As Filed With The Securities And Exchange Commission On
May 16, 2000
DEFINITIVE INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF
THE SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
Preliminary Information Statement [ ]
Confidential, For Use of the Commission Only (as permitted by
Rule l4c-5(d)(2)) [ ]
Definitive Information Statement [X]
NEXTLINK COMMUNICATIONS, INC.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per
Exchange Act Rules 14c-5(g) and 0-11.
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Title of each class of securities to which transaction applies: |
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Aggregate number of securities to which transaction applies: |
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was
determined): |
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(4) |
Proposed maximum aggregate value of the transaction: |
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Total fee paid: |
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[ ] Fee paid previously with preliminary
materials. |
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Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or
Schedule and the date of its filing. |
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(1) |
Amount Previously Paid: |
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Form, Schedule or Registration Statement No.: |
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Filing Party: |
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Date Filed: |
CONCENTRIC LOGO
To Our Stockholders:
I am pleased to announce the proposed merger with NEXTLINK
Communications, Inc. This merger will create a combined company
offering a broad set of solutions for telecommunications and
Internet services.
The merger is structured so that Concentric and NEXTLINK will
merge into a third company, named NM Acquisition Corp., which has
been formed for this purpose and which, following the merger,
will be known as NEXTLINK Communications, Inc. This merger is
described in detail in the attached document.
In the merger, if the average trading price of NEXTLINK common
stock is between $69.23 and $90.91 per share, then for each share
of Concentric common stock you hold, you will receive common
stock of the combined company worth $45 per share. Holders of
Concentric common stock will receive a higher amount if the
average trading price of NEXTLINK common stock is higher than
$90.91 per share, and will receive a lower amount if the average
trading price of NEXTLINK common stock is lower than $69.23 per
share. For a more detailed discussion, including a discussion of
adjustments to the exchange ratio necessary to reflect
NEXTLINK’s proposed class A common stock split, please
see the section entitled “Questions and Answers About the
Merger” beginning inside on page iv.
You will be asked to vote upon the merger agreement and the
merger with NEXTLINK at a special meeting of Concentric
stockholders. The date, time and place of this special meeting
is:
Thursday, June 15, 2000
1:00 p.m. local time
Concentric Network Corporation
1400 Parkmoor Avenue
San Jose, California 95126-3429
The merger cannot be consummated unless the holders of a majority
of shares of Concentric common stock approve the merger
agreement and the merger. Only stockholders who hold shares of
Concentric common stock at the close of business
on May 10, 2000, the record date, will be entitled to
vote at the special meeting.
We are very excited by the opportunities we see for the combined
company. After careful consideration, your board of directors has
unanimously determined that the terms and conditions of the
merger are fair to and in the best interests of you, the
Concentric stockholders, and has recommended that you approve the
merger agreement and merger.
Please carefully read this document for detailed information
about NEXTLINK, the combined company and the merger. Your vote is
very important regardless of the number of shares you own.
Whether or not you expect to attend the special meeting, please
mark, date, sign and promptly return the accompanying proxy in
the enclosed postage-prepaid envelope, so that your shares may be
represented at the special meeting. Returning your proxy does
not deprive you of your right to attend the special meeting and
vote your shares in person.
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Very truly yours, |
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NOTHHAFT SIGNATURE |
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Henry R. Nothhaft |
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Chairman, President and |
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Chief Executive Officer |
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved the securities
to be issued under this proxy statement/information
statement/prospectus or passed upon the adequacy or accuracy of
this proxy statement/information statement/prospectus. Any
representation to the contrary is a criminal offense.
This proxy statement/information statement/prospectus is dated
May 12, 2000 and is first being mailed to Concentric
stockholders on or about May 15, 2000
CONCENTRIC LOGO
CONCENTRIC NETWORK CORPORATION
1400 PARKMOOR AVENUE
SAN JOSE, CA 95126
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY JUNE 15, 2000
To Our Stockholders:
Notice is hereby given that a special meeting of stockholders of
Concentric Network Corporation will be held on Thursday,
June 15, 2000 at 1:00 p.m., Pacific Daylight
Time, at the principal executive offices of Concentric at 1400
Parkmoor Avenue, San Jose, California 95126-3429, for the
following purpose:
To consider and vote upon a proposal to adopt the Amended and
Restated Agreement and Plan of Merger and Share Exchange
Agreement, dated as of May 10, 2000, by and among
Concentric, NEXTLINK Communications, Inc., Eagle River
Investments, L.L.C., Craig O. McCaw and NM Acquisition
Corp., and to approve the acquisition of Concentric by NEXTLINK
by means of a merger of both Concentric and NEXTLINK into NM
Acquisition Corp., a company formed for this purpose. We describe
the merger and the merger agreement more fully in the
accompanying proxy statement/information statement/prospectus,
which we urge you to read. This document is also a prospectus of
NM Acquisition Corp. relating to the shares of NM Acquisition
Corp. common stock to be issued in the merger, and an information
statement for the stockholders of NEXTLINK.
Only stockholders of record of Concentric common stock at the
close of business on May 10, 2000 are entitled to vote at
the special meeting or any adjournments or postponements of the
special meeting. YOUR VOTE IS VERY IMPORTANT. Approval of the
merger proposal, requires the favorable vote of the holders of a
majority of the outstanding shares of Concentric common stock. A
FAILURE BY A HOLDER OF CONCENTRIC COMMON STOCK TO VOTE, EITHER BY
NOT RETURNING THE ENCLOSED PROXY OR BY CHECKING THE
“ABSTAIN” BOX ON THE PROXY, WILL HAVE THE SAME EFFECT
AS A VOTE AGAINST THE MERGER.
Please mark, date, sign and promptly return your proxy whether or
not you plan to attend the special meeting.
The board of directors of Concentric has unanimously approved the
merger and the merger agreement and determined that the merger
is advisable and in the best interests of Concentric and its
stockholders. After careful consideration, the Concentric board
of directors unanimously recommends that the Concentric
stockholders vote “FOR” the proposal.
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By Order of the Board of |
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Directors |
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NOTHHAFT SIGNATURE |
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Henry R. Nothhaft |
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Chairman, President and |
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Chief Executive Officer |
May 12, 2000
[NEXTLINK LOGO]
Dear NEXTLINK Stockholder:
The board of directors of NEXTLINK Communications, Inc. has
approved the merger of NEXTLINK and Concentric Network
Corporation. In the merger, among other things, NEXTLINK and
Concentric will each merge with and into NM Acquisition Corp., a
Delaware corporation without any operations or material assets
which was formed in connection with the merger and which,
following the merger, will change its name to NEXTLINK
Communications, Inc.
Eagle River Investments, L.L.C., which owns shares representing
more than 50% of the total voting power of all outstanding
NEXTLINK common stock, agreed in connection with the execution of
the merger agreement to approve the merger and did so on
May 10, 2000. Under Delaware law and the terms of
NEXTLINK’s certificate of incorporation and bylaws, Eagle
River’s approval is sufficient to approve the merger and the
merger agreement. For this reason, NEXTLINK is not calling a
meeting of its stockholders to vote on the merger and the merger
agreement. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY.
Although we are not asking you for a proxy and ask that you not
send us one, we are furnishing this information statement in
order to provide you with important information about the merger.
Please read this document and the attached merger agreement
carefully. This document is also a prospectus of NM Acquisition
Corp. relating to the shares of NM Acquisition Corp. common stock
to be issued in the merger, and a proxy statement for the
stockholders of Concentric who are being asked to approve the
merger.
/s/ DANIEL F. AKERSON
Daniel F. Akerson,
Chairman and Chief Executive Officer
May 12, 2000
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved the securities
to be issued under this proxy statement/information
statement/prospectus or passed upon the adequacy or accuracy of
this proxy statement/information statement/prospectus. Any
representation to the contrary is a criminal offense.
This proxy statement/information statement/prospectus is dated
May 12, 2000 and is first being mailed to NEXTLINK
stockholders on or about May 15, 2000.
TABLE OF CONTENTS
PROXY STATEMENT/ INFORMATION STATEMENT/ PROSPECTUS
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PROXY STATEMENT OF
CONCENTRIC NETWORK CORPORATION
1400 PARKMOOR AVENUE
SAN JOSE, CA 95126
(408) 817-2800 |
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INFORMATION STATEMENT OF
NEXTLINK COMMUNICATIONS, INC.
1505 FARM CREDIT DRIVE
MCLEAN, VA 22102
(703) 547-2000 |
PROSPECTUS OF
NM ACQUISITION CORP.
1505 FARM CREDIT DRIVE
MCLEAN, VA 22102
(703) 547-200
TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE MERGER |
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iv |
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SUMMARY |
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The Companies |
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The Merger |
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Concentric Special Meeting |
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Stockholder Votes Required to Approve the Merger |
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Board Approvals and Recommendations |
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Reasons for the Merger |
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Opinions of Financial Advisors |
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Interests of Insiders of Concentric in the Merger |
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4 |
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Overview of the Merger Agreement |
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4 |
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Appraisal Rights |
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5 |
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Material Federal Income Tax Consequences |
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Listing of NM Acquisition Corp. Class A Common Stock |
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Concentric Voting Agreements |
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Required Regulatory Approvals |
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Officers and Directors After the Merger |
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Market Price Information |
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Selected Financial Data of Concentric |
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8 |
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Selected Financial Data of NEXTLINK |
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10 |
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Selected Unaudited Pro Forma Condensed Combined Financial Data |
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11 |
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Comparative Per Share Data |
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12 |
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RISK FACTORS |
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13 |
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Risks Related to the Merger |
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13 |
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Risks Related to the Business and Operations of NEXTLINK and
Concentric |
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15 |
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Risks Related to Liquidity and Capital Resources |
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Risks Related to NEXTLINK’s Technology and Network
Development |
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Risks Related to Competition and the Telecommunications and Data
Services Industries |
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Risks Related to Growth and Development of NEXTLINK’s
Network and Concentric’s Data Services Business After the
Merger |
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22 |
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Other Risks |
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24 |
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Forward-Looking Statements |
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THE CONCENTRIC SPECIAL MEETING |
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General |
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Date, Time and Place |
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Purpose of the Special Meeting |
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Board Recommendation |
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Record Date; Voting Rights |
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Quorum |
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Voting of Proxies |
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Vote Required to Approve the Merger Agreement and the Merger |
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Abstentions and Broker Non-Votes |
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Solicitation of Proxies and Expenses |
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Appraisal Rights |
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THE MERGER |
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Background of the Merger |
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Concentric’s Reasons for the Merger and Additional
Considerations |
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NEXTLINK’s Reasons for the Merger and Additional
Considerations |
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Opinion of Concentric’s Financial Advisor |
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Opinion of NEXTLINK’s Financial Advisor |
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42 |
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Recommendation of Concentric’s Board of Directors |
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48 |
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Recommendation of NEXTLINK’s Board of Directors |
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48 |
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Interests of Insiders of Concentric in the Merger |
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The Merger Structure |
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Effective Time of the Merger |
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49 |
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Conversion of Concentric and NEXTLINK Securities |
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50 |
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Certificate of Incorporation and Bylaws of NM Acquisition Corp.
After the Merger |
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51 |
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Appraisal Rights |
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51 |
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Material Federal Income Tax Consequences of the Merger |
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53 |
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Restrictions on Resale of NM Acquisition Corp. Common Stock |
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Accounting Treatment |
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Stock Exchange Listing of NM Acquisition Corp. Class A
Common Stock |
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Delisting and Deregistration of Concentric Common Stock After the
Merger |
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56 |
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THE MERGER AGREEMENT AND RELATED AGREEMENTS |
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Representations and Warranties |
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57 |
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Conduct of Concentric Business Pending the Merger |
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58 |
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Conditions Precedent to the Merger |
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Required Regulatory Approvals |
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60 |
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Limitation on Concentric Negotiations With Third Parties |
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Termination Fees and Expenses |
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Termination of the Merger Agreement |
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63 |
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Concentric Voting Agreements |
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Eagle River Voting Agreement |
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64 |
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Consent Solicitation |
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Waiver and Amendment |
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64 |
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Surrender of Concentric Stock Certificates |
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64 |
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Officers and Directors After the Merger |
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65 |
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Indemnification of Officers and Directors |
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LHP Share Exchange |
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66 |
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UNAUDITED PRO FORMA FINANCIAL INFORMATION |
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67 |
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DESCRIPTION OF NM ACQUISITION CORP. CAPITAL STOCK |
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Authorized Common Stock |
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NM Acquisition Corp. Class A Common Stock |
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NM Acquisition Corp. Class B Common Stock |
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73 |
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COMPARISON OF STOCKHOLDER RIGHTS |
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74 |
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Authorized Capital Stock |
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74 |
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Board of Directors |
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75 |
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Voting Rights |
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75 |
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Action by Written Consent |
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76 |
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Special Meeting of Stockholders |
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76 |
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Business Combinations |
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76 |
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WHERE YOU CAN FIND MORE INFORMATION |
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77 |
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DOCUMENTS INCORPORATED BY REFERENCE |
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79 |
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EXPERTS |
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80 |
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SHAREHOLDER PROPOSALS |
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80 |
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LEGAL MATTERS |
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80 |
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APPENDIX A — AMENDED AND RESTATED AGREEMENT AND PLAN OF
MERGER AND SHARE EXCHANGE AGREEMENT |
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A-1 |
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APPENDIX B — FAIRNESS OPINION OF BEAR, STEARNS &
CO. INC. |
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B-1 |
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APPENDIX C — FAIRNESS OPINION OF MERRILL LYNCH &
CO. |
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C-1 |
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APPENDIX D — SECTION 262 OF THE DELAWARE GENERAL
CORPORATION LAW |
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D-1 |
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APPENDIX E — FORM OF RESTATED CERTIFICATE OF
INCORPORATION OF NM ACQUISITION CORP. |
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E-1 |
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APPENDIX F — FORM OF RESTATED BYLAWS OF NM ACQUISITION
CORP. |
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F-1 |
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ii
This proxy statement/ information statement/ prospectus
incorporates important business and financial information about
Concentric and NEXTLINK that is not included or delivered with
this document. This business and financial information is
available without charge to stockholders of both Concentric and
NEXTLINK upon their written or oral request at the following
address and/or telephone number:
For Concentric stockholders:
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CONCENTRIC NETWORK CORPORATION |
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1400 Parkmoor Avenue |
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San Jose, CA 95126 |
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Attention: Investor Relations |
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Telephone number: (408) 817-2000 |
For NEXTLINK stockholders:
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NEXTLINK COMMUNICATIONS, INC. |
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1505 Farm Credit Drive, 6th Floor |
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McLean, VA 22102 |
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Attention: Investor Relations |
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Telephone number: (703) 547-2000 |
If you would like to request documents from Concentric or
NEXTLINK and want to receive them prior to the Concentric
stockholder meeting, please make your request at least five
business days before the date of that meeting, or June 8,
2000.
See also “Where You Can Find More Information” on
page 77.
NM Acquisition Corp. may not sell the securities to be issued
under this prospectus until the registration statement filed with
the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell securities and it is not
soliciting an offer to buy securities in any state where the
offer or sale is not permitted.
In this proxy statement/ information statement/ prospectus,
unless otherwise indicated, “we” refers to both
Concentric and NEXTLINK, and “our” refers to both
Concentric and NEXTLINK.
iii
QUESTIONS AND ANSWERS ABOUT THE MERGER
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| Q: |
What will NEXTLINK stockholders receive in the merger? |
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NEXTLINK stockholders will receive one share of NM Acquisition
Corp. class A common stock for each share of NEXTLINK
class A common stock and one share of NM Acquisition Corp.
class B common stock for each share of NEXTLINK class B
common stock. |
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| Q: |
What is NM Acquisition Corp. and what will its stock
represent? |
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NM Acquisition Corp. is a newly-formed corporation which will
have no assets and liabilities of its own until the closing of
the merger. After the closing, its assets and business will be
those of NEXTLINK and Concentric, and it will also own 100% of
INTERNEXT, L.L.C., a Delaware limited liability company. NEXTLINK
will be contributing the majority of the assets of NM
Acquisition Corp., and NEXTLINK stockholders will receive NM
Acquisition Corp. shares on a one-for-one basis as discussed
above. |
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| Q: |
What is the difference between NM Acquisition Corp.
class A and class B common stock? |
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| A: |
NM Acquisition Corp. class A common stock, which holders of
Concentric common stock and NEXTLINK class A common stock
will receive in the merger, will be entitled to one vote per
share. NM Acquisition Corp. class B common stock, which
holders of NEXTLINK class B common stock will receive in
the merger, will be entitled to ten votes per share and will be
convertible on a one-for-one basis into shares of
NM Acquisition Corp. class A common stock. These
differences are identical to the differences between
NEXTLINK’s class A common stock and class B common stock.
Except for these differences, NM Acquisition Corp.
class A class common stock and class B common stock
will be identical. |
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| Q: |
What will Concentric stockholders receive in the Merger? |
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| A: |
For each share of Concentric common stock converted in the
merger, Concentric stockholders will receive NM Acquisition Corp.
class A common stock worth $45 dollars per share, unless
the average price of NEXTLINK common stock prior to the merger is
outside of a specified range known as a “collar.” Each
share of NM Acquisition Corp. class A common stock is
intended to be the economic equivalent of a share of NEXTLINK
class A common stock. |
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| Q: |
How does the collar work? |
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| A: |
If the NEXTLINK share price is within the collar, the exchange
ratio adjusts so that Concentric stockholders receive
class A common stock of NM Acquisition Corp. with a value
(based on the value of an equivalent number of NEXTLINK shares)
of $45 per share of Concentric common stock. If the NEXTLINK
share price is outside the collar, the exchange ratio is fixed
and the value of the merger consideration will depend upon the
value of the underlying NEXTLINK shares. The range of the collar
was originally set at $69.23 to $90.91 per share of NEXTLINK
class A common stock, which results in an exchange ratio of
0.495 (if the NEXTLINK average share price is at or higher than
$90.91) to 0.650 (if the NEXTLINK average share price is at or
below $69.23). However, as discussed below, it is anticipated
that NEXTLINK will, subject to the approval of its stockholders,
pay a one-for-one stock dividend on its class A common stock
prior to the consummation of the merger. In such event, the
merger agreement provides that, in order to adjust for the stock
dividend, the exchange ratio will be between 0.99 and 1.3 (i.e.
the low and high ends of the range of the collar will be $34.61
and $45.46, respectively). If the average NEXTLINK share price is
below the low end of the collar, (regardless of whether the
collar is adjusted for the proposed NEXTLINK class A common
stock dividend), Concentric stockholders will receive NM
Acquisition Corp. class A common stock worth less than $45
per share for each share of Concentric common stock converted in
the merger. If the average NEXTLINK share price is above the high
end of the collar, Concentric stockholders will receive NM
Acquisition Corp. class A common stock worth more than $45
per share for each share of Concentric common stock converted in
the merger. |
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| Q: |
How is the average NEXTLINK share price computed? |
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| A: |
It’s the volume-weighted average price on the Nasdaq
National Market, as reported by Bloomberg, L.P., for the 20
trading day period ending on the third trading day prior to the
closing of the merger. However, |
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for any portion of the measurement period prior to the payment
date of the NEXTLINK class A common stock dividend, the
relevant NEXTLINK share prices will be divided by two. |
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| Q: |
What is the proposed NEXTLINK class A common stock dividend
and how will it affect the NEXTLINK class A common stock? |
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| A: |
Holders of record of NEXTLINK class A common stock as of the
close of business on June 15, 2000 will be entitled to
receive a one-for-one stock dividend of NEXTLINK class A common
stock, subject to the approval of an increase in the number of
authorized shares of NEXTLINK common stock by NEXTLINK common
stockholders at the NEXTLINK annual meeting of stockholders to be
held on May 24, 2000. As a result of the stock dividend,
the number of shares of NEXTLINK class A common stock issued and
outstanding after the stock dividend will be two times the number
issued and outstanding on June 15, 2000, and the price per
share at the opening of trading on June 16, 2000 should,
other things being equal, be approximately one-half of the prior
day’s closing price. |
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| Q: |
Will the proposed NEXTLINK class A common stock dividend
affect the value of the NM Acquisition Corp. class A common
stock received by Concentric stockholders in the merger? |
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| A: |
No. We expect the closing of the merger to occur after the stock
dividend is made. As a result, the collar and the resultant
exchange ratio will be adjusted as discussed above, so that
Concentric common stockholders would receive twice the number of
shares of NM Acquisition Corp. class A common stock as would have
been received if the merger closed prior to June 16, 2000. |
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| Q: |
Does the board of directors of Concentric recommend voting in
favor of the merger agreement and the merger? |
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| A: |
Yes. After careful consideration, the board of directors of
Concentric has determined that the merger is in the best interest
of Concentric and its stockholders, has unanimously approved the
merger agreement and the merger, and recommends that its
stockholders vote in favor of the merger agreement and the
merger. |
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| Q: |
Has the NEXTLINK board of directors approved the merger
agreement and the merger? |
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| A: |
Yes. After careful consideration, the board of directors of
NEXTLINK has determined that the merger is in the best interest
of NEXTLINK and its stockholders and has unanimously approved the
merger agreement and the merger. |
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| Q: |
Should Concentric stockholders send in stock certificates now?
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| A: |
No. After we complete the merger, NM Acquisition Corp.
(which will then be renamed NEXTLINK Communications, Inc.) will
send instructions to Concentric stockholders explaining how to
exchange their certificates for shares of Concentric common
stock. |
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| Q: |
Will NEXTLINK stockholders need to send stock certificates now
or later? |
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| A: |
No. Shares of NEXTLINK common stock will, by operation of
the merger, be deemed to be converted into shares of NM
Acquisition Corp. common stock, and there will be no need for
NEXTLINK stockholders to exchange their common stock
certificates. |
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| Q: |
What do I need to do now? |
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| A: |
Please carefully read and consider the information contained in
this proxy statement/information statement/prospectus. If you are
a Concentric stockholder, you may indicate how you want to vote
on your proxy card and then sign and mail your proxy card in the
enclosed return envelope as soon as possible so that your shares
will be represented at the Concentric special meeting. You may
also attend the special meeting and vote in person instead of
submitting a proxy. |
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| A: |
If you are a Concentric stockholder and you fail either to return
your proxy card or to vote in person at the special meeting, or
if you mark your proxy “abstain,” the effect will be a
vote against the merger agreement and the merger. If you sign and
send in your proxy without indicating how you want to vote, your
proxy will be counted as a vote for the merger agreement and the
merger unless your shares are held in a brokerage account. |
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| Q: |
If my shares are held in a brokerage account, will my broker
vote my shares for me? |
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| A: |
If you are a Concentric stockholder, your broker will not be able
to vote your shares without instructions from you on how to
vote. Therefore, it is important that you follow the directions
provided by your broker regarding how to instruct your broker to
vote your shares. If you fail to provide your broker with
instructions, it will have the same effect as a vote against the
merger agreement and the merger. |
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| Q: |
May I change my vote after I have mailed in my signed proxy
card? |
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| A: |
If you are a Concentric stockholder, you may change your vote at
any time before the vote takes place at the Concentric special
meeting. To do so, you may either complete and submit a later
dated proxy card or send a written notice stating that you would
like to revoke your proxy. In addition, you may attend the
special meeting and vote in person. However, if you elect to vote
in person at the special meeting and your shares are held by a
broker, bank or other nominee, you must bring to the special
meeting a letter from the broker, bank or other nominee
confirming your beneficial ownership of the shares. |
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| Q: |
When do you expect to complete the merger? |
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| A: |
We are working to complete the merger on June 16, 2000, or
as soon as practicable thereafter, assuming Concentric
stockholder approval is obtained at the Concentric special
meeting on June 15, 2000. June 15, 2000 is also the
payment date for the proposed NEXTLINK class A common stock
dividend. Because the merger is subject to other conditions,
however, we cannot predict the exact timing. |
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| Q: |
When and where is the Concentric special meeting? |
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| A: |
The special meeting of Concentric stockholders will be held on
Thursday, June 15, 2000, at 1:00 p.m., Pacific Daylight
Time, at the principal executive offices of Concentric at 1400
Parkmoor Avenue, San Jose, California 95126-3429. |
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| Q: |
What are the federal income tax consequences of the merger?
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| A: |
The merger is intended to qualify as a tax-free reorganization
under the Internal Revenue Code. Accordingly, no gain or loss
will generally be recognized by Concentric, NEXTLINK or NM
Acquisition Corp. as a result of the merger. Additionally, no
gain or loss will be recognized by Concentric or NEXTLINK
stockholders to the extent they receive shares of NM Acquisition
Corp. common stock in the merger. In general, however, Concentric
stockholders will recognize taxable gain to the extent they
receive cash in lieu of fractional shares in the merger.
Concentric stockholders should consult their tax advisors for a
full understanding of the tax consequences of the merger. |
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| Q: |
Are there any risks associated with the merger? |
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| A: |
Yes. The merger does involve some risks. For a discussion of risk
factors that should be considered in evaluating the merger, see
“Risk Factors” on page 13. |
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| Q: |
Who can I contact with questions? |
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| A: |
If you are a Concentric stockholder and you have questions about
the merger or how to submit your proxy, you should contact: |
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Concentric Network Corporation |
1400 Parkmoor Avenue
San Jose, CA 95216
Attention: Secretary
If you are a NEXTLINK stockholder and you have questions about
the merger you should contact:
NEXTLINK Communications, Inc.
1505 Farm Credit Drive
McLean, VA 22102
Attention: Investor Relations
vi
SUMMARY
This brief summary does not contain all of the information about
the merger that may be important to you. You should read this
entire document and the other documents we refer to for a more
complete understanding of NEXTLINK, Concentric and the terms of
the merger. See “Where You Can Find More Information”
beginning on page 77.
The Companies
NEXTLINK COMMUNICATIONS, INC.
Since 1996, NEXTLINK has provided high quality telecommunications
services to the rapidly growing business market. To serve its
customers’ broad and expanding telecommunications needs,
NEXTLINK has assembled a unique collection of high-bandwidth,
local and national network assets. These assets include:
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31 high-bandwidth, or broadband, local networks operating in 19
states, generally located in the central business districts of
the cities NEXTLINK serves, the number of which is increasing as
NEXTLINK continues to build additional networks; |
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high-capacity fixed broadband spectrum covering 95% of the
population of the 30 largest U.S. cities; and |
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an interest in a national fiber optic network now being built for
INTERNEXT, L.L.C. that will connect over 50 cities in the United
States and Canada, including all of the major metropolitan
markets that NEXTLINK’s current and planned local networks
serve. NEXTLINK currently holds a 50% interest in INTERNEXT,
L.L.C., but has agreed to acquire the remaining 50% interest in
conjunction with the merger. |
NEXTLINK intends to integrate these assets with additional
communications technologies and services in order to become one
of the nation’s leading providers of a comprehensive array
of communications services.
NEXTLINK now operates 31 broadband local networks in 49 cities,
providing nearly 428,000 business telephone lines to its
customers as of December 31, 1999, of which more than 78,000
were installed in the fourth quarter of 1999. NEXTLINK is
currently building additional networks, and plans to have
operational networks in most of the 30 largest U.S. cities by the
end of 2000.
For further information on NEXTLINK, see “Where You Can Find
More Information” on page 77.
CONCENTRIC NETWORK CORPORATION
Since 1995, Concentric has provided tailored, Internet-protocol
based network services for small to medium sized companies.
Concentric provides these services through data centers connected
to its national network, which forms a part of the Internet
backbone. Concentric’s services include implementing private
networks for companies, offering high speed access to the
Internet, and hosting Web-sites on the World Wide Web.
By using Concentric’s services, companies can take advantage
of Internet tools, such as browsers and high performance
servers, to customize their data communications both within a
company and between a company and its suppliers, partners and
customers. Concentric’s services incorporate the advantages
of a public network, such as low cost, nationwide access and
standard protocols, with the advantages of a private network,
such as customization, high performance, reliability and
security. Concentric’s current distribution partners include
Intuit, SBC and Web TV.
For further information on Concentric, see “Where You Can
Find More Information” on page 77.
NM ACQUISITION CORP.
NM Acquisition Corp. was incorporated in Delaware on
December 13, 1999. NM Acquisition Corp. does not have, and
will not have prior to completion of the merger, any operations,
assets or liabilities. Other than the shares of
NM Acquisition Corp. issued in the LHP share exchange
immediately prior to the
consummation of the merger, no shares of NM Acquisition Corp.
common stock are issued and outstanding, and no shares will be
outstanding prior to completion of the merger. In the merger,
each share of NEXTLINK common stock will become one share of NM
Acquisition Corp. common stock, so that each share of NM
Acquisition Corp. common stock will be the economic equivalent of
one share of NEXTLINK common stock.
NM Acquisition Corp. will be treated as the successor entity to
NEXTLINK for all reporting purposes under U.S. securities laws.
The Merger (see page 28)
In the merger, Concentric and NEXTLINK will each merge with and
into NM Acquisition Corp. As a result of the merger, the separate
existence of Concentric and NEXTLINK will cease and NM
Acquisition Corp. will succeed to the business, assets and
liabilities of Concentric and NEXTLINK. Immediately following the
merger, NM Acquisition Corp. will change its name to NEXTLINK
Communications, Inc.
For a detailed description of the terms of the merger, see
“The Merger” beginning on page 28.
Concentric Special Meeting (see page 25)
The Concentric special meeting will be held on Thursday,
June 15, 2000 at 1:00 p.m. Pacific Daylight Time, at
the principal executive offices of Concentric at 1400 Parkmoor
Avenue, San Jose, California. At the special meeting or any
adjournment of the special meeting, Concentric stockholders will
be asked to consider and vote upon a proposal to approve the
merger and the merger agreement.
Concentric stockholders are entitled to cast one vote per share
of Concentric common stock owned as of the close of business on
May 10, 2000, the record date for determining Concentric
stockholders entitled to vote at the Concentric special meeting.
There were 52,006,633 shares of Concentric common stock
outstanding on the record date.
Stockholder Votes Required to Approve the Merger Agreement and
the Merger (see page 27)
Concentric
The affirmative vote of the holders of a majority of the
outstanding shares of Concentric common stock is required to
approve and adopt the merger agreement and approve the merger.
The failure by a holder of Concentric common stock to vote or
instruct a broker, bank or other record holder on how to vote (if
that holder’s shares are held in street name) will have the
effect of a vote against the merger agreement and the merger. As
of the record date, there were 52,006,633 shares of
Concentric common stock entitled to vote outstanding.
Concentric’s directors, executive officers and their
affiliates hold approximately 8.27% of the outstanding shares
entitled to vote, as of the record date.
NEXTLINK
The votes of a majority of the total voting power of the
outstanding shares of NEXTLINK common stock are required to
approve and adopt the merger agreement and approve the merger.
Eagle River Investments, L.L.C., which owns shares
representing more than 50% of the total voting power of all
outstanding NEXTLINK common stock, agreed in connection with the
execution of the merger agreement to approve the merger and did
so on May 10, 2000. Under Delaware law and the terms of
NEXTLINK’s certificate of incorporation and bylaws, Eagle
River’s approval is sufficient to approve the merger and the
merger agreement. For this reason, NEXTLINK is not calling a
meeting of its stockholders to vote on the merger and the merger
agreement, nor is NEXTLINK asking its stockholders for a proxy.
2
Board Approvals and Recommendations
Concentric
The board of directors of Concentric believes that the merger
agreement is fair to, and in the best interests of, the
stockholders of Concentric, and has unanimously approved the
merger and the merger agreement. The Concentric board unanimously
recommends that Concentric stockholders vote “FOR”
the approval of the merger agreement and the merger.
NEXTLINK
The board of directors of NEXTLINK believes that the merger
agreement is fair to, and in the best interests of, the
stockholders of NEXTLINK, and has approved the merger and the
merger agreement. The board of directors of NEXTLINK established
a special committee to give independent consideration to the LHP
share exchange (which is described below in this summary and in
“The Merger Agreement and Related Agreements — LHP
Share Exchange”), and the special committee evaluated and
participated in the negotiation of the LHP share exchange. The
special committee unanimously determined that the LHP share
exchange, as contemplated by the merger agreement, is fair to and
in the best interests of the NEXTLINK and recommended that the
board of directors of NEXTLINK approve the LHP share exchange.
Reasons for the Merger (see page 30-33)
The boards of directors of Concentric and NEXTLINK believe that
the merger may result in a number of benefits to
Concentric’s and NEXTLINK’s stockholders, including,
among other potential benefits:
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the combined company is expected to compete more effectively in
the rapidly growing market for telecommunications and Internet
services; |
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• |
the merger may provide the combined company with greater depth of
skilled personnel, strengthened research and development
activity and expanded distribution and support capacity; |
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• |
customers of both companies would have access to expanded
telecommunications and other products and services; |
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• |
the merger may provide the combined company with access to each
company’s existing customer base and partners; and |
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• |
the creation of a larger customer base, a higher market profile
and greater financial strength would present greater
opportunities for marketing the products and services of the
combined company. |
In addition, the Concentric board of directors believes that the
merger may result in a number of benefits to Concentric and its
stockholders, including, among other potential benefits:
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• |
opportunities after combining Concentric’s business with
NEXTLINK’s business, compared with the opportunities for
Concentric as a stand-alone company; |
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• |
alignment of interests, goals and objectives resulting from a
broadened communications business, allowing the combined company
to leverage synergies resulting from an integrated management
team, streamlined operation, and strengthened infrastructure; |
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• |
the ability to combine NEXTLINK’s growing local telephone
service business and its existing and planned long distance and
fixed wireless network assets with Concentric’s web hosting
and Internet data services, enabling the combined company to
provide cross selling opportunities and other synergies; |
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• |
potential synergies of the combined company, including the
offering of a complete, single-source communications service for
small and medium-sized businesses, consisting of
Concentric’s Internet business, data center and application
service provider services, transported across NEXTLINK’s
network; |
3
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access to NEXTLINK’s planned Internet Protocol (IP)-centric
national fiber optic network and extensive fixed wireless
spectrum; |
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the continued consolidation of the network services
communications industry which enables businesses with substantial
resources to effectively compete in the future in cost structure
and service offerings; and |
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the opportunity for Concentric stockholders to participate in the
potential for growth of the combined company’s business
after the merger, in the form of the combined company’s
common stock. |
In addition, the NEXTLINK board of directors believes that the
merger may result in a number of benefits to NEXTLINK and its
stockholders, including, among other potential benefits:
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acceleration of NEXTLINK’s planned expansion of its data
product and service offerings; |
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the opportunity to increase revenue relating to the utilization
of NEXTLINK’s network assets; |
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the opportunity to move local and data traffic onto
NEXTLINK’s broadband metropolitan and broadband wireless
networks; and |
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access to an established base in the European data marketplace. |
To review the background and reasons for the merger in greater
detail, as well as the risks of the merger, see “The
Merger— Concentric’s Reasons for the Merger and
Additional Considerations” beginning on page 30,
“— NEXTLINK’s Reasons for the Merger and
Additional Considerations” beginning on page 32,
“— Background of the Merger” beginning on
page 28, “— Opinion of Concentric’s
Financial Advisor” beginning on page 33, “—
Opinion of NEXTLINK’s Financial Advisor” beginning on
page 42 and “Risk Factors — Risks Related to
the Merger” beginning on page 13.
Opinions of Financial Advisors (see pages 33 and 42;
Appendices B and C)
In deciding to approve the merger and the merger agreement, the
board of directors of Concentric considered the opinion of its
financial advisor and the board of directors of NEXTLINK
considered the opinion of its financial advisor. Concentric
received an opinion from its financial advisor, Bear, Stearns
& Co. Inc., that the exchange ratio was fair, from a
financial point of view, to the Concentric stockholders. NEXTLINK
received an opinion from its financial advisor, Merrill Lynch
& Co., that the exchange ratio was fair from a financial
point of view to NEXTLINK.
Interests of Insiders of Concentric in the Merger (see
page 48)
When considering the recommendation of the Concentric board, you
should be aware that the terms of the merger agreement and
agreements it contemplates gives a number of Concentric executive
officers and key employees substantial interests in the merger
that are different from, or in addition to, the interests of
Concentric stockholders, including stock option grants at market
exercise prices, shares of restricted stock and cash retention
bonuses. The board of directors of Concentric was aware of these
interests at the time it adopted the merger agreement and
approved the merger.
Overview of the Merger Agreement (see page 57)
For a detailed description of the merger agreement see “The
Merger Agreement and Related Agreements” beginning on
page 57. The merger agreement is attached to the back of
this proxy statement/information statement prospectus as
Appendix A.
Conditions to the Merger
Concentric and NEXTLINK will complete the merger only if
Concentric’s stockholders approve it and other contractual
and other legal conditions are either satisfied or waived.
4
Limitation on Negotiations
Until the merger is completed or the merger agreement terminated,
Concentric has agreed not to directly or indirectly solicit
other acquisition proposals and to notify NEXTLINK promptly of
any third party inquiries or requests for non-public information
that could lead to an acquisition proposal.
Termination of the Merger Agreement
Either Concentric or NEXTLINK may terminate the merger agreement
if, among other things:
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the merger is not completed on or before August 31, 2000; or |
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Concentric accepts or recommends to its stockholders a superior
proposal and pays to NEXTLINK a $110 million termination
fee. |
Concentric does not have any right to terminate the merger
agreement solely because the price of NEXTLINK common stock
declines, even though the exchange rate on conversion will not be
adjusted to maintain a $45 value if NEXTLINK’s share price
falls below $69.23 per share. However, Concentric and NEXTLINK
may agree at any time not to complete the merger, even if
stockholders have approved it.
Termination Fees and Expenses
Concentric has agreed to pay NEXTLINK a termination fee of
$110 million upon the occurrence of certain events.
Otherwise, Concentric and NEXTLINK will generally pay their own
fees and expenses in connection with the merger, whether or not
the merger is completed.
Amendment of the Merger Agreement
Concentric and NEXTLINK may jointly amend the terms of the merger
agreement. However, after Concentric’s stockholders approve
the merger, any amendment which changes the amount or form of
consideration in the merger would require further stockholder
approval.
LHP Share Exchange
Currently, NEXTLINK and Craig O. McCaw each own 50% of LHP,
L.L.C., a Washington limited liability company, which in turn
owns 100% of INTERNEXT, whose sole asset is an interest in a
national telecommunications network currently under construction.
Immediately prior to the merger, Craig O. McCaw will
contribute 100% of his equity interests in LHP to NM Acquisition
Corp. in exchange for approximately 3.4 million shares of NM
Acquisition Corp. class A common stock. As a result, NM
Acquisition Corp. will own 100% of both LHP and INTERNEXT.
Accounting Treatment
The merger of Concentric and NEXTLINK will be accounted for as a
purchase of the Concentric business by NEXTLINK. The LHP share
exchange will be accounted for on an historical cost basis, since
NEXTLINK and INTERNEXT are under common control.
Completion and Effectiveness of the Merger
We will complete the merger when all of the conditions for
completion of the merger are satisfied or waived in accordance
with the merger agreement. The merger will become effective when
we file certificates of merger with the State of Delaware. We
expect to complete the merger on June 16, 2000, or as soon
thereafter as practicable.
Appraisal Rights (see page 51)
Under Delaware law, Concentric common stockholders and NEXTLINK
class A common stockholders are not entitled to appraisal
rights in connection with the merger. However, holders of
NEXTLINK class B
5
common stock (as well as holders of NEXTLINK 14% redeemable
preferred stock, NEXTLINK 6 1/2% convertible preferred stock
and Concentric 13 1/2% series B redeemable
exchangeable preferred stock) who submit a written demand for
appraisal of their shares and who comply with the other
applicable procedures under Delaware law will be entitled to
appraisal rights and to receive payment in cash for the fair
market value of their shares as determined by the Delaware
Chancery Court. For a more complete description of the appraisal
rights available to holders of NEXTLINK class B common
stock, see “The Merger — Appraisal Rights.”
Material Federal Income Tax Consequences (see page 53)
The merger is intended to qualify as a “reorganization”
for United States federal income tax purposes. In general,
therefore, the Concentric stockholders and the NEXTLINK
stockholders, respectively, will recognize no gain or loss upon
the exchange of shares of Concentric common stock and NEXTLINK
common stock, respectively, for NM Acquisition Corp. common stock
in the merger, except to the extent of cash received in lieu of
fractional shares.
The obligation of Concentric and NEXTLINK to consummate the
merger is subject to the prior receipt of an opinion from Wilson
Sonsini Goodrich & Rosati, counsel to Concentric, and an
opinion from Willkie Farr & Gallagher, counsel to NEXTLINK,
that the merger will be treated as a “reorganization”
within the meaning of the Internal Revenue Code, and that each of
Concentric, NEXTLINK and NM Acquisition Corp. will be a party to
the reorganization within the meaning of Section 368(b) of
the Internal Revenue Code for United States federal income tax
purposes. For a further discussion of the tax consequences of the
merger, see “The Merger — Material Federal Income
Tax Consequences of the Merger.”
Listing of NM Acquisition Corp. Class A Common Stock
(see page 56)
Prior to the effective time, NM Acquisition Corp. will list the
shares of its common stock to be delivered in the merger on The
Nasdaq National Market.
Concentric Voting Agreements (see page 63)
To induce NEXTLINK to enter into the merger agreement, ten
Concentric officers and directors holding approximately 3.67% of
Concentric’s common stock outstanding at the record date
have agreed with NEXTLINK to vote their Concentric shares in
favor of the merger and the adoption of the merger agreement and
against approval of any proposal opposing or competing against
the merger.
Required Regulatory Approvals (see page 60)
The obligations of Concentric and NEXTLINK to consummate the
merger is conditioned upon the receipt of regulatory approvals.
NEXTLINK is required to obtain, and is in the process of
obtaining, the approval of eleven state public utility service
commissions to the merger of NEXTLINK with and into NM
Acquisition Corp.
Officers and Directors After the Merger (see page 65)
After the merger, the NM Acquisition Corp. board of directors
will consist of the current NEXTLINK board of directors, with the
addition of Henry Nothhaft, President, Chief Executive Officer
and Chairman of the Board of Concentric, and Peter C. Waal,
currently a member of the board of directors of Concentric. The
officers of NEXTLINK immediately prior to the consummation of the
merger will be the officers of NM Acquisition Corp. following
consummation of the merger, with the addition of
Mr. Nothhaft as Vice Chairman and other officers of
Concentric.
6
MARKET PRICE INFORMATION
Concentric common stock trades on The Nasdaq National Market
under the symbol “CNCX.” NEXTLINK class A common
stock trades on The Nasdaq National Market under the symbol
“NXLK.” The following table presents the quarterly high
and low sales prices for each of Concentric common stock and
NEXTLINK class A common stock as reported on The Nasdaq
National Market for the periods indicated. Concentric common
stock commenced trading on July 31, 1997 and NEXTLINK common
stock commenced trading on September 26, 1997. NEXTLINK
1998 and 1999 prices have been adjusted for the two-for-one stock
split effected August 27, 1999.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concentric |
|
NEXTLINK |
|
|
Common Stock |
|
Common Stock |
|
|
|
|
|
|
|
High |
|
Low |
|
High |
|
Low |
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 1997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter |
|
$ |
8.00 |
|
|
$ |
5.69 |
|
|
$ |
25.50 |
|
|
$ |
23.13 |
|
|
|
|
|
|
|
Fourth Quarter |
|
|
7.50 |
|
|
|
3.94 |
|
|
|
27.75 |
|
|
|
19.50 |
|
|
Year Ended December 31, 1998 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
10.19 |
|
|
$ |
4.44 |
|
|
$ |
18.44 |
|
|
$ |
10.60 |
|
|
|
|
|
|
|
Second Quarter |
|
|
15.75 |
|
|
|
9.31 |
|
|
|
18.91 |
|
|
|
12.94 |
|
|
|
|
|
|
|
Third Quarter |
|
|
20.50 |
|
|
|
7.13 |
|
|
|
20.37 |
|
|
|
10.32 |
|
|
|
|
|
|
|
Fourth Quarter |
|
|
18.63 |
|
|
|
7.25 |
|
|
|
16.75 |
|
|
|
5.50 |
|
|
Year Ended December 31, 1999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
40.13 |
|
|
$ |
16.38 |
|
|
$ |
31.44 |
|
|
$ |
13.00 |
|
|
|
|
|
|
|
Second Quarter |
|
|
52.25 |
|
|
|
25.06 |
|
|
|
43.38 |
|
|
|
26.63 |
|
|
|
|
|
|
|
Third Quarter |
|
|
39.75 |
|
|
|
17.88 |
|
|
|
56.88 |
|
|
|
30.00 |
|
|
|
|
|
|
|
Fourth Quarter |
|
|
34.38 |
|
|
|
17.25 |
|
|
|
91.31 |
|
|
|
49.81 |
|
|
Year Ended December 31, 2000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
57.44 |
|
|
$ |
28.25 |
|
|
$ |
131.74 |
|
|
$ |
70.94 |
|
|
|
|
|
|
|
Second Quarter (through May 10, 2000) |
|
$ |
56.56 |
|
|
$ |
36.00 |
|
|
$ |
121.75 |
|
|
$ |
68.00 |
|
Recent Closing Prices
On January 7, 2000, the last trading day before announcement
of the proposed merger, the closing prices per share of common
stock of Concentric and class A common stock of NEXTLINK on
The Nasdaq National Market were as follows:
| |
|
|
|
|
|
|
|
|
|
|
Concentric |
|
NEXTLINK |
|
|
|
|
|
|
Closing Price Per Share |
|
$ |
30 |
|
|
$ |
78.50 |
|
On May 10, 2000, the latest practicable trading day before
the printing of this proxy statement/information
statement/prospectus, the closing prices per share of each of
Concentric common stock and NEXTLINK common stock on The Nasdaq
National Market were as follows:
| |
|
|
|
|
|
|
|
|
|
|
Concentric |
|
NEXTLINK |
|
|
|
|
|
|
Closing Price Per Share |
|
$ |
43.31 |
|
|
$ |
81.19 |
|
We urge you to obtain current market quotations for Concentric
common stock and NEXTLINK common stock. We cannot give you any
assurances as to the future prices or markets for Concentric
common stock or NEXTLINK common stock.
7
SELECTED FINANCIAL DATA OF CONCENTRIC
The following is a summary of consolidated financial information
regarding Concentric’s financial position and operating
results as of the dates and for the periods indicated. This
information is only a summary and you should read it in
conjunction with the financial statements and other information
Concentric has filed with the Securities and Exchange Commission.
You should read this summary in conjunction with
“Management’s Discussion and Analysis of Financial
Conditions and Results of Operations” included in
Concentric’s 1999 Form 10-K, which explains and
qualifies it. See “Where You Can Find More Information”
on page 77.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
|
|
1995 |
|
1996 |
|
1997 |
|
1998(1) |
|
1999(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share data) |
|
|
|
|
|
|
Consolidated Statement of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
2,483 |
|
|
$ |
15,648 |
|
|
$ |
45,457 |
|
|
$ |
82,807 |
|
|
$ |
147,060 |
|
|
|
|
|
|
|
Cost of revenue |
|
|
16,168 |
|
|
|
47,945 |
|
|
|
61,439 |
|
|
|
85,352 |
|
|
|
133,922 |
|
|
|
|
|
|
|
Network equipment write-off |
|
|
— |
|
|
|
8,321 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
Development, marketing and sales and general and administrative
operating expenses |
|
|
7,602 |
|
|
|
22,503 |
|
|
|
34,262 |
|
|
|
57,925 |
|
|
|
80,636 |
|
|
|
|
|
|
|
Amortization of goodwill and other intangible assets |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,842 |
|
|
|
7,913 |
|
|
|
|
|
|
|
Acquisition-related charges |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,291 |
|
|
|
— |
|
|
|
|
|
|
|
Write-off of in-process technology |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,200 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
23,770 |
|
|
|
78,769 |
|
|
|
95,701 |
|
|
|
153,610 |
|
|
|
222,471 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(21,287 |
) |
|
|
(63,121 |
) |
|
|
(50,244 |
) |
|
|
(70,803 |
) |
|
|
(75,411 |
) |
|
|
|
|
|
|
Other income (expense) |
|
|
— |
|
|
|
— |
|
|
|
1,233 |
|
|
|
(750 |
) |
|
|
(663 |
) |
|
|
|
|
|
|
Net interest expense |
|
|
(721 |
) |
|
|
(3,260 |
) |
|
|
(6,571 |
) |
|
|
(13,595 |
) |
|
|
(9,011 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before extraordinary item |
|
|
(22,008 |
) |
|
|
(66,381 |
) |
|
|
(55,582 |
) |
|
|
(85,148 |
) |
|
|
(85,085 |
) |
|
|
|
|
|
|
Extraordinary gain on early retirement of debt |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
3,042 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(22,008 |
) |
|
$ |
(66,381 |
) |
|
$ |
(55,582 |
) |
|
$ |
(82,106 |
) |
|
$ |
(85,085 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends and accretion |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(11,958 |
) |
|
|
(26,697 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders |
|
$ |
(22,008 |
) |
|
$ |
(66,381 |
) |
|
$ |
(55,582 |
) |
|
$ |
(94,064 |
) |
|
$ |
(111,782 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share attributable to common stockholders(3) |
|
|
|
|
|
$ |
(6.73 |
) |
|
$ |
(2.82 |
) |
|
$ |
(3.23 |
) |
|
$ |
(2.76 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing net loss per share attributable to
common stockholders(3) |
|
|
|
|
|
|
9,874 |
|
|
|
19,744 |
|
|
|
29,094 |
|
|
|
40,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Consolidated Financial Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
$ |
2,196 |
|
|
$ |
9,470 |
|
|
$ |
19,230 |
|
|
$ |
33,418 |
|
|
$ |
40,833 |
|
|
|
|
|
|
|
EBITDA(4) |
|
|
(19,091 |
) |
|
|
(53,651 |
) |
|
|
(31,014 |
) |
|
|
(30,894 |
) |
|
|
(34,578 |
) |
|
|
|
|
|
|
Capital expenditures(5) |
|
|
17,176 |
|
|
|
39,093 |
|
|
|
22,798 |
|
|
|
30,137 |
|
|
|
43,104 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
|
|
|
1995 |
|
1996 |
|
1997 |
|
1998(1) |
|
1999(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share data) |
|
|
|
|
|
|
Consolidated Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
19,054 |
|
|
$ |
17,657 |
|
|
$ |
119,959 |
|
|
$ |
98,988 |
|
|
$ |
25,891 |
|
|
|
|
|
|
|
Short term investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
52,226 |
|
|
|
80,095 |
|
|
|
|
|
|
|
Restricted cash(6) |
|
|
— |
|
|
|
— |
|
|
|
52,525 |
|
|
|
36,238 |
|
|
|
144,060 |
|
|
|
|
|
|
|
Property and equipment, net |
|
|
16,289 |
|
|
|
47,927 |
|
|
|
53,710 |
|
|
|
64,268 |
|
|
|
82,894 |
|
|
|
|
|
|
|
Total assets |
|
|
37,235 |
|
|
|
70,722 |
|
|
|
244,489 |
|
|
|
298,257 |
|
|
|
497,794 |
|
|
|
|
|
|
|
Notes payable and capital lease obligations, net of current
portion |
|
|
11,047 |
|
|
|
30,551 |
|
|
|
179,172 |
|
|
|
156,455 |
|
|
|
153,416 |
|
|
|
|
|
|
|
Redeemable exchangeable preferred stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
156,105 |
|
|
|
179,521 |
|
|
|
|
|
|
|
Convertible redeemable preferred stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
41,339 |
|
|
|
|
|
|
|
Total stockholders’ equity (deficit) |
|
|
9,763 |
|
|
|
2,925 |
|
|
|
31,918 |
|
|
|
(56,875 |
) |
|
|
62,154 |
|
8
|
|
| (1) |
During 1998, Concentric acquired InterNex, DeltaNet and AnaServe,
the effects of which have been included in its 1998 financial
results. |
| |
| (2) |
During 1999 Concentric acquired 9 Net Avenue, Inc., the
effects of which have been included in the 1999 financial
results. |
| |
| (3) |
Net loss per share and shares used in computing net loss per
share attributable to common stockholders are presented on a pro
forma basis for the years ended December 31, 1996 and 1997
and on an historical basis for the years ended December 31,
1998 and 1999. |
| |
| (4) |
EBITDA is loss from operations before interest, taxes,
depreciation and amortization and also excludes the write off of
in-process technology and acquisition-related charges. EBITDA is
included in this table because Concentric’s management
believes that investors find it to be a useful tool for
approximating its cash flow. However, EBITDA does not represent
cash flow from operations, as defined by generally accepted
accounting principles, should not be considered as a substitute
for net loss as an indicator of Concentric’s operating
performance or cash flow as a measure of liquidity, and should be
examined in conjunction with Concentric’s consolidated
financial statements and notes thereto included in
Concentric’s 1999 Form 10-K. Because EBITDA is not
defined in GAAP, different companies report it differently and so
cannot be directly compared on this basis. For example,
Concentric and NEXTLINK report EBITDA differently. |
| |
| (5) |
Capital expenditures includes assets acquired through capital
lease financing and other debt. |
| |
| (6) |
Restricted cash consists of $19.1 million of funds held in
escrow to pay interest relating to Concentric’s 12 3/4%
Senior Notes, and $125.0 million of funds held in escrow
for the acquisition of Internet Technology Group Plc, which was
closed in January 2000. See Note 5 of notes to
Concentric’s consolidated financial statements included in
Concentric’s 1999 Form 10-K. |
9
SELECTED FINANCIAL DATA OF NEXTLINK
The following is a summary of consolidated financial information
regarding NEXTLINK’s financial position and operating
results as of the dates and for the periods indicated. This
information is only a summary and you should read it in
conjunction with the financial statements and other information
NEXTLINK has filed with the Securities and Exchange Commission.
