<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 4, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
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 Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</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 AVENUE
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
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PRICE(1) OFFERING RICE FEE
<S> <C> <C> <C> <C>
10 3/4% Senior Notes due 2008 $500,000,000 100% $500,000,000 $139,000
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 4, 1999.
THIS INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT OFFER THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
[LOGO]
NEXTLINK COMMUNICATIONS, INC.
---------------
EXCHANGE OFFER FOR: 10 3/4% SENIOR NOTES DUE 2008
THE REGISTERED NOTES
- The terms of the new notes are substantially identical to the outstanding
notes, except that the new notes will be freely tradable.
- Interest accrues from November 12, 1998 at the rate of 10 3/4% per annum,
payable semi-annually in arrears on each May 15 and November 15, beginning
on May 15, 1999.
- The notes will mature on November 15, 2008.
- The notes are unsecured and will rank equally with our 12 1/2% Senior
Notes due 2006, our 9 5/8% Senior Notes due 2007, our 9% Senior Notes due
2008 and our 9.45% Senior Discount Notes due 2008.
THE EXCHANGE OFFER
- The Exchange Offer expires at 5:00 p.m., New York City time, on March ,
1999 unless extended.
- The Exchange Offer is not subject to any conditions other than that the
Exchange Offer not violate applicable law or any applicable interpretation
of the Staff of the Securities and Exchange Commission.
- All old notes that are validly tendered and not validly withdrawn will be
exchanged.
- Tenders of old notes may be withdrawn at any time prior to the expiration
of the Exchange Offer.
- We will not receive any proceeds from the Exchange Offer.
INVESTMENT IN THE NEW NOTES INVOLVES CERTAIN RISKS. CONSIDER CAREFULLY THE
RISK FACTORS BEGINNING ON PAGE 13 IN THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is February , 1999.
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This prospectus incorporates documents by reference which are not presented
herein or delivered herewith. We will provide these documents to you upon
written or oral request directed to: NEXTLINK Communications, Inc., 500 108th
Avenue N.E., Suite 2200, Bellevue, Washington 98004. In order to ensure timely
delivery of the documents, any request should be made five days before the
Expiration Date.
The following documents, which we have filed (File No. 000-22939) with the
Securities and Exchange Commission (the "Commission" or "SEC") pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), are
incorporated in this Prospectus and shall be deemed to be a part of this
Prospectus:
1. The Annual Report on Form 10-KSB for the fiscal year ended December
31, 1997, filed on March 25, 1998;
2. The Quarterly Report on Form 10-Q, for the quarter ended March 31,
1998, filed on May 15, 1998;
3. The Quarterly Report on Form 10-Q, for the quarter ended June 30,
1998, filed on August 14, 1998;
4. The Quarterly Report on Form 10-Q, for the quarter ended September
30, 1998, filed on November 16, 1998.
5. The Current Reports on Form 8-K, filed on March 12, 1998, April 14,
1998, July 20, 1998, July 22, 1998, December 8, 1998 and January 19, 1999.
All documents that we file pursuant to Section 13(a) or 15(d) of the
Exchange Act after the date of this Prospectus and prior to termination of this
Exchange Offer are incorporated by reference into this Prospectus. These
documents shall be deemed to be a part of this Prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Commission a registration statement on Form S-4 (the
"Registration Statement") with respect to the notes. This Prospectus, which is a
part of the Registration Statement, omits certain information included in the
Registration Statement. You may read and copy the Registration Statement,
including the attached exhibits, and any reports, statements or other
information that we file at the SEC's public reference room in Washington, D.C.
You may also obtain information about us from the following regional offices of
the SEC: Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and 7 World Trade Center, 13th Floor, New York, New
York 10048. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference rooms. Copies of such material can be obtained
by mail from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 at prescribed rates. Our SEC filings are
also available to the public on the SEC's internet home paget at
http://www.sec.gov.
We file annual, quarterly, proxy statements, and other information with the
Commission. In the event that we are no longer required to do so pursuant to the
Exchange Act, we have agreed to file with the SEC (unless the SEC will not
accept such a filing), so long as the notes remain outstanding, the following
items:
1. All quarterly and annual financial information, including a
"Management's Discussion and Ananlysis of Results of Operation and Financial
Condition," that would be included in a Form 10-Q and 10-K;
ii
<PAGE>
2. With respect to annual financial information only, a report by our
independent public accountants; and
3. All reports that we would file on a Form 8-K.
UNTIL 1999 (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 New Notes will be available initially in book-entry form, and the
Company expects that the New Notes 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 "Depository") and registered in its name or in the name of
Cede & Co., its nominee. Beneficial interests in the Global Note representing
the New Notes will be shown on, and transfers thereof to qualified institutional
buyers will be effected through, records maintained by the Depository 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--Exchanges of Book-Entry Notes for Certificated Notes."
iii
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS, BUT DOES
NOT CONTAIN ALL INFORMATION THAT MAY BE IMPORTANT TO YOU. THIS PROSPECTUS
INCLUDES SPECIFIC TERMS OF THE EXCHANGE OFFER, AS WELL AS INFORMATION REGARDING
OUR BUSINESS AND DETAILED FINANCIAL DATA. WE ENCOURAGE YOU TO READ ALL OF THE
DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND THEIR NOTES
APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE REQUIRED BY THE
CONTEXT, REFERENCES IN THIS PROSPECTUS TO "WE," "US," "NEXTLINK," OR THE
"COMPANY" REFER TO NEXTLINK COMMUNICATIONS, INC., ITS SUBSIDIARIES AND ITS 40%
INTEREST IN TELECOMMUNICATIONS OF NEVADA, LLC AND GIVES EFFECT TO OUR JUNE 4,
1998 REINCORPORATION FROM A WASHINGTON CORPORATION TO A DELAWARE CORPORATION. WE
ACCOUNT FOR OUR INVESTMENT IN TELECOMMUNICATIONS OF NEVADA, LLC USING THE EQUITY
METHOD. ALL OF OUR OPERATIONAL STATISTICS IN THIS PROSPECTUS INCLUDE 100% OF THE
OPERATIONAL STATISTICS OF TELECOMMUNICATIONS OF NEVADA, LLC. ALL OF OUR
FINANCIAL AND OPERATIONAL DATA FOR PERIODS PRIOR TO JANUARY 31, 1997 RELATE TO
NEXTLINK COMMUNICATIONS, L.L.C., OUR PREDECESSOR ENTITY. THE TERM "OLD NOTES"
REFERS TO THE 10 3/4% SENIOR NOTES DUE 2008 THAT WERE ISSUED ON NOVEMBER 12,
1998. THE TERM "NEW NOTES" REFERS TO OUR 10 3/4% SENIOR NOTES DUE 2008 WE WILL
ISSUE UNDER THIS EXCHANGE OFFER. THE TERM "NOTES" REFERS TO THE OLD NOTES AND
THE NEW NOTES, COLLECTIVELY. ALL CAPITALIZED TERMS USED IN THIS PROSPECTUS NOT
OTHERWISE DEFINED HEREIN HAVE THE MEANING ASCRIBED TO THEM IN THE INDENTURE
PURSUANT TO WHICH THE NOTES WILL BE ISSUED (THE "INDENTURE").
THE COMPANY
Craig O. McCaw founded NEXTLINK in 1994 and is the Company's largest and
controlling shareholder. We provide telephone and other telecommunications
services to our targeted customer base of small and medium-sized businesses
using our facilities-based networks and switches. We were one of the first
companies to take advantage of the Telecommunications Act of 1996 (the "Telecom
Act"), which opened the market for local telecommunications services to
competition. In the language of the Telecom Act, we are referred to as a
"competitive local exchange carrier" or "CLEC." We compete in each of our
markets principally against the existing telephone company in that area that had
a monopoly on local service prior to the entry of CLECs. Each of these existing
carriers are referred to in the Telecom Act as the "incumbent local exchange
carrier" or the "ILEC." We offer our customers an integrated package of high
quality local, long distance and enhanced telecommunications services at
competitive prices. We also are developing a national network strategy to enable
us to offer our customers complete, end-to-end voice and data communications
services over our own facilities.
We develop and operate high capacity, local fiber optic networks with broad
market coverage in a growing number of markets across the United States. We
currently operate 22 facilities-based networks, and provide switched local, long
distance and enhanced services in 36 markets in 14 states. We serve larger
markets, including New York, Los Angeles, Chicago, Atlanta, the San Francisco
Bay Area, Denver, Dallas and Miami, medium-sized markets, such as Salt Lake City
and Nashville, and clusters of smaller markets in Orange County, California and
central Pennsylvania.
In the markets where we provide switched local telecommunications services,
we offer our customers a bundled package of local and resold long distance
services. In these same local markets we also offer customers dedicated
transmission lines for their sole use, as well as direct access to our networks
to long distance carriers and other end users. Our target customer base within
our markets is small and medium-sized businesses, generally those businesses
with fewer than 50 telephone lines (these lines are generally called "access
lines" in our industry). Based on consultants' reports, we estimate that as of
year end 1997, there were approximately 170 million access lines nationwide,
including approximately 55 million business lines.
1
<PAGE>
Our customer base has been growing rapidly, as the following table
demonstrates:
<TABLE>
<CAPTION>
TOTAL ACCESS LINES
DATE MARKETS IN SERVICE INSTALLED
- ------------------------------------------- ----------------------- -------------------------
<S> <C> <C>
December 31, 1996.......................... 7 8,511
December 31, 1997.......................... 25 50,131
December 31, 1998.......................... 36 174,182
</TABLE>
We have also improved our quarterly rate of access line installations. The
following table illustrates this improvement:
<TABLE>
<CAPTION>
ACCESS LINE INSTALLATIONS
PERIOD PER QUARTER
- ---------------------------------------------------------- -------------------------------
<S> <C>
Fourth Quarter 1996....................................... 1,604
Fourth Quarter 1997....................................... 19,187
Fourth Quarter 1998....................................... 40,075
</TABLE>
Based on our recent successes in expanding and operating our existing
networks, as well as new opportunities in other markets, we have recently
expanded our growth plan. We now intend to develop networks throughout a
majority of the nation's top 30 markets and to serve markets with 27 million
addressable business lines by the end of 2000. We plan to launch switched
service in San Diego, Washington, D.C. and Seattle in the first half of 1999. We
plan to enter other large and medium-sized markets on a stand-alone basis where
economic, competitive and other market factors warrant such entry, and will
consider pursuing smaller markets where we can extend or cluster an existing
network with relatively little incremental capital.
We believe that a critical factor in the successful implementation of our
strategy is the quality of our management team and their extensive experience in
the telecommunications industry. NEXTLINK has built a management team that we
believe 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, and
George M. Tronsrue III, the Company's President and 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 18 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, Mr. Perry was Vice Chairman of AT&T Wireless Services, Inc.
and Mr. Hooper was Chief Executive Officer of AT&T Wireless Services.
BUSINESS STRATEGY
We have built a customer-focused, locally-oriented organization dedicated to
providing switched local and long distance telephone service at competitive
prices to small and medium-sized businesses. The six key components of our
strategy to become a leading provider of competitive telecommunications services
and maximize penetration of our targeted customer base are:
- DEVELOP HIGH CAPACITY FIBER OPTIC NETWORKS WITH BROAD MARKET COVERAGE.
We build high-capacity local networks in the central business districts of
our targeted markets using large fiber optic cable bundles. These cables are
capable of carrying high volumes of voice, data, video and Internet traffic
as well as other high bandwidth services. We employ a uniform technology
2
<PAGE>
platform within these networks based on Nortel DMS 500 switches and other
common transmission technologies. This architecture enables us to provide
direct connections to a high percentage of commercial buildings and ILEC
central switching offices situated near our network. We also expect this
architecture to result in a higher proportion of traffic that is both
originated and terminated on our network, thereby providing higher long-term
operating margins. In some markets, we lease unused fiber (generally called
"dark fiber") and fiber capacity from third parties to launch
facilities-based services and begin building a customer base in advance of
completing construction of our own fiber optic network in those markets. We
currently utilize both direct connections from our network to buildings in
the central business district as well as leased unbundled loop lines from
the ILEC to connect off-network customers to our network (commonly referred
to as the "last mile"). For off-network buildings, we are also evaluating
alternative means for establishing the transport that links our end-user to
our network through the use of local multipoint distribution service
(generally called "LMDS") wireless spectrum. See "--Recent
Developments--NEXTBAND" and "--Recent Developments--Acquisition of WNP
Communications, Inc." We also are developing plans for the deployment of
data switching and transmission equipment in 1999, including Asynchronous
Transfer Mode (ATM), Internet Protocol (IP) and frame-relay facilities, as
well as Digital Subscriber Line ("DSL") services. See "--Recent
Developments--Covad Strategic Alliance."
- CONTINUE MARKET EXPANSION. We plan to build our own local
facilities-based networks throughout a majority of the nation's top 30
markets and to serve markets with 27 million addressable business lines by
the end of 2000. We anticipate continuing our 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. We will continue to consider clustered market expansion in
geographic areas with smaller markets that offer us the opportunity to (1)
create economies of scale in management, marketing, sales and network
operations, and (2) capture a significant percentage of regional traffic and
develop regional pricing plans.
- DEVELOP NATIONAL CITY-TO-CITY LONG HAUL CONNECTIVITY. We are
developing a national strategy that will link our local networks to each
other. We anticipate executing this strategy by using our interest in a
16,000 route mile national fiber optic network that links 50 cities in the
United States and Canada. This national network is now under construction,
and we expect substantially all of its segments to be completed in years
2000 and 2001. Through this network, we will be able to provide our
customers with complete, end-to-end communications services over NEXTLINK
facilities. The network is designed to support switched voice circuits and
packet-switched data services, such as IP, ATM and frame relay. See
"--Recent Developments--INTERNEXT."
- CONTINUE TO FOSTER DECENTRALIZED LOCAL MANAGEMENT AND CONTROL. We
believe that our success has been enhanced by our locally based management
teams. The Company has recruited experienced entrepreneurs and industry
executives as presidents of each of its regional groups of 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 the following key areas: customer care,
network growth and building connectivity, and managing the relationship and
provisioning efforts with the ILEC. We believe that this local management
focus will provide a critical competitive edge in customer acquisition and
retention in each market.
- PROVIDE BUNDLED TELECOMMUNICATIONS THROUGH DIRECT SALES AND EFFECTIVE
CUSTOMER CARE ORGANIZATIONS. Currently, we primarily focus our sales efforts
on businesses and professional groups having fewer than 50 access lines. We
have a record of success in penetrating this market, where we believe that
ILECs are less likely to apply significant resources towards retaining
customers. To reach and retain these customers, we have established and are
continuing to build a highly
3
<PAGE>
motivated and experienced direct sales force and customer care organization
with direct and personal relationships with our customers. We have expanded
our sales force from 223 salespeople (152 dedicated to CLEC sales) at
December 31, 1997 to 288 salespeople (244 dedicated to CLEC sales) at
September 30, 1998. To ensure customer satisfaction, each customer is
assigned a single customer care representative who is responsible for
solving problems and responding to customer inquiries. We have expanded our
customer care organization from 162 customer care employees at December 31,
1997 to 220 customer care employees at September 30, 1998.
- CONTINUOUSLY IMPROVE PROVISIONING PROCESSES TO ACCELERATE REVENUE
GROWTH. The process of transitioning new CLEC customers from an ILEC's
network to our network is complex. Therefore, we continue to identify and
focus on implementing best provisioning practices so that we will be able to
provide rapid and seamless customer transitions. To support the provisioning
of our services, we are implementing a comprehensive information technology
platform geared toward delivering information and automated ordering and
provisioning capability directly to our internal staff. Eventually, we
anticipate being able to deliver this capability to the end user. We believe
that our provisioning practices and our comprehensive information technology
platform, as it is developed, will allow us to more rapidly implement
switched local services in our targeted markets and to shorten the time
between the receipt of a customer order and the generation of revenues. Our
improving capacity to provision access lines to our networks is reflected in
the increased number of access lines we install per business day. In those
markets where we have offered switched local services since 1996, we have
increased our installation rate from 108 installations per business day
during the fourth quarter of 1997 to 132 installations per business day
during the fourth quarter of 1998.
FINANCING PLAN
The net proceeds from the sale of the Old Notes, together with unrestricted
cash and investments balances of $1,176.8 million at September 30, 1998, has
provided us with $1,665.3 million of pro forma cash and investments available to
pursue our growth plan. Our current plan contemplates an aggressive expansion
into a number of new markets throughout the United States. We may pursue various
alternatives for achieving our growth strategy, including: additional network
construction; additional leases of network capacity from third party providers;
acquisitions of existing networks; and joint ventures such as INTERNEXT. We also
anticipate that a substantial amount of additional capital expenditures will be
made in 1999 and beyond. We expect the funding for these expenditures 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 governing the terms of
the notes does not limit the amount that we may invest directly or indirectly in
Restricted Subsidiaries or certain joint ventures (including INTERNEXT) engaged
in one or more Telecommunications Businesses or the amount of Debt that we may
incur to fund investments in Restricted Subsidiaries or joint ventures. See
"Description of the Notes."
RECENT DEVELOPMENTS
INTERNEXT
In July 1998, we announced the formation of INTERNEXT L.L.C. ("INTERNEXT").
NEXTLINK and Eagle River Investments, L.L.C. ("Eagle River") each beneficially
owns 50% of INTERNEXT. Eagle River is the holding company (owned principally by
Craig O. McCaw) that is our largest shareholder. INTERNEXT has entered into a
Cost Sharing and IRU Agreement (the "Cost Sharing Agreement") with Level 3
Communications, LLC ("Level 3"). Level 3 is constructing a national fiber optic
network that is expected to cover more than 16,000 route miles with six or more
conduits and connect 50 cities in the United States and Canada. INTERNEXT has an
exclusive interest in 24 fibers in a shared, filled conduit. INTERNEXT also has
an exclusive interest in one empty
4
<PAGE>
conduit and the right to 25% of the fibers pulled through the sixth and any
additional conduits in the network. INTERNEXT has a $700 million commitment
under the Cost Sharing Agreement, which is payable largely as segments of the
network are built out and accepted by INTERNEXT. INTERNEXT expects the network
build-out to occur substantially in years 2000 and 2001. We have guaranteed 50%
of the financial obligations of INTERNEXT under the Cost Sharing Agreement.
Together with Eagle River, we also have guaranteed the performance of certain
other obligations of INTERNEXT under the Cost Sharing Agreement.
NEXTBAND
NEXTLINK and Nextel Communications, Inc., a wireless telecommunications
company in which Eagle River holds a substantial interest, each owns 50% of
NEXTBAND Communications, L.L.C. NEXTBAND acquired LMDS licenses for 42 markets
covering approximately 114 million persons located within the licensed areas
("POPs") through a Federal Communications Commission ("FCC")-sponsored auction.
We have reached an agreement in principle with Nextel to acquire Nextel's 50%
interest in NEXTBAND. LMDS is a newly-authorized fixed broadband
point-to-multipoint service which the license holder may deploy for wireless
local loop telephony, mobile wireless backhaul services, high-speed data
transfer, video broadcasting and videoconferencing, in any combination. We are
evaluating means to use our access to NEXTBAND's LMDS spectrum to enhance our
ability to connect customers to our fiber rings and to deploy fixed wireless
telephony technologies using LMDS spectrum, where we determine that it is cost
effective to do so. Our acquisition of Nextel's interest in NEXTBAND will be
subject to certain conditions, including approval by the FCC.
ACQUISITION OF WNP COMMUNICATIONS, INC.
On January 14, 1999, we entered into an agreement to acquire WNP
Communications, Inc. ("WNP") for approximately $695 million, payable in cash and
our Class A Common Stock. Of this amount, approximately $152.9 million will be
paid to the FCC for license fees, including interest thereon. Pursuant to this
acquisition, we will receive 39 A block LMDS wireless licenses covering 98
million POPs and one B block LMDS wireless license covering 16 million POPs.
After combining the wireless LMDS licenses that we have agreed to acquire from
WNP with the licenses that we own through our interest in NEXTBAND, we will
become the largest holder of LMDS wireless spectrum in North America, covering
approximately 95 percent of the POPs in the 30 largest markets in the United
States. Our acquisition of WNP is subject to certain conditions, including
approval by the FCC.
COVAD STRATEGIC ALLIANCE
On January 4, 1999, we announced a strategic agreement with Covad
Communications Group, Inc., a leading provider of high-speed digital
communication services using DSL technology. DSL technology is designed to
decrease performance bottlenecks of the existing public switched telephone
networks by increasing the data carrying capacity of copper telephone lines.
Under this agreement, we have invested $20 million in Covad. In addition, Covad
will become a preferred provider of DSL services to NEXTLINK. NEXTLINK will also
be a preferred provider to Covad for local transport and collocation services
for Covad's regional data centers.
MANAGEMENT
At its meeting on June 4, 1998, our Board of Directors amended the Company's
Bylaws to increase the size of the Board from nine to ten persons. At that
meeting, our Board appointed Gregory J. Parker to fill the new vacancy. Mr.
Parker, who is 41 years old, is President of Ampersand Holdings, Inc., an
investment management company. He was a partner of the law firm of Seed, Mackall
& Cole LLP from 1990 to 1998, where his practice emphasized financing, capital
investment and real estate matters. From 1994 to 1997, he was Managing Partner
of the firm. Mr. Parker also is
5
<PAGE>
the trustee of the Ampersand Telecom Trust ("Ampersand"). Ampersand owns
9,722,649 shares of our Class B Common Stock. Ampersand's holdings represent 33%
of the outstanding shares of our Class B Common Stock, 18% of the total
outstanding shares of our common stock, and 31% of the total voting power of our
outstanding common stock. The beneficiary of Ampersand is Wendy P. McCaw.
Effective July 17, 1998, James F. Voelker resigned as President and from our
Board of Directors. Our Board of Directors elected George M. Tronsrue, III, who
had been serving as the Company's Chief Operating Officer, to the additional
office of President, but has not filled the Board of Directors vacancy resulting
from Mr. Voelker's resignation.
Effective January 21, 1999, Scot Jarvis resigned from our Board of
Directors. We have announced that we expect our Board of Directors to appoint
Nicolas Kauser to our Board of Directors to fill the vacancy created by the
resignation of Mr. Jarvis. From 1994 until his recent retirement, Mr. Kauser was
Executive Vice President and Chief Technology Officer of AT&T Wireless Services.
From 1990 until 1994, Mr. Kauser was Chief Technology Officer of McCaw Cellular,
which merged with AT&T Wireless in 1994.
6
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer........... We are offering to exchange $1,000 principal amount of our
10 3/4% Senior Notes due 2008 that have been registered
under the Securities Act for each $1,000 principal amount of
our outstanding 10 3/4% Senior Notes due 2008 which were
issued on November 4, 1998 in a private offering. In order
to exchange your unregistered notes, you must properly
tender your Old Note and we must properly accept your
tender. We will exchange all outstanding Old Notes that are
validly tendered and not validly withdrawn. When the
Exchange Offer is complete, the terms of the New Notes will
be identical in all material respects to the terms of the
Old Notes. The New Notes, however, will not bear legends
restricting their transfer because they will have been
registered under the Securities Act. In addition, because
the New Notes are registered, they will not have terms
providing for an increase in interest rate in the event they
are not registered.
Minimum Condition............ The Exchange Offer is not subject to any minimum amount of
Old Notes being tendered for exchange.
Expiration Date.............. The Exchange Offer will expire at 5:00 p.m., New York City
time, on 1999, unless we decide to extend the
expiration date.
Exchange Date................ We will consummate the exchange of New Notes for Old Notes
on the first business day after the expiration date.
Conditions to the Exchange
Offer...................... The Exchange Offer is subject to only one condition: that
the Exchange Offer not violate applicable law or any
applicable interpretation of the Staff of the Securities and
Exchange Commission.
Withdrawal Rights............ You may withdraw your tender of Old Notes at any time before
5:00 p.m., New York City time, on the expiration date.
Federal Income Tax
Consequences............... The exchange of Notes will not be a taxable event for United
States federal income tax purposes. You will not recognize
any taxable gain or loss or any interest income as a result
of such exchange.
Certain Representations...... If you desire to participate in the Exchange Offer, you will
be required to make the following representations:
- You are not one of our "affiliates" (as defined in Rule
405 of the Securities Act);
- You 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; and
- You are acquiring the New Notes in the ordinary course of
your business.
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Transfer Restrictions on New
Notes...................... If the representations that you make to us are true then we
believe that the New Notes issued in the Exchange Offer may
be offered for resale, resold and otherwise transferred by
you without compliance with the registration and prospectus
delivery provisions of the Securities Act. Otherwise, if you
transfer any New Note issued to you without delivering a
prospectus meeting the requirements of the Securities Act or
without an exemption from registration of your New Notes
from such requirements, you may incur liability under the
Securities Act. We will not assume or indemnify you against
such liability.
If you are a broker-dealer and you are issued New Notes in
the Exchange Offer for your own account in exchange for Old
Notes and you acquired the Old Notes which were acquired by
that broker-dealer as a result of market-making or other
trading activities you must acknowledge that you will
deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of the New
Notes issued in the Exchange Offer. A broker-dealer may use
this Prospectus for an offer to resell, resale or other
retransfer of the New Notes.
Effect on Holders of Old You are entitled to exchange your Old Notes for New Notes
Notes...................... with substantially identical terms. The Exchange Offer is
intended to satisfy these rights. After the Exchange Offer
is complete, you will no longer be entitled to any exchange
or registration rights with respect to your Old Notes. If
you do not tender your Old Notes, or if your Old Notes are
tendered but unaccepted, your Old Notes will be subject to
the restrictions on transfer provided for in the Old Notes
and the indenture relating to the Old Notes. 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.
</TABLE>
8
<PAGE>
THE NEW NOTES
<TABLE>
<S> <C>
Issuer....................... NEXTLINK Communications, Inc.
Maturity..................... November 15, 2008.
Interest..................... Interest accrues from November 12, 1998 at the rate of
10 3/4% per year, payable semi-annually in arrears on each
May 15 and November 15, beginning on May 15, 1999.
Ranking...................... The New Notes:
- are unsecured indebtedness of NEXTLINK;
- rank equal in right of payment with all of our existing
and future senior unsecured obligations;
- are senior in right of payment to all of our existing and
future subordinated indebtedness;
- will be effectively subordinated to all indebtedness and
other liabilities (including trade payables) and commitments
of our subsidiaries; and
- will be effectively subordinated to certain of our secured
indebtedness to the extent of such security interests.
Optional Redemption.......... On or after November 15, 2003, the New Notes will be
redeemable, at our option, in whole or in part, at any time
or from time to time, at the redemption prices described in
this Prospectus under the heading "Description of the
Notes--Optional Redemption" plus accrued and unpaid
interest, if any, to the date of redemption. In addition,
prior to November 15, 2001, New Notes having a principal
amount of up to approximately $166.667 million may be
redeemed at a redemption price equal to 112.75% of the
principal amount thereof with the net cash proceeds of
certain public offerings of equity in our company.
Change of Control............ Upon certain specific kinds of changes of control of
NEXTLINK, we are required to make an offer to purchase the
registered Notes from you at a purchase price equal to 101%
of their aggregate principal amount, plus accrued and unpaid
interest, if any, to the date of purchase.
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Covenants.................... The indenture under which the Old Notes have been and the
New Notes are being issued contains certain covenants for
your benefit which, among other things and subject to
certain exceptions, restrict our ability and the ability of
our subsidiaries to:
- incur indebtedness;
- make certain payments;
- issue capital stock of certain of our subsidiaries;
- repurchase our stock or subordinated indebtedness;
- enter into transactions with stockholders and affiliates;
- create liens;
- pay dividends or make other distributions;
- engage in sale-leaseback transactions; and
- consolidate, merge or sell all or substantially all of our
assets or the assets of our subsidiaries.
The indenture allows modification and amendment of these and
other covenants by a vote of holders of a majority in
aggregate principal amount of the notes, subject to certain
exceptions described in the Indenture. Also, holders of a
majority in aggregate principal amount of the Notes may
waive our compliance with certain other restrictive
covenants in the indenture.
Use of Proceeds.............. We will not receive any proceeds from the Exchange Offer.
</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" immediately following this summary for a discussion of
certain factors that you should consider in connection with your investment in
the New Notes to be issued in the Exchange Offer.
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<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS)
We have summarized below our historical consolidated financial data as of
and for the years ended December 31, 1996 and 1997. This data is derived from
and qualified by reference to our audited Consolidated Financial Statements
included in our 1997 Form 10-KSB, which is incorporated in this Prospectus by
reference. Our 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.
You should be aware that the operating results shown below for the three and
nine-month periods ended September 30, 1998 may not be indicative of what actual
results will be for the full year ending December 31, 1998. The operating data
presented below are derived from our 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," included in our 1997 Form 10-KSB and our 1998 Form
10-Qs. All data should also be read in conjunction with our audited and
unaudited Consolidated Financial Statements and notes thereto, which are also
included in our 1997 Form 10-KSB and our 1998 Form 10-Qs. Our 1997 Form 10-KSB
and our 1998 Form 10-Qs are incorporated in this Prospectus by reference.
Our financial results for the years ended December 31, 1996 and 1997 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>
NINE MONTHS THREE MONTHS ENDED
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------- --------------------
1996 1997 1997 1998 1997 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue..................................................... $ 25,686 $ 57,579 $ 35,058 $ 96,392 $ 13,390 $ 37,817
Costs and expenses:
Operating................................................. 25,094 54,031 35,857 85,448 13,916 32,828
Selling, general and administrative....................... 31,353 75,732 48,421 109,599 19,318 41,565
Deferred compensation..................................... 9,914 3,247 1,449 3,104 334 1,720
Depreciation and amortization............................. 10,340 27,190 14,460 37,141 5,529 14,778
--------- --------- --------- --------- --------- ---------
Loss from operations........................................ (51,015) (102,621) (65,129) (138,900) (25,707) (53,074)
Interest income............................................. 10,446 27,827 15,560 56,116 4,868 21,559
Interest expense............................................ (30,876) (54,495) (32,787) (99,050) (10,746) (37,434)
--------- --------- --------- --------- --------- ---------
Loss before minority interests.............................. (71,445) (129,289) (82,356) (181,834) (31,585) (68,949)
Minority interests.......................................... 344 285 -- -- -- --
--------- --------- --------- --------- --------- ---------
Net loss.................................................... $ (71,101) $(129,004) $ (82,356) $(181,834) $ (31,585) $ (68,949)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
OTHER DATA:
Ratio of earnings to fixed charges(1)....................... -- -- -- -- -- --
EBITDA(2)................................................... $ (30,761) $ (72,184) $ (49,220) $ (98,655) $ (19,844) $ (36,576)
Summary Cash Flow Information:
Net cash used in operating activities..................... (40,563) (94,495) (59,233) (104,770) (13,436) (25,717)
Net cash provided by (used in) investing activities....... (227,012) (470,195) (141,490) (793,401) (36,032) 117,902
Net cash provided by (used in) financing activities....... 343,032 876,957 268,004 901,447 (5,207) (265)
Capital expenditures, including acquisitions of businesses
(net of cash acquired) and investments in affiliates
(3)..................................................... 85,872 232,069 130,727 209,136 36,032 82,484
</TABLE>
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<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
AS OF DECEMBER 31, -------------------------
-------------------- AS ADJUSTED
1996 1997 ACTUAL (4)
--------- --------- --------- --------------
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities............... $ 124,520 $ 742,357 $1,176,843 $1,665,343
Pledged securities(5).......................................... 101,438 62,610 42,992 42,992
Working capital................................................ 137,227 741,685 1,160,244 1,648,744
Property and equipment, net.................................... 97,784 253,653 448,550 448,550
Total assets................................................... 390,683 1,217,153 2,026,178 2,526,178
Long-term debt and capital lease obligations, less current
portion...................................................... 356,262 757,640 1,518,167 2,018,167
14% Preferred Shares, net of issuance costs.................... -- 313,319 349,174 349,174
6 1/2% Cumulative Convertible Preferred Stock, net of issuance
costs........................................................ -- -- 194,084 194,084
Equity units subject to redemption............................. 4,950 -- -- --
Class B common stock subject to redemption..................... -- 4,950 -- --
Total shareholders' equity (deficit)........................... (18,654) 68,460 (137,828) (137,828)
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF AS OF AS OF AS OF
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1997 1997 1998 1998 1998
------------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
OPERATING DATA(6):
Route miles(7)................................. 1,757 1,897 2,036 2,099 2,150
Fiber miles(8)................................. 124,399 133,224 141,788 152,225 158,987
On-net buildings connected(9).................. 479 513 571 658 736
Switches installed(10)......................... 13 13 14 17 18
Access lines in service(11).................... 30,944 50,131 72,834 102,887 134,107
Employees...................................... 1,027 1,327 1,499 1,765 2,065
</TABLE>
- ------------------------------
(1) For the years ended December 31, 1996 and 1997, and for the three and
nine-month periods ended September 30, 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, $31,585,
$82,356, $68,949 and $181,834, 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>
THREE MONTHS ENDED
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------- --------------------
1996 1997 1997 1998 1997 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Cash expended..................................... $ 72,042 $ 210,545 $ 130,727 $ 209,136 $ 36,032 $ 82,484
Debt issued and assumed........................... 8,228 5,000 -- -- -- --
Equity issued..................................... 5,602 16,524 -- -- -- --
--------- --------- --------- --------- --------- ---------
Total............................................. $ 85,872 $ 232,069 $ 130,727 $ 209,136 $ 36,032 $ 82,484
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
(4) As adjusted to give effect to the net proceeds to the Company of the sale of
the Old 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 include 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 September 30,
1998, the Company had 10,424 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 as well as the switch installed in NEXTLAB, the Company's
testing facility.
(11) Represents the number of access lines in service for which the Company is
billing services, including those lines which are provided through resale of
Centrex services. The Company serviced 3,312 resold Contrex access lines as
of September 30, 1998. The Company defines an access line as a telephone
connection between a customer purchasing local telephone services and
NEXTLINK. This connection does not include the concept of access line
equivalents (ALEs), and is a one-for-one relationship with no multipliers
used for trunk ratios, except for those trunks over which primary rate
interface (PRI) service is provided, which are counted as 23 access lines.
As of December 31, 1998, the Company had 174,182 access lines installed.
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<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, before
tendering your Old Notes for the New Notes offered in this exchange offer, you
should consider carefully the factors which follow. Other than factors entitled
"Consequences of Failure to Exchange" and "Absence of a Public Market for the
New Notes; Possible Volatility of Note Price", these risk factors are generally
applicable to the Old Notes as well as the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
If you do not exchange your Old Notes for New Notes pursuant to this
Exchange Offer, you will continue to be subject to the restrictions on transfer
of your Old Notes as set forth in the legend set forth on the Old Notes because
the Old Notes have not been registered under the Securities Act or applicable
state securities laws. In general, the Old Notes may be offered or sold only if
they are registered under the Securities Act and applicable state securities
laws, unless they are sold pursuant to an exemption from the Securities Act and
state securities laws. Except under certain limited circumstances, we do not
intend to register the Old Notes under the Securities Act.
If you tender in the Exchange Offer for the purpose of participating in a
distribution of New Notes, the New Notes that you receive will be deemed to be
restricted securities. To the extent that your New Notes are deemed to be
restricted securities, you will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale of such New Notes. To the extent Old Notes are tendered and accepted in
the Exchange Offer, the trading market, if any, for the Old Notes which are not
tendered, and the price at which the Old Notes may be sold, could be adversely
affected. See "The Exchange Offer."
LEVERAGE
As of September 30, 1998, our outstanding consolidated liabilities
(including current portion) were $1,620.7 million. As adjusted for the sale of
the Old Notes, our outstanding consolidated liabilities (including current
portion) would have been $2,120.7 million. Of the consolidated liabilities
outstanding as of September 30, 1998:
- $350.0 million was outstanding under the 12 1/2% Notes, which will rank
PARI PASSU with the Notes;
- $400.0 million was outstanding under the 9 5/8% Notes, which will rank
PARI PASSU with the Notes,
- approximately $334.4 million was outstanding under the 9% Notes, which
will rank PARI PASSU with the Notes;
- approximately $418.9 million was outstanding under the 9.45% Notes, which
will rank PARI PASSU with the Notes; and
- approximately $60.2 million was outstanding pursuant to miscellaneous
obligations of the Company's subsidiaries.
Pursuant to the Indenture, we and our subsidiaries are limited in, but not
prohibited from, incurring additional indebtedness, and we 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 our subsidiaries effectively will rank senior to the
Notes. See "Description of the Notes." Our ability to satisfy our obligations
will be dependent upon our future performance, which is subject to prevailing
economic conditions and financial, business, regulatory and other factors,
including factors beyond our control. In the near term, we do not expect our
operating cash flow to be sufficient to meet our debt service requirements. We
cannot assure you that we will be able to repay the Notes or other indebtedness
at maturity or that we will be able to
13
<PAGE>
refinance the Notes or other indebtedness at maturity. See "Capitalization" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
In addition, our operating flexibility with respect to certain business
matters is, and will continue to be, limited by covenants contained in the
indenture relating to the Notes that you hold and the indentures relating to the
12 1/2% Notes, the 9 5/8% Notes, the 9% Notes and the 9.45% Notes. Among other
things, these covenants limit our ability and our subsidiaries' ability 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. We can give no assurance that these covenants
will not adversely affect our ability to finance our future operations or our
capital needs or our ability to engage in other business activities that may be
in our interest. In addition, the terms of the our 14% Senior Exchangeable
Redeemable Preferred Shares, par value $.01 per share (the "14% Preferred
Shares"), restrict our ability to incur additional indebtedness. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
HOLDING COMPANY STRUCTURE; UNSECURED OBLIGATIONS; EFFECTIVE SUBORDINATION OF THE
NOTES
We are a holding company and we derive substantially all of our revenues
from our subsidiaries. We intend to lend or contribute substantially all of the
net proceeds from the sale of the Notes to certain of our subsidiaries or joint
ventures.
The Notes are not secured by any of the assets of the Company. The indenture
relating to the Notes permits us to incur secured debt, including, among other
things:
- unlimited amounts of purchase money indebtedness; and
- indebtedness up to the greater of (x) $175 million and (y) 85% of the
Eligible Receivables (as defined in the indenture), which may be used for
any purpose.
With respect to assets securing any indebtedness, holders of any such
secured indebtedness will have claims that are prior to the claims of the
holders of the Notes. In addition, the Notes will be effectively subordinated to
all indebtedness and other liabilities and commitments (including trade
payables) of our subsidiaries. See "Description of the
Notes--Covenants--Limitation on Consolidated Indebtedness" and "--Limitation on
Debt and Preferred Stock of Restricted Subsidiaries." As of September 30, 1998,
$43.0 million of U.S. Treasury securities was pledged to secure our obligations
under the 12 1/2% Notes.
We will be dependent upon payments from our subsidiaries to generate the
funds necessary to meet our obligations, including the payment of principal of
and interest on the Notes. The ability of our subsidiaries to make these
payments will be subject to, among other things, the availability of sufficient
cash and may be subject to restrictive covenants in future debt agreements. Our
subsidiaries are party to certain capital lease obligations. We may borrow funds
at the subsidiary level in the future.
NEGATIVE CASH FLOW AND OPERATING LOSSES; LIMITED HISTORY OF OPERATIONS
The development of our businesses and the installation and expansion of our
networks require significant expenditures. A substantial portion of these
expenditures must be made before we may realize any revenue. Certain of these
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. These negative cash
flows and operating losses will continue until an adequate revenue base is
established. We cannot assure you that an adequate revenue base will be
established or sustained for any of our networks. Our operations resulted in a
net loss of $129.0 million and negative cash flow from operations of 94.5
million for the year ended December 31,
14
<PAGE>
1997. We also incurred a net loss of $181.8 million and negative cash flow from
operations of $104.8 million for the nine-month period ended September 30, 1998.
We will continue to incur significant expenditures in the future in connection
with the acquisition, development and expansion of our networks, services and
customer base. We cannot assure you that we will achieve or sustain
profitability or generate positive cash flow in the future. See "Selected
Historical Consolidated Financial and Operating Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
SIGNIFICANT FUTURE CAPITAL REQUIREMENTS; SUBSTANTIAL INDEBTEDNESS
We will require significant capital expenditures in order to expand our
existing networks and services. We will also require significant capital
expenditures for the development and acquisition of new networks and services.
We will continue to evaluate additional revenue opportunities in each of our
markets. When and if attractive additional opportunities develop, we plan to
make capital investments in our networks that might be required to pursue such
opportunities. We expect to meet our additional capital needs with:
- the proceeds from credit facilities and other borrowings;
- the proceeds from public or private sales of debt securities;
- the public or private sale or issuance of equity securities; and
- through joint ventures.
We cannot assure you that we will be successful in raising sufficient
additional capital on terms that we will consider acceptable. In the near term,
we do not expect our operations to produce positive cash flow in sufficient
amounts to service our debt and to pay cash dividends on our 6 1/2% Cumulative
Convertible Preferred Stock, liquidation preference $50 per share (the "6 1/2%
Preferred Stock"). Based on our obligations as of September 30, 1998, after
giving effect to the sale of the Old Notes, we will require approximately $157.3
million in unrestricted cash in order to service our debt and make payment of
preferred dividends in 1999. If we fail to raise and generate sufficient funds,
we may be required to delay or abandon some of our planned future expansion or
expenditures, which could have a material adverse effect on our growth and our
ability to compete in the telecommunications services industry. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
We expect to incur substantial additional indebtedness (including secured
indebtedness) during the next few years to finance, among other things, the
following:
- the acquisition, construction and expansion of networks;
- the potential acquisition of telecommunications companies;
- the construction and deployment of facilities associated with LMDS
spectrum and the possible acquisition of additional spectrum;
- the purchase of additional switches and data switching and transmission
equipment, including ATM and frame-relay facilities;
- the offering of switched local and long distance services;
- the introduction of other new service offerings, including DSL services;
- the development and implementation of a comprehensive information
technology platform; and
- the funding of INTERNEXT and the construction and deployment of facilities
associated with INTERNEXT's network.
15
<PAGE>
The indenture relating to the Notes does not place a limit on the amount
that we may invest directly or indirectly in:
- Restricted Subsidiaries;
- certain joint ventures (including INTERNEXT) engaged in one or more
Telecommunications Businesses; or
- the amount of Debt that we may incur to fund investments in Restricted
Subsidiaries or such joint ventures.
As of September 30, 1998, after giving effect to the sale of the Old Notes,
our total consolidated liabilities would have been approximately $2,120.7
million. The future funding requirements discussed above are based on our
current estimates. We cannot assure you 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 our operations (including the construction
and acquisition of additional networks) will depend on, among other things, our
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, we have experienced rapid growth since our inception, and we believe
that sustained growth places a strain on our operational, human and financial
resources. The following items are important for us to manage our growth:
- we must continue to improve our operating and administrative systems
including the continued development of effective systems relating to
ordering, provisioning and billing for telecommunications services; and
- we must continue to attract and retain qualified managerial, professional
and technical personnel.
We cannot assure you that we will be able to implement and manage
successfully our growth strategy. Our growth strategy also involves the
following risks:
QUALIFIED PERSONNEL. We believe that a critical component for our success
will be the attraction and retention of qualified managerial, professional and
technical personnel. We expect to continue to experience significant competition
in the attraction and retention of personnel who possess the skill sets that we
seek. Although we have been successful in attracting and retaining qualified
personnel, we cannot assure you that we will not experience a shortage of
qualified personnel in the future.
SWITCH AND EQUIPMENT INSTALLATION. The provision of switched local service
is an essential element of our current strategy. We cannot assure you that the
installation of the required switches, fiber optic cable and associated
electronics necessary to implement our business plan will continue to be
completed on time. Additionally, we cannot assure you that, during the testing
of these switches and related equipment, we will not experience technological
problems that cannot be resolved. If we fail to install and operate additional
switches and other network equipment successfully, there could be a material
adverse effect upon our ability to enter additional markets as a single source
provider of telecommunications services.
INTERCONNECTION AGREEMENTS. We have agreements or are currently negotiating
agreements for the interconnection of our networks with the networks of the ILEC
covering each market in which we either have or are constructing a network. We
may be required to negotiate new, or renegotiate existing, interconnection
agreements as we enter new markets in the future. We cannot assure you that
16
<PAGE>
we will successfully negotiate such other agreements for interconnection with
the ILEC or renewals of existing interconnection agreements. If we fail to
negotiate required interconnection agreements, there could be a material adverse
effect upon our ability to enter rapidly the telecommunications market as a
single source provider of telecommunications services.
ORDERING, PROVISIONING AND BILLING. We have developed processes and
procedures and are working with external vendors, including the ILECs, in the
following areas: (1) the implementation of customer orders for services; (2) the
provisioning, installation and delivery of such services; and (3) monthly
billing for those services. In connection with our development of a
comprehensive information technology platform, we are developing and
implementing automated internal systems for processing customer orders,
provisioning and billing. If we fail to develop effective internal processes and
systems for these service elements or if our current vendors or the ILECs fail
to deliver effective ordering and provisioning services (including establishing
sufficient capacity and facilities on the ILECs' networks to service the
Company), there could be a material adverse effect upon our ability to achieve
our growth strategy.
PRODUCTS AND SERVICES. We expect to continue to enhance our systems in
order to offer our customers switched local services and other enhanced products
and services in all of our networks as quickly as practicable and as permitted
by applicable regulations. We believe our ability to offer, market and sell
these additional products and services will be important to our ability to meet
our long-term strategic growth objectives. However, our ability to offer, market
and sell these additional products and services is also dependent on our ability
to obtain the needed capital, additional favorable regulatory developments and
the acceptance of such products and services by our customers. We cannot assure
you that we will be able to obtain such capital or that such developments or
acceptance will occur.
ACQUISITIONS. In addition to expansion through internal development, we may
expand our networks and service offerings through acquisitions, which could be
material. Such acquisitions, if made, could divert our resources and management
time and would require integration with our 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 us or would be
successfully integrated into our operations.
NEED TO OBTAIN AND MAINTAIN PERMITS AND RIGHTS-OF-WAY
In order for us to acquire and develop our networks, we 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
highway authorities, local governments and transit authorities. We cannot assure
you that we will be able to maintain our existing franchises, permits and rights
or to obtain and maintain the other franchises, permits and rights needed to
implement our business plan on acceptable terms. We do not believe that any of
the existing arrangements will be canceled or will not be renewed as needed in
the near future. However, cancellation or non-renewal of certain of such
arrangements could materially adversely affect our business in the affected
metropolitan area. In addition, our failure to enter into and maintain any such
required arrangements for a particular network, including a network which is
already under development, may affect our ability to acquire or develop that
network.
COMPETITION
In each of the markets served by our networks, we compete 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. Although recent FCC administrative
decisions and
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initiatives provide increased business opportunities to telecommunications
providers such as us, these regulations also provide the ILECs with increased
pricing flexibility for their private line, 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, then our
income (as well as the income of other competitors to the ILECs) could be
materially adversely affected. Other decisions by regulatory agencies which give
the ILECs increased pricing flexibility or other regulatory relief could also
have a material adverse effect on the Company (as well as other competitors to
the ILECs). For instance, in an effort to speed the nationwide deployment of
advanced telecommunications services, the FCC has proposed to allow ILECs' to
deploy across LATA boundaries advanced telecommunications services, including
data services, even where the ILEC has not yet met the Telecom Act's conditions
for entering the long distance market.
We also face, and expect 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 marketplace such as AT&T
Corp. ("AT&T"), MCI WorldCom, Inc. ("MCI WorldCom") and Sprint Corporation
("Sprint"), 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, we
could face significant new competitors as a result of a continuing trend toward
combinations and strategic alliances in the telecommunications industry. The
Telecom Act includes provisions which impose certain regulatory requirements on
all local exchange carriers, including NEXTLINK, 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 our ability to successfully compete against ILECs and other
telecommunications service providers. We also compete with equipment vendors and
installers, and telecommunications management companies with respect to certain
portions of our business. Many of our 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.
We also compete with long distance carriers in the provision of long
distance services. Although the long distance market is dominated by three major
competitors, AT&T, MCI WorldCom and Sprint, hundreds of other companies also
compete in the long distance marketplace.
REGULATION
We are subject to varying degrees of federal, state and local regulation. In
each state in which we desire to offer our services, we are required to obtain
authorization from the appropriate state commission. Although we have received
such authorization for each of our operational markets, there can be no
assurance that we will receive such authorization for markets to be launched in
the future. We are not currently subject to price cap or rate of return
regulation, nor are we currently required to obtain FCC authorization for the
installation, acquisition or operation of our wireline network facilities.
Further, the FCC has determined that non-dominant carriers, such as NEXTLINK and
our subsidiaries, are not required to file interstate tariffs for interstate
access and domestic long distance service on an ongoing basis. However, on
February 13, 1997, the United States Court of Appeals for the District of
Columbia granted motions for a stay of this FCC detariffing order pending
judicial review of that order. The result of this stay is that all carriers,
including NEXTLINK and our subsidiaries, must continue to file tariffs for
interstate long distance services. The FCC requires us and our subsidiaries to
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file interstate tariffs on an ongoing basis for interstate and international
interexchange traffic. Our 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, we cannot assure you 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 NEXTLINK. 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, we
cannot assure you that these ILECs will negotiate quickly with us (or other
competitors) for the required interconnection of our networks (or the
competitor's network) with those of the ILEC.
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 flexibility to enable them to respond to competition for special
access, private line services and advanced telecommunications services. In
September 1998, the FCC ruled that certain ILEC "teaming" arrangements with long
distance carriers, which would have allowed ILECs to offer a form of "one stop
shopping" in competition with our offerings, violated the Telecom Act. However,
the ILECs have filed petitions with the United States Court of Appeals for the
District of Columbia seeking review of this FCC ruling, and if the courts uphold
such "teaming" arrangements, our 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 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. On
January 25, 1999, the Supreme Court, in a decision generally favorable to the
CLEC industry, reinstated all but one of the FCC rules vacated by the Eighth
Circuit. In finding that the FCC has general jurisdiction to implement the
Telecom Act's local competition provisions, including pricing and enforcement
jurisdiction, the Supreme Court's decision restored the balance of power in
telecommunications regulation between the FCC and the states. The Supreme Court
answered the following questions regarding the scope of FCC authority under the
Telecom Act: (1) the Court affirmed that the FCC, rather than the states, has
the power to adopt rules implementing key provisions of the Telecom Act; (2) the
Court held that the FCC correctly interpreted the meaning of the term "network
element" which defines the parts of an ILEC's operations that may be subject to
the "unbundling" requirement of the Telecom Act; (3) the Court, however, held
that the FCC did not correctly determine which network elements must be
unbundled and made available to CLECs; (4) the Court held that the FCC correctly
determined that competitors need not own their own facilities to use network
elements; (5) the Court held that the FCC has the power to forbid ILECs from
separating network elements that are normally provisioned as a combination; and
(6) the Court also held that the FCC's "pick and choose" rule, which allows
competitors to adopt specific provisions of other carriers' interconnection
agreements is consistent with the Telecom Act. While it is unclear how the
Supreme Court's ruling will affect rules for local competition developed by the
states, it does, however, confirm the FCC's role in establishing national
telecommunications policy and creates greater certainty regarding the rules
governing local competition going forward.
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RAPID TECHNOLOGICAL CHANGES; LICENSES
The telecommunications industry is subject to rapid and significant changes
in technology. We cannot predict how these changes, which include changes
relating to emerging wireline and wireless transmission and switching
technologies and data transmission technologies, including ATM, frame-relay and
the Internet, will affect us. In addition, from time to time we receive requests
to consider licensing certain patents held by third parties that may have
bearing on our interactive voice response ("IVR") services. We consider such
requests on their merits and, should we be required to pay license fees in the
future, such payments, if substantial, could have a material adverse effect on
our results of operations.
RISKS RELATED TO DATA TRANSMISSION
We are still developing and defining material aspects of plans for the
deployment of data switching and transmission equipment in 1999, including ATM
and frame-relay facilities. We are also still developing and defining material
aspects of our relationship with Covad. We cannot assure you that we will
develop and implement a successful and profitable data transmission strategy, or
that implementation of our data transmission strategy will not involve
substantial expense. In addition, to the extent that we utilize Covad and its
DSL technology to implement this strategy, we are subject to risks related to
DSL technology, including the ability of Covad's DSL networks to perform as
planned and the growth in demand for DSL-based services.
RISKS RELATED TO NATIONAL NETWORK STRATEGY
The construction of the INTERNEXT national fiber optic network is being
managed by and is under the control of Level 3. Although Level 3 Communications
Inc., Level 3's parent corporation, has agreed to guarantee the obligations of
Level 3 for the benefit of INTERNEXT, we cannot assure you that the network will
be completed, that it will be placed in service within the expected time frame
or that it will contain the contemplated number of fibers and conduits
throughout the entire network. Also, we have guaranteed 50% of the financial
obligations of INTERNEXT under the Cost Sharing Agreement and, together with
Eagle River, we have also guaranteed the performance of certain other
obligations of INTERNEXT under the Cost Sharing Agreement. Although INTERNEXT
itself may seek and raise capital to fund its operations, including its
obligations under the Cost Sharing Agreement, we may be required to make
significant capital contributions for the benefit of INTERNEXT or make
significant payments to Level 3 pursuant to its guaranty obligations. We cannot
assure you that INTERNEXT or NEXTLINK will develop and implement a successful
and profitable national network strategy, or that implementation of such
strategy will not involve substantial expense to INTERNEXT and NEXTLINK.
RISKS 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. We are still developing and defining
material aspects of our LMDS implementation and acquisition strategy and use of
our LMDS spectrum. We cannot assure you that we will develop and implement a
successful and profitable LMDS strategy, or that implementation of our LMDS
strategy will not involve substantial expense.
To the extent that our LMDS strategy is dependent upon our ability to
utilize the LMDS spectrum owned by WNP, we are subject to certain risks related
to the consummation of the acquisition of WNP. Consummation of the merger with
WNP is subject to regulatory and other conditions, including, without
limitation, that (1) any waiting period (and any extension thereof) under the
Hart-Scott-Rodino
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Act applicable to the merger shall have expired or been terminated, (2) the FCC
shall have granted its consent and approval to the assignment of WNP's LMDS
licenses to us, and such approval shall be in full force and effect and shall
have become final, and (3) the Securities and Exchange Commission shall have
declared effective the Company's registration statement registering any shares
of common stock to be issued to stockholders of WNP as consideration for the
merger. Although certain conditions to consummation of the merger may be waived
by WNP, we cannot assure you that each necessary condition will be satisfied or
waived by WNP or that the merger will be consummated.
In addition, although we have reached agreement in principal with Nextel to
acquire its interest in NEXTBAND, we have not yet entered into a definitive
agreement with Nextel related to the acquisition. Also, consummation of the
acquisition of Nextel's interest will likely be subject to regulatory and other
conditions. In the event that we are unable to reach definitive agreement with
Nextel, or each necessary condition to the closing of the acquisition is not
satisfied or waived, we will have to determine the terms and conditions upon
which NEXTBAND will make its resources available to NEXTLINK and Nextel. With
respect to the LMDS spectrum granted to NEXTBAND, on July 17, 1998, another LMDS
auction participant filed a petition for reconsideration of the licenses granted
to NEXTBAND, requesting the FCC to revoke and reauction the licenses. Because
the matter remains pending, we cannot assure you that the FCC will not grant the
petitions and the relief sought.
DEPENDENCE ON KEY PERSONNEL
Our businesses are managed by a small number of key executive officers. If
we lose certain of these executive officers, there could be a material adverse
effect on the Company. We believe that our future success will depend in large
part on our ability to develop a large and sophisticated sales force and our
ability to attract and retain highly skilled and qualified personnel. Most of
the our executive officers and the presidents of our regional groups of
operating subsidiaries do not have employment agreements. Although we have been
successful in attracting and retaining qualified personnel, we cannot assure you
that we will not experience a shortage of qualified personnel in the future.
VARIABILITY OF QUARTERLY OPERATING RESULTS
We anticipate that our operating results could vary significantly from
period to period as a result of the significant expenses associated with the
expansion and development of our networks and services and the variability of
the level of revenues generated through sales of our IVR enhanced communications
services. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
CONTROL BY CRAIG O. MCCAW; POTENTIAL CONFLICTS OF INTEREST
Craig O. McCaw, primarily through his majority ownership and control of
Eagle River, controls approximately 59% of NEXTLINK's total voting power. As a
result, Mr. McCaw has the ability to control the direction and future operations
of NEXTLINK. Mr. McCaw is not one of our executive officers. In addition to his
investment in NEXTLINK through Eagle River, Mr. McCaw has significant
investments in other communications companies, including Nextel, Teledesic
Corporation and Cable Plus Inc., some of which could compete with us as a single
source provider of telecommunications services or act as one of our suppliers of
certain telecommunications services. We do 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 our 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. We
do not intend to apply for listing of the New Notes on any securities exchange
or for the inclusion of the New Notes in
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any automated quotation system. Accordingly, we cannot assure you 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, our 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. Even if a market for the New
Notes were to develop, such a market could be subject to similar disruptions.
RISKS ASSOCIATED WITH YEAR 2000 ISSUES
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field and cannot distinguish 21st
century dates from 20th century dates. These date code fields will need to
distinguish 21st century dates from 20th century dates and, as a result, many
companies' software and computer systems may need to be upgraded or replaced in
order to comply with such "Year 2000" requirements.
We are in the process of assessing the impact of the Year 2000, and we have
adopted a formal Year 2000 plan (the "Plan"). The purpose of the Plan is to
develop and perform reasonable steps intended to prevent our critical
operational functions from being impaired due to the Year 2000 problem. We,
however, cannot assure you that the Plan will succeed in accomplishing its
purposes. In addition, unforeseen circumstances may arise during implementation
of the Plan that would materially and adversely affect us. We are continuing to
test our existing telecommunications equipment and back office systems to assess
the effects of the Year 2000 problem on those areas that would result in
significant impairment to our critical operations. We, however, cannot assure
you that such testing will identify all problems that could result in
significant impairment. The Plan also will address the potential adverse effects
to us in the event that the computer, telecommunications, and other systems of
outside entities (including vendors, customers and local and interexchange
carriers and Internet service providers with which we interchange traffic) are
not Year 2000 compatible. We cannot assure you that such adverse effects can be
avoided, as we do not have control of these outside entities or their systems.
To date, we have not incurred material costs for Year 2000 awareness,
inventory, assessment, analysis, conversion, testing or contingency planning,
and we anticipate that our future costs for these purposes will not be material.
We cannot assure you, however, that the actual costs of implementing the Plan
will not differ materially from the estimated costs or that we will not be
materially adversely affected by Year 2000 issues. The estimated costs of
implementing the Plan do not consider the costs, if any, that might be incurred
as a result of Year 2000-related failures that occur despite our implementation
of the Plan.
As part of the Plan, we are developing contingency plans designed to
minimize the disruptions or other adverse effects resulting from Year 2000
incompatibilities with respect to critical functions or systems. We cannot
assure you, however, that significant disruptions or other adverse effects will
not occur despite such efforts.
Between now and the Year 2000 there will be increased competition for people
with the technical and managerial skills necessary to deal with the Year 2000
problem. We believe that we employ an adequate number of personnel skilled in
dealing with the Year 2000 problem. We have retained outside consultants who
bring additional skilled people to deal with the Year 2000 problem as it affects
us. Nevertheless, we could face shortages of skilled personnel or other
resources, such as Year 2000 compliant computer chips. These shortages might
delay or otherwise impair our ability to ensure that its critical systems are
Year 2000 compliant. Outside entities could face similar problems that could
materially affect us.
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We are taking reasonable steps to identify, assess and, where appropriate,
replace devices that contain embedded chips. Despite these reasonable efforts,
we may not be able to find and remediate all embedded chips in all of our
systems. Further, outside entities on which we depend also may not be able to
find and remediate all embedded chips in their systems. Some chips that are not
Year 2000 compliant may create system disruptions or failures, which may, in
turn, cause disruptions or failures in other systems. These cascading problems
could impair our ability to serve our customers and otherwise fulfill
contractual and legal obligations.
We cannot ensure that suppliers upon which we depend for essential supplies
and services will convert and test their critical systems and processes in a
timely manner. Failure or delay by all or some of these entities, including
federal, state or local governments, to make their systems and processes Year
2000 compliant could create substantial disruptions having a material adverse
effect on our operations.
Finally, among other things, we could face substantial claims by customers
or loss of revenue due to service interruptions, inability to fulfill
contractual obligations or to bill customers accurately and on a timely basis,
and increased expenses associated with litigation, stabilization of operations
following critical system failures, and the execution of contingency plans. We
could also experience an inability by customers and others to pay, on a timely
basis or at all, obligations owed to us. Under these circumstances, the adverse
effects on us would be material, although not quantifiable at this time.
Further, the cumulative effect of these failures could have a substantial
adverse effect on the economy, domestically and internationally. The adverse
effect on us from a domestic or global recession or depression also could be
material, although not quantifiable at this time. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Impact of Year
2000."
RISKS REGARDING FORWARD-LOOKING STATEMENTS
Certain statements and information contained in this prospectus are not
historical facts, but are "forward-looking statements" (as such term is defined
in the Private Securities Litigation Reform Act of 1995). These forward-looking
statements can be identified by the use of forward-looking terminology such as
"believes", "expects", "plans", "may", "will", "should", or "anticipates" or the
negative of these words or other variations of these words or other comparable
words, or by discussions of strategy that involve risks and uncertainties. Such
forward-looking statements include:
- the number of markets we expect to serve by the end of 2000, our expected
number of addressable business lines in our existing markets and the
markets which we will serve by the end of 2000;
- the basis by which we evaluate entry into markets;
- the participation by other entities in certain joint ventures and
financial matters related thereto;
- our expectations regarding margins from our chosen market segments;
- our expectations regarding our ability to attract and retain customers;
- our beliefs regarding certain competitive advantages, including that of
our management structure and provisioning processes and systems;
- our expectation regarding the size of our sales and customer care forces;
- our belief regarding traffic flow over our networks and the effects and
benefits of high capacity networks with broad coverage based on a uniform
technology platform;
- our plans to install additional switches and data networking capabilities,
including frame-relay and ATM facilities;
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- our plans regarding the deployment of DSL technology;
- our anticipated development of and entry into new markets and market
expansion (including the timing thereof) and the means to accomplish such
development and expansion;
- our intentions regarding LMDS technology;
- our expectation regarding the development of a national network;
- our anticipated capital expenditures, funding thereof and levels of
indebtedness;
- our beliefs regarding the elements of our growth strategy;
- statements with respect to our Year 2000 project; and
- other statements contained in this prospectus regarding matters that are
not historical facts.
We wish to caution you that these forward-looking statements are only
predictions. Actual events or results may differ materially as a result of risks
that we face, including those set forth herein under "Risk Factors". These are
representative of factors that could affect the outcome of the forward-looking
statements. In addition, such statements could be affected by general industry,
market and economic conditions, including interest rate fluctuations.
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THE COMPANY
NEXTLINK Communications, Inc. is a corporation organized under the laws of
the State of Delaware. NEXTLINK Communications, L.L.C., a predecessor to the
Company, 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. 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 canceled 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 September 30, 1998, the actual
capitalization of the Company and the capitalization of the Company as adjusted
to reflect the sale of the Old Notes. This table should be read in conjunction
with the Selected Historical Consolidated Financial and Operating Data included
elsewhere in this Prospectus, and the audited and unaudited Consolidated
Financial Statements and notes thereto included in the 1997 Form 10-KSB and the
1998 Form 10-Qs, each of which is incorporated herein by reference.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
--------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
------------ ------------
Cash, cash equivalents and marketable securities...................................... $ 1,176,843 $ 1,665,343
Pledged securities(1)................................................................. 42,992 42,992
------------ ------------
Total............................................................................. $ 1,219,835 $ 1,708,335
------------ ------------
------------ ------------
Current portion of long-term obligations.............................................. $ 2,721 $ 2,721
Capital lease obligations, less current portion....................................... 12,183 12,183
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.............................................................. 334,362 334,362
9.45% Senior Discount Notes due 2008.................................................. 418,901 418,901
10 3/4% Senior Notes due 2008......................................................... -- 500,000
------------ ------------
Total debt........................................................................ 1,518,167 2,018,167
------------ ------------
Redeemable Preferred Stock, par value $0.01 per share, 25,000,000 shares authorized,
net of issuance costs:
14% Preferred Shares, 7,009,348 shares issued and outstanding..................... 349,174 349,174
6 1/2% Cumulative Convertible Preferred Stock, 4,000,000 shares issued and
outstanding..................................................................... 194,084 194,084
Shareholders' deficit:
Common Stock, par value $.02 per share, stated at amounts paid in; Class A,
110,334,000 shares authorized, 20,830,169 issued and outstanding; Class B,
44,133,600 shares authorized, 33,133,502 shares issued and outstanding(2)......... 352,018 352,018
Deferred compensation............................................................... (12,894) (12,894)
Accumulated deficit................................................................. (476,952) (476,952)
------------ ------------
Total shareholders' deficit....................................................... (137,828) (137,828)
------------ ------------
Total capitalization.............................................................. $ 1,923,597 $ 2,423,597
------------ ------------
------------ ------------
</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) Issued and outstanding does not include 7,938,774 and 654,858 shares of
Class A Common Stock and Class B Common Stock, respectively, issuable upon
exercise of outstanding options.
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
(Dollars in thousands)
We have summarized below our historical consolidated financial data as of
and for the years ended December 31, 1996 and 1997. This data is derived from
and qualified by reference to our audited Consolidated Financial Statements
included in our 1997 Form 10-KSB, which is incorporated in this Prospectus by
reference. Our 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.
You should be aware that the operating results shown below for the three and
nine-month periods ended September 30, 1998 may not be indicative of what actual
results will be for the full year ending December 31, 1998. The operating data
presented below are derived from our 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," included in our 1997 Form 10-KSB and our 1998 Form
10-Qs. All data should also be read in conjunction with our audited and
unaudited Consolidated Financial Statements and notes thereto, which are also
included in our 1997 Form 10-KSB and our 1998 Form 10-Qs. Our 1997 Form 10-KSB
and our 1998 Form 10-Qs are incorporated in this Prospectus by reference.
Our financial results for the years ended December 31, 1996 and 1997 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
YEAR ENDED NINE MONTHS ENDED ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
1996 1997 1997 1998 1997 1998
--------- --------- --------- --------- --------- ---------
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue......................................... $ 25,686 $ 57,579 $ 35,058 $ 96,392 $ 13,390 $ 37,817
Costs and expenses:
Operating..................................... 25,094 54,031 35,857 85,448 13,916 32,828
Selling, general and administrative........... 31,353 75,732 48,421 109,599 19,318 41,565
Deferred compensation......................... 9,914 3,247 1,449 3,104 334 1,720
Depreciation and amortization................. 10,340 27,190 14,460 37,141 5,529 14,778
--------- --------- --------- --------- --------- ---------
Loss from operations............................ (51,015) (102,621) (65,129) (138,900) (25,707) (53,074)
Interest income................................. 10,446 27,827 15,560 56,116 4,868 21,559
Interest expense................................ (30,876) (54,495) (32,787) (99,050) (10,746) (37,434)
--------- --------- --------- --------- --------- ---------
Loss before minority interests.................. (71,445) (129,289) (82,356) (181,834) (31,585) (68,949)
Minority interests.............................. 344 285 -- -- -- --
--------- --------- --------- --------- --------- ---------
Net loss........................................ $ (71,101) $(129,004) $ (82,356) $(181,834) $ (31,585) $ (68,949)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
OTHER DATA:
Ratio of earnings to fixed charges(1)........... -- -- -- -- -- --
EBITDA(2)....................................... $ (30,761) $ (72,184) $ (49,220) $ (98,655) $ (19,844) $ (36,576)
Summary Cash Flow Information:
Net cash used in operating activities......... (40,563) (94,495) (59,233) (104,770) (13,436) (25,717)
Net cash provided by (used in) investing
activities.................................. (227,012) (470,195) (141,490) (793,401) (36,032) 117,902
Net cash provided by (used in) financing
activities.................................. 343,032 876,957 268,004 901,447 (5,207) (265)
Capital expenditures, including acquisitions of
businesses (net of cash acquired) and
investments in affiliates(3).................. 85,872 232,069 130,727 209,136 36,032 82,484
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
AS OF
AS OF SEPTEMBER 30, 1998
DECEMBER 31, ----------------------
-------------------- AS
1996 1997 ACTUAL ADJUSTED(4)
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities.................. $ 124,520 $ 742,357 $1,176,843 $1,665,343
Pledged securities(5)............................................. 101,438 62,610 42,992 42,992
Working capital................................................... 137,227 741,685 1,160,244 1,648,744
Property and equipment, net....................................... 97,784 253,653 448,550 448,550
Total assets...................................................... 390,683 1,217,153 2,026,178 2,526,178
Long-term debt and capital lease obligations, less current
portion......................................................... 356,262 757,640 1,518,167 2,018,167
14% Preferred Shares, net of issuance costs....................... -- 313,319 349,174 349,174
6 1/2% Cumulative Convertible Preferred Stock, net of issuance
costs........................................................... -- -- 194,084 194,084
Equity units subject to redemption................................ 4,950 -- -- --
Class B common stock subject to redemption........................ -- 4,950 -- --
Total shareholders' equity (deficit).............................. (18,654) 68,460 (137,828) (137,828)
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF AS OF AS OF AS OF
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1997 1997 1998 1998 1998
------------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
OPERATING DATA(6):
Route miles(7)................................. 1,757 1,897 2,036 2,099 2,150
Fiber miles(8)................................. 124,399 133,224 141,788 152,225 158,987
On-net buildings connected(9).................. 479 513 571 658 736
Switches installed(10)......................... 13 13 14 17 18
Access lines in service (11)................... 30,944 50,131 72,834 102,887 134,107
Employees...................................... 1,027 1,327 1,499 1,765 2,065
</TABLE>
- ------------------------
(1) For the years ended December 31, 1996 and 1997, and for the three and
nine-month periods ended September 30, 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, $31,585,
$82,356, $68,949 and $181,834, 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>
NINE MONTHS ENDED THREE MONTHS ENDED
YEAR ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
1996 1997 1997 1998 1997 1998
--------- --------- --------- --------- --------- ---------
Cash expended.............................................. $ 72,042 $ 210,545 $ 130,727 $ 209,136 $ 36,032 $ 82,484
Debt issued and assumed.................................... 8,228 5,000 -- -- -- --
Equity issued.............................................. 5,602 16,524 -- -- -- --
--------- --------- --------- --------- --------- ---------
Total...................................................... $ 85,872 $ 232,069 $ 130,727 $ 209,136 $ 36,032 $ 82,484
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
(4) As adjusted to give effect to the net proceeds to the Company from the sale
of the Old 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 subsequent to March 1996 include 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.
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<PAGE>
(9) Represents buildings physically connected to the Company's networks,
excluding those connected by unbundled ILEC facilities. As of September 30,
1998, the Company had 10,424 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, as well as the switch installed in NEXTLAB, the Company's
testing facility.
(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. The Company serviced 3,312 resold access lines as of
September 30, 1998. The Company defines an access line as a telephone
connection between a customer purchasing local telephone services and
NEXTLINK. This connection does not include the concept of access line
equivalents (ALEs), and is a one-for-one relationship with no multipliers
used for trunk ratios, except for those trunks over which primary rate
interface (PRI) service is provided, which are counted as 23 access lines.
As of December 31, 1998, the Company had 174,182 access lines installed.
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Since its inception in 1994, the Company has executed a strategy of
constructing and acquiring fiber optic networks and acquiring related
telecommunications businesses. Over this period, the Company has pursued this
strategy by constructing, acquiring, leasing fibers or capacity on, and entering
into agreements to acquire local telecommunications networks.
The Company develops and operates high capacity, local 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. The Company plans to acquire, build or develop networks in new areas,
expand its current networks, and also explore the acquisition or licensing of
additional enhanced communications services and other telecommunications service
providers. These efforts should allow the Company to increase its presence in
the marketplace, and facilitate providing a single source solution for the
telecommunications needs of its customers.
The Company currently operates 22 facilities-based networks providing
switched local and long distance services in 36 markets in 14 states. The
Company serves larger markets including New York, Los Angeles, Chicago, Atlanta,
the San Francisco Bay Area, Denver, Dallas and Miami, medium-sized markets such
as Salt Lake City and Nashville, and clusters of smaller markets in Orange
County, California and central Pennsylvania. The Company anticipates developing
additional new markets throughout a majority of the nation's top 30 markets
which, together with its existing markets, are expected to have a total of
approximately 27 million addressable business lines by the end of 2000. The
Company plans to launch service in San Diego, Washington, D.C. and Seattle in
the first half of 1999. The Company is also developing a national network
strategy to enable it to offer its customers complete, end-to-end voice and data
communications services over NEXTLINK-owned facilities.
The Company builds its networks to encompass the significant business
concentrations in each area it serves, focusing on direct connections to
end-user locations and ILEC central offices. The Company employs a uniform
technology platform for each of its local exchange networks that is based on the
Nortel DMS 500 digital local and long distance combination switching platform
and associated distribution technology. As of December 31, 1998, the Company had
19 operational Nortel DMS 500 switches, including one switch in its NEXTLAB
facility. NEXTLAB is a fully functional model of one of the Company's networks,
which serves as a testing facility for switch software and the Company's
products and services and will serve as the Company's network operations control
center.
The development of the Company's businesses and the construction,
acquisition and expansion of its networks require significant expenditures,
substantial portions of which are incurred before the realization of revenues.
These expenditures, together with the associated early operating expenses,
result in negative cash flow until an adequate customer base is established.
However, as the customer base grows, the Company expects that incremental
revenues can be generated with decreasing incremental operating expenses, which
may provide positive contributions to cash flow. The Company has made the
strategic decision to build high capacity networks with broad market coverage,
which initially increases its level of capital expenditures and operating
losses. The Company believes that over the long term this will enhance the
Company's financial performance by increasing the traffic flow over the
Company's networks. The Company has recently entered into leased dark fiber and
fiber capacity arrangements which allow the Company, by installing one or more
switches and related electronics, to enter a market prior to completing
construction of its own fiber optic network.
30
<PAGE>
RESULTS OF OPERATIONS
THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1998 COMPARED WITH THREE
AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1997
Revenue increased 182% to $37.8 million during the third quarter of 1998,
from $13.4 million in the same period in 1997. Year to date revenue of $96.4
million represented a 175% increase from the $35.1 million reported for the
comparable period in 1997. The increase was driven by 290% growth in revenues
from bundled local and long distance services and dedicated services, as well as
by the acquisitions of Start Technologies Corporation (Start) and Chadwick
Telecommunications Corporation (Chadwick) in the fourth quarter of 1997.
Revenues reported in the third quarter of 1998 included $31.5 million derived
from local and long distance, competitive access, dedicated line services and
shared tenant services and $6.3 million derived from enhanced communications
services, primarily interactive voice response (IVR) services. The Company's IVR
revenue comprised 16% and 28% of the Company's total revenues during the third
quarter of 1998 and 1997, respectively.
The Company increased the number of customer access lines added during the
quarter from 30,053 in the second quarter of 1998 to 31,220 during the third
quarter of 1998. As of September 30, 1998, the Company had 134,107 access lines
in service, compared to 50,131 as of December 31, 1997 and 30,944 as of
September 30, 1997. Revenues from the provision of such services are expected to
continue to increase as a component of total revenues over future periods.
Access lines in service includes those lines which are provided through resale
of Centrex services, the number of which is decreasing over time as the Company
converts those customers to its own network.
Operating expenses consist of costs directly related to providing
facilities-based network and enhanced communications services and also include
salaries and benefits and related costs of operations and engineering personnel.
Operating expenses increased 136% in the third quarter of 1998 to $32.8 million,
an increase of $18.9 million over the third quarter of 1997. For the nine months
ended September 30, 1998, operating expenses rose $49.6 million, or 138%, over
the same period in 1997. These increases were attributed to increased network
costs related to provisioning higher volumes of local, long distance and
enhanced communications services, an increase in employees and an increase in
other related costs primarily to expand the Company's switched local and long
distance service businesses in its existing and planned markets. To a lesser
extent, the acquisitions of Start and Chadwick in the fourth quarter of 1997
also contributed to the increase in operating costs over those in the third
quarter of 1997.
Selling, general and administrative (SG&A) expenses include salaries and
related personnel costs, facilities expenses, sales and marketing, information
systems costs, consulting and legal fees and equity in loss of affiliates. SG&A
expenses increased 115% and 126% in the three and nine-month periods ended
September 30, 1998 as compared to the corresponding periods in 1997. The
increases were due to the Company's increase in employees, as well as other
costs associated with the expansion of the Company's switched local and long
distance service businesses in its existing and planned markets.
Deferred compensation expense was recorded in connection with the Company's
Equity Option Plan until April 1997, and in connection with the Company's Stock
Option Plan, which replaced the Equity Option Plan, subsequent to April 1997.
The stock options granted under the Equity Option Plan were considered
compensatory and were accounted for on a basis similar to that for stock
appreciation rights. All options outstanding under the Equity Option Plan were
regranted under the new Stock Option Plan with terms and conditions
substantially the same as under the Equity Option Plan. As such, the Company
continues to record deferred compensation expense for those compensatory stock
options issued, as well as for compensatory stock options issued subsequent to
the Plan conversion date. Compensation expense is recognized over the vesting
periods based on the excess of the fair value of the stock options at the date
of grant over the exercise price.
31
<PAGE>
Depreciation expense increased primarily due to placement in service of
additional telecommunications network assets, including switches, fiber optic
cable, network electronics and related equipment. Amortization of intangible
assets increased primarily as a result of the Start and Chadwick acquisitions in
the fourth quarter of 1997.
Interest expense increased 248% in the third quarter of 1998 over the
comparable period in the prior year due to an increase in the Company's average
outstanding indebtedness over the respective periods. Interest expense will
increase in future periods in conjunction with the sale of $500.0 million in
aggregate principal amount of 10 3/4% Senior Notes on November 12, 1998. See
"--Liquidity and Capital Resources." Pursuant to Statement of Financial
Accounting Standards No. 34, the Company capitalizes a portion of its interest
costs as part of the construction cost of its communications networks.
Capitalized interest during the first nine months of 1998 totaled $3.0 million.
Interest income results from investment of excess cash as well as certain
securities that have been pledged as collateral for interest payments on the
12 1/2% Senior Notes. The increase in interest income for the three and
nine-month periods in 1998 over the same periods in 1997 corresponded to the
increase in the Company's average outstanding cash balances.
LIQUIDITY AND CAPITAL RESOURCES
The competitive local telecommunications service business is a
capital-intensive business. The Company's existing operations have required and
will continue to require substantial capital investment for the acquisition and
installation of fiber, electronics and related equipment in order to provide
switched services in the Company's networks and the funding of operating losses
during the start-up phase of each market. In addition, the Company's strategic
plan calls for expansion into additional market areas. Such expansion will
require significant additional capital for: potential acquisitions of businesses
or assets; design, development and construction of new networks; and the funding
of operating losses during the start-up phase of each market. During the first
nine months of 1998, the Company used $104.8 million in cash for operating
activities, compared to $59.2 million for the same period in the prior year. The
increase was primarily due to a substantial increase in the Company's activities
associated with the continued development and expansion of switched local and
long distance service operations. During the first nine months of 1998, the
Company invested an additional $301.1 million in property and equipment and
acquisitions of telecommunications assets. During the same period in 1997, the
Company invested $130.7 million in property and equipment, acquisitions of
telecommunications assets and businesses and equity investments in
telecommunications businesses.
On January 14, 1999, the Company entered into an agreement to acquire WNP
Communications, Inc. ("WNP"). The total consideration to be paid by the Company
will be $695 million. Of this amount, $152.9 million will be paid in cash to the
FCC for license fees, including interest thereon. The remainder will be paid to
stockholders of WNP, which will consist of cash and, at the Company's election,
shares of its Class A Common stock, provided, however, that at least
approximately $187 million of such remainder will be paid in cash. The
acquisition of WNP is subject to certain conditions, including approval by the
FCC.
In July 1998, the Company announced the formation of INTERNEXT L.L.C., which
is beneficially owned 50% each by the Company and Eagle River Investments,
L.L.C. (Eagle River). INTERNEXT entered into an agreement with Level 3
Communications LLC (Level 3). Level 3 is constructing a national fiber optic
network that is expected to cover more than 16,000 route miles with six or more
conduits and connect 50 cities in the United States and Canada. Pursuant to this
agreement, INTERNEXT will receive an exclusive interest in 24 fibers in a
shared, filled conduit, one entire empty conduit and the right to 25% of the
fibers pulled through the sixth and any additional conduits in the network.
INTERNEXT will pay $700.0 million in exchange for these rights, the majority of
which will be payable as segments of the network are completed and accepted by
INTERNEXT, which is expected to occur substantially during 2000 and 2001. The
Company has guaranteed 50% of the financial
32
<PAGE>
obligations of INTERNEXT under this agreement and, together with Eagle River,
has also guaranteed the performance of certain other obligations of INTERNEXT
thereunder. The Company is in the process of defining its plans for
implementation of a national network strategy, which will require additional
capital expenditures.
In February 1998, the Company signed a definitive agreement with Metromedia
Fiber Network for exclusive rights to multiple fibers and innerducts for 20
years, with two 10-year renewals. The route covered by the agreement extends
from Manhattan to White Plains (NY), to Stamford (CT), to Newark (NJ) and south
from Manhattan through Philadelphia, Wilmington (DE), Baltimore, and to
Washington (DC). The route will offer frequent splice points within metropolitan
areas and on routes between metropolitan areas, as well as provide access to
ILEC central and tandem switching offices. The Company paid $92.0 million in
cash for this transaction, $80.3 million of which was placed into escrow, to be
released as segments of the route are constructed and delivered to the Company.
In January 1998, the Company and Nextel formed NEXTBAND, a joint venture
that is owned 50% each by the Company and Nextel. NEXTBAND was the successful
bidder in 42 markets in the FCC's local multipoint distribution service (LMDS)
auctions. The Company's pro rata share of NEXTBAND's total bid in the LMDS
auctions was $67.4 million, which was paid in full in June 1998. The Company is
in process of defining its operational and financial plans for implementation of
an LMDS strategy, which will likely involve additional capital expenditures.
On March 3, 1998, the Company completed the sale of $335.0 million in
aggregate principal amount of 9% Senior Notes due March 15, 2008. Proceeds from
the sale net of discounts, underwriting commissions, advisory fees and expenses
totaled approximately $326.5 million. Interest payments on the 9% Senior Notes
are due semi-annually, beginning September 1998.
On March 31, 1998, the Company completed the sale of 4,000,000 shares of
6 1/2% cumulative convertible preferred stock (6 1/2% Preferred Stock) with a
liquidation preference of $50 per share. The sale generated gross proceeds to
the Company of $200.0 million, and proceeds net of underwriting discounts,
advisory fees and expenses of $193.8 million. Each share of 6 1/2% Preferred
Stock is convertible, at the option of the holder, into 1.145 shares of the
Company's Class A common stock (subject to adjustments in certain
circumstances). Dividends on the 6 1/2% Preferred Stock accrue from March 31,
1998 and are payable quarterly in cash, beginning on June 30, 1998.
On April 1, 1998, the Company completed the sale of 9.45% Senior Discount
Notes (9.45% Notes), due April 15, 2008. The 9.45% Notes were issued at a
discount from their principal amount to generate aggregate gross proceeds to the
Company of approximately $400.0 million. Proceeds net of underwriting
commissions, advisory fees and expenses totaled $390.9 million. The 9.45% Notes
accrete at a rate of 9.45% compounded semi-annually, to an aggregate principal
amount of approximately $637.0 million by April 15, 2003. No cash interest will
accrue on the Notes until April 15, 2003. Interest will become payable in cash
semi-annually beginning on October 15, 2003.
On November 12, 1998, the Company completed the sale of $500.0 million in
aggregate principal amount of 10 3/4% Senior Notes due November 15, 2008.
Proceeds from the sale net of underwriting commissions, advisory fees and
expenses totaled approximately $488.5 million. Interest payments on the notes
are due semi-annually, beginning May 1999. Pursuant to a covenant in the
indenture under which the 10 3/4% Senior Notes were issued, the Company has
agreed to use the net proceeds from the sale for expenditures relating to the
construction, improvement and acquisition of new and existing networks and
services and direct or indirect investments in certain joint ventures (including
NEXTBAND and INTERNEXT) to fund similar expenditures.
The Company will use the net proceeds from the sale of the 9% Senior Notes,
the 6 1/2% Preferred Stock, the 9.45% Notes, the 10 3/4% Senior Notes (subject
to the limitations described above) and existing unrestricted cash balances for
expenditures relating to the development, construction,
33
<PAGE>
acquisition and operation of telecommunications networks and service providers
and the offering of telecommunications services in those areas where the Company
currently operates or intends to operate. Expenditures for the construction and
operation of networks include (i) the purchase and installation of switches and
related electronics in existing networks and in networks to be constructed or
acquired in new or adjacent markets, (ii) the purchase and installation of fiber
optic cable and electronics to expand existing networks and develop new
networks, including the connection of new buildings, (iii) the development of
its comprehensive information technology platform, (iv) the acquisition of LMDS
spectrum purchased in the FCC's auction and the construction and deployment of
associated facilities and (v) the funding of operating losses and working
capital. The Company may also acquire or invest in businesses that consist of
existing networks or companies engaged in businesses similar to those engaged in
by the Company and its subsidiaries or other complementary businesses.
As of September 30, 1998, the Company had unrestricted cash and investments
of $1,176.8 million and $1,665.3 million on a pro forma basis after giving
effect to the sale of the 10 3/4% Senior 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 that was purchased during the 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 of these capital 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 sales of public or private capital
stock and joint ventures. There can be no assurance, however, that the Company
will be successful in raising sufficient additional capital on terms that it
will consider acceptable or that the Company's operations will produce positive
consolidated cash flow in sufficient amounts to meet its interest and dividend
obligations on its outstanding securities. Failure to raise and generate
sufficient funds may require the Company to delay or abandon some of its planned
future expansion or expenditures, which could have a material adverse effect on
the Company's growth and its ability to compete in the telecommunications
services industry.
In addition, the Company's operating flexibility with respect to certain
business matters is, and will continue to be, limited by covenants associated
with the 12 1/2% Senior Notes, the 9 5/8% Senior Notes, the 9% Senior Notes, the
9.45% Notes and the 10 3/4% Senior Notes (collectively referred to as the
Notes). Among other things, these covenants limit the ability of the Company and
its subsidiaries to incur additional indebtedness, create liens upon assets,
apply the proceeds from the disposal of assets, make dividend payments and other
distributions on capital stock and redeem capital stock. In addition, the terms
of the 14% Senior Exchangeable Redeemable Preferred Shares (14% Preferred
Shares) contain certain covenants that may limit the Company's operating
flexibility with respect to the incurrence of indebtedness and issuance of
additional preferred shares. There can be no assurance that such covenants will
not adversely affect the Company's ability to finance its future operations or
capital needs or to engage in other business activities that may be in the
interest of the Company. The Company was in compliance with all covenants
associated with the Notes and the 14% Preferred Shares as of September 30, 1998.
IMPACT OF YEAR 2000
Certain of the Company's older computer systems and applications were
written to define a given year with abbreviated dates using the last two digits
in a year rather than the entire four digits. As a result, when computer systems
attempt to process dates both before and after January 1, 2000, two digit year
fields may create processing ambiguities that can cause errors and system
failures. For example, systems and applications may have time-sensitive software
that recognize an abbreviated year "00" as the year 1900 rather than the year
2000. These errors or failures may have limited effects, or
34
<PAGE>
the effects may be widespread, depending on the computer chip, system, or
software, and its location and function.
STATE OF READINESS
The Company is currently assessing the impact of the Year 2000, and has
adopted a formal Year 2000 plan (the "Plan"). The purpose of the Plan will be to
develop and perform reasonable steps intended to prevent the Company's critical
operational functions from being impaired due to the Year 2000 problem. The
first phase of the Company's Year 2000 assessment, which has been completed,
includes: 1) taking an inventory of Company-wide systems and equipment to
determine the extent of testing required for Year 2000 compliance (generally
defined as the ability of information systems to accurately process data from,
into and between the twentieth and twenty-first centuries, including leap year
calculations), 2) developing a strategy to manage vendors' and other outside
entities' progress toward Year 2000 compliance, 3) designing a Company-wide Year
2000 communications plan, and 4) creating a risk assessment and impact analysis
from which the Plan can be developed. The Company has engaged outside
consultants to aid in formulating and implementing the Plan.
The Company's assessments to date have indicated that its major operational
support systems, including its billing, order management, network management,
and financial systems are Year 2000 compliant. In addition, the Company has
received positive confirmation from its vendor that the Company's Nortel DMS 500
switches are also Year 2000 compliant.
As part of the Plan and ongoing Year 2000 assessment, the Company will
continue its testing of existing telecommunications equipment and back office
systems to access the effects of the Year 2000 problem on those areas that would
result in significant impairment to the Company's critical operations. Through
its NEXTLAB facility, which operates separate and apart from the Company's
operational switches, the Company has the means to test switch configurations
without impacting its networks or customers, and the Company is using NEXTLAB to
independently verify Year 2000 compliance of its network systems and equipment.
The Plan will also address the potential adverse effects to the Company in
the event that the computer, telecommunications, and other systems of outside
entities' (including vendors, customers, and local and interexchange carriers
and Internet service providers with which the Company interchanges traffic) are
not Year 2000 compatible. The Company does not have control of these outside
entities or their systems. However, the Company's Plan will include ongoing
identification of and contact with such outside entities whose systems may have
a substantial effect on the Company's ability to continue to conduct the
critical aspects of its operations without disruption from Year 2000 problems.
In the event such outside systems are identified, the Company will work with the
outside entities in a reasonable attempt to inventory, assess, analyze, test,
and develop contingency plans for the Company's connections to these outside
entities and their systems and to determine the extent to which they are, or can
be made to be, Year 2000 compliant.
COSTS TO ADDRESS YEAR 2000 ISSUES
The Company has not incurred material historical costs for Year 2000
awareness, inventory, assessment, analysis, conversion, testing, or contingency
planning. Further, the Company anticipates that its future costs for these
purposes will not be material.
Year 2000 costs are difficult to estimate accurately because of
unanticipated vendor delays, technical difficulties, the impact of tests of
outside entities' systems, and similar events. Although management believes that
its estimates are reasonable, there can be no assurance that the actual costs of
implementing the Plan will not differ materially from the estimated costs or
that the Company will not be materially adversely affected by Year 2000 issues.
Furthermore, the estimated costs of
35
<PAGE>
implementing the Plan do not consider the costs, if any, that might be incurred
as a result of Year 2000-related failures that occur despite the Company's
implementation of the Plan.
YEAR 2000 RISK FACTORS
Between now and the year 2000 there will be increased competition for people
with the technical and managerial skills necessary to deal with the Year 2000
problem. The Company believes it employs an adequate number of personnel skilled
in dealing with the Year 2000 problem and has retained outside consultants who
bring additional skilled people to deal with the Year 2000 problem as it affects
the Company. Nevertheless, the Company could face shortages of skilled personnel
or other resources, such as Year 2000 compliant computer chips. These shortages
might delay or otherwise impair the Company's ability to assure that its
critical systems are Year 2000 compliant. Outside entities could face similar
problems that could materially affect the Company. The Company believes that the
possible impact of the shortage of skilled people and resources is not, and will
not be, unique to the Company.
The Company believes that its critical systems will be Year 2000 compliant
before January 1, 2000. However, there is no assurance that the Plan will
succeed in accomplishing its purposes and unforeseen circumstances may arise
during implementation of the Plan that would materially and adversely affect the
Company.
The Company is taking reasonable steps to identify, assess, and, where
appropriate, replace devices that contain embedded chips. Despite these
reasonable efforts, the Company may not be able to find and remediate all
embedded chips in all of the Company's systems. Further, outside entities on
which the Company depends also may not be able to find and remediate all
embedded chips in their systems. Some chips that are not Year 2000 compliant may
create system disruptions or failures, which may, in turn, cause disruptions or
failures in other systems. These cascading problems could impair the Company's
ability to serve its customers and otherwise fulfill contractual and legal
obligations. The Company believes that the possible adverse impact of the
embedded chip problem is not, and will not be, unique to the Company.
The Company cannot ensure that suppliers upon which it depends for essential
supplies and services will convert and test their critical systems and processes
in a timely manner. Failure or delay by all or some of these entities, including
federal, state, or local governments, to make their systems and processes Year
2000 compliant could create substantial disruptions having a material adverse
effect on the Company's operations.
In a recent Securities and Exchange Commission release regarding Year 2000
disclosure, the Securities and Exchange Commission stated that public companies
must disclose the most reasonably likely worst case Year 2000 scenario. Although
it is not possible to assess the likelihood of any of the following events, each
must be included in a consideration of worst case scenarios: widespread failure
of electrical, gas, and similar supplies serving the Company; widespread
disruption of the services provided by common communications carriers; similar
disruption to the means and modes of transportation for the Company and its
employees, contractors, suppliers, and customers; significant disruption to the
Company's ability to gain access to, and remain working in, office buildings and
other facilities; the failure of substantial numbers of the Company's critical
computer hardware and software systems, including both internal business systems
and systems controlling operational facilities such as electrical generation,
transmission, and distribution systems; and the failure of outside entities'
systems, including systems related to banking and finance. Among other things,
the Company could face substantial claims by customers or loss of revenue due to
service interruptions, inability to fulfill contractual obligations or to bill
customers accurately and on a timely basis, and increased expenses associated
with litigation, stabilization of operations following critical system failures,
and the execution of contingency plans. The Company could also experience an
inability by customers and others to pay, on a timely basis or at all,
obligations owed to the Company. Under these circumstances, the adverse
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effects on the Company would be material, although not quantifiable at this
time. Further, the cumulative effect of these failures could have a substantial
adverse effect on the economy, domestically and internationally. The adverse
effect on the Company from a domestic or global recession or depression also
could be material, although not quantifiable at this time.
The Company will continue to monitor business conditions to assess and
quantify material adverse effects, if any, that may result from the Year 2000
problem.
CONTINGENCY PLANS
As part of the Plan, the Company is developing contingency plans that deal
with two aspects of the Year 2000 problem: 1) that the Company, despite its good
faith and reasonable efforts, may not have satisfactorily addressed the Year
2000 problem with respect to its critical internal systems and 2) that outside
entities' systems may not be Year 2000 ready. The Company's contingency plans
will be designed to minimize the disruptions or other adverse effects resulting
from Year 2000 incompatibilities with respect to critical functions or systems.
The Company's contingency plans will contemplate an assessment of all its
critical internal information technology systems and its internal operational
systems that use computer-based controls. In addition, the Company will assess
any critical disruptions due to Year 2000-related failures that are external to
the Company. These processes will begin January 1, 2000, and will continue as
long as circumstances require.
The Company's contingency plans will include the creation of teams that will
be prepared to respond immediately and as necessary to critical Year 2000
problems as soon as they become known. The composition of teams that are
assigned to deal with such problems will vary according to the nature,
significance, and location of the problem.
NEW ACCOUNTING STANDARD
In April 1998, the AICPA released Statement of Position 98-5, "Reporting on
the Costs of Start-Up Activities" (SOP 98-5). The new standard requires that all
entities expense costs of start-up activities as those costs are incurred. SOP
98-5 defines "start-up costs" as those costs directly related to pre-operating,
pre-opening, and organization activities. This standard must be adopted in
fiscal years beginning after December 15, 1998. The adoption of SOP 98-5 will
not have a material impact the Company's financial position.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by the Company on November 12, 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
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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
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.
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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 at stated
maturity of New Notes in exchange for each $1,000 principal amount at stated
maturity of outstanding Old Notes accepted in the 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, $500,000,000 million aggregate principal
amount of the Old Notes is outstanding. The Company has fixed the close of
business on , 1999 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
, 1999, 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
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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.
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
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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.
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."
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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.
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;
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(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 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
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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 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.
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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 Stermer
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 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.
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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
November 12, 1998, by and between NEXTLINK and 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" refers 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 is filed as an exhibit 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 $500 million aggregate principal amount;
- will mature on November 15, 2008; and
- will bear interest at the rate of 10 3/4% per annum, payable semi-annually
on May 15 and November 15 of each year, commencing May 15, 1999, to the
Person in whose name the Note (or any predecessor Note) is registered at
the close of business on the preceding May 1 or November 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. (Section 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. (Section301, 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. (Section302) 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. (Section305)
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RANKING
The Notes:
- will be senior obligations of the Company;
- will rank pari passu in right of payment with all existing and future
senior obligations of the Company, including, without limitation, the 9%
Notes, the 9 5/8% Notes, the 12 1/2% Notes and the 9.45% Notes; and
- will rank senior in right of payment to all future subordinated
obligations of 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. See "Risk
Factors--Holding Company Structure; Unsecured Obligations; Effective
Subordination of the Notes."
As of September 30, 1998, on a pro forma basis after giving effect to the
sale of the old notes:
- the total amount of outstanding consolidated liabilities of the Company
and its Subsidiaries, including trade payables, would have been
approximately $2,120.7 million, of which $14.2 million would have been
secured obligations (excluding the 12 1/2% Notes, which are secured by a
pledge of $43.0 million of U.S. Treasury securities as of September 30,
1998); and
- the total amount of outstanding liabilities of the Company's Subsidiaries,
including trade payables, would have been $60.2 million, of which $11.7
million would have been secured obligations.
See "Description of Certain Indebtedness" and "Selected Historical
Consolidated Financial and Operating Data."
FORM, DENOMINATION, TRANSFER, EXCHANGE AND BOOK-ENTRY PROCEDURES
Notes will not be issued in bearer form. Notes will be issued:
- only in fully registered form;
- without interest coupons; and
- in minimum denominations of $1,000 principal amount at maturity and any
integral multiples of $1,000 in excess thereof.
The Old Notes sold pursuant to Rule 144A are represented by one or more
Notes in registered, global form without interest coupons (collectively, the
"Restricted Global Note" or the "Global Note"). The Old Notes sold pursuant to
Regulation S are represented by one or more Notes in registered, global form
without interest coupons (collectively, the "Regulation S Global Note" and,
together with the Restricted Global Note, the "Global Notes"). The Global Notes
have been deposited with the
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Trustee as custodian for DTC in New York, New York, and registered in the name
of DTC or its nominee, in each case for credit to an account of a direct or
indirect participant in DTC as described below. Prior to the expiration of the
Restricted Period (as defined below), beneficial interests in the Regulation S
Global Note may be held only through Euroclear or CEDEL (as indirect
participants in DTC), unless exchanged for interests in the Restricted Global
Note in accordance with the transfer and certification requirements described
below. "Restricted Period" means the period through and including December 22,
1998.
Old Notes sold pursuant to Rule 144A (including beneficial interests in the
Restricted Global Note) are subject to certain restrictions on transfer and such
Notes bear a restrictive legend restricting their transfer. Old Notes sold
pursuant to Regulation S Notes bear a restrictive legend restricting their
transfer. In addition, transfers of beneficial interests in the Global Notes are
subject to the applicable rules and procedures of DTC and its direct or indirect
participants (including, if applicable, those of Euroclear and CEDEL), which may
change from time to time.
Except as set forth below, the Global Notes may be transferred, in whole and
not in part, only to DTC or its nominee, or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for Notes
in certificated form except in the limited circumstances described below under
"--Exchanges of Book-Entry Notes for Certificated Notes." In addition,
beneficial interest in the Restricted Global Note may not be exchanged for
beneficial Interests in the Regulation S Global Note or vice versa except in
accordance with certain transfer and certification requirements.
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:
- 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 Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and in either case the Company thereupon fails to appoint
a successor Depositary;
- the Company, at its option, notifies the Trustee in writing that it elects
to cause the issuance of the Notes in certificated form; or
- 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.
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
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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
Purchaser), 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's current practice, upon the issuance of the Restricted Global Note
and the Regulation S 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. Investors may hold their interests in the Regulation S Global Note
through CEDEL or Euroclear, if they are participants in such systems, or
indirectly through organizations which are participants in such systems. After
the expiration of the Restricted Period (but not earlier), investors may also
hold their interests in Regulation S Global Note on behalf of their participants
through customers' securities accounts in their respective names on the books of
their respective depositories. The depositories, in turn, will hold such
interests in the Regulation S Global Note in customers' securities accounts in
the depositories' names on the books of DTC. 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.
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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 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.
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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 will be subject to redemption, at the option of the Company, in
whole or in part, at any time on or after November 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 at maturity or an integral
multiple of $1,000, at the following Redemption 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 November
15 of the years indicated:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ------------------------------------------------------------------------ ----------------
<S> <C>
2003.................................................................... 105.375%
2004.................................................................... 103.583%
2005.................................................................... 101.792%
2006 and thereafter..................................................... 100.000%
</TABLE>
(SectionSection 203, 1101, 1105 and 1107)
The Notes will be redeemable prior to November 15, 2003 only in the event
that on or before November 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 that:,
- at least 66 2/3% of the original aggregate principal amount of the Notes
remains outstanding after such redemption; and
- the redemption occurs 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 at maturity or an integral
multiple of $1,000 at a redemption price of 112.750% of their principal
amount plus accrued and unpaid interest to but excluding the Redemption
Date (subject to the right of Holders of record 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. (Section1104)
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MANDATORY REDEMPTION; SINKING FUND
Except as set forth under "Covenants--Limitation on Asset Dispositions" 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 following "restrictive covenants" are promises that we make to you about
how we will run our business, or business actions that we promise not to
LIMITATION ON CONSOLIDATED INDEBTEDNESS
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
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
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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 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 or 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;
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(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 Indebtedness," 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 Notes;
(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 Indebtedness";
(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
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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;
(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.
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LIMITATION ON RESTRICTED PAYMENTS
The Company may not:
(i) 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) 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) 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) 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 Indebtedness" 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
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.
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Notwithstanding the foregoing:
(i) the Company may 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) the Company may 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 Indebtedness" 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;
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(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 Indebtedness", PROVIDED that such restriction is
consistent with, and not materially more restrictive (as conclusively
determined in good faith by the Chief Financial Officer of the Company),
taken as a whole, than, comparable provisions included in similar agreements
or facilities extended to comparable credits engaged in the
Telecommunications Business;
(d) pursuant to an agreement effecting a renewal, refunding or extension
of Debt Incurred pursuant to an agreement referred to in clause (a) or (b)
above or (e) below, PROVIDED, HOWEVER, that the provisions contained in such
renewal, refunding or extension agreement relating to such encumbrance or
restriction are not materially more restrictive (as conclusively determined
in good faith by the Chief Financial Officer of the Company), taken as a
whole, than the provisions contained in the agreement the subject thereof;
(e) in the case of clause (iii) above, restrictions contained in any
security agreement (including a Capital Lease Obligation) securing Debt of
the Company or a Restricted Subsidiary otherwise permitted under 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
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(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 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
Indebtedness";
(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)
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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,
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
(or 100% of the accreted value thereof in the case of Debt issued at an
original issue discount) (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. (Section1013)
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."
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;
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(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. (Section 1014)
TRANSACTIONS WITH AFFILIATES AND RELATED PERSONS
The Company may not, and may not permit any Restricted Subsidiary of the
Company to, enter into any transaction (or series of related transactions) with
an Affiliate or Related Person of the Company (other than the Company or a
Wholly Owned Restricted Subsidiary of the Company), including any Investment,
but excluding transactions pursuant to employee compensation arrangements
approved by the 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
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 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 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
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(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. (Section 1016)
Except as described above with respect to a Change of Control, the Indenture
does not contain provisions that permit the Holders of the Notes to require that
the Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar restructuring.
Restrictions in the Indenture described herein on the ability of the Company
and its Restricted Subsidiaries to incur additional Indebtedness, to grant Liens
on its or their property, to make Restricted Payments and to make Asset Sales
may also make more difficult or discourage a takeover of the Company, whether
favored or opposed by the management of the Company. Consummation of any such
transaction in certain circumstances may require redemption or repurchase of the
Notes, and there can be no assurance that the Company or the acquiring party
will have sufficient financial resources to effect such redemption or
repurchase. Such restrictions and the restrictions on transactions with
Affiliates may, in certain circumstances, make more difficult or discourage any
leveraged buyout of the Company or any of its Subsidiaries by the management of
the Company or other Persons. While such restrictions cover a variety of
arrangements which have traditionally been used to effect highly leveraged
transactions, the Indenture may not afford the Holders of Notes protection in
all circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction.
In the event of a Change of Control, the indentures relating to the 9.45%
Notes, the 9% Notes, the 9 5/8% Notes and the 12 1/2% Notes would require the
Company to make an offer to purchase the 9.45% Notes, the 9% Notes, the 9 5/8%
Notes and the 12 1/2% Notes. The Company does not currently have adequate
financial resources to effect such repurchases and repurchase the Notes upon a
Change of Control and there can be no assurance that the Company will have such
resources in the future. The inability of the Company to repurchase the Notes
upon a Change of Control would constitute an Event of Default.
In addition, there may be restrictions contained in instruments evidencing
Indebtedness incurred by the Company or its Restricted Subsidiaries permitted
under the Indenture which restrict or prohibit the ability of the Company to
effect any repurchase required under the Indenture in connection with a Change
of Control.
In the event that the Company makes an Offer to Purchase the Notes, the
Company intends to comply with any applicable securities laws and regulations,
including any applicable requirements of Section 14(e) of, and Rule 14e-1 under,
the Exchange Act.
PROVISION OF FINANCIAL INFORMATION
The Company has agreed that, for so long as any Notes remain outstanding, it
will 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
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will not accept such a filing) and the Trustee. The Company will furnish copies
of the SEC Reports to the holders of Notes at the time the Company is required
to file the same with the Trustee and will make such information available to
investors who request it in writing. (Section 1017)
LIMITATION ON USE OF PROCEEDS
The Company will apply the net proceeds from the sale of the Old Notes
toward the construction, improvement and acquisition by the Company or one or
more Restricted Subsidiaries of the Company or Joint Ventures of
Telecommunications Assets of the Company, such Restricted Subsidiaries or Joint
Ventures (or will advance such net proceeds to such Restricted Subsidiaries of
the Company or Joint Ventures for such purpose); provided, however, pending such
application, the net proceeds of the sale of the Old Notes may be invested in
Marketable Securities. (Section 1020)
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
"Covenants--Limitations on Restricted Payments," any such
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surviving Person shall only be deemed to have succeeded to and be substituted
for the Company with respect to the period subsequent to the effective time of
such transaction, and the Company (before giving effect to such transaction)
shall be deemed to be the "Company" for such purposes for all prior periods.
(Section801)
The meaning of the phrase "all or substantially all" as used above varies
according to the facts and circumstances of the subject transaction, has no
clearly established meaning under relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances, there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of the Company, and
therefore it may be unclear whether the foregoing provisions are applicable.
CERTAIN DEFINITIONS
Set forth below is a summary of some of the definitions used in the
Indenture. Reference is made to the Indenture for the definition of all such
terms, as well as any other term used herein for which no definition is
provided. (Section101)
"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
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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 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,
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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 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;
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(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 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;
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(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
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Subsidiaries in the ordinary course of business, accounts receivables and other
commercially reasonable extensions of trade credit.
"Issue Date" means the date on which the Notes are first authenticated and
delivered under the Indenture.
"Joint Venture" means a corporation, partnership or other entity engaged in
one or more Telecommunications Businesses as to which the Company (directly or
through one or more Restricted Subsidiaries) exercises managerial control and in
which the Company owns (i) a 50% or greater interest, or (ii) a 30% or greater
interest, together with options or other contractual rights, exercisable not
more than seven years after the Company's initial Investment in such Joint
Venture, to increase its interest to not less than 50%.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, Receivables Sale, deposit
arrangement, security interest, lien, charge, easement (other than any easement
not materially impairing usefulness or marketability), encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing).
"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
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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 shall become Net Available Proceeds at such
time and to the extent such amounts are released to such Person.
"Offer to Purchase" means a written offer (the "Offer") sent by the Company
by first class mail, postage prepaid, to each holder at his address appearing in
the Note Register on the date of the Offer offering to purchase up to the
principal amount of Notes specified in such Offer at the purchase price
specified in such Offer (as determined pursuant to the Indenture). Unless
otherwise required by applicable law, the Offer shall specify an expiration date
(the "Expiration Date") of the Offer to Purchase which shall be, subject to any
contrary requirements of applicable law, not less than 30 days or more than 60
days after the date of such Offer and a settlement date (the "Purchase Date")
for purchase of Notes within five Business Days after the Expiration Date. The
Company shall notify the Trustee at least 15 Business Days (or such shorter
period as is acceptable to the Trustee) prior to the mailing of the Offer of the
Company's obligation to make an Offer to Purchase, and the Offer shall be mailed
by the Company or, at the Company's request, by the Trustee in the name and at
the expense of the Company. The Offer shall contain information concerning the
business of the Company and its Subsidiaries which the Company in good faith
believes will enable such holders to make an informed decision with respect to
the Offer to Purchase (which at a minimum will include (i) the most recent
annual and quarterly financial statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained in the
documents required to be filed with the Trustee pursuant to the Indenture (which
requirements may be satisfied by delivery of such documents together with the
Offer), (ii) a description of material developments in the Company's business
subsequent to the date of the latest of such financial statements referred to in
clause (i) (including a description of the events requiring the 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;
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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 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.
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"Permitted Interest Rate or Currency Protection Agreement" of any Person
means any Interest Rate or Currency Protection Agreement entered into with one
or more financial institutions in the ordinary course of business that is
designed to protect such Person against fluctuations in interest rates or
currency exchange rates with respect to Debt Incurred and which shall have a
notional amount no greater than the payments due with respect to the Debt being
hedged thereby and not for purposes of speculation.
"Permitted Investment" means:
(i) any Investment in a Joint Venture (including the purchase or
acquisition of any Capital Stock of a Joint Venture), provided the aggregate
amount of all outstanding Investments pursuant to this clause (i) in Joint
Ventures in which the Company owns, directly or indirectly, a less than 50%
interest shall not exceed $25 million;
(ii) any Investment in any Person as a result of which such Person
becomes a Restricted Subsidiary or, subject to the proviso to clause (i) of
this definition, becomes a Joint Venture of the Company;
(iii) any Investment in Marketable Securities,
(iv) Investments in Permitted Interest Rate or Currency Protection
Agreements;
(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 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
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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, 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.
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"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 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,
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
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 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 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").
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"Subsidiary" of any Person means (i) a corporation more than 50% of the
combined voting power of the outstanding Voting Stock of which is owned,
directly or indirectly, by such Person or by one or more other Subsidiaries of
such Person or by such Person and one or more Subsidiaries thereof or (ii) any
other Person (other than a corporation) in which such Person, or one or more
other Subsidiaries of such Person or such Person and one or more other
Subsidiaries thereof, directly or indirectly, has at least a majority ownership
and power to direct the policies, management and affairs thereof.
"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
Indebtedness" 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 Indebtedness" 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)
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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.
"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 are 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. (Section603) 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)
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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 at maturity 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
at maturity 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. (Section502) For information as to waiver of defaults, see "Modification
and Waiver".
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a continuing Event of
Default (as defined) and unless also the Holders of at least 25% in aggregate
principal amount of the outstanding Notes shall have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee, and the Trustee shall not have received from the Holders of a majority
in aggregate principal amount of the outstanding Notes a direction inconsistent
with such request and shall have failed to institute such proceeding within 60
days. (Section507) 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. (Section508)
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. (Section602)
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. (Section1018)
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. (Section401)
DEFEASANCE
The Indenture will provide 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
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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 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. (Section1201)
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)
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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. (Section901)
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. (Section1019) 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.
(Section513)
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.
GOVERNING LAW
The Indenture and the Notes will be governed by the laws of the State of New
York.
THE TRUSTEE
The Trustee's current address is 114 West 47th Street, New York, New York
10036.
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise as a prudent person would exercise
under the circumstances in the conduct of such person's own affairs.
(Section601)
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. (SectionSection608, 613)
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DESCRIPTION OF CERTAIN INDEBTEDNESS
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 and United States
Trust Company of New York, as trustee. On September 6, 1996, the Company
consummated an 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 the 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% 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. 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>
In addition, at any time on or before March 15, 1999, the Company may redeem
up to 33 1/3% of the original aggregate principal amount of the 12 1/2% Notes
with the net proceeds of a sale of common equity 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 or an Asset
Disposition (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
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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.
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 among the Company and United States Trust Company of
New York, as 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 Company,
will rank PARI PASSU in right of payment with all existing and future senior
obligations of the Company, including the 12 1/2% Notes, the 9% Notes, the 9.45%
Notes and the Notes and will rank senior in right of payment to all future
subordinated obligations of the Company.
REDEMPTION. 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>
In addition, at any time on or before October 1, 2002, the Company may
redeem up to 33 1/3% of the original aggregate principal amount of the 9 5/8%
Notes with the net proceeds of a sale of common equity 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
or an Asset Disposition (as defined in the indenture relating to the 9 5/8%
Notes) of the Company, the Company is 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
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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 9% NOTES
GENERAL. The Company issued $335 million of 9% Senior Notes Due 2008
pursuant to an Indenture among the Company and United States Trust Company of
New York, as trustee. On July 15, 1998, the Company consummated an offer to
exchange such notes for $335 million of 9% Senior Notes Due 2008 that had been
registered under the Securities Act.
PRINCIPAL, MATURITY AND INTEREST. The 9% Notes are limited in aggregate
principal amount to $335 million and will mature on March 15, 2008. Interest on
the 9% Notes accrues at 9% per annum and is payable semiannually in arrears on
March 15 and September 15 of each year. Interest is computed on the basis of a
360-day year comprised of twelve 30-day months.
RANKING. The 9% 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 9.45% Notes, 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. The 9% Notes are not redeemable at the Company's option prior
to March 15, 2003. Thereafter, the 9% 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 March 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ------------------------------------------------------------------------------ -----------
<S> <C>
2003.......................................................................... 104.500%
2004.......................................................................... 103.000%
2005.......................................................................... 101.500%
2006 and thereafter........................................................... 100.000%
</TABLE>
In addition, at any time on or before March 15, 2003, the Company may redeem
up to 33 1/3% of the original aggregate principal amount of the 9% Notes with
the net proceeds of a sale of common equity at a redemption price equal to 9% of
the principal amount 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% Notes remains outstanding immediately after
such redemption. Except in connection with a Change of Control or an Asset
Disposition (as defined in the indenture relating to the 9% Notes) of the
Company, the Company is not required to make mandatory redemption or sinking
fund payments with respect to the 9% Notes.
COVENANTS. The indenture relating to the 9% 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
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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% Notes. The indenture relating to the 9%
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% 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 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 among
the Company and United States Trust Company of New York, as trustee. On August
24, 1998, the Company consummated an offer to exchange such notes for
$636,974,000 million in principal amount at stated maturity of 9.45% Senior
Discount Notes due 2008 that have been registered under the Securities Act.
PRINCIPAL, MATURITY AND INTEREST. The 9.45% Notes are limited to
$636,974,000 aggregate principal amount at stated maturity and will mature on
April 15, 2008. The 9.45% Notes were issued at a discount from their principal
amount to generate aggregate gross of proceeds of approximately $400.0 million.
The 9.45% Notes accrete at a rate of 9.45% compounded semi-annually, to an
aggregate principal amount of $636,974,000 by April 15, 2003. No interest will
accrue on the 9.45% Notes prior to April 15, 2003. The 9.45% Notes bear interest
at 9.45% per annum payable semi-annually on April 15 and October 15 of each
year, commencing October 15, 2003, accruing from April 15, 2003, or from the
most recent interest payment date to which interest has been paid or provided.
RANKING. The 9.45% Notes are unsecured senior obligations of the Company,
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, the
9% Notes and the Notes, and will rank senior in right of payment to all future
subordinated obligations of the Company.
REDEMPTION. The 9.45% Notes are subject to redemption, at the option of the
Company, in whole or in part, at any time on or after April 15, 2003 and prior
to maturity in amounts of $1,000 principal amount at maturity or an integral
multiple of $1,000 at the following redemption prices (expressed as percentages
of the principal amount) plus accrued interest to but excluding the Redemption
Date, if redeemed during the 12 month period beginning April 15 of the years
indicated:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ------------------------------------------------------------------------------ -----------
<S> <C>
2003.......................................................................... 104.725%
2004.......................................................................... 103.150%
2005.......................................................................... 101.575%
2006 and thereafter........................................................... 100.000%
</TABLE>
The 9.45% Notes will be redeemable prior to April 15, 2003 only in the event
that on or before April 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 the 9.45% Notes in a principal amount
of up to an aggregate amount equal to 33 1/3% of the original principal amount
of the 9.45% Notes, PROVIDED, HOWEVER, that at least 66 2/3% of the original
aggregate principal amount of the 9.45% Notes remains outstanding after such
redemption. Except in connection with a Change of Control or an Asset
Disposition (as defined in the indenture relating to the 9.45% Notes) of the
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<PAGE>
Company, 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
such 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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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 do not constitute a significant modification from the
terms of the Old Notes. Accordingly, such exchange should not constitute a
taxable event to holders and, therefore, (i) no gain or loss should be realized
by 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 DE
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 at the time of such disposition. In addition, a U.S.
Holder may be
88
<PAGE>
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 excludable 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 20% in respect of property held for
more than twelve month. 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.
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Under present United States federal income and estate tax law, and subject
to the discussion of backup withholding below:
(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 made after December 31, 1999,
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 would generally be applied to the
partners of the 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. Non-U.S. Holders who exchange
their Old Notes for New Notes pursuant to the Exchange Offer are urged to
consult their tax advisor regarding the Final Withholding Regulations.
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
Sates 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
90
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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 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 thorough a foreign office of a broker will not be subject to information
reporting or backup withholding, except that information reporting requirements
will apply 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.
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
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<PAGE>
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.
LEGAL MATTERS
The validity of the New Notes will be passed upon for the Company by Willkie
Farr & Gallagher, New York, New York.
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.
92
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION OR TO MAKE ANY
REPRESENTATION TO YOU THAT IS NOT CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED. YOU SHOULD NOT UNDER ANY CIRCUMSTANCES ASSUME THAT THE INFORMATION IN
THIS PROSPECTUS IS CORRECT ON ANY DATE AFTER THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Incorporation Of Certain Documents By
Reference..................................... ii
Where You Can Find More Information............. ii
Prospectus Summary.............................. 1
Risk Factors.................................... 13
The Company..................................... 25
Use Of Proceeds................................. 25
Capitalization.................................. 26
Selected Historical Consolidated Financial And
Operating Data................................ 27
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 30
The Exchange Offer.............................. 38
Description Of The Notes........................ 48
Description Of Certain Indebtedness............. 83
Certain United States Federal Income Tax
Consequences.................................. 88
Plan Of Distribution............................ 91
Legal Matters................................... 92
Experts......................................... 92
</TABLE>
$500,000,000
Offer to Exchange 10 3/4% Senior
Notes due 2008
that have been registered under the
Securities Act of 1933
for outstanding 10 3/4% Senior
Notes due 2008
---------------------
P R O S P E C T U S
DATED FEBRUARY , 1999
---------------------
[LOGO]
NEXTLINK
COMMUNICATIONS,
INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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 or
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 has entered into indemnification agreements with each of the
Company's officers and directors.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS:
<TABLE>
<C> <C> <S>
1 -- Purchase Agreement by and among the Company and the Initial Purchasers.
3.1 -- Certificate of Incorporation of the Company.(1)
3.2 -- By-laws of the Company.(1)
4.1 -- Indenture, dated November 12, 1998, by and among NEXTLINK Communications, Inc. and
United States Trust Company of New York, as trustee, relating to the 10 3/4% Senior
Notes due 2008.
4.2 -- 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.(3)
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <C> <S>
4.3 -- 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.(1)
4.4 -- Form of stock certificate of 14% Senior Exchangeable Redeemable Preferred
Shares.(3)
4.5 -- 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.(2)
4.6 -- 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.(3)
4.7 -- Form of Indenture between United States Trust Company, as Trustee and NEXTLINK
Communications, Inc., relating to the 9 5/8% Senior Notes due 2007.(4)
4.8 -- Indenture, dated March 3, 1998, between United States Trust Company, as Trustee and
NEXTLINK Communications, Inc., relating to the 9% Senior Notes due 2008.(5)
4.9 -- 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.(1)
4.10 -- 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.(6)
4.11 -- 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.(1)
4.12 -- 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.(1)
4.13 -- 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.(1)
4.14 -- 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.(1)
5.1 -- Opinion of Willkie Farr & Gallagher.
8.1 -- Tax Opinion of Willkie Farr & Gallagher
10.1 -- Stock Option Plan of the Company, as amended.(1)
10.2 -- Employee Stock Purchase Plan of the Company.(1)
10.3 -- Registration Rights Agreement dated as of January 15, 1997, between the Company and
the signatories listed therein(3).
10.4 -- Preferred Exchange and Registration Rights Agreement, dated as of January 31, 1997,
by and among the Company and the Initial Purchasers(3).
10.5 -- Fiber Lease and Innerduct Use Agreement, dated February 23, 1998, by and between
the Company and Metromedia Fiber Network, Inc. (5)
</TABLE>
II-2
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<TABLE>
<C> <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. (5)
10.7 -- Agreement and Plan of Merger, dated as of January 14, 1999, among the Company, WNP
Communications, Inc. and PCO Acquisition Corp. (7)
10.8 -- Registration Rights Agreement, dated January 14, 1999, between the Company and the
Holders referred to therein. (7)
21 -- Subsidiaries of the Registrant.(5)
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).
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, Inc. (Commission File No.
333-53975).
(2) 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).
(3) 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).
(4) 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).
(5) 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).
(6) 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).
(7) Incorporated herein by reference to the exhibits filed with the current
report on Form 8-K filed on January 19, 1999 (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
II-3
<PAGE>
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-4
<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 29th day of January, 1999.
NEXTLINK COMMUNICATIONS, INC.
By: /s/ WAYNE M. PERRY
-----------------------------------------
Wayne M. Perry
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
We, the undersigned officers and directors of NEXTLINK Communications, Inc.,
hereby severally and individually constitute and appoint Kathleen H. Iskra and
R. Bruce Easter, Jr., and each of them, as the true and lawful attorneys-in-fact
for the undersigned, in any and all capacities, with full power of substitution,
to sign any and all amendments to this Registration Statement (including
post-effective amendments), and to file the same with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ STEVEN W. HOOPER Chairman of the Board
- ------------------------------ January 29, 1999
Steven W. Hooper
Vice Chairman and Chief
/s/ WAYNE M. PERRY Executive Officer
- ------------------------------ (Principal Executive January 29, 1999
Wayne M. Perry Officer) and Director
Vice President, Chief
Financial Officer and
/s/ KATHLEEN H. ISKRA Treasurer (Principal
- ------------------------------ Financial Officer and January 29, 1999
Kathleen H. Iskra Principal Accounting
Officer)
/s/ CRAIG O. MCCAW Director
- ------------------------------ January 29, 1999
Craig O. Mccaw
/s/ DENNIS WEIBLING Director
- ------------------------------ January 29, 1999
Dennis Weibling
II-5
<PAGE>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ WILLIAM A. HOGLUND Director
- ------------------------------ January 29, 1999
William A. Hoglund
/s/ SHARON L. NELSON Director
- ------------------------------ January 27, 1999
Sharon L. Nelson
/s/ JEFFREY S. RAIKES Director
- ------------------------------ January 29, 1999
Jeffrey S. Raikes
/s/ GREGORY J. PARKER Director
- ------------------------------ January 5, 1999
Gregory J. Parker
II-6
<PAGE>
Exhibit 1
NEXTLINK COMMUNICATIONS, INC.
10 3/4% SENIOR NOTES DUE 2008
PURCHASE AGREEMENT
New York, New York
November 4, 1998
Salomon Smith Barney 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 Delaware (the "Company"), proposes to issue and sell to the parties
named in Schedule I hereto (the "Initial Purchasers") an aggregate of
$500,000,000 principal amount of its 10 3/4% Senior Notes due 2008 (the
"Securities"). The Securities are to be issued under an indenture (the
"Indenture") dated as of November 12, 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 will prepare an
offering memorandum, dated the date hereof (the "Execution Date"), including any
and all exhibits thereto and any and all documents incorporated by reference
therein (the "Offering Memorandum") subject to the approval of the Initial
Purchasers, which approval will not be unreasonably withheld or delayed.
References herein to the Offering Memorandum or to any amendment or supplement
thereto shall also mean information incorporated by reference therein.
References herein to the Offering Memorandum as of the date hereof refer to
information contained in the documents to be incorporated by reference therein.
The Offering Memorandum will set forth certain information concerning the
Company and the Securities. The Company hereby confirms that it has authorized
the use of the Offering 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 Offering Memorandum
are to the Offering Memorandum at the Execution Time (as defined below) and are
not meant to include any amendment or supplement subsequent to the Execution
Time.
The Initial Purchasers and their direct and indirect transferees of the
Securities will be entitled to the benefits of the Exchange and Registration
Rights Agreement, substantially in the form
<PAGE>
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 Offering Memorandum, 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 Offering 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 Salomon Smith Barney Inc. specifically for
inclusion therein. The documents incorporated by reference in the Offering
Memorandum, when they were filed with the Commission, conformed in all
material respects to the requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and any further documents so filed and incorporated by
reference in the Offering Memorandum or any further amendment or supplement
thereto, when such documents become effective or are filed with the
Commission, as the case may be, will conform in all material respects to
the requirements of the Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder and will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Initial Purchaser through Salomon Smith Barney Inc. expressly for use
therein;
(ii) Independent Accountants. The accountants who certified the
financial statements included in the Offering Memorandum or incorporated by
reference therein 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 or incorporated by reference in the
Offering Memorandum present fairly the
2
<PAGE>
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 Offering 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
Offering Memorandum;
(iv) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Offering 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 other than
scheduled or regular dividends, if any, on outstanding preferred stock of
the Company as previously disclosed to the Initial Purchasers;
(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 Delaware and has power and authority to own, lease and operate its
properties and to conduct its business as described in the Offering
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, Inc.
(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 Offering
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
3
<PAGE>
to qualify or to be in good standing would not result in a Material Adverse
Effect; except as otherwise disclosed in the Offering 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 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 Offering 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 and Registration Rights
Agreement. This Agreement has been duly authorized, executed and delivered
by the Company; the Registration Rights Agreement has been duly authorized
by the Company and, when executed and delivered by the Company as of the
Closing Date, will constitute 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,
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<PAGE>
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 Offering Memorandum and will be in
substantially the form previously delivered to the Initial Purchasers;
(x) Absence of Defaults and Conflicts. Neither the Company 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 Offering Memorandum and the consummation of the transactions
contemplated herein, therein and in the Offering 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 Offering 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
5
<PAGE>
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
its business in the manner described in the Offering 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
Offering 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 Offering 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
Offering 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 Offering 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
6
<PAGE>
unpatentable 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
Offering 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 to 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 Offering
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 Offering
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 Offering
Memorandum and except such matters as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company 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
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<PAGE>
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 Offering
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 Offering Memorandum. The statements
set forth in the Offering Memorandum under the caption "Description of
Notes", insofar as they purport to constitute a summary of the terms of the
Securities, and under the caption "Plan of Distribution", and under the
caption "Business--Regulatory Overview" in the Company's Annual Report on
Form 10-KSB, filed on March 25, 1998, which is incorporated therein by
reference, 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 Offering 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 Offering 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
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
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<PAGE>
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 (excluding the
Initial Purchasers as to the actions of which the Company makes no
representation or warranty) 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.
2. SALE AND DELIVERY TO INITIAL PURCHASERS.
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<PAGE>
(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 97.75% of the principal amount thereof, plus accrued interest, if any,
from November 12, 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 Smith Barney 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 November 12, 1998 (the "Closing Date"),
or such other time and date as Salomon Smith Barney 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;
provided, however, that November 11, 1998 shall be deemed to be a New York
Business Day.
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 Offering
Memorandum and each Initial Purchaser hereby represents and warrants to, and
agrees with the Company that:
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(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 Offering Memorandum; Notices. To prepare the Offering
Memorandum in a form approved by the Initial Purchasers; to make no amendment or
any supplement to the Offering 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 Offering 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 Offering Memorandum
and each amendment or supplement thereto signed by an authorized officer of the
Company with the independent accountants' report(s) in the Offering 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 Offering 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 Offering
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
Offering 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 Offering
Memorandum or a supplement to the Offering 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
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
Smith Barney Inc.;
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<PAGE>
(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
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
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<PAGE>
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
Offering 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 the Offering 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, 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
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<PAGE>
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, and of R. Bruce
Easter, Esq., Vice President, General Counsel and Secretary of the Company, in
form and substance satisfactory to counsel for the Initial Purchasers, to the
effect set forth in Exhibits A-1 and A-2 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 Offering 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 Offering 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
Offering 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 Offering 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
14
<PAGE>
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. At the Closing Time, the Initial
Purchasers shall have received from Arthur Andersen LLP a letter or letters
dated as of the Closing Date, 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 Offering Memorandum;
(e) No Material Adverse Change in Business. Since the respective dates as
of which information is given in the Offering 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) 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 Offering Memorandum (exclusive of any amendment thereof or
supplement thereto);
(f) Maintenance of Rating. At the Closing Date, the Securities shall be
rated at least B by Standard & Poor's Corporation and B3 by Moody's Investors
Service Inc. and, 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 statistical rating organization",
as that term is defined by the Commission for purposes of Rule 436(g)(2) under
the Act, and no such organization shall have publicly announced that it has
under surveillance or review its rating of any of the Company's debt securities
or preferred stock;
(g) Offering Memorandum. The Offering Memorandum shall be in form and
substance reasonably satisfactory to the Initial Purchasers. The Company shall
have complied with the provisions of Section 4(a) hereof with respect to the
furnishing of Offering Memoranda as soon as practicable but in no event later
than 10:00 a.m. on November 8, 1998;
(h) 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 Offering Memorandum which is not disclosed
therein;
15
<PAGE>
(i) 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
(j) 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 material
fact contained in the Offering 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
16
<PAGE>
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 Smith Barney 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 Offering Memorandum
constitute the only information furnished in writing by or on behalf of the
several Initial Purchasers for inclusion in such Offering 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 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,
17
<PAGE>
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.
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 Offering 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.
18
<PAGE>
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 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 Stock Market, Inc. ("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 Offering
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
19
<PAGE>
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 Offering
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 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 Smith Barney 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
Smith Barney Inc. General Counsel (fax no. (212) 783-1752) and confirmed to
Salomon Smith Barney 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 Offering 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,
20
<PAGE>
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 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.
21
<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 Smith Barney 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, General Counsel
and Secretary
CONFIRMED AND ACCEPTED,
as of the date first above written:
Salomon Smith Barney Inc.
By /s/ Robert F. Doherty
-------------------------------
Name: Robert F. Doherty
Title: Vice President
<PAGE>
SCHEDULE I
AGGREGATE
PRINCIPAL AMOUNT OF
SECURITIES TO BE
INITIAL PURCHASER PURCHASED
----------------- -------------------
Salomon Smith Barney Inc. $500,000,000
------------
Total $500,000,000
============
<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,
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)
<PAGE>
(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 WILLKIE 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 Delaware.
(ii) The Company has power and authority to own, lease and operate its
properties and to conduct its business as described in the Offering 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 Offering 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.
(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 Offering 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 Offering
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, PROVIDED that such counsel
need express no opinion as to the enforceability of provisions with respect to
indemnity for liabilities arising under the Securities Act of 1933, as amended.
(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.
A-1-1
<PAGE>
(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 Offering 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 Offering 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 caption "Plan of Distribution", and the
information under the caption "Business--Regulatory Overview" included in the
Company's Annual Report on Form 10-KSB, filed on March 25, 1998, which is
incorporated therein by reference, 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 Offering 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 Offering 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 Offering
Memorandum that are not described or referred to in the Offering Memorandum
other than those described or referred to therein and the descriptions thereof
or references thereto are correct in all material respects.
(xiii) The documents incorporated by reference in the Offering Memorandum
(other than the financial statements and related schedules therein, as to which
such counsel need express no opinion), as of the date of the Offering
Memorandum, complied as to form in all material respects
A-1-2
<PAGE>
with the requirements of the Exchange Act and the rules and regulations of the
Commission thereunder.
(xiv) 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 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 Offering
Memorandum.
(xv) 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.
(xvi) 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 Offering Memorandum, and the
consummation of the transactions contemplated herein, therein and in the
Offering 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.
(xvii) 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.
A-1-3
<PAGE>
Such counsel shall also state that although such counsel does not assume
any responsibility for the accuracy, completeness or fairness of the statements
contained in the Offering 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 Offering Memorandum or any further amendment or supplement thereto made by
the Company prior to each Closing Time or any documents incorporated by
reference therein (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 Offering Memorandum
or any further amendment or supplement thereto made by the Company prior to such
Closing Time or any documents incorporated by reference therein (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 R. Bruce Easter, Esq., Vice President, General Counsel and Secretary
of 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).
A-1-4
<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
Offering Memorandum.
(ii) To the best of my knowledge and except as set forth in or
contemplated by the Offering 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 Offering 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.
(iv) 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 Offering 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.
(v) To the best of my knowledge, none of the Designated Subsidiaries is
in violation of, as applicable, its articles of incorporation, bylaws, limited
liability company agreement or partnership agreement.
A-2-1
<PAGE>
In rendering such opinion, such counsel (A) may rely as to matters of fact
(but not as to legal conclusions), to the extent he deems proper, on
certificates of 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).
A-2-2
<PAGE>
Exhibit 4
================================================================================
NEXTLINK COMMUNICATIONS, INC.
TO
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
---------------------------
Indenture
Dated as of November 12, 1998
---------------------------
$500,000,000
103/4% SENIOR NOTES
DUE 2008
================================================================================
<PAGE>
NEXTLINK COMMUNICATIONS, INC.
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section Section
- --------------- ---------------
Section 310(a)(1) ..................................... 609
(a)(2) ..................................... 609
(a)(3) ..................................... Not Applicable
(a)(4) ..................................... Not Applicable
(b) ..................................... 608
..................................... 610
Section 311(a) ..................................... 613
(b) ..................................... 613
Section 312(a) ..................................... 701
(b) ..................................... 702
(c) ..................................... 702
Section 313(a) ..................................... 703
(b) ..................................... 703
(c) ..................................... 703
(d) ..................................... 703
Section 314(a) ..................................... 704
..................................... 1018
(b) ..................................... Not Applicable
(c)(1) ..................................... 102
(c)(2) ..................................... 102
(c)(3) ..................................... Not Applicable
(d) ..................................... Not Applicable
(e) ..................................... 102
Section 315(a) ..................................... 601
(b) ..................................... 602
(c) ..................................... 601
(d) ..................................... 601
(e) ..................................... 514
Section 316(a)(1)(A)..................................... 502
- ---------------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
-i-
<PAGE>
..................................... 512
(a)(1)(B) ..................................... 513
(a)(2) ..................................... Not Applicable
(b) ..................................... 508
(c) ..................................... 104
Section 317(a)(1) ..................................... 503
(a)(2) ..................................... 504
(b) ..................................... 1003
Section 318(a) ..................................... 107
- ---------------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
-ii-
<PAGE>
TABLE OF CONTENTS
PAGE
RECITALS OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE Definitions and Other Provisions of General Application
SECTION 101. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Acquired Debt . . . . . . . . . . . . . . . . . . . . . . . . . 2
Additional Interest . . . . . . . . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Agent Member. . . . . . . . . . . . . . . . . . . . . . . . . . 3
Applicable Procedures . . . . . . . . . . . . . . . . . . . . . 3
Asset Disposition . . . . . . . . . . . . . . . . . . . . . . . 3
Attributable Value. . . . . . . . . . . . . . . . . . . . . . . 3
Bank Credit Agreement . . . . . . . . . . . . . . . . . . . . . 4
Board of Directors. . . . . . . . . . . . . . . . . . . . . . . 4
Board Resolution. . . . . . . . . . . . . . . . . . . . . . . . 4
Business Day. . . . . . . . . . . . . . . . . . . . . . . . . . 4
Capital Lease Obligation. . . . . . . . . . . . . . . . . . . . 4
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . 5
Cedel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Change of Control . . . . . . . . . . . . . . . . . . . . . . . 5
Commission. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Common Equity . . . . . . . . . . . . . . . . . . . . . . . . . 5
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Company Request . . . . . . . . . . . . . . . . . . . . . . . . 5
Company Order . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Capital Ratio. . . . . . . . . . . . . . . . . . . 5
Consolidated Cash Flow Available for
Fixed Charges . . . . . . . . . . . . . . . . . . . . . . . . . 6
Consolidated Income Tax Expense . . . . . . . . . . . . . . . . 6
Consolidated Interest Expense . . . . . . . . . . . . . . . . . 6
Consolidated Net Income . . . . . . . . . . . . . . . . . . . . 7
Consolidated Net Worth. . . . . . . . . . . . . . . . . . . . . 7
Consolidated Tangible Assets. . . . . . . . . . . . . . . . . . 8
Corporate Trust Office. . . . . . . . . . . . . . . . . . . . . 8
corporation . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Defaulted Interest. . . . . . . . . . . . . . . . . . . . . . . 9
Depositary. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
- --------------------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
-iii-
<PAGE>
Disqualified Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
DTC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Eagle River. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Eligible Institution . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Exchange Registration Statement. . . . . . . . . . . . . . . . . . . . . . . 11
Exchange Security. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Expiration Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Global Security. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Government Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Incur. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Indenture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Interest Payment Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Interest Rate or Currency Protection
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Issue Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Joint Venture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Marketable Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Net Available Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Offer to Purchase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Officers' Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Original Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Permitted Interest Rate or Currency
Protection Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Permitted Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Permitted Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Predecessor Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Preferred Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Purchase Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Purchase Money Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
readily marketable cash equivalents. . . . . . . . . . . . . . . . . . . . . 22
Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
- --------------------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
-iv-
<PAGE>
Receivables Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Redemption Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Registered Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Regular Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Regulation S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Regulation S Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Regulation S Global Security . . . . . . . . . . . . . . . . . . . . . . . . 23
Regulation S Legend. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Regulation S Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Related Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Resale Registration Statement. . . . . . . . . . . . . . . . . . . . . . . . 23
Responsible Officer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Restricted Global Security . . . . . . . . . . . . . . . . . . . . . . . . . 24
Restricted Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Restricted Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Restricted Securities Certificate. . . . . . . . . . . . . . . . . . . . . . 24
Restricted Securities Legend . . . . . . . . . . . . . . . . . . . . . . . . 24
Restricted Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Rule 144A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Rule 144A Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Sale and Leaseback Transaction . . . . . . . . . . . . . . . . . . . . . . . 24
SEC Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Securities Act Legend. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Security Register. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Security Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Significant Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Special Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Stated Maturity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Step-Down Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Step-Up. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Subordinated Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Successor Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Telecommunications Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 27
Telecommunications Business. . . . . . . . . . . . . . . . . . . . . . . . . 27
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Trust Indenture Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Unrestricted Securities Certificate. . . . . . . . . . . . . . . . . . . . . 28
Unrestricted Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Vendor Financing Facility. . . . . . . . . . . . . . . . . . . . . . . . . . 29
Vice President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Voting Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
- --------------------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
-v-
<PAGE>
Wholly-Owned Restricted Subsidiary. . . . . . . . . . . . . . 29
SECTION 102. Compliance Certificates and Opinions. . . . . . . . . . . . . 29
SECTION 103. Form of Documents Delivered to Trustee. . . . . . . . . . . . 30
SECTION 104. Acts of Holders; Record Dates . . . . . . . . . . . . . . . . 31
SECTION 105. Notices, Etc., to Trustee and Company . . . . . . . . . . . . 34
SECTION 106. Notice to Holders; Waiver . . . . . . . . . . . . . . . . . . 34
SECTION 107. Application of Trust Indenture Act. . . . . . . . . . . . . . 35
SECTION 108. Effect of Headings and Table of Contents. . . . . . . . . . . 35
SECTION 109. Successors and Assigns. . . . . . . . . . . . . . . . . . . . 35
SECTION 110. Separability Clause . . . . . . . . . . . . . . . . . . . . . 35
SECTION 111. Benefits of Indenture . . . . . . . . . . . . . . . . . . . . 35
SECTION 112. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 113. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 202. Form of Face of Security. . . . . . . . . . . . . . . . . . . 37
SECTION 203. Form of Reverse of Security . . . . . . . . . . . . . . . . . 42
SECTION 204. Additional Provisions Required in
Global Security. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 205. Form of Trustee's Certificate of
Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE THREE
The Securities
SECTION 301. Title and Terms . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 302. Denominations . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 303. Execution, Authentication, Delivery
and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 304 Temporary Securities. . . . . . . . . . . . . . . . . . . . . 51
SECTION 305. Registration, Registration of Transfer
and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 306. Mutilated, Destroyed, Lost and
Stolen Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 307. Payment of Interest; Interest
Rights Preserved . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 308. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . 60
SECTION 309. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 310. Computation of Interest . . . . . . . . . . . . . . . . . . . 60
SECTION 311. CUSIP and ISIN Numbers. . . . . . . . . . . . . . . . . . . . 60
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture . . . . . . . . . . . 61
SECTION 402. Application of Trust Money. . . . . . . . . . . . . . . . . . 62
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Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
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ARTICLE FIVE
Remedies
SECTION 501. Events of Default . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 502. Acceleration of Maturity; Rescission and Annulment. . . . . . 65
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 504. Trustee May File Proofs of Claim. . . . . . . . . . . . . . . 67
SECTION 505. Trustee May Enforce Claims Without Possession of Securities . 68
SECTION 506. Application of Money Collected. . . . . . . . . . . . . . . . 68
SECTION 507. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . 69
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium
and Interest . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 509. Restoration of Rights and Remedies. . . . . . . . . . . . . . 70
SECTION 510. Rights and Remedies Cumulative. . . . . . . . . . . . . . . . 70
SECTION 511. Delay or Omission Not Waiver. . . . . . . . . . . . . . . . . 71
SECTION 512. Control by Holders. . . . . . . . . . . . . . . . . . . . . . 71
SECTION 513. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . 71
SECTION 514. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . 72
SECTION 515. Waiver of Stay or Extension Laws. . . . . . . . . . . . . . . 72
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities . . . . . . . . . . . . . 73
SECTION 602. Notice of Defaults. . . . . . . . . . . . . . . . . . . . . . 73
SECTION 603. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . 73
SECTION 604. Not Responsible for Recitals or Issuance of Securities. . . . 75
SECTION 605. May Hold Securities . . . . . . . . . . . . . . . . . . . . . 75
SECTION 606. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . 75
SECTION 607. Compensation and Reimbursement. . . . . . . . . . . . . . . . 75
SECTION 608. Disqualification; Conflicting Interests . . . . . . . . . . . 76
SECTION 609. Corporate Trustee Required; Eligibility . . . . . . . . . . . 77
SECTION 610. Resignation and Removal; Appointment
of Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 611. Acceptance of Appointment by Successor. . . . . . . . . . . . 79
SECTION 612. Merger, Conversion, Consolidation
or Succession to Business. . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 613. Preferential Collection of Claims Against
the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 614. Appointment of Authenticating Agent . . . . . . . . . . . . . 80
ARTICLE SEVEN
Holders' Lists and Reports by
Trustee and the Company
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Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
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<PAGE>
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders . . 82
SECTION 702. Preservation of Information; Communications
to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 703. Reports by Trustee. . . . . . . . . . . . . . . . . . . . . . 83
SECTION 704. Reports by Company. . . . . . . . . . . . . . . . . . . . . . 83
SECTION 705. Officers' Certificate with Respect to
Change in Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . 83
ARTICLE EIGHT
Merger, Consolidation, Etc.
SECTION 801. Mergers, Consolidations and Certain
Sales of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 802. Successor Substituted . . . . . . . . . . . . . . . . . . . . 85
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent
of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 902. Supplemental Indentures with Consent
of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 903. Execution of Supplemental Indentures. . . . . . . . . . . . . 88
SECTION 904. Effect of Supplemental Indentures . . . . . . . . . . . . . . 88
SECTION 905. Conformity with Trust Indenture Act . . . . . . . . . . . . . 88
SECTION 906. Reference in Securities to Supplemental
Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and Interest. . . . . . . . . . 89
SECTION 1002. Maintenance of Office or Agency . . . . . . . . . . . . . . . 89
SECTION 1003. Money for Security Payments to be
Held in Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 1004. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 1005. Maintenance of Properties and Insurance . . . . . . . . . . . 92
SECTION 1006. Payment of Taxes and Other Claims . . . . . . . . . . . . . . 92
SECTION 1007. Limitation on Consolidated Debt . . . . . . . . . . . . . . . 93
SECTION 1008. Limitation on Debt and Preferred Stock of Restricted
Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 1009. Limitation on Restricted Payments . . . . . . . . . . . . . . 99
SECTION 1010. Limitation on Dividend and Other Payment
Restrictions Affecting RestrictedSubsidiaries. . . . . . . . . . . . . . . . 101
SECTION 1011. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . 103
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Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
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<PAGE>
SECTION 1012. Limitation on Sale and Leaseback Transactions . . . . . . . 104
SECTION 1013. Limitation on Asset Dispositions. . . . . . . . . . . . . . 104
SECTION 1014. Limitation on Issuances and Sales of Capital Stock of
Restricted Subsidiaries . . . . . . . . . . . . . . . . . . 107
SECTION 1015. Transactions with Affiliates and Related Persons. . . . . . 107
SECTION 1016. Change of Control . . . . . . . . . . . . . . . . . . . . . 108
SECTION 1017. Provision of Financial Information. . . . . . . . . . . . . 109
SECTION 1018. Statement by Officers as to Default . . . . . . . . . . . . 110
SECTION 1019. Waiver of Certain Covenants . . . . . . . . . . . . . . . . 110
SECTION 1020. Limitation on Use of Proceeds . . . . . . . . . . . . . . . 110
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption . . . . . . . . . . . . . . . . . . . . 111
SECTION 1102. Applicability of Article. . . . . . . . . . . . . . . . . . 112
SECTION 1103. Election to Redeem; Notice to Trustee . . . . . . . . . . . 112
SECTION 1104. Securities to Be Redeemed Pro Rata. . . . . . . . . . . . . 112
SECTION 1105. Notice of Redemption. . . . . . . . . . . . . . . . . . . . 113
SECTION 1106. Deposit of Redemption Price . . . . . . . . . . . . . . . . 114
SECTION 1107. Securities Payable on Redemption Date . . . . . . . . . . . 114
SECTION 1108. Securities Redeemed in Part . . . . . . . . . . . . . . . . 115
ARTICLE TWELVE
Defeasance and Covenant Defeasance
SECTION 1201. Company's Option to Effect Defeasance or Covenant Defeasance 115
SECTION 1202. Defeasance and Discharge. . . . . . . . . . . . . . . . . . 115
SECTION 1203. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . 116
SECTION 1204. Conditions to Defeasance or Covenant Defeasance . . . . . . 116
SECTION 1205. Deposited Money and U.S. Government Obligations to Be Held
in Trust; Other Miscellaneous Provisions. . . . . . . . . . 119
SECTION 1206. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . 120
SECTION 1207. Repayment to Company. . . . . . . . . . . . . . . . . . . . 120
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Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
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<PAGE>
ANNEX A -- Form of Regulation S Certificate
ANNEX B -- Form of Restricted Securities Certificate
ANNEX C -- Form of Unrestricted Securities Certificate
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Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
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<PAGE>
INDENTURE, dated as of November 12, 1998, between NEXTLINK
Communications, Inc., a corporation organized under the laws of the State of
Delaware (the "Company"), having its principal office at 500 108th Avenue N.E.,
Suite 2200, Bellevue, Washington 98004, and United States Trust Company of New
York, duly organized and existing under the laws of the State of New York, as
Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of
$500,000,000 aggregate principal amount of its 103/4% Senior Notes due 2008 (the
"Securities") of substantially the tenor and amount hereinafter set forth, and
to provide therefor the Company has duly authorized the execution and delivery
of this Indenture. The Securities may consist of Original Securities and/or
Exchange Securities, each as defined herein. The Original Securities and the
Exchange Securities shall rank PARI PASSU in right of payment with all existing
and future senior obligations of the Company.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
<PAGE>
(1) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles (whether or not such is indicated herein) and,
except as otherwise herein expressly provided, the term "generally
accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles
as are generally accepted as consistently applied by the Company at
the date of such computation; and
(4) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
Certain terms, used principally in Article Six, are defined in that
Article.
"Act", when used with respect to any Holder, has the meaning specified
in Section 104.
"Acquired Debt" means, with respect to any specified Person, (i) Debt
of any other Person existing at the time such Person merges with or into or
consolidates with or becomes a Restricted Subsidiary of such specified Person
and (ii) Debt secured by a Lien encumbering any asset acquired by such specified
Person, which Debt was not Incurred in anticipation of, and was outstanding
prior to, such merger, consolidation or acquisition.
"Additional Interest" has the meaning set forth in the form of
Security contained in Section 202. Unless the context otherwise requires,
references herein to "interest" on the Securities shall include Additional
Interest.
"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
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specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent Member" means any member of, or participant in, the Depository.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein, the
rules and procedures of the Depositary for such Security, Euroclear and Cedel,
in each case to the extent applicable to such transaction and as in effect from
time to time.
"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 Section 1008 or
pursuant to a transaction in compliance with Section 801, (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 by the provisions of Section
1009; 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
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determination at a rate per annum equal to the discount rate which would be
applicable to a Capital Lease Obligation with like term in accordance with
generally accepted accounting principles. The net amount of rent required to be
paid under any such lease for any such period shall be the aggregate amount of
rent payable by the lessee with respect to such period after excluding amounts
required to be paid on account of insurance, taxes, assessments, utility,
operating and labor costs and similar charges. In the case of any lease which is
terminable by the lessee upon the payment of penalty, such net amount shall also
include the lesser of the amount of such penalty (in which case no rent shall be
considered as required to be paid under such lease subsequent to the first date
upon which it may be so terminated) or the rent which would otherwise be
required to be paid if such lease is not so terminated. "Attributable Value"
means, as to a Capital Lease Obligation, the principal amount thereof.
"Bank Credit Agreement" means any one or more credit agreements (which
may include or consist of revolving credits) between the Company or any
Restricted Subsidiary of the Company and one or more banks or other financial
institutions providing financing for the business of the Company and its
Restricted Subsidiaries.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that Board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The Borough of
Manhattan, The City of New York, New York are authorized or obligated by law or
executive order to close.
"Capital Lease Obligation" of any Person means the obligation to pay
rent or other payment amounts under a lease of (or other Debt arrangements
conveying the right to use) real or personal property of such Person which is
required to be classified and accounted for as a capital lease or a liability on
the face of a balance sheet of such Person in accordance with generally accepted
accounting principles (a "Capital Lease"). The stated maturity of such
obligation shall be the date of the last payment of rent or
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<PAGE>
any other amount due under such lease prior to the first date upon which such
lease may be terminated by the lessee without payment of a penalty. The
principal amount of such obligation shall be the capitalized amount thereof that
would appear on the face of a balance sheet of such Person in accordance with
generally accepted accounting principles.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock or
other equity participations, including partnership interests, whether general or
limited, of such Person.
"Cedel" means Cedel Bank, S.A. (or any successor securities clearing
agency).
"Change of Control" has the meaning specified in Section 1016.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Equity" of any Person means Capital Stock of such Person that
is not Disqualified Stock, and a "sale of Common Equity" includes any sale of
Common Equity effected by private sale or public offering.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture and thereafter "Company"
shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by (i) the Chief Executive Officer, the
President, an Executive Vice President or a Vice President of the Company, and
(ii) the Treasurer, Assistant Treasurer or Secretary of the Company, and
delivered to the Trustee.
"Consolidated Capital Ratio" of any Person as of any date means the
ratio of (i) the aggregate consolidated principal amount of Debt (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
5
<PAGE>
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 or foreign currency hedge, exchange or similar agreements;
(iv) Preferred Dividends of the Company and its Restricted Subsidiaries (other
than dividends paid
6
<PAGE>
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) non-cash gains or
losses resulting from fluctuations in currency exchange rates, (g) any non-cash
gain or loss realized on the termination of any employee pension benefit plan
and (h) the tax effect of any of the items described in clauses (a) through (g)
above; PROVIDED, FURTHER, that for purposes of any determination pursuant to the
provisions of Section 1009 there shall further be excluded therefrom the net
income (but not net loss) of any Restricted Subsidiary of the Company that is
subject to a restriction which prevents the payment of dividends or the making
of distributions to the Company or another Restricted Subsidiary of the Company
to the extent of such restriction.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with generally accepted accounting principles, less amounts
attributable to Disqualified Stock of such Person; PROVIDED that, with respect
to the Company, adjustments following the date of this Indenture to the
accounting books and records of the Company in accordance with Accounting
Principles Board Opinions Nos. 16 and 17 (or successor opinions thereto) or
otherwise resulting from the acquisition of control of the Company by another
Person shall not be given effect to.
7
<PAGE>
"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 this Indenture to the accounting books and records of the Company in
accordance with Accounting Principles Board Opinions Nos. 16 and 17 (or
successor opinions thereto) or otherwise resulting from the acquisition of
control of the Company by another Person shall not be given effect to.
"Corporate Trust Office" means the principal office of the Trustee in
the Borough of Manhattan, The City of New York, New York, at which at any
particular time its corporate trust business shall be administered, which at the
date hereof is located at 114 West 47th Street, New York, New York 10036.
"corporation" means a corporation, association, company, limited
liability company, joint-stock company or business trust.
"Debt" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (i) every obligation of such Person for money borrowed, (ii)
every obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, including any such obligations Incurred in connection with
the acquisition of property, assets or businesses, (iii) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person, (iv)
every obligation of such Person issued or assumed as the deferred purchase price
of property or services (including securities repurchase agreements but
excluding trade accounts payable or accrued liabilities arising in the ordinary
course of business which are not overdue or which are being contested in good
faith), (v) every Capital Lease Obligation of such Person, (vi) all Receivables
Sales of such Person, together with any obligation of such Person to pay any
discount, interest, fees, indemnities, penalties, recourse, expenses or other
amounts in connection therewith, (vii) all obligations to redeem Disqualified
Stock issued by such Person, (viii) every obligation under Interest Rate or
Currency Pro-
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tection Agreements of such Person and (ix) every obligation of the type referred
to in clauses (i) through (viii) of another Person and all dividends of another
Person the payment of which, in either case, such Person has Guaranteed. The
"amount" or "principal amount" of Debt at any time of determination as used
herein represented by (a) any Debt issued at a price that is less than the
principal amount at maturity thereof, shall be the amount of the liability in
respect thereof determined in accordance with generally accepted accounting
principles, (b) any Receivables Sale, shall be the amount of the unrecovered
capital or principal investment of the purchaser (other than the Company or a
Wholly-Owned Restricted Subsidiary of the Company) thereof, excluding amounts
representative of yield or interest earned on such investment, (c) any
Disqualified Stock, shall be the maximum fixed redemption or repurchase price in
respect thereof, (d) any Capital Lease Obligation, shall be determined in
accordance with the definition thereof, or (e) any Permitted Interest Rate or
Currency Protection Agreement, shall be zero. In no event shall Debt include
any liability for taxes.
"Default" means an event that with the passing of time or the giving
of notice or both shall constitute an Event of Default.
"Defaulted Interest" has the meaning specified in Section 307.
"Depositary" means, with respect to the Securities issuable or issued
in whole or in part in the form of one or more Global Securities, DTC for so
long as it shall be a clearing agency registered under the Exchange Act, or such
successor (which shall be a clearing agency registered under the Exchange Act)
as the Company shall designate from time to time in an Officers' Certificate
delivered to the Trustee.
"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 Securities; PROVIDED, HOWEVER, that
any Preferred Stock which would not constitute Disqualified Stock but for
provisions thereof giving holders thereof the right to require the Company to
repurchase or redeem such Preferred Stock upon the occur-
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rence of an asset sale or a Change of Control occurring prior to the final
Stated Maturity of the Securities 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 Securities contained in Section 1013 or Section 1016 and such
Preferred Stock specifically provides that the Company will not repurchase or
redeem any such stock pursuant to such provisions prior to the Company's
repurchase of such Securities as are required to be repurchased pursuant to
Section 1013 or Section 1016.
"DTC" means The Depository Trust Company.
"Eagle River" means Eagle River Investments, L.L.C., a limited
liability company formed under the laws of the State of Washington.
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent in
foreign currency, whose debt is rated "A-3" or higher, "A" or higher or "A" or
higher according to Moody's Investors Service, Inc., Standard & Poor's Ratings
Group or Duff & Phelps Credit Rating Co. (or such similar equivalent rating by
at least one "nationally recognized statistical rating organization" (as defined
in Rule 436 under the Securities Act)) respectively, at the time as of which any
investment or rollover therein is made.
"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.
"Euroclear" means the Euroclear Clearance System (or any successor
securities clearing agency).
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
(or any successor act) and the rules and regulations thereunder.
"Exchange Offer" has the meaning set forth in the form of the
Securities contained in Section 202.
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"Exchange Registration Statement" has the meaning set forth in the
form of the Securities contained in Section 202.
"Exchange Security" means any Security issued in exchange for an
Original Security or Original Securities pursuant to the Exchange Offer or
otherwise registered under the Securities Act and any Security with respect to
which the next preceding Predecessor Security of such Security was an Exchange
Security.
"Expiration Date" has the meaning set forth in the definition of
"Offer to Purchase" in this Section 101.
"Global Security" means a Security in the form prescribed in Section
204 evidencing all or part of the Securities, issued to the Depositary or its
nominee, and registered in the name of such Depositary or its nominee.
"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 Section 1011 shall not be deemed to
constitute a Guarantee by such
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Restricted Subsidiary of any Purchase Money Debt of the Company secured thereby.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Incur" means, with respect to any Debt or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Debt or other obligation
including by acquisition of Subsidiaries or the recording, as required pursuant
to generally accepted accounting principles or otherwise, of any such Debt or
other obligation on the balance sheet of such Person (and "Incurrence",
"Incurred", "Incurrable" and "Incurring" shall have meanings correlative to the
foregoing); PROVIDED, HOWEVER, that a change in generally accepted accounting
principles that results in an obligation of such Person that exists at such time
becoming Debt shall not be deemed an Incurrence of such Debt and that neither
the accrual of interest nor the accretion of original issue discount shall be
deemed an Incurrence of Debt; PROVIDED, FURTHER, HOWEVER, that the Company may
elect to treat all or any portion of revolving credit debt of the Company or a
Subsidiary as being incurred from and after any date beginning the date the
revolving credit commitment is extended to the Company or a Subsidiary, by
furnishing notice thereof to the Trustee, and any borrowings or reborrowings by
the Company or a Subsidiary under such commitment up to the amount of such
commitment designated by the Company as Incurred shall not be deemed to be new
Incurrences of Debt by the Company or such Subsidiary.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Rate or Currency Protection Agreement" of any Person means
any forward contract, futures contract, swap, option or other financial
agreement or arrangement (including, without limitation, caps, floors, collars
and similar agreements) relating to, or the value of which is dependent upon,
interest rates or currency exchange rates or indices.
"Investment" by any Person means any direct or indirect loan, advance
or other extension of credit or
12
<PAGE>
capital contribution (by means of transfers of cash or other property to others
or payments for property or services for the account or use of others, or
otherwise) to, or purchase or acquisition of Capital Stock, bonds, notes,
debentures or other securities or evidence of Debt issued by, any other Person,
including any payment on a Guarantee of any obligation of such other Person, but
excluding any loan, advance or extension of credit to an employee of the Company
or any of its Restricted Subsidiaries in the ordinary course of business,
accounts receivable and other commercially reasonable extensions of trade
credit.
"Issue Date" means the date on which the Securities are first
authenticated and delivered under this Indenture.
"Joint Venture" means a corporation, partnership or other entity
engaged in one or more Telecommunications Businesses as to which the Company
(directly or through one or more Restricted Subsidiaries) exercises managerial
control and in which the Company owns (i) a 50% or greater interest, or (ii) a
30% or greater interest, together with options or other contractual rights,
exercisable not more than seven years after the Company's initial Investment in
such Joint Venture, to increase its interest to not less than 50%.
"Lien" means, with respect to any property or assets, any mortgage or
deed of trust, pledge, hypothecation, assignment, Receivables Sale, deposit
arrangement, security interest, lien, charge, easement (other than any easement
not materially impairing usefulness or marketability), encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing).
"Marketable Securities" means: (i) Government Securities; (ii) any
time 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 "P-1" or higher according to Moody's Investors Service,
Inc., "A-1" or higher according to Standard & Poor's Ratings Group or "A-1" or
higher according to Duff & Phelps Credit Rating Co. (or such
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<PAGE>
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.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Net Available Proceeds" from any Asset Disposition by any Person
means cash or readily marketable cash equivalents received (including by way of
sale or discounting of a note, installment receivable or other receivable, but
excluding any other consideration received in the form of assumption by the
acquiror of Debt or other obligations relating to such properties or assets)
therefrom by such Person, net of (i) all legal, title and recording tax
expenses, commissions and other fees and expenses Incurred and all federal,
state, provincial, foreign and local taxes (including taxes payable upon payment
or other distribution of funds from a foreign subsidiary to the Company or
another subsidiary of the Company) required to be accrued as a liability as a
consequence of such Asset Disposition, (ii) all payments made by such Person or
its Restricted Subsidiaries on any Debt which is secured by such assets in
accordance with the terms of any Lien upon or with respect to such assets or
which must by the terms of such Lien, or in order to obtain a necessary consent
to such Asset Disposition or by applicable law, be repaid out of the proceeds
from such Asset Disposition, (iii) all distributions and other payments made to
minority interest holders in Restricted Subsidiaries of such Person or joint
ventures as a result of such Asset Disposition, (iv) appropriate amounts to be
provided by such Person or any Restricted Subsidiary thereof, as the case may
be, as a reserve in accordance with generally accepted accounting principles
against any liabilities associated with such assets and retained by such Person
or any Restricted Subsidiary thereof, as the case may be, after such Asset
Disposition, including, without limitation, liabilities under any
indemnification obligations and
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<PAGE>
severance and other employee termination costs associated with such Asset
Disposition, in each case as determined by the Board of Directors, in its
reasonable good faith judgment evidenced by a Board Resolution filed with the
Trustee; PROVIDED, HOWEVER, that any reduction in such reserve within twelve
months following the consummation of such Asset Disposition will be treated for
all purposes of this Indenture and the Securities as a new Asset Disposition at
the time of such reduction with Net Available Proceeds equal to the amount of
such reduction, and (v) any consideration for an Asset Disposition (which would
otherwise constitute Net Available Proceeds) that is required to be held in
escrow pending determination of whether a purchase price adjustment will be
made, but amounts under this clause (v) shall become Net Available Proceeds at
such time and to the extent such amounts are released to such Person.
"Offer to Purchase" means a written offer (the "Offer") sent by the
Company by first class mail, postage prepaid, to each Holder at his address
appearing in the Security Register on the date of the Offer offering to purchase
up to the principal amount of Securities specified in such Offer at the purchase
price specified in such Offer (as determined pursuant to this Indenture). Unless
otherwise required by applicable law, the Offer shall specify an expiration date
(the "Expiration Date") of the Offer to Purchase which shall be, subject to any
contrary requirements of applicable law, not less than 30 days or more than 60
days after the date of such Offer and a settlement date (the "Purchase Date")
for purchase of Securities within five Business Days after the Expiration Date.
The Company shall notify the Trustee at least 15 Business Days (or such shorter
period as is acceptable to the Trustee) prior to the mailing of the Offer of the
Company's obligation to make an Offer to Purchase, and the Offer shall be mailed
by the Company or, at the Company's request, by the Trustee in the name and at
the expense of the Company. The Offer shall contain information concerning the
business of the Company and its Subsidiaries which the Company in good faith
believes will enable such Holders to make an informed decision with respect to
the Offer to Purchase (which at a minimum will include (i) the most recent
annual and quarterly financial statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained in the
documents required to be filed with the Trustee pursuant to this Indenture
(which requirements may be satisfied by delivery of such documents together with
the Offer), (ii) a description of material developments in the Company's
business subsequent to the date of the latest of such financial statements
referred to in clause (i) (including a description of the events requiring the
Company
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<PAGE>
to make the Offer to Purchase), (iii) if applicable, appropriate pro forma
financial information concerning the Offer to Purchase and the events requiring
the Company to make the Offer to Purchase and (iv) any other information
required by applicable law to be included therein). The Offer shall contain all
instructions and materials necessary to enable such Holders to tender Securities
pursuant to the Offer to Purchase. The Offer shall also state:
(a) the Section of this Indenture pursuant to which the Offer to
Purchase is being made;
(b) the Expiration Date and the Purchase Date;
(c) the aggregate principal amount of the Outstanding Securities
offered to be purchased by the Company pursuant to the Offer to Purchase
(including, if less than 100%, the manner by which such has been determined
pursuant to Section 1013 or 1016) (the "Purchase Amount");
(d) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Securities accepted for payment (as specified
pursuant to this Indenture) (the "Purchase Price");
(e) that the Holder may tender all or any portion of the Securities
registered in the name of such Holder and that any portion of a Security
tendered must be tendered in an integral multiple of $1,000 principal
amount;
(f) the place or places where Securities are to be surrendered for
tender pursuant to the Offer to Purchase;
(g) that interest on any Security not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will continue to
accrue;
(h) that on the Purchase Date the Purchase Price will become due and
payable upon each Security being accepted for payment pursuant to the Offer
to Purchase and that interest thereon shall cease to accrue on and after
the Purchase Date;
(i) that each Holder electing to tender a Security pursuant to the
Offer to Purchase will be required to surrender such Security at the place
or places specified in the Offer prior to the close of business on the
Expiration Date (such Security being,
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<PAGE>
if the Company or the Trustee so requires, duly endorsed by, or accompanied
by a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney duly
authorized in writing);
(j) that Holders will be entitled to withdraw all or any portion of
Securities tendered if the Company (or 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 Security the Holder tendered, the certificate
number of the Security the Holder tendered and a statement that such Holder
is withdrawing all or a portion of his tender;
(k) that (a) if Securities in an aggregate principal amount less than
or equal to the Purchase Amount are duly tendered and not withdrawn
pursuant to the Offer to Purchase, the Company shall purchase all such
Securities and (b) if Securities in an aggregate principal amount in excess
of the Purchase Amount are tendered and not withdrawn pursuant to the Offer
to Purchase, the Company shall purchase Securities having an aggregate
principal amount equal to the Purchase Amount on a pro rata basis (with
such adjustments as may be deemed appropriate so that only Securities in
denominations of $1,000 or integral multiples thereof shall be purchased);
(l) that in the case of any Holder whose Security is purchased only
in part, the Company shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge, a new
Security or Securities, of any authorized denomination as requested by such
Holder, in an aggregate principal amount equal to and in exchange for the
unpurchased portion of the Security so tendered; and
(m) the CUSIP number or numbers of the Securities offered to be
purchased by the Company pursuant to the Offer to Purchase.
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
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the Company, and delivered to the Trustee and containing the statements provided
for in Section 102. One of the officers signing an Officers' Certificate given
pursuant to Section 1018 shall be the principal executive, financial or
accounting officer of the Company.
"Opinion of Counsel" means a written opinion of legal counsel, who may
be counsel for the Company, and who shall be acceptable to the Trustee, and
containing the statements provided for in Section 102.
"Original Securities" means all Securities other than Exchange
Securities.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, EXCEPT:
(i) Securities theretofore cancelled by the Trustee or delivered
to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or
any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its
own Paying Agent) for the Holders of such Securities; PROVIDED that,
if such Securities are to be redeemed, notice of such redemption has
been duly given pursuant to this Indenture; and
(iii) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held by
a bona fide purchaser in whose hands such Securities are valid
obligations of the Company;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstand-
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ing, except that, in determining whether the Trustee shall be protected in
relying upon any such request, demand, authorization, direction, notice, consent
or waiver, only Securities which the Trustee knows to be so owned shall be so
disregarded. Securities so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company. The Trustee is hereby authorized by the Company to act as a
"Paying Agent" for the purposes of this Indenture, until such time as the
Company notifies the Trustee in writing that such authorization is revoked.
"Permitted Interest Rate or Currency Protection Agreement" of any
Person means any Interest Rate or Currency Protection Agreement entered into
with one or more financial institutions in the ordinary course of business that
is designed to protect such Person against fluctuations in interest rates or
currency exchange rates with respect to Debt Incurred and which shall have a
notional amount no greater than the payments due with respect to the Debt being
hedged thereby and not for purposes of speculation.
"Permitted Investment" means (i) any Investment in a Joint Venture
(including the purchase or acquisition of any Capital Stock of a Joint Venture),
provided the aggregate amount of all outstanding Investments pursuant to this
clause (i) in Joint Ventures in which the Company owns, directly or indirectly,
a less than 50% interest shall not exceed $25 million, (ii) any Investment in
any Person as a result of which such Person becomes a Restricted Subsidiary, or,
subject to the proviso to clause (i) of this definition, becomes a Joint Venture
of the Company, (iii) any Investment in Marketable Securities, (iv) Investments
in Permitted Interest Rate or Currency Protection Agreements, (v) Investments
made as a result of the receipt of noncash consideration from an Asset
Disposition that was made pursuant to and in compliance with Section 1013 of
this Indenture 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 this Indenture from the sale or liquidation of any
Unrestricted Subsidiary or any interest therein (except to the extent that any
such
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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 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
20
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organization, government or agency or political subdivision thereof or any other
entity.
"Predecessor Security" of any particular Security means every previous
Security issued before, and evidencing all or a portion of the same debt as that
evidenced by, such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 306 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall
be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen
Security.
"Preferred Dividends" for any Person means for any period the quotient
determined by dividing the amount of dividends and distributions paid or accrued
(whether or not declared) on Preferred Stock of such Person during such period
calculated in accordance with generally accepted accounting principles, by 1
minus the maximum statutory income tax rate then applicable to the Company
(expressed as a decimal).
"Preferred Stock" of any Person means Capital Stock of such Person of
any class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of such Person.
"Purchase Agreement" means the Purchase Agreement, dated as of
November 4, 1998, between the Company and the Purchasers, as such agreement may
be amended from time to time.
"Purchase Date" has the meaning set forth in the definition of "Offer
to Purchase" in this Section 101.
"Purchase Money Debt" means (i) Acquired Debt Incurred in connection
with the acquisition of Telecommunications Assets and (ii) Debt of the Company
or of any Restricted Subsidiary of the Company (including, without limitation,
Debt represented by 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
21
<PAGE>
documents, instruments and agreements executed in connection therewith, as the
same may be amended, supplemented, modified or restated from time to time.
"Purchasers" means Salomon Smith Barney Inc.
"readily marketable cash equivalents" means (i) marketable securities
issued or directly and unconditionally guaranteed by the United States
Government or issued by any agency thereof and backed by the full faith and
credit of the United States; (ii) marketable direct obligations issued by any
state of the United States of America or any political subdivision of any such
state or any public instrumentality thereof and, at the time of acquisition,
having the highest rating obtainable from either Standard & Poor's Rating Group
or Moody's Investors Service, Inc.; (iii) commercial paper maturing no more than
180 days from the date of acquisition thereof and, at the time of acquisition,
having a rating of P-1 according to Moody's Investors Service, Inc., "A-1" or
higher according to Standard & Poor's Ratings Group or "A-1" or higher according
to Duff & Phelps Credit Rating Co. (or such similar equivalent rating by at
least one "nationally recognized statistical rating organization" (as defined in
Rule 436 under the Securities Act)); and (iv) certificates of deposit or
bankers' acceptance maturing within one year from the date of acquisition
thereof issued by any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia having
unimpaired capital and surplus of not less than $100,000,000.
"Receivables" means receivables, chattel paper, instruments, documents
or intangibles evidencing or relating to the right to payment of money in
respect of the sale of goods or services.
"Receivables Sale" of any Person means any sale of Receivables of such
Person (pursuant to a purchase facility or otherwise), other than in connection
with a disposition of the business operations of such Person relating thereto or
a disposition of defaulted Receivables for purpose of collection and not as a
financing arrangement.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
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"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registered Securities" means the Exchange Securities and all other
Securities sold or otherwise disposed of pursuant to an effective registration
statement under the Securities Act, together with their respective Successor
Securities.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the April 1 or October 1 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Regulation S Certificate" means a certificate substantially in the
form set forth in Annex A.
"Regulation S Global Security" has the meaning specified in Section
201.
"Regulation S Legend" means a legend substantially in the form of the
legend required in the form of Security set forth in Section 202 to be placed
upon each Regulation S Security.
"Regulation S Securities" means all Securities required pursuant to
Section 305(c) to bear a Regulation S Legend. Such term includes the Regulation
S Global Security.
"Related Person" of any Person means any other Person directly or
indirectly owning (a) 10% or more of the Outstanding Common Equity of such
Person (or, in the case of a Person that is not a corporation, 10% or more of
the equity interest in such Person) or (b) 10% or more of the combined voting
power of the Voting Stock of such Person.
"Resale Registration Statement" has the meaning set forth in the Form
of the Securities contained in Section 202.
"Responsible Officer", when used with respect to the Trustee, means
the chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, any trust officer or assistant trust officer, the controller
or any assistant controller or any other officer of the Trustee
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customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Global Security" has the meaning specified in Section 201.
"Restricted Period" means the period of 41 consecutive days beginning
on and including the later of (i) the day on which Securities are first offered
to persons other than distributors (as defined in Regulation S) in reliance on
Regulation S and (ii) the original issuance date of the Securities.
"Restricted Securities" means all Securities required pursuant to
Section 305(c) to bear any Restricted Securities Legend. Such term includes the
Restricted Global Security.
"Restricted Securities Certificate" means a certificate substantially
in the form set forth in Annex B.
"Restricted Securities Legend" means, collectively, the legends
substantially in the forms of the legends required in the form of Security set
forth in Section 202 to be placed upon each Restricted Security.
"Restricted Subsidiary" of the Company means any Subsidiary, whether
existing on or after the date of this Indenture, unless such Subsidiary is an
Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act (or any successor
provision), as it may be amended from time to time.
"Rule 144A Securities" means the Securities purchased by the
Purchasers from the Company pursuant to the Purchase Agreement, other than the
Regulation S Securities.
"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
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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.
"SEC Reports" has the meaning specified in Section 704.
"Securities" means the Exchange Securities and the Original
Securities.
"Securities Act" means the Securities Act of 1933 and any statute
successor thereto, in each case as amended from time to time.
"Securities Act Legend" means a Restricted Securities Legend or a
Regulation S Legend.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305(b).
"Significant Subsidiary" means a Restricted Subsidiary that is a
"significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under the
Securities Act and the Exchange Act.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest, as the case may be, is due and payable.
"Step-Down Date" has the meaning set forth in the form of the Security
contained in Section 202.
"Step-Up" has the meaning set forth in the form of the Security
contained in Section 202.
"Subordinated Debt" means Debt of the Company as to which the payment
of principal of (and premium, if any) and interest and other payment obligations
in respect of such Debt shall be subordinate to the prior payment in full of the
Securities to at least the following extent: (i) no payments of principal of
(or premium, if any) or interest on or otherwise due in respect of such Debt may
be permitted
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for so long as any default in the payment of principal (or premium, if any) or
interest on the Securities exists; (ii) in the event that any other default that
with the passing of time or the giving of notice, or both, would constitute an
Event of Default exists with respect to the Securities, upon notice by 25% or
more in principal amount of the Securities to the Trustee, the Trustee shall
have the right to give notice to the Company and the holders of such Debt (or
trustees or agents therefor) of a payment blockage, and thereafter no payments
of principal of (or premium, if any) or interest on or otherwise due in respect
of such Debt may be made for a period of 179 days from the date of such notice
or for the period until such default has been cured or waived or ceased to exist
and any acceleration of the Securities has been rescinded or annulled, whichever
period is shorter (which Debt may provide 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 excluding any retirement required by virtue of
acceleration of such Debt upon an event of default thereunder), in each case
prior to the final Stated Maturity of the Securities or (y) permit redemption or
other retirement (including pursuant to an offer to purchase made by the
Company) of such other Debt at the option of the holder thereof prior to the
final Stated Maturity of the Securities, other than a redemption or other
retirement at the option of the holder of such Debt (including pursuant to an
offer to purchase made by the Company) which is conditioned upon a change of
control of the Company pursuant to provisions substantially similar to those of
Section 1016 (and which shall provide that such Debt will not be repurchased
pursuant to such provisions prior to the Company's repurchase of the Securities
required to be repurchased by the Company pursuant to the provisions of Section
1016.
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"Subsidiary" of any Person means (i) a corporation more than 50% of
the combined voting power of the outstanding Voting Stock of which is owned,
directly or indirectly, by such Person or by one or more other Subsidiaries of
such Person or by such Person and one or more Subsidiaries thereof or (ii) any
other Person (other than a corporation) in which such Person, or one or more
other Subsidiaries of such Person or such Person and one or more other
Subsidiaries thereof, directly or indirectly, has at least a majority ownership
and power to direct the policies, management and affairs thereof.
"Successor Security" of any particular Security means every Security
issued after, and evidencing all or a portion of the same debt as that evidenced
by, such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 306 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"Telecommunications Assets" means all assets, rights (contractual or
otherwise) and properties, whether tangible or intangible, used or intended for
use in connection with a Telecommunications Business.
"Telecommunications Business" means the business of (i) transmitting,
or providing services relating to the transmission of, voice, video or data
through owned or leased transmission facilities, (ii) creating, developing or
marketing communications related network equipment, software and other devices
for use in a Telecommunication Business or (iii) evaluating, participating or
pursuing any other activity or opportunity that is primarily related to those
identified in (i) or (ii) above and shall, in any event, include all businesses
in which the Company or any of its Subsidiaries are engaged on the Issue Date;
PROVIDED that the determination of what constitutes a Telecommunications
Business shall be made in good faith by the Board of Directors, which
determination shall be conclusive.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; PROVIDED, HOWEVER,
that in the event the Trust Indenture Act of 1939 is amended after such date,
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"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"Unrestricted Securities Certificate" means a certificate
substantially in the form set forth in Annex C.
"Unrestricted Subsidiary" means (1) any Subsidiary of the Company
designated as such by the Board of Directors as set forth below where (a)
neither the Company nor any of its other Subsidiaries (other than another
Unrestricted Subsidiary) (i) provides credit support for, or Guarantee of, any
Debt of such Subsidiary or any Subsidiary of such Subsidiary (including any
undertaking, agreement or instrument evidencing such Debt) or (ii) is directly
or indirectly liable for any Debt of such Subsidiary or any Subsidiary of such
Subsidiary, and (b) no default with respect to any Debt of such Subsidiary or
any Subsidiary of such Subsidiary (including any right which the holders thereof
may have to take enforcement action against such Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Debt of the Company and
its Restricted Subsidiaries to declare a default on such other Debt or cause the
payment thereof to be accelerated or payable prior to its final scheduled
maturity and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of
Directors may designate any Subsidiary to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any
property of, any other Subsidiary of the Company which is not a Subsidiary of
the Subsidiary to be so designated or otherwise an Unrestricted Subsidiary,
PROVIDED that either (x) the Subsidiary to be so designated has total assets of
$1,000 or less or (y) immediately after giving effect to such designation, the
Company could Incur at least $1.00 of additional Debt pursuant to the first
paragraph of Section 1007 and PROVIDED, FURTHER, that the Company could make a
Restricted Payment in an amount equal to the greater of the fair market value
and the book value of such Subsidiary pursuant to Section 1009 and such amount
is thereafter treated as a Restricted Payment for the purpose of calculating the
aggregate amount available for Restricted Payments thereunder. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary, PROVIDED that 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 of Section 1007 or (b) the Company or such Restricted Subsidiary could
Incur such Debt hereunder (other than as Acquired Debt).
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"Vendor Financing Facility" means any agreements between the Company
or a Restricted Subsidiary of the Company and one or more vendors or lessors of
equipment to the Company or any of its Restricted Subsidiaries (or any affiliate
of any such vendor or lessor) providing financing for the acquisition by the
Company or any such Restricted Subsidiary of equipment from any such vendor or
lessor.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly-Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person 99% or more of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly-Owned Restricted
Subsidiaries of such Person or by such Person and one or more Wholly-Owned
Restricted Subsidiaries of such Person.
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act and under this Indenture. Each such certificate or opinion shall
be given in the form of an Officers' Certificate, if to be given by an officer
of the Company, or an Opinion of Counsel, if to be given by counsel, and shall
comply with the requirements of the Trust Indenture Act and any other
requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
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(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate of an officer of the Company may be based, insofar as
it relates to legal matters, upon an opinion of counsel submitted therewith,
unless such officer knows, or in the exercise of reasonable care should know,
that the opinion with respect to the matters upon which his certificate is based
is erroneous. Any opinion of counsel may be based, insofar as it relates to
factual matters, upon a certificate of an officer or officers of the Company
submitted therewith stating the information on which counsel is relying, unless
such counsel knows, or in the exercise of reasonable care should know, that the
certificate with respect to such matters is erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
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SECTION 104. ACTS OF HOLDERS; RECORD DATES.
Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 601) conclusive in favor of the Trustee and the Company,
if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such
instrument or writing pursuant to this Section 104 may be proved by the
affidavit of a witness of such execution or by a certificate of a notary public
or other officer authorized by law to take acknowledgments of deeds, certifying
that the individual signing such instrument or writing acknowledged to him the
execution thereof. Where such execution is by a signer acting in a capacity
other than his individual capacity, such certificate or affidavit shall also
constitute sufficient proof of his authority. The fact and date of the
execution of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner which the Trustee
deems sufficient.
The ownership of Securities shall be proved by the Security Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding
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Securities entitled to give, make or take any request, demand, authorization,
direction, notice, consent, waiver or other action provided or permitted by this
Indenture to be given, made or taken by Holders of Securities, PROVIDED that the
Company may not set a record date for, and the provisions of this paragraph
shall not apply with respect to, the giving or making of any notice,
declaration, request or direction referred to in the next paragraph. If not set
by the Company prior to the first solicitation of a Holder made by any Person in
respect of any such matter referred to in the foregoing sentence, the record
date for any such matter shall be the 30th day (or, if later, the date of the
most recent list of Holders required to be provided pursuant to Section 701)
prior to such first solicitation. If any record date is set pursuant to this
paragraph, the Holders of Outstanding Securities on such record date, and no
other Holders, shall be entitled to take the relevant action, whether or not
such Holders remain Holders after such record date; PROVIDED that no such action
shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities on such record date. Nothing in this paragraph shall be construed to
prevent the Company from setting a new record date for any action for which a
record date has previously been set pursuant to this paragraph (whereupon the
record date previously set shall automatically and with no action by any Person
be cancelled and of no effect), and nothing in this paragraph shall be construed
to render ineffective any action taken by Holders of the requisite principal
amount of Outstanding Securities on the date such action is taken. Promptly
after any record date is set pursuant to this paragraph, the Company, at its own
expense, shall cause notice of such record date, the proposed action by Holders
and the applicable Expiration Date to be given to the Trustee in writing and to
each Holder of Securities in the manner set forth in Section 106.
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to join in the giving
or making of (i) any Notice of Default, (ii) any declaration of acceleration
referred to in Section 502, (iii) any request to institute proceedings referred
to in Section 507(2) or (iv) any direction referred to in Section 512. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities on such record date, and no other Holders, shall be entitled to join
in such notice, declaration, request or direction, whether or not such Holders
remain Holders after such record date; PROVIDED that no such action shall be
effective hereunder unless taken on or prior to the applicable Expiration Date
by Holders of the requisite principal amount of Outstanding Securities on such
record date. Nothing in this paragraph shall be construed to prevent the
Trustee from setting a new record date for any action for which a record date
has previously been set pursuant to this paragraph (whereupon the record date
previously set shall automatically and with no action by any Person be cancelled
and of no effect), and nothing in this paragraph shall be construed to render
ineffective any action taken by Holders of the requi-
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ite principal amount of Outstanding Securities on the date such action is taken.
Promptly after any record date is set pursuant to this paragraph, the Trustee,
at the Company's expense, shall cause notice of such record date, the proposed
action by Holders and the applicable Expiration Date to be given to the Company
in writing and to each Holder of Securities in the manner set forth in Section
106.
With respect to any record date set pursuant to this Section, the
party hereto which sets such record dates may designate any day as the
"Expiration Date" and from time to time may change the Expiration Date to any
earlier or later day; PROVIDED that no such change shall be effective unless
notice of the proposed new Expiration Date is given to the other party hereto in
writing, and to each Holder of Securities in the manner set forth in Section
106, on or prior to the existing Expiration Date. If an Expiration Date is not
designated with respect to any record date set pursuant to this Section, the
party hereto which set such record date shall be deemed to have initially
designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be
later than the 180th day after the applicable record date.
Without limiting the foregoing, a Holder entitled hereunder to take
any action hereunder with regard to any particular Security may do so with
regard to all or any part of the principal amount of such Security or by one or
more duly appointed agents each of which may do so pursuant to such appointment
with regard to all or any part of such principal amount.
SECTION 105. NOTICES, ETC., TO TRUSTEE AND COMPANY.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
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(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if delivered in writing to the Trustee at its
Corporate Trust Office, Attention: Corporate Trust Administration, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to the Company at the address of its principal office specified
in the first paragraph of this instrument or at any other address
previously furnished in writing to the Trustee by the Company.
SECTION 106. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if (i) in the case of a Global Security, in writing by facsimile and/or by
overnight mail to the Depositary, and (ii) in the case of securities other than
Global Securities, in writing and mailed, first-class postage prepaid, to each
Holder affected by such event, at his address as it appears in the Security
Register, not later than the latest date (if any), and not earlier than the
earliest date (if any), prescribed for the giving of such notice. In any case
where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other Holders. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 107. APPLICATION OF TRUST INDENTURE ACT.
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The Trust Indenture Act shall apply as a matter of contract to this
Indenture for purposes of interpretation, construction and defining the rights
and obligations hereunder. If any provision hereof limits, qualifies or
conflicts with a provision of the Trust Indenture Act that is required under
such Act to be a part of and govern this Indenture, the latter provision shall
control. If any provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or to be
excluded, as the case may be.
SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 110. SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders of Securities, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
SECTION 112. GOVERNING LAW.
This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of New York.
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SECTION 113. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date, Purchase
Date or Stated Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal (and premium, if any) need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date, Redemption Date, Purchase
Date or at the Stated Maturity, PROVIDED that no interest shall accrue for the
period from and after such Interest Payment Date, Redemption Date, Purchase Date
or Stated Maturity, as the case may be.
ARTICLE TWO
Security Forms
SECTION 201. FORMS GENERALLY.
The Securities and the Trustee's certificates of authentication
thereof shall be in substantially the forms set forth in this Article, with such
appropriate legends, insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture, and may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any securities exchange
or as may, consistently herewith, be determined by the officers executing such
Securities, as evidenced by their execution of the Securities.
Upon their original issuance, Rule 144A Securities shall be issued in
the form of one or more Global Securities registered in the name of the
Depositary or its nominee and deposited with the Trustee, as custodian for the
Depositary, for credit by the Depositary to the respective accounts of
beneficial owners of the Securities represented thereby (or such other accounts
as they may direct). Such Global Securities, together with their Successor
Securities which are Global Securities other than the Regulation S Global
Security, are collectively herein called the "Restricted Global Security". Upon
their original issuance, Regulation S Securities shall be issued in the form of
one or more Global Securities registered in the name of the Depositary, or its
nominee and deposited with the Trustee, as custodian for the Depositary, for
credit to the respective accounts of the beneficial owners of the Securities
represented thereby
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(or such other accounts as they may direct), PROVIDED that upon such deposit all
such Securities shall be credited to or through accounts maintained at the
Depositary by or on behalf of Euroclear or Cedel. Such Global Securities,
together with their Successor Securities which are Global Securities other than
the Restricted Global Security, are collectively herein called the "Regulation S
Global Security".
The definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these methods on steel engraved borders or may
be produced in any other manner, all as determined by the officers executing
such Securities, as evidenced by their execution of such Securities.
In certain cases described elsewhere herein, the legends set forth in
Section 202 may be omitted from Securities issued hereunder.
SECTION 202. FORM OF FACE OF SECURITY.
[If Restricted Securities, then insert -- THIS NOTE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT").
THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES FOR THE BENEFIT OF THE
COMPANY THAT THIS NOTE MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X)
PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR
SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY AT
ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER
CASE, OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS NOTE IS ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN
THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (3) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH REGULATIONS UNDER THE SECURITIES ACT, (4)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR (5) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE
37
<PAGE>
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE HOLDER HEREOF, BY
PURCHASING THIS NOTE REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT
IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2)
A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT
SATISFYING THE REQUIREMENTS OF PARAGRAPH (O)(2) OF RULE 902 UNDER) REGULATIONS
UNDER THE SECURITIES ACT.]
[If a Regulation S Security, then insert -- THIS SECURITY HAS NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY
NOT BE OFFERED, SOLD OR DELIVERED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT
OR BENEFIT OF, ANY U.S. PERSON, UNLESS THIS SECURITY IS REGISTERED UNDER THE
SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF IS
AVAILABLE.]
NEXTLINK Communications, Inc.
10.75% SENIOR NOTES DUE 2008
[IF RESTRICTED GLOBAL SECURITY - CUSIP NO. 65333H AH 6]
[IF ANY REGULATION S SECURITY - CUSIP NO. U6500E AC 2]
[IF REGULATION S GLOBAL SECURITY - ISIN NO. - __________]
No. ______ $_______________
NEXTLINK Communications, Inc., a corporation organized under the laws
of the State of Delaware (herein called the "Company", which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of _____________ Dollars [if this Security is a Global Security,
then insert: (which principal amount may from time to time be increased or
decreased to such other principal amounts (which, taken together with the
principal amounts of all other Outstanding Securities, shall not exceed
$500,000,000 in the aggregate at any time) by adjustments made on the records of
the Trustee hereinafter referred to in accordance with the Indenture)] on
November 15, 2008, and to pay interest thereon from November 12, 1998 or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for, semi-annually on May 15 and November 15 in each year, commencing
May 15, 1999 at the rate of 10 3/4%
38
<PAGE>
per annum, until the principal hereof is paid or made available for payment.
[If Original Securities, then insert: PROVIDED, HOWEVER, that if (i) the
Company has not filed a registration statement (the "Exchange Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
registering a security substantially identical to this Security (except that
such Security will not contain terms with respect to the Additional Interest
payments described below or transfer restrictions) pursuant to an exchange offer
(the "Exchange Offer") (or, in lieu thereof, a registration statement
registering this Security for resale (a "Resale Registration Statement")) by
February 10, 1999, or (ii) the Exchange Registration Statement relating to the
Exchange Offer or, if applicable, the Resale Registration Statement has not
become or been declared effective by March 12, 1999, or (iii) the Exchange Offer
has not been completed within 45 days after the date on which the Exchange
Registration Statement has become or been declared effective initially (if the
Exchange Offer is then required to be made pursuant to the Exchange and
Registration Rights Agreement (the "Exchange and Registration Rights
Agreement"), dated as of November 12, 1998, by and between the Company, the
Purchasers (as defined therein) and the Holders from time to time of the
Securities) or (iv) either the Exchange Registration Statement or, if
applicable, the Resale Registration Statement is filed and declared effective
(except as specifically permitted therein) but shall thereafter cease to be
effective without being succeeded promptly by an additional registration
statement filed and declared effective, in each case (i) through (iv) upon the
terms and conditions set forth in the Exchange and Registration Rights Agreement
(each such event referred to in clauses (i) through (iv), a "Registration
Default"), then interest will accrue (in addition to the original issue discount
and any stated interest on the Securities) (the "Step-Up") at a rate of 0.5% per
annum, determined daily, on the principal amount of the Securities, from the
period from the occurrence of the Registration Default until such time (the
"Step-Down Date") as no Registration Default is in effect and, PROVIDED,
FURTHER, that if either the Exchange Offer has not been consummated or, if
applicable, the Resale Registration Statement has not become or been declared
effective, in each case by April 26, 1999, then the per annum rate of such
Additional Interest shall increase (the "Subsequent Step-Up") by an additional
0.25% per annum for each subsequent 90-day period (provided that the Step-Up and
all Subsequent Step-Up interest rates shall not exceed 1.0% per annum in the
aggregate) and Additional Interest will be payable at such increased rate until
such time (the "Subsequent Step Down Date") as the Company consummates the
Exchange Offer or, if applicable,
39
<PAGE>
the Resale Registration Statement becomes or has been declared effective (after
which such interest rate will be restored to its initial rate). Interest
accruing as a result of the Step-Up or the Subsequent Step-Up (which shall be
computed on the basis of a 365-day year) is referred to herein as "Additional
Interest." Accrued Additional Interest, if any, shall be paid semi-annually on
May 15 and November 15, in each year; and the amount of accrued Additional
Interest shall be determined on the basis of the number of days actually
elapsed. Any accrued and unpaid interest (including Additional Interest) on
this Security upon the issuance of an Exchange Security (as defined in the
Indenture) in exchange for this Security shall cease to be payable to the Holder
hereof but such accrued and unpaid interest (including Additional Interest)
shall be payable on the next Interest Payment Date for such Exchange Security to
the Holder thereof on the related Regular Record Date.] The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in such Indenture, be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest, which shall be May 1 or
November 1 (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date. Any such interest not so punctually paid or duly
provided for will forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name this Security (or
one or more Predecessor Securities) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed by
the Trustee, notice whereof shall be given to Holders of Securities not less
than 10 days prior to such Special Record Date, or be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in said Indenture.
In the case of a default in payment of principal and premium, if any,
upon acceleration or redemption, such interest shall be payable pursuant to the
preceding paragraph on such overdue principal (and premium, if any), such
interest shall be payable on demand and, if not so paid on demand, such interest
shall itself bear interest at the rate of 1% per annum (to the extent that the
payment of such interest shall be legally enforceable), and shall accrue from
the date of such demand for payment to the date payment of such interest has
been made or duly provided for, and such interest on unpaid interest shall also
be payable on demand.
40
<PAGE>
If this Security is issued in the form of a Global Security, payments
of the principal of (and premium, if any) and interest on this Security shall be
made in immediately available funds to the Depositary. If this Security is
issued in certificated form, payment of the principal of (and premium, if any)
and interest on this Security will be made at the corporate trust office of the
Trustee and at the office or agency of the Company maintained for that purpose
in the Borough of Manhattan, The City of New York, New York, and at any other
office or agency maintained by the Company for such purpose, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; PROVIDED, HOWEVER, that at the
option of the Company payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated:
NEXTLINK Communications, Inc.
By______________________________
Name:
Title:
Attest:
______________________________
Name:
Title:
SECTION 203. FORM OF REVERSE OF SECURITY.
41
<PAGE>
This Security is one of a duly authorized issue of Securities of the
Company designated as its 103/4% Senior Notes Due 2008 (the "Securities") issued
under an Indenture, dated as of November 12, 1998 (herein called the
"Indenture"), between the Company and United States Trust Company of New York,
as trustee (herein called the "Trustee", which term includes any successor
trustee under the Indenture). The Securities are limited in aggregate principal
amount to $500,000,000. Reference is hereby made to the Indenture and all
indentures supplemental thereto for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Company, the
Trustee and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered.
The Securities are subject to redemption upon not less than 30 nor
more than 60 days' notice by mail to each Holder of Securities to be redeemed at
such Holder's address appearing in the Security Register, in amounts of $1,000
or an integral multiple of $1,000, at any time on or after November 15, 2003 and
prior to maturity, as a whole or in part, at the election of the Company, at the
following Redemption Prices (expressed as percentages of the principal amount)
plus accrued and unpaid interest to but excluding the Redemption Date (subject
to the right of Holders of record on the relevant Regular Record Date to receive
interest due on an Interest Payment that is on or prior to the Redemption Date),
if redeemed during the 12-month period beginning November 15, of each of the
years indicated below:
Year Redemption
---- Price
----------
2003 105.375%
2004 103.583%
2005 101.792%
and thereafter at a Redemption Price equal to 100.000% of the principal amount,
together in the case of any such redemption with accrued interest to the
Redemption Date, but interest installments whose Stated Maturity is on or prior
to such Redemption Date will be payable to the Holders of such Securities, or
one or more Predecessor Securities, of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in the
Indenture.
42
<PAGE>
The Securities are further subject to redemption prior to November 15,
2003 only in the event that on or before November 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 Securities
in a principal amount of up to an aggregate amount equal to 331/3% of the
original principal amount of the Securities, PROVIDED, HOWEVER, that Securities
in an amount equal to at least 662/3% of the original aggregate principal amount
of the Securities remain Outstanding after such redemption. Such redemption
must occur on a Redemption Date within 90 days of any such sale and upon not
less than 30 nor more than 60 days' notice by mail to each Holder of Securities
to be redeemed at such Holder's address appearing in the Security Register, in
amounts of $1,000 or an integral multiple of $1,000 at a Redemption Price of
112.750% of their principal amount plus accrued and unpaid interest of the
Securities to be redeemed to but excluding the Redemption Date (subject to the
right of Holders of record to receive interest due on an Interest Payment Date
that is on or prior to the Redemption Date).
In the event of redemption of this Security in part only, a new
Security or Securities for the unredeemed portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.
The Securities do not have the benefit of any sinking fund
obligations.
The Indenture provides that, subject to certain conditions, if (i) a
Change of Control occurs or (ii) certain Net Available Proceeds are available to
the Company as a result of any Asset Disposition, the Company shall be required
to make an Offer to Purchase for all or a specified portion of the Securities.
[If not a Global Security -- In the event of redemption or purchase
pursuant to an Offer to Purchase of this Security in part only, a new Security
or Securities of like tenor for the unredeemed or unpurchased portion hereof
will be issued in the name of the Holder hereof upon the cancellation hereof.]
[If a Global Security insert -- In the event of a deposit or
withdrawal of an interest in this Security (including upon an exchange,
transfer, redemption or repurchase of this Security in part only) effected in
accordance with the Applicable Procedures, the Security Registrar, upon receipt
of notice of such event from the Depositary's custodian for this Security, shall
make an adjustment on its
43
<PAGE>
records to reflect an increase or decrease of the Outstanding principal amount
of this Security resulting from such deposit or withdrawal, as the case may be.]
If an Event of Default shall occur and be continuing, the principal of
all the Securities may be declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time of (i)
the entire indebtedness of this Security, or (ii) certain restrictive covenants
and Events of Default with respect to this Security, in each case upon
compliance with certain conditions set forth therein.
Unless the context otherwise requires, the Original Securities (as
defined in the Indenture) and the Exchange Securities (as defined in the
Indenture) shall constitute one series for all purposes under the Indenture,
including without limitation, amendments, waivers, redemptions and Offers to
Purchase.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default, the Holders of not
less than 25% in principal amount of the Outstanding Securities shall have made
written request to the Trustee to institute
44
<PAGE>
proceedings in respect of such Event of Default as Trustee and offered the
Trustee reasonable indemnity, and the Trustee shall not have received from the
Holders of a majority in principal amount of Outstanding Securities a direction
inconsistent with such request, and shall have failed to institute any such
proceeding, for 60 days after receipt of such notice, request and offer of
indemnity. The foregoing shall not apply to any suit instituted by the Holder of
this Security for the enforcement of any payment of principal hereof or any
premium or interest hereon on or after the respective due dates expressed
herein.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, New York, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities, of authorized denominations and like tenor
and for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like tenor and aggregate principal amount of Securities of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue,
45
<PAGE>
and none of the Company, the Trustee or any such agent shall be affected by
notice to the contrary.
Interest [If an Original Security, then insert: (other than Additional
Interest)] on this Security shall be computed on the basis of a 360-day year of
twelve 30-day months.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased in its entirety
by the Company pursuant to Section 1013 or 1016 of the Indenture, check the box:
/ /
If you want to elect to have only a part of this Security purchased by
the Company pursuant to Section 1013 or 1016 of the Indenture, state the amount:
$___________
Dated:________________ Your Signature ___________________________
(Sign exactly as name appears on the
other side of this Security)
Signature Guarantee:________________________________________
Notice: Signature(s) must be guaranteed by an "eligible
guarantor institution" meeting the requirements of the
Trustee, which requirements will include membership or
participation in STAMP or such other "signature guarantee
program" as may be determined by the Trustee in addition to,
or in substitution for STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
46
<PAGE>
SECTION 204. ADDITIONAL PROVISIONS REQUIRED IN GLOBAL SECURITY.
Any Global Security issued hereunder shall, in addition to the
provisions contained in Sections 202 and 203, bear a legend in substantially the
following form:
[If a Global Security, insert -- THIS SECURITY IS A GLOBAL SECURITY
WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN
THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE
EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS
SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER
THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.]
[If a Global Security to be held by the Depository Trust Company,
insert -- UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY SECURITY
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY A PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE
& CO., HAS AN INTEREST HEREIN.]
SECTION 205. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Securities referred to in the within-mentioned
Indenture.
United States Trust Company of New York,
as Trustee
By _____________________________
Authorized Signatory
47
<PAGE>
ARTICLE THREE
The Securities
SECTION 301. TITLE AND TERMS.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $500,000,000,
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section 304,
305, 306, 906 or 1108 or in connection with an Offer to Purchase pursuant to
Section 1013 or 1016.
The Company may issue Exchange Securities from time to time pursuant
to an Exchange Offer or otherwise, in each case pursuant to a Board Resolution,
subject to Section 303, included in an Officers' Certificate delivered to the
Trustee, in authorized denominations in exchange for a like principal amount of
Original Securities. Upon any such exchange the Original Securities shall be
canceled in accordance with Section 309 and shall no longer be deemed
Outstanding for any purpose. In no event shall the aggregate principal amount
of Original Securities and Exchange Securities Outstanding exceed $500,000,000.
The Securities shall be known and designated as the "103/4% Senior
Notes due 2008" of the Company. The Stated Maturity of the Securities shall be
November 15, 2008. The Securities shall bear interest at the rate of 103/4% per
annum, from November 12, 1998 or from the most recent Interest Payment Date
thereafter to which interest has been paid or duly provided for, as the case may
be, payable semi-annually on May 15 and November 15, commencing May 15, 1999,
until the principal thereof is paid or made available for payment; PROVIDED,
HOWEVER, with respect to Original Securities, if there has been a Registration
Default, a Step-Up will occur and the Original Securities will from then bear
Additional Interest until the Step-Down Date and, if either the Exchange Offer
has not been consummated or, if applicable, the Resale Registration Statement
has not become or been declared effective, in each case, by April 26, 1999, a
Subsequent Step-Up will occur and the Original Securities will from then bear
Additional Interest until the Subsequent Step-Down Date. Accrued Additional
Interest, if any, shall be paid in cash in arrears semi-annually on May 15 and
November 15 in each year, and the amount of accrued Additional Interest shall be
determined on the basis of the
48
<PAGE>
number of days actually elapsed. In connection with the cash payment of any
Additional Interest, the Company shall notify the Trustee (the "Additional
Interest Notice") on or before the later to occur of (i) the Regular Record Date
preceding such payment of any Additional Interest, and (ii) the date on which
any such Additional Interest begins to accrue, of the amount of Additional
Interest to be paid by the Company on the next Interest Payment Date. In the
event of the occurrence of a Step-Down Date during the period between the date
on which the Additional Interest Notice is given and the next Interest Payment
Date, the Company shall so notify the Trustee and shall provide the Trustee with
the revised amount of Additional Interest to be paid by the Company on such
Interest Payment Date.
In the case of a default in payment of principal and premium, if any,
upon acceleration or redemption, interest shall be payable pursuant to the
preceding paragraph on such overdue principal (and premium, if any), such
interest shall be payable on demand and, if not so paid on demand, such interest
shall itself bear interest at the rate of 1% per annum (to the extent that the
payment of such interest shall be legally enforceable), and shall accrue from
the date of such demand for payment to the date payment of such interest has
been made or duly provided for, and such interest on unpaid interest shall also
be payable on demand.
The principal of and premium, if any, and interest on the Securities
shall be payable at the corporate trust office of the Trustee in the Borough of
Manhattan, The City of New York, New York, maintained for such purpose and at
any other office or agency maintained by the Company for such purpose; PROVIDED,
HOWEVER, that at the option of the Company payment of interest may be made by
check mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register.
The Securities shall be subject to repurchase by the Company pursuant
to an Offer to Purchase as provided in Sections 1013 and 1016.
The Securities shall be redeemable as provided in Article Eleven.
The Securities shall not have the benefit of any sinking fund
obligations.
The Securities shall be subject to defeasance at the option of the
Company as provided in Article Twelve.
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<PAGE>
Unless the context otherwise requires, the Original Securities and the
Exchange Securities shall constitute one series for all purposes under the
Indenture, including without limitation, amendments, waivers, redemptions and
Offers to Purchase.
SECTION 302. DENOMINATIONS.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Securities shall be executed on behalf of the Company by its Chief
Executive Officer, its President, its Executive Vice President or one of its
Vice Presidents and attested by its Secretary. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities as in
this Indenture provided and not otherwise.
At any time and from time to time after the execution and delivery of
this Indenture and after the effectiveness of a Registration Statement under the
Securities Act with respect thereto, the Company may deliver Exchange Securities
executed by the Company to the Trustee for authentication, together with a
Company Order for the authentication and delivery of such Exchange Securities
and a like principal amount of Original Securities for cancellation in
accordance with Section 309 of this Indenture, and the Trustee in accordance
with the Company Order shall authenticate and deliver such Securities. In
authenticating such Exchange Securities, and accepting the additional
responsibilities under this Indenture in relation to such
50
<PAGE>
Securities, the Trustee shall be entitled to receive, and (subject to Section
601) shall be fully protected in relying upon, an Opinion of Counsel stating,
(a) that such Exchange Securities have been duly and validly issued
in accordance with the terms of the Indenture, and are entitled to all the
rights and benefits set forth herein; and
(b) that the issuance of the Exchange Securities in exchange for the
Original Securities has been effected in compliance with the Securities Act
of 1933, as amended.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.
SECTION 304. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities, the Company may
execute, and upon a Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 1002, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities, the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like tenor and principal amount of definitive
Securities of authorized
51
<PAGE>
denominations. Until so exchanged, the temporary Securities shall in all
respects be entitled to the same benefits under this Indenture as definitive
Securities.
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
(a) The Company shall cause to be kept at the Corporate Trust Office
of the Trustee a register (the register maintained in such office and in any
other office or agency designated pursuant to Section 1002 being herein
sometimes collectively referred to as the "Security Register") in which, subject
to such reasonable regulations as they may prescribe, the Company shall provide
for the registration of Securities and of transfers and exchanges of Securities.
The Trustee is hereby appointed "Security Registrar" for the purpose of
registering Securities and transfers and exchanges of Securities as herein
provided. Such Security Register shall distinguish between Original Securities
and Exchange Securities.
Subject to the other provisions of this Indenture regarding
restrictions on transfer, upon surrender for registration of transfer of any
Security at an office or agency of the Company designated pursuant to Section
1002 for such purpose in accordance with the terms hereof, the Company shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities of any
authorized denominations and of a like tenor and aggregate principal amount and
bearing such restrictive legends as may be required by this Indenture.
At the option of the Holder and subject to the other provisions of
this Section 305, Securities may be exchanged for other Securities of any
authorized denominations and of a like tenor and aggregate principal amount,
upon surrender of the Securities to be exchanged at such office or agency.
Whenever any Securities are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and deliver, the Securities which
the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and (subject to the provisions in the Original Securities regarding the
payment of Additional Interest) entitled to the same benefits under this
Indenture, as the Securities surrendered upon such registration of transfer or
exchange.
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Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made to the Holder for any registration of
transfer or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 304, 305, 906 or 1108 or in accordance with
any Offer to Purchase pursuant to Section 1013 or 1016 not involving any
transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of Securities
selected for redemption under Section 1104 and ending at the close of business
on the day of such mailing, or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
(b) CERTAIN TRANSFERS AND EXCHANGES. Notwithstanding any other
provision of this Indenture or the Securities, transfers and exchanges of
Securities and beneficial interests in a Global Security of the kinds specified
in this Section 305(b) shall be made only in accordance with this Section
305(b).
(i) RESTRICTED GLOBAL SECURITY TO REGULATION S GLOBAL SECURITY.
If the owner of a beneficial interest in the Restricted Global Security
wishes at any time to transfer such interest to a Person who wishes to
acquire the same in the form of a beneficial interest in the Regulation S
Global Security, such transfer may be effected only in accordance with the
provisions of this Clause (b)(i) and Clause (b)(iv) below and subject to
the Applicable Procedures. Upon receipt by the Trustee, as Security
Registrar, of (A) an order given by the Depositary or its authorized
representative directing that a beneficial interest in the Regulation S
Global Security in a specified principal amount be credited to a specified
Agent Member's account and that a beneficial interest in the Restricted
Global Security in an equal principal amount be
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debited from another specified Agent Member's account and (B) a Regulation
S Certificate, satisfactory to the Trustee and duly executed by the owner
of such beneficial interest in the Restricted Global Security or his
attorney duly authorized in writing, then the Trustee, as Security
Registrar but subject to Clause (b)(vii) below, shall reduce the principal
amount of the Restricted Global Security and increase the principal amount
of the Regulation S Global Security by such specified principal amount.
(ii) REGULATION S GLOBAL SECURITY TO RESTRICTED GLOBAL SECURITY.
If the owner of a beneficial interest in the Regulation S Global Security
wishes at any time to transfer such interest to a Person who wishes to
acquire the same in the form of a beneficial interest in the Restricted
Global Security, such transfer may be effected only in accordance with this
Clause (b)(ii) and subject to the Applicable Procedures. Upon receipt by
the Trustee, as Security Registrar, of (A) an order given by the Depositary
or its authorized representative directing that a beneficial interest in
the Restricted Global Security in a specified principal amount be credited
to a specified Agent Member's account and that a beneficial interest in the
Regulation S Global Security in an equal principal amount be debited from
another specified Agent Member's account and (B) if such transfer is to
occur during the Restricted Period, a Restricted Securities Certificate,
satisfactory to the Trustee and duly executed by the owner of such
beneficial interest in the Regulation S Global Security or his attorney
duly authorized in writing, then the Trustee, as Security Registrar, shall
reduce the principal amount of the Regulation S Global Security and
increase the principal amount of the Restricted Global Security by such
specified principal amount.
(iii) NON-GLOBAL SECURITY TO NON-GLOBAL SECURITY. A Security that
is not a Global Security may be transferred, in whole or in part, to a
Person who takes delivery in the form of another Security that is not a
Global Security as provided in Section 305(a), PROVIDED that, if the
Security to be transferred in whole or in part is a Restricted Security, or
is a Regulation S Security and the transfer is to occur during the
Restricted Period, then the Trustee shall have received (A) a Restricted
Securities Certificate, satisfactory to the Trustee and duly executed by
the transferor Holder or his attorney duly authorized in writing, in which
case the transferee Holder shall take delivery in
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the form of a Restricted Security, or (B) a Regulation S Certificate,
satisfactory to the Trustee and duly executed by the transferor Holder or
his attorney duly authorized in writing, in which case the transferee
Holder shall take delivery in the form of a Regulation S Security (subject
in every case to Section 305(c)).
(iv) REGULATION S GLOBAL SECURITY TO BE HELD THROUGH EUROCLEAR OR
CEDEL DURING RESTRICTED PERIOD. The Company shall use its best efforts to
cause the Depositary to ensure that, until the expiration of the Restricted
Period, beneficial interests in the Regulation S Global Security may be
held only in or through accounts maintained at the Depositary by Euroclear
or Cedel (or by Agent Members acting for the account thereof), and no
person shall be entitled to effect any transfer or exchange that would
result in any such interest being held otherwise than in or through such an
account; PROVIDED that this Clause (b)(iv) shall not prohibit any transfer
or exchange of such an interest in accordance with Clause (b)(ii) above.
(v) EXCHANGES OF BOOK-ENTRY SECURITIES FOR CERTIFICATED
SECURITIES. A beneficial interest in a Global Security may not be
exchanged for a Security in certificated form unless (i) DTC (x) notifies
the Company that it is unwilling or unable to continue as Depositary for
the Global Security 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 its option, notifies
the Trustee in writing that it elects to cause the issuance of the
Securities 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 with respect to the Securities.
In all cases, certificated Securities delivered in exchange for any Global
Security 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
Security issued in exchange for an interest in a Global Security will bear
the legend restricting transfers that is borne by such Global Security.
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 Security.
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(c) SECURITIES ACT LEGENDS. Rule 144A Securities and their Successor
Securities shall bear a Restricted Securities Legend, and the Regulation S
Securities and their Successor Securities shall bear a Regulation S Legend,
subject to the following:
(i) subject to the following Clauses of this Section 305(c), a
Security or any portion thereof which is exchanged, upon transfer or
otherwise, for a Global Security or any portion thereof shall bear the
Securities Act Legend borne by such Global Security while represented
thereby;
(ii) subject to the following Clauses of this Section 305(c), a new
Security which is not a Global Security and is issued in exchange for
another Security (including a Global Security) or any portion thereof, upon
transfer or otherwise, shall bear the Securities Act Legend borne by such
other Security, PROVIDED that, if such new Security is required pursuant to
Section 305(b)(v) or (vi) to be issued in the form of a Restricted
Security, it shall bear a Restricted Securities Legend and, if such new
Security is so required to be issued in the form of a Regulation S
Security, it shall bear a Regulation S Legend;
(iii) Registered Securities shall not bear a Securities Act Legend;
(iv) at any time after the Securities may be freely transferred
without registration under the Securities Act or without being subject to
transfer restrictions pursuant to the Securities Act, a new Security which
does not bear a Securities Act Legend may be issued in exchange for or in
lieu of a Security (other than a Global Security) or any portion thereof
which bears such a legend if the Trustee has received an Unrestricted
Securities Certificate, satisfactory to the Trustee and duly executed by
the Holder of such legended Security or his attorney duly authorized in
writing, and after such date and receipt of such certificate, the Trustee
shall authenticate and deliver such a new Security in exchange for or in
lieu of such other Security as provided in this Article Three;
(v) a new Security which does not bear a Securities Act Legend may
be issued in exchange for or in lieu of a Security (other than a Global
Security) or any portion thereof which bears such a legend if, in the
Company's judgment, placing such a legend upon such
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new Security is not necessary to ensure compliance with the registration
requirements of the Securities Act, and the Trustee, at the direction of
the Company, shall authenticate and deliver such a new Security as provided
in this Article Three; and
(vi) notwithstanding the foregoing provisions of this Section
305(c), a Successor Security of a Security that does not bear a particular
form of Securities Act Legend shall not bear such form of legend unless the
Company has reasonable cause to believe that such Successor Security is a
"restricted security" within the meaning of Rule 144, in which case the
Trustee, at the direction of the Company, shall authenticate and deliver a
new Security bearing a Restricted Securities Legend in exchange for such
Successor Security as provided in this Article Three.
SECTION 306. Mutilated, Destroyed, Lost and
STOLEN SECURITIES.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and principal amount and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in the discretion of
the Company may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
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Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.
Any interest (including Additional Interest) on any Security which is
payable, but is not punctually paid or duly provided for, on any Interest
Payment Date (herein called "Defaulted Interest") shall (a) bear interest at the
rate per annum stated in the form of Security included herein (to the extent
that the payment of such interest shall be legally enforceable), and (b)
forthwith cease to be payable to the Holder on the relevant Regular Record Date
by virtue of having been such Holder, and such Defaulted Interest may be paid by
the Company, at its election in each case, as provided in Clause (1) or (2)
below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall
be fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in
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respect of such Defaulted Interest or shall make arrangements satisfactory
to the Trustee for such deposit prior to the date of the proposed payment,
such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this Clause provided.
Thereupon the Trustee shall fix a Special Record Date for the payment of
such Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less than 10
days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such Special
Record Date and, in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor to be mailed, first-class postage prepaid, to each
Holder at his address as it appears in the Security Register, not less than
10 days prior to such Special Record Date. Notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor having been
so mailed, such Defaulted Interest shall be paid to the Persons in whose
names the Securities (or their respective Predecessor Securities) are
registered at the close of business on such Special Record Date and shall
no longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this Clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
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SECTION 308. PERSONS DEEMED OWNERS.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and premium, if
any, and (subject to Section 307) interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and none of the
Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 309. CANCELLATION.
All Securities surrendered for payment, redemption, registration of
transfer, exchange or pursuant to any Offer to Purchase pursuant to Section 1013
or 1016 shall, if surrendered to any Person other than the Trustee, be delivered
to the Trustee and shall be promptly cancelled by it. The Company may at any
time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Company may have acquired in any
manner whatsoever, and all Securities so delivered shall be promptly cancelled
by the Trustee. No Securities shall be authenticated in lieu of or in exchange
for any Securities cancelled as provided in this Section, except as expressly
permitted by this Indenture. All cancelled Securities held by the Trustee shall
be disposed of in accordance with its standard procedures or as directed by a
Company Order; PROVIDED, HOWEVER, that the Trustee shall not be required to
destroy such Securities.
SECTION 310. COMPUTATION OF INTEREST.
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months, except that Additional Interest shall be computed
on the basis of a 365-day year.
SECTION 311. CUSIP AND ISIN NUMBERS.
The Company in issuing Securities may use "CUSIP" and "ISIN" numbers
(if then generally in use) in addition to serial numbers; if so, the Trustee
shall use such "CUSIP" and "ISIN" numbers in addition to serial numbers in
notices of redemption and repurchase as a convenience to Holders; PROVIDED that
any such notice may state that no represen-
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tation is made as to the correctness of such CUSIP and ISIN numbers either as
printed on the Securities or as contained in any notice of a redemption or
repurchase and that reliance may be placed only on the serial or other
identification numbers printed on the Securities, and any such redemption or
repurchase shall not be affected by any defect in or omission of such CUSIP and
ISIN numbers.
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall cease to be of further effect as to all
outstanding Securities (except as to (i) rights of registration of transfer and
exchange and the Company's right of optional redemption, (ii) substitution of
apparently mutilated, defaced, destroyed, lost or stolen Securities, (iii)
rights of holders of Securities to receive payment of principal of and premium,
if any, and interest on the Securities, (iv) rights, obligations and immunities
of the Trustee under the Indenture and (v) rights of the holders of the
Securities as beneficiaries of the Indenture with respect to any property
deposited with the Trustee payable to all or any of them), and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture, when
(1) either
(A) the Company will have paid or caused to be paid the
principal of and premium, if any, and interest on the Securities as
and when the same will have become due and payable; or
(B) all outstanding Securities (except lost, stolen or destroyed
Securities which have been replaced or paid) have been delivered to
the Trustee for cancellation;
and the Company, in the case of (A) above, has deposited or caused to
be deposited with the Trustee as trust funds in trust for the purpose
an amount sufficient to pay and discharge the entire indebtedness on
such Securities not theretofore delivered to the Trustee for
cancellation, for principal of and premium, if any, and interest to
the date of such deposit (in the case of
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Securities which have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company;
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with; and
(4) the Trustee shall have received such other documents and
assurances as the Trustee shall have reasonably requested.
Notwithstanding the satisfaction and discharge of this Indenture, (i) the
obligations of the Company to the Trustee under Section 607, (ii) substitution
of apparently mutilated, defaced, destroyed, lost or stolen Securities, (iii)
rights of holders of Securities to receive payment of principal of and premium,
if any, and interest on the Securities, (iv) rights, obligations and immunities
of the Trustee under this Indenture (including, if money shall have been
deposited with the Trustee pursuant to subclause (B) of Clause (1) of this
Section, the obligations of the Trustee under Section 402 and the last paragraph
of Section 1003), and (v) rights of holders of the Securities as beneficiaries
of this Indenture with respect to any property deposited with the Trustee
payable to all or any of them, shall survive.
SECTION 402. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee.
ARTICLE FIVE
Remedies
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SECTION 501. EVENTS OF DEFAULT.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) default in the payment of any interest upon any Security when it
becomes due and payable, and continuance of such default for a period of 30
days; or
(2) default in the payment of the principal of (or premium, if any,
on) any Security when due; or
(3) default in the payment of principal and interest upon any
Security required to be purchased pursuant to an Offer to Purchase pursuant
to Sections 1013 or 1016 when due and payable; or
(4) default in the performance, or breach, of Section 801; or
(5) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture or in any Security (other than a
covenant or warranty a default in whose performance or whose breach is
elsewhere in this Section specifically dealt with), and continuance of such
default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Outstanding Securities a written notice specifying
such default or breach and requiring it to be remedied and stating that
such notice is a "Notice of Default" hereunder; or
(6) a default or defaults under any bond(s), debenture(s), note(s) or
other evidence(s) of Debt by the Company or any Significant Subsidiary of
the Company or under any mortgage(s), indenture(s) or instrument(s) under
which there may be issued or by which there may be secured or evidenced any
Debt of such type by the Company or any such Significant Subsidiary with a
principal amount then outstanding, individually or in the aggregate, in
excess of $10 million, whether such Debt now exists or shall hereafter be
created, which default or defaults shall
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constitute a failure to pay such Debt when due at the final maturity
thereof, or shall have resulted in such Debt becoming or being declared due
and payable prior to the date on which it would otherwise have become due
and payable; or
(7) a final judgment or final judgments (not subject to appeal) for
the payment of money are entered against the Company or any Significant
Subsidiary in an aggregate amount in excess of $10 million by a court or
courts of competent jurisdiction, which judgments remain undischarged or
unstayed for a period (during which execution shall not be effectively
stayed) of 45 days after the right to appeal all such judgments has
expired; or
(8) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company or any Significant
Subsidiary in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar
law or (B) a decree or order adjudging the Company or any Significant
Subsidiary a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition of
or in respect of the Company or any Significant Subsidiary under any
applicable Federal or State law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of
the Company or any Significant Subsidiary or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order for relief or any such other decree
or order unstayed and in effect for a period of 60 consecutive days; or
(9) the commencement by the Company or any Significant Subsidiary of
a voluntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or of any other
case or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by it to the entry of a decree or order for relief in respect of
the Company or any Significant Subsidiary in an involuntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing by it
of a petition or answer or consent seeking reorganization or relief under
any applicable Federal
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or State law, or the consent by it to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the Company or
any Significant Subsidiary or of any substantial part of its property, or
the making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by the Company or any
Significant Subsidiary in furtherance of any such action.
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default specified in
Section 501(8) or (9) with respect to the Company) occurs and is continuing,
then and in every such case the Trustee or the Holders of not less than 25% in
aggregate principal amount of the Outstanding Securities may declare the Default
Amount of all the Securities to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders), and upon any
such declaration such Default Amount and any accrued interest, together with all
other amounts due under this Indenture, shall become immediately due and
payable. If an Event of Default specified in Section 501(8) or (9) with respect
to the Company occurs, the Default Amount of and any accrued interest on the
Securities then Outstanding, together with all other amounts due under this
Indenture, shall ipso facto become immediately due and payable without any
declaration or other Act on the part of the Trustee or any Holder.
The "Default Amount" in respect of any particular Security as of any
particular date of acceleration shall equal the principal amount of the Security
plus accrued and unpaid interest to such date.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due based on acceleration
has been obtained by the Trustee as hereinafter in this Article provided, the
Holders of a majority in aggregate principal amount of the Outstanding
Securities, by written notice to the Company and the Trustee, may rescind and
annul such declaration and its consequences if:
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(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, on) any Securities
which have become due otherwise than by such declaration of
acceleration (including any Securities required to have been purchased
on the Purchase Date pursuant to an Offer to Purchase made by the
Company) and interest thereon at the rate borne by the Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the applicable rate borne by the
Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default, other than the non-payment of the
principal of Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or premium,
if any, on) any Security at the Maturity thereof or, with respect to any
Security required to have been purchased pursuant to an Offer to Purchase
made by the Company, at the Purchase Date thereof,
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the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and, to the extent
that payment of such interest shall be legally enforceable, interest on any
overdue principal (and premium, if any) and on any overdue interest, at the rate
provided by the Securities, and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses incurred by the Trustee
under this Indenture, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys, securities or other property payable or deliverable upon the
exchange of the Securities or upon any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to
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the making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 607.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding; PROVIDED,
HOWEVER, that the Trustee may, on behalf of the Holders, vote for the election
of a trustee in bankruptcy or similar official and be a member of a creditors or
other similar committee.
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal (or premium,
if any) or interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
607; and
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been collected,
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ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal (and premium, if
any) and interest, respectively.
The Trustee, upon prior written notice to the Company, may fix a record date and
payment date for any payment to the Holders pursuant to this Section 506.
SECTION 507. LIMITATION ON SUITS.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(2) the Holders of at least 25% in aggregate principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered and, if requested, provided
to the Trustee reasonable indemnity against the costs, expenses and
liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer and, if requested, provision of indemnity has failed to institute
any such proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
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SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM
AND INTEREST.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 307) interest on such Security on the respective Stated Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date or, in the case of an Offer to Purchase made by the Company and required to
be accepted as to such Security, on the Purchase Date) and to institute suit for
the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. DELAY OR OMISSION NOT WAIVER.
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No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 512. CONTROL BY HOLDERS.
The Holders of a majority in aggregate principal amount of the
Outstanding Securities shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, PROVIDED that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture or expose the Trustee to personal liability (as
determined in the sole discretion of the Trustee), and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
The Trustee may refuse, however, to follow any direction that the Trustee, in
its sole discretion, determines may be unduly prejudicial to the rights of
another Holder or that may subject the Trustee to any liability or expense if
the Trustee determines, in its sole discretion, that it lacks indemnification
against such loss or expense.
SECTION 513. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in aggregate principal amount
of the Outstanding Securities may on behalf of the Holders of all the Securities
by written notice to the Trustee waive any past default hereunder and its
consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on any Security (including any Security which is required to have
been purchased pursuant to an Offer to Purchase which has been made by the
Company), or
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(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security affected or
(3) arising from failure to purchase any Security tendered pursuant
to Sections 1013 and 1016.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 514. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court may require any party litigant in such suit to file an
undertaking to pay the costs of such suit, and may assess costs against any such
party litigant, in the manner and to the extent provided in the Trust Indenture
Act; PROVIDED that neither this Section nor the Trust Indenture Act shall be
deemed to authorize any court to require such an undertaking or to make such an
assessment in any suit instituted by the Company.
SECTION 515. WAIVER OF STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
The Trustee
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.
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The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
SECTION 602. NOTICE OF DEFAULTS.
The Trustee shall give the Holders notice of any Default hereunder as
and to the extent provided by the Trust Indenture Act, unless such Default has
been cured or waived; PROVIDED, HOWEVER, that in the case of any Default of the
character specified in Section 501(5), no such notice to Holders shall be given
until at least 30 days after the occurrence thereof.
SECTION 603. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or a Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may,
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in the absence of bad faith on its part, rely upon an Officers' Certificate
or an Opinion of Counsel;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction reasonably satisfactory to the Trustee;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder; and
(h) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith which the Trustee reasonably believed to have
been authorized or within its rights or powers.
SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication,
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shall be taken as the statements of the Company, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or the Securities. The Trustee
shall not be accountable for the use or application by the Company of Securities
or the proceeds thereof.
SECTION 605. MAY HOLD SECURITIES.
The Trustee, any Paying Agent, any Security Registrar (if other than
the Trustee) or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
608 and 613, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Paying Agent, Security Registrar or such other
agent.
SECTION 606. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
SECTION 607. COMPENSATION AND REIMBURSEMENT.
The Company agrees
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense (including the reasonable compensation,
expenses and
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disbursements of its agents, accountants, experts and counsel) incurred
without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of this trust, including
the costs and expenses of enforcing this Indenture against the Company
(including, without limitation, this Section 607) and of defending itself
against any claim (whether asserted by any Holder or the Company) or
liability in connection with the exercise or performance of any of its
powers or duties hereunder. The provisions of this Section 607 shall
survive any termination of this Indenture and the resignation or removal of
the Trustee.
As security for the performance of the obligations of the Company
under this Section 607, the Trustee shall have a lien prior to the Securities
upon all property and funds held or collected by the Trustee, except funds held
in trust for the payment of principal of (and premium, if any) or interest on
particular Securities. The Trustee's right to receive payment of any amounts
due under this Section 607 shall not be subordinate to any other liability or
indebtedness of the Company (even though the Securities may be so subordinated).
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 501(8) or (9) occurs, the expenses and the
compensation for such services are intended to constitute expenses of
administration under Title 11, U.S. Code, or any similar Federal state or
foreign law for the relief of debtors.
SECTION 608. DISQUALIFICATION; CONFLICTING INTERESTS.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000 and its Corporate
Trust Office in the Borough of Manhattan, The City of New York, New York. If
such Person publishes reports of condition at least annually, pursuant to law or
to the require-
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ments of a Federal, State, Territorial or District of Columbia supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such Person shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 611, at which
time the retiring Trustee shall be fully discharged from its obligations
hereunder.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs
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for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by Board Resolution, may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 106. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee under Section 607, execute and deliver an instrument
transferring to such successor Trustee all the
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rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee,
the Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, PROVIDED that
such corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
SECTION 614. APPOINTMENT OF AUTHENTICATING AGENT.
The Trustee may appoint an Authenticating Agent or Agents with respect
to the Securities which shall be authorized to act on behalf of the Trustee to
authenticate Securities issued upon original issue and upon exchange,
registration of transfer or partial redemption thereof or
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pursuant to Section 306, and Securities so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, any State thereof
or the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a
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successor Authenticating Agent which shall be acceptable to the Company and
shall give notice of such appointment in the manner provided in Section 106 to
all Holders of Securities. Any successor Authenticating Agent upon acceptance of
its appointment hereunder shall become vested with all the rights, powers and
duties of its predecessor hereunder, with like effect as if originally named as
an Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 607.
If an appointment is made pursuant to this Section, the Securities may
have endorsed thereon, in lieu of the Trustee's certificate of authentication,
an alternative certificate of authentication in the following form:
This is one of the Securities referred to in the within-mentioned
Indenture.
United States Trust Company of New York,
AS TRUSTEE
By
--------------------------------------
AS AUTHENTICATING AGENT
By
--------------------------------------
AUTHORIZED SIGNATORY
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and the Company
SECTION 701. Company to Furnish Trustee
NAMES AND ADDRESSES OF HOLDERS.
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the
names and ad-
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dresses of the Holders as of such Regular Record Date, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
EXCLUDING from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that none of the Company, the Trustee or
any agent of any of them shall be held accountable by reason of any disclosure
of information as to names and addresses of Holders made pursuant to the Trust
Indenture Act.
SECTION 703. REPORTS BY TRUSTEE.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Com-
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pany will notify the Trustee when the Securities are listed on any stock
exchange.
SECTION 704. REPORTS BY COMPANY.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act and in the manner set
forth in Section 1017; PROVIDED that any such information, documents or reports
required to be filed with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act ("SEC Reports") shall be filed with the Trustee within 15 days
after the same is so required to be filed with the Commission. In the event the
Company shall cease to be required to file SEC Reports pursuant to the Exchange
Act, the Company will nonetheless continue to file such reports with the
Commission (unless the Commission will not accept such a filing) and the Trustee
and to furnish copies of such SEC Reports to the Holders of Securities at the
time the Company is required to file such reports with the Trustee and will make
such information available to investors who request it in writing.
SECTION 705. OFFICERS' CERTIFICATE WITH RESPECT TO CHANGE IN INTEREST RATES.
Within five days after any Step-Up, Subsequent Step-Up, Step-Down Date
or Subsequent Step-Down Date, the Company shall deliver an Officers' Certificate
to the Trustee stating the new interest rate and the date on which it became
effective.
ARTICLE EIGHT
Merger, Consolidation, Etc.
SECTION 801. MERGERS, CONSOLIDATIONS AND CERTAIN SALES OF ASSETS.
(a) The Company may not, in a single transaction or a series of
related transactions, (i) consolidate with or merge into any other Person or
permit any other Person to consolidate with or merge into the Company (other
than a consolidation or merger of a Wholly-Owned Restricted Subsidiary organized
under the laws of a State of the United States into the Company), or (ii)
directly or indirectly, transfer, sell, lease or otherwise dispose of all or
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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 this
Indenture; (2) immediately after giving pro forma effect to such transaction as
if such transaction had occurred at the beginning of the last full fiscal
quarter immediately prior to the consummation of such transaction with the
appropriate adjustments with respect to the transaction being included in such
pro forma calculation and treating any Debt which becomes an obligation of the
Company or a Subsidiary as a result of such transaction as having been Incurred
by the Company or such Subsidiary at the time of the transaction, no Default or
Event of Default shall have occurred and be continuing; (3) immediately after
giving effect to such transaction, the Consolidated Net Worth of the Company (or
other successor entity to the Company) is equal to or greater than that of the
Company immediately prior to the transaction; (4) if, as a result of any such
transaction, property or assets of the Company would become subject to a Lien
prohibited by the provisions of Section 1011, the Company or the successor
entity to the Company shall have secured the Securities as required by Section
1011;(5) the Company has delivered to the Trustee an Officer's Certificate and
an Opinion of Counsel, each in form and substance satisfactory to the Trustee
stating that such consolidation, merger, conveyance, transfer, lease or
acquisition and, if a supplemental indenture is required in connection with such
transaction, such supplemental indenture, complies with this Article and that
all conditions precedent herein provided for relating to such transaction have
been complied with, and, with respect to such Officer's Certificate, setting
forth the manner of determination of the Consolidated Net Worth in accordance
with Clause (3) of Section 801, of the Company or, if applicable, of the
Successor Company as required pursuant to the foregoing.
(b) In the event of any transaction (other than a lease) described in
and complying with the immediately preceding paragraph in which the Company is
not the
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surviving Person and the surviving Person assumes all the obligations of the
Company under the Securities and this Indenture pursuant to a supplemental
indenture, such surviving Person shall succeed to, and be substituted for, and
may exercise every right and power of, the Company, and the Company will be
discharged from its obligations under this Indenture and the Securities;
PROVIDED that solely for the purpose of calculating amounts under Section
1009(3), any such surviving Person shall only be deemed to have succeeded to and
be substituted for the Company with respect to the period subsequent to the
effective time of such transaction, and the Company (before giving effect to
such transaction) shall be deemed to be the "Company" for such purposes for all
prior periods.
SECTION 802. SUCCESSOR SUBSTITUTED.
Upon any consolidation of the Company with, or merger of the Company
with or into, any other Person or any conveyance, transfer or lease of the
properties and assets of the Company substantially as an entirety in accordance
with Section 801, the successor Person formed by such consolidation or into
which the Company is merged or to which such conveyance, transfer or lease is
made shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein, and thereafter, except in
the case of a lease, the predecessor Person shall be relieved of all obligations
and covenants under this Indenture and the Securities.
ARTICLE NINE
Supplemental Indentures
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Company, when authorized by
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities; or
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(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
(3) to secure the Securities pursuant to the requirements of Section
1011 or otherwise; or
(4) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to comply with any requirement of the
Commission in order to effect qualification of this Indenture under the
Trust Indenture Act in connection with the issuance of Exchange Securities
or thereafter to maintain the qualification of this Indenture under the
Trust Indenture Act;
(5) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture which shall not be inconsistent with the provisions of
this Indenture, PROVIDED that such action pursuant to this Clause (5) shall
not adversely affect the legal rights of the Holders; or
(6) to provide for uncertificated Securities in addition to or in
place of certificated Securities.
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Securities, by Act of said Holders
delivered to the Company and the Trustee, and consistent with Section 513, the
Company, when authorized by Board Resolution, and the Trustee may enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders under
this Indenture; PROVIDED, HOWEVER, that no such supplemental indenture shall,
without the consent of the Holder of each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable thereon, or
change the place of payment where, or the coin or
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currency in which, any Security or any premium or interest thereon is
payable, or impair the right to institute suit for the enforcement of any
such payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date) or, in the case of an Offer to
Purchase which has been made, on or after the applicable Purchase Date, or
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture,
or
(3) modify any of the provisions of this Section, Section 513 or
Section 1019, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby, or
(4) following the mailing of an Offer with respect to an Offer to
Purchase pursuant to Section 1013 or 1016 and until the Expiration Date of
such Offer to Purchase, modify the provisions of this Indenture with
respect to such Offer to Purchase in a manner materially adverse to such
Holder.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
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SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
ARTICLE TEN
Covenants
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
The Company will duly and punctually pay the principal of and premium,
if any, and interest on the Securities in accordance with the terms of the
Securities and this Indenture.
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in the Borough of Manhattan, The City of New
York, New York, an office or agency where Securities may be presented or
surrendered for payment, where Securities may be surrendered for registration of
transfer or exchange and where notices and demands
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to or upon the Company in respect of the Securities and this Indenture may be
served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside the Borough of Manhattan, The City of New
York, New York) where the Securities may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; PROVIDED,
HOWEVER, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, New York for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
SECTION 1003. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of (and premium, if any) or interest
on any of the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal (and premium, if
any) or interest so becoming due until such sums shall be paid to such Persons
or otherwise disposed of as herein provided and will promptly notify the Trustee
in writing of its action or failure so to act. As provided in Section 504, upon
any bankruptcy or reorganization proceeding relative to the Company, the Trustee
shall serve as the Paying Agent for the Securities.
Whenever the Company shall have one or more Paying Agents, it will,
prior to each due date of the principal of (and premium, if any) or interest on
any Securities, deposit with a Paying Agent a sum sufficient to pay the
principal (and premium, if any) or interest so becoming due, such sum to be held
in trust for the benefit of the Persons entitled to such principal, premium or
interest, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee in writing of its action or failure so to
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act. As provided in Section 504, upon any bankruptcy or reorganization
proceeding relative to the Company the Trustee shall serve as the Paying Agent
for the Securities.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of
(and premium, if any) or interest on Securities in trust for the
benefit of the Persons entitled thereto until such sums shall be paid
to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or
any other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest;
(3) at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee all
sums so held in trust by such Paying Agent; and
(4) acknowledge, accept and agree to comply in all respects with the
provisions of this Indenture relating to the duties, rights and obligations
of such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest on any Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall be paid to the Company on the Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look
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only to the Company for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; PROVIDED, HOWEVER, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in a newspaper
published in the English language, customarily published on each Business Day
and of general circulation in the Borough of Manhattan, The City of New York,
New York, notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
publication, any unclaimed balance of such money then remaining will be repaid
to the Company.
SECTION 1004. EXISTENCE.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; PROVIDED, HOWEVER, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1005. MAINTENANCE OF PROPERTIES AND INSURANCE.
The Company will cause all properties used or useful in the conduct of
its business or the business of any Subsidiary, to be maintained and kept in
good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; PROVIDED,
HOWEVER, that nothing in this Section shall prevent the Company from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, as determined in the good faith judgment of the Board of
Directors evidenced by a Board Resolution, desirable in the conduct of its
business or, in the case of the Company, the business of any Subsidiary, and not
disadvantageous in any material respect to the Holders.
The Company shall, and shall cause the Subsidiaries of the Company to,
keep at all times all of their
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properties which are of an insurable nature insured against loss or damage with
insurers believed by the Company to be responsible to the extent that property
of similar character is usually so insured by corporations similarly situated
and owning like properties in accordance with good business practice.
SECTION 1006. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiaries of
the Company or upon the income, profits or property of the Company or any
Subsidiaries, and (2) all lawful claims for labor, materials and supplies which,
if unpaid, might by law become a lien upon the property of the Company or any
Subsidiaries of the Company; PROVIDED, HOWEVER, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings.
SECTION 1007. LIMITATION ON CONSOLIDATED DEBT.
The Company may not, and may not permit any Restricted Subsidiary of
the Company to, Incur any Debt unless either (a) the ratio of (i) the aggregate
consolidated principal amount of Debt of the Company outstanding as of the most
recent available quarterly or annual balance sheet, after giving pro forma
effect to the Incurrence of such Debt and any other Debt Incurred since such
balance sheet date and the receipt and application of the proceeds thereof to
(ii) Consolidated Cash Flow Available for Fixed Charges for the four full fiscal
quarters next preceding the Incurrence of such Debt for which consolidated
financial statements are available, determined on a pro forma basis as if (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 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
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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'
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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 this Indenture or Incurred
pursuant to the preceding paragraph or clause (ii) of this paragraph or the
Securities in an aggregate principal amount not to exceed the aggregate
principal amount of and accrued interest on the Debt so refinanced plus the
amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of the Debt so refinanced or the amount
of any premium reasonably determined by the Company as necessary to
accomplish such refinancing by means of a tender offer or privately
negotiated repurchase, plus the amount of expenses of the Company incurred
in connection with such refinancing; PROVIDED, HOWEVER, that Debt the
proceeds of which are used to refinance the Securities or Debt which is
PARI PASSU to the Securities or debt which is subordinate in right of
payment to the Securities shall only be permitted if (A) in the case of any
refinancing of the Securities or Debt which is PARI PASSU to the
Securities, the refinancing Debt is made PARI PASSU to the Securities or
subordinated to the Securities, and, in the case of any refinancing of Debt
which is subordinated to the Securities, the refinancing Debt constitutes
Subordinated Debt and (B) in either case, the refinancing Debt by its
terms, or by the terms of any agreement or instrument pursuant to which
such Debt is issued, (x) does not provide for payments of principal of such
Debt at the stated maturity thereof or by way of a sinking fund applicable
thereto or by way of any mandatory redemption, defeasance, retirement or
repurchase thereof by the Company (including any redemption, retirement or
repurchase which is contingent upon events or circumstances, but excluding
any retirement required by virtue of acceleration of such Debt upon any
event of default thereunder), in each case prior to the time the same are
required by the terms of the Debt being refinanced and (y) does not permit
redemption or other retirement (including pursuant to an offer to purchase
made by the Company) of such Debt at the option of the holder thereof prior
to the final stated maturity of the Debt
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being refinanced, other than a redemption or other retirement at the option
of the holder of such Debt (including pursuant to an offer to purchase made
by the Company) which is conditioned upon a change substantially similar to
the provisions of Section 1016 or which is pursuant to provisions
substantially similar to the provisions of Section 1013;
(v) Debt consisting of Permitted Interest Rate and Currency Protection
Agreements;
(vi) Debt outstanding under the Securities;
(vii) Subordinated Debt invested by (a) a group of employees of the
Company, which includes the Chief Executive Officer of the Company, who
own, directly or indirectly, through an employee stock ownership plan or
arrangement, shares of the Company's Capital Stock or (b) any other Person
that controls the Company (i) on the Issue Date or (ii) after a Change of
Control, PROVIDED that the Company is not in default with respect to its
obligations under Section 1016;
(viii) Debt consisting of performance and other similar bonds and
reimbursement obligations Incurred in the ordinary course of business
securing the performance of contractual, franchise or license obligations
of the Company or a Restricted Subsidiary, or in respect of a letter of
credit obtained to secure such performance; and
(ix) Debt not otherwise permitted to be Incurred pursuant to clauses (i)
through (viii) above, which, together with any other outstanding Debt
Incurred pursuant to this clause (ix), has an aggregate principal amount
(or, in the case of Debt issued at a discount, an accreted amount
(determined in accordance with generally accepted accounting principles) at
the time of Incurrence) not in excess of $10 million at any time
outstanding.
For purposes of determining compliance with this Section 1007, in the
event that an item of Debt meets the criteria of more than one of the types of
Debt the Company is permitted to incur pursuant to the foregoing clauses (i)
through (ix) or the first paragraph of this Section 1007, 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
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such covenant, Guarantees or Liens with respect to letters of credit supporting
Debt otherwise included in the determination of a particular amount shall not be
included.
SECTION 1008. LIMITATION ON DEBT AND PREFERRED STOCK OF RESTRICTED
SUBSIDIARIES.
The Company may not permit any Restricted Subsidiary of the Company
(other than a Restricted Subsidiary that has fully and unconditionally
Guaranteed the Securities on an unsubordinated basis) to Incur or suffer to
exist any Debt or issue any Preferred Stock except:
(i) Debt or Preferred Stock outstanding on the date of this Indenture
after giving effect to the application of the proceeds of the Securities;
(ii) Debt Incurred or Preferred Stock issued to and held by the Company
or a 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 Section
1007;
(vii) Debt consisting of Guarantees of the Securities;
(viii) Debt or Preferred Stock which is exchanged for, or the proceeds of
which are used to refinance, refund
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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 the provisions of Section 1016 or which is
pursuant to provisions substantially similar to the provisions of Section
1013, and PROVIDED, FURTHER, that in the case of any exchange or redemption
of Preferred Stock of a Restricted
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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; and
(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.
For purposes of determining compliance with this Section 1008, 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.
SECTION 1009. LIMITATION ON RESTRICTED PAYMENTS.
The Company (i) may not, directly or indirectly, declare or pay any
dividend, or make any distribution, in respect of its Capital Stock or to the
holders thereof (in their capacity as such), excluding any dividends or
distributions payable solely in shares of its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to acquire its
Capital Stock
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(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 Securities (each of clauses (i) through (iv) being a
"Restricted Payment") if: (1) a Default or an Event of Default shall have
occurred and is continuing; or (2) upon giving effect to such Restricted
Payment, the Company could not Incur at least $1.00 of additional Debt pursuant
to the provisions of the first paragraph of Section 1007; or (3) upon giving
effect to such Restricted Payment, the aggregate of all Restricted Payments from
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 April 25,
1996, including the fair value of property other than cash (determined in good
faith by the Board of Directors, as conclusively evidenced
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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 of Section 1007; 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 the good faith determination of the Company be permitted under
this Indenture, such Restricted Payment shall be deemed to have been made in
compliance with this Indenture notwithstanding any subsequent adjustments made
in good faith to the Company financial statements affecting Consolidated Net
Income for any period.
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
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in transactions under clause (iv) of the immediately preceding paragraph.
SECTION 1010. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES.
The Company may not, and may not permit any Restricted Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary of the Company (i) to pay dividends (in cash or otherwise)
or make any other distributions in respect of its Capital Stock owned by the
Company or any other Restricted Subsidiary of the Company or pay any Debt or
other obligation owed to the Company or any other Restricted Subsidiary; (ii) to
make loans or advances to the Company or any other Restricted Subsidiary; or
(iii) to transfer any of its property or assets to the Company or any other
Restricted Subsidiary. Notwithstanding the foregoing, the Company may, and may
permit any Restricted Subsidiary to, suffer to exist any such encumbrance or
restriction (a) pursuant to any agreement in effect on the Issue Date; (b)
pursuant to an agreement relating to any Acquired Debt, which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person so acquired and its Subsidiaries; (c) pursuant to
any one or more Bank Credit Agreements or Vendor Financing Facilities (and
renewals, extensions, refinancings or refundings thereof) which is permitted to
be outstanding under clause (i) of Section 1007, PROVIDED that such restriction
is consistent with, and not materially more restrictive (as conclusively
determined in good faith by the Chief Financial Officer of the Company), taken
as a whole, than, comparable provisions included in similar agreements or
facilities extended to comparable credits engaged in the Telecommunications
Business; (d) pursuant to an agreement effecting a renewal, refunding or
extension of Debt Incurred pursuant to an agreement referred to in clause (a) or
(b) above or (e) below, PROVIDED, HOWEVER, that the provisions contained in such
renewal, refunding or extension agreement relating to such encumbrance or
restriction are not materially more restrictive (as conclusively determined in
good faith by the Chief Financial Officer of the Company), taken as a whole,
than the provisions contained in the agreement the subject thereof; (e) in the
case of clause (iii) above, restrictions contained in any security agreement
(including a Capital Lease Obligation) securing Debt of the Company or a
Restricted Subsidiary otherwise permitted under this Indenture, but only to the
extent such restrictions restrict the transfer of the property subject
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to such security agreement; (f) in the case of clause (iii) above, customary
nonassignment provisions entered into in the ordinary course of business in
leases and other agreements; (g) any restriction with respect to a Restricted
Subsidiary of the Company imposed pursuant to an agreement which has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of such Restricted Subsidiary, provided that
consummation of such transaction would not result in a Default or an Event of
Default, that such restriction terminates if such transaction is not consummated
and that such consummation or abandonment of such transaction occurs within one
year of the date such agreement was entered into; (h) pursuant to applicable law
or regulations; (i) pursuant to this Indenture and the Securities; or (j) any
restriction on the sale or other disposition of assets or property securing Debt
as a result of a Permitted Lien on such assets or property.
SECTION 1011. LIMITATION ON LIENS.
The Company may not, and may not permit any Restricted Subsidiary of
the Company to, Incur or suffer to exist any Lien on or with respect to any
property or assets now owned or hereafter acquired to secure any Debt without
making, or causing such Restricted Subsidiary to make, effective provision for
securing the Securities (x) equally and ratably with (or prior to) such Debt as
to such property for so long as such Debt will be so secured or (y) in the event
such Debt is Debt of the Company which is subordinate in right of payment to the
Securities, prior to such Debt as to such property for so long as such Debt will
be so secured.
The foregoing restrictions shall not apply to: (i) Liens existing on
the Issue Date and securing Debt outstanding on the Issue Date or securing the
Securities or Liens securing Debt Incurred pursuant to any Bank Credit Agreement
or Vendor Financing Facility (whether or not such Bank Credit Agreement or
Vendor Financing Facility was outstanding on the Issue Date); (ii) Liens
securing Debt in an amount which, together with the aggregate amount of Debt
then outstanding or available under the Bank Credit Agreement and Vendor
Financing Facility (or under refinancings or amendments of such agreements),
does not exceed 1.5 times the Company's Consolidated Cash Flow Available for
Fixed Charges for the four full fiscal quarters preceding the Incurrence of such
Lien for which consolidated financial statements are available, determined on a
pro forma basis as if such Debt had been Incurred and the proceeds thereof had
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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 this Indenture, PROVIDED, HOWEVER, that (a) the net proceeds of
any Debt secured by such a Lien does not exceed 100% of such purchase price or
cost of construction or improvement of the property subject to such Lien, (b)
such Lien attaches to such property prior to, at the time of or within 180 days
after the acquisition, completion of construction or commencement of operation
of such property and (c) such Lien does not extend to or cover any property
other than the property (or identifiable portions thereof) acquired, constructed
or constituting the improvements made with the proceeds of such Purchase Money
Debt (it being understood and agreed that all Debt owed to any single lender or
group of lenders or outstanding under any single credit facility shall be
considered a single Purchase Money Debt, whether drawn at one time or from time
to time); (v) Liens to secure Acquired Debt, PROVIDED, HOWEVER, that (a) such
Lien attaches to the acquired asset prior to the time of the acquisition of such
asset and (b) such Lien does not extend to or cover any other asset; (vi) Liens
to secure Debt Incurred to extend, renew, refinance or refund (or successive
extensions, renewals, refinancings or refundings), in whole or in part, Debt
secured by any Lien referred to in the foregoing clauses (i), (ii), (iv) and (v)
so long as such Lien does not extend to any other property and the principal
amount of Debt so secured is not increased except as otherwise permitted under
clause (iv) of Section 1007; (vii) Liens securing Debt not otherwise permitted
by the foregoing clauses (i) through (vi) in an amount not to exceed 5% of the
Company's Consolidated Tangible Assets determined as of the most recent
available quarterly or annual balance sheet; and (viii) Permitted Liens.
SECTION 1012. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.
The Company may not, and may not permit any Restricted Subsidiary to,
enter into any Sale and Leaseback Transaction unless (i) the Company or such
Restricted Subsidiary would be entitled to Incur a Lien to secure Debt by reason
of the provisions of Section 1011, equal in amount to the Attributable Value of
the Sale and Leaseback
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Transaction without equally and ratably securing the Securities; or (ii) the
Sale and Leaseback Transaction is treated as an Asset Disposition and all of the
conditions of Section 1013 (including the provisions concerning the application
of Net Available Proceeds) are satisfied with respect to such Sale and Leaseback
Transaction, treating all of the consideration received in such Sale and
Leaseback Transaction in the same manner as consideration in respect of an Asset
Disposition for purposes of such covenant.
SECTION 1013. LIMITATION ON ASSET DISPOSITIONS.
(a) The Company may not, and may not permit any Restricted Subsidiary
to, make any Asset Disposition in one or more related transactions occurring
within any 12-month period unless: (i) the Company or the Restricted
Subsidiary, as the case may be, receives consideration for such disposition at
least equal to the fair market value for the assets sold or disposed of as
determined by the Board of Directors in good faith and evidenced by a Board
Resolution filed with the Trustee, which determination shall be conclusive; (ii)
at least 75% of the consideration for such disposition consists of (1) cash or
readily marketable cash equivalents or the assumption of Debt of the Company
(other than Debt that is subordinated to the Securities) or of the Restricted
Subsidiary and release from all liability on the Debt assumed; (2)
Telecommunications Assets; or (3) shares of publicly-traded Voting Stock of any
Person engaged in the Telecommunications Business in the United States; and
(iii) all Net Available Proceeds, less any amounts invested 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 Securities at 100% of their principal amount plus
accrued interest to the date of purchase and, to the extent required by the
terms thereof, any other Debt of the Company that is PARI PASSU with the
Securities at a price no greater than 100% of the principal amount thereof plus
accrued interest to the date of purchase (or 100% of the accreted value in the
case of original issue discount Debt) 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
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of the Company, to the extent permitted under the terms thereof. To the extent
any Net Available Proceeds remain after such uses, the Company and its
Restricted Subsidiaries may use such amounts for any purposes not prohibited by
this Indenture.
(b) The Company will mail the Offer for an Offer to Purchase required
pursuant to Section 1013(a) not more than 360 days after consummation of the
disposition referred to in Section 1013(a). The aggregate principal amount of
the Securities to be offered to be purchased pursuant to the Offer to Purchase
shall equal the Net Available Proceeds available therefor pursuant to Clause
(iii)(2) of Section 1013(a) (rounded down to the next lowest integral multiple
of $1,000). Each Holder shall be entitled to tender all or any portion of the
Securities owned by such Holder pursuant to the Offer to Purchase, subject to
the requirement that any portion of a Security tendered must be tendered in an
integral multiple of $1,000 principal amount.
The Company shall not be entitled to any credit against its
obligations under this Section 1013 for the principal amount of any Securities
acquired or redeemed by the Company otherwise than pursuant to the Offer to
Purchase pursuant to this Section 1013.
(c) Not later than the date of the Offer with respect to an Offer to
Purchase pursuant to this Section 1013, the Company shall deliver to the Trustee
an Officers' Certificate as to (i) the Purchase Amount, (ii) the allocation of
the Net Available Proceeds from the Asset Disposition pursuant to which such
Offer is being made, including, if amounts are invested in Telecommunication
Assets, the amount of the assets acquired and (iii) the compliance of such
allocation with the provisions of Section 1013(a).
The Company and the Trustee shall perform their respective obligations
specified in the Offer for the Offer to Purchase. On or prior to the Purchase
Date, the Company shall (i) accept for payment (on a pro rata basis, if
necessary) Securities or portions thereof tendered pursuant to the Offer, (ii)
deposit with the Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) money sufficient
to pay the purchase price of all Securities or portions thereof so accepted and
(iii) deliver or cause to be delivered to the Trustee all Securities so accepted
together with an Officers' Certificate stating the Securities or portions
thereof accepted for payment by the Company. The Paying Agent (or the Company,
if so acting) shall promptly
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mail or deliver to Holders of Securities so accepted payment in an amount equal
to the purchase price, and the Trustee shall promptly authenticate and mail or
deliver to such Holders a new Security of like tenor equal in principal amount
to any unpurchased portion of the Security surrendered. Any Security not
accepted for payment shall be promptly mailed or delivered by the Company to the
Holder thereof.
(d) Notwithstanding the foregoing, this Section 1013 shall not apply
to any Asset Disposition which constitutes a transfer, conveyance, sale, lease
or other disposition of all or substantially all of the Company's properties or
assets within the meaning of Section 801 hereof.
SECTION 1014. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES.
The Company may not, and may not permit any Restricted Subsidiary of
the Company to, issue, transfer, convey, sell or otherwise dispose of any shares
of Capital Stock of a Restricted Subsidiary of the Company or securities
convertible or exchangeable into, or options, warrants, rights or any other
interest with respect to, Capital Stock of a Restricted Subsidiary of the
Company to any person other than the Company or a Wholly-Owned Restricted
Subsidiary of the Company except (i) in a transaction consisting of a sale of
Capital Stock of such Restricted Subsidiary owned by the Company or any
Restricted Subsidiary of the Company and that complies with the provisions of
Section 1013 to the extent such provisions apply; (ii) if required, the
issuance, transfer, conveyance, sale or other disposition of directors'
qualifying shares; (iii) in a transaction in which, or in connection with which,
the Company or a Restricted Subsidiary acquires at the same time sufficient
Capital Stock of such Restricted Subsidiary to at least maintain the same
percentage ownership interest it had prior to such transaction; (iv)
constituting the issuance of Preferred Stock permitted by the provisions of
Section 1008; and (v) Disqualified Stock issued in exchange for, or upon
conversion of, or the proceeds of the issuance of which are used to redeem,
refinance, replace or refund shares of Disqualified Stock of such Restricted
Subsidiary, provided that the amounts of the redemption obligations of such
Disqualified Stock shall not exceed the amounts of the redemption obligations
of, and such Disqualified Stock shall have redemption obligations no earlier
than those required by, the Disqualified Stock being
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exchanged, converted, redeemed, refinanced, replaced or refunded.
SECTION 1015. TRANSACTIONS WITH AFFILIATES AND RELATED PERSONS.
The Company may not, and may not permit any Restricted Subsidiary of
the Company to, enter into any transaction (or series of related transactions)
with an Affiliate or Related Person of the Company (other than the Company or a
Wholly-Owned Restricted Subsidiary of the Company), including any Investment,
but excluding transactions pursuant to employee compensation arrangements
approved by the Board of Directors, either directly or indirectly, unless such
transaction is on terms no less favorable to the Company or such Restricted
Subsidiary than those that could 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 an Officer's 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 1016. CHANGE OF CONTROL.
(a) Within 30 days of the occurrence of a Change of Control, the
Company will be required to make an Offer to Purchase all Outstanding Securities
at a purchase price equal to 101% of their principal amount plus accrued and
unpaid interest to the date of purchase.
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(b) The Company and Trustee shall perform their respective
obligations specified in the Offer for the Offer to Purchase. On or prior to
the Purchase Date, the Company shall (i) accept for payment Securities or
portions thereof tendered pursuant to the Offer, (ii) deposit with the Paying
Agent (or, if the Company is acting as its own Paying Agent, segregate and hold
in trust as provided in Section 1003) money sufficient to pay the purchase price
of all Securities or portions thereof so accepted and (iii) deliver or cause to
be delivered to the Trustee all Securities so accepted together with an
Officers' Certificate stating the Securities or portions thereof accepted for
payment by the Company. The Paying Agent shall promptly mail or deliver to
Holders of Securities so accepted payment in an amount equal to the purchase
price, and the Trustee shall promptly authenticate and mail or deliver to such
Holders a new Security or Securities equal in principal amount to any
unpurchased portion of the Security surrendered as requested by the Holder. Any
Security not accepted for payment shall be promptly mailed or delivered by the
Company to the Holder thereof.
(c) A "Change of Control" will be deemed to have occurred at such
time as either (a) any Person or any Persons acting together that would
constitute a "group" (a "Group") for purposes of Section 13(d) of the Exchange
Act, or any successor provision thereto (other than Eagle River, Mr. Craig O.
McCaw and their respective Affiliates or an underwriter engaged in a firm
commitment underwriting on behalf of the Company), shall beneficially own
(within the meaning of Rule 13d-3 under the Exchange Act, or any successor
provision thereto) more than 50% of the aggregate voting power of all classes of
Voting Stock of the Company; or (b) neither Mr. Craig O. McCaw nor any person
designated by him to the Company as acting on his behalf shall be a director of
the Company; or (c) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board of Directors (together
with any new directors whose election by the Board of Directors or whose
nomination for election by the shareholders of the Company was proposed by a
vote of a majority of the directors of the Company then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office.
(d) In the event that the Company makes an Offer to Purchase the
Securities, the Company intends to comply with any applicable securities laws
and regulations,
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including any applicable requirements of Section 14(e) of, and Rule 14e-1 under,
the Exchange Act.
(e) Unless the Company defaults in the payment of the Purchase Price,
any Security accepted for payment pursuant to an Offer to Purchase shall cease
to accrue interest after the Purchase Date.
SECTION 1017. PROVISION OF FINANCIAL INFORMATION.
The Company has agreed to file with the Trustee, within 15 days after
it files them with the Commission, copies of the SEC Reports. In the event the
Company shall cease to be required to file SEC Reports pursuant to the Exchange
Act, the Company will nevertheless continue to file such reports with the
Commission (unless the Commission will not accept such a filing) and the
Trustee. The Company will furnish copies of the SEC Reports to the Holders of
Securities at the time the Company is required to file the same with the Trustee
and will make such information available to investors who request it in writing.
SECTION 1018. STATEMENT BY OFFICERS AS TO DEFAULT.
(a) The Company will deliver to the Trustee, within 90 days after the
end of each quarter of each fiscal year of the Company ending after the date
hereof, an Officers' Certificate, stating whether or not to the best knowledge
of the signers thereof the Company is in default in the performance and
observance of any of the terms, provisions and conditions of this Indenture and
if the Company shall be in default, specifying all such defaults and the nature
and status thereof of which they may have knowledge.
(b) The Company shall deliver to the Trustee, as soon as possible and
in any event within 10 days after the Company becomes aware of the occurrence of
a Default or an Event of Default, an Officers' Certificate setting forth the
details of such Default or Event of Default and the action which the Company
proposes to take with respect thereto.
SECTION 1019. WAIVER OF CERTAIN COVENANTS.
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Sections 1004 to 1017, inclusive, if before
or after the time for such compliance the Holders of at least a majority in
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aggregate principal amount of the Outstanding Securities shall, by Act of such
Holders, either waive such compliance in such instance or generally waive
compliance with such covenant or condition, but no such waiver shall extend to
or affect such covenant or condition except to the extent so expressly waived,
and, until such waiver shall become effective, the obligations of the Company
and the duties of the Trustee in respect of any such covenant or condition shall
remain in full force and effect.
SECTION 1020. LIMITATION ON USE OF PROCEEDS.
The Company will apply the net proceeds received from the issuance and
sale of the Securities (the "Securities Net Proceeds") toward the construction,
improvement, and acquisition by the Company or one or more Restricted
Subsidiaries of the Company or Joint Ventures of Telecommunications Assets of
the Company, such Restricted Subsidiaries or Joint Ventures (or will advance
such net proceeds to such Restricted Subsidiaries of the Company or Joint
Ventures for such purpose); provided, however, pending such application, the
Securities Net Proceeds may be invested in Marketable Securities.
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. RIGHT OF REDEMPTION.
(a) The Securities may be redeemed prior to November 15, 2003 only in
the event that on or before November 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 Securities in a
principal amount of up to an aggregate amount equal to 331/3% of the original
principal amount of the Securities PROVIDED, HOWEVER, that Securities in an
amount equal to at least 662/3% of the original aggregate principal amount of
the Notes remain outstanding after such redemption. Such redemption must occur
on a Redemption Date within 90 days of any such sale and upon not less than 30
nor more than 60 days' notice by mail to each Holder of Securities to be
redeemed at such Holder's address appearing in the Security Register, in amounts
of $1,000 or an integral multiple of $1,000 at a Redemption Price of 112.75% of
their principal amount plus accrued and unpaid interest, if any, to but
excluding the Redemption Date (subject to the right of Holders of record on the
relevant
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Regular Record Date to receive interest due on an Interest Payment Date that is
on or prior to the Redemption Date).
(b) The Securities further may be redeemed, as a whole or in part, at
the election of the Company, at any time on or after November 15, 2003 and prior
to maturity, upon not less than 30 nor more than 60 days' notice by mail to each
Holder of Securities to be redeemed at such Holder's address appearing in the
Security Register, in amounts of $1,000 or an integral multiple of $1,000, at
the Redemption Prices specified in the form of Security hereinbefore set forth,
together with accrued and unpaid interest to, but excluding, the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
to receive interest due on an Interest Payment Date that is on or prior to the
Redemption Date).
SECTION 1102. APPLICABILITY OF ARTICLE.
Redemption of Securities at the election of the Company, as permitted
or required by any provision of this Indenture, shall be made in accordance with
such provision and this Article.
SECTION 1103. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Securities pursuant to
Section 1101 shall be evidenced by Board Resolution. In case of any redemption
at the election of the Company of less than all the Securities, the Company
shall, at least 60 days prior to the Redemption Date fixed by the Company
(unless a shorter notice shall be satisfactory to the Trustee), notify the
Trustee in writing of such Redemption Date and of the principal amount of
Securities to be redeemed. In the case of any redemption of Securities prior to
the expiration of any restriction on such redemption provided in the terms of
such Securities or elsewhere in this Indenture, the Company shall furnish the
Trustee with an Officers' Certificate evidencing compliance with such
restriction.
SECTION 1104. SECURITIES TO BE REDEEMED PRO RATA.
If less than all the Securities are to be redeemed in any redemption,
the Securities to be redeemed shall be selected by the Trustee by prorating, as
nearly as may be practicable, the principal amount of Securities to be redeemed.
In any proration pursuant to this Section, the
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Trustee shall make such adjustments, reallocations and eliminations as it shall
deem proper (and in compliance with the requirements of the principal national
securities exchange, if any, on which the Securities are listed) to the end that
the principal amount of Securities so prorated shall be $1,000 or a multiple
thereof, by increasing or decreasing or eliminating the amount which would be
allocable to any Holder on the basis of exact proportion by an amount not
exceeding $1,000. The Trustee in its discretion may determine the particular
Securities (if there are more than one) registered in the name of any Holder
which are to be redeemed, in whole or in part.
The Trustee shall promptly notify the Company and each Security
Registrar (other than the Trustee) in writing of the Securities selected for
redemption and, in the case of any Securities selected for partial redemption,
the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 1105. NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at such Holder's address
appearing in the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) whether the redemption is being made pursuant to Section 1101(a)
or (b) and, if being made pursuant to Section 1101(a), a brief statement
setting forth the Company's right to effect such redemption and the
Company's basis therefor,
(4) if less than all the Outstanding Securities are to be redeemed,
the identification (and, in the case of partial redemption of any
Securities,
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the principal amounts) of the particular Securities to be redeemed,
(5) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and that interest
thereon will cease to accrue on and after said date,
(6) the place or places where such Securities are to be surrendered
for payment of the Redemption Price,
(7) that in the case that a Security is only redeemed in part, the
Company shall execute and the Trustee shall authenticate and deliver to the
Holder of such Security without service charge, a new Security or
Securities in an aggregate amount equal to the unredeemed portion of the
Security,
(8) the aggregate principal amount of Securities being redeemed, and
(9) the CUSIP number or numbers of the Securities being redeemed.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, if request is made to the Trustee
no less than 35 days prior to the Redemption Date, by the Trustee in the name
and at the expense of the Company.
SECTION 1106. DEPOSIT OF REDEMPTION PRICE.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued and unpaid interest on, all the
Securities which are to be redeemed on that date.
SECTION 1107. SECURITIES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price
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and accrued and unpaid interest) such Securities shall cease to bear interest.
Upon surrender of any such Security for redemption in accordance with said
notice, such Security shall be paid by the Company at the Redemption Price,
together with accrued and unpaid interest to the Redemption Date; PROVIDED,
HOWEVER, that installments of interest whose Stated Maturity is on or prior to
the Redemption Date shall be payable to the Holders of such Securities, or one
or more Predecessor Securities, registered as such at the close of business on
the relevant Record Dates according to their terms and the provisions of Section
307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate provided by the
Security.
SECTION 1108. SECURITIES REDEEMED IN PART.
Any Security which is to be redeemed only in part shall be surrendered
at an office or agency of the Company designated for that purpose pursuant to
Section 1002 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney duly authorized
in writing), and the Company shall execute, and the Trustee shall authenticate
and deliver to the Holder of such Security without service charge, a new
Security or Securities of like tenor, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in exchange
for the unredeemed portion of the principal of the Security so surrendered. If
a Global Security is so surrendered, such new Security shall also be a Global
Security.
ARTICLE TWELVE
Defeasance and Covenant Defeasance
SECTION 1201. COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at its option by Board Resolution at any time
(subject to 10-day prior written notification to the Trustee), elect to have
either Section 1202 or Section 1203 applied to the Outstanding Securities upon
compliance with the conditions set forth below in this Article Twelve.
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SECTION 1202. DEFEASANCE AND DISCHARGE.
Upon the Company's exercise of the option provided in Section 1201
applicable to this Section, the Company shall be deemed to have been discharged
from its obligations with respect to the Outstanding Securities on the date the
conditions set forth below are satisfied (hereinafter, "defeasance"). For this
purpose, such defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the Outstanding Securities and
to have satisfied all its other obligations under such Securities and this
Indenture insofar as such Securities are concerned (and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging the
same), except for the following which shall survive until otherwise terminated
or discharged hereunder: (A) the rights of Holders of Outstanding Securities to
receive, solely from the trust fund described in Section 1204 and as more fully
set forth in such Section, payments in respect of the principal of (and premium,
if any) and interest on such Securities when such payments are due, (B) the
Company's obligations with respect to such Securities under Sections 304, 305,
306, 1002 and 1003, (C) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and (D) this Article Twelve. Subject to compliance with this
Article Twelve, the Company may exercise its option under this Section 1202
notwithstanding the prior exercise of its option under Section 1203.
SECTION 1203. COVENANT DEFEASANCE.
Upon the Company's exercise of the option provided in Section 1201
applicable to this Section (i) the Company shall be released from its
obligations under Sections 1005 through 1017, inclusive, and Clauses (3) and (4)
of Section 801, (ii) the occurrence of an event specified in Sections 501(3),
501(4) (with respect to Clauses (3) and (4) of Section 801), and 501 (5) (with
respect to Sections 1005 through 1017, inclusive) shall not be deemed to be an
Event of Default, on and after the date the conditions set forth below are
satisfied (hereinafter, "covenant defeasance"). For this purpose, such covenant
defeasance means that the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
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Section or Article, whether directly or indirectly by reason of any reference
elsewhere herein to any such Section or Article or by reason of any reference in
any such Section or Article to any other provision herein or in any other
document, but the remainder of this Indenture and such Securities shall be
unaffected thereby.
SECTION 1204. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions to application of either Section
1202 or Section 1203 to the Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (A)
money in an amount, or (B) U.S. Government Obligations which through the
scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day before the
due date of any payment, money in an amount, or (C) a combination thereof,
sufficient, in the opinion of a nationally recognized firm of independent
certified public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall be applied
by the Trustee to pay and discharge, the principal of, premium, if any, and
each installment of interest on the Securities on the Stated Maturity of
such principal or installment of interest on the day on which such payments
are due and payable in accordance with the terms of this Indenture and of
such Securities. For this purpose, "U.S. Government Obligations" means
securities that are (x) direct obligations of the United States of America
for the payment of which its full faith and credit is pledged or (y)
obligations of a Person controlled or supervised by and acting as an agency
or instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in either case, are not callable or
redeemable at the option of the issuer thereof, and shall also include a
depositary receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such
U.S. Government Obligation held by such custodian for the account of the
holder of such depositary receipt, PROVIDED that
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(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depositary receipt
from any amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal of or interest on the U.S.
Government Obligation evidenced by such depositary receipt.
(2) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit or, insofar as subsections 501(8)
and (9) are concerned, at any time during the period ending on the 91st day
after the date of such deposit (it being understood that this condition
shall not be deemed satisfied until the expiration of such period).
(3) Such defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest as defined in Section 608 and for
purposes of the Trust Indenture Act with respect to any securities of the
Company.
(4) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or
any other agreement or instrument to which the Company is a party or by
which it is bound.
(5) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the defeasance under Section 1202
or the covenant defeasance under Section 1203 (as the case may be) have
been complied with.
(6) In the case of an election under Section 1202, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (x) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (y) since the date of this Indenture there has
been a change in the applicable Federal income tax law, in either case to
the effect that, and based thereon such opinion shall confirm that, the
Holders of the Outstanding Securities will not recognize income, gain or
loss for Federal income tax purposes as a result of such deposit,
defeasance and discharge and will be subject to Federal income tax on the
same amounts, in the same manner and at the same times as would have been
the
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case if such deposit, defeasance and discharge had not occurred.
(7) In the case of an election under Section 1203, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the Outstanding Securities will not recognize income, gain or
loss for Federal income tax purposes as a result of such deposit and
covenant defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such covenant defeasance had not occurred.
(8) The Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that such deposit and defeasance or covenant
defeasance shall not result in the trust arising from such deposit
constituting an investment company as defined in the Investment Company Act
of 1940, as amended, or such trust shall be qualified under such act or
exempt from regulation thereunder.
SECTION 1205. DEPOSITED MONEY AND U.S.GOVERNMENT OBLIGATIONS TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee--collectively, for
purposes of this Section 1205, the "Trustee") pursuant to Section 1204 in
respect of the Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Securities, of all sums due and to become due thereon in respect of
principal (and premium, if any) and interest, but such money need not be
segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1204 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Outstanding Securities.
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Anything in this Article Twelve to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 1204 which, in the opinion of a nationally recognized accounting firm
expressed in a written certification thereof delivered to the Trustee, are in
excess of the amount thereof which would then be required to be deposited to
effect an equivalent defeasance or covenant defeasance.
SECTION 1206. REINSTATEMENT.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with Section 1202 or 1203 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article Twelve until such time as the Trustee or Paying Agent
is permitted to apply all such money in accordance with Section 1202 and 1203;
PROVIDED, HOWEVER, that if the Company makes any payment of principal of (and
premium, if any) any Security following the reinstatement of its obligations,
the Company shall be subrogated to the rights of the Holders of such Securities
to receive such payment from the money held by the Trustee or the Paying Agent.
SECTION 1207. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Security and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its written request or (if then held by the Company)
shall be discharged from such trust; and the Holder of such security shall
thereafter, as a creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that,
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after a date specified therein, which shall not be less than 30 days from the
date of such notification or publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
-----------------------
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed and attested, and the Trustee has caused its seal to be
hereunto affixed and attested, all as of the day and year first above written.
NEXTLINK Communications, Inc.
By /s/ R. Bruce Easter, Jr.
------------------------------------
Name: R. Bruce Easter, Jr.
Title: Vice President, General
Counsel and Secretary
Attest:
/s/ Scott B. Nelson
- --------------------------------
Name: Scott B. Nelson
Title: Vice President, GM
Nextlink Utah
UNITED STATES TRUST COMPANY
OF NEW YORK
By /s/ Patricia Stermer
------------------------------------
Name: Patricia Stermer
Title: Assistant Vice President
[SEAL]
Attest:
/s/ Jason G. Gregory
- --------------------------------
Name: Jason G. Gregory
Title: Assistant Secretary
<PAGE>
STATE OF UTAH ) ss.:
COUNTY OF SALT LAKE )
On this 12th day of November, 1998, before me personally appeared R.
Bruce Easter, Jr., to me known, who, being duly sworn, did depose and say that
he is the Vice President of NEXTLINK Communications, Inc., one of the
corporations described in and which executed the foregoing instrument, and duly
acknowledged to me that he executed the same by authority of the Board of
Directors of said corporation.
/s/ Tamara D. Breen
------------------------
Notary Public
STATE OF NEW YORK ) ss.:
COUNTY OF NEW YORK )
On this 12th day of November, 1998, before me personally appeared
Patricia Stermer, to me known, who, being duly sworn, did depose and say
that she is the Assistant 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 she executed the same
by authority of the Board of Directors of said corporation.
/s/ Christine C. Collins
------------------------
Notary Public
<PAGE>
ANNEX A -- Form of
Regulation S Certificate
REGULATION S CERTIFICATE
(For transfers pursuant to Section 305(b)(i), (iii) and (v)
of the Indenture)
United States Trust Company of New York,
as Trustee
114 West 47th Street, 25th Floor
New York, New York 10036
Attention: Corporate Trust Trustee Administration
Re: 103/4% Senior Notes due 2008
of NEXTLINK Communications, Inc.
(The "Securities")
--------------------------------
Reference is made to the Indenture, dated as of November 12, 1998 (the
"Indenture"), between NEXTLINK Communications, Inc. (the "Company") and United
States Trust Company of New York, as Trustee. Terms used herein and defined in
the Indenture or in Regulation S or Rule 144 under the U.S. Securities Act of
1933, as amended (the "Securities Act") are used herein as so defined.
This certificate relates to U.S. $____________ principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). ___________________________
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the Depositary or an Agent Member in the name of the Undersigned, as or
on behalf of the Owner. If the Specified Securities are not represented by a
Global Security, they are registered in the name of the Undersigned, as or on
behalf of the Owner.
The Owner has requested that the Specified Securities be transferred
to a person (the "Transferee") who will take delivery in the form of a
Regulation S Security. In connection with such transfer, the Owner hereby
certifies that, unless such transfer is being effected pursuant to an
A-1
<PAGE>
effective registration statement under the Securities Act, it is being effected
in accordance with Rule 904 or Rule 144 under the Securities Act and with all
applicable securities laws of the states of the United States and other
jurisdictions. Accordingly, the Owner hereby further certifies as follows:
(1) RULE 904 TRANSFERS. If the transfer is being effected in
accordance with Rule 904:
(A) the Owner is not a distributor of the Securities, an
affiliate of the Company or any such distributor or a person acting on
behalf of any of the foregoing;
(B) the offer of the Specified Securities was not made to a
person in the United States;
(C) either:
(i) at the time the buy order was originated, the
Transferee was outside the United States or the Owner and any
person acting on its behalf reasonably believed that the
Transferee was outside the United States, or
(ii) the transaction is being executed in, on or through
the facilities of the Eurobond market, as regulated by the
Association of International Bond Dealers, or another designated
offshore securities market and neither the Owner nor any person
acting on its behalf knows that the transaction has been
prearranged with a buyer in the United States;
(D) no directed selling efforts have been made in the United
States by or on behalf of the Owner or any affiliate thereof;
(E) if the Owner is a dealer in securities or has received a
selling concession, fee or other remuneration in respect of the
Specified Securities, and the transfer is to occur during the
Restricted Period, then the requirements of Rule 904(c)(1) have been
satisfied; and
(F) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
A-2
<PAGE>
(2) RULE 144 TRANSFERS. If the transfer is being effected pursuant
to Rule 144:
(A) the transfer is occurring after a holding period of at least
one year (computed in accordance with paragraph (d) of Rule 144) has
elapsed since the Specified Securities were last acquired from the
Company or from an affiliate of the Company, whichever is later, and
is being effected in accordance with the applicable amount, manner of
sale and notice requirements of Rule 144; or
(B) the transfer is occurring after a holding period of at least
two years has elapsed since the Specified Securities were last
acquired from the Company or from an affiliate of the Company,
whichever is later, and the Owner is not, and during the preceding
three months has not been, an affiliate of the Company.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Purchasers.
Dated:
------------------------------------------
(Print the name of the Undersigned,
as such term is defined in the
second paragraph of this certificate.)
By:
---------------------------------------
Name:
Title:
(If the Undersigned is a corporation, partnership or fiduciary,
the title of the person signing on behalf of the Undersigned must
be stated.)
A-3
<PAGE>
ANNEX B -- Form of Restricted
Securities Certificate
RESTRICTED SECURITIES CERTIFICATE
(For transfers pursuant to Section 305(b)(ii), (iii), (iv) and (v)
of the Indenture)
United States Trust Company of New York,
as Trustee
114 West 47th Street, 25th Floor
New York, New York 10036
Attention: Corporate Trust Trustee Administration
Re: 103/4% Senior Notes due 2008
of NEXTLINK Communications, Inc.
(the "Securities")
--------------------------------
Reference is made to the Indenture, dated as of November 12, 1998 (the
"Indenture"), between NEXTLINK Communications Inc. (the "Company") and United
States Trust Company of New York, as Trustee. Terms used herein and defined in
the Indenture or in Regulation S or Rule 144 under the U.S. Securities Act of
1933, as amended (the "Securities Act") are used herein as so defined.
This certificate relates to U.S. $_____________ principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). ___________________________
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the Depositary or an Agent Member in the name of the Undersigned, as or
on behalf of the Owner. If the Specified Securities are not represented by a
Global Security, they are registered in the name of the Undersigned, as or on
behalf of the Owner.
The Owner has requested that the Specified Securities be transferred
to a person (the "Transferee") who will take delivery in the form of a
Restricted Security. In
B-1
<PAGE>
connection with such transfer, the Owner hereby certifies that, unless such
transfer is being effected pursuant to an effective registration statement under
the Securities Act, it is being effected in accordance with Rule 144A or Rule
144 under the Securities Act and all applicable securities laws of the states of
the United States and other jurisdictions. Accordingly, the Owner hereby
further certifies as follows:
(1) RULE 144A TRANSFERS. If the transfer is being effected in
accordance with Rule 144A:
(A) the Specified Securities are being transferred to a person
that the Owner and any person acting on its behalf reasonably believe
is a "qualified institutional buyer" within the meaning of Rule 144A,
acquiring for its own account or for the account of a qualified
institutional buyer; and
(B) the Owner and any person acting on its behalf have taken
reasonable steps to ensure that the Transferee is aware that the Owner
may be relying on Rule 144A in connection with the transfer; and
(2) RULE 144 TRANSFERS. If the transfer is being effected pursuant
to Rule 144:
(A) the transfer is occurring after a holding period of at least
one year (computed in accordance with paragraph (d) of Rule 144) has
elapsed since the Specified Securities were last acquired from the
Company or from an affiliate of the Company, whichever is later, and
is being effected in accordance with the applicable amount, manner of
sale and notice requirements of Rule 144; or
(B) the transfer is occurring after a holding period of at least
two years has elapsed since the Specified Securities were last
acquired from the Company or from an affiliate of the Company,
whichever is later, and the Owner is not, and during the preceding
three months has not been, an affiliate of the Company.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Purchasers.
B-2
<PAGE>
Dated:
-----------------------------------------
(Print the name of the Undersigned,
as such term is defined in the
second paragraph of this certificate.)
By:
--------------------------------------
Name:
Title:
(If the Undersigned is a corporation, partnership or fiduciary,
the title of the person signing on behalf of the Undersigned must
be stated.)
B-3
<PAGE>
ANNEX C -- Form of Unrestricted
Securities Certificate
UNRESTRICTED SECURITIES CERTIFICATE
(For removal of Securities Act Legends pursuant to Section 305(c))
United States Trust Company of New York,
as Trustee
114 West 47th Street, 25th Floor
New York, New York 10036
Attention: Corporate Trust Trustee Administration
Re: 103/4% Senior Notes due 2008
of NEXTLINK Communication, Inc.
(the "Securities")
-------------------------------
Reference is made to the Indenture, dated as of November 12, 1998 (the
"Indenture"), between NEXTLINK Communication, Inc. (the "Company") and United
States Trust Company of New York, as Trustee. Terms used herein and defined in
the Indenture or in Regulation S or Rule 144 under the U.S. Securities Act of
1933, as amended (the "Securities Act") are used herein as so defined.
This certificate relates to U.S. $_____________ principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). ___________________________
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the Depositary or an Agent Member in the name of the Undersigned, as or
on behalf of the Owner. If the Specified Securities are not represented by a
Global Security, they are registered in the name of the Undersigned, as or on
behalf of the Owner.
The Owner has requested that the Specified Securities be exchanged for
Securities bearing no Securities Act Legend pursuant to Section 305(c) of the
Indenture. In connection with such exchange, the Owner hereby certifies
C-1
<PAGE>
that the exchange is occurring after a holding period of at least two years
(computed in accordance with paragraph (d) of Rule 144) has elapsed since the
Specified Securities were last acquired from the Company or from an affiliate of
the Company, whichever is later, and the Owner is not, and during the preceding
three months has not been, an affiliate of the Company. The Owner also
acknowledges that any future transfers of the Specified Securities must comply
with all applicable securities laws of the states of the United States and other
jurisdictions.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Purchasers.
Dated:
-----------------------------------------
(Print the name of the Undersigned,
as such term is defined in the
second paragraph of this certificate.)
By:
--------------------------------------
Name:
Title:
(If the Undersigned is a corporation, partnership or fiduciary,
the title of the person signing on behalf of the Undersigned must
be stated.)
C-2
<PAGE>
Exhibit 5.1
[LETTERHEAD OF WILLKIE, FARR & GALLAGHER]
February 2, 1999
NEXTLINK Communications, Inc.
500 108th Avenue N.E., Suite 2200
Bellevue, Washington 98004
Re: $500,000,000 10-3/4% Senior Notes
due 2008 Exchange Offer
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 February 4, 1999 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 up to $500,000,000 aggregate principal amount of
its 10-3/4% Senior Notes due 2008 (the "Old Notes"), of up to $500,000,000
aggregate principal amount of its 10-3/4% Senior Notes due 2008 (the "New
Notes"). The New Notes are to be issued pursuant to an indenture dated as of
November 12, 1998 (the "Indenture") between the Company and The United States
Trust Company of New York, as trustee (the "Trustee"). Capitalized terms used
herein and not otherwise defined have the meaning ascribed thereto in the
Indenture.
In rendering the opinion contained herein, we have assumed (a) the due
authorization, execution and delivery of each of the Indenture, the Exchange and
Registration Rights Agreement dated November 12, 1998 between the Company and
Salomon Smith Barney Inc. (the "Exchange and Registration Rights Agreement"),
and the New Notes by each of the parties thereto, (b) that each such party has
the legal power to act in the capacity or capacities in which it is to act
thereunder, (c) the authenticity of all documents submitted to us a originals,
(d) the conformity to the original of all documents submitted to us as copies
and (e) the genuineness of all signatures on all documents submitted to us.
The law covered by the opinions expressed herein is limited to the law
of the State of New York, the General Corporation Law of the State of Delaware
and the federal laws of the United States of America.
<PAGE>
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 constitutes the valid and
binding obligation of the Company.
3. The Company has the 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.
4. 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 Exchange and 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 creditor's 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).
This opinion is limited to matters expressly set forth herein and no
opinion is to be implied or may be inferred beyond the matters expressly stated
herein. This letter speaks only as of the date hereof and is limited to present
statutes, regulations and administrative and judicial interpretations. We
undertake no responsibility to update or supplement this letter after the date
hereof.
We consent 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/ Willkie Farr & Gallagher
2
<PAGE>
Exhibit 8.1
[LETTERHEARD OF WILLKIE, FARR & GALLAGHER]
February 2, 1999
NEXTLINK Communications, Inc.
500 108th Avenue N.E., Suite 2200
Bellevue, WA 98004
Re: $500,000,000 10-3/4% Senior Notes
due 2008 Exchange Offer
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 (the "Commission") on February 4, 1999 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, in exchange for $500,000,000 aggregate principal amount of
the Company's 10-3/4% Senior Notes due 2008 (the "Old Notes"), of $500,000,000
aggregate principal amount of the Company's 10-3/4% Senior Notes due 2008 (the
"New Notes"). The New Notes are to be issued pursuant to an Indenture dated as
of November 12, 1998 (the "Indenture") between the Company and The United States
Trust Company of New York, as trustee (the "Trustee"). Capitalized terms used
herein and not defined 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 Income Tax Consequences" accurately describe the
material federal income tax consequences to the holders of the New Notes issued
pursuant to the Prospectus.
We know that we are referred to under the heading "Legal Matters" in
the Propspectus, and we hereby consent to such use of or 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 & Gallagher
<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 to this registration statement on Form S-4 (the
"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
February 1, 1999
<PAGE>
Exhibit 25
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
--------------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) _______
--------------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation 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 98004
Bellevue, Washington (Zip code)
(Address of principal executive offices)
--------------------------
10 3/4% Senior Notes 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 January 28, 1999, 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 28th day of January, 1999.
UNITED STATES TRUST COMPANY OF
NEW YORK, Trustee
By: /s/ Patricia Stermer
---------------------------------------
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
SEPTEMBER 30, 1998
($ IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
- ------
<S> <C>
Cash and Due from Banks $ 339,287
Short-Term Investments 161,493
Securities, Available for Sale 563,176
Loans 1,954,456
Less: Allowance for Credit Losses 16,860
--------------
Net Loans 1,937,596
Premises and Equipment 58,809
Other Assets 120,308
--------------
TOTAL ASSETS $3,180,669
--------------
--------------
LIABILITIES
- -----------
Deposits:
Non-Interest Bearing $ 646,593
Interest Bearing 1,838,108
----------
Total Deposits 2,484,701
Short-Term Credit Facilities 375,849
Accounts Payable and Accrued Liabilities 142,513
--------------
TOTAL LIABILITIES $3,003,063
--------------
--------------
STOCKHOLDER'S EQUITY
- --------------------
Common Stock 14,995
Capital Surplus 49,541
Retained Earnings 109,648
Unrealized Gains on Securities
Available for Sale (Net of Taxes) 3,422
--------------
TOTAL STOCKHOLDER'S EQUITY 177,606
--------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $3,180,669
--------------
--------------
</TABLE>
I, Richard E. Brinkmann, Managing Director & 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, Managing Director & Controller
November 2, 1998
<PAGE>
Exhibit 99.1
LETTER OF TRANSMITTAL
FOR
OFFER FOR ALL OUTSTANDING 10-3/4% SENIOR NOTES DUE 2008
IN EXCHANGE FOR UP TO $500,000,000 PRINCIPAL AMOUNT OF
10-3/4% SENIOR NOTES DUE 2008
OF
NEXTLINK COMMUNICATIONS, INC.
PURSUANT TO THE PROSPECTUS
DATED FEBRUARY , 1999
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1999,
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 DELIVERY: FACSIMILE TRANSMISSIONS BY REGISTERED OR CERTIFIED MAIL:
(ELLIGIBLE INSTITUTIONS ONLY)
United States Trust Company (212) 852-1626 United States Trust Company
of New York of New York
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 Attention: Patricia Stermer
Reorganization Section (212) 852-1664 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 10-3/4% 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 , 1999 (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.
<PAGE>
METHOD OF DELIVERY
- --------------------------------------------------------------------------------
/ / CHECK HERE IF CERTIFICATES FOR TENDERED OLD NOTES ARE BEING
DELIVERED HEREWITH.
/ / 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:
-------------- --------------
- --------------------------------------------------------------------------------
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.
<TABLE>
<CAPTION>
DESCRIPTION OF OLD NOTES
- ------------------------------------------------------------------------------------------------
AGGREGATE
NAME(S) AND ADDRESS(ES) OF HOLDER(S) CERTIFICATE PRINCIPAL AMOUNT PRINCIPAL AMOUNT
(PLEASE FILL IN, IF BLANK) NUMBERS* REPRESENTED** TENDERED
- ------------------------------------ ------------ ---------------- -----------------
<S> <C> <C> <C>
------------ ----------------- -----------------
------------ ----------------- -----------------
------------ ----------------- -----------------
------------ ----------------- -----------------
TOTAL PRINCIPAL
AMOUNT OF OLD NOTES
</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.
<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
<PAGE>
Ladies and Gentlemen:
By execution hereof, the undersigned acknowledges receipt of the
Prospectus, dated , 1999 (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 the Company's offer to exchange $1,000 principal amount of
10-3/4% 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 outstanding 10-3/4% Senior Notes due 2008 (the
"Old Notes") of the Company.
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
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
<PAGE>
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, 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
<PAGE>
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 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.
<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: , 1999
------------------------------------------------------------------
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: , 1999
------------------------------------------------------------------
<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)
<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 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
<PAGE>
Transmittal and the instructions thereto, will be deposited by such Eligible
Institution with the Exchange Agent; and
(iii) the Exchange Agent must have received 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 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 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
<PAGE>
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 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
<PAGE>
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.
<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 attached Substitute Form W-9 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, 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, any amounts
withheld under the backup withholding rules will be allowed as a refund or a
credit against such Holder's federal income tax liability, provided that the
required information is furnished to 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 attached form, 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
from backup withholding.
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.
<PAGE>
SUBSTITUTE FORM W-9
Request for Taxpayer Identification Number and Certification
PAYOR'S NAME: Nextlink Communications, Inc.
- --------------------------------------------------------------------------------
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: ____________________________________________________
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------------------------------------- -------------------------------
PART I Taxpayer Identification Number ("TIN") PART II Payees Exempt from
Enter your TIN below. For individuals, this is your social security number. For Backup Withholding
other entities, it is your employer identification number. Refer to the chart on Check box (See page 2 of the
page 1 of the Guidelines for Certification of Taxpayer Identification Number on Guidelines for further
Substitute Form W-9 (the "Guidelines") for further clarification. If you do not clarification. Even if you
have a TIN, see instructions on how to obtain a TIN on page 2 of the Guidelines, are exempt from backup
check the appropriate box below indicating that you have applied for a TIN and, in withholding, you should still
addition to the Part III Certification, sign the attached Certification of Awaiting complete and sign the
Taxpayer Identification Number. certification below):
EXEMPT
Social security number:
- -
_________ Applied For
Employer identification number:
-
</TABLE>
- --------------------------------------------------------------------------------
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
------------------------ ---------------------------
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
<PAGE>
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL OUTSTANDING
10-3/4% SENIOR NOTES DUE 2008
IN EXCHANGE FOR NEW
10-3/4% SENIOR NOTES DUE 2008
OF
NEXTLINK COMMUNICATIONS, INC.
As set forth in the Prospectus dated , 1999 (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 10-3/4%
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 of New York (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 , 1999,
UNLESS EXTENDED OR TERMINATED (THE "EXPIRATION DATE").
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
UNITED STATES TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
BY HAND OR OVERNIGHT DELIVERY: FACSIMILE TRANSMISSIONS: BY REGISTERED OR CERTIFIED MAIL:
(ELIGIBLE INSTITUTIONS ONLY)
United States Trust Company (212) 852-1626 United States Trust Company
of New York of New York
114 West 47th Street FACSIMILE TRANSMISSIONS: 114 West 47th Street
New York, New York 10036 (ELIGIBLE INSTITUTIONS ONLY) New York, New York 10036
Attention: Patricia Stermer Attention: Patricia Stermer
Reorganization Section (212) 852-1664 Reorganization Section
</TABLE>
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.
<PAGE>
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.
<PAGE>
PLEASE SIGN AND COMPLETE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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.
---------------------------
</TABLE>
- --------------------------------------------------------------------------------
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.
<PAGE>
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.
Name of Firm:
--------------------------- ---------------------------------
Address: Authorized Signature
-------------------------------
-------------------------------
Area Code and Name:
Telephone No.: ---------------------------
-------------------------
Title:
---------------------------
Date:
---------------------------
<PAGE>
Exhibit 99.3
NEXTLINK COMMUNICATIONS, INC.
OFFER FOR ALL OUTSTANDING 10-3/4% SENIOR NOTES
DUE 2008 IN EXCHANGE FOR UP TO $500,000,000 PRINCIPAL
AMOUNT OF 10-3/4% SENIOR NOTES DUE 2008
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1999, UNLESS EXTENDED OR TERMINATED (THE "EXPIRATION DATE").
To Our Clients:
Enclosed for your consideration is a Prospectus dated 1999 (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 $500,000,000 in aggregate principal amount of
its Senior Notes due 2008 (the "Old Notes") for $500,000,000 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 , 1999, 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
<PAGE>
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.
<PAGE>
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:
AGGREGATE PRINCIPAL AMOUNT OF OLD NOTES
---------------------------------
/ / Please DO NOT tender any Old
Notes held by you for my
account
-----------------------------------
Dated: ____________________, 1999
-----------------------------------
Signature(s)
-----------------------------------
-----------------------------------
Please Print Name(s) here
-----------------------------------
-----------------------------------
Address(es)
-----------------------------------
Area Code(s) and Telephone Number(s)
-----------------------------------
Tax Identification or Social Security No(s)
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.
<PAGE>
Exhibit 99.4
NEXTLINK COMMUNICATIONS, INC.
OFFER FOR ALL OUTSTANDING 10-3/4% SENIOR NOTES DUE 2008
IN EXCHANGE FOR UP TO $500,000,000 PRINCIPAL AMOUNT
OF 10-3/4% SENIOR NOTES DUE 2008
THE EXCHANGE OFFER WILL EXPIRE AT MIDNIGHT, NEW YORK CITY TIME, ON 1999,
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 ,
1999 (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 $500,000,000 in
aggregate principal amount of its Senior Notes due 2008 (the "New Notes") for
$500,000,000 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 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
<PAGE>
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 , 1999, 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 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 of New York, 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.
