<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 8, 1998
REGISTRATION NO. 333-53975
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NEXTLINK COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 4813 91-1738221
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification No.)
Incorporation or Classification Code
Organization) Number)
</TABLE>
------------------------
500 108TH AVENUE N.E., SUITE 2200, BELLEVUE, WASHINGTON 98004, (425) 519-8900
(Address, including ZIP code, and telephone number, including area code, of
the Registrant's principal executive offices)
------------------------
R. BRUCE EASTER JR., ESQ.
500 108TH AVENUE N.E., SUITE 2200
BELLEVUE, WASHINGTON 98004
(425) 519-8900
(Name, address, including ZIP code, and telephone number, including area code,
of agent for service)
------------------------
COPY TO:
BRUCE R. KRAUS, ESQ.
WILLKIE FARR & GALLAGHER
787 SEVENTH AVE
NEW YORK, NEW YORK 10019
(212) 728-8000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED OFFER TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PRICE(1) PRICE FEE
<S> <C> <C> <C> <C>
9% Senior Notes due 2008.......................... $335,000,000 99.798% $334,323,300 $98,625(2)
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Previously paid.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
[LOGO]
OFFER FOR ALL OUTSTANDING 9% SENIOR NOTES DUE 2008
IN EXCHANGE FOR UP TO $335,000,000 PRINCIPAL AMOUNT OF
9% SENIOR NOTES DUE 2008
OF
NEXTLINK COMMUNICATIONS, INC.
----------
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON JULY 10, 1998
UNLESS EXTENDED
NEXTLINK Communications, Inc. (the "Company" or "NEXTLINK") hereby offers
upon the terms and subject to the conditions set forth in this Prospectus and
the accompanying Letter of Transmittal (which together constitute the "Exchange
Offer") to exchange $1,000 principal amount of the Company's 9% Senior Notes due
2008 (the "New Notes") for each $1,000 principal amount of its issued and
outstanding 9% Senior Notes due 2008 (the "Old Notes" and, together with the New
Notes, the "Notes") from the holders (the "Holders") thereof. The terms of the
New Notes are identical in all material respects to the terms of the Old Notes,
except that the New Notes have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), and, therefore, will not bear legends
restricting their transfer and will not contain certain terms providing for an
increase in the interest rate on the Old Notes under certain circumstances
described in the Registration Rights Agreement (as defined). The New Notes
evidence the same debt as the Old Notes and will be issued pursuant to, and
entitled to the same benefits under, the Indenture (as defined) governing the
Old Notes.
The Notes will mature on March 15, 2008. Interest on the Notes is payable
semi-annually on March 15 and September 15 of each year, beginning on September
15, 1998. The Notes are redeemable at the option of the Company, in whole or in
part, at any time on or after March 15, 2003, at the redemption prices set forth
herein plus accrued and unpaid interest, if any, to the date of redemption. In
the event that, on or before March 15, 2001, the Company receives net proceeds
from a sale of its Common Equity (as defined), up to a maximum of 33 1/3% of the
aggregate principal amount of the Notes originally issued will, at the option of
the Company, be redeemable from the net cash proceeds of such sale at a
redemption price equal to 109% of the stated principal amount thereof, plus
accrued and unpaid interest, if any, to the date of redemption, PROVIDED,
HOWEVER, that at least 66 2/3% of the original aggregate principal amount of the
Notes remains outstanding after such redemption. See "Description of
Notes--Optional Redemption." Upon a Change of Control (as defined), holders of
the Notes may require the Company to repurchase all or a portion of the Notes at
a purchase price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of repurchase. See "Description of the
Notes--Covenants--Change of Control."
The Notes are senior obligations of the Company, rank PARI PASSU in right of
payment with all existing and future senior obligations of the Company,
including, without limitation, the Company's 12 1/2% Senior Notes due 2006 (the
"12 1/2% Notes"), the Company's 9 5/8% Senior Notes due 2007 (the "9 5/8%
Notes") and the Company's 9.45% Senior Discount Notes due 2008 (the "9.45%
Notes" and, together with the Old Notes and the Company's 6 1/2% Cumulative
Convertible Preferred Stock (liquidation preference $50 per share), the "1998
Securities"), and will rank senior in right of payment to all future
subordinated obligations of the Company. Holders of secured obligations of the
Company, however, have claims that are prior to the claims of the holders of the
Notes with respect to the assets securing such other obligations. The Notes are
effectively subordinated to all existing and future indebtedness of the
Company's subsidiaries. As of March 31, 1998, on a pro forma basis after giving
effect to the sale of the 9.45% Notes, (i) the total amount of outstanding
consolidated liabilities of the Company and its Subsidiaries (as defined
herein), including trade payables, would have been approximately $1,631.3
million, $7.5 million of which were secured obligations (excluding the 12 1/2%
Notes, which are secured by a pledge of $63.5 million of U.S. Treasury
securities as of March 31, 1998) and (ii) the total amount of outstanding
liabilities of the Company's Subsidiaries, including trade payables, was
approximately $54.3 million, of which $7.5 million represented secured
obligations.
The New Notes will bear interest from and including their respective dates
of issuance. Holders whose Old Notes are accepted for exchange will receive
accrued interest thereon to, but not including, the date of issuance of the New
Notes, such interest to be payable with the first payment on the New Notes, but
will not receive any payment in respect of interest on the Old Notes accrued
after the issuance of the New Notes.
The Old Notes were originally issued and sold on March 3, 1998 in a
transaction not registered under the Securities Act in reliance upon the
exemption provided in Section 4(2) of the Securities Act and Rule 144A of the
Securities Act (the "Initial Offering"). The Company is making the Exchange
Offer in reliance on the position of the staff of the Securities and Exchange
Commission (the "Commission") as set forth in certain no-action letters
addressed to other parties in other transactions. However, the Company has not
sought its own no-action letter and there can be no assurance that the staff of
the Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances.
(COVER CONTINUED ON NEXT PAGE)
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS
THAT HOLDERS OF THE OLD NOTES SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE
OFFER AND THAT PROSPECTIVE INVESTORS IN THE NEW NOTES SHOULD CONSIDER IN
CONNECTION WITH SUCH INVESTMENT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------
The date of this Prospectus is June 10, 1998
<PAGE>
(COVER CONTINUED FROM PREVIOUS PAGE)
Each Holder desiring to participate in the Exchange Offer will be required
to represent, among other things, that (i) it is not an "affiliate" (as defined
in Rule 405 of the Securities Act) of the Company, (ii) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the New Notes, and (iii) it is
acquiring the New Notes in the ordinary course of its business (a holder unable
to make the foregoing representations is referred to as a "Restricted Holder").
A Restricted Holder will not be able to participate in the Exchange Offer and
may only sell its Old Notes pursuant to a registration statement containing the
selling securityholder information required by Item 507 of Regulation S-K of the
Securities Act, or pursuant to an exemption from the registration requirement of
the Securities Act.
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer (a "Participating Broker-Dealer") is required to acknowledge
in the Letter of Transmittal that it acquired the Old Notes as a result of
market-making activities or other trading activities and that it will deliver a
prospectus in connection with the resale of such New Notes. Based upon
interpretations by the staff of the Commission, the Company believes that New
Notes issued pursuant to the Exchange Offer to Participating Broker-Dealers may
be offered for resale, resold, and otherwise transferred by a Participating
Broker-Dealer upon compliance with the prospectus delivery requirements, but
without compliance with the registration requirements, of the Securities Act.
The Company has agreed that for a period of 30 days following consummation of
the Exchange Offer it will make this Prospectus available to Participating
Broker-Dealers for use in connection with any such resale. During such period of
time, delivery of this Prospectus, as it may be amended or supplemented, will
satisfy the prospectus delivery requirements of a Participating Broker-Dealer
engaged in market making or other trading activities. See "Exchange Offer" and
"Plan of Distribution".
Based upon interpretations by the staff of the Commission, the Company
believes that the New Notes issued pursuant to the Exchange Offer may be offered
for resale, resold, and otherwise transferred by a Holder thereof (other than a
Participating Broker-Dealer) without compliance with the registration and
prospectus delivery requirements of the Securities Act.
The New Notes are new securities for which there is currently no market. The
Company presently does not intend to apply for listing of the New Notes on any
securities exchange or for quotation through the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"). The Company has been
advised by the Initial Purchasers, Salomon Brothers Inc and TD Securities (USA)
Inc., that, following completion of the Exchange Offer, they presently intend to
make a market in the New Notes; however, the Initial Purchasers are not
obligated to do so and any market-making activities with respect to the New
Notes may be discontinued at any time without notice. There can be no assurance
that an active public market for the New Notes will develop.
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding and will be entitled to all the rights and preferences and will be
subject to the limitations applicable thereto under the Indenture. Following
consummation of the Exchange Offer, the holders of Old Notes will continue to be
subject to the existing restrictions upon transfer thereof and the Company will
have no further obligation to such holders (other than (x) to the Restricted
Holders, (y) to any Holder prohibited by law or Commission policy from
participating in the Exchange Offer, or (z) to any Holder required to deliver a
prospectus (other than this Prospectus) in connection with the resale of the New
Notes) to provide for the registration under the Securities Act of the Old Notes
held by them. To the extent that Old Notes are tendered and accepted in the
Exchange Offer, a Holder's ability to sell untendered Old Notes could be
adversely affected. It is not expected that an active market for the Old Notes
will develop while they are subject to restrictions on transfer.
The Company will accept for exchange any and all Old Notes that are validly
tendered and not withdrawn on or prior to 5:00 p.m., New York City time, on the
date the Exchange Offer expires, which will be July 10, 1998 (the "Expiration
Date"), unless the Exchange Offer is extended by the Company in its sole
discretion, in which case the term "Expiration Date" shall mean the latest date
and time to which the Exchange Offer is extended. Tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date. The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange. However, the Exchange Offer is subject to
certain conditions which may be waived by the Company in its reasonable
discretion and to the terms and provisions of the Registration Rights Agreement.
Old Notes may be tendered only in denominations of $1,000 and integral multiples
thereof. The Company has agreed to pay all of the expenses incurred by it in
connection with the Exchange Offer. See "The Exchange Offer--Fees and Expenses."
This Prospectus, together with the Letter of Transmittal, is being sent to
all registered holders of Old Notes as of June 10, 1998.
The Company will not receive any proceeds from this Exchange Offer. No
dealer-manager is being used in connection with this Exchange Offer. See "Use of
Proceeds" and "Plan of Distribution."
ii
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by NEXTLINK with the Commission under file
number are incorporated herein by reference:
1. The Annual Report on Form 10-KSB for the fiscal year ended December 31,
1997 (the "1997 Form 10-KSB") filed pursuant to Section 13(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
2. All other reports filed by the Company pursuant to Section 13(a) or 15(d)
of the Exchange Act since December 31, 1997, consisting of the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1998 (the
"1998 Form 10-Q") and the Company's Current Reports on Form 8-K dated March 12,
1998 and April 14, 1998.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to
termination of this Exchange Offer shall be deemed to be incorporated by
reference into the Prospectus and to be part hereof from the dates of filing of
such documents.
These documents are available upon request from the Company, 500 108(th)
Avenue N.E., Suite 2200, Bellevue, Washington 98004 and its telephone number is
(425)519-8900.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement," which term shall include all amendments,
exhibits, annexes and schedules thereto) pursuant to the Securities Act, and the
rules and regulations promulgated thereunder, covering the New Notes being
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to in the Registration Statement are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
The Company is subject to the information reporting requirements of the
Exchange Act, and in accordance therewith files reports and other information
with the Commission. Reports, proxy statements and other information concerning
the Company can be inspected without charge at the Public Reference Room
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington
D.C. 20549. In addition, upon request, such reports, proxy statements and other
information will be made available for inspection and copying at the regional
offices of the Commission located at Seven World Trade Center, 13th Floor, New
York, New York 10048, and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained
upon request from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and its public reference facilities in New
York, New York and Chicago, Illinois, at the prescribed rates. Such material may
also be accessed electronically at the Commission's Web located at
http://www.sec.gov.
In the event that the Company ceases to be subject to the informational
reporting requirements of the Exchange Act, the Company has agreed that, whether
or not it is required to do so by the rules and regulations of the Commission,
for so long as any of the Notes remain outstanding, it will furnish to the
holders of the Notes and file with the Commission (unless the Commission will
not accept such a filing) (i) all quarterly and annual financial information
that would be required to be contained in such a filing with the Commission on
Forms 10-Q and 10-K as if the Company was required to file such forms, including
a "Management's Discussion and Analysis of Results of Operations and Financial
Condition" and, with respect to the annual information only, a report thereon by
the Company's independent public accountants
iii
<PAGE>
and (ii) all reports that would be required to be filed with the Commission on
Form 8-K as if the Company was required to file such reports. In addition, for
so long as any of the Old Notes remain outstanding, the Company has agreed to
make available to any beneficial owner of the Old Notes, in connection with any
sale thereof, the information required by Rule 144A(d)(4) under the Securities
Act.
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, THE NEW NOTES IN ANY JURISDICTION WHERE,
OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONS THAT THERE HAS NOT BEEN ANY CHANGE IN
THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Incorporation of Certain Documents by Reference............................................................ iii
Available Information...................................................................................... iii
Prospectus Summary......................................................................................... 1
Risk Factors............................................................................................... 12
The Company................................................................................................ 20
Use of Proceeds............................................................................................ 20
Capitalization............................................................................................. 21
Selected Historical Consolidated Financial and Operating Data.............................................. 22
The Exchange Offer......................................................................................... 24
Description of the Notes................................................................................... 33
Description of Certain Indebtedness........................................................................ 63
Certain United States Federal Income Tax Consequences...................................................... 66
Plan of Distribution....................................................................................... 70
Validity of the Notes...................................................................................... 71
Experts.................................................................................................... 71
</TABLE>
UNTIL SEPTEMBER 8, 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES OFFERED HEREBY, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS,
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
------------------------
The Notes will be available initially in book-entry form, and the Company
expects that the Notes sold pursuant hereto will be issued in the form of a
Global Note (as defined), which will be deposited with, or on behalf of, The
Depository Trust Company (the "Depositary") and registered in its name or in the
name of Cede & Co., its nominee. Beneficial interests in the Global Note
representing the Notes will be shown on, and transfers thereof to qualified
institutional buyers will be effected through, records maintained by the
Depositary and its participants. After the initial issuance of the Global Note,
Notes in certificated form will be issued in exchange for the Global Note on the
terms set forth in the Indenture (as defined). See "Description of the
Notes--Book-Entry, Delivery and Form."
iv
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROSPECTUS. REFERENCE IS MADE TO, AND THIS PROSPECTUS SUMMARY IS QUALIFIED
IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION, INCLUDING THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS INCORPORATED HEREIN BY REFERENCE. UNLESS THE
CONTEXT OTHERWISE REQUIRES, THE TERMS "NEXTLINK" AND THE "COMPANY" REFER TO
NEXTLINK COMMUNICATIONS, INC., A DELAWARE CORPORATION, WHICH IS THE SUCCESSOR TO
NEXTLINK COMMUNICATIONS, INC., A WASHINGTON CORPORATION ("NEXTLINK
COMMUNICATIONS, (WASHINGTON) INC."), PURSUANT TO A REINCORPORATION MERGER THAT
WAS EFFECTED ON JUNE 4, 1998, ITS CONSOLIDATED SUBSIDIARIES AND 40% MEMBERSHIP
INTEREST IN TELECOMMUNICATIONS OF NEVADA, LLC, WHICH OPERATES A NETWORK THAT IS
MANAGED BY THE COMPANY. NEXTLINK COMMUNICATIONS (WASHINGTON), INC. IS THE
SUCCESSOR TO NEXTLINK COMMUNICATIONS, LLC, A WASHINGTON LIMITED LIABILITY
COMPANY ("NEXTLINK COMMUNICATIONS, LLC") PURSUANT TO A MERGER EFFECTED JANUARY
31, 1997. ALL OPERATIONAL STATISTICS OF THE COMPANY INCLUDED IN THIS PROSPECTUS
INCLUDE 100% OF THE OPERATIONAL STATISTICS OF TELECOMMUNICATIONS OF NEVADA, LLC.
ALL FINANCIAL AND OPERATIONAL DATA PRESENTED FOR PERIODS PRIOR TO JANUARY 31,
1997 RELATE TO NEXTLINK COMMUNICATIONS, L.L.C.
THE COMPANY
NEXTLINK was founded in 1994 by Craig O. McCaw, its largest and controlling
shareholder, to provide local facilities-based telecommunications services to
its targeted customer base of small and medium-sized businesses. In July 1996,
NEXTLINK became one of the first competitive local exchange carriers ("CLECs")
in the United States to provide facilities-based switched local 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
seeks to become a principal competitor to the incumbent local exchange carrier
("ILEC") for its targeted customers by providing an integrated package of high
quality local, long distance and enhanced telecommunications services at
competitive prices. In October 1997, the Company completed an initial public
offering of shares of its Class A Common Stock (the "IPO").
The market potential for competitive telecommunications services is large
and growing. Industry sources estimate that in 1996 the total revenues from
local and long distance telecommunications services were approximately $183
billion, of which approximately $101 billion were derived from local exchange
services and approximately $82 billion from long distance services. Based upon
FCC information, aggregate revenues for local and long distance services grew at
a compounded annual rate of approximately 5.5% between 1991 and 1996. The
Telecom Act, the FCC's issuance of rules for competition and pro-competitive
policies developed by state regulatory commissions have created opportunities
for new entrants, including the Company, to capture a portion of the ILEC's
dominant, and historically monopoly controlled, market share of local services.
The development of switched local services competition, however, is in its early
stages, and the Company believes that CLECs currently serve fewer than 5% of the
total business lines in the United States.
The Company's targeted customer base within the national telecommunications
market is small to medium-sized businesses, generally those businesses with
fewer than 50 access lines. Based on consultants' reports, the Company estimates
that as of year end 1996, there were approximately 170 million access lines
nationwide, including approximately 55 million business lines.
The Company develops and operates high capacity, fiber optic networks with
broad market coverage in a growing number of markets across the United States.
In its switched local service markets, the Company offers its customers a
bundled package of local and long distance services and also offers dedicated
transmission and competitive access services to long distance carriers and end
users. In addition, NEXTLINK offers a variety of interactive voice response
("IVR") products, which are non-network-based enhanced communications services
offered to customers nationwide.
The Company is one of two 50% owners of NEXTBAND Communications, L.L.C.
("NEXTBAND"), which was the successful bidder in 42 markets covering
approximately 105 million POPs, or persons located
1
<PAGE>
within the licensed areas, in the FCC's recently concluded LMDS spectrum
auctions. LMDS is a newly authorized fixed broadband point-to-multipoint service
which the license holder may deploy for wireless local loop telephone service,
high-speed data transfer and video broadcasting service, in any combination. Two
LMDS licenses are available in each of the nation's 493 Basic Trading Areas
("BTAs"); a 1,150 MHz block A license and a 150 MHz block B license.
At the conclusion of the LMDS auctions on March 25, 1998, NEXTBAND was the
high bidder in 13 block A markets, including Los Angeles, Seattle-Tacoma,
Sacramento, Portland (OR), Louisville and Birmingham and 29 block B markets,
including New York, Chicago, San Francisco, Washington (DC), Detroit, Boston,
Atlanta, Minneapolis-St. Paul and St. Louis. NEXTBAND's total bid in the LMDS
auctions was $134.7 million, for an average price per POP of $1.285. NEXTLINK
and Nextel Communications, Inc. ("Nextel"), a nationwide provider of wireless
telephone services and the co-owner of NEXTBAND, are developing a strategy to
implement LMDS technology as a cost-effective enhancement to their respective
businesses.
The Company currently operates 17 facilities-based networks providing
switched local and long distance services in 31 markets in eight states. The
Company anticipates developing additional new markets during 1998 which,
together with its existing markets, are expected to have a total of
approximately 15 million addressable business lines by the end of 1998. The
Company's goal is to add or expand markets to increase its addressable business
lines for markets in service or under development to approximately 21 million by
the end of 1999.
The Company's goal of targeting 15 million addressable business lines by
year-end 1998 represents a 36% increase over the Company's previous objective.
The Company has increased its line targets based principally on three factors:
initial success in establishing networks and launching services in major
metropolitan markets including Los Angeles, Chicago and Philadelphia; the
Company's significant growth in the sale and installation of access lines
throughout all markets; and the Company's review of several potential target
markets, which underlined the significant market opportunity available for
NEXTLINK in those markets.
NEXTLINK is pursuing its targeted customer base in markets of all sizes. In
larger markets, the Company has operational networks in Los Angeles, Chicago and
the San Francisco Bay Area, and networks under development in New York City and
Atlanta. The Company also has operational networks in medium-sized markets such
as Las Vegas and Nashville as well as smaller markets that have been clustered
in Orange County, California and central Pennsylvania. The Company will enter
large markets on a stand-alone basis where it is economically attractive to do
so and where competitive and other market factors warrant such entry. The
Company also considers pursuing smaller markets where it can extend or cluster
an existing network with relatively little incremental capital. The Company
anticipates that the addressable business lines in the larger markets that it is
currently operating and developing will represent the majority of the Company's
addressable business lines by year end 1998 and 1999.
NEXTLINK has experienced significant growth in its customer base. NEXTLINK's
customer access lines in service have increased from 11,256 access lines at
March 31, 1997 to 50,131 access lines at December 31, 1997, and 72,834 as of
March 31, 1998. This growth is attributable to both new network launches as well
as significant increases in growth rates in those markets where the Company
launched service in 1996. For markets launched in 1996, the Company has
increased its access lines in service by 227%, from 11,140 to 36,454 at March
31, 1997 and 1998, respectively, representing 41% of the Company's overall
increase in access lines in service over the respective periods. The Company has
also improved the quarterly rate of access line additions from 2,745 in the
first quarter of 1997 to 22,703 in the first quarter of 1998. Approximately 26%
of the increase in total quarterly installations was driven by an increase in
quarterly installations in those markets launched in 1996, where installations
increased from 2,629 in the first quarter 1997 to 7,727 in the first quarter of
1998.
NEXTLINK believes that a critical factor in the successful implementation of
its strategy is the quality of its management team and their extensive
experience in the telecommunications industry. The Company
2
<PAGE>
has built a management team that it believes is well suited to challenge the
dominance of the ILECs in the local exchange market. Craig O. McCaw, the
Company's founder and largest and controlling shareholder, Steven W. Hooper, the
Company's Chairman of the Board, Wayne M. Perry, the Company's Vice Chairman and
Chief Executive Officer, James F. Voelker, the Company's President, and George
M. Tronsrue III, the Company's Chief Operating Officer, each has 15 or more
years of experience in leading companies in competitive segments of the
telecommunications industry. In addition, the presidents of the Company's
operating subsidiaries and the Company's senior officers have an average of 14
years of experience in the telecommunications industry. Mr. Hooper and Mr. Perry
were members of the senior management team at McCaw Cellular Communications,
Inc. ("McCaw Cellular") during the years in which it became the nation's largest
cellular telephone company. Following McCaw Cellular's sale to AT&T Corp. in
1994, Messrs. Perry and Hooper were Vice Chairman and Chief Executive Officer,
respectively, of AT&T Wireless Services, Inc.
BUSINESS STRATEGY
The Company has built an end user-focused, locally oriented organization
dedicated to providing switched local and long distance telephone service at
competitive prices to small and medium-sized businesses. The key components of
the Company's strategy to become a leading provider of competitive
telecommunications services and maximize penetration of its targeted customer
base are:
PROVIDE INTEGRATED TELECOMMUNICATIONS SERVICES TO SMALL AND MEDIUM-SIZED
BUSINESSES. The Company primarily focuses its sales efforts for switched
local and long distance services on small and medium-sized businesses and
professional groups, those businesses having fewer than 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 and retain these customers through a direct sales effort
by offering: (i) bundled local and long distance services, as well as the
Company's enhanced communications services; (ii) up to a 10% to 15% discount
to comparable pricing by the ILEC as well as promotional discounts,
depending on the individual market; and (iii) responsive customer service
and account management provided on a local level.
FOSTER DECENTRALIZED LOCAL MANAGEMENT AND CONTROL. The Company believes
that its success is enhanced by building locally based management teams that
are responsible for the Company's success in each of their operational
markets. The Company has recruited experienced entrepreneurs and industry
executives as presidents of each of the Company's operating subsidiaries,
many of whom have previously built and led their own start-up
telecommunications businesses. The local presidents and their teams are
charged with achieving growth objectives in their respective markets and
have decision making authority in key operating areas, including customer
care, network growth and building connectivity, and managing the
relationship and provisioning efforts with the ILEC. The Company has
established an incentive based compensation policy for these management
teams that is based upon the achievement of targeted growth and operational
objectives. The Company believes that this local management focus will
provide a critical competitive edge in customer acquisition and retention in
each market.
FURTHER DEVELOP EFFECTIVE DIRECT SALES AND CUSTOMER CARE
ORGANIZATIONS. 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. The Company
has expanded its sales force from 223 salespeople at year end 1997 to 239
salespeople at March 31, 1998. The Company expects to further increase its
sales force to approximately 350 salespeople by year end 1998. Salespeople
are given incentives through a commission structure that targets
approximately 40% of a
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<PAGE>
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. The Company employed 157 personnel in its customer care
organization at March 31, 1998. The Company expects to further increase its
customer care organization to approximately 275 customer care employees by
year end 1998.
CONTINUOUSLY IMPROVE PROVISIONING PROCESSES TO ACCELERATE REVENUE
GROWTH. The Company believes that a significant ongoing challenge for CLECs
will be to continuously improve provisioning systems, which include the
complex process of transitioning ILEC customers to the Company's network.
Accordingly, the Company will continue to identify and 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 the long-term development and implementation
of 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 more rapidly implement switched local
services in its markets and to shorten the time between the receipt of a
customer order and the generation of revenues.
DEVELOP HIGH CAPACITY FIBER OPTIC NETWORKS WITH BROAD MARKET
COVERAGE. NEXTLINK designs its networks with a long-term view focusing on
three key elements. First, the Company designs and builds its networks to
provide extensive coverage of those areas where the density of business
lines is highest and to enable the Company to provide direct connections to
a high percentage of commercial buildings and ILEC central offices situated
near the network. Over time, 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. In Atlanta,
Chicago, New York and Newark, New Jersey, the Company will utilize leased
dark fiber and fiber capacity to launch facilities-based services and begin
building a customer base in advance of completing construction of its own
fiber optic network in these markets. 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 currently has 14 operational Nortel DMS 500
switches, including one installed switch at the Company's testing and
network operations control center ("NEXTLAB"). For economic or strategic
reasons, the Company may in the future elect to utilize other switch vendors
and may also acquire and utilize non-Nortel switches in connection with
acquisitions of other companies. 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.
CONTINUE MARKET EXPANSION. The Company's goal is to add or expand
markets and market clusters to increase its addressable business lines to
approximately 15 million by the end of 1998 and 21 million by the end of
1999. The Company anticipates continued expansion into new geographic areas,
including additional large markets, as opportunities arise either through
building new networks, acquiring existing networks or other
telecommunications companies, or acquiring or leasing dark fiber and fiber
capacity. NEXTLINK also believes that its strategy of operating its networks
in clusters (i) offers substantial advantages including economies of scale
in management, marketing, sales and
4
<PAGE>
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
that are too small to develop on a stand alone basis.
OFFER ENHANCED COMMUNICATIONS SERVICES. NEXTLINK offers customers
value-added services such as the Company's IVR products that are not
dependent on the Company's local facilities. The Company offers its enhanced
communications services in all of its markets as well as in areas of planned
network expansion. The Company believes these services increase its
visibility in attracting local exchange customers when it operates networks
in these markets.
REDUCE COST AND ACCELERATE MARKET PENETRATION USING LMDS
SPECTRUM. Through its ownership interest in NEXTBAND, the Company has
access to LMDS spectrum in 42 markets covering 105 million POPs. The Company
intends to use LMDS to create wireless local loops to accelerate and
supplement its fiber network build-out in selected localities on a
cost-effective basis. The Company believes, moreover, that the competitive
force created by wireless local loops may exert downward pressure on
unbundled local loop charges from the ILEC in certain markets, thus reducing
the Company's operating costs.
FINANCING PLAN
As of March 31, 1998, the Company had $1,070.7 million of unrestricted cash
and investments to pursue its growth plan, and $1,461.6 million on a pro forma
basis after giving effect to the April 1, 1998 sale of the 9.45% Notes. The
Company's current plan contemplates an aggressive expansion into a number of new
markets throughout the United States. The Company may pursue various
alternatives for achieving its growth strategy, including: additional network
construction; additional leases of network capacity from third party providers;
acquisitions of existing networks; and spectrum purchased during the recently
concluded LMDS auction and associated facilities construction and deployment.
The Company also anticipates that a substantial amount of additional capital
expenditures will be made in 1999 and beyond. The funding for these expenditures
is expected to be provided by existing cash balances, future vendor and/ or
credit facilities, future public or private sales of debt securities, future
public or private sales of capital stock and joint ventures. The Indenture does
not limit the amount the Company may invest in Restricted Subsidiaries or
certain joint ventures (including NEXTBAND) engaged in one or more
Telecommunications Businesses or the amount of Debt the Company may incur to
fund investments in Restricted Subsidiaries or such joint ventures. See
"Description of the Notes."
RECENT DEVELOPMENTS
At its meeting of June 4, 1998, the Company's Board of Directors amended the
Company's Bylaws to increase the size of the Board from nine to ten persons and
appointed Gregory J. Parker to fill the new vacancy. Mr. Parker, who is 40 years
old, has been a partner of the law firm of Seed, Mackall & Cole LLP since 1990,
where his practice emphasizes financing, capital investment and real estate
matters. From 1994 to 1997, he was Managing Partner of the firm. Mr. Parker also
is a Vice President and the Chief Operating Officer of Ampersand Holdings, Inc.,
an investment management company and is the trustee of the Ampersand Telecom
Trust ("Ampersand"). Ampersand owns 9,722,649 shares of the Company's Class B
Common Stock, which represents 29% of the outstanding shares of Class B Common
Stock, 18% of the total outstanding shares of the Company's common stock, and
27% of the total voting power the Company's outstanding common stock. The
beneficiary of Ampersand is Mrs. Wendy P. McCaw.
5
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer........... The Company is offering to exchange (the "Exchange Offer")
up to $335,000,000 aggregate principal amount of 9% Senior
Notes due 2008 (the "New Notes") for up to $335,000,000
aggregate principal amount of their outstanding 9% Senior
Notes due 2008 (the "Old Notes"). Upon consummation of the
Exchange Offer, the terms of the New Notes will be identical
in all material respects (including principal amount,
interest rate, maturity and ranking) to the terms of the Old
Notes for which they may be exchanged pursuant to the
Exchange Offer, except that the New Notes have been
registered under the Securities Act, and, therefore, will
not bear legends restricting their transfer and will not
contain certain terms providing for an increase in the
interest rate on the Old Notes under certain circumstances
described in the Registration Rights Agreement (as defined).
Minimum Condition............ The Exchange Offer is not conditioned upon any minimum
aggregate principal amounts of Old Notes being tendered for
exchange.
Expiration Date.............. The Exchange Offer will expire at 5:00 p.m., New York City
time, on July 10, 1998, unless extended (the "Expiration
Date").
Exchange Date................ The date of acceptance for exchange for the Old Notes will
be the first business day following the Expiration Date.
Conditions to the Exchange
Offer...................... The obligation of the Company to consummate the Exchange
Offer is subject to certain conditions. See "The Exchange
Offer--Conditions." The Company reserves the right to
terminate or amend the Exchange Offer at any time prior to
the Expiration Date upon the occurrence of any such
condition.
Withdrawal Rights............ Tenders may be withdrawn at any time prior to 5:00 p.m. on
the Expiration Date. Any Old Notes not accepted for any
reason will be returned without expense to the tendering
holders thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
Procedures for Tendering Old
Notes...................... See "The Exchange Offer--Procedures for Tendering."
Federal Income Tax
Consequences............... The exchange of Old Notes for New Notes by Holders will not
be a taxable exchange for federal income tax purposes, and
Holders, should not recognize any taxable gain or loss or
any interest income as a result of such exchange.
Certain Representations...... Each Holder desiring to participate in the Exchange Offer
will be required to represent, among other things, that (i)
it is not an "affiliate" (as defined in Rule 405 of the
Securities Act) of the Company, (ii) it is not engaged in,
and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a
distribution of the New Notes, and (iii) it is acquiring the
New Notes in the ordinary course of its business (a holder
unable to make the foregoing representations is referred to
as a "Restricted Holder").
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Transfer Restrictions on New
Notes...................... Based upon interpretations by the staff of the Commission,
the Company believes that New Notes issued pursuant to the
Exchange Offer to Participating Broker-Dealers may be
offered for resale, resold, and otherwise transferred by a
Participating Broker-Dealer upon compliance with the
prospectus delivery requirements, but without compliance
with the registration requirements, of the Securities Act.
The Company has agreed that for a period of 30 days
following consummation of the Exchange Offer it will make
this Prospectus available to Participating Broker-Dealers
for use in connection with any such resale. During such
period of time, delivery of this Prospectus, as it may be
amended or supplemented, will satisfy the prospectus
delivery requirements of a Participating Broker-Dealer
engaged in market making or other trading activities. See
"Exchange Offer" and "Plan of Distribution". Based upon
interpretations by the staff of the Commission, the Company
believes that New Notes issued pursuant to the Exchange
Offer may be offered for resale, resold and otherwise
transferred by a Holder thereof (other than a Restricted
Holder or a Participating Broker-Dealer) without compliance
with the registration and prospectus delivery requirements
of the Securities Act.
Effect on Holders of Old
Notes...................... As a result of the making of this Exchange Offer, and upon
acceptance for exchange of all validly tendered Old Notes
pursuant to the terms of this Exchange Offer, the Company
will have fulfilled a covenant contained in the Registration
Rights Agreement (the "Registration Rights Agreement") dated
as of February 26, 1998 by and among the Company and the
Initial Purchasers, and the Company will have no further
obligation to such holders to provide for the registration
under the Securities Act of the Old Notes held by them.
Holders of the Old Notes who do not tender their Old Notes
in the Exchange Offer will continue to hold such Old Notes
and will be entitled to all the rights and limitations
applicable thereto under the Indenture dated as of March 3,
1998, among the Company and The United States Trust Company,
as trustee (the "Trustee"), relating to the Old Notes and
the New Notes (the "Indenture"). All untendered, and
tendered but unaccepted, Old Notes will continue to be
subject to the restrictions on transfer provided for in the
Old Notes and the Indenture. To the extent that Old Notes
are tendered and accepted in the Exchange Offer, the trading
market, if any, for the Old Notes could be adversely
affected. See "Risk Factors--Consequences of Failure to
Exchange."
</TABLE>
7
<PAGE>
THE NEW NOTES
<TABLE>
<S> <C>
Issuer....................... NEXTLINK Communications, Inc.
Maturity..................... March 15, 2008.
Interest..................... The New Notes will accrue interest at the rate of 9% per
annum from the Exchange Date, payable semi-annually in
arrears on March 15 and September 15, commencing September
15, 1998.
Ranking...................... The New Notes will be senior unsecured obligations of the
Company, will rank PARI PASSU in right of payment with all
existing and future senior unsecured obligations of the
Company and will rank senior in right of payment to any
future subordinated obligations of the Company. Holders of
secured obligations of the Company will, however, have
claims that are prior to the claims of the holders of the
Notes with respect to the assets securing such obligations.
The Notes will be effectively subordinated to all
indebtedness and other liabilities and commitments
(including trade payables) of the Company's subsidiaries. As
of March 31, 1998, on a pro forma basis giving effect to the
sale of the 9.45% Notes, (i) the total amount of outstanding
consolidated liabilities of the Company, including trade
payables, would have been approximately $1,631.3 million,
$7.5 million of which would have been secured obligations
(excluding the 12 1/2% Notes, which are secured by a pledge
of $63.5 million of U.S. Treasury securities as of March 31,
1998) and (ii) the total amount of outstanding liabilities
of the Company's subsidiaries, including trade payables, was
$54.3 million, of which $7.5 million would have been secured
obligations. See "Covenants" below.
Optional Redemption.......... The New Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after March
15, 2003 at the redemption prices set forth herein plus
accrued and unpaid interest, if any, to the date of
redemption. In the event that, on or before March 15, 2001,
the Company receives net proceeds from a sale of its Common
Equity (as defined in the Indenture), up to a maximum of
33 1/3% of the aggregate principal amount of the New Notes
originally issued will, at the option of the Company, be
redeemable from the net cash proceeds of such sale at a
redemption price equal to 109% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the
date of redemption, PROVIDED, HOWEVER, that at least 66 2/3%
of the original aggregate principal amount of the New Notes
remains outstanding after such redemption.
Change of Control............ In the event of a Change of Control (as defined), holders of
the New Notes will have the right to require the Company to
purchase their New Notes, in whole or in part, at a price
equal to 101% of the principal amount thereof, plus accrued
and unpaid interest, if any, thereon to the date of
purchase.
Covenants.................... The Indenture, pursuant to which the Old Notes were and the
New Notes will be issued, contains certain covenants that,
among other things, limits the ability of the Company and
its subsidiaries to incur
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
additional indebtedness, issue stock in subsidiaries, pay
dividends or make other distributions, repurchase equity
interests or subordinated indebtedness, engage in sale and
leaseback transactions, create certain liens, enter into
certain transactions with affiliates, sell assets of the
Company and its subsidiaries, and enter into certain mergers
and consolidations. The Indenture contains provisions that
allow for the modification and amendment of the covenants
contained in the Indenture by a vote of holders owning a
majority of the Outstanding Notes (as defined in the
Indenture), including the covenant relating to a Change of
Control, except during the pendency of an Offer to Purchase
(as defined). In addition, the holders of a majority in
aggregate principal amount of the Outstanding Notes, on
behalf of all holders of Notes, may waive compliance by the
Company with certain restrictive provisions of the
Indenture. See "Description of the Notes--Modification and
Waiver".
Use of Proceeds.............. The Company will receive no cash proceeds from the issuance
of the New Notes offered hereby. See "Use of Proceeds."
</TABLE>
For additional information regarding the Notes, see "Description of the
Notes" and "Certain United States Federal Income Tax Consequences."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors which should be
considered by potential investors.
9
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS)
The summary historical consolidated financial data presented below as of and
for the years ended December 31, 1996 and 1997 are derived from and qualified by
reference to the audited Consolidated Financial Statements of the Company
included in the 1997 Form 10-KSB. The Company's Consolidated Financial
Statements as of and for the years ended December 31, 1996 and 1997 have been
audited by Arthur Andersen LLP, independent public accountants, as stated in
their report, which is incorporated by reference herein. The summary historical
consolidated financial data presented below as of March 31, 1998 and for the
three-month periods ended March 31, 1997 and 1998, have been derived from the
unaudited Interim Consolidated Financial Statements of the Company included in
the 1998 Form 10-Q. In the opinion of management, the unaudited financial
statements have been prepared on the same basis as the audited financial
statements and include all adjustments, which consist only of normal recurring
adjustments, necessary for a fair presentation of the financial position and the
results of operations for these periods. Operating results for the three-month
period ended March 31, 1998 are not necessarily indicative of the results that
may be expected for the full year ended December 31, 1998. The operating data
presented below are derived from the Company's records. All of the data should
be read in conjunction with and are qualified by reference to "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
incorporated by reference herein. The Company's financial results for the years
ended December 31, 1996 and 1997 and the three-month periods ended March 31,
1997 and 1998 include the results of ITC, which was acquired in December 1996,
and Linkatel Pacific, L.P. ("Linkatel"), which was acquired in February 1997,
from their respective dates of acquisition.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEAR ENDED DECEMBER 31, 31,
------------------------ ------------------------
1996 1997 1997 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue.................................................................. $ 25,686 $ 57,579 $ 10,067 $ 26,545
Costs and expenses:
Operating.............................................................. 25,094 54,031 9,904 24,550
Selling, general and administrative.................................... 31,353 75,732 13,274 31,957
Deferred compensation.................................................. 9,914 3,247 892 624
Depreciation and amortization.......................................... 10,340 27,190 4,406 10,183
----------- ----------- ----------- -----------
Loss from operations..................................................... (51,015) (102,621) (18,409) (40,769)
Interest income.......................................................... 10,446 27,827 5,029 11,735
Interest expense......................................................... (30,876) (54,495) (11,043) (23,278)
----------- ----------- ----------- -----------
Loss before minority interests........................................... (71,445) (129,289) (24,423) (52,312)
Minority interests....................................................... 344 285 -- --
----------- ----------- ----------- -----------
Net loss................................................................. $ (71,101) $ (129,004) $ (24,423) $ (52,312)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
OTHER DATA:
Ratio of earnings to fixed charges(1).................................... -- -- -- --
EBITDA(2)................................................................ $ (30,761) $ (72,184) $ (13,111) $ (29,962)
Summary Cash Flow Information:
Net cash used in operating activities.................................. (40,563) (94,495) (14,123) (24,215)
Net cash used in investing activities.................................. (227,012) (470,195) (114,322) (440,901)
Net cash provided by financing activities.............................. 343,032 876,957 273,572 514,069
Capital expenditures, including acquisitions of businesses (net of cash
acquired) and investments in affiliates (3)............................ 85,872 232,069 54,687 44,501
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
-------------------------
AS ADJUSTED
FOR
AS OF DECEMBER 31, THE SALE OF
-------------------- THE
1996 1997 ACTUAL 9.45% NOTES(4)
--------- --------- --------- --------------
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities....................... $ 124,520 $ 742,357 $1,070,710 $1,461,611
Pledged securities(5).................................................. 101,438 62,610 63,542 63,542
Working capital........................................................ 137,227 741,685 1,010,352 1,401,253
Property and equipment, net............................................ 97,784 253,653 298,752 298,752
Total assets........................................................... 390,683 1,217,153 1,762,585 2,162,586
Long-term debt and capital lease obligations, less current portion..... 356,262 757,640 1,090,052 1,490,053
Redeemable preferred stock, net of issuance costs...................... -- 313,319 518,770 518,770
Equity units subject to redemption..................................... 4,950 -- -- --
Common stock subject to redemption..................................... -- 4,950 4,950 4,950
Total shareholders' equity (deficit)................................... (18,654) 68,460 7,607 7,607
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF AS OF AS OF AS OF
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1996 1997 1997 1997 1997
--------------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
OPERATING DATA(6):
Route miles(7).......................................... 1,080 1,355 1,595 1,757 1,897
Fiber miles(8).......................................... 66,046 90,378 117,464 124,399 133,224
On-net buildings connected(9)........................... 403 449 459 479 513
Switches installed(10).................................. 9 10 12 13 13
Access lines in service (11)............................ 8,511 11,256 17,409 30,944 50,131
Employees............................................... 568 679 845 1,027 1,327
<CAPTION>
AS OF
MARCH 31,
1998
-----------
<S> <C>
OPERATING DATA(6):
Route miles(7).......................................... 2,036
Fiber miles(8).......................................... 141,788
On-net buildings connected(9)........................... 571
Switches installed(10).................................. 14
Access lines in service (11)............................ 72,834
Employees............................................... 1,499
</TABLE>
- ------------------------------
(1) For the years ended December 31, 1996 and 1997, and for the three months
ended March 31, 1997 and 1998, earnings were insufficient to cover fixed
charges during the periods presented by the amount of loss before minority
interests of $71,445, $129,289, $24,423 and $52,312, respectively.
(2) EBITDA consists of net loss before net interest expense, minority
interests, depreciation, amortization and deferred compensation expense.
EBITDA is commonly used to analyze companies on the basis of operating
performance, leverage and liquidity. While EBITDA should not be construed as
a substitute for operating income or a better measure of liquidity than cash
flow from operating activities, which are determined in accordance with
generally accepted accounting principles, it is included herein to provide
additional information with respect to the ability of the Company to meet
future debt service, capital expenditures and working capital requirements.
(3) Total capital expenditures, acquisitions, and investments in affiliates
were funded as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER THREE MONTHS ENDED
31, MARCH 31,
-------------------- --------------------
1996 1997 1997 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash expended.............................................. $ 72,042 $ 210,545 $ 54,687 $ 44,501
Debt issued and assumed.................................... 8,228 5,000 -- --
Equity issued.............................................. 5,602 16,524 -- --
--------- --------- --------- ---------
Total...................................................... $ 85,872 $ 232,069 $ 54,687 $ 44,501
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
(4) As adjusted to give effect to the net proceeds to the Company of the sale
of the 9.45% Notes.
(5) Pledged U.S. Treasury securities, which represent funds sufficient to
provide for payment in full of interest through April 15, 1999 on the
Company's 12 1/2% Senior Notes due April 15, 2006.
(6) The operating data for all periods include 100% of the statistics of the
Las Vegas network, which the Company manages and in which the Company has a
40% membership interest.
(7) Route miles refers to the number of miles of the telecommunications path in
which the Company-owned or leased fiber optic cables are installed.
(8) 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.
(9) Represents buildings physically connected to the Company's networks,
excluding those connected by unbundled ILEC facilities. As of March 31,
1998, the Company had 6,518 buildings physically connected to its networks,
including those buildings connected through unbundled ILEC facilities.
(10) All switch counts include two long distance switches acquired in the ITC
acquisition. Switch counts as of June 30, 1997 and thereafter include the
switch installed in NEXTLAB, the Company's testing facility. The Company
installed two additional switches in May 1998.
(11) Represents the number of access lines in service, including those lines
which are provided through resale of Centrex services, for which the Company
is billing services. Access lines in service as of March 31, 1998 includes
1,811 access lines acquired with the Company's shared tenant services
business.
11
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, before
tendering their Old Notes for the New Notes offered hereby, holders of Old Notes
should consider carefully the following factors, which (other than "Consequences
of Failure to Exchange" and "Absence of a Public Market for the New Notes;
Possible Volatility of Note Price") are generally applicable to the Old Notes as
well as the New Notes:
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act and applicable state
securities laws, or pursuant to an exemption therefrom. Except under certain
limited circumstances, the Company does not intend to register the Old Notes
under the Securities Act. In addition, any holder of Old Notes who tenders in
the Exchange Offer for the purpose of participating in a distribution of New
Notes may be deemed to have received restricted securities and, if so, will be
required to comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. To the extent Old
Notes are tendered and accepted in the Exchange Offer, the trading market, if
any, for the Old Notes not tendered and the price at which they may be sold,
could be adversely affected. See "The Exchange Offer."
LEVERAGE
As of March 31, 1998, the Company's outstanding consolidated liabilities
(including current portion) were $1,231.3 million and, as adjusted for the sale
of the 9.45% Notes, the Company's outstanding consolidated liabilities
(including current portion) would have been $1,631.3 million. Of the amount
outstanding, (i) $350.0 million was outstanding under the 12 1/2% Notes, which
will rank PARI PASSU with the Notes, (ii) $400.0 million was outstanding under
the 9 5/8% Notes, which will rank PARI PASSU with the Notes, (iii) $334.3
million was outstanding under the Old Notes, and (iv) approximately $54.3
million was outstanding pursuant to miscellaneous obligations of the Company's
subsidiaries. The Indenture limits, but does not prohibit, the incurrence of
additional indebtedness by the Company and its subsidiaries, and the Company may
incur substantial additional indebtedness during the next few years. Additional
indebtedness of the Company may rank PARI PASSU with the Notes in certain
circumstances, while additional indebtedness of the subsidiaries effectively
will rank senior to the Notes. See "Description of the Notes." The Company's
ability to satisfy its obligations will be dependent upon its future
performance, which is subject to prevailing economic conditions and financial,
business, regulatory and other factors, including factors beyond the Company's
control. There can be no assurance that the Company's operating cash flow will
be sufficient to meet its debt service requirements or to repay the Notes or
other indebtedness at maturity or that the Company will be able to refinance the
Notes or other indebtedness at maturity. See "Capitalization."
In addition, the Company's operating flexibility with respect to certain
business matters is, and will continue to be, limited by covenants contained in
the Indenture and the indentures relating to the 12 1/2% Notes, the 9 5/8% Notes
and the 9.45% 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.
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. In
addition, the terms of the Company's 14% Senior Exchangeable Redeemable
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<PAGE>
Preferred Shares (the "14% Preferred Shares") restrict the Company's ability to
incur additional indebtedness.
HOLDING COMPANY STRUCTURE; UNSECURED OBLIGATIONS; EFFECTIVE SUBORDINATION OF THE
NOTES
The Company is a holding company which derives substantially all of its
revenues from its subsidiaries. The Company intends to lend or contribute
substantially all of the net proceeds from the sale of the Notes to certain of
its subsidiaries.
The Notes are not secured by any of the assets of the Company. The Indenture
will permit the Company to incur secured debt, including, among other things,
purchase money indebtedness, which the Indenture will permit the Company to
incur in unlimited amounts, and indebtedness up to the greater of (x) $175
million and (y) 85% of the Eligible Receivables (as defined), which may be used
for any purpose. Holders of any secured indebtedness of the Company will have
claims that are prior to the claims of the holders of the Notes with respect to
the assets securing such other indebtedness. In addition, the Notes will be
effectively subordinated to indebtedness and other liabilities and commitments
(including trade payables) of the Company's subsidiaries. See "Description of
the Notes--Covenants--Limitation on Consolidated Debt" and "--Limitation on Debt
and Preferred Stock of Subsidiaries." As of March 31, 1998, $63.5 million of
U.S. Treasury securities were pledged to secure the Company's obligations under
the 12 1/2% Notes.
The Company will be dependent upon payments from its subsidiaries to
generate the funds necessary to meet its obligations, including the payment of
principal of and interest on the Notes. The ability of the Company's
subsidiaries to make such payments will be subject to, among other things, the
availability of sufficient cash and may be subject to restrictive covenants in
future debt agreements. The Company's subsidiaries are party to certain capital
lease obligations and the Company may borrow funds at the subsidiary level in
the future.
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. The Company's
operations have resulted in net losses of $71.1 million and $129.0 million for
the years ended December 31, 1996 and 1997, respectively, and $24.4 million and
$52.3 million for the three-month periods ended March 31, 1997 and 1998,
respectively. 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 positive cash flow in the
future.
The Company was formed in September 1994. A significant, but declining,
portion of the Company's revenue for the years ended December 31, 1996 and 1997,
and for the three-month period ended March 31, 1998, was derived from the
operations of the Company's IVR enhanced service offering, which operations were
acquired by the Company in September 1995. Prospective investors, therefore,
have limited historical financial information upon which to base an evaluation
of the Company's performance in the business which will be its principal focus
in the future. The Company has only recently commenced operations as a single
source service provider of telecommunications services. 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 positive
cash flow in the future.
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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 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 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 public or private
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
Company's 6 1/2% Cumulative Convertible Preferred Stock, liquidation preference
$50 per share ("6 1/2% Preferred Stock") and the 14% 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 potential acquisition of
telecommunications companies, the acquisition of LMDS spectrum and the
construction and deployment of associated facilities, the purchase of additional
switches, the offering of switched local and long distance services, the
introduction of other new service offerings and the development and
implementation of a comprehensive information technology platform. The Indenture
does not limit the amount the Company may invest in Restricted Subsidiaries or
certain joint ventures (including NEXTBAND) engaged in one or more
Telecommunications Businesses or the amount of Debt the Company may incur to
fund investments in Restricted Subsidiaries or such joint ventures. As of March
31, 1998, after giving pro forma effect to the sale of the 9.45% Notes, the
amount of total consolidated liabilities of the Company would have been
approximately $1,631.3 million.
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.
RISKS 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:
QUALIFIED PERSONNEL. NEXTLINK believes that a critical component for its
success will be the attraction and retention of qualified managerial,
professional and technical personnel. To date, 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
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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 service. There can be no
assurance that the installation of the required switches, fiber optic cable and
associated electronics necessary to implement the Company's business plan will
continue to 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 install and operate
successfully additional switches and other network equipment could have a
material adverse effect upon the Company's ability to enter additional markets
as a single source provider of telecommunications services.
INTERCONNECTION AGREEMENTS. The Company has agreements or is currently
negotiating 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. NEXTLINK may be required to negotiate new, or renegotiate existing
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, including the ILECs, 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 and implementing automated internal systems
for processing customer orders and provisioning. Billing is provided by
unaffiliated third-party vendors. The failure to develop effective internal
processes and systems for these service elements or the failure of the Company's
current vendors or the ILECs to deliver effectively ordering, provisioning
(including establishing sufficient capacity and facilities on the ILECs'
networks to service the Company) 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 services 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 sale of
the 1998 Securities to expand its networks and service offerings through
internal development and acquisitions, which could be material. Such
acquisitions, if made, could divert the resources and management time of the
Company and would require integration with the Company's existing networks and
services. There can be no assurance that any such acquisitions will occur or
that any such acquisitions, if made, would be on terms favorable to the Company
or would be successfully integrated into the Company's operations.
NEED TO OBTAIN AND MAINTAIN PERMITS AND RIGHTS-OF-WAY
In order to acquire and develop its networks the Company must obtain local
franchises and other permits, as well as rights to utilize underground conduit
and aerial pole space and other rights-of-way and fiber capacity from entities
such as ILECs and other utilities, railroads, long distance companies, state
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<PAGE>
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 switched 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 their 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 WorldCom, Inc. ("WorldCom"), and from other CLECs,
competitive access providers ("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 a material
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,
including brand name recognition, substantially greater than those of the
Company, as well as other competitive advantages over the Company.
The Company also competes with long distance carriers in the provision of
long distance services. Although the long distance market is dominated by four
major competitors, AT&T, MCI, Sprint and WorldCom, hundreds of other companies
also compete in the long distance marketplace.
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REGULATION
The Company is subject to varying degrees of federal, state and local
regulation. In each state in which the Company desires to offer its services,
the Company is required to obtain authorization from the appropriate state
commission. Although the Company has received such authorization for each of its
operational markets, there can be no assurance that the Company will receive
such authorization for markets to be launched in the future. 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 wireline 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 interstate access and domestic long
distance service on an ongoing basis. On February 13, 1997, the United States
Court of Appeals for the District of Columbia granted motions for a 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 interstate and international interexchange
traffic. 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 Regional Bell
Operating Companies ("RBOCs") to enter the long distance service market, there
can be no assurance that these ILECs will negotiate quickly with competitors
such as the Company for the required interconnection of the competitor's
networks with those of the ILEC.
On July 2, 1997, SBC Communications Inc. ("SBC") and its local exchange
carrier subsidiaries filed a lawsuit in the United States District Court for the
Northern District of Texas challenging on Constitutional grounds the Telecom Act
restrictions applicable to the RBOCs only. On December 31, 1997, the district
court issued a decision holding that Sections 271 through 275, including the
long distance entry provisions, of the Telecom Act are unconstitutional because
they violate separation of powers principles and the bill of attainder provision
of the U.S. Constitution. On February 11, 1998, the district court granted the
CLECs' request for a stay of the December 31, 1997 decision pending appeal by
the U.S. government and a number of other intervenors, to the United States
Court of Appeals for the Fifth Circuit. That appeal is currently pending. If the
stay is lifted, or if the Fifth Circuit upholds the district court's ruling,
then the RBOCs would be free to enter the long distance market, providing
additional competition to the Company's bundled service offering. In addition,
the district court's ruling would eliminate the long distance entry incentives
under the Telecom Act that were designed to promote interconnection between the
ILEC and new competitors.
The FCC has significant responsibility in the manner in which the Telecom
Act will be implemented especially in the areas of universal service, access
charges, numbering, number portability and price caps. The details of the rules
adopted by the FCC 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 for
special access and private line services. To the extent such pricing flexibility
is granted, the Company's ability to compete for certain services may be
adversely affected.
On July 18, 1997, the United States Court of Appeals for the Eighth Circuit
overturned many of the rules the FCC had established pursuant to the Telecom Act
governing the terms under which CLECs may, among other things, interconnect with
ILECs, resell ILEC services, lease unbundled ILEC network elements and terminate
traffic on ILEC networks. On October 14, 1997, the Eighth Circuit vacated the
FCC's rule prohibiting ILECs from separating unbundled network elements that are
already combined, except at the request of the CLECs. On January 22, 1998, the
Eighth Circuit issued a writ of mandamus
17
<PAGE>
ordering the FCC to follow the Court's July 1997 decision in addressing certain
pricing issues in the context of an RBOC's petition to enter the long distance
market under the Telecom Act. These Eighth Circuit decisions substantially limit
the FCC's jurisdiction and expands the state regulators' jurisdiction to set and
enforce rules governing the development of local competition. As a result, it is
more likely that the rules governing local competition will vary substantially
from state to state. Most states, however, have already begun to establish rules
for local competition that are consistent with the FCC rules overturned by the
Eighth Circuit. If a patchwork of state regulations were to develop, it could
increase the Company's costs of regulatory compliance and could make competitive
entry in some markets more difficult and expensive than in others.
DEPENDENCE ON LARGE CUSTOMERS
To date the Company has derived a substantial proportion of its revenues
from certain large customers of its competitive access services and its IVR
enhanced communication service offerings, the loss of one or more of which could
have a material adverse effect on the Company's operating results. The Company's
10 largest customers accounted for approximately 51%, 25% and 20% of the
Company's revenues in 1996, 1997 and for the three months ended March 31, 1998,
respectively. The Company does not have long-term service contracts with most of
these customers. The Company will continue to be dependent upon a small number
of customers for a substantial portion of its revenues until such time, if any,
as the Company generates substantial revenues from the provision of switched
local and long distance communications services.
RAPID TECHNOLOGICAL CHANGES; LICENSES
The telecommunications industry is subject to rapid and significant changes
in technology. The effect on the Company of technological changes, including
changes relating to emerging wireline and wireless transmission and switching
technologies, cannot be predicted. In addition, the Company from time to time
receives requests to consider licensing certain patents held by third parties
that may have bearing on its IVR services. The Company considers such requests
on their merits, but has not to date entered into any such license agreements.
Should the Company be required to pay license fees in the future, such payments,
if substantial, could have a material adverse effect on the Company's results of
operations.
RISK RELATED TO LMDS STRATEGY
LMDS is a new service, and major telecommunications equipment manufacturers
have yet to introduce infrastructure products for the LMDS frequency band. As a
result, no wireless local loop systems are currently operating under LMDS, and
implementation of such systems could be subject to unforeseen delays, costs and
possible quality and implementation issues. Material aspects of the Company's
LMDS implementation strategy, and its operating relationships with NEXTBAND and
Nextel, are still being developed and defined, and there can be no assurance
that the Company will develop and implement a successful and profitable LMDS
strategy, or that implementation of its LMDS strategy will not involve
substantial expense.
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.
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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 CRAIG O. MCCAW; POTENTIAL CONFLICTS OF INTEREST
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 54% of the Company's total voting power. As a
result, Mr. McCaw has the ability to control the direction and future operations
of the Company. Mr. McCaw is not an executive officer of the Company and, 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 Cable Plus Inc., 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. Mr. McCaw is not bound by any contractual restrictions
against future sales of the Company's common stock.
ABSENCE OF A PUBLIC MARKET FOR THE NEW NOTES; POSSIBLE VOLATILITY OF NOTE PRICE
The New Notes are new securities for which there is currently no market. The
Company does not intend to apply for listing of the New Notes on any securities
exchange or for the inclusion of the New Notes in any automated quotation
system. The Old Notes have been designated for trading in the PORTAL market.
Although the Company has been advised by the Initial Purchasers that, following
completion of the Exchange Offer, they currently intend to make a market in the
New Notes, they are not obligated to do so and any such market making activities
may be discontinued at any time without notice. Accordingly, there can be no
assurance as to the development or liquidity of any market for the New Notes. If
a market for the New Notes were to develop, the New Notes could trade at prices
that may be higher or lower than their initial offering price depending upon
many factors, including prevailing interest rates, the Company's operating
results and the markets for similar securities. Historically, the market for
non-investment grade debt has been subject to disruptions that have caused
substantial volatility in the prices of securities similar to the New Notes.
There can be no assurance that, if a market for the New Notes were to develop,
such a market would not be subject to similar disruptions.
RISKS REGARDING FORWARD LOOKING STATEMENTS
The statements contained in this Prospectus and in prior filings by the
Company with the Securities and Exchange Commission which are not historical
facts are "forward-looking statements" (as such term is defined in the Private
Securities Litigation Reform Act of 1995), which 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. Management wishes to caution the reader that these
forward-looking statements, such as the Company's plans to build and acquire
networks in new areas, its anticipation of revenues from designated markets, and
statements regarding the development of the Company's businesses, the markets
for the Company's services and products, the Company's anticipated capital
expenditures, regulatory reform and other statements contained herein regarding
matters that are not historical facts, are only predictions. No assurance can be
given that the future results will be achieved; actual events or results may
differ materially as a result of risks facing the Company. Such risks include,
but are not limited to, the Company's ability to successfully market its
services to current and new customers, access markets, identify, finance and
complete suitable acquisitions, design and construct fiber optic networks,
install cable and facilities, including switching electronics, design and
construct LMDS systems and obtain
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rights-of-way, building access rights and any required governmental
authorizations, franchises and permits, all in a timely manner, at reasonable
costs and on satisfactory terms and conditions, as well as regulatory,
legislative and judicial developments that could cause actual results to differ
materially from the future results indicated; expressed or implied, in such
forward-looking statements.
THE COMPANY
NEXTLINK Communications, Inc. is a corporation organized under the laws of
the State of Delaware. NEXTLINK Communications, L.L.C., was organized on
September 16, 1994 to provide local facilities-based telecommunications services
with a focus on delivering switched services to commercial customers. On January
31, 1997, NEXTLINK Communications, L.L.C. was merged with and into NEXTLINK
Communications (Washington), Inc. On June 4, 1998, NEXTLINK Communications
(Washington), Inc. merged with and into what is now NEXTLINK Communications,
Inc., a Delaware corporation ("NEXTLINK" or the "Company"). The principal
executive offices of the Company are located at 500 108th Avenue N.E., Suite
2200, Bellevue, Washington 98004. The telephone number is (425) 519-8900.
USE OF PROCEEDS
NEXTLINK will not receive any cash proceeds from the issuance of the New
Notes as described in this Prospectus. NEXTLINK will receive in exchange Old
Notes in like principal amount. The Old Notes surrendered in exchange for the
New Notes will be retired and cancelled and cannot be reissued. Accordingly, the
issuance of the New Notes will not result in any change in the indebtedness of
NEXTLINK.
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CAPITALIZATION
(Dollars in thousands, except per share amounts)
The following table sets forth as of March 31, 1998, the actual
capitalization of the Company and the capitalization of the Company as adjusted
to reflect the sale of the 9.45% Notes. This table should be read in conjunction
with the Selected Consolidated Financial and Operating Data included elsewhere
in this Prospectus and the Consolidated Financial Statements incorporated by
reference herein.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
--------------------------
<S> <C> <C>
AS ADJUSTED
FOR THE SALE
OF THE 9.45%
ACTUAL NOTES
------------ ------------
Cash, cash equivalents and marketable securities...................................... $ 1,070,710 $ 1,461,611
Pledged securities(1)................................................................. 63,542 63,542
------------ ------------
Total............................................................................... $ 1,134,252 $ 1,525,153
------------ ------------
------------ ------------
Current portion of long-term obligations.............................................. $ 1,775 $ 1,775
Capital lease obligations, less current portion....................................... 5,724 5,724
12 1/2% Senior Notes due 2006......................................................... 350,000 350,000
9 5/8% Senior Notes due 2007.......................................................... 400,000 400,000
9% Senior Notes due 2008.............................................................. 334,323 334,323
9.45% Senior Discount Notes due 2008.................................................. -- 400,001
------------ ------------
Total debt.......................................................................... 1,091,822 1,491,823
------------ ------------
Redeemable Preferred Stock, par value $0.01 per share, 25,000,000 shares authorized,
net of issuance costs:
14% Preferred Shares, 6,543,302 shares issued and outstanding..................... 324,870 324,870
6 1/2% Cumulative Convertible Preferred Stock, 4,000,000 shares issued and
outstanding..................................................................... 193,900 193,900
Common Stock, par value $.02 per share, 63,355 and 456,595 Class A and Class B shares
issued and outstanding, subject to redemption by the Company(2)..................... 4,950 4,950
Shareholders' equity:
Common Stock, par value $.02 per share, stated at amounts paid in; Class A,
110,334,000 shares authorized, 19,720,924 issued and outstanding; Class B,
44,133,600 shares authorized, 33,286,882 shares issued and outstanding(3)......... 334,067 334,067
Deferred compensation............................................................... (10,092) (10,092)
Accumulated deficit................................................................. (316,368) (316,368)
------------ ------------
Total shareholders' equity........................................................ 7,607 7,607
------------ ------------
Total capitalization.............................................................. $ 1,623,149 $ 2,023,150
------------ ------------
------------ ------------
</TABLE>
- ------------------------
(1) Pledged U.S. Treasury securities, which represent funds sufficient to
provide for payment in full of interest through April 15, 1999 on the
Company's 12 1/2% Senior Notes due April 15, 2006.
(2) The Company has provided to the holders of these shares an option to require
the Company to repurchase such shares at $19.92 per share beginning in the
fourth quarter of 1999. Such repurchase obligation terminated on May 25,
1998.
(3) Issued and outstanding does not include 5,687,277 and 654,858 shares of
Class A Common Stock and Class B Common Stock, respectively, issuable upon
exercise of outstanding options.
21
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
(Dollars in thousands)
The selected historical consolidated financial data presented below as of
and for the years ended December 31, 1996 and 1997 are derived from and
qualified by reference to the audited Consolidated Financial Statements of the
Company included in the 1997 Form 10-KSB. The Company's Consolidated Financial
Statements as of and for the years ended December 31, 1996 and 1997 have been
audited by Arthur Andersen LLP, independent public accountants, as stated in
their report, which is incorporated by reference herein. The summary historical
consolidated financial data presented below as of March 31, 1998 and for the
three-month periods ended March 31, 1997 and 1998, have been derived from the
unaudited Interim Consolidated Financial Statements of the Company included in
the 1998 Form 10-Q. In the opinion of management, the unaudited financial
statements have been prepared on the same basis as the audited financial
statements and include all adjustments, which consist only of normal recurring
adjustments, necessary for fair presentation of the financial position and the
results of operations for these periods. Operating results for the three-month
period ended March 31, 1998 are not necessarily indicative of the results that
may be expected for the full year ended December 31, 1998. The operating data
presented below are derived from the Company's records. All of the data should
be read in conjunction with and are qualified by reference to "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
incorporated by reference herein. The Company's financial results for the years
ended December 31, 1996 and 1997 and the three-month periods ended March 31,
1997 and 1998 include the results of ITC, which was acquired in December 1996,
and Linkatel Pacific, L.P. ("Linkatel"), which was acquired in February 1997,
from their respective dates of acquisition.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER THREE MONTHS
31, ENDED MARCH 31,
---------------------- ----------------------
1996 1997 1997 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue.................................................................. $ 25,686 $ 57,579 $ 10,067 $ 26,545
Costs and expenses:
Operating.............................................................. 25,094 54,031 9,904 24,550
Selling, general and administrative.................................... 31,353 75,732 13,274 31,957
Deferred compensation.................................................. 9,914 3,247 892 624
Depreciation and amortization.......................................... 10,340 27,190 4,406 10,183
---------- ---------- ---------- ----------
Loss from operations..................................................... (51,015) (102,621) (18,409) (40,769)
Interest income.......................................................... 10,446 27,827 5,029 11,735
Interest expense......................................................... (30,876) (54,495) (11,043) (23,278)
---------- ---------- ---------- ----------
Loss before minority interests........................................... (71,445) (129,289) (24,423) (52,312)
Minority interests....................................................... 344 285 -- --
---------- ---------- ---------- ----------
Net loss................................................................. $ (71,101) $ (129,004) $ (24,423) $ (52,312)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
OTHER DATA:
Ratio of earnings to fixed charges(1).................................... -- -- -- --
EBITDA(2)................................................................ $ (30,761) $ (72,184) $ (13,111) $ (29,962)
Summary Cash Flow Information:
Net cash used in operating activities.................................. (40,563) (94,495) (14,123) (24,215)
Net cash used in investing activities.................................. (227,012) (470,195) (114,322) (440,901)
Net cash provided by financing activities.............................. 343,032 876,957 273,572 514,069
Capital expenditures, including acquisitions of businesses (net of cash
acquired) and investments in affiliates (3)............................ 85,872 232,069 54,687 44,501
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
-------------------------
AS ADJUSTED
FOR
AS OF DECEMBER 31, THE SALE OF
-------------------- THE
1996 1997 ACTUAL 9.45% NOTES(4)
--------- --------- --------- --------------
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities............... $ 124,520 $ 742,357 $1,070,710 $1,461,611
Pledged securities(5).......................................... 101,438 62,610 63,542 63,542
Working capital................................................ 137,227 741,685 1,010,352 1,401,253
Property and equipment, net.................................... 97,784 253,653 298,752 298,752
Total assets................................................... 390,683 1,217,153 1,762,585 2,162,586
Long-term debt and capital lease obligations, less current
portion...................................................... 356,262 757,640 1,090,052 1,490,053
Redeemable preferred stock, net of issuance costs.............. -- 313,319 518,770 518,770
Equity units subject to redemption............................. 4,950 -- -- --
Common stock subject to redemption............................. -- 4,950 4,950 4,950
Total shareholders' equity (deficit)........................... (18,654) 68,460 7,607 7,607
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF AS OF AS OF AS OF AS OF
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1996 1997 1997 1997 1997 1998
--------------- ----------- ----------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA(6):
Route miles(7)..................... 1,080 1,355 1,595 1,757 1,897 2,036
Fiber miles(8)..................... 66,046 90,378 117,464 124,399 133,224 141,788
On-net buildings connected(9)...... 403 449 459 479 513 571
Switches installed(10)............. 9 10 12 13 13 14
Access lines in service (11)....... 8,511 11,256 17,409 30,944 50,131 72,834
Employees.......................... 568 679 845 1,027 1,327 1,499
</TABLE>
- ------------------------
(1) For the years ended December 31, 1996 and 1997, and for the three months
ended March 31, 1997 and 1998, earnings were insufficient to cover fixed
charges during the periods presented by the amount of loss before minority
interests of $71,445, $129,289, $24,423 and $52,312, respectively.
(2) EBITDA consists of net loss before net interest expense, minority interests,
depreciation, amortization and deferred compensation expense. EBITDA is
commonly used to analyze companies on the basis of operating performance,
leverage and liquidity. While EBITDA should not be construed as a substitute
for operating income or a better measure of liquidity than cash flow from
operating activities, which are determined in accordance with generally
accepted accounting principles, it is included herein to provide additional
information with respect to the ability of the Company to meet future debt
service, capital expenditures and working capital requirements.
(3) Total capital expenditures, acquisitions, and investments in affiliates were
funded as follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------------- --------------------
1996 1997 1997 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash expended............................................... $ 72,042 $ 210,545 $ 54,687 $ 44,501
Debt issued and assumed..................................... 8,228 5,000 -- --
Equity issued............................................... 5,602 16,524 -- --
--------- --------- --------- ---------
Total....................................................... $ 85,872 $ 232,069 $ 54,687 $ 44,501
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
(4) As adjusted to give effect to the net proceeds to the Company of the sale of
the 9.45% Notes.
(5) Pledged U.S. Treasury securities, which represent funds sufficient to
provide for payment in full of interest through April 15, 1999 on the
Company's 12 1/2% Senior Notes due April 15, 2006.
(6) The operating data for all periods include 100% of the statistics of the Las
Vegas network, which the Company manages and in which the Company has a 40%
membership interest.
(7) Route miles refers to the number of miles of the telecommunications path in
which the Company-owned or leased fiber optic cables are installed.
(8) 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.
(9) Represents buildings physically connected to the Company's networks,
excluding those connected by unbundled ILEC facilities. As of March 31,
1998, the Company had 6,518 buildings physically connected to its networks,
including those buildings connected through unbundled ILEC facilities.
(10) All switch counts include two long distance switches acquired in the ITC
acquisition. Switch counts as of June 30, 1997 and thereafter include the
switch installed in NEXTLAB, the Company's testing facility. The Company
installed two additional switches in May 1998.
(11) Represents the number of access lines in service, including those lines
which are provided through resale of Centrex services, for which the Company
is billing services. Access lines in service as of March 31, 1998 includes
1,811 access lines acquired with the Company's shared tenant services
business.
23
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by the Company on March 3, 1998 to the Initial
Purchasers, who placed the Old Notes with certain institutional investors. In
connection therewith, the Company and the Initial Purchasers entered into the
Registration Rights Agreement, pursuant to which the Company agreed, for the
benefit of the Holders of the Old Notes, that the Company would, at its sole
cost, (i) within 90 days following the original issuance of the Old Notes, file
with the Commission the Exchange Offer Registration Statement (of which this
Prospectus is a part) under the Securities Act with respect to an issue of a
series of new notes of the Company identical in all material respects to the
series of Old Notes and (ii) use its reasonable best efforts to cause such
Exchange Offer Registration Statement to become effective under the Securities
Act at the earliest possible time, but in no event later than 120 days following
the original issuance of the Old Notes. Upon the effectiveness of the Exchange
Offer Registration Statement (of which this Prospectus is a part), the Company
will offer to the Holders of the Old Notes the opportunity to exchange their Old
Notes for a like principal amount of New Notes, to be issued without a
restrictive legend and which may, subject to certain exceptions described below,
be reoffered and resold by the Holder without restrictions or limitations under
the Securities Act. The term "Holder" with respect to any Note means any person
in whose name such Note is registered on the books of NEXTLINK.
Each Holder desiring to participate in the Exchange Offer will be required
to represent, among other things, that (i) it is not an "affiliate" (as defined
in Rule 405 of the Securities Act) of the Company, (ii) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the New Notes, and (iii) it is
acquiring the New Notes in the ordinary course of its business (a holder unable
to make the foregoing representations is referred to herein as a "Restricted
Holder"). A Restricted Holder will not be able to participate in the Exchange
Offer, and may only sell its Old Notes pursuant to a registration statement
containing the selling securityholder information required by Item 507 of
Regulation S-K of the Securities Act, or pursuant to an exemption from the
registration requirement of the Securities Act.
Each Participating Broker-Dealer is required to acknowledge in the Letter of
Transmittal that it acquired the Old Notes as a result of market-making
activities or other trading activities and that it will deliver a prospectus in
connection with the resale of such New Notes. Based upon interpretations by the
staff of the Commission, the Company believes that New Notes issued pursuant to
the Exchange Offer to Participating Broker-Dealers may be offered for resale,
resold, and otherwise transferred by a Participating Broker-Dealer upon
compliance with the prospectus delivery requirements, but without compliance
with the registration requirements, of the Securities Act. The Company has
agreed that for a period of 30 days following consummation of the Exchange Offer
they will make this Prospectus available to Participating Broker-Dealers for use
in connection with any such resale. During such period of time, delivery of this
Prospectus, as it may be amended or supplemented, will satisfy the prospectus
delivery requirements of a Participating Broker-Dealer engaged in market-making
or other trading activities.
Based upon interpretations by the staff of the Commission, the Company
believes that New Notes issued pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by a Holder thereof (other than a
Participating Broker-Dealer) without compliance with the registration and
prospectus delivery requirements of the Securities Act.
If prior to the consummation of the Exchange Offer existing Commission
interpretations are changed such that the New Notes 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, then the Company is required under the
Registration Rights Agreement to file with the Commission a shelf registration
statement (the "Shelf Registration Statement"). The Company is required under
the Registration Rights Agreement to use its reasonable best efforts to cause
the Shelf Registration Statement to be declared effective at the earliest
possible time but in no event later than 120 days after the issuance of the Old
Notes and to keep such Shelf Registration
24
<PAGE>
continuously effective for a period ending on the earlier of the second
anniversary of the issuance of the Old Notes or such time as there are no longer
any Registrable Securities outstanding.
Registrable Securities shall mean the Old Notes unless such Old Notes are
sold pursuant to Rule 144 (or any successor provision) promulgated under the
Securities Act under circumstances in which any legend borne by such Notes
relating to restrictions on transferability thereof, under the Securities Act or
otherwise, is removed by the Company or pursuant to the Indenture or such Notes
are eligible to be sold pursuant to paragraph (k) of Rule 144 or (when) such
Notes shall cease to be outstanding.
The Company will, in the event of the filing of the Shelf Registration
Statement, provide to each Holder of Registrable Securities covered by the Shelf
Registration Statement copies of any Shelf Registration Statement or any
prospectus which is a part of the Shelf Registration Statement, notify each such
Holder when the Shelf Registration Statement has become effective and take
certain other actions as are required to permit unrestricted resales of
Registrable Securities. A Holder of Registrable Securities that sells such
Registrable Securities pursuant to the Shelf Registration Statement generally
will be required to be named as a selling security holder in the related
prospectus and to deliver a prospectus to the purchaser, will be subject to
certain of the civil liability provisions under the Securities Act in connection
with such sales and will be bound by the provisions of the Registration Rights
Agreement which are applicable to such Holder (including certain indemnification
obligations). In addition, Holders of Registrable Securities will be required to
deliver information to be used in connection with the Shelf Registration
Statement and to provide comments on the Shelf Registration Statement within the
time periods set forth in the Registration Rights Agreement in order to have
their Registrable Securities included in the Shelf Registration Statement and
benefit from the provisions regarding Liquidated Damages, if any, set forth in
the following paragraph.
If (i) the Company is required to file the Shelf Registration Statement and
(ii) the Shelf Registration has not become effective or been declared effective
by the Commission on or before the 120th day after the issuance of the Old
Notes, or (iii) the Shelf Registration Statement is filed and declared effective
but shall thereafter cease to be effective (except as specifically permitted in
the Registration Rights Agreement) without being succeeded promptly by an
additional registration statement filed and declared effective (each such event
referred to in clauses (i) through (iii), a "Registration Default"), then
interest will accrue (in addition to any stated interest on the Securities) a
the rate of 0.5% per annum on the principal amount of the Old Notes, determined
daily (calculated on the same basis as interest on the Notes shall be
calculated) for the period from the occurrence of the Registration Default until
such time as no Registration Default is in effect (after which time no such
special interest will accrue). Such additional interest (the "Additional
Interest") will be payable in cash semi-annually in arrears on each March 15 and
September 15 in accordance with the Indenture. In addition, in the event that
the Shelf Registration has not become effective or been declared effective by
the Commission on or before the 165th day after the issuance of the Old Notes,
then the per annum rate of Additional Interest shall increase by an additional
0.25% for each subsequent 90-day period (provided that such Additional Interest
shall in no event exceed 1.0% per annum in the aggregate), that Additional
Interest will be paid at such increased rate until such time as the Shelf
Registration has become or been declared effective.
Payment of Additional Interest is the sole remedy available to the Holders
of Registrable Securities in the event that the Company does not comply with the
deadlines set forth in the Registration Rights Agreement with respect to the
registration of Registrable Securities for resale under the Shelf Registration
Statement.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $1,000 principal amount of New Notes
in exchange for each $1,000 principal amount of outstanding Old Notes accepted
in the
25
<PAGE>
Exchange Offer. Holders may tender some or all of their Old Notes pursuant to
the Exchange Offer. However, Old Notes may be tendered only in integral
multiples of $1,000.
The form and terms of the New Notes will be identical in all material
respects (including principal amount, interest rate, maturity and ranking) to
terms of the Old Notes for which they may be exchanged pursuant to the Exchange
Offer except that the New Notes have been registered under the Securities Act
and, therefore, will not bear legends restricting their transfer and will not
contain certain terms providing for an increase in the interest rate on the Old
Notes under certain circumstances described in the Registration Rights Agreement
(as defined). The New Notes will evidence the same debt as the Old Notes and
will be entitled to the benefits of the Indenture under which the Old Notes
were, and the New Notes will be, issued.
As of the date of this Prospectus, $335.0 million aggregate principal amount
of the Old Notes is outstanding. The Company has fixed the close of business on
June 10, 1998 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus, together with the Letter of
Transmittal, will initially be sent. As of such date, there was one registered
Holder of the Old Notes.
Holders of the Old Notes do not have any appraisal or dissenters' rights
under law or the Indenture in connection with the Exchange Offer. The Company
intends to conduct the Exchange Offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the Commission
thereunder.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commission or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on July
10, 1998, unless the Company, in its reasonable discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent (as defined) of any extension by oral or written notice and will make a
public announcement thereof prior to 9:00 a.m., New York City time, on the next
business day after each previously scheduled Expiration Date, unless otherwise
required by applicable law or regulation.
The Company reserves the right, in its reasonable discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or, if in their reasonable
judgment any of the conditions set forth below under the caption "--Conditions"
shall not have been satisfied, to terminate the Exchange Offer, by giving oral
or written notice of such delay, extension or termination to the Exchange Agent,
or (ii) to amend the terms of the Exchange Offer in any manner. Any such delay
in acceptance, extension, termination or amendment will be followed as promptly
as practicable by a public announcement thereof. If the Exchange Offer is
amended in a manner determined by the Company to constitute a material change,
the Company will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered Holders, and the Company
will extend the Exchange Offer for a period of five to ten business days,
depending upon the significance of the amendment and the manner of disclosure to
the registered Holders, if the Exchange Offer would otherwise expire during such
five to ten business day period.
Without limiting the manner in which the Company may choose to make a public
announcement of any delay, extension, termination or amendment of the Exchange
Offer, the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
26
<PAGE>
PROCEDURES FOR TENDERING
Only a Holder of Old Notes may tender such Old Notes in the Exchange Offer.
A Holder who wishes to tender Old Notes for exchange pursuant to the Exchange
Offer must transmit a properly completed and duly executed Letter of
Transmittal, or a facsimile thereof, together with any required signature
guarantees, or, in the case of a book-entry transfer, Agent's Message (as
defined), and any other required documents, to the Exchange Agent prior to
Midnight, New York City time, on the Expiration Date. In addition, either (i)
certificates for such Old Notes must be received by the Exchange Agent prior to
the Expiration Date along with the Letter of Transmittal, (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old
Notes into the Exchange Agent's account at The Depository Trust Company ("DTC"
or the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date or (iii) the Holder must comply with the guaranteed delivery
procedures described below. To be tendered effectively, the Old Notes, or
Book-Entry Confirmation, as the case may be, the Letter of Transmittal and other
required documents must be received by the Exchange Agent at the address set
forth below under "--Exchange Agent" prior to 5:00 p.m., New York City time, on
the Expiration Date. DELIVERY OF DOCUMENTS TO THE BOOK ENTRY TRANSFER FACILITY
IN ACCORDANCE WITH ITS PROCEDURE DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
DTC has authorized DTC participants that hold Old Notes on behalf of
beneficial owners of Old Notes through DTC to tender their Old Notes as if they
were Holders. To effect a tender of Old Notes, DTC participants should either
(i) complete and sign the Letter of Transmittal (or a manually signed facsimile
thereof), have the signature thereon guaranteed if required by the Instructions
to the Letter of Transmittal, and mail or deliver the Letter of Transmittal (or
such manually signed facsimile) to the Exchange Agent pursuant to the procedure
set forth in "Procedures for Tendering" or (ii) transmit their acceptance to DTC
through the DTC Automated Tender Offer Program ("ATOP") for which the
transaction will be eligible and follow the procedure for book-entry transfer
set forth in "--Book-Entry Transfer."
The tender by a Holder will constitute an agreement between such Holder and
the Company in accordance with the terms and subject to the conditions set forth
herein and in the Letter of Transmittal.
The method of delivery of the Old Notes and the Letter of Transmittal and
all other required documents to the Exchange Agent is at the election and risk
of the Holder. Instead of delivery by mail, it is recommended that Holders use
an overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure delivery to the Exchange Agent before the Expiration Date. No
Letter of Transmittal or Old Notes, or Book-Entry Confirmation, as the case may
be, should be sent to the Company.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered Holder promptly and instruct such registered
Holder to tender on such beneficial owner's behalf. If such beneficial owner
wishes to tender on such beneficial owner's own behalf, such owner must, prior
to completing and executing the Letter of Transmittal and delivering such
beneficial owner's Old Notes, either make appropriate arrangement to register
ownership of the Old Notes in such owner's name or obtain a properly completed
bond power from the registered Holder. The transfer of registered ownership may
take considerable time.
If the Letter of Transmittal is signed by a person other than the registered
Holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power and signed by such registered
Holder as such registered Holder's name appears on such Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
27
<PAGE>
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below) unless
the Old Notes tendered pursuant thereto are tendered (i) by a registered Holder
who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-5 under the Exchange Act (an "Eligible Institution").
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) shall be final and binding on all parties. Unless waived, any
defects of irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Neither the Company, the
Exchange Agent nor any other person shall incur any liability for failure to
give notice of any defect or irregularity with respect to any tender of Old
Notes. Tenders of Old Notes will not be deemed to have been made until such
defects or irregularities have been cured or waived. Any Old Notes received by
the Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will not be deemed to have been
properly tendered. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering Holders,
unless otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
By tendering, each Holder will represent to the Company, among other things,
that such Holder is not a Restricted Holder. Each Participating Broker-Dealer
must acknowledge that it will deliver a prospectus in connection with any resale
of such New Notes. See "Plan of Distribution."
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. For purposes of the Exchange Offer, the Company shall be deemed to
have accepted properly tendered Old Notes for exchange when, as and if the
Company has given oral or written notice thereof to the Exchange Agent.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal or Agent's Message and all other required documents. If any tendered
Old Notes are not accepted for any reason set forth in the terms and conditions
of the Exchange Offer or if Old Notes are submitted for a greater principal
amount than the Holder desires to exchange, such unaccepted or non-exchanged Old
Notes will be returned without expense to the tendering Holder thereof (or, in
the case of Old Notes tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described below, such non-exchanged Old Notes will be credited to an
account maintained with such Book-Entry Transfer Facility) as promptly as
practicable after the Expiration Date.
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BOOK-ENTRY TRANSFER
The Exchange Agent will establish a new account or utilize an existing
account with respect to the Old Notes at DTC promptly after the date of this
Prospectus, and any financial institution that is a participant in DTC and whose
name appears on a security position listing as the owner of Old Notes may make a
book-entry tender of Old Notes by causing DTC to transfer such Old Notes into
the Exchange Agent's account in accordance with DTC's procedures for such
transfer. However, although tender of Old Notes may be effected through
book-entry transfer into the Exchange Agent's account at DTC, the Letter of
Transmittal (or a manually signed facsimile thereof), properly completed and
validly executed, with any required signature guarantees, or an Agent's Message
in lieu of the Letter of Transmittal, and any other required documents, must, in
any case, be received by the Exchange Agent at its address set forth below under
the caption "Exchange Agent" on or prior to the Expiration Date, or the
guaranteed delivery procedures described below must be complied with. The
confirmation of a book-entry transfer of Old Notes into the Exchange Agent's
account at DTC as described above is referred to herein as a "Book-Entry
Confirmation." Delivery of documents to DTC in accordance with DTC's procedures
does not constitute delivery to the Exchange Agent.
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Exchange Agent and forming a part of a Book-Entry Confirmation,
which states that DTC has received an express acknowledgment from the
participant in DTC tendering the Old Notes stating (i) the aggregate principal
amount of Old Notes which have been tendered by such participant, (ii) that such
participant has received and agrees to be bound by the term of the Letter of
Transmittal and (iii) that the Company may enforce such agreement against the
participant.
GUARANTEE DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date or (iii) who cannot complete the procedure for book-entry
transfer on a timely basis, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, mail or hand delivery) setting forth the
name and address of the Holder, the certificate number(s) of such Old Notes and
the principal amount of Old Notes tendered, stating that the tender is being
made thereby and guaranteeing that, within three New York Stock Exchange trading
days after the Expiration Date, the Letter of Transmittal (or facsimile thereof)
or, in the case of a book-entry transfer, an Agent's Message, together with the
certificate(s) representing the Old Notes, or a Book-Entry Confirmation, as the
case may be, and any other documents required by the Letter of Transmittal will
be deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or facsimile
thereof) or, in the case of a book-entry transfer, an Agent's Message, as well
as the certificate(s) representing all tendered Old Notes in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and all other
documents required by the Letter of Transmittal are received by the Exchange
Agent within three New York Stock Exchange trading days after the Expiration
Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the
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<PAGE>
person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) be signed by the Holder
in the same manner as the original signature on the Letter of Transmittal by
which such Old Notes were tendered (including any required signature guarantees)
or be accompanied by documents of transfer sufficient to have the Trustee with
respect to the Old Notes register the transfer of such Old Notes into the name
of the person withdrawing the tender and (iv) specify the name in which any such
Old Notes are to be registered, if different from that of the Depositor. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates, the withdrawing
Holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such Holder is an Eligible Institution. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes
and otherwise comply with the procedures of the Book-Entry Transfer Facility.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company in its sole
discretion, which determination shall be final and binding on all parties. Any
Old Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no New Notes will be issued with respect
thereto unless the Old Notes so withdrawn are validly retendered. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described above under "--Procedures for Tendering" at any time prior to the
Expiration Date.
Any Old Notes which have been tendered but which are not accepted for
payment due to withdrawal, rejection of tender or termination of the Exchange
Offer will be returned as soon as practicable after withdrawal, rejection of
tender or termination of the Exchange Offer to the Holder thereof without cost
to such Holder (or, in the case of Old Notes tendered by book-entry transfer
into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant
to the book-entry transfer procedures described above, such Old Notes will be
credited to an account maintained with such Book-Entry Transfer Facility for the
Old Notes).
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange New Notes for, any Old Notes,
and may terminate the Exchange Offer as provided herein before the acceptance of
such Old Notes, if:
(a) any action or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the Exchange Offer which, in
the reasonable judgment of the Company, might materially impair the ability of
the Company to proceed with the Exchange Offer or materially impair the
contemplated benefits of the Exchange Offer to the Company, or any material
adverse development has occurred in any existing action or proceeding with
respect to the Company or any of its subsidiaries;
(b) any change, or any development involving a prospective change, in the
business or financial affairs of the Company or any of their subsidiaries has
occurred which, in the reasonable judgment of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer or
materially impair the contemplated benefits of the Exchange Offer to the
Company;
(c) any law, statute, rule or regulation is proposed, adopted or enacted,
which, in the reasonable judgment of the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer or materially impair
the contemplated benefits of the Exchange Offer to the Company; or
(d) any governmental approval has not been obtained, which approval the
Company shall, in its reasonable discretion, deem necessary for the consummation
of the Exchange Offer as contemplated hereby.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the
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Company in whole or in part at any time and from time to time in their
reasonable discretion. The failure by the Company at any time to exercise any of
the foregoing rights shall not be deemed a waiver of such right and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time.
If the Company determines in its reasonable discretion that any of the
conditions are not satisfied, the Company may (i) refuse to accept any Old Notes
and return all tendered Old Notes to the tendering Holders, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of the
Exchange Offer, subject, however, to the rights of Holders to withdraw such Old
Notes (see "--Withdrawal of Tenders" above) or (iii) waive such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Old Notes which have not been withdrawn. If such waiver constitutes a material
change to the Exchange Offer, the Company will promptly disclose such waiver by
means of a prospectus supplement that will be distributed to the registered
Holders, and the Company will extend the Exchange Offer for a period of five to
ten business days, depending upon the significance of the waiver and the manner
of disclosure to the registered Holders, if the Exchange Offer would otherwise
expire during such five to ten business day period.
EXCHANGE AGENT
United States Trust Company has been appointed as Exchange Agent for the
Exchange Offer. Requests for additional copies of this Prospectus or of the
Letter of Transmittal should be directed to the Exchange Agent addressed as
follows:
To: United States Trust Company
By Hand/Overnight Courier:
United States Trust Company
114 West 47(th) Street
New York, NY 10036
Attn: Patricia Sterner
Reorganization Section
Facsimile Transmission
(212) 852-1625
Confirm by Telephone: (212) 852-1664
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The Company
has not retained any dealer-manager in connection with the Exchange Offer and
will not make any payments to brokers, dealers or others soliciting acceptances
of the Exchange Offer. The Company, however, will pay the exchange agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered Holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
Holder or any other persons) will be payable by the tendering Holder. If
satisfactory evidence of payment of such taxes or
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<PAGE>
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering Holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is the principal amount as reflected in the Company's accounting records
on the date of the exchange. Accordingly, no gain or loss for accounting
purposes will be recognized. The expenses of the Exchange Offer and the
unamortized expenses related to the issuance of the Old Notes will be amortized
over the term of the Notes.
REGULATORY APPROVALS
The Company does not believe that the receipt of any material federal or
state regulatory approvals will be necessary in connection with the Exchange
Offer, other than the effectiveness of the Exchange Offer Registration Statement
under the Securities Act.
OTHER
Participation in the Exchange Offer is voluntary and Holders of Old Notes
should carefully consider whether to accept the terms and conditions thereof.
Holders of the Old Notes are urged to consult their financial and tax advisors
in making their own decisions on what action to take with respect to the
Exchange Offer.
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DESCRIPTION OF THE NOTES
The New Notes, like the Old Notes, will be issued under the Indenture, dated
March 3, 1998, by and between NEXTLINK and The The United States Trust Company
as trustee (the "Trustee"). The terms of the New Notes are identical in all
material respects to the terms of the Old Notes, except that the New Notes have
been registered under the Securities Act, and, therefore, will not bear legends
restricting their transfer and will not contain certain terms providing for an
increase in the interest rate on the Old Notes under the circumstances described
in the Registration Rights Agreement. The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Notes
are subject to all such terms, and Holders of Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof. The statements
under this caption relating to the Notes and the Indenture are summaries and do
not purport to be complete, and are subject to, and are qualified in their
entirety by reference to, all the provisions of the Indenture, including the
definitions of certain terms therein. Unless otherwise indicated, references
under this caption to sections, "Section" or articles are references to the
Indenture. Where reference is made to particular provisions of the Indenture or
to defined terms not otherwise defined herein, such provisions or defined terms
are incorporated herein by reference. For purposes of the description of the
Notes, the term "Company" referes to NEXTLINK Communications, Inc. and does not
include its subsidiaries except for purposes of financial data determined on a
consolidated basis. A copy of the Indenture and Registration Rights Agreement
are filed as exhibits to the Registration Statement of which this Prospectus is
a part. The definitions of certain terms used in the following summary are set
forth below under "--Certain Definitions."
GENERAL
The Notes will be senior obligations of the Company, will be limited to $335
million aggregate principal amount and will mature on March 15, 2008. The Notes
will bear interest at the rate of 9% per annum payable semi-annually on March 15
and September 15 of each year, commencing September 15, 1998, or from the most
recent Interest Payment Date to which interest has been paid or provided for, to
the Person in whose name the Note (or any predecessor Note) is registered at the
close of business on the preceding March 1 or September 1, as the case may be.
Interest on the Notes will be computed on the basis of a 360 day year of twelve
30 day months. (SectionSection 301, 307 and 310)
Principal of and premium, if any, and interest on the Notes will be payable,
and the Notes may be presented for registration of transfer and exchange, at the
office or agency of the Company maintained for that purpose in the Borough of
Manhattan, The City of New York PROVIDED that at the option of the Company,
payment of interest on the Notes may be made by check mailed to the address of
the Person entitled thereto as it appears in the Note Register. Until otherwise
designated by the Company, such office or agency will be the corporate trust
office of the Trustee, as Paying Agent and Registrar. (SectionSection 301, 305
and 1002)
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 principal amount at maturity and any integral multiple
of $1,000 in excess thereof. (Section 302) No service charge will be made for
any registration of transfer or exchange of Notes, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith. (Section 305)
RANKING
The Notes are senior obligations of the Company, rank PARI PASSU in right of
payment with all existing and future senior obligations of the Company,
including, without limitation, the 9.45% Notes, the 9 5/8% Notes and the 12 1/2%
Notes, and rank senior in right of payment to all future subordinated
obligations of
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the Company. Holders of secured obligations of the Company, however, will have
claims that are prior to the claims of the holders of the Notes with respect to
the assets securing such other obligations.
The Company's principal operations are conducted through its Subsidiaries,
and the Company is therefore dependent upon the cash flow of its Subsidiaries to
meet its obligations. The Company's Subsidiaries will have no obligation to
guarantee or otherwise pay amounts due under the Notes. Therefore, the Notes
will be effectively subordinated to all indebtedness and other liabilities and
commitments (including trade payables) of the Company's Subsidiaries. Any right
of the Company to receive assets of any of its Subsidiaries upon any liquidation
or reorganization of such Subsidiary (and the consequent right of holders of the
Notes to participate in those assets) will be effectively subordinated to the
claims of the Subsidiary's creditors, except to the extent that the Company
itself is recognized as a creditor of the Subsidiary. Any recognized claims of
the Company as a creditor of the Subsidiary would be subordinate to any prior
security interest held by any other creditor of the Subsidiary and obligations
of the Subsidiary that are senior to those owing to the Company.
As of March 31, 1998, on a pro forma basis after giving effect to the sale
of the 9.45% Notes, (i) the total amount of outstanding consolidated liabilities
of the Company and its Subsidiaries, including trade payables, was approximately
$1,631.3 million, of which $7.5 million represents secured obligations
(excluding the 12 1/2% Notes, which are secured by a pledge of $63.5 million of
U.S. Treasury securities as of March 31, 1998) and (ii) the total amount of
outstanding liabilities of the Company's Subsidiaries, including trade payables,
was $54.3 million, of which $7.5 million represented secured obligations. See
"Description of Certain Indebtedness" and "Selected Historical Consolidated
Financial and Operating Data."
FORM, DENOMINATION, TRANSFER, EXCHANGE AND BOOK-ENTRY PROCEDURES
New Notes will be issued only in fully registered form, without interest
coupons (each, a "Global Note"), in minimum denominations of $1,000 principal
amount at maturity and any integral multiples of $1,000 in excess thereof. New
Notes will not be issued in bearer form. New Notes will be issued only against
tender of Old Notes and, upon issuance, each Global Note will be deposited with,
or on behalf of, The Depositary Trust Company ("DTC") and registered in the name
of Cede & Co., as nominee of DTC.
EXCHANGES OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES. A beneficial interest
in a Global Note may not be exchanged for a Note in certificated form unless (i)
DTC (x) notifies the Company that it is unwilling or unable to continue as
Depositary for the Global Note or (y) has ceased to be a clearing agency
registered under the Exchange Act and in either case the Company thereupon fails
to appoint a successor Depositary, (ii) the Company, at is option, notifies the
Trustee in writing that it elects to cause the issuance of the Notes in
certificated form or (iii) there shall have occurred and be continuing an Event
of Default or any event which after notice or lapse of time or both would be an
Event of Default or any event which after notice or lapse of time or both would
be an Event of Default with respect to the Notes. In all cases, certificated
Notes delivered in exchange for any Global Note or beneficial interests therein
will be registered in the names, and issued in any approved denominations,
requested by or on behalf of the Depositary (in accordance with its customary
procedures). Any certificated Note issued in exchange for an interest in a
Global Note will bear the legend restricting transfers that is borne by such
Global Note. Any such exchange will be effected through the DWAC System and an
appropriate adjustment will be made in the records of the Security Registrar to
reflect a decrease in the principal amount of the relevant Global Note.
CERTAIN BOOK-ENTRY PROCEDURES FOR GLOBAL NOTES. THE DESCRIPTIONS OF THE
OPERATIONS AND PROCEDURES OF DTC, EUROCLEAR AND CEDEL THAT FOLLOW ARE PROVIDED
SOLELY AS A MATTER OF CONVENIENCE. THESE OPERATIONS AND PROCEDURES ARE SOLELY
WITHIN THE CONTROL OF THE RESPECTIVE SETTLEMENT SYSTEMS AND ARE SUBJECT TO
CHANGES BY THEM FROM TIME TO TIME. THE COMPANY TAKES NO RESPONSIBILITY FOR THESE
OPERATIONS AND PROCEDURES AND URGES INVESTORS TO CONTACT THE SYSTEM OR THEIR
PARTICIPANTS DIRECTLY TO DISCUSS THESE MATTERS.
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DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants ("participants") and facilitate the clearance
and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical transfer and delivery of certificates.
Participants include securities brokers and dealers (including the Initial
Purchasers), banks, trust companies and clearing corporations and may include
certain other organizations. Indirect access to the DTC system is available to
other entities such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a participant, either directly
or indirectly ("indirect participants").
DTC has advised the Company that its current practice, upon the issuance of
the Global Note, is to credit, on its internal system, the respective principal
amount of the individual beneficial interests represented by such Global Notes
to the accounts with DTC of the participants through which such interests are to
be held. Ownership of beneficial interests in the Global Notes will be shown on,
and the transfer of that ownership will be effected only through, records
maintained by DTC or its nominees (with respect to interests of participants)
and the records of participants and indirect participants (with respect to
interests of persons other than participants).
AS LONG AS DTC, OR ITS NOMINEE, IS THE REGISTERED HOLDER OF A GLOBAL NOTE,
DTC OR SUCH NOMINEE, AS THE CASE MAY BE, WILL BE CONSIDERED THE SOLE OWNER AND
HOLDER OF THE NOTES REPRESENTED BY SUCH GLOBAL NOTE FOR ALL PURPOSES UNDER THE
INDENTURE AND THE NOTES. Except in the limited circumstances described above
under "--Exchanges of Book-Entry Notes for Certificated Notes", owners of
beneficial interests in a Global Note will not be entitled to have any portions
of such Global Note registered in their names, will not receive or be entitled
to receive physical delivery of Notes in definitive form and will not be
considered the owners or Holders of the Global Note (or any Notes represented
thereby) under the Indenture or the Notes.
Investors may hold their interests in the Restricted Global Note directly
through DTC, if they are participants in such system, or indirectly through
organizations (including Euroclear and CEDEL) which are participants in such
system. All interests in a Global Note, including those held through Euroclear
or CEDEL, will be subject to the procedures and requirements of DTC. Those
interests held through Euroclear or CEDEL will also be subject to the procedures
and requirements of such system.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Note to such persons may be limited to
that extent. Because DTC can act only on behalf of its participants, which in
turn act on behalf of indirect participants and certain banks, the ability of a
person having beneficial interests in a Global Note to pledge such interest to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of such interests, may be affected by the lack of a physical
certificate evidencing such interests.
Payments of the principal of, premium, if any, and interest on Global Notes
will be made to DTC or its nominee as the registered owner thereof. Neither the
Company, the Trustee nor any of their respective agents will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Note representing any Notes held by
it or its nominee, will immediately credit participants' accounts with payments
in amounts proportionate to their respective beneficial interests in the
principal amount of such Global Note for such Notes as shown on the records of
DTC or its nominee. The Company also expects that payments by participants to
owners of beneficial interests in such Global Note held through such
participants will be governed by standing instructions and customary practice,
as is
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<PAGE>
the case with securities held for the accounts of customers registered in
"street name." Such payments will be the responsibility of such participants.
Except for trades involving only Euroclear and CEDEL participants, interests
in the Global Notes will trade in DTC's settlement system and secondary market
trading activity in such interests will therefore settle in immediately
available funds, subject in all cases to the rules and procedures of DTC and its
participants. Transfers between participants in DTC will be effected in
accordance with DTC's procedures, and will be settled in same-day funds.
Transfers between participants in Euroclear and CEDEL will be effected in the
ordinary way in accordance with their respective rules and operating procedures.
Subject to compliance with the transfer and exchange restrictions applicable
to the Notes described elsewhere herein, cross-market transfers between DTC
participants, on the one hand, and Euroclear or CEDEL participants, on the other
hand, will be effected by DTC in accordance with DTC's rules on behalf of
Euroclear or CEDEL, as the case may be, by its respective depository; however,
such cross-market transactions will require delivery of instructions to
Euroclear or CEDEL, as the case may be, by the counterparty in such system in
accordance with the rules and procedures and within the established deadlines
(Brussels time) of such system. Euroclear or CEDEL, as the case may be, will, if
the transaction meets its settlement requirements, deliver instructions to its
respective depository to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant Global Note in DTC, and making
or receiving payment in accordance with normal procedures or same-day funds
settlement applicable to DTC, Euroclear participants and CEDEL participants may
not deliver instructions directly to the depositories for Euroclear or CEDEL.
Because of time zone differences, the securities account of a Euroclear or
CEDEL participant purchasing an interest in a Global Note from a DTC participant
will be credited, and any such crediting will be reported to the relevant
Euroclear or CEDEL participant, during the securities settlement processing day
(which must be a business day for Euroclear and CEDEL) immediately following the
DTC settlement date. Cash received in Euroclear or CEDEL participant to a DTC
participant will be received with value on the DTC settlement date but will be
available in the relevant Euroclear or CEDEL cash account only as of the
business day for Euroclear or CEDEL following the DTC settlement date.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more participants to whose
account with DTC interests in the Global Notes are credited and only in respect
of such portion of the aggregate principal amount of the Notes as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default (as defined below) under the Notes, DTC reserves the
right to exchange the Global Notes for legended Notes in certificated form, and
to distribute such Notes to its participants.
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures in
order to facilitate transfers of beneficial ownership interests in the Global
Notes among participants of DTC, Euroclear and CEDEL, they are under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. None of the Company, the Trustee nor
any of their respective agents will have any responsibility for the performance
by DTC. Euroclear and CEDEL, their participants or indirect participants of
their respective obligations under the rules and procedures governing their
operations, including maintaining, supervising or reviewing the records relating
to, or payments made on account of, beneficial ownership interests in Global
Notes.
OPTIONAL REDEMPTION
The Notes are subject to redemption, at the option of the Company, in whole
or in part, at any time on or after March 15, 2003 and prior to maturity, upon
not less than 30 nor more than 60 days' notice mailed to each Holder of Notes to
be redeemed at such Holder's address appearing in the Note Register, in amounts
of $1,000 principal amount or an integral multiple of $1,000, at the following
Redemption
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Prices (expressed as percentages of the principal amount) plus accrued interest
to but excluding the Redemption Date (subject to the right of Holders of record
on the relevant Regular Record Date to receive interest due on an Interest
Payment Date that is on or prior to the Redemption Date), if redeemed during the
12 month period beginning March 15 of the years indicated:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ----------------------------------------------------------------------------------------------------- -----------
<S> <C>
2003................................................................................................. 104.500%
2004................................................................................................. 103.000%
2005................................................................................................. 101.500%
2006 and thereafter.................................................................................. 100.000%
</TABLE>
(SectionSection 203, 1101, 1105 and 1107)
The Notes are redeemable prior to March 15, 2003 only in the event that on
or before March 15, 2001 the Company receives net proceeds from a sale of its
Common Equity, in which case the Company may, at its option, use all or a
portion of any such net proceeds to redeem Notes in a principal amount of up to
an aggregate amount equal to 33 1/3% of the original principal amount of the
Notes, PROVIDED, HOWEVER, that at least 66 2/3% of the original aggregate
principal amount of the Notes remains outstanding after such redemption. Such
redemption must occur on a Redemption Date within 90 days of such sale and upon
not less than 30 nor more than 60 days' notice mailed to each Holder of Notes to
be redeemed at such Holder's address appearing in the Note Register, in amounts
of $1,000 principal amount or an integral multiple of $1,000 at a redemption
price of 109% of their principal amount plus accrued and unpaid interest to but
excluding the Redemption Date (subject to the rights 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 less than all the Notes are to be redeemed, the Trustee shall select, on
a pro rata basis, by lot or by such other method as the Trustee shall deem fair
and appropriate, the particular Notes to be redeemed or any portion thereof that
is an integral multiple of $1,000. (Section 1104)
MANDATORY REDEMPTION; SINKING FUND
Except as set forth under "Covenants--Limitation on Asset Sales" and
"Covenants--Change of Control" below, the Company is not required to purchase or
make mandatory redemption payments or sinking fund payments with respect to the
Notes.
COVENANTS
The Indenture contains, among others, the following covenants:
LIMITATION ON CONSOLIDATED DEBT
The Company may not, and may not permit any Restricted Subsidiary of the
Company to, Incur any Debt unless either (a) the ratio of (i) the aggregate
consolidated principal amount of Debt of the Company outstanding as of the most
recent available quarterly or annual balance sheet, after giving pro forma
effect to the Incurrence of such Debt and any other Debt Incurred since such
balance sheet date and the receipt and application of the proceeds thereof to
(ii) Consolidated Cash Flow Available for Fixed Charges for the four full fiscal
quarters next preceding the Incurrence of such Debt for which consolidated
financial statements are available, determined on a pro forma basis as if (x)
any such Debt had been Incurred and the proceeds thereof had been applied at the
beginning of such four fiscal quarters, (y) the net income (or loss) for such
period of any Person or related to any assets disposed of by the Company or a
Restricted Subsidiary of the Company prior to the end of such period had been
excluded from Consolidated Net Income and (z) the net income (or loss) for such
period of any Person or related to any assets acquired by
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the Company or any Restricted Subsidiary prior to the end of such period had
been included in Consolidated Net Income, 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, any issuance of capital stock
(other than Disqualified Stock) since such balance sheet date, any increase in
paid-in-capital (other than in respect of Disqualified Stock) since such balance
sheet date and the Incurrence of any other Debt 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 the greater of (x) $175 million and (y) 85% of the Eligible
Receivables, and any renewal, extension, refinancing or refunding thereof in
an amount which, together with any principal amount remaining outstanding or
available under all Bank Credit Agreements and Vendor Financing Facilities
of the Company and its Restricted Subsidiaries, plus the amount of any
premium required to be paid in connection with such refinancing pursuant to
the terms of any Bank Credit Agreement so refinanced plus the amount of
expenses incurred in connection with such refinancing, does not exceed the
aggregate principal amount outstanding or available under all such Bank
Credit Agreements and Vendor Financing Facilities of the Company and its
Restricted Subsidiaries immediately prior to such renewal, extension,
refinancing or refunding;
(ii) Purchase Money Debt Incurred to finance the construction,
acquisition or improvement of Telecommunications Assets, provided that the
net proceeds of such Purchase Money Debt do not exceed 100% of the cost of
construction, acquisition or improvement price of the applicable
Telecommunications Assets;
(iii) Debt owed by the Company to any Restricted Subsidiary of the
Company or Debt owed by a Restricted Subsidiary of the Company to the
Company or a Restricted Subsidiary of the Company; provided, however, that
upon either (x) the transfer or other disposition by such Restricted
Subsidiary or the Company of any Debt so permitted to a Person other than
the Company or another 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 Restricted Subsidiary, as a result of which the obligor of
such Debt ceases to be a Restricted Subsidiary, the provisions of this
clause (iii) shall no longer be applicable to such Debt and such Debt shall
be deemed to have been Incurred at the time of such transfer or other
disposition;
(iv) Debt Incurred to renew, extend, refinance or refund (each, a
"refinancing") Debt outstanding at the date of the Indenture or Incurred
pursuant to the preceding paragraph or clause (ii) of this paragraph or the
Notes in an aggregate principal amount not to exceed the aggregate principal
amount of and accrued interest on the Debt so refinanced plus the amount of
any premium required to be paid in connection with such refinancing pursuant
to the terms of the Debt so refinanced or the amount of any premium
reasonably determined by the Company as necessary to accomplish such
refinancing by means of a tender offer or privately negotiated repurchase,
plus the amount of expenses of the Company incurred in connection with such
refinancing; provided, however, that Debt the proceeds of which are used to
refinance the Notes or Debt which is pari passu to the Notes or debt which
is subordinate in right of payment to the Notes shall only be permitted if
(A) in the case of any refinancing of the Notes or Debt which is PARI PASSU
to the Notes, the refinancing Debt is made PARI PASSU to the Notes or
subordinated to the Notes, and, in the case of any refinancing of Debt which
is subordinated to the Notes, the refinancing Debt constitutes Subordinated
Debt and (B) in either case, the refinancing Debt by its terms, or by the
terms of any agreement or instrument pursuant to which such Debt is issued,
(x) does not provide for payments of principal of such Debt at the stated
maturity
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thereof or by way of a sinking fund applicable thereto or by way of any
mandatory redemption, defeasance, retirement or repurchase thereof by the
Company (including any redemption, retirement or repurchase which is
contingent upon events or circumstances, but excluding any retirement
required by virtue of acceleration of such Debt upon any event of default
thereunder), in each case prior to the time the same are required by the
terms of the Debt being refinanced and (y) does not permit redemption or
other retirement (including pursuant to an offer to purchase made by the
Company) of such debt at the option of the holder thereof prior to the final
stated maturity of the Debt being refinanced, other than a redemption or
other retirement at the option of the holder of such Debt (including
pursuant to an offer to purchase made by the Company) which is conditioned
upon a change substantially similar to those described under "--Change of
Control" or which is pursuant to provisions substantially similar to those
described under "--Limitation on Asset Dispositions".
(v) Debt consisting of Permitted Interest Rate and Currency Protection
Agreements;
(vi) Debt outstanding under the Notes;
(vii) Subordinated Debt invested by (a) a group of employees of the
Company, which includes the Chief Executive Officer of the Company, who own,
directly or indirectly, through an employee stock ownership plan or
arrangement, shares of the Company's Capital Stock or (b) any other Person
that controls the Company (i) on the Issue Date or (ii) after a Change of
Control, provided that the Company is not in default with respect to its
obligations described under "--Change of Control" below;
(viii) Debt consisting of performance and other similar bonds and
reimbursement obligations Incurred in the ordinary course of business
securing the performance of contractual, franchise or license obligations of
the Company or a Restricted Subsidiary, or in respect of a letter of credit
obtained to secure such performance; and
(ix) Debt not otherwise permitted to be Incurred pursuant to clauses (i)
through (viii) above, which, together with any other outstanding Debt
Incurred pursuant to this clause (ix), has an aggregate principal amount or,
in the case of Debt issued at a discount, an accreted amount (determined in
accordance with generally accepted accounting principles) at the time of
Incurrence not in excess of $10 million at any time outstanding.
For purposes of determining compliance with this "Limitation on Consolidated
Debt" covenant, in the event that an item of Debt meets the criteria of more
than one of the types of Debt the Company is permitted to incur pursuant to the
foregoing clauses (i) through (ix) or the first unnumbered paragraph of this
"Limitation on Consolidated Debt", 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 or paragraph 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. (Section1007)
LIMITATION ON DEBT AND PREFERRED STOCK OF RESTRICTED SUBSIDIARIES
The Company may not permit any Restricted Subsidiary of the Company (other
than a Restricted Subsidiary that has fully and unconditionally Guaranteed the
Notes on an unsubordinated basis) to Incur or suffer to exist any Debt or issue
any Preferred Stock except:
(i) Debt or Preferred Stock outstanding on the date of the Indenture
after giving effect to the application of the proceeds of the Old Notes;
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(ii) Debt Incurred or Preferred Stock issued to and held by the Company
or a Restricted Subsidiary of the Company (provided that such Debt or
Preferred Stock is at all times held by the Company or a Restricted
Subsidiary of the Company);
(iii) Debt Incurred or Preferred Stock issued by a Person prior to the
time (A) such Person became a Restricted Subsidiary of the Company, (B) such
Person merges into or consolidates with a Restricted Subsidiary of the
Company or (C) another Restricted Subsidiary of the Company merges into or
consolidates with such Person (in a transaction in which such Person becomes
a Restricted Subsidiary of the Company), which Debt or Preferred Stock was
not Incurred or issued in anticipation of such transaction and was
outstanding prior to such transaction;
(iv) Debt consisting of Permitted Interest Rate and Currency Protection
Agreements;
(v) Debt or Preferred Stock of a Joint Venture;
(vi) Debt under any one or more Bank Credit Agreements or Vendor
Financing Facilities (and renewals, extensions, refinancings or refundings
thereof) which is permitted to be outstanding under clause (i) of the
"Limitation on Consolidated Debt";
(vii) Debt consisting of Guarantees of the Notes;
(viii) Debt or Preferred Stock which is exchanged for, or the proceeds of
which are used to refinance, refund or redeem, any Debt or Preferred Stock
permitted to be outstanding pursuant to clauses (i), (iii) and (ix) hereof
(or any extension or renewal thereof) (for purposes hereof, a
"refinancing"), in an aggregate principal amount, in the case of Debt, or
with an aggregate liquidation preference, in the case of Preferred Stock,
not to exceed the aggregate principal amount of the Debt so refinanced or
the aggregate liquidation preference of the Preferred Stock so refinanced,
plus the amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of the Debt or Preferred Stock so
refinanced or the amount of any premium reasonably determined by the Company
as necessary to accomplish such refinancing by means of a tender offer or
privately negotiated repurchase, plus the amount of expenses of the Company
and the Restricted Subsidiary incurred in connection therewith and provided
the Debt or Preferred Stock incurred or issued upon such refinancing by its
terms, or by the terms of any agreement or instrument pursuant to which such
Debt or Preferred Stock is Incurred or issued, (x) does not provide for
payments of principal or liquidation value at the stated maturity of such
Debt or Preferred Stock or by way of a sinking fund applicable to such Debt
or Preferred Stock or by way of any mandatory redemption, defeasance,
retirement or repurchase of such Debt or Preferred Stock by the Company or
any Restricted Subsidiary of the Company (including any redemption,
retirement or repurchase which is contingent upon events or circumstances,
but excluding any retirement required by virtue of acceleration of such Debt
upon an event of default thereunder), in each case prior to the time the
same are required by the terms of the Debt or Preferred Stock being
refinanced and (y) does not permit redemption or other retirement (including
pursuant to an offer to purchase made by the Company or a Restricted
Subsidiary of the Company) of such Debt or Preferred Stock at the option of
the holder thereof prior to the stated maturity of the Debt or Preferred
Stock being refinanced, other than a redemption or other retirement at the
option of the holder of such Debt or Preferred Stock (including pursuant to
an offer to purchase made by the Company or a Restricted Subsidiary of the
Company) which is conditioned upon the change of control of the Company
pursuant to provisions substantially similar to those contained in the
Indenture described under "--Change of Control" or which is pursuant to
provisions substantially similar to those described under "--Limitation on
Asset Dispositions", and PROVIDED, FURTHER, that in the case of any exchange
or redemption of Preferred Stock of a Restricted Subsidiary of the Company,
such Preferred Stock may only be exchanged for or redeemed with Preferred
Stock of such Restricted Subsidiary;
(ix) 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 100% of the cost of
construction, acquisition or improvement price of the applicable
Telecommunications Assets;
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(x) 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
(xi) Debt not otherwise permitted to be incurred pursuant to clauses (i)
through (x) above, which, together with any other outstanding Debt incurred
pursuant to this clause (xi), 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.
(Section1008)
For purposes of determining compliance with this "Limitation on Debt and
Preferred Stock of Restricted Subsidiaries" covenant, in the event that an item
of Debt meets the criteria of more than one of the types of Debt a Restricted
Subsidiary of the Company is permitted to incur pursuant to the foregoing
clauses (i) through (xi), the Company shall have the right, in its sole
discretion, to classify such item of Debt and shall be only 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
or otherwise included in the determination of a particular amount shall not be
included.
LIMITATION ON RESTRICTED PAYMENTS
The Company (i) may not, directly or indirectly, declare or pay any
dividend, or make any distribution, in respect of its Capital Stock or to the
holders thereof (in their capacity as such), excluding any dividends or
distributions payable solely in shares of its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to acquire its
Capital Stock (other than Disqualified Stock); (ii) may not, and may not permit
any Restricted Subsidiary to, purchase, redeem, or otherwise retire or acquire
for value (a) any Capital Stock of the Company or any Related Person of the
Company; or (b) any options, warrants or rights to purchase or acquire shares of
Capital Stock of the Company or any Related Person of the Company or any
securities convertible or exchangeable into shares of Capital Stock of the
Company or any Related Person of the Company; (iii) may not make, or permit any
Restricted Subsidiary to make, any Investment in, or payment on a Guarantee of
any obligation of, any Person, other than the Company or a Restricted Subsidiary
of the Company, except for Permitted Investments; and (iv) may not, and may not
permit any Restricted Subsidiary to, redeem, defease, repurchase, retire or
otherwise acquire or retire for value, prior to any scheduled maturity,
repayment or sinking fund payment, Debt of the Company which is subordinate in
right of payment to the Notes (each of clauses (i) through (iv) being a
"Restricted Payment") if: (1) a Default or an Event of Default shall have
occurred and is continuing; or (2) upon giving effect to such Restricted
Payment, the Company could not Incur at least $1.00 of additional Debt pursuant
to the terms of the Indenture described in the first paragraph of "--Limitation
on Consolidated Debt" above; or (3) upon giving effect to such Restricted
Payment, the aggregate of all Restricted Payments from April 25, 1996 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 April 25, 1996 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
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April 25, 1996, including the fair value of property other than cash (determined
in good faith by the Board of Directors of the Company, as conclusively
evidenced by a Board Resolution filed with the Trustee), as capital
contributions to the Company or from the issuance (other than to a Restricted
Subsidiary) of Capital Stock (other than Disqualified Stock) of the Company and
warrants, rights or options on Capital Stock (other than Disqualified Stock) of
the Company and the principal amount of Debt of the Company that has been
converted into Capital Stock (other than Disqualified Stock and other than by a
Restricted Subsidiary) of the Company after April 25, 1996.
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 April 25, 1996 from issuances of its Common Equity or options to acquire
its Common Equity to members, officers, managers, directors and employees of the
Company or any of its Subsidiaries; (iii) the Company and its Restricted
Subsidiaries may refinance any Debt otherwise permitted by clause (iv) of the
second paragraph under "--Limitation on Consolidated Debt" above; and (iv) the
Company and its Restricted Subsidiaries may retire or repurchase any Capital
Stock or Subordinated Debt 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 good faith determination of the
Company be permitted under the Indenture, such Restricted Payment shall be
deemed to have been made in compliance with the Indenture notwithstanding any
subsequent adjustments in good faith to the Company financial statements
affecting Consolidated Net Income for any period.
In determining the aggregate amount expended or available for Restricted
Payments in accordance with clause (3) of the first paragraph above, (1) no
amounts expended under clauses (iii) or (iv) of the immediately preceding
paragraph shall be included, (2) 100% of the amounts expended under clauses (i)
and (ii) of the immediately preceding paragraph shall be included, and (3) no
amount shall be credited in respect of issuances of Capital Stock in
transactions under clause (iv) of the immediately preceding paragraph. (Section
1009 )
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES
The Company may not, and may not permit any Restricted Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary of the Company (i) to pay dividends (in cash or otherwise)
or make any other distributions in respect of its Capital Stock owned by the
Company or any other Restricted Subsidiary or pay any Debt or other obligation
owed to the Company or any other Restricted Subsidiary; (ii) to make loans or
advances to the Company or any other Restricted Subsidiary; or (iii) to transfer
any of its property or assets to the Company or any other Restricted Subsidiary.
Notwithstanding the foregoing, the Company may, and may permit any Restricted
Subsidiary to, suffer to exist any such encumbrance or restriction (a) pursuant
to any agreement in effect on the Issue Date; (b) pursuant to an agreement
relating to any Acquired Debt, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person so acquired and its Subsidiaries; (c) pursuant to any one or more
Bank Credit Agreements or Vendor Financing Facilities (and renewals, extensions,
refinancings or refundings thereof) which is permitted to be outstanding under
clause (i) of the "Limitation on Consolidated Debt", PROVIDED that such
restriction is consistent with, and not materially more restrictive (as
conclusively determined in good faith by the Chief Financial Officer of the
Company), taken as a whole, than, comparable provisions included in similar
agreements or facilities extended to comparable credits engaged in the
Telecommunications Business; (d) pursuant to an agreement effecting a renewal,
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refunding or extension of Debt Incurred pursuant to an agreement referred to in
clause (a) or (b) above or (e) below, PROVIDED, HOWEVER, that the provisions
contained in such renewal, refunding or extension agreement relating to such
encumbrance or restriction are not materially more restrictive (as conclusively
determined in good faith by the Chief Financial Officer of the Company), taken
as a whole, than the provisions contained in the agreement the subject thereof;
(e) in the case of clause (iii) above, restrictions contained in any security
agreement (including a Capital Lease Obligation) securing Debt of the Company or
a Restricted Subsidiary otherwise permitted under the Indenture, but only to the
extent such restrictions restrict the transfer of the property subject to such
security agreement; (f) in the case of clause (iii) above, customary
nonassignment provisions entered into in the ordinary course of business in
leases and other agreements; (g) any restriction with respect to a Restricted
Subsidiary of the Company imposed pursuant to an agreement which has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of such Restricted Subsidiary, PROVIDED that
consummation of such transaction would not result in a Default or an Event of
Default, that such restriction terminates if such transaction is not consummated
and that such consummation or abandonment of such transaction occurs within one
year of the date such agreement was entered into; (h) pursuant to applicable law
or regulations; (i) pursuant to the Indenture and the Notes; or (j) any
restriction on the sale or other disposition of assets or property securing Debt
as a result of a Permitted Lien on such assets or property. (Section 1010)
LIMITATION ON LIENS
The Company may not, and may not permit any Restricted Subsidiary of the
Company to, Incur or suffer to exist any Lien on or with respect to any property
or assets now owned or hereafter acquired to secure any Debt without making, or
causing such Restricted Subsidiary to make, effective provision for securing the
Notes (x) equally and ratably with (or prior to) such Debt as to such property
for so long as such Debt will be so secured or (y) in the event such Debt is
Debt of the Company which is subordinate in right of payment to the Notes, prior
to such Debt as to such property for so long as such Debt will be so secured.
The foregoing restrictions shall not apply to: (i) Liens existing on the
Issue Date and securing Debt outstanding on the Issue Date or securing the Notes
or Liens securing Debt Incurred pursuant to any Bank Credit Agreement or Vendor
Financing Facility (whether or not such Bank Credit Agreement or Vendor
Financing Facility was outstanding on the Issue Date); (ii) Liens securing Debt
in an amount which, together with the aggregate amount of Debt then outstanding
or available under the Bank Credit Agreement and the Vendor Financing Facility
(or under refinancings or amendments of such agreements), does not exceed 1.5
times the Company's Consolidated Cash Flow Available for Fixed Charges for the
four full fiscal quarters preceding the Incurrence of such Lien for which
consolidated financial statements are available, determined on a pro forma basis
as if such Debt had been Incurred and the proceeds thereof had been applied at
the beginning of such four fiscal quarters; (iii) Liens in favor of the Company
or any Wholly Owned Restricted Subsidiary of the Company; (iv) Liens on real or
personal property of the Company or a Restricted Subsidiary of the Company
acquired, constructed or constituting improvements made after the Issue Date to
secure Purchase Money Debt which is Incurred for the construction, acquisition
and improvement of Telecommunications Assets and is otherwise permitted under
the Indenture, PROVIDED, HOWEVER, that (a) the net proceeds of any Debt secured
by such a Lien does not exceed 100% of such purchase price or cost of
construction or improvement of the property subject to such Lien; (b) such Lien
attaches to such property prior to, at the time of or within 180 days after the
acquisition, completion of construction or commencement of operation of such
property; and (c) such Lien does not extend to or cover any property other than
the property (or identifiable portions thereof) acquired, constructed or
constituting improvements made with the proceeds of such Purchase Money Debt (it
being understood and agreed that all Debt owed to any single lender or group of
lenders or outstanding under any single credit facility shall be considered a
single Purchase Money Debt, whether drawn at one time or from time to time); (v)
Liens to secure Acquired Debt, PROVIDED, HOWEVER, that (a) such Lien attaches to
the acquired asset prior to the time of the acquisition of such asset and (b)
such Lien does not extend to or
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cover any other asset; (vi) Liens to secure Debt Incurred to extend, renew,
refinance or refund (or successive extensions, renewals, refinancings or
refundings), in whole or in part, Debt secured by any Lien referred to in the
foregoing clauses (i), (ii), (iv) and (v) so long as such Lien does not extend
to any other property and the principal amount of Debt so secured is not
increased except as otherwise permitted under clause (iv) of "--Limitation on
Consolidated Debt"; (vii) Liens securing Debt not otherwise permitted by the
foregoing clauses (i) through (vi) in an amount not to exceed 5% of the
Company's Consolidated Tangible Assets determined as of the most recent
available quarterly or annual balance sheet; and (viii) Permitted Liens.
(Section 1011)
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS
The Company may not, and may not permit any Restricted Subsidiary to, enter
into any Sale and Leaseback Transaction unless (i) the Company or such
Restricted Subsidiary would be entitled to Incur a Lien to secure Debt by reason
of the provisions described under "--Limitation on Liens" above, equal in amount
to the Attributable Value of the Sale and Leaseback Transaction without equally
and ratably securing the Notes; or (ii) the Sale and Leaseback Transaction is
treated as an Asset Disposition and all of the conditions of the Indenture
described under "--Limitation on Asset Dispositions" (including the provisions
concerning the application of Net Available Proceeds) are satisfied with respect
to such Sale and Leaseback Transaction, treating all of the consideration
received in such Sale and Leaseback Transaction in the same manner as
consideration received in respect of an Asset Disposition for purposes of such
covenant. (Section 1012)
LIMITATION ON ASSET DISPOSITIONS
The Company may not, and may not permit any Restricted Subsidiary to, make
any Asset Disposition in one or more related transactions occurring within any
12 month period unless: (i) the Company or the Restricted Subsidiary, as the
case may be, receives consideration for such disposition at least equal to the
fair market value for the assets sold or disposed of as determined by the Board
of Directors of the Company in good faith and evidenced by a Board Resolution
filed with the Trustee, which determination shall be conclusive; (ii) at least
75% of the consideration for such disposition consists of (1) cash or readily
marketable cash equivalents or the assumption of Debt of the Company (other than
Debt that is subordinated to the Notes) or of the Restricted Subsidiary and
release from all liability on the Debt assumed; (2) Telecommunications Assets;
or (3) shares of publicly traded Voting Stock of any Person engaged in the
Telecommunications Business in the United States; and (iii) all Net Available
Proceeds, less any amounts invested in Telecommunications Assets (within 180
days prior to and 360 days following such disposition), are applied within 360
days of such disposition (1) first, to the permanent repayment or reduction of
Debt then outstanding under any Bank Credit Agreement or Vendor Financing
Facility, to the extent such agreements would require such application or
prohibit payments pursuant to clause (2) following, (2) second, to the extent of
remaining Net Available Proceeds, to make an Offer to Purchase outstanding Notes
at 100% of their principal amount, plus accrued interest to the date of purchase
(or 100% of the accreted value thereof, in the case of Debt issued at an
original issue discount) and, to the extent required by the terms thereof, any
other Debt of the Company that is PARI PASSU with the Notes at a price no
greater than 100% of the principal amount thereof plus accrued interest to the
date of purchase and (3) third, to the extent of any remaining Net Available
Proceeds following the completion of the Offer to Purchase, to the repayment of
other Debt of the Company or Debt of a Restricted Subsidiary of the Company, to
the extent permitted under the terms thereof. To the extent any Net Available
Proceeds remain after such uses, the Company and its Restricted Subsidiaries may
use such amounts for any purposes not prohibited by the Indenture. (Section
1013) Notwithstanding the foregoing, these provisions shall not apply to any
Asset Disposition which constitutes a transfer, conveyance, sale, lease or other
disposition of all or substantially all of the Company's properties or assets as
described under "--Mergers, Consolidations and Certain Sales of Assets".
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LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES
The Company may not, and may not permit any Restricted Subsidiary of the
Company to, issue, transfer, convey, sell or otherwise dispose of any shares of
Capital Stock of a Restricted Subsidiary of the Company or securities
convertible or exchangeable into, or options, warrants, rights or any other
interest with respect to, Capital Stock of a Restricted Subsidiary of the
Company to any person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company except (i) in a transaction consisting of a sale of
Capital Stock of such Restricted Subsidiary owned by the Company or any
Restricted Subsidiary of the Company and that complies with the provisions
described under "--Limitation on Asset Dispositions" above to the extent such
provisions apply; (ii) if required, the issuance, transfer, conveyance, sale or
other disposition of directors' qualifying shares; (iii) in a transaction in
which, or in connection with which, the Company or a Restricted Subsidiary
acquires at the same time sufficient Capital Stock of such Restricted Subsidiary
to at least maintain the same percentage ownership interest it had prior to such
transaction; (iv) constituting the issuance of Preferred Stock permitted by the
provisions described under "--Limitation on Debt and Preferred Stock of
Restricted Subsidiaries" above; and (v) Disqualified Stock issued in exchange
for, or upon conversion of, or the proceeds of the issuance of which are used to
redeem, refinance, replace or refund shares of Disqualified Stock of such
Restricted Subsidiary, PROVIDED that the amounts of the redemption obligations
of such Disqualified Stock shall not exceed the amounts of the redemption
obligations of, and such Disqualified Stock shall have redemption obligations no
earlier than those required by, the Disqualified Stock being exchanged,
converted, redeemed, refinanced, replaced or refunded. (Section1014)
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 of the Company, either directly or
indirectly, unless such transaction is on terms no less favorable to the Company
or such Restricted Subsidiary than those that could reasonably 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 $15 million, the Chief Executive Officer of the Company shall
determine that the transaction satisfies the above criteria and shall evidence
such a determination by a certificate filed with the Trustee. For any
transaction that involves in excess of $15 million, the Company shall also
obtain an opinion from a nationally recognized expert with experience in
appraising the terms and conditions, taken as a whole, of the type of
transaction (or series of related transactions) for which the opinion is
required stating that such transaction (or series of related transactions) is on
terms and conditions, taken as a whole, no less favorable to the Company or such
Restricted Subsidiary than those that could be obtained in a comparable arm's
length transaction with an entity that is not an Affiliate or Related Person of
the Company, which opinion shall be filed with the Trustee. This covenant shall
not apply to Investments by an Affiliate or a Related Person of the Company in
the Capital Stock (other than Disqualified Stock) of the Company or any
Restricted Subsidiary of the Company. (Section 1015)
CHANGE OF CONTROL
Within 30 days of the occurrence of a Change of Control, the Company will be
required to make an Offer to Purchase all outstanding Notes at a purchase price
equal to 101% of their principal amount plus accrued and unpaid interest to the
date of purchase. A "Change of Control" will be deemed to have occurred at such
time as either (a) any Person or any Persons acting together that would
constitute a "group" (a "Group") for purposes of Section 13(d) of the Securities
Exchange Act of 1934, or any
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successor provision thereto (other than Eagle River, Mr. Craig O. McCaw and
their respective Affiliates or an underwriter engaged in a firm commitment
underwriting on behalf of the Company), shall beneficially own (within the
meaning of Rule 13d-3 under the Exchange Act, or any successor provision
thereto) more than 50% of the aggregate voting power of all classes of Voting
Stock of the Company; or (b) neither 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. (Section1016)
Except as described above with respect to a Change of Control, the Indenture
does not contain provisions that permit the Holders of the Notes to require that
the Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar restructuring.
Restrictions in the Indenture described herein on the ability of the Company
and its Restricted Subsidiaries to incur additional Indebtedness, to grant Liens
on its or their property, to make Restricted Payments and to make Asset Sales
may also make more difficult or discourage a takeover of the Company, whether
favored or opposed by the management of the Company. Consummation of any such
transaction in certain circumstances may require redemption or repurchase of the
Notes, and there can be no assurance that the Company or the acquiring party
will have sufficient financial resources to effect such redemption or
repurchase. Such restrictions and the restrictions on transactions with
Affiliates may, in certain circumstances, make more difficult or discourage any
leveraged buyout of the Company or any of its Subsidiaries by the management of
the Company or other Persons. While such restrictions cover a variety of
arrangements which have traditionally been used to effect highly leveraged
transactions, the Indenture may not afford the Holders of Notes protection in
all circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction.
In the event of a Change of Control, the indentures relating to the 9 5/8%
Notes and the 12 1/2% Notes would require the Company to make an offer to
purchase the 9 5/8% Notes and the 12 1/2% Notes. The Company does not currently
have adequate financial resources to effect a repurchase of the 9 5/8% Notes and
the 12 1/2% Notes upon a Change of Control and there can be no assurance that
the Company will have such resources in the future. The inability of the Company
to repurchase the Notes upon a Change of Control would constitute an Event of
Default.
In addition, there may be restrictions contained in instruments evidencing
Indebtedness incurred by the Company or its Restricted Subsidiaries permitted
under the Indenture which restrict or prohibit the ability of the Company to
effect any repurchase required under the Indenture in connection with a Change
of Control.
In the event that the Company makes an Offer to Purchase the Notes, the
Company intends to comply with any applicable securities laws and regulations,
including any applicable requirements of Section 14(e) of, and Rule 14e1 under,
the Exchange Act.
PROVISION OF FINANCIAL INFORMATION
The Company has agreed that, for so long as any Notes remain outstanding, it
will file with the Trustee within 15 days after it files them with the
Commission copies of the annual and quarterly reports and the information,
documents, and other reports that the Company is required to file with the
Commission pursuant to Section 13(a) or 15(d) of the Exchange Act ("SEC
Reports"). In the event the Company shall cease to be required to file SEC
Reports pursuant to the Exchange Act, the Company will nevertheless continue to
file such reports with the Commission (unless the Commission will not accept
such a filing) and
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the Trustee. The Company will furnish copies of the SEC Reports to the holders
of Notes at the time the Company is required to file the same with the Trustee
and will make such information available to investors who request it in writing.
(Section 1017)
MERGERS, CONSOLIDATIONS AND CERTAIN SALES OF ASSETS
The Company may not, in a single transaction or a series of related
transactions, (i) consolidate with or merge into any other Person or permit any
other Person to consolidate with or merge into the Company (other than 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 shall be a
corporation organized under the laws of the United States of America or any
State thereof or the District of Columbia and shall expressly assume, by a
supplemental indenture executed and delivered to the Trustee in form
satisfactory to the Trustee, all of the Company's obligations under the
Indenture; (2) immediately after giving pro forma effect to such transaction as
if such transaction had occurred at the beginning of the last full fiscal
quarter immediately prior to the consummation of such transaction with the
appropriate adjustments with respect to the transaction being included in such
pro forma calculation and treating any Debt which becomes an obligation of the
Company or a Subsidiary as a result of such transaction as having been Incurred
by the Company or such Subsidiary at the time of the transaction, no Default or
Event of Default shall have occurred and be continuing; (3) immediately after
giving effect to such transaction, the Consolidated Net Worth of the Company (or
other successor entity to the Company) is equal to or greater than that of the
Company immediately prior to the transaction; (4) if, as a result of any such
transaction, property or assets of the Company would become subject to a Lien
prohibited by the provisions of the Indenture described under "Covenants--
Limitation on Liens" above, the Company or the successor entity to the Company
shall have secured the Notes as required by said covenant; and (5) certain other
conditions are met. (Section 801)
In the event of any transaction (other than a lease) described in and
complying with the immediately preceding paragraph in which the Company is not
the surviving Person and the surviving Person assumes all the obligations of the
Company under the Notes and the Indenture pursuant to a supplemental indenture,
such surviving Person shall succeed to, and be substituted for, and may exercise
every right and power of, the Company, and the Company will be discharged from
its obligations under the Indenture and the Notes; PROVIDED that solely for the
purpose of calculating amounts described in clause (3) under
"Covenant--Limitations on Restricted Payments", any such 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 801)
The meaning of the phrase "all or substantially all" as used above varies
according to the facts and circumstances of the subject transaction, has no
clearly established meaning under relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances, there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of the Company, and
therefore it may be unclear whether the foregoing provisions are applicable.
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CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided. (Section 101)
"Acquired Debt" means, with respect to any specified Person, (i) Debt of any
other Person existing at the time such Person merges with or into or
consolidates with or becomes a Restricted Subsidiary of such specified Person
and (ii) Debt secured by a Lien encumbering any asset acquired by such specified
Person, which Debt was not Incurred in anticipation of, and was outstanding
prior to, such merger, consolidation or acquisition.
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any 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 the Company or any Restricted Subsidiary means any
transfer, conveyance, sale, lease or other disposition(other than a creation of
a Lien) by such Person (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
Company, but excluding a disposition by a Restricted Subsidiary of the Company
to the Company or a Restricted Subsidiary of the Company or by the Company to a
Restricted Subsidiary of the Company) of (i) shares of Capital Stock or other
ownership interests of a Restricted Subsidiary of the Company, other than as
permitted by the provisions of the Indenture described above under the Caption
"--Limitation on Debt and Preferred Stock of Restricted Subsidiaries" or
pursuant to a transaction in compliance with the covenant described under
"--Mergers, Consolidations and Certain Sales of Assets" above, (ii)
substantially all of the assets of the Company 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 the Company or any of
its Restricted Subsidiaries other than (A) in the ordinary course of business or
(B) that constitutes a Restricted Payment which is permitted under the covenant
"--Limitation on Restricted Payments" above; provided that a transaction
described in clauses (i), (ii) and (iii) shall constitute an Asset Disposition
only if the aggregate consideration for such transfer, conveyance, sale, lease
or other disposition is equal to $5 million or more in any 12 month period.
"Attributable Value" means, as to any particular lease under which any
Person is at the time liable other than a Capital Lease Obligation, and at any
date as of which the amount thereof is to be determined, the total net amount of
rent required to be paid by such Person under such lease during the initial term
thereof as determined in accordance with generally accepted accounting
principles, discounted from the last date of such initial term to the date of
determination at a rate per annum equal to the discount rate which would be
applicable to a Capital Lease Obligation with like term in accordance with
generally accepted accounting principles. The net amount of rent required to be
paid under any such lease for any such period shall be the aggregate amount of
rent payable by the lessee with respect to such period after excluding amounts
required to be paid on account of insurance, taxes, assessments, utility,
operating and labor costs and similar charges. In the case of any lease which is
terminable by the lessee upon the payment of penalty, such net amount shall also
include the lesser of the amount of such penalty (in which case no rent shall be
considered as required to be paid under such lease subsequent to the first date
upon which it may be so terminated) or the rent which would otherwise be
required to be paid if such lease is not so terminated. "Attributable Value"
means, as to a Capital Lease Obligation, the principal amount thereof.
"Bank Credit Agreement" means any one or more credit agreements (which may
include or consist of revolving credits) between the Company or any Restricted
Subsidiary of the Company and one or more
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banks or other financial institutions providing financing for the business of
the Company and its Restricted Subsidiaries.
"Capital Lease Obligation" of any Person means the obligation to pay rent or
other payment amounts under a lease of (or other Debt arrangements conveying the
right to use) real or personal property of such Person which is required to be
classified and accounted for as a capital lease or a liability on the face of a
balance sheet of such Person in accordance with generally accepted accounting
principles (a "Capital Lease"). The stated maturity of such obligation shall be
the date of the last payment of rent or any other amount due under such lease
prior to the first date upon which such lease may be terminated by the lessee
without payment of a penalty. The principal amount of such obligation shall be
the capitalized amount thereof that would appear on the face of a balance sheet
of such Person in accordance with generally accepted accounting principles.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock or
other equity participations, including partnership interests, whether general or
limited, of such Person.
"Common Equity" of any Person means Capital Stock of such Person that is not
Disqualified Stock, and a "sale of Common Equity" includes any sale of Common
Equity effected by private sale or public offering.
"Consolidated Capital Ratio" of any Person as of any date means the ratio of
(i) the aggregate consolidated principal amount of Debt (or in the case of Debt
issued at a discount the accreted amount thereof) of such Person then
outstanding (which amount of Debt shall be reduced by any amount of cash or cash
equivalent collateral securing on a perfected basis and dedicated for
disbursement exclusively to the payment of principal of and interest on such
Debt) 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 noncash expense for such period (excluding any
noncash charge to the extent that it requires an accrual of or a reserve for
cash disbursements in any future period), 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
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or foreign currency hedge, exchange or similar agreements; (iv) Preferred
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 or accrued during such period that is
allocable to interest expense.
"Consolidated Net Income" for any period means the consolidated net income
(or loss) of the Company and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with generally accepted
accounting principles; PROVIDED that there shall be excluded therefrom (a) the
net income (or loss) of any Person acquired by the Company or a Restricted
Subsidiary of the Company in a pooling of interests transaction for any period
prior to the date of such transaction, (b) the net income (or loss) of any
Person that is not a Restricted Subsidiary of the Company except to the extent
of the amount of dividends or other distributions actually paid to the Company
or a Restricted Subsidiary of the Company by such Person during such period, (c)
gains or losses on Asset Dispositions by the Company or its Restricted
Subsidiaries, (d) all extraordinary gains and extraordinary losses, (e) the
cumulative effect of changes in accounting principles, (f) noncash gains or
losses resulting from fluctuations in currency exchange rates, (g) any noncash
gain or loss realized on the termination of any employee pension benefit plan
and (h) the tax effect of any of the items described in clauses (a) through (g)
above; PROVIDED, FURTHER, that for purposes of any determination pursuant to the
provisions described under "Covenants--Limitation on Restricted Payments," there
shall further be excluded therefrom the net income (but not net loss) of any
Restricted Subsidiary of the Company that is subject to a restriction which
prevents the payment of dividends or the making of distributions to the Company
or another Restricted Subsidiary of the Company to the extent of such
restriction.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
generally accepted accounting principles, less amounts attributable to
Disqualified Stock of such Person; PROVIDED that, with respect to the Company,
adjustments following the date of the Indenture to the accounting books and
records of the Company in accordance with Accounting Principles Board Opinions
Nos. 16 and 17 (or successor opinions thereto) or otherwise resulting from the
acquisition of control of the Company by another Person shall not be given
effect to.
"Consolidated Tangible Assets" of any Person means the total amount of
assets (less applicable reserves and other properly deductible items) which
under generally accepted accounting principles would be included on a
consolidated balance sheet of such Person and its Restricted Subsidiaries after
deducting therefrom all goodwill, trade names, trademarks, patents, unamortized
debt discount and expense and other like intangibles, which in each case under
generally accepted accounting principles would be included on such consolidated
balance sheet; PROVIDED that, with respect to the Company, adjustments following
the date of the Indenture to the accounting books and records of the Company in
accordance with Accounting Principles Board Opinions Nos. 16 and 17 (or
successor opinions thereto) or otherwise resulting from the acquisition of
control of the Company by another Person shall not be given effect to.
"Debt" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or not
contingent, (i) every obligation of such Person for money borrowed, (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, including any such obligations Incurred in connection with the
acquisition of property, assets or businesses, (iii) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person, (iv)
every obligation of such Person issued or assumed as the deferred purchase price
of property or services (including securities repurchase agreements but
excluding trade accounts payable or accrued liabilities arising in the ordinary
course of business which are not overdue or which are being contested in good
faith), (v) every Capital Lease Obligation of such Person, (vi) all Receivables
Sales of such Person, together with any obligation of
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such Person to pay any discount, interest, fees, indemnities, penalties,
recourse, expenses or other amounts in connection therewith, (vii) all
obligations to redeem Disqualified Stock issued by such Person, (viii) every
obligation under Interest Rate and Currency Protection Agreements of such Person
and (ix) every obligation of the type referred to in clauses (i) through (viii)
of another Person and all dividends of another Person the payment of which, in
either case, such Person has Guaranteed. The "amount" or "principal amount" of
Debt at any time of determination as used herein represented by (a) any Debt
issued at a price that is less than the principal amount at maturity thereof,
shall be the amount of the liability in respect thereof determined in accordance
with generally accepted accounting principles, (b) any Receivables Sale, shall
be the amount of the unrecovered capital or principal investment of the
purchaser (other than the Company or a Wholly Owned Restricted Subsidiary of the
Company) thereof, excluding amounts representative of yield or interest earned
on such investment, (c) any Disqualified Stock, shall be the maximum fixed
redemption or repurchase price in respect thereof, (d) any Capital Lease
Obligation, shall be determined in accordance with the definition thereof, or
(e) any Permitted Interest Rate or Currency Protection Agreement, shall be zero.
In no event shall Debt include any liability for taxes.
"Default" means an event that with the passing of time or the giving of
notice or both shall constitute an Event of Default.
"Disqualified Stock" of any Person means any Capital Stock of such Person
(other than Capital Stock outstanding on the Issue Date) 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 Notes; PROVIDED, HOWEVER, that any Preferred Stock
which would not constitute Disqualified Stock but for provisions thereof giving
holders thereof the right to require the Company to repurchase or redeem such
Preferred Stock upon the occurrence of an asset sale or a Change of Control
occurring prior to the final Stated Maturity of the Notes shall not constitute
Disqualified Stock if the asset sale or change of control provisions applicable
to such Preferred Stock are no more favorable to the holders of such Preferred
Stock than the provisions applicable to the Notes contained in the covenant
described under "Covenants--Limitation on Asset Dispositions" or
"Covenants--Change of Control" and such Preferred Stock specifically provides
that the Company will not repurchase or redeem any such stock pursuant to such
provisions prior to the Company's repurchase of such Notes as are required to be
repurchased pursuant to the covenant described under "Covenants--Limitation on
Asset Dispositions" or "Covenants--Change of Control".
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent in
foreign currency, whose debt is rated "A 3" or higher, "A" or higher or "A" or
higher according to Moody's Investors Service, Inc., Standard & Poor's Ratings
Group or Duff & Phelps Credit Rating Co. (or such similar equivalent rating by
at least one "nationally recognized statistical rating organization" (as defined
in Rule 436 under the Securities Act)) respectively, at the time as of which any
investment or rollover therein is made.
"Eligible Receivables" means, at any time, Receivables of the Company and
its Restricted Subsidiaries, as evidenced on the most recent quarterly
consolidated balance sheet of the Company as at a date at least 45 days prior to
such time arising in the ordinary course of business of the Company or any
Restricted Subsidiary of the Company.
"Event of Default" has the meaning set forth under "Events of Default"
below.
"Exchange Act" means the Securities Exchange Act of 1934, as amended (or any
successor act) and the rules and regulations thereunder.
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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 permitted under clause (iv) of the second paragraph of
the "Limitation on Liens" covenant shall not be deemed to constitute a Guarantee
by such Restricted Subsidiary of any Purchase Money Debt of the Company secured
thereby.
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Debt or other obligation
including by acquisition of Subsidiaries or the recording, as required pursuant
to generally accepted accounting principles or otherwise, of any such Debt or
other obligation on the balance sheet of such Person (and "Incurrence",
"Incurred", "Incurrable" and "Incurring" shall have meanings correlative to the
foregoing); PROVIDED, HOWEVER, that a change in generally accepted accounting
principles that results in an obligation of such Person that exists at such time
becoming Debt shall not be deemed an Incurrence of such Debt and that neither
the accrual of interest nor the accretion of original issue discount shall be
deemed an Incurrence of Debt; PROVIDED, FURTHER, however, that the Company may
elect to treat all or any portion of revolving credit debt of the Company or a
Subsidiary as being Incurred from and after any date beginning the date the
revolving credit commitment is extended to the Company or a Subsidiary, by
furnishing notice thereof to the Trustee, and any borrowings or reborrowings by
the Company or a Subsidiary under such commitment up to the amount of such
commitment designated by the Company as Incurred shall not be deemed to be new
lncurrences of Debt by the Company or such Subsidiary.
"Interest Rate or Currency Protection Agreement" of any Person means any
forward contract, futures contract, swap, option or other financial agreement or
arrangement (including, without limitation, caps, floors, collars and similar
agreements) relating to, or the value of which is dependent upon, interest rates
or currency exchange rates or indices.
"Investment" by any Person means any direct or indirect loan, advance or
other extension of credit or capital contribution (by means of transfers of cash
or other property to others or payments for property or services for the account
or use of others, or otherwise) to, or purchase or acquisition of Capital Stock,
bonds, notes, debentures or other securities or evidence of Debt issued by, any
other Person, including any payment on a Guarantee of any obligation of such
other Person, but excluding any loan, advance or extension of credit to an
employee of the Company or any of its Restricted Subsidiaries in the ordinary
course of business, accounts receivables and other commercially reasonable
extensions of trade credit.
"Issue Date" means the date on which the Notes are first authenticated and
delivered under the Indenture.
"Joint Venture" means a corporation, partnership or other entity engaged in
one or more Telecommunications Businesses as to which the Company (directly or
through one or more Restricted Subsidiaries) exercises managerial control and in
which the Company owns (i) a 50% or greater interest, or (ii) a 30% or
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greater interest, together with options or other contractual rights, exercisable
not more than seven years after the Company's initial Investment in such Joint
Venture, to increase its interest to not less than 50%.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, Receivables Sale, deposit
arrangement, security interest, lien, charge, easement (other than any easement
not materially impairing usefulness or marketability), encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing).
"Marketable Securities" means: (i) Government Securities; (ii)any time or
demand deposit account, money market deposit and certificate of deposit maturing
not more than 365 days after the date of acquisition issued by, or time deposit
of, an Eligible Institution; (iii) commercial paper maturing not more than 365
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 "P1" or higher according to Moody's Investors Service, Inc.,
"A1" or higher according to Standard & Poor's Ratings Group or "A1" 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; (vi) auction rate
preferred stocks of any corporation maturing within 90 days after the date of
acquisition by the Company thereof, having a rating of at least AA by Standard &
Poor's; and (vii) any fund investing exclusively in investments of the types
described in clauses (i) through (vi) above.
"Net Available Proceeds" from any Asset Disposition by any Person means cash
or readily marketable cash equivalents received (including by way of sale or
discounting of a note, installment receivable or other receivable, but excluding
any other consideration received in the form of assumption by the acquiror of
Debt or other obligations relating to such properties or assets) therefrom by
such Person, net of (i) all legal, title and recording tax expenses, commissions
and other fees and expenses Incurred and all federal, state, provincial, foreign
and local taxes (including taxes payable upon payment or other distribution of
funds from a foreign subsidiary to the Company or another subsidiary of the
Company) required to be accrued as a liability as a consequence of such Asset
Disposition, (ii) all payments made by such Person or its Restricted
Subsidiaries on any Debt which is secured by such assets in accordance with the
terms of any Lien upon or with respect to such assets or which must by the terms
of such Lien, or in order to obtain a necessary consent to such Asset
Disposition or by applicable law, be repaid out of the proceeds from such Asset
Disposition, (iii) all distributions and other payments made to minority
interest holders in Restricted Subsidiaries of such Person or joint ventures as
a result of such Asset Disposition, (iv) appropriate amounts to be provided by
such Person or any Restricted Subsidiary thereof, as the case may be, as a
reserve in accordance with generally accepted accounting principles against any
liabilities associated with such assets and 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 of the
Company, 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 the Indenture and the Notes as a new Asset
Disposition at the time of such reduction with Net Available Proceeds equal to
the amount of such reduction, and (v) any consideration for an Asset Disposition
(which would otherwise constitute Net Available Proceeds) that is required to be
held in escrow pending determination of whether a purchase price adjustment will
be made, but amounts under this clause (v) shall become Net Available Proceeds
at such time and to the extent such amounts are released to such Person.
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"Offer to Purchase" means a written offer (the "Offer") sent by the Company
by first class mail, postage prepaid, to each holder at his address appearing in
the Note Register on the date of the Offer offering to purchase up to the
principal amount of Notes specified in such Offer at the purchase price
specified in such Offer (as determined pursuant to the Indenture). Unless
otherwise required by applicable law, the Offer shall specify an expiration date
(the "Expiration Date") of the Offer to Purchase which shall be, subject to any
contrary requirements of applicable law, not less than 30 days or more than 60
days after the date of such Offer and a settlement date (the "Purchase Date")
for purchase of Notes within five Business Days after the Expiration Date. The
Company shall notify the Trustee at least 15 Business Days (or such shorter
period as is acceptable to the Trustee) prior to the mailing of the Offer of the
Company's obligation to make an Offer to Purchase, and the Offer shall be mailed
by the Company or, at the Company's request, by the Trustee in the name and at
the expense of the Company. The Offer shall contain information concerning the
business of the Company and its Subsidiaries which the Company in good faith
believes will enable such holders to make an informed decision with respect to
the Offer to Purchase (which at a minimum will include (i) the most recent
annual and quarterly financial statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained in the
documents required to be filed with the Trustee pursuant to the Indenture (which
requirements may be satisfied by delivery of such documents together with the
Offer), (ii) a description of material developments in the Company's business
subsequent to the date of the latest of such financial statements referred to in
clause (i) (including a description of the events requiring the 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 Notes pursuant to the
Offer to Purchase. The Offer shall also state:
a. the Section of the Indenture pursuant to which the Offer to Purchase
is being made;
b. the Expiration Date and the Purchase Date;
c. the aggregate principal amount of the outstanding Notes offered to
be purchased by the Company pursuant to the Offer to Purchase (including, if
less than 100%, the manner by which such has been determined pursuant to the
Indenture provision requiring the Offer to Purchase) (the "Purchase
Amount");
d. the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Notes accepted for payment (as specified
pursuant to the Indenture) (the "Purchase Price");
e. that the holder may tender all or any portion of the Notes
registered in the name of such holder and that any portion of a Note
tendered must be tendered in an integral multiple of $1,000 principal
amount;
f. the place or places where Notes are to be surrendered for tender
pursuant to the Offer to Purchase;
g. that interest on any Note not tendered or tendered but not purchased
by the Company pursuant to the Offer to Purchase will continue to accrue;
h. that on the Purchase Date the Purchase Price will become due and
payable upon each Note being accepted for payment pursuant to the Offer to
Purchase and that interest thereon shall cease to accrue on and after the
Purchase Date;
i. that each holder electing to tender a Note pursuant to the Offer to
Purchase will be required to surrender such Note at the place or places
specified in the Offer prior to the close of business on the Expiration Date
(such Note being, if the Company or the Trustee so requires, duly endorsed
by, or
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accompanied by a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the holder thereof or his attorney
duly authorized in writing);
j. that holders will be entitled to withdraw all or any portion of
Notes tendered if the Company (or 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 principal
amount of the Note the holder tendered, the certificate number of the Note
the holder tendered and a statement that such holder is withdrawing all or a
portion of his tender;
k. that (a) if Notes in an aggregate principal amount less than or
equal to the Purchase Amount are duly tendered and not withdrawn pursuant to
the Offer to Purchase, the Company shall purchase all such Notes and (b) if
Notes in an aggregate principal amount in excess of the Purchase Amount are
tendered and not withdrawn pursuant to the Offer to Purchase, the Company
shall purchase Notes having an aggregate principal amount equal to the
Purchase Amount on a pro rata basis (with such adjustments as may be deemed
appropriate so that only Notes in denominations of $1,000 or integral
multiples thereof shall be purchased);
l. that in the case of any holder whose Note is purchased only in part,
the Company shall execute, and the Trustee shall authenticate and deliver to
the holder of such Note without service charge, a new Note or Notes, of any
authorized denomination as requested by such holder, in an aggregate
principal amount equal to and in exchange for the unpurchased portion of the
Note so tendered; and
m. the CUSIP number or numbers of the Notes offered to be purchased by
the Company pursuant to the Offer to Purchase.
Any Offer to Purchase shall be governed by and effected in accordance with
the Offer for such Offer to Purchase.
"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, (v) Investments
made as a result of the receipt of noncash consideration from an Asset
Disposition that was made pursuant to and in compliance with the covenant
described under "Covenants--Limitation on Asset Dispositions" above and (vi)
other Investments in an aggregate amount not to exceed the aggregate net
proceeds received by the Company or any Restricted Subsidiary after the date of
the Indenture from the sale or liquidation of any Unrestricted Subsidiary or any
interest therein (except to the extent that any such amount is included in the
calculation of Consolidated Net Income).
"Permitted Liens" means (a) Liens for taxes, assessments, governmental
charges or claims which are not yet delinquent or which are being contested in
good faith by appropriate proceedings, if a reserve or other appropriate
provision, if any, as shall be required in conformity with generally accepted
accounting principles shall have been made therefor; (b) other Liens incidental
to the conduct of the Company's and its Restricted Subsidiaries' business or the
ownership of its property and assets not securing any Debt, and which do not in
the aggregate materially detract from the value of the Company's and its
Restricted
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Subsidiaries' property or assets when taken as a whole, or materially impair the
use thereof in the operation of its business; (c) Liens with respect to assets
of a Restricted Subsidiary granted by such Restricted Subsidiary to the Company
to secure Debt owing to the Company; (d) pledges and deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of statutory obligations (including to
secure government contracts); (e) deposits made to secure the performance of
tenders, bids, leases, and other obligations of like nature incurred in the
ordinary course of business (exclusive of obligations for the payment of
borrowed money); (f) zoning restrictions, servitudes, easements, rights-of-way,
restrictions and other similar charges or encumbrances incurred in the ordinary
course of business which, in the aggregate, do not materially detract from the
value of the property subject thereto or interfere with the ordinary conduct of
the business of the Company or its Restricted Subsidiaries; (g) Liens arising
out of judgments or awards against the Company or any Restricted Subsidiary with
respect to which the Company or such Restricted Subsidiary is prosecuting an
appeal or proceeding for review and the Company or such Restricted Subsidiary is
maintaining adequate reserves in accordance with generally accepted accounting
principles; (h) any interest or title of a lessor in the property subject to any
lease other than a Capital Lease; and (i) any statutory warehousemen's,
materialmen's or other similar Liens for sums not then due and payable (or
which, if due and payable, are being contested in good faith and with respect to
which adequate reserves are being maintained to the extent required by generally
accepted accounting principles).
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust, unincorporated
organization, government or agency or political subdivision thereof or any other
entity.
"Preferred Dividends" for any Person means for any period the quotient
determined by dividing the amount of dividends and distributions paid or accrued
(whether or not declared) on Preferred Stock of such Person during such period
calculated in accordance with generally accepted accounting principles, by 1
minus the maximum statutory income tax rate then applicable to the Company
(expressed as a decimal).
"Preferred Stock" of any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of such Person.
"Purchase Money Debt" means (i) Acquired Debt Incurred in connection with
the acquisition of Telecommunications Assets and (ii) Debt of the Company or of
any Restricted Subsidiary of the Company (including, without limitation, Debt
represented by Bank Credit Agreements, Capital Lease Obligations, Vendor
Financing Facilities, mortgage financings and purchase money obligations)
Incurred for the purpose of financing all or any part of the cost of
construction, acquisition or improvement by the Company or any Restricted
Subsidiary of the Company or any Joint Venture of any Telecommunications Assets
of the Company, any Restricted Subsidiary of the Company or any Joint Venture,
and including any related notes, Guarantees, collateral documents, instruments
and agreements executed in connection therewith, as the same may be amended,
supplemented, modified or restated from time to time.
"Receivables" means receivables, chattel paper, instruments, documents or
intangibles evidencing or relating to the right to payment of money in respect
of the sale of goods or services.
"Receivables Sale" of any Person means any sale of Receivables of such
Person (pursuant to a purchase facility or otherwise), other than in connection
with a disposition of the business operations of such Person relating thereto or
a disposition of defaulted Receivables for purpose of collection and not as a
financing arrangement.
"Related Person" of any Person means any other Person directly or indirectly
owning (a) 10% or more of the Outstanding Common Equity of such Person (or, in
the case of a Person that is not a corporation,
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10% or more of the equity interest in such Person) or (b) 10% or more of the
combined voting power of the Voting Stock of such Person.
"Restricted Subsidiary" of the Company means any Subsidiary, whether
existing on or after the date of the Indenture, unless such Subsidiary is an
Unrestricted Subsidiary.
"Sale and Leaseback Transaction" of any Person means an arrangement with any
lender or investor or to which such lender or investor is a party providing for
the leasing by such Person of any property or asset of such Person which has
been or is being sold or transferred by such Person more than 365 days after the
acquisition thereof or the completion of construction or commencement of
operation thereof to such lender or investor or to any person to whom funds have
been or are to be advanced by such lender or investor on the security of such
property or asset. The stated maturity of such arrangement shall be the date of
the last payment of rent or any other amount due under such arrangement prior to
the first date on which such arrangement may be terminated by the lessee without
payment of a penalty.
"Significant Subsidiary" means a Restricted Subsidiary that is a
"significant subsidiary" as defined in Rule 102(w) of Regulation S-X under the
Securities Act and the Exchange Act.
"Subordinated Debt" means Debt of the Company as to which the payment of
principal of (and premium, if any) and interest and other payment obligations in
respect of such Debt shall be subordinate to the prior payment in full of the
Notes to at least the following extent: (i) no payments of principal of (or
premium, if any) or interest on or otherwise due in respect of such Debt may be
permitted for so long as any default in the payment of principal (or premium, if
any) or interest on the Notes exists; (ii) in the event that any other default
that with the passing of time or the giving of notice, or both, would constitute
an Event of Default exists with respect to the Notes, upon notice by 25% or more
in principal amount of the Notes to the Trustee, the Trustee shall have the
right to give notice to the Company and the holders of such Debt (or trustees or
agents therefor) of a payment blockage, and thereafter no payments of principal
of (or premium, if any) or interest on or otherwise due in respect of such Debt
may be made for a period of 179 days from the date of such notice or for the
period until such default has been cured or waived or ceased to exist and any
acceleration of the Notes has been rescinded or annulled, whichever period is
shorter (which Debt may provide that (A) no new period of payment blockage may
be commenced by a payment blockage notice unless and until 360 days have elapsed
since the effectiveness of the immediately prior notice, (B) no nonpayment
default that existed or was continuing on the date of delivery of any payment
blockage notice to such holders (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 executing any retirement required by virtue of
acceleration of such Debt upon an event of default thereunder), in each case
prior to the final Stated Maturity of the Notes or (y) permit redemption or
other retirement (including pursuant to an offer to purchase made by the
Company) of such other Debt at the option of the holder thereof prior to the
final Stated Maturity of the Notes, other than a redemption or other retirement
at the option of the holder of such Debt (including pursuant to an offer to
purchase made by the Company) which is conditioned upon a change of control of
the Company pursuant to provisions substantially similar to those described
under "Covenants--Change of Control" (and which shall provide that such Debt
will not be repurchased pursuant to such provisions prior to the Company's
repurchase of the Notes required to be repurchased by the Company pursuant to
the provisions described under "Covenants--Change of Control").
"Subsidiary" of any Person means (i) a corporation more than 50% of the
combined voting power of the outstanding Voting Stock of which is owned,
directly or indirectly, by such Person or by one or more
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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 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 of the Company, which determination
shall be conclusive.
"Unrestricted Subsidiary" means (1) any Subsidiary of the Company designated
as such by the Board of Directors of the Company as set forth below where (a)
neither the Company nor any of its other Subsidiaries (other than another
Unrestricted Subsidiary) (i) provides credit support for, or Guarantee of, any
Debt of such Subsidiary or any Subsidiary of such Subsidiary (including any
undertaking, agreement or instrument evidencing such Debt) or (ii) is directly
or indirectly liable for any Debt of such Subsidiary or any Subsidiary of such
Subsidiary, and (b) no default with respect to any Debt of such Subsidiary or
any Subsidiary of such Subsidiary (including any right which the holders thereof
may have to take enforcement action against such Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Debt of the Company and
its Restricted Subsidiaries to declare a default on such other Debt or cause the
payment thereof to be accelerated or payable prior to its final scheduled
maturity and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of
Directors of the Company may designate any Subsidiary to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds
any Lien on any property of, any other Subsidiary of the Company which is not a
Subsidiary of the Subsidiary to be so designated or otherwise an Unrestricted
Subsidiary, PROVIDED that either (x) the Subsidiary to be so designated has
total assets of $1,000 or less or (y) immediately after giving effect to such
designation, the Company could Incur at least $1.00 of additional Debt pursuant
to the first paragraph under "Covenants-- Limitation on Consolidated Debt" above
and provided, further, that the Company could make a Restricted Payment in an
amount equal to the greater of the fair market value and the book value of such
Subsidiary pursuant to the covenant described under "Covenants--Limitation on
Restricted Payments" and such amount is thereafter treated as a Restricted
Payment for the purpose of calculating the aggregate amount available for
Restricted Payments thereunder. The Board of Directors of the Company may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary, PROVIDED
that, if such Unrestricted Subsidiary has Debt outstanding at such time, either
(a) immediately after giving effect to such designation, the Company could Incur
at least $1.00 of additional Debt pursuant to the first paragraph under
"Covenants-- Limitation on Consolidated Debt" above or (b) the Company or such
Restricted Subsidiary could Incur such Debt hereunder (other than as Acquired
Debt).
"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 or other capital assets 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 or other capital assets from any such vendor or lessor.
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"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person 99% or more of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person or by such Person and one or more Wholly Owned
Restricted Subsidiaries of such Person.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a) failure to
pay principal of (or premium, if any, on) any Note when due; (b) failure to pay
any interest on any Note when due, continued for 30 days; (c) default in the
payment of principal and interest on Notes required to be purchased pursuant to
an Offer to Purchase as described under "Covenants--Change of Control" when due
and payable; (d) failure to perform or comply with the provisions described
under "Mergers, Consolidations and Certain Sales of Assets"; (e) failure to
perform any other covenant or agreement of the Company under the Indenture or
the Notes continued for 60 days after written notice to the Company by the
Trustee or Holders of at least 25% in aggregate principal amount of outstanding
Notes; (f) default under the terms of any instrument evidencing or securing Debt
of the Company or any Significant Subsidiary having an outstanding principal
amount of $10 million individually or in the aggregate which default results in
the acceleration of the payment of such Debt or constitutes the failure to pay
such Debt when due; (g) the rendering of a final judgment or judgments (not
subject to appeal) for the payment of money against the Company or any
Significant Subsidiary in an aggregate amount in excess of $10 million which
remains undischarged or unstayed for a period of 45 days after the date on which
the right to appeal all such judgments has expired; and (h) certain events of
bankruptcy, insolvency or reorganization affecting the Company or any
Significant Subsidiary. (Section 501) Subject to the provisions of the Indenture
relating to the duties of the Trustee in case an Event of Default shall occur
and be continuing, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request or direction of any of
the Holders, unless such Holders shall have offered to the Trustee reasonable
indemnity. (Section 603) Subject to such provisions for the indemnification of
the Trustee, the Holders of a majority in aggregate principal amount of the
outstanding Notes will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee. The Trustee may refuse, however, to
follow any direction that the Trustee, in its sole discretion, determines may be
unduly prejudicial to the rights of another holder or that may subject the
Trustee to any liability or expense if the Trustee determines, in its sole
discretion, that it lacks indemnification against such loss or expense.
(Section512)
If an Event of Default (other than an Event of Default described in Clause
(h) above with respect to the Company) shall occur and be continuing, either the
Trustee or the Holders of at least 25% in aggregate principal amount of the
outstanding Notes may accelerate the maturity of all Notes; PROVIDED, HOWEVER,
that after such acceleration, but before a judgment or decree based on
acceleration, the Holders of a majority in aggregate principal amount of
outstanding Notes may, under certain circumstances, rescind and annul such
acceleration if all Events of Default, other than the nonpayment of accelerated
principal, have been cured or waived as provided in the Indenture. If an Event
of Default specified in Clause (h) above occurs with respect to the Company, the
outstanding Notes will IPSO FACTO become immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder. (Section 502)
For information as to waiver of defaults, see "Modification and Waiver".
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a continuing Event of
Default (as defined) and unless also the Holders of at least 25% in aggregate
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principal amount of the outstanding Notes shall have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee, and the Trustee shall not have received from the Holders of a majority
in aggregate principal amount of the outstanding Notes a direction inconsistent
with such request and shall have failed to institute such proceeding within 60
days. (Section 507) However, such limitations do not apply to a suit instituted
by a Holder of a Note for enforcement of payment of the principal of and
premium, if any, or interest on such Note on or after the respective due dates
expressed in such Note. (Section 508)
The Indenture provides that if a Default occurs and is continuing, generally
the Trustee must, within 90 days after the occurrence of such Default, give to
the Holders notice of such Default. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal of, premium, if any or
interest) if it determines that withholding notice is in their interest;
PROVIDED HOWEVER, that in the case of any default of a character specified in
Clause (e) above, no such notice to holders shall be given until at least 30
days after the occurrence thereof. (Section 602)
The Company will be required to furnish to the Trustee quarterly a statement
as to the performance by the Company of certain of its obligations under the
Indenture and the Company is required upon becoming aware of any Default or
Event of Default to deliver to the Trustee a statement specifying such Default
or Event of Default. (Section 1018)
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture will cease to be of further effect as to all outstanding Notes
(except as to (i) rights of registration of transfer and exchange and the
Company's right of optional redemption, (ii) substitution of apparently
mutilated, defaced, destroyed, lost or stolen Notes, (iii) rights of Holders to
receive payment of principal of and premium, if any, and interest on the Notes,
(iv) rights, obligations and immunities of the Trustee under the Indenture and
(v) rights of the Holders of the Notes as beneficiaries of the Indenture with
respect to any property deposited with the Trustee payable to all or any of
them), if (x) the Company will have paid or caused to be paid the principal of
and premium, if any, and interest on the Notes as and when the same will have
become due and payable or (y) all outstanding Notes (except lost, stolen or
destroyed Notes which have been replaced or paid) have been delivered to the
Trustee for cancellation. (Section 401)
DEFEASANCE
The Indenture provides that, at the option of the Company, (a) if
applicable, the Company will be discharged from any and all obligations in
respect of the outstanding Notes or (b) if applicable, the Company may omit to
comply with certain restrictive covenants, and that such omission shall not be
deemed to be an Event of Default under the Indenture and the Notes, in either
case (a) or (b) upon irrevocable deposit with the Trustee, in trust, of money
and/or U.S. government obligations which will provide money in an amount
sufficient in the opinion of a nationally recognized firm of independent
certified public accountants to pay the principal of and premium, if any, and
each installment of interest, if any, on the outstanding Notes on the Stated
Maturity. With respect to clause (b), the obligations under the Indenture other
than with respect to such covenants and the Events of Default other than the
Events of Default relating to such covenants above shall remain in full force
and effect. Such trust may only be established if, among other things (i) with
respect to clause (a), the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or there has been a change
in law after the Issue Date, which in the Opinion of Counsel provides that
holders of the Notes will not recognize gain or loss for Federal income tax
purposes as a result of such deposit, defeasance and discharge and will be
subject to Federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such deposit, defeasance and discharge
had not occurred; or, with respect to clause (b), the Company has delivered to
the Trustee an Opinion of Counsel to the effect that the holders of the
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Notes will not recognize gain or loss for Federal income tax purposes as a
result of such deposit and defeasance and will be subject to Federal income tax
on the same amounts, in the same manner and at the same times as would have been
the case if such deposit and defeasance had not occurred; (ii) no Default or
Event of Default shall have occurred or be continuing; (iii) the Company has
delivered to the Trustee an Opinion of Counsel to the effect that such deposit
shall not cause the Trustee or the trust so created to be subject to the
Investment Company Act of 1940, as amended; and (iv) certain other customary
conditions precedent are satisfied. (Section 1201)
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the holders of a majority in aggregate principal
amount of the outstanding Notes; PROVIDED, HOWEVER, that no such modification or
amendment may, without the consent of the holder of each outstanding Note
affected thereby, (a) change the due date of the principal of, or any
installment of interest on, any Note, (b) reduce the principal amount of, or the
premium or interest on, any Note, (c) change the place or currency of payment of
principal of, or premium or interest on, any Note, (d) impair the right to
institute suit for the enforcement of any payment on or with respect to any
Note, (e) reduce the above stated percentage of outstanding Notes necessary to
modify or amend the Indenture, (f) reduce the percentage of aggregate principal
amount of outstanding Notes necessary for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults, (g) modify any
provisions of the Indenture relating to the modification and amendment of the
Indenture or the waiver of past defaults or covenants, except as otherwise
specified, or (h) following the mailing of any Offer to Purchase and until the
Expiration Date of that Offer to Purchase, modify any Offer to Purchase for the
Notes required under the "Limitation on Asset Dispositions" and the "Change of
Control" covenants contained in the Indenture in a manner materially adverse to
the Holders thereof. (Section 902)
Notwithstanding the foregoing, without the consent of any holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to holders of Notes or that does not adversely affect the
legal rights under the Indenture of any such holder, or to comply with
requirements of the Commission in order to maintain the qualification of the
Indenture under the Trust Indenture Act. (Section 901)
The holders of a majority in aggregate principal amount of the outstanding
Notes, on behalf of all holders of Notes, may waive compliance by the Company
with certain restrictive provisions of the Indenture. (Section 1019) Subject to
certain rights of the Trustee, as provided in the Indenture, the holders of a
majority in aggregate principal amount of the outstanding Notes, on behalf of
all holders of Notes, may waive any past default under the Indenture, except a
default in the payment of principal, premium or interest or a default arising
from failure to purchase any Note tendered pursuant to an Offer to Purchase.
(Section 513)
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes or the Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such waiver is against public policy.
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GOVERNING LAW
The Indenture and the Old Notes are, and the New Notes will be, governed by
the laws of the State of New York.
THE TRUSTEE
The Trustee's current address is 114 West 47th Street, New York, New York
10036.
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise as a prudent person would exercise
under the circumstances in the conduct of such person's own affairs. (Section
601)
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of the Company, to obtain payment of claims in certain cases
or to realize on certain property received by it in respect of any such claim as
security or otherwise. The Trustee is permitted to engage in other transactions
with the Company or any Affiliate, PROVIDED, HOWEVER, that if it acquires any
conflicting interest (as defined in the Indenture or in the Trust Indenture
Act), it must eliminate such conflict or resign. (SectionSection 608, 613)
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DESCRIPTION OF CERTAIN INDEBTEDNESS
DESCRIPTION OF THE 9.45% NOTES
GENERAL. The Company issued $636,974,000 principal amount at stated
maturity of 9.45% Senior Discount Notes due 2008 pursuant to an Indenture by and
between the Company and United States Trust Company of New York, as trustee (the
"Trustee"). The 9.45% Notes have not been registered under the Securities Act.
The Company has agreed to use its best efforts to exchange the 9.45% Notes for a
new issue of 9.45% Notes that will be registered under the Securities Act.
PRINCIPAL MATURITY AND INTEREST. The 9.45% Notes will accrete at a rate of
9.45% compounded semi-annually to an aggregate principle amount of $636,974,000
by April 15, 2003. No cash interest will accrue on the 9.45% Notes prior to
April 15, 2003. Thereafter, the 9.45% Notes will accrete at the rate of 9.45%
per annum. The 9.45% Notes will mature on April 15, 2008.
RANKING. The 9.45% Notes are unsecured senior obligations of the Company,
will rank PARI PASSU in right of payment with all existing and future senior
obligations of the Company, including the 9 5/8% Notes, the 12 1/2% Notes and
the Notes and will rank senior in right of payment to all future subordinated
obligations of the Company.
REDEMPTION. Generally, the 9.45% Notes are not redeemable at the Company's
option prior to April 15, 2003. Thereafter, the 9.45% Notes are subject to
redemption at the option of the Company, in whole or in part, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on April 15 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------------------------------- -----------
<S> <C>
2003.................................................................................. 104.725%
2004.................................................................................. 103.150%
2005.................................................................................. 101.575%
2006 and thereafter................................................................... 100.000%
</TABLE>
The Company may redeem up to 33 1/3% of the original aggregate principal
amount of the 9.45% Notes prior to April 15, 2003 with the net proceeds of a
sale of common equity received prior to April 15, 2001, at a redemption price
equal to 109.450% of the Accreted Value thereof, plus accrued and unpaid
interest thereon, if any, to the date of redemption, provided that at least
66 2/3% of the original aggregate principal amount of 9.45% Notes remains
outstanding immediately after such redemption. Except in connection with a
Change of Control or an Asset Sale (as defined in the indenture relating to the
9.45% Notes) of the Company is not required to make mandatory redemption or
sinking fund payments with respect to the 9.45% Notes.
COVENANTS. The indenture relating to the 9.45% Notes restricts, among other
things, the Company's ability to incur additional indebtedness, pay dividends or
make certain other restricted payments, incur certain liens to secure PARI PASSU
or subordinated indebtedness, engage in any sale and leaseback transaction, sell
assign, transfer, lease, convey or otherwise dispose of substantially all of the
assets of the Company, enter into certain transactions with affiliates, or incur
indebtedness that is subordinate in right of payment to any senior indebtedness
and senior in right of payment to the 9.45% Notes. The indenture relating to the
9.45% Notes permits, under certain circumstances, the Company's subsidiaries to
be deemed unrestricted subsidiaries and thus not subject to the restrictions of
the indenture.
EVENTS OF DEFAULT. The indenture relating to the 9.45% Notes contains
standard events of default, including (i) defaults in the payment of principal,
premium or interest, (ii) defaults in the compliance with covenants contained in
the indenture, (iii) cross defaults on more than $10 million of other
indebtedness, (iv) failure to pay more than $10 million of judgments and (v)
certain events of its subsidiaries.
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DESCRIPTION OF THE 9 5/8% NOTES
GENERAL. The Company issued $400 million of 9 5/8% Senior Notes Due 2007
pursuant to an Indenture by and between the Company and United States Trust
Company of New York, as trustee (the "Trustee"). The 9 5/8% Notes have been
registered under the Securities Act.
PRINCIPAL, MATURITY AND INTEREST. The 9 5/8% Notes are limited in aggregate
principal amount to $400 million and will mature on October 1, 2007. Interest on
the 9 5/8% Notes accrues at 9 5/8% per annum and is payable semiannually in
arrears on April 1 and October 1 of each year. Interest is computed on the basis
of a 360-day year comprised of twelve 30-day months.
RANKING. The 9 5/8% Notes are unsecured senior obligations of the Issuers,
will rank PARI PASSU in right of payment with all existing and future senior
obligations of the Issuers, including the 12 1/2% Notes, the 9.45% Notes and the
Notes and will rank senior in right of payment to all future subordinated
obligations of the Issuers.
REDEMPTION. Generally, the 9 5/8% Notes are not redeemable at the Company's
option prior to October 1, 2002. Thereafter, the 9 5/8% Notes are subject to
redemption at the option of the Company, in whole or in part, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on October 1 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------------------------------- -----------
<S> <C>
2002.................................................................................. 104.813%
2003.................................................................................. 103.208%
2004.................................................................................. 101.604%
2005 and thereafter................................................................... 100.000%
</TABLE>
The Company may redeem up to 33 1/3% of the original aggregate principal
amount of the 9 5/8% Notes prior to October 1, 2002 with the net proceeds of a
sale of common equity received prior to October 1, 2000, at a redemption price
equal to 109.625% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the date of redemption, provided that at least
$266.7 million of aggregate principal amount of 9 5/8% Notes remains outstanding
immediately after such redemption. Except in connection with a Change of Control
(as defined in the indenture relating to the 9 5/8% Notes) of the Company, the
Issuers are not required to make mandatory redemption or sinking fund payments
with respect to the 9 5/8% Notes.
COVENANTS. The indenture relating to the 9 5/8% Notes restricts, among
other things, the Company's ability to incur additional indebtedness, pay
dividends or make certain other restricted payments, incur certain liens to
secure PARI PASSU or subordinated indebtedness, engage in any sale and leaseback
transaction, sell assign, transfer, lease, convey or otherwise dispose of
substantially all of the assets of the Company, enter into certain transactions
with affiliates, or incur indebtedness that is subordinate in right of payment
to any senior indebtedness and senior in right of payment to the 9 5/8% Notes.
The indenture relating to the 9 5/8% Notes permits, under certain circumstances,
the Company's subsidiaries to be deemed unrestricted subsidiaries and thus not
subject to the restrictions of the indenture.
EVENTS OF DEFAULT. The indenture relating to the 9 5/8% Notes contains
standard events of default, including (i) defaults in the payment of principal,
premium or interest, (ii) defaults in the compliance with covenants contained in
the indenture, (iii) cross defaults on more than $10 million of other
indebtedness, (iv) failure to pay more than $10 million of judgments and (v)
certain events of its subsidiaries.
DESCRIPTION OF THE 12 1/2% NOTES
GENERAL. The Company and NEXTLINK Capital, Inc., a Washington corporation
and a wholly owned subsidiary of the Company ("Capital" and, together with the
Company, the "Issuers") issued $350 million of 12 1/2% Senior Notes Due April
15, 2006 pursuant to an Indenture among the Company, Capital
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and United States Trust Company of New York, as trustee (the "Trustee"). On
September 6, 1996, the Company consummated an offer (the "Exchange Offer") to
exchange such notes for $350 million of 12 1/2% Senior Notes Due April 15, 2006
that had been registered under the Securities Act.
PRINCIPAL, MATURITY AND INTEREST. The 12 1/2% Notes are limited in
aggregate principal amount to $350 million and will mature on April 15, 2006.
Interest on the 12 1/2% Notes accrues at 12 1/2% per annum and is payable
semiannually in arrears on April 15 and October 15 of each year. Interest is
computed on the basis of a 360-day year comprised of twelve 30-day months. At
the closing of the offering, the Company used $117.7 million of the net proceeds
of the offering of 12 1/2% Notes to purchase a portfolio of securities,
initially consisting of U.S. government securities (including any securities
substituted in respect thereof, the "Pledged Securities"), to pledge as security
for payment of interest on the 12 1/2% Notes through April 15, 1999 and, under
certain circumstances, as security for repayment of the principal of the 12 1/2%
Notes. Proceeds from the Pledged Securities may be used by the Company to make
interest payments on the 12 1/2% Notes through April 15, 1999. The Pledged
Securities are being held by the Trustee pending disbursement.
RANKING. The 12 1/2% Notes are unsecured senior obligations of the Issuers,
will rank PARI PASSU in right of payment with all existing and future senior
obligations of the Issuers, including the 9 5/8% Notes, the 9.45% Notes and the
Notes and will rank senior in right of payment to all future subordinated
obligations of the Issuers.
REDEMPTION. Generally, the 12 1/2% Notes are not redeemable at the
Company's option prior to April 15, 2001. Thereafter, the 12 1/2% Notes are
subject to redemption at the option of the Company, in whole or in part, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on April 15 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------------------------------- -----------
<S> <C>
2001.................................................................................. 106.250%
2002.................................................................................. 104.167%
2003.................................................................................. 102.083%
2004 and thereafter................................................................... 100.000%
</TABLE>
The Company may redeem up to 33 1/3% of the original aggregate principal
amount of the 12 1/2% Notes prior to April 15, 2001 with the net proceeds of a
sale of common equity received prior to April 15, 1999, at a redemption price
equal to 112.50% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the date of redemption, provided that at least $175
million of aggregate principal amount of 12 1/2% Notes remains outstanding
immediately after such redemption. Except in connection with a Change of Control
(as defined in the indenture relating to the 12 1/2% Notes) of the Company, the
Issuers are not required to make mandatory redemption or sinking fund payments
with respect to the 12 1/2% Notes.
COVENANTS. The indenture relating to the 12 1/2% Notes restricts, among
other things, the Company's ability to incur additional indebtedness, pay
dividends or make certain other restricted payments, incur certain liens to
secure PARI PASSU or subordinated indebtedness, engage in any sale and leaseback
transaction, sell assign, transfer, lease, convey or otherwise dispose of
substantially all of the assets of the Company, enter into certain transactions
with affiliates, or incur indebtedness that is subordinate in right of payment
to any senior indebtedness and senior in right of payment to the 12 1/2% Notes.
The indenture relating to the 12 1/2% Notes permits, under certain
circumstances, the Company's subsidiaries to be deemed unrestricted subsidiaries
and thus not subject to the restrictions of the indenture.
EVENTS OF DEFAULT. The indenture relating to the 12 1/2% Notes contains
standard events of default, including (i) defaults in the payment of principal,
premium or interest, (ii) defaults in the compliance with covenants contained in
the indenture, (iii) cross defaults on more than $10 million of other
indebtedness, (iv) failure to pay more than $10 million of judgments and (v)
certain events of its subsidiaries.
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<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain United States federal income tax
consequences associated with the ownership and disposition of the Notes. Except
where noted, it deals only with Notes held as capital assets and does not deal
with special situations, such as those of dealers in securities or currencies,
traders in securities that elect to mark to market, financial institutions, life
insurance companies, tax-exempt organizations or U.S. Holders (defined below)
whose "functional currency" is not the U.S. dollar or who hold the Notes as a
hedge or part of a straddle or conversion transaction. Furthermore, the
discussion below is based upon the provisions of the Internal Revenue Code of
1986, as amended (the "Code"), and regulations, rulings and judicial decisions
thereunder as of the date hereof, and, at any time and without prior notice,
such authorities may be repealed, revoked or modified so as to result in federal
income tax consequences different from those discussed below.
PERSONS CONSIDERING THE TENDER OF THEIR OLD NOTES FOR THE NEW NOTES OFFERED
HEREBY, OR THE PURCHASE, OWNERSHIP OR DISPOSITION OF NOTES, SHOULD CONSULT THEIR
OWN TAX ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES AND CONSEQUENCES
ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
THE EXCHANGE OFFER
The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should be treated as a continuation of the corresponding Old Notes because the
terms of the New Notes are not materially different from the terms of the Old
Notes. Accordingly, such exchange should not constitute a taxable event to U.S.
Holders and, therefore, (i) no gain or loss should be realized by U.S. Holders
upon receipt of a New Note, (ii) the holding period of the New Note should
include the holding period of the Old Note exchanged therefor and (iii) the
adjusted tax basis of the New Note should be the same as the adjusted tax basis
of the Old Note exchanged therefor immediately before the exchange.
UNITED STATES HOLDERS
A United States holder (a "U.S. Holder") is generally, a citizen or resident
of the United States, a corporation, a partnership or other entity created or
organized in or under the laws of the United States or any political subdivision
thereof, or an estate the income of which is subject to United States federal
income taxation regardless of its source, a trust if a United States court can
exercise primary supervision over the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of the trust, or any other person whose worldwide income or gain is
otherwise subject to United States federal income taxation on a net income
basis.
PAYMENT OF INTEREST
Interest on the Notes will be taxable to a U.S. Holder as ordinary interest
income in accordance with the U.S. Holder's method of tax accounting at the time
that such interest is accrued or (actually or constructively) received. The
Company expects that the Notes will not be issued with original issue discount
for United States federal income tax purposes.
MARKET DISCOUNT
If a U.S. Holder purchases a Note for an amount that is less than its issue
price (or, in the case of a subsequent purchaser, its principal amount), such
U.S. Holder will be treated as having purchased such Note at a "market
discount", unless the amount of such market discount is less than a specified DI
MINIMUS amount. Under the market discount rules, a U.S. Holder will be required
to treat any gain on the maturity, sale, exchange, retirement or other
disposition of Notes as ordinary income to the extent of the market discount
which has not previously been included in income and is treated as having
accrued on such Notes
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at the time of such disposition. In addition, a U.S. Holder may be required to
defer, until the maturity of the Notes or earlier disposition in a taxable
transaction, the deduction of all or a portion of the interest expense on any
indebtedness incurred or continued to purchase or carry such Notes.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Notes, unless the U.S.
Holder elects to accrue on a constant yield method. A U.S. Holder of Notes may
elect to include market discount in income currently as it accrues (on either a
ratable or constant yield method), in which case the rule described above
regarding deferral of interest deductions will not apply. This election to
include market discount in income currently, once made, applies to all market
discount obligations acquired in or after the first taxable year to which the
election applies and may not be revoked without the consent of the Internal
Revenue Service ("IRS"). U.S. Holders should consult with their own tax advisors
regarding this election.
AMORTIZABLE BOND PREMIUM
A U.S. Holder that purchases Notes for an amount greater than the principal
amount of the Notes, will be considered to have purchased such Notes with "bond
premium." A U.S. Holder generally may elect to amortize the bond premium over
the remaining term of the Notes on a constant yield method. The amount amortized
in any year will be treated as a reduction of the U.S. Holder's interest income
from the Notes. Bond premium on a Note held by a U.S. Holder that does not make
such an election will decrease the gain or increase the loss otherwise
recognized on disposition of the Notes. Any election to amortize bond premium
applies to all debt obligations (other than debt obligations the interest on
which is excludible from gross income) held by the U.S. Holder at the beginning
of the first taxable year to which the election applies or thereafter acquired
by the U.S. Holder, and may not be revoked without the consent of the IRS. U.S.
Holders should consult with their tax advisors regarding this election.
SALE, EXCHANGE AND RETIREMENT OF NOTES
A U.S. Holder's adjusted tax basis in Notes will, in general, equal the
holder's cost therefor increased by any market discount included in the U.S.
Holder's income and reduced by any amortized bond premium. Upon the sale,
exchange or retirement of Notes, a U.S. Holder will recognize gain or loss equal
to the difference between the amount realized upon the sale, exchange or
retirement and the U.S. Holder's adjusted tax basis in the Notes. Except with
respect to market discount accrued but unpaid interest, such gain or loss will
be capital gain or loss. Long-term capital gain of an individual U.S. Holder is
generally subject to a maximum tax rate of 28% in respect of property held for
more than one year and the maximum rate is reduced to 20% in respect of property
held in excess of 18 months. The deductibility of capital losses is subject to
limitations.
EXCHANGE OFFER
The exchange of Notes for new notes pursuant to the Exchange Offer should
not be taxable to the holders of the Notes. Any Additional Interest payment due
to the holders of the Notes will be taxable income and may be characterized as
additional interest income for tax purposes.
NON-UNITED STATES HOLDERS
For purposes of this discussion, a "Non-U.S. Holder" is any holder of a Note
who is (i) a nonresident alien individual or (ii) a foreign corporation,
partnership or estate or trust which is not subject to United States federal
income tax on a net income basis in respect of income or gain from a Note.
Under present United States federal income and estate tax law, and subject
to the discussion of backup withholding below:
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(i) payments of principal, premium, if any, and interest by the Company
or any of its paying agents to a Non-U.S. Holder will not be subject to
United States federal withholding tax if, in the case of interest, (a) the
beneficial owner of the Note does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of in the
Company, (b) the beneficial owner of the Note is not a controlled foreign
corporation that is related to the Company through stock ownership, and (c)
either (A) the beneficial owner of the Note certifies to the Company or its
agent, under penalties of perjury, that it is not a U.S. Holder and provides
its name and address or (B) a securities clearing organization, bank or
other financial institution that holds customers' securities in the ordinary
course of its trade or business (a "financial institution") and holds the
Note certifies to the Company or its agent under penalties of perjury that
such statement has been received from the beneficial owner by it or by a
financial institution between it and the beneficial owner and furnishes the
payor with a copy thereof;
(ii) a Non-U.S. Holder of a Note will not be subject to United States
federal withholding tax on any gain realized on the sale or exchange of a
Note; and
(iii) a Note held by an individual who at death is not a citizen or
resident of the United States will not be includible in the individual's
gross estate for purposes of the United States federal estate tax as a
result of the individual's death if (a) the individual did not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock in the Company and (b) the income on the Note would not
have been effectively connected with a United States trade or business of
the individual at the individual's death.
Recently finalized regulations (the "Final Withholding Regulations"), that
are generally effective with respect to payments after December 31, 1998, would
provide alternative methods for satisfying the certification requirement
described in clause (i)(c) above. The Final Withholding Regulations also
require, in the case of Notes held by a foreign partnership, that (x) the
certification described in clause (i)(c) above be provided by the partners
rather than by the foreign partnership and (y) the partnership provide certain
information, including a United States taxpayer identification number. A
look-through rule will apply in the case of tiered partnerships.
BACKUP WITHHOLDING AND INFORMATION REPORTING
UNITED STATES HOLDERS
In general, information reporting requirements will apply to certain
payments of principal, premium, if any, and interest and to the proceeds of sale
of a Note made to holders other than certain exempt recipients (such as
corporations). Backup withholding and information reporting generally will not
apply to payments of principal, premium, if any, and interest on Notes made
outside the United States (other than payments made to an address in the United
States or by transfer to an account maintained by the holder with a bank in the
United States) by the Company or any paying agent (acting in its capacity as
such) to a holder. A 31% backup withholding tax may apply to such payments if
the U.S. Holder fails to provide a taxpayer identification number or
certification of foreign or other exempt status or is notified by the IRS that
it has failed to report in full dividend and interest income.
NON-UNITED STATES HOLDERS
Under current law, information reporting on Internal Revenue Service Form
1099 and backup withholding will not apply to payments of principal, premium (if
any) and interest made by the Company or a paying agent to a Non-U.S. Holder on
a Note; provided, the certification described in clause (i)(c) under "Non-United
States Holders" above is received, and provided further that the payor does not
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have actual knowledge that the holder is a United States person. The Company or
a paying agent, however, may report (on Internal Revenue Service Form 1042S)
payments of interest on Notes.
Payments of the proceeds from the sale by a Non-U.S. Holder of a Note made
to or through a foreign office of a broker will not be subject to information
reporting or backup withholding, except that if the broker is a United States
person, a controlled foreign corporation for United States tax purposes or a
foreign person 50% or more of whose gross income is effectively connected with a
United States trade or business for a specified three-year period, information
reporting may apply to such payments. Payments of the proceeds from the sale of
a Note to or through the United States office of a broker is subject to
information reporting and backup withholding unless the holder or beneficial
owner certifies as to its non-United States status or otherwise establishes an
exemption from information reporting and backup withholding. See the discussion
above with respect to the rules under the Final Withholding Regulations.
69
<PAGE>
PLAN OF DISTRIBUTION
Each Holder desiring to participate in the Exchange Offer will be required
to represent, among other things, that (i) it is not an "affiliate" (as defined
in Rule 405 of the Securities Act) of the Company, (ii) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the New Notes, and (iii) it is
acquiring the New Notes in the ordinary course of its business (a holder unable
to make the foregoing representations is referred to herein as a "Restricted
Holder"). A Restricted Holder will not be able to participate in the Exchange
Offer, and may only sell its Old Notes pursuant to a registration statement
containing the selling securityholder information required by Item 507 of
Regulation S-K of the Securities Act, or pursuant to an exemption from the
registration requirement of the Securities Act.
Each Participating Broker-Dealer is required to acknowledge in the Letter of
Transmittal that it acquired the Old Notes as a result of market-making
activities or other trading activities and that it will deliver a prospectus in
connection with the resale of such New Notes. Based upon interpretations by the
staff of the Commission, the Company believes that New Notes issued pursuant to
the Exchange Offer to Participating Broker-Dealers may be offered for resale,
resold, and otherwise transferred by a Participating Broker-Dealer upon
compliance with the prospectus delivery requirements, but without compliance
with the registration requirements, of the Securities Act. The Company has
agreed that for a period of 30 days following consummation of the Exchange
Offer, they will make this Prospectus available to Participating Broker-Dealers
for use in connection with any such resale. During such period of time, delivery
of this Prospectus, as it may be amended or supplemented, will satisfy the
prospectus delivery requirements of a Participating Broker-Dealer engaged in
market making or other trading activities.
Based upon interpretations by the staff of the Commission, the Company
believes that New Notes issued pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by a Holder thereof (other than a
Participating Broker-Dealer) without compliance with the registration and
prospectus delivery requirements of the Securities Act.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by Participating Broker-Dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such methods
of resale, at market prices prevailing at the time of resale, at prices related
to such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
Participating Broker-Dealer and/or the purchasers of any such New Notes. Any
Participating Broker-Dealer that resells New Notes that were received by it for
its own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act, as set forth in the
Registration Rights Agreement.
70
<PAGE>
VALIDITY OF THE NOTES
The validity of the New Notes will be passed upon for the Company by Willkie
Farr & Gallagher, New York, New York. As to matters of Delaware law, Willkie
Farr & Gallagher will rely upon the opinion of Davis Wright Tremaine LLP,
Seattle, Washington.
EXPERTS
The audited financial statements included in the Company's Annual Report on
Form 10-KSB, filed on March 25, 1998, which is incorporated herein by reference,
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
71
<PAGE>
PART II
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is a Delaware corporation. In its Certificate of Incorporation,
the Company has adopted the provisions of Section 102(b)(7) of the Delaware
General Corporation Law (the "Delaware Law"), which enables a corporation in its
original certificate of incorporation or an amendment thereto to eliminate or
limit the personal liability of a director for monetary damages for breach of
the director's fiduciary duty, except (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) pursuant to Section 174 of the Delaware law (providing for
liability of directors for unlawful payment of dividends or unlawful stock
purchases or redemptions) or (iv) for any transaction from which a director will
personally receive a benefit in money, property or services to which the
director is not legally entitled.
The Company has also adopted indemnification provisions pursuant to Section
145 of the Delaware Law, which provides that a corporation may indemnify any
persons, including officers and directors, who are, or are threatened to be
made, parties to any threatened, pending or completed legal action, suit or
proceedings, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation), by reason of the fact
that such person was an officer, director, employee or agent of the corporation,
or is or was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. The indemnity may
include expenses (including attorneys fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding, provided such officer, director, employee or
agent acted in good faith and in a manner he reasonably believed to be in or not
opposed to the corporation's best interests and, with respect to criminal
proceedings, had no reasonable cause to believe that his conduct was unlawful. A
Delaware corporation may indemnify officers or directors in an action by or in
the right of the corporation under the same conditions, except that no
indemnification is permitted without judicial approval if the officer of
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against expenses
(including attorney's fees) that such officer or director actually and
reasonably incurred.
The Company intends to enter into indemnification agreements with each of
the Company's officers and directors.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS:
<TABLE>
<S> <C>
1 --Purchase Agreement by and among the Company and the Initial Purchasers.
3.1 --Certificate of Incorporation of the Company.
3.2 --By-laws of the Company.
4.1 --Form of Exchange Note Indenture, by and among NEXTLINK Communications, Inc. and
United States Trust Company of New York, as Trustee, relating to the Exchange
Notes, including form of Exchange Note.(2)
4.2 --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.
4.3 --Form of stock certificate of 14% Senior Exchangeable Redeemable Preferred
Shares.(2)
4.4 --Indenture, dated as of April 25, 1996, by and among NEXTLINK Communications, Inc.,
NEXTLINK Capital, Inc. 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.(1)
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C>
4.5 --First Supplemental Indenture, dated as of January 31, 1997, by and among the
Company, NEXTLINK Communications, L.L.C., NEXTLINK Capital, Inc. and United States
Trust Company of New York, as Trustee.(2)
4.6 --Form of Indenture between United States Trust Company, as Trustee and NEXTLINK
Communications, Inc., relating to the 9 5/8% Senior Notes due 2007.(3)
4.7 --Indenture, dated March 3, 1998, between United States Trust Company, as Trustee and
NEXTLINK Communications, Inc., relating to the 9% Senior Notes due 2008.(4)
4.8 --Certificate of Designation of Powers, Preferences and Relative, Participating,
Optional and Other Special Rights of 6 1/2% Cumulative Convertible Preferred Stock
and Qualifications, Limitations and Restrictions Thereof.
4.9 --Indenture, dated April 1, 1998, between United States Trust Company, as Trustee and
NEXTLINK Communications, Inc., relating to the 9.45% Senior Discount Notes due
2008.(5)
4.10 --Second Supplemental Indenture, dated June 3, 1998, amending Indenture dated April
25, 1996, by and among NEXTLINK Communications, Inc., NEXTLINK Capital, Inc. and
United States Trust Company of New York, as Trustee.
4.11 --First Supplemental Indenture, dated June 3, 1998, amending Indenture dated
September 25, 1997, by and between NEXTLINK Communications, Inc. and United States
Trust Company of New York, as Trustee.
4.12 --First Supplemental Indenture, dated June 3, 1998, amending Indenture dated March 3,
1998, by and between NEXTLINK Communications, Inc. and United States Trust Company
of New York, as Trustee.
4.13 --First Supplemental Indenture, dated June 3, 1998, amending Indenture dated April 1,
1998, by and between NEXTLINK Communications, Inc. and United States Trust Company
of New York, as Trustee.
5.1 --Opinion of Willkie Farr & Gallagher.
5.2 --Opinion of Davis Wright Tremaine, LLP
8.1 --Tax Opinion of Willkie Farr & Gallagher
10.1 --Stock Option Plan of the Company, as amended.
10.2 --Employee Stock Purchase Plan of the Company.
10.3 --Registration Rights Agreement dated as of January 15, 1997, between the Company and
the signatories listed therein(2).
10.4 --Preferred Exchange and Registration Rights Agreement, dated as of January 31, 1997,
by and among the Company and the Initial Purchasers(2).
10.5 --Fiber Lease and Innerduct Use Agreement, dated February 23, 1998, by and between
the Company and Metromedia Fiber Network, Inc. (4)
10.6 --Amendment No. 1 to Fiber Lease and Innerduct Use Agreement, dated March 4, 1998, by
and between the Company and Metromedia Fiber Network, Inc. (4)
21 --Subsidiaries of the Registrant(4).
23.1 --Consent of Arthur Andersen LLP.
23.2 --Consent of Willkie Farr & Gallagher (included in their opinion filed as Exhibit 5.1
and Exhibit 8.1).
23.3 --Consent of Davis Wright Tremaine, LLP (included in their opinion filed as Exhibit
5.2)
24 --Powers of Attorney (included on signature pages).
25 --Statement on Form T-1 of Eligibility of Trustee.
99.1 --Form of Letter of Transmittal.
99.2 --Form of Notice of Guaranteed Delivery.
99.3 --Form of Letter to Clients.
99.4 --Form of Letter to Nominees.
</TABLE>
II-2
<PAGE>
- ------------------------
(1) Incorporated herein by reference to the exhibit filed with the Registration
Statement on Form S-4 of NEXTLINK Communications, L.L.C. (the predecessor of
NEXTLINK Communications, Inc.) and NEXTLINK Capital, Inc. (Commission File
No. 333-4603).
(2) Incorporated herein by reference to the exhibit filed with the Annual Report
on Form 10-KSB for the year ended December 31, 1996 of NEXTLINK
Communications, Inc. and NEXTLINK Capital, Inc. (Commission File Nos.
33-04603 and 333-04603-01).
(3) Incorporated here by reference to the exhibit filed with the Registration
Statement on Form S-1 of NEXTLINK Communications, Inc. (Commission File No.
333-32003).
(4) Incorporated herein by reference to the exhibit filed with the Annual Report
on Form 10-KSB for the year ended December 31, 1997 of NEXTLINK
Communications, Inc. and NEXTLINK Capital, Inc. (Communication File Nos.
333-04603 and 333-04603-01).
(5) Incorporated herein by reference to the exhibit filed with the quarterly
report on Form 10-Q for the quarterly period ended March 31, 1998 of
NEXTLINK Communications, Inc. Commission File No. 000-22939.
B FINANCIAL STATEMENT SCHEDULES.
None.
ITEM 22. UNDERTAKINGS.
Insofar as indemnifications for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 20 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the option of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of this Registration Statement through the date
of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing a Form S-4 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Bellevue, State of Washington, on the 8th day of June 1998.
NEXTLINK COMMUNICATIONS, INC.
BY: /S/ R. BRUCE EASTER, JR.
-----------------------------------------
R. Bruce Easter, Jr.
VICE PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Chairman of the Board
- ------------------------------
Steven W. Hooper
* Vice Chairman and Chief June 8, 1998
- ------------------------------ Executive Officer and
Wayne W. Perry Director
* President (Principal June 8, 1998
- ------------------------------ Executive Officer) and
James F. Voelker Director
Vice President, Chief June 8, 1998
Financial Officer and
* Treasurer (Principal
- ------------------------------ Financial Officer and
Kathleen H. Iskra Principal Accounting
Officer)
Director
- ------------------------------
Craig O. McCaw
* Director June 8, 1998
- ------------------------------
Dennis Weibling
* Director June 8, 1998
- ------------------------------
Scot Jarvis
II-4
<PAGE>
<TABLE>
<C> <S> <C>
* Director June 8, 1998
- ------------------------------
William A. Hoglund
Director
- ------------------------------
Sharon L. Nelson
* Director June 8, 1998
- ------------------------------
Jeffrey S. Raikes
Director
- ------------------------------
Gregory J. Parker
</TABLE>
By: /s/ R. BRUCE EASTER, JR.
-----------------------------------
R. Bruce Easter, Jr.
ATTORNEY-IN-FACT
II-5
<PAGE>
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS:
<TABLE>
<C> <S>
1 --Purchase Agreement by and among the Company and the Initial Purchasers.
3.1 --Certificate of Incorporation of the Company.
3.2 --By-laws of the Company.
4.1 --Form of Exchange Note Indenture, by and among NEXTLINK Communications, Inc. and
United States Trust Company of New York, as Trustee, relating to the Exchange
Notes, including form of Exchange Notes.(2)
4.2 --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.
4.3 --Form of stock certificate of 14% Senior Exchangeable Redeemable Preferred
Shares.(2)
4.4 --Indenture, dated as of April 25, 1996, by and among NEXTLINK Communications, Inc.,
NEXTLINK Capital, Inc., 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.(1)
4.5 --First Supplemental Indenture, dated as of January 31, 1997, by and among the
Company, NEXTLINK Communications, L.L.C., NEXTLINK Capital, Inc. and United States
Trust Company of New York, as Trustee.(2)
4.6 --Form of Indenture between United States Trust Company, as Trustee and NEXTLINK
Communications, Inc., relating to the 9 5/8% Senior Notes due 2007.(3)
4.7 --Indenture, dated March 3, 1998, between United States Trust Company, as Trustee and
NEXTLINK Communications, Inc., relating to the 9% Senior Notes due 2008.(4)
4.8 --Certificate of Designation of Powers, Preferences and Relative, Participating,
Optional and Other Special Rights of 6 1/2% Cumulative Convertible Preferred Stock
and Qualifications, Limitations and Restrictions Thereof.
4.9 --Indenture, dated April 1, 1998, between United States Trust Company, as Trustee and
NEXTLINK Communications, Inc., relating to the 9.45% Senior Discount Notes due
2008.(5)
4.10 --Second Supplemental Indenture, dated June 3, 1998, amending Indenture dated April
25, 1996, by and among NEXTLINK Communications, Inc., NEXTLINK Capital, Inc. and
United States Trust Company of New York, as Trustee.
4.11 --First Supplemental Indenture, dated June 3, 1998, amending Indenture dated
September 25, 1997, by and between NEXTLINK Communications, Inc. and United States
Trust Company of New York, as Trustee.
4.12 --First Supplemental Indenture, dated June 3, 1998, amending Indenture dated March 3,
1998, by and between NEXTLINK Communications, Inc. and United States Trust Company
of New York, as Trustee.
4.13 --First Supplemental Indenture, dated June 3, 1998, amending Indenture dated April 1,
1998, by and between NEXTLINK Communications, Inc. and United States Trust Company
of New York, as Trustee.
5.1 --Opinion of Willkie Farr & Gallagher.
5.2 --Opinion of Davis Wright Tremaine, LLP
8.1 --Tax Opinion of Willkie Farr & Gallagher
10.1 --Stock Option Plan of the Company, as amended.
10.2 --Employee Stock Purchase of the Company.
10.3 --Registration Rights Agreement dated as of January 15, 1997, between the Company and
the signatories listed therein(2).
10.4 --Preferred Exchange and Registration Rights Agreement, dated as of January 31, 1997,
by and among the Company and the Initial Purchasers(2).
10.5 --Fiber Lease and Innerduct Use Agreement, dated February 23, 1998, by and between
the Company and Metromedia Fiber Network, Inc. (4)
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.6 --Amendment No. 1 to Fiber Lease and Innerduct Use Agreement, dated March 4, 1998, by
and between the Company and Metromedia Fiber Network, Inc. (4)
21 --Subsidiaries of the Registrant(4).
23.1 --Consent of Arthur Andersen LLP.
23.2 --Consent of Willkie Farr & Gallagher (included in their opinion filed as Exhibit 5.1
and Exhibit 8.1).
23.3 --Consent of Davis Wright Tremaine, LLP (included in their opinion filed as Exhibit
5.2)
24 --Powers of Attorney (included on signature pages).
25 --Statement on Form T-1 of Eligibility of Trustee.
99.1 --Form of Letter of Transmittal.
99.2 --Form of Notice of Guaranteed Delivery.
99.3 --Form of Letter to Clients.
99.4 --Form of Letter to Nominees.
</TABLE>
- ------------------------
(1) Incorporated herein by reference to the exhibit filed with the Registration
Statement on Form S-4 of NEXTLINK Communications, L.L.C. (the predecessor of
NEXTLINK Communications, Inc.) and NEXTLINK Capital, Inc. (Commission File
No. 333-4603).
(2) Incorporated herein by reference to the exhibit filed with the Annual Report
on Form 10-KSB for the year ended December 31, 1996 of NEXTLINK
Communications, Inc. and NEXTLINK Capital, Inc. (Commission File Nos.
33-04603 and 333-04603-01).
(3) Incorporated here by reference to the exhibit filed with the Registration
Statement on Form S-1 of NEXTLINK Communications, Inc. (Commission File No.
333-32003).
(4) Incorporated herein by reference to the exhibit filed with the Annual Report
on Form 10-KSB for the year ended December 31, 1997 of NEXTLINK
Communications, Inc. and NEXTLINK Capital, Inc. (Communication File Nos.
333-04603 and 333-04603-01).
(5) Incorporated herein by reference to the exhibit filed with the Quarter
Report on Form 10-Q for the quarterly period ended March 31, 1998 of
NEXTLINK Communications, Inc. (Commission File No. 000-22939).
B FINANCIAL STATEMENT SCHEDULES.
None.
<PAGE>
CONFORMED COPY
NEXTLINK COMMUNICATIONS, INC.
$335,000,0000
9% SENIOR NOTES DUE 2008
PURCHASE AGREEMENT
New York, New York
February 26, 1998
Salomon Brothers Inc
TD Securities (USA) Inc.
As Representatives of the Initial Purchasers
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
NEXTLINK Communications, Inc., a corporation organized under the laws of
the State of Washington (the "Company"), proposes to issue and sell to the
parties named in Schedule I hereto (the "Initial Purchasers") $335,000,000
principal amount of its 9% Senior Notes Due March 15, 2008 (the "Securities").
The Securities are to be issued under an indenture (the "Indenture") dated as of
March 3, 1998 between the Company and The United States Trust Company of New
York, as trustee. If you are the only Initial Purchasers, all references herein
to the Representatives shall be deemed to be to the Initial Purchasers.
The sale of the Securities to the Initial Purchasers will be made without
registration of the Securities under the Securities Act of 1933, as amended (the
"Act"), in reliance upon exemptions from the registration requirements of the
Act. You have advised the Company that the Initial Purchasers will offer and
sell the Securities purchased by them hereunder in accordance with Section 3
hereof as soon as you deem advisable.
In connection with the sale of the Securities, the Company has prepared a
preliminary offering memorandum, dated February 23, 1998, including any and all
exhibits thereto (the "Preliminary Memorandum"), and a final offering
memorandum, dated the date hereof (the "Execution Date") including any and all
exhibits thereto (the "Final Memorandum"). Each of the Preliminary Memorandum
and the Final Memorandum sets forth certain information concerning the Company
and the Securities. The Company hereby confirms that it has authorized the use
of the Preliminary Memorandum and the Final Memorandum, and any amendment or
supplement thereto, in connection with the offer and sale of the Securities by
the Initial Purchasers. Unless stated to the contrary, all references herein to
the Final Memorandum are to the Final Memorandum at the Execution Time (as
defined below) and are not meant to include any amendment or supplement
subsequent to the Execution Time.
0
<PAGE>
The Initial Purchasers and their direct and indirect transferees of the
Securities will be entitled to the benefits of the Registration Rights
Agreement, substantially in the form attached hereto as Exhibit A (the
"Registration Rights Agreement"), pursuant to which the Company has agreed,
among other things, to file a registration statement (the "Registration
Statement") with the Securities and Exchange Commission (the "Commission")
registering the Securities or the Exchange Securities (as defined in the
Registration Rights Agreement) under the Act.
1. Representations and Warranties.
(a) The Company represents and warrants to each of the Initial Purchasers
as set forth below in this Section 1:
(i) Contents of Offering Memorandum. The Preliminary Memorandum, at
the date thereof, did not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. The Final Memorandum, at the Execution Date, does not, and at
the Closing Date (as defined below) will not (and any amendment or
supplement thereto, at the date thereof and at the Closing Date, will
not), contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided,
however, that the Company makes no representation or warranty as to the
information contained in or omitted from the Preliminary Memorandum or the
Final Memorandum, or any amendment or supplement thereto, in reliance upon
and in conformity with information furnished in writing to the Company by
or on behalf of the Initial Purchasers through the Representatives
specifically for inclusion therein;
(ii) Independent Accountants. The accountants who certified the
financial statements included in the Final Memorandum are independent
certified public accountants with respect to the Company and its
subsidiaries within the meaning of Regulation S_X under the Act;
(iii) Financial Statements. The financial statements, together with
the related notes, included in the Final Memorandum present fairly the
financial position of the Company and its consolidated subsidiaries at the
dates indicated and the statement of operations, shareholders' equity and
cash flows of the Company and its consolidated subsidiaries for the
periods specified; said financial statements have been prepared in
conformity with generally accepted accounting principles ("GAAP") applied
on a consistent basis throughout the periods involved. The selected
financial data and the summary financial information included in the Final
Memorandum present fairly the information shown therein and have been
compiled on a basis consistent with that of the audited financial
statements included in the Final Memorandum;
1
<PAGE>
(iv) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Final Memorandum, except as
otherwise stated therein, (1) there has been no material adverse change in
the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company and its subsidiaries
considered as one enterprise (a "Material Adverse Effect"), whether or not
arising in the ordinary course of business, (2) there have been no
transactions entered into by the Company or any of its subsidiaries, other
than those in the ordinary course of business, which are material with
respect to the Company and its subsidiaries considered as one enterprise
and (3) there has been no dividend or distribution of any kind declared,
paid or made by the Company on any class of its capital stock;
(v) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation under the laws of the
State of Washington and has power and authority to own, lease and operate
its properties and to conduct its business as described in the Final
Memorandum and to enter into and perform its obligations under this
Agreement; and the Company is duly qualified as a foreign corporation to
transact business and is in good standing in each other jurisdiction in
which such qualification is required, whether by reason of the ownership
or leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a
Material Adverse Effect;
(vi) Good Standing of Designated Subsidiaries. Each "significant
subsidiary" of the Company (as such term is defined in Rule 1_02 of
Regulation S_X) and NEXTLINK Pennsylvania, L.P. and NEXTLINK Ohio, L.L.C.
(each a "Designated Subsidiary" and, collectively, the "Designated
Subsidiaries") has been duly organized and is validly existing and in good
standing, where applicable, as a corporation, limited liability company or
limited partnership, as the case may be, under the laws of the
jurisdiction of its formation, has power and authority to own, lease and
operate its properties and to conduct its business as described in the
Final Memorandum and is duly qualified as a foreign corporation, limited
liability company or limited partnership, as the case may be, to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing
of property or the conduct of business, except where the failure so to
qualify or to be in good standing would not result in a Material Adverse
Effect; except as otherwise disclosed in the Final Memorandum, all of the
issued and outstanding capital stock or other equity interest of each
Designated Subsidiary has been duly authorized and validly issued, is
fully paid and non-assessable and 99% thereof is owned by the Company,
directly or through subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; none of the
outstanding shares of capital stock or other equity interest of the
Designated Subsidiaries was issued in violation of any preemptive or
similar rights arising by operation of law, or under the constituting or
1
<PAGE>
operative document or agreement of any Designated Subsidiary or under any
agreement to which the Company or any Designated Subsidiary is a party;
(vii) Capitalization. The authorized, issued and outstanding capital
stock of the Company is as set forth in the Final Memorandum as of the
dates indicated therein. The shares of issued and outstanding capital
stock of the Company have been duly authorized and validly issued and are
fully paid and non-assessable; and none of the outstanding shares of
capital stock of the Company was issued in violation of the preemptive or
other similar rights of any securityholder of the Company, as applicable;
(viii) Authorization of Purchase Agreement. This Agreement and the
Registration Rights Agreement have been duly authorized, executed and
delivered by the Company, and the Registration Rights Agreement
constitutes a valid and legally binding agreement of the Company
enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
(ix) Authorization and Description of the Securities and the
Indenture. The Securities, when issued, will be in the form contemplated
by the Indenture. The Securities and the Exchange Securities (as defined
in the Registration Rights Agreement) have each been duly and validly
authorized by the Company and, when executed by the Company, authenticated
by the Trustee in accordance with the provisions of the Indenture and, in
the case of the Securities, when delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, and, in the
case of the Exchange Securities, when the Indenture has been duly
qualified under the Trust Indenture Act and the Exchange Securities have
been exchanged for the Securities pursuant to the Registration Rights
Agreement, will constitute valid and legally binding obligations of the
Company, entitled to the benefits of the Indenture, and enforceable
against the Company in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
and to general equity principles; the Indenture has been duly authorized
and when executed and delivered by the Company and the Trustee, will
constitute a valid and legally binding instrument, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles; and the Securities and the Indenture will conform in all
material respects to the descriptions thereof in the Final Memorandum and
will be in substantially the form previously delivered to the Initial
Purchasers;
(x) Absence of Defaults and Conflicts. Neither the Company
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nor any of its subsidiaries is in violation of its constituting or
operative document or agreement or in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or other agreement or instrument to which
the Company or any of its subsidiaries is a party, or by which any of them
may be bound, or to which any of the property or assets of the Company or
any of its subsidiaries is subject (collectively, "Agreements and
Instruments") except for such defaults that would not result in a Material
Adverse Effect; the execution, delivery and performance of this Agreement,
the Indenture, the Securities, the Registration Rights Agreement and any
other agreement or instrument entered into or issued or to be entered into
or issued by the Company in connection with the transactions contemplated
hereby, thereby or in the Final Memorandum and the consummation of the
transactions contemplated herein, therein and in the Final Memorandum
(including the issuance and sale of the Securities by the Company
hereunder), the compliance by the Company with its obligations hereunder
and under the Indenture, the Securities and the Registration Rights
Agreement have been duly authorized by all necessary action and do not and
will not, whether with or without the giving of notice or passage of time
or both, conflict with or constitute a breach of, or default or a
Repayment Event (as defined below) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets
of the Company or any of its subsidiaries pursuant to, the Agreements and
Instruments except for such conflicts, breaches or defaults or liens,
charges or encumbrances that, singly or in the aggregate, would not result
in a Material Adverse Effect, nor will such action result in any violation
of the provisions of the constituting or operative document or agreement
of the Company or any of its subsidiaries or any applicable law, statute,
rule, regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any of its subsidiaries or any of their
assets or properties. As used herein, a "Repayment Event" means any event
or condition which gives the holder of any material note, debenture or
other evidence of indebtedness (or any person acting on such holder's
behalf) the right to require repurchase, redemption or repayment of all or
a portion of such indebtedness by the Company or any of its subsidiaries;
(xi) Possession of Licenses and Permits. Except as set forth in or
contemplated by the Final Memorandum with respect to systems under
development and the offering of dial tone service, each of the Company and
its Designated Subsidiaries has all material certificates, consents,
exemptions, orders, permits, licenses, authorizations, franchises or other
material approvals (each, an "Authorization") of and from, and has made
all material declarations and filings with, all Federal, state, local and
other governmental authorities, all self-regulatory organizations and all
courts and other tribunals, necessary or appropriate for the Company and
its Designated Subsidiaries to own, lease, license, use and construct its
properties and assets and to conduct
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its business in the manner described in the Final Memorandum, except to
the extent that the failure to obtain any such Authorizations or make any
such declaration or filing would not, singly or in the aggregate, result
in a Material Adverse Effect. Except as set forth in or contemplated by
the Final Memorandum, all such Authorizations are in full force and effect
with respect to the Company and its Designated Subsidiaries; to the best
knowledge of the Company, no event has occurred that permits, or after
notice or lapse of time could permit, the revocation, termination or
modification of any such Authorization; the Company and its Designated
Subsidiaries are in compliance in all material respects with the terms and
conditions of all such Authorizations and with the rules and regulations
of the regulatory authorities and governing bodies having jurisdiction
with respect thereto; and, except as set forth in the Final Memorandum,
the Company has no knowledge that any person is contesting or intends to
contest the granting of any material Authorization; and neither the
execution and delivery of this Agreement, the Indenture or the Securities,
nor the consummation of the transactions contemplated hereby and thereby
nor compliance with the terms, conditions and provisions hereof and
thereof by the Company or any of its Designated Subsidiaries will cause
any suspension, revocation, impairment, forfeiture, nonrenewal or
termination of any Authorization;
(xii) Absence of Labor Dispute. No labor dispute with the employees
of the Company or any of its subsidiaries exists or, to the knowledge of
the Company, is imminent, and the Company is not aware of any existing
labor disturbance by the employees of any of its or any of its
subsidiaries' principal suppliers, manufacturers, customers or
contractors, which, in either case, would reasonably be expected to result
in a Material Adverse Effect;
(xiii) Absence of proceedings. Except as disclosed in the Final
Memorandum, there is no action, suit, proceeding, inquiry or investigation
before or by any court or governmental agency or body, domestic or
foreign, now pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its subsidiaries which could
reasonably be expected to result in a Material Adverse Effect, or which
might reasonably be expected to materially and adversely affect the
properties or assets of the Company or any of its subsidiaries or the
consummation of this Agreement or the performance by the Company of its
obligations hereunder. The aggregate of all pending legal or governmental
proceedings to which the Company or any subsidiary thereof is a party or
of which any of their respective property or assets is the subject which
are not described in the Final Memorandum, including ordinary routine
litigation incidental to the business, could not reasonably be expected to
result in a Material Adverse Effect;
(xiv) Possession of Intellectual Property. The Company and its
subsidiaries own or possess, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
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proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the business
now operated by them, and except as otherwise described in the Final
Memorandum neither the Company nor any of its subsidiaries has received
any notice or is otherwise aware of any infringement of or conflict with
asserted rights of others with respect to any Intellectual Property or of
any facts or circumstances which would render any Intellectual Property
invalid or inadequate to protect the interest of the Company or any of its
subsidiaries therein, and which infringement or conflict (if the subject
of any unfavorable decision, ruling or finding) or invalidity or
inadequacy, singly or in the aggregate, would result in a Material Adverse
Effect;
(xv) Title of Property. The Company and its subsidiaries have good
and marketable title to all real property owned by them and good title to
all other properties owned by them, in each case, free and clear of all
mortgages, pledges, liens, security interests, claims, restrictions or
encumbrances of any kind except such as (a) are described in the Final
Memorandum or (b) do not, singly or in the aggregate, materially affect
the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company or any of its
subsidiaries; and all of the leases and subleases material to the business
of the Company and its subsidiaries, considered as one enterprise, and
under which the Company or any of its subsidiaries holds properties
described in the Final Memorandum, are in full force and effect, and
neither the Company nor any of its subsidiaries has any notice of any
material claim of any sort that has been asserted by anyone adverse to the
rights of the Company or any of its subsidiaries under any of the leases
or subleases mentioned above, or affecting or questioning the rights of
the Company or any subsidiary thereof to the continued possession of the
leased or subleased premises under any such lease or sublease;
(xvi) Tax Returns. The Company and its subsidiaries have filed all
federal, state, foreign and, to the extent material, local tax returns
that are required to be filed or have duly requested extensions thereof
and have paid all taxes required to be paid by any of them and any related
assessments, fines or penalties, except for any such tax, assessment, fine
or penalty that is being contested in good faith and by appropriate
proceedings; and adequate charges, accruals and reserves have been
provided for in the financial statements referred to in Section 1(a)(iii)
above in respect of all federal, state, local and foreign taxes for all
periods as to which the tax liability of the Company or any of its
subsidiaries has not been finally determined or remains open to
examination by applicable taxing authorities;
(xvii) Environmental Laws. Except as described in the Final
Memorandum and except such matters as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company
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nor any of its subsidiaries is in violation of any federal, state, local
or foreign statute, law, rule, regulation, ordinance, code, policy or rule
of common law or any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent, decree or
judgment, relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including,
without limitation, laws and regulations relating to the release or
threatened release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, "Environmental Laws"), (B) the Company
and its subsidiaries have all permits, authorizations and approvals
required under any applicable Environmental Laws and are each in
compliance with their requirements, (C) there are no pending or, to the
Company's knowledge, threatened administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigation or proceedings relating to any
Environmental Law against the Company or any of its subsidiaries and (D)
there are no events or circumstances that would reasonably be expected to
form the basis of an order for clean-up or remediation, or an action, suit
or proceeding by any private party or governmental body or agency, against
or affecting the Company or any of its subsidiaries relating to Hazardous
Materials or Environmental Laws;
(xviii) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Final
Memorandum will not be, an "investment company" or an entity "controlled"
by an "investment company" as such terms are defined in the Investment
Company Act of 1940, as amended (the "1940 Act");
(xix) Certain Disclosures in Final Memorandum. The statements set
forth in the Final Memorandum under the caption "Description of Notes",
insofar as they purport to constitute a summary of the terms of the
Securities, and under the captions "Business Regulatory Overview" and
"Plan of Distribution", insofar as they purport to describe the provisions
of the laws and documents referred to therein, are accurate and complete
in all material respects; and the statements set forth in the Final
Memorandum under the caption "Certain United States Federal Income Tax
Consequences", insofar as such statements purport to summarize certain
United States federal income and estate tax consequences of the ownership
and dispensation of the Securities by certain U.S. Holders and non-U.S.
Holders (as such terms are defined in the Final Memorandum) of the
Securities, provide a fair summary of such consequences under current law;
(xx) Cuba. Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or affiliate
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located in Cuba within the meaning of Section 517.075, Florida Statutes;
(xxi) No Manipulation or Stabilization. Neither the Company nor, to
its knowledge, any of its officers, directors or affiliates has taken and
will take, directly or indirectly, any action which is designed to or
which has constituted or which might reasonably be expected to cause or
result in stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Securities;
(xxii) Other Listed Securities. No securities of the Company or any
subsidiary that are of the same class (within the meaning of Rule 144A
under the Act) as the Securities are listed on a national securities
exchange registered under Section 6 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or quoted in a U.S. automated
inter-dealer quotation system;
(xxiii) No General Solicitation or Directed Selling Efforts. Neither
the Company nor any of its Affiliates (as defined in Rule 501(b) of
Regulation D under the Act ("Regulation D")), nor any person acting on its
or their behalf has offered or sold the Securities by means of any general
solicitation or general advertising within the meaning of Rule 502(c)
under the Act or, with respect to Securities sold outside the United
States to non-U.S. persons (as defined in Rule 902 under the Act), by
means of any directed selling efforts within the meaning of Rule 902 under
the Act and the Company, any Affiliate of the Company and any person
acting on its or their behalf has complied with and will implement the
"offering restriction" within the meaning of such Rule 902;
(xxiv) Eligibility of Securities. The Securities satisfy the
eligibility requirements of Rule 144A(d)(3) under the Act;
(xxv) Compliance with Exchange Act. The Company is subject to and in
full compliance with the reporting requirements of Section 13 or Section
15(d) of the Exchange Act;
(xxvi) Other Agents. The Company has not paid or agreed to pay to
any person any compensation for soliciting another to purchase any
securities of the Company (except as contemplated by this Agreement); and
(xxvii) Additional Issuer Information. The information provided by
the Company pursuant to Section 4(f) hereof will not, at the date thereof,
contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(b) Any certificate signed by any officer of the Company or any of its
subsidiaries delivered to the Initial Purchasers or to counsel for the Initial
Purchasers shall be deemed a representation and warranty by the Company to each
Initial Purchaser as to the matters covered thereby.
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2. Sale and Delivery to Initial Purchasers.
(a) Securities. Subject to the terms and conditions and in reliance upon
the representations and warranties herein set forth, the Company agrees to sell
to each Initial Purchaser, severally and not jointly, and each Initial Purchaser
agrees, severally and not jointly, to purchase from the Company, at a purchase
price of 99.798% the principal amount thereof, plus accrued interest, if any,
from March 3, 1998 to the Closing Date, the principal amount of Securities set
forth opposite such Initial Purchaser's name in Schedule I hereto.
(b) Closing and Payment. (i) The Securities to be purchased by each
Initial Purchaser hereunder, in definitive form, and in such authorized
denominations and registered in such names as Salomon Brothers Inc may
request upon at least forty-eight hours' prior notice to the Company shall
be delivered by or on behalf of the Company to the Initial Purchasers,
through the facilities of the Depository Trust Company ("DTC") (unless the
Initial Purchasers shall otherwise instruct) for the account of such
Initial Purchaser, against payment by or on behalf of such Initial
Purchaser of the purchase price therefor by wire transfer or certified or
official bank check or checks, payable to the order of the Company in
immediately available (same day) funds. The Company will cause the
certificates representing the Securities to be made available for checking
and packaging at least twenty-four hours prior to the Closing Time (as
defined below) with respect thereto at the offices of DTC or its
designated custodian (the "Designated Office"). The time and date of such
delivery and payment shall be 10:00 a.m. on March 3, 1998 (the "Closing
Date"), or such other time and date as Salomon Brothers Inc and the
Company may agree upon in writing, such time and date for delivery of the
Securities is herein "Closing Time".
(ii) The documents to be delivered at the Closing Time by or on
behalf of the parties hereto pursuant to Section 6 hereof, including the
cross receipt for the Securities and any additional documents requested by
the Initial Purchasers pursuant to Section 6(j) hereof, will be delivered
at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New
York 10004 (the "Closing Location"), and the Securities will be delivered
at the Designated Office, all at the Closing Time. A meeting will be held
at the Closing Location at 2:00 p.m. on the New York Business Day next
preceding the Closing Time, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be
available for review by the parties hereto. For the purposes of this
Section 2, "New York Business Day" shall mean each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which banking
institutions in New York are generally authorized or obligated by law or
executive order to close.
3. Offering of Securities. Upon the authorization by you of the release of
the Securities, the Initial Purchasers propose to offer the Securities for sale
upon the terms and conditions set forth in this Agreement and the Final
Memorandum and each Initial Purchaser hereby represents and warrants to,
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and agrees with the Company that:
(a) It will offer and sell the Securities only to: (i) persons who it
reasonably believes are "qualified institutional buyers" ("QIBs") within the
meaning of Rule 144A under the Act in transactions meeting the requirements of
Rule 144A, or (ii) upon the terms and conditions set forth in Annex I to this
Agreement;
(b) It is a QIB; and
(c) It will not offer or sell the Securities by any form of general
solicitation or general advertising, including but not limited to the methods
described in Rule 502(c) under the Act.
4. Covenants. The Company covenants and agrees with each Initial
Purchaser:
(a) Preparation of Final Memorandum; Notices. To prepare the Final
Memorandum in a form approved by the Initial Purchasers; to make no amendment or
any supplement to the Final Memorandum which shall be disapproved by the Initial
Purchasers promptly after reasonable notice thereof; and to furnish the Initial
Purchasers with copies thereof;
(b) Copies of and Amendments to Final Memorandum and Supplements. To
furnish the Initial Purchasers with copies in such quantities as the Initial
Purchasers may from time to time reasonably request of the Final Memorandum and
each amendment or supplement thereto signed by an authorized officer of the
Company with the independent accountants' report(s) in the Final Memorandum, and
any amendment or supplement containing amendments to the financial statements
covered by such report(s), signed by the accountants, and if, at any time prior
to the expiration of nine months after the Execution Date, any event shall have
occurred as a result of which the Final Memorandum as then amended or
supplemented would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made when such Final
Memorandum is delivered, not misleading, or, if for any other reason it shall be
necessary or desirable during such same period to amend or supplement the Final
Memorandum, to notify the Initial Purchasers and upon the request of the Initial
Purchasers to prepare and furnish without charge to each Initial Purchaser and
to any dealer in securities as many copies as the Initial Purchasers may from
time to time reasonably request of an amended Final Memorandum or a supplement
to the Final Memorandum which will correct such statement or omission or effect
such compliance;
(c) Lock-up. During the period beginning from the Execution Date and
continuing to and including the date 90 days after the Closing Date, not to
offer, sell, contract to sell or otherwise dispose of, directly or indirectly,
or announce an offering of, except as provided hereunder any debt securities of
the Company in an offering to the public (or in a private offering where holders
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of the debt securities are granted rights to have such debt securities
registered under the Act, or to exchange such debt securities for other debt
securities that are so registered) without the prior written consent of Salomon
Brothers Inc
(d) Investment Company. Not to be or become, at any time prior to the
expiration of three years after the Closing Date, an open-end investment
company, unit investment trust, closed-end investment company or face-amount
certificate company that is or is required to be registered under Section 8 of
the 1940 Act;
(e) Portal. To use its reasonable best efforts to cause the Securities to
be eligible for the PORTAL trading system of the National Association of
Securities Dealers, Inc.;
(f) Information to holders of Securities. (i) At any time when the
Company is not subject to Section 13 or 15(d) of the Exchange Act, for the
benefit of holders from time to time of Securities, to furnish at its
expense, upon request, to holders of Securities and prospective purchasers
of securities information (the "Additional Issuer Information") satisfying
the requirements of subsection (d)(4)(i) of Rule 144A under the Act;
(ii) To furnish to the holders of the Securities as soon as
practicable after the end of each fiscal year an annual report (including
a balance sheet and statements of income, stockholders' equity and cash
flows of the Company and its consolidated subsidiaries certified by
independent public accountants) and, as soon as practicable after the end
of each of the first three quarters of each fiscal year (beginning with
the fiscal quarter ending after the Execution Date), consolidated summary
financial information of the Company and its subsidiaries for such quarter
in reasonable detail;
(g) Initial Purchasers. During a period of five years from the Execution
Date, to furnish to the Initial Purchasers copies of all reports or other
communications (financial or other) furnished to stockholders of the Company,
and to deliver to the Initial Purchasers (i) as soon they are available, copies
of any reports and financial statements furnished to or filed with the
Commission or any securities exchange on which the Securities or any class of
securities or any class of securities of the Company is listed; and (ii) such
additional information concerning the business and financial condition of the
Company as the Initial Purchasers may from time to time reasonably request (such
financial statements to be on a consolidated basis to the extent the accounts of
the Company and its subsidiaries are consolidated in reports furnished to its
stockholders generally or to the Commission);
(h) Resales by Company and Affiliates. Until such time as the Exchange
Offer is completed and all Securities have been exchanged for Exchange
Securities, during the period of two years after the Closing Date, the Company
will not, and will not permit any of its "affiliates" (as defined in Rule 144
under the Act) to, resell any of the Securities which constitute "restricted
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securities" under Rule 144 that have been reacquired by any of them;
(i) Exchange Registration. The Company shall file and use its best efforts
to cause to be declared or become effective under the Act, on or prior to 120
days after the Closing Date, a registration statement on Form S-4 providing for
the registration of the Exchange Securities and the exchange of the Securities
for the Exchange Securities, all in a manner which will permit persons who
acquire the Exchange Securities to resell the Exchange Securities pursuant to
Section 4(1) of the Act;
(j) Use of Proceeds. To use the net proceeds received by it from the sale
of the Securities pursuant to this Agreement in the manner specified in the
Final Memorandum under the caption "Use of Proceeds";
(k) Manner of Sale. Neither the Company nor any of its Affiliates nor any
person acting on its or their behalf will offer or sell the Securities by means
of any general solicitation or general advertising within the meaning of Rule
502(c) under the Act or, with respect to Securities sold outside the United
States to non-U.S. persons (as defined in Rule 902 under the Act), by means of
any directed selling efforts within the meaning of Rule 902 under the Act and
the Company, any Affiliate of the Company and any person acting on its or their
behalf will comply with and will implement the "offering restriction" within the
meaning of such Rule 902; and
(l) DTC. The Company will cooperate with the Representatives and use its
best efforts to permit the Securities to be eligible for clearance and
settlement through The Depository Trust Company.
5. Expenses. The Company covenants and agrees with the Initial Purchasers
that the Company will pay or cause to be paid all costs and expenses incident to
the performance of its obligations under this Agreement, whether or not the
transactions contemplated herein are consummated or this Agreement is terminated
pursuant to Section 10 hereof, including all costs and expenses incident to (i)
the fees, disbursements and expenses of the Company's counsel and accountants
and all other expenses in connection with the preparation, word processing,
printing or other production of any Preliminary Memorandum, the Final Memorandum
and amendments and supplements thereto; (ii) the cost of word processing,
printing or reproducing this Agreement, the Agreement Among Underwriters, the
Selling Agreement, the Indenture, the Registration Rights Agreement, the
Securities, closing documents (including any compilations thereof) and any other
documents in connection with the offering, purchase, sale and delivery of the
Securities; (iii) all arrangements relating to the delivery to the Initial
Purchasers and dealers of copies of the foregoing documents; (iv) the costs and
charges of any transfer agent or registrar and of DTC; (v) reasonable expenses
in connection with any meetings with prospective investors in the Securities,
(vi) fees and expenses of the Trustee including fees and expenses of counsel for
the Trustee, (vii) all expenses and listing fees incurred in connection with the
application for quotation of the Securities on the PORTAL market and (viii) any
fees charged by investment rating agencies for the rating of the Securities. It
is understood, however, that,
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except as provided in this Section, and Sections 7, 8 and 11 hereof, the Initial
Purchasers will pay all of their own costs and expenses, including the fees of
their counsel, transfer taxes on resale of any of the Securities by them, and
any advertising expenses connected with any offers they may make.
If this Agreement is terminated by the Initial Purchasers in accordance
with the provisions of Section 6 or Section 10 hereof, the Company shall
reimburse the Initial Purchasers for all of their out of pocket expenses,
including the reasonable fees and disbursements of counsel for the Initial
Purchasers.
6. Conditions to the Obligations of the Initial Purchasers. The
obligations of the Initial Purchasers to purchase the Securities shall be
subject to the accuracy of the representations and warranties on the part of the
Company contained herein at the date and time that this Agreement is executed
and delivered by the parties hereto (the "Execution Time") and the Closing Time,
to the accuracy of the statements of the Company made in any certificates
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder and to the following additional conditions:
(a) Opinion of Counsel for Company. At the Closing Time, the Initial
Purchasers shall have received the favorable opinions, dated as of the Closing
Date, of Willkie Farr & Gallagher, counsel for the Company, of R. Bruce Easter,
Esq., Vice President, General Counsel and Secretary of the Company, and of Davis
Wright Tremaine LLP, special Washington counsel to the Company, in form and
substance satisfactory to counsel for the Initial Purchasers, to the effect set
forth in Exhibits A_1, A_2 and A-3 hereto, respectively, and to such further
effect as counsel to the Initial Purchasers may reasonably request;
(b) Opinion of Counsel for Initial Purchasers. At the Closing Time, the
Initial Purchasers shall have received the favorable opinion, dated as of the
Closing Date, of Sullivan & Cromwell, counsel for the Initial Purchasers, with
respect to the incorporation of the Company, the Indenture, the validity of the
Securities being delivered at the Closing Time, the Final Memorandum and such
other related matters as the Initial Purchasers may reasonably request. In
giving such opinion such counsel may rely, as to all matters governed by the
laws of jurisdictions other than the law of the State of New York and the
federal law of the United States, upon the opinions of counsel satisfactory to
the Initial Purchasers. Such counsel may also state that, insofar as such
opinion involves factual matters, they have relied, to the extent they deem
proper, upon certificates of officers of the Company and its subsidiaries and
certificates of public officials;
(c) Officers' Certificate. At such Closing Time, there shall not have
been, since the Execution Date or since the date of the most recent financial
statements included in the Final Memorandum (exclusive of any supplement
thereto), any material adverse change in the condition, financial or otherwise,
or in the earnings, business affairs or business prospects of the Company and
its subsidiaries considered as one enterprise, whether or not arising from
transactions in the ordinary course of business except as set forth in the Final
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Memorandum (exclusive of any supplement thereto), and the Initial Purchasers
shall have received certificates of the Chairman of the Board, the President or
a Vice President of the Company and of the chief financial or chief accounting
officer of the Company, satisfactory to the Initial Purchasers, to the effect
that, at and as of such Closing Time, (i) they have carefully examined the
Preliminary Memorandum, the Final Memorandum and any supplements thereto and
this Agreement, (ii) there has been no such material adverse change, (iii) the
representations and warranties of the Company in Section 1 hereof are true and
correct in all material respects on and as of the Closing Time with the same
force and effect as though expressly made at and as of such Closing Time, and
(iv) the Company has complied with all agreements and satisfied all conditions
on its part to be performed or satisfied at or prior to such Closing Time;
(d) Accountant's Comfort Letter. On the Execution Date at a time prior to
the execution of this Agreement, and at 10:00 a.m. on the effective date of any
amendment or supplement thereto entered into subsequent to the Execution Date,
the Initial Purchasers shall have received from Arthur Andersen LLP a letter or
letters dated the respective dates of delivery thereof, in form and substance
satisfactory to the Initial Purchasers, containing statements and information of
the type ordinarily included in accountants' "comfort letters" to the Initial
Purchasers with respect to the financial statements and certain financial
information contained in the Final Memorandum;
(e) Bring-down Comfort Letter. At the Closing Time, the Initial Purchasers
shall have received from Arthur Andersen LLP a letter, dated as of the Closing
Date, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (d) of this Section 6, except that the
specified date referred to shall be a date not more than three business days
prior to such Closing Date;
(f) No Material Adverse Change in Business. Since the respective dates as
of which information is given in the Final Memorandum, except as otherwise
stated therein, (1) there has been no Material Adverse Effect, whether or not
arising in the ordinary course of business, (2) there have been no transactions
entered into by the Company or any of its subsidiaries, other than those in the
ordinary course of business, which are material with respect to the Company and
its subsidiaries considered as one enterprise (3) there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class of
its capital stock and (4) there has been no change or decrease specified in the
letters referred to in Section 6(d) and 6(e) above, the effect of which, in any
case referred to in clauses (1) through (4) above, is, in the sole judgment of
the Initial Purchasers, so material and adverse as to make it impractical or
inadvisable to proceed with the offering or delivery of the Securities as
contemplated by the Final Memorandum (exclusive of any amendment thereof or
supplement thereto);
(g) Maintenance of Rating. On or after the Execution Date, there shall not
have occurred a downgrading in the rating assigned to the Company's debt
securities or preferred stock by any nationally recognized securities rating
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<PAGE>
agency, and no such securities rating agency shall have publicly announced that
it has under surveillance or review, with possible negative implications, its
rating of any of the Company's debt securities or preferred stock;
(h) Final Memorandum. The Company shall have complied with the provisions
of Section 4(c) hereof with respect to the furnishing of Final Memoranda on the
New York Business Day next succeeding the Execution Date;
(i) Adequate Disclosure of Litigation. There is no litigation or
governmental or other action, suit, claim, proceeding or investigation before
any court or any public, regulatory or governmental agency or body, pending or,
to the best of the Company's knowledge, threatened against the Company or any of
its subsidiaries or any of their respective officers (in their capacity as
officers of the Company or such subsidiaries) or any of the properties, assets,
business or rights of the Company or such subsidiaries which is of a character
required to be disclosed in the Final Memorandum which is not disclosed therein;
(j) Additional Documents. At the Closing Time: (i) the Company shall have
furnished to the Initial Purchasers such further information, certificates and
documents as the Initial Purchasers may reasonably request; (ii) counsel for the
Initial Purchasers shall have been furnished with such documents and opinions as
they may require for the purpose of enabling them to pass upon the issuance and
sale of the Securities as herein contemplated, or in order to evidence the
accuracy of any of the representations or warranties, or the fulfillment of any
of the conditions, herein contained; and (iii) all proceedings taken by the
Company in connection with the issuance and sale of the Securities as herein
contemplated shall be satisfactory in form and substance to the Initial
Purchasers and counsel for the Initial Purchasers; and
(k) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement may be terminated by the Initial Purchasers by notice to the Company
at any time at or prior to the Closing Time, and such termination shall be
without liability of any party to any other party except as provided in Section
5 and except that Sections 1, 7 and 8 shall survive any such termination and
remain in full force and effect.
7. Indemnification.
(a) Indemnification of Initial Purchasers. The Company agrees to indemnify
and hold harmless each Initial Purchaser, the directors, officers, employees and
agents of each Initial Purchaser and each person, if any, who controls any
Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act against any and all losses, liabilities (joint or several),
claims, damages and expenses whatsoever, to which they or any of them may become
subject under the Act, the Exchange Act or other Federal or state statutory law
or regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a
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<PAGE>
material fact contained in the Preliminary Memorandum (or any amendment or
supplement thereto) or the Final Memorandum (or any amendment or supplement
thereto), or arise out of or are based upon the omission or alleged omission
therefrom of a material fact necessary in order to make the statements therein
not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
any Initial Purchaser through the Initial Purchasers specifically for inclusion
therein. This indemnity agreement will be in addition to any liability which the
Company may otherwise have.
(b) Indemnification of Company, Directors and Officers. Each Initial
Purchaser severally agrees to indemnify and hold harmless the Company, each of
its directors (including any person who, with his or her consent, is named in
the Registration Statement as about to become a director of the Company) and
each person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20 of the Exchange Act against any and all losses,
liabilities (joint or several), claims, damages and expenses described in the
indemnity contained in subsection (a) of this Section, as incurred, but only
with respect to written information furnished to the Company by such Initial
Purchaser through Salomon Brothers Inc specifically for inclusion in the
documents referred to in the foregoing indemnity. The Company acknowledges that
the statements set forth in the last paragraph of the cover page regarding
delivery of the Securities, the stabilization legend in block capital letters on
the reverse of the cover page and, under the heading "Plan of Distribution", the
paragraph related to stabilization in the Preliminary Memorandum or the Final
Memorandum constitute the only information furnished in writing by or on behalf
of the several Initial Purchasers for inclusion in such Preliminary Memorandum
or Final Memorandum.
(c) Actions against Parties; Notification. Each indemnified party shall
give written notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party (i) will not
relieve it from liability under paragraph (a) or (b) above unless and to the
extent it did not otherwise learn of such action and such failure results in the
forfeiture by the indemnifying party of substantial rights and defenses and (ii)
will not, in any event, relieve the indemnifying party from any obligations to
any indemnified party other than the indemnification obligation provided in
paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint
counsel of the indemnifying party's choice at the indemnifying party's expense
to represent the indemnified party in any action for which indemnification is
sought (in which case the indemnifying party shall not thereafter be responsible
for the fees and expenses of any separate counsel retained by the indemnified
party or parties except as set forth below); provided, however, that such
counsel
15
<PAGE>
shall be satisfactory to the indemnified party. Notwithstanding the indemnifying
party's election to appoint counsel to represent the indemnified party in an
action, the indemnified party shall have the right to employ separate counsel
(including local counsel), and the indemnifying party shall bear the reasonable
fees, costs and expenses of such separate counsel if (i) the use of counsel
chosen by the indemnifying party to represent the indemnified party would
present such counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, (iii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of the institution of such action or (iv)
the indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 7 or Section
8 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding 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.
8. Contribution. If the indemnification provided for in Section 7 hereof
is for any reason unavailable to or insufficient to hold harmless an indemnified
party in respect of any losses, liabilities, claims, damages or expenses
referred to therein, then each indemnifying party shall contribute to the
aggregate amount of such losses, liabilities, claims, damages and expenses
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) incurred by such indemnified party, as
incurred, (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Initial Purchasers on
the other hand from the offering of the Securities pursuant to this Agreement
(provided that in no case shall any Initial Purchaser (except as may be provided
in any agreement among Initial Purchasers relating to the offering of the
Securities) be responsible for any amount in excess of the underwriting discount
or commission applicable to the Securities purchased by such Initial Purchaser
hereunder) or (ii) if the allocation provided by clause (i) is unavailable for
any reason, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and of the Initial Purchasers on the other hand in
connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
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<PAGE>
The relative benefits received by the Company on the one hand and the
Initial Purchasers on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company bear to the total underwriting discounts and commissions received by
the Initial Purchasers, in each case as set forth in the Final Memorandum.
The relative fault of the Company on the one hand and the Initial
Purchasers on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Initial Purchasers and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Initial Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 8 were determined by pro rata
allocation (even if the Initial Purchasers were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 8.
Notwithstanding the provisions of this Section 8, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed to
investors were offered to investors exceeds the amount of any damages which such
Initial Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 8, no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
For purposes of this Section 8, each person, if any, who controls an
Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act shall have the same rights to contribution as such Initial
Purchaser, and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Company. The Initial Purchasers' respective
obligations to contribute pursuant to this Section 8 are several in proportion
to the number of Securities set forth opposite their respective names in
Schedule I hereto and not joint.
9. Representations, Warranties and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement, or in
certificates of officers of the Company submitted pursuant hereto, shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of any Initial Purchaser or controlling person, or by or on
17
<PAGE>
behalf of the Company, and shall survive delivery of the Securities to the
Initial Purchasers.
10. Termination of Agreement.
(a) Termination; General. This Agreement shall be subject to termination
in the absolute discretion of the Initial Purchasers, by notice given to the
Company prior to delivery of and payment for the Securities, if at any time
prior to such time (i) trading in the Company's Common Stock shall have been
suspended by the Commission or the NASDAQ or trading in securities generally on
the New York Stock Exchange or the NASDAQ shall have been suspended or limited
or minimum prices shall have been established on such Exchange or NASDAQ, (ii) a
banking moratorium shall have been declared either by Federal or New York State
authorities or (iii) there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a national emergency or war or
other calamity or crisis the effect of which on financial markets is such as to
make it, in the sole judgment of the Initial Purchasers, impractical or
inadvisable to proceed with the offering or delivery of the Securities as
contemplated by the Final Memorandum (exclusive of any supplement thereto).
(b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 5 hereof, and provided further that Sections 1, 7
and 8 shall survive such termination and remain in full force and effect.
11. Default by One or More of the Initial Purchasers. If any one or more
of the Initial Purchasers shall fail to purchase and pay for any of the
Securities agreed to be purchased by such Initial Purchaser or Initial
Purchasers hereunder and such failure to purchase shall constitute a default in
the performance of its or their obligations under this Agreement, the remaining
Initial Purchasers shall be obligated severally to take up and pay for (in the
respective proportions which the amount of Securities set forth opposite their
names in Schedule I hereto bears to the aggregate amount of Securities set forth
opposite the names of all the remaining Initial Purchasers) the Securities which
the defaulting Initial Purchaser or Initial Purchasers agreed but failed to
purchase; provided, however, that in the event that the aggregate amount of
Securities which the defaulting Initial Purchaser or Initial Purchasers agreed
but failed to purchase shall exceed 10% of the aggregate amount of Securities
set forth in Schedule I hereto, the remaining Initial Purchasers shall have the
right to purchase all, but shall not be under any obligation to purchase any, of
the Securities, and if such nondefaulting Initial Purchasers do not purchase all
of the Securities, this Agreement will terminate without liability to any
nondefaulting Initial Purchaser or the Company. In the event of a default by any
Initial Purchaser as set forth in this Section 11, the Closing Time shall be
postponed for such period, not exceeding five Business Days, as the Initial
Purchasers shall determine in order that the required changes in the Final
Memorandum or in any other documents or arrangements may be effected. Nothing
contained in this Agreement shall relieve any defaulting Initial Purchaser of
its liability, if any, to the Company and any nondefaulting Initial
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<PAGE>
Purchaser for damages occasioned by its default hereunder.
12. Reliance; Notices. In all dealings hereunder, the Initial Purchasers
shall act on behalf of each of the Initial Purchasers, and the parties hereto
shall be entitled to act and rely upon any statement, request, notice or
agreement on behalf of any Initial Purchaser made or given by the Initial
Purchasers jointly or by Salomon Brothers Inc on their behalf.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Initial Purchasers shall be delivered or sent by mail,
telex or facsimile transmission to the Initial Purchasers in care of Salomon
Brothers Inc General Counsel (fax no. (212) 783-1752) and confirmed to Salomon
Brothers Inc, Seven World Trade Center, New York, New York 10048, Attention:
General Counsel; and if to the Company shall be delivered or sent by mail, telex
or facsimile transmission to the address of the Company set forth in the Final
Memorandum, Attention: General Counsel; provided, however, that any notice to an
Initial Purchaser pursuant to Section 7(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Initial Purchaser at its address
set forth in its Initial Purchasers' Questionnaire, or telex constituting such
Questionnaire, which address will be supplied to the Company by the Initial
Purchasers upon request. Any such statements, requests, notices or agreements
shall take effect upon receipt thereof.
13. Parties. This Agreement shall inure to the benefit of and be binding
upon the Initial Purchasers, the Company and their respective successors.
Nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any person, firm or corporation, other than the Initial
Purchasers, the Company and the controlling persons and officers and directors
referred to in Sections 7 and 8 and their respective heirs, executors,
administrators, successors and assigns any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision herein contained.
This Agreement and all conditions and provisions hereof are intended to be for
the sole and exclusive benefit of the Initial Purchasers, the Company and said
controlling persons and officers and directors and their respective heirs,
executors, administrators, successors and assigns, and for the benefit of no
other person, firm or corporation. No purchaser of Securities from any Initial
Purchaser shall be deemed to be a successor by reason merely of such purchase.
14. Time of the Essence. Time shall be of the essence of this Agreement.
As used herein, the term "business day" shall mean any day when the Commission's
office in Washington, D.C. is open for business.
15. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
THE CONFLICTS OF LAWS PROVISIONS THEREOF. SPECIFIED TIMES OF DAY REFER TO NEW
YORK CITY TIME.
16. Effect of Headings. The Section and sub-section headings herein
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<PAGE>
are for convenience only and shall not affect the construction hereof.
17. Counterparts. This Agreement may be executed by any one of more of the
parties hereto in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument.
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<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, and upon
the acceptance hereof by Salomon Brothers Inc, on behalf of each of the Initial
Purchasers, this letter and such acceptance hereof shall constitute a binding
agreement between each of the Initial Purchasers and the Company. It is
understood that your acceptance of this letter on behalf of each of the Initial
Purchasers is pursuant to the authority set forth in a form of Agreement among
Initial Purchasers, the form of which shall be submitted to the Company for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly Yours,
NEXTLINK Communications, Inc.
By /s/ R. BRUCE EASTER, Jr.
-----------------------------------
Name: R. Bruce Easter, Jr.
Title: Vice President
CONFIRMED AND ACCEPTED,
as of the date first above written:
Salomon Brothers Inc
TD Securities (USA) Inc.
By: Salomon Brothers Inc
By /s/ ANNE DANNACHER
----------------------------------
Name: Anne Dannacher
Title: Associate
For themselves and on behalf of the
other Initial Purchasers named in Schedule I hereto.
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SCHEDULE I
Aggregate
Principal
Amount of
Securities to
Initial Purchaser be Purchased
Salomon Brothers Inc $ 268,000,000
TD Securities (USA) Inc. $ 67,000,000
Total $ 335,000,000
=============
<PAGE>
ANNEX I
(1) The Securities have not been and will not be registered under the Act
and may not be offered or sold within the United States or to, or for the
account or benefit of, U.S. persons except in accordance with Regulation S under
the Act or pursuant to an exemption from the registration requirements of the
Act. The Initial Purchasers represent that they have offered and sold the
Securities, and will offer and sell the Securities (i) as part of their
distribution at any time and (ii) otherwise until 40 days after the later of the
commencement of the offering and the Closing Date, only in accordance with Rule
903 of Regulation S or Rule 144A under the Act. Accordingly, the Initial
Purchasers agree that neither they nor any persons acting on their behalf has
engaged or will engage in any directed selling efforts with respect to the
Securities, and they have complied and will comply with the offering
restrictions requirement of Regulation S. The Initial Purchasers agree that, at
or prior to confirmation of sale of Securities (other than a sale pursuant to
Rule 144A), they will have sent to each distributor, dealer or person receiving
a selling concession, fee or other remuneration that purchases Securities from
it during the restricted period a confirmation or notice to substantially the
following effect:
"THE SECURITIES COVERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED
AND SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
U.S. PERSONS (I) AS PART OF THEIR DISTRIBUTION AT ANY TIME OR (II)
OTHERWISE UNTIL 40 DAYS AFTER THE LATER OF THE COMMENCEMENT OF THE
OFFERING AND THE CLOSING DATE, EXCEPT IN EITHER CASE IN ACCORDANCE WITH
REGULATION S (OR RULE 144A IF AVAILABLE) UNDER THE SECURITIES ACT. TERMS
USED ABOVE HAVE THE MEANING GIVEN TO THEM BY REGULATION S."
Terms used in this paragraph have the meanings given to them by Regulation S.
The Initial Purchasers further agree that they have not entered and will
not enter into any contractual arrangement with respect to the distribution or
delivery of the Securities, except with their affiliates or with the prior
written consent of the Company.
(2) The Initial Purchasers further agree, on behalf of themselves and
their affiliates, that (a) they have not offered or sold and, prior to the date
six months after the date of issue of the Securities, will not offer or sell any
Securities to persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purpose of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995, (b) they have complied, and will comply,
<PAGE>
with all applicable provisions of the Financial Services Act 1996 of Great
Britain with respect to anything done by them in relation to the Securities in,
from or otherwise involving the United Kingdom and (c) they have only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by them in connection with the issuance of the Securities to a person
who is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 of Great Britain or is a
person to whom the document may otherwise lawfully be issued or passed on.
<PAGE>
Exhibit A-1
FORM OF OPINION OF WILKIE FARR & GALLAGHER
TO BE DELIVERED PURSUANT TO SECTION 6(a)
(i) The Company has been duly incorporated and is validly existing as a
corporation under the laws of the State of Washington.
(ii) The Company has power and authority to own, lease and operate its
properties and to conduct its business as described in the Final Memorandum and
to enter into and perform its obligations under the Purchase Agreement.
(iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock of the Company
is as set forth in the Final Memorandum as of the dates indicated therein;
except that the par value of the Class A Common Stock and the class B Common
Stock is $.022658473; the shares of issued and outstanding capital stock of the
Company have been duly authorized and validly issued and are fully paid and
non-assessable; and none of the outstanding shares of capital stock of the
Company was issued in violation of the preemptive or other similar rights of any
securityholder of the Company.
(v) Each Designated Subsidiary has been duly formed and is validly
existing as a corporation, limited liability company or limited partnership in
good standing, as applicable, under the laws of the jurisdiction of its
formation, and has power and authority to own, lease and operate its properties
and to conduct its business as described in the Final Memorandum; all of the
issued and outstanding shares, membership interests or partnership interests of
each Designated Subsidiary have been duly authorized and validly issued, are
fully paid and non-assessable and, except as otherwise set forth in the Final
Memorandum in respect of the minority interests described therein, are owned by
the Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity.
(vi) The Purchase Agreement and the Registration Rights Agreement have
been duly authorized, executed and delivered by the Company, and the
Registration Rights Agreement constitutes a valid and legally binding agreement
of the Company enforceable against the Company in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(vii) The Indenture has been duly authorized, executed and delivered; and,
assuming due execution by the Trustee, the Indenture constitutes a valid and
legally binding obligation of the Company enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
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(viii) The Securities have been duly authorized and executed by the
Company and authenticated, issued and delivered in accordance with the Indenture
and constitute valid and legally binding obligations of the Company entitled to
the benefits provided by the Indenture, subject, as to enforcement, to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles. In rendering the opinion set forth in this
paragraph (viii), as to authentication we have relied solely on a certificate of
the Trustee as to the authentication of the Securities by a duly authorized
representative of the Trustee and have assumed that the Securities so
authenticated have been delivered to you and paid for by you in accordance with
the Purchase Agreement. The Securities and the Indenture conform in all material
respects to the descriptions thereof in the Final Memorandum;
(ix) The Exchange Securities have been duly and validly authorized by the
Company and, when executed by the Company, authenticated by the Trustee in
accordance with the provisions of the Indenture and when the Indenture has been
duly qualified under the Trust Indenture Act and the Exchange Securities have
been exchanged for the Securities pursuant to the Registration Rights Agreement,
will constitute valid and legally binding obligations of the Company, entitled
to the benefits of the Indenture, and enforceable against the Company in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
(x) The information in the Final Memorandum under the caption "Description
of the Notes", to the extent that it constitutes a summary of the terms of the
Securities, and under the captions "Business Regulatory Overview" and "Plan of
Distribution", to the extent that it constitutes matters of law, summaries of
legal matters, or legal conclusions, has been reviewed by us and is correct in
all material respects.
(xi) The statements set forth in the Final Memorandum under the caption
"Certain United States Federal Income Tax Consequences", insofar as such
statements purport to summarize certain United States federal income and estate
tax consequences of the ownership and dispensation of the Securities by certain
U.S. Holders and non-U.S. Holders of the Securities, provide a fair summary of
such consequences under current law.
(xii) All descriptions in the Final Memorandum of contracts and other
documents to which the Company or any of its subsidiaries are a party are
accurate in all material respects; to the best of our knowledge, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments that would be required to be described in the Final Memorandum
that are not described or referred to in the Final Memorandum other than those
described or referred to therein and the descriptions thereof or references
thereto are correct in all material respects.
(xiii) To our best knowledge, neither the Company nor any of its
subsidiaries is in violation of its charter or by-laws or other constituting or
operative document or agreement and, to the best of our knowledge, no default
2
<PAGE>
by the Company or any of its subsidiaries exists in the due performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note, lease or
other agreement or instrument that is described or referred to in the Final
Memorandum.
(xiv) No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of its
obligations under the Purchase Agreement, the Registration Rights Agreement or
the Indenture, in connection with the offering, issuance or sale of the
Securities hereunder or thereunder or the consummation of the actions
contemplated by the Purchase Agreement, the Registration Rights Agreement or the
Indenture, except such as may be required under the Act and the Trust Indenture
Act in connection with the Exchange Offer.
(xv) The issue and sale of the Securities, the execution, delivery and
performance of the Purchase Agreement, the Indenture, the Securities, the
Registration Rights Agreement and any other agreement or instrument entered into
or issued or to be entered into or issued by the Company in connection with the
transactions contemplated hereby, thereby or in the Final Memorandum, and the
consummation of the transactions contemplated herein, therein and in the Final
Memorandum (including the issuance and sale of the Securities by the Company
hereunder), the compliance by the Company with its obligations hereunder and
thereunder have been duly authorized by all necessary corporate action on the
part of the Company and do not and will not, whether with or without the giving
of notice or passage of time or both, conflict with or constitute a breach of,
or default or a Repayment Event under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the Company or
any of its subsidiaries, pursuant to any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease, or any other agreement or
instrument known to such counsel to which the Company or any of its subsidiaries
is a party or by which it or any of them may be bound, or to which any of the
property or assets of the Company or any subsidiaries thereof is subject, except
for such conflicts, breaches or defaults or liens, charges or encumbrances that,
singly or in the aggregate, would not result in a Material Adverse Effect, nor
will such action result in any violation of the provisions of the constituting
or operative document or agreement of the Company or any of its subsidiaries or
any applicable law, statute, rule, regulation, judgment, order, writ or decree
of any government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any of its subsidiaries or any of their
assets or properties.
(xvi) The Company is not, and upon the issuance and sale of the Securities
and the application of the net proceeds therefrom will not be, an "investment
company" or an entity "controlled" by an "investment company," as such terms are
defined in the 1940 Act.
(xvii) Although such counsel does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the Final
1
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Memorandum, except for those referred to in subsection (x) of this opinion, such
counsel has no reason to believe that, as of its date, the Final Memorandum or
any further amendment or supplement thereto made by the Company prior to each
Closing Time (other than the financial statements and related schedules therein,
as to which such counsel need express no opinion) contained an untrue statement
of a material fact or omitted to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading or that, as of such Closing Time, the Final Memorandum or any
further amendment or supplement thereto made by the Company prior to such
Closing Time (other than the financial statements and related schedules therein,
as to which such counsel need express no opinion) contains an untrue statement
of a material fact or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
In rendering such opinion, such counsel (A) may rely (i) as to matters
involving the application of the laws of the State of Washington, upon the
opinion of Davis Wright Tremaine LLP, special Washington counsel to the Company
(which opinion shall be dated and furnished to the Initial Purchasers at the
Closing Time, shall be satisfactory in form and substance to counsel for the
Initial Purchasers and shall expressly state that the Initial Purchasers may
rely on such opinion as if it were addressed to them), provided that Willkie
Farr & Gallagher shall state in their opinion that they believe that they and
the Initial Purchasers are justified in relying upon such opinion, and (ii) as
to matters of fact (but not as to legal conclusions), to the extent they deem
proper, on certificates of responsible officers of the Company and public
officials and (B) may state that they express no opinion as to the laws of any
jurisdiction outside the United States. Such opinion shall not state that it is
to be governed or qualified by, or that it is otherwise subject to, any
treatise, written policy or other document relating to legal opinions,
including, without limitation, the Legal Opinion Accord of the ABA Section of
Business Law (1991).
2
<PAGE>
Exhibit A-2
FORM OF OPINION OF R. BRUCE EASTER, ESQ.
TO BE DELIVERED PURSUANT TO SECTION 6(a)
(i) There is not pending or, to the best of my knowledge, threatened any
action, suit, proceeding, inquiry or investigation, to which the Company or any
subsidiary thereof is a party, or to which the property of the Company or any
subsidiary thereof is subject, before or brought by any court or governmental
agency or body, which could reasonably be expected to result in a Material
Adverse Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets thereof or the consummation of the
transactions contemplated in the Purchase Agreement, the Indenture, the
Registration Rights Agreement or the Securities or the performance by the
Company of its obligations thereunder or the transactions contemplated by the
Final Memorandum.
(ii) To the best of my knowledge and except as set forth in or
contemplated by the Final Memorandum with respect to systems under development,
(a) each of the Company and its Designated Subsidiaries has all Authorizations
of and from, and has made all declarations and filings with, all Federal, state,
local and other governmental authorities, all self-regulatory organizations and
all courts and other tribunals, which are necessary or appropriate for the
Company and its Designated Subsidiaries to own, lease, license, use and
construct its properties and assets and to conduct its business in the manner
described in the Final Memorandum, except to the extent that the failure to
obtain any such Authorizations or make any such declaration or filing would not,
singly or in the aggregate, reasonably be expected to result in a Material
Adverse Effect, (b) all such Authorizations are in full force and effect with
respect to the Company and its Designated Subsidiaries, (c) no event has
occurred that permits, or after notice or lapse of time could permit, the
revocation, termination or modification of any such Authorization and (d) the
Company and its Designated Subsidiaries are in compliance in all material
respects with the terms and conditions of all such Authorizations and with the
rules and regulations of the regulatory authorities and governing bodies having
jurisdiction with respect thereto.
(iii) To the best of my knowledge, neither the execution and delivery of
the Purchase Agreement, the Indenture, the Registration Rights Agreement or the
Securities, nor the consummation by the Company of the transactions contemplated
hereby or thereby will cause any suspension, revocation, impairment, forfeiture,
nonrenewal or termination of any Authorization.
In rendering such opinion, such counsel (A) may rely (i) as to matters
involving the application of the laws of the State of Washington, upon the
opinion of Davis Wright Tremaine LLP, special Washington counsel to the Company
(which opinion shall be dated and furnished to the Initial Purchasers at the
Closing Time, shall be satisfactory in form and substance to counsel for the
Initial Purchasers and shall expressly state that the Initial Purchasers may
rely on such opinion as if it were addressed to them), provided that Mr. Easter
shall state in his opinion that he believes that he and the Initial Purchasers
are justified in relying upon such opinion, and (ii) as to matters of fact (but
not as to legal conclusions), to the extent he deems proper, on certificates of
1
<PAGE>
responsible officers of the Company and public officials and (B) may state that
he expresses no opinion as to the laws of any jurisdiction outside the United
States. Such opinion shall not state that it is to be governed or qualified by,
or that it is otherwise subject to, any treatise, written policy or other
document relating to legal opinions, including, without limitation, the Legal
Opinion Accord of the ABA Section of Business Law (1991).
2
<PAGE>
Exhibit A-3
FORM OF OPINION OF DAVIS WRIGHT TREMAINE LLP
TO BE DELIVERED PURSUANT TO SECTION 6(a)
(i) The Company has been duly incorporated and is validly existing as a
corporation under the laws of the State of Washington.
(ii) Each of the Indenture, the Purchase Agreement and the Registration
Rights Agreement has been duly authorized, executed and delivered by the Company
under the laws of the State of Washington.
(iii) The Securities have been duly authorized and executed by the
Company.
(iv) The issue and sale of the Securities, the execution, delivery and
performance of the Purchase Agreement, the Indenture, the Securities, the
Registration Rights Agreement and any other agreement or instrument entered into
or issued or to be entered into or issued by the Company in connection with the
transactions contemplated thereby or in the Final Memorandum, and the
consummation of the transactions contemplated therein and in the Final
Memorandum (including the issuance and sale of the Securities by the Company
under the Purchase Agreement and the use of the proceeds from the sale of the
Securities as described in the Final Memorandum under the caption "Use of
Proceeds"), the compliance by the Company with its obligations under the
Purchase Agreement have been duly authorized by all necessary corporate action
on the part of the Company and do not and will not, whether with or without the
giving of notice or passage of time or both, conflict with, contravene or
constitute a breach of the Company's Articles of Incorporation or By_Laws.
(v) No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental authority or
agency of the State of Washington is necessary or required for the performance
by the Company of its obligations under the Purchase Agreement, the Registration
Rights Agreement or the Indenture, in connection with the offering, issuance or
sale of the Securities thereunder or the consummation of the actions
contemplated by the Purchase Agreement, the Registration Rights Agreement or the
Indenture.
(vi) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the Final
Memorandum and to enter into and perform its obligations under the Purchase
Agreement.
(vii) Each Designated Subsidiary formed under the laws of the State of
Washington has been duly formed and is validly existing as a limited liability
company or limited partnership under the laws of the State of Washington, each
such limited liability company has the power and authority under the Washington
limited liability company act and its limited liability company agreement, and
each such limited partnership has the partnership power and authority, to own,
lease and operate its respective properties and to conduct its respective
business as described in the Final Memorandum, and all of the issued and
outstanding membership interests or partnership interests of each such
Designated Subsidiary have been duly authorized and validly issued.
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(viii) The authorized capital stock of the Company is as set forth in the
Final Memorandum, except that the par value of the Class A Common Stock and the
Class B Common Stock is $0.022658473; the shares of issued and outstanding
capital stock of the Company have been duly authorized and validly issued and
are fully paid and non-assessable.
(ix) To our knowledge, neither the Company nor any of its Designated
Subsidiaries is in violation of, as applicable, its articles of incorporation,
bylaws, limited liability company agreement or partnership agreement.
In rendering such opinion, such counsel (A) may rely as to
matters of fact (but not as to legal conclusions), to the extent they deem
proper, on certificates of responsible officers of the Company and public
officials and (B) may state that they express no opinion as to the laws of any
jurisdiction other than the State of Washington. Such opinion shall not state
that it is to be governed or qualified by, or that it is otherwise subject to,
any treatise, written policy or other document relating to legal opinions,
including, without limitation, the Legal Opinion Accord of the ABA Section of
Business Law (1991).
2
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
NEW NEXTLINK COMMUNICATIONS, INC.
Pursuant to Section 102 of the General Corporation Law of Delaware, the
undersigned does hereby submit this Certificate of Incorporation for the purpose
of forming a business corporation.
1. Name. The name of the corporation is:
NEW NEXTLINK COMMUNICATIONS, INC.
New NEXTLINK Communications, Inc., is referred to as the "Corporation"
hereafter in this Certificate of Incorporation.
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 General Corporation Law of Delaware.
3. Shares. The Corporation shall have authority to issue One Hundred
Fifty-Four Million Four Hundred Sixty-Seven Thousand Six Hundred (154,467,600)
shares of common stock (the "Common Stock"), which shall be divided into two
classes, One Hundred Ten Million Three Hundred Thirty-Four Thousand
(110,334,000) shares of Class A Common Stock, par value $0.02 per share (the
"Class A Common Stock"), and Forty-Four Million One Hundred Thirty-Three
Thousand Six Hundred (44,133,600) shares of Class B Common Stock, par value
$0.02 per share (the "Class B Common Stock"). The Corporation shall have
authority to issue Twenty-Five Million (25,000,000) shares of preferred stock,
par value $.01 per share (the "Preferred Stock").
The 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. Each share of Class B Common Stock may also be
converted, at the option of the Corporation as determined in the sole discretion
of its Board of Directors, into one share of Class A Common Stock at any time
such Class B Common Stock is
Page 1 - CERTIFICATE OF INCORPORATION
<PAGE>
transferred, or is presented to the Company for transfer on the Company's
records by the holder of such Class B Common Stock, whether such transfer
results from a contractual obligation of the holder, by operation of law, by a
change in control of the holder, by testamentary disposition or gift, or for any
other reason.
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 a
Certificate of Designations adopted and filed as required by Section 151 of the
General Corporation Law of Delaware 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 Delaware.
4. Bylaws. In furtherance and not in limitation of the 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.
5. 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:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
The Corporation Trust Company 1209 Orange Street
Wilmington, DE 19801
</TABLE>
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 one director and his name and address are as follows:
Page 2 - CERTIFICATE OF INCORPORATION
<PAGE>
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
R. Bruce Easter, Jr. NEXTLINK Communications, Inc.
155 108th Avenue NE
Ste. 810
Bellevue, WA 98004
</TABLE>
The term of the initial directors shall be until the first annual meeting
of the stockholders 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, WA 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 Delaware 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 or she 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 or her in connection with such action, suit or proceeding if he
or she acted in good faith and in a manner he or she 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, employee or agent) be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding as authorized
Page 3 - CERTIFICATE OF INCORPORATION
<PAGE>
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 or she 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 this
Certificate 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 stockholders for monetary damages for breach
of fiduciary duty as a director, except for any breach of the director's duty of
loyalty to the corporation or its stockholders, acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law by
the director, conduct violating Section 174 of the General Corporation Law of
Delaware, 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 General Corporation Law of Delaware 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 General Corporation Law of Delaware,
as so amended. Any repeal or modification of this Article shall not adversely
affect any right or protection of a director of the corporation existing at the
time of such repeal or modification for or with respect to an act or omission of
such director occurring prior to such repeal or modification.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose
of forming a Corporation pursuant to the General Corporation Law of Delaware,
executes this Certificate, 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 18th day of May, 1998.
/s/ Greg F. Adams
----------------------------------
Greg F. Adams
Incorporator
Page 4 - CERTIFICATE OF INCORPORATION
<PAGE>
Exhibit 3.2
BYLAWS
OF
NEW NEXTLINK COMMUNICATIONS, INC.
These Bylaws are intended to conform to the mandatory requirements of
the General Corporation Law of Delaware (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
Stockholders
Section 1. - Place.
Stockholders 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 Stockholders 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 Certificate 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
Stockholders on the next convenient day.
Section 3. - Special Meetings.
Special meetings of the Stockholders 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 Delaware 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.
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
BYLAWS - Page 1
<PAGE>
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 Stockholder 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 Stockholders.
Section 6. - Adjourned Meetings.
If there is no quorum present at any annual or special meeting the
Stockholders 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
Stockholders 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 Stockholder entitled to vote on the subject matter shall be
entitled to that number of votes provided in the Certificate of Incorporation
for each share of stock standing in the name of the Stockholder 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
Stockholders. The Stockholders present at a duly organized meeting may continue
to transact business until adjournment, notwithstanding the withdrawal of enough
Stockholders to leave less than a quorum.
The secretary shall prepare and make, at least ten days before every
election of directors, a complete list of the Stockholders entitled to vote,
arranged in alphabetical order and showing the address of each Stockholder and
the number of shares of each Stockholder. Such list shall be open at the offices
of the Corporation for said ten days, to the examination of any Stockholder, 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 Stockholder who may be
present.
BYLAWS - Page 2
<PAGE>
Section 8. - Proxies.
At all meetings of Stockholders, a Stockholder may vote in person or by
proxy executed in writing by the Stockholder 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 sixty days nor less than ten days preceding the date of any meeting of
the Stockholders, 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 Stockholders for any purposes, as a record date for the
determination of the Stockholders 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 Stockholders and only such Stockholders as
shall be Stockholders 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 Stockholders.
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 Stockholders to speak, governing all aspects of the conduct of
such meetings.
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 one (1) director, and thereafter shall
consist of such number as may be fixed from time to time by resolution of the
Board of Directors. The member of the first Board of Directors shall hold office
until the first annual meeting of the Stockholders and until his successor(s)
shall have been elected and qualified. Thereafter, the term of the Directors
shall begin
BYLAWS - Page 3
<PAGE>
upon each Director's election by the Stockholders 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 Stockholders 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 Stockholders 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 Stockholders and at the same
place.
Section 5. - Special Meeting.
Special meetings may be called from time to time by the President or
any one of the Directors. Any business may be transacted at any special meeting.
Section 6. - Quorum.
A majority of the Directors shall constitute a quorum. The act of a
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors. If less than a quorum is present at
a meeting, a majority of the Directors present may adjourn the meeting from time
to time without further notice, other than announcement at the meeting, until a
quorum shall be present. Interested Directors may be counted for quorum
purposes.
Section 7. - Notice and Place of Meetings.
Notice of all Directors' meetings shall be given in accordance with
the Act. No notice need
BYLAWS - Page 4
<PAGE>
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
Certificate of Incorporation or these Bylaws, 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.
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
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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.
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 or she 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.
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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 Stockholders 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
Stockholders 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 Stockholders as may be required. In
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.
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Section 5. - Secretary.
The Secretary shall keep a record of the proceedings at the meetings of
the Stockholders 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 Stockholders 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 Stockholders 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 Stockholder 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.
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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 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 stockholders 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 Certificate 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.
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ARTICLE VI
Seal
There shall be no corporate seal.
ARTICLE VII
Waiver of Notice
Whenever any notice is required to be given to any Stockholder or
Director of the Corporation, a waiver signed by the person or persons entitled
to such notice, whether before or after the time stated therein, shall be
equivalent to the giving of such notice.
ARTICLE VIII
Action by Stockholders or Directors
Without a Meeting
Any action required to be taken at a meeting of the Stockholders of the
Corporation, or any other action which may be taken at a meeting of the
Stockholders, may be taken without a meeting, if a consent in writing setting
forth the actions so taken shall be signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted with respect to the subject matter thereof. Such
consent shall have the same effect and force as a vote of said Stockholders.
Any action required to be taken at a meeting of the Board of Directors
of the Corporation, or any other action which may be taken at a meeting of the
Board of Directors, or any committee thereof, may be taken without a meeting if
a consent in writing setting forth the actions so taken shall be signed by all
of the members of the Board of Directors or committee, as the case may be. Such
consent shall have the same effect and force as a unanimous vote of said
Directors or committee.
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
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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
Bylaws to be given shall be sufficient if given as provided in the General
Corporation Law of Delaware.
Section 3. - Waiver of Notice.
Any Stockholder or director may at any time, by writing or by fax,
waive any notice required to be given under these Bylaws, and if any Stockholder
or director shall be present at any meeting his presence shall constitute a
waiver of such notice.
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 stockholders of any corporation of which the Corporation is a
stockholder 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.
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IDENTIFICATION
I hereby certify that I was the Secretary of the first Directors'
meeting of New NEXTLINK Communications, Inc. and that the foregoing Bylaws in
twelve 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
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<PAGE>
Exhibit 4.2
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
- --------------------------------------------------------------------------------
Pursuant to Section 151 of the
Delaware General Corporation Law
- --------------------------------------------------------------------------------
New NEXTLINK Communications, Inc. (the "Corporation"), a corporation
organized and existing under the Delaware General Corporation Law, does hereby
certify that, pursuant to authority conferred upon the board of directors of the
Corporation (the "Board of Directors") by its Certificate of Incorporation
(hereinafter referred to as the "Certificate of Incorporation"), and pursuant to
the provisions of Section 151 of the Delaware General Corporation Law, said
Board of Directors, on May 29, 1998, duly approved and adopted a resolution to
read as follows (the "Resolution"):
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by its Certificate 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 Certificate 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.
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(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 $.02 per share and the
Class B Common Stock, par value $.02 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 Share, 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
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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 or its successor
has not filed the registration statement relating to the Exchange
Offer (or, if applicable, the registration statement relating to
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)
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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 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.
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(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 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) [Intentionally omitted.]
(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 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
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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 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) [Intentionally omitted.];
(2) The Mandatory Redemption Price;
(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 Mandatory Redemption Price.
(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 Mandatory Redemption Price 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 Mandatory Redemption Price,
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
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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 Mandatory Redemption Price, without interest.
(f) Voting Rights.
(i) The Holders of Senior Exchangeable Redeemable Preferred
Shares, except as otherwise required under Delaware 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 be, 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 Certificate 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
7
<PAGE>
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.
(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
8
<PAGE>
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 Certificate
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 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:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2002 107.00%
2003 105.25
2004 103.50
2005 101.75
2006 and thereafter 100.00
</TABLE>
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
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<PAGE>
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
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
10
<PAGE>
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 Party
Shares separately as a single class, to elect the lesser of two
directors and that number of directors constituting 25% of 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
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<PAGE>
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
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.
12
<PAGE>
(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
Delaware 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 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;
13
<PAGE>
(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.
(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
14
<PAGE>
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.
(iv) 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.
(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
15
<PAGE>
compliance with any applicable provisions of the laws of Delaware)
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, including but not limited to
reissuance as a stock dividend on the Company's 14% Senior
Exchangeable Redeemable Preferred Shares; provided that such
reacquired shares shall not otherwise be reissued as 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
16
<PAGE>
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 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 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
17
<PAGE>
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
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.
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(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 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
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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 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
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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.
"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
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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.
"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
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repurchase agreements but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business which are not
overdue or which are being contested in good faith), (v) every Capital
Lease Obligation of such Person, (vi) all Receivables Sales of such
Person, together with any obligation of such Person to pay any
discount, interest, fees, indemnities, penalties, recourse, expenses
or other amounts in connection therewith, (vii) all obligations to
redeem Disqualified Stock issued by such Person, (viii) every
obligation under Interest Rate and Currency Protection Agreements of
such Person and (ix) every obligation of the type referred to in
clauses (i) through (viii) of another Person and all dividends of
another Person the payment of which, in either case, such Person has
Guaranteed. The "amount" or "principal amount" of Debt at any time of
determination as used herein represented by (a) any Debt issued at a
price that is less than the principal amount at maturity thereof,
shall be the amount of the liability in respect thereof determined in
accordance with generally accepted accounting principles, (b) any
Receivables Sale, shall be the amount of the unrecovered capital or
principal investment of the purchaser (other than the 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.
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"Eagle River" means Eagle River Investments, L.L.C., a limited
liability company formed under the laws of the State of Delaware.
"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.
"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
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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
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.
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"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 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
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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 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,
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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;
(k) that in the case of any Holder whose Senior Exchangeable
Redeemable Preferred Shares 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 Share 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:
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(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
(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
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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 $.02 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
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.
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"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.
"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
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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 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.
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"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.
"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.
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<PAGE>
"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 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
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("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 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.
IN WITNESS WHEREOF, said New NEXTLINK Communications, Inc. has caused
this Certificate to be signed by R. Bruce Easter, Jr., its Vice President, this
29th day of May, 1998.
NEW NEXTLINK COMMUNICATIONS, INC.
By: /s/ R. Bruce Easter, Jr.
Name: R. Bruce Easter, Jr.
Title: Vice President
<PAGE>
Exhibit 4.8
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS OF THE 6 1/2%
CUMULATIVE CONVERTIBLE PREFERRED STOCK AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
- --------------------------------------------------------------------------------
Pursuant to Section 151 of the
Delaware General Corporation Law
- --------------------------------------------------------------------------------
New NEXTLINK Communications, Inc. (the "Corporation"), a corporation
organized and existing under the Delaware General Corporation Law, does hereby
certify that, pursuant to authority conferred upon the board of directors of the
Corporation (the "Board of Directors") by its Certificate of Incorporation
(hereinafter referred to as the "Certificate of Incorporation"), and pursuant to
the provisions of Section 151 of the Delaware General Corporation Law, said
Board of Directors, on May 29, 1998, duly approved and adopted a resolution to
read as follows (the "Resolution"):
RESOLVED, that, pursuant to the authority vested in
the Board of Directors by New NEXTLINK Communications, Inc.'s
Certificate of Incorporation, the Board of Directors does
hereby create, authorize and provide for the issuance of a
series of Preferred Stock designated as the 6 1/2% Cumulative
Convertible Preferred Stock, (liquidation preference $50 per
share) in an amount not to exceed 4,600,000 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 Certificate
of Incorporation and in this Resolution as follows:
(a) Designation.
There is hereby created out of the authorized and unissued
Preferred Stock of the Corporation a class of Preferred Stock
designated as the "6 1/2% Cumulative Convertible Preferred Stock." The
number of shares constituting such class shall not exceed 4,600,000 and
are referred to as the "Convertible Preferred Stock." The liquidation
preference of the Convertible Preferred Stock shall be $50 per share.
<PAGE>
(b) Ranking.
The Convertible Preferred Stock 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 $.02 per share and the Class B Common Stock,
par value $.02 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 Convertible Preferred Stock 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 Stock of the Corporation hereafter created the terms of
which expressly provide that such class or series will rank on a
parity with the Convertible Preferred Stock as to dividends and
distributions upon liquidation, winding-up and dissolution
(collectively referred to as "Parity Shares"); and (iii) junior to the
Corporation's 14% Senior Exchangeable Redeemable Preferred Shares and
each other class of Capital Stock of the Corporation or series of
Preferred Stock of the Corporation hereafter created the terms of
which expressly provide that such class or series will rank senior to
the Convertible Preferred Stock 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
Convertible Preferred Stock 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 share of
Convertible Preferred Stock, at a rate per annum equal to 6 1/2% of
the liquidation preference per share of the Convertible Preferred
Stock, 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. Such dividends shall be paid only in cash.
Each dividend shall be payable to the shares of Convertible Preferred
Stock 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 shares of Convertible Preferred Stock on the date of their
redemption unless the Corporation 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 shelf registration of the
Convertible Preferred Stock for
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resale by Holders contemplated by the Registration Rights Agreement
(the "Resale Registration") on or before the 90th day after the Issue
Date, (2) the Resale Registration has not become effective on or
before the 120th day after the Issue Date, or (3) the Resale
Registration 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 (3), a "Registration Default"), then additional
dividends will accrue (in addition to the stated dividends on the
Convertible Preferred Stock) at the rate of 0.25% per annum on the
liquidation preference of the Convertible Preferred Stock 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 Convertible Preferred Stock 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 Convertible Preferred
Stock 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 Convertible Preferred Stock 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 Convertible Preferred
Stock for all Dividend Periods terminating on 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 Convertible Preferred Stock
and any other Parity Shares shall be declared pro rata so that the amount
of dividends declared per share on the Convertible Preferred Stock and such
Parity Shares shall in all cases bear to each
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other the same ratio that accrued dividends per share on the Convertible
Preferred Stock and such Parity Shares bear to each other.
(vi)
(A) Holders of shares of Convertible Preferred Stock 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, accrued dividends have not been paid in full on
the Convertible Preferred Stock. So long as any shares of Convertible
Preferred Stock 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, accrued
dividends determined in accordance herewith on the Convertible Preferred
Stock have been paid in full.
(vii) Dividends payable on the Convertible Preferred Stock 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
shares of Convertible Preferred Stock 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 share of Convertible Preferred Stock, 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
shares of Convertible Preferred Stock shall not be entitled to any
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
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Holders of outstanding shares of Convertible Preferred Stock 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 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.
(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 amounts
for the payment of liquidation preference on Convertible Preferred Stock at
any time.
(e) Redemption.
(i)
(A) Mandatory Redemption. On March 31, 2010, the Corporation
shall redeem, to the extent of funds legally available therefor, in
the manner provided for in paragraph (e)(ii) hereof, all of the shares
of Convertible Preferred Stock 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).
(B) Optional Redemption. The Convertible Preferred Stock shall be
redeemable, at any time on or after April 16, 2006, in whole or in
part, at the option of the Company, 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).
(ii) Procedures for Redemption.
(A) At least thirty (30) days and not more than sixty (60) days
prior to the date fixed for any redemption of shares of Convertible
Preferred Stock pursuant to paragraph (e)(i) 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 shares of Convertible Preferred Stock at such
Holder's address
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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 for the redemption of any shares of
Convertible Preferred Stock 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) The redemption price;
(2) The Redemption Date;
(3) 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 shares of
Convertible Preferred Stock to be redeemed; and
(4) That dividends on the shares of Convertible Preferred Stock
to be redeemed shall cease to accumulate on such Redemption
Date unless the Corporation defaults in the payment of the
redemption price.
(B) Each Holder of shares of Convertible Preferred Stock
shall surrender the certificate or certificates representing such
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 redemption price 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 shares of Convertible Preferred Stock
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 redemption price, without interest;
provided, however, that if a notice of redemption shall have been
given as provided in paragraph (ii)(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 redemption price, without
interest.
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(f) Voting Rights.
(i) The Holders of shares of Convertible Preferred Stock, except as
otherwise required under Delaware 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 shares of Convertible Preferred Stock are
outstanding, the Corporation shall not amend, alter or repeal any of the
provisions of the Corporation's Certificate of Incorporation (including
this Certificate of Designations) or the bylaws of the Corporation so as to
affect adversely the specified rights, powers, preferences, privileges or
voting rights of the Holders of the Convertible Preferred Stock or reduce
the time for any notice which the Holders of the Convertible Preferred
Stock may be entitled without the affirmative vote or consent of Holders of
at least two-thirds of the issued and outstanding shares of Convertible
Preferred Stock, 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.
(B) Notwithstanding the foregoing, modifications and amendments of the
terms of this Certificate of Designations contained in paragraph (i) below
may be made by the Corporation with the consent of the Holders of a
majority of the outstanding shares of Convertible Preferred Stock. In
addition, the Holders of a majority of the outstanding shares of
Convertible Preferred Stock, on behalf of all holders of Convertible
Preferred Stock, may waive compliance by the Corporation with the covenant
set forth below in paragraph (i) and may waive any past default under the
Certificate of Designations.
(C) Notwithstanding anything to the contrary contained herein, (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 (other than a reduction in the number of authorized shares of
Preferred Stock below the number thereof then outstanding), shall not
require the consent of Holders of Convertible Preferred Stock and shall not
be deemed to affect adversely the rights, preferences, privileges or voting
rights of Holders of shares of Convertible Preferred Stock.
(iii) Without the affirmative vote or consent of Holders of a majority of
the issued and outstanding shares of Convertible Preferred Stock, 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
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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 Company, partnership or
trust organized and existing under the laws of the United States or any State
thereof or the District of Columbia; (B) either (1) the Corporation is the
surviving or continuing Person and the outstanding shares of Convertible
Preferred Stock continue to exist as outstanding shares of Convertible Preferred
Stock or are converted into or exchanged for shares of Capital Stock of an
Acquiring Entity, having the same powers, preferences and relative,
participating, optional or other special rights and the qualifications,
limitations or restrictions thereon that the shares of Convertible Preferred
Stock had immediately prior to such transaction or (2) the shares of Convertible
Preferred Stock shall be converted into or exchanged for shares of Capital Stock
of such successor, transferee or resulting Person or an Acquiring Entity, having
in respect of such successor, transferee or resulting Person, the same powers,
preferences and relative, participating, optional or other special rights and
the qualifications, limitations or restrictions thereon, that the shares of
Convertible Preferred Stock 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.
Except as specified in this paragraph, the Holders of Convertible Preferred
Stock shall not have voting rights with respect to mergers.
(iv)
(A) If (1) dividends on the Convertible Preferred Stock are in arrears
and unpaid for six or more Dividend Periods (whether or not consecutive) (a
"Dividend Default"); (2) the Corporation fails to redeem all of the then
outstanding shares of Convertible Preferred Stock on March 31, 2010 or
fails otherwise to
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discharge any redemption obligation with respect to the Convertible
Preferred Stock; (3) the Corporation breaches or violates one of the
provisions set forth in any paragraphs (f)(iii) or (i) 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 shares of Convertible Preferred Stock then
outstanding, or (4) 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)-(4)
the number of directors constituting the Board of Directors shall be
adjusted by the number, if any, necessary to permit the Holders of the
Convertible Preferred Stock, 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 the members of the Board
of Directors. Each such event described in clauses (1), (2), (3) and (4) is
a "Voting Rights Triggering Event." Holders of a majority of the issued and
outstanding shares of Convertible Preferred Stock, 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 shall expire (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 Convertible Preferred Stock for any
Voting Rights Triggering Event.
(B) The right of the Holders of Convertible Preferred Stock 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 Convertible Preferred Stock are paid in full 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 shares of Convertible Preferred Stock then outstanding, at
which time (1) the special right of the Holders of Convertible Preferred
Stock so to vote for the election of directors and (2) the term of office
of the directors elected by the Holders of the Convertible Preferred Stock
shall each terminate and the directors elected by the holders of Voting
Stock other than the Convertible Preferred Stock 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
Convertible Preferred Stock pursuant to paragraph (f)(iv)(A) hereof, or if
vacancies shall exist in
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the offices of directors elected by the Holders of Convertible Preferred
Stock, a proper officer of the Corporation may, and upon the written
request of he Holders of record of at least twenty-five percent (25%) of
the shares of Convertible Preferred Stock then outstanding addressed to the
Secretary of the Corporation shall, call a special meeting of the Holders
of Convertible Preferred Stock, 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 shares of
Convertible Preferred Stock 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 shares
of Convertible Preferred Stock 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 Convertible Preferred Stock 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 shares
of Convertible Preferred Stock and Parity Shares shall be required to
constitute a quorum of such Convertible Preferred Stock and Parity Shares.
(D) Any vacancy occurring in the office of a director elected by the
Holders of shares of Convertible Preferred Stock and Parity Shares may be
filled by the remaining directors elected by the Holders of Convertible
Preferred Stock and Parity Shares unless and until such vacancy shall be
filled by the Holders of Convertible Preferred Stock and Parity Shares.
(v) In any case in which the Holders of Convertible Preferred Stock shall
be entitled to vote pursuant to this paragraph (f) or pursuant to Delaware law,
each Holder of shares of Convertible Preferred Stock entitled to vote with
respect to such matter shall be entitled to one vote for each share of
Convertible Preferred Stock held.
(vi) The Corporation may voluntarily grant voting rights to the holders of
Convertible Preferred Stock under such terms and conditions as the Corporation
shall determine, provided, however, that such grant does not affect adversely
the then-existing voting rights of such holders.
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(g) Reissuance of Convertible Preferred Stock.
Shares of Convertible Preferred Stock that have been issued and reacquired
in any manner, including shares purchased or redeemed, shall (upon compliance
with any applicable provisions of the laws of Delaware) have the status of
authorized and unissued shares of Preferred Stock undesignated as to series and
may be redesignated and reissued as part of any series of Preferred Stock;
provided that such reacquired shares shall not be reissued as shares of
Convertible Preferred Stock.
(h) 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.
(i) Certain Additional Provisions.
(i) Reports. So long as any shares of Convertible Preferred Stock are
outstanding, the Corporation will provide to the Holders of Convertible
Preferred Stock, 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 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 Convertible Preferred Stock.
(j) 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.
"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.
"Acquiring Entity" means the entity that is a constituent party to a
transaction covered by paragraph (f)(iii) and that thereafter is the parent
entity of the Corporation or its successor and whose shares of Capital Stock the
holders of Class A Common Stock
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receive in a transaction in exchange for or in consideration of their shares of
Class A Common Stock.
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Applicable Price" means (i) in the event of a Non-Stock Change in Control
in which the holders of the Class A Common Stock receive only cash, the amount
of cash received by the holder of one share of Class A Common Stock and (ii) in
the event of any other Non-Stock Change in Control or any Common Stock Change in
Control, the average of the Closing Price for the Class A Common Stock during
the 10 Trading Days prior to and including the record date for the determination
of the holders of Class A Common Stock entitled to receive cash, securities,
property or other assets in connection with such Non-Stock Change in Control or
Common Stock Change in Control or, if there is no such record date, the date
upon which the holders of the Class A Common Stock shall have the right to
receive such cash, securities, property or other assets or the date upon which
such Non-Stock Change in Control is deemed to have occurred, as the case may be,
in each case as adjusted in good faith by the Board of Directors to
appropriately reflect any of the events referred to in paragraph (k)(vi).
"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.
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"Change in Control" will be deemed to have occurred at such time as (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all the assets of the Corporation and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act), (ii) the adoption of a plan relating to the liquidation or dissolution of
the Corporation, (iii) the consummation of any transaction (including any merger
or consolidation) the result of which is that 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, (iv) 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 (v) 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.
"Class A Common Stock" means the Class A Common Stock, par value $0.02 per
share, of the Corporation.
"Closing Price" means, with respect to the Class A Common Stock of the
Corporation, for any day, the closing sale price (or, if no closing sale price
is reported, the last reported sale price) per share of the Class A Common Stock
as reported by the Nasdaq National Market, or, if the Class A Common Stock is
not so reported, on the principal national securities exchange or inter-dealer
quotation system on which the Class A Common Stock is listed or admitted to
trading, or if not listed or admitted to trading on any national securities
exchange or inter-dealer quotation system, the average of the closing bid and
asked prices per share in the over-the-counter market as reported by the
National Quotation Bureau or similar organization or as furnished by any New
York Stock Exchange member firm selected from time to time by the Corporation
for that purpose.
"Common Stock" means the Class A Common Stock and the Class B Common Stock,
par value $0.02 per share, of the Corporation.
"Common Stock Change in Control" means any Change in Control in which more
than 50% of the value (as determined in good faith by the Board of Directors of
the Corporation) of the consideration received by holders of Class A Common
Stock consists
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of common stock of another company that for each of the 10 consecutive Trading
Days referred to in the definition of "Applicable Price" above has been admitted
for listing or admitted for listing subject to notice of issuance on a national
securities exchange or quoted on the Nasdaq National Market; provided, however,
that a Change in Control shall not be a Common Stock Change in Control unless
either (i) the Corporation continues to exist after the occurrence of such
Change in Control and the outstanding shares of Convertible Preferred Stock
continue to exist as outstanding shares of Convertible Preferred Stock (or are
converted into or exchanged for shares of Capital Stock of an Acquiring Entity,
having the same powers, preferences and relative, participating, optional or
other special rights and the qualifications, limitations or restrictions thereon
that the shares of Convertible Preferred Stock had immediately prior to such
transaction), or (ii) not later than the occurrence of such Change in Control,
the outstanding shares of Convertible Preferred Stock are converted into or
exchanged for shares of convertible preferred stock of a corporation succeeding
to the business of the Corporation or the Acquiring Entity, which convertible
preferred stock has powers, preferences and relative, participating, optional or
other rights, and qualifications, limitations and restrictions, substantially
similar to those of the Convertible Preferred Stock.
"Conversion Agent" means the conversion agent for the Convertible Preferred
Stock designated by the Company from time to 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 of the
Corporation, based on the most recently completed arm's-length transaction
between the Corporation and a person other than an Affiliate of the Corporation
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 of the Corporation, 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 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
Conversion Agent by the President, any Vice President or the Chief Financial
Officer of the Corporation. 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
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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 Corporation, (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
Corporation, 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.
"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
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.
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"Depositary" means, with respect to the shares of Convertible Preferred
Stock issuable or issued in whole or in part in the form of a Global Share
Certificate, DTC for so long as it shall be a clearing agency registered under
the Exchange Act, or such successor (which shall be a clearing agency registered
under the Exchange Act) as the Corporation shall designate from time to time in
an Officer's Certificate delivered to the Transfer Agent.
"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 March 31, 2010; provided, however, that any
Convertible 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 Convertible Preferred Stock upon the
occurrence of a Change in Control occurring prior to March 31, 2010 shall not
constitute Disqualified Stock.
"Dividend Payment Date" means March 31, June 30, September 30 and December
31, of each year.
"Dividend Period" means the Initial Dividend Period, and thereafter, each
Quarterly Dividend Period.
"Dividend Record Date" means March 15, June 15, September 15 and December
15 of each year.
"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.
"Exchange Act" means the Securities Exchange Act of 1934, and the rules and
regulations promulgated thereunder.
"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 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
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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 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, shall not be deemed to
constitute a Guarantee by such Restricted Subsidiary of any Purchase Money Debt
of the Corporation 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 (or
identifiable portions thereof) acquired, constructed or constituting
improvements made with the proceeds of such Purchase Money Debt (it being
understood and agreed that all Debt owed to any single lender or group of
lenders or outstanding under any single credit facility shall be considered a
single Purchase Money Debt, whether drawn at one time or from time to time).
"Holder" means a holder of shares of Convertible Preferred Stock as
reflected in the share books of the Corporation.
"Implied Conversion Price" means the quotient obtained by dividing $50.00
by the Conversion Rate.
"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 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 Trustee or the Transfer Agent,
as applicable, 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 Incurrence of Debt
by the Corporation or such Subsidiary.
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"Initial Dividend Period" means the dividend period commencing on the Issue
Date and ending on the first Dividend Payment Date to occur thereafter.
"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.
"Issue Date" means the date of original issuance of the Convertible
Preferred Stock.
"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), encumbrances, 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).
"Non-Stock Change in Control" means any Change in Control other than a
Common Stock Change in Control.
"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 statement 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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(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
(d) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
"Parity Shares" shall have the meaning ascribed to it in paragraph (b)
hereof.
"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.
"Preferred Stock" of any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of such Person.
"Purchase Money Debt" means (i) Acquired Debt Incurred in connection with
the acquisition of Telecommunications Assets and (ii) Debt of the 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
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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 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.
"Purchaser Stock Price" means, with respect to any Common Stock Change
in Control, the average of the per share Closing Prices for the common stock
received as consideration in such Common Stock Change in Control for the 10
consecutive Trading Days prior to and including the record date for the
determination of the holders of Class A Common Stock entitled to receive such
common stock, or if there is no such record date, the date upon which the
holders of the Class A Common Stock shall have the right to receive such common
stock, in each case, as adjusted in good faith by the Board of Directors to
appropriately reflect any of the events referred to in paragraph (k)(vi);
provided, however, that if no such Closing Prices exist, then the Purchaser
Stock Price shall be set at a price determined in good faith by the Board of
Directors of the Corporation.
"Quarterly Dividend Period" shall mean the quarterly period commencing
on each March 31, June 30, September 30 and December 31 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 the 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 agreement.
"Redemption Date", with respect to any share of Convertible Preferred
Stock, means the date on which such share of Convertible Preferred Stock is
redeemed by the Corporation.
"Redemption Notice" shall have the meaning ascribed to it in paragraph
(e) hereof.
"Reference Market Price" shall initially mean $23.33, and in the event
of any adjustment to the Conversion Rate other than as a result of a Change in
Control, the Reference Market Price shall also be adjusted so that the ratio of
the Reference Market Price to the Implied Conversion Price after giving effect
to any such adjustment shall always be the same as the ratio of $23.33 to
$43.67.
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"Registration Rights Agreement" means the Registration Rights Agreement
dated as of March 31, 1998 among the Corporation, Smith Barney, Inc. and
Goldman, Sachs & Co. (for the benefit of Holders from time to time).
"Restricted Period Termination Date" means the date that is two years after
the later of the Issue Date or the last date on which the Corporation or an
Affiliate of the Corporation was the owner thereof.
"Restricted Subsidiary" of the Corporation means any Subsidiary, whether
existing on or after the Issue date, other than an Unrestricted Subsidiary.
"Senior Shares" shall have the meaning ascribed to it in paragraph (b)
hereof.
"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 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 of the Company, which determination
shall be conclusive.
"Trading Day" means (i) if the Class A Common Stock is admitted to trading
on the Nasdaq National Market or any other system of automated dissemination of
quotations of securities prices, a day on which trades may be effected through
such system; (ii) if the Class A Common Stock is not so admitted for trading but
is listed or admitted for trading on the American Stock Exchange or any other
national securities exchange, a day on which such exchange is open for business;
or (iii) if the Class A Common Stock is not listed or admitted for trading on
any national securities exchange or
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admitted to trading on the Nasdaq National Market or any other system of
automated dissemination of quotation of securities prices, a day on which the
Common Stock is traded regular way in the over-the-counter market and for which
a closing bid and a closing asked price for the Class A Common Stock are
available.
"Transfer Agent" means the transfer agent for the Convertible Preferred
Stock designated by the Corporation from time to time.
"Unrestricted Subsidiary" means (1) any Subsidiary of the Corporationor
admitted for trading on any national securities exchange or admitted to trading
on the Nasdaq National Market or any other system of automated dissemination of
quotation of securities prices, a day on which the Common Stock is traded
regular way in the over-the-counter market and for which a closing bid and a
closing asked price for the Class A Common Stock are available. "Transfer Agent"
means the transfer agent for the Convertible Preferred Stock designated by the
Corporation from time to time. "Unrestricted Subsidiary" means (1) any
Subsidiary of the Corporationof 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 of the Corporation 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 certain covenants under the 12
1/2% Notes, the 9 % Notes and the 9% Notes. The Board of Directors of the
Corporation 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
certain covenants under the 12 1/2% Notes, the 9 % Notes and the 9% Notes, as
applicable.
"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 Rights Triggering Event" shall have the meaning ascribed to it in
paragraph (f)(iv) hereof.
"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
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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.
(k) Conversion Rights.
(i) The Convertible Preferred Stock will be convertible at the option of
the Holder, into shares of Class A Common Stock at any time, unless previously
redeemed or repurchased, at a conversion rate of 1.145 shares of Class A Common
Stock per share of the Convertible Preferred Stock (as adjusted pursuant to the
provisions hereof, the "Conversion Rate") (subject to the adjustments described
below). The right to convert a share of the Convertible Preferred Stock called
for redemption will terminate at the close of business on the Redemption Date
for such share of Convertible Preferred Stock. In addition, at any time from and
after April 15, 2001, through and including April 15, 2006, the Corporation may
elect to cause such conversion right to expire, upon not less than 30 nor more
than 60 days' notice to the holders of shares of Convertible Preferred Stock, if
the Closing Price of the Class A Common Stock exceeds 120% of the Implied
Conversion Price for 20 Trading Days in any period of 30 consecutive Trading
Days, including the last Trading Day of such period; provided that such
conversion right shall expire only if the Corporation is current in the payment
of accrued dividends on the Convertible Preferred Stock at such expiration date.
(ii) The right of conversion attaching to any shares of Convertible
Preferred Stock may be exercised by the Holder thereof by delivering the shares
to be converted to the office of the Conversion Agent, accompanied by a duly
signed and completed notice of conversion in form reasonably satisfactory to the
Conversion Agent. The conversion date will be the date on which the shares of
Convertible Preferred Stock and the duly signed and completed notice of
conversion are so delivered. The Person or Persons entitled to receive the Class
A Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such Class A Common Stock as of such
conversion date and such Person or Persons will cease to be a record Holder or
record Holders of the Convertible Preferred Stock on that date. As promptly as
practicable on or after the conversion date, the Corporation will issue and
deliver to the Conversion Agent a certificate or certificates for the number of
full shares of Class A Common Stock issuable upon conversion, with any
fractional shares rounded up to full shares or, at the Corporation's option,
payment in cash in lieu of any fraction of a share, based on the Closing Price
of the Class A Common Stock on the Trading Day preceding the conversion date.
Such certificate or certificates will be delivered by the Conversion
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Agent to the appropriate Holder on a book-entry basis or by mailing certificates
evidencing the additional shares to the Holders at their respective addresses
set forth in the register of Holders maintained by the Transfer Agent. Any
shares of Convertible Preferred Stock surrendered for conversion during the
period from the close of business on any Record Date to the opening of business
on the next succeeding Dividend Payment Date must be accompanied by payment of
an amount equal to the dividends payable on such Dividend Payment Date on the
shares of Convertible Preferred Stock being surrendered for conversion. In the
case of any shares of Convertible Preferred Stock that have been converted after
any Record Date but before the next Dividend Payment Date, dividends that are
payable on such Dividend Payment Date will be payable on such Dividend Payment
Date notwithstanding such conversion, and such dividends will be paid to the
Holder of such shares of Convertible Preferred Stock on such Record Date. No
other payment or adjustment for dividends, or for any dividends in respect of
shares of Class A Common Stock, will be made upon conversion. Holders of Class A
Common Stock issued upon conversion will not be entitled to receive any
dividends payable to holders of Class A Common Stock as of any record time
before the close of business on the conversion date.
(iii) All shares of Class A Common Stock delivered upon any conversion of
Convertible Preferred Stock prior to the Restricted Period Termination Date
shall bear a legend substantially in the form of the legend required to be set
forth on the Convertible Preferred Stock and shall be subject to the
restrictions on transfer provided in such legend.
(iv) The Corporation shall at all times reserve and keep available out of
its authorized and unissued Class A Common Stock, solely for issuance upon the
conversion of the Convertible Preferred Stock, such number of shares of Class A
Common Stock as shall from time to time be issuable upon the conversion of all
the shares of Convertible Preferred Stock then outstanding. Whenever the
Corporation issues shares of Class A Common Stock upon conversion of shares of
Convertible Preferred Stock and the Corporation has in effect at such time a
share purchase rights agreement under which holders of Class A Common Stock are
issued rights ("Rights") entitling the holders under certain circumstances to
purchase an additional share or shares of stock, the Corporation will issue,
together with each such share of Class A Common Stock, such number of Rights
(which number may be a fraction) as shall at that time be issuable with a share
of Class A Common Stock pursuant to such share purchase rights agreement. Any
shares of Class A Common Stock issued upon conversion of the Convertible
Preferred Stock shall be duly authorized, validly issued and fully paid and
nonassessable and shall rank pari passu with the other shares of Class A Common
Stock outstanding from time to time. The Conversion Agent shall deliver the
shares of Class A Common Stock received upon conversion of the Convertible
Preferred Stock to the converting Holder free and clear of all liens, charges,
security interests and encumbrances, except for United States withholding taxes.
The Corporation shall use its best efforts to obtain and keep in force such
governmental or regulatory permits or other authorizations as may be required by
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law, and shall comply with all applicable requirements as to registration or
qualification of the Class A Common Stock (and all requirements to list the
Class A Common Stock issuable upon conversion of the Convertible Preferred Stock
that are at the time applicable), in order to enable the Corporation to lawfully
issue Class A Common Stock upon conversion of the Convertible Preferred Stock
and to lawfully deliver the Class A Common stock to each Holder upon conversion
of the Convertible Preferred Stock.
(v) The Corporation will pay any and all taxes that may be payable in
respect of the issue or delivery of shares of Class A Common Stock on
conversion of Convertible Preferred Stock. The Corporation shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Class A Common Stock
in a name other than that in which the Convertible Preferred Stock so
converted were registered, and no such issue or delivery shall be made unless
and until the Person requesting such issue has paid to the Conversion Agent
the amount of any such tax, or has established to the satisfaction of the
Conversion Agent that such tax has been paid.
(vi) The Conversion Rate shall be subject to adjustment (without
duplication) from time to time as follows:
(1) In case the Corporation shall pay or make a dividend or other
distribution on any class of Capital Stock of the Corporation payable in
shares of Common stock, the Conversion Rate in effect at the opening of
business on the day following the date fixed for the determination of
shareholders entitled to receive such dividend or other distribution shall
be increased by dividing such Conversion Rate by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the
close of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the total number
of shares constituting such dividend or other distribution, such increase
to become effective immediately after the opening of business on the day
following the date fixed for such determination. If, after any such date
fixed for determination, any dividend or distribution is not in fact paid,
the Conversion Rate shall be immediately readjusted, effective as of the
date the Board of Directors determines not to pay such dividend or
distribution, to the Conversion Rate that would have been in effect if such
determination date had not been fixed. For the purposes of this paragraph
(1), the number of shares of Common Stock at any time outstanding shall not
include shares held in the treasury of the Corporation but shall include
shares issuable in respect of scrip certificates issued in lieu of
fractions of shares of Common Stock. The Corporation will not pay any
dividend or make any distribution on shares of Common Stock held in the
treasury of the Corporation.
(2) In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Rate in
effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately increased, and,
conversely, in case
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outstanding shares of Common Stock shall be combined into a smaller number
of shares of Common Stock, the Conversion Rate in effect at the opening of
business on the day following the day upon which such combination becomes
effective shall be proportionately reduced, such increase or reduction, as
the case may be, to become effective immediately after the opening of
business on the day following the day upon which such subdivision or
combination becomes effective.
(3) In case the Company shall issue rights, options or warrants to
holders of its Common Stock (by reason of such holder's ownership of such
stock) entitling them to subscribe for or purchase shares of Common Stock
at a price per share less than the Current Market Price per share of the
Class A Common Stock on the date fixed for the determination of
stockholders entitled to receive such rights, options or warrants (other
than any rights, options or warrants that by their terms will also be
issued to any Holder upon conversion of a share of Convertible Preferred
Stock into shares of Class A Common Stock without any action required by
the Corporation or any other Person), the Conversion Rate in effect at the
opening of business on the day following the date fixed for such
determination shall be increased by dividing such Conversion Rate by a
fraction of which the numerator shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock which the aggregate
of the offering price of the total number of shares of Common Stock so
offered for subscription or purchase would purchase at such Current Market
Price and the denominator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for such
subscription or purchase, such increase to become effective immediately
after the opening of business on the day following the date fixed for such
determination. If, after any such date fixed for determination, any such
rights, options or warrants are not in fact issued, the Conversion Rate
shall be immediately readjusted, effective as of the date the Board of
Directors determines not to issue such rights, options or warrants, to the
Conversion Rate that would have been in effect if such determination date
had not been fixed. For the purposes of this paragraph (3), the number of
shares of Common Stock at any time outstanding shall not include shares
held in the treasury of the Corporation but shall include shares issuable
in respect of scrip certificates issued in lieu of fractions of shares of
Common Stock. The Corporation will not issue any rights, options or
warrants in respect of shares of Common Stock held in the treasury of the
Corporation.
(4) In case the Corporation shall, by dividend or otherwise,
distribute to holders of its Common Stock 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 paragraph (3) of this Section, (ii) any dividend or distribution paid
exclusively in cash, (iii) any dividend or distribution referred to in
paragraph (1) of this paragraph (k)(vi) and (iv) any merger or
consolidation to which paragraph (k)(ix) applies), the Conversion Rate
shall be adjusted so the same shall
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equal the rate determined by dividing the Conversion Rate in effect
immediately prior to the close of business on the date fixed for the
determination of stockholders entitled to receive such distribution by a
fraction of which the numerator shall be the Current Market Price per share
of the Common Stock 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) of the portion of the assets, shares or
evidences of indebtedness so distributed applicable to one share of Common
Stock entitled to such distribution and the denominator shall be such
Current Market Price per share of the Class A Common Stock, such adjustment
to become effective immediately prior to the opening of business on the day
following the date fixed for the determination of stockholders entitled to
receive such distribution. If, after any such date fixed for determination,
any such distribution is not in fact made, the Conversion Rate shall be
immediately readjusted, effective as of the date of the Board of Directors
determines not to make such distribution, to the Conversion Rate that would
have been in effect if such determination date had not been fixed.
(5) In case the Corporation shall, by dividend or otherwise,
distribute to holders of its Common Stock cash (excluding any cash that is
distributed upon a merger or consolidation to which paragraph (k)(ix)
applies or as part of a distribution referred to in paragraph (4) of this
paragraph (k)(vi)) in an aggregate amount that, combined together with (I)
the aggregate amount of any other cash distributions to all holders of its
Common Stock 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 paragraph (5) 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) of consideration payable in
respect of any tender offer or other stock repurchase program by the
Corporation or any of its Subsidiaries for all or any portion of the Common
Stock concluded within the 12 months preceding the date of payment of such
distribution and in respect of which no adjustment pursuant to paragraph
(6) of this paragraph (k)(vi) has been made (the "combined cash and tender
amount"), exceeds 12.5% of the product of the Current Market Price per
share of the Class A Common Stock on the date for the determination of
holders of shares of Common Stock entitled to receive such distribution
times the number of shares of Common Stock 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 Conversion
Rate shall be adjusted so that the same shall equal the rate determined by
dividing the Conversion Rate in effect immediately prior to the close of
business on the date fixed for determination of the stockholders entitled
to receive such distribution by a fraction (i) the numerator of which shall
be equal to the Current Market Price per share of the Class A Common Stock
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
Common Stock outstanding on such date for determination and (ii) the
denominator of which
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shall be equal to the Current Market Price per share of the Class A Common
Stock on such date for determination.
(6) In case a tender offer made by the Corporation or any Subsidiary
for all or any portion of the Common Stock shall expire and such tender
offer (as amended upon the expiration thereof) shall require the payment to
stockholders (based on the acceptance (up to any maximum specified in the
terms of the tender offer) of Common Stock (as defined below) of an
aggregate consideration having a fair market value (as determined by the
Board of Directors, whose determination shall be conclusive) 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) as of the expiration of such tender offer, of consideration
payable in respect of any other tender offer or other stock repurchase
program by the Corporation or any Subsidiary for all or any portion of the
Common Stock expiring within the 12 months preceding the expiration of such
tender offer and in respect of which no adjustment pursuant to this
paragraph (6) has been made and (II) the aggregate amount of any cash
distributions to all holders of the Corporation's Common Stock within 12
months preceding the expiration of such tender offer and in respect of
which no adjustment pursuant to paragraph (5) of this paragraph (k)(vi) has
been made (the "combined tender and cash amount") exceeds 12.5 % of the
product of the Current Market Price per share of the Class A Common Stock
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
shares of Common Stock 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
Conversion Rate shall be adjusted so that the same shall equal the rate
determined by dividing the Conversion Rate immediately prior to 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 Common Stock on the date of the Expiration Time multiplied by
(II) the number of shares of Common Stock 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 the Class A Common
Stock as of the Expiration Time multiplied by (B) the number of shares of
Common Stock 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").
(7) The reclassification of Common Stock into securities including
other than Common Stock (other than any reclassification upon a
consolidation or merger to which paragraph (k)(ix) applies) shall be deemed
to involve (a) a distribution of such securities other than Common Stock to
all holders of Common Stock (and the effective date of such
reclassification shall be deemed to be "the date
28
<PAGE>
fixed for the determination of stockholders entitled to receive such
distribution" and "the date fixed for such determination" within the
meaning of paragraph (4) of this paragraph (k)(vi), and (b) a subdivision
or combination, as the case may be, of the number of shares of Common Stock
outstanding immediately prior to such reclassification into the number of
shares of Common Stock outstanding immediately thereafter (and the
effective date of such reclassification shall be deemed to be "the day upon
which such subdivision becomes effective" or "the day upon which such
combination becomes effective", as the case may be, and "the day upon which
such subdivision or combination becomes effective" within the meaning of
paragraph (2) of this paragraph (k)(vi).
(8) For the purpose of any computation under paragraphs (2), (4), (5)
or (6) of this paragraph (k)(vi), the Current Market Price per share of
Class A Common Stock on any date shall be calculated by the Company and be
based on a period of Trading Days ending not later than the earlier of the
day in question and the day before the "`ex" date with respect to the
issuance or distribution requiring such computation. For purposes of this
paragraph, the term "`ex" date", when used with respect to any issuance or
distribution, means the first date on which the Common Stock trades regular
way in the applicable securities market or on the applicable securities
exchange without the right to receive such issuance or distribution.
(9) No adjustment in the Conversion Rate shall be required unless such
adjustment (plus any adjustments not previously made by reason of this
paragraph (9)) would require an increase or decrease of at least one
percent (1%) in such rate; provided, however, that any adjustments which by
reason of this paragraph (9) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All
calculations under this paragraph (f) shall be made to the nearest cent or
to the nearest one-hundredth of a share, as the case may be.
(10) The Corporation may make voluntary increases in the Conversion
Rate, for the remaining term of the Convertible Preferred Stock or any
shorter term, in addition to those required by paragraphs (1), (2), (3),
(4), (5) and (6) of this paragraph (f)(vi), provided that each such
increase is in effect for at least 20 calendar days.
(vii) Whenever the Conversion Rate is adjusted as herein provided:
(1) the Corporation shall compute the adjusted Conversion Rate in
accordance with paragraph (f)(vi) and shall prepare a certificate
signed by the Chief Financial Officer of the Corporation setting forth
the adjusted Conversion Rate and showing in reasonable detail the
facts upon which such adjustment is based, and such certificate shall
promptly be filed with the Conversion Agent; and
(2) upon each such adjustment, a notice stating that the
Conversion Rate has been adjusted and setting forth the adjusted
Conversion Rate shall be
29
<PAGE>
required, and as soon as practicable after it is required, such notice
shall be provided by the Company to all Holders.
The Conversion Agent shall not be under any duty or
responsibility with respect to any such certificate or the information
and calculations contained therein, except to exhibit the same to any
Holder of Convertible Preferred Stock desiring inspection thereof at
its office during normal business hours.
(viii) In case:
(a) the Corporation shall declare a dividend (or any other
distribution) on its Class A Common Stock payable (i) otherwise than
exclusively in cash or (ii) exclusively in cash in an amount that
would require any adjustment pursuant to paragraph (f)(vi); or
(b) the Corporation shall authorize the granting to holders of
its Class A Common Stock (by reason of such holders' ownership of such
stock) of rights, options or warrants to subscribe for or purchase any
shares of capital stock of any class or of any other rights; or
(c) of any reclassification of the Class A Common Stock of the
Corporation, or of any consolidation, merger or share exchange to
which the Corporation is a party and for which approval of any
stockholders of the Corporation is required, or of the conveyance,
sale, transfer or lease of all or substantially all of the assets of
the Corporation; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation;
then the Corporation shall cause to be filed at the office of the
Conversion Agent, and shall cause to be provided to all Holders, at
least 20 days (or 10 days in any case specified in clause (a) or (b)
above) prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, rights, options
or warrants, or, if a record is not to be taken, the date as of which
the holders of Class A Common Stock of record to be entitled to such
dividend, distribution, rights, options or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, conveyance, transfer, sale, lease, dissolution,
liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such
reclassification,
30
<PAGE>
consolidation, merger, conveyance, transfer, sale,
lease, dissolution, liquidation or winding up. Neither the failure to
give such notice referred to in the following paragraph nor any defect
therein shall affect the legality or validity of the proceedings
described in clauses (a) through (d) of this paragraph (f)(viii).
The Company shall cause to be filed at the office of the
Conversion Agent and shall cause to be provided to all Holders, notice
of any tender offer by the Corporation or any Subsidiary for all or
any portion of the Class A Common Stock at or about the time that such
notice of tender offer is provided to the public generally.
(ix)
(a) In the event that the Corporation is a party to any
transaction including, without limitation, a merger (other than a
merger that does not result in a reclassification, conversion,
exchange or cancellation of Class A Common Stock), consolidation, sale
of all or substantially all of the assets of the Corporation,
recapitalization or reclassification of Class A Common Stock (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 of Class A Common Stock) or any compulsory share exchange
(each of the foregoing being referred to as a "Transaction"), in each
case, as a result of which shares of Class A Common Stock shall be
converted into the right to receive, or shall be exchanged for, (i) in
the case of any Transaction other than a Transaction involving a
Common Stock Change in Control (and subject to funds being legally
available for such purpose under applicable law at the time of such
conversion), securities, cash or other property, each share of
Convertible Preferred Stock shall thereafter be convertible solely
into the kind and amount of securities, cash and other property
receivable upon the consummation of such Transaction by a holder of
that number of shares of Class A Common Stock into which a share of
Convertible Preferred Stock was convertible immediately prior to such
Transaction (but after giving effect to any adjustment discussed in
paragraphs (b) and (c) relating to Change in Control if such
Transaction constitutes a Change in Control), or (ii) in the case of a
Transaction involving a Common Stock Change in Control, common stock,
each share of Convertible Preferred Stock shall thereafter be
convertible solely (in the manner described herein) into common stock
of the kind received by holders of Class A Common Stock (but after
giving effect to any adjustment discussed in paragraphs (b) and (c)
relating to Change in Control if such Transaction constitutes a Change
in Control). The Holders of Convertible Preferred Stock will have no
voting rights with respect to any Transaction described in this
section. Shares of Convertible Preferred Stock issued in a Transaction
by the successor transferee or resulting Person or an Acquiring Entity
as provided in paragraph (f)(iii) will be subject to this paragraph
k(ix)(a) and will be convertible solely into the consideration
provided for herein.
31
<PAGE>
(b) If any Change in Control occurs, then the Conversion Rate in
effect will be adjusted immediately after such Change in Control as
described in paragraph (c) below.
(c) For purposes of calculating any adjustment to be made in the
event of a Change in Control, immediately after such Change in
Control:
(i) in the case of a Non-Stock Change in Control, the
Conversion Rate will thereupon become the higher of (A) the
Conversion Rate in effect immediately prior to such Non-Stock
Change in Control, but after giving effect to any other prior
adjustments, and (B) a fraction, the numerator of which is the
then-current deemed redemption price per share, which shall be
equal to the product of the liquidation preference per share of
$50.00 and 105.20% in year one, 104.55% in year 2, 103.9% in year
3, 103.25% in year 4, 102.6% in year 5, 101.95% in year 6, 101.3%
in year 7, 100.65% in year 8 and 100.00 in year 9 and thereafter,
respectively and the denominator of which is the greater of the
Applicable Price or the then applicable Reference Market Price;
and
(ii) in the case of a Common Stock Change in Control, the
Conversion Rate in effect immediately prior to such Common Stock
Change in Control, but after giving effect to any other prior
adjustments, will thereupon be adjusted by multiplying such
Conversion Rate by a fraction, of which the numerator will be the
Applicable Price and the denominator will be the Purchaser Stock
Price (as defined); provided, however, that in the event of a
Common Stock Change in Control in which (A) 100% of the value of
the consideration received by a holder of Class A Common Stock is
common stock of the successor, acquiror or other third party (and
cash, if any, with respect to any fractional interests) and (B)
all the Class A Common Stock (other than shares of Class A Common
Stock for which cash was paid pursuant to rights of dissent and
appraisal) will have been exchanged for, converted into, or
acquired for, common stock (and cash with respect to fractional
interests) of the successor, acquiror or other third party, the
Conversion Rate in effect immediately prior to such Common Stock
Change in Control will thereupon be adjusted by multiplying such
Conversion Rate by the number of shares of common stock of the
successor, acquiror, or other third party received by a holder of
one share of Class A Common Stock as a result of such Common
Stock Change in Control.
32
<PAGE>
(l) Restrictions on Transfer.
(i) Each share of Convertible Preferred Stock shall contain a legend
substantially to the following effect until the date that is two years
after the later of the Issue Date or the last date on which the Corporation
or any Affiliate of the Corporation was the owner thereof, unless the
Corporation determines otherwise:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT (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 IN EACH CASE, IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES.
(m) Book Entry Delivery and Form.
The Convertible Preferred Stock sold will be issued in the form of a
Global Share Certificate. The Global Share Certificate will be deposited
with, or on behalf of, the Depositary and registered in the name of the
Depositary or its nominee. Except as set forth below, the Global Share
Certificate may be transferred, in whole and not in part, only to the
Depositary or other nominee of the Depositary. Holders may hold their
beneficial interests in the Global Share Certificate directly through the
Depositary if they have an account with the Depositary or indirectly
through organizations which have accounts with the Depositary.
The Convertible Preferred Stock represented by the Global
Share Certificate is exchangeable for certificated Convertible
Preferred Stock in definitive form of like tenor as such Convertible
Preferred Stock if (i) the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary for the Global Share
Certificate and a successor is not promptly appointed or if at any time
the Depositary ceases to be a clearing agency registered under the
Exchange Act or (ii) the Company in its discretion at any time
determines not to have all of the Convertible Preferred Stock
represented by the Global Share Certificate. Any Convertible Preferred
Stock that is exchangeable pursuant to the preceding sentence is
exchangeable for certificated Convertible Preferred Stock
33
<PAGE>
issuable in authorized denominations and registered in such names as
the Depositary shall direct. Subject to the foregoing, the Global
Share Certificate is not exchangeable, except for a Global Share
Certificate of the same aggregate denomination to be registered in the
name of the Depositary or its nominee.
(n) Amendments Without Consent of Holders.
Without the Consent of any Holders, the Company, when authorized
by Board Resolution may amend this Certificate of Designation to cure
any ambiguity, correct or supplement any provision herein which may be
inconsistent with any other provision herein, make any other
provisions with respect to matters or questions arising under this
Certificate of Designation that are not inconsistent with the
provisions of this Certificate of Designation, provided that such
action pursuant to this paragraph (n) shall not adversely affect the
legal rights of the Holders.
IN WITNESS WHEREOF, said NEXTLINK Communications, Inc. has caused this
Certificate to be signed by R. Bruce Easter, Jr., its Vice President, this
29th day of May, 1998.
NEXTLINK COMMUNICATIONS, INC.
By /s/ R. Bruce Easter, Jr.
----------------------------
Name: R. Bruce Easter, Jr.
Title: Vice President
34
<PAGE>
Exhibit 4.10
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
NEW NEXTLINK COMMUNICATIONS, INC.
(to be known as NEXTLINK Communications, Inc.)
AND
NEXTLINK CAPITAL, INC.
Issuers
and
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
----------------------------------------
SECOND
SUPPLEMENTAL INDENTURE
Dated as of June 3, 1998
Amending
INDENTURE
Dated as of April 25, 1996
----------------------------------------
$350,000,000
12-1/2% Senior Notes
Due April 15, 2006
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
THIS SECOND SUPPLEMENTAL INDENTURE, dated as of June 3, 1998 (herein
called the "Supplement"), is between NEW NEXTLINK COMMUNICATIONS, INC., a
corporation organized and existing under the laws of the State of Delaware
(herein called the "Company"), and NEXTLINK CAPITAL, INC., a corporation
organized and existing under the laws of the State of Washington which will
become a wholly owned subsidiary of the Company following the Merger
("Capital"), as joint and several obligors (collectively, the "Issuers"), each
having its principal office at 155 108th Avenue N.E., 8th Floor, Bellevue,
Washington 98004, and UNITED STATES TRUST COMPANY OF NEW YORK, duly organized
and existing under the laws of the State of New York, as Trustee (herein called
the "Trustee").
RECITALS OF THE ISSUERS
WHEREAS, pursuant to the terms of the Indenture, dated as of April 25,
1996 (as supplemented by the First Supplemental Indenture, herein called the
"Original Indenture"), between NEXTLINK Communications, L.L.C., a limited
liability company formed under the laws of the State of Washington, Capital and
the Trustee, $350,000,000 principal amount of 12-1/2% Senior Notes due April 15,
2006 (herein called the "Securities") were issued; and
WHEREAS, pursuant to the terms of the First Supplemental Indenture,
dated as of January 31, 1997 (the "First Supplemental Indenture"), NEXTLLINK
Communications, Inc., a corporation organized and existing under the laws of the
State of Washington ("NEXTLINK-WA"), became the successor to NEXTLINK
Communications, L.L.C. as the result of the merger of NEXTLINK Communications,
L.L.C. with and into NEXTLINK-WA; and
WHEREAS, pursuant to the terms of that certain Agreement and Plan of
Merger, dated as of May 29, 1998, by and among the Company and NEXTLINK-WA,
NEXTLINK-WA will be merged with and into the Company, with the Company as the
surviving corporation (the "Merger"); and
WHEREAS, as a result of the Merger, the Company will change its name to
NEXTLINK Communications, Inc.; 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, NEXTLINK-WA is permitted to become a
Delaware corporation through a merger transaction in which NEXTLINK-WA 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
<PAGE>
WHEREAS, pursuant to the provisions of Section 801(b) the Company
wishes by this Supplemental Indenture to evidence its succession to NEXTLINK-WA
and its assumption of the covenants of NEXTLINK-WA contained in the Original
Indenture and the Securities and pursuant to the provisions of Section 802 the
Company shall succeed to, and be substituted for, and may exercise every right
and power of, NEXTLINK-WA 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 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. Representations of the Company. The Company hereby
represents and warrants to the Trustee that as of the date hereof:
(a) The Company is a corporation validly existing and in good standing
under the laws of the State of Delaware; and
(b) no Default or Event of Default will result from the Merger or the
execution and delivery of this Supplement.
SECTION 103. Assumption of Obligations. The Company hereby assumes all
of the obligations of NEXTLINK-WA in its capacity as the Company under the
Original Indenture.
SECTION 104. 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 105. 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 106. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
SECTION 107. Separability Clause. In case any provision in this
Supplement shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining
<PAGE>
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 108. 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 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 109. GOVERNING LAW. THIS SUPPLEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 110. No Recourse Against Others. A director, member, managing
member officer, employee, stockholder or incorporator, as such, of the Issuers
shall not have any liability for any obligations of the Issuers under this
Supplement or for any claim based on, in respect or by reason of such
obligations or their creation.
SECTION 111. 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 112. Effectiveness. This Supplement shall become effective in
accordance with the provisions of Article Nine of the Original Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this Supplement to
be duly executed as of the day and year first above written.
NEW NEXTLINK COMMUNICATIONS, INC.
By /s/ R. Bruce Easter, Jr.
------------------------------
Title: President
--------------------------
Attest:
/s/ Richard A. Montfort, Jr.
- ------------------------------
Name: Richard A. Montfort, Jr.
------------------------
Title: counsel
-------------------------
<PAGE>
NEXTLINK CAPITAL, INC.
By /s/ R. Bruce Easter, Jr.
------------------------
Title: President
------------
Attest:
/s/ Richard A. Montfort, Jr.
- -------------------------------
Name: Richard A. Montfort, Jr.
-------------------------
Title: counsel
-------------------------
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By /s/ Patricia Stermer
------------------------
Title: Asst. Vice President
--------------------
Attest:
/s/ Sirojni Dihdial
- ------------------------------
Name: Sirojni Dihdial
------------------------
Title: Asst. Secretary
------------------------
<PAGE>
STATE OF WASHINGTON )
)ss.:
COUNTY OF KING )
On the 2nd day of June, 1998, before me personally came R. BRUCE
EASTER, JR., to me known, who, being by me duly sworn, did depose and say that
he is the President of NEW NEXTLINK COMMUNICATIONS, INC., a Delaware
corporation, 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.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the
day and year first above written.
/s/ Julia A. Aviles
--------------------------------------
NOTARY PUBLIC in and for the State of
Washington, residing at Bellvue, WA
---------------
My appointment expires 1-19-02
---------------
Print Name Julia A. Aviles
---------------------------
STATE OF WASHINGTON )
)ss.:
COUNTY OF KING )
On the 2nd day of June, 1998, before me personally came R. Bruce
Easter, Jr., to me known, who, being by me duly sworn, did depose and say that
he/she is the Vice President of NEXTLINK CAPITAL, INC., a Washington
corporation, one of the corporations described in and which executed the
foregoing instrument, and duly acknowledged to me that he/she executed the same
by authority of the Board of Directors of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the
day and year first above written.
/s/ Julia A. Aviles
--------------------------------------
NOTARY PUBLIC in and for the State of
Washington, residing at Bellvue, WA
---------------
My appointment expires 1-19-02
---------------
Print Name Julia A. Aviles
---------------------------
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 3rd day of June, 1998, before me personally came Patricia
Stermer, to me known, who, being by me duly sworn, did depose and say that
he/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,
and duly acknowledged to me that he/she signed his/her name thereto by authority
of the By-Laws of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the
day and year first above written.
/s/ Christine C. Collins
----------------------------------------
NOTARY PUBLIC in and for the State of New
York, residing at
-----------------------
My appointment expires
------------------
Print Name
------------------------------
Christine C. Collins
Notary Public, State of New York
No. 03-4624735
Qualified in Bronx County
Certificate Filed in New York County
Commission Expires March 30, 2000
<PAGE>
Exhibit 4.11
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
NEW NEXTLINK COMMUNICATIONS, INC.
(to be known as NEXTLINK Communications, Inc.)
and
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
----------------------------------------
FIRST
SUPPLEMENTAL INDENTURE
Dated as of June 3, 1998
Amending
INDENTURE
Dated as of September 25, 1997
----------------------------------------
$400,000,000
9-5/8% Senior Notes
Due 2007
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of June 3, 1998 (herein
called the "Supplement"), is between NEW NEXTLINK COMMUNICATIONS, INC., a
corporation organized and existing under the laws of the State of Delaware
(herein called 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
WHEREAS, pursuant to the terms of the Indenture, dated as of September
25, 1997 (the "Original Indenture"), between NEXTLINK Communications, Inc., a
corporation organized under the laws of the State of Washington, and the
Trustee, $400,000,000 principal amount of 9-5/8% Senior Notes due 2007 (herein
called the "Securities") were issued; and
WHEREAS, pursuant to the terms of that certain Agreement and Plan of
Merger, dated as of May 29, 1998, by and among the Company and NEXTLINK-WA,
NEXTLINK-WA will be merged with and into the Company, with the Company as the
surviving corporation (the "Merger"); and
WHEREAS, as a result of the Merger, the Company will change its name to
NEXTLINK Communications, Inc.; and
WHEREAS, Section 901 of the Original Indenture provides for the
execution and delivery by the Company 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, NEXTLINK-WA is permitted to become a
Delaware corporation through a merger transaction in which NEXTLINK-WA is not
the surviving corporation, and under the Original Indenture, the Company and the
Trustee may enter into a supplemental indenture, "to evidence the succession of
another Person to the Company and the assumption by such successor of the
covenants of the Company 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, pursuant to the provisions of Section 801(b) the Company
wishes by this Supplemental Indenture to evidence its succession to NEXTLINK-WA
and its assumption of the covenants of NEXTLINK-WA contained in the Original
Indenture and the Securities and pursuant to the provisions of Section 802 the
Company shall succeed to, and be substituted for, and may exercise every right
and power of, NEXTLINK-WA 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 Company in accordance
with its terms have been done.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
<PAGE>
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. Representations of the Company. The Company hereby
represents and warrants to the Trustee that as of the date hereof:
(a) The Company is a corporation validly existing and in good standing
under the laws of the State of Delaware; and
(b) no Default or Event of Default will result from the Merger or the
execution and delivery of this Supplement.
SECTION 103. Assumption of Obligations. The Company hereby assumes all
of the obligations of NEXTLINK-WA in its capacity as the Company under the
Original Indenture.
SECTION 104. 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 105. 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 106. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
SECTION 107. 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 108. 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 Company or
<PAGE>
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 109. GOVERNING LAW. THIS SUPPLEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 110. No Recourse Against Others. A director, member, managing
member officer, employee, stockholder or incorporator, as such, of the Company
shall not have any liability for any obligations of the Company under this
Supplement or for any claim based on, in respect or by reason of such
obligations or their creation.
SECTION 111. 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 112. Effectiveness. This Supplement shall become effective in
accordance with the provisions of Article Nine of the Original Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this Supplement to
be duly executed as of the day and year first above written.
NEW NEXTLINK COMMUNICATIONS, INC.
By /s/ R. Bruce Easter, Jr.
-------------------------------
Title: President
--------------------
Attest:
/s/ Richard A. Montfort, Jr.
- ------------------------------
Name: Richard A. Montfort, Jr.
------------------------
Title: counsel
------------------------
<PAGE>
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By /s/ Patricia Stermer
-------------------------------
Title: Asst. Vice President
--------------------
Attest:
/s/ Sirojni Dihdial
- ------------------------------
Name: Sirojni Dihdial
------------------------
Title: Asst. Secretary
------------------------
STATE OF WASHINGTON )
)ss.:
COUNTY OF KING )
On the 2nd day of June, 1998, before me personally came R. BRUCE
EASTER, JR., to me known, who, being by me duly sworn, did depose and say that
he is the President of NEW NEXTLINK COMMUNICATIONS, INC., a Delaware
corporation, 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.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the
day and year first above written.
/s/ Julia A. Aviles
--------------------------------------
NOTARY PUBLIC in and for the State of
Washington, residing at Bellvue, WA
--------------
My appointment expires 1-19-02
---------------
Print Name Julia A. Aviles
---------------------------
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 3rd day of June, 1998, before me personally came Patricia
Stermer, to me known, who, being by me duly sworn, did depose and say that
he/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,
and duly acknowledged to me that he/she signed his/her name thereto by authority
of the By-Laws of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the
day and year first above written.
/s/ Christine C. Collins
--------------------------------------
NOTARY PUBLIC in and for the State of
New York, residing at
-----------------
My appointment expires
----------------
Print Name
----------------------------
Christine C. Collins
Notary Public, State of New York
No. 03-4624735
Qualified in Bronx County
Certificate Filed in New York County
Commission Expires March 30, 2000
<PAGE>
Exhibit 4.12
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
NEW NEXTLINK COMMUNICATIONS, INC.
(to be known as NEXTLINK Communications, Inc.)
and
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
----------------------------------------
FIRST
SUPPLEMENTAL INDENTURE
Dated as of June 3, 1998
Amending
INDENTURE
Dated as of March 3, 1998
----------------------------------------
$335,000,000
9% Senior Notes
Due 2008
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of June 3, 1998 (herein
called the "Supplement"), is between NEW NEXTLINK COMMUNICATIONS, INC., a
corporation organized and existing under the laws of the State of Delaware
(herein called 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
WHEREAS, pursuant to the terms of the Indenture, dated as of March 3,
1998 (the "Original Indenture"), between NEXTLINK Communications, Inc., a
corporation organized under the laws of the State of Washington, and the
Trustee, $335,000,000 principal amount of 9% Senior Notes due 2008 (herein
called the "Securities") were issued; and
WHEREAS, pursuant to the terms of that certain Agreement and Plan of
Merger, dated as of May 29, 1998, by and among the Company and NEXTLINK-WA,
NEXTLINK-WA will be merged with and into the Company, with the Company as the
surviving corporation (the "Merger"); and
WHEREAS, as a result of the Merger, the Company will change its name to
NEXTLINK Communications, Inc.; and
WHEREAS, Section 901 of the Original Indenture provides for the
execution and delivery by the Company 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, NEXTLINK-WA is permitted to become a
Delaware corporation through a merger transaction in which NEXTLINK-WA is not
the surviving corporation, and under the Original Indenture, the Company and the
Trustee may enter into a supplemental indenture, "to evidence the succession of
another Person to the Company and the assumption by such successor of the
covenants of the Company 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, pursuant to the provisions of Section 801(b) the Company
wishes by this Supplemental Indenture to evidence its succession to NEXTLINK-WA
and its assumption of the covenants of NEXTLINK-WA contained in the Original
Indenture and the Securities and pursuant to the provisions of Section 802 the
Company shall succeed to, and be substituted for, and may exercise every right
and power of, NEXTLINK-WA 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 Company in accordance
with its terms have been done.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
<PAGE>
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. Representations of the Company. The Company hereby
represents and warrants to the Trustee that as of the date hereof:
(a) The Company is a corporation validly existing and in good standing
under the laws of the State of Delaware; and
(b) no Default or Event of Default will result from the Merger or the
execution and delivery of this Supplement.
SECTION 103. Assumption of Obligations. The Company hereby assumes all
of the obligations of NEXTLINK-WA in its capacity as the Company under the
Original Indenture.
SECTION 104. 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 105. 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 106. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
SECTION 107. 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 108. 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 Company or
<PAGE>
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 109. GOVERNING LAW. THIS SUPPLEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 110. No Recourse Against Others. A director, member, managing
member officer, employee, stockholder or incorporator, as such, of the Company
shall not have any liability for any obligations of the Company under this
Supplement or for any claim based on, in respect or by reason of such
obligations or their creation.
SECTION 111. 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 112. Effectiveness. This Supplement shall become effective
in accordance with the provisions of Article Nine of the Original Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this Supplement to
be duly executed as of the day and year first above written.
NEW NEXTLINK COMMUNICATIONS, INC.
By /s/ R. Bruce Easter, Jr.
-------------------------------
Title: President
--------------------
Attest:
/s/ Richard A. Montfort, Jr.
- ------------------------------
Name: Richard A. Montfort, Jr.
------------------------
Title: counsel
------------------------
<PAGE>
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By /s/ Patricia Stermer
--------------------------------
Title: Asst. Vice President
--------------------
Attest:
/s/ Sirojni Dihdial
- -------------------------------
Name: Sirojni Dihdial
-------------------------
Title: Asst. Secretary
-------------------------
STATE OF WASHINGTON )
)ss.:
COUNTY OF KING )
On the 2nd day of June, 1998, before me personally came R. BRUCE
EASTER, JR., to me known, who, being by me duly sworn, did depose and say that
he is the President of NEW NEXTLINK COMMUNICATIONS, INC., a Delaware
corporation, 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.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the
day and year first above written.
/s/ Julia A. Aviles
NOTARY PUBLIC in and for the State of
Washington, residing at Bellvue, WA
---------------
My appointment expires 1-19-02
---------------
Print Name Julia A. Aviles
---------------------------
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 3rd day of June, 1998, before me personally came Patricia
Stermer, to me known, who, being by me duly sworn, did depose and say that
he/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,
and duly acknowledged to me that he/she signed his/her name thereto by authority
of the By-Laws of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the
day and year first above written.
/s/ Christine C. Collins
--------------------------------------
NOTARY PUBLIC in and for the State of
New York, residing at
-----------------
My appointment expires
----------------
Print Name
----------------------------
Christine C. Collins
Notary Public, State of New York
No. 03-4624735
Qualified in Bronx County
Certificate Filed in New York County
Commission Expires March 30, 2000
<PAGE>
Exhibit 4.13
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NEW NEXTLINK COMMUNICATIONS, INC.
(to be known as NEXTLINK Communications, Inc.)
and
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
----------------------------------------
FIRST
SUPPLEMENTAL INDENTURE
Dated as of June 3, 1998
Amending
INDENTURE
Dated as of April 1, 1998
----------------------------------------
$636,974,000
9.45% Senior Discount Notes
Due 2008
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of June 3, 1998 (herein
called the "Supplement"), is between NEW NEXTLINK COMMUNICATIONS, INC., a
corporation organized and existing under the laws of the State of Delaware
(herein called 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
WHEREAS, pursuant to the terms of the Indenture, dated as of April 1,
1998 (the "Original Indenture"), between NEXTLINK Communications, Inc., a
corporation organized under the laws of the State of Washington, and the
Trustee, $636,974,000 principal amount of 9.45% Senior Discount Notes due 2008
(herein called the "Securities") were issued; and
WHEREAS, pursuant to the terms of that certain Agreement and Plan of
Merger, dated as of May 29, 1998, by and among the Company and NEXTLINK-WA,
NEXTLINK-WA will be merged with and into the Company, with the Company as the
surviving corporation (the "Merger"); and
WHEREAS, as a result of the Merger, the Company will change its name
to NEXTLINK Communications, Inc.; and
WHEREAS, Section 901 of the Original Indenture provides for the
execution and delivery by the Company 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, NEXTLINK-WA is permitted to become a
Delaware corporation through a merger transaction in which NEXTLINK-WA is not
the surviving corporation, and under the Original Indenture, the Company and the
Trustee may enter into a supplemental indenture, "to evidence the succession of
another Person to the Company and the assumption by such successor of the
covenants of the Company 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, pursuant to the provisions of Section 801(b) the Company
wishes by this Supplemental Indenture to evidence its succession to NEXTLINK-WA
and its assumption of the covenants of NEXTLINK-WA contained in the Original
Indenture and the Securities and pursuant to the provisions of Section 802 the
Company shall succeed to, and be substituted for, and may exercise every right
and power of, NEXTLINK-WA 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 Company in accordance
with its terms have been done.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
<PAGE>
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. Representations of the Company. The Company hereby
represents and warrants to the Trustee that as of the date hereof:
(a) The Company is a corporation validly existing and in good standing
under the laws of the State of Delaware; and
(b) no Default or Event of Default will result from the Merger or the
execution and delivery of this Supplement.
SECTION 103. Assumption of Obligations. The Company hereby assumes all
of the obligations of NEXTLINK-WA in its capacity as the Company under the
Original Indenture.
SECTION 104. 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 105. 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 106. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
SECTION 107. 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 108. 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 Company or
<PAGE>
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 109. GOVERNING LAW. THIS SUPPLEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 110. No Recourse Against Others. A director, member, managing
member officer, employee, stockholder or incorporator, as such, of the Company
shall not have any liability for any obligations of the Company under this
Supplement or for any claim based on, in respect or by reason of such
obligations or their creation.
SECTION 111. 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 112. Effectiveness. This Supplement shall become effective in
accordance with the provisions of Article Nine of the Original Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this Supplement to
be duly executed as of the day and year first above written.
NEW NEXTLINK COMMUNICATIONS, INC.
By /s/ R. Bruce Easter, Jr.
------------------------
Title: President
Attest:
/s/ Richard A. Montfort, Jr.
- ----------------------------
Name: Richard A. Montfort, Jr.
Title: counsel
<PAGE>
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By /s/ Patricia Stermer
--------------------
Title: Asst. Vice President
Attest:
/s/ Sirojni Dihdial
- -------------------
Name: Sirojni Dihdial
Title: Asst. Secretary
STATE OF WASHINGTON )
)ss.:
COUNTY OF KING )
On the 2nd day of June, 1998, before me personally came R. BRUCE
EASTER, JR., to me known, who, being by me duly sworn, did depose and say that
he is the President of NEW NEXTLINK COMMUNICATIONS, INC., a Delaware
corporation, 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.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the
day and year first above written.
/s/ Julia A. Aviles
-------------------
NOTARY PUBLIC in and for the State of
Washington, residing at Bellvue, WA
My appointment expires 1-19-02
Print Name Julia A. Aviles
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 3rd day of June, 1998, before me personally came Patricia
Stermer, to me known, who, being by me duly sworn, did depose and say that
he/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,
and duly acknowledged to me that he/she signed his/her name thereto by authority
of the By-Laws of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the
day and year first above written.
/s/ Christine C. Collins
------------------------
NOTARY PUBLIC in and for the State of
New York, residing at
---------------
My appointment expires
---------------
Print Name
---------------------------
Christine C. Collins
Notary Public, State of New York
No. 03-4624735
Qualified in Bronx County
Certificate Filed in New York County
Commission Expires March 30, 2000
<PAGE>
Exhibit 5.1
[Letterhead of Willkie Farr & Gallagher]
June 8, 1998
NEXTLINK Communications, Inc.
155 108th Avenue N.E., 8th Floor
Bellvue, WA 98004
Re: $335,000,000 9% Senior Notes due 2008
Exchange Offer
Ladies and Gentlemen:
We have acted as counsel for NEXTLINK Communications, Inc., a
Delaware corporation (the "Company"), in connection with the filing by the
Company with the Securities and Exchange Commission (the "Commission") on May
29, 1998 of a registration statement (the "Registration Statement") on Form
S-4 under the Securities Act of 1933, as amended, relating to the proposed
issuance, in exchange for $335,000,000 aggregate principal amount of the
Company's 9% Senior Notes due 2008 (the "Old Notes"), of $335,000,000
aggregate principal amount of the Company's 9% Senior Notes due 2008 (the
"New Notes"). The New Notes are to be issued pursuant to an Indenture dated
as of March 3, 1998 as supplemented by a First Supplemental Indenture dated
as of June 3, 1998 (the "Indenture"), between the Company and The United
States Trust Company, as trustee (the "Trustee"). Capitalized terms used
herein and not otherwise defined herein have the meanings ascribed thereto in
the Indenture or in the Purchase Agreement, dated as of February 26, 1998,
among the Company, Salomon Brothers Inc and TD Securities (USA) (the "Initial
Purchasers").
In that connection, we have examined originals, or copies certified or
otherwise identified to our
<PAGE>
satisfaction, of such documents, corporate records and other instruments as we
have deemed necessary or appropriate for purposes of this opinion, including the
Indenture, the Exchange and Registration Rights Agreement, dated as of March 3,
1998 (the "Registration Rights Agreement"), among the Company and the Initial
Purchasers, the form of the New Notes and the Registration Statement.
In rendering the opinions contained herein, we have assumed (a) the due
authorization, execution and delivery of each of the Indenture, the Registration
Rights Agreement and the New Notes by each of the parties thereto, (b) that each
of such parties has the legal power to act in the respective capacity or
capacities in which it is to act thereunder, (c) the authenticity of all
documents submitted to us as originals, (d) the conformity to the original
documents of all documents submitted to us as copies and (e) the genuineness of
all signatures on all documents submitted to us.
Based on the foregoing, we are of the opinion that the New Notes, when
duly issued and authenticated in accordance with the provisions of the Indenture
and delivered in exchange for the Old Notes pursuant to the Registration Rights
Agreement, will constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their terms (subject in each
case to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights generally
from time to time in effect and to general principles of equity, including,
without limitation, concepts of materiality, reasonableness, good faith and fair
dealing, regardless of whether considered in a proceeding in equity or at law).
We do not express any opinion with respect to matters governed by any
laws other than the laws of the State of New York and the federal laws of the
United States of America.
We know that we may be referred to as counsel who has passed upon the
legality of the issuance of the New Notes on behalf of the Company in the
Registration Statement filed with the Commission, and we hereby consent to such
use of our name in said Registration Statement and to the filing of this opinion
with said Registration Statement as Exhibit 5.2 thereto.
Very truly yours,
/s/ Willkie Farr & Gallagher
<PAGE>
EXHIBIT 5.2
[LETTERHEAD OF DAVIS WRIGHT TREMAINE LLP]
June 5, 1998
NEXTLINK Communications, Inc.
155 108th Avenue N.E., 8th Floor
Bellevue, Washingtn 98004
Ladies and Gentlemen:
We have acted as counsel to NEXTLINK Communications, Inc., a
Delaware corporation (the "Company"), in connection with the filing by the
Company with the Securities and Exchange Commission on May 29, 1998 of a
registration statement (the "Registration Statement") on Form S-4 under the
Securities Act of 1933, as amended (the "Securities Act") relating to the
proposed issuance by the Company, in exchange for $335,000,000 aggregate
principal amount of its 9% Senior Notes due 2008 (the "Old Notes"), of
$335,000,000 aggregate principal amount of its 9% Senior Notes due 2008 (the
"New Notes"). The New Notes are to be issued pursuant to an Indenture dated
as of March 3, 1998 (the "Indenture"), as supplemented by a First
Supplemental Indenture dated as of June 3, 1998 (the "Supplemental
Indenture") among the Company and The United States Trust Company, as
trustee.
We have examined the originals or copies of such documents,
certificates and records as we have deemed relevant or necessary as the basis
for the opinions hereinafter expressed. We have assumed the genuineness of
all signatures, the authenticity of documents, certificates and records
submitted to us as originals, the conformity to the originals of all
documents, certificates and records submitted to us as certified or
reproduction copies, the legal capacity of all natural persons executing
documents, certificates and records, and the completeness and accuracy as of
the date of this opinion letter of the information contained in such
documents, certificates and records.
<PAGE>
NEXTLINK Communications, Inc.
June , 1998
Page 2
The law covered by opinions expressed herein is limited to the
Federal law of the United States, the law of the State of Washington and the
General Corporation Law of the State of Delaware.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly incorporated and validly
existing under the laws of the State of Delaware and has the corporate power
and authority to own and operate its properties and assets and to conduct its
business as described in the Registration Statement.
2. The Indenture was duly executed and delivered by the Company's
predecessor and constitutes the valid and binding obligation of the Company
as the result of the merger of the Company's predecessor into the Company,
with the Company as the surviving corporation. The Supplemental Indenture was
duly executed and delivered by the Company.
3. The Company has corporate power and authority to issue, execute
and deliver the New Notes, and the issuance, execution and delivery of the
New Notes have been duly authorized by all necessary corporate action on the
part of the Company.
This opinion letter is delivered as of its date and without any
undertaking to advise you of any changes of law or fact that occur after the
date of this opinion letter even though the changes may affect a legal
analysis or conclusion or an information confirmation in this opinion letter.
We consent to being named in the Registration Statement and related
Prospectus as counsel who are passing upon the legality of the New Notes for
the Company and to the reference to our name under the caption "Legal
Matters" in such Prospectus. We further consent to your filing copies of
this opinion as an exhibit to the Registration Statement or any amendment
thereto. In giving such consents, we do not hereby admit that we are in the
category of persons whose consent is required under Section 7 of the
Securities Act.
Very truly yours,
/s/ Davis Wright Tremaine LLP
<PAGE>
Exhibit 8.1
[Letterhead of Willkie Farr & Gallagher]
June 8, 1998
NEXTLINK Communications, Inc.
155 108th Avenue N.E., 8th Floor
Bellvue, WA 98004
Re: $335,000,000 9% Senior Notes due 2008
Exchange Offer
Ladies and Gentlemen:
We have acted as counsel for NEXTLINK Communications, Inc., a
Washington corporation, (the "Company"), in connection with the filing by the
Company with the Securities and Exchange Commission (the "Commission") of a
registration statement (the "Registration Statement") on Form S-4 under the
Securities Act of 1933, as amended, relating to the proposed issuance, in
exchange for $335,000,000 aggregate principal amount of the Company's 9% Senior
Notes due 2008 (the "Old Notes"), of $335,000,000 aggregate principal amount of
the Company's 9% Senior Notes due 2008 (the "New Notes"). The New Notes are to
be issued pursuant to an indenture dated as of March 3, 1998 (the "Indenture"),
between the Company and The United States Trust Company, as trustee (the
"Trustee"). Capitalized terms used herein and not otherwise defined herein have
the meanings ascribed thereto in the Indenture.
We hereby confirm that the statements set forth in the prospectus (the
"Prospectus") forming a part of the Registration Statement under the subheading
"Certain United States Federal Tax Consequences" accurately describe the
<PAGE>
material Federal income tax consequences to holders of the New Notes issued
pursuant to the Prospectus.
We know that we are referred to under the heading "Legal Matters" in
the Prospectus, and we hereby consent to such use of our name therein and to the
use of this opinion for filing with the Registration Statement as Exhibit 8.1
thereto.
Very truly yours,
/s/ Willkie Farr and Gallagher
<PAGE>
Exhibit 10.1
NEXTLINK COMMUNICATIONS, INC.
STOCK OPTION PLAN
(as amended on September 30, 1997, December 31, 1997 and February 5, 1998)
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."
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
required 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 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 Section 422 of the
Internal Revenue Code (the "Code"), 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,
and options granted under 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 this 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
Page 1 - STOCK OPTION PLAN
<PAGE>
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 9,854,696
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 use as replacement
options that 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 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 number 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, except with respect to the substitution of a new
option for an old option, or an assumption of an old option, in accordance with
Code Section 424(a). With respect to nonqualified stock options, the exercise
price shall be the amount set by the Plan Administrator.
Page 2 - STOCK OPTION PLAN
<PAGE>
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 as follows:
(a) if the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the fair market value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported), as quoted
on such system or exchange for the last market trading date prior to the time of
determination as reported in The Wall Street Journal or such other source as the
Plan Administrator deems reliable;
(b) if the Common Stock is quoted on the NASDAQ System (but not
on the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, the fair market value
shall be the mean between the high and low asked prices for the Common Stock on
the last market trading date prior to the day of determination, as reported in
The Wall Street Journal or such other source as the Plan Administrator deems
reliable; or
(c) In the absence of an established market for the Common
Stock, fair market value shall be determined by the Plan Administrator 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 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 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:
Page 3 - STOCK OPTION PLAN
<PAGE>
<TABLE>
<CAPTION>
Period of Optionee's Continuous Relationship Portion of Total Option
With the Company or Related Entity from the Which is Exercisable
Date the Option is Granted
<S> <C>
After one year 25%
After two years 50%
After three years 75%
After four years 100%
</TABLE>
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 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
Page 4 - STOCK OPTION PLAN
<PAGE>
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 a
request by the Optionee for the Company to pay the exercise price by withholding
from the shares that would otherwise be issued that number of shares having a
fair market value equal to the option exercise price; provided, the Plan
Administrator retains complete discretion to honor or deny the Optionee's
request for such a method of exercise.
5.6 Shareholders' Agreement. To the extent required by the Plan
Administrator 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
Page 5 - STOCK OPTION PLAN
<PAGE>
laws of descent and distribution; provided, with respect to a non-qualified
stock option, an Optionee may transfer the option to a revocable trust created
by the Optionee for the benefit of his or her descendants, to an immediate
family member or to a partnership in which only immediate family members or such
trusts are partners. Options under this Plan 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 ceases for any reason other
than termination for cause, death or permanent and 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 permanent and 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
Page 6 - STOCK OPTION PLAN
<PAGE>
and expires). As used in this Plan, the term "permanent and total disability"
has the same meaning provided in Code Section 22(e)(3).
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 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
Page 7 - STOCK OPTION PLAN
<PAGE>
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 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
Page 8 - STOCK OPTION PLAN
<PAGE>
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 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 shall not become fully vested merely by the
occurrence of a Change in Control.
Page 9 - STOCK OPTION PLAN
<PAGE>
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:
(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 substantially 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, shall be final, binding and
conclusive. Unless an Optionee agrees otherwise,
Page 10 - STOCK OPTION PLAN
<PAGE>
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.
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:
Page 11 - STOCK OPTION PLAN
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(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 to this Plan that would constitute a "modification" to
incentive stock options outstanding on the date of such amendment shall not be
applicable to outstanding incentive stock options, but shall have prospective
effect only, unless individual Optionees agree 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.
Page 12 - STOCK OPTION PLAN
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Exhibit 10.2
NEXTLINK COMMUNICATIONS, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase the Class A
Common Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Code. The provisions of the Plan, accordingly,
shall be construed so as to extend and limit participation in a manner
consistent with the requirements of that section of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the full Board, the Compensation Committee of
the Board, or such other committee as may be appointed by the Board, which shall
be the administrative committee for the Plan.
(d) "Common Stock" shall mean the Class A Common Stock of the Company,
$0.022658473 par value per share.
(e) "Company" shall mean Nextlink Communications, Inc., a Washington
corporation.
(f) "Compensation" shall mean all wages, salary, overtime, bonuses, and
commissions.
(g) "Designated Subsidiaries" shall mean all of the Subsidiaries at any
time and from time to time, unless the Board designates otherwise.
(h) "Employee" shall mean any individual who is an employee of the Company
or a Designated Subsidiary for purposes of tax withholding under the Code, whose
customary employment with the Company or any Designated Subsidiary is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship will be deemed to have terminated on the
91st day of such leave.
<PAGE>
(i) "Enrollment Date" shall mean the first Trading Day of each Offering
Period.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(k) "Exercise Date" shall mean the last Trading Day of each Offering
Period.
(l) "Fair Market Value" shall mean, as of any date, the value of Common
Stock determined as follows:
(1) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ"), its Fair Market Value shall be the average of the
high and low sale price for the Common Stock (or the average of the closing bid
and asked prices, if no sales were reported), as quoted on such exchange (or the
exchange with the greatest volume of trading in Common Stock) or system on the
date of such determination, if such date is a Trading Day, or if such date is
not a Trading Day, then on the Trading Day immediately preceding such date, as
reported in The Wall Street Journal or such other source as the Board deems
reliable; or
(2) If the Common Stock is quoted on NASDAQ (but not on the National
Market System thereof) or is regularly quoted by a recognized securities dealer
but selling prices are not reported, its Fair Market Value shall be the average
of the closing bid and asked prices for the Common Stock on the date of such
determination, if such date is a Trading Day, or if such date is not a Trading
Day, then on the Trading Day immediately preceding such date, as reported in The
Wall Street Journal or such other source as the Board deems reliable; or
(3) In the absence of an established market for the Common Stock, the
Fair Market Value thereof shall be determined in good faith by the Board.
(m) "Offering Period" shall mean, subject to the second sentence of
Section 4 hereof, each calendar month commencing on the first Trading Day of the
month and ending on the last Trading Day of the month; provided, however that
the first Offering Period shall commence on July 1, 1998.
(n) "Parent" shall mean a corporation which is a "parent corporation" of
the Company within the meaning of section 424(e) of the Code.
(o) "Plan" shall mean this Nextlink Communications, Inc. Employee Stock
Purchase Plan.
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<PAGE>
(p) "Purchase Price" shall mean an amount equal to 85% of the average of
the Fair Market Value of a share of Common Stock on (i) the Enrollment Date and
(ii) the Exercise Date.
(q) "Reserves" shall mean the number of shares of Common Stock covered by
each option under the Plan which have not yet been exercised and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but not yet placed under option.
(r) "Rule 16b-3" shall mean Rule 16b-3 promulgated under the Exchange Act
or any successor provision.
(s) "Subsidiary" shall mean a corporation which is a "subsidiary
corporation" of the Company within the meaning of section 424(f) of the Code.
(t) "Trading Day" shall mean a day on which national stock exchanges and
NASDAQ are open for trading.
3. Eligibility.
(a) Each person who is an Employee, on a given Enrollment Date, shall be
eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee would own stock (together with stock owned by any other
person or entity that would be attributed to such Employee pursuant to section
424(d) of the Code) of the Company (including, for this purpose, all shares of
stock subject to any outstanding options to purchase such stock, whether or not
currently exercisable and irrespective of whether such options are subject to
the favorable tax treatment of section 421(a) of the Code) possessing five
percent (5%) or more of the total combined voting power or value of all classes
of stock of the Company or of any Parent or Subsidiary, or (ii) which permits
his or her rights to purchase stock under all employee stock purchase plans
(within the meaning of section 423 of the Code) of the Company and its Parents
and Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of Common Stock (determined at the Fair Market Value of the
Common Stock at the time such option is granted) for each calendar year in which
such option is outstanding at any time. The limitation described in clause (ii)
of the preceding sentence shall be applied in a manner consistent with Section
423(b)(8) of the Code.
4. Offering Periods. The Plan shall be implemented by consecutive
Offering Periods continuing from the first Offering Period until terminated in
accordance with Section 19 hereof. The Board shall have the power to change the
duration of Offering Periods (including the commencement dates thereof) with
respect to future offerings without shareholder approval if such change
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<PAGE>
is announced at least twenty-five (25) days prior to the scheduled beginning of
the first Offering Period to be affected thereafter.
5. Participation.
(a) An Employee may become a participant in the Plan for an Offering
Period by completing a subscription agreement authorizing payroll deductions in
the form of Exhibit A to this Plan and filing it with the Committee no later
than the 20th day of the month immediately prior to the applicable Enrollment
Date, unless a later time for filing the subscription agreement is set by the
Board for all Employees with respect to a given Offering Period. A
participant's subscription agreement shall remain in effect for successive
Offering Periods unless the participant (i) ceases participation by delivery of
a new subscription agreement indicating his or her desire to cease participation
in future Offering Periods or (ii) withdraws from an Offering Period pursuant to
Section 10 hereof. Upon a participant's election to cease participation in the
Plan, any amount remaining in his account shall be returned to him promptly
after the end of the Offering Period during which he has elected to cease
participation.
(b) Payroll deductions for a participant shall commence on the first
payroll date on or following the Enrollment Date and shall end on the last
payroll date in the Offering Period to which such authorization is applicable,
unless sooner terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription agreement, he
or she shall elect to have payroll deductions made on each pay day during the
Offering Period in an amount (expressed as a whole number percentage) not
exceeding ten percent (10%) of the Compensation which he or she receives on each
pay day during the Offering Period; provided, however, that the maximum number
of shares which may be purchased by any participant during any Offering Period
is the number of shares equal to $25,000 minus the fair market value of the
number of shares of Common Stock previously purchased during such calendar year,
such fair market value determined as of each such prior Enrollment Date during
the calendar year with respect to which the shares were previously purchased,
divided by the fair market value of the Common Stock on the Enrollment Date for
the current Offering Period.
(b) All payroll deductions made for a participant shall be credited to his
or her account under the Plan and will be withheld in whole percentages only. A
participant may not make any additional payments into such account.
4
<PAGE>
(c) A participant may discontinue his or her participation in the Plan, as
provided in Section 10 hereof, at any time during the Offering Period prior to
the Exercise Date. Once an Offering Period has commenced, a participant may not
increase or decrease the rate of his or her payroll deductions for that Offering
Period, but may, during that Offering Period, increase or decrease the rate of
his or her payroll deductions for the next succeeding Offering Period, by
completing or filing with the Committee a new subscription agreement, no later
than the 20th day of the month immediately prior to the end of that Offering
Period, authorizing a change in payroll deduction rate.
(d) Notwithstanding the foregoing, a participant's payroll deductions may
be decreased to 0% (i) at any time, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 3(b) hereof, and (ii) for each
Offering Period, at such time during such Offering Period that the aggregate
fair market value of the Common Stock (measured as of the date of each
respective Enrollment Date) previously purchased when added to the fair market
value of the shares of Common Stock to be purchased with respect to such then
current Offering Period equals or would exceed $25,000 in such calendar year.
Subject to the preceding sentence, payroll deductions shall recommence at the
rate provided in such participant's subscription agreement at the beginning of
the next succeeding Offering Period, unless terminated by the participant as
provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at the
time some or all of the Common Stock issued under the Plan is disposed of, the
participant must make adequate provisions for the Company's federal, state, or
other tax withholding obligations, if any, which arise upon the exercise of the
option or the disposition of the Common Stock. At any time, the Company may,
but will not be obligated to, withhold from the participant's compensation the
amount necessary for the Company to meet applicable withholding obligations,
including any withholding required to make available to the Company any tax
deductions or benefits attributable to sale or early disposition of Common Stock
by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
Employee participating in such Offering Period shall be granted an option to
purchase on the Exercise Date of such Offering Period (at the applicable
Purchase Price) up to a number of shares of the Company's Common Stock
determined by dividing such Employee's payroll deductions accumulated prior to
such Exercise Date and retained in the participant's account as of the Exercise
Date by the applicable Purchase Price; provided, however, that the maximum
number of shares which may be purchased by any participant during any Offering
Period is the number of shares equal to $25,000 minus the fair market value of
the number of shares of Common Stock previously purchased during such calendar
year, such fair market value determined as of each such prior Enrollment Date
during the calendar year with respect
5
<PAGE>
to which the shares were previously purchased, divided by the fair market value
of the Common Stock on the Enrollment Date for the current Offering Period, and
provided, further, that such purchase shall be subject to the limitations set
forth in Sections 3(b) and 12 hereof. Exercise of the option shall occur as
provided in Section 8 hereof, unless the participant has withdrawn pursuant to
Section 10 hereof, and shall expire on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares will
be exercised automatically on the Exercise Date, and, subject to the limitations
set forth in Sections 3(b), 7 and 12 hereof, the maximum number of full shares
subject to option shall be purchased for such participant at the applicable
Purchase Price with the accumulated payroll deductions in his or her account.
During a participant's lifetime, a participant's option to purchase shares
hereunder is exercisable only by the participant.
9. Crediting of Shares and Delivery or Sale of Shares. As promptly as
practicable after each Exercise Date on which a purchase of shares occurs, the
Company shall arrange for the full and fractional shares of Common Stock to be
held by the Company on behalf of the participant or deposited in the brokerage
account of each participant at a brokerage house designated by the Committee.
The shares shall be held by the Company or in such brokerage account until such
time as the participant, or his or her designated beneficiary or estate in the
event of a participant's death, requests delivery of a stock certificate
representing any full shares of Common Stock or requests that any shares be sold
and the proceeds therefrom be distributed to such participant. Upon the request
of a participant, or his or her designated beneficiary or estate in the event of
a participant's death, any fractional shares of Common Stock will be distributed
in cash in the form of a check having a value equal to the value of such
fractional shares.
10. Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time prior to the Exercise Date of an Offering
Period by giving written notice to the Committee in the form of Exhibit B to
this Plan. All of the participant's payroll deductions credited to his or her
account but not yet used to purchase shares will be paid to such participant
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period will be automatically terminated, and no further payroll
deductions for the purchase of shares will be made during the Offering Period.
If a participant withdraws from the Plan during an Offering Period, he or she
may not resume participation in the
6
<PAGE>
next succeeding Offering Period. A Participant who has withdrawn from an
Offering Period will be ineligible for future participation for the six
consecutive Offering Periods immediately following the Offering Period during
which he or she withdrew from the Plan and cannot resume participation in the
Plan until the seventh succeeding Offering Period. He or she may resume
participation for any such subsequent Offering Period by delivering to the
Company a new subscription agreement no later than the 20th day of the month
immediately prior to the Enrollment Date for such Offering Period.
(b) Upon a participant's ceasing to be an Employee, for any reason, he or
she will be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option will be distributed to such participant or,
in the case of his or her death, to the person or persons entitled thereto under
Section 14 hereof, and such participant's option will be automatically
terminated. Any full and fractional shares of Common Stock held in the
brokerage account of such participant shall remain in such account until such
participant or, in the case of his or her death, the person or persons
designated under Section 14 hereof, request that a certificate representing the
shares be distributed or that such shares be sold and the proceeds from the sale
distributed to the participant, or such other person. Upon a participant's
request, any fractional shares of Common Stock will be distributed in cash in
the form of a check having a value equal to the value of such fractional shares.
(c) A participant's withdrawal from an Offering Period will not have any
effect upon his or her eligibility to participate in any similar plan which may
hereafter be adopted by the Company.
11. Interest.
No interest or other increment shall accrue or be payable with respect to
any of the payroll deductions of a participant in the Plan.
12. Stock.
(a) The shares of Common Stock to be offered and sold to participants
under the Plan may, at the election of the Company, be either treasury shares,
shares acquired on the open market by an independent brokerage firm specifically
to satisfy obligations under the Plan or authorized but previously unissued
shares of Common Stock. The maximum number of shares of Common Stock which
shall be made available for sale under the Plan shall be 3,000,000 shares,
subject to adjustment upon changes in capitalization of the Company as provided
in Section 18 hereof. If on a given Exercise Date the number of shares
with respect to which options are to be exercised exceeds the number of shares
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<PAGE>
then available under the Plan, the Committee shall make a pro rata allocation of
the shares remaining available for purchase in as uniform a manner as shall be
practicable and as it shall determine to be equitable.
(b) No participant will have an interest or voting right in shares covered
by his option until such option has been exercised. All shares of Common Stock
held by the Company or in a participant's brokerage account on behalf of a
participant shall be voted by such participant. Dividends accruing on shares of
Common Stock, if any, held in a participant's brokerage account shall be
reinvested in shares of Common Stock at the full market value of such shares at
the time of purchase and deposited in such brokerage account until such time as
the participant requests delivery or sale of shares of Common Stock as set forth
in Section 9 herein.
(c) Shares to be held by the Company or deposited into a participant's
brokerage account under the Plan will be registered in the name of the
participant.
13. Administration.
(a) Administrative Body. The Plan shall be administered by the Committee.
The Committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. The Committee shall also
have authority to develop, amend and terminate rules governing the operation of
the Plan in conformity with the terms of the Plan. Every finding, decision and
determination made by the Committee shall, to the full extent permitted by law,
be final and binding upon all parties.
(b) Rule 16b-3 Limitations. Notwithstanding the provisions of Subsection
(a) of this Section 13, in the event that Rule 16b-3 provides specific
requirements for the administrators of plans of this type, the Plan shall be
only administered by such a body and in such a manner as shall comply with the
applicable requirements of Rule 16b-3.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who is
to receive the rights to any full or fractional shares of Common Stock in the
participant's brokerage account under the Plan in the event of such
participant's death subsequent to an Exercise Date on which the option is
exercised but prior to distribution of such shares to such participant. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to exercise of the option.
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<PAGE>
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the executor or administrator of the
estate of the participant shall have all the rights to the cash and or shares of
Common Stock attributable to such participant or his or her brokerage account
under the Plan.
15. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
16. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each participant
in the Plan. Statements of account will be given to participating Employees at
least annually, within such time as the Committee may reasonably determine,
which statements will set forth the amounts of payroll deductions, the Purchase
Price, the number of shares purchased and held in the participant's brokerage
account.
18. Adjustments Upon Changes in Capitalization.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the Reserves as well as the price per share of
Common Stock covered by each option under the Plan which has not yet been
exercised shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to,
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<PAGE>
the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, the Offering Period will terminate immediately
prior to the consummation of such proposed action, unless otherwise provided by
the Board.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each option under the Plan shall be assumed or
an equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation, unless the Board determines,
in the exercise of its sole discretion and in lieu of such assumption or
substitution, to shorten the Offering Period then in progress by setting a new
Exercise Date (the "New Exercise Date"). If the Board shortens the Offering
Period then in progress in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for his option has been changed to the new Exercise Date and that his or
her option will be exercised automatically on the new Exercise Date, unless
prior to such date he or she has withdrawn from the Offering Period as provided
in Section 10 hereof. For purposes of this paragraph, an option granted under
the Plan shall be deemed to be assumed if, following the sale of assets or
merger, the option confers the right to purchase, for each share of Common Stock
subject to the option immediately prior to the sale of assets or merger, the
consideration (whether stock, cash or other securities or property) received in
the sale of assets or merger by holders of Common Stock for each share of Common
Stock held on the effective date of the transaction (and if such holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares of Common Stock); provided,
however, that if such consideration received in the sale of assets or merger was
not solely common stock of the successor corporation or its parent (as defined
in Section 424(e) of the Code), the Board may, with the consent of the successor
corporation and the participant, provide for the consideration to be received
upon exercise of the option to be solely common stock of the successor
corporation or its parent equal in fair market value to the per share
consideration received by holders of Common Stock in the sale of assets or
merger.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per share
of Common Stock covered by each outstanding option, in the event the Company
effects one or more reorganizations, recapitalizations, rights offerings or
other increases or reductions of shares of its outstanding Common
10
<PAGE>
Stock, and in the event of the Company being consolidated with or merged into
any other corporation.
19. Amendment or Termination.
(a) The Board may at any time and for any reason terminate or amend the
Plan. Except as provided in Section 18 hereof, no such termination may
adversely affect options previously granted; provided, that an Offering Period
may be terminated by the Board on any Exercise Date if the Board determines that
the termination of the Plan is in the best interests of the Company and its
shareholders. Except as provided in Section 18 hereof, no amendment may make
any change in any option theretofore granted which adversely affects the rights
of any participant. To the extent necessary to comply with Section 423 of the
Code (or any successor rule or provision or any other applicable law or
regulation), the Company shall obtain shareholder approval in such a manner and
to such a degree as required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or the Committee) shall be entitled to change the Offering Periods, limit
the frequency or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods or accounting and crediting procedures
to ensure that amounts applied toward the purchase of Common Stock for each
participant properly correspond with amounts withheld from the participant's
Compensation, and establish such other limitations or procedures as the Board
(or the Committee) finds, in its sole discretion, advisable and consistent with
the Plan.
20. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, 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.
11
<PAGE>
As a condition to the exercise of an option, the Company may require the
person exercising such option 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 of the
aforementioned applicable provisions of law.
22. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years thereafter unless sooner terminated under Section 19 hereof.
As adopted by the Board of Directors
of Nextlink Communications, Inc.
on March 26, 1998
12
<PAGE>
EXHIBIT A
NEXTLINK COMMUNICATIONS, INC.
EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
___ Original Application Enrollment Date:____________
___ Change in Payroll Deduction Rate
___ Change of Beneficiary(ies)
___ Cease future participation in Plan
1. ____________________________________________________ hereby elects to ____
participate in ____ cease participation in (check one) the Nextlink
Communications, Inc. Employee Stock Purchase Plan (the "Employee Stock
Purchase Plan") for the Offering Period commencing on the Enrollment Date
listed above.
2. I understand that by choosing to participate in the Employee Stock Purchase
Plan I have chosen to subscribes to purchase shares of the Company's Class
A Common Stock in accordance with this Subscription Agreement and the
Employee Stock Purchase Plan.
3. I hereby authorize payroll deductions from each paycheck in the amount of
____ % (a whole number not to exceed 10%) of my Compensation on each payday
during this Offering Period and all future Offering Periods in accordance
with the Employee Stock Purchase Plan. (Please note that no fractional
percentages are permitted.)
4. I understand that said payroll deductions will be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option on the applicable Exercise Date.
5. I have received a copy of "Information Regarding the Nextlink
Communications, Inc. Employee Stock Purchase Plan", which is accompanied by
a copy of the complete "Nextlink Communications, Inc. Employee Stock
Purchase Plan." I understand that my participation in the Employee Stock
Purchase Plan is in all respects subject to the terms of the Plan.
6. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name of (Employee Only):__________________________________
_____________________________________________________. I understand that
shares purchased by me under the Plan will
<PAGE>
be held in an account for me by the Company or a brokerage firm until I
request delivery of such shares.
7. I understand that, under current Federal income tax law, if I dispose of
any shares received by me pursuant to the Plan within two years after the
Enrollment Date (i.e., within two years after the first day of the Offering
Period during which I purchased such shares), I will be treated for Federal
income tax purposes as having made a disqualifying disposition, and as
having received ordinary income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares at the
time such shares were delivered to me over the price which I paid for the
shares. The remainder of the gain, if any, recognized on such
disqualifying disposition will be taxed as capital gain. I hereby agree to
notify the Company in writing within 30 days after the date of any
disqualifying disposition of my shares and I will make adequate provision
for federal, state or other tax withholding obligations, if any, which
arise upon such disqualifying disposition. The Company may, but will not
be obligated to, withhold from my Compensation the amount necessary to meet
any applicable withholding obligation including any withholding necessary
to make available to the Company any tax deductions or benefits
attributable to the sale or disqualifying disposition of Common Stock by
me. If I dispose of such shares at any time after the expiration of the
two-year holding period, I understand that I will be treated for federal
income tax purposes as having received income only at the time of such
disposition, and that such income will be taxed as ordinary income only to
the extent of an amount equal to the lesser of (1) the excess of the fair
market value of the shares at the time of such disposition over the
purchase price which I paid for the shares, or (2) 15% of the fair market
value of the shares on the first day of the Offering Period in which the
shares were purchased. The remainder of the gain, if any, recognized on
such disposition will be taxed as capital gain.
8. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
9. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
2
<PAGE>
Name: (Please Print)
_________________________________________________________________
(Last) (First) (Middle)
____________________ ___________________________________
Relationship
___________________________________
(Address)
Name: (Please Print)
_______________________________________________________________________________
(Last) (First) (Middle)
____________________ __________________________________________
Relationship
___________________________________________
(Address)
Employee's Social
Security Number: ___________________________________________
Employee's Address: ___________________________________________
___________________________________________
___________________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME AND THAT ANY AMOUNT
REMAINING IN MY ACCOUNT FOLLOWING AN EXERCISE DATE SHALL, UNLESS EARLIER
WITHDRAWN, BE USED TO PURCHASE SHARES IN THE NEXT SUCCEEDING OFFERING PERIOD.
IF I HAVE CHOSEN TO CEASE PARTICIPATION IN THE PLAN, ANY AMOUNT REMAINING IN MY
ACCOUNT WILL BE RETURNED TO ME.
Dated: ____________ ___________________________________________
Signature of Employee
3
<PAGE>
EXHIBIT B
NEXTLINK COMMUNICATIONS, INC.
EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Nextlink
Communications, Inc. Employee Stock Purchase Plan (the "Employee Stock Purchase
Plan") which began on ________________ , 19 (the "Enrollment Date") hereby
notifies the Company that he or she hereby withdraws from the Offering Period.
The undersigned hereby directs the Company to pay to the undersigned as promptly
as practicable all the payroll deductions credited to his or her account with
respect to such Offering Period. The undersigned understands and agrees that
his or her option for such Offering Period will be automatically terminated.
The undersigned also understands that no further payroll deductions will be made
for the purchase of shares in the current Offering Period and the undersigned
may not participate in the Employee Stock Purchase Plan for the six consecutive
Offering Periods immediately following the current Offering Period. The
undersigned may resume participation in the Employee Stock Purchase Plan (if
otherwise eligible) in the seventh or any future Offering Period following the
current Offering Period only by delivering to the Company a new Subscription
Agreement within the requisite time period set forth in of the Employee Stock
Purchase Plan for such Offering Period.
Name and Address of Participant
___________________________________
___________________________________
___________________________________
Signature:
___________________________________
Date: _____________________________
<PAGE>
EXHIBIT 23.1
[Letterhead of Arthur Andersen LLP]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in Amendment No. 1 to this registration statement of our report dated
March 12, 1998 included in NEXTLINK Communications, Inc.'s Form 10-KSB for the
year ended December 31, 1997 and to all references to our Firm included in this
registration statement.
/s/ Arthur Andersen LLP
Seattle, Washington
June 5, 1998
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
--------------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) _______
--------------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation or (I. R. S. Employer
organization if not a U. S. national bank) Identification Number)
114 West 47th Street 10036-1532
New York, New York (Zip Code)
(Address of principal
executive offices)
--------------------------
NEXTLINK Communications, Inc.
(Exact name of obligor as specified in its charter)
Washington 91-1738221
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
155 108th Avenue NW, 8th Floor 98004
Bellvue, WA (Zip code)
(Address of principal executive offices)
--------------------------
9% Senior Note due 2008
(Title of the indenture securities)
===============================================================================
<PAGE>
- 2 -
GENERAL
1. General Information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of New York (2nd District), New York,
New York (Board of Governors of the Federal Reserve System).
Federal Deposit Insurance Corporation, Washington, D. C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with the Obligor
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
3,4,5,6,7,8,9,10,11,12,13,14 and 15.
The obligor is currently not in default under any of its outstanding
securities for which United States Trust Company of New York is Trustee.
Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14
and 15 of Form T-1 are not required under General Instruction B.
16. List of Exhibits
T-1.1 -- Organization Certificate, as amended, issued by the State of
New York Banking Department to transact business as a Trust
Company, is incorporated by reference to Exhibit T-1.1 to Form
T-1 filed on September 15, 1995 with the Commission pursuant
to the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 (Registration No. 33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE>
- 3 -
16. List of Exhibits (continued)
T-1.4 -- The By-laws of the United States Trust Company of New York, as
amended, is incorporated by reference to Exhibit T-1.4 to Form
T-1 filed on September 15, 1995 with the Commission pursuant
to the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 (Registration No. 33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939, as amended by the Trust Indenture
Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee
pursuant to law or the requirements of its supervising or
examining authority.
NOTE
As of May 8, 1998, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U. S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States
Trust Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility, as to matters
peculiarly within the knowledge of the obligor or its directors, the
trustee has relied upon information furnished to it by the obligor and
will rely on information to be furnished by the obligor and the trustee
disclaims responsibility for the accuracy or completeness of such
information.
---------------------
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, United States Trust Company of New York, a corporation organized
and existing under the laws of the State of New York, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New
York, on the 8th day of May, 1998.
UNITED STATES TRUST COMPANY OF
NEW YORK, Trustee
By:
------------------------------------
Patricia Stermer
Assistant Vice President
<PAGE>
Exhibit T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
----------------------
By: /S/Gerard F. Ganey
Senior Vice President
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
MARCH 31, 1998
($ IN THOUSANDS)
ASSETS
Cash and Due from Banks $ 303,692
Short-Term Investments 325,044
Securities, Available for Sale 650,954
Loans 1,717,101
Less: Allowance for Credit Losses 16,546
----------
Net Loans 1,700,555
Premises and Equipment 58,868
Other Assets 120,865
----------
Total Assets $3,159,978
==========
LIABILITIES
Deposits:
Non-Interest Bearing $ 602,769
Interest Bearing 1,955,571
----------
Total Deposits 2,558,340
Short-Term Credit Facilities 293,185
Accounts Payable and Accrued Liabilities 136,396
----------
Total Liabilities $2,987,921
==========
STOCKHOLDER'S EQUITY
Common Stock 14,995
Capital Surplus 49,541
Retained Earnings 105,214
Unrealized Gains on Securities
Available for Sale (Net of Taxes) 2,307
----------
Total Stockholder's Equity 172,057
----------
Total Liabilities and
Stockholder's Equity $3,159,978
==========
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory authority
and is true to the best of my knowledge and belief.
Richard E. Brinkmann, SVP & Controller
May 6, 1998
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
FOR
OFFER FOR ALL OUTSTANDING 9% SENIOR NOTES DUE 2008
IN EXCHANGE FOR UP TO $335,000,000 PRINCIPAL AMOUNT OF
9% SENIOR NOTES DUE 2008
OF
NEXTLINK COMMUNICATIONS, INC.
PURSUANT TO THE PROSPECTUS
DATED JUNE 10, 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JULY 10,
1998, UNLESS EXTENDED OR TERMINATED (THE "EXPIRATION DATE").
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
UNITED STATES TRUST COMPANY
<TABLE>
<S> <C> <C>
BY HAND OR OVERNIGHT FACSIMILE TRANSMISSIONS: BY REGISTERED OR CERTIFIED
DELIVERY: (ELIGIBLE INSTITUTIONS ONLY) MAIL:
United States Trust Company (212) 852-1626 United States Trust Company
114 West 47th Street TO CONFIRM BY TELEPHONE 114 West 47th Street
New York, New York 10036 OR FOR INFORMATION CALL: New York, New York 10036
Attention: Patricia Stermer (212) 852-1664 Attention: Patricia Stermer
Reorganization Section Reorganization Section
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL (THE "LETTER OF TRANSMITTAL") TO AN
ADDRESS, OR TRANSMISSION VIA FACSIMILE TO A NUMBER, OTHER THAN AS SET FORTH
ABOVE, WILL NOT CONSTITUTE A VALID TENDER OF 9% SENIOR NOTES DUE 2008 (THE "OLD
NOTES").
The Instructions contained herein should be read carefully before this
Letter of Transmittal is completed and signed.
<PAGE>
This Letter of Transmittal is to be used by registered holders of Old Notes
("Holders") if: (i) certificates representing Old Notes are to be physically
delivered to the Exchange Agent by such Holders; (ii) tender of Old Notes is to
be made by book-entry transfer to the Exchange Agent's account at The Depositary
Trust Company ("DTC" or the "Book-Entry Transfer Facility") pursuant to the
procedures set forth in the Prospectus, dated June 10, 1998 (as the same may be
amended from time to time, the "Prospectus") under the caption "The Exchange
Offer--Book-Entry Transfer" by any financial institution that is a participant
in DTC and whose name appears on a security position listing as the owner of Old
Notes or (iii) delivery of Old Notes is to be made according to the guaranteed
delivery procedures set forth in the Prospectus under the caption "The Exchange
Offer--Guaranteed Delivery Procedures," and, in each case, instructions are not
being transmitted through the DTC Automated Tender Program ("ATOP"). DELIVERY OF
DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY
TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
In order to properly complete this Letter of Transmittal, a Holder must (i)
complete the box entitled "Method of Delivery" by checking one of the three
boxes therein and supplying the appropriate information, (ii) complete the box
entitled "Description of Old Notes," (iii) if such Holder is a Participating
Broker Dealer (as defined below) and wishes to receive additional copies of the
Prospectus for delivery in connection with resales of New Notes, check the
applicable box, (iv) sign this Letter of Transmittal by completing the box
entitled "Please Sign Here", (v) if appropriate, check and complete the boxes
relating to the "Special Issuance Instructions" and "Special Delivery
Instructions," and (vi) complete the Substitute Form W-9. Each Holder should
carefully read the detailed Instructions below prior to completing this Letter
of Transmittal. See "The Exchange Offer--Procedures For Tendering" in the
Prospectus.
Holders of Old Notes that are tendering by book-entry transfer to the
Exchange Agent's account at DTC can execute the tender through ATOP for which
the transaction will be eligible. DTC participants that are accepting the
Exchange Offer should transmit their acceptance to DTC, which will edit and
verify the acceptance and execute a book-entry delivery to the Exchange Agent's
account at DTC. DTC will then send an Agent's Message to the Exchange Agent for
its acceptance. Delivery of the Agent's Message by DTC will satisfy the terms of
the Exchange Offer as to execution and delivery of a Letter of Transmittal by
the participant identified in the Agent's Message. DTC participants may also
accept the Exchange Offer by submitting a Notice of Guaranteed Delivery through
ATOP.
If Holders desire to tender Old Notes pursuant to the Exchange Offer and (i)
certificates representing such Old Notes are not lost but are not immediately
available, (ii) time will not permit this Letter of Transmittal, certificates
representing such Holder's Old Notes and all other required documents to reach
the Exchange Agent prior to the Expiration Date or (iii) the procedures for
book-entry transfer cannot be completed prior to the Expiration Date, such
Holders may effect a tender of such Old Notes in accordance with the guaranteed
delivery procedures set forth in the Prospectus under the caption "The Exchange
Offer--Guaranteed Delivery Procedures." See Instruction 2 below.
A Holder having Old Notes registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee if they desire to accept
the Exchange Offer with respect to the Old Notes so registered.
THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS OF OLD NOTES BE
ACCEPTED FROM OR ON BEHALF OF) HOLDERS IN ANY JURISDICTION IN WHICH THE MAKING
OR ACCEPTANCE OF THE EXCHANGE OFFER WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF
SUCH JURISDICTION.
All capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Prospectus.
Your bank or broker can assist you in completing this form. The instructions
included with this Letter of Transmittal must be followed. Questions and
requests for assistance or for additional copies of the Prospectus, this Letter
of Transmittal and the Notice of Guaranteed Delivery may be directed to the
Exchange Agent, whose address and telephone number appear on the front cover of
this Letter of Transmittal. See Instruction 11 below.
2
<PAGE>
________________________________________________________________________________
METHOD OF DELIVERY
________________________________________________________________________________
<TABLE>
<CAPTION>
/ / CHECK HERE IF CERTIFICATES FOR TENDERED OLD NOTES ARE BEING DELIVERED HEREWITH.
<C> <S>
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE
ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A BOOK-ENTRY TRANSFER FACILITY AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution:
Account Number: Transaction Code Number:
CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT PURSUANT TO INSTRUCTION 2 BELOW AND
COMPLETE THE FOLLOWING:
Name of Registered Holder(s):
Window Ticket No. (if any):
Date of Execution of Notice of Guaranteed Delivery:
Name of Eligible Institution that Guaranteed Delivery:
If Delivered by Book-Entry Transfer (yes or no):
Account Number: Transaction Code Number:
</TABLE>
________________________________________________________________________________
List below the Old Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, list the certificate numbers and principal
amounts on a separately signed schedule and affix the schedule to this Letter of
Transmittal.
________________________________________________________________________________
DESCRIPTION OF OLD NOTES
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL PRINCIPAL
NAME(S) AND ADDRESS(ES) OF HOLDER(S) CERTIFICATE AMOUNT AMOUNT
(PLEASE FILL IN, IF BLANK) NUMBERS* REPRESENTED** TENDERED
<S> <C> <C> <C>
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
<CAPTION>
TOTAL
PRINCIPAL
AMOUNT OF OLD
NOTES
<S> <C> <C> <C>
</TABLE>
* Need not be completed by Holders tendering by book-entry transfer (see
below).
** Unless otherwise indicated in the column labeled "Principal Amount Tendered"
and subject to the terms and conditions of the Prospectus, a Holder will be
deemed to have tendered the entire aggregate principal amount represented by
the Old Notes indicated in the column labeled "Aggregate Principal Amount
Represented." See Instruction 3.
________________________________________________________________________________
3
<PAGE>
FOR PARTICIPATING BROKER-DEALERS ONLY:
/ / CHECK HERE AND PROVIDE THE INFORMATION REQUESTED BELOW IF YOU ARE A
PARTICIPATING BROKER-DEALER (AS DEFINED BELOW) AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND, DURING THE 30-DAY PERIOD FOLLOWING THE
CONSUMMATION OF THE EXCHANGE OFFER, 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO, AS WELL AS ANY NOTICES FROM THE COMPANY TO SUSPEND AND RESUME USE OF
THE PROSPECTUS. BY TENDERING ITS OLD NOTES AND EXECUTING THIS LETTER OF
TRANSMITTAL, EACH PARTICIPATING BROKER-DEALER AGREES TO USE ITS REASONABLE BEST
EFFORTS TO NOTIFY THE COMPANY OR THE EXCHANGE AGENT WHEN IT HAS SOLD ALL OF ITS
NEW NOTES. (IF NO PARTICIPATING BROKER-DEALERS CHECK THIS BOX, OR IF ALL
PARTICIPATING BROKER-DEALERS WHO HAVE CHECKED THIS BOX SUBSEQUENTLY NOTIFY THE
COMPANY OR THE EXCHANGE AGENT THAT ALL THEIR NEW NOTES HAVE BEEN SOLD, THE
COMPANY WILL NOT BE REQUIRED TO MAINTAIN THE EFFECTIVENESS OF THE EXCHANGE OFFER
REGISTRATION STATEMENT OR TO UPDATE THE PROSPECTUS AND WILL NOT PROVIDE ANY
NOTICES TO ANY HOLDERS TO SUSPEND OR RESUME USE OF THE PROSPECTUS.)
Provide the name of the individual who should receive, on behalf of the
Holder, additional copies of the Prospectus, and amendments and supplements
thereto, and any notices to suspend and resume use of the Prospectus:
Name: __________________________________________________________________________
Address: _______________________________________________________________________
_______________________________________________________________________________
Telephone No.: ____________________
Facsimile No.: ____________________
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
4
<PAGE>
Ladies and Gentlemen:
By execution hereof, the undersigned acknowledges receipt of the Prospectus,
dated JUNE 10, 1998 (as the same may be amended from time to time, the
"Prospectus" and, together with the Letter of Transmittal, the "Exchange
Offer"), of NEXTLINK Communications, Inc., a DELAWARE corporation (the
"Company"), and this Letter of Transmittal and instructions hereto, which
together constitute Company's offer to exchange $1,000 principal amount of the
9% Senior Notes due 2008 (the "New Notes") of the Company, upon the terms and
subject to the conditions set forth in the Exchange Offer, for each $1,000
principal amount of their outstanding 9% Senior Notes due 2008 (the "Old
Notes").
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of Old Notes
indicated above. Subject to, and effective upon, the acceptance for exchange of
the Old Notes tendered herewith, the undersigned hereby exchanges, assigns and
transfers to, or upon the order of, the Company all right, title and interest in
and to such Old Notes. The undersigned hereby irrevocably constitutes and
appoints the Exchange Agent as the true and lawful agent and attorney-in-fact of
the undersigned (with full knowledge that the Exchange Agent also acts as the
agent of the Company) with respect to such Old Notes with full power of
substitution (such power-of-attorney being deemed to be an irrevocable power
coupled with an interest) to (i) present such Old Notes and all evidences of
transfer and authenticity to, or transfer ownership of, such Old Notes on the
account books maintained by the Book-Entry Transfer Facility to, or upon the
order of, the Company, (ii) present such Old Notes for transfer of ownership on
the books of the Company or the trustee under the Indenture (the "Trustee"), and
(iii) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Old Notes, all in accordance with the terms of and conditions
of the Exchange Offer as described in the Prospectus.
The undersigned represents and warrants that it has full power and authority
to tender, exchange, assign and transfer the Old Notes tendered hereby and to
acquire New Notes issuable upon the exchange of such tendered Old Notes, and
that, when the same are accepted for exchange, the Company will acquire good and
unencumbered title to the tendered Old Notes, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim or
right. The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company to
be necessary or desirable to complete the exchange, assignment and transfer of
the Old Notes tendered hereby or transfer ownership of such Old Notes on the
account books maintained by the book-entry transfer facility.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer--Conditions." The undersigned
recognizes that as a result of these conditions (which may be waived by the
Company, in whole or in part, in the reasonable discretion of the Company), as
more particularly set forth in the Prospectus, the Company may not be required
to exchange any of the Old Notes tendered hereby and, in such event, the Old
Notes not exchanged will be returned to the undersigned at the address shown
above.
THE EXCHANGE OFFER IS NOT BEING MADE TO ANY BROKER-DEALER WHO PURCHASED OLD
NOTES DIRECTLY FROM THE COMPANY FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT OR TO ANY PERSON THAT IS AN "AFFILIATE" OF THE COMPANY WITHIN THE
MEANING OF RULE 405 UNDER THE SECURITIES ACT. THE UNDERSIGNED UNDERSTANDS AND
AGREES THAT THE COMPANY RESERVE THE RIGHT NOT TO ACCEPT TENDERED OLD NOTES FROM
ANY TENDERING HOLDER IF THE COMPANY DETERMINE, IN THEIR REASONABLE DISCRETION,
THAT SUCH ACCEPTANCE COULD RESULT IN A VIOLATION OF APPLICABLE SECURITIES LAWS.
The undersigned, if the undersigned is a beneficial holder, represents, or,
if the undersigned is a broker, dealer, commercial bank, trust company or other
nominee, represents that it has received representations from the beneficial
owners of the Old Notes (the "Beneficial Owner") stating that (i) the
5
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New Notes to be acquired in connection with the Exchange Offer by the Holder and
each Beneficial Owner of the Old Notes are being acquired by the Holder and each
such Beneficial Owner in the ordinary course of business of the Holder and each
such Beneficial Owner, (ii) the Holder and each such Beneficial Owner are not
engaged in, do not intend to engage in, and have no arrangement or understanding
with any person to participate in, a distribution of the New Notes, (iii) the
Holder and each Beneficial Owner acknowledge and agree that any person
participating in the Exchange Offer for the purpose of distributing the New
Notes must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction of the New
Notes acquired by such person and cannot rely on the position of the staff of
the Commission set forth in the no-action letters that are discussed in the
Prospectus under the caption "The Exchange Offer--Purpose and Effect of the
Exchange Offer" and may only sell the New Notes acquired by such person pursuant
to a registration statement containing the selling security holder information
required by Item 507 of Regulation S-K under the Securities Act, (iv) if the
Holder is a broker-dealer that acquired Old Notes as a result of market-making
or other trading activities, it will deliver a prospectus in connection with any
resale of New Notes acquired in the Exchange Offer (but by so acknowledging and
by delivering a prospectus, the undersigned will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act) and (v) neither
the Holder nor any such Beneficial Owner is an "affiliate," as defined under
Rule 405 of the Securities Act, of the Company or is a broker-dealer who
purchased Old Notes directly from the Company for resale pursuant to Rule 144A
under the Securities Act.
In addition, if the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of New Notes. If the undersigned is a broker-dealer that will
receive New Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such New Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
EACH BROKER-DEALER WHO ACQUIRED OLD NOTES FOR ITS OWN ACCOUNT AS A RESULT OF
MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES (A "PARTICIPATING
BROKER-DEALER"), BY TENDERING SUCH OLD NOTES AND EXECUTING THIS LETTER OF
TRANSMITTAL, AGREES THAT, UPON RECEIPT OF NOTICE FROM THE COMPANY OF THE
OCCURRENCE OF ANY EVENT OR THE DISCOVERY OF ANY FACT WHICH MAKES ANY STATEMENT
CONTAINED OR INCORPORATED BY REFERENCE IN THE PROSPECTUS UNTRUE IN ANY MATERIAL
RESPECT OR WHICH CAUSES THE PROSPECTUS TO OMIT TO A STATE A MATERIAL FACT
NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE
THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT
MISLEADING OR OF THE OCCURRENCE OR CERTAIN OTHER EVENTS SPECIFIED IN THE
REGISTRATION RIGHTS AGREEMENT, SUCH PARTICIPATING BROKER-DEALER WILL SUSPEND THE
SALE OF NEW NOTES PURSUANT OT THE PROSPECTUS UNTIL THE COMPANY HAS AMENDED OR
SUPPLEMENTED THE PROSPECTUS TO CORRECT SUCH MISSTATEMENT OR OMISSION AND HAS
FURNISHED COPIES OF THE AMENDED OR SUPPLEMENTED PROSPECTUS TO THE PARTICIPATING
BROKER-DEALER OR THE COMPANY HAS GIVEN NOTICE THAT THE SALE OF THE NEW NOTES MAY
BE RESUMED, AS THE CASE MAY BE.
EACH PARTICIPATING BROKER-DEALER SHOULD CHECK THE BOX HEREIN UNDER THE
CAPTION "FOR PARTICIPATING BROKER-DEALERS ONLY" IN ORDER TO RECEIVE ADDITIONAL
COPIES OF THE PROSPECTUS, AND ANY AMENDMENTS AND SUPPLEMENTS THERETO, FOR USE IN
CONNECTION WITH RESALES OF THE NEW NOTES, AS WELL AS ANY NOTICES FROM THE
COMPANY TO SUSPEND AND RESUME USE OF THE PROSPECTUS. BY TENDERING ITS OLD NOTES
AND EXECUTING THIS LETTER OF TRANSMITTAL,
6
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EACH PARTICIPATING BROKER-DEALER AGREES TO USE ITS REASONABLE BEST EFFORTS TO
NOTIFY THE COMPANY OR THE EXCHANGE AGENT WHEN IT HAS SOLD ALL OF ITS NEW NOTES.
IF NO PARTICIPATING BROKER-DEALERS CHECK SUCH BOX, OR IF ALL PARTICIPATING
BROKER-DEALERS WHO HAVE CHECKED SUCH BOX SUBSEQUENTLY NOTIFY THE COMPANY OR THE
EXCHANGE AGENT THAT ALL THEIR NEW NOTES HAVE BEEN SOLD, THE COMPANY WILL NOT BE
REQUIRED TO MAINTAIN THE EFFECTIVENESS OF THE EXCHANGE OFFER REGISTRATION
STATEMENT OR TO UPDATE THE PROSPECTUS AND WILL NOT PROVIDE ANY HOLDERS WITH ANY
NOTICES TO SUSPEND OR RESUME USE OF THE PROSPECTUS.
The undersigned understands that tenders of the Old Notes pursuant to any
one of the procedures described under "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company in accordance with the
terms and subject to the conditions of the Exchange Offer. All authority herein
conferred or agreed to be conferred by this Letter of Transmittal and every
obligation of the undersigned hereunder shall be binding upon the heirs, legal
representatives, successors and assigns, executors, administrators and trustees
in bankruptcy of the undersigned and shall survive the death or incapacity of
the undersigned. Tendered Old Notes may be withdrawn at any time prior to the
Expiration Date in accordance with the terms of the Exchange Offer.
The undersigned understands that by tendering Old Notes pursuant to one of
the procedures described under "The Exchange Offer--Procedures for Tendering" in
the Prospectus and the instructions hereto, the tendering holder will be deemed
to have waived the right to receive any payment in respect of interest on the
Old Notes accrued up to the date of issuance of the New Notes.
The undersigned also understands and acknowledges that the Company reserves
the right in ITS sole discretion to purchase or make offers for any Old Notes
that remain outstanding subsequent to the Expiration Date in the open market, in
privately negotiated transactions, through subsequent exchange offers or
otherwise. The terms of any such purchases or offers could differ from the terms
of the Exchange Offer.
The undersigned understands that the delivery and surrender of the Old Notes
is not effective, and the risk of loss of the Old Notes does not pass to the
Exchange Agent, until receipt by the Exchange Agent of this Letter of
Transmittal, or a manually signed facsimile hereof, properly completed and duly
executed, with any required signature guarantees, together with all accompanying
evidences of authority and any other required documents in form satisfactory to
the Company. All questions as to form of all documents and the validity
(including time of receipt) and acceptance of tenders and withdrawals of Old
Notes will be determined by the Company, in their sole discretion, which
determination shall be final and binding.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions," the undersigned hereby requests that any Old Notes representing
principal amounts not tendered or not accepted for exchange be issued in the
name(s) of the undersigned and that New Notes be issued in the name(s) of the
undersigned (or, in the case of Old Notes delivered by book-entry transfer, by
credit to the account at the Book-Entry Transfer Facility). Similarly, unless
otherwise indicated herein in the box entitled "Special Delivery Instructions,"
the undersigned hereby requests that any Old Notes representing principal
amounts not tendered or not accepted for exchange and certificates for New Notes
be delivered to the undersigned at the address(es) shown above. In the event
that the "Special Issuance Instructions" box or the "Special Delivery
Instructions" box is, or both are, completed, the undersigned hereby requests
that any Old Notes representing principal amounts not tendered or not accepted
for exchange be issued in the name(s) of, certificates for such Old Notes be
delivered to, and certificates for New Notes be issued in the name(s) of, and be
delivered to, the person(s) at the address(es) so indicated, as applicable. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Issuance Instructions" box or "Special Delivery Instructions" box to
transfer any Old Notes from the name of the registered Holder(s) thereof if the
Company does not accept for exchange any of the principal amount of such Old
Notes so tendered.
7
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL HOLDERS OF OLD NOTES
REGARDLESS OF WHETHER OLD NOTES ARE BEING PHYSICALLY DELIVERED HEREWITH)
This Letter of Transmittal must be signed by the Holder(s) of Old Notes
exactly as their name(s) appear(s) on certificate(s) for Old Notes or, if
delivered by a participant in the Book-Entry Transfer Facility, exactly as such
participant's name appears on a security position listing as the owner of Old
Notes, or by person(s) authorized to become Holder(s) by endorsements and
documents transmitted with this Letter of Transmittal. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below under "Capacity" and submit evidence
satisfactory to the Company of such person's authority to so act. See
Instruction 4 below.
If the signature appearing below is not of the record holder(s) of the Old
Notes, then the record holder(s) must sign a valid bond power.
X ______________________________________________________________________________
X ______________________________________________________________________________
SIGNATURE(S) OF REGISTERED HOLDER(S) OR AUTHORIZED SIGNATORY
Date: ___________________________________________________________________ , 1998
Name(s): _______________________________________________________________________
(PLEASE PRINT)
Capacity: ______________________________________________________________________
Address: _______________________________________________________________________
_______________________________________________________________________________
(INCLUDING ZIP CODE)
Area Code and Telephone No.: ___________________________________________________
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
/ / CHECK HERE IF YOU ARE A BROKER DEALER WHO ACQUIRED THE OLD NOTES FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES AND
WISH TO RECEIVE ADDITIONAL COPIES OF THE PROSPECTUS AND COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name: ______________________________________________________________________
Address: ___________________________________________________________________
MEDALLION SIGNATURE GUARANTEE (SEE INSTRUCTION 4 BELOW)
CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION
________________________________________________________________________________
(NAME OF ELIGIBLE INSTITUTION GUARANTEEING SIGNATURES)
________________________________________________________________________________
(ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE NUMBER (INCLUDING AREA CODE) OF
FIRM)
________________________________________________________________________________
(AUTHORIZED SIGNATURE)
________________________________________________________________________________
(PRINTED NAME)
________________________________________________________________________________
(TITLE)
Dated: ___________________________________________________________________, 1998
8
<PAGE>
- --------------------------------------------------------------------------------
- -------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3, 4, 5 AND 7)
To be completed ONLY if certificates for Old Notes in a principal amount
not tendered or not accepted for exchange are to be issued in the name of,
or certificates for New Notes are to be issued to the order of, someone
other than the person or persons whose signature(s) appear(s) within this
Letter of Transmittal.
Issue: / / Old Notes
/ / New Notes
(CHECK AS APPLICABLE)
Name: __________________________________________________________________________
(PLEASE PRINT)
Address: _______________________________________________________________________
________________________________________________________________________________
(ZIP CODE)
________________________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 HEREIN)
Credit Old Notes not exchanged and delivered by book entry transfer to the
Book Entry Transfer Facility account set below:
________________________________________________________________________________
(BOOK ENTRY TRANSFER FACILITY ACCOUNT NUMBER)
Credit New Notes to the Book Entry Transfer Facility account set below:
________________________________________________________________________________
(BOOK ENTRY TRANSFER FACILITY ACCOUNT NUMBER)
- ------------------------------------------------------
- ------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5)
To be completed ONLY if certificates for Old Notes in a principal amount
not accepted for exchange or certificates for New Notes are to be sent to
someone other than the person or persons whose signature(s) appear(s) within
this Letter of Transmittal or to an address different from that shown in the
box entitled "Description of Old Notes" within the Letter of Transmittal.
Deliver: / / Old Notes
/ / New Notes
(CHECK AS APPLICABLE)
Name: __________________________________________________________________________
(PLEASE PRINT)
Address: _______________________________________________________________________
________________________________________________________________________________
(ZIP CODE)
- -----------------------------------------------------
9
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR OLD NOTES OR
BOOK-ENTRY CONFIRMATIONS; WITHDRAWAL OF TENDERS.
To tender Old Notes in the Exchange Offer, physical delivery of certificates
for Old Notes or confirmation of a book-entry transfer into the Exchange Agent's
account with a Book-Entry Transfer Facility of Old Notes tendered
electronically, as well as a properly completed and duly executed copy or
manually signed facsimile of this Letter of Transmittal, or in the case of a
book-entry transfer, an Agent's Message, and any other documents required by
this Letter of Transmittal, must be received by the Exchange Agent at its
address set forth herein prior to the Expiration Date. Tenders of Old Notes in
the Exchange Offer may be made prior to the Expiration Date in the manner
described in the preceding sentence and otherwise in compliance with this Letter
of Transmittal. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL,
CERTIFICATES FOR OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE
AGENT, INCLUDING DELIVERY THROUGH DTC AND ANY ACCEPTANCE OF AN AGENT'S MESSAGE
TRANSMITTED THROUGH ATOP, IS AT THE ELECTION AND RISK OF THE HOLDER TENDERING
OLD NOTES. IF SUCH DELIVERY IS MADE BY MAIL, IT IS SUGGESTED THAT THE HOLDER USE
PROPERLY INSURED, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED AND THAT
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO ALTERNATIVE,
CONDITIONAL OR CONTINGENT TENDERS OF OLD NOTES WILL BE ACCEPTED. Except as
otherwise provided below, the delivery will be made when actually received by
the Exchange Agent. THIS LETTER OF TRANSMITTAL, CERTIFICATES FOR THE OLD NOTES
AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT ONLY TO THE EXCHANGE AGENT, NOT
TO THE COMPANY, THE TRUSTEE OR DTC.
Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date. In order to be valid, notice of withdrawal of
tendered Old Notes must comply with the requirements set forth in the Prospectus
under the caption "The Exchange Offer--Withdrawal of Tenders."
2. GUARANTEED DELIVERY PROCEDURES.
If Holders desire to tender Old Notes pursuant to the Exchange Offer and (i)
certificates representing such Old Notes are not lost but are not immediately
available, (ii) time will not permit this Letter of Transmittal, certificates
representing such Holder's Old Notes and all other required documents to reach
the Exchange Agent prior to the Expiration Date or (iii) the procedures for
book-entry transfer cannot be completed prior to the Expiration Date, such
Holders may effect a tender of Old Notes in accordance with the guaranteed
delivery procedures set forth in the Prospectus under the caption "The Exchange
Offer-- Guaranteed Delivery Procedures."
Pursuant to the guaranteed delivery procedures:
(i) such tender must be made by or through an Eligible Institution;
(ii) prior to the Expiration Date, the Exchange Agent must have received
from such Eligible Institution, at one of the addresses set forth on the
cover of this Letter of Transmittal, a properly completed and validly
executed Notice of Guaranteed Delivery (by manually signed facsimile
transmission, mail or hand delivery) in substantially the form provided with
the Prospectus, setting forth the name(s) and address(es) of the registered
Holder(s) and the principal amount of Old Notes being tendered and stating
that the tender is being made thereby and guaranteeing that, within three
Nasdaq National Market ("NNM") trading days from the date of the Notice of
Guaranteed Delivery, the Letter of Transmittal (or a manually signed
facsimile thereof), properly completed and duly executed, or, in the case of
a book-entry transfer, an Agent's Message, together with certificates
10
<PAGE>
representing the Old Notes (or confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at a Book-Entry Transfer
Facility), and any other documents required by this Letter of Transmittal
and the instructions thereto, will be deposited by such Eligible Institution
with the Exchange Agent; and
(iii) this Letter of Transmittal (or a manually signed facsimile thereof),
properly completed and validly executed with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message, together with
certificates for all Old Notes in proper form for transfer (or a Book-Entry
Confirmation with respect to all tendered Old Notes), and any other required
documents must be received by the Exchange Agent within three NNM trading days
after the date of such Notice of Guaranteed Delivery.
3. PARTIAL TENDERS.
If less than the entire principal amount of any Old Notes evidenced by a
submitted certificate is tendered, the tendering Holder must fill in the
principal amount tendered in the last column of the box entitled "Description of
Old Notes" herein. The entire principal amount represented by the certificates
for all Old Notes delivered to the Exchange Agent will be deemed to have been
tendered, unless otherwise indicated. The entire principal amount of all Old
Notes not tendered or not accepted for exchange will be sent (or, if tendered by
book-entry transfer, returned by credit to the account at the Book-Entry
Transfer Facility designated herein) to the Holder unless otherwise provided in
the "Special Issuance Instructions" or "Special Delivery Instructions" boxes of
this Letter of Transmittal.
4. SIGNATURES ON THIS LETTER OF TRANSMITTAL, BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the Holder(s) of the Old Notes
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the certificate(s) without alteration, enlargement or any change
whatsoever. If this Letter of Transmittal is signed by a participant in one of
the Book-Entry Transfer Facilities whose name is shown as the owner of the Old
Notes tendered hereby, the signature must correspond with the name shown on the
security position listing as the owner of the Old Notes.
If any of the Old Notes tendered hereby are registered in the name of two or
more Holders, all such Holders must sign this Letter of Transmittal. If any
tendered Old Notes are registered in different names on several certificates, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal and any necessary accompanying documents as there are
different names in which certificates are held.
If this Letter of Transmittal or any certificates for Old Notes or bond
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
proper evidence satisfactory to the Company of their authority so to act must be
submitted with this Letter of Transmittal.
IF THIS LETTER OF TRANSMITTAL IS EXECUTED BY A PERSON OR ENTITY WHO IS NOT
THE REGISTERED HOLDER, THEN THE REGISTERED HOLDER MUST SIGN A VALID BOND POWER,
WITH THE SIGNATURE OF SUCH REGISTERED HOLDER GUARANTEED BY A PARTICIPANT IN A
RECOGNIZED MEDALLION SIGNATURE PROGRAM (A "MEDALLION SIGNATURE GUARANTOR").
No signature guarantee is required if (i) this Letter of Transmittal is
signed by the registered Holder(s) of the Old Notes tendered herewith (or by a
participant in one of the Book-Entry Transfer Facilities whose name appears on a
security position listing as the owner of Old Notes) and certificates for New
Notes or for any Old Notes for principal amounts not tendered or not accepted
for exchange are to be issued, directly to such Holder(s) or, if tendered by a
participant in one of the Book-Entry Transfer
11
<PAGE>
Facilities, any Old Notes for principal amounts not tendered or not accepted for
exchange are to be credited to such participant's account at such Book-Entry
Transfer Facility and neither the "Special Issuance Instructions" box nor the
"Special Delivery Instructions" box of this Letter of Transmittal has been
completed or (ii) such Old Notes are tendered for the account of an Eligible
Institution. IN ALL OTHER CASES, ALL SIGNATURES ON LETTERS OF TRANSMITTAL
ACCOMPANYING OLD NOTES MUST BE GUARANTEED BY A MEDALLION SIGNATURE GUARANTOR. In
all such other cases (including if this Letter of Transmittal is not signed by
the Holder), the Holder must either properly endorse the certificates for Old
Notes tendered or transmit a separate properly completed bond power with this
Letter of Transmittal (in either case, executed exactly as the name(s) of the
registered Holder(s) appear(s) on such Old Notes, and, with respect to a
participant in a Book-Entry Transfer Facility whose name appears on a security
position listing as the owner of Old Notes, exactly as the name(s) of the
participant(s) appear(s) on such security position listing), with the signature
on the endorsement or bond power guaranteed by a Medallion Signature Guarantor,
unless such certificates or bond powers are executed by an Eligible Institution.
Endorsements on certificates for Old Notes and signatures on bond powers
provided in accordance with this Instruction 4 by registered Holders not
executing this Letter of Transmittal must be guaranteed by a Medallion Signature
Guarantor.
5. SPECIAL ISSUANCE AND SPECIAL DELIVERY INSTRUCTIONS.
Tendering Holders should indicate in the applicable box or boxes the name
and address to which Old Notes for principal amounts not tendered or not
accepted for exchange or certificates for New Notes, if applicable, are to be
sent or issued, if different from the name and address of the Holder signing
this Letter of Transmittal. In the case of payment to a different name, the
taxpayer identification or social security number of the person named must also
be indicated. If no instructions are given, Old Notes not tendered or not
accepted for exchange will be returned, and certificates for New Notes will be
sent, to the Holder of the Old Notes tendered.
6. TAXPAYER IDENTIFICATION NUMBER.
Each tendering Holder is required to provide the Exchange Agent with the
Holder's social security or Federal employer identification number, on
Substitute Form W-9, which is provided under "Important Tax Information" below,
or alternatively, to establish another basis for exemption from backup
withholding. A Holder must cross out item (2) in the Certification box in Part
III on Substitute Form W-9 if such Holder is subject to backup withholding.
Failure to provide the information on the form may subject such Holder to 31%
Federal backup withholding tax on any payment made to the Holder with respect to
the Exchange Offer. The box in Part I of the form should be checked if the
tendering or consenting Holder has not been issued a Taxpayer Identification
Number ("TIN") and has either applied for a TIN or intends to apply for a TIN in
the near future. If the box in Part I is checked the Holder should also sign the
attached Certification of Awaiting Taxpayer Identification Number. If the
Exchange Agent is not provided with a TIN within 60 days thereafter, the
Exchange Agent will withhold 31% on all such payments of the New Notes until a
TIN is provided to the Exchange Agent.
7. TRANSFER TAXES.
The Company will pay all transfer taxes applicable to the exchange and
transfer of Old Notes pursuant to the Exchange Offer, except if (i) deliveries
of certificates for Old Notes for principal amounts not tendered or not accepted
for exchange are registered or issued in the name of any person other than the
Holder of Old Notes tendered thereby, (ii) tendered certificates are registered
in the name of any person other than the person signing this Letter of
Transmittal or (iii) a transfer tax is imposed for any reason other than the
exchange of Old Notes pursuant to the Exchange Offer. If satisfactory evidence
of payment
12
<PAGE>
of such taxes or exemption therefrom is not submitted herewith, the amount of
such transfer taxes will be billed directly to such tendering Holder.
8. IRREGULARITIES.
All questions as to the form of all documents and the validity (including
time of receipt) and acceptance of all tenders and withdrawals of Old Notes will
be determined by the Company, in its sole discretion, which determination shall
be final and binding. ALTERNATIVE, CONDITIONAL OR CONTINGENT TENDERS OF OLD
NOTES WILL NOT BE CONSIDERED VALID. The Company reserves the absolute right to
reject any and all tenders of Old Notes that are not in proper form or the
acceptance of which, in the Company's opinion, would be unlawful. The Company
also reserves the right to waive any defects, irregularities or conditions of
tender as to particular Old Notes. The Company's interpretations of the terms
and conditions of the Exchange Offer (including the instructions in this Letter
of Transmittal) will be final and binding. Any defect or irregularity in
connection with tenders of Old Notes must be cured within such time as the
Company determines, unless waived by the Company. Tenders of Old Notes shall not
be deemed to have been made until all defects or irregularities have been waived
by the Company or cured. A defective tender (which defect is not waived by the
Company or cured by the Holder) will not constitute a valid tender of Old Notes
and will not entitle the Holder to New Notes. None of the Company, the Trustee,
the Exchange Agent or any other person will be under any duty to give notice of
any defect or irregularity in any tender or withdrawal of any Old Notes, or
incur any liability to Holders for failure to give any such notice.
9. WAIVER OF CONDITIONS.
The Company reserves the right, in its reasonable discretion, to amend or
waive any of the conditions to the Exchange Offer.
10. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES FOR OLD NOTES.
Any Holder whose certificates for Old Notes have been mutilated, lost,
stolen or destroyed should write to or telephone the Trustee at the address or
telephone number set forth on the cover of this Letter of Transmittal for the
Exchange Agent.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering Old Notes and requests for
assistance or additional copies of the Prospectus, this Letter of Transmittal,
the Notice of Guaranteed Delivery or other documents may be directed to the
Exchange Agent, whose address and telephone number appear above.
13
<PAGE>
IMPORTANT TAX INFORMATION
Under federal income tax laws, a Holder who tenders Old Notes prior to
receipt of the New Notes is required to provide the Exchange Agent with such
Holder's correct TIN on the Substitute Form W-9 below or otherwise establish a
basis for exemption from backup withholding. If such Holder is an individual,
the TIN is his or her social security number. If the Exchange Agent is not
provided with the correct TIN, a $50 penalty may be imposed by the Internal
Revenue Service ("IRS") and payments, including any New Notes, made to such
Holder with respect to Old Notes exchanged pursuant to the Exchange Offer may be
subject to backup withholding.
Certain Holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should indicate their exempt status on the
Substitute Form W-9. A foreign person may qualify as an exempt recipient by
submitting to the Exchange Agent a properly completed IRS Form W-8, signed under
penalties of perjury, attesting to that Holder's exempt status. A Form W-8 can
be obtained from the Exchange Agent. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions. Holders are urged to consult their own tax advisors to
determine whether they are exempt.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any payments made to the Holder or other payee. Backup withholding is not
an additional Federal income tax. Rather, the Federal income tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the IRS.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments, including any New Notes, made
with respect to Old Notes exchanged pursuant to the Exchange Offer, the Holder
is required to provide the Exchange Agent with (i) the Holder's correct TIN by
completing the form below, certifying that the TIN provided on the Substitute
Form W-9 is correct (or that such Holder is awaiting a TIN) and that (A) such
Holder is exempt from backup withholding, (B) the Holder has not been notified
by the IRS that the Holder is subject to backup withholding as a result of
failure to report all interest or dividends or (C) the IRS has notified the
Holder that the Holder is no longer subject to backup withholding and (ii) if
applicable, an adequate basis for exemption.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered Holder. If
the Old Notes are held in more than one name or are held not in the name of the
actual owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
number to report.
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SUBSTITUTE FORM W-9
REQUEST FOR TAXPAYER IDENTIFICATION NUMBER AND CERTIFICATION
PAYOR'S NAME: NEXTLINK COMMUNICATIONS, INC.
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PAYEE INFORMATION
(Please print or type)
Individual or business name (if joint account, list first and circle the name of person or
entity whose number you furnish in
Part 1 below):
Check appropriate box: / / Individual/Sole
proprietor / / Corporation / / Partnership / / Other ---------
Address (number, street, and apt. or suite no.):
City, state, and ZIP code:
PART I TAXPAYER IDENTIFICATION NUMBER ("TIN") PART II PAYEES EXEMPT
Enter your TIN below. For individuals, this is your social FROM BACKUP WITHHOLDING
security number. For other entities, it is your employer Check box (See page 2 of the
identification number. Refer to the chart on page 1 of the Guidelines for further
Guidelines for Certification of Taxpayer Identification clarification. Even if you are
Number on Substitute Form W-9 (the "Guidelines") for further exempt from backup
clarification. If you do not have a TIN, see instructions on withholding, you should still
how to obtain a TIN on page 2 of the Guidelines, check the complete and sign the
appropriate box below indicating that you have applied for a certification below):
TIN and, in addition to the Part III Certification, sign the / / EXEMPT
attached Certification of Awaiting Taxpayer Identification
Number.
Social security number:
/ / / / / / - / / / / - / / / / / /
/ / Applied For
Employer identification number:
/ / / / - / / / / / / / / / / / / / /
PART III CERTIFICATION
Certification Instructions: You must cross out item 2 below if you have been notified by the
Internal Revenue Service (the "IRS") that you are currently subject to backup withholding
because of underreporting interest or dividends on your tax return (See page 2 of the
Guidelines for further clarification).
Under penalties of perjury, I certify that:
1. The number shown on this form is my correct taxpayer identification number (or I am
waiting for a number to be issued to me), and
2. I am not subject to backup withholding because: (a) I am exempt from backup withholding,
(b) I have not been notified by the IRS that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) the IRS has notified me
that I am no longer subject to backup withholding.
SIGNATURE DATE
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NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED "GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9" FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATION IF YOU CHECKED THE BOX "APPLIED
FOR" IN PART I OF SUBSTITUTE FORM W-9
CERTIFICATION OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify, under penalties of perjury, that a TIN has not been
issued to me, and either (a) I have mailed or delivered an
application to receive a TIN to the appropriate IRS Service
Center or Social Security Administration Office, or (b) I
intend to mail or deliver an application in the near future. I
understand that I must provide a TIN to the payor within 60
days of submitting this Substitute Form W-9 and that if I do
not provide a TIN to the payor within 60 days, the payor is
required to withhold 31% of all reportable payments thereafter
to me until I furnish the payor with a TIN.
____________________________________
Signature
____________________________________
Date
15
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EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL OUTSTANDING
9% SENIOR NOTES DUE 2008
IN EXCHANGE FOR NEW
9% SENIOR NOTES DUE 2008
OF
NEXTLINK COMMUNICATIONS, INC.
As set forth in the Prospectus dated June 10, 1998 (as the same may be
amended from time to time, the "Prospectus") of NEXTLINK Communications, Inc.
(the "Company") under the caption "The Exchange Offer--Guaranteed Delivery
Procedures," and in the accompanying Letter of Transmittal (the "Letter of
Transmittal") and Instruction 2 thereto, this form or one substantially
equivalent, must be used to tender any of the Company's outstanding 9% Senior
Notes due 2008 (the "Old Notes") pursuant to the Exchange Offer, if (i)
certificates representing the Old Notes to be tendered for exchange are not lost
but are not immediately available, (ii) time will not permit a Holder's Letter
of Transmittal, certificates representing the Old Notes to be tendered and all
other required documents to reach United States Trust Company (the "Exchange
Agent") prior to the Expiration Date with respect to the Exchange Offer, or
(iii) the procedures for book-entry transfer cannot be completed prior to the
Expiration Date. This form may be delivered by an Eligible Institution by mail
or hand delivery or transmitted, via manually signed facsimile, to the Exchange
Agent as set forth below.
Terms not otherwise defined herein shall have their respective meanings as
set forth in the Prospectus.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JULY 10,
1998, UNLESS EXTENDED OR TERMINATED (THE "EXPIRATION DATE").
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
UNITED STATES TRUST COMPANY
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BY HAND OR OVERNIGHT BY REGISTERED OR CERTIFIED
DELIVERY: FACSIMILE TRANSMISSIONS: MAIL:
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(ELIGIBLE INSTITUTIONS ONLY)
United States Trust Company (212) 852-1626 United States Trust Company
114 West 47th Street TO CONFIRM BY TELEPHONE 114 West 47th Street
New York, New York 10036 OR FOR INFORMATION CALL: New York, New York 10036
Attention: Patricia Stermer (212) 852-1664 Attention: Patricia Stermer
Reorganization Section Reorganization Section
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DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
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LADIES AND GENTLEMEN:
The undersigned hereby tender(s) to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the Letter of Transmittal,
receipt of which is hereby acknowledged, the principal amount of Old Notes set
forth below pursuant to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer--Guaranteed Delivery
Procedures."
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender the Old Notes. The undersigned will, upon request,
execute and deliver any additional documents deemed by the Exchange Agent or the
Company to be necessary or desirable for the perfection of the undersigned's
tender.
Tenders may be withdrawn in accordance with the procedures set forth in the
Prospectus. The undersigned authorizes the Exchange Agent to deliver this Notice
of Guaranteed Delivery to the Company and the Trustee as evidence of the
undersigned's tender of Old Notes.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
2
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PLEASE SIGN AND COMPLETE
Signatures of Registered Holder(s) or Date:
Authorized Signatory:
Address:
Name(s) of Registered Holder(s): Area Code and Telephone No.:
Principal Amount of Notes Tendered: If Notes will be delivered by book-entry
transfer, complete the following:
Certificate No.(s) of Notes (if available):
Depository Account No.
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This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly as
their names appear on certificates for Old Notes or on a security position
listing as the owner of Old Notes, or by person(s) authorized to become
Holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title below
under "Capacity" and submit evidence satisfactory to the Company of such
person's authority to so act.
Please print name(s) and address(es)
Name(s): ___________________________________________________________________
____________________________________________________________________________
Capacity: __________________________________________________________________
Address(es): _______________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
DO NOT SEND OLD NOTES WITH THIS FORM. OLD NOTES SHOULD BE SENT TO THE EXCHANGE
AGENT, TOGETHER WITH A PROPERLY COMPLETED AND VALIDLY EXECUTED LETTER OF
TRANSMITTAL AND ANY OTHER RELATED DOCUMENTS.
3
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GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc. or a commercial bank
or trust company having an office or correspondent in the United States, hereby
guarantees that, within three Nasdaq National Market trading days from the date
of this Notice of Guaranteed Delivery, a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile thereof), together with
certificates representing the Old Notes tendered hereby in proper form for
transfer (or confirmation of the book-entry transfer of such Old Notes into the
Exchange Agent's account at a Book-Entry Transfer Facility, pursuant to the
procedure for book-entry transfer set forth in the Prospectus under the caption
"The Exchange Offer--Book-Entry Transfer"), and any other required documents
will be deposited by the undersigned with the Exchange Agent at its address set
forth above.
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Name of Firm:
Address: Authorized Signature
Area Code and Name:
Telephone No.:
Title:
Date:
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4
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EXHIBIT 99.3
NEXTLINK COMMUNICATIONS, INC.
OFFER FOR ALL OUTSTANDING 9% SUBORDINATED NOTES DUE 2008
IN EXCHANGE FOR UP TO $335,000,000 PRINCIPAL AMOUNT OF
9% SENIOR NOTES DUE 2008
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JULY 10,
1998, UNLESS EXTENDED OR TERMINATED (THE "EXPIRATION DATE").
To Our Clients:
Enclosed for your consideration is a Prospectus dated June 10, 1998 (as the
same may be amended or supplemented from time to time, the "Prospectus") and a
form of Letter of Transmittal (the "Letter of Transmittal") relating to the
offer (the "Exchange Offer") by NEXTLINK Communications, Inc. (the "Company") to
exchange up to $335,000,000 in aggregate principal amount of its Senior Notes
due 2008 (the "Old Notes") for $335,000,000 in aggregate principal amount of its
Senior Notes due 2008 (the "New Notes") upon the terms and conditions set forth
in the Prospectus and the Letter of Transmittal.
The material is being forwarded to you as the beneficial owner of Old Notes
held by us for your account or benefit but not registered in your name. A tender
of the Old Notes pursuant to the Exchange Offer may be made only by us as the
registered holder of the Old Notes, and pursuant to your instructions.
Therefore, the Company urges beneficial owners of Old Notes registered in the
name of a broker, dealer, commercial bank, trust company or other nominee to
contact such holder promptly if they wish to tender Old Notes in the Exchange
Offer.
Accordingly, we request instructions as to whether you wish us to tender any
or all Old Notes held by us for your account or benefit, pursuant to the terms
and conditions set forth in the Prospectus and Letter of Transmittal. We urge
you to read carefully the Prospectus and Letter of Transmittal before
instructing us to tender your Old Notes pursuant to the Exchange Offer.
Your instructions to us should be forwarded as promptly as practicable in
order to permit us to tender Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m.,
New York City Time, on , 1998, unless extended (the "Expiration Date"). Old
Notes tendered pursuant to the Exchange Offer may be withdrawn, subject to the
procedures described in the Prospectus, at any time prior to the Expiration
Date.
If you wish to have us tender any or all of your Old Notes held by us for
your account or benefit, please so instruct us by completing, executing and
returning to us the instruction form that appears below. The accompanying Letter
of Transmittal is furnished to you for informational purposes only and may not
be used by you to tender Old Notes held by us and registered in our name for
your account or benefit.
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INSTRUCTIONS WITH RESPECT TO THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer made by Nextlink
Communications, Inc. with respect to their Old Notes.
This will instruct you to tender the Old Notes held by you for the account
of the undersigned, upon and subject to the terms and conditions set forth in
the Prospectus and the related Letter of Transmittal.
Please tender the Old Notes held by you for my account as indicated below:
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AGGREGATE PRINCIPAL AMOUNT OF OLD NOTES
/ / Please do not tender any Old Notes held
by you for my account
Dated: , 1998
Signature(s)
Please Print Name(s) here
Address(es)
Area Code(s) and Telephone Number(s)
Tax Identification or Social Security No(s)
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None of the Old Notes held by us for your account will be tendered unless we
receive written instructions from you to do so. Unless a specific instruction is
given in the space provided, your signature(s) hereon shall constitute an
instruction to us to tender all the Old Notes held by us for your account.
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EXHIBIT 99.4
NEXTLINK COMMUNICATIONS, INC.
OFFER FOR ALL OUTSTANDING 9% SENIOR NOTES DUE 2008
IN EXCHANGE FOR UP TO $335,000,000 PRINCIPAL AMOUNT OF
9% SENIOR NOTES DUE 2008
THE EXCHANGE OFFER WILL EXPIRE AT MIDNIGHT, NEW YORK CITY TIME, ON JULY 10,
1998, UNLESS EXTENDED OR TERMINATED (THE "EXPIRATION DATE").
To Brokers, Dealers, Commercial Banks
Trust Companies and Other Nominees:
Enclosed for your consideration is a Prospectus dated June 10, 1998 (as the
same may be amended or supplemented form time to time, the "Prospectus") and a
form of Letter of Transmittal (the "Letter of Transmittal") relating to the
offer (the "Exchange Offer") by NEXTLINK Communications, Inc. (the "Company") to
exchange up to $335,000,000 in aggregate principal amount of its Senior Notes
due 2008 (the "New Notes") for $335,000,000 in aggregate principal amount of its
Senior Notes due 2008 (the "Old Notes").
We are asking you to contact your clients for whom you hold Old Notes
registered in your name or in the name of your nominee. In addition, we ask you
to contact your clients who, to your knowledge, hold Old Notes registered in
their own name. The Company will not pay any fees or commissions to any broker,
dealer or other person in connection with the solicitation of tenders pursuant
to the Exchange Offer. You will, however, be reimbursed by the Company for
customary mailing and handling expenses incurred by you in forwarding any of the
enclosed materials to your clients. The Company will pay all transfer taxes, if
any, applicable to the tender any of the enclosed materials to your clients. The
Company will pay all transfer taxes, if any, applicable to the tender of Old
Notes to it or its order, except as otherwise provided in the Prospectus and the
Letter of Transmittal.
Enclosed are copies of the following documents:
1. The Prospectus;
2. A Letter of Transmittal for your use in connection with the tender of
Old Notes and for the information of your clients;
3. A form of letter that may be sent to your clients for whose accounts you
hold Old Notes registered in your name or the name of your nominee; with
space provided for obtaining the clients' instructions with regard to the
Exchange Offer;
4. A form of Notice of Guaranteed Delivery; and
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
Your prompt action is requested. The Exchange Offer will expire at 5:00
p.m., New York City Time, on July 10, 1998, unless extended (the "Expiration
Date"). Old Notes tendered pursuant to the Exchange Offer may be withdrawn,
subject to the procedures described in the Prospectus, at any time prior to the
Expiration Date.
In all cases, exchanges of Old Notes for New Notes accepted for exchange
pursuant to the Exchange Offer will be made only after timely receipt by the
Exchange Agent of (a) certificates representing such Old Notes or a confirmation
of a book-entry transfer of such Old Notes, as the case may be, (b) the Letter
of Transmittal (or a facsimile thereof) promptly completed and duly executed
with any required signature guarantees, and (c) any other documents required by
the Letter of Transmittal.
Holders who wish to tender their Old Notes and (a) whose Old Notes are not
immediately available, (b) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the
<PAGE>
Exchange Agent prior to the Expiration Date or (c) who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Old Notes
by following the guaranteed delivery procedures described in the Prospectus
under "The Exchange Offer--Guaranteed Delivery Procedures."
To tender Old Notes, certificates for Old Notes, a duly executed and
properly completed Letter of Transmittal or a facsimile thereof, together with
any other required documents, must be received by the Exchange Agent as provided
the Prospectus and the Letter of Transmittal.
Additional copies of the enclosed material may be obtained form the Exchange
Agent, United States Trust Company, by calling (212) 852-1664.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO
THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS AND
THE LETTER OF TRANSMITTAL.
