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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended December 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
TO
Commission File No. 333-04603 and 333-04603-01
NEXTLINK COMMUNICATIONS, INC.
(FORMERLY KNOWN AS NEXTLINK COMMUNICATIONS, L.L.C.)
NEXTLINK CAPITAL, INC.
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A Washington Corporation I.R.S. Employer No. 91-1738221
A Washington Corporation I.R.S. Employer No. 91-1716062
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155 108th Avenue, N.E., 8th Floor, Bellevue, Washington 98004
Telephone Number (206) 519-8900
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the Registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Registration S-B is not contained herein, and will not be contained, to the
best of Registrants' knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ X ]
The Registrants' revenues for its most recent fiscal year were $25,686,000.
The Registrants' voting stock is not publicly traded, and as a result, no
aggregate market value of the voting stock is available.
At March 11, 1997, the number of shares of Class B Common Stock, par value $.01
per share of NEXTLINK Communications, Inc. ("NEXTLINK" or the "Company") was
83,123,084 and there were 1,000 shares of Common Stock, par value $.01 per share
of NEXTLINK Capital, Inc.
NEXTLINK Capital, Inc. ("NEXTLINK Capital" and together with the Company, the
"Issuers") meets the conditions set forth in General Instruction G(1)(a) and (b)
of Form 10-KSB and is therefore filing this form with the reduced disclosure
format.
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TABLE OF CONTENTS
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ITEM PAGE
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PART I
1. Description of Business............................................................................. 1
2. Description of Properties........................................................................... 27
3. Legal Proceedings................................................................................... 27
4. Submission of Matters to a Vote of Security Holders................................................. 27
PART II
5. Market for Registrants' Common Stock and Related Stockholder Matters................................ 27
6. Managements' Discussion and Analysis of Financial Condition and Results of Operations............... 28
7. Financial Statements................................................................................ 33
8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................ 33
PART III
9. Directors and Executive Officers of the Company..................................................... 34
10. Executive Compensation.............................................................................. 38
11. Security Ownership of Certain Beneficial Owners and Management...................................... 44
12. Certain Relationships and Related Transactions...................................................... 47
13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.................................... 48
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NEXTLINK COMMUNICATIONS, INC.
(FORMERLY KNOWN AS NEXTLINK COMMUNICATIONS, L.L.C.)
NEXTLINK CAPITAL, INC.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
OVERVIEW
NEXTLINK Communications, Inc. ("NEXTLINK" or the "Company") was founded in
1994 by Mr. Craig O. McCaw, its Chief Executive Officer and principal equity
owner, to provide local facilities-based telecommunications services with a
focus on delivering switched services to commercial customers. In July 1996,
NEXTLINK became one of the first competitive local exchange carriers ("CLECs")
in the United States to provide facilities-based local dial tone services under
the Telecommunications Act of 1996 (the "Telecom Act"), which opened the entire
local exchange market to competition. In each of the markets it serves,
NEXTLINK's goal is to become the principal competitor to the incumbent local
exchange carrier ("ILEC") for its targeted customer base of small and medium
sized businesses by offering a single source for local, long distance and
enhanced communications services. All operational statistics of the Company
included in this Report include 100% of the operational statistics of
Telecommunications of Nevada, LLC, a limited liability company in which the
Company has a 40% membership interest, which owns a network that is managed by
the Company in Las Vegas, Nevada.
The Company currently offers a bundled package of switched local dial tone
and long distance services in eight markets and anticipates launching these
services in an additional 14 markets, 13 of which are anticipated to be launched
by the end of June 1997. In addition, the Company offers dedicated transmission
and competitive access services to long distance carriers and end users in 18 of
its markets, including those markets where the Company has not yet launched
switched local dial tone and long distance services. NEXTLINK also offers
enhanced communications services, including a series of interactive voice
response ("IVR") products, a virtual communications center for mobile
professionals and workgroups and an interactive communications tool for the
World Wide Web and intranet applications called the Intermind Communicator.
To date, NEXTLINK has acquired and constructed telecommunications networks
in seven states, with operations currently active or under construction in 22
markets containing an aggregate of approximately four million addressable
business lines. As of December 31, 1996, the Company's operations included
approximately 1,080 route miles of installed and operational high capacity fiber
optic cable with a combined total of approximately 66,000 fiber miles which
connect to 403 buildings and an additional 400 route miles under construction.
The Company seeks to encompass the significant business concentrations 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
employs a uniform technology platform for each of its networks that is based on
the Nortel DMS 500 digital local and long distance combination switching system
and associated distribution technology. As of December 31, 1996, the Company had
five operational Nortel DMS 500 switches serving eight markets, had installed
three switches during the first quarter of 1997 and anticipates installing one
switch in the second quarter 1997, allowing the Company to service in the
aggregate 14 additional markets. The Company plans to install a tenth switch in
its NEXTLAB facility, a fully functional model of one of the Company's networks,
which will serve as the Company's network operations control center and a
testing facility for switch software and the Company's products and services.
NEXTLINK has interconnection agreements covering 15 markets and is currently
negotiating two additional interconnection agreements that will cover its seven
additional markets. These agreements provide the Company with the ability to
exchange telecommunications traffic between its customers and the customers of
the ILEC. The Company accelerated its offering of switched local dial tone
services by
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establishing initial interconnection agreements while longer term agreements are
negotiated. The operating experience gained by the Company under these
agreements gives the Company critical knowledge for negotiating longer term
arrangements, which the Company believes provides it with an advantage over
other CLECs in modifying its ongoing relationships with the ILECs.
BUSINESS STRATEGY
The Company has built an end user-focused, locally oriented organization
dedicated to providing a broad range of products and services at competitive
prices primarily to small and medium sized businesses. The key components of the
Company's strategy to maximize penetration of its targeted customer base are:
FOCUS ON SMALL AND MEDIUM SIZED BUSINESSES. The Company primarily
focuses marketing efforts for its switched local, long distance and enhanced
communications services on small and medium sized businesses and
professional groups with 10 to 50 business lines. The Company's market
research indicates that these customers prefer a single source for all of
their telecommunications requirements, including products, billing,
installation, maintenance and customer service. The Company has chosen to
focus on this segment, based on its expectations that higher gross margins
will generally be available on services provided to these customers, as
compared with larger businesses, and that ILECs may be less likely to apply
significant resources towards retaining these customers. The Company expects
to attract these customers through a direct sales effort by offering: (i)
bundled facilities-based local dial tone and resold 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) responsive customer service and support provided on a
local level.
DEVELOP A DIRECT SALES FORCE AND A CUSTOMER CARE ORGANIZATION. NEXTLINK
is building a highly motivated and experienced direct sales force and
customer care organization that is designed to establish a direct and
personal relationship with its customers. Salespeople are given incentives
through a commission structure that targets 40% 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 is
responsible for solving problems and responding to customer inquiries.
Management believes that the quality of its sales force and the
responsiveness of its customer care organization will help to attract and
retain customers and provide a key competitive advantage in competing with
the ILEC in the local exchange market.
STANDARDIZE PROCESSES TO ACCELERATE REVENUE GROWTH. The Company
believes that the immediate challenge for CLECs will be developing the
ability to implement effective provisioning systems, which include the
complex process of transitioning ILEC customers to the Company's switched
local dial tone services. Accordingly, the Company has begun to identify and
will focus, as a key competitive strategy, on implementing best provisioning
practices in each of its markets that will provide for rapid and seamless
transitions of customers from the ILEC to the Company. To support the
provisioning of its services, the Company has begun a long-term development
program relating to a comprehensive information technology platform geared
toward delivering information and automated ordering and provisioning
capability directly to the end-user as well as to the Company's internal
staff. The Company believes that these practices and its comprehensive
information technology platform, as developed, will provide the Company with
a long-term competitive advantage and allow it to implement more rapidly
switched local dial tone services in its markets and to shorten the time
between the sale of its services and the generation of revenues.
DEVELOP HIGH CAPACITY NETWORKS WITH BROAD MARKET COVERAGE. NEXTLINK has
and intends to continue to approach network design with a long-term view
focusing on three key elements. First, the Company designs and builds its
networks to provide extensive coverage of principal business
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concentrations, featuring direct physical connection of the Company's
network to a high percentage of the commercial buildings and a majority of
the ILEC central offices. This broad coverage is expected to 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 high volumes of voice, data, video and
Internet traffic as well as other high bandwidth services. This strategy
should reduce potential "overbuild" costs and provide added network capacity
as the Company adds high bandwidth services in the future. Third, the
Company employs a uniform technology platform based on Nortel DMS 500
switches, associated distribution technology and other common transmission
technologies enabling the Company to (i) deploy features and functions
quickly in all of its networks, (ii) expand switching capacity in a cost
effective manner and (iii) lower maintenance costs through reduced training
and spare parts requirements. The Company also utilizes unbundled loops from
the ILEC to connect the Company's switch and network to end user buildings
and is evaluating other alternatives for building connectivity, including
wireless connections, for the "last mile" of transport.
OFFER ENHANCED COMMUNICATIONS SERVICES. NEXTLINK offers customers
value-added services that are not dependent on the Company's local
facilities. As a result, the Company believes it can establish a customer
base in a market in advance of constructing network facilities as well as
offer additional services in markets where the Company has constructed
facilities. These enhanced communications service offerings include: (i) IVR
services, which provide an interface between NEXTLINK's clients and their
customers for a variety of applications; (ii) Xpress, NEXTLINK's virtual
communications center that allows mobile professionals and workgroups to
access a suite of commonly used communications services from any telephone
in the public switched network; and (iii) the Intermind Communicator, an
interactive communications tool for the World Wide Web and intranet
applications. The Company plans to focus the marketing of its enhanced
communications services in all of its markets, as well as in areas of
planned network expansion. This should increase the Company's visibility,
develop customer relationships and assist the Company in attracting local
exchange customers when it operates networks in these markets.
CONTINUE MARKET EXPANSION. The Company currently operates or is
constructing networks in 22 markets in seven states. These markets, in the
aggregate, have approximately four million addressable business lines. The
Company's goal is to add or expand markets and market clusters in order to
increase its market potential to approximately 11 million addressable
business lines by the end of 1998. NEXTLINK believes that its strategy of
operating its networks in clusters (i) offers substantial advantages
including economies of scale in management, marketing, sales and network
operations, (ii) enables 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 and (iii) provides opportunities in smaller markets and
those markets that are too small to develop on a stand alone basis. The
Company anticipates continuing to expand into new geographic areas as
opportunities arise either through building new networks, acquiring existing
networks or acquiring capacity. Most recently the Company acquired an 80
mile fiber optic network located in Los Angeles and six adjacent markets and
reached an agreement in principle to acquire an existing operational fiber
optic network in downtown Philadelphia in order to extend its existing
network in Pennsylvania.
The Company believes that 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 of
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experience in leading companies in competitive segments of the
telecommunications industry. In addition, the Company has recruited experienced
entrepreneurs and industry executives to head each of its operating
subsidiaries, many of whom have previously built and led their own start-up
telecommunications businesses. 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.
THE COMPANY'S TELECOMMUNICATIONS SERVICES
LOCAL AND LONG DISTANCE SERVICES
The Company commenced the offering of switched local dial tone and long
distance services in seven markets on July 4, 1996, and in an eighth market on
January 1, 1997. The Company expects to commence the offering of switched local
dial tone and long distance services in its remaining 14 markets later in 1997.
The Company focuses its product offering on basic telecommunications services,
which it believes are the core of local exchange services. Pricing, which is
determined and implemented by the Company's operating subsidiary in each local
market, has been generally 10% to 15% lower than the pricing for comparable
local services from the ILEC. The Company's current product offering includes:
- 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, including 1+, 800/888 and operator services;
- Voice messaging with personalized greetings, send, transfer, reply and
remote retrieval capabilities; and
- Directory listings and assistance.
Currently, the Company offers competitive access services in 18 of its
markets, focusing on long distance carriers and the private line needs of high
volume customers. In addition, data services that are currently offered by the
Company include Ethernet, TOKEN rings, and Fiber Distributed Data Interface
(FDDI).
The Company's competitive access 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.
ENHANCED COMMUNICATIONS SERVICES
NEXTLINK's IVR 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 to leave simultaneously
a profile of the caller behind for use by either NEXTLINK or its clients.
Currently, NEXTLINK provides four types of IVR 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;
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- 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 and other functions,
including 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 through its Xpress service, which offers a suite of
personal communications services. These services are made available through a
specialized personal telephone number. The key services provided by this center
are the following:
- Follow-Me--instructs the communications center to forward any calls to an
Xpress 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--provides the ability to capture the telephone number of anyone
who calls the subscriber, which is also displayed on the subscriber's
pager;
- Fax Messaging--stores an incoming fax and delivers it to the nearest fax
machine designated by the subscriber when the subscriber calls in to
retrieve it; and
- Teleconferencing--handles all teleconferencing needs through a
teleconferencing operator.
The Intermind Communicator is a new category of interactive communications
software for the World Wide Web and intranet applications. The Intermind
Communicator provides functions similar to the Company's IVR services for use on
the Internet. The Intermind Communicator utilizes hypercommunications, which is
a special type of publish/subscribe application. The Company markets the
Intermind Communicator to businesses that are seeking to deliver and receive
(that is, "push and pull") information over the Internet. The Intermind
Communicator allows these businesses to interact with end users by providing
requested information and simultaneously receiving specific communications
anonymously from that end user.
The Company has developed its enhanced communications service offerings
through acquisitions, marketing agreements and equity investment. In June 1995,
the Company acquired certain enhanced communications services assets from City
Signal, Inc. These assets are used by the Company to offer its Xpress service.
In September 1995, the Company acquired a fully operational interactive voice
response business through which the Company offers its IVR services. In June
1996, the Company invested in the preferred stock of Intermind Corporation, an
Internet communications tool software developer. Simultaneously, the Company
executed an exclusive marketing agreement, which provides that the Company is
the exclusive telecommunications company authorized to market the Intermind
Communicator in each of the Company's current geographic service areas. The
Company anticipates that it will continue to explore other enhanced
communications services opportunities and may acquire, invest in or establish
marketing relationships with, additional service providers in the future that
support its overall business and marketing strategies.
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SALES AND CUSTOMER CARE
OVERVIEW
The Company utilizes a two-pronged sales strategy in each of its markets.
The initial sales efforts in the Company's markets are for switched local dial
tone and long distance services focusing on small and medium sized businesses
and professional groups with 10 to 15 business lines. The Company's market
research indicates that these customers prefer a single source for all of their
telecommunications requirements, including products, billing, installation,
maintenance and customer service. The Company utilizes a direct sales effort
offering combined local and long distance services with prices that are
generally at a 10% to 15% discount from the ILEC. Providing a combination of
local and long distance services provides the Company's customers a level of
convenience that has been generally unavailable since the break-up of AT&T. The
Company is also marketing its enhanced communications services through 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 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 care organization that is designed to establish a direct and
personal relationship with its customers. The Company seeks to recruit
salespeople with strong sales backgrounds, including salespeople from long
distance companies, telecommunications equipment manufacturers and the ILECs.
Salespeople are given incentives through a commission structure that targets 40%
of a salesperson's compensation to be based on performance. With respect to
traditional competitive access provider ("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.
The Company anticipates that its enhanced communications service offerings
will continue to be sold across the country by its 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 markets. The
Company believes that this two-pronged approach to each market will provide
revenues that are incremental to its local exchange operations.
CUSTOMER CARE
The Company is augmenting its direct sales approach with superior customer
care and support through locally based customer care representatives. The
Company is structuring its customer care organization in such a manner that each
customer will have a single point of contact for customer care who is
responsible for solving problems and responding to customer inquiries. The
Company seeks to provide a customer care group that has the ability and
resources to respond to and resolve customer problems as they arise. The Company
believes that customer care representatives will be the most effective if they
are based in the community in which the Company is offering services.
NETWORK DEVELOPMENT
GENERAL
In developing its networks, the Company has executed a strategy of (i)
acquiring fully or partially constructed fiber optic networks and (ii) designing
and constructing high capacity fiber optic networks with broad coverage. The
Company is constantly evaluating markets as locations for expansion of the
Company's current networks and the development of additional networks. The
decision to build, acquire
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or utilize capacity of 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 market and the surrounding markets;
- availability of rights-of-way;
- actual and potential competitors; and
- potential for the Company to cluster additional networks in the region.
If a particular market 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 market 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 market 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. The
Company anticipates continuing the expansion of its networks into new markets
utilizing the market development analysis described above. 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.
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THE COMPANY'S NETWORKS
The Company currently operates or is constructing networks in 22 markets in
seven states. The following table provides certain information on the Company's
networks.
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AS OF DECEMBER 31, 1996
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ROUTE FIBER BUILDINGS
STATE/MARKET LAUNCH DATE(1) MILES(2) MILES(3) CONNECTED(4)
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Tennessee............................................... 384 32,342 260
MEMPHIS............................................... July 1996
NASHVILLE............................................. July 1996
Pennsylvania............................................ 357 20,219 37
ALLENTOWN............................................. July 1996
HARRISBURG............................................ July 1996
LANCASTER............................................. July 1996
READING............................................... July 1996
SCRANTON/WILKES BARRE................................. June 1997
PHILADELPHIA(5)....................................... June 1997
Washington.............................................. 1 152 16
SPOKANE............................................... July 1996
Ohio.................................................... 17 2,499 2
CLEVELAND............................................. April 1997
COLUMBUS.............................................. April 1997
AKRON................................................. December 1997
Utah.................................................... 10 1,440 10
SALT LAKE CITY........................................ January 1997
PROVO/OREM............................................ April 1997
Nevada.................................................. 311 9,394 78
LAS VEGAS............................................. April 1997
California(6)........................................... 80 5,609 8
LOS ANGELES........................................... June 1997
ANAHEIM............................................... June 1997
COSTA MESA............................................ June 1997
GARDEN GROVE.......................................... June 1997
IRVINE................................................ June 1997
ORANGE................................................ June 1997
SANTA ANA............................................. June 1997
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Total............................................... 1,160 71,655 411
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(1) Actual/Anticipated launch date of local dial tone services.
(2) Route miles refers to the number of miles of the telecommunications path in
which the Company-owned or leased fiber optic cables are installed.
(3) 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.
(4) Represents on-net building connections.
(5) Acquisition anticipated to be completed during the second quarter of 1997.
(6) Acquisition completed in February 1997.
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TENNESSEE. In January 1995, the Company acquired from City Signal, Inc. an
extensive, fully operational network in Memphis, Tennessee and another network
then under development in Nashville, Tennessee. 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
and, beginning in July 1996, local dial tone and long distance services. 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 initial
backbone network was completed in December 1995, and the Company also began
providing local dial tone and long distance services to customers in this area
in 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 backbone network connecting these four areas and
covering 21 counties was completed in the first quarter of 1996. The Company
believes that this network provides it with the foundation for significant
regional service offerings. The Company commenced offering switched local dial
tone services to customers utilizing its Pennsylvania networks in July 1996. The
Company recently completed an extension of the network to the Scranton/Wilkes
Barre market. The Company recently entered into an agreement in principle which
will enable it to extend this network into downtown Philadelphia during 1997.
WASHINGTON. In April 1995, the Company acquired a local exchange service
reseller located in Spokane, Washington. Currently serving approximately 880
business customers with approximately 7,300 lines serving the central business
district of Spokane, the Company completed the construction of a fiber optic
ring in the downtown area to provide facilities-based local telecommunications
services directly to these customers. The Company commenced offering switched
local dial tone services to customers utilizing its Spokane network in July
1996. The Company is in the process of migrating its current resale customers to
the fiber optic network as portions of that network are completed.
OHIO. In January 1996, the Company acquired existing fiber optic networks
and switching facilities in the downtown business centers of Cleveland, Columbus
and Akron, Ohio. The Company's networks in Ohio currently are limited to the
downtown cores, but the Company will be expanding the route and fiber miles of
each of these networks during 1997. In addition, the Company is currently
replacing the switches that were acquired in Ohio with two Nortel DMS 500
switches, the Company's standard switching platform. The Company anticipates
that it will begin offering switched local and long distance services in
Cleveland and Columbus during the second quarter of 1997 and in Akron during the
fourth 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 provided 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, which the Company believes is among the fastest growing areas in
the United States. Construction of the downtown fiber optic ring began in the
second quarter of 1996. The switching facilities were installed during the
fourth quarter of 1996 with switched local and long distance service starting
January 1, 1997. The Company recently executed a right-of-way agreement which
will enable the expansion of this network to Provo and Orem during the first
quarter of 1997.
NEVADA. 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, which the Company believes is one of the fastest growing areas in the
United States. 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 approximately
300 route miles throughout Las Vegas. The Company will provide strategic
planning and management of the business for a ten year period through one of its
subsidiaries. The Company anticipates that it will begin offering switched local
and long distance services in this market during the second quarter of 1997.
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CALIFORNIA. On February 4, 1997, the Company acquired substantially all the
assets of Linkatel Pacific, L.P. ("Linkatel"), a Los Angeles-based competitive
access telecommunications provider. At the time of the acquisition, Linkatel
operated an 80 mile fiber optic telecommunications network covering several
markets from the downtown Los Angeles area to the City of Irvine in Orange
County. The Los Angeles/Orange County area represents one of the largest
telecommunications markets in the United States, with over 2 million addressable
business lines. The Company assumed management of this operation in November
1996. As part of the assets acquired, the Company obtained access to
approximately 250 route miles of right-of-way, of which 80 miles have been
completed, and the Company is currently constructing an additional 110 miles.
The network is currently providing competitive access services with the launch
of switched local and long distance services scheduled for June 1997.
NETWORK ARCHITECTURE
DESIGN
The Company builds or acquires its own fiber optic networks because it
believes that facilities-based full service telecommunications companies whose
networks are directly connected to their customers will have the ability to
respond more quickly to customer needs for capacity and services. Moreover, the
Company believes that facilities-based carriers develop a more knowledgeable,
cooperative relationship with their customers, improving their ability to
provide new services and other telecommunications solutions, which should result
in higher long-term operating margins.
The Company believes that the future telecommunications market will be an
interconnected network of networks. 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, 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 than
traditional CAPs, 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 the
following advantages:
- 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.
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
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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 significant 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 its
deployment. After installing the network backbone, extensions to additional
buildings and expansions to other areas of a market 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.
The Company is also evaluating other alternatives for building connectivity,
including wireless connections, for the "last mile" of transport. 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 is reconfigured for routing to
its ultimate destination. After completion of network construction, the Company
employs maintenance and line crews that are responsible for responding to
outages and routine maintenance of the network.
UNIFORM TECHNOLOGY PLATFORM
The Company is implementing a consistent technology platform based on the
Nortel DMS 500 switch throughout its networks. 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 (i) deploy
features and functions quickly in all of its networks, (ii) expand switch
capacity in a cost effective manner and (iii) lower maintenance costs through
reduced training and spare parts requirements. In addition, the scalability and
capacity of these switches will allow the Company to switch calls from more than
one market, 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 digital access and cross connect systems ("DACCS")
and other ancillary transmission equipment. DACCS provide the ability to
aggregate and disaggregate capacity along the fiber optic network. Using the
DACCS, the capacity of 24 DS-0s can be aggregated to form a DS-1 and, again
through the DACCS, 28 DS-1s can be aggregated to form a DS-3.
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The Company has begun construction of 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 operational switches, distribution and ancillary
equipment. Located in Dallas, Texas, this site, which will be referred to as
NEXTLAB, will operate separate and apart from the Company's operational switches
as both the Company's network operations control center (NOCC) and as a testing
facility. NEXTLAB will provide the Company with a means to test switch software
and service configurations prior to their release on the Company's networks. The
Company believes that this process should: (i) minimize network outages; (ii)
save network operating and training costs; and (iii) improve levels of customer
service.
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 all of these arrangements for Pennsylvania,
Tennessee, Washington, Utah, and Ohio. These key elements include:
INTERCONNECTION. The Company has executed interconnection agreements for
all of its current operating networks: in Nashville and Memphis, Tennessee, with
BellSouth; in Harrisburg, Reading, Lancaster and Allentown, Pennsylvania, with
Bell Atlantic; and in Spokane, Washington, and Salt Lake City and Provo/Orem,
Utah with US West. In each of the Tennessee, Pennsylvania and Washington
markets, the Company began providing switched local dial tone services on July
4, 1996, and the Company was the first CLEC to interconnect with the ILEC for
local traffic. The Company began providing local switched dial tone services in
Salt Lake City on January 1, 1997. The Company has executed interconnection
agreements with Ameritech for Cleveland, Columbus and Akron, Ohio, with
Sprint/Centel for Las Vegas, Nevada. The Company anticipates executing two
interconnection agreements with the ILECs for Los Angeles and the surrounding
cluster of markets in the second quarter of 1997. In addition, the Company
believes that interconnection arrangements between the ILECs and other CLECs or
the Company will be in place in other markets that the Company may enter. The
Company likely will initially "piggy-back" on these other arrangements while
pursuing more favorable long-term arrangements.
The Company's approach to interconnection has been a two-step process. To
accelerate its launch of switched local dial tone services, the Company has
entered into initial interconnection arrangements that allow for the immediate
exchange of local traffic with the ILEC. These arrangements allow the Company to
commence service immediately and then work to optimize its arrangements with the
ILEC. The Company's ILEC agreements are now being re-negotiated under Sections
251 and 252 of the Telecom Act. The actual operating experience gained through
the Company's initial interconnection agreements gives the Company critical
knowledge for negotiating longer term arrangements, and the Company believes
this knowledge provides it with an advantage over other CLECs in modifying these
relationships with the ILEC. In some cases, where agreement on a long-term
arrangement cannot be reached, the Company will pursue binding arbitration
before the state utility commissions as provided under the Telecom Act. Should
it choose to do so, the Company has the right to initiate arbitration in its
four initial operating markets in the first quarter of 1997. There can be no
assurance, however, that the Company will be able to negotiate longer term
relationships on terms and conditions satisfactory to the Company or that the
arbitrations will result in rates, terms and conditions satisfactory to the
Company.
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 arrangements will allow ILEC customers to retain their telephone
numbers when changing local exchange service carriers. In addition, the Company
has been allocated multiple blocks of 10,000 telephone numbers for each of its
Tennessee, Washington, Pennsylvania, Ohio, Utah and Las Vegas 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,
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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.
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
which 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 has entered into an agreement with a national
SS7 service provider that will allow the Company to utilize SS7 signaling in its
current and new markets nationwide.
REGULATORY OVERVIEW
OVERVIEW
The Company's services are subject to varying degrees of federal, state and
local regulation. The FCC generally exercises jurisdiction over the facilities
of, and services offered by, telecommunications common carriers that provide
interstate or international communications. The state regulatory commissions
retain jurisdiction over the same facilities and services to the extent they are
used to provide 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 CAP and other
competitors of the ILECs in the local market.
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
belief as to the anticipated effect of the new requirements, if properly
implemented.
<TABLE>
<CAPTION>
ISSUE DEFINITION ANTICIPATED EFFECT
- --------------------- -------------------------------------------- --------------------------------------------
<S> <C> <C>
Interconnection Efficient network interconnection to Allows competitive telecommunications
transfer calls back and forth between ILECs provider to service and terminate calls to
and competitive networks (including 911, 0+, customers not directly connected to its
directory assistance, etc.) networks
Local Loop Allows competitors to selectively gain Reduces the capital and operating costs of a
Unbundling access at cost-based rates to ILEC wires competitive telecommunications provider to
from central offices to customer premises serve customers not directly connected to
its networks
Reciprocal Mandates reciprocal compensation for local Improves the competitive telecommunications
Compensation traffic exchange between ILECs and provider's margins for local service
competitors
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
ISSUE DEFINITION ANTICIPATED EFFECT
- --------------------- -------------------------------------------- --------------------------------------------
<S> <C> <C>
Number Portability Allows customers to change local carriers Allows customers to switch to competitive
without changing numbers; true portability telecommunications provider's local service
allows incoming calls to be routed directly without changing phone numbers
to a competitor. Interim 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 telephone numbers Allows competitive telecommunications
Numbers to competitive telecommunications provider's providers to provide telephone numbers to
customers new customers on the same 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 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 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 their
new competitors.
The FCC has significant responsibility in the manner in which the Telecom
Act will be implemented. The details of the rules adopted by the FCC
implementing the Telecom Act's requirements 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 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.
The state Public Utility Commissions ("PUCs") also have significant
responsibility in implementing the Telecom Act. Specifically, the states have
authority to establish interconnection pricing, including unbundled loop
charges, reciprocal compensation and wholesale pricing. The states are also
charged under the Telecom Act with overseeing the arbitration process for
resolving interconnection negotiation disputes between CLECs and the ILECs.
In addition, the Telecom Act provides that ILECs that are subsidiaries of
regional bell operating companies ("RBOCs") cannot combine in-region, long
distance services across local access and transport areas ("LATAs") with the
local services they offer until they have demonstrated that (i) they
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have entered into an approved interconnection agreement with a facilities-based
CLEC or that no such CLEC has requested interconnection as of a statutorily
determined deadline, (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 and (iii) the FCC has determined that
in-region, inter-LATA approval is consistent with the public interest,
convenience and necessity.
FEDERAL REGULATION
The FCC was granted authority to eliminate tariff and reporting requirements
for non-dominant carriers such as the Company. Acting under that authority, the
FCC has eliminated tariff filing requirements for such carriers providing
interstate long distance services. On February 13, 1997, the U.S. Court of
Appeals for the District of Columbia granted motions for stay of the FCC
detariffing order pending judicial review of that order. The result of this stay
is that carriers must continue to file tariffs for interstate long distance
services. Regulatory compliance measures remain in place for international
traffic and for access services. In addition, the Telecom Act now requires that
ILECs provide CLECs 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.
The FCC has taken two actions related to the assignment of telephone
numbers, first in July 1995 mandating that over the course of the next year
responsibility for administering and assigning local telephone numbers be
transferred from the RBOCs and a few other ILECs to a neutral entity, and second
in July 1996 adopting a regulatory structure under which a wide range of number
portability issues would be resolved.
On August 8, 1996, the FCC issued an order containing rules providing
guidance to the ILECs, CLECs, long distance companies and state PUCs regarding
several provisions of the Telecom Act. The rules include, among other things,
FCC guidance on: (1) discounts for end-to-end resale of ILEC local exchange
services (which the FCC has suggested should be in the range of 17%-25%); (2)
availability of unbundled local loops and other unbundled ILEC network elements;
(3) the use of Total Element Long Run Incremental Costs ("TELRIC") in the
pricing of these unbundled network elements; (4) average default proxy prices
for unbundled local loops in each state; (5) mutual compensation proxy rates for
termination of ILEC/CLEC local calls; (6) an access charge transition plan that:
(a) leaves access charges in place with respect to situations involving resale
of ILEC local exchange services; (b) leaves access charges in place with respect
to situations involving use of ILEC unbundled switching to provide local
exchange access services except for 25% of the transport interconnection charge
("TIC"); and (c) permits avoidance of access charges only when the ILEC switch
is not utilized; and (7) the ability of CLECs and other interconnectors to opt
into portions of interconnection agreements negotiated by the ILECs with other
parties on a most favored nation (or a "pick and choose") basis.
In a combined Report and Order and Notice of Proposed Rulemaking released on
December 24, 1996, the FCC made changes and proposed further changes in the
interstate access charge structure. In the Report and Order, the FCC removed
restrictions on ILECs' ability to lower access prices and relaxed the regulation
of new switched access services in those markets where there are other providers
of access services. If this increased pricing flexibility is not effectively
monitored by federal regulators, it could have a material adverse effect on the
Company's ability to compete in providing interstate access services. In the
Notice of Proposed Rulemaking, the FCC proposed rules to reform the interstate
access charge rate structure. The FCC also proposed to bring interstate access
rate levels more in line with costs either by granting ILECs levels of increased
pricing flexibility upon demonstrations of increased competition (or potential
competition) in relevant markets or by mandating lower rates regardless of the
level of competition (or through some combination of the two approaches).
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In its Recommended Decision that was issued on November 8, 1996 (the
"Recommended Decision"), the Federal-State Joint Board on Universal Service
consisting of the FCC, state PUC commissioners and state consumer advocates (the
"Joint Board") recommended that the FCC establish a federal telecommunications
subsidy regime that would probably significantly expand the current subsidy
program. For example, the Recommended Decision proposes a new subsidy regime for
services provided to qualifying schools and libraries. The Joint Board
recommended the adoption of a cap of $2.25 billion per year for the program. The
Joint Board also recommended the expansion of federal subsidies to low-income
consumers of telecommunications services. In addition, the Telecom Act requires
the FCC to adopt a subsidy scheme for the provision of telecommunications
services to rural health care providers. The Joint Board recommended that the
FCC require all providers of interstate telecommunications services, including
in all likelihood the Company, to pay for these and other subsidy programs based
on their gross revenues from the sale of telecommunications services minus
payments made to other telecommunications carriers. The FCC must establish final
universal service rules by May 8, 1997. The Company cannot at this time predict
the level of its mandatory contribution, but the Company believes that it will
likely be a significant expenditure if the FCC adopts the Joint Board
recommendations.
The Company anticipates that the FCC will initiate a number of additional
proceedings, of its own volition and as a result of requests from CLECs and
others, as a result of the Telecom Act. Such proceedings will further define and
construe the Telecom Act's terms.
COURT OF APPEALS DECISION
Various parties, including ILECs and state PUCs, filed appeals of the FCC's
August 8, 1996 order in various U.S. Courts of Appeal, and several parties
petitioned the FCC and the courts to stay the effectiveness of the FCC's rules
included in the FCC's order, pending a ruling on the appeals. Many of the
appeals were consolidated and transferred to the U.S. Court of Appeals for the
Eight Circuit. On October 15, 1996, the Eighth Circuit issued a partial stay of
the FCC's rules until the full appeal on the FCC's rules could be heard. The
stay was limited to two areas of the FCC's rules: (1) the pricing rules other
than those dealing with commercial mobile radio service providers; and (2) the
CLECs' ability to utilize a most favored nation procedure to select favorable
provisions from other interconnectors' agreements.
The Company believes that the stay will not have a material adverse effect
on it, because the Company already has interconnection agreements in place, or
expects to have such agreements in place after state PUC arbitration
proceedings, under the provisions of the FCC's order and the Telecom Act which
have not been stayed by the Court. The stay does not delay the implementation of
the Telecom Act by the parties and by the state PUCs, but rather suspends the
guidance on pricing and most favored nation procedures that the FCC sought to
provide to the parties and the state PUCs.
STATE REGULATION
The Company expects that as it offers local exchange and other intrastate
services in an increasing number of states, it will be subject to direct state
PUC regulation in most if not all such states. In all states where certification
as a common carrier is currently required, the Company's operating subsidiaries
are certificated.
In most states, the Company is required to file tariffs or price lists
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
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<PAGE>
promote universal service, protect public safety and welfare, maintain quality
of service and safeguard the rights of consumers. The Company anticipates that
state PUCs will play a major role in determining the specific charges for local
network interconnection. In some states, those charges are being determined by
generic cost proceedings and in other states they are being established through
arbitration proceedings.
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 currently impose
fees will not seek to impose such fees in the future, 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.
If any of the Company's existing franchise or license agreements were
terminated prior to its expiration date and the Company were 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 market 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 competes 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.
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<PAGE>
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 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 entry barriers must be
lowered in the areas served by ILECs that are subsidiaries of RBOCs before such
ILECs are permitted to provide in-region, interLATA services. When ILECs that
are RBOC subsidiaries are permitted to provide such services, they will be in a
position to offer single source service. ILECs that are not RBOC subsidiaries
may offer single source service presently.
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. In addition, 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 service offerings,
each is subject to competition. For example, there are several competitors that
offer IVR services, such as Call Interactive, which the Company believes focuses
its sales efforts on large volume IVR service users. Another competitor,
Telemedia, which is owned by Sprint, also offers significant call volume
capacity. With respect to Xpress, the Company's virtual communications center,
there are numerous competitors with product offerings that include some or all
of the services offered by Xpress. Similarly, the Company's Intermind offering
faces competition from the services and products offered by such companies and
Netscape, Marimba, Backweb and others.
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, with Nortel for telecommunications switches, and
with 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 decisions are made, purchase orders for the appropriate
fiber and selected equipment types are placed under the general purchase
agreements.
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EMPLOYEES
As of December 31, 1996, the Company employed 568 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.
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 the distinctive floating X and
related marks as protected trademarks under federal law. These filings all are
pending. The Company has no assurance that they will be granted.
CAUTIONARY STATEMENTS
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), the Company is hereby filing
cautionary statements identifying important factors that could cause the
Company's actual results to differ materially from those projected in any
forward-looking statements of the Company made by or on behalf of the Company,
whether oral or written. These forward-looking statements can be identified by
the use of forward-looking terminology such as "believes," "expects," "may,"
"will," "should," or "anticipates" or the negative thereof or other variations
thereon or comparable terminology, or by discussions of strategy that involve
risks and uncertainties. The Company wishes to ensure that any forward-looking
statements are accompanied by meaningful cautionary statements in order to
maximize to the fullest extent possible the protections of the safe harbor
established in the Reform Act. Accordingly, any such statements are qualified in
their entirety by reference to, and are accompanied by, the following important
factors, among others, that could cause the Company's actual results to differ
materially from those projected in forward-looking statements of the Company.
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 net losses of $0.3 million for the period
from September 16, 1994 through December 31, 1994, $12.7 million for the year
ended December 31, 1995 and $71.1 million for the year ended December 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 its debt and to pay cash dividends on its 14% Senior Exchangeable
Redeemable Preferred Stock, par value $.01 per share (the "Preferred Shares").
The Company was formed in September 1994. A significant portion of the
Company's revenue for the years ended December 31, 1995 and 1996 was derived
from the operations of the Company's IVR 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. Although the Company
generates revenues from its current operations, the Company has only recently
commenced operations as a single source service
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provider of telecommunications services in eight markets and will not commence
such operations in 14 additional markets until later in 1997. Given the
Company's limited operating history, there can be no assurance that it will be
able to compete successfully in the telecommunications business and to generate
sufficient cash flow to service its debt and to pay cash dividends on the
Preferred Shares.
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 anticipated capital expenditures and operating losses (excluding
acquisitions) for 1997 will approximate $200 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 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 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 its debt and to pay cash
dividends on the Preferred Shares. 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.
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, the introduction of other new
service offerings and the development and implementation of a comprehensive
information technology platform. The debt service requirements of any additional
indebtedness could make it more difficult for the Company to service its debt
and to pay cash dividends on the Preferred Shares.
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.
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. In addition, the Company has experienced rapid growth
since its inception, and the Company believes that sustained growth places a
strain on operational, human and financial resources. In order to manage its
growth, NEXTLINK must continue to improve its operating and administrative
systems including the continued development of effective systems relating to
ordering, provisioning and billing for telecommunications services. NEXTLINK
must also continue to attract and retain qualified managerial, professional and
technical personnel. As a result, there can be no assurance that the Company
will be able to implement and manage successfully its growth strategy. The
Company's growth strategy also involves the following risks:
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QUALIFIED PERSONNEL. NEXTLINK believes that a critical component for its
success will be the attraction and retention of qualified managerial,
professional and technical personnel. During the last six months the Company has
experienced significant competition in the attraction and retention of personnel
that possess the skill sets that the Company is seeking. Although the Company
has been successful in attracting and retaining qualified personnel, there can
be no assurance that NEXTLINK will not experience a shortage of qualified
personnel in the future.
SWITCH AND EQUIPMENT INSTALLATION. An essential element of the Company's
current strategy is the provision of switched local dial tone service. To
provide dial tone service, the Company has installed eight Nortel DMS 500
switches and intends to install an additional two Nortel DMS 500 switches during
the second quarter of 1997. There can be no assurance, however, that the
installation of the required switches, fiber optic cable and associated
electronics will be completed on time or that, during the testing of these
switches and related equipment, the Company will not experience technological
problems that cannot be resolved. The failure of the Company to have its
switches and related equipment 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 has executed agreements for the
interconnection of its networks with the networks of the ILEC covering each
market in which NEXTLINK either has or is constructing a network, with the
exception of those markets in California. NEXTLINK may be required to negotiate
new interconnection agreements as it enters new markets in the future. There can
be no assurance that the Company will successfully negotiate such other
agreements for interconnection with the ILEC or renewals of existing
interconnection agreements. The failure to negotiate required 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.
ORDERING, PROVISIONING AND BILLING. The Company has developed processes and
procedures and is working with external vendors in the implementation of
customer orders for services, the provisioning, installation and delivery of
such services and monthly billing for those services. In connection with its
development of a comprehensive information technology platform, the Company is
developing automated internal systems for processing customer orders,
provisioning and billing. The failure to develop effective internal processes
and systems for these service elements or the failure of the Company's current
vendors to deliver effectively ordering, provisioning and billing services could
have a material adverse effect upon the Company's ability to achieve its growth
strategy.
PRODUCTS AND SERVICES. The Company expects to continue to enhance its
systems in order to offer its customers switched local dial tone 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. 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.
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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 and fiber capacity 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 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.
COMPETITION
In each of the markets served by the Company's networks, the Company
competes principally with 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, with respect to
competitive access services (as opposed to dial tone local exchange services)
the FCC recently proposed a rule that would provide for increased ILEC pricing
flexibility and deregulation for such access services either automatically or
after certain competitive levels are reached. If the ILECs are allowed by
regulators to offer discounts to large customers through contract tariffs,
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 access services 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 long distance carriers
seeking to enter, reenter or expand entry into the local exchange market place
such as AT&T Corp. ("AT&T"), MCI Communications Corporation ("MCI"), Sprint
Corporation ("Sprint") and from other CLECs, CAPs, 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.
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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. Further, the
FCC has determined that non-dominant carriers, such as the Company and its
subsidiaries, are not required to file interstate tariffs for domestic long
distance service on an ongoing basis. On February 13, 1997, the U.S. Court of
Appeals for the District of Columbia granted motions for stay of the FCC
detariffing order pending judicial review of that order. The result of this stay
is that carriers must continue to file tariffs for interstate long distance
services. The FCC requires the Company and its subsidiaries to file interstate
tariffs on an ongoing basis for international traffic and access services. The
Company's subsidiaries that provide or will provide intrastate services are also
generally subject to certification and tariff or price list 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 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.
The Joint Board in its Recommended Decision recommended that the FCC
establish a federal telecommunications subsidy regime for schools and libraries
that would probably significantly expand the current subsidy program. The Joint
Board recommended the adoption of a cap of $2.25 billion per year for the
program. The Joint Board also recommended the expansion of federal subsidies to
low-income consumers of telecommunications services. In addition, the Telecom
Act requires the FCC to adopt a subsidy scheme for the provision of
telecommunications services to rural health care providers. The Joint Board
recommended that the FCC require all providers of interstate telecommunications
services, including in all likelihood the Company, to pay for these and other
subsidy programs based on their gross revenues from the sale of
telecommunications services minus payments made to other telecommunications
carriers. The FCC must establish final universal service rules by May 8, 1997.
The Company cannot at this time predict the level of its mandatory contribution,
but the Company believes that it will likely be a significant expenditure if the
FCC adopts the Joint Board recommendations.
DEPENDENCE ON LARGE CUSTOMERS
To date the Company has been dependent on certain large customers of its IVR
enhanced communication service offerings, the loss of one or more of which could
have a material adverse effect on the Company. The Company's 10 largest
customers accounted for approximately 66% and 51% of the Company's revenues in
1995 and 1996, respectively. 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, which there can be no assurance the
Company will be able to do.
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.
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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. Most of
the executive officers of the Company, including the presidents of its operating
subsidiaries, do not have employment agreements. Although the Company has been
successful in attracting and retaining qualified personnel, there can be no
assurance that NEXTLINK will not experience a shortage of qualified personnel in
the future.
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 sales of NEXTLINK's IVR enhanced communications
services, 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, primarily 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.
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 CLEC such as the Company to connect its
network to the ILECs central offices. Physical collocation occurs when a CLEC
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 CLEC to connect its network to the ILEC's central offices on
comparable terms, even though the CLEC'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
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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).
DS-0, DS-1, DS-3--The standard circuit capacity classifications. 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 digital
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 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.
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 RBOCs 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.
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.
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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.
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.
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ITEM 2. DESCRIPTION OF PROPERTIES
The Company's local exchange service providers own or lease, in their
respective operating territories, telephone property which includes: fiber optic
backbone and distribution network; central office switching equipment;
connecting lines between customers' premises and the central offices; and
customer premise equipment.
The fiber optic backbone and distribution network and connecting lines
include aerial and underground cable, conduit, and poles and wires. These
facilities are located on public streets and highways or on privately owned
land. The Company has permission to use these lands pursuant to consent or
lease, permit, easement, or other agreement. The central office switching
equipment includes electronic switches and peripheral equipment.
The Company and its subsidiaries lease facilities for their administrative
and sales offices, network nodes and warehouse space. The various leases expire
on dates ranging from July 1997 to January 2016. Most have renewal options.
Additional office space and equipment rooms will be leased as the Company's
operations and networks are expanded and as new networks are constructed. The
Company's headquarters are located in leased office space at 155 108th Avenue
NE, 8th Floor, Bellevue, WA.
NEXTLINK Capital owns no property.
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently party to any legal proceedings, other than
regulatory and other proceedings that are in the normal course of its business.
NEXTLINK Capital is not currently party to any legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter
ended December 31, 1995.
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
MARKET INFORMATION
There is no public trading market for the Company's common equity. In
addition, there is no public trading market for NEXTLINK Capital's common
equity. As of March 11, 1997, there were 12 holders of record of the Company's
Class B Common Stock, par value $.01 per share and no holders of record of the
Company's Class A Common Stock, par value $.01 per share. The Company is the
sole holder of record of NEXTLINK Capital's Common Stock, par value $.01 per
share.
DIVIDENDS
Both the Company and NEXTLINK Capital have never declared any cash dividends
on any of their respective equity securities. Covenants in the indenture
pursuant to which the Company's and NEXTLINK Capital's 12 1/2% Senior Notes due
April 15, 2006 restrict the ability of the Company to pay cash dividends on its
capital stock.
SALES OF UNREGISTERED SECURITIES
Effective January 1, 1996, the Company issued 651,933 Class A Units to U.S.
Network Corporation in connection with the Company's acquisition of an existing
fiber optic network and switching facilities in
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the downtown business centers of Cleveland, Columbus and Akron, Ohio. Such Class
A Units were issued in reliance upon an exemption from registration contained in
Section 4(2) of the Securities Act of 1933, as amended (the "Act").
Effective January 1, 1996, the Company merged four of its five operating
subsidiaries with newly formed entities owned by the Company (the
"Recapitalization"). As a result of these mergers, the entities and individuals
holding minority interests in the subsidiaries exchanged these interests for
3,841,207 Class A Units of the Company (representing an approximate 5.9%
ownership interest in the Company) which were valued at approximately $5.6
million. NEXTLINK Washington, L.L.C. did not participate in the merger. The
transaction has been accounted for as a purchase of minority interests.
Accordingly, the $2.9 million excess of the purchase price over the book value
of the interests acquired was recorded as goodwill. In addition to the exchange
of equity interests, the Company exchanged options to acquire equity interests
in the subsidiaries for options to acquire Class B Units in the Company. In
connection with this transaction, the Company issued 1,953,656 options with
exercise prices of $0.01 and four-year vesting schedules. These options had
substantially the same economic values and vesting schedules as the subsidiary
options which were exchanged. Such securities were issued in reliance upon an
exemption from registration contained in Section 4(2) of the Act.
On December 13, 1996, the Company issued 900,000 Class A Units to the prior
owners of the ITC Companies ("ITC") in connection with the acquisition of ITC by
the Company. ITC is a switched-based long distance reseller based in Salt Lake
City, Utah with operations in Utah, Colorado, Arizona, New Mexico and Idaho.
Such Class A Units were issued in reliance upon an exemption from registration
contained in Section 4(2) of the Act.
At various times throughout 1996, the Company issued options under the EOP
to its employees to purchase an aggregate of 1,031,002 Class B Units. The
exercise prices of these options range from $0.01 (with respect to options to
purchase 726,674 Class B Units) to $0.44 (with respect to options to purchase
724,874 Class B Units) to $3.50 (with respect to options to purchase 158,500
Class B Units). The options granted vest in equal installments over four years
(with respect to options to purchase 220,828 Class B Units) or five years (with
respect to options to purchase 810,174 Class B Units). Such options were issued
in reliance upon an exemption from registration contained in Section 4(2) of the
Act.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Since its inception in 1994, the Company has executed a strategy of
constructing and acquiring fiber optic networks and acquiring related
telecommunications businesses. Over this period, the Company has begun
construction of, acquired, or entered into agreements to acquire
telecommunications networks in 22 markets in seven states.
The Company commenced the offering of switched local dial tone
telecommunications services in seven of its markets on July 4, 1996 and in an
eighth market on January 1, 1997. The Company expects to commence the offering
of switched local dial tone and long distance services in its remaining 14
markets later in 1997.
In addition, the Company offers enhanced communications services including:
(i) interactive voice response services, which provide an interface between the
Company's clients and their customers for a variety of applications; (ii)
Xpress, the Company's virtual communications center that allows mobile
professionals and workgroups to access a suite of commonly used communications
services from any telephone in the public switched telephone network; and (iii)
the Intermind Communicator, an interactive communications tool for the World
Wide Web and intranet applications.
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The Company plans to acquire and build networks in new areas, expand its
current networks, and also explore the acquisition or licensing of additional
enhanced communications services and other telecommunications service 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.
The development of the Company's businesses and the construction,
acquisition and expansion of its systems require significant expenditures, a
substantial portion of which is incurred before the realization of revenues.
These expenditures, together with the associated early operating expenses,
result in negative cash flow until an adequate customer base is established.
However, as the customer base grows, the Company expects that incremental
revenues can be generated with decreasing incremental operating expenses, which
may provide positive contributions to cash flow. 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.
Prior to January 31, 1997, the Company was a limited liability company that
was classified and taxed as a partnership for federal and state income tax
purposes. On January 31, 1997, the Company was merged with and into NEXTLINK
Communications, Inc., a Washington corporation, and will be subject to federal
and state income tax. See Note 12 to Consolidated Financial Statements.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 VS. YEAR ENDED DECEMBER 31, 1995
Revenue increased 240% to $25.7 million for 1996, compared to $7.6 million
in 1995. The increase was due to recording a full year of revenue during 1996
for acquisitions completed during 1995 as well as growth in dedicated and
enhanced communications services revenues. The 1996 revenues included $15.3
million derived from enhanced communications services, $6.4 million from
competitive access and dedicated line services, $3.8 million from local and long
distance resale services and $0.2 million from switched local dial tone and
other services. This compares to $3.4 million derived from enhanced
communications services, $3.2 million from competitive access and dedicated line
services and $1.0 million from local exchange resale services during 1995. The
Company's interactive voice response subsidiary, which was acquired in September
1995, provided 52% of the Company's revenues during 1996, including one customer
who accounted for 23% of the Company's total revenues. The revenues generated by
this subsidiary, while generally increasing over time, have tended to fluctuate
on a quarter to quarter basis as a substantial portion of the revenues are
derived from a small number of customers and the revenues are generally
nonrecurring in nature. The Company began offering switched local dial tone
services in seven of its markets in July 1996. Revenues from the provision of
local dial tone services, while not material during 1996, are expected to
represent an increasing component of total revenues in future periods.
Operating expenses consist of costs directly related to providing
facilities-based network and enhanced communications services and include
salaries and benefits, right-of-way fees and local and long distance service
costs. Operating expenses increased 279% due to the effect of acquisitions and
the Company's continued addition of employees as well as other related costs in
order to expand the Company's switched local dial tone service businesses in its
existing and planned markets. In addition, the Company experienced increased
network costs related to the provision of local and long distance services.
SG&A includes salaries and benefits, sales and marketing, consulting and
legal fees, property taxes, facilities expense and billing and systems
development costs. Selling, general and administrative
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expenses ("SG&A") increased 228% due to acquisitions completed during 1995, the
Company's continued addition of employees as well as other related costs in
order to expand the Company's switched local dial tone service businesses in its
existing and planned markets and to a lesser degree due to activities associated
with the marketing of the Company's enhanced communications service offerings.
Deferred compensation expenses are recorded in connection with the Company's
Equity Option Plan. The option grants under this plan are considered
compensatory and are accounted for similar to stock appreciation rights. The
Company recorded noncash charges of $9.9 million and $0.4 million during 1996
and 1995, respectively, resulting from an increase in value of the options as
well as the grant of additional options. See Note 10 to Consolidated Financial
Statements.
Depreciation expense increased during 1996 primarily due to placement in
service of additional telecommunications network assets, including switches,
fiber optic cable, network electronics and related equipment as well as due to
acquisitions completed during 1995 and early 1996. Amortization of intangible
assets increased as a result of acquisitions completed during 1995 and 1996.
Interest expense during 1996 (net of $0.9 million capitalized) primarily
reflects the interest expense associated with the Company's and NEXTLINK
Capital's 12 1/2% Senior Notes due April 15, 2006 (the "Senior Notes"). See
"Liquidity and Capital Resources." Pursuant to Statement of Financial Accounting
Standards No. 34, the Company capitalizes a portion of its interest costs as
part of the construction cost of its communications networks. Interest income
results from certain securities that have been pledged as collateral for
interest payments on the Senior Notes and investment of excess cash.
PERIOD FROM INCEPTION (SEPTEMBER 16, 1994) TO DECEMBER 31, 1994 VS. DECEMBER
31, 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, operating expenses
increased from $106,000 in 1994 to $6.6 million in 1995. This increase is due to
the acquisitions described above and expansion of the business.
SG&A increased from $232,000 in 1994 to $9.6 million in 1995. 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.
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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.
LIQUIDITY AND CAPITAL RESOURCES
The competitive local telecommunications service business is a capital
intensive business. The Company's existing operations have required and will
continue to require substantial capital investment for the acquisition and
installation of fiber, electronics and related equipment in order to provide
switched services in the Company's networks and the funding of operating losses
during the start-up phase of each market. In addition, the Company's strategic
plan calls for expansion into additional market areas. Such expansion will
require significant additional capital for: potential acquisitions of businesses
or assets; design, development and construction of new networks; and the funding
of operating losses during the start-up phase of each market. During 1996, the
Company used $40.6 million in cash for operating activities, compared to $9.2
million in 1995. The increase was primarily due to a substantial increase in the
Company's activities associated with the development and initiation of
competitive switched local dial tone services and to a lesser degree due to the
activities associated with the marketing of the Company's enhanced
communications service offerings. During 1996, the Company also invested an
additional $72.0 million in property and equipment, acquisitions of
telecommunications assets and equity investments in telecommunications
businesses. During 1995, the Company invested $35.4 million in capital equipment
and acquisitions of telecommunications assets and businesses.