You should read this summary in conjunction with
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” included in
NEXTLINK’s 1999 Form 10-K, which explains and qualifies
it. See “Where You Can Find More Information” on
page 77.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
|
|
1995 |
|
1996 |
|
1997 |
|
1998 |
|
1999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share data) |
|
|
|
|
|
|
Consolidated Statement of Operating Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
7,552 |
|
|
$ |
25,686 |
|
|
$ |
57,579 |
|
|
$ |
139,667 |
|
|
$ |
274,324 |
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
|
6,618 |
|
|
|
25,094 |
|
|
|
54,031 |
|
|
|
123,675 |
|
|
|
221,664 |
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
9,563 |
|
|
|
31,353 |
|
|
|
75,732 |
|
|
|
156,929 |
|
|
|
266,908 |
|
|
|
|
|
|
|
Restructuring (including $28.0 million in non-cash stock
consideration) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
30,935 |
|
|
|
|
|
|
|
Deferred compensation |
|
|
375 |
|
|
|
9,914 |
|
|
|
3,247 |
|
|
|
4,993 |
|
|
|
12,872 |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
3,458 |
|
|
|
10,340 |
|
|
|
27,190 |
|
|
|
60,254 |
|
|
|
108,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(12,462 |
) |
|
|
(51,015 |
) |
|
|
(102,621 |
) |
|
|
(206,184 |
) |
|
|
(366,530 |
) |
|
|
|
|
|
|
Interest expense, net |
|
|
(269 |
) |
|
|
(20,086 |
) |
|
|
(26,383 |
) |
|
|
(72,156 |
) |
|
|
(192,162 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(12,731 |
) |
|
$ |
(71,101 |
) |
|
$ |
(129,004 |
) |
|
$ |
(278,340 |
) |
|
$ |
(588,692 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss applicable to common shares |
|
$ |
(12,731 |
) |
|
$ |
(71,101 |
) |
|
$ |
(168,324 |
) |
|
$ |
(337,113 |
) |
|
$ |
(627,881 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share(3) |
|
|
|
|
|
$ |
(0.91 |
) |
|
$ |
(1.96 |
) |
|
$ |
(3.13 |
) |
|
$ |
(5.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to fixed charges(1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
EBITDA(2) |
|
$ |
(8,629 |
) |
|
$ |
(30,761 |
) |
|
$ |
(72,184 |
) |
|
$ |
(140,937 |
) |
|
$ |
(214,248 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
|
|
|
1995 |
|
1996 |
|
1997 |
|
1998 |
|
1999 |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and marketable securities |
|
$ |
1,350 |
|
|
$ |
124,520 |
|
|
$ |
742,357 |
|
|
$ |
1,478,062 |
|
|
$ |
1,881,764 |
|
|
|
|
|
|
|
Property and equipment, net |
|
|
29,664 |
|
|
|
97,784 |
|
|
|
253,653 |
|
|
|
594,408 |
|
|
|
1,180,021 |
|
|
|
|
|
|
|
Total assets |
|
|
53,461 |
|
|
|
390,683 |
|
|
|
1,219,978 |
|
|
|
2,483,106 |
|
|
|
4,597,108 |
|
|
|
|
|
|
|
Long-term debt |
|
|
— |
|
|
|
350,000 |
|
|
|
750,000 |
|
|
|
2,013,192 |
|
|
|
3,733,342 |
|
|
|
|
|
|
|
Redeemable preferred stock, net of issuance costs |
|
|
— |
|
|
|
— |
|
|
|
313,319 |
|
|
|
556,168 |
|
|
|
612,352 |
|
|
|
|
|
|
|
Total shareholders’ equity (deficit) |
|
|
36,719 |
|
|
|
(18,654 |
) |
|
|
71,285 |
|
|
|
(246,463 |
) |
|
|
(13,122 |
) |
|
|
| (1) |
For the years ended December 31, 1995, 1996, 1997, 1998 and
1999, earnings were insufficient to cover fixed charges during
the periods presented by the net loss amounts of $12,731,
$71,101, $129,004, $278,340 and $588,692, respectively. |
| |
| (2) |
EBITDA consists of net loss before net interest expense,
depreciation, amortization, deferred compensation expense and
restructuring costs. EBITDA is commonly used to analyze companies
on the basis of operating performance, leverage and liquidity.
EBITDA is not a substitute for operating income or a better
measure of liquidity than cash flow from operating activities,
which are determined in accordance with generally accepted
accounting principles. We include EBITDA to provide additional
information with respect to our anticipated ability to meet
future debt service, capital expenditures and working capital
requirements. |
| |
| (3) |
For the year ended December 31, 1995, net loss per share is
not applicable as prior to 1996, NEXTLINK was not subject to the
reporting requirements of the Securities Exchange Act of 1934. |
10
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following selected unaudited pro forma condensed combined
financial data of NEXTLINK and Concentric combine the
consolidated financial information of NEXTLINK for the year ended
December 31, 1999 and the year ended December 31, 1998,
with the consolidated financial information of Concentric for the
year ended December 31, 1999, and the year ended
December 31, 1998. The selected unaudited pro forma
condensed combined financial data are derived from the unaudited
pro forma combined condensed financial statements contained
elsewhere in this proxy statement. We have prepared the unaudited
pro forma condensed combined financial information using the
purchase method of accounting. This pro forma information does
not give effects to any restructuring costs or to any potential
cost savings or other operating efficiencies that could result
from the merger.
The unaudited pro format condensed combined financial information
does not purport to represent what the combined company’s
financial position or results of operations would have been had
the merger occurred at the beginning of the earliest period
presented or to project the combined financial position or
results of operations for any future date or period.
You should read the financial information in this section along
with historical and unaudited pro forma condensed combined
financial statements and accompanying notes, either incorporated
by reference or included in this proxy statement. See
“Unaudited Pro Forma Condensed Combined Financial
Statements” beginning on page 67.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma |
|
|
|
|
|
For the |
|
For the |
|
|
year ended |
|
year ended |
|
|
December 31, 1998 |
|
December 31, 1999 |
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
Revenue |
|
$ |
222,474 |
|
|
$ |
421,384 |
|
|
|
|
|
|
|
Income (loss) applicable to common shares |
|
|
(838,731 |
) |
|
|
(1,144,175 |
) |
|
|
|
|
|
|
Balance Sheet data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
7,459,332 |
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
3,879,984 |
|
|
|
|
|
|
|
Shareholders’ equity |
|
|
|
|
|
|
2,413,462 |
|
11
COMPARATIVE PER SHARE DATA
You should read the comparative share data presented below in
conjunction with the historical financial statements and related
notes contained in the annual and other reports that Concentric
and NEXTLINK have filed with the Securities and Exchange
Commission.
The following table presents on a pro forma basis unaudited data
concerning the net income, dividends and book value per share for
NEXTLINK after giving effect to the merger and the LHP share
exchange, assuming that those transactions occurred as of the
beginning of the periods presented:
Pro Forma Basis:
| |
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
Year Ended |
|
|
December 31, 1998 |
|
December 31, 1999 |
|
|
|
|
|
|
Basic and diluted net income per share |
|
$ |
(6.68 |
) |
|
$ |
(7.66 |
) |
|
|
|
|
|
|
Dividends declared per share |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
Book value per share at end of period |
|
|
— |
|
|
|
14.97 |
|
The following tables present historical per share data for
Concentric and NEXTLINK :
Concentric:
| |
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
Year Ended |
|
|
December 31, 1998 |
|
December 31, 1999 |
|
|
|
|
|
|
Historical Per Share Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income per share |
|
$ |
(3.23 |
) |
|
$ |
(2.76 |
) |
|
|
|
|
|
|
Book value per share at end of period |
|
|
(1.878 |
) |
|
|
1.368 |
|
NEXTLINK:
| |
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
Year Ended |
|
|
December 31, 1998 |
|
December 31, 1999 |
|
|
|
|
|
|
Historical Per Share Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income per share |
|
$ |
(3.13 |
) |
|
$ |
(5.02 |
) |
|
|
|
|
|
|
Book value per share at end of period |
|
|
(2.262 |
) |
|
|
(.098 |
) |
12
RISK FACTORS
By voting in favor of the merger, Concentric stockholders will be
choosing to invest in the combined company, which involves a
high degree of risk. You should consider all of the following
risks in deciding whether to vote in favor of the merger. Any of
the following risks could materially adversely affect the
business, operating results and financial condition of NEXTLINK,
Concentric or the combined company. You should consider these
factors in conjunction with the information contained elsewhere
in this document.
In light of the following factors, we caution you that you should
not consider the past financial performance of NEXTLINK or
Concentric to be a reliable indicator of future performance of
and or use historical trends to anticipate results or trends in
future periods.
RISKS RELATED TO THE MERGER
Difficulties integrating Concentric and NEXTLINK may prevent
anticipated benefits of the merger from being realized.
As a result of the differing nature of Concentric’s and
NEXTLINK’s operations, it may be difficult to successfully
integrate the products, services, technologies, research and
development activities, administration, sales and marketing and
other operations of the two companies. Integration difficulties
may disrupt the combined company’s business and could
prevent the achievement of the potential benefits of the merger.
The difficulties, costs and delays involved in integrating the
companies, which could be substantial, may include:
|
|
|
| |
• |
distracting management and other key personnel, particularly
sales and marketing personnel and senior engineers involved in
network deployment, from the business of the combined company; |
| |
| |
• |
failure to integrate complex technology, product lines and
development plans and the difficulty of maintaining uniform
standards, controls, procedures and policies; |
| |
| |
• |
potential incompatibility of business cultures; |
| |
| |
• |
costs and delays in implementing common systems and procedures,
particularly in integrating different information systems; |
| |
| |
• |
inability to retain and integrate key management, technical,
sales and customer support personnel; |
| |
| |
• |
disruptions in the combined sales forces that may result in a
loss of current customers or the inability to close sales with
potential customers; |
| |
| |
• |
additional financial resources that may be needed to fund
combined operations; |
| |
| |
• |
management’s ability to maximize its financial and strategic
position by the incorporation of acquired technology or
businesses into its service offerings; and |
| |
| |
• |
impairment of relationships with employees and customers as a
result of changes in management. |
Any of the above risks could prevent the combined company from
realizing significant benefits from the merger.
If the combined company cannot quickly and efficiently integrate
Concentric and NEXTLINK personnel, products and services
following the closing of the merger, it will not enjoy the full
benefits anticipated from the transaction. Concentric officers
and employees have valuable knowledge of the data services and
web hosting business that would be difficult to replace if the
combined company does not retain the services of a substantial
portion of them.
If the average price of NEXTLINK common stock decreases below
$69.23 per share prior to the merger, Concentric stockholders
will receive less dollar value for their Concentric common stock.
If the average price per share of NEXTLINK common stock prior to
the merger falls below $69.23, the NM Acquisition Corp. common
stock received by Concentric stockholders will be worth less than
$45 per share. Additionally, Concentric does not have
“walk-away rights” and consequently cannot terminate
the
13
merger agreement solely because NEXTLINK’s stock price
declines. The market prices of NEXTLINK common stock and
Concentric common stock as of a recent date are set forth under
“Summary — Comparative Market Price
Information.” Concentric stockholders are advised to obtain
recent market quotations for NEXTLINK common stock and Concentric
common stock. Additionally, there may be some time between when
Concentric stockholders vote to approve the merger and when the
merger is actually completed, during which the price of NEXTLINK
common stock could decline. As a consequence, Concentric
stockholders will not know with certainty at the time they vote
the value of the shares of NM Acquisition Corp. common stock they
will receive in the merger.
Some officers and directors of Concentric have conflicts of
interest arising out of personal benefits to be received in the
merger that could influence their support of the merger.
Certain of Concentric’s executive officers and directors
will receive substantial employment-related benefits in the
merger. These benefits constitute a conflict of interest for each
of these individuals because these benefits, which Concentric
stockholders will not share, give them a personal interest in the
merger and could have influenced their support for it. In
particular, certain of Concentric’s executive officers and
directors will receive stock options at market and nominal
exercise prices, shares of restricted stock and cash retention
bonuses. The directors and officers of Concentric may therefore
have been more likely to vote to approve the merger agreement and
the merger than if they did not have these interests. Concentric
stockholders should consider whether these interests may have
influenced these directors and officers to support or recommend
the merger. You should read more about these interests under
“The Merger — Interests of Insiders of Concentric
in the Merger” on page 48.
Concentric may not be able to enter into a merger or business
combination with another party at a favorable price because of
restrictions in the merger agreement.
While the merger agreement is in effect, subject to specified
exceptions, Concentric is prohibited from entering into or
soliciting, initiating or encouraging any inquiries or proposals
that may lead to a proposal or offer for a merger, consolidation,
business combination, sale of substantial assets, tender offer,
sale of shares of capital stock or other similar transactions
with any person other than NEXTLINK. As a result of this
prohibition, Concentric may not be able to enter into an
alternative transaction at a favorable price.
The combined company’s success in the Internet/data
services market depends upon third-party distribution and
engineering relationships, some of which could be jeopardized by
the merger.
An important element of Concentric’s strategy has been to
develop relationships with leading companies to enhance its
distribution and engineering efforts. Concentric also has
technology supply arrangements in place for key components of its
web hosting and e-commerce platform. We cannot assure you that
the merger won’t adversely affect some or all of these
important relationships. NEXTLINK competes with Williams, SBC and
Teligent, all of which are important Concentric customers and
therefore may make these companies reluctant to deal with the
combined company following the merger.
Concentric has also entered into strategic agreements with SBC
and Teligent for the delivery of private-labeled services to
their customers. Concentric relies on these relationships for the
acquisition of small and medium enterprise customers.
Termination of any of these agreements or the combined
company’s failure to renew any of the agreements upon
termination on terms acceptable to it could have a material
adverse effect on its business, financial condition and results
of operations. For example, Concentric currently is in the
process of winding down its relationship with Teligent to deliver
private label services to Teligent’s customers. Concentric
expects the relationship to be terminated in 2000. If Concentric
does not successfully replace the Teligent relationship, then
Concentric may have difficulty attracting new small and medium
sized enterprise customers which could have a material adverse
impact on the results of operations of the combined enterprise.
Concentric has an outsourcing agreement with Williams Technology
Solutions, a subsidiary of Williams Communications Group, Inc.,
that enables Concentric to use Williams employees for the
operational support of its network. Concentric’s use of
Williams employees and Williams engineering expertise was
integral to the development of Concentric’s network and
continues to be integral to the ongoing operation of
Concentric’s
14
network operations center. Pursuant to the agreement with
Williams, all of the Williams employees currently working for
Concentric will transition to become employees of the combined
company when the agreement terminates in December 2000. If
the combined enterprise experiences any difficulty transitioning
or attracting the Williams employees, the company may experience
difficulty running its network operations center which could have
a material adverse effect on the operations of the combined
company.
If the combined company is required to redeem Concentric
senior notes and preferred stock, there will be substantial
expenses resulting from the merger that will divert resources
from other productive uses.
Under the terms of the indenture governing Concentric’s
12 3/4% senior notes due 2007, and the terms of its
13 1/2% series B senior redeemable exchangeable preferred
stock, upon completion of the merger the combined company will be
required to offer to repurchase those outstanding senior notes
and shares of preferred stock at a purchase price equal to 101%
of the principal amount of the senior notes and 101% of the
liquidation preference of the shares of preferred stock. As of
March 31, 2000, the total principal amount of the senior
notes and the liquidation preference of the shares of preferred
stock outstanding was approximately $338.7 million. If the
combined company is required to utilize available cash to fund
repurchase of all or a significant amount of Concentric’s
senior notes and preferred stock, it would reduce the amount of
funds available to implement the business plan of the combined
company.
RISKS RELATED TO THE BUSINESS AND OPERATIONS OF NEXTLINK AND
CONCENTRIC
The risks set forth below are a number of the risks relating to
the business and operations of Concentric and NEXTLINK. It is
important for stockholders of Concentric and NEXTLINK to
understand these risks because, after the merger, they could harm
the business of the combined company.
Risks Related to Liquidity and Capital Resources
NEXTLINK and Concentric have substantial existing debt and the
combined company will incur substantial additional debt, in
addition to NEXTLINK’s and Concentric’s records of
increasing losses and negative cash flow.
As of March 31, 2000 NEXTLINK had outstanding nine issues of
senior notes totaling $3,733.3 million in principal amount,
approximately $4.1 million in miscellaneous debt
obligations of its subsidiaries, and two series of redeemable
preferred stock. These redeemable preferred stock series include
8,324,796 shares of 14% redeemable preferred stock, with a
liquidation preference of $50 per share, and 4,000,000 shares of
6 1/2% preferred stock, with a liquidation preference of $50
per share. NEXTLINK has also issued 584,357 shares of
Series C cumulative convertible participating preferred
stock and 265,625 shares of Series D convertible
participating preferred stock, both with a liquidation preference
of $1,000 per share. NEXTLINK has also obtained a
$1,000.0 million secured credit facility, of which
$375.0 million has been drawn.
At March 31, 2000 Concentric’s total debt (including
the current portion) was $214.8 million, and
stockholders’ equity was $62.2 million. Interest on
this indebtedness totaled approximately $22.6 million in
1999. Concentric also issued 150,000 shares of preferred stock in
June 1998 with dividends which accrue at the rate of
13 1/2 % per year and 50,000 shares of preferred stock in
June 1999 with dividends which accrue at the rate of 7% per
year.
The combination of NEXTLINK’s and Concentric’s debt,
including preferred stock, will have important consequences for
the combined company, including the following:
|
|
|
| |
• |
its ability to obtain additional financing in the future, whether
for working capital, capital expenditures, acquisitions or other
purposes, may be impaired; |
| |
| |
• |
a substantial portion of its cash flow from operations and
financing activities will be dedicated to the payment of interest
on its debt and dividends on preferred stock, which will reduce
the funds available for other purposes; |
| |
| |
• |
its flexibility in planning for or reacting to changes in market
conditions may be limited; and |
15
|
|
|
| |
• |
it may be more vulnerable in the event of a downturn in its
business. |
For each period since inception, both NEXTLINK and Concentric
have incurred substantial and increasing net losses and negative
cash flow from operations. Consequently, neither NEXTLINK nor
Concentric currently generates, and the combined company may not
be able to generate, cash flows from which it can make interest
payments on outstanding notes and dividend payments on
outstanding preferred stock or fund continuing operations and
planned capital expenditures. We cannot know when, if ever, net
cash generated by the internal business operations of the
combined company will support its growth and continued
operations. If the combined company is unable to generate cash
flow in the future sufficient to cover its fixed charges and is
unable to borrow sufficient funds from other sources, then it may
be required to:
|
|
|
| |
• |
refinance all or a portion of its existing debt and redeemable
preferred stock; or |
| |
| |
• |
sell all or a portion of its assets. |
If the combined company fails to pay principal and interest on
its notes when due, the noteholders could declare default and
demand that it repay the entire amount of defaulted notes. Unless
the combined company is able to find alternate financing to pay
the entire amount, the noteholders could seek a judgment and
attempt to seize its assets to satisfy the debt to them. Any
action of this type would have a material adverse affect on the
business of the combined company and on the market price of its
common stock.
The indentures under which NEXTLINK’s and Concentric’s
notes have been issued, and NEXTLINK’s credit facility, will
permit the combined company to incur substantial additional
debt. We fully expect to draw down the remaining
$625.0 million available under NEXTLINK’s credit
facility and borrow substantial additional funds in the next
several years. This additional indebtedness, together with the
indebtedness of Concentric expected to be assumed in connection
with the merger, will further increase the risk of a default
unless the combined company can establish an adequate revenue
base and generate sufficient cash flow to repay its indebtedness.
We cannot assure you that the combined company will ever
establish an adequate revenue base to produce an operating profit
or generate adequate positive cash flow to provide future
capital expenditures and repayment of debt.
Neither NEXTLINK nor Concentric has sufficient additional
financing commitments to meet the long term needs of the combined
company and, if the combined company not successful in raising
additional capital, it will not be able to build and maintain its
business.
Building the business of the combined company will require
substantial additional capital spending. NEXTLINK’s and
Concentric’s capital spending plans have increased
substantially over time, as their respective strategies have
evolved and their planned networks have grown larger and more
robust and service offerings have expanded. The combined company
will need to raise additional capital because its anticipated
future capital requirements exceed NEXTLINK’s and
Concentric’s cash and marketable securities on hand as of
March 31, 2000, the $850.0 million that NEXTLINK
received in January 2000 in connection with its Forstmann Little
investment, the $375.0 million that NEXTLINK received in
February 2000 in connection with its credit facility, and
the $625.0 million currently available under NEXTLINK’s
credit facility, the only current commitment for additional
financing for the combined company. If the combined company fails
to raise sufficient capital, it may be required to delay or
abandon some of its planned future expansion or expenditures,
which could have a material adverse effect on its growth and its
ability to compete in the telecommunications services industry
and generate profits for stockholders, and could even result in a
payment default on its existing debt.
The covenants in NEXTLINK’s and Concentric’s
indentures and NEXTLINK’s credit facility will restrict the
combined company’s financial and operational flexibility,
which could have an adverse effect on its results of operations.
The indentures under which NEXTLINK’s and Concentric’s
senior notes have been issued and NEXTLINK’s credit facility
contain covenants that restrict, among other things, the ability
of the combined company to borrow money, make particular types
of investments or other restricted payments, sell assets or
16
merge or consolidate. NEXTLINK’s credit facility also
requires the combined company to maintain specified financial
ratios. If the combined company fails to comply with these
covenants or meet these financial ratios, the noteholders or the
lenders under the credit facility could declare a default and
demand immediate repayment. Unless the combined company cures any
such default, they could seek a judgment and attempt to seize
our assets to satisfy the debt to them. After the merger is
completed, the security for the credit facility will consist of
all of the assets purchased with the proceeds thereof, the stock
of the combined company’s direct subsidiaries, all assets of
the combined company and, to the extent of $125.0 million
of guaranteed debt, all assets of certain of the combined
company’s subsidiaries. In addition, a default under any of
these obligations could adversely affect our rights under other
commercial agreements.
Risks Related to NEXTLINK’s Technology and
Network Development
If the combined company cannot quickly and efficiently install
NEXTLINK’s hardware, it will be unable to generate revenue.
Each of NEXTLINK’s networks consists of many different
pieces of hardware, including switches, routers, fiber optic
cables, electronics, and combination radio transmitter/receivers,
known as transceivers, and associated equipment, which are
difficult to install. If the combined company cannot install this
hardware quickly, the time in which customers can be connected
to its network and it can begin to generate revenue from
NEXTLINK’s network will be delayed. The construction of
NEXTLINK’s national fiber optic network is not under
NEXTLINK’s control, but is under the control of Level 3
Communications. If Level 3 Communications fails to complete its
network on time or if it fails to perform as specified,
NEXTLINK’s strategy of linking its local networks to one
another and creating an end-to-end national network will be
delayed.
Internet-protocol technology has not yet been perfected for
full service networks like NEXTLINK’s.
NEXTLINK plans to rely on IP technology as the principal basis
for its planned end-to-end network. Although IP technology is
used throughout the Internet, its extension to support other
telecommunications applications, such as voice and video, has not
yet been perfected, and currently has several deficiencies,
including poor reliability and quality. Integrating these
technologies into NEXTLINK’s network may prove difficult and
may be subject to delays. NEXTLINK cannot assure you that these
improvements will become available in a timely fashion or at
reasonable cost, if at all, or that the technology choices we
make will prove to be cost effective and correct.
The combined company may not be able to connect
NEXTLINK’s network to the incumbent carrier’s network
on favorable terms.
NEXTLINK currently requires interconnection agreements with the
dominant local telephone company to connect calls between its
customers and non-customers. Congress and the telecommunications
industry refer to this dominant local carrier as the incumbent
local exchange carrier, or the incumbent carrier. We cannot
assure you that the combined company will be able to negotiate or
renegotiate interconnection agreements in all of NEXTLINK’s
markets on favorable terms.
Physical space limitations in office buildings and landlord
demands for fees or revenue sharing could limit the combined
company’s ability to connect customers directly to
NEXTLINK’s networks and reduce the combined company’s
operating margins.
Connecting a customer who is a tenant in an office building
directly to NEXTLINK’s network requires installation of
in-building cabling through the building’s risers from the
customer’s office to NEXTLINK’s fiber in the street or
its antenna on the roof. In some office buildings, particularly
the premier buildings in the largest markets, the risers are
already close to their maximum physical capacity due to the entry
of other competitive carriers into the market. Moreover, the
owners of these buildings are increasingly requiring competitive
telecommunications service providers like NEXTLINK to pay fees or
otherwise share revenue as a condition of access. NEXTLINK has
not been required to pay these fees in smaller markets it has
served in
17
the past, but the combined company may be required to do so to
penetrate larger markets, which would reduce the combined
company’s operating margins. In addition, some major office
building owners have equity interests in, or joint ventures with,
companies offering broadband communications services over fiber
optic networks and may have an incentive to encourage their
tenants to choose those companies’ services over the
combined company’s or to grant those companies more
favorable terms for installation of in-building cabling.
NEXTLINK’s deployment of wireless first mile connections
could be delayed by a lack of acceptable equipment and by
installation risks.
The Federal Communications Commission, or FCC, licensed
NEXTLINK’s broadband wireless spectrum in what it calls the
Local Multipoint Distribution Service, or LMDS. LMDS is a
newly-authorized service, and equipment vendors are only
beginning to offer radios, transceivers and related equipment
designed to work at its frequencies. Recently completed field
testing revealed that improvements in the price, features and
functionality of the point-to-multi-point equipment must be made
before NEXTLINK undertakes a broader commercial launch of
services using this technology. Although NEXTLINK’s vendors
have advised NEXTLINK that these improvements will be
incorporated in their second generation equipment, this equipment
is still in development. NEXTLINK cannot be certain that
commercial quantities of equipment meeting its standards will be
available in time to meet its development schedule.
LMDS direct connections require NEXTLINK to obtain access to
rooftops from building owners and to satisfy local construction
and zoning rules for antennas and transmitters. The need to
obtain these authorizations could be an additional source of
delay.
NEXTLINK cannot accurately predict the total cost of its fixed
wireless deployment.
Although NEXTLINK has selected one vendor from which we will
purchase LMDS equipment, because NEXTLINK’s fixed wireless
development strategy contemplates using a number of equipment
vendors, we don’t know precisely how much the equipment the
combined company will need will cost. Installation costs are
expected to vary greatly, depending on the particular
characteristics of the locations to be served. After initial
installation, we expect to incur additional costs to reconfigure,
redeploy and upgrade our fixed wireless direct connections as
technologies improve.
NEXTLINK’s competition against the incumbent carrier in
local markets and Concentric’s dependence upon incumbent
local carriers may make it more difficult for the combined
company to connect new customers to its networks.
It is expensive and difficult for NEXTLINK to switch a new
customer to NEXTLINK’s network because:
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a potential customer faces switching costs if it decides to
become our customer, and |
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NEXTLINK requires cooperation from the incumbent carrier. |
NEXTLINK’s principal competitors, the incumbent carriers,
are already established providers of local telephone services to
all or virtually all telephone subscribers within their
respective service areas.
Their physical connections from their premises to those of their
customers are expensive and difficult to duplicate. To complete
the new customer provisioning process, NEXTLINK relies on the
incumbent carrier to process certain information. The incumbent
carriers have a financial interest in retaining their customers,
which could reduce their willingness to cooperate with our new
customer provisioning requests.
We cannot assure you that the combined company will be able to
overcome these advantages and compete successfully with the
incumbent carriers.
Additionally, Concentric is dependent upon incumbent carriers to
provide telecommunications services to it and its customers.
Concentric experiences delays from time to time in receiving
telecommunications services from these suppliers. We cannot
assure you that the combined company will be able to obtain such
18
services on the scale and within the time frames required by it
at an affordable cost, or at all. Any failure to obtain such
services on a sufficient scale, on a timely basis or at an
affordable cost would have a material adverse effect on the
combined company’s business, financial condition and results
of operations.
If the combined company loses key personnel and qualified
technical staff, our ability to manage the day-to-day aspects of
our complex network will be weakened.
We believe that a critical component for the success of the
combined company will be the attraction and retention of
qualified professional and technical personnel. If the combined
company loses key personnel and qualified technical staff, or is
unable to recruit qualified personnel, our ability to manage the
day-to-day aspects of our complex network will be weakened.
NEXTLINK and Concentric face significant competition in the
attraction and retention of personnel who possess the skill sets
that they seek.
In addition, the combined company must also develop and retain a
large and sophisticated sales force. If the combined company
fails to do so, there will be an adverse effect on its ability to
generate revenue and, consequently, its operating cash flow.
Risks Related to Competition and the
Telecommunications and Data Services Industries
The combined company will face competition in local markets
from other carriers, putting downward pressure on prices.
NEXTLINK currently faces, and the combined company will face,
competition from recent and potential market entrants, including
long distance carriers entering, reentering or expanding their
entry into the local exchange marketplace such as AT&T, MCI
WorldCom and Sprint (which has agreed to merge with MCI
WorldCom). This places downward pressure on prices for local
telephone service and for data services and makes it more
difficult for NEXTLINK and the combined company to achieve
positive operating cash flow. In addition, competition from other
companies, such as cable television companies, electric
utilities, microwave carriers, wireless telephone system
operators and private networks built by large end-users is
expected. We cannot assure you that the combined company will be
able to compete effectively with these industry participants.
The combined company will face competition in long distance
markets, putting downward pressure on prices.
NEXTLINK also currently faces, and the combined company will
face, intense competition from long distance carriers in the
provision of long distance services, which places downward
pressure on prices for long distance service, including both
voice and data services, and makes it difficult for us to achieve
positive operating cash flow. Although the long distance market
is dominated by three major competitors, AT&T, MCI WorldCom
and Sprint (which has agreed to merge with MCI WorldCom),
hundreds of other companies also compete in the long distance
marketplace. We also anticipate that the incumbent carriers will
be competing in the long distance market in the near future. We
cannot assure you that the combined company will be able to
effectively compete with any of these industry participants.
The combined company will face competition in creating a
national broadband network.
Several of NEXTLINK’s competitors, such as Qwest, Level 3,
IXC and Williams, have announced an intention to create
end-to-end broadband networks that would compete directly with
the network NEXTLINK is building. In addition, the major
long-distance and incumbent local carriers have the ability and
announced intention to do so as well. We cannot assure you that
the combined company will be able to successfully compete with
these service providers.
The combined company will face competition for data services.
Competitors for data services consist of online service
providers, Internet service providers and Web hosting providers.
New competitors continue to enter this market and include large
computer hardware, software, media and other technology and
telecommunications companies, including the incumbent carriers.
19
Certain telecommunications companies and online services
providers are currently offering or have announced plans to offer
Internet or online services or to expand their network services.
Certain companies, including America Online, BBN, PSINet and
Verio, have also obtained or expanded their Internet access
products and services.
Many of these competitors have superior resources, which may
place the combined company at a cost and price disadvantage.
Many of our current and potential competitors have market
presence, engineering, technical and marketing capabilities and
financial, personnel and other resources substantially greater
than those of NEXTLINK and Concentric and those of the combined
company. As a result, some of these competitors can raise capital
at a lower cost than we can, and they may be able to develop and
expand their communications and network infrastructures more
quickly, adapt more swiftly to new or emerging technologies and
changes in customer requirements, take advantage of acquisition
and other opportunities more readily, and devote greater
resources to the marketing and sale of their products and
services than we can. Also, our competitors’ greater brand
name recognition may require us to price our services at lower
levels in order to win business. Finally, our competitors’
cost advantages give them the ability to reduce their prices for
an extended period of time if they so choose.
The technologies used by NEXTLINK and Concentric may become
obsolete, which would limit the ability of the combined company
to compete effectively.
The telecommunications industry is subject to rapid and
significant changes in technology. If the combined company does
not replace or upgrade technology and equipment that becomes
obsolete, it will be unable to compete effectively because it
will not be able to meet the expectations of its customers.
The following technologies and equipment that NEXTLINK uses or
will use are subject to obsolescence: wireline and wireless
transmission technologies, circuit, and packet switching
technologies and data transmission technologies, including the
digital subscriber line (DSL), asynchronous transfer mode (ATM)
and IP technologies. In addition, we cannot assure you that the
technologies that the combined company chooses to invest in will
lead to successful implementation of its business plan.
Additionally, the markets for Concentric’s services are
characterized by rapidly changing technology, evolving industry
standards, changes in customer needs, emerging competition and
frequent new product and service introductions. The future
success of the combined company’s data services business
will depend, in part, on its ability to accomplish the following
in a timely and cost-effective manner:
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effectively use leading technologies; |
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continue to develop its technical expertise; |
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enhance its current networking services; |
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develop new services that meet changing customer needs; |
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advertise and market its services; and |
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influence and respond to emerging industry standards and other
technological changes. |
We believe that the combined company’s ability to compete
successfully in the data services market will depend upon the
continued compatibility and interoperability of Concentric’s
services with products and architectures offered by various
vendors. We cannot assure you that industry standards will be
established, or, if established, that we can conform to those
standards in time to maintain a competitive position. In
addition, if the combined company fails to develop successive
enhancements to DSL technology or other enhanced services,
it may not maintain a competitive position. Also, in order to
maintain its competitive position, the
20
combined company must be able to develop new technology to
accommodate new industry developments, including:
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Internet access through cable television, satellite and wireless
modems; |
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Internet access through screen-based telephones, televisions or
other consumer electronic devices; or |
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subscriber requirements that change the way Internet access is
provided. |
Any failure to pursue these technological advances, which may
require substantial time and expense, may result in the combined
company losing its competitive position and causing a material
adverse effect on the combined company’s business. We cannot
assure you that we will succeed in adapting Concentric’s
network service business to alternate access devices and conduits
as they emerge.
We cannot assure you that the combined company will be successful
in effectively using new technologies, developing new services
or enhancing its existing services on a timely basis or that such
new technologies or enhancements will achieve market acceptance.
The combined company’s pursuit of necessary technological
advances may require substantial time and expense.
The combined company may be required to pay patent licensing
fees, which will divert funds which could be used for other
purposes.
From time to time NEXTLINK and Concentric receive requests to
consider licensing certain patents held by third parties that may
have bearing on its interactive voice response, other enhanced,
or data services. Should the combined company be required to pay
license fees in the future, such payments, if substantial, could
have a material adverse effect on its results of operations.
Additionally, if someone asserts a claim relating to
Concentric’s proprietary technology or information, the
combined company may seek licenses to such intellectual property.
We cannot assure you, however, that the combined company could
obtain licenses on commercially reasonable terms, if at all. The
failure to obtain the necessary licenses or other rights could
have a material adverse effect on the combined company’s
business, financial condition and results of operations.
NEXTLINK and its industry are, and Concentric and its industry
may become, highly regulated, imposing substantial compliance
costs and restricting the ability of the combined company to
compete in its target markets.
NEXTLINK is subject to varying degrees of federal, state and
local regulation. This regulation imposes substantial compliance
costs on NEXTLINK. It also restricts its ability to compete. For
example, in each state in which NEXTLINK desires to offer its
services, it needs to obtain authorization from the appropriate
state commission. NEXTLINK cannot assure you that it will receive
authorization for markets to be launched in the future.
As an operator of value-added networks that provide access to
regulated transmission facilities only as part of a data services
package, Concentric is not currently subject to direct
regulation by the Federal Communications Commission (FCC) or any
other governmental agency, other than regulations applicable to
businesses generally. However, future changes in law or
regulation could result in some aspects of its current operations
becoming subject to one or more forms of telecommunication
regulation by the FCC or other regulatory agencies.
The prices at which the combined company may sell
Concentric’s services could be affected by regulatory
changes:
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in the Internet connectivity market; |
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that indirectly or directly affect telecommunications costs; or |
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that increase the likelihood or scope of competition from the
regional bell operating companies, or RBOCs, that are currently
restricted from providing certain services. |
21
We cannot predict the effect, if any, that future regulation or
regulatory changes may have on the combined company’s
business, and we cannot assure you that future regulation or
regulatory changes will not have a material adverse effect on the
combined company’s business, results of operations or
financial condition.
The requirement that NEXTLINK obtain permits and rights-of-way
increases its cost of doing business.
In order for NEXTLINK to acquire and develop its fiber networks,
it must obtain local franchises and other permits, as well as
rights-of-way and fiber capacity from entities such as incumbent
carriers and other utilities, railroads, long distance companies,
state highway authorities, local governments and transit
authorities. The process of obtaining these permits and
rights-of-way increases the cost of doing business.
We cannot assure you that the combined company will be able to
maintain the existing franchises, permits and rights-of-way that
it will need to implement its business. Nor can we assure you
that the combined company will be able to obtain and maintain the
other franchises, permits and rights that it will require. A
sustained and material failure to obtain or maintain these rights
could materially adversely affect the combined company’s
business in the affected metropolitan area.
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Risks Related to Growth and Development of NEXTLINK’s
Network and Concentric’s Data Services Business After the
Merger |
Continued rapid growth of the combined company’s network,
services and subscribers could be slowed if we cannot manage the
growth of NEXTLINK’s network.
NEXTLINK has rapidly expanded and developed its network, services
and subscribers, and expect to continue to do so. This has
placed and will continue to place significant demands on
NEXTLINK’s and the combined company’s management,
operational and financial systems and procedures and controls. We
may not be able to manage the anticipated growth of the combined
company effectively, which would harm its business, results of
operations and financial condition. Further expansion and
development will depend on a number of factors, including:
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technological developments; |
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the combined company’s ability to hire, train and retain
qualified personnel in a competitive labor market; |
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availability of rights-of-way, building access and antenna sites; |
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development of customer billing, order processing and network
management systems that are capable of serving our growing
customer base; |
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cooperation of the existing local telephone companies; |
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regulatory and governmental developments; and |
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existence of strategic alliances or relationships. |
The combined company will need to continue to improve its
operational and financial systems and its procedures and controls
as it grows. It must also develop, train and manage its
employees.
The combined company’s ability to succeed in the data
services market is uncertain.
The combined company’s ability to succeed in the data
services market depends to a large extent on its ability to build
a tailored, value-added network services business. The combined
company’s ability to do so is subject to the following
risks:
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the data services markets are relatively new, and current and
future competitors are likely to introduce competing services or
products which may result in market saturation; |
22
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certain critical issues concerning commercial use of tailored,
value-added services and Internet services, including, among
others, security, reliability, ease and cost of access, and
quality of service, remain unresolved and may impact the growth
of such services; |
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the market for data services may fail to grow or grow more slowly
than anticipated; |
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reliability, quality or compatibility problems with new
enterprise service offerings which we may introduce could
significantly delay or hinder market acceptance and could divert
technical and other resources; |
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the combined company’s inability to obtain sufficient
quantities of sole- or limited-source components required to
provide data services or to develop alternative sources, if
required, could result in delays and increased costs in
expanding, and overburdening of, our network infrastructure; |
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suppliers may not provide the combined company with products or
components that comply with Internet standards or that
inter-operate with other products or components used in its
infrastructure; |
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capacity constraints that adversely affect the system performance
if demand for data services were to increase faster than
projected or were to exceed current forecasts; |
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the combined company’s ability to respond to changing
customer requirements or evolving industry trends; |
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the failure of any link in the delivery chain, including the
networks with which the combined company establish public or
private peering arrangements or private transit; |
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the market for tailored value-added network services is extremely
competitive, and we expect that competition will intensify in
the future; |
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increased price and other competition due to Internet industry
consolidation; |
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interruptions in service due to a natural disaster, such as an
earthquake, or other unanticipated problem; and |
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liability for information disseminated through our network. |
The combined company faces risks associated with international
expansion.
NEXTLINK has begun to expand into Canadian markets and the merger
will entail the acquisition of Concentric’s UK operations.
The combined company may expand into other international markets
in the future. The following risks are inherent in doing business
on an international level:
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unexpected changes in regulatory requirements; |
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export restrictions and controls relating to encryption
technology; |
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tariffs and other trade barriers; |
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difficulties in staffing and managing foreign operations; |
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longer payment cycles and problems in collecting accounts
receivable; |
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political instability; |
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fluctuations in currency exchange rates; |
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seasonal reductions in business activity during the summer months
in Europe and certain other parts of the world; and |
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potentially adverse tax consequences that could adversely impact
the success of its international operations. |
We cannot assure you that one or more of such factors will not
have a material adverse effect on the existing or future
international operations of the combined company and,
consequently, on its business, financial condition and results of
operations. The risks will become increasingly material to the
combined company if our international business continues to grow.
23
OTHER RISKS
Craig O. McCaw, who will control a majority of the combined
company’s voting power after the merger, may have interests
which are adverse to your interests.
Craig O. McCaw, primarily through his majority ownership and
control of Eagle River Investments, L.L.C., will control a
majority of the combined company’s total voting power after
the merger. Because Mr. McCaw has the ability to control the
direction and future operations of the combined company and has
interests in other companies that may compete with the combined
company, he may make decisions that are adverse to your
interests. Mr. McCaw effectively controls a decision whether
a change of control of NEXTLINK will occur.
We do not plan on the combined company paying dividends on its
common stock.
We do not anticipate the combined company paying any dividends
for the foreseeable future. The NEXTLINK credit facility and the
indentures governing the combined company’s senior notes
will restrict our ability to pay cash dividends.
Forward-Looking Statements
Our forward-looking statements are subject to a variety of
factors that could cause actual results to differ significantly
from current beliefs.
Some statements and information contained or incorporated in this
proxy statement/ information statement/ prospectus are not
historical facts, but are “forward-looking statements,”
as such term is defined in the Private Securities Litigation
Reform Act of 1995. These forward-looking statements can be
identified by the use of forward-looking terminology such as
“believes,” “expects,” “plans,”
“may,” “will,” “would,”
“could,” “should,” or
“anticipates,” or the negative of these words or other
variations of these words or other comparable words, or by
discussions of strategy that involve risks and uncertainties.
Such forward-looking statements include, but are not limited to,
statements regarding:
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market development, the number of markets we expect to serve, and
the expected number of addressable business lines in such
markets; |
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network development, including those with respect to IP and ATM
network and facilities development and deployment, broadband
fixed wireless technology, testing and installation, high speed
technologies such as DSL, and matters relevant to our national
network; |
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liquidity and financial resources, including anticipated capital
expenditures, funding of capital expenditures and anticipated
levels of indebtedness; and |
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statements with respect to when the merger will be completed and
the effects of the merger, including the potential benefits of
the merger to Concentric, NEXTLINK and their respective
stockholders. |
All such forward-looking statements are qualified by the inherent
risks and uncertainties surrounding expectations generally, and
also may materially differ from our actual experience involving
any one or more of these matters and subject areas. The operation
and results of our business also may be subject to the effect of
other risks and uncertainties in addition to the relevant
qualifying factors identified in the above “Risk
Factors” section and elsewhere in this proxy
statement/information statement/prospectus, including, but not
limited to:
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general economic conditions in the geographic areas that we are
targeting for communications services; |
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the ability to achieve and maintain market penetration and
revenue levels sufficient to provide financial viability to our
business; |
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access to sufficient debt or equity capital to meet our operating
and financing needs; |
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the quality and price of similar or comparable communications
services offered or to be offered by our competitors; and |
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future telecommunications-related legislation or regulatory
actions. |
24
THE CONCENTRIC SPECIAL MEETING
General
Concentric is furnishing this document as a proxy statement to
holders of Concentric common stock in connection with the
solicitation of proxies by the Concentric board of directors for
use at the special meeting of stockholders of Concentric to be
held on Thursday, June 15, 2000, and any adjournment
thereof, and as a prospectus for the NM Acquisition Corp.
class A common stock to be issued to holders of Concentric
common stock as contemplated by the merger agreement. This
document is first being furnished to stockholders of Concentric
on or about May 15, 2000 for their special meeting. This
document is also being furnished to NEXTLINK stockholders as an
information statement in connection with the merger, and as a
prospectus for the NM Acquisition Corp. class A common
stock to be issued to holders of NEXTLINK class A common
stock and for the NM Acquisition Corp. class B common stock
to be issued to holders of NEXTLINK class B common stock, as
contemplated by the merger agreement.
Date, Time and Place
The special meeting will be held on Thursday, June 15, 2000,
starting at 1:00 p.m., Pacific Daylight Time, at the principal
executive offices of Concentric at 1400 Parkmoor Avenue, San
Jose, California 95126-3429.
Purpose of the Special Meeting
At the special meeting, Concentric stockholders will consider and
vote upon a proposal to adopt the merger agreement and to
approve the transactions it contemplates.
Board Recommendation
The Concentric board has determined that the merger is advisable
and fair to, and in the best interests of, Concentric and its
stockholders. The Concentric board has therefore unanimously
approved the merger and the merger agreement and recommends that
stockholders vote for approval of the merger and the merger
agreement. When considering the recommendation of the Concentric
board, you should be aware that the terms of the merger gives a
number of Concentric directors, executive officers and key
employees substantial interests in the merger that are different
from, or in addition to, the interests of Concentric
stockholders, including stock option grants at market and nominal
exercise prices, shares of restricted stock and cash retention
bonuses. The board of directors of Concentric was aware of these
interests at the time it adopted the merger agreement and
approved the merger. See “The Merger — Interests
of Certain Insiders of Concentric in the Merger.”
The matters to be considered at the special meeting are of great
importance to you as a stockholder of Concentric. Accordingly, we
urge you to read and carefully consider the information
presented in this proxy statement/information
statement/prospectus, and to complete, date, sign and promptly
return the enclosed proxy in the enclosed postage-paid envelope.
You should not send any stock certificates with your proxy
card. We will mail you a transmittal form with instructions for
the surrender of Concentric common stock certificates promptly
after completion of the merger.
Record Date; Voting Rights
Only holders of record of Concentric common stock at the close of
business on the record date, May 10, 2000, are entitled to
receive notice of and to vote at the special meeting. At the
close of business on the record date, there were 52,006,633
shares of Concentric common stock outstanding, held by
approximately 25,000 record holders. Each share of Concentric
common stock entitles the record holder of the share to one vote.
On the record date, the directors and executive officers of
Concentric and their affiliates beneficially owned and were
entitled to vote 4,301,233 shares of Concentric common
stock, or approximately 8.27% of the shares of Concentric common
stock outstanding, on the record date.
25
Quorum
To constitute a quorum for the special meeting, stockholders
entitled to cast at least a majority of the votes that all
stockholders of Concentric are entitled to cast on the merger
agreement and the merger must be present in person or by properly
executed proxy. Concentric common stock represented by proxies
which are marked “ABSTAIN” will be counted as shares
present for purposes of determining the presence of a quorum on
all matters, as will shares that are represented by proxies that
are executed by any broker, fiduciary or other nominee on behalf
of the beneficial owner(s) of the shares regardless of whether
authority to vote is withheld from the broker, fiduciary of
nominee on one or more matters. If a quorum is not present at the
special meeting, it is expected that the meeting will be
adjourned to solicit additional proxies.
Voting of Proxies
To assure that your shares are represented at the special
meeting, we urge you to complete, date and sign the enclosed
proxy and promptly return it in the enclosed envelope or
otherwise mail it to Concentric.
Concentric stockholders may also vote their shares in person at
the special meeting. In order to vote in person at the special
meeting, Concentric stockholders must attend the special meeting
and cast their votes according to the voting procedures announced
at the special meeting. If your shares are held in “street
name” by your broker, your broker will vote your shares only
if you provide instructions on how to vote. Your broker will
provide directions on how to instruct the broker to vote your
shares.
Stockholders may revoke their proxies at any time prior to their
use. Proxies may be revoked by:
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filing, with the Secretary of Concentric, before taking the vote
at the special meeting, a written notice of revocation bearing a
later date than the date of the proxy or a later-dated proxy
relating to the same shares; or |
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attending the special meeting and voting in person. Attendance at
the special meeting will not in and of itself constitute a
revocation of a proxy. Any written notice of revocation or
subsequent proxy must be sent so as to be delivered at or before
the taking of the vote at the special meeting. |
Concentric stockholders who require assistance in changing or
revoking a proxy should contact Pete Bergeron at the address or
phone number provided in this document under the caption
“Where You Can Find More Information.”
All shares of Concentric common stock represented by proxies
properly received prior to or at the special meeting and not
revoked will be voted in accordance with their instructions
indicated on such proxies. If Concentric stockholders do not
indicate any instructions on a proxy properly executed and
returned, that proxy will be voted FOR the merger proposal.
If any other matters are properly presented at the special
meeting for consideration, the persons named in the enclosed form
of proxy, and acting under that proxy, will have discretion to
vote on such matters in accordance with their best judgment,
unless authorization to use that discretion is withheld. If a
proposal to adjourn the special meeting is properly presented,
the persons named in the enclosed form of proxy will not have
discretion to vote shares voted against any of the proposals
related to the approval of the merger in favor of the adjournment
proposal. Concentric’s board does not currently intend to
bring any other business before the special meeting, and so far
as Concentric’s board knows, no other matters are to be
brought before the special meeting.
Abstentions may be specified on the merger proposal. Since the
favorable vote of holders of a majority of the outstanding shares
of Concentric common stock on the merger proposal is required to
approve the proposal, a proxy marked “ABSTAIN” with
respect to any such proposal will have the effect of a vote
against that proposal. In addition, the failure of a Concentric
stockholder in connection with the merger proposal to return a
proxy will have the effect of a vote against the proposal.
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Vote Required to Approve the Merger Agreement and the Merger
Under Delaware law, the affirmative vote of a majority of the
outstanding Concentric common stock entitled to vote is required
to approve the merger agreement and the merger. On the record
date, there were 52,006,633 shares of Concentric common
stock outstanding and entitled to vote and, thus, the affirmative
vote of 26,003,317 shares is required for approval.
Pursuant to voting agreements, directors and executive officers
of Concentric beneficially owning an aggregate of
1,983,976 shares of Concentric common stock, including
shares issuable upon exercise of options, as of the record date,
or approximately 3.67% of the shares of Concentric common stock
outstanding on that date, have agreed to vote their shares of
Concentric common stock in favor of the merger and the merger
agreement.
Abstentions and Broker Non-Votes
Under the General Corporation Law of the State of Delaware, an
abstaining vote and a broker “non-vote” are counted as
present and entitled to vote and are, therefore, included for
purposes of determining whether a quorum of shares is present at
a meeting; however, such votes are not deemed to be “votes
cast.” As a result, abstentions and broker
“non-votes” are not included in the tabulation of the
voting results for approval of the merger and the merger
agreement. A broker “non-vote” occurs when a nominee
holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have
discretionary voting power with respect to that item and has not
received instructions from the beneficial owner. Because the
required vote of the Concentric stockholders to adopt the merger
agreement and the merger is based upon the number of outstanding
shares of Concentric common stock, rather than upon the shares
actually voted, the failure by the holder of any shares to submit
a proxy or to vote in person at the Concentric meeting
(including abstentions and broker non-votes) will have the same
effect as a vote against the adoption of the merger agreement and
the merger.
Solicitation of Proxies and Expenses
Concentric has retained the services of ChaseMellon Consulting
Services, LLC to assist in the solicitation of proxies from its
stockholders. The fees to be paid by Concentric to ChaseMellon
Consulting Services, LLC for these services are not expected to
exceed $20,000 plus reasonable out-of-pocket expenses. Concentric
will bear its own expenses in connection with the solicitation
of proxies for the special meeting of stockholders, except that
Concentric and NEXTLINK each will pay one-half of all filing and
other fees (other than fees to be paid by Eagle River in
connection with the LHP share exchange) paid to the SEC in
connection with the registration statement and this proxy
statement/information statement/prospectus.
In addition to solicitation by mail, the directors, officers and
employees of Concentric may solicit proxies from their
stockholders by telephone, facsimile or in person. Brokerage
houses, nominees, fiduciaries and other custodians will be
requested to forward soliciting materials to beneficial owners
and will be reimbursed for their reasonable expenses incurred in
sending proxy materials to beneficial owners.
Appraisal Rights
Under Delaware law, Concentric stockholders are not entitled to
appraisal rights in connection with the merger.
27
THE MERGER
This section describes material aspects of the proposed merger
and related transactions. While we believe that the description
covers the material terms of the merger and the related
transactions, this summary may not contain all of the information
that is important to you. You should read the entire merger
agreement, which is incorporated by reference and attached to
this proxy statement/information statement/prospectus as
Appendix A, and the other documents we refer to carefully
and in their entirety for a more complete understanding of the
merger.
Background of the Merger
In the summer of 1999, NEXTLINK conducted an internal study of
the Internet Service Provider (ISP)/data services market. The
intent was to evaluate potential strategic partners with
positions in ISP, web hosting and e-commerce services that would
complement NEXTLINK’s position as a leading competitive
local exchange carrier (CLEC)/emerging broadband data company.
