Exhibit 22
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STOCK PURCHASE AGREEMENT
dated as of
January 15, 2002
among
XO Communications, Inc.,
Forstmann Little & Co. Equity Partnership VII, L.P.,
Forstmann Little & Co. Subordinated Debt and
Equity Management Buyout Partnership VIII, L.P.
and
Telefonos de Mexico, S.A. de C.V.
TABLE OF CONTENTS
Page
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ARTICLE I ISSUANCE AND SALE OF NEW COMMON SHARES; AMENDMENTS............2
1.1. Issuance, Purchase and Sale.........................2
1.2. The Closing; Deliveries.............................2
1.3. Capitalized Terms...................................3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY................3
2.1. Organization; Subsidiaries..........................3
2.2. Due Authorization...................................4
2.3. Capitalization......................................5
2.4. SEC Reports.........................................6
2.5. Financial Statements................................6
2.6. Absence of Certain Changes..........................7
2.7. Litigation..........................................7
2.8. Consents; No Violations.............................7
2.9. Communications Regulatory Matters...................8
2.10. Compliance with Laws................................9
2.11. Commitments.........................................9
2.12. Financial Advisory, Legal and Other Fees...........10
2.13. Taxes..............................................11
2.14. ERISA Compliance...................................12
2.15. Intellectual Property; Technology..................14
2.16. Environmental Matters..............................14
2.17. Insurance..........................................15
2.18. Business Combination and Takeover Statutes.........15
2.19. Offering of New Common Shares......................16
2.20. Network Facilities.................................16
2.21. Disclosure.........................................17
2.22. Confidentiality....................................17
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE INVESTORS............17
3.1. Acquisition for Investment.........................17
3.2. Restricted Securities..............................17
3.3. Accredited Investor................................18
3.4. Organization.......................................18
3.5. Due Authorization..................................18
3.6. Consents; No Violations............................18
3.7. Availability of Funds..............................19
3.8. Litigation.........................................19
3.9. No Other Representations...........................19
ARTICLE IV COVENANTS...................................................19
4.1. Conduct of Business by the Company Pending
the Closing........................................19
4.2. Press Releases; Interim Public Filings.............22
4.3. HSR Act; Foreign Competition Filings...............23
4.4. Consents; Approvals................................23
4.5. Listing............................................24
4.6. Board Representation; VCOC.........................24
4.7. Amended and Restated Certificate of Incorporation..24
4.8. Cooperation........................................25
4.9. Access to Property; Records........................25
4.10. Reserve Shares.....................................25
4.11. Use of Proceeds....................................25
4.12 Restructuring......................................26
4.13 Notice of Proposal.................................27
4.14 Access to Certain Information......................27
4.15 Limitation on Equity Sales.........................27
4.16 Alternative Investment Structure...................28
4.17 Supplemental Schedules.............................28
4.18 Stockholders Agreement.............................28
4.19 Management Shares..................................28
4.20 Releases...........................................29
4.21 Retention Bonus Plan Payments......................29
4.22 Company's Obligation Regarding Fees and Expenses...29
ARTICLE V CONDITIONS...................................................29
5.1. Conditions to Obligations of Each Investor
and the Company....................................29
5.2. Conditions to Obligations of Each Investor.........30
5.3. Conditions to Obligations of the Company...........34
ARTICLE VI TERMINATION.................................................35
6.1. Termination........................................35
6.2. Effect of Termination..............................37
6.3 Break-Up Payment...................................37
ARTICLE VII SURVIVAL AND LOSSES........................................38
7.1. Survival...........................................38
7.2. Losses.............................................38
ARTICLE VIII MISCELLANEOUS............................................39
8.1. Defined Terms; Interpretations.....................39
8.2. Fees and Expenses..................................51
8.3. Restrictive Legends................................52
8.4. Further Assurances.................................52
8.5. Successors and Assigns.............................52
8.6. Entire Agreement...................................53
8.7. Notices............................................53
8.8. Amendments.........................................55
8.9. Counterparts.......................................55
8.10. Headings...........................................55
8.11. Governing Law......................................55
8.12. Submission to Jurisdiction.........................55
8.13. Waiver Of Jury Trial...............................55
8.14. Severability.......................................56
Exhibit A -- New Capitalization
Exhibit B -- Stockholders Agreement
Exhibit C -- Registration Rights Agreement
Exhibit D -- Amended and Restated Certificate of Incorporation
Exhibit E -- Restated Bylaws
Exhibit F -- Contractual Management Rights Letter
Exhibit G -- Investor/Management Common Stock Terms
Exhibit H -- New Employee Stock Option Plan
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of January 15,
2002, among XO Communications, Inc., a Delaware corporation (the
"Company"), Forstmann Little & Co. Equity Partnership VII, L.P., a Delaware
limited partnership ("Equity VII"), Forstmann Little & Co. Subordinated
Debt and Equity Management Buyout Partnership VIII, L.P., a Delaware
limited partnership ("MBO VIII" and together with Equity VII, "Forstmann
Little") and Telefonos de Mexico, S.A. de C.V., sociedad anonima de capital
variable organized under the laws of the United Mexican States ("Telmex";
Forstmann Little and Telmex are sometimes hereinafter referred to as the
"Investors" and each is sometimes referred to individually as an
"Investor").
W I T N E S S E T H :
WHEREAS, the Company desires to undertake the Restructuring (as
hereinafter defined) that will, among other things, result in the New
Capitalization (as hereinafter defined); and
WHEREAS, in connection with the Restructuring, the Investors desire to
make a significant investment in the Company; and
WHEREAS, to implement such investment, the Investors desire to
purchase from the Company, and the Company desires to issue and sell to the
Investors, upon the terms and subject to the conditions set forth herein,
the New Common Shares (as hereinafter defined) of the Company; and
WHEREAS, as an inducement to the Investors to enter into this
Agreement, the Investors and the Company shall, on or prior to the Closing
(as hereinafter defined), enter into a stockholders agreement in the form
attached hereto as Exhibit B (the "Stockholders Agreement") setting forth
certain rights and obligations of the Investors and the Company; and
WHEREAS, as a further inducement to the Investors to enter into this
Agreement, the Investors and the Company shall, on or prior to the Closing,
enter into a registration rights agreement in the form attached hereto as
Exhibit C (the "Registration Rights Agreement"), in respect of the New
Common Shares and shares of Common Stock (as hereinafter defined) into
which New Common Shares may be convertible; and
WHEREAS, in order to effect the transactions contemplated by this
Agreement, the Company shall, on or prior to the Closing of the
transactions contemplated hereby, amend and restate its certificate of
incorporation and bylaws in the respective forms attached hereto as Exhibit
D and Exhibit E, respectively.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements set forth in this
Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
ARTICLE I
ISSUANCE AND SALE OF NEW COMMON SHARES; AMENDMENTS
1.1. Issuance, Purchase and Sale. Upon the terms and subject to the
conditions set forth herein, at the Closing: (a) the Company shall issue
and sell to Forstmann Little and Forstmann Little shall purchase from the
Company 79,999,998 shares of the Company's Class A Common Stock, par value
$0.01 per share (the "Class A Common Stock"), and two shares of the
Company's to-be-designated Class D Common Stock, par value $0.01 per share,
in each case having the rights and preferences stated in the Amended and
Restated Certificate of Incorporation (as hereinafter defined) (the "Class
D Common Stock"), which shares of Class A Common Stock and Class D Common
Stock shall (subject to footnote no. 5 to Exhibit A) in the aggregate equal
40.00% of the New Outstanding Equity (as hereinafter defined)
(collectively, the "New Forstmann Little Shares"); (b) the Company shall
issue and sell to Telmex and Telmex shall purchase from the Company
80,000,000 shares of the Company's to-be-designated Class C Common Stock,
par value $0.01 per share, having the rights and preferences stated in the
Amended and Restated Certificate of Incorporation (the "Class C Common
Stock"), which Class C Common Stock shall (subject to footnote no. 5 to
Exhibit A) in the aggregate equal 40.00% of the New Outstanding Equity (the
"New Telmex Shares" and together with the New Forstmann Little Shares, the
"New Common Shares"); and (c) Telmex and Forstmann Little shall each pay to
the Company, by wire transfer of immediately available funds, an aggregate
purchase price of $400,000,000 in cash in United States dollars
(collectively, the amounts to be paid by all of the Investors pursuant to
this Section 1.1, the "Purchase Price") in consideration for the New Common
Shares purchased by such Investor upon the Closing (collectively, the
"Investment").
1.2. The Closing; Deliveries. (a) The closing of the purchase and sale
of the New Common Shares hereunder and the other transactions contemplated
hereby (the "Closing") shall take place at the offices of Fried, Frank,
Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
at a date (the "Closing Date") and time to be mutually agreed upon by the
Company and the Investors, which shall be at least three (3) but no more
than thirty (30) days after the date following the satisfaction or waiver
by each Investor or the Company, as appropriate, of all of the conditions
set forth in Article V (other than those conditions that by their nature
are to be satisfied at the Closing, but subject to the satisfaction or
waiver of those conditions); provided, however, that in the event the
parties are not able mutually to agree on a Closing Date in accordance with
the immediately preceding clause, the parties agree that the Closing Date
shall be on the thirtieth (30th) day following the satisfaction or waiver
of all of the conditions set forth in Article V (other than those
conditions that by their nature are to be satisfied at the Closing, but
subject to the satisfaction or waiver of those conditions).
(b) At the Closing, the Company shall deliver certificates to (i)
Equity VII and MBO VIII representing the New Forstmann Little Shares being
purchased by Equity VII and MBO VIII, respectively, each registered in the
name of Equity VII or its nominee or designee or MBO VIII or its nominee or
designee in such amounts as Equity VII or MBO VIII shall specify to the
Company prior to the Closing and (ii) Telmex representing the New Telmex
Shares being purchased by Telmex and registered in the name of Telmex or
its nominee or designee in such amounts as Telmex shall specify to the
Company prior to the Closing. Delivery of such certificates to each
Investor shall be made against receipt by the Company of the portion of the
Purchase Price payable by such Investor, which shall be paid by wire
transfer of immediately available funds to an account designated at least
three Business Days prior to the Closing Date by the Company.
1.3. Capitalized Terms. Capitalized terms not otherwise defined herein
shall have the meanings ascribed to such terms in Section 8.1.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Investor, as of the
date hereof and as of the Closing, as follows:
2.1. Organization; Subsidiaries. (a) The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to
carry on its business as it is now being conducted. The Company is duly
qualified and licensed as a foreign corporation to do business and is in
good standing (and has paid all relevant franchise or analogous taxes), in
each jurisdiction where the character of its assets owned or held under
lease or the nature of its business makes such qualification necessary
except where the failure to be so qualified or licensed would not
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect.
(b) Exhibit 21 to the Company's Annual Report on Form 10-K for the
year ended December 31, 2000 (the "2000 10-K") and Schedule 2.1(b)(i)
together set forth a complete and correct list as of the date hereof of
each corporation, limited liability company, partnership, business
association or other Person with respect to which the Company has, directly
or indirectly, ownership of or rights with respect to securities or other
interests having the power to elect a majority of such Person's board of
directors or analogous or similar governing body, or otherwise having the
power to direct the management, business or policies of that corporation,
limited liability company, partnership, business association or other
Person which is a "Significant Subsidiary" as defined in Rule 1-02(w) of
Regulation S-X (each, a "Significant Subsidiary" and, collectively, the
"Significant Subsidiaries"). Except as set forth in Exhibit 21 to the 2000
10-K or on Schedule 2.1(b)(ii), as of the date hereof (i) the Company owns,
either directly or indirectly through one or more Subsidiaries, all of the
capital stock or other equity interests of the Significant Subsidiaries
free and clear of all Encumbrances, other than Permitted Encumbrances, and
(ii) there are no outstanding subscription rights, options, warrants,
convertible or exchangeable securities or other rights of any character
whatsoever relating to issued or unissued capital stock or other equity
interests of any Significant Subsidiary, or any Commitments of any
character whatsoever relating to issued or unissued capital stock or other
equity interests of any Significant Subsidiary or pursuant to which any
Significant Subsidiary is or may become bound to issue or grant additional
shares of its capital stock or other equity interests or related
subscription rights, options, warrants, convertible or exchangeable
securities or other rights, or to grant preemptive rights. Except for any
Subsidiaries which are not Significant Subsidiaries, all of which (other
than those wholly owned Subsidiaries that do not engage in any material
business activities or hold any material assets) are set forth on Schedule
2.1(b)(iii), and except as set forth in Exhibit 21 to the 2000 10-K or on
Schedule 2.1(b)(iv), as of the date hereof the Company does not own,
directly or indirectly, any interest in any corporation, limited liability
company, partnership, business association or other Person.
(c) Except as would not have a Material Adverse Effect, each
Subsidiary is a corporation or limited liability company duly organized,
validly existing and in good standing (in jurisdictions where such concept
is recognized) under the laws of the jurisdiction of its organization and
has the requisite corporate power and authority to carry on its business as
it is now being conducted. Each Subsidiary of the Company is duly qualified
and licensed as a foreign corporation or other business entity to do
business and is in good standing (and has paid all relevant franchise or
analogous taxes), in each jurisdiction where the character of its assets
owned or held under lease or the nature of its business makes such
qualification necessary and where the failure to be so qualified or
licensed would not individually or in the aggregate reasonably be expected
to have a Material Adverse Effect.
2.2. Due Authorization. The Company has all right, corporate power and
authority to enter into this Agreement and each of the other Transaction
Documents to which it is a party, subject to approval of the Bankruptcy
Court, if applicable, and to consummate the transactions contemplated
hereby and thereby. The execution and delivery by the Company of this
Agreement and each of the other Transaction Documents to which it is a
party is, and the issuance, sale and delivery of the New Common Shares by
the Company and the compliance by the Company with each of the provisions
of this Agreement and each of the other Transaction Documents to which it
is a party (including the reservation and issuance of the Conversion Shares
after giving effect to the consummation by the Company of the transactions
contemplated hereby) will, upon the effectiveness of the Amended and
Restated Certificate of Incorporation, be (a) within the corporate power
and authority of the Company, and (b) have been duly authorized by all
requisite corporate and other action of the Company. At the time of the
Closing, the Confirmation Order and the Bankruptcy Plan, if applicable,
shall have directed and authorized the Company to have filed the Amended
and Restated Certificate of Incorporation, and the Amended and Restated
Certificate of Incorporation shall authorize a number of shares of Class A
Common Stock, Class C Common Stock and Class D Common Stock at least equal
to the number of shares of New Common Shares to be issued to the Investors
pursuant to the terms of this Agreement plus the Conversion Shares. This
Agreement has been, and each of the other Transaction Documents to which
the Company is a party when executed and delivered by the Company will be,
duly and validly executed and delivered by the Company, and this Agreement
constitutes, and each of such other Transaction Documents when executed and
delivered by the Company will constitute, a valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms,
except as such enforcement is limited by bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors' rights generally and
for limitations imposed by general principles of equity. The Conversion
Shares will have been validly reserved for issuance at the Closing, and
upon such issuance, will be duly authorized and validly issued and
outstanding, fully paid and nonassessable. The Company has taken all action
necessary to waive, and by its execution hereof does hereby waive, the
provisions of Section 4.16 of the 1999 Stock Purchase Agreement and Section
4.16 of the 2000 Stock Purchase Agreement to the extent necessary to permit
each Investor to consummate the transactions contemplated by this Agreement
and the other Transaction Documents. The terms, designations, powers,
preferences and relative participation, optional and other special rights,
qualifications, limitations and restrictions of the Class C Common Stock
and the Class D Common Stock shall be as set forth in the Amended and
Restated Certificate of Incorporation. The New Common Shares, when issued
and delivered in accordance with the terms of this Agreement, will be duly
authorized and validly issued and outstanding, fully paid and
nonassessable, free and clear of any Encumbrances and not subject to the
preemptive or other similar rights of any stockholders of the Company,
other than as contemplated by this Agreement and the other Transaction
Documents.
2.3. Capitalization. As of January 11, 2002, the authorized capital
stock of the Company consists of (a) 1,000,000,000 shares of Class A Common
Stock, par value $0.02 per share, of which 337,774,204 shares are issued
and outstanding, with any increase since that date being attributable
solely to (i) the exercise of outstanding employee stock options and
purchases under employee stock plans set forth on Schedule 2.3 and (ii) the
other transactions described on Schedule 2.3; (b) 120,000,000 shares of
Class B Common Stock, par value $0.02 per share (the "Class B Common
Stock", and together with the Class A Common Stock, the "Common Stock"), of
which 104,423,158 shares are issued and outstanding, with any changes in
the number of such issued and outstanding shares of Class B Common Stock
resulting solely from the conversion of shares of Class B Common Stock into
shares of Class A Common Stock, and (c) 25,000,000 shares of Preferred
Stock, par value $0.01 per share, of which (i) 10,961,885 shares are issued
and outstanding as 14% Series A Senior Exchangeable Redeemable Preferred
Shares (the "Series A Preferred Stock"), (ii) 1,768,695 shares are issued
and outstanding as the 6 1/2% Series B Cumulative Convertible Preferred
Stock (the "Series B Preferred Stock"), (iii) 584,375 shares are issued and
outstanding as the Series C Cumulative Convertible Participating Preferred
Stock (the "Series C Preferred Stock"), (iv) 265,625 shares are issued and
outstanding as the Series D Convertible Participating Preferred Stock (the
"Series D Preferred Stock"), (v) 238,070 shares are issued and outstanding
as the 13 1/2% Series E Senior Redeemable Exchangeable Preferred Stock due
2010 (the "Series E Preferred Stock"), (vi) 58,125 shares are issued and
outstanding as the 7% Series F Convertible Redeemable Preferred Stock (the
"Series F Preferred Stock"), (vii) 268,750 shares are issued and
outstanding as the Series G Cumulative Convertible Participating Preferred
Stock (the "Series G Preferred Stock") and (viii) 131,250 shares are issued
and outstanding as the Series H Convertible Participating Preferred Stock
(the "Series H Preferred Stock" and, together with the Series A Preferred
Stock, the Series B Preferred Stock, the Series C Preferred Stock, the
Series D Preferred Stock, the Series E Preferred Stock, the Series F
Preferred Stock, and the Series G Preferred Stock, the "Preferred Stock"),
with any changes in the number of such issued and outstanding shares of
Preferred Stock resulting solely from the conversion of shares of Preferred
Stock into shares of Class A Common Stock. As of the Closing, after giving
effect to the Investment and the Restructuring, the authorized capital
stock of the Company shall be as set forth in the Amended and Restated
Certificate of Incorporation (as revised pursuant to Section 4.19) and the
complete capitalization of the Company shall be the New Capitalization,
including the New Forstmann Little Shares, the New Telmex Shares and the
Management Shares, but excluding shares of Class A Common Stock to be
issued upon the exercise of options issued under the New Employee Stock
Option Plan. All of the issued and outstanding shares of Common Stock and
Preferred Stock have been duly authorized and are validly issued and
outstanding, fully paid and nonassessable. Except as provided in the 1999
Stock Purchase Agreement or the 2000 Stock Purchase Agreement, no shares of
capital stock of the Company are entitled to preemptive or similar rights.
Except as set forth on Schedule 2.3, as of the date hereof, there are no
outstanding subscription rights, options, warrants, convertible or
exchangeable securities or other rights of any character whatsoever
relating to issued or unissued capital stock of the Company, or any
Commitments of any character whatsoever relating to issued or unissued
capital stock of the Company or pursuant to which the Company or any of the
Subsidiaries is or may become bound to issue or grant additional shares of
its capital stock or related subscription rights, options, warrants,
convertible or exchangeable securities or other rights, or to grant
preemptive rights. Except as set forth on Schedule 2.3 or as contemplated
by this Agreement and the other Transaction Documents, as of the date
hereof, (a) the Company has not agreed to register any securities under the
Securities Act or under any state securities law or granted registration
rights to any Person or entity and (b) there are no voting trusts,
stockholders agreements, proxies or other Commitments or understandings in
effect to which the Company is a party or of which it has Knowledge with
respect to the voting or transfer of any of the outstanding shares of
Common Stock or Preferred Stock.