On February 4, 1997 the Company completed the acquisition of substantially
all of the assets of Linkatel, a Los Angeles-based competitive access
telecommunications provider. At the time of acquisition, Linkatel operated an 80
mile fiber optic telecommunications network covering several markets in the
Orange and Los Angeles county areas. The total purchase price of $42.5 million
consisted of a cash payment of $36.1 million (including the release of $6.0
million which was deposited into escrow during 1996) plus the payoff of debt of
$5.6 million and the assumption of net liabilities totaling $0.8 million.
In December 1996, the Company completed the acquisition of ITC, a
switched-based long distance reseller based in Salt Lake City, Utah with
operations in Utah, Colorado, Arizona, New Mexico and Idaho. ITC has
approximately 9,000 long distance customers and recorded 1996 revenues of $11.4
million. The purchase price for ITC consisted of a cash payment of $4.0 million
(of which $2.6 million was placed into escrow to be paid during 1998) plus the
issuance of 900,000 Class A Units of the Company, which were valued at $5.50 per
unit. The Company has granted the seller an option to require the Company to
repurchase such units at $11.50 per unit beginning three years from the date of
closing of the acquisition in the event that the Company has not completed a
public offering of its equity securities prior to that time.
In January 1997, the Company obtained rights-of-way to expand its existing
Salt Lake City network into Provo and Orem, Utah. In December 1996, the Company
reached an agreement in principle to acquire an existing fiber optic network in
downtown Philadelphia in order to extend its existing network in Pennsylvania,
which acquisition is anticipated to be consummated during the second quarter of
1997.
Since inception, the Company has funded its expenditures with approximately
$55.0 million of cash equity investments from two entities that are controlled
by Mr. Craig O. McCaw and with the proceeds from the issuance of long-term debt
and redeemable preferred stock. On April 25, 1996, the Company raised net
proceeds of approximately $190 million through the issuance of $350 million in
Senior Notes. The Company used $117.7 million of the gross 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 used an
additional $32.2 million to repay certain advances and accrued interest from
Eagle River. In addition, the Company incurred costs of $9.8 million in
connection with the financing. Interest payments on the Senior Notes are due
semi-annually. On January 31, 1997, the Company
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completed the sale of $285 million of Preferred Shares which after deducting
issuance costs, resulted in net proceeds to the Company of approximately $274
million. The Preferred Shares will accrue dividends at the rate of 14% per
annum. Before February 1, 2002, dividends may, at the option of the Company, be
paid in cash or by issuing additional Preferred Shares with an aggregate
liquidation preference equal to the amount of such dividends. After February 1,
2002, dividends must be paid in cash. Since inception, the Company also has
issued $15.5 million of Class A Units primarily for the acquisition of certain
telecommunications assets and the stock of ITC, which Units were converted to
shares of Class B Common Stock of the Company on January 31, 1997.
The Company will continue to use the remaining proceeds from the sale of the
Senior Notes and the Preferred Shares for expenditures relating to the
construction, acquisition and operation of telecommunications networks and
service providers and the offering of telecommunications services in those areas
where the Company currently operates or intends to operate. Expenditures for the
construction and operation of networks include (i) the purchase and installation
of switches and related electronics in existing networks and in networks to be
constructed or acquired in new or adjacent markets, (ii) the purchase and
installation of fiber optic cable and electronics to expand existing networks
and develop new networks, including the connection of new buildings, (iii) the
development of its comprehensive information technology platform and (iv) the
funding of operating losses and working capital. The Company may also acquire or
invest in businesses that consist of existing networks or companies engaged in
businesses similar to those engaged in by the Company and its subsidiaries or
other complementary businesses.
As of December 31, 1996, the Company had unrestricted cash and investments
of $124.5 million. On a pro forma basis, after giving effect to the Linkatel
acquisition and the sale of the Preferred Shares Offering, the Company would
have had $363.5 million of unrestricted cash and investments. The Company
estimates that the cash required to fund its anticipated capital expenditures
and operating losses (excluding acquisitions) for 1997 will approximate $200
million.
The Company's planned growth subsequent to 1997 will require substantial
additional capital to fund capital expenditures, acquisition opportunities,
working capital and any future operating losses. The Company will 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 to pursue such opportunities. The
Company expects to meet its additional capital needs with the proceeds from
sales or issuance of equity securities, credit facilities and other borrowings,
sales of additional debt 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 Senior Notes and to pay cash dividends on the Preferred
Shares. 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.
In addition, the Company's operating flexibility with respect to certain
business matters is, and will continue to be, limited by covenants associated
with the Senior Notes. Among other things, these covenants limit the ability of
the Company and its subsidiaries to incur additional indebtedness, create liens
upon assets, apply the proceeds from the disposal of assets, make dividend
payments and other distributions on capital stock and redeem capital stock. In
addition, the terms of the Preferred Shares contain certain covenants that may
limit the Company's operating flexibility with respect to the incurrence of
indebtedness and issuance of additional preferred shares. There can be no
assurance that such covenants will not adversely affect the Company's ability to
finance its future operations or capital needs or to engage in other business
activities that may be in the interest of the Company. The Company was in
compliance with all covenants associated with the Senior Notes as of December
31, 1996.
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EFFECTS OF INFLATION
Inflation has not had a significant effect on Company operations. However,
there can be no assurance that inflation will not have a material effect on the
Company's operations in the future.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company are filed under this
Item, beginning on page F-1 of this Report, and of NEXTLINK Capital are filed
under this Item, beginning on Page F-19 of this Report.
Selected quarterly financial data required under this item is included in
Note 11 to the Consolidated Financial Statements.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
MANAGEMENT
The following table sets forth the names, ages and positions of the
executive officers and members of the Company's board of directors. Their
respective backgrounds are described following the table.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Craig O. McCaw....................................... 47 Chief Executive Officer and Director
James F. Voelker(1).................................. 46 President and Director
Jan Loichle.......................................... 48 Vice President, Chief of Local Exchange Operations
Kathleen H. Iskra.................................... 40 Vice President, Chief Financial Officer and Treasurer
R. Bruce Easter, Jr.................................. 39 Vice President, General Counsel and Secretary
Charles P. Daniels................................... 40 Vice President, Chief Marketing Officer
Gordon Sileo......................................... 46 Vice President, Chief Information Officer
J. Scott Bonney...................................... 40 Vice President, Regulatory and External Affairs
Dennis Weibling(2)................................... 45 Director
Scot Jarvis(1)....................................... 35 Director
C. James Judson(2)................................... 52 Director
William A. Hoglund(1)................................ 42 Director
</TABLE>
- --------------------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
The following persons are the presidents of the Company's operating
subsidiaries:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Hugh C. Cathey....................................... 46 President of NEXTLINK Ohio, L.L.C.
Greg Green........................................... 33 President of NEXTLINK Washington, L.L.C.
Don Hillenmeyer...................................... 50 President of NEXTLINK Tennessee, L.L.C.
Robert Kingery....................................... 42 President of NEXTLINK Interactive, L.L.C.
Dwayne Nielson....................................... 41 President of NEXTLINK Utah, L.L.C.
Gary Rawding......................................... 45 President of NEXTLINK Pennsylvania, L.P.
Donald W. Sessamen................................... 64 President of NEXTLINK California, L.L.C.
</TABLE>
All of the officers identified above serve at the discretion of the Board of
Directors of the Company. There are no family relationships between any person
identified above. The following are brief biographies of persons identified
above.
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 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
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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 company vision and guiding overall operations. He
is recognized as one of the early entrepreneurs in the business of building and
delivering competitive local exchange service. Mr. Voelker's career in
telecommunications spans almost two decades and includes experience in very
different segments of the industry in a variety of executive positions. From
1981 to 1984 he served as vice president of sales, marketing and customer
service for Lexitel Corporation, the forerunner of Allnet Communications. Mr.
Voelker co-founded Digital Signal Inc. and served as chief operating officer and
chief executive officer from 1985 through the company's sale to SP Telecom in
1990. Digital Signal operated a nation wide fiber optic network supplying
capacity, engineering, provisioning and operational support to over one hundred
interexchange carriers. In the CAP arena, Mr. Voelker became vice chairman of
City Signal Inc. in 1992, which constructed and operated networks in six
markets. Subsequently, he served as its chief executive officer after the
company merged with its sister company Teledial America to form U S Signal.
Based in Grand Rapids, Michigan, U S Signal was one of the first fully certified
CLECs in the country. Mr. Voelker has served as vice chairman of ALTS, the
industry Association of Local Telephone Service providers and as a director of
Phoenix Network Inc., a publicly held long distance company. Mr. Voelker is also
a member of the Compensation Committee of the Board of Directors.
JAN LOICHLE has been Vice President, Chief of Local Exchange Operations of
NEXTLINK since October 1996. Prior to that, Ms. Loichle was the President of
NEXTLINK Solutions (the virtual communications center) from 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.
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.
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
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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 has been Vice President, Chief Marketing Officer of
NEXTLINK since 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 responsible for evaluating and implementing
new technologies that either reduced costs or generated new revenue.
GORDON SILEO has been Vice President, Chief Information Officer of NEXTLINK
since 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.
J. SCOTT BONNEY has been Vice President, 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, from 1988 through November 1992, Mr. Bonney served as Director of
Regulatory Affairs for Teleport Communications Group, one of the original
competitors for local phone service.
DENNIS WEIBLING has been a director of the Company since January 1997 and
had been Executive Vice President of NEXTLINK since September 1994. Mr. Weibling
is also President of Eagle River, Inc., since October 1993. Mr. Weibling is a
director and member of Nextel Communications, Inc.'s board, operations, audit
and compensation committees. Nextel is a leading provider of integrated wireless
communications services for teams of mobile workers. Mr. Weibling serves on the
board and executive committee of Teledesic Corporation, a satellite
telecommunications company backed by Mr. McCaw and Microsoft founder Mr. William
Gates. Mr. Weibling is a director of Cable Plus, one of the leading providers of
private cable television and telephony service to residential apartment
complexes. A licensed certified public accountant in Washington, Mr. Weibling is
a member of the American Society of Certified Public Accountants and the
Washington Society of Certified Public Accountants. In addition, Mr. Weibling is
a licensed attorney in Ohio and a member of the American Bar Association and
Ohio State Bar Association. Mr. Weibling is also a member of the Audit Committee
of the Board of Directors.
SCOT JARVIS has been a director of the Company since January 1997 and had
been Executive Vice President of NEXTLINK since September 1994, was a Vice
President of Eagle River, Inc. from October 1994 through April 1996. Mr. Jarvis
is the co-founder and since March 1997 has been a member of Cedar Grove
Partners, LLC. Prior to that, Mr. Jarvis 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 from 1985 through 1994. 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: NEXTEL Communications, Inc.,
PriCellular Corporation, 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. Mr. Jarvis is also a member of the
Compensation Committee of the Board of Directors.
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<PAGE>
C. JAMES JUDSON has been a director of the Company since January 1997 and
had been Executive Vice President of NEXTLINK since February 1995. Mr. Judson is
also Vice President and General Counsel of Eagle River, Inc. since January 1995.
Prior to joining Eagle River, Inc., from January 1, 1975 through January 1995,
Mr. Judson was a partner in the Seattle law firm of Davis Wright Tremaine where
he focused his practice primarily in the areas of corporation law and taxation.
Mr. Judson is also a member of the Audit Committee of the Board of Directors.
WILLIAM A. HOGLUND has been a director of the Company since January 1997 and
had been Executive Vice President of NEXTLINK since February 1996. Mr. Hoglund
is also 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. Mr.
Hoglund is also a member of the Compensation Committee of the Board of
Directors.
The following individuals are the senior management of the Company's
subsidiaries.
HUGH C. CATHEY has been the President of NEXTLINK Ohio since August 1996.
Prior to joining NEXTLINK, Mr. Cathey had nearly 20 years of experience in the
telecommunications industry. From 1993 to 1996, Mr. Cathey was president and
chief executive officer of Digital Network, Inc., a publicly traded,
facilities-based long distance company based in Dallas, Texas. From 1989 to
1993, Mr. Cathey served as president and chief executive officer of United
Telemanagement, Inc. Prior to that, Mr. Cathey held sales and product management
positions of increasing responsibility with AT&T, culminating as the senior
executive of a business unit of AT&T with annual revenues of approximately $100
million. During Mr. Cathey's tenure at United Telemanagement, Inc., that company
filed a petition under the Federal bankruptcy laws.
GREG GREEN has been the President of NEXTLINK Washington since March 1995.
Prior to that, from 1985 through March 1995, Mr. Green was the founder and
former President of Tel-West Communications, Inc. ("Tel-West") until the
Company's acquisition of certain 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 Areas 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.
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.
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.
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
37
<PAGE>
from 1989 until 1993. Prior to joining Eastern TeleLogic, Mr. Rawding held
various positions with Bell Atlantic Corporation.
DONALD W. SESSAMEN has been President of NEXTLINK California since November
1996. Prior to that, Mr. Sessamen acted as a consultant to NEXTLINK. Prior to
acting as a consultant to the Company, Mr. Sessamen joined Brooks Fiber
California in 1994 as president, after the company acquired Phoenix Fiberlink.
At Brooks Fiber California, Mr. Sessamen completed the installation of the San
Jose system and managed the entry into switched services in the Sacramento
market. From 1991 to 1994, Mr. Sessamen was executive vice president of
operations, engineering and MIS at SP Telecom, a fiber optic systems
construction and wholesale transmission company using Southern Pacific Railroad
rights-of-way east of the Mississippi River. At SP Telecom, Mr. Sessamen led SP
Telecom's entry into switch-based products utilizing the Northern Telecom DMS
250 Super Node, introducing innovative switch-based products.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the fiscal year ended December 31, 1996,
individual compensation information for the Chief Executive Officer of the
Company and each of the four other most highly compensated executive officers of
the Company who were serving as executive officers at December 31, 1996 (the
"Named Executive Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------------------------------------------------------------
OTHER SECURITIES ALL OTHER
NAME AND PRINCIPAL ANNUAL UNDERLYING COMPENSATION
POSITION FISCAL YEAR SALARY ($) BONUS ($) COMPENSATION ($) OPTIONS(#)(1) ($)(2)
- ------------------------------ ------------- ----------- ----------- ------------------ -------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
McCaw, Craig O................ 1995 -0- -0- -0- -0- -0-
CEO 1996 -0- -0- -0- -0- -0-
Voelker, James J.............. 1995 89,405 87,000 11,542(3) 1,000,000 -0-
President 1996 160,609 -0- -0- 15,000 6,523
Kingery, Robert............... 1995 65,589 88,082 -0- 98,347(4) -0-
President of NEXTLINK 1996 225,000 30,000 -0- 5,000 5,625
Interactive
Iskra, Kathleen H............. 1995 -0- -0- -0- -0- -0-
Vice President, Chief 1996 121,233 65,250 -0- 153,500 1,575
Financial Officer and
Treasurer
Daniels, Charles P............ 1995 14,423 25,000 -0- 100,000 -0-
Vice President, Chief 1996 100,000 84,750 -0- 7,500 2,512
Marketing Officer
</TABLE>
- --------------------------
(1) Represents Class B membership units granted in connection with the Company's
equity option plan during 1995 and 1996, respectively.
(2) Represents contributions made by the Company on behalf of the executive
officer under the Company's 401(k) Plan.
(3) Of this amount, $11,238 was allocated to temporary housing expenses.
(4) This represents the number of options to acquire Class B units granted in
connection with the Recapitalization of the Company and its subsidiaries.
Prior to the Recapitalization, this executive held options to acquire
membership interests in Nextlink Interactive.
38
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
INDIVIDUAL GRANTS AT ASSUMED ANNUAL RATES
----------------------- OF SHARES PRICE
NUMBER OF % OF TOTAL OPTIONS APPRECIATION FOR OPTION TERM(2)
SECURITIES GRANTED TO EXERCISE OR -----------------------------------------
NAME AND PRINCIPAL UNDERLYING OPTIONS EMPLOYEES IN FISCAL BASE PRICE EXPIRATION 5% 10%
POSITION GRANTED(#) YEAR(%) ($/SH) DATE(3) ($) ($)
- ----------------------- ------------------- ----------------------- --------------- ------------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
McCaw, Craig O., -0- -0- -0- N/A
Voelker, James F. 15,000 1.79 .44 August 19, 2011 600 46,200
Kingery, Robert 5,000 0.60 .44 August 19, 2011 200 15,400
Iskra, Kathleen H. 75,000 8.96 .01 January 2, 2011 -0- 122,250
75,000 8.96 .44 January 2, 2011 3,000 231,000
3,500 .42 .44 August 19, 2011 140 10,780
Daniels, Charles P. 7,500 .90 .44 August 19, 2011 300 23,100
</TABLE>
- --------------------------
(1) Effective on January 31, 1997, NEXTLINK Communications, L.L.C. was merged
with and into NEXTLINK Communications, Inc. The information presented in
this table reflects the grant of options pursuant to the Amended and
Restated Equity Option Plan of NEXTLINK Communications, L.L.C. (the "EOP").
The Company has adopted a Stock Option Plan and is currently preparing
documentation to cause the options to be options to purchase the Company's
Class A Common Stock. See Note 12 to the Consolidated Financial Statements.
(2) The value of the Company's Class B Units is determined in accordance with
the EOP. Although Class B Units, when exercised, would constitute an
ownership interest in the Company, the interest is limited to the
appreciation in value of the Company, that is the distributable profits
interests, if any, of the Company. Pursuant to the EOP, the Administrative
Committee, which is comprised of two representatives from Eagle River and
the President of the Company, determines the appreciation interest value of
the options. During 1995, the members of the Administrative Committee were
Messrs. Weibling, Jarvis and Voelker. During the period in which theses
options were granted, the EOP provided that the valuation would be based
upon financial data dated as of the close of the most recent tax year.
Because of the small amount of capital invested at December 31, 1994, and
because there had been no appreciation in the value of Class A Units at
December 31, 1994, there was no fair market value ascribed to the unit
options in excess of the $0.01 exercise price at the time of their grants
during 1994 and 1995. Further, and consistent with the EOP, no separate
determination of value was made for the grants until the end of 1995. The
appreciation value was determined by the Administrative Committee by
applying a rate of return to the capital invested based on expected rates of
return for similar investments in comparable telecommunications businesses
and accounting for payment of the preferred return described above and the
return of capital to the Class A unit holders, and dividing that amount by
the total Class A Units issued at December 31, 1996 and 1995. Based upon
this valuation process, the appreciation interest per unit at years ended
1996 and 1995 for Class B Units was determined to be $3.50 and $0.44,
respectively, and for Class A Units was determined to be $4.36 and $1.45,
respectively. Commencing July 1, 1995, the EOP was revised to provide that
the Administrative Committee could revalue the Company based on such
financial data as the Administrative Committee deemed appropriate.
The dollar amounts under the 5% and 10% columns are the result of
calculations required by the rules of the Securities and Exchange Commission
("SEC") and, therefore, are not intended to forecast possible future
appreciation, if any, of the Company's Class B Units. The amounts shown
reflect the difference between (a) the appreciation of each unit at the
SEC's assumed annual rates of appreciation through the fifteenth anniversary
of the date of the grant based on the per unit valuation at the time of the
grant 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 utilized a prime rate of 8.25% in calculating the above
returns under the SEC's assumed rates of return.
(3) Options granted during 1996 vest either 20% at employment and 20% at the end
of each subsequent year or 25% at the end of each of the next four years
after grant.
39
<PAGE>
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1996 AT DECEMBER 31, 1996 (1)
---------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------- ------------ -------------- ------------- --------------
<S> <C> <C> <C> <C>
McCaw, Craig O...................................... -0- -0- -0- -0-
Voelker, James F.................................... 400,000 615,000 $ 1,400,000 $ 2,152,500
Kingery, Robert..................................... 39,339 64,008 137,687 224,028
Iskra, Kathleen H................................... 60,000 93,500 210,000 327,250
Daniels, Charles P.................................. 40,000 67,500 140,000 236,250
</TABLE>
- --------------------------
(1) Reflects the difference between the exercise price and a valuation of $3.50
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, 1996.
EMPLOYMENT AGREEMENTS
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.
NEXTLINK Interactive, L.L.C. ("NEXTLINK Interactive"), an operating
subsidiary of the Company, has entered into an employment agreement with Robert
Kingery, its President, for a term expiring on August 31, 1998, subject to
earlier termination. The agreement provides for a base salary of $225,000, with
a bonus based on the attainment of goals and milestones to be agreed to by
NEXTLINK Interactive and Mr. Kingery. If NEXTLINK Interactive terminates Mr.
Kingery's employment on 30 days notice, Mr. Kingery is entitled to receive a
bonus as if he had been employed for each year of the initial term of the
agreement. The agreement also contains non-compete, non-solicitation and
confidentiality provisions.
NEXTLINK Washington, L.L.C. ("NEXTLINK Washington"), an operating subsidiary
of the Company, has entered into an employment agreement with Gregory Green as
its President for a term expiring March 28, 1998, subject to earlier
termination. The agreement provides for a base salary of $100,000 with a bonus
of $30,000 during the first year, $35,000 during the second year and $40,000
during the third year, in each case upon the achievement of objectives. The
agreement also contains non-compete, non-solicitation and confidentiality
provisions.
NEXTLINK COMMUNICATIONS, L.L.C. EQUITY OPTION PLAN
The Company adopted an Amended and Restated Equity Option Plan (the "EOP").
Pursuant to the EOP, the Company could grant any employee of the Company or its
Affiliates (as defined in the EOP) the
40
<PAGE>
right to acquire Class B membership interests ("Equity Interests") in the
Company (an "Option"). The EOP has been superseded by the NEXTLINK
Communications, Inc. Stock Option Plan, described below, which was adopted in
connection with the incorporation of the Company on January 31, 1997. The
Company anticipates granting replacement options under the NEXTLINK
Communications, Inc. Stock Option Plan to the holders of options granted under
the EOP. The Option Plan is administered by a committee comprised of three
members (the "Administrative Committee"). Two of the members were appointed by
Eagle River, the primary member of the Company, and the third was the President
of the Company. The Administrative Committee had sole and unfettered
discretionary authority to administer the EOP and to alter, modify, change or
terminate the EOP at any time.
An Option granted under the EOP must be evidenced by a written agreement
between the Company and the employee. Such agreement set forth the quantity of
Equity Interests with respect to which the Option is granted, the Option price,
the date the Option was granted, and such other terms, conditions, and
restrictions as the Company deemed advisable and which were not inconsistent
with the terms of the EOP. The holder of an Option (an "Option Holder") did 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 would not have voting or other
management rights in the Company.
An Option could have been exercised, in whole or in part, at any time after
December 31, 1996 and within a 15-year period following the date the Option was
granted, subject to ratable vesting of the Option over four Years of Service (as
defined in the EOP) and provisions in the EOP relating to early termination of
the Option in the case of termination of employment. Any portion of an Option
that was not exercised by the end of the 15-year term would terminate unless
extended by the Company.
Under the EOP, the Company had 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 EOP) 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 EOP); 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.
NEXTLINK COMMUNICATIONS, INC. STOCK OPTION PLAN
The Company established the NEXTLINK Communications, Inc. Stock Option Plan
(the "Plan") to replace the EOP and to provide a performance incentive for
certain officers, employees, and individuals who provide services to the
Company, and to enable these individuals to acquire or increase proprietary
interest in the success of the Company.
Pursuant to the terms of the Plan, the Company's Board of Directors (the
"Board") has reserved the right to terminate, modify, or amend the Plan subject
to the following restriction: The Board must obtain shareholder approval for any
amendment that (1) increases the number of shares of Class A Common Stock
available under the Plan, (2) changes the Plan's eligibility provisions, or (3)
requires shareholder approval under applicable law.
The Plan Administrator may modify or amend outstanding options granted under
the Plan, provided modification or amendment of an outstanding option shall not,
without the consent of the optionee, impair or diminish any of the optionee's
rights or any of the obligations of the Company. Except as otherwise provided in
the Plan, no outstanding option shall be terminated without the consent of the
optionee. Unless the optionee agrees otherwise, any change or adjustment to an
outstanding incentive stock option shall be made so as not to constitute a
"modification," as defined in Section 424(h) of the
41
<PAGE>
Internal Revenue Code of 1986, as amended (the "Code"), and so as not to cause
the option to cease qualifying as an incentive stock option, as defined in Code
Section 422(b).
The "Plan Administrator" is the Compensation Committee of the Board, and its
members are Messrs. Voelker, Jarvis and Hoglund. The Board may from time to time
remove members from, or add members to, the Compensation Committee. Vacancies on
the committee, however caused, may be filled by the Board.
The Plan Administrator acts as the manager of the Plan, possessing
discretionary authority to determine all matters relating to the options to be
granted. The Plan Administrator has the sole authority to interpret the
provisions of the Plan, any option issued under the Plan, and any rule or
regulation applicable to the Plan. The Plan Administrator's interpretation is
conclusive and binding on all interested parties, so long as the interpretation
and construction with respect to incentive stock options corresponds to the
requirements of Code Section 422, the regulations thereunder, and any amendments
thereto.
The stock available under the stock options granted under the Plan are
shares of the Company's authorized but unissued Class A Common Stock, par value
$.01 per share ("Class A Common Stock"). The total number of shares that may be
issued pursuant to options under the Plan, including both incentive and
non-statutory options, shall not exceed an aggregate of 10,000,000 shares.
Incentive stock options may be granted only to officers and other employees
of the Company (or a parent or subsidiary corporation of the Company), including
Board members who are also employees of the Company (or employees of a parent or
subsidiary corporation of the Company). Non-statutory options may be granted to
both employees and non-employees of the Company (or a corporate or non-corporate
parent or subsidiary), including non-employee Board members. Certain limitations
apply to 10% shareholders.
Within the parameters established by the Plan, the Plan Administrator has
the sole discretion to determine the options to be granted under the Plan,
including selection of the individuals receiving option grants, the number of
shares available under each option, the exercise price, and all other terms and
conditions of the options. Separate option grants under the Plan need not be
identical in any respect, even when made simultaneously. The Plan Administrator
shall issue each optionee an individual "option agreement," which describes the
relevant terms of the option.
The purchase price per share of Class A Common Stock under each incentive
stock option shall be not less than the fair market value of the Class A Common
Stock on the date the option is granted, except where the option is a
substituted or assumed option from another plan, and the exercise price relates
to the original exercise price, in accordance with applicable provisions of the
Code. Certain additional limitations apply to 10% shareholders. The purchase
price per share of Class A Common Stock under each non-statutory stock option
shall be not less than 85% of the fair market value of the Class A Common Stock
on the date the option is granted, except where the option is a substituted or
assumed option from another plan, and the exercise price relates to the option's
original exercise price.
The aggregate shares of Class A Common Stock available to an optionee
through incentive stock options, which are exercisable for the first time during
a calendar year, shall not exceed $100,000 in value. For purposes of this limit,
the Class A Common Stock shall be valued at its fair market value as of the
option grant date. To the extent an incentive stock option exceeds this
limitation, it shall be considered a non-statutory stock option.
An optionee must exercise his or her option, if at all, before it expires.
Each option shall expire on the date specified in the individual option
agreement, which date shall not be later than the tenth anniversary of the date
on which the option was granted with respect to incentive stock options, the
15th anniversary with respect to non-statutory options and the fifth anniversary
in the case of a 10% stockholder.
42
<PAGE>
Options granted under the Plan and the rights and privileges conferred
thereby may not be transferred, assigned, pledged, or hypothecated in any manner
(whether by operation of law or otherwise), other than by will or applicable
laws of descent and distribution; provided that non-statutory stock options may
be transferred to a revocable trust established by the optionee for his or her
descendants, to an immediate family member, or to a partnership in which only
immediate family members or such estate-planning trusts are partners. Options
shall not be subject to execution, attachment, or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate, or otherwise dispose of any
option under the Plan, or any rights or privilege conferred by the Plan,
contrary to the provisions of the Plan, or upon the sale or levy or any
attachment or similar process upon the rights and privileges conferred by the
Plan, such option shall thereupon terminate and become void. No person may
create a lien on any funds, securities, or other property held under the Plan.
Options granted under the Plan shall generally expire on the earlier of the
following two events: (i) the date of expiration expressed in the individual
option agreement, or (ii) three months after termination of employment (unless
the termination is for cause, in which case the option shall immediately
expire). Special rules apply in the event of an optionee's death or disability.
In addition, options shall terminate if the shareholders of the Company receive
cash, stock, or other property in exchange for or in connection with their
shares of Class A Common Stock as a result of a merger, consolidation,
acquisition of property or stock, separation, reorganization, or liquidation of
the Company (other than a mere reincorporation, creation of a holding company,
or merger in which the Company's shareholders receive a corresponding number of
shares of Class A Common Stock in the survivor corporation). Prior to such an
event, the optionee shall have the right to exercise his or her option, in whole
or in part, to the extent vested.
43
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
THE COMPANY. The following table sets forth certain information as of
January 31, 1997, with respect to the beneficial ownership of NEXTLINK's capital
stock by (i) each person known by the Company to own beneficially 5% or more of
the outstanding shares of capital stock, (ii) the Company's Board of Directors,
(iii) the Company's Chief Executive Officer and each of the Named Executive
Officers and (iv) all directors and executive officers as a group.
CLASS A COMMON STOCK
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENTAGE OF CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP (%)
- ------------------------------------------------------------------ ---------------------- ---------------------
<S> <C> <C>
James F. Voelker.................................................. 400,000(1) 21.66
155 108th Avenue, N.E., Suite 810
Bellevue, WA 98004
Don Hillenmeyer................................................... 136,943(1) 7.42
105 Molloy Street
Suite 300
Nashville, TN 37201
Greg Breetz....................................................... 136,943(1) 7.42
105 Molloy Street
Suite 300
Nashville, TN 37201
Russ Land......................................................... 136,943(1) 7.42
105 Molloy Street
Suite 300
Nashville, TN 37201
Craig O. McCaw.................................................... 0 --
Dennis Weibling................................................... 0 --
Scot Jarvis....................................................... 0 --
C. James Judson................................................... 0 --
William A. Hoglund................................................ 0 --
Robert Kingery.................................................... 39,339(1) 2.13
Kathleen H. Iskra................................................. 60,000(1) 3.25
Charles P. Daniels................................................ 40,000(1) 2.17
All directors and executive officers as a group (19 persons)...... 1,020,050(1) 56.86
</TABLE>
- ------------------------
(1) Represents shares that are anticipated to be eligible for acquisition upon
exercise of stock options during the next 60 days from January 31, 1997,
which the Company anticipates granting as replacement options for options
granted under the EOP.
44
<PAGE>
CLASS B COMMON STOCK
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENTAGE OF CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP (%)
- -------------------------------------------------------------------- ---------------------- ---------------------
<S> <C> <C>
Eagle River, LLC.................................................... 72,307,914 83.41
2300 Carillon Point
Kirkland, WA 98033
BWP, Inc............................................................ 5,914,497(1) 6.82
707 S.W. Washington, 8th Floor
Portland, OR 97205
Craig O. McCaw...................................................... 72,911,686(2) 84.10
2300 Carillon Point
Kirkland, WA 98033
Dennis Weibling..................................................... 72,307,914(3) 83.41
2300 Carillon Point
Kirkland, WA 98033
James F. Voelker.................................................... 3,571,364(4) 4.12
Scot Jarvis......................................................... 670,283(5) *
C. James Judson..................................................... 0 --
William A. Hoglund.................................................. 0 --
Robert Kingery...................................................... 2,081,312(6) 2.50
Kathleen H. Iskra................................................... 0 --
Charles P. Daniels.................................................. 0 --
All directors and executive officers as a group (19 persons)........ 80,110,582(7) 92.41
</TABLE>
- ------------------------
(1) Represents shares of Class B Common Stock held beneficially by Douglas Bean
and Robert F. Kingery, who own 39.88% and 35.19%, respectively of the total
shares held by BWP, Inc.
(2) Represents shares of Class B Common Stock 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 shares of Class B Common Stock that are eligible for acquisition
upon exercise of a stock option during the next 60 days from January 31,
1997.
(5) Includes 134,057 shares of Class B Common Stock held by the Rowena Family
Limited Liability Company, of which Mr. Jarvis is the sole managing member.
(6) Represents shares of Class B Common Stock held beneficially by Mr. Kingery
as a result of his ownership in BWP, Inc.
(7) See notes (2), (3), (4) and (6) above.
* Less than 1%.
45
<PAGE>
EAGLE RIVER. The following table sets forth certain information as of
January 31, 1997, 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) the Company's Board of
Directors, (iii) the Company's Chief Executive Officer and each of the Named
Executive Officers and (iv) all directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENTAGE OF CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) (%)
- -------------------------------------------------------------------- ---------------------- ---------------------
<S> <C> <C>
Craig O. McCaw...................................................... 31,122(2) 97.07
2300 Carillon Point
Kirkland, WA 98033
Dennis Weibling..................................................... 940 2.93
2300 Carillon Point
Kirkland, WA 98033
James F. Voelker.................................................... 0 --
Scot Jarvis......................................................... 0 --
C. James Judson..................................................... 0 --
William A. Hoglund.................................................. 0 --
Robert Kingery...................................................... 0 --
Kathleen H. Iskra................................................... 0 --
Charles P. Daniels.................................................. 0 --
All directors and executive officers as a group %
(19 persons)...................................................... 32,062 100
</TABLE>
- ------------------------
(1) Represents Class A Units.
(2) Represents Class A Units held beneficially by Mr. McCaw as a result of his
ownership interests in Eagle River and Eagle River, Inc.
46
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From the inception of NEXTLINK through the end of 1995, NEXTLINK's capital
and operational funding was provided on an as needed basis, primarily by Eagle
River. During this period, under NEXTLINK's limited liability company agreement,
one equity unit was issued for each dollar in cash or assets contributed to
NEXTLINK. The equity ownership units issued from time to time during the course
of this period thus reflect this one dollar to one equity unit equivalency. As
of December 31, 1996, Eagle River had contributed approximately $53.9 million to
NEXTLINK and had received approximately 53.9 million Class A Units in NEXTLINK
Communications, L.L.C., which were converted to approximately 72.3 million
shares of Class B Common Stock of the Company on January 31, 1997, including
certain issuances described below.
On September 15, 1994, NEXTLINK 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 interest payments on September 15.
On August 18, 1995, NEXTLINK lent $93,141 to James F. Voelker, NEXTLINK's
President, in connection with his relocation to Washington. This loan bears
interest at the prime rate and principal and interest are due on the earlier of
December 31, 1998 or the sale of Mr. Voelker's former residence.
On September 1, 1995, NEXTLINK agreed to pay $3.0 million to BWP, Inc. in
connection with the acquisition of certain assets of Sound Response Corporation.
A payment of $1.5 million was made on September 1, 1996 and an additional
payment of $1.5 million is due September 1, 1997. In addition, NEXTLINK issued
approximately 4.4 million Class A Units in NEXTLINK Communications, L.L.C.,
which were converted to approximately 5.9 million shares of Class B Common Stock
of the Company on January 31, 1997, to BWP, Inc. in connection with this asset
acquisition.
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 was
unsecured and bore interest at the prime rate plus 2%. The note plus accrued
interest was repaid with a portion of the net proceeds of NEXTLINK's offering of
Senior Notes. NEXTLINK's principal equity owner, Mr. Craig O. McCaw, through
Eagle River made advances to NEXTLINK primarily to fund NEXTLINK's capital
expenditures (excluding acquisitions) and operating losses between January 1996
and April 1996. These advances of approximately $32.2 million, including accrued
interest, were repaid using a portion of the net proceeds of the offering of the
Senior Notes.
During 1995, Eagle River lent NEXTLINK $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 and approximately 7.3
million Class A Units in NEXTLINK Communications, L.L.C., which, along with the
other Units owned by Eagle River, were converted to shares of Class B Common
Stock of the Company on January 31, 1997.
During 1995, NEXTLINK incurred expenses for administrative services provided
by U.S. Signal, a minority member of NEXTLINK, pursuant to temporary agreements
related to the acquisitions of certain assets from City Signal, Inc. NEXTLINK
recorded expenses in connection with fees to this affiliate of $1.5 million in
1995.
Each share of the Company's Class B Common Stock is convertible at the
option of the holder thereof, at any time, into one share of Class A Common
Stock. The Company and the current holders of the Company's Class B Common Stock
and the holders of options to purchase Class B Common Stock will enter into a
Registration Rights Agreement (the "Company Registration Rights Agreement") as
of the consummation of the Incorporation, which, among other things, will
provide that at any time after a Qualifying IPO (as defined) and upon the
request of holders of at least 4% of the outstanding Class B Common Stock that
is subject to the Company Registration Rights Agreement, the Company will
47
<PAGE>
register under the Securities Act any of the shares of Class A Common Stock
currently held by, or to be acquired in the future by, such holders, for sale in
accordance with such holders' intended method of disposition thereof (a "Demand
Registration"). The holders of the Class B Common Stock will have the right to
request two Demand Registrations. The holders of the Class B Common Stock also
will have the right, at any time after the Qualifying IPO, to include the shares
of Class A Common Stock held by them in certain other registrations of common
equity securities of the Company initiated by the Company on its own behalf or
on behalf of its shareholders. The holders' rights under the Company
Registration Rights Agreement are not transferable. In addition, the holders of
Class B Common Stock and options to purchase Class B Common Stock have agreed to
pay their pro rata share of all costs and expenses incurred in connection with
each registration of their respective shares of Class A Common Stock. For
purposes of the Company Registration Rights Agreement, "Qualifying IPO" means a
public offering of Class A Common Stock that results in net proceeds to the
Company of not less than $75,000,000 or such lesser amount as the Board of
Directors of the Company may, in their discretion, determine to be adequate to
commence the rights of the holders under the Company Registration Rights
Agreement.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements
<TABLE>
<CAPTION>
NEXTLINK COMMUNICATIONS, INC.
<S> <C>
Report of Independent Public Accountants..................................... F-1
Consolidated Balance Sheets at December 31, 1996 and 1995.................... F-2
Consolidated Statements of Operations for the Years Ended December 31, 1996
and 1995 and From Inception (September 16, 1994) to December 31, 1994...... F-3
Consolidated Statements of Changes in Members' Equity (Deficit) for the Years
Ended December 31, 1996 and 1995 and From Inception (September 16, 1994) to
December 31, 1994.......................................................... F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996
and 1995 and From Inception (September 16, 1994) to December 31, 1994...... F-5
Notes to Consolidated Financial Statements................................... F-7
NEXTLINK CAPITAL, INC.
Report of Independent Public Accountants..................................... F-19
Balance Sheet at December 31, 1996........................................... F-20
Note to Balance Sheet........................................................ F-21
</TABLE>
(b) List of Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------
<C> <S>
3.1 --Articles of Incorporation of the Company.
3.2 --By-laws of the Company
4.1 --Form of Exchange Note Indenture, by and among the Company and United States Trust Company
of New York, as trustee, relating to the Exchange Notes, including form of Exchange Notes.
4.3 --Certificate of Designations of the Powers, Preferences and Relative, Participating,
Optional and Other Special Rights of 14% Senior Exchangeable Redeemable Preferred Shares
and Qualifications, Limitations and Restrictions Thereof.
4.4 --Form of stock certificate of 14% Senior Exchangeable Redeemable Preferred Shares.
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------
4.5 --Indenture, dated as of April 25, 1996, by and among the Company, NEXTLINK Capital and
United States Trust Company of New York, as trustee, relating to 12 1/2% Senior Notes due
April 15, 2006, including form of global note (incorporated by reference to Exhibit 4.1 to
the Registration Statement on Form S-4 of NEXTLINK Communications, L.L.C. (the predecessor
of the Company) and NEXTLINK Capital, file no. 333-4603).
<C> <S>
4.6 --First Supplemental Indenture, dated as of January 31, 1997, by and among the Company,
NEXTLINK Communications, L.L.C., NEXTLINK Capital and United States Trust Company of New
York, as Trustee.
10.1 --Stock Option Plan of the Company.
10.2 --Management Agreement, dated as of April 30, 1996, by and between NEXTLINK Management
Services, L.L.C. and Telecommunications of Nevada, L.L.C. (incorporated by reference to
Exhibit 10.2 to the Registration Statement on Form S-4 of NEXTLINK Communications, L.L.C.
(the predecessor of the Company) and NEXTLINK Capital, file no. 333-4603).
10.3 --Warrant Agreement, dated as of January 31, 1997, by and between the Company and
Continental Stock Trust & Transfer Company, as warrant agent.
10.4 --Registration Rights Agreement dated as of January 15, 1997, between the Company and the
signatories listed therein.
10.5 --Preferred Exchange and Registration Rights Agreement, dated as of January 31, 1997, by
and among the Company and the Initial Purchasers.
12 --Statement Regarding Computation of Ratio of Earnings to Fixed Charges.
21 --Subsidiaries of the Registrants.
27 --Financial Data Schedule.
</TABLE>
(c) Reports on Form 8-K
None.
49
<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, 1996 and 1995, and the related consolidated statements of
operations, changes in members' equity (deficit) and cash flows for the years
then ended 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, 1996 and 1995, and the results of
their operations and their cash flows for the years then ended 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 10, 1997
F-1
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................................................. $ 76,807 $ 1,350
Marketable securities.................................................................. 47,713 --
Accounts receivable, net............................................................... 7,008 3,563
Other.................................................................................. 607 746
Pledged securities..................................................................... 39,770 --
----------- ---------
Total current assets............................................................... 171,905 5,659
Pledged securities....................................................................... 61,668 --
Property and equipment, net.............................................................. 97,784 29,664
Goodwill, net............................................................................ 24,110 12,137
Other intangible assets, net............................................................. 11,243 5,751
Other long-term assets, net.............................................................. 23,973 250
----------- ---------
Total assets....................................................................... $ 390,683 $ 53,461
----------- ---------
----------- ---------
LIABILITIES AND MEMBERS' EQUITY (DEFICIT)
Current liabilities:
Bank overdraft......................................................................... $ -- $ 1,373
Accounts payable....................................................................... 18,622 4,315
Accrued expenses....................................................................... 4,112 1,266
Accrued interest payable............................................................... 9,250 --
Current portion of capital lease obligations........................................... 1,194 --
Payable to affiliates.................................................................. 1,500 4,937
----------- ---------
Total current liabilities.......................................................... 34,678 11,891
Long-term liabilities:
Long-term debt......................................................................... 350,000 --
Capital lease obligations.............................................................. 6,262 --
Other.................................................................................. 13,139 1,965
----------- ---------
Total liabilities.................................................................. 404,079 13,856
Commitments and contingencies
Minority interests....................................................................... 308 2,886
Equity units subject to redemption (900,000 units outstanding as of December 31, 1996)... 4,950 --
Members' equity (deficit) (63,793,820 and 49,798,659 units outstanding as of December 31,
1996 and 1995, respectively)........................................................... (18,654) 36,719
----------- ---------
Total liabilities and members' equity (deficit).................................... $ 390,683 $ 53,461
----------- ---------
----------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-2
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 AND FROM INCEPTION
(SEPTEMBER 16, 1994) TO DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ---------
<S> <C> <C> <C>
Revenue......................................................................... $ 25,686 $ 7,552 $ --
Costs and expenses:
Operating..................................................................... 25,094 6,618 106
Selling, general and administrative........................................... 31,353 9,563 232
Deferred compensation......................................................... 9,914 375 --
Depreciation.................................................................. 6,640 1,125 7
Amortization of intangible assets............................................. 3,700 2,333 7
---------- ---------- ---------
Total costs and expenses.................................................. 76,701 20,014 352
---------- ---------- ---------
Loss from operations............................................................ (51,015) (12,462) (352)
Interest income................................................................. 10,446 -- --
Interest expense................................................................ (30,876) (499) --
---------- ---------- ---------
Loss before minority interests.................................................. (71,445) (12,961) (352)
Minority interests in loss of consolidated subsidiaries......................... 344 230 3
---------- ---------- ---------
Net loss........................................................................ $ (71,101) $ (12,731) $ (349)
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-3
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 AND FROM INCEPTION
(SEPTEMBER 16, 1994) TO DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNITS AMOUNT
------------- ----------
<S> <C> <C>
BALANCE, INCEPTION (SEPTEMBER 16, 1994)............................................... -- $ --
Contributed capital................................................................. 1,021,305 1,021
Net loss............................................................................ -- (349)
------------- ----------
BALANCE, DECEMBER 31, 1994............................................................ 1,021,305 672
Contributed capital................................................................. 44,365,413 44,366
Issuance of units for NEXTLINK Interactive acquisition.............................. 4,411,941 4,412
Net loss............................................................................ -- (12,731)
------------- ----------
BALANCE, DECEMBER 31, 1995............................................................ 49,798,659 36,719
Contributed capital................................................................. 9,502,021 9,502
Issuance of units for NEXTLINK Ohio acquisition..................................... 651,933 652
Impact of recapitalization and merger of affiliates................................. 3,841,207 5,574
Net loss............................................................................ -- (71,101)
------------- ----------
BALANCE, DECEMBER 31, 1996............................................................ 63,793,820 $ (18,654)
------------- ----------
------------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 AND FROM INCEPTION
(SEPTEMBER 16, 1994) TO DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss........................................................................ $ (71,101) $ (12,731) $ (349)
Adjustments to reconcile net loss to net cash used in operating activities:
Deferred compensation expense............................................... 9,914 375 --
Equity in loss of affiliates................................................ 1,100 -- --
Depreciation and amortization............................................... 10,340 3,458 14
Minority interest in loss of consolidated subsidiaries...................... (344) (230) (3)
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable......................................................... (1,659) (2,529) --
Other current assets........................................................ (42) (638) --
Other long-term assets...................................................... (1,430) (500) (79)
Accounts payable............................................................ 993 2,163 --
Accrued expenses............................................................ 2,416 1,452 21
Accrued interest payable.................................................... 9,250 -- --
---------- ---------- ---------
Total adjustments....................................................... 30,538 3,551 (47)
---------- ---------- ---------
Net cash used in operating activities........................................... (40,563) (9,180) (396)
INVESTING ACTIVITIES:
Purchase of property and equipment.......................................... (51,920) (17,778) (140)
Net assets acquired in business and asset acquisitions...................... (15,169) (17,639) (460)
Cash placed into escrow for business acquisition............................ (6,000) -- --
Investments in unconsolidated affiliates.................................... (4,953) -- --
Purchase of pledged securities.............................................. (117,688) -- --
Maturity of pledged securities.............................................. 16,431 -- --
Purchase of marketable securities,net....................................... (47,713) -- --
---------- ---------- ---------
Net cash used in investing activities........................................... (227,012) (35,417) (600)
FINANCING ACTIVITIES:
Proceeds from issuance of senior notes...................................... 350,000 -- --
Capital contributions....................................................... 9,935 37,091 1,021
Proceeds from payable to affiliates......................................... 28,766 7,458 --
Repayment of payables to affiliates......................................... (33,703) -- --
Bank overdraft.............................................................. (1,373) 1,373 --
Costs incurred in connection with financing................................. (9,822) -- --
Repayment of capital lease obligations...................................... (771) -- --
---------- ---------- ---------
Net cash provided by financing activities....................................... 343,032 45,922 1,021
---------- ---------- ---------
Net increase in cash and cash equivalents....................................... 75,457 1,325 25
Cash and cash equivalents, beginning of period.................................. 1,350 25 --
---------- ---------- ---------
Cash and cash equivalents, end of period........................................ $ 76,807 $ 1,350 $ 25
---------- ---------- ---------
---------- ---------- ---------
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest, net of amount capitalized........................... $ 20,912 $ 16 $ --
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
F-5
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 AND FROM INCEPTION
(SEPTEMBER 16, 1994) TO DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
SUPPLEMENTAL CASH FLOW DISCLOSURES:
(DOLLARS IN THOUSANDS)
Noncash investing and financing activities:
During 1996 and 1995, the Company completed various acquisitions of
businesses and assets (see Note 3). In connection with these acquisitions, the
Company issued equity units and assumed liabilities as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Fair value of tangible assets acquired..................................................... $ 12,579 $ 11,500
Liabilities assumed........................................................................ (8,228) (3,554)
Fair value of intangible assets acquired................................................... 16,420 19,335
--------- ---------
$ 20,771 $ 27,281
--------- ---------
--------- ---------
Cash paid for assets....................................................................... $ 15,169 $ 17,022
Deferred purchase consideration............................................................ -- 3,000
Equity units issued:
Company units issued (1)................................................................. 5,602 4,412
Subsidiary units and options issued...................................................... -- 2,847
--------- ---------
$ 20,771 $ 27,281
--------- ---------
--------- ---------
</TABLE>
- ------------------------
(1) Company units issued in 1996 includes 900,000 Class A Units valued at $4,950
which are subject to redemption (see Note 3).
During 1996, the Company acquired $1,377 in property and equipment under
capital lease obligations, exclusive of property and equipment under capital
lease obligations which were acquired in acquisitions.
In January 1996, the Company recognized additional members' equity and
goodwill of $5,574 and $2,907, respectively, and a reduction in minority
interests of $2,667 relating to a recapitalization and merger of companies
holding minority equity interests in certain subsidiaries of the Company, which
exchanged these interests for Class A units of the Company.
In December 1995, the Company issued 7,273,918 Class A Units to an affiliate
in satisfaction of a payable of $7,274.
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION:
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 on September 16, 1994 and, through its subsidiaries,
provides competitive local telecommunications services in selected markets in
the United States. The Company is a majority-owned subsidiary of Eagle River
Investments, L.L.C. (Eagle River).
Prior to January 31, 1997, the Company was organized and operated under a
limited liability company agreement. The agreement provided, among other things,
for specific allocation of net profits and losses to each member, allocations
and distributions to members, and a preferred return to members on their
respective contributions invested in the Company, as well as a return of their
respective investments in the Company. On January 31, 1997, NEXTLINK
Communications, L.L.C. merged with and into NEXTLINK Communications, Inc., a
Washington corporation (the Incorporation). See Note 12 for further discussion.
Unless otherwise indicated all information presented herein is presented for
periods prior to the Incorporation, and therefore relate to the time that the
Company was a limited liability company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The Company's consolidated financial statements include 100% of the assets,
liabilities and results of operations of subsidiaries in which the Company has a
controlling interest of greater than 50%. The ownership interests of the other
members or partners are reflected as minority interests. The Company's
investments in entities in which it has voting interests of at least 20% but not
more than 50% are accounted for using the equity method and investments in
entities in which it has voting interests of not more than 20% are accounted for
using the cost method. All significant intercompany accounts and transactions
have been eliminated.
REVENUE RECOGNITION
The Company recognizes revenue on telecommunications and enhanced
communications services in the period that service is provided.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of highly liquid investments with original
maturities of three months or less at the time of purchase.
MARKETABLE SECURITIES
Marketable securities consist of U.S. government securities and commercial
paper with original maturities beyond three months, but less than 12 months.
Marketable securities are stated at cost, adjusted for discount accretion and
premium amortization. The securities in the Company's portfolio are classified
as "held to maturity," as management has the intent and ability to hold those
securities to maturity. The fair value of the Company's marketable securities
approximates the carrying value.
F-7
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
PLEDGED SECURITIES
In connection with the sale of Senior Notes (see Note 6), a portion of the
net proceeds were utilized to purchase a portfolio consisting of U.S. government
securities, which mature at dates sufficient to provide for payment in full of
interest on the Senior Notes through April 15, 1999. The pledged securities are
stated at cost, adjusted for premium amortization and accrued interest. The fair
value of the pledged securities approximates the carrying value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Direct costs of construction are
capitalized, including $853,000 of interest costs related to construction during
1996. There were no interest costs capitalized prior to 1996. Depreciation is
computed using the straight-line method over estimated useful lives beginning in
the month an asset is put into service.
Estimated useful lives of property and equipment are as follows:
<TABLE>
<S> <C>
Telecommunications switching and other equipment... 5-10 years
Fiber optic network................................ 15-20 years
Office equipment, furniture and other.............. 3-5 years
Leasehold improvements............................. the lesser of the
estimated useful lives
or
the terms of the
leases
</TABLE>
INTANGIBLE ASSETS
Intangible assets primarily represent costs allocated in acquisitions to
customer bases and contracts, software and related intellectual property and
goodwill. Intangible assets are amortized using the straight-line method over
the estimated useful lives of the assets as follows:
<TABLE>
<S> <C>
Customer contracts.................................... term of the
contracts
Customer bases........................................ 5 years
Software and related intellectual property............ 5 years
Goodwill.............................................. 15-20 years
</TABLE>
LONG-LIVED ASSETS
The Company periodically reviews the carrying value of its long-lived
assets, including property, equipment and intangible assets, whenever events or
changes in circumstances indicate that the carrying value may not be
recoverable. To the extent the estimated future cash inflows attributable to the
asset, less estimated future cash outflows, is less than the carrying amount, an
impairment loss is recognized.
F-8
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
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. See Note 12 for
discussion regarding the effect of the Incorporation.
CONCENTRATION OF CREDIT RISK
The Company is exposed to concentration of credit risk principally from
accounts receivable. The Company had one customer whose revenue represented
approximately 23% of the Company's 1996 revenue and three customers whose
revenue each represented approximately 12-14% of the Company's 1995 revenue.
ESTIMATES USED IN FINANCIAL STATEMENT PRESENTATION
The preparation of consolidated 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.
RECLASSIFICATIONS
Certain reclassifications have been made to prior period amounts in order to
conform to the current presentation.
3. ACQUISITIONS:
In December 1996, the Company acquired ITC, a switched-based long-distance
reseller based in Salt Lake City, Utah. ITC has approximately 9,000
long-distance customers in Utah, Colorado, Arizona, New Mexico and Idaho.
Consideration for the acquisition of ITC consisted of a cash payment of $4.0
million, of which $2.6 million was placed into escrow to be paid during 1998,
plus the issuance of 900,000 Class A Units of the Company. The Company has
granted the seller an option requiring the Company to repurchase the units at
$11.50 per unit beginning three years from the date of the closing of the
acquisition in the event that the Company has not completed a public
<#>offering</#> of its equity securities prior to that time. The Company has
valued the units, including the put option, at $4,950,000, or $5.50 per unit.
In January 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. is
currently constructing fiber optic telecommunications systems for the Ohio
region. Consideration for the purchase consisted of a cash payment of $9.6
million, the issuance of 651,933 Class A Units of the Company, valued at
$651,933, plus the assumption of capital lease obligations of $6.1 million.
F-9
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
3. ACQUISITIONS: (CONTINUED)
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 voice response and
debit card services. The total cost of the acquisition was approximately $12.2
million. Included in the cost of the acquisition are 4,411,941 Class A Units of
the Company valued at $4,411,941 and $3.0 million of deferred purchase
consideration payable to BWP, Inc. (formerly known as Sound Response
Corporation) of which $1.5 million was paid during 1996 and $1.5 is payable
during 1997.
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. These assets are used by NEXTLINK Solutions, L.L.C. to offer a
virtual communications center for mobile professionals and workgroups. The total
cost of the acquisition was approximately $617,000.