NEXTLINK narrowed the target list of potential strategic partners
and set up several meetings, including with Concentric, to
discuss possible business/strategic relationship opportunities.
On August 2, 1999, Scott Macleod, Chief Business Development
Officer of NEXTLINK, and Hank Koerner, Director of Business
Development of NEXTLINK, flew to San Jose to meet with
representatives of Concentric to discuss a range of possible
business relationships. The representatives of Concentric
included James Isaacs, Vice President of Business Development,
John Peters, Vice President and General Manager, Network
Services, and others. The range of business relationships
discussed included a purely commercial relationship involving the
resale of each other’s services, as well as a potentially
larger strategic relationship. No specific terms of a transaction
were discussed. It was determined that additional discussions
should be considered after both parties briefed their respective
senior management teams.
On September 17, 1999, Steve Hooper, then Chief Executive
Officer of NEXTLINK, and Mr. Macleod met with Hank Nothhaft,
Chief Executive Officer, and John Peters, of Concentric, in San
Jose. The purpose of the meeting was to further discuss a range
of possible business relationships and to provide a high level
overview of NEXTLINK’s and Concentric’s respective
business operations. A possible strategic combination was
discussed and both parties agreed to consider whether a
combination of NEXTLINK and Concentric should be pursued.
Several discussions occurred between late September and early
November 1999 as NEXTLINK and Concentric evaluated whether to
pursue more serious discussions with each other.
On November 8, 1999, Daniel F. Akerson, the newly
appointed Chief Executive Officer of NEXTLINK, and
Mr. Hooper met with Messrs. Nothhaft and Peters of
Concentric, in San Jose. It was agreed that there was significant
business rationale in support of a combination of the two
companies and it was determined that both parties should proceed
to conduct due diligence reviews.
Following the November 8, 1999 meeting, Mr. Nothhaft
met with a representative of Bear, Stearns & Co. Inc.
regarding the potential strategic combination and retained Bear
Stearns to assist Concentric in its evaluation of a potential
transaction with NEXTLINK.
On November 12, 1999, Mr. Akerson contacted Merrill
Lynch & Co. concerning the proposed transaction and retained
Merrill Lynch to act as financial advisor to NEXTLINK on the
Concentric transaction. Merrill Lynch had been working informally
for several months assisting NEXTLINK in its review of potential
strategic partners in the ISP/data services business.
On November 14 and 15, 1999, a representative of Merrill
Lynch spoke with representatives of Bear Stearns concerning the
process and timetable for the transaction. The representative of
Bear Stearns stated that prior to NEXTLINK conducting a due
diligence review of Concentric, NEXTLINK would need to supply
Concentric a written indication of interest, including a
preliminary valuation range for Concentric.
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On November 16, 1999, Messrs. Akerson and Nothhaft
spoke by telephone, and Mr. Akerson provided a verbal
indication of interest and committed to provide a follow-up
indication of interest in written form. A preliminary valuation
range was also discussed.
On November 18, 1999, NEXTLINK and Concentric entered into a
non-disclosure agreement in anticipation of the ongoing due
diligence reviews and discussions regarding a strategic
transaction. Mr. Akerson sent Mr. Nothhaft the written
indication of interest, which included a preliminary valuation
range and addressed other management and operational issues.
Concentric’s representatives subsequently confirmed that
Concentric was willing to proceed with due diligence based on the
preliminary indication of interest.
Starting on November 29 and continuing through
December 2, 1999, representatives of NEXTLINK, including
Messrs. Hooper and Macleod, representatives of Merrill Lynch
and NEXTLINK’s legal advisors met with representatives of
Concentric and Bear Stearns at Concentric’s headquarters to
conduct due diligence.
On December 6, 1999, the NEXTLINK board of directors met
telephonically. At the meeting, Mr. Akerson advised the
board regarding the status of the discussions with Concentric and
the valuation ranges under consideration.
On December 13, 1999, a telephonic meeting of the board of
directors of Concentric was held, with directors Hank Nothhaft,
Vinod Khosla, Peter C. Waal and Randy Katz in attendance.
Mr. Nothhaft reviewed with the board the status of
discussions with NEXTLINK and other parties with respect to a
strategic combination transaction. Mr. Nothhaft then
reviewed with the board the terms of NEXTLINK’s indication
of interest, previously distributed to the board. Representatives
of Bear Stearns reviewed with the board the valuation metrics
being applied by Concentric, and the potential synergies of the
combined companies. The board and management, along with
Concentric’s financial and legal advisors, then discussed
the timing of negotiations and strategies in this regard.
On December 16, 1999, a telephonic meeting of the board of
directors of Concentric was held, with directors
Messrs. Nothhaft, Khosla, Waal, Katz and Franco Regis in
attendance. Mr. Nothhaft reviewed with the Board the status
of discussions with NEXTLINK since the last board meeting. The
board then directed management, in consultation with
Concentric’s financial and legal advisors, to present the
board with further valuation metrics and analysis at a subsequent
meeting of the board in order to formulate a further basis for
negotiations.
On December 23, 1999, a representative of Merrill Lynch
spoke with representatives of Bear Stearns and discussed
potential valuation ranges for Concentric based on the results of
NEXTLINK’s due diligence reviews. No agreement was reached
on valuation.
On December 23, 1999, Messrs. Akerson and Nothhaft
spoke and reached a preliminary agreement on the value per
Concentric share to be paid in NEXTLINK common stock in the
transaction. It was agreed that the value per share would be $45,
subject to the negotiation of an acceptable “collar”
and the finalization and approval of definitive agreements.
Messrs. Akerson and Nothhaft directed Merrill Lynch and Bear
Stearns and the parties’ respective legal advisors to work
on the other aspects of the transaction, such as the appropriate
terms of the collar.
On December 29, 1999, a telephonic meeting of the board of
directors of Concentric was held, with directors
Messrs. Nothhaft, Khosla, Waal and Katz in attendance.
Mr. Nothhaft reviewed with the board the status of
negotiations since the last meeting of the board. Representatives
of Bear Stearns reviewed with the board the status of
negotiations on pricing and related terms. The board made inquiry
of management, as well as Concentric’s financial and legal
advisors, with respect to the expected timing of further
negotiation on open issues.
On December 31, 1999, Messrs. Akerson and Nothhaft
discussed issues raised by NEXTLINK’s due diligence reviews,
including questions regarding Concentric’s performance in
the fourth quarter of 1999.
29
On January 5, 2000, representatives of Merrill Lynch spoke
with representatives of Bear Stearns and finalized the terms of
the collar.
On January 8 and 9, 2000, representatives of NEXTLINK and
Concentric exchanged drafts of the proposed merger agreement and
negotiated the terms of the agreement, including the collar.
On January 8, 2000, the Concentric board of directors held a
special meeting. Mr. Nothhaft updated the board on the
status of negotiations. Representatives of Bear Stearns then
presented their financial and valuation analyses of the proposed
merger and summarized the terms of the proposed merger agreement.
After the presentation, Bear Stearns indicated that, in its
opinion, the exchange ratio was fair, from a financial point of
view, to the stockholders of Concentric. The board of directors
unanimously concluded that the proposed merger was in the best
interests of Concentric and its stockholders and authorized
Concentric’s management to conclude negotiations and execute
the merger agreement. Members of the board and certain officers
of Concentric executed voting agreements at this time.
On January 9, 2000, the NEXTLINK board of directors met
telephonically to consider the transaction and the definitive
agreements relating thereto. Messrs. Akerson and Macleod
made a presentation that reviewed the terms and strategic
rationale for the proposed transaction. Following the
presentation by NEXTLINK’s management, representatives of
Merrill Lynch made presentations to the NEXTLINK board regarding
the transactions contemplated by the merger agreement, including
the financial terms thereof, and summarized their financial
analysis. Merrill Lynch delivered its opinion that the exchange
ratio was fair, from a financial point of view to NEXTLINK. The
NEXTLINK board of directors unanimously voted to authorize the
transaction.
During the course of the day on January 9, 2000, management
of both NEXTLINK and Concentric and their respective legal
advisors completed negotiations and finalized the terms of the
definitive merger agreement. Thereafter, on the evening of
January 9, 2000, the parties entered into the merger
agreement and Eagle River signed its voting agreement. The merger
agreement was announced in a joint press release on
January 10, 2000.
Concentric’s Reasons for the Merger and Additional
Considerations
The Concentric board of directors held several meetings to
evaluate the merits of the merger. At a special meeting held on
January 8, 2000, the Concentric directors concluded that the
merger is in the best interests of Concentric and its
stockholders, and voted unanimously to enter into the merger
agreement and to recommend that Concentric stockholders vote to
adopt the merger agreement and approve the merger.
The decision of the Concentric directors to authorize Concentric
to enter into the merger agreement, and to recommend that
Concentric stockholders adopt the merger agreement and approve
the merger, was the result of their careful consideration of a
range of strategic alternatives, including the pursuit of a
long-term independent business strategy for Concentric. The
directors’ primary consideration was to identify and secure
the strategic alternative that would provide the greatest value
to Concentric stockholders.
In reaching its decision, the Concentric board consulted with:
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Concentric management regarding the business and financial
condition of Concentric, trends and competitors in the IP-based
network services industry, Concentric management’s due
diligence investigation of NEXTLINK’s business and the terms
and other considerations in the proposed merger; |
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Bear Stearns, its financial advisor, regarding the financial
aspects of the proposed transaction and the fairness, from a
financial point of view, of the exchange ratio to holders of
Concentric common stock in the merger; and |
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Concentric’s legal counsel regarding the proposed terms of
the transaction and the obligations of the members of the
Concentric board in its consideration of the proposed
transaction. |
30
In reaching its decision, the Concentric board considered the
following information and factors:
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opportunities after combining Concentric’s business with
NEXTLINK’s business, compared with the opportunities for
Concentric as a stand alone company; |
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alignment of interests, goals and objectives resulting from a
broadened communications business, allowing the combined company
to leverage synergies resulting from an integrated management
team, streamlined operation, and strengthened infrastructure; |
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the ability to combine NEXTLINK’s growing local telephone
service business and its long distance and fixed wireless network
assets with Concentric’s web hosting and Internet data
services, enabling the combined company to provide cross selling
opportunities and other synergies; |
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potential synergies of the combined company, including the
offering of a complete, single-source communications service for
small and medium-sized businesses, consisting of
Concentric’s Internet business, data center and application
service provider services, transported across NEXTLINK’s
network; |
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access to NEXTLINK’s planned IP-centric national fiber optic
network and extensive fixed wireless spectrum; |
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the continual consolidation of the network services
communications industry which enables businesses with substantial
resources to effectively compete in the future in cost structure
and service offerings; |
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current financial market conditions and historical market prices; |
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the oral opinion, subsequently confirmed in writing, of Bear
Stearns delivered January 8, 2000, that, as of such date,
the exchange ratio is fair, from a financial point of view, to
holders of Concentric common stock (see “— Opinion
of Concentric’s Financial Advisor); |
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the opportunity for Concentric stockholders to participate in the
potential for growth of the combined company’s business
after the merger, in the form of the combined company’s
common stock; |
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detailed reports from Concentric’s management and financial
advisors as to the results of their due diligence regarding
NEXTLINK’s business operations, financial condition,
culture, long-term strategic goals, prospects, integration plans
and strategies; and |
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the fact that the parties intend to treat the merger as a
tax-free reorganization under the Internal Revenue Code and the
condition to Concentric’s obligations that it receive an
opinion of its counsel that the merger is a tax-free
reorganization for Concentric and its stockholders. |
The Concentric directors also considered potentially negative
factors relating to the merger, including:
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the risk that the potential benefits and synergies anticipated to
result from the merger set forth above might not be realized; |
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the fact that the combined company will not be a separate
independent company from NEXTLINK as Concentric currently is; |
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the possibility of a decline in the value of the combined
company’s common stock following the merger; |
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the substantial costs that will be incurred in connection with
the merger, including the amortization of large amounts of
goodwill, as well as the costs of integrating the businesses and
transaction expenses arising from the merger; |
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the risk that Concentric’s key personnel might not continue
with the combined company due to integration difficulties or
other factors; |
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the risk of future dilution to former Concentric stockholders
through the issuance of the combined company’s common stock
in future mergers and acquisitions, or to finance the operations
of the |
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combined company and the issuance of options to purchase the
combined company’s common stock to employees of the combined
company; |
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the risk that the merger could harm, or that the public
announcement of the merger could have harmed, Concentric’s
relationships with some of its customers and strategic partners; |
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the possibility that the merger might not be completed, even if
approved by Concentric stockholders, and the effect of public
announcement of the merger or any failure to complete the merger
on Concentric’s business and stock price, its ability to
attract and retain key management, sales and marketing and
technical personnel and the fees payable by Concentric if the
merger is terminated under some circumstances; and |
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other potential risks described in this document under “Risk
Factors.” |
In view of the number and wide variety of factors considered in
connection with its evaluation of the merger and the complexity
of these matters the Concentric board of directors did not find
it practicable to, nor did they attempt to, quantify, rank or
otherwise assign relative weights to the specific factors they
considered. In addition, the board did not undertake to make any
specific determination as to whether any particular factor was
favorable or unfavorable to its ultimate determination or assign
any particular weight to any factor, but rather conducted an
overall analysis of the factors described above, including
through discussions with and questioning of Concentric’s
management and management’s analysis of the proposed merger
based on information received from Concentric’s legal and
financial advisors. In considering the factors described above,
individual members of the Concentric board of directors may have
given different weight to different factors. The Concentric
directors considered all these factors as a whole, and overall
considered the factors to be favorable to and to support its
determination.
NEXTLINK’s Reasons for the Merger and Additional
Considerations
The NEXTLINK board of directors held several meetings to evaluate
the merits of the merger. At its meeting on January 9,
2000, the NEXTLINK board of directors concluded that the merger
and the merger agreement are in the best interest of NEXTLINK and
its stockholders, and voted unanimously to enter into the merger
agreement.
The NEXTLINK board of directors believes that the following are
reasons why the merger would be beneficial to NEXTLINK and its
stockholders:
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the Concentric network will accelerate NEXTLINK’s planned
expansion of its data product and services offerings; |
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the opportunity to increase revenue relating to the utilization
of NEXTLINK’s network assets; |
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the ability to offer integrated voice and data services to
NEXTLINK’s customers; |
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the opportunity to move local and data traffic onto
NEXTLINK’s broadband metropolitan and broadband wireless
networks; |
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access to an established base in the European data market; |
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the geographic “fit” of Concentric’s operations
with NEXTLINK’s local and planned INTERNEXT network; |
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marketing opportunities to sell NEXTLINK telecommunications
services to Concentric’s customers; |
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the belief that technical expertise of Concentric will accelerate
and expand NEXTLINK products and services; and |
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the ability to market “bundled” services to small and
mid-sized customers will offer competitive advantages. |
The NEXTLINK board of directors instructed NEXTLINK’s senior
management to conduct a detailed due diligence review of
Concentric, its business operations, strategies and goals and its
prospects for future
32
performance. In addition, the NEXTLINK board of directors sought
the advice and analysis of independent financial, legal and
accounting advisors regarding due diligence and the structure and
fairness of the merger. The NEXTLINK board of directors
considered, among other things:
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the extent to which the merger would further NEXTLINK’s long
term strategies and goals; |
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the detailed reports presented by NEXTLINK’s management and
advisers regarding Concentric’s business operations,
financial condition, culture, long-term strategic goals,
prospects, and NEXTLINK’s integration plans and strategies; |
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the belief that the terms of the merger agreement, including the
parties’ representations, warranties and covenants and the
conditions to each party’s obligations, are reasonable; |
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current financial market conditions and historical market prices; |
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volatility and trading information with respect to both
companies’ common stock; |
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the terms and conditions of the merger agreement; |
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the fact that the parties intend to treat the merger as a
tax-free reorganization under the Internal Revenue Code and the
condition to NEXTLINK’s obligations that it receive an
opinion of its counsel that the merger is a tax-free
reorganization for NEXTLINK and its stockholders; |
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the oral opinion, subsequently confirmed in writing, of Merrill
Lynch delivered January 9, 2000, that, as of such date, the
exchange ratio is fair, from a financial point of view, to
NEXTLINK (see “— Opinion of NEXTLINK’s
Financial Advisor”); and |
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the compatibility of the corporate cultures of each of NEXTLINK
and Concentric. |
The NEXTLINK board of directors also considered a variety of
potentially negative factors in its deliberations concerning the
merger, including:
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the potential dilutive effect of the issuance of NM Acquisition
Corp. common stock in the merger; |
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the substantial costs expected to be incurred, primarily in the
current and next quarter, in connection with the merger,
including the transaction expenses arising from the merger and
costs associated with combining the operations of the two
companies; |
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the risk that, despite the intentions and efforts of NEXTLINK and
Concentric, the benefits sought to be achieved in the merger
will not be achieved; |
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the risk that the combined company will be unable to integrate
the two businesses successfully; and |
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other potential risks described in this document under “Risk
Factors.” |
The foregoing discussion of the information and factors
considered by the NEXTLINK board of directors is not intended to
be exhaustive but is believed to include all material factors
considered by the NEXTLINK board of directors. In view of the
variety of factors considered in connection with its evaluation
of the merger, the NEXTLINK board of directors did not find it
possible to and did not quantify or otherwise assign relative
weights to the specific factors considered in reaching its
determination. In addition, individual members of the NEXTLINK
board of directors may have given different weights to different
factors. The NEXTLINK directors considered all these factors as a
whole, and overall considered the factors to be favorable to and
to support its determination.
Opinion of Concentric’s Financial Advisor
Overview
Concentric retained Bear Stearns to act as its financial advisor
in connection with the merger. Bear Stearns delivered its written
opinion, dated January 8, 2000, to the Concentric board of
directors to the effect that, and based upon and subject to the
assumptions made, the exchange ratio pursuant to the merger
agreement was fair, from a financial point of view, to holders of
shares of Concentric common stock.
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The full text of the Bear Stearns opinion is attached as
Appendix B to this proxy statement/ information statement/
prospectus. Holders of Concentric common stock are urged to read
the Bear Stearns opinion its entirety, especially with regard to
the assumptions made and matters considered by Bear Stearns, as
well as the limitations on the information considered and
analysis presented.
The Bear Stearns opinion was prepared for the benefit and use of
the Concentric board of directors and addresses only the
fairness, from a financial point of view, of the exchange ratio
pursuant to the merger to holders of shares of Concentric common
stock as of the date of the opinion. The opinion does not address
any other aspect of the merger, does not constitute a
recommendation to the Concentric board of directors in connection
with the merger and does not constitute a recommendation to any
holder of Concentric common stock as to how to vote at the
Concentric special meeting. Bear Stearns did not express any
opinion as to Concentric’s underlying business decision to
pursue the merger or the price or range of prices at which
Concentric common stock may trade subsequent to the announcement
of the merger or the price or range of prices at which the shares
of the common stock may trade subsequent to the consummation of
the merger.
The exchange ratio, the form of the consideration and the terms
of the merger were determined by arm’s length negotiations
between Concentric and NEXTLINK and were not based on any
recommendation by Bear Stearns. Concentric did not impose any
limitations on Bear Stearns with respect to the investigation
made or the procedures followed by Bear Stearns in rendering its
opinion.
In arriving at its opinion, Bear Stearns, among other things:
|
|
|
| |
• |
reviewed the merger agreement; |
| |
| |
• |
reviewed Concentric’s and NEXTLINK’s respective recent
filings with the Securities and Exchange Commission; |
| |
| |
• |
reviewed certain operating and financial information relating to
Concentric’s business and prospects on a stand alone basis,
including certain projections, all of which was prepared and
provided by Concentric’s management; |
| |
| |
• |
reviewed certain operating and financial information relating to
NEXTLINK’s business and prospects on a stand alone basis,
which was prepared and provided by NEXTLINK’s management,
and certain projections which were prepared and provided by
Concentric’s management based on verbal guidance provided by
NEXTLINK’s management to Concentric’s management; |
| |
| |
• |
reviewed certain estimates of revenue enhancements, cost savings
and other combination benefits expected to result from the
merger, prepared and provided by Concentric’s management; |
| |
| |
• |
met with certain members of Concentric’s and NEXTLINK’s
senior management to discuss each company’s respective
business, operations, historical and projected financial results
and future prospects; |
| |
| |
• |
reviewed the historical prices, trading multiples and trading
volumes of the shares of Concentric common stock and NEXTLINK
class A common stock; |
| |
| |
• |
reviewed publicly available financial data, stock market
performance data and trading multiples of companies which Bear
Stearns deemed generally comparable to Concentric and NEXTLINK; |
| |
| |
• |
reviewed the terms of recent precedent mergers and acquisitions
involving companies which Bear Stearns deemed generally
comparable to Concentric; |
| |
| |
• |
performed discounted cash flow analyses relating to Concentric
and NEXTLINK on a stand alone basis and the combined company on a
pro forma combined basis, both including and excluding the
estimated combination benefits; |
34
|
|
|
| |
• |
reviewed the financial condition and capitalization of the
combined company, giving effect to the merger; and |
| |
| |
• |
conducted such other studies, analyses, inquiries and
investigations as Bear Stearns deemed appropriate. |
Bear Stearns relied upon and assumed, without independent
verification, the accuracy and completeness of the financial and
other information provided by Concentric and NEXTLINK, including
without limitation, projections and estimated combination
benefits expected to result from the merger. With respect to such
projections and estimated combination benefits that could be
achieved upon consummation of the merger, Bear Stearns assumed
that they had been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the senior
management of Concentric and NEXTLINK as to the expected future
performance of Concentric, NEXTLINK and the combined company.
Bear Stearns did not independently verify or assess any of this
information or the projections and combination benefits provided,
and Bear Stearns also relied upon the assurances of the senior
management of Concentric and NEXTLINK that they were unaware of
any facts that would make the information provided to Bear
Stearns incomplete or misleading. In addition, Bear Stearns did
not make or receive any independent evaluation or appraisal of
the assets or liabilities of Concentric or NEXTLINK, nor was Bear
Stearns furnished with any such evaluation or appraisal.
The preparation of a fairness opinion is a complex process that
involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of
those methods to the particular circumstances. Therefore, a
fairness opinion is not necessarily susceptible to partial
analysis or summary description. Bear Stearns believes that its
analyses must be considered as a whole and that selecting
portions of its analyses and the factors considered, without
considering all of the analyses and factors, could create a
misleading or incomplete view of the processes underlying its
opinion. In arriving at its opinion, Bear Stearns did not assign
any particular weight to any analysis or factor considered by it,
but rather made qualitative judgments based upon its experience
in providing such opinions and on then-existing economic,
monetary, market and other conditions as to the significance of
each analysis and factor. In its analyses, Bear Stearns, at
Concentric’s direction and with Concentric’s consent,
made numerous assumptions with respect to industry performance,
general business conditions and other matters, many of which are
beyond the control of Concentric, NEXTLINK or Bear Stearns. Any
assumed estimates implicitly contained in Bear Stearns’
opinion or relied upon by Bear Stearns in rendering its opinion
do not necessarily reflect actual values or predict future
results or values. Any estimates relating to the value of a
business or securities do not purport to be appraisals or to
necessarily reflect the prices at which companies or securities
may actually be sold.
The Concentric board of directors retained Bear Stearns based
upon Bear Stearns’ qualifications, experience and expertise.
Bear Stearns is an internationally recognized investment banking
firm which, as part of its investment banking business,
regularly engages in the evaluation of businesses and their
securities in connection with mergers and acquisitions,
negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other
purposes. Bear Stearns has previously rendered investment banking
and financial advisory services to Concentric and has received
fees for rendering these services. In addition to acting as
Concentric’s advisor in connection with the merger, Bear
Stearns has previously been retained by Concentric as an advisor
in connection with its acquisition of Internet Technology Group,
plc in September 1999 and as an underwriter in connection
with its offering of $162 million of common stock in
February 1999 ($33.8 million of which was offered and
sold by certain selling stockholders), its offering of
$150 million of 13 1/2% series B senior redeemable
exchangeable preferred stock in June 1998 and its offering
of $150 million of 12 3/4% senior notes in
December 1997. In the ordinary course of its business, Bear
Stearns may actively trade the equity and/or debt securities of
Concentric and NEXTLINK for its own account or for accounts of
its customers and, accordingly, Bear Stearns may at any time hold
a long or short position in such securities.
Pursuant to the terms of the engagement letter between Concentric
and Bear Stearns dated December 29, 1999, Concentric agreed
to pay to Bear Stearns customary financial advisory fees. In
addition, Concentric has agreed to reimburse Bear Stearns for all
reasonable out-of-pocket expenses incurred by it in
35
connection with the merger, including the reasonable fees and
disbursements of its legal counsel. Concentric also has agreed to
indemnify Bear Stearns against specific liabilities in
connection with its engagement, including liabilities under the
federal securities laws.
Summary of Analyses
The following is a summary of the material financial analyses
presented by Bear Stearns to the Concentric board of directors on
January 8, 2000. Some of these summaries of financial
analyses include information presented in tabular format. In
order to fully understand the financial analyses used by Bear
Stearns, the tables must be read together with the text of each
summary. The tables alone do not represent a complete description
of the financial analyses.
Summary Valuation Analysis. Bear Stearns reviewed
the aggregate equity and enterprise values of Concentric based on
Concentric’s closing stock price on January 5, 2000
and based on the merger assuming a per share value of $45.00
(that is, within the collar — see “-- Collar
Analysis” below). In addition, Bear Stearns compared such
per share values to recent trading prices and calculated implied
multiples of enterprise value to estimated revenue for 2000 and
2001 (which revenue, estimates are based on an average of
Concentric management’s high case and low case projections
as more fully discussed in “— Discounted Cash Flow
Analysis” below). These analyses are summarized in the
table below:
Summary Valuation Analysis
| |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction |
|
|
|
|
At Market |
|
Within Collar |
|
|
|
|
as of 1/5/00 |
|
Value |
|
|
|
|
|
|
|
|
Valuation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concentric Stock Price |
|
|
|
$ |
28.25 |
|
|
$ |
45.00 |
|
| |
|
|
|
|
|
|
Gross Equity Value |
|
|
|
$ |
1,886.2 |
|
|
$ |
2,939.7 |
|
|
|
|
|
|
|
Net Equity Value |
|
|
|
|
1,690.9 |
|
|
|
2,727.7 |
|
|
|
|
|
|
|
Enterprise Value |
|
|
|
|
1,744.0 |
|
|
|
2,741.5 |
|
| |
|
|
|
|
|
|
Valuation Parameters |
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|
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|
|
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|
|
|
|
|
|
Premium (Discount) to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing Price on 1/5/00 |
|
$29.69 |
|
|
0.0 |
% |
|
|
51.6 |
% |
|
|
|
|
|
|
20-Day Average Closing Price |
|
28.43 |
|
|
4.4 |
|
|
|
58.3 |
|
|
|
|
|
|
|
Past Year High Closing Price |
|
52.25 |
|
|
(43.2 |
) |
|
|
(13.9 |
) |
|
|
|
|
|
|
Past Year Low Closing Price |
|
16.38 |
|
|
81.3 |
|
|
|
174.8 |
|
| |
|
|
|
|
|
|
Enterprise Value/ Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2000E |
|
|
|
|
5.3 |
x |
|
|
8.4 |
x |
|
|
|
|
|
|
2001E |
|
|
|
|
3.2 |
x |
|
|
5.0 |
x |
Collar Analysis. Bear Stearns reviewed the impact
of a range of assumed NEXTLINK average closing prices on:
|
|
|
| |
• |
the exchange ratio (which, as contemplated by the merger
agreement, may float between a minimum of 0.4950 and a maximum of
0.6500); |
| |
| |
• |
the resulting per share values to be received by Concentric
stockholders in the merger; |
| |
| |
• |
the percentage premium to be received compared to Concentric
closing stock price of $29.69 per share on January 5, 2000;
and |
| |
| |
• |
the implied transaction multiple based on enterprise value to
estimated revenue for 2000 and 2001. |
36
The following table summarizes this analysis:
Collar Analysis
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Assumed |
|
|
|
|
|
|
|
Concentric Implied |
| NEXTLINK |
|
|
|
|
|
Premium/ |
|
Transaction Multiple |
| Average Trading |
|
|
|
Illustrative Value |
|
(Discount) to |
|
Based on Enterprise |
| Price During |
|
|
|
of Merger |
|
Concentric |
|
Value/ Revenue |
| Measurement |
|
Exchange |
|
Consideration per |
|
Closing Price of |
|
|
| Period(1) |
|
Ratio |
|
Concentric Share |
|
$29.69 on 1/5/00 |
|
2000E |
|
2001E |
|
|
|
|
|
|
|
|
|
|
|
| $ |
50.00 |
|
|
|
0.6500 |
x |
|
$ |
32.50 |
|
|
|
9.5 |
% |
|
|
5.9 |
x |
|
|
3.5 |
x |
|
60.00 |
|
|
|
0.6500 |
|
|
|
39.00 |
|
|
|
31.4 |
|
|
|
7.2 |
|
|
|
4.2 |
|
|
|
|
|
|
|
69.23 |
|
|
|
0.6500 |
|
|
|
45.00 |
|
|
|
51.6 |
|
|
|
8.4 |
|
|
|
5.0 |
|
|
80.00 |
|
|
|
0.5625 |
|
|
|
45.00 |
|
|
|
51.6 |
|
|
|
8.4 |
|
|
|
5.0 |
|
|
|
|
|
|
|
90.91 |
|
|
|
0.4950 |
|
|
|
45.00 |
|
|
|
51.6 |
|
|
|
8.4 |
|
|
|
5.0 |
|
|
100.00 |
|
|
|
0.4950 |
|
|
|
49.50 |
|
|
|
66.7 |
|
|
|
9.3 |
|
|
|
5.5 |
|
|
110.00 |
|
|
|
0.4950 |
|
|
|
54.45 |
|
|
|
83.4 |
|
|
|
10.3 |
|
|
|
6.1 |
|
|
|
| (1) |
Based on NEXTLINK’s volume weighted average closing stock
price for the 20 trading days ending on the third day prior to
the closing of the merger. |
Exchange Ratio Analysis. Bear Stearns compared the
proposed exchange ratio of 0.4950 — 0.6500 shares
of NEXTLINK common stock per share of Concentric common stock
pursuant to the merger agreement to the ratio of the closing
market prices of Concentric common stock and NEXTLINK common
stock on January 5, 2000. Bear Stearns also compared this
ratio to selected average historical ratios of the closing market
prices of Concentric common stock and NEXTLINK common stock over
various periods ending January 5, 2000. The table below
summarizes the results of this analysis:
Exchange Ratio Analysis
| |
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|
|
|
|
|
Market Price |
|
|
Ratio |
|
|
|
|
January 5, 2000 |
|
|
0.3717 |
x |
|
|
|
|
|
|
Average Ratio: |
|
|
|
|
|
|
|
|
|
|
20 Prior Trading Days |
|
|
0.3759 |
|
|
|
|
|
|
|
Past Six Months |
|
|
0.4751 |
|
|
|
|
|
|
|
Past Year |
|
|
0.7608 |
|
Analysis of Selected Precedent M&A Transactions.
Bear Stearns reviewed selected precedent mergers and
acquisitions involving companies that, like Concentric, provide
Internet- and data-related services. Bear Stearns noted that most
precedent transactions involving such companies are not directly
relevant for the purpose of comparison to the merger, as such
precedent transactions were, among other things:
|
|
|
| |
• |
mostly acquisitions of consumer-oriented internet service
providers (ISPs); |
| |
| |
• |
acquisitions of non-U.S. or smaller, privately-held companies; |
| |
| |
• |
acquisitions of companies that provide Web hosting services; or |
| |
| |
• |
representative of mergers-of-equals transactions as opposed to
outright acquisitions. |
37
However, Bear Stearns did make a direct comparison of the merger
to the pending acquisition of Splitrock Services, Inc. by
McLeodUSA Incorporated, which transaction was announced on
January 7, 2000. The table below summarizes certain relevant
statistics from this analysis:
Precedent M&A Transaction Analysis
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|
|
|
|
Implied |
|
|
McLeod USA/Splitrock |
|
NEXTLINK/Concentric |
|
|
Transaction |
|
Merger |
|
|
|
|
|
|
Price Premium to One Week Prior Trading Price |
|
|
53.0% |
|
|
|
51.9 |
% |
|
|
|
|
|
|
Multiples of Enterprise Value to Revenue Based On: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Latest Quarter Annualized |
|
|
20.4 |
x |
|
|
18.0 |
x |
|
|
|
|
|
|
2000E |
|
|
10.3 |
|
|
|
8.4 |
(1) |
|
|
|
|
|
|
2001E |
|
|
6.1 |
|
|
|
5.0 |
(1) |
|
|
|
| |
(1) |
Based on an average of the high and low Concentric projection
scenarios. |
Bear Stearns noted that the McLeod USA/ Splitrock transaction is
not identical to the merger. Bear Stearns further noted that the
analysis of precedent transactions necessarily involves complex
considerations and judgments concerning differences in financial
and operating characteristics and other factors that would
necessarily affect the acquisition value of Concentric versus the
acquisition value of any other comparable company in general and
Splitrock in particular.
Discounted Cash Flow Analysis. Bear Stearns
performed discounted cash flow analyses to determine a range of
estimated per share equity values for each of Concentric and
NEXTLINK on a stand alone basis. In addition, Bear Stearns
performed discounted cash flow analyses to determine a range of
estimated per share equity values for NEXTLINK on a pro forma
basis giving effect to the merger. Bear Stearns then calculated
the implied per share equity values to be received by
Concentric’s shareholders pursuant to the merger by applying
the appropriate exchange ratio to the corresponding NEXTLINK pro
forma per share equity value.
Concentric Stand Alone Discounted Cash Flow Analyses. Bear
Stearns performed discounted cash flow analyses on the after-tax
cash flows of Concentric on a stand alone basis. After-tax cash
flows for the ten-year period beginning January 1, 2000 and
ending on December 31, 2009 were calculated as after-tax
earnings before depreciation and amortization less changes in
working capital and capital expenditures. Bear Stearns calculated
a terminal value for Concentric on a stand alone basis by
applying to projected earnings before interest, taxes,
depreciation and amortization (“EBITDA”) in 2009 a
range of multiples of 9.0x to 11.0x. Bear Stearns determined that
such range of terminal multiples was appropriate for valuing
Concentric based on:
|
|
|
| |
• |
the implied perpetual growth rates of free cash flow derived from
such multiples; |
| |
| |
• |
Bear Stearns’ review of Internet and data-related companies
generally comparable to Concentric; and |
| |
| |
• |
Bear Stearns’ overall experience in valuing growth-oriented
companies. |
Bear Stearns chose weighted average costs of capital
(“WACC”) ranging from 15.0% to 17.0% based on several
assumptions regarding factors such as the inherent business risk
of Concentric and the resulting equity beta, Concentric’s
cost of debt and Concentric’s prospective capital structure.
Concentric’s management provided Bear Stearns with two
separate projection scenarios: a low case and a high case. The
principal difference between the low case and the high case
reflects different revenue growth rate assumptions and gross
margin assumptions for certain business units. Concentric’s
management indicated to Bear Stearns that they believed that the
low case projections were more likely to be reflective of
Concentric’s future operating results.
38
Bear Stearns discounted cash flow analyses of Concentric on a
stand alone basis generated the following range of per share
equity values:
Concentric Stand Alone Discounted Cash Flow Analysis
| |
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Low Case |
|
High Case |
|
|
|
|
|
|
|
|
|
|
| WACC |
|
EBITDA Exit Multiple in 2009 |
|
WACC |
|
EBITDA Exit Multiple in 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.0x |
|
|
|
10.0x |
|
|
|
11.0x |
|
|
|
|
|
9.0x |
|
|
|
10.0x |
|
|
|
11.0x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15.0% |
|
$ |
36.81 |
|
|
$ |
39.77 |
|
|
$ |
42.86 |
|
|
15.0% |
|
$ |
52.07 |
|
|
$ |
56.31 |
|
|
$ |
60.55 |
|
|
|
|
|
|
|
16.0% |
|
|
33.96 |
|
|
|
36.85 |
|
|
|
39.74 |
|
|
16.0% |
|
|
48.13 |
|
|
|
52.02 |
|
|
|
55.91 |
|
|
|
|
|
|
|
17.0% |
|
|
31.35 |
|
|
|
34.02 |
|
|
|
36.67 |
|
|
17.0% |
|
|
44.53 |
|
|
|
48.10 |
|
|
|
51.67 |
|
NEXTLINK Stand Alone Discounted Cash Flow Analyses. Bear
Stearns performed a discounted cash flow analysis of the
after-tax cash flows of NEXTLINK on a stand alone basis for the
ten year period beginning January 1, 2000 and ending on
December 31, 2009. Bear Stearns calculated a terminal value
for NEXTLINK on a stand alone basis by applying to projected
EBITDA in 2009 a range of multiples of 9.0x to 11.0x. Bear
Stearns determined that such range of terminal multiples was
appropriate for valuing NEXTLINK based on:
|
|
|
| |
• |
the implied perpetual growth rates of free cash flow derived from
such multiples; |
| |
| |
• |
Bear Stearns’ review of competitive local exchange carrier
companies generally comparable to NEXTLINK; and |
| |
| |
• |
Bear Stearns’ overall experience in valuing growth-oriented
companies. |
Bear Stearns chose weighted average costs of capital ranging from
13.0% to 15.0% based on several assumptions regarding factors
such as the inherent business risk of NEXTLINK and the resulting
equity beta, NEXTLINK’s cost of debt and NEXTLINK’s
prospective capital structure. Equity beta is a statistical
measure of a security’s risk and volatility calculated based
upon an analysis of its trading history.
The NEXTLINK stand alone discounted cash flow analyses were based
on projections prepared and provided to Bear Stearns by
Concentric’s management, based on verbal guidance provided
by NEXTLINK’s management to Concentric’s management.
The discounted cash flow analyses of NEXTLINK on a stand alone
basis generated the following range of per share equity values:
NEXTLINK Stand Alone Discounted Cash Flow Analysis
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| WACC |
|
EBITDA Exit Multiple in 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
9.0x |
|
|
|
10.0x |
|
|
|
11.0x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.0% |
|
$ |
67.37 |
|
|
$ |
75.34 |
|
|
$ |
83.32 |
|
|
|
|
|
|
|
14.0% |
|
|
60.17 |
|
|
|
67.69 |
|
|
|
74.99 |
|
|
|
|
|
|
|
15.0% |
|
|
53.35 |
|
|
|
60.55 |
|
|
|
67.43 |
|
Bear Stearns compared the following historical trading prices for
NEXTLINK common stock to the NEXTLINK per share discounted cash
flow equity values as outlined in the table above.
NEXTLINK Stock Price Data
| |
|
|
|
|
|
|
|
|
|
|
Closing Stock Price on 1/5/00 |
|
$ |
79.88 |
|
|
|
|
|
|
|
10-Day Average Closing Stock Price |
|
|
81.28 |
|
|
|
|
|
|
|
20-Day Average Closing Stock Price |
|
|
76.09 |
|
|
|
|
|
|
|
Past Year High Closing Price |
|
|
91.38 |
|
|
|
|
|
|
|
Past Year Low Closing Price |
|
|
13.00 |
|
39
NEXTLINK Pro Forma Discounted Cash Flow Analyses. Bear
Stearns performed discounted cash flow analyses of the after-tax
cash flows of NEXTLINK and Concentric on a pro forma combined
basis giving effect to the merger. Bear Stearns based its
analyses on the NEXTLINK projections prepared by
Concentric’s management and on low case and high case
projections for Concentric, including in both cases certain
estimated combination benefits prepared and provided to Bear
Stearns by Concentric management.
The resulting ranges of per share equity values of NEXTLINK on a
pro forma basis, based on both the Concentric low case and
Concentric high case projections and including estimated
combination benefits, are outlined in the table below:
NEXTLINK Pro Forma Discounted Cash Flow Analysis
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Based on Concentric Low Case |
|
Based on Concentric High Case |
|
|
|
|
|
|
|
|
|
|
| WACC(1) |
|
EBITDA Exit Multiple in 2009 |
|
WACC(1) |
|
EBITDA Exit Multiple in 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.0x |
|
|
|
10.0x |
|
|
|
11.0x |
|
|
|
|
|
9.0x |
|
|
|
10.0x |
|
|
|
11.0x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13%/15.0% |
|
$ |
80.17 |
|
|
$ |
90.27 |
|
|
$ |
98.98 |
|
|
13%/15.0% |
|
$ |
90.03 |
|
|
$ |
99.38 |
|
|
$ |
108.61 |
|
|
|
|
|
|
|
14%/16.0% |
|
|
71.08 |
|
|
|
80.33 |
|
|
|
89.57 |
|
|
14%/16.0% |
|
|
80.20 |
|
|
|
90.10 |
|
|
|
98.67 |
|
|
|
|
|
|
|
15%/17.0% |
|
|
64.00 |
|
|
|
71.29 |
|
|
|
79.77 |
|
|
15%/17.0% |
|
|
71.26 |
|
|
|
80.33 |
|
|
|
89.40 |
|
|
|
|
| |
(1) |
Represents the estimated weighted average cost of capital for
NEXTLINK and Concentric, respectively. |
|
|
| |
Bear Stearns then calculated implied pro forma per share equity
values to be received by Concentric’s shareholders, as well
as the premium of such implied pro forma per share equity values
to Concentric’s stand alone discounted cash flow per share
equity values, by applying the appropriate exchange ratio
pursuant to the merger agreement to each per share equity value
of NEXTLINK on a pro forma basis calculated under the various
scenarios as described above: |
Implied Concentric Pro Forma Discounted Cash Flow Per Share
Equity Value
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Based on Concentric Low Case and |
|
Based on Concentric High Case and |
| NEXTLINK Base Case |
|
NEXTLINK Base Case |
|
|
|
|
|
|
|
|
|
|
| WACC(1) |
|
EBITDA Exit Multiple in 2009 |
|
WACC(1) |
|
EBITDA Exit Multiple in 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.0x |
|
|
|
10.0x |
|
|
|
11.0x |
|
|
|
|
|
9.0x |
|
|
|
10.0x |
|
|
|
11.0x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13%/15.0% |
|
$ |
45.00 |
|
|
$ |
45.00 |
|
|
$ |
48.99 |
|
|
13%/15.0% |
|
$ |
45.00 |
|
|
$ |
49.19 |
|
|
$ |
53.76 |
|
|
|
|
|
|
|
14%/16.0% |
|
|
45.00 |
|
|
|
45.00 |
|
|
|
45.00 |
|
|
14%/16.0% |
|
|
45.00 |
|
|
|
45.00 |
|
|
|
48.84 |
|
|
|
|
|
|
|
15%/17.0% |
|
|
41.60 |
|
|
|
45.00 |
|
|
|
45.00 |
|
|
15%/17.0% |
|
|
45.00 |
|
|
|
45.00 |
|
|
|
45.00 |
|
|
|
|
| |
(1) |
Represents the estimated weighted average cost of capital for
NEXTLINK and Concentric, respectively. |
Premium/(Discount) Relative to Concentric’s Stand Alone
Per Share Discounted Cash Flow Value
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Based on Concentric Low Case and |
|
Based on Concentric High Case and |
| NEXTLINK Base Case |
|
NEXTLINK Base Case |
|
|
|
|
|
|
|
|
|
|
| WACC(1) |
|
EBITDA Exit Multiple in 2009 |
|
WACC(1) |
|
EBITDA Exit Multiple in 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.0x |
|
|
|
10.0x |
|
|
|
11.0x |
|
|
|
|
|
9.0x |
|
|
|
10.0x |
|
|
|
11.0x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13%/15.0% |
|
|
22.3% |
|
|
|
13.1% |
|
|
|
14.3% |
|
|
13%/15.0% |
|
|
(13.6%) |
|
|
|
(12.6%) |
|
|
|
(11.2%) |
|
|
|
|
|
|
|
14%/16.0% |
|
|
32.5 |
|
|
|
22.1 |
|
|
|
13.2 |
|
|
14%/16.0% |
|
|
(6.5) |
|
|
|
(13.5) |
|
|
|
(12.6) |
|
|
|
|
|
|
|
15%/17.0% |
|
|
32.7 |
|
|
|
32.3 |
|
|
|
22.7 |
|
|
15%/17.0% |
|
|
1.1 |
|
|
|
(6.4) |
|
|
|
(12.9) |
|
|
|
|
| |
(1) |
Represents the estimated WACC for NEXTLINK and Concentric,
respectively |
40
Illustrative Value Creation Analysis. Bear Stearns
calculated implied per share equity values to be received by
Concentric’s shareholders on a pro forma basis, based on:
|
|
|
| |
• |
a range of trading multiples of estimated 2001 revenue with a
midpoint equal to the implied blended trading multiple of
NEXTLINK and Concentric and |
| |
| |
• |
a range of estimated combination benefits. |
Bear Stearns then compared such values to Concentric’s
closing stock price of $29.26 on January 5, 2000. Bear
Stearns calculated the pro forma equity market value of NEXTLINK
by subtracting total debt and preferred stock of both NEXTLINK
and Concentric from the implied pro forma enterprise value and
adding cash and cash equivalents and the value of unconsolidated
investments. Bear Stearns then calculated the pro forma per share
equity value of NEXTLINK by dividing the aggregate pro forma
equity value by the number of fully diluted common shares of
NEXTLINK that would be outstanding based on the exchange ratio
pursuant to the merger. The implied per share equity value to be
received by Concentric’s shareholders was then calculated by
multiplying the pro forma per share equity value of NEXTLINK by
the appropriate exchange ratio pursuant to the merger (giving
effect to the collar mechanism).
The assumed multiples of estimated 2001 revenue ranged from 6.7x
to 12.3x, which range was based on:
|
|
|
| |
• |
NEXTLINK’s current trading multiple of estimated 2001
revenue (that is, 12.3x), |
| |
| |
• |
an implied blended multiple of combined enterprise value to
combined estimated 2001 revenue (assuming an average of the low
and high Concentric projection scenarios) (that is, 9.5x) and |
| |
| |
• |
an assumed low multiple of estimated 2001 revenue (that is,
6.7x). Bear Stearns analyzed the implied per share equity values
to be received by Concentric’s shareholders against an
assumed range of annual combination benefits of $0 to $200
million, which combination benefits were capitalized at a
multiple of 20.0x. Bear Stearns noted that projected combination
benefits pursuant to the transaction were estimated at
approximately $16 million, $53 million, $132 million,
$190 million, and $312 million in 2000, 2001, 2002,
2003, and 2004, respectively. The range of Concentric implied pro
forma per share equity values based on these multiples and
potential annual combination benefits are set forth in the
following table: |
Pro Forma Value Per Concentric Share Assuming Collar Mechanism
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Assumed Annual |
|
|
| Combination |
|
2001 Revenue Multiple |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits |
|
|
6.7x |
|
|
|
9.5x |
|
|
|
12.3x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0 |
|
$ |
33.12 |
|
|
$ |
45.00 |
|
|
$ |
49.46 |
|
|
|
|
|
|
|
100 |
|
|
39.13 |
|
|
|
45.00 |
|
|
|
53.94 |
|
|
|
|
|
|
|
200 |
|
|
44.84 |
|
|
|
47.07 |
|
|
|
58.43 |
|
The following table sets forth the percentage premium of the
implied values in the table above to the closing price of $29.26
of Concentric common stock on January 5, 2000:
Premium to Concentric Closing Stock Price of $29.26 as of
January 5, 2000
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Assumed Annual |
|
|
| Combination |
|
2001 Revenue Multiple |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits |
|
|
6.7 |
x |
|
|
9.5 |
x |
|
|
12.3 |
x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0 |
|
|
11.6 |
% |
|
|
51.6 |
% |
|
|
66.6 |
% |
|
|
|
|
|
|
100 |
|
|
31.8 |
|
|
|
51.6 |
|
|
|
81.7 |
|
|
|
|
|
|
|
200 |
|
|
51.0 |
|
|
|
58.6 |
|
|
|
96.8 |
|
41
Bear Stearns compared the range of multiples of estimated 2001
revenues for NEXTLINK on a pro forma basis (that is,
6.7x – 12.3x) to trading multiples of selected
competitive local exchange carrier companies and Internet-and
data-related companies which, in Bear Stearns’ judgment,
were generally comparable to the operations of NEXTLINK and
Concentric. Such multiples were based on publicly available
information, including estimates in published third party
research reports. Such comparable companies and their respective
multiples are set forth in the table below:
Comparable Trading Multiples
| |
|
|
|
|
|
|
|
Revenue Multiple — 2001E |
|
|
|
|
Competitive Local Exchange Carriers: |
|
|
|
|
|
|
|
|
|
|
Adelphia Business Solutions |
|
|
4.3 |
x |
|
|
|
|
|
|
Allegiance Telecom Inc. |
|
|
11.0 |
|
|
|
|
|
|
|
Electric Lightwave Inc. |
|
|
3.6 |
|
|
|
|
|
|
|
e.spire Communications Inc. |
|
|
2.7 |
|
|
|
|
|
|
|
GST Telecommunications Inc. |
|
|
3.2 |
|
|
|
|
|
|
|
ICG Communications Inc. |
|
|
2.6 |
|
|
|
|
|
|
|
Intermedia Communications |
|
|
3.6 |
|
|
|
|
|
|
|
McLeod USA Inc. |
|
|
7.0 |
|
|
|
|
|
|
|
Time Warner Telecom |
|
|
8.6 |
|
|
|
|
|
|
|
Internet/ Data Companies: |
|
|
|
|
|
|
|
|
|
|
Verio, Inc. |
|
|
9.6 |
x |
|
|
|
|
|
|
PSINet, Inc. |
|
|
5.4 |
|
|
|
|
|
|
|
Globix Corporation |
|
|
12.4 |
|
Bear Stearns noted that none of the comparable companies is
identical to Concentric or NEXTLINK and that, accordingly, any
analysis of comparable companies necessarily involves complex
consideration and judgments concerning differences in financial
and operating characteristics and other factors that would
necessarily affect the relative trading values of Concentric and
NEXTLINK versus the companies to which Concentric and NEXTLINK
were being compared.
Opinion of NEXTLINK’s Financial Advisor
Merrill Lynch acted as financial advisor to NEXTLINK in
connection with the merger. In its role as financial advisor to
NEXTLINK, Merrill Lynch was asked by NEXTLINK to render an
opinion to the NEXTLINK board as to the fairness of the exchange
ratio, from a financial point of view, to NEXTLINK. On January 9,
2000, at a meeting of the NEXTLINK board held to evaluate the
merger, Merrill Lynch delivered its oral opinion, subsequently
confirmed in writing, to the NEXTLINK board of directors to the
effect that, as of that date, and based upon the assumptions made
and matters considered as set forth in its opinion, the exchange
ratio was fair from a financial point of view to NEXTLINK.
A copy of the Merrill Lynch written opinion dated January 9,
2000 with respect to the exchange ratio, which sets forth the
assumptions made, matters considered and certain limitations on
the scope of review undertaken by Merrill Lynch is attached as
Appendix C to this proxy statement/information
statement/prospectus. We urge each holder of NEXTLINK common
stock to read the Merrill Lynch opinion in its entirety. The
opinion was intended for the use and benefit of the NEXTLINK
board of directors, was directed only to the fairness from a
financial point of view to NEXTLINK of the exchange ratio, did
not address the merits of the underlying decision by NEXTLINK to
engage in the merger and does not constitute a recommendation to
any stockholder as to how that stockholder should vote on the
proposed issuance of NEXTLINK common stock or any related matter.
The exchange ratio was determined on the basis of negotiations
between NEXTLINK and Concentric and was approved by the NEXTLINK
board of directors. The summary of the Merrill Lynch opinion set
forth in this document is qualified in its entirety by reference
to the full text of the opinion attached as Appendix C.
42
In arriving at its opinion, Merrill Lynch, among other things:
|
|
|
| |
• |
reviewed publicly available business and financial information
relating to Concentric and NEXTLINK that Merrill Lynch deemed to
be relevant; |
| |
| |
• |
reviewed information, including financial forecasts, relating to
the business, earnings, cash flow, assets, liabilities and
prospects of Concentric and NEXTLINK furnished to Merrill Lynch
by Concentric and NEXTLINK, respectively, as well as the amount
and timing of the cost savings and related expenses and synergies
expected to result from the merger or the alternative merger
(the “Expected Synergies”) furnished to Merrill Lynch
by NEXTLINK; |
| |
| |
• |
conducted discussions with members of senior management and
representatives of Concentric and NEXTLINK concerning the matters
described above, as well as their respective businesses and
prospects before and after giving effect to the merger or the
alternative merger, and the Expected Synergies; |
| |
| |
• |
reviewed the market prices and valuation multiples for Concentric
common stock and NEXTLINK common stock and compared them with
those of certain publicly traded companies that Merrill Lynch
deemed to be relevant; |
| |
| |
• |
reviewed the results of operations of Concentric and NEXTLINK and
compared them with those of certain publicly traded companies
that Merrill Lynch deemed to be relevant; |
| |
| |
• |
compared the proposed financial terms of the merger and the
alternative merger with the financial terms of certain other
transactions that Merrill Lynch deemed to be relevant; |
| |
| |
• |
participated in discussions and negotiations among
representatives of Concentric and NEXTLINK and their financial
and legal advisors; |
| |
| |
• |
reviewed the potential pro forma impact of the merger and the
alternative merger; |
| |
| |
• |
reviewed the merger agreement; and |
| |
| |
• |
reviewed other financial studies and analyses and took into
account other matters that Merrill Lynch deemed necessary,
including Merrill Lynch’s assessment of general economic,
market and monetary conditions. |
In preparing its opinion, Merrill Lynch assumed and relied on the
accuracy and completeness of all information supplied or
otherwise made available to Merrill Lynch, discussed with or
reviewed by or for Merrill Lynch, or publicly available. Merrill
Lynch did not assume any responsibility for independently
verifying this information or for undertaking an independent
evaluation or appraisal of any of the assets or liabilities of
Concentric or NEXTLINK and was not furnished with any valuation
or appraisal of this type. In addition, Merrill Lynch did not
assume any obligation to conduct any physical inspection of the
properties or facilities of Concentric or NEXTLINK. With respect
to the financial forecast information and the expected synergies
furnished to or discussed with Merrill Lynch by Concentric or
NEXTLINK, Merrill Lynch assumed that they were reasonably
prepared and reflected the best currently available estimates and
judgment of Concentric’s or NEXTLINK’s management as
to the expected future financial performance of Concentric or
NEXTLINK, as the case may be. Merrill Lynch further assumed that
the merger and alternative merger would each qualify as a
tax-free reorganization for U.S. federal income tax purposes.