2.4. SEC Reports. Except as set forth on Schedule 2.4, since December
31, 1998, the Company, or its predecessor, has timely filed all proxy
statements, reports and other documents required to be filed by it under
the Exchange Act. The Company has made available to each Investor complete
copies of all annual reports, quarterly reports, proxy statements and other
reports filed by the Company under the Exchange Act, each as filed with the
SEC (collectively, the "SEC Reports"). Except as set forth on Schedule 2.4,
each SEC Report was on the date of its filing, in compliance in all
material respects with the requirements of its respective report form and
the Exchange Act and did not, on the date of filing, contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
2.5. Financial Statements. The consolidated financial statements of
the Company (including any related schedules and/or notes) included in the
SEC Reports, have been prepared in accordance with United States generally
accepted accounting principles ("GAAP") consistently followed throughout
the periods involved (except as may be indicated in the notes thereto) and
fairly present in accordance with GAAP the consolidated financial
condition, results of operations, cash flows and changes in stockholders'
equity of the Company and the Subsidiaries as of the respective dates
thereof and for the respective periods then ended (in each case subject, as
to interim statements, to the absence of footnotes and as permitted by Form
10-Q and subject to changes resulting from year-end adjustments, none of
which are material in amount or effect). Except as set forth on Schedule
2.5 or disclosed in the SEC Reports, neither the Company nor any Subsidiary
has any liability or obligation (whether accrued, absolute, contingent,
unliquidated or otherwise, whether known or unknown, whether due or to
become due and regardless of when asserted), except (a) liabilities and
obligations in the respective amounts reflected or reserved against in the
unaudited consolidated balance sheet of the Company and the Subsidiaries as
of September 30, 2001 or (b) liabilities and obligations incurred in the
ordinary course of business since September 30, 2001 which individually or
in the aggregate would not reasonably be expected to have a Material
Adverse Effect.
2.6. Absence of Certain Changes. Except as set forth on Schedule 2.6
or as disclosed in the SEC Reports or as contemplated by this Agreement or
any of the other Transaction Documents, since September 30, 2001, neither
the Company nor any of the Subsidiaries has suffered any change, event or
development or series of changes, events or developments which individually
or in the aggregate has had or would reasonably be expected to have a
Material Adverse Effect or an adverse effect on the ability of the Company
to perform its obligations under this Agreement or any of the Transaction
Documents.
2.7. Litigation. (a) Except (i) as set forth on Schedule 2.7(a) or
(ii) as disclosed in the SEC Reports, there is no claim, action, suit,
investigation or proceeding of any kind or nature whatsoever ("Litigation")
pending or, to the Knowledge of the Company, threatened against the Company
or any of the Subsidiaries or involving any of their respective properties
or assets by or before any court, arbitrator or other Governmental Entity
which (i) in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement or any of
the other Transaction Documents or (ii) if resolved adversely to the
Company or a Subsidiary would reasonably be expected to have a Material
Adverse Effect.
(b) Except as set forth on Schedule 2.7(b) or as disclosed in the SEC
Reports, neither the Company nor any of the Subsidiaries is in default
under or in breach of any order, judgment or decree of any court,
arbitrator or other Governmental Entity, and neither the Company nor any of
the Subsidiaries is a party or subject to any order, judgment or decree of
any court, arbitrator or other Governmental Entity which, in either case,
would reasonably be expected to have a Material Adverse Effect.
2.8. Consents; No Violations. Except as set forth on Schedule 2.8(a),
neither the execution, delivery or performance by the Company of this
Agreement or any of the other Transaction Documents to which the Company is
a party nor the consummation of the transactions contemplated hereby or
thereby will: (a) conflict with, or result in a breach or a violation of,
any provision of the certificate of incorporation or bylaws or other
organizational documents of the Company or any of the Subsidiaries
including, without limitation, any of the provisions of the certificates of
designation for the Preferred Stock; (b) constitute, with or without notice
or the passage of time or both, a breach, violation or default, create an
Encumbrance, other than Permitted Encumbrances, or give rise to any right
of termination, modification, cancellation, prepayment, suspension,
limitation, revocation or acceleration, under (i) any Law or (ii) any
provision of any agreement or other instrument to which the Company or any
of the Subsidiaries is a party or pursuant to which any of them or any of
their assets or properties is subject, except, with respect to the matters
set forth in this clause (ii), for breaches, violations, defaults,
Encumbrances, other than Permitted Encumbrances, or rights of termination,
modification, cancellation, prepayment, suspension, limitation, revocation
or acceleration, which, individually or in the aggregate, would not
reasonably be expected to result in a Material Adverse Effect or adversely
affect the ability of the Company to perform its obligations under this
Agreement or any of the Transaction Documents to which it is a party; (c)
except for the (i) filing of the Amended and Restated Certificate of
Incorporation with the Secretary of State of the State of Delaware, (ii)
any required filings under the HSR Act, the Exchange Act or the Securities
Act, (iii) the Regulatory Approvals, (iv) the Required Consents, (v) the
Confirmation Order, if applicable, (vi) the Break-Up Payment Order, if
applicable, and (vii) any consents of third parties required under any
agreement or other instrument to which the Company or any of the
Subsidiaries is a party or pursuant to which any of them or any of their
material assets or properties is subject, all of which are set forth on
Schedule 2.8(b) (the "Third Party Consents"), require any consent, approval
or authorization of, notification to, filing with, or exemption or waiver
by, any Governmental Entity or any other Person on the part of the Company
or any of the Subsidiaries.
2.9. Communications Regulatory Matters. (a) Except as set forth on
Schedule 2.9(a), as of the date hereof and as of the Closing, the Company
has all licenses, permits, certificates, franchises, consents, waivers,
registrations or other regulatory authorizations from each Governmental
Entity that regulates telecommunications in each applicable jurisdiction,
including without limitation, (i) the State PUCs (together with any
renewals, extensions, or modifications thereof and any additions thereto
made as of the Closing Date, the "State Licenses"); (ii) the appropriate
foreign Governmental Entities (together with any renewals, extensions, or
modifications thereof and any additions thereto made as of the Closing
Date, the "Foreign Licenses"); (iii) the appropriate municipal Governmental
Entities (together with any renewals, extensions, or modifications thereof
and any additions thereto made as of the Closing Date, the "Local
Authorizations") and (iv) the FCC (together with any renewals, extensions
or modifications thereof and any additions thereto made as of the Closing
Date, the "FCC Licenses") that are required for the conduct of its business
as presently conducted, except where the failure to hold such
Communications Licenses (as herein defined) would not reasonably be
expected to, individually or in the aggregate, result in a Material Adverse
Effect. The FCC Licenses, Foreign Licenses, Local Authorizations and the
State Licenses are hereafter collectively referred to as the
"Communications Licenses". All of the Communications Licenses other than
the Local Authorizations are set forth in Schedule 2.9(b).
(b) Other than Communications Licenses the loss of which would not
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect, each of the Communications Licenses was duly
issued, is valid and in full force and effect, has not been suspended,
canceled, revoked or modified in any materially adverse manner and is not
subject to conditions or requirements that are not generally imposed on
such authorizations.
(c) Except as would not reasonably be expected to, individually or in
the aggregate, result in a Material Adverse Effect, (i) each holder of a
Communications License has operated in compliance with all terms thereof;
and (ii) each holder of a Communications License is in compliance with, and
the conduct of its business has been and is in compliance with, the
Communications Act and any applicable state or local regulations, and each
such holder has filed all registrations and reports and paid all required
fees, including any renewal applications, required by the Communications
Act, any non U.S. laws or regulations or any applicable state or local
regulations. Except as would not reasonably be expected to, individually or
in the aggregate, result in a Material Adverse Effect, (x) there is no
pending or, to the Knowledge of the Company, threatened action by or before
the FCC, any State PUC, any municipal Governmental Entity or any foreign
Governmental Entity to revoke, cancel, suspend, modify or refuse to renew
any of the Communications Licenses, and (y) except as set forth in Schedule
2.9(c)(ii), there is not now issued, outstanding or, to the Knowledge of
the Company, threatened, any notice by the FCC, any State PUC, any
municipal Governmental Entity or any foreign Governmental Entity of any
violation or complaint, or any application, complaint, or proceeding (other
than applications, proceedings, or complaints that generally affect the
Company's industry as a whole) relating to the business or operations of
the Company or any Subsidiary.
(d) Except as set forth in Schedule 2.9(d) or as would not reasonably
be expected, individually or in the aggregate, to result in a Material
Adverse Effect, no event has occurred which permits the revocation or
termination of any of the Communications Licenses or the imposition of any
restriction thereon, or that would prevent any of the Communications
Licenses from being renewed on a routine basis or in the ordinary course.
(e) None of the execution, delivery or performance of this Agreement
or any of the other Transaction Documents by the Company, nor the
consummation of the transactions contemplated hereby or thereby will result
in any revocation, cancellation, suspension or material modification of any
Communications Licenses or give rise to the right of any Governmental
Entity to take any such action or to fail to renew any Communications
License.
2.10. Compliance with Laws. Except as set forth on Schedule 2.10 or as
disclosed in the SEC Reports, the Company and the Subsidiaries are in
compliance with all Laws, and neither the Company nor any Subsidiary has
received any notice of any alleged violation of Law applicable to it that
would reasonably be expected to have a Material Adverse Effect. In addition
to the Communications Licenses, the Company holds all other licenses,
franchise permits, consents, registrations, certificates, and other
governmental or regulatory permits, authorizations or approvals required
for the operation of the business as presently conducted and for the
ownership, lease or operation of the Company's and its Subsidiaries'
properties (collectively, "Licenses"), except as would not reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect. Except as set forth on Schedule 2.10 or as would not reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect, the Company and the Subsidiaries have all Licenses, and all of such
Licenses are valid and in full force and effect, and the Company and the
Subsidiaries have duly performed and are in compliance with all of their
obligations under such Licenses.
2.11. Commitments. The 2000 10-K (as supplemented by Schedule 2.11(a))
discloses or lists as of the date hereof each binding contract, agreement,
understanding, arrangement and commitment of any nature whatsoever, whether
written or oral, including all amendments thereof and supplements thereto
("Commitments") of the following types to which the Company or any
Subsidiary is a party or by or to which the Company or any Subsidiary or
any of their properties may be bound or subject: (a) Commitments containing
covenants purporting to limit the freedom of the Company or any Subsidiary
to compete in any line of business in any geographic area or to hire any
individual or group of individuals that would individually or in the
aggregate have a Material Adverse Effect; (b) written Commitments relating
to planned or in process capital expenditures or other purchases in excess
of $20,000,000; (c) Commitments relating to indentures, mortgages,
promissory notes, loan agreements, guarantees, letters of credit or other
agreements or instruments of the Company or any Subsidiary involving
indebtedness in amounts in excess of $20,000,000; (d) written Commitments
relating to the acquisition or disposition of any operating business or the
capital stock of any Person in each case having a purchase price in excess
of $10,000,000 that has not been consummated or that has been consummated
but contains representations, warranties, covenants, guarantees,
indemnities or other obligations that remain in effect; (e) Commitments in
respect of any joint venture, partnership or other similar arrangement, but
not including any subsidiaries, in each case involving a Commitment of
future capital of $10,000,000 on the part of the Company; (f) except for
performance bonds and sales, use and income taxes, Commitments with any
Governmental Entity involving reasonably contemplated annual payments by
the Company or any subsidiaries in excess of $7,500,000; (g) Commitments
relating to interconnection agreements with local carriers and Commitments
with resellers (1) involving payments in 2001, or reasonably expected to
involve payments in 2002, in each case in excess of $5,000,000 or (2) with
any regional ▇▇▇▇ operating company; and (h) Commitments with customers
under which the customer is obligated to purchase communications services
to the extent such Commitments involve expected payments to the Company in
2002 in excess of $30,000,000. Except as set forth on Schedule 2.11(b) or
as would not reasonably be expected to have a Material Adverse Effect,
neither the Company nor any of its Subsidiaries are in breach of any
Commitment, to the Knowledge of the Company, no other party to a Commitment
is in breach thereof or intends to cancel, terminate or refuse to renew
such Commitment or to exercise or decline to exercise any option or right
thereunder and the Commitments remain valid and binding in accordance with
their terms.
2.12. Financial Advisory, Legal and Other Fees. As of the date hereof,
no agent, broker, accounting firm, investment bank, other financial
advisor, commercial bank, other financial institution, law firm, public
relations firm or any other Person is or will be entitled to any fee,
commission, expense or other amount from the Company or any of the
Subsidiaries in connection with any of the transactions contemplated by
this Agreement or the other Transaction Documents except for (i) the fees
of Houlihan, Lokey, ▇▇▇▇▇▇ & Zukin Capital, ▇▇▇▇▇▇▇▇ & Co. and
PricewaterhouseCoopers LLP, (1) the bases of which have been disclosed to
the Investors, (2) which have been calculated assuming the successful
completion of the transactions contemplated hereby, including the New
Capitalization, and (3) which do not and will not in the aggregate total
more than $30.0 million, and (ii) the fees, commissions, expenses and other
amounts accrued through the date hereof and paid or payable to all other
such Persons, which do not in the aggregate total more than $5.0 million
(taking into account any amount saved if any of the aforementioned advisors
is replaced); provided that the amounts referred to in clauses (i) and (ii)
above shall (A) include any and all fees, expenses and other amounts
(including, without limitation, legal fees and expenses, but excluding
amounts paid to settle Litigation or as judgments or other awards in
connection with Litigation) not covered by liability or other insurance and
payable by the Company or any Subsidiary in connection with any Litigation
brought by stockholders of the Company or derivatively on behalf of, or in
the name of, the Company related to the Company, its business, its
governance, its securities regulatory disclosure practices, the purchase or
sale of any of the Company's equity or debt securities, the Investment or
the Restructuring Transaction and (B) exclude (1) the Company's obligations
to pay Expenses pursuant to Section 8.2 and (2) any and all fees (but not
reimbursable expenses, including, without limitation, fees and expenses of
counsel) paid or payable to any commercial bank or any other financial
institution in connection with any amendments to the Bank Credit Facility
or entering into the Amended Bank Credit Facility.
2.13. Taxes. (a) Except as set forth in Schedule 2.13(a), (i) the
Company and each Subsidiary of the Company has (or will have by the Closing
Date) timely filed all material Tax Returns required to be filed by any of
them, and all Tax Returns are correct and complete in all material
respects; (ii) all material Taxes of the Company and the Subsidiaries have
been paid or adequate reserves for such Taxes have been established in the
financial statements included in the most recent SEC Report; and (iii) the
Company and each Subsidiary of the Company has either withheld and paid
over to the relevant taxing authority or set aside in accounts for such
purpose amounts sufficient to pay all material Taxes required to have been
withheld and paid in connection with payments to employees, independent
contractors, creditors, stockholders or other third parties.
(b) Except as set forth in Schedule 2.13(b), (i) there are no material
Encumbrances for Taxes upon the assets of the Company or any subsidiary of
the Company except Encumbrances for Taxes not yet due; (ii) there are no
material outstanding deficiencies for any Taxes threatened, proposed,
asserted or assessed in writing against the Company or any Subsidiary of
the Company which are not adequately provided for in the financial
statements included in the most recent SEC Report; (iii) no Taxes or Tax
Returns of the Company or any Subsidiary of the Company are currently under
audit or examination or subject to any other administrative or judicial
proceedings by any taxing authority; (iv) the statutes of limitation for
the assessment of federal income Taxes filed by the Company and each
Subsidiary for all periods through and including 1996 have expired; (v)
none of the Company or any Subsidiary of the Company has been a member of
an "affiliated group" (within the meaning of Section 1504(a) of the Code),
or any similar affiliated, combined or consolidated group for state, local
or foreign Tax purposes (other than a group the common parent of which is
the Company), or has any liability for the Taxes of any person (other than
the Company or any subsidiary of the Company) under Treasury Regulation
Section 1.1502-6 or any similar provision of state, local or foreign law or
as a transferee, successor, by contract or otherwise; (vi) neither the
Company nor any Subsidiary of the Company is a party to any Tax sharing,
Tax indemnity or other agreement or arrangement with respect to Taxes with
any entity not included in the financial statements included in the SEC
Reports; (vii) to the Knowledge of the Company, no claim involving material
amounts has been made by any taxing authority in any jurisdiction where the
Company or any Subsidiary of the Company does not file Tax Returns that the
Company or such Subsidiary of the Company is or maybe subject to taxation
by that jurisdiction; and (viii) no agreement or other document waiving,
extending, or having the effect of waiving or extending the statute of
limitations, the period of assessment or collection of any material Taxes
on the Company or any Subsidiary of the Company and no power of attorney
with respect to any such Taxes, has been filed with any governmental
authority which waiver, extension or power of attorney is currently in
effect.
(c) The Company is not a "U.S. real property holding company" as
defined in Section 897 of the Code.
2.14. ERISA Compliance. (a) Absence of Changes in Plans. Schedule
2.14(a)(i) contains a complete and correct list, as of the date hereof, of
(i) all Plans, as amended, that consist of material severance and
employment agreements of the Company or the Subsidiaries with their
respective current employees and their respective officers, or directors,
(ii) all Plans, as amended, that consist of material severance programs,
policies and practices of each of the Company and each of the Subsidiaries,
(iii) any Plans that contain change of control provisions, including in all
cases any and all amendments entered on or prior to the date hereof, and
(iv) all other material Plans. Except as set forth in Schedule 2.14(a)(ii)
or in the documents set forth in Schedule 2.14(a)(i), since January 1,
2001, until the date hereof, there has not been (x) any adoption of or
amendment to, written interpretation of or announcement of a modification
of, any Plan by the Company or any of the Subsidiaries, (y) any material
change in any actuarial or other assumptions used to calculate funding
obligations thereunder (if applicable), or (z) any change in the manner in
which contributions, eligibility for benefits or participation are
determined thereunder, in the case of each of (x) through (z) that,
individually or in the aggregate, would result in a material increase in
the Company's or the Subsidiaries' liabilities thereunder.
(b) With respect to each Plan, no event has occurred and there exists
no condition or set of circumstances in connection with which the Company
or any of the Subsidiaries would be subject to any liability under ERISA,
the Code or any other applicable law that, individually or in the
aggregate, would have, or would reasonably be expected to result in, a
Material Adverse Effect.
(c) Except as would not have a Material Adverse Effect, each Plan has
been administered in accordance with its terms, and each of the Plans (and
any related trust) has been operated and is in compliance with the
applicable provisions of ERISA, the Code and all other applicable laws.
Except as set forth on Schedule 2.14(c), each Plan which is an "employee
pension benefit plan," as defined in Section 3(2) of ERISA, which is
intended to be qualified under Section 401(a) of the Code is so qualified
and has been determined by the IRS to be so qualified. Except as would not
result, individually or in the aggregate, in material liability, each Plan
which is primarily subject to the laws of a jurisdiction outside of the
United States is in good standing with applicable regulatory authorities.
(d) Neither the Company, nor any ERISA Affiliate nor any of the
Subsidiaries has incurred any material unsatisfied liability under Title IV
of ERISA in connection with any Plan and, to the knowledge of the Company,
no condition exists that presents a material risk to the Company, any ERISA
Affiliate or any Subsidiary of incurring any such liability. No Plan has
incurred an "accumulated funding deficiency" within the meaning of Section
302 of ERISA or Section 412 of the Code, whether or not waived.
(e) As of the date hereof, except as set forth in Schedule 2.14(e), no
Plan (i) is subject to Title IV of ERISA; (ii) is a "multiemployer plan"
within the meaning of Section 3(37) of ERISA; (iii) is a "multiple employer
plan" within the meaning of Section 413(c) of the Code; or (iv) is or at
any time was funded through a "welfare benefit fund" within the meaning of
Section 419(e) of the Code and no benefits under a Plan are or at any time
have been provided through a voluntary employees' beneficiary association
within the meaning of Section 501(c)(9) of the Code or a supplemental
unemployment benefit plan within the meaning of Section 501(c)(17) of the
Code.
(f) None of the Company or any of the Subsidiaries has any material
liability for unpaid contributions with respect to any Plan, each of them
has made all required contributions under each Plan for all prior periods
(except contributions that are not, individually or in the aggregate,
material), and proper accruals relating to each Plan have been made and are
appropriately reflected on the books of the Company.