In April 1995, the Company acquired the telecommunications business of
Tel-West Central Services, Inc., a local exchange service reseller in Spokane,
Washington, through acquisition of the ownership units of NEXTLINK Washington,
L.L.C. The total cost of the acquisition was approximately $1.2 million.
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,
primarily consisting of an existing fiber optic telecommunications network in
Memphis and another network then under development in Nashville. NEXTLINK
Tennessee, L.L.C. is expanding the networks and is currently providing switched
local and long-distance telecommunications services in these markets. The total
cost of the acquisition was approximately $17.5 million. Included in the cost of
the acquisition were 2,847,444 Class A Units and related options of NEXTLINK
Tennessee, L.L.C. valued at $2,847,444.
In September 1994, the Company acquired certain assets of Penns Light
Communications, Inc. through NEXTLINK Pennsylvania, L.P. The total cost of the
acquisition was approximately $460,000.
The above described 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 consolidated financial
statements since the dates of acquisition. The total purchase price in excess of
the fair market value of the net assets acquired was recorded as goodwill. See
Note 10 for a discussion of valuation of Class A Units.
The following unaudited pro forma information presents the results of the
Company as if the above described acquisitions plus the Linkatel acquisition
(see Note 12) had 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>
DECEMBER 31,
----------------------
<S> <C> <C>
1996 1995
---------- ----------
<CAPTION>
(UNAUDITED, IN
THOUSANDS)
<S> <C> <C>
Revenue.............................................................. $ 36,105 $ 25,620
Net loss............................................................. $ (67,616) $ (15,992)
</TABLE>
F-10
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
4. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1996 1995
--------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Telecommunications networks................................................................ $ 66,762 $ 15,358
Office equipment, leasehold improvements, furniture and other.............................. 18,097 3,710
--------- ---------
84,859 19,068
Less accumulated depreciation.............................................................. (8,369) (1,125)
--------- ---------
76,490 17,943
Network construction in progress........................................................... 21,294 11,721
--------- ---------
$ 97,784 $ 29,664
--------- ---------
--------- ---------
</TABLE>
5. OTHER LONG-TERM ASSETS:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1996 1995
--------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Financing costs............................................................................... $ 9,822 $ --
Cash held in escrow for acquisitions.......................................................... 8,682 --
Equity investments............................................................................ 3,853 --
Advances to business to be acquired........................................................... 1,490 --
Other noncurrent assets....................................................................... 854 250
--------- ---------
24,701 250
Less accumulated amortization................................................................. (728) --
--------- ---------
$ 23,973 $ 250
--------- ---------
--------- ---------
</TABLE>
The Company's equity investments include (i) a 40% investment in
Telecommunications of Nevada, L.L.C., which operates a fiber optic
telecommunications network serving the Las Vegas market and (ii) a $3.2 million
investment in convertible preferred stock of Intermind Corporation, representing
a 13.6% voting interest. Intermind markets an interactive communications tool
for the World Wide Web and intranet applications.
6. LONG-TERM DEBT:
On April 25, 1996, the Company completed the issuance and sale of $350.0
million in principal amount of 12.5% Senior Notes due April 15, 2006. The
Company used $117.7 million of the gross 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 used an additional $32.2
million to repay the advances and accrued interest from Eagle River. In
addition, the Company incurred costs of $9.8 million in connection with the
financing (including underwriter discounts and commissions). Interest payments
on the Senior Notes are due semi-annually. As of December 31, 1996, the fair
value of long-term debt approximated carrying value.
F-11
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
6. LONG-TERM DEBT: (CONTINUED)
The Senior Notes will be redeemable at the option of the Company, in whole
or in part, at any time on or after April 15, 2001 at the following prices
(expressed in percentages of the principal amount thereof at stated maturity) if
redeemed during the 12-month period beginning April 15 of the years indicated
below, in each case together with interest accrued to the redemption date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ------------------------------------------------------------------------------------- -----------
<S> <C>
2001................................................................................. 106.250%
2002................................................................................. 104.167%
2003................................................................................. 102.083%
2004 and thereafter.................................................................. 100.000%
</TABLE>
The indenture pursuant to which the Senior Notes are issued 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.
In the event of a change in control of the Company as defined in the
indenture, holders of the Senior Notes will have the right to require the
Company to purchase their Senior 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. The Senior Notes are senior unsecured
obligations of the Company, and are subordinated to all current and future
indebtedness of the Company's subsidiaries, including trade payables.
7. RELATED PARTY TRANSACTIONS:
During 1995, Eagle River loaned the Company $7.3 million at an interest rate
of prime plus 2%. On December 1, 1995, the note payable and accrued interest
were converted to equity.
Included in payable to affiliates is $1.5 million payable to a Company
member in conjunction with the Sound Response Corporation acquisition. The
amount is due September 1, 1997.
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 $1.5 million in 1995.
8. COMMITMENTS AND CONTINGENCIES:
Capitalized leases consist of leases of telecommunications equipment and
fiber optic networks. The Company is also 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.
F-12
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
8. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
Future minimum payments required under the capital leases and operating
leases and agreements that have an initial or remaining noncancelable lease term
in excess of one year at December 31, 1996 are summarized below:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEARS ENDING DECEMBER 31, LEASES LEASES
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
(IN THOUSANDS)
1997 $ 2,322 $ 2,562
1998 2,310 2,568
1999 2,213 2,537
2000 1,921 2,338
2001 285 1,971
Thereafter............................................................ 1,376 8,051
---------
Total minimum lease payments.......................................... 10,427
Amounts representing interest......................................... (2,971)
---------
Present value of future minimum lease payments........................ 7,456
Less amounts due in one year.......................................... (1,194)
---------
$ 6,262
---------
---------
</TABLE>
Total rent expense amounted to $2,248,000, $579,000 and $18,000 in 1996,
1995 and 1994, respectively.
The Company is obligated under a supply agreement with a telecommunications
equipment vendor to purchase a certain dollar volume of equipment over the next
four years in order to obtain special pricing. If the Company is unable to meet
the required purchase commitment, the Company will be obligated to pay
additional amounts for previous purchases.
9. EMPLOYEE BENEFIT PLAN:
The Company offers a 401(k) Plan to eligible employees as part of a 401(k)
Plan 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 $357,000 and
$50,000 in 1996 and 1995, respectively.
10. MEMBERS' EQUITY:
MEMBERSHIP UNITS
The Company's limited liability company agreement provides for both Class A
and Class B membership interests in the Company. Class A Unit holders are
entitled to a preferred return on their investment in the Company plus a return
of their capital upon the dissolution of the Company. Class B Units are granted
in connection with the Company's Amended and Restated Equity Option Plan (EOP).
Although Class B Units, when exercised, will constitute an ownership interest in
the Company, the interest is limited to the appreciation in the value of the
Company, that is the distributable profits interest,
F-13
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
10. MEMBERS' EQUITY: (CONTINUED)
if any, of the Company. On January 31, 1997, the Company merged with and into
NEXTLINK Communications, Inc. (see Note 12).
The valuation of membership units is determined by the EOP Administrative
Committee. The value of Class A Units as of December 31, 1995 and 1996 was
determined to be approximately $1.45 and $4.36, respectively, and the
appreciation interest per unit for Class B Units was approximately $0.44 and
$3.50 as of the same dates.
RECAPITALIZATION
Effective January 1, 1996, the Company merged four of its five operating
subsidiaries with newly formed entities owned by the Company (the
Recapitalization). As a result of these mergers, the entities and individuals
holding minority interests in the subsidiaries exchanged these interests for
3,841,207 Class A Units of the Company (representing an approximate 5.9%
ownership interest in the Company) which were valued at approximately $5.6
million. NEXTLINK Washington, L.L.C. did not participate in the merger. The
transaction has been accounted for as a purchase of minority interests.
Accordingly, the $2.9 million excess of the purchase price over the book value
of the interests acquired was recorded as goodwill.
In addition to the exchange of equity interests, the Company exchanged
options to acquire equity interests in the subsidiaries for options to acquire
Class B Units in the Company. In connection with this transaction, the Company
issued 1,953,656 options with exercise prices of $0.01 and four-year vesting
schedules. These options had substantially the same economic values and vesting
schedules as the subsidiary options which were exchanged. These options are
included in the summary of information regarding the EOP that follows.
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 grants,
including those granted pursuant to the Recapitalization, are considered
compensatory and are accounted for similar to stock appreciation rights. The
Company recognizes compensation expense over the vesting period based on the
excess of the fair value of the Class B Units, as determined by the
Administrative Committee, over the exercise price of the option and such expense
is periodically adjusted for changes in the fair value of the Class B units.
Effective January 1, 1996, the various option plans mentioned above were
replaced by the EOP. The EOP provides for the grant of EO Interests in the
Company. Options generally 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-14
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
10. MEMBERS' EQUITY: (CONTINUED)
Information regarding the Company's EOP is summarized below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF UNITS PRICES
----------- --------------
<S> <C> <C>
Balance, inception (September 16, 1994).........................
Granted....................................................... 898,996 $ 0.01
-----------
Balance, December 31, 1994...................................... 898,996 $ 0.01
Granted....................................................... 1,135,176 $ 0.01
Granted pursuant to the Recapitalization...................... 1,953,656 $ 0.01
Canceled...................................................... (375,000) $ 0.01
-----------
Balance, December 31, 1995...................................... 3,612,828 $ 0.01
Granted....................................................... 1,031,002 $ 0.85
Canceled...................................................... (101,608) $ 0.01
-----------
Balance, December 31, 1996...................................... 4,542,222 $ 0.20
----------- --------------
----------- --------------
</TABLE>
Of the options outstanding at December 31, 1996, there were 4,383,722 with
exercise prices ranging from $0.01 to $0.44 and 158,500 with an exercise price
of $3.50.
As of December 31, 1996, 1995 and 1994, there were 1,551,782, 805,864 and
59,149 options vested, respectively. For the same periods, the weighted average
exercise for these vested options were $0.02, $0.01 and $0.01, respectively. The
Company recorded $9,914,000 and $375,000 of deferred compensation expense
related to the EOP during 1996 and 1995, respectively. Such deferred
compensation is included in other long-term liabilities.
On January 31, 1997, in conjunction with the Incorporation, the Company
established a new stock option plan. All options previously outstanding will be
regranted under the new plan with terms and conditions substantially the same as
under the previous plan except that option holders will no longer have the
option to require the Company to repurchase units for cash upon exercise of such
units, nor will the Company have the option to repurchase exercised units for
cash.
11. 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.
F-15
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
11. QUARTERLY SUMMARY OF OPERATIONS (UNAUDITED): (CONTINUED)
Summarized quarterly financial data for 1996 and 1995 is as follows
(unaudited, in thousands):
<TABLE>
<CAPTION>
1996
---------------------------------------------
<S> <C> <C> <C> <C>
1ST 2ND 3RD 4TH
--------- ---------- ---------- ----------
Revenue...................................... $ 5,370 $ 6,671 $ 6,919 $ 6,726
Cost and expenses............................ 12,041 15,415 23,050 26,195
--------- ---------- ---------- ----------
Loss from operations......................... (6,671) (8,744) (16,131) (19,469)
Other income (expense), net.................. (445) (4,973) (7,371) (7,297)
--------- ---------- ---------- ----------
Net loss..................................... $ (7,116) $ (13,717) $ (23,502) $ (26,766)
--------- ---------- ---------- ----------
--------- ---------- ---------- ----------
<CAPTION>
1995
---------------------------------------------
1ST 2ND 3RD 4TH
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue...................................... $ 399 $ 1,000 $ 2,825 $ 3,328
Cost and expenses............................ 2,003 3,289 5,271 9,451
--------- ---------- ---------- ----------
Loss from operations......................... (1,604) (2,289) (2,446) (6,123)
Other income, net............................ 43 36 (95) (253)
--------- ---------- ---------- ----------
Net loss..................................... $ (1,561) $ (2,253) $ (2,541) $ (6,376)
--------- ---------- ---------- ----------
--------- ---------- ---------- ----------
</TABLE>
12. SUBSEQUENT EVENTS:
INCORPORATION
On January 31, 1997, the Company was merged into NEXTLINK Communications,
Inc. (Communications), a Washington corporation in a tax-free transaction. In
the merger, the Company's Class A membership interests were converted into
shares of Class B common stock of Communications, and options to purchase Class
B membership interests were converted into options to purchase shares of Class A
common stock of Communications. Communications Class A common stock and Class B
common stock will be identical in dividend and liquidation rights, and will vote
together as a single class on all matters, except as otherwise required by
applicable law, with the Class A shareholders entitled to cast one vote per
share, and the Class B shareholders entitled to cast 10 votes per share. In
calculating the number of shares of Communications common stock that each of the
Company's Class A members received in the merger, the Company applied a formula
that reflected each members' revalued capital account balance as of January 31,
1997. Class B membership options were converted on a one to one basis. After the
incorporation, Communications had 100,000,000 and 83,123,084 shares of Class B
common stock authorized and outstanding, respectively and 250,000,000 and 0
shares of Class A common stock authorized and outstanding, respectively with
options to purchase 4,668,912 shares of Class A common stock outstanding.
Communications also has 25,000,000 shares of Preferred Stock authorized,
5,700,000 are outstanding. See below under "Financing." The amount of Class B
common stock outstanding excludes 3,571,364 shares of Class B common stock
issuable upon exercise of an option granted to Mr. James F. Voelker, the
Company's President.
F-16
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
12. SUBSEQUENT EVENTS: (CONTINUED)
The conversion of the Company to a taxable corporation will result in the
Company recording fully reserved net deferred tax assets. Major items giving
rise to deferred tax assets include deferred compensation and certain operating
expenses capitalized for tax purposes. Management believes that, based on a
number of factors, the available objective evidence creates sufficient
uncertainty regarding the realization of the net deferred tax assets.
Accordingly, a valuation allowance will be provided for the net deferred tax
assets of the Company.
FINANCING
On January 31, 1997, the Company completed the sale of 5.7 million units
consisting of (i) 14% senior exchangeable redeemable preferred shares (Preferred
Shares), liquidation preference $50 per share, and (ii) contingent warrants to
acquire in the aggregate 5% of each class of outstanding junior shares (as
defined) of the Company on a fully diluted basis as of February 1, 1998, which
resulted in gross proceeds to the Company of $285 million and proceeds net of
underwriting discounts, advisory fees and expenses of $274 million. Dividends on
the Preferred Shares will accrue from January 31, 1997 and will be payable
quarterly commencing on May 1, 1997 at an annual rate of 14% of the liquidation
preference thereof. Dividends may be paid, at the Company's option, on any
dividend payment date occurring on or prior to February 1, 2002 either in cash
or by issuing additional Preferred Shares with an aggregate liquidation
preference equal to the amount of such dividends. The Company is required to
redeem all of the Preferred Shares outstanding on February 1, 2009 at a
redemption price equal to 100% of the liquidation preference thereof, plus
accumulated and unpaid dividends to the date of redemption.
Subject to certain conditions, the Preferred Shares are exchangeable in
whole, but not in part, at the option of the Company, on any dividend payment
date, for the 14% senior subordinated notes (Senior Subordinated Notes) due
February 1, 2009 of the Company. All terms and conditions of the Senior
Subordinated Notes would be substantially the same as those of the Preferred
Shares.
The contingent warrants are only exercisable on any business day after
February 1, 1998 if a Qualifying Event has not occurred on or prior to February
1, 1998. A Qualifying Event means a public equity <#>offering</#> (as defined)
or one or more strategic equity investments (as defined) which in either case
results in aggregate net proceeds to the Company of not less than $75 million.
In the event of a change in control of the Company, the Company will be
required to offer to purchase all of the then outstanding Preferred Shares at a
price equal to 101% of the liquidation preference thereof, plus accumulated and
unpaid dividends to the date of redemption.
ACQUISITION
On February 4, 1997, the Company completed the acquisition of substantially
all of the assets of Linkatel Pacific, L.P. (Linkatel), a Los Angeles-based
competitive access telecommunications provider. At the time of acquisition,
Linkatel operated an 80 mile fiber optic telecommunications network covering
several markets in the Orange and Los Angeles county areas. The acquired assets
consist primarily of fiber optic network equipment and rights-of-way. The
Company plans to expand the network and add switching facilities in order to
provide local dial tone services during 1997. The total purchase price of $42.5
million consisted of a cash payment of $36.1 million, the repayment of debt of
$5.6 million and the assumption of net liabilities of $0.8 million.
F-17
<PAGE>
NEXTLINK COMMUNICATIONS, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
12. SUBSEQUENT EVENTS: (CONTINUED)
The assets acquired and consideration given were as follows (in thousands):
<TABLE>
<S> <C>
Fair value of tangible assets and liabilities acquired............ $ 12,003
Fair value of intangible assets acquired.......................... 29,682
---------
$ 41,685
---------
---------
Cash paid for assets, including repayment of debt................. $ 41,685
---------
---------
</TABLE>
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 December 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
December 31, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
SEATTLE, WASHINGTON,
MARCH 11, 1997
F-19
<PAGE>
NEXTLINK CAPITAL, INC.
BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS
<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
DECEMBER 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.C.C. (NEXTLINK). NEXTLINK
Capital was initially funded with a $100 contribution from NEXTLINK and 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 and 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>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the <#>Registrant</#> has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on March 13,
1997.
NEXTLINK COMMUNICATIONS, INC.
/S/ CRAIG O. MCCAW
---------------------------------------------
BY: CRAIG O. MCCAW
TITLE: CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated:
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ CRAIG O. MCCAW Chief Executive Officer and
- ------------------------------ Director March 13, 1997
Craig O. McCaw
Vice President, Chief
/s/ KATHLEEN H. ISKRA Financial Officer
- ------------------------------ (Principal Financial March 13, 1997
Kathleen H. Iskra Officer and Principal
Accounting Officer)
/s/ JAMES F. VOELKER President (Principal
- ------------------------------ Executive Officer) and March 13, 1997
James F. Voelker Director
/s/ DENNIS WEIBLING Director
- ------------------------------ March 13, 1997
Dennis Weibling
/s/ SCOT JARVIS Director
- ------------------------------ March 13, 1997
Scot Jarvis
/s/ C. JAMES JUDSON Director
- ------------------------------ March 13, 1997
C. James Judson
/s/ WILLIAM A. HOGLUND Director
- ------------------------------ March 13, 1997
William A. Hoglund
<PAGE>
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
NEXTLINK COMMUNICATIONS MERGER, 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.
1. NAME. The name of the corporation (the "Corporation") is
NEXTLINK COMMUNICATIONS MERGER, INC.
2. PURPOSE. The nature of the business or purpose to be conducted
or promoted by the Corporation is to engage in any lawful act or activity for
which corporations may be organized under the Corporation Law of the State of
Washington.
3. SHARES. The Corporation shall have authority to issue Three
Hundred Fifty Million (350,000,000) shares of common stock (the "Common Stock"),
which shall be divided into two classes, Two Hundred Fifty Million (250,000,000)
shares of Class A Common Stock, par value $.01 per share (the "Class A Common
Stock"), and One Hundred Million (100,000,000) shares of Class B Common Stock,
par value $.01 per share (the "Class B Common Stock"). The Corporation shall
have authority to issue Twenty Five Million (25,000,000) shares of preferred
stock, par value $.01 per share (the "Preferred Stock").
The Class A and Class B Common Stock are entitled to vote on all
matters which come before the stockholders. Subject to the differential voting
power hereafter described in this paragraph 3, all Common Stock shall vote
together as a single class. Each share of Class A Common Stock shall have one
(1) vote and each share of Class B Common Stock shall have ten (10) votes on all
matters on which holders of Common Stock are entitled to vote. Each share of
Class B Common Stock may be converted, at any time and at the option of the
holder, into one share of Class A Common Stock.
Page 1- ARTICLES OF INCORPORATION
<PAGE>
Except with regard to the differential voting power hereinbefore
described in this paragraph 3, the Class A Common Stock and the Class B Common
Stock shall carry identical characteristics, rights, preferences, and
limitations, including but not limited to participating equally in any dividends
when and as declared by the Directors out of funds lawfully available therefor
and in any distribution resulting from a liquidation or distribution of assets,
whether voluntary or involuntary, in each case subject to any preferential
rights granted to any series of Preferred Stock that may be then outstanding.
Shares of Preferred Stock of the Corporation may be issued from time
to time in one or more classes or series, each of which class or series shall
have such distinctive designation or title as shall be fixed by the Board of
Directors of the Corporation (the "Board of Directors") and recorded in Articles
of Amendment adopted and filed as required by RCW 23B.06.020(4) prior to the
issuance of any shares thereof. Each such class or series of Preferred Stock
shall have such voting powers, full or limited, or no voting powers, and such
preferences and relative participating, option or other special rights and such
qualifications, limitations or restrictions thereof, as shall be stated in such
resolution or resolutions providing for the issue of such class or series of
Preferred Stock as may be adopted from time to time by the Board of Directors
prior to the issuance of any shares thereof pursuant to the authority hereby
expressly vested in it, all in accordance with the laws of the State of
Washington.
4. NO PREEMPTIVE RIGHTS. Except as may otherwise be provided by the
Board of Directors, no preemptive rights shall exist with respect to shares of
stock or securities convertible into shares of stock of this corporation.
5. 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.
6. BYLAWS. In furtherance and not in limitation of the
Page 2- ARTICLES OF INCORPORATION
<PAGE>
powers conferred by statute, the bylaws of the Corporation may be made, altered,
amended or repealed by the stockholders or by a majority of the entire Board of
Directors.
7. 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:
NAME ADDRESS
DWTR&J Corp. 2600 Century Square
1501 Fourth Avenue
Seattle, WA 98101-1688
8. DIRECTORS. 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. The initial Board
of Directors shall consist of 6 directors and their names and addresses are as
follows:
NAME ADDRESS
Craig O. McCaw 2300 Carillon Point
Kirkland, Wa. 98033
Scot Jarvis 155 108th Ave. N.E., Ste. 810
Bellevue, Wa. 98004
James F. Voelker 155 108th Ave. N.E., Ste. 810
Bellevue, Wa. 98004
C. James Judson 2300 Carillon Point
Kirkland, Wa. 98033
Dennis Weibling 2300 Carillon Point
Kirkland, Wa. 98033
William A. Hoglund 2300 Carillon Point
Kirkland, Wa. 98033
Page 3- ARTICLES OF INCORPORATION
<PAGE>
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. Elections of directors
need not be by written ballot.
9. INCORPORATOR. The name and mailing address of the incorporator
are as follows:
Greg F. Adams
Davis Wright Tremaine
2600 Century Square
1501 Fourth Avenue
Seattle, Washington 98101-1688
10. INDEMNIFICATION.
(a) The Corporation shall indemnify to the fullest extent permitted
under and in accordance with the laws of the State of Washington any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, trustee, employee or agent of or in any
other capacity with another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees and costs),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
(b) Expenses incurred in defending a civil or criminal action, suit
or proceeding shall (in the case of any action, suit or proceeding against a
director of the Corporation) or may (in the case of any action, suit or
proceeding against an officer, trustee,
Page 4- ARTICLES OF INCORPORATION
<PAGE>
employee or agent) be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the Board of
Directors upon receipt of an undertaking by or on behalf of the indemnified
person to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this paragraph
10.
(c) The indemnification and other rights set forth in this paragraph
10 shall not be exclusive of any provisions with respect thereto in the bylaws
or any other contract or agreement between the Corporation and any officer,
director, employee or agent of the Corporation.
(d) Neither the amendment nor repeal of this paragraph 10,
subparagraph (a), (b) or (c), nor the adoption of any provision of these
Articles of Incorporation inconsistent with this paragraph 10, subparagraph (a),
(b) or (c), shall eliminate or reduce the effect of this paragraph 10,
subparagraphs (a), (b) and (c), in respect of any matter occurring before such
amendment, repeal or adoption of an inconsistent provision or in respect of any
cause of action, suit or claim relating to any such matter which would have
given rise to a right of indemnification or right to receive expenses pursuant
to this paragraph 10, subparagraph (a), (b) or (c), if such provision had not
been so amended or repealed or if a provision inconsistent therewith had not
been so adopted.
11. LIMITATION OF DIRECTOR 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
Page 5- ARTICLES OF INCORPORATION
<PAGE>
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.
12. SHAREHOLDER VOTING ON 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.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a Corporation pursuant to the Corporation Law of the State of
Washington, executes these Articles, hereby declaring and certifying that this
is his act and deed and the facts herein stated are true and, accordingly, has
hereunto set his hand this 13th day of January, 1997.
/s/ GREG F. ADAMS
--------------------------
Greg F. Adams
Incorporator
Page 6- ARTICLES OF INCORPORATION
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
NEXTLINK COMMUNICATIONS MERGER, INC.
These Bylaws are intended to conform to the mandatory requirements of the
Washington Business Corporation Act, RCW Chapter 23B, (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 date and time
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, whether stated in the notice of meeting or not, except as
otherwise expressly stated in the articles of incorporation. 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 or the
Board of Directors for any purpose at any time, and shall be called by the
President at the request of the holders of shares entitled to cast at least 25%
of votes eligible to be cast. Special meetings shall be held at such place or
places within or without the state of Washington as shall be designated by the
Board of Directors and stated in the notice of such meeting. At a special
meeting no business shall be transacted and no corporate action shall be taken
other than that stated in the notice of the meeting.
BYLAWS - Page 1
<PAGE>
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, or
for such other notice period as may be required by the Act. Such notice and the
effective date thereof shall be determined as provided in the Act.
Section 5. - Quorum.
A majority of votes entitled to be cast by 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 present, and subject to the requirements of the Act, 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 that number of votes provided in the Articles of Incorporation 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.
BYLAWS - Page 2
<PAGE>
The secretary shall prepare and make, at least ten days before every
election of directors, a complete list of the Shareholders entitled to vote,
arranged in alphabetical order and showing the address of each Shareholder and
the number of shares of each Shareholder. Such list shall be open at the
offices of the Corporation for said ten days, to the examination of any
Shareholder, and shall be produced and kept at the time and place of election
during the whole time thereof, and subject to the inspection of any Shareholder
who may be present.
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.
Section 9. - Record Date.
The Board of Directors is authorized to fix in advance a date not exceeding
seventy days nor less than ten days preceding the date of any meeting of the
Shareholders, or the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with obtaining the
consent Shareholders for any purposes, as a record date for the determination of
the Shareholders entitled to notice of, and to vote at, any such meeting, and
any adjournment thereof, or entitled to receive payment of any such dividend, or
to any such allotment of rights, or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, or to give such consent,
and, in such case, such Shareholders and only such Shareholders as shall be
Shareholders of record on the date so fixed shall be entitled to such notice of,
and to vote at, such meeting, and any adjournment thereof, or to receive payment
of such dividend, or to receive such allotment of rights, or to exercise such
rights, or to give such consent, as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation, after such record date
fixed pursuant to this Section.
Section 10. - Conduct of Meetings.
The Chairman of the Board of Directors or, in his absence the Chief
Executive Officer, President, or the vice-President designated by the Chairman
of the Board, shall preside at all regular or special meetings of Shareholders.
To the maximum extent permitted by law, such presiding person shall have the
power to set procedural rules, including but not limited to rules respecting the
time allotted to Shareholders to speak, governing all aspects of the conduct of
such meetings.
BYLAWS - Page 3
<PAGE>
ARTICLE II
DIRECTORS
Section 1. - In General.
The business and affairs of the Corporation shall be managed by a Board of
Directors initially consisting of six (6) directors, and thereafter shall
consist of such number as may 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.
Section 3. - Vacancies.
Vacancies in the Board of Directors may 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.
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.
BYLAWS - Page 4
<PAGE>
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 and Place of Meetings.
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.
Meetings of the Board of Directors may be held at the principal office of
the corporation, or at such other place as shall be stated in the notice of such
meeting. Members of the Board of Directors, or any committee designated by the
board of directors, shall, except as otherwise provided by law, the Articles of
Incorporation or these By-laws, have the power to participate in a meeting of
the board of Director, or any committee, by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation shall constitute
presence in person at this meeting.
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.
BYLAWS - Page 5
<PAGE>
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 manifested in the
manner required by the Act. Such right to dissent shall not apply to a Director
who voted in favor of such action.
Section 11. - Committees.
The Board of Directors may, by resolution passed by a majority of the whole
Board, designate two or more of their number to constitute an Executive
Committee to hold office at the pleasure of the board, which committee shall,
during the intervals between meetings of the Board of Directors, have and
exercise all of the powers of the Board of Directors in the management of the
business and affairs of the Corporation, subject only to such restrictions or
limitations as the Board of Directors may from time to time specify, or as
limited by the Act. Any member of the Executive Committee may be removed at any
time, with or without cause, by a resolution of a majority of the whole Board of
Directors. Any vacancy in the Executive Committee may be filled from among the
directors by a resolution of a majority of the whole Board of Directors. Other
committees of two or more Directors, may be appointed by the Board of Directors
or the Executive Committee, which committees shall hold office for such time and
have such powers and perform such duties as may from time to time be assigned to
them by the Board of Directors or the Executive Committee.
ARTICLE III
OFFICERS AND AGENTS - GENERAL PROVISIONS
Section 1. - Number, Election and Term.
Officers of the Corporation shall be a President, Secretary, and Treasurer.
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 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.
BYLAWS - Page 6
<PAGE>
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, subject to Sections 2 and 3 of this Article IV, 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. - Chief Executive Officer.
The Chief Executive Officer, if any, 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
BYLAWS - Page 7
<PAGE>
addition, if no Chairman of the Board is elected by the Board or if the Chairman
is unavailable, the Chief Executive Officer shall perform all the duties
required of such officer by these Bylaws.
Section 3. - President.
The President shall, if no Chief Executive Officer shall have been
appointed or if the Chief Executive Officer is unavailable, perform all of the
duties of the Chief Executive Officer. If a Chief Executive Officer shall have
been appointed, the President shall perform such duties as shall be assigned by
the Board of Directors, and in the case of absence, death or disability of the
Chief Executive Officer, shall perform and be vested with all of the duties and
powers of the Chief Executive Officer, until the Chief Executive Officer shall
have resumed such duties or the Chief Executive Officer's successor shall have
been appointed.
Section 4. - Vice President.
The Vice President, or any of them, 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 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 5. - 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 6. - 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
BYLAWS - Page 8
<PAGE>
Shareholders as may be required, perform such other duties as the Board of
Directors may from time to time delegate.
Section 7. - 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 evidenced by an entry in
stock transfer records of the Corporation, and may 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, upon request, to a certificate of
stock. All certificates shall be consecutively numbered by class.
Certificates, if any, shall be signed by the Chairman of the Board of Directors,
the President or one of the Vice Presidents, and the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, provided, however, that
where such certificates are signed by a transfer agent or an assistant transfer
agent or by a transfer clerk acting on behalf of the corporation and a
registrar, the signature of any such officer may be facsimile.
Section 2. - Transfer of Certificates.
Any certificates of stock transferred by endorsement shall be surrendered,
canceled 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, with respect to certificated shares, Section 2 of this Article are met to
the satisfaction of the Secretary of the Corporation.
The Board of Directors may make other and further rules and regulations
concerning the transfer and registration of shares of the Corporation, and may
appoint a transfer agent
BYLAWS - Page 9
<PAGE>
or registrar or both and may require all certificates of stock to bear the
signature of either or both.
The stock ledgers of the Corporation, containing the names and addresses of
the shareholders and the number of shares held by them respectively, shall be
kept at the principal offices of the Corporation or at the offices of the
transfer agent 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.
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.
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.
BYLAWS - Page 10
<PAGE>
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.
ARTICLE X
MISCELLANEOUS
Section 1. - Fiscal Year.
The fiscal year of the Corporation shall be fixed, and may be changed, by
resolution of the Board of Directors.
Section 2. - Notices.
Except as otherwise expressly provided, any notice required by these By-
laws to be given shall be sufficient if given as provided in RCW 23B.01.410.
Section 3. - Waiver of Notice.
Any Shareholder or director may at any time, by writing or by fax, waive
any notice required to be given under these By-laws, and if any Shareholder or
director shall be present at any meeting his presence shall constitute a waiver
of such notice.
BYLAWS - Page 11
<PAGE>
Section 4. - Voting Stock of Other Corporations.
Except as otherwise ordered by the Board of Directors, the Chairman of the
Board, Chief Executive Officer, President or Treasurer shall have full power and
authority on behalf of the Corporation to attend and to act and to vote at any
meeting of the shareholders of any corporation of which the Corporation is a
shareholder and to execute a proxy to any other person to represent the
Corporation at any such meeting, and at any such meeting such person shall
possess and may exercise any and all rights and powers incident to ownership of
such stock and which, as owner thereof, the Corporation might have possessed and
exercised if present.
ARTICLE XI
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 Communications, Inc. and that the foregoing Bylaws in ten
typewritten pages numbered consecutively from 1 to 12, were and are the Bylaws
adopted by the Directors of the Corporation at that meeting.
/s/ R. BRUCE EASTER, JR.
--------------------------------------------
R. Bruce Easter, Jr., Secretary
BYLAWS - Page 12
<PAGE>
Exhibit 4.1
================================================================================
NEXTLINK COMMUNICATIONS, INC.
TO
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
------------------------
Indenture
Dated as of ________, _____
------------------------
$___________
14% SENIOR SUBORDINATED NOTES DUE 2009
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE ONE Page
Definitions and Other Provisions
of General Application
SECTION 101. Definitions...................................... 1
Act ................................................... 2
Acquired Debt............................................ 2
Affiliate................................................ 2
Agent Member............................................. 2
Asset Disposition........................................ 2
Bank Credit Agreement.................................... 2
Board of Directors....................................... 3
Board Resolution......................................... 3
Business Day............................................. 3
Capital Lease Obligation................................. 3
Capital Stock............................................ 3
Change of Control........................................ 3
Commission............................................... 3
Common Equity............................................ 3
Company.................................................. 3
Company Request.......................................... 3
Consolidated Capital Ratio............................... 4
Consolidated Cash Flow Available for Fixed Charges....... 4
Consolidated Income Tax Expense.......................... 4
Consolidated Interest Expense............................ 4
Consolidated Net Income.................................. 4
Consolidated Net Worth................................... 5
Consolidated Tangible Assets............................. 5
Corporate Trust Office................................... 5
corporation.............................................. 5
Debt ................................................... 5
Default.................................................. 6
Defaulted Interest....................................... 6
Depository............................................... 6
Designated Senior Debt................................... 6
Disqualified Stock....................................... 6
DTC ................................................... 7
Eagle River.............................................. 7
Eligible Institution..................................... 7
Event of Default......................................... 7
Exchange Act............................................. 7
-i-
<PAGE>
Page
Exchange and Registration Rights Agreements.............. 7
Exchange Offer........................................... 7
Exchange Security........................................ 7
Global Security.......................................... 7
Government Securities.................................... 7
Guarantee................................................ 7
Holder................................................... 8
Incur ................................................... 8
Indenture................................................ 8
Initial Purchasers....................................... 8
Interest Payment Date.................................... 8
Interest Rate or Currency Protection Agreement........... 8
Investment............................................... 8
Issue Date............................................... 9
Joint Venture............................................ 9
Junior Shares............................................ 9
Lien ................................................... 9
Marketable Securities.................................... 9
Maturity................................................. 9
Net Available Proceeds................................... 9
Offer Expiration Date.................................... 10
Offer to Purchase........................................ 10
Officers' Certificate.................................... 12
Opinion of Counsel....................................... 12
Original Securities...................................... 12
Outstanding.............................................. 12
Paying Agent............................................. 13
Permitted Interest Rate or Currency Protection Agreement. 13
Permitted Investment..................................... 13
Person................................................... 14
Predecessor Security..................................... 14
Preferred Dividends...................................... 14
Preferred Issue Date..................................... 14
Preferred Shares......................................... 14
Preferred Stock.......................................... 14
Public Equity Offering................................... 14
Purchase Date............................................ 14
Purchase Money Debt...................................... 14
Qualifying Event......................................... 15
Qualified Junior Shares.................................. 15
readily marketable cash equivalents...................... 15
Receivables.............................................. 15
Receivables Sale......................................... 15
Redemption Date.......................................... 15
-ii-
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Page
Redemption Price......................................... 15
Registration Default..................................... 15
Regular Record Date...................................... 15
Related Person........................................... 15
Responsible Officer...................................... 16
Restricted Subsidiary.................................... 16
Rule 144................................................. 16
Rule 144A................................................ 16
Secondary Securities..................................... 16
Securities............................................... 16
Securities Act........................................... 16
Security Register........................................ 16
Security Registrar....................................... 16
Senior Debt.............................................. 16
Senior Notes............................................. 17
Significant Subsidiary................................... 17
Special Interest......................................... 17
Special Record Date...................................... 17
Stated Maturity.......................................... 17
Strategic Equity Investment.............................. 17
Strategic Investor....................................... 17
Subordinated Debt........................................ 17
Subsidiary............................................... 18
Successor Security....................................... 18
Telecommunications Assets................................ 18
Telecommunications Business.............................. 18
Trustee.................................................. 19
Trust Indenture Act...................................... 19
Unrestricted Subsidiary.................................. 19
Vendor Financing Facility................................ 19
Vice President........................................... 19
Voting Stock............................................. 19
Wholly-Owned Restricted Subsidiary....................... 20
SECTION 102. Compliance Certificates and Opinions............. 20
SECTION 103. Form of Documents Delivered to Trustee........... 20
SECTION 104. Acts of Holders; Record Dates.................... 21
SECTION 105. Notices, Etc., to Trustee and the Company........ 23
SECTION 106. Notice to Holders; Waiver........................ 23
-iii-
<PAGE>
Page
SECTION 107. The Application of Trust Indenture Act........... 24
SECTION 108. Effect of Headings and Table of Contents......... 24
SECTION 109. Successors and Assigns........................... 24
SECTION 110. Separability Clause.............................. 24
SECTION 111. Benefits of Indenture............................ 24
SECTION 112. Governing Law.................................... 24
SECTION 113. Legal Holidays................................... 25
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally.................................. 25
SECTION 202. Form of Face of Security......................... 25
SECTION 203. Form of Reverse of Security...................... 29
SECTION 204. Form of Trustee's Certificate of Authentication.. 32
ARTICLE THREE
The Securities
SECTION 301. Title and Terms.................................. 33
SECTION 302. Denominations.................................... 35
SECTION 303. Execution, Authentication, Delivery and Dating... 35
SECTION 304. Temporary Securities............................. 36
SECTION 305. Global Securities; Registration, Registration of
Transfer and Exchange......................... 37
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. 40
-iv-
<PAGE>
Page
SECTION 307. Payment of Interest; Interest Rights Preserved... 40
SECTION 308. Persons Deemed Owners............................ 42
SECTION 309. Cancellation..................................... 42
SECTION 310. Computation of Interest.......................... 42
SECTION 311. CUSIP Numbers.................................... 42
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<PAGE>
Page
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture.......... 43
SECTION 402. Application of Trust Money....................... 44
ARTICLE FIVE
Remedies
SECTION 501. Events of Default................................ 44
SECTION 502. Acceleration of Maturity; Rescission and
Annulment.................................... 46
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee....................... 47
SECTION 504. Trustee May File Proofs of Claim................. 47
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities................................... 48
SECTION 506. Application of Money Collected................... 48
SECTION 507. Limitation on Suits.............................. 49
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest.............. 49
SECTION 509. Restoration of Rights and Remedies............... 49
SECTION 510. Rights and Remedies Cumulative................... 50
SECTION 511. Delay or Omission Not Waiver..................... 50
SECTION 512. Control by Holders............................... 50
SECTION 513. Waiver of Past Defaults.......................... 51
SECTION 514. Undertaking for Costs............................ 51
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<PAGE>
Page
SECTION 515. Waiver of Stay or Extension Laws................. 51
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.............. 52
SECTION 602. Notice of Defaults............................... 52
SECTION 603. Certain Rights of Trustee........................ 52
SECTION 604. Not Responsible for Recitals or Issuance of
Securities................................... 53
SECTION 605. May Hold Securities.............................. 53
SECTION 606. Money Held in Trust.............................. 53
SECTION 607. Compensation and Reimbursement................... 54
SECTION 608. Disqualification; Conflicting Interests.......... 54
SECTION 609. Corporate Trustee Required; Eligibility.......... 55
SECTION 610. Resignation and Removal; Appointment of
Successor.................................... 55
SECTION 611. Acceptance of Appointment by Successor........... 56
SECTION 612. Merger, Conversion, Consolidation or Succession
to Business.................................. 56
SECTION 613. Preferential Collection of Claims Against
Company...................................... 57
SECTION 614. Appointment of Authenticating Agent.............. 57
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and the Company
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<PAGE>
Page
SECTION 701. Company to Furnish Trustee Names and Addresses
of Holders................................... 59
SECTION 702. Preservation of Information; Communications to
Holders...................................... 59
SECTION 703. Reports by Trustee............................... 59
SECTION 704. Reports by Company............................... 60
SECTION 705. Officers' Certificate with Respect to Change in
Interest Rates............................... 60
ARTICLE EIGHT
Merger, Consolidation, Etc
SECTION 801. Mergers, Consolidations and Certain Sales of
Assets....................................... 60
SECTION 802. Successor Substituted............................ 61
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of
Holders...................................... 62
SECTION 902. Supplemental Indentures with Consent of
Holders...................................... 63
SECTION 903. Execution of Supplemental Indentures............. 64
SECTION 904. Effect of Supplemental Indentures................ 64
SECTION 905. Conformity with Trust Indenture Act.............. 65
SECTION 906. Reference in Securities to Supplemental
Indentures................................... 65
ARTICLE TEN
-viii-
<PAGE>
Page
Covenants
SECTION 1001. Payment of Principal, Premium and
Interest. ....................................65
SECTION 1002. Maintenance of Office or Agency................. 65
SECTION 1003. Money for Security Payments to be Held in Trust. 66
SECTION 1004. Existence....................................... 67
SECTION 1005. Maintenance of Properties and Insurance......... 67
SECTION 1006. Payment of Taxes and Other Claims............... 68
SECTION 1007. Limitation on Consolidated Debt................. 68
SECTION 1008. Limitation on Senior Subordinated Debt ......... 70
SECTION 1009. Limitation on Restricted Payments............... 70
SECTION 1010. Limitation on Dividend and Other Payment
Restrictions Affect Restricted Subsidiaries . 72
SECTION 1011. Limitation on Liens............................. 73
SECTION 1012. Limitation on Issuance of Guarantees of
Subordinated Debt............................ 73
SECTION 1013. Limitation on Asset Dispositions................ 73
SECTION 1014. Limitation on Issuances and Sales of Capital
Stock of Restricted Subsidiaries............. 75
SECTION 1015. Transactions with Affiliates and Related
Persons...................................... 75
SECTION 1016. Change of Control............................... 76
SECTION 1017. Provision of Financial Information.............. 77
SECTION 1018. Statement by Officers as to Default............. 77
SECTION 1019. Waiver of Certain Covenants..................... 77
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<PAGE>
Page
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption............................. 78
SECTION 1102. Applicability of Article........................ 78
SECTION 1103. Election to Redeem; Notice to Trustee............78
SECTION 1104. Securities to Be Redeemed Pro Rata.............. 78
SECTION 1105. Notice of Redemption............................ 79
SECTION 1106. Deposit of Redemption Price..................... 80
SECTION 1107. Securities Payable on Redemption Date........... 80
SECTION 1108. Securities Redeemed in Part..................... 80
ARTICLE TWELVE
Defeasance and Covenant Defeasance
SECTION 1201. Company's Option to Effect Defeasance or
Covenant Defeasance.......................... 81
SECTION 1202. Defeasance and Discharge........................ 81
SECTION 1203. Covenant Defeasance............................. 81
SECTION 1204. Conditions to Defeasance or Covenant Defeasance. 82
SECTION 1205. Deposited Money and U.S. Government
Obligations to Be Held in Trust;
Other Miscellaneous Provisions. ............. 83
SECTION 1206. Reinstatement................................... 84
SECTION 1207. Repayment to Company............................ 84
ARTICLE THIRTEEN
Subordination of Securities
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Page
SECTION 1301. Securities Subordinate to Senior Debt. ......... 85
SECTION 1302. Payment Over of Proceeds Upon Dissolution, Etc.. 85
SECTION 1303. No Payment When Senior Debt in Default.......... 86
SECTION 1304. Payment Permitted If No Default................. 87
SECTION 1305. Subrogation to Rights of Holders of Senior Debt. 87
SECTION 1306. Provisions Solely to Define Relative Rights..... 87
SECTION 1307. Trustee to Effectuate Subordination............. 88
SECTION 1308. No Waiver of Subordination Provisions........... 88
SECTION 1309. Notice to Trustee............................... 89
SECTION 1310. Reliance on Judicial Order or Certificate of
Liquidating Agent............................ 89
SECTION 1311. Trustee Not Fiduciary for Holders of Senior Debt 90
SECTION 1312. Rights of Trustee as Holder of Senior Debt;
Preservation of Trustee's Rights. ........... 90
SECTION 1313. Article Applicable to Paying Agents............. 90
SECTION 1314. Defeasance of this Article Thirteen............. 90
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<PAGE>
NEXTLINK COMMUNICATIONS, INC.
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section Section
- --------------- ---------
ss. 310(a)(1)..............................................................609
(a)(2)..............................................................609
(a)(3)...................................................Not Applicable
(a)(4)...................................................Not Applicable
(b).................................................................608
................................................................610
ss. 311(a).................................................................613
(b).................................................................613
ss. 312(a).................................................................701
..............................................................702(a)
(b)..............................................................702(b)
(c)..............................................................702(c)
ss. 313(a)..............................................................703(a)
(a)(4)...........................................................703(a)
(b)..............................................................703(a)
(c)..............................................................703(a)
(d)..............................................................703(b)
ss. 314(a).................................................................704
...............................................................1018
(b)......................................................Not Applicable
(c)(1)..............................................................102
(c)(2)..............................................................102
(c)(3)...................................................Not Applicable
(d)......................................................Not Applicable
(e).................................................................102
ss. 315(a).................................................................601
(b).................................................................602
(c).................................................................601
(d).................................................................601
(e).................................................................514
ss. 316(a)(1)(A)...........................................................502
..........................................................512
- ----------
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
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<PAGE>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
(a)(1)(B)...........................................................513
(a)(2)...................................................Not Applicable
(b).................................................................508
(c).................................................................104
ss. 317(a)(1)..............................................................503
(a)(2)..............................................................504
(b)................................................................1003
ss. 318(a).................................................................107
- ----------
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
-ii-
<PAGE>
INDENTURE, dated as of ________ __, ____ between NEXTLINK
Communications, Inc., a corporation organized under the laws of the State of
Washington (the "Company"), 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 COMPANY
The Company has duly authorized the creation of an issue of
$___________ initial aggregate principal amount of its 14% Senior Subordinated
Notes due February 1, 2009 (the "Securities") of substantially the tenor and
amount hereinafter set forth, and to provide therefor the Company has 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
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, 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:
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
<PAGE>
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 Company 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.
"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.
"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 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.
"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
-2-
<PAGE>
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 the board of directors of the Company.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors 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
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.
"Certificate of Designations" means the Certificate of Designations
of the Powers, Preference and Relative Participating, Optional and Other Special
Rights of the Preferred Shares and Qualifications, Limitations and Restrictions
thereof.
"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 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.
-3-
<PAGE>
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by (i) the Chief Executive Officer, the
President, or a Vice President of the Company, and (ii) the Treasurer, Assistant
Treasurer or Secretary of the Company, and delivered to the Trustee.
"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.
"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
-4-
<PAGE>
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 Issue Date 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 Issue Date 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.
"Covenant Amendment" means either (i) the defeasance, extinguishment
or amendment of certain covenants of the Senior Indenture that would cause the
Preferred Shares to be deemed "Disqualified Stock" under the Senior Indenture
(and as defined in the Senior Indenture) if the provisions of paragraph
(f)(G)(x) and (y) of the Certificate of Designations were a part of the
-5-
<PAGE>
Certificate of Designations, and include, but are not limited to, the definition
of Disqualified Stock in the Senior Indenture or (ii) defeasance or
extinguishment of the Senior Indenture of its entirety.
"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 or
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.
"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.
"Designated Senior Debt" means (i) Debt under the Senior Notes and
(ii) any Senior Debt of the Company (a) which at the time of determination
exceeds $15 million in aggregate principal amount outstanding or available under
a committed facility, (b) which is designated in the instrument evidencing such
Senior Debt as "Designated Senior Debt" by the Company and (c) as to which the
Trustee has received an Officers' Certificate specifying such Senior Debt as
"Designated Senior Debt."
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"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 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 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.
"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 and Registration Rights Agreement" means the Preferred
Exchange and Registration Rights Agreement, dated as of January 31, 1997,
between the Company and the Initial Purchasers, as it may be amended from time
to time, attached hereto as Annex A.
"Exchange Offer" has the meaning specified in the Exchange and
Registration Rights Agreement.
"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.
"Global Security" means, a Security registered in the name of the
Depository.
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"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 18 months
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 on real or
personal property of such Restricted Subsidiary 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 this Indenture, shall
not be deemed to constitute a Guarantee by such Restricted Subsidiary of any
Purchase Money Debt of the Company secured thereby; 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 or 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).
"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 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
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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 Merrill Lynch, Pierce, Fenner & Smith
Incorporated 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 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.
"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%.
"Junior Shares" means Capital Stock of the Company that does not
rank, as to the payment of dividends or other comparable distributions or as to
the distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company, prior to or on a parity with the
Preferred Shares.
"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
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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).
"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 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 the Board
of Directors, in its reasonable good faith judgment evidenced by a Board
Resolution 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
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under this clause (v) shall become Net Available Proceeds at such time and to
the extent such amounts are released to such Person.
"Offer Expiration Date" has the meaning set forth in the definition
of "Offer to Purchase" in this Section 101.
"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 "Offer 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 Offer
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
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 Offer 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");
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(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;
(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
Offer 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 Offer 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 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.
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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, 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 1018 shall be the principal executive,
financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of legal counsel, who
may be counsel for the Company, 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.
"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 Company) in trust or set aside and segregated
in trust by the Company (if the Company shall act as its own Paying Agent)
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 Company;
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 Company or any other obligor upon the Securities or any Affiliate of the
Company 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
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Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company. The Trustee is hereby authorized by the Company to act as a "Paying
Agent" for the purposes of this Indenture, until such time as the Company
notifies the Trustee in writing that such authorization is revoked.
"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.
"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.
"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 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 Issue Date" means the date on which the Preferred Shares
are initially issued.
"Preferred Shares" means the Company's 14% Senior Exchangeable
Redeemable Preferred Shares, liquidation preference $50 per share.
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"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.
"Public Equity Offering" means an underwritten public offering of
common stock, par value $.01 per share, of the Company pursuant to an effective
registration statement filed with the Commission in accordance with the
Securities Act.
"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.
"Qualifying Event" means a Public Equity Offering or one or more
Strategic Equity Investments which in either case results in aggregate net
proceeds to the Company of not less than $75 million.
"Qualified Junior Shares" means Junior Shares that do not constitute
Disqualified Stock.
"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 political 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.
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"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.
"Registration Default" has the meaning specified in the Exchange and
Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the January 15 or July 15 (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date.
"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.
"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 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.
"Rule 144A" means Rule 144A under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Secondary Securities" has the meaning specified in Section 301.
"Securities" has the meaning specified in the second paragraph of
this instrument.
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"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).
"Senior Debt" means the principal of (and premium, if any) and
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding) on, or other
amount of, (i) Debt for money borrowed of the Company created pursuant to Bank
Credit Agreements or Vendor Financing Facilities, (ii) Debt for money borrowed
of the Company, whether Incurred on or prior to the Issue Date or thereafter
Incurred, other than the Securities, (iii) Debt evidenced by bonds, debentures,
notes or other similar instruments, including Debt Incurred in connection with
the acquisition of property, assets or businesses, (iv) matured and unmatured
reimbursement or other obligations of the Company with respect to letters of
credit, bankers' acceptances or similar facilities issued for the account of the
Company; (v) obligations of the Company under interest rate swaps, caps, collars
and similar arrangements, (vii) Capital Lease Obligations of the Company; (vi)
guarantees by the Company of (x) Debt for money borrowed and (y) Debt of a
Restricted Subsidiary 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 or such
Restricted Subsidiary, or in respect of a letter of credit obtained to secure
such performance; and (viii) amendments, renewals, extensions, modifications,
refinancings and refundings of any such Debt; provided, however, the following
shall not constitute Senior Debt: (A) any Debt owed to a Person when such Person
is a Subsidiary of the Company, (B) any Debt which by the terms of the
instrument creating or evidencing the same is not superior in right of payment
to the Securities, (C) any Debt Incurred in violation of this Indenture or (D)
any Debt which is subordinated in right of payment in any respect to any other
Debt of the Company.
"Senior Indenture" means the Indenture, dated as of April 15, 1996
among the Company, NEXTLINK Capital, Inc. and United States Trust Company of New
York, as Trustee.
"Senior Notes" means the 12 1/2% Senior Notes due April 15, 2006 of
the Company and NEXTLINK Capital, Inc. issued pursuant to the Senior Indenture
"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 specified in the Exchange and
Registration Rights Agreement. 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.
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"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.
"Strategic Equity Investment" means an investment in Qualified
Junior Shares made by a Strategic Investor in an aggregate amount of not less
than $25 million.
"Strategic Investor" means a Person engaged in one or more
Telecommunications Businesses (which need not be such Person's primary business)
that has, or 80% or more of the Voting Stock of which is owned, directly or
indirectly, by a Person that has, an equity market capitalization or net worth,
at the time of its initial Investment in the Company, in excess of $2.0 billion.
"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 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.
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"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.
"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 Board of
Directors, which determination shall be conclusive.
"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 Board of Directors 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
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final scheduled maturity and (2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors 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 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 Board of Directors 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 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.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to
take any action under any provision of this Indenture, the Company 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 shall
be given in the form of an Officers' Certificate, if to be given by an officer
of the Company, 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
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(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 document, 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 Company 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 Company
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 Company. Such
instrument or instruments (and the action embodied
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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 Company, 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 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
Company 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 Company 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 Company, at its 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,
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(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 Company's expense, shall cause notice of such
record date, the proposed action by Holders and the applicable Expiration Date
to be given to the Company 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 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 the Company.
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 Company 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 Company 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 Company
addressed to the Company at the address of its
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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 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 Company shall
bind its 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, the holders of Senior Debt (subject to Article Thirteen hereof) 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 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.
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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 Section 202 may be omitted from Securities issued hereunder and additional
legends may be placed on all or certain of the 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 applicable, then insert -- THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION AND SUBJECT TO COMPLIANCE WITH OTHER APPLICABLE LAWS.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE"), ONLY
(A) TO THE COMPANY; (B) PURSUANT TO A
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REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THESE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT PROVIDED BY RULE 144, (E) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS
THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER
THE SECURITIES ACT OR (F) IN THE CASE OF EITHER ANY INITIAL INVESTOR THAT IS A
QUALIFIED INSTITUTIONAL BUYER OR ANY SUBSEQUENT INVESTOR, TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) or (7)
OR RULE 501 UNDER THE SECURITIES ACT PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT (IF AVAILABLE), AND OTHERWISE IN COMPLIANCE WITH OTHER
APPLICABLE LAWS, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (C), (D), (E) OR (F) TO REQUIRE
THE DELIVERY OF A TRANSFER CERTIFICATE AND, IN THE CASE OF CLAUSE (F), AN
OPINION OF COUNSEL OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THE LEGEND
WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.]