The Merrill Lynch opinion was necessarily based upon market,
economic and other conditions as they existed and could be
evaluated on, and on the information made available to Merrill
Lynch as of the date of the Merrill Lynch opinion. Merrill Lynch
assumed that in the course of obtaining the necessary regulatory
or other consents or approvals, whether contractual or otherwise,
for the merger or the alternative merger, no restrictions,
including any divestiture requirements or amendments or
modifications, would be imposed that would have a material
adverse effect on the contemplated benefits of the merger or the
alternative merger.
Pursuant to the terms of a letter agreement between NEXTLINK and
Merrill Lynch dated January 1, 2000, NEXTLINK has agreed to
pay Merrill Lynch financial advisory fees. NEXTLINK has also
agreed to
43
reimburse Merrill Lynch for its reasonable out-of-pocket
expenses, including the reasonable fees and disbursements of
legal counsel, and to indemnify Merrill Lynch and certain related
parties from and against certain liabilities, including
liabilities under the federal securities laws, arising out of its
engagement.
Merrill Lynch has, in the past, provided financial advisory and
financing services to NEXTLINK and/or its affiliates, including
Eagle River, and may continue to do so and has received, and may
receive, fees for rendering of such services. In addition, in the
ordinary course of Merrill Lynch’s business, Merrill Lynch
may actively trade Concentric common stock and other securities
of Concentric, as well as NEXTLINK common stock and other
securities of NEXTLINK, for its own account and for the accounts
of its customers and, accordingly, may at any time hold a long or
short position in these securities.
Financial Analysis
The following is a summary of the material portions of the
financial and comparative analyses performed by Merrill Lynch in
connection with the opinion delivered to NEXTLINK’s board of
directors on January 9, 2000 with respect to the exchange
ratio.
Concentric Valuation
Historical Stock Price Performance Analysis. Merrill Lynch
reviewed the relationship between movements of the price of
Concentric’s common stock and an index comprised of the
following Internet service providers for the one-year period
ending January 6, 2000:
|
|
|
| |
• |
Earthlink Network, Inc.; |
| |
| |
• |
Mindspring Enterprises, Inc.; |
| |
| |
• |
PSINet Inc.; and |
| |
| |
• |
Verio Inc. |
Merrill Lynch also reviewed the relationship between movements of
the price of Concentric’s common stock and the NASDAQ
Composite Index for the one-year period ending January 6,
2000. Merrill Lynch noted that over this one-year period
Concentric’s common stock outperformed this Internet service
providers index, comprised of the companies listed above, and
the NASDAQ Composite Index.
The following table indicates the appreciation in the stock price
performance from January 6, 1999 to January 6, 2000:
| |
|
|
|
|
|
|
Stock Price |
|
|
Appreciation |
|
|
|
|
Concentric |
|
|
71.2 |
% |
|
|
|
|
|
|
Internet service providers |
|
|
52.2 |
% |
|
|
|
|
|
|
NASDAQ Composite Index |
|
|
60.6 |
% |
Merrill Lynch reviewed the range of the daily closing prices of
Concentric’s common stock for the 52 week period ending
January 6, 2000. Merrill Lynch noted that Concentric’s
common stock had traded in a range from $16.50 to $52.25 during
this period.
Comparable Publicly Traded Companies Analysis. Merrill
Lynch reviewed publicly available information to compare
financial and operating information and multiples of firm value,
calculated as equity value on a fully diluted basis plus total
debt less cash and marketable securities, to 2000 estimated
revenues as reported in publicly available financial
analysts’ reports for a group of publicly traded companies
that Merrill Lynch deemed to be comparable to Concentric. Because
certain of the companies reviewed had different product mixes or
were at different stages of development than Concentric, their
trading multiples were less
44
relevant. Merrill Lynch determined the relevant range of the
comparable public company multiples was 5.5x to 8.5x with
Concentric at 5.6x. The companies reviewed in this analysis
included the following:
|
|
|
| |
• |
PSINet Inc. |
| |
| |
• |
Verio Inc. |
| |
| |
• |
Exodus Communications, Inc. |
| |
| |
• |
Digex, Inc. |
Comparable Transaction Analysis. Merrill Lynch reviewed
publicly available information to compare the merger with
business combinations in the communications industry that Merrill
Lynch deemed relevant. Merrill Lynch compared the transaction
value of each of these transactions, which was calculated as the
equity offer value on a fully diluted basis plus total debt less
cash and marketable securities, to the revenues of the acquired
company in the calendar year of the transaction and the calendar
year following the transaction. Merrill Lynch determined the
relevant range of these comparable transaction multiples to be
5.6x to 10.9x compared to the NEXTLINK transaction with
Concentric of 9.1x for the calendar year of the transactions,
with transaction multiples of 1.3x to 6.6x compared to 5.2x for
the NEXTLINK transaction with Concentric for the calendar year
following the transactions. The transactions reviewed in this
analysis included the following:
|
|
|
| |
• |
Global Telesystems Group, Inc./ Ebone A/S; |
| |
| |
• |
Mindspring Enterprises, Inc./ Earthlink Network, Inc.; |
| |
| |
• |
Verio Inc./ TabNet; |
| |
| |
• |
Sprint Corporation/ Earthlink Network, Inc.; |
| |
| |
• |
NTT/ Verio Inc.; |
| |
| |
• |
America Online, Inc./ Netscape Communications Corporation; |
| |
| |
• |
MFS Communications Inc./ UUNet Technologies, Inc.; and |
| |
| |
• |
McLeodUSA, Inc./ Splitrock Services, Inc. |
Discounted Cash Flow Analysis. Merrill Lynch performed a
discounted cash flow analysis of the projected after-tax
unlevered free cash flow of Concentric (defined as unlevered
after-tax earnings plus amortization and depreciation less
capital expenditures and net changes in working capital), using
financial projections of Concentric as prepared by NEXTLINK.
Merrill Lynch calculated a range of present values for Concentric
based upon the discounted present value of the sum of the
projected stream of after-tax unlevered free cash flows of
Concentric and the projected terminal value of Concentric based
upon a range of multiples of Concentric’s projected 2004
EBITDA. Applying discount rates ranging from 14.0% to 16.0% and
2004 terminal value EBITDA multiples of 14.0x to 16.0x, Merrill
Lynch calculated implied equity values per share of Concentric
common stock ranging from $51.00 to $58.00, giving effect to
expected synergies from the merger, compared to the offer price
of $45.00.
Analysts’ Price Targets. Merrill Lynch considered and
reviewed research analysts’ price targets for Concentric
common stock prior to the announcement of the merger, which
indicated a selected range of 12-month price targets for
Concentric common stock of approximately $32.00 to $60.00 per
share.
45
NEXTLINK Financial Analysis
Historical Stock Price Performance. Merrill Lynch reviewed
the relationship between movements of the price of
NEXTLINK’s common stock and two indices comprised of the
following fiber-based and wireless competitive local exchange
carrier companies for the one-year period ending January 6,
2000:
Fiber-based competitive local exchange providers:
|
|
|
| |
• |
Allegiance Telecom Inc.; |
| |
| |
• |
ICG Communications Inc.; |
| |
| |
• |
Intermedia Communications Inc.; |
| |
| |
• |
McLeodUSA Inc.; and |
| |
| |
• |
Time Warner Telecom Inc. |
Wireless competitive local exchange providers:
|
|
|
| |
• |
Teligent, Inc.; and |
| |
| |
• |
Winstar Communications, Inc. |
Merrill Lynch also reviewed the relationship between movements of
the price of NEXTLINK’s common stock and the NASDAQ
Composite Index for the one-year period ending January 6,
2000. Merrill Lynch noted that over this one-year period
NEXTLINK’s common stock outperformed the fiber-based and
wireless competitive local exchange carriers comprised of the
companies listed above and the NASDAQ Composite Index.
The following table indicates the appreciation in the stock price
performance from January 6, 1999 to January 6, 2000:
| |
|
|
|
|
|
|
Stock Price |
|
|
Appreciation |
|
|
|
|
NEXTLINK |
|
|
409.5 |
% |
|
|
|
|
|
|
Fiber-based competitive local exchange providers |
|
|
209.8 |
% |
|
|
|
|
|
|
Wireless competitive local exchange providers |
|
|
73.2 |
% |
|
|
|
|
|
|
NASDAQ Composite Index |
|
|
60.6 |
% |
Merrill Lynch reviewed the range of the daily closing prices of
NEXTLINK’s common stock for the 52 week period ending
January 6, 2000. Merrill Lynch noted that NEXTLINK’s
common stock had traded in a range from $14.50 to $91.38 during
this period.
Comparable Publicly Traded Companies Analysis. Merrill
Lynch reviewed publicly available information to compare
financial and operating information and multiples of firm value,
which was calculated as the equity offer value on a fully diluted
basis plus total debt less cash and marketable securities, to
2000 and 2001 estimated revenues for a group of publicly traded
companies that Merrill Lynch deemed to be comparable to NEXTLINK.
Merrill Lynch determined the relevant range of the comparable
public company multiples was 8.5x to 25.1x with NEXTLINK at 28.8x
for 2000 and 6.0x to 11.2x with NEXTLINK at 15.4x for 2001. The
companies reviewed in this analysis included the following:
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|
| |
• |
Allegiance Telecom Inc.; |
| |
| |
• |
McLeodUSA Inc.; |
| |
| |
• |
Teligent, Inc.; |
| |
| |
• |
Time Warner Telecom Inc.; and |
| |
| |
• |
Winstar Communications, Inc. |
46
Analysts’ Price Targets. Merrill Lynch considered and
reviewed research analysts’ price targets for NEXTLINK
common stock prior to the announcement of the merger, which
indicated a selected range of 12-month price targets for NEXTLINK
common stock of approximately $62.50 to $102.00 per share.
Pro Forma Combination Analysis
Historical Exchange Ratios. Merrill Lynch reviewed the
relationship between the price of Concentric’s common stock
and NEXTLINK’s common stock for the one-year period ending
January 6, 2000. The range of exchange ratios for this
period ranged from 0.304x to 1.648x compared to the exchange
ratio range of between 0.495x and 0.650x.
The following table illustrates the various average exchange
ratios for the period from January 6, 1999 to
January 6, 2000:
| |
|
|
|
|
|
|
Average |
|
|
|
|
At 1/6/00 |
|
|
0.382 |
x |
|
|
|
|
|
|
30 Day |
|
|
0.420 |
x |
|
|
|
|
|
|
60 Day |
|
|
0.454 |
x |
|
|
|
|
|
|
90 Day |
|
|
0.431 |
x |
|
|
|
|
|
|
Maximum |
|
|
1.648 |
x |
|
|
|
|
|
|
Minimum |
|
|
0.304 |
x |
|
|
|
|
|
|
Mean |
|
|
0.760 |
x |
Pro Forma Stock Ownership Analysis. Merrill Lynch reviewed
the exchange ratio and the number of shares of NEXTLINK common
stock to be issued to holders of Concentric common stock based
upon the offer value of $45.00. This analysis indicated that
current shareholders of Concentric would own between
approximately 16% and 20% of NEXTLINK’s common stock for the
exchange ratio range of 0.495x to 0.650x, respectively, after
the merger.
Discounted Cash Flow Value Accretion/(Dilution) Analysis.
Merrill Lynch performed a discounted cash flow analysis of the
projected after-tax unlevered free cash flows for NEXTLINK and
Concentric on a combined basis giving effect to the expected
synergies using financial information provided by NEXTLINK. Based
on the midpoint of the discounted cash flow per share for
NEXTLINK as a stand alone entity compared to the midpoint of the
combined discounted cash flows of NEXTLINK and Concentric on a
combined basis giving effect to the expected synergies, per
share, the transaction would be approximately 2.0% accretive to
NEXTLINK shareholders, or provide an approximate incremental
$1.20 in intrinsic value per share.
The summary set forth above does not purport to be a complete
description of the analyses performed by Merrill Lynch in
arriving at its opinion. The preparation of a fairness opinion is
a complex process and is not necessarily susceptible to partial
or summary description. The matters considered by Merrill Lynch
in its analysis were based on numerous macroeconomic, operating
and financial assumptions with respect to industry performance,
general business and economic conditions and other matters, many
of which are beyond NEXTLINK’s and Merrill Lynch’s
control and involve the application of complex methodologies and
educated judgment. Any estimates contained in Merrill
Lynch’s analysis are not necessarily indicative of actual
past or future results or values, which may be significantly more
or less favorable than the estimates. Estimated values do not
purport to be appraisals and do not necessarily reflect the
prices at which businesses or companies may be sold in the
future, and the estimates are inherently subject to uncertainty.
No company utilized as a comparison in the analyses described
above is identical to Concentric or NEXTLINK. Also, no
transaction utilized in the analyses described above is identical
to the merger of Concentric and NEXTLINK. In addition, various
analyses performed by Merrill Lynch incorporate projections
prepared by research analysts using only publicly available
information. These estimates may or may not prove to be accurate.
An analysis of comparable transactions and publicly traded
comparable companies is not mathematical; rather, it involves
complex considerations and judgments concerning
47
differences in financial and operating characteristics of the
comparable companies and other factors that could affect the
public trading value of the comparable companies or company to
which they are being compared.
The NEXTLINK board of directors selected Merrill Lynch to act as
its financial advisor because of Merrill Lynch’s reputation
as an internationally recognized investment banking firm with
substantial experience in transactions similar to the merger and
because it is familiar with NEXTLINK and its business. The
NEXTLINK board of directors did not impose any limitations on the
investigation made or the procedures followed by Merrill Lynch
in rendering its opinion. As part of its investment banking
business, Merrill Lynch is continually engaged in the valuation
of businesses and their securities in connection with mergers and
acquisitions, leveraged buyouts, negotiated underwritings,
competitive biddings, secondary distributions of listed and
unlisted securities, private placements and other purposes.
Recommendation of Concentric’s Board of Directors
Concentric’s board of directors believes that the merger is
fair to and in the best interests of Concentric and its
stockholders and recommends to its stockholders that they vote
“FOR” the proposal to adopt the merger agreement and
approve the merger.
In considering the recommendation of Concentric’s board of
directors with respect to the merger agreement and merger, you
should be aware that certain directors and executive officers of
Concentric have certain interests that are different from, or
addition to, the interests of Concentric stockholders generally.
Please see “The Merger — Interests of Certain
Insiders of Concentric in the Merger.”
Recommendation of NEXTLINK’s Board of Directors
NEXTLINK’s board of directors believes that the merger is
fair to and in the best interests of NEXTLINK and its
stockholders.
Interests of Insiders of Concentric in the Merger
The terms of the merger agreement and agreements it contemplates
give a number of Concentric, executive officers and key employees
substantial interests in the merger that are different from, or
in addition to, the interests of Concentric stockholders,
including stock option grants at market exercise prices, shares
of restricted stock and cash retention bonuses. The board of
directors of Concentric was aware of these interests at the time
it adopted the merger agreement and approved the merger. The
names and titles of the individuals who are executive officers of
Concentric and are known to have these additional interests are
described below.
Additionally, under the terms of the merger agreement, the
combined company has agreed to provide to the entire Concentric
employee base, certain performance incentives, including stock
options, restricted shares and a cash bonus.
The new stock options will be granted at the consummation of the
merger and will vest and become exercisable in installments over
the four year period immediately following the merger. Twenty
percent of the restricted stock will be fully vested as of the
consummation of the merger and the vesting of the remaining
seventy percent will be subject to the achievement of certain
performance objectives during the two years immediately following
the merger. Similarly, twenty percent of the cash retention
bonuses will be paid upon consummation of the merger and the
remaining seventy percent will be subject to the achievement of
certain performance objectives during the two years immediately
following the merger.
Solely with respect to the cash retention bonuses paid and the
restricted stock vested at the time of the consummation of the
merger, NEXTLINK has agreed to pay an additional gross-up amount
to certain Concentric executives who become subject to the excise
tax provisions of Section 280G of the Code, to put them in the
same position with respect to such cash retention bonuses and
restricted stock as they would have been in had no excise tax
applied to those cash bonus or restricted stock payments. Henry
R. Nothhaft will receive a gross-up amount with respect to 100%
of any cash retention bonus paid or restricted stock that
48
becomes vested during the two year period immediately following
the merger to the extent that any such amount becomes subject to
any excise tax under Section 280G.
In addition to the cash bonus to be offered to the entire
Concentric employee base and stock options and restricted stock
to certain employees, the combined company has agreed to offer
two-year employment agreements with certain senior management and
key personnel of Concentric. The employment agreements will
provide full acceleration of restricted stock, cash bonus and new
and assumed options if such employee is terminated, other than
for “cause” or “involuntary termination”,
within 24 months of the merger. Furthermore, certain senior
management and key personnel, will be eligible to participate in
the combined company management bonus plan, as if they commenced
employment with the combined company starting January 1,
2000.
Stock Ownership and Voting. As of the record date,
directors and officers of Concentric beneficially owned 1,143,878
shares of Concentric common stock, or approximately 2.20% of the
outstanding shares of Concentric common stock.
Stock Options. Executive officers of Concentric who hold
options to purchase Concentric common stock will have their
options assumed by NM Acquisition Corp. and converted to options
to acquire class A common stock of NM Acquisition Corp. These
options will continue to vest if these officers continue to be
employed by the combined company.
In January 2000, the Concentric board of directors approved
a resolution to accelerate all of the outstanding options held by
Randy Katz and Peter C. Waal, its two outside directors,
effective and contingent upon the consummation of the merger.
Randy Katz and Peter C. Waal each hold unvested options to
purchase 45,000 shares of common stock of Concentric.
Severance Agreements. Certain executive employees of
Concentric have entered into severance agreements with
Concentric. These severance agreements grant certain benefits if
such employee is terminated within 18 months following a
merger. Under the terms of these agreements, if such executive is
terminated, the executive will receive, for a period of
24 months, certain benefits, including severance pay equal
to such employee’s current compensation, medical benefits
and continuing vesting of options held. The executive employees
of Concentric who have entered into these severance agreements
include: Henry R. Nothhaft, Chairman, President, Chief Executive
Officer and Director; Michael F. Anthofer, Senior Vice President
and Chief Financial Officer; Mark W. Fisher, Senior Vice
President of Corporate Marketing, General Manager, Network
Services Division; Leslie R. Hamilton, Senior Vice President of
Network Engineering and Operations; William C. Etheredge, Senior
Vice President of Sales; and Eileen A. Curtis, Senior Vice
President of Customer Relations.
The Merger Structure
At the closing of the merger, each of NEXTLINK and Concentric
will merge with and into NM Acquisition Corp. at which time the
separate corporate existence of NEXTLINK and Concentric will
cease. The merger of NEXTLINK will immediately precede the merger
of Concentric. NM Acquisition Corp. will change its name to
NEXTLINK Communications, Inc. following the consummation of the
merger. The merger agreement also provides that, immediately
prior to the effective time of the merger, NM Acquisition Corp.
will acquire indirect ownership of the 50% of INTERNEXT that
NEXTLINK does not already own from Craig O. McCaw through
the LHP share exchange.
Effective Time of the Merger
The mergers of each of NEXTLINK and Concentric into NM
Acquisition Corp. will become effective upon the filing of
separate certificates of merger with the Secretary of State of
Delaware. The merger
49
agreement provides that the closing of the merger will occur at
which time the certificates of merger are to be filed, on a date
to be specified by Concentric and NEXTLINK but not later than the
fifth business day after:
|
|
|
| |
• |
the Concentric stockholders have approved the merger agreement
and the merger; |
| |
| |
• |
all required regulatory approvals and actions have been obtained
or taken; |
| |
| |
• |
the registration statement, of which this document is a part,
shall have been declared effective by the Securities and Exchange
Commission and no stop order with respect the registration
statement is in effect; |
| |
| |
• |
the shares of NM Acquisition Corp. common stock to be issued in
the merger have been approved for issuance on The Nasdaq National
Market; and |
| |
| |
• |
all other conditions to the consummation of the merger have been
satisfied or waived (see “The Merger Agreement —
Conditions to the Merger”). |
We are working towards completing the merger as soon as possible.
We expect to complete the merger on June 16, 2000 or as
soon as practicable thereafter.
Conversion of Concentric and NEXTLINK Securities
Common Stock. As a result of the merger, each share of
Concentric common stock will be converted into a number of shares
of NM Acquisition Corp. class A common stock determined by
application of an exchange ratio, known as a collar, which will
be between 0.495 and 0.650 (or between 0.99 and 1.3 after
adjustment for NEXTLINK’s proposed one-for-one common stock
dividend). The actual exchange ratio will depend on the
volume-weighted average price of NEXTLINK class A common
stock on The Nasdaq National Market, as reported by Bloomberg,
L.P., for the 20 trading day period ending on the third trading
day prior to the closing of the merger. However, for any portion
of the measurement period prior to the payment date of the
NEXTLINK class A common stock dividend, the relevant
NEXTLINK share prices will be divided by two. The collar
corresponds to a price per share (prior to the consummation of
NEXTLINK’s proposed one-for-one common stock dividend) of
NEXTLINK class A common stock between $69.23 and $90.91 (or
between $34.61 and $45.46 after adjustment for NEXTLINK’s
proposed one-for-one common stock dividend) and will affect the
value of the NM Acquisition Corp. shares received by Concentric
stockholders as follows:
|
|
|
| |
• |
if the average NEXTLINK share price is within the collar,
Concentric stockholders will receive NM Acquisition Corp. class A
common stock worth $45 (the value of NM Acquisition Corp.
class A common stock being assumed to be equivalent to the
value of NEXTLINK class A common stock) for each share of
Concentric common stock converted in the merger; |
| |
| |
• |
if the average NEXTLINK share price is less than $69.23 (or
$34.61 after adjustment for NEXTLINK’s proposed one-for-one
common stock dividend) per share, Concentric stockholders will
receive NM Acquisition Corp. class A common stock, worth less
than $45 for each share of Concentric common stock converted in
the merger; and |
| |
| |
• |
if the average NEXTLINK share price is more than $90.91 (or
$45.46 after adjustment for NEXTLINK’s proposed one-for-one
common stock dividend) per share, Concentric stockholders will
receive NM Acquisition Corp. class A common stock worth more than
$45 for each share of Concentric common stock converted in the
merger. |
Each issued and outstanding share of NEXTLINK class A common
stock and class B common stock will, by operation of the merger,
automatically be converted on a one-for-one basis into shares of
NM Acquisition Corp. class A common stock and class B
common stock, respectively. Accordingly, class A common
stock of NM Acquisition Corp. will be the economic equivalent of
NEXTLINK class A common stock and is expected to be valued based
on the market value of NEXTLINK class A common stock.
Preferred Stock. Each issued and outstanding share of
NEXTLINK and Concentric preferred stock will, by operation of the
merger, be converted into shares of NM Acquisition Corp.
preferred stock with
50
identical substantive provisions, except for the relative ranking
of the series of preferred stock and certain changes which the
holders of Concentric senior notes and series B preferred
stock have consented to.
Options. Upon the merger, all options to purchase
Concentric common stock then outstanding under Concentric’s
stock option plans, compensation plans and arrangements and held
by existing employees of Concentric, whether or not exercisable
or vested, will to be assumed by NM Acquisition Corp. and
automatically be converted into options to acquire NM Acquisition
Corp. class A common stock, with the number of shares
issuable upon exercise and the exercise price adjusted as
follows:
|
|
|
| |
• |
each Concentric common stock option outstanding immediately prior
to the effective time will be deemed to constitute an option to
acquire, on the same terms and conditions as were applicable
under the Concentric stock option, the same number of shares of
NM Acquisition Corp. class A common stock as the holder of
the Concentric stock option would have been entitled to receive
in the merger if the option had been exercised in full prior to
the effective time; and |
| |
| |
• |
the per share exercise price of the NM Acquisition Corp. stock
option received on conversion of a Concentric stock option will
be the aggregate exercise price for the shares of Concentric
common stock issuable under the Concentric stock option divided
by the aggregate number of shares of NM Acquisition Corp.
class A common stock deemed issuable under the NM
Acquisition Corp. stock option. |
Upon consummation of the merger, each outstanding option to
purchase NEXTLINK class A common stock granted under any
NEXTLINK stock option or compensation plans or arrangements,
whether or not exercisable or vested, will be deemed to
constitute an option to acquire the same number of shares of NM
Acquisition Corp. class A common stock, subject to the same
terms and conditions, as were acquirable upon exercise of the
NEXTLINK option at the effective time.
On or before the next business day following the effective times
of the mergers, NM Acquisition Corp. will file a registration
statement on Form S-8 with the Securities and Exchange
Commission with respect to the shares of NM Acquisition Corp.
class A common stock subject to the assumed Concentric and
NEXTLINK options.
Warrants. At the effective time, outstanding warrants to
purchase Concentric common stock and NEXTLINK class A common
stock then outstanding will become exercisable for NM
Acquisition Corp. common stock in accordance with their terms.
Certificate of Incorporation and Bylaws of NM Acquisition
Corp. After the Merger
Upon completion of the merger, the restated certificate of
incorporation for NM Acquisition Corp. will be in
substantially the form set forth in Appendix E to this proxy
statement/information statement/prospectus and the restated
bylaws of NM Acquisition Corp. will be substantially in the
form set forth in Appendix F to this proxy
statement/information statement/prospectus. For a summary of the
material provisions of the restated certificate of incorporation
and restated bylaws of NM Acquisition Corp., and the rights
of stockholders of NM Acquisition Corp. under the restated
certificate of incorporation and restated bylaws, see the section
entitled “Description of NM Acquisition Corp. Capital
Stock.”
Appraisal Rights
Under Delaware law, holders of neither Concentric common stock
nor NEXTLINK class A common stock are entitled to appraisal
rights in connection with the merger. Holders of NEXTLINK class B
common stock (which is not publicly traded) and holders of
specified series of Concentric and NEXTLINK preferred stock who
comply with the provisions of Section 262 of the Delaware
General Corporation Law are entitled to appraisal rights in the
merger. The following description may not be applicable to the
appraisal rights as to which holders of NEXTLINK 14% redeemable
preferred stock, NEXTLINK 6 1/2% convertible preferred
stock and Concentric 13 1/2% series B redeemable
exchangeable preferred stock may be entitled, and such holders
will receive separate notice of their appraisal rights in
connection with the merger.
51
If the merger is completed, holders of record of NEXTLINK class B
common stock who object to the terms of the merger may seek an
appraisal under Section 262 of the Delaware General Corporation
Law for the judicially determined fair value of their shares. As
this is not a complete description, a copy of Section 262 is
attached to this document as Appendix D. Holders of
NEXTLINK class B common stock should review Section 262
carefully. If you fail to take any action required by
Section 262, you will terminate or waive your rights to
appraisal under Section 262.
Holders of NEXTLINK class B common stock will receive a notice
relating to their appraisal rights as follows:
|
|
|
| |
• |
before the effective time, NEXTLINK will notify each holder of
NEXTLINK class B common stock (other than Eagle River or Craig O.
McCaw) that the merger has been approved and that appraisal
rights are available for any or all shares of NEXTLINK class B
common stock held by that holder; or |
| |
| |
• |
within ten days after the effective time, NM Acquisition Corp.
will notify each holder of NEXTLINK class B common stock (other
than Eagle River or Craig O. McCaw) that appraisal rights are
available for any or all shares of NEXTLINK class B common
stock held by that holder and of the effective time of the
merger. |
This proxy statement/information statement/prospectus may be
deemed to be the notice referred to above.
Holders of NEXTLINK class B common stock who elect to exercise
appraisal rights must:
|
|
|
| |
• |
deliver a written demand for appraisal to NEXTLINK within
20 days after the date of mailing of the notice; and |
| |
| |
• |
not vote for or consent in writing to the approval of the merger
agreement and the merger. |
Holders of NEXTLINK class B common stock must deliver their
demand to NEXTLINK Communications, Inc. at 1505 Farm Credit Drive
McLean, VA 22103, Attention: Gary D. Begeman, Senior Vice
President and General Counsel. The demand will be sufficient if
it reasonably informs NEXTLINK or NM Acquisition Corp., as the
case may be, of the identity of the stockholder and that the
stockholder intends to demand the appraisal of such
stockholder’s NEXTLINK class B common stock.
Only holders of record of NEXTLINK class B common stock will be
entitled to demand appraisal rights for NEXTLINK class B common
stock registered in their name. The demand must be executed by or
for the holder of record, fully and correctly, as such
person’s name appears on his or her NEXTLINK class B common
stock certificates. An authorized agent, including one of two or
more joint owners, may execute the demand for appraisal for a
holder of record; however, the agent must identify the holder of
record and expressly disclose the fact that, in executing the
demand, the agent is acting as agent for such person.
If a holder of record, such as a broker, holds NEXTLINK class B
common stock as nominee for beneficial owners, the holder may
exercise his or her right of appraisal with respect to NEXTLINK
class B common stock held for all or less than all of such
beneficial owners. In this case, the written demand should state
the number of shares of NEXTLINK class B common stock covered by
the demand. If no number of shares of NEXTLINK class B common
stock is expressly mentioned, we will presume it covers all
shares of NEXTLINK class B common stock outstanding in the name
of the holder of record.
Within 10 days after the effective time, we will send notice
of the effectiveness of the merger to each person who satisfied
the above conditions prior to the effective time.
Within 120 days after the effective time, NEXTLINK or any
NEXTLINK class B common stockholder who has satisfied the
above conditions may file a petition in the Delaware Court of
Chancery demanding a determination of the fair value of the
NEXTLINK class B common stock. If you are seeking to exercise
your appraisal rights, you should not assume that we will file a
petition to appraise the value of your NEXTLINK class B common
stock or that we will initiate any negotiations with respect to
the fair value of your
52
NEXTLINK class B common stock. Accordingly, you should initiate
all necessary action if you wish to perfect your appraisal rights
within the time periods specified in Section 262.
Within 120 days after the effective time, if you have
complied with the requirements for exercise of appraisal rights,
as discussed above, you will be entitled, upon written request,
to receive a statement from us setting forth:
|
|
|
| |
• |
the aggregate number of shares of NEXTLINK class B common stock
not voted in favor of the merger and with respect to which
demands for appraisal have been made; and |
| |
| |
• |
the aggregate number of holders of such NEXTLINK class B common
stock. |
We must mail this statement within 10 days after we receive
your written request to do so. If a petition for an appraisal is
timely filed, after a hearing on the petition, the Delaware Court
of Chancery will determine which stockholders are entitled to
appraisal rights and will appraise the value of the NEXTLINK
class B common stock owned by those stockholders. The court will
determine fair value exclusive of any element of value arising
from the accomplishment or expectation of the merger and will
determine the amount of interest, if any, to be paid upon the
value of the NEXTLINK class B common stock of the stockholders
entitled to appraisal. Any judicial determination of the fair
value of NEXTLINK class B common stock could be based upon
considerations other than or in addition to the price paid in the
merger and the market value of NEXTLINK class B common stock,
including asset values, the investment value and voting rights of
the NEXTLINK class B common stock and any other valuation
considerations generally accepted in the investment community.
This judicial determination of value could be more than, less
than or the same as the consideration paid under the merger
agreement. The court may also order that all or a portion of any
stockholder’s expenses incurred in connection with an
appraisal proceeding, including reasonable attorney’s fees
and fees and expenses of experts utilized in the appraisal
proceeding, be charged pro rata against the value of all NEXTLINK
class B common stock entitled to appraisal.
If you demand an appraisal in compliance with Section 262,
you will not, after the effective time, be entitled to vote the
shares subject to this demand for any purpose. You will also not
have the right to dividends or other distributions on that
NEXTLINK class B common stock, other than those payable or deemed
to be payable to stockholders of record as of a date prior to
the effective time.
You will lose your right to appraisal if you do not file a
petition within 120 days after the effective time, or if you
deliver a written withdrawal of your demand for an appraisal and
an acceptance of the merger to NEXTLINK. Any attempt to withdraw
made more than 60 days after the effective time will
require our written approval.
You will be entitled to receive the consideration you would have
been paid under the merger agreement if:
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you do not perfect your appraisal rights; or |
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you withdraw your demand for appraisal rights. |
If you correctly follow the procedures described above and
perfect your right of appraisal after instituting a timely
appraisal, your appraisal proceeding cannot be dismissed without
the approval of the Delaware court.
Material Federal Income Tax Consequences of the Merger
The following discussion summarizes the material federal income
tax consequences of the merger that are generally applicable to
Concentric stockholders and NEXTLINK stockholders exchanging
their Concentric common stock or NEXTLINK class A or
class B common stock, as the case may be, for NM Acquisition
Corp. class A or class B common stock, as the case may
be. The discussion does not address all aspects of federal
income taxation that may apply to Concentric stockholders or
NEXTLINK stockholders in light of their particular circumstances
and who may be subject to special rules, including dealers in
securities, foreign persons, insurance companies, tax-exempt
entities, retirement plans and persons who acquired their
Concentric common stock or NEXTLINK class A common stock, as
the case may be,
53
pursuant to the exercise of employee stock options or otherwise
as compensation. In addition, the following discussion does not
address the tax consequences of the merger under applicable
state, local or foreign tax laws. Finally, the following
discussion does not address the tax consequences of transactions
occurring prior to or after the merger (whether or not such
transactions are in connection with the merger) including,
without limitation, the exercise of options or rights to purchase
Concentric common stock or NEXTLINK class A or class B
common stock, as the case may be, in anticipation of the merger.
Accordingly, Concentric stockholders and NEXTLINK
stockholders are urged to consult their own tax advisors as to
the specific tax consequences to them of the merger, including
the applicable federal, state, local and foreign tax consequences
to them of the merger.
The following discussion is based on the Internal Revenue Code of
1986, as amended (the “Code”), applicable Treasury
Regulations, judicial authority and administrative rulings and
practice, all as of the date hereof. The Internal Revenue Service
could adopt a contrary position. In addition, future
legislative, judicial or administrative changes or
interpretations could adversely affect the accuracy of the
statements and conclusions set forth herein. Any such changes or
interpretations could be applied retroactively and could affect
the tax consequences of the merger to NEXTLINK, Concentric, NM
Acquisition Corp., and/or the respective stockholders of NEXTLINK
and Concentric.
The merger is intended to qualify as a reorganization under
section 368(a) of the Code. Assuming the merger does qualify as a
reorganization, and assuming that the NM Acquisition Corp.
class A or class B common stock received by each
Concentric stockholder or NEXTLINK stockholder, as the case may
be, is held as a capital asset within the meaning of Section 1221
of the Code, the following tax consequences should result
(subject to the limitations and qualifications referred to
herein):
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none of NM Acquisition Corp., Concentric or NEXTLINK will
recognize any gain or loss solely as a result of the merger; |
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a holder of Concentric common stock or NEXTLINK class A or class
B common stock, as the case may be, who exchanges shares of
Concentric common stock or NEXTLINK class A or class B common
stock, as the case may be, for shares of NM Acquisition Corp.
class A or class B common stock pursuant to the merger will not
recognize any gain or loss upon such exchange, except that (as
noted in the last bullet point below) gain or loss may be
recognized with respect to cash received in lieu of a fractional
share of NM Acquisition Corp. class A common stock; |
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the aggregate adjusted tax basis of the NM Acquisition Corp.
class A or class B common stock received by a
Concentric stockholder or NEXTLINK stockholder, as the case may
be, will be equal to the aggregate adjusted tax basis of the
shares of Concentric common stock or NEXTLINK class A or
class B common stock, as the case may be, surrendered in
exchange therefor (reduced by any basis allocable to fractional
shares for which cash is received); |
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the holding period of the shares of NM Acquisition Corp.
class A and class B common stock received by each
Concentric stockholder or NEXTLINK stockholder, as the case may
be, will include the holding period of the shares of Concentric
common stock or NEXTLINK class A or class B common
stock, as the case may be, exchanged therefor; and |
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a holder of shares of Concentric common stock who receives cash
in the merger in lieu of a fractional share of NM Acquisition
Corp. class A common stock will be treated as if such holder
actually received such fractional share which was subsequently
redeemed by NM Acquisition Corp. The recipient should recognize
capital gain or loss equal to the difference between the amount
of cash received and the portion of such holder’s adjusted
tax basis allocable to the fractional share. |
Completion of the merger is conditioned on the receipt by
Concentric of an opinion from Wilson Sonsini Goodrich &
Rosati, Professional Corporation, Concentric’s tax counsel,
and the receipt by NEXTLINK of an opinion from Willkie
Farr & Gallagher, NEXTLINK’s tax counsel, stating
that the merger will be treated for federal income tax purposes
as reorganization within the meaning of Section 368(a) of the
Code, and that each of NEXTLINK, Concentric and NM Acquisition
Corp. will be a party to the reorganization within the meaning of
Section 368(b) of the Code. These opinions will be based upon
the existing law, the truth and
54
accuracy of certain representations of NEXTLINK, Concentric and
NM Acquisition Corp., and will be subject to certain assumptions
and qualifications, including the assumption that the merger will
be effected pursuant to applicable state law and otherwise
completed according to the terms of the merger agreement. The tax
opinions neither bind nor preclude the Internal Revenue Service
or the courts from adopting a contrary position, and it is
possible that the Internal Revenue Service may assert
successfully a contrary position in litigation or other
proceedings. Neither Concentric nor NEXTLINK intend to obtain a
ruling from the Internal Revenue Service with respect to the tax
consequences of the merger.
The foregoing discussion of material federal income tax
consequences is for general information purposes only. Because of
the complexity of the tax laws, and because the tax consequences
of any particular stockholder may be affected by matters not
discussed herein, each Concentric stockholder and NEXTLINK
stockholder, as the case may be, is urged to consult his or her
own tax adviser with respect to his or her own particular
circumstances and with respect to the specific tax consequences
of the merger to him or her, including the applicability and
effect of state, local and foreign tax laws, estate tax laws and
proposed changes in applicable tax laws.
Restrictions on Resale of NM Acquisition Corp. Common Stock
The shares of NM Acquisition Corp. common stock issuable to
Concentric and NEXTLINK stockholders have been registered under
the Securities Act. Such shares may be traded freely without
restriction by those stockholders who are not deemed to be
“affiliates” of Concentric, as that term is defined in
the rules under the Securities Act.
Shares of NM Acquisition Corp. common stock received by those
stockholders of Concentric who are deemed to be
“affiliates” of Concentric may be resold without
registration under the Securities Act only as permitted by
Rule 145 under the Securities Act or as otherwise permitted
under the Securities Act. NEXTLINK has obtained or will obtain
prior to the effective time of the merger agreements by each
stockholder of Concentric who is an “affiliate” of
Concentric to this effect.
Accounting Treatment
The merger will be accounted for as a “purchase” for
accounting and financial reporting purposes. For purposes of
preparing the combined company’s consolidated financial
statements, NEXTLINK will establish a new accounting basis for
Concentric’s assets and liabilities based upon their fair
values and NEXTLINK’s purchase price, including the direct
costs of the acquisition. A final determination of required
purchase accounting adjustments and of the fair value of the
assets and liabilities of Concentric has not yet been made. After
the merger, NEXTLINK will undertake a study to determine the
fair value of Concentric’s assets and liabilities and will
make appropriate purchase accounting adjustments upon completion
of the study. For financial reporting purposes, NEXTLINK will
consolidate the results of Concentric’s operations with
those of NEXTLINK’s operations, beginning with the closing
of the merger, but NEXTLINK’s financial statements for prior
periods will not be restated as a result of the merger.
NM Acquisition Corp.’s indirect acquisition through the LHP
share exchange of the 50% interest in INTERNEXT, L.L.C. that
NEXTLINK does not already own will be recorded by NM Acquisition
Corp. at Eagle River’s historical cost, since the entities
involved are under common control.
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Stock Exchange Listing of NM Acquisition Corp. Class A
Common Stock
It is a condition to the obligations of Concentric and NEXTLINK
to consummate the merger that the shares of NM Acquisition Corp.
class A common stock to be issued in the merger be approved
for listing on The Nasdaq National Market. NM Acquisition Corp.
will file an additional listing application with The Nasdaq Stock
Market covering such shares, and we expect the application to be
approved at or before the close of the merger.
Delisting and Deregistration of Concentric Common Stock After
the Merger
If the merger is completed, Concentric common stock will be
delisted from The Nasdaq National Market and will be deregistered
under the Securities Exchange Act of 1934.
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THE MERGER AGREEMENT AND RELATED AGREEMENTS
The following is only a summary of the material provisions of the
merger agreement not already described above and we urge you to
read the merger agreement in its entirety.
Representations and Warranties
Concentric made a number of representations in the merger
agreement relating to, among other things:
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its organization and similar corporate matters and the
organization and similar corporate matters regarding its
subsidiaries; |
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its capital structure; |
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authorization, execution, delivery, performance and
enforceability of the merger agreement and related matters; |
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the absence of conflicts under certificates of incorporation or
bylaws, required consents or approvals and violations of any
instruments or law; |
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documents filed with the Securities and Exchange Commission and
the accuracy of the information contained therein; |
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absence of certain specified material adverse changes, material
litigation or material undisclosed liabilities; |
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tax, labor and employee benefit matters; |
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certain intellectual property matters; |
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compliance with applicable laws including environmental laws; |
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the accuracy of information supplied by Concentric in connection
with the preparation of this proxy statement/information
statement/prospectus and the related registration statement, |
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the receipt of a fairness opinion from Bear Stearns; |
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the absence of undisclosed litigation; |
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the existence of material contracts. |
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the exemption of the merger and the merger agreement from the
restrictions of Section 203 of the Delaware General
Corporation Law; and |
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the taking of all necessary action to render the Concentric
preferred shares rights agreement inapplicable to the merger. |
Under the merger agreement, NEXTLINK made a number of
representations relating to, among other things:
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its organization and similar corporate matters and the
organization and similar corporate matters regarding its
subsidiaries; |
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its capital structure; |
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authorization, execution, delivery, performance and
enforceability of the merger agreement and related matters; |
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the absence of conflicts under certificates of incorporation or
bylaws, required consents or approvals and violations of any
instruments or law; |
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documents filed with the Securities and Exchange Commission and
the accuracy of the information contained therein; |
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absence of certain specified material adverse changes, material
litigation or material undisclosed liabilities; |
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tax matters; |
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certain intellectual property matters; |
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compliance with applicable laws including environmental laws; |
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the accuracy of information supplied by NEXTLINK in connection
with the preparation of this proxy statement/ information
statement/ prospectus and the related registration statement; |
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the receipt of a fairness opinion from Merrill Lynch; |
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the absence of undisclosed litigation; and |
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the existence of material contracts. |
Each of Concentric and NEXTLINK has agreed promptly to notify the
other of any event likely to result in the failure of a
representation or warranty to be true in any material respect or
the material breach of a covenant under the merger agreement.
Conduct of Concentric Business Pending the Merger
Pursuant to the merger agreement, Concentric has agreed that,
except as expressly contemplated by the merger agreement or as
agreed by NEXTLINK, until the consummation of the merger or the
termination of the merger agreement, Concentric will, and will
cause its subsidiaries to, among other things:
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conduct their business in the ordinary course; |
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pay debts and taxes when due; and |
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use reasonable efforts consistent with past practice to preserve
intact their present business, keep available the services of
their officers and key employees and maintain in effect all
material licenses and authorizations. |
Specifically, neither Concentric nor any of its subsidiaries
will, except as disclosed in the Concentric disclosure schedule
to the merger agreement or as consented to by NEXTLINK in
writing:
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amend its certificate of incorporation or bylaws; |
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amend any material term of any outstanding securities; |
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split, combine or reclassify any shares of capital stock; |
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declare, set aside or pay any dividend or distribution, except
for regular dividends on outstanding preferred stock or dividends
paid by a subsidiary wholly owned by Concentric; |
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issue, deliver or sell shares of capital stock or convertible
securities, except for issuance pursuant to the exercise or
conversion of outstanding options or convertible securities and
the granting of options specified in the Concentric disclosure
schedule to the merger agreement; |
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incur capital expenditures exceeding $45 million; |
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acquire any assets other than pursuant to agreements in effect as
of the date of the merger agreement, assets used in the ordinary
course of business consistent with past practice and assets with
a fair market value exceeding $5 million in individual
transactions or $25 million in the aggregate; |
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sell, lease, license, encumber or transfer any domestic assets
with a fair market value exceeding $5 million in any one
transaction or series of related transactions or $25 million in
the aggregate, except pursuant to agreements in effect as of the
date of the merger agreement; |
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incur, assume or guarantee any indebtedness other than as
expressly contemplated in the Concentric disclosure schedule to
the merger agreement or as otherwise agreed with NEXTLINK; |
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make any loan, advance or capital contributions to or investment
in any person other than loans, advances or capital contributions
to or investments in its wholly owned subsidiaries of
Concentric, except for advances to Internet Technology Group plc
not to exceed $12 million in the aggregate; |
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engage in or enter into any transaction or commitment, enter into
any contract or agreement, or relinquish or amend in any respect
any contract or other right outside of the ordinary course of
Concentric’s business consistent with past practice (except
as otherwise specifically permitted by the merger agreement); |
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enter into any agreement or arrangement that materially limits or
otherwise materially restricts Concentric or any of its
subsidiaries or any of their respective affiliates or successors
or that would, after the effective time, materially limit or
restrict NEXTLINK, any of its subsidiaries, the combined company
or any of their affiliates, from engaging in any line of
business; |
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enter into any commitment to provide or amend any existing
arrangement for severance pay to any director, officer or
employee or establish, adopt or amend (except as required by
applicable law) any collective bargaining, bonus, profit-sharing,
thrift, pension, retirement, deferred compensation,
compensation, stock option, restricted stock or other benefit
plan or arrangement covering any director, officer or employee,
except to the extent mandated by applicable law, except as
required pursuant to existing written, binding agreements listed
in the Concentric disclosure schedule to the merger agreement; |
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increase the compensation, bonus or other benefits payable to any
director, officer or employee or amend the terms of any
outstanding option to purchase shares in Concentric common stock;
other as required by any agreement in effect as of the date
hereof and raises and option grants to employees (other than
officers and directors) in the ordinary course; |
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change its methods of accounting or accounting practices in any
material respect, except as required by concurrent changes in
U.S. generally accepted accounting principles or by law, or its
fiscal year; |
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enter into or amend in any material respect any agreement of
general or limited partnership, limited liability company
agreement or any other agreement creating a “joint
venture” (as defined in the Hart-Scott-Rodino Act) involving
assets or liabilities in excess of $5 million; |
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settle, or propose to settle, any litigation, investigation,
arbitration, proceeding or other claim in an aggregate amount for
all such matters in excess of $1,500,000, (excluding amounts for
which Concentric is contractually entitled to indemnification
from a third party); |
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make any material tax election or enter into any settlement or
compromise of any material tax liability; |
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take any action that would make any representation or warranty of
Concentric in the merger agreement inaccurate in any material
respect at the effective time of the merger; or |
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agree or commit to do any of the foregoing. |
Conditions Precedent to the Merger
The respective obligations of Concentric and NEXTLINK to effect
the merger are subject to the fulfillment or waiver of the
following conditions at or prior to the merger:
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approval of the merger agreement by the Concentric stockholders; |
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expiration or termination of the waiting period and any extension
thereof under the Hart-Scott-Rodino Act (which waiting period
has been terminated); |
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absence of any law, statute, ordinance, rule, regulation,
judgment, decree, injunction or other order restraining,
enjoining or otherwise prohibiting the merger; |
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effectiveness of the registration statement and the absence of
any stop order suspending the effectiveness of the registration
statement; and |
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the listing on The Nasdaq National Market of the shares of NM
Acquisition Corp. common stock to be issued in the merger. |
The obligations of NEXTLINK to effect the merger are also subject
to the fulfillment or waiver at or prior to the merger of the
following additional conditions:
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performance in all material respects by Concentric of its
obligations under the merger agreement; |
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the representations and warranties of Concentric in the merger
agreement being true and correct at and as of the effective time,
except for representations and warranties made as of a specific
date which must be true as of that date, with only such
exceptions, individually or in the aggregate, have not had and
would not be reasonably expected to have a material adverse
effect on Concentric and its subsidiaries taken as a whole; and |
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receipt by NEXTLINK of the opinion of Willkie Farr &
Gallagher, its legal counsel, to the effect that the merger will
be treated for federal income tax purposes as a reorganization
under the provisions of Section 368(a) of the Internal
Revenue Code and that each of NEXTLINK, Concentric and NM
Acquisition Corp. will be a party to the reorganization within
the meaning of Section 368(b) of the Internal Revenue Code. |
The obligations of Concentric to effect the merger are also
subject to the fulfillment or waiver at or prior to the merger of
the following additional conditions:
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performance in all material respects by NEXTLINK of its
obligations under the merger agreement; |
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the representations and warranties of NEXTLINK in the merger
agreement being true and correct at and as of the effective time,
except for representations and warranties made as of a specific
date which must be true as of that date, with only such
exceptions, individually or in the aggregate, have not had and
would not be reasonably expected to have a material adverse
effect on NEXTLINK and its subsidiaries taken as a whole; and |
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receipt by Concentric of the opinion of Wilson Sonsini Goodrich
& Rosati, Professional Corporation, its outside legal
counsel, to the effect that the merger will be treated for
federal income tax purposes as a reorganization under the
provisions of Section 368(a) of the Internal Revenue Code
and that each of NEXTLINK, Concentric and NM Acquisition Corp.
will be a party to the reorganization within the meaning of
Section 368(b) of the Internal Revenue Code. |
Concentric has specifically agreed that NEXTLINK and its
subsidiaries may enter into certain transactions subsequent to
the signing of the merger agreement and prior to the effective
time, including acquisitions, divestitures, issuances of equity
interests and strategic alliances without the results of such
transactions being deemed to be a breach of any representation or
warranty of NEXTLINK in the merger agreement, so long as:
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NEXTLINK obtains an opinion from a nationally recognized
investment bank to the effect that, from a financial point of
view, the subsequent transaction is fair to holders of NEXTLINK
common stock and, if applicable, NEXTLINK, except that no such
opinion is required with respect to three transactions which
NEXTLINK commenced prior to the date of the merger agreement; and |
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the subsequent transaction will not cause the merger to be
treated as other than a tax-free reorganization under
Section 368 of the Internal Revenue Code. |
Required Regulatory Approvals
Under the merger agreement, the obligations of both Concentric
and NEXTLINK to consummate the merger are subject to the
expiration or termination of any waiting period (and any
extensions thereof) applicable to the consummation of the merger
under the Hart-Scott-Rodino (HSR) Act and no action having been
instituted by the Department of Justice or the Federal Trade
Commission, or FTC, challenging or seeking to enjoin the
consummation of the merger, which action shall not have been
withdrawn or terminated.
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Transactions such as the merger are reviewed by the Department of
Justice and the FTC to determine whether they comply with
applicable antitrust laws. Under the provisions of the HSR Act,
the merger may not be consummated until such time as certain
information has been furnished to the Department of Justice and
the FTC and the specified waiting period requirements of the HSR
Act have been satisfied. Pursuant to the HSR Act, on
February 10, 2000, Concentric and NEXTLINK each furnished
notification of the merger and provided certain information to
the Department of Justice and the FTC. Concentric and NEXTLINK
received early termination of the waiting period requirements of
the HSR Act on February 23, 2000. We cannot assure you that
a challenge to the merger on antitrust grounds will not be made
by the Department of Justice, the FTC, state attorney’s
general, or a private person or entity. If such a challenge is
made, Concentric and NEXTLINK may not prevail and may be required
to accept certain conditions, possibly including certain
divestitures in order to consummate the merger.
NEXTLINK is required to obtain, and is in the process of
obtaining, the approval of eleven state public utility service
commissions to the merger of NEXTLINK with and into NM
Acquisition Corp.
