<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 3, 1999
REGISTRATION NO. 333-[ ]
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
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>
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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)
------------------------
COPIES TO:
<TABLE>
<S> <C>
BRUCE R. KRAUS, ESQ. ROBERT E. BUCKHOLZ, ESQ.
WILLKIE FARR & GALLAGHER SULLIVAN & CROMWELL
787 SEVENTH AVENUE 125 BROAD STREET
NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10004
(212) 728-8000 (212) 558-4000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED OFFER TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ______
If this Form is a post-effective amendment filed pursuant to Rule 462(b)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / / ______
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
NUMBER OF PROPOSED PROPOSED
SHARES MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE PER SHARE OFFERING AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PRICE(1) OFFERING PRICE FEE
<S> <C> <C> <C> <C>
Class A Common Stock, par value $.02 per share... 9,890,000 $72.313 $715,175,570 $198,819
</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.
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<PAGE>
EXPLANATORY NOTE
This registration statement contains two forms of prospectuses: one we will
use in connection with an offering in the United States and Canada, which we
call the U.S. prospectus, and one that we will use in a concurrent international
offering outside the United States and Canada, which we call the international
prospectus. Some pages of the U.S. prospectus included in this registration
statement are followed by corresponding alternate pages we will use for the
international prospectus. We labeled each of these alternate pages "Alternate
Page for the International Prospectus." We will file final forms of each
prospectus with the Securities and Exchange Commission under Rule 424(b).
<PAGE>
SUBJECT TO COMPLETION, MAY 3, 1999
U.S. PROSPECTUS
THE 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]
8,600,000 SHARES
NEXTLINK COMMUNICATIONS, INC.
CLASS A COMMON STOCK
NEXTLINK and the NEXTLINK stockholders listed on page 34 of this prospectus
are offering shares of our Class A common stock to the public. We are offering
4,982,050 newly issued shares of Class A common stock and the selling
stockholders are offering 3,617,950 shares that they currently hold.
A syndicate of U.S. underwriters will offer 6,880,000 of these shares in the
United States and Canada, and a syndicate of international underwriters will
offer the remaining 1,720,000 shares in other countries.
Shares of our Class A common stock are listed on The Nasdaq National Market
under the symbol "NXLK." On April 30, 1999, the last reported sale price of our
shares on The Nasdaq National Market was $73.25 per share.
--------------
INVESTING IN OUR CLASS A COMMON STOCK INVOLVES RISKS. A DESCRIPTION OF THESE
RISKS BEGINS ON PAGE 4.
Neither the SEC 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.
--------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
----------- ---------
<S> <C> <C>
Public offering price....................................... $ $
Underwriting discounts and commissions...................... $ $
Proceeds, before expenses, to NEXTLINK...................... $ $
Proceeds to selling stockholders............................ $ $
</TABLE>
NEXTLINK and the selling stockholders have granted the underwriters the
right to purchase up to 1,290,000 additional shares of Class A common stock to
cover any over-allotments.
--------------
SALOMON SMITH BARNEY
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
CREDIT SUISSE FIRST BOSTON
MERRILL LYNCH & CO.
<PAGE>
SUBJECT TO COMPLETION, MAY 3, 1999
INTERNATIONAL PROSPECTUS
THE 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]
8,600,000 SHARES
NEXTLINK COMMUNICATIONS, INC.
CLASS A COMMON STOCK
NEXTLINK and the NEXTLINK stockholders listed on page 34 of this prospectus
are offering shares of our Class A common stock to the public. We are offering
4,982,050 newly issued shares of Class A common stock and the selling
stockholders are offering 3,617,950 shares that they currently hold.
A syndicate of international underwriters will offer 1,720,000 of these
shares outside the U.S. and Canada, and a syndicate of U.S. underwriters will
offer the remaining 6,880,000 shares in the U.S. and Canada.
Shares of our Class A common stock are listed on The Nasdaq National Market
under the symbol "NXLK." On April 30, 1999, the last reported sale price of our
shares on The Nasdaq National Market was $73.25 per share.
--------------
INVESTING IN OUR CLASS A COMMON STOCK INVOLVES RISKS. A DESCRIPTION OF THESE
RISKS BEGINS ON PAGE .
Neither the SEC 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.
--------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
----------- ---------
<S> <C> <C>
Public offering price....................................... $ $
Underwriting discounts and commissions...................... $ $
Proceeds, before expenses, to NEXTLINK...................... $ $
Proceeds to selling stockholders............................ $ $
</TABLE>
NEXTLINK and the selling stockholders have granted the underwriters the
right to purchase up to 1,290,000 additional shares of Class A common stock to
cover any over-allotments.
--------------
SALOMON SMITH BARNEY INTERNATIONAL
GOLDMAN SACHS INTERNATIONAL
BEAR, STEARNS INTERNATIONAL LIMITED
CREDIT SUISSE FIRST BOSTON
MERRILL LYNCH INTERNATIONAL
<PAGE>
PROSPECTUS SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES TO THE FINANCIAL STATEMENTS
INCORPORATED BY REFERENCE FROM OUR FORM 10-K, DATED MARCH 29, 1999.
OUR BUSINESS
Since 1996, NEXTLINK has provided high-quality telecommunications services
to the rapidly growing business market. We believe that increasing usage of both
telephone service and newer data and information services will continue to
increase demand for telecommunications capacity, or bandwidth, and for new
telecommunications services and applications.
To serve our customers' broad and expanding telecommunications needs, we
have assembled a unique collection of high-bandwidth, local and national network
assets. We intend to integrate these assets with advanced communications
technologies and services in order to become one of the nation's leading
providers of comprehensive end-to-end telecommunications services.
To accomplish this:
- we have built 23 high-bandwidth, or broadband, local networks in 14
states, generally located in the central business districts of the cities
we serve, and we are continuing to build additional networks;
- we have become the nation's largest holder of broadband fixed wireless
spectrum, with FCC licenses covering 95% of the population of the 30
largest U.S. cities, which we will use to extend the reach of our networks
to additional customers; and
- we have acquired exclusive interests in a national broadband network now
being built to traverse over 16,000 miles and to connect more than 50
cities, including all of the largest cities that our current and planned
local networks serve.
As our networks become increasingly optimized for data transmission, we plan
to offer our customers high-speed Internet access and additional services, such
as Internet web hosting and support for e-commerce. By web hosting, we mean
support for customers' web sites at our central offices, running either on their
computers or on ours, together with website design and maintenance services. We
also plan to build on our existing expertise in communicating customized
information to mass-market customers and automated order fulfillment to serve
clients with e-commerce businesses, that is, businesses conducting high volume
retail transactions over the Internet.
We are now operating local networks in 38 cities. We provided nearly 225,000
business telephone lines to our customers as of March 31, 1999, of which more
than 50,000 were installed in the first quarter of 1999. We are currently
building additional networks, and plan to have operational networks in most of
the 30 largest U.S. cities by the end of 2000.
Our local and national networks employ fiber optic technology, which uses
light waves to transmit signals over cables consisting of many glass fiber
strands. Each strand in these fiber optic cables has enough capacity to carry
over 100,000 times more traffic than a strand of traditionally-configured copper
wire. Rings of our fiber optic cables typically encircle a city's central
business district and connect to our central offices. These central offices
<PAGE>
contain the switches and routers that direct calls and data traffic to their
destinations, and have space to house the additional equipment necessary for
future telecommunications services. Wherever we can, we build and own these
networks ourselves. This enables us to deliver higher quality services and will
enable us to deliver new services that we expect will increase our operating
margins.
Our goal is to provide our customers with complete voice and data network
solutions for all of their communications needs, using our own fiber, switches
and other facilities to the greatest extent possible. Today, however, we
frequently lease the existing copper telephone wires from the dominant local
telephone company to make the physical connection for the short distance -which
we refer to as the "first mile"- between our customers and our fiber optic
networks.
To reduce our reliance on first mile connections leased from the dominant
carrier, we intend to increase the number of customers connected directly to our
networks. In some cases, we will construct a new fiber optic extension from our
network to the customer's premises. In other cases, we will deploy a
high-bandwidth wireless connection between an antenna on the roof of the
customer's premises and an antenna attached to our fiber rings. These wireless
connections offer high-quality broadband capacity and often cost less than fiber
to install. We expect to deploy wireless first mile extensions in 25 markets by
the end of 2000.
We are also deploying a technology called Digital Subscriber Line, or DSL,
to meet the high bandwidth needs of those customers whose first mile connection
remains over copper wire. DSL increases the effective capacity of existing
copper telephone wires. We are installing our own DSL equipment to provide these
services ourselves, and also resell another provider's DSL services.
Our networks support a variety of communications technologies, which permits
us to offer customers a set of technology options to meet their changing needs,
and introduce new technologies as they become available. For example, we have
begun to add new technologies to our networks including Internet Protocol, or IP
routers and switches, and Asynchronous Transfer Mode, or ATM switches. ATM
switches will enable us to meet the demands of large, high-volume customers,
while IP routers and switches will enable us to carry Internet traffic more
efficiently and to provide more services.
As IP technology evolves and matures, we believe it will gradually replace
ATM, and we therefore intend to invest heavily in optimizing our networks for
present and future IP implementations. We anticipate that future IP technologies
will enable the high-bandwidth, end-to-end national network we are building to
carry data, voice and video. Such a network should also enable us to offer our
customers entirely new classes of IP services. We intend to remain flexible in
our technology choices, to serve our customers' present needs and to take
advantage of the future opportunities that technological advances may bring.
2
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Class A common stock offered by NEXTLINK
Communications, Inc......................... 4,982,050 shares
Class A common stock offered by selling
stockholders................................ 3,617,950 shares
Common stock to be outstanding after the
offering:
Class A common stock........................ 36,505,184 shares
Class B common stock........................ 29,184,372 shares
Nasdaq National Market symbol................. NXLK
Use of Proceeds............................... We intend to use the net proceeds to expand
our networks and services, introduce new
technologies and to fund operating losses,
working capital and possible acquisitions.
</TABLE>
We calculated outstanding shares above assuming no exercise of the
underwriters' overallotment option and based on the number of shares outstanding
as of April 29, 1999, excluding a total of 11,613,088 shares of Class A common
stock and 654,858 shares of Class B common stock issuable upon exercise of
options.
RISK FACTORS
You should read the "Risk Factors" section of this prospectus to learn about
the risks associated with holding NEXTLINK Class A common stock.
3
<PAGE>
RISK FACTORS
You should consider carefully the following risks before you decide to buy
our Class A common stock.
WE HAVE SUBSTANTIAL EXISTING DEBT AND WILL INCUR SUBSTANTIAL ADDITIONAL DEBT,
WHICH COULD DEPRIVE COMMON STOCKHOLDERS OF VALUE AND CONTROL
As of March 31, 1999, NEXTLINK had outstanding five issues of senior notes
totaling $2,023.0 million in principal amount and approximately $73.2 million in
miscellaneous debt obligations of our subsidiaries. Because we have these
substantial obligations, we may be unable to pay interest or principal on any or
all of these outstanding notes, which could result in a work-out or bankruptcy
that would dilute or eliminate the ownership interests of our common
stockholders.
For each period since our inception, we have had substantial and increasing
net losses and negative cash flow from operations. Consequently, we do not
currently generate cash flows from which we can make payments on our outstanding
notes. If we fail to pay principal and interest on our notes when due, the
noteholders could declare a default and demand that we repay the entire amount
of defaulted notes. Unless we were able to find alternative financing to pay the
entire amount, the noteholders could seek a judgment and attempt to seize our
assets to satisfy the debt to them. Any action of this type would have a serious
adverse affect on our business and on the market price of the Class A common
stock.
Our indentures permit us to incur substantial additional debt, and we fully
expect to borrow substantial additional funds. This additional indebtedness will
further increase the risk of a default unless we can establish an adequate
revenue base and generate sufficient cash flow to repay our indebtedness. We
cannot assure you that we will ever establish an adequate revenue base to
produce an operating profit or generate adequate positive cash flow to provide
future capital expenditures and repayment of debt.
IF WE ARE NOT SUCCESSFUL IN RAISING ADDITIONAL CAPITAL, WE WILL NOT BE ABLE TO
BUILD AND MAINTAIN OUR NETWORKS
Building our business will require a large amount of additional capital
spending. Our capital spending plans have increased substantially over time, as
our strategy has evolved and our planned network has grown larger and more
robust. Because our anticipated future capital requirements will exceed the
$1,244.4 million in cash and marketable securities we had on hand as of March
31, 1999, and the $343.8 million in net proceeds we expect to receive from our
stock offering, we will be required to raise additional capital. If we fail to
raise sufficient capital, 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 and generate profits for stockholders, and could even result
in a payment default on our existing debt.
IF WE CANNOT QUICKLY AND EFFICIENTLY INSTALL OUR HARDWARE, WE WILL BE UNABLE TO
GENERATE REVENUE
Each of our networks consists of many different pieces of hardware,
including switches, routers, fiber optic cables, electronics, and wireless
combination transmitter/receivers, known
4
<PAGE>
as transceivers, and associated equipment, which are difficult to install. If we
cannot install this hardware quickly, the time in which customers can be
connected to our network and we can begin to generate revenue from our network
will be delayed. You should be aware that the construction of our national fiber
optic network is not under our control, but is under the control of Level 3
Communications. We cannot assure you that the Level 3 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. Failure of Level 3 to complete its network in a timely manner would
delay implementation of our strategy of linking our local networks to one
another and creating an end-to-end national network.
IP TECHNOLOGY HAS NOT YET BEEN PERFECTED FOR FULL SERVICE NETWORKS LIKE OURS
We plan to rely on IP technology as the basis for our planned end-to-end
network. Although IP technology is used throughout the Internet, its extension
to support other telecommunications applications, such as voice and video, has
not yet been perfected, and currently has several deficiencies, including poor
reliability and quality. Integrating these technologies into our network may
prove difficult and may be subject to delays. We cannot assure you that these
improvements will become available in a timely fashion or at reasonable cost, if
at all, or that the technology choices we make will prove to be cost effective
and correct.
WE MAY NOT BE ABLE TO CONNECT OUR NETWORK TO THE INCUMBENT CARRIER'S NETWORK OR
TO THE INTERNET ON FAVORABLE TERMS
We require interconnection agreements with the dominant local telephone
company to connect calls between our customers and non-customers. Congress and
our industry refer to this dominant local carrier as the incumbent local
exchange carrier, or the incumbent carrier. We cannot assure you that we will be
able to negotiate or renegotiate interconnection agreements in all of our
markets on favorable terms.
To become an Internet service provider, or ISP, we will require peering
arrangements with other ISPs, particularly the large, national ISPs. While we
anticipate that we will enter into the agreements necessary to become an ISP,
the terms and conditions of these so-called peering agreements are becoming more
restrictive as Internet service becomes increasingly commercialized, and we
cannot be sure that our peering arrangements will be on favorable terms.
THE REQUIREMENT THAT WE OBTAIN PERMITS AND RIGHTS-OF-WAY INCREASES OUR COST OF
DOING BUSINESS
In order for us to acquire and develop our fiber networks, we must obtain
local franchises and other permits, as well as rights-of-way and fiber capacity
from entities such as incumbent carriers and other utilities, railroads, long
distance companies, state highway authorities, local governments and transit
authorities. You should be aware that the process of obtaining these permits and
rights-of-way increases our cost of doing business.
We cannot assure you that we will be able to maintain our existing
franchises, permits and rights-of-way that we need to implement our business.
Nor can we assure you that we will be able to obtain and maintain the other
franchises, permits and rights that we require. A
5
<PAGE>
sustained and material failure to obtain or maintain these rights could
materially adversely affect our business in the affected metropolitan area.
OUR DEPLOYMENT OF WIRELESS FIRST MILE CONNECTIONS COULD BE DELAYED BY A LACK OF
ACCEPTABLE EQUIPMENT AND BY INSTALLATION RISKS
The FCC licensed our broadband wireless spectrum in what it calls the Local
Multipoint Distribution Services, or LMDS. LMDS is a newly-authorized service,
and equipment vendors are only beginning to offer radios, transceivers and
related equipment designed to work at its frequencies. We are testing several
vendors' equipment, but can't be certain that any equipment meeting our
standards will be available in time to meet our development schedule.
LMDS first mile connections require us to obtain access to rooftops from
building owners and to satisfy local construction and zoning rules for antennas
and transmitters. The need to obtain these authorizations could be an additional
source of delay.
WE CANNOT ACCURATELY PREDICT THE TOTAL COST OF OUR WIRELESS FIRST MILE
DEPLOYMENT
Since we have not negotiated final contracts to purchase any LMDS equipment,
we don't know precisely how much the equipment we will need will cost.
Installation costs will vary greatly, depending on the particular
characteristics of the locations to be served. After initial installation, we
expect to incur additional costs to reconfigure, redeploy and upgrade our
wireless first mile as technologies improve.
IN LOCAL MARKETS, WE COMPETE AGAINST THE INCUMBENT CARRIER, WHO HAS A VESTED
INTEREST IN MAKING IT DIFFICULT FOR US TO CONNECT CUSTOMERS TO OUR NETWORK
In each of the local markets served by our networks, we compete principally
with the incumbent carrier in that market.
The incumbent carriers are already established providers of local telephone
services to all or virtually all telephone subscribers within their respective
service areas. The incumbent carriers have begun to provide data services and
are seeking to provide service using DSL technology. Their physical connections
from their premises to those of their customers are expensive and difficult to
duplicate. In addition, they have long-standing relationships with regulatory
authorities at the federal and state levels.
It is expensive and difficult for us to switch a new customer to our network
because:
- a potential customer faces switching costs if it decides to become our
customer, and
- we require cooperation from the incumbent carrier.
We cannot assure you that we will be able to overcome these advantages and
compete successfully with the incumbent carriers.
WE FACE COMPETITION IN LOCAL MARKETS FROM OTHER CARRIERS, PUTTING DOWNWARD
PRESSURE ON PRICES
We also face competition from recent and potential market entrants,
including long distance carriers seeking to enter, reenter or expand entry into
the local exchange marketplace such as AT&T, MCI WorldCom and Sprint. This
places downward pressure on prices for local telephone service and for data
services and makes it more difficult for us to
6
<PAGE>
achieve positive operating cash flow. In addition, we expect competition from
other companies, such as cable television companies, electric utilities,
microwave carriers, wireless telephone system operators and private networks
built by large end-users. We cannot assure you that we will be able to compete
effectively with these industry participants.
WE FACE COMPETITION IN LONG DISTANCE MARKETS, PUTTING DOWNWARD PRESSURE ON
PRICES
We also face intense competition from long distance carriers in the
provision of long distance services, which places downward pressure on prices
for long distance service, including both voice and data services, and makes it
difficult for us to achieve positive operating cash flow. 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. We also anticipate that the incumbent carriers will be competing in
the long distance market in the near future. We cannot assure you that we will
be able to effectively compete with any of these industry participants.
WE ALSO FACE COMPETITION IN CREATING A NATIONAL BROADBAND NETWORK
Several of our competitors, such as Qwest, Level 3, IXC and Williams, have
announced an intention to create end-to-end broadband networks that would
compete directly with the network we are building. In addition, the major
long-distance and incumbent local carriers have the ability to do so as well. We
cannot assure you that we will be able to successfully compete with these
service providers.
OUR COMPETITION MAY HAVE SUPERIOR RESOURCES, PLACING US AT A COST AND PRICE
DISADVANTAGE
Many of our current and potential competitors have financial, personnel and
other resources, including brand name recognition, substantially greater than
those of NEXTLINK. As a result, some of our competitors can raise capital at a
lower cost than we can. Also, our competitors' greater name recognition may
require us to price our services at lower levels in order to win business.
Finally, our competitors' cost advantages give them the ability to reduce their
prices for an extended period of time if they so choose.
OUR COMPANY AND INDUSTRY ARE HIGHLY REGULATED, IMPOSING SUBSTANTIAL COMPLIANCE
COSTS AND RESTRICTING OUR ABILITY TO COMPETE IN OUR TARGET MARKETS
We are subject to varying degrees of federal, state and local regulation.
This regulation imposes substantial compliance costs on us. It also restricts
our ability to compete. For example, in each state in which we desire to offer
our services, we are required to obtain authorization from the appropriate state
commission. We cannot assure you that we will receive authorization for markets
to be launched in the future.
The NEXTBAND LMDS licenses, described in more detail in "Management's
Discussion and Analysis of Financial Condition and Results of Operations," are
subject to a petition for reconsideration filed by another auction participant.
The petition asks the FCC to revoke and reauction NEXTBAND's licenses. Because
the matter remains pending, we cannot assure you that the FCC will not grant the
petitions and relief sought.
7
<PAGE>
THE TECHNOLOGIES THAT WE USE MAY BECOME OBSOLETE, WHICH WOULD LIMIT OUR ABILITY
TO COMPETE EFFECTIVELY
The telecommunications industry is subject to rapid and significant changes
in technology. If we do not replace or upgrade technology and equipment that
becomes obsolete, we will be unable to compete effectively because we will not
be able to meet the expectations of our customers.
The following technologies and equipment that we use or will use are subject
to obsolescence: wireline and wireless transmission technologies, circuit, and
packet switching technologies and data transmission technologies, including the
Nortel DMS 500 switches, DSL, ATM and IP technologies. In addition, we cannot
assure you that the technologies that we choose to invest in will lead to
successful implementation of our business plan.
WE MAY BE REQUIRED TO PAY PATENT LICENSING FEES, WHICH WILL DIVERT FUNDS WHICH
COULD BE USED FOR OTHER PURPOSES
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,
other enhanced, or data services. 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.
IF WE LOSE KEY PERSONNEL AND QUALIFIED TECHNICAL STAFF, OUR ABILITY TO MANAGE
THE DAY-TO-DAY ASPECTS OF OUR COMPLEX NETWORK WILL BE WEAKENED
We believe that a critical component for our success will be the attraction
and retention of qualified professional and technical personnel. If we lose key
personnel and qualified technical staff, or are unable to recruit qualified
personnel, our ability to manage the day-to-day aspects of our complex network
will be weakened. You should be aware that we face significant competition in
the attraction and retention of personnel who possess the skill sets that we
seek.
In addition, we must also develop and retain a large and sophisticated sales
force. If we fail to do so, there will be an adverse effect on our ability to
generate revenue and, consequently, our operating cash flow.
CRAIG O. MCCAW, WHO WILL CONTROL APPROXIMATELY 57% OF NEXTLINK'S VOTING POWER
AFTER THE STOCK OFFERING, MAY HAVE INTERESTS WHICH ARE ADVERSE TO YOUR
INTERESTS
Craig O. McCaw, primarily through his majority ownership and control of
Eagle River Investments, LLC, will control approximately 57% of NEXTLINK's total
voting power after giving effect to the additional shares that are expected to
be issued in the stock offering. Because Mr. McCaw has the ability to control
the direction and future operations of NEXTLINK and has interests in other
companies that may compete with NEXTLINK, he may make decisions which are
adverse to your interests.
In addition to his investment in NEXTLINK through Eagle River, Mr. McCaw has
significant investments in other communications companies, including Nextel
Communications, Teledesic Corporation and INTERNEXT, some of which could compete
with us or act as one of our suppliers of certain telecommunications services.
You should be aware that we do not
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<PAGE>
have a noncompetition agreement with either Mr. McCaw or Eagle River. Mr. McCaw
is not bound by any contracts with NEXTLINK restricting his future sales of our
common stock.
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN THE NET TANGIBLE BOOK
VALUE OF THE SHARES OF CLASS A COMMON STOCK FROM THE PUBLIC OFFERING PRICE
You will experience an immediate and substantial dilution of $64.25 per
share in the net tangible book value per share of your Class A common stock,
assuming a purchase price per share of $73.25.