NEXTLINK Communications, Inc.
14% Senior Subordinated Notes due 2009
CUSIP NUMBER: __________
No. __________ $_______________
NEXTLINK Communications, Inc., a corporation organized under the
laws of the State of Washington (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to __________, or registered assigns, the
principal sum of __________ Dollars on February 1, 2009, and to pay interest
thereon from [insert Issue Date or relevant Interest Payment Date with respect
to a Secondary Security (as applicable)] or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
on February 1 and August 1 in each year, commencing [insert the first Interest
Payment date after the Issue Date or the relevant Interest Payment Date with
respect to a Secondary Security (as applicable)] at the rate of 14% per annum,
until the principal hereof is paid or made available for payment. 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 the
January 15 or July 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
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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), 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.
On each Interest Payment Date occurring on or prior to February 1,
2002, the Company may, at its option, subject to and in accordance with the
provisions of this Security and the Indenture, issue Secondary Securities (as
hereinafter defined) in lieu of the payment in cash of any portion of the
interest due and payable on such Interest Payment Date. If the Company elects to
issue Secondary Securities in lieu of the payment in cash of such portion of
interest, it shall execute and deliver to the Trustee for authentication, and
the Trustee shall authenticate and deliver to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on such Regular Record Date, additional Securities dated such Interest
Payment Date in a principal amount equal to such portion of interest (such
additional Securities being referred to herein as the "Secondary Securities"),
and the due issuance of such Secondary Securities shall constitute full payment
of such portion of interest.
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 Company 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 Company 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
Company 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.
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.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed.
Dated:
NEXTLINK COMMUNICATIONS, INC.
By______________________________
Title:
Attest:
______________________________
Title:
SECTION 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of Securities of the
Company designated as its 14% Senior Subordinated Notes due February 1, 2009
(the "Securities") issued under an Indenture, dated as of ________, ____ (herein
called the "Indenture"), between the Company 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 (except as
otherwise provided in the Indenture referred to below) in aggregate principal
amount to $[insert the aggregate of preferred of the Preferred Shares at time of
exchange]. 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 Company, the Trustee and the
Holders of the Securities and of the terms upon which the Securities are, and
are to be, authenticated and delivered.
[If after a Covenant Amendment the Securities become redeemable then
insert -- 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 February 1, 2002 and
prior to maturity, as a whole or in part, at the election of the Company, 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
February 1, of each of the years indicated below:
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Redemption
Year Price
---- ----------
2002 107.00%
2003 105.25%
2004 103.50%
2005 101.75%
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
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 February
1, 2002 only in the event that on or before February 1, 2000 the Company
receives net cash proceeds from one or more Qualifying Events (other than a
Qualifying Event that results in a Change of Control, 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 not to exceed $99.75 million; provided,
however, that Securities in an amount equal to at least $185.25 million remain
Outstanding after such redemption. Such redemption must occur on a Redemption
Date within 60 days after the receipt by the Company of the proceeds of any such
Qualifying Event 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 114% of their principal amount plus accrued and unpaid
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 are not subject to redemption.]
The Securities do not have the benefit of any sinking fund
obligations.
[If applicable insert -- . The Holder of this Security [if this
Security is a Global Security, then insert-- (and any Person that has a
beneficial interest in this Security)] is entitled to the benefits of an
Exchange and Registration Rights Agreement, dated as of January 31, 1996, as the
same may be amended from time to time (the "Exchange and Registration Rights
Agreement"), executed by the Company. In the event of any Registration Default,
Special Interest will accrue and be payable on this Security upon the terms of,
and in the manner provided by, the Exchange and Registration Rights Agreement.
Whenever in this Security there is a reference, in any context, to
interest on, or in respect of, any Security such mention shall be deemed to
include mention of Special Interest accrued or payable to the extent that, in
such context, Special Interest is, was or would be accrued or payable in respect
of such Security and express mention of Special Interest in any provisions of
this Security
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<PAGE>
shall not be construed as excluding Special Interest in those provisions of this
Security where such express mention is not made.
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 Company as a result of any Asset Disposition, the Company 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.
The indebtedness evidenced by this Security is, to the extent
provided in the Indenture, subordinate and subject in right of payment to the
prior payment in full of all Senior Debt, and this Security is issued subject to
the provisions of the Indenture with respect thereto. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination so
provided and (c) appoints the Trustee his attorney-in-fact for any and all such
purposes.
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, 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
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company 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 Company 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
Company, which is absolute and unconditional, to
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<PAGE>
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 Company 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 Company 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.
The Securities are issuable only in registered form without coupons
in denominations of $1 and any integral multiple thereof. 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 Company 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 Company, the Trustee and any agent of the Company 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 Company, 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.
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<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased in its entirety
by the Company 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 Company 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 Securities shall be issued in exchange for the outstanding
Preferred Shares in accordance with the terms thereof. The aggregate principal
amount of Securities which may be authenticated and delivered under this
Indenture is limited to an amount not to exceed the aggregate liquidation
preference of the outstanding Preferred Shares at the Issue Date, except for
Securities authenticated and delivered as Secondary Securities pursuant to the
fourth paragraph of this Section and 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. If prior to the Issue Date the
Company has not exchanged the Preferred Shares initially issued for Preferred
Shares registered under the Securities Act pursuant to the Exchange Offer, the
Company may issue Exchange Securities from time to time pursuant to an Exchange
Offer or otherwise, in each case pursuant to a Board Resolution, 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 an amount not to exceed the sum of
the aggregate liquidation preference of the outstanding Preferred Shares at the
Issue Date plus the aggregate principal amount of Secondary Securities issued in
accordance herewith.
The Securities shall be known and designated as the "14% Senior
Subordinated Notes due 2009" of the Company. The Stated Maturity of the
Securities shall be February 1, 2009. The Securities shall bear interest at the
rate of 14% per annum, from the Issue Date 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 February 1 and August 1, commencing
the first such date after the Issue Date until the principal thereof is paid or
made available for payment. In addition, in the event of any Registration
Default, Special Interest will accrue and be payable on the Securities upon the
terms of, and in the manner provided by, the Exchange and Registration Rights
Agreement, the terms of which are hereby incorporated by reference and made a
part hereof. Accrued Special Interest, if any, shall be paid in arrears
semi-annually on February 1 and August 1 in each year, and 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.
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.
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<PAGE>
On each Interest Payment Date occurring on or prior to February 1,
2002, the Company may, at its option, in lieu of the payment in cash of any
portion of interest due and payable on such Interest Payment Date, by giving
notice to the Trustee not less than 10 nor more than 30 days prior to the
Regular Record Date for such Interest Payment Date, execute, and deliver to the
Trustee for authentication, together with a Company Order given not less than 10
nor more than 30 days prior to such Interest Payment Date for the authentication
and delivery of additional Securities dated such Interest Payment Date in an
aggregate principal amount equal to such portion of interest; and the Trustee in
accordance with such Company Order shall authenticate and deliver to the Holders
of record on such Regular Record Date such additional Securities requested in
such Company Order (such duly executed and authenticated additional Securities
being of the same series as the Securities and referred to herein as "Secondary
Securities"), and the due issuance of such Secondary Securities shall constitute
full payment of such portion of interest; provided, however, that interest shall
not so be payable in whole or part in Secondary Securities in lieu of cash from
and after the date of any deposit of money pursuant to Section 401 or the
defeasance or covenant defeasance of the Securities pursuant to Article Twelve.
The Company shall pay interest on each Secondary Security from the Interest
Payment Date to which its issuance relates. Each issuance of Secondary
Securities in lieu of the payment in cash of all or any portion of interest on
the Securities shall be made pro rata with respect to the Outstanding
Securities. All Secondary Securities shall be issued in the same series as the
Securities originally issued pursuant to the Indenture, and all Holders of
Secondary Securities shall be treated as Holders of Securities for any and all
purposes of any Act of Holders or of other action of Holders or otherwise
pursuant to this Indenture except as may otherwise be required by law. Any such
Secondary Securities shall be governed by the Indenture and the terms of each
such Secondary Security shall be identical to the terms of this Security except
with respect to, as the case may be, the designation of such Secondary Security
(which may (but need not) indicate the Interest Payment Date of its original
issuance), its aggregate principal amount, its CUSIP number or other required
identifications, any required legends (including with respect to taxation) and
the date from which interest accrues and except as may otherwise be required by
law. Notwithstanding the foregoing, Secondary Securities may be issued on any
given Interest Payment Date in separate series if such is required pursuant to a
change in law after the Issue Date, and, in such event, the Holders of Secondary
Securities shall continue to be treated in all respects as Holders of Securities
for all purposes of this Indenture (including with respect to any Act of Holders
or any other action of Holders or otherwise pursuant to this Indenture) except
as required by such change in law.
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 Company for such purpose; provided,
however, that at the option of the Company 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 not have the benefit of any sinking fund
obligations.
Unless provided pursuant to clause (8) of Section 901 following a
Covenant Amendment, the Securities shall not be redeemable at the option of the
Company.
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<PAGE>
The Securities shall be subject to defeasance at the option of the
Company as provided in Article Twelve.
The Securities shall be subordinated in right of payment to Senior
Debt as provided in Article Thirteen.
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 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chief Executive Officer, its President or one of its Vice Presidents, and
attested by its Secretary or one of its Assistant Secretaries. 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 shall bind the Company,
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 Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities as in
this Indenture provided and not otherwise.
If prior to the Issue Date the Company has not exchanged Preferred
Shares initially issued for Preferred Shares registered under the Securities Act
pursuant to the Exchange Offer, at any time and from time to time after the
Issue Date and after the effectiveness of a Registration Statement under the
Securities Act with respect thereto, the Company may deliver Exchange Securities
executed by the Company to the Trustee for authentication, together with a
Company 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 such Company
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,
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<PAGE>
(a) if the form of such Exchange Securities has been established by
or pursuant to a Board Resolution, as permitted by Section 301, that such
form has been established in conformity with the provisions of this
Indenture;
(b) if the terms of such Exchange Securities have been established
by or pursuant to a Board Resolution, 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 (except
as may be otherwise provided herein with respect to Secondary Securities).
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 Company may
execute, and upon a Company 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.
If temporary Securities are issued, the Company 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 Company designated pursuant to Section
1002, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities, the Company 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
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<PAGE>
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 Company
that it is unwilling or unable to continue as Depository for such Global
Security and the Company thereupon fails to appoint a successor Depository
or (ii) has ceased to be a clearing agency registered under the Exchange
Act.
(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 procedures of the Depository, shall
instruct the Depository or its authorized representatives to make a
corresponding adjustment to its records. 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
Company 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, 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 of any legend upon a Security, the
registered Holder of a Security 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
Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company,
the Trustee or any agent of the Company 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.
(b) Registration, Registration of Transfer and Exchange and Legends.
The Company 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 Company 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 Company designated pursuant to Section 1002 for such
purpose in accordance with the terms hereof, the Company 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.
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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 required to be placed
thereon, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
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 Company, 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 Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company 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 Company 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 Company 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.
Unless the Company shall determine otherwise, each Security
initially issued hereunder in exchange for Preferred Shares shall bear the
legends regarding restrictions on transfers, if any, that were borne by the
certificates evidencing the Preferred Shares with respect to which such Security
was issued and each Secondary Security issued shall bear the same legends
regarding restrictions on transfers as the Security with respect to which it was
issued. Any such required legend on a Security shall not be removed unless the
Company shall have delivered to the Trustee (and the Securities Registrar, if
other than the Trustee) a Company Order which states that the Security may be
issued without such legend thereon. If a legend 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 Company has 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.
Unless the Company shall determine otherwise, in the event that the
Preferred Shares in exchange for which any Security is issued are subject to
certification requirements for transfer pursuant to the Certificate of
Designations, the Securities issued in exchange therefor shall be subject
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to identical certification requirements hereunder. The Company shall promptly
notify the Trustee and the Securities Registrar (if other than the Trustee) of
any such transfer certification requirements.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company
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 Company 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 Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company 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 Company 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
Company 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 Company, 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.
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
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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 Company, at its election in each case, as
provided in Clause (1) or (2) below:
(1) The Company 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 Company
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 Company 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 Company of such
Special Record Date and, in the name and at the expense of the
Company, 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 Company 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 Company 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
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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 Company, the Trustee and any agent of the Company 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
Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
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 Company may at any
time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Company 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 a
Company 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 any Special
Interest payable 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 Company 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, if applicable, the Company's 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 Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture, when
(1) either
(A) the Company 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 Company, 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 Company has paid or caused to be paid all other sums payable
hereunder by the Company;
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each 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 Company 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
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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 Company acting as its 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 occasioned by the provisions of Article Thirteen or be voluntary or be
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, 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, and continuance of such default for a period of
30 day; 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 Company 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 Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Outstanding
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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
(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 $15 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 the Company 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 the Company 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 the Company 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
the Company 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 the Company 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
the Company 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 the Company or any Significant Subsidiary or of any
substantial part of its property, or the making 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 the Company or any Significant Subsidiary in
furtherance of any such action.
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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 Company) 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 Company (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 Company 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 Company and the Trustee, may
rescind and annul such declaration and its consequences if:
(1) the Company has 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 (including 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.
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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 Company covenants 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 Company 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 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 Company fails 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 Company 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 Company 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 Company (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
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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 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.
Subject to Article Thirteen, 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 extent provided in Article Thirteen, to the holders
of Senior Debt in accordance with Article Thirteen; and
THIRD: 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 Company, 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
Section 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, sub-
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ject to any determination in such proceeding, the Company, 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 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.
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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.
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 Company.
SECTION 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so)
that it 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 Company (to the extent that it may
lawfully do so) hereby expressly waives 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.
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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 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 Company mentioned herein shall
be sufficiently evidenced by a Company Request or a Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(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;
(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;
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(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 Company, 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 Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or the Securities. The Trustee shall not be accountable for the use or
application by the Company 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 Company, 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 Company 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 Company.
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SECTION 607. Compensation and Reimbursement.
The Company agrees
(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 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
Company (including, without limitation, this Section 607) and of defending
itself against any claim (whether asserted by any Holder or the Company)
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 Company
under this Section 607, the Trustee shall have a lien prior to the Securities
upon all property and funds held or collected by the Trustee, 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 Company (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.
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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 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 Company. 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 Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after written
request therefor by the Company 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 Company 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 for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by Board Resolution 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.
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(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
Company, by Board Resolution, 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 Company 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 Company.
If no successor Trustee shall have been so appointed by the Company 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 Company 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 Company 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 vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on request of the
Company 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 Company 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.
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SECTION 613. Preferential Collection of Claims Against the Company.
If and when the Trustee shall be or become a creditor of the Company
(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
the Company (or any such other obligor).
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
Company 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 Company. 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 Company. 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 Company 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
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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 Company
SECTION 701. The Company to Furnish Trustee Names and Addresses of Holders.
The Company 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 Company 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 Company and the Trustee that none of the Company, 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.
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
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Commission and with the Company. The Company will notify the Trustee when the
Securities are listed on any stock exchange.
SECTION 704. Reports by the Company.
The Company 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
Company shall cease to be required to file SEC Reports pursuant to the Exchange
Act, the Company 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 Company 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.
In the event that (i) any Special Interest becomes payable on the
Securities, (ii) the amount of Special Interest so payable increases, or (iii)
any Special Interest ceases to be so payable, then within three Business Days of
such event the Company shall deliver an Officers' Certificate to the Trustee
stating the new interest rate and the date on which it became effective.
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
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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; and (5) 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 the Company with, or merger of the Company
with or into, any other Person or any conveyance, transfer or lease of the
properties and assets of the Company substantially as an entirety in accordance
with Section 801, the successor Person formed by such consolidation or into
which the Company 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, the Company under this Indenture with the same effect as if such
successor Person had been named as the Company 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 Company, when authorized by
Board Resolution, 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 the Company and
the assumption by any such successor of the covenants of the Company
herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; 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 Exchange Offer Registration
Statement or thereafter to maintain the qualification of this Indenture
under the Trust Indenture Act;
(5) to modify the restrictions on, and procedures for, resale and
other transfers of the Securities to the extent required by any change in
applicable law or regulation (or the interpretation thereof) of the United
States of America or in practices relating to the resale or transfer of
restricted securities (as defined in Rule 144) generally; or
(6) 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 (6)
shall not adversely affect the legal rights of the Holders;
(7) to provide for uncertificated Securities in addition to or in
place of certificated Securities; or
(8) following a Covenant Amendment, to add provisions making the
Securities redeemable at the option of the Company as follows:
(i) at any time on or after February 1, 2002 and prior to
maturity, in whole or in part, upon not less than 30 nor more than
60 days' notice mailed to each Holder 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 following
Redemption Prices (expressed as percentages of the principal amount)
plus accrued interest to but
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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 February 1
of the years indicated:
Redemption
Year Price
---- ----------
2002.................................................... 107.00%
2003.................................................... 105.25%
2004.................................................... 103.50%
2005.................................................... 101.75%
2006 and thereafter..................................... 100.00%
(ii) prior to February 1, 2000, in part, in an aggregate
principal amount not to exceed $99.75 million out of the net cash
proceeds of one or more Qualifying Events (other than a Qualifying
Event that results in a Change of Control), provided, however, that
Securities in an aggregate principal amount equal to at least
$185.25 million remain outstanding after such redemption. Such
redemption must occur on a Redemption Date within 60 days after the
receipt by the Company of the proceeds of such Qualifying Event and
upon not less than 30 or nor more than 60 days' notice mailed to
each Holder of Securities 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 114% of their principal
amount plus accrued and unpaid 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).
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 Company and the Trustee, and consistent with Section 513, the
Company, when authorized by Board Resolution 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
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(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 1019, 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 Indenture with
respect to such Offer to Purchase in a manner materially adverse to such
Holder, or
(5) modify any of the provisions of this Indenture relating to the
subordination of the Securities in a manner adverse to the Holders.
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. No such supplemental indenture shall directly or
indirectly modify the provisions of Article Thirteen in any manner which might
terminate or impair the rights of the Senior Debt pursuant to such subordination
provisions.
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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 Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and Interest.
The Company 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.
SECTION 1002. Maintenance of Office or Agency.
The Company 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 Company in
respect of the Securities and this Indenture may be served. The Company 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 Company 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
Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
The Company 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
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, New York for such purposes. The Company will
give prompt
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written notice to the Trustee 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 Company shall at any time act as its 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
Company, the Trustee shall serve as the Paying Agent for the Securities.
Whenever the Company 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 Company 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 Company the Trustee shall serve as the Paying Agent for the
Securities.
The Company 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 Company (or any
other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest;
(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 Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company 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
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Company 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 Company, 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 Company on a Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general 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 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 Company.
SECTION 1004. Existence.
Subject to Article Eight, the Company will do or cause to be done
all things necessary to preserve and keep in full force and effect its
existence, rights (charter and statutory) and franchises; provided, however,
that the Company shall not be required to preserve any such right or franchise
if the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1005. Maintenance of Properties and Insurance.
The Company will cause all properties used or useful in the conduct
of its business or 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
the Company 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 the Company from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, as determined in the good faith judgment of the Board of
Directors and 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 Company 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 Company 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.
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SECTION 1006. Payment of Taxes and Other Claims.
The Company 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 Company or any Subsidiaries of
the Company or upon the income, profits or property of the Company or any
Subsidiaries, and (2) all lawful claims for labor, materials and supplies which,
if unpaid, might by law become a lien upon the property of the Company or any
Subsidiaries of the Company; provided, however, that the Company 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 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
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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") (a) Debt referred to in clause (vi) of this paragraph, (b)
Debt Incurred pursuant to the preceding paragraph or clause (ii) of this
paragraph or (c) 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 which is
subordinate in right of payment to the Securities shall only be permitted
if (1) 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 (2) 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;
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(vi) Debt outstanding at the Issue Date;
(vii) Debt outstanding under the Securities;
(viii) 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;
(ix) 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
(x) Debt not otherwise permitted to be Incurred pursuant to clauses
(i) through (ix) above, which, together with any other outstanding Debt
Incurred pursuant to this clause (x), 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 (x), 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 Senior Subordinated Debt
The Company shall not Incur any Debt which by its terms is both (i)
subordinated in right of payment to any Senior Debt and (ii) senior in right of
payment to the Securities.
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 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
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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 Preferred Issue Date 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 Preferred Issue Date 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 Preferred Issue Date, including the fair value of
property other than cash (determined in good faith by the Board of Directors, as
conclusively evidenced by a Board Resolution), 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 Preferred Issue Date.
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; and (iv) 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
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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 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 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.
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SECTION 1011. Limitation on Liens Securing Subordinated Debt.
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 which is
pari passu with or subordinated in right of payment to the Securities without
making, or causing such Restricted Subsidiary to make, effective provision for
securing the Securities (and, if the Company shall so determine, any other Debt
of the Company which is not subordinate to the Securities or of such Restricted
Subsidiary) (x) equally and ratably with such Debt as to such property or assets
for so long as such Debt shall 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 shall be so
secured.
The foregoing restrictions shall not apply to: (i) Liens in respect
of Debt existing at the Issue Date; (ii) Liens securing only the Securities;
(iii) Liens in favor of the Company or a Wholly-Owned Restricted Subsidiary; or
(iv) Liens to secure Debt incurred to extend, renew, refinance or refund (or
successive extensions, renewals, refinancings or refundings), in whole or in
part, any Debt secured by Liens referred to in the foregoing clauses (i) or (ii)
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 the second paragraph of Section 1007.
SECTION 1012. Limitation on Issuance of Guarantees of Subordinated Debt.
The Company shall not permit any Restricted Subsidiary, directly or
indirectly, to assume, Guarantee or in any other manner become liable with
respect to any Debt of the Company that is expressly by its terms subordinated
or junior in right of payment to any other Debt of the Company unless such
Restricted Subsidiary shall make effective provision for guaranteeing the
Securities (x) with respect to Debt that ranks pari passu with the Securities,
to the same extent as such Debt is to be guaranteed by such Restricted
Subsidiary or (y) with respect to Debt that is subordinated in right of payment
to the Securities, to a greater extent than such other Debt is to be guaranteed
by such Restricted Subsidiary.
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 Board of Directors in good faith and evidenced by a Board
Resolution, 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
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reduction of Senior Debt then outstanding under any agreements or instruments
that 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 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.
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(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 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; and (iv)
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
approved by the Board of Directors, 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
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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 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 (i) 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; (ii) neither Mr. Craig O. McCaw nor any person
designated by him to the Company as acting on his behalf shall be a director of
the Company; or (iii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors (together
with any new directors whose election by the Board of Directors or whose
nomination for election by the shareholders of the Company was proposed by a
vote of a majority of the directors of the Company then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office.
(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.
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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, the Company will file with the Trustee within 15 days after it files
them with the Commission copies of the 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 1017 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. Statement by Officers as to Default.
(a) The Company will deliver to the Trustee, within 90 days after
the end of each quarter of each fiscal year of the Company ending after the date
hereof, an Officers' Certificate, stating whether or not to the best knowledge
of the signers thereof the Company is in default in the performance and
observance of any of the terms, provisions and conditions of this Indenture and
if the Company shall be in default, specifying all such defaults and the nature
and status thereof of which they may have knowledge.
(b) The Company shall deliver to the Trustee, as soon as possible
and in any event within 10 days after the Company becomes 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
Company proposes to take with respect thereto.
SECTION 1019. Waiver of Certain Covenants.
The Company 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 Company
and the duties of the Trustee in respect of any such covenant or condition shall
remain in full force and effect.
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ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption.
The Securities shall not be redeemable at the election of the
Company prior to their Stated Maturity unless the Company and the Trustee
execute an indenture supplemental hereto pursuant to Section 901(8).
SECTION 1102. Applicability of Article.
Redemption of Securities at the election of the Company, 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.
In the event the Securities become redeemable, the election of the
Company to redeem any Securities shall be evidenced by a Board Resolution. In
case of any redemption at the election of the Company of less than all the
Securities, the Company shall, at least 60 days prior to the Redemption Date
fixed by the Company (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
Company shall furnish the Trustee with an Officers' Certificate evidencing
compliance with such restriction.
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 Company 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.
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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 Clause (a) or
(b) of Section 901(8) and, if being made pursuant to such Clause (b), a
brief statement setting forth the Company's right to effect such
redemption and the Company's 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
Company 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 Company shall be given by the Company or, if request is made to the Trustee
no less than 30 days prior to the Redemption Date, by the Trustee in the name
and at the expense of the Company.
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SECTION 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its 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.
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
Company 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 Company 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 Company designated for that purpose
pursuant to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or 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), and 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 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.
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ARTICLE TWELVE
Defeasance and Covenant Defeasance
SECTION 1201. The Company's Option to Effect Defeasance or Covenant Defeasance.
The Company may at its option by Board Resolution 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 Company's exercise of the option provided in Section 1201
applicable to this Section, the Company 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 Company 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 Company, 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
Company's 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 Company may exercise its option under this Section 1202
notwithstanding the prior exercise of their option under Section 1203.
SECTION 1203. Covenant Defeasance.
Upon the Company's exercise of the option provided in Section 1201
applicable to this Section (i) the Company shall be released from its
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 and (iii) the provisions of Article Thirteen hereof shall cease
to be effective, on and after the date the conditions set forth below are
satisfied (hereinafter, "covenant defeasance"). For this purpose, such covenant
defeasance means that the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
Section, Clause or Article, whether directly or indirectly by reason of any
reference elsewhere herein to any such Section, Clause 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.
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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 Company 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 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
Company.
(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 the Company is a party or by
which it is bound.
(5) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to
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either the defeasance under 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 Company shall
have delivered to the Trustee an Opinion of Counsel stating that (x) the
Company has 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 Company 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 Company 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.
(9) At the time of such deposit: (A) no default in the payment of
all or a portion of principal of (or premium, if any) or interest on or
other obligations in respect of any Senior Debt shall have occurred and be
continuing, and no event of default with respect to any Senior Debt shall
have occurred and be continuing and shall have resulted in such Senior
Debt becoming or being declared due and payable prior to the date on which
it would otherwise have become due and payable and (B) no other event of
default with respect to any Senior Debt shall have occurred and be
continuing permitting (after notice or the lapse of time, or both) the
holders of such Senior Debt (or a trustee on behalf of the holders
thereof) to declare such Senior Debt due and payable prior to the date on
which it would otherwise have become due and payable, or, in the case of
either Clause (A) or Clause (B) above, each such default or event of
default shall have been cured or waived or shall have ceased to exist.
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 applied by the Trustee, in accordance with
the provisions of such Securities and this Indenture, to the payment, either
directly or
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through any Paying Agent (including the Company acting as its 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 Company 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 Company from time to time upon Company
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 Company's 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 Company makes any payment of principal of (and
premium, if any) any Security following the reinstatement of its obligations,
the Company 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 Company, in trust for the payment 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.
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ARTICLE THIRTEEN
Subordination of Securities
SECTION 1301. Securities Subordinate to Senior Debt.
The Company covenants and agrees, and each Holder of a Security, by
his acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article (subject to the provisions
of Article Four and Article Twelve), the payment of the principal of (and
premium, if any) and interest on each and all of the Securities are hereby
expressly made subordinate and subject in right of payment to the prior payment
in full of all Senior Debt.
SECTION 1302. Payment Over of Proceeds Upon Dissolution, Etc.
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its creditors,
as such, or to its assets, or (b) any liquidation, dissolution or other winding
up of the Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshalling of assets and liabilities of the Company, then and in any
such event specified in (a), (b) or (c) above (each such event, if any, herein
sometimes referred to as a "Proceeding") the holders of Senior Debt shall be
entitled to receive payment in full of all amounts due or to become due on or in
respect of all Senior Debt, or provision shall be made for such payment in cash
or cash equivalents or otherwise in a manner satisfactory to the holders of
Senior Debt, before the Holders of the Securities are entitled to receive any
payment or distribution of any kind or character, whether in cash, property or
securities (including any payment or distribution which may be payable or
deliverable by reason of the payment of any other Debt of the Company
subordinated to the payment of the Securities, such payment or distribution
being hereinafter referred to as a "Junior Subordinated Payment"), on account of
principal of (or premium, if any) or interest on the Securities or on account of
any purchase or other acquisition of Securities by the Company or any Subsidiary
of the Company (all such payments, distributions, purchases and acquisitions
herein referred to, individually and collectively, as a "Securities Payment"),
and to that end the holders of Senior Debt shall be entitled to receive, for
application to the payment thereof, any Securities Payment which may be payable
or deliverable in respect of the Securities in any such Proceeding.
In the event that, notwithstanding the foregoing provisions of
this Section, the Trustee or the Holder of any Security shall have received any
Securities Payment before all Senior Debt is paid in full or payment thereof
provided for in cash or cash equivalents or otherwise in a manner satisfactory
to the holders of Senior Debt, and if such fact shall, at or prior to the time
of such Securities Payment, have been made known in writing to the Trustee or,
as the case may be, such Holder, then and in such event such Securities Payment
shall be paid over or delivered forthwith to the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee, agent or other Person making
payment or distribution of assets of the Company for application to the payment
of all Senior Debt remaining unpaid, to the extent necessary to pay all Senior
Debt in full, after giving effect to any concurrent payment or distribution to
or for the holders of Senior Debt.
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For purposes of this Article only, the words "any payment or
distribution of any kind or character, whether in cash, property or securities"
shall not be deemed to include a payment or distribution of stock or securities
of the Company provided for by a plan of reorganization or readjustment
authorized by an order or decree of a court of competent jurisdiction in a
reorganization proceeding under any applicable bankruptcy law or of any other
corporation provided for by such plan of reorganization or readjustment which
stock or securities are subordinated in right of payment to all then outstanding
Senior Debt to substantially the same extent as the Securities are so
subordinated as provided in this Article. The consolidation of the Company with,
or the merger of the Company into, another Person or the liquidation or
dissolution of the Company following the conveyance or transfer of all or
substantially all of its properties and assets as an entirety to another Person
upon the terms and conditions set forth in Article Eight shall not be deemed a
Proceeding for the purposes of this Section if the Person formed by such
consolidation or into which the Company is merged or the Person which acquires
by conveyance or transfer such properties and assets as an entirety, as the case
may be, shall, as a part of such consolidation, merger, conveyance or transfer,
comply with the conditions set forth in Article Eight.
SECTION 1303. No Payment When Senior Debt in Default.
In the event that any Senior Payment Default (as defined
below) shall have occurred and be continuing, then no Securities Payment shall
be made unless and until such Senior Payment Default shall have been cured or
waived or shall have ceased to exist or all amounts then due and payable in
respect of Senior Debt shall have been paid in full, or provision shall have
been made for such payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Debt. "Senior Payment Default" means any
default in the payment of principal of (or premium, if any) or interest on any
Senior Debt when due, whether at the Stated Maturity of any such payment or by
declaration of acceleration, call for redemption or otherwise.
In the event that any Senior Nonmonetary Default (as defined
below) shall have occurred and be continuing, then, upon the receipt by the
Company and the Trustee of written notice of the occurrence such Senior
Nonmonetary Default from a holder of or agent or trustee for the holders of any
Designated Senior Debt that is the subject of such Senior Nonmonetary Default,
no Securities Payment shall be made during a period (the "Payment Blockage
Period") commencing on the date of such receipt of such written notice and
ending the earlier of (i) the date on which such Senior Nonmonetary Default
shall have been cured or waived or ceased to exist or all Designated Senior Debt
the subject of such Senior Nonmonetary Default shall have been discharged or
(ii) the 179th day after the date of the receipt of such written notice. No more
than one Payment Blockage Period may be commenced with respect to the Securities
during any 360-day period and there shall be a period of at least 181
consecutive days in each 360-day period when no Payment Blockage Period is in
effect. For all purposes of this paragraph, no Senior Nonmonetary Default or
Senior Payment Default that existed or was continuing on the date of
commencement of any Payment Blockage Period shall be, or be made, the basis for
the commencement of a subsequent Payment Blockage Period by holders of Senior
Debt or their representatives unless such Senior Nonmonetary Default or Senior
Payment Default shall have been cured for a period of not less than 90
consecutive days. "Senior Nonmonetary Default" means a default with respect to
any Designated Senior Debt, other than a Senior Payment Default, which with the
giving of notice of the passage of time, or both, shall give the holders of such
Designated Senior Debt (or a trustee or other agent on behalf of the holders
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thereof) the right to declare such Designated Senior Debt due and payable prior
to the date on which it would otherwise become due and payable.
In the event that, notwithstanding the foregoing, the Company
shall make any Securities Payment to the Trustee or any Holder prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such Securities Payment, have been made known in writing to the Trustee
or, as the case may be, such Holder, then and in such event such Securities
Payment shall be paid over and delivered forthwith to the Company.
The provisions of this Section shall not apply to any
Securities Payment with respect to which Section 1302 would be applicable.
SECTION 1304. Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this
Indenture or in any of the Securities shall prevent (a) the Company, at any time
except during the pendency of any Proceeding referred to in Section 1302 or
under the conditions described in Section 1303, from making Securities Payments,
or (b) the application by the Trustee of any money deposited with it hereunder
to Securities Payments or the retention of such Securities Payment by the
Holders, if, two Business Days prior to such application by the Trustee, it did
not have written notice that such Securities Payment would have been prohibited
by the provisions of this Article.
SECTION 1305. Subrogation to Rights of Holders of Senior Debt.
Subject to the payment in full of all amounts due or to become
due on or in respect of Senior Debt, or the provision for such payment in cash
or cash equivalents or otherwise in a manner satisfactory to the holders of
Senior Debt, the Holders of the Securities shall be subrogated to the rights of
the holders of such Senior Debt to receive payments and distributions of cash,
property and securities applicable to the Senior Debt until the principal of
(and premium, if any) and interest on the Securities shall be paid in full. For
purposes of such subrogation, no payments or distributions to the holders of the
Senior Debt of any cash, property or securities to which the Holders of the
Securities or the Trustee would be entitled except for the provisions of this
Article, and no payments over pursuant to the provisions of this Article to the
holders of Senior Debt by Holders of the Securities or the Trustee, shall, as
among the Company, its creditors other than holders of Senior Debt and the
Holders of the Securities, be deemed to be a payment or distribution by the
Company to or on account of the Senior Debt.
SECTION 1306. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for
the purpose of defining the relative rights of the Holders on the one hand and
the holders of Senior Debt on the other hand. Nothing contained in this Article
or elsewhere in this Indenture or in the Securities is intended to or shall (a)
impair, as among the Company, its creditors other than holders of Senior Debt
and the Holders of the Securities, the obligation of the Company, which is
absolute and unconditional
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(and which, subject to the rights under this Article of the holders of Senior
Debt, is intended to rank equally with all other general obligations of the
Company), to pay to the Holders of the Securities the principal of (and premium,
if any) and interest on the Securities as and when the same shall become due and
payable in accordance with their terms; or (b) affect the relative rights
against the Company of the Holders of the Securities and creditors of the
Company other than the holders of Senior Debt; or (c) prevent the Trustee or the
Holder of any Security from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article of the holders of Senior Debt to receive cash, property and
securities otherwise payable or deliverable to the Trustee or such Holder.
SECTION 1307. Trustee to Effectuate Subordination.
Each Holder of a Security by his acceptance thereof authorizes
and directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
SECTION 1308. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Debt to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article or
the obligations hereunder of the Holders of the Securities to the holders of
Senior Debt, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Debt, or otherwise amend or supplement in any manner Senior Debt or any
instrument evidencing the same or any agreement under which Senior Debt is
outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Debt; (iii) release any Person
liable in any manner for the collection of Senior Debt; and (iv) exercise or
refrain from exercising any rights against the Company and any other Person.
SECTION 1309. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any payment to
or by the Trustee in respect of the Securities. Notwithstanding the provisions
of this Article or any other provision of this Indenture, the Trustee shall not
be charged with knowledge of the existence of any facts which would
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prohibit the making of any payment to or by the Trustee in respect of the
Securities, unless and until the Trustee shall have received written notice
thereof from the Company or a holder of Senior Debt or from any trustee
therefor; and, prior to the receipt of any such written notice, the Trustee,
subject to the provisions of Section 601, shall be entitled in all respects to
assume that no such facts exist; provided, however, that if the Trustee shall
not have received the notice provided for in this Section at least 2 Business
Days prior to the date upon which by the terms hereof any money may become
payable for any purpose (including, without limitation, the payment of the
principal of (and premium, if any) or interest on any Security), then, anything
herein contained to the contrary notwithstanding, the Trustee shall have full
power and authority to receive such money and to apply the same to the purpose
for which such money was received and shall not be affected by any notice to the
contrary which may be received by it within 2 Business Days prior to such date.
Subject to the provisions of Section 601, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Debt (or a trustee therefor) to
establish that such notice has been given by a holder of Senior Debt (or a
trustee therefor). In the event that the Trustee determines in good faith that
further evidence is required with respect to the right of any Person as a holder
of Senior Debt to participate in any payment or distribution pursuant to this
Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article, and if such evidence is not furnished, the Trustee
may defer any payment to such Person pending judicial determination as to the
right of such Person to receive such payment.
SECTION 1310. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Company
referred to in this Article, the Trustee, subject to the provisions of Section
601, and the Holders of the Securities shall be entitled to rely upon any order
or decree entered by any court of competent jurisdiction in which such
Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the benefit of creditors, agent or
other Person making such payment or distribution, delivered to the Trustee or to
the Holders of Securities, for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of the Senior Debt
and other indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article.
SECTION 1311. Trustee Not Fiduciary for Holders of Senior Debt.
The Trustee shall not be deemed to owe any fiduciary duty to
the holders of Senior Debt and shall not be liable to any such holders if it
shall in good faith mistakenly pay over or distribute to Holders of Securities
or to the Company or to any other Person cash, property or securities to which
any holders of Senior Debt shall be entitled by virtue of this Article or
otherwise.
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SECTION 1312. Rights of Trustee as Holder of Senior Debt; Preservation of
Trustee's Rights.
The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article with respect to any Senior Debt which
may at any time be held by it, to the same extent as any other holder of Senior
Debt, and nothing in this Indenture shall deprive the Trustee of any of its
rights as such holder.
Nothing in this Article shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 607.
SECTION 1313. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee
shall have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article in addition to or in place of the Trustee; provided,
however, that Section 1312 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
SECTION 1314. Defeasance of this Article Thirteen.
The subordination of the Securities provided by this Article
Thirteen is expressly made subject to the provisions for defeasance or covenant
defeasance in Article Twelve hereof and, anything herein to the contrary
notwithstanding, upon the effectiveness of any such defeasance or covenant
defeasance, the Securities then outstanding shall thereupon cease to be
subordinated pursuant to this Article Thirteen.
------------------------
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.
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IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed and attested, all as of the day and year first
above written.
NEXTLINK COMMUNICATIONS, INC.
By___________________________________
Name:
Title:
Attest:
___________________________
By
UNITED STATES TRUST COMPANY
OF NEW YORK
By___________________________________
Name:
Title:
Attest:
___________________________
By
<PAGE>
STATE OF _________ )
ss.:
COUNTY OF ________ )
On this ____________ day of _______, 19__, before me
personally appeared _______________, to me known, who, being duly sworn, did
depose and say that he is the ____________ of _______________NEXTLINK
Communications, 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 corporations.
________________________________
Notary Public
STATE OF _________ )
ss.:
COUNTY OF ________ )
On this ____________ day of _______, 19__, before me
personally appeared _______________, to me known, who, being duly sworn, did
depose and say that he is the ____________ of United States Trust Company of New
York, 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>
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS OF 14% SENIOR
EXCHANGEABLE REDEEMABLE PREFERRED SHARES AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
- ------------------------------------------------------------------------------
Pursuant to Section 23B.06.020 of the
Business Corporation Act of the State of Washington
- ------------------------------------------------------------------------------
NEXTLINK Communications Merger, Inc. (the "Corporation"), a corporation
organized and existing under the Business Corporation Act of the State of
Washington, does hereby certify that, pursuant to authority conferred upon the
board of directors of the Corporation (the "Board of Directors") by its Articles
of Incorporation, as amended (hereinafter referred to as the "Articles of
Incorporation"), and pursuant to the provisions of Section 23B.06.020 of the
Business Corporation Act of the State of Washington, said Board of Directors, at
a meeting thereof on January 27, 1997, duly approved and adopted the following
resolution (the "Resolution"):
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by its Articles of Incorporation, the Board of Directors does
hereby create, authorize and provide for the issuance of 14% Senior
Exchangeable Redeemable Preferred Shares, par value $.01 per share, with a
stated value of $50 per share, in an amount not to exceed 11,700,000
shares, having the designations, preferences, relative, participating,
optional and other special rights and the qualifications, limitations and
restrictions thereof that are set forth in the Articles of Incorporation
and in this Resolution as follows:
(a) DESIGNATION.
There is hereby created out of the authorized and unissued
Preferred Shares of the Corporation a class of Preferred Shares
designated as the "14% Senior Exchangeable Redeemable Preferred
Shares." The number of shares constituting such class shall not
exceed 11,700,000 and are referred to as the "Senior Exchangeable
Redeemable Preferred Shares." The liquidation preference of the
Senior Exchangeable Redeemable Preferred Shares shall be $50 per
share. The Senior Exchangeable Redeemable Preferred Shares shall
consist of the Original Shares and the Exchange Shares.
(b) RANKING.
The Senior Exchangeable Redeemable Preferred Shares shall, with
respect to dividends and distributions upon liquidation, winding-up
and dissolution of the Corporation, rank (i) senior to each class of
Capital Stock of the Corporation (including, without limitation, the
Corporation's Class A Common Stock, par value $.01 per share
<PAGE>
and the Class B Common Stock, par value $.01 per share) outstanding or
hereafter created the terms of which do not expressly provide that it
ranks senior to, or on a parity with, the Senior Exchangeable
Redeemable Preferred Shares as to dividends and distributions upon
liquidation, winding-up and dissolution of the Corporation
(collectively referred to as "Junior Shares"); (ii) on a parity with
any class of Capital Stock of the Corporation or series of Preferred
Shares of the Corporation hereafter created the terms of which
expressly provide that such class or series will rank on a parity with
the Senior Exchangeable Redeemable Preferred Shares as to dividends
and distributions upon liquidation, winding-up and dissolution
(collectively referred to as "Parity Shares"); PROVIDED that any such
Parity Shares that were not issued in compliance with paragraph
(f)(ii)(A) hereof shall be deemed to be Junior Shares and not Parity
Shares; and (iii) junior to each class of Capital Stock of the
Corporation or series of Preferred Shares of the Corporation hereafter
created that has been issued in compliance with paragraph (f)(ii)(B)
hereof and the terms of which expressly provide that such class or
series will rank senior to the Senior Exchangeable Redeemable
Preferred Shares as to dividends and distributions upon liquidation,
winding-up and dissolution of the Corporation (collectively referred
to as "Senior Shares").
(c) DIVIDENDS.
(i) (A) Beginning on the Issue Date, the Holders of the
outstanding Senior Exchangeable Redeemable Preferred Shares
shall be entitled to receive, when, as and if declared by the
Board of Directors, out of funds legally available therefor,
distributions in the form of dividends on each Senior
Exchangeable Redeemable Preferred Shares, at a rate PER ANNUM
equal to 14% of the liquidation preference per share of the
Senior Exchangeable Redeemable Preferred Shares, payable
quarterly. No interest shall be payable in respect to any
dividends that may be in arrears. All dividends shall be
cumulative, whether or not earned or declared, on a daily basis
from their date of issuance and shall be payable quarterly in
arrears on each Dividend Payment Date, commencing on the first
Dividend Payment Date after the Issue Date. Dividends may be
paid at the Corporation's option on any Dividend Payment Date
occurring on or before February 1, 2002 either in cash or by
issuing additional fully paid and nonassessable Senior
Exchangeable Redeemable Preferred Shares with an aggregate
liquidation preference equal to the amount of such dividends.
After February 1, 2002, dividends shall be paid only in cash.
Each dividend shall be payable to the Senior Exchangeable
Redeemable Preferred Shares held by Holders of record as they
appear on the share books of the Corporation on the Dividend
Record Date immediately preceding the related Dividend Payment
Date. Dividends shall cease to accumulate in respect of the
Senior Exchangeable Redeemable Preferred Shares on the Exchange
Date or on the date of their earlier redemption unless the
Corporation shall have failed to issue the appropriate aggregate
principal amount of Exchange Notes in respect of the Senior
Exchangeable Redeemable Preferred Shares on such Exchange Date or
shall have failed to pay the relevant redemption price on the
date fixed for redemption.
(B) In the event that (1) the Corporation has not filed the
registration statement relating to the Exchange Offer (or, if
applicable, the registration statement relating to
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<PAGE>
the shelf registration of the Senior Exchangeable Redeemable
Preferred Shares for resale by holders contemplated by the
Registration Rights Agreement (the "Resale Registration")) on or
before the 45th day after the Issue Date, (2) such registration
statement (or, if applicable, the Resale Registration) has not
become effective on or before the 120th day after the Issue Date,
(3) the Exchange Offer has not been consummated within
30 Business Days following the initial effective date of the
registration statement relating to the Exchange Offer or (4) 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 (1) through (4), a "Registration Default"), then
additional dividends will accrue (in addition to the stated
dividends on the Senior Exchangeable Redeemable Preferred Shares)
at the rate of 0.25% PER ANNUM on the liquidation preference of
the Senior Exchangeable Redeemable Preferred Shares for the
period from and including the occurrence of the Registration
Default until such time as no Registration Default is in effect.
Such additional dividends (the "Special Dividends") will be
payable quarterly in arrears on each regular Dividend Payment
Date in accordance with the provisions of this paragraph (c).
For each 90-day period that the Registration Default continues,
the PER ANNUM rate of such Special Dividends will increase by an
additional 0.25%; PROVIDED that such rate shall in no event
exceed 1.0% PER ANNUM in the aggregate. At such time as the
Registration Default is no longer in effect, the dividend rate on
the Senior Exchangeable Redeemable Preferred Shares shall be the
rate stated in paragraph (c)(i)(A) hereof and no further Special
Dividends will accrue unless and until another Registration
Default shall occur.
(ii) All dividends paid with respect to the Senior
Exchangeable Redeemable Preferred Shares pursuant to paragraph
(c)(i) shall be paid PRO RATA to the Holders entitled thereto.
(iii) Nothing herein contained shall in any way or under
any circumstances be construed or deemed to require the Board of
Directors to declare, or the Corporation to pay or set apart for
payment, any dividends on the Senior Exchangeable Redeemable
Preferred Shares at any time.
(iv) Dividends on account of arrears for any past
Dividend Period and dividends in connection with any mandatory
redemption pursuant to paragraph (e)(ii) may be declared and paid
at any time, without reference to any regular Dividend Payment
Date, to Holders of record on such date, not more than forty-five
(45) days prior to the payment thereof, as may be fixed by the
Board of Directors of the Corporation.
(v) No full dividends shall be declared by the Board of
Directors or paid or set apart for payment by the Corporation on
any Parity Shares for any period unless full cumulative dividends
have been or contemporaneously are declared and paid in full, or
declared and, if payable in cash, a sum in cash set apart
sufficient for such payment, on the Senior Exchangeable
Redeemable Preferred Shares for all Dividend Periods terminating
on
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<PAGE>
or prior to the date of payment of such full dividends on such
Parity Shares. If full dividends are not so paid, all dividends
declared upon the Senior Exchangeable Redeemable Preferred Shares
and any other Parity Shares shall be declared PRO RATA so that
the amount of dividends declared per share on the Senior
Exchangeable Redeemable Preferred Shares and such Parity Shares
shall in all cases bear to each other the same ratio that accrued
dividends per share on the Senior Exchangeable Redeemable
Preferred Shares and such Parity Shares bear to each other.
(vi) (A) Holders of the Senior Exchangeable Redeemable
Preferred Shares shall be entitled to receive the dividends
provided for in paragraph (c)(i) hereof in preference to and in
priority over any dividends upon any of the Junior Shares.
(B) No dividends may be paid or set apart for such
payment on Junior Shares (except dividends on Junior Shares
payable in additional Junior Shares) if full cumulative dividends
have not been paid in full on the Senior Exchangeable Redeemable
Preferred Shares. So long as any Senior Exchangeable Redeemable
Preferred Shares are outstanding, the Corporation shall not make
any payment on account of, or set apart for payment money for a
sinking or other similar fund for, the purchase, redemption or
other retirement of, any Parity Shares or Junior Shares, or any
warrants, rights, calls or options to purchase any Parity Shares
or Junior Shares, whether in cash, obligations or shares of the
Corporation or other property, and shall not permit any
corporation or other entity directly or indirectly controlled by
the Corporation to purchase or redeem any Parity Shares or Junior
Shares or any such warrants, rights, calls or options unless full
cumulative dividends determined in accordance herewith on the
Senior Exchangeable Redeemable Preferred Shares have been paid in
full.
(vii) Dividends payable on the Senior Exchangeable
Redeemable Preferred Shares for any period shorter than a
quarterly dividend period shall be computed on the basis of a
360-day year of twelve 30-day months and the actual number of
days elapsed in the period for which payable.
(d) LIQUIDATION PREFERENCE
(i) In the event of any voluntary or involuntary
liquidation, dissolution or winding-up of affairs of the
Corporation, the Holders of Senior Exchangeable Redeemable
Preferred Shares then outstanding shall be entitled to be paid,
out of the assets of the Corporation available for distribution
to its shareholders, an amount in cash equal to the liquidation
preference of $50 per Senior Exchangeable Redeemable Preferred
Share, plus, without duplication, an amount in cash equal to
accumulated and unpaid dividends thereon to the date fixed for
liquidation, dissolution or winding-up (including an amount equal
to a prorated dividend for the period from the last Dividend
Payment Date to the date fixed for liquidation, dissolution or
winding-up) before any payment shall be made or any assets
distributed to the holders of any of the Junior Shares including,
without limitation, common stock of the Corporation. Except as
provided in the preceding sentence, Holders of Senior
Exchangeable Redeemable Preferred Shares shall not be entitled to
any
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<PAGE>
distribution in the event of any liquidation, dissolution or
winding-up of the affairs of the Corporation. If the assets of
the Corporation are not sufficient to pay in full the liquidation
payments payable to the Holders of outstanding Senior
Exchangeable Redeemable Preferred Shares and all Parity Shares,
then the holders of all such shares shall share equally and
ratably in such distribution of assets in proportion to the full
liquidation preference, including, without duplication, all
accrued and unpaid dividends, to which each is entitled.
(ii) For the purposes of this paragraph (d), neither the
sale, conveyance, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially
all of the property or assets of the Corporation nor the
consolidation or merger of the Corporation with or into one or
more entities shall be deemed to be a liquidation, dissolution or
winding-up of the affairs of the Corporation.
(e) REDEMPTION.
(i) SPECIAL MANDATORY REDEMPTION. If the merger of the
Corporation and NEXTLINK Communications, L.L.C. pursuant to the
Agreement and Plan of Merger dated January 23, 1997, between the
Corporation and NEXTLINK Communications, L.L.C. has not been
consummated on or prior to February 28, 1997, the Corporation
shall redeem promptly from any source of funds legally available
therefor, in the manner provided for in paragraph (e)(iii)
hereof, all of the Senior Exchangeable Redeemable Preferred
Shares, at a price equal to 100% of the liquidation preference
thereof plus, without duplication, an amount in cash equal to all
accumulated and unpaid dividends per share through and including
the Redemption Date (the "Special Mandatory Redemption Price").
(ii) MANDATORY REDEMPTION. On February 1, 2009, the
Corporation shall redeem, to the extent of funds legally
available therefor, in the manner provided for in paragraph
(e)(iii) hereof, all of the Senior Exchangeable Redeemable
Preferred Shares then outstanding at a redemption price equal to
100% of the liquidation preference per share, plus, without
duplication, an amount in cash equal to all accumulated and
unpaid dividends per share (including an amount equal to a
prorated dividend for the period from the Dividend Payment Date
immediately prior to the Redemption Date to the Redemption Date)
(the "Mandatory Redemption Price").
(iii) PROCEDURES FOR REDEMPTION. (A) At least (x) five
(5) days and not more than seven (7) days prior to the date fixed
for any redemption of the Senior Exchangeable Preferred Shares
pursuant to paragraph (e)(i) and (y) thirty (30) days and not
more than sixty (60) days prior to the date fixed for any
redemption of the Senior Exchangeable Redeemable Preferred Shares
pursuant to paragraph (e)(ii) hereof, written notice (each, a
"Redemption Notice") shall be given by first class mail, postage
prepaid, to each Holder of record on the record date fixed for
such redemption of the Senior Exchangeable Redeemable Preferred
Shares at such Holder's address as it appears on the stock books
of the Corporation, PROVIDED that no failure to give such notice
nor any deficiency therein shall affect the validity of the
procedure
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<PAGE>
for the redemption of any Senior Exchangeable Redeemable
Preferred Shares to be redeemed except as to the Holder or
Holders to whom the Corporation has failed to give said notice or
except as to the Holder or Holders whose notice was defective.
The Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph (e)(i)
or (e)(ii) hereof;
(2) the Special Mandatory Redemption Price or the Mandatory
Redemption Price, as the case may be;
(3) the Redemption Date;
(4) that the Holder is to surrender to the Corporation, in
the manner, at the place or places and at the price designated,
his certificate or certificates representing the Senior
Exchangeable Redeemable Preferred Shares to be redeemed; and
(5) that dividends on the Senior Exchangeable Redeemable
Preferred Shares to be redeemed shall cease to accumulate on such
Redemption Date unless the Corporation defaults in the payment of
the Special Mandatory Redemption Price or the Mandatory
Redemption Price, as the case may be.
(B) Each Holder of Senior Exchangeable Redeemable
Preferred Shares shall surrender the certificate or certificates
representing such Senior Exchangeable Redeemable Preferred Shares
to the Corporation, duly endorsed (or otherwise in proper form
for transfer, as determined by the Corporation), in the manner
and at the place designated in the Redemption Notice, and on the
Redemption Date the full Special Mandatory Redemption Price or
Mandatory Redemption Price, as the case may be, for such shares
shall be payable in cash to the Person whose name appears on such
certificate or certificates as the owner thereof, and each
surrendered certificate shall be canceled and retired.