Limitation on Concentric Negotiations With Third Parties
Until the merger is completed or the merger agreement terminated,
Concentric has agreed not to directly or indirectly solicit
other acquisition proposals. Acquisition proposals are defined in
the merger agreement to include, subject to limited exceptions,
a bona fide offer or proposal for:
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a merger, consolidation, share exchange, business combination,
reorganization, recapitalization or other similar transaction
involving Concentric or any of its significant subsidiaries; |
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the acquisition by a third party of 25% or more of the voting
securities of Concentric or any of its significant subsidiaries;
or |
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the acquisition by a third party of assets, securities or
ownership interests representing 25% or more of the consolidated
assets or earning power of Concentric and its subsidiaries on a
consolidated basis. |
Concentric’s no-solicitation obligations prohibit Concentric
from doing or causing any of its subsidiaries, agents or
advisors to do any of the following:
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take any action to solicit, initiate or knowingly facilitate or
encourage the submission of any acquisition proposal; |
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engage in any discussions with, or disclose any non-public
information relating to Concentric or any of its subsidiaries to
any person known by Concentric to be considering making, or who
has made, an acquisition proposal, other than discussions or
disclosures in the ordinary course of business and not related to
an acquisition proposal; |
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afford access to the properties, books or records of Concentric
or any of its subsidiaries to any person known by Concentric to
be considering making, or who has made, an acquisition proposal,
other than access in the ordinary course of business and not
related to an acquisition proposal; |
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amend or grant any waiver or release under standstill or similar
agreement with respect to any class of equity securities of
Concentric; |
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approve any transaction or any person’s becoming an
“interested stockholder” under Section 203 of the
Delaware General Corporation Law; |
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to the fullest extent permitted by Delaware law, amend or grant
any waiver or release or approve any transaction or redeem any
rights under the Concentric Preferred Shares Rights Agreement; or |
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enter into any agreement with respect to an acquisition proposal. |
Until the merger is completed or the merger agreement terminated,
Concentric has agreed to promptly notify NEXTLINK of any third
party inquiries or requests for non-public information or access
to books and records that may result in any acquisition
proposals. The notice must identify the person making the
acquisition proposal or request for information or access, and
the terms and conditions of the acquisition
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proposal. Concentric must also keep NEXTLINK fully informed of
the status and details of any acquisition proposal or request for
information and access.
Concentric may negotiate with, furnish non-public information to
and provide a waiver or release of a standstill agreement to a
third party who delivers an unsolicited acquisition proposal if
the following conditions are met:
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Concentric has complied with its no-solicitation obligations
under the merger agreement; |
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the board of directors of Concentric has determined by majority
vote, after consultation with outside counsel, that it must
negotiate with and/or provide non-public information or a waiver
or release of a standstill agreement to the third party to comply
with its fiduciary duties under applicable law; and |
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the third party executes a confidentiality agreement with terms
no less favorable in the aggregate to Concentric than those
contained in the November 18, 1999 confidentiality agreement
between Concentric and NEXTLINK. |
Concentric may withdraw, or modify in a manner adverse to
NEXTLINK, its recommendation to Concentric stockholders to
approve the merger agreement and the merger, under the following
circumstances:
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Concentric has complied with its no-solicitation obligations
under the merger agreement; |
| |
| |
• |
a superior proposal is pending; |
| |
| |
• |
the Concentric board of directors determines, after consultation
with outside counsel, that it is required to withdraw or modify
its recommendation in order to satisfy its fiduciary duty under
applicable law; and |
| |
| |
• |
Concentric has delivered to NEXTLINK a written notice that it
intends to withdraw or modify its recommendation. |
A superior proposal is defined in the merger agreement as a bona
fide, unsolicited acquisition proposal that the board of
directors of Concentric determines in good faith by a majority
vote, after consultation with its financial advisor, and taking
into account all the terms and conditions of the acquisition
proposal, is more favorable to Concentric’s stockholders
than the merger and for which financing, to the extent required,
is then fully committed or reasonably determined to be available
by the board of directors of Concentric.
Termination Fees and Expenses
Concentric has agreed to pay NEXTLINK a termination fee of
$110 million upon the occurrence of any of the following
events:
|
|
|
| |
• |
The Concentric board withdraws, modifies or refrains from
recommending the merger, and NEXTLINK terminates the merger
agreement; |
| |
| |
• |
Concentric breaches any of its obligations with respect to the
solicitation of alternative acquisition proposals, and NEXTLINK
terminates the merger agreement; or |
| |
| |
• |
Concentric stockholders fail to approve the merger during the
pendency of a third party acquisition proposal, NEXTLINK
terminates the merger agreement, and within one year an
alternative acquisition agreement is signed or an alternative
acquisition tender offer is commenced. |
Otherwise, Concentric and NEXTLINK will generally pay their own
fees and expenses in connection with the merger, whether or not
the merger is completed.
62
Termination of the Merger Agreement
The merger agreement may be terminated by either Concentric of
NEXTLINK following circumstances by mutual consent and if:
|
|
|
| |
• |
the merger is not completed on or before August 31, 2000,
unless caused by the breach of any provision of the merger
agreement by the party seeking to terminate the merger agreement; |
| |
| |
• |
any law or regulation makes consummation of the merger illegal or
otherwise prohibited; |
| |
| |
• |
any court or other governmental authority of competent
jurisdiction shall have taken any action having the effect or
permanently enjoining the consummation of the merger; or |
| |
| |
• |
the required approval of the stockholders of Concentric is not
obtained at the Concentric stockholders special meeting or any
adjournment or postponement thereof. |
Additionally, NEXTLINK may terminate the merger agreement if:
|
|
|
| |
• |
the board of directors of Concentric has failed to recommend or
has withdrawn, or modified in a manner adverse to NEXTLINK, its
approval or recommendation of the merger agreement and the
merger, of has materially breached its obligation to call the
Concentric special stockholders meeting; |
| |
| |
• |
Concentric has willfully and materially breached any of its
obligations under the merger agreement with respect to
solicitation of alternative acquisition proposals or the approval
of a superior acquisition proposal; or |
| |
| |
• |
Concentric has breached any of its representations, warranties,
covenants or agreements in the merger agreement, which breach
would constitute a failure of a condition to closing the merger
and which cannot be cured prior to August 31, 2000 in order
to render the condition to closing satisfied. |
Additionally, Concentric may terminate the merger agreement if:
|
|
|
| |
• |
Eagle River has materially breached its voting agreement; |
| |
| |
• |
NEXTLINK has breached any of its representations, warranties,
covenants or agreements in the merger agreement, which breach
would constitute a failure of a condition to closing the merger
and which cannot be cured prior to August 31, 2000 in order
to render the condition to closing satisfied; or |
| |
| |
• |
its board of directors authorizes Concentric to enter into a
binding written agreement concerning a transaction which
constitutes a superior proposal, notifies NEXTLINK in writing of
such agreement, NEXTLINK fails to make a matching offer deemed by
the Concentric board to be at least a favorable to Concentric as
the superior proposal, Concentric pays to NEXTLINK a breakup fee
in the amount of $110 million plus any other fees owed to
NEXTLINK under the merger agreement, and Concentric has complied
with its no-solicitation obligations in the merger agreement. |
Concentric cannot terminate the merger agreement solely because
the price of NEXTLINK common stock declines.
Concentric Voting Agreements
To induce NEXTLINK to enter into the merger agreement, ten
Concentric officers and directors entered into voting agreements
with NEXTLINK with respect to shares of Concentric common stock
they beneficially own. The voting agreements require these
Concentric stockholders to vote all their shares in favor of the
merger and the adoption of the merger agreement and against
approval of any proposal opposing or competing against the
merger. These Concentric stockholders also granted an irrevocable
proxy in favor of NEXTLINK to vote each of the Concentric
stockholders’ shares in favor of the merger and the merger
agreement. These Concentric stockholders were not paid additional
consideration in connection with the voting agreements or
irrevocable proxies.
On the record date, directors and executive officers of
Concentric and their affiliates owned approximately
percent of the issued and outstanding shares of
Concentric common stock. The Concentric stockholders
63
who An aggregate of 1,983,976 shares of Concentric common
stock, including shares issuable upon exercise of options,
representing approximately 3.67% of Concentric’s common
stock as of the record date, are subject to the terms of the
voting agreements.
Eagle River Voting Agreement
To induce Concentric to enter into the merger agreement, Eagle
River agreed to vote all of its shares of NEXTLINK common stock
in favor of the merger and the adoption of the merger agreement
and against approval of any proposal opposing or competing
against the merger. On May 10, 2000 Eagle River executed a
written consent in lieu of a stockholders meeting pursuant to
which it approved the merger and the merger agreement. Eagle
River owns shares of NEXTLINK class A common stock and class B
common stock representing more than 50% of the total voting power
of all outstanding NEXTLINK common stock. Under Delaware law and
the terms of NEXTLINK’s certificate of incorporation and
bylaws, Eagle River’s approval is sufficient to approve the
merger and the merger agreement. Eagle River was not paid
additional consideration in connection with the voting agreement.
Consent Solicitation
On March 8, 2000 NEXTLINK and Concentric commenced a
solicitation of consents from holders of Concentric’s
12 3/4% senior notes due 2007 and 13 1/2% series B
redeemable exchangeable preferred stock due 2010 to conform
certain covenants contained in the indenture relating to the
notes and the certificate of designations relating to the
preferred stock to corresponding covenants contained in
NEXTLINK’s 10 1/2% senior notes due 2009. The consent
solicitation expired on March 24, 2000 with the consents of
holders of a majority of the outstanding principal amount of
Concentric senior notes and of a majority of the outstanding
shares of Concentric series B preferred stock having been
obtained. NM Acquisition Corp., as successor to NEXTLINK will pay
the holders of the Concentric senior notes and series B
preferred stock an aggregate consent fee of approximately
$6.8 million upon consummation of the merger.
Waiver and Amendment
At any time before the completion of the merger, Concentric or
NEXTLINK may extend the time for the performance of any of the
obligations or other acts of the parties of the merger agreement,
waive any inaccuracies in the representations and warranties of
the other contained in the merger agreement or waive compliance
by the other with any of the agreements or conditions contained
in the merger agreement.
The merger agreement may be amended by Concentric and NEXTLINK at
any time before or after the approval by the stockholders of
Concentric and the approval by written consent of Eagle River of
the merger agreement. After approval is obtained from the
Concentric stockholders, however, no amendment may be made that
by law requires stockholder approval without obtaining such
further approval.
Surrender of Concentric Stock Certificates
Promptly after the completion of the merger, NM Acquisition
Corp., at that time renamed NEXTLINK Communications, Inc., will
cause its exchange agent to mail to each Concentric stockholder
of record a letter of transmittal with instructions to be used by
such stockholder in surrendering certificates which, prior to
the merger, represented shares of Concentric common stock in
exchange for certificates representing shares of NM Acquisition
Corp. class A common stock. Concentric stockholders should
not surrender stock certificates for exchange until they receive
a letter of transmittal from NM Acquisition Corp.’s exchange
agent.
Upon the surrender of a Concentric common stock certificate to NM
Acquisition Corp.’s exchange agent, together with a duly
executed letter of transmittal and such other documents as may be
reasonably required by the exchange agent, the holder of such
certificate will be entitled to receive in exchange therefor a
certificate representing the number of shares of NM Acquisition
Corp. class A common stock, plus cash in lieu of fractional
shares, to which the holder of Concentric common stock is
entitled pursuant to the provisions merger agreement. In the
event of a transfer of ownership of Concentric common stock which
is
64
not registered in the transfer records of Concentric, a
certificate representing the appropriate number of shares of NM
Acquisition Corp. class A common stock may be issued to the
transferee if the certificate representing such Concentric common
stock is presented to the exchange agent, accompanied by all
documents required to evidence and effect such transfer and to
evidence that any applicable stock transfer taxes have been paid,
along with a duly executed letter of transmittal.
Until a certificate representing Concentric common stock has been
surrendered to the exchange agent, each such certificate will be
deemed at any time after the completion of the merger to
represent only the right to receive upon such surrender the
certificate representing the number of shares of NM Acquisition
Corp. class A common stock, and cash in lieu of fractional
shares, to which the Concentric stockholder is entitled under the
merger agreement. Upon consummation of the merger, shares of
Concentric common stock will cease to be traded on The Nasdaq
National Market, and there will be no further market for
Concentric common stock.
Under the terms of the merger agreement, at the effective time,
outstanding shares of NEXTLINK class A common stock and
NEXTLINK class B common stock will automatically be converted on
a one-for-one basis into shares of NM Acquisition Corp.
class A common stock and class B common stock, respectively,
and NM Acquisition Corp. will change its name to NEXTLINK
Communications, Inc. Therefore, certificates representing shares
of NEXTLINK common stock and class B common stock prior to the
merger will not be exchanged and will, after the effective time,
be deemed to represent shares of NM Acquisition Corp.
class A common stock and class B common stock, respectively.
Officers and Directors After the Merger
After the merger, the NM Acquisition Corp. board of directors
will consist of the current NEXTLINK board of directors, with the
addition of Henry Nothhaft, President, Chief Executive Officer
and Chairman of the Board of Concentric, and Peter C. Waal,
currently a member of the Board of Directors of Concentric. The
officers of NEXTLINK immediately prior to the consummation of the
merger will be the officers of NM Acquisition Corp. following
consummation of the merger, with the addition of
Mr. Nothhaft as Vice Chairman of NM Acquisition Corp.
Indemnification of Officers and Directors
Under the merger agreement, from and after the effective time, NM
Acquisition Corp. will indemnify each person who is an officer
and/or a director of Concentric or any Concentric subsidiary for
any liability arising in whole or in part out of the
person’s status as an officer and/or director at or prior to
the effective time. The indemnification will be to the fullest
extent permitted under:
|
|
|
| |
• |
applicable law; |
| |
| |
• |
the amended and restated certificate of incorporation and the
bylaws of Concentric or any Concentric subsidiary, as applicable;
and |
| |
| |
• |
any agreement between the indemnified person and Concentric or
any Concentric subsidiary, as applicable. |
After the merger, NM Acquisition Corp. will provide
officer’s and director’s liability insurance for a
period of six years after the effective time covering officers
and directors of Concentric and its subsidiaries who were covered
by such insurance prior on the date of the merger agreement. The
coverage and amount of the officer’s and director’s
liability insurance to be provided by NM Acquisition Corp. is to
be no less favorable than the Concentric policy in effect on the
date of the merger agreement, so long as the annual premium paid
by NM Acquisition Corp. is not in excess of two times the last
annual premium paid by Concentric prior to the date of the merger
agreement.
65
LHP Share Exchange
Craig O. McCaw owns 50% of the limited liability company
interests of LHP, L.L.C., a Washington limited liability company,
which in turn owns 100% of the limited liability company
interest in INTERNEXT, L.L.C., a Delaware limited liability
company. INTERNEXT owns an interest in a national fiber optic
network now under construction that will connect 50 cities in the
United States and Canada, including all of the major
metropolitan markets that NEXTLINK’s current and planned
local networks serve. NEXTLINK currently owns the other 50% of
LHP.
Immediately prior to consummation of the merger of NEXTLINK with
and into NM Acquisition Corp., Craig O. McCaw will
contribute to NM Acquisition Corp. all of his interest in LHP in
exchange for 3,426,791 shares of NM Acquisition Corp.
class A common stock. Upon consummation of the LHP share
exchange and the merger, NM Acquisition Corp. will own, directly
or indirectly, 100% of LHP.
NM Acquisition Corp. will grant registration rights to
Craig O. McCaw with respect to the NM Acquisition Corp.
class A common stock issued to Craig O. McCaw in the
LHP share exchange. NM Acquisition Corp. and Craig O. McCaw
will execute a registration rights agreement upon consummation of
the LHP share exchange.
At the closing of the LHP share exchange, NM Acquisition Corp.
will reimburse Eagle River Funding, LLC, a subsidiary of Eagle
River, L.L.C., in cash for amounts advanced by Eagle River
Funding, LLC to LHP after December 6, 1999, together with
interest at the prime rate. Approximately $10.3 million had
been advanced by Eagle River Funding, L.L.C. as of May 10,
2000.
The consummation of the merger and the consummation of the LHP
share exchange are expressly not conditioned on the consummation
of the other. In the merger agreement, NEXTLINK has made a number
of representations and warranties to Eagle River and its
controlling affiliate, Craig O. McCaw, and Eagle River and
Craig O. McCaw have made a number of representations and
warranties to NEXTLINK, including representations and warranties:
|
|
|
| |
• |
by each of NEXTLINK, Eagle River and Craig O. McCaw,
relating to corporate existence and authority to enter into the
merger agreement; |
| |
| |
• |
by each of NEXTLINK, Eagle River and Craig O. McCaw,
relating to due authorization of the merger agreement; |
| |
| |
• |
by each of NEXTLINK, Eagle River and Craig O. McCaw,
relating to no conflict with or contravention of laws,
organizational documents or agreements as a result of the
execution and delivery of the merger agreement, the registration
rights agreement and the consummation of the LHP share exchange; |
| |
| |
• |
by NEXTLINK, relating to the NM Acquisition Corp. class A
common stock to be issued to Eagle River or its controlling
affiliate being duly authorized, validly issued, fully paid and
non-assessable; |
| |
| |
• |
by Eagle River and Craig O. McCaw, to the effect that
Craig O. McCaw beneficially owns the LHP membership
interests being contributed to NM Acquisition Corp. free and
clear of any liens, other than those created by NEXTLINK or NM
Acquisition Corp.; |
| |
| |
• |
by Eagle River and Craig O. McCaw, to the effect that no
action has been taken, other than pursuant to the merger
agreement, binding, or purporting to bind, LHP or INTERNEXT or
any of their assets in any manner; |
| |
| |
• |
by Eagle River and Craig O. McCaw, relating to its
acquisition of NM Acquisition Corp. common stock for investment
purposes only; and |
| |
| |
• |
by NEXTLINK, acknowledging that NEXTLINK has led and controlled
the business of LHP and INTERNEXT. |
Neither Concentric on the one hand, nor Eagle River and
Craig O. McCaw on the other hand, has made any
representations to the other.
66
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Condensed Combined
Financial Statements of NEXTLINK and Concentric
The following unaudited pro forma condensed combined financial
statements combine the historical consolidated balance sheets and
statements of operations of NEXTLINK and Concentric, including
their respective subsidiaries after giving effect to the merger.
The unaudited pro forma condensed combined balance sheet as of
December 31, 1999, set forth below gives effect to the
merger as if it occurred on December 31, 1999. The unaudited
pro forma condensed combined statement of operations for the
year ended December 31, 1998 and 1999 give effect to the
merger as if it occurred January 1, 1998. These statements
are prepared on the basis of accounting for the merger as a
purchase business combination and are based on the notes set
forth in the notes to these unaudited pro forma condensed
combined financial statements.
The following unaudited pro forma financial information has been
prepared based upon, and should be read in conjunction with, the
audited historical consolidated financial statements of NEXTLINK
and Concentric. The unaudited pro forma condensed combined
financial statements are not necessarily indicative of the
financial position or operating results that would have occurred
had the merger been completed on December 31, 1999 or at the
beginning of the period for which the merger is being given
effect, nor is it necessarily indicative of future financial
position or operating results.
67
Unaudited Pro Forma Condensed Combined Balance Sheet
As of December 31, 1999
(Dollars in thousands, except per share amounts)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical |
|
Historical |
|
Historical |
|
Pro Forma |
|
|
|
|
|
|
NEXTLINK |
|
Concentric |
|
Combined |
|
Adjustment |
|
Note |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
868,463 |
|
|
$ |
25,891 |
|
|
$ |
894,354 |
|
|
|
|
|
|
|
|
|
|
$ |
894,354 |
|
|
|
|
|
|
|
Restricted cash |
|
|
— |
|
|
|
144,060 |
|
|
|
144,060 |
|
|
|
|
|
|
|
|
|
|
|
144,060 |
|
|
|
|
|
|
|
Marketable securities |
|
|
1,013,301 |
|
|
|
80,095 |
|
|
|
1,093,396 |
|
|
|
(27,000 |
) |
|
|
2 |
|
|
|
1,066,396 |
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
80,746 |
|
|
|
29,114 |
|
|
|
109,860 |
|
|
|
|
|
|
|
|
|
|
|
109,860 |
|
|
|
|
|
|
|
Note receivable |
|
|
— |
|
|
|
16,000 |
|
|
|
16,000 |
|
|
|
|
|
|
|
|
|
|
|
16,000 |
|
|
|
|
|
|
|
Other current assets |
|
|
24,498 |
|
|
|
10,049 |
|
|
|
34,547 |
|
|
|
|
|
|
|
|
|
|
|
34,547 |
|
|
|
|
|
|
|
Pledged securities |
|
|
40,759 |
|
|
|
— |
|
|
|
40,759 |
|
|
|
|
|
|
|
|
|
|
|
40,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
2,027,767 |
|
|
|
305,209 |
|
|
|
2,332,976 |
|
|
|
(27,000 |
) |
|
|
|
|
|
|
2,305,976 |
|
|
|
|
|
|
|
Property and equipment, net |
|
|
1,180,021 |
|
|
|
82,894 |
|
|
|
1,262,915 |
|
|
|
|
|
|
|
|
|
|
|
1,262,915 |
|
|
|
|
|
|
|
Investment in fixed wireless licenses |
|
|
933,128 |
|
|
|
— |
|
|
|
933,128 |
|
|
|
|
|
|
|
|
|
|
|
933,128 |
|
|
|
|
|
|
|
Goodwill and other intangible assets |
|
|
— |
|
|
|
70,627 |
|
|
|
70,627 |
|
|
|
2,181,928 |
|
|
|
2 |
|
|
|
2,252,555 |
|
|
|
|
|
|
|
Investments |
|
|
— |
|
|
|
27,101 |
|
|
|
27,101 |
|
|
|
|
|
|
|
|
|
|
|
27,101 |
|
|
|
|
|
|
|
Other assets, net |
|
|
456,192 |
|
|
|
11,963 |
|
|
|
468,155 |
|
|
|
209,502 |
|
|
|
2 |
|
|
|
677,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
4,597,108 |
|
|
$ |
497,794 |
|
|
$ |
5,094,902 |
|
|
$ |
2,364,430 |
|
|
|
|
|
|
$ |
7,459,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
249,217 |
|
|
|
59,594 |
|
|
|
308,811 |
|
|
|
|
|
|
|
|
|
|
|
308,811 |
|
|
|
|
|
|
|
Long-term debt |
|
|
3,733,342 |
|
|
|
146,642 |
|
|
|
3,879,984 |
|
|
|
|
|
|
|
|
|
|
|
3,879,984 |
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
15,319 |
|
|
|
8,544 |
|
|
|
23,863 |
|
|
|
|
|
|
|
|
|
|
|
23,863 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
3,997,878 |
|
|
|
214,780 |
|
|
|
4,212,658 |
|
|
|
|
|
|
|
|
|
|
|
4,212,658 |
|
|
|
|
|
|
|
Redeemable preferred stock |
|
|
612,352 |
|
|
|
220,860 |
|
|
|
833,212 |
|
|
|
|
|
|
|
|
|
|
|
833,212 |
|
|
|
|
|
|
|
Shareholders’ equity (deficit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
1,139,232 |
|
|
|
420,515 |
|
|
|
1,559,747 |
|
|
|
2,070,226 |
|
|
|
2 |
|
|
|
3,606,249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
396,791 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(420,515 |
) |
|
|
3a |
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation |
|
|
(85,489 |
) |
|
|
(524 |
) |
|
|
(86,013 |
) |
|
|
524 |
|
|
|
3a |
|
|
|
(85,489 |
) |
|
|
|
|
|
|
Accumulated other comprehensive income |
|
|
150,634 |
|
|
|
— |
|
|
|
150,634 |
|
|
|
|
|
|
|
|
|
|
|
150,634 |
|
|
|
|
|
|
|
Accumulated deficit |
|
|
(1,217,499 |
) |
|
|
(357,837 |
) |
|
|
(1,575,336 |
) |
|
|
357,837 |
|
|
|
3a |
|
|
|
(1,257,932 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(40,433 |
) |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Shareholders’ equity (deficit) |
|
|
(13,122 |
) |
|
|
62,154 |
|
|
|
49,032 |
|
|
|
2,364,430 |
|
|
|
|
|
|
|
2,413,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity (deficit) |
|
$ |
4,597,108 |
|
|
$ |
497,794 |
|
|
$ |
5,094,902 |
|
|
$ |
2,364,430 |
|
|
|
|
|
|
$ |
7,459,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 1999
(Dollars in thousands, except per share amounts)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical |
|
Historical |
|
Historical |
|
Pro Forma |
|
|
|
|
|
|
NEXTLINK |
|
Concentric |
|
Combined |
|
Adjustment |
|
Note |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
274,324 |
|
|
$ |
147,060 |
|
|
$ |
421,384 |
|
|
$ |
— |
|
|
|
|
|
|
$ |
421,384 |
|
|
|
|
|
|
|
Costs and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
|
221,664 |
|
|
|
121,144 |
|
|
|
342,808 |
|
|
|
— |
|
|
|
|
|
|
|
342,808 |
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
266,908 |
|
|
|
64,637 |
|
|
|
331,545 |
|
|
|
— |
|
|
|
|
|
|
|
331,545 |
|
|
|
|
|
|
|
Restructuring |
|
|
30,935 |
|
|
|
— |
|
|
|
30,935 |
|
|
|
— |
|
|
|
|
|
|
|
30,935 |
|
|
|
|
|
|
|
Deferred compensation |
|
|
12,872 |
|
|
|
373 |
|
|
|
13,245 |
|
|
|
— |
|
|
|
|
|
|
|
13,245 |
|
|
|
|
|
|
|
Depreciation |
|
|
93,097 |
|
|
|
28,404 |
|
|
|
121,501 |
|
|
|
— |
|
|
|
|
|
|
|
121,501 |
|
|
|
|
|
|
|
Amortization |
|
|
15,378 |
|
|
|
7,913 |
|
|
|
23,291 |
|
|
|
364,079 |
|
|
|
3b |
|
|
|
387,370 |
|
|
|
|
|
|
|
Write-off of in-process technology |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
40,433 |
|
|
|
2 |
|
|
|
40,433 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
640,854 |
|
|
|
222,471 |
|
|
|
863,325 |
|
|
|
404,512 |
|
|
|
|
|
|
|
1,267,837 |
|
|
|
|
|
|
|
Loss from operations |
|
|
(366,530 |
) |
|
|
(75,411 |
) |
|
|
(441,941 |
) |
|
|
(404,512 |
) |
|
|
|
|
|
|
(846,453 |
) |
|
|
|
|
|
|
Net interest expense and other |
|
|
(192,162 |
) |
|
|
(9,674 |
) |
|
|
(201,836 |
) |
|
|
— |
|
|
|
|
|
|
|
(201,836 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
|
(558,692 |
) |
|
|
(85,085 |
) |
|
|
(643,777 |
) |
|
|
(404,512 |
) |
|
|
|
|
|
|
(1,048,289 |
) |
|
|
|
|
|
|
Preferred stock dividends and accretion |
|
|
(69,189 |
) |
|
|
(26,697 |
) |
|
|
(95,886 |
) |
|
|
— |
|
|
|
|
|
|
|
(95,886 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss applicable to common shares |
|
$ |
(627,881 |
) |
|
$ |
(111,782 |
) |
|
$ |
(739,663 |
) |
|
$ |
(404,512 |
) |
|
|
|
|
|
$ |
(1,144,175 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share (basic and diluted) |
|
|
(5.02 |
) |
|
|
(2.76 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7.66 |
) |
|
|
|
|
|
|
Shares used in computation of net loss per share |
|
|
125,132,459 |
|
|
|
40,473,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
149,416,259 |
|
69
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 1998
(Dollars in thousands, except per share amounts)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical |
|
Historical |
|
Historical |
|
Pro Forma |
|
|
|
|
|
|
NEXTLINK |
|
Concentric |
|
Combined |
|
Adjustment |
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
139,667 |
|
|
$ |
82,807 |
|
|
$ |
222,474 |
|
|
$ |
— |
|
|
|
|
|
|
$ |
222,474 |
|
|
|
|
|
|
|
Costs and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
123,675 |
|
|
|
73,779 |
|
|
|
197,454 |
|
|
|
— |
|
|
|
|
|
|
|
197,454 |
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
156,929 |
|
|
|
44,683 |
|
|
|
201,612 |
|
|
|
— |
|
|
|
|
|
|
|
201,612 |
|
|
|
|
|
|
|
Deferred compensation |
|
|
4,993 |
|
|
|
373 |
|
|
|
5,366 |
|
|
|
— |
|
|
|
|
|
|
|
5,366 |
|
|
|
|
|
|
|
Depreciation |
|
|
45,638 |
|
|
|
24,442 |
|
|
|
70,080 |
|
|
|
— |
|
|
|
|
|
|
|
70,080 |
|
|
|
|
|
|
|
Amortization |
|
|
14,616 |
|
|
|
3,842 |
|
|
|
18,458 |
|
|
|
364,079 |
|
|
|
3b |
|
|
|
382,537 |
|
|
|
|
|
|
|
Acquisition related charges |
|
|
— |
|
|
|
1,291 |
|
|
|
1,291 |
|
|
|
|
|
|
|
|
|
|
|
1,291 |
|
|
|
|
|
|
|
Write-off of in-process technology |
|
|
— |
|
|
|
5,200 |
|
|
|
5,200 |
|
|
|
40,433 |
|
|
|
2 |
|
|
|
45,633 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
345,851 |
|
|
|
153,610 |
|
|
|
499,461 |
|
|
|
404,512 |
|
|
|
|
|
|
|
903,973 |
|
|
|
|
|
|
|
Loss from operations |
|
|
(206,184 |
) |
|
|
(70,803 |
) |
|
|
(276,987 |
) |
|
|
(404,512 |
) |
|
|
|
|
|
|
(681,499 |
) |
|
|
|
|
|
|
Net interest expense and other |
|
|
(72,156 |
) |
|
|
(14,345 |
) |
|
|
(86,501 |
) |
|
|
— |
|
|
|
|
|
|
|
(86,501 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before extraordinary item |
|
|
(278,340 |
) |
|
|
(85,148 |
) |
|
|
(363,488 |
) |
|
|
(404,512 |
) |
|
|
|
|
|
|
(768,000 |
) |
|
|
|
|
|
|
Extraordinary gain on early retirement of debt |
|
|
— |
|
|
|
3,042 |
|
|
|
3,042 |
|
|
|
— |
|
|
|
|
|
|
|
3,042 |
|
|
|
|
|
|
|
Net Loss |
|
|
(278,340 |
) |
|
|
(82,106 |
) |
|
|
(360,446 |
) |
|
|
(404,512 |
) |
|
|
|
|
|
|
(764,958 |
) |
|
|
|
|
|
|
Preferred stock dividends and accretion |
|
|
(58,773 |
) |
|
|
(11,958 |
) |
|
|
(70,731 |
) |
|
|
— |
|
|
|
|
|
|
|
(70,731 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss applicable to common shares |
|
$ |
(337,113 |
) |
|
$ |
(94,064 |
) |
|
$ |
(431,177 |
) |
|
$ |
(404,512 |
) |
|
|
|
|
|
$ |
(835,689 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share (basic and diluted) |
|
|
(3.13 |
) |
|
|
(3.23 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6.68 |
) |
|
|
|
|
|
|
Shares used in computation of net loss per share |
|
|
107,708,000 |
|
|
|
29,094,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,164,400 |
|
70
NOTES TO UNAUDITED PROFORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
Note 1. Basis of Presentation
The unaudited pro forma condensed combined balance sheet as of
December 31, 1999, gives effect to the merger as if it had
occurred on December 31, 1999. The unaudited pro forma combined
statement of operations for the year ended December 31, 1998
and 1999 give effect to the merger as if it had occurred
January 1, 1998. These statements are prepared on the basis
of accounting for the merger as a purchase business combination.
Note 2. Purchase Price and Purchase Price
Allocation
The merger will be accounted for as a purchase of Concentric by
NEXTLINK. The merger will therefore result in an allocation of
purchase price to the tangible and intangible assets of
Concentric, as well as a write-off of the portion of the purchase
price allocated to in-process technology. The transaction is not
expected to result in an increased deferred tax liability. This
allocation reflects our estimate of the fair value of assets to
be acquired by NEXTLINK based upon information available to us at
the date of the accompanying unaudited pro forma condensed
combined financial statements. We plan to adjust this allocation
based on the final purchase price and our final determination of
asset value.
Concentric’s primary common stock outstanding was based on
shares outstanding on January 7, 2000. NEXTLINK’s
market value per share used to calculate the exchange ratio, and
the calculation of the number of shares of NM Acquisition Corp.
class A common stock to be exchanged for Concentric common stock,
was based on NEXTLINK’s class A common stock average
closing price before and after the date the merger announced,
which was $74.49 per share.
Concentric’s outstanding options and warrants will be
converted to equivalent options and warrants of NM Acquisition
Corp. The number of options and warrants and the exercise prices
will be adjusted so that the NM Acquisition Corp. options and
warrants issued for Concentric options and warrants will have an
equivalent intrinsic value per option and warrant. The term and
vesting of the options and warrants will not be modified. We have
therefore included the estimated fair value of these options and
warrants in the purchase price. We calculated the fair value of
the options and warrants to purchase shares in NM Acquisition
Corp. based on the number of options and warrants outstanding as
of April 10, 2000, the latest practicable date.
The aggregate purchase price was determined as follows (in
thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
Concentric common shares outstanding at January 7, 2000 |
|
|
46,320 |
|
|
|
|
|
|
|
Exchange ratio ($45 per share/NEXTLINK market value per share) |
|
|
0.60 |
|
|
|
|
|
|
|
Equivalent NEXTLINK common stock exchanged |
|
|
27,792 |
|
|
|
|
|
|
|
NEXTLINK market value per share (see note 2) |
|
$ |
74.49 |
|
|
|
|
|
|
|
Fair value of common stock issued |
|
$ |
2,070,226 |
|
|
|
|
|
|
|
Fair value of Concentric liabilities at December 31, 1999 |
|
|
214,780 |
|
|
|
|
|
|
|
Fair value of Concentric preferred stock at December 31,
1999 |
|
|
220,860 |
|
|
|
|
|
|
|
Fair value of Concentric options |
|
|
259,725 |
|
|
|
|
|
|
|
Fair value of Concentric warrants |
|
|
137,066 |
|
|
|
|
|
|
|
Estimated investment banking, legal and accounting fees, and fees
paid to holders of Concentric notes and preferred stock |
|
|
27,000 |
|
|
|
|
|
|
|
Total consideration |
|
$ |
2,929,657 |
|
|
|
|
|
|
71
The aggregate purchase price was allocated to the tangible and
intangible assets of Concentric as follows (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
Fair value of assets acquired |
|
$ |
497,794 |
|
|
|
|
|
|
|
Fair value of current products and technology |
|
|
105,714 |
|
|
|
|
|
|
|
Fair value of core technology |
|
|
46,323 |
|
|
|
|
|
|
|
Fair value of customer lists |
|
|
44,322 |
|
|
|
|
|
|
|
Fair value of in-process technology |
|
|
40,433 |
|
|
|
|
|
|
|
Fair value of Concentric trade name |
|
|
13,143 |
|
|
|
|
|
|
|
Preliminary goodwill |
|
|
2,181,928 |
|
|
|
|
|
|
|
Aggregate purchase price |
|
$ |
2,929,657 |
|
The exchange ratio of NM Acquisition Corp common stock for
Concentric common stock is subject to change and may affect the
final purchase price if the 20-day average trading price of
NEXTLINK Class A common stock prior to closing is less than
$69.23 or greater than $90.91. Each $1 increase in the 20-day
average trading price of NEXTLINK common stock in excess of
$90.91 will result in an increase in goodwill of approximately
$23 million and an annual increase of goodwill amortization
of approximately $3.29 million.
Note 3. Other Pro Forma Adjustments
a. The pro forma adjustments reflect the elimination of
Concentric’s historical common stock, deferred compensation
and accumulated deficit as of December 31, 1999.
b. The effect of allocating the aggregate purchase price to
the tangible and intangible assets of Concentric results in
additional amortization expense of $364.1 million for the
years ended December 31, 1998 and 1999. For amortization
purposes, goodwill and has been assigned a seven-year life and
all other acquired intangible assets have been assigned a
four-year life.
c. Proforma shares outstanding used in the computation of
net loss per share for the year ended December 31, 1999 and
1998 is based on the exchange rate (see Note 2) multiplied
by Concentric’s historically reported weighted average
shares outstanding for the period plus NEXTLINK’s
historically reported weighted average shares outstanding for the
period.
Note 4. Reclassifications
Certain historical amounts have been reclassified to conform with
the pro forma condensed combined presentation.
72
DESCRIPTION OF NM ACQUISITION CORP. CAPITAL STOCK
This section of the proxy statement/information
statement/prospectus describes the material terms of the capital
stock of NM Acquisition Corp. under the certificate of
incorporation and bylaws that will be in effect immediately after
the merger is completed. The terms of the NM Acquisition Corp.
restated certificate of incorporation and bylaws are more
detailed than the general information below. Therefore, you
should carefully consider the actual provisions of these
documents. The NM Acquisition Corp. restated certificate of
incorporation is attached as Appendix E to this proxy
statement/information statement/ prospectus and the NM
Acquisition Corp. restated bylaws are attached as Appendix F
to this proxy statement/ information statement/prospectus.
Authorized Common Stock
Total Shares. NM Acquisition Corp. initially will have
authority to issue a total of 1,120,000,000 shares of common
stock consisting of:
|
|
|
| |
• |
1,000,000,000 shares of class A common stock, par value
$0.02 per share; and |
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120,000,000 shares of class B common stock, par value $0.02
per share. |
Class A Common Stock. Following completion of the
merger, we anticipate that approximately 145,000,000 shares
(290,000,000 shares if the proposed NEXTLINK class A common
stock dividend is paid) of NM Acquisition Corp. class A
common stock will be outstanding.
Class B Common Stock. Following completion of the
merger, we anticipate that approximately 54,880,000 shares
(109,760,000 shares if the proposed NEXTLINK class A
common stock dividend is paid) of NM Acquisition Corp.
class B common stock will be outstanding.
Listing. NEXTLINK intends to apply to list the NM
Acquisition Corp. class A common stock on the Nasdaq
National Market under the symbol “NXLK”.
Preemptive Rights. The holders of NM Acquisition Corp.
class A common stock and class B common stock will not
have preemptive rights to purchase or subscribe for any stock or
other securities of NM Acquisition Corp.
NM Acquisition Corp. Class A Common Stock
Voting Rights. Each outstanding share of NM Acquisition
Corp. class A common stock will be entitled to one vote per
share and will vote with the NM Acquisition Corp. class B
common stock as a single class on all matters on which holders of
common stock are entitled to vote.
Dividends. NM Acquisition Corp. class A common stock
will participate equally in any dividend, when and as declared by
the board of directors of NM Acquisition Corp. out of funds
lawfully available therefor, with the NM Acquisition Corp.
class B common stock.
Liquidation Rights. In the event of the liquidation or
distribution of assets of NM Acquisition Corp., whether voluntary
or involuntary, and subject to the rights, if any, of any
outstanding shares of NM Acquisition Corp. Preferred Stock, the
NM Acquisition Corp. class A common stock shall participate
equally with the NM Acquisition Corp. class B common stock.
NM Acquisition Corp. Class B Common Stock
Voting Rights. Each outstanding share of NM Acquisition
Corp. class B common stock will be entitled to ten votes per
share and will vote with the NM Acquisition Corp. class A
common stock as a single class on all matters on which holders of
common stock are entitled to vote.
Dividends. NM Acquisition Corp. class B common stock
shall participate equally in any dividend, when and as declared
by the board of directors of NM Acquisition Corp. out of funds
lawfully available therefor, with the NM Acquisition Corp.
class A common stock.
73
Liquidation Rights. In the event of the liquidation or
distribution of assets of NM Acquisition Corp., whether voluntary
or involuntary, and subject to the rights, if any, of any
outstanding shares of NM Acquisition Corp. Preferred Stock, the
NM Acquisition Corp. class B common stock shall participate
equally with the NM Acquisition Corp. class A common stock.
Conversion. Each share of NM Acquisition Corp.
class B common stock will be convertible, at any time and at
the option of the holder thereof, into one share of NM
Acquisition Corp. class A common stock. In addition, each
share of NM Acquisition Corp. class B common stock will be
convertible at the option of the board of directors of NM
Acquisition Corp. into one share of its class A common stock
at any time the class B common stock is transferred or
presented to NM Acquisition Corp. for transfer on its records by
the holder thereof.
COMPARISON OF STOCKHOLDER RIGHTS
NEXTLINK, Concentric and NM Acquisition Corp. are each
incorporated under the laws of the State of Delaware. The holders
of Concentric common stock whose rights as stockholders are
currently governed by Delaware law, Concentric’s certificate
of incorporation, and the Concentric bylaws will, upon the
exchange of their shares pursuant to the merger, become holders
of NM Acquisition Corp. class A common stock, and their
rights as such will be governed by the Delaware corporate law,
the NM Acquisition Corp. certificate of incorporation and the NM
Acquisition Corp. bylaws. The material differences between the
rights of holders of Concentric common stock and the rights of
holders of NM Acquisition Corp. class A common stock, which
result from differences in their governing corporate documents,
are summarized below.
The following summary is not intended to be complete and is
qualified in its entirety by reference to Delaware law, the
Concentric certificate of incorporation, the Concentric bylaws,
the NM Acquisition Corp. restated certificate of incorporation
(attached hereto as Appendix E) and the restated NM
Acquisition Corp. bylaws (attached hereto as Appendix F), as
appropriate. The identification of specific differences is not
meant to indicate that other equally or more significant
differences do not exist.
Authorized Capital Stock
The Concentric certificate of incorporation provides for
authorized stock consisting of 100,000,000 shares of common
stock, par value $0.001 per share, and 10,000,000 shares of
preferred stock, par value $0.001 per share, of which 500,000
shares have been designated as series A junior preferred stock,
295,000 shares have been designated as 13 1/2% series B
redeemable exchangeable preferred stock, par value $1.00 per
share, and 110,000 shares have been designated as 7% series C
convertible redeemable preferred stock, par value $1.00 per
share.
The NEXTLINK certificate of incorporation provides for authorized
stock consisting of 400,000,000 shares of class A common stock,
par value $0.02 per share, 60,000,000 shares of class B common
stock, par value $0.02 per share and 25,000,000 shares of
preferred stock, par value $0.01 per share, of which 11,700,000
shares have been designated as 14% redeemable preferred stock,
4,600,000 shares have been designated as 6 1/2% convertible
preferred stock, 584,375 shares have been designated as series C
convertible participating preferred stock and 265,625 shares
have been designated as series D convertible participating
preferred stock.
Upon consummation of the merger, the NM Acquisition Corp.
certificate of incorporation will provide for authorized stock
consisting of 1,000,000,000 shares of class A common stock,
par value $0.02 per share, 120,000,000 shares of class B
common stock, par value $0.02 per share, and 25,000,000 shares of
preferred stock, par value $0.01 per share, of which 11,700,000
shares will be designated as series A preferred stock
(corresponding to the NEXTLINK 14% redeemable preferred stock),
4,600,000 shares will be designated as series B preferred
stock (corresponding to the NEXTLINK 6 1/2% convertible
preferred stock), 584,375 shares will be designated as
series C preferred stock (corresponding to the NEXTLINK
series C convertible participating preferred stock), 265,625
shares will be designated as series D preferred stock
(corresponding to the NEXTLINK series D convertible
participating preferred stock), 295,000 shares will be designated
as series E preferred stock (corresponding to the
Concentric 13 1/2% series B redeemable exchangeable
preferred
74
stock) and 110,000 shares will be designated as series F
preferred stock (corresponding to the Concentric 7% convertible
redeemable preferred stock).
Board of Directors
Under Delaware law, a board of directors must have one or more
members, as fixed by, or in the manner provided by, the bylaws,
unless fixed by the certificate of incorporation. The certificate
of incorporation, an initial bylaw or a bylaw adopted by a vote
of the stockholders may provide for staggered terms for the
directors up to three classes of directors. Directors, unless
their terms are staggered, are elected at each annual stockholder
meeting. The Concentric certificate of incorporation provides
for a staggered board of directors, each serving three year
terms. The number of directors is fixed by resolution of the
board of directors. The Concentric board currently consists of 5
directors. Concentric directors are elected by a majority of
stockholders entitled to vote on the election of directors in
favor of the director.
The NEXTLINK certificate of incorporation does not, and the NM
Acquisition Corp. certificate of incorporation will not, provide
for a staggered board of directors. The number of directors of NM
Acquisition Corp. will be fixed by the board of directors. The
NEXTLINK board currently consists of eleven directors, and,
following consummation of the merger, the NM Acquisition Corp.
board will consist of thirteen directors.
Voting Rights
Under Delaware law, each outstanding share of common stock,
regardless of class, is entitled to one vote unless the
certificate of incorporation provides otherwise. Accordingly,
each outstanding share of Concentric common stock is entitled to
one vote. However, the NEXTLINK certificate of incorporation
provides that each share of NEXTLINK class A common stock has one
vote and each share of NEXTLINK class B common stock has ten
votes. Each share of NEXTLINK class B common stock is
convertible, at the option of the holder, into one share of
NEXTLINK class A common stock. Additionally, each share of
NEXTLINK class B common stock may be converted, at the
option of NEXTLINK as determined in the sole discretion of its
board of directors, into one share of NEXTLINK class A common
stock at any time such NEXTLINK class B common stock is
transferred, or is presented to NEXTLINK for transfer on the
records of NEXTLINK by the holder of such NEXTLINK class B common
stock. The NEXTLINK class B common stock is not registered under
the Securities Exchange Act of 1934. The NM Acquisition Corp.,
certificate of incorporation will contain voting provisions that
are substantially the same as these provisions of the NEXTLINK
certificate of incorporation.
The NEXTLINK certificate of incorporation provides that the
NEXTLINK class A common stock and NEXTLINK class B
common stock vote together as a single class. However, pursuant
to Section 242(b)(2) of the Delaware General Corporation Law, the
holders of each class of common stock are entitled to vote
separately to increase or decrease the aggregate number of
authorized shares of such class, unless the certificate of
incorporation provides otherwise. The NM Acquisition Corp.
restated certificate of incorporation will provide that the
NM Acquisition Corp. class A common stock and
NM Acquisition Corp. Class B common stock will vote
together as a single class to increase or decrease the aggregate
number of authorized shares of either class.
The certificates of incorporation of Concentric and NEXTLINK both
permit the directors to establish the voting rights of preferred
stock. Concentric’s board of directors adopted a
stockholder rights plan (the “Shareholder Rights Plan”)
on November 10, 1999. Pursuant to the Shareholder Rights
Plan, Concentric’s board of directors declared a dividend
distribution of one Preferred Share Purchase Right (a
“Right”) on each outstanding share of Concentric common
stock. Each Right entitles Concentric stockholders to buy one
one-thousandth of a share of Concentric’s series A
junior participating preferred stock at an exercise price of
$175.00. The Rights become exercisable following the tenth day
after a person or group announces acquisition of 15% or more of
Concentric’s common stock or announces commencement of a
tender offer the consummation of which would result in ownership
by the person or group of 15% or more of the Concentric common
stock (each, a “Triggering Event”). Concentric may
redeem the Rights at $0.001 per Right at any
75
time on or before the tenth day following acquisition by a person
or group of 15% or more of Concentric’s Common Stock. Prior
to ten days after a Triggering Event, a separate certificate for
each Right is not issued to stockholders of Concentric, but each
certificate for a share of the Company’s Common Stock also
represents a Right.
If prior to redemption of the Rights, a person or group acquires
15% or more of the Concentric’s common stock, each Right not
owned by a holder of 15% or more of the Concentric’s common
stock will entitle its holder to purchase, at the Right’s
then current exercise price, that number of shares of common
stock of Concentric (or, in certain circumstances as determined
by the board, cash, other property or other securities) having a
market value at that time of twice the Right’s exercise
price. If, after the tenth day following acquisition by a person
or group of 15% or more of Concentric’s common stock,
Concentric sells more than 50% of its assets or earning power or
is acquired in a merger or other business combination
transaction, the acquiring person must assume the obligations
under the Rights and the Rights will become exercisable to
acquire common stock of the acquiring person at the discounted
price. At any time after an event triggering exercisability of
the Rights at a discounted price and prior to the acquisition by
the acquiring person of 50% or more of the outstanding common
stock, Concentric’s board of directors may exchange the
Rights (other than those owned by the acquiring person or its
affiliates) for common stock of Concentric at an exchange ratio
of one share of common stock per Right. Concentric’s board
of directors has taken all necessary action to render the
Shareholder Rights Plan inapplicable to the merger and the other
transactions contemplated by the merger agreement, and the Rights
will not become exercisable in connection with the merger or the
other transactions contemplated by the merger agreement.
Neither NEXTLINK nor NM Acquisition Corp. has adopted a
shareholder rights plan and no shares equivalent to
Concentric’s series A junior participating preferred stock
will be authorized by NM Acquisition Corp. upon consummation of
the merger.
Neither the Concentric nor the NEXTLINK certificate of
incorporation provide for cumulative voting in the election of
directors, although Delaware law permits such voting is set forth
in a corporation’s certificate of incorporation.
Action by Written Consent
Delaware law permits stockholders of a corporation to consent in
writing to any action without a meeting, unless the certificate
of incorporation of such corporation provides otherwise, as long
as the consent is signed by stockholders having at least the
minimum number of votes required to authorize such action at a
meeting (subject to certain restrictions in the case of election
of directors by written consent). The Concentric certificate of
incorporation does not permit stockholders to take action by
written consent in lieu of a meeting but the NEXTLINK certificate
of incorporation does not, and the NM Acquisition Corp.
certificate of incorporation will not prohibit stockholder action
by written consent.
Special Meeting of Stockholders
Delaware law provides that special meetings of the stockholders
of a corporation may be called by the corporation’s board of
directors or by such other persons as may be authorized in the
corporation’s certificate of incorporation or bylaws. The
Concentric certificate of incorporation states that special
meetings of stockholders may be called only by the president or
the chairman of the board or by the board of directors or by the
holders of shares entitled to cast not less than 10% of the votes
at the meeting. The NEXTLINK certificate of incorporation is,
and the NM Acquisition certificate of incorporation will be
silent as to special meetings, but the NEXTLINK bylaws provide,
and the NM Acquisition bylaws will provide that special meetings
of stockholders may be called by the president, the board of
directors or by the holders of shares entitled to cast at least
25% of votes eligible to be cast.
Business Combinations
Section 203 of the Delaware General Corporation Law
prohibits generally a public Delaware corporation from engaging
in a business combination with an interested stockholder for a
period of three years after the
76
date of the transaction in which an interested stockholder became
such, unless certain conditions are met. A corporation is not
governed by Section 203 if it expressly elects in its
certificate of incorporation not to be governed by
Section 203. Concentric has elected not to be governed by
Section 203, but NEXTLINK has not so elected. NM Acquisition
will not elect not to be governed by Section 203.
WHERE YOU CAN FIND MORE INFORMATION
Concentric and NEXTLINK are each subject to the informational
requirements of the Exchange Act and, accordingly, file reports,
proxy statements and other information with the Securities and
Exchange Commission (SEC). You may access these materials through
the SEC’s website at www.sec.gov and may also inspect and
copy these materials in person at the public reference facilities
maintained by the SEC at:
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New York, New York 10048 |
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Washington, D.C. 20549 |
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Information regarding the operation of the public reference rooms
may be obtained by calling the SEC at 1-800-SEC-0330.
This proxy statement/information statement/prospectus
incorporates important business and financial information about
Concentric and NEXTLINK that is not included in or delivered with
this document. You may obtain documents that are filed with the
SEC and incorporated by reference in this document without charge
by making written request from Concentric (for Concentric
stockholders) and NEXTLINK (for NEXTLINK stockholders) at the
following addresses:
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CONCENTRIC NETWORK CORPORATION
1400 Parkmoor Avenue
San Jose, CA 95126
Attention: Secretary |
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NEXTLINK COMMUNICATIONS, INC.
1505 Farm Credit Drive, 6th Floor
McLean, VA 22102
Attention: Investor Relations |
If you would like to request documents from Concentric or
NEXTLINK and want to receive them prior to the Concentric
stockholder meeting, please make your request by five business
days before the date of such meeting, or June 8, 2000.
Concentric’s world wide web home page is located at
www.concentric.com. NEXTLINK’s world wide web home page is
located at www.nextlink.com. Information contained in either
Concentric’s or NEXTLINK’s website does not constitute,
and shall not be deemed to constitute, part of this proxy
statement/information statement/prospectus.
NEXTLINK’s and Concentric’s common stock is each quoted
for trading on The Nasdaq National Market and, accordingly,
reports, proxy statements and other information concerning
NEXTLINK or Concentric, as the case may be, may also be inspected
at:
The Nasdaq Stock Market
33 Whitehall Street
New York, NY 10004
(212) 858-4000
NM Acquisition Corp. has filed with the SEC a registration
statement on Form S-4 under the Securities Act with respect
to the shares of its class A common stock and class B
common stock offered by this proxy statement/information
statement/prospectus. This proxy statement/information
statement/prospectus does not contain all of the information set
forth in the registration statement and the exhibits to the
registration statement. For further information with respect to
NM Acquisition Corp., you may review the registration statement
and the exhibits filed with the registration statement.
Statements contained in this prospectus as to the contents of any
contract or any other document referred to are not necessarily
complete, and are qualified
77
in their entirety to the copy of the contract or other document
filed as an exhibit to the registration statement. You may review
a copy of the registration statement without charge at the
offices of the SEC public reference room at the address noted
above. This proxy statement/information statement/prospectus is a
part of that registration statement and constitutes a prospectus
of NM Acquisition Corp. in addition to being a proxy statement
of Concentric for use at its special meeting and an information
statement of NEXTLINK.
NEXTLINK has supplied all information contained or incorporated
by reference in this proxy statement/information
statement/prospectus relating to NEXTLINK and NM Acquisition
Corp., and Concentric has supplied all information contained or
incorporated by reference in this proxy statement/information
statement/prospectus relating to Concentric. Neither NEXTLINK nor
Concentric warrants the accuracy or completeness of information
relating to the other.
You should rely only on the information contained or incorporated
by reference in this proxy statement/information
statement/prospectus to vote your shares at the special meeting.
Neither NEXTLINK nor Concentric has authorized anyone to provide
you with information that is different from what is contained or
incorporated by reference in this proxy statement/information
statement and prospectus. This proxy statement/information
statement/prospectus is dated May 12, 2000. You should not
assume the information contained in this proxy
statement/information statement/prospectus is accurate as of any
date other than that date, or any other date as this proxy
statement/information statement/prospectus indicates. Neither the
mailing of this proxy statement/information statement/prospectus
to you, nor the issuance of common stock in the merger, creates
any implication to the contrary.
78
DOCUMENTS INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/
INFORMATION STATEMENT/ PROSPECTUS
This proxy statement/information statement/prospectus
incorporates documents by reference which are not presented in or
delivered with this document. To obtain these additional
documents, see “Where You Can Find More Information” on
page 77.
The SEC allows NEXTLINK and Concentric to incorporate by
reference information into this proxy statement/information
statement/prospectus, which means that NEXTLINK and Concentric
can disclose important information to you by referring you to
another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this proxy
statement/information statement and prospectus, except for any
information superseded by information contained directly in this
proxy statement/information statement/prospectus or in later
filed documents incorporated by reference in this proxy
statement/information statement/prospectus.
The following documents, which have been filed by NEXTLINK with
the SEC, are incorporated by reference into this proxy
statement/information statement/prospectus:
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NEXTLINK’s annual report on Form 10-K for the fiscal
year ended December 31, 1999 (filed on March 30, 2000); |
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NEXTLINK’s current report on Form 8-K dated
January 10, 2000 (filed on January 11, 2000); |
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NEXTLINK’s current report on Form 8-K dated
January 24, 2000; and |
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NEXTLINK’s current report on Form 8-K dated
February 14, 2000 (filed on February 16, 2000). |
All documents filed by NEXTLINK pursuant to Section 13(a),
13(c), 14 and 15(d) of the Exchange Act subsequent to the date of
this proxy statement/information statement/prospectus and prior
to the date the merger is consummated shall be deemed to be
incorporated by reference in this proxy statement/information
statement/prospectus and to be a part of this proxy
statement/information statement/prospectus from the date any such
document is filed.
The following documents, which have been filed by Concentric with
the SEC, are incorporated by reference into this proxy
statement/information statement/prospectus:
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Concentric’s annual report on Form 10-K for the fiscal
year ended December 31, 1999 (filed on March 30, 2000); |
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Concentric’s amendment to annual report on Form 10-K/A
for the fiscal year ended December 31, 1999 (filed on
April 26, 2000); |
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Concentric’s current report on Form 8-K dated
January 12, 2000; and |
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Concentric’s current report on Form 8-K dated
February 14, 2000. |
All documents filed by Concentric pursuant to Section 13(a),
13(c), 14 and 15(d) of the Exchange Act subsequent to the date
of this proxy statement/information statement/prospectus and
prior to the date of the special meeting shall be deemed to be
incorporated by reference into this proxy statement/information
statement/prospectus and to be a part of this proxy
statement/information statement/prospectus from the date any such
document is filed.
Any statement contained in a document incorporated or deemed to
be incorporated in this document by reference will be deemed to
be modified or superseded for purposes of this proxy
statement/information statement/prospectus to the extent that a
statement contained in this document or any other subsequently
filed document that is deemed to be incorporated in this document
by reference modifies or supersedes the statement. Any statement
so modified or superseded will not be deemed, except as so
modified or superseded, to constitute a part of this proxy
statement/information statement/prospectus.
79
EXPERTS
The consolidated financial statements of NEXTLINK as of
December 31, 1999 and 1998, and for each of the three years
in the period ended December 31, 1999, included in the
annual report on Form 10-K of NEXTLINK for the year ended
December 31, 1999, incorporated by reference in this proxy
statement/ information statement/ prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as
indicated in its report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in
giving such report.
The consolidated financial statements of Concentric at
December 31, 1999 and 1998, and for each of the three years
in the period ended December 31, 1999, included in the
annual report on Form 10-K of Concentric for the year ended
December 31, 1999, have been audited by Ernst & Young
LLP, independent public accountants, as set forth in their report
to these financial statements incorporated by reference in this
proxy statement/information statement/prospectus, and are
incorporated in this proxy statement/information
statement/prospectus in reliance upon the authority of Ernst
& Young LLP as experts in accounting and auditing.
SHAREHOLDER PROPOSALS
Proposals submitted by stockholders of Concentric for
presentation at the 2000 annual meeting of stockholders, to be
scheduled if the merger is not approved at the special meeting,
must be received by the secretary of Concentric no later than
June 22, 2000 for inclusion in the proxy statement and form
of proxy relating to the 2000 annual meeting of stockholders.
LEGAL MATTERS
The validity of the common stock offered by this proxy
statement/information statement/prospectus will be passed upon
for NEXTLINK by Willkie Farr & Gallagher, New York, New York.
Willkie Farr & Gallagher, counsel for NEXTLINK, and
Wilson Sonsini Goodrich & Rosati, Professional
Corporation, counsel for Concentric, will pass upon federal
income tax consequences of the merger for NEXTLINK and
Concentric, respectively. See details of the opinions provided by
these firms under “The Merger — Material Tax
Consequences of the Merger.”
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APPENDIX A
Amended and Restated Agreement and Plan of Merger and
Share Exchange Agreement dated as of May 10, 2000
by and among
Concentric Network Corporation,
NEXTLINK Communications, Inc.,
Eagle River Investments, L.L.C.,
Craig O. McCaw and
NM Acquisition Corp.
TABLE OF CONTENTS
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SECTION 1.1 |
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Definitions |
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| ARTICLE 2. THE MERGERS |
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SECTION 2.1 |
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The Mergers |
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SECTION 2.2 |
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LHP Share Exchange |
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SECTION 2.3 |
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Certificate of Incorporation and Bylaws of the Surviving
Corporation |
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SECTION 2.4 |
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Directors and Officers of the Surviving Corporation |
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SECTION 2.5 |
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Alternative Transaction Structure |
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SECTION 2.6 |
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Closing |
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SECTION 3.1 |
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Effect on Capital Stock |
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Exchange of Certificates |
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Stock Options |
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Withholding Rights |
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Corporate Existence and Power |
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Corporate Authorization |
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Governmental Authorization |
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Non-contravention |
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Capitalization |
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Subsidiaries |
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Financial Statements |
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SECTION 4.9 |
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Information Supplied |
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SECTION 4.10 |
|
Absence of Certain Changes |
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21 |
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|
SECTION 4.11 |
|
No Undisclosed Material Liabilities |
|
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21 |
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|
SECTION 4.12 |
|
Compliance with Laws and Court Orders |
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21 |
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|
SECTION 4.13 |
|
Litigation |
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21 |
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|
SECTION 4.14 |
|
Finders’ Fees |
|
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22 |
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|
SECTION 4.15 |
|
Opinion of Financial Advisor |
|
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22 |
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|
SECTION 4.16 |
|
Taxes |
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22 |
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|
SECTION 4.17 |
|
Tax Opinions |
|
|
22 |
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|
SECTION 4.18 |
|
Employee Benefit Plans and Labor Matters |
|
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23 |
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|
SECTION 4.19 |
|
Environmental Matters |
|
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25 |
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|
SECTION 4.20 |
|
Intellectual Property |
|
|
25 |
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|
SECTION 4.21 |
|
Contracts |
|
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26 |
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|
SECTION 4.22 |
|
Vote Required |
|
|
26 |
|
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|
SECTION 4.23 |
|
Antitakeover Statues: Rights Agreement |
|
|
26 |
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|
|
| ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF NEXTLINK |
|
|
27 |
|
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|
|
SECTION 5.1 |
|
Corporate Existence and Power |
|
|
27 |
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|
SECTION 5.2 |
|
Corporate Authorization |
|
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27 |
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|
SECTION 5.3 |
|
Governmental Authorization |
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27 |
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|
SECTION 5.4 |
|
Non-contravention |
|
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27 |
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|
SECTION 5.5 |
|
Capitalization |
|
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28 |
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|
SECTION 5.6 |
|
Subsidiaries |
|
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29 |
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|
SECTION 5.7 |
|
SEC Filings |
|
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29 |
|
(i)
| |
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Page |
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|
SECTION 5.8 |
|
Financial Statements |
|
|
29 |
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|
SECTION 5.9 |
|
Information Supplied |
|
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30 |
|
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|
SECTION 5.10 |
|
Absence of Certain Changes |
|
|
30 |
|
|
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|
|
|
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|
SECTION 5.11 |
|
No Undisclosed Material Liabilities |
|
|
30 |
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|
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|
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|
SECTION 5.12 |
|
Compliance with Laws and Court Orders |
|
|
30 |
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|
SECTION 5.13 |
|
Litigation |
|
|
30 |
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|
SECTION 5.14 |
|
Finders’ Fees |
|
|
30 |
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|
SECTION 5.15 |
|
Taxes |
|
|
31 |
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|
SECTION 5.16 |
|
Tax Opinions |
|
|
31 |
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|
SECTION 5.17 |
|
Environmental Matters |
|
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31 |
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|
SECTION 5.18 |
|
Intellectual Property |
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|
31 |
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|
SECTION 5.19 |
|
Contracts |
|
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32 |
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|
SECTION 5.20 |
|
Vote Required |
|
|
32 |
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|
SECTION 5.21 |
|
Reliance of McCaw on NEXTLINK Representations and Warranties |
|
|
32 |
|
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|
|
|
|
| ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF EAGLE RIVER AND MCCAW |
|
|
33 |
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|
SECTION 6.1 |
|
Organization and Authority |
|
|
33 |
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|
SECTION 6.2 |
|
Due Authorization etc. |
|
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33 |
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|
SECTION 6.3 |
|
No Conflicts, etc. |
|
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33 |
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|
SECTION 6.4 |
|
Consents |
|
|
33 |
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|
SECTION 6.5 |
|
Title to Contributed Interest, etc |
|
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33 |
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|
SECTION 6.6 |
|
No Actions |
|
|
33 |
|
|
|
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|
SECTION 6.7 |
|
Brokers, Finders, etc. |
|
|
34 |
|
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|
|
|
SECTION 6.8 |
|
Acquisition for Investment |
|
|
34 |
|
|
|
|
|
|
| ARTICLE 7. COVENANTS OF CONCENTRIC |
|
|
34 |
|
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|
|
|
SECTION 7.1 |
|
Concentric Interim Operations |
|
|
34 |
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|
SECTION 7.2 |
|
Concentric Stockholders’ Meeting: Proxy Material |
|
|
36 |
|
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|
|
|
SECTION 7.3 |
|
No Solicitation |
|
|
37 |
|
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|
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|
|
|
SECTION 7.4 |
|
Bondholder and Preferred Consent |
|
|
37 |
|
|
|
|
|
|
|
|
SECTION 7.5 |
|
The Exchange Offer |
|
|
38 |
|
|
|
|
|
|
| ARTICLE 8. COVENANTS OF NEXTLINK |
|
|
41 |
|
|
|
|
|
|
|
|
SECTION 8.1 |
|
Eagle River Consent |
|
|
41 |
|
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|
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|
SECTION 8.2 |
|
Director and Officer Liability |
|
|
41 |
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|
SECTION 8.3 |
|
Quotation of Stock |
|
|
42 |
|
|
|
|
|
|
|
|
SECTION 8.4 |
|
NEXTLINK Board of Directors |
|
|
42 |
|
|
|
|
|
|
|
|
SECTION 8.5 |
|
Employee Matters |
|
|
42 |
|
|
|
|
|
|
|
|
SECTION 8.6 |
|
Assumption of Concentric Stock Option Plans: Form S-8
Employee Plans |
|
|
43 |
|
|
|
|
|
|
|
|
SECTION 8.7 |
|
Newco Certificate of Incorporation and Bylaws |
|
|
43 |
|
|
|
|
|
|
| ARTICLE 9. COVENANTS OF NEXTLINK, CONCENTRIC, EAGLE RIVER AND MCCAW |
|
|
43 |
|
|
|
|
|
|
|
|
SECTION 9.1 |
|
Reasonable Efforts |
|
|
43 |
|
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|
|
SECTION 9.2 |
|
Proxy Statement: Registration Statement |
|
|
44 |
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|
SECTION 9.3 |
|
Public Announcements |
|
|
44 |
|
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|
|
SECTION 9.4 |
|
Further Assurances |
|
|
45 |
|
|
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|
|
SECTION 9.5 |
|
Access to Information |
|
|
45 |
|
|
|
|
|
|
|
|
SECTION 9.6 |
|
Notices of Certain Events |
|
|
45 |
|
(ii)
| |
|
|
|
|
|
|
|
|
|
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|
|
Page |
|
|
|
|
|
|
|
|
|
SECTION 9.7 |
|
Tax-free Reorganization: Tax-free Exchange |
|
|
45 |
|
|
|
|
|
|
|
|
SECTION 9.8 |
|
Affiliates |
|
|
46 |
|
|
|
|
|
|
|
|
SECTION 9.9 |
|
Certain Other Agreements and Acknowledgments of NEXTLINK, Eagle
River and McCaw Relating to the LHP Share Exchange |
|
|
46 |
|
|
|
|
|
|
|
|
SECTION 9.10 |
|
Subsequent Transactions |
|
|
47 |
|
|
|
|
|
|
| ARTICLE 10. CONDITIONS TO THE MERGERS |
|
|
48 |
|
|
|
|
|
|
|
|
SECTION 10.1 |
|
Conditions to the Obligations of Concentric and NEXTLINK to
Consummate the Mergers |
|
|
48 |
|
|
|
|
|
|
|
|
SECTION 10.2 |
|
Conditions to the Obligations of NEXTLINK |
|
|
48 |
|
|
|
|
|
|
|
|
SECTION 10.3 |
|
Conditions to the Obligations of Concentric |
|
|
50 |
|
|
|
|
|
|
|
|
SECTION 10.4 |
|
Conditions to the Obligations of McCaw |
|
|
51 |
|
|
|
|
|
|
|
|
SECTION 10.5 |
|
Waiver of NEXTLINK and McCaw Conditions |
|
|
51 |
|
|
|
|
|
|
| ARTICLE 11. TERMINATION |
|
|
51 |
|
|
|
|
|
|
|
|
SECTION 11.1 |
|
Termination |
|
|
51 |
|
|
|
|
|
|
|
|
SECTION 11.2 |
|
Effect of Termination |
|
|
52 |
|
|
|
|
|
|
|
|
SECTION 11.3 |
|
Fees and Expenses |
|
|
52 |
|
|
|
|
|
|
|
|
SECTION 11.4 |
|
Termination of LHP Share Exchange |
|
|
53 |
|
|
|
|
|
|
|
|
SECTION 11.5 |
|
Survival of NEXTLINK and Eagle River and McCaw Representations
and Warranties Relating to the LHP Share Exchange;
Indemnification |
|
|
54 |
|
|
|
|
|
|
| ARTICLE 12. MISCELLANEOUS |
|
|
55 |
|
|
|
|
|
|
|
|
SECTION 12.1 |
|
Notices |
|
|
55 |
|
|
|
|
|
|
|
|
SECTION 12.2 |
|
Survival of Representations and Warranties |
|
|
55 |
|
|
|
|
|
|
|
|
SECTION 12.3 |
|
Amendments; No Waivers |
|
|
55 |
|
|
|
|
|
|
|
|
SECTION 12.4 |
|
Successors and Assigns |
|
|
56 |
|
|
|
|
|
|
|
|
SECTION 12.5 |
|
Governing Law |
|
|
56 |
|
|
|
|
|
|
|
|
SECTION 12.6 |
|
Jurisdiction |
|
|
56 |
|
|
|
|
|
|
|
|
SECTION 12.7 |
|
WAIVER OF JURY TRIAL |
|
|
56 |
|
|
|
|
|
|
|
|
SECTION 12.8 |
|
Counterparts; Effectiveness |
|
|
56 |
|
|
|
|
|
|
|
|
SECTION 12.9 |
|
Entire Agreement |
|
|
56 |
|
|
|
|
|
|
|
|
SECTION 12.10 |
|
Captions |
|
|
56 |
|
|
|
|
|
|
|
|
SECTION 12.11 |
|
Severability |
|
|
57 |
|
|
|
|
|
|
|
|
SECTION 12.12 |
|
Specific Performance |
|
|
57 |
|
|
|
|
|
|
|
|
SECTION 12.13 |
|
Schedules |
|
|
57 |
|
(iii)
EXHIBITS
| |
|
|
|
A — |
|
Form of NEXTLINK Voting Agreement Exhibit |
|
B — |
|
Form of Concentric Voting Agreement |
|
C — |
|
Form of Concentric Rule 145 Affiliate Letter |
|
D — |
|
Form of Craig O. McCaw Registration Rights Agreement |
|
E — |
|
Form of NM Acquisition Corp. Certificate of Incorporation |
|
F — |
|
Form of NM Acquisition Corp. Bylaws |
(iv)
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AND SHARE EXCHANGE AGREEMENT
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER AND SHARE
EXCHANGE AGREEMENT (this “AGREEMENT”) dated as of
May 10, 2000 by and among Concentric Network Corporation, a
Delaware corporation (“CONCENTRIC”), NEXTLINK
Communications, Inc., Inc. a Delaware corporation
(“NEXTLINK”), Eagle River Investments, L.L.C., a
Washington limited liability company (“EAGLE RIVER”),
Craig O. McCaw (“MCCAW”) and NM Acquisition Corp., a
Delaware corporation (“NEWCO”).
WHEREAS, on January 9, 2000, Concentric, NEXTLINK, Eagle
River and Newco entered into an Agreement and Plan of Merger and
Share Exchange Agreement (the “ORIGINAL AGREEMENT”),
pursuant to which, among other things, (i) NEXTLINK and
Concentric agreed to consummate the mergers of each of NEXTLINK
and Concentric with and into Newco and (ii) Eagle River,
NEXTLINK and Newco agreed to consummate the contribution of the
Contributed Interest (as hereinafter defined) by Eagle River to
Newco in exchange for Newco Common Stock (as hereinafter
defined), in each case in accordance with the terms and
conditions set forth in the Original Agreement;
WHEREAS, the respective Boards of Directors of NEXTLINK and
Concentric approved the Original Agreement, and authorized
certain officers of NEXTLINK and Concentric, respectively, to
enter into additional agreements, including this Agreement, in
furtherance of the transactions contemplated by the Original
Agreement;
WHEREAS, the respective Boards of Directors of NEXTLINK and
Concentric deem it advisable and in the best interests of their
respective stockholders to consummate the Mergers (as defined
herein) of each of Concentric and NEXTLINK into Newco on the
terms and conditions set forth herein;
WHEREAS, as a condition and inducement to Concentric’s
entering into the Original Agreement, concurrently with the
execution and delivery of the Original Agreement, Concentric and
Eagle River entered into a Voting Agreement in the form attached
as Exhibit A hereto (the “NEXTLINK VOTING
AGREEMENT”), pursuant to which Eagle River has agreed to
deliver its consent as majority stockholder approving the Mergers
(the “EAGLE RIVER CONSENT”);
WHEREAS, as a condition and inducement to NEXTLINK’s
entering into the Original Agreement, concurrently with the
execution and delivery of the Original Agreement, NEXTLINK,
Concentric and the Concentric stockholders parties thereto
entered into Voting Agreements in the form attached hereto as
Exhibit B (the “CONCENTRIC VOTING AGREEMENT”);
WHEREAS, on the date of the Original Agreement, Eagle River and
NEXTLINK together owned 100% of the limited liability company
interests in LHP, L.L.C., a Washington limited liability company
(“LHP”), and LHP owned 100% of the limited liability
company interests in INTERNEXT, L.L.C., a Delaware limited
liability company (“INTERNEXT”);
WHEREAS, on May 5, 2000, Eagle River transferred all of the
LHP limited liability company interests owned by it to McCaw, the
controlling affiliate of Eagle River, so that, on the date of
this Agreement, McCaw and NEXTLINK together own 100% of the LHP
limited liability company interests;
WHEREAS, immediately prior to the closing of the Mergers, McCaw
will contribute to Newco all of the LHP limited liability company
interests (or capital stock of LHP in the event that LHP is
converted into a corporation) owned by McCaw (the
“CONTRIBUTED INTEREST”) in consideration of the
issuance by Newco of shares of Newco Common Stock (as hereinafter
defined) to McCaw as set forth herein (the “LHP SHARE
EXCHANGE”);
A-1
WHEREAS, it is intended that, for federal income tax purposes,
the Mergers shall qualify as reorganizations within the meaning
of the provisions of Section 368(a) of the Internal Revenue
Code of 1986 (the “CODE”) and the LHP Share Exchange in
conjunction with the Mergers shall qualify as a tax-free
exchange under Section 351 of the Code;
WHEREAS, following the date of the Original Agreement, NEXTLINK
declared a stock dividend (the “NEXTLINK Stock
Dividend”) of one share of NEXTLINK Common Stock (as
hereinafter defined) for each share of NEXTLINK Common Stock,
which NEXTLINK Stock Dividend will, subject to receipt of
required stockholder approvals, be paid at the close of business
on June 15, 2000 (the “NEXTLINK Stock Dividend Payment
Date”);
WHEREAS, in the event that the Closing Date occurs after the
NEXTLINK Stock Dividend Payment Date, the Common Stock Ratio (as
hereinafter defined) will be adjusted as set forth herein; and
WHEREAS, in order to (i) modify the LHP Share Exchange to
reflect the transfer of LHP limited liability company interests
from Eagle River to McCaw, (ii) provide for the adjustment
of the Common Stock Ratio in connection with the NEXTLINK Stock
Dividend, if necessary, and (iii) make certain other changes
to the Original Agreement, Concentric, NEXTLINK, Eagle River,
McCaw and Newco desire to amend and restate the Original
Agreement in its entirety, as set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
set forth below, the parties agree as follows:
ARTICLE 1.
DEFINITIONS
SECTION 1.1. Definitions. (a) The following
terms, as used herein, have the following meanings:
“ACQUISITION PROPOSAL” means any bona fide offer or
proposal made, renewed or continued after the date hereof for
(i) a merger, consolidation, share exchange, business
combination, reorganization, recapitalization or other similar
transaction involving Concentric or any Concentric Significant
Subsidiary or (ii) the acquisition, directly or indirectly,
of (A) an equity interest representing more than 25% of the
voting securities of Concentric or any Concentric Significant
Subsidiary or (B) assets, securities or ownership interests
representing an amount equal to or greater than 25% of the
consolidated assets or earning power of the Concentric Group,
other than the transactions contemplated by this Agreement or
permitted pursuant to Section 7.1 hereof.
“AFFILIATE” means, with respect to any Person, any
other Person directly or indirectly controlling, controlled by,
or under common control with such Person.
“BENEFIT ARRANGEMENT” means, with respect to any
Person, any employment, severance or similar contract or
arrangement (whether or not written) providing for compensation,
bonus, profit-sharing, stock option, or other stock-related
rights or other forms of incentive or deferred compensation,
vacation benefits, insurance coverage (including any self-insured
arrangements), health or medical benefits, disability benefits,
workers’ compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits
(including compensation, pension, health, medical or life
insurance or other benefits) that (i) is not an Employee
Plan, (ii) is entered into, maintained, administered, or
contributed to or obligated to contribute to, as the case may be,
by such Person or any of its Subsidiaries and (iii) covers
any employee or former employee of such Person or any of its
Subsidiaries. “CONCENTRIC BENEFIT ARRANGEMENTS” means
the Benefit Arrangements of Concentric or the Concentric
Subsidiaries and “NEXTLINK BENEFIT ARRANGEMENTS” means
the Benefit Arrangements of NEXTLINK or the NEXTLINK
Subsidiaries.
“BUSINESS DAY” means a day other than a Saturday,
Sunday or other day on which commercial banks in New York City
are authorized or required by law to close.
A-2
“COMMON STOCK RATIO” means, subject to adjustment in
accordance with Section 3.1 (o), the quotient (rounded to
the nearest 1/10,000) determined by dividing $45.00 by the
Weighted Average Sales Price; provided that the Common
Stock Ratio shall not be less than .495 or greater than .650.
“CONCENTRIC BALANCE SHEET” means the Consolidated
Balance Sheets of Concentric and its consolidated subsidiaries as
of September 30, 1999 and the footnotes thereto set forth
in the Concentric 10-Q.
“CONCENTRIC BALANCE SHEET DATE” means
September 30, 1999.
“CONCENTRIC COMMON STOCK” means Common Stock, par value
$0.001 per share, of Concentric.
“CONCENTRIC DEBENTURES” means Concentric’s
13 1/2% Subordinated Debentures due 2010 issuable in
exchange for Concentric Series B Preferred Stock at the
option of Concentric.
“CONCENTRIC GROUP” means Concentric and the Concentric
Subsidiaries.
“CONCENTRIC MATERIAL ADVERSE EFFECT” means a material
adverse effect on financial condition, assets or results of
operations of the Concentric Group taken as a whole, excluding
any such effect resulting from or arising in connection with
(i) this Agreement, the transactions contemplated hereby or
the pendancy or announcement thereof including, but not limited
to the Concentric Board of Directors’ decision to enter into
this Agreement or the failure to receive the consent of the
holders of Concentric Senior Notes, Concentric Debentures,
Concentric Series B Preferred Stock and Concentric
Series C Preferred Stock described in Section 7.4
hereof or any default under or any obligation of Concentric to
offer to repurchase the subject securities under the respective
indentures for the Concentric Senior Notes or the Concentric
Debentures or under the certificate of designations for the
Concentric Series B Preferred Stock or Concentric
Series C Preferred Stock or any appraisal liability in
respect of the Concentric Series B Preferred Stock or
Concentric Series C Preferred Stock under Section 262
of the Delaware General Corporation Law resulting from the
consummation of the Mergers, (ii) changes or conditions generally
affecting the industries in which the Concentric Group operates
or (iii) changes in general economic, regulatory or
political conditions.
“CONCENTRIC SENIOR NOTES” means the 12 3/4% Senior
Notes due 2007 of Concentric.
“CONCENTRIC PREFERRED STOCK” means Concentric
Series B Preferred Stock and Concentric Series C
Preferred Stock, collectively.
“CONCENTRIC RIGHTS AGREEMENT” means the Preferred
Shares Rights Agreement, dated as of November 10, 1999.
“CONCENTRIC SERIES A JUNIOR PREFERRED STOCK” means the
Series A Junior Participating Preferred Stock of Concentric.
“CONCENTRIC SERIES B PREFERRED STOCK” means the
13 1/2% Series B Redeemable Exchangeable Preferred
Stock, par value $1.00 per share, of Concentric.
“CONCENTRIC SERIES C PREFERRED STOCK” means the 7%
Series C Convertible Redeemable Preferred Stock, par value
$1.00 per share, of Concentric.
“CONCENTRIC SIGNIFICANT SUBSIDIARY” means any
Concentric Subsidiary that would constitute a “significant
subsidiary” within the meaning of Rule 1-02 of
Regulation S-X of the SEC as of September 30, 1999.
“CONCENTRIC SUBSIDIARY” means any entity of which
securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other
persons performing similar functions are at any time, directly or
indirectly, owned by Concentric, including any Concentric
subsidiary included in the Concentric consolidated financial
statements in accordance with GAAP.
“CONCENTRIC 10-K” means Concentric’s annual report
on Form 10-K for the fiscal year ended December 31,
1998.
A-3
“CONCENTRIC 10-Q” means Concentric’s quarterly
report on Form 10-Q for the quarter ended September 30,
1999.
“DEFERRED COMPENSATION PLAN” means, with respect to any
Person, any plan, agreement or arrangement that (i) is
described under Sections 4(b)(5) or 401(a)(1) of ERISA (or
similar plan covering one or more non-employee directors of a
Person), (ii) is maintained, administered or contributed to
or required to be contributed to by such Person or any of its
Affiliates and (iii) covers any current or former employee
or director of such Person or any of its Subsidiaries.
“CONCENTRIC DEFERRED COMPENSATION PLAN” means a
Deferred Compensation Plan of Concentric or any Concentric
Affiliate for the benefit of any current or former employee or
director of Concentric or any Concentric Subsidiary.
“DELAWARE LAW” means the General Corporation Law of the
State of Delaware.
“EMPLOYEE PLAN” means, with respect to any Person, any
“employee benefit plan,” as defined in
Section 3(3) of ERISA, that (i) is subject to any
provision of ERISA, (ii) is maintained, administered,
contributed to or obligated to contribute to by such Person or
any of its Affiliates and (iii) covers any employee or former
employee of such Person or any of its Subsidiaries.
“CONCENTRIC EMPLOYEE PLAN” means an Employee Plan of
Concentric or any of the Concentric Subsidiaries. “NEXTLINK
EMPLOYEE PLAN” means an Employee Plan of NEXTLINK or any of
the NEXTLINK Subsidiaries.
“ENVIRONMENTAL LAWS” means any federal, state, local or
foreign law (including, without limitation, common law), treaty,
judicial decision, regulation, rule, judgment, order, decree,
injunction, permit or governmental restriction or requirement or
any agreement with any Governmental Authority or other third
party, relating to human health and safety, the environment or to
pollutants, contaminants, wastes or chemicals or any toxic,
radioactive, ignitable, corrosive, reactive or otherwise
hazardous substances, wastes or materials.
“ENVIRONMENTAL PERMITS” means, with respect to any
Person, all permits, licenses, franchises, certificates,
approvals and other similar authorizations of any Governmental
Authority relating to or required by Environmental Laws and
affecting, or relating in any way to, the business of such Person
or any of its Subsidiaries as currently conducted.
“ERISA” means the Employee Retirement Income Security
Act of 1974.
“ERISA AFFILIATE” of any entity means any other entity
that, together with such entity, would be treated as a single
employer under Section 414 of the Code.
“FCC” means the Federal Communications Commission.
“FORSTMANN LITTLE AGREEMENT” means the Stock Purchase
Agreement, dated as of December 7, 1999, by and between
NEXTLINK and the purchasers named therein and all agreements
contemplated thereby.
“HSR ACT” means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976.
“KNOWLEDGE” means, with respect to any fact, the
conscious awareness of such fact by an executive officer (as
defined under the 1933 Act) of the relevant Person.
“LEVEL 3” means Level 3 Communications, L.L.C., a
Delaware limited liability company.
“LEVEL 3 AGREEMENT” means the Cost Sharing and IRU
Agreement, dated July 18, 1998, between Level 3 and INTERNEXT.
“LIEN” means, with respect to any property or asset,
any mortgage, lien, pledge, charge, security interest,
encumbrance or other adverse claim of any kind in respect of such
property or asset. For purposes of this Agreement, a Person
shall be deemed to own subject to a Lien any property or asset
that it has acquired or holds subject to the interest of a vendor
or lessor under any conditional sale agreement, capital lease or
other title retention agreement relating to such property or
asset.
A-4
“MULTIEMPLOYER PLAN” means each Employee Plan that is a
multiemployer plan, as defined in Section 3(37) of ERISA.
“NASDAQ” means The Nasdaq National Market.
“NEWCO CLASS B COMMON STOCK” means the Class B
Common Stock, par value $0.02, of Newco.
“NEWCO COMMON STOCK” means the Class A Common
Stock, par value $0.02 per share, of Newco.
“NEWCO PREFERRED STOCK” means the Newco Series A
Preferred Stock, Newco Series B Preferred Stock, Newco
Series C Preferred Stock, Newco Series D Preferred
Stock, Newco Series E Preferred Stock and Newco
Series F Preferred Stock, collectively.
“NEWCO SERIES A PREFERRED STOCK” means the series of
Newco 14% redeemable preferred stock, par value $0.01 per share,
to be designated by Newco as Series A Preferred Stock.
“NEWCO SERIES B PREFERRED STOCK” means the series of
Newco 6 1/2% convertible preferred stock, par value $0.01
per share, to be designated by Newco as Series B Preferred Stock.
“NEWCO SERIES C PREFERRED STOCK” means the series of
cumulative participating preferred stock, par value $0.01 per
share, to be designated by Newco as Series C Preferred
Stock.
“NEWCO SERIES D PREFERRED STOCK” means the series of
cumulative participating preferred stock, par value $0.01 per
share, to be designated by Newco as Series D Preferred
Stock.
“NEWCO SERIES E PREFERRED STOCK” means the series of
Newco 13 1/2% redeemable exchangeable preferred stock, par
value $1.00 per share, to be designated as by Newco as
Series E Preferred Stock.
“NEWCO SERIES F PREFERRED STOCK” means the series of
Newco 7% convertible redeemable preferred stock, par value $1.00
per share, to be designated as by Newco as Series F
Preferred Stock.
“NEXTLINK BALANCE SHEET” means the Consolidated Balance
Sheet of NEXTLINK and its consolidated subsidiaries as of
September 30, 1999 and the footnotes thereto, as set forth
in the NEXTLINK 10-Q.
“NEXTLINK BALANCE SHEET DATE” means September 30,
1999.
“NEXTLINK CLASS B COMMON STOCK” means the Class B
Common Stock, par value $.02 per share, of NEXTLINK.
“NEXTLINK COMMON STOCK” means the Class A Common
Stock, par value $.02 per share, of NEXTLINK.
“NEXTLINK 14% PREFERRED STOCK” means the series of
NEXTLINK redeemable preferred stock, par value $0.01 per share,
currently designated as NEXTLINK 14% Redeemable Preferred Stock.
“NEXTLINK GROUP” means NEXTLINK and the NEXTLINK
Subsidiaries.
“NEXTLINK MATERIAL ADVERSE EFFECT” means a material
adverse effect on the financial condition, assets or results of
operations of NEXTLINK Group, taken as a whole, excluding any
such effect resulting from or arising in connection with
(i) this Agreement, the transactions contemplated hereby or
pendancy or the announcement thereof including, but not limited
to the NEXTLINK Board of Director’s decision to enter into
this Agreement, (ii) changes or conditions generally
affecting the industries in which NEXTLINK and the NEXTLINK
Subsidiaries operate or (iii) changes in general economic,
regulatory or political conditions.
“NEXTLINK PREFERRED STOCK” means the NEXTLINK 14%
Preferred Stock, NEXTLINK Series C Preferred Stock, NEXTLINK
Series D Preferred Stock and NEXTLINK 6 1/2% Preferred
Stock, collectively.
A-5
“NEXTLINK SERIES C PREFERRED STOCK” means the
Series C Cumulative Convertible Participating Preferred
Stock of NEXTLINK.
“NEXTLINK SERIES D PREFERRED STOCK” means the
Series D Cumulative Convertible Participating Preferred
Stock of NEXTLINK.
“NEXTLINK SIGNIFICANT SUBSIDIARY” means any NEXTLINK
Subsidiary that would constitute a “significant
subsidiary” within the meaning of Rule 1-02 of
Regulation S-X of the SEC as of September 30, 1999.
“NEXTLINK 6 1/2% PREFERRED STOCK” means the series
of NEXTLINK preferred stock, par value $0.01 per share,
currently designated as NEXTLINK 6 1/2% Convertible
Preferred Stock.
“NEXTLINK SUBSIDIARY” means any entity of which
securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other
persons performing similar functions are at any time, directly or
indirectly, owned by NEXTLINK, including any NEXTLINK subsidiary
included in the NEXTLINK consolidated financial statements in
accordance with GAAP.
“NEXTLINK 10-K” means NEXTLINK’s annual report on
Form 10-K for the fiscal year ended December 31, 1998.
“NEXTLINK 10-Q” means NEXTLINK’s quarterly report
on Form 10-Q for the quarter ended September 30, 1999.
“1933 ACT” means the Securities Act of 1933.
“1934 ACT” means the Securities Exchange Act of 1934.
“PENSION PLAN” means any plan (other than a
Multiemployer Plan) that is subject to Title IV of ERISA.
“PERSON” means an individual, corporation, partnership,
limited liability company, association, trust or other entity or
organization, including a government or political subdivision or
an agency or instrumentality thereof.
“PRIME RATE” means, at any time, the rate of interest
per annum equal to the rate of interest per annum quoted,
published and commonly known as the “prime rate” of the
Bank of America, which the Bank of America establishes at its
main office in New York, New York, as the reference rate of
interest in order to determine interest rates for loans in U.S.
dollars to its U.S. borrowers, adjusted automatically with each
quoted or published change in such rate.
“REGISTRATION RIGHTS AGREEMENT” means the registration
rights agreement to be entered into between Eagle River and
NEXTLINK or Eagle River and Newco, as the case may be, for the
registration of NEXTLINK Common Stock or Newco Common Stock, as
the case may be, received by Eagle River in the LHP Share
Exchange, which Registration Rights Agreement shall be
substantially in the form set forth as Exhibit D hereto.
“RIGHTS” means the rights to purchase one
one-thousandth share of Concentric Series A Junior Preferred
Stock issued pursuant to the Rights Agreement.
“SEC” means the Securities and Exchange Commission.
“SPECIAL COMMITTEE” means the special committee of the
independent directors of NEXTLINK formed to pass upon the LHP
Share Exchange.
“SUBSEQUENT TRANSACTION” means any transaction whereby
(i) any member of the NEXTLINK Group would acquire or divest
(by merger, consolidation, purchase or sale of stock or assets
or otherwise) any corporation, limited liability company,
partnership, other business organization or assets or division
thereof, (ii) any member of the NEXTLINK Group would acquire
or divest an investment interest in any of the foregoing,
(iii) any member of the NEXTLINK Group would issue or retire
any equity interest or incur or repay any indebtedness whether
in connection with any item described in (i) or (ii) or
otherwise,
A-6
(iv) any member of the NEXTLINK Group enters into or engages
in a strategic alliance or other commercial relationship or
(v) any member of the NEXTLINK Group is acting in the
ordinary course consistent with past practice; provided,
however, in connection with a Subsequent Transaction described in
items (i), (ii), (iii) or (iv) of this definition,
(other than (A) the pending acquisition through Wispra, a
Canadian entity in which NEXTLINK owns 65% of the equity and 35%
of the voting rights, of fixed wireless spectrum from Industry
Canada, (B) the issuance of NEXTLINK Series C Preferred
Stock and NEXTLINK Series D Preferred Stock pursuant to the
Forstmann Little Agreement and (C) the implementation by
NEXTLINK of a secured bank credit facility in an amount up to
$2,000,000,000) which is material to the business or financial
condition of NEXTLINK Group taken as a whole, NEXTLINK shall have
received an opinion from a nationally recognized investment
bank, acting as financial advisor to NEXTLINK, to the effect
that, from a financial point of view, such Subsequent Transaction
is fair to the holders of NEXTLINK Common Stock and, if
applicable, NEXTLINK, and such transaction would not cause
(x) the Mergers or the Alternative Merger, as applicable, to
be treated as other than 368 Reorganizations, (y) the LHP
Share Exchange in conjunction with the Mergers or the Alternative
Merger, as applicable, to be treated as other than a 351
Transaction or (z) any of the conditions set forth in
Article 10 hereof not to be satisfied.
“SUBSIDIARY” means, with respect to any Person, any
entity of which securities or other ownership interests having
ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at
any time directly or indirectly owned by such Person, including
any subsidiary included in consolidated financial statements in
accordance with GAAP.
“SUPERIOR PROPOSAL” means any bona fide, unsolicited
written Acquisition Proposal that the Board of Directors of
Concentric determines in good faith by a majority vote, after
consultation with its financial advisor, and taking into account
all the terms and conditions of the Acquisition Proposal, is more
favorable to Concentric’s stockholders than the Mergers and
for which financing, to the extent required, is then fully
committed or reasonably determined to be available by the Board
of Directors of Concentric.
“TEN DAY AVERAGE CLOSING PRICE” means the average
closing price of one share of NEXTLINK Common Stock as quoted by
the National Association of Securities Dealers Automated
Quotation System for the ten trading days immediately preceding
January 15, 2000.
“WEIGHTED AVERAGE SALES PRICE” means, subject to
adjustment in accordance with Section 3.1(o), for the twenty
trading day period ending on the third trading day prior to the
Effective Times, the average (rounded to the nearest 1/10,000) of
the volume weighted averages (rounded to the nearest 1/10,000)
of the trading prices of NEXTLINK Common Stock on Nasdaq for each
day during such period, as reported by Bloomberg, L.P.
Any reference in this Agreement to a statute shall be to such
statute, as amended from time to time, and to the rules and
regulations promulgated thereunder.
Any reference herein to “the date hereof” shall, unless
otherwise noted, refer to the date of the Original Agreement.
(b) Each of the following terms is defined in the Section
set forth opposite such term:
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Section |
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Adjusted Option |
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3.3(a) |
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Alternative Merger |
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2.5 |
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Certificates |
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3.2(b) |
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Certificates of Merger |
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2.1(b) |
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Closing |
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2.6 |
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Closing Date |
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2.6 |
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Code |
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Preamble |
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Common Stock Consideration |
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3.1(c) |
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Concentric |
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Preamble |
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Concentric Benefit Arrangements |
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1.1(a) |
A-7
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Section |
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Concentric Employee Plan |
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1.1(a) |
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Concentric Intellectual Property |
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4.20 |
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Concentric Rule 145 Affiliate |
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9.8 |
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Concentric SEC Documents |
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4.7(a) |
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Concentric Series B Consideration |
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3.1(h) |
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Concentric Series C Consideration |
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3.1(i) |
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Concentric Stockholders’ Meeting |
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4.9 |
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Concentric Stockholders’ Approval |
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4.22 |
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Concentric Stock Option |
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3.3(a) |
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Concentric Voting Agreement |
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Preamble |
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Confidentiality Agreement |
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7.3(a) |
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Contributed Interest |
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Preamble |
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Eagle River |
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Preamble |
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Effective Times |
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2.1(b) |
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End Date |
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11.1(b) |
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Exchange Agent |
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3.2(a) |
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Exchange Consideration |
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7.5(a) |
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Exchange Fund |
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3.2(a) |
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Exchange Offer |
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7.5(a) |
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Exchange Offer Conditions |
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7.5(a) |
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Exchange Offer Documents |
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7.5(b) |
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Exchange Offer Merger |
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7.5(g) |
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Exchange Offer Transactions |
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9.7(a) |
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Exchange Registration Statement |
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7.5(b) |
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GAAP |
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4.8 |
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Governmental Authority |
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4.3 |
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Indemnified Person |
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8.2(a) |
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INTERNEXT |
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Preamble |
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INTERNEXT Guarantee |
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9.1(c) |
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IRS |
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4.16 |
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LHP |
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Preamble |
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LHP Consideration |
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2.2(a) |
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LHP Share Exchange |
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Preamble |
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McCaw |
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Preamble |
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Merger Consideration |
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3.1(i) |
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Mergers |
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2.1(a) |
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Newco |
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Preamble |
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New Directors |
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8.4 |
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New Directors Committee |
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8.4 |
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NEXTLINK |
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Preamble |
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NEXTLINK 6 1/2% Preferred Consideration |
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3.1(e) |
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NEXTLINK 14% Preferred Consideration |
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3.1(d) |
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NEXTLINK Benefit Arrangements |
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1.1(a) |
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NEXTLINK Employee Plan |
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1.1(a) |
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NEXTLINK Intellectual Property |
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5.18 |
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NEXTLINK SEC Documents |
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5.7(a) |
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NEXTLINK Securities |
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5.5(c) |
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NEXTLINK Series C Preferred Consideration |
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3.1(f) |
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NEXTLINK Series D Preferred Consideration |
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3.1(g) |
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NEXTLINK Stock Dividend |
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Preamble |
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NEXTLINK Stock Dividend Payment Date |
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Preamble |
A-8
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Section |
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NEXTLINK Stock Options |
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3.3(b) |
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NEXTLINK Subsidiary |
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1.1(a) |
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Offer to Exchange |
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7.5(c) |
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Original Agreement |
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Preamble |
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Proxy Statement |
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4.9 |
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Registration Statement |
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4.9 |
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Schedule 14D-1. |
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7.5(b) |
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Schedule 14D-9. |
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7.5(d) |
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Standstill Agreement |
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7.3(a) |
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Stockholders’ Meetings |
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4.9 |
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Successor Plan |
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8.5(b) |
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Surviving Corporation |
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2.1(a) |
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Taxes |
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4.16 |
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Tax Return |
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4.16 |
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Termination Fee |
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11.3(b) |
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Third Party |
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7.3(a) |
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Transferred Employees |
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8.5(a) |
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351 Transaction |
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9.7(a) |
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368 Reorganization |
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9.7(a) |
ARTICLE 2.
THE MERGERS
SECTION 2.1. The Mergers. (a) At the applicable
Effective Time, NEXTLINK shall be merged with and into Newco,
and Concentric shall immediately thereafter be merged with and
into Newco (collectively, the “MERGERS”) in accordance
with Delaware Law and upon the terms set forth in this Agreement,
whereupon the separate existence of Concentric and NEXTLINK
shall cease and Newco shall be the surviving corporation (the
“SURVIVING CORPORATION”).
(b) As soon as practicable (and, in any event, within 5
Business Days) after satisfaction or, to the extent permitted
hereunder, waiver of all conditions to the Mergers set forth in
Article 10, other than conditions that by their nature are
to be satisfied at the Effective Times and will in fact be
satisfied at the Effective Times, certificates of merger shall be
duly prepared, executed and acknowledged by Concentric and Newco
and by NEXTLINK and Newco, respectively, and thereafter
delivered to the Secretary of State of Delaware for filing
pursuant to Delaware Law. Such certificates of merger shall be
referred to herein as the “CERTIFICATES OF MERGER.” The
Mergers shall become effective at such time (their respective
“EFFECTIVE TIMES”) as the relevant Certificates of
Merger are duly filed with the Secretary of State of Delaware (or
at such later time as may be agreed by Concentric and NEXTLINK
and specified in the Certificates of Merger).
(c) From and after the Effective Times, the Surviving
Corporation shall possess all the rights, powers, privileges and
franchises and be subject to all of the obligations, liabilities,
restrictions and disabilities of NEXTLINK and Concentric, all as
provided under Delaware Law.
SECTION 2.2. LHP Share Exchange. (a) At the
Closing immediately prior to the Effective Times, McCaw shall
contribute to Newco, and Newco shall accept from McCaw all of
McCaw’s right, title and interest in and to the Contributed
Interest, free and clear of any Liens other than Liens created by
NEXTLINK or Newco, for the consideration described and payable
as provided in Section 2.2(d) (the “LHP
CONSIDERATION”).
(b) Immediately after the Effective Times, Newco shall
assume, and shall thereafter perform and be bound by, and
indemnify McCaw against, any and all of the conditions, covenants
and obligations of McCaw
A-9
solely as a member of LHP arising after the Effective Times, and
effective as of the Effective Times, Newco shall become the sole
member of LHP and McCaw shall cease to be a member of LHP.
(c) At the Closing, immediately prior to the Effective
Times, McCaw shall deliver to Newco, free and clear of any Liens
other than Liens created by NEXTLINK or Newco, the Contributed
Interest.
(d) At the Closing, Newco shall pay the LHP Consideration
in full by issuing a certificate registered in the name of McCaw
representing:
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(i) if the Ten Day Average Closing Price is greater than or
equal to $42.80, but less than or equal to $64.20, 4,112,150
shares of Newco Common Stock; |
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(ii) if the Ten Day Average Closing Price is greater than
$64.20, 3,426,791 shares of Newco Common Stock; or |
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(iii) if the Ten Day Average Closing Price is less than
$42.80, 5,140,187 shares of Newco Common Stock. |
(e) Newco shall reimburse Eagle River in cash all amounts
advanced or loaned by Eagle River to LHP after December 6,
1999 to enable INTERNEXT to satisfy payments due to Level 3 under
the Level 3 Agreement, together with interest on such amounts
from the transfer date or dates to the Closing, at the rate per
annum equal to the Prime Rate.
SECTION 2.3. Certificate of Incorporation and Bylaws of
the Surviving Corporation. (a) The certificate of
incorporation of Newco, prior to the Effective Times and
thereafter, shall be in the form attached hereto as
Exhibit E, except as amended (i) at the Effective Times
pursuant to Sections 2.3(b) and (c) and
(ii) thereafter in accordance with its terms and the
Delaware General Corporation Law. The bylaws of Newco, prior to
the Effective Times and thereafter, shall be in the form attached
hereto as Exhibit F, until amended in accordance with its
terms, the Certificate of Incorporation and the Delaware General
Corporation Law.
(b) Upon the filing of the Certificate of Merger relating
to the merger of NEXTLINK with and into Newco, the Surviving
Corporation’s certificate of incorporation shall be amended
to (i) change the name of Newco to NEXTLINK Communications,
Inc. and (ii) so as to contain the designation of Newco
Preferred Stock issuable upon the conversion of NEXTLINK
Preferred Stock as provided herein.
(c) Upon the filing of the Certificate of Merger relating
to the merger of Concentric with and into Newco, the Surviving
Corporation’s certificate of incorporation shall be amended
to so as to contain the designation of Newco Preferred Stock
issuable upon the conversion of Concentric Preferred Stock as
provided herein.
SECTION 2.4. Directors and Officers of the Surviving
Corporation. From and after the Effective Times, until
successors are duly elected or appointed and qualified in
accordance with applicable law, (i) the directors of
NEXTLINK at the Effective Time of the NEXTLINK Merger, together
with the New Directors as specified in Section 8.4, shall be
the directors of the Surviving Corporation and (ii) the
officers of NEXTLINK at the Effective Time of the NEXTLINK Merger
shall be the officers of the Surviving Corporation.
SECTION 2.5. Alternative Transaction Structure.
(a) The parties anticipate and intend that immediately
following the Effective Times (i) Newco will be deemed to be
a successor issuer to NEXTLINK and Concentric for purposes of
Rule 12g-3 under the 1934 Act, (ii) Newco will be
entitled to include the prior activities and status of NEXTLINK
and Concentric in determining whether Newco meets the eligibility
requirements for the use of Form S-3, (iii) Newco will
be entitled to include the prior reporting history of NEXTLINK
and Concentric in determining whether it has complied with the
public information requirements of Rule 144(c)(1) and
(iv) Newco will not be required to comply with the
prospectus or delivery requirements of Section 4(3) of the
1933 Act by virtue of Rule 174(b) promulgated thereunder.
If, prior to the Effective Time, the parties shall not have
received a no-action letter or other similar assurance from the
Securities and Exchange Commission reasonably satisfactory to
NEXTLINK and Concentric to
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the foregoing effect, the parties will restructure the
transaction to provide for the merger of Concentric with and into
NEXTLINK in the manner contemplated by this Section 2.5. In
such event, all references to the term “Mergers” shall
be deemed references to the transactions contemplated by this
Section 2.5; all references to the term “Surviving
Corporation” shall be deemed references to NEXTLINK as the
Surviving Corporation in the merger of Concentric into NEXTLINK;
all references to the term “Effective Time” in this
Agreement shall be deemed references to the time at which the
certificate of merger is duly filed with the Secretary of State
of the State of Delaware (or at such later time as is specified
in the certificate of merger) with respect to the merger as
restructured in the manner contemplated by this Section 2.5;
Section 2.1 shall no longer be of any force or effect; and
the provisions of this Section 2.5 shall govern the terms of
the Merger. The Merger, restructured as contemplated by this
Section 2.5 is sometimes referred to as the
“ALTERNATIVE MERGER.” The Alternative Merger shall not
affect the consummation of the LHP Share Exchange, which shall
take place between Eagle River and NEXTLINK, whether or not it
qualifies as a 351 Transaction.