(g) Except as set forth on Schedule 2.14(g), no Plan provides medical
benefits (whether or not insured), with respect to current or former
employees after retirement or other termination of service (other than (x)
coverage mandated by statute or (y) benefits the full cost of which is
borne by the current or former employee).
(h) Except as set forth in Schedule 2.14(h), amounts payable under
each Plan are, in all material respects, deductible for federal income Tax
purposes. Except as set forth in Schedule 2.14(h) or as expressly
contemplated by this Agreement and subject to the limitations provided in
Section 5.2(p), the consummation of the transactions contemplated by this
Agreement and the other Transaction Documents will not, either alone or in
combination with another event, (i) entitle any current or former employee,
agent, independent contractor or officer of the Company or any Subsidiary
to severance pay, unemployment compensation or any other payment, (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due any such employee, agent, independent contractor or
officer, (iii) constitute a "change in control" causing a material increase
or acceleration of benefits under any Plan, (iv) result in any payment or
benefit that will be characterized as an "excess parachute payment" within
the meaning of Section 280G(b)(1) of the Code or (v) result in any material
loss of deduction for federal income Tax purposes.
(i) There is no pending or, to the Knowledge of the Company,
threatened (i) assessment, complaint, proceeding, or investigation of any
kind in any court or government agency with respect to any Plan (other than
routine claims for benefits) or (ii) litigation relating to the employment
or termination of employment of any current or former employee of the
Company or any of its Subsidiaries, in each case except as would not be
reasonably likely to, individually or in the aggregate, result in a
Material Adverse Effect.
(j) The Company and the Subsidiaries are and have been in compliance
in all material respects with all applicable federal, state and local laws,
rules and regulations (domestic and foreign) respecting employment,
employment practices, labor, terms and conditions of employment and wages
and hours, in each case, with respect to employees. Except as set forth on
Schedule 2.14(j), neither the Company nor any of the Subsidiaries is a
party to or bound by any collective bargaining agreement or other labor
union contract. No work stoppage or labor strike by employees is pending or
threatened; neither the Company nor any of the Subsidiaries is involved in
or threatened with any labor dispute, grievance or litigation relating to
labor matters, in each case that is material to the Company; and no
organizational effort or other activity the purpose of which is to achieve
representation of employees has been threatened or is ongoing.
2.15. Intellectual Property; Technology. Except as would not have a
Material Adverse Effect or except as set forth in Schedule 2.15, (a) to the
Knowledge of the Company, the conduct of the business of the Company and
the Subsidiaries as currently conducted does not infringe upon or
misappropriate the Intellectual Property rights of any third party, and no
claim has been asserted to the Company that the conduct of the business of
the Company and the Subsidiaries as currently conducted infringes upon the
Intellectual Property rights of any third party; (b) with respect to each
item of Intellectual Property owned by the Company or a Subsidiary of the
Company and used in connection with its business as currently conducted
("Company Owned Intellectual Property"), the Company or such Subsidiary of
the Company owns such Company Owned Intellectual Property free and clear of
all Encumbrances, other than Permitted Encumbrances; (c) with respect to
each item of Intellectual Property licensed to the Company or a Subsidiary
of the Company ("Company Licensed Intellectual Property"), the Company or
such Subsidiary has the right to use such Company Licensed Intellectual
Property in the continued operation of its respective business pursuant to
the terms of the license agreement governing the use of such Company
Licensed Intellectual Property; (d) the Company Owned Intellectual Property
has not been adjudged invalid or unenforceable in whole or in part; (e) to
the Knowledge of the Company, no person is engaging in any activity that
infringes upon the Company Owned Intellectual Property; (f) each license
governing the use of the Company Licensed Intellectual Property is valid
and enforceable, is binding (except as may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or similar laws
of general applicability affecting or relating to the rights of creditors
or by general principles of equity) on the Company or its Subsidiary and,
to the Knowledge of the Company, all other parties to such license, and is
in full force and effect; (g) neither the Company nor any subsidiary is,
and, to the knowledge of the Company, no other party to any license of the
Company Licensed Intellectual Property is in breach thereof or default
thereunder; and (h) neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby shall adversely affect
any of the Company's rights with respect to the Company Owned Intellectual
Property or the Company Licensed Intellectual Property.
2.16. Environmental Matters. Except as described in Schedule 2.16, or
as would not reasonably be expected to have a Material Adverse Effect, (a)
the Company and the Subsidiaries have at all times complied with all
applicable Environmental Laws, including compliance with all Environmental
Permits and authorizations required pursuant to all applicable
Environmental Laws; (b) the Company and the Subsidiaries are not the
subject of any litigation related to any Environmental Law with respect to
any of the current or past operations of the Company or any of the
Subsidiaries, or any of the currently or formerly owned, leased or used
property or assets of the Company or any of the Subsidiaries; (c) the
Company has no liability relating to, and neither the Company nor any of
the Subsidiaries, nor, to the Knowledge of the Company, any other Person,
has caused or taken any action that will result in any liability or
obligation on the part of the Company or any of the Subsidiaries relating
to (x) the environmental conditions on, under, or about the real property
or other properties or assets currently or formerly owned, leased, operated
or used by the Company or any of the Subsidiaries or (y) the past or
present use, management, handling, transport, treatment, generation,
storage, disposal, or release of any Hazardous Materials; and (d) neither
the Company nor any of the Subsidiaries is subject to any outstanding order
from, or contractual or other obligation with, or to its Knowledge,
investigation by, any Governmental Entity or other person in respect of
which the Company or any of the Subsidiaries may be required to incur costs
arising from the release or threatened release of a Hazardous Material.
2.17. Insurance. Schedule 2.17 contains a complete and correct list
and description (including the name of the insurer(s), name of the
insured(s), amount of coverage, type of coverage, deductible amounts and
significant exclusions) of all material insurance policies maintained
(including directors' and officers' liability insurance) by or on behalf of
the Company and the Subsidiaries, including policies that have expired (the
"Expired Policies") but have been renewed by the Company but in respect of
which the Company has not yet received a new policy (the "Replacement
Policies"); provided, that any Replacement Policy shall not contain any
significant exclusions that are materially more adverse to the Company than
those contained in the Expired Policy. The Company has made available to
each Investor complete and correct copies of all such policies together
with all riders and amendments thereto. Such policies are valid and in full
force and effect, and all premiums due thereon have been paid. The Company
and the Subsidiaries have complied in all material respects with the terms
and provisions of such policies. The insurance coverage provided by such
policies, in all material respects, (a) is on such terms (including,
without limitation, as to deductibles and self-insured retentions), (b)
covers such categories of risk (including, without limitation, errors and
omissions, property and casualty, directors' and officers' liability, and
workers' compensation liabilities liability, securities liability,
fiduciary liability, employment practices), (c) the Company has no
liability relating to, and contains such deductibles and retentions, and
(d) is in such amounts as, with respect to each of the criteria set forth
in the foregoing clauses (a) through (d), is adequate and suitable for the
business and operations of the Company and the Subsidiaries.
2.18. Business Combination and Takeover Statutes. (a) The Board of
Directors has taken all actions necessary or advisable so that the
restrictions contained in Section 203 of the DGCL applicable to a "business
combination" (as defined in such Section) will not apply to the execution,
delivery or performance of this Agreement or any of the other Transaction
Documents or the consummation of the transactions contemplated hereby or
thereby, including, but not limited to, conversion of any shares of Class C
Common Stock or Class D Common Stock into Conversion Shares.
(b) The execution, delivery and performance of this Agreement or any
of the other Transaction Documents and the consummation of the transactions
contemplated hereby or thereby, including, but not limited to, conversion
of any shares of Class C Common Stock or Class D Common Stock into the
Conversion Shares, will not cause to be applicable to the Company Section
203 or any "fair price," "moratorium," "control share acquisition" or other
similar anti-takeover statute or regulation enacted under state or federal
laws.
2.19. Offering of New Common Shares. Neither the Company nor any
Person acting on its behalf has taken or will take any action (including,
without limitation, any offering of any securities of the Company under
circumstances which would require, under the Securities Act, the
integration of such offering with the offering and sale of the New Common
Shares) which might reasonably be expected to subject the offering,
issuance or sale of the New Common Shares to the registration requirements
of Section 5 of the Securities Act.
2.20. Network Facilities. (a) Schedule 2.20(a) consists of maps of (i)
fiber routes that make up the Company's domestic inter city and metro fiber
optic networks, and (ii) the Company's domestic fixed wireless licenses to
use broadband fixed wireless spectrum (collectively, the "Network Maps").
As of the date hereof, the information set forth in the Network Maps is
true, correct and complete in all material respects, subject to (i)
inherent dimensional limitations of the presentation of such information on
maps, and (ii) with respect to the fixed wireless licenses, subject to the
information set forth on Schedule 2.9(a).
(b) Except to the extent that the Company or the Subsidiaries can
access the Customer Base directly through the Company's network facilities,
including the location of the fiber optic cables, fibers or conduits used
or available for use by the Company in connection with its operations and
the provision of telecommunications services including, without limitation,
the Company's longhaul network, each longhaul segment thereof, fiber optic
cables, fibers, or conduits subject to the Company's rights pursuant to
agreements with third parties providing for an indefeasible right of use
for its metropolitan networks (the "Network Facilities") or as would not
have a Material Adverse Effect, the Company or the Subsidiaries have all
rights necessary to offer telecommunication services to the Customer Base
on a resale or other basis from each incumbent local exchange carrier.
(c) Except as set forth on the Network Maps, or as would not
reasonably be expected to have a Material Adverse Effect, the Company or
its Subsidiaries have good and marketable title to, a valid leasehold
interest in, or a valid right to use all of the Network Facilities. Except
as would not reasonably be expected to have a Material Adverse Effect, each
of the Network Facilities owned by the Company or the Subsidiaries: (i) is
located on property to which the Company has good and marketable title or
is operating pursuant to valid rights-of-way or other similar rights; (ii)
is free and clear of any Encumbrances, other than Permitted Encumbrances or
Encumbrances which are inherent in an indefeasible right to use; and (iii)
is not subject to any pending Litigation or administrative actions relating
to any such property or right of way.
(d) Except as would not have a Material Adverse Effect, each agreement
with third parties providing for an indefeasible right to use (each, an
"IRU Agreement") or other agreement permitting the Company or its
Subsidiaries to use the Network Facilities is legal, valid and binding on
the parties thereto and permits each of the Company and the Subsidiaries to
use the applicable Network Facilities set forth on the Network Maps, and is
enforceable in accordance with its terms. Except as would not have a
Material Adverse Effect, the Company or one of the Subsidiaries has an IRU
Agreement or other agreement permitting it to use each of the Network
Facilities that it does not own.
2.21. Disclosure. Neither this Agreement nor any other Transaction
Document, nor any schedule or exhibit hereto or thereto, nor any
certificate furnished to the Investors by or on behalf of the Company in
connection with the transactions contemplated hereby and thereby, when read
in conjunction with the 2000 10-K and the SEC Reports filed at any time
after the 2000 10-K was filed with the SEC, contains any untrue statement
of a material fact or omits to state a material fact necessary in order to
make the statements contained herein or therein not misleading. For
purposes of the preceding sentence, any preliminary document or written
information shall be disregarded if a final or updated version of such
document or written information was delivered to each Investor by the
Company prior to the date hereof. As of the date hereof there is no fact or
information relating to the Company and/or any of its Subsidiaries that, to
the Company's Knowledge, would reasonably be expected to be material to the
Company and its Subsidiaries and that has not been described in the SEC
Reports or otherwise disclosed to each Investor in writing.
2.22. Confidentiality. The Company acknowledges and agrees that all
Confidential Information disclosed to Telmex by Forstmann Little or any of
its Affiliates prior to the execution of the Telmex Confidentiality
Agreement in connection with the transactions contemplated by this
Agreement and the other Transaction Documents was disclosed only pursuant
to the Forstmann Little Confidentiality Agreement and not pursuant to any
other confidentiality agreement between the Company and any affiliates of
Forstmann Little.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor, as to those representations and warranties that are
applicable to each such Investor, hereby represents and warrants to the
Company, severally and not jointly, as of the date hereof and as of the
Closing, as follows:
3.1. Acquisition for Investment. (a) Forstmann Little is acquiring the
New Forstmann Little Shares and any Conversion Shares for its own account,
for investment and not with a view to the distribution thereof within the
meaning of the Securities Act.
(b) Telmex is acquiring the New Telmex Shares and any Conversion
Shares for its own account, for investment and not with a view to the
distribution thereof within the meaning of the Securities Act.
3.2. Restricted Securities. (a) Forstmann Little understands that (i)
the New Forstmann Little Shares and any Conversion Shares have not been
registered under the Securities Act or any state securities laws by reason
of their issuance by the Company in a transaction exempt from the
registration requirements thereof and (ii) the New Forstmann Little Shares
and any Conversion Shares may not be sold or otherwise disposed of unless
such sale or disposition is registered under the Securities Act and
applicable state securities laws or such sale or other disposition is
exempt from registration thereunder.
(b) Telmex understands that (i) the New Telmex Shares and any
Conversion Shares have not been registered under the Securities Act or any
state securities laws by reason of their issuance by the Company in a
transaction exempt from the registration requirements thereof and (ii) the
New Telmex Shares and any Conversion Shares may not be sold or otherwise
disposed of unless such sale or disposition is registered under the
Securities Act and applicable state securities laws or such sale or other
disposition is exempt from registration thereunder.
3.3. Accredited Investor. Equity VII, MBO VIII and Telmex is each an
"accredited investor" (as defined in Rule 501(a) under the Securities Act).
Equity VII, MBO VIII and Telmex each has sufficient knowledge and
experience in financial and business matters so as to be capable of
evaluating the merits and risks of its investment in the New Common Shares
and is capable of bearing the economic risks of such investment.
3.4. Organization. (a) Each of Equity VII and MBO VIII is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite power and authority to
carry on its business as it is now being conducted.
(b) Telmex is a sociedad anonima de capital variable duly organized,
validly existing and in good standing under the laws of the United Mexican
States and has the requisite power and authority to carry on its business
as it is now being conducted.
3.5. Due Authorization. Each Investor has all rights, power and
authority to enter into this Agreement and the other Transaction Documents
to which it is a party and to consummate the transactions contemplated
hereby and thereby. The execution and delivery by each Investor of this
Agreement and the other Transaction Documents to which it is a party, the
compliance by each Investor with each of the provisions of this Agreement
and the other Transaction Documents to which it is a party, and the
consummation by such Investor of the transactions contemplated hereby and
thereby (a) are within the power and authority of each Investor and (b)
have been duly authorized by all necessary action on the part of each
Investor. This Agreement constitutes, and each of the other Transaction
Documents to which it is a party will constitute upon execution and
delivery by each Investor, a valid and binding agreement of each Investor
enforceable against each Investor in accordance with its respective terms,
except as such enforcement is limited by bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors' rights generally and
for limitations imposed by general principles of equity.
3.6. Consents; No Violations. Neither the execution, delivery or
performance by each Investor of this Agreement and the other Transaction
Documents to which it is a party nor the consummation of the transactions
contemplated hereby or thereby will (a) conflict with, or result in a
breach or a violation of, any provision of the organizational documents of
such Investor; (b) constitute, with or without notice or the passage of
time or both, a breach, violation or default, create an Encumbrance (other
than Encumbrances which would not, individually or in the aggregate,
materially impair the ability of such Investor to consummate the
transactions contemplated by this Agreement and the other Transaction
Documents) or give rise to any right of termination, modification,
cancellation, prepayment, suspension, limitation, revocation or
acceleration, under (i) any Law, or (ii) any Commitment of each Investor,
or to which each Investor or any of its assets or properties is subject,
except, with respect to the matters set forth in clause (ii), for breaches,
violations, defaults, Encumbrances (other than Encumbrances which would
not, individually or in the aggregate, materially impair the ability of
such Investor to consummate the transactions contemplated by this Agreement
and the other Transaction Documents) or rights of termination,
modification, cancellation, prepayment, suspension, limitation, revocation
or acceleration, which, individually or in the aggregate, would not have a
material adverse effect on the ability of each Investor to consummate the
transactions contemplated hereby; or (c) except as set forth on Schedule
3.6 and except for any required filing under the HSR Act, the Foreign
Competition Approvals, the Regulatory Approvals, the completion of the
Restructuring Transaction, including, if applicable, the Confirmation Order
and the Third Party Consents, require any consent, approval or
authorization of, notification to, filing with, or exemption or waiver by,
any Governmental Entity or any other Person on the part of any Investor.
3.7. Availability of Funds. Equity VII, MBO VIII, and Telmex each has
available or committed sufficient funds to pay its respective portion of
the Purchase Price.
3.8. Litigation. Except as set forth on Schedule 3.8, as of the date
hereof, to the knowledge of each Investor there is no pending or threatened
Litigation against such Investor or any of its Affiliates or involving any
of its properties or assets by or before any court, arbitrator or other
Governmental Entity which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay the transactions contemplated by this
Agreement.
3.9. No Other Representations. Each Investor acknowledges and agrees
that it is an informed and sophisticated purchaser, and has undertaken such
investigation and has been provided with and has evaluated such documents
and information as it deems necessary to enable such Investor to make an
informed decision with respect to the execution, delivery and performance
of this Agreement. Each Investor will undertake, prior to the Closing, such
further investigation and request such additional documents and information
as it deems necessary. Each Investor agrees to accept the New Common Shares
based upon its own inspection, examination and determination with respect
thereto as to all matters.
ARTICLE IV
COVENANTS
4.1. Conduct of Business by the Company Pending the Closing. (a)
Except as set forth on Schedule 4.1 or as contemplated by this Agreement
(including but not limited to Section 4.12) and the Restructuring
Transaction or any of the other Transaction Documents, to which the
Investors are parties during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Closing, unless each Investor otherwise agrees in writing, the Company
shall, and shall cause each of the Subsidiaries to, (i) conduct its
business only in the ordinary course and consistent with past practice or
as may be ordered or otherwise required by the Bankruptcy Court; (ii) use
reasonable best efforts to preserve and maintain its assets and properties
and its relationships with its customers, suppliers, advertisers,
distributors, agents, officers and employees and other Persons with which
it has significant business relationships; (iii) use reasonable best
efforts to maintain all of the material assets it owns or uses in the
ordinary course of business consistent with past practice; (iv) use
reasonable best efforts to preserve the goodwill and ongoing operations of
its business; (v) maintain its books and records in the usual, regular and
ordinary manner, on a basis consistent with past practice; and (vi) comply
in all material respects with applicable Laws.
(b) Except as expressly contemplated by this Agreement (including but
not limited to Section 4.12) and the Restructuring Transaction or as set
forth on Schedule 4.1, between the date of this Agreement and the Closing,
the Company shall not, and shall cause each of the Subsidiaries not to,
without the prior written consent of each Investor:
(i) (x) incur any additional Indebtedness, except as contemplated
by the Forebearance Agreement, (y) make any loans, advances or capital
contributions to, or investments in, any Person, except as
contemplated by the Forebearance Agreement or (z) make capital
expenditures (1) in any fiscal quarter that exceed the budget for
capital expenditures set forth in the Operational Plan for such fiscal
quarter by more than ten percent and (2) in the aggregate, for all
fiscal quarters that exceed the budget for capital expenditures set
forth in the Operational Plan for such overall period by more than
five percent;
(ii) change any method of accounting or accounting practice used
by the Company or any Subsidiary, other than such changes required by
GAAP;
(iii) repurchase, redeem or otherwise acquire or exchange any
share of Common Stock, Preferred Stock or other equity interests other
than as required by the terms of the Preferred Stock or the Class B
Common Stock;
(iv) issue or sell any additional shares of the capital stock of,
or other equity interests in, the Company or any Subsidiary, or
securities convertible into or exchangeable for such shares or other
equity interests, or issue or grant any subscription rights, options,
warrants or other rights of any character relating to shares of such
capital stock, such other equity interests or such securities, except
for (x) issuances of Class A Common Stock pursuant to the exercise of
options to purchase or conversion rights exercisable for Class A
Common Stock, in each case outstanding on the date hereof, (y) options
to purchase 28,246,805 shares of Class A Common Stock pursuant to the
exchange offer filed by the Company with the SEC on Schedule TO on May
29, 2001, as amended and (z) options to purchase up to 610,000 shares
of Class A Common Stock to be issued as promotion awards pursuant to
the XO Communications, Inc. Stock Option Plan;
(v) declare, set aside, make or pay any dividend, or make any
distribution, in respect of any shares of capital stock of the Company,
including dividends required to be paid by the Company pursuant to the
terms of the Preferred Stock;
(vi) redeem, retire, defease, offer to purchase or change any material
term of any Public Debt or any indebtedness for borrowed money except as
required by the Forebearance Agreement in connection with asset sales
otherwise permitted by this Agreement;
(vii) amend (x) the Company's Certificate of Incorporation, bylaws or
other organizational documents or (y) any Subsidiary's charter, bylaws or
other organizational documents except for the adoption and filing of the
Amended and Restated Certificate of Incorporation;
(viii) take any action that is reasonably likely to result in (x) any
of the representations and warranties set forth in Article II becoming
false or inaccurate in any material respect as of the Closing Date or (y)
the failure of any of the conditions set forth in Article V to be
satisfied;
(ix) make any interest payments or other distributions on or in
respect of the Public Debt;
(x) permit any insurance policy listed on Schedule 2.17 to lapse or
cease to remain effective or be renewed when subject to expiration without
(A) replacing such policy (the "Old Policy") immediately upon notice of
pending, threatened or actual cancellation, termination, expiration with
another policy (the "New Policy") (1) that provides the Company and its
Subsidiaries with coverage that is no less favorable than that provided by
the Old Policy, taking into account the insurer(s), the insured(s), the
type, scope and amount of coverage, deductibles, exclusions and other
material terms (the "Material Terms") of the Old Policy and the New Policy
or (2) the Material Terms of which are customary for similar companies
operating in the same industry and geographic markets as the Company and
its Subsidiaries and which are adequate and suitable for the business and
operations of the Company and its Subsidiaries or (B) otherwise ensuring
that the potential exposure or liability of the Company, the Subsidiaries,
directors, officers, employees, assets and properties for any risk or any
Loss is no greater without the Old Policy or the New Policy than is
customary for similar companies operating in the same industry and
geographic markets as the Company and the Subsidiaries and which are
adequate and suitable for the business and operations of the Company and
the Subsidiaries; provided, however, that notwithstanding anything to the
contrary in this Section 4.1(b)(x), the Company shall at all times during
the term of the Stockholders Agreement maintain directors' and officers'
liability insurance in such amounts and otherwise on terms and conditions
reasonably acceptable to each Investor;
(xi) (A) materially increase the compensation or benefits of, or pay
any bonuses or other similar compensation to, any officer, director,
employee or consultant, except for ordinary merit increases for employees
other than officers based on periodic reviews in accordance with past
practice; or (B) enter into, modify or terminate any Plan, (including
without limitation, any employment agreement or severance agreement),
provided, however, that notwithstanding clause (A) above, the Company and
the Subsidiaries may pay bonuses under and pursuant to the Company's 2001
Bonus Plan (the "2001 Bonus Plan") for the fiscal year ended December 31,
2001, in an aggregate amount (1) which does not exceed $28,000,000 and is
otherwise approved by the compensation committee of the Board of Directors
and (2) which, when added to the total aggregate amount of bonuses and
other amounts paid or payable under the Retention Bonus Plan as a result
of, or in connection with, the transactions contemplated hereby and by the
other Transaction Documents, does not exceed $35.0 million; provided,
further, that the Company and the Subsidiaries shall not pay any bonus or
other amount under or pursuant to the 2001 Bonus Plan to any officer,
director, employee or consultant who has received, or is to receive, any
bonus or other amount under or pursuant to the Retention Bonus Plan as a
result of, or in connection with, the transactions contemplated hereby and
the other Transaction Documents;
(xii) sell, lease, license, encumber or otherwise dispose of, or agree
to sell, lease, license, encumber or otherwise dispose of any of its assets
other than (A) immaterial dispositions of personal property in the ordinary
course of business consistent with past practice, (B) swaps of "dark fiber"
for "dark fiber" in the ordinary course of business consistent with past
practice, (C), the sale or grant of indefeasible rights to use of "dark
fiber" in the ordinary course of business consistent with past practice, so
long as any such sale or grant, or any series of related sales or grants,
does not in the aggregate exceed $10 million in any calendar quarter or (D)
a sale of either (x) XO One, Inc. or its assets or (y) XO Limited, its
assets or those of its subsidiaries, provided that the net consideration
received by the Company for any such sale shall be in a form and amount
reasonably acceptable to each Investor; or
(xiii) agree to take any of the actions restricted by this Section
4.1.
(c) Notwithstanding the foregoing provisions of this Section 4.1, the
parties acknowledge that the transfer of control of the Company may require
Regulatory Approvals and that all final decisions with respect to the
Communications Licenses must be taken by the Company until the Regulatory
Approvals have been obtained. The parties do not intend that the foregoing
provisions of this Section 4.1 shall transfer control of the Company or of
the Communications Licenses prior to obtaining the Regulatory Approvals.
4.2. Press Releases; Interim Public Filings. The Company shall, and
shall cause each Subsidiary to, deliver to each Investor complete and
correct copies of all press releases and public filings made between the
date hereof and the Closing Date, and, to the extent any such press
releases refer to any of the Investors or their Affiliates, shall give each
Investor the reasonable opportunity to review and comment on such releases
and filings (on a strictly confidential basis until such information is
released), in each case, prior to release in the form in which it will be
issued. Each Investor shall give to the Company and to the other Investor
the reasonable opportunity to review and comment on all Investor Press
Announcements (on a strictly confidential basis until such information is
released), in each case prior to release in the form in which it will be
issued.
4.3. HSR Act; Foreign Competition Filings. Each Investor and the
Company shall cooperate in making all filings required (a) under the HSR
Act; and (b) to be filed with any Governmental Entity in connection with
seeking the Foreign Competition Approvals, and shall use its reasonable
best efforts to take, or cause to be taken, all actions necessary, proper
or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement, including using its
reasonable best efforts to resolve such objections, if any, as the
Antitrust Division of the Department of Justice or the Federal Trade
Commission or state antitrust enforcement or other Governmental Entities
may assert under U.S. and foreign antitrust and competition Laws with
respect to the transactions contemplated hereby.
4.4. Consents; Approvals. (a) The Company and each Investor shall each
use its reasonable best efforts to obtain all consents, waivers,
exemptions, approvals, authorizations or orders, including without
limitation, the Regulatory Approvals, the Foreign Competition Approvals and
the Third Party Consents (collectively, "Consents") required in connection
with the transactions contemplated by this Agreement or any of the other
Transaction Documents (including, without limitation (i) all Consents
required to avoid any breach, violation, default, Encumbrance, other than
Permitted Encumbrances, or right of termination, modification,
cancellation, prepayment, suspension, limitation, revocation or
acceleration of any material agreement or instrument to which the Company
or any Significant Subsidiary is a party or by which any of their material
assets are bound, in each case, only to the extent that the Company
reasonably believes that such breach, violation, default, encumbrance or
right of termination, modification, cancellation, prepayment, suspension,
limitation, revocation or acceleration will not be discharged or otherwise
extinguished pursuant to the Confirmation Order, (ii) all Consents required
as a result of the Restructuring Transaction, (iii) all Consents required
as a result of the filing of the Bankruptcy Case, the Confirmation Order or
the change of control resulting therefrom and (iv) all Consents required
from the SEC). The Company also shall use its reasonable best efforts to
obtain all necessary state securities laws or blue sky permits and
approvals required to carry out the transactions contemplated hereby and
shall give each Investor the reasonable opportunity to review and comment
on all filings related to such permits or approvals (on a strictly
confidential basis until such information is released). The Company shall
furnish to each Investor all information as may be reasonably requested in
connection with any such action.
(b) Notwithstanding the provisions of Section 4.3, Section 4.4(a) and
Section 4.8, nothing contained in this Agreement will require or obligate
an Investor or its respective Affiliates to: (i) agree to otherwise become
subject to any limitations on its respective rights effectively to acquire,
control, or operate the business of the Company or its Subsidiaries, or
exercise full rights of ownership of the Company or (ii) agree or otherwise
be required to sell or otherwise dispose of, hold separate (through the
establishment of a trust or otherwise), divest itself of all or a material
portion of the assets or business of such Investor or its Affiliates or the
business of the Company or its Subsidiaries, or (iii) suffer to exist any
other material condition in respect of all or a material portion of the
assets or business of such Investor or its Affiliates. The parties agree
that no representation, warranty or covenant of the Company or each
Investor contained in this Agreement shall be breached or deemed breached
as a result of the failure by any party hereto or any of its Affiliates to
take any of the actions specified in the preceding sentence.
4.5. Listing. The Company shall use its reasonable best efforts to
have its Class A Common Stock listed on the NASDAQ National Market System
(the "NMS") or the New York Stock Exchange for so long as any New Common
Shares or any Conversion Shares are outstanding and held by any of the
Investors; provided, that if the Company is unable to maintain the listing
of the Class A Common Stock on the NMS prior to Closing, the Company shall
use its reasonable best efforts to have the Class A Common Stock quoted on
another inter-dealer quotation system. Prior to the Closing, the Company
shall, at the reasonable request of either Investor, prepare and submit to
the NMS or the New York Stock Exchange, in consultation with each Investor,
a listing application covering the New Common Shares and the Conversion
Shares and shall use its reasonable best efforts to obtain approval for the
listing of such shares, subject to official notice of issuance.
4.6. Board Representation; VCOC. (a) The Company agrees to take all
actions required so that, at Closing, the Board of Directors will include
the number of directors nominated or appointed by Forstmann Little equal to
the product of (A) forty percent (40.00%) times (B) the total number of
directors on the Board of Directors, rounded up to the nearest whole
number, times (C) two (2) ; provided, however, that in the event that any
non-terminating or non-terminated Investor shall have assumed the rights
and obligations of a terminating or terminated Investor pursuant to Section
8.5(b), the number of directors to be nominated or appointed by each
Investor shall be adjusted to that number of directors to which each such
Investor would be entitled to appoint or nominate pursuant to the
Stockholders Agreement as revised pursuant to Section 4.18 if determining
such number of directors as of the Closing. For avoidance of doubt, this
formula can be expressed mathematically as (0.40 x A = B; B x 2 = C), where
A is the total number of directors on the Board of Directors, B is the
result of the first multiplication, rounded up to the nearest whole number
and C is the total number of directors to be nominated or appointed by
Forstmann Little.
(b) At any time and for so long as any of Equity VI, Equity VII, MBO
VII or MBO VIII holds any equity securities of the Company and does not
have a contractual right from the Company or right pursuant to the
Company's Amended and Restated Certificate of Incorporation to appoint or
nominate at least one director to the Board of Directors, at the request of
Forstmann Little, the Company shall enter into a letter agreement
substantially in the form attached hereto as Exhibit F (the "Contractual
Management Rights Letter") with Equity VI, Equity VII, MBO VII and/or MBO
VIII (or one of their respective Affiliates) and such letter agreement
shall remain in full force and effect.
4.7. Amended and Restated Certificate of Incorporation. The Company
shall, prior to the Closing, use its reasonable best efforts to take, or
cause to be taken, all action (under Section 242 of the DGCL or otherwise)
to cause the Amended and Restated Certificate of Incorporation to be the
certificate of incorporation of the Company at the Closing. In the event
that the Bankruptcy Case is commenced, the Confirmation Order and the
Bankruptcy Plan shall approve the Amended and Restated Certificate of
Incorporation and shall direct and authorize the Company to file it with
the Delaware Secretary of State.
4.8. Cooperation. Each Investor and the Company shall use its
reasonable best efforts to take, or cause to be taken, all such further
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement and the other Transaction
Documents including, but not limited to, (i) obtaining all Consents from
any Governmental Entity and other third parties required for the
consummation of transactions contemplated by this Agreement and the other
Transaction Documents and (ii) timely making all necessary filings under
the HSR Act. Each Investor will furnish such information as the Company may
reasonably request in connection with any Bankruptcy Case and will
otherwise reasonably support the Company's preparation and presentation of
any motion, filing or other pleading in any Restructuring Transaction
consistent with the terms of this Agreement.
4.9. Access to Property; Records. Between the date hereof and the
Closing the Company shall afford each Investor and its employees, counsel,
accountants, partners, members, investors, and other authorized
representatives reasonable access, upon notice, during normal business
hours, to the assets, properties, offices and other facilities, officers,
employees, Commitments and books and records of the Company and of the
Subsidiaries, and to the outside auditors of the Company and their work
papers relating to the Company and the Subsidiaries. All such information
shall be held in confidence in accordance with the terms of the Forstmann
Little Confidentiality Agreement and the Telmex Confidentiality Agreement.
The parties hereto agree that no investigation by the Investors or their
representatives shall affect or limit the scope of the representations and
warranties of the Company contained in this Agreement or in any other
Transaction Document delivered pursuant hereto or limit the liability for
breach of any such representation or warranty.
4.10. Reserve Shares. Following the Closing, the Company will at all
times reserve and keep available, solely for issuance and delivery upon
conversion of outstanding Class C Common Stock and Class D Common Stock,
the number of shares of Class A Common Stock from time to time issuable
upon conversion of all shares of the Class C Common Stock and Class D
Common Stock at the time outstanding. All shares of Class A Common Stock
issuable upon conversion of the Class C Common Stock and the Class D Common
Stock shall be duly authorized and, when issued upon such conversion, shall
be validly issued, fully paid and nonassessable.
4.11. Use of Proceeds. The proceeds received by the Company in respect
of the Investment shall be used by the Company for general corporate
purposes, except that the Company may commit a portion of such proceeds or
other cash in an amount up to $200 million in the aggregate in connection
with the Restructuring.
4.12 Restructuring. (a) The Company shall use its reasonable best
efforts to restructure the capitalization of the Company such that the
complete capitalization of the Company shall, upon the Closing, be the New
Capitalization (the "Restructuring"). In furtherance of and without
limiting the generality of the foregoing, the Company shall use its
reasonable best efforts to undertake one or more of the following actions
as expeditiously as possible following the date hereof:
(i) (A) commencing an exchange offer pursuant to which the
Company will offer to exchange all of its outstanding Public Debt and
the Preferred Stock for Class A Common Stock and resulting in the New
Capitalization, and (B) commencing a related consent solicitation with
respect to the approval of a prepackaged plan of reorganization that
will result in the Company having the New Capitalization (the
"Prepackaged Plan");
(ii) if the exchange offer described in the immediately preceding
paragraph (i) fails to result in the Company having the New
Capitalization, but the Company has received the consents necessary
under the Bankruptcy Code to confirm the Prepackaged Plan, commence a
Bankruptcy Case and file the Prepackaged Plan and a related disclosure
statement with the Bankruptcy Court and seeking to obtain the
Confirmation Order with respect to the Prepackaged Plan as
expeditiously as possible (either of the options described in this
paragraph (ii) and in the immediately preceding paragraph (i) being
hereinafter referred to as the "Prepackaged Approach");
(iii) if the Company determines in good faith upon the advice of
its financial and legal advisors and representatives that it is not
advisable or feasible to implement the Prepackaged Approach or if such
Prepackaged Approach is unsuccessful in effecting the New
Capitalization, (A) the Company shall use commercially reasonable
efforts to obtain consents or lock-up agreements sufficient to proceed
with a pre-negotiated plan of reorganization that will result in the
Company having the New Capitalization (the "Pre-negotiated Plan"), and
(B) if such consents and/or lock-up agreements are obtained, the
Company shall commence a Bankruptcy Case and file the Pre-negotiated
Plan and a related disclosure statement with the Bankruptcy Court and
seek to obtain the Confirmation Order with respect to the
Pre-negotiated Plan as expeditiously as possible; and/or
(iv) any other actions reasonably likely to effect the New
Capitalization which are acceptable to each Investor in its reasonable
discretion.
(b) The Company shall provide each Investor with copies of all
material motions, orders, applications and supporting papers and notices
prepared by the Company (including without limitation, forms of orders and
notices to interested parties), prior to their being filed with the
Bankruptcy Court, relating in any way to the Bankruptcy Case and shall
consult as practicable with each Investor prior to taking any significant
action with respect to the Restructuring, including the Bankruptcy Case.
4.13 Notice of Proposal. The Company will:
(a) Promptly notify each Investor of the receipt of any oral or
written proposal, offer or inquiry from any Person (including the other
Investor) regarding any proposed (i) merger, (ii) consolidation, (iii)
other business combination, (iv) acquisition of 10% or more of the
then-outstanding equity securities of the Company, (v) acquisition of debt
or other securities convertible into or exchange for, equity securities of
the Company which would, after giving effect to such conversion or
exchange, constitute more than 10% of the outstanding equity securities of
the Company, (vi) acquisition of debt securities of the Company with a
principal amount in excess of $100 million or (vii) Change of Control
(each, a "Proposal"); and
(b) Keep each Investor apprised regarding the status and details of
any negotiations regarding any Proposal.
4.14 Access to Certain Information. From the date hereof until the
Closing, the Company hereby agrees to the fullest extent permitted by the
DGCL:
(a) that the members of the Board of Directors who were elected by the
Series C Preferred Stock and the Series D Preferred Stock shall be
permitted to participate in all meetings and votes of the Board of
Directors and shall receive all information provided to other members of
the Board of Directors regarding any Proposal unless Forstmann Little or
its Affiliates are the parties making such Proposal; and
(b) that Telmex shall receive, on a confidential basis, subject to
applicable law, including applicable provisions of the DGCL, all
information provided to members of the Board of Directors regarding any
Proposal.
4.15 Limitation on Equity Sales. Except as expressly contemplated by
this Agreement and the other Transaction Documents, the Company agrees:
(a) to cause its respective Executive Officers (as such term is
defined in Rule 3b-7 promulgated under the Exchange Act) and directors, on
any date on or after the Closing Date, not to, until the six month
anniversary of the Closing Date, without the prior written consent of each
Investor, directly or indirectly sell, offer, contract to sell, make any
short sale, pledge, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase
or otherwise transfer or dispose of any shares of Common Stock or any
securities convertible into or exchangeable or exercisable for or any
rights to purchase or acquire Common Stock, in each case, acquired pursuant
to the transactions contemplated by this Agreement; and
(b) not to, and to use its reasonable best efforts to cause each
holder of 5% or more of the Common Stock (other than the Investors) on any
date on or after the Closing Date, not to, until the first anniversary of
the Closing Date, without the prior written consent of the Company and each
Investor, directly or indirectly, (i) sell, offer, contract to sell, make
any short sale, pledge, sell any option or contract to purchase, purchase
any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of any shares of Common Stock or
any securities convertible into or exchangeable or exercisable for or any
rights to purchase or acquire Common Stock or (ii) enter into any swap or
other agreement that transfers, in whole or in part, any of the economic
consequences or ownership of Common Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of
Common Stock or such other securities, in cash or otherwise.
4.16 Alternative Investment Structure. At any time on or prior to
September 15, 2002, if Telmex notifies the Company and Forstmann Little
that Telmex has concluded in good faith that the Regulatory Approvals in
respect of the FCC Licenses are not likely to be obtained prior to January
15, 2003, because of the nature or extent of Telmex's proposed ownership of
capital stock of the Company, the Company and each Investor agrees that
they shall use their respective reasonable best efforts to restructure
Telmex's portion of the Investment hereunder in such a manner that is (i)
likely to result in receipt of the Regulatory Approvals in respect of the
FCC Licenses and (ii) on terms and conditions that are no less favorable in
all material respects to the Company, Forstmann Little and Telmex than the
Investment.
4.17 Supplemental Schedules. The Investors acknowledge and agree that
the Company shall be entitled, following the date hereof, to amend and
supplement Schedules 2.6 and 2.7(a), in each case solely to identify
additional complaints from Litigation (other than complaints related to
Ordinary Course Litigation) of which the Company did not have Knowledge on
the date hereof, that are exceptions to the representations and warranties
contained in such Sections 2.6 and 2.7(a). The Company shall promptly, and
in any event within two Business Days after receipt of any complaint or
other notice of any Litigation that the Company intends to identify on
Schedule 2.6 and/or 2.7(a), deliver copies of any such amendment or
supplement to such Schedule, together with copies of such complaint or
other notice, to each Investor. Nothing in this Section 4.17 shall
adversely affect the rights of each Investor under Section 5.2(u), Section
6.1(d) or Section 7.2.