(C) On and after the Redemption Date, unless the
Corporation defaults in the payment in full of the applicable
redemption price, dividends on the Senior Exchangeable Redeemable
Preferred Shares called for redemption shall cease to accumulate
on the Redemption Date, and all rights of the Holders of redeemed
shares shall terminate with respect thereto on the Redemption
Date, other than the right to receive the Special Mandatory
Redemption Price or the Mandatory Redemption Price, as the case
may be, without interest; PROVIDED, HOWEVER, that if a notice of
redemption shall have been given as provided in paragraph
(iii)(A) above and the funds necessary for redemption (including
an amount in respect of all dividends that will accrue to the
Redemption Date) shall have been irrevocably deposited in trust
for the equal and ratable benefit for the Holders of the shares
called for redemption, then, at the close of business on the day
on which such funds are segregated and set apart, the Holders of
the shares to be redeemed shall cease to be shareholders of the
Corporation and shall be entitled only to receive the Special
Redemption Price or the Mandatory Redemption Price, as the case
may be, without interest.
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<PAGE>
(f) VOTING RIGHTS.
(i) The Holders of Senior Exchangeable Redeemable Preferred
Shares, except as otherwise required under Washington law or as set
forth in paragraphs (ii), (iii) and (iv) below, shall not be entitled
or permitted to vote on any matter required or permitted to be voted
upon by the shareholders of the Corporation.
(ii) (A) So long as any Senior Exchangeable Redeemable
Preferred Shares are outstanding, the Corporation shall not
authorize or issue any Parity Shares (other than additional
Senior Exchangeable Redeemable Preferred Shares issued as
dividends on the Senior Exchangeable Redeemable Preferred Shares
in accordance with the terms hereof and Exchange Shares) without
the affirmative vote or consent of Holders of at least a majority
of the then outstanding Senior Exchangeable Redeemable Preferred
Shares, voting or consenting, as the case may be, as a separate
class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting, if after
giving effect to the issuance of such Parity Shares, the
aggregate liquidation preference of the outstanding Parity Shares
(other than (i) the Senior Exchangeable Redeemable Preferred
Shares originally issued on the Issue Date, (ii) additional
Senior Exchangeable Redeemable Preferred Shares issued as
dividends in accordance with the terms hereof on the Senior
Exchangeable Redeemable Preferred Shares originally issued on the
Issue Date and additional Senior Exchangeable Redeemable
Preferred Shares issued as dividends on the Senior Exchangeable
Redeemable Preferred Shares in accordance with the terms hereof
and (iii) any Exchange Shares) would exceed the sum of (x) $50
million and (y) the aggregate amount of gross proceeds received
after the Issue Date and on or prior to the date of issuance of
such Parity Shares from the issuance of Qualified Junior Shares.
(B) So long as any Senior Exchangeable Redeemable Preferred
Shares are outstanding, the Corporation shall not authorize any
class of Senior Shares without the affirmative vote or consent of
Holders of at least two-thirds of the outstanding Senior
Exchangeable Redeemable Preferred Shares, voting or consenting,
as the case may, as a separate class, given in person or by
proxy, either in writing or by resolution adopted at an annual or
special meeting.
(C) So long as any Senior Exchangeable Redeemable Preferred
Shares are outstanding, the Corporation shall not amend, alter or
repeal any of the provisions of the Corporation's Articles of
Incorporation (including this Certificate of Designations) or the
by-laws of the Corporation so as to affect adversely the
specified rights, powers, preferences, privileges or voting
rights of the holders of Senior Exchangeable Redeemable Preferred
Shares or reduce the time for any notice which the holders of the
Senior Exchangeable Redeemable Preferred Shares may be entitled
without the affirmative vote or consent of Holders of at least
two-thirds of the issued and outstanding Senior Exchangeable
Redeemable Preferred Shares, voting or consenting, as the case
may be, as one class, given in person or by proxy, either in
writing or by resolution adopted at an annual or special meeting.
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<PAGE>
(D) Notwithstanding the foregoing, modifications and
amendments of the terms of this Certificate of Designations
contained in paragraphs (h) and (l) below may be made by the
Corporation with the consent of the Holders of a majority of the
outstanding Senior Exchangeable Redeemable Preferred Shares;
PROVIDED, HOWEVER, that no such modification or amendment may,
without the consent of the Holder of each outstanding Senior
Exchangeable Redeemable Preferred Share affected thereby
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 Senior Exchangeable Redeemable Preferred Shares
required by paragraph (h) hereof in a manner materially adverse
to the holders of outstanding Senior Exchangeable Redeemable
Preferred Shares. In addition, the holders of a majority of the
outstanding Senior Exchangeable Redeemable Preferred Shares, on
behalf of all holders of Senior Exchangeable Redeemable Preferred
Shares, may waive compliance by the Corporation with the
covenants described below in paragraphs (h) and (l) and may waive
any past default under the Certificate of Designations, except a
default arising from failure to purchase any Senior Exchangeable
Redeemable Preferred Shares tendered pursuant to an Offer to
Purchase.
(E) Prior to the exchange of Senior Exchangeable Redeemable
Preferred Shares for Exchange Notes, the Corporation shall not
amend or modify the form of the Indenture for the Exchange Notes
as it exists on the Issue Date (the "Indenture") (except as
expressly provided therein in respect of amendments that may be
made without the consent of Holders of Exchange Notes) without
the affirmative vote or consent of Holders of at least a majority
of the Senior Exchangeable Redeemable Preferred Shares then
outstanding, voting or consenting, as the case may be, as one
class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting.
(F) Except as set forth in paragraphs (f)(ii)(A),(f)(ii)(B)
and (f)(ii)(C) above, (x) the creation, authorization or issuance
of any shares of any Junior Shares, Parity Shares or Senior
Shares or (y) the increase or decrease in the amount of
authorized Capital Stock of any class, including Senior Shares or
Parity Shares, shall not require the consent of Holders of Senior
Exchangeable Redeemable Preferred Shares and shall not be deemed
to affect adversely the rights, preferences, privileges or voting
rights of Holders of Senior Exchangeable Redeemable Preferred
Shares.
(G) Notwithstanding the foregoing, at any time following a
Covenant Amendment, the Corporation may, at its election and
without the consent of any Holder of Senior Exchangeable
Redeemable Preferred Shares, amend the Corporation's Articles of
Incorporation (including this Certificate of Designations) to add
provisions making the Senior Exchangeable Redeemable Preferred
Shares redeemable at the option of the Corporation (subject to
contractual and other restrictions with respect thereto and the
legal availability of funds therefor) as follows:
(x) at any time on or after February 1, 2002, in whole or
in part, at the option of the Corporation, at the redemption
prices (expressed in percentages of the liquidation
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<PAGE>
preference thereof) set forth below, plus, without duplication,
an amount in cash equal to all accumulated and unpaid dividends
to the Redemption Date (including an amount in cash equal to a
prorated dividend for the period from the Dividend Payment Date
immediately prior to the Redemption Date), if redeemed during the
12-month period beginning February 1 of each of the years set
forth below:
YEAR PERCENTAGE
---- ----------
2002 107.00%
2003 105.25
2004 103.50
2005 101.75
2006 and thereafter 100.00
In the event of redemption of only a portion of the then
outstanding Senior Exchangeable Redeemable Preferred Shares, the
Corporation shall effect such redemption on a PRO RATA basis.
(y) prior to February 1, 2000, in part, in an amount not to
exceed 35% of the initial aggregate liquidation preference of the
Senior Exchangeable Redeemable Preferred Shares originally issued
out of the net cash proceeds of one or more Qualifying Events
(other than any Qualifying Event that results in a Change of
Control) at a redemption price of 114.0% of the liquidation
preference thereof plus, without duplication, an amount in cash
equal to all accumulated and unpaid dividends to the redemption
date (including an amount in cash equal to a prorated dividend
for the period from the Dividend Payment Date immediately prior
to the Redemption Date); PROVIDED, HOWEVER, that after any such
redemption, the aggregate liquidation preference of the Senior
Exchangeable Redeemable Preferred Shares outstanding must equal
at least 65% of the Senior Exchangeable Redeemable Preferred
Shares issued on the Issue Date. Any such redemption shall occur
on or prior to 60 days after the receipt by the Corporation of
the proceeds of such Qualifying Event.
(iii) Without the affirmative vote or consent of Holders of
a majority of the issued and outstanding Senior Exchangeable
Redeemable Preferred Shares, voting or consenting, as the case
may be, as a separate class, given in person or by proxy, either
in writing or by resolution adopted at an annual or special
meeting, the Corporation shall not, in a single transaction or
series of related transactions, consolidate with or merge with or
into, or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets to, another
Person or adopt a plan of liquidation unless: (A) either (1) the
Corporation is the surviving or continuing Person or (2) the
Person (if other than the Corporation) formed by such
consolidation or into which the Corporation is merged or the
Person that acquires by conveyance, transfer or lease the
properties and assets of the Corporation substantially as an
entirety or in the case of a plan of liquidation, the Person to
which assets of the Corporation have been transferred, shall be a
corporation, limited liability Corporation, partnership or trust
organized and existing under the laws of the United States or any
State thereof or the District of Columbia; (B) the Senior
Exchangeable Redeemable Preferred Shares shall be converted into
or exchanged for and shall become
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<PAGE>
shares of Capital Stock of such successor, transferee or
resulting Person, having in respect of such successor, transferee
or resulting Person, having the same powers, preferences and
relative, participating, optional or other special rights and the
qualifications, limitations or restrictions thereon, that the
Senior Exchangeable Redeemable Preferred Shares had immediately
prior to such transaction; (C) immediately after giving pro forma
effect to such transaction, no Voting Rights Triggering Event
shall have occurred or be continuing; and (D) the Corporation has
delivered to the Transfer Agent prior to the consummation of the
proposed transaction an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger or transfer
complies with the terms hereof and that all conditions precedent
herein relating to such transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series
of related transactions) of all or substantially all of the
properties or assets of one or more Subsidiaries of the
Corporation, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the
Corporation, shall be deemed to be the transfer of all or
substantially all of the properties and assets of the
Corporation.
(iv) (A) If (1) dividends on the Senior
Exchangeable Redeemable Preferred Shares are in arrears and
unpaid (and, if after February 1, 2002, such dividends are
not paid in cash) for six or more Dividend Periods (whether
or not consecutive) (a "Dividend Default"); (2) the
Corporation fails to redeem all of the then outstanding
Senior Exchangeable Redeemable Preferred Shares on February
1, 2009 or fails otherwise to discharge any redemption
obligation with respect to the Senior Exchangeable
Redeemable Preferred Shares; (3) the Corporation fails to
make an Offer to Purchase (whether pursuant to the terms of
paragraph (h)(i) or otherwise) following a Change of Control
if such Offer to Purchase is required by paragraph (h)
hereof or fails to purchase Senior Exchangeable Redeemable
Preferred Shares from Holders who elect to have such shares
purchased pursuant to the Offer to Purchase; (4) the
Corporation breaches or violates one of the provisions set
forth in any paragraphs (f)(iii) or (1) hereof and the
breach or violation continues for a period of 30 days or
more after the Corporation receives notice thereof
specifying the default from the Holders of at least 25% of
the Senior Exchangeable Redeemable Preferred Shares then
outstanding, or (5) the Corporation fails to pay at the
final stated maturity (giving effect to any extensions
thereof) the principal amount of any Debt of the Corporation
or any Subsidiary of the Corporation, or the final stated
maturity of any such Debt is accelerated, if the aggregate
principal amount of such Debt, together with the aggregate
principal amount of any other such Debt in default for
failure to pay principal at the final stated maturity
(giving effect to any extensions thereof) or that has been
accelerated, aggregates $15,000,000 or more at any time, in
each case, after a 10-day period during which such default
shall not have been cured or such acceleration rescinded,
then in the case of any of clauses (1)-(5) the number of
directors constituting the Board of Directors shall be
adjusted by the number, if any, necessary to permit the
Holders of the Senior Exchangeable Redeemable Preferred
Shares, voting together with any outstanding Parity Shares
separately as a single class, to elect the lesser of two
directors and that number of directors constituting 25% of
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the members of the Board of Directors. Each such event
described in clauses (1), (2), (3), (4) and (5) is a "Voting
Rights Triggering Event." Holders of a majority of the
issued and outstanding Senior Exchangeable Redeemable
Preferred Shares, voting together with any outstanding
Parity Shares separately as a single class, shall have the
exclusive right to elect the lesser of two directors and
that number of directors constituting 25% of the members of
the Board of Directors at a meeting therefor called upon
occurrence of such Voting Rights Triggering Event, and at
every subsequent meeting at which the terms of office of the
directors so elected (other than as described in (f)(iv)(B)
below). The voting rights provided herein shall be the
exclusive remedy at law or in equity of the holders of the
Senior Exchangeable Redeemable Preferred Shares for any
Voting Rights Triggering Event.
(B) The right of the Holders of Senior
Exchangeable Redeemable Preferred Shares to elect members of
the Board of Directors as set forth in subparagraph
(f)(iv)(A) above shall continue until such time as (x) in
the event such right arises due to a Dividend Default, all
accumulated dividends that are in arrears on the Senior
Exchangeable Redeemable Preferred Shares are paid in full
(and, in the case of dividends payable after February 1,
2002, paid in cash) and (y) in all other cases, the failure,
breach or default giving rise to such Voting Rights
Triggering Event is remedied or waived by the holders of at
least a majority of the Senior Exchangeable Redeemable
Preferred Shares then outstanding, at which time (1) the
special right of the Holders of Senior Exchangeable
Redeemable Preferred Shares so to vote for the election of
directors and (2) the term of office of the directors
elected by the Holders of the Senior Exchangeable Redeemable
Preferred Shares shall each terminate and the directors
elected by the holders of Voting Stock other than the Senior
Exchangeable Redeemable Preferred Shares shall constitute
the entire Board of Directors. At any time after voting
power to elect directors shall have become vested and be
continuing in the Holders of Senior Exchangeable Redeemable
Preferred Shares pursuant to paragraph (f)(iv)(A) hereof, or
if vacancies shall exist in the offices of directors elected
by the Holders of Senior Exchangeable Redeemable Preferred
Shares, a proper officer of the Corporation may, and upon
the written request of the Holders of record of at least
twenty-five percent (25%) of the Senior Exchangeable
Redeemable Preferred Shares then outstanding addressed to
the Secretary of the Corporation shall, call a special
meeting of the Holders of Senior Exchangeable Redeemable
Preferred Shares, for the purpose of electing the directors
which such Holders are entitled to elect. If such meeting
shall not be called by a proper officer of the Corporation
within twenty (20) days after personal service of said
written request upon the Secretary of the Corporation, or
within twenty (20) days after mailing the same within the
United States by certified mail, addressed to the Secretary
of the Corporation at its principal executive offices, then
the Holders of record of at least twenty-five percent (25%)
of the outstanding Senior Exchangeable Redeemable Preferred
Shares may designate in writing one of their number to call
such meeting at the expense of the Corporation, and such
meeting may be called by the Person so designated upon the
notice required for the annual meetings of shareholders of
the Corporation and shall be held at the place for holding
the annual meetings of shareholders. Any Holder of Senior
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<PAGE>
Exchangeable Redeemable Preferred Shares so designated shall
have, and the Corporation shall provide, access to the lists
of shareholders to be called pursuant to the provisions
hereof.
(C) At any meeting held for the purpose of
electing directors at which the Holders of Senior
Exchangeable Redeemable Preferred Shares voting together
with any outstanding shares of Parity Shares as a separate
class shall have the right as described herein to elect
directors, the presence in person or by proxy of the Holders
of at least a majority of the then outstanding Senior
Exchangeable Redeemable Preferred Shares and Parity Shares
shall be required to constitute a quorum of such Senior
Exchangeable Redeemable Preferred Shares and Parity Shares.
(D) Any vacancy occurring in the office of a
director elected by the Holders of Senior Exchangeable
Redeemable Preferred Shares and Parity Shares may be filled
by the remaining directors elected by the Holders of Senior
Exchangeable Redeemable Preferred Shares and Parity Shares
unless and until such vacancy shall be filled by the Holders
of Senior Exchangeable Redeemable Preferred Shares and
Parity Shares.
(v) In any case in which the Holders of Senior
Exchangeable Redeemable Preferred Shares shall be entitled
to vote pursuant to this paragraph (f) or pursuant to
Washington law, each Holder of Senior Exchangeable
Redeemable Preferred Shares entitled to vote with respect to
such matter shall be entitled to one vote for each share of
Senior Exchangeable Redeemable Preferred Shares held.
(g) EXCHANGE.
(i) REQUIREMENTS. The outstanding Senior Exchangeable
Redeemable Preferred Shares are exchangeable as a whole but not in
part, at the option of the Corporation at any time on any Dividend
Payment Date for the Corporation's 14% Senior Subordinated Notes due
2009 (the "Exchange Notes") to be substantially in the form set forth
in the Indenture, a copy of which is on file with the secretary of the
Corporation and the Transfer Agent, PROVIDED that any such exchange
may only be made if on or prior to the date of such exchange (A) the
Corporation has paid all accumulated dividends on the Senior
Exchangeable Redeemable Preferred Shares (including the dividends
payable on the date of exchange) and there shall be no contractual
impediment to such exchange and (B) immediately after giving effect to
such exchange, no Default or Event of Default (as defined in the
Indenture) would exist under the Indenture and no default or event of
default would exist under the Existing Indenture. The exchange rate
shall be $1.00 principal amount of Exchange Notes for each $1.00 of
the aggregate liquidation preference of Senior Exchangeable Redeemable
Preferred Shares, including, to the extent necessary, Exchange Notes
in principal amounts less than $1,000.
(ii) PROCEDURE FOR EXCHANGE. (A) At least thirty (30)
days and not more than sixty (60) days prior to the date fixed
for exchange, written notice (the "Exchange Notice") shall be
given by first class mail, postage prepaid, to each Holder of
record on the record date fixed for such exchange of the Senior
Exchangeable Redeemable
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<PAGE>
Preferred Shares at such Holder's address as the same appears on the
share books of the Corporation, PROVIDED that no failure to give such
notice nor any deficiency therein shall affect the validity of the
procedure for the exchange of any Senior Exchangeable Redeemable
Preferred Shares to be exchanged except as to the Holder or Holders to
whom the Corporation has failed to give said notice or except as to
the Holder or Holders whose notice was defective. The Exchange Notice
shall state:
(1) the Exchange Date;
(2) that the Holder is to surrender to the Corporation, in the
manner and at the place or places designated, his certificate or
certificates representing the Senior Exchangeable Redeemable Preferred
Shares to be exchanged;
(3) that dividends on the Senior Exchangeable Redeemable
Preferred Shares to be exchanged shall cease to accrue on such
Exchange Date whether or not certificates for Senior Exchangeable
Redeemable Preferred Shares are surrendered for exchange on such
Exchange Date unless the Corporation shall default in the delivery of
Exchange Notes; and
(4) that interest on the Exchange Notes shall accrue from the
Exchange Date whether or not certificates for Senior Exchangeable
Redeemable Preferred Shares are surrendered for exchange on such
Exchange Date.
(B) On or before the Exchange Date, each Holder of Senior
Exchangeable Redeemable Preferred Shares shall surrender the
certificate or certificates representing such Senior Exchangeable
Redeemable Preferred Shares, in the manner and at the place designated
in the Exchange Notice. The Corporation shall cause the Exchange
Notes to be executed on the Exchange Date and, upon surrender in
accordance with the Exchange Notice of the certificates for any Senior
Exchangeable Redeemable Preferred Shares so exchanged, duly endorsed
(or otherwise in proper form for transfer, as determined by the
Corporation), such shares shall be exchanged by the Corporation into
Exchange Notes. The Corporation shall pay interest on the Exchange
Notes at the rate and on the dates specified therein from the Exchange
Date.
(C) If notice has been mailed as aforesaid, and if before the
Exchange Date specified in such notice (1) the Indenture shall have
been duly executed and delivered by the Corporation and the trustee
thereunder and (2) all Exchange Notes necessary for such exchange
shall have been duly executed by the Corporation and delivered to the
trustee under the Indenture with irrevocable instructions to
authenticate the Exchange Notes necessary for such exchange, then the
rights of the Holders of Senior Exchangeable Redeemable Preferred
Shares so exchanged as shareholders of the Corporation shall cease
(except the right to receive Exchange Notes, an amount in cash equal
to the amount of accrued and unpaid dividends to the Exchange Date),
and the Person or Persons entitled to receive the Exchange Notes
issuable upon exchange shall be treated for all purposes as the
registered Holder or Holders of such Exchange Notes as of the Exchange
Date.
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(iii) NO EXCHANGE IN CERTAIN CASES. Notwithstanding the
foregoing provisions of this paragraph (g), the Corporation shall not
be entitled to exchange the Senior Exchangeable Redeemable Preferred
Shares for Exchange Notes if such exchange, or any term or provision
of the Indenture or the Exchange Notes, or the performance of the
Corporation's obligations under the Indenture or the Exchange Notes,
shall materially violate or conflict with any applicable law or if, at
the time of such exchange, the Corporation is insolvent or if it would
be rendered insolvent by such exchange.
(h) CHANGE OF CONTROL.
(i) Within 30 days following a Change of Control (the date of
such occurrence being the "Change of Control Date"), the Corporation
shall notify the Holders of the Senior Exchangeable Redeemable
Preferred Shares in writing of such occurrence and shall make an Offer
to Purchase all of the then outstanding Senior Exchangeable Redeemable
Preferred Shares at a purchase price of 101% of the liquidation
preference thereof plus, without duplication, an amount in cash equal
to all accumulated and unpaid dividends per share (including an amount
in cash equal to a prorated dividend for the period from the Dividend
Payment Date immediately prior to the Payment Date to the Payment
Date).
(ii) The Corporation will comply with any securities laws and
regulations, to the extent such laws and regulations are applicable to
the repurchase of the Senior Exchangeable Redeemable Preferred Shares
in connection with an Offer to Purchase.
(iii) On the Payment Date the Corporation shall (A) accept for
payment the Senior Exchangeable Redeemable Preferred Shares validly
tendered pursuant to the Offer to Purchase, (B) pay to the Holders of
shares so accepted the purchase price therefor in cash and (C) cancel
and retire each surrendered certificate. Unless the Corporation
defaults in the payment for the Senior Exchangeable Redeemable
Preferred Shares tendered pursuant to the Offer to Purchase, dividends
will cease to accrue with respect to the Senior Exchangeable
Redeemable Preferred Shares tendered and all rights of Holders of such
tendered shares will terminate, except for the right to receive
payment therefor, on the Payment Date.
(v) Notwithstanding the foregoing, the Corporation will not
repurchase or redeem any Senior Exchangeable Redeemable Preferred
Shares pursuant to the provisions of this paragraph prior to the
Corporation's repurchase of such Senior Notes as are required to be
repurchased pursuant to the Existing Indenture.
(i) CONVERSION OR EXCHANGE.
The Holders of Senior Exchangeable Redeemable Preferred Shares
shall not have any rights hereunder to convert such shares into or
exchange such shares for shares of any other class or classes or of
any other series of any class or classes of Capital Stock of the
Corporation.
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(j) REISSUANCE OF SENIOR EXCHANGEABLE REDEEMABLE PREFERRED SHARES.
Senior Exchangeable Redeemable Preferred Shares that have been
issued and reacquired in any manner, including shares purchased or
redeemed or exchanged, shall (upon compliance with any applicable
provisions of the laws of Washington) have the status of authorized
and unissued shares of Preferred Shares undesignated as to series and
may be redesignated and reissued as part of any series of Preferred
Shares, other than Senior Exchangeable Redeemable Preferred Shares.
(k) BUSINESS DAY.
If any payment, redemption or exchange shall be required by the
terms hereof to be made on a day that is not a Business Day, such
payment, redemption or exchange shall be made on the immediately
succeeding Business Day.
(l) CERTAIN ADDITIONAL PROVISIONS.
(i) LIMITATION ON CONSOLIDATED DEBT. The Corporation may not,
and may not permit any Restricted Subsidiary of the Corporation to,
Incur any Debt unless either (a) the ratio of (i) the aggregate
consolidated principal amount of Debt of the Corporation 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
Corporation'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 Corporation and any
Restricted Subsidiary may Incur the following:
(A) 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 Corporation 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
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under all such Bank Credit Agreements and Vendor Financing Facilities
of the Corporation and its Restricted Subsidiaries immediately prior
to such renewal, extension, refinancing or refunding;
(B) 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;
(C) Debt owed by the Corporation to any Wholly-Owned Restricted
Subsidiary of the Corporation or Debt owed by a Restricted Subsidiary
of the Corporation to the Corporation or another Wholly-Owned
Restricted Subsidiary of the Corporation; PROVIDED, HOWEVER, that upon
either (x) the transfer or other disposition by such Wholly-Owned
Restricted Subsidiary or the Corporation of any Debt so permitted to a
Person other than the Corporation or another Wholly-Owned Restricted
Subsidiary of the Corporation 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 Corporation or another such Wholly-Owned Restricted
Subsidiary, the provisions of this clause (C) 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;
(D) Debt Incurred to renew, extend, refinance or refund (each, a
"refinancing") Debt (1) referred to in clause (F) below or (2)
Incurred pursuant to the preceding paragraph or clause (B) of this
paragraph 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 Corporation as
necessary to accomplish such refinancing by means of a tender offer or
privately negotiated repurchase, plus the amount of expenses of the
Corporation incurred in connection with such refinancing; PROVIDED,
HOWEVER, that, 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 Corporation (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 Corporation) 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 Corporation) which is
conditioned upon a change substantially similar to the provisions of
paragraph (h) above or which is pursuant to provisions substantially
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similar to the provisions of Section 1013 of the Existing Indenture as
in effect on the Issue Date (whether or not the Existing Notes are
outstanding or the Existing Indenture is in effect);
(E) Debt consisting of Permitted Interest Rate and Currency
Protection Agreements;
(F) Debt outstanding at the Issue Date;
(G) Subordinated Debt invested by (a) a group of employees of
the Corporation, which includes the Chief Executive Officer of the
Corporation, who own, directly or indirectly, through an employee
stock ownership plan or arrangement, shares of the Corporation's
Capital Stock or (b) any other Person that controls the Corporation
(i) on the Issue Date or (ii) after a Change of Control, PROVIDED that
the Corporation is not in default with respect to its obligations
under paragraph (h) above;
(H) 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 Corporation or a Restricted Subsidiary, or in
respect of a letter of credit obtained to secure such performance; and
(I) Debt not otherwise permitted to be Incurred pursuant to
clauses (A) through (H) above, which, together with any other
outstanding Debt Incurred pursuant to this clause (I), 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 paragraph
(l)(i), in the event that an item of Debt meets the criteria of more than
one of the types of Debt the Corporation is permitted to Incur pursuant to
the foregoing clauses (A) through (I), the Corporation 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 this 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.
(ii) REPORTS. So long as any Senior Exchangeable Redeemable
Preferred Shares are outstanding, the Corporation will provide to the
holders of Senior Exchangeable Redeemable Preferred Shares, within 15 days
after it files them with the Securities and Exchange Commission (or any
successor agency performing similar functions), copies of the annual
reports and of the information, documents and other reports (or copies of
such portions of any of the foregoing as the Commission may by rules and
regulation prescribe) which the Corporation files with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act. In the event that the
Corporation is no longer required to furnish such reports to its
securityholders pursuant to the Exchange Act, the Corporation will cause
its
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consolidated financial statements, comparable to those which would have
been required to appear in annual or quarterly reports, to be delivered to
the Holders of Senior Exchangeable Redeemable Preferred Shares.
(m) DEFINITIONS.
As used in this Certificate of Designations, the following terms shall
have the following meanings (with terms defined in the singular having
comparable meanings when used in the plural and VICE VERSA), unless the
context otherwise requires. Any reference in any of the following terms to
any term in or provision of the Existing Indenture shall refer to such term
or provision as in effect on the Issue Date and as may be amended in
accordance with the terms of the Existing Indenture (whether or not the
Existing Notes are outstanding or the Existing Indenture is in effect):
"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 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.
"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 of the Existing Indenture or
pursuant to a transaction in compliance with Section 801 of the Existing
Indenture), (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 (as defined in the Existing
Indenture)) 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 (as defined in the Existing
Indenture) which is permitted by the provisions of Section 1009 of the
Existing Indenture; PROVIDED that a transaction described in clause (i),
(ii) and (iii) shall constitute an Asset Disposition
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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.
"Bank Credit Agreement" means any one or more credit agreements (which
may include or consist of revolving credits) between the Corporation or any
Restricted Subsidiary of the Corporation and one or more banks or other
financial institutions providing financing for the business of the
Corporation and its Restricted Subsidiaries.
"Board of Directors" shall have the meaning ascribed to it in the
first paragraph of this Resolution.
"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 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.
"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 Corporation), 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 Corporation; (b) neither Mr. Craig O.
McCaw nor any person designated by him to the Corporation as acting on his
behalf shall be a director of the Corporation; or (c) during any period of
two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors (together with any new directors whose
election by the Board of Directors or whose nomination for election by the
shareholders of the Corporation was proposed by a vote of a majority of the
directors of the Corporation then still in office who were either directors
at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office.
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"Change of Control Date" shall have the meaning ascribed to it in
paragraph (h)(i) hereof.
"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 Corporation and its Restricted
Subsidiaries for such period increased by the sum of (i) Consolidated
Interest Expense of the Corporation and its Restricted Subsidiaries for
such period, plus (ii) Consolidated Income Tax Expense of the Corporation
and its Restricted Subsidiaries for such period, plus (iii) the
consolidated depreciation and amortization expense included in the income
statement of the Corporation and its Restricted Subsidiaries for such
period, plus (iv) any non-cash expense related to the issuance to employees
of the Corporation or any Restricted Subsidiary of the Corporation of
options to purchase Capital Stock of the Corporation 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 Corporation (calculated separately for such
Restricted Subsidiary in the same manner as provided above for the
Corporation) that is subject to a restriction which prevents the payment of
dividends or the making of distributions to the Corporation or another
Restricted Subsidiary of the Corporation to the extent of such restriction.
"Consolidated Income Tax Expense" for any period means the
consolidated provision for income taxes of the Corporation 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 Corporation 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 Corporation 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 Corporation and its Restricted Subsidiaries, whether or not declared or
paid; (vi) interest on Debt guaranteed by the Corporation and its
Restricted Subsidiaries; and (vii) the portion of any Capital Lease
Obligation paid during such period that is allocable to interest expense.
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"Consolidated Net Income" for any period means the consolidated net
income (or loss) of the Corporation 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 (i) the net income (or loss) of any Person acquired by the
Corporation or a Restricted Subsidiary of the Corporation in a
pooling-of-interests transaction for any period prior to the date of such
transaction, (ii) the net income (or loss) of any Person that is not a
Restricted Subsidiary of the Corporation except to the extent of the amount
of dividends or other distributions actually paid to the Corporation or a
Restricted Subsidiary of the Corporation by such Person during such period,
(iii) gains or losses on Asset Dispositions by the Corporation or its
Restricted Subsidiaries, (iv) all extraordinary gains and extraordinary
losses, (v) the cumulative effect of changes in accounting principles, (vi)
non-cash gains or losses resulting from fluctuations in currency exchange
rates, (vii) any non-cash gain or loss realized on the termination of any
employee pension benefit plan and (viii) the tax effect of any of the items
described in clauses (i) through (vii) above.
"corporation" means a corporation, association, company, limited
liability company, joint-stock company or business trust.
"Covenant Amendment" means either (i) the defeasance, extinguishment
or amendment of certain covenants of the Existing Indenture that would
cause the Senior Exchangeable Redeemable Preferred Shares to be deemed
Disqualified Stock (under the Existing Indenture) if the provisions of
paragraph (f)(G)(x) and (y) were a part of this Certificate of
Designations, and include, but are not limited to, the definition of
Disqualified Stock (under the Existing Indenture) or (ii) defeasance or
extinguishment of the Existing Indenture in its entirety.
"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
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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 Corporation or a Wholly-Owned Restricted
Subsidiary of the Corporation) 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.
"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 the holder
thereof, in whole or in part, on or prior to February 1, 2009; PROVIDED,
HOWEVER, that any Preferred Stock which would not constitute Disqualified
Stock but for provisions thereof giving holders thereof the right to
require the Corporation to repurchase or redeem such Preferred Stock upon
the occurrence of a Change of Control occurring prior to February 1, 2009
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 contained in paragraph (h) hereof
and such Preferred Stock specifically provides that the Corporation will
not repurchase or redeem any such stock pursuant to such provisions prior
to the Corporation's repurchase of such Senior Exchangeable Redeemable
Preferred Shares as are required to be purchased pursuant to paragraph (h)
hereof.
"Dividend Payment Date" means February 1, May 1, August 1 and November
1, of each year.
"Dividend Period" means the Initial Dividend Period and, thereafter,
each Quarterly Dividend Period.
"Dividend Record Date" means January 15, April 15, July 15 and October
15 of each year.
"Eagle River" means Eagle River Investments, L.L.C., a limited
liability company formed under the laws of the State of Washington.
"Exchange Act" means the Securities Exchange Act of 1934, and the
rules and regulations promulgated thereunder.
"Exchange Date" means the date on which Senior Exchangeable Redeemable
Preferred Shares are exchanged by the Corporation for Exchange Notes.
"Exchange Notes" shall have the meaning ascribed to it in paragraph
(g)(i) hereof.
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"Exchange Notice" shall have the meaning ascribed to it in paragraph
(g)(ii) hereof.
"Exchange Offer" means the exchange offer contemplated by the
Registration Rights Agreement.
"Exchange Shares" means any Senior Exchangeable Redeemable Preferred
Shares issued in exchange for an Original Share or Original Shares pursuant
to the Exchange Offer or otherwise registered under the Securities Act and
any Senior Exchangeable Redeemable Preferred Shares with respect to which
the next preceding Predecessor Shares of such Senior Exchangeable
Redeemable Preferred Shares was an Exchange Share, and their Successor
Shares.
"Existing Notes" means the Corporation's $350,000,000 aggregate
principal amount of 12 1/2% Senior Notes due April 15, 2006, as the same
may be modified or amended from time to time.
"Existing Indenture" means the Indenture governing the Existing Notes
as such Indenture may be amended or supplemented from time to time in
accordance with the terms thereof.
"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 Corporation of a lien permitted under clause
(iv) of the second paragraph of Section 1011 of the Existing Indenture
shall not be deemed to constitute a Guarantee by such Restricted Subsidiary
of any Purchase Money Debt of the Corporation secured thereby.
"Holder" means a holder of Senior Exchangeable Redeemable Preferred
Shares as reflected in the share books of the Corporation.
"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
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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 Corporation may elect to treat all or any portion of
revolving credit debt of the Corporation or a Subsidiary as being incurred
from and after any date beginning the date the revolving credit commitment
is extended to the Corporation or a Subsidiary, by furnishing notice
thereof to the Transfer Agent, and any borrowings or reborrowings by the
Corporation or a Subsidiary under such commitment up to the amount of such
commitment designated by the Corporation as Incurred shall not be deemed to
be new Incurrences of Debt by the Corporation or such Subsidiary.
"Initial Dividend Period" means the dividend period commencing on the
Issue Date and ending on the first Dividend Payment Date to occur
thereafter.
"Initial Purchaser" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated or Toronto Dominion Securities (USA) Inc.
"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 Corporation 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 of original issuance of the Senior
Exchangeable Redeemable Preferred Shares.
"Joint Venture" means a corporation, partnership or other entity
engaged in one or more Telecommunications Businesses as to which the
Corporation (directly or through one or more Restricted Subsidiaries)
exercises managerial control and in which the Corporation 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
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<PAGE>
Corporation's initial Investment in such Joint Venture, to increase its
interest to not less than 50%.
"Junior Shares" shall have the meaning ascribed to it in paragraph (b)
hereof.
"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).
"Mandatory Redemption Price" shall have the meaning ascribed to it in
paragraph (e)(ii) hereof.
"Offer to Purchase" means a written offer (the "Offer") sent by the
Corporation by first class mail, postage prepaid, to each Holder at his
address appearing in the records of the Corporation on the date of the
Offer offering to purchase any and all of the Senior Exchangeable
Redeemable Preferred Shares at the purchase price specified in such Offer
(as determined pursuant to this Certificate of Designations). 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 "Payment Date") for purchase of Senior Exchangeable Redeemable
Preferred Shares within five Business Days after the Expiration Date. The
Corporation shall notify the Transfer Agent at least 15 Business Days (or
such shorter period as is acceptable to the Transfer Agent) prior to the
mailing of the Offer of the Corporation's obligation to make an Offer to
Purchase, and the Offer shall be mailed by the Corporation or, at the
Corporation's request, by the Transfer Agent in the name and at the expense
of the Corporation. The Offer shall contain information concerning the
business of the Corporation and its Subsidiaries which the Corporation 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 Securities and
Exchange Commission or provided to the Transfer Agent pursuant to this
Certificate of Designations (which requirements may be satisfied by
delivery of such documents together with the Offer), (ii) a description of
material developments in the Corporation'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 Corporation to make
the Offer to Purchase), (iii) if applicable, appropriate pro forma
financial information concerning the Offer to Purchase and the events
requiring the Corporation 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
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<PAGE>
tender Senior Exchangeable Redeemable Preferred Shares pursuant to the
Offer to Purchase. The Offer shall also state:
(a) the paragraph of this Certificate of Designations pursuant
to which the Offer to Purchase is being made;
(b) the Expiration Date and the Payment Date;
(c) the purchase price to be paid by the Corporation for each
Senior Exchangeable Redeemable Preferred Shares accepted for payment
(as specified pursuant to this Certificate of Designations) (the
"Purchase Price");
(d) that the Holder may tender all or any portion of the Senior
Exchangeable Redeemable Preferred Shares registered in the name of
such Holder;
(e) the place or places where Senior Exchangeable Redeemable
Preferred Shares are to be surrendered for tender pursuant to the
Offer to Purchase;
(f) that dividends on any Senior Exchangeable Redeemable
Preferred Share not tendered or tendered but not purchased by the
Corporation pursuant to the Offer to Purchase will continue to accrue;
(g) that on the Payment Date the Purchase Price will become due
and payable upon each Senior Exchangeable Redeemable Preferred Share
being accepted for payment pursuant to the Offer to Purchase and that
dividends thereon shall cease to accrue on and after the Purchase
Date;
(h) that each Holder electing to tender a Senior Exchangeable
Redeemable Preferred Share pursuant to the Offer to Purchase will be
required to surrender such Senior Exchangeable Redeemable Preferred
Share at the place or places specified in the Offer prior to the close
of business on the Expiration Date (such Senior Exchangeable
Redeemable Preferred Share being, if the Corporation or the Transfer
Agent so requires, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Corporation and the
Transfer Agent duly executed by, the Holder thereof or his attorney
duly authorized in writing);
(i) that Holders will be entitled to withdraw all or any portion
of Senior Exchangeable Redeemable Preferred Shares tendered if the
Corporation (or its 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
number of the Senior Exchangeable Redeemable Preferred Shares the
Holder tendered, the certificate number(s) of the Senior Exchangeable
Redeemable Preferred Shares the Holder tendered and a statement that
such Holder is withdrawing all or a portion of his tender;
(j) that the Corporation shall purchase all Senior Exchangeable
Redeemable Preferred Shares tendered;
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<PAGE>
(k) that in the case of any Holder whose Senior Exchangeable
Redeemable Preferred Share is purchased only in part, the Corporation
shall issue and deliver to the Holder of such Senior Exchangeable
Redeemable Preferred Share without service charge, a new Senior
Exchangeable Redeemable Preferred Share or Senior Exchangeable
Redeemable Preferred Shares as requested by such Holder; and
(l) the CUSIP number or numbers of the Senior Exchangeable
Redeemable Preferred Shares offered to be purchased by the Corporation
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 Corporation and delivered to the Transfer Agent
and containing the following:
(a) a statement that each individual signing such certificate
has read such covenant or condition and the definitions herein
relating thereto;
(b) 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;
(c) 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
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of legal counsel, who may be
counsel for the Corporation and containing the following statements:
(a) a statement that such counsel has read such covenant or
condition and the definitions herein relating thereto;
(b) 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;
(c) 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
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<PAGE>
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
"Original Shares" means Senior Exchangeable Redeemable Preferred
Shares that are not Exchange Shares.
"Parity Shares" shall have the meaning ascribed to it in paragraph (b)
hereof.
"Payment Date" shall have the meaning ascribed to it in the definition
of 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.
"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.
"Predecessor Share" of any particular Senior Exchangeable Redeemable
Preferred Share means every previous Senior Exchangeable Redeemable
Preferred Share issued before, and evidencing all or a portion of the same
interest as that evidenced by, such particular Senior Exchangeable
Redeemable Preferred Share; and, for the purposes of this definition, any
Senior Exchangeable Redeemable Preferred Share issued and delivered in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Senior
Exchangeable Redeemable Preferred Share shall be deemed to evidence the
same interest as the mutilated, destroyed, lost or stolen Senior
Exchangeable Redeemable Preferred Share.
"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.
"Public Equity Offering" means a underwritten public offering of
common stock, par value $.01 per share, of the Corporation pursuant to an
effective registration statement filed with the Securities and Exchange
Commission in accordance with the Securities Act.
"Purchase Money Debt" means (i) Acquired Debt Incurred in connection
with the acquisition of Telecommunications Assets and (ii) Debt of the
Corporation or of any Restricted Subsidiary of the Corporation (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 Corporation or any
Restricted Subsidiary of the Corporation or any Joint Venture of any
Telecommunications Assets of
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<PAGE>
the Corporation, any Restricted Subsidiary of the Corporation 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.
"Qualified Junior Shares" shall mean Junior Shares that do not
constitute Disqualified Stock.
"Qualifying Event" means a Public Equity Offering or one or more
Strategic Equity Investments which in either case results in aggregate net
proceeds to the Corporation of not less than $75 million.
"Quarterly Dividend Period" shall mean the quarterly period commencing
on each February 1, May 1, August 1 and November 1 and ending on the next
succeeding Dividend Payment Date, respectively.
"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", with respect to any Senior Exchangeable Redeemable
Preferred Shares, means the date on which such Senior Exchangeable
Redeemable Preferred Shares are redeemed by the Corporation.
"Redemption Notice" shall have the meaning ascribed to it in paragraph
(e) hereof.
"Restricted Subsidiary" of the Corporation means any Subsidiary,
whether existing on or after the date of this Certificate of Designations,
unless such Subsidiary is an Unrestricted Subsidiary.
"Registration Rights Agreement" means that certain Preferred Exchange
and Registration Rights Agreement, dated as of January 31, 1997, by and
between the Corporation and Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Toronto Dominion Securities (USA) Inc.
"Senior Exchangeable Redeemable Preferred Shares" shall have the
meaning ascribed to it in paragraph (a) hereof.
"Special Mandatory Redemption Price" shall have the meaning ascribed
to it in paragraph (e)(i) hereof.
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<PAGE>
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Senior Shares" shall have the meaning ascribed to it in paragraph (b)
hereof.
"Strategic Equity Investment" means an investment in Qualified Junior
Shares made by a Strategic Investor in an aggregate amount of not less than
$25 million.
"Strategic Investor" means a Person engaged in one or more
Telecommunications Businesses (which need not be such Person's primary
business) that has, or 80% or more of the Voting Stock of which is owned,
directly or indirectly, by a Person that has, an equity market
capitalization or net worth, at the time of its initial investment in the
Corporation, in excess of $2.0 billion.
"Subordinated Debt" means Debt of the Corporation 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 Exchange Notes, or the Existing Notes if the
Exchange Notes have not yet been issued, 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
Exchange Notes or Existing Notes, as applicable, 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 Exchange Notes or the Existing Notes, as applicable, upon notice by
25% or more in principal amount of the Exchange Notes or the Existing
Notes, as applicable, to the relevant trustee, the relevant trustee shall
have the right to give notice to the Corporation 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 Exchange
Notes or the Existing Notes, as applicable, 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 Corporation 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 Corporation (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 (as defined in the Existing
Indenture) of the Exchange Notes or the Existing
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<PAGE>
Notes, as applicable, or (y) permit redemption or other retirement
(including pursuant to an offer to purchase made by the Corporation) of
such other Debt at the option of the holder thereof prior to the final
Stated Maturity (as defined in the Existing Indenture) of the Exchange
Notes or the Existing Notes, as applicable, 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 Corporation) which is
conditioned upon a change of control of the Corporation pursuant to
provisions substantially similar to those contained in paragraph (h) hereof
(and which shall provide that such Debt will not be repurchased pursuant to
such provisions prior to the Corporation's repurchase of the Exchange Notes
or the Existing Notes, as applicable, required to be repurchased by the
Corporation pursuant to the provisions of Section 1016 of the Existing
Indenture or Section 1016 of the Indenture, as applicable.
"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 Share" of any particular Senior Exchangeable Redeemable
Preferred Share means every Senior Exchangeable Redeemable Preferred Share
issued after, and evidencing all or a portion of the same interest as that
evidenced by, such particular Senior Exchangeable Redeemable Preferred
Share; and, for the purposes of this definition, any Senior Exchangeable
Redeemable Preferred Share issued and delivered in exchange for or in lieu
of a mutilated, destroyed, lost or stolen Senior Exchangeable Redeemable
Preferred Share shall be deemed to evidence the same interest as the
mutilated, destroyed, lost or stolen Senior Exchangeable Redeemable
Preferred Share.
"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 Corporation 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 Board of Directors of the Corporation, which determination
shall be conclusive.
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<PAGE>
"Transfer Agent" means the transfer agent for the Senior Exchangeable
Redeemable Preferred Shares designated by the Corporation from time to
time.
"Unrestricted Subsidiary" means (1) any Subsidiary of the Corporation
designated as such by the Board of Directors as set forth below where (a)
neither the Corporation 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 Corporation 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 Board of
Directors 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 Corporation 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 Corporation could incur at least
$1.00 of additional Debt pursuant to paragraph (l)(i) hereof. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary, PROVIDED that, immediately after giving effect to such
designation, the Corporation could incur at least $1.00 of additional Debt
pursuant to the paragraph (l)(i) hereof.
"Vendor Financing Facility" means any agreements between the
Corporation or a Restricted Subsidiary of the Corporation and one or more
vendors or lessors of equipment to the Corporation or any of its Restricted
Subsidiaries (or any affiliate of any such vendor or lessor) providing
financing for the acquisition by the Corporation or any such Restricted
Subsidiary of equipment from any such vendor or lessor.
"Vice President", when used with respect to the Corporation 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.
"Voting Rights Triggering Event" shall have the meaning ascribed to it
in paragraph f(iv) hereof.
"Wholly-Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person 99% or more of the outstanding Capital Stock or
other
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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.
(n) RESTRICTIONS ON TRANSFER
(i) Each Original Share shall contain a legend substantially to the
following effect until the Resale Restriction Termination Date (as defined
below) unless the Corporation determines otherwise:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, REGISTRATION AND SUBJECT TO COMPLIANCE WITH OTHER
APPLICABLE LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE
DATE WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF
AND THE LAST DATE ON WHICH THE CORPORATION OR ANY AFFILIATE OF THE
CORPORATION WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS
SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE"), ONLY (A) TO THE
CORPORATION; (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THESE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144, (E) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT OR (F) IN THE CASE OF EITHER ANY
INITIAL INVESTOR THAT IS A QUALIFIED INSTITUTIONAL BUYER OR ANY SUBSEQUENT
INVESTOR, TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (a)(1), (2), (3) or (7) OF RULE 501 UNDER THE SECURITIES ACT
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (IF
AVAILABLE), AND OTHERWISE IN COMPLIANCE WITH OTHER APPLICABLE LAWS, SUBJECT
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TO THE CORPORATION'S AND THE TRANSFER AGENT AND REGISTRAR'S RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (C), (D), (E) OR (F) TO
REQUIRE THE DELIVERY OF A TRANSFER CERTIFICATE AND IN THE CASE OF CLAUSE
(F) AN OPINION OF COUNSEL /OR OTHER INFORMATION SATISFACTORY TO EACH OF
THEM. THE LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE.
(ii) If prior to the Resale Restriction Termination Date (or such
shorter period as may be prescribed by Rule 144(k) under the Securities Act
(or any successor thereto)) a Holder of Original Shares that acquired
Senior Exchangeable Redeemable Preferred Shares from an Initial Purchaser
in a sale that was not made in reliance upon Rule 144A under the Securities
Act wishes to transfer such Original Shares, such transfer may be effected
only upon receipt by the Corporation or the Transfer Agent of a certificate
substantially in the form of Exhibit A hereto duly executed by such Holder
or his attorney duly authorized in writing.
[Balance of page intentionally blank.]
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IN WITNESS WHEREOF, said NEXTLINK Communications Merger, Inc., has caused
this Certificate to be signed by R. Bruce Easter, Jr., its Vice President, this
30th day of January 1997.
NEXTLINK COMMUNICATIONS MERGER, INC.
By: /s/ R. Bruce Easter, Jr.
----------------------------
Name: R. Bruce Easter, Jr.
Title: Vice President
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<TABLE>
<CAPTION>
<S> <C> <C>
NUMBER SHARES
NEXTLINK COMMUNICATIONS, INC.
INCORPORATED UNDER THE LAWS OF THE 14% SENIOR EXCHANGEABLE REDEEMABLE CUSIP No.
STATE OF WASHINGTON PREFERRED SHARES,
PAR VALUE $.01 PER SHARE
THE RIGHTS, PREFERENCES AND LIMITATIONS OF THE SENIOR EXCHANGEABLE REDEEMABLE PREFERRED SHARES REPRESENTED BY THIS CERTIFICATE
ARE DETERMINED BY THE CERTIFICATE OF DESIGNATION ESTABLISHING THE RIGHTS, PREFERENCES AND LIMITATIONS OF THIS CLASS OF SHARES, WHICH
WAS APPROVED BY THE BOARD OF DIRECTORS OF THE CORPORATION AND FILED WITH THE SECRETARY OF STATE OF THE STATE OF WASHINGTON. A COPY
OF THE CERTIFICATE OF DESIGNATION IS AVAILABLE FROM THE CORPORATION WITHOUT CHARGE TO SHAREHOLDERS UPON WRITTEN REQUEST.
This
CERTIFIES
that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE 14% SENIOR EXCHANGEABLE REDEEMABLE PREFERRED SHARES, PAR VALUE $.01 PER SHARE, OF
NEXTLINK COMMUNICATIONS, INC.
transferable on the books of the corporation by the holder hereof in person or by a duly authorized attorney upon
surrender of this Certificate properly endorsed. This Certificate is not valid until countersigned and registered by the
Transfer Agent and Registrar.
IN WITNESS WHEREOF, the corporation has caused this Certificate to be signed by its duly authorized officers.
COUNTERSIGNED AND REGISTERED:
Dated: January 31, 1997
CONTINENTAL STOCK TRANSFER & TRUST COMPANY,
SECRETARY VICE PRESIDENT as TRANSFER AGENT AND REGISTRAR
AUTHORIZED SIGNATURE
</TABLE>
<PAGE>
NEXTLINK COMMUNICATIONS, INC.
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION AND SUBJECT TO COMPLIANCE WITH OTHER APPLICABLE LAWS.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
CORPORATION OR ANY AFFILIATE OF THE CORPORATION WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION
DATE"), ONLY (A) TO THE CORPORATION; (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THESE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144,
(E) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR
(F) IN THE CASE OF EITHER ANY INITIAL INVESTOR THAT IS A QUALIFIED INSTITUTIONAL
BUYER OR ANY SUBSEQUENT INVESTOR, TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) or (7) OF RULE 501 UNDER THE
SECURITIES ACT PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT (IF AVAILABLE), AND OTHERWISE IN COMPLIANCE WITH OTHER APPLICABLE LAWS,
SUBJECT TO THE CORPORATION'S AND THE TRANSFER AGENT AND REGISTRAR'S RIGHT PRIOR
TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (C), (D), (E) OR (F) TO
REQUIRE THE DELIVERY OF A TRANSFER CERTIFICATE AND IN THE CASE OF CLAUSE (F) AN
OPINION OF COUNSEL AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THE
LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
UNTIL THE EARLIEST TO OCCUR OF: (I) AUGUST 1, 1997, (II) THE EFFECTIVE DATE OF
THE EXCHANGE OFFER REGISTRATION STATEMENT AND (III) A CHANGE OF CONTROL, THE
CONTINGENT WARRANTS EVIDENCED HEREBY MAY NOT BE SOLD, ASSIGNED OR OTHERWISE
TRANSFERRED TO ANY PERSON UNLESS, FOR EACH TRANSFER OF A CONTINGENT WARRANT,
SIMULTANEOUSLY WITH SUCH TRANSFER, THE HOLDER HEREOF TRANSFERS TO THE SAME
TRANSFEREE ONE SHARE OF THE 14% SENIOR EXCHANGEABLE REDEEMABLE PREFERRED SHARES
OF NEXTLINK COMMUNICATIONS, INC.
UNTIL THE EARLIEST TO OCCUR OF: (I) AUGUST 1, 1997, (II) THE EFFECTIVE DATE OF
THE EXCHANGE OFFER REGISTRATION STATEMENT AND (III) A CHANGE OF CONTROL, THE
14% SENIOR EXCHANGEABLE REDEEMABLE PREFERRED SHARES EVIDENCED HEREBY MAY NOT BE
TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED
ONLY TOGETHER WITH, CONTINGENT WARRANTS ISSUED BY NEXTLINK COMMUNICATIONS, INC.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
<TABLE>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT -- ...........Custodian................
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of Under Uniform Gifts to Minors
survivorship and not as tenants in common Act.................................
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
- -----------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
shares
- -------------------------------------------------------------------
of the capital stock represented by the within Certificate, and do
hereby irrevocably constitute and appoint
Attorney
- -------------------------------------------------------------------
to transfer the said stock on the books of the within named
Corporation with full power of substitution in the premises.
Dated __________________
X__________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OF ENLARGEMENT OR ANY
CHANGE WHATEVER.
In presence of
X_________________________
<PAGE>
___________________________________________________________________
___________________________________________________________________
NEXTLINK COMMUNICATIONS, L.L.C.
AND
NEXTLINK CAPITAL, INC.
Issuers
NEXTLINK COMMUNICATIONS MERGER, INC.
(Successor to NEXTLINK Communications, L.L.C.
and
to be known as NEXTLINK COMMUNICATIONS, INC.)
and
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
________________________________________
FIRST
SUPPLEMENTAL INDENTURE
Dated as of January 31, 1997
Amending
INDENTURE
Dated as of April 25, 1996
________________________________________
$350,000,000
121/2% Senior Notes
Due April 15, 2006
___________________________________________________________________
___________________________________________________________________
<PAGE>
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of January 31, 1997
(herein called the "Supplement"), is between NEXTLINK COMMUNICATIONS, L.L.C., a
limited liability company formed under the laws of the State of Washington
(herein called the "Company") and NEXTLINK CAPITAL, INC., a corporation
organized and existing under the laws of the State of Washington 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, NEXTLINK COMMUNICATIONS
MERGER, INC., a corporation organized and existing under the laws of the State
of Washington and the successor in interest to the Company ("INC") 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"). Upon
consummation of the Merger, INC will change its name to NEXTLINK Communications,
Inc.