(b) The following terms shall apply to the Alternative
Merger: At the Effective Time of the Alternative Merger,
Concentric shall be merged with and into NEXTLINK in accordance
with Delaware Law and upon the terms set forth in this Agreement,
whereupon the separate existence of Concentric shall cease; the
representations, warranties and other provisions of this
Agreement shall be appropriately amended to account for the
change while otherwise effecting the intent of the parties as
expressed in this Agreement; for the avoidance of doubt at the
effective time of the Alternative Merger, (i) each issued
and outstanding share of Concentric Common Stock shall be
converted into the right to receive a number of fully paid and
nonassessable shares of NEXTLINK Common Stock equal to the Common
Stock Ratio (together with cash in lieu of fractional shares of
NEXTLINK Common Stock as specified below), (ii) each issued
and outstanding share of Concentric Series B Preferred Stock
shall be converted into the right to receive one share of a
series of preferred stock to be designated by NEXTLINK, which
series shall have terms that are identical to those of Concentric
Series B Preferred Stock (giving effect to any amendments
thereto as contemplated by Section 7.4 and except that such
series shall rank pari passu with the NEXTLINK 14%
Preferred Stock), (iii) each issued and outstanding share of
Concentric Series C Preferred Stock shall be converted into
the right to receive one share of a series of preferred stock to
be designated by NEXTLINK, which series shall have terms that
are identical to those of Concentric Series C Preferred
Stock (except that such series shall rank pari passu with
the NEXTLINK 6 1/2% Preferred Stock), (iv) each
outstanding option to acquire Concentric Common Stock then
outstanding shall be assumed by NEXTLINK, (v) each
outstanding warrant to purchase Concentric Common Stock will
become exercisable for NEXTLINK Common Stock in accordance with
its terms, (vi) the Alternative Merger shall not otherwise affect
the provisions of Article 3 hereof; provided, that
the provisions of Sections 3.1(a), 3.1(b), 3.1(d), 3.1(e),
3.1(f), 3.1(g) and 3.1(h) shall be of no force or effect and the
current references to Newco Common Stock and Newco Preferred
Stock in Article 3 shall be deemed to be references to
NEXTLINK Common Stock and NEXTLINK Preferred Stock, respectively,
and the current references to NEXTLINK Common Stock shall be
disregarded, (vii) all obligations of NEXTLINK set forth
herein shall not be affected or limited by the Alternative
Merger, (viii) all obligations of Newco hereunder shall
cease, and, as applicable, shall become obligations of NEXTLINK,
(ix) the LHP Share Exchange shall be consummated, except
that the LHP Consideration shall be in the form of NEXTLINK
Common Stock rather than Newco Common Stock and (x) NEXTLINK
shall be responsible for the obligations of the Surviving
Corporation under Section 8.2 hereof. The parties shall
execute and deliver an amendment and restatement of this
Agreement giving effect to the intentions of the parties to
implement the Alternative Merger as described in this
Section 2.5.
SECTION 2.6. Closing. The closing of the Mergers and
the LHP Share Exchange (the “CLOSING”) will take place
on a date and time to be specified by the parties (the
“CLOSING DATE”), which shall be no later than the fifth
Business Day after satisfaction or waiver of the conditions set
forth in Article 10 (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), unless another
time or date is agreed to by the parties hereto. The Closing will
be held at the offices of Willkie Farr & Gallagher, 787
Seventh Avenue, New York, New York 10019, or at such other
location as may be agreed to by the parties hereto.
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ARTICLE 3.
CONVERSION OF SECURITIES
SECTION 3.1. Effect on Capital Stock. As of the
Effective Times, by virtue of the Mergers and without any action
on the part of the holder of any shares of capital stock of
Concentric, NEXTLINK or Newco:
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(a) NEXTLINK Common Stock. Each share of NEXTLINK
Common Stock issued and outstanding immediately prior to the
Effective Times (other than shares to be canceled in accordance
with Section 3.1(j)) shall, by operation of the merger of
NEXTLINK with and into Newco, be converted into one share of
Newco Common Stock and each certificate representing shares of
NEXTLINK Common Stock immediately prior to the Effective Times
shall be deemed to represent the same number of shares of Newco
Common Stock. |
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(b) NEXTLINK Class B Common Stock. Each share
of NEXTLINK Class B Common Stock issued and outstanding
immediately prior to the Effective Times (other than shares to be
canceled in accordance with Section 3.1(j)) shall, by
operation of the merger of NEXTLINK with and into Newco, be
converted into one share of Newco Class B Common Stock and
each certificate representing shares of NEXTLINK Class B
Common Stock immediately prior to the Effective Times shall be
deemed to represent the same number of shares of Newco
Class B Common Stock. |
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(c) Conversion of Concentric Common Stock. Subject
to Section 3.1(m), each issued and outstanding share (other
than shares to be canceled in accordance with
Section 3.1(j)) of Concentric Common Stock shall be
converted into the right to receive a number of fully paid and
nonassessable shares of Newco Common Stock equal to the Common
Stock Ratio (together with the cash in lieu of fractional shares
of Newco Common Stock as specified below, the “COMMON STOCK
CONSIDERATION”) and the associated Rights shall be
terminated immediately prior thereto. As of the Effective Times,
all such shares of Concentric Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and
shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with
respect thereto, except the right to receive the Concentric
Common Stock Consideration upon surrender of such certificate in
accordance with Section 3.2. Holders of fractional shares of
Concentric Common Stock as a result of the Mergers shall, in
lieu of such fractional shares, receive cash in the amount of the
fair market value thereof, as provided in Section 3.2(e). |
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(d) Conversion of NEXTLINK 14% Preferred Stock.
Subject to Section 3.1(m), each issued and outstanding share
(other than shares to be canceled in accordance with
Section 3.1(j)) of NEXTLINK 14% Preferred Stock outstanding
immediately prior to the Effective Times shall be converted into
the right to receive one share of Newco Series A Preferred
Stock (the “NEXTLINK 14% PREFERRED CONSIDERATION”) that
shall have terms that are identical to those of NEXTLINK 14%
Preferred Stock, provided that (A) the Newco Series A
Preferred Stock shall rank on parity with the Newco Series E
Preferred Stock and senior to all other shares of Newco
Preferred Stock with respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution or winding
up, (B) as a result of the Mergers, the issuer thereof shall
be Newco rather than NEXTLINK; and (C) Newco’s
obligations with respect to quarterly dividends on Newco
Series A Preferred Stock shall accrue from the date of the
last dividend paid on NEXTLINK 14% Preferred Stock. |
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(e) Conversion of NEXTLINK 6 1/2% Preferred Stock.
Subject to Section 3.1(m), each issued and outstanding share
(other than shares to be canceled in accordance with
Section 3.1(j)) of NEXTLINK 6 1/2% Preferred Stock
outstanding immediately prior to the Effective Times shall be
converted into the right to receive one share of Newco
Series B Preferred Stock (the “NEXTLINK 6 1/2%
PREFERRED CONSIDERATION”) that shall have terms that are
identical to those of NEXTLINK 6 1/2% Preferred Stock,
provided that (A) the Newco Series B Preferred Stock
shall rank on parity with the Newco Series F Preferred Stock
and junior to all other series of Newco Preferred Stock with
respect to the payment of dividends and the distribution of
assets upon liquidation, dissolution or winding up, |
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(B) as a result of the Mergers, the issuer thereof shall be
Newco rather than NEXTLINK; and (C) Newco’s obligations
with respect to quarterly dividends on Newco Series B
Preferred Stock shall accrue from the date of the last dividend
paid on NEXTLINK 6 1/2% Preferred Stock. |
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(f) Conversion of NEXTLINK Series C Preferred
Stock. Subject to Section 3.1(m), each issued and outstanding
share (other than shares to be canceled in accordance with
Section 3.1(j)) of NEXTLINK Series C Preferred Stock
outstanding immediately prior to the Effective Times shall be
converted into the right to receive one share of Newco
Series C Preferred Stock (the “NEXTLINK SERIES C
PREFERRED CONSIDERATION”) that shall have terms that are
identical to those of NEXTLINK Series C Preferred Stock,
provided that (A) the Newco Series C Preferred Stock shall
rank on parity with the Newco Series D Preferred Stock,
senior to the Newco Series B Preferred Stock and Newco
Series F Preferred Stock, and junior to the Newco
Series A Preferred Stock and Newco Series E Preferred
Stock with respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution or winding
up, (B) as a result of the Mergers, the issuer thereof shall
be Newco rather than NEXTLINK; and (C) Newco’s obligations
with respect to quarterly dividends on Newco Series C
Preferred Stock shall accrue from the date of the last dividend
paid on NEXTLINK Series C Preferred Stock, or the date of
issuance, if no such dividends have been paid. |
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(g) Conversion of NEXTLINK Series D Preferred
Stock. Subject to Section 3.1(m), each issued and outstanding
share (other than shares to be canceled in accordance with
Section 3.1(j)) of NEXTLINK Series D Preferred Stock
outstanding immediately prior to the Effective Times shall be
converted into the right to receive one share of Newco
Series D Preferred Stock (the “NEXTLINK SERIES D
PREFERRED CONSIDERATION”) that shall have terms that are
identical to those of NEXTLINK Series D Preferred Stock,
provided that (A) the Newco Series D Preferred Stock shall
rank on parity with the Newco Series C Preferred Stock,
senior to the Newco Series B Preferred Stock and Newco
Series F Preferred Stock, and junior to the Newco
Series A Preferred Stock and Newco Series E Preferred
Stock with respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution or winding
up, (B) as a result of the Mergers, the issuer thereof shall
be Newco rather than NEXTLINK; and (C) Newco’s
obligations with respect to quarterly dividends on Newco
Series D Preferred Stock shall accrue from the date of the
last dividend paid on NEXTLINK Series D Preferred Stock, or
the date of issuance, if no such dividends have been paid. |
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(h) Conversion of Concentric Series B Preferred
Stock. Each issued and outstanding share (other than shares
to be canceled in accordance with Section 3.1(j)) of Concentric
Series B Preferred Stock outstanding immediately prior to
the Effective Times shall be converted into the right to receive
one share of Newco Series E Preferred Stock (the
“CONCENTRIC SERIES B CONSIDERATION”) that shall have
terms that are identical to those of Concentric Series B
Preferred Stock (giving effect to any amendments thereto
contemplated by Section 7.4), provided that (A) the
Newco Series E Preferred Stock shall rank on parity with the
Newco Series A Preferred Stock and senior to all other
Newco Preferred Stock with respect to the payment of dividends
and the distribution of assets upon liquidation, dissolution or
winding up, (B) as a result of the Mergers, the issuer
thereof shall be Newco rather than Concentric; and
(C) Newco’s obligations with respect to quarterly
dividends on Newco Series E Preferred Stock shall accrue
from the date of the last dividend paid on Concentric Series B
Preferred Stock. |
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(i) Conversion of Concentric Series C Preferred
Stock. Each issued and outstanding share (other than shares
to be canceled in accordance with Section 3.1(m)) of Concentric
Series C Preferred Stock outstanding immediately prior to
the Effective Times shall be converted into the right to receive
one share of Newco Series F Preferred Stock (the
“CONCENTRIC SERIES C CONSIDERATION” and, together with
the Common Stock Consideration, the NEXTLINK 14% Preferred
Consideration, the NEXTLINK 6 1/2% Preferred Consideration,
the NEXTLINK Series C Preferred Consideration, the NEXTLINK
Series D Preferred Consideration and the Concentric
Series B Consideration, the “MERGER
CONSIDERATION”) that shall have terms that are identical to
those of Concentric Series C Preferred Stock, provided that
(A) the Newco Series F Preferred Stock shall rank on a
parity with the Newco Series B Preferred Stock and junior to
all other Newco Preferred Stock with respect to |
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the payment of dividends and the distribution of assets upon
liquidation, dissolution or winding up, (B) as a result of
the Mergers, the issuer thereof shall be Newco rather than
Concentric; (C) Newco’s obligations with respect to
quarterly dividends on Newco Series F Preferred Stock shall
accrue from the date of the last dividend paid on Concentric
Series C Preferred Stock; (D) the last sentence of
Section 3 of the Amended Certificate of Designation relating
thereto shall be omitted; and (E) the Newco Series F
Preferred Stock shall initially be convertible into a number of
shares of Newco Common Stock equal to (x) the
“Conversion Rate” of Concentric Series C Preferred
Stock in effect immediately prior to the Effective Times
multiplied by (y) the Common Stock Ratio. |
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(j) Cancellation of Stock. All shares of Concentric
Common Stock, NEXTLINK Common Stock, Concentric Preferred Stock
and NEXTLINK Preferred Stock that are directly owned by
Concentric or NEXTLINK shall automatically be canceled and
retired and shall cease to exist, and no consideration shall be
delivered in exchange therefor. The Concentric Series A
Junior Preferred Stock shall cease to exist as a class, and any
outstanding shares thereof shall be canceled. |
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(k) Options. At the Effective Times, all stock
options to purchase Concentric Common Stock and NEXTLINK Common
Stock then outstanding shall be assumed by Newco in accordance
with Section 3.3. |
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(l) Warrants. Outstanding warrants to purchase
Concentric Common Stock and NEXTLINK Common Stock will become
exercisable for Newco Common Stock in accordance with their
terms. |
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(m) Anti-Dilution Provisions. In the event NEXTLINK
changes (or establishes a record date for changing) the number of
shares of its common stock issued and outstanding prior to the
Effective Date as a result of a stock split, stock dividend,
recapitalization, subdivision, reclassification, combination,
exchange of shares or similar transaction with respect to its
outstanding common stock and the record date therefor shall be
prior to the Effective Date, the Common Stock Ratio shall be
proportionately adjusted to reflect such stock split, stock
dividend, recapitalization, subdivision, reclassification,
combination, exchange of shares of similar transaction. |
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(n) Treatment of NEXTLINK Common Certificates. Each
certificate representing shares of NEXTLINK Common Stock and
NEXTLINK Class B Common Stock immediately prior to the
Effective Times shall from and after the Effective Times be
deemed to evidence the ownership of shares of Newco Common Stock
and Newco Class B Common Stock, respectively, into which
such shares were converted in accordance with
Sections 3.1(a) and 3.1(b) hereof, and each holder of such a
certificate shall have and be entitled to exercise any voting
and other rights with respect to, and to receive any dividend and
other distribution upon, the shares of Newco Common Stock and
Newco Class B Common Stock evidenced by such outstanding
certificates. |
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(o) Adjustment for NEXTLINK Stock Dividend Paid Prior to
the Closing Date. If the Closing Date occurs after the
NEXTLINK Stock Dividend Payment Date, then (x) for purposes
of calculating the Weighted Average Sales Price, the applicable
trading prices on any trading day that is on or prior to the
NEXTLINK Stock Dividend Payment Date shall be divided by two and
(y) “COMMON STOCK RATIO” shall be defined as
“the quotient (rounded to the nearest 1/10,000) determined
by dividing $45.00 by the Weighted Average Sales Price;
provided that the Common Stock Ratio shall not be less than
.99 or greater than 1.3.” |
SECTION 3.2. Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Times,
Newco shall appoint a bank or trust company to act as exchange
agent hereunder for the purpose of exchanging Certificates, as
defined below, for the Merger Consideration (the “EXCHANGE
AGENT”). At or prior to the Effective Times, NEXTLINK shall
cause Newco to deposit with the Exchange Agent, in trust for the
benefit of the holders of Concentric Common Stock, Concentric
Preferred Stock and NEXTLINK Preferred Stock, certificates
representing the Newco Common Stock and Newco Preferred Stock
issuable pursuant to Section 3.1 in exchange for the
outstanding shares of Concentric Common Stock, Concentric
Preferred Stock and NEXTLINK Preferred Stock, respectively, and
such cash as it deems likely to be sufficient to pay cash in lieu
of fractional shares pursuant
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to Section 3.2(e) and any dividends and other distributions
pursuant to Section 3.2(c). The cash and certificates of
Newco Common Stock, and Newco Preferred Stock deposited with the
Exchange Agent shall hereinafter be referred to as the
“EXCHANGE FUND.”
(b) Exchange Procedures. As soon as is practicable
after the Effective Times, the Exchange Agent shall mail to each
holder of record of a certificate or certificates which
immediately prior to the Effective Times represented outstanding
shares of Concentric Common Stock, Concentric Preferred Stock,
and NEXTLINK Preferred Stock (the “CERTIFICATES”) whose
shares were converted into the right to receive the Merger
Consideration pursuant to Section 3.1: (i) a letter of
transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Exchange Agent and shall
be in such form and have such other provisions as NEXTLINK may
reasonably specify) and (ii) instructions for use in
surrendering the Certificates in exchange for certificates
representing the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with
such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Exchange Agent,
the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole
shares of Newco Common Stock or Newco Preferred Stock that such
holder has the right to receive pursuant to the provisions of
this Article 3, certain dividends or other distributions in
accordance with Section 3.2(c), and cash in lieu of any
fractional share of Newco Common Stock in accordance with
Section 3.2(e), and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of
Concentric Common Stock, Concentric Preferred Stock, or NEXTLINK
Preferred Stock that is not registered in the transfer records
of Concentric or NEXTLINK, respectively, a certificate
representing the proper number of shares of Newco Common Stock,
or Newco Preferred Stock may be issued to a Person other than the
Person in whose name the Certificate so surrendered is
registered if such Certificate has been properly endorsed or
otherwise is in proper form for transfer, and if the Person
requesting such issuance shall pay any transfer or other taxes
required by reason of the issuance of shares of Newco Common
Stock or Newco Preferred Stock to a Person other than the
registered holder of such Certificate (or shall establish to the
satisfaction of NEXTLINK that such tax has been paid or is not
applicable). Until surrender as contemplated by this
Section 3.2(b), each Certificate shall be deemed at any time
after the Effective Times to represent only the right to receive
upon such surrender the Merger Consideration and any cash in
lieu of fractional shares to be issued or paid in consideration
therefor upon surrender of such certificate in accordance with
this Section 3.2. No interest shall be paid or will accrue
on any cash payable to holders of Certificates pursuant to the
provisions of this Article 3.
(c) Distributions with Respect to Unexchanged Shares.
No dividends or other distributions with respect to Newco
Common Stock or Newco Preferred Stock with a record date after
the Effective Times shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Newco
Common Stock or Newco Preferred Stock represented thereby, and no
cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 3.2(e), until the holder of
record of such Certificate shall surrender such Certificate in
accordance with this Article 3. Subject to the effect of
applicable escheat or similar laws, following surrender of any
such Certificate there shall be paid to the holder of the
certificate representing whole shares of Newco Common Stock or
Newco Preferred Stock issued in exchange therefor, without
interest: (i) at the time of such surrender, the amount of
dividends or other distributions with a record date after the
Effective Times theretofore paid with respect to such whole
shares of Newco Common Stock or Newco Preferred Stock and the
amount of any cash payable in lieu of a fractional share of Newco
Common Stock to which such holder is entitled pursuant to
Section 3.2(e); and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a
record date after the Effective Times but prior to such surrender
and with a payment date subsequent to such surrender payable
with respect to such whole shares of Newco Common Stock or Newco
Preferred Stock.
(d) No Further Ownership Rights in Concentric and
NEXTLINK Stock. All shares of Newco Common Stock and Newco
Preferred Stock issued upon the exchange of Certificates in
accordance with the terms of this Article 3 (including any
cash paid pursuant to this Article 3) shall be deemed to
have been issued (and paid) in full satisfaction of all rights
pertaining to the shares of Concentric Common Stock, Concentric
Preferred Stock, and NEXTLINK Preferred Stock previously
represented by such Certificates, subject,
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however, to the Surviving Corporation’s obligation to pay
any dividends or make any other distributions with a record date
prior to the Effective Times which may have been declared or made
by Concentric or NEXTLINK on shares of Concentric Common Stock,
Concentric Preferred Stock, and NEXTLINK Preferred Stock which
remain unpaid at the Effective Time, and there shall be no
further registration of transfers on the stock transfer books of
the Surviving Corporation of the shares of Concentric Common
Stock, Concentric Preferred Stock and NEXTLINK Preferred Stock
which were outstanding immediately prior to the Effective Times.
The stock transfer books of NEXTLINK relating to the NEXTLINK
Common Stock and NEXTLINK Class B Common Stock immediately
prior to the Effective Times shall be the stock transfer books of
Newco at the Effective Times with respect to Newco Common Stock
and Newco Class B Common Stock. If, after the Effective
Times, Certificates are presented to the Surviving Corporation or
the Exchange Agent for any reason, they shall be canceled and
exchanged as provided in this Article 3.
(e) No Fractional Shares. No certificates or scrip
representing fractional shares of Newco Common Stock shall be
issued upon the surrender for exchange of Certificates, no
dividend or distribution by Newco shall relate to such fractional
share interests and such fractional share interests shall not
entitle the owner thereof to vote or to any rights of a
stockholder of Newco. All fractional shares of Newco Common Stock
that a holder of shares of Concentric Common Stock is entitled
to as a result of the Mergers shall be aggregated and if a
fractional share results from such aggregation, such holder shall
be entitled to receive, in lieu thereof, cash (without interest)
in an amount, less the amount of any withholding taxes that may
be required thereon, equal to such fractional part of a share of
NEXTLINK Common Stock multiplied by the volume-weighted average
per share closing price of NEXTLINK Common Stock on the Closing
Date as reported by Bloomberg, L.P.
(f) Termination. Any holders of the Certificates who
have not complied with this Article 3 shall thereafter look
only to Newco for payment of their claim for Merger
Consideration, any dividends or distributions with respect to
Newco Common Stock and Newco Preferred Stock and any cash in lieu
of fractional shares of Newco Common Stock.
(g) No Liability. None of NEXTLINK, Concentric,
Newco or the Exchange Agent shall be liable to any Person in
respect of any shares of Newco Common Stock and Newco Preferred
Stock, any dividends or distributions with respect thereto, any
cash in lieu of fractional shares of Newco Common Stock or any
cash from the Exchange Fund, in each case delivered to a public
official pursuant to any applicable abandoned property, escheat
or similar law. If any Certificate shall not have been
surrendered prior to the earlier date on which any Merger
Consideration, any dividends or distributions payable to the
holder of such Certificate or any cash payable to the holder of
such Certificate pursuant to this Article 3, would otherwise
escheat to or become the property of any Governmental Authority,
any such Merger Consideration, dividends or distributions in
respect of such Certificate or such cash shall, to the extent
permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any
Person previously entitled thereto.
(h) Investment. The Exchange Agent shall invest any
cash provided to it pursuant to this Article 3, as directed
by NEXTLINK, and any interest and other income resulting from
such investments shall be paid to NEXTLINK.
(i) Lost Certificates. If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and, if required by Newco, and subject to the
posting by such Person of a bond in such reasonable amount as
Newco may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration and, if applicable, any
unpaid dividends and distributions on shares of Newco Common
Stock or Newco Preferred Stock deliverable in respect thereof and
any cash in lieu of fractional shares, in each case pursuant to
this Agreement.
(j) Return of Consideration. Any portion of the
Concentric Series B Consideration or Concentric
Series C Consideration made available to the Exchange Agent
pursuant to Section 3.2(a) to pay for shares of
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Concentric Series B Preferred Stock or Concentric
Series C Preferred Stock for which appraisal rights have
been perfected shall be returned to Newco upon demand.
SECTION 3.3. Stock Options. (a) After the
Effective Times, each outstanding option to purchase shares of
Concentric Common Stock granted under any Concentric stock option
or compensation plans or arrangements (a “CONCENTRIC STOCK
OPTION”), whether or not exercisable or vested, shall be
adjusted as necessary to provide that, at the Effective Times,
each Concentric Stock Option outstanding immediately prior to the
Effective Times shall be deemed to constitute an option to
acquire, on the same terms and conditions as were applicable
under such Concentric Stock Option (including terms regarding
vesting), the same number of shares of Newco Common Stock as the
holder of such Concentric Stock Option would have been entitled
to receive pursuant to the Mergers had such holder exercised such
Concentric Stock Option in full immediately prior to the
Effective Times, at a price per share of Newco Common Stock equal
to (A) the aggregate exercise price for the shares of
Concentric Common Stock otherwise purchasable pursuant to such
Concentric Stock Option divided by (B) the aggregate number
of shares of Newco Common Stock deemed purchasable pursuant to
such Concentric Stock Option (each, as so adjusted, an
“ADJUSTED OPTION”) rounded up to the nearest cent;
provided that any fractional share of Newco Common Stock
resulting from an aggregation of all the shares of a holder
subject to Concentric Stock Option shall be rounded down to the
nearest whole share, and provided further that, for any
Concentric Stock Option to which Section 421 of the Code
applies by reason of its qualification under any of
Sections 422 through 424 of the Code, the option price, the
number of shares purchasable pursuant to such option and the
terms and conditions of exercise of such option shall be
determined in order to comply with Section 424 of the Code.
(b) After the Effective Times, each outstanding option to
purchase shares of NEXTLINK Common Stock granted under any
NEXTLINK stock option or compensation plans or arrangements (a
“NEXTLINK STOCK OPTION”), whether or not exercisable or
vested, shall be deemed to constitute an option to acquire the
same number of shares of Newco Common Stock, on the same terms
and conditions as were applicable under such NEXTLINK Stock
Option (including terms regarding vesting), as the number of
shares of NEXTLINK Common Stock which could be acquired on
exercise of such NEXTLINK Stock Option prior to the Effective
Times. Newco shall take such actions as are necessary for the
assumption of the NEXTLINK Stock Options pursuant to this
Section 3.3 and any obligations to issue NEXTLINK Common
Stock under the existing terms of any other plans, agreements or
arrangements of NEXTLINK covering any current or former employee
or director of NEXTLINK or any NEXTLINK Subsidiary, including the
reservation, issuance and listing of Newco Common Stock as is
necessary to effectuate the transactions contemplated by this
Section 3.3(b). Each NEXTLINK Benefit Arrangement and
NEXTLINK Employee Plan shall be assumed by Newco and continue in
full force and effect after the Effective Times. Newco shall take
such actions as are necessary for the assumption of any
obligations to issue NEXTLINK Common Stock under the existing
terms of any other plans, agreements or arrangements of NEXTLINK
covering any current or former employee or director of NEXTLINK
or any NEXTLINK Subsidiary, including the reservation, issuance
and listing of Newco Common Stock as is necessary to effectuate
the transactions contemplated by this Section 3.3.
(c) Newco shall take such actions as are necessary for the
assumption of the Concentric Stock Options pursuant to this
Section 3.3 and any obligations to issue Concentric Common
Stock under the existing terms of any other plans, agreements or
arrangements of Concentric covering any current or former
employee or director of Concentric or any Concentric Subsidiary,
including the reservation, issuance and listing of Newco Common
Stock as is necessary to effectuate the transactions contemplated
by this Section 3.3.
(d) On or before the next Business Day following the
Effective Times, Newco shall prepare and file with the SEC a
registration statement on Form S-8 (or any other appropriate
form) or a post-effective amendment to a registration statement
previously filed under the 1933 Act, with respect to the shares
of Newco Common Stock subject to the Adjusted Options and the
assumed NEXTLINK Stock Options and, where applicable, shall use
its reasonable best efforts to have such registration statement
declared effective as soon as practicable following the Effective
Times and to maintain the effectiveness of such registration
statement covering such Adjusted Options and the assumed NEXTLINK
Stock Options (and to maintain the current status of the
prospectus contained therein) for so long as such Adjusted
Options and the assumed
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NEXTLINK Stock Options remain outstanding. With respect to those
individuals, if any, who, subsequent to the Effective Times, will
be subject to the reporting requirements under
Section 16(a) of the 1934 Act, where applicable, Newco shall
use all reasonable efforts to administer any Adjusted Options
and assumed NEXTLINK Stock Options assumed pursuant to
Section 3.3 in a manner that complies with Rule 16b-3
promulgated under the 1934 Act to the extent that the Concentric
Stock Option in respect of which such Adjusted Option has been
issued complied with such rule prior to the Mergers.
(e) Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will
result in the acceleration of the vesting of any Concentric
Stock Option.
SECTION 3.4. Withholding Rights. Newco shall be
entitled to deduct and withhold from the consideration otherwise
payable to any Person pursuant to this Article 3 such
amounts as it is required to deduct and withhold with respect to
the making of such payment under any provision of federal, state,
local or foreign tax law. If Newco so withholds amounts, such
amounts shall be treated for all purposes of this Agreement as
having been paid to the holders of Concentric Common Stock,
Concentric Preferred Stock, NEXTLINK Common Stock, NEXTLINK
Class B Common Stock or NEXTLINK Preferred Stock as the case
may be, in respect of which NEXTLINK made such deduction and
withholding.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF CONCENTRIC
Except as set forth in the Concentric Disclosure Schedule or as
disclosed in the Concentric SEC Documents filed prior to the date
hereof and after December 31, 1998, Concentric represents
and warrants to NEXTLINK as follows:
SECTION 4.1. Corporate Existence and Power.
Concentric is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and
has all corporate powers required to carry on its business as now
conducted. Concentric is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction
where such qualification is necessary, except for those
jurisdictions where failure to be so qualified, individually or
in the aggregate, has not had and would not be reasonably
expected to have a Concentric Material Adverse Effect. Concentric
has heretofore delivered or made available to NEXTLINK true and
complete copies of the certificate of incorporation and bylaws of
Concentric as currently in effect.
SECTION 4.2. Corporate Authorization. The execution,
delivery and performance by Concentric of this Agreement and the
consummation by Concentric of the transactions contemplated
hereby are within Concentric’s corporate powers and, except
for the required approval of Concentric’s stockholders of
this Agreement and except as contemplated by Section 7.2(b),
have been duly authorized by all necessary corporate action on
the part of Concentric. At a meeting duly called and held prior
to the execution of this Agreement, Concentric’s Board of
Directors: (i) determined that this Agreement and the
transactions contemplated hereby are advisable and fair to and in
the best interests of Concentric’s stockholders;
(ii) approved and adopted this Agreement and the
transactions contemplated hereby; and (iii) resolved to
recommend approval and adoption of this Agreement by its
stockholders, subject to the provisions of Section 7.2(b).
This Agreement constitutes a valid and binding agreement of
Concentric, enforceable against Concentric in accordance with its
terms, except (i) as the same may be limited by applicable
bankruptcy, insolvency, moratorium or similar laws of general
application relating to or affecting creditors’ rights, and
(ii) for the limitations imposed by general principles of
equity.
SECTION 4.3. Governmental Authorization. The
execution, delivery and performance by Concentric of this
Agreement and the consummation by Concentric of the transactions
contemplated hereby require no action by or in respect of, or
filing with, any governmental body, agency, official or
authority, domestic or foreign (a “GOVERNMENTAL
AUTHORITY”), other than: (i) the filing of a
certificate of Merger with respect to the Mergers with the
Delaware Secretary of State and appropriate documents with the
relevant authorities of other states in which Concentric is
qualified to do business; (ii) compliance with the
applicable requirements of the HSR Act; (iii) compliance
with any applicable requirements of the 1933 Act, 1934 Act,
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and any other applicable securities laws, whether state or
foreign; and (iv) any actions or filings the absence of
which, individually or in the aggregate, would not be reasonably
expected to have a Concentric Material Adverse Effect or
materially impair or delay the ability of Concentric to
consummate the transactions contemplated by this Agreement.
SECTION 4.4. Non-contravention. The execution,
delivery and performance by Concentric of this Agreement and the
consummation by Concentric of the transactions contemplated
hereby do not and will not (i) contravene, conflict with, or
result in any violation or breach of any provision of the
certificate of incorporation or bylaws of Concentric;
(ii) assuming compliance with the matters referred to in
Section 4.3, contravene, conflict with or result in a
violation or breach of any provision of any applicable law,
statute, ordinance, rule, regulation, judgment, injunction,
order, or decree; (iii) require any consent or other action
by any Person under, constitute a default (or an event that, with
or without notice or lapse of time or both, would constitute a
default) under, or cause or permit the termination, cancellation,
acceleration, triggering or other change of any right or
obligation or the loss of any benefit to which any member of the
Concentric Group is entitled under (A) any provision of any
agreement or other instrument binding upon any member of the
Concentric Group or (B) any license, franchise, permit,
certificate, approval or other similar authorization held by, or
affecting, or relating in any way to, the assets or business of,
any member of the Concentric Group; or (iv) result in the
creation or imposition of any Lien on any asset of any member of
the Concentric Group, other than such exceptions in the case of
clauses (ii), (iii) and (iv) as would not be,
individually or in the aggregate, reasonably expected to have a
Concentric Material Adverse Effect or materially impair or delay
the ability of Concentric to consummate the transactions
contemplated by this Agreement.
SECTION 4.5. Capitalization. (a) As of
December 31, 1999, the authorized capital stock of
Concentric consists of 100,000,000 shares of Concentric Common
Stock and 10,000,000 shares of Preferred Stock, par value $0.001
per share, of which 500,000 shares have been designated as
Concentric Series A Junior Preferred Stock and reserved for
issuance upon the exercise of Rights, (ii) 295,000 shares have
been designated as Concentric Series B Preferred Stock; and
(iii) 110,000 shares have been designated as Concentric
Series C Preferred Stock. As of December 30, 1999,
there were outstanding (i) 45,556,564 shares of Concentric
Common Stock (inclusive of all shares of restricted stock granted
under any compensatory plans or arrangements),
(ii) Concentric Stock Options to purchase an aggregate of
not more than 8,939,367 shares of Concentric Common Stock (of
which options to purchase an aggregate of not more than 1,509,332
shares of Concentric Common Stock were vested and exercisable),
(iii) phantom shares or stock units issued under any stock
option, compensation or deferred compensation plan or arrangement
with respect to an aggregate of no shares of Concentric Common
Stock (except in respect of share purchase rights under
Concentric’s 1997 employee stock purchase plan),
(iv) no shares of Concentric Series A Preferred Stock,
(v) 176,589.4 shares of Concentric Series B Preferred
Stock, and (vi) 51,478 shares of Concentric Series C
Preferred Stock, and there has been no change to the foregoing
capitalization since December 31, 1999 (other than option
exercises in the ordinary course). All outstanding shares of
capital stock of Concentric have been, and all shares that may be
issued pursuant to any compensatory plan or arrangement will be,
when issued in accordance with the respective terms thereof,
duly authorized, validly issued, fully paid and nonassessable.
Concentric has also reserved for issuance 4,244,510 shares of
Concentric Common Stock for issuance upon exercise of outstanding
warrants.
(b) Except as set forth in this Section 4.5 and for
changes since December 30, 1999 resulting from the exercise
of employee stock options outstanding on such date or granted
thereafter in the ordinary course of business within the
limitations described in the Concentric Disclosure Schedule and
the conversion of Concentric Series C Preferred Stock
outstanding on such date, there are no outstanding
(i) shares of capital stock or voting securities of
Concentric, (ii) securities of Concentric convertible into
or exchangeable for shares of capital stock or voting securities
of Concentric or (iii) options, warrants or other rights to
acquire from Concentric, or other obligation of Concentric to
issue any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting
securities of Concentric. There are no outstanding obligations of
Concentric or any Concentric Subsidiary to repurchase, redeem or
otherwise acquire any of the securities referred to in clauses
(i), (ii) and (iii) above.
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SECTION 4.6. Subsidiaries. (a) Each Concentric
Subsidiary is a corporation or other legal entity duly organized,
validly existing and in good standing (where applicable) under
the laws of its jurisdiction of organization and has all
corporate, LLC, partnership or other similar powers required to
carry on its business as now conducted, other than such
exceptions as, individually or in the aggregate, have not had and
would not be reasonably expected to have a Concentric Material
Adverse Effect. Each Concentric Subsidiary is duly qualified to
do business as a foreign corporation or other foreign legal
entity and is in good standing in each jurisdiction where such
qualification is necessary, with such exceptions, individually or
in the aggregate, as have not had and would not be reasonably
expected to have a Concentric Material Adverse Effect. The
Concentric Disclosure Schedule sets forth a list of all
Concentric Subsidiaries and their respective jurisdictions of
organization and identifies Concentric’s (direct or
indirect) percentage ownership interest therein.
(b) All of the outstanding capital stock of, or other
voting securities or ownership interests in, each Concentric
Subsidiary, is owned by Concentric, directly or indirectly, free
and clear of any Lien and free of any other limitation or
restriction (including any restriction on the right to vote, sell
or otherwise dispose of such capital stock or other voting
securities or ownership interests) other than transfer
restrictions under the 1933 Act and the Rules promulgated
thereunder. There are no outstanding (i) securities of any
member of the Concentric Group convertible into or exchangeable
for shares of capital stock or other voting securities or
ownership interests in any Concentric Subsidiary or
(ii) options or other rights to acquire from any member of
the Concentric Group, or other obligation of any member of the
Concentric Group to issue any capital stock, or other voting
securities or ownership interests in, or any securities
convertible into or exchangeable for any capital stock or other
voting securities or ownership interests in, any Concentric
Subsidiary. There are no outstanding obligations of Concentric or
any Concentric Significant Subsidiary to repurchase, redeem or
otherwise acquire any of the items referred to in clauses
(i) and (ii) above. Except as set forth in the
Concentric Disclosure Schedule or provided hereunder, no member
of the Concentric Group is obligated to make any investment in
any other Person.
SECTION 4.7. SEC Filings. (a) Concentric has
timely filed all reports required to be filed by it with the SEC
since July 31, 1997 pursuant to the 1934 Act. Concentric has
delivered or made available to NEXTLINK: (i) Concentric’s
annual report on Form 10-K for its fiscal year ended
December 31, 1998 and the Concentric 10-K; (ii) its
proxy or information statements relating to meetings of, or
actions taken without a meeting by, the stockholders of
Concentric held since December 31, 1998; and (iii) all
of its other reports, statements, schedules and registration
statements filed with the SEC since December 31, 1998 (the
documents referred to in this Section 4.7(a), including any
exhibits thereto or documents incorporated therein by reference,
collectively, the “CONCENTRIC SEC DOCUMENTS”).
(b) As of its filing date, each Concentric SEC Document
complied as to form in all material respects with the applicable
requirements of the 1933 Act and the 1934 Act, as the case may
be.
(c) As of its filing date, each Concentric SEC Document
filed pursuant to the 1934 Act did not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading.
(d) Each Concentric SEC Document that is a registration
statement, as amended or supplemented, if applicable, filed
pursuant to the 1933 Act, as of the date such registration
statement or amendment became effective, did not contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading.
SECTION 4.8. Financial Statements. The audited
consolidated financial statements and unaudited consolidated
interim financial statements of Concentric included in the
Concentric SEC Documents fairly present, in all material
respects, in conformity with generally accepted accounting
principles (“GAAP”) applied on a consistent basis
(except as may be indicated in the notes thereto), the
consolidated financial position of Concentric and its
consolidated Subsidiaries as of the respective dates thereof and
their consolidated results of operations and cash flows for the
periods then ended (subject to normal year-end adjustments in the
case of any unaudited interim financial statements) and except
that unaudited financial statements may not contain all notes
required under GAAP with respect to audited financial statements.
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SECTION 4.9. Information Supplied. The information
supplied by Concentric for inclusion or incorporation in the
registration statement on Form S-4 or any amendment or
supplement thereto pursuant to which shares of Newco Common Stock
(or NEXTLINK Common Stock, as applicable) issuable in the
Mergers will be registered with the SEC (the “REGISTRATION
STATEMENT”) shall not at the time the Registration Statement
is declared effective by the SEC contain any untrue statement of
a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading. The information supplied by Concentric for
inclusion in the joint proxy statement/information
statement/prospectus (the “PROXY STATEMENT”) to be sent
to the stockholders of Concentric in connection with their
meeting to consider this Agreement and the Mergers (the
“CONCENTRIC STOCKHOLDERS’ MEETING”) and to the
stockholders of NEXTLINK in connection with the Mergers shall
not, on the date the Proxy Statement is first mailed to the
stockholders of Concentric and NEXTLINK or at the time of either
of the Stockholders’ Meetings or at the Effective Time,
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 4.10. Absence of Certain Changes. Since the
Concentric Balance Sheet Date, the business of Concentric and the
Concentric Subsidiaries has been conducted in the ordinary
course consistent with past practices and there has not been:
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(a) any event, occurrence or development of a state of
circumstances or facts which, individually or in the aggregate,
has had or would be reasonably expected to have a Concentric
Material Adverse Effect; or |
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(b) any action, event, occurrence or transaction that would
have been prohibited by clause (a), (b), (c), (d), (f),
(g) or (i) of the second sentence of Section 7.1
(or committed to do any of the foregoing) if this Agreement had
been in effect as of the time thereof. |
SECTION 4.11. No Undisclosed Material Liabilities.
There are no liabilities or obligations of Concentric or any
Concentric Subsidiary of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and
there is no existing condition, situation or set of circumstances
that could be reasonably expected to result in such a liability
or obligation, other than:
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(a) liabilities or obligations disclosed and provided for
in the Concentric Balance Sheet or in the notes thereto or in
Concentric SEC Documents filed prior to the date hereof or in the
Concentric 10-K; |
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(b) liabilities or obligations incurred in the ordinary
course of business consistent with past practice since the
Concentric Balance Sheet; and |
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(c) liabilities or obligations that, individually or in the
aggregate have not had and would not be reasonably expected to
have a Concentric Material Adverse Effect. |
SECTION 4.12. Compliance with Laws and Court Orders.
Each member of the Concentric Group holds all licenses,
franchises, certificates, consents, permits, qualifications and
authorizations from all Governmental Authorities necessary for
the lawful conduct of their business, except where the failure to
hold any of the foregoing, individually or in the aggregate, has
not had and would not be reasonably expected to have a
Concentric Material Adverse Effect. Each member of the Concentric
Group is and has been in compliance with, and to the Knowledge
of Concentric, is not under investigation with respect to and has
not been threatened to be charged with or given notice of any
violation of, any such license, franchise, certificate, consent,
permit, qualification or authorization, applicable law, statute,
ordinance, rule, regulation, judgment, injunction, order or
decree, except for failures to comply or violations that,
individually or in the aggregate, have not had and would not be
reasonably expected to have a Concentric Material Adverse Effect.
SECTION 4.13. Litigation. There is no action, suit,
investigation or proceeding (or, to the Knowledge of Concentric,
any reasonable basis therefor) pending against, or, to the
Knowledge of Concentric, threatened against or affecting,
Concentric or any Concentric Subsidiary or any of their
respective properties before any
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court or arbitrator or before or by any other Governmental
Authority, that, individually or in the aggregate, would be
reasonably expected to have a Concentric Material Adverse Effect.
SECTION 4.14. Finders’ Fees. Except for Bear
Stearns & Co., Inc. there is no investment banker, broker,
finder or other intermediary that has been retained by or is
authorized to act on behalf of Concentric or any Concentric
Subsidiary who might be entitled to any fee or commission from
NEXTLINK, any of the NEXTLINK Subsidiaries, Concentric or any of
the Concentric Subsidiaries in connection with the transactions
contemplated by this Agreement. A copy of Bear Stearns & Co.,
Inc.’s engagement agreement has been provided to NEXTLINK.
SECTION 4.15. Opinion of Financial Advisor. The
Board of Directors of Concentric has received an opinion of Bear
Stearns & Co., Inc., financial advisor to Concentric, to the
effect that the Common Stock Consideration is fair to the holders
of Concentric Common Stock from a financial point of view.
SECTION 4.16. Taxes. Except as set forth in the
Concentric Balance Sheet (including the notes thereto) and except
as would not be, individually or in the aggregate, reasonably
expected to have a Concentric Material Adverse Effect,
(i) all Concentric Tax Returns required to be filed with any
taxing authority by, or with respect to, Concentric and the
Concentric Subsidiaries have been filed in accordance with all
applicable laws; (ii) Concentric and the Concentric
Subsidiaries have timely paid all Taxes shown as due and payable
on the Concentric Tax Returns that have been so filed (other than
Taxes which are being contested in good faith and for which
adequate reserves are reflected on the Concentric Balance Sheet),
and, as of the time of filing, the Concentric Tax Returns were
correct and complete; (iii) Concentric and the Concentric
Subsidiaries have made provision for all Taxes payable by
Concentric and the Concentric Subsidiaries for which no
Concentric Tax Return has yet been filed (other than Taxes which
are being contested in good faith and for which adequate reserves
are reflected on the Concentric Balance Sheet and other than
payroll and similar taxes (excluding the income taxes of
Concentric or a Concentric Subsidiary) incurred in the ordinary
course of business since the Concentric Balance Sheet Date);
(iv) the charges, accruals and reserves for Taxes with
respect to Concentric and the Concentric Subsidiaries reflected
on the Concentric Balance Sheet are adequate under GAAP to cover
the Tax liabilities accruing through the date thereof;
(v) there is no action, suit, proceeding, audit or claim now
proposed or pending against or with respect to Concentric or any
Concentric Subsidiary in respect of any Tax where there is a
reasonable possibility of an adverse determination; (vi) the
federal income Tax Returns of Concentric and the Concentric
Subsidiaries have been examined and settled with the Internal
Revenue Service (the “IRS”) (or the applicable statutes
of limitation for the assessment of federal income Taxes for
such periods have expired) for all years through 1995; and
(vii) there are no material Liens or encumbrances for Taxes
on any of the assets of Concentric or any Concentric Subsidiary
except liens for current Taxes not yet due. For purposes of this
Agreement, “TAXES” shall mean any and all taxes,
charges, fees, levies or other assessments, including, without
limitation, all net income, gross income, gross receipts, excise,
stamp, real or personal property, ad valorem, withholding,
social security (or similar), unemployment, occupation, use,
service, service use, license, net worth, payroll, franchise,
severance, transfer, recording, employment, premium, windfall
profits, environmental (including taxes under Section 59A of
the Code), customs duties, capital stock, profits, disability,
sales, registration, value added, alternative or add-on minimum,
estimated or other taxes, assessments or charges imposed by any
federal, state, local or foreign governmental entity and any
interest, penalties, or additions to tax attributable thereto.
For purposes of this Agreement, “TAX RETURNS” shall
mean any return, report, form 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.
SECTION 4.17. Tax Opinions. There are no facts or
circumstances relating to Concentric or, to the Knowledge of
Concentric, that would prevent Wilson Sonsini Goodrich &
Rosati, Professional Corporation from delivering the opinion
referred to in Section 10.3(b) as of the date hereof.
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SECTION 4.18. Employee Benefit Plans and Labor Matters.
Except as have not had and would not be reasonably expected
to have, individually or in the aggregate, a Concentric Material
Adverse Effect:
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(a) The Concentric Disclosure Schedule contains a true and
complete list, as of the date hereof, of all Concentric Employee
Plans and all Concentric Benefit Arrangements. Copies of each
Concentric Employee Plan and each Concentric Benefit Arrangement
(and, if applicable, related trust agreements) and all amendments
thereto and formal, written interpretations thereof have been
made available to NEXTLINK as of the date hereof or will have
been made available to NEXTLINK within thirty days after the date
hereof, together with the three most recent annual reports
(Form 5500 including, if applicable, Schedule B
thereto) and the most recent actuarial valuation report prepared
in connection with any Concentric Employee Plan. |
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(b) None of the Concentric Employee Plans is a
Multiemployer Plan and neither the Concentric nor any Concentric
ERISA Affiliate has withdrawn in a complete or partial withdrawal
from any Multiemployer Plan, nor has any of them incurred any
liability due to the termination or reorganization of a
Multiemployer Plan. |
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(c) None of the Concentric Employee Plans is a Pension Plan
and neither Concentric nor any Concentric ERISA Affiliate has
any liability with respect to any Pension Plan. |
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(d) Each Concentric Employee Plan that is intended to
qualify under Section 401 of the Code has either received a
favorable determination, opinion, notification or advisory
letter, as applicable, from the Internal Revenue Service to the
effect that it meets the requirements of Code Section 401(a)
or has a remaining period of time under applicable Treasury
Regulations or IRS pronouncements in which to apply for such a
letter and any trust maintained pursuant to any such Concentric
Employee Plan is intended to be exempt from federal income
taxation under Section 501 of the Code, and to
Concentric’s Knowledge nothing has occurred with respect to
the operation of any such Concentric Employee Plan that could
cause the loss of such qualification or exemption or the
imposition of any liability, penalty or tax under ERISA or the
Code. |
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(e) There is no contract, plan or arrangement (written or
otherwise) covering any employee or former employee of Concentric
or any Concentric Subsidiary that, individually or collectively,
could give rise to the payment of any amount that would not be
deductible pursuant to the terms of Sections 162(m) or 280G
of the Code. |
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(f) All contributions (including all employer contributions
and employee salary reduction contributions) required to have
been made under any of the Concentric Employee Plans and
Concentric Benefit Arrangements or by law to any funds or trusts
established thereunder or in connection therewith have been made
by the due date thereof (including any valid extension), and all
contributions for any period ending on or before the Closing Date
which are not yet due will have been paid or accrued on or prior
to the Closing Date. |
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(g) There has been no material violation of ERISA or the
Code with respect to the filing of applicable reports, documents
and notices regarding the Concentric Employee Plans and
Concentric Benefit Arrangements with the Secretary of Labor or
the Secretary of the Treasury or the furnishing of required
reports, documents or notices to the participants or
beneficiaries of the Concentric Employee Plans and Concentric
Benefit Arrangements. |
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(h) Each Concentric Employee Plan and Concentric Benefit
Arrangement has been maintained, in all material respects, in
accordance with its terms and with all provisions of ERISA and
the Code (including rules and regulations thereunder) and other
applicable federal and state laws and regulations, and neither
Concentric, nor, to the Knowledge of Concentric, any “party
in interest” or “disqualified person” with respect
to the Concentric Employee Plans has engaged in a
“prohibited transaction” within the meaning of Section
406 of ERISA or 4975 of the Code, and not otherwise exempt under
Section 4975 of the Code or Section 408 of ERISA (or
any administrative class exemption issued thereunder). To the
Knowledge of Concentric, no fiduciary has any liability for
breach of fiduciary duty |
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or any other failure to act or comply in connection with the
administration or investment of the assets of any Employee
Benefit Plan. |
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(i) There are no actions, claims or lawsuits which are
pending or, to the Knowledge of Concentric, threatened against
any Concentric Employee Plan or Concentric Benefit Arrangement,
the assets of any of the trusts under such plans or arrangements
or the sponsors or the administrators, or against any fiduciary
of such plans or arrangements with respect to their operation
(other than routine benefit claims), nor does Concentric have
Knowledge of facts which could form the basis for any such claim
or lawsuit. |
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(j) All amendments and actions required to bring the
Concentric Employee Plans into conformity in all material
respects with all of the applicable provisions of ERISA, the Code
and other applicable laws have been made or taken except to the
extent that such amendments or actions are not required by law to
be made or taken until a date after the Closing Date. |
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(k) None of the Concentric Employee Plans or Concentric
Benefit Arrangements provide retiree health benefits except as
may be required under Section 4980B of the Code,
Section 601 of ERISA or any similar provision of state law,
or at the expense of the participant or the participant’s
beneficiary. Concentric and the Concentric ERISA Affiliates have
at all times complied with the notice and health care
continuation requirements of Section 4980B of the Code and
Sections 601 through 608 of ERISA. |
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(l) Except as set forth in the Concentric Disclosure
Schedule hereto, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment becoming due to any
employee (current, former or retired) of Concentric,
(ii) increase any benefits otherwise payable under any
Concentric Employee Plan or Concentric Benefit Arrangement,
(iii) result in the acceleration of the time of payment or
vesting of any benefits under any Concentric Employee Plan or
Concentric Benefit Arrangement (except to the extent required by
the Code and ERISA if NEXTLINK causes a partial or full
termination to occur under any Concentric Employee Plan), or
(iv) qualify as a “change of control” or similar
event under any Concentric Employee Plan or Concentric Benefit
Arrangement. |
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(m) Except as set forth in the Concentric Disclosure
Schedule, no stock or other security issued by Concentric or any
Affiliate forms or has formed a material part of the assets of
any Concentric Employee Plan. |
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(n) There has been no “mass layoff” or
“plant closing” as defined by the Worker Adjustment and
Retraining Notification Act or any similar state or local
“plant closing” law in the four years prior to the
Effective Times. |
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(o) The Concentric Disclosure Schedule contains a complete
and accurate list of the following information for each key
employee or officer of the Company, including such employee on
leave of absence or layoff status: employer; name; and job title. |
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(p) Except as set forth on the Concentric Disclosure
Schedule, no stock appreciation rights were granted that are
currently outstanding under the Concentric 1995 Stock Incentive
Plan for Employees and Consultants, the Concentric Amended and
Restated 1996 Stock Plan, the Concentric 1997 Stock Plan or the
Concentric 1999 Nonstatutory Stock Option Plan or any other
equity-based compensation plan maintained by Concentric or any
Concentric Subsidiary (the “Concentric Equity Plans”).