WE DO NOT PLAN ON PAYING ANY DIVIDENDS ON OUR COMMON STOCK
We have not declared or paid any dividends on our common stock and we do not
plan on paying any dividends in the foreseeable future. The indentures governing
our outstanding notes restrict our ability to pay any dividends on our common
stock while any of the notes are outstanding. As a result, the potential return
on an investment in our common stock will depend solely on its stock market
performance for the foreseeable future.
WE MAY FACE ADDITIONAL COSTS AND OTHER ADVERSE EFFECTS DUE TO YEAR 2000 ISSUES
To ensure that our computer systems and applications will function properly
beyond 1999, we have implemented a year 2000 program. As part of this program,
we conducted an inventory of network equipment and enterprise systems that
execute primary business processes, such as accounting, service assurance,
service delivery, customer service and billing. We cannot be sure that mission
critical equipment has not been overlooked.
Our determinations whether any systems or applications require modification
or replacement are based in part on statements made to us by vendors used by us
as to the year 2000 compliance of the systems and applications used by us. We
will not be able to independently confirm the accuracy or completeness of these
vendor representations.
Telecommunications and data traffic between our customers who are directly
connected to one of our networks and parties who are not customers of ours are
routed over networks that we do not control. In addition, many of our customers
are connected to one of our networks through facilities of the incumbent
carrier. Consequently, our customers may not be able to complete calls or data
transmissions if the computer, telecommunications and other systems of outside
entities, including local and interexchange carriers and Internet service
providers that interchange traffic, are not year 2000 compliant. A failure by
some or all of these entities to make their systems year 2000 compliant could
create substantial disruptions, which in turn could have a material adverse
effect on our operations.
For further discussion on our year 2000 program, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Impact
of Year 2000" in our Annual Report on Form 10-K for 1998.
THIS PROSPECTUS INCLUDES FORWARD-LOOKING STATEMENTS, BUT ACTUAL RESULTS MAY
DIFFER SIGNIFICANTLY
Some 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. We wish to caution you
that these forward-looking statements are only
9
<PAGE>
predictions, and actual events or results may differ materially as a result of
risks that we face, including those set forth herein under "Risk Factors." These
forward-looking statements can be identified by the use of forward-looking
terminology such as "believes", "expects", "plans", "may", "will", "would,"
"could," "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, but are not limited to:
- the number of markets we expect to serve, the expected number of
addressable business lines in markets in which we currently provide
service and the markets in which we expect to provide service;
- our expectations regarding our ability to attract and retain customers;
- our beliefs regarding certain competitive advantages, including that of
our national end-to-end network, the introduction of IP and ATM
technologics, our management structure and our 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, data networking capabilities
such as IP and ATM facilities and high speed technologies such as DSL;
- our plans to implement wireless first mile connections;
- our ability to maintain technological flexibility;
- our expectation regarding the development of a national network and the
implementation of a national network end-to-end strategy;
- our anticipated capital expenditures, funding thereof and levels of
indebtedness and our expectations regarding additional indebtedness; and
- statements with respect to our Year 2000 project.
10
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the 4,982,050 shares of
common stock we are issuing in this offering will be approximately $343.8
million, at an assumed public offering price of $73.25 per share, after
deducting the estimated underwriting discounts and offering expenses. If the
underwriters exercise their over-allotment option in full, we estimate that the
net proceeds for the additional shares we would issue in connection with the
over-allotment option would be approximately $67.8 million. We will not receive
any proceeds from the sale of the 3,617,950 shares of Class A common stock being
offered by the selling stockholders in this offering.
We plan to use the proceeds, together with our cash on hand, to expand our
existing networks and services, to provide new communications and data services
and implement new technologies, to provide electronics and equipment for our
national network, develop and acquire new networks and services, to potentially
acquire other communications and data services companies and to fund operating
losses and working capital. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
DIVIDEND POLICY
We do not anticipate paying any cash dividends on our common stock in the
foreseeable future. The indentures governing the terms of our outstanding
indebtedness restrict us from paying dividends while the indebtedness is
outstanding.
11
<PAGE>
CAPITALIZATION
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
The following table sets forth as of March 31, 1999, the actual
capitalization of NEXTLINK and the capitalization of NEXTLINK as adjusted to
reflect NEXTLINK's sale of common stock in this offering, and further adjusted
to reflect the acquisitions of WNP and the 50% interest in NEXTBAND that we do
not already own. This table should be read in conjunction with the Selected
Historical Consolidated Financial and Operating Data included elsewhere in this
prospectus, and the audited Consolidated Financial Statements and notes thereto
included in our 1998 Form 10-K, which is incorporated herein by reference.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
--------------------------------------------------
<S> <C> <C> <C>
AS ADJUSTED
FOR
THE STOCK
AS ADJUSTED OFFERING AND
FOR THE WNP AND
THE STOCK NEXTBAND
ACTUAL OFFERING TRANSACTIONS(3)
------------------ -------------- --------------
Cash, cash equivalents and marketable securities.............. $ 1,244,406 $ 1,588,218 $ 1,102,726
Pledged securities(1)......................................... 21,821 21,821 21,821
------------------ -------------- --------------
Total....................................................... $ 1,266,227 $ 1,610,039 $ 1,124,547
------------------ -------------- --------------
------------------ -------------- --------------
Current portion of long-term obligations...................... $ 2,760 $ 2,760 $ 2,760
Other long-term liabilities................................... 16,304 16,304 16,304
12 1/2% Senior Notes due 2006................................. 350,000 350,000 350,000
9 5/8% Senior Notes due 2007.................................. 400,000 400,000 400,000
9% Senior Notes due 2008...................................... 334,396 334,396 334,396
9.45% Senior Discount Notes due 2008.......................... 438,636 438,636 438,636
10 3/4% Senior Notes due 2008................................. 500,000 500,000 500,000
------------------ -------------- --------------
Total debt.................................................. 2,042,096 2,042,096 2,042,096
Redeemable Preferred Stock, par value $0.01 per share,
25,000,000 shares authorized, net of issuance costs:
14% Preferred Shares, 7,508,588 shares issued and
outstanding............................................. 375,177 375,177 375,177
6 1/2% Cumulative Convertible Preferred Stock, 4,000,000
shares issued and outstanding........................... 194,341 194,341 194,341
Shareholders' equity (deficit):
Common Stock, par value $.02 per share, stated at amounts
paid in; Class A, 110,334,000 shares authorized,
25,712,771 issued and outstanding (34,312,771 as adjusted
to reflect the sale of common stock in this offering, and
36,410,652 as further adjusted to reflect the acquisition
of WNP); Class B, 44,133,600 shares authorized, 29,184,372
shares issued and outstanding(2).......................... 360,213 704,025 1,054,463
Deferred compensation....................................... (10,399) (10,399) (10,399)
Accumulated other comprehensive income...................... 119,844 119,844 119,844
Accumulated deficit......................................... (708,504) (708,504) (708,504)
------------------ -------------- --------------
Total shareholders' equity (deficit)........................ (238,846) 104,966 455,404
------------------ -------------- --------------
Total capitalization........................................ $ 2,372,768 $ 2,716,580 $ 3,067,018
------------------ -------------- --------------
------------------ -------------- --------------
</TABLE>
- --------------------------
(1) Pledged U.S. Treasury securities, which represent funds sufficient to
provide for payment in full of interest through April 15, 1999 on NEXTLINK's
12 1/2% Senior Notes due April 15, 2006.
(2) Issued and outstanding does not include 11,582,405 and 654,858 shares of
Class A Common Stock and Class B Common Stock, respectively, issuable upon
exercise of outstanding options as of March 31, 1999.
(3) The acquisition of WNP closed on April 26, 1999. The acquisition of the 50%
interest in NEXTBAND that we do not already own remains pending, and is
subject to certain regulatory approvals.
12
<PAGE>
DILUTION
The net tangible book value of NEXTLINK as of March 31, 1999 was
approximately $227.9 million or $4.15 per share of common stock. Net tangible
book value per share represents the amount of total tangible assets less total
liabilities, divided by the shares of common stock outstanding as of March 31,
1999. The pro forma net tangible book value of NEXTLINK as of March 31, 1999,
would have been $571.7 million, or $9.00 per share, after giving effect to:
- the issuance and sale of the 8,600,000 shares of common stock offered
hereby at an assumed initial public offering price of $73.25 per share
after deducting estimated underwriting discounts and commissions and
estimated offering expenses.
This represents an immediate increase in pro forma net tangible book value
per share of $4.81 to existing stockholders and an immediate dilution per share
of $61.04 to new investors. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price................................ $73.25
Net tangible book value before this offering............... $4.15
Increase in pro forma net tangible book value attributable
to net proceeds from the stock offering.................. 4.85
---------
Pro forma net tangible book value per share after offering... 9.00
---------
Dilution to new investors.................................... $64.25
---------
---------
</TABLE>
The following table summarizes, on a pro forma basis, as of March 31, 1999,
the number of shares of Class A common stock purchased in this offering, the
aggregate cash consideration paid and the average price per share paid by
existing stockholders for common stock and by new investors purchasing shares of
Class A common stock in this offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------- --------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders........................ 54,897,143 86% $ 330,298,000 34% $ 6.02
New Investors................................ 8,600,000 14% 629,950,000 66% $ 73.25
------------ --- -------------- ---
Total...................................... 63,497,143 100% $ 960,248,000 100% $ 15.12
------------ --- -------------- ---
------------ --- -------------- ---
</TABLE>
The foregoing discussion and tables assume no exercise of any stock options.
As of March 31, 1999, there were options outstanding to purchase a total of
11,582,405 shares of Class A common stock and 654,858 shares of Class B common
stock with a combined weighted average exercise price of $26.20 per share. To
the extent that any of these options are exercised, there may be further
dilution to new investors.
13
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The summary historical consolidated financial data below as of March 31,
1999 and for the three-month periods ended March 31, 1998 and 1999 have been
derived from our unaudited interim consolidated financial statements. In
management's opinion, the unaudited interim consolidated financial statements
have been prepared on the same basis as the audited financial statements and
include all adjustments, which consist only of normal recurring adjustments,
necessary for a fair presentation of our financial position and results of
operations. Operating results for the three-month period ended March 31, 1999
are not necessarily indicative of the results that may be expected for the full
year ended December 31, 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEAR ENDED DECEMBER 31, 31,
--------------------------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- ----------- ----------- ----------- -----------
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenue................................. $ -- $ 7,552 $ 25,686 $ 57,579 $ 139,667 $ 26,545 $ 48,586
Costs and expenses:
Operating............................. 106 6,618 25,094 54,031 123,675 24,550 43,699
Selling, general and administrative... 232 9,563 31,353 75,732 156,929 31,957 52,334
Deferred compensation................. -- 375 9,914 3,247 4,993 624 1,059
Depreciation and amortization......... 14 3,458 10,340 27,190 60,254 10,183 22,853
--------- --------- --------- ----------- ----------- ----------- -----------
Loss from operations.................... (352) (12,462) (51,015) (102,621) (206,184) (40,769) (71,359)
Interest expense, net................... 3 (269) (20,086) (26,383) (72,156) (11,543) (30,927)
--------- --------- --------- ----------- ----------- ----------- -----------
Net loss................................ $ (349) $ (12,731) $ (71,101) $ (129,004) $ (278,340) $ (52,312) $ (102,286)
--------- --------- --------- ----------- ----------- ----------- -----------
--------- --------- --------- ----------- ----------- ----------- -----------
Net loss applicable to common shares.... $ (349) $ (12,731) $ (71,101) $ (168,324) $ (337,113) $ (63,863) $ (118,886)
--------- --------- --------- ----------- ----------- ----------- -----------
--------- --------- --------- ----------- ----------- ----------- -----------
Net loss per share...................... $ (1.81) $ (3.91) $ (6.26) $ (1.19) $ (2.17)
--------- ----------- ----------- ----------- -----------
--------- ----------- ----------- ----------- -----------
OTHER DATA:
Ratio of earnings to fixed charges(1)... -- -- -- -- -- -- --
EBITDA(2)............................... $ (338) $ (8,629) $ (30,761) $ (72,184) $ (140,937) $ (29,962) $ (47,447)
Capital expenditures, including
acquisitions of businesses (net of
cash acquired) and investments in
affiliates (3)........................ $ 600 $ 49,230 $ 85,872 $ 232,069 $ 416,445 $ 44,501 $ 112,051
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
-------------------------------------------
AS ADJUSTED
FOR THE STOCK
OFFERING AND
AS OF DECEMBER 31, AS ADJUSTED THE WNP AND
--------------------------------------------------------- FOR THE STOCK NEXTBAND
1994 1995 1996 1997 1998 ACTUAL OFFERING TRANSACTIONS
--------- --------- --------- ----------- ----------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Cash, cash equivalents
and marketable
securities........... $ 25 $ 1,350 $ 124,520 $ 742,357 $ 1,478,062 $ 1,244,406 $ 1,588,218 $ 1,102,726
Pledged
securities(4)........ -- -- 101,438 62,610 21,500 21,821 21,821 21,821
Working capital........ 14 (6,232) 137,227 744,510 1,408,501 1,195,396 1,539,208 1,053,716
Property and equipment,
net.................. 134 29,664 97,784 253,653 594,408 701,546 701,546 701,546
Total assets........... 690 53,461 390,683 1,219,978 2,483,106 2,506,678 2,850,490 3,200,928
Long-term debt......... -- 1,590 356,262 750,000 2,013,192 2,023,032 2,023,032 2,023,032
Redeemable preferred
stock, net of
issuance costs....... -- -- -- 313,319 556,168 569,518 569,518 569,518
Equity units subject to
redemption........... -- -- 4,950 -- -- -- -- --
Class B common stock
subject to
redemption........... -- -- -- 4,950 -- -- -- --
Total stockholders'
equity (deficit)..... 672 36,719 (18,654) 71,285 (246,463) (238,846) 104,966 455,404
</TABLE>
- --------------------------
(1) For the years ended December 31, 1994, 1995, 1996, 1997 and 1998, and for
the three-month periods ended March 31, 1998 and 1999, earnings were
insufficient to cover fixed charges during the periods presented by the net
loss amounts of $349, $12,731, $71,101, $129,004, $278,340, $52,312 and
$102,286, respectively.
(2) EBITDA consists of net loss before net interest expense, 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 our anticipated ability 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 DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- ---------
Cash expended........................ $ 600 $ 35,417 $ 72,042 $ 210,545 $ 416,445 $ 44,501 $ 112,051
Debt issued and assumed.............. -- 6,554 8,228 5,000 -- -- --
Equity issued........................ -- 7,259 5,602 16,524 -- -- --
--------- --------- --------- --------- --------- --------- ---------
Total................................ $ 600 49,230 $ 85,872 $ 232,069 $ 416,445 $ 44,501 $ 112,051
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
(4) Pledged U.S. Treasury securities, which represent funds sufficient to
provide for payment in full of interest through April 15, 1999 on our
12 1/2% Senior Notes.
15
<PAGE>
The operating data contained in the table below includes the statistics of
our Las Vegas network, which we manage and in which we have a 40% membership
interest. Terms used in this table are defined as follows:
A "route mile" measures the expansiveness of our network, and is equal to
the number of physical miles along which we have installed or leased fiber optic
cable.
A "fiber strand" is an advanced fiber optic line which can carry a large
volume of data transmissions and voice communications. The number of "fiber
miles" that we have installed is equal to our estimate of the number of fiber
strands that we have installed along our network, multiplied by the number of
route miles covered by our network. It is a measure of our carrying capacity of
large volumes of data transmissions and voice communications.
"On-net buildings connected" means buildings physically connected to our
network, excluding those buildings which are connected to our network by
facilities leased from the incumbent telephone company. "Off-net buildings
connected" are those buildings connected to our network by facilities leased
from the incumbent or other carriers.
"Switches" are electronic devices that route data transmissions and voice
communications to their final destination. All switch counts include two long
distance switches acquired in 1996 as well as the switch installed in NEXTLAB,
our telecommunications and data testing facility.
An "access line" is a telephone connection between a customer purchasing
local telephone services and our facilities. This definition of access lines is
adjusted to reflect the fact that some high performance connections, known as
primary rate interface, can carry comparatively larger volumes of data and voice
communications. Lines over which primary rate interface service is provided are
counted as 23 access lines. The number of "access lines installed" represents
the number of access lines for which NEXTLINK is billing services. This number
includes access lines that are provisioned through the resale of services. We
serviced 2,894 resold access lines as of March 31, 1999.
<TABLE>
<CAPTION>
AS OF AS OF AS OF AS OF AS OF
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1998 1998 1998 1998 1999
---------- ---------- ------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Route miles.................................... 2,036 2,099 2,150 2,477 2,897
Fiber miles.................................... 141,788 152,225 158,987 195,531 223,463
On-net buildings connected..................... 571 658 736 801 854
Off-net buildings connected.................... 5,947 8,448 9,688 13,443 13,950
Switches installed............................. 14 17 18 21 22
Access lines installed......................... 72,834 102,887 134,107 174,182 224,713
Employees...................................... 1,499 1,756 2,065 2,299 2,539
</TABLE>
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1998
For the three months ended March 31, 1999, total revenue was $48.6 million,
an 83% increase over the $26.5 million in revenue reported in the first quarter
of 1998.
NEXTLINK's core services revenue, which consists of bundled local and long
distance and dedicated services, rose 27% over the same period in 1998 to $34.9
million in the first quarter of 1999.
The increase in core services revenue was driven by the increasing number of
access lines installed during the first quarter. NEXTLINK installed 50,531
access lines during the first quarter of 1999, compared to 22,703 access lines
added during the first quarter of 1998. Total access lines installed was 224,713
as of March 31, 1999.
YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997
Revenue increased 143% to $139.7 million in 1998 from $57.6 million in 1997.
The increase was driven by 277% growth in revenues from bundled local and long
distance services and dedicated services. The acquisitions of Start
Technologies, a shared tenant services provider, and Chadwick
Telecommunications, a switch-based long distance service reseller, in the fourth
quarter of 1997, also contributed to this increase. Revenue reported consisted
of the following components (in thousands):
<TABLE>
<CAPTION>
1998 1997
---------- ---------
<S> <C> <C>
Bundled local and long distance services and dedicated services........ $ 76,654 $ 20,342
Shared tenant services................................................. 12,781 2,018
Long distance telephone services....................................... 26,937 16,478
Enhanced services...................................................... 23,295 18,741
---------- ---------
$ 139,667 $ 57,579
---------- ---------
---------- ---------
</TABLE>
Enhanced services revenue consists primarily of revenue generated from our
interactive voice response services.
We began offering switched local and long distance services in our first
seven markets in July 1996, in 18 markets during 1997 and 12 additional markets
during 1998. In addition, since January 1995 we have offered private, leased
line, or dedicated services.
Our quarterly installation rate of customer access lines increased from
19,187 in the fourth quarter of 1997 to 40,075 during the fourth quarter of
1998. At December 31, 1998, we had 174,182 access lines in service, compared to
50,131 as of December 31, 1997.
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 129% in 1998 to
17
<PAGE>
$123.7 million, an increase of $69.6 million over the same period in 1997. These
increases primarily resulted from:
- increased network costs related to provisioning higher volumes of local,
long distance and enhanced communications services;
- an increase in the number of our employees; and
- an increase in other related costs primarily to expand our switched local
and long distance service businesses in our 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 1997.
Selling, general and administrative expenses include salaries and related
personnel costs, facilities expenses, sales and marketing, information systems
costs, consulting and legal fees and equity in losses of affiliates. Selling,
general and administrative expenses increased 107% for the year ended December
31, 1998 as compared to the corresponding period in 1997. The increase was
primarily due to an increase in the number of our employees, as well as other
costs associated with the expansion of our switched local and long distance
service businesses in our existing and planned markets.
We recorded deferred compensation expense in connection with options granted
under our Equity Option Plan until April 1997, and our 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 we
accounted for them on a basis similar to that used for stock appreciation
rights. All options outstanding under the Equity Option Plan were regranted
under the Stock Option Plan with terms and conditions substantially the same as
under the Equity Option Plan. As a result, we continue to record deferred
compensation expense for the compensatory stock options issued under both plans
over their vesting periods, based on the excess of the fair value at the date of
grant over their exercise prices.
Depreciation expense increased primarily due to placement in service of
additional telecommunications network assets, including switches, fiber optic
cable, network electronics and related equipment. We expect depreciation expense
to continue to increase as we expand our networks and install additional
switches 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 165% in 1998 over the prior year due to an
increase in our average outstanding indebtedness over this period. Interest
expense will increase in future periods as a result of our issuing $500.0
million in aggregate principal amount of 10 3/4% Senior Notes in November 1998.
Statement of Financial Accounting Standards No. 34 requires us to capitalize a
portion of our interest costs as part of the construction cost of our
communications networks. Capitalized interest during 1998 totaled $4.3 million.
Our interest income resulted from investment of excess cash and certain
securities pledged as collateral to secure repayment of our 12 1/2% Senior
Notes. The increase in interest income in 1998 over 1997 corresponded to the
increase in our average outstanding cash balances.
18
<PAGE>
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996
Revenue increased 124% to $57.6 million in 1997 from $25.7 million in the
same period in 1996. The increase was primarily due to 45% growth in our local
and long distance services (both switched and resale), dedicated services and
enhanced communications services. The increase was also attributable to the fact
that we recorded a full year's revenue from ITC, a switch-based long distance
reseller we acquired in December 1996. To a lesser extent, our acquisitions of
Start and Chadwick in the fourth quarter of 1997 also contributed to the
increase in revenue. Revenues reported in 1997 included $38.9 million derived
from local and long distance, competitive access, dedicated line services and
shared tenant services and $18.7 million derived from enhanced communications
services. Our interactive voice response subsidiary contributed 27% and 52% of
our revenues during 1997 and 1996, respectively.
Our quarterly rate for installing customer access lines increased from 1,604
in the fourth quarter of 1996 to 19,187 during the fourth quarter of 1997. As of
December 31, 1997, we had 50,131 access lines in service, compared to 8,511 as
of December 31, 1996. Access lines in service includes lines provided through
resale of Centrex services.
Operating expenses increased 115% in 1997 to $54.0 million, an increase of
$28.9 million over the same period in 1996. This increase resulted primarily
from:
- an increase in network costs related to the provision of increased volumes
of local, long distance and enhanced communications services;
- an increase in the number of our employees; and
- an increase in other related costs primarily to expand our switched local
and long distance service businesses in our existing and planned markets.
Additionally, the effects of the ITC acquisition in December 1996 and the Start
and Chadwick acquisitions in the fourth quarter of 1997 further contributed to
the increase in 1997 operating expenses over those of the prior year.
Selling, general and administrative expenses increased 142% for the year
ended December 31, 1997 as compared to the corresponding period in 1996. The
increase was primarily due to:
- an increase in the number of our employees;
- other costs associated with the expansion of our switched local and long
distance service businesses in our existing and planned markets; and
- the ITC acquisition.
We recorded deferred compensation expense in connection with options granted
under our Equity Option Plan until April 1997, and our Stock Option Plan, which
replaced the Equity Option Plan, subsequent to April 1997. All options
outstanding under the Equity Option Plan were regranted under the Stock Option
Plan with terms and conditions substantially the same as under the Equity Option
Plan. The stock options granted under the Equity Option Plan were compensatory
and were accounted for on a basis similar to that used for stock appreciation
rights. As a result, we continued to record deferred compensation expense for
the compensatory stock options issued under both plans over their vesting
periods, based on the excess of the fair value at the date of grant over their
exercise price.
19
<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 ITC acquisition in December 1996,
as well as our acquisitions of Start, Chadwick and Linkatel Pacific in 1997.
Linkatel Pacific owned and operated a fiber optic network that provided
communication services to customers in portions of Orange and Los Angeles
counties.
Interest expense increased 76% in 1997 over the prior year due to an
increase in our average outstanding indebtedness over the respective periods,
primarily relating to the 12 1/2% and 9 5/8% senior notes we issued in April
1996 and October 1997, respectively. Statement of Financial Accounting Standards
No. 34 requires us to capitalize a portion of our interest costs as part of the
construction cost of our communications networks. Capitalized interest during
1997 totaled $1.8 million. Our interest income resulted from investment of
excess cash as well as certain securities that have been pledged as collateral
to secure repayment of our 12 1/2% Senior Notes. The increase in interest income
in 1997 over 1996 corresponded to the increase in our average outstanding cash
balances.
LIQUIDITY AND CAPITAL RESOURCES
Our business is capital intensive and, as such, has required and will
continue to require substantial capital investment. We build high capacity
networks with broad market coverage, a strategy that initially increases our
level of capital expenditures and operating losses and requires us to make a
substantial portion of our capital investments before we realize any revenue
from them. These capital expenditures, together with the associated early
operating expenses, will continue to result in negative cash flow unless and
until we are able to establish an adequate customer base. We believe, however,
that over the long term this strategy will enhance our financial performance by
increasing the traffic flow over our networks.
During 1998, we used $174.5 million in cash for operating activities,
compared to $97.3 million used in 1997 and $40.6 million used in 1996. The
increase was primarily due to a substantial increase in our activities
associated with the continued development and expansion of switched local and
long distance service operations. In addition, during 1998, we invested an
additional $508.4 million in property and equipment, acquisitions of
telecommunications assets and equity investments in telecommunications
businesses. During 1997 and 1996, we invested $210.5 million and $78.0 million,
respectively, in property and equipment, acquisitions of telecommunications
assets and businesses and equity investments in telecommunications businesses.
Our current 1999 and 2000 plans call for approximately $2,000 million in
total capital expenditures (including the commitments of the INTERNEXT joint
venture described below), of which $112.1 million was spent in the first quarter
of 1999. Our actual capital spending may be higher or lower than these amounts.
We expect to make substantial capital expenditures relating to our existing and
planned network development and operations and for the introduction of new
technologies. These expenditures include:
- the purchase and installation of switches, routers, servers and other
data-related equipment and related electronics in existing networks and in
networks to be constructed or acquired in new or adjacent markets;
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- the purchase and installation of fiber optic cable and electronics to
expand existing networks and develop new networks, including the
connection of new buildings;
- the development of our comprehensive information technology platform;
- the purchase and installation of equipment associated with the deployment
of LMDS using our LMDS spectrum;
- funding of the INTERNEXT venture described below, and related expenses we
expect to incur in building our national network;
- the purchase and installation of equipment associated with deployment of
DSL; and
- the funding of operating losses and working capital.
Our strategic plan calls also for expansion into additional market areas.
This 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 and working capital during the start-up
phase of each market.
As of March 31, 1999, we had unrestricted cash and investments of $1,244.4
million, and $1,588.2 million on a pro forma basis after giving effect to the
stock offering.
In April 1999, we acquired WNP Communications, Inc. for $698.2 million. Of
this amount, $157.7 million was paid in cash to the FCC for license fees,
including interest. The remainder was paid to stockholders of WNP, and consisted
of $190.1 million cash and 5,715,831 shares of Class A common stock. In this
transaction, we acquired 39 A block LMDS wireless licenses covering an area
where approximately 98 million people live or work and one B block LMDS wireless
license covering an area where approximately 16 million people live or work. We
plan to use the fixed wireless licenses acquired in the WNP transaction to
extend the reach of our fiber networks and to connect additional customers
directly to our fiber networks. Deploying the technologies associated with our
LMDS strategy will require additional capital expenditures.
In January 1998, we formed NEXTBAND, a joint venture that is owned 50% each
by us and Nextel. NEXTBAND owns LMDS licenses in 42 markets throughout the U.S.
On March 30, 1999, we entered into a definitive agreement to acquire Nextel's
50% interest in NEXTBAND for approximately $137.7 million, consisting of at
least $68.9 million in cash, with the remainder payable at our election in cash
or shares of Class A common stock. The purchase price was determined based on a
formula derived from the purchase price paid in the WNP merger. The minimum cash
consideration will increase by an amount equal to 25% of the proceeds NEXTLINK
receives in this offering up to the amount of the total purchase price.
In January 1999, we entered into a strategic agreement with Covad
Communications Group, Inc., a leading provider of high-speed digital
communications services using DSL technology. Pursuant to this agreement, we
will become a preferred provider to Covad for local transport and colocation
services for Covad's regional data centers. We also invested
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<PAGE>
$20.0 million in Covad under this agreement, and Covad will become a preferred
provider to us of DSL services, where we elect not to provide such services
ourselves.
In July 1998, we formed INTERNEXT L.L.C., which is beneficially owned 50%
each by us and Eagle River Investments L.L.C., and is managed by us. INTERNEXT
entered into an agreement with Level 3 Communications, Inc. 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. NEXTLINK has guaranteed 50% of the financial
obligations of INTERNEXT under this agreement and, together with Eagle River,
has also guaranteed the performance of certain other obligations of INTERNEXT.
In addition, our operating flexibility with respect to certain business
matters is, and will continue to be, limited by covenants associated with our
outstanding senior notes. Among other things, these covenants limit the ability
of us and our 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. A covenant in
the indenture for the 10 3/4% senior notes requires us to use the net proceeds
from the sale of those notes to fund not more than 80% of the cost of
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, and to fund similar
expenditures. We expect to fund the remainder of these costs with the proceeds
of equity offerings.
In addition, the terms of our 14% Senior Exchangeable Redeemable Preferred
Stock contain covenants that may limit our flexibility in incurring additional
indebtedness and issuing additional preferred shares. We were in compliance with
all covenants associated with our notes and the 14% preferred stock as of March
31, 1999.
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<PAGE>
BUSINESS
Since 1996, NEXTLINK has provided high-quality telecommunications services
to the rapidly growing business market. To serve our customers' broad and
expanding telecommunications needs, we have assembled a unique collection of
high-bandwidth, local and national network assets.
These assets include:
- 23 broadband local networks operating in 14 states, the number of which is
increasing as we continue to build additional networks;
- high-capacity fixed broadband spectrum covering 52 cities including 95% of
the population of the 30 largest U.S. cities; and
- exclusive interests in a national fiber optic network now being built that
will connect all of the largest cities that our current and planned local
networks serve.
We intend to integrate these assets into a seamless network that will
support the most advanced communications technologies available, and make us the
provider best positioned to deliver the broad variety of data and voice
applications our customers require.
BUSINESS STRATEGY
Our goal is to provide integrated, end-to-end solutions for all of our
customers' communications needs over our own network. We plan to deliver these
solutions primarily through equipment and networks we own and therefore continue
to be a facilities-based carrier. The key components of our strategy to achieve
this goal are to:
- BUILD BROADBAND LOCAL NETWORKS. We build high-bandwidth local networks
using fiber optic cable bundles, which are capable of carrying high
volumes of data, voice, video and Internet traffic as well as other high
bandwidth services. In our newer markets, we install up to 400 fiber
strands in each network, with built-in capacity for future growth. We plan
to have completed broadband local networks in most of the nation's 30
largest cities by the end of 2000.
- INCREASE CUSTOMER FIRST MILE CONNECTIONS. We generally build our networks
in the central business districts of our markets to permit direct
connections to a high percentage of the area's commercial buildings. For
buildings where direct fiber connections to our networks are not economic,
we will use our wireless spectrum to make broadband first mile connections
where appropriate.
- CREATE AN INTEGRATED, END-TO-END, FACILITIES-BASED NATIONAL NETWORK. We
will use our interest in a national fiber optic network now under
construction to offer end-to-end services over our own facilities, rather
than lines leased from others. This network will be able to operate at
very high speeds in order to meet our customers' current and future
broadband data needs.
- DEPLOY NEW TECHNOLOGY OPTIMIZED FOR IP. We are adding IP and ATM routers
and switches to our network to meet our customers' growing data needs. We
believe that future IP technologies will gradually replace ATM and enable
our network to carry all types of communications traffic: data, voice and
video.
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- INTRODUCE NEW INTERNET SERVICES. In addition to high-speed Internet
access, we plan to offer customers secure, robust web hosting services at
our central offices, and provide extensive back-office support for their
e-commerce operations.
- BUILD ON OUR CUSTOMER BASE, STAFF, AND SYSTEMS TO SUCCEED IN THE DATA
SERVICES MARKET. We will apply the strategies and skills we have developed
competing successfully in the local exchange market to the expanding data
services market. These include a focus on the business customer,
decentralized, local management, close attention to customer care and
effective, reliable back-office systems.
- ATTRACT AND RETAIN EXPERIENCED MANAGEMENT AT ALL KEY LEVELS. Under the
leadership of Craig McCaw, we have retained highly-qualified senior
management. Experienced technology industry executives will lead the
implementation of our data strategy. Seasoned industry entrepreneurs and
executives run our regional groups and operating subsidiaries.
OUR NETWORK
We have built, and are continuing to build, operational fiber optic networks
with robust capacity in urban centers across the country. Our IP-optimized
national network will connect these local networks to one another. Our fiber
optic and wireless first mile connections will complete our goal of becoming an
end-to-end, facilities-based provider of broadband communications services.
LOCAL FIBER OPTIC NETWORKS
The core of each of our local networks is a ring of fiber optic cable in the
city's central business district that connects to our central offices. These
facilities contain the switches and routers that direct data and voice traffic
to their destinations, and also have the space to house the additional equipment
necessary for future telecommunications services.
We are now operating 23 local networks in 38 cities. We serve larger cities,
such as 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.
Based on our recent successes in operating and expanding our existing
networks, as well as new opportunities in other markets, we are pursuing an
aggressive growth plan. We are currently building additional local networks, and
plan to have operational networks in most of the 30 largest U.S. cities by the
end of 2000. We launched telephone service in San Diego earlier this year, and
the next phase of our expansion plan includes the launch of service in
Washington, D.C. and Seattle in the second quarter of 1999, and in Newark,
Detroit, Boston, Phoenix and Houston by the end of 1999.
We build high capacity networks using a backbone density ranging between 72
and 432 strands of fiber optic cable. Each fiber strand has the capacity, or
bandwidth, to carry over 100,000 times the amount of traffic as a strand of
traditionally-configured copper wire. We believe that installing high-count
fiber strands will allow us to offer a higher volume of broadband and voice
services without incurring significant additional construction costs.
We design wide, expansive networks, rather than a simple core fiber optic
ring in a downtown metropolitan area. This design maximizes the number of
customers that can be
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<PAGE>
connected directly to our networks with fiber strands that we own. We believe
that controlling first mile connections is critical to being able to meet our
customers' complete communications requirements and by controlling the first
mile we enhance our ability to:
- ensure technological support for high bandwidth communications;
- manage and control the quality of services used by our customers;
- meet the varying bandwidth needs of our customers; and
- achieve better operating margins.
BROADBAND WIRELESS SPECTRUM
We intend to reduce our reliance on first mile connections leased from the
incumbent carrier by increasing the number of customers connected directly to
our networks. In some cases, we will construct a new fiber optic extension from
the customer's premises to our network. In other cases, we will deploy a
high-bandwidth wireless connection between an antenna on the roof of the
customer's premises and an antenna attached to our fiber rings. These wireless
connections offer high-quality broadband capacity and often cost less to
install. We expect to deploy wireless first mile extensions in 25 markets by the
end of 2000.
Through a series of auction bids and acquisition transactions, we have
become the largest holder of broadband fixed wireless spectrum in North America.
We hold licenses to 1,150 to 1,300 MHz of LMDS spectrum in 52 cities, covering
areas where 95 percent of the population the 30 largest U.S. cities live or
work. Our spectrum assets are very large in comparison to cellular and PCS
licenses (up to 30 MHz) and to other fixed wireless licenses (80-400 MHz ). Our
licenses also include 150 MHz of LMDS spectrum in 13 smaller cities. We believe
that, for many locations, broadband wireless connections from customer buildings
to our local fiber optic networks will offer a lower cost solution for providing
high-quality broadband services than fiber or copper extensions.
LMDS is a newly authorized fixed broadband service that the license holder
may use to provide high-speed data transfer, wireless local telephone service,
wireless transmission of telephone calls in bulk quantity, video broadcasting
and videoconferencing, in any combination. This spectrum is not suitable for
portable telephones, but can transmit voice, data or video signals from one
fixed antenna to many others. As the word "local" in the local multipoint
distribution service name implies, the radio links provided using LMDS
frequencies are of limited distance, typically of a few miles or less, due to
the degradation of these high-frequency signals over distances greater than a
few miles.
A wireless connection typically consists of paired antennas generally placed
at a distance of approximately 2.5 miles from one another with a direct,
unobstructed line of sight. The antennas are typically installed on rooftops,
towers or windows. Point-to-multipoint technology allows a single hub site
antenna to be used to form multiple paths with antennas located on numerous
customer buildings. As few as four hub site antennas can provide
telecommunications connections to buildings in all directions that have line of
sight visibility.
Wireless local loop technology typically utilizes millimeter wave
transmissions having narrow beam width, reducing the potential for channel
interference and allowing dense deployment and channel re-use. This means that,
like cellular technology, LMDS sites can be split into sectors in order to
increase the available capacity. The large amount of capacity in each channel
permits the simultaneous use of multiple voice and data applications. Properly
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<PAGE>
deployed, wireless local loop technology can substantially reduce the cost of
connecting customers to a network.
LMDS and other wireless broadband services require a direct line of sight
between two antennas comprising a link and are subject to distance and rain
attenuation. We expect that the average coverage radius of a base station will
be up to approximately 2.5 miles, depending on local conditions, and we expect
that our base stations will utilize power control to increase signal strength
and mitigate the effects of rain attenuation. In areas of heavy rainfall,
transmission links will be engineered for shorter distances and greater power to
maintain transmission quality. This reduction of path link distances to maintain
transmission quality requires more closely spaced transceivers and therefore
tends to increase the cost of service coverage.
Due to line of sight limitations, we currently plan to install our
transceivers and antennas on the rooftops of buildings. Line of sight and
distance limitations generally do not present problems in urban areas, provided
that suitable roof rights can be obtained, due to the existence of unobstructed
structures from which to transmit and the concentration of customers within a
limited area. Line of sight and distance limitations in non-urban areas can
arise due to lack of structures with sufficient height to clear local
obstructions. We may have to plan to construct intermediate links or use other
means to resolve line of sight and distance issues. These limitations, however,
may render point-to-multipoint links uneconomical in certain locations.
In order to obtain the necessary access to install our transceivers and
antennas and connect its intended customers, we must secure roof and other
building access rights, or rights to access other line of sight locations,
including access to conduits and wiring from the owners of each building or
other structure on which we propose to install our equipment, and may require
construction, zoning, franchises or other governmental permits.
LMDS equipment is not in general commercial service at this time, but we are
testing the offerings of several vendors, and expect to begin to deploy LMDS in
1999.
DSL TECHNOLOGY
We are also currently deploying DSL technology to meet the high bandwidth
needs of those customers located less than three miles from the incumbent
carrier's central office and whose first mile connection remains over copper
wire. DSL technology reduces the bottleneck in the transport of information,
particularly for data services, by increasing the data carrying capacity of
copper telephone lines.
We have arrangements with incumbent carriers with respect to more than 150
of their central offices that enable us to make first mile connections to each
business or resident connected to that central office over leased lines. These
arrangements are known in our industry as colocations. We plan to introduce our
own DSL equipment and services at many of our colocation sites to provide our
customers with increased data carrying capacity.
In December of 1998, we also formed a strategic relationship with Covad
Communications, a DSL provider, under which Covad will become a preferred
provider of DSL services to us in locations where we do not provide our own DSL
service. As of January 31, 1999, Covad had established arrangements to maintain
its equipment over 165 incumbent carrier central office spaces.
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NATIONAL NETWORK
We are creating a single, end-to-end network by linking our local networks
to one another through the use of a national fiber optic backbone network
currently being constructed by Level 3 Communications. This network 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 L.L.C., a joint venture
managed by us and owned 50% each by us and Eagle River, has entered into a cost
sharing agreement with Level 3 with respect to this network. Under this
agreement, INTERNEXT has:
- an exclusive interest in 24 fibers in a shared, filled conduit throughout
this network;
- an exclusive interest in one empty conduit, through which we expect to be
able to pull up to 432 fiber optic strands; and
- the right to 25% of the fibers pulled by Level 3 through the sixth and any
additional conduits in the network.
INTERNEXT expects the network build-out to occur substantially in years 2000
and 2001. When our system of local city networks is linked together by this
interstate fiber optic network, we will be able to offer our customers
integrated, end-to-end telecommunications services over facilities we control.
TECHNOLOGY
The wires, cables and spectrum that comprise the physical layer of our
networks can support a variety of communications technologies. We seek to offer
customers a set of technology options to meet their changing needs, and
introduce new technologies as necessary. Specifically, we believe that a service
platform based on IP will provide us with significant future opportunities,
because it will enable data, voice and video to be carried inexpensively over
our end-to-end, facilities-based network. We have, therefore, begun to
supplement our current data and voice switching technology with Internet
Protocol, or IP, and Asynchronous Transfer Mode, or ATM, equipment.
These technologies will enable us to offer our customers additional
services, such as high-speed Internet access, Internet web hosting, e-commerce
and other Internet services. Because they are more efficient, IP and ATM
technology increase the effective capacity of networks for these types of
applications, and in the future may become the preferred technology for voice
calls and faxes as well.
CIRCUIT SWITCHING VS. PACKET SWITCHING
There are two widely used switching technologies in currently deployed
communications networks: circuit-switching systems and packet-switching systems.
Circuit switch-based communications systems, which currently dominate the public
telephone network, establish a dedicated channel for each communication (such as
a telephone call for voice or fax), maintain the channel for the duration of the
call, and disconnect the channel at the conclusion of the call.
Packet-switch based communications systems, which format the information to
be transmitted into a series of shorter digital messages called "packets," are
the preferred means of data transmission. Each packet consists of a portion of
the complete message plus the addressing information to identify the destination
and return address. A key feature that
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distinguishes Internet architecture from the public telephone network is that on
the packet-switched Internet, a single dedicated channel between communication
points is not required.
Packet switch-based systems offer several advantages over circuit
switch-based systems, particularly the ability to commingle packets from several
communications sources together simultaneously onto a single channel. For most
communications, particularly those with bursts of information followed by
periods of "silence," the ability to commingle packets provides for superior
network utilization and efficiency, resulting in more information being
transmitted through a given communication channel.
IP technology, an open protocol that allows unrelated computer networks to
exchange data, is the technological basis of the Internet. The Internet's
explosive growth in recent years has focused intensive efforts worldwide on
developing IP-based networks and applications. In contrast to protocols like
ATM, which was the product of elaborate negotiations between the world's
monopoly telephone companies, IP is an open standard, subject to continuous
improvement.
We believe that a form of IP-based switching will eventually replace both
ATM and circuit switched technologies, and will be the foundation of integrated
networks that treat all transmissions -- including voice, fax and video --
simply as forms of data transmission. Current implementations of IP technology
over the Internet lack necessary quality of service to support real-time
applications like voice and fax at commercially acceptable quality levels. We
fully expect that a combination of increased bandwidth and improved technology
will correct these deficiencies.
We are in the process of configuring our network to add packet switch-based
technology to our current circuit switch-based systems. Our goal is to meet the
current demands of our customers for reliable, high-quality switched telephone
connections, while also deploying the facilities, hardware and software
necessary to satisfy their growing demand for high-speed data transmission.
We believe that the IP deployment currently under way on our network will
enable us to implement new services based on current IP technology, and position
us to adopt future IP technology implementations as they evolve to support
fully-integrated communications networks. We anticipate remaining flexible in
our use of technology, however, so that as underlying communications technology
changes, we will have the ability to take advantage of and implement these new
technologies.
APPLICATIONS
VOICE APPLICATIONS
In each market in which we operate, we currently offer the telephone
services listed below, at prices that are determined and implemented locally in
each market. These prices are generally 10% to 15% lower than the pricing for
comparable local services from the incumbent carrier. Our service offerings
include:
- standard dial tone, including touch tone dialing, 911, and operator
assisted calling;
- multi-trunk services, including direct inward dialing (DID) and direct
outward dialing (DOD);
- long distance service, including 1+, 800/888 and operator services;
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- voice messaging with personalized greetings, send, transfer, reply and
remote retrieval capabilities; and
- directory listings and assistance.
In each of our operational markets, we have negotiated and entered into
interconnection agreements with the incumbent carrier, and implemented permanent
local number portability, which allows customers to retain their telephone
numbers when changing telephone service providers.
Additionally, in each of our markets we offer the following services to long
distance carriers and high volume customers, which our customers use as both
primary and back-up circuits:
- special access circuits that connect end users to long distance carriers;
- special access circuits that connect long distance carriers' facilities to
one another; and
- private line circuits that connect several facilities owned by the same
end user.
DATA APPLICATIONS
We currently offer customers the ability to use our networks for data
services including facsimile and e-mail. Deploying ATM and IP facilities will
enable us to offer our customers extensive bandwidth capacity with increased
speed and reliability. This will allow us to offer data services such as:
Our central offices are the hubs of our network. We expect that their
location on our network's backbone, their electrical and environmental controls
and 24-hour maintenance and technical support will make them attractive
locations for our customers to locate their larger computers (which are known as
servers) or run important applications on servers we will maintain there. This
will enable us to offer:
- WEB HOSTING: support for customers' websites, including design,
maintenance and telecommunications services;
- SERVER HOSTING: colocation of customers' servers in our central offices;
- APPLICATION HOSTING: running our customers' enterprise-wide applications
at our central offices and distributing them as needed over our network to
ensure uniformity, reduce costs and implement upgrades on a continuous and
immediate basis; and
- E-COMMENCE SUPPORT: support for high-volume purchases over the Internet,
including system design, order fulfillment and network security.
We plan to combine the capabilities of our national IP-optimized network
with the mass-market e-commerce expertise we have developed through NEXTLINK
Interactive to offer customers a broad range of services to their e-commerce
activities, including telecommunications, web-site design, order fulfillment and
back-office systems.
We also intend to develop and offer our own Internet access services as an
Internet service provider in the year 2000. In the interim, we have also entered
into agreements with PSINet that will allow us to resell PSINet's Internet
access service directly to our customers under our "NEXTLINK" brand. To become
an Internet service provider, or ISP, ourselves we will need to establish
arrangements, known as peering agreements, with other ISPs to allow us to
exchange traffic with them. As ownership of the Internet backbone has become
increasingly
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concentrated, the terms and conditions of peering agreements are becoming
increasingly restrictive. We can't predict the terms of our future peering
agreements.
Through our NEXTLINK Interactive subsidiary, we currently provide a number
of voice response, speech recognition and e-commerce services for Fortune 100
companies. These systems offer consumer-oriented businesses telephone and
Internet-based automated systems that process orders and supply information to
their customers about their products. We design and operate voice and
Internet-based systems to meets these clients' needs by integrating existing
third-party software applications. These service offerings, however, are not
integrated with our local networks at this time. Examples of systems that we
have developed and operated for our clients include:
- Systems that help our clients' customers locate the nearest dealer, office
or other location;
- Systems that give our clients' customers information, including cost
information, about the clients' products and services and automate their
purchases; and
- Automated order entry systems.
GROWTH IN CUSTOMER BASE
We have been successful in attracting customers in the markets that we
serve. Our customer base has been growing rapidly, as the following table of
access lines installed on our networks illustrates:
<TABLE>
<CAPTION>
TOTAL ACCESS
MARKETS IN LINES
DATE SERVICE INSTALLED
- ---------------------------------------------- ------------- --------------
<S> <C> <C>
December 31, 1996............................. 7 8,511
December 31, 1997............................. 25 50,131
December 31, 1998............................. 37 174,182
March 31, 1999................................ 38 224,713
</TABLE>
In addition, we have increased the rate at which we install access lines
each quarter. 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
First Quarter 1999........................................... 50,531
</TABLE>
We also have successfully developed and deployed order entry/provisioning,
billing/ collection and other back-office systems for each market in which we
operate. We anticipate that we will continue to develop and deploy new
back-office systems to improve our capabilities as we add new technologies and
services to our networks.
MANAGEMENT TEAM
We believe that the quality of our management team and their extensive
experience in the telecommunications industry is one of our competitive
advantages and a critical factor in the successful implementation of our
strategy. The following key members of our management
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team each has 16 or more years of experience in leading companies in competitive
segments of the telecommunications industry:
- CRAIG O. MCCAW - our founder, largest and controlling shareholder and
member of our Board of Directors, who, prior to founding NEXTLINK, was the
founder of McCaw Cellular Communications, Inc., which became the nation's
largest cellular telephone company.
- STEVEN W. HOOPER - our Chairman of the Board and Chief Executive Officer,
who was a member of the senior management team at McCaw Cellular, and was
Chief Executive Officer of AT&T Wireless Services following McCaw
Cellular's sale to AT&T, prior to joining NEXTLINK.
- WAYNE M. PERRY - our Vice Chairman and member of our Board of Directors,
who was a member of the senior management team at McCaw Cellular and was
Vice Chairman of AT&T Wireless Services following McCaw Cellular's sale to
AT&T, prior to joining NEXTLINK.
- GEORGE M. TRONSRUE III - our President and Chief Operating Officer, who
held senior management positions with ACSI, Teleport Communications Group
and MFS Communications prior to joining NEXTLINK.
In addition, the presidents of our operating subsidiaries and our other
senior officers have an average of 18 years of experience in the
telecommunications industry.
The members of our senior management team who will lead our design and
implementation of technologies include:
- DOUG CARTER - our Senior Vice President, Chief Technology Officer, who was
the Senior Vice President of Network Operations of AT&T Wireless prior to
joining NEXTLINK.
- JOHN CURRAN - our Vice President, Internet Technology and head of our
Cambridge, MA - based IP Design Center, who was Chief Technology Officer
of GTE Internetworking prior to joining NEXTLINK.
- CHUCK DANIELS - our Vice President, Implementation and head of our Plano,
Texas implementation center, who was Vice President of Engineering of MCI
prior to joining NEXTLINK.
- NICK KAUSER - a member of our Board of Directors, who was the Chief
Technology Officer of AT&T Wireless prior to joining NEXTLINK.
31
<PAGE>
REGULATION
The federal Telecommunications Act of 1996 opened local telephone markets to
competition from companies like NEXTLINK. Prior to that time, states typically
granted an exclusive franchise in each local service area to a single dominant
carrier/often a former subsidiary of AT&T known as a "Baby Bell" which owned and
operated the entire local exchange network. The 1996 Act preserved state and
local jurisdiction over many aspects of local telephone service, and, as a
result, NEXTLINK is subject to varying degrees of federal, state and local
regulation. FCC and state regulators, and other legislative or judicial
initiatives relating to the telecommunications industry, could help or hinder
our business.
We are not currently required to obtain FCC authorization for the
installation, acquisition or operation of our wireline network facilities. We
are required to hold and we have obtained FCC authorizations for the operation
of our wireless facilities. In each state in which we desire to offer our
services, we also must first obtain authorization from the appropriate state
commission. Although we currently hold the required state authorizations in each
of our operational markets, we can't be certain that we will receive the
necessary state authorizations for markets to be launched in the future.
Unlike the incumbent carriers, we are not currently subject to price cap or
rate of return regulation, which leaves us more free to set our own pricing
policies. The FCC requires us to file interstate tariffs on an ongoing basis for
interstate and international interexchange traffic. An FCC order that would have
exempted us from any requirement to file tariffs for interstate access and
domestic long distance service has been stayed pending further judicial review,
and, as a result, we currently file tariffs for these services. Our intrastate
services are also generally subject to state certification and tariff or price
list filing requirements.
The 1996 Act gave the FCC significant responsibility for its implementation,
especially in the areas of universal service, access charges, numbering, number
portability and price caps. The details of the rules adopted by the FCC, and the
extent to which they are upheld by the courts reviewing the FCC's rules, will
have a significant effect on when and to what extent barriers to competition in
local services are removed. For example, the FCC has the power to grant
incumbent carriers increased flexibility to enable them to reduce prices for
special access, private line services and advanced telecommunications services.
The 1996 Act provides incentives to most of the incumbent carriers to enter
into interconnection agreements with carriers like NEXTLINK. We need
interconnection agreements to gain access to the incumbent carriers' networks.
Although we have interconnection agreements in all of our currently operational
markets, we can't be certain that incumbent carriers in new markets we seek to
enter will negotiate quickly with us or that any resulting agreements will be on
terms favorable to us.
The incumbent carriers have frequently resorted to litigation in an attempt
to obtain the benefits of these incentives without offering consumers and
competitors like NEXTLINK the full benefits intended by the 1996 Act. For
example, in September 1998, the FCC ruled that certain incumbent carrier
"teaming" arrangements with long distance carriers, which would have allowed
incumbent carriers to offer a form of "one stop shopping" in competition with
NEXTLINK's combined local and long distance offerings, violated the 1996 Act. In
response, the incumbent carriers have filed petitions with the United States
Court of Appeals for the
32
<PAGE>
District of Columbia seeking to overturn this ruling. If this FCC's ruling is
reversed by the courts, one of our current competitive advantages would be
undermined.
In January 1999, the U.S. Supreme Court upheld key provisions of the FCC
rules implementing the 1996 Act, in a decision that was generally favorable to
competitive telephone companies like NEXTLINK. In two earlier decisions, the
United States Court of Appeals for the Eighth Circuit had invalidated these
rules. The Supreme Court's decision reinstated all but one of the FCC rules
invalidated by the Eighth Circuit. The Supreme Court held that the FCC has
general jurisdiction to implement the 1996 Act's local competition provisions,
including pricing and enforcement jurisdiction. Significantly, the Court upheld
that the FCC's "pick and choose" rule, which allows competitors to choose which
provisions of other carriers' interconnection agreements they wish to
incorporate in their own interconnection agreements with that incumbent carrier.
A key provision of the 1996 Act requires incumbent carriers to make elements
of their networks available to competing carriers like NEXTLINK at reasonable
rates. The Supreme Court broadly affirmed these provisions, but held that the
FCC did not correctly determine precisely which network elements must be
unbundled and made available to competitors like NEXTLINK. This ruling cast
existing interconnection agreements in doubt when some incumbent carriers stated
that they would no longer make elements of their networks available until the
FCC clarified which elements they must offer to competitors. These incumbent
carriers subsequently assured FCC officials that they would continue to provide
currently available network elements to their competitors and continue to
negotiate new interconnection agreements in good faith.
Until the FCC adopts new rules complying with the Supreme Court's decision,
competitors like NEXTLINK will need to rely to a great extent on the continued
good faith of the incumbent carriers, rather than express regulatory rights, to
obtain new interconnection agreements and network elements.
The Supreme Court decision did not address or resolve the incumbent
carriers' challenge to the FCC's forward-looking pricing methodology for
unbundled network elements. The incumbent carriers have challenged this
methodology, claiming that any correct procedure would take into account
historical costs. If the incumbent carriers succeed in this contention, we would
have to pay more to purchase network elements, which could significantly
increase our cost of doing business.
33
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth information about the selling stockholders
and the number of shares of Class A common stock beneficially owned by them.
Based on information provided to us from the selling stockholders, none of the
selling stockholders has, or within the past three years has had, any position,
office or other material relationship with NEXTLINK or its affiliates.
<TABLE>
<CAPTION>
NUMBER OF CLASS
A CLASS A
CLASS A SHARES SHARES TO BE SHARES OWNED
OWNED PRIOR TO SOLD IN AFTER
NAME OF SELLING STOCKHOLDER OFFERING OFFERING OFFERING
- ----------------------------------------------------------------- --------------- --------------- -------------
<S> <C> <C> <C>
Alta Communications VI, LP....................................... 257,432 182,224 75,208
Alta-Comm S By S, LLC............................................ 5,860 4,148 1,712
Columbia Capital Corporation..................................... 24,200 24,200 --
Providence Equity Partners, L.P.................................. 486,883 344,641 142,242
Providence Equity Partners II, L.P............................... 6,789 4,806 1,983
Madison Dearborn Capital Partners II, L.P........................ 658,229 465,928 192,301
Prime VIII, L.P.................................................. 115,190 81,537 33,653
Venture Fund I, LP............................................... 8,228 3,843 4,385
AT&T Venture Fund II, LP......................................... 74,051 34,586 39,465
Special Partners Fund, LP........................................ 12,521 5,848 6,673
Special Partners Fund International, LP.......................... 69,757 32,580 37,177
Advanced MobileComm Technologies, Inc............................ 164,557 116,482 48,075
HarbourVest Venture Partners V - Direct Fund, L.P................ 329,114 232,964 96,150
Norwest Venture Partners VI, LP.................................. 329,114 232,964 96,150
Excelsior Private Equity Fund II, Inc............................ 164,557 116,482 48,075
Global Private Equity III L.P.................................... 267,340 189,237 78,103
Advent PGGM Global LP............................................ 41,139 29,120 12,019
Advent Partners GPE III L.P...................................... 4,048 2,865 1,183
Advent Partners North America GPE III L.P........................ 1,218 862 356
Advent Partners L.P.............................................. 9,873 6,989 2,884
Digital Media and Communications L.P............................. 61,676 43,657 18,019
Adwest L.P....................................................... 6,582 4,659 1,923
Oakstone Ventures L.P............................................ 25,704 18,195 7,509
TelAdvent L.P.................................................... 10,268 7,268 3,000
Formus Communications, Inc....................................... 329,114 232,964 96,150
Spectrum Equity Investors, II, L.P............................... 329,114 232,964 96,150
Chase Venture Capital Associates, L.P............................ 658,229 465,928 192,301
CEA Capital Partners USA, L.P.................................... 125,771 89,027 36,744
CEA Capital Partners USA, CI, L.P................................ 38,786 27,455 11,331
Battery Ventures IV, L.P......................................... 162,089 114,733 47,356
Battery Investment Partners IV, LLC.............................. 2,468 1,747 721
Media/Communications Partners III L.P............................ 156,329 110,658 45,671
M/C Investors L.L.C.............................................. 8,228 5,824 2,404
Tigris Rivanna LLC............................................... 42,528 29,769 12,759
Thomas H. Jones.................................................. 146,086 102,260 43,826
Trygve E. Myhren................................................. 12,881 6,747 6,134
J. Barclay Jones................................................. 14,286 5,714 8,572
Mark J. Emery.................................................... 3,588 1,794 1,794
Raymond D. Keneipp............................................... 3,588 1,900 1,688
Bart Schneider................................................... 1,903 1,903 --
Brian Eick....................................................... 355 355 --
Melissa Leitner.................................................. 123 123 --
Total.......................................................... 5,169,796 3,617,950 1,551,846
--------------- --------------- -------------
--------------- --------------- -------------
</TABLE>
34
<PAGE>
UNDERWRITING
This offering consists of (1) an offering of 6,880,000 shares of NEXTLINK's
common stock in the United States and Canada and (2) a concurrent offering of
1,720,000 shares of NEXTLINK's common stock outside the United States and
Canada. Salomon Smith Barney Inc. is the global coordinator and bookrunner of
this offering.
Subject to the terms and conditions stated in the U.S. underwriting
agreement, each U.S. underwriter named below has severally agreed to purchase,
and NEXTLINK and the selling stockholders have agreed to sell to such U.S.
underwriter, the number of shares set forth opposite its name:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
Salomon Smith Barney Inc.........................................................
Goldman, Sachs & Co..............................................................
Bear, Stearns & Co. Inc..........................................................
Credit Suisse First Boston Corporation...........................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...........................................................
Total....................................................................
</TABLE>
The U.S. underwriting agreement provides that the obligations of the U.S.
underwriters to purchase the shares included in this offering are subject to
approval of certain legal matters by counsel and to certain other conditions.
The U.S. underwriters are obligated to purchase all the shares (other than those
covered by their over-allotment option described below) if they purchase any of
the shares.
The U.S. underwriters, for whom Salomon Smith Barney Inc., Goldman, Sachs &
Co., Bear, Stearns & Co. Inc., Credit Suisse First Boston Corporation and
Merrill Lynch, Pierce, Fenner & Smith Incorporated are acting as
representatives, propose to offer some of the shares directly to the public at
the public offering price set forth on the cover page of this prospectus and
some of the shares to certain dealers at the public offering price less a
concession not in excess of $ per share. The U.S. underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per share on
sales to certain other dealers. After the initial offering of the shares to the
public, the public offering price and such concessions may be changed by the
representatives.
NEXTLINK and the selling stockholders have granted to the U.S. underwriters
an option, exercisable for 30 days from the date of this prospectus, to purchase
up to 1,032,000 additional shares of common stock at the public offering price
less the underwriting discount. The U.S. underwriters may exercise such option
solely for the purpose of covering over-allotments, if any, in connection with
this offering. To the extent such option is exercised, each U.S. underwriter
will be obligated, subject to certain conditions, to purchase a number of
additional shares approximately proportionate to such U.S. underwriter's initial
purchase commitment. If the underwriters exercise their overallotment option,
75% of the shares sold pursuant to this option will be issued by NEXTLINK for
its own account, and the remaining 25% will be sold for the account of the
selling stockholders in the same proportion as the number of shares being sold
for their respective accounts in the offering.
35
<PAGE>
NEXTLINK and the selling stockholders have also entered into an underwriting
agreement with a syndicate of international underwriters providing for the
concurrent offering and sale of 1,720,000 shares of common stock outside the
United States and Canada. Salomon Brothers International Limited is the lead
manager of the underwriters for the international offering. The offering price
and aggregate underwriting discounts and commissions per share for the U.S.
offering and the international offering are identical. In addition, the U.S.
offering and the international offering are each conditioned upon the closing of
the other.
The U.S. and international underwriters will enter into an agreement in
which they agree to restrictions on where and to whom they and any dealer
purchasing from them may offer shares of common stock. The U.S. and
international underwriters also have agreed that they may sell shares of common
stock between their respective underwriting syndicates.
NEXTLINK and its executive officers have agreed that, subject to certain
exceptions, for a period of 90 days from the date of this prospectus, NEXTLINK
and its executive officers will not, without prior written consent of Salomon
Smith Barney Inc., offer, sell, contract to sell, or otherwise dispose of, any
shares of NEXTLINK's common stock or any securities convertible into, or
exercisable or exchangeable for, common stock. Salomon Smith Barney Inc. in its
sole discretion may release any of the securities subject to these lock-up
agreements at any time without notice.
The following tables shows the underwriting discounts and commissions to be
paid by NEXTLINK to the U.S. underwriters in connection with this offering.
These amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase additional shares of common stock.
<TABLE>
<CAPTION>
PAID BY NEXTLINK &
THE SELLING STOCKHOLDERS
NO EXERCISE FULL EXERCISE
------------- -------------
<S> <C> <C>
Per share...................................................... $ $
Total.......................................................... $ $
</TABLE>
In connection with this offering, Salomon Smith Barney Inc., on behalf of
the underwriters, may over-allot, or engage in syndicate covering transactions,
stabilizing transactions and penalty bids. Over-allotment involves syndicate
sales of common stock in excess of the number of shares to be purchased by the
underwriters in this offering, which creates a syndicate short position.
Syndicate covering transactions involve purchases of the common stock in the
open market after the distribution has been completed in order to cover
syndicate short positions. Stabilizing transactions consist of certain bids or
purchases of common stock while this offering is in progress. Penalty bids
permit the underwriters to reclaim a selling concession from a syndicate member
when Salomon Smith Barney Inc., in covering syndicate short positions or making
stabilizing purchases, repurchases shares originally sold by that syndicate
member. These activities may cause the price of NEXTLINK's common stock to be
higher than the price that otherwise would exist in the open market in the
absence of such transactions. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise and, if commenced,
may be discountinued at any time.
In addition, in connection with this offering, certain of the underwriters
(and selling group members) may engage in passive market making transactions in
the common stock on the Nasdaq National Market, prior to the pricing and
completion of this offering. Passive
36
<PAGE>
market making consists of displaying bids on the Nasdaq National Market no
higher than the bid prices of independent market makers and making purchases at
prices no higher than those independent bids and effected in response to order
flow. Net purchases by a passive market maker on each day are limited to a
specific percentage of the passive market maker's average daily trading volume
in the common stock during a specified period and must be discontinued when such
limit is reached. Passive market making may cause the price of NEXTLINK's common
stock to be higher than the price that otherwise would exist in the open market
in the absence of such transactions. If passive market making is commenced, it
may be discontinued at any time.
The representatives have performed certain investment banking and advisory
services for NEXTLINK from time to time for which they have received customary
fees and expenses. The representatives may, from time to time, engage in
transactions with and perform services for us in the ordinary course of their
business.
NEXTLINK has agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the underwriters may be required to make in respect of any of those
liabilities.
Up to 2,894,360 of the shares to be offered in the U.S. offering will be
sold by the selling stockholders, who are parties to the U.S. underwriting
agreement.
37
<PAGE>
Alternate Page for the International Prospectus
UNDERWRITING
This offering consists of (1) an offering of 1,720,000 shares of NEXTLINK's
common stock outside the United States and Canada and (2) a concurrent offering
of 6,880,000 shares of NEXTLINK's common stock in the United States and Canada.
Salomon Smith Barney Inc. is the global coordinator and bookrunner of this
offering.
Subject to the terms and conditions stated in the international underwriting
agreement, each international underwriter named below has severally agreed to
purchase, and NEXTLINK and the selling stockholders have agreed to sell to such
international underwriter, the number of shares set forth opposite its name:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
Salomon Brothers International Limited...........................................
Goldman Sachs International......................................................
Bear, Stearns International Limited..............................................
Credit Suisse First Boston (Europe) Limited......................................
Merrill Lynch International......................................................
Total....................................................................
</TABLE>
The international underwriting agreement provides that the obligations of
the international underwriters to purchase the shares included in this offering
are subject to approval of certain legal matters by counsel and to certain other
conditions. The international underwriters are obligated to purchase all the
shares (other than those covered by their over-allotment option described below)
if they purchase any of the shares.
The international underwriters, for whom Salomon Brothers International
Limited, Goldman Sachs International, Bear, Stearns International Limited,
Credit Suisse First Boston (Europe) Limited and Merrill Lynch International are
acting as representatives, propose to offer some of the shares directly to the
public at the public offering price set forth on the cover page of this
prospectus and some of the shares to certain dealers at the public offering
price less a concession not in excess of $ per share. The international
underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share on sales to certain other dealers. After the initial
offering of the shares to the public, the public offering price and such
concessions may be changed by the representatives.
NEXTLINK and the selling stockholders have granted to the international
underwriters an option, exercisable for 30 days from the date of this
prospectus, to purchase up to 258,000 additional shares of common stock at the
public offering price less the underwriting discount. The international
underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, in connection with this offering. To the extent such
option is exercised, each international underwriter will be obligated, subject
to certain conditions, to purchase a number of additional shares approximately
proportionate to such international underwriter's initial purchase commitment.
If the underwriters exercise their overallotment option, 75% of the shares sold
pursuant to this option will be issued by NEXTLINK for its own account, and the
remaining 25% will be sold for the account of the selling stockholders in the
same proportion as the number of shares being sold for their respective accounts
in the offering.
NEXTLINK and the selling stockholders have also entered into an underwriting
agreement with a syndicate of U.S. underwriters providing for the concurrent
offering and
36
<PAGE>
Alternate Page for the International Prospectus
sale of 6,880,000 shares of common stock in the United States and Canada.
Salomon Smith Barney Inc. is the lead manager of the underwriters for the U.S.
offering. The offering price and aggregate underwriting discounts and
commissions per share for the international offering and the U.S. offering are
identical. In addition, the international offering and the U.S. offering are
each conditioned upon the closing of the other.
The international and U.S. underwriters will enter into an agreement in
which they agree to restrictions on where and to whom they and any dealer
purchasing from them may offer shares of common stock. The international and
U.S. underwriters also have agreed that they may sell shares of common stock
between their respective underwriting syndicates.
NEXTLINK and its executive officers have agreed that, subject to certain
exceptions, for a period of 90 days from the date of this prospectus, NEXTLINK
and its executive officers will not, without prior written consent of Salomon
Smith Barney Inc., offer, sell, contract to sell, or otherwise dispose of, any
shares of NEXTLINK's common stock or any securities convertible into, or
exercisable or exchangeable for, common stock. Salomon Smith Barney Inc. in its
sole discretion may release any of the securities subject to these lock-up
agreements at any time without notice.
The following tables shows the underwriting discounts and commissions to be
paid by NEXTLINK to the international underwriters in connection with this
offering. These amounts are shown assuming both no exercise and full exercise of
the underwriters' option to purchase additional shares of common stock.
<TABLE>
<CAPTION>
PAID BY NEXTLINK &
THE SELLING STOCKHOLDERS
NO EXERCISE FULL EXERCISE
------------- -------------
<S> <C> <C>
Per share...................................................... $ $
Total.......................................................... $ $
</TABLE>
In connection with this offering, Salomon Smith Barney Inc., on behalf of
the underwriters, may over-allot, or engage in syndicate covering transactions,
stabilizing transactions and penalty bids. Over-allotment involves syndicate
sales of common stock in excess of the number of shares to be purchased by the
underwriters in this offering, which creates a syndicate short position.
Syndicate covering transactions involve purchases of the common stock in the
open market after the distribution has been completed in order to cover
syndicate short positions. Stabilizing transactions consist of certain bids or
purchases of common stock while this offering is in progress. Penalty bids
permit the underwriters to reclaim a selling concession from a syndicate member
when Salomon Smith Barney Inc., in covering syndicate short positions or making
stabilizing purchases, repurchases shares originally sold by that syndicate
member. These activities may cause the price of NEXTLINK's common stock to be
higher than the price that otherwise would exist in the open market in the
absence of such transactions. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise and, if commenced,
may be discountinued at any time.
In addition, in connection with this offering, certain of the underwriters
(and selling group members) may engage in passive market making transactions in
the common stock on the Nasdaq National Market, prior to the pricing and
completion of this offering. Passive market making consists of displaying bids
on the Nasdaq National Market no higher than the bid prices of independent
market makers and making purchases at prices no higher than
37
<PAGE>
Alternate Page for the International Prospectus
those independent bids and effected in response to order flow. Net purchases by
a passive market maker on each day are limited to a specific percentage of the
passive market maker's average daily trading volume in the common stock during a
specified period and must be discontinued when such limit is reached. Passive
market making may cause the price of NEXTLINK's common stock to be higher than
the price that otherwise would exist in the open market in the absence of such
transactions. If passive market making is commenced, it may be discontinued at
any time.
The representatives have performed certain investment banking and advisory
services for NEXTLINK from time to time for which they have received customary
fees and expenses. The representatives may, from time to time, engage in
transactions with and perform services for us in the ordinary course of their
business.
NEXTLINK has agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the underwriters may be required to make in respect of any of those
liabilities.
Up to 723,590 of the shares to be offered in the international offering will
be sold by the selling stockholders, who are parties to the international
underwriting agreement.
38
<PAGE>
LEGAL MATTERS
Willkie Farr & Gallagher, New York, New York, counsel for NEXTLINK, will
pass upon the validity of the shares of Class A common stock being issued under
this prospectus. The validity of the shares will be passed upon for the
underwriters by Sullivan & Cromwell.
EXPERTS
The consolidated financial statements included in NEXTLINK's Annual Report
on Form 10-K, filed on March 29, 1999, 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.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. We have also filed with the SEC a registration
statement on Form S-3 to register the shares of Class A common stock offered by
this prospectus. This prospectus, which forms part of the registration
statement, does not contain all of the information included in that registration
statement. For further information about NEXTLINK and the Class A common shares
being registered under this prospectus, you should refer to the registration
statement and its exhibits.
We file our SEC materials electronically with the SEC, so you can also
review our filings by accessing the web site maintained by the SEC at
http://www.sec.gov. This site contains reports, proxy and information statements
and other information regarding issuers that file electronically with the SEC.
You may also read and copy any document we file with the SEC at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information about the Public Reference
Room.
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means we can disclose
important information to you by referring you to those documents. The
information included in the following documents is incorporated by reference and
is considered to be a part of this prospectus. The most recent information that
we file with the Securities and Exchange Commission automatically updates and
supersedes more dated information. We have previously filed the following
documents with the Securities and Exchange Commission and are incorporating them
by reference into this prospectus:
1. Our Annual Report on Form 10-K for the fiscal year ended December 31,
1998, filed on March 29, 1999;
2. Our Current Reports on Form 8-K filed on January 19, 1999 and April
1, 1999.
3. Item 1 ("Description of Registrant's Securities to be Registered")
contained in our Registration Statement on Form 8-A, filed on August 4, 1997
to register shares of our Class A common stock under the Securities and
Exchange Act of 1934, as amended.
38
<PAGE>
We also incorporate by reference all documents subsequently filed by us
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities and Exchange Act
of 1934, as amended, until the offering is completed.
We will provide without charge to each person, including any person having a
control relationship with that person, to whom a prospectus is delivered, a copy
of any or all of the information that has been incorporated by reference in this
prospectus but not delivered with this prospectus. If you would like to obtain
this information from us, please direct your request, either in writing or by
telephone to R. Bruce Easter, Jr., General Counsel and Secretary, NEXTLINK
Communications, Inc., 500 108th Avenue N.E., Suite 2200, Bellevue, Washington
98004.
39
<PAGE>
Alternate Page for the International Prospectus
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK
The following is a general discussion of certain U.S. federal income and
estate tax consequences of the ownership and disposition of common stock by a
holder that is not a "U.S. person" (a "non-U.S. holder"). A "U.S. person" is a
person or entity that, for U.S. federal income tax purposes, is any of the
following:
- a citizen or resident of the United States;
- a corporation or other entity taxable as a corporation for U.S. federal
income tax purposes created or organized in the United States or under the
laws of the United States or of any political subdivision thereof
(including each state and the District of Columbia);
- an estate whose income is includible in gross income for U.S. federal
income tax purposes regardless of its source; or
- a trust subject to the supervision of a court within the United States and
the control of one or more United States persons as described in Section
7701 (a) (30) of Internal Revenue Code of 1986, as amended (the "Code").
This discussion is based on the provisions of the Code and administrative
and judicial interpretations as of the date hereof, all of which may be changed
either retroactively or prospectively. This discussion does not address all the
aspects of U.S. federal income and estate taxation that may be relevant to
non-U.S. holders in light of their particular circumstances, nor does it address
tax consequences under the laws of any U.S. state, municipality or other taxing
jurisdiction or under the laws of any jurisdiction other than the United States.
The following discussion is merely a summary of the principal U.S. federal
income and estate tax consequences of the ownership and disposition of common
stock by non-U.S. Holders.
THUS, WE URGE ALL INVESTORS TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT
TO THE APPLICATION AND EFFECT OF THE U.S. FEDERAL INCOME AND ESTATE TAX
CONSEQUENCES (CURRENT AND PROSPECTIVE) OF THE OWNERSHIP AND DISPOSITION OF THE
COMMON STOCK, AS WELL AS THE APPLICATION AND EFFECT OF THE LAWS OF ANY STATE,
LOCAL, FOREIGN, OR OTHER TAXING JURISDICTION.
DIVIDENDS
We do not intend to pay any dividends in the foreseeable future. In the
event we do pay dividends to a non-U.S. holder, however, these dividends will
generally be subject to United States federal withholding tax at a 30% rate or
such lower rate as may be specified by an applicable income tax treaty, except
as described in the next paragraph.
Generally, there is no withholding tax on dividends that are:
- effectively connected with the non-U.S. holder's conduct of a trade or
business within the United States, as long as if you file a Form 4224 or
an applicable successor form is filed with us or
- if an applicable tax treaty so requires, attributable to a United States
permanent establishment of the non-U.S. holder,
If either exception applies, dividends are subject to the U.S. federal
income tax on net income applicable to U.S. persons. Effectively connected
dividends received by a foreign
<PAGE>
Alternate Page for the International Prospectus
corporation may be subject to an additional "branch profits tax" at a 30%
rate (or a lower rate under an applicable income tax treaty) when such
dividends are deemed repatriated from the United States.
Current U.S. Treasury regulations create a presumption for withholding tax
purposes that, except as described in the next paragraph and unless the payor
has knowledge to the contrary, dividends paid to an address outside the United
States were paid to a resident of the country of address. For dividends paid on
or prior to December 31, 2000, the same address-presumption system currently
applies, in general, to determine the applicability of reduced rate of
withholding under U.S. tax treaties. Thus, non-U.S. holders receiving dividends
at addresses outside the United States generally are not currently required to
file tax forms to obtain the benefit of an applicable treaty rate. However,
under U.S. Treasury regulations that were recently finalized, this
address/presumption system will no longer apply for purposes of claiming treaty
benefits for payments made after December 31, 2000. Instead, to claim these
benefits, a non-U.S. holder will have to file a certification attesting
eligibility. If there is excess withholding on a person eligible for a treaty
benefit, the person can file for a refund with the U.S. Internal Revenue
Service.
GAIN ON DISPOSITION OF COMMON STOCK
A non-U.S. holder generally will not be subject to U.S. federal income tax
on gain recognized upon a disposition of common stock unless
- the gain is effectively connected with the conduct of a trade or business
in the United States of the non-U.S. holder (or of a partnership in which
the non-U.S. holder is a member that holds the common stock or, if a tax
treaty applies, is attributable to a United States permanent establishment
of the non-U.S. holder;
- in the case of a non-U.S. holder who is an individual and holds the common
stock as a capital asset within the meaning of Section 1221 of the Code
(or is a member in a partnership that holds the common stock as a capital
asset), such holder is present in the United States for 183 or more days
in the taxable year of the disposition and certain other conditions are
met;
- the non-U.S. holder is subject to tax under the provision of U.S. tax law
applicable to certain U.S. expatriates or
- we are or have been a "U.S. real property holding corporation" for federal
income tax purposes at any time within the shorter of the five-year period
preceding such disposition or such non-U.S. holder's holding period.
We are not currently, have not been and do not anticipate becoming a "U.S.
real property holding corporation" for U.S. federal income tax purposes. Even if
we were to become one, any gain recognized by a non-U.S. holder, on the
disposition of the common stock, still would not be subject to U.S. tax if the
shares were considered to be "regularly traded" (as per the meaning of the
applicable U.S. Treasury regulations) on an established securities market (e.g.,
Nasdaq National market, on which our shares are currently quoted) and the
non-U.S. holder did not own, actually, constructively, directly, or indirectly,
more than 5% of such class of stock at any time during the shorter of the
periods described above.
<PAGE>
Alternate Page for the International Prospectus
INFORMATION REPORTING AND BACKUP WITHHOLDING
U.S. Treasury regulations require us to report annually to the IRS and to
each non-U.S. holder the amount of dividends paid to, and the tax withheld with
respect to, such holder, regardless of whether tax was actually withheld. That
information may also be made available to the tax authorities of the country in
which the non-U.S. holder resides.
United States federal backup withholding (which generally is withholding
imposed at the rate of 31% on payments to persons not otherwise exempt who fail
to furnish identifying information to the IRS) will generally not apply to
dividends paid to a non-U.S. holder that are subject to withholding at the 30%
rate (or would be so subject but for a reduced rate under an applicable treaty).
In addition, for dividends paid on or prior to December 31, 2000, the payor of
dividends may rely on the payee's foreign address in determining that the payee
is exempt from backup withholding, unless the payor has knowledge that the payee
is a U.S. person. However, as discussed above, for payments made after December
31, 2000 and the payee will have to furnish a certification to the payor to
claim exemption from backup withholding.
The backup withholding and information reporting requirements also apply to
the gross proceeds paid to a non-U.S. holder upon the disposition of common
stock by or through a U.S. office of a U.S or foreign broker, unless the holder
certifies to the broker under penalty of perjury as to its name, address and
status as a non-U.S. holder or the holder otherwise establishes an exemption.
Information reporting requirements, (but not backup withholding) will apply to a
payment of the proceeds of a disposition of common stock by or through a foreign
office of:
- a U.S. broker,
- a foreign broker 50% or more of whose gross income for certain periods is
effectively connected with the conduct of a trade or business in the
United States, or
- a foreign broker that is a "controlled foreign corporation" for U.S.
federal income tax purposes, unless the broker has documentary evidence in
its records that the holder is a non-U.S. holder and certain other
conditions are met, or the holder otherwise establishes an exemption.
Neither backup withholding nor information reporting will generally apply to
a payment of the proceeds of a disposition of common stock by or through a
foreign office of a foreign broker not subject to the preceding sentence.
Any amounts withheld under the backup withholding rules will be refunded or
credited against the non-U.S. holder's United States federal income tax
liability, provided that required information is furnished to the IRS.
FEDERAL ESTATE TAXES
Common stock owned or treated as being owned by an individual who is neither
a citizen nor a resident of the United States for federal estate tax purposes at
the date of death will be included in such individual's gross estate for U.S.
federal estate tax purposes and may be subject to U.S. federal estate tax unless
an applicable estate tax treaty provides otherwise. Estates of nonresident
aliens are generally allowed a statutory credit for U.S. federal estate tax
purposes. Estate tax treaties may permit a larger credit. A special definition
of the term "U.S. resident" applies for U.S. federal estate tax purposes.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8,600,000 SHARES
NEXTLINK
COMMUNICATIONS, INC.
CLASS A COMMON STOCK
[LOGO]
------
U. S. P R O S P E C T U S
SUBJECT TO COMPLETION
MAY 3, 1999
---------
SALOMON SMITH BARNEY
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
CREDIT SUISSE FIRST BOSTON
MERRILL LYNCH & CO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8,600,000 SHARES
NEXTLINK
COMMUNICATIONS, INC.
CLASS A COMMON STOCK
[LOGO]
------
I N T E R N A T I O N A L P R O S P E C T U S
SUBJECT TO COMPLETION
MAY 3, 1999
---------
SALOMON SMITH BARNEY INTERNATIONAL
GOLDMAN SACHS INTERNATIONAL
BEAR, STEARNS INTERNATIONAL LIMITED
CREDIT SUISSE FIRST BOSTON
MERRILL LYNCH INTERNATIONAL
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the fees and expenses payable by the
Registrant in connection with this offering, other than underwriting discounts
and commissions. All the amounts shown are estimates, except the SEC
registration fee:
<TABLE>
<S> <C>
SEC registration fee.............................................. 198,819
NASD fee..........................................................
Printing fees.....................................................
Legal fees and expenses...........................................
Accounting fees and expenses......................................
Miscellaneous fees and expenses...................................
---------
Total.......................................................
---------
---------
</TABLE>
ITEM 15. 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.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS:
<TABLE>
<C> <S>
1 Form of Underwriting Agreement.*
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.(8)
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 Indenture, dated September 25, 1997, between United States Trust Company, as Trustee
and NEXTLINK Communications, Inc., relating to the 9 5/8% Senior Notes due 2007.
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 Form of stock certificate of Class A common stock(9)
4.11 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)
4.12 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)
4.13 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)
4.14 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)
4.15 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)
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
5.1 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)
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)
10.9 Consent and Indemnity Agreement of Stockholders, dated January 14, 1999, by and
among NEXTLINK Communications, Inc., WNP Communications, Inc. and certain holders of
non-voting and voting common stock of WNP Communications, Inc.(10)
10.10 Consent and Indemnity Agreement of Preferred Stockholders, dated January 14, 1999,
by and among NEXTLINK Communications, Inc., WNP Communications, Inc. and certain
holders of Series A preferred stock of WNP Communications, Inc.(10)
10.11 NEXTBAND Interests Purchase Agreement, dated March 31, 1999, between Nextel Spectrum
Acquisition Corp. and NEXTLINK Communications, Inc.(11)
10.12 Registration Rights Agreement, dated March 31, 1999, between Nextel Spectrum
Acquisition Corp. and NEXTLINK Communications, Inc.(11)
21 Subsidiaries of the Registrant.(12)
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Willkie Farr & Gallagher (included in their opinion filed as Exhibit
5.1).*
24 Power of Attorney (included on signature pages).
</TABLE>
- ------------------------
* To be filed by amendment.
(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. (Commission File Nos.
333-04603 and 333-04603-01).
II-3
<PAGE>
(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).
(8) Incorporated herein by reference to the exhibits filed with the Registration
Statement on Form S-4 of NEXTLINK Communications, Inc. (Commission File No.
333-71749).
(9) Incorporated herein by reference to the exhibit filed with the Registration
Statement on Form S-1 of NEXTLINK Communications, Inc. (Commission File No.
333-32001).
(10) Incorporated herein by reference to the exhibits filed with the
Registration Statement on Form S-4 of NEXTLINK Communications, Inc.
(Commission File No. 333-75923.
(11) Incorporated herein by reference to the exhibits filed with the current
report on Form 8-K filed on April 1, 1999 (Commission File No. 000-22939).
(12) Incorporated herein by reference to the exhibit filed with the Annual
Report on Form 10-K for the year ended December 31, 1998 of NEXTLINK
Communications, Inc. and NEXTLINK Capital, Inc. (Commission File No.
000-22939).
(B) FINANCIAL STATEMENT SCHEDULES: NONE.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 20 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the option of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of this Registration Statement through the date
of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
II-4
<PAGE>
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus 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.
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-5
<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-3 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 30th day of April, 1999.
<TABLE>
<S> <C> <C>
NEXTLINK COMMUNICATIONS, INC.
By: /s/ R. BRUCE EASTER, JR.
-----------------------------------------
R. Bruce Easter, Jr.
VICE PRESIDENT, GENERAL COUNSEL AND
SECRETARY
</TABLE>
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 attorney-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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
Chairman of the Board and
/s/ STEVEN W. HOOPER Chief Executive Officer
- ------------------------------ (Principal Executive April 30, 1999
Steven W. Hooper Officer)
/s/ WAYNE M. PERRY
- ------------------------------ Vice Chairman and Director April 30, 1999
Wayne M. Perry
Vice President, Chief
Financial Officer and
/s/ KATHLEEN H. ISKRA Treasurer (Principal
- ------------------------------ Financial Officer and April 30, 1999
Kathleen H. Iskra Principal Accounting
Officer)
- ------------------------------ Director
Craig O. McCaw
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
- ------------------------------ Director
Dennis Weibling
/s/ WILLIAM A. HOGLUND
- ------------------------------ Director April 20, 1999
William A. Hoglund
/s/ SHARON L. NELSON
- ------------------------------ Director April 20, 1999
Sharon L. Nelson
/s/ JEFFREY S. RAIKES
- ------------------------------ Director April 30, 1999
Jeffrey S. Raikes
/s/ GREGORY J. PARKER
- ------------------------------ Director April 30, 1999
Gregory J. Parker
- ------------------------------ Director
Nicolas Kauser
</TABLE>
II-7
<PAGE>
NEXTLINK COMMUNICATIONS, INC.
TO
UNITED STATES TRUST COMPANY OF NEW YORK
TRUSTEE
----------------------
Indenture
Dated as of September 25, 1997
----------------------
$400,000,000
9 5/8% SENIOR NOTES
DUE 2007
<PAGE>
NEXTLINK COMMUNICATIONS, INC.
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
----------- -------
<S> <C>
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
512
(a)(1)(B) ................................... 513
</TABLE>
- ----------
Note: This table of contents shall not, for any purpose, be deemed
to be a part of the Indenture.
-i-
<PAGE>
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
----------- -------
<S> <C>
(a)(2) ...................................... Not Applicable
(b) ......................................... 508
(c) ......................................... 104
Section 317(a)(1) ...................................... 503
(a)(2) ...................................... 504
(b) ......................................... 1003
Section 318(a) ......................................... 107
</TABLE>
- ----------
Note: This table of contents shall not, for any purpose, be deemed
to be a part of the Indenture.
-ii-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Parties................................................................................................... 1
Recitals of the Company................................................................................... 1
</TABLE>
ARTICLE ONE
Definitions and Other Provisions of
General Application
<TABLE>
<CAPTION>
SECTION 101. Definitions:
<S> <C> <C>
Act.................................................................................. 2
Acquired Debt........................................................................ 2
Affiliate............................................................................ 2
Agent Member......................................................................... 2
Asset Disposition.................................................................... 2
Attributable Value................................................................... 3
Bank Credit Agreement ............................................................... 4
Board of Directors................................................................... 4
Board Resolution..................................................................... 4
Business Day......................................................................... 4
Capital Lease Obligation............................................................. 4
Capital Stock........................................................................ 4
Change of Control ................................................................... 4
Commission........................................................................... 4
Common Equity........................................................................ 5
Company.............................................................................. 5
Company Request; Company Order....................................................... 5
Consolidated Capital Ratio........................................................... 5
Consolidated Cash Flow Available for
Fixed Charges...................................................................... 5
Consolidated Income Tax Expense...................................................... 6
Consolidated Interest Expense........................................................ 6
Consolidated Net Income.............................................................. 6
Consolidated Net Worth............................................................... 7
Consolidated Tangible Assets......................................................... 7
Corporate Trust Office............................................................... 7
corporation.......................................................................... 7
Debt................................................................................. 8
Default.............................................................................. 8
Defaulted Interest................................................................... 8
Depository........................................................................... 9
</TABLE>
- ----------
Note: This table of contents shall not, for any purpose, be deemed
to be a part of the Indenture.
-iii-
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Disqualified Stock................................................................... 9
DTC.................................................................................. 9
Eagle River.......................................................................... 9
Eligible Institution................................................................. 9
Event of Default..................................................................... 10
Exchange Act......................................................................... 10
Expiration Date...................................................................... 10
Global Security...................................................................... 10
Government Securities................................................................ 10
Guarantee............................................................................ 10
Holder............................................................................... 10
Incur................................................................................ 11
Indenture............................................................................ 11
Interest Payment Date................................................................ 11
Interest Rate or Currency Protection
Agreement.......................................................................... 11
Investment........................................................................... 11
Issue Date........................................................................... 12
Joint Venture........................................................................ 12
Lien................................................................................. 12
Marketable Securities................................................................ 12
Maturity............................................................................. 13
Net Available Proceeds............................................................... 13
Offer to Purchase.................................................................... 14
Officers' Certificate................................................................ 16
Opinion of Counsel................................................................... 17
Outstanding.......................................................................... 17
Paying Agent......................................................................... 18
Permitted Interest Rate or Currency
Protection Agreement............................................................... 18
Permitted Investment................................................................. 18
Permitted Liens...................................................................... 18
Person............................................................................... 19
Predecessor Security................................................................. 19
Preferred Dividends.................................................................. 20
Preferred Stock...................................................................... 20
Purchase Date........................................................................ 20
Purchase Money Debt.................................................................. 20
readily marketable cash equivalents.................................................. 20
Receivables.......................................................................... 21
Receivables Sale..................................................................... 21
Redemption Date...................................................................... 21
Redemption Price..................................................................... 21
</TABLE>
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Note: This table of contents shall not, for any purpose, be deemed
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Regular Record Date.................................................................. 21
Related Person....................................................................... 21
Responsible Officer.................................................................. 21
Restricted Subsidiary................................................................ 22
Sale and Leaseback Transaction....................................................... 22
SEC Reports.......................................................................... 22
Securities........................................................................... 22
Securities Act....................................................................... 22
Security Register; Security Registrar................................................ 22
Significant Subsidiary............................................................... 22
Special Record Date.................................................................. 22
Stated Maturity...................................................................... 23
Subordinated Debt.................................................................... 23
Subsidiary........................................................................... 24
Successor Security................................................................... 24
Telecommunications Assets............................................................ 24
Telecommunications Business.......................................................... 24
Trustee.............................................................................. 25
Trust Indenture Act.................................................................. 25
Unrestricted Subsidiary.............................................................. 25
Vendor Financing Facility............................................................ 26
Vice President....................................................................... 26
Voting Stock......................................................................... 26
Wholly-Owned Restricted Subsidiary................................................... 26
SECTION 102. Compliance Certificates and
Opinions........................................................................... 26
SECTION 103. Form of Documents Delivered to
Trustee............................................................................ 27
SECTION 104. Acts of Holders; Record Dates........................................................ 28
SECTION 105. Notices, Etc., to Trustee and
Company............................................................................ 31
SECTION 106. Notice to Holders; Waiver............................................................ 31
SECTION 107. Conflict with Trust Indenture Act.................................................... 32
SECTION 108. Effect of Headings and
Table of Contents.................................................................. 32
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SECTION 109. Successors and Assigns............................................................... 32
SECTION 110. Separability Clause.................................................................. 32
SECTION 111. Benefits of Indenture................................................................ 32
SECTION 112. Governing Law........................................................................ 33
SECTION 113. Legal Holidays....................................................................... 33
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally...................................................................... 33
SECTION 202. Form of Face of Security............................................................. 34
SECTION 203. Form of Reverse of Security.......................................................... 36
SECTION 204. Additional Provisions Required
in Global Security................................................................. 41
SECTION 205. Form of Trustee's Certificate of
Authentication..................................................................... 41
ARTICLE THREE
The Securities
SECTION 301. Title and Terms...................................................................... 42
SECTION 302. Denominations........................................................................ 43
SECTION 303. Execution, Authentication,
Delivery and Dating................................................................ 43
SECTION 304. Temporary Securities................................................................. 44
SECTION 305. Registration, Registration of
Transfer and Exchange............................................................. 44
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SECTION 306. Mutilated, Destroyed, Lost and
Stolen Securities.................................................................. 47
SECTION 307. Payment of Interest; Interest Rights
Preserved.......................................................................... 48
SECTION 308. Persons Deemed Owners................................................................ 49
SECTION 309. Cancellation......................................................................... 50
SECTION 310. Computation of Interest.............................................................. 50
SECTION 311. CUSIP Numbers........................................................................ 50
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of
Indenture.......................................................................... 50
SECTION 402. Application of Trust Money........................................................... 52
ARTICLE FIVE
Remedies
SECTION 501. Events of Default.................................................................... 52
SECTION 502. Acceleration of Maturity; Rescission
and Annulment...................................................................... 55
SECTION 503. Collection of Indebtedness and Suits
for Enforcement by Trustee......................................................... 56
SECTION 504. Trustee May File Proofs of Claim..................................................... 57
SECTION 505. Trustee May Enforce Claims Without
Possession of Securities........................................................... 58
SECTION 506. Application of Money Collected....................................................... 58
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SECTION 507. Limitation on Suits.................................................................. 58
SECTION 508. Unconditional Right of Holders to
Receive Principal, Premium and
Interest .......................................................................... 59
SECTION 509. Restoration of Rights and Remedies................................................... 60
SECTION 510. Rights and Remedies Cumulative....................................................... 60
SECTION 511. Delay or Omission Not Waiver......................................................... 60
SECTION 512. Control by Holders................................................................... 61
SECTION 513. Waiver of Past Defaults.............................................................. 61
SECTION 514. Undertaking for Costs................................................................ 62
SECTION 515. Waiver of Stay or Extension Laws..................................................... 62
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.................................................. 62
SECTION 602. Notice of Defaults................................................................... 63
SECTION 603. Certain Rights of Trustee............................................................ 63
SECTION 604. Not Responsible for Recitals or
Issuance of Securities............................................................. 64
SECTION 605. May Hold Securities.................................................................. 65
SECTION 606. Money Held in Trust.................................................................. 65
SECTION 607. Compensation and Reimbursement....................................................... 65
SECTION 608. Disqualification; Conflicting
Interests.......................................................................... 66
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SECTION 609. Corporate Trustee Required;
Eligibility........................................................................ 66
SECTION 610. Resignation and Removal; Appointment
of Successor....................................................................... 67
SECTION 611. Acceptance of Appointment by
Successor.......................................................................... 68
SECTION 612. Merger, Conversion, Consolidation
or Succession to Business.......................................................... 69
SECTION 613. Preferential Collection of Claims
Against Company.................................................................... 69
SECTION 614. Appointment of Authenticating Agent.................................................. 69
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and The Company
SECTION 701. Company to Furnish Trustee Names
and Addresses of Holders........................................................... 71
SECTION 702. Preservation of Information;
Communications to Holders.......................................................... 72
SECTION 703. Reports by Trustee................................................................... 72
SECTION 704. Reports by Company .................................................................. 73
ARTICLE EIGHT
Merger, Consolidation, Etc.
SECTION 801. Mergers, Consolidations and Certain
Sales of Assets.................................................................... 73
SECTION 802. Successor Substituted................................................................ 75
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ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without
Consent of Holders................................................................. 75
SECTION 902. Supplemental Indentures with
Consent of Holders................................................................. 76
SECTION 903. Execution of Supplemental Indentures................................................. 77
SECTION 904. Effect of Supplemental Indentures.................................................... 77
SECTION 905. Conformity with Trust Indenture Act.................................................. 78
SECTION 906. Reference in Securities to
Supplemental Indentures............................................................ 78
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and
Interest........................................................................... 78
SECTION 1002. Maintenance of Office or Agency...................................................... 78
SECTION 1003. Money for Security Payments to be
Held in Trust...................................................................... 79
SECTION 1004. Existence............................................................................ 81
SECTION 1005. Maintenance of Properties and
Insurance.......................................................................... 81
SECTION 1006. Payment of Taxes and Other Claims.................................................... 82
SECTION 1007. Limitation on Consolidated Debt...................................................... 82
SECTION 1008. Limitation on Debt and Preferred
Stock of Restricted Subsidiaries................................................... 85
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SECTION 1009. Limitation on Restricted Payments.................................................... 88
SECTION 1010. Limitations on Dividend and Other
Payment Restrictions Affecting
Restricted Subsidiaries............................................................ 90
SECTION 1011. Limitation on Liens ................................................................ 91
SECTION 1012. Limitation on Sale and Leaseback
Transactions....................................................................... 93
SECTION 1013. Limitation on Asset Dispositions..................................................... 93
SECTION 1014. Limitation on Issuances and Sales
of Capital Stock of Restricted
Subsidiaries....................................................................... 95
SECTION 1015. Transactions with Affiliates and
Related Persons.................................................................... 96
SECTION 1016. Change of Control.................................................................... 97
SECTION 1017. Provision of Financial Information................................................... 98
SECTION 1018. Statement by Officers as to Default.................................................. 98
SECTION 1019. Waiver of Certain Covenants.......................................................... 99
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption.................................................................. 99
SECTION 1102. Applicability of Article............................................................. 100
SECTION 1103. Election to Redeem; Notice to
Trustee............................................................................ 100
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SECTION 1104. Securities to Be Redeemed Pro Rata................................................... 100
SECTION 1105. Notice of Redemption................................................................. 101
SECTION 1106. Deposit of Redemption Price.......................................................... 102
SECTION 1107. Securities Payable on Redemption
Date............................................................................... 102
SECTION 1108. Securities Redeemed in Part.......................................................... 103
ARTICLE TWELVE
Defeasance and Covenant Defeasance
SECTION 1201. Company's Option to Effect Defeasance
or Covenant Defeasance............................................................. 103
SECTION 1202. Defeasance and Discharge............................................................. 103
SECTION 1203. Covenant Defeasance ................................................................ 104
SECTION 1204. Conditions to Defeasance or Covenant
Defeasance......................................................................... 104
SECTION 1205. Deposited Money and U.S. Government
Obligations to Be Held in Trust;
Other Miscellaneous Provisions..................................................... 107
SECTION 1206. Reinstatement........................................................................ 108
SECTION 1207. Repayment to Company................................................................. 108
SIGNATURES.................................................................................................... 109
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<PAGE>
INDENTURE, dated as of October 1, 1997 between NEXTLINK
Communications, Inc., a corporation organized under the laws of the State of
Washington (the "Company"), having its principal office at 155 108th Avenue
N.E., 8th Floor, Bellevue, Washington 98004, and United States Trust Company of
New York, duly organized and existing under the laws of the State of New York,
as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of
$400,000,000 aggregate principal amount of its 9 5/8% Senior Notes Due 2007 (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.
All things necessary to make the Securities, when executed by
the Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities, as
follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. DEFINITIONS.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either
<PAGE>
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.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent Member" means any member of, or participant in, the
Depository.
"Asset Disposition" by any Person means any transfer,
conveyance, sale, lease or other disposition by such
-2-
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Person or any of its Restricted Subsidiaries (including a consolidation or
merger or other sale of any such Restricted Subsidiary with, into or to another
Person in a transaction in which such Restricted Subsidiary ceases to be a
Restricted Subsidiary of the specified Person, but excluding a disposition by a
Restricted Subsidiary of such Person to such Person or a Wholly-Owned Restricted
Subsidiary of such Person or by such Person to a Wholly-Owned Restricted
Subsidiary of such Person) of (i) shares of Capital Stock or other ownership
interests of a Restricted Subsidiary of such Person (other than as permitted by
the provisions of Section 1008 or pursuant to a transaction in compliance with
Section 801), (ii) substantially all of the assets of such Person or any of its
Restricted Subsidiaries representing a division or line of business (other than
as part of a Permitted Investment) or (iii) other assets or rights of such
Person or any of its Restricted Subsidiaries other than (A) in the ordinary
course of business or (B) that constitutes a Restricted Payment which is
permitted by the provisions of Section 1009; PROVIDED that a transaction
described in clauses (i), (ii) and (iii) shall constitute an Asset Disposition
only if the aggregate consideration for such transfer, conveyance, sale, lease
or other disposition is equal to $5 million or more in any 12-month period.
"Attributable Value" means, as to any particular lease under
which any Person is at the time liable other than a Capital Lease Obligation,
and at any date as of which the amount thereof is to be determined, the total
net amount of rent required to be paid by such Person under such lease during
the initial term thereof as determined in accordance with generally accepted
accounting principles, discounted from the last date of such initial term to the
date of determination at a rate per annum equal to the discount rate which would
be applicable to a Capital Lease Obligation with like term in accordance with
generally accepted accounting principles. The net amount of rent required to be
paid under any such lease for any such period shall be the aggregate amount of
rent payable by the lessee with respect to such period after excluding amounts
required to be paid on account of insurance, taxes, assessments, utility,
operating and labor costs and similar charges. In the case of any lease which is
terminable by the lessee upon the payment of penalty, such net amount shall also
include the lesser of the amount of such penalty (in which case no rent shall be
considered as required to be paid under such lease subsequent to the first date
upon which it may be so terminated) or the rent which would otherwise be
required to be paid if such lease is not so terminated. "Attributable Value"
means, as to a Capital Lease Obligation, the principal amount thereof.
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"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 the board of directors of the
Company.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in The Borough of
Manhattan, The City of New York, New York are authorized or obligated by law or
executive order to close.
"Capital Lease Obligation" of any Person means the obligation
to pay rent or other payment amounts under a lease of (or other Debt
arrangements conveying the right to use) real or personal property of such
Person which is required to be classified and accounted for as a capital lease
or a liability on the face of a balance sheet of such Person in accordance with
generally accepted accounting principles (a "Capital Lease"). The stated
maturity of such obligation shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty. The principal
amount of such obligation shall be the capitalized amount thereof that would
appear on the face of a balance sheet of such Person in accordance with
generally accepted accounting principles.
"Capital Stock" of any Person means any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock or other equity participations, including partnership interests, whether
general or limited, of such Person.
"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
perform-
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ing 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 of
such Person then outstanding to (ii) the aggregate consolidated Capital Stock
(other than Disqualified Stock) and paid-in capital (other than in respect of
Disqualified Stock) of such Person as of such date.
"Consolidated Cash Flow Available for Fixed Charges" for any
period means the Consolidated Net Income of the Company and its Restricted
Subsidiaries for such period increased by the sum of (i) Consolidated Interest
Expense of the Company and its Restricted Subsidiaries for such period, plus
(ii) Consolidated Income Tax Expense of the Company and its Restricted
Subsidiaries for such period, plus (iii) the consolidated depreciation and
amortization expense included in the income statement of the Company and its
Restricted Subsidiaries for such period, plus (iv) any non-cash expense related
to the issuance to employees of the Company or any Restricted Subsidiary of the
Company of options to purchase Capital Stock of the Company or such Restricted
Subsidiary, plus (v) any charge related to any premium or penalty paid in
connection with redeeming or retiring any Debt prior to its stated maturity;
PROVIDED, HOWEVER, that there shall be excluded therefrom the Consolidated Cash
Flow Available for Fixed Charges (if positive) of any Restricted Subsidiary of
the Company (calculated separately for such Restricted Subsidiary in the same
manner as provided above for the Company) that is subject to a restriction which
prevents the payment of dividends or the making of distributions to the
-5-
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Company or another Restricted Subsidiary of the Company to the extent of such
restriction.
"Consolidated Income Tax Expense" for any period means the
consolidated provision for income taxes of the Company and its Restricted
Subsidiaries for such period calculated on a consolidated basis in accordance
with generally accepted accounting principles.
"Consolidated Interest Expense" means for any period the
consolidated interest expense included in a consolidated income statement
(excluding interest income) of the Company and its Restricted Subsidiaries for
such period calculated on a consolidated basis in accordance with generally
accepted accounting principles, including without limitation or duplication (or,
to the extent not so included, with the addition of), (i) the amortization of
Debt discounts; (ii) any payments or fees with respect to letters of credit,
bankers' acceptances or similar facilities; (iii) fees with respect to interest
rate swap or similar agreements or foreign currency hedge, exchange or similar
agreements; (iv) Preferred Stock dividends of the Company and its Restricted
Subsidiaries (other than dividends paid in shares of Preferred Stock that is not
Disqualified Stock) declared and paid or payable; (v) accrued Disqualified Stock
dividends of the Company and its Restricted Subsidiaries, whether or not
declared or paid; (vi) interest on Debt guaranteed by the Company and its
Restricted Subsidiaries; and (vii) the portion of any Capital Lease Obligation
paid during such period that is allocable to interest expense.
"Consolidated Net Income" for any period means the
consolidated net income (or loss) of the Company and its Restricted Subsidiaries
for such period determined on a consolidated basis in accordance with generally
accepted accounting principles; PROVIDED that there shall be 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
-6-
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gain or loss realized on the termination of any employee pension benefit plan
and (h) the tax effect of any of the items described in clauses (a) through (g)
above; PROVIDED, FURTHER, that for purposes of any determination pursuant to the
provisions of Section 1009 there shall further be excluded therefrom the net
income (but not net loss) of any Restricted Subsidiary of the Company that is
subject to a restriction which prevents the payment of dividends or the making
of distributions to the Company or another Restricted Subsidiary of the Company
to the extent of such restriction.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with generally accepted accounting principles, less amounts
attributable to Disqualified Stock of such Person; PROVIDED that, with respect
to the Company, adjustments following the date of this Indenture to the
accounting books and records of the Company in accordance with Accounting
Principles Board Opinions Nos. 16 and 17 (or successor opinions thereto) or
otherwise resulting from the acquisition of control of the Company by another
Person shall not be given effect to.
"Consolidated Tangible Assets" of any Person means the total
amount of assets (less applicable reserves and other properly deductible items)
which under generally accepted accounting principles would be included on a
consolidated balance sheet of such Person and its Restricted Subsidiaries after
deducting therefrom all goodwill, trade 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.
-7-
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"Debt" means (without duplication), with respect to any
Person, whether recourse is to all or a portion of the assets of such Person and
whether or not contingent, (i) every obligation of such Person for money
borrowed, (ii) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including any such obligations Incurred in
connection with the acquisition of property, assets or businesses, (iii) every
reimbursement obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of such
Person, (iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (including securities repurchase
agreements but excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business which are not overdue or which are being
contested in good faith), (v) every Capital Lease Obligation of such Person,
(vi) all Receivables Sales of such Person, together with any obligation of such
Person to pay any discount, interest, fees, indemnities, penalties, recourse,
expenses or other amounts in connection therewith, (vii) all obligations to
redeem Disqualified Stock issued by such Person, (viii) every obligation under
Interest Rate or Currency Protection Agreements of such Person and (ix) every
obligation of the type referred to in clauses (i) through (viii) of another
Person and all dividends of another Person the payment of which, in either case,
such Person has Guaranteed. The "amount" or "principal amount" of Debt at any
time of determination as used herein represented by (a) any Debt issued at a
price that is less than the principal amount at maturity thereof, shall be the
amount of the liability in respect thereof determined in accordance with
generally accepted accounting principles, (b) any Receivables Sale, shall be the
amount of the unrecovered capital or principal investment of the purchaser
(other than the Company or a Wholly-Owned Restricted Subsidiary of the Company)
thereof, excluding amounts representative of yield or interest earned on such
investment, (c) any Disqualified Stock, shall be the maximum fixed redemption or
repurchase price in respect thereof, (d) any Capital Lease Obligation, shall be
determined in accordance with the definition thereof, or (e) any Permitted
Interest Rate or Currency Protection Agreement, shall be zero. In no event shall
Debt include any liability for taxes.
"Default" means an event that with the passing of time or the
giving of notice or both shall constitute an Event of Default.
"Defaulted Interest" has the meaning specified in Section 307.
-8-
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"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 which, by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof,
in whole or in part, on or prior to the final Stated Maturity of the Securities;
PROVIDED, HOWEVER, that any Preferred Stock which would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require the Company to repurchase or redeem such Preferred Stock upon the
occurrence of a Change of Control occurring prior to the final Stated Maturity
of the Securities shall not constitute Disqualified Stock if the change of
control provisions applicable to such Preferred Stock are no more favorable to
the holders of such Preferred Stock than the provisions applicable to the
Securities contained in Section 1016 and such Preferred Stock specifically
provides that the Company will not repurchase or redeem any such stock pursuant
to such provisions prior to the Company's repurchase of such Securities as are
required to be repurchased pursuant to Section 1016.
"DTC" means The Depository Trust Company.
"Eagle River" means Eagle River Investments, L.L.C., a limited
liability company formed under the laws of the State of Washington.
"Eligible Institution" means a commercial banking institution
that has combined capital and surplus of not less than $500 million or its
equivalent in foreign currency, whose debt is rated "A-3" or higher, "A-" or
higher or "A-" or higher according to Moody's Investors Service, Inc., Standard
& Poor's Ratings Group or Duff & Phelps Credit Rating Co. (or such similar
equivalent rating by at least one "nationally recognized statistical rating
organization" (as defined in Rule 436 under the Securities Act)) respectively,
at the time as of which any investment or rollover therein is made.
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"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.
"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 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.
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"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 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
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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 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
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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 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
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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 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
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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, 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
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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 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
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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.
"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 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
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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,
and (v) Investments made as a result of the receipt of noncash consideration
from an Asset Disposition that was made pursuant to and in compliance with
Section 1013 of this Indenture.
"Permitted Liens" means (a) Liens for taxes, assessments,
governmental charges or claims which are not yet delinquent or which are being
contested in good faith by appropriate proceedings, if a reserve or other
appropriate provision, if any, as shall be required in conformity with generally
accepted accounting principles shall have been made therefor; (b) other Liens
incidental to the conduct of the Company's and its Restricted Subsidiaries'
business or the ownership of its property and assets not securing any Debt, and
which do not in the aggregate materially detract
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from the value of the Company's and its Restricted Subsidiaries' property or
assets when taken as a whole, or materially impair the use thereof in the
operation of its business; (c) Liens with respect to assets of a Restricted
Subsidiary granted by such Restricted Subsidiary to the Company to secure Debt
owing to the Company; (d) pledges and deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of statutory obligations (including to secure government contracts);
(e) deposits made to secure the performance of tenders, bids, leases, and other
obligations of like nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (f) zoning
restrictions, servitudes, easements, rights-of-way, restrictions and other
similar charges or encumbrances incurred in the ordinary course of business
which, in the aggregate, do not materially detract from the value of the
property subject thereto or interfere with the ordinary conduct of the business
of the Company or its Restricted Subsidiaries; (g) Liens arising out of
judgments or awards against the Company or any Restricted Subsidiary with
respect to which the Company or such Restricted Subsidiary is prosecuting an
appeal or proceeding for review and the Company or such Restricted Subsidiary is
maintaining adequate reserves in accordance with generally accepted accounting
principles; (h) any interest or title of a lessor in the property subject to any
lease other than a Capital Lease; and (i) any statutory warehousemen's,
materialmen's or other similar Liens for sums not then due and payable (or
which, if due and payable, are being contested in good faith and with respect to
which adequate reserves are being maintained to the extent required by generally
accepted accounting principles).
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint stock company,
trust, unincorporated organization, government or agency or political
subdivision thereof or any other entity.
"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.
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"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 Date" has the meaning set forth in the definition of
"Offer to Purchase" in this Section 101.
"Purchase Money Debt" means (i) Acquired Debt Incurred in
connection with the acquisition of Telecommunications Assets and (ii) Debt of
the Company or of any Restricted Subsidiary of the Company (including, without
limitation, Debt represented by Capital Lease Obligations, Vendor Financing
Facilities, mortgage financings and purchase money obligations) Incurred for the
purpose of financing all or any part of the cost of construction, acquisition or
improvement by the Company or any Restricted Subsidiary of the Company or any
Joint Venture of any Telecommunications Assets of the Company, any Restricted
Subsidiary of the Company or any Joint Venture, and including any related notes,
Guarantees, collateral documents, instruments and agreements executed in
connection therewith, as the same may be amended, supplemented, modified or
restated from time to time.
"readily marketable cash equivalents" means (i) marketable
securities issued or directly and unconditionally guaranteed by the United
States Government or issued by any agency thereof and backed by the full faith
and credit of the United States; (ii) marketable direct obligations issued by
any state of the United States of America or any 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 &
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Poor's Ratings Group or "A-1" or higher according to Duff & Phelps Credit Rating
Co. (or such similar equivalent rating by at least one "nationally recognized
statistical rating organization" (as defined in Rule 436 under the Securities
Act)); and (iv) certificates of deposit or bankers' acceptance maturing within
one year from the date of acquisition thereof issued by any commercial bank
organized under the laws of the United States of America or any state thereof or
the District of Columbia having unimpaired capital and surplus of not less than
$100,000,000.
"Receivables" means receivables, chattel paper, instruments,
documents or intangibles evidencing or relating to the right to payment of money
in respect of the sale of goods or services.
"Receivables Sale" of any Person means any sale of Receivables
of such Person (pursuant to a purchase facility or otherwise), other than in
connection with a disposition of the business operations of such Person relating
thereto or a disposition of defaulted Receivables for purpose of collection and
not as a financing arrangement.
"Redemption Date", when used with respect to any Security to
be redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to
be redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the September 15 or March 15 (whether or not a Business Day),
as the case may be, next preceding such Interest Payment Date.
"Related Person" of any Person means any other Person directly
or indirectly owning (a) 10% or more of the Outstanding Common Equity of such
Person (or, in the case of a Person that is not a corporation, 10% or more of
the equity interest in such Person) or (b) 10% or more of the combined voting
power of the Voting Stock of such Person.
"Responsible Officer", when used with respect to the Trustee,
means the chairman or any vice-chairman of the board of directors, the chairman
or any vice-chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any vice president, the
secretary, any assistant secretary, the treasurer, any assistant treasurer, the
cashier, any assistant cashier, any trust officer or assistant trust officer,
the controller or
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any assistant controller or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Subsidiary" of the Company means any Subsidiary,
whether existing on or after the date of this Indenture, unless such Subsidiary
is an Unrestricted Subsidiary.
"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.
"SEC Reports" has the meaning specified in Section
704.
"Securities" has the meaning specified in the
second paragraph of this instrument.
"Securities Act" means the Securities Act of 1933 and any
statute successor thereto, in each case as amended from time to time.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 305(b).
"Significant Subsidiary" means a Restricted Subsidiary that is
a "significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under
the Securities Act and the Exchange Act.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section 307.
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"Stated Maturity", when used with respect to any Security or
any installment of interest thereon, means the date specified in such Security
as the fixed date on which the principal of such Security or such installment of
interest, as the case may be, is due and payable.
"Subordinated Debt" means Debt of the Company as to which the
payment of principal of (and premium, if any) and interest and other payment
obligations in respect of such Debt shall be subordinate to the prior payment in
full of the Securities to at least the following extent: (i) no payments of
principal of (or premium, if any) or interest on or otherwise due in respect of
such Debt may be permitted for so long as any default in the payment of
principal (or premium, if any) or interest on the Securities exists; (ii) in the
event that any other default that with the passing of time or the giving of
notice, or both, would constitute an Event of Default exists with respect to the
Securities, upon notice by 25% or more in principal amount of the Securities to
the Trustee, the Trustee shall have the right to give notice to the Company and
the holders of such Debt (or trustees or agents therefor) of a payment blockage,
and thereafter no payments of principal of (or premium, if any) or interest on
or otherwise due in respect of such Debt may be made for a period of 179 days
from the date of such notice or for the period until such default has been cured
or waived or ceased to exist and any acceleration of the Securities has been
rescinded or annulled, whichever period is shorter (which Debt may provide 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
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by the Company) which is conditioned upon a change of control of the Company
pursuant to provisions substantially similar to those of Section 1016 (and which
shall provide that such Debt will not be repurchased pursuant to such provisions
prior to the Company's repurchase of the Securities required to be repurchased
by the Company pursuant to the provisions of Section 1016.
"Subsidiary" of any Person means (i) a corporation more than
50% of the combined voting power of the outstanding Voting Stock of which is
owned, directly or indirectly, by such Person or by one or more other
Subsidiaries of such Person or by such Person and one or more Subsidiaries
thereof or (ii) any other Person (other than a corporation) in which such
Person, or one or more other Subsidiaries of such Person or such Person and one
or more other Subsidiaries thereof, directly or indirectly, has at least a
majority ownership and power to direct the policies, management and affairs
thereof.
"Successor Security" of any particular Security means every
Security issued after, and evidencing all or a portion of the same debt as that
evidenced by, such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 306 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall
be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen
Security.
"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
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the determination of what constitutes a Telecommunications Business shall be
made in good faith by the Board of Directors, which determination shall be
conclusive.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as
in force at the date as of which this instrument was executed; PROVIDED,
HOWEVER, that in the event the Trust Indenture Act of 1939 is amended after such
date, "Trust Indenture Act" means, to the extent required by any such amendment,
the Trust Indenture Act of 1939 as so amended.
"Unrestricted Subsidiary" means (1) any Subsidiary
of the Company designated as such by the Board of Directors as set forth below
where (a) neither the Company nor any of its other Subsidiaries (other than
another Unrestricted Subsidiary) (i) provides credit support for, or Guarantee
of, any Debt of such Subsidiary or any Subsidiary of such Subsidiary (including
any undertaking, agreement or instrument evidencing such Debt) or (ii) is
directly or indirectly liable for any Debt of such Subsidiary or any Subsidiary
of such Subsidiary, and (b) no default with respect to any Debt of such
Subsidiary or any Subsidiary of such Subsidiary (including any right which the
holders thereof may have to take enforcement action against such Subsidiary)
would permit (upon notice, lapse of time or both) any holder of any other Debt
of the Company and its Restricted Subsidiaries to declare a default on such
other Debt or cause the payment thereof to be accelerated or payable prior to
its 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
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Restricted Payment for the purpose of calculating the aggregate amount available
for Restricted Payments thereunder. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary, PROVIDED that,
immediately after giving effect to such designation, the Company could Incur at
least $1.00 of additional Debt pursuant to the first paragraph of Section 1007.
"Vendor Financing Facility" means any agreements between the
Company or a Restricted Subsidiary of the Company and one or more vendors or
lessors of equipment to the Company or any of its Restricted Subsidiaries (or
any affiliate of any such vendor or lessor) providing financing for the
acquisition by the Company or any such Restricted Subsidiary of equipment from
any such vendor or lessor.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Voting Stock" of any Person means Capital Stock of such
Person which ordinarily has voting power for the election of directors (or
persons performing similar functions) of such Person, whether at all times or
only so long as no senior class of securities has such voting power by reason of
any contingency.
"Wholly-Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person 99% or more of the outstanding Capital
Stock or other ownership interests of which (other than directors' qualifying
shares) shall at the time be owned by such Person or by one or more Wholly-
Owned Restricted Subsidiaries of such Person or by such Person and one or more
Wholly-Owned Restricted Subsidiaries of such Person.
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee
to take any action under any provision of this Indenture, the Company shall
furnish to the Trustee such certificates and opinions as may be required under
the Trust Indenture Act and under this Indenture. Each such certificate or
opinion shall be given in the form of an Officers' Certificate, if to be given
by an officer of the Company, or an Opinion of Counsel, if to be given by
counsel, and shall comply with the requirements of the Trust Indenture Act and
any other requirement set forth in this Indenture.
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Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certif ied 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
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reasonable care should know, that the certificate with respect to such matters
is erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 104. ACTS OF HOLDERS; RECORD DATES.
Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied 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
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and the Holder of every Security issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done,
omitted or suffered to be done by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Security.
The Company may set any day as a record date for the purpose
of determining the Holders of Outstanding Securities entitled to give, make or
take any request, demand, authorization, direction, notice, consent, waiver or
other action provided or permitted by this Indenture to be given, made or taken
by Holders of Securities, PROVIDED that the Company may not set a record date
for, and the provisions of this paragraph shall not apply with respect to, the
giving or making of any notice, declaration, request or direction referred to in
the next paragraph. If not set by the Company prior to the first solicitation of
a Holder made by any Person in respect of any such matter referred to in the
foregoing sentence, the record date for any such matter shall be the 30th day
(or, if later, the date of the most recent list of Holders required to be
provided pursuant to Section 701) prior to such first solicitation. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities on such record date, and no other Holders, shall be entitled to take
the relevant action, whether or not such Holders remain Holders after such
record date; PROVIDED that no such action shall be effective hereunder unless
taken on or prior to the applicable Expiration Date by Holders of the requisite
principal amount of Outstanding Securities on such record date. Nothing in this
paragraph shall be construed to prevent the Company from setting a new record
date for any action for which a record date has previously been set pursuant to
this paragraph (whereupon the record date previously set shall automatically and
with no action by any Person be cancelled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities on the date such
action is taken. Promptly after any record date is set pursuant to this
paragraph, the Company, at its own expense, shall cause notice of such record
date, the proposed action by Holders and the applicable Expiration Date to be
given to the Trustee in writing and to each Holder of Securities in the manner
set forth in Section 106.
The Trustee may set any day as a record date for the purpose
of determining the Holders of Outstanding Securities entitled to join in the
giving or making of (i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 502, (iii) any request to
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institute proceedings referred to in Section 507(2) or (iv) any direction
referred to in Section 512. If any record date is set pursuant to this
paragraph, the Holders of Outstanding Securities on such record date, and no
other Holders, shall be entitled to join in such notice, declaration, request or
direction, whether or not such Holders remain Holders after such record date;
PROVIDED that no such action shall be effective hereunder unless taken on or
prior to the applicable Expiration Date by Holders of the requisite principal
amount of Outstanding Securities on such record date. Nothing in this paragraph
shall be construed to prevent the Trustee from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with
no action by any Person be cancelled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities on the date such
action is taken. Promptly after any record date is set pursuant to this
paragraph, the Trustee, at the Company's expense, shall cause notice of such
record date, the proposed action by Holders and the applicable Expiration Date
to be given to the Company in writing and to each Holder of Securities in the
manner set forth in Section 106.
With respect to any record date set pursuant to this Section,
the party hereto which sets such record dates may designate any day as the
"Expiration Date" and from time to time may change the Expiration Date to any
earlier or later day; PROVIDED that no such change shall be effective unless
notice of the proposed new Expiration Date is given to the other party hereto in
writing, and to each Holder of Securities in the manner set forth in Section
106, on or prior to the existing Expiration Date. If an Expiration Date is not
designated with respect to any record date set pursuant to this Section, the
party hereto which set such record date shall be deemed to have initially
designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be
later than the 180th day after the applicable record date.
Without limiting the foregoing, a Holder entitled hereunder to
take any action hereunder with regard to any particular Security may do so with
regard to all or any part of the principal amount of such Security or by one or
more duly appointed agents each of which may do so pursuant to such appointment
with regard to all or any part of such principal amount.
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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,
(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
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impracticable to give such notice by mail, then such notifi cation as shall be
made with the approval of the Trustee shall constitute a sufficient notification
for every purpose hereunder.
SECTION 107. CONFLICT WITH TRUST INDENTURE ACT.
The Trust Indenture Act shall apply as a matter of contract to
this Indenture for purposes of interpretation, construction and defining the
rights and obligations here under. 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
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Holders of Securities, any benefit or any legal or equitable right, remedy or
claim under this Indenture.
SECTION 112. GOVERNING LAW.
This Indenture and the Securities shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 113. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date,
Purchase Date or Stated Maturity of any Security shall not be a Business Day,
then (notwithstanding any other provision of this Indenture or of the
Securities) payment of interest or principal (and premium, if any) need not be
made on such date, but may be made on the next succeeding Business Day with the
same force and effect as if made on the Interest Payment Date, Redemption Date,
Purchase Date or at the Stated Maturity, PROVIDED that no interest shall accrue
for the period from and after such Interest Payment Date, Redemption Date,
Purchase Date or Stated Maturity, as the case may be.
ARTICLE TWO
Security Forms
SECTION 201. FORMS GENERALLY.
The 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.
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.
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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 the Security is a Global Security, insert the
legends required by Section 204 of the Indenture]
NEXTLINK Communications, Inc.
9 5/8% SENIOR NOTES DUE 2007
CUSIP NUMBER: 65333H AA 1
No. $
------ ---------------
NEXTLINK Communications, Inc., a corporation organized under
the laws of the State of Washington (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of _____________ Dollars on October 1, 2007, and to pay interest
thereon from October 1, 1997 or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, semi-annually on October 1,
and April 1 in each year, commencing April 1, 1998 at the rate of 9 5/8% per
annum, until the principal hereof is paid or made available for payment. The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in such Indenture, be paid to the Person in whose
name this Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest, which shall be
September 15 or March 15 (whether or not a Business Day), as the case may be,
next preceding such Interest Payment Date. Any such interest not so punctually
paid or duly provided for will forthwith cease to be payable to the Holder on
such Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Securities
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such notice
as may be
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required by such exchange, all as more fully provided in said Indenture.
In the case of a default in payment of principal and premium,
if any, upon acceleration or redemption, interest shall be payable pursuant to
the preceding paragraph on such overdue principal (and premium, if any), such
interest shall be payable on demand and, if not so paid on demand, such interest
shall itself bear interest at the rate of 1% per annum (to the extent that the
payment of such interest shall be legally enforceable), and shall accrue from
the date of such demand for payment to the date payment of such interest has
been made or duly provided for, and such interest on unpaid interest shall also
be payable on demand.
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: October 1, 1997.
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NEXTLINK Communications, Inc.
By
------------------------------
Name: Charles P. Daniels
Title: Vice President
Attest:
- ------------------------------
Name: R. Bruce Easter, Jr.
Title: Vice President, General
Counsel & Secretary
SECTION 203. FORM OF REVERSE OF SECURITY.
This Security is one of a duly authorized issue of Securities
of the Company designated as its 95/8% Senior Notes Due 2007 (the "Securities")
issued under an Indenture, dated as of October 1, 1997 (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 $400,000,000. 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 October 1,
2002 and prior to maturity, as a whole or in part, at the election of the
Company, at the following Redemption Prices (expressed as percentages of the
principal amount) plus accrued and unpaid interest 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
October 1, of each of the years indicated below:
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<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2002 104.813%
2003 103.208%
2004 101.604%
</TABLE>
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.
The Securities are further subject to redemption prior to
October 1, 2002 only in the event that on or before October 1, 2000 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
33 1/3% of the original principal amount of the Securities, PROVIDED, HOWEVER,
that Securities in an amount equal to at least $266.7 million remain Outstanding
after such redemption. Such redemption must occur on a Redemption Date within 90
days of any such sale and upon not less than 30 nor more than 60 days' notice by
mail to each Holder of Securities to be redeemed at such Holder's address
appearing in the Security Register, in amounts of $1,000 or an integral multiple
of $1,000 at a Redemption Price of 109.625% of their principal amount plus
accrued and unpaid interest, if any, to but excluding the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
to receive interest due on an Interest Payment Date that is on or prior to the
Redemption Date).
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)
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certain Net Available Proceeds are available to the Company as a result of any
Asset Disposition, the Company shall be required to make an Offer to Purchase
for all or a specified portion of the Securities.
In the event of redemption or purchase pursuant to an Offer to
Purchase of this Security in part only, a new Security or Securities of like
tenor for the unredeemed or unpurchased portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.
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.
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
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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,
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and none of the Company, the Trustee or any such agent shall be affected by
notice to the contrary.
Interest on this Security shall be computed on the basis of a
360-day year of twelve 30-day months.
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.
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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
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ARTICLE THREE
The Securities
SECTION 301. TITLE AND TERMS.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $400,000,000,
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 Securities shall be known and designated as the "95/8%
Senior Notes Due 2007" of the Company. The Stated Maturity of the Securities
shall be October 1, 2007. The Securities shall bear interest at the rate of
95/8% per annum, from October 1, 1997 or from the most recent Interest Payment
Date thereafter to which interest has been paid or duly provided for, as the
case may be, payable semi-annually on October 1 and April 1, commencing April 1,
1998, until the principal thereof is paid or made available for payment.
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.
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 the
Securities are issued in certificated form, 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.
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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.
SECTION 302. DENOMINATIONS.
The Securities are issuable only in registered form without
coupons 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.
Each Security shall be dated the date of its authentication.
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No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Security a certificate of authentication substantially in the form provided for
herein executed by the Trustee by manual signature, and such certificate upon
any Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder.
SECTION 304. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities, the Company
may execute, and upon a Company Order the Trustee shall authenticate and
deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at any office or agency of the Company designated pursuant to Section
1002, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like tenor and principal amount
of definitive Securities of authorized denominations. Until so exchanged, the
temporary 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.
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
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purpose of registering Securities and transfers and exchanges of Securities as
herein provided. Such Security Register shall distinguish between Original
Securities and Exchange Securities.
Upon surrender for registration of transfer of any Security at
an office or agency of the Company designated pursuant to Section 1002 for such
purpose, 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 the applicable legends set forth in Section 202.
At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denomina tions and of a like tenor and
aggregate principal amount and bearing the applicable legends set forth in
Section 202, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the 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 entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for regis tration 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, 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
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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.
The provisions of Clauses (1), (2), (3) and (4) below shall
apply only to Global Securities:
(1) Each Global Security authenticated under this Indenture
shall be registered in the name of the Depositary designated for such
Global Security or a nominee thereof and delivered to such Depositary
or a nominee thereof or custodian therefor, and each such Global
Security shall constitute a single Security for all purposes of this
Indenture.
(2) Notwithstanding any other provisions in this Indenture, no
Global Security may be exchanged in whole or in part for Securities
registered, and no transfer of a Global Security in whole or in part
may be registered, in the name of any Person other than the Depositary
for such Global Security or a nominee thereof unless (A) such
Depositary (i) has notified the Company that it is unwilling or unable
to continue as Depositary for such Global Security or (ii) has ceased
to be a clearing agency registered under the Exchange Act, or (B) there
shall have occurred and be continuing an Event of Default with respect
to such Global Security.
(3) Subject to Clause (2) above, any exchange of a Global
Security for other Securities may be made in whole or in part, and all
Securities issued in exchange for a Global Security or any portion
thereof shall be registered in such names as the Depositary for such
Global Security shall direct.
(4) Every Security authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu of, a Global
Security or any portion thereof, whether pursuant to this Section,
Section 304, 306, 906 or 1108 or otherwise, shall be authenticated and
delivered in the form of, and shall be, a Global Security, unless such
Security is registered in the name of a Person other than the
Depositary for such Global Security or a nominee thereof.
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SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.
If any mutilated Security is surrendered to the Trustee, the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security and (ii) such security or indemnity as may be required by them to save
each of them and any agent of either of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company shall execute and the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Company in the discretion
of the Company may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
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SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Security which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall be paid to the
Person in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest.
Any interest 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 pay ment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Security and the date of the proposed
payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
Clause provided. Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not more than
15 days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify
the Company of such
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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.
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.
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SECTION 309. CANCELLATION.
All Securities surrendered for payment, redemp tion,
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.
SECTION 311. CUSIP NUMBERS.
The Company shall in issuing the Securities use CUSIP numbers,
and the Trustee shall use the applicable CUSIP number in notices of redemption
or exchange as a convenience to the Holders; PROVIDED, that any such notice may
state that no representation is made as to the accuracy of correctness of the
CUSIP number or numbers printed in the notice or on the certificates
representing the Securities and that reliance may be placed only on the other
identification numbers printed on the certificates representing the Securities.
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
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apparently mutilated, defaced, destroyed, lost or stolen Securities, (iii)
rights of holders of Securities to receive payment of principal of and premium,
if any, and interest on the Securities, (iv) rights, obligations and immunities
of the Trustee under this Indenture and (v) rights of the holders of the
Securities as beneficiaries of this Indenture with respect to any property
deposited with the Trustee payable to all or any of them), and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture, when
(1) either
(A) the Company will have paid or caused to be paid
the principal of and premium, if any, and interest on the
Securities as and when the same will have become due and
payable; or
(B) all outstanding Securities (except lost, stolen
or destroyed Securities which have been replaced or paid) have
been delivered to the Trustee for cancellation;
and the Company, in the case of (A) above, has deposited or
caused to be deposited with the Trustee as trust funds in
trust for the purpose an amount sufficient to pay and
discharge the entire indebtedness on such Securities not
theretofore delivered to the Trustee for cancellation, for
principal of and premium, if any, and interest to the date of
such deposit (in the case of Securities which have become due
and payable) or to the Stated Maturity or Redemption Date, as
the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company;
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with; and
(4) the Trustee shall have received such other documents and
assurances as the Trustee shall have reasonably requested.
Notwithstanding the satisfaction and discharge of this Indenture, (i) the
obligations of the Company to the Trustee
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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
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
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(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 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
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respect of the Company or any Significant Subsidiary in an involuntary
case or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or (B) a decree or
order adjudging the Company or any Significant Subsidiary a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect
of the Company or any Significant Subsidiary under any applicable
Federal or State law, or appointing a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the
Company or any Significant Subsidiary or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and
the continuance of any such decree or order for relief or any such
other decree or order unstayed and in effect for a period of 60
consecutive days; or
(9) the commencement by the Company or any Significant
Subsidiary of a voluntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other
similar law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by it to the entry of a decree or
order for relief in respect of the Company or any Significant
Subsidiary in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or insolvency case
or proceeding against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under any applicable
Federal or State law, or the consent by it to the filing of such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or any Significant Subsidiary or of any
substantial part of its property, or the making by it of an assignment
for the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due, or the taking
of corporate action by the Company or any Significant Subsidiary in
furtherance of any such action.
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SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default
specified in Section 501(8) or (9) with respect to the Company) occurs and is
continuing, then and in every such case the Trustee or the Holders of not less
than 25% in aggregate principal amount of the Outstanding Securities may declare
the Default Amount of all the Securities to be due and payable immediately, by a
notice in writing to the Company (and to the Trustee if given by Holders), and
upon any such declaration such Default Amount and any accrued interest, together
with all other amounts due under this Indenture, shall become immediately due
and payable. If an Event of Default specified in Section 501(8) or (9) with
respect to the Company occurs, the Default Amount of and any accrued interest on
the Securities then Outstanding, together with all other amounts due under this
Indenture, shall ipso facto become immediately due and payable without any
declaration or other Act on the part of the Trustee or any Holder.
The "Default Amount" in respect of any particular Security as
of any particular date of acceleration shall equal the principal amount of the
Security plus accrued and unpaid interest to such date.
At any time after such a declaration of acceleration has been
made and before a judgment or decree for payment of the money due based on
acceleration has been obtained by the Trustee as hereinafter in this Article
provided, the Holders of a majority in aggregate principal amount of the
Outstanding Securities, by written notice to the Company and the Trustee, may
rescind and annul such declaration and its consequences if:
(1) the Company has paid or deposited with the
Trustee a sum sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, on) any
Securities which have become due otherwise than by such
declaration of acceleration (including any Securities
required to have been purchased on the Purchase Date pursuant
to an Offer to Purchase made by the Company) and interest
thereon at the rate borne by the Securities,
(C) to the extent that payment of such interest is
lawful, interest
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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,
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
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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 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 Securi ties 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
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bankruptcy or similar official and be a member of a creditors or other similar
committee.
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this Article
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal
(or premium, if any) or interest, upon presentation of the Securities and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the
Trustee under Section 607; and
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for
principal (and premium, if any) and interest, respectively.
The Trustee, upon prior written notice to the 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
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respect to this Indenture, or for the appointment of a receiver or trustee, or
for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of at least 25% in aggregate principal amount
of the Outstanding Securities shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered and, if requested,
provided to the Trustee reasonable indemnity against the costs,
expenses and liabilities to be incurred in compliance with such
request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer and, if requested, provision of indemnity has failed
to institute any such proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND
INTEREST.
Notwithstanding any other provision in this Indenture, the
Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment of the principal of (and premium, if any) and
(subject to Section 307) interest on such Security on the respective Stated
Maturities expressed in such Security (or, in the case of redemption, on the
Redemption Date or, in the case of an Offer to Purchase made by the Company and
required to be accepted as to such Security, on the Purchase Date) and to
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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.
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.
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SECTION 512. CONTROL BY HOLDERS.
The Holders of a majority in aggregate principal amount of the
Outstanding Securities shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, PROVIDED that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture or expose the Trustee to personal liability
(as determined in the sole discretion of the Trustee), and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
The Trustee may refuse, however, to follow any direction that the Trustee, in
its sole discretion, determines may be unduly prejudicial to the rights of
another Holder or that may subject the Trustee to any liability or expense if
the Trustee determines, in its sole discretion, that it lacks indemnification
against such loss or expense.
SECTION 513. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in aggregate principal
amount of the Outstanding Securities may on behalf of the Holders of all the
Securities by written notice to the Trustee waive any past default hereunder and
its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on any Security (including any Security which is required to
have been purchased pursuant to an Offer to Purchase which has been
made by the Company), or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security affected or
(3) arising from failure to purchase any Security tendered
pursuant to Sections 1013 and 1016.
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;
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but no such waiver shall extend to any subsequent or other default or impair any
right consequent thereon.
SECTION 514. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; PROVIDED that neither this Section nor the Trust Indenture Act
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment in any suit instituted by the Company.
SECTION 515. WAIVER OF STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law and covenant that they will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
ARTICLE SIX
The Trustee
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.
The duties and responsibilities of the Trustee shall be as
provided by the Trust Indenture Act. Notwithstanding the foregoing, no
provision of this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. Whether or not therein expressly so provided
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every provision of this Indenture relating to the conduct or affecting the
liability of or affording protec tion to the Trustee shall be subject to the
provisions of this Section.
SECTION 602. NOTICE OF DEFAULTS.
The Trustee shall give the Holders notice of any Default
hereunder as and to the extent provided by the Trust Indenture Act, unless such
Default has been cured or waived; PROVIDED, HOWEVER, that in the case of any
Default of the character specified in Section 501(5), no such notice to Holders
shall be given until at least 30 days after the occurrence thereof.
SECTION 603. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or a Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officers'
Certificate or an Opinion of Counsel;
(d) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
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(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction reasonably
satisfactory to the Trustee;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder; and
(h) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith which the Trustee reasonably
believed to have been authorized or within its rights or powers.
SECTION 604. NOT RESPONSIBLE FOR RECITALS
OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Securities, except
the Trustee's certificates of authentication, shall be taken as the statements
of the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or the Securities. The Trustee shall not be accountable for the use or
application by the Company of Securities or the proceeds thereof.
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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 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)
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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 requirements of a Federal, State, Territorial or District of Columbia
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Person shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of
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this Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT
OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee under
Section 611, at which time the retiring Trustee shall be fully discharged from
its obligations hereunder.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the
Holders of a majority in principal amount of the Outstanding Securities,
delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609
and shall fail to resign after written request therefor by the Company
or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by Board Resolution, may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself
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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 resig nation and
each removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 106. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on request of the
Company or the successor Trustee under Section 607, execute and deliver an
instrument transferring to such successor Trustee all the rights, powers and
trusts of the retiring Trustee and shall duly assign, transfer and deliver to
such successor Trustee all property and money held by such retiring Trustee
hereunder. Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts.
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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 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
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authentication and delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, any State thereof or the
District of Columbia, authorized under such laws to act as Authenticating Agent,
having a combined capital and surplus of not less than $50,000,000 and subject
to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which such
Authenticating Agent shall be a party, or any corporation succeeding to the
corporate agency or corporate trust business of an Authenticating Agent, shall
continue to be an Authenticating Agent, provided such corporation shall be
otherwise eligible under this Section, without the execution or filing of any
paper or any further act on the part of the Trustee or the Authenticating
Agent.
An Authenticating Agent may resign at any time by giving
written notice thereof to the Trustee and to the Company. The Trustee may at
any time terminate the agency of an Authenticating Agent by giving written
notice thereof to such Authenticating Agent and to the Company. Upon
receiving such a notice of resignation or upon such a termination, or in case
at any time such Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, the Trustee may appoint a
successor Authenticating Agent which shall be acceptable to the Company and
shall give notice of such appointment in the manner provided in Section 106
to all Holders of Securities. Any successor Authenticating Agent upon
acceptance of its appointment 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
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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 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
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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
Company will notify the Trustee when the Securities are listed on any stock
exchange.
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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.
ARTICLE EIGHT
Merger, Consolidation, Etc.
SECTION 801. MERGERS, CONSOLIDATIONS AND CERTAIN SALES OF ASSETS.
(a) The Company may not, in a single transaction or a series
of related transactions, (i) consolidate with or merge into any other Person or
permit any other Person to consolidate with or merge into the Company (other
than a consolidation or merger of a Wholly-Owned Restricted Subsidiary organized
under the laws of a State of the United States into the Company), or (ii)
directly or indirectly, transfer, sell, lease or otherwise dispose of all or
substantially all of its assets (determined on a consolidated basis for the
Company and its Restricted Subsidiaries taken as a whole and provided that the
creation of a Lien on or in any of its assets shall not in and of itself
constitute the transfer, sale, lease or disposition of the assets subject to the
Lien), unless: (1) in a transaction in which the Company does not survive or in
which the Company sells, leases or otherwise disposes of all or substantially
all of its assets to any other Person, the successor entity to the Company 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
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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 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
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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
(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
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order 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 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
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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.
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.
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SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article
shall conform to the requirements of the Trust Indenture Act.
SECTION 906. REFERENCE IN SECURITIES
TO SUPPLEMENTAL INDENTURES.
Securities authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
ARTICLE TEN
Covenants
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM AND
INTEREST.
The Company will duly and punctually pay the principal of and
premium, if any, and interest on the Securities in accordance with the terms of
the Securities and this Indenture.
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in the Borough of Manhattan, The
City of New York, New York, an office or agency where Securities may be
presented or surrendered for payment, where Securities may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Securities and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the
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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 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:
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(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
prin cipal (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 liabil ity 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 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
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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 publi cation, 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 properties which are of an insurable
nature insured against loss or damage with insurers believed by the Company to
be responsible to the extent that property of similar character is usually so
insured by corporations similarly situated and owning like properties in
accordance with good business practice.
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SECTION 1006. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (1) all taxes, assessments
and governmental charges levied or imposed upon the Company or any Subsidiaries
of the Company or upon the income, profits or property of the Company or any
Subsidiaries, and (2) all lawful claims for labor, materials and supplies which,
if unpaid, might by law become a lien upon the property of the Company or any
Subsidiaries of the Company; PROVIDED, HOWEVER, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings.
SECTION 1007. LIMITATION ON CONSOLIDATED DEBT.
The Company may not, and may not permit any Restricted
Subsidiary of the Company to, Incur any Debt unless either (a) the ratio of (i)
the aggregate consolidated principal amount of Debt of the Company outstanding
as of the most recent available quarterly or annual balance sheet, after giving
pro forma effect to the Incurrence of such Debt and any other Debt Incurred
since such balance sheet date and the receipt and application of the proceeds
thereof to (ii) Consolidated Cash Flow Available for Fixed Charges for the four
full fiscal quarters next preceding the Incurrence of such Debt for which
consolidated financial statements are available, determined on a pro forma basis
as if any such Debt had been Incurred and the proceeds thereof had been applied
at the beginning of such four fiscal quarters, would be less than 5.5 to 1 for
such four-quarter periods ending on or prior to December 31, 1999 and 5.0 to 1
for such periods ending thereafter, or (b) the Company's Consolidated Capital
Ratio as of the most recent available quarterly or annual balance sheet, after
giving pro forma effect to the Incurrence of such Debt and any other Debt
Incurred since such balance sheet date and the receipt and application of the
proceeds thereof, is less than 2.0 to 1.
Notwithstanding the foregoing limitation, the Company and any
Restricted Subsidiary may Incur the following:
(i) Debt under any one or more Bank Credit Agreements or Vendor
Financing Facilities in an aggregate principal amount at any one time
not to exceed $125 million, and any renewal, extension,
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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 90% of the
cost of construction, acquisition or improvement price of the
applicable Telecommunications Assets;
(iii) Debt owed by the Company to any Wholly-Owned Restricted
Subsidiary of the Company or Debt owed by a Restricted Subsidiary of
the Company to the Company or a Wholly-Owned Restricted Subsidiary of
the Company; PROVIDED, HOWEVER, that upon either (x) the transfer or
other disposition by such Wholly-Owned Restricted Subsidiary or the
Company of any Debt so permitted to a Person other than the Company or
another Wholly-Owned Restricted Subsidiary of the Company or (y) the
issuance (other than directors' qualifying shares), sale, lease,
transfer or other disposition of shares of Capital Stock (including by
consolidation or merger) of such Wholly-Owned Restricted Subsidiary to
a Person other than the Company or another such Wholly-Owned Restricted
Subsidiary, the provisions of this clause (iii) shall no longer be
applicable to such Debt and such Debt shall be deemed to have been
Incurred at the time of such transfer or other disposition;
(iv) Debt Incurred to renew, extend, refinance or refund (each, a
"refinancing") Debt outstanding at the date of this Indenture or
Incurred pursuant to the preceding paragraph or clause (ii) of this
paragraph or the Securities in an aggregate principal amount not to
exceed the aggregate principal amount of and accrued interest on the
Debt so
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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 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
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(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), the Company shall have the right, in its sole
discretion, to classify such item of Debt and shall only be required to include
the amount and type of such Debt under the clause permitting the Debt as so
classified. For purposes of determining any particular amount of Debt under such
covenant, Guarantees or Liens with respect to letters of credit supporting Debt
otherwise included in the determination of a particular amount shall not be
included.
SECTION 1008. LIMITATION ON DEBT AND PREFERRED STOCK OF
RESTRICTED SUBSIDIARIES.
The Company may not permit any Restricted Subsidiary of the
Company (other than a Restricted Subsidiary that has fully and unconditionally
Guaranteed the Securities on an unsubordinated basis) to Incur or suffer to
exist any Debt or issue any Preferred Stock except:
(i) Debt or Preferred Stock outstanding on the date of this
Indenture after giving effect to the application of the proceeds of the
Securities;
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(ii) Debt Incurred or Preferred Stock issued to and held by the
Company or a Wholly-Owned Restricted Subsidiary of the Company
(provided that such Debt or Preferred Stock is at all times held by the
Company or a Wholly-Owned Restricted Subsidiary of the Company);
(iii) Debt Incurred or Preferred Stock issued by a Person prior to
the time (A) such Person became a Restricted Subsidiary of the Company,
(B) such Person merges into or consolidates with a Restricted
Subsidiary of the Company or (C) another Restricted Subsidiary of the
Company merges into or consolidates with such Person (in a transaction
in which such Person becomes a Restricted Subsidiary of the Company),
which Debt or Preferred Stock was not Incurred or issued in
anticipation of such transaction and was outstanding prior to such
transaction;
(iv) Debt consisting of Permitted Interest Rate and
Currency Protection Agreements;
(v) Debt or Preferred Stock of a Joint Venture;
(vi) Debt under any one or more Bank Credit Agreements or Vendor
Financing Facilities (and renewals, extensions, refinancings or
refundings thereof) which is permitted to be outstanding under clause
(i) of Section 1007;
(vii) Debt consisting of Guarantees of the
Securities;
(viii) Debt or Preferred Stock which is exchanged for, or the
proceeds of which are used to refinance, refund or redeem, any Debt or
Preferred Stock permitted to be outstanding pursuant to clauses (i),
(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
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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 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 90% of the
cost of construction, acquisition or improvement price of the
applicable Telecommunications Assets; and
(x) Debt not otherwise permitted to be incurred pursuant to
clauses (i) through (ix) above, which, together with any other
outstanding Debt incurred pursuant to this clause (x), has an aggregate
principal amount (or, in the case of Debt issued at a discount, an
accreted amount (determined in accordance with
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generally accepted accounting principles) at the time of Incurrence)
not in excess of $10 million at any time outstanding.
SECTION 1009. LIMITATION ON RESTRICTED PAYMENTS.
The Company (i) may not, directly or indirectly, declare or
pay any dividend, or make any distribution, in respect of its Capital Stock or
to the holders thereof (in their capacity as such), excluding any dividends or
distributions payable solely in shares of its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to acquire its
Capital Stock (other than Disqualified Stock); (ii) may not, and may not permit
any Restricted Subsidiary to, purchase, redeem, or otherwise 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
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(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 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
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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 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)
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above or (e) below, PROVIDED, HOWEVER, that the provisions contained in such
renewal, refunding or extension agreement relating to such encumbrance or
restriction are not materially more restrictive (as conclusively determined in
good faith by the Chief Financial Officer of the Company), taken as a whole,
than the provisions contained in the agreement the subject thereof; (e) in the
case of clause (iii) above, restrictions contained in any security agreement
(including a Capital Lease Obligation) securing Debt of the Company or a
Restricted Subsidiary otherwise permitted under this Indenture, but only to the
extent such restrictions restrict the transfer of the property subject to such
security agreement; (f) in the case of clause (iii) above, customary
nonassignment provisions entered into in the ordinary course of business in
leases and other agreements; (g) any restriction with respect to a Restricted
Subsidiary of the Company imposed pursuant to an agreement which has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of such Restricted Subsidiary, provided that
consummation of such transaction would not result in a Default or an Event of
Default, that such restriction terminates if such transaction is not consummated
and that such consummation or abandonment of such transaction occurs within one
year of the date such agreement was entered into; (h) pursuant to applicable law
or regulations; (i) pursuant to this Indenture and the Securities; or (j) any
restriction on the sale or other disposition of assets or property securing Debt
as a result of a Permitted Lien on such assets or property.
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
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Agreement or Vendor Financing Facility (whether or not such Bank Credit
Agreement or Vendor Financing Facility was outstanding on the Issue Date); (ii)
Liens securing Debt in an amount which, together with the aggregate amount of
Debt then outstanding or available under the Bank Credit Agreement and Vendor
Financing Facility (or under refinancings or amendments of such agreements),
does not exceed 1.5 times the Company's Consolidated Cash Flow Available for
Fixed Charges for the four full fiscal quarters preceding the Incurrence of such
Lien for which consolidated financial statements are available, determined on a
pro forma basis as if such Debt had been Incurred and the proceeds thereof had
been applied at the beginning of such four fiscal quarters; (iii) Liens in favor
of the Company or any Wholly-Owned Restricted Subsidiary of the Company; (iv)
Liens on real or personal property of the Company or a Restricted Subsidiary of
the Company acquired, constructed or constituting improvements made after the
Issue Date to secure Purchase Money Debt which is Incurred for the construction,
acquisition and improvement of Telecommunications Assets and is otherwise
permitted under 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
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determined as of the most recent available quarterly or annual balance sheet;
and (viii) Permitted Liens.
SECTION 1012. LIMITATION ON SALE AND LEASEBACK
TRANSACTIONS.
The Company may not, and may not permit any Restricted
Subsidiary to, enter into any Sale and Leaseback Transaction unless (i) the
Company or such Restricted Subsidiary would be entitled to Incur a Lien to
secure Debt by reason of the provisions of Section 1011, equal in amount to the
Attributable Value of the Sale and Leaseback Transaction without equally and
ratably securing the Securities; or (ii) the Sale and Leaseback Transaction is
treated as an Asset Disposition and all of the conditions of Section 1013
(including the provisions concerning the application of Net Available Proceeds)
are satisfied with respect to such Sale and Leaseback Transaction, treating all
of the consideration received in such Sale and Leaseback Transaction in the same
manner as consideration in respect of an Asset Disposition for purposes of such
covenant.
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 within 360 days of
such disposition in new Telecommunications Assets, are applied within 360 days
of such disposition (1) first, to the permanent repayment or reduction of Debt
then outstanding under any Bank Credit Agreement or Vendor Financing Facility,
to the extent such agreements would require such application or prohibit
payments pursuant to clause (2) following, (2) second, to
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the extent of remaining Net Available Proceeds, to make an Offer to Purchase
outstanding Securities at 100% of their principal amount plus accrued interest
to the date of purchase and, to the extent required by the terms thereof, any
other Debt of the Company that is pari passu with the Securities at a price no
greater than 100% of the principal amount thereof plus accrued interest to the
date of purchase, and (3) third, to the extent of any remaining Net Available
Proceeds following the completion of the Offer to Purchase, to the repayment of
other Debt of the Company or Debt of a Restricted Subsidiary of the Company, to
the extent permitted under the terms thereof. To the extent any Net Available
Proceeds remain after such uses, the Company and its Restricted Subsidiaries may
use such amounts for any purposes not prohibited by this Indenture.
(b) The Company will mail the Offer for an Offer to Purchase
required pursuant to Section 1013(a) not more than 360 days after consummation
of the disposition referred to in Section 1013(a). The aggregate principal
amount of the Securities to be offered to be purchased pursuant to the Offer to
Purchase shall equal the Net Available Proceeds available therefor pursuant to
Clause (iii)(2) of Section 1013(a) (rounded down to the next lowest integral
multiple of $1,000). Each Holder shall be entitled to tender all or any portion
of the Securities owned by such Holder pursuant to the Offer to Purchase,
subject to the requirement that any portion of a Security tendered must be
tendered in an integral multiple of $1,000 principal amount.
The Company shall not be entitled to any credit against its
obligations under this Section 1013 for the principal amount of any Securities
acquired or redeemed by the Company otherwise than pursuant to the Offer to
Purchase pursuant to this Section 1013.
(c) Not later than the date of the Offer with respect to an
Offer to Purchase pursuant to this Section 1013, the Company shall deliver to
the Trustee an Officers' Certificate as to (i) the Purchase Amount, (ii) the
alloca tion of the Net Available Proceeds from the Asset Disposi tion 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)
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Securities or portions thereof tendered pursuant to the Offer, (ii) deposit with
the Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 1003) money sufficient to pay
the purchase price of all Securities or portions thereof so accepted and (iii)
deliver or cause to be delivered to the Trustee all Securities so accepted
together with an Officers' Certificate stating the Securities or portions
thereof accepted for payment by the Company. The Paying Agent (or the Company,
if so acting) shall promptly mail or deliver to Holders of Securities so
accepted payment in an amount equal to the purchase price, and the Trustee shall
promptly authenticate and mail or deliver to such Holders a new Security of like
tenor equal in principal amount to any unpurchased portion of the Security
surren dered. 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
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the provisions of Section 1008; and (v) Disqualified Stock issued in exchange
for, or upon conversion of, or the proceeds of the issuance of which are used to
redeem, refinance, replace or refund shares of Disqualified Stock of such
Restricted Subsidiary, provided that the amounts of the redemption obligations
of such Disqualified Stock shall not exceed the amounts of the redemption
obligations of, and such Disqualified Stock shall have redemption obligations no
earlier than those required by, the Disqualified Stock being exchanged,
converted, redeemed, refinanced, replaced or refunded.
SECTION 1015. TRANSACTIONS WITH AFFILIATES
AND RELATED PERSONS.
The Company may not, and may not permit any Restricted
Subsidiary of the Company to, enter into any transaction (or series of related
transactions) with an Affiliate or Related Person of the Company (other than the
Company or a Wholly-Owned Restricted Subsidiary of the Company), including any
Investment, but excluding transactions pursuant to employee compensation
arrangements approved by the Board of Directors, either directly or indirectly,
unless such transaction is on terms no less favorable to the Company or such
Restricted Subsidiary than those that could be obtained in a comparable
arm's-length transaction with an entity that is not an Affiliate or Related
Person and is in the best interests of such Company or such Restricted
Subsidiary. For any transaction that involves in excess of $1 million but less
than or equal to $5 million, the Chief Executive Officer of the Company shall
determine that the transaction satisfies the above criteria and shall evidence
such a determination by an Officer's Certificate filed with the Trustee. For any
transaction that involves in excess of $5 million, the Company shall also obtain
an opinion from a nationally recognized expert with experience in appraising the
terms and conditions, taken as a whole, of the type of transaction (or series of
related transactions) for which the opinion is required stating that such
transaction (or series of related transactions) is on terms and conditions,
taken as a whole, no less favorable to the Company or such Restricted Subsidiary
than those that could be obtained in a comparable arm's-length transaction with
an entity that is not an Affiliate or Related Person of the Company, which
opinion shall be filed with the Trustee. This covenant shall not apply to
Investments by an Affiliate or a Related Person of the Company in the Capital
Stock (other than Disqualified Stock) of the Company or any Restricted
Subsidiary of the Company.
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SECTION 1016. CHANGE OF CONTROL.
(a) Within 30 days of the occurrence of a Change of Control,
the Company will be required to make an Offer to Purchase all Outstanding
Securities at a purchase price equal to 101% of their principal amount plus
accrued and unpaid interest to the date of purchase.
(b) The Company and Trustee shall perform their respective
obligations specified in the Offer for the Offer to Purchase. On or prior to the
Purchase Date, the Company shall (i) accept for payment Securities or portions
thereof tendered pursuant to the Offer, (ii) deposit with the Paying Agent (or,
if the Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1003) money sufficient to pay the purchase price of all
Securities or portions thereof so accepted and (iii) deliver or cause to be
delivered to the Trustee all Securities so accepted together with an Officers'
Certificate stating the Securities or portions thereof accepted for payment by
the Company. The Paying Agent shall promptly mail or deliver to Holders of
Securities so accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail or deliver to such Holders a new
Security or Securities equal in principal amount to any unpurchased portion of
the Security surrendered as requested by the Holder. Any Security not accepted
for payment shall be promptly mailed or delivered by the Company to the Holder
thereof.
(c) A "Change of Control" will be deemed to have occurred at
such time as either (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
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election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors then in office.
(d) In the event that the Company makes an Offer to Purchase
the Securities, the Company intends to comply with any applicable securities
laws and regulations, including any applicable requirements of Section 14(e) of,
and Rule 14e-1 under, the Exchange Act.
(e) Unless the Company defaults in the payment of the Purchase
Price, any Security accepted for payment pursuant to an Offer to Purchase shall
cease to accrue interest after the Purchase Date.
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.
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SECTION 1019. WAIVER OF CERTAIN COVENANTS.
The Company may omit in any particular instance to comply with
any covenant or condition set forth in Sections 1004 to 1017, inclusive, if
before or after the time for such compliance the Holders of at least a majority
in aggregate principal amount of the Outstanding Securities shall, by Act of
such Holders, either waive such compliance in such instance or generally waive
compliance with such covenant or condition, but no such waiver shall extend to
or affect such covenant or condition except to the extent so expressly waived,
and, until such waiver shall become effective, the obligations of the Company
and the duties of the Trustee in respect of any such covenant or condition shall
remain in full force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. RIGHT OF REDEMPTION.
(a) The Securities may be redeemed prior to October 1, 2002
only in the event that on or before October 1, 2000 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 $266.7 million remain outstanding after such
redemption. Such redemption must occur on a Redemption Date within 90 days of
any such sale and upon not less than 30 nor more than 60 days' notice by mail to
each Holder of Securities to be redeemed at such Holder's address appearing in
the Security Register, in amounts of $1,000 or an integral multiple of $1,000 at
a Redemption Price of 109.625% of their principal amount plus accrued and unpaid
interest, if any, to but excluding the Redemption Date (subject to the right of
Holders of record on the relevant Regular Record Date to receive interest due on
an Interest Payment Date that is on or prior to the Redemption Date).
(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 October 1, 2002
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
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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 Securi ties 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 satisfac tory to the Trustee), notify
the Trustee in writing of such Redemption Date and of the principal amount of
Securities to be redeemed. In the case of any redemption of Securities prior to
the expiration of any restriction on such redemption provided in the terms of
such Securities or elsewhere in this Indenture, the Company shall furnish the
Trustee with an Officers' Certificate evidencing compliance with such
restriction.
SECTION 1104. SECURITIES TO BE REDEEMED PRO RATA.
If less than all the Securities are to be redeemed in any
redemption, the Securities to be redeemed shall be selected by the Trustee by
prorating, as nearly as may be practicable, the principal amount of Securities
to be redeemed. In any proration pursuant to this Section, the Trustee shall
make such adjustments, reallocations and eliminations as it shall deem proper
(and in compliance with the requirements of the principal national securities
exchange, if any, on which the Securities are listed) to the end that the
principal amount of Securities so prorated shall be $1,000 or a multiple
thereof, by increasing or decreasing or eliminating the amount which would be
allocable to any Holder on the basis of exact proportion by an amount not
exceeding $1,000. The Trustee in its discretion may determine the particular
Securities (if there
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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, 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,
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(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 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.
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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.
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
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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
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
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funds in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of such Securities, (A) money in an amount, or
(B) U.S. Government Obligations which through the scheduled payment of
principal and interest in respect thereof in accordance with their
terms will provide, not later than one day before the due date of any
payment, money in an amount, or (C) a combination thereof, sufficient,
in the opinion of a nationally recognized firm of independent certified
public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall be
applied by the Trustee to pay and discharge, the principal of, premium,
if any, and each installment of interest on the Securities on the
Stated Maturity of such principal or installment of interest on the day
on which such payments are due and payable in accordance with the terms
of this Indenture and of such Securities. For this purpose, "U.S.
Government Obligations" means securities that are (x) direct
obligations of the United States of America for the payment of which
its full faith and credit is pledged or (y) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality
of the United States of America the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States
of America, which, in either case, are not callable or redeemable at
the option of the issuer thereof, and shall also include
a depositary receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such U.S.
Government Obligation or a specific payment of principal of or interest
on any such U.S. Government Obligation held by such custodian for the
account of the holder of such depositary receipt, provided that (except
as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depositary
receipt from any amount received by the custodian in respect of the
U.S. Government Obligation or the specific payment of principal of or
interest on the U.S. Government Obligation evidenced by such depositary
receipt.
(2) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit or, insofar as subsections
501(8) and (9) are concerned, at any time during the period ending on
the 91st day after the date of such deposit (it being
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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, defea sance and discharge and will be subject
to Federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such deposit, defeasance
and discharge had not occurred.
(7) In the case of an election under Section 1203, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the Outstanding Securities will not recognize
income, gain or loss for Federal income tax purposes as a result of
such deposit and covenant defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred.
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(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.
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.
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SECTION 1206. REINSTATEMENT.
If the Trustee or the Paying Agent is unable to apply any
money in accordance with Section 1202 or 1203 by reason of any order or judgment
of any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article Twelve until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 1202 and 1203; PROVIDED, HOWEVER, that if the Company makes any payment
of principal of (and premium, if any) any Security following the reinstatement
of its obligations, the Company shall be subrogated to the rights of the Holders
of such Securities to receive such payment from the money held by the Trustee or
the Paying Agent.
SECTION 1207. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of, premium,
if any, or interest on any Security and remaining unclaimed for two years after
such principal, and premium, if any, or interest has become due and payable
shall be paid to the Company on its written request or (if then held by the
Company) shall be discharged from such trust; and the Holder of such security
shall thereafter, as a creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
---------------------------
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
----------------------------------
Name: R. Bruce Easter, Jr.
Title: Vice President, General
Counsel and Secretary
Attest:
- --------------------------------
Name:
Title:
UNITED STATES TRUST COMPANY
OF NEW YORK
By
----------------------------------
Name:
Title:
[SEAL]
Attest:
- --------------------------------
Name:
Title:
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STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
On this day of October, 1997, 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.
------------------------------
Notary Public
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
On this day of October, 1997, before me personally appeared ,
to me known, who, being duly sworn, did depose and say that he is the Vice
President of United States Trust Company of New York, one of the corporations
described in and which executed the foregoing instrument, and duly acknowledged
to me that he executed the same by authority of the Board of Directors of said
corporation.
------------------------------
Notary Public
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statement on Form S-3 filed by NEXTLINK Communications, Inc.
/s/ Arthur Andersen LLP
Seattle, Washington,
April 29, 1999