RECITALS OF THE ISSUERS
WHEREAS, pursuant to the terms of the Indenture, dated as of April 25,
1996 (herein called the "Original Indenture"), between the Issuers and the
Trustee, the Issuers have issued $350,000,000 principal amount of 121/2% Senior
Notes due April 15, 2006 (herein called the "Securities"); and
WHEREAS, pursuant to the terms of that certain Agreement and Plan of
Merger, dated as of January 23, 1997, by and among the Company and INC, the
Company merged with and into INC, with INC as the surviving corporation (the
"Merger"); and
WHEREAS, the Prospectus dated July 31, 1996 pursuant to which the
Securities were issued states that in a manager managed limited liability
company such as the Company, there is no board of directors, but pursuant to the
terms of the Company's Amended and Restated Limited Liability Company Agreement,
management of the Company is vested in the Managing Members; and
WHEREAS, as a result of the Merger, INC will change its name to
NEXTLINK Communications, Inc. and as the surviving corporation of the Merger
will be a corporation with a board of directors; and
WHEREAS, Section 901 of the Original Indenture provides for the
execution and delivery by the Issuers and, subject to the provisions of Section
903 of the Original Indenture, by the Trustee of one or more supplemental
indentures, without the consent of the Holders of the Securities, for the
purposes specified therein; and
WHEREAS, pursuant to the provisions of Section 801 and assuming the
requirements of such Section are satisfied, the Company is permitted to become a
corporation through a merger transaction in which the Company is not the
surviving corporation, and under the Original Indenture, the Issuers and the
Trustee may enter into a supplemental indenture, "to evidence the succession of
another Person to either of the Issuers and the assumption by such successor of
the covenants of the Issuers contained in the Securities," which supplement,
pursuant to Section 901 of the Original Indenture, does not require the consent
of the Holders of the Securities; and
WHEREAS, Section 901 of the Original Indenture also allows the
execution and delivery of a Supplemental Indenture "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," and
<PAGE>
WHEREAS, Section 901 of the Original Indenture further allows the
execution and delivery of a Supplemental Indenture "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 is pursuant to this
Indenture, PROVIDED that such action pursuant to this Clause 5 shall not
adversely affect the legal rights of the Holders," and
WHEREAS, the definition of "Change of Control" addresses only the
situation where the Company remains a limited liability company and does not
address what would constitute a "Change of Control" should the Company become a
corporation, which was specifically contemplated at the time of the execution of
the Original Indenture as indicated in clause (5) of Section 801(a) of the
Original Indenture; and
WHEREAS, the Issuers desire to further evidence that a corporation has
succeeded to the Company by modifying certain other provisions of the Original
Indenture, including the definition of "Board of Directors," Board Resolution,"
"Change of Control" and "Managing Member's Certificate;" and
WHEREAS, pursuant to the provisions of Section 801(b) INC wishes by
this Supplemental Indenture to evidence its succession to the Company and its
assumption of the covenants of the Company contained in the Original Indenture
and the Securities and pursuant to the provisions of Section 802 INC shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Original Indenture; and
WHEREAS, all things necessary to make this Supplement, when executed
and delivered by the Trustee, the valid agreement of the Issuers and INC in
accordance with its terms have been done.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
SECTION 101. Definitions. Except as otherwise expressly provided
herein, all capitalized words and terms used herein shall have the respective
meanings ascribed thereto in Article One of the Original Indenture.
SECTION 102. Amendment of Original Indenture.
(a) The definition of "Board of Directors" contained in Section
101 of the Original Indenture is hereby amended and restated in its entirety
to read as follows (new language is indicated in BOLD ITALICS for convenience
of reference):
"Board of Directors" means, the Board of Directors of THE COMPANY
OR Capital, AS THE CASE MAY BE, or any duly authorized committee of
that board.
(b) The definition of "Board Resolution " contained in Section 101
of the Original Indenture is hereby amended and restated in its entirety to
read as follows (new language is indicated in BOLD ITALICS for convenience of
reference):
"Board Resolution " means, in respect of THE COMPANY OR Capital,
a copy of a resolution certified by the Secretary or any Assistant
Secretary of THE COMPANY OR Capital, AS THE CASE MAY BE, to have been
duly adopted by the Board of Directors and
2
<PAGE>
to be in full force and effect on the date of such certification, and
delivered to the Trustee..
(c) The definition of "Managing Member's Certificate" contained in
Section 101 of the Original Indenture is hereby deleted.
(d) The definition of "Change of Control" contained in Section
1016(c) of the Original Indenture is hereby amended and restated in its
entirety to read as follows (new language is indicated in BOLD ITALICS for
convenience of reference):
(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 13D 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) (I) SO LONG AS THE COMPANY REMAINS A LIMITED
LIABILITY COMPANY, neither Eagle River nor any Affiliate of Mr. Craig
O. McCaw or Eagle River shall be a Managing Member of the Company OR
(II) SO LONG AS THE COMPANY IS A CORPORATION, NEITHER MR. CRAIG O.
MCCAW NOR ANY PERSON DESIGNATED BY HIM TO THE COMPANY AS ACTING ON HIS
BEHALF SHALL BE A DIRECTOR OF THE COMPANY; OR (C) DURING ANY PERIOD OF
TWO CONSECUTIVE YEARS, INDIVIDUALS WHO AT THE BEGINNING OF SUCH PERIOD
CONSTITUTED THE BOARD OF DIRECTORS OF THE COMPANY (TOGETHER WITH ANY
NEW DIRECTORS WHOSE ELECTION BY THE BOARD OF DIRECTORS OF THE COMPANY
OR WHOSE NOMINATION FOR ELECTION BY THE SHAREHOLDERS OF THE COMPANY
WAS PROPOSED BY A VOTE OF A MAJORITY OF THE DIRECTORS OF THE COMPANY
THEN STILL IN OFFICE WHO WERE EITHER DIRECTORS AT THE BEGINNING OF
SUCH PERIOD OR WHOSE ELECTION OR NOMINATION FOR ELECTION WAS
PREVIOUSLY SO APPROVED) CEASE FOR ANY REASON TO CONSTITUTE A MAJORITY
OF THE BOARD OF DIRECTORS OF THE COMPANY THEN IN OFFICE.
SECTION 103. SUCCESSOR SUBSTITUTION.
(a) Pursuant to the provisions of Section 801(b) INC hereby
acknowledges and agrees that it has succeeded the Company as the Company
under the Indenture and the Securities, and does hereby assume and agree to
perform all of the obligations of the Company under the Indenture and the
Securities and does otherwise agree to be bound by and subject to the terms
and provisions of the Indenture and the Securities in each and every respect
as if it had been initially named as the Company therein. Without in any way
limiting the generality of the foregoing, INC hereby agrees to be liable for
the due and punctual payment of principal of (and premium, if any) and
interest on all of the Securities.
(b) All references in the Original Indenture to any action to be
taken by a Managing Member shall be amended and restated to provide that such
action shall be taken by the Board of Directors of INC, and that all action
of a Managing Member that is required to be evidenced by an Managing Member's
Certificate shall be evidenced by an Officers' Certificate.
(c) In order to further evidence the succession of INC to the
Company and INC's assumption of the covenants of the Company under the
Indenture and the Securities, the form of Securities set forth in
3
<PAGE>
ARTICLE TWO of the Original Indenture are hereby amended by replacing, in their
entirety, such forms of Securities with the form of Securities set forth in
Exhibit A hereto. In exchange for any Security outstanding under the Original
Indenture, INC shall issue, and the Trustee shall authenticate, a new Security
in accordance with the provisions of the Indenture.
SECTION 104. Representations of INC INC hereby represents and
warrants to the Trustee that as of the date hereof:
(a) INC is a corporation validly existing and in good standing
under the laws of the State of Washington; and
(b) no Default or Event of Default will result from the Merger or
the execution and delivery of this Supplemental Indenture.
SECTION 105. Construction with Original Indenture. All of the
covenants, agreements and provisions of this Supplement shall be deemed to be
and construed as part of the Original Indenture and VICE VERSA to the same
extent as if fully set forth verbatim therein and herein and shall be fully
enforceable in the manner provided in the Original Indenture. Except as
provided in this Supplement, the Original Indenture shall remain in full
force and effect and the terms and conditions thereof are hereby confirmed.
SECTION 106. Conflict with Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with a provision of the Trust Indenture
Act that is required under such Act to be part of and govern the Original
Indenture or this Supplement, the latter provision shall control. If any
provision hereof 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 Supplement as so modified or to be excluded, as the case may
be.
SECTION 107. Effect of Headings. The Section headings herein are
for convenience only and shall not affect the construction hereof.
SECTION 109. Separability Clause. In case any provision in this
Supplement 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, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
SECTION 110. Benefits of Supplement and Original Indenture.
Nothing in this Supplement or the Original Indenture or in the Securities,
express or implied, shall give to any Person other than the parties hereto
and thereto and their successors hereunder and thereunder and the Holders of
Securities, any benefit or any legal or equitable right, remedy or claim
under this Supplement or the Original Indenture. Neither this Supplement nor
the Original Indenture may be used to interpret another indenture, loan
agreement or debt agreement of the Issuers, INC or any of their respective
Subsidiaries. No such other indenture or loan or debt agreement may be
utilized to interpret this Supplement or the Original Indenture.
SECTION 111. GOVERNING LAW. THIS SUPPLEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 112. No Recourse Against Others. A director, member,
managing member officer, employee, stockholder or incorporator, as such, of
the Issuers or INC shall not have any liability for any
4
<PAGE>
obligations of the Issuers or INC under this Supplement or for any claim based
on, in respect or by reason of such obligations or their creation.
SECTION 113. Duplicate Originals. All parties may sign any number of
copies or counterparts of this Supplement. Each signed copy or counterpart
shall be an original, but all of them together shall represent the same
agreement.
SECTION 114. Effectiveness. This Supplement shall become
effective in accordance with the provisions of Article Nine of the Original
Indenture.
[Signature page follows.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplement
to be duly executed, and their respective corporate seals to be hereunto
affixed and attested, if applicable, all as of the day and year first above
written.
NEXTLINK COMMUNICATIONS, L.L.C.
By: /s/ Kathleen H. Iskra
-----------------------------------
Attest: Title: Vice President
----------------------------------
/s/ R. Bruce Easter, Jr.
- -----------------------------
NEXTLINK CAPITAL, INC.
By: /s/ Kathleen H. Iskra
----------------------------------
Attest: Title: Vice President
---------------------------------
/s/ R. Bruce Easter, Jr.
- -----------------------------
NEXTLINK COMMUNICATIONS MERGER, INC.
By: /s/ Kathleen H. Iskra
------------------------------------
Attest: Title: Vice President
---------------------------------
/s/ R. Bruce Easter, Jr.
- -----------------------------
[SEAL] UNITED STATES TRUST COMPANY OF NEW YORK
By: /s/ Patricia Stermer
-----------------------------------
Attest: Title: Assistant Vice President
---------------------------------
/s/ Margaret Ciesmelewski
- --------------------------------
6
<PAGE>
STATE OF WASHINGTON )
ss.:
COUNTY OF KING )
On the 30th day of January, 1997, before me personally came
Kathleen H. Iskra, to me known, who, being by me duly sworn, did depose and
say that she is the Vice President or 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 she executed the same by authority of the Managing
Members of said limited liability company.
/s/ Nancy L. Stead
----------------------------------------
STATE OF WASHINGTON )
ss.:
COUNTY OF KING )
On the 30th day of January, 1997, before me personally came
Kathleen H. Iskra, to me known, who, being by me duly sworn, did depose and
say that she is the Vice President or NEXTLINK CAPITAL, INC., one of the
corporations described in and which executed the foregoing instrument, and
duly acknowledged to me that she executed the same by authority of the Board
of Directors of said corporation.
/s/ Nancy L. Stead
----------------------------------------
7
<PAGE>
STATE OF WASHINGTON )
ss.:
COUNTY OF KING )
On the 30th day of January, 1997, before me personally came
Kathleen H. Iskra, to me known, who, being by me duly sworn, did depose and
say that she is the Vice President or NEXTLINK COMMUNICATIONS, INC., one of
the corporations described in and which executed the foregoing instrument,
and duly acknowledged to me that she executed the same by authority of the
Board of Directors of said corporation.
/s/ Nancy L. Stead
----------------------------------------
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
On the 31st day of January, 1996, before me personally came Patricia
Stermer, to me known, who, being by me duly sworn, did depose and say that she
is Asst. Vice President of UNITED STATES TRUST COMPANY OF NEW YORK, one of the
corporations described in and which executed the foregoing instrument; that
he/she knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by authority of the
By-Laws of said corporation, and that he/she signed his/her name thereto by like
authority.
/s/ Christopher Grell
---------------------------------------
8
<PAGE>
EXHIBIT A
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 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.]
A-1
<PAGE>
[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.]
121/2% SENIOR NOTES DUE April 15, 2006
CUSIP NUMBER: __________
No. __________ $_______________
NEXTLINK Communications, Inc., a corporation 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 121/2 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)
A-2
<PAGE>
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 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),
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
A-3
<PAGE>
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.
IN WITNESS WHEREOF, the Issuers have caused this instrument to be duly
executed.
Dated:
NEXTLINK COMMUNICATIONS, INC.
By____________________________
Title:
Attest:
______________________________
Title:
NEXTLINK CAPITAL, INC.
By______________________________
Title:
Attest:
______________________________ Title:
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:
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 are limited in aggregate principal
A-4
<PAGE>
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>
<S> <C> <C> <C> <C>
Amount of Amount of Principal Amount
decrease in increase in of this Global
Principal Amount Principal Amount Security following Signature of
of this Global of this Global such decrease (or authorized officer
Date of Exchange Security Security increase) of Trustee
- ---------------- ----------------- ---------------- ------------------- ------------------
</TABLE>
A-5
<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:
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:
Year Redemption Price
---------------- -----------------------
2001 106.250%
2002 104.167%
2003 102.083%
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
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).
A-6
<PAGE>
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, 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.
A-7
<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.
A-8
<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.
A-9
<PAGE>
EXHIBIT B
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, INC.
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, Inc. 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, $________ of the
above-captioned Securities (the "Securities") are beneficially owned by non-U.S.
person(s). As used in this paragraph, the term "U.S. person" has the meaning
given to it by Regulation S under the Securities Act of 1933, as amended.
We undertake to advise you promptly by tested telex on or
prior to the date on which you intend to submit your certification relating
to the Securities held by you for our account in accordance with your
operating procedures if any applicable statement herein is not correct on
such date, and in the absence of any such notification it may be assumed that
this certification applies as of such date.
We understand that this certificate is required in connection
with certain securities laws of the United States. In connection therewith,
if administrative or legal proceedings are commenced or threatened in
connection with which this certificate is or would be relevant, we
irrevocably authorize you to produce this certificate to any interested party
in such proceedings. This certificate and the statements contained herein are
made for your benefit and the benefit of the Issuers and the Initial
Purchasers.
Dated:______________, ____
By:____________________________________________
As, or as agent for, the beneficial owner(s)
of the Securities to which this certificate
relates.
A-1
<PAGE>
ANNEX B
[FORM OF CERTIFICATION TO BE GIVEN BY THE EUROCLEAR
OPERATOR OR CEDEL BANK, SOCIETE ANONYME]
DEPOSITORY SECURITIES CERTIFICATION
NEXTLINK COMMUNICATIONS, INC.
NEXTLINK CAPITAL, INC.
12 1/2% Senior Notes due April 15, 2006
CUSIP No. _____
Reference is hereby made to the Indenture, dated as of April
25, 1996 (the "Indenture"), between NEXTLINK Communications, Inc. and
NEXTLINK Capital, Inc., as Issuers, and United States Trust Company of New
York, as Trustee. Capitalized terms used but not defined herein shall have
the meanings given to them in the Indenture.
This is to certify that, with respect to U.S.$___________
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 proceedings are commenced or threatened
in connection with which this certification is or would be relevant, we
______________
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>
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, INC.
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, Inc. 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, Inc. 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, Inc. 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 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;
___________________
1 Insert one of these two provisions, which come from the definition of
"offshore transaction" in Regulation S.
D-1
<PAGE>
(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, Inc. and NEXTLINK Capital, Inc.
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, Inc. 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, Inc. 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 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
_________________________
1 Insert one of these two provisions, which come from the definition of
"ofshore transaction" in Regulation S.
E-1
<PAGE>
(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, Inc. and NEXTLINK Capital, Inc.
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, Inc. 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, Inc. 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 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, Inc. and NEXTLINK Capital, Inc.
F-1
<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, Inc. 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, Inc. 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 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.
G-1-1
<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, Inc. 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, Inc. 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, Inc. 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
(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
G-2-1
<PAGE>
(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, Inc. and NEXTLINK Capital, Inc.
G-2-2
<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, Inc. 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, Inc. 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
H-1-1
<PAGE>
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, Inc. 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, Inc. 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, Inc. 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
(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
H-2-1
<PAGE>
(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 torRule 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, Inc. and NEXTLINK Capital,rInc.
H-2-2
<PAGE>
NEXTLINK COMMUNICATIONS, INC.
STOCK OPTION PLAN
SECTION 1. PURPOSE. The purpose of this Stock Option Plan (this "Plan")
is to provide a means whereby Nextlink Communications, Inc. (the "Company") or
any parent or subsidiary of the Company, as defined in Subsection 5.9 (the
"related entities"), may continue to attract, motivate and retain selected
employees, officers and independent contractors who can materially contribute
to the Company's growth and success, and to encourage stock ownership in the
Company through granting incentive stock options or nonqualified stock options,
or both, to purchase the Class A Common Stock of the Company (as defined in
Section 3), so that such key employees and other persons and entities will more
closely identify their interests with those of the Company and its
shareholders. In addition, options under this Plan may serve as replacement
options for options issued under the Equity Option Plan sponsored by the
Company's predecessor
SECTION 2. ADMINISTRATION. This Plan shall be administered by the Board
of Directors of the Company (the "Board") or, in the event the Board shall
appoint or authorize a committee to administer this Plan, by such committee.
The administrator of this Plan shall hereinafter be referred to as the "Plan
Administrator."
If the Company registers any of its equity securities pursuant to Section 12(b)
or 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), then with respect to grants made to officers or other optionees affected
by Section 16(b) of the Exchange Act, the Plan Administrator shall be
constituted at all times so as to meet the requirements of the exemption under
the rules of Section 16(b) of the Exchange Act, as amended from time to time.
2.1 PROCEDURES. The Board may designate one of the members of the
Plan Administrator as chairperson. The Plan Administrator may hold meetings at
such times and places as it shall determine. The acts of a majority of the
members of the Plan Administrator present at meetings at which a quorum exists,
or acts reduced to or approved in writing by all Plan Administrator members,
shall be valid acts of the Plan Administrator.
2.2 RESPONSIBILITIES. Except for the terms and conditions explicitly
set forth in this Plan, the Plan Administrator shall have the authority, in its
discretion, to determine all matters relating to the options to be granted under
this Plan, including selection of the individuals to be granted options, the
number of shares to be subject to each option, the exercise price, and all other
terms and conditions of the options. Grants under this Plan need not be
identical in any respect, even
Page 1- STOCK OPTION PLAN
<PAGE>
when made simultaneously. The interpretation and construction by the Plan
Administrator of any terms or provisions of this Plan or any option issued under
this Plan, or of any rule or regulation promulgated in connection with this
Plan, shall be conclusive and binding on all interested parties, so long as such
interpretation and construction with respect to incentive stock options
correspond to the requirements of Internal Revenue Code (the "Code")
Section 422, as amended, and the regulations thereunder.
2.3 SECTION 16(B) COMPLIANCE AND BIFURCATION OF PLAN. In the event
the Company registers any of its equity securities pursuant to Section 12(b) or
12(g) of the Exchange Act, it is the intention of the Company that this Plan
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 deemed null and void, and in all events the Plan shall be
construed in favor of its meeting the requirements of Rule 16b-3.
Notwithstanding anything in this Plan to the contrary, the Board, in its
absolute discretion, may bifurcate this Plan so as to restrict, limit or
condition the use of any provision of this Plan to participants who are officers
and directors subject to Section 16(b) of the Exchange Act without so
restricting, limiting or conditioning other Plan participants.
SECTION 3. STOCK SUBJECT TO THIS PLAN. The stock subject to this Plan
shall be the Company's Class A Common Stock (the "Class A Common Stock"),
presently authorized but unissued or now held or subsequently acquired by the
Company as treasury shares. Subject to adjustment as provided in Section 7 of
this Plan, the aggregate amount of Class A Common Stock to be delivered upon the
exercise of all options granted under this Plan shall not exceed 10,000,000
shares as such Class A Common Stock was constituted on the effective date of
this Plan. If any option granted under this Plan expires or is surrendered,
canceled, terminated or exchanged for another option for any reason without
having been exercised in full, the unpurchased shares subject to such option
shall again be available for purposes of this Plan, including for replacement
options which may be granted in exchange for such surrendered, canceled or
terminated options.
SECTION 4. ELIGIBILITY. An incentive stock option may be granted only to
an individual who, at the time the option is granted, is an employee of the
Company (or a corporate related entity, as described in Section 5.9) and who the
Board may from time to time select for participation in this Plan. Members of
the Board shall not be eligible for grants of incentive stock options unless
they are also employees of the Company. At the discretion of the Plan
Administrator, employees and independent contractors of the Company (including
nonemployee directors) or any related entity may receive nonqualified stock
options. Any party to whom an
Page 2- STOCK OPTION PLAN
<PAGE>
option is granted under this Plan shall be referred to in this Plan as an
"Optionee."
SECTION 5. TERMS AND CONDITIONS OF OPTIONS. Options granted under this
Plan shall be evidenced by written agreements that contain such terms,
conditions, limitations and restrictions as the Plan Administrator shall deem
advisable and which are not inconsistent with this Plan. Notwithstanding the
foregoing, options shall include or incorporate by reference the following terms
and conditions:
5.1 NUMBER OF SHARES. The maximum number of shares that may be
purchased pursuant to the exercise of each option, which shall be as established
by the Plan Administrator.
5.2 PRICE OF SHARES. The price per share at which each option is
exercisable (the "exercise price") shall be as established by the Plan
Administrator, provided that the Plan Administrator shall act in good faith to
establish the exercise price as follows:
5.2.1 INCENTIVE STOCK OPTIONS AND NONQUALIFIED STOCK OPTIONS.
With respect to incentive stock options intended to qualify under Section 422 of
the Code, and subject to Subsection 5.2.2 below, the exercise price shall be not
less than the fair market value per share of the Class A Common Stock at the
time the option is granted. With respect to nonqualified stock options, the
exercise price shall be the amount set by the Plan Administrator, provided that
if the Company has registered any of its equity securities pursuant to Section
12(b) or 12(g) of the Exchange Act, the exercise price shall not be less than 85
percent of the fair market value of a share of the Class A Common Stock at the
time the option is granted, unless the option represents a replacement of an
option granted under a predecessor plan and the exercise price relates to the
original exercise price under the predecessor plan.
5.2.2 INCENTIVE STOCK OPTIONS TO GREATER THAN 10% SHAREHOLDERS.
With respect to incentive stock options granted to greater than 10% shareholders
of the Company, the exercise price shall be as required by Section 6.
5.2.3 FAIR MARKET VALUE. The fair market value per share of the
Class A Common Stock for the purpose of determining the exercise price under
this Section 5.2 shall be determined by the Board in good faith at the time the
option is granted.
5.3 TERM AND MATURITY. Subject to the restrictions contained in
Section 6 with respect to granting incentive stock options to greater than 10%
shareholders of the Company, the term of each incentive stock option shall be 10
years from the date it
Page 3- STOCK OPTION PLAN
<PAGE>
is granted unless a shorter period of time is established by the Plan
Administrator, but in no event shall the term of any incentive stock option
exceed 10 years. The term of each nonqualified stock option shall be 15 years
from the date it is granted, unless a shorter period of time is established by
the Plan Administrator in the individual option agreement. To ensure that the
Company or related entities will achieve the purpose and receive the benefits
contemplated in this Plan, any option granted to any Optionee under this Plan
shall, unless this condition is waived or modified by the Plan Administrator in
the agreement evidencing the option, or by subsequent resolution of the Plan
Administrator, be exercisable according to the following schedule:
Period of Optionee's Continuous
Relationship With the Company
or Related Entity from the DATE Portion of Total Option Which
THE OPTION IS GRANTED IS EXERCISABLE
- --------------------------------- ------------------------------
After one year 25%
After two years 50%
After three years 75%
After four years 100%
5.4 EXERCISE. Subject to the vesting schedule described in subsection
5.3 above, if any, and to any additional holding period required by applicable
law, each option may be exercised in whole or in part; provided, however, that
only whole shares will be issued pursuant to the exercise of any option and that
the exercise price shall not be less than the par value per share of the Class A
Common Stock at the time the option is exercised. During an Optionee's
lifetime, any stock options granted under this Plan are personal to him or her
and are exercisable solely by such Optionee, except as provided in Section 5.8.
Options shall be exercised by delivery to the Company of notice of the number of
shares with respect to which the option is exercised, together with payment of
the exercise price.
5.5 PAYMENT OF EXERCISE PRICE. Payment of the option exercise 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 Plan Administrator in a
particular case determines not to accept a personal check) for the Class A
Common Stock being purchased.
The Plan Administrator can determine at the time the option is granted
for incentive stock options, or at any time before exercise for nonqualified
stock options, that additional forms of payment will be permitted, including
installment payments
Page 4- STOCK OPTION PLAN
<PAGE>
on such terms and over such period as the Plan Administrator may determine in
its discretion. To the extent permitted by the Plan Administrator and
applicable laws and regulations (including, but not limited to, federal tax and
securities laws and regulations and state corporate law), an option may be
exercised by:
(a) delivery of shares of stock of the Company held by an Optionee
having a fair market value equal to the exercise price, such fair market value
to be determined in good faith by the Plan Administrator;
(b) delivery of a full-recourse promissory note executed by the
Optionee, provided that (i) such note delivered in connection with an incentive
stock option shall, and such note delivered in connection with a nonqualified
stock option may, in the sole discretion of the Plan Administrator, bear
interest at a rate specified by the Plan Administrator but in no case less than
the rate required to avoid imputation of interest (taking into account any
exceptions to the imputed interest rules) for federal income tax purposes; (ii)
the Plan Administrator in its sole discretion shall specify the term and other
provisions of such note at the time an incentive stock option is granted or at
any time prior to exercise of a nonqualified stock option; (iii) the Plan
Administrator may require that the Optionee pledge the Optionee's shares to the
Company for the purpose of securing the payment of such note and may require
that the certificate representing such shares be held in escrow in order to
perfect the Company's security interest; (iv) the note provides that 90 days
following the Optionee's termination of employment with the Company or a related
entity, the entire outstanding balance under the note shall become due and
payable, if not previously due and payable; and (v) the Plan Administrator in
its sole discretion may at any time restrict or rescind this right upon
notification to the Optionee;
(c) delivery of a properly executed exercise notice, together with
irrevocable instructions to a broker, all in accordance with the regulations of
the Federal Reserve Board, 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;
provided, that the Plan Administrator, in its sole discretion, may at any time
determine that this Subparagraph (c), to the extent the instructions to the
broker call for an immediate sale of the shares, shall not be applicable to any
Optionee who is subject to Section 16(b) of the Exchange Act if such transaction
would result in a violation of Section 16(b), or is not an employee at the time
of exercise;
(d) delivery of a properly executed exercise notice together with
instructions to the Company to withhold from the
Page 5- STOCK OPTION PLAN
<PAGE>
shares that would otherwise be issued upon exercise that number of shares having
a fair market value equal to the option exercise price.
5.6 SHAREHOLDERS' AGREEMENT. Upon exercise of an option the
Optionee shall agree to enter into and be bound by the agreement then in effect,
if any, between the Company and its shareholders relating to the repurchase by
the Company of its outstanding Class A Common Stock.
5.7 WITHHOLDING TAX REQUIREMENT. The Company or any related entity
shall have the right to retain and withhold from any payment of cash or Class A
Common Stock under this Plan the amount of taxes required by any government to
be withheld or otherwise deducted and paid with respect to such payment. At its
discretion, the Company may require an Optionee receiving shares of Class A
Common Stock to reimburse the Company or a related entity for any such taxes
required to be withheld and may withhold any distribution in whole or in part
until the Company, or related entity, is so reimbursed. In lieu of such
withholding or reimbursement, the Company (or related entity) shall have the
right to withhold from any other cash amounts due or to become due from the
Company (or related entity) to the Optionee an amount equal to such taxes or to
retain and withhold a number of shares having a market value not less than the
amount of such taxes required to be withheld as reimbursement for any such taxes
and cancel (in whole or in part) any such shares so withheld.
5.8 NONTRANSFERABILITY OF OPTION. Options granted under this Plan
and the rights and privileges conferred by this Plan may not be transferred,
assigned, pledged or hypothecated in any manner (whether by operation of law or
otherwise) other than by will or by the applicable laws of descent and
distribution, or to a trust created by an Optionee for the benefit of his or her
descendants, and shall not be subject to execution, attachment or similar
process. Any attempt to transfer, assign, pledge, hypothecate or otherwise
dispose of any option under this Plan or of any right or privilege conferred by
this Plan, contrary to the Code or to the provisions of this Plan, or the sale
or levy or any attachment or similar process upon the rights and privileges
conferred by this Plan shall be null and void. Notwithstanding the foregoing,
an Optionee may during the Optionee's lifetime, designate a person who may
exercise the option after the Optionee's death by giving written notice of such
designation to the Plan Administrator. Such designation may be changed from
time to time by the Optionee by giving written notice to the Plan Administrator
revoking any earlier designation and making a new designation.
5.9 TERMINATION OF RELATIONSHIP. If the Optionee's employment
relationship with the Company or any related entity
Page 6- STOCK OPTION PLAN
<PAGE>
ceases for any reason other than termination for cause, death or total
disability, and unless by its terms the option sooner terminates or expires,
then the Optionee may exercise, for a period of three months after such
cessation, that portion of the Optionee's option which is exercisable at the
time of such cessation. The Optionee's option, however, shall terminate at the
end of the three month period following such cessation as to all Shares for
which it has not been exercised, unless such provision is waived in the
agreement evidencing the option or by resolution adopted by the Plan
Administrator. If, in the case of an incentive stock option, an Optionee's
relationship with the Company or related entity changes (I.E., from employee to
nonemployee, such as a consultant), such change shall constitute a termination
of an Optionee's employment with the Company or related entity and the
Optionee's incentive stock option shall terminate in accordance with this
subsection. Upon the expiration of the three month period following cessation
of employment, the Plan Administrator shall have sole discretion in a particular
circumstance to extend the exercise period following such cessation beyond that
specified above. If, however, in the case of an incentive stock option, the
Optionee does not exercise the Optionee's option within three months after
cessation of employment, the option will no longer qualify as an incentive stock
option under the Code.
Upon an Optionee's termination of employment for cause, all of the
optionee's outstanding (i.e., unexercised) options issued under this Plan shall
immediately expire and no longer be available for exercise. For purposes of
this Plan, a termination shall be considered for "cause" if the termination is
attributable to the Optionee's: (a) Embezzlement; (b) use of illegal drugs or
alcohol that materially impairs the Optionee's ability to fulfill his or her
duties as an employee or independent contractor; (c) 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.
If an Optionee's relationship with the Company or any related entity
ceases because of a total disability, the Optionee's option shall not terminate,
and in the case of an incentive stock option, shall not cease to be treated as
an incentive stock option, until the end of the 12-month period following such
cessation (unless by its terms it sooner terminates and expires). As used in
this Plan, the term "total disability" refers to a mental or physical impairment
of the Optionee which is expected to result in death or which has lasted or is
expected to last for a continuous period of 12 months or more and which causes,
in the opinion of the Company and two independent physicians, the Optionee to be
unable to perform his or her duties for the Company, following reasonable
accommodation, and to be engaged in any substantial gainful activity. Total
disability shall be deemed to have occurred on the
Page 7- STOCK OPTION PLAN
<PAGE>
first day after the Company and the two independent physicians have furnished
their opinion of total disability to the Plan Administrator.
For purposes of this subsection 5.9, a transfer of relationship
between or among the Company and/or any related entity shall not be deemed to
constitute a cessation of relationship with the Company or any of its related
entities. For purposes of this subsection 5.9, with respect to incentive stock
options, employment shall be deemed to continue while the Optionee is on
military leave, sick leave or other bona fide leave of absence (as determined by
the Plan Administrator). The foregoing notwithstanding, employment shall not be
deemed to continue beyond the first 90 days of such leave, unless the Optionee's
reemployment rights are guaranteed by statute or by contract.
As used in this Plan, the term "related entity," when referring to a
subsidiary, shall mean any business entity (other than the Company) which, at
the time of the granting of the option, is in an unbroken chain of entities
ending with the Company, if stock or voting interests possessing 50% or more of
the total combined voting power of all classes of stock or other ownership
interests of each of the entities other than the Company is owned by one of the
other entities in such chain. When referring to a parent entity, the term
"related entity" shall mean any entity in an unbroken chain of entities ending
with the Company if, at the time of the granting of the option, each of the
entities other than the Company owns stock or other ownership interests
possessing 50% or more of the total combined voting power of all classes of
stock (or other ownership interests) in one of the other entities in such
chain. In addition, with respect to an incentive stock option, the definition
of "related entity" as used in this Plan shall apply by only considering
entities that are corporations.
5.10 DEATH OF OPTIONEE. If an Optionee dies while he or she has a
relationship with the Company or any related entity or dies within the three
month period (or 12-month period in the case of totally disabled Optionees)
following cessation of such relationship, any option held by such Optionee to
the extent that the Optionee would have been entitled to exercise such option,
may be exercised within one year after his or her death by the personal
representative of his or her estate or by the person or persons to whom the
Optionee's rights under the option shall pass by will or by the applicable laws
of descent and distribution.
5.11 STATUS OF SHAREHOLDER. Neither the Optionee nor any party to
which the Optionee's rights and privileges under the option may pass shall be,
or have any of the rights or privileges of, a shareholder of the Company with
respect to any of the shares
Page 8- STOCK OPTION PLAN
<PAGE>
issuable upon the exercise of any option granted under this Plan unless and
until such option has been exercised.
5.12 CONTINUATION OF EMPLOYMENT. Nothing in this Plan or in any
option granted pursuant to this Plan shall confer upon any Optionee any right to
continue in the employ of the Company or of a related entity, or to interfere in
any way with the right of the Company or of any related entity to terminate his
or her employment or other relationship with the Company or a related entity at
any time.
5.13 MODIFICATION AND AMENDMENT OF OPTION. Subject to the
requirements of Code Section 422 with respect to incentive stock options and to
the terms and conditions and within the limitations of this Plan, the Plan
Administrator may modify or amend outstanding options granted under this Plan.
The modification or amendment of an outstanding option shall not, without the
consent of the Optionee, impair or diminish any of his or her rights or any of
the obligations of the Company under such option. Except as otherwise provided
in this Plan, no outstanding option shall be terminated without the consent of
the Optionee. Unless the Optionee agrees otherwise, any changes or adjustments
made to outstanding incentive stock options granted under this Plan shall be
made in such a manner so as not to constitute a "modification" as defined in
Code Section 424(h) and so as not to cause any incentive stock option issued
hereunder to fail to continue to qualify as an incentive stock option as defined
in Code Section 422(b).
5.14 LIMITATION ON VALUE FOR INCENTIVE STOCK OPTIONS. As to all
incentive stock options granted under the terms of this Plan, to the extent that
the aggregate fair market value (determined at the time the incentive stock
option is granted) of the stock with respect to which incentive stock options
are exercisable for the first time by the Optionee during any calendar year
(under this Plan and all other incentive stock option plans of the Company, a
related entity or a predecessor corporation) exceeds $100,000, those options (or
the portion of an option) beyond the $100,000 threshold shall be treated as
nonqualified stock options. The previous sentence shall not apply if the
Internal Revenue Service publicly rules, issues a private ruling to the Company,
any Optionee, or any legatee, personal representative or distributee of an
Optionee or issues regulations changing or eliminating such annual limit.
SECTION 6. GREATER THAN 10% SHAREHOLDERS.
6.1 EXERCISE PRICE AND TERM OF INCENTIVE STOCK OPTIONS. If incentive
stock options are granted under this Plan to employees who own more than 10% of
the total combined voting power of all
Page 9- STOCK OPTION PLAN
<PAGE>
classes of stock of the Company or any related entity, the term of such
incentive stock options shall not exceed five years and the exercise price shall
be not less than 110% of the fair market value of the Class A Common Stock at
the time the incentive stock option is granted. This provision shall control
notwithstanding any contrary terms contained in an option agreement or any other
document.
6.2 ATTRIBUTION RULE. For purposes of subsection 6.1, in determining
stock ownership, an employee shall be deemed to own the stock owned, directly or
indirectly, by or for his brothers, sisters, spouse, ancestors and lineal
descendants. Stock owned, directly or indirectly, by or for a corporation,
partnership, estate or trust shall be deemed to be owned proportionately by or
for its shareholders, partners or beneficiaries. If an employee or a person
related to the employee owns an unexercised option or warrant to purchase stock
of the Company, the stock subject to that portion of the option or warrant which
is unexercised shall not be counted in determining stock ownership. For
purposes of this Section 6, stock owned by an employee shall include all stock
actually issued and outstanding immediately before the grant of the incentive
stock option to the employee.
SECTION 7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. The aggregate
number and class of shares for which options may be granted under this Plan, the
number and class of shares covered by each outstanding option and the exercise
price per share thereof (but not the total price), and each such option, shall
all be proportionately adjusted for any increase or decrease in the number of
issued shares of Class A Common Stock of the Company resulting from a split-up
or consolidation of shares or any like capital adjustment, or the payment of any
stock dividend.
7.1 EFFECT OF LIQUIDATION, REORGANIZATION OR CHANGE IN CONTROL.
7.1.1 CASH, STOCK OR OTHER PROPERTY FOR STOCK. Except as
provided in subsection 7.1.2, upon a merger (other than a merger of the Company
in which the holders of Class A Common Stock immediately prior to the merger
have the same proportionate ownership of Class A Common Stock in the surviving
corporation immediately after the merger), consolidation, acquisition of
property or stock, separation, reorganization (other than a mere reincorporation
or the creation of a holding company) or liquidation of the Company, as a result
of which the shareholders of the Company receive cash, stock or other property
in exchange for or in connection with their shares of Class A Common Stock, any
option granted under this Plan shall terminate. Notwithstanding the foregoing,
the Optionee shall have the right immediately prior to any such merger,
consolidation, acquisition of property or
Page 10- STOCK OPTION PLAN
<PAGE>
stock, separation, reorganization or liquidation to exercise such option in
whole or in part, to the extent the vesting requirements set forth in this Plan
have been satisfied, unless stated otherwise in the Optionee's individual option
agreement.
7.1.2 CONVERSION OF OPTIONS ON STOCK FOR STOCK EXCHANGE. If the
shareholders of the Company receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Class A Common Stock in any
transaction involving a merger (other than a merger of the Company in which the
holders of Class A Common Stock immediately prior to the merger have the same
proportionate ownership of common stock in the surviving corporation immediately
after the merger), consolidation, acquisition of property or stock, separation
or reorganization (other than a mere reincorporation or the creation of a
holding company), all options granted under this Plan shall be converted into
options to purchase shares of Exchange Stock unless the Company and the
corporation issuing the Exchange Stock, in their sole discretion, determine that
any or all such options granted under this Plan shall not be converted into
options to purchase shares of Exchange Stock, but instead shall terminate in
accordance with the provisions of subsection 7.1.1. The amount and price of
converted options shall be determined by adjusting the amount and price of the
options granted under this Plan in the same proportion as used for determining
the number of shares of Exchange Stock the holders of the Class A Common Stock
receive in such merger, consolidation, acquisition of property or stock,
separation or reorganization. Unless accelerated by the Board, the vesting
schedule set forth in the option agreement shall continue to apply for the
Exchange Stock.
7.1.3 CHANGE IN CONTROL. In the event of a "Change in Control",
as defined in Section 7.1.4 below, of the Company after the Company has
registered any of its equity securities pursuant to Section 12(b) or 12(g) of
the Exchange Act, unless otherwise determined by the Board prior to the
occurrence of such Change in Control, any options or portions of such options
outstanding as of the date such Change in Control is determined to have occurred
that are not yet fully vested on such date shall become immediately exercisable
in full.
7.1.4 DEFINITION OF "CHANGE IN CONTROL." For purposes of this
Plan, a "Change in Control" shall mean (a) the first approval by the Board or by
the stockholders of the Company of an Extraordinary Event, (b) a Purchase, or
(c) a Board Change.
For purposes of the Plan, an "Extraordinary Event" shall mean any of the
following actions:
Page 11- STOCK OPTION PLAN
<PAGE>
(i) any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which shares
of Class A Common Stock would be converted into cash, securities or other
property, other than a merger of the Company in which the holders of common
stock immediately prior to the merger have the same proportionate ownership
of common stock of the surviving corporation immediately after the merger;
(ii) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, the
assets of the Company; or
(iii) the adoption of any plan or proposal for liquidation or
dissolution of the Company.
For purposes of the Plan, a "Purchase" shall mean the acquisition by any
person (as such term is defined in Section 13(d) of the Exchange Act) of any
shares of Class A Common Stock or securities convertible into Class A Common
Stock) without the prior approval of a majority of the Continuing Directors (as
defined below) of the Company, if after making such acquisition such person is
the beneficial owner (as such term is defined in Rule 13d-3 under the Exchange
Act) directly or indirectly of securities of the Company representing 20% or
more of the combined voting power of the Company's then outstanding securities
(calculated as provided in paragraph (d) of such Rule 13d-3).
For purposes of the Plan, a "Board Change" shall have occurred if
individuals who constitute the Board of the Company at the time of adoption of
this Plan (the "Continuing Directors") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a Director
subsequent to the date of adoption of this Plan whose nomination for election
was approved by a vote of at least a majority of the Continuing Directors (other
than a nomination of an individual whose initial assumption of office is in
connection with an actual threatened election contest relating to the election
of the Directors of the Company, as such terms are used in Rule 14a-11 of
Regulation 14A under the Exchange Act) shall be deemed to be a Continuing
Director.
7.2 FRACTIONAL SHARES. In the event of any adjustment in the number
of shares covered by any option, any fractional shares resulting from such
adjustment shall be disregarded and each such option shall cover only the number
of full shares resulting from such adjustment.
7.3 DETERMINATION OF BOARD TO BE FINAL. All Section 7 adjustments
shall be made by the Board, and its determination as to what adjustments shall
be made, and the extent of such adjustments,
Page 12- STOCK OPTION PLAN
<PAGE>
shall be final, binding and conclusive. Unless an Optionee agrees otherwise,
any change or adjustment to an incentive stock option shall be made in such a
manner so as not to constitute a "modification" as defined in Code Section
424(h) and so as not to cause his or her incentive stock option issued under
this Plan to fail to continue to qualify as an incentive stock option as defined
in Code Section 422(b).
SECTION 8. SECURITIES REGULATION. Shares shall not be issued with respect
to an option granted under this Plan unless the exercise of such option and the
issuance and delivery of such shares pursuant to the exercise of such option
shall comply 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 shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance, including the availability of an exemption from registration
for the issuance and sale of any shares under this Plan. Inability of the
Company to obtain from any regulatory body having jurisdiction, the authority
deemed by the Company's counsel to be necessary for the lawful issuance and sale
of any shares under this Plan or the unavailability of an exemption from
registration for the issuance and sale of any shares under this Plan shall
relieve the Company of any liability in respect of the nonissuance or sale of
such shares as to which such requisite authority shall not have been obtained.
As a condition to the exercise of an option, the Company may require the
Optionee to represent and warrant at the time of any such exercise that the
shares are being purchased only for investment and without any present intention
to sell or distribute such shares if, in the opinion of counsel for the Company,
such a representation is required by any relevant provision of the
aforementioned laws. At the option of the Company, a stop-transfer order
against any shares of stock may be placed on the official stock books and
records of the Company, and a legend indicating that the stock 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 stock
certificates in order to assure exemption from registration. The Plan
Administrator may also require such other action or agreement by the Optionees
as may from time to time be necessary to comply with the federal and state
securities laws. THIS PROVISION SHALL NOT OBLIGATE THE COMPANY TO UNDERTAKE
REGISTRATION OF THE OPTIONS OR STOCK HEREUNDER.
Page 13- STOCK OPTION PLAN
<PAGE>
Should any of the Company's capital stock of the same class as the stock
subject to options granted under this Plan be listed on a national securities
exchange, all stock issued under this Plan if not previously listed on such
exchange shall be authorized by that exchange for listing on such exchange prior
to the issuance of such stock.
SECTION 9. AMENDMENT AND TERMINATION.
9.1 BOARD ACTION. The Board may at any time suspend, amend or
terminate this Plan, provided that except as set forth in Section 7, the
approval of the Company's shareholders is necessary within 12 months before or
after the adoption by the Board of any amendment which will:
(a) increase the number of shares which are to be reserved for
the issuance of options under this Plan;
(b) permit the granting of stock options to a class of persons
other than those presently permitted to receive stock options under this Plan;
or
(c) require shareholder approval under applicable law, including
Section 16(b) of the Exchange Act.
Any amendment made to this Plan which would constitute a "modification" to
incentive stock options outstanding on the date of such amendment, shall not be
applicable to such outstanding incentive stock options, but shall have
prospective effect only, unless the Optionee agrees otherwise.
9.2 AUTOMATIC TERMINATION. Unless sooner terminated by the Board,
this Plan shall terminate ten years from the earlier of (a) the date on which
this Plan is adopted by the Board or (b) the date on which this Plan is approved
by the shareholders of the Company. No option may be granted after such
termination or during any suspension of this Plan. The amendment or termination
of this Plan shall not, without the consent of the option holder, alter or
impair any rights or obligations under any option previously granted under this
Plan.
SECTION 10. EFFECTIVENESS OF THIS PLAN. This Plan shall become effective
upon adoption by the Board so long as it is approved by the Company's
shareholders any time within 12 months before or after the adoption of this
Plan.
Adopted by the Board of Directors on January 15, 1997, and approved by the
shareholders on January 15, 1997.
Page 14- STOCK OPTION PLAN
<PAGE>
Exhibit 10.3
================================================================================
WARRANT AGREEMENT
Dated as of January 31, 1997
by and between
NEXTLINK COMMUNICATIONS, INC.
and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
================================================================================
<PAGE>
WARRANT AGREEMENT
TABLE OF CONTENTS*
Page
----
SECTION 1. Certain Definitions ........................................... 1
SECTION 2. Appointment of Warrant Agent .................................. 5
SECTION 3. Issuance of Contingent Warrants ............................... 5
SECTION 4. Warrant Certificates .......................................... 5
SECTION 5. Execution of Warrant Certificates ............................. 6
SECTION 6. Transfers of Contingent Warrants Prior to the
Separation of Contingent Warrants and Preferred
Shares; Separation of Contingent Warrants and
Preferred Shares .............................................. 7
SECTION 7. Registration .................................................. 8
SECTION 8. Registration of Transfers and Exchanges ....................... 9
SECTION 9. Terms of Contingent Warrants; Exercise of
Contingent Warrants ........................................... 11
SECTION 10. Mutilated or Missing Warrant Certificates ..................... 13
SECTION 11. Reservations of Warrant Shares ................................ 14
SECTION 12. Adjustment of Exercise Rate ................................... 15
SECTION 13. No Dilution or Impairment ..................................... 19
SECTION 14. Fractional Interests .......................................... 19
SECTION 15. Notices to Contingent Warrant Holders; Rights of
Contingent Warrant Holders .................................... 20
SECTION 16. Warrant Agent ................................................. 21
- --------
* This Table of Contents does not constitute a part of this Agreement or
have any bearing upon the interpretation of any of its terms or
provisions.
-i-
<PAGE>
Page
----
SECTION 17. Merger, Consolidation, or Change of Name of Warrant
Agent ......................................................... 23
SECTION 18. Resignation and Removal of Warrant Agent; Appointment
of Successor .................................................. 23
SECTION 19. Notices to the Company and Warrant Agent ...................... 24
SECTION 20. Supplements and Amendments .................................... 25
SECTION 21. Reports ....................................................... 25
SECTION 22. Successors .................................................... 25
SECTION 23. Termination ................................................... 26
SECTION 24. Governing Law ................................................. 26
SECTION 25. Benefits of This Agreement .................................... 26
SECTION 26. Counterparts .................................................. 26
EXHIBIT A Form of Contingent Warrant Certificate......................... A-1
EXHIBIT B Form of Certificate for Transfers of Certificated
Warrants ...................................................... B-1
-ii-
<PAGE>
WARRANT AGREEMENT, dated as of January 31, 1997, between NEXTLINK
Communications, Inc., a Washington corporation (the "Company"), and Continental
Stock Transfer & Trust Company, a corporation duly organized and existing under
the laws of the State of New York, as Warrant Agent (the "Warrant Agent").
RECITALS
WHEREAS, pursuant to a Purchase Agreement, dated January 21, 1997,
by and among the Company, NEXTLINK Communications, L.L.C., a Washington limited
liability company, and the initial purchasers named therein (the "Initial
Purchasers"), the Company has agreed to sell to the Initial Purchasers 5,700,000
units (the "Units"), each consisting of (i) one share of the Company's 14%
Senior Exchangeable Redeemable Preferred Stock Shares, liquidation preference
$50 per share (the "Preferred Shares"), and (ii) one Contingent Warrant (the
"Contingent Warrants") entitling the holder thereof to purchase, subject to the
conditions contained herein, a number of shares of each class of Junior Shares
outstanding as of February 1, 1998 equal to 1/5,700,000 of the aggregate
Contingent Warrant Share Amount (the Junior Shares issuable on exercise of the
Contingent Warrants are referred to herein as the "Warrant Shares"); and
WHEREAS, the Company desires the Warrant Agent to act on behalf of
the Company, and the Warrant Agent is willing so to act, in connection with the
issuance of Contingent Warrants and other matters as provided herein
(capitalized terms not defined herein shall have the respective meanings
specified in the Indenture);
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. Certain Definitions. For purposes of this Agreement, the
following terms shall have the following respective meanings:
"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled 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.
"Board of Directors" means either the board of directors of the
Company or any committee of that board duty authorized to act for it in respect
thereof; provided, however, that for purposes of the definition of "Change of
Control", "Board of Directors" means the Board of Directors of the Company only
and not a committee thereof.
"Board Resolution" means a copy of a resolution certified by the
Secretary of the Company to have been duly adopted by the Board of Directors and
to be in full force and effect on the date of such certification, and delivered
to the Warrant Agent.
<PAGE>
"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 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.
"Certificate of Designations" means the certificate of designations,
rights and preferences relating to the Preferred Shares.
"Change of Control" means 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 (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, (b) neither Mr. Craig O. McCaw nor any person designated
by him to the Company as acting on his behalf shall be a director of the Company
or (c) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with any
new directors whose election by the Board of Directors or whose nomination for
election by the shareholders of the Company was proposed by a vote of a majority
of the directors of the Company then still in office who were either directors
at the beginning of such period of whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company then in office.
"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 applicable law, then the body
performing such duties at such time.
"Current Market Price" per Junior Share or any other security at any
date means (i) if the security is not registered under the Exchange Act, (a) the
value of the security, determined in good faith by the Board of Directors, based
on the most recently completed arm's-length transaction between the Company and
a person other than an Affiliate of the Company and the closing of which occurs
on such date or shall have occurred within the six-month period preceding such
date, or (b) if no such transaction shall have occurred on such date or within
such six-month period, the value of the security as determined by an independent
financial expert (provided that, in the case of the calculation of Current
Market Price for determining the cash value of fractional shares, any such
determination within six months that is, in the good faith judgment of the Board
of Directors, a reasonable determination, may be utilized) or (ii) (a) if the
security is registered under the Exchange Act, the average of the daily market
prices of the security for the 20 consecutive trading days immediately preceding
such date, or (b) if the security has been registered under the Exchange Act for
less than 20 consecutive trading days before such date, then the average of
-2-
<PAGE>
the closing sales prices for all of the trading days before such date for which
closing sales prices are available, in the case of each of (ii) (a) and (ii)
(b), as certified to the Warrant Agent by the President, any Vice President or
the Chief Financial Officer of the Company. The market price for each such
trading day shall be: (A) in the case of a security listed or admitted to
trading on any national securities exchange or quotation system, the closing
sales price, regular way, on such day, or if no sale takes place on such day,
the average of the closing bid and asked prices on such day, (B) in the case of
a security not then listed or admitted to trading on any national securities
exchange or quotation system, the last reported sale price on such day, or if no
sale takes place on such day, the average of the closing bid and asked prices on
such day, as reported by a reputable quotation source designated by the Company,
(C) in the case of a security not then listed or admitted to trading on any
national securities exchange or quotation system and as to which no such
reported sale price or bid and asked prices are available, the average of the
reported high bid and low asked prices on such day, as reported by a reputable
quotation service, or a newspaper of general circulation in the Borough of
Manhattan, City and State of New York, customarily published on each Business
Day, designated by the Company, or, if there shall be no bid and asked prices on
such day, the average of the high bid and low asked prices, as so reported, on
the most recent day (not more than 30 days prior to the date in question) for
which prices have been so reported and (D) if there are no bid and asked prices
reported during the 30 days prior to the date in question, the Current Market
Price shall be determined as if the securities were not registered under the
Exchange Act.
"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 the holder thereof,
in whole or in part, on or prior to February 1, 2009; 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 February 1, 2009 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
change of control covenant with respect to the Preferred Shares contained in the
Certificate of Designations 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 the Preferred Shares as are
required to be repurchased pursuant to such covenant.
"Eagle River" means Eagle River Investments, L.L.C., a limited
liability company formed under the laws of the States of Washington.
"Exchange Act" means the Securities Exchange Act of 1934 and (unless
the context otherwise requires) includes the rules and regulations of the
Commission promulgated thereunder.
"Exchange Offer Registration Statement" means the registration
statement filed under the Securities Act relating to the exchange offer of the
Company made pursuant to
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the Preferred Exchange and Registration Rights Agreement, dated as of January
31, 1997, between the Company and the Initial Purchasers.
"Junior Shares" means Capital Stock of the Company that does not
rank, as to the payment of dividends or other comparable distributions or as to
the distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company, prior to or on a parity with the
Preferred Shares. At the date hereof, the Company's Class A Common Stock, par
value $.01 per share, and Class B Common Stock, par value $.01 per share, are
the only authorized and outstanding classes of Junior Shares.
"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.
"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.
"Public Equity Offering" means an underwritten public offering of
common stock, par value $.01 per share, of the Company pursuant to an effective
registration statement filed with the Commission in accordance with the
Securities Act.
"Qualified Junior Shares" means Junior Shares that do not constitute
Disqualified Stock.
"Qualifying Event" means a Public Equity Offering or one or more
Strategic Equity Investments which in either case results in aggregate net
proceeds to the Company of not less than $75 million.
"Resale Restriction Termination Date" has the meaning specified in
Section 8.
"Rule 144" means Rule 144 under the Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC Reports" means 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.
"Securities Act" means the Securities Act of 1933 and (unless the
context otherwise requires) includes the rules and regulations of the Commission
promulgated thereunder.
"Strategic Equity Investment" means an investment in Qualified
Junior Shares made by a Strategic Investor in an aggregate amount of not less
than $25 million.
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"Strategic Investor" means a Person engaged in one or more
Telecommunications Businesses (which need not be such Person's primary business)
that has, or 80% or more of the Voting Stock of which is owned, directly or
indirectly, by a Person that has, an equity market capitalization or net worth,
at the time of its initial investment in the Company, in excess of $2.0 billion.
"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.
"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 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
date hereof; provided that termination of what constitutes a Telecommunications
Business shall be made in good faith by the Board of Directors of the Company,
which determination shall be conclusive.
"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.
Unless the context otherwise requires, any reference herein to a
"Section", "paragraph", "subsection" or "clause" refers to a Section, paragraph,
subsection or clause, as the case may be, of this Agreement, and the words
"herein," "hereof," and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular Section or other
subdivision. Unless the context otherwise requires, any reference to a statute,
rule or regulation refers to the same (including any successor statute, rule or
regulation thereto) as it may be amended from time to time.
SECTION 2. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with the
instructions set forth herein, and the Warrant Agent hereby accepts such
appointment.
SECTION 3. Issuance of Contingent Warrants. The Contingent Warrants
shall be originally issued in connection with the issuance of the Preferred
Shares and shall not be separately transferable from the Preferred Shares until
the earliest to occur of the following (the "Separation Date"): (i) August 1,
1997, (ii) the effective date of the Exchange Offer Registration Statement or
(iii) a Change of Control.
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SECTION 4. Warrant Certificates. The Units will be issued in the
form of fully registered Units in global form, each comprised of Preferred
Shares in global form ("Global Preferred Shares") and Contingent Warrants in
global form ("Global Warrants"). Contingent Warrants in definitive form
("Certificated Warrants") will not be issued except in the circumstances
described below when Certificated Warrants are distributed to the beneficial
owners of the Global Warrants and, except in the case of the initial sale of the
Units, when such sale is not made in reliance upon Rule 144A. Global Warrants
and Certificated Warrants are sometimes collectively referred to herein as
"Warrant Certificates." Any Warrant Certificates to be issued and delivered
pursuant to this Agreement shall be in registered form only and shall be
substantially in the form set forth in Exhibit A hereto.
All Warrant Certificates issued hereunder prior to the Resale
Restriction Termination Date shall, upon issuance, bear the Securities Act
legend contained in Exhibit A and such required legend shall not be removed
unless the Company shall have delivered to the Warrant Agent a notice and an
opinion of counsel to the Company, each stating that Warrant Certificates may be
issued without such legend thereon. If such legend required for a Warrant
Certificate has been or may be so removed from a Warrant Certificate as provided
above, no other Warrant Certificate issued in exchange for all or any part of
the Contingent Warrants evidenced thereby shall bear such legend, unless the
Company has reasonable cause to believe that such other Contingent Warrants
constitute "restricted securities" within the meaning of Rule 144 and instructs
the Warrant Agent to cause a legend to appear thereon.
Any Global Warrant issued hereunder to The Depository Trust Company
(the "Depository") or its nominee and registered in the name of such Depository
or nominee shall bear the legends specified in Exhibit A.
SECTION 5. Execution of Warrant Certificates. Warrant Certificates
evidencing an aggregate of 5,700,000 Contingent Warrants shall be duly executed,
on or after the date of this Agreement, by the Company and delivered to the
Warrant Agent for countersignature, and the Warrant Agent shall thereupon
countersign the Warrant Certificates. After the Separation Date the Warrant
Agent shall retain custody of the Global Warrants and deliver Certificated
Warrants to the registered holders of any Preferred Shares that have been issued
in certificated form ("Certificated Preferred Shares") in accordance with the
provisions of Section 6 hereof. The Warrant Agent is hereby authorized to
countersign and deliver Warrant Certificates from time to time as required under
the provisions of this Agreement.
Warrant Certificates shall be signed on behalf of the Company by its
Chairman of the Board, its Chief Executive Officer, its President, or one of its
Vice Presidents and attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Warrant Certificates
may be manual or facsimile. Each Warrant Certificate shall be dated the date of
its countersignature.
Warrant Certificates bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the countersignature and delivery of such Warrant
Certificates or did not hold such offices at the date of such Warrant
Certificates.
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No Warrant Certificate shall be entitled to any benefit under this
Agreement or be valid or obligatory for any purpose unless such Warrant
Certificate has been manually countersigned by the Warrant Agent, and such
countersignature upon any Warrant Certificate shall be conclusive evidence, and
the only evidence, that such Warrant Certificate has been duly issued,
countersigned and delivered hereunder.
SECTION 6. Transfers of Contingent Warrants Prior to the Separation
of Contingent Warrants and Preferred Shares; Separation of Contingent Warrants
and Preferred Shares. Notwithstanding the provisions of Section 8 hereof, each
Certificated Warrant will be held by the Warrant Agent, as custodian for the
holders of the Units, until such time on or after the Separation Date as the
registered holder of Certificated Preferred Shares containing a Warrant
Endorsement substantially in the form set forth in this Section 6 shall have
surrendered such Certificated Preferred Shares to the Warrant Agent at its
principal corporate trust office (the "Warrant Agent Office") for a Warrant
Certificate or Certificates evidencing the underlying Contingent Warrants and
for a like number of Certificated Preferred Shares and not containing a Warrant
Endorsement (such surrender and exchange being referred to herein as a
"Separation" and the related Contingent Warrants being referred to as
"Separated").
Prior to Separation, beneficial ownership of the Certificated
Warrants will be evidenced by the Certificated Preferred Shares registered in
the names of the holders of the Certificated Preferred Shares, which
certificates will bear thereon a Warrant Endorsement, and the right to receive
or exercise Contingent Warrants evidenced by Certificated Warrants will be
transferable only in connection with the transfer of such Certificated Preferred
Shares. In connection with the foregoing, upon original issuance and thereafter
until Separation, the Global Warrant and each Certificated Warrant will bear the
following Warrant Endorsement:
UNTIL THE EARLIEST TO OCCUR OF: (I) AUGUST 1, 1997, (II) THE EFFECTIVE
DATE OF THE EXCHANGE OFFER REGISTRATION STATEMENT AND (III) A CHANGE OF
CONTROL, THE CONTINGENT WARRANTS EVIDENCED HEREBY MAY NOT BE SOLD,
ASSIGNED OR OTHERWISE TRANSFERRED TO ANY PERSON UNLESS, FOR EACH TRANSFER
OF A CONTINGENT WARRANT, SIMULTANEOUSLY WITH SUCH TRANSFER, THE HOLDER
HEREOF TRANSFERS TO THE SAME TRANSFEREE ONE SHARE OF THE 14% SENIOR
EXCHANGEABLE REDEEMABLE PREFERRED SHARES OF NEXTLINK COMMUNICATIONS, INC.
The Company shall give the Warrant Agent and the registrar and transfer agent of
the Preferred Shares (the "Registrar and Transfer Agent") written notice of the
Separation Date as soon as practicable after becoming aware of such date.
With respect to the Global Warrants and the Global Preferred Shares,
Separation may be effected in any commercially reasonable manner satisfactory to
the Company, the Warrant Agent, the Registrar and Transfer Agent and the
applicable Depository. The Warrant Agent shall continue to hold the Global
Warrants, as custodian for the Depository and the owners of beneficial interests
in the Global Warrant, after Separation.
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The Global Preferred Shares and Certificated Preferred Shares issued
prior to the Separation Date shall have printed on the face thereof the
following Warrant Endorsement:
UNTIL THE EARLIEST TO OCCUR OF: (I) AUGUST 1, 1997, (II) THE EFFECTIVE
DATE OF THE EXCHANGE OFFER REGISTRATION STATEMENT AND (III) A CHANGE OF
CONTROL, THE 14% SENIOR EXCHANGEABLE REDEEMABLE PREFERRED SHARES EVIDENCED
HEREBY MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE
TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, CONTINGENT WARRANTS ISSUED BY
NEXTLINK COMMUNICATIONS, INC.
All Certificated Preferred Shares containing a Warrant Endorsement
presented for Separation shall be duly endorsed or be accompanied by a written
instrument or instruments of exchange or transfer in form satisfactory to the
Warrant Agent and the Registrar and Transfer Agent. The Warrant Agent shall
deliver such Certificated Preferred Shares to the Registrar and Transfer Agent
with instructions to issue new Certificated Preferred Shares not containing a
Warrant Endorsement equal to the number of the Certificated Preferred Shares
registered in the name of such registered holder or holders or, if such
Certificated Preferred Shares also are being presented for registration of
transfer, in the name of the transferee or transferees. The Warrant Agent, as
custodian, shall deliver (or cause to be delivered) the Certificated Preferred
Shares not bearing a Warrant Endorsement so received from the Registrar and
Transfer Agent and in number equal to the aggregate number of the Certificated
Preferred Shares surrendered and a Warrant Certificate or Certificates executed
by the Company and countersigned by the Warrant Agent in the name of such
registered holder of or holders of such transferee or transferees for a number
of Contingent Warrants as shall equal the number of Preferred Shares so
exchanged for Separation, bearing numbers or other distinguishing symbols not
contemporaneously outstanding, to the Person or Persons entitled thereto.
SECTION 7. Registration. The Warrant Agent, on behalf of the
Company, shall number and register the Warrant Certificates in a register as
they are issued by the Company. The Company and the Warrant Agent may deem and
treat the registered holder(s) of the Warrant Certificates as the absolute
owner(s) thereof (notwithstanding any notation of ownership or other writing
thereon made by anyone), for all purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Prior to a
Separation of Contingent Warrants underlying a Unit, the registered holder of a
Preferred Share containing a Warrant Endorsement relating to such Contingent
Warrants shall be deemed the registered holder of such Contingent Warrants for
all purposes hereunder. The Company agrees to arrange for the Registrar and
Transfer Agent to act as registrar hereunder with respect to Contingent Warrants
that are not Separated.
References herein to "Contingent Warrant holder(s)" or "holders of
the Warrant Certificates" means in each case registered holders of Warrant
Certificates.
SECTION 8. Registration of Transfers and Exchanges. Prior to the
Separation Date, the Contingent Warrants shall not be transferable separately
but shall be
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transferable only as a Unit with the Preferred Shares as provided in Section 6.
With respect to beneficial interests in a Global Warrant, transfers shall only
be made on the books and records of the Depository. No beneficial owner of an
interest in any Global Warrant will be able to transfer that interest except in
accordance with the Depository's applicable procedures (in addition to those
under the Certificate of Designations and this Agreement, as applicable). With
respect to Certificated Warrants, the Company shall cause to be kept at the
Warrant Agent Office a register in which, subject to such reasonable regulations
as it may prescribe, the Company shall provide for the registration of Warrant
Certificates and of transfers or exchanges of Warrant Certificates at the
Contingent Warrant holder's option by the Warrant Agent as herein provided.
The Warrant Agent shall from time to time register the transfer of
any outstanding Certificated Warrants upon the records to be maintained by it
for that purpose, upon surrender thereof. Upon any such registration of
transfer, a new Warrant Certificate shall be issued to the transferee(s) and the
surrendered Warrant Certificate shall be cancelled by the Warrant Agent.
Cancelled Warrant Certificates shall thereafter be disposed of by the Warrant
Agent in accordance with its customary procedures and a certificate of their
destruction delivered to the Company. Whenever any Warrant Certificates are
surrendered for exchange, the Company shall execute, and the Warrant Agent shall
countersign and deliver, the Warrant Certificates that the Contingent Warrant
holder making the exchange is entitled to receive.
All Certificated Warrants issued upon any registration of transfer
or exchange of Warrant Certificates shall be the valid obligations of the
Company, evidencing the same obligations, and entitled to the same benefit under
this Agreement, as the Certificated Warrants surrendered for such registration
of transfer or exchange.
Every Certificated Warrant surrendered for registration of transfer
or exchange shall (if so required by the Company or the Warrant Agent) be duly
endorsed, or be accompanied by a written instrument of transfer in the form
contained Exhibit A hereto or such other form satisfactory to the Company and as
Warrant Agent, duly executed by the holder thereof or his attorney duly
authorized in writing (with, in the case of transfer, such signature guaranteed
by an Eligible Guarantor Institution).
If the holder of a Certificated Warrant wishes at any time prior to
the date which is three years (or such shorter period as may be prescribed by
Rule 144(k)) after the later of the date of original issuance of the Contingent
Warrants and the last day on which the Company or any affiliate (as defined in
Rule 144) of the Company was the owner of such Contingent Warrants, or any
predecessor thereto (the "Resale Restriction Termination Date"), such transfer
may be effected only in accordance with the provisions of this Section 8 and
subject to the applicable procedures of the Depository. Upon receipt by the
Warrant Agent of (i) such Certificated Warrant and instructions satisfactory to
the Warrant Agent directing that a specified number of Contingent Warrants not
greater than the number of Contingent Warrants represented by such Certificated
Warrant be credited to a specified account at the Depository and (ii) a
certificate substantially in the form of Exhibit B hereto duly executed by the
Contingent Warrant holder or his attorney duly authorized in writing, then the
Warrant Agent shall cancel such Certificated Warrant (and issue a new
Certificated Warrant in respect
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of any untransferred Contingent Warrants) and increase the aggregate number of
Contingent Warrants represented by such Contingent Warrants so transferred.
No service charge shall be made for any registration of transfer or
exchange upon surrender of Certificated Warrants or any issuance of Warrant
Certificates in connection with a Separation, but the Company may require
payment of a sum sufficient to cover any stamp or other governmental charge or
tax that may be imposed in connection with any such transfer or exchange.
Notwithstanding the foregoing, except in the circumstances referred
to below, owners of beneficial interests in a Global Warrant will not be
entitled to have such Global Warrant or any Contingent Warrants presented
thereby registered in their names, will not receive or be entitled to receive
physical delivery of Certificated Warrants in exchange therefor and will not be
considered to be the owners or holders of such Global Warrant or any Contingent
Warrants represented thereby for any purpose under this Agreement. Any Global
Warrant shall be exchangeable pursuant to this Section 8 for Certificated
Warrants registered in the names of persons other than the Depository or its
nominee only if the Depository notifies the Company that it is unwilling or
unable to continue as Depository or if at any time the Depository ceases to be a
clearing agency registered under the Exchange Act. Any Global Warrant that is
exchangeable pursuant to the preceding sentence shall be exchangeable for
Certificated Warrants registered in such names as the Depository shall direct.
Notwithstanding any other provision in this Agreement, a Global
Warrant may not be transferred except in whole by the Depository to a nominee of
the Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository.
Neither the Company, the Warrant Agent nor any agent of the Company
or the Warrant Agent will have any responsibility or liability for any actions
or omissions of the Depository or for any aspect of the records relating to or
payments made on account of beneficial ownership interests of a Global Warrant
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
Any Certificated Warrant when duly endorsed in blank (with signature
guaranteed) shall be deemed negotiable. The holder of any Certificated Warrant
duly endorsed in blank may be treated by the Company, the Warrant Agent and all
other persons dealing therewith as the absolute owner thereof for any purpose
and as the person entitled to exercise the rights represented thereby, or to the
transfer thereof on the register of the Company maintained by Warrant Agent, any
notice to the contrary notwithstanding; but until such transfer on such
register, the Company and the Warrant Agent may treat the registered holder
thereof as the owner for all purposes. Notwithstanding the foregoing, with
respect to any Global Warrant, nothing herein shall prevent the Company, the
Warrant Agent or any agent of the Company or the Warrant Agent, from giving
effect to any written certification, proxy or other authorization furnished by
any Depository (or its nominee), as a Contingent Warrant holder, with respect to
such Global Warrant or impair, as between such Depository and owners of
beneficial interests in such Global Warrant, the operation of customary
practices governing the exercise of the rights of such Depository (or its
nominee) as the holder of such Global Warrant.
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SECTION 9. Terms of Contingent Warrants; Exercise of Contingent
Warrants. Subject to the terms of this Agreement, the Contingent Warrants are
only exercisable on any Business Day after February 1, 1998 if a Qualifying
Event has not occurred on or prior to February 1, 1998. The Contingent Warrants
will expire at 5:00 P.M., New York City time, on February 1, 2009 or, if a
Qualifying Event has occurred on or prior to February 1, 1998, the date of such
Qualifying Event (the "Expiration Date").
In the event that a Qualifying Event has occurred on or prior to
February 1, 1998, the Company shall, within the earlier of 15 Business Days
after such Qualifying Event or the first Business Day after February 1, 1998,
inform the Warrant Agent and send a written notice by first-class mail, postage
prepaid to each Contingent Warrant holder at his or her address appearing on the
Warrant register to the effect that (i) a Qualifying Event has occurred on the
date on which such event occurred, together with a description of the
transaction(s) constituting such Qualifying Event that is sufficient to indicate
that the event(s) described so constitute a Qualifying Event and (ii) the
Contingent Warrants expired on such date without becoming exercisable. In the
event that a Qualifying Event has not occurred on or prior to February 1, 1998,
the Company shall, as soon as practicable but in any event within two Business
Days after February 1, 1998, inform the Warrant Agent and send a written notice
by first-class mail, postage prepaid to each Contingent Warrant holder at his or
her address appearing in the Warrant register stating (i) that a Qualifying
Event has not occurred on or prior to February 1, 1998 and, accordingly, the
Contingent Warrants are exercisable on any Business Day until the Expiration
Date, (ii) the Expiration Date and (iii) the class or classes of Junior Shares
for which the Contingent Warrants are so exercisable and the Exercise Rate as of
the date of such notice with respect to each such class.
Each Contingent Warrant, when exercised, will enable the holder
thereof to purchase from the Company (and the Company shall issue and sell to
such holder of a Contingent Warrant) at any time on or after the date on which
the Contingent Warrants become exercisable and on or prior to the close of
business on the Expiration Date a number of fully paid and non-assessable shares
of each class of Junior Shares outstanding as of February 1, 1998 equal to
1/5,700,000 of the aggregate Contingent Warrant Shares Amount (and any other
securities or property purchasable or deliverable upon exercise of such Warrant
as provided in Section 12 hereof), subject to adjustment as provided in Section
12, at an exercise price of $.01 per Warrant Share to be received upon exercise
of such Contingent Warrant, subject to adjustment as provided in Section 12
hereof (the "Exercise Price"). The number of shares of a class of Junior Shares
for which a particular Contingent Warrant may be exercised (the "Exercise Rate")
shall be subject to adjustment from time to time as set forth in Section 12
hereof. No cash dividend shall be paid to a holder of Warrant Shares issuable
upon the exercise of Contingent Warrants unless such holders was, as of the
record date for the declaration of such dividend, the record holders of such
Warrants Shares.
The "Contingent Warrant Shares Amount" with respect to a class of
Junior Shares equals the number of Junior Shares of such class that would
collectively represent 5.0% of such class on a fully diluted basis as of
February 1, 1998 (giving effect to, among other things, the issuance of such
shares).
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Each Contingent Warrant not exercised prior to 5:00 p.m., New York
City time, on the Expiration Date shall become void and all rights thereunder
and all rights in respect thereof under this Agreement shall cease as of such
time. The Company shall give written notice of the Expiration Date to the
registered holders of the then outstanding Contingent Warrants not less than 90
nor more than 120 days prior to the Expiration Date; provided, however, that if
the Company fails to give such notice, the Contingent Warrants shall still
terminate and become void on the applicable Expiration Dates.
A Contingent Warrant may be exercised upon surrender to the Company
at the office of the Warrant Agent of the Warrant Certificate or Certificates
evidencing the Contingent Warrants to be exercised with the form of election to
exercise on the reverse thereof duly completed and executed, together with
payment to the Warrant Agent for the account of the Company of the Exercise
Price for each Warrant Share to be received. Each Contingent Warrant may be
exercised only in whole. The Exercise Price may be paid (i) in cash or by
certified or official bank check or (ii) by the surrender (which surrender shall
be evidenced by cancellation of the number of Contingent Warrants represented by
any Warrant Certificate presented in connection with a Cashless Exercise) of a
Contingent Warrant or Warrants (represented by one or more relevant Warrant
Certificates), and without the payment of the Exercise Price in cash, in return
for the delivery to the surrendering holder of such number of Junior Shares
equal to the product of (1) the number of Junior Shares for which such
Contingent Warrant is exercisable as of the date of exercise (if the Exercise
Price were being paid in cash) and (2) the Cashless Exercise Ratio. For purposes
of this Agreement, the "Cashless Exercise Ratio" with respect to a class of
Junior Shares shall equal a fraction, the numerator of which is the excess of
the Current Market Price per share of such class on the date of exercise over
the Exercise Price per share as of the date of exercise and the denominator of
which is the Current Market Price per share of such class on the date of
exercise. An exercise of a Contingent Warrant in accordance with clause (ii) of
the second preceding sentence is herein called a "Cashless Exercise". If a
Contingent Warrant is exercisable for Junior Shares of more than one class, the
Cashless Exercise Ratio shall be determined on the basis of the Current Market
Price of the Junior Shares of all such classes taken together, and shall be
applied to the Junior Shares of each class for which such Contingent Warrant is
exercisable. Upon surrender of a Warrant Certificate representing more than one
Contingent Warrant in connection with the holder's option to elect a Cashless
Exercise, the number of Warrant Shares deliverable upon a Cashless Exercise
shall be equal to the number of Contingent Warrants that the holder specifies is
to be exercised pursuant to a Cashless Exercise multiplied by the Cashless
Exercise Ratio. All provisions of this Agreement shall be applicable with
respect to an exercise of a Warrant Certificate pursuant to a Cashless Exercise
for less than the full number of Contingent Warrants represented thereby. If,
pursuant to the Securities Act, the Company is not able to effect the
registration under the Securities Act of the issuance and sale of the Warrant
Shares by the Company to the holders of the Contingent Warrants upon the
exercise thereof as required by this Agreement, the holders of the Contingent
Warrants will be required to effect the exercise of the Contingent Warrants
solely pursuant to the Cashless Exercise option.
Upon surrender of the Warrant Certificate or Certificates and
payment of the Exercise Price, the Company shall issue and cause the Warrant
Agent to deliver with all reasonable dispatch, to or upon the written order of
the Contingent Warrant holder and in
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such name or names as the Contingent Warrant holder may designate, a certificate
or certificates for the number of Warrant Shares issuable or other securities or
property to which such holder is entitled hereunder upon the exercise of such
Contingent Warrants, including, at the Company's option, any cash payable in
lieu of fractional interests as provided in Section 14 hereof. Such certificate
or certificates shall be deemed to have been issued and any person so designated
to be named therein shall be deemed to have become a holder of record of such
Warrants Shares as of the date of the surrender of such Contingent Warrants and
payment of the Exercise Price. The Company may issue fractional shares of Common
Stock upon exercise of any Contingent Warrants in accordance with the provision
of Section 14 hereof. All Warrant Shares or other securities by the Company upon
the exercise of the Contingent Warrants must be validly issued, fully paid and
nonassessable.
In the event that a Certificated Warrant is exercised in respect of
fewer than all of the Contingent Warrants evidenced thereby on such exercise at
any time prior to the date of expiration of the Contingent Warrants, a new
certificate evidencing such remaining Contingent Warrants will be issued, and
the Warrant Agent is hereby irrevocably authorized to countersign and to deliver
the required new Certificated Warrants pursuant to the provisions of this
Section 9 and Section 8, and the Company, whenever required by the Warrant
Agent, will supply the Warrant Agent with Certificated Warrants duly executed on
behalf of the Company for such purpose.
All Certificated Warrants surrendered upon exercise of Contingent
Warrants shall be cancelled by the Warrant Agent and disposed of by the Warrant
Agent in accordance with its customary procedures, and a certificate of their
destruction shall be delivered to the Company. The Warrant Agent shall account
promptly in writing to the Company with respect to Contingent Warrants exercised
and concurrently pay to the Company all monies received by the Warrant Agent for
the purchase of the Warrant Shares through the exercise of such Contingent
Warrants.
In the event that the Company shall purchase or otherwise acquire
Certificated Warrants, the Company may elect to have the Certificated Warrants
cancelled and retired by delivery of Certificated Warrants to the Warrant Agent
who, upon the written request of the Company, shall promptly cancel and retire
such Certificated Warrants.
The Warrant Agent shall keep copies of this Agreement and any
notices given or received hereunder available for inspection by the registered
Contingent Warrant holders during normal business hours and upon reasonable
notice at its office. The Company shall supply the Warrant Agent from time to
time with such numbers of copies of this Agreement as the Warrant Agent may
request.
SECTION 10. Mutilated or Missing Warrant Certificates. If any
mutilated Warrant Certificate is surrendered to the Warrant Agreement, the
Company shall execute and the Warrant Agreement shall countersign and deliver in
exchange therefor a new Warrant Certificate representing a like number of
Contingent Warrants.
If there shall be delivered to the Company and the Warrant Agreement
(i) evidence to their satisfaction of the destruction, loss or theft of any
Warrant Certificate and
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(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
Company or the Warrant Agent that such Warrant Certificate has been acquired by
a bona fide purchaser, the Company shall execute and the Warrant Agent shall
countersign and deliver, in lieu of any such destroyed, lost or stolen Warrant
Certificate, a new Warrant Certificate representing a like number of Contingent
Warrants.
Upon the issuance of any new Warrant Certificate under this Section,
the Company 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 Warrant Agent) connected
therewith.
Every new Warrant Certificate issued pursuant to this Section in
lieu of any destroyed, lost or stolen Warrant Certificate shall constitute an
original additional contractual obligation of the Company, whether or not the
destroyed, lost or stolen Warrant Certificate shall be at any time enforceable
by anyone, and shall be entitled to all the benefits of this Agreement equally
and proportionately with any and all other Warrant Certificates 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 Warrant Certificates.
SECTION 11. Reservations of Warrant Shares. The Company shall with
respect to each class of Junior Shares for which the Contingent Warrants are
exercisable at all times reserve and keep available, free from preemptive
rights, out of the aggregate of the authorized but unissued shares of such class
for the purpose of enabling it to satisfy any obligation to issue Warrant Shares
upon exercise of Contingent Warrants, the maximum number of Junior Shares of
such class which would then be deliverable upon the exercise of all outstanding
Contingent Warrants if all such outstanding Contingent Warrants were then
exercisable. The Company agrees that any Warrant Shares issued upon exercise of
the Contingent Warrants shall be duly issued out of authorized and previously
unissued shares of such class.
The transfer agent for each class of Junior Shares for which the
Contingent Warrants are exercisable (which may be the Company if it is acting as
such transfer agent) and every subsequent transfer agent for any shares of the
Company's Capital Stock issuable upon the exercise of any of the rights of
purchase aforesaid will be irrevocably authorized and directed at all times to
reserve such number of authorized shares as shall be required for such purpose.
The Company will keep a copy of this Agreement on file with each such transfer
agent. The Warrant Agent is hereby irrevocably authorized to requisition from
time to time from each such transfer agent the stock certificates required to
honor outstanding Contingent Warrants upon exercise thereof in accordance with
the terms of this Agreement. The Company will supply each such transfer agent
with duly executed certificates for such purposes and will provide or otherwise
make available any cash which may be payable as provided in Section 14 hereof.
The Company will furnish each such transfer agent a copy of
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all notices of adjustments and certificates related thereto which are
transmitted to each Contingent Warrant holder pursuant to Section 15 hereof.
The Company covenants that all Warrant Shares which may be issued
upon exercise of Contingent Warrants will, upon payment of the Exercise Price
and issuance, be duly and validly issued, fully paid and nonassessable, free of
preemptive rights and free from all taxes, liens, charges and security interests
with respect to the issue thereof.
SECTION 12. Adjustment of Exercise Rate. The Exercise Rate with
respect to a class of Junior Shares shall be subject to adjustment from time to
time upon the occurrence of the events enumerated in this Section 12.
(a) If at any time after February 1, 1998 the Company:
(1) pays a dividend or makes a distribution on any of its Capital Stock
in Junior Shares or other shares of its Capital Stock;
(2) subdivides, reclassifies or recapitalizes any class of Junior Shares
into a greater number of shares;
(3) combines, reclassifies or recapitalizes any class of Junior Shares
of Junior Shares into a smaller number of shares;
(4) issues by reclassification of any class of Junior Shares any shares
of its Capital Stock (excluding any such reclassification in
connection with a consolidation or merger);
then the Exercise Rate with respect to a class of Junior Shares in effect
immediately prior to such action shall be proportionately adjusted if necessary
so that the holder of any Contingent Warrant thereafter exercised may receive
the aggregate number and kind of shares of Capital Stock of the Company which
such holder would have owned immediately following such action if such
Contingent Warrant had been exercised immediately prior to such action (without
giving effect to the Cashless Option).
Any adjustment required by this subsection (a) shall be made
successively immediately after the record date, in the case of a dividend or
distribution, or the effective date, in the case of a subdivision, combination,
reclassification or recapitalization, to allow the purchase of such aggregate
number and kind of shares.
(b) In case after February 1, 1998 the Company shall issue rights,
options or warrants to all holders of a class of Junior Shares entitling them to
subscribe for or purchase shares of such class at a price per share less than
the Current Market Price per share of such class on the date fixed for the
determination of shareholders entitled to receive such rights, options or
warrants, the Exercise Rate with respect to such class of Junior Shares in
effect at the opening of business on the day following the date fixed for such
determination shall be increased by dividing such Exercise Rate by a fraction of
which the numerator shall be the number of shares of such class outstanding at
the close of business on the date fixed for
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such determination plus the number of shares which the aggregate of the offering
price of the total number of shares so offered for subscription or purchase
would purchase at such Current Market Price and the denominator shall be the
number of shares of such class outstanding at the close of business on the date
fixed for such determination plus the number of shares so offered for
subscription or purchase, such increase to become effective immediately after
the opening of business on the day following the date fixed for such
determination. For the purposes of this subsection (b), the number of Junior
Shares of a class at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of such shares. The Company will not
issue any rights, options or warrants in respect of any Junior Shares held in
the treasury of the Company.
(c) In case after February 1, 1998 the Company shall, by dividend or
otherwise, distribute to all holders of a class of Junior Shares evidences of
its indebtedness, shares of any class of Capital Stock, or other property
(including securities, but excluding (i) any rights, options or warrants
referred to in subsection (b) of this Section 12, (ii) any dividend or
distribution paid exclusively in cash, (iii) any dividend or distribution
referred to in subsection (a) of this Section 12 and (iv) any merger or
consolidation to which subsection (i) of this Section 12 applies), the Exercise
Rate with respect to such class of Junior Shares shall be adjusted so that the
same shall equal the rate determined by dividing such Exercise Rate in effect
immediately prior to the close of business on the date fixed for the
determination of shareholders entitled to receive such distribution by a
fraction of which the numerator shall be the Current Market Price per share of
such class on the date fixed for such determination less the then fair market
value (as determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution) of the portion of the assets,
shares or evidences of indebtedness so distributed applicable to one share of
such class and the denominator shall be such Current Market Price per share of
such class, such adjustment to become effective immediately prior to the opening
of business on the day following the date fixed for the determination of
shareholders entitled to receive such distribution.
(d) In case after February 1, 1998 the Company shall, by dividend or
otherwise, distribute to all holders of a class of Junior Shares cash (excluding
any cash that is distributed upon a merger or consolidation to which subsection
(i) of this Section 12 applies or as part of a distribution referred to in
paragraph (c) of this Section) in an aggregate amount that, combined together
with (I) the aggregate amount of any other cash distributions to all holders of
such Junior Shares made exclusively in cash within the 12 months preceding the
date of payment of such distribution and in respect of which no adjustment
pursuant to this subsection (d) has been made and (II) the aggregate of any cash
plus the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) of
consideration payable in respect of any tender offer by the Company or any of
its subsidiaries for all or any portion of such class of Junior Shares concluded
within the 12 months preceding the date of payment of such distribution and in
respect of which no adjustment pursuant to subsection (c) of this Section has
been made (the "combined cash and tender amount") exceeds 10% of the product of
the Current Market Price per share of such class on the date for the
determination of holders of such shares of such class entitled to receive such
distribution times the number of such shares of such class
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outstanding on such date (the "aggregate current market price"), then, and in
each such case, immediately after the close of business on such date for
determination, the Exercise Rate with respect to such class of Junior Shares
shall be adjusted so that the same shall equal the rate determined by dividing
such Exercise Rate in effect immediately prior to the close of business on the
date fixed for determination of the shareholders entitled to receive such
distribution by a fraction (i) the numerator of which shall be equal to the
Current Market Price per share of such class on the date fixed for such
determination less an amount equal to the quotient of (x) the excess of such
combined cash and tender amount over such aggregate current market price divided
by (y) the number of shares of such class outstanding on such date for
determination and (ii) the denominator of which shall be equal to the Current
Market Price per share of such class on such date for determination.
(e) In case after February 1, 1998 a tender offer made by the
Company or any subsidiary for all or any portion of any class of Junior Shares
shall expire and such tender offer (as amended upon the expiration thereof)
shall require the payment to shareholders (based on the acceptance (up to any
maximum specified in the terms of the tender offer) of Purchased Shares (as
defined below)) of an aggregate consideration having a fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a Board Resolution) that combined together with (I) the
aggregate of the cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution), as of the expiration of such tender offer, of consideration payable
in respect of any other tender offer by the Company or any subsidiary for all or
any portion of the such class of Junior Shares expiring within the 12 months
preceding the expiration of such tender offer and in respect of which no
adjustment pursuant to this subsection (e) has been made and (II) the aggregate
amount of any cash distributions to all holders of such class of Junior Shares
within 12 months preceding the expiration of such tender offer and in respect of
which no adjustment pursuant to subsection (d) of this Section 12 has been made
(the "combined tender and cash amount") exceeds 10% of the product of the
Current Market Price per share of such class as of the last time (the
"Expiration Time") tenders could have been made pursuant to such tender offer
(as it may be amended) times the number of such shares of such class outstanding
(including any tendered shares) as of the Expiration Time, then, and in each
such case, immediately prior to the opening of business on the day after the
date of the Expiration Time, the Exercise Rate with respect to such class of
Junior Shares shall be adjusted so that the same shall equal the rate determined
by dividing such Exercise Rate in effect immediately prior to the close of
business on the date of the Expiration Time by a fraction (i) the numerator of
which shall be equal to (A) the product of (I) the Current Market Price per
share of such of such class on the date of the Expiration Time multiplied by
(II) the number of such shares of such class outstanding (including any tendered
shares) on the Expiration Time less (B) the combined tender and cash amount, and
(ii) the denominator of which shall be equal to the product of (A) the Current
Market Price per share of such class as of the Expiration Time multiplied by (B)
the number of shares of such class outstanding (including any tendered shares)
as of the Expiration Time less the number of all shares validly tendered and not
withdrawn as of the Expiration Time (the shares deemed so accepted up to any
such maximum, being referred to as the "Purchased Shares").
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(f) No adjustment in the Exercise Rate with respect to a class of
Junior Shares need be made unless the adjustment would require an increase or
decrease of at least 1% in such Exercise Rate; provided, however, that any
adjustments that are not made shall be carried forward and taken into account in
any subsequent adjustment. Upon each adjustment of an Exercise Rate with respect
to a class of Junior Shares, the corresponding Exercise Price with respect to
the Warrant Shares of such class shall be adjusted by multiplying such Exercise
Price in effect immediately prior to such adjustment by the Exercise Rate in
effect immediately prior to such adjustment and dividing the product thereof by
the Exercise Rate resulting from such adjustment. All calculations under this
Section 12 shall be made to the nearest 1/1,000th of a share or nearest 1/100th
of a cent, as the case may be.
(g) Whenever the Exercise Rate with respect to a class of Junior
Shares and the corresponding Exercise Price are adjusted, the Company shall
provide the notices required by Section 15 hereof.
(h) The Company from time to time may increase the Exercise Rate
with respect to a class of Junior Shares, and decrease the corresponding
Exercise Price, by any amount for any period of time if the period is at least
20 days and if the increase or decrease, as the case may be, is irrevocable
during the period. Whenever an Exercise Rate is increased and corresponding
Exercise Price decreased, the Company shall mail to the registered Contingent
Warrant holders a notice of the increase and related decrease. The Company shall
mail the notice at least 15 days before the date such increased Exercise Rate
and decreased Exercise Price takes effect. The notice shall state the increased
Exercise Rate and decreased Exercise Price and the period it will be in effect.
Any increase in an Exercise Rate and corresponding decrease in an
Exercise Price made pursuant to this subsection (h) shall not change or adjust
any Exercise Rate or Exercise Price otherwise in effect, or as used for
calculations, for purposes of subsections (a) through (c) of this Section 12.
(i) Except as provided below, in the event that the Company
consolidates with, merges with or into, or sells all or substantially all of its
property and assets to another Person, each Contingent Warrant thereafter shall,
if and when exercisable, entitle the holder thereof to receive upon exercise
thereof and payment of the Exercise Price the number of shares of capital stock
or other securities or property which the holder would have received immediately
after such transaction if such holder had exercised the Contingent Warrant
immediately before the effective date of the transaction (whether or not the
Contingent Warrants were then exercisable and without giving effect to the
Cashless Exercise option), assuming (to the extent applicable) that such holder
(i) was not a Person with which the Company consolidated or merged with or into
or which merged with or into the Company or to which such conveyance, sale,
transfer or lease was made, as the case may be ("Constituent Person") or an
Affiliate of a Constituent Person to such transaction, (ii) made no election
with respect thereto and (iii) was treated alike with the plurality of
non-electing holders. If the Company merges or consolidates with, or sells all
or substantially all the property and assets of the Company to, another Person
and, in connection therewith, consideration to the holders of Junior Shares in
exchange for their shares is payable solely in cash, or in the event of the
dissolution, liquidation or winding-up of the Company, then the holder of each
Contingent
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Warrant, if then exercisable, will be entitled to receive distributions on an
equal basis with the holders of Junior Shares or other securities issuable upon
exercise of such Contingent Warrant, as if such Contingent Warrant had been
exercised immediately prior to such event, less the Exercise Price therefor.
Upon receipt of such payment, if any, the Contingent Warrants will expire and
the rights of the holders thereof will cease. In case of any such merger,
consolidation or sale of assets, the surviving or acquiring person and, in the
event of any dissolution, liquidation or winding-up of the Company, the Company
shall deposit promptly with the Warrant Agent the funds, if any, to pay to the
holders of the Contingent Warrants. After such funds and, in the case of
Certificated Warrants, the surrendered Warrant Certificates are received, the
Warrant Agent shall make payment by delivering a check in such amount as is
appropriate (or, in the case of consideration other than cash, such other
consideration as is appropriate) to such person or persons as it may be directed
in writing by the holders surrendering such Contingent Warrants.
Concurrently with the consummation of such transaction, the entity
formed by or surviving any such consolidation or merger if other than the
Company, or the person to which such sale or conveyance shall have been made,
shall enter into a supplemental Warrant Agreement so providing and further
providing for adjustments in the future which shall be nearly equivalent as may
be practicable to the adjustments provided for in this Section 12. If the issuer
of securities deliverable upon exercise of Contingent Warrants under the
supplemental Warrant Agreement is an affiliate of the formed, surviving,
transferee or lessee corporation, that issuer shall join in the supplemental
Warrant Agreement.
If this subsection (i) applies with respect to a transaction,
subsections (a) through (e) of this Section 12 shall not apply with respect to
such transaction.
(j) The Warrant Agent shall have no duty to determine when an
adjustment under this Section 12 should be made, how it should be made or what
it should be. The Warrant Agent shall have no duty to determine whether any
provisions of a supplemental Warrant Agreement executed pursuant to subsection
(i) of this Section 12 are correct. The Warrant Agent makes no representation or
warranty as to the validity or value of any securities or assets issued upon
exercise of Contingent Warrants or pursuant to any adjustment. The Warrant Agent
shall not be responsible for the Company's failure to comply with this Section
12.
(k) In any case in which this Section 12 shall require that an
adjustment in the Exercise Rate with respect to a class of Junior Shares be made
effective as of a record date for a specified event, the Company may elect to
defer until the occurrence of such event (i) issuing to the holder of any
Contingent Warrant exercised after such record date the Warrant Shares and other
Capital Stock of the Company, if any, issuable upon such exercise over and above
the Warrant Shares and other Capital Stock of the Company, if any, issuable upon
such exercise on the basis of such Exercise Rate and (ii) paying to such holder
any amount in lieu of a fractional share pursuant to Section 14 hereof;
provided, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional Warrant Shares, other capital stock and cash upon the occurrence of
the event requiring such adjustment.
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SECTION 13. No Dilution or Impairment. If any event shall occur as
to which the provisions of Section 12 hereof are not strictly applicable but the
failure to make any adjustment would adversely affect the purchase rights
represented by the Contingent Warrants in a way that is contrary to the manifest
and essential intent and principles of Section 12 hereof, then, in each such
case, the Company shall appoint an investment banking firm of recognized
national standing, or any other financial expert that does not (or whose
directors, officers, employees, affiliates or stockholders do not) have a direct
or indirect material financial interest in the Company, who has not been, and,
at the time it is called upon to give independent financial advice to the
Company, is not (and none of its directors, officers, employees, affiliates or
stockholders are) a promoter, director or officer of the Company, which shall
give their opinion upon the adjustment, if any, on a basis consistent with the
manifest and essential intent and principles established in Section 12 hereof,
necessary to preserve, without dilution, the purchase rights, represented by the
Contingent Warrants. Upon receipt of such opinion, the Company will promptly
mail a copy thereof to the Warrant Agent and the Contingent Warrant holders and
shall make the adjustments described therein.
The Company shall at all times in good faith assist in the carrying
out of the terms of this Agreement.
SECTION 14. Fractional Interests. The Company shall not be required
to issue fractional Warrant Shares on the exercise of Contingent Warrants,
although it may do so in its sole discretion. If more than one Contingent
Warrant shall be presented for exercise in full at the same time by the same
holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Contingent Warrants so presented.
If any fraction of a Warrant Share would, except for the provisions of this
Section 14, be issuable upon the exercise of any such Contingent Warrants (or
specified portion thereof), the Company shall notify the Warrant Agent in
writing of the amount to be paid in lieu of the fraction of a Warrant Share and
concurrently pay or provide to the Warrant Agent for payment to the Contingent
Warrant holder an amount in cash equal to the Current Market Value per Warrant
Share of the relevant class or classes of Junior Shares, as determined on the
day immediately preceding the date the Contingent Warrant is presented for
exercise, multiplied by such fraction, computed to the nearest whole cent.
SECTION 15. Notices to Contingent Warrant Holders; Rights of
Contingent Warrant Holders. Upon any adjustment of the Exercise Rate with
respect to a class of Junior Shares pursuant to Section 12 hereof, the Company
shall promptly thereafter (i) cause to be filed with the Warrant Agent a
certificate of a firm of independent public accountants of recognized standing
selected by the Board of Directors (which may be the regular auditors of the
Company setting forth the Exercise Rate with respect to such class after such
adjustments and setting forth in reasonable detail the method of calculation and
the facts upon which such calculations are based and setting forth the number of
Warrant Shares (or portion thereof) issuable after such adjustment of such
Exercise Rate upon exercise of a Contingent Warrant and the corresponding
Exercise Price and (ii) cause to be given to each of the registered holders of
the Warrant Certificates at his or her address appearing on the Warrant register
written notice of such adjustments by first-class mail, postage prepaid. Where
appropriate,
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such notice may be given in advance and included as a part of the notice
required to be mailed under the other provisions of this Section 15.
In case:
(a) the Company shall authorize the issuance to all holders of
shares of a class of Junior Shares of rights, options or warrants to
subscribe for or purchase shares of such class or of any other
subscription rights or warrants; or
(b) the Company shall authorize the distribution to all holders of
shares of a class of Junior Shares of evidences of its indebtedness or
assets (other than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends payable in shares of
such class or distributions referred to in of Section 12(a) hereof); or
(c) of any consolidation or merger to which the Company is a party
and for which approval of any shareholders of the Company is required, or
of the conveyance or transfer of the properties and assets of the Company
substantially as an entirety, or of any reclassification or change of
Junior Shares issuable upon exercise of the Contingent Warrants (other
than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination);
or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) the Company or any subsidiary shall commence a tender offer for
all or a portion of the outstanding shares of a class of Junior Shares (or
shall amend any such tender offer); or
(f) the Company proposes to take any other action (other than
actions of the character described in Section 12(a) hereof) which would
require an adjustment of the Exercise Rate with respect to a class of
Junior Shares pursuant to Section 12 hereof;
then the Company shall cause to be filed with the Warrant Agent and, if such
event occurs after the date on which the Contingent Warrants first become
exercisable, shall cause to be given to each of the Contingent Warrant holders
at the address appearing on the Warrant register, at least 20 days (or 10 days
in any case specified in clauses (a) or (b) above) prior to the applicable
record date hereinafter specified, or promptly in the case of events for which
there is no record date, by first-class mail, postage prepaid, a written notice
stating (i) the date as of which the holders of record of shares of such class
to be entitled to receive any such rights, options, warrants or distributions
are to be determined, or (ii) the date on which the right to make tenders set
forth in any tender offer expires, or (iii) the date on which any such
consolidation, merger, conveyance, transfer, reclassification, dissolution,
liquidation or winding up is expected to become effective or consummated, and
the date as of which it is expected that holders of record of shares of such
class shall be entitled to exchange such shares for securities or other
property, if any, deliverable upon such consolidation, merger,
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conveyance, transfer, reclassification, dissolution, liquidation or winding up.
The failure to give the notice required by this Section 15 or any defect therein
shall not affect the legality or validity of any issuance, right, option,
warrant, distribution, tender offer, exchange offer, consolidation, merger,
conveyance, transfer, reclassification, dissolution, liquidation or winding up,
or the vote upon any action.
Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the right
to vote or to consent or to receive notice of meetings of shareholders or the
election of directors of the Company or any other matter, or any other rights of
shareholders of the Company, including any right to receive dividends.
SECTION 16. Warrant Agent. The Warrant Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the Contingent Warrant holders, by
their acceptance thereof, shall be bound:
(a) The statements contained herein and in the Warrant Certificates
shall be taken as statements of the Company, and the Warrant Agent assumes no
responsibility for the correctness of any of the same except for the
countersignature by it. The Warrant Agent assumes no responsibility with respect
to the distribution of the Warrant Certificates except as otherwise provided
herein.
(b) The Warrant Agent shall not be responsible for any failure of
the Company to comply with any of the covenants contained in this Agreement or
in the Warrant Certificates.
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company), and the Warrant Agent
shall incur no liability or responsibility to the Company or to any holder of
any Warrant Certificate in respect of any action taken, suffered or omitted by
it hereunder in good faith and in accordance with the opinion or the advice of
such counsel.
(d) The Warrant Agent shall incur no liability or responsibility to
the Company or to any Contingent Warrant holder for any action taken in reliance
on any Warrant Certificate, certificate of shares, notice, resolution, waiver,
consent, order, certificate, or other paper, document or instrument believed by
it to be genuine and to have been signed, sent or presented by the proper party
or parties.
(e) The Company agrees to pay to the Warrant Agent compensation as
agreed between the Company and the Warrant Agent for all services rendered by
the Warrant Agent in the execution, performance and observance of this
Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution, performance and observance of this Agreement and
to indemnify the Warrant Agent and save it harmless against any and all
liabilities, including judgments, costs and counsel fees, for anything done or
omitted by the
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Warrant Agent in the execution, performance or observance of this Agreement,
except as a result of the Warrant Agent's gross negligence or willful
misconduct.
(f) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to involve
expenses or liability unless the Company or one or more registered Contingent
Warrant holders shall furnish the Warrant Agent with reasonable security and
indemnity satisfactory to the Warrant Agent for any liabilities, costs and
expenses which may be incurred. However, this provision shall not affect the
power of the Warrant Agent to take such action as it may consider proper,
whether with or without any such security or indemnity. All rights of action
under this Agreement or under any of the Contingent Warrants may be enforced by
the Warrant Agent without the possession of any of the Warrant Certificates or
the production thereof at any trial or other proceeding relative thereto, and
any such action, suit or proceeding instituted by the Warrant Agent shall be
brought in its name as Warrant Agent and any recovery of judgment shall be for
the ratable benefit of the Contingent Warrant holders, as their respective
rights or interests may appear.
(g) The Warrant Agent, and any stockholder, director, officer or
employee of it, may buy, sell or deal in any of the Contingent Warrants or other
securities of the Company or become pecuniarily interest in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Warrant Agent
under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent for the
Company, and its duties shall be determined solely by the provisions hereof (and
no implied duties shall be read into this Agreement against the Warrant Agent
beyond those duties expressly set forth herein). The Warrant Agent shall not be
liable for anything which it may do or refrain from doing in connection with
this Agreement, except for action or inaction resulting from its own gross
negligence or willful misconduct. The Warrant Agent shall have no liability for
the actions or omissions of the Company.
(i) The Warrant Agent shall not at any time be under any duty or
responsibility to any Contingent Warrant holder to make or cause to be made any
adjustment of the Exercise Rate with respect to a class of Junior Shares or
number of the Warrant Shares or other securities or property deliverable as
provided in this Agreement, or to determine whether any facts exist which may
require any of such adjustments, or with respect to the nature or extent of any
such adjustments, when made, or with respect to the method employed in making
the same. The Warrant Agent shall not be accountable with respect to the
validity or value or the kind or amount of any Warrant Shares or of any
securities or property which may at any time be issued or delivered upon the
exercise of any Contingent Warrant or with respect to whether any such Warrant
Shares or other securities will when issued be validly issued and fully paid and
nonassessable, and makes no representation with respect thereto.
-23-
<PAGE>
(j) The Warrant Agent shall not be deemed to have notice of any
matter unless actually known to an officer working in its corporate trust and
agency group, or unless written notice thereof is received in its corporate
trust and agency group.
SECTION 17. Merger, Consolidation, or Change of Name of Warrant
Agent. Any entity into which the Warrant Agent may be merged or with which it
may be consolidated, or any entity resulting from any merger or consolidation to
which the Warrant Agent shall be a party, or any entity succeeding to the
business of the Warrant Agent, shall be the successor to the Warrant Agent
hereunder without the execution or filing of any paper or any further act on the
part of any of the parties hereto, provided that such entity would be eligible
for appointment as a successor warrant agent under the provisions of Section 18
hereof. In case at the time such successor to the Warrant Agent shall succeed to
the agency created by this Agreement and any of the Certificated Warrants shall
have been countersigned but not delivered, any such successor to the Warrant
Agent may adopt the countersignature of the original Warrant Agent. If at that
time any of the Warrant Certificates shall not have been countersigned, any
successor to the Warrant Agent may countersign such Warrant Certificates either
in the name of the predecessor Warrant Agent or in the name of the successor to
the Warrant Agent. In either of the foregoing instances, such Warrant
Certificates shall have the full force and effect provided in the Warrant
Certificates and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed
and at such time any of the Certificated Warrants shall have been countersigned
but not delivered, the Warrant Agent whose name has been changed may adopt the
countersignature under its prior name, and in case at that time any of the
Warrant Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name. In either of the foregoing instances, such Warrant Certificates shall have
the full force and effect provided for in the Warrant Certificates and in this
Agreement.
The surviving Warrant Agent (if not the original Warrant Agent) or
the original Warrant Agent (in the event of a name change) shall, promptly cause
to be mailed (by first class mail, postage prepaid) to each then outstanding
Contingent Warrant holder at such holder's last address as shown on the register
of the Company maintained by the original Warrant Agent, notices of its
succession or name change, as the case may be.
SECTION 18. Resignation and Removal of Warrant Agent; Appointment of
Successor. No resignation or removal of the Warrant Agent and no appointment of
a successor warrant agent shall become effective until the acceptance of
appointment by the successor warrant agent as provided herein. The Warrant Agent
may assign its duties and be discharged from all further duties and liability
hereunder (except liability arising as a result of the Warrant Agent's own gross
negligence or willful misconduct) after giving written notice to the Company.
The Company may remove the Warrant Agent upon written notice, and the Warrant
Agent shall thereupon in like manner be discharged from all further duties and
liabilities hereunder, except as aforesaid. The Warrant Agent shall, at the
Company's expense, cause to be mailed (by first class mail, postage prepaid) to
each Contingent Warrant holder at his last address as shown on the register of
the Company maintained by the Warrant Agent, a copy of said notice of
resignation or notice of removal, as the case may be. Upon
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<PAGE>
such resignation or removal by the Company, the Company shall appoint in writing
a new warrant agent. If the Company shall fail to make such appointment within a
period of 60 days after it has been notified in writing of such resignation by
the resigning Warrant Agent or after such removal, then the Company shall become
Warrant Agent until a successor Warrant Agent has been appointed, and the holder
of any Contingent Warrant may apply to any court of competent jurisdiction for
the appointment of a new warrant agent. The provisions of Section 16 shall
survive only such resignation or removal for the protection of the Warrant Agent
so removed or resigned, to the extent applicable, with respect to its actions or
omissions prior to such resignation or removal.
Any new warrant agent, whether appointed by the Company, a court or
the holders of a majority of the then outstanding Warrants, shall (i) be a
corporation doing business under the laws of the United States, any state
thereof or the District of Columbia, (ii) be in good standing and (iii) have a
combined capital and surplus of not less than $50,000,000. The combined capital
and surplus of any such new warrant agent shall be deemed to be the combined
capital and surplus as set forth in the most recent annual report of its
condition published by such warrant agent prior to its appointment, provided
that such reports are published at least annually pursuant to law or to the
requirements of a federal or state supervising or examining authority. After
acceptance in writing of such appointment by the new warrant agent, it shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named herein as the Warrant Agent, without any further
assurance, conveyance, act or deed; but if for any reason it shall be necessary
or expedient to execute and deliver any further assurance, conveyance, act or
deed, the same shall be done at the expense of the Company and shall be legally
and validly executed and delivered by the resigning or removed Warrant Agent.
The former Warrant Agent shall deliver and transfer to the successor Warrant
Agent any property at the time held by it hereunder and execute and deliver any
further assurance, conveyance, act or deed necessary for that purpose. Not later
than the effective date of any such appointment, the Company shall give notice
thereof to the resigning or removed Warrant Agent. Failure to give any notice
provided for in this Section 18, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Warrant
Agent or the appointment of a new warrant agent, as the case may be.
SECTION 19. Notices to the Company and Warrant Agent. Any notice or
demand authorized by this Agreement to be given or made by the Warrant Agent or
by the any Contingent Warrant holder to the Company shall be sufficiently given
or made when deposited in the mail, first class or registered, postage prepaid,
addressed (until another address is filed in writing by the Company with the
Warrant Agent), as follows:
NEXTLINK Communications, Inc.
155 108th Avenue NE
Bellevue, Washington 98004
Attention: General Counsel
Any notice pursuant to this Agreement to be given by the Company or
by any Contingent Warrant holder to the Warrant Agent shall be sufficiently
given when deposited in
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<PAGE>
the mail, first-class or registered, postage prepaid, addressed (until another
address is filed in writing by the Warrant Agent with the Company) to the
Warrant Agent as follows:
Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
Attention: Compliance Department
SECTION 20. Supplements and Amendments. The Company and the Warrant
Agent may from time to time supplement or amend this Agreement without the
approval of any Contingent Warrant holders in order (i) to cure any ambiguity or
to correct or supplement any provision contained herein which may be defective
or inconsistent with any other provision herein, (ii) to modify the restrictions
on, and procedures for, resale and other transfers of the Contingent Warrants to
the extent required by any change in applicable law or regulation (or the
interpretation thereof) of the United States of America or in practices relating
to the resale or transfer of restricted securities (as defined in Rule 144)
generally, (iii) to add to or modify the certification requirements for
transfers of Certificated Warrants prior to the Resale Restriction Termination
Date in the event of the issuance of Certificated Warrants in exchange for
Global Warrants as provided herein, (iv) to make any other provisions in regard
to matters or questions arising hereunder which the Company and the Warrant
Agent may deem necessary or desirable or (v) to evidence the succession of
another Person to the Company and the assumption by such successor of this
Agreement as provided herein; provided that any such supplement or amendment
made pursuant to any of clauses (i) through (iv) above shall not in any way
adversely affect the rights of any Contingent Warrant holder. Any amendment or
supplement to this Agreement that has an adverse effect on the interests of
holders of Warrant Certificates shall require the written consent of registered
holders of two-thirds of the then outstanding Contingent Warrants. The consent
of each holder of a Contingent Warrant affected shall be required for any
amendment pursuant to which the Exercise Rate with respect to any class of
Junior Shares would be decreased or the Exercise Price with respect to any class
of Junior Shares would be increased (other than pursuant to the adjustments
provided herein).
SECTION 21. Reports. For so long as any Contingent Warrants remain
outstanding and not expired by their terms, the Company shall furnish to the
holders of the Contingent Warrants 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, the Company shall file
with the Warrant Agent within 15 days after it files them with the Commission
copies of its SEC Reports. In the event the Company shall cease to be required
to file SEC Reports pursuant to the Exchange Act, the Company shall nevertheless
continue to file such reports with the Commission (unless the Commission will
not accept such filings) and the Warrant Agent. The Company shall furnish copies
of the SEC Report to the holders of Contingent Warrants promptly after the
Company files the same with the Warrant Agent.
SECTION 22. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
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<PAGE>
SECTION 23. Termination. This Agreement shall terminate on the 30th
day after the Expiration Date. Notwithstanding the foregoing, this Agreement
will terminate on any earlier date if all Contingent Warrants have been
exercised. The provisions of Section 16 hereof shall survive any such
termination.
SECTION 24. Governing Law. This Agreement and each Warrant
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of New York and for all purposes shall be governed by and
construed in accordance with the laws of such State.
SECTION 25. Benefits of This Agreement. Nothing in this Agreement
shall be construed to give to any person or entity other than the Company, the
Warrant Agent and the holders of Warrant Certificates any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Warrant Agent (including its
successors in such capacity) and the holders of the Warrant Certificates.
SECTION 26. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but on and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
NEXTLINK COMMUNICATIONS, INC.
By: /s/ R. Bruce Easter, Jr.
------------------------------
Name: R. Bruce Easter, Jr.
Title: Vice President, General Counsel
and Secretary
CONTINENTAL STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
By:______________________________
Name:
Title:
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
NEXTLINK COMMUNICATIONS, INC.
By:______________________________
Name:
Title:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
By: /s/ William F. Seegraber
------------------------------
Name: William F. Seegraber
Title: Vice President
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<PAGE>
EXHIBIT A
Form of Contingent Warrant Certificate
[Face]
[If applicable, inset the following Securities Act legend-- THE SECURITIES
EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION AND SUBJECT TO COMPLIANCE WITH OTHER APPLICABLE LAWS.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE"), ONLY
(A) TO THE COMPANY; (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THESE SECURITIES
ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144, (E) PURSUANT TO
OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (F) IN THE CASE OF
EITHER ANY INITIAL INVESTOR THAT IS A QUALIFIED INSTITUTIONAL BUYER OR ANY
SUBSEQUENT INVESTOR, TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE
MEANING OF SUBPARAGRAPH (a)(1), (2), (3) or (7) OR RULE 501 UNDER THE SECURITIES
ACT PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (IF
AVAILABLE), AND OTHERWISE IN COMPLIANCE WITH OTHER APPLICABLE LAWS, SUBJECT TO
THE COMPANY'S AND THE WARRANT AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSE (C), (D), (E) OR (F) TO REQUIRE THE DELIVERY OF A
TRANSFER CERTIFICATE AND, IN THE CASE OF CLAUSE (F), AN OPINION OF COUNSEL OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THE LEGEND WILL BE REMOVED UPON
THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.]
UNTIL THE EARLIEST TO OCCUR OF: (I) AUGUST 1, 1997, (II) THE EFFECTIVE DATE OF
THE EXCHANGE OFFER REGISTRATION STATEMENT, OR (III) A CHANGE OF CONTROL, THE
CONTINGENT WARRANTS EVIDENCED HEREBY MAY NOT BE SOLD, ASSIGNED OR OTHERWISE
TRANSFERRED TO ANY PERSON UNLESS, FOR EACH TRANSFER OF A CONTINGENT WARRANT,
SIMULTANEOUSLY WITH SUCH TRANSFER, THE HOLDER HEREOF TRANSFERS TO THE SAME
TRANSFEREE ONE SHARE OF 14% SENIOR EXCHANGEABLE REDEEMABLE PREFERRED SHARES OF
NEXTLINK COMMUNICATIONS, INC.
A-1
<PAGE>
[IF THE WARRANT CERTIFICATE IS TO BE A GLOBAL WARRANT INSERT--This Warrant
Certificate is a Global Warrant Certificate within the meaning of the Warrant
Agreement hereinafter referred to and is registered in the name of The
Depository Trust Company (the "Depository") or a nominee of the Depository. This
Warrant Certificate is exchangeable for Warrant Certificates registered in the
name of a person other than the Depository or its nominee only in the limited
circumstances described in the Warrant Agreement and no transfer of this Warrant
Certificate (other than a transfer of this Warrant Certificate as a whole by the
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository) may be registered except in
limited circumstances.
Unless this Warrant Certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York) to
NEXTLINK Communications, Inc. or its agent for registration of transfer,
exchange or payment, and any issued is registered in the name of Cede & Co. or
such other name as requested by an authorized representative of The Depository
Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL inasmuch as
the registered owner hereof, Cede & Co., has an interest herein. ]
No. ___ ___ Contingent Warrants
Contingent Warrant Certificate
NEXTLINK COMMUNICATIONS, INC.
This Warrant Certificate certifies that ____________________________
____________________________________________________________________________, or
registered assigns, is the registered holder of ______________ Contingent
Warrants (the "Contingent Warrants") expiring 5:00 P.M., New York City Time, on
February 1, 2009 or, if a Qualifying Event has occurred on or prior to February
1, 1998, the date of such Qualifying Event (the "Expiration Date"). Each
Contingent Warrant entitles the holder upon exercise to purchase from NEXTLINK
Communications Inc., a Washington corporation (the "Company"), on any Business
Day after February 1, 1998 if a Qualifying Event has not occurred on or prior to
February 1, 1998 and prior to the Expiration Date a number of fully paid and
nonassessable shares of each class of Junior Shares outstanding as of February
1, 1998 equal to 1/5,700,000 of the aggregate Contingent Warrant Shares Amount
("Warrant Shares") upon surrender of this Warrant Certificate and payment in
full of the Exercise Price of $.01 for each Warrant Share purchased (subject to
adjustment) at the office or agency of the Warrant Agent, subject to the
conditions set forth herein and in the Warrant Agreement referred to on the
reverse hereof. The number of Warrants Shares purchasable upon exercise hereof
and the Exercise Price are subject to adjustment upon the occurrence of certain
events set forth in the Warrant Agreement.
No Warrant may be exercised after the Expiration Date, and to the
extent not exercised by such time, such Warrants shall become void.
A-2
<PAGE>
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof, which provisions shall for all
purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by
of the Warrant Agent, as such term is used in the Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed.
Dated:
NEXTLINK COMMUNICATIONS, INC.
By: _______________________________
Attest:
__________________________________
Warrant Agent's Countersignature
Countersigned
Continental Stock Transfer & Trust Company,
Warrant Agent
By: ___________________________________
Authorized Officer
A-3
<PAGE>
[Reverse]
The Contingent Warrants evidenced by this Warrant Certificate are
part of a duly authorized issue of Contingent Warrants issued and to be issued
pursuant to a Warrant Agreement, dated as of January 31, 1997 (the "Warrant
Agreement"), between the Company and Continental Stock Transfer & Trust Company,
as warrant agent (herein called the "Warrant Agent", which term includes any
successor warrant agent under the Warrant Agreement), which Warrant Agreement is
hereby incorporated by reference in and made a part of this instrument and is
hereby referred to for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Warrant Agent, the Company
and the holders (the words "holders" or "holder" meaning the registered holders
or registered holder) of the Contingent Warrants. All terms not otherwise
defined herein shall have the meanings set forth in the Warrant Agreement. A
copy of the Warrant Agreement may be obtained by the holder hereof upon written
request to the Company.
Contingent Warrants may be exercised at any time on any business day
after February 1, 1998 if a Qualifying Event has not occurred on or prior to
February 1, 1998 and prior to the Expiration Date. The holder of Contingent
Warrants evidenced by this Warrant Certificate may exercise such Contingent
Warrants by (i) surrendering this Warrant Certificate, with the form of Election
to Exercise set forth hereon duly completed and executed and (ii) to the extent
such exercise is not being effected through a Cashless Exercise, by paying in
full the Exercise Price for each such Contingent Warrant exercised and any other
amounts required to be paid pursuant to the Warrant Agreement.
No adjustment shall be made for any dividends on any Junior Shares
issuable upon exercise of this Contingent Warrant. The Company will not be
required to issue fractional Warrant Shares on the exercise of Contingent
Warrants, although it may do so in its sole discretion. If fractional shares are
not issued, the Company will pay the cash value of such fractional shares as
determined in accordance with the provisions of the Warrant Agreement.
In the event that upon any exercise of Contingent Warrants evidenced
hereby the number of Contingent Warrants exercised shall be less than the total
number of Contingent Warrants evidenced hereby, there shall be issued to the
holder hereof or his assignee a new Warrant Certificate evidencing the number of
Contingent Warrants not exercised.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Rate with respect to a class of Junior Shares and the
corresponding Exercise Price may, subject to certain conditions, be adjusted.
Warrant Certificates, when surrendered at any office or agency
maintained by the Company for that purpose by the registered holder thereof in
person or by legal representative or attorney duly authorized in writing, may be
exchanged for a new Warrant Certificate or new Warrant Certificates evidencing
in the aggregate a like number of Contingent Warrants, in the manner and subject
to the limitations provided in the Warrant Agreement, without charge except for
any tax or other governmental charge imposed in connection therewith.
A-4
<PAGE>
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent, a new Warrant Certificate or
Warrant Certificates evidencing in the aggregate a like number of Contingent
Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary.
Neither the Contingent Warrants nor this Warrant Certificate
entitles any holder hereof to any rights of a shareholder of the Company.
This Warrant Certificate shall be governed and construed in
accordance with the laws of the State of New York.
A-5
<PAGE>
Form of Election to Exercise
(To Be Executed Upon Exercise of Contingent Warrant)
The undersigned hereby irrevocably elects to exercise ____ of the
Contingent Warrants represented by this Warrant Certificate and purchase the
number of Warrant Shares issuable upon the exercise of such Contingent Warrants
and herewith tenders payment for such Warrant Shares as follows:
(Check One)
[ ] $__________ in cash or by certified or official bank check; or
[ ] by surrender of Contingent Warrants pursuant to a Cashless Exercise (as
defined in the Warrant Agreement) at the current Cashless Exercise Ratio.
The undersigned requests that a certificate representing such
Warrant Shares be registered in
the name of __________________________________________________________
whose address is _______________________________________________________________
and that such Warrant Shares be delivered to ___________________________________
whose address is ______________________________________________________________.
Any cash payments to be paid in lieu of a fractional Warrant Share
should be
made to ________________________________________________________________________
whose address is _______________________________________________________________
and the check representing payment thereof should be delivered to ______________
whose address is ______________________________________________________________.
Dated _____________________, ____
Name of holder of
Warrant Certificate: ___________________________
(Please Print)
Tax Identification or
Social Security Number: ________________________________________________________
Address: _____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
Signature: _____________________________________________________________________
Note: The above signature must correspond with the name as written upon the face
of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever and if the certificate representing the
Warrant Shares or any Warrant Certificate representing Contingent Warrants
not exercised is to be registered in a name other than that in which this
Warrant Certificate is registered or if any cash payment to be paid in
lieu of a fractional Warrant Share is to be made to a
A-6
<PAGE>
person other than the registered holder of this Warrant Certificate, the
signature of the holder hereof must be guaranteed as provided in the
Warrant Agreement.
Signature Guaranteed: ______________________________
[FORM OF ASSIGNMENT]
For value received _______________________________________ hereby
sells, assigns and transfers unto _______________________________________ the
within Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint
_______________________________________ attorney, to transfer said Warrant
Certificate on the books of the within-named Company, with full power of
substitution in the premises.
Dated ________________, _____
Signature: ___________________________________________
Note: The above signature must correspond with the name as written upon the face
of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
Signature Guaranteed: _________________________________
A-7
<PAGE>
EXHIBIT B
Form of Certificate for Transfers of Certificated Warrants
Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
Attention: Compliance Department
Re: Contingent Warrants of NEXTLINK Communications, Inc.
(the "Warrants")
Reference is made to the Warrant Agreement, dated as of January 31,
1997 (the "Warrant Agreement"), between NEXTLINK Communications, Inc. (the
"Company") and Continental Stock Transfer & Trust Company, as Warrant Agent.
Terms used herein and defined in the Warrant Agreement or in Regulation S, Rule
144A or Rule 144 under the Securities Act of 1933 (the "Securities Act") are
used herein as so defined.
This certificate relates to _______ Contingent Warrants, which are
evidenced by the following certificate(s) (the "Specified Warrants"):
CUSIP No. _______________________________
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Warrants or (ii) it is acting on behalf of all the beneficial owners
of the Specified Warrants and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
The Specified Warrants are registered in the name of the Undersigned, as or on
behalf of the Owner.
The Owner has requested that the Specified Warrants be transferred
to a person (the "Transferee") who will take delivery in the form of an interest
in the Global Warrant. In connection with such transfer, the Owner hereby
certifies that such transfer is being effected in accordance with (a) either:
(Check one)
|_| Rule 144A,
|_| Rule 904, or
|_| Rule 144
under the Securities Act and (b) all applicable securities laws of the states of
the United States and other jurisdictions. Accordingly, the Owner hereby further
certifies as follows with respect to the type of transfer indicated herein:
(1) Rule 144A Transfers. If the transfer is being effected in
accordance with Rule 144A:
B-1
<PAGE>
(A) the Specified Warrants are being transferred to a person
that the Owner and any person acting on its behalf reasonably
believe is a "qualified institutional buyer" within the meaning of
Rule 144A, acquiring for its own account or for the account of a
qualified institutional buyer; and
(B) the Owner and any person acting on its behalf have taken
reasonable steps to ensure that the Transferee is aware that the
Owner may be relying on Rule 144A in connection with the transfer;
and
(2) Rule 904 Transfers. If the transfer is being effected in
accordance with Rule 904:
(A) the Owner is not a distributor of the Securities, an
affiliate of the Company or any such distributor or a person acting
on behalf of any of the foregoing;
(B) the offer of the Specified Warrants was not made to a
person in the United States;
(C) either;
(i) at the time the buy order was originated, the
Transferee was outside the United States or the Owner and any
person acting on its behalf reasonably believed that the
Transferee was outside the United States, or
(ii) the transaction is being executed in, on or through
the facilities of the Eurobond market, as regulated by the
Association of International Bond Dealers, or another
designated offshore securities market and neither the Owner
nor any person acting on its behalf knows that the transaction
has been prearranged with a buyer in the United States;
(D) no directed selling efforts have been made in the United
States by or on behalf of the Owner or any affiliate thereof; and
(E) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act.
(3) Rule 144 Transfers. If the transfer is being effected pursuant
to Rule 144:
(A) the transfer is occurring after a holding period of at
least two years (computed in accordance with paragraph (d) of Rule
144) has elapsed since the date the Specified Warrants were acquired
from the Company or from an affiliate (as such term is defined in
Rule 144) of the Company, whichever is later, and is being effected
in accordance with the applicable amount, manner of sale and notice
requirements of paragraphs (e), (f) and (h) of Rule 144; or
(B) the transfer is occurring after a holding period of at
least three years has elapsed since the date the Specified Warrants
were acquired from the Company or from an affiliate (as such term is
defined in Rule 144) of the Company, whichever is later, and the
B-2
<PAGE>
Owner is not, and during the preceding three months has not been, an
affiliate of the Company.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company, the Warrant Agent and the Initial
Purchasers.
Dated: ___________, ____ __________________________________________________
(Print the name of the Undersigned, as such term
is defined in the second paragraph of this
certificate.)
By:_______________________________________________
Name:
Title:
(If the Undersigned is a corporation, partnership
or fiduciary, the title of the person signing on
behalf of the Undersigned must be stated.)
B-3
<PAGE>
EXHIBIT 10.4
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of January 15, 1997,
is between NEXTLINK COMMUNICATIONS, INC., a Washington corporation (the
"Company") and the parties that are signatories to this Agreement that are
holders of Class B Common Stock of the Company or of options to purchase Class B
Common Stock (the "Holders").
WHEREAS, the Holders have made capital contributions to NEXTLINK
Communications, L.L.C., a Washington limited liability company ("LLC"), the
predecessor in interest to the Company, and currently own all of the issued and
outstanding shares of Class B common stock, $.01 par value, of the Company, or
options to purchase the Class B Common stock, (the "Class B Common Stock"); and
WHEREAS, in connection with the incorporation of the Company, the
Company wishes to grant to the Holders certain registration rights with respect
to the shares of Class A common stock, par value $.01 per share of the Company
(the "Class A Common Stock") for which the shares of Class B Common Stock are
convertible that the Holders currently own or may acquire in the future, as
provided further herein.
NOW THEREFORE, in consideration of the capital contributions made by
the Holders to LLC and of the promises herein contained, the parties hereto
agree as follows:
1. DEFINITIONS.
As used in this Agreement:
(i) the terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Act (and any post-effective amendments filed or required to
be filed) and the declaration or ordering of effectiveness of such registration
statement;
(ii) the term "Registrable Securities" means (A) all shares of Class
A Common Stock owned by the Holders as of the date hereof, (B) any shares of
Class A Common Stock acquired by the Holders through conversion of Class B
Common Stock or otherwise and (C) any capital stock of the Company issued as a
dividend or other distribution with respect to, or in exchange for or in
replacement of, the shares of Class A Common Stock referred to in clause (A) or
(B) above;
<PAGE>
(iii) the term "Holder" shall mean solely those parties that are a
signatory to this Agreement;
(iv) the term "Initiating Holders" shall mean any Holder or Holders
who in the aggregate are Holders of more than 4% of the then outstanding
Registrable Securities;
(v) "Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Act;
(vi) "Qualifying IPO" shall mean a public offering of Class A Common
Stock of the Company that results in net proceeds to the Company of not less
than Seventy Five Million Dollars ($75,000,000) or such lesser amount as the
Directors of the Company may, in their discretion, determine to be adequate to
commence the rights of the Holders hereunder;
(vii) "Registration Expenses" shall mean all third-party expenses
incurred by the Company in compliance with Sections 2 and 3 hereof, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Company and the underwriters, if any, blue
sky fees and expenses and the third-party expenses of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company, which shall be paid in any event by the
Company);
(viii) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for each of the Holders;
(ix) "Act" shall mean the Securities Act of 1933, as amended; and
(x) "Exchange Act" shall mean the Securities Exchange Act of 1934.
2. REQUESTED REGISTRATION.
(i) REQUEST FOR REGISTRATION. If the Company shall receive from an
Initiating Holder, at any time after a Qualifying IPO, a written request that
the Company effect any registration with respect to all or a part of the
Registrable Securities, the Company will:
(A) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(B) as soon as practicable, use its diligent best efforts to
effect such registration (including, without limitation, the execution of
an undertaking to file post-effective amendments, appropriate qualification
under applicable blue sky or other
2
<PAGE>
state securities laws and appropriate compliance with applicable
regulations issued under the Act) as may be so requested and as would
permit or facilitate the sale and distribution as soon as is
practicable of all or such portion of such Registrable Securities as
are specified in such request, together with all or such portion of
the Registrable Securities of any Holder or Holders joining in such
request as are specified in a written request received by the Company
within twenty (20) business days after written notice from the Company
is given under Section 2(i)(A) above; PROVIDED that the Company shall
not be obligated to effect, or take any action to effect, any such
registration pursuant to this Section 2:
(a) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in
effecting such registration, qualification or compliance, unless the
Company is already subject to service in such jurisdiction and except
as may be required by the Act or applicable rules or regulations
thereunder;
(b) After the Company has effected a total of two (2) such
registrations pursuant to this Section 2 and such registrations have
been declared or ordered effective and the sales of such Registrable
Securities shall have closed; or
(c) If the Registrable Securities requested by all Holders to be
registered pursuant to such request do not have an anticipated
aggregate public offering price (before any underwriting discounts and
commissions) of not less than $10,000,000.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Section 2(ii) below,
include other securities of the Company which are held by officers or directors
of the Company, or which are held by persons who, by virtue of agreements with
the Company, are entitled to include their securities in any such registration,
but the Company shall have no absolute right to include any of its securities in
any such registration.
The registration rights set forth in this Section 2 are personal to
the Holders and shall not be assignable, by operation of law or otherwise.
(ii) UNDERWRITING. If the Initiating Holders intend to distribute
the Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
Section 2.
If officers or directors of the Company holding other securities of
the Company shall request inclusion in any registration pursuant to Section 2,
or if holders of securities of the Company other than Registrable Securities who
are entitled, by contract with the Company
3
<PAGE>
or otherwise, to have securities included in such a registration (the "Other
Stockholders") request such inclusion, the Holders shall offer to include the
securities of such officers, directors and Other Stockholders in the
underwriting and may condition such offer on their acceptance of the further
applicable provisions of this Section 2. The Holders whose shares are to be
included in such registration and the Company shall (together with all officers,
directors and Other Stockholders proposing to distribute their securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected for
such underwriting by the Initiating Holders and reasonably acceptable to the
Company. Notwithstanding any other provision of this Section 2, if the
representative advises the Holders that marketing factors require a limitation
on the number of shares to be underwritten, the securities of the Company held
by officers or directors of the Company and the securities held by Other
Stockholders shall be excluded from such registration to the extent so required
by such limitation. If, after the exclusion of such shares, further reductions
are still required, the number of shares included in the registration by each
Holder shall be reduced on a pro rata basis (based on the number of shares
proposed to be sold by such Holder), by such minimum number of shares as is
necessary to comply with such request. No Registrable Securities or any other
securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration. If any officer,
director or Other Stockholder who has requested inclusion in such registration
as provided above disapproves of the terms of the underwriting, such person may
elect to withdraw therefrom by written notice to the Company, the underwriter
and the Initiating Holders. The securities so withdrawn shall also be withdrawn
from registration. If the underwriter has not limited the number of Registrable
Securities or other securities to be underwritten, the Company may include its
securities for its own account in such registration if the representative so
agrees and if the number of Registrable Securities and other securities which
would otherwise have been included in such registration and underwriting will
not thereby be limited.
(iii) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting the filing of a registration statement pursuant to Section
2(i), a certificate signed by the President or Chief Executive Officer of the
Company stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such registration statement to be filed and it is therefore essential to
defer the filing of such registration statement, then the Company shall have the
right to defer such filing for a period of not more than 120 days after receipt
of the request of the Initiating Holders; PROVIDED, HOWEVER, that the Company
may not utilize this right more than once in any twelve (12) month period.
3. COMPANY REGISTRATION.
(i) If, at any time after a Qualifying IPO, the Company shall
determine to register any of its equity securities either for its own account or
for the account of a security
4
<PAGE>
holder or holders exercising their respective demand registration rights, other
than a registration relating solely to employee benefit plans, or a registration
relating solely to a Commission Rule 145 transaction, or a registration on any
registration form which does not permit secondary sales or does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Registrable Securities, the Company
will:
(A) promptly give to each of the Holders a written notice thereof
(which shall include a list of the jurisdictions in which the Company
intends to attempt to qualify such securities under the applicable blue sky
or other state securities laws); and
(B) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made by the Holders within twenty (20) days after receipt of the
written notice from the Company described in clause (i) above, except as
set forth in Section 3(ii) below. Such written request may specify all or
a part of the Holders' Registrable Securities.
(ii) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise each of the Holders as a part of the written notice
given pursuant to Section 3(i)(A). In such event, the right of each of the
Holders to registration pursuant to this Section 3 shall be conditioned upon
such Holders' participation in such underwriting and the inclusion of such
Holders' Registrable Securities in the underwriting to the extent provided
herein. The Holders whose shares are to be included in such registration shall
(together with the Company and the Other Stockholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the representative of the underwriter or underwriters
selected for underwriting by the Company. Notwithstanding any other provision
of this Section 3, if the representative determines that marketing factors
require a limitation on the number of shares to be underwritten, the
representative may (subject to the allocation priority set forth below) limit
the number of Registrable Securities to be included in the registration and
underwriting. The Company shall so advise all holders of securities requesting
registration, and the number of shares of securities that are entitled to be
included in the registration and underwriting shall be allocated in the
following manner: The securities of the Company held by officers, directors and
Other Stockholders of the Company (other than securities held by holders who by
contractual right initiated the demand for such registration ("Demanding
Holders")) shall be excluded from such registration and underwriting to the
extent required by such limitation, and, if a limitation on the number of shares
is still required, the number of shares that may be included in the registration
and underwriting by each of the Holders and Demanding Holders shall be reduced,
on a pro rata basis (based on the number of shares proposed to be sold by such
Holder or Demanding Holder), by such minimum number of shares as is necessary to
comply with such limitation. If any of the Holders or Demanding Holders
5
<PAGE>
or any officer, director or Other Stockholder disapproves of the terms of any
such underwriting, he may elect to withdraw therefrom by written notice to the
Company and the underwriter. Any Registrable Securities or other securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration.
(iii) NUMBER AND TRANSFERABILITY. Each of the Holders shall be
entitled to have its shares included in an unlimited number of registrations
pursuant to this Section 3. The registration rights granted pursuant to this
Section 3 are personal to the Holders and shall not be assignable, by operation
of law or otherwise.
4. EXPENSES OF REGISTRATION. All Registration Expenses and Selling
Expenses incurred in connection with any registration, qualification or
compliance pursuant to Section 2 of this Agreement shall be borne by the holders
of the securities so registered pro rata on the basis of the number of shares so
registered. Without limiting the generality of the foregoing, in the event the
Company includes shares in any registration, qualification or compliance
pursuant to Section 2 of this Agreement, the Company shall pay the Registration
Expenses in proportion to the Company's share of the total number of shares
included in such registration. All Registration Expenses incurred in connection
with any registration, qualification or compliance pursuant to Section 3 of this
Agreement shall be borne by the Company (or the Demanding Holders if so provided
in the applicable contract), and all Selling Expenses incurred in connection
with any such registration, qualification or compliance shall be borne by the
Holders of securities so registered pro rata on the basis of the number of
shares so registered.
5. REGISTRATION PROCEDURES. In the case of each registration
effected by the Company pursuant to this Agreement, the Company will keep the
Holders, as applicable, advised in writing as to the initiation of each
registration and as to the completion thereof. The Company will:
(i) Keep such registration effective for a period of one hundred
eighty (180) days or until the Holders, as applicable, have completed the
distribution described in the registration statement relating thereto,
whichever first occurs; provided, however, that (A) such 180-day period
shall be extended for a period of time equal to the period during which the
Holders, as applicable, refrain from selling any securities included in
such registration in accordance with provisions in Section 9 hereof; and
(B) in the case of any registration of Registrable Securities on Form S-3
which are intended to be offered on a continuous or delayed basis, such
180-day period shall be extended until all such Registrable Securities are
sold, provided that Rule 415, or any successor rule under the Act, permits
an offering on a continuous or delayed basis, and provided further that
applicable rules under the Act governing the obligation to file a
post-effective amendment permit, in lieu of filing a post-effective
amendment which (1) includes any prospectus required by Section 10(a) of
the Act or (2) reflects facts or
6
<PAGE>
events representing a material or fundamental change in the
information set forth in the registration statement, the incorporation
by reference of information required to be included in (1) and (2)
above to be contained in periodic reports filed pursuant to Section 12
or 15(d) of the Exchange Act in the registration statement.
(ii) Furnish such number of prospectuses and other documents
incident thereto as each of the Holders, as applicable, from time to time
may reasonably request; PROVIDED, HOWEVER, that the Holders, pro rata on
the basis of the number of their shares so included in such registration,
reimburse the Company for expenses incurred in performing its obligations
under this Section 5.
(iii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement.
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue
Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(v) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each
Holder participating in such underwriting shall also enter into and perform
its obligations under such an agreement.
(vii) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Agreement, on the
date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Agreement, if such
securities are being sold through underwriters, or, if such securities are
not being sold through underwriters, on the date that the registration
statement with respect to such securities becomes effective, (A) an
opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily
given to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders requesting registration of
Registrable Securities and (B) a letter dated such date, from the
independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public
accountants to underwriters in
7
<PAGE>
an underwritten public offering, addressed to the underwriters, if
any, and to the Holders requesting registration of Registrable
Securities.
6. INDEMNIFICATION.
(i) The Company will indemnify each of the Holders, as applicable,
each of its officers, directors and partners, and each person controlling each
of the Holders, with respect to each registration which has been effected
pursuant to this Agreement, and each underwriter, if any, and each person who
controls any underwriter, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Act or any rule or regulation thereunder applicable to the Company and relating
to action or inaction required of the Company in connection with any such
registration, qualification or compliance, and will reimburse each of the
Holders, each of its officers, directors and partners, and each person
controlling each of the Holders, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Company by the Holders or underwriter and stated to
be specifically for use therein.
(ii) Each of the Holders will, if Registrable Securities held by it
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company or such
underwriter within the meaning of the Act and the rules and regulations
thereunder, each Other Stockholder and each of their officers, directors, and
partners, and each person controlling such Other Stockholder against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document made by such Holder, or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements by such Holder therein not misleading, and will reimburse the
Company and such Other Stockholders, directors, officers, partners, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or
8
<PAGE>
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder and
stated to be specifically for use therein; provided, however, that the
obligations of each of the Holders hereunder shall be limited to an amount equal
to the net proceeds to such Holder of securities sold as contemplated herein.
(iii) Each party entitled to indemnification under this Section 6
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld) and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnified Party shall have
reasonably concluded that there may be a conflict of interest between the
Indemnifying Party and the Indemnified Party in such action, in which case the
fees and expenses of counsel shall be at the expense of the Indemnifying Party),
and provided further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 6 unless the Indemnifying Party is materially prejudiced
thereby. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with the defense of
such claim and litigation resulting therefrom.
(iv) If the indemnification provided for in this Section 6 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to herein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions which resulted in such loss, liability, claim,
damage or expense, as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
9
<PAGE>
(v) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with any underwritten public offering contemplated by
this Agreement are in conflict with the foregoing provisions, the provisions in
such underwriting agreement shall be controlling.
(vi) The foregoing indemnity agreement of the Company and Holders is
subject to the condition that, insofar as they relate to any loss, claim,
liability or damage made in a preliminary prospectus but eliminated or remedied
in the amended prospectus on file with the Commission at the time the
registration statement in question becomes effective or the amended prospectus
filed with the Commission pursuant to Commission Rule 424(b) (the "Final
Prospectus"), such indemnity agreement shall not inure to the benefit of any
underwriter if a copy of the Final Prospectus was furnished to the underwriter
and was not furnished to the person asserting the loss, liability, claim or
damage at or prior to the time such action is required by the Act.
7. INFORMATION BY THE HOLDERS. Each of the Holders and each Other
Stockholder holding securities included in any registration, shall furnish to
the Company such information regarding such Holder or Other Stockholder and the
distribution proposed by such Holder or Other Stockholder as the Company may
reasonably request in writing and as shall be reasonably required in connection
with any registration, qualification or compliance referred to in this
Agreement.
8. RULE 144 REPORTING.
With a view to making available the benefits of certain rules and
regulations of the Commission which may permit the sale of restricted securities
to the public without registration, the Company agrees to:
(i) make and keep public information available as those terms
are understood and defined in Rule 144, at all times from and after ninety
(90) days following the effective date of the first registration under the
Act filed by the Company for an offering of its securities to the general
public;
(ii) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under
the Act and the Exchange Act at any time after it has become subject to
such reporting requirements; and
(iii) so long as the Holder owns any Registrable Securities,
furnish to the Holder upon request, a written statement by the Company as
to its compliance with the reporting requirements of Rule 144 (at any time
from and after ninety (90) days
10
<PAGE>
following the effective date of the first registration statement filed
by the Company for an offering of its securities to the general
public), and of the Act and the Exchange Act (at any time after it has
become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other
reports and documents so filed as the Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing
the Holder to sell any such securities without registration.
9. "MARKET STAND-OFF" AGREEMENT. Each Holder agrees, if requested by
the Company and an underwriter of Common Stock (or other securities) of the
Company, not to sell or otherwise transfer or dispose of any Class A Common
Stock (or other securities) of the Company held by such Holder during the 180
day period following the effective date of the initial registration statement of
the Company relating to any such securities filed under the Act and during the
90 day period following any subsequent registration statement filed under the
Act.
If requested by the underwriters, the Holders shall execute a separate
agreement to the foregoing effect. The Company may impose stop-transfer
instructions with respect to the shares (or securities) subject to the foregoing
restriction until the end of such period.
10. TERMINATION. The registration rights set forth in this Agreement
shall not be available to any Holder if, in the opinion of counsel to the
Company, all of the Registrable Securities then owned by such Holder could be
sold in any 90-day period pursuant to Rule 144 under the Act (without giving
effect to the provisions of Rule 144(k)). In addition, the registration rights
set forth in this Agreement shall terminate upon the transfer or assignment of
the Registrable Securities or the Class B Stock that is convertible to the Class
A Stock.
11. NOTICES. All communications provided for hereunder shall be sent
by first-class mail or facsimile and (a) if addressed to a Holder, addressed to
the Holder at the address or fax number contained on Schedule A to this
Agreement, or at such other address or fax number as such party shall have
furnished to the Company in writing or (b) if addressed to the Company, at 155
108th Avenue NE, 8th Floor, Bellevue, Washington 98004, Attention: General
Counsel, or fax number (206) 519-8910 or at such other address or fax number, or
to the attention of such other officer, as the Company shall have furnished to
each Holder of Registrable Securities at the time outstanding. Notices sent by
first-class mail shall be deemed received three days after the date of deposit
of such notice in the United States mail. Notices sent by facsimile shall be
deemed received upon receipt by the notified party's facsimile machine.
12. NO ASSIGNMENT. This Agreement is personal to the Holders and
shall not be assignable, by operation of law or otherwise.
11
<PAGE>
13. DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
14. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Washington.
15. COUNTERPARTS. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original, but all
such counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
EAGLE RIVER INVESTMENTS, L.L.C.
By: /s/ C. James Judson
----------------------------------
Name: C. James Judson
---------------------------
Title: Manager
---------------------------
NEXTLINK, INC.
By: /s/ R. Bruce Easter, Jr.
----------------------------------
Name: R. Bruce Easter, Jr.
----------------------------
Title: Vice President
----------------------------
BWP, INC.
By: /s/ Doug Bean
----------------------------------
Name: Doug Bean
----------------------------
Title: President
----------------------------
ROWENA FAMILY LIMITED LIABILITY COMPANY
By: /s/ Scot B. Jarvis
----------------------------------
Name: Scot B. Jarvis
----------------------------
Title: Member
----------------------------
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<PAGE>
PENNS LIGHT COMMUNICATIONS, INC.
By: /s/ Gary A. Rawding
----------------------------------
Name: Gary A. Rawding
----------------------------
Title: President & CEO
----------------------------
PROBE VENTURES CORP.
By: /s/ Victor Schnee
----------------------------------
Name: Victor Schnee
----------------------------
Title: President
----------------------------
CITY SIGNAL, INC.
By: /s/ R. Postma
----------------------------------
Name: R. Postma
----------------------------
Title: Secretary & General Counsel
-----------------------------
U.S. NETWORK CORPORATION
By:
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Name:
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Title:
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G. ANDREW BARFUSS
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J. MERRILL BEAN
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JOAN BEAN
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NEXTLINK COMMUNICATIONS, INC.
By: /s/ R. Bruce Easter, Jr.
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Name: R. Bruce Easter, Jr.
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Title: Vice President
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/s/ Scot B. Jarvis
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SCOT JARVIS
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SCHEDULE A
HOLDERS' ADDRESSES FOR NOTICES
EAGLE RIVER INVESTMENTS, L.L.C.
c/o C. James Judson
2300 Carillon Point
Kirkland, WA 98033
Fax: (206)828-8060
NEXTLINK, INC.
c/o R. Bruce Easter, Jr.
155 108th Avenue N.E., Suite 810
Bellevue, WA 98004
Fax: (206)519-8910
BWP, INC.
c/o Robert Kingery
700 S.W. Washington, 8th Floor
Portland, OR 97205
Fax: (503)727-6821
ROWENA FAMILY LIMITED LIABILITY COMPANY
c/o Scot Jarvis
4153 Issaquah Pine Lake Road
Issaquah, WA 98029
Fax: (206)392-9944
PENNS LIGHT COMMUNICATIONS, INC.
c/o Gary Rawding
925 Berkshire Blvd.
Wyomissing, PA 91610
Fax: (610)288-5666
PROBE VENTURES CORP.
c/o Victor Schnee
Three Wing Drive, Suite 240
Cedar Knolls, NJ 07927-1000
Fax: (201)285-1519
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CITY SIGNAL, INC.
c/o Richard Postma
Miller, Johnson, Snell & Cummiskey
800 Calder Plaza Building
Grand Rapids, MI 49503
Fax: (616)459-6708
U.S. NETWORK CORPORATION
c/o Ron Gavillet
10 South Riverside Plaza, Suite 401
Chicago, IL 60606-3709
Fax: (312)906-3636
G. ANDREW BARFUSS
1499 North Cherry Blossom Drive
Farmington, UT 84025-3900
Fax: (801)451-9708
J. MERRILL BEAN
1972 North 2600 East
Layton, UT 84040
Fax: (801)451-9708
JOAN BEAN
1972 North 2600 East
Layton, UT 84040
Fax: (801)451-9708
SCOT JARVIS
4153 Issaquah Pine Lake Road
Issaquah, Washington 98029
Fax: (206) 392-9944
16
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Exhibit 10.5
PREFERRED EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
PREFERRED EXCHANGE AND REGISTRATION RIGHTS AGREEMENT, dated as of January
31, 1997, by and between NEXTLINK Communications, Inc., a corporation organized
under the laws of the State of Washington (the "Company"), and Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Toronto Dominion Securities (USA) Inc.
(collectively, the "Initial Purchasers") of the Company's 14% Senior
Exchangeable Redeemable Preferred Shares ("Preferred Shares").
1. CERTAIN DEFINITIONS.
For purposes of this Agreement, the following terms shall have the following
respective meanings:
(a) "CERTIFICATE OF DESIGNATIONS" means the Certificate of Designation
of the Powers, Preferences and Relative, Participating, Optional and Other
Special Rights of the Preferred Shares and Qualifications, Limitations and
Restrictions Thereof.
(b) "CLOSING DATE" shall mean the date on which the Preferred Shares are
initially issued.
(c) "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.
(d) "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.
(e) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934.
(f) "EXCHANGE OFFER" shall have the meaning assigned thereto in Section
2(a).
(g) "EXCHANGE SECURITIES" shall have the meaning assigned thereto in
Section 2(a).
(h) The term "HOLDER" shall mean each of the Initial 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.
(i) "INDENTURE" shall mean the Indenture, relating to the Notes to be
entered into between the Company and United States Trust Company of New York, as
Trustee.
(j) "NOTES" means the Company's 14% Senior Subordinated Notes due
February 1, 2009, that may be issued at the election of the Company in exchange
for the Preferred Shares.
(k) The term "PERSON" shall mean a corporation, association,
partnership, organization, business, individual, government or political
subdivision thereof or governmental agency.
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(l) "PURCHASE AGREEMENT" shall mean the Purchase Agreement dated
January 21, 1997 among the Company, NEXTLINK Communications, L.L.C. and the
Initial Purchasers.
(m) "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 Company 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.
(n) "REGISTRATION DEFAULT" shall have the meaning assigned thereto in
Section 2(c) hereof.
(o) "REGISTRATION EXPENSES" shall have the meaning assigned thereto in
Section 4 hereof.
(p) "RESTRICTED HOLDER" shall mean (i) a holder that is an affiliate of
the Company 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.
(q) "RULE 144", "RULE 405" AND "RULE 415" shall mean, in each case, such
rule promulgated under the Securities Act.
(r) "SECURITIES" shall mean, collectively, the Preferred Shares and the
Notes.
(s) "SECURITIES ACT" shall mean the Securities Act of 1933.
(t) "SHELF REGISTRATION" shall have the meaning assigned thereto in
Section 2(b) hereof.
(u) "SPECIAL DIVIDENDS" shall have the meaning assigned thereto in
Section 2(c) hereof.
(v) "SPECIAL INTEREST" shall have the meaning assigned thereto in
Section 2(c) hereof.
(w) "TRUST INDENTURE ACT" shall mean the Trust Indenture Act of 1939.
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Unless the context otherwise requires, any reference herein to a
"Section" or "clause" refers to a Section or clause, as the case may be, of this
Agreement, and the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Section or other subdivision. Unless the context otherwise requires, any
reference to a statute, rule or regulation refers to the same (including any
successor statute, rule or regulation thereto) as it may be amended from time to
time.
2. REGISTRATION UNDER THE SECURITIES ACT.
(a) Except as set forth in Section 2(b) below, the Company agrees to use
its reasonable best efforts to file under the Securities Act no later than 45
days after the Closing Date, a registration statement relating to an offer to
exchange (the "Exchange Offer") any and all of the Registrable Securities for a
like aggregate liquidation preference and amount of preferred shares of the
Company and debt securities of the Company which are substantially identical to
the Preferred Shares and the Notes, respectively, (and, in the case of the debt
securities, 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 preferred shares and debt securities will not contain provisions for
additional dividends and additional interest, respectively, contemplated in
Section 2(c) below or provisions restricting transfer in the absence of
registration under the Securities Act (such new preferred shares and debt
securities hereinafter called "Exchange Securities"). The Company agrees to use
its 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 Securities 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 Company further agrees 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
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 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
Exchange Securities will be subject to certain prospectus delivery requirements
with respect to resale of the Exchange Securities. The Exchange Offer shall be
deemed to have been completed upon the earlier to occur of (i) the Company
having exchanged the Exchange Securities for all outstanding Registrable
Securities pursuant to the Exchange Offer and (ii) the Company 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 Company agrees (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 Company 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.
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(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 Company 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 "Shelf
Registration"). The Company agrees to use its 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 Company further agrees 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
Company for such Shelf Registration or by the Securities Act or rules and
regulations thereunder for shelf registration, and the Company agrees 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 Company has not filed the registration
statement relating to the Exchange Offer (or, if applicable, the Shelf
Registration) on or before the 45th 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, as applicable,
either (i) dividends will accumulate (in addition to the stated dividends on the
Preferred Shares) at the rate of 0.25% per annum on the liquidation preference
of the Preferred Shares or (ii) interest will accrue (in addition to the stated
interest on the Notes) at the rate of 0.25% per annum on the principal amount of
the Notes, in each case for the period from and including the occurrence of the
Registration Default until such time as no Registration Default is in effect.
Such additional dividends (the "Special Dividends") will be payable quarterly in
arrears on February 1, May 1, August 1 and November 1 in accordance with the
Certificate of Designations, and such additional interest (the "Special
Interest") will be payable semi-annually in arrears on each February 1 and
August 1 in accordance with the Indenture. For each 90-day period that the
Registration Default continues, the per annum rate of Special Dividends or
Special Interest, as applicable, shall increase by an additional 0.25%, provided
that such rate shall in no event exceed 1.0% per annum in the aggregate. Special
Dividends or 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.
(d) Notwithstanding any other provisions of this Agreement, in the event
that the Notes are issued in exchange for the Preferred Shares prior to the time
when there are no outstanding Registrable Securities, then from the time of such
exchange (i) all references in this Section 2 and Section 3 to Securities,
Registrable Securities and Exchange Securities shall not include the Preferred
Shares or the preferred shares to be issued in exchange therefor in the Exchange
Offer, as applicable, and (ii) all requirements for action to be taken by the
Company in or pursuant to this Section 2 and Section 3 shall
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apply only to the Notes and the debt securities to be issued in exchange
therefor in the Exchange Offer; PROVIDED, HOWEVER, that if the Preferred Shares
are accumulating Special Dividends at the time of such exchange of Preferred
Shares for Notes, the Notes shall upon their issuance accrue Special Interest at
the same per annum rate as the per annum rate of the Special Dividends at such
time.
3. REGISTRATION PROCEDURES.
If the Company files 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 Company 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 Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
(c) In connection with the Company's obligations with respect to the Shelf
Registration, if applicable, the Company shall use its 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 Company shall:
(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
Company 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 Company 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 Company 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 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;
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(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 Company's 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 Company 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 Company, and cause the officers, employees, counsel and independent
certified public accountants of the Company 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 Company 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 Company 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 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 Company 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 Company 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 its 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;
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(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 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;
(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 Company hereby consents 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 Company, 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 its 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 Company shall not be required for any such
purpose to (1) qualify as a corporation in any jurisdiction wherein it
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
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Company is not already subject to taxation or (4) make any changes to the
Company's articles of incorporation or by-laws or any other agreement
between it and its shareholders;
(xi) use its 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;
(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% 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 Company 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 the Company 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
Company substantially the same as the opinions provided for in Section 5 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 incorporation of the Company and its subsidiaries; the
qualification of the Company and its subsidiaries to transact business as
foreign corporations, 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,
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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
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 Company 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% 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; 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 to amend or waive any provision of this 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 Conduct of the National
Association
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of Securities Dealers, Inc. ("NASD") 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 of Conduct, including,
without limitation, by (A) if such Rules of Conduct shall so require,
engaging a "qualified independent underwriter" (as defined in such Rules of
Conduct) 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 Conduct 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 Company 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 Company 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 Company 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 Company, 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 Company may require each holder of Registrable Securities as to
which any registration is being effected to furnish in writing to the Company
such information regarding such holder and such holder's intended method of
distribution of such Registrable Securities as the Company 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 Company as promptly as practicable of any inaccuracy or change in
information previously furnished by such holder to the Company 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 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 Company any additional information required to
correct and
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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 Company will not, and
will not permit any of its "affiliates" (as defined in Rule 144) 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 Securities Act or any exemption therefrom; PROVIDED,
HOWEVER, that, for purposes of this paragraph, "affiliates" shall not include
the Initial Purchasers or any of their affiliates other than the Company and its
subsidiaries, officers, managers and directors.
4. REGISTRATION EXPENSES.
If the Company files 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 Company's performance of or compliance with this 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 Exchange
Securities, (d) messenger and delivery expenses, (e) fees and expenses of the
registrar and transfer agent for the Preferred Shares, the Trustee under the
Indenture and any escrow agent or custodian, (f) internal expenses (including,
without limitation, all salaries and expenses of the Company's officers and
employees performing legal or accounting duties), (g) fees, disbursements and
expenses of counsel and independent certified public accountants of the Company
(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 of the
Registrable Securities being registered, and fees, expenses and disbursements of
any other persons, including special experts, retained by the Company 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 Registrable Securities and the fees and disbursements of any
counsel or other advisors or experts retained by such holders (severally or
jointly),
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other than the counsel and experts specifically referred to above, transfer
taxes on resale of any of the Registrable 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 represents and warrants to, and agrees with, each Initial
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 Company furnishes 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 Company
by a holder of Registrable Securities or any placement or sales agent
therefor or underwriter thereof expressly for use therein.
(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 Company by a holder of Registrable Securities expressly for
use therein.
(c) The compliance by the Company with all of the provisions of this
Agreement and the consummation of the transactions herein contemplated will
not conflict with or result in a breach of
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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 or any subsidiary of the Company is a party
or by which the Company or any subsidiary of the Company is bound or to
which any of the property or assets of the Company or any subsidiary of the
Company is subject, nor will such action result in any violation of the
provisions of the articles of incorporation or by-laws of the Company, 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 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 of the
transactions contemplated by this 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 and the Exchange Securities.
(d) This Agreement has been duly authorized, executed and delivered by
the Company.
6. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. Upon the registration of the Registrable
Securities pursuant to Section 2 hereof, and in consideration of the agreements
of the Initial Purchasers contained herein, and as an inducement to the Initial
Purchasers to purchase the Securities, the Company shall, and hereby agrees 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 Securities Act, or any preliminary, final or summary prospectus
contained therein or furnished by the Company 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 Company 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 Company 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
Company 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
Company 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
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<PAGE>
agreement or underwriting agreement, severally and not jointly, to (i) indemnify
and hold harmless the Company, and all other holders of Registrable Securities,
against any losses, claims, damages or liabilities to which the Company 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 Company 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 Company by such holder,
agent or underwriter expressly for use therein, and (ii) reimburse the Company
for any legal or other expenses reasonably incurred by the Company 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 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.
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(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 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 amount of Registrable Securities registered, underwritten or
placed, as the case may be, by them and not joint.
(e) The obligations of the Company under this Section 6 shall be in addition
to any liability which the Company 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 Company (including any person who, with his consent,
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is named in any registration statement as about to become a director of the
Company) and to each person, if any, who controls the Company 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 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 Company.
(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.
(c) CONSOLIDATED EARNING STATEMENTS. In the event of an underwritten
offering, the Company 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
(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 Company covenants to the holders of Registrable Securities that to the
extent it shall be required to do so under the Exchange Act, the Company shall
timely file the reports required to be filed by it 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 Company 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 Company to register any of its securities under the Exchange Act.
9. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company represents, warrants, covenants
and agrees that it has not granted, and, until either the consummation of the
Exchange Offer or, with respect to the Shelf Registration, the period referred
to in Section 2(b), as applicable, will not grant, registration rights with
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respect to Registrable Securities or any other securities that would limit or
interfere with the exercise of the rights granted, or the obligations of the
Company under, this 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 Agreement in
accordance with the terms and conditions of this 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, 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
other records of the Company, 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 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
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
Agreement. If the Company 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 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 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 Agreement are inserted for convenience only, do not
constitute a part of this Agreement and shall not affect in any way the meaning
or interpretation of this Agreement.
-17-
<PAGE>
(h) ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the other writings
referred to herein (including the Certificate of Designations, the Indenture and
the forms 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 Agreement supersedes all prior agreements and understandings
between the parties with respect to its subject matter. This Agreement may be
amended and the observance of any term of this 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 the holders of at
least 66-2/3 percent 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 indicating such amendment or
waiver appears on such Registrable Securities or is delivered to such holder.
(i) INSPECTION. For so long as this Agreement shall be in effect, this
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.
-18-
<PAGE>
Agreed to and accepted as of the date referred to above.
NEXTLINK COMMUNICATIONS, INC.
By: /s/ R. Bruce Easter, Jr.
----------------------------
Name: R. Bruce Easter, Jr.
Title: Vice President, General Counsel
and Secretary
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By: /s/ Marcy Becker
----------------------------
Name: Marcy Becker
Title: Vice President
TORONTO DOMINION SECURITIES (USA) INC.
By: /s/ Gordon Paris
----------------------------
Name: Gordon Paris
Title: Managing Director
<PAGE>
EXHIBIT 12
NEXTLINK Communications, L.L.C. and Subsidiaries
Statement Regarding Computation of Ratio
of Earnings to Fixed Charges
($ in thousands)
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------
1996 1995 1994
-------------------------------------------------
<S> <C> <C> <C>
Income (loss) $ (71,101) $(12,731) $ (349)
Add:
Interest $ 31,729 $ 499 $ -
Portion of rents representative
of the interest factor 742 194 6
-------------------------------------------------
Income (loss) as adjusted $ (38,630) $(12,038) $ (343)
-------------------------------------------------
Fixed Charges:
Interest $ 31,729 $ 499 $ -
Portion of rents representative
of the interest factor 742 194 6
-------------------------------------------------
Fixed Charges $ 32,471 $ 693 $ 6
<CAPTION>
Earnings are Earnings are Earnings are
Inadequate Inadequate Inadequate
-------------------------------------------------
<S> <C> <C> <C>
Ratio of earnings to fixed charges
Deficiency of: $ 71,101 $ 12,731 $ 349
-------------------------------------------------
</TABLE>
<PAGE>
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
NEXTLINK Communications, Inc. Jurisdiction of Organization
- ----------------------------- ----------------------------
NEXTLINK Capital, Inc. Washington
NEXTLINK Interactive, L.L.C. Washington
NEXTLINK Leasing of Utah, L.L.C. Washington
NEXTLINK Management Services, L.L.C. Washington
NEXTLINK Mindshare, L.L.C. Washington
NEXTLINK Pennsylvania, L.P. Washington
d/b/a Penns Light Communications
NEXTLINK Ohio, L.L.C. Washington
NEXTLINK Solutions, L.L.C. Washington
NEXTLINK Tennessee, L.L.C. Washington
NEXTLINK Utah, L.L.C. Washington
NEXTLINK Washington, L.L.C. Washington
Telecommunications of Nevada, L.L.C. Washington
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 76,807
<SECURITIES> 47,713
<RECEIVABLES> 7,008
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 171,905
<PP&E> 106,153
<DEPRECIATION> 8,369
<TOTAL-ASSETS> 390,683
<CURRENT-LIABILITIES> 34,678
<BONDS> 356,262
0
0
<COMMON> 0
<OTHER-SE> (18,654)
<TOTAL-LIABILITY-AND-EQUITY> 390,683
<SALES> 25,686
<TOTAL-REVENUES> 25,686
<CGS> 0
<TOTAL-COSTS> 76,701
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,876
<INCOME-PRETAX> (71,101)
<INCOME-TAX> 0
<INCOME-CONTINUING> (71,101)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (71,101)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