4.18 Stockholders Agreement. If an Investor becomes an Assuming
Investor pursuant to Section 8.5(b), (a) the Company and the Assuming
Investor shall use their reasonable best efforts to revise the Stockholders
Agreement to take into account the revised percentage ownership of the
Company and (b) the Assuming Investor may, in its sole discretion, elect to
terminate the Stockholders Agreement.
4.19 Management Shares. (a) Subject to Section 4.19(b), (i) upon the
Closing, the Company shall have the right (but not the obligation) to issue
to the members of management of the Company designated by the Company and
approved by the Investors (such approval not to be unreasonably withheld)
up to 4,000,000 shares in the aggregate (the "Management Shares") of a
to-be-designated Class E Common Stock which shall have the rights and
preferences set forth on Exhibit G (the "Class E Common Stock").
(b) Between the date hereof and the Closing, the parties hereto shall
use their reasonable best efforts to agree upon the definitive rights and
preferences of the Class E Common Stock and upon revisions to the Amended
and Restated Certificate of Incorporation to reflect the terms of the Class
E Common Stock as set forth on Exhibit G.
4.20 Releases. In the event a Bankruptcy Case is commenced, the
Company shall use its reasonable best efforts to ensure that the
Confirmation Order shall provide, among other things, that the directors of
the Company and each Investor and its affiliates, members, managers,
shareholders, partners, representatives, employees, attorneys and agents
are released from any and all Litigation related to the Company, its
business, its governance, its securities disclosure practices, the purchase
or sale of any of the Company's equity or debt securities, the Investment
or the Restructuring Transaction.
4.21 Retention Bonus Plan Payments. The Company shall use its
reasonable best efforts consistent with its contractual and other legal
obligations to minimize the total aggregate amount of bonuses and other
amounts paid or payable under the Retention Bonus Plan as a result of, or
in connection with, the consummation of the transactions contemplated
hereby and by the other Transaction Documents.
4.22 Company's Obligation Regarding Fees and Expenses. The Company
shall use its reasonable best efforts, consistent with its contractual
obligations, to minimize the amount of fees, commissions, expenses and
other amounts paid or payable by the Company and the Subsidiaries in
connection with the transactions contemplated hereby and by the other
Transaction Documents, including, without limitation, the fees,
commissions, expenses and other amounts referred to in Sections 2.12 and
5.2(t).
ARTICLE V
CONDITIONS
5.1. Conditions to Obligations of Each Investor and the Company. The
respective obligation of each Investor and the Company to consummate the
transactions contemplated hereby are subject to the satisfaction or waiver
by such Investor or the Company, as the case may be, at or prior to the
Closing of each of the following conditions:
(a) No statute, rule or regulation or order, judgment or decree of any
court or administrative agency or other Governmental Entity shall be in
effect which prohibits the consummation of the transactions contemplated
hereby or by any of the other Transaction Documents; provided, however,
that except as otherwise provided in this Agreement, each of the parties
shall have used, subject to Section 4.4, reasonable efforts to prevent the
entry of any such injunction or other order and to appeal as promptly as
possible any injunction or other order that may be entered; and provided
further that no party hereto can assert the failure of this condition to be
satisfied if such failure resulted from such party's failure to satisfy the
first proviso of this Section 5.1(a) or any other provision of this
Agreement or any other Transaction Document;
(b) Any waiting period (and any extension thereof) under the HSR Act
applicable to this Agreement and the transactions contemplated hereby shall
have expired or been terminated; and
(c) All material Foreign Competition Approvals required for the
consummation of the transactions contemplated by this Agreement and the
other Transaction Documents shall have been obtained.
5.2. Conditions to Obligations of Each Investor. The obligation of
each Investor to consummate the transactions contemplated hereby shall be
subject to the satisfaction, in the judgment of each Investor, or waiver by
such Investor at or prior to the Closing of each of the following
conditions:
(a) Each of the representations and warranties of the Company and the
other Investor contained in this Agreement and each of the other
Transaction Documents (i) that are qualified as to materiality or Material
Adverse Effect shall be true and correct in all respects as of the date
hereof and as of the Closing (except to the extent such representations and
warranties are made as of a particular date, in which case such
representations and warranties shall have been true and correct as of such
date) and (ii) that are not so qualified shall be true and correct in all
respects as of the date hereof and as of the Closing (except to the extent
such representations and warranties are made as of a particular date, in
which case such representations and warranties shall have been true and
correct as of such date) except for such inaccuracies in the
representations and warranties referred to in this clause (ii) that do not
have, and are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect;
(b) The Company and the other Investor shall have performed, satisfied
and complied in all material respects with all of their respective
covenants and agreements set forth in this Agreement and each of the other
Transaction Documents to be performed, satisfied and complied with prior to
or at the Closing;
(c) The Company shall have delivered to the Investors an officer's
certificate certifying as to the Company's compliance with the conditions
set forth in clauses (a) and (b) of this Section 5.2;
(d) The Company and the other Investor shall have executed and
delivered the Registration Rights Agreement, the Registration Rights
Agreement shall be in full force and effect and there shall exist no breach
of, or default under, the Registration Rights Agreement;
(e) The Company and the other Investor shall have executed and
delivered the Stockholders Agreement, the Stockholders Agreement shall be
in full force and effect and there shall exist no breach of or default
under the Stockholders Agreement;
(f) All of the Transaction Documents shall be in full force and effect
and there shall exist no breach of, or default under, any of the
Transaction Documents by the Company, excluding any breach by such
Investor;
(g) The Amended and Restated Certificate of Incorporation
substantially in the form of Exhibit D hereto, as it may be revised
pursuant to the mutual agreement of the parties hereto in accordance with
Section 4.19(b) to reflect the terms of the Class E Common Stock as set
forth on Exhibit G, shall have been duly filed by the Company with the
Secretary of State of the State of Delaware and shall be effective,
provided that if, despite their compliance with Section 4.19(b) hereof, the
parties hereto cannot agree upon revisions to the Certificate of
Incorporation to reflect the terms of the Class E Common Stock as set forth
on Exhibit G, this condition shall be satisfied by the filing of the
Amended and Restated Certificate of Incorporation substantially in the form
attached hereto as Exhibit D;
(h) There shall be no outstanding shares of the Class B Common Stock;
(i) All Consents required in connection with the transactions
contemplated by this Agreement and the other Transaction Documents shall
have been obtained except where the failure to have obtained any such
Consent would not, individually or in the aggregate, have a Material
Adverse Effect;
(j) The Class A Common Stock shall be listed on the NMS or the New
York Stock Exchange and the New Common Shares and the Conversion Shares
shall have been approved for listing on the NMS or such other national
securities exchange, subject to notice of issuance; provided, however, this
Section 5.2(j) shall be deemed waived if the Investors do not permit the
Company to take any actions reasonably necessary to meet any applicable
listing requirements regarding a minimum number of stockholders;
(k) Either (i) the Bank Credit Facility shall be in form and substance
reasonably acceptable to such Investor, shall be in full force and effect,
there shall exist no breach of or default under the Bank Credit Facility
and any and all fees and expenses paid or payable to any commercial bank or
any other financial institution in connection with any amendments to the
Bank Credit Facility shall be reasonably acceptable to each Investor or
(ii) the Amended Bank Credit Facility shall be in form and substance
reasonably acceptable to such Investor, shall be in full force and effect,
there shall exist no breach of or default under the Amended Bank Credit
Facility and any and all fees and expenses paid or payable to any
commercial bank or any other financial institution in connection with
entering into the Amended Bank Credit Facility shall be reasonably
acceptable to each Investor;
(l) Upon the Closing, after giving effect to the issuance of the New
Common Shares pursuant to the terms of this Agreement, the complete capital
structure of the Company shall be the New Capitalization in all material
respects;
(m) If a Bankruptcy Case is commenced, (i) the Bankruptcy Plan shall
be in form and substance reasonably satisfactory to such Investor in all
material respects and shall have been approved by the Bankruptcy Court
pursuant to the Confirmation Order, (ii) the Confirmation Order shall be in
form and substance reasonably satisfactory to such Investor in all material
respects and shall be final and non-appealable and (iii) all other material
orders of the Bankruptcy Court in respect of the Restructuring shall be
final and non-appealable;
(n) (i) Except as may be rendered moot by the entry of the
Confirmation Order, no Litigation shall have been instituted before any
court or Governmental Entity seeking to restrain, modify or prevent the
consummation of the transactions contemplated by this Agreement and the
other Transaction Documents; and (ii) no Litigation shall have been
instituted against the Company or for which the Company would be required
to indemnify any Person before any court or Governmental Entity that, in
the reasonable opinion of such Investor, would reasonably be expected to
have a Material Adverse Effect;
(o) (i) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall continue to be employed by the Company
as the Chief Executive Officer and shall not have expressed any intention
to leave the Company and (ii) each of the following positions at the
Company shall be held either by the person who holds such position on the
date hereof or another person acceptable to each Investor and none of the
persons employed in such positions shall have expressed any intention to
leave the Company; provided, however, that it is understood that the
persons employed in such positions as of the date hereof are acceptable to
each Investor: President and Chief Operating Officer, Chief Financial
Officer, Chief Technology Officer, Chief Marketing Officer; General
Counsel, Senior Vice President - Market Sales Operations and Senior Vice
President - National Accounts, Sales & Marketing;
(p) Except as expressly contemplated by Exhibit A or Exhibit H, the
Company shall not have made and shall have no obligation (other than
obligations theretofore waived by the recipient) to make any payment, issue
any securities or make any distribution of any kind or nature whatsoever
under the Plans in connection with or as a result of the consummation of
the transactions contemplated by this Agreement and the other Transaction
Documents (including, without limitation, any severance or other payment to
any person upon termination of such person's employment with the Company or
any Subsidiary, whether such termination occurs before, upon or after the
Closing) because such payment, issuance or distribution is not required by
the terms of the Plans, the party entitled to receive such payment,
securities or distribution has waived its rights thereto or otherwise or
the obligation to make such payment has been terminated by the Confirmation
Order; provided that, in connection with or as a result of the consummation
of the transactions contemplated by this Agreement and the other
Transaction Documents, the Company and the Subsidiaries shall have the
right to make payments under and pursuant to the Retention Bonus Plan in an
amount not to exceed $35.0 million less the total aggregate amount of all
bonuses and other amounts paid or payable under and pursuant to the 2001
Bonus Plan;
(q) A Business Plan that is reasonably acceptable to such Investor
shall have been adopted by the Company;
(r) Since the date hereof, there shall not have occurred any event,
circumstance, condition, fact, effect or other matter which, individually
or in the aggregate, has had or would reasonably be expected to have a
material adverse effect (i) on the business, operations, assets, financial
condition, prospects, or results of operations of the Company and its
Subsidiaries taken as a whole (a "Material Adverse Effect") or (ii) on the
ability of the Company and such Subsidiaries to perform any material
obligation under this Agreement or the other Transaction Documents or to
consummate the transactions contemplated by this Agreement and the other
Transaction Documents; provided, however, that any event, circumstance,
condition, fact, effect, or other matter that would otherwise constitute a
Material Adverse Effect shall not constitute a Material Adverse Effect if
the material adverse effect thereof shall have been eliminated or rendered
moot by the Confirmation Order;
(s) All Regulatory Approvals that are required in order to consummate
the transactions contemplated by this Agreement and the other Transaction
Documents, shall have been obtained by a Final Order (or waived in whole or
in part, which waiver will not be unreasonably withheld, in a writing
executed by such Investor, unless such a waiver is prohibited by law),
other than Regulatory Approvals the absence of which would not reasonably
be expected to have a Material Adverse Effect or be unreasonably burdensome
to any Investor, and all parties shall have complied with the conditions,
if any, imposed in connection with the grant of the Regulatory Approvals,
other than Regulatory Approvals the absence of which would not reasonably
be expected to have a Material Adverse Effect or be unreasonably burdensome
to any Investor; provided, that no Investor shall be required to accept or
comply with any material condition that would be unreasonably burdensome or
that would have a material adverse effect on it or on the value of the
Company and shall not be obligated to effect the transactions contemplated
by the Transaction Documents if such conditions are imposed;
(t) As of the Closing, the total amount of any and all fees,
commissions, expenses, and other amounts paid or payable by the Company and
the Subsidiaries to any Person, including, without limitation, any and all
broker, agent, accounting firm, investment bank, other financial advisor,
commercial bank, other financial institution, law firm or public relations
firm in connection with any of the transactions contemplated by this
Agreement or the other Transaction Documents ("Transaction Fees") shall not
exceed $45.0 million; provided that Transaction Fees shall (A) include any
and all fees, expenses and other amounts (including, without limitation,
legal fees and expenses, but excluding amounts paid to settle Litigation or
as judgments or other awards in connection with Litigation) not covered by
liability or other insurance and payable by the Company or any Subsidiary
in connection with any Litigation brought by stockholders of the Company or
derivatively on behalf of, or in the name of, the Company related to the
Company, its business, its governance, its securities regulatory disclosure
practices, the purchase or sale of any of the Company's equity or debt
securities, the Investment or the Restructuring Transaction and (B) exclude
(1) the Company's obligations to pay Expenses pursuant to Section 8.2 and
(2) any and all fees (but not reimbursable expenses, including, without
limitation, fees and expenses of counsel) paid or payable to any commercial
bank or any other financial institution in connection with any amendments
to the Bank Credit Facility or entering into the Amended Bank Credit
Facility; and provided further that nothing in this Section 5.2(t) shall
limit the Company's obligation to pay Expenses pursuant to Section 8.2;
(u) Any and all Litigation pending or threatened against the Company
or its Affiliates, officers, directors, employees, representatives,
attorneys and agents, and any and all Litigation pending or threatened
against either Investor or its respective Affiliates, officers, directors,
managers, partners, members, stockholders, employees, representatives,
attorneys and agents, related to the Company, its business, its governance,
its securities regulatory disclosure practices, the purchase or sale of any
of the Company's equity or debt securities, the Investment or the
Restructuring Transaction, shall have been resolved in a manner that is
satisfactory to each Investor in its sole discretion; provided that neither
Investor shall be able to assert the failure of this condition to be
satisfied solely as a result of pending Ordinary Course Litigation; and
(v) The bylaws of the Company, substantially in the form attached
hereto as Exhibit E (the "Bylaws"), shall have been adopted by the Board of
Directors and shall be in full force and effect.
5.3. Conditions to Obligations of the Company. The obligation of the
Company to consummate the transactions contemplated hereby shall be subject
to the satisfaction or waiver by the Company at or prior to the Closing of
each of the following conditions:
(a) Each of the representations and warranties of each Investor
contained in this Agreement shall be true and correct when made and as of
the Closing (except to the extent such representations and warranties are
made as of a particular date, in which case such representations and
warranties shall have been true and correct as of such date), except for
failures to be true and correct which individually or in the aggregate
would not have a material adverse effect on the ability of such Investor to
consummate the transactions contemplated hereby;
(b) Each Investor shall have performed, satisfied and complied in all
material respects with all of its covenants and agreements set forth in
this Agreement to be performed, satisfied and complied with on or prior to
the Closing Date;
(c) Each Investor shall have delivered to the Company an officer's
certificate certifying as to such Investor's compliance with the conditions
set forth in clauses (a) and (b) of this Section 5.3;
(d) Each Investor shall have executed and delivered the Registration
Rights Agreement and the Stockholders Agreement to the Company, the
Registration Rights Agreement and the Stockholders Agreement shall each be
in full force and effect and there shall exist no breach of or default
under either of the Registration Rights Agreement or the Stockholders
Agreement;
(e) If a Bankruptcy Case is commenced, (i) the Bankruptcy Plan shall
have been approved by the Bankruptcy Court pursuant to the Confirmation
Order without material modifications or conditions and (ii) the
Confirmation Order shall have become final and non-appealable; and
(f) All Regulatory Approvals that are required in order to consummate
the transactions contemplated by this Agreement and the other Transaction
Documents, shall have been obtained by a Final Order (or waived in whole or
in part in a writing executed by the Company, unless such a waiver is
prohibited by law), other than Regulatory Approvals the absence of which
would not reasonably be expected to have a Material Adverse Effect, and all
parties shall have complied with the conditions, if any, imposed in
connection with the grant of the Regulatory Approvals, other than
Regulatory Approvals the absence of which would not reasonably be expected
to have a Material Adverse Effect; provided that no Investor shall be
required to accept or comply with any material condition that would be
unreasonably burdensome or that would have a material adverse effect on it
or on the value of the Company and shall not be obligated to effect the
transactions contemplated by the Transaction Documents if such condition is
imposed.
ARTICLE VI
TERMINATION
6.1. Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by mutual written agreement of the Company and each Investor;
(b) by either Investor, but only with respect to its own rights and
obligations hereunder and not those of the other Investor, if the Closing
shall not have been consummated on or before September 15, 2002; provided,
that in the event all of the conditions set forth in Article V other than
the condition set forth in Section 5.2(s) regarding Regulatory Approvals
hereof shall have been satisfied or waived by the parties hereto on or
before September 15, 2002, then the termination right set forth in this
clause (b) shall not be available to either Investor until the earlier of
(i) January 15, 2003 and (ii) the date on which the Company shall notify
each Investor in writing that the Regulatory Approvals cannot be obtained;
provided, further, that in the event all of the conditions set forth in
Article V other than the condition set forth in Section 5.2(s) regarding
Regulatory Approvals hereof shall have been satisfied or waived by the
parties hereto on or before September 15, 2002 and the condition set forth
in Section 5.2(s) regarding Regulatory Approvals hereof shall have been
satisfied or waived by the parties hereto in all respects other than
receipt of a Final Order on or before January 15, 2003, then the
termination right set forth in this clause (b) shall not be available to
either Investor until the earlier of (i) March 15, 2003 and (ii) the date
on which the Company shall notify each Investor in writing that the Final
Order has been denied; provided, further, that in the event either Investor
elects, pursuant to Section 1.2, to delay the Closing beyond the third day
following satisfaction or waiver of all of the conditions set forth in
Article V hereof, any of the dates set forth in this clause (b), as
applicable, shall be extended by the actual number of days of such delay;
(c) by either Investor, but only with respect to its own rights and
obligations hereunder and not those of the other Investor, if the other
Investor or the Company shall have breached any of its respective
representations, warranties, covenants or other agreements contained in
this Agreement, which breach constitutes or would reasonably be expected to
have a Material Adverse Effect and cannot reasonably be expected to be
cured by the Closing;
(d) by either Investor, but only with respect to its own rights and
obligations hereunder and not those of the other Investor, if any event,
circumstance, condition, fact, effect, or other matter has occurred or
exists which (i) would, or would be reasonably likely to give rise to the
failure of any of the conditions to the obligations of such Investor set
forth in Section 5.1 or Section 5.2; and (ii) cannot be or has not been
cured within 20 days after the giving of written notice to the Company and
the other Investor;
(e) by either Investor, but only with respect to its own rights and
obligations hereunder and not those of the other Investor, if the Company
has not complied with its obligations under Section 6.3(b) relating to
obtaining Bankruptcy Court approval of the Company's obligations to pay the
Break-Up Payment and Expenses (including the timing of the filing of a
motion and proposed order related thereto that is acceptable to each
Investor in all respects) or if the Bankruptcy Court has not issued an
order approving such obligations, in substance reasonably satisfactory to
such Investor, within 45 days following commencement of the Bankruptcy
Case;
(f) by either Investor if the other Investor has terminated this
Agreement;
(g) by either Investor or the Company if a court of competent
jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued a final and nonappealable order, judgment or
decree or taken any other action having the effect of permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement;
(h) by the Company if (i) the Board of Directors determines in good
faith that termination of this Agreement is necessary in order for the
Company to accept any Proposal or (ii) the Bankruptcy Court has ordered the
Company to terminate this Agreement in order to accept any Proposal,
provided that the Company shall have the right to terminate this Agreement
pursuant to clause (i) above only if it has complied in all material
respects with all of the provisions of Section 4.13, including the notice
provisions thereof, and in any event it shall comply in all material
respects with the requirements of Sections 6.3 and 8.2 relating to the
payment (including the timing of any payment) of Expenses and the Break-Up
Payment prior to termination of this Agreement pursuant to this Section
6.1(h);
(i) by either Investor, but only with respect to its rights and
obligations hereunder and not those of the other Investor, if the Company
enters into a written agreement with respect to any Proposal;
(j) by the Company, if either Investor terminates its rights and
obligations under this Agreement pursuant to this Section 6.1 and the other
Investor shall not have agreed, within 10 Business Days of receipt of
notice of such termination from the terminating Investor (the delivery of
such notice being a condition precedent to any termination under this
Section 6.1(j)) to exercise its rights to assume all of the rights and
obligations of the terminating Investor pursuant to Section 8.5(b);
(k) by the Company, if the Closing shall not have been consummated on
or before the date specified in Section 6.1(b), including the extensions
provided for in each of the three provisos contained therein, if
applicable;
(l) by the Company, if either Investor shall have breached in any
material respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach cannot reasonably be
expected to be cured by the Closing; provided, that the non-breaching
Investor (if there is one) shall not have agreed, within 10 Business Days
of receipt of notice from the Company of the determination that such breach
cannot reasonably be expected to be cured by the Closing (the delivery of
such notice being a condition precedent to any termination under this
Section 6.1(l)), to waive such breach and exercise its rights to assume all
of the rights and obligations of the breaching Investor pursuant to Section
8.5(b); and
(m) by the Company, if any material event, circumstance, condition,
fact, effect or other matter has occurred or exists which (i) would, or
would be reasonably likely to give rise to the failure of any of the
conditions to the obligation of the Company set forth in Section 5.1 or
5.3; and (ii) cannot be cured within 20 days after the giving of written
notice to each Investor.
6.2. Effect of Termination. Subject to Section 8.5(b), in the event of
the termination of this Agreement by any party pursuant to Section 6.1,
this Agreement shall forthwith become void as to such terminating party and
there shall be no liability on the part of any party hereto (or any
stockholder, director, officer, partner, employee, agent, consultant or
representative of such party) to the party that has terminated this
Agreement, except as set forth in this Section 6.2, provided, that nothing
contained in this Agreement shall relieve any party from liability for any
breach of this Agreement; and provided, further, that this Section 6.2 and
Sections 7.1, 7.2, 8.1, 8.2, 8.5, 8.6, 8.7, 8.8, 8.11, 8.12, 8.13 and 8.14
shall survive termination of this Agreement by any party.
6.3 Break-Up Payment. (a) The Company shall pay or cause to be paid to
each Investor a payment (the "Break-Up Payment") equal to one percent (1%)
of the implied, pre-money enterprise value of the Company if the Company
proposes to terminate this Agreement under Section 6.1(h) or both Investors
elect to terminate this Agreement pursuant to Section 6.1(i). The parties
agree that the implied, pre-money enterprise value of the Company shall be
determined using the accounting methods and principles and valuation
methodology set forth on Schedule 6.3(a). The payment of the Break-Up
Payment, in same day funds, to each Investor, shall (i) be a condition
precedent to the effectiveness of any termination by the Company of this
Agreement under Section 6.1(h) or (ii) be made by the Company promptly, but
in no event later than the third Business Day following delivery of notice
by either Investor to the Company that either Investor has elected to
terminate this Agreement pursuant to Section 6.1(i); provided, however,
that in the event the Company is engaged in a Bankruptcy Case, the timing
of the payment of the Break-Up Payment shall, in all events, be in
accordance with the Break-Up Payment Order.
(b) In the event a Bankruptcy Case is commenced, the Company shall
promptly, but in no event later than three Business Days after commencement
of such Bankruptcy Case, take all action reasonably necessary to obtain
approval from the Bankruptcy Court of the Company's obligation to pay the
Expenses and the Break-Up Payment to each Investor in accordance with the
terms of this Section 6.3. Any and all motions and other documents filed by
the Company in connection with its obligations under this Section 6.3 must
be reasonably acceptable to each Investor. Furthermore, to the extent that
the Company seeks to establish bidding or similar procedures in connection
with any Proposal, such procedures (and any and all motions and other
documents filed by the Company in connection therewith) must, subject to
applicable fiduciary duties of the Board of Directors, be reasonably
acceptable to each Investor in all respects.
(c) The Company acknowledges and agrees that (i) the payment of the
Break-Up Payment is an integral part of the transactions contemplated by
this Agreement, (ii) in the absence of the Company's obligations to make
this payment, neither Investor would have entered into this Agreement and
(iii) subject to the proviso to the last sentence of Section 6.3(a), time
is of the essence with respect to the payment of the Break-Up Payment. The
Company accordingly agrees that in the event that the Company fails to pay
the Break-Up Payment in accordance with this Section 6.3 promptly, the
Company will, in addition to the payment of such amount, also pay to each
Investor all of its reasonable costs and expenses (including reasonable
attorneys' fees and expenses) incurred by such Investor in the enforcement
of its rights under this Section 6.3, together with interest on such amount
accruing from the date of such failure at a rate of 10% per annum from the
date upon which such payment was due, to and including the date of payment.
ARTICLE VII
SURVIVAL AND LOSSES
7.1. Survival. The representations and warranties of the parties
hereto contained in this Agreement or in any of the other Transaction
Documents shall expire on the three-year anniversary of the Closing Date,
except that the representations and warranties set forth in Section 2.13
shall expire on the earlier of (i) the expiration of the statute of
limitations applicable to the substance of such representation or warranty
or (ii) the five-year anniversary of the Closing Date, in each case except
to the extent a party has asserted a claim in accordance with this Article
VII for breach of any such representation or warranty prior to the
expiration of such period, in which event any representation or warranty to
which such claim relates shall survive with respect to such claim until
such claim is resolved as provided in this Article VII. After the
expiration of such periods, any claim by a party hereto based upon any such
representation or warranty shall be of no further force or effect. The
covenants and agreements of the parties hereto contained in this Agreement
and in any of the other Transaction Documents shall survive the Closing
until performed in accordance with their terms.
7.2. Losses. (a) The Company shall indemnify, defend and hold harmless
each Investor, their Affiliates, and their respective officers, directors,
partners, members, managers, employees, agents, representatives, successors
and assigns (each an "Investor Covered Person") from and against any and
all Losses incurred or suffered by an Investor Covered Person (whether
incurred or suffered directly or indirectly through ownership or proposed
ownership of Common Stock, membership on the Board of Directors or any
committee thereof or otherwise) arising from or in connection with any
Litigation threatened, commenced or pending by any direct or indirect
stockholder of the Company (whether in the name of the Company or
otherwise).
(b) An Investor Covered Person seeking indemnification under this
Section 7.2 shall, promptly upon becoming aware of the facts indicating
that a claim for indemnification may be warranted, give to the Company a
notice of claim relating to such Loss (a "Claim Notice"). Each Claim Notice
shall specify the nature of the claim, and, if possible, the amount or the
estimated amount thereof. No failure or delay in giving a Claim Notice and
no failure to include any specific information relating to the claim (such
as the amount or estimated amount thereof) shall affect the obligation of
the party from whom indemnification is sought.
ARTICLE VIII
MISCELLANEOUS
8.1. Defined Terms; Interpretations. (a) The following capitalized
terms, as used in this Agreement, shall have the following meanings:
"Affiliate" shall have the meaning ascribed thereto such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act.
"Agreement" shall have the meaning ascribed thereto in the preamble.
"Amended and Restated Certificate of Incorporation" shall mean the
Amended and Restated Certificate of Incorporation attached hereto as
Exhibit D, which shall be revised and completed in accordance with Section
4.19.
"Amended Bank Credit Facility" shall mean a bank credit facility under
which the Company is the borrower, in effect as of the Closing as a
replacement to the Bank Credit Facility, which provides for a term loan or
term loans and revolving loans.
"Assuming Investor" shall have the meaning ascribed thereto in Section
8.5(b).
"Bank Credit Facility" shall mean the Credit and Guarantee Agreement,
dated as of February 3, 2000, among Nextlink, certain subsidiaries of
Nextlink, various Lenders (as defined therein), ▇▇▇▇▇▇▇ ▇▇▇▇▇ Credit
Partners, L.P., as Syndication Agent, Toronto Dominion (Texas), Inc., as
Administrative Agent, Barclays Bank plc and The Chase Manhattan Bank, as
Co-Documentation Agents, and TD Securities, together with ▇▇▇▇▇▇▇ ▇▇▇▇▇
Credit Partners, L.P., the Joint Lead Arrangers, and all ancillary
agreements entered into pursuant to the terms thereof, each as amended as
of the Closing.
"Bankruptcy Case" shall mean all legal proceedings, if any, instituted
in a United States Bankruptcy Court in connection with the Restructuring or
otherwise involving the Company, and any of its Affiliates, as debtor.
"Bankruptcy Code" shall mean Title 11 of the United States Code, 11
U.S.C. ss. 101, et seq., as now in effect or hereafter amended.
"Bankruptcy Court" shall mean the United States Bankruptcy Court or
other U.S. federal court of competent jurisdiction in which the Bankruptcy
Case is pending.
"Bankruptcy Plan" shall mean either the Prepackaged Plan or the
Pre-negotiated Plan, whichever may be filed in connection with the
Bankruptcy Case.
"Board of Directors" shall mean the Board of Directors of the Company.
"Break-Up Payment" shall have the meaning ascribed thereto in Section
6.3(a).
"Break-Up Payment Order" shall mean an order of the Bankruptcy Court
approving the Break-Up Payment.
"Business Day" shall mean any day other than a Saturday or Sunday
which is not a day on which banking institutions in New York City are
authorized or obligated by law or executive order to close.
"Business Plan" shall mean the business plan of the Company, as
approved by each Investor prior to the Closing, which approval shall not be
unreasonably withheld, and as the same may be amended from time to time in
accordance with the Stockholders Agreement.
"Bylaws" shall have the meaning ascribed thereto in Section 5.2(v).
"Capital Lease" shall mean a lease with respect to which the lessee is
required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"Change of Control" shall mean the occurrence of any of the following
events:
(i) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934), is or becomes the
beneficial owner, directly or indirectly, of more than 50% of the total
outstanding voting stock of the Company;
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors or other
governing body of the Company (together with any new directors whose
election to such Board of Directors or whose nomination for election by the
stockholders of the Company was approved by a vote of 662/3% of the
directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously
so approved), cease for any reason to constitute a majority of such Board
of Directors then in office;
(iii) the Company consolidates with or merges with or into any Person,
or any Person consolidates with or merges with or into the Company, and
immediately following the consummation of such transaction the holders of
the outstanding common stock of the Company immediately prior to such
transaction hold less than 50% of the outstanding common stock and the
combined voting power of the outstanding voting securities of (x) the
surviving Person in such transaction or (y) the Person into whose
securities the outstanding common stock of the Company was converted in
such transaction or whose securities were otherwise issued to holders of
the outstanding common stock of the Company in such transaction;
(iv) the Company sells, transfers, conveys, leases or otherwise
disposes of all or substantially all of its assets in one transaction or a
series of related transactions; or
(v) the Company is liquidated or dissolved or adopts a plan of
liquidation or dissolution.
"Claim Notice" shall have the meaning ascribed thereto in Section
7.2(b).
"Class A Common Stock" shall have the meaning ascribed thereto in
Section 1.1.
"Class B Common Stock" shall have the meaning ascribed thereto in
Section 2.3.
"Class C Common Stock" shall have the meaning ascribed thereto in
Section 1.1.
"Class D Common Stock" shall have the meaning ascribed thereto in
Section 1.1.
"Class E Common Stock" shall have the meaning ascribed thereto in
Section 4.19(a).
"Closing" shall have the meaning ascribed thereto in Section 1.2(a).
"Closing Date" shall have the meaning ascribed thereto in Section
1.2(a).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commitments" shall have the meaning ascribed thereto in Section 2.11.
"Common Stock" shall have the meaning ascribed thereto in Section 2.3
and shall include, as the context may require, Class A Common Stock, Class
B Common Stock and all common stock now or hereafter authorized to be
issued (including, without limitation, the Class C Common Stock and Class D
Common Stock), and any and all securities of any kind whatsoever of the
Company which may be exchanged for or converted into Common Stock, and any
and all securities of any kind whatsoever of the Company which may be
issued on or after the date hereof in respect of, in exchange for, or upon
conversion of shares of Common Stock pursuant to a merger, consolidation,
stock split, stock dividend, recapitalization of the Company or otherwise.
"Communications Act" shall mean the Communications Act of 1934, as
amended, and the rules and regulations (including those issued by the FCC)
promulgated thereunder.
"Communications License" or "Communications Licenses" shall have the
meaning ascribed thereto in Section 2.9(a).
"Company" shall have the meaning ascribed thereto in the preamble.
"Company Licensed Intellectual Property" shall have the meaning
ascribed thereto in Section 2.15.
"Company Owned Intellectual Property" shall have the meaning ascribed
thereto in Section 2.15.
"Confidential Information" shall have the meaning ascribed thereto in
the Forstmann Little Confidentiality Agreement.
"Confirmation Order" shall mean the order entered by the Bankruptcy
Court in the Bankruptcy Case confirming the Bankruptcy Plan pursuant to
Section 1129 of the Bankruptcy Code. The Confirmation Order shall provide,
among other things, that (i) the sale of Common Stock pursuant to this
Agreement shall be free and clear of all liens, claims, interests, rights
of others or encumbrances of any kind, (ii) an express finding that the
Company and each Investor have acted in good faith, and (iii) the issuance
of Common Stock to creditors under the Bankruptcy Plan is exempt from
registration under the Securities Act.
"Consents" shall have the meaning ascribed thereto in Section 4.4(a).
"Contractual Management Rights Letter" shall have the meaning ascribed
thereto in Section 4.6(b).
"Conversion Shares" shall mean shares of Class A Common Stock issuable
upon conversion of the Class C Common Stock and Class D Common Stock into
Class A Common Stock pursuant to the Amended and Restated Certificate of
Incorporation, and any and all securities of any kind whatsoever of the
Company which may be issued on or after the date hereof in respect of, in
exchange for, or upon conversion of shares of Class A Common Stock pursuant
to a merger, consolidation, stock split, stock dividend, recapitalization
of the Company or otherwise.
"Customer Base" shall mean those Persons to which the Company or the
Subsidiaries provide telecommunications service.
"DGCL" shall mean the Delaware General Corporation Law.
"Encumbrance" shall mean, with respect to any Person, any mortgage,
lien, pledge, charge, claim, option, proxy, voting trust, security interest
or other encumbrance, or any interest or title of any vendor, lessor,
lender or other secured party to or of such Person under any conditional
sale or other title retention agreement or Capital Lease, upon or with
respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"Environmental Law" shall mean any foreign, federal, state or local
law, statute, regulation, rule, ordinance, decree, or any other requirement
of law (including common law) regulating or relating to the protection of
human health and safety or the environment, including, but not limited to,
laws relating to releases or threatened releases of Hazardous Materials
into the environment.
"Environmental Permits" shall mean all federal, state, local and
foreign franchises, approvals, authorizations, franchises, licenses,
orders, registrations, certificates, filings, variances, notices and other
similar permits or rights obtained from any Governmental Entity, related to
any Environmental Law.
"Equity VI" shall mean Forstmann Little & Co. Equity Partnership VI,
L.P., a Delaware limited partnership.
"Equity VII" shall have the meaning ascribed thereto in the preamble.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean any trade or business, whether or not
incorporated, which together with the Company would be deemed a "single
employer" within the meaning of Section 4001(b) of ERISA.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of
the SEC thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934,
as amended, shall include reference to the comparable section, if any, of
any such successor federal statute.
"Expenses" shall have the meaning ascribed thereto in Section 8.2.
"Expired Policies" shall have the meaning ascribed thereto in Section
2.17.
"FCC" shall mean the Federal Communications Commission and any
successor Governmental Entity.
"FCC Licenses" shall have the meaning ascribed thereto in Section
2.9(a).
"Final Order" shall mean an order or determination by the FCC or other
regulatory authority (including State PUCs) (w) that is not reversed,
stayed, enjoined, set aside, annulled or suspended within the deadline, if
any, provided by applicable statute or regulation, (x) with respect to
which no request for stay, motion or petition for reconsideration,
application or request for review, or notice of appeal or judicial petition
for review that is filed within the period referred to in clause (w) above
is pending, (y) as to which the deadlines, if any, for filing such request,
motion, petition, application, appeal or notice have expired, and (z) as to
which the deadlines, if any, for the entry by the FCC or other regulatory
authority of orders staying, reconsidering or reviewing on its own motion
such order or determination have expired; provided, however, that if the
statutes and rules applicable to the regulatory authority do not specify
deadlines for the regulatory authority to enter such orders, this clause
(z) shall not apply to the orders or determinations of that regulatory
agency.
"FL Fund" shall mean FL Fund, L.P., a Delaware limited partnership.
"Forebearance Agreement" shall mean that certain Forebearance
Agreement, by and between the Company, the lenders under the Senior Credit
Facility and certain Subsidiaries of the Company, dated December 14, 2001,
as in effect as of the date hereof.
"Foreign Licenses" shall have the meaning ascribed thereto in Section
2.9(a).
"Foreign Competition Approvals" shall mean all consents,
authorizations, approvals, waivers, filings and other actions required by
any Governmental Entities related to antitrust or competition Laws in
connection with the transactions contemplated by this Agreement and the
other transactions documents.
"Forstmann Little" shall have the meaning ascribed thereto in the
preamble.
"Forstmann Little Confidentiality Agreement" shall mean the
Confidentiality Agreement, dated as of September 27, 2001, between the
Company and FLC XXXI Partnership, L.P., a Delaware limited partnership
doing business as Forstmann Little & Co., which is an affiliate of
Forstmann Little.
"GAAP" shall have the meaning ascribed thereto in Section 2.5.
"Governmental Entity" shall mean any supernational, national, foreign,
federal, state or local judicial, legislative, executive, administrative or
regulatory body or authority.
"Guaranty" shall mean, with respect to any Person, any obligation
(except the endorsement in the ordinary course of business of negotiable
instruments for deposit or collection) of such Person guaranteeing or in
effect guaranteeing (whether by reason of being a general partner of a
partnership or otherwise) any indebtedness, dividend or other obligation of
any other Person in any manner, whether directly or indirectly, including
(without limitation) obligations incurred through an agreement, contingent
or otherwise, by such Person: (a) to purchase such indebtedness or
obligation or any property constituting security therefor; (b) to advance
or supply funds (i) for the purchase or payment of such indebtedness or
obligation, or (ii) to maintain any working capital or other balance sheet
condition or any income statement condition of any other Person or
otherwise to advance or make available funds for the purchase or payment of
such indebtedness or obligation; (c) to lease properties or to purchase
properties or services primarily for the purpose of assuring the owner of
such indebtedness or obligation of the ability of any other Person to make
payment of the indebtedness or obligation; or (d) otherwise to assure the
owner of such indebtedness or obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor
under any Guaranty, the indebtedness or other obligations that are the
subject of such Guaranty shall be assumed to be direct obligations of such
obligor.
"Hazardous Materials" shall mean any substance or material that is
classified or regulated as "hazardous" or "toxic" or similar designation
pursuant to any Environmental Law, including, without limitation, asbestos,
polychlorinated biphenyls, petroleum and urea-formaldehyde insulation.
"HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended, and the rules and regulations thereunder.
"Indebtedness" shall mean, with respect to any Person , at any time,
without duplication, (a) its liabilities for borrowed money; (b) its
liabilities for the deferred purchase price of property acquired by such
Person (excluding accounts payable arising in the ordinary course of
business but including all liabilities created or arising under any
conditional sale or other title retention agreement with respect to any
such property); (c) all liabilities appearing on its balance sheet in
accordance with GAAP in respect of Capital Leases; (d) all liabilities for
borrowed money secured by any Encumbrance with respect to any property
owned by such Person (whether or not it has assumed or otherwise become
liable for such liabilities); (e) all its liabilities in respect of letters
of credit or instruments serving a similar function issued or accepted for
its account by banks and other financial institutions (whether or not
representing obligations for borrowed money); (f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities of a type
described in any of clauses (a) through (f) hereof.
"Intellectual Property" shall mean the United States and foreign
trademarks, service marks, trade names, trade dress, domain names, logos,
business and product names, and slogans including registrations and
applications to register or renew the registration of any of the foregoing;
copyrights and registrations or renewals thereof; United States and foreign
letters patent and patent applications, including all reissues,
continuations, divisions, continuations-in-part or renewals or extensions
thereof; inventions, processes, designs, formulae, trade secrets, know-how,
confidential business and technical information; software and computer
programs of any kind whatsoever (including without limitation all modeling
software in both source code and object code versions) and all
documentation relating thereto; Internet websites; mask works and other
semiconductor chip rights and registrations or renewals thereof; and all
other intellectual property and proprietary rights, tangible embodiments of
any of the foregoing (in any form or medium including electronic media),
and licenses of any of the foregoing.
"Investment" shall have the meaning ascribed thereto in Section 1.1.
"Investor Covered Person" shall have the meaning ascribed thereto in
Section 7.2(a).
"Investor Press Announcement" shall mean any press releases and public
filings made by an Investor between the date hereof and the Closing Date
and referring to the Company, the other Investor, this Agreement or any of
the other Transaction Documents, or any of the transactions contemplated
thereby.
"Investor Reimbursement Cap" shall have the meaning ascribed thereto
in Section 8.2.
"Investors" shall have the meaning ascribed thereto in the preamble.
"IRS" shall mean the United States Internal Revenue Service. ---
"IRU Agreement" shall have the meaning ascribed thereto in Section
2.20(d).
"Knowledge", with respect to the Company, shall mean the knowledge of
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and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any such persons and the knowledge that any of the
foregoing persons would have after due and reasonable inquiry and
investigation.
"Laws" shall mean all foreign, federal, state, and local laws,
statutes, ordinances, rules, regulations, orders, judgments, decrees and
bodies of law.
"Licenses" shall have the meaning ascribed thereto in Section 2.10.
"Litigation" shall have the meaning ascribed thereto in Section
2.7(a).
"Local Authorizations" shall have the meaning ascribed thereto in
Section 2.9(a).
"Losses" shall mean each and all of the following items: claims,
losses, (including, without limitation, losses of earnings) liabilities,
obligations, payments, damages (actual or punitive but not consequential),
charges, judgments, fines, penalties, amounts paid in settlement, costs and
expenses (including, without limitation, interest which may be imposed in
connection therewith, costs and expenses of investigation, Litigation,
demands, assessments and fees, expenses and disbursements of counsel,
consultants and other experts).
"Management Shares" shall have the meaning ascribed thereto in Section
4.19.
"Material Adverse Effect" shall have the meaning ascribed thereto in
Section 5.2(r).
"Material Terms" shall have the meaning ascribed thereto in Section
4.1(b)(x).
"MBO VII" shall mean Forstmann Little & Co. Subordinated Debt and
Equity Management Buyout Partnership VII, L.P., a Delaware limited
partnership.
"MBO VIII" shall have the meaning ascribed thereto in the preamble.
"Network Facilities" shall have the meaning ascribed thereto in
Section 2.20(b).
"Network Maps" shall have the meaning ascribed thereto in Section
2.20(a).
"New Capitalization" shall mean the total capitalization of the
Company as set forth on Exhibit A hereto, including, without limitation,
the Management Shares, but excluding shares of Class A Common Stock issued
or issuable upon exercise of options issued under the New Employee Stock
Option Plan.
"New Common Shares" shall have the meaning ascribed thereto in Section
1.1.
"New Employee Stock Option Plan" shall mean a stock option plan having
terms and conditions outlined in Exhibit H hereto, and otherwise reasonably
satisfactory in form and substance to each of the Investors.
"New Forstmann Little Shares" shall have the meaning ascribed thereto
in Section 1.1.
"New Outstanding Equity" shall mean the total outstanding equity
securities of the Company immediately after giving effect to the
Restructuring and the Investment, excluding any options outstanding under a
New Employee Stock Option Plan approved by the Investors, but including but
not limited to, all outstanding Common Stock.
"New Policy" shall have the meaning ascribed thereto in Section
4.1(b)(x).
"New Telmex Shares" shall have the meaning ascribed thereto in Section
1.1.
"Nextlink" shall mean NEXTLINK Communications, Inc., a Delaware
Corporation and the predecessor to the Company.
"1999 Stock Purchase Agreement" shall mean the Stock Purchase
Agreement, dated as of December 7, 1999, by and between Equity VI, MBO VII,
FL Fund, and Nextlink.
"NMS" shall have the meaning ascribed thereto in Section 4.5.
"Old Policy" shall have the meaning ascribed thereto in Section
4.1(b)(x).
"Operational Plan" shall mean the revised financial projections and
business plan prepared by the Company and its advisors for presentation to
the lenders under the Bank Credit Facility, a copy of which has been
provided by the Company to each of the Investors.
"Ordinary Course Litigation" shall mean Litigation arising in the
ordinary course of business of the Company and the Subsidiaries relating to
the business and operations of the Company and the Subsidiaries which
satisfies all of the following criteria:
(i) Such Litigation which would not, or would not reasonably be
expected to have, either individually or in the aggregate, (x) a Material
Adverse Effect or (y) a material adverse effect upon any officer or
director of the Company or upon either Investor or any Affiliate, officer,
director, manager, partner, member, stockholder, employee, representative,
attorney or agent of either Investor;
(ii) The plaintiffs, claimants or other Persons commencing or pursuing
such Litigation do not include any direct or indirect stockholders of the
Company or of any Subsidiary or any representatives of any such
stockholders suing in such capacity;
(iii) Such Litigation is not, and does not include, in whole or in
part, a derivative or similar claim or action brought by or on behalf of,
or in the name of, the Company or any Subsidiary;
(iv) Such Litigation does not arise out of or relate to, in whole or
in part, the governance or securities regulatory disclosure practices of
the Company, the direct or indirect purchase or sale of any debt or equity
securities of the Company or any Subsidiary, the Investment or the
Restructuring Transaction; and
(v) Such Litigation does not include, in whole or in part, any claim
or allegation of (i) breach of fiduciary duty by the Company or any
director, officer, employee or stockholder of the Company or (ii) breach of
any federal, state or foreign securities or blue sky laws.
"Permitted Encumbrances" shall mean: any Encumbrance (x) permitted
under the Bank Credit Facility, (y) permitted under any Amended Bank Credit
Facility, or (z) securing Indebtedness ranking pari passu with the Bank
Credit Facility or any Amended Bank Credit Facility.
"Person" shall mean any individual, firm, corporation, limited
liability company, partnership, company, trust or other entity, and shall
include any successor (by merger or otherwise) of such entity.
"Plan" shall mean each collective bargaining agreement, employment
agreement or severance agreement, and any bonus, pension, post-retirement
benefit, profit sharing, deferred compensation, incentive compensation,
stock ownership, stock purchase, stock option, phantom stock, retirement,
vacation, severance, disability, death benefit, hospitalization, medical,
dental or other plan, arrangement or understanding providing compensation
or benefits generally to current employees, officers, independent
contractors, or directors of the Company or any of the Subsidiaries,
including without limitation, the Retention Bonus Plan and all other plans,
agreements, arrangements and understandings set forth on Schedule
2.14(a)(i).
"Preferred Stock" shall have the meaning ascribed thereto in Section
2.3.
"Pre-negotiated Plan" shall have the meaning ascribed thereto in
Section 4.12(a)(iii).
"Prepackaged Approach" shall have the meaning ascribed thereto in
Section 4.12(a)(ii).
"Prepackaged Plan" shall have the meaning ascribed thereto in Section
4.12(a)(i)(B).
"Proposal" shall have the meaning ascribed thereto in Section 4.13(a).
"Public Debt" shall mean the Company's (a) 12 1/2% Senior Notes due
2006, (b) 9 5/8% Senior Noted due 2007, (c) 9% Senior Noted due 2008, (d)
9.45% Senior Discount Notes due 2008, (e) 10 3/4% Senior Notes due 2008,
(f) 10 3/4% Senior Notes due 2009, (g) 12 1/4% Senior Discount Notes due
2009, (h) 10 1/2% Senior Notes due 2009, (i) 12 1/8% Senior Discount Notes
due 2009, (j) 12 3/4% Senior Notes due 2007, and (k) 5 3/4% Convertible
Subordinated Notes due 2009.
"Purchase Price" shall have the meaning ascribed thereto in Section
1.1.
"Registration Rights Agreement" shall have the meaning ascribed
thereto in the recitals.
"Regulatory Approvals" shall mean all approvals, consents (including
consents to assignments of permits and rights of way), waivers,
certificates, and other authorizations required to be obtained from the
FCC, any State PUCs or any other federal, state, foreign or municipal
communications regulatory agency having jurisdiction over the Company's or
either Investor's business in order to consummate the transactions
contemplated by this Agreement and the other Transaction Documents.
"Replacement Policies" shall have the meaning ascribed thereto in
Section 2.17.
"Required Consents" shall mean such consents or agreements of
creditors and security holders as shall be required to effectuate the
Restructuring Transaction.
"Restructuring" shall have the meaning ascribed thereto in Section
4.12(a).
"Restructuring Transaction" shall mean any transaction, filing, case,
action or event or other series of transactions, filings, cases, actions or
events (including, without limitation, an exchange offer, a consent
solicitation, a Prepackaged Plan, a Pre-negotiated Plan or any other
Bankruptcy Case), whereby the completion of which, as evidenced by a Final
Order, if applicable, the Company, in all material respects, shall have
effectuated the Restructuring.
"Retention Bonus Plan" shall mean the NEXTLINK Communications, Inc.
Change of Control Retention Bonus and Severance Pay Plan, as filed with the
SEC as Exhibit 10.3 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999.
"SEC" shall mean the United States Securities and Exchange Commission
and any successor Governmental Entity.
"SEC Reports" shall have the meaning ascribed thereto in Section 2.4.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Act shall include reference to the
comparable section, if any, of such successor federal statute.
"Series A Preferred Stock" shall have the meaning ascribed thereto in
Section 2.3.
"Series B Preferred Stock" shall have the meaning ascribed thereto in
Section 2.3.
"Series C Preferred Stock" shall have the meaning ascribed thereto in
Section 2.3.
"Series D Preferred Stock" shall have the meaning ascribed thereto in
Section 2.3.
"Series E Preferred Stock" shall have the meaning ascribed thereto in
Section 2.3.
"Series F Preferred Stock" shall have the meaning ascribed thereto in
Section 2.3.
"Series G Preferred Stock" shall have the meaning ascribed thereto in
Section 2.3.
"Series H Preferred Stock" shall have the meaning ascribed thereto in
Section 2.3.
"Stockholders Agreement" shall have the meaning ascribed thereto in
the recitals.
"Significant Subsidiaries" shall have the meaning ascribed thereto in
Section 2.1(b).
"State Licenses" shall have the meaning ascribed thereto in Section
2.9(a).
"State PUCs" shall mean the state and local public service and public
utilities commissions and agencies, commissions, and similar bodies
performing similar functions.
"Subsidiaries" shall mean the collective reference to the Significant
Subsidiaries and all other direct or indirect subsidiaries of the Company.
"Swaps" shall mean, with respect to any Person, payment obligations
with respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency.
"Tax" shall mean any tax, assessment or other governmental charge
imposed by any federal, state, provincial, local government or other
political subdivision or agency thereof, including any income, alternative
minimum, accumulated earnings, personal holding company, franchise, capital
stock, profits, windfall profits, gross receipts, sales, use, value added,
transfer, registration, stamp, premium, excise, customs duties, severance,
real property, personal property, ad valorem, occupancy, license,
occupation, employment, payroll, social security, disability, unemployment,
workers' compensation, withholding, estimated or other similar tax,
assessment or other governmental charge, including penalties, interest and
additions thereto.
"Tax Return" shall mean any return, report or similar statement
required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return, claim
for refund, amended return or declaration of estimated Tax.
"Telmex" shall have the meaning ascribed thereto in the preamble.
"Telmex Confidentiality Agreement" shall mean the letter agreement, of
even date herewith, between Telmex and the Company, regarding the
disclosure of information concerning the Company.
"Third Party Consents" shall have the meaning ascribed thereto in
Section 2.8.
"Transaction Documents" shall mean this Agreement, the Amended and
Restated Certificate of Incorporation, the Bylaws, the Stockholders
Agreement, the Registration Rights Agreement, the Bankruptcy Plan, if
applicable, and all other contracts, agreements, schedules, certificates
and other documents being delivered pursuant to or in connection with this
Agreement.
"Transaction Fees" shall have the meaning ascribed thereto in Section
5.2(t).
"Transferring Investor" shall have the meaning ascribed thereto in
Section 8.5(b).
"2000 Stock Purchase Agreement" shall mean the Stock Purchase
Agreement, dated as of June 14, 2000, by and between Equity VI, MBO VII, FL
Fund, and Nextlink.
"2000 10-K" shall have the meaning ascribed thereto in Section 2.1(b).
"2001 Bonus Plan" shall have the meaning ascribed thereto in Section
4.1(b)(xi).
(b) For all purposes of this Agreement, unless otherwise expressly
provided or unless the context requires otherwise:
(i) the terms defined in this Section 8.1 and elsewhere in this
Agreement may include both the plural and singular, as the context may
require;
(ii) the words "herein", "hereto" and "hereby", and other words
of similar import, refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision of this Agreement;
(iii) unless otherwise specified, references to Articles,
Sections, paragraphs, clauses, subclauses, subparagraphs, Exhibits and
Schedules are references to Articles, Sections, paragraphs, clauses,
subclauses, subparagraphs, Exhibits and Schedules of this Agreement;
(iv) the words "including" and "include" and other words of
similar import shall be deemed to be followed by the phrase "without
limitation";
(v) any reference herein to a statute, rule or regulation of any
governmental entity (or any provision thereof) shall include such
statute, rule or regulation (or provision thereof), including any
successor thereto, as it may be amended from time to time; and
(vi) whenever the context may require, any pronouns used herein
shall include the corresponding masculine, feminine or neuter forms,
and the singular form of names and pronouns shall include the plural
and vice versa.
8.2. Fees and Expenses. The Company shall pay, or cause to be paid, to
the Investors, all of their reasonable, documented, out-of-pocket costs and
expenses incurred in connection with the transactions contemplated by this
Agreement and the other Transaction Documents, including, without
limitation, all fees and expenses (a) incurred in connection with
evaluating such transactions, conducting a due diligence investigation of
the Company and the Subsidiaries, negotiating and documenting this
Agreement and the other Transaction Documents, taking all actions
reasonably necessary or appropriate to consummate such transactions
(including, without limitation, the Investment and the Restructuring
Transaction) and enforcing any provision of this Agreement or any other
Transaction Document, (b) of law firms, investment banking firms,
accountants, public relations firms, experts, consultants and all other
Persons engaged by an Investor and (c) incurred in connection with any
regulatory filings, including filings under the HSR Act, the Communications
Act, the Securities Act and the Exchange Act, any foreign antitrust or
competition Laws and with the State PUCs and non-U.S. regulatory
authorities (collectively "Expenses"); provided that the Company shall have
no obligation to reimburse the Investors for any Expenses pursuant to this
Section 8.2 in an amount in excess of $14,000,000 in the aggregate (the
"Investor Reimbursement Cap"), except that Expenses (including, without
limitation, legal fees) incurred by the Investors in enforcing any
provision of this Agreement or any other Transaction Document shall not be
subject to the Investor Reimbursement Cap. Subject to approval of the
Bankruptcy Court, if applicable, the Company shall pay Expenses to an
Investor promptly following receipt by the Company of documentation for any
such Expenses, which such Investor may, at its option, deliver to the
Company on an "as-incurred" basis.
8.3. Restrictive Legends. No New Common Shares may be transferred
without registration under the Securities Act and applicable state
securities laws unless counsel to the Company shall advise the Company that
such transfer may be effected without such registration. Each certificate
representing any of the foregoing shall bear legends in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS.
8.4. Further Assurances. At any time or from time to time after the
Closing, the Company, on the one hand, and each Investor, on the other
hand, agree to cooperate with each other, and at the request of the other
party, to execute and deliver any further instruments or documents and to
take all such further action as the other party may reasonably request in
order to evidence or effectuate the consummation of the transactions
contemplated hereby or by the other Transaction Documents and to otherwise
carry out the intent of the parties hereunder or thereunder.
8.5. Successors and Assigns. (a) This Agreement shall bind and inure
to the benefit of the Company and each Investor and their respective
successors, permitted assigns, heirs and personal representatives, provided
that the Company may not assign its rights or obligations under this
Agreement to any Person without the prior written consent of each Investor,
and provided, further, that neither Investor may assign its rights or
obligations under this Agreement to any Person without the prior written
consent of the Company, which consent shall not be unreasonably withheld or
delayed; provided, further, that notwithstanding the foregoing, either
Investor may assign its rights and obligations hereunder to one of its
Affiliates; provided, that no such assignment to an Affiliate shall release
the party making such assignment from any of its obligations under this
Agreement. For the purpose of clarity, the Company may withhold consent to
any transfer by either Investor to any Person (including without
limitation, an Affiliate of such Investor), if such assignment would
reasonably be expected to result in the Company incurring a significant
delay in obtaining the Regulatory Approvals.
(b) Notwithstanding anything to the contrary contained in Section
8.5(a) or elsewhere in this Agreement, if (i) one Investor (but not both
Investors) terminates this Agreement pursuant to Section 6.1(b), 6.1(c),
6.1(d), 6.1(e), 6.1(i) or 6.1(n) or (ii) the Company proposes to terminate
this Agreement pursuant to Section 6.1(l) as a result of a breach of a
representation, warranty, covenant or other agreement made by one Investor
in this Agreement, the non-terminating Investor in the case of clause (i)
above and the non-breaching Investor in the case of clause (ii) above (such
non-terminating Investor or such non-breaching Investor, the "Assuming
Investor") shall have the right, in its sole discretion, without the
consent of the terminating Investor in the case of clause (i) above or the
breaching Investor in the case of clause (ii) above (such terminating
Investor or such breaching Investor, the "Transferring Investor") or, in
the case of clauses (i) and (ii) above, the Company, to assume the rights
and obligations of the Transferring Investor under this Agreement and the
other Transaction Documents to which it is a party and, except as expressly
provided in Section 6.1(j), the Company shall have no right to terminate
this Agreement or any other Transaction Document solely as a result
thereof; provided, however, that an Assuming Investor shall have no
obligation or liability to the Company or any other Person for any breach
by the Transferring Investor of any representation, warranty, covenant or
agreement made by such Transferring Investor pursuant to this Agreement or
any other Transaction Document; and provided further that the Company shall
have no right to terminate this Agreement as a result of any breach by the
Assuming Investor of any representation, warranty, covenant or agreement
made by such Assuming Investor pursuant to this Agreement or any other
Transaction Document which breach arises solely as a result of the
termination of this Agreement by the Transferring Investor.
8.6. Entire Agreement. This Agreement and the other Transaction
Documents and paragraph 4 of the Letter Agreement, dated November 21, 2001,
between Telmex and Forstmann Little & Co. contain the entire agreement
among the parties with respect to the subject matter hereof and supersede
all prior and contemporaneous arrangements or understandings with respect
thereto; provided, that the Forstmann Little Confidentiality Agreement and
the Telmex Confidentiality Agreement will remain in full force and effect
in accordance with their terms.
8.7. Notices. All notices, requests, consents and other communications
hereunder to any party shall be deemed to be sufficient if contained in a
written instrument delivered in person or sent by telecopy, nationally
recognized overnight courier or first class registered or certified mail,
return receipt requested, postage prepaid, addressed to such party at the
address set forth below or such other address as may hereafter be
designated in writing by such party to the other parties:
(i) if to the Company, to:
XO Communications, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Esq.
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy:(▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
(ii) if to Forstmann Little, to:
c/o Forstmann Little & Co.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
(iii)if to Telmex, to:
Telefonos de Mexico, S.A. de C.V.
Parque ▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, D.F.
Attention: Lic. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
All such notices, requests, consents and other communications shall be
deemed to have been given or made if and when delivered personally or by
overnight courier to the parties at the above addresses or sent by
electronic transmission, with confirmation received, to the telecopy
numbers specified above (or at such other address or telecopy number for a
party as shall be specified by like notice). Any notice delivered by any
party hereto to any other party hereto shall also be delivered to each
other party hereto simultaneously with delivery to the first party
receiving such notice.
8.8. Amendments. The terms and provisions of this Agreement may be
modified or amended, or any of the provisions hereof waived, temporarily or
permanently, in a writing executed and delivered by the Company and each
Investor. No waiver of any of the provisions of this Agreement shall be
deemed to or shall constitute a waiver of any other provision hereof
(whether or not similar). No delay on the part of any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof.
8.9. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute
but one agreement.
8.10. Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to
be a part of this Agreement.
8.11. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT
TO THE PRINCIPLES OF CONFLICTS OF LAW, OTHER THAN THE CHOICE OF LAW
PRINCIPLES OF SUCH STATE.
8.12. Submission to Jurisdiction. Each of the parties hereto hereby
irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of Delaware and of the United
States of America, in each case located in New Castle County, for any
Litigation arising out of or relating to this Agreement or the other
Transaction Documents and the transactions contemplated hereby and thereby
(and agrees not to commence any Litigation relating hereto or thereto
except in such courts), and further agrees that service of any process,
summons, notice or document by U.S. registered mail to its respective
address set forth in this Agreement shall be effective service of process
for any Litigation brought against it in any such court. Each of the
parties hereto hereby irrevocably and unconditionally waives any objection
to the laying of venue of any litigation arising out of this Agreement or
the transactions contemplated hereby in the courts of the State of Delaware
or the United States of America, in each case located in the New Castle
County, hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such litigation brought in
any such court has been brought in an inconvenient forum.
8.13. Waiver Of Jury Trial. THE COMPANY AND THE INVESTORS HEREBY WAIVE
ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION,
PROCEEDING OR LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS.
8.14. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in
any manner adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the fullest extent possible.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
Investors
FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP VII, L.P.
By: FLC XXXII Partnership, L.P.
its general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: General Partner
FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND EQUITY MANAGEMENT BUYOUT
PARTNERSHIP VIII, L.P.
By: FLC XXXIII Partnership, L.P.
its general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: General Partner
TELEFONOS DE MEXICO, S.A. DE C.V.
By: /s/ Francisco ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------
Name: Francisco ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: General Counsel
XO COMMUNICATIONS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman and Chief Executive
Officer
Exhibit A
---------
The New Capitalization
Upon Closing, the complete capitalization of the Company, after giving
effect to (i) the Restructuring, (ii) the issuance of the Management Shares
and (iii) the other transactions contemplated by the Stock Purchase
Agreement of which this Exhibit is a part and to which it is attached, but
excluding any options issued under the New Employee Stock Option Plan or
any shares of Class A Common Stock issued or issueable upon exercise of
such options, shall be as follows:
------------------------------- --------------------------------------------------- -------------------------
AMOUNT OWNERSHIP OF THE
COMPANY(1)
------------------------------- --------------------------------------------------- -------------------------
Unrestricted Cash If the Closing occurs at any time during a period ---
specified below, the Company's unrestricted cash
upon Closing shall not be less than the amount
set forth opposite such period:(2)
Period Unrestricted Cash
From the date hereof
through and including
March 31, 2002 $486 million
From April 1, 2002
through and including
June 30, 2002 $335 million
From July 1, 2002
through and including
September 30, 2002 $192 million
From October 1, 2002
through and including
the Closing $70 million
------------------------------- --------------------------------------------------- -------------------------
Aggregate Indebtedness(3) Not to exceed $1.034 billion ---
------------------------------- --------------------------------------------------- -------------------------
Forstmann Little's New $400 million 40.00%
Equity (79,999,998 shares
of Class A Common Stock
and two shares of Class D
Common Stock)
------------------------------- --------------------------------------------------- -------------------------
Telmex's New Equity $400 million 40.00%
(80,000,000 shares
of Class C Common Stock)
------------------------------- --------------------------------------------------- -------------------------
Management Shares (up to approximately $7.0 million(5) 2.00%(6)
4,000,000 shares of Class E
Common Stock)(4)
------------------------------- --------------------------------------------------- -------------------------
Other Equity Holders $180 million(7) 18.00%
(up to 36,000,000 shares
shares of Class A Common Stock)
------------------------------- --------------------------------------------------- -------------------------
-------------------------------
1 Without giving effect to New Employee Stock Option Plan.
2 The amounts set forth below are exclusive of any and all Transaction
Fees payable during such period, provided that in no event shall the
total aggregate amount of all Transaction Fees exceed the amount set
forth in Section 5.2(t).
3 For purposes of this Exhibit A, "Indebtedness" means all indebtedness
of the Company and its subsidiaries for borrowed money and all
liabilities appearing on the Company's balance sheet in accordance
with GAAP in respect of Capital Leases. "Indebtedness" does not
include intercompany debt or accrued interest.
4 See generally Exhibit G for the rights and preferences of the Class E
Common Stock.
5 This figure is subject to change within the range set forth on Exhibit
G. Any change to this figure may affect the percentage of the
outstanding Common Stock represented by the Management Shares and the
percentage of the outstanding Common Stock acquired by Forstmann
Little and Telmex in the Investment but shall not effect the
percentage of the outstanding Common Stock allocable to the other
equity holders as set forth above.
6 See footnote no. 5 above.
7 Implied valuation.
Exhibit F
---------
Contractual Management Rights Letter
XO Communications, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
[Insert date]
[Insert name and address of Investor]
To [Insert name of Investor]:
This letter will confirm our agreement that, effective immediately and
continuing for so long as you ("you," or "Investor") hold any equity
securities of XO Communications, Inc. (the "Company"), you will be entitled
to each of the following contractual management rights relating to the
Company (collectively, the "Management Rights"):
(1) Investor shall be entitled to routinely consult with and advise
management of the Company with respect to the Company's business and
financial matters, including management's proposed annual operating
plans, and management will meet regularly during each year with
representatives of Investor (the "Representatives") at the Company's
facilities at mutually agreeable times for such consultation and
advice, including to review progress in achieving said plans. The
Company shall give Investor reasonable advance written notice of any
significant new initiatives or material changes to existing operating
plans and shall afford Investor adequate time to meet with management
to consult on such initiatives or changes prior to implementation. The
Company agrees to give due consideration to the advice given and any
proposals made by Investor.
(2) Investor may inspect all contracts, books, records, personnel, offices
and other facilities and properties of the Company and, to the extent
available to the Company after the Company uses reasonable efforts to
obtain them, the records of its legal advisors and accountants,
including the accountants' work papers, and Investor may make such
copies and inspections thereof as Investor may reasonably request. The
Company shall furnish Investor with such financial and operating data
and other information with respect to the business and properties of
the Company as Investor may request. The Company shall permit the
Representatives to discuss the affairs, finances and accounts of the
Company with, and to make proposals and furnish advice with respect
thereto, the principal officers of the Company.
(3) The Company shall, after receiving notice from Investor as to the
identity of any Representative, (i) permit a Representative to attend
all meetings of the Board of Directors of the Company (the "Board")
and all committees thereof as an observer, (ii) provide the
Representative advance notice of each such meeting, including such
meeting's time and place, at the same time and in the same manner as
such notice is provided to the members of the Board (or such committee
thereof), (iii) provide the Representative with copies of all
materials, including notices, minutes and consents, distributed to the
members of the Board (or such committee thereof) at the same time as
such materials are distributed to such Board (or such committee
thereof) and shall permit the Representative to have the same access
to information concerning the business and operations of the Company
and (iv) permit the Representative to discuss the affairs, finances
and accounts of the Company with, and to make proposals and furnish
advice with respect thereto to, the Board, without voting, and the
Board and the Company's officers shall take such proposals or advice
seriously and give due consideration thereto. Reasonable costs and
expenses incurred by the Representative for the purposes of attending
Board (or committee) meetings and conducting other Company business
will be paid by the Company.
Investor agrees, and shall cause each of its Representatives to agree,
to hold in confidence and trust and not use or disclose any confidential
information provided to or learned by it in connection with the exercise of
Investor's Management Rights under this letter agreement, unless otherwise
required by law or unless such confidential information otherwise becomes
publicly available or available to it other than through this letter
agreement.
The rights set forth in this letter agreement are intended to satisfy
the requirement of contractual management rights for purposes of qualifying
Investor's interests in the Company as venture capital investments for
purposes of the Department of Labor's "plan assets" regulations, and in the
event that, after the date hereof, as a result of any change in applicable
law or regulation or a judicial or administrative interpretation of
applicable law or regulation, it is determined that such rights are not
satisfactory for such purpose, Investor and the Company shall reasonably
cooperate in good faith to agree upon mutually satisfactory management
rights which satisfy such regulations.
[signature page follows]
Very truly yours,
XO COMMUNICATIONS, INC.
---------------------------
By:
------------------------
Its:
AGREED AND ACCEPTED THIS -----------------------
__ day of _______________.
[Insert name of Investor]
--------------------------
By:
-----------------------
Its:
-----------------------
Exhibit G
---------
INVESTOR/MANAGEMENT COMMON STOCK TERMS(1)
----------------------------- ---------------------------------------------
INVESTOR STOCK To-be-designated (i) Class A Common Stock (to
be held by Forstmann Little), (ii) Class C
Common Stock (to be held by Telmex) and (iii)
Class D Common Stock (to be held by Forstmann
Little).(2)
The Investor Stock shall have the rights and
preferences set forth in the Amended and
Restated Certificate of Incorporation.
----------------------------- ---------------------------------------------
MANAGEMENT STOCK To-be-designated Class E Common Stock, par
value $0.01 per share. The Management Stock
will be issued to certain agreed upon members
of management of the Company (collectively
"Eligible Management Members"). It is
intended that the Management Stock shall have
the rights and preferences set forth herein
and, to the extent mutually agreed among the
parties to the Stock Purchase Agreement, in
the Amended and Restated Certificate of
Incorporation.
----------------------------- ---------------------------------------------
NUMBER OF SHARES o Class A Common (Forstmann Little):
OF EACH CLASS 79,999,998 shares
o Class C Common (Telmex): 80,000,000
shares
o Class D Common (Forstmann Little):
2 shares
o Class E Common (Eligible Management
Members): 4,000,000 shares(3)
----------------------------- ---------------------------------------------
PURCHASE PRICE The Investors shall purchase shares of
Investor Stock for $5.00 per share in cash
(the "Investor Stock Purchase Price").
Management shall have the right, but not the
obligation, to purchase shares of Management
Stock for cash at a price equal to
approximately one-third of the Investor Stock
Purchase Price (the "Management Stock
Purchase Price" and together with the
Investor Stock Purchase Price, the "Aggregate
Stock Purchase Price").
----------------------------- ---------------------------------------------
CLOSING Any purchase by Eligible Management Members
of Management Stock shall close
simultaneously with the Closing of the
Investment.
----------------------------- ---------------------------------------------
VESTING OF CERTAIN RIGHTS Certain rights of the holders of Management
Stock shall vest over time in accordance with
a schedule and subject to such conditions as
shall be mutually agreed among the parties to
the Stock Purchase Agreement prior to the
Closing.
----------------------------- ---------------------------------------------
VOTING RIGHTS All shares of Investor Stock and Management
Stock shall have one vote per share. The
classes of Investor Stock shall have the
special voting and other rights and
preferences set forth in the Amended and
Restated Certificate of Incorporation.
Otherwise the Investor Stock and the
Management Stock shall have the same voting
rights and shall vote together as a single
class.
----------------------------- ---------------------------------------------
DIVIDENDS The Investor Stock and the Management Stock
shall receive dividends in a ratio
approximately equal to the ratio between the
Investor Stock Purchase Price and the
Management Stock Purchase Price.
----------------------------- ---------------------------------------------
LIQUIDATION Upon liquidation, the net assets of the
Company shall be distributed pro rata to the
Company's stockholders such that each holder
of Investor Stock and of Management Stock
shall receive:
o First, the lesser of (i) the amount
of the Investor Stock Purchase
Price or Management Stock Purchase
Price paid in respect of such
Investor Stock or Management Stock
or (ii) net assets of the Company
in a ratio approximately equal to
the ratio between the Investor
Stock Purchase Price and the
Management Stock Purchase Price;
o Second, each holder of Investor
Stock shall receive net assets
proportionate to its pro rata share
of the difference between the
Investor Stock Purchase Price and
the Management Stock Purchase
Price; and
o Third, each stockholder of the
Company shall receive its pro rata
portion of the remaining net assets
of the Company.
----------------------------- ---------------------------------------------
NON-TRANSFERABILITY The Management Stock may not be transferred,
pledged or otherwise disposed of except for
(i) transfers upon death to an heir, (ii)
transfers back to the Company and (iii) such
additional permissible transfers as may be
mutually agreed among the parties to the
Stock Purchase Agreement prior to the Closing.
In addition, shares of Class A Common Stock
into which Management Stock shall be
converted may be subject to transfer
restrictions to be mutually agreed among the
parties to the Stock Purchase Agreement prior
to the Closing.
The Investor Stock shall be transferable in
accordance with the terms of the Stockholders
Agreement.
----------------------------- ---------------------------------------------
CONVERSION TO MANAGEMENT
STOCK TO CLASS A COMMON
STOCK
----------------------------- ---------------------------------------------
Voluntary Conversion Each share of Management Stock shall be
convertible, at any time at the option of the
holder, into shares of Class A Common Stock
at the Conversion Ratio (as hereinafter
defined).
----------------------------- ---------------------------------------------
Mandatory Conversion All shares of Management Stock or such
of all Shares of portion of such shares as shall be
Management Stock determined by a majority of the Board of
Directors shall automatically be converted
into shares of Class A Common Stock at the
Conversion Ratio upon the occurrence of
certain events. These events shall include,
but may not be limited to, the following:
1. a Major Event (as defined in the
Stockholders Agreement)
2. the sale by either Investor of 50%
or more of the shares of Investor
Stock acquired by such Investor
under the Stock Purchase Agreement
3. the sale by both Investors of 50%
or more of the aggregate number of
shares of Investor Stock acquired
by the Investors pursuant to the
Stock Purchase Agreement (the sales
referred to in item no. 2 above and
this item no. 3 being hereinafter
referred to as a "Major Investor
Sale")
4. when the public trading price of
the Class A Common Stock exceeds an
agreed upon price for an agreed
upon trading period
5. the vote of a majority of the Board
of Directors
6. the vote of a majority of the
members of the Executive Committee
of the Board of Directors
7. upon a date to be mutually agreed
among the parties to the Stock
Purchase Agreement prior to the
Closing.
----------------------------- ---------------------------------------------
Automatic Conversion Upon A share of Management Stock shall
Prohibited Transfer automatically be converted into shares of
Class A Common Stock at the Conversion Ratio
upon any prohibited transfer of such share.
----------------------------- ---------------------------------------------
CONVERSION RATIO A ratio or ratios to be mutually agreed among
the parties to the Stock Purchase Agreement
prior to the Closing, provided that in no
event shall any conversion ratio be greater
than 1.00:1.00 (the "Conversion Ratio"). The
conversion ratio may vary based upon the
event or circumstance causing such
conversion.
----------------------------- ---------------------------------------------
DRAG-ALONG RIGHTS The Management Stock shall be subject to
customary drag-along rights in the event of a
Major Event or a Major Investor Sale
----------------------------- ---------------------------------------------
TAG-ALONG RIGHTS The Management Stock shall have customary
tag-along rights in the event of a Major
Event or Major Investor Sale.
----------------------------- ---------------------------------------------
REGISTRATION RIGHTS Eligible Management Members shall have
customary piggyback (but not demand)
registration rights with respect to
Management Stock, subject to customary
indemnification, cutback and similar
provisions.
----------------------------- ---------------------------------------------
REPURCHASE Management Stock may be repurchased by the
Company or the Investors from an Eligible
Management Member under certain circumstances
to be specified, including, but not limited
to, employee termination, death or
disability, at prices and upon terms and
subject to conditions to be mutually agreed
among the parties to the Stock Purchase
Agreement prior to the Closing.
----------------------------- ---------------------------------------------
DOCUMENTATION The purchase by Eligible Management Members
of Management Stock shall be pursuant to
subscription agreements between the Company
and each Eligible Management Member
purchasing Management Stock containing
customary terms and conditions to be mutually
agreed among the parties to the Stock
Purchase Agreement prior to the Closing.
The Company will use its reasonable best
efforts to enter into subscription agreements
with such Eligible Management Members on or
prior to the filing of the Bankruptcy Case;
provided, however, that the purchase by
Eligible Management Members of Management
Stock shall close simultaneously with the
Closing of the Investment.
-----------------------
1 THIS EXHIBIT G IS SUBJECT TO SECTION 4.19(b) OF THE STOCK
PURCHASE AGREEMENT. The following sets forth only the indicative
terms of the Class E Common Stock. The definitive terms of such
stock, which will be set forth in the Amended and Restated
Certificate of Incorporation, may differ from the indicative
terms set forth herein. Unless otherwise defined herein or the
context otherwise requires, capitalized terms used herein and
defined in the Stock Purchase Agreement, to which this Exhibit G
is an Exhibit, shall be used herein as therein defined.
2 Some shares of the Company's Class A Common Stock may remain
outstanding after the Closing of the Investment. All shares of
the Company's Class B Common Stock shall be cancelled in
connection with the Restructuring.
3 This number of shares is based upon an investment of
approximately $7 million by the Eligible Management Members. The
amount of such investment may vary between approximately $7
million and $8 million.
Exhibit H
---------
New Employee Stock Option Plan
Concurrent with the Closing of the Investment and the Restructuring,
the Company shall have authorized and implemented an Employee Stock Option
Plan (the "New Option Plan") providing for the grant of options (which may
be non-qualified options or incentive stock options, as recommended by
management and approved by the Investors, which approval shall not be
unreasonably withheld) (the "New Options") to purchase shares of Class A
Common Stock in an amount up to 5.0% of the Common Stock outstanding after
giving effect to the issuance of Common Stock in connection with the
Investment and the Restructuring (including the Management Shares but
excluding any Common Stock issuable pursuant to the New Options) (the
"Outstanding Common Stock"). Shares of Class A Common Stock subject to New
Options granted pursuant to the New Option Plan shall be in addition to the
Management Shares as contemplated by Exhibit H to the Stock Purchase
Agreement.
The New Options shall have the following terms in addition to the
terms contemplated by the New Option Plan (which shall contain commercially
reasonable terms to be recommended by Company management and approved by
the Investors (such approval not to be unreasonably withheld)):
Grant Date: The first set of New Options (the
"Initial Options") shall be granted as of the
later of (i) the Closing Date and (ii) if the
Company is "publicly held" (as defined in the
regulations (the "Regulations") promulgated
under Section 162(m) of the Code) immediately
following the Closing, the date on which
stockholder approval has been obtained such
that the New Options constitute "qualified
performance-based compensation" (as defined
in the Regulations); subsequent New Options
shall be granted from time to time
thereafter.
Exercise Price: The exercise price for the Initial
Options shall be $5.00 per share and the
exercise price for any subsequently-granted
New Options shall be the fair market value of
the Common Stock on the date of grant.
Grantees: Employees of the Company to be recommended by
Company management and approved by the
Investors (such approval not to be
unreasonably withheld); grants to be made (i)
by the Company's compensation committee or
(ii) if the Company is "publicly held" (as
defined in the Regulations), by a committee
of two or more "outside directors" (as
defined in the Regulations).
Vesting: 25% of the Initial Options shall vest on the
Closing Date and 25% of the Initial Options
shall vest on each of the first, second and
third anniversaries of the Closing Date, with
the allocation of such vested options among
the employees as recommended by the Company
management and as approved by the Investors
(such approval not to be unreasonably
withheld); 25% of any subsequently-granted
New Options shall vest on the grant date and
25% on each of the first, second and third
anniversaries thereof.
Term of Options: 10 years