Set forth on the Concentric Disclosure Schedule is a complete
list of stock options granted and currently outstanding under all
of the Concentric Equity Plans, separately identifying the
optionholders and number of options held, vesting status and
exercise price for each stock option. |
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(q) To Concentric’s Knowledge, no employee or director
of Concentric or any Concentric Subsidiary is a party to, or is
otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement,
between such employee or director and any other person or entity
(“Proprietary Rights Agreement”) that in any way
adversely affects or will affect (i) the performance of his
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Concentric or any Concentric Subsidiary, or (ii) the ability
of Concentric or any Concentric Subsidiary to conduct its
business, including any Proprietary Rights Agreement with
Concentric or any Concentric Subsidiary by any such employee or
director. To Concentric’s Knowledge, no employees of
Concentric or any Concentric Subsidiary intend to terminate their
employment with Concentric. |
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(r) Neither Concentric nor any Concentric Subsidiary has
for the last two years been nor currently is a party to any
collective bargaining or other labor contract. For the last two
years, there has not been, there is not presently pending or
existing, and to Concentric’s Knowledge there is not
threatened, (a) any strike, slowdown, picketing, work stoppage,
or employee grievance process, (b) any proceeding against or
affecting Concentric or any Concentric Subsidiary relating to
the alleged violation of any legal requirement pertaining to
labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor
Relations Board, the Equal Employment Opportunity Commission, or
any comparable governmental body, organizational activity, or
other labor or employment dispute against or affecting the
Concentric or any Concentric Subsidiary or its premises, or
(c) any application for certification of a collective
bargaining agent. To Concentric’s Knowledge, no event has
occurred or circumstance exists that could provide the basis for
any such work stoppage or other labor dispute. There is no
lockout of any employees by Concentric or any Concentric
Subsidiary, and no such action is contemplated by Concentric or
any Concentric Subsidiary. Concentric and each Concentric
Subsidiary has complied in all material respects with all legal
requirements relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours,
benefits, collective bargaining, the payment of social security
and similar taxes, occupational safety and health, and plant
closing. Neither Concentric nor any Concentric Subsidiary is
liable for the payment of any compensation, damages, taxes,
fines, penalties, or other amounts, however designated, for
failure to comply with any of the foregoing legal requirements. |
SECTION 4.19. Environmental Matters. (a) Except
as have not had and would not be reasonably expected to have,
individually or in the aggregate, a Concentric Material Adverse
Effect:
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(i) no notice, notification, demand, request for
information, citation, summons or order has been received, no
complaint has been filed, no penalty has been assessed, and no
investigation, action, claim, suit, proceeding or review (or, to
the Knowledge of Concentric, any reasonable basis therefor) is
pending or, to the Knowledge of Concentric, is threatened by any
Governmental Authority or other Person relating to or arising out
of any Environmental Law; |
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(ii) Each member of the Concentric Group is and has been in
compliance with all Environmental Laws and all Environmental
Permits; and |
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(iii) there are no liabilities of or relating to any member
of the Concentric Group of any kind whatsoever, whether accrued,
contingent, absolute, determined, or arising under or relating
to Environmental Laws or any facts, conditions, situations or set
of circumstances that could reasonably be expected to result in
or be the basis for any such liability. |
(b) To the Knowledge of Concentric, there have been no
environmental investigations, studies, audits, tests, reviews or
other analyses conducted in relation to the current or prior
business of any member of the Concentric Group or any property or
facility now or previously owned or leased by any member of the
Concentric Group that reveal matters that, individually or in the
aggregate, have had or would reasonably be expected to have a
Concentric Material Adverse Effect.
(c) For purposes of this Section 4.19, the terms
“CONCENTRIC GROUP” shall include any entity that is, in
whole or in part, a predecessor of any member of the Concentric
Group.
SECTION 4.20. Intellectual Property. With such
exceptions as, individually or in the aggregate, have not had and
would not be reasonably expected to have a Concentric Material
Adverse Effect, each member of the Concentric Group owns or has a
valid license to use each trademark, service mark, trade name,
invention, patent, trade secret, copyright, know-how (including
any registrations or applications for registration of any of the
foregoing) or any other similar type of proprietary intellectual
property right (collectively, the “CONCENTRIC INTELLECTUAL
PROPERTY”) necessary to carry on its business substantially
as
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currently conducted. No member of the Concentric Group has
received any notice of infringement of or conflict with, and to
Concentric’s Knowledge, there are no infringements of or
conflicts with, the rights of any Person with respect to the use
of any Concentric Intellectual Property that, in either such
case, individually or in the aggregate, have had or would be
reasonably expected to have, a Concentric Material Adverse
Effect.
SECTION 4.21. Contracts. Except as disclosed in
Concentric SEC Documents, no member of the Concentric Group is a
party to or bound by (i) any “material contract”
(as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC) or any agreement, contract or
commitment that would be such a “material contract” but
for the exception for contracts entered into in the ordinary
course of business, (ii) any non-competition agreement or
any other agreement or obligation which materially limits or will
materially limit any member of the Concentric Group (or after
the Mergers, any member of the NEXTLINK Group) from engaging in
any line of business, or (iii) any material agreement,
contract or commitment to which SBC, Williams, Microsoft or any
of their respective Affiliates is a party that is not in the
ordinary course of business of the Concentric Group. With such
exceptions as, individually or in the aggregate, have not had,
and would not be reasonably expected to have, a Concentric
Material Adverse Effect, (x) each of the contracts,
agreements and commitments of the Concentric Group is valid and
in full force and effect and (y) no member of the Concentric
Group has violated any provision of, or committed or failed to
perform any act which, with or without notice, lapse of time, or
both, would constitute a default under the provisions of any such
contract, agreement or commitment. To the Knowledge of
Concentric, no counterparty to any such contract, agreement or
commitment has violated any provision of, or committed or failed
to perform any act which, with or without notice, lapse of time,
or both would constitute a default or other breach under the
provisions of, such contract, agreement or commitment, except for
defaults or breaches which, individually or in the aggregate,
have not had, or would not reasonably be expected to have, a
Concentric Material Adverse Effect. Neither Concentric nor any
Concentric Subsidiary is a party to, or otherwise a guarantor of
or liable with respect to, any interest rate, currency or other
swap or derivative transaction, other than any such transactions
which are not material to the business of the Concentric Group.
Concentric has provided or made available to NEXTLINK a copy of
each agreement described in item (i), (ii) or
(iii) above (except for such agreements filed as exhibits to
the Concentric SEC Documents).
SECTION 4.22. Vote Required. The only vote of the
holders of any class or series of capital stock of Concentric
necessary to approve this Agreement and the transactions
contemplated hereby is the affirmative vote of the holders of a
majority of the outstanding shares of Concentric Common Stock
(the “CONCENTRIC STOCKHOLDERS’ APPROVAL”)
SECTION 4.23. Antitakeover Statutes; Rights Agreement.
(a) Concentric has taken all action necessary to exempt
the Mergers and this Agreement and the transactions contemplated
hereby from the restrictions of Section 203 of Delaware Law,
and, accordingly, neither such Section nor any other
antitakeover or similar statute or regulation applies or purports
to apply to any such transactions. No other “control share
acquisition,” “fair price,” “moratorium”
or other antitakeover laws or regulations enacted under U.S.
state or federal laws apply to this Agreement or any of the
transactions contemplated hereby.
(b) Concentric and the Concentric Board have taken all
necessary action to (i) render the Concentric Rights
Agreement inapplicable to the Mergers and the other transactions
contemplated by this Agreement, (ii) provide that
(A) none of NEXTLINK, any NEXTLINK Subsidiary or Newco shall
be deemed an Acquiring Person (as defined in the Rights
Agreement) as a result of this Agreement or any of the
transactions contemplated hereby, (B) no Distribution Date
(as defined in the Rights Agreement) shall be deemed to have
occurred as a result of this Agreement or the consummation of any
of the transactions contemplated hereby and (C) the rights
issuable pursuant to the Rights Agreement will not separate from
the shares of Concentric Common Stock, as a result of the
approval, execution or delivery of this Agreement or the
consummation of the transactions contemplated hereby.
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ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF NEXTLINK
Except as set forth in the NEXTLINK Disclosure Schedule or as
disclosed in the NEXTLINK SEC Documents filed prior to the date
hereof, NEXTLINK represents and warrants to Concentric (and to
McCaw to the extent provided in Section 5.21) that:
SECTION 5.1. Corporate Existence and Power.
(a) NEXTLINK is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware and has all corporate powers required to carry on its
business as now conducted. NEXTLINK is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction where such qualification is necessary except for
those jurisdictions where failure to be so qualified,
individually or in the aggregate, has not had and would not be
reasonably expected to have a NEXTLINK Material Adverse Effect.
NEXTLINK has heretofore delivered or made available to Concentric
true and complete copies of the certificate of incorporation and
bylaws of NEXTLINK, as currently in effect.
(b) Newco is a corporation duly incorporated, validly
existing and in good standing under the laws of the Sate of
Delaware and has all corporate powers required to carry on its
business as now conducted.
SECTION 5.2. Corporate Authorization. (a) The
execution, delivery and performance by NEXTLINK and the
consummation by NEXTLINK of the transactions contemplated hereby
are within the corporate powers of NEXTLINK and, except for the
approval of Nextlink’s stockholders of this Agreement, have
been duly authorized by all necessary corporate action including,
without limitation, NEXTLINK’s Board of Directors having:
(i) determined that this Agreement and the transactions
contemplated hereby are fair to and in the best interests of
NEXTLINK’s stockholders; (ii) approved this Agreement
and the transactions contemplated hereby; and (iii) resolved
to recommend approval and adoption of this Agreement by its
stockholders. This Agreement constitutes a valid and binding
agreement of NEXTLINK enforceable against NEXTLINK in accordance
with its terms, except (i) as the same may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws of
general application relating to or affecting creditors’
rights, (ii) provisions providing for indemnity for
liability under the securities laws and (iii) for the
limitations imposed by general principles of equity.
(b) The execution, delivery and performance by Newco and
the consummation by Newco of the transactions contemplated hereby
are within the corporate powers of Newco, and have been duly
authorized by all necessary corporate action. This Agreement
constitutes a valid and binding agreement of Newco enforceable
against Newco in accordance with its terms, except (i) as
the same may be limited by applicable bankruptcy, insolvency,
moratorium or similar laws of general application relating to or
affecting creditors’ rights, (ii) provisions providing for
indemnity for liability under the securities laws and
(iii) for the limitations imposed by general principles of
equity.
SECTION 5.3. Governmental Authorization. The
execution, delivery and performance by NEXTLINK and Newco of this
Agreement and the consummation by NEXTLINK and Newco of the
transactions contemplated hereby require no action by or in
respect of, or filing with, any Governmental Authority, other
than: (i) the filing of a certificate of Merger with respect to
the Mergers with the Delaware Secretary of State and appropriate
documents with the relevant authorities of other states in which
NEXTLINK is qualified to do business; (ii) compliance with any
applicable requirements of the HSR Act; (v) compliance with
any applicable requirements of the 1933 Act, the 1934 Act and any
other applicable securities laws, whether state or foreign;
(vi) as set forth in the NEXTLINK Disclosure Schedule; and
(vii) any actions or filings the absence of which,
individually or in the aggregate, would not be reasonably
expected to have a NEXTLINK Material Adverse Effect or materially
impair or delay the ability of NEXTLINK and Newco to consummate
the transactions contemplated by this Agreement.
SECTION 5.4. Non-contravention. The execution,
delivery and performance by NEXTLINK and Newco of this Agreement
and the consummation by NEXTLINK and Newco of the transactions
contemplated hereby do not and will not (i) contravene, conflict
with, or result in any violation or breach of any provision of
the certificate of incorporation or bylaws of NEXTLINK or Newco;
(ii) assuming compliance with the
A-27
matters referred to in Section 5.3, contravene, conflict
with or result in a violation or breach of any provision of any
law, rule, regulation, judgment, injunction, order or decree;
(iii) require any consent or other action by any Person under,
constitute a default under (or an event that, with or without
notice or lapse of time or both, would constitute a default), or
cause or permit the termination, cancellation, acceleration,
triggering or other change of any right or obligation or the loss
of any benefit to which NEXTLINK, Newco or any NEXTLINK
Subsidiary is entitled under (A) any provision of any
agreement or other instrument binding upon NEXTLINK, Newco or any
NEXTLINK Subsidiary or (B) any license, franchise, permit,
certificate, approval or other similar authorization held by, or
affecting, or relating in any way to, the assets or business of
NEXTLINK, Newco or any NEXTLINK Subsidiary; or (iv) result
in the creation or imposition of any Lien on any asset of
NEXTLINK, Newco or any NEXTLINK Subsidiary, other than such
exceptions in the case of clauses (ii), (iii) and
(iv) as would not be, individually or in the aggregate,
reasonably expected to have a NEXTLINK Material Adverse Effect or
materially impair the ability of NEXTLINK or Newco to consummate
the transactions contemplated by this Agreement.
SECTION 5.5. Capitalization. (a) As of
December 30, 1999, the authorized capital stock of NEXTLINK
consists of (i) 400,000,000 shares of NEXTLINK Common Stock
(ii) 60,000,000 shares of NEXTLINK Class B Common
Stock, (iii) 25,000,000 shares of Preferred Stock, $0.01 par
value per share of which (A) 11,700,000 shares have been
designated 14% Redeemable Preferred Stock, (B) 4,600,000
have been designated 6 1/2% Convertible Preferred Stock,
(C) 584,375 shares have been designated as NEXTLINK
Series C Preferred Stock and (D) 265,625 shares have
been designated as NEXTLINK Series D Preferred Stock. As of
December 30, 1999, there were outstanding
(i) 75,222,269 shares of NEXTLINK Common Stock, (ii)
58,902,550 shares of NEXTLINK Class B Common Stock,
(iii) employee and non-employee director and consultant
stock options to purchase an aggregate of not more than
28,146,011 shares of NEXTLINK Common Stock (of which options to
purchase an aggregate of not more than 4,446,178 shares of
NEXTLINK Common Stock were exercisable), (v) 8,324,796
shares of NEXTLINK 14% Preferred Stock, (vi) 4,000,000
shares of NEXTLINK 6 1/2% Preferred Stock and (vii) no
shares of NEXTLINK Series C Preferred Stock or NEXTLINK
Series D Preferred Stock. NEXTLINK has entered into an
agreement to issue and sell all of the authorized shares of
NEXTLINK Series C Preferred Stock and NEXTLINK Series D
Preferred Stock. All outstanding shares of capital stock of
NEXTLINK have been duly authorized and validly issued and are
fully paid and nonassessable.
(b) Except as set forth in this Section 5.5 and for
changes since December 30, 1999 resulting from (x) the
exercise of employee and non-employee director and consultant
stock options outstanding on such date (and the grant or award of
employee and non-employee director and consultant stock options
in the ordinary course of business and the exercise thereof),
(y) the conversion of shares of NEXTLINK 6 1/2%
Preferred Stock outstanding on such date and (z) issuance of
NEXTLINK Series C Preferred Stock and NEXTLINK Series D
Preferred Stock pursuant to the Forstmann Little Agreement,
there are no outstanding (i) shares of capital stock or
voting securities of NEXTLINK, (ii) securities of NEXTLINK
convertible into or exchangeable for shares of capital stock or
voting securities of NEXTLINK or (iii) options or other
rights to acquire from NEXTLINK or other obligations of NEXTLINK
to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting
securities of NEXTLINK. There are no outstanding obligations of
NEXTLINK or any NEXTLINK Subsidiary to repurchase, redeem or
otherwise acquire any of the securities referred to in clause
(i), (ii) or (iii) above (collectively, the
“NEXTLINK SECURITIES”).
(c) As of December 30, 1999, the authorized capital
stock of Newco consisted of (i) 800,000,000 shares of Newco
Common Stock (ii) 120,000,000 of Newco Class B Common
Stock, (iii) 25,000,000 shares of Preferred Stock, $0.01 par
value per share and (iv) 10,000,000 shares of Preferred
Stock, $0.001 par value per share. As of December 30, 1999,
there were no outstanding shares of Newco capital stock. There
will be no outstanding shares of Newco capital stock prior to the
Effective Time.
(d) The Newco Common Stock and the Newco Preferred Stock or
the NEXTLINK Securities, as applicable, to be issued as part of
the Merger Consideration (or upon exercise of Adjusted Options)
have been duly authorized and, when issued and delivered in
accordance with the terms of this Agreement (or the
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Adjusted Options, as the case may be), will have been validly
issued and will be fully paid and nonassessable and the issuance
thereof is not subject to any preemptive or similar right.
SECTION 5.6. Subsidiaries. (a) Each NEXTLINK
Subsidiary is a corporation or other legal entity duly organized,
validly existing and in good standing (where applicable) under
the laws of its jurisdiction of organization, has all corporate,
LLC, partnership or other similar powers required to carry on its
business as now conducted other than such exceptions as,
individually or in the aggregate, have not had and would not
reasonably be expected to have a NEXTLINK Material Adverse
Effect. Each NEXTLINK Subsidiary is duly qualified to do business
as a foreign corporation or other foreign legal entity and is in
good standing in each jurisdiction where such qualification is
necessary, with such exceptions, individually or in the
aggregate, as have not had and would not be reasonably expected
to have a NEXTLINK Material Adverse Effect. The NEXTLINK
Disclosure Schedule sets forth a list of all NEXTLINK Significant
Subsidiaries and their respective jurisdictions of incorporation
and identifies NEXTLINK’s (direct or indirect) percentage
ownership interest therein.
(b) All of the outstanding capital stock of, or other
voting securities or ownership interests in, each NEXTLINK
Significant Subsidiary is owned by NEXTLINK, directly or
indirectly, free and clear of any Lien and free of any other
limitation or restriction (including any restriction on the right
to vote, sell or otherwise dispose of such capital stock or
other voting securities or ownership interests, other than
transfer restrictions under the 1933 Act and the rules
promulgated thereunder). There are no outstanding (i) securities
of NEXTLINK or any NEXTLINK Subsidiary convertible into or
exchangeable for shares of capital stock or other voting
securities or ownership interests in any NEXTLINK Significant
Subsidiary or (ii) options or other rights to acquire from
NEXTLINK or any NEXTLINK Subsidiary, or other obligations of
NEXTLINK or any NEXTLINK Subsidiary to issue, any capital stock
or other voting securities or ownership interests in, or any
securities convertible into or exchangeable for any capital stock
or other voting securities or ownership interests in, any
NEXTLINK Significant Subsidiary. There are no outstanding
obligations of NEXTLINK or any NEXTLINK Significant Subsidiary to
repurchase, redeem or otherwise acquire any of the securities
referred to in clauses (i) or (ii) above.
SECTION 5.7. SEC Filings. (a) NEXTLINK has
delivered or made available to Concentric
(i) NEXTLINK’s annual reports on Form 10-K for its
fiscal years ended December 31, 1998 and 1997,
(ii) its proxy or information statements relating to
meetings of, or actions taken without a meeting by
NEXTLINK’s stockholders held since December 31, 1998,
and (iii) all of its other reports, statements, schedules
and registration statements filed with the SEC since
December 31, 1998 (the documents referred to in this
Section 5.7(a) including any exhibits thereto or documents
incorporated therein by reference, collectively, the
“NEXTLINK SEC DOCUMENTS”).
(b) As of its filing date, each NEXTLINK SEC Document
complied as to form in all material respects with the applicable
requirements of the 1933 Act and 1934 Act, as the case may be.
(c) As of its filing date, each NEXTLINK SEC Document filed
pursuant to the 1934 Act did not contain any untrue statement of
a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(d) Each NEXTLINK SEC Document that is a registration
statement, as amended or supplemented, if applicable, filed
pursuant to the 1933 Act, as of the date such registration
statement or amendment became effective, did not contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading.
SECTION 5.8. Financial Statements. The audited
consolidated financial statements and unaudited consolidated
interim financial statements of NEXTLINK included in the NEXTLINK
SEC Documents fairly present, in all material respects, in
conformity with GAAP applied on a consistent basis (except as may
be indicated in the notes thereto), the consolidated financial
position of NEXTLINK and its consolidated Subsidiaries as of the
respective dates thereof and their consolidated results of
operations and cash flows for the periods then ended (subject to
normal year-end adjustments in the case of any unaudited interim
A-29
financial statements) and except that unaudited financial
statements may not contain all notes required under GAAP with
respect to audited Financial Statements.
SECTION 5.9. Information Supplied. The information
supplied by NEXTLINK for inclusion in the Registration Statement
shall not at the time the Registration Statement is declared
effective by the SEC contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading. The information supplied by NEXTLINK for inclusion in
the Proxy Statement to be sent to the stockholders of Concentric
in connection with the Concentric Stockholders’ Meeting and
to the stockholders of NEXTLINK in connection with the Mergers
shall not, on the date the Proxy Statement is first mailed to the
stockholders of Concentric and NEXTLINK or at the time either of
the Stockholders’ Meetings or at the Effective Time,
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 5.10. Absence of Certain Changes. Since the
NEXTLINK Balance Sheet Date, the business of NEXTLINK and the
NEXTLINK Subsidiaries has been conducted in the ordinary course
consistent with past practices. Since the NEXTLINK Balance Sheet
Date, there has not been any event, occurrence or development of
a state of circumstances or facts which, individually or in the
aggregate, has had or would be reasonably expected to have a
NEXTLINK Material Adverse Effect.
SECTION 5.11. No Undisclosed Material Liabilities.
There are no liabilities or obligations of NEXTLINK or any
NEXTLINK Subsidiary of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and
there is no existing condition, situation or set of circumstances
that could be reasonably expected to result in such a liability
or obligation, other than:
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(a) liabilities or obligations disclosed and provided for
in the NEXTLINK Balance Sheet or in the notes thereto or in the
NEXTLINK SEC Documents filed prior to the date hereof; |
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(b) liabilities or obligations incurred in the ordinary
course of business consistent with past practice since the
NEXTLINK Balance Sheet Date; or |
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(c) liabilities or obligations that, individually or in the
aggregate have not had and would not be reasonably expected to
have a NEXTLINK Material Adverse Effect. |
SECTION 5.12. Compliance with Laws and Court Orders.
NEXTLINK and the NEXTLINK Subsidiaries hold all licenses,
franchises, certificates, consents, permits, qualifications and
authorizations from all Governmental Authorities necessary for
the lawful conduct of their business, except where the failure to
hold any of the foregoing, individually or in the aggregate, has
not had and would not be reasonably expected to have a NEXTLINK
Material Adverse Effect. NEXTLINK and each of the NEXTLINK
Subsidiaries are, and have been in compliance with, and to the
Knowledge of NEXTLINK, are not under investigation with respect
to and have not been threatened to be charged with or given
notice of any violation of, any such license, franchise,
certificate, consent, permit, qualification or authorization,
applicable law, statute, ordinance, rule, regulation, judgment,
injunction, order or decree, except for failures to comply or
violations that, individually or in the aggregate, have not had
and would not be reasonably expected to have a NEXTLINK Material
Adverse Effect.
SECTION 5.13. Litigation. There is no action, suit,
investigation or proceeding (or to the Knowledge of NEXTLINK, any
reasonable basis therefor) pending against, or, to the Knowledge
of NEXTLINK, threatened against or affecting, NEXTLINK, any
NEXTLINK Subsidiary, or any of their respective properties before
any court or arbitrator or before or by any other Governmental
Authority, that, individually or in the aggregate, would be
reasonably expected to have a NEXTLINK Material Adverse Effect.
SECTION 5.14. Finders’ Fees. Except for Merrill
Lynch & Co., a copy of whose engagement agreement has been
provided to Concentric, whose fees will be paid by NEXTLINK,
there is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on
behalf of NEXTLINK, Newco or any NEXTLINK Subsidiary who might
be entitled to any fee or commission from
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NEXTLINK or any of the NEXTLINK Subsidiaries upon consummation of
the transactions contemplated by this Agreement.
SECTION 5.15. Taxes. Except as set forth in the
NEXTLINK Balance Sheet (including the notes thereto) and except
as would not be, individually or in the aggregate, reasonably
expected to have a NEXTLINK Material Adverse Effect: (i) all
NEXTLINK Tax Returns required to be filed with any taxing
authority by, or with respect to, NEXTLINK and the NEXTLINK
Subsidiaries have been filed in accordance with all applicable
laws; (ii) NEXTLINK and the NEXTLINK Subsidiaries have
timely paid all Taxes shown as due and payable on the NEXTLINK
Tax Returns that have been so filed, and, as of the time of
filing, the NEXTLINK Tax Returns were correct and complete (other
than Taxes which are being contested in good faith and for which
adequate reserves are reflected on the NEXTLINK Balance Sheet);
(iii) NEXTLINK and the NEXTLINK Subsidiaries have made
provision for all Taxes payable by NEXTLINK and the NEXTLINK
Subsidiaries for which no NEXTLINK Tax Return has yet been filed;
(iv) the charges, accruals and reserves for Taxes with
respect to NEXTLINK and the NEXTLINK Subsidiaries reflected on
the NEXTLINK Balance Sheet are adequate under GAAP to cover the
Tax liabilities accruing through the date thereof; (v) there
is no action, suit, proceeding, audit or claim now proposed or
pending against or with respect to NEXTLINK or any NEXTLINK
Subsidiary in respect of any Tax where there is a reasonable
possibility of an adverse determination; (vi) the federal
income Tax Returns of NEXTLINK and the NEXTLINK Subsidiaries have
been examined and settled with the IRS (or the applicable
statutes of limitation for the assessment of federal income Taxes
for such periods have expired) for all years through 1991; and
(vii) there are no material Liens or encumbrances for Taxes
on any of the assets of NEXTLINK or any NEXTLINK Subsidiary
except liens for current Taxes not yet due.
SECTION 5.16. Tax Opinions. There are no facts or
circumstances relating to NEXTLINK or Newco that would prevent
Willkie Farr & Gallagher from delivering the opinion referred
to in Section 10.2(a)(ii) as of the date hereof.
SECTION 5.17. Environmental Matters. (a) Except
as have not had and would not be reasonably expected to have,
individually or in the aggregate, a NEXTLINK Material Adverse
Effect:
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(i) no notice, notification, demand, request for
information, citation, summons or order has been received, no
complaint has been filed, no penalty has been assessed, and no
investigation, action, claim, suit, proceeding or review (or, to
the Knowledge of NEXTLINK, any reasonable basis therefor) is
pending or, to the Knowledge of NEXTLINK, is threatened by any
Governmental Authority or other Person relating to or arising out
of any Environmental Law; |
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(ii) NEXTLINK is and has been in compliance with all
Environmental Laws and all Environmental Permits; and |
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(iii) there are no liabilities of or relating to NEXTLINK
or any NEXTLINK Subsidiary of any kind whatsoever, whether
accrued, contingent, absolute, determined, or arising under or
relating to Environmental Laws or any facts, conditions,
situations or set of circumstances that could reasonably be
expected to result in or be the basis for any such liability. |
(b) To the Knowledge of NEXTLINK, there have been no
environmental investigations, studies, audits, tests, reviews or
other analyses conducted of which NEXTLINK has knowledge in
relation to the current or prior business of NEXTLINK or any
NEXTLINK Subsidiary or any property or facility now or previously
owned or leased by NEXTLINK or any NEXTLINK Subsidiary that
reveal matters that, individually or in the aggregate, have had
or would reasonably be expected to have a NEXTLINK Material
Adverse Effect.
(c) For purposes of this Section 5.17, the terms
“NEXTLINK” and “NEXTLINK SUBSIDIARY” shall
include any entity that is, in whole or in part, a predecessor of
NEXTLINK or any NEXTLINK Subsidiary.
SECTION 5.18. Intellectual Property. With such
exceptions as, individually or in the aggregate, have not had and
would not be reasonably expected to have a NEXTLINK Material
Adverse Effect, each of NEXTLINK and the NEXTLINK Subsidiaries
own or have a valid license to use each trademark, service
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mark, trade name, invention, patent, trade secret, copyright,
know-how (including any registrations or applications for
registration of any of the foregoing) or any other similar type
of proprietary intellectual property right (collectively, the
“NEXTLINK INTELLECTUAL PROPERTY”) necessary to carry on
its business substantially as currently conducted. Neither
NEXTLINK nor any NEXTLINK Subsidiary has received any notice of
infringement of or conflict with, and to NEXTLINK’s
knowledge, there are no infringements of or conflicts with, the
rights of any Person with respect to the use of any NEXTLINK
Intellectual Property that, in either such case, individually or
in the aggregate, have had or would be reasonably expected to
have, a NEXTLINK Material Adverse Effect.
SECTION 5.19. Contracts. Other than as disclosed in
the SEC Documents, (a) neither NEXTLINK nor any of the
NEXTLINK Subsidiaries is a party to or bound by (i) any
“material contract” (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) or any agreement,
contract or commitment that would be such a “material
contract” but for the exception for contracts entered into
in the ordinary course of business, (ii) any non-competition
agreement or any other agreement or obligation which materially
limits or will materially limit NEXTLINK or the NEXTLINK
Subsidiaries (or after the Mergers, Concentric or the Concentric
Subsidiaries) from engaging in any line of business. With such
exceptions as, individually or in the aggregate, have not had,
and would not reasonably be expected to have, a NEXTLINK Material
Adverse Effect, (x) each of the contracts, agreements and
commitments of NEXTLINK and the NEXTLINK Subsidiaries is valid
and in full force and effect and (y) neither NEXTLINK nor
any of the NEXTLINK Subsidiaries has violated any provision of,
or committed or failed to perform any act which, with or without
notice, lapse of time, or both, would constitute a default under
the provisions of, any such contract, agreement or commitment. To
the Knowledge of NEXTLINK, no counterparty to any such contract,
agreement or commitment has violated any provision of, or
committed or failed to perform any act which, with or without
notice, lapse of time, or both would constitute a default or
other breach under the provisions of such contract, agreement or
commitment, except for defaults or breaches which, individually
or in the aggregate, have not had, or would not reasonably be
expected to have, a NEXTLINK Material Adverse Effect. Neither
NEXTLINK nor any NEXTLINK Subsidiary is a party to, or otherwise
a guarantor of or liable with respect to, any interest rate,
currency or other swap or derivative transaction, other than any
such transactions which are not material to the business of
NEXTLINK and the NEXTLINK Subsidiaries, taken as a whole.
NEXTLINK has provided or made available to Concentric a copy of
each agreement of the type described in item (i) or
(ii) above (except for such agreements filed as exhibits to
the NEXTLINK SEC Documents.)
(b) Newco is a newly formed corporation with no operations
or material assets and is not a party to any contracts.
SECTION 5.20. Vote Required. The only vote of the
holders of any class or series of capital stock necessary to
approve the issuance of NEXTLINK Common Stock in the Alternative
Merger is the affirmative vote of a majority of the votes cast by
holders of NEXTLINK Common Stock and NEXTLINK Class B
Common Stock (voting as a single class). The NEXTLINK Voting
Agreement covers a number of votes sufficient for such approval.
Pursuant to Section 251(f) of the Delaware Law, no vote of
holders of Newco Capital Stock is required to approve the Mergers
or the Alternative Merger.
SECTION 5.21. Reliance of McCaw on NEXTLINK
Representations and Warranties. McCaw shall be entitled to
rely on the representations of NEXTLINK contained in
Sections 5.1, 5.2, 5.3, 5.4 and 5.14 of this Article 5
to the extent applicable to the LHP Share Exchange; provided that
references to this Agreement in such representations shall be
deemed to include references to the Registration Rights
Agreement, except that the Registration Rights Agreement is to be
executed and delivered on the Closing Date. In addition to the
foregoing, NEXTLINK and Newco hereby represent and warrant to
McCaw as follows:
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(a) Newco is acquiring the Contributed Interest for
investment and not with a view toward any resale or distribution
of the Contributed Interest except in compliance with the 1933
Act. |
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(b) The shares of Newco Common Stock (or NEXTLINK Common
Stock, as applicable), when issued and delivered to McCaw in
payment of the LHP Consideration in accordance with the terms of |
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this Agreement, will have been duly authorized and validly issued
and will be fully-paid and non-assessable. |
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(c) NEXTLINK has been leading and controlling the business
of LHP and INTERNEXT (assuming that the representation of Eagle
River and McCaw in the first sentence of Section 6.6 to be
true and correct) and, except as otherwise expressly provided in
this Agreement, is not relying on any representation of Eagle
River or McCaw with respect to the respective business,
operations or commercial prospects of LHP or INTERNEXT. |
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF EAGLE RIVER AND MCCAW
Eagle River and McCaw hereby represent and warrant to NEXTLINK
and Newco that:
SECTION 6.1. Organization and Authority. Eagle River
and, to the Knowledge of Eagle River and McCaw, LHP, are each a
limited liability company duly formed, validly existing and in
good standing under the laws of the State of Washington. Eagle
River has all requisite power and authority to execute and
deliver this Agreement and to perform its obligations under this
Agreement.
SECTION 6.2. Due Authorization etc. The execution,
delivery and performance by Eagle River of this Agreement has
been authorized by all necessary action on Eagle River’s
behalf. Eagle River and McCaw have duly executed and delivered
this Agreement. McCaw will, by the Closing Date, have duly
executed and delivered the Registration Rights Agreement. This
Agreement constitutes legal, valid and binding obligations of
Eagle River and McCaw, enforceable against Eagle River and McCaw
in accordance with its terms.
SECTION 6.3. No Conflicts, etc. The execution,
delivery and performance by Eagle River and McCaw of this
Agreement and by McCaw of the Registration Rights Agreement, and
the consummation of the transactions contemplated by this
Agreement and the Registration Rights Agreement do not:
(a) conflict with, contravene, result in a violation or
breach of or default under (with or without the giving of notice
or the lapse of time, or both) (i) any applicable law
statute, ordinance, rule, regulation, judgment, injunction, order
or decree; (ii) the certificate of formation or other
organizational documents of Eagle River; or (iii) any
material contract, agreement or other instrument to which either
Eagle River or McCaw is a party or by which their respective
properties or assets may be bound; or (b) create in any
other Person a right or claim of termination, amendment,
modification, acceleration or cancellation of, or result in or
require the creation of any Lien (or any obligation to create any
Lien) on, the Level 3 Agreement or the rights of INTERNEXT
therein.
SECTION 6.4. Consents. Neither Eagle River nor McCaw
is required to obtain any consent, approval or authorization of
any Governmental Authority or other consent in connection with
the execution and delivery of this Agreement or the Registration
Rights Agreement, or the consummation of the transactions
contemplated by this Agreement or the Registration Rights
Agreement.
SECTION 6.5. Title to Contributed Interest, etc.
McCaw owns, beneficially and of record, the Contributed Interest,
free and clear of any Liens other than Liens created by NEXTLINK
or Newco. Upon the payment for the Contributed Interest at the
Closing under this Agreement, Newco will acquire good and valid
title to the Contributed Interest free and clear of any Liens
other than Liens created by NEXTLINK or Newco.
SECTION 6.6. No Actions. Except for this Agreement,
neither Eagle River nor McCaw has taken any action
(i) binding, or purporting to bind, LHP or INTERNEXT or any
of their respective assets in any manner; or
(ii) committing, or purporting to commit, LHP or INTERNEXT
to issue any additional limited liability company interests or
admit any Person as a member of LHP or INTERNEXT. To the best
knowledge of Eagle River and McCaw, neither LHP nor INTERNEXT has
any liabilities or obligations of any nature except those
arising hereunder, under the Level 3 Agreement and any that may
have been created by NEXTLINK.
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SECTION 6.7. Brokers, Finders, etc. All negotiations
relating to this Agreement, and the transactions contemplated by
this Agreement, have been carried on without the participation
of any Person acting on behalf of Eagle River, McCaw or, to the
best knowledge of Eagle River and McCaw, LHP in such a manner as
to give rise to any valid claim against Newco, LHP or INTERNEXT
for any brokerage or finder’s commission, fee or similar
compensation.
SECTION 6.8. Acquisition for Investment. McCaw is
acquiring shares of Newco Common Stock or NEXTLINK Common Stock,
as the case may be, for investment and not with a view toward any
resale or distribution of such shares except in compliance with
the 1933 Act.
ARTICLE 7.
COVENANTS OF CONCENTRIC
Concentric agrees that:
SECTION 7.1. Concentric Interim Operations. Except
as set forth in the Concentric Disclosure Schedule or otherwise
contemplated by this Agreement and the other agreements by and
between Concentric and its affiliates, on the one hand, and
NEXTLINK and its affiliates, on the other hand, and the several
transactions contemplated hereby and thereby, during the period
from the date of this Agreement and continuing until the earlier
of the termination of this Agreement or the Effective Times,
Concentric agrees (except to the extent that NEXTLINK shall
otherwise have previously consented in writing) to carry on the
Concentric Group’s respective business in the usual, regular
and ordinary course in substantially the same manner as
heretofore conducted, to pay the debts and Taxes of Concentric
Group when due (unless debts and Taxes are subject to a dispute
that Concentric is reasonably and actively seeking to resolve),
to pay or perform other obligations when due (unless such
obligations are the subject of a dispute that Concentric is
actively seeking to resolve) and, to the extent consistent with
such businesses, use its reasonable efforts consistent with past
practice and policies to preserve intact Concentric Group’s
present business organizations, keep available the services of
its present officers and key employees, to maintain in effect all
material foreign, federal, state and local licenses, approvals
and authorizations, including, without limitation, all material
licenses and permits that are required for Concentric or any
Concentric Subsidiary to carry on its business and preserve its
relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it, all with
the goal of preserving the Concentric Group’s goodwill and
ongoing business at the Effective Times, and to refrain from
taking such action that would cause any of the conditions
contained in Article IX hereof not to be satisfied;
provided, however, that Concentric shall not be deemed in breach
of this Section 7.1 because of attrition, if any, among
Concentric’s employees which may occur as a result of this
Agreement, the transactions contemplated hereby or the
announcement or pendancy thereof, so long as Concentric uses
reasonable efforts to retain such employees at Concentric.
Without limiting the generality of the foregoing, except as set
forth in the Concentric Disclosure Schedule or as otherwise
contemplated by this Agreement, from the date hereof until the
Effective Times, without the prior written consent of NEXTLINK,
Concentric shall not, nor shall it permit any Concentric
Subsidiary to:
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(a) amend its certificate of incorporation or by-laws or
other applicable governing instrument; |
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(b) amend any material term of any of its outstanding
securities; |
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(c) split, combine, subdivide or reclassify any shares of
its capital stock or other equity interests or declare, set aside
or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its
capital stock, or redeem, repurchase or otherwise acquire or
offer to redeem, repurchase, or otherwise acquire any of its
securities or any securities of Concentric or any Concentric
Subsidiary, except for (i) regular dividends on outstanding
preferred stock pursuant to the terms of such securities,
(ii) dividends paid by any Concentric Subsidiary that is,
directly or indirectly, wholly owned by Concentric; |
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(d) adopt a plan or agreement of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other material reorganization (other than a
merger or consolidation |
A-34
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between wholly owned Concentric Subsidiaries and acquisitions or
mergers of a Concentric Subsidiary, in which the sole
consideration consists of cash in an amount not to exceed
$5,000,000 in any one transaction or series of related
transactions or $25,000,000 in the aggregate); |
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(e) issue, deliver or sell, or authorize the issuance,
delivery or sale of, any shares of its capital stock of any class
or other equity interests or any securities convertible into or
exercisable for, or any rights, warrants or options to acquire,
any such capital stock or other equity interests, other than
(i) the issuance of shares of Concentric Common Stock upon
the exercise of stock options or warrants in accordance with
their present terms, (ii) issuances pursuant to the conversion of
convertible securities outstanding on the date hereof in
accordance with their present terms, (iii) the granting of
options to acquire shares of Concentric Common Stock in
accordance with Section 7.1(e) of the Concentric Disclosure
Schedule; |
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(f) incur any capital expenditures exceeding by more than
$5 million the amount currently budgeted therefor as set
forth in the Concentric Disclosure Schedule; |
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(g) except for capital expenditures, which shall be
governed by clause (f), acquire (by merger, consolidation,
acquisition of stock or assets or otherwise), directly or
indirectly, any assets, other than (i) pursuant to
agreements in effect as of the date hereof and listed in the
Concentric Disclosure Schedule, (ii) assets used in the
ordinary course of business of Concentric and the Concentric
Subsidiaries in a manner that is consistent with past practice or
(iii) assets having a fair market value not exceeding
$5,000,000 in individual cases or $25,000,000 in the aggregate; |
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(h) other than pursuant to agreements in effect as of the
date hereof and listed in the Concentric Disclosure Schedule,
sell, lease, license, encumber or otherwise transfer any domestic
assets having a fair market value exceeding $5,000,000 in any
one transaction or series of related transactions or $25,000,000
in the aggregate; |
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(i) incur, assume or guarantee any indebtedness for
borrowed money other than as expressly contemplated in the
Concentric Disclosure Schedule or as otherwise agreed with
NEXTLINK; |
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(j) make any loan, advance or capital contributions to or
investment in any Person other than loans, advances or capital
contributions to or investments in its wholly owned Subsidiaries,
except for advances to Internet Technology Group plc not to
exceed $12 million in the aggregate; |
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(k) engage in or enter into any transaction or commitment,
enter into any contract or agreement, or relinquish or amend in
any respect any contract or other right outside of the ordinary
course of Concentric’s business consistent with past
practice (except as otherwise specifically permitted by this
Section 7.1); |
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(l) enter into any agreement or arrangement that materially
limits or otherwise materially restricts Concentric, any
Concentric Subsidiary or any of their respective Affiliates or
any successor thereto or that would, after the Effective Time,
materially limit or restrict NEXTLINK, any NEXTLINK Subsidiary,
the Surviving Corporation or any of their Affiliates, from
engaging in any line of business; |
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(m) except as required pursuant to existing written,
binding agreements listed in the Concentric Disclosure Schedule
or as otherwise mandated by law as of the date hereof
(i) enter into any commitment to provide any severance or
termination pay to (or amend any existing arrangement with) any
director, officer or employee of Concentric or any Concentric
Subsidiary, (ii) increase the benefits payable under any
existing severance or termination pay policy or employment
agreement (other than as may be increased by function of the
existing terms of any such policy or agreement), (iii) enter
into any employment, deferred compensation or other similar
agreement (or amend any such existing agreement) with any
director, officer or employee of Concentric or any Concentric
Subsidiary, (iv) establish, adopt or amend (except as
required by applicable law) any collective bargaining, bonus,
profit-sharing, thrift, pension, retirement, deferred
compensation, compensation, stock option, restricted stock or
other benefit plan or arrangement covering any director, officer
or employee of Concentric or any Concentric Subsidiary, except
that Concentric and the Concentric Subsidiaries may amend any
such |
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existing agreement or plan or adopt a successor plan or
arrangement to the extent mandated by applicable law or to the
extent that such amendment would not result in a more than de
minimis increase in the costs or liabilities under such agreement
or plan, (v) other as required by any agreement in effect
as of the date hereof, increase the compensation, bonus or other
benefits payable to any director, officer or employee of
Concentric or any Concentric Subsidiary or (vi) amend the
terms of any outstanding option to purchase shares in Concentric
Common Stock; provided, that nothing in this
Section 7.1(m) shall prohibit raises and option grants to
employees (other than officers and directors) in the ordinary
course; |
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(n) change (i) its methods of accounting or accounting
practices in any material respect, except as required by
concurrent changes in U.S. GAAP or by law or (ii) its fiscal
year; |
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(o) enter into or amend in any material respect any
agreement of general or limited partnership, limited liability
company agreement or any other agreement creating a “joint
venture” (as defined in the HSR Act) involving assets or
liabilities in excess of $5 million; |
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(p) settle, or propose to settle, any litigation,
investigation, arbitration, proceeding or other claim in an
aggregate amount for all such matters in excess of $1,500,000,
(excluding amounts for which Concentric is contractually entitled
to indemnification from a third party); |
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(q) make any material tax election or enter into any
settlement or compromise of any material tax liability; |
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(r) take any action that would make any representation or
warranty of Concentric hereunder inaccurate in any material
respect at the Effective Time; or |
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(s) agree or commit to do any of the foregoing; |
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provided that the limitations set forth above shall not
apply to any transaction between Concentric and any Concentric
Subsidiary that is wholly owned by Concentric or between any such
wholly owned Concentric Subsidiaries. |
SECTION 7.2. Concentric Stockholders’ Meeting;
Proxy Material. (a) Concentric shall cause the Concentric
Stockholders’ Meeting to be duly called and held as soon as
reasonably practicable following the receipt of an order of the
SEC declaring the Registration Statement effective under the 1933
Act for the purpose of voting on the approval and adoption of
this Agreement and the Mergers. In connection with such meeting,
Concentric will (i) subject to Section 7.2(b), use its
best efforts to obtain the necessary approvals by its
stockholders of this Agreement and the transactions contemplated
hereby and (ii) otherwise comply with all legal requirements
applicable to such meeting.
(b) Except as provided below, the Board of Directors of
Concentric shall unanimously recommend approval and adoption of
this Agreement and the Mergers or the Alternative Merger, as
applicable, by Concentric’s stockholders and shall take all
lawful action to solicit such approval including calling a
special meeting of its stockholders and mail the Proxy Statement
in connection therewith. The Board of Directors of Concentric
shall be permitted to withdraw, or modify in a manner adverse to
NEXTLINK, its recommendation to its stockholders, but only if:
(i) Concentric has complied with the terms of
Section 7.3, including, without limitation, the requirement
in Section 7.3(b) that it notify NEXTLINK promptly after its
receipt of any Acquisition Proposal, or has made good faith
efforts to comply with such terms of Section 7.3 and has
substantially complied with them; (ii) a Superior Proposal
is pending at the time the Board of Directors determines to take
any such action; (iii) the Board of Directors determines in
good faith by a majority vote, after consultation with
Concentric’s outside counsel, that it is required to take
such action to satisfy its fiduciary duties under applicable law;
and (iv) Concentric shall have delivered to NEXTLINK a
prior written notice advising NEXTLINK that it intends to take
such action (such notice to be delivered not less than two days
prior to the time such action is taken). Unless this Agreement is
previously terminated in accordance with Article 11,
Concentric shall submit this Agreement to its stockholders at the
Concentric Stockholders’ Meeting even if the Concentric
Board of Directors determines at any time after the date hereof
that is no longer advisable or recommends that the Concentric
stockholders reject it.
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SECTION 7.3. No Solicitation. (a) From the date
hereof until the termination hereof, Concentric will not, and
will cause the Concentric Subsidiaries and the officers,
directors, employees, investment bankers, attorneys, accountants,
consultants or other agents or advisors of Concentric and the
Concentric Subsidiaries not to, directly or indirectly:
(i) take any action to solicit, initiate, or knowingly
facilitate or encourage the submission of any Acquisition
Proposal; (ii) other than in the ordinary course of business
and not related to an Acquisition Proposal, engage in any
discussions or negotiations with, or disclose any non-public
information relating to Concentric or any Concentric Subsidiary
or afford access to the properties, books or records of
Concentric or any Concentric Subsidiary to, any Person who is
known by Concentric to be considering making, or has made, an
Acquisition Proposal; (iii) (A) amend or grant any waiver or
release under any standstill or similar agreement with respect
to any class of equity securities of Concentric (a
“STANDSTILL AGREEMENT”), (B) approve any
transaction under Section 203 of Delaware Law, (C) to
the fullest extent permitted by Delaware Law, amend or grant any
waiver or release or approve any transaction or redeem any Rights
or (D) approve of any Person’s becoming an
“interested stockholder” under Section 203 of
Delaware Law or (iv) enter into any agreement with respect
to an Acquisition Proposal (other than a confidentiality
agreement as described in item (C) below); provided that
Concentric may negotiate or otherwise engage in substantive
discussions with, and furnish non-public information and provide
a waiver or release of a Standstill Agreement to, any Person (a
“THIRD PARTY”) who delivers an unsolicited Acquisition
Proposal that the Concentric Board of Directors reasonably
believes will lead to a Superior Proposal if: (A) Concentric
has complied with the terms of this Section 7.3, including
without limitation, the requirement in Section 7.3(b) that
it notify NEXTLINK promptly after its receipt of any Acquisition
Proposal (or has made good faith efforts to comply with such
terms and has substantially complied with them); (B) the
Board of Directors of Concentric determines in good faith by a
majority vote, after consultation with Concentric’s outside
legal counsel, that it must take such action to comply with its
fiduciary duties under applicable law; and (C) the Third
Party executes a confidentiality agreement with terms no less
favorable in the aggregate to Concentric than those contained in
the Confidentiality Agreement dated as of November 18, 1999
between Concentric and NEXTLINK (the “CONFIDENTIALITY
AGREEMENT”). Nothing contained in this Agreement shall
prevent the Board of Directors of Concentric from complying with
applicable securities laws and regulations including, without
limitation, the 1934 Act and Rule 14e-2 and Rule 14d-9
thereunder with regard to an Acquisition Proposal.
(b) Concentric will notify NEXTLINK promptly (but in no
event later than 48 hours) after receipt by Concentric (or any of
its advisors) of any Acquisition Proposal, or of any request
(other than in the ordinary course of business and not related to
an Acquisition Proposal) for non-public information relating to
Concentric or any of the Concentric Subsidiaries or for access to
the properties, books or records of Concentric or any Concentric
Subsidiary by any Person who is known to be considering making,
or has made, an Acquisition Proposal. Concentric shall provide
such notice orally and in writing and shall identify the Person
making, and the terms and conditions of, any such Acquisition
Proposal, indication or request. Concentric shall keep NEXTLINK
fully informed, on a prompt basis (but in any event no later than
48 hours), of the status and details of any such Acquisition
Proposal, indication or request. Concentric shall, and shall
cause the Concentric Subsidiaries and the directors, employees
and other agents of Concentric and the Concentric Subsidiaries
to, cease immediately and cause to be terminated all activities,
discussions or negotiations, if any, with any Persons conducted
prior to the date hereof with respect to any Acquisition
Proposal.
SECTION 7.4. Bondholder and Preferred Consent.
(a) Each of Concentric and NEXTLINK shall (i) solicit,
and use its commercially reasonable efforts to obtain, the
consent of holders of the Concentric Senior Notes and the
Concentric Series B Preferred Stock to the Mergers and, at
NEXTLINK’s request, to the replacement, as of the Effective
Time, of the covenants contained in the indentures relating to
the Concentric Senior Notes and the Concentric Debentures and the
Concentric Series B Preferred Stock covenants substantially
identical, mutatis mutandis, to those applicable to
NEXTLINK’s 10 1/2% Senior Notes due 2009 and the
consent of the holder of the Concentric Series C Preferred
Stock to the items contemplated by clauses (A) and
(D) of Section 3.1(i), provided that any fees or
other inducements paid or provided for in connection therewith
shall be paid by NEXTLINK in such amounts, at such times and
subject to such contingencies as NEXTLINK shall determine in its
sole discretion and/or, if NEXTLINK elects to do so,
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(ii) exchange the Concentric Series B Preferred Stock
for Concentric Debentures in accordance with its terms and
subject such Concentric Notes and the Concentric Debentures to
covenant defeasance in accordance with Section 403 of the
respective indentures related thereto, effective immediately
prior to the Mergers, in the case of the Concentric Senior Notes,
and effective immediately prior to the exchange of Concentric
Series B Preferred Stock for Concentric Debentures, in the
case of the Concentric Debentures, in each case with the funds
therefor to be supplied by NEXTLINK, provided that nothing
contained in this Agreement will require NEXTLINK to elect such
covenant defeasance.
(b) If, within forty (40) days after the date
Concentric distributes a consent solicitation contemplated in
Section 7.4(a)(i) or such extension thereof as NEXTLINK
shall determine, with the consent of Concentric not to be
unreasonably withheld (the “SOLICITATION TERMINATION
DATE”), Concentric has not received the requisite consents
of holders of the Concentric Senior Notes and Concentric
Series B Preferred Stock to the actions described in Section
7.4(a)(i), NEXTLINK may elect (the “NEXTLINK
ELECTION”) to commence an exchange offer as set forth in
Section 7.5. NEXTLINK shall exercise the NEXTLINK Election,
if it determined, in its sole discretion, to do so, by delivering
written notice to Concentric within five (5) Business Days
after the Solicitation Termination Date. Concentric agrees to
provide NEXTLINK with written notice of the Solicitation
Termination Date at least five (5) Business Days prior to
the occurrence of the Solicitation Termination Date.
SECTION 7.5. The Exchange Offer.
(a) Terms of the Exchange Offer. Upon the making of
a NEXTLINK Election, Newco shall announce as promptly as
practicable in accordance with applicable law the commencement
(within the meaning of Rule 14d-2 under the 1934 Act) of an
irrevocable exchange offer (the “EXCHANGE OFFER”) to
acquire all of the issued and outstanding shares of Concentric
Common Stock and Concentric Series C Preferred Stock in exchange
for the Common Stock Consideration and the Concentric
Series C Consideration, respectively (the “EXCHANGE
CONSIDERATION”), and with such other terms and conditions
which make the Exchange Offer at least as favorable to the
exchanging holders of such shares as the Mergers. Newco shall
conduct such Exchange Offer in accordance with this
Section 7.5 and applicable law. To the extent practicable in
the context of the Exchange Offer, the parties hereto shall seek
to provide to each other all of the benefits of the provisions
of this Agreement. Newco hereby agrees that within two
(2) Business Days following the later to occur of the
expiration of the minimum statutory period during which exchange
offers must remain open and all Exchange Offer Conditions (as
defined below) having been satisfied or waived, Newco shall
accept for exchange all shares of Concentric Common Stock and
Concentric Series C Preferred Stock tendered and promptly
issue the Exchange Consideration to the holders of Concentric
Common Stock and Concentric Series C Preferred Stock who
shall have tendered their shares in the Exchange Offer.
The obligation of Newco to consummate the Exchange Offer once it
is commenced and to accept for exchange the shares of Concentric
Common Stock and Concentric Series C Preferred Stock
tendered pursuant to the Exchange Offer shall be subject only to
the following conditions (the “EXCHANGE OFFER
CONDITIONS”): (i) the holders of the outstanding
Concentric Common Stock and Concentric Series C Preferred
Stock (on a fully converted basis) representing at least 50.1% of
the voting power of the Concentric Common Stock (on a fully
diluted basis) as of the date the Exchange Offer is commenced
(and all shares of Concentric Common Stock and Concentric
Series C Preferred Stock (on a fully converted basis) held
by Newco, each NEXTLINK Subsidiary and each affiliate thereof
shall be deemed to be included within such 50.1%) accepting the
Exchange Offer, (ii) the resignations of Concentric’s
directors prior to consummation of the Exchange Offer and (iii)
the satisfaction of the following conditions precedent sections
of this Agreement (to the extent applicable to an exchