred December 31, 1995.
<TABLE>
<S> <C>
ASSETS
Current assets.................................................. $ 5,658,000
Property and equipment.......................................... 38,401,000
Goodwill, net................................................... 22,560,000
Customer contracts, net......................................... 2,364,000
Other assets, net............................................... 3,740,000
-----------
$72,723,000
===========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities............................................. $12,802,000
Other noncurrent liabilities.................................... 7,158,000
-----------
Total liabilities............................................. 19,960,000
Minority interest............................................... 316,000
Members' equity................................................. 52,447,000
-----------
$72,723,000
===========
</TABLE>
The increase in other noncurrent liabilities is due to the assumption of
capital leases. These are due over five years at a rate of approximately
$1,700,000 per year.
Financing
From inception through the first several months of 1996, the Company has
been principally funded by its majority member. Further funding is intended to
be from short-term debt from the majority member. The Company anticipates the
short-term debt will be replaced by long-term financing arrangements.
F-18
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To NEXTLINK Capital, Inc.:
We have audited the accompanying balance sheet of NEXTLINK Capital, Inc. (a
Washington corporation) as of March 31, 1996. This balance sheet is the
responsibility of the Company's management. Our responsibility is to express
an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of NEXTLINK Capital, Inc. as of
March 31, 1996, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Seattle, Washington,
March 31, 1996
F-19
<PAGE>
NEXTLINK CAPITAL, INC.
BALANCE SHEET
MARCH 31, 1996
ASSETS
<TABLE>
<S> <C>
CASH IN BANK.......................................................... $ 100
=====
SHAREHOLDER'S EQUITY
COMMON STOCK, no par value,
1,000 shares authorized, issued and outstanding...................... $ --
Additional paid-in capital........................................... 100
-----
$ 100
=====
</TABLE>
The accompanying note is an integral part of this balance sheet
F-20
<PAGE>
NEXTLINK CAPITAL, INC.
NOTE TO BALANCE SHEET
MARCH 31, 1996
1. DESCRIPTION OF THE COMPANY
NEXTLINK Capital, Inc. (NEXTLINK Capital) is a Washington corporation and a
wholly owned subsidiary of NEXTLINK Communications, L.L.C. (NEXTLINK).
NEXTLINK Capital was initially funded with a $100 contribution from NEXTLINK
and has had no operations to date.
NEXTLINK Capital was formed in March 1996 to facilitate the issuance of
Senior Notes in conjunction with NEXTLINK. Management's intent is that
NEXTLINK Capital will issue Senior Notes and advance the proceeds to NEXTLINK.
NEXTLINK Capital's sole source of repayment for the notes will be from the
operations of NEXTLINK. Therefore, this balance sheet should be read in
conjunction with the consolidated financial statements of NEXTLINK.
F-21
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Sound Response Corporation:
We have audited the accompanying balance sheets of Sound Response
Corporation (an Oregon corporation) as of August 31, 1995, and December 31,
1994 and 1993, and the related statements of operations, changes in
shareholders' equity and cash flows for the eight months ended August 31,
1995, and for the years ended December 31, 1994 and 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Sound Response Corporation
as of August 31, 1995, and December 31, 1994 and 1993, and the results of its
operations and its cash flows for the eight months ended August 31, 1995, and
for the years ended December 31, 1994 and 1993 in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Seattle, Washington,
March 22, 1996
F-22
<PAGE>
SOUND RESPONSE CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
AUGUST 31, -------------------
1995 1994 1993
---------- ---------- --------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash......................................... $ 688,963 $ 113,842 $ 34,221
Accounts receivable, net of allowance for un-
collectible accounts of $40,000, $0 and $0,
respectively................................ 2,377,956 651,378 379,155
Receivable from shareholder.................. -- 30,615 --
Other current assets......................... 12,935 7,334 2,612
---------- ---------- --------
Total current assets....................... 3,079,854 803,169 415,988
PROPERTY AND EQUIPMENT, net (Note 2)........... 1,368,361 421,578 256,533
OTHER ASSETS, net.............................. -- 900 1,500
---------- ---------- --------
Total assets............................... $4,448,215 $1,225,647 $674,021
========== ========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank overdraft............................... $ -- $ -- $ 36,074
Accounts payable............................. 1,891,300 330,646 170,003
Payroll accruals............................. -- 106,188 --
Telecom accruals............................. -- 42,561 --
Current portion of long-term liabilities..... 29,123 10,632 26,193
Deferred revenue............................. -- -- 175,000
---------- ---------- --------
Total current liabilities.................. 1,920,423 490,027 407,270
LONG-TERM LIABILITIES:
Notes payable................................ 53,385 44,963 56,158
Loans from shareholders...................... -- 156,295 154,419
---------- ---------- --------
Total long-term liabilities................ 53,385 201,258 210,577
---------- ---------- --------
Total liabilities.......................... 1,973,808 691,285 617,847
---------- ---------- --------
COMMITMENTS AND CONTINGENCIES (Note 4)
SHAREHOLDERS' EQUITY:
Common stock, no par value; 21,000,000 shares
authorized:
Class A Common Stock, 4,000,000 issued and
outstanding at August 31, 1995 and
2,000,000 issued and outstanding at
December 31, 1994 and 1993................. -- -- --
Class B Common Stock, 262,500, 185,000 and
110,000 issued and outstanding at August
31, 1995, December 31, 1994 and 1993,
respectively............................... -- -- --
Paid-in capital.............................. 240,500 240,500 98,000
Retained earnings (deficit).................. 2,233,907 293,862 (41,826)
---------- ---------- --------
Total shareholders' equity................. 2,474,407 534,362 56,174
---------- ---------- --------
Total liabilities and shareholders' equi-
ty........................................ $4,448,215 $1,225,647 $674,021
========== ========== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-23
<PAGE>
SOUND RESPONSE CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
EIGHT
MONTHS YEARS ENDED
ENDED DECEMBER 31,
AUGUST 31, ---------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
REVENUE....................................... $8,285,795 $3,232,907 $1,888,805
---------- ---------- ----------
COST AND EXPENSES:
Operating................................... 2,565,889 885,781 606,690
Selling, general and administrative......... 3,330,860 1,889,106 1,094,155
Depreciation and amortization............... 151,328 102,012 70,410
---------- ---------- ----------
6,048,077 2,876,899 1,771,255
---------- ---------- ----------
INCOME FROM OPERATIONS........................ 2,237,718 356,008 117,550
INTEREST EXPENSE.............................. 16,848 20,320 17,563
---------- ---------- ----------
NET INCOME.................................... $2,220,870 $ 335,688 $ 99,987
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE>
SOUND RESPONSE CORPORATION
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
SHARES OUTSTANDING
--------------------------------
RETAINED TOTAL
CLASS A VOTING CLASS B NONVOTING PAID-IN EARNINGS SHAREHOLDERS'
COMMON STOCK COMMON STOCK CAPITAL (DEFICIT) EQUITY
-------------- ----------------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1,
1993................... 20,000 -- $ 10,000 $ (101,813) $ (91,813)
Common stock split on
100:1 basis.......... 2,000,000 -- -- -- --
Cancellation of origi-
nal Class A stock.... (20,000) -- -- -- --
Dividends declared at
$0.02 per share...... -- -- -- (40,000) (40,000)
Issuance of nonvoting
stock................ -- 110,000 88,000 -- 88,000
Net income............ -- -- -- 99,987 99,987
--------- -------- -------- ---------- ----------
BALANCE, DECEMBER 31,
1993................... 2,000,000 110,000 98,000 (41,826) 56,174
Issuance of nonvoting
stock................ -- 75,000 142,500 -- 142,500
Net income............ -- -- -- 335,688 335,688
--------- -------- -------- ---------- ----------
BALANCE, DECEMBER 31,
1994................... 2,000,000 185,000 240,500 293,862 534,362
Dividends declared at
$0.07 per share...... -- -- -- (152,950) (152,950)
Common stock split on
2:1 basis............ 2,000,000 185,000 -- -- --
Cancellation of non-
voting stock......... -- (107,500) -- -- --
Dividends declared at
$0.03 per share...... -- -- -- (127,875) (127,875)
Net income............ -- -- -- 2,220,870 2,220,870
--------- -------- -------- ---------- ----------
BALANCE, AUGUST 31,
1995................... 4,000,000 262,500 $240,500 $2,233,907 $2,474,407
========= ======== ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE>
SOUND RESPONSE CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
EIGHT
MONTHS YEARS ENDED
ENDED DECEMBER 31,
AUGUST 31, --------------------
1995 1994 1993
----------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income................................ $ 2,220,870 $ 335,688 $ 99,987
----------- --------- ---------
Adjustments to reconcile net income to net
cash provided by operating activities--
Noncash compensation.................... 30,615 142,500 106,000
Depreciation and amortization........... 151,328 102,012 70,410
Changes in assets and liabilities:
Accounts receivable................... (1,726,578) (272,223) (310,666)
Other current assets.................. (5,601) (35,337) (2,612)
Bank overdraft........................ -- (36,074) 36,074
Accounts payable...................... 1,560,655 160,642 124,852
Accrued expenses...................... (148,749) 130,750 (62,264)
Deferred revenue...................... -- (175,000) 175,000
----------- --------- ---------
(138,330) 17,270 136,794
----------- --------- ---------
Net cash provided by operations..... 2,082,540 352,958 236,781
----------- --------- ---------
INVESTING ACTIVITIES:
Purchase of property and equipment........ (1,042,019) (266,457) (125,231)
----------- --------- ---------
FINANCING ACTIVITIES:
Dividends paid............................ (280,825) -- (40,000)
Proceeds from lines of credit............. 1,360,000 -- --
Payments on notes payable................. (28,280) (6,880) (3,306)
Payments on loans from shareholders....... (156,295) -- (43,086)
Payments on lines of credit............... (1,360,000) -- --
----------- --------- ---------
Net cash used in financing activi-
ties............................... (465,400) (6,880) (86,392)
----------- --------- ---------
NET INCREASE IN CASH........................ 575,121 79,621 25,158
CASH, beginning of year..................... 113,842 34,221 9,063
----------- --------- ---------
CASH, end of year........................... $ 688,963 $ 113,842 $ 34,221
=========== ========= =========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest:................... $ 16,848 $ 18,444 $ 17,563
=========== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE>
SOUND RESPONSE CORPORATION
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and Principles of Consolidation
The financial statements include the accounts of Sound Response Corporation,
an Oregon S corporation. The Company was formed August 12, 1991, and is
principally engaged in the ownership and operation of enhanced or intelligent
communications services.
Revenue Recognition
The Company recognizes revenue in the period that service is provided. Bad
debt expense of $40,000, $28,739 and $2,952 are included in selling, general
and administrative expenses for the periods ended August 31, 1995, December
31, 1994 and 1993, respectively. The Company determined that no allowance for
uncollectible accounts was required at December 31, 1994 and 1993.
Property and Equipment
Property and equipment are stated at cost. Provisions for depreciation are
computed using the straight-line method over estimated useful lives, which
range from five to seven years, beginning in the month an asset is put into
service. Leasehold improvements are amortized using the straight-line method
over the term of the lease.
Income Taxes
The Company has been organized and operated under a subchapter S tax status
structured in a manner that is intended to result in the classification of the
Company as a partnership for federal income tax purposes. Accordingly, no
provision for income taxes has been made.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentration
of credit risk consist principally of accounts receivable. Concentrations of
credit risk with respect to accounts receivable are limited due to the
dispersion of the Company's customer base among different industries and
remedies provided by terms of contracts and statutes.
Certain of the Company's customers provide a significant portion of the
Company's revenues. Customers providing more than 10% of the Company's
revenues during the periods ending August 31, 1995, December 31, 1994 and 1993
are as follows:
<TABLE>
<CAPTION>
EIGHT
MONTHS YEAR ENDED
ENDED DECEMBER 31,
AUGUST 31, ---------------
1995 1994 1993
---------- ------ ------
<S> <C> <C> <C>
Number of customers......................... 2 2 3
Percentage of revenues...................... 97% 42% 71%
</TABLE>
F-27
<PAGE>
SOUND RESPONSE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
AUGUST 31, 1995
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
DECEMBER 31,
AUGUST 31, -----------------
1995 1994 1993
---------- -------- --------
<S> <C> <C> <C>
Network equipment.............................. $1,519,199 $605,415 $348,272
Furniture...................................... 124,450 35,934 26,620
Software....................................... 59,363 -- --
Leasehold improvements......................... 35,548 -- 16,664
---------- -------- --------
1,738,560 641,349 391,556
Less--accumulated depreciation................. 370,199 219,771 135,023
---------- -------- --------
$1,368,361 $421,578 $256,533
========== ======== ========
</TABLE>
3. LONG TERM DEBT:
A summary of the Company's outstanding long-term debt is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
AUGUST 31, ------------------
1995 1994 1993
---------- -------- --------
<S> <C> <C> <C>
Notes payable to shareholders; interest at
9%; interest payments due monthly; princi-
pal due 180 days following demand.......... $ -- $156,295 $154,419
Note payable to shareholder; interest at 8%;
principal and interest due March 30,
1994....................................... -- -- 18,000
Note payable for equipment; interest at
26.36%; graduated principal plus interest
payments due monthly until maturity on Au-
gust 1, 1998............................... 33,748 55,595 64,351
Note payable for equipment; interest at
15.8%; graduated principal plus interest
payments due monthly until maturity on
April 1, 1998.............................. 48,760 -- --
-------- -------- --------
82,508 211,890 236,770
Less- current maturities.................... (29,123) (10,632) (26,193)
-------- -------- --------
$ 53,385 $201,258 $210,577
======== ======== ========
</TABLE>
During 1995, the Company entered into several operating line-of-credit
agreements with interest rates ranging from 9.5% to 10.5%. All agreements were
cancelled as of August 31, 1995.
The Company's future minimum payments under its long-term debt agreements
are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
Remainder of 1995.................................................. $ 7,569
1996............................................................... 31,158
1997............................................................... 36,397
1998............................................................... 7,384
-------
$82,508
=======
</TABLE>
F-28
<PAGE>
SOUND RESPONSE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
AUGUST 31, 1995
4. COMMITMENTS AND CONTINGENCIES:
The Company is leasing premises under various operating leases which, in
addition to rental payments, require payments for insurance, maintenance,
property taxes and other executory costs related to the leases. The lease
agreements have various expiration dates and renewal options through 2001.
Future minimum payments required under operating leases and agreements that
have an initial or remaining noncancellable lease term in excess of one year
at August 31, 1995 are summarized below:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
Remainder of 1995............................................... $ 66,403
1996............................................................ 285,744
1997............................................................ 285,744
1998............................................................ 285,744
1999............................................................ 282,576
Thereafter...................................................... 394,216
----------
$1,600,427
==========
</TABLE>
Total rent expense amounted to approximately $115,000 for the eight months
ended August 31, 1995 and $78,000 and $51,000 for the years ended December 31,
1994 and 1993, respectively.
5. EMPLOYEE STOCK AWARD PLAN:
During 1993, the Company established the Key Employee Stock Award Plan (the
Plan). During the eight months ended August 31, 1995 and the years ended
December 31, 1994 and 1993, 2,500, 75,000 and 110,000 shares were awarded,
respectively. Compensation expense was recorded upon award of the shares.
Compensation expense of $0, $142,500 and $88,000 was recognized in the eight
months ended August 31, 1995 and the years ended December 31, 1994 and 1993,
respectively. The Plan was terminated as of August 31, 1995.
6. SUBSEQUENT EVENT:
In September 1995, NEXTLINK Communications, L.L.C. (NEXTLINK) acquired
certain assets of the Company and immediately contributed the assets to
NEXTLINK Interactive, L.L.C. NEXTLINK Interactive, L.L.C. provides interactive
nationwide voice response and debit card services. The total cost of the
acquisition was approximately $12,193,000. Included in the cost of the
acquisition are 4,411,941 units of NEXTLINK valued at $4,411,941 and
$3,000,000 of deferred purchase consideration payable to BWP, Inc. (formerly
known as Sound Response Corporation). In addition, NEXTLINK made a
distribution of $905,000 to BWP, Inc., in 1996 to satisfy certain liabilities
in connection with the acquisition.
F-29
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Tel-West Central Services, Inc.:
We have audited the accompanying balance sheets of Tel-West Central
Services, Inc. (a Washington corporation) as of March 31, 1995, and September
30, 1994 and 1993, and the related statements of operations, changes in
shareholders' equity and cash flows for the six months ended March 31, 1995,
and for the years ended September 30, 1994 and 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Tel-West Central Services,
Inc. as of March 31, 1995, and September 30, 1994 and 1993, and the results of
its operations and its cash flows for the six months ended March 31, 1995, and
for the years ended September 30, 1994 and 1993 in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Seattle, Washington,
May 9, 1996
F-30
<PAGE>
TEL-WEST CENTRAL SERVICES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
MARCH 31, ------------------
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................................ $ 2,624 $ 3,826 $ 3,294
Accounts receivable, net of allowance for doubt-
ful accounts of $0, $5,000 and $0, respective-
ly............................................. 163,743 53,005 32,865
Receivables from related parties................ 58,604 59,734 62,278
-------- -------- --------
224,971 116,565 98,437
PROPERTY AND EQUIPMENT, net....................... 306,042 250,038 67,588
-------- -------- --------
Total assets.................................. $531,013 $366,603 $166,025
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................ $170,492 $ 83,723 $ 15,765
Payroll accruals................................ 7,627 17,612 93
Accrued taxes payable........................... 13,739 2,653 4,462
Line of credit.................................. 9,177 9,177 --
Current portion of notes payable--affiliates.... 112,183 25,041 --
Current portion of notes payable--others........ 14,524 14,109 18,663
-------- -------- --------
327,742 152,315 38,983
LONG-TERM LIABILITIES:
Notes payable--affiliates....................... 205,414 219,497 --
Notes payable--others........................... 14,917 21,736 51,443
-------- -------- --------
220,331 241,233 51,443
-------- -------- --------
Total liabilities............................. 548,073 393,548 90,426
-------- -------- --------
SHAREHOLDERS' EQUITY:
Common stock, no par value, and paid-in capital;
50,000 shares authorized, issued and
outstanding.................................... 63,298 63,298 63,298
Retained earnings (deficit)..................... (80,358) (90,243) 12,301
-------- -------- --------
Total shareholders' equity.................... (17,060) (26,945) 75,599
-------- -------- --------
Total liabilities and shareholders' equity.... $531,013 $366,603 $166,025
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-31
<PAGE>
TEL-WEST CENTRAL SERVICES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX
MONTHS YEAR ENDED
ENDED SEPTEMBER 30,
MARCH 31, -------------------
1995 1994 1993
--------- --------- --------
<S> <C> <C> <C>
REVENUE.......................................... $472,083 $ 523,625 $216,183
-------- --------- --------
COST AND EXPENSES:
Operating...................................... 361,479 421,391 147,001
Selling, general and administrative............ 61,143 168,187 24,921
Depreciation................................... 20,991 22,393 25,627
-------- --------- --------
443,613 611,971 197,549
-------- --------- --------
INCOME (LOSS) FROM OPERATIONS.................... 28,470 (88,346) 18,634
INTEREST EXPENSE................................. 18,585 14,198 4,083
-------- --------- --------
INCOME (LOSS) BEFORE TAXES....................... 9,885 (102,544) 14,551
PROVISION FOR INCOME TAXES....................... -- -- 2,250
-------- --------- --------
NET INCOME (LOSS)................................ $ 9,885 $(102,544) $ 12,301
======== ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE>
TEL-WEST CENTRAL SERVICES, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------------
RETAINED TOTAL
SHARES PAID-IN EARNINGS SHAREHOLDERS'
OUTSTANDING AMOUNT CAPITAL (DEFICIT) EQUITY
----------- ------ ------- --------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, October 1, 1992.. 50,000 $-- $63,298 $ -- $ 63,298
Net income.............. -- -- -- 12,301 12,301
------ ---- ------- --------- ---------
BALANCE, September 30,
1993..................... 50,000 -- 63,298 12,301 75,599
Net income.............. -- -- -- (102,544) (102,544)
------ ---- ------- --------- ---------
BALANCE, September 30,
1994..................... 50,000 -- 63,298 (90,243) (26,945)
Net income.............. -- -- -- 9,885 9,885
------ ---- ------- --------- ---------
BALANCE, March 31, 1995... 50,000 $-- $63,298 $ (80,358) $ (17,060)
====== ==== ======= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE>
TEL-WEST CENTRAL SERVICES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED SEPTEMBER 30,
MARCH 31, ------------------
1995 1994 1993
---------- --------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss).............................. $ 9,885 $(102,544) $12,301
-------- --------- -------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities--
Depreciation and amortization................ 20,991 22,393 25,627
Gain on asset sale........................... -- (965) --
Changes in assets and liabilities:
Accounts receivable........................ (110,738) (20,140) (16,233)
Accounts payable........................... 86,768 67,959 413
Accrued expenses........................... 1,101 15,709 4,555
-------- --------- -------
(1,878) 84,956 14,362
-------- --------- -------
Net cash provided by (used in) operating
activities.............................. 8,007 (17,588) 26,663
-------- --------- -------
INVESTING ACTIVITIES:
Purchase of property and equipment............. (76,994) (228,878) (6,588)
-------- --------- -------
FINANCING ACTIVITIES:
Proceeds from notes payable--affiliates........ 84,800 252,790 --
Proceeds from notes payable--other............. -- -- 55,425
Payments on notes payable--affiliates.......... (11,741) (8,252) --
Payments on notes payable--other............... (6,404) (13,223) (26,907)
Proceeds from line of credit................... -- 9,177 --
Decrease (increase) in receivables from related
parties....................................... 1,130 6,506 (46,255)
-------- --------- -------
Net cash provided by (used in) financing
activities.............................. 67,785 246,998 (17,737)
-------- --------- -------
Net (decrease) increase in cash.................. (1,202) 532 2,338
CASH, beginning of year.......................... 3,826 3,294 956
-------- --------- -------
CASH, end of year................................ $ 2,624 $ 3,826 $ 3,294
======== ========= =======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest......................... $ 18,585 $ 14,198 $ 4,083
Cash paid for taxes............................ -- 2,250 --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE>
TEL-WEST CENTRAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and Principles of Consolidation
The financial statements include the accounts of Tel-West Central Services,
Inc., (the Company) a Washington corporation. The Company was formed September
8, 1992, and is principally engaged in the ownership and operation of fiber-
optic telecommunications services.
Revenue Recognition
The Company recognizes revenues in the period that service is provided.
Provisions for bad debts of $0, $5,000 and $0 are included in selling, general
and administrative expenses for the periods ended March 31, 1995, September
30, 1994 and September 30, 1993, respectively. The Company determined an
allowance for doubtful accounts was not required at March 31, 1995 and
September 30, 1994 and 1993.
Property and Equipment
Property and equipment are stated at cost. Provisions for depreciation are
computed using the straight-line method over estimated useful lives (from five
to seven years) beginning in the month an asset is put into service.
Income Taxes
The Company accounts for deferred taxes using the asset and liability
method.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentration
of credit risk consist principally of accounts receivable. Concentrations of
credit risk with respect to accounts receivable are limited due to the
dispersion of the Company's customer base among different industries and
remedies provided by terms of contracts and statutes.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-35
<PAGE>
TEL-WEST CENTRAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1995
2. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
SEPTEMBER 30,
MARCH 31, ------------------
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
Switch equipment.............................. $351,124 $190,088 $ 97,034
Furniture and fixtures........................ 16,844 16,392 2,448
Vehicles...................................... -- -- 28,995
-------- -------- --------
367,968 206,480 128,477
Less--accumulated depreciation................ (99,313) (78,322) (60,889)
-------- -------- --------
268,655 128,158 67,588
Work in process............................... 37,387 121,880 --
-------- -------- --------
$306,042 $250,038 $ 67,588
======== ======== ========
</TABLE>
3. LONG TERM DEBT:
A summary of the Company's outstanding long-term debt is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
MARCH 31, -------------
1995 1994 1993
--------- -------- ----
<S> <C> <C> <C>
Notes payable to affiliates:
Note payable to affiliate; interest at 11.5%;
graduated principal plus interest payments due
monthly until maturity on February 20, 2001...... $131,013 $138,538 $--
Note payable to affiliate; interest at 11.5%;
graduated principal plus interest payments due
monthly until maturity on October 20, 2001....... 101,784 106,000 --
Note payable to affiliate; interest at 12%; inter-
est-only payments due bi-weekly until maturity on
December 21, 1994................................ 55,000 -- --
Notes payable to officers; non-interest bearing;
due
upon sale of assets of the Company (April 1,
1995)............................................ 29,800 -- --
-------- -------- ----
317,597 244,538 --
Less current maturities........................... 112,183 25,041 --
-------- -------- ----
$205,414 $219,497 $--
======== ======== ====
</TABLE>
F-36
<PAGE>
TEL-WEST CENTRAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1995
<TABLE>
<CAPTION>
SEPTEMBER 30,
MARCH 31, ---------------
1995 1994 1993
--------- ------- -------
<S> <C> <C> <C>
Notes payable to others:
Note payable to commercial bank; interest at
prime plus 2.5%; graduated principal plus in-
terest payments due monthly until maturity on
February 10, 1997............................. $29,441 $35,845 $48,075
Note payable to credit union; interest at 6.5%;
graduated principal plus interest payments due
monthly until maturity on January 27, 1997.... -- -- 22,031
------- ------- -------
29,441 35,845 70,106
Less current maturities........................ 14,524 14,109 18,663
------- ------- -------
$14,917 $21,736 $51,443
======= ======= =======
</TABLE>
The Company's future minimum payments under its long-term debt agreements
are as follows:
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
---------------------
<S> <C>
1996.............................................................. $126,707
1997.............................................................. 45,621
1998.............................................................. 34,426
1999.............................................................. 38,602
2000.............................................................. 43,282
Thereafter........................................................ 58,400
--------
$347,038
========
</TABLE>
4. LINE OF CREDIT:
The Company had an operating line of credit with a commercial bank. As of
March 31, 1995, the credit line was $10,000 and the unused borrowing capacity
was $823. The line of credit bore interest at the bank's prime plus 2.5%. The
interest rate was 11.0% and 9.75% as of March 31, 1995 and September 30, 1994,
respectively. There were no borrowings under the credit line as of
September 30, 1993. The line of credit was collateralized by the assets of the
Company and matured on May 1, 1995.
5. RELATED PARTY TRANSACTIONS:
The Company purchased certain telecommunications equipment from and sold
equipment to a company which is affiliated with the Company's president and
principal shareholder. Purchases in the amount of $372, $14,315 and $7,785
were made from this affiliated company during the six months ended March 31,
1995 and the years ended September 30, 1994 and 1993, respectively. Sales to
this affiliated company were $3,437, $39,486 and $10,622 during the six months
ended March 31, 1995 and the years ended September 30, 1994 and 1993,
respectively.
F-37
<PAGE>
TEL-WEST CENTRAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1995
6. COMMITMENTS AND CONTINGENCIES:
The Company leased premises under an operating lease which, in addition to
rental payments, required payments for insurance, maintenance, property taxes
and other executory costs related to the lease. The lease agreement expires on
December 31, 1998.
Future minimum payments required under the operating lease are summarized
below:
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
---------------------
<S> <C>
1996............................................................... $ 9,060
1997............................................................... 9,060
1998............................................................... 9,060
1999............................................................... 6,795
-------
$33,975
=======
</TABLE>
Total rent expense amounted to approximately $4,900, $5,800 and $0 for the
six months ended March 31, 1995, and for the years ended September 30, 1994
and 1993, respectively.
7. INCOME TAXES:
Significant components of deferred income tax assets are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
MARCH 31, --------------
1995 1994 1993
--------- -------- ----
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards................ $ 13,900 $ 15,400 $--
Valuation allowance............................. (13,900) (15,400) --
-------- -------- ----
$ -- $ -- $--
======== ======== ====
</TABLE>
For tax purposes, the Company had available at March 31, 1995, net operating
loss carryforwards for regular tax purposes of approximately $93,000 which
will expire in 2009. The change in valuation allowance was a decrease of
$1,500 in the six months ended March 31, 1995 and an increase of $15,400 in
the year ended September 30, 1994.
Management believes that, based on a number of factors, the available
objective evidence creates sufficient uncertainty regarding the realization of
the net deferred tax asset. Such factors include recurring operating losses
resulting primarily from the development of the Company's network and expected
increased competition. Accordingly, a valuation allowance has been provided
for the deferred tax assets of the Company.
The difference between the statutory tax rate for small businesses of
approximately 15% and the tax provision recorded by the Company is due to the
Company's full valuation allowance against its deferred tax assets.
8. SUBSEQUENT EVENT:
In April 1995, NEXTLINK Washington, L.L.C. acquired certain assets and
liabilities of the Company. NEXTLINK Washington, L.L.C. operates a local
exchange service business in Spokane, Washington, and is constructing fiber-
optic telecommunications networks in this region. The total cost of the
acquisition was approximately $1,151,000.
F-38
<PAGE>
ANNEX A TO THE PROSPECTUS
GLOSSARY
CAP (competitive access provider)--A company that provides its customers
with an alternative to the ILEC for local private line and special access
telecommunications services.
Central offices--The switching centers or central switching facilities of
the LECs.
Co-carrier status--A regulatory scheme under which the ILEC is required to
integrate new, competing providers of local exchange service, such as the
Company, into the systems of traffic exchange, inter-carrier compensation, and
other inter-carrier relationships that already exist among ILECs in most
jurisdictions.
Collocation--The ability of a CAP such as the Company to connect its network
to the ILECs central offices. Physical collocation occurs when a CAP places
its network connection equipment inside the ILEC's central offices. Virtual
collocation is an alternative to physical collocation pursuant to which the
ILEC permits a CAP to connect its network to the ILEC's central offices on
comparable terms, even though the CAP's network connection equipment is not
physically located inside the central offices.
Dedicated--Telecommunications lines dedicated or reserved for use by
particular customers and charged on a flat, usually monthly basis.
Digital--A method of storing, processing and transmitting information
through the use of distinct electronic or optical pulses that represent the
binary digits 0 and 1. Digital transmission and switching technologies employ
a sequence of these pulses to represent information as opposed to the
continuously variable analog signal. The precise digital numbers minimize
distortion (such as graininess or snow in the case of video transmission, or
static or other background distortion in the case of audio transmission).
Ethernet--A local area network technology used for connecting computers,
printers, workstations, terminals, etc., within the same building. Ethernet
operates over twisted wire or coaxial cable at speeds up to 100 megabits per
second. Ethernet is the most popular LAN technology.
FCC--The United States Federal Communications Commission.
FDDI (Fiber Distributed Data Interface)--Based on fiber optics, FDDI is a
100 megabit per second local area network technology used to connect
computers, printers, and workstations at very high speeds. FDDI is also used
as backbone technology to interconnect other LANs.
Fiber mile--The number of route miles installed (excluding pending
installations) along a telecommunications path multiplied by the number of
fibers along that path. See the definition of "route mile" below.
Interconnection Decisions--Rulings by the FCC announced in September 1992
and August 1993, which require the BOCs and most other large ILECs to provide
interconnection in ILEC central offices to any CAP, long distance carrier or
end-user seeking such interconnection for the provision of interstate special
access and switched access transport services.
Kilobit--One thousand bits of information. The information-carrying capacity
(i.e., bandwidth) of a circuit may be measured in "kilobits per second." One
kilobit is approximately sufficient to encode a standard telegram.
A-1
<PAGE>
LANs (local area networks)--The interconnection of computers for the purpose
of sharing files, programs and various devices such as printers and high-speed
modems. LANs may include dedicated computers or file servers that provide a
centralized source of shared files and programs.
Local exchange--A geographic area determined by the appropriate state
regulatory authority in which calls generally are transmitted without toll
charges to the calling or called party.
LEC (local exchange carrier)--A company providing local telephone services.
Line--an electrical path between a LEC central office and a subscriber.
Long distance carriers (interexchange carriers)--Long distance carriers
provide services between local exchanges on an interstate or intrastate basis.
A long distance carrier may offer services over its own or another carrier's
facilities.
Megabit--One million bits of information. The information-carrying capacity
(i.e., bandwidth) of a circuit may be measured in "megabits per second." One
megabit is approximately sufficient to encode a 3 inch by 5 inch photograph.
Number portability--The ability of an end-user to change local exchange
carriers while retaining the same telephone number.
POPs (points of presence)--Locations where a long distance carrier has
installed transmission equipment in a service area that serves as, or relays
calls to, a network switching center of that long distance carrier.
PUC (public utility commission)--A state regulatory body, established in
most states, which regulates utilities, including telephone companies
providing intrastate services.
Private line--A dedicated telecommunications connection between end-user
locations.
Public switched network--That portion of a ILEC's network available to all
users generally on a shared basis (i.e., not dedicated to a particular user).
Traffic along the public switched network is generally switched at the ILEC's
central offices.
Reciprocal compensation--The compensation paid to and from a new competitive
local exchange carrier and the ILEC for termination of a local call on each
other's networks.
Route mile--The number of miles of the telecommunications path in which the
Company-owned or leased fiber-optic cables are installed.
Special access services--The lease of private, dedicated telecommunications
lines or "circuits" along the network of a ILEC or a CAP, which lines or
circuits run to or from the long distance carrier POPs. Examples of special
access services are telecommunications lines running between POPs of a single
long distance carrier, from one long distance carrier POP to the POP of
another long distance carrier or from an end-user to a long distance carrier
POP.
Switch--A device that opens or closes circuits or selects the paths or
circuits to be used for transmission of information. Switching is a process of
interconnecting circuits to form a transmission path between users.
Switched access services--Transmission of switched calls through the local
switched network for the purpose of originating or terminating toll calls.
Long distance companies pay switched access charges to the ILECs for each
switched call originated or terminated on the ILEC's network.
A-2
<PAGE>
Switched access transport services--Transportation of switched traffic along
dedicated lines between the ILEC central offices and long distance carrier
POPs.
Switched traffic--Telecommunications traffic along the public switched
network that is charged on a per-minute or other range sensitive basis. This
traffic is generally switched at the ILEC's central offices.
Token Ring--A local area network technology used to interconnect personal
computers, file servers, printers, and other devices. Token Ring LANs
typically operate at either 4 megabits per second or 16 megabits per second.
A-3
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C.
NEXTLINK CAPITAL, INC.
All tendered Senior Notes, executed Letters of Transmittal, and other related
documents should be directed to the Exchange Agent. Requests for assistance and
for additional copies of the Prospectus, the Letter of Transmittal and other
related documents should be directed to the Exchange Agent.
The Exchange Agent
for the Exchange Offer is
UNITED STATES TRUST COMPANY OF NEW YORK
By Facsimile:
(212) 420-6152
Attention: Customer Service
Confirm by telephone:
(800) 548-6565
By Registered or Certified Mail:
United States Trust Company of New York
P.O. Box 844 Cooper Station
New York, New York 10276
By Hand:
United States Trust Company of New York
111 Broadway
New York, New York 10006
Attention: Corporate Trust Operations
By Overnight Courier:
United States Trust Company of New York
770 Broadway
New York, New York 10003
Attention: Corporate Trust Operations
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company, a Washington limited liability company, is empowered by the
Washington Limited Liability Company Act, through its limited liability
company agreement, to eliminate or limit the personal liability of a member or
manager to the limited liability company or its members for monetary damages
for conduct as a member or manager and to indemnify any member or manager from
and against any judgments, settlements, penalties, fines or expenses incurred
in a proceeding by reason of his, her or its capacity as a member or manager,
except in certain circumstances involving acts or omission not in good faith
or involving negligence or unlawful conduct.
Article 11 of the Company's Amended and Restated Limited Liability Company
Agreement provides as follows:
ARTICLE 11--LIMITATION OF MEMBERS LIABILITY; INDEMNIFICATION OF MEMBERS
11.1 LIMITATION OF LIABILITY. No Member or Manager, or their respective
officers, directors, agents, employees, members or managers, shall have
liability to the Company or its Members for monetary damages for conduct as
a Member or Manager, except for acts or omissions that involve a breach of
this Agreement, intentional misconduct, a knowing violation of law, conduct
violating RCW 25.15.235, or for any transaction from which such person has
personally received a benefit in money, property or services to which such
person was not legally entitled. If the Act is hereafter amended to
authorize Company action further limiting the personal liability of such
persons, then the liability of such persons shall be eliminated or limited
to the full extent permitted by the Act, as so amended. No repeal or
modification of the Act or this Section 11.1 shall adversely affect any
right or protection of any such person existing at the time of such repeal
or modification for or with respect to an act or omission of such person
occurring prior to such repeal or notification.
11.2 INDEMNIFICATION. The Company shall indemnify each Member and
Manager, and their respective officers, directors, agents, employees,
members or managers, from and against any judgments, settlements,
penalties, fines or expenses incurred in a proceeding to which such person
is a party because he, she or it is, or was, a Member, a Manager, or
officer, director, agent, employee, member or manager thereof; provided,
that such persons shall not be indemnified from or on account of acts or
omissions of such persons finally adjudicated to be a breach of this
Agreement, intentional misconduct or a knowing violation of law by such
persons, conduct of such persons adjudged to be in violation of RCW
25.15.235, or any transaction with respect to which it was finally adjudged
that such person received a benefit in money, property or services to which
such person was not legally entitled. The right to indemnification
conferred in this Section 11.2 shall be a contract right and shall include
the right to be paid by the Company the expenses incurred in defending any
such proceeding in advance of its final disposition; provided, that the
payment of such expenses in advance of the final disposition of a
proceeding shall be made only upon delivery to the Company of an
undertaking, by or on behalf of such indemnified person, to repay all
amounts so advanced if it shall ultimately be determined that such person
is not entitled to be indemnified under this Section 11.2 or otherwise.
The right to indemnification and payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in
this Section 11.2 shall not be exclusive of any other right any person
entitled to indemnification under this Agreement may have or hereafter
acquire under any statute, this Agreement, vote of Members or otherwise.
No repeal or modification of the Act or this Section 11.2 shall adversely
affect any right to indemnification existing at the time of such repeal or
modification for or with respect to
II-1
<PAGE>
indemnification related to an act or omission of such person occurring
prior to such repeal or modification.
Capital, a Washington corporation, is empowered by the Washington Business
Corporations Act ("WBCA"), through its articles of incorporation and bylaws,
to limit the liability of directors and to grant indemnity to directors,
officers, employees or agents for actions taken with respect to the
corporation in their respective capacities as directors, officers, employees
or agents. The WBCA provides that indemnification for such liabilities may be
provided to an officer, director, employee or agent based upon the
determination by a vote of the disinterested board of directors, a vote by a
special committee of the board of directors, by the determination of a special
legal counsel or by a vote of the shareholders that the director, officer,
employee or agent may properly be indemnified under the statute. Capital's
Articles of Incorporation provide for indemnification of the directors and
officers of such entities to the full extent permitted by WBCA.
Articles XI and XII of Capital's Articles of Incorporation provides as
follows:
ARTICLE XI. LIMITATION OF DIRECTORS' LIABILITY. A director shall have no
liability to the corporation or its shareholders for monetary damages for
conduct as a director, except for acts or omissions that involve
intentional misconduct by the director, or a knowing violation of law by
the director, or for conduct violating RCW 23B.08.310, or for any
transaction from which the director will personally receive a benefit in
money, property or services to which the director is not legally entitled,
if the Washington Business Corporation Act is hereafter amended to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director shall be
eliminated or limited to the full extent permitted by the Washington
Business Corporation Act, as so amended. Any repeal or modification of this
Article shall not adversely affect any right or protection of a director of
the corporation existing at the time of such repeal or modification for or
with respect to an act or omission of such director occurring prior to such
repeal or modification.
ARTICLE XII. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 1. Right
to Indemnification. Each person who was, or is threatened to be made a
party to or is otherwise involved (including, without Stations as a
witness) in any actual or threatened action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact
that he or she is or was a director or officer of the corporation or, while
a director or officer, he or she is or was serving at the request of the
corporation as a director, trustee, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis
of such proceeding is alleged action in an official capacity as a director,
trustee, officer, employee or agent or in any other capacity while serving
as a director, trustee, officer, employee or agent, shall be indemnified
and held harmless by the corporation, to the full extent permitted by
applicable law as then in effect, against all expense, liability and loss
(including attorney's fees, judgments, fines, ERISA excise taxes or
penalties and amounts to be paid in settlement) actually and reasonably
incurred or suffered by such person in connection therewith, and such
indemnification shall continue as to a person who has ceased to be a
director, trustee, officer, employee or agent and shall inure to the
benefit of his or her heirs, executors and administrators; provided,
however, that except as provided in Section 2 of this Article with respect
to proceedings seeking to enforce rights to indemnification, the
corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person
only if such proceeding (or part thereof) was authorized by the board of
directors of the corporation. The right to indemnification conferred in
this Section 1 shall be a contract right and shall include the right to be
paid by the corporation the expenses incurred in defending any such
proceeding in advance of its final disposition; provided, however, that the
payment of such expenses in advance of the final disposition of a
proceeding shall be made only upon delivery to the corporation of an
undertaking, by or on behalf of such
II-2
<PAGE>
director or officer, to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled to
be indemnified under this Section 1 or otherwise.
Section 2. Right of Claimant to Bring Suit. If a claim under Section 1 of
this Article is not paid in full by the corporation within sixty (60) days
after a written claim has been received by the corporation, except in the
case of a claim for expenses incurred in defending a proceeding in advance
of its final disposition, in which case the applicable period shall be
twenty (20) days, the claimant may at any time thereafter bring suit
against the corporation to recover the unpaid amount of the claim and, to
the extent successful in whole or in part, the claimant shall be entitled
to be paid also the expense of prosecuting such claim. The claimant shall
be presumed to be entitled to indemnification under this Article upon
submission of a written claim (and, in an action brought to enforce a claim
for expenses incurred in defending any proceeding in advance of its final
disposition, where the required undertaking has been tendered to the
corporation), and thereafter the corporation shall have the burden of proof
to overcome the presumption that the claimant is not so entitled. Neither
the failure of the corporation (including its board of directors,
independent legal counsel or its shareholders) to have made a determination
prior to the commencement of such action that indemnification of or
reimbursement or advancement of expenses to the claimant is proper in the
circumstances nor an actual determination by the corporation (including its
board of directors, independent legal counsel or its shareholders) that the
claimant is not entitled to indemnification or to the reimbursement or
advancement of expenses shall be a defense to the action or create a
presumption that the claimant is not so entitled.
Section 3. Nonexclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article shall not be exclusive of any
other right which any person may have or hereafter acquire under any
statute, provision of the Articles of Incorporation, Bylaws, agreement,
vote of shareholders or disinterested directors or otherwise.
Section 4. Insurance, Contracts and Funding. The corporation may maintain
insurance, at its expense, to protect itself and any director, trustee,
officer, employee or agent of the corporation or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the corporation would have the power to
indemnify such person against such expense, liability or loss under the
Washington Business Corporation Act. The corporation may, without further
shareholder action, enter into contracts with any director or officer of
the corporation in furtherance of the provisions of this Article and may
create a trust fund, grant a security interest or use other means
(including, without Stations a letter of credit) to ensure the payment of
such amounts as may be necessary to effect indemnification as provided in
this Article.
Section 5. Indemnification of Employees and Agents of the
Corporation. The corporation may, by action of its board of directors from
time to time, provide indemnification and pay expenses in advance of the
final disposition of a proceeding to employees and agents of the
corporation with the same scope and effect as the provisions of this
Article with respect to the indemnification and advancement of expenses of
directors and officers of the corporation or pursuant to rights granted
pursuant to, or provided by, the Washington Business Corporation Act or
otherwise.
The Issuers maintain an insurance policy providing for indemnification of
their officers, directors and certain other persons against liabilities and
expenses incurred by any of them in certain stated proceedings and under
certain stated conditions.
II-3
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS:
<TABLE>
<C> <S>
1 --Purchase Agreement, dated as of April 25, 1996, by and among the
Company, Capital and the Purchasers.
3.1 --Amended and Restated Certificate of Formation of the Company.
3.2 --Amended and Restated Limited Liability Company Agreement of the
Company.
3.3 --Articles of Incorporation of Capital.
3.4 --By-laws of Capital.
4.1 --Indenture, dated as of April 25, 1996, by and among the Company,
Capital, United States Trust Company of New York, as trustee, relating
to $350,000,000 principal amount of 12 1/2% Senior Notes due April 15,
2006, including form of Global Note.
4.2 --Collateral Pledge and Agreement dated April 25, 1996, by and between
the Company and the Trustee.
4.3 --Exchange and Registration Rights Agreement, dated as of April 25,
1996, by and among the Company, Capital and the Purchasers.
*5 --Opinion of Willkie Farr & Gallagher.
10 --Amended and Restated Equity Option Plan of the Company.
12 --Statement Regarding Computation of Ratio of Earnings to Fixed Charges.
21 --Subsidiaries of the Registrants.
23.1 --Consent of Arthur Andersen LLP.
*23.2 --Consent of Willkie Farr & Gallagher (included in their opinion filed
as Exhibit 5).
24 --Powers of Attorney (included on signature pages).
25 --Statement on Form T-1 of Eligibility of Trustee.
27 --Financial Data Schedule.
99.1 --Form of Letter of Transmittal.
99.2 --Form of Notice of Guaranteed Delivery.
99.3 --Form of Letter to Clients.
99.4 --Form of Letter to Nominees.
</TABLE>
- --------
* To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES:
All schedules have been omitted because they are not applicable or not
required or the required information is included in the financial statements
or notes thereto.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of Registrants
pursuant to the provisions, described under Item 20 above, or otherwise, the
Registrants have been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the
II-4
<PAGE>
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrants of expenses incurred or paid by a director, officer or controlling
person of the Registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrants will, unless
in the option of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of this Registration Statement through
the date of responding to the request.
The undersigned registrants hereby undertake to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
this Registration Statement when it became effective.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT THE REGISTRANT HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW
YORK, ON MAY 24, 1996.
Nextlink Communications, L.L.C.
/s/ Craig O. McCaw
_____________________________________
By:Craig O. McCaw
Title: Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of NEXTLINK Communications,
L.L.C., do hereby severally constitute and appoint James F. Voelker and R.
Bruce Easter, Jr., and each of them, our true and lawful attorneys and agents,
to do any and all acts and things in our name and behalf in our capacities as
directors and officers and to execute any and all instruments for us and in
our names in the capacities indicated below, which said attorneys and agents,
or any of them, may deem necessary or advisable to enable said Corporation to
comply with the Securities Act of 1933, as amended, and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
this Registration Statement on Form S-4, including specifically, but without
limitation, power and authority to sign for us or any of us, in our names in
the capacities indicated below, any and all amendments (including post-
effective amendments) hereto; and we do each hereby ratify and confirm all
that said attorneys and agents, or any one of them, shall do or cause to be
done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE TITLE DATE
/s/ Craig O. McCaw Chief Executive May 24, 1996
- ------------------------------------- Officer (Principal
CRAIG O. MCCAW Executive Officer)
/s/ Kathleen H. Iskra Vice President, May 24, 1996
- ------------------------------------- Chief Financial
KATHLEEN H. ISKRA Officer (Principal
Financial Officer
and Principal
Accounting Officer)
Eagle River Investments, L.L.C. Manager May 24, 1996
/s/ Craig O. McCaw
By:__________________________________
Name: Craig O. McCaw
Title: Chief Executive Officer
Nextlink, Inc. Manager May 24, 1996
/s/ Craig O. McCaw
By:__________________________________
Name: Craig O. McCaw
Title: Chief Executive Officer
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT THE REGISTRANT HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW
YORK, ON MAY 21, 1996.
Nextlink Capital, Inc.
/s/ James F. Voelker
_____________________________________
By:James F. Voelker
Title: Director, Chief Executive
Officer and President
POWER OF ATTORNEY
We, the undersigned directors and officers of NEXTLINK Capital, Inc., do
hereby severally constitute and appoint James F. Voelker and R. Bruce Easter,
Jr., and each of them, our true and lawful attorneys and agents, to do any and
all acts and things in our name and behalf in our capacities as directors and
officers and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or any of them,
may deem necessary or advisable to enable said Corporation to comply with the
Securities Act of 1933, as amended, and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with
this Registration Statement on Form S-4, including specifically, but without
limitation, power and authority to sign for us or any of us, in our names in
the capacities indicated below, any and all amendments (including post-
effective amendments) hereto; and we do each hereby ratify and confirm all
that said attorneys and agents, or any one of them, shall do or cause to be
done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE TITLE DATE
/s/ James F. Voelker Director, Chief May 21, 1996
- ------------------------------------- Executive Officer
JAMES F. VOELKER and President
(Principal
Executive Officer)
/s/ Kathleen H. Iskra Vice President and May 24, 1996
- ------------------------------------- Treasurer
KATHLEEN H. ISKRA (Principal
Accounting Officer
and Principal
Financial Officer)
/s/ R. Bruce Easter, Jr. Director, Vice May 21, 1996
- ------------------------------------- President, General
R. BRUCE EASTER, JR. Counsel and
Secretary
II-7
<PAGE>
EXHIBIT 1
NEXTLINK Communications, L.L.C.
NEXTLINK Capital, Inc.
12 1/2% Senior Notes due April 15, 2006
---------------------------------------
Purchase Agreement
------------------
April 18, 1996
Goldman, Sachs & Co.,
Bear, Stearns & Co. Inc.,
Salomon Brothers Inc,
Toronto Dominion Securities (USA) Inc.,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
NEXTLINK Communications, L.L.C., a limited liability company formed under the
laws of the State of Washington (the "Company") and NEXTLINK Capital, Inc., a
Washington corporation ("Capital"), propose, subject to the terms and conditions
stated herein, to issue and sell to the Purchasers named in Schedule I hereto
(the "Purchasers") an aggregate of $350,000,000 principal amount of the Notes
specified above (the "Securities").
1. The Company and Capital, jointly and severally, represent and warrant to,
and agree with, each of the Purchasers that:
(a) A preliminary offering circular, dated March 28, 1996 (the
"Preliminary Offering Circular") and an offering circular in final form,
dated April 18, 1996 (the "Offering Circular") have been prepared in
connection with the offering of the Securities. Any reference to the
Preliminary Offering Circular or the Offering Circular shall be deemed to
refer to and include any Additional Issuer Information (as defined in Section
5(f)) furnished by the Company or Capital prior to the completion of the
distribution of the Securities. The Preliminary Offering Circular or the
Offering Circular and any amendments or supplements thereto did not and will
not, as of their respective dates, contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Company or
Capital by a Purchaser through Goldman, Sachs & Co. expressly for use
therein;
<PAGE>
(b) None of the Company, any of its subsidiaries (which term is used
herein as defined in the Indenture referred to in Section 1(g) below) or
Capital has sustained since the date of the latest audited financial
statements included in the Offering Circular any material loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Offering Circular; and, since the respective dates as of
which information is given in the Offering Circular, there has not been any
material change (except as described therein) in the aggregate level of
membership interests or long-term debt of the Company or any of its
subsidiaries, or in the capital stock or long-term debt of Capital, or any
material adverse change, or any development involving a prospective material
adverse change, in or affecting the general affairs, management, financial
position, members' equity, shareholders' equity or results of operations of
the Company, its subsidiaries and Capital, otherwise than as set forth or
contemplated in the Offering Circular;
(c) The Company and its subsidiaries have good and marketable title in
fee simple to all real property and good and marketable title to all personal
property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Offering
Circular or such as do not materially affect the value of such property and
do not materially interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries; and any real property and
buildings held under lease by the Company and its subsidiaries are held by
them under valid, subsisting and enforceable leases with such exceptions as
are not material and do not materially interfere with the use made and
proposed to be made of such property and buildings by the Company and its
subsidiaries;
(d) The Company has been duly formed and is validly existing as a limited
liability company under the laws of the State of Washington, with power and
authority to own its properties and conduct its business as described in the
Offering Circular, and has been duly qualified as a foreign limited liability
company for the transaction of business under the laws of each other
jurisdiction in which it owns or leases properties or conducts any business
so as to require such qualification, or is subject to no material liability
or disability by reason of the failure to be so qualified in any such
jurisdiction; and each subsidiary of the Company has been duly formed and is
validly existing as a limited liability company or limited partnership under
the laws of its jurisdiction of formation and has been duly qualified as a
foreign limited liability company or limited partnership for the transaction
of business under the laws of each other jurisdiction in which it owns or
leases properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by reason
of the failure to be so qualified in any such jurisdiction;
(e) Capital has been duly incorporated and is validly existing as a
corporation under the laws of the State of Washington, with full corporate
power and authority to conduct its business as described in the Offering
Circular, and has been duly qualified as a foreign corporation for the
transaction of business under the laws of each other jurisdiction in which it
conducts any business so as to require such qualification, or is
2
<PAGE>
subject to no material liability or disability by reason of the failure to be
so qualified in any jurisdiction;
(f) The Company and Capital have an authorized capitalization as set
forth in the Offering Circular, and all of the issued membership interests of
the Company have been duly and validly authorized and issued, and all of the
issued shares of capital stock of Capital have been duly and validly
authorized and issued and are fully paid and non-assessable; and all of the
issued membership interests or partnership interests, as the case may be, of
each subsidiary of the Company have been duly and validly authorized and
issued, and (except as otherwise set forth in the Offering Circular in
respect of the minority interests described therein) are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims; and all of the shares of capital stock of Capital owned
by the Company are owned free and clear of all liens, encumbrances, equities
or claims (except as otherwise set forth in the Offering Circular;
(g) The Securities have been duly authorized and, when issued and
delivered pursuant to this Agreement, will have been duly executed,
authenticated, issued and delivered and will constitute valid and legally
binding obligations of the Company and Capital entitled to the benefits
provided by the indenture to be dated as of April 25, 1996 (the "Indenture")
between the Company, Capital and United States Trust Company of New York, as
Trustee (the "Trustee"), under which they are to be issued, which will be
substantially in the form previously delivered to you; the Indenture has been
duly authorized and, when executed and delivered by the Company, Capital and
the Trustee, the Indenture will constitute a valid and legally binding
instrument, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles; and the Securities and the Indenture will conform
to the descriptions thereof in the Offering Circular and will be in
substantially the form previously delivered to you;
(h) None of the transactions contemplated by this Agreement (including,
without limitation, the use of the proceeds from the sale of the Securities)
will violate or result in a violation of Section 7 of the United States
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
regulation promulgated thereunder, including, without limitation, Regulations
G, T, U, and X of the Board of Governors of the Federal Reserve System;
(i) The issue and sale of the Securities and the compliance by the
Company and Capital with all of the provisions of the Securities, the
Indenture, the Registration Rights Agreement (as hereinafter defined in
Section 1(s) hereof), the Pledge Agreement (as hereinafter defined in Section
1(t) hereof) and this Agreement and the consummation of the transactions
herein and therein contemplated will not conflict with or result in a breach
or violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument (including without limitation, any license,
franchise, permit, consent or similar authorization granted to the Company or
any subsidiary of the Company by any
3
<PAGE>
franchising or other governmental body) to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries is
bound or to which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such action result in any violation of the
provisions of the Certificate of Formation of the Company or the limited
liability company agreement of the Company, in each case, as in effect at the
applicable time, the Articles of Incorporation or Bylaws of Capital, in each
case, as in effect at the applicable time, or any statute or any order, rule
or regulation of any court or governmental agency or body having jurisdiction
over the Company, any of its subsidiaries or Capital or any of their
properties; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Securities or the consummation by the
Company or Capital of the transactions contemplated by this Agreement, the
Registration Rights Agreement, the Pledge Agreement or the Indenture, except
for the filing of a registration statement by the Company and Capital with
the Securities and Exchange Commission (the "Commission") pursuant to the
United States Securities Act of 1933, as amended (the "Act") pursuant to
Section 5(l) hereof and such consents, approvals, authorizations,
registrations or qualifications as may be required under state securities or
Blue Sky laws in connection with the purchase and distribution of the
Securities by the Purchasers;
(j) None of the Company, any of its subsidiaries or Capital is in
violation of its respective organizational documents, as in effect at the
applicable time, or in default in the performance or observance of any
material obligation, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or
instrument (including without limitation, any license, franchise, permit,
consent or similar authorization granted to the Company, any subsidiary or
Capital by any franchising or other governmental body) to which it is a party
or by which it or any of its properties may be bound;
(k) The statements set forth in the Offering Circular under the caption
"Description of Notes", insofar as they purport to constitute a summary of
the terms of the Securities, and under the captions "Business -- Regulatory
Overview", "Certain United States Federal Income Tax Consequences" and "Offer
and Resale", insofar as they purport to describe the provisions of the laws
and documents referred to therein, are accurate and complete;
(l) Other than as set forth in the Offering Circular, there are no legal
or governmental proceedings pending to which the Company, any of its
subsidiaries or Capital is a party or of which any property of the Company,
any of its subsidiaries or Capital is the subject which, if determined
adversely to the Company, any of its subsidiaries or Capital, would
individually or in the aggregate have a material adverse effect on the
current or future financial position, members' equity, shareholders' equity
or results of operations of the Company, its subsidiaries and Capital; and,
to the best of the Company's and Capital's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by
others;
4
<PAGE>
(m) When the Securities are issued and delivered pursuant to this
Agreement, the Securities will not be of the same class (within the meaning
of Rule 144A under the Securities Act) as securities which are listed on a
national securities exchange registered under Section 6 of the Exchange Act
or quoted in a U.S. automated inter-dealer quotation system;
(n) Neither the Company nor Capital is or, after giving effect to the
offering and sale of the Securities, will be an "investment company", or an
entity "controlled" by an "investment company", as such terms are defined in
the United States Investment Company Act of 1940, as amended (the "Investment
Company Act");
(o) None of the Company, Capital or any person acting on its or their
behalf has offered or sold the Securities by means of any general
solicitation or general advertising within the meaning of Rule 502(c) under
the Act or, with respect to Securities sold outside the United States to non-
U.S. persons (as defined in Rule 902 under the Act), by means of any directed
selling efforts within the meaning of Rule 902 under the Securities Act and
the Company, Capital, any affiliate of either of them and any person acting
on its or their behalf has complied with and will implement the "offering
restriction" within the meaning of such Rule 902; provided, however, no
representation is made with respect to any actions that may have been taken
by the Purchasers or any of their affiliates other than Capital, the Company,
the Company's subsidiaries, and their respective members and officers;
(p) Within the preceding six months, none of the Company, Capital or any
other person acting on their behalf has offered or sold to any person any
Securities, or any securities of the same or a similar class as the
Securities, other than Securities offered or sold to the Purchasers
hereunder;
(q) None of the Company, Capital or any of their affiliates does business
with the government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes;
(r) Arthur Andersen LLP, who have audited certain financial statements of
the Company and its subsidiaries, are independent public accountants as
required by the Act and the rules and regulations of the Commission
thereunder;
(s) The Exchange and Registration Rights Agreement between the Company,
Capital and the Purchasers to be dated as of April 25, 1996 (the
"Registration Rights Agreement") has been duly authorized, and, when executed
and delivered by the Company and Capital (assuming due authorization,
execution and delivery by the Purchasers), will constitute a valid and
legally binding agreement of the Company and Capital enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating
to or affecting creditors' rights, to general equity principles and, as to
enforcement of rights to indemnity and contribution thereunder, to
limitations under applicable securities laws or public policy; and the
Registration Rights Agreement will conform in all material respects to the
description thereof in the Offering Circular;
5
<PAGE>
(t) The Collateral Pledge and Security Agreement between the Company and
the Trustee to be dated as of April 25, 1996 (the "Pledge Agreement") has
been duly authorized, and, when executed and delivered by the Company
(assuming due authorization, execution and delivery by the Trustee), will
constitute a valid and legally binding agreement of the Company enforceable
in accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating
to or affecting creditors' rights, to general equity principles and, as to
enforcement of rights to indemnity and contribution thereunder, to
limitations under applicable securities laws or public policy; and the Pledge
Agreement will conform in all material respects to the description thereof in
the Offering Circular. Upon the Company's purchase of the Pledged Securities
(as defined in the Pledge Agreement), the Company will be the sole beneficial
owner of the Pledged Securities and no lien, encumbrance, equity or claim
will exist upon such Pledged Securities (and no right or option to acquire
the same will exist in favor of any other person or entity), except for the
pledge and security interest in favor of the Trustee for the ratable benefit
of the holders of the Securities to be created or provided for in the Pledge
Agreement, which pledge and security interest constitute a first priority
perfected pledge and security interest in and to all of the Pledged
Securities.
(u) This Agreement has been duly authorized, executed and delivered by
the Company and Capital;
(v) No holder of any security of the Company or Capital has or will have
any right to require the registration of such security by virtue of any
transactions contemplated by this Agreement, the Pledge Agreement or the
Registration Rights Agreement other than any such right that has been
expressly waived in writing;
(w) Except as set forth in or contemplated by the Offering Circular with
respect to systems under development and the offering of dial tone service,
each of the Company and its subsidiaries has all material certificates,
consents, exemptions, orders, permits, licenses, authorizations, franchises
or other material approvals (each, an "Authorization") of and from, and has
made all material declarations and filings with, all Federal, state, local
and other governmental authorities, all self-regulatory organizations and all
courts and other tribunals, necessary or appropriate for the Company and its
subsidiaries to own, lease, license, use and construct its properties and
assets and to conduct its business in the manner described in the Offering
Circular, except to the extent that the failure to obtain any such
Authorizations or make any such declaration or filing would not, singularly
or in the aggregate, reasonably be expected to have a material adverse effect
on the current or future consolidated financial position, members' equity or
results of operations of the Company and its subsidiaries. All such
Authorizations are in full force and effect with respect to the Company and
its subsidiaries; to the best knowledge of the Company, no event has occurred
that permits, or after notice or lapse of time could permit, the revocation,
termination or modification of any such Authorization; the Company and its
subsidiaries are in compliance in all material respects with the terms and
conditions of all such Authorizations and with the rules and regulations of
the regulatory authorities and governing bodies having jurisdiction with
respect thereto; and, except as set forth in the Offering Circular, the
6
<PAGE>
Company has no knowledge that any person is contesting or intends to contest
the granting of any material Authorization; and
(x) Neither the execution and delivery of this Agreement, the Indenture,
the Pledge Agreement or the Registration Rights Agreement, nor the
consummation of the transactions contemplated hereby or thereby nor
compliance with the terms, conditions and provisions thereof by the Company
or Capital will cause any suspension, revocation, impairment, forfeiture,
nonrenewal or termination of any Authorization.
2. Subject to the terms and conditions herein set forth, the Company and
Capital agree to issue and sell to each of the Purchasers, and each of the
Purchasers agrees, severally and not jointly, to purchase from the Company and
Capital, at a purchase price of 97.25% of the principal amount thereof, plus
accrued interest, if any, from April 25, 1996, the principal amount of
Securities set forth opposite the name of such Purchaser in Schedule I hereto.
3. Upon the authorization by you of the release of the Securities, the
several Purchasers propose to offer the Securities for sale upon the terms and
conditions set forth in this Agreement and the Offering Circular and each
Purchaser hereby represents and warrants to, and agrees with the Company and
Capital that:
(a) It will offer and sell the Securities only to: (i) persons who it
reasonably believes are "qualified institutional buyers" ("QIBs") within the
meaning of Rule 144A under the Act in transactions meeting the requirements
of Rule 144A, (ii) institutions which it reasonably believes are "accredited
investors" ("Institutional Accredited Investors") within the meaning of Rule
501 under the Act or, (iii) upon the terms and conditions set forth in Annex
I to this Agreement;
(b) It is an Institutional Accredited Investor; and
(c) It will not offer or sell the Securities by any form of general
solicitation or general advertising, including but not limited to the methods
described in Rule 502(c) under the Act.
4. (a) Except as set forth in the next paragraph, the Securities to be
purchased by each Purchaser hereunder will be represented by one or more
definitive global Securities in book-entry form which will be deposited by or on
behalf of the Company and Capital with The Depository Trust Company ("DTC") or
its designated custodian. The Company and Capital will deliver the Securities
to Goldman, Sachs & Co., for the account of each Purchaser, against payment by
or on behalf of such Purchaser of the purchase price therefor by electronic
transfer to the order of the Company in Federal (same day) funds, by causing DTC
to credit the Securities to the account of Goldman, Sachs & Co. at DTC. The
Company and Capital will cause the certificates representing the Securities to
be made available to Goldman, Sachs & Co. for checking at least twenty-four
hours prior to the Time of Delivery (as defined below) at the office of DTC or
its designated custodian (the "Designated Office"). The time and date of such
delivery and payment shall be 9:30 a.m., New York City time, on April 25, 1996
or
7
<PAGE>
such other time and date as Goldman, Sachs & Co. and the Company may agree upon
in writing. Such time and date are herein called the "Time of Delivery".
Such Securities, if any, as Goldman, Sachs & Co. may request upon at least
forty-eight hours' prior notice to the Company or Capital (such request to
include the authorized denominations and the names in which they are to be
registered), shall be delivered in definitive certificated form, by or on behalf
of the Company and Capital to Goldman, Sachs & Co. for the account of certain of
the Purchasers, against payment by or on behalf of such Purchaser of the
purchase price therefor by electronic transfer to the order of the Company in
Federal (same day) funds. The Company and Capital will cause the certificates
representing the Securities to be made available for checking and packaging at
least twenty-four hours prior to the Time of Delivery at the office of Goldman,
Sachs & Co., 85 Broad Street, New York, New York 10004.
(b) The documents to be delivered at the Time of Delivery by or on behalf of
the parties hereto pursuant to Section 7 hereof, including the cross-receipt for
the Securities and any additional documents requested by the Purchasers pursuant
to Section 7(k) hereof, will be delivered at such time and date at the offices
of Sullivan & Cromwell, 125 Broad Street, New York, New York 10004 (the "Closing
Location"), and the Securities will be delivered at the Designated Office, all
at the Time of Delivery. A meeting will be held at the Closing Location at 2:00
p.m., New York City time, on the New York Business Day next preceding the Time
of Delivery, at which meeting the final drafts of the documents to be delivered
pursuant to the preceding sentence will be available for review by the parties
hereto. For the purposes of this Section 4, "New York Business Day" shall mean
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in New York are generally authorized or obligated by law or
executive order to close.
5. The Company and Capital, jointly and severally, agree with each of the
Purchasers:
(a) To prepare the Offering Circular in a form approved by you; to make
no amendment or any supplement to the Offering Circular which shall be
disapproved by you promptly after reasonable notice thereof; and to furnish
you with copies thereof;
(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Securities for offering and sale under the securities
laws of such jurisdictions as you may request and to comply with such laws so
as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of
the Securities, provided that in connection therewith neither the Company nor
Capital shall be required to qualify as a foreign limited liability company
or foreign corporation, as the case may be, or to file a general consent to
service of process in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York Business Day
next succeeding the date of this Agreement and from time to time, to furnish
the Purchasers with copies of the Offering Circular in New York City and each
amendment or supplement thereto, together with the independent accountants'
report(s) in the Offering Circular, and any amendment or supplement
containing amendments to the financial
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statements covered by such report(s), signed by the accountants, and
additional copies thereof in such quantities as you may from time to time
reasonably request, and if, at any time prior to the expiration of nine
months after the date of the Offering Circular, any event shall have occurred
as a result of which the Offering Circular as then amended or supplemented
would include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made when such Offering Circular
is delivered, not misleading, or, if for any other reason it shall be
necessary or desirable during such same period to amend or supplement the
Offering Circular, to notify you and upon your request to prepare and furnish
without charge to each Purchaser and to any dealer in securities as many
copies as you may from time to time reasonably request of an amended Offering
Circular or a supplement to the Offering Circular which will correct such
statement or omission or effect such compliance;
(d) During the period beginning from the date hereof and continuing until
the date 90 days after the Time of Delivery, not to offer, sell, contract to
sell or otherwise dispose of, except as provided hereunder any securities of
the Company or Capital that are substantially similar to the Securities
(other than as contemplated by the Registration Rights Agreement) or any
securities of the Company or Capital convertible or exchangeable for
securities of the Company or Capital, as the case may be, that are
substantially similar to the Securities without the prior written consent of
Goldman, Sachs & Co.; in addition, the Company and Capital will take
reasonable precautions designed to insure that any offer or sale, direct or
indirect, in the United States or to any U.S. person (as defined in Rule 902
under the Act) of any Securities or any substantially similar security issued
by the Company and Capital, within six months subsequent to the date on which
the distribution of the Securities has been completed (as notified to the
Company and Capital by Goldman, Sachs & Co.), is made under restrictions and
other circumstances reasonably designed not to affect the status of the offer
and sale of the Securities in the United States and to U.S. persons
contemplated by this Agreement as transactions exempt from the registration
provisions of the Securities Act;
(e) Not to be or become, at any time prior to the expiration of three
years after the Time of Delivery, an open-end investment company, unit
investment trust, closed-end investment company or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act;
(f) At any time when the Company or Capital is not subject to Section 13
or 15(d) of the Exchange Act, for the benefit of holders from time to time of
Securities, to furnish at its expense, upon request, to holders of Securities
and prospective purchasers of securities information (the "Additional Issuer
Information") satisfying the requirements of subsection (d)(4)(i) of Rule
144A under the Act;
(g) If requested by you, to use its reasonable best efforts to cause such
Securities to be eligible for the PORTAL trading system of the National
Association of Securities Dealers, Inc.;
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(h) To file with the Commission, not later than 15 days after the Time of
Delivery, five copies of a notice on Form D under the Act (one of which will
be manually signed by a person duly authorized by the Company); to otherwise
comply with the requirements of Rule 503 under the Act; and to furnish
promptly to you evidence of each such required timely filing (including a
copy thereof);
(i) To furnish to the holders of the Securities as soon as practicable
after the end of each fiscal year an annual report (including a consolidated
balance sheet and consolidated statements of income, equity and cash flows of
the Company, its consolidated subsidiaries and Capital certified by
independent public accountants) and, as soon as practicable after the end of
each of the first three quarters of each fiscal year (beginning with the
fiscal quarter ending after the date of the Offering Circular), consolidated
summary financial information of the Company, its subsidiaries and Capital
for such quarter in reasonable detail;
(j) During a period of five years from the date of the Offering Circular,
to furnish to you copies of all financial reports furnished to members or
stockholders, as applicable, and to deliver to you (i) as soon as they are
available, copies of any reports and financial statements furnished to or
filed with the Commission or any securities exchange on which the Securities
or any class of securities of the Company, or Capital is listed; and (ii)
such additional information concerning the business and financial condition
of the Company or Capital as you may from time to time reasonably request
(such financial statements to be on a consolidated basis to the extent the
accounts of the Company, its subsidiaries and Capital are consolidated in
reports furnished to its members generally or to the Commission);
(k) During the period of three years after the Time of Delivery, neither
the Company nor Capital will, nor will they permit any of their "affiliates"
(as defined in Rule 144 under the Securities Act) to, resell any of the
Securities which constitute "restricted securities" under Rule 144 that have
been reacquired by any of them except pursuant to an effective registration
statement under the Act;
(l) Pursuant to the Registration Rights Agreement, the Company and
Capital shall file on or prior to the 30th day after the Time of Delivery,
and use their reasonable best efforts to cause to be declared or become
effective under the Securities Act, as soon as practicable thereafter, a
registration statement on Form S-4 providing for the registration of another
series of debt securities of the Company and Capital, with terms identical to
the Securities (the "Exchange Securities"), and the exchange of the
Securities for the Exchange Securities, all in a manner which will permit
persons who acquire the Exchange Securities to resell the Exchange Securities
pursuant to Section 4(1) of the Securities Act; and
(m) To use the net proceeds received by them from the sale of the
Securities pursuant to this Agreement in the manner specified in the Offering
Circular under the caption "Use of Proceeds".
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6. The Company covenants and agrees with the several Purchasers that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the counsel and accountants of the Company and Capital in
connection with the issue of the Securities and all other expenses in connection
with the preparation, printing and filing of the Preliminary Offering Circular
and the Offering Circular and any amendments and supplements thereto and the
mailing and delivering of copies thereof to the Purchasers and dealers; (ii) the
cost of printing or producing any Agreement among Purchasers, this Agreement,
the Indenture, the Registration Rights Agreement, the Pledge Agreement, the Blue
Sky and Legal Investment Memoranda, closing documents (including any
compilations thereof) and any other documents in connection with the offering,
purchase, sale and delivery of the Securities; (iii) all expenses in connection
with the qualification of the Securities for offering and sale under state
securities laws as provided in Section 5(b) hereof, including the fees and
disbursements of counsel for the Purchasers in connection with such
qualification and in connection with the Blue Sky and legal investment surveys;
(iv) any fees charged by securities rating services for rating the Securities;
(v) the cost of preparing the Securities; (vi) the fees and expenses of the
Trustee and any agent of the Trustee and the fees and disbursements of counsel
for the Trustee in connection with the Indenture and the Securities; (vii) any
cost incurred in connection with the designation of the Securities for trading
in PORTAL; and (viii) all other costs and expenses incident to the performance
of its obligations hereunder which are not otherwise specifically provided for
in this Section. It is understood, however, that, except as provided in this
Section, and Sections 8 and 11 hereof, the Purchasers will pay all of their own
costs and expenses, including the fees of their counsel, transfer taxes on
resale of any of the Securities by them, and any advertising expenses connected
with any offers they may make. The Purchasers have also agreed to reimburse the
Company for certain of its expenses incurred in connection with the transactions
contemplated by this Agreement, in an aggregate amount of $625,000.
7. The obligations of the Purchasers hereunder shall be subject, in their
discretion, to the condition that all representations and warranties and other
statements of the Company and Capital herein are, at and as of the Time of
Delivery, true and correct, the condition that the Company and Capital shall
have performed all of its obligations hereunder theretofore to be performed, and
the following additional conditions:
(a) Sullivan & Cromwell, counsel for the Purchasers, shall have furnished
to you such opinion or opinions, dated the Time of Delivery, with respect to
the formation of the Company, the incorporation of Capital, the validity of
the Indenture, the Securities, the Pledge Agreement and the Registration
Rights Agreement, the Offering Circular, and such other related matters as
you may reasonably request, and such counsel shall have received such papers
and information as they may reasonably request to enable them to pass upon
such matters;
(b) Willkie Farr & Gallagher, counsel for the Company and Capital, shall
have furnished to you their written opinion, dated the Time of Delivery, in
form and substance satisfactory to you, to the effect that:
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(i) The Company has been duly formed and is validly existing as a
limited liability company under the laws of the State of Washington, with
power and authority to own its properties and conduct its business as
described in the Offering Circular;
(ii) Capital has been duly incorporated and is validly existing as
a corporation under the laws of the State of Washington with corporate power
and authority to conduct its business as described in the Offering Circular;
(iii) The Company and Capital have an authorized capitalization as
set forth in the Offering Circular, and all of the issued membership
interests of the Company have been duly and validly authorized and issued,
and all of the issued shares of capital stock of Capital have been duly and
validly authorized and issued and are fully paid and non-assessable; all of
the outstanding shares of capital stock of Capital owned by the Company are
owned free and clear of all liens, encumbrances, equities or claims (except
as otherwise set forth in the Offering Circular);
(iv) The Company has been duly qualified as a foreign limited
liability company for the transaction of business under the laws of each
other jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, or is subject to no material
liability or disability by reason of the failure to be so qualified in any
such jurisdiction;
(v) Capital has been duly qualified as a foreign corporation for
the transaction of business under the laws of each other jurisdiction in
which it conducts any business so as to require such qualification, or is
subject to no material liability or disability by reason of the failure to be
so qualified in any such jurisdiction;
(vi) The Company will be classified for United States federal
income tax purposes as a partnership within the meaning of Section 7701(a)(2)
of the Internal Revenue Code of 1986, as amended;
(vii) Each subsidiary of the Company has been duly formed and is
validly existing as a limited liability company or limited partnership under
the laws of its jurisdiction of formation; and all of the issued membership
interests or partnership interests of each such subsidiary have been duly and
validly authorized and issued, and (except as otherwise set forth in the
Offering Circular in respect of the minority interests described therein) are
owned directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims;
(viii) This Agreement has been duly authorized, executed and
delivered by the Company and Capital;
(ix) The Securities have been duly and validly authorized and
executed by the Company and Capital and, assuming due authentication of the
Securities by the Trustee, upon delivery to the Purchasers against payment
therefor in accordance with the terms of this Agreement, will have been
validly issued and delivered and will constitute valid and legally binding
obligations of the Company and Capital entitled to the benefits
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<PAGE>
provided by the Indenture, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating
or affecting creditors' rights and to general equity principles; and the
Securities and the Indenture conform in all material respects to the
descriptions thereof in the Offering Circular;
(x) The Registration Rights Agreement has been duly authorized,
executed and delivered by the Company, Capital and, assuming due
authorization, execution and delivery by the Purchasers, constitutes a valid
and legally binding obligation of the Company and Capital enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating
to or affecting creditors' rights and to general equity principles and, as to
enforcement of rights to indemnity and contribution thereunder, to
limitations under applicable securities laws or public policy; and the
Registration Rights Agreement conforms in all material respects to the
summary thereof in the Offering Circular;
(xi) The Indenture has been duly authorized, executed and delivered
by the Company and Capital and, assuming due execution and delivery by the
Trustee, constitutes a valid and legally binding instrument, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating
to or affecting creditors' rights and to general equity principles;
(xii) The Pledge Agreement has been duly authorized, executed and
delivered by the Company, Capital and, assuming due authorization, execution
and delivery by the Trustee, constitutes a valid and legally binding
obligation of the Company and Capital enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or affecting creditors'
rights and to general equity principles and, as to enforcement of rights to
indemnity and contribution thereunder, to limitations under applicable
securities laws or public policy; and the Pledge Agreement conforms in all
material respects to the summary thereof in the Offering Circular, without
expressing any opinion as to the priority of the security interest created
under the Pledge Agreement;
(xiii) The issue and sale of the Securities and the compliance by
the Company and Capital with all of the provisions of the Securities, the
Indenture, the Registration Rights Agreement, the Pledge Agreement and this
Agreement and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or violation of any
of the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument
known to such counsel to which the Company, any of its subsidiaries or
Capital is a party or by which the Company, any of its subsidiaries or
Capital is bound or to which any of the property or assets of the Company or
any of its subsidiaries is subject, nor will such actions result in any
violation of the provisions of the Certificate of Formation of the Company or
the limited liability company agreement of the Company, in each case, as in
effect at the applicable time, or the Articles of Incorporation or Bylaws of
Capital, in each case, as in effect at the applicable time, or any order,
rule or regulation, known to such counsel to be applicable to the Company
13
<PAGE>
or Capital and any of their respective subsidiaries or properties, of any
court or governmental agency or body having jurisdiction over the Company,
any of its subsidiaries or Capital or any of their properties;
(xiv) To the best of such counsel's knowledge, no consent,
approval, authorization, order, registration or qualification of or with any
such court or governmental agency or body is required for the issue and sale
of the Securities, the consummation by the Company and Capital of the
transactions contemplated by this Agreement, the Indenture, the Pledge
Agreement or the Registration Rights Agreement, except such consents,
approvals, authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Purchasers, and such consents,
approvals, authorizations, orders, registrations and qualifications as may be
required under the Act, the United States Trust Indenture Act of 1939 (the
"Trust Indenture Act") and state or foreign securities or Blue Sky laws in
connection with the filing of a registration statement by the Company and
Capital with the Commission pursuant to the Act in accordance with Section
5(l) hereof and the exchange offer or resale registration contemplated by the
Registration Rights Agreement described in the Offering Circular;
(xv) The statements set forth in the Offering Circular under the
caption "Description of Notes", insofar as they purport to constitute a
summary of the terms of the Securities, and under the captions "Business --
Regulatory Overview", "Certain United States Federal Income Tax Consequences"
and "Offer and Resale", insofar as they purport to describe the provisions of
the laws and documents referred to therein, are accurate and complete;
(xvi) No registration of the Securities under the Act, and no
qualification of an indenture under the Trust Indenture Act with respect
thereto, is required for the offer, sale and initial resale of the Securities
by the Purchasers in the manner contemplated by this Agreement;
(xvii) Neither the Company nor Capital is or, after giving effect
to the offering contemplated hereby, will be, an "investment company" or an
entity "controlled" by an "investment company", as such terms are defined in
the Investment Company Act;
(xviii) The provisions of the Pledge Agreement are effective to
create in favor of the Trustee for the benefit of the holders of Securities
the security interest purported to be created therein in all right, title and
interest of the Issuers in and to Pledged Securities that from time to time
are transferred to the Trustee on behalf of the holders of Securities and the
proceeds thereof received from time to time by the Trustee; and
(xix) The security interest of the Trustee in the Pledged
Securities, initially consisting of Government Securities (as defined in the
Indenture), created pursuant to the Pledge Agreement, upon transfer of such
Pledged Securities to the Trustee for the benefit of the holders of
Securities, will be a perfected security interest.
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Such counsel shall also state that they have no reason to believe that the
Offering Circular and any further amendments or supplements thereto made by the
Company and Capital prior to the Time of Delivery (other than the financial
statements therein, as to which such counsel need express no opinion) contained
as of its date or contains as of the Time of Delivery an untrue statement of a
material fact or omitted or omits, as the case may be, to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. Such counsel will be entitled to
rely as to matters of Washington law upon opinions of local counsel and in
respect of matters of fact upon certificates of officers of the Company,
provided that such counsel shall state that they believe that both you and they
are justified in relying upon such opinions and certificates.
(c) R. Bruce Easter, Esq., Vice President, General Counsel and Secretary
of the Company, shall have furnished to you his written opinion, dated the
Time of Delivery, in form and substance satisfactory to you, to the effect
that:
(i) The Company has the power and authority to own its properties
and conduct its business as described in the Offering Circular;
(ii) Capital has the corporate power and authority to conduct its
business as described in the Offering Circular;
(iii) The Company and Capital have an authorized capitalization as
set forth in the Offering Circular, and all of the issued membership
interests of the Company and all of the issued shares of capital stock of
Capital have been duly and validly authorized and issued and are fully paid
and non-assessable; all of the outstanding shares of capital stock of Capital
owned by the Company are owned free and clear of all liens, encumbrances,
equities or claims (except as otherwise set forth in the Offering Circular);
(iv) The Company has been duly qualified as a foreign limited
liability company for the transaction of business under the laws of each
other jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, or is subject to no material
liability or disability by reason of the failure to be so qualified in any
such jurisdiction (such counsel being entitled to rely in respect of the
opinion in this clause upon opinions of local counsel and in respect of
matters of fact upon certificates of officers of the Company, provided that
such counsel shall state that he believes that both you and he are justified
in relying upon such opinions and certificates);
(v) Capital has been duly qualified as a foreign corporation for
the transaction of business under the laws of each other jurisdiction in
which it conducts any business so as to require such qualification, or is
subject to no material liability or disability by reason of the failure to be
so qualified in any such jurisdiction (such counsel being entitled to rely in
respect of the opinion in this clause upon opinions of local counsel and in
respect of matters of fact upon certificates of officers of Capital, provided
that such counsel shall state that he believes that both you and he are
justified in relying upon such opinions and certificates);
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(vi) Each subsidiary of the Company has been duly formed and is
validly existing as a limited liability company or a limited partnership
under the laws of its jurisdiction of formation and has been duly qualified
as a foreign limited liability company or a foreign limited partnership for
the transaction of business under the laws of each other jurisdiction in
which it owns or leases properties or conducts any business so as to require
such qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction ; and all
of the issued membership interests of each such subsidiary have been duly and
validly authorized and issued, are fully paid and non-assessable, and (except
as otherwise set forth in the Offering Circular in respect of the minority
interests described therein) are owned directly or indirectly by the Company,
free and clear of all liens, encumbrances, equities or claims (such counsel
being entitled to rely in respect of the opinion in this clause upon opinions
of local counsel and in respect of matters of fact upon certificates of
officers of the Company or its subsidiaries, provided that such counsel shall
state that they believe that both you and they are justified in relying upon
such opinions and certificates);
(vii) To the best of such counsel's knowledge and other than as set
forth in the Offering Circular, there are no legal or governmental
proceedings pending to which the Company, any of its subsidiaries or Capital
is a party or of which any property of the Company, any of its subsidiaries
or Capital is the subject which, if determined adversely to the Company, any
of its subsidiaries or Capital, would individually or in the aggregate have a
material adverse effect on the consolidated financial position, members'
equity, shareholders' equity, results of operations or general affairs of the
Company, its subsidiaries or Capital; and, to the best of such counsel's
knowledge, no such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(viii) To the best knowledge of such counsel and except as set forth
in or contemplated by the Offering Circular with respect to systems under
development, (a) each of the Company and its subsidiaries has all
Authorizations of and from, and has made all declarations and filings with,
all Federal, state, local and other governmental authorities, all self-
regulatory organizations and all courts and other tribunals, which are
necessary or appropriate for the Company and its subsidiaries to own, lease,
license, use and construct its properties and assets and to conduct its
business in the manner described in the Offering Circular, except to the
extent that the failure to obtain any such Authorizations or make any such
declaration or filing would not, singularly or in the aggregate, reasonably
be expected to have a material adverse effect on the consolidated financial
position, members' equity, shareholders' equity, results of operations or
general affairs of the Company or its subsidiaries, (b) all such
Authorizations are in full force and effect with respect to the Company and
its subsidiaries, (c) no event has occurred that permits, or after notice or
lapse of time could permit, the revocation, termination or modification of
any such Authorization and (d) the Company and its subsidiaries are in
compliance in all material respects with the terms and conditions of all such
Authorizations and with the rules and regulations of the regulatory
authorities and governing bodies having jurisdiction with respect thereto;
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(ix) To the best knowledge of such counsel, neither the execution
and delivery of this Agreement, the Indenture, the Pledge Agreement or the
Registration Rights Agreement, the issuance and sale of the Securities by the
Company and Capital to the Purchasers, nor the consummation by the Company
and Capital of the transactions contemplated hereby or thereby nor compliance
with the terms, conditions and provisions thereof by the Company or Capital
will cause any suspension, revocation, impairment, forfeiture, nonrenewal or
termination of any Authorization; and
(x) The statements set forth in the Offering Circular under the
caption "Business -- Regulatory Overview", insofar as they purport to
describe certain of the provisions of the laws, legal proceedings and
documents referred to therein, are accurate summaries of such provisions in
all material respects.
(d) Davis Wright Tremaine, special Washington counsel for the Company
and Capital, shall have furnished to you their written opinion, dated the
Time of Delivery, in form and substance satisfactory to you, to the effect
that:
(i) the Company has been duly formed and is validly existing as a
limited liability company under the laws of the State of Washington;
(ii) Capital has been duly incorporated and is an existing corporation
under the laws of the State of Washington;
(iii) each of the Indenture, this Agreement, the Pledge Agreement and
the Registration Rights Agreement has been duly authorized, executed and
delivered by the Company and Capital;
(iv) the Securities have been duly authorized, executed, issued and
delivered by the Company and Capital;
(v) the execution and delivery of the Securities, the Indenture, this
Agreement, the Pledge Agreement and the Registration Rights Agreement do not
and will not conflict with, contravene or result in a breach of the Company's
current Amended and Restated Limited Liability Company Agreement or its
Certificate of Formation;
(vi) the execution and delivery of the Securities, the Indenture, this
Agreement, the Pledge Agreement and the Registration Rights Agreement do not
and will not conflict with, contravene or result in a breach of Capital's
Articles of Incorporation or Bylaws; and
(vii) no consent, authorization, approval, order, registration or other
action by, and no notice to or filing with, any governmental authority or
regulatory body of the State of Washington is required for the due execution
and delivery by the Company or Capital of the Indenture, this Agreement, the
Pledge Agreement and the Registration Rights Agreement, nor for the due
execution, issue and delivery of the Securities, except such consents,
approvals, authorizations, registrations or qualifications as may be required
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under securities or Blue Sky laws of the State of Washington in connection
with the purchase and distribution of the Securities by the Purchasers.
(e) On the date of the Offering Circular prior to the execution of this
Agreement and also at the Time of Delivery, Arthur Andersen LLP shall have
furnished to you a letter or letters, dated the respective dates of delivery
thereof, in form and substance satisfactory to you, to the effect set forth
in Annex II hereto;
(f) (i) None of the Company, any of its subsidiaries or Capital shall
have sustained since the date of the latest audited financial statements
included in the Offering Circular any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Offering
Circular, and (ii) since the respective dates as of which information is
given in the Offering Circular there shall not have been any change in the
aggregate level of membership interests, partnership interests or long-term
debt of the Company or any of its subsidiaries, or in the capital stock or
long-term debt of Capital, or any change, or any development involving a
prospective change, in or affecting the general affairs, management,
financial position, members' equity, shareholders' equity or results of
operations of the Company, its subsidiaries and Capital, otherwise than as
set forth or contemplated in the Offering Circular, the effect of which, in
any such case described in Clause (i) or (ii), is in the judgment of the
Purchasers so material and adverse as to make it impracticable or inadvisable
to proceed with the offering or the delivery of the Securities on the terms
and in the manner contemplated in this Agreement and in the Offering
Circular;
(g) On or after the date hereof (i) no downgrading shall have occurred in
the rating accorded the debt securities of the Company and Capital by any
"nationally recognized statistical rating organization", as that term is
defined by the Commission for purposes of Rule 436(g)(2) under the Act, and
(ii) no such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of
any of the debt securities of the Company and Capital;
(h) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange; (ii) a general moratorium on
commercial banking activities declared by either Federal or New York State
authorities; (iii) the outbreak or escalation of hostilities involving the
United States or the declaration by the United States of a national emergency
or war, if the effect of any such event specified in this Clause (iii) in the
judgment of the Purchasers makes it impracticable or inadvisable to proceed
with the public offering or the delivery of the Securities on the terms and
in the manner contemplated in the Offering Circular; or (iv) the occurrence
of any material adverse change in the existing, financial, political or
economic conditions in the United States or elsewhere which, in the judgment
of the Purchasers, would materially and adversely affect the financial
markets for the Securities and other debt securities;
(i) The Securities shall have been designated for trading on PORTAL;
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(j) The Registration Rights Agreement shall have been duly authorized,
executed and delivered by the Company and Capital;
(k) The Pledge Agreement shall have been duly authorized, executed and
delivered by the Company and Capital; and
(l) The Company and Capital shall have furnished or caused to be
furnished to you at the Time of Delivery certificates of officers of the
Company and Capital satisfactory to you as to the accuracy of the
representations and warranties of the Company and Capital herein at and as of
such Time of Delivery, as to the performance by the Company and Capital of
all of their obligations hereunder to be performed at or prior to such Time
of Delivery, as to the matters set forth in subsections (a) and (f) of this
Section and as to such other matters as you may reasonably request.
8. (a) The Company and Capital, jointly and severally, will indemnify and
hold harmless each Purchaser against any losses, claims, damages or liabilities,
joint or several, to which such Purchaser may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Offering
Circular or the Offering Circular, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact necessary to make the statements therein not misleading, and
will reimburse each Purchaser for any legal or other expenses reasonably
incurred by such Purchaser in connection with investigating or defending any
such action or claim as such expenses are incurred; provided, however, that
neither the Company nor Capital shall be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Offering Circular or the Offering Circular or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company or Capital by any Purchaser through
Goldman, Sachs & Co. expressly for use therein.
(b) Each Purchaser will indemnify and hold harmless the Company and
Capital against any losses, claims, damages or liabilities to which the Company
or Capital may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Offering Circular or the Offering
Circular, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in any Preliminary Offering
Circular or the Offering Circular or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company or Capital by such Purchaser through Goldman, Sachs & Co. expressly for
use therein; and will reimburse the Company and Capital, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such action or claim as such expenses are incurred.
19
<PAGE>
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written
consent of the indemnified party, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or threatened
action or claim in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified party is an actual or potential
party to such action or claim) unless such settlement, compromise or judgment
(i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to, or an admission of, fault, culpability or a failure to act, by
or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and Capital on the one hand and the Purchasers on the other from
the offering of the Securities. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under subsection (c) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company and Capital on
the one hand and the Purchasers on the other in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and Capital on
the one hand and the Purchasers on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company and Capital (considered as one party for this
purpose) bear to the total underwriting discounts and commissions received by
the Purchasers, in each case as set forth in the Offering Circular. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
20
<PAGE>
Company and Capital on the one hand or the Purchasers on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, Capital and the
Purchasers agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Purchasers were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), no Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed to
investors were offered to investors exceeds the amount of any damages which such
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. The Purchasers' obligations in
this subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) The obligations of the Company and Capital under this Section 8
shall be in addition to any liability which the Company and Capital may
otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls any Purchaser within the meaning of the Act; and
the obligations of the Purchasers under this Section 8 shall be in addition to
any liability which the respective Purchasers may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of the
Company or Capital and to each person, if any, who controls the Company or
Capital within the meaning of the Act.
9. (a) If any Purchaser shall default in its obligation to purchase the
Securities which it has agreed to purchase hereunder, you may in your discretion
arrange for you or another party or other parties to purchase such Securities on
the terms contained herein. If within thirty-six hours after such default by
any Purchaser you do not arrange for the purchase of such Securities, then the
Company and Capital shall be entitled to a further period of thirty-six hours
within which to procure another party or other parties satisfactory to you to
purchase such Securities on such terms. In the event that, within the
respective prescribed periods, you notify the Company or Capital that you have
so arranged for the purchase of such Securities, or the Company or Capital
notifies you that it has so arranged for the purchase of such Securities, you,
the Company or Capital shall have the right to postpone the Time of Delivery for
a period of not more than seven days, in order to effect whatever changes may
thereby be made necessary in the Offering Circular, or in any other documents or
arrangements, and the Company and Capital agree to prepare promptly any
amendments to the Offering Circular which in your opinion may thereby be made
necessary. The term "Purchaser" as used in this Agreement shall include any
person substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Purchaser or Purchasers by you and the Company or
Capital as provided in
21
<PAGE>
subsection (a) above, the aggregate principal amount of such Securities which
remains unpurchased does not exceed one-eleventh of the aggregate principal
amount of all the Securities, then the Company and Capital shall have the right
to require each non-defaulting Purchaser to purchase the principal amount of
Securities which such Purchaser agreed to purchase hereunder and, in addition,
to require each non-defaulting Purchaser to purchase its pro rata share (based
on the principal amount of Securities which such Purchaser agreed to purchase
hereunder) of the Securities of such defaulting Purchaser or Purchasers for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Purchaser from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Purchaser or Purchasers by you and the Company or
Capital as provided in subsection (a) above, the aggregate principal amount of
Securities which remains unpurchased exceeds one-eleventh of the aggregate
principal amount of all the Securities, or if neither the Company nor Capital
exercises the right described in subsection (b) above to require non-defaulting
Purchasers to purchase Securities of a defaulting Purchaser or Purchasers, then
this Agreement shall thereupon terminate, without liability on the part of any
non-defaulting Purchaser, the Company or Capital, except for the expenses to be
borne by the Company, Capital and the Purchasers as provided in Section 6 hereof
and the indemnity and contribution agreements in Section 8 hereof; but nothing
herein shall relieve a defaulting Purchaser from liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company, Capital and the several Purchasers, as set
forth in this Agreement or made by or on behalf of them, respectively, pursuant
to this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Purchaser or any controlling person of any Purchaser, or the Company,
Capital, or any officer or director or controlling person of the Company or
Capital, and shall survive delivery of and payment for the Securities.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor Capital shall then be under any liability to any
Purchaser except as provided in Sections 6 and 8 hereof; but, if for any other
reason, the Securities are not delivered by or on behalf of the Company and
Capital as provided herein, the Company and Capital will reimburse the
Purchasers through you for all out-of-pocket expenses approved in writing by
you, including fees and disbursements of counsel, reasonably incurred by the
Purchasers in making preparations for the purchase, sale and delivery of the
Securities, but the Company and Capital shall then be under no further liability
to any Purchaser except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Purchasers, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Purchaser made or given
by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representative.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Purchasers shall be delivered or sent by mail, telex or
facsimile transmission to you as
22
<PAGE>
the representatives in care of Goldman, Sachs & Co., 85 Broad Street, New York,
New York 10004, Attention: Registration Department; and if to the Company or
Capital shall be delivered or sent by mail, telex or facsimile transmission to
the address of the Company set forth in the Offering Circular, Attention:
Secretary; provided, however, that any notice to a Purchaser pursuant to Section
8(c) hereof shall be delivered or sent by mail, telex or facsimile transmission
to such Purchaser at its address set forth in its Purchasers' Questionnaire, or
telex constituting such Questionnaire, which address will be supplied to the
Company by you upon request. Any such statements, requests, notices or
agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit of,
the Purchasers, the Company, Capital and, to the extent provided in Sections 8
and 10 hereof, the officers and directors of the Company and each person who
controls the Company, Capital or any Purchaser, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Securities from any Purchaser shall be deemed a successor or assign
by reason merely of such purchase.
14. Time shall be of the essence of this Agreement.
15. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such respective counterparts shall together constitute one and the same
instrument.
23
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Purchasers, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Purchasers, the Company and
Capital. It is understood that your acceptance of this letter on behalf of each
of the Purchasers is pursuant to the authority set forth in a form of Agreement
among Purchasers, the form of which shall be submitted to the Company and
Capital for examination upon request, but without warranty on your part as to
the authority of the signers thereof.
Very truly yours,
NEXTLINK Communications, L.L.C.
By: NEXTLINK, Inc.
By: /s/ R. Bruce Easter, Jr.
------------------------
Name: R. Bruce Easter, Jr.
Title: Vice President
NEXTLINK Capital, Inc.
By: /s/ R. Bruce Easter, Jr.
------------------------
Name: R. Bruce Easter, Jr.
Title: Vice President
Accepted as of the date hereof:
Goldman, Sachs & Co.
Bear, Stearns & Co. Inc.
Salomon Brothers Inc
Toronto Dominion Securities (USA) Inc.
By: /s/ Goldman, Sachs & Co.
------------------------
(Goldman, Sachs & Co.)
24
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I
Principal
Amount of
Securities
to be
Purchaser Purchased
--------- ---------
<S> <C>
Goldman, Sachs & Co............................................... $199,500,000
Bear, Stearns & Co. Inc........................................... 73,500,000
Salomon Brothers Inc.............................................. 56,000,000
Toronto Dominion Securities (USA) Inc............................. 21,000,000
Total.......................................................... $350,000,000
</TABLE>
25
<PAGE>
ANNEX I
(1) The Securities have not been and will not be registered under the Act and
may not be offered or sold within the United States or to, or for the account or
benefit of, U.S. persons except in accordance with Regulation S under the Act or
pursuant to an exemption from the registration requirements of the Act. Each
Purchaser represents that it has offered and sold the Securities, and will offer
and sell the Securities (i) as part of their distribution at any time and (ii)
otherwise until 40 days after the later of the commencement of the offering and
the Time of Delivery, only in accordance with Rule 903 of Regulation S or Rule
144A under the Act. Accordingly, each Purchaser agrees that neither it, its
affiliates nor any persons acting on its or their behalf has engaged or will
engage in any directed selling efforts with respect to the Securities, and it
and they have complied and will comply with the offering restrictions
requirement of Regulation S. Each Purchaser agrees that, at or prior to
confirmation of sale of Securities (other than a sale pursuant to Rule 144A), it
will have sent to each distributor, dealer or person receiving a selling
concession, fee or other remuneration that purchases Securities from it during
the restricted period a confirmation or notice to substantially the following
effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933 (the "Securities Act") and may not be offered and sold
within the United States or to, or for the account or benefit of, U.S.
persons (i) as part of their distribution at any time or (ii) otherwise until
40 days after the later of the commencement of the offering and the closing
date, except in either case in accordance with Regulation S (or Rule 144A if
available) under the Securities Act. Terms used above have the meaning given
to them by Regulation S."
Terms used in this paragraph have the meanings given to them by Regulation S.
Each Purchaser further agrees that it has not entered and will not enter into
any contractual arrangement with respect to the distribution or delivery of the
Securities, except with its affiliates or with the prior written consent of the
Company and Capital.
(2) Notwithstanding the foregoing, Securities in registered form may be
offered, sold and delivered by the Purchasers in the United States and to U.S.
persons pursuant to Section 3 of this Agreement without delivery of the written
statement required by paragraph (1) above.
(3) Each Purchaser further represents and agrees that (i) it has not offered
or sold, and will not offer or sell, in the United Kingdom by means of any
document, any Securities other than to persons whose ordinary business it is to
buy or sell debentures, whether as principal or as agent, or in circumstances
which do not constitute an offer to the public within the meaning of the
Companies Act 1985 of the United Kingdom, (ii) it has complied, and will comply,
with all applicable provisions of the Financial Services Act 1986 of the United
Kingdom with respect to anything done by it in relation to the Securities in,
from or otherwise involving the United Kingdom, and (iii) it has only issued or
passed on, and will only issue or pass on, in the United Kingdom, any document
received by it in connection with the issuance of the Securities to a person who
is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1995 of the United
A-1
<PAGE>
Kingdom or is a person to whom the document may otherwise lawfully be issued or
passed on.
(4) Each Purchaser agrees that it will not offer, sell or deliver any of the
Securities in any jurisdiction outside the United States except under
circumstances that will result in compliance with the applicable laws thereof,
and that it will take at its own expense whatever action is required to permit
its purchase and resale of the Securities in such jurisdictions. Each Purchaser
understands that no action has been taken to permit a public offering in any
jurisdiction outside the United States where action would be required for such
purpose. Each Purchaser agrees not to cause any advertisement of the Securities
to be published in any newspaper or periodical or posted in any public place and
not to issue any circular relating to the Securities, except in any such case
with Goldman, Sachs & Co.'s express written consent and then only at its own
risk and expense.
A-2
<PAGE>
ANNEX II
Pursuant to Section 7(e) of the Purchase Agreement, the accountants shall
furnish letters to the Purchasers to the effect that:
(i) They are independent certified public accountants with respect to
the Company, its subsidiaries and Capital under rule 101 of the American
Institute of Certified Public Accountants' Code of Professional Conduct, and
its interpretations and rulings;
(ii) In their opinion, the consolidated financial statements and
financial statement schedules audited by us and included in the Offering
Circular comply as to form in all material respects with generally accepted
accounting principles;
(iii) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company for
the two most recent fiscal years included in the Offering Circular agrees
with the corresponding amounts (after restatements where applicable) in the
audited consolidated financial statements for such two fiscal years;
(iv) On the basis of limited procedures not constituting an audit in
accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information referred
to below, a reading of the latest available interim financial statements of
the Company, its subsidiaries and Capital, inspection of the minute books of
the Company, its subsidiaries and Capital since the date of the latest
audited financial statements included in the Offering Circular, inquiries of
officials of the Company, its subsidiaries and Capital responsible for
financial and accounting matters and such other inquiries and procedures as
may be specified in such letter, nothing came to their attention that caused
them to believe that:
(A) the unaudited consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Offering Circular are not in conformity with generally accepted accounting
principles applied on the basis substantially consistent with the basis for
the unaudited condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Offering Circular;
(B) any other unaudited income statement data and balance sheet items
included in the Offering Circular do not agree with the corresponding items
in the unaudited consolidated financial statements from which such data and
items were derived, and any such unaudited data and items were not determined
on a basis substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements included in the
Offering Circular;
(C) the unaudited financial statements which were not included in the
Offering Circular but from which were derived any unaudited condensed
financial statements referred to in Clause (A) and any unaudited income
statement data and balance sheet items included in the Offering Circular and
referred to in Clause (B) were not determined
<PAGE>
on a basis substantially consistent with the basis for the audited
consolidated financial statements included in the Offering Circular;
(D) any unaudited pro forma consolidated condensed financial statements
included in the Offering Circular do not comply as to form in all material
respects with the applicable accounting requirements or the pro forma
adjustments have not been properly applied to the historical amounts in the
compilation of those statements;
(E) as of a specified date not more than five days prior to the date of
such letter, there have been any changes in the aggregate level of membership
interests, consolidated capital stock (other than issuances of capital stock
upon exercise of options and stock appreciation rights, upon earn-outs of
performance shares and upon conversions of convertible securities, in each
case which were outstanding on the date of the latest financial statements
included in the Offering Circular or any increase in the consolidated long-
term debt of the Company, its subsidiaries and Capital, or in the capital
stock or long-term debt of Capital, or any decreases in consolidated net
current assets, members' equity or stockholders' equity or other items
specified by the Purchasers, or any increases in any items specified by the
Purchasers, in each case as compared with amounts shown in the latest balance
sheet included in the Offering Circular except in each case for changes,
increases or decreases which the Offering Circular discloses have occurred or
may occur or which are described in such letter; and
(F) for the period from the date of the latest financial statements
included in the Offering Circular to the specified date referred to in Clause
(E) there were, except as specified therein, any decreases in consolidated
net revenues or operating profit (loss) or the total or per share amounts of
consolidated net income (loss) or other items specified by the Purchasers, or
any increases in any items specified by the Purchasers, in each case as
compared with the comparable period of the preceding year and with any other
period of corresponding length specified by the Purchasers, except in each
case for decreases or increases which the Offering Circular discloses have
occurred or may occur or which are described in such letter; and
(v) In addition to the examination referred to in their report(s) included
in the Offering Circular and the limited procedures, inspection of minute
books, inquiries and other procedures referred to in paragraphs (iii) and
(iv) above, they have carried out certain specified procedures, not
constituting an audit in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and financial
information specified by the Purchasers, which are derived from the general
accounting records of the Company, its subsidiaries and Capital, which appear
in the Offering Circular, and have compared certain of such amounts,
percentages and financial information with the accounting records of the
Company, its subsidiaries and Capital and have found them to be in agreement.
2
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF FORMATION
OF
NEXTLINK INVESTMENTS, L.L.C.
The undersigned, for the purpose of forming a limited liability company
under the Washington Limited Liability Company Act, hereby adopts the following
Amended and Restated Certificate of Formation.
1. The name of the limited liability company is hereby changed to:
NEXTLTNK Communications, L.L.C.
2. The latest date upon which the limited liability company is to dissolve
is: DECEMBER 31, 2025.
3. The name of the registered agent of the limited liability company is:
DWTR&J CORP.
4. The street address of the registered agent's office address is: 2600
CENTURY SQUARE, 1501 FOURTH AVENUE, SEATTLE, WA. 98101-1688.
5. The address of the principal place of business of the limited liability
company is: 2320 CARILLON POINT, KIRKLAND, WA. 98033.
6. The name and address of each person executing this certificate is:
Name Address
---- -------
JAY D. HULL 1300 S.W. FIFTH AVENUE
SUITE 2300
PORTLAND, OR. 97201
7. Management of the limited liability comidanv shall be vested in one or
more managers.
8. This Amended and Restated Certificate of Formation will be effective
upon filing.
<PAGE>
This document is hereby executed under penalties of perjury and is, to the best
of the undersigned's knowledge, true and correct.
Dated: MARCH 21, 1996
/s/ R. Bruce Easter, Jr.
-----------------------------
R. BRUCE EASTER, JR.,
Vice President of
NEXTLINK, Inc., Manager
-2-
<PAGE>
CONSENT TO APPOINTMENT AS REGISTERED AGENT
DWTR&J Corp., a Washington corporation, hereby consents to serve as
Registered Agent, in the State of Washington, for the limited liability company
herein named. DWTR&J Corp. understands that as agent for the limited liability
company it will be responsible to accept Service of Process in the name of the
limited liability company and to immediately notify the Office of the Secretary
of State in the event of its resignation or of any change in the Registered
Office address of the limited liability company for which it is agent.
DWTR&J CORP.
March 21, 1996
By: /s/ Jay D. Hull
----------------------------
JAY D. HULL, Vice President
2600 Century Square
1501 Fourth Avenue
Seattle, Washington 98101-1688
-3-
<PAGE>
EXHIBIT 3.2
======================================================================
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
NEXTLINK COMMUNICATIONS, L.L.C.
(A WASHINGTON LIMITED LIABILITY COMPANY)
DATED AND EFFECTIVE
AS OF
MARCH 29, 1996
======================================================================
<PAGE>
TABLE OF CONTENTS
=================
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 1 -- FORMATION 1
1.1 Certificate of Formation...................... 1
1.2 Name.......................................... 1
1.3 Purpose....................................... 1
1.4 Term.......................................... 1
1.5 Principal Place of Business................... 1
1.6 Registered Office and Registered Agent........ 1
ARTICLE 2 -- DEFINITIONS................................ 2
ARTICLE 3 -- MEMBERS, CONTRIBUTIONS AND INTERESTS....... 5
3.1 Members Names, Addresses and Percentages...... 5
3.2 Contributions................................. 5
3.3 Additional Members; Equity Option Plan........ 6
3.4 Capital Accounts.............................. 7
3.5 No Withdrawal or Transfer of Member's Interest 7
ARTICLE 4 -- MEETINGS OF MEMBERS........................ 7
4.1 Meetings...................................... 7
4.2 Place of Meetings............................. 8
4.3 Notice of Meetings............................ 8
4.4 Record Date................................... 8
4.5 Quorum........................................ 8
4.6 Proxies....................................... 8
4.7 Waiver of Notice.............................. 9
4.8 Action Without Meeting........................ 9
4.9 Meetings by Telephone......................... 9
ARTICLE 5 -- MANAGEMENT................................. 9
5.1 Management.................................... 9
5.2 Manager Agent of Company...................... 9
5.3 Managers' Other Activities.................... 9
5.4 Agents; Administrative Functions.............. 9
5.5 Meetings of Managers.......................... 10
ARTICLE 6 -- ACCOUNTING AND RECORDS..................... 10
6.1 Books of Account.............................. 10
6.2 Fiscal Year................................... 11
6.3 Accounting Reports............................ 11
6.4 Tax Returns................................... 11
6.5 Tax Matters Member............................ 11
ARTICLE 7 -- ALLOCATIONS................................ 11
7.1 Allocation of Net Profit and Loss - In General 11
7.2 Special Allocations........................... 12
7.3 Corrective Allocations........................ 13
7.4 Other Allocation Rules........................ 13
7.5 Determination of Net Profit or Loss........... 14
7.6 Mandatory Tax Allocations Under Code
Section 704(c)................................ 14
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE 8 -- DISTRIBUTIONS TO MEMBERS................... 15
8.1 Nonliquidating Distributions.................. 15
8.2 Special Distribution to SRC to Cover 1995 Taxes 16
8.3 Distributions in Liquidation.................. 17
8.4 Distributions in Kind......................... 17
ARTICLE 9 -- DISSOLUTION AND LIQUIDATION................ 17
9.1 Events of Dissolution......................... 17
9.2 Liquidation Upon Dissolution and Winding Up... 18
9.3 No Obligation to Restore Negative Capital Account
Balance on Liquidation........................
ARTICLE 10 -- DISSOCIATION OF A MEMBER.................. 18
10.1 Events....................................... 18
10.2 Purchase Price............................... 19
10.3 Failure to Exercise Purchase Option.......... 19
ARTICLE 11 -- LIMITATION OF MEMBER'S LIABILITY;
INDEMNIFICATION........................... 19
11.1 Limitation of Liability...................... 19
11.2 Indemnification.............................. 20
ARTICLE 12 -- MISCELLANEOUS............................. 20
12.1 Notices...................................... 20
12.2 Governing Law................................ 21
12.3 Amendments................................... 21
12.4 Construction................................. 21
12.5 Headings..................................... 21
12.6 Waivers...................................... 21
12.7 Remedies..................................... 21
12.8 Severability................................. 21
12.9 Heirs, Successors and Assigns................ 22
12.10 Creditors.................................... 22
12.11 Jurisdiction and Venue....................... 22
12.12 Dispute Resolution........................... 22
12.13 Counterparts................................. 24
</TABLE>
ii
<PAGE>
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
NEXTLINK COMMUNICATIONS, L.L.C.
(A WASHINGTON LIMITED LIABILITY COMPANY)
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT, dated as of
March 29, 1996, is made among the persons whose signatures appear on the
signature page hereof.
ARTICLE 1 -- FORMATION
1.1 CERTIFICATE OF FORMATION. A Certificate of Formation was filed on
January 6, 1995, and was effective immediately upon filing, the date on which
the term of the Company began. The Company's Limited Liability Company
Agreement was previously amended and restated in a First Amended and Restated
Limited Liability Company Agreement dated as of September 1, 1995.
1.2 NAME. The name of the limited liability company is "NEXTLINK
Communications, L.L.C." The company was formerly known as "Nextlink
Investments, L.L.C." and as "FiberLink Investments, L.L.C."
1.3 PURPOSE. The purpose and business of the Company is to engage in any
lawful business permitted under the Act and to exercise all other powers
necessary or reasonably connected or incidental to such purpose and business
that may be legally exercised by the Company.
1.4 TERM. The term shall continue until December 31, 2025, unless the
Company is earlier dissolved in accordance with Article 9.
---------
1.5 PRINCIPAL PLACE OF BUSINESS. The principal place of business of the
Company shall be 155 108th Avenue NE, Bellevue, Washington 98004. The Managers
may relocate the Company's principal place of business or establish additional
Company offices from time to time.
1.6 REGISTERED OFFICE AND REGISTERED AGENT. The Company's initial
registered agent and the address of its initial registered office are as
follows:
Name Address
---- -------
DWTR&J Corp. 2600 Century Square
1501 Fourth Avenue
Seattle, WA 98101-1688
<PAGE>
The registered office and registered agent may be changed by the Managers from
time to time by filing an amendment to the Certificate of Formation.
ARTICLE 2 -- DEFINITIONS
The following terms used in this Agreement shall have the following
meanings (unless otherwise expressly provided herein):
"ACT" means the Washington Limited Liability Company Act (RCW Ch. 25.15).
"AGREEMENT" means this amended and restated limited liability company
agreement, as originally executed and as amended from time to time.
"CAPITAL ACCOUNT" has the meaning defined in Section 3.4.
-----------
"CAPITAL CONTRIBUTION" means, with respect to each Member, the amount
contributed by such Member to the capital of the Company pursuant to Sections
--------
3.2 and 3.3.
- --- ---
"CLASS A MEMBER" has the meaning given in Article 3.
---------
"CLASS B MEMBER" has the meaning given in Article 3.
---------
"CODE" means the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent superseding federal revenue laws.
"COMPANY" means the limited liability company governed by this Agreement.
"DEFICIT CAPITAL ACCOUNT" means, with respect to any Member, the deficit
balance, if any, in such Member's Capital Account as of the end of the taxable
year, after giving effect to the following adjustments:
(i) credit to such Capital Account any amount that such Member is
obligated to restore to the Company under Regulation Section 1.704-
1(b)(2)(ii)(c), as well as any addition thereto pursuant to the next to last
sentences of Regulation Sections 1.704-2(g)(1) and (i)(5); and
(ii) debit to such Capital Account the items described in Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
This definition is intended to comply with the provisions of Regulation Sections
1.704-1(b)(2)(ii)(d) and 1.704-2, and shall be interpreted consistently with
those provisions.
2
<PAGE>
"DISTRIBUTABLE CASH" means, with respect to any fiscal period, all cash
receipts received by the Company from operations in the ordinary course of
business including, without limitation, income from invested Reserves and cash
receipts of the Company from any borrowing by the Company, but after deducting
Operating Cash Expenses, debt service, commitment fees, loan broker fees, and
other payments made in connection with any loan to the Company or other loans
secured by a lien on the Company's assets, capital expenditures of the Company
and amounts set aside for the creation of or addition to Reserves, all as
determined in the discretion of the Managers. Distributable Cash does not
include Capital Contributions made in accordance with Article 3. The Managers
---------
shall use their discretion to determine the nature and extent of Distributable
Cash.
"EAGLE RIVER" means Eagle River Investments, L.L.C., a Washington limited
liability company, formerly known as Eagle River Transition, L.L.C.
"EQUITY OPTION PLAN" means the Company's Amended and Restated Equity Option
Plan, dated as of February 27, 1996, as amended from time to time.
"MAJORITY INTEREST" means the vote, approval, consent or other action of
Members holding more than fifty percent (50%) of the Profits Interests and the
Capital Interests of the Company held by such Members. For these purposes, a
Member's Profit Interest is determined by reference to the Member's interest in
the Company's net profits under Section 7.1.1(d), and a Member's Capital
----------------
Interest is based on the Member's Capital Account balance determined as of the
date on which the event triggering such other action of the Members occurs.
"MAJORITY PERCENTAGE INTEREST" means the vote, approval, consent or other
action of the Members entitled to act holding more than fifty percent (50%) of
the outstanding units held by such Members as of the date on which the event
triggering the vote or other action of Members occurs.
"MANAGERS" means Eagle River and NEXTLINK, Inc.
"MEMBER" means each person who executes a counterpart of this Agreement as
a Class A Member or a Class B Member, and each person who may hereafter be
admitted to the Company as an additional or substituted Class A Member or Class
B Member.
"NET CAPITAL CONTRIBUTION" means, with respect to a Class A Member, the
average daily amount of the following calculation: (i) the amount of each
Capital Contribution made by such Member, (ii) less the amount of all
distributions made to such Member pursuant to Section 8.1(c).
--------------
3
<PAGE>
"NEXTLINK, INC." means NEXTLINK, Inc., a Washington corporation.
"OPERATING CASH EXPENSES" means, with respect to any fiscal period, the
amount of cash disbursed in the ordinary course of operations of the Company
during such period, including without limitation, all cash expenses such as
expenses relating to marketing, sales, regulatory matters, technical matters,
engineering matters, rights of way, telecommunication expenses, utility charges,
administrative costs, advertising expenses, legal and accounting fees, insurance
premiums, taxes, and repair and maintenance expenses, all as determined in the
discretion of the Managers. Operating Cash Expenses shall not include
expenditures paid out of Reserves.
"PERCENTAGE INTEREST" means, with respect to any Member at any time, the
percentage determined based on the ratio that the number of Units held by such
Member bears to the total number of outstanding Units held by all Members.
"PREFERRED RETURN" shall mean, as of any date, an amount equal to an annual
return at a rate equal to the SFNB Prime Rate, as in effect on the first day of
each calendar quarter, plus 2% per annum, on the Net Capital Contribution of
each Class A Member, accruing from the date of each Capital Contribution.
"REGULATION" includes proposed, temporary and final Treasury regulations
promulgated under the Code and the corresponding sections of any regulations
subsequently issued that amend or supersede such regulations.
"RESERVES" means, with respect to any fiscal period, funds set aside or
amounts allocated during such period to reserves that may be maintained by the
Company for working capital and to pay taxes, insurance, debt services or other
costs or expenses of the Company, all as determined in the discretion of the
Managers.
"SFNB PRIME RATE" means on any day Seattle-First National Bank's publicly
announced prime rate of interest, or if Seattle-First National Bank shall not be
publicly announcing such rate, a comparable base lending rate publicly announced
by a commercial bank, selected by the Managers.
"SRC" means BWP, Inc., an Oregon corporation formerly known as Sound
Response Corporation, and its permitted successors and assigns.
"UNITS" means the Class A or Class B Units issued to the Members pursuant
to this Agreement. The Units held by the Members shall be set forth on attached
Schedule 1, as amended from time to time.
- ----------
4
<PAGE>
ARTICLE 3 -- MEMBERS, CONTRIBUTIONS AND INTERESTS
3.1 MEMBERS NAMES, ADDRESSES AND PERCENTAGES. The names and
addresses of the Members, and their Units and Percentage Interests are as set
forth on attached Schedule 1, as amended from time to time. Class A Members are
----------
holders of Class A Units. Class B Members are holders of Class B Units.
Members shall be either Class A Members or Class B Members and their respective
rights, preferences and limitations as Members shall in all respects be the
same, except as specifically provided in this Article 3 or elsewhere in this
---------
Agreement. Class B Members shall not have any right to vote on any matter,
except as provided in Section 9.1(c) and Section 12.3.
-------------- ------------
3.2 CONTRIBUTIONS. The Members shall make, or previously have made,
the Capital Contributions in cash or by contribution of assets as stated in the
records of the Company prior to the date of this Agreement and in any Schedule 2
----------
attached to this Agreement as amended from time to time. No interest shall be
paid on Capital Contributions and no Member shall have the right to withdraw
his, her or its Capital Contribution.
Additional Capital Contributions shall be required of Class A Members
only upon a written call for additional capital by the Managers setting forth
the aggregate amount of additional capital, the number of additional Class A
Units to be issued in connection with the call for additional capital, and the
subscription price for each Class A Unit. If the Managers issue a call for
additional Capital Contributions, the Class A Members shall make such additional
Capital Contributions on a pro rata basis in proportion to their respective
ownership of the total Class A Units, such that 100% of the additional Capital
Contribution is funded by the Class A Members, within ten business days after
receipt of notice of the required additional Capital Contribution. Class B
Members shall have no right or obligation to make additional Capital
Contributions.
In the event that any Class A Member fails to make a required
additional Capital Contribution within the time required, the non-defaulting
Class A Members may, at their option and as determined by the Managers:
(a) recharacterize the additional Capital Contribution made by each
of the non-defaulting Class A Members as a loan to the Company, bearing interest
at a rate equal to the lesser of the maximum rate permitted by law or the SFNB
Prime Rate in effect as of the first day of each calendar month, plus three
percent per annum, with such interest rate being adjusted as of the first day of
each calendar month and with interest payable monthly and principal payable
within thirty (30) days after written demand; or
5
<PAGE>
(b) contribute to the Company, pro rata in accordance with the number
of Class A Units held by each non-defaulting Class A Member or in such other
manner as the non-defaulting Class A Members may agree, an amount equal to the
defaulting Member's required additional Capital Contribution in exchange for
additional Class A Units at the subscription price set forth in the Managers'
call for additional capital; or
(c) advance, pro rata in accordance with the number of Class A Units
held by each non-defaulting Class A Member or in such other manner as the non-
defaulting Class A Members may agree, an amount equal to such required
additional Capital Contribution on behalf of the defaulting Member (a "Default
Loan"). Default Loans shall bear interest at the lesser of the maximum rate
permitted by law or the SFNB Prime Rate in effect as of the first day of each
calendar month, plus 3% per annum, and such interest rate shall be adjusted as
of the first day of each calendar month. Default Loans shall be repayable
within thirty (30) days after written demand and if not sooner repaid or demand
made, shall be repaid from any cash distributions otherwise distributable by the
Company to the defaulting Member (and charged against the Defaulting Member's
Capital Account) or offset against any amount to be paid to the defaulting
Member by the Company.
Following the contribution of additional capital and the issuance of
additional Class A Units pursuant to the call of the Managers under this Section
-------
3.2, the Percentage Interests of the Members shall be adjusted so that the
- ---
Percentage Interest of each Member is in the ratio of a fraction, the numerator
of which is the aggregate number of Units held by each Member and the
denominator of which is the aggregate number of Units held by all Members, and
Schedule 1 shall be amended accordingly.
- ----------
3.3 ADDITIONAL MEMBERS; EQUITY OPTION PLAN. The Company may, as
determined by the Managers time to time, admit additional persons as Members, or
grant options to persons to become Members, pursuant to the Equity Option Plan
or otherwise. The Equity Option Plan, and additional agreements executed
pursuant to the terms of the Equity Option Plan, shall govern the terms of any
options to become a Member. Persons admitted as Members pursuant to the Equity
Option Plan shall be admitted as Class B Members.
3.4 CAPITAL ACCOUNTS. A capital account ("Capital Account") shall be
determined and maintained for each Member in accordance with the principles of
Regulation Section 1.704-1(b) at all times throughout the full term of the
Company. In the event of a permitted sale or assignment of all or any part of a
Member's interest in the Company, the Capital Account of the transferor shall
become the Capital Account of the transferee to the extent it relates to the
transferred Company interest.
6
<PAGE>
The book value of all Company properties may be adjusted to equal
their respective gross fair market values, as determined by the Managers, as of
the following times: (1) in connection with the acquisition of an interest in
the Company by a new or existing Member, (2) in connection with the liquidation
of the Company as defined in Regulation Section 1.704-(1)(b)(2)(ii)(g), or (3)
in connection with a distribution to a retiring or a continuing Member as
consideration for all or a portion of his, her or its interest in the Company.
In the event of a revaluation of any Company assets hereunder, the Capital
Accounts of the Members shall be adjusted, including continuing adjustments for
depreciation, to the extent provided in Regulation Section 1.704-
(1)(b)(2)(iv)(f).
3.5 NO WITHDRAWAL OR TRANSFER OF MEMBER'S INTEREST. No Member shall
voluntarily withdraw from the Company without the consent of the Managers. A
withdrawal in violation of this Section 3.5 shall constitute a breach of this
-----------
Agreement for which the Company and other Members shall have the remedies
provided under applicable law.
No Member shall voluntarily assign, encumber, sell or otherwise
transfer all or any portion of the Member's interest in the Company or options
to acquire any interest in the Company (except as set forth in the Equity Option
Plan governing such option), or enter into any agreement as a result of which
any person shall become interested with the Member in the Company, without the
consent of a Majority Percentage Interest of the non-transferring Members. The
Members acknowledge and agree that this is a reasonable restraint on the
alienation of their interests in the Company in view of the paramount objective
of the Members that the Company be treated as a partnership for federal income
tax purposes.
ARTICLE 4 -- MEETINGS OF MEMBERS
4.1 MEETINGS. Meetings of Members are not required, but may be
called by Class A Members holding at least twenty percent (20%) of the
Percentage Interests held by Members; provided, however, that Class A Members
holding at least fifteen percent (15%) of the Percentage Interests held by
Members may call a meeting of Members once per year. No business shall be
transacted at any meeting of Members except as is specified in the notice
calling such meeting.
4.2 PLACE OF MEETINGS. The Members may designate any place, either
within or outside the State of Washington, as the place of meeting for any
meeting of the Members. If no designation is made, the place of meeting shall
be the principal office of the Company specified in Section 1.5.
-----------
7
<PAGE>
4.3 NOTICE OF MEETINGS. Written notice stating the place, day and
time of the meeting and the purpose for which the meeting is called shall be
delivered not less than ten (10) nor more than fifty (50) days before the date
of the meeting, either personally or by mail, by or at the direction of the
Members calling the meeting, to each Member entitled to vote at such meeting.
If mailed, such notice shall be deemed to be delivered three (3) calendar days
after being deposited in the United States Mail, addressed to the Member at his,
her or its address as it appears on the records of the Company, postage prepaid.
4.4 RECORD DATE. For the purpose of determining Members entitled to
notice of or to vote at any meeting of Members or any adjournment thereof, or
Members entitled to any distribution, the date on which notice of the meeting is
first delivered or mailed, or the date on which a resolution declaring such
distribution is adopted, as the case may be, shall be the record date for such
determination of Members. When a determination of Members entitled to vote at
any meeting of Members has been made as provided in this Section 4.4, such
-----------
determination shall apply to any adjournment thereof.
4.5 QUORUM. Members holding a Majority Percentage Interest,
represented in person or by proxy, shall constitute a quorum at any meeting of
Members. In the absence of a quorum at any such meeting, a majority of the
Percentage Interests so represented may adjourn the meeting from time to time
for a period not to exceed sixty (60) days without further notice. However, if
the adjournment is for more than sixty (60) days, or if after the adjournment a
new record date is fixed for the adjourned meeting, notice of the adjourned
meeting shall be given to each Member. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally noticed.
4.6 PROXIES. At all meetings of Members, a Member may vote in person
or by proxy executed in writing by the Member or by the Member's attorney-in-
fact or agent appointed in writing. Such proxy or appointment shall be filed
with the Company before or at the time of the meeting. No proxy or appointment
shall be valid after eleven (11) months from the date of its execution, unless
otherwise provided in the proxy or appointment.
4.7 WAIVER OF NOTICE. When any notice is required to be given to any
Member, a waiver thereof in writing signed by the Member entitled to such
notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such notice. Attendance at a meeting shall
constitute waiver of notice of the meeting unless the Member at the beginning of
the meeting objects to holding the meeting or transacting business at the
meeting.
8
<PAGE>
4.8 ACTION WITHOUT MEETING. Any action required or permitted to be
taken by the Members at a meeting may be taken without a meeting if a consent in
writing, describing the action taken, is signed by a Majority Percentage
Interest of the Class A Members, unless a different vote is required to approve
such action under this Agreement. Such action shall be included in the minutes
of the Company's meetings.
4.9 MEETINGS BY TELEPHONE. Meetings of the Members may be held by
conference telephone or by any other means of communication by which all
participants can hear each other simultaneously during the meeting, and such
participation shall constitute presence in person at the meeting.
ARTICLE 5 -- MANAGEMENT
5.1 MANAGEMENT. The Company shall be managed exclusively by the
Managers. The Managers shall have the right to make all management, financial,
and accounting decisions concerning the Company, including the right and
authority, notwithstanding any provision of this Agreement to the contrary, to
cause the Company to be merged with or into another entity or to cause the
Company to be converted into a corporation.
5.2 MANAGER AGENT OF COMPANY. The Managers are agents of the Company
for purposes of its business, and the act of either Manager for the purpose of
carrying on the business of the Company, including the execution in the Company
name of any instrument for such purpose, shall bind the Company.
5.3 MANAGERS' OTHER ACTIVITIES. Each Manager is at all times
specifically permitted to engage in any other business ventures and activities
including such activities as may be deemed to be in competition with the Company
and shall have no obligation to account to the Company or its Members for any
such business ventures or activities.
5.4 AGENTS; ADMINISTRATIVE FUNCTIONS. The Managers may also delegate
to one Manager the right to implement the decisions of the Managers and
administration of the day-to-day operational matters of the Company. The
Managers may also authorize, in writing, one or more agents or officers (each,
an "Administrator") to implement the management decisions of the Managers and to
handle the day-to-day operational matters of the Company. Such authority may be
general or limited to specific instances. The Managers shall determine the
duties, compensation, term of service and other matters relating to any
Administrator. The Managers may remove an Administrator at any time. The
Administrator's expenses incurred on behalf of the Company shall be paid by, or
reimbursed by, the Company.
9
<PAGE>
5.5 MEETINGS OF MANAGERS. Meetings of Managers are not required.
Either Manager may call a meeting of the Managers. The Manager calling the
meeting may designate any place, either within or outside the State of
Washington, as the place of meeting of the Managers. The affirmative vote of
Managers present at the meeting holding a Majority Percentage Interest of the
Units held by the Managers shall be the act of the Managers. A Manager may be
represented in meetings or votes of the Managers by any representative
designated by such Manager. Any action required or permitted to be taken by the
Managers may be taken without a meeting if a consent in writing, describing the
action taken, is signed by Managers holding a Majority Percentage Interest of
the Units held by the Managers. Meetings of the Managers may be held by
conference telephone or by any other means of communication by which all
participants can hear each other simultaneously during the meeting, and such
participation shall constitute presence at the meeting.
ARTICLE 6 -- ACCOUNTING AND RECORDS
6.1 BOOKS OF ACCOUNT. The Managers shall maintain records and
accounts of all of the Company's operations and expenditures. At a minimum the
Managers shall keep at the Company's principal place of business the following
records:
(a) A current list and past list, setting forth the full name and last
known mailing address of each Member and Manager;
(b) A copy of the Certificate of Formation and all amendments thereto;
(c) Copies of this Agreement and all amendments hereto and copies of
all limited liability company agreements no longer in effect;
(d) Copies of the Company's federal, state, and local tax returns and
reports, if any, for the three (3) most recent years;
(e) Minutes of meetings of the Members, if any, and any written
consents obtained from Members for actions taken by Members without a meeting;
and
(f) Copies of the Company's financial statements for the three (3)
most recent years.
6.2 FISCAL YEAR. The fiscal year of the Company shall be the calendar
year.
6.3 ACCOUNTING REPORTS. Within one hundred twenty (120) days after
the close of each fiscal year, the Managers
10
<PAGE>
shall cause each Member to receive an unaudited financial report of the
activities of the Company for the preceding fiscal year, including the balance
sheet of the Company as of the end of such year and a statement of income or
loss for such year.
6.4 TAX RETURNS. The Managers shall cause to be prepared and timely
filed all required federal and state income tax returns. Within ninety (90)
days after the end of each fiscal year, each Member shall be furnished a
statement suitable for use in the preparation of the Member's income tax return.
6.5 TAX MATTERS MEMBER. For purposes of the Code and any comparable
provisions of state law, the "Tax Matters Partner" shall be Eagle River.
ARTICLE 7 -- ALLOCATIONS OF PROFITS, LOSSES AND OTHER ITEMS
7.1 ALLOCATION OF NET PROFIT AND LOSS - IN GENERAL.
7.1.1 ALLOCATION OF NET PROFIT. After giving effect to the special
allocations set forth in Sections 7.2 and 7.3, the net profit for any fiscal
------------ ---
year of the Company shall be allocated among the Members as follows:
(a) first, to the Members in proportion to the aggregate allocations
of net loss to each Member pursuant to Section 7.1.2(c), until each Member has
----------------
received aggregate allocations of net profit under this Paragraph (a) in an
-------------
amount that is equal to (but does not exceed) the aggregate allocations of net
loss to such Member under Section 7.1.2(c);
----------------
(b) second, to the Members in proportion to the aggregate allocations
of net loss to each Member pursuant to Section 7.1.2(b), until each Member has
----------------
received aggregate allocations of net profit under this Paragraph (b) in an
-------------
amount that is equal to (but does not exceed) the aggregate allocations of net
loss to such Member under Section 7.1.2(b);
----------------
(c) third, one hundred percent (100%) to the Class A Members (pro
rata, in accordance with their respective accrued and unallocated Preferred
Return) until the net profit allocated pursuant to this Section 7.1.1(c) for the
----------------
current and all prior fiscal years is equal to the cumulative Preferred Return
for such Class A Members from the inception of the Company to the day on which
such allocation is made; and
(d) fourth, to the Members in proportion to their respective
Percentage Interests.
7.1.2 ALLOCATION OF NET LOSS. After giving effect to the special
allocations set forth in Sections 7.2 and 7.3, the
------------ ---
11
<PAGE>
net loss for any fiscal year of the Company shall be allocated among the Members
as follows:
(a) first, to the Members, in proportion to the aggregate allocations
of net profits to each Member pursuant to Section 7.1.1(d), until each Member
----------------
has received aggregate allocations of net loss under this Paragraph (a) in an
-------------
amount that is equal to (but does not exceed) the aggregate allocations of net
profit to such Member under Section 7.1.1(d);
----------------
(b) second, to the Members, pro rata in proportion to their
respective Percentage Interests; provided, however, that no net loss shall be
-------- -------
allocated to any Member if and to the extent such allocation of net loss would
cause such Member to have an Adjusted Capital Account Deficit at the end of the
Company's fiscal year and any such excess net loss shall be allocated pursuant
to Paragraph (c) below; and
-------------
(c) the balance of the net loss, if any, shall be allocated among
those Members who do not have Deficit Capital Accounts in proportion to their
respective Percentage Interests; provided, however, that no allocation under
this Section 7.1.2(c) shall cause any Member to have a Deficit Capital Account.
----------------
7.2 SPECIAL ALLOCATIONS. The following special allocations shall be
made for any fiscal year of the Company in the following order:
7.2.1 MINIMUM GAIN CHARGEBACK. If there is a decrease in the
Company's "partnership minimum gain," as defined in and determined under
Regulation Sections 1.704-2(b)(2) and 1.704-2(d), the minimum gain chargeback
provisions of Regulation Section 1.704-2(f), which are hereby incorporated into
this Agreement by this reference, shall be applied.
7.2.2 MEMBER MINIMUM GAIN CHARGEBACK. If there is a decrease in any
Member's share of "partner nonrecourse debt minimum gain," as defined in and
determined under Regulation Section 1.704-2(i), the partner nonrecourse debt
minimum gain chargeback provisions of Regulation Section 1.704-2(i)(4), which
are hereby incorporated into this Agreement by this reference, shall be applied.
7.2.3 QUALIFIED INCOME OFFSET. In the event that any Member
unexpectedly receives any adjustments, allocations, or distributions described
in Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company
income and gain shall be specially allocated to such Member in accordance with
Regulation Section 1.704-(1)(b)(2)(ii)(d).
12
<PAGE>
7.2.4 NONRECOURSE DEDUCTIONS. "Nonrecourse deductions," as defined
in and determined under Regulation Sections 1.704-2(b)(1) and (c), shall be
allocated among the Members in accordance with their respective Percentage
Interests.
7.2.5 MEMBER NONRECOURSE DEDUCTIONS. "Partner nonrecourse
deductions," as defined in and determined under Regulation Sections 1.704-
2(i)(1) and (2), shall be specially allocated among the Members in accordance
with Regulation Section 1.704-2(i).
7.3 CORRECTIVE ALLOCATIONS. The allocations set forth in Section
-------
7.2 are intended to comply with certain regulatory requirements under Code
- ---
Section 704(b). The Members intend that, to the extent possible, all
allocations made pursuant to such Sections will, over the term of the Company,
be offset either with other allocations pursuant to Section 7.2 or with special
-----------
allocations of other items of Company income, gain, loss, or deduction pursuant
to this Section 7.3. Accordingly, the Managers are hereby authorized and
-----------
directed to make offsetting allocations of Company income, gain, loss or
deduction under this Section 7.3 in whatever manner the Managers determine is
-----------
appropriate so that, after such offsetting special allocations are made (and
taking into account the reasonably anticipated future allocations of income and
gain pursuant to Sections 7.2.1 and 7.2.2), the Capital Accounts of the Members
-------------- -----
are, to the extent possible, equal to the Capital Accounts each would have if
the provisions of Section 7.2 were not contained in this Agreement and all
-----------
income, gain, loss and deduction of the Company were instead allocated pursuant
to Section 7.1.
-----------
7.4 OTHER ALLOCATION RULES.
7.4.1 GENERAL. Except as otherwise provided in this Agreement, all
items of Company income, gain, loss, deduction, credit, and any other
allocations not otherwise provided for shall be divided among the Members in
accordance with their Percentage Interests, or as otherwise may be required
under the Code and the regulations thereunder.
7.4.2 ALLOCATION OF RECAPTURE ITEMS. In making any allocation among
the Members of income or gain from the sale or other disposition of a Company
asset, the ordinary income portion, if any, of such income and gain resulting
from the recapture of cost recovery or other deductions shall be allocated among
those Members who were previously allocated (or whose predecessors-in-interest
were previously allocated) the cost recovery deductions or other deductions
resulting in the recapture items, in proportion to the amount of such cost
recovery deductions or other deductions previously allocated to them.
13
<PAGE>
7.4.3 ALLOCATION OF EXCESS NONRECOURSE LIABILITIES. Solely for
purposes of determining a Member's proportionate share of the "excess
nonrecourse liabilities" of the Company within the meaning of Regulation Section
1.752-3(a)(3), the Members' interests in the Company's profits shall be in
accordance with their respective Percentage Interests.
7.4.4 ALLOCATIONS IN CONNECTION WITH VARYING INTERESTS. If, during a
Company fiscal year, there is (i) a permitted transfer of all or a part of a
Member's interest, or (ii) the admission or withdrawal of a Member, net profit,
net loss, each item thereof, and all other tax items of the Company for such
fiscal year shall be divided and allocated among the Members by taking into
account their varying interests during such fiscal year in accordance with Code
Section 706(d) and using any conventions permitted by law and selected by the
Managers.
7.5 DETERMINATION OF NET PROFIT OR LOSS.
7.5.1 COMPUTATION OF NET PROFIT OR LOSS. The net profit or net loss
of the Company, for each fiscal year or other period, shall be an amount equal
to the Company's taxable income or loss for such period, determined in
accordance with Code Section 703(a) (and, for this purpose, all items of income,
gain, loss or deduction required to be stated separately pursuant to Code
Section 703(a)(1), including income and gain exempt from federal income tax,
shall be included in taxable income or loss).
7.5.2 ADJUSTMENTS TO NET PROFIT OR LOSS. For purposes of computing
taxable income or loss on the disposition of an item of Company property or for
purposes of determining the cost recovery, depreciation, or amortization
deduction with respect to any property, the Company shall use such property's
book value determined in accordance with Regulation Section 1.704-1(b).
7.5.3 ITEMS SPECIALLY ALLOCATED. Notwithstanding any other provision
of this Section 7.5, any items that are specially allocated pursuant to Section
----------- -------
7.2 or Section 7.3 shall not be taken into account in computing the Company's
- --- -----------
net profit or net loss.
7.6 MANDATORY TAX ALLOCATIONS UNDER CODE SECTION 704(C). In
accordance with Code Section 704(c) and Regulation Section 1.704-3, income,
gain, loss and deduction with respect to any property contributed to the capital
of the Company shall, solely for tax purposes, be allocated among the Members so
as to take account of any variation between the adjusted basis of such property
to the Company for federal income tax purposes and its initial book value
computed in accordance with Section 7.5.2. Prior to the contribution of any
-------------
property to the Company that has a fair market value that differs from its
adjusted tax basis in the hands of the contributing Member on the date of
contribution,
14
<PAGE>
the contributing Member and the Managers shall agree upon the allocation method
to be applied with respect to that property under Regulation Section 1.704-3,
which allocation method shall be set forth on attached Schedule 3, if any, as
----------
amended from time to time. The same procedure shall apply to any revaluation of
Company property as permitted under Regulation Section 1.704-2(b)(iv)(f);
provided, however, that all decisions with respect to such revaluation shall be
- -------- -------
made by the Managers.
Allocations pursuant to this Section 7.6 are solely for purposes of
-----------
federal, state, and local taxes and shall not affect, or in any way be taken
into account in computing, any Member's Capital Account or share of net profit,
net loss, or other items as computed for book purposes, or, subject to Section
-------
8.1(a), distributions pursuant to any provision of this Agreement.
- ------
ARTICLE 8 -- DISTRIBUTIONS TO MEMBERS
8.1 NONLIQUIDATING DISTRIBUTIONS. Subject to Section 8.2,
-----------
distributions of Distributable Cash and distributions in kind, other than
distributions in liquidation pursuant to Section 8.3, shall be distributed at
-----------
times and under circumstances determined by the Managers in the following order
of priority:
(a) first, the Company shall make a distribution to the Members in an
amount equal to at least (a) the Company's net taxable income during the fiscal
year multiplied by (b) the maximum federal income tax rate of any Member in
effect for the fiscal year, less (c) the amount of any distributions made by the
Company during the fiscal year (other than distributions made during the fiscal
year that are required to be made under the provisions of this Section 8.1(a)
--------------
with respect to a prior fiscal year). Such distribution shall be made to each
Member in proportion to the net taxable income reported on such Member's Form K-
1 from the Company for such fiscal year. For purposes of this Section 8.1(a),
--------------
the Company's net taxable income shall be the net excess of items of recognized
income and gain over the items of recognized loss and deduction reported on the
Company's federal income tax return for the taxable year with respect to which
the distribution is being made. Notwithstanding the foregoing, in the event (1)
there is an allocation by the Company of income or gain to SRC, or losses or
deductions only to the other Members (or Members other than the Company in the
event the assets previously contributed to the Company by SRC are contributed by
the Company to another limited liability company or partnership), with respect
to property contributed by SRC for a particular fiscal year in accordance with
Section 7.6 of this Agreement and (2) the amount of cash distributed to SRC for
- -----------
that fiscal year pursuant to the first two sentences of this Section 8.1(a),
--------------
when added to the amount of any prior distributions made to SRC during that year
(other than distributions made during the fiscal year that are required to be
15
<PAGE>
made under provisions of this Section 8.1(a) with respect to a prior fiscal
--------------
year), is less than the product of (a) the maximum federal income tax rate for
individuals for that year times (b) the net amount of gain allocated by the
Company to SRC for that fiscal year for federal income tax purposes, then the
Company shall distribute to SRC an additional amount of cash equal to such
"shortfall." Such distribution shall be made to SRC no later than five business
days before the due date of the federal tax return filed by SRC reflecting such
gain. The Company's obligation to make such distribution is subject to the
restrictions governing distributions under the Act.
(b) second, to the Class A Members (pro rata in accordance with their
respective accrued and unpaid Preferred Return), until such Members have
received aggregate distributions under this Section 8.1(b) in an amount that is
--------------
equal to (but does not exceed) such Members' accrued Preferred Return through
the date of the distribution;
(c) third, to the Class A Members (pro rata in accordance with their
respective Net Capital Contributions) to the extent of such Class A Members'
Capital Contributions to the Company until such Class A Members have received
aggregate distributions under this Section 8.1(c) in an amount that is equal to
--------------
(but does not exceed) such Class A Members' aggregate Capital Contributions to
the Company through the date of the distribution; and
(d) fourth, to the Members pro rata in proportion to their respective
Percentage Interests.
8.2 SPECIAL DISTRIBUTION TO SRC TO COVER 1995 TAXES. On or before
April 15, 1996, the Company shall make a special distribution to SRC in the
positive amount (if any) determined under the following formula:
[(A - B) X C] - D = Amount of Distribution
For purposes of applying this formula, each of the following variables shall
have the meaning set forth opposite such variable:
A = SRC's net taxable income attributable to its operations from January
1, 1995 through August 31, 1995, determined in a manner consistent
with the historical preparation of SRC's Form 1120S, Income Tax Return
for an S Corporation. The calculation of SRC's net taxable income for
this purpose shall not include any consideration received by SRC under
the Member Contribution and Asset Purchase Agreement between the
Company and SRC.
16
<PAGE>
B = SRC's allocable share of net loss of the Company for calendar year
1995.
C = 48.6% (the combined highest marginal federal and Oregon state income
tax rates imposed on individuals during 1995).
D = The aggregate amount of distributions made by SRC to its shareholders
during the period commencing on January 1, 1995 and ending on August
31, 1995.
8.3 DISTRIBUTIONS IN LIQUIDATION. Notwithstanding Sections 8.1 and 8.2,
--------------------
distributions in liquidation of the Company shall be made to each Member in the
manner set forth in Article 9.
---------
8.4 DISTRIBUTIONS IN KIND. Non-cash assets, if any, shall be distributed
at times and in a manner determined in the discretion of the Managers that
reflects how cash proceeds from the sale of such assets for fair market value
would have been distributed (after any unrealized income, gain or loss
attributable to such non-cash assets has been allocated among the Members in
accordance with Article 7).
---------
ARTICLE 9 -- DISSOLUTION AND LIQUIDATION
9.1 EVENTS OF DISSOLUTION. Except as otherwise provided in this
Agreement, the Company shall dissolve upon the earlier of:
(a) expiration of the term specified in Section 1.4;
-----------
(b) the written agreement of a Majority Percentage Interest of the
Class A Members; or
(c) the occurrence of any of the following events, unless the business
of the Company is continued with the consent of a Majority Interest of the
remaining Members within ninety (90) days following such event:
(i) a Member is the subject of a voluntary or involuntary insolvency
or bankruptcy proceeding as specified in RCW 25.15.130(1)(d) or (c); or
(ii) in the case of a Member who is an individual, the death of the
Member or the entry of an order by a court of competent jurisdiction
adjudicating the Member incompetent to manage his or her person or estate; or
(iii) in the case of a Member that is a general partnership, limited
partnership or limited liability company, the dissolution and commencement of
winding up of such entity; or
17
<PAGE>
(iv) in the case of a Member that is a corporation, the filing of
articles of dissolution or the equivalent for the corporation or the
administrative dissolution of the corporation and the lapse of any period
authorized for application for reinstatement; or
(v) in the case of a Member that is a trust, the termination of such
trust; or
(vi) any event which causes the Company to have fewer than two (2)
Members.
9.2 LIQUIDATION UPON DISSOLUTION AND WINDING UP. Upon the dissolution of
the Company, the Managers shall wind up the affairs of the Company. A full
account of the assets and liabilities of the Company shall be taken. The assets
shall be promptly liquidated and the proceeds thereof applied as required by the
Act. Upon discharging all debts and liabilities of the Company, all remaining
assets shall be distributed to the Members or their representatives by the end
of the taxable year in which the liquidation occurs (or, if later, within ninety
(90) days after the date of such liquidation) in proportion to the positive
balances of their respective Capital Accounts, as determined after taking into
account all Capital Account adjustments for the taxable year during which the
liquidation occurs (other than those made pursuant to this Section 9.2). The
-----------
Managers may, in the process of winding up the Company, distribute property in
kind, in which case the Members' Capital Account balances shall be adjusted in
accordance with Regulation Section 1.704-1(b)(2)(iv)(e).
9.3 NO OBLIGATION TO RESTORE NEGATIVE CAPITAL ACCOUNT BALANCE ON
LIQUIDATION. No Member shall have any obligation to make any Capital
Contribution to the Company to eliminate the negative balance, if any, of such
Member's Capital Account upon a liquidation within the meaning of Regulation
Section 1.704-1(b)(2)(ii)(g) and such negative balance shall not be considered a
debt owed by such Member to the Company or to any other person for any purpose
whatsoever.
ARTICLE 10 -- DISSOCIATION OF A MEMBER
10.1 EVENTS. Upon the occurrence of an event of Member dissociation
specified in Section 9.1(c) with respect to any Member other than Eagle River or
--------------
NEXTLINK, Inc., the non-dissociated Class A Members shall each have the option,
exercisable by written notice to the person who succeeds to the interest of such
dissociated Member, to purchase such Member's entire interest in the Company.
If more than one Class A Member exercises the option to purchase the dissociated
Member's interest, their exercise of the purchase option shall be deemed an
election to purchase a portion of the interest that is the
18
<PAGE>
ratio of the purchasing Member's Percentage Interest to the Percentage Interests
of all purchasing Members. Upon the occurrence of an event of Member
dissociation specified in Section 9.1(c) with respect to Eagle River or
--------------
NEXTLINK, Inc., the other Class A Members shall not have any option to purchase
the interest of Eagle River or NEXTLINK, Inc. in the Company. The terms of the
Company's right to repurchase any option to acquire Class B Units in the Company
shall be governed by the Equity Option Plan rather than the provisions of this
Article 10.
- ----------
10.2 PURCHASE PRICE. The purchase price for a selling Member's
interest in the Company for purposes of Section 10.1 shall be the amount of the
------------
liquidating distribution the Selling Member would receive pursuant to Section
-------
9.2 if the Company's assets (other than purchased good will) were sold for their
- ---
book values as determined at the close of the immediately preceding fiscal year
of the Company, the Company's liabilities repaid, and the balance distributed to
the Members in liquidation of their interests in the Company.
10.3 FAILURE TO EXERCISE PURCHASE OPTION. If the Class A Members do
not exercise the purchase option under Section 10.1 and the business of the
------------
Company is continued as provided in Section 9.1(c), then each of the persons who
--------------
succeed to the dissociated Member's interest shall be an assignee of such
dissociated Member, but shall not be a Member unless admitted as a Member in
accordance with Section 3.3. The rights of such Member's successors shall be
-----------
subject to offset for any damages suffered by the Company or the other Members
as a result of such wrongful dissociation.
ARTICLE 11 -- LIMITATION OF MEMBER'S LIABILITY;
INDEMNIFICATION OF MEMBERS
11.1 LIMITATION OF LIABILITY. No Member or Manager, or their respective
officers, directors, agents, employees, members or managers, shall have
liability to the Company or its Members for monetary damages for conduct as a
Member or Manager, except for acts or omissions that involve a breach of this
Agreement, intentional misconduct, a knowing violation of law, conduct violating
RCW 25.15.235, or for any transaction from which such person has personally
received a benefit in money, property or services to which such person was not
legally entitled. If the Act is hereafter amended to authorize Company action
further limiting the personal liability of such persons, then the liability of
such persons shall be eliminated or limited to the full extent permitted by the
Act, as so amended. No repeal or modification of the Act or this Section 11.1
------------
shall adversely affect any right or protection of any such person existing at
the time of such repeal or modification for or with respect to an act or
omission of such person occurring prior to such repeal or modification.
19
<PAGE>
11.2 INDEMNIFICATION. The Company shall indemnify each Member and
Manager, and their respective officers, directors, agents, employees, members or
managers, from and against any judgments, settlements, penalties, fines or
expenses incurred in a proceeding to which such person is a party because he,
she or it is, or was, a Member, a Manager, or officer, director, agent,
employee, member or manager thereof; provided, that such persons shall not be
indemnified from or on account of acts or omissions of such persons finally
adjudicated to be a breach of this Agreement, intentional misconduct or a
knowing violation of law by such persons, conduct of such persons adjudged to be
in violation of RCW 25.15.235, or any transaction with respect to which it was
finally adjudged that such person received a benefit in money, property or
services to which such person was not legally entitled. The right to
indemnification conferred in this Section 11.2 shall be a contract right and
------------
shall include the right to be paid by the Company the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
that the payment of such expenses in advance of the final disposition of a
proceeding shall be made only upon delivery to the Company of an undertaking, by
or on behalf of such indemnified person, to repay all amounts so advanced if it
shall ultimately be determined that such person is not entitled to be
indemnified under this Section 11.2 or otherwise.
------------
The right to indemnification and payment of expenses incurred in defending
a proceeding in advance of its final disposition conferred in this Section 11.2
------------
shall not be exclusive of any other right any person entitled to indemnification
under this Agreement may have or hereafter acquire under any statute, this
Agreement, vote of Members or otherwise.
No repeal or modification of the Act or this Section 11.2 shall adversely
------------
affect any right to indemnification existing at the time of such repeal or
modification for or with respect to indemnification related to an act or
omission of such person occurring prior to such repeal or modification.
ARTICLE 12 -- MISCELLANEOUS
12.1 NOTICES. Any notice or other communication required or permitted
under this Agreement shall be deemed to have been duly given if delivered
personally to the party to whom directed or, if mailed, by registered or
certified mail, postage and charges prepaid, addressed (a) if to a Member or
Manager, to such person's address specified on attached Schedule 1, and (b) if
----------
to the Company, to the Company's address specified in Section 1.5. Any such
-----------
notice shall be deemed to be given when personally delivered, on the date of
delivery if delivered by overnight courier service, on the date such notice is
sent by telecopier to a telecopy number designated on the Schedule if such
notice is
20
<PAGE>
also sent by overnight courier service, or, if mailed, two (2) business days
after the date of mailing. A Member, Manager or the Company may change its
address for purposes of notices hereunder by giving notice specifying such
changed address in the manner specified in this Section 12.1.
------------
12.2 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Washington.
12.3 AMENDMENTS. This Agreement may be amended by the affirmative vote of
a Majority Percentage Interest of the Class A Members; provided, however, that
-------- -------
Section 3.2, Article 7 and Article 8 of this Agreement shall not be modified in
- ----------- --------- ---------
any way that has an adverse effect on a Member unless such Member consents to
the proposed modification.
12.4 CONSTRUCTION. Whenever the singular number is used in this Agreement
and when required by the context, the same shall include the plural and vice
versa, and the masculine gender shall include the feminine and neuter genders
and vice versa.
12.5 HEADINGS. The headings in this Agreement are inserted for
convenience only and shall not affect the interpretation of this Agreement.
12.6 WAIVERS. The failure of any person to seek redress for violation of
or to insist upon the strict performance of any covenant or condition of this
Agreement shall not prevent a subsequent act, which would have originally
constituted a violation, from having the effect of an original violation.
12.7 REMEDIES. The rights and remedies of the parties hereunder shall not
be mutually exclusive, and the exercise of any one right or remedy shall not
preclude or waive the right to exercise any other remedies. Said rights and
remedies are in addition to any other rights the parties may have by law or
otherwise.
12.8 SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstance shall be invalid, illegal or unenforceable
to any extent, the remainder of this Agreement and the application thereof shall
not be affected and shall be enforceable to the fullest extent permitted by law.
12.9 HEIRS, SUCCESSORS AND ASSIGNS. Each and all of the covenants, terms,
provisions and agreements herein contained shall be binding upon and inure to
the benefit of the parties hereto and, to the extent permitted by this
Agreement, their respective heirs, legal representatives, successors and
assigns.
21
<PAGE>
12.10 CREDITORS. None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditors of the Company.
12.11 JURISDICTION AND VENUE. In the event that any suit is brought
arising out of or in connection with this Agreement, the parties consent to the
jurisdiction of, and agree that sole venue will lie in, the state and federal
courts located in King County, Washington.
12.12 DISPUTE RESOLUTION.
12.12.1 DISPUTE RESOLUTION. The parties to this Agreement desire to
resolve disputes arising out of this Agreement without litigation. Accordingly,
except for action seeking a temporary restraining order injunction related to
the purposes of this Agreement, or suit to compel compliance with this dispute
resolution process, the parties agree to use the dispute resolution procedures
set forth in Section 12.12 as their sole remedy with respect to any controversy
-------------
or claim arising out of or relating to this Agreement or its breach.
At the written request of any party, the parties to the dispute will
appoint knowledgeable, responsible representatives to meet and negotiate in good
faith to resolve any dispute arising under this Agreement. The parties intend
that these negotiations be conducted by non-lawyer, business representatives.
The location, format, frequency, duration and conclusion of these discussions
shall be left to the discretion of the representatives. Discussion and
correspondence among the representatives for purposes of these negotiations
shall be treated as confidential information developed for purposes of
settlement, exempt from discovery and production, which shall not be admissible
in the arbitration described below. Documents identified in or provided with
such communications, which are not prepared for purposes of the negotiations,
are not so exempted and may, if otherwise admissible, be admitted in evidence in
the arbitration or lawsuit.
12.12.2 MEDIATION. If the negotiations set forth in Section 12.12.1
---------------
do not resolve the dispute within sixty (60) days of the initial written
request, the parties agree to work in good faith to settle the dispute by
mediation under the commercial mediation rules of the American Arbitration
Association. The parties will attempt to agree on a mediator. If they are
unable to do so, the mediation will be referred to the Seattle office of the
American Arbitration Association for mediation which will appoint a qualified
mediator to serve. The mediation shall take place in Seattle. Unless the
parties agree otherwise, the first mediation session shall take place no later
than ninety (90) days after the initial written request to negotiate. The
mediation shall continue until the dispute is resolved or until such time
22
<PAGE>
as the mediator makes a good faith determination that the likelihood of
resolution is sufficiently remote that continuation of the mediation is not
warranted.
12.12.3 ARBITRATION. If a determination is made pursuant to Section
-------
12.12.2 that continuation of the mediation process is not warranted, the dispute
- -------
shall be submitted to binding arbitration by a panel of three arbitrators
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association. Any party may demand such arbitration in accordance with the
procedures set out in those rules. Each party shall have the right to take the
deposition of one individual, and any expert witness designated by the other
party. Each party shall also have the right to request production of relevant
documents, the scope and enforcement of which shall be governed by the
arbitrator. Additional discovery may be only by order of the arbitrator, and
only upon a showing of substantial need. The arbitrator shall be authorized to
issue subpoenas for the purpose of requiring attendance of witnesses at
depositions. The arbitration hearing shall be commenced within sixty (60) days
of the determination that mediation is not going to be successful. The
arbitration shall be held in Seattle, Washington or such other location as
mutually agreed upon by the parties. The arbitrator shall control the
scheduling so as to process the matter expeditiously. The parties may submit
written briefs. The arbitrator shall rule on the dispute by issuing a written
opinion within thirty (30) days after the close of hearings. The times
specified in this section may be extended upon mutual agreement of the parties
or by the arbitrator upon a showing of good cause. The award rendered by
arbitration shall be final, binding and nonappealable judgment and the award may
be entered in any court of competent jurisdiction in the United States.
Punitive damages shall not be awarded by the arbitrator.
12.12.4 CONFIDENTIALITY. The parties agree that all communications
and negotiations between the parties during the dispute resolution process, any
settlements agreed upon during the dispute resolution process and any
information regarding the other party obtained during the dispute resolution
process (that are not already public knowledge) are confidential and may be
disclosed only to employees and agents of the parties who shall have a "need to
know" the information and who shall have been made aware of the confidentiality
obligations set forth in this Section, unless the party is required by law to
disclose such information.
12.12.5 FEES AND EXPENSES. The parties shall equally split the fees
of the mediator and the arbitrator. Any party found by the arbitrator to have
breached this Agreement shall pay all other costs and expenses, including
reasonable attorneys' fees and expenses, of the other party incurred in
connection with the dispute resolution process. If the arbitrator does not find
23
<PAGE>
that any party has breached this Agreement, then each party shall bear its own
costs and expenses, including attorneys' fees and expenses.
12.13 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same instrument.
[Signature Page Follows]
24
<PAGE>
Executed as of the date first above written by the undersigned.
EAGLE RIVER INVESTMENTS, L.L.C.
By
----------------------------------
Manager
NEXTLINK, INC.
By
----------------------------------
Title
--------------------------
BWP, INC.
By
----------------------------------
Title
--------------------------
------------------------------------
SCOT JARVIS
25
<PAGE>
PENNS LIGHT COMMUNICATIONS, INC.
By
----------------------------------
Title
--------------------------
PROBE VENTURES, INC.
By
----------------------------------
Title
--------------------------
CITY SIGNAL, INC.
By
----------------------------------
Title
--------------------------
U.S. NETWORK CORPORATION
By
----------------------------------
Title
--------------------------
26
<PAGE>
Schedule 1
to
Amended and Restated Limited Liability Company Agreement
of
NEXTLINK Communications, L.L.C.
<TABLE>
<CAPTION>
NAMES AND ADDRESSES OF PERCENTAGE
MEMBERS UNITS INTERESTS
<S> <C> <C>
EAGLE RIVER 53,938,354 87.705%
INVESTMENTS, L.L.C.
2320 Carillon Point
Kirkland, WA 98033
NEXTLINK, INC. 820,388 1.334%
155 108TH Ave. N.E.
Bellevue, WA 98004
BWP, INC. 4,411,941 7.174%
700 S.W. Washington
Portland, OR 97205
SCOT JARVIS 500,000 0.813%
2320 Carillon Point
Kirkland, WA 98033
PENNS LIGHT COMMUNICATIONS, INC. 262,525 0.427%
925 Berkshire Blvd.
Wyomissing, PA 91610
PROBE VENTURES CORP. 26,239 0.043%
Three Wing Drive
Cedar Knolls, NJ 07927-1000
CITY SIGNAL, INC. 888,371 1.445%
2855 Oak Industrial Drive N.E.
Grand Rapids, MI 49506
U.S. NETWORK CORPORATION 651,993 1.060%
10 South Riverside Plaza
Chicago, IL 60606-3709
TOTALS 61,499,811 100%
</TABLE>
27
<PAGE>
EXHIBIT 3.3
ARTICLES OF INCORPORATION
OF
NEXTLINK CAPITAL, INC.
Pursuant to RCW 23B.02.020 of the Washington Business Corporation Act, the
undersigned does hereby submit these Articles of Incorporation for the purpose
of forming a business corporation.
ARTICLE I
NAME
----
The name of this corporation is NEXTLINK Capital, Inc.
ARTICLE II
PURPOSES
--------
This corporation is organized for the following purposes:
To engage in any business, trade or activity which may be conducted
lawfully by a corporation organized under the Washington Business Corporation
Act.
ARTICLE III
SHARES
------
This corporation is authorized to issue one thousand (1,000) shares of
common stock with no par value.
ARTICLE IV
PREEMPTIVE RIGHTS
-----------------
Each Shareholder shall have preemptive rights to acquire additional shares
which may be issued by this corporation to the extent preemptive rights apply to
such shares under the Washington Business Corporation Act.
ARTICLES OF INCORPORATION - Page 1
<PAGE>
ARTICLE V
NO CUMULATIVE VOTING
--------------------
At each election for directors, every shareholder entitled to vote at such
election has the right to vote in person or by proxy the number of shares held
by such shareholder for as many persons as there are directors to be elected.
No cumulative voting for directors shall be permitted.
ARTICLE VI
BYLAWS
------
The Board of Directors shall have the power to adopt, amend or repeal the
Bylaws or adopt new Bylaws. Nothing herein shall deny the concurrent power of
the shareholders to adopt, alter, amend or repeal the Bylaws.
ARTICLE VII
REGISTERED AGENT AND OFFICE
---------------------------
The name of the initial registered agent of this corporation and the
address of its initial registered office are as follows:
Registered Agent Office
---------------- ------
DWTR&J Corp. 1501 Fourth Avenue, Suite 2600
Seattle, WA 98101
ARTICLE VIII
DIRECTORS
---------
A. The number of directors of this corporation shall be determined in the
manner specified by the Bylaws and may be increased or decreased from time to
time in the manner provided therein.
B. The term of the initial directors shall be until the first annual
meeting of the shareholders or until their successors are elected and qualified,
unless removed in accordance with the provisions of the Bylaws.
ARTICLES OF INCORPORATION - Page 2
<PAGE>
ARTICLE IX
SHAREHOLDER VOTING REQUIREMENTS FOR CERTAIN TRANSACTIONS
--------------------------------------------------------
In order to obtain shareholder approval in connection with the following
corporate actions, such actions must be approved by each voting group of
shareholders entitled to vote thereon by a majority of all the votes entitled to
be cast by that voting group: amendment of the Articles of Incorporation; a
plan of merger or share exchange; the sale, lease, exchange, or other
disposition of all, or substantially all, of the corporation's assets other than
in the usual and regular course of business; or dissolution of the corporation.
ARTICLE X
INCORPORATOR
------------
The name and address of the incorporator are as follows:
Name Address
---- -------
Jay D. Hull 1300 SW Fifth Avenue, Suite 2300
Portland, OR 97201
ARTICLE XI
LIMITATION OF DIRECTORS' LIABILITY
----------------------------------
A director shall have no liability to the corporation or its shareholders
for monetary damages for conduct as a director, except for acts or omissions
that involve intentional misconduct by the director, or a knowing violation of
law by the director, or for conduct violating RCW 23B.08.310, or for any
transaction from which the director will personally receive a benefit in money,
property or services to which the director is not legally entitled. If the
Washington Business Corporation Act is hereafter amended to authorize corporate
action further eliminating or limiting the personal liability of directors, then
the liability of a director shall be eliminated or limited to the full extent
permitted by the Washington Business Corporation Act, as so amended. Any repeal
or modification of this Article shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification for or with respect to an act or omission of such director
occurring prior to such repeal or modification.
ARTICLES OF INCORPORATION - Page 3
<PAGE>
ARTICLE XII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
Section 1. Right to Indemnification. Each person who was, or is
------------------------
threatened to be made a party to or is otherwise involved (including, without
limitation, as a witness) in any actual or threatened action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he or she is or was a director or officer of the corporation
or, while a director or officer, he or she is or was serving at the request of
the corporation as a director, trustee, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action in an official capacity as a director,
trustee, officer, employee or agent or in any other capacity while serving as a
director, trustee, officer, employee or agent, shall be indemnified and held
harmless by the corporation, to the full extent permitted by applicable law as
then in effect, against all expense, liability and loss (including attorney's
fees, judgments, fines, ERISA excise taxes or penalties and amounts to be paid
in settlement) actually and reasonably incurred or suffered by such person in
connection therewith, and such indemnification shall continue as to a person who
has ceased to be a director, trustee, officer, employee or agent and shall inure
to the benefit of his or her heirs, executors and administrators; provided,
however, that except as provided in Section 2 of this Article with respect to
proceedings seeking to enforce rights to indemnification, the corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the board of directors of the corporation.
The right to indemnification conferred in this Section 1 shall be a contract
right and shall include the right to be paid by the corporation the expenses
incurred in defending any such proceeding in advance of its final disposition;
provided, however, that the payment of such expenses in advance of the final
disposition of a proceeding shall be made only upon delivery to the corporation
of an undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Section 1 or otherwise.
Section 2. Right of Claimant to Bring Suit. If a claim under Section 1 of
-------------------------------
this Article is not paid in full by the corporation within sixty (60) days after
a written claim has been received by the corporation, except in the case of a
claim for expenses incurred in defending a proceeding in advance of its final
disposition, in which case the applicable period shall be twenty (20) days, the
claimant may at any time thereafter bring suit against the corporation to
recover the unpaid amount of the claim and, to the extent successful in whole or
in part, the
<PAGE>
claimant shall be entitled to be paid also the expense of prosecuting such
claim. The claimant shall be presumed to be entitled to indemnification under
this Article upon submission of a written claim (and, in an action brought to
enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition, where the required undertaking has been tendered to the
corporation), and thereafter the corporation shall have the burden of proof to
overcome the presumption that the claimant is not so entitled. Neither the
failure of the corporation (including its board of directors, independent legal
counsel or its shareholders) to have made a determination prior to the
commencement of such action that indemnification of or reimbursement or
advancement of expenses to the claimant is proper in the circumstances nor an
actual determination by the corporation (including its board of directors,
independent legal counsel or its shareholders) that the claimant is not entitled
to indemnification or to the reimbursement or advancement of expenses shall be a
defense to the action or create a presumption that the claimant is not so
entitled.
Section 3. Nonexclusivity of Rights. The right to indemnification and the
------------------------
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Articles of Incorporation, Bylaws, agreement, vote of shareholders or
disinterested directors or otherwise.
Section 4. Insurance, Contracts and Funding. The corporation may maintain
--------------------------------
insurance, at its expense, to protect itself and any director, trustee, officer,
employee or agent of the corporation or another corporation, partnership, joint
venture, trust or other enterprise against any expense, liability or loss,
whether or not the corporation would have the power to indemnify such person
against such expense, liability or loss under the Washington Business
Corporation Act. The corporation may, without further shareholder action, enter
into contracts with any director or officer of the corporation in furtherance of
the provisions of this Article and may create a trust fund, grant a security
interest or use other means (including, without limitation, a letter of credit)
to ensure the payment of such amounts as may be necessary to effect
indemnification as provided in this Article.
Section 5. Indemnification of Employees and Agents of the Corporation.
----------------------------------------------------------
The corporation may, by action of its board of directors from time to time,
provide indemnification and pay expenses in advance of the final disposition of
a proceeding to employees and agents of the corporation with the same scope and
effect as the provisions of this Article with respect to the indemnification and
advancement of expenses of directors and officers of the corporation or pursuant
to rights granted pursuant to, or provided by, the Washington Business
Corporation Act or otherwise.
ARTICLES OF INCORPORATION - Page 5
<PAGE>
ARTICLE XIII
EFFECTIVE DATE
--------------
These Articles of Incorporation shall be effective upon filing.
Dated: March 18, 1996.
-----------------------------
Jay D. Hull, Incorporator
ARTICLES OF INCORPORATION - Page 6
<PAGE>
CONSENT TO SERVE AS REGISTERED AGENT
------------------------------------
DWTR&J Corp., a Washington corporation, hereby consents to serve as
Registered Agent, in the State of Washington, for NEXTLINK Capital, Inc. DWTR&J
Corp. understands that as agent for said corporation, it will be responsible to
receive service of process in the name of said corporation; to forward all mail
to said corporation; and to immediately notify the office of the Secretary of
State in the event of its resignation, or of any changes in the registered
office address of 2600 Century Square, 1501 Fourh Avenue, Seattle, WA 98101-
1688.
DWTR&J CORP.
Date: March 18, 1996 By: ___________________________
Linda M. Lufkin
Its: Vice President
2600 Century Square
1501 Fourth Avenue
Seattle, Washington 98101-1688
ARTICLES OF INCORPORATION - Page 7
<PAGE>
EXHIBIT 3.4
BYLAWS
OF
NEXTLINK CAPITAL, INC.
These Bylaws are intended to conform to the mandatory requirements of the
Washington Business Corporation Act, RCW Chapter 23, (the "Act"). Any ambiguity
arising between these Bylaws and the discretionary provisions of the Act shall
be resolved in favor of the application of the Act.
ARTICLE I
---------
Shareholders
------------
Section 1. - Place.
Shareholders meetings shall be held at the registered office of the
Corporation unless a different place shall be designated by the Board of
Directors.
Section 2. - Annual Meeting.
The annual meeting of the Shareholders shall be held on the third Tuesday
of April of each year unless otherwise designated by the Board of Directors.
The meeting shall be held for the purpose of electing Directors and for the
transaction of such other business as may come before the meeting. If the day
fixed for the annual meeting shall be a legal holiday, such meeting shall be
held on the next succeeding business day. If the election of Directors shall
not be held on the day designated herein, the Board of Directors shall cause the
election to be held at a special meeting of the Shareholders on the next
convenient day.
Section 3. - Special Meetings.
Special meetings of the Shareholders may be called by the President, the
Board of Directors or the holders of not less than one-tenth of all the shares
entitled to vote at the meeting.
Section 4. - Notice.
Written or printed notice stating the place, hour and day of the meeting
and, in case of a special meeting, the purpose or purposes for which the meeting
is called, shall be delivered not less than ten (10) days nor more than sixty
(60) days before the date of the meeting, either personally or by mail, by or at
the direction of the President, the Secretary, or the officer or persons calling
the meeting to each Shareholder of record entitled to vote at such meeting.
Such notice and the effective date thereof shall be determined as provided in
the Act.
Section 5. - Quorum.
A majority of the shares issued, outstanding and entitled to vote upon the
subject matter at the time of the meeting, represented in person or by proxy,
shall constitute a quorum for the transaction of business at any meeting of the
Shareholders.
Section 6. - Adjourned Meetings.
If there is no quorum present at any annual or special meeting the
Shareholders present may adjourn to such time and place as may be decided upon
by the holders of the majority of the shares present, in person or by proxy, and
notice of such adjournment shall be given in accordance with Section 4 of this
Article, but if a quorum is present, adjournment may be taken from day to day or
to such time and place as may be decided and announced by a majority of the
Shareholders
<PAGE>
present, and no notice of such adjournment need be given. At any such adjourned
meeting at which a quorum is present, any business may be transacted which could
have been transacted at the meeting originally called.
Section 7. - Voting.
Each Shareholder entitled to vote on the subject matter shall be entitled
to one vote for each share of stock standing in the name of the Shareholder on
the books of the Corporation at the time of the closing of the Transfer Books
for said meeting, whether represented and present in person or by proxy. The
affirmative vote of the holders of a majority of the shares of each class
represented at the meeting and entitled to vote on the subject matter shall be
the act of the Shareholders. The Shareholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough Shareholders to leave less than a quorum.
Section 8. - Proxies.
At all meetings of Shareholders, a Shareholder may vote in person or by
proxy executed in writing by the Shareholder or by his duly authorized attorney
in fact. No proxy shall be valid after eleven (11) months from the date of its
execution, unless otherwise provided in the proxy and coupled with an interest
as provided in the Act.
Section 9. - Closing of Transfer Books.
The Stock Transfer Books shall be closed for the meetings of the
Shareholders and for the payment of dividends during such periods (not to exceed
50 days) as from time to time may be fixed by the Board of Directors. During
such periods, no stock shall be transferred.
ARTICLE II
----------
Directors
---------
Section 1. - In General.
The business and affairs of the Corporation shall be managed by a Board of
one to seven (1-7) Directors, whose exact number shall be fixed from time to
time by resolution of the Board of Directors. The members of the first Board of
Directors shall hold office until the first annual meeting of the Shareholders
and until their successors shall have been elected and qualified. Thereafter,
the term of the Directors shall begin upon each Director's election by the
Shareholders as provided in Article I, Section 7 above, and shall continue until
his successor shall have been elected and qualified.
Section 2. - Powers.
The corporate powers, business, property and interests of the Corporation
shall be exercised, conducted and controlled by the Board of Directors, which
shall have all power necessary to conduct, manage and control its affairs, and
to make such rules and regulations as it may deem necessary as provided by the
Act; to appoint and remove all officers, agents and employees; to prescribe
their duties and fix their compensation; to call special meetings of
Shareholders whenever it is deemed necessary by the Board, to incur indebtedness
and to give securities, notes and mortgages for same. It shall be the duty of
the Board to cause a complete record to be kept of all the minutes, acts, and
proceedings of its meetings. The Board shall have the power to declare
dividends out of the surplus profits of the Corporation when such profits shall,
in the opinion of the Board, warrant the same.
Section 3. - Vacancies.
Vacancies in the Board of Directors shall be temporarily filled by the
affirmative vote of a majority of the remaining Directors even though less than
a quorum of the Board of Directors. Such temporary Director or Directors shall
hold office until the first meeting of the Shareholders held thereafter, at
which time such vacancy or vacancies shall be permanently filled by election
according to the procedure specified in Section 1 of this Article II. During
the existence of any vacancy or
<PAGE>
vacancies, the surviving or remaining Directors, though less than a quorum,
shall possess and may exercise all of the powers vested in the Board of
Directors.
Section 4. - Annual Meeting.
There shall be an annual meeting of the Board of Directors which shall be
held immediately after the annual meeting of the Shareholders and at the same
place.
Section 5. - Special Meeting.
Special meetings may be called from time to time by the President or any
one of the Directors. Any business may be transacted at any special meeting.
Section 6. - Quorum.
A majority of the Directors shall constitute a quorum. The act of a
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors. If less than a quorum is present at
a meeting, a majority of the Directors present may adjourn the meeting from time
to time without further notice, other than announcement at the meeting, until a
quorum shall be present. Interested Directors may be counted for quorum
purposes.
Section 7. - Notice.
Notice of all Directors meetings shall be given in accordance with the Act.
No notice need be given of any annual meeting of the Board of Directors. One
day prior notice shall be given for all special meetings of the Board, but the
purpose of special meetings need not be stated in the notice.
Section 8. - Compensation.
By resolution of the Board of Directors, each Director may either be
reimbursed for his expenses, if any, for attending each meeting of the Board of
Directors or may be paid a fixed fee for attending each meeting of the Board of
Directors, or both. No such payment shall preclude any Director from serving
the Corporation in any other capacity and receiving compensation therefor.
Section 9. - Removal or Resignation of Directors.
Any Director may resign by delivering written notice of the resignation to
the Board of Directors or an officer of the Corporation. All or any number of
the Directors may be removed, with or without cause, at a meeting expressly
called for that purpose by a vote of the holders of the majority of the shares
then entitled to vote at an election of Directors.
Section 10. - Presumption of Assent.
A Director of the Corporation who is present at a meeting of the Board of
Directors at which action on any corporate matter is taken shall be presumed to
have assented to the action taken, unless his dissent shall be entered in the
minutes of the meeting. Such right to dissent shall not apply to a Director who
voted in favor of such action.
ARTICLE III
-----------
Officers and Agents - General Provisions
----------------------------------------
Section 1. - Number, Election and Term.
Officers of the Corporation shall be a President and a Secretary. Officers
shall be elected by the Board of Directors at its first meeting, and at each
regular annual meeting of the Board of Directors thereafter. Each officer shall
hold office until
<PAGE>
the next succeeding annual meeting of the Directors and until his successor
shall be elected and qualified. Any one person may hold more than one office if
it is deemed advisable by the Board of Directors.
Section 2. - Additional Officers and Agents.
The Board of Directors may appoint and create such other officers and
agents as may be deemed advisable and prescribe their duties.
Section 3. - Resignation or Removal.
Any officer or agent of the Corporation may resign from such position by
delivering written notice of the resignation to the Board of Directors, but such
resignation shall be without prejudice to the contract rights, if any, of the
Corporation. Any officer or agent elected or appointed by the Board of
Directors may be removed by the Board of Directors whenever in its judgment the
best interests of the Corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Election or appointment of an officer or agent shall not of itself
create contract rights.
Section 4. - Vacancies.
Vacancies in any office caused by any reason shall be filled by the Board
of Directors at any meeting by selecting a suitable and qualified person to act
during the unexpired term.
Section 5. - Salaries.
The salaries of all the officers, agents and other employees of the
Corporation shall be fixed by the Board of Directors and may be changed from
time to time by the Board, and no officer shall be prevented from receiving such
salary by reason of the fact that he is also a Director of the Corporation. All
Directors, including interested Directors, are specifically authorized to
participate in the voting of such compensation irrespective of their interest.
ARTICLE IV
----------
Duties of the Officers
----------------------
Section 1. - Chairman of the Board.
The Chairman of the Board, if any, shall be a member of the Board of
Directors and shall preside at all meetings of the Shareholders and Directors;
perform all duties required by the Bylaws of the Corporation, and as may be
assigned from time to time by the Board of Directors; and shall make such
reports to the Board of Directors and Shareholders as may be required.
Section 2. - President/Chief Executive Officer.
The President/Chief Executive Officer shall have general charge and control
of the affairs of the Corporation subject to the direction of the Board of
Directors; sign as President all Certificates of Stock of the Corporation;
perform all duties required by the Bylaws of the Corporation, and as may be
assigned from time to time by the Board of Directors; and shall make such
reports to the Board of Directors and Shareholders as may be required. In
addition, if no Chairman of the Board is elected by the Board, the
President/Chief Executive Officer shall perform all the duties required of such
officer by these Bylaws.
Section 3. - Vice President.
The Vice President, if any, shall perform such duties as shall be assigned
by the Board of Directors, and in the case of absence, disability or death of
the President, the Vice President shall perform and be vested with all the
duties and powers of the President, until the President shall have resumed such
duties or the President's successor is elected. In the event there
<PAGE>
is more than one Vice President, the Board of Directors may designate one or
more of the Vice Presidents as Executive Vice Presidents, who, in the event of
the absence, disability or death of the President shall perform such duties as
shall be assigned by the Board of Directors.
Section 4. - Secretary.
The Secretary shall keep a record of the proceedings at the meetings of the
Shareholders and the Board of Directors and shall give notice as required in
these Bylaws of all such meetings; have custody of all the books, records and
papers of the Corporation, except such as shall be in charge of the Treasurer or
some other person authorized to have custody or possession thereof by the Board
of Directors; sign all Certificates of Stock of the Corporation; from time to
time make such reports to the officers, Board of Directors and Shareholders as
may be required and shall perform such other duties as the Board of Directors
may from time to time delegate. In addition, if no Treasurer is elected by the
Board, the Secretary shall perform all the duties required of the office of
Treasurer by the Act and these Bylaws.
Section 5. - Treasurer.
The Treasurer shall keep accounts of all monies of the Corporation received
or disbursed; from time to time make such reports to the officers, Board of
Directors and Shareholders as may be required, perform such other duties as the
Board of Directors may from time to time delegate.
Section 6. - Assistant Secretary.
The Assistant Secretary, if any, shall assist the Secretary in all duties
of the office of Secretary. In the case of absence, disability or death of the
Secretary, the Assistant Secretary shall perform and be vested with all the
duties and powers of the Secretary, until the Secretary shall have resumed such
duties or the Secretary's successor is elected.
ARTICLE V
---------
Stock
-----
Section 1. - Certificates.
The shares of stock of the Corporation shall be represented by Stock
Certificates in a form adopted by the Board of Directors and every person who
shall become a Shareholder shall be entitled to a Certificate of Stock. All
Certificates shall be consecutively numbered by class.
Section 2. - Transfer of Certificates.
All Certificates of stock transferred by endorsement shall be surrendered,
cancelled and new certificates issued to the purchaser or assignee.
Section 3. - Transfer of Shares.
Shares of stock shall be transferred only on the books of the Corporation
by the holder thereof, in person or by his attorney, and no transfers of
Certificates of Stock shall be binding upon the Corporation until this Section
and Section 2 of this Article are met to the satisfaction of the Secretary of
the Corporation.
Section 4. - Lost Certificates.
In the case of loss, mutilation or destruction of a Certificate of Stock, a
duplicate Certificate may be issued upon such terms as the Board of Directors
shall prescribe.
Section 5. - Dividends.
<PAGE>
The Board of Directors may from time to time declare, and the Corporation
may then pay, dividends on its outstanding shares in the manner and upon the
terms and conditions provided by the Act and in its Articles of Incorporation.
Section 6. - Working Capital.
Before the payment of any dividends or the making of any distributions of
the net profits, the Board of Directors may set aside out of the net profits of
the Corporation such sum or sums as in their discretion they think proper, as a
working capital or as a reserve fund to meet contingencies. The Board of
Directors may increase, diminish or vary the capital of such reserve fund in
their discretion.
Section 7. - Restrictions on Transfer.
No shares of stock of the Corporation or Certificates representing such
shares shall be transferred in violation of any law or of any restriction on
such transfer (1) set forth in the Articles of Incorporation or amendments
thereto, or the Bylaws; or (2) contained in any Buy-Sell Agreement, right of
first refusal, or other Agreement restricting such transfer which Agreement has
been filed with the Corporation, and, if Certificates have been issued,
reference to which restriction is made on the Certificates representing such
shares. The Corporation shall not be bound by any restriction not so filed and
noted. The Corporation may rely in good faith upon the opinion of its counsel
as to such legal or contractual violation unless the issue has been finally
determined by a court of competent jurisdiction. The Corporation and any party
to any such agreement shall have the right to have a restrictive legend
imprinted upon any such Certificates and any Certificate issued in replacement
or exchange thereof or with respect thereto.
ARTICLE VI
----------
Seal
----
There shall be no corporate seal.
ARTICLE VII
-----------
Waiver of Notice
----------------
Whenever any notice is required to be given to any Shareholder or Director
of the Corporation, a waiver signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be equivalent to
the giving of such notice.
ARTICLE VIII
------------
Action by Shareholders or Directors
-----------------------------------
Without a Meeting
-----------------
Any action required to be taken at a meeting of the Shareholders or
Directors of the Corporation, or any other action which may be taken at a
meeting of the Shareholders or Directors, may be taken without a meeting if a
consent in writing setting forth the actions so taken shall be signed by all the
Shareholders or Directors entitled to vote with respect to the subject matter
thereof. Such consent shall have the same effect and force as a unanimous vote
of said Shareholders or Directors.
ARTICLE IX
----------
Borrowing
---------
Notwithstanding any other provision in these Bylaws, no officer of the
Corporation shall have authority to obligate the Corporation to borrow any funds
or to hypothecate any assets thereof, for corporate purposes or otherwise,
except as expressly stated in a resolution approved by a majority of Directors.
Such resolution may be general or specific.
<PAGE>
ARTICLE X
---------
Amendments
----------
Any and all of these Bylaws may be altered, amended, repealed or
suspended by the affirmative vote of a majority of the Directors at any meeting
of the Directors. New Bylaws may be adopted in like manner.
IDENTIFICATION
--------------
I hereby certify that I was the Secretary of the first Directors'
meeting of NEXTLINK Capital, Inc. and that the foregoing Bylaws in ten
typewritten pages numbered consecutively from 1 to 10, were and are the Bylaws
adopted by the Directors of the Corporation at that meeting.
-------------------------------
R. Bruce Easter, Jr., Secretary
<PAGE>
EXHIBIT 4.1
================================================================================
NEXTLINK COMMUNICATIONS, L.L.C.
AND
NEXTLINK CAPITAL, INC.
Issuers
-------
TO
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
-------
--------------------
Indenture
Dated as of April 25, 1996
--------------------
$350,000,000
12 1/2% SENIOR NOTES
DUE April 15, 2006
================================================================================
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C.
NEXTLINK CAPITAL, INC.
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- ------------------ ------------
<S> <C>
(S) 310(a)(1) ....................... 609
(a)(2) ....................... 609
(a)(3) ....................... Not
Applicable
(a)(4) ....................... Not
Applicable
(b) ....................... 608
....................... 610
(S) 311(a) ....................... 613
(b) ....................... 613
(S) 312(a) ....................... 701
702(a)
(b) ....................... 702(b)
(c) ....................... 702(c)
(S) 313(a) ....................... 703(a)
(a)(4) ....................... 703(a)
(b) ....................... 703(a)
(c) ....................... 703(a)
(d) ....................... 703(b)
(S) 314(a) ....................... 704
1018
(b) ....................... Not
Applicable
(c)(1) ....................... 102
(c)(2) ....................... 102
(c)(3) ....................... Not
Applicable
(d) ....................... Not
Applicable
(e) ....................... 102
(S) 315(a) ....................... 601
(b) ....................... 602
(c) ....................... 601
(d) ....................... 601
(e) ....................... 514
</TABLE>
- ------------------
Note: This reconciliation and tie shall not, for any
purpose, be deemed to be a part of the Indenture.
-i-
<PAGE>
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- ------------------ ------------
<S> <C>
(S) 316(a)(1)(A) 502
512
(a)(1)(B) ....................... 513
(a)(2) ....................... Not
Applicable
(b) ....................... 508
(c) ....................... 104
(S) 317(a)(1) ....................... 503
(a)(2) ....................... 504
(b) ....................... 1003
(S) 318(a) ....................... 107
</TABLE>
- ------------------
Note: This reconciliation and tie shall not, for any
purpose, be deemed to be a part of the Indenture.
-ii-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Parties ............................................................. 1
Recitals of the Issuers.............................................. 1
</TABLE>
ARTICLE ONE
Definitions and Other Provisions of
General Application
<TABLE>
<CAPTION>
SECTION 101. Definitions:
<S> <C> <C>
Act.................................................... 2
Acquired Debt.......................................... 2
Additional Step-Up..................................... 3
Affiliate.............................................. 3
Agent Member........................................... 3
Applicable Procedures.................................. 3
Asset Disposition...................................... 3
Attributable Value..................................... 3
Bank Credit Agreement.................................. 4
Board of Directors..................................... 4
Board Resolution....................................... 4
Business Day........................................... 4
Capital Lease Obligation............................... 4
Capital Stock.......................................... 5
CEDEL.................................................. 5
Change of Control...................................... 5
Commission............................................. 5
Common Equity.......................................... 5
Company................................................ 5
Consolidated Capital Ratio............................. 5
Consolidated Cash Flow Available for
Fixed Charges.......................................... 6
Consolidated Income Tax Expense........................ 6
Consolidated Interest Expense.......................... 6
Consolidated Net Income................................ 7
Consolidated Net Worth................................. 7
Consolidated Tangible Assets........................... 7
Corporate Trust Office................................. 8
corporation............................................ 8
Debt................................................... 8
Default................................................ 9
</TABLE>
- -----------------
Note: This table of contents shall not, for any purpose, be deemed to be
a part of the Indenture.
-iii-
<PAGE>
Page
----
<TABLE>
<S> <C> <C>
Defaulted Interest.................................... 9
Depository............................................ 9
Depository Securities Certification................... 9
Disqualified Stock.................................... 9
DTC................................................... 10
Eagle River........................................... 10
Eligible Institution.................................. 10
Euroclear............................................. 10
Event of Default...................................... 10
Exchange Act.......................................... 10
Exchange Offer........................................ 10
Exchange Offer Registration Statement................. 10
Exchange Security..................................... 10
Expiration Date....................................... 11
Global Security....................................... 11
Government Securities................................. 11
Guarantee............................................. 11
Holder................................................ 11
Incur................................................. 11
Indenture............................................. 12
Initial Purchasers.................................... 12
Interest Payment Date................................. 12
Interest Rate or Currency Protection
Agreement........................................... 12
Investment............................................ 12
Issue Date............................................ 13
Issuers Request; Issuers Order........................ 13
Joint Venture......................................... 13
Lien.................................................. 13
Managing Member....................................... 13
Managing Member's Certificate......................... 13
Marketable Securities................................. 14
Maturity.............................................. 14
Net Available Proceeds................................ 14
Offer to Purchase..................................... 15
Officers' Certificate................................. 18
Opinion of Counsel.................................... 18
Original Securities................................... 18
Other Securities...................................... 18
Outstanding........................................... 18
Owner Securities Certification........................ 19
Paying Agent.......................................... 19
Permanent Regulation S Global Security................ 19
</TABLE>
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Note: This table of contents shall not, for any purpose, be deemed to be
a part of the Indenture.
-iv-
<PAGE>
Page
----
<TABLE>
<S> <C> <C>
Permitted Interest Rate or Currency
Protection Agreement.................................. 20
Permitted Investment.................................. 20
Permitted Liens....................................... 20
Person................................................ 21
Pledge Account........................................ 21
Pledge Agreement...................................... 21
Pledged Securities.................................... 21
Predecessor Security.................................. 21
Preferred Dividends................................... 22
Preferred Stock....................................... 22
Purchase Agreement.................................... 22
Purchase Date......................................... 22
Purchase Money Debt................................... 22
readily marketable cash equivalents................... 22
Receivables........................................... 23
Receivables Sale...................................... 23
Redemption Date....................................... 23
Redemption Price...................................... 23
Regular Record Date................................... 23
Regulation S.......................................... 23
Related Person........................................ 23
Resale Registration Statement......................... 24
Responsible Officer................................... 24
Restricted Global Security............................ 24
Restricted Period..................................... 24
Restricted Securities................................. 24
Restricted Subsidiary................................. 24
Rule 144.............................................. 24
Rule 144A............................................. 25
Sale and Leaseback Transaction........................ 25
Securities............................................ 25
Securities Act........................................ 25
Security Register; Security Registrar................. 25
Significant Subsidiary................................ 25
Special Interest...................................... 25
Special Record Date................................... 25
Stated Maturity....................................... 25
Step-Down Date........................................ 26
Step-Up............................................... 26
Subordinated Debt..................................... 26
Subsidiary............................................ 27
Successor Security.................................... 27
</TABLE>
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Note: This table of contents shall not, for any purpose, be deemed to be
a part of the Indenture.
-v-
<PAGE>
Page
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<TABLE>
<S> <C> <C>
Tax Amount............................................ 27
Telecommunications Assets............................. 27
Telecommunications Business........................... 27
Temporary Regulation S Global
Security.............................................. 28
Transferee Securities Certification................... 28
Trustee............................................... 28
Trust Indenture Act................................... 28
Unrestricted Subsidiary............................... 28
Vendor Financing Facility............................. 29
Vice President........................................ 29
Voting Stock.......................................... 29
Wholly-Owned Restricted Subsidiary.................... 29
SECTION 102. Compliance Certificates and
Opinions............................................ 30
SECTION 103. Form of Documents Delivered to
Trustee............................................. 30
SECTION 104. Acts of Holders; Record Dates......................... 31
SECTION 105. Notices, Etc., to Trustee and
Issuers............................................. 34
SECTION 106. Notice to Holders; Waiver............................. 34
SECTION 107. The Application of Trust Indenture
Act................................................. 35
SECTION 108. Effect of Headings and
Table of Contents.................................. 35
SECTION 109. Successors and Assigns................................ 35
SECTION 110. Separability Clause................................... 36
SECTION 111. Benefits of Indenture................................. 36
SECTION 112. Governing Law......................................... 36
SECTION 113. Legal Holidays........................................ 36
</TABLE>
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Note: This table of contents shall not, for any purpose, be deemed to be
a part of the Indenture.
-vi-
<PAGE>
Page
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ARTICLE TWO
Security Forms
<TABLE>
<S> <C> <C>
SECTION 201. Forms Generally...................................... 36
SECTION 202. Form of Face of Security............................. 40
SECTION 203. Form of Reverse of Security.......................... 45
SECTION 204. Form of Trustee's Certificate of
Authentication.................................... 51
</TABLE>
ARTICLE THREE
The Securities
<TABLE>
<S> <C> <C>
SECTION 301. Title and Terms....................................... 52
SECTION 302. Denominations......................................... 53
SECTION 303. Execution, Authentication,
Delivery and Dating................................... 54
SECTION 304. Temporary Securities.................................. 55
SECTION 305. Global Securities; Registration,
Registration of Transfer and
Exchange.............................................. 56
SECTION 306. Mutilated, Destroyed, Lost and
Stolen Securities..................................... 66
SECTION 307. Payment of Interest; Interest Rights
Preserved............................................. 67
SECTION 308. Persons Deemed Owners................................. 68
SECTION 309. Cancellation.......................................... 69
SECTION 310. Computation of Interest............................... 69
</TABLE>
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Note: This table of contents shall not, for any purpose, be deemed to be
a part of the Indenture.
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<TABLE>
<S> <C> <C>
SECTION 311. CUSIP Numbers......................................... 69
<CAPTION>
ARTICLE FOUR
Satisfaction and Discharge
<S> <C> <C>
SECTION 401. Satisfaction and Discharge of
Indenture........................................... 70
SECTION 402. Application of Trust Money............................ 71
<CAPTION>
ARTICLE FIVE
Remedies
<S> <C> <C>
SECTION 501. Events of Default..................................... 71
SECTION 502. Acceleration of Maturity; Rescission
and Annulment........................................ 74
SECTION 503. Collection of Indebtedness and Suits
for Enforcement by Trustee........................... 75
SECTION 504. Trustee May File Proofs of Claim...................... 76
SECTION 505. Trustee May Enforce Claims Without
Possession of Securities............................. 77
SECTION 506. Application of Money Collected........................ 77
SECTION 507. Limitation on Suits................................... 78
SECTION 508. Unconditional Right of Holders to
Receive Principal, Premium and
Interest............................................. 78
SECTION 509. Restoration of Rights and Remedies.................... 79
SECTION 510. Rights and Remedies Cumulative........................ 79
SECTION 511. Delay or Omission Not Waiver.......................... 79
</TABLE>
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Note: This table of contents shall not, for any purpose, be deemed to be
a part of the Indenture.
-viii-
<PAGE>
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<TABLE>
<S> <C> <C>
SECTION 512. Control by Holders.................................... 80
SECTION 513. Waiver of Past Defaults............................... 80
SECTION 514. Undertaking for Costs................................. 81
SECTION 515. Waiver of Stay or Extension Laws...................... 81
<CAPTION>
ARTICLE SIX
The Trustee
<S> <C> <C>
SECTION 601. Certain Duties and Responsibilities................... 81
SECTION 602. Notice of Defaults.................................... 82
SECTION 603. Certain Rights of Trustee............................. 82
SECTION 604. Not Responsible for Recitals or
Issuance of Securities............................... 83
SECTION 605. May Hold Securities................................... 84
SECTION 606. Money Held in Trust................................... 84
SECTION 607. Compensation and Reimbursement........................ 84
SECTION 608. Disqualification; Conflicting
Interests............................................ 85
SECTION 609. Corporate Trustee Required;
Eligibility.......................................... 85
SECTION 610. Resignation and Removal; Appointment
of Successor......................................... 86
SECTION 611. Acceptance of Appointment by
Successor............................................ 87
SECTION 612. Merger, Conversion, Consolidation
or Succession to Business............................ 88
</TABLE>
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Note: This table of contents shall not, for any purpose, be deemed to be
a part of the Indenture.
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<TABLE>
<S> <C> <C>
SECTION 613. Preferential Collection of Claims
Against Issuers...................................... 88
SECTION 614. Appointment of Authenticating Agent................... 89
<CAPTION>
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and The Issuers
<S> <C> <C>
SECTION 701. Issuers to Furnish Trustee Names
and Addresses of Holders............................. 91
SECTION 702. Preservation of Information;
Communications to Holders............................ 91
SECTION 703. Reports by Trustee.................................... 92
SECTION 704. Reports by Issuers.................................... 92
SECTION 705. Officers' Certificate with Respect to
Change in Interest Rates............................. 92
<CAPTION>
ARTICLE EIGHT
Merger, Consolidation, Etc.
<S> <C> <C>
SECTION 801. Mergers, Consolidations and Certain
Sales of Assets...................................... 93
SECTION 802. Successor Substituted................................. 94
<CAPTION>
ARTICLE NINE
Supplemental Indentures
<S>
SECTION 901. Supplemental Indentures Without
Consent of Holders................................... 95
SECTION 902. Supplemental Indentures with
Consent of Holders................................... 96
</TABLE>
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Note: This table of contents shall not, for any purpose, be deemed to be
a part of the Indenture.
-x-
<PAGE>
Page
----
<TABLE>
<S> <C> <C>
SECTION 903. Execution of Supplemental Indentures.................. 97
SECTION 904. Effect of Supplemental Indentures..................... 97
SECTION 905. Conformity with Trust Indenture Act................... 97
SECTION 906. Reference in Securities to
Supplemental Indentures.............................. 97
<CAPTION>
ARTICLE TEN
Covenants
<S>
SECTION 1001. Payment of Principal, Premium and
Interest............................................. 98
SECTION 1002. Maintenance of Office or Agency....................... 98
SECTION 1003. Money for Security Payments to be
Held in Trust........................................ 99
SECTION 1004. Existence............................................. 100
SECTION 1005. Maintenance of Properties and
Insurance............................................ 101
SECTION 1006. Payment of Taxes and Other Claims..................... 101
SECTION 1007. Limitation on Consolidated Debt....................... 102
SECTION 1008. Limitation on Debt and Preferred
Stock of Restricted Subsidiaries..................... 105
SECTION 1009. Limitation on Restricted Payments..................... 107
SECTION 1010. Limitations on Dividend and Other
Payment Restrictions Affecting
Restricted Subsidiaries.............................. 109
SECTION 1011. Limitation on Liens................................... 111
</TABLE>
- --------------------
Note: This table of contents shall not, for any purpose, be deemed to be
a part of the Indenture.
-xi-
<PAGE>
Page
----
<TABLE>
<S> <C> <C>
SECTION 1012. Limitation on Sale and Leaseback
Transactions......................................... 112
SECTION 1013. Limitation on Asset Dispositions...................... 113
SECTION 1014. Limitation on Issuances and Sales
of Capital Stock of Restricted
Subsidiaries......................................... 115
SECTION 1015. Transactions with Affiliates and
Related Persons...................................... 115
SECTION 1016. Change of Control..................................... 116
SECTION 1017. Provision of Financial Information.................... 117
SECTION 1018. Limitations on Conduct of Business
of Capital........................................... 118
SECTION 1019. Pledge Agreement; Security............................ 118
SECTION 1020. Statement by Officers as to Default................... 120
SECTION 1021. Waiver of Certain Covenants........................... 121
<CAPTION>
ARTICLE ELEVEN
Redemption of Securities
<S> <C> <C>
SECTION 1101. Right of Redemption................................... 121
SECTION 1102. Applicability of Article.............................. 122
SECTION 1103. Election to Redeem; Notice to
Trustee.............................................. 122
SECTION 1104. Securities to Be Redeemed Pro Rata.................... 123
SECTION 1105. Notice of Redemption.................................. 123
SECTION 1106. Deposit of Redemption Price........................... 124
</TABLE>
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Note: This table of contents shall not, for any purpose, be deemed to be
a part of the Indenture.
-xii-
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Page
----
<TABLE>
<S> <C> <C>
SECTION 1107. Securities Payable on Redemption
Date................................................. 125
SECTION 1108. Securities Redeemed in Part........................... 125
<CAPTION>
ARTICLE TWELVE
Defeasance and Covenant Defeasance
SECTION 1201. Issuers' Option to Effect Defeasance
or Covenant Defeasance............................... 126
SECTION 1202. Defeasance and Discharge.............................. 126
SECTION 1203. Covenant Defeasance................................... 127
SECTION 1204. Conditions to Defeasance
or Covenant Defeasance............................... 127
SECTION 1205. Deposited Money and U.S.Government
Obligations to Be Held in Trust;
Other Miscellaneous Provisions....................... 129
SECTION 1206. Reinstatement......................................... 130
SECTION 1207. Repayment to Company.................................. 130
TESTIMONIUM........................................................... 132
SIGNATURES............................................................ 132
ACKNOWLEDGMENTS....................................................... 133
</TABLE>
- ----------------
Note: This table of contents shall not, for any purpose, be deemed to be
a part of the Indenture.
-xiii-
<PAGE>
INDENTURE, dated as of April 25, 1996 between NEXTLINK Communications,
L.L.C., a limited liability company formed under the laws of the State of
Washington (the "Company"), and NEXTLINK Capital, Inc., a Washington corporation
and a wholly-owned subsidiary of the Company ("Capital"), as joint and several
obligors (collectively, the "Issuers"), each having its principal office at 155
108th Avenue N.E., 8th Floor, Bellevue, Washington 98004, and United States
Trust Company of New York, duly organized and existing under the laws of the
State of New York, as Trustee (herein called the "Trustee").
RECITALS OF THE ISSUERS
The Issuers have duly authorized the creation of an issue of
$350,000,000 aggregate principal amount of their 12 1/2% Senior Notes due April
15, 2006 (the Securities") of substantially the tenor and amount hereinafter set
forth, and to provide therefor the Issuers have duly authorized the execution
and delivery of this Indenture. The Securities may consist of either or both of
Original Securities or Exchange Securities, each as defined herein. The
Original Securities and the Exchange Securities shall rank pari passu.
---- -----
All things necessary to make the Securities, when executed by the
Issuers and authenticated and delivered hereunder and duly issued by the
Issuers, the valid obligations of the Issuers, and to make this Indenture a
valid agreement of the Issuers, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
<PAGE>
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions.
-----------
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles (whether or not such is indicated herein) and, except as
otherwise herein expressly provided, the term "generally accepted
accounting principles" with respect to any computation required or
permitted hereunder shall mean such accounting principles as are generally
accepted as consistently applied by the Issuers at the date of such
computation; and
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally in Article Six, are defined in that
Article.
"Act", when used with respect to any Holder, has the meaning specified
in Section 104.
"Acquired Debt" means, with respect to any specified Person, (i) Debt
of any other Person existing at the time such Person merges with or into or
consolidates with or becomes a Restricted Subsidiary of such specified Person
and (ii) Debt secured by a Lien encumbering any asset acquired by such specified
Person, which Debt was not Incurred in anticipation of, and was outstanding
prior to, such merger, consolidation or acquisition.
-2-
<PAGE>
"Additional Step-Up" has the meaning set forth in the form of Security
contained in Section 202.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent Member" means any member of, or participant in, the Depository.
"Applicable Procedures" has the meaning set forth in Section
305(c)(2).
"Asset Disposition" by any Person means any transfer, conveyance,
sale, lease or other disposition by such Person or any of its Restricted
Subsidiaries (including a consolidation or merger or other sale of any such
Restricted Subsidiary with, into or to another Person in a transaction in which
such Restricted Subsidiary ceases to be a Restricted Subsidiary of the specified
Person, but excluding a disposition by a Restricted Subsidiary of such Person to
such Person or a Wholly-Owned Restricted Subsidiary of such Person or by such
Person to a Wholly-Owned Restricted Subsidiary of such Person) of (i) shares of
Capital Stock or other ownership interests of a Restricted Subsidiary of such
Person (other than as permitted by the provisions of Section 1008 or pursuant to
a transaction in compliance with Section 801), (ii) substantially all of the
assets of such Person or any of its Restricted Subsidiaries representing a
division or line of business (other than as part of a Permitted Investment) or
(iii) other assets or rights of such Person or any of its Restricted
Subsidiaries other than (A) in the ordinary course of business or (B) that
constitutes a Restricted Payment which is permitted by the provisions of Section
1009; provided that a transaction described in clause (i), (ii) and (iii) shall
--------
constitute an Asset Disposition only if the aggregate consideration for such
transfer, conveyance, sale, lease or other disposition is equal to $5 million or
more in any 12-month period.
"Attributable Value" means, as to any particular lease under which any
Person is at the time liable other than a Capital Lease Obligation, and at any
date as of which the amount thereof is to be determined, the total net amount
-3-
<PAGE>
of rent required to be paid by such Person under such lease during the initial
term thereof as determined in accordance with generally accepted accounting
principles, discounted from the last date of such initial term to the date of
determination at a rate per annum equal to the discount rate which would be
applicable to a Capital Lease Obligation with like term in accordance with
generally accepted accounting principles. The net amount of rent required to be
paid under any such lease for any such period shall be the aggregate amount of
rent payable by the lessee with respect to such period after excluding amounts
required to be paid on account of insurance, taxes, assessments, utility,
operating and labor costs and similar charges. In the case of any lease which is
terminable by the lessee upon the payment of penalty, such net amount shall also
include the lesser of the amount of such penalty (in which case no rent shall be
considered as required to be paid under such lease subsequent to the first date
upon which it may be so terminated) or the rent which would otherwise be
required to be paid if such lease is not so terminated. "Attributable Value"
means, as to a Capital Lease Obligation, the principal amount thereof.
"Bank Credit Agreement" means any one or more credit agreements (which
may include or consist of revolving credits) between the Company or any
Restricted Subsidiary of the Company and one or more banks or other financial
institutions providing financing for the business of the Company and its
Restricted Subsidiaries.
"Board of Directors" means, in respect of Capital, the board of
directors of Capital, or any duly authorized committee of that board.
"Board Resolution" means, in respect of Capital, a copy of a
resolution certified by the Secretary or an Assistant Secretary of Capital to
have been duly adopted by the Board of Directors of Capital and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The Borough of
Manhattan, The City of New York, New York are authorized or obligated by law or
executive order to close.
"Capital Lease Obligation" of any Person means the obligation to pay
rent or other payment amounts under a lease of (or other Debt arrangements
conveying the right to use) real or personal property of such Person which is
-4-
<PAGE>
required to be classified and accounted for as a capital lease or a liability on
the face of a balance sheet of such Person in accordance with generally accepted
accounting principles (a "Capital Lease"). The stated maturity of such
obligation shall be the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which such lease may be terminated
by the lessee without payment of a penalty. The principal amount of such
obligation shall be the capitalized amount thereof that would appear on the face
of a balance sheet of such Person in accordance with generally accepted
accounting principles.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock or
other equity participations, including partnership interests, whether general or
limited, of such Person.
"CEDEL" means Cedel Bank, Societe Anonyme (or any successor securities
clearing agency).
"Change of Control" has the meaning specified in Section 1016.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Equity" of any Person means Capital Stock of such Person that
is not Disqualified Stock, and a "sale of its Common Equity" includes any sale
effected by private sale or public offering.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture and thereafter "Company"
shall mean such successor Person.
"Consolidated Capital Ratio" of any Person as of any date means the
ratio of (i) the aggregate consolidated principal amount of Debt of such Person
then outstanding to (ii) the aggregate consolidated Capital Stock (other than
Disqualified Stock) and paid-in capital (other than in respect of Disqualified
Stock) of such Person as of such date.
-5-
<PAGE>
"Consolidated Cash Flow Available for Fixed Charges" for any period
means the Consolidated Net Income of the Company and its Restricted Subsidiaries
for such period increased by the sum of (i) Consolidated Interest Expense of the
Company and its Restricted Subsidiaries for such period, plus (ii) Consolidated
Income Tax Expense of the Company and its Restricted Subsidiaries for such
period, plus (iii) the consolidated depreciation and amortization expense
included in the income statement of the Company and its Restricted Subsidiaries
for such period, plus (iv) any non-cash expense related to the issuance to
employees of the Company or any Restricted Subsidiary of the Company of options
to purchase Capital Stock of the Company or such Restricted Subsidiary, plus (v)
any charge related to any premium or penalty paid in connection with redeeming
or retiring any Debt prior to its stated maturity; provided, however, that there
-------- -------
shall be excluded therefrom the Consolidated Cash Flow Available for Fixed
Charges (if positive) of any Restricted Subsidiary of the Company (calculated
separately for such Restricted Subsidiary in the same manner as provided above
for the Company) that is subject to a restriction which prevents the payment of
dividends or the making of distributions to the Company or another Restricted
Subsidiary of the Company to the extent of such restriction.
"Consolidated Income Tax Expense" for any period means the
consolidated provision for income taxes of the Company and its Restricted
Subsidiaries for such period calculated on a consolidated basis in accordance
with generally accepted accounting principles.
"Consolidated Interest Expense" means for any period the consolidated
interest expense included in a consolidated income statement (excluding interest
income) of the Company and its Restricted Subsidiaries for such period
calculated on a consolidated basis in accordance with generally accepted
accounting principles, including without limitation or duplication (or, to the
extent not so included, with the addition of), (i) the amortization of Debt
discounts; (ii) any payments or fees with respect to letters of credit, bankers'
acceptances or similar facilities; (iii) fees with respect to interest rate swap
or similar agreements or foreign currency hedge, exchange or similar agreements;
(iv) Preferred Stock dividends of the Company and its Restricted Subsidiaries
(other than dividends paid in shares of Preferred Stock that is not Disqualified
Stock) declared and paid or payable; (v) accrued Disqualified Stock dividends of
the Company and its Restricted Subsidiaries, whether or not declared or paid;
(vi) interest on Debt guaranteed by the Company and its Restricted Subsidiaries;
and (vii) the portion of any
-6-
<PAGE>
Capital Lease Obligation paid during such period that is allocable to interest
expense.
"Consolidated Net Income" for any period means the consolidated net
income (or loss) of the Company and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with generally accepted
accounting principles; provided that there shall be excluded therefrom (a) the
--------
net income (or loss) of any Person acquired by the Company or a Restricted
Subsidiary of the Company in a pooling-of-interests transaction for any period
prior to the date of such transaction, (b) the net income (or loss) of any
Person that is not a Restricted Subsidiary of the Company except to the extent
of the amount of dividends or other distributions actually paid to the Company
or a Restricted Subsidiary of the Company by such Person during such period, (c)
gains or losses on Asset Dispositions by the Company or its Restricted
Subsidiaries, (d) all extraordinary gains and extraordinary losses, (e) the
cumulative effect of changes in accounting principles, (f) non-cash gains or
losses resulting from fluctuations in currency exchange rates, (g) any non-cash
gain or loss realized on the termination of any employee pension benefit plan
and (h) the tax effect of any of the items described in clauses (a) through (g)
above; provided, further, that for purposes of any determination pursuant to the
-------- -------
provisions of Section 1009 there shall further be excluded therefrom the net
income (but not net loss) of any Restricted Subsidiary of the Company that is
subject to a restriction which prevents the payment of dividends or the making
of distributions to the Company or another Restricted Subsidiary of the Company
to the extent of such restriction.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with generally accepted accounting principles, less amounts
attributable to Disqualified Stock of such Person; provided that, with respect
--------
to the Company, adjustments following the date of this Indenture to the
accounting books and records of the Company in accordance with Accounting
Principles Board Opinions Nos. 16 and 17 (or successor opinions thereto) or
otherwise resulting from the acquisition of control of the Company by another
Person shall not be given effect to.
"Consolidated Tangible Assets" of any Person means the total amount of
assets (less applicable reserves and other properly deductible items) which
under generally accepted accounting principles would be included on a
consolidated balance sheet of such Person and its Restricted Subsidiaries after
deducting therefrom all goodwill, trade
-7-
<PAGE>
names, trademarks, patents, unamortized debt discount and expense and other like
intangibles, which in each case under generally accepted accounting principles
would be included on such consolidated balance sheet; provided that, with
--------
respect to the Company, adjustments following the date of this Indenture to the
accounting books and records of the Company in accordance with Accounting
Principles Board Opinions Nos. 16 and 17 (or successor opinions thereto) or
otherwise resulting from the acquisition of control of the Company by another
Person shall not be given effect to.
"Corporate Trust Office" means the principal office of the Trustee in
the Borough of Manhattan, The City of New York, New York, at which at any
particular time its corporate trust business shall be administered, which at the
date hereof is located at 114 West 47th Street, New York, New York 10036.
"corporation" means a corporation, association, company, limited
liability company, joint-stock company or business trust.
"Debt" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (i) every obligation of such Person for money borrowed, (ii)
every obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, including any such obligations Incurred in connection with
the acquisition of property, assets or businesses, (iii) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person, (iv)
every obligation of such Person issued or assumed as the deferred purchase price
of property or services (including securities repurchase agreements but
excluding trade accounts payable or accrued liabilities arising in the ordinary
course of business which are not overdue or which are being contested in good
faith), (v) every Capital Lease Obligation of such Person, (vi) all Receivables
Sales of such Person, together with any obligation of such Person to pay any
discount, interest, fees, indemnities, penalties, recourse, expenses or other
amounts in connection therewith, (vii) all obligations to redeem Disqualified
Stock issued by such Person, (viii) every obligation under Interest Rate and
Currency Protection Agreements of such Person and (ix) every obligation of the
type referred to in clauses (i) through (viii) of another Person and all
dividends of another Person the payment of which, in either case, such Person
has Guaranteed. The "amount" or "principal amount" of Debt at any time of
determination as used herein represented by
-8-
<PAGE>
(a) any Debt issued at a price that is less than the principal amount at
maturity thereof, shall be the amount of the liability in respect thereof
determined in accordance with generally accepted accounting principles, (b) any
Receivables Sale, shall be the amount of the unrecovered capital or principal
investment of the purchaser (other than the Company or a Wholly-Owned Restricted
Subsidiary of the Company) thereof, excluding amounts representative of yield or
interest earned on such investment, (c) any Disqualified Stock, shall be the
maximum fixed redemption or repurchase price in respect thereof, (d) any Capital
Lease Obligation, shall be determined in accordance with the definition thereof,
or (e) any Permitted Interest Rate or Currency Protection Agreement, shall be
zero. In no event shall Debt include any liability for taxes.
"Default" means an event that with the passing of time or the giving
of notice or both shall constitute an Event of Default.
"Defaulted Interest" has the meaning specified in Section 307.
"Depository" means, with respect to the Securities issuable or issued
in whole or in part in the form of one or more Global Securities, DTC for so
long as it shall be a clearing agency registered under the Exchange Act, or such
successor as the Company shall designate from time to time in an Officers'
Certificate delivered to the Trustee.
"Depository Securities Certification" has the meaning set forth in
Section 201.
"Disqualified Stock" of any Person means any Capital Stock of such
Person which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of such Person, any
Restricted Subsidiary of such Person or the holder thereof, in whole or in part,
on or prior to the final Stated Maturity of the Securities; provided, however,
-------- -------
that any Preferred Stock which would not constitute Disqualified Stock but for
provisions thereof giving holders thereof the right to require the Company to
repurchase or redeem such Preferred Stock upon the occurrence of a Change of
Control occurring prior to the final Stated Maturity of the Securities shall not
constitute Disqualified Stock if the change of control provisions applicable to
such Preferred Stock are no more favorable to the holders of such Preferred
Stock than the provisions
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applicable to the Securities contained in Section 1016 and such Preferred Stock
specifically provides that the Company will not repurchase or redeem any such
stock pursuant to such provisions prior to the Company's repurchase of such
Securities as are required to be repurchased pursuant to Section 1016.
"DTC" means The Depository Trust Company.
"Eagle River" means Eagle River Investments, L.L.C., a limited
liability company formed under the laws of the State of Washington.
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent in
foreign currency, whose debt is rated "A-3" or higher, "A-" or higher or "A-" or
higher according to Moody's Investors Service, Inc., Standard & Poor's Ratings
Group or Duff & Phelps Credit Rating Co. (or such similar equivalent rating by
at least one "nationally recognized statistical rating organization" (as defined
in Rule 436 under the Securities Act)) respectively, at the time as of which any
investment or rollover therein is made.
"Euroclear" means Chemical Bank, as operator of the Euroclear System.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
(or any successor act) and the rules and regulations thereunder.
"Exchange Offer" has the meaning set forth in the form of the
Securities contained in Section 202.
"Exchange Offer Registration Statement" has the meaning set forth in
the form of the Securities contained in Section 202.
"Exchange Security" means any Security issued in exchange for an
Original Security or Original Securities pursuant to the Exchange Offer or
otherwise registered under the Securities Act and any Security with respect to
which the next preceding Predecessor Security of such Security was an Exchange
Security, and their Successor Securities.
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"Expiration Date" has the meaning set forth in the definition of
"Offer to Purchase" in this Section 101.
"Global Security" means, as the context may require, any or all of the
Temporary Regulation S Global Security, the Permanent Regulation S Global
Security and the Restricted Global Security.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which obligations
or guarantee the full faith and credit of the United States is pledged and which
have a remaining weighted average life to maturity of not more than one year
from the date of Investment therein; provided that Government Securities which
--------
constitute Pledged Securities may have a remaining weighted average life to
maturity in excess of one year from the date of Investment therein.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing, or having the economic effect of
guaranteeing, any Debt of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, and including, without limitation, any
obligation of such Person, (i) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Debt or to purchase (or to advance or
supply funds for the purchase of) any security for the payment of such Debt,
(ii) to purchase property, securities or services for the purpose of assuring
the holder of such Debt of the payment of such Debt, or (iii) to maintain
working capital, equity capital or other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Debt (and "Guaranteed", "Guaranteeing" and "Guarantor" shall have meanings
correlative to the foregoing); provided, however, that the Guarantee by any
-------- -------
Person shall not include endorsements by such Person for collection or deposit,
in either case, in the ordinary course of business; and provided, further, that
-------- -------
the incurrence by a Restricted Subsidiary of the Company of a lien permitted
under clause (iv) of the second paragraph of Section 1011 shall not be deemed to
constitute a Guarantee by such Restricted Subsidiary of any Purchase Money Debt
of the Company secured thereby.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Incur" means, with respect to any Debt or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or
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otherwise become liable in respect of such Debt or other obligation including by
acquisition of Subsidiaries or the recording, as required pursuant to generally
accepted accounting principles or otherwise, of any such Debt or other
obligation on the balance sheet of such Person (and "Incurrence", "Incurred",
"Incurrable" and "Incurring" shall have meanings correlative to the foregoing);
provided, however, that a change in generally accepted accounting principles
- -------- -------
that results in an obligation of such Person that exists at such time becoming
Debt shall not be deemed an Incurrence of such Debt and that neither the accrual
of interest nor the accretion of original issue discount shall be deemed an
Incurrence of Debt; provided, further, however, that the Company may elect to
-------- ------- -------
treat all or any portion of revolving credit debt of the Company or a Subsidiary
as being incurred from and after any date beginning the date the revolving
credit commitment is extended to the Company or a Subsidiary, by furnishing
notice thereof to the Trustee, and any borrowings or reborrowings by the Company
or a Subsidiary under such commitment up to the amount of such commitment
designated by the Company as Incurred shall not be deemed to be new Incurrences
of Debt by the Company or such Subsidiary.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Initial Purchasers" means Goldman, Sachs & Co., Bear, Stearns & Co.
Inc., Salomon Brothers Inc and Toronto Dominion Securities (USA) Inc.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Rate or Currency Protection Agreement" of any Person means
any forward contract, futures contract, swap, option or other financial
agreement or arrangement (including, without limitation, caps, floors, collars
and similar agreements) relating to, or the value of which is dependent upon,
interest rates or currency exchange rates or indices.
"Investment" by any Person means any direct or indirect loan, advance
or other extension of credit or capital contribution (by means of transfers of
cash or other property to others or payments for property or services for the
account or use of others, or otherwise) to, or purchase or acquisition of
Capital Stock, bonds, notes, debentures or other securities or evidence of Debt
issued by, any other
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Person, including any payment on a Guarantee of any obligation of such other
Person, but excluding any loan, advance or extension of credit to an employee of
the Company or any of its Restricted Subsidiaries in the ordinary course of
business, accounts receivable and other commercially reasonable extensions of
trade credit.
"Issue Date" means the date on which the Securities are first
authenticated and delivered under this Indenture.
"Issuers Request" or "Issuers Order" means a written request or order
signed in the name of the Issuers by (i) the Chief Executive Officer, the
President, an Executive Vice President or a Vice President of each of the
Company and Capital, and (ii) the Treasurer, Assistant Treasurer or Secretary of
each of the Company and Capital, and delivered to the Trustee.
"Joint Venture" means a corporation, partnership or other entity
engaged in one or more Telecommunications Businesses as to which the Company
(directly or through one or more Restricted Subsidiaries) exercises managerial
control and in which the Company owns (i) a 50% or greater interest, or (ii) a
40% or greater interest, together with options or other contractual rights,
exercisable not more than seven years after the Company's initial Investment in
such Joint Venture, to increase its interest to not less than 50%.
"Lien" means, with respect to any property or assets, any mortgage or
deed of trust, pledge, hypothecation, assignment, Receivables Sale, deposit
arrangement, security interest, lien, charge, easement (other than any easement
not materially impairing usefulness or marketability), encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing).
"Managing Member" means Eagle River or Nextlink, Inc., or their
respective successors as Managing Members under the Company's third Amended and
Restated Limited Liability Company Agreement.
"Managing Member's Certificate" means a certificate signed by (i) the
Chief Executive Officer, President, an Executive Vice President or a Vice
President, and (ii) the Treasurer, Assistant Treasurer, Secretary or an
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Assistant Secretary, of a Managing Member and delivered to the Trustee and
containing the statements provided for in Section 102.
"Marketable Securities" means: (i) Government Securities; (ii) any
time deposit account, money market deposit and certificate of deposit maturing
not more than 270 days after the date of acquisition issued by, or time deposit
of, an Eligible Institution; (iii) commercial paper maturing not more than 270
days after the date of acquisition issued by a corporation (other than an
Affiliate of the Company) with a rating, at the time as of which any investment
therein is made, of "P-1" or higher according to Moody's Investors Service,
Inc., "A-1" or higher according to Standard & Poor's Ratings Group or "A-1" or
higher according to Duff & Phelps Credit Rating Co. (or such similar equivalent
rating by at least one "nationally recognized statistical rating organization"
(as defined in Rule 436 under the Securities Act)); (iv) any banker's
acceptances or money market deposit accounts issued or offered by an Eligible
Institution; (v) repurchase obligations with a term of not more than 7 days for
Government Securities entered into with an Eligible Institution; and (vi) any
fund investing exclusively in investments of the types described in clauses (i)
through (v) above.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Net Available Proceeds" from any Asset Disposition by any Person
means cash or readily marketable cash equivalents received (including by way of
sale or discounting of a note, installment receivable or other receivable, but
excluding any other consideration received in the form of assumption by the
acquiror of Debt or other obligations relating to such properties or assets)
therefrom by such Person, net of (i) all legal, title and recording tax
expenses, commissions and other fees and expenses Incurred and all federal,
state, provincial, foreign and local taxes (including taxes payable upon payment
or other distribution of funds from a foreign subsidiary to the Company or
another subsidiary of the Company) required to be accrued as a liability as a
consequence of such Asset Disposition, (ii) all payments made by such Person or
its Restricted Subsidiaries on any Debt which is secured by such assets in
accordance with the terms of any Lien upon or with respect to such assets or
which must by the terms of such Lien, or
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in order to obtain a necessary consent to such Asset Disposition or by
applicable law, be repaid out of the proceeds from such Asset Disposition, (iii)
all distributions and other payments made to minority interest holders in
Restricted Subsidiaries of such Person or joint ventures as a result of such
Asset Disposition, (iv) appropriate amounts to be provided by such Person or any
Restricted Subsidiary thereof, as the case may be, as a reserve in accordance
with generally accepted accounting principles against any liabilities associated
with such assets and retained by such Person or any Restricted Subsidiary
thereof, as the case may be, after such Asset Disposition, including, without
limitation, liabilities under any indemnification obligations and severance and
other employee termination costs associated with such Asset Disposition, in each
case as determined by a Managing Member, in its reasonable good faith judgment
evidenced by a Managing Member's Certificate filed with the Trustee; provided,
--------
however, that any reduction in such reserve within twelve months following the
- -------
consummation of such Asset Disposition will be treated for all purposes of this
Indenture and the Securities as a new Asset Disposition at the time of such
reduction with Net Available Proceeds equal to the amount of such reduction, and
(v) any consideration for an Asset Disposition (which would otherwise constitute
Net Available Proceeds) that is required to be held in escrow pending
determination of whether a purchase price adjustment will be made, but amounts
under this clause (v) shall become Net Available Proceeds at such time and to
the extent such amounts are released to such Person.
"Offer to Purchase" means a written offer (the "Offer") sent by the
Company by first class mail, postage prepaid, to each Holder at his address
appearing in the Security Register on the date of the Offer offering to purchase
up to the principal amount of Securities specified in such Offer at the purchase
price specified in such Offer (as determined pursuant to this Indenture). Unless
otherwise required by applicable law, the Offer shall specify an expiration date
(the "Expiration Date") of the Offer to Purchase which shall be, subject to any
contrary requirements of applicable law, not less than 30 days or more than 60
days after the date of such Offer and a settlement date (the "Purchase Date")
for purchase of Securities within five Business Days after the Expiration Date.
The Company shall notify the Trustee at least 15 Business Days (or such shorter
period as is acceptable to the Trustee) prior to the mailing of the Offer of the
Company's obligation to make an Offer to Purchase, and the Offer shall be mailed
by the Company or, at the Company's request, by the Trustee in the name and at
the expense of
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<PAGE>
the Company. The Offer shall contain information concerning the business of the
Company and its Subsidiaries which the Company in good faith believes will
enable such Holders to make an informed decision with respect to the Offer to
Purchase (which at a minimum will include (i) the most recent annual and
quarterly financial statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained in the documents
required to be filed with the Trustee pursuant to this Indenture (which
requirements may be satisfied by delivery of such documents together with the
Offer), (ii) a description of material developments in the Company's business
subsequent to the date of the latest of such financial statements referred to in
clause (i) (including a description of the events requiring the Company to make
the Offer to Purchase), (iii) if applicable, appropriate pro forma financial
information concerning the Offer to Purchase and the events requiring the
Company to make the Offer to Purchase and (iv) any other information required by
applicable law to be included therein). The Offer shall contain all instructions
and materials necessary to enable such Holders to tender Securities pursuant to
the Offer to Purchase. The Offer shall also state:
(a) the Section of this Indenture pursuant to which the Offer to
Purchase is being made;
(b) the Expiration Date and the Purchase Date;
(c) the aggregate principal amount of the Outstanding Securities
offered to be purchased by the Company pursuant to the Offer to Purchase
(including, if less than 100%, the manner by which such has been determined
pursuant to Section 1013 or 1016) (the "Purchase Amount");
(d) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Securities accepted for payment (as specified
pursuant to this Indenture) (the "Purchase Price");
(e) that the Holder may tender all or any portion of the Securities
registered in the name of such Holder and that any portion of a Security
tendered must be tendered in an integral multiple of $1,000 principal
amount;
(f) the place or places where Securities are to be surrendered for
tender pursuant to the Offer to Purchase;
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<PAGE>
(g) that interest (including Special Interest) on any Security not
tendered or tendered but not purchased by the Company pursuant to the Offer
to Purchase will continue to accrue;
(h) that on the Purchase Date the Purchase Price will become due and
payable upon each Security being accepted for payment pursuant to the Offer
to Purchase and that interest (including Special Interest) thereon shall
cease to accrue on and after the Purchase Date;
(i) that each Holder electing to tender a Security pursuant to the
Offer to Purchase will be required to surrender such Security at the place
or places specified in the Offer prior to the close of business on the
Expiration Date (such Security being, if the Company or the Trustee so
requires, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or his attorney duly authorized in writing);
(j) that Holders will be entitled to withdraw all or any portion of
Securities tendered if the Company (or the Paying Agent) receives not later
than the close of business on the Expiration Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Security the Holder tendered, the certificate
number of the Security the Holder tendered and a statement that such Holder
is withdrawing all or a portion of his tender;
(k) that (a) if Securities in an aggregate principal amount less than
or equal to the Purchase Amount are duly tendered and not withdrawn
pursuant to the Offer to Purchase, the Company shall purchase all such
Securities and (b) if Securities in an aggregate principal amount in excess
of the Purchase Amount are tendered and not withdrawn pursuant to the Offer
to Purchase, the Company shall purchase Securities having an aggregate
principal amount equal to the Purchase Amount on a pro rata basis (with
such adjustments as may be deemed appropriate so that only Securities in
denominations of $1,000 or integral multiples thereof shall be purchased);
(l) that in the case of any Holder whose Security is purchased only in
part, the Company shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge, a new
Security or Securities, of any authorized denomination
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as requested by such Holder, in an aggregate principal amount equal to and
in exchange for the unpurchased portion of the Security so tendered; and
(m) the CUSIP number or numbers of the Securities offered to be
purchased by the Company pursuant to the Offer to Purchase.
Any Offer to Purchase shall be governed by and effected in accordance with the
Offer for such Offer to Purchase.
"Officers' Certificate" means a certificate signed by (i) the Chief
Executive Officer, President, an Executive Vice President or a Vice President,
and (ii) the Treasurer, Assistant Treasurer, Secretary or an Assistant
Secretary, of the Company or of Capital, as applicable, and delivered to the
Trustee and containing the statements provided for in Section 102. One of the
officers signing an Officers' Certificate given pursuant to Section 1020 shall
be the principal executive, financial or accounting officer of the Company and
of Capital.
"Opinion of Counsel" means a written opinion of legal counsel, who may
be counsel for the Company or Capital, and who shall be acceptable to the
Trustee, and containing the statements provided for in Section 102.
"Original Securities" means Securities that are not Exchange
Securities.
"Other Securities" has the meaning set forth in Section 201.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture (including, as of such date, all Securities represented by
Global Securities authenticated and delivered under this Indenture), except the
reduced portion or portions of any Global Security, as such reduction or
reductions shall have been endorsed on such Global Security by the Trustee as
provided herein and, except:
------
(i) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Issuers) in trust or set aside and
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segregated in trust by the Issuers (if the Issuers shall act as their own
Paying Agents) for the Holders of such Securities; provided that, if such
--------
Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture; and
(iii) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Issuers;
provided, however, that in determining whether the Holders of the requisite
- -------- -------
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Issuers or any other obligor upon the Securities or any Affiliate of the
Issuers or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee knows to be so owned shall
be so disregarded. Securities so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction of
the Trustee the pledgee's right so to act with respect to such Securities and
that the pledgee is not an Issuer or any other obligor upon the Securities or
any Affiliate of the Issuers or of such other obligor.
"Owner Securities Certification" has the meaning set forth in Section
201.
"Paying Agent" means any Person authorized by the Issuers to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Issuers. The Trustee is hereby authorized by the Issuers to act as a
"Paying Agent" for the purposes of this Indenture, until such time as the
Issuers notify the Trustee in writing that such authorization is revoked.
"Permanent Regulation S Global Security" has the meaning set forth in
Section 201.
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"Permitted Interest Rate or Currency Protection Agreement" of any
Person means any Interest Rate or Currency Protection Agreement entered into
with one or more financial institutions in the ordinary course of business that
is designed to protect such Person against fluctuations in interest rates or
currency exchange rates with respect to Debt Incurred and which shall have a
notional amount no greater than the payments due with respect to the Debt being
hedged thereby and not for purposes of speculation.
"Permitted Investment" means (i) any Investment in a Joint Venture
(including the purchase or acquisition of any Capital Stock of a Joint Venture),
provided the aggregate amount of all outstanding Investments pursuant to this
clause (i) in Joint Ventures in which the Company owns, directly or indirectly,
a less than 50% interest shall not exceed $25 million, (ii) any Investment in
any Person as a result of which such Person becomes a Restricted Subsidiary, or,
subject to the proviso to clause (i) of this definition, becomes a Joint Venture
of the Company, (iii) any Investment in Marketable Securities, (iv) Investments
in Permitted Interest Rate or Currency Protection Agreements, and (v)
Investments made as a result of the receipt of noncash consideration from an
Asset Disposition that was made pursuant to and in compliance with Section 1013
of this Indenture.
"Permitted Liens" means (a) Liens for taxes, assessments, governmental
charges or claims which are not yet delinquent or which are being contested in
good faith by appropriate proceedings, if a reserve or other appropriate
provision, if any, as shall be required in conformity with generally accepted
accounting principles shall have been made therefor; (b) other Liens incidental
to the conduct of the Company's and its Restricted Subsidiaries' business or the
ownership of its property and assets not securing any Debt, and which do not in
the aggregate materially detract from the value of the Company's and its
Restricted Subsidiaries' property or assets when taken as a whole, or materially
impair the use thereof in the operation of its business; (c) Liens with respect
to assets of a Restricted Subsidiary granted by such Restricted Subsidiary to
the Company to secure Debt owing to the Company; (d) pledges and deposits made
in the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of statutory obligations (including to
secure government contracts); (e) deposits made to secure the performance of
tenders, bids, leases, and other obligations of like nature incurred in the
ordinary course of business (exclusive of obligations for the payment of
borrowed money); (f) zoning restrictions, servitudes,
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easements, rights-of-way, restrictions and other similar charges or encumbrances
incurred in the ordinary course of business which, in the aggregate, do not
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the business of the Company or its Restricted
Subsidiaries; (g) Liens arising out of judgments or awards against the Company
or any Restricted Subsidiary with respect to which the Company or such
Restricted Subsidiary is prosecuting an appeal or proceeding for review and the
Company or such Restricted Subsidiary is maintaining adequate reserves in
accordance with generally accepted accounting principles; (h) any interest or
title of a lessor in the property subject to any lease other than a Capital
Lease; and (i) any statutory warehousemen's, materialmen's or other similar
Liens for sums not then due and payable (or which, if due and payable, are being
contested in good faith and with respect to which adequate reserves are being
maintained to the extent required by generally accepted accounting principles).
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof or any other entity.
"Pledge Account" means an account established with the Trustee
pursuant to the terms of the Pledge Agreement for the deposit of the Pledged
Securities purchased by the Company with a portion of the net proceeds from the
sale of the Securities to the Initial Purchasers.
"Pledge Agreement" means the Collateral Pledge and Security Agreement,
dated as of the date of this Indenture, by and between the Trustee and the
Company, governing the disbursement of funds from the Pledge Account.
"Pledged Securities" means the securities purchased by the Company with a
portion of the net proceeds from the sale of the Securities, which shall
initially consist of Government Securities, to be deposited in the Pledge
Account.
"Predecessor Security" of any particular Security means every previous
Security issued before, and evidencing all or a portion of the same debt as that
evidenced by, such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 306 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall
be deemed to
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evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"Preferred Dividends" for any Person means for any period the quotient
determined by dividing the amount of dividends and distributions paid or accrued
(whether or not declared) on Preferred Stock of such Person during such period
calculated in accordance with generally accepted accounting principles, by 1
minus the maximum statutory income tax rate then applicable to the Company
(expressed as a decimal).
"Preferred Stock" of any Person means Capital Stock of such Person of
any class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of such Person.
"Purchase Agreement" means the Purchase Agreement, dated as of April
18, 1996, between the Issuers and the Initial Purchasers, as such agreement may
be amended from time to time.
"Purchase Date" has the meaning set forth in the definition of "Offer
to Purchase" in this Section 101.
"Purchase Money Debt" means (i) Acquired Debt Incurred in connection
with the acquisition of Telecommunications Assets and (ii) Debt of the Company
or of any Restricted Subsidiary of the Company (including, without limitation,
Debt represented by Capital Lease Obligations, Vendor Financing Facilities,
mortgage financings and purchase money obligations) Incurred for the purpose of
financing all or any part of the cost of construction, acquisition or
improvement by the Company or any Restricted Subsidiary of the Company or any
Joint Venture of any Telecommunications Assets of the Company, any Restricted
Subsidiary of the Company or any Joint Venture, and including any related notes,
Guarantees, collateral documents, instruments and agreements executed in
connection therewith, as the same may be amended, supplemented, modified or
restated from time to time.
"readily marketable cash equivalents" means (i) marketable securities
issued or directly and unconditionally guaranteed by the United States
Government or issued by any agency thereof and backed by the full faith and
credit of the United States; (ii) marketable direct obligations issued by any
state of the United States of America or any poli-
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tical subdivision of any such state or any public instrumentality thereof and,
at the time of acquisition, having the highest rating obtainable from either
Standard & Poor's Rating Group or Moody's Investors Service, Inc.; (iii)
commercial paper maturing no more than 180 days from the date of acquisition
thereof and, at the time of acquisition, having a rating of P-1 according to
Moody's Investors Service, Inc., "A-1" or higher according to Standard & Poor's
Ratings Group or "A-1" or higher according to Duff & Phelps Credit Rating Co.
(or such similar equivalent rating by at least one "nationally recognized
statistical rating organization" (as defined in Rule 436 under the Securities
Act)); and (iv) certificates of deposit or bankers' acceptance maturing within
one year from the date of acquisition thereof issued by any commercial bank
organized under the laws of the United States of America or any state thereof or
the District of Columbia having unimpaired capital and surplus of not less than
$100,000,000.
"Receivables" means receivables, chattel paper, instruments, documents
or intangibles evidencing or relating to the right to payment of money in
respect of the sale of goods or services.
"Receivables Sale" of any Person means any sale of Receivables of such
Person (pursuant to a purchase facility or otherwise), other than in connection
with a disposition of the business operations of such Person relating thereto or
a disposition of defaulted Receivables for purpose of collection and not as a
financing arrangement.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the March 15 or September 15 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Related Person" of any Person means any other Person directly or
indirectly owning (a) 10% or more of the Outstanding Common Equity of such
Person (or, in the case of
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a Person that is not a corporation, 10% or more of the equity interest in such
Person) or (b) 10% or more of the combined voting power of the Voting Stock of
such Person.
"Resale Registration Statement" has the meaning set forth in the Form
of the Securities contained in Section 202.
"Responsible Officer", when used with respect to the Trustee, means
the chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, any trust officer or assistant trust officer, the controller
or any assistant controller or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Global Security" has the meaning set forth in Section 201.
"Restricted Period" has the meaning set forth in Section 201.
"Restricted Securities" means the Restricted Global Security, Other
Securities and any Successor Security, other than (i) any Security issued upon a
transfer or exchange for which a certificate substantially in the form set forth
in (a) Annex D is required to be provided and is provided pursuant to Section
305(c)(3), (b) Annex E is required to be provided and is provided pursuant to
Section 305(c)(4) or (c) Annex G-2 is required to be provided and is provided
pursuant to Section 305(c)(6), (ii) any Exchange Security and (iii) any Security
issued in exchange for or in lieu of any Security specified in Clause (i) or
(ii) or any Security issued in exchange therefor or in lieu thereof.
"Restricted Subsidiary" of the Company means any Subsidiary, whether
existing on or after the date of this Indenture, unless such Subsidiary is an
Unrestricted Subsidiary.
"Rule 144" means Rule 144 under the Securities Act (or any successor
provision), as it may be amended from time to time.
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"Rule 144A" means the Rule 144A under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Sale and Leaseback Transaction" of any Person means an arrangement
with any lender or investor or to which such lender or investor is a party
providing for the leasing by such Person of any property or asset of such Person
which has been or is being sold or transferred by such Person more than 365 days
after the acquisition thereof or the completion of construction or commencement
of operation thereof to such lender or investor or to any person to whom funds
have been or are to be advanced by such lender or investor on the security of
such property or asset. The stated maturity of such arrangement shall be the
date of the last payment of rent or any other amount due under such arrangement
prior to the first date on which such arrangement may be terminated by the
lessee without payment of a penalty.
"Securities" means the Exchange Securities and the Original
Securities.
"Securities Act" means the Securities Act of 1933 and any statute
successor thereto, in each case as amended from time to time.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305(b).
"Significant Subsidiary" means a Restricted Subsidiary that is a
"significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under the
Securities Act and the Exchange Act.
"Special Interest" has the meaning set forth in the form of Security
contained in Section 202. Unless the context otherwise requires, references
herein to "interest" on the Securities shall include Special Interest.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest, as the case may be, is due and payable.
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"Step-Down Date" has the meaning set forth in the form of the Security
contained in Section 202.
"Step-Up" has the meaning set forth in the form of the Security
contained in Section 202.
"Subordinated Debt" means Debt of the Company as to which the payment
of principal of (and premium, if any) and interest and other payment obligations
in respect of such Debt shall be subordinate to the prior payment in full of the
Securities to at least the following extent: (i) no payments of principal of (or
premium, if any) or interest on or otherwise due in respect of such Debt may be
permitted for so long as any default in the payment of principal (or premium, if
any) or interest on the Securities exists; (ii) in the event that any other
default that with the passing of time or the giving of notice, or both, would
constitute an Event of Default exists with respect to the Securities, upon
notice by 25% or more in principal amount of the Securities to the Trustee, the
Trustee shall have the right to give notice to the Company and the holders of
such Debt (or trustees or agents therefor) of a payment blockage, and thereafter
no payments of principal of (or premium, if any) or interest on or otherwise due
in respect of such Debt may be made for a period of 179 days from the date of
such notice or for the period until such default has been cured or waived or
ceased to exist and any acceleration of the Securities has been rescinded or
annulled, whichever period is shorter (which Debt may provide (A) no new period
of payment blockage may be commenced by a payment blockage notice unless and
until 360 days have elapsed since the effectiveness of the immediately prior
notice, (B) no nonpayment default that existed or was continuing on the date of
delivery of any payment blockage notice to such holders (or such agents or
trustees) shall be, or be made, the basis for a subsequent payment blockage
notice and (C) failure of the Company to make payment on such Debt when due or
within any applicable grace period, whether or not on account of such payment
blockage provisions, shall constitute an event of default thereunder); and (iii)
such Debt may not (x) provide for payments of principal of such Debt at the
stated maturity thereof or by way of a sinking fund applicable thereto or by way
of any mandatory redemption, defeasance, retirement or repurchase thereof by the
Company (including any redemption, retirement or repurchase which is contingent
upon events or circumstances, but excluding any retirement required by virtue of
acceleration of such Debt upon an event of default thereunder), in each case
prior to the final Stated Maturity of the Securities or (y) permit redemption or
other retirement (including pursuant to an offer to purchase made
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by the Company) of such other Debt at the option of the holder thereof prior to
the final Stated Maturity of the Securities, other than a redemption or other
retirement at the option of the holder of such Debt (including pursuant to an
offer to purchase made by the Company) which is conditioned upon a change of
control of the Company pursuant to provisions substantially similar to those of
Section 1016 (and which shall provide that such Debt will not be repurchased
pursuant to such provisions prior to the Company's repurchase of the Securities
required to be repurchased by the Company pursuant to the provisions of Section
1016.
"Subsidiary" of any Person means (i) a corporation more than 50% of
the combined voting power of the outstanding Voting Stock of which is owned,
directly or indirectly, by such Person or by one or more other Subsidiaries of
such Person or by such Person and one or more Subsidiaries thereof or (ii) any
other Person (other than a corporation) in which such Person, or one or more
other Subsidiaries of such Person or such Person and one or more other
Subsidiaries thereof, directly or indirectly, has at least a majority ownership
and power to direct the policies, management and affairs thereof.
"Successor Security" of any particular Security means every Security
issued after, and evidencing all or a portion of the same debt as that evidenced
by, such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 306 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"Tax Amount" means for each fiscal year of any Person (a) the
aggregate amount of income or gain of such Person over the aggregate amount of
loss, deduction or expense of such Person multiplied by (b) the maximum marginal
federal and applicable state income tax rates.
"Telecommunications Assets" means all assets, rights (contractual or
otherwise) and properties, whether tangible or intangible, used or intended for
use in connection with a Telecommunications Business.
"Telecommunications Business" means the business of (i) transmitting,
or providing services relating to the transmission of, voice, video or data
through owned or leased transmission facilities, (ii) creating, developing or
marketing communications related network equipment, software
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and other devices for use in a Telecommunication Business or (iii) evaluating,
participating or pursuing any other activity or opportunity that is primarily
related to those identified in (i) or (ii) above and shall, in any event,
include all businesses in which the Company or any of its Subsidiaries are
engaged on the Issue Date; provided that the determination of what constitutes a
--------
Telecommunications Business shall be made in good faith by the Managing Member
of the Company, which determination shall be conclusive.
"Temporary Regulation S Global Security" has the meaning set forth in
Section 201.
"Transferee Securities Certification" has the meaning set forth in
Section 305(c)(2).
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided, however,
-------- -------
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"Unrestricted Subsidiary" means (1) any Subsidiary of the Company
designated as such by the Managing Member of the Company as set forth below
where (a) neither the Company nor any of its other Subsidiaries (other than
another Unrestricted Subsidiary) (i) provides credit support for, or Guarantee
of, any Debt of such Subsidiary or any Subsidiary of such Subsidiary (including
any undertaking, agreement or instrument evidencing such Debt) or (ii) is
directly or indirectly liable for any Debt of such Subsidiary or any Subsidiary
of such Subsidiary, and (b) no default with respect to any Debt of such
Subsidiary or any Subsidiary of such Subsidiary (including any right which the
holders thereof may have to take enforcement action against such Subsidiary)
would permit (upon notice, lapse of time or both) any holder of any other Debt
of the Company and its Restricted Subsidiaries to declare a default on such
other Debt or cause the payment thereof to be accelerated or payable prior to
its final scheduled maturity and (2) any Subsidiary of an Unrestricted
Subsidiary. The Managing Member may designate any Subsidiary to be an
Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of,
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or owns or holds any Lien on any property of, any other Subsidiary of the
Company which is not a Subsidiary of the Subsidiary to be so designated or
otherwise an Unrestricted Subsidiary, provided that either (x) the Subsidiary to
--------
be so designated has total assets of $1,000 or less or (y) immediately after
giving effect to such designation, the Company could incur at least $1.00 of
additional Debt pursuant to the first paragraph of Section 1007 and provided,
--------
further, that the Company could make a Restricted Payment in an amount equal to
- -------
the greater of the fair market value and the book value of such Subsidiary
pursuant to Section 1009 and such amount is thereafter treated as a Restricted
Payment for the purpose of calculating the aggregate amount available for
Restricted Payments thereunder. The Managing Member may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary, provided that,
--------
immediately after giving effect to such designation, the Company could incur at
least $1.00 of additional Debt pursuant to the first paragraph of Section 1007.
"Vendor Financing Facility" means any agreements between the Company
or a Restricted Subsidiary of the Company and one or more vendors or lessors of
equipment to the Company or any of its Restricted Subsidiaries (or any affiliate
of any such vendor or lessor) providing financing for the acquisition by the
Company or any such Restricted Subsidiary of equipment from any such vendor or
lessor.
"Vice President", when used with respect to the Company, Capital or
the Trustee, means any vice president, whether or not designated by a number or
a word or words added before or after the title "vice president".
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly-Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person 99% or more of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly-Owned Restricted
Subsidiaries of such Person or by such Person and one or more Wholly-Owned
Restricted Subsidiaries of such Person.
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SECTION 102. Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Issuers to the Trustee to take
any action under any provision of this Indenture, the Issuers shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act and under this Indenture. Each such certificate or opinion, and
any certificate evidencing a determination required to be made by a Managing
Member of the Company under this Indenture, shall be given in the form of an
Officers' Certificate, if to be given by an officer of the Issuers, a Managing
Member's Certificate, if to be given by a Managing Member or an Opinion of
Counsel, if to be given by counsel, and shall comply with the requirements of
the Trust Indenture Act and any other requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one docu-
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ment, but one such Person may certify or give an opinion with respect to some
matters and one or more other such Persons as to other matters, and any such
Person may certify or give an opinion as to such matters in one or several
documents.
Any certificate of an officer of the Issuers may be based, insofar as
it relates to legal matters, upon an opinion of counsel submitted therewith,
unless such officer knows, or in the exercise of reasonable care should know,
that the opinion with respect to the matters upon which his certificate is based
is erroneous. Any opinion of counsel may be based, insofar as it relates to
factual matters, upon a certificate of an officer or officers of the Issuers
submitted therewith stating the information on which counsel is relying, unless
such counsel knows, or in the exercise of reasonable care should know, that the
certificate with respect to such matters is erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders; Record Dates.
-----------------------------
Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Issuers. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 601) conclusive in favor of the Trustee and the Issuers,
if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such
instrument or writing pursuant to this Section 104 may be proved by the
affidavit of a witness of such execution or by a certificate of a notary public
or other officer authorized by law to take acknowledgments of
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deeds, certifying that the individual signing such instrument or writing
acknowledged to him the execution thereof. Where such execution is by a signer
acting in a capacity other than his individual capacity, such certificate or
affidavit shall also constitute sufficient proof of his authority. The fact and
date of the execution of any such instrument or writing, or the authority of the
Person executing the same, may also be proved in any other manner which the
Trustee deems sufficient.
The ownership of Securities shall be proved by the Security Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Issuers in
reliance thereon, whether or not notation of such action is made upon such
Security.
The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to give, make or take
any request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Indenture to be given, made or taken by
Holders of Securities, provided that the Company may not set a record date for,
--------
and the provisions of this paragraph shall not apply with respect to, the giving
or making of any notice, declaration, request or direction referred to in the
next paragraph. If not set by the Company prior to the first solicitation of a
Holder made by any Person in respect of any such matter referred to in the
foregoing sentence, the record date for any such matter shall be the 30th day
(or, if later, the date of the most recent list of Holders required to be
provided pursuant to Section 701) prior to such first solicitation. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities on such record date, and no other Holders, shall be entitled to take
the relevant action, whether or not such Holders remain Holders after such
record date; provided that no such action shall be effective hereunder unless
--------
taken on or prior to the applicable Expiration Date by Holders of the requisite
principal amount of Outstanding Securities on such record date. Nothing in this
paragraph shall be construed to prevent the Issuers from setting a new record
date for any action for which a record date has previously been set pursuant to
this paragraph (whereupon the record date previously set shall
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automatically and with no action by any Person be cancelled and of no effect),
and nothing in this paragraph shall be construed to render ineffective any
action taken by Holders of the requisite principal amount of Outstanding
Securities on the date such action is taken. Promptly after any record date is
set pursuant to this paragraph, the Issuers, at their own expense, shall cause
notice of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Trustee in writing and to each Holder of
Securities in the manner set forth in Section 106.
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to join in the giving
or making of (i) any Notice of Default, (ii) any declaration of acceleration
referred to in Section 502, (iii) any request to institute proceedings referred
to in Section 507(2) or (iv) any direction referred to in Section 512. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities on such record date, and no other Holders, shall be entitled to join
in such notice, declaration, request or direction, whether or not such Holders
remain Holders after such record date; provided that no such action shall be
--------
effective hereunder unless taken on or prior to the applicable Expiration Date
by Holders of the requisite principal amount of Outstanding Securities on such
record date. Nothing in this paragraph shall be construed to prevent the Trustee
from setting a new record date for any action for which a record date has
previously been set pursuant to this paragraph (whereupon the record date
previously set shall automatically and with no action by any Person be cancelled
and of no effect), and nothing in this paragraph shall be construed to render
ineffective any action taken by Holders of the requisite principal amount of
Outstanding Securities on the date such action is taken. Promptly after any
record date is set pursuant to this paragraph, the Trustee, at the Issuers'
expense, shall cause notice of such record date, the proposed action by Holders
and the applicable Expiration Date to be given to the Issuers in writing and to
each Holder of Securities in the manner set forth in Section 106.
With respect to any record date set pursuant to this Section, the
party hereto which sets such record dates may designate any day as the
"Expiration Date" and from time to time may change the Expiration Date to any
earlier or later day; provided that no such change shall be effective unless
--------
notice of the proposed new Expiration Date is given to the other party hereto in
writing, and to each Holder of Securities in the manner set forth in Section
106, on or prior to the existing Expiration Date. If an Expiration
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Date is not designated with respect to any record date set pursuant to this
Section, the party hereto which set such record date shall be deemed to have
initially designated the 180th day after such record date as the Expiration Date
with respect thereto, subject to its right to change the Expiration Date as
provided in this paragraph. Notwithstanding the foregoing, no Expiration Date
shall be later than the 180th day after the applicable record date.
Without limiting the foregoing, a Holder entitled hereunder to take
any action hereunder with regard to any particular Security may do so with
regard to all or any part of the principal amount of such Security or by one or
more duly appointed agents each of which may do so pursuant to such appointment
with regard to all or any part of such principal amount.
SECTION 105. Notices, Etc., to Trustee and Issuers.
-------------------------------------
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Issuers shall be sufficient
for every purpose hereunder if delivered in writing to the Trustee at its
Corporate Trust Office, Attention: Corporate Trust Administration, or
(2) the Issuers by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Issuers
addressed to the Company at the address of its principal office specified
in the first paragraph of this instrument or at any other address
previously furnished in writing to the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if (i) in the case of a Global Security, in writing by facsimile and/or by
overnight mail to the Depository, and (ii) in the case of securities other than
Global Securities, in writing and mailed, first-class postage prepaid, to each
Holder affected by such event, at his address as it appears in the
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Security Register, not later than the latest date (if any), and not earlier than
the earliest date (if any), prescribed for the giving of such notice. In any
case where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other Holders. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 107. The Application of Trust Indenture Act.
--------------------------------------
The Trust Indenture Act shall apply as a matter of contract to this
Indenture for purposes of interpretation, construction and defining the rights
and obligations hereunder. If any provision hereof limits, qualifies or
conflicts with a provision of the Trust Indenture Act that is required under
such Act to be a part of and govern this Indenture, the latter provision shall
control. If any provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or to be
excluded, as the case may be.
SECTION 108. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Issuers shall
bind their successors and assigns, whether so expressed or not.
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SECTION 110. Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders of Securities, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
SECTION 112. Governing Law.
-------------
This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 113. Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption Date, Purchase
Date or Stated Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal (and premium, if any) need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date, Redemption Date, Purchase
Date or at the Stated Maturity, provided that no interest shall accrue for the
--------
period from and after such Interest Payment Date, Redemption Date, Purchase Date
or Stated Maturity, as the case may be.
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally.
---------------
The Original Securities, the Exchange Securities and the Trustee's
certificates of authentication thereof shall be in substantially the forms set
forth in this
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Article, with such appropriate legends, insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by their execution of the
Securities.
The definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these methods on steel engraved borders or may
be produced in any other manner all as determined by the officers executing such
Securities, as evidenced by their execution of such Securities.
In certain cases described elsewhere herein, the legends set forth in
the first five paragraphs of Section 202 may be omitted from Securities issued
hereunder.
Securities offered and sold in their initial distribution in reliance
on Regulation S shall be initially issued in the form of temporary Global
Securities in fully registered form without interest coupons, substantially in
the form of Security set forth in Sections 202 and 203, with such applicable
legends as are provided for in Section 202. Such temporary Global Securities
shall be registered in the name of the Depository or its nominee and deposited
with the Trustee, at its Corporate Trust Office, as custodian for the
Depository, duly executed by the Issuers and authenticated by the Trustee as
hereinafter provided, for credit by the Depository to the respective accounts of
the beneficial owners of the Securities represented thereby (or such other
accounts as they may direct), provided that upon such deposit all such
Securities shall be credited to or through accounts maintained at the Depository
by or on behalf of Euroclear or CEDEL. Until such time as the Restricted Period
(as defined below) shall have expired, such temporary Global Securities,
together with their Successor Securities which are Global Securities other than
the Restricted Global Security, shall be referred to herein as a "Temporary
Regulation S Global Security". After such time as the Restricted Period shall
have expired and the certifications referred to below in the next succeeding
paragraph shall have been provided, interests in such Temporary Regulation S
Global Securities shall be exchanged for interests in like Global Securities,
referred to herein collectively as the "Permanent Regulation S Global Security",
substantially in the form of Security set forth in Sections 202 and 203, with
such applicable legends as are provided for in Section 202.
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<PAGE>
Such Permanent Regulation S Global Securities shall be registered in the name of
the Depository or its nominee and deposited with the Trustee, at its Corporate
Trust Office, as custodian for the Depository, duly executed by the Issuers and
authenticated by the Trustee as hereinafter provided, for credit to the
respective accounts of the beneficial owners of the Securities represented
thereby (or such other accounts as they may direct). The aggregate principal
amount of the Temporary Regulation S Global Security or the Permanent Regulation
S Global Security may be increased or decreased from time to time by adjustments
made on the records of the Trustee, as custodian for the Depository, as
hereinafter provided. As used herein, the term "Restricted Period" means the
period of 40 days commencing on the day after the latest of (a) the day on which
the Securities are first offered to persons other than distributors (as defined
in Regulation S) in reliance on Regulation S and (b) the Closing Date.
Interests in a Temporary Regulation S Global Security may be exchanged
for interests in a Permanent Regulation S Global Security only after (a) the
expiration of the Restricted Period, (b) delivery by a beneficial owner of an
interest therein to Euroclear or CEDEL of a written certification (an "Owner
Securities Certification") substantially in the form of Annex A hereto, and (c)
upon delivery by Euroclear or CEDEL to the Trustee of a written certification (a
"Depository Securities Certification") substantially in the form attached hereto
as Annex B. Upon satisfaction of such conditions, the Trustee will exchange the
portion of the Temporary Regulation S Global Security covered by such
certification for interests in a Permanent Regulation S Global Security. The
delivery by such Holder of a beneficial interest in such Temporary Regulation S
Global Security of such certification shall constitute an irrevocable
instruction by such holder to Euroclear or CEDEL, as the case may be, to
exchange such Holder's beneficial interest in the Temporary Regulation S Global
Security for a beneficial interest in the Permanent Regulation S Global Security
upon the expiration of the Restricted Period in accordance with the next
succeeding paragraph.
Upon:
(i) the expiration of the Restricted Period;
(ii) receipt by Euroclear or CEDEL, as the case may be, of Owner
Securities Certifications described in the preceding paragraph;
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<PAGE>
(iii) receipt by the Depository of:
(1) written instructions given in accordance with the Applicable
Procedures from an Agent Member directing the Depository to credit or cause to
be credited to a specified Agent Member's account a beneficial interest in a
Permanent Regulation S Global Security in a principal amount equal to that of
the beneficial interest in a corresponding Temporary Regulation S Global
Security for which the necessary certifications have been delivered; and
(2) a written order given in accordance with the Applicable
Procedures containing information regarding the account of the Agent Member, and
the Euroclear or CEDEL account for which such Agent Member's account is held, to
be credited with, and the account of the Agent Member to be debited for, such
beneficial interest; and
(iv) receipt by the Trustee of notification from the Depository of the
transactions described in (iii) above and from Euroclear or CEDEL, as the case
may be, of Depository Securities Certifications, the Trustee, as Security
Registrar, shall instruct the Depository to reduce the principal amount of such
Temporary Regulation S Global Security and to increase the principal amount of
such Permanent Regulation S Global Security, by the principal amount of the
beneficial interest in such Temporary Regulation S Global Security to be so
transferred, and to credit or cause to be credited to the account of the person
specified in such instructions a beneficial interest in such Permanent
Regulation S Global Security having a principal amount equal to the amount by
which the principal amount of such Temporary Regulation S Global Security was
reduced upon such transfer.
Securities offered and sold in their initial distribution in reliance
on Rule 144A shall be issued in the form of one or more Global Securities
(collectively, and, together with their Successor Securities, the "Restricted
Global Security") in fully registered form without interest coupons,
substantially in the form of Security set forth in Sections 202 and 203, with
such applicable legends as are provided for in Section 202, except as otherwise
permitted herein. Such Restricted Global Security shall be registered in the
name of the Depository or its nominee and deposited with the Trustee, at its
Corporate Trust Office, as custodian for the Depository, duly executed by the
Issuers and authenticated by the Trustee as hereinafter provided, for credit by
the Depository to the respective accounts of beneficial owners of the Securities
represented thereby (or
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<PAGE>
such other accounts as they may direct). The aggregate principal amount of the
Restricted Global Security may be increased or decreased from time to time by
adjustments made on the records of the Trustee, as custodian for the Depository,
in connection with a corresponding decrease or increase in the aggregate
principal amount of the Temporary Regulation S Global Security or the Permanent
Regulation S Global Security, as hereinafter provided.
Securities offered and sold in their initial distribution other than
in reliance on Regulation S or Rule 144A (collectively, "Other Securities")
shall not be issued in the form of a Global Security or in any other form
intended to facilitate book-entry trading in the beneficial interests of such
Securities.
SECTION 202. Form of Face of Security.
------------------------
[If a Global Security not to be held by The Depository Trust Company,
then insert -- THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY
OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART
FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART
MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A
NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.]
[If a Global Security to be held by The Depository Trust Company, then
insert -- UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
[If a Temporary Regulation S Global Security, then insert -- THIS
SECURITY IS A TEMPORARY REGULATION S GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE REFERRED TO HEREINAFTER. EXCEPT IN THE CIRCUMSTANCES DESCRIBED IN
SECTION 305(c) OF THE INDENTURE, INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL
SECURITY MAY NOT BE OFFERED OR SOLD TO A
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<PAGE>
U.S. PERSON OR FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON PRIOR TO THE
EXPIRATION OF THE RESTRICTED PERIOD (AS DEFINED IN THE INDENTURE), AND NO
TRANSFER OR EXCHANGE OF AN INTEREST IN THIS TEMPORARY REGULATION S GLOBAL
SECURITY MAY BE MADE FOR AN INTEREST IN A RESTRICTED GLOBAL SECURITY OR IN A
PERMANENT REGULATION S GLOBAL SECURITY UNTIL AFTER THE LATER OF THE DATE OF
EXPIRATION OF THE RESTRICTED PERIOD AND THE DATE ON WHICH THE OWNER SECURITIES
CERTIFICATION AND THE DEPOSITORY SECURITIES CERTIFICATION RELATING TO SUCH
INTEREST HAVE BEEN PROVIDED IN ACCORDANCE WITH THE TERMS OF THE INDENTURE, TO
THE EFFECT THAT THE BENEFICIAL OWNER OR OWNERS OF SUCH INTEREST ARE NOT U.S.
PERSONS.]
[If a Permanent Regulation S Security, then insert -- THE SECURITIES
EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT
OF 1933 (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, OR DELIVERED IN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON,
UNLESS THE SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS THEREOF IS AVAILABLE.]
[If a Restricted Security, then insert -- THE SECURITIES EVIDENCED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933
(THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT (A) BY THE INITIAL INVESTOR (1) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE
903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE) OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND (B) BY SUBSEQUENT INVESTORS, AS SET FORTH IN (A)
ABOVE OR TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE
WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER
JURISDICTIONS.]
12 1/2% SENIOR NOTES DUE April 15, 2006
CUSIP NUMBER: __________
No. __________ $_______________
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<PAGE>
NEXTLINK Communications, L.L.C., a limited liability company formed
under the laws of the State of Washington (herein called the "Company", which
term includes any successor Person under the Indenture hereinafter referred to),
and NEXTLINK Capital, Inc., a Washington corporation and a wholly-owned
subsidiary of the Company (herein called "Capital", and together with the
Company, the "Issuers"), for value received, hereby promises to pay to
__________, or registered assigns, the principal sum of __________ Dollars on
April 25, 2006, and to pay interest thereon from April 25, 1996 or from the most
recent Interest Payment Date to which interest has been paid or duly provided
for, semi-annually on October 15 and April 15 in each year, commencing October
15, 1996 at the rate of 12 1/2% per annum, until the principal hereof is paid or
made available for payment [If Original Securities, then insert: provided,
--------
however, that if (i) the Issuers have not filed a registration statement under
- -------
the Securities Act of 1933, as amended (the "Securities Act"), registering a
security substantially identical to this Security (except that such Security
will not contain terms with respect to the Special Interest payments described
below or transfer restrictions) pursuant to an exchange offer (the "Exchange
Offer") (the "Exchange Registration Statement") by May 16, 1996, or (ii) the
Exchange Registration Statement relating to the Exchange Offer (or, in lieu
thereof, a registration statement registering this Security for resale (a
"Resale Registration Statement")) has not become or been declared effective by
August 23, 1996, or (iii) the Exchange Offer has not been completed within 30
business days after the date on which the Exchange Registration Statement has
become or been declared effective initially (if the Exchange Offer is then
required to be made pursuant to the Exchange and Registration Rights Agreement
(the "Exchange and Registration Rights Agreement"), dated as of April 25, 1996,
by and between the Issuers, the Purchasers (as defined therein) and the Holders
from time to time of the Securities) or (iv) either the Exchange Registration
Statement or, if applicable, the Resale Registration Statement is filed and
declared effective (except as specifically permitted therein) but shall
thereafter cease to be effective without being succeeded promptly by an
additional registration statement filed and declared effective, in each case
(i) through (iv) upon the terms and conditions set forth in the Exchange and
Registration Rights Agreement (each such event referred to in clauses
(i) through (iv), a "Registration Default"), then interest will accrue (in
addition to the stated interest on the Securities) (the "Step-Up") at a rate
of 0.25% per annum, determined daily, on the principal amount of the
Securities, for the period from the occurrence of the Registration
-42-
<PAGE>
Default until such time (the "Step-Down Date") as no Registration Default is in
effect and, provided, further, that for each 90-day period that the Registration
-------- -------
Default continues, the per annum rate of such Special Interest shall increase
(each such increase, an "Additional Step-Up") by an additional 0.25% per annum,
provided that such rate shall in no event exceed 1.0% per annum in the aggregate
until the Step-Down Date (after which the interest rate will be restored to its
initial rate). The Issuers shall provide the Trustee with written notice of the
date of any Registration Default and the Step-Down Date. Interest accruing as a
result of the Step-Up or an Additional Step-Up is referred to herein as "Special
Interest." Accrued Special Interest, if any, shall be paid semi-annually in
arrears on October 15 and April 15 in each year; and the amount of accrued
Special Interest shall be determined on the basis of a 365 or 366 day year, as
the case may be, and the number of days actually elapsed. Any accrued and
unpaid interest (including Special Interest) on this Security upon the issuance
of an Exchange Security (as defined in the Indenture) in exchange for this
Security shall cease to be payable to the Holder hereof but such accrued and
unpaid interest (including Special Interest) shall be payable on the next
Interest Payment Date for such Exchange Security to the Holder thereof on the
related Regular Record Date.] The interest so payable, and punctually paid or
duly provided for, on any Interest Payment Date will, as provided in such
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest, which shall be March 15 or September 15 (whether
or not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities not less than 10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.
In the case of a default in payment of principal and premium, if any,
upon acceleration or redemption, interest shall be payable pursuant to the
preceding paragraph on such overdue principal (and premium, if any),
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<PAGE>
such interest shall be payable on demand and, if not so paid on demand, such
interest shall itself bear interest at the rate of 1% per annum (to the extent
that the payment of such interest shall be legally enforceable), and shall
accrue from the date of such demand for payment to the date payment of such
interest has been made or duly provided for, and such interest on unpaid
interest shall also be payable on demand.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the corporate trust office of the Trustee and at the
office or agency of the Issuers maintained for that purpose in the Borough of
Manhattan, The City of New York, New York, and at any other office or agency
maintained by the Issuers for such purpose, in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts; provided, however, that at the option of the
-------- -------
Issuers payment of interest may be made by check mailed to the address of the
Person entitled thereto as such address shall appear in the Security Register.
The Company shall enter into the Pledge Agreement (as defined in the
Indenture) and use a portion of the net proceeds of the sale of the Securities
to the Initial Purchasers (as defined in the Indenture) to purchase the
securities, which shall initially consist of Government Securities (as defined
in the Indenture), to be pledged to the Trustee (the "Pledged Securities") for
the benefit of the Holders of the Securities in such amount as will be
sufficient upon receipt of scheduled interest and principal payments of such
securities, in the opinion of a nationally recognized firm of independent public
accountants selected by the Company, to provide for payment in full of the first
six scheduled interest payments due on the Securities. The Pledged Securities
will be pledged by the Company to the Trustee for the benefit of the Holders of
the Securities and will be held by the Trustee in the Pledge Account (as defined
in the Indenture) pending disbursement pursuant to the Pledge Agreement.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
-44-
<PAGE>
IN WITNESS WHEREOF, the Issuers have caused this instrument to be duly
executed.
Dated:
NEXTLINK COMMUNICATIONS, L.L.C.
By NEXTLINK, INC.:
By_______________________________
Title:
Attest:
______________________________
Title:
NEXTLINK CAPITAL, INC.
By_______________________________
Title:
Attest:
______________________________
Title:
SECTION 203. Form of Reverse of Security.
---------------------------
(a) Temporary Regulation S Global Security. The form of reverse of
--------------------------------------
a Temporary Regulation S Global Security shall be as set forth below in this
Section 203(a).
This Temporary Regulation S Global Security is one of a duly
authorized issue of Securities of the Issuers designated as its Senior Notes due
April 15, 2006 (the "Securities") issued under an Indenture, dated as of April
25, 1996 (herein called the "Indenture"), between the Issuers and United States
Trust Company of New York, as trustee (herein called the "Trustee", which term
includes any successor trustee under the Indenture). The Securities
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<PAGE>
are limited in aggregate principal amount to $350,000,000. Reference is hereby
made to the Indenture and all indentures supplemental thereto for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Issuers, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered.
Until this Temporary Regulation S Global Security is exchanged for a
Permanent Regulation S Global Security, the Holder hereof shall not be entitled
to receive payments of interest hereon; until so exchanged in full, this
Temporary Regulation S Global Security shall in all other respects be entitled
to the same benefits as other Securities under the Indenture.
This Temporary Regulation S Global Security is exchangeable in whole
or in part for one or more Permanent Regulation S Global Securities or
Restricted Global Securities only (i) on or after the expiration of the
Restricted Period and (ii) upon presentation of certificates (accompanied by an
Opinion of Counsel, if applicable) required by Article 3 of the Indenture. Upon
exchange of this Temporary Regulation S Global Security for one or more
Permanent Regulation S Global Securities or Restricted Global Securities, the
Trustee shall cancel this Temporary Regulation S Global Security.
This Temporary Regulation S Global Security shall not become valid or
obligatory until the certificate of authentication hereon shall have been duly
manually signed by the Trustee in accordance with the Indenture. This Temporary
Regulation S Global Security shall be governed by and construed in accordance
with the laws of the State of New York.
SCHEDULE OF EXCHANGES FOR GLOBAL SECURITIES
The following exchanges of a part of this Temporary Regulation S
Global Security for other Global Securities have been made:
<TABLE>
<CAPTION>
Principal Amount of this
Amount of decrease in Amount of increase in Global Security Signature of
Principal Amount of Principal Amount of following such decrease authorized officer
Date of Exchange this Global Security this Global Security (or increase) of Trustee
- ---------------- --------------------- --------------------- ------------------------ ------------------
<S> <C> <C> <C> <C>
</TABLE>
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<PAGE>
(b) Securities other than a Temporary Regulation S Global Security.
--------------------------------------------------------------
The form of reverse of all Securities other than a Temporary Regulation S Global
Security shall be as set forth below in this Section 203(b).
This Security is one of a duly authorized issue of Securities of the
Issuers designated as its Senior Notes due April 15, 2006 (the "Securities")
issued under an Indenture, dated as of April 25, 1996 (herein called the
"Indenture"), between the Issuers and United States Trust Company of New York,
as trustee (herein called the "Trustee", which term includes any successor
trustee under the Indenture). The Securities are limited in aggregate principal
amount to $350,000,000. Reference is hereby made to the Indenture and all
indentures supplemental thereto for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Issuers, the
Trustee and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered.
The Securities are subject to redemption upon not less than 30 nor
more than 60 days' notice by mail to each Holder of Securities to be redeemed at
such Holder's address appearing in the Security Register, in amounts of $1,000
or an integral multiple of $1,000, at any time on or after April 15, 2001 and
prior to maturity, as a whole or in part, at the election of the Issuers, at the
following Redemption Prices (expressed as percentages of the principal amount)
plus accrued and unpaid interest (including Special Interest) to but excluding
the Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date to receive interest due on an Interest Payment that is on or
prior to the Redemption Date), if redeemed during the 12-month period beginning
April 15, of each of the years indicated below:
<TABLE>
<CAPTION>
Year Redemption
---- Price
----------
<S> <C>
2001 106.250%
2002 104.167%
2003 102.083%
</TABLE>
and thereafter at a Redemption Price equal to 100% of the principal amount,
together in the case of any such redemption with accrued interest to the
Redemption Date, but interest installments whose Stated Maturity is on or prior
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<PAGE>
to such Redemption Date will be payable to the Holders of such Securities, or
one or more Predecessor Securities, of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in the
Indenture.
The Securities are further subject to redemption prior to April 15,
2001 only in the event that on or before April 15, 1999 the Company receives net
proceeds from any sale of its Common Equity, in which case the Company may, at
its option, use all or a portion of any such net proceeds to redeem Securities
in a principal amount of up to an aggregate amount equal to 33 1/3% of the
original principal amount of the Securities, provided, however, that Securities
-------- -------
in an amount equal to at least $175 million remain Outstanding after such
redemption. Such redemption must occur on a Redemption Date within 90 days of
any such sale and upon not less than 30 nor more than 60 days' notice by mail to
each Holder of Securities to be redeemed at such Holder's address appearing in
the Security Register, in amounts of $1,000 or an integral multiple of $1,000 at
a Redemption Price of 112.50% of their principal amount plus accrued and unpaid
interest (including Special Interest), if any to but excluding the Redemption
Date (subject to the right of Holders of record on the relevant Regular Record
Date to receive interest due on an Interest Payment Date that is on or prior to
the Redemption Date).
The Securities do not have the benefit of any sinking fund
obligations.
The Indenture provides that, subject to certain conditions, if (i) a
Change of Control occurs or (ii) certain Net Available Proceeds are available to
the Issuers as a result of any Asset Disposition, the Issuers shall be required
to make an Offer to Purchase for all or a specified portion of the Securities.
In the event of redemption or purchase pursuant to an Offer to
Purchase of this Security in part only, a new Security or Securities of like
tenor for the unredeemed or unpurchased portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the principal of
all the Securities may be declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time of
(i) the entire indebtedness of this Security,
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<PAGE>
or (ii) certain restrictive covenants and Events of Default with respect to this
Security, in each case upon compliance with certain conditions set forth
therein.
Unless the context otherwise requires, the Original Securities (as
defined in the Indenture) and the Exchange Securities (as defined in the
Indenture) shall constitute one series for all purposes under the Indenture,
including without limitation, amendments, waivers, redemptions and Offers to
Purchase.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuers and the rights of the Holders of the Securities under the Indenture at
any time by the Issuers and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Issuers with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Issuers, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Issuers in the Borough of Manhattan, The City of New
York, New York, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Issuers and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities, of authorized denominations and like tenor
and for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
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<PAGE>
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof, subject to a minimum
initial purchase amount of $100,000 for Other Securities. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like tenor and aggregate principal amount of Securities of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of transfer
or exchange, but the Issuers may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Issuers, the Trustee and any agent of the Issuers or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and none of
the Issuers, the Trustee or any such agent shall be affected by notice to the
contrary.
Interest on this Security shall be computed on the basis of a 360-day
year of twelve 30-day months; provided, however, that Special Interest shall be
-------- -------
computed on the basis of a 365 or 366 day year, as the case may be, and the
number of days actually elapsed.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
-50-
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased in its entirety
by the Issuers pursuant to Section 1013 or 1016 of the Indenture, check the box:
[ ]
If you want to elect to have only a part of this Security purchased by
the Issuers pursuant to Section 1013 or 1016 of the Indenture, state the amount:
$___________
Dated:________________ Your Signature:__________________________________
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee:____________________________________________________________
Notice: Signature(s) must be guaranteed by an "eligible
guarantor institution" meeting the requirements of the
Trustee, which requirements will include membership or
participation in STAMP or such other "signature guarantee
program" as may be determined by the Trustee in addition to,
or in substitution for STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
SECTION 204. Form of Trustee's Certificate of
Authentication.
--------------------------------
This is one of the Securities referred to in the within-mentioned
Indenture.
United States Trust Company of New York,
as Trustee
By ____________________
Authorized Signatory
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ARTICLE THREE
The Securities
SECTION 301. Title and Terms.
---------------
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $350,000,000,
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section 304,
305, 306, 906 or 1108 or in connection with an Offer to Purchase pursuant to
Section 1013 or 1016. The Issuers may issue Exchange Securities from time to
time pursuant to an Exchange Offer or otherwise, in each case pursuant to a
Board Resolution of Capital and a resolution of the Managing Member of the
Company, conclusively evidenced by a Managing Member's Certificate, subject to
Section 303, included in an Officers' Certificate delivered to the Trustee, in
authorized denominations in exchange for a like principal amount of Original
Securities. Upon any such exchange the Original Securities shall be cancelled
in accordance with Section 309 and shall no longer be deemed Outstanding for any
purpose. In no event shall the aggregate principal amount of Original
Securities and Exchange Securities Outstanding exceed $350,000,000.
The Securities shall be known and designated as the "12 1/2% Senior
Notes due April 15, 2006" of the Issuers. The Stated Maturity of the Securities
shall be April 15, 2006. The Securities shall bear interest at the rate of
12 1/2% per annum, from April 25, 1996 or from the most recent Interest Payment
Date thereafter to which interest has been paid or duly provided for, as the
case may be, payable semi-annually on October 15 and April 15, commencing
October 15, 1996, until the principal thereof is paid or made available for
payment; provided, however, with respect to Original Securities, if there has
-------- -------
been a Registration Default, a Step-Up will occur and the Original Securities
will from then bear Special Interest and, for each 90-day period that the
Registration Default continues, an Additional Step-Up will occur and the per
annum rate of such Special Interest shall increase by an additional 0.25% per
annum, provided that such rate shall in no event exceed 1.0% per annum in the
aggregate, until the Step-Down Date (after which the interest rate will be
restored to its initial rate). Accrued Special Interest, if any, shall be paid
in cash in arrears semi-annually on October 15 and April 15 in each year, the
amount of accrued Special Interest shall be determined on the basis of the
number of days actually elapsed and computed as provided in Section 310.
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<PAGE>
In the case of a default in payment of principal and premium, if any,
upon acceleration or redemption, interest shall be payable pursuant to the
preceding paragraph on such overdue principal (and premium, if any), such
interest shall be payable on demand and, if not so paid on demand, such interest
shall itself bear interest at the rate of 1% per annum (to the extent that the
payment of such interest shall be legally enforceable), and shall accrue from
the date of such demand for payment to the date payment of such interest has
been made or duly provided for, and such interest on unpaid interest shall also
be payable on demand.
The principal of and premium, if any, and interest on the Securities
shall be payable at the corporate trust office of the Trustee in the Borough of
Manhattan, The City of New York, New York, maintained for such purpose and at
any other office or agency maintained by the Issuers for such purpose; provided,
--------
however, that at the option of the Issuers payment of interest may be made by
- -------
check mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register.
The Securities shall be subject to repurchase by the Company pursuant
to an Offer to Purchase as provided in Sections 1013 and 1016.
The Securities shall be redeemable as provided in Article Eleven.
The Securities shall not have the benefit of any sinking fund
obligations.
The Securities shall be subject to defeasance at the option of the
Issuers as provided in Article Twelve.
Unless the context otherwise requires, the Original Securities and the
Exchange Securities shall constitute one series for all purposes under this
Indenture, including without limitation, amendments, waivers, redemptions and
Offers to Purchase.
SECTION 302. Denominations.
-------------
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof, subject to a minimum
initial purchase amount of $100,000 for Other Securities.
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<PAGE>
SECTION 303. Execution, Authentication, Delivery
and Dating.
-----------------------------------
The Securities shall be executed on behalf of the Issuers by the Chief
Executive Officer, President, an Executive Vice President or a Vice President of
the Company and Capital, attested by the Secretary of the Company and Capital.
The signature of any of these officers on the Securities may be manual or
facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company and Capital shall bind
the Issuers, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Issuers may deliver Securities executed by the Issuers to
the Trustee for authentication, together with an Issuers Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Issuers Order shall authenticate and deliver such Securities as in
this Indenture provided and not otherwise.
At any time and from time to time after the execution and delivery of
this Indenture and after the effectiveness of a Registration Statement under the
Securities Act with respect thereto, the Issuers may deliver Exchange Securities
executed by the Issuers to the Trustee for authentication, together with an
Issuers Order for the authentication and delivery of such Exchange Securities
and a like principal amount of Original Securities for cancellation in
accordance with Section 309, and the Trustee in accordance with the Issuers
Order shall authenticate and deliver such Securities. In authenticating such
Exchange Securities, and accepting the additional responsibilities under this
Indenture in relation to such Securities, the Trustee shall be entitled to
receive, and (subject to Section 601) shall be fully protected in relying upon,
an Opinion of Counsel stating,
(a) if the form of such Exchange Securities has been established by or
pursuant to a resolution of the Managing Member, conclusively evidenced by
a Managing Member's Certificate as permitted by Section 301, that such form
has been established in conformity with the provisions of this Indenture;
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<PAGE>
(b) if the terms of such Exchange Securities have been established by
or pursuant to a resolution of the Managing Member, conclusively evidenced
by a Managing Member's Certificate as permitted by Section 301, that such
terms have been established in conformity with the provisions of this
Indenture;
(c) that such Exchange Securities have been duly and validly issued in
accordance with the terms of the Indenture, and are entitled to all the
rights and benefits set forth herein; and
(d) that the issuance of the Exchange Securities in exchange for the
Original Securities has been effected in compliance with the Securities
Act.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Exchange Securities if the issue of such Exchange
Securities pursuant to this Indenture will affect the Trustee's own rights,
duties or immunities under the Exchange Securities and this Indenture or
otherwise in a manner which is not reasonably acceptable to the Trustee.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.
SECTION 304. Temporary Securities.
--------------------
Pending the preparation of definitive Securities, the Issuers may
execute, and upon Issuers Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
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<PAGE>
If temporary Securities are issued, the Issuers will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Issuers designated pursuant to Section 1002, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities, the Issuers shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like tenor and principal amount of definitive
Securities of authorized denominations. Until so exchanged, the temporary
Securities shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities.
SECTION 305. Global Securities; Registration,
Registration of Transfer and Exchange.
-------------------------------------
(a) Global Securities. The provisions of Clauses (1) through (7)
-----------------
below shall apply only to Global Securities:
(1) Each Global Security authenticated under this Indenture shall
be registered in the name of the Depository or a nominee thereof and
delivered to the Depository or a nominee thereof or custodian therefor, and
each such Global Security shall constitute a single Security for all
purposes of this Indenture.
(2) Notwithstanding any other provision in this Indenture, no
Global Security may be exchanged in whole or in part for Securities
registered, and no transfer of a Global Security in whole or in part may be
registered, in the name of any Person other than the Depository or a
nominee thereof unless (A) the Depository (i) has notified the Issuers that
it is unwilling or unable to continue as Depository for such Global
Security and the Issuers thereupon fail to appoint a successor Depository
or (ii) has ceased to be a clearing agency registered under the Exchange
Act, (B) the Issuers, at their option, notify the Trustee in writing that
they elect to cause the issuance of the Securities in definitive registered
certificated form, (C) there shall have occurred and be continuing a
Default or an Event of Default with respect to the Securities evidenced by
such Global Security, or (D) pursuant to the following sentence.
Beneficial interests in a Global Security may, subject to the restrictions
on the transferability of the Securities, be exchanged for certificated
Securities upon request but only upon at least 20 days' prior written
notice
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<PAGE>
given to the Trustee by or on behalf of the Depository (in accordance with
the Depository's customary procedures) and will bear the applicable legends
set forth in Section 202.
(3) If any Global Security is to be exchanged for other
Securities or cancelled in whole, it shall be surrendered by or on behalf
of the Depository or its nominee to the Trustee, as Security Registrar, for
exchange or cancellation as provided in this Article Three. If any Global
Security is to be exchanged for other Securities or cancelled in part, or
if another Security is to be exchanged in whole or in part for a beneficial
interest in any Global Security, such Global Security shall be so
surrendered for exchange or cancellation as provided in this Article Three
or, if the Trustee is acting as custodian for the Depository or its nominee
(or is party to a similar arrangement) with respect to such Global
Security, the principal amount thereof shall be reduced or increased by an
amount equal to the portion thereof to be so exchanged or cancelled, or the
principal amount of such other Security to be so exchanged for a beneficial
interest therein, as the case may be, in each case by means of an
appropriate adjustment made on the records of the Trustee, whereupon the
Trustee, in accordance with the Applicable Procedures, shall instruct the
Depository or its authorized representatives to make a corresponding
adjustment to its records (including by crediting or debiting any Agent
Member's account as necessary to reflect any transfer or exchange of a
beneficial interest pursuant to Section 305(c)). Upon any such surrender
or adjustment of a Global Security, the Trustee shall, subject to
Section 305(a)(2) and as otherwise provided in this Article Three,
authenticate and deliver any Securities issuable in exchange for such
Global Security (or any portion thereof) to or upon the order of, and
registered in such names as may be directed by, the Depository or its
authorized representative. Upon the request of the Trustee in connection
with the occurrence of any of the events specified in the preceding
paragraph, the Issuers shall promptly make available to the Trustee a
reasonable supply of Securities that are not in the form of Global
Securities. The Trustee shall be entitled to rely upon any order,
direction or request of the Depository or its authorized representative
which is given or made pursuant to this Article Three if such order,
direction or request is given or made in accordance with the Applicable
Procedures.
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<PAGE>
(4) Every Security authenticated and delivered upon registration
of transfer of, or in exchange for or in lieu of, a Global Security or any
portion thereof, whether pursuant to this Article Three, Section 906, 1013,
1016 or 1108 or otherwise, shall be authenticated and delivered in the form
of, and shall be, a Global Security, unless such Security is registered in
the name of a Person other than the Depository or a nominee thereof.
(5) None of the Company, Capital, the Trustee, any agent of the
Trustee, any Paying Agent or the Security Registrar will have any
responsibility or liability for any aspect of the Depository's records (or
the records of the participant of such Depository) relating to or payments
made on account of beneficial ownership interests of a Global Security or
for maintaining, supervising or reviewing any records of the Depository
relating to such beneficial ownership interests.
(6) Subject to the provisions in the legends required by
Section 202 above, the registered Holder may grant proxies and otherwise
authorize any Person, including Agent Members and Persons who may hold
interests in Agent Members, to take any action that such Holder is
entitled to take under this Indenture.
(7) Neither Agent Members nor any other Person on whose behalf
Agent Members may act shall have any rights under this Indenture with
respect to any Global Security held on their behalf by the Depository or
under the Global Security, and the Depository may be treated by the
Issuers, the Trustee and any agent of the Issuers or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Issuers,
the Trustee or any agent of the Issuers or the Trustee from giving effect
to any written certification, proxy or other authorization furnished by the
Depository or impair, as between the Depository and its Agent Members, the
operation of customary practices governing the exercise of the rights of a
Holder of any Security. With respect to any Global Security deposited with
the Trustee as custodian for the Depository for credit to their respective
accounts (or to such other accounts as they may direct) at Euroclear or
CEDEL, the provisions of the "Operating Procedures of the Euroclear System"
and the "Terms and Conditions Governing Use of Euroclear" and the
"Management Regulations" and "Instructions to
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<PAGE>
Participants" of CEDEL, respectively, shall be applicable to such Global
Security.
(b) Registration, Registration of Transfer and Exchange and Legends.
---------------------------------------------------------------
The Issuers shall cause to be kept at the Corporate Trust Office of the Trustee
a register (the register maintained in such office and in any other office or
agency designated pursuant to Section 1002 being herein sometimes collectively
referred to as the "Security Register") in which, subject to such reasonable
regulations as they may prescribe, the Issuers shall provide for the
registration of Securities and of transfers and exchanges of Securities. The
Trustee is hereby appointed "Security Registrar" for the purpose of registering
Securities and transfers and exchanges of Securities as herein provided. Such
Security Register shall distinguish between Original Securities and Exchange
Securities.
Upon surrender for registration of transfer of any Security at an
office or agency of the Issuers designated pursuant to Section 1002 for such
purpose in accordance with the terms hereof, the Issuers shall, subject to the
other provisions of this Section 305, execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities of any authorized denominations and of a
like tenor and aggregate principal amount and bearing the applicable legends set
forth in Section 202.
Subject to Section 305(c), at the option of the Holder, Securities may
be exchanged for other Securities of any authorized denominations and of a like
tenor and aggregate principal amount and bearing the applicable legends set
forth in Section 202, upon surrender of the Securities to be exchanged at such
office or agency. Whenever any Securities are so surrendered for exchange, the
Issuers shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Issuers, evidencing the same
debt, and (subject to the provisions in the Original Securities regarding the
payment of Special Interest) entitled to the same benefits under this Indenture,
as the Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Issuers or the Trustee) be duly
endorsed, or be accom-
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<PAGE>
panied by a written instrument of transfer in form satisfactory to the Issuers
and the Security Registrar duly executed, by the Holder thereof or his attorney
duly authorized in writing.
No service charge shall be made to the Holder for any registration of
transfer or exchange of Securities, but the Issuers may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 303, 304, 305, 906 or 1108 or in accordance
with any Offer to Purchase pursuant to Section 1013 or 1016 not involving any
transfer.
The Issuers shall not be required (i) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of Securities
selected for redemption under Section 1104 and ending at the close of business
on the day of such mailing, or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
All Original Securities initially issued hereunder shall, upon
issuance, bear the legend specified in Section 202 to be applied to such a
Security and such required legend shall not be removed unless the Issuers shall
have delivered to the Trustee (and the Securities Registrar, if other than the
Trustee) an Issuers Order which states that the Security may be issued without
such legend thereon. If such legend required for an Original Security has been
removed from a Security as provided above, no other Security issued in exchange
for all or any part of such Security shall bear such legend, unless the Issuers
have reasonable cause to believe that such other Security is a "restricted
security" within the meaning of Rule 144 of the Securities Act and instructs the
Trustee to cause a legend to appear thereon.
(c) Certain Transfers and Exchanges. Upon presentation for transfer
-------------------------------
or exchange of any Security at the office of the Trustee, as Securities
Registrar, located in the Borough of Manhattan, The City of New York,
accompanied by a written instrument of transfer or exchange in the form approved
by the Issuers (it being understood that, until notice to the contrary is given
to holders of Securities, the Issuers shall be deemed to have approved the form
of instrument of transfer or exchange, if any, printed on any Security),
executed by the registered Holder, in person or
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<PAGE>
by such Holder's attorney thereunto duly authorized in writing, and upon
compliance with this Section 305, such Security shall be transferred upon the
Security Register, and a new Security shall be authenticated and issued in the
name of the transferee. Notwithstanding any provision to the contrary herein or
in the Securities, transfers of a Global Security, in whole or in part, and
transfers of interests therein of the kind described in this Section 305(c),
shall only be made in accordance with this Section 305(c). Transfers and
exchanges subject to this Section 305(c) shall also be subject to the other
provisions of this Indenture that are not inconsistent with this Section 305(c).
(1) General. A Global Security may not be transferred, in whole or
-------
in part, to any Person other than the Depository or a nominee thereof, and
no such transfer to any such other Person may be registered; provided,
--------
however, that this Clause (1) shall not prohibit any transfer of a Security
-------
that is issued in exchange for a Global Security but is not itself a Global
Security. No transfer of a Security to any Person shall be effective under
this Indenture or the Securities unless and until such Security has been
registered in the name of such Person. Nothing in this Clause (1) shall
prohibit or render ineffective any transfer of a beneficial interest in a
Global Security effected in accordance with the other provisions of this
Section 305(c).
(2) Temporary Regulation S Global Security. If the holder of a
--------------------------------------
beneficial interest in a Temporary Regulation S Global Security wishes at
any time to transfer such interest to a Person who wishes to take delivery
thereof in the form of a beneficial interest in such Temporary Regulation S
Global Security, such transfer may be effected, subject to the rules and
procedures of the Depository, Euroclear and CEDEL, in each case to the
extent applicable and as in effect from time to time (the "Applicable
Procedures"), only in accordance with this Clause (2). Upon delivery
(a) by a beneficial owner of an interest in a Temporary Regulation S Global
Security to Euroclear or CEDEL, as the case may be, of an Owner Securities
Certification, (b) by the transferee of such beneficial interest in the
Temporary Regulation S Global Security to Euroclear or CEDEL, as the case
may be, of a written certification (a "Transferee Securities
Certification") substantially in the form of Annex C hereto and (c) by
Euroclear or CEDEL, as the case may be, to the Trustee, as Security
Registrar, of a Depository Securities
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<PAGE>
Certification, the Trustee may direct either Euroclear or CEDEL, as the
case may be, to reflect on its records the transfer of a beneficial
interest in the Temporary Regulation S Global Security from the beneficial
owner providing the Owner Securities Certification to the Person providing
the Transferee Securities Certification.
(3) Restricted Global Security to Temporary Regulation S Global
-----------------------------------------------------------
Security. If the holder of a beneficial interest in the Restricted Global
--------
Security wishes at any time to transfer such interest to a Person who
wishes to take delivery thereof in the form of a beneficial interest in the
Temporary Regulation S Global Security, such transfer may be effected,
subject to the Applicable Procedures, only in accordance with the
provisions of this Clause (3) and Clause (9) below. Upon receipt by the
Trustee, as Security Registrar, of (A) written instructions given by or on
behalf of the Depository in accordance with the Applicable Procedures
directing the Trustee to credit or cause to be credited to a specified
Agent Member's account a beneficial interest in the Temporary Regulation S
Global Security in a specified principal amount and to cause to be debited
from another specified Agent Member's account a beneficial interest in the
Restricted Global Security in an equal principal amount and (B) a
certificate in substantially the form set forth in Annex D signed by or on
behalf of the holder of such beneficial interest in the Restricted Global
Security, the Trustee, as Security Registrar, shall, subject to Clause (9)
below, reduce the principal amount of the Restricted Global Security, and
increase the principal amount of the Temporary Regulation S Global Security
by such specified principal amount as provided in Section 305(a)(3).
(4) Restricted Global Security to Permanent Regulation S Global
-----------------------------------------------------------
Security. If the holder of a beneficial interest in the Restricted Global
--------
Security wishes at any time to transfer such interest to a Person who
wishes to take delivery thereof in the form of a beneficial interest in the
Permanent Regulation S Global Security, such transfer may be effected,
subject to the Applicable Procedures, only in accordance with this Clause
(4). Upon receipt by the Trustee, as Security Registrar, of (A) written
instructions given by or on behalf of the Depository in accordance with the
Applicable Procedures directing the Trustee to credit or cause to be
credited to a specified Agent Member's account a beneficial interest in the
Permanent
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<PAGE>
Regulation S Global Security in a specified principal amount and to cause
to be debited from another specified Agent Member's account a beneficial
interest in the Restricted Global Security in an equal principal amount and
(B) a certificate in substantially the form set forth in Annex E signed by
or on behalf of the holder of such beneficial interest in the Restricted
Global Security, the Trustee, as Security Registrar, shall reduce the
principal amount of a Restricted Global Security, and increase the
principal amount of the Permanent Regulation S Global Security by such
specified principal amount as provided in Section 305(a)(3).
(5) Temporary Regulation S Global Security or Permanent Regulation S
----------------------------------------------------------------
Global Security to Restricted Global Security. If the holder of a
---------------------------------------------
beneficial interest in the Temporary Regulation S Global Security or the
Permanent Regulation S Global Security at any time, wishes to transfer such
interest to a Person who wishes to take delivery thereof in the form of a
beneficial interest in the Restricted Global Security, such transfer may be
effected, subject to the Applicable Procedures, only in accordance with
this Clause (5) and Clause (9) below; provided, that with respect to any
--------
transfer of a beneficial interest in a Temporary Regulation S Global
Security, the transferor and Euroclear or CEDEL, as the case may be, must
have previously delivered an Owner Securities Certification and a
Depository Securities Certification respectively, with respect to such
beneficial interest. Upon receipt by the Trustee, as Security Registrar,
of (A) written instructions given by or on behalf of the Depository in
accordance with the Applicable Procedures directing the Trustee to credit
or cause to be credited to a specified Agent Member's account a beneficial
interest in the Restricted Global Security in a specified principal amount
and to cause to be debited from another specified Agent Member's account a
beneficial interest in the Temporary Regulation S Global Security or the
Permanent Regulation S Global Security, as the case may be, in an equal
principal amount and (B) a certificate in substantially the form set forth
in Annex F signed by or on behalf of the holder of such beneficial interest
in the Temporary Regulation S Global Security or the Permanent Regulation S
Global Security, as the case may be, the Trustee, as Security Registrar,
shall, subject to Clause (9) below, reduce the principal amount of such
Temporary Regulation S Global Security or Permanent Regulation S Global
Security, as the case may be, and increase the princi-
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<PAGE>
pal amount of the Restricted Global Security by such specified principal
amount as provided in Section 305(a)(3).
(6) Non-Global Restricted Security to Global Security. If the holder
-------------------------------------------------
of a Restricted Security (other than a Global Security) wishes at any time
to transfer all or any portion of such Security to a Person who wishes to
take delivery thereof in the form of a beneficial interest in the
Restricted Global Security, the Temporary Regulation S Global Security or
the Permanent Regulation S Global Security, such transfer may be effected,
subject to the Applicable Procedures, only in accordance with this Clause
(6) and Clause (9) below. Upon receipt by the Trustee, as Security
Registrar, of (A) such Security and written instructions given by or on
behalf of such Holder as provided in Section 305(b) directing the Trustee
to credit or cause to be credited to a specified Agent Member's account a
beneficial interest in the Restricted Global Security, the Temporary
Regulation S Global Security or the Permanent Regulation S Global Security,
as the case may be, in a specified principal amount equal to the principal
amount of the Restricted Security (or portion thereof) to be so
transferred, and (B) an appropriately completed certificate substantially
in the form set forth in Annex G-1 hereto, if the specified account is to
be credited with a beneficial interest in the Restricted Global Security,
or Annex G-2 hereto, if the specified account is to be credited with a
beneficial interest in the Temporary Regulation S Global Security or the
Permanent Regulation S Global Security, signed by or on behalf of such
Holder, then the Trustee, as Security Registrar, shall, subject to Clause
(9) below, cancel such Restricted Security (and issue a new Security in
respect of any untransferred portion thereof) as provided in Section 305(b)
and increase the principal amount of the Restricted Global Security,
Temporary Regulation S Global Security or Permanent Regulation S Global
Security, as the case may be, by the specified principal amount as provided
in Section 305(a)(3).
(7) Non-Global Permanent Regulation S Security to Restricted Global
---------------------------------------------------------------
Security or Permanent Regulation S Global Security. If the Holder of a
--------------------------------------------------
Permanent Regulation S Security (other than a Global Security) wishes at
any time to transfer all or any portion of such Security to a Person who
wishes to take delivery thereof in the form of a beneficial interest in the
Restricted Global Security or the Permanent Regulation
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<PAGE>
S Global Security, as the case may be, such transfer may be effected only
in accordance with this Clause (7) and subject to the Applicable
Procedures. Upon receipt by the Trustee, as Security Registrar, of (A)
such Security and instructions given by or on behalf of such Holder as
provided in Section 305(b) directing the Trustee to credit or cause to be
credited to a specified Agent Member's account a beneficial interest in the
Restricted Global Security or the Permanent Regulation S Global Security,
as the case may be, in a principal amount equal to the principal amount of
the Security (or portion thereof) to be so transferred, and (B) (i) with
respect to a transfer which is to be delivered in the form of a beneficial
interest in the Restricted Global Security, a certificate in substantially
the form set forth in Annex H-1, signed by or on behalf of such Holder, and
(ii) with respect to a transfer which is to be delivered in the form of a
beneficial interest in the Permanent Regulation S Global Security, a
certificate in substantially the form set forth in Annex H-2, signed by or
on behalf of such Holder, then the Trustee, as Security Registrar, shall,
subject to Clause (9) below, cancel such Security (and issue a new Security
in respect of any untransferred portion thereof) as provided in Section
305(b) and increase the principal amount of the Restricted Global Security,
or the Permanent Regulation S Global Security, as the case may be, by the
specified principal as provided in Section 305(a)(3).
(8) Other Exchanges. Securities that are not Global Securities may
---------------
be exchanged (on transfer or otherwise) for Securities that are not Global
Securities or for beneficial interests in a Global Security (if any is then
outstanding) only in accordance with such procedures, which shall be
substantially consistent with the provisions of clauses (1) through (7)
above (including the certification requirements intended to insure that
transfers of beneficial interests in a Global Security comply with Rule
144A, Rule 144 or Regulation S, as the case may be) and any Applicable
Procedures, as may be from time to time adopted by the Issuers and the
Trustee.
(9) Interests in Temporary Regulation S Global Security to be Held
--------------------------------------------------------------
Through Euroclear or CEDEL. Until the later of the expiration of the
--------------------------
Restricted Period and the provision of the Owner Securities Certification
and the Depository Securities Certification, beneficial interests in any
Temporary Regulation S Global Security may be held only in or through
accounts maintained at
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the Depository by Euroclear or CEDEL (or by Agent Members acting for the
account thereof).
SECTION 306. Mutilated, Destroyed, Lost and
Stolen Securities.
------------------------------
If any mutilated Security is surrendered to the Trustee, the Issuers
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Issuers and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Issuers or the Trustee that such Security has been acquired by a bona fide
purchaser, the Issuers shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and principal amount and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Issuers in the discretion of
the Company may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Issuers
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Issuers, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
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SECTION 307. Payment of Interest; Interest
Rights Preserved.
-----------------------------
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.
Any interest (including Special Interest) on any Security which is
payable, but is not punctually paid or duly provided for, on any Interest
Payment Date (herein called "Defaulted Interest") shall (a) bear interest at the
rate per annum stated in the form of Security included herein (to the extent
that the payment of such interest shall be legally enforceable), and (b)
forthwith cease to be payable to the Holder on the relevant Regular Record Date
by virtue of having been such Holder, and such Defaulted Interest may be paid by
the Issuers, at its election in each case, as provided in Clause (1) or (2)
below:
(1) The Issuers may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall
be fixed in the following manner. The Issuers shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment, and at the same time the
Issuers shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be
held in trust for the benefit of the Persons entitled to such Defaulted
Interest as in this Clause provided. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which shall
be not more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly notify
the Issuers of such
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Special Record Date and, in the name and at the expense of the Issuers,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder at his address as it appears in the Security Register, not
less than 10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor having been so mailed, such Defaulted Interest shall be paid to
the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on such Special Record
Date and shall no longer be payable pursuant to the following Clause (2).
(2) The Issuers may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Issuers to the Trustee of the proposed payment pursuant to this Clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 308. Persons Deemed Owners.
---------------------
Prior to due presentment of a Security for registration of transfer,
the Issuers, the Trustee and any agent of the Issuers or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and premium, if
any, and (subject to Section 307) interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and none of the
Issuers, the Trustee or any agent of the Issuers or the Trustee shall be
affected by notice to the contrary.
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SECTION 309. Cancellation.
------------
All Securities surrendered for payment, redemption, registration of
transfer, exchange or pursuant to any Offer to Purchase pursuant to Section 1013
or 1016 shall, if surrendered to any Person other than the Trustee, be delivered
to the Trustee and shall be promptly cancelled by it. The Issuers may at any
time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Issuers may have acquired in any
manner whatsoever, and all Securities so delivered shall be promptly cancelled
by the Trustee. No Securities shall be authenticated in lieu of or in exchange
for any Securities cancelled as provided in this Section, except as expressly
permitted by this Indenture. All cancelled Securities held by the Trustee shall
be disposed of in accordance with its standard procedures or as directed by an
Issuers Order; provided, however, that the Trustee shall not be required to
-------- -------
destroy such Securities.
SECTION 310. Computation of Interest.
-----------------------
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months, provided, however, that Special Interest on
-------- -------
Original Securities shall be computed on the basis of a 365 or 366 day year, as
the case may be, and the number of days actually elapsed.
SECTION 311. CUSIP Numbers.
-------------
The Issuers shall in issuing the Securities use CUSIP numbers, and
the Trustee shall use the applicable CUSIP number in notices of redemption or
exchange as a convenience to the Holders; provided, that any such notice may
--------
state that no representation is made as to the accuracy of correctness of the
CUSIP number or numbers printed in the notice or on the certificates
representing the Securities and that reliance may be placed only on the other
identification numbers printed on the certificates representing the Securities.
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ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall cease to be of further effect as to all
outstanding Securities (except as to (i) rights of registration of transfer and
exchange and the Issuers' right of optional redemption, (ii) substitution of
apparently mutilated, defaced, destroyed, lost or stolen Securities, (iii)
rights of holders of Securities to receive payment of principal of and premium,
if any, and interest on the Securities, (iv) rights, obligations and immunities
of the Trustee under this Indenture and (v) rights of the holders of the
Securities as beneficiaries of this Indenture with respect to any property
deposited with the Trustee payable to all or any of them), and the Trustee, on
demand of and at the expense of the Issuers, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture, when
(1) either
(A) the Issuers will have paid or caused to be paid the
principal of and premium, if any, and interest on the Securities as
and when the same will have become due and payable; or
(B) all outstanding Securities (except lost, stolen or destroyed
Securities which have been replaced or paid) have been delivered to
the Trustee for cancellation;
and the Issuers, in the case of (A) above, has deposited or caused to
be deposited with the Trustee as trust funds in trust for the purpose
an amount sufficient to pay and discharge the entire indebtedness on
such Securities not theretofore delivered to the Trustee for
cancellation, for principal of and premium, if any, and interest to
the date of such deposit (in the case of Securities which have become
due and payable) or to the Stated Maturity or Redemption Date, as the
case may be;
(2) the Issuers have paid or caused to be paid all other sums payable
hereunder by the Issuers;
(3) the Issuers have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each
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stating that all conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been complied with; and
(4) the Trustee shall have received such other documents and
assurances as the Trustee shall have reasonably requested.
Notwithstanding the satisfaction and discharge of this Indenture, (i) the
obligations of the Issuers to the Trustee under Section 607, (ii) substitution
of apparently mutilated, defaced, destroyed, lost or stolen Securities, (iii)
rights of holders of Securities to receive payment of principal of and premium,
if any, and interest on the Securities, (iv) rights, obligations and immunities
of the Trustee under this Indenture (including, if money shall have been
deposited with the Trustee pursuant to subclause (B) of Clause (1) of this
Section, the obligations of the Trustee under Section 402 and the last paragraph
of Section 1003), and (v) rights of holders of the Securities as beneficiaries
of this Indenture with respect to any property deposited with the Trustee
payable to all or any of them, shall survive.
SECTION 402. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Issuers acting as their own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee.
ARTICLE FIVE
Remedies
SECTION 501. Events of Default.
-----------------
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order,
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rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Security when it
becomes due and payable, as to any Interest Payment Date falling on or
prior to April 15, 1999, and any such failure continued for 30 days as to
any Interest Payment Date thereafter; or
(2) default in the payment of the principal of (or premium, if any,
on) any Security when due; or
(3) default in the payment of principal and interest upon any
Security required to be purchased pursuant to an Offer to Purchase pursuant
to Sections 1013 or 1016 when due and payable; or
(4) default in the performance, or breach, of Section 801; or
(5) default in the performance, or breach, of any covenant or
warranty of the Issuers in this Indenture or in any Security (other than a
covenant or warranty a default in whose performance or whose breach is
elsewhere in this Section specifically dealt with), and continuance of such
default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the Issuers by the Trustee or to the
Issuers and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Outstanding Securities a written notice specifying
such default or breach and requiring it to be remedied and stating that
such notice is a "Notice of Default" hereunder; or
(6) a default or defaults under any bond(s), debenture(s), note(s) or
other evidence(s) of Debt by the Company or any Significant Subsidiary of
the Company or under any mortgage(s), indenture(s) or instrument(s) under
which there may be issued or by which there may be secured or evidenced any
Debt of such type by the Company or any such Significant Subsidiary with a
principal amount then outstanding, individually or in the aggregate, in
excess of $10 million, whether such Debt now exists or shall hereafter be
created, which default or defaults shall constitute a failure to pay such
Debt when due at the final maturity thereof, or shall have resulted in such
Debt becoming or being declared due and payable prior to the date on which
it would otherwise have become due and payable; or
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(7) a final judgment or final judgments (not subject to appeal) for
the payment of money are entered against the Company or any Significant
Subsidiary in an aggregate amount in excess of $10 million by a court or
courts of competent jurisdiction, which judgments remain undischarged or
unstayed for a period (during which execution shall not be effectively
stayed) of 45 days after the right to appeal all such judgments has
expired; or
(8) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of an Issuer or any Significant
Subsidiary in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar
law or (B) a decree or order adjudging an Issuer or any Significant
Subsidiary a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition of
or in respect of an Issuer or any Significant Subsidiary under any
applicable Federal or State law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of an
Issuer or any Significant Subsidiary or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order for relief or any such other decree
or order unstayed and in effect for a period of 60 consecutive days; or
(9) the commencement by an Issuer or any Significant Subsidiary of a
voluntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or of any other
case or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by it to the entry of a decree or order for relief in respect of an
Issuer or any Significant Subsidiary in an involuntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing by it
of a petition or answer or consent seeking reorganization or relief under
any applicable Federal or State law, or the consent by it to the filing of
such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of an Issuer or any Significant Subsidiary or of any substantial
part of its property, or the making
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by it of an assignment for the benefit of creditors, or the admission by it
in writing of its inability to pay its debts generally as they become due,
or the taking of corporate action by an Issuer or any Significant
Subsidiary in furtherance of any such action.
SECTION 502. Acceleration of Maturity; Rescission
and Annulment.
------------------------------------
If an Event of Default (other than an Event of Default specified in
Section 501(8) or (9) with respect to the Issuers) occurs and is continuing,
then and in every such case the Trustee or the Holders of not less than 25% in
aggregate principal amount of the Outstanding Securities may declare the Default
Amount of all the Securities to be due and payable immediately, by a notice in
writing to the Issuers (and to the Trustee if given by Holders), and upon any
such declaration such Default Amount and any accrued interest, together with all
other amounts due under this Indenture, shall become immediately due and
payable. If an Event of Default specified in Section 501(8) or (9) with respect
to the Issuers occurs, the Default Amount of and any accrued interest on the
Securities then Outstanding, together with all other amounts due under this
Indenture, shall ipso facto become immediately due and payable without any
declaration or other Act on the part of the Trustee or any Holder.
The "Default Amount" in respect of any particular Security as of any
particular date of acceleration shall equal the principal amount of the Security
plus accrued and unpaid interest to such date.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due based on acceleration
has been obtained by the Trustee as hereinafter in this Article provided, the
Holders of a majority in aggregate principal amount of the Outstanding
Securities, by written notice to the Issuers and the Trustee, may rescind and
annul such declaration and its consequences if:
(1) the Issuers have paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, on) any Securities
which have become due otherwise than by such declaration of
acceleration (includ-
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ing any Securities required to have been purchased on the Purchase
Date pursuant to an Offer to Purchase made by the Company) and
interest thereon at the rate borne by the Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the applicable rate borne by the
Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default, other than the non-payment of the
principal of Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits
for Enforcement by Trustee
------------------------------------
The Issuers covenant that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or premium,
if any, on) any Security at the Maturity thereof or, with respect to any
Security required to have been purchased pursuant to an Offer to Purchase
made by the Company, at the Purchase Date thereof,
the Issuers will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and, to the extent
that payment of such interest shall be legally enforceable, interest on any
overdue principal (and premium, if any) and on any overdue interest, at the rate
provided by the Securities, and, in addition thereto, such further amount as
shall
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be sufficient to cover the costs and expenses incurred by the Trustee under this
Indenture, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
If the Issuers fail to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Issuers or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Issuers or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
--------------------------------
In case of any judicial proceeding relative to the Issuers (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys, securities or other property payable or deliverable upon the
exchange of the Securities or upon any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept
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or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights of any Holder
thereof or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding; provided, however, that the Trustee may, on
-------- -------
behalf of the Holders, vote for the election of a trustee in bankruptcy or
similar official and be a member of a creditors or other similar committee.
SECTION 505. Trustee May Enforce Claims Without
Possession of Securities.
----------------------------------
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected.
------------------------------
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal (or premium,
if any) or interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
607; and
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal (and premium, if
any) and interest, respectively.
The Trustee, upon prior written notice to the Issuers, may fix a record date and
payment date for any payment to the Holders pursuant to this Section 506.
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SECTION 507. Limitation on Suits.
-------------------
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(2) the Holders of at least 25% in aggregate principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered and, if requested, provided
to the Trustee reasonable indemnity against the costs, expenses and
liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer and, if requested, provision of indemnity has failed to institute
any such proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders
to Receive Principal, Premium
and Interest.
------------------------------
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to Sec-
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tion 307) interest on such Security on the respective Stated Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date or, in the case of an Offer to Purchase made by the Company and required to
be accepted as to such Security, on the Purchase Date) and to institute suit for
the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Issuers, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as
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may be deemed expedient, by the Trustee or by the Holders, as the case may be.
SECTION 512. Control by Holders.
------------------
The Holders of a majority in aggregate principal amount of the
Outstanding Securities shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, provided that
--------
(1) such direction shall not be in conflict with any rule of law or
with this Indenture or expose the Trustee to personal liability (as
determined in the sole discretion of the Trustee), and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
The Trustee may refuse, however, to follow any direction that the Trustee, in
its sole discretion, determines may be unduly prejudicial to the rights of
another Holder or that may subject the Trustee to any liability or expense if
the Trustee determines, in its sole discretion, that it lacks indemnification
against such loss or expense.
SECTION 513. Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in aggregate principal amount
of the Outstanding Securities may on behalf of the Holders of all the Securities
by written notice to the Trustee waive any past default hereunder and its
consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on any Security (including any Security which is required to have
been purchased pursuant to an Offer to Purchase which has been made by the
Company), or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security affected or
(3) arising from failure to purchase any Security tendered pursuant
to Sections 1013 and 1016.
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Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court may require any party litigant in such suit to file an
undertaking to pay the costs of such suit, and may assess costs against any such
party litigant, in the manner and to the extent provided in the Trust Indenture
Act; provided that neither this Section nor the Trust Indenture Act shall be
--------
deemed to authorize any court to require such an undertaking or to make such an
assessment in any suit instituted by the Issuers.
SECTION 515. Waiver of Stay or Extension Laws.
--------------------------------
The Issuers covenant (to the extent that they may lawfully do so) that
they will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Issuers (to the extent that they
may lawfully do so) hereby expressly waive all benefit or advantage of any such
law and covenant that they will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.
-----------------------------------
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of
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its rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it. Whether or not therein expressly so provided,
every provision of this Indenture relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject to the
provisions of this Section.
SECTION 602. Notice of Defaults.
------------------
The Trustee shall give the Holders notice of any Default hereunder as
and to the extent provided by the Trust Indenture Act, unless such Default has
been cured or waived; provided, however, that in the case of any Default of the
-------- -------
character specified in Section 501(5), no such notice to Holders shall be given
until at least 30 days after the occurrence thereof.
SECTION 603. Certain Rights of Trustee.
-------------------------
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request or direction of the Issuers mentioned herein shall be
sufficiently evidenced by an Issuers Request or an Issuers Order and any
resolution of the Managing Member of the Company may be sufficiently
evidenced by a Managing Member's Certificate and any resolution of the
Board of Directors of Capital may be sufficiently evidenced by a Board
Resolution of Capital;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate or an Opinion of
Counsel;
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(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction reasonably satisfactory to the Trustee;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Issuers, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder; and
(h) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith which the Trustee reasonably believed to have
been authorized or within its rights or powers.
SECTION 604. Not Responsible for Recitals
or Issuance of Securities.
----------------------------
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Issuers, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or
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sufficiency of this Indenture, the Pledge Agreement, the Pledged Securities or
the Securities. The Trustee shall not be accountable for the use or application
by the Issuers of Securities or the proceeds thereof.
SECTION 605. May Hold Securities.
-------------------
The Trustee, any Paying Agent, any Security Registrar (if other than
the Trustee) or any other agent of the Issuers, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
608 and 613, may otherwise deal with the Issuers with the same rights it would
have if it were not Trustee, Paying Agent, Security Registrar or such other
agent.
SECTION 606. Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Issuers.
SECTION 607. Compensation and Reimbursement.
------------------------------
The Issuers agree
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense (including the reasonable compensation,
expenses and disbursements of its agents, accountants, experts and counsel)
incurred without negligence or bad faith on
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its part, arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of enforcing
this Indenture against the Issuers (including, without limitation, this
Section 607) and of defending itself against any claim (whether asserted by
any Holder or the Issuers) or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The provisions of
this Section 607 shall survive any termination of this Indenture and the
resignation or removal of the Trustee.
As security for the performance of the obligations of the Issuers
under this Section 607 and the Pledge Agreement, the Trustee shall have a lien
prior to the Securities upon all property and funds held or collected by the
Trustee, including the Collateral (as defined in the Pledge Agreement), except
funds held in trust for the payment of principal of (and premium, if any) or
interest on particular Securities. The Trustee's right to receive payment of
any amounts due under this Section 607 shall not be subordinate to any other
liability or indebtedness of the Issuers (even though the Securities may be so
subordinated).
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 501(8) or (9) occurs, the expenses and the
compensation for such services are intended to constitute expenses of
administration under Title 11, U.S. Code, or any similar Federal state or
foreign law for the relief of debtors.
SECTION 608. Disqualification; Conflicting Interests.
---------------------------------------
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000 and its Corporate
Trust Office in the Borough of Manhattan, The City of New York, New York. If
such Person publishes reports of condition at least annually, pursuant to law or
to the requirements of a Federal, State, Territorial or District of
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Columbia supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Person shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section, it shall resign immediately
in the manner and with the effect hereinafter specified in this Article.
SECTION 610. Resignation and Removal; Appointment
of Successor.
------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 611, at which
time the retiring Trustee shall be fully discharged from its obligations
hereunder.
(b) The Trustee may resign at any time by giving written notice
thereof to the Issuers. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Issuers.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after written
request therefor by the Issuers or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Issuers or by
any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs
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for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Issuers by (x) a resolution of the Managing
Member of the Company, which may be sufficiently evidenced by a Managing
Member's Certificate and (y) Board Resolution of Capital, may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Issuers, by (x) a resolution of the Managing Member of the Company, which may be
sufficiently evidenced by a Managing Member's Certificate and (y) Board
Resolution of Capital, shall promptly appoint a successor Trustee. If, within
one year after such resignation, removal or incapability, or the occurrence of
such vacancy, a successor Trustee shall be appointed by Act of the Holders of a
majority in principal amount of the Outstanding Securities delivered to the
Issuers and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor Trustee
and supersede the successor Trustee appointed by the Issuers. If no successor
Trustee shall have been so appointed by the Issuers or the Holders and accepted
appointment in the manner hereinafter provided, any Holder who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee.
(f) The Issuers shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee to all Holders in the
manner provided in Section 106. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
--------------------------------------
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Issuers and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become
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vested with all the rights, powers, trusts and duties of the retiring Trustee;
but, on request of the Issuers or the successor Trustee under Section 607,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee,
the Issuers shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. Merger, Conversion, Consolidation
or Succession to Business.
---------------------------------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided that
--------
such corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collection
of Claims Against Issuers.
-------------------------
If and when the Trustee shall be or become a creditor of either of the
Issuers (or any other obligor upon the Securities), the Trustee shall be subject
to the provisions of the Trust Indenture Act regarding the collection of claims
against such Issuer (or any such other obligor).
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SECTION 614. Appointment of Authenticating Agent.
-----------------------------------
The Trustee may appoint an Authenticating Agent or Agents with respect
to the Securities which shall be authorized to act on behalf of the Trustee to
authenticate Securities issued upon original issue and upon exchange,
registration of transfer or partial redemption thereof or pursuant to Section
306, and Securities so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if authenticated
by the Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Issuers and shall at all times be a corporation organized and doing business
under the laws of the United States of America, any State thereof or the
District of Columbia, authorized under such laws to act as Authenticating Agent,
having a combined capital and surplus of not less than $50,000,000 and subject
to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the
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Issuers. The Trustee may at any time terminate the agency of an Authenticating
Agent by giving written notice thereof to such Authenticating Agent and to the
Issuers. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time such Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section, the Trustee may
appoint a successor Authenticating Agent which shall be acceptable to the
Issuers and shall give notice of such appointment in the manner provided in
Section 106 to all Holders of Securities. Any successor Authenticating Agent
upon acceptance of its appointment hereunder shall become vested with all the
rights, powers and duties of its predecessor hereunder, with like effect as if
originally named as an Authenticating Agent. No successor Authenticating Agent
shall be appointed unless eligible under the provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 607.
If an appointment is made pursuant to this Section, the Securities may
have endorsed thereon, in lieu of the Trustee's certificate of authentication,
an alternative certificate of authentication in the following form:
This is one of the Securities referred to in the within-mentioned
Indenture.
United States Trust Company of New York,
As Trustee
By......................................,
As Authenticating Agent
By.......................................
Authorized Signatory
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ARTICLE SEVEN
Holders' Lists and Reports by Trustee and the Issuers
SECTION 701. Issuers to Furnish Trustee
Names and Addresses of Holders.
------------------------------
The Issuers will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Issuers of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
- ---------
capacity as Security Registrar.
SECTION 702. Preservation of Information;
Communications to Holders.
----------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Issuers and the Trustee that none of the Issuers, the Trustee or
any agent of any of them shall be held accountable by reason of any disclosure
of information as to names and addresses of Holders made pursuant to the Trust
Indenture Act.
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SECTION 703. Reports by Trustee.
------------------
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Securities are listed on any stock
exchange.
SECTION 704. Reports by Issuers.
------------------
The Issuers shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act and in the manner set
forth in Section 1017; provided that any such information, documents or reports
--------
required to be filed with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act ("SEC Reports") shall be filed with the Trustee within 15 days
after the same is so required to be filed with the Commission. In the event the
Issuers shall cease to be required to file SEC Reports pursuant to the Exchange
Act, the Issuers will nonetheless continue to file such reports with the
Commission (unless the Commission will not accept such a filing) and the Trustee
and to furnish copies of such SEC Reports to the Holders of Securities at the
time the Issuers are required to file such reports with the Trustee and will
make such information available to investors who request it in writing.
SECTION 705. Officers' Certificate with Respect
to Change in Interest Rates.
----------------------------------
Within five days after any Step-Up, Additional Step-Up or Step-Down
Date, the Issuers shall deliver an Officers' Certificate to the Trustee stating
the new interest rate and the date on which it became effective.
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ARTICLE EIGHT
Merger, Consolidation, Etc.
SECTION 801. Mergers, Consolidations and Certain
Sales of Assets.
-----------------------------------
(a) The Company may not, in a single transaction or a series of
related transactions, (i) consolidate with or merge into any other Person or
permit any other Person to consolidate with or merge into the Company (other
than a consolidation or merger of a Wholly-Owned Restricted Subsidiary organized
under the laws of a State of the United States into the Company), or (ii)
directly or indirectly, transfer, sell, lease or otherwise dispose of all or
substantially all of its assets (determined on a consolidated basis for the
Company and its Restricted Subsidiaries taken as a whole and provided that the
creation of a Lien on or in any of its assets shall not in and of itself
constitute the transfer, sale, lease or disposition of the assets subject to the
Lien), unless: (1) in a transaction in which the Company does not survive or in
which the Company sells, leases or otherwise disposes of all or substantially
all of its assets to any other Person, the successor entity to the Company is
organized under the laws of the United States of America or any State thereof or
the District of Columbia and shall expressly assume, by a supplemental indenture
executed and delivered to the Trustee in form satisfactory to the Trustee, all
of the Company's obligations under this Indenture; (2) immediately after giving
pro forma effect to such transaction as if such transaction had occurred at the
beginning of the last full fiscal quarter immediately prior to the consummation
of such transaction with the appropriate adjustments with respect to the
transaction being included in such pro forma calculation and treating any Debt
which becomes an obligation of the Company or a Subsidiary as a result of such
transaction as having been Incurred by the Company or such Subsidiary at the
time of the transaction, no Default or Event of Default shall have occurred and
be continuing; (3) immediately after giving effect to such transaction, the
Consolidated Net Worth of the Company (or other successor entity to the Company)
is equal to or greater than that of the Company immediately prior to the
transaction; (4) if, as a result of any such transaction, property or assets of
the Company would become subject to a Lien prohibited by the provisions of
Section 1011, the Company or the successor entity to the Company shall have
secured the Securities as required by Section 1011; (5) the Issuers have
delivered to the Trustee an Opinion of Counsel to the effect that the Holders of
the Securities will not recognize gain or loss for federal
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income tax purposes as a result of such transaction; and (6) the Company has
delivered to the Trustee an Officer's Certificate and an Opinion of Counsel,
each in form and substance satisfactory to the Trustee stating that such
consolidation, merger, conveyance, transfer, lease or acquisition and, if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture, complies with this Article and that all conditions
precedent herein provided for relating to such transaction have been complied
with, and, with respect to such Officer's Certificate, setting forth the manner
of determination of the Consolidated Net Worth in accordance with Clause (3) of
Section 801, of the Company or, if applicable, of the Successor Company as
required pursuant to the foregoing.
(b) In the event of any transaction (other than a lease) described in
and complying with the immediately preceding paragraph in which the Company is
not the surviving person and the surviving person assumes all the obligations of
the Company under the Securities and this Indenture pursuant to a supplemental
indenture, such surviving person shall succeed to, and be substituted for, and
may exercise every right and power of, the Company, and the Company will be
discharged from its obligations under this Indenture and the Securities;
provided that solely for the purpose of calculating amounts under Section
- --------
1009(3), any such surviving person shall only be deemed to have succeeded to and
be substituted for the Company with respect to the period subsequent to the
effective time of such transaction, and the Company (before giving effect to
such transaction) shall be deemed to be the "Company" for such purposes for all
prior periods.
SECTION 802. Successor Substituted.
---------------------
Upon any consolidation of either of the Issuers with, or merger of
either of the Issuers with or into, any other Person or any conveyance, transfer
or lease of the properties and assets of either of the Issuers substantially as
an entirety in accordance with Section 801, the successor Person formed by such
consolidation or into which either of the Issuers is merged or to which such
conveyance, transfer or lease is made shall succeed to, and be substituted for,
and may exercise every right and power of, such Issuer under this Indenture with
the same effect as if such successor Person had been named as such Issuer
herein, and thereafter, except in the case of a lease, the predecessor Person
shall be relieved of all obligations and covenants under this Indenture and the
Securities.
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ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures
Without Consent of Holders.
--------------------------
Without the consent of any Holders, the Issuers, when authorized by
(x) a resolution of the Managing Member of the Company, which may be
sufficiently evidenced by a such Managing Member's Certificate and (y) Board
Resolution of Capital, and the Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto, in form satisfactory to
the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to either of the
Issuers and the assumption by any such successor of the covenants of the
Issuers herein and in the Securities; or
(2) to add to the covenants of the Issuers for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Issuers; or
(3) to secure the Securities pursuant to the requirements of Section
1011 or otherwise; or
(4) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to comply with any requirement of the
Commission in order to effect qualification of this Indenture under the
Trust Indenture Act in connection with the issuance of Exchange Securities
or thereafter to maintain the qualification of this Indenture under the
Trust Indenture Act;
(5) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture which shall not be inconsistent with the provisions of
this Indenture, provided that such action pursuant to this Clause (5) shall
--------
not adversely affect the legal rights of the Holders; or
(6) to provide for uncertificated Securities in addition to or in
place of certificated Securities.
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SECTION 902. Supplemental Indentures
with Consent of Holders.
-----------------------
With the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Securities, by Act of said Holders
delivered to the Issuers and the Trustee, and consistent with Section 513, the
Issuers, when authorized by (x) a resolution of the Managing Member of the
Company, which may be sufficiently evidenced by a Managing Member's Certificate
and (y) Board Resolution of Capital, and the Trustee may enter into an indenture
or indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture or
of modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
- -------- -------
consent of the Holder of each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable thereon, or
change the place of payment where, or the coin or currency in which, any
Security or any premium or interest thereon is payable, or impair the right
to institute suit for the enforcement of any such payment on or after the
Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date) or, in the case of an Offer to Purchase which has been
made, on or after the applicable Purchase Date, or
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture,
or
(3) modify any of the provisions of this Section, Section 513 or
Section 1021, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby, or
(4) following the mailing of an Offer with respect to an Offer to
Purchase pursuant to Section 1013 or 1016 and until the Expiration Date of
such Offer to Purchase, modify the provisions of this
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Indenture with respect to such Offer to Purchase in a manner materially
adverse to such Holder.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Securities
to Supplemental Indentures.
--------------------------
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Issuers shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Issuers, to any
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such supplemental indenture may be prepared and executed by the Issuers and
authenticated and delivered by the Trustee in exchange for Outstanding
Securities.
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and
Interest.
---------------------------------
The Issuers will duly and punctually pay the principal of and premium,
if any, and interest on the Securities in accordance with the terms of the
Securities and this Indenture; provided, however, that no payment of principal
-------- -------
or interest will be made in respect of a Temporary Regulation S Global Note.
SECTION 1002. Maintenance of Office or Agency.
-------------------------------
The Issuers will maintain in the Borough of Manhattan, The City of New
York, New York, an office or agency where Securities may be presented or
surrendered for payment, where Securities may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Issuers in
respect of the Securities and this Indenture may be served. The Issuers will
give prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Issuers shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee, and the
Issuers hereby appoint the Trustee as their agent to receive all such
presentations, surrenders, notices and demands.
The Issuers may also from time to time designate one or more other
offices or agencies (in or outside the Borough of Manhattan, The City of New
York, New York) where the Securities may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
--------
however, that no such designation or rescission shall in any manner relieve the
- -------
Issuers of their obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, New York for such purposes. The Issuers will
give prompt written notice to the Trustee
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of any such designation or rescission and of any change in the location of any
such other office or agency.
SECTION 1003. Money for Security
Payments to be Held in Trust.
----------------------------
If the Issuers shall at any time act as their own Paying Agent, they
will, on or before each due date of the principal of (and premium, if any) or
interest on any of the Securities, segregate and hold in trust for the benefit
of the Persons entitled thereto a sum sufficient to pay the principal (and
premium, if any) or interest so becoming due until such sums shall be paid to
such Persons or otherwise disposed of as herein provided and will promptly
notify the Trustee in writing of its action or failure so to act. As provided
in Section 504, upon any bankruptcy or reorganization proceeding relative to the
Issuers, the Trustee shall serve as the Paying Agent for the Securities.
Whenever the Issuers shall have one or more Paying Agents, it will,
prior to each due date of the principal of (and premium, if any) or interest on
any Securities, deposit with a Paying Agent a sum sufficient to pay the
principal (and premium, if any) or interest so becoming due, such sum to be held
in trust for the benefit of the Persons entitled to such principal, premium or
interest, and (unless such Paying Agent is the Trustee) the Issuers will
promptly notify the Trustee in writing of its action or failure so to act. As
provided in Section 504, upon any bankruptcy or reorganization proceeding
relative to the Issuers the Trustee shall serve as the Paying Agent for the
Securities.
The Issuers will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Issuers (or any
other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest;
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(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent; and
(4) acknowledge, accept and agree to comply in all respects with the
provisions of this Indenture relating to the duties, rights and obligations
of such Paying Agent.
The Issuers may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Issuers Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Issuers or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Issuers or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Issuers, in trust for the payment of the principal of (and premium, if
any) or interest on any Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall be paid to the Issuers on the Issuers Request, or (if then held by the
Issuers) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Issuers for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Issuers as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
-------- -------
Paying Agent, before being required to make any such repayment, may at the
expense of the Issuers cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the Borough of Manhattan, The City of New York, New York, notice
that such money remains unclaimed and that, after a date specified therein,
which shall not be less than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be repaid to the Issuers.
SECTION 1004. Existence.
---------
Subject to Article Eight, the Issuers will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and
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statutory) and franchises; provided, however, that the Issuers shall not be
-------- -------
required to preserve any such right or franchise if the Managing Member of the
Company or the Board of Directors of Capital, as the case may be, shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of that Issuer and that the loss thereof is not disadvantageous in
any material respect to the Holders.
SECTION 1005. Maintenance of Properties and Insurance.
---------------------------------------
Each Issuer will cause all properties used or useful in the conduct of
its business, or in the case of the Company, the business of any Subsidiary, to
be maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of such Issuer may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section shall prevent an Issuer from
- -------- -------
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, as determined in the good faith judgment of (x) in the case
of the Company, the Managing Member, evidenced by a Managing Member's
Certificate or (y) in the case of Capital, the Board of Directors of Capital
evidenced by a Board Resolution, desirable in the conduct of its business or, in
the case of the Company, the business of any Subsidiary, and not disadvantageous
in any material respect to the Holders.
The Issuers shall, and shall cause the Subsidiaries of the Company to,
keep at all times all of their properties which are of an insurable nature
insured against loss or damage with insurers believed by the Issuers to be
responsible to the extent that property of similar character is usually so
insured by corporations similarly situated and owning like properties in
accordance with good business practice.
SECTION 1006. Payment of Taxes and Other Claims.
---------------------------------
The Issuers will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Issuers or any Subsidiaries of
the Company or upon the income, profits or property of the Issuers or any
Subsidiaries, and (2) all lawful claims for
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labor, materials and supplies which, if unpaid, might by law become a lien upon
the property of the Issuers or any Subsidiaries of the Company; provided,
--------
however, that the Issuers shall not be required to pay or discharge or cause to
- -------
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
SECTION 1007. Limitation on Consolidated Debt.
-------------------------------
The Company may not, and may not permit any Restricted Subsidiary of
the Company to, Incur any Debt unless either (a) the ratio of (i) the aggregate
consolidated principal amount of Debt of the Company outstanding as of the most
recent available quarterly or annual balance sheet, after giving pro forma
effect to the Incurrence of such Debt and any other Debt Incurred since such
balance sheet date and the receipt and application of the proceeds thereof to
(ii) Consolidated Cash Flow Available for Fixed Charges for the four full fiscal
quarters next preceding the Incurrence of such Debt for which consolidated
financial statements are available, determined on a pro forma basis as if any
such Debt had been Incurred and the proceeds thereof had been applied at the
beginning of such four fiscal quarters, would be less than 5.5 to 1 for such
four-quarter periods ending on or prior to December 31, 1999 and 5.0 to 1 for
such periods ending thereafter, or (b) the Company's Consolidated Capital Ratio
as of the most recent available quarterly or annual balance sheet, after giving
pro forma effect to the Incurrence of such Debt and any other Debt Incurred
since such balance sheet date and the receipt and application of the proceeds
thereof, is less than 2.0 to 1.
Notwithstanding the foregoing limitation, the Company and any
Restricted Subsidiary may Incur the following:
(i) Debt under any one or more Bank Credit Agreements or Vendor
Financing Facilities in an aggregate principal amount at any one time not
to exceed $125 million, and any renewal, extension, refinancing or
refunding thereof in an amount which, together with any principal amount
remaining outstanding or available under all Bank Credit Agreements and
Vendor Financing Facilities of the Company and its Restricted Subsidiaries,
plus the amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of any Bank Credit Agreement so
refinanced plus the amount of
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expenses incurred in connection with such refinancing, does not exceed the
aggregate principal amount outstanding or available under all such Bank
Credit Agreements and Vendor Financing Facilities of the Company and its
Restricted Subsidiaries immediately prior to such renewal, extension,
refinancing or refunding;
(ii) Purchase Money Debt Incurred to finance the construction,
acquisition or improvement of Telecommunications Assets, provided that the
--------
net proceeds of such Purchase Money Debt do not exceed 80% of the cost of
construction, acquisition or improvement price of the applicable
Telecommunications Assets;
(iii) Debt owed by the Company to any Wholly-Owned Restricted
Subsidiary of the Company or Debt owed by a Restricted Subsidiary of the
Company to the Company or another Wholly-Owned Restricted Subsidiary of the
Company; provided, however, that upon either (x) the transfer or other
-------- -------
disposition by such Wholly-Owned Restricted Subsidiary or the Company of
any Debt so permitted to a Person other than the Company or another Wholly-
Owned Restricted Subsidiary of the Company or (y) the issuance (other than
directors' qualifying shares), sale, lease, transfer or other disposition
of shares of Capital Stock (including by consolidation or merger) of such
Wholly-Owned Restricted Subsidiary to a Person other than the Company or
another such Wholly-Owned Restricted Subsidiary, the provisions of this
clause (iii) shall no longer be applicable to such Debt and such Debt shall
be deemed to have been Incurred at the time of such transfer or other
disposition;
(iv) Debt Incurred to renew, extend, refinance or refund (each, a
"refinancing") Debt outstanding at the date of this Indenture or Incurred
pursuant to the preceding paragraph or clause (ii) of this paragraph or the
Securities in an aggregate principal amount not to exceed the aggregate
principal amount of and accrued interest on the Debt so refinanced plus the
amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of the Debt so refinanced or the amount
of any premium reasonably determined by the Company as necessary to
accomplish such refinancing by means of a tender offer or privately
negotiated repurchase, plus the amount of expenses of the Company incurred
in connection with such refinancing; provided, however, that Debt the
-------- -------
proceeds of which are used to refinance the Securities or Debt which is
pari passu to the Securities or debt
---- -----
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<PAGE>
which is subordinate in right of payment to the Securities shall only be
permitted if (A) in the case of any refinancing of the Securities or Debt
which is pari passu to the Securities, the refinancing Debt is made pari
---- ----- ----
passu to the Securities or subordinated to the Securities, and, in the case
-----
of any refinancing of Debt which is subordinated to the Securities, the
refinancing Debt constitutes Subordinated Debt and (B) in either case, the
refinancing Debt by its terms, or by the terms of any agreement or
instrument pursuant to which such Debt is issued, (x) does not provide for
payments of principal of such Debt at the stated maturity thereof or by way
of a sinking fund applicable thereto or by way of any mandatory redemption,
defeasance, retirement or repurchase thereof by the Company (including any
redemption, retirement or repurchase which is contingent upon events or
circumstances, but excluding any retirement required by virtue of
acceleration of such Debt upon any event of default thereunder), in each
case prior to the time the same are required by the terms of the Debt being
refinanced and (y) does not permit redemption or other retirement
(including pursuant to an offer to purchase made by the Company) of such
debt at the option of the holder thereof prior to the final stated maturity
of the Debt being refinanced, other than a redemption or other retirement
at the option of the holder of such Debt (including pursuant to an offer to
purchase made by the Company) which is conditioned upon a change
substantially similar to the provisions of Section 1016 or which is
pursuant to provisions substantially similar to the provisions of
Section 1013;
(v) Debt consisting of Permitted Interest Rate and Currency
Protection Agreements;
(vi) Debt outstanding under the Securities;
(vii) Subordinated Debt invested by (a) a group of employees of the
Company, which includes the Chief Executive Officer of the Company, who
own, directly or indirectly, through an employee stock ownership plan or
arrangement, shares of the Company's Capital Stock or (b) any other Person
that controls the Company (i) on the Issue Date or (ii) after a Change of
Control, provided that the Company is not in default with respect to its
--------
obligations under Section 1016;
(viii) Debt consisting of performance and other similar bonds and
reimbursement obligations Incurred in the ordinary course of business
securing the
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performance of contractual, franchise or license obligations of the Company
or a Restricted Subsidiary, or in respect of a letter of credit obtained to
secure such performance; and
(ix) Debt not otherwise permitted to be Incurred pursuant to clauses
(i) through (viii) above, which, together with any other outstanding Debt
Incurred pursuant to this clause (ix), has an aggregate principal amount
(or, in the case of Debt issued at a discount, an accreted amount
(determined in accordance with generally accepted accounting principles) at
the time of Incurrence) not in excess of $10 million at any time
outstanding.
For purposes of determining compliance with this Section 1007, in the event
that an item of Debt meets the criteria of more than one of the types of Debt
the Company is permitted to incur pursuant to the foregoing clauses (i) through
(ix), the Company shall have the right, in its sole discretion, to classify such
item of Debt and shall only be required to include the amount and type of such
Debt under the clause permitting the Debt as so classified. For purposes of
determining any particular amount of Debt under such covenant, Guarantees or
Liens with respect to letters of credit supporting Debt otherwise included in
the determination of a particular amount shall not be included.
SECTION 1008. Limitation on Debt and Preferred Stock
of Restricted Subsidiaries.
--------------------------------------
The Company may not permit any Restricted Subsidiary of the Company (other
than a Restricted Subsidiary that has fully and unconditionally Guaranteed the
Securities on an unsubordinated basis) to Incur or suffer to exist any Debt or
issue any Preferred Stock except:
(i) Debt or Preferred Stock outstanding on the date of this
Indenture after giving effect to the application of the proceeds of the
Securities;
(ii) Debt Incurred or Preferred Stock issued to and held by the
Company or a Wholly-Owned Restricted Subsidiary of the Company (provided
that such Debt or Preferred Stock is at all times held by the Company or a
Wholly-Owned Restricted Subsidiary of the Company);
(iii) Debt Incurred or Preferred Stock issued by a Person prior to
the time (A) such Person became a Restricted Subsidiary of the Company,
(B) such Person
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merges into or consolidates with a Restricted Subsidiary of the Company or
(C) another Restricted Subsidiary of the Company merges into or
consolidates with such Person (in a transaction in which such Person
becomes a Restricted Subsidiary of the Company), which Debt or Preferred
Stock was not Incurred or issued in anticipation of such transaction and
was outstanding prior to such transaction;
(iv) Debt consisting of Permitted Interest Rate and Currency
Protection Agreements;
(v) Debt or Preferred Stock of a Joint Venture;
(vi) Debt under any one or more Bank Credit Agreements or Vendor
Financing Facilities (and renewals, extensions, refinancings or refundings
thereof) which is permitted to be outstanding under clause (i) of
Section 1007;
(vii) Debt consisting of Guarantees of the Securities;
(viii) Debt or Preferred Stock which is exchanged for, or the
proceeds of which are used to refinance, refund or redeem, any Debt or
Preferred Stock permitted to be outstanding pursuant to clauses (i) and
(iii) hereof (or any extension or renewal thereof) (for purposes hereof, a
"refinancing"), in an aggregate principal amount, in the case of Debt, or
with an aggregate liquidation preference, in the case of Preferred Stock,
not to exceed the aggregate principal amount of the Debt so refinanced or
the aggregate liquidation preference of the Preferred Stock so refinanced,
plus the amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of the Debt or Preferred Stock so
refinanced or the amount of any premium reasonably determined by the
Company as necessary to accomplish such refinancing by means of a tender
offer or privately negotiated repurchase, plus the amount of expenses of
the Company and the Restricted Subsidiary incurred in connection therewith
and provided the Debt or Preferred Stock incurred or issued upon such
refinancing by its terms, or by the terms of any agreement or instrument
pursuant to which such Debt or Preferred Stock is Incurred or issued,
(x) does not provide for payments of principal or liquidation value at the
stated maturity of such Debt or Preferred Stock or by way of a sinking fund
applicable to such Debt or Preferred Stock or by way of any mandatory
redemption, defeasance, retirement or
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repurchase of such Debt or Preferred Stock by the Company or any Restricted
Subsidiary of the Company (including any redemption, retirement or
repurchase which is contingent upon events or circumstances, but excluding
any retirement required by virtue of acceleration of such Debt upon an
event of default thereunder), in each case prior to the time the same are
required by the terms of the Debt or Preferred Stock being refinanced and
(y) does not permit redemption or other retirement (including pursuant to
an offer to purchase made by the Company or a Restricted Subsidiary of the
Company) of such Debt or Preferred Stock at the option of the holder
thereof prior to the stated maturity of the Debt or Preferred Stock being
refinanced, other than a redemption or other retirement at the option of
the holder of such Debt or Preferred Stock (including pursuant to an offer
to purchase made by the Company or a Restricted Subsidiary of the Company)
which is conditioned upon the change of control of the Company pursuant to
provisions substantially similar to the provisions of Section 1016 or which
is pursuant to provisions substantially similar to the provisions of
Section 1013, and provided, further, that in the case of any exchange or
-------- -------
redemption of Preferred Stock of a Restricted Subsidiary of the Company,
such Preferred Stock may only be exchanged for or redeemed with Preferred
Stock of such Restricted Subsidiary; and
(ix) Debt not otherwise permitted to be incurred pursuant to clauses
(i) through (viii) above, which, together with any other outstanding Debt
incurred pursuant to this clause (ix), has an aggregate principal amount
(or, in the case of Debt issued at a discount, an accreted amount
(determined in accordance with generally accepted accounting principles) at
the time of Incurrence) not in excess of $10 million at any time
outstanding.
SECTION 1009. Limitation on Restricted Payments.
---------------------------------
The Company (i) may not, directly or indirectly, declare or pay any
dividend, or make any distribution, in respect of its Capital Stock or to the
holders thereof (in their capacity as such), excluding any dividends or
distributions payable solely in shares of its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to acquire its
Capital Stock (other than Disqualified Stock); (ii) may not, and may not permit
any Restricted Subsidiary to, purchase, redeem, or otherwise
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retire or acquire for value (a) any Capital Stock of the Company or any Related
Person of the Company; or (b) any options, warrants or rights to purchase or
acquire shares of Capital Stock of the Company or any Related Person of the
Company or any securities convertible or exchangeable into shares of Capital
Stock of the Company or any Related Person of the Company; (iii) may not make,
or permit any Restricted Subsidiary to make, any Investment in, or payment on a
Guarantee of any obligation of, any Person, other than the Company or a
Restricted Subsidiary of the Company, except for Permitted Investments; and
(iv) may not, and may not permit any Restricted Subsidiary to, redeem, defease,
repurchase, retire or otherwise acquire or retire for value, prior to any
scheduled maturity, repayment or sinking fund payment, Debt of the Company
which is subordinate in right of payment to the Securities (each of clauses
(i) through (iv) being a "Restricted Payment") if: (1) a Default or an Event
of Default shall have occurred and is continuing; or (2) upon giving effect
to such Restricted Payment, the Company could not Incur at least $1.00 of
additional Debt pursuant to the provisions of the first paragraph of
Section 1007; or (3) upon giving effect to such Restricted Payment, the
aggregate of all Restricted Payments from the date of this Indenture exceeds
the sum of: (a) 50% of cumulative Consolidated Net Income (or, in the case
Consolidated Net Income shall be negative, less 100% of such deficit) since
the end of the last full fiscal quarter prior to the date of this Indenture
through the last day of the last full fiscal quarter ending immediately
preceding the date of such Restricted Payment; plus (b) $5 million; plus
(c) 100% of the net reduction in Investments in any Unrestricted Subsidiary
resulting from payments of interest on Debt, dividends, repayments of loans or
advances, or other transfers of assets, in each case to the Company or any
Restricted Subsidiary of the Company from such Unrestricted Subsidiary (except
to the extent that any such payment is included in the calculation of
Consolidated Net Income) or from redesignations of Unrestricted Subsidiaries
as Restricted Subsidiaries; provided that the amount included in this
--------
clause (c) shall not exceed the amount of Investments previously made by the
Company and its Restricted Subsidiaries in such Unrestricted Subsidiary;
provided, further, that the Company or a Restricted Subsidiary of the Company
- -------- -------
may make any Restricted Payment with the aggregate net proceeds received
after the date of this Indenture, including the fair value of property other
than cash (determined in good faith by the Managing Member, as conclusively
evidenced by a Managing Member's Certificate filed with the Trustee), as
capital contributions to the Company or from the issuance (other than to a
Restricted Subsidiary) of Capital Stock (other than Disqualified Stock)
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of the Company and warrants, rights or options on Capital Stock (other than
Disqualified Stock) of the Company and the principal amount of Debt of the
Company that has been converted into Capital Stock (other than Disqualified
Stock and other than by a Restricted Subsidiary) of the Company after the date
of this Indenture.
Notwithstanding the foregoing, the Company may (i) pay any dividend on
Capital Stock of any class within 60 days after the declaration thereof if, on
the date when the dividend was declared, the Company could have paid such
dividend in accordance with the foregoing provisions; (ii) repurchase any shares
of its Common Equity or options to acquire its Common Equity from Persons who
were formerly officers or employees of the Company, provided that the aggregate
--------
amount of all such repurchases made pursuant to this clause (ii) shall not
exceed $2 million, plus the aggregate cash proceeds received by the Company
since the date of this Indenture from issuances of its Common Equity or options
to acquire its Common Equity to members, officers, managers and employees of the
Company or any of its Subsidiaries; (iii) the Company and its Restricted
Subsidiaries may refinance any Debt otherwise permitted by clause (iv) of the
second paragraph of Section 1007; (iv) so long as no Event of Default shall have
occurred and be continuing, and so long as the Company is treated as a
partnership for U.S. federal income tax purposes, make distributions in respect
of members' or partners' income tax liability in an amount not to exceed the Tax
Amount; and (v) the Company and its Restricted Subsidiaries may retire or
repurchase any Capital Stock of the Company or of any Restricted Subsidiary of
the Company in exchange for, or out of the proceeds of the substantially
concurrent sale (other than to a Restricted Subsidiary of the Company) of,
Capital Stock (other than Disqualified Stock) of the Company. If the Company
makes a Restricted Payment which, at the time of the making of such Restricted
Payment, would in the good faith determination of the Company be permitted under
this Indenture, such Restricted Payment shall be deemed to have been made in
compliance with this Indenture notwithstanding any subsequent adjustments made
in good faith to the Company financial statements affecting Consolidated Net
Income for any period.
SECTION 1010. Limitation on Dividend and Other
Payment Restrictions Affecting
Restricted Subsidiaries.
--------------------------------
The Company may not, and may not permit any Restricted Subsidiary to,
directly or indirectly, create or
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otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary of the
Company (i) to pay dividends (in cash or otherwise) or make any other
distributions in respect of its Capital Stock owned by the Company or any other
Restricted Subsidiary of the Company or pay any Debt or other obligation owed to
the Company or any other Restricted Subsidiary; (ii) to make loans or advances
to the Company or any other Restricted Subsidiary; or (iii) to transfer any of
its property or assets to the Company or any other Restricted Subsidiary.
Notwithstanding the foregoing, the Company may, and may permit any Restricted
Subsidiary to, suffer to exist any such encumbrance or restriction (a) pursuant
to any agreement in effect on the Issue Date; (b) pursuant to an agreement
relating to any Acquired Debt, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person so acquired and its Subsidiaries; (c) pursuant to any one or more
Bank Credit Agreements or Vendor Financing Facilities (and renewals, extensions,
refinancings or refundings thereof) which is permitted to be outstanding under
clause (i) of Section 1007, provided that such restriction is consistent with,
--------
and not materially more restrictive (as conclusively determined in good faith by
the Chief Financial Officer of the Company), taken as a whole, than, comparable
provisions included in similar agreements or facilities extended to comparable
credits engaged in the Telecommunications Business; (d) pursuant to an
agreement effecting a renewal, refunding or extension of Debt Incurred pursuant
to an agreement referred to in clause (a) or (b) above or (e) below, provided,
--------
however, that the provisions contained in such renewal, refunding or extension
- -------
agreement relating to such encumbrance or restriction are not materially more
restrictive (as conclusively determined in good faith by the Chief Financial
Officer of the Company), taken as a whole, than the provisions contained in the
agreement the subject thereof; (e) in the case of clause (iii) above,
restrictions contained in any security agreement (including a Capital Lease
Obligation) securing Debt of the Company or a Restricted Subsidiary otherwise
permitted under this Indenture, but only to the extent such restrictions
restrict the transfer of the property subject to such security agreement; (f) in
the case of clause (iii) above, customary nonassignment provisions entered into
in the ordinary course of business in leases and other agreements; (g) any
restriction with respect to a Restricted Subsidiary of the Company imposed
pursuant to an agreement which has been entered into for the sale or disposition
of all or substantially all of the Capital Stock or assets of such Restricted
Subsidiary, provided that consummation of such transaction would not result in a
Default or an Event
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of Default, that such restriction terminates if such transaction is not
consummated and that such consummation or abandonment of such transaction occurs
within one year of the date such agreement was entered into; (h) pursuant to
applicable law or regulations; (i) pursuant to this Indenture and the
Securities; or (j) any restriction on the sale or other disposition of assets or
property securing Debt as a result of a Permitted Lien on such assets or
property.
SECTION 1011. Limitation on Liens.
-------------------
The Company may not, and may not permit any Restricted Subsidiary of the
Company to, Incur or suffer to exist any Lien on or with respect to any property
or assets now owned or hereafter acquired to secure any Debt without making, or
causing such Restricted Subsidiary to make, effective provision for securing the
Securities (x) equally and ratably with (or prior to) such Debt as to such
property for so long as such Debt will be so secured or (y) in the event such
Debt is Debt of the Company which is subordinate in right of payment to the
Securities, prior to such Debt as to such property for so long as such Debt will
be so secured.
The foregoing restrictions shall not apply to: (i) Liens existing on the
Issue Date and securing Debt outstanding on the Issue Date or securing the
Securities or Liens securing Debt Incurred pursuant to any Bank Credit Agreement
or Vendor Financing Facility (whether or not such Bank Credit Agreement or
Vendor Financing Facility was outstanding on the Issue Date); (ii) Liens
securing Debt in an amount which, together with the aggregate amount of Debt
then outstanding or available under the Bank Credit Agreement and Vendor
Financing Facility (or under refinancings or amendments of such agreements),
does not exceed 1.5 times the Company's Consolidated Cash Flow Available for
Fixed Charges for the four full fiscal quarters preceding the Incurrence of such
Lien for which consolidated financial statements are available, determined on a
pro forma basis as if such Debt had been Incurred and the proceeds thereof had
been applied at the beginning of such four fiscal quarters; (iii) Liens in favor
of the Company or any Wholly-Owned Restricted Subsidiary of the Company;
(iv) Liens on real or personal property of the Company or a Restricted
Subsidiary of the Company acquired, constructed or constituting improvements
made after the Issue Date to secure Purchase Money Debt which is Incurred for
the construction, acquisition and improvement of Telecommunications Assets and
is otherwise permitted under
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this Indenture, provided, however, that (a) the net proceeds of any Debt secured
-------- -------
by such a Lien does not exceed 100% of such purchase price or cost of
construction or improvement of the property subject to such Lien, (b) such Lien
attaches to such property prior to, at the time of or within 180 days after the
acquisition, completion of construction or commencement of operation of such
property and (c) such Lien does not extend to or cover any property other than
the property (or identifiable portions thereof) acquired, constructed or
constituting the improvements made with the proceeds of such Purchase Money Debt
(it being understood and agreed that all Debt owed to any single lender or group
of lenders or outstanding under any single credit facility shall be considered a
single Purchase Money Debt, whether drawn at one time or from time to time);
(v) Liens to secure Acquired Debt, provided, however, that (a) such Lien
-------- -------
attaches to the acquired asset prior to the time of the acquisition of such
asset and (b) such Lien does not extend to or cover any other asset; (vi) Liens
to secure Debt Incurred to extend, renew, refinance or refund (or successive
extensions, renewals, refinancings or refundings), in whole or in part, Debt
secured by any Lien referred to in the foregoing clauses (i), (ii), (iv) and
(v) so long as such Lien does not extend to any other property and the principal
amount of Debt so secured is not increased except as otherwise permitted under
clause (iv) of Section 1007; (vii) Liens securing Debt not otherwise permitted
by the foregoing clauses (i) through (vi) in an amount not to exceed 5% of the
Company's Consolidated Tangible Assets determined as of the most recent
available quarterly or annual balance sheet; and (viii) Permitted Liens.
SECTION 1012. Limitation on Sale and Leaseback
Transactions.
--------------------------------
The Company may not, and may not permit any Restricted Subsidiary to, enter
into any Sale and Leaseback Transaction unless (i) the Company or such
Restricted Subsidiary would be entitled to Incur a Lien to secure Debt by reason
of the provisions of Section 1011, equal in amount to the Attributable Value of
the Sale and Leaseback Transaction without equally and ratably securing the
Securities; or (ii) the Sale and Leaseback Transaction is treated as an Asset
Disposition and all of the conditions of Section 1013 (including the provisions
concerning the application of Net Available Proceeds) are satisfied with respect
to such Sale and Leaseback Transaction, treating all of the consideration
received in such Sale and Leaseback Transaction in the same manner as
consideration in respect of an Asset Disposition for purposes of such covenant.
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SECTION 1013. Limitation on Asset Dispositions.
--------------------------------
(a) The Company may not, and may not permit any Restricted Subsidiary to,
make any Asset Disposition in one or more related transactions occurring within
any 12-month period unless: (i) the Company or the Restricted Subsidiary, as
the case may be, receives consideration for such disposition at least equal to
the fair market value for the assets sold or disposed of as determined by the
Managing Member in good faith and evidenced by a Managing Member's Certificate
filed with the Trustee, which determination shall be conclusive; (ii) at least
75% of the consideration for such disposition consists of (1) cash or readily
marketable cash equivalents or the assumption of Debt of the Company (other than
Debt that is subordinated to the Securities) or of the Restricted Subsidiary and
release from all liability on the Debt assumed; (2) Telecommunications Assets;
or (3) shares of publicly-traded Voting Stock of any Person engaged in the
Telecommunications Business in the United States; and (iii) all Net Available
Proceeds, less any amounts invested within 360 days of such disposition in new
Telecommunications Assets, are applied within 360 days of such disposition
(1) first, to the permanent repayment or reduction of Debt then outstanding
under any Bank Credit Agreement or Vendor Financing Facility, to the extent such
agreements would require such application or prohibit payments pursuant to
clause (2) following, (2) second, to the extent of remaining Net Available
Proceeds, to make an Offer to Purchase outstanding Securities at 100% of their
principal amount plus accrued interest to the date of purchase and, to the
extent required by the terms thereof, any other Debt of the Company that is pari
passu with the Securities at a price no greater than 100% of the principal
amount thereof plus accrued interest to the date of purchase, and (3) third, to
the extent of any remaining Net Available Proceeds following the completion of
the Offer to Purchase, to the repayment of other Debt of the Company or Debt of
a Restricted Subsidiary of the Company, to the extent permitted under the terms
thereof. To the extent any Net Available Proceeds remain after such uses, the
Company and its Restricted Subsidiaries may use such amounts for any purposes
not prohibited by this Indenture.
(b) The Company will mail the Offer for an Offer to Purchase required
pursuant to Section 1013(a) not more than 360 days after consummation of the
disposition referred to in Section 1013(a). The aggregate principal amount of
the Securities to be offered to be purchased pursuant to the Offer to Purchase
shall equal the Net Available Proceeds available therefor pursuant to Clause
(iii)(2) of
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Section 1013(a) (rounded down to the next lowest integral multiple of $1,000).
Each Holder shall be entitled to tender all or any portion of the Securities
owned by such Holder pursuant to the Offer to Purchase, subject to the
requirement that any portion of a Security tendered must be tendered in an
integral multiple of $1,000 principal amount.
The Company shall not be entitled to any credit against its obligations
under this Section 1013 for the principal amount of any Securities acquired or
redeemed by the Company otherwise than pursuant to the Offer to Purchase
pursuant to this Section 1013.
(c) Not later than the date of the Offer with respect to an Offer to
Purchase pursuant to this Section 1013, the Company shall deliver to the Trustee
an Officers' Certificate as to (i) the Purchase Amount, (ii) the allocation of
the Net Available Proceeds from the Asset Disposition pursuant to which such
Offer is being made, including, if amounts are invested in Telecommunication
Assets, the amount of the assets acquired and (iii) the compliance of such
allocation with the provisions of Section 1013(a).
The Company and the Trustee shall perform their respective obligations
specified in the Offer for the Offer to Purchase. On or prior to the Purchase
Date, the Company shall (i) accept for payment (on a pro rata basis, if
necessary) Securities or portions thereof tendered pursuant to the Offer,
(ii) deposit with the Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 1003) money
sufficient to pay the purchase price of all Securities or portions thereof so
accepted and (iii) deliver or cause to be delivered to the Trustee all
Securities so accepted together with an Officers' Certificate stating the
Securities or portions thereof accepted for payment by the Company. The Paying
Agent (or the Company, if so acting) shall promptly mail or deliver to Holders
of Securities so accepted payment in an amount equal to the purchase price, and
the Trustee shall promptly authenticate and mail or deliver to such Holders a
new Security of like tenor equal in principal amount to any unpurchased portion
of the Security surrendered. Any Security not accepted for payment shall be
promptly mailed or delivered by the Company to the Holder thereof.
(d) Notwithstanding the foregoing, this Section 1013 shall not apply to
any Asset Disposition which constitutes a transfer, conveyance, sale, lease or
other disposition of all or substantially all of the Company's
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properties or assets within the meaning of Section 801 hereof.
SECTION 1014. Limitation on Issuances and Sales of
Capital Stock of Restricted Subsidiaries.
----------------------------------------
The Company may not, and may not permit any Restricted Subsidiary of
the Company to, issue, transfer, convey, sell or otherwise dispose of any shares
of Capital Stock of a Restricted Subsidiary of the Company or securities
convertible or exchangeable into, or options, warrants, rights or any other
interest with respect to, Capital Stock of a Restricted Subsidiary of the
Company to any person other than the Company or a Wholly-Owned Restricted
Subsidiary of the Company except (i) in a transaction consisting of a sale of
Capital Stock of such Restricted Subsidiary owned by the Company or any
Restricted Subsidiary of the Company and that complies with the provisions of
Section 1013 to the extent such provisions apply; (ii) if required, the
issuance, transfer, conveyance, sale or other disposition of directors'
qualifying shares; (iii) in a transaction in which, or in connection with which,
the Company or a Restricted Subsidiary acquires at the same time sufficient
Capital Stock of such Restricted Subsidiary to at least maintain the same
percentage ownership interest it had prior to such transaction;
(iv) constituting the issuance of Preferred Stock permitted by the provisions
of Section 1008; and (v) Disqualified Stock issued in exchange for, or upon
conversion of, or the proceeds of the issuance of which are used to redeem,
refinance, replace or refund shares of Disqualified Stock of such Restricted
Subsidiary, provided that the amounts of the redemption obligations of such
Disqualified Stock shall not exceed the amounts of the redemption obligations
of, and such Disqualified Stock shall have redemption obligations no earlier
than those required by, the Disqualified Stock being exchanged, converted,
redeemed, refinanced, replaced or refunded.
SECTION 1015. Transactions with Affiliates
and Related Persons.
----------------------------
The Company may not, and may not permit any Restricted Subsidiary of the
Company to, enter into any transaction (or series of related transactions) with
an Affiliate or Related Person of the Company (other than the Company or a
Wholly-Owned Restricted Subsidiary of the Company), including any Investment,
but excluding transactions pursuant to employee compensation arrangements
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approved by the Managing Member of the Company, either directly or indirectly,
unless such transaction is on terms no less favorable to the Company or such
Restricted Subsidiary than those that could be obtained in a comparable arm's-
length transaction with an entity that is not an Affiliate or Related Person and
is in the best interests of such Company or such Restricted Subsidiary. For any
transaction that involves in excess of $1 million but less than or equal to $5
million, the Chief Executive Officer of the Company shall determine that the
transaction satisfies the above criteria and shall evidence such a determination
by an Officer's Certificate filed with the Trustee. For any transaction that
involves in excess of $5 million, the Company shall also obtain an opinion from
a nationally recognized expert with experience in appraising the terms and
conditions, taken as a whole, of the type of transaction (or series of related
transactions) for which the opinion is required stating that such transaction
(or series of related transactions) is on terms and conditions, taken as a
whole, no less favorable to the Company or such Restricted Subsidiary than those
that could be obtained in a comparable arm's-length transaction with an entity
that is not an Affiliate or Related Person of the Company, which opinion shall
be filed with the Trustee. This covenant shall not apply to Investments by an
Affiliate or a Related Person of the Company in the Capital Stock (other than
Disqualified Stock) of the Company or any Restricted Subsidiary of the Company.
SECTION 1016. Change of Control.
-----------------
(a) Within 30 days of the occurrence of a Change of Control, the Company
will be required to make an Offer to Purchase all Outstanding Securities at a
purchase price equal to 101% of their principal amount plus accrued and unpaid
interest to the date of purchase.
(b) The Company and Trustee shall perform their respective obligations
specified in the Offer for the Offer to Purchase. On or prior to the Purchase
Date, the Company shall (i) accept for payment Securities or portions thereof
tendered pursuant to the Offer, (ii) deposit with the Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1003) money sufficient to pay the purchase price of all
Securities or portions thereof so accepted and (iii) deliver or cause to be
delivered to the Trustee all Securities so accepted together with an Officers'
Certificate stating the Securities or portions thereof accepted for payment by
the Company. The Paying Agent shall promptly mail or deliver to
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Holders of Securities so accepted payment in an amount equal to the purchase
price, and the Trustee shall promptly authenticate and mail or deliver to such
Holders a new Security or Securities equal in principal amount to any
unpurchased portion of the Security surrendered as requested by the Holder. Any
Security not accepted for payment shall be promptly mailed or delivered by the
Company to the Holder thereof.
(c) A "Change of Control" will be deemed to have occurred at such time as
either (a) any Person or any Persons acting together that would constitute a
"group" (a "Group") for purposes of Section 13(d) of the Exchange Act, or any
successor provision thereto (other than Eagle River, Mr. Craig O. McCaw and
their respective Affiliates or an underwriter engaged in a firm commitment
underwriting on behalf of the Company), shall beneficially own (within the
meaning of Rule 13d-3 under the Exchange Act, or any successor provision
thereto) more than 50% of the aggregate voting power of all classes of Voting
Stock of the Company; or (b) neither Eagle River nor any Affiliate of Mr. Craig
O. McCaw or Eagle River shall be a Managing Member of the Company.
(d) In the event that the Company makes an Offer to Purchase the
Securities, the Company intends to comply with any applicable securities laws
and regulations, including any applicable requirements of Section 14(e) of, and
Rule 14e-1 under, the Exchange Act.
(e) Unless the Company defaults in the payment of the Purchase Price, any
Security accepted for payment pursuant to an Offer to Purchase shall cease to
accrue interest after the Purchase Date.
SECTION 1017. Provision of Financial Information.
----------------------------------
The Company has agreed that, for so long as any Securities remain
outstanding, it will furnish to the Holders of the Securities and to securities
analysts and prospective investors, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. In
addition, prior to the effectiveness of the Exchange Offer Registration
Statement, the Company will file with the Trustee and furnish to the holders of
the Securities the quarterly and annual financial statements and related notes
and an accompanying Management's Discussion and Analysis of Financial Condition
and Results of Operations in the format that would be required to be included in
the Company's periodic reports filed with the
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Commission if the Company were required to file such reports with the
Commission. The Company will furnish such information to the Trustee and the
holders of the Securities within 15 days after the date on which the Company
would have been required to file the same with the Commission. Following the
effectiveness of the Exchange Offer Registration Statement (or earlier if the
Company becomes obligated to file reports with the Commission), the Company will
file with the Trustee within 15 days after it files them with the Commission
copies of the annual and quarterly reports and the information, documents, and
other reports that the Company is required to file with the Commission pursuant
to section 13(a) or 15(d) of the Exchange Act ("SEC Reports"). In the event the
Company shall cease to be required to file SEC Reports pursuant to the Exchange
Act, the Company will nevertheless continue to file such reports with the
Commission (unless the Commission will not accept such a filing) and the
Trustee. The Company will furnish copies of the SEC Reports to the Holders of
Securities at the time the Company is required to file the same with the Trustee
and will make such information available to investors who request it in writing.
The Company shall not be required to furnish information pursuant to this
Section 1013 at any time to a prospective purchaser located outside the United
States who is not a "U.S. Person" within the meaning of Regulation S if such
Security may then be sold to such prospective purchaser in accordance with
Rule 904 under the Securities Act (or any successive provision thereto).
SECTION 1018. Limitations on Conduct of Business of Capital
---------------------------------------------
Capital will not hold any operating assets or other properties or conduct
any business other than to serve as an Issuer and co-obligor with respect to the
Securities and will not own any Capital Stock of any Person to the extent that
such ownership would cause such Person to be deemed a Subsidiary of Capital.
SECTION 1019. Pledge Agreement; Security
--------------------------
(a) The Company shall (i) enter into the Pledge Agreement (in the form
attached hereto as Exhibit I) and comply with the terms and provisions thereof
and (ii) use a portion of the net proceeds of the sale of the Securities to the
Initial Purchasers to purchase the Pledged Securities to be pledged to the
Trustee for the benefit of the Holders of the Securities in such amount as will
be sufficient upon receipt of scheduled interest and principal payments of such
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securities, in the opinion of a nationally recognized firm of independent public
accountants selected by the Company, to provide for payment in full of the first
six scheduled interest payments due on the Securities. The Pledged Securities
shall be pledged by the Company to the Trustee for the benefit of the Holders of
the Securities and shall be held by the Trustee in the Pledge Account pending
disbursement pursuant to the Pledge Agreement.
(b) Each Holder, by its acceptance of a Security, consents and agrees to
the terms of the Pledge Agreement (including, without limitation, the provisions
providing for foreclosure and release of Collateral (as defined in the Pledge
Agreement)) as the same may be in effect or may be amended from time to time in
accordance with its terms, and authorizes and directs the Trustee to enter into
the Pledge Agreement to which it is a party and to perform its respective
obligations and exercise its respective rights thereunder in accordance
therewith. The Company will do or cause to be done all such acts and things as
may be necessary or proper, or as may be required by the provisions of the
Pledge Agreement, to assure and confirm to the Trustee the security interest in
the Collateral (as defined in the Pledge Agreement) contemplated hereby, by the
Pledge Agreement or any part thereof, as from time to time constituted, so as to
render the same available for the security and benefit of this Indenture and of
the Securities secured hereby, according to the intent and purposes herein
expressed. The Company shall take, or shall cause to be taken, upon request of
the Trustee, any and all actions reasonably required to cause the Pledge
Agreement to create and maintain, as security for the obligations of the Company
under this Indenture and the Securities, valid and enforceable first priority
liens in and on all the Collateral, in favor of the Trustee, superior to and
prior to the rights of all third Persons and subject to no other Liens other
than as provided herein.
(c) The release of any Collateral pursuant to the Pledge Agreement will
not be deemed to impair the security under this Indenture in contravention of
the provisions hereof if and to the extent the Collateral is released pursuant
to this Indenture and the Pledge Agreement. To the extent applicable, the
Company shall cause Section 314(d) of the Trust Indenture Act relating to the
release of property or securities from the Lien and security interest of the
Pledge Agreement and relating to the substitution therefor of any property or
securities to be subjected to the Lien and security interest of the Pledge
Agreement to be complied with. Any certificate or opinion required by
Section 314(d) of the Trust Indenture Act may be made by an officer of the
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Company, except in cases where Section 314(d) of the Trust Indenture Act
requires that such certificate or opinion be made by an independent Person,
which Person shall be an independent engineer, appraiser or other expert
selected or approved by the Trustee in the exercise of reasonable care.
(d) The Company shall cause Section 314(b) of the Trust Indenture Act,
relating to opinions of counsel regarding the Lien of the Pledge Agreement, to
be complied with. The Company shall furnish to the Trustee prior to each
proposed release of Collateral pursuant to the Pledge Agreement all documents
required by section 314(d) of the Trust Indenture Act. The Trustee may, to the
extent permitted by Sections 601 and 603 hereof, accept as conclusive evidence
of compliance with the foregoing provisions the appropriate statements contained
in such instruments.
(e) The Trustee may, in its sole discretion and without the consent of the
Holders, on behalf of the Holders, take all actions it deems necessary or
appropriate in order to (i) enforce any of the terms of the Pledge Agreement and
(ii) collect and receive any and all amounts payable in respect of the
obligations of the Company hereunder. The Trustee shall have power to institute
and to maintain such suits and proceedings as it may deem expedient to prevent
any impairment of the Collateral by any acts that may be unlawful or in
violation of the Pledge Agreement or this Indenture, and such suits and
proceedings as the Trustee may deem expedient to preserve or protect its
interests and the interests of the Holders in the Collateral (including power to
institute and maintain suits or proceedings to restrain the enforcement of or
compliance with any legislative or other governmental enactment, rule or order
that may be unconstitutional or otherwise invalid if the enforcement of, or
compliance with, such enactment, rule or order would impair the security
interest hereunder or be prejudicial to the interests of the Holders or of the
Trustee).
SECTION 1020. Statement by Officers as to Default.
-----------------------------------
(a) The Issuers will deliver to the Trustee, within 90 days after the end
of each quarter of each fiscal year of the Issuers ending after the date hereof,
an Officers' Certificate, stating whether or not to the best knowledge of the
signers thereof the Issuers are in default in the performance and observance of
any of the terms, provisions and conditions of this Indenture and if an Issuer
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shall be in default, specifying all such defaults and the nature and status
thereof of which they may have knowledge.
(b) The Issuers shall deliver to the Trustee, as soon as possible and in
any event within 10 days after the Issuers become aware of the occurrence of a
Default or an Event of Default, an Officers' Certificate setting forth the
details of such Default or Event of Default and the action which the Issuers
propose to take with respect thereto.
SECTION 1021. Waiver of Certain Covenants.
---------------------------
The Issuers may omit in any particular instance to comply with any covenant
or condition set forth in Sections 1004 to 1017, inclusive, if before or after
the time for such compliance the Holders of at least a majority in aggregate
principal amount of the Outstanding Securities shall, by Act of such Holders,
either waive such compliance in such instance or generally waive compliance with
such covenant or condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Issuers and the duties of
the Trustee in respect of any such covenant or condition shall remain in full
force and effect.
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption.
-------------------
(a) The Securities may be redeemed prior to April 15, 2001 only in the
event that on or before April 15, 1999 the Company receives net proceeds from
any sale of its Common Equity, in which case the Company may, at its option, use
all or a portion of any such net proceeds to redeem Securities in a principal
amount of up to an aggregate amount equal to 33 1/3% of the original principal
amount of the Securities provided, however, that Securities in an amount equal
-------- -------
to at least $175 million remain outstanding after such redemption. Such
redemption must occur on a Redemption Date within 90 days of any such sale and
upon not less than 30 nor more than 60 days' notice by mail to each Holder of
Securities to be redeemed at such Holder's address appearing in the Security
Register, in amounts of $1,000 or an integral multiple of $1,000 at a Redemption
Price of 112.50% of their principal amount plus accrued and unpaid
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interest, if any, to but excluding the Redemption Date (subject to the right of
Holders of record on the relevant Regular Record Date to receive Special
Interest due on an Interest Payment Date that is on or prior to the Redemption
Date).
(b) The Securities further may be redeemed, as a whole or in part, at the
election of the Company, at any time on or after April 15, 2001 and prior to
maturity, upon not less than 30 nor more than 60 days' notice by mail to each
Holder of Securities to be redeemed at such Holder's address appearing in the
Security Register, in amounts of $1,000 or an integral multiple of $1,000, at
the Redemption Prices specified in the form of Security hereinbefore set forth,
together with accrued and unpaid interest (including Special Interest) to, but
excluding, the Redemption Date (subject to the right of Holders of record on the
relevant Regular Record Date to receive interest (including Special Interest)
due on an Interest Payment Date that is on or prior to the Redemption Date).
SECTION 1102. Applicability of Article.
------------------------
Redemption of Securities at the election of the Issuers, as permitted or
required by any provision of this Indenture, shall be made in accordance with
such provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Issuers to redeem any Securities pursuant to Section
1101 shall be evidenced by a Managing Member's Certificate and a Board
Resolution of Capital. In case of any redemption at the election of the Issuers
of less than all the Securities, the Issuers shall, at least 60 days prior to
the Redemption Date fixed by the Issuers (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee in writing of such Redemption
Date and of the principal amount of Securities to be redeemed. In the case of
any redemption of Securities prior to the expiration of any restriction on such
redemption provided in the terms of such Securities or elsewhere in this
Indenture, the Issuers shall furnish the Trustee with an Officers' Certificate
evidencing compliance with such restriction.
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SECTION 1104. Securities to Be Redeemed Pro Rata.
----------------------------------
If less than all the Securities are to be redeemed in any redemption, the
Securities to be redeemed shall be selected by the Trustee by prorating, as
nearly as may be practicable, the principal amount of Securities to be redeemed.
In any proration pursuant to this Section, the Trustee shall make such
adjustments, reallocations and eliminations as it shall deem proper (and in
compliance with the requirements of the principal national securities exchange,
if any, on which the Securities are listed) to the end that the principal amount
of Securities so prorated shall be $1,000 or a multiple thereof, by increasing
or decreasing or eliminating the amount which would be allocable to any Holder
on the basis of exact proportion by an amount not exceeding $1,000. The Trustee
in its discretion may determine the particular Securities (if there are more
than one) registered in the name of any Holder which are to be redeemed, in
whole or in part.
The Trustee shall promptly notify the Issuers and each Security Registrar
(other than the Trustee) in writing of the Securities selected for redemption
and, in the case of any Securities selected for partial redemption, the
principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Securities redeemed or to be redeemed only in part, to the portion
of the principal amount of such Securities which has been or is to be redeemed.
SECTION 1105. Notice of Redemption.
--------------------
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the Redemption Date, to
each Holder of Securities to be redeemed, at such Holder's address appearing in
the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) whether the redemption is being made pursuant to Section 1101(a)
or (b) and, if being made pursuant to Section 1101(a), a brief statement
setting forth the
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Issuers' right to effect such redemption and the Issuers' basis therefor,
(4) if less than all the Outstanding Securities are to be redeemed,
the identification (and, in the case of partial redemption of any
Securities, the principal amounts) of the particular Securities to be
redeemed,
(5) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and that interest
thereon will cease to accrue on and after said date,
(6) the place or places where such Securities are to be surrendered
for payment of the Redemption Price,
(7) that in the case that a Security is only redeemed in part, the
Issuers shall execute and the Trustee shall authenticate and deliver to the
Holder of such Security without service charge, a new Security or
Securities in an aggregate amount equal to the unredeemed portion of the
Security,
(8) the aggregate principal amount of Securities being redeemed, and
(9) the CUSIP number or numbers of the Securities being redeemed.
Notice of redemption of Securities to be redeemed at the election of the
Issuers shall be given by the Issuers or, if request is made to the Trustee no
less than 35 days prior to the Redemption Date, by the Trustee in the name and
at the expense of the Issuers.
SECTION 1106. Deposit of Redemption Price.
---------------------------
Prior to any Redemption Date, the Issuers shall deposit with the Trustee or
with a Paying Agent (or, if the Issuers are acting as their own Paying Agent,
segregate and hold in trust as provided in Section 1003) an amount of money
sufficient to pay the Redemption Price of, and (except if the Redemption Date
shall be an Interest Payment Date) accrued and unpaid interest on, all the
Securities which are to be redeemed on that date.
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<PAGE>
SECTION 1107. Securities Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as aforesaid, the Securities so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Issuers shall default in the payment of the Redemption Price and accrued and
unpaid interest) such Securities shall cease to bear interest. Upon surrender
of any such Security for redemption in accordance with said notice, such
Security shall be paid by the Issuers at the Redemption Price, together with
accrued and unpaid interest to the Redemption Date; provided, however, that
-------- -------
installments of interest whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of Section
307.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate provided by the Security.
SECTION 1108. Securities Redeemed in Part.
---------------------------
Any Security which is to be redeemed only in part shall be surrendered at
an office or agency of the Issuers designated for that purpose pursuant to
Section 1002 (with, if the Issuers or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Issuers and
the Trustee duly executed by, the Holder thereof or his attorney duly authorized
in writing), and the Issuers shall execute, and the Trustee shall authenticate
and deliver to the Holder of such Security without service charge, a new
Security or Securities of like tenor, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in exchange
for the unredeemed portion of the principal of the Security so surrendered.
-125-
<PAGE>
ARTICLE TWELVE
Defeasance and Covenant Defeasance
SECTION 1201. Issuers' Option to Effect Defeasance or
Covenant Defeasance.
---------------------------------------
The Issuers may at their option by, in the case of the Company, resolution
of the Managing Member of the Company, as evidenced by a Managing Member's
Certificate and, in the case of Capital, by Board Resolution of Capital, at any
time (subject to 10-day prior written notification to the Trustee), elect to
have either Section 1202 or Section 1203 applied to the Outstanding Securities
upon compliance with the conditions set forth below in this Article Twelve.
SECTION 1202. Defeasance and Discharge.
------------------------
Upon the Issuers' exercise of the option provided in Section 1201
applicable to this Section, the Issuers shall be deemed to have been discharged
from its obligations with respect to the Outstanding Securities on the date the
conditions set forth below are satisfied (hereinafter, "defeasance"). For this
purpose, such defeasance means that the Issuers shall be deemed to have paid and
discharged the entire indebtedness represented by the Outstanding Securities and
to have satisfied all its other obligations under such Securities and this
Indenture insofar as such Securities are concerned (and the Trustee, at the
expense of the Issuers, shall execute proper instruments acknowledging the
same), except for the following which shall survive until otherwise terminated
or discharged hereunder: (A) the rights of Holders of Outstanding Securities to
receive, solely from the trust fund described in Section 1204 and as more fully
set forth in such Section, payments in respect of the principal of (and premium,
if any) and interest on such Securities when such payments are due, (B) the
Issuers' obligations with respect to such Securities under Sections 304, 305,
306, 1002 and 1003, (C) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and (D) this Article Twelve. Subject to compliance with this
Article Twelve, the Issuers may exercise their option under this Section 1202
notwithstanding the prior exercise of their option under Section 1203.
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<PAGE>
SECTION 1203. Covenant Defeasance.
-------------------
Upon the Issuers' exercise of the option provided in Section 1201
applicable to this Section (i) the Issuers shall be released from their
obligations under Sections 1005 through 1017, inclusive, and Clauses (3) and (4)
of Section 801, (ii) the occurrence of an event specified in Sections 501(3),
501(4) (with respect to Clauses (3) and (4) of Section 801), and 501 (5) (with
respect to Sections 1005 through 1017, inclusive) shall not be deemed to be an
Event of Default, on and after the date the conditions set forth below are
satisfied (hereinafter, "covenant defeasance"). For this purpose, such covenant
defeasance means that the Issuers may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
Section or Article, whether directly or indirectly by reason of any reference
elsewhere herein to any such Section or Article or by reason of any reference in
any such Section or Article to any other provision herein or in any other
document, but the remainder of this Indenture and such Securities shall be
unaffected thereby.
SECTION 1204. Conditions to Defeasance or
Covenant Defeasance.
---------------------------
The following shall be the conditions to application of either Section
1202 or Section 1203 to the Outstanding Securities:
(1) The Issuers shall irrevocably have deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (A)
money in an amount, or (B) U.S. Government Obligations which through the
scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day before the
due date of any payment, money in an amount, or (C) a combination thereof,
sufficient, in the opinion of a nationally recognized firm of independent
certified public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall be applied
by the Trustee to pay and discharge, the principal of, premium, if any, and
each installment of interest on the Securities on the Stated Maturity of
such principal or installment of interest on the day on which such payments
are due and payable in accordance with the terms of this Indenture and of
such
-127-
<PAGE>
Securities. For this purpose, "U.S. Government Obligations" means
securities that are (x) direct obligations of the United States of America
for the payment of which its full faith and credit is pledged or (y)
obligations of a Person controlled or supervised by and acting as an agency
or instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in either case, are not callable or
redeemable at the option of the issuer thereof, and shall also include a
depositary receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such
U.S. Government Obligation held by such custodian for the account of the
holder of such depositary receipt, provided that (except as required by
--------
law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depositary receipt from any amount received
by the custodian in respect of the U.S. Government Obligation or the
specific payment of principal of or interest on the U.S. Government
Obligation evidenced by such depositary receipt.
(2) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit or, insofar as subsections 501(8)
and (9) are concerned, at any time during the period ending on the 91st day
after the date of such deposit (it being understood that this condition
shall not be deemed satisfied until the expiration of such period).
(3) Such defeasance or covenant defeasance shall not cause the Trustee
to have a conflicting interest as defined in Section 608 and for purposes
of the Trust Indenture Act with respect to any securities of the Issuers.
(4) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or
any other agreement or instrument to which either Issuer is a party or by
which it is bound.
(5) The Issuers shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the defeasance under
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<PAGE>
Section 1202 or the covenant defeasance under Section 1203 (as the case may
be) have been complied with.
(6) In the case of an election under Section 1202, the Issuers shall
have delivered to the Trustee an Opinion of Counsel stating that (x) the
Issuers have received from, or there has been published by, the Internal
Revenue Service a ruling, or (y) since the date of this Indenture there has
been a change in the applicable Federal income tax law, in either case to
the effect that, and based thereon such opinion shall confirm that, the
Holders of the Outstanding Securities will not recognize income, gain or
loss for Federal income tax purposes as a result of such deposit,
defeasance and discharge and will be subject to Federal income tax on the
same amounts, in the same manner and at the same times as would have been
the case if such deposit, defeasance and discharge had not occurred.
(7) In the case of an election under Section 1203, the Issuers shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the Outstanding Securities will not recognize income, gain or
loss for Federal income tax purposes as a result of such deposit and
covenant defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such covenant defeasance had not occurred.
(8) The Issuers shall have delivered to the Trustee an Opinion of
Counsel to the effect that such deposit and defeasance or covenant
defeasance shall not result in the trust arising from such deposit
constituting an investment company as defined in the Investment Company Act
of 1940, as amended, or such trust shall be qualified under such act or
exempt from regulation thereunder.
SECTION 1205. Deposited Money and U.S. Government
Obligations to Be Held in Trust;
Other Miscellaneous Provisions.
-----------------------------------
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee (or other qualifying trustee--collectively, for purposes of
this Section 1205, the "Trustee") pursuant to Section 1204 in respect of the
Securities shall be held in trust and
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<PAGE>
applied by the Trustee, in accordance with the provisions of such Securities and
this Indenture, to the payment, either directly or through any Paying Agent
(including the Issuers acting as their own Paying Agent) as the Trustee may
determine, to the Holders of such Securities, of all sums due and to become due
thereon in respect of principal (and premium, if any) and interest, but such
money need not be segregated from other funds except to the extent required by
law.
The Issuers shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1204 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Outstanding Securities.
Anything in this Article Twelve to the contrary notwithstanding, the
Trustee shall deliver or pay to the Issuers from time to time upon Issuers
Request any money or U.S. Government Obligations held by it as provided in
Section 1204 which, in the opinion of a nationally recognized accounting firm
expressed in a written certification thereof delivered to the Trustee, are in
excess of the amount thereof which would then be required to be deposited to
effect an equivalent defeasance or covenant defeasance.
SECTION 1206. Reinstatement
-------------
If the Trustee or the Paying Agent is unable to apply any money in
accordance with Section 1202 or 1203 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Issuers' obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article Twelve until such time as the Trustee or Paying Agent
is permitted to apply all such money in accordance with Section 1202 and 1203;
provided, however, that if the Issuers make any payment of principal of (and
- -------- -------
premium, if any) any Security following the reinstatement of its obligations,
the Issuers shall be subrogated to the rights of the Holders of such Securities
to receive such payment from the money held by the Trustee or the Paying Agent.
SECTION 1207. Repayment to Company
--------------------
Any money deposited with the Trustee or any Paying Agent, or then held
by the Issuers, in trust for the payment
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<PAGE>
of the principal of, premium, if any, or interest on any Security and remaining
unclaimed for two years after such principal, and premium, if any, or interest
has become due and payable shall be paid to the Company on its written request
or (if then held by the Company) shall be discharged from such trust; and the
Holder of such security shall thereafter, as a creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
-------- -------
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in the New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification or publication, any unclaimed balance of such
money then remaining will be repaid to the Company.
--------------------
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
-131-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed and attested, and the Trustee has caused its seal to be
hereunto affixed and attested, all as of the day and year first above written.
NEXTLINK COMMUNICATIONS, L.L.C.
By: NEXTLINK, INC.
By /s/ R. Bruce Easter, Jr.
----------------------------
Name: R. Bruce Easter, Jr.
Title: Vice President and
Secretary
Attest:
/s/ Gary A. Rawding
- -------------------
By Gary A. Rawding
Vice President
NEXTLINK CAPITAL, INC.
By /s/ R. Bruce Easter, Jr.
-------------------------
Name: R. Bruce Easter, Jr.
Title: Vice President and
Secretary
Attest:
/s/ Gary A. Rawding
- -------------------
By Gary A. Rawding
Vice President
UNITED STATES TRUST COMPANY
OF NEW YORK
By /s/ Patricia Stermer
-------------------------
Name: Patricia Stermer
Title: Assistant Vice President
Attest:
/s/ Cynthia Chaney
- ------------------
By Cynthia Chaney
<PAGE>
STATE OF NEW YORK ) ss.:
COUNTY OF NEW YORK )
On this twenty-fifth day of April, 1996, before me personally appeared
R. Bruce Easter, to me known, who, being duly sworn, did depose and say that he
is the Vice President of NEXTLINK, Inc., a Managing Member of NEXTLINK
Communications, L.L.C., one of the limited liability companies described in and
which executed the foregoing instrument, and duly acknowledged to me that he
executed the same by authority of the Managing Members of said limited liability
company.
______________________________
Notary Public
STATE OF NEW YORK ) ss.:
COUNTY OF NEW YORK )
On this twenty-fifth day of April, 1996, before me personally appeared
R. Bruce Easter, to me known, who, being duly sworn, did depose and say that he
is the Vice President of NEXTLINK Capital, Inc., one of the corporations
described in and which executed the foregoing instrument, and duly acknowledged
to me that he executed the same by authority of the Board of Directors of said
corporation.
_______________________________
Notary Public
<PAGE>
ANNEX A
[FORM OF CERTIFICATION TO BE GIVEN BY HOLDERS OF
BENEFICIAL INTEREST IN A TEMPORARY
REGULATION S GLOBAL SECURITY
TO EUROCLEAR OR CEDEL]
OWNER SECURITIES CERTIFICATION
NEXTLINK COMMUNICATIONS, L.L.C.
NEXTLINK CAPITAL, INC.
12 1/2% Senior Notes due April 15, 2006
CUSIP No. _____
Reference is hereby made to the Indenture, dated as of April 25, 1996
(the "Indenture"), between NEXTLINK Communications, L.L.C. and NEXTLINK Capital,
Inc., as Issuers, and United States Trust Company of New York, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
This is to certify that, as of the date hereof, $________ of the
above-captioned Securities (the "Securities") are beneficially owned by non-U.S.
person(s). As used in this paragraph, the term "U.S. person" has the meaning
given to it by Regulation S under the Securities Act of 1933, as amended.
We undertake to advise you promptly by tested telex on or prior to the
date on which you intend to submit your certification relating to the Securities
held by you for our account in accordance with your operating procedures if any
applicable statement herein is not correct on such date, and in the absence of
any such notification it may be assumed that this certification applies as of
such date.
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceedings.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Issuers and the Initial Purchasers.
Dated:______________, ____
By:____________________________________________
As, or as agent for, the beneficial
owner(s) of the Securities to which this
certificate relates.
A-1
<PAGE>
ANNEX B
[FORM OF CERTIFICATION TO BE GIVEN
BY THE EUROCLEAR OPERATOR OR
CEDEL BANK, SOCIETE ANONYME]
DEPOSITORY SECURITIES CERTIFICATION
NEXTLINK COMMUNICATIONS, L.L.C.
NEXTLINK CAPITAL, INC.
12 1/2% Senior Notes due April 15, 2006
CUSIP No. _____
Reference is hereby made to the Indenture, dated as of April 25, 1996 (the
"Indenture"), between NEXTLINK Communications, L.L.C. and NEXTLINK Capital,
Inc., as Issuers, and United States Trust Company of New York, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
This is to certify that, with respect to U.S.$___________ principal amount of
the above-captioned Securities (the "Securities"), except as set forth below, we
have received in writing, by tested telex or by electronic transmission, from
member organizations appearing in our records as persons being entitled to a
portion of the principal amount of the Securities (our "Member Organizations"),
certifications with respect to such portion, substantially to the effect set
forth in the Indenture./1/
We further certify (i) that we are not making available herewith for exchange
(or, if relevant, exercise of any rights or collection of any interest) any
portion of the Temporary Regulation S Global Security (as defined in the
Indenture) excepted in such certifications and (ii) that as of the date hereof
we have not received any notification from any of our Member Organizations to
the effect that the statements made by such Member Organizations with respect to
any portion of the part submitted herewith for exchange (or, if relevant,
exercise of any rights or collection of any interest) are no longer true and
cannot be relied upon as of the date hereof.
We understand that this certification is required in connection with certain
securities laws of the United States. In connection therewith, if administrative
or legal
____________________
/1/ Unless Morgan Guaranty Trust Company of New York, London Branch is
otherwise informed by the Agent, the long form certificate set out in the
Operating Procedures will be deemed to meet the requirements of this
sentence.
B-1
<PAGE>
proceedings are commenced or threatened in connection with which this
certification is or would be relevant, we irrevocably authorize you to produce
this certification to any interested party in such proceedings. This certificate
and the statements contained herein are made for your benefit and the benefit of
the Issuers and the Initial Purchasers.
Dated: _____________, _______
Yours faithfully,
[CHEMICAL BANK, as operator of the
Euroclear System]
or
[CEDEL BANK, SOCIETE ANONYME]
By______________________________
B-2
<PAGE>
ANNEX C
[FORM OF CERTIFICATION TO BE GIVEN BY
TRANSFEREE OF BENEFICIAL INTEREST IN A
TEMPORARY REGULATION S GLOBAL SECURITY]
TRANSFEREE SECURITIES CERTIFICATION
NEXTLINK COMMUNICATIONS, L.L.C.
NEXTLINK CAPITAL, INC.
12 1/2% Senior Notes due April 15, 2006
CUSIP No. _____
Reference is hereby made to the Indenture, dated as of April 25, 1996 (the
"Indenture"), between NEXTLINK Communications, L.L.C. and NEXTLINK Capital,
Inc., as Issuers, and United States Trust Company of New York, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
For purposes of acquiring a beneficial interest in the Temporary Regulation S
Global Security, the undersigned certifies that it is not a U.S. Person as
defined by Regulation S under the Securities Act of 1933, as amended.
We undertake to advise you promptly by tested telex on or prior to the date on
which you intend to submit your certification relating to the Securities held by
you in which we intend to acquire a beneficial interest in accordance with your
operating procedures if any applicable statement herein is not correct on such
date, and in the absence of any such notification it may be assumed that this
certification applies as of such date.
We understand that this certificate is required in connection with certain
securities laws of the United States. In connection therewith, if administrative
or legal proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to produce
this certificate to any interested party in such proceeding. This certificate
and the statements contained herein are made for your benefit and the benefit of
the Issuers and the Initial Purchasers.
Dated:______________, ____
By:_____________________________
As, or as agent for, the
beneficial acquiror of the
Securities to which this
certificate relates.
C-1
<PAGE>
ANNEX D
FORM OF CERTIFICATION FOR TRANSFER OR
EXCHANGE OF RESTRICTED GLOBAL SECURITY
TO TEMPORARY REGULATION S GLOBAL SECURITY
(Exchanges or transfers pursuant to
Section 305(c)(3) of the Indenture)
United States Trust Company of New York,
as Trustee
114 West 47th Street,
New York, New York 10036.
Attention: Ms. Patricia Stermer
Re: NEXTLINK Communications, L.L.C. and
NEXTLINK Capital, INC.
12 1/2% Senior Notes
Due April 15, 2006 (the "Securities")
-------------------------------------
Reference is hereby made to the Indenture, dated as of April 25, 1996
(the "Indenture"), between NEXTLINK Communications, L.L.C. and NEXTLINK Capital,
Inc., as Issuers, and United States Trust Company of New York, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
This letter relates to U.S.$___________ aggregate principal amount of
Securities which are held in the form of the Restricted Global Security (CUSIP
No. _________) with the Depository in the name of [insert name of transferor]
(the "Transferor"). The Transferor has requested a transfer of such beneficial
interest in the Securities to a Person who will take delivery thereof in the
form of an equal aggregate principal amount of Securities evidenced by the
Temporary Regulation S Global Security (CUSIP No. _________) to be held with the
Depository in the name of [Euroclear] [Cedel Bank, societe anonyme].
In connection with such request and in respect of such Securities, the
Transferor does hereby certify that such transfer has been effected in
accordance with the transfer restrictions set forth in the Securities and
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended (the "Securities Act"), and accordingly the Transferor does
hereby certify that:
(1) the offer of the Securities was not made to a person in the
United States;
[(2) at the time the buy order was originated, the transferee was
outside the United States or the
D-1
<PAGE>
Transferor and any person acting on its behalf reasonably believed that the
transferee was outside the United States;]/1/
[(2) the transaction was executed in, on or through the facilities of
a designated offshore securities market and neither the Transferor nor any
person acting on our behalf knows that the transaction was pre-arranged
with a buyer in the United States;]/1/
(3) no directed selling efforts have been made in contravention of
the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) upon completion of the transaction, the beneficial interest being
transferred as described above is to be held with the Depository in the
name of [Euroclear] [Cedel Bank, societe anonyme].
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding. This
certificate and the statements contained herein are made for your benefit and
the benefit of the Issuers and the Initial Purchasers.
[Insert Name of Transferor]
By:_____________________________
Name:
Title:
Dated: ______________
cc: NEXTLINK Communications, L.L.C. and NEXTLINK Capital, Inc.
- --------------------
/1/ Insert one of these two provisions, which come from the definition of
"offshore transaction" in Regulation S.
D-2
<PAGE>
ANNEX E
FORM OF CERTIFICATION FOR TRANSFER OR EXCHANGE OF
RESTRICTED GLOBAL SECURITY TO
PERMANENT REGULATION S GLOBAL SECURITY
(Exchanges or transfers pursuant to
Section 305(c)(4) of the Indenture)
United States Trust Company of New York,
as Trustee
114 West 47th Street,
New York, New York 10036.
Attention: Ms. Patricia Stermer
Re: NEXTLINK Communications, L.L.C. and NEXTLINK Capital, INC.
12 1/2% Senior Notes
Due April 15, 2006 (the "Securities")
-------------------------------------
Reference is hereby made to the Indenture, dated as of April 25, 1996
(the "Indenture"), between NEXTLINK Communications, L.L.C. and NEXTLINK Capital,
Inc., as Issuers, and United States Trust Company of New York, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
This letter relates to U.S.$___________ aggregate principal amount of
Securities which are held in the form of the Restricted Global Securities (CUSIP
No. _________) with the Depository in the name of [insert name of transferor]
(the "Transferor"). The Transferor has requested a transfer of such beneficial
interest in the Securities to a Person who will take delivery thereof in the
form of an equal aggregate principal amount of Securities evidenced by the
Permanent Regulation S Global Security (CUSIP No. _________).
In connection with such request, and in respect of such Securities,
the Transferor does hereby certify that such transfer has been effected in
accordance with the transfer restrictions set forth in the Securities and,
(1) with respect to transfers made in reliance on Regulation S under the
Securities Act of 1933, as amended (the "Securities Act"), the Transferor does
hereby certify that:
(A) the offer of the Securities was not made to a person in the United
States;
[(B) at the time the buy order was originated, the transferee was
outside the United States or the Transferor and any person acting on its
behalf reasonably
E-1
<PAGE>
believed that the transferee was outside the United States;]/1/
[(B) the transaction was executed in, on or through the facilities of
a designated offshore securities market and neither the Transferor nor any
person acting on our behalf knows that the transaction was pre-arranged
with a buyer in the United States;]/1/
(C) no directed selling efforts have been made in contravention of the
requirements of Rule 903(b) or 904(b) of Regulation S, as applicable; and
(D) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; or
(2) with respect to transfers made in reliance on Rule 144 under the Securities
Act, the Transferor does hereby certify that the Securities are being
transferred in a transaction permitted by Rule 144 under the Securities Act.
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding. This
certificate and the statements contained herein are made for your benefit and
the benefit of the Issuers and the Initial Purchasers.
[Insert Name of Transferor]
By:_____________________________
Name:
Title:
Dated: ______________
cc: NEXTLINK Communications, L.L.C. and NEXTLINK Capital, Inc.
____________________
/1/ Insert one of these two provisions, which come from the definition of
"offshore transactions" in Regulation S.
E-2
<PAGE>
ANNEX F
FORM OF CERTIFICATION FOR TRANSFER OR EXCHANGE OF
TEMPORARY REGULATION S GLOBAL SECURITY
OR PERMANENT REGULATION S GLOBAL SECURITY TO
RESTRICTED GLOBAL SECURITY
(Exchanges or transfers pursuant to
Section 305(c)(5) of the Indenture)
United States Trust Company of New York,
as Trustee
114 West 47th Street,
New York, New York 10036.
Attention: Ms. Patricia Stermer
Re: NEXTLINK Communications, L.L.C. and NEXTLINK Capital, INC.
12 1/2% Senior Notes
Due April 15, 2006 (the "Securities")
-------------------------------------
Reference is hereby made to the Indenture, dated as of April 25, 1996
(the "Indenture"), between NEXTLINK Communications, L.L.C. and NEXTLINK Capital,
Inc., as Issuers, and United States Trust Company of New York, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
This letter relates to U.S. $___________ principal amount of
Securities which are evidenced by an aggregate [Temporary Regulation S Global
Security (CUSIP No. _________)] [Permanent Regulation S Global Security (CUSIP
No. _________)] and held with the Depository through [Euroclear] [Cedel] (Common
Code _______) in the name of [insert name of transferor] (the "Transferor").
The Transferor has requested a transfer of such beneficial interest in
Securities to a person that will take delivery thereof in the form of an equal
principal amount of Securities evidenced by a Restricted Global Security of the
same series and of like tenor as the Securities (CUSIP No. _________).
In connection with such request, and in respect of such Securities,
the Transferor does hereby certify that such transfer is being effected pursuant
to and in accordance with Rule 144A under the Securities Act and, accordingly,
the Transferor does hereby further certify that the Securities are being
transferred to a person that the Transferor reasonably believes is purchasing
the Securities for its own account, or for one or more accounts with respect to
which such person exercises sole investment discretion, and such person and each
F-1
<PAGE>
such account is a "qualified institutional buyer" within the meaning of Rule
144A, in each case in a transaction meeting the requirements of Rule 144A and in
accordance with any applicable securities laws of any state of the United
States.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuers and the Initial Purchasers.
[Insert Name of Transferor]
By:_____________________________
Name:
Title:
Dated: ______________
cc: NEXTLINK Communications, L.L.C. and NEXTLINK Capital, Inc.
F-2
<PAGE>
ANNEX G-1
FORM OF CERTIFICATION FOR TRANSFER
OR EXCHANGE OF NON-GLOBAL RESTRICTED SECURITY TO
RESTRICTED GLOBAL SECURITY
(Transfers and exchanges pursuant to Section 305(c)(6)
of the Indenture)
United States Trust Company of New York,
as Trustee
114 West 47th Street,
New York, New York 10036.
Attention: Ms. Patricia Stermer
Re: NEXTLINK Communications, L.L.C. and
NEXTLINK Capital, INC.
12 1/2% Senior Notes
Due April 15, 2006 (the "Securities")
-------------------------------------
Reference is hereby made to the Indenture, dated as of April 25, 1996
(the "Indenture"), between NEXTLINK Communications, L.L.C. and NEXTLINK Capital,
Inc., as Issuers, and United States Trust Company of New York, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
This letter relates to $___________ principal amount of Restricted
Securities held in definitive form (CUSIP No. _____) by [insert name of
transferor] (the "Transferor"). The Transferor has requested an exchange or
transfer of such Securities.
In connection with such request and in respect of such Securities, the
Transferor does hereby certify that (i) such Securities are owned by the
Transferor and are being exchanged without transfer or (ii) such transfer has
been effected pursuant to and in accordance with Rule 144A or Rule 144 under the
United States Securities Act of 1933, as amended (the "Securities Act") and
accordingly the Transferor does hereby further certify that:
(1) if the transfer has been effected pursuant to Rule 144A:
(A) the Securities are being transferred to a person that the
Transferor reasonably believes is
G-1-1
<PAGE>
purchasing the Securities for its own account, or for one or more
accounts with respect to which such Person exercises sole investment
discretion;
(B) such Person and each such account is a "qualified
institutional buyer" within the meaning of Rule 144A; and
(C) the Securities have been transferred in a transaction
meeting the requirements of Rule 144A and in accordance with any
applicable securities laws of any state of the United States; or
(2) if the transfer has been effected pursuant to Rule 144:
(A) more than two years has elapsed since the date of the
closing of the initial placement of the Securities pursuant to the
Purchase Agreement; and
(B) the Securities have been transferred in a transaction
permitted by Rule 144 and made in accordance with any applicable
securities laws of any state of the United States.
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding. This
certificate and the statements contained herein are made for your benefit and
the benefit of the Issuers and the Initial Purchasers.
Dated: ______________, ____
[Insert Name of Transferor]
By:_____________________________
Name:
Title:
cc: NEXTLINK Communications, L.L.C. and NEXTLINK Capital, Inc.
G-1-2
<PAGE>
ANNEX G-2
FORM OF CERTIFICATION FOR TRANSFER
OR EXCHANGE OF NON-GLOBAL RESTRICTED SECURITY TO
PERMANENT REGULATION S GLOBAL SECURITY
OR TEMPORARY REGULATION S GLOBAL SECURITY
(Transfers and exchanges pursuant to Section 305(c)(6)
of the Indenture)
United States Trust Company of New York,
as Trustee
114 West 47th Street,
New York, New York 10036.
Attention: Ms. Patricia Stermer
Re: NEXTLINK Communications, L.L.C. and
NEXTLINK Capital, INC.
12 1/2% Senior Notes
Due April 15, 2006 (the "Securities")
-------------------------------------
Reference is hereby made to the Indenture, dated as of April 25, 1996
(the "Indenture"), between NEXTLINK Communications, L.L.C. and NEXTLINK Capital,
Inc., as Issuers, and United States Trust Company of New York, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
This letter relates to $___________ principal amount of Restricted
Securities held in definitive form (CUSIP No. _____) by [insert name of
transferor] (the "Transferor"). The Transferor has requested an exchange or
transfer of such Securities.
In connection with such request and in respect of such Securities, the
Transferor does hereby certify that (i) such Securities are owned by the
Transferor and are being exchanged without transfer or (ii) such transfer has
been effected pursuant to and in accordance with (a) Rule 903 or Rule 904 under
the Securities Act of 1933, as amended (the "Act"), or (b) Rule 144 under the
Act, and accordingly the Transferor does hereby further certify that:
(1) if the transfer has been effected pursuant to Rule 903 or Rule
904:
(A) the offer of the Securities was not made to a person in the
United States;
(B) either:
G-2-1
<PAGE>
(i) at the time the buy order was originated, the
transferee was outside the United States or the Transferor and
any person acting on its behalf reasonably believed that the
transferee was outside the United States, or
(ii) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither
the Transferor nor any person acting on its behalf knows that the
transaction was pre-arranged with a buyer in the United States;
(C) no directed selling efforts have been made in contravention
of the requirements of Rule 903 (b) or 904(b) of Regulation S, as
applicable;
(D) the transaction is not part of a plan or scheme to evade the
registration requirements of the Act; and
(E) if such transfer is to occur during the Restricted Period,
upon completion of the transaction, the beneficial interest being
transferred as described above was held with the Depository through
[Euroclear] [CEDEL]; or
(2) if the transfer has been effected pursuant to Rule 144:
(A) more than two years has elapsed since the date of the
closing of the initial placement of the Securities pursuant to the
Purchase Agreement; and
(B) the Securities have been transferred in a transaction
permitted by Rule 144 and made in accordance with any applicable
securities laws of any state of the United States.
G-2-2
<PAGE>
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding. This
certificate and the statements contained herein are made for your benefit and
the benefit of the Issuers and the Initial Purchasers.
Dated: ______________, ____
[Insert Name of Transferor]
By:_____________________________
Name:
Title:
cc: NEXTLINK Communications, L.L.C. and NEXTLINK Capital, Inc.
G-2-3
<PAGE>
ANNEX H-1
FORM OF CERTIFICATION FOR TRANSFER
OR EXCHANGE OF NON-GLOBAL PERMANENT REGULATION S
SECURITY TO RESTRICTED GLOBAL SECURITY
(Transfers and exchanges pursuant to Section 305(c)(7)
of the Indenture)
United States Trust Company of New York,
as Trustee
114 West 47th Street,
New York, New York 10036.
Attention: Ms. Patricia Stermer
Re: NEXTLINK Communications, L.L.C. and
NEXTLINK Capital, INC.
12 1/2% Senior Notes
Due April 15, 2006 (the "Securities")
-------------------------------------
Reference is hereby made to the Indenture, dated as of April 25, 1996
(the "Indenture"), between NEXTLINK Communications, L.L.C. and NEXTLINK Capital,
Inc., as Issuers, and United States Trust Company of New York, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
This letter relates to $___________ principal amount of Restricted
Securities held in definitive form (CUSIP No. ____) by [insert name of
transferor] (the "Transferor"). The Transferor has requested an exchange or
transfer of such Securities.
In connection with such request and in respect of such Securities, the
Transferor does hereby certify that (i) such Securities are owned by the
Transferor and are being exchanged without transfer or (ii) such transfer has
been effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended, and accordingly the Transferor does
hereby further certify that the Securities are being transferred to a person
that the Transferor reasonably believes is purchasing the Securities for its own
account, or for one or more accounts with respect to which such Person exercises
sole investment discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A, in each case in
a transaction meeting the requirements of Rule 144A and in accordance with any
applicable securities laws of any state of the United States.
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested
H-1-1
<PAGE>
party in such proceeding. This certificate and the statements contained herein
are made for your benefit and the benefit of the Issuers and the Initial
Purchasers.
Dated: ________________, ____
[Insert Name of Transferor]
By:___________________________
Name:
Title:
cc: NEXTLINK Communications, L.L.C. and NEXTLINK Capital, Inc.
H-1-2
<PAGE>
ANNEX H-2
FORM OF CERTIFICATION FOR TRANSFER
OR EXCHANGE OF NON-GLOBAL PERMANENT REGULATION S
SECURITY TO PERMANENT REGULATION S GLOBAL SECURITY
(Transfers and exchanges pursuant to Section 305(c)(7)
of the Indenture)
United States Trust Company of New York,
as Trustee
114 West 47th Street,
New York, New York 10036.
Attention: Ms. Patricia Stermer
Re: NEXTLINK Communications, L.L.C. and
NEXTLINK Capital, INC.
12 1/2% Senior Notes
Due April 15, 2006 (the "Securities")
-------------------------------------
Reference is hereby made to the Indenture, dated as of April 25, 1996
(the "Indenture"), between NEXTLINK Communications, L.L.C. and NEXTLINK Capital,
Inc., as Issuers, and United States Trust Company of New York, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
This letter relates to $___________ principal amount of Restricted
Securities held in definitive form (CUSIP No. ____) by [insert name of
transferor] (the "Transferor"). The Transferor has requested an exchange or
transfer of such Securities.
In connection with such request and in respect of such Securities, the
Transferor does hereby certify that (i) such Securities are owned by the
Transferor and are being exchanged without transfer or (ii) such transfer has
been effected pursuant to and in accordance with (a) Rule 903 or Rule 904 under
the Securities Act of 1933, as amended (the "Act"), or (b) Rule 144 under the
Act, and accordingly the Transferor does hereby further certify that:
(1) if the transfer has been effected pursuant to Rule 903 or Rule
904:
(A) the offer of the Securities was not made to a person in the
United States;
(B) either:
(i) at the time the buy order was originated, the
transferee was outside the United States or the Transferor and
any person acting on its behalf reasonably believed that the
transferee was outside the United States, or
H-2-1
<PAGE>
(ii) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither
the Transferor nor any person acting on its behalf knows that the
transaction was pre-arranged with a buyer in the United States;
(C) no directed selling efforts have been made in contravention
of the requirements of Rule 903 (b) or 904(b) of Regulation S, as
applicable;
(D) the transaction is not part of a plan or scheme to evade the
registration requirements of the Act; and
(E) if such transfer is to occur during the Restricted Period,
upon completion of the transaction, the beneficial interest being
transferred as described above was held with the Depository through
[Euroclear] [CEDEL]; or
(2) if the transfer has been effected pursuant to Rule 144:
(A) more than two years has elapsed since the date of the
closing of the initial placement of the Securities pursuant to the
Purchase Agreement; and
(B) the Securities have been transferred in a transaction
permitted by Rule 144 and made in accordance with any applicable
securities laws of any state of the United States.
We understand that this certificate is required in connection with
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Issuers and the Initial Purchasers.
Dated: ________________, ____
[Insert Name of Transferor]
By:___________________________
Name:
Title:
cc: NEXTLINK Communications, L.L.C. and NEXTLINK Capital, Inc.
H-2-2
<PAGE>
ANNEX I
[FORM OF PLEDGE AGREEMENT]
I-1
<PAGE>
EXHIBIT 4.2
COLLATERAL PLEDGE AND SECURITY AGREEMENT
COLLATERAL PLEDGE AND SECURITY AGREEMENT, dated as of April 25, 1996,
between NEXTLINK Communications, L.L.C., a limited liability company formed
under the laws of the State of Washington (the "Pledgor") and United States
Trust Company of New York, as collateral agent, (the "Trustee") for the holders
("Holders") of the Notes (as defined herein) of the Pledgor.
WHEREAS, the Pledgor and United States Trust Company of New York, as
trustee, have entered into that certain indenture dated as of April 25, 1996 (as
amended, restated, supplemented or otherwise modified from time to time, the
"Indenture"), pursuant to which the Pledgor is issuing on the date hereof
$350,000,000 in aggregate principal amount of Senior Notes due 2006 (the
"Notes"). Capitalized terms used herein and not otherwise defined herein shall
have the meanings given to such terms in the Indenture; and
WHEREAS, the Pledgor agrees, pursuant to the Indenture, to (i)
purchase Government Securities (together with any replacement or substitute
securities, the "Pledged Securities") in an amount sufficient upon receipt of
scheduled interest and principal payments in respect of Pledged Securities, in
the opinion of a nationally recognized firm of independent accountants selected
by the Pledgor, to provide for payment of the first six scheduled interest
payments due on the Notes and (ii) place such Pledged Securities in an account
held by the Trustee for the benefit of Holders of the Notes; and
WHEREAS, the Pledgor is the legal and beneficial owner of the Pledged
Securities; and
WHEREAS, to secure its obligations under the Indenture and the Notes
(the "Obligations"), the Pledgor has agreed to (i) pledge to the Trustee for its
benefit and the ratable benefit of the Holders of Notes, a security interest in
the Pledged Securities and the Pledge Account (as defined below) and (ii)
execute and deliver this Pledge Agreement in order to secure the payment and
performance by the Pledgor of all such Obligations.
<PAGE>
WITNESSETH:
NOW THEREFORE, the parties hereto agree as follows:
1. Pledge and Grant of Security Interest.
-------------------------------------
The Pledgor hereby pledges to the Trustee for its benefit and for the
ratable benefit of the Holders of Notes, and grants to the Trustee for its
benefit and for the ratable benefit of the Holders of Notes, a continuing first
priority security interest in and to (i) all of Pledgor's right, title and
interest in the Pledged Securities and the Pledge Account, (ii) the certificates
or other evidence of ownership representing the Pledged Securities and the
Pledge Account, and (iii) all products and proceeds of any of the Pledged
Securities, including, without limitation, all dividends, interest, principal
payments, cash, options, warrants, rights, instruments, subscriptions and other
property or proceeds from time to time received, receivable or otherwise
distributed or distributable in respect of or in exchange for any or all of the
Pledged Securities (collectively, the "Collateral").
2. Security for Obligations.
------------------------
The Pledge Agreement and the Collateral secure the prompt and complete
payment and performance when due (whether at stated maturity, by acceleration or
otherwise) of all Obligations.
3. Delivery of Collateral; Pledge Account;
Interest; Substitution of Collateral.
---------------------------------------
(a) All certificates or instruments representing or evidencing the
Collateral shall be delivered to and held by or on behalf of the Trustee
pursuant thereto and shall be in suitable form for transfer by delivery, or
shall be accompanied by duly executed instruments of transfer or assignment
in blank, all in form and substance satisfactory to the Trustee.
(b) Concurrently with the execution and delivery hereof, the Trustee
shall establish an account entitled the "NEXTLINK COMMUNICATIONS PLEDGE
ACCOUNT" for the deposit of the Pledged Securities (the "Pledge Account")
at its office at 114 West 47th Street, New York, New York 10036. Subject
to the other terms and conditions of this Pledge Agreement, all funds or
other property accepted by the Trustee pursuant to this
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<PAGE>
Pledge Agreement shall be held in the Pledge Account for the benefit of the
Trustee and the ratable benefit of the Holders of Notes.
(c) All interest earned on any Collateral shall be retained in the
Pledge Account (or reinvested, as the case may be), pending disbursement
pursuant to the terms hereof.
(d) At any time while the Pledge Agreement is in force the Pledgor may
substitute Marketable Securities for the Government Securities originally
pledged as collateral hereunder; provided, however that the Marketable
-------- -------
Securities so substituted must have a value (measured at the date of
substitution), in the opinion of a nationally recognized firm of
independent public accountants selected by the Pledgor, at least equal to
125% of the amount of any of the first six scheduled interest payments on
the Notes that are unpaid (or the pro rata portion of such interest
payments equal to the percentage of such interest payments to be secured by
such Marketable Securities) as of the date such Marketable Securities are
proposed to be substituted as security for the Pledgor's obligations
hereunder. Concurrently with such substitution, the Pledgor will deliver
to the Trustee a certificate signed by an executive officer of the Pledgor
reaffirming the representations and warranties set forth in Section 5(a)
through (g) hereof.
(e) Pending disbursement of funds from the Pledge Account as
contemplated hereby, the Trustee may reinvest any interest payments
received in respect of the Pledged Securities in money market deposit
accounts issued or offered by an Eligible Institution, provided that any
--------
monies so reinvested and the securities acquired thereby must be (i) held
as Collateral in the Pledge Account, (ii) subject to the security interest
created hereby and (iii) otherwise subject to the terms hereof.
4. Disbursements.
-------------
(a) Not less than five (5) Business Days prior to the date of any of
the first six scheduled interest payments due on the Notes the Pledgor may,
in writing, direct the Trustee to transfer from the Pledge Account to the
Trustee in its capacity as Paying Agent funds necessary to provide for
payment in full or any portion of the next scheduled interest payment on
the Notes.
-3-
<PAGE>
Upon receipt of such written request, the Trustee will take any action
necessary to provide for the payment of such interest payment on the Notes
directly to the Holders of Notes from proceeds of the Pledged Securities in
the Pledge Account.
(b) If the Pledgor makes any interest payment or portion of an
interest payment for which the Pledged Securities are collateral from a
source of funds other than the Pledge Account ("Pledgor Funds"), the
Pledgor may, after payment in full for such interest payment, direct the
Trustee in writing to release to the Pledgor or at the direction of the
Pledgor an amount of funds from the Pledge Account less than or equal to
the amount of Pledgor Funds so expended. Upon receipt of a direction from
the Pledgor and any other documentation reasonably satisfactory to the
Trustee to substantiate such use of Pledgor Funds by the Pledgor (including
the certificate described in the following sentence), the Trustee will take
any action necessary to enable it to pay over to the Pledgor the requested
amount. Concurrently with any release of funds to the Pledgor pursuant to
this Section 4(b), the Pledgor will deliver to the Trustee a certificate
signed by an executive officer of the Pledgor stating that such use of
Pledgor Funds has been duly authorized by all necessary corporate action,
and does not contravene, or constitute a default under, any provisions of
applicable law or regulation or of the certificate of incorporation of the
Pledgor or of any agreement, judgment, injunction, order, decree or other
instrument binding upon the Pledgor or result in the creation or imposition
of any Lien on any assets of the Pledgor.
(c) If at any time the amount of Pledged Securities exceeds (i) (for
so long as the Pledged Securities consist solely of Government Securities)
100% of the amount sufficient, in the opinion of a nationally recognized
firm of independent public accountants selected by the Pledgor, to provide
for payment in full of the first six scheduled interest payments due on the
Notes (or, in the event an interest payment or payments have been made, an
amount sufficient to provide for payment in full of any interest payments
then remaining, up to and including the sixth scheduled interest payment)
and (ii) (if at any time Marketable Securities have been substituted for
any Government Securities) 125% of the amount sufficient, in the opinion of
a nationally recognized firm of independent public accountants selected by
the
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<PAGE>
Pledgor, (or such pro rata portion of such interest payments then remaining
unpaid as is equal to the percentage of such interest payments then secured
by Marketable Securities), the Pledgor may direct the Trustee in writing to
release any such overfunding to it. Upon receipt of a request from the
Pledgor and any other documentation reasonably satisfactory to the Trustee
to substantiate such excess, the Trustee will pay over to the Pledgor any
such overfunded amount.
(d) Upon payment in full of the first six scheduled interest payments
on the Notes, the security interest in the Collateral evidenced by this
Pledge Agreement will terminate and be of no further force and effect.
Furthermore, upon the release of any Collateral from the Pledge Account in
accordance with the terms of this Pledge Agreement, whether upon release of
Collateral to Holders as payment of interest, to the Company or otherwise,
the security interest evidenced by this Pledge Agreement in the Collateral
so released will terminate and be of no further force and effect.
5. Representations and Warranties.
------------------------------
The Pledgor hereby represents and warrants that:
(a) The execution, delivery and performance by the Pledgor of this
Pledge Agreement do not contravene, or constitute a default under, any
provision of applicable law or regulation or of the certificate of
formation of the Pledgor or of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Pledgor or result in the
creation or imposition of any Lien on any assets of the Pledgor, except for
the security interests granted under this Pledge Agreement.
(b) No financing statement covering the Pledged Securities is on file
in any public office (other than the financing statements filed pursuant to
this Pledge Agreement.
(c) Upon the delivery to the Trustee of the certificates, if any,
representing the Pledged Securities, any filing of financial statements
required by the Uniform Commercial Code (the "UCC") and the notations on
the records of the Trustee that it holds the Pledged Securities as pledgee,
the pledge of the Collateral pursuant to this Pledge Agreement creates a
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<PAGE>
valid and perfected first priority security interest in and to the
Collateral, securing the payment of the Obligations for the benefit of the
Trustee and the ratable benefit of the Holders of Notes, enforceable as
such against all creditors of the Pledgor and any persons purporting to
purchase any of the Collateral from the Pledgor other than as permitted by
the Indenture.
(d) No consent of any other person and no consent, authorization,
approval, or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required either (i) for the
pledge by the Pledgor of the Collateral pursuant to this Pledge Agreement
or for the execution, delivery or performance of this Pledge Agreement by
the Pledgor (except for any filings and notations necessary to perfect
Liens on the Collateral) or (ii) for the exercise by the Trustee of the
rights provided for in this Pledge Agreement or the remedies in respect of
the Collateral pursuant to this Pledge Agreement.
(e) The pledge of the Collateral pursuant to this Pledge Agreement is
not prohibited by any applicable law or government regulation, release
interpretation or opinion of the Board of Governors of the Federal Reserve
System or other regulatory agency (including, without limitation,
Regulations G, T, U and X of the Board of Governors of the Federal Reserve
System).
6. Further Assurances.
------------------
The Pledgor agrees to promptly take such actions and to execute and
deliver or cause to be executed and delivered, or use its best efforts to
procure, such stock or bond powers, proxies, assignments, instruments and such
other or different writings as the Trustee may request, all in form and
substance satisfactory to the Trustee, deliver any instruments to the Trustee
and take any other actions that are necessary or, in the opinion of the Trustee,
desirable, to perfect, continue the perfection of, confirm and assure the first
priority of the Trustee's security interest in the Collateral, to protect the
Collateral against the rights, claims or interests of third persons, to
otherwise effect the purposes of this Pledge Agreement.
7. Covenants.
---------
The Pledgor covenants and agrees with the Trustee and the Holders of
Notes from and after the date of this
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<PAGE>
Pledge Agreement until the earlier of payment in full in cash of (A) each of the
first six scheduled interest payments due on the Notes under the terms of the
Indenture or (B) all Obligations due and owing under the Indenture and the Notes
in the event such Obligations become due and payable prior to the payment of the
first six scheduled interest payments on the Notes:
(a) The Pledgor agrees that it will not (i) sell or otherwise dispose
of, or grant any option or warrant with respect to, any of the Collateral
or (ii) create or permit to exist any Lien upon or with respect to any of
the Collateral (except for the lien created pursuant to this Pledge
Agreement) and at all times will be the sole beneficial owner of the
Collateral.
(b) The Pledgor agrees that it will not (i) enter into any agreement
or understanding that purports to or may restrict or inhibit the Trustee's
rights or remedies hereunder, including, without limitation, the Trustee's
right to sell or otherwise dispose of the Collateral or (ii) fail to pay or
discharge any tax, assessment or levy of any nature not later than five
days prior to the date of any proposed sale under any judgement, writ or
warrant of attachment with regard to the Collateral.
8. Power of Attorney.
-----------------
In addition to all of the powers granted to the Trustee pursuant to
Article 6 of the Indenture, the Pledgor hereby appoints and constitutes the
Trustee as the Pledgor's attorney-in-fact to exercise to the fullest extent
permitted by law all of the following powers upon and at any time after the
occurrence and during the continuance of an Event of Default: (i) collection of
proceeds of any Collateral; (ii) conveyance of any item of Collateral to any
purchaser thereof; (iii) giving of any notices or recording of any Liens under
Section 6 hereof; (iv) making of any payments or taking any acts under Section 9
hereof and (v) paying or discharging taxes or Liens levied or placed upon the
Collateral, the legality or validity thereof and the amounts necessary to
discharge the same to be determined by the Trustee in its sole discretion, and
such payments made by the Trustee to become the Obligations of the Pledgor to
the Trustee, due and payable immediately upon demand. The Trustee's authority
hereunder shall include, without limitation, the authority to endorse and
negotiate any checks or instruments representing proceeds of Collateral in the
name of the Pledgor, execute and give receipt for any
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<PAGE>
certificate of ownership or any document constituting Collateral, transfer title
to any item of Collateral, sign the Pledgor's name on all financing statements
(to the extent permitted by applicable law) or any other documents deemed
necessary or appropriate by the Trustee to preserve, process or perfect the
security interest in the Collateral and to file the same, prepare, file and sign
the Pledgor's name on any notice of Lien, and to take any other actions arising
from or incident to the powers granted to the Trustee in this Pledge Agreement.
This power of attorney is coupled with an interest and is irrevocable by the
Pledgor.
9. Trustee May Perform.
-------------------
If the Pledgor fails to perform any agreement contained herein, the
Trustee may itself perform, or cause performance of, such agreement, and the
reasonable expenses of the Trustee incurred in connection therewith shall be
payable by the Pledgor under Section 13 hereof.
10. No Assumption of Duties; Reasonable Care.
----------------------------------------
The rights and powers granted to the Trustee hereunder are being
granted in order to preserve and protect the Trustee's and the Holders' of Notes
security interest in and to the Collateral granted hereby and shall not be
interpreted to, and shall not, impose any duties on the Trustee in connection
therewith other than those imposed under applicable law.
11. Indemnity.
---------
The Pledgor shall indemnify, defend and hold harmless the Trustee and
its directors, officers, agents and employees from and against all claims,
actions, obligations, losses, liabilities and expenses, including costs, fees
and disbursements of counsel (including, without limitation, the reasonable cost
to the Trustee of legal counsel), the costs of investigations, and claims for
damages, arising from the Trustee's performance under this Pledge Agreement,
except insofar as the same may have been caused by the bad faith, gross
negligence or wilful misconduct of such indemnified person.
12. Remedies upon Event of Default.
------------------------------
If an Event of Default shall have occurred:
(a) The Trustee shall have and may exercise with reference to the
Collateral any or all of the rights
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<PAGE>
and remedies of a secured party under the Uniform Commercial Code in effect
in the State of New York, and as otherwise granted herein or under any
other applicable law or under any other agreement now or hereafter in
effect executed by Pledgor, including, without limitation, the right and
power to sell, at public or private sale or sales, or otherwise dispose of,
or otherwise utilize the Collateral and any part or parts thereof in any
manner authorized or permitted under said Uniform Commercial Code after
default by a debtor, and to apply the proceeds thereof toward payment of
any costs and expenses and attorneys' fees and expenses thereby incurred by
the Trustee and toward payment of the Obligations in such order or manner
as the Trustee may elect. Specifically and without limiting the foregoing,
the Trustee shall have the right to take possession of all or any part of
the Collateral or any security therefor and of all books, records, papers
and documents of Pledgor or in Pledgor's possession or control relating to
the Collateral which are not already in the Trustee's possession, and for
such purpose may enter upon any premises upon which any of the Collateral
or any security therefor or any of said books, records, papers and
documents are situated and remove the same therefrom without any liability
for trespass or damages thereby occasioned. To the extent permitted by
law, Pledgor expressly waives any notice of sale or other disposition of
the Collateral and all other rights or remedies of Pledgor or formalities
prescribed by law relative to sale or disposition of the Collateral or
exercise of any other right or remedy of the Trustee existing after default
hereunder; and to the extent any such notice is required and cannot be
waived, Pledgor agrees that if such notice is given in the manner provided
in Section 17 hereof at least three (3) days before the time of the sale or
disposition, such notice shall be deemed reasonable and shall fully satisfy
any requirement for giving of said notice. The Trustee shall not be
obligated to make any sale of Collateral regardless of notice of sale
having been given. The Trustee may adjourn any public or private sale. The
Pledgor further agrees to use its best efforts to do or cause to be done
all such other acts as may be necessary.
(b) All rights to marshalling of assets of Pledgor, including any
such right with respect to the Collateral, are hereby waived by Pledgor.
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<PAGE>
13. Expenses.
--------
The Pledgor will upon demand pay to the Trustee the amount of any and
all reasonable expenses (including, without limitation, the reasonable fees,
expenses and disbursements of its counsel, experts and agents retained by the
Trustee) that the Trustee may incur in connection with (i) the administration of
this Pledge Agreement, (ii) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Collateral, (iii) the
exercise or enforcement of any of the rights of the Trustee and the Holders of
Notes hereunder or (iv) the failure by the Pledgor to perform or observe any of
the provisions hereof.
14. Security Interest Absolute.
--------------------------
All rights of the Trustee and the Holders of Notes and security
interests hereunder, and all obligations of the Pledgor hereunder, shall be
absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Indenture or any
other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Indenture;
(c) any exchange, surrender, release or non-perfection of any Liens on
any other collateral for all or any of the Obligations; or
(d) to the extent permitted by applicable law, any other circumstance
which might otherwise constitute a defense available to, or a discharge of,
the Pledgor in respect of the Obligations or of this Pledge Agreement.
15. Continuing Security Interest; Termination
-----------------------------------------
(a) This Pledge Agreement shall create a continuing security interest
in and to the Collateral and shall, unless otherwise provided in the
Indenture or in this Pledge Agreement, remain in full force and effect
until the earlier of payment in full in case of (A) each of the first six
scheduled interest payments due on the Notes under the terms of the
Indenture or
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<PAGE>
(B) all Obligations due and owing under the Indenture and the Notes in the
event such Obligations become payable prior to the payment of the first six
scheduled interest payments on the Notes. This Pledge Agreement shall be
binding upon the Pledgor, its successors and assigns, and shall inure,
together with the rights and remedies of the Trustee hereunder, to the
benefit of the Trustee, the Holders of Notes and their respective
successors, transferees and assigns.
(b) This Pledge Agreement shall terminate upon the earlier of payment
in full in cash of (A) each of the first six scheduled interest payments
due on the Notes under the terms of the Indenture or (B) all Obligations
due and owing under the Indenture and the Notes in the event such
Obligations become payable prior to the payment of the first six scheduled
interest payments on the Notes. At such time, the Trustee shall, at the
written request of the Pledgor, reassign and redeliver to the Pledgor all
of the Collateral hereunder that has not been sold, disposed of, retained
or applied by the Trustee in accordance with the terms of this Pledge
Agreement and the Indenture. Such reassignment and redelivery shall be
without warranty (either express or implied) by or recourse to the Trustee,
except as to the absence of any prior assignments by the Trustee of its
interest in the Collateral, and shall be at the expense of the Pledgor.
16. Authority of the Trustee.
------------------------
(a) The Trustee shall have and be entitled to exercise all powers
hereunder that are specifically granted to the Trustee by the terms hereof,
together with such powers as are reasonably incident thereto. The Trustee
may perform any of its duties hereunder or in connection with the
Collateral by or through agents or employees and shall be entitled to
retain counsel and to act in reliance upon the advice of counsel concerning
all such matters. Neither the Trustee, any director, officer, employee,
attorney or agent of the Trustee nor the Holders of Notes shall be liable
to the Pledgor for any action taken or omitted to be taken by it or them
hereunder, except for its or their own bad faith, gross negligence or
willful misconduct, nor shall the Trustee be responsible for the validity,
effectiveness or sufficiency hereof or of any document or security
furnished pursuant hereto. The Trustee and its directors, officers,
employees, attorneys and
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<PAGE>
agents shall be entitled to rely on any communication, instrument or
document believed by it or them to be genuine and correct and to have been
signed or sent by the proper person or persons.
(b) The Pledgor acknowledges that the rights and responsibilities of
the Trustee under this Pledge Agreement with respect to any action taken by
the Trustee or the exercise or non-exercise by the Trustee of any option,
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Pledge Agreement shall, as between the
Trustee and the Holders of Notes, be governed by the Indenture and by such
other agreements with respect thereto as may exist from time to time among
them, but, as between the Trustee and the Pledgor, the Trustee shall be
conclusively presumed to be acting as agent for the Holders of Notes with
full and valid authority so to act or refrain from acting, and the Pledgor
shall not be obligated or entitled to make any inquiry respecting such
authority.
17. Notices.
-------
Any communication, notice or demand to be given hereunder shall be
duly given hereunder if given in the form and manner, and delivered to their
address set forth in the Indenture, or in such other form and manner or to such
other address as shall be designated by any party hereto to each other party
hereto in a written notice delivered in accordance with the terms of the
Indenture.
18. No Waiver; Cumulative Rights.
----------------------------
No failure on the part of the Trustee to exercise, and no delay in
exercising, any right, remedy or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by the Trustee of any right,
remedy or power hereunder preclude any other or future exercise of any other
right, remedy or power. Each and every right, remedy and power hereby granted
to the Trustee or allowed it by law or other agreement shall be cumulative and
not exclusive the one of any other, and may be exercised by the Trustee from
time to time.
19. Benefits of Pledge Agreement.
----------------------------
Nothing in this Pledge Agreement, express or implied shall give to any
person, other than the parties hereto and their successors hereunder, and the
Holders of
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the Notes, any benefit or any legal or equitable right, remedy or claim under
this Pledge Agreement.
20. Applicable Law; Consent to Jurisdiction.
---------------------------------------
This Agreement and the rights and obligations of the parties hereunder
shall be governed by, and construed in accordance with, the laws of the State of
New York. Pledgor hereby irrevocably submits to the non-exclusive jurisdiction
of any New York State or Federal court located in the State of New York in any
action or proceeding arising out of or relating to this Agreement.
21. Submission to Jurisdiction; Waiver of Jury Trial.
------------------------------------------------
(a) THIS PLEDGE AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK. TO INDUCE THE TRUSTEE TO ENTER INTO THIS PLEDGE
AND SECURITY AGREEMENT, THE PLEDGOR HEREBY IRREVOCABLY AGREES THAT, SUBJECT TO
THE TRUSTEE'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS WHICH IN
ANY MANNER ARISE OUT OF OR IN CONNECTION WITH OR ARE IN ANY WAY RELATED TO THIS
PLEDGE AGREEMENT SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE COUNTY OF
NEW YORK, STATE OF NEW YORK. THE PLEDGOR HEREBY CONSENTS TO THE JURISDICTION OF
ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW
YORK. THE PLEDGOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE
VENUE OF ANY LITIGATION BETWEEN THE PLEDGOR AND THE TRUSTEE IN ACCORDANCE WITH
THIS PARAGRAPH.
(b) EACH OF THE PLEDGOR AND THE TRUSTEE HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
WHICH IN ANY MANNER ARISES OUT OF OR IN CONNECTION WITH OR IS IN ANY WAY RELATED
TO THIS PLEDGE AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN.
(c) THE PROVISIONS OF THIS SECTION 21 ARE A MATERIAL INDUCEMENT FOR
THE TRUSTEE ENTERING INTO THE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
HEREIN. PLEDGOR HEREBY ACKNOWLEDGES THAT IT HAS REVIEWED THE PROVISIONS OF THIS
SECTION 21 WITH ITS INDEPENDENT COUNSEL.
22. Execution in Counterparts.
-------------------------
This Pledge Agreement may be executed in any number of counterparts,
each of which shall be an original,
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but such counterparts shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused his Agreement to be duly
executed as of the date first above written.
NEXTLINK COMMUNICATIONS, L.L.C.
By: NEXTLINK, INC.
By /s/ R. Bruce Easter, Jr.
-------------------------
R. Bruce Easter, Jr.
Vice President and Secretary
UNITED STATES TRUST COMPANY OF
NEW YORK
By /s/ Patricia Stermer
---------------------
Patricia Stermer
Assistant Vice President
<PAGE>
EXHIBIT 4.3
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT, dated as of April 25, 1996 by and
between NEXTLINK Communications, L.L.C., a limited liability company formed
under the laws of the State of Washington (the "Company"), NEXTLINK Capital,
Inc., a Washington corporation ("Capital" and, together with the Company, the
"Issuers"), and Goldman, Sachs & Co., Bear, Stearns & Co. Inc., Salomon Brothers
Inc and Toronto Dominion Securities (USA) Inc. (collectively, the "Purchasers")
of the 12 1/2% Senior Notes due April 15, 2006 of the Issuers.
1. Certain Definitions.
For purposes of this Exchange and Registration Rights Agreement, the following
terms shall have the following respective meanings:
(a) "Closing Date" shall mean the date on which the Securities are
initially issued.
(b) "Commission" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Exchange Act or the
Securities Act, whichever is the relevant statute for the particular purpose.
(c) "Effective Time", in the case of (i) an Exchange Offer, shall mean the
date on which the Commission declares the Exchange Offer registration
statement effective or on which such registration statement otherwise becomes
effective and (ii) a Shelf Registration, shall mean the date on which the
Commission declares the Shelf Registration effective or on which the Shelf
Registration otherwise becomes effective.
(d) "Exchange Act" shall mean the Securities Exchange Act of 1934, or any
successor thereto, as the same shall be amended from time to time.
(e) "Exchange Offer" shall have the meaning assigned thereto in Section
2(a).
(f) "Exchange Securities" shall have the meaning assigned thereto in
Section 2(a).
(g) The term "holder" shall mean each of the Purchasers for so long as it
owns any Registrable Securities, and such of its respective successors and
assigns who acquire Registrable Securities, directly or indirectly, from such
person or from any successor or assign of such person, in each case for so
long as such person owns any Registrable Securities.
(h) "Indenture" shall mean the Indenture, dated as of April 25, 1996,
between the Company, Capital and United States Trust Company of New York, as
Trustee.
(i) The term "person" shall mean a corporation, association, partnership,
organization, business, individual, government or political subdivision
thereof or governmental agency.
(j) "Purchase Agreement" shall mean the Purchase Agreement dated April 18,
1996 between the Company, Capital and the Purchasers.
<PAGE>
(k) "Registrable Securities" shall mean the Securities; provided, however,
that such Securities shall cease to be Registrable Securities when (i) except
if prior to the consummation of the Exchange Offer existing Commission
interpretations are changed such that the Exchange Securities received by
holders in the Exchange Offer for Registrable Securities are not or would not
be, upon receipt, transferable by each such holder (other than a Restricted
Holder) without restriction under the Securities Act in the circumstances
contemplated by Section 2(a), the Exchange Offer is conducted as contemplated
in Section 2(a); provided, however, that any such Securities that, pursuant to
the last two sentences of Section 2(a), are included in a prospectus for use
in connection with resales by broker-dealers shall be deemed to be Registrable
Securities with respect to Sections 5, 6 and 9 until resale of such Exchange
Securities has been effected within the 90-day period referred to in Section
2(a); (ii) in the circumstances contemplated by Section 2(b), a registration
statement registering such Securities under the Securities Act has been
declared or becomes effective and such Securities have been sold or otherwise
transferred by the holder thereof pursuant to such effective registration
statement; (iii) such Securities are sold pursuant to Rule 144 (or any
successor provision) promulgated under the Securities Act under circumstances
in which any legend borne by such Securities relating to restrictions on
transferability thereof, under the Securities Act or otherwise, is removed by
the Issuers or pursuant to the Indenture or such Securities are eligible to be
sold pursuant to paragraph (k) of Rule 144; or (iv) such Securities shall
cease to be outstanding.
(l) "Registration Default" shall have the meaning assigned thereto in
Section 2(c) hereof.
(m) "Registration Expenses" shall have the meaning assigned thereto in
Section 4 hereof.
(n) "Restricted Holder" shall mean (i) a holder that is an affiliate of the
Company or Capital within the meaning of Rule 405 under the Securities Act,
(ii) a holder who acquires Exchange Securities outside the ordinary course of
such holder's business or (iii) a holder who has arrangements or
understandings with any person to participate in the Exchange Offer for the
purpose of distributing Exchange Securities.
(o) "Securities" shall mean, collectively, the 12 1/2% Senior Notes due
April 15, 2006, of the Issuers to be issued and sold to the Purchasers, and
securities issued in exchange therefor or in lieu thereof pursuant to the
Indenture.
(p) "Securities Act" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
(q) "Shelf Registration" shall have the meaning assigned thereto in Section
2(b) hereof.
(r) "Special Interest" shall have the meaning assigned thereto in Section
2(c) hereof.
(s) "Trust Indenture Act" shall mean the Trust Indenture Act of 1939, or
any successor thereto, and the rules, regulations and forms promulgated
thereunder, all as the same shall be amended from time to time.
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<PAGE>
2. Registration Under the Securities Act.
(a) Except as set forth in Section 2(b) below, the Issuers agree to use their
reasonable best efforts to file under the Securities Act no later than 30 days
after the Closing Date, a registration statement relating to an offer to
exchange (the "Exchange Offer") for a like aggregate principal amount of debt
securities of the Issuers which are substantially identical to the Securities
(and which are entitled to the benefits of a trust indenture which is
substantially identical to the Indenture or is the Indenture and which has been
qualified under the Trust Indenture Act) except that they have been registered
pursuant to an effective registration statement under the Securities Act and
such new debt securities will not contain provisions for Special Interest or
provisions restricting transfer in the absence of registration under the
Securities Act (such new debt securities hereinafter called "Exchange
Securities") for any or all of the Registrable Securities. The Issuers agree to
use their reasonable best efforts to cause such registration statement to become
effective under the Securities Act as soon as practicable thereafter. The
Exchange Offer will be registered under the Act on the appropriate form and will
comply in all material respects with all applicable tender offer rules and
regulations under the Exchange Act. The Issuers further agree to commence the
Exchange Offer promptly after such registration statement has become effective,
hold the Exchange Offer open for at least 30 days and exchange Exchange
Securities for all Registrable Securities that have been tendered and not
withdrawn on or prior to the expiration of the Exchange Offer. The Exchange
Offer will be deemed to have been completed only if the Exchange Securities
received by holders other than Restricted Holders in the Exchange Offer for
Registrable Securities are, upon receipt, transferable by each such holder
without restriction under the Securities Act and the Exchange Act and without
material restrictions under the blue sky or securities laws of a substantial
majority of the States of the United States of America, it being understood that
broker-dealers receiving Securities will be subject to certain prospectus
delivery requirements with respect to resale of the Securities. The Exchange
Offer shall be deemed to have been completed upon the earlier to occur of (i)
the Issuers having exchanged the Exchange Securities for all outstanding
Registrable Securities pursuant to the Exchange Offer and (ii) the Issuers
having exchanged, pursuant to the Exchange Offer, Exchange Securities for all
Registrable Securities that have been tendered and not withdrawn before the
expiration of the Exchange Offer, which shall be on a date that is at least 30
days following the commencement of the Exchange Offer. The Issuers agree (i) to
include in the registration statement a prospectus for use in connection with
any resales by any holder of Exchange Securities that is a broker-dealer and
(ii) to keep such registration statement effective for a period ending on the
earlier of the 90th day after the Exchange Offer has been completed or such time
as such broker-dealers no longer own any Registrable Securities. With respect to
such registration statement the Issuers and any such holder shall have the
benefit of, and shall each provide to the other, the rights of indemnification
and contribution set forth in Section 6 hereof.
(b) If on or prior to the consummation of the Exchange Offer existing
Commission interpretations are changed such that the Exchange Securities
received by holders other than Restricted Holders in the Exchange Offer for
Registrable Securities are not or would not be, upon receipt, transferable by
each such holder without restriction under the Securities Act, in lieu of
conducting the Exchange Offer contemplated by Section 2(a) the Issuers shall
file under the Securities Act a "shelf" registration statement providing for the
registration of, and the sale on a continuous or delayed basis by the holders
of, all of the Registrable Securities, pursuant to Rule 415 under the Securities
Act and/or any similar rule that may be adopted by the Commission (the
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<PAGE>
"Shelf Registration"). The Issuers agree to use their reasonable best efforts to
cause the Shelf Registration to become or be declared effective and to keep such
Shelf Registration continuously effective for a period ending on the earlier of
the third anniversary of the Closing Date or such time as there are no longer
any Registrable Securities outstanding. The Issuers further agree to supplement
or make amendments to the Shelf Registration, as and when required by the rules,
regulations or instructions applicable to the registration form used by the
Issuers for such Shelf Registration or by the Securities Act or rules and
regulations thereunder for shelf registration, and the Issuers agree to furnish
to the holders of the Registrable Securities copies of any such supplement or
amendment prior to its being used and/or filed with the Commission.
(c) In the event that (i) the Issuers have not filed the registration
statement relating to the Exchange Offer (or, if applicable, the Shelf
Registration) on or before the 30th day after the Closing Date, or (ii) such
registration statement (or, if applicable, the Shelf Registration) has not
become effective or been declared effective by the Commission on or before the
120th day after the Closing Date, or (iii) the Exchange Offer has not been
completed within 30 business days after the initial effective date of the
registration statement (if the Exchange Offer is then required to be made) or
(iv) any registration statement required by Section 2(a) or 2(b) is filed and
declared effective but shall thereafter cease to be effective (except as
specifically permitted herein) without being succeeded promptly by an additional
registration statement filed and declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), then interest will
accrue (in addition to the stated interest on the Securities) at the rate of
0.25% per annum on the principal amount of the Securities, for the period from
the occurrence of the Registration Default until such time as no Registration
Default is in effect. Such additional interest (the "Special Interest") will be
payable in cash semi-annually in arrears on each October 15 and April 15 in
accordance with the Indenture. For each 90-day period that the Registration
Default continues, the per annum rate of Special Interest shall increase by an
additional 0.25%, provided that such rate shall in no event exceed 1.0% per
annum in the aggregate. Special interest, if any, will be computed on the basis
of a 365 or 366 day year, as the case may be, and the number of days actually
elapsed.
3. Registration Procedures.
If the Issuers file a registration statement pursuant to Section 2(a) or
Section 2(b), the following provisions shall apply:
(a) At or before the Effective Time of the Exchange Offer or the Shelf
Registration, as the case may be, the Issuers shall qualify the Indenture under
the Trust Indenture Act.
(b) In the event that such qualification would require the appointment of a
new trustee under the Indenture, the Issuers shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
(c) In connection with the Issuers' obligations with respect to the Shelf
Registration, if applicable, the Issuers shall use their reasonable best efforts
to effect or cause the Shelf Registration to permit the sale of the Registrable
Securities by the holders thereof in accordance with the intended method or
methods of distribution thereof described in the Shelf Registration. In
connection therewith, the Issuers shall:
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(i) prepare and file with the Commission a registration statement with
respect to the Shelf Registration on any form which may be utilized by the
Issuers and which shall permit the disposition of the Registrable Securities
in accordance with the intended method or methods thereof, as specified in
writing to the Issuers by the holders of the Registrable Securities;
(ii) as soon as reasonably possible, prepare and file with the Commission
such amendments and supplements to such registration statement and the
prospectus included therein as may be necessary to effect and maintain the
effectiveness of such registration statement for the period specified in
Section 2(b) hereof and as may be required by the applicable rules and
regulations of the Commission and the instructions applicable to the form of
such registration statement;
(iii)as soon as reasonably possible, comply with the provisions of the
Securities Act applicable to the Issuers in connection with the disposition
of all of the Registrable Securities covered by such registration statement
in accordance with the intended methods of disposition by the holders
thereof, set forth in such registration statement;
(iv) provide (A) the holders of the Registrable Securities to be included
in such registration statement and not more than one counsel for all the
holders of such Registrable Securities, (B) the underwriters (which term,
for purposes of this Exchange and Registration Rights Agreement, shall
include a person deemed to be an underwriter within the meaning of Section
2(11) of the Securities Act), if any, thereof, (C) the sales or placement
agent, if any, therefor, and (D) one counsel for such underwriters or
agents, if any, reasonable opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with
the Commission, and each amendment or supplement thereto;
(v) for a reasonable period prior to the filing of such registration
statement, and throughout the period specified in Section 2(b), make
available at reasonable times at the Issuers' principal place of business or
such other reasonable place for inspection by the persons referred to in
Section 3(c)(iv) who shall certify to the Issuers that they have a current
intention to sell the Registrable Securities pursuant to the Shelf
Registration such financial and other information and books and records of
the Issuers, and cause the officers, employees, counsel and independent
certified public accountants of the Issuers to respond to such inquiries, as
shall be reasonably necessary, in the judgment of the respective counsel
referred to in such Section, to conduct a reasonable investigation within
the meaning of Section 11 of the Securities Act; provided, however, that
each such party shall be required to maintain in confidence and not to
disclose to any other person any information or records reasonably
designated by the Issuers as being confidential, until such time as (A) such
information becomes a matter of public record (whether by virtue of its
inclusion in such registration statement or otherwise, except by disclosure
by such party in breach of this Agreement), or (B) such person shall be
required so to disclose such information pursuant to the subpoena or order
of any court or other governmental agency or body having jurisdiction over
the matter (subject to, and only to the extent required by, the requirements
of such order, and only after such person shall have given the Issuers
prompt prior written notice of such requirement), or (C) such information is
required to be set forth in such registration statement or the prospectus
included therein or in an amendment to such registration statement or an
amendment or supplement to such prospectus in order that such
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<PAGE>
registration statement, prospectus, amendment or supplement, as the case may
be, does not contain an untrue statement of a material fact or omit to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing;
(vi) promptly notify the selling holders of Registrable Securities, the
sales or placement agent, if any, therefor and the managing underwriter or
underwriters, if any, thereof and confirm such advice in writing, (A) when
such registration statement or the prospectus included therein or any
prospectus amendment or supplement or post-effective amendment has been
filed, and, with respect to such registration statement or any post-
effective amendment, when the same has become effective, (B) of any comments
by the Commission and by the Blue Sky or securities commissioner or
regulator of any state with respect thereto or any request by the Commission
for amendments or supplements to such registration statement or prospectus
or for additional information, (C) of the issuance by the Commission of any
stop order suspending the effectiveness of such registration statement or
the initiation or threatening of any proceedings for that purpose, (D) if at
any time the representations and warranties of the Issuers contemplated by
Section 3(c)(xv) or Section 5 cease to be true and correct in all material
respects, (E) of the receipt by the Issuers of any notification with respect
to the suspension of the qualification of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose, or (F) at any time when a prospectus is required to be
delivered under the Securities Act, that such registration statement,
prospectus, prospectus amendment or supplement or post-effective amendment,
or any document incorporated by reference in any of the foregoing, contains
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing;
(vii)use their reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of such registration statement or any
post-effective amendment thereto at the earliest practicable date;
(viii)if requested in writing by any managing underwriter or underwriters,
any placement or sales agent or counsel for the holders of Registrable
Securities, promptly incorporate in a prospectus supplement or post-
effective amendment such information as is required by the applicable rules
and regulations of the Commission and as such managing underwriter or
underwriters, such agent or such holder specifies should be included therein
relating to the terms of the sale of such Registrable Securities, including,
without limitation, information with respect to the principal amount of
Registrable Securities being sold by any holder or agent or to any
underwriters, the name and description of such holder, agent or underwriter,
the offering price of such Registrable Securities and any discount,
commission or other compensation payable in respect thereof, the purchase
price being paid therefor by such underwriters and with respect to any other
terms of the offering of the Registrable Securities, to be sold by such
holder or agent or to such underwriters; and make all required filings of
such prospectus supplement or post-effective amendment promptly after
notification of the matters to be incorporated in such prospectus supplement
or post-effective amendment;
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(ix) furnish to each holder of Registrable Securities, each placement or
sales agent, if any, therefor, each underwriter, if any, thereof and the
respective counsel referred to in Section 3(c)(iv) an executed copy of such
registration statement, each such amendment and supplement thereto (in each
case including all exhibits thereto and documents incorporated by reference
therein) and such number of copies of such registration statement (excluding
exhibits thereto and documents incorporated by reference therein unless
specifically so requested by such holder, agent or underwriter, as the case
may be) and of the prospectus included in such registration statement
(including each preliminary prospectus and any summary prospectus), in
conformity with the requirements of the Securities Act, and such other
documents, as such holder, agent, if any, and underwriter, if any, may
reasonably request in order to facilitate the offering and disposition of
the Registrable Securities owned by such holder, offered or sold by such
agent or underwritten by such underwriter and to permit such holder, agent
and underwriter to satisfy the prospectus delivery requirements of the
Securities Act; and the Issuers hereby consent to the use of such prospectus
(including such preliminary and summary prospectus) and any amendment or
supplement thereto by each such holder and by any such agent and
underwriter, in each case in the form most recently provided to such party
by the Issuers, in connection with the offering and sale of the Registrable
Securities covered by the prospectus (including such preliminary and summary
prospectus) or any supplement or amendment thereto;
(x) use their reasonable best efforts to (A) register or qualify the
Registrable Securities to be included in such registration statement under
such securities laws or blue sky laws of such jurisdictions as any holder of
such Registrable Securities and each placement or sales agent, if any,
therefor and underwriter, if any, thereof shall reasonably request, (B) keep
such registrations or qualifications in effect and comply with such laws so
as to permit the continuance of offers, sales and dealings therein in such
jurisdictions during the period the Shelf Registration is required to remain
effective under Section 2(b) above and for so long as may be necessary to
enable any such holder, agent or underwriter to complete its distribution of
Securities pursuant to such registration statement and (C) take any and all
other actions as may be reasonably necessary or advisable to enable each
such holder, agent, if any, and underwriter, if any, to consummate the
disposition in such jurisdictions of Registrable Securities; provided,
however, that the Issuers shall not be required for any such purpose to (1)
qualify as a limited liability company or corporation, as the case may be,
in any jurisdiction wherein they would not otherwise be required to qualify
but for the requirements of this Section 3(c)(x), (2) consent to general
service of process in any such jurisdiction, (3) subject itself to taxation
in any jurisdiction where the Issuers are not already subject to taxation or
(4) make any changes to the Company's certificate of formation, limited
liability company agreement or any other agreement between the Company and
its members or to Capital's Certificate of Incorporation or By-Laws or any
agreement between Capital and its shareholders;
(xi) use their reasonable best efforts to obtain the consent or approval
of each governmental agency or authority, whether federal, state or local,
which may be required to effect the Shelf Registration or the offering or
sale in connection therewith or to enable the selling holder or holders to
offer, or to consummate the disposition of, their Registrable Securities;
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(xii)cooperate with the holders of the Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold,
which certificates shall be printed, lithographed or engraved, or produced
by any combination of such methods, and which shall not bear any restrictive
legends; and, in the case of an underwritten offering, enable such
Registrable Securities to be in such denominations and registered in such
names as the managing underwriters may request at least two business days
prior to any sale of the Registrable Securities;
(xiii)provide a CUSIP number for all Registrable Securities, not later
than the effective date of the Shelf Registration;
(xiv)enter into one or more underwriting agreements, engagement letters,
agency agreements or similar agreements, as appropriate, including (without
limitation) provisions relating to indemnification and contribution
substantially the same as those set forth in Section 6 hereof, and take such
other actions in connection therewith as any holders of Registrable
Securities aggregating at least 25% in aggregate principal amount of the
Registrable Securities included in such Shelf Registration shall request in
order to expedite or facilitate the disposition of such Registrable
Securities; provided, that the Issuers shall not be required to enter into
any such agreement more than once with respect to all of the Registrable
Securities and may delay entering into such agreement until the consummation
of any underwritten public offering which such Issuers shall have then
undertaken;
(xv) whether or not an agreement of the type referred to in Section
(3)(c)(xiv) hereof is entered into and whether or not any portion of the
offering contemplated by such registration statement is an underwritten
offering or is made through a placement or sales agent or any other entity,
(A) make such representations and warranties to the holders of such
Registrable Securities and the placement or sales agent, if any, therefor
and the underwriters, if any, thereof substantially the same as those set
forth in Section 1 of the Purchase Agreement and such other representations
and warranties as are customarily made with respect to the offering of debt
securities pursuant to a shelf registration statement on the applicable form
under the Act; (B) obtain an opinion or opinions of counsel to the Issuers
substantially the same as the opinions provided for in Section 7 of the
Purchase Agreement, addressed to such holder or holders and the placement or
sales agent, if any, therefor and the underwriters, if any, thereof and
dated the effective date of such registration statement (and if such
registration statement contemplates an underwritten offering of a part or
all of the Registrable Securities, dated the date of the closing under the
underwriting agreement relating thereto) (it being agreed that the matters
to be covered by such opinion shall also include, without limitation, the
due formation and good standing of the Company and its subsidiaries; the
qualification of the Company and its subsidiaries to transact business as
foreign limited liability companies or limited partnerships, as the case may
be; the due authorization, execution and delivery of the relevant agreement
of the type referred to in Section (3)(c)(xiv) hereof, the due
authorization, execution, authentication and issuance, and the validity and
enforceability, of the Securities; the absence of material legal or
governmental proceedings involving the Company; the absence of a breach by
the Company or any of its subsidiaries of, or a default under, material
agreements binding upon the Company or any subsidiary of the Company; the
absence of governmental approvals required to be obtained in connection with
the Shelf Registration, the offering and sale of the Registrable Securities,
this Exchange and
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Registration Rights Agreement or any agreement of the type referred to in
Section (3)(c)(xiv) hereof, except such approvals as may be required under
state securities or blue sky laws; and the compliance as to form of such
registration statement and any documents incorporated by reference therein
and of the Indenture with the requirements of the Securities Act and the
Trust Indenture Act, respectively; and, such opinion shall also state that
such counsel has no reason to believe that, as of the date of the opinion
and of the registration statement or most recent post-effective amendment
thereto, as the case may be, such registration statement and the prospectus
included therein, as then amended or supplemented, and the documents
incorporated by reference therein (in each case other than the financial
statements and other financial information contained therein) contains or
contained an untrue statement of a material fact or omits or omitted to
state therein a material fact necessary to make the statements therein not
misleading (in the case of such documents, in the light of the circumstances
existing at the time that such documents were filed with the Commission
under the Exchange Act)); (C) obtain a "cold comfort" letter or letters from
the independent certified public accountants of the Issuers addressed to the
selling holders of Registrable Securities, the placement or sales agent, if
any, therefor and the underwriters, if any, thereof, dated (i) the effective
date of such registration statement and (ii) the effective date of any
prospectus supplement to the prospectus included in such registration
statement or post-effective amendment to such registration statement which
includes unaudited or audited financial statements as of a date or for a
period subsequent to that of the latest such statements included in such
prospectus (and, if such registration statement contemplates an underwritten
offering pursuant to any prospectus supplement to the prospectus included in
such registration statement or post-effective amendment to such registration
statement which includes unaudited or audited financial statements as of a
date or for a period subsequent to that of the latest such statements
included in such prospectus, dated the date of the closing under the
underwriting agreement relating thereto), such letter or letters to be in
customary form and covering such matters of the type customarily covered by
letters of such type; (D) deliver such other documents and certificates,
including officers' certificates, as may be reasonably requested by any
holders of at least 25% in aggregate principal amount of the Registrable
Securities included in such Shelf Registration or the placement or sales
agent, if any, therefor and the managing underwriters, if any, thereof to
evidence the accuracy of the representations and warranties made pursuant to
clause (A) above or those contained in Section 5(a) hereof and the
compliance with or satisfaction of any agreements or conditions contained in
the underwriting agreement or other agreement entered into by the Company or
Capital; and (E) undertake such obligations relating to expense
reimbursement, indemnification and contribution as are provided in Section 6
hereof;
(xvi)notify in writing each holder of Registrable Securities of any
proposal by the Company or Capital to amend or waive any provision of this
Exchange and Registration Rights Agreement pursuant to Section 9(h) hereof
and of any amendment or waiver effected pursuant thereto, each of which
notices shall contain the text of the amendment or waiver proposed or
effected, as the case may be;
(xvii)in the event that any broker-dealer registered under the Exchange
Act shall underwrite any Registrable Securities or participate as a member
of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Rules of Fair Practice and the By-
Laws of the National Association of Securities Dealers, Inc. ("NASD")
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<PAGE>
or any successor thereto, as amended from time to time) thereof, whether as
a holder of such Registrable Securities or as an underwriter, a placement or
sales agent or a broker or dealer in respect thereof, or otherwise, assist
such broker-dealer in complying with the requirements of such Rules and By-
Laws, including, without limitation, by (A) if such Rules or By-Laws,
including Schedule E thereto (or any successor thereto), shall so require,
engaging a "qualified independent underwriter" (as defined in such Schedule
(or any successor thereto)) to participate in the preparation of the
registration statement relating to such Registrable Securities, to exercise
usual standards of due diligence in respect thereto and, if any portion of
the offering contemplated by such registration statement is an underwritten
offering or is made through a placement or sales agent, to recommend the
yield of such Registrable Securities, (B) indemnifying any such qualified
independent underwriter to the extent of the indemnification of underwriters
provided in Section 6 hereof, and (C) providing such information to such
broker-dealer as may be required in order for such broker-dealer to comply
with the requirements of the Rules of Fair Practice of the NASD; and
(xviii)comply with all applicable rules and regulations of the Commission,
and make generally available to its security holders as soon as practicable
but in any event not later than eighteen months after the effective date of
such registration statement, an earning statement of the Company and its
subsidiaries complying with Section 11(a) of the Securities Act (including,
at the option of the Company, Rule 158 thereunder).
(d) In the event that the Issuers would be required, pursuant to Section
3(c)(vi)(F) above, to notify the selling holders of Registrable Securities, the
placement or sales agent, if any, therefor and the managing underwriters, if
any, thereof, the Issuers shall without delay prepare and furnish to each such
holder, to each placement or sales agent, if any, and to each underwriter, if
any, a reasonable number of copies of a prospectus supplemented or amended so
that, as thereafter delivered to purchasers of Registrable Securities, such
prospectus shall not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.
Each holder of Registrable Securities agrees that upon receipt of any notice
from the Issuers pursuant to Section 3(c)(vi)(F) hereof, such holder shall
forthwith discontinue the disposition of Registrable Securities, pursuant to the
registration statement applicable to such Registrable Securities until such
holder shall have received copies of such amended or supplemented prospectus,
and if so directed by the Issuers, such holder shall deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus covering such Registrable Securities
at the time of receipt of such notice.
(e) The Issuers may require each holder of Registrable Securities as to
which any registration is being effected to furnish in writing to the Issuers
such information regarding such holder and such holder's intended method of
distribution of such Registrable Securities as the Issuers may from time to time
reasonably request in writing, but only to the extent that such information is
required in order to comply with the Securities Act. Each such holder agrees to
notify the Issuers as promptly as practicable of any inaccuracy or change in
information previously furnished by such holder to the Issuers or of the
occurrence of any event in either case as a result of which any prospectus
relating to such registration contains or would contain an untrue statement of a
material fact regarding such holder or such holder's intended method of
distribution of such
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Registrable Securities or omits to state any material fact regarding such holder
or such holder's intended method of distribution of such Registrable Securities
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, and promptly to furnish
to the Issuers any additional information required to correct and update any
previously furnished information or required so that such prospectus shall not
contain, with respect to such holder or the distribution of such Registrable
Securities, an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing. Each such holder
shall comply with the provisions of the Securities Act applicable to such holder
with respect to the disposition by such holder of Registrable Securities covered
by such registration statement in accordance with the intended methods of
disposition by such holder set forth in such registration statement.
(f) Until three years after the Closing Date, the Issuers will not, and will
not permit any of their "affiliates" (as defined in Rule 144 under the Act) to,
resell any of the Securities which constitute "restricted securities" under Rule
144 that have been reacquired by any of them except pursuant to an effective
registration statement under the Act or any exemption therefrom; provided,
however, that, for purposes of this paragraph, "affiliates" shall not include
the Purchasers or any of their affiliates other than the Company and its
subsidiaries, officers, managers and directors.
4. Registration Expenses.
If the Issuers file a registration statement pursuant to Section 2(a) or
Section 2(b), the following provisions shall apply:
The Company agrees to bear and to pay or cause to be paid all expenses
incident to the Issuers' performance of or compliance with this Exchange and
Registration Rights Agreement, including, without limitation, (a) all Commission
and any NASD registration and filing fees and expenses, (b) all fees and
expenses in connection with the qualification of Registrable Securities for
offering and sale under the State securities and blue sky laws referred to in
Section 3(c)(x) hereof, including reasonable fees and disbursements of counsel
for the placement or sales agent, if any, or underwriters, if any, in connection
with such qualifications, (c) all expenses relating to the preparation,
printing, distribution and reproduction of each registration statement required
to be filed hereunder, each prospectus included therein or prepared for
distribution pursuant hereto, each amendment or supplement to the foregoing, and
the certificates representing the Securities, (d) messenger and delivery
expenses, (e) fees and expenses of the Trustee under the Indenture and of any
escrow agent or custodian, (f) internal expenses (including, without limitation,
all salaries and expenses of the Issuers' officers and employees performing
legal or accounting duties), (g) fees, disbursements and expenses of counsel and
independent certified public accountants of the Issuers (including the expenses
of any opinions or "cold comfort" letters required by or incident to such
performance and compliance), (h) fees, disbursements and expenses of any
"qualified independent underwriter" engaged pursuant to Section 3(c)(xvii)
hereof, (i) fees, disbursements and expenses of one counsel for the holders of
Registrable Securities retained in connection with a Shelf Registration, as
selected by the holders of at least a majority in aggregate principal amount of
the Registrable Securities being registered, and fees, expenses and
disbursements of any other persons, including special experts, retained by the
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Issuers in connection with such registration (collectively, the "Registration
Expenses"). To the extent that any Registration Expenses are incurred, assumed
or paid by any holder of Registrable Securities or any placement or sales agent
therefor or underwriter thereof, the Company shall reimburse such person for the
full amount of the Registration Expenses so incurred, assumed or paid promptly
after receipt of a written request therefor. Notwithstanding the foregoing, the
holders of the Registrable Securities being registered shall pay all agency or
brokerage fees and commissions and underwriting discounts and commissions
attributable to the sale of such Registered Securities and the fees and
disbursements of any counsel or other advisors or experts retained by such
holders (severally or jointly), other than the counsel and experts specifically
referred to above, transfer taxes on resale of any of the Securities by such
holders and any advertising expenses incurred by or on behalf of such holders in
connection with any offers they may make.
5. Representations and Warranties.
The Company and Capital, jointly and severally, represent and warrant to,
and agree with, each Purchaser and each of the holders from time to time of
Registrable Securities that:
(a) Each registration statement covering Registrable Securities and each
prospectus (including any preliminary or summary prospectus) contained
therein or furnished pursuant to Section 3(c)(ix) hereof and any further
amendments or supplements to any such registration statement or prospectus,
when it becomes effective or is filed with the Commission, as the case may
be, and, in the case of an underwritten offering of Registrable Securities,
at the time of the closing under the underwriting agreement relating
thereto, will conform in all material respects to the requirements of the
Securities Act and the Trust Indenture Act and any such registration
statement and any amendment thereto will not contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading and any
such prospectus or any amendment or supplement thereto will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing; and at all times
subsequent to the Effective Time of any such registration statement when a
prospectus would be required to be delivered under the Securities Act, other
than from (i) such time as a notice has been given to holders of Registrable
Securities pursuant to Section 3(c)(vi)(F) hereof until (ii) such time as
the Issuers furnish an amended or supplemented prospectus pursuant to
Section 3(d) hereof, each such registration statement, and each prospectus
(including any summary prospectus) contained therein or furnished pursuant
to Section 3(c)(ix) hereof, as then amended or supplemented, will conform in
all material respects to the requirements of the Securities Act and the
Trust Indenture Act and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Issuers
by a holder of Registrable Securities or any placement or sales agent
therefor or underwriter thereof expressly for use therein.
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<PAGE>
(b) Any documents incorporated by reference in any prospectus referred to
in Section 5(a) hereof, when they become or became effective or are or were
filed with the Commission, as the case may be, will conform or conformed in
all material respects to the requirements of the Securities Act or the
Exchange Act, as applicable, and none of such documents will contain or
contained an untrue statement of a material fact or will omit or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Issuers by a holder of Registrable Securities expressly for
use therein.
(c) The compliance by the Issuers with all of the provisions of this
Exchange and Registration Rights Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company, Capital or any subsidiary of the Company is
a party or by which the Company, Capital or any subsidiary of the Company is
bound or to which any of the property or assets of the Company, Capital or
any subsidiary of the Company is subject, nor will such action result in any
violation of the provisions of the certificate of formation, or the limited
liability company agreement of the Company, in each case, as in effect at
the applicable time, or the Certificate of Incorporation or By-Laws of
Capital, in each case, as in effect at the applicable time, or any statute
or any order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company, Capital or any subsidiary of the
Company or any of their properties; and no consent, approval, authorization,
order, registration or qualification of or with any such court or
governmental agency or body is required for the consummation by the Company
or Capital of the transactions contemplated by this Exchange and
Registration Rights Agreement, except the registration under the Securities
Act of the Registrable Securities, qualification of the Indenture under the
Trust Indenture Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under State securities or
blue sky laws in connection with the offering and distribution of the
Registrable Securities.
(d) This Exchange and Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and Capital.
6. Indemnification.
(a) Indemnification by the Issuers. Upon the registration of the Registrable
Securities pursuant to Section 2 hereof, and in consideration of the agreements
of the Purchasers contained herein, and as an inducement to the Purchasers to
purchase the Securities, the Company and Capital, jointly and severally, shall,
and hereby agree to, (i) indemnify and hold harmless each of the holders of
Registrable Securities to be included in such registration, and each person who
participates as a placement or sales agent or as an underwriter in any offering
or sale of such Registrable Securities against any losses, claims, damages or
liabilities, joint or several, to which such holder, agent or underwriter may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a material
fact contained in any registration statement under which such Registrable
Securities were registered under the
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Securities Act, or any preliminary, final or summary prospectus contained
therein or furnished by the Issuers to any such holder, agent or underwriter, or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(ii) reimburse such holder, such agent and such underwriter for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such action or claim as such expenses are incurred; provided,
however, that the Issuers shall not be liable to any such person in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any such registration statement, or preliminary, final
or summary prospectus, or amendment or supplement thereto, in reliance upon and
in conformity with written information furnished to the Issuers by any holders
of Registrable Securities or any placement or sales agent thereof or underwriter
thereof expressly for use therein;
(b) Indemnification by the Holders and any Agents and Underwriters. The
Issuers may require, as a condition to including any Registrable Securities in
any registration statement filed pursuant to Section 2 hereof and to entering
into any placement or underwriting agreement with respect thereto, that the
Issuers shall have received an undertaking reasonably satisfactory to them from
the holder of such Registrable Securities and from each placement agent or
underwriter named in any such placement agreement or underwriting agreement,
severally and not jointly, to (i) indemnify and hold harmless the Issuers, and
all other holders of Registrable Securities, against any losses, claims, damages
or liabilities to which the Issuers or such other holders of Registrable
Securities may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in such registration statement, or any preliminary,
final or summary prospectus contained therein or furnished by the Issuers to any
such holder, agent or underwriter, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Issuers by such holder, agent or underwriter
expressly for use therein, and (ii) reimburse the Issuers for any legal or other
expenses reasonably incurred by the Issuers in connection with investigating or
defending any such action or claim as such expenses are incurred; provided,
however, that no such holder shall be required to undertake liability to any
person under this Section 6(b) for any amounts in excess of the dollar amount of
the proceeds to be received by such holder from the sale of such holder's
Registrable Securities pursuant to such registration.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified party
under subsection (a) or (b) above of written notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party pursuant to the indemnification provisions of
or contemplated by this Section 6, notify such indemnifying party in writing of
the commencement of such action; but the omission so to notify the indemnifying
party shall not relieve it from any liability which it may have to any
indemnified party other than under the indemnification provisions of or
contemplated by Section 6(a) or 6(b) hereof. In case any such action shall be
brought against any indemnified party and it shall notify an indemnifying
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party of the commencement thereof, such indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, such indemnifying party shall not be
liable to such indemnified party for any legal expenses of other counsel or any
other expenses, in each case subsequently incurred by such indemnified party, in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any indemnified
party. No indemnifying party shall be liable for the cost of any settlement
effected by an indemnified party without the written consent of such
indemnifying party, which consent shall not be unreasonably withheld. In no
event shall any indemnifying party be liable for the fees and expenses of more
than one firm or counsel (except to the extent that local counsel, in addition
to such firm or counsel, is required for effective representation) to represent
all indemnified parties with respect to a single action or separate but
substantially similar actions in the same jurisdiction arising out of the same
general allegations.
(d) Contribution. If for any reason the indemnification provisions
contemplated by Section 6(a) or Section 6(b) are unavailable to or insufficient
to hold harmless an indemnified party in respect of any losses, claims, damages
or liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect not
only (i) the relative benefits received by the holders of the Registrable
Securities, on the one hand, and any agents or underwriters, on the other, from
any offering or sale of the Registrable Securities, but also (ii) the relative
fault of the indemnifying party and the indemnified party in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the holders of the
Registrable Securities on the one hand and any agents or underwriters on the
other shall be deemed to be in the same proportion as the total net proceeds
from any offering or sale thereof (before deducting expenses) received by such
holders bear to the total discounts and commissions received by any such agents
or underwriters with respect to such offer or sale. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by such indemnifying party or by such indemnified party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The parties hereto
agree that it would not be just and equitable if contributions pursuant to this
Section 6(d) were determined by pro rata allocation (even if the holders or any
agents or underwriters or all of them were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 6(d). The
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amount paid or payable by an indemnified party as a result of the losses,
claims, damages, or liabilities (or actions in respect thereof) referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this Section 6(d),
no holder shall be required to contribute any amount in excess of the amount by
which the dollar amount of the proceeds received by such holder from the sale of
any Registrable Securities (after deducting any fees, discounts and commissions
applicable thereto) exceeds the amount of any damages which such holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission, and no underwriter or agent shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities placed or underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such underwriter or agent has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The holders'
and any underwriters' or agent's obligations in this Section 6(d) to contribute
shall be several in proportion to the principal amount of Registrable Securities
registered, underwritten or placed, as the case may be, by them and not joint.
(e) The obligations of the Issuers under this Section 6 shall be in addition
to any liability which the Issuers may otherwise have and shall extend, upon the
same terms and conditions, to each officer, director and partner of each holder,
agent and underwriter and each person, if any, who controls any holder, agent or
underwriter within the meaning of the Securities Act; and the obligations of the
holders and any agents or underwriters contemplated by this Section 6 shall be
in addition to any liability which the respective holder, agent or underwriter
may otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Issuers (including any person who, with his consent,
is named in any registration statement as about to become a director of the
Company or Capital) and to each person, if any, who controls the Issuers within
the meaning of the Securities Act.
7. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Registrable Securities covered by
the Shelf Registration are to be sold pursuant to an underwritten offering, the
managing underwriter or underwriters thereof shall be designated by the holders
of at least a majority in aggregate principal amount of the Registrable
Securities to be included in such offering, provided that such designated
managing underwriter or underwriters is or are reasonably acceptable to the
Issuers.
(b) Participation by Holders. Each holder of Registrable Securities hereby
agrees with each other such holder that no such holder may participate in any
underwritten offering hereunder unless such holder (i) agrees to sell such
holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
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(c) Consolidated Earning Statements. In the event of an underwritten offering,
the Issuers agrees to make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the effective
date of the applicable registration statement (as defined in Rule 158(c) under
the Act), a consolidated earning statement of the Company and Capital (which
need not be audited) complying with Section 11(a) of the Act and the rules and
regulations of the Commission thereunder (including, at the option of the
Company, Rule 158 under the Act).
8. Rule 144.
The Issuers covenant to the holders of Registrable Securities that to the
extent they shall be required to do so under the Exchange Act, the Issuers shall
timely file the reports required to be filed by them under the Exchange Act or
the Securities Act (including, but not limited to, the reports under Section 13
and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144
adopted by the Commission under the Securities Act) and the rules and
regulations adopted by the Commission thereunder, and shall take such further
action as any holder of Registrable Securities may reasonably request, all to
the extent required from time to time to make Rule 144 available to such holder
for the sale of Registrable Securities without registration under the Securities
Act within the limitations of the exemption provided by Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or any similar or
successor rule or regulation hereafter adopted by the Commission. Upon the
request of any holder of Registrable Securities in connection with that holder's
sale pursuant to Rule 144, the Issuers shall deliver to such holder a written
statement as to whether they have complied with such requirements.
Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to
require the Issuers to register any of their securities under the Exchange Act.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Issuers, jointly and severally, represent,
warrant, covenant and agree that they have not granted, and shall not grant,
registration rights with respect to Registrable Securities or any other
securities which would be inconsistent with the terms contained in this Exchange
and Registration Rights Agreement.
(b) Specific Performance. The parties hereto acknowledge that there would be
no adequate remedy at law if any party fails to perform any of its obligations
hereunder and that each party may be irreparably harmed by any such failure, and
accordingly agree that each party, in addition to any other remedy to which it
may be entitled at law or in equity, shall be entitled to compel specific
performance of the obligations of any other party under this Exchange and
Registration Rights Agreement in accordance with the terms and conditions of
this Exchange and Registration Rights Agreement, in any court of the United
States or any State thereof having jurisdiction.
(c) Notices. All notices, requests, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand, if delivered personally or by courier, or
three days after being deposited in the mail (registered or certified mail,
postage prepaid, return receipt requested) as follows: If to the Company or
Capital, at 155 108th Avenue N.E., Bellevue, Washington 98004, Attention:
Secretary and if to a holder, to the address of such holder set forth in the
security register or
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other records of the Company and/or Capital, or to such other address as any
party may have furnished to the others in writing in accordance herewith, except
that notices of change of address shall be effective only upon receipt.
(d) Parties in Interest. All the terms and provisions of this Exchange and
Registration Rights Agreement shall be binding upon, shall inure to the benefit
of and shall be enforceable by the respective successors and assigns of the
parties hereto. In the event that any transferee of any holder of Registrable
Securities shall become a holder of Registrable Securities, in any manner,
whether by gift, bequest, purchase, operation of law or otherwise, such
transferee shall, without any further writing or action of any kind, be deemed a
party hereto for all purposes and such Registrable Securities shall be held
subject to all of the terms of this Exchange and Registration Rights Agreement,
and by taking and holding such Registrable Securities such transferee shall be
entitled to receive the benefits of and be conclusively deemed to have agreed to
be bound by and to perform all of the terms and provisions of this Exchange and
Registration Rights Agreement. If the Issuers shall so request, any such
successor, assign or transferee shall agree in writing to acquire and hold the
Registrable Securities subject to all of the terms hereof.
(e) Survival. The respective indemnities, agreements, representations,
warranties and each other provision set forth in this Exchange and Registration
Rights Agreement or made pursuant hereto shall remain in full force and effect
regardless of any investigation (or statement as to the results thereof) made by
or on behalf of any holder of Registrable Securities, any director, officer or
partner of such holder, any agent or underwriter or any director, officer or
partner thereof, or any controlling person of any of the foregoing, and shall
survive delivery of and payment for the Registrable Securities pursuant to the
Purchase Agreement and the transfer and registration of Registrable Securities
by such holder and the consummation of an Exchange Offer.
(f) LAW GOVERNING. THIS EXCHANGE AND REGISTRATION RIGHTS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(g) Headings. The descriptive headings of the several Sections and paragraphs
of this Exchange and Registration Rights Agreement are inserted for convenience
only, do not constitute a part of this Exchange and Registration Rights
Agreement and shall not affect in any way the meaning or interpretation of this
Exchange and Registration Rights Agreement.
(h) Entire Agreement; Amendments. This Exchange and Registration Rights
Agreement and the other writings referred to herein (including the Indenture and
the form of Securities) or delivered pursuant hereto which form a part hereof
contain the entire understanding of the parties with respect to its subject
matter. This Exchange and Registration Rights Agreement supersedes all prior
agreements and understandings between the parties with respect to its subject
matter. This Exchange and Registration Rights Agreement may be amended and the
observance of any term of this Exchange and Registration Rights Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) only by a written instrument duly executed by the Company and
Capital and the holders of at least 66-2/3 percent in aggregate principal amount
of the Registrable Securities at the time outstanding. Each holder of any
Registrable Securities at the time or thereafter outstanding shall be bound by
any amendment or waiver effected pursuant to this Section 9(h), whether or not
any notice, writing or marking
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indicating such amendment or waiver appears on such Registrable Securities or is
delivered to such holder.
(i) Inspection. For so long as this Exchange and Registration Rights Agreement
shall be in effect, this Exchange and Registration Rights Agreement and a
complete list of the names and addresses of all the holders of Registrable
Securities shall be made available for inspection and copying on any business
day by any holder of Registrable Securities at the offices of the Company at the
address thereof set forth in Section 9(c) above or at the office of the Trustee
under the Indenture.
(j) Counterparts. This agreement may be executed by the parties in
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same instrument.
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Agreed to and accepted as of the date referred to above.
NEXTLINK COMMUNICATIONS, L.L.C.
By: NEXTLINK, INC.
By: /s/ R. Bruce Easter, Jr.
-------------------------
Name: R. Bruce Easter, Jr.
Title: Vice President
NEXTLINK CAPITAL, INC.
By: /s/ R. Bruce Easter, Jr.
-------------------------
Name: R. Bruce Easter, Jr.
Title: Vice President
GOLDMAN, SACHS & CO.
By: /s/ David Y. Adler
-------------------
Name: David Y. Adler
Title: Vice President
BEAR, STEARNS & CO. INC.
By: /s/ J. Andrew Bugas
--------------------
Name: J. Andrew Bugas
Title: Senior Managing Director
SALOMON BROTHERS INC
By:/s/ Peter Westley
-----------------
Name: Peter Westley
Title: Vice President
TORONTO DOMINION SECURITIES (USA) INC.
By:/s/ David S. McCann
-------------------
Name: David S. McCann
Title: President
<PAGE>
EXHIBIT 10
NEXTLINK COMMUNICATIONS, L.L.C.
AMENDED AND RESTATED EQUITY OPTION PLAN
This Amended and Restated Equity Option Plan is adopted by NEXTLINK
COMMUNICATIONS, L.L.C. for the benefit of certain of its employees and employees
of its Affiliates.
The purpose of this Equity Option Plan is to enable the Company and
its Affiliates to attract and retain quality employees by providing selected
employees with the option to acquire equity interests in the Company.
1. DEFINITIONS.
1.1 ADMINISTRATIVE COMMITTEE means the Committee described in Section
11.1 hereafter which is to administer the Plan in its sole and unfettered
discretion.
1.2 AFFILIATE of any entity means (a) any entity controlling,
controlled by or under common control with such entity, or (b) any entity owning
or controlling 50% or more of the outstanding voting interests of such entity.
For the purposes of this definition, the term "controls," "is controlled by," or
"is under common control with" shall mean possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of an
entity, whether through the ownership of voting securities, by contract or
otherwise.
1.3 COMPANY means NextLink Communications, L.L.C.
1.4 EQUITY INTEREST means a Class B membership interest in the
Company, which is governed by the terms of the Company's Limited Liability
Company Agreement relating to Class B Units.
1.5 EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended from time to time.
1.6 FAIR MARKET VALUE of an Equity Interest or an Option means the
fair market value of the interest as determined by and in the sole and
unfettered discretion of the Administrative Committee, based on financial data
for the Company dated as of the close of the most recent tax year. The
occurrence of an event described
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in Section 7 does not obligate the Administrative Committee to redetermine such
fair market value using financial data more recent than the close of the most
recent tax year.
1.7 INTEREST in the Company means an Equity Interest.
1.8 LEAVE OF ABSENCE means any period of absence from the service of
the Company with the Company's prior written consent.
1.9 OPTION means the right of an Option Holder to acquire an Equity
Interest in the Company.
1.10 OPTION HOLDER means a person who holds an Option.
1.11 PLAN means this Equity Option Plan, the terms of which are set
forth in this document.
1.12 TERMINATION DATE means the date of an Option Holder's severance
from the employment of the Company for any reason.
1.13 YEAR OF SERVICE means a consecutive 12-month period during which
an Option Holder has been in the continuous full time employ of the Company or
its Affiliate. The 12-month period shall be the 12-month period commencing on
the later of (i) the date on which the Option Holder first becomes an employee
of the Company or its Affiliate, or (ii) January 1, 1995, and on each
anniversary date thereafter; provided, however, that if, subsequent to an Option
Holder's Termination Date, an Option Holder is reemployed by the Company or its
Affiliate, service prior to such reemployment shall be disregarded with respect
to Options granted at or after such reemployment. Further, any Leave of Absence
from the Company or its affiliate shall be disregarded when determining the
Option Holder's Years of Service.
2. GRANT OF OPTIONS.
The Company may grant an Option or Options to any employee of the
Company or its Affiliates. An Option granted hereunder shall be evidenced by a
written agreement between the Company and the Option Holder which shall set
forth the quantity of Equity Interests with respect to which the Option is
granted, the Option price, the date the Option is granted, and such other terms,
conditions and restrictions as the Company deems advisable and which are not
inconsistent with the terms of this
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Plan, including but not limited to the right of the Company to redeem the Option
acquired hereunder and a right of first refusal of the Company to purchase the
Option intended to be transferred by the recipient of the Option. The grant of
one or more Options does not give voting or other rights in the Company or in
management of the Company to the Option Holder. Upon exercise of an Option and
acquisition of an Equity Interest, the holder of the Equity Interest will not
have voting or other management rights in the Company.
3. WHEN EXERCISABLE.
3.1 FIFTEEN-YEAR TERM. The Option may be exercised by the Option
Holder, in whole or in the part, at any time or times after December 31, 1996
and within a 15-year period following the date the Option is granted, subject to
the vesting provisions of Section 3.2, and the early termination provisions of
Sections 5 and 10.2. Any portion of the Option not exercised by the end of the
15-year term shall terminate unless the Option term is extended by the Company.
3.2 VESTING. The Option Holder's right to exercise the Options
granted hereunder is subject to such Options being vested. An Option Holder
shall vest in Options according to the number of whole Years of Service,
determined according to the following schedule, or such other schedule as may be
determined by the Administrative Committee:
Number of Vested
Years of Service Percentage
---------------- ----------
1 Year 25%
2 Years 25%
3 Years 25%
4 Years 25%
4. PAYMENT OF OPTION PRICE.
4.1 WHEN DUE. Payment of the Option price shall be made in full at
the time the notice of exercise of the Option is delivered to the Company and
shall be in cash, bank certified or cashier's check or personal check (unless at
the time of exercise the Administrative Committee in a particular case
determines not to accept a personal check) for the Equity Interest being
purchased. Subject to the terms of this Plan
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(including but not limited to Section 9 below), upon receipt of the payment
price, the Company's records shall be amended to identify the holder of such
Option as a member of the Company holding Class B membership interests in the
Company with a capital contribution equivalent to payment price and the number
of units subject to the exercised Options.
4.2 ADDITIONAL FORMS OF PAYMENT. The Administrative Committee may
determine at any time before exercise of the Option that additional forms of
payment will be permitted. To the extent permitted by the Administrative
Committee and applicable laws and regulations (including, but not limited to,
federal tax and securities laws and state corporate, partnership or limited
liability company laws), an Option may be exercised by:
(a) Delivery of a properly executed exercise notice, together
with irrevocable instructions to a broker to sell all or a portion of the
Equity Interest or make a loan to the Option Holder, all in accordance with
appropriate governmental regulations, and to promptly deliver to the
Company the amount of sale or loan proceeds to pay the exercise price and
any federal, state or local withholding tax obligations that may arise in
connection with the exercise; or
(b) Delivery of a properly executed exercise notice, together
with instructions to the Company to withhold from the Equity Interest that
would otherwise be issued upon exercise that quantity of Equity Interests
having a Fair Market Value equal to the Option price, and to cancel such
withheld Equity Interests.
4.3 CASH PAYMENT. In lieu of requiring an Option Holder to pay
cash or Equity Interests and to receive in turn Equity Interests upon the
exercise of an Option, the Administrative Committee may elect to require the
Option Holder to surrender the Option to the Company for cancellation as to all
or any portion of the Equity Interest covered by the intended exercise and
receive in exchange for such surrender a payment, at the election of the
Administrative Committee, in cash, or in a combination of cash and Equity
Interests, equivalent to the appreciated value of the Equity Interests covered
by the Option surrendered for cancellation. Such appreciated value shall be the
difference between the Option price of such Equity Interest (as adjusted
pursuant to Section 10) and the Fair Market Value of such Equity Interest.
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4.4 PAYMENT DUE. The delivery of the notice of exercise by the
Option Holder shall constitute an exercise by the Option Holder of the Option to
the extent therein set forth, and payment for the Equity Interests covered by
such exercise shall become due immediately.
4.5 WITHHOLDING TAX REQUIREMENTS. The Company shall have the
right determined in its sole and unfettered discretion (i) to require the Option
Holder fully to fund with cash paid to the Company prior to exercise of an
Option, or (ii) to retain and withhold from any payment of cash or Equity
Interest under the Plan, the amount of taxes required by any government to be
withheld or otherwise deducted and paid with respect to such payment. Any
exercise attempted by an Option Holder contrary to the instructions of the
Company in this regard shall be null and void.
5. TERMINATION OF OPTION.
Notwithstanding Section 3 above to the contrary, the Option, to the
extent unexercised, shall terminate prior to the termination date set forth in
Section 3.1 above, under the following circumstances:
5.1 TERMINATION OF EMPLOYMENT. The Option, to the extent
unexercised, shall terminate one hundred eighty (180) days following the date
the Option Holder ceases to be employed by the Company or its Affiliate. The
foregoing shall not apply in the case of termination for cause (as defined in
Section 5.4 below), termination as the result of total disability, or
termination as a result of the Option Holder's death.
5.2 DISABILITY. The Option, to the extent unexercised, shall
terminate 12 months following the date the Option Holder ceases to be employed
by the Company or its Affiliate, if such cessation of employment is due to the
total disability of the Employee, as reasonably determined by the Administrative
Committee.
5.3 DEATH. The Option, to the extent unexercised, shall
terminate 12 months following the date of Option Holder's death.
5.4 TERMINATION FOR CAUSE. The Option, to the extent
unexercised, shall terminate immediately upon the Option Holder being given
notice by the Company or its Affiliate that the Option Holder is being
terminated as an employee for cause. For the purposes of the foregoing, the
termination for cause shall mean
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termination for any one or more of the following reasons, as determined by the
Administrative Committee:
(a) Embezzlement;
(b) Repeated use of drugs or alcohol which materially impairs
the Option Holder's ability to fulfill his or her duties as an employee;
(c) The willful disclosure of trade secrets or confidential
information of the Company;
(d) Dishonesty which results in substantial harm to the Company;
or
(e) Conviction or confession of a criminal felony.
5.5 ATTEMPTED TRANSFER. Any attempt to assign, encumber, sell, or
otherwise transfer all or any portion of the Option Holder's Options hereunder
other than as set forth in Section 6 below.
6. TRANSFER.
The Option is not transferable by the Option Holder other than by Will
and by the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined under the Employee Retirement Income Security Act.
The Option shall be exercisable only by the Option Holder, his or her personal
representative, beneficiaries or heirs, or the transferee under a qualified
domestic relations order.
7. BUYOUT.
7.1 COMPANY PURCHASE OPTION. Upon the occurrence of any one or
more of the events or conditions indicated below, and subject to the terms of
the "Purchase Procedures" stated in Section 7.2, an option (the "Election")
shall be deemed to be triggered in favor of the Company to purchase Option
Holder's (or his or her trustee in bankruptcy, personal representative,
guardian, executor or administrator (as appropriate) (collectively referred to
in this Section with the Option Holder as the "Transferee")) or Transferee's
Options in the Company at a purchase price equal to the then Fair Market Value.
(With respect to the Company's right to repurchase Options,
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this Plan shall govern despite the provisions of the Company's Limited Liability
Company Agreement. With respect to the Company's right to repurchase Equity
Interests, the Company's Limited Liability Company Agreement shall govern
despite the provisions of this Plan.) The events or conditions are:
(a) the filing of a petition in bankruptcy by or against the
Transferee which is not vacated within sixty (60) days after the filing
thereof;
(b) an adjudication by a court of competent jurisdiction that the
Transferee is an insane or incompetent person;
(c) any general assignment by the Transferee for the benefit of
his creditors;
(d) the death of the Transferee;
(e) the termination, for any reason, of the Transferee's
employment with the Company or any Affiliate of the Company, or the
termination of any Employment Agreement by and between the Transferee and
the Company or any Affiliate of the Company;
(f) any other event which, were it not for the provisions of this
Agreement, would cause any such Interest in the Company, or any interest
therein, to be sold, assigned, awarded, confirmed, or otherwise
transferred, for consideration or otherwise, to any person, whether
voluntarily, involuntarily, or by operation of law.
7.2 PURCHASE PROCEDURES. The purchase of the Transferee's
Options in the Company shall be made in accordance with the following terms and
conditions (the "Purchase Procedures"): Within thirty (30) days after the
occurrence of an event described in Section 7.1, the Transferee shall give
notice (the "Option Notice") to the Company of such event specifying the date of
such event and describing in reasonable detail the nature of the event. Such
Option Notice shall be deemed to grant the Company an option (the "Election"),
exercisable within 180 days of such Option Notice (the "Exercise Period"), to
purchase the Transferee's Option in the Company for its Fair Market Value.
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7.3 PAYMENT. The purchase price for the Transferee's Option
shall be paid as follows. An initial cash payment shall be made at the time of
transfer of the Transferee's Interest to the Company in an amount equal to 25%
of the Fair Market Value, together with an amount equal to 40% of the income or
gain realized by the Transferee upon such transfer. The balance shall be made
in cash in five (5) equal payments of principal over five (5) years. Interest
will be paid on the unpaid balance at a per annum rate equal to Seattle-First
National Bank's Prime Rate at the time the first installment is paid. Interest
shall be payable on each installment date. The unpaid balance of the Purchase
Price for the Transferee's Interest in the Company may be prepaid in whole or in
part at any time without penalty. The Company shall have the right, on thirty
(30) days' prior written notice to the Option Holder or Transferee, to elect to
pay the purchase price by distributing any remaining balance payable pursuant to
this Section 7.3 in an undivided pro rata interest in all of the assets of the
Company.
8. EMPLOYMENT RIGHTS.
The grant of Options under this Plan (or the exercise of such Options)
shall not confer upon Option Holder any right to, or guaranty of, continued
employment by the Company or its Affiliates, or to the Option Holder's
continuation in his or her position as of the date of the Option is granted, or
in any way limit the right of the Company or its Affiliates to terminate the
Option Holder's employment at any time.
9. SECURITIES REGULATIONS.
9.1 COMPLIANCE. Equity Interests shall not be issued with
respect to an Option unless the exercise of such Option and the issuance and
delivery of such Equity Interests pursuant thereto complies with all relevant
provisions of law, including, without limitation, any applicable state
securities laws, the Securities Act of 1933, as amended, the Exchange Act, the
rules and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the Equity Interest may then be listed, and shall further be
subject to the approval of counsel for the Company with respect to such
compliance. The inability of the Company to obtain from any regulatory body
having jurisdiction, the authority deemed by Company counsel to be necessary for
the lawful issuance and sale of any Equity Interest hereunder, shall relieve the
Company of any liability in respect to the nonissuance of such Equity Interest
as to which such authority shall not have been obtained.
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9.2 REPRESENTATIONS BY OPTION HOLDER.
(a) As a condition to the exercise of an Option, the Company may
require the Option Holder to represent and warrant at the time of any such
exercise that the Equity Interest is being purchased only for investment
and without any present intention to sell or distribute such Equity
Interest, if, in the opinion of counsel for the Company, such
representation is required by any relevant provision of the laws referred
to in Section 9.1. At the option of the Company, a stop transfer order
against any Equity Interest may be placed on the official books and records
of the Company, and a legend indicating that the Equity Interest may not be
pledged, sold, or otherwise transferred unless an opinion of counsel is
provided (concurred in by counsel for the Company) stating that such
transfer is not in violation of any applicable law or regulation, may be
stamped on any certificate representing the Equity Interest in order to
assure exemption from registration. The Administrative Committee of the
Company may also require such other action or agreement by the Option
Holder as may from time to time be necessary to comply with federal and
state securities laws. This provision shall not obligate the Company to
undertake registration of Equity Interests issued hereunder.
(b) Option Holder recognizes that the primary investor in the
Company has invested in excess of fifty-five million Dollars ($55,000,000)
as equity in the Company, that other investors have also made material
equity investments in the Company, and that pursuant to the Company's
Limited Liability Company Agreement (as amended from time to time), the
primary investor and certain other investors in the Company (holders of
Class A membership interests in the Company) are entitled to a Preferred
Return on all of their respective investments in the Company, whether such
investments are made before or after the date of this Plan, at a rate equal
to the Seattle-First National Bank Prime Rate of interest plus two percent
(2%) per annum, and to a preferred repayment of their respective
investments in the Company.
10. CHANGES IN OWNERSHIP OR CAPITAL STRUCTURE.
10.1 CHANGE IN EQUITY INTERESTS. In the event that the
outstanding Equity Interests of the Company are hereafter increased or decreased
or changed or exchanged for a different number or kind of Equity Interest of the
Company by reason of any reorganization, consolidation, recapitalization,
reclassification, stock split-up, combination of Equity Interests, or dividend
or distribution payable in Equity Interests, appropriate adjustment shall be
made by the Administrative Committee to the number
9
<PAGE>
and kind of Equity Interests subject to Options granted under this Plan, to the
end that the Option Holder's proportionate interest as reflected by his or her
unexercised Option shall be maintained as before the occurrence of such event.
Such adjustment in the quantity of Equity Interests remaining subject to Options
shall be made without change in the total price applicable to the unexercised
portion of the Options and with the corresponding adjustment in the exercise
price per item of Equity Interest. Any such adjustment made by the
Administrative Committee shall be conclusive.
10.2 EXCHANGE OF EQUITY INTEREST IN ANOTHER ENTITY. If the
owners of the Company receive equity interests of another entity ("Exchange
Equity") in exchange for their Class A membership interests in the Company in
any transaction involving a merger, consolidation, acquisition of property or
equity interests, separation, reorganization or liquidation, all Equity
Interests as well as the unexercised portion of the Options shall be converted
into ownership of or options to purchase Exchange Equity unless in the sole and
unfettered discretion of the Administrative Committee such conversion shall not
be feasible. The amount and price of the converted options shall be determined
by adjusting the amount and price of the Equity Interests subject to the Option
granted hereunder in the same proportion as used for determining the quantity of
Exchange Equity the holders of Class A membership interests receive in such
merger, consolidation, acquisition of property or equity interest, separation,
reorganization or liquidation. The vesting schedule set forth in Section 3.2 of
this Plan shall continue to apply to the options granted for the Exchange
Equity. In the event the unexercised portion of the Option is terminated, the
Option Holder shall have the right immediately prior to any such merger,
consolidation, acquisition of property or equity interest, separation,
reorganization or liquidation to exercise his or her unexercised portion of the
Option in whole or in part to the extent vested.
10.3 NO DILUTION PROTECTION. In the event of injection of
additional equity into the Company, the interests of all Option Holders shall be
diluted in a fashion determined in the sole and unfettered discretion of the
Administrative Committee.
11. ADMINISTRATION.
11.1 ADMINISTRATIVE COMMITTEE. The Administrative Committee of
the Plan shall initially be comprised of three members. Two of the members
shall be appointed by Eagle River Investments, L.L.C., the primary member of the
Company, and the third shall be the President of the Company.
10
<PAGE>
11.2 CONSTRUCTION AND INTERPRETATION. The construction and
interpretation of any provision of this Plan by the Administrative Committee
shall be final and conclusive. The Company may alter, modify, change, or
terminate this Plan at any time in its sole and unfettered discretion.
11.3 DELEGATION. The Administrative Committee may, in its sole
and unfettered discretion, delegate its duties hereunder to an officer or
employee, or a committee composed of officers and/or employees of the Company;
provided, however, the Administrative Committee may not delegate its authority
to construe and interpret this Plan or its authority to grant Options.
11.4 EXCHANGE ACT COMPLIANCE. The foregoing notwithstanding, in
the event the Company shall register any of its Equity Interests pursuant to
Section 12(b) or 12(g) of the Exchange Act, (1) this Plan and any outstanding
Options shall be modified to the extent necessary to comply in all respects with
Rule 16b-3 under the Exchange Act and, if any Plan provision is later found not
to be in compliance with such Section, the provision shall be construed in favor
of its meeting the requirements of Rule 16b-3, and (ii) the Administrative
Committee, in its sole and unfettered discretion, may bifurcate the Plan so as
to restrict, limit or condition the use of any provision of the Plan to Option
Holders who are officers and directors subject to Section 16(b) of the Exchange
Act without so restricting, limiting or conditioning the Plan with respect to
other Option Holders.
12. CLAIMS PROCEDURE.
12.1 INTERPRETATION. Any person desiring a benefit under,
interpretation or construction of, ruling under or information regarding this
Plan shall submit a written request therefor to the Administrative Committee.
The Administrative Committee shall respond in writing to any such request as
soon as practicable. Any interpretation or construction of, and any ruling
under, this Plan by the Administrative Committee shall be final and binding on
all parties.
12.2 DENIAL OF CLAIM. If a claim for benefits under this Plan is
denied in whole or in part, the Administrative Committee shall notify the
claimant of such denial and of his or her right to a conference with an
individual designated in the notice for the purpose of explaining the denial.
If the claimant does not want such a conference, or is dissatisfied with its
outcome, he or she shall be furnished in writing, in a manner
11
<PAGE>
calculated to be understood by the claimant, specific reasons for such denial,
specific references to the Plan provisions on which the denial is based, a
description of any additional material necessary for him or her to perfect his
or her claim, an explanation of why such material is necessary, and an
explanation of this Plan's review procedure as described in Section 12.3.
12.3 APPEAL PROCEDURE. Any person, or his or her duly authorized
representative, whose claim for benefits under this Plan has been denied in
whole or in part, may appeal from such denial to the Administrative Committee by
submitting to the Administrative Committee a written request for review within
seventy-five (75) days after receiving notice of denial. The Administrative
Committee shall give the claimant an opportunity to review pertinent documents
relating to the denial in preparing his or her request for review. The request
must set forth all the grounds upon which it is based, supporting facts and
documents, and any other matters which the claimant deems pertinent, and the
relief sought. The Administrative Committee may require the claimant to submit
such additional facts, documents or other material as it deems necessary or
advisable in making its review. The Administrative Committee shall act upon a
request for review within 60 days after receipt thereof unless special
circumstances require further time, but in no event later than 120 days after
such receipt. If the Administrative Committee confirms the denial in whole or
in part, the Administrative Committee shall give written notice to the claimant
setting forth, in a manner calculated to be understood by the claimant, the
specific reasons for denial and specific reference to the Plan provisions on
which the decision was based. The determination of the Administrative Committee
upon such review shall be final and conclusive and shall be binding upon the
claimant and all persons claiming by, through or under him or her, subject,
however, to any right of appeal under applicable law.
13. AMENDMENT.
The Company may, by action of its Members, in the exercise of its sole
and unfettered discretion, amend this Plan at any time. Any amendment of this
Plan shall not affect the rights of any Option Holder with respect to Options
held at the time of the amendment.
14. GOVERNING LAW.
This Option Plan shall be governed by the laws of the State of
Washington.
12
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C.
(formerly known as FiberLink
Investments, L.L.C.)
Date: By:
----------------------------- ---------------------------------
Its:
---------------------------------
13
<PAGE>
EXHIBIT 12
NEXTLINK Communications, L.L.C. and Subsidiaries
Statement Regarding Computation of Ratio
of Earnings to Fixed Charges
($ in thousands)
<TABLE>
<CAPTION>
Quarter Ended
March 31, Year ended December 31,
-------------------------------------------
1996 1995 1994
-------------------------------------------
<S> <C> <C> <C>
Income (loss) $ (7,116) $(12,731) $ (349)
Add:
Interest $ 496 $ 499 $ -
Portion of rents representative
of the interest factor 101 194 6
-------------------------------------------
Income (loss) as adjusted $ (6,519) $(12,038) $ (343)
-------------------------------------------
Fixed Charges:
Interest $ 496 $ 499 $ -
Portion of rents representative
of the interest factor 101 194 6
-------------------------------------------
Fixed Charges $ 597 $ 693 $ 6
<CAPTION>
Earnings are Earnings are Earnings are
Inadequate Inadequate Inadequate
-------------------------------------------
<S> <C> <C> <C>
Ratio of earnings to fixed charges
Deficiency of: $ 7,116 $ 12,731 $ 349
-------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANTS
NEXTLINK Communications, L.L.C. Jurisdiction of Organization
- ------------------------------- ----------------------------
NEXTLINK Capital, Inc. Washington
NEXTLINK Tennessee, L.L.C. Washington
NEXTLINK Washington, L.L.C. Washington
NEXTLINK Solutions, L.L.C. Washington
NEXTLINK Interactive, L.L.C. Washington
NEXTLINK Pennsylvania, L.P. Washington
d/b/a Penns Light Communications
NEXTLINK Utah, L.L.C. Washington
NEXTLINK Ohio, L.L.C. Washington
NEXTLINK Management Services, L.L.C. Washington
NEXTLINK Capital, INC.
- ----------------------
None
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
described below (and to all references to our Firm) included in or made a part
of this registration statement.
Company Audit Report Date
- ------- -----------------
NEXTLINK Communications, L.L.C. February 23, 1996
NEXTLINK Capital, Inc. March 31, 1996
Sound Response Corporation March 22, 1996
Tel-West Central Services, Inc. May 9, 1996
Arthur Andersen LLP
Seattle, Washington,
May 24, 1996
<PAGE>
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
__________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
__________________________
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) _______
__________________________
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I. R. S. Employer
if not a U. S. national bank) Identification Number)
114 West 47th Street 10036-1532
New York, New York (Zip Code)
(Address of principal
executive offices)
--------------------------
NEXTLINK Communications, L.L.C.
NEXTLINK Capital, Inc.
(Exact name of OBLIGOR as specified in its charter)
Washington 91-1678465
Washington 91-1716062
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
155 108th Avenue NE 98004
Bellevue, Washington
(Address of principal executive offices) (Zip code)
__________________________
12-1/2% Senior Notes due April 15, 2006
(Title of the indenture securities)
<PAGE>
-2-
GENERAL
1. GENERAL INFORMATION
-------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Reserve Bank of New York (2nd District), New York, New
York (Board of Governors of the Federal Reserve System).
Federal Deposit Insurance Corporation, Washington, D. C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH THE OBLIGOR
-----------------------------
If the obligor is an affiliate of the trustee, describe each such affiliation.
None.
3,4,5,6,7,8,9,10,11,12,13,14 and 15.
NEXTLINK Communications, L.L.C. and NEXTLINK Capital, Inc. is currently
not in default under any of its outstanding securities for which United
States Trust Company of New York is Trustee. Accordingly, responses to
Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15 of Form T-1 are not
required under General Instruction B.
<PAGE>
-3-
16. LIST OF EXHIBITS
----------------
T-1.1 -- Organization Certificate, as amended, issued by the
State of New York Banking Department to transact business as a
Trust Company, is incorporated by reference to Exhibit T-1.1 to
Form T-1 filed on September 15, 1995 with the Commission pursuant
to the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
T-1.4 -- The By-Laws of United States Trust Company of New
York, as amended, is incorporated by reference to
Exhibit T-1.4 to Form T-1 filed on September 15, 1995
with the Commission pursuant to the Trust Indenture
Act of 1939, as amended by the Trust Indenture
Reform Act of 1990 (Registration No. 33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b) of
the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990.
T-1.7 A copy of the latest report of condition of the trustee
pursuant to law or the requirements of its supervising or
examining authority.
NOTE
As of May 9, 1996, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U. S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States
Trust Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility, as to matters
peculiarly within the knowledge of the obligor or its directors, the
trustee has relied upon information furnished to it by the obligor and will
rely on information to be furnished by the obligor and the trustee
disclaims responsibility for the accuracy or completeness of such
information.
_____________________
<PAGE>
-4-
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, United States Trust Company of New York, a corporation organized
and existing under the laws of the State of New York, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New
York, on the 9th day of May, 1996.
UNITED STATES TRUST COMPANY OF
NEW YORK, Trustee
/s/ Patricia Stermer
By: _______________________________________
<PAGE>
EXHIBIT T-1.1
STATE OF NEW YORK
Banking Department
Know all Men by these Presents, Whereas the organization certificate of
NEW U.S. TRUST COMPANY OF NEW YORK of New York, New York has heretofore been
duly approved and said NEW U.S. TRUST COMPANY OF NEW YORK has complied with the
provisions of Chapter 2 of the Consolidated Laws,
Note Therefore, I NEIL D. LEVIN, as Superintendent of Banks of the State
of New York, do hereby authorize the said NEW U.S. TRUST COMPANY OF NEW YORK to
transact the business of a Trust Company at 114 West 47th Street, Borough of
Manhattan, City of New York within this State.
In Witness Whereof, I have hereunto set my hand and affixed the official
seal of the Banking Department, this 30th day of August in the year one
thousand nine hundred and ninety-five.
Neil D. Levin
Superintendent of Banks
By: /s/ Carmine M. Tenga
----------------------------
Carmine M. Tenga
Deputy Superintendent
<PAGE>
State of New York
Banking Department
I, CARMINE M. TENGA, Deputy Superintendent of Banks of the State of New
York, do hereby certify that I have caused the annexed copy of the Organization
Certificate for NEW U.S. TRUST COMPANY OF NEW YORK--filed in the Office of the
Superintendent of Banks on August 14, 1995, to be compared by a competent clerk
with the original on file in the Banking Department, and the same is a correct
copy of said certificate and of the whole thereof.
IN WITNESS WHEREOF, I have hereunto
set my hand and affixed the official seal of
the Banking Department at New York, NY,
this 25th day of August, 1995.
/s/ Carmine M. Tenga
-----------------------------------
Deputy Superintendent of Banks
<PAGE>
ORGANIZATION CERTIFICATE
OF
"NEW U.S. TRUST COMPANY OF NEW YORK"
Received this 15th day of February, 1995.
/s/
-------------------------
Deputy Superintendent of Banks
Filed for examination this 21st day of February, 1995.
/s/
--------------------------
Deputy Superintendent of Banks
Conditionally approved by the Banking Board,
at a meeting held on the 2nd day of March, 1995.
/s/
---------------------------
Secretary of the Banking Board
Approved and filed
this 14th day of August, 1995.
/s/
--------------------------
Deputy Superintendent of Banks
Filed in the office of
-----------------------------------------
this ________ day of _________, 1995.
--------------------------------------
Recorded in the office of
------------------------------------
this ________ day of _________, 1995.
==========================================
<PAGE>
ORGANIZATION CERTIFICATE
OF
New U.S. Trust Company of New York
We, the undersigned all being of full age, all of us being citizens of
the United States and five of us being residents of the State of New York,
having associated ourselves together for the purpose of forming a trust company
under and pursuant to the Banking Law of the State of New York, do hereby
certify:
FIRST. That the name by which the corporation is to be known is New U.S.
Trust Company of New York.
SECOND. That the place where its principal office is to be located is
114 West 47th Street, New York, NY 10036.
THIRD. That the amount of its capital stock is to be Fourteen million,
nine hundred ninety-five thousand, one hundred and forty-five Dollars
($14,995,145) and the number of shares into which such capital stock is to be
divided is 2,999,029 with a par value of $5 each.*/
-
FOURTH. The shares are not to be classified as preferred and common.
If the shares are to be so classified,
(a) The number and par value of shares to be included in each class are
as follows:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(b) All the designations, preferences, privileges and voting powers of
the shares of each class, and the restrictions or qualifications thereof are as
follows:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
*/ Of the total capital stock, 100 shares are issued and outstanding, and the
- - balance of the shares are being held in reserve and will be issued
immediately after the transfer of the assets and liabilities from United
States Trust Company of New York to New U.S. Trust Company of New York.
<PAGE>
BY-LAWS
OF
NEW U.S. TRUST COMPANY OF NEW YORK
ARTICLE I
Stockholders
------------
SECTION 1.1. Annual Election of Directors. The annual election of
-----------------------------
Directors of New U.S. Trust Company of New York (the "Trust Company") shall be
held at the principal office of the Trust Company in the City of New York within
the first four months of each calendar year at such time as may be designated by
the Board of Directors (the "Board").
SECTION 1.2. Special Meetings of Stockholders. Special meetings of
---------------------------------
stockholders may be called by the Board, the Chairman of the Board (the
"Chairman"). Such meetings shall be held at such time and at such place, within
or without the State of New York, as the Board or the officer calling the
meeting may designate.
SECTION 1.3. Notice and Record Date. The Secretary shall, not less than
-----------------------
ten nor more than fifty days before each annual election of Directors and any
special meeting of stockholders, give written notice of such annual election or
special meeting to the stockholders entitled to vote thereat, directed to each
such stockholder at his address as it appears on the record of stockholders, or
at such address as such stockholder may have filed with the Secretary, and
stating the date, hour and place of the annual election or special meeting, and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called and that the notice is being issued by or at the direction of the
person or persons calling the meeting. For the purpose of determining the
stockholders entitled to notice of or to vote at any election of Directors or
meeting of stockholders or any adjournment thereof, or for the purpose of
determining stockholders entitled to receive payment of any dividend or the
allotment of any rights, or for the purpose of any other action, the Board may
fix, in advance, a date as the record date for any such determination of
stockholders. Such date shall not be more than fifty days nor less than ten days
before the date
<PAGE>
of such election or meeting, nor more than fifty days prior to any other action.
SECTION 1.4. Voting; Proxies. Each stockholder of record shall be entitled to
---------------
one vote for each share of capital stock standing in his name on the record of
stockholders. Every stockholder entitled to vote may authorize another person or
persons to act for him by proxy. Every proxy must be signed by the stockholder
or his attorney-in-fact and filed with the Secretary.
SECTION 1.5. Quorum and Vote of Stockholders. The holders of a majority of
--------------------------------
the shares entitled to vote thereat shall constitute a quorum at any annual
election of Directors or special meeting of stockholders. At all special
meetings of stockholders, a quorum being present, all matters, except as
otherwise provided by law, shall be authorized by a majority of the votes cast
at the meeting by the stockholders entitled to vote thereon. When a quorum is
once present to organize a meeting, it is not broken by the subsequent
withdrawal of any stockholders. The stockholders present may adjourn the meeting
despite the absence of a quorum.
ARTICLE II
Board of Directors
-------------------
SECTION 2.1. Number. The affairs of the Trust Company shall be managed by
------
the Board, consisting of such number of Directors, not less than thirteen nor
more than thirty, as may from time to time be fixed by resolution adopted by a
majority of the Directors then in office.
SECTION 2.2. Qualifications. No person shall be eligible for election or
---------------
qualified to remain in office as a Director who shall have attained the age of
seventy-two years, and any Director in office shall retire as such upon
attaining the age of seventy-two years.
SECTION 2.3. Classification and Term. The Board shall be classified into
------------------------
three classes as nearly equal as may be, with the terms of office of one class
expiring each year on the date of the annual election of Directors. At each
annual election of Directors, the successors to the Directors of the class whose
term expires in that year shall be elected Directors for a term of three years,
but each
<PAGE>
Director, of whatever class, shall hold office until his successor shall have
been elected and shall qualify. In case of any increase in the number of
Directors, the Board shall designate the class or classes in which the
additional Directors shall be included, but the additional Directors shall be so
apportioned among the classes as to make all classes as nearly equal in number
as possible.
SECTION 2.4. Election. The Directors to be elected at any annual
---------
election of Directors shall be elected by a plurality of the votes cast by the
holders of shares entitled to vote in the election. Every election of Directors
shall be by ballot.
SECTION 2.5. Regular Meetings of the Board. Regular monthly meetings of
------------------------------
the Board shall be held at least ten times a year provided, however, that during
any three consecutive calendar months the Board shall meet at least twice at
such time and at such place, within or without the State of New York, as may be
fixed by the Board from time to time. Within fifteen days after the annual
election of Directors, the Board shall hold a regular meeting, which shall be
designated as the Annual Meeting of the Board for the election of officers as
provided in Section 6.1 and for the transaction of other business. No notice
need be given for regular meetings of the Board.
SECTION 2.6. Special Meetings of the Board. Special meetings of the
------------------------------
Board may be called at any time by the Chairman, the President or a Vice
Chairman, and the Secretary shall call a special meeting at the written request
of any three Directors. The Secretary shall give notice of the date, hour and
place (which may be within or without the State of New York) of any special
meeting by mailing or delivering the same at least two days before the meeting,
or by telegraphing or telephoning the same at least one day before the meeting,
to each Director.
SECTION 2.7. Quorum and Voting. One-third of the entire Board, but in no
------------------
event less than five Directors, shall constitute a quorum for the transaction of
business and, except as otherwise required by law, the vote of a majority of the
Directors present at the time of the vote, if a quorum is then present, shall be
the act of the Board.
SECTION 2.8. Meetings by Telephone. Any one or more members of the Board
----------------------
or any committee thereof may participate in a meeting of such Board or committee
by means
<PAGE>
of a conference telephone or similar communications equipment allowing all
persons participating in the meeting to hear each other at the same time.
Participating by such means shall constitute presence in person at a meeting.
The minutes of such meeting shall indicate which members participated by
telephone or similar communications equipment.
SECTION 2.9. Vacancies. Vacancies (including vacancies resulting from an
----------
increase in the number of Directors) shall be filled for the unexpired term by
election by the stockholders, except that vacancies not exceeding one-third of
the entire Board may be filled for the unexpired term by the affirmative vote of
a majority of the Directors then in office.
SECTION 2.10. Reports and Minutes. At each regular meeting of the Board
--------------------
there shall be submitted a report of the business of the Trust Company and such
other reports as may be required by law or by regulatory authorities. Regular
minutes of the proceedings of the Board shall be kept and shall be open for
inspection by any Director.
SECTION 2.11. Honorary Directors. The Board may appoint any former
-------------------
Director to be an Honorary Director to remain so at the pleasure of the Board.
Honorary Directors may be invited to attend and participate in discussions at
meetings of the Board or any committee of the Board, but shall not be entitled
to vote or be eligible to serve as a member of any committee of the Board. Each
Honorary Director shall receive such reasonable compensation as the Board may
fix from time to time.
SECTION 2.12. Compensation of Directors. Directors who are not officers
--------------------------
of the Trust Company shall be entitled to such compensation for their services
as Directors or as members of any committee, and shall be entitled to such fees
for attendance at meetings of the Board or of committees, as the Board may fix
from time to time. Nothing herein shall preclude any Director from serving the
Trust Company is any other capacity and receiving compensation therefor.
<PAGE>
ARTICLE III
Executive Committee
-------------------
SECTION 3.1. Membership and Authority. The Board by resolution adopted by a
------------------------
majority of the entire Board, may designate from among its members an Executive
Committee, consisting of not less than five Directors, including the Chief
Executive Officer, which shall have all the authority of the Board when the
Board is not in session, except as may be otherwise provided by law or limited
by a resolution of the Board. The Executive Committee shall designate one of its
members to preside at meetings of the Committee. The Board may designate one or
more Directors as alternate members of the Executive Committee who may replace
any absent members at any meeting of such Committee. The Executive Committee
shall serve at the pleasure of the Board.
SECTION 3.2. Regular Meetings. Regular meetings of the Executive Committee
----------------
shall be held at such time and at such place, within or without the State of New
York, as the Committee may fix from time to time, and no notice thereof need be
given. The Executive Committee shall meet at least once in each thirty day
period during which the Board does not meet.
SECTION 3.3. Special Meetings. Special meetings of the Executive Committee
----------------
may be called at any time by the Chairman or the President or, in their absence
a Vice Chairman, and shall be called upon the written request of any two members
of the Committee. Notice of special meeting shall be given as provided in
Section 2.6 for special meetings of the Board.
SECTION 3.4. Quorum and Voting. A majority of the members of the Executive
-----------------
Committee shall constitute a quorum for the transaction of business. The vote of
a majority of the members of the Committee present at the time of the vote, if a
quorum is then present, shall be the act of the Committee.
SECTION 3.5. Minutes. Regular minutes of the proceedings of the Executive
--------
Committee shall be kept and shall be open for inspection by any Director.
Minutes of the meetings of the Executive Committee held since the previous
meeting of the Board shall be submitted at the next regular meeting of the
Board.
<PAGE>
ARTICLE IV
Examining and Audit Committee
-----------------------------
SECTION 4.1. Number and Election. The Board, by resolution adopted by a
--------------------
majority of the entire Board, may designate from among its members an Examining
and Audit Committee consisting of not less than three Directors who are not also
officers of the Trust Company, one of whom shall be designated by the Board as
Chairman of such Committee.
SECTION 4.2. Meetings. The Examining and Audit Committee shall meet at
---------
least four times each fiscal year and shall also meet at other times on call of
its Chairman.
SECTION 4.3. Duties and Powers. The Examining and Audit Committee shall
------------------
conduct examinations of the affairs of the Trust Company as required by law or
as directed by the Board and shall have supervision over the activities of the
Auditor. The Examining and Audit Committee shall review the examinations of the
Trust Company made by any regulatory authority and report to the Board on its
recommendations with respect thereto and shall report to the Board such other
matters as it deems advisable with respect to the Trust Company, its various
departments and the conduct of its affairs. In the performance of its duties,
the Examining and Audit Committee may employ or retain, from time to time, such
independent experts and assistance as it may find necessary or convenient.
ARTICLE V
Other Committees
----------------
The Board may appoint, from time to time, such other committees
consisting of Directors, officers or other persons and having such powers,
duties and functions in the management, or relating to the business and affairs,
of the Trust Company as the Board may determine. Each such committee shall serve
at the pleasure of the Board, or in the case of any committee appointed by the
Chief Executive Officer, at the pleasure of the Chief Executive Officer. A
majority of the members of any such committee may determine its rules of order
and procedure and the time and place of its meetings, unless the Board, or in
the case of a
<PAGE>
committee appointed by the Chief Executive Officer, the Chief Executive Officer,
shall otherwise provide. The Board, or in the case of any committee appointed by
the Chief Executive Officer, the Chief Executive Officer, may fill any vacancy
in a committee and may designate one or more persons as alternate members of a
committee who may replace any absent member or members at any meeting of such
committee.
ARTICLE VI
Officers
--------
SECTION 6.1. Officers. The officers of the Trust Company shall be a
---------
Chairman of the Board, a President, one or more Vice Chairman of the Board, one
or more Vice Presidents (any one or more of whom may be designated Executive
Vice President, Senior Vice President or by some other special designation), a
Secretary, a Treasurer, a Comptroller and an Auditor. The Chairman, the
President, the Vice Chairman, Executive Vice Presidents (each of the foregoing
officers being referred to hereinafter as an "Executive Officer"), one or more
other Vice Presidents and such other officers, if any, as the Board may
determine, shall be elected by the Board at the Annual Meeting of the Board. The
Board shall from time to time appoint the other officers provided for in these
By-Laws and such additional officers as it may determine. In addition, the
Chairman, or in his absence the President, may appoint one or more Assistant
Vice Presidents, Assistant Secretaries, Assistant Treasurers, Assistant
Comptrollers or Assistant Auditors and other officers below the rank of Vice
President with such titles and duties as may be specified upon appointment.
Vacancies in the offices of any officers so elected or appointed shall be filled
in the manner prescribed in these By-Laws for election or appointment to such
offices.
SECTION 6.2. Chairman of the Board; President. The Chairman and the
---------------------------------
President shall be elected from among the members of the Board, and one of them
shall be designated by the Board as Chief Executive Officer. The Chief Executive
Officer shall have general supervision of the business and affairs of the Trust
Company which shall in every case be subject to the direction and control of the
Board. The Chairman, or in his absence the President, shall preside at all
meetings of the stockholders and of the Board.
<PAGE>
SECTION 6.3. Duties of Officers. Officers shall participate in the
-------------------
management of the business and affairs of the Trust Company as directed, and in
the order of seniority as determined, by the Board. They shall perform such
duties as may be assigned to them by the Board, the Chief Executive Officer or
any officer authorized by the Board or the Chief Executive Officer to do so, or
as may be prescribed by law or by these By-Laws.
SECTION 6.4. Secretary. The Secretary shall keep the minutes of all meetings
---------
of the Board and of the Executive Committee, shall have custody of the corporate
seal, shall give notices of meetings required by these By-Laws, shall perform
such other duties as may be assigned to him from time to time by the Board or
the Chief Executive Officer and, in general, shall perform those duties incident
to the office of Secretary. In the absence of the Secretary, an Assistant
Secretary shall have the authority to perform the duties of the Secretary.
SECTION 6.5. Treasurer. The Treasurer shall have responsibility for the care
----------
and custody of all monies, funds and other property of the Trust Company which
may come into his hands, shall perform such other duties as may be assigned to
him from time to time by the Board or the Chief Executive Officer and, in
general, shall perform those duties incident to the office of Treasurer.
In the absence of the Treasurer, an Assistant Treasurer shall have the authority
to perform the duties of the Treasurer.
SECTION 6.6. Comptroller. The Comptroller shall exercise general supervision
------------
over all accounting functions of the Trust Company, including preparation of its
required tax returns and reports to supervisory authorities. He shall be
responsible to the Chief Executive Officer and may report directly to the Board
or to the Executive Committee on such matters as in his judgment should be
brought to their attention. In the absence of the Comptroller, an Assistant
Comptroller shall have the authority to perform the duties of the Comptroller.
SECTION 6.7. Auditor. The Auditor shall exercise supervision over the
-------
Auditing Department, and shall review and evaluate all existing controls and
procedures and be responsible for reporting on the adequacy of controls, systems
and protective procedures and devices to insure the accuracy of records and the
safety of assets owned or managed by the Trust Company. He shall be responsible
to
16
<PAGE>
the Chief Executive Officer and to the Board. The Auditor shall report directly
to the Board, the Executive Committee or the Examining and Audit Committee on
such matters as in his judgment should be brought to their attention.
SECTION 6.8. Removal of Officers. All officers may be removed, or their
-------------------
authority may be suspended, with or without cause, by the Board or the
Executive Committee, except that the Chairman and the President may be removed,
or their authority suspended, with or without cause, only by the Board. Officers
appointed by the Chairman or the President may be removed, or their authority
suspended, with or without cause, by the Chairman, or in his absence the
President.
SECTION 6.9. Agents and Employees. All other agents and employees of the
---------------------
Trust Company shall be appointed, their duties prescribed and their compensation
fixed, by the Chairman or the President, or any officer authorized to do so by
either of them.
ARTICLE VII
Signing Authorities
-------------------
Real property owned by the Trust Company in its own right shall not be
deeded, conveyed, mortgaged, assigned or transferred except when duly
authorized by a resolution of the Board.
Subject to the exceptions provided in the preceding and following
paragraphs, all checks, orders, contracts, leases, notes, drafts and other
documents and instruments in connection with the business of the Trust Company
may be signed by any Executive Officer of the Trust Company or by such other
officer, employee or agent thereunto authorized by resolution of the Board, or
in writing by the Chief Executive Officer, or by an officer or officers
designated by him subject to such restrictions as the Chief Executive Officer
shall prescribe.
Notwithstanding the foregoing, the Auditor shall have the power to sign
checks, vouchers, agreements or other documents or instruments on behalf of the
Trust Company, except that the Auditor is authorized to certify in the name of,
or on behalf of, the Trust Company, in its own right or in a fiduciary or
representative capacity, as to the
<PAGE>
accuracy and completeness of any account, schedule of assets, or other document,
instrument or paper requiring such certification and to sign in the name of, or
on behalf of, the Trust Company reports and responses to any regulatory
authority.
ARTICLE VIII
Indemnification and Security
----------------------------
SECTION 8.1. Indemnification. The Trust Company shall indemnify any
person made or threatened to be made a party to any action or proceeding,
whether civil or criminal, and whether or not by or in the right of the Trust
Company or of any other corporation of any type or kind, whether or not formed
under any law of the State of New York, or any partnership, joint venture,
trust, employee benefit plan or other enterprise, by reason of the fact that
such person, his testator or intestate, is or was a Director or officer of the
Trust Company or served any other corporation of any type or kind, whether or
not formed under any law of the State of New York, or any partnership, joint
venture, trust, employee benefit plan or other enterprise in any capacity at the
request of the Trust Company, against judgments, fines, amounts paid in
settlement and reasonable expenses, including attorneys' fees, actually and
necessarily incurred as a result of such action or proceeding, or any appeal
therein, provided that (i) no indemnification may be made to or on behalf of any
person if a judgment or other final adjudication adverse to such person
establishes that his acts were committed in bad faith or were the result of
active and deliberate dishonesty and were material to the case of action so
adjudicated, or that he personally gained in fact a financial profit or other
advantage to which he was not legally entitled, (ii) no indemnification shall be
required in connection with the settlement of any pending or threatened action
or proceeding, or any other disposition thereof except a final adjudication,
unless the Trust Company has consented to such settlement or other disposition
and (iii) the Trust Company shall not be obligated to indemnify any person by
reason of the adoption of this Section 8.1 if and to the extent such person is
entitled to be indemnified under a policy of insurance as such policy would
apply in the absence of the adoption of this Section 8.1.
<PAGE>
Reasonable expenses, including attorney's fees, incurred in defending
any action or proceeding, whether threatened or pending, shall be paid or
reimbursed by the Trust Company in advance of the final disposition thereof upon
receipt of an undertaking by or on behalf of the person seeking indemnification
to repay such amount to the Trust Company to the extent, if any, such person is
ultimately found not to be entitled to indemnification.
Notwithstanding any other provision hereof, no repeal of this Section
8.1, or amendment hereof or any other corporate action or agreement which
prohibits or otherwise limits the right of any person to indemnification or
advancement or reimbursement of expenses hereunder, shall be effective as to any
person until the 60th day following notice to such person of such action, and no
such repeal or amendment or other corporate action or agreement shall deprive
any person of any right hereunder arising out of any alleged or actual act or
omission occurring prior to such 60th day.
The Trust Company is hereby authorized, but shall not be required, to
enter into agreements with any of its Directors, officers or employees providing
for rights to indemnification and advancement and reimbursement of reasonable
expenses, including attorneys' fees, to the extent permitted by law, but the
Trust Company's failure to do so shall not in any manner affect or limit the
rights provided for by this Section 8.1 or otherwise.
For purposes of this Section 8.1, the term "Trust Company" shall include
any legal successor to the Trust Company, including any corporation which
acquires all or substantially all of the assets of the Trust Company in one or
more transactions. For purposes of this Section 8.1, the Trust Company shall be
deemed to have requested a person to serve an employee benefit plan where the
performance by such person of his duties to the Trust Company or any subsidiary
thereof also imposes duties on, or otherwise involves services by, such person
to the plan or participants or beneficiaries of the plan, and excise taxes
assessed on a person with respect to an employee benefit plan pursuant to
applicable law shall be considered fines.
The rights granted pursuant to or provided by the foregoing provision of
this Section 8.1 shall be in addition to and shall not be exclusive of any other
right to indemnification and expenses to which any person may
<PAGE>
otherwise be entitled under any statute, rule, regulation, certificate of
incorporation or other organization certificate, by-law, agreement or
otherwise.
SECTION 8.2. Security. The Board may from time to time require any
---------
officer or employee to give security for the faithful performance of his duties.
ARTICLE IX
Capital Stock
-------------
SECTION 9.1. Certificates of Stock. Certificates of stock shall be
----------------------
signed by the Chairman, a Vice Chairman, the President or a Vice President and
the Secretary or an Assistant Secretary and may bear the seal of the Trust
Company or a facsimile thereof. Signatures may be facsimiles if the certificate
is countersigned by a transfer agent or registered by a registrar. In case any
officer who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the Trust Company with the same effect as it he were
such officer at the date of issue.
SECTION 9.2. Lost or Mutilated Certificates. In case any certificate for
-------------------------------
shares of stock of the Trust Company shall be destroyed, mutilated, lost or
stolen, the Trust Company may in its discretion issue a new certificate for a
like number of shares in replacement thereof. Before a new certificate is
issued, the applicant for a replacement certificate shall be required to furnish
evidence satisfactory to the Trust Company of the destruction, mutilation, loss
or theft of such stock certificate and indemnity acceptable to the Trust
Company, and in case of mutilation shall deposit the mutilated certificate with
the Trust Company.
ARTICLE X
Corporate Seal
--------------
The Board shall provide a corporate seal for the Trust Company which any
officer shall have the power to affix to papers requiring a seal to attest the
same.
<PAGE>
ARTICLE XI
Fiscal Year
-----------
The fiscal year of the Trust Company shall begin on the first day of
January in each calendar year and end on the last year of December next
following.
ARTICLE XII
Amendment of By-Laws
--------------------
The By-Laws may be adopted, amended or repealed by the Board, or by vote
of the stockholders at the time entitled to vote in the election of any
Director. Any By-Law adopted by the Board may be amended or repealed by the
stockholders entitled to vote thereon.
<PAGE>
State of New York
Banking Department
I, CARMINE M. TENGA, Deputy Superintendent of Banks of the State of New
York, DO HEREBY APPROVE, the annexed certificate entitled "CERTIFICATE OF
AMENDMENT OF ORGANIZATION CERTIFICATE OF NEW U.S. TRUST COMPANY OF NEW YORK
UNDER SECTION 8005 OF THE BANKING LAW", dated August 29, 1995, providing for a
change of name from NEW U.S. TRUST COMPANY OF NEW YORK to UNITED STATES TRUST
COMPANY OF NEW YORK.
Witness, my hand and official seal of the Banking Department at the City
of New York, this 1st day of September in the Year of our Lord one thousand
nine hundred and ninety-five.
/s/ Carmine M. Tenga
-----------------------------------
Deputy Superintendent of Banks
<PAGE>
CERTIFICATE OF AMENDMENT OF THE
ORGANIZATION CERTIFICATE OF
NEW U.S. TRUST COMPANY OF NEW YORK
UNDER SECTION 8005 OF THE BANKING LAW
1. The name of the corporation is New U.S. Trust Company of New York
(the "Corporation").
2. The organization certificate was filed by the Superintendent of Banks
on August 14, 1995.
3. Article First of the Organization Certificate, which now provides
that the Corporation's name is "New U.S. Trust Company of New York", is hereby
amended, effective upon the closing date of the transaction between U.S. Trust
Corporation ("USTC") and The Chase Manhattan Corporation ("Chase") pursuant to
which Chase will acquire the processing businesses of USTC, to read as follows:
"FIRST. That the name by which the corporation is to be known is United
States Trust Company of New York."
<PAGE>
4. The foregoing amendment was authorized by vote of all the outstanding
shares of the Corporation on August 29, 1995, pursuant to Banking Law Section
6015.
IN WITNESS WHEREOF, we have made, signed and sealed on this 29 day of
August, 1995.
NEW U.S. TRUST COMPANY OF
NEW YORK,
by /s/
__________________________
Name: Jeffrey S. Maurer
Title: President
by
/s/
_________________________
Name: Carol A. Strickland
Title: Secretary
<PAGE>
STATE OF NEW YORK, )
) ss.:
COUNTY OF NEW YORK, )
JEFFREY S. MAURER, being duly sworn, deposes and says that he is the
president of New U.S. Trust Company of New York and that he has read the
foregoing Certificate of Amendment of the Organization Certificate and knows the
contents thereof to be true.
/s/
---------------------------------
Jeffrey S. Maurer
Sworn to before me this
29th day of August, 1995
/s/ Edward R. Muirhead
- -------------------------
Notary Public
<PAGE>
[copy cut off] are to be reserved for issuance in exchange for preferred
shares or otherwise to replace any capital stock represented by preferred
shares is none.
FIFTH. The name, place of residence and citizenship of each
incorporator, and the number of shares subscribed for by each are:
<TABLE>
<CAPTION>
No. of
Full name Residence *Citizenship Shares
- ----------------- ----------- ------------ ------
<S> <C> <C> <C>
Samuel C. Butler New York, NY New York 0
Antonia M. Grumbach New York, NY New York 0
Jeffery S. Maurer Great Neck, NY New York 0
H. Marshall Schwarz New York, NY New York 0
Frederick B. Taylor Purchase, NY New York 0
- ----------------- ----------- ------------ ------
- ----------------- ----------- ------------ ------
- ----------------- ----------- ------------ ------
- ----------------- ----------- ------------ ------
- ----------------- ----------- ------------ ------
- ----------------- ----------- ------------ ------
- ----------------- ----------- ------------ ------
- ----------------- ----------- ------------ ------
- ----------------- ----------- ------------ ------
- ----------------- ----------- ------------ ------
- ----------------- ----------- ------------ ------
- ----------------- ----------- ------------ ------
- ----------------- ----------- ------------ ------
- ----------------- ----------- ------------ ------
- ----------------- ----------- ------------ ------
</TABLE>
- --------
* If a citizen of New York or a contiguous state, insert name of such state.
SIXTH. The term of existence of the corporation is to be perpetual.
SEVENTH. The number of directors is to be not less than five nor more
than thirty.
EIGHTH. The names of the incorporators who shall be the directors until
the first annual meeting of stockholders are:
Samuel C. Butler Antonia M. Grumbach
- ------------------ --------------------- -------------------
Jeffery S. Maurer H. Marshall Schwarz Frederick B. Taylor
- ------------------ --------------------- -------------------
- ------------------ --------------------- -------------------
- ------------------ --------------------- -------------------
- ------------------ --------------------- -------------------
<PAGE>
NINTH. The corporation is to exercise the powers conferred by Section
100 of the Banking Law.
IN WITNESS WHEREOF, We have made, signed and acknowledged this
certificate in duplicate, this 13th day of February 1995.
Samuel C. Butler
-------------------------------
-------------------------------
-------------------------------
-------------------------------
-------------------------------
-------------------------------
-------------------------------
-------------------------------
-------------------------------
-------------------------------
STATE OF NEW YORK |
| ss.:
County of New York |
On this 13th day of February 1995 personally appeared before me
Samuel C. Butler
- ------------------- ------------------- -------------------
- ------------------- ------------------- -------------------
- ------------------- ------------------- -------------------
- ------------------- ------------------- -------------------
- ------------------- ------------------- -------------------
- ------------------- ------------------- -------------------
to me known to be the persons described in and who executed the foregoing
certificate, and severally acknowledged that they executed the same.
/s/ Mary Ann Skobla
-------------------------------
(Attach County Clerk's certificate authenticating
signature of Notary Public who makes acknowledgements.)
<PAGE>
NINTH. The corporation is to exercise the powers conferred by Section
100 of the Banking Law.
IN WITNESS WHEREOF, We have made, signed and acknowledged this
certificate in duplicate, this 13th day of February 1995.
Antonia M. Grumbach
-------------------------------
-------------------------------
-------------------------------
-------------------------------
-------------------------------
-------------------------------
-------------------------------
-------------------------------
-------------------------------
-------------------------------
STATE OF NEW YORK }
} ss.:
County of New York }
On this 13th day of February 1995 personally appeared before me
Antonia M. Grumbach
- ------------------- ------------------- -------------------
- ------------------- ------------------- -------------------
- ------------------- ------------------- -------------------
- ------------------- ------------------- -------------------
- ------------------- ------------------- -------------------
- ------------------- ------------------- -------------------
to me known to be the persons described in and who executed the foregoing
certificate, and severally acknowledged that they executed the same.
/s/ Elizabeth E. Shepp
-------------------------------
(Attach County Clerk's certificate authenticating
signature of Notary Public who makes acknowledgements.)
<PAGE>
NINTH. The corporation is to exercise the powers conferred by Section
100 of the Banking Law.
IN WITNESS WHEREOF, We have made, signed and acknowledged this
certificate in duplicate, this day of 19 .
/s/ Jefferey S. Maurer
/s/ H. Marshall Schwarz
/s/ Frederick B. Taylor
-------------------------------
-------------------------------
-------------------------------
-------------------------------
-------------------------------
-------------------------------
-------------------------------
-------------------------------
-------------------------------
-------------------------------
STATE OF NEW YORK }
} ss.:
County of }
On this 14th day of February 1995 personally appeared before me
Jeffery S. Maurer ------------------- -------------------
H. Marshall Schwarz ------------------- -------------------
Frederick B. Taylor ------------------- -------------------
- ------------------- ------------------- -------------------
- ------------------- ------------------- -------------------
- ------------------- ------------------- -------------------
- ------------------- ------------------- -------------------
to me known to be the persons described in and who executed the foregoing
certificate, and severally acknowledged that they executed the same.
/s/ Phyllis Goldberg
-------------------------------
(Attach County Clerk's certificate authenticating
signature of Notary Public who makes acknowledgements.)
<PAGE>
State of New York )
) ss.: ---------------
County of New York )
I, NORMAN GOODMAN, County Clerk and Clerk of the Supreme Court of the
State of New York, in and for the County of New York, a Court of Record, having
by law a seal,
DO HEREBY CERTIFY pursuant to the Executive Law of the State of New
York, that
/s/
________________________________________________________________________________
whose name is subscribed to the annexed affidavit, deposition, certificate of
acknowledgement or proof, was at the time of taking the same a NOTARY PUBLIC in
and for the State of New York duly commissioned, sworn and qualified to act as
such; that pursuant to law, a commission or a certificate of his official
character, with his autograph signature has been filed in my office; that at
the time of taking such proof, acknowledgement or oath, he was duly authorized
to take the same; that I am well acquainted with the handwriting of such NOTARY
PUBLIC or have compared the signature on the annexed instrument with his
autograph signature deposited in my office, and I believe that such signature is
genuine.
IN WITNESS WHEREOF, I have hereunto set my hand affixed my official seal
this
__________________________________
FEE PAID $3.00
/s/
--------------------------------------------
County Clerk and Clerk of the Supreme Court,
New York County
State of New York )
) ss.: ---------------
County of New York )
I, NORMAN GOODMAN, County Clerk and Clerk of the Supreme Court of the
State of New York, in and for the County of New York, a Court of Record, having
by law a seal,
DO HEREBY CERTIFY pursuant to the Executive Law of the State of New
York, that
/s/
________________________________________________________________________________
whose name is subscribed to the annexed affidavit, deposition, certificate of
acknowledgement or proof, was at the time of taking the same a NOTARY PUBLIC in
and for the State of New York duly commissioned, sworn and qualified to act as
such; that pursuant to law, a commission or a certificate of his official
character, with his autograph signature has been filed in my office; that at
the time of taking such proof, acknowledgement or oath, he was duly authorized
to take the same; that I am well acquainted with the handwriting of such NOTARY
PUBLIC or have compared the signature on the annexed instrument with his
autograph signature deposited in my office, and I believe that such signature is
genuine.
IN WITNESS WHEREOF, I have hereunto set my hand affixed my official seal
this
__________________________________
FEE PAID $3.00
/s/
--------------------------------------------
County Clerk and Clerk of the Supreme Court,
New York County
<PAGE>
State of New York )
) ss.: ---------------
County of New York )
I, GLORIA D'AMICO, Clerk of the County of Queens, and Clerk of the
Supreme Court in and for said county, the same being a court of record having a
seal, DO HEREBY CERTIFY THAT
/s/
- --------------------------------------------------------------------------------
whose name is subscribed to the annexed original instrument has been
commissioned and qualified
as a NOTARY PUBLIC ___________________________________________________________
- ------------------------------------------------------------------------------
and has filed his autograph signature in this office and that he/she was at the
time of taking such proof or acknowledgment or oath duly authorized by the laws
of the State of New York to take the same; that he is well acquainted with the
handwriting of such public officer or has compared the signature on the
certificate of proof or acknowledgment or oath with the autograph signature
filed in his office by such public officer, and he believes that the signature
on the original instrument is genuine.
IN WITNESS WHEREOF, I have hereunto set my hand and my official seal
this
__________________ day of _________________, 19 ____
/s/
----------------------------------------
County Clerk, Queens County
<PAGE>
EXHIBIT T-1.6
-------------
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
/s/ Gerard F. Ganey
By: --------------------
S/Gerard F. Ganey
Senior Vice President
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
DECEMBER 31, 1995
------------------------------------------
($ IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
- ------
<S> <C>
Cash and Due from Banks $ 86,275
Short-Term Investments 50
Securities, Available for Sale 676,970
Loans 1,257,372
Less: Allowance for Credit Losses 13,254
----------
Net Loans 1,244,118
Premises and Equipment 57,692
Other Assets 129,999
----------
TOTAL ASSETS $2,195,104
==========
LIABILITIES
- -----------
Deposits:
Non-Interest Bearing $ 471,642
Interest Bearing 1,306,996
----------
Total Deposits 1,778,638
Short-Term Credit Facilities 114,789
Accounts Payable and Accrued Liabilities 146,307
----------
TOTAL LIABILITIES $2,039,734
==========
STOCKHOLDER'S EQUITY
- --------------------
Common Stock 14,995
Capital Surplus 41,944
Retained Earnings 96,878
Unrealized Gains on Securities Available
for Sale (Net of Taxes) 1,553
----------
TOTAL STOCKHOLDER'S EQUITY 155,370
----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $2,195,104
==========
</TABLE>
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory authority
and is true to the best of my knowledge and belief.
/s/ Richard E. Brinkmann
- -------------------------------
Signature of Officer
February 12, 1996
- -------------------------------
Date
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1995 AND FROM
INCEPTION (SEPTEMBER 16, 1994) TO DECEMBER 31, 1994 AND THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1996 OF
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001015126
<NAME> NEXTLINK COMMUNICATIONS LLC
<S> <C> <C> <C>
<PERIOD-TYPE> OTHER OTHER 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994 DEC-31-1996
<PERIOD-START> JAN-01-1995 SEP-16-1994 JAN-01-1996
<PERIOD-END> DEC-31-1995 DEC-31-1994 MAR-31-1996
<CASH> 1,349,557 25,229 15,249,777
<SECURITIES> 0 0 0
<RECEIVABLES> 3,566,216 0 5,232,782
<ALLOWANCES> (3,200) 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 5,658,320 25,229 21,333,776
<PP&E> 30,789,259 140,215 55,286,340
<DEPRECIATION> (1,125,164) (6,543) (2,207,829)
<TOTAL-ASSETS> 53,460,628 690,131 104,313,735
<CURRENT-LIABILITIES> 11,891,329 11,171 51,058,490
<BONDS> 0 0 6,234,595
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> 36,718,893 672,528 45,330,631
<TOTAL-LIABILITY-AND-EQUITY> 53,460,628 690,131 104,313,735
<SALES> 7,551,726 0 5,369,630
<TOTAL-REVENUES> 7,551,726 0 5,369,630
<CGS> 0 0 0
<TOTAL-COSTS> 0 0 0
<OTHER-EXPENSES> 20,014,174 351,914 12,039,136
<LOSS-PROVISION> 3,200 0 0
<INTEREST-EXPENSE> 498,536 0 495,820
<INCOME-PRETAX> (12,961,184) (351,914) (7,165,326)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (12,730,989) (348,777) (7,116,269)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (12,730,989) (348,777) (7,116,269)
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
<PAGE>
EXHIBIT 99.1
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD TIME, ON ,
1996, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR
TO 5:00 P.M., EASTERN STANDARD TIME, ON THE EXPIRATION DATE.
NEXTLINK COMMUNICATIONS, L.L.C.
NEXTLINK CAPITAL, INC.
155 108TH AVENUE N.E., 8TH FLOOR
BELLEVUE, WASHINGTON 98004
LETTER OF TRANSMITTAL
FOR 12 1/2% SENIOR NOTES DUE APRIL 15, 2006
EXCHANGE AGENT:
UNITED STATES TRUST COMPANY OF NEW YORK
By Facsimile:
(212) 420-6152
Attention: Customer Service
Confirm by telephone:
(800) 548-6565
By Registered or Certified Mail:
United States Trust Company of New York
P.O. Box 844 Cooper Station
New York, New York 10276
By Hand:
United States Trust Company of New York
111 Broadway
New York, New York 10006
Attention: Corporate Trust Operations
By Overnight Courier:
United States Trust Company of New York
770 Broadway
New York, New York 10003
Attention: Corporate Trust Operations
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated , 1996
(the "Prospectus") of NEXTLINK Communications, L.L.C., a Washington limited
liability company (the "Company"), and NEXTLINK Capital, Inc., a Washington
corporation, (together with the Company, the "Issuers") and this Letter of
Transmittal for 12 1/2% Senior Notes due April 15, 2006, which may be amended
from time to time (this "Letter"), which together constitute the Issuers'
offer to exchange (the "Exchange Offer"), for each $1,000 in principal amount
of its outstanding 12 1/2% Senior Notes due April 15, 2006 in reliance upon an
exemption from registration under the Securities Act of 1933, as amended
(the "Senior Notes"), $1,000 in principal amount of 12 1/2% Senior Notes due
April 15, 2006 (the "Exchange Notes").
<PAGE>
The undersigned has completed, executed and delivered this Letter to
indicate the action he or she desires to take with respect to the Exchange
Offer.
All holders of Senior Notes who wish to tender their Senior Notes must,
prior to the Expiration Date: (1) complete, sign, date and mail or otherwise
deliver this Letter to the Exchange Agent, in person or to the address set
forth above; and (2) tender his or her Senior Notes or, if a tender of Senior
Notes is to be made by book-entry transfer to the account maintained by the
Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer
Facility"), confirm such book-entry transfer (a "Book-Entry Confirmation"), in
each case in accordance with the procedures for tendering described in the
Instructions to this Letter. Holders of Senior Notes whose certificates are
not immediately available, or who are unable to deliver their certificates or
Book-Entry Confirmation and all other documents required by this Letter to be
delivered to the Exchange Agent on or prior to the Expiration Date, must
tender their Senior Notes according to the guaranteed delivery procedures set
forth under the caption "The Exchange Offer--How to Tender" in the Prospectus.
(See Instruction 1).
The Instructions included with this Letter must be followed in their
entirety. Questions and requests for assistance or for additional copies of
the Prospectus or this Letter may be directed to the Exchange Agent, at the
address listed above, or R. Bruce Easter, Jr., Esq., General Counsel and
Secretary of the Company, at (206) 519-8900, 155 108th Avenue N.E., 8th Floor,
Bellevue, Washington 98004.
<PAGE>
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING
THE INSTRUCTIONS TO THIS LETTER, CAREFULLY
BEFORE CHECKING ANY BOX BELOW
Capitalized terms used in this Letter and not defined herein shall have the
respective meanings ascribed to them in the Prospectus.
List in Box 1 below the Senior Notes of which you are the holder. If the
space provided in Box 1 is inadequate, list the certificate numbers and
principal amount of Senior Notes on a separate SIGNED schedule and affix that
schedule to this Letter.
BOX 1
TO BE COMPLETED BY ALL TENDERING HOLDERS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND
ADDRESS(ES)
OF
REGISTERED
HOLDER(S) PRINCIPAL
(PLEASE AMOUNT OF
FILL IN IF CERTIFICATE PRINCIPAL AMOUNT SENIOR NOTES
BLANK) NUMBER(S)(1) OF SENIOR NOTES TENDERED(2)
- ---------------------------------------------------------------
------------------------
------------------------
------------------------
<S> <C> <C> <C>
TOTALS:
</TABLE>
- -------------------------------------------------------------------------------
(1) Need not be completed if Senior Notes are being tendered by book-entry
transfer.
(2) Unless otherwise indicated, the entire principal amount of Senior Notes
represented by a certificate or Book-Entry Confirmation delivered to
the Exchange Agent will be deemed to have been tendered.
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned tenders to the Issuers the principal amount of Senior Notes
indicated above. Subject to, and effective upon, the acceptance for exchange
of the Senior Notes tendered with this Letter, the undersigned exchanges,
assigns and transfers to, or upon the order of, the Issuers all right, title
and interest in and to the Senior Notes tendered.
The undersigned constitutes and appoints the Exchange Agent as his or her
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Issuers) with respect to the tendered Senior Notes,
with full power of substitution, to: (a) deliver certificates for such Senior
Notes; (b) deliver Senior Notes and all accompanying evidence of transfer and
authenticity to or upon the order of the Issuers upon receipt by the Exchange
Agent, as the undersigned's agent, of the Exchange Notes to which the
undersigned is entitled upon the acceptance by the Issuers of the Senior Notes
tendered under the Exchange Offer; and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of the Senior Notes, all in
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full power
and authority to tender, exchange, assign and transfer the Senior Notes
tendered hereby and that the Issuers will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claim. The undersigned will, upon request,
execute and deliver any additional documents deemed by the Issuers to be
necessary or desirable to complete the assignment and transfer of the Senior
Notes tendered.
The undersigned agrees that acceptance of any tendered Senior Notes by the
Issuers and the issuance of Exchange Notes in exchange therefor shall
constitute performance in full by the Issuers of their obligations under the
Registration Rights Agreement (as defined in the Prospectus) and that, upon
the issuance of the Exchange
<PAGE>
Notes, the Issuers will have no further obligations or liabilities thereunder
(except in certain limited circumstances). By tendering Senior Notes, the
undersigned certifies (a) that it is not an "affiliate" of the Issuers within
the meaning of Rule 405 under the Securities Act, that it is not a broker-
dealer that owns Senior Notes acquired directly from the Issuers or an
affiliate of the Issuers, that it is acquiring the Exchange Notes in the
ordinary course of the undersigned's business and that the undersigned has no
arrangement with any person to participate in the distribution of the Exchange
Notes or (b) that it is an "affiliate" (as so defined) of the Issuers or of
the initial purchasers in the original offering of the Senior Notes, and that
it will comply with the registration and prospectus delivery requirements of
the Securities Act to the extent applicable to it.
The undersigned acknowledges that, if it is a broker-dealer that will
receive Exchange Notes for its own account, it will deliver a prospectus in
connection with any resale of such Exchange Notes. By so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
The undersigned understands that the Issuers may accept the undersigned's
tender by delivering written notice of acceptance to the Exchange Agent, at
which time the undersigned's right to withdraw such tender will terminate.
All authority conferred or agreed to be conferred by this Letter shall
survive the death or incapacity of the undersigned, and every obligation of
the undersigned under this Letter shall be binding upon the undersigned's
heirs, personal representatives, successors and assigns. Tenders may be
withdrawn only in accordance with the procedures set forth in the Instructions
contained in this Letter.
Unless otherwise indicated under "Special Delivery Instructions" below, the
Exchange Agent will deliver Exchange Notes (and, if applicable, a certificate
for any Senior Notes not tendered but represented by a certificate also
encompassing Senior Notes which are tendered) to the undersigned at the
address set forth in Box 1.
The undersigned acknowledges that the Exchange Offer is subject to the more
detailed terms set forth in the Prospectus and, in case of any conflict
between the terms of the Prospectus and this Letter, the Prospectus shall
prevail.
[_]CHECK HERE IF TENDERED SENIOR NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
[_]CHECK HERE IF TENDERED SENIOR NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s): ____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Window Ticket Number (if available): _______________________________________
Name of Institution which Guaranteed Delivery: _____________________________
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
BOX 2
PLEASE SIGN HERE
WHETHER OR NOT SENIOR NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
X __________________________________________________ _______________________
X __________________________________________________ _______________________
SIGNATURE(S) OF OWNER(S) OR AUTHORIZED SIGNATORY DATE
Area Code and Telephone Number: _____________________________________________
This box must be signed by registered holder(s) of Senior Notes as their
name(s) appear(s) on certificate(s) for Senior Notes, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Letter. If signature is by a trustee, executor,
administrator, guardian, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title
below. (See Instruction 3)
Name(s) _____________________________________________________________________
_____________________________________________________________________________
(PLEASE PRINT)
Capacity ____________________________________________________________________
Address _____________________________________________________________________
_____________________________________________________________________________
(INCLUDE ZIP CODE)
Signature(s) Guaranteed _____________________________________________________
by an Eligible Institution: (AUTHORIZED SIGNATURE)
(If required by Instruction 3)
___________________________________________________________
(TITLE)
___________________________________________________________
(NAME OF FIRM)
<PAGE>
BOX 3
TO BE COMPLETED BY ALL TERNDERING HOLDERS
PAYOR'S NAME: UNITED STATES TRUST COMPANY OF NEW YORK
PART 1--PLEASE PROVIDE YOUR Social security number
TIN IN THE BOX AT RIGHT AND or Employer
CERTIFY BY SIGNING AND identification number
DATING BELOW.
SUBSTITUTE
FORM W-9
DEPARTMENT OF ----------------------
THE TREASURY --------------------------------------------------------
INTERNAL REVENUE PART 2--Check the box if you are NOT subject to back-
SERVICE up withholding under the provisions of Section
2406(a)(1)(C) of the Internal Revenue Code because
(1) you have not been notified that you are subject
to back-upwithholding as a result of failure to
report all interestor dividends or (2) the Internal
Revenue Service has notified you that you are no
longer subject to back-up withholding. [_]
PAYOR'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN)
CERTIFICATION--UNDER THE PENALTIES OF
PERJURY, I CERTIFY THAT THE PART 3 --
INFORMATION PROVIDED ON THIS FORM IS Check if
TRUE, CORRECT, AND COMPLETE. Awaiting
TIN [_]
--------------------------------------------------------
SIGNATURE ______________ DATE _______
BOX 4 BOX 5
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4) (SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certifi- To be completed ONLY if certifi-
cates for Senior Notes in a prin- cates for Senior Notes in a prin-
cipal amount not exchanged, or cipal amount not exchanged, or
Exchange Notes, are to be issued Exchange Notes, are to be sent to
in the name of someone other than someone other than the person
the person whose signature ap- whose signature appears in Box 2
pears in Box 2, or if Senior or to an address other than that
Notes delivered by book-entry shown in Box 1.
transfer which are not accepted
for exchange are to be returned
by credit to an account main-
tained at the Book-Entry Transfer
Facility other than the account
indicated above.
Deliver:
(check appropriate boxes)
[_] Senior Notes not tendered
Issue and deliver: [_] Exchange Notes, to:
Name______________________________
(check appropriate boxes) (PLEASE PRINT)
Address __________________________
[_] Senior Notes not tendered __________________________________
[_] Exchange Notes, to:
Name _____________________________
(PLEASE PRINT)
Address __________________________
__________________________________
Please complete the Substitute
Form W-9 at Box 3
__________________________________
(TAX I.D. OR SOCIAL SECURITY
NUMBER)
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND CERTIFICATES. Certificates for Senior Notes
or a Book-Entry Confirmation, as the case may be, as well as a properly
completed and duly executed copy of this Letter and any other documents
required by this Letter, must be received by the Exchange Agent at one of its
addresses set forth herein on or before the Expiration Date. The method of
delivery of this Letter, certificates for Senior Notes or a Book-Entry
Confirmation, as the case may be, and any other required documents is at the
election and risk of the tendering holder, but except as otherwise provided
below, the delivery will be deemed made when actually received by the Exchange
Agent. If delivery is by mail, the use of registered mail with return receipt
requested, properly insured, is suggested.
Holders whose Senior Notes are not immediately available or who cannot
deliver their Senior Notes or a Book-Entry Confirmation, as the case may be,
and all other required documents to the Exchange Agent on or before the
Expiration Date may tender their Senior Notes pursuant to the guaranteed
delivery procedures set forth in the Prospectus. Pursuant to such procedure:
(i) tender must be made by or through an Eligible Institution (as defined in
the Prospectus under the caption "The Exchange Offer"); (ii) prior to the
Expiration Date, the Exchange Agent must have received from the Eligible
Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by telegram, telex, facsimile transmission, mail or hand delivery)
(x) setting forth the name and address of the holder, the description of the
Senior Notes and the principal amount of Senior Notes tendered, (y) stating
that the tender is being made thereby and (z) guaranteeing that, within five
New York Stock Exchange trading days after the date of execution of such
Notice of Guaranteed Delivery, this Letter together with the certificates
representing the Senior Notes or a Book-Entry Confirmation, as the case may
be, and any other documents required by this Letter will be deposited by the
Eligible Institution with the Exchange Agent; and (iii) the certificates for
all tendered Senior Notes or a Book-Entry Confirmation, as the case may be, as
well as all other documents required by this Letter, must be received by the
Exchange Agent within five New York Stock Exchange trading days after the date
of execution of such Notice of Guaranteed Delivery, all as provided in the
Prospectus under the caption "The Exchange Offer--How to Tender."
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Senior Notes will be
determined by the Issuers, whose determination will be final and binding. The
Issuers reserve the absolute right to reject any or all tenders that are not
in proper form or the acceptance of which, in the opinion of the Issuers'
counsel, would be unlawful. The Issuers also reserve the right to waive any
irregularities or conditions of tender as to particular Senior Notes. All
tendering holders, by execution of this Letter, waive any right to receive
notice of acceptance of their Senior Notes.
Neither the Issuers, the Exchange Agent nor any other person shall be
obligated to give notice of defects or irregularities in any tender, nor shall
any of them incur any liability for failure to give any such notice.
2. PARTIAL TENDERS; WITHDRAWALS. If less than the entire principal amount of
any Senior Note evidenced by a submitted certificate or by a Book-Entry
Confirmation is tendered, the tendering holder must fill in the principal
amount tendered in the fourth column of Box 1 above. All of the Senior Notes
represented by a certificate or by a Book-Entry Confirmation delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise
indicated. A certificate for Senior Notes not tendered will be sent to the
holder, unless otherwise provided in Box 5, as soon as practicable after the
Expiration Date, in the event that less than the entire principal amount of
Senior Notes represented by a submitted certificate is tendered (or, in the
case of Senior Notes tendered by book-entry transfer, such non-exchanged
Senior Notes will be credited to an account maintained by the holder with the
Book-Entry Transfer Facility).
If not yet accepted, a tender pursuant to the Exchange Offer may be
withdrawn prior to the Expiration Date. To be effective with respect to the
tender of Senior Notes, a notice of withdrawal must: (i) be received by the
<PAGE>
Exchange Agent before the Issuers notify the Exchange Agent that they have
accepted the tender of Senior Notes pursuant to the Exchange Offer; (ii)
specify the name of the person who tendered the Senior Notes; (iii) contain a
description of the Senior Notes to be withdrawn, the certificate numbers shown
on the particular certificates evidencing such Senior Notes and the principal
amount of Senior Notes represented by such certificates; and (iv) be signed by
the holder in the same manner as the original signature on this Letter
(including any required signature guarantee).
3. SIGNATURES ON THIS LETTER; ASSIGNMENTS; GUARANTEE OF SIGNATURES. If this
Letter is signed by the holder(s) of Senior Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the
certificate(s) for such Senior Notes, without alteration, enlargement or any
change whatsoever.
If any of the Senior Notes tendered hereby are owned by two or more joint
owners, all owners must sign this Letter. If any tendered Senior Notes are
held in different names on several certificates, it will be necessary to
complete, sign and submit as many separate copies of this Letter as there are
names in which certificates are held.
If this Letter is signed by the holder of record and (i) the entire
principal amount of the holder's Senior Notes are tendered; and/or (ii)
untendered Senior Notes, if any, are to be issued to the holder of record,
then the holder of record need not endorse any certificates for tendered
Senior Notes, nor provide a separate bond power. If any other case, the holder
of record must transmit a separate bond power with this Letter.
If this Letter or any certificate or assignment is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and proper evidence satisfactory to
the Issuer of their authority to so act must be submitted, unless waived by
the Issuers.
Signatures on this Letter must be guaranteed by an Eligible Institution,
unless Senior Notes are tendered: (i) by a holder who has not completed the
Box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on this Letter; or (ii) for the account of an Eligible
Institution. In the event that the signatures in this Letter or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantees
must be by an eligible guarantor institution which is a member of The
Securities Transfer Agents Medallion Program (STAMP), The New York Stock
Exchanges Medallion Signature Program (MSP) or The Stock Exchanges Medallion
Program (SEMP) (collectively, "Eligible Institutions"). If Senior Notes are
registered in the name of a person other than the signer of this Letter, the
Senior Notes surrendered for exchange must be endorsed by, or be accompanied
by a written instrument or instruments of transfer or exchange, in
satisfactory form as determined by the Issuers, in their sole discretion, duly
executed by the registered holder with the signature thereon guaranteed by an
Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in Box 4 or 5, as applicable, the name and address to which the
Exchange Notes or certificates for Senior Notes not exchanged are to be issued
or sent, if different from the name and address of the person signing this
Letter. In the case of issuance in a different name, the tax identification
number of the person named must also be indicated. Holders tendering Senior
Notes by book-entry transfer may request that Senior Notes not exchanged be
credited to such account maintained at the Book-Entry Transfer Facility as
such holder may designate.
5. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder
whose tendered Senior Notes are accepted for exchange must provide the
Exchange Agent (as payor) with his or her correct taxpayer identification
number ("TIN"), which, in the case of a holder who is an individual, is his or
her social security number. If the Exchange Agent is not provided with the
correct TIN, the holder may be subject to a $50 penalty imposed by the
Internal Revenue Service. In addition, delivery to the holder of the Exchange
Notes pursuant to the Exchange Offer may be subject to back-up withholding.
(If withholding results in overpayment of taxes, a refund may be obtained.)
Exempt holders (including, among others, all corporations and certain foreign
individuals) are not subject to these back-up withholding and reporting
requirements. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
<PAGE>
Under federal income tax laws, payments that may be made by the Issuers on
account of Exchange Notes issued pursuant to the Exchange Offer may be subject
to back-up withholding at a rate of 31%. In order to prevent back-up
withholding, each tendering holder must provide his or her correct TIN by
completing the "Substitute Form W-9" referred to above, certifying that the
TIN provided is correct (or that the holder is awaiting a TIN) and that: (i)
the holder has not been notified by the Internal Revenue Service that he or
she is subject to back-up withholding as a result of failure to report all
interest or dividends; or (ii) the Internal Revenue Service has notified the
holder that he or she is no longer subject to back-up withholding; or (iii)
certify in accordance with the Guidelines that such holder is exempt from
back-up withholding. If the Senior Notes are in more than one name or are not
in the name of the actual owner, consult the enclosed Guidelines for
information on which TIN to report.
6. TRANSFER TAXES. The Issuers will pay all transfer taxes, if any,
applicable to the transfer of Senior Notes to them or their order pursuant to
the Exchange Offer. If, however, the Exchange Notes or certificates for Senior
Notes not exchanged are to be delivered to, or are to be issued in the name
of, any person other than the record holder, or if tendered certificates are
recorded in the name of any person other than the person signing this Letter,
or if a transfer tax is imposed by any reason other than the transfer of
Senior Notes to the Issuers or their order pursuant to the Exchange Offer,
then the amount of such transfer taxes (whether imposed on the record holder
or any other person) will be payable by the tendering holder. If satisfactory
evidence of payment of taxes or exemption from taxes is not submitted with
this Letter, the amount of transfer taxes will be billed directly to the
tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter.
7. WAIVER OF CONDITIONS. The Issuers reserve the absolute right to amend or
waive any of the specified conditions in the Exchange Offer in the case of any
Senior Notes tendered.
8. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder whose
certificates for Senior Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above, for further
instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus or this Letter, may be directed to the Exchange Agent.
IMPORTANT: This Letter (together with certificates representing tendered
Senior Notes or a Book-Entry Confirmation and all other required documents)
must be received by the Exchange Agent on or before the Expiration Date (as
defined in the Prospectus).
<PAGE>
EXHIBIT 99.2
NEXTLINK COMMUNICATIONS, L.L.C.
NEXTLINK CAPITAL, INC.
EXCHANGE OFFER
TO HOLDERS OF THEIR
12 1/2% SENIOR NOTES DUE APRIL 15, 2006
NOTICE OF GUARANTEED DELIVERY
As set forth in the Prospectus dated , 1996 (the "Prospectus") of
NEXTLINK Communications, L.L.C. (the "Company") and NEXTLINK Capital, Inc.
(together with the Company, the "Issuers") under "The Exchange Offer--How to
Tender" and in the Letter of Transmittal for 12 1/2% Senior Notes due April
15, 2006 (the "Letter of Transmittal"), this form or one substantially
equivalent hereto must be used to accept the Exchange Offer (as defined below)
of the Issuers if: (i) certificates for the above-referenced Notes (the
"Senior Notes") are not immediately available; or (ii) time will not permit
all required documents to reach the Exchange Agent (as defined below) on or
prior to the Expiration Date (as defined in the Prospectus) of the Exchange
Offer. Such form may be delivered by hand or transmitted by telegram, telex,
facsimile transmission or letter to the Exchange Agent.
TO: UNITED STATES TRUST COMPANY OF NEW YORK (THE "EXCHANGE AGENT")
By Facsimile:
(212) 420-6152
Attention: Customer Service
Confirm by telephone to:
(800) 548-6565
By Registered or Certified Mail:
United States Trust Company of New York
P.O. Box 844 Cooper Station
New York, New York 10276
By Hand:
United States Trust Company of New York
111 Broadway
New York, New York 10006
Attention: Corporate Trust Operations
By Overnight Courier:
United States Trust Company of New York
770 Broadway
New York, New York 10003
Attention: Corporate Trust Operations
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMITTAL OF THIS INSTRUMENT TO A FACSIMILE OR TELEX NUMBER OTHER THAN AS
SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuers, upon the terms and conditions
set forth in the Prospectus and the Letter of Transmittal (which together
constitute the "Exchange Offer"), receipt of which are hereby acknowledged,
the principal amount of Senior Notes set forth below pursuant to the
guaranteed delivery procedure described in the Prospectus and the Letter of
Transmittal.
Sign Here
Signature(s) ________________________
Principal Amount of Senior Notes _____________________________________
Tendered ____________________________
Please Print the Following
Certificate Nos. (if available) ____ Information
Total Principal Amount Represented Name(s) _____________________________
by Senior Notes Certificate(s) _____ _____________________________________
Address _____________________________
Account Number ______________________ _____________________________________
Dated: , 1996 Area Code and Tel. No(s). ___________
_____________________________________
<PAGE>
GUARANTEE
The undersigned, a member of a recognized signature guarantee medallion
program within the meaning of Rule 17A(d)-15 under the Securities Exchange Act
of 1934, hereby guarantees (a) that the above-named person(s) own(s) the
above-described securities tendered hereby within the meaning of Rule 10b-4
under the Securities Exchange Act of 1934, (b) that such tender of the above-
described securities complies with Rule 10b-4, and (c) that delivery to the
Exchange Agent of certificates tendered hereby, in proper form for transfer,
or delivery of such certificates pursuant to the procedure for book-entry
transfer, in either case with delivery of a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) and any other required
documents, is being made within five trading days after the date of execution
of a Notice of Guaranteed Delivery of the above-named person.
_____________________________________
Name of Firm
_____________________________________
Authorized Signature
_____________________________________
Number and Street or P.O. Box
_____________________________________
City State Zip Code
_____________________________________
Area Code and Tel. No.
Dated: , 1996
<PAGE>
EXHIBIT 99.3
NEXTLINK COMMUNICATIONS, L.L.C.
NEXTLINK CAPITAL, INC.
OFFER TO EXCHANGE
$350,000,000 IN PRINCIPAL AMOUNT OF
12 1/2% SENIOR NOTES DUE APRIL 15, 2006
IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
FOR
$350,000,000 IN PRINCIPAL AMOUNT OF
12 1/2% SENIOR NOTES DUE APRIL 15, 2006
To Our Clients:
Enclosed for your consideration is a Prospectus dated , 1996 (as the
same may be amended or supplemented from time to time, the "Prospectus") and a
form of Letter of Transmittal (the "Letter of Transmittal") relating to the
offer (the "Exchange Offer") by NEXTLINK Communications, L.L.C. (the
"Company") and NEXTLINK Capital, Inc. (together with the Company, the
"Issuers") to exchange up to $350,000,000 in principal amount of their 12 1/2%
Senior Notes due April 15, 2006 in reliance upon an exemption from
registration under the Securities Act of 1933, as amended (the "Senior
Notes"), for $350,000,000 in principal amount of their 12 1/2% Senior Notes
due April 15, 2006 (the "Exchange Notes").
The material is being forwarded to you as the beneficial owner of Senior
Notes carried by us for your account or benefit but not registered in your
name. A tender of any Senior Notes may be made only by us as the registered
holder and pursuant to your instructions. Therefore, the Issuers urge
beneficial owners of Senior Notes registered in the name of a broker, dealer,
commercial bank, trust company or other nominee to contact such registered
holder promptly if they wish to tender Senior Notes in the Exchange Offer.
Accordingly, we request instructions as to whether you wish us to tender any
or all Senior Notes, pursuant to the terms and conditions set forth in the
Prospectus and Letter of Transmittal. We urge you to read carefully the
Prospectus and Letter of Transmittal before instructing us to tender your
Senior Notes.
YOUR INSTRUCTIONS TO US SHOULD BE FORWARDED AS PROMPTLY AS POSSIBLE IN ORDER
TO PERMIT US TO TENDER SENIOR NOTES ON YOUR BEHALF IN ACCORDANCE WITH THE
PROVISIONS OF THE EXCHANGE OFFER. The Exchange Offer will expire at 5:00 p.m.,
Eastern Standard Time, on , 1996, unless extended (the "Expiration
Date"). Senior Notes tendered pursuant to the Exchange Offer may be withdrawn,
subject to the procedures described in the Prospectus, at any time prior to
the Expiration Date.
If you wish to have us tender any or all of your Senior Notes held by us for
your account or benefit, please so instruct us by completing, executing and
returning to us the instruction form that appears below. The accompanying
Letter of Transmittal is furnished to you for informational purposes only and
may not be used by you to tender Senior Notes held by us and registered in our
name for your account or benefit.
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INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer of NEXTLINK
Communications, L.L.C. and NEXTLINK Capital, Inc.
THIS WILL INSTRUCT YOU TO TENDER THE PRINCIPAL AMOUNT OF SENIOR NOTES
INDICATED BELOW HELD BY YOU FOR THE ACCOUNT OR BENEFIT OF THE UNDERSIGNED AND
TO DELIVER THE UNDERSIGNED'S CONSENT WITH RESPECT TO SUCH SENIOR NOTES,
PURSUANT TO THE TERMS OF AND CONDITIONS SET FORTH IN THE PROSPECTUS AND THE
LETTER OF TRANSMITTAL.
Box 1 [_]Please tender my Senior Notes held by you for my account or benefit
and deliver my Consent with respect to such Senior Notes. I have
identified on a signed schedule attached hereto the principal amount
of Senior Notes to be tendered, in integral multiples of $1,000, if I
wish to tender less than all of my Senior Notes.
Box 2 [_]Please do not tender any Senior Notes held by you for my account or
benefit and do not deliver my Consent.
Date: , 1996
_____________________________________
_____________________________________
Signature(s)
_____________________________________
_____________________________________
Please print name(s) here
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Unless a specific contrary instruction is given in a signed Schedule attached
hereto, your signature(s) hereon shall constitute an instruction to us to
tender all your Senior Notes and to deliver your Consent with respect thereto.
<PAGE>
EXHIBIT 99.4
NEXTLINK COMMUNICATIONS, L.L.C.
NEXTLINK CAPITAL, INC.
OFFER TO EXCHANGE
$350,000,000 IN PRINCIPAL AMOUNT OF
12 1/2% SENIOR NOTES DUE APRIL 15, 2006
IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
FOR
$350,000,000 IN PRINCIPAL AMOUNT OF
12 1/2% SENIOR NOTES DUE APRIL 15, 2006
To Securities Dealers, Commercial Banks
Trust Companies and Other Nominees:
Enclosed for your consideration is a Prospectus dated , 1996 (as the
same may be amended or supplemented from time to time, the "Prospectus") and a
form of Letter of Transmittal (the "Letter of Transmittal") relating to the
offer (the "Exchange Offer") by NEXTLINK Communications, L.L.C. (the
"Company") and NEXTLINK Capital, Inc. (together with the Company, the
"Issuers") to exchange up to $350,000,000 in principal amount of their 12 1/2%
Senior Notes due April 15, 2006 in reliance upon an exemption from
registration under the Securities Act of 1933, as amended (the "Senior
Notes"), for $350,000,000 in principal amount of their 12 1/2% Senior Notes
due April 15, 2006 (the "Exchange Notes").
We are asking you to contact your clients for whom you hold Senior Notes
registered in your name or in the name of your nominee. In addition, we ask
you to contact your clients who, to your knowledge, hold Senior Notes
registered in their own name. The Issuers will not pay any fees or commissions
to any broker, dealer or other person in connection with the solicitation of
tenders pursuant to the Exchange Offer. You will, however, be reimbursed by
the Issuers for customary mailing and handling expenses incurred by you in
forwarding any of the enclosed materials to your clients. The Issuers will pay
all transfer taxes, if any, applicable to the tender of Senior Notes to them
or their order, except as otherwise provided in the Prospectus and the Letter
of Transmittal.
Enclosed are copies of the following documents:
1. The Prospectus;
2. A Letter of Transmittal for your use in connection with the tender of
Senior Notes and for the information of your clients;
3. A form of letter that may be sent to your clients for whose accounts
you hold Senior Notes registered in your name or the name of your nominee,
with space provided for obtaining the clients' instructions with regard to
the Exchange Offer;
4. A form of Notice of Guaranteed Delivery; and
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
Your prompt action is requested. The Exchange Offer will expire at 5:00
p.m., Eastern Standard Time, on , 1996, unless extended (the "Expiration
Date"). Senior Notes tendered pursuant to the Exchange Offer may be withdrawn,
subject to the procedures described in the Prospectus, at any time prior to
the Expiration Date.
<PAGE>
To tender Senior Notes, certificates for Senior Notes or a Book-Entry
Confirmation, a duly executed and properly completed Letter of Transmittal or
a facsimile thereof, and any other required documents, must be received by the
Exchange Agent as provided in the Prospectus and the Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the Exchange
Agent, United States Trust Company of New York, by calling (800) 548-6565.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE ISSUERS OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR
ANY OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT
TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS
AND THE LETTER OF TRANSMITTAL.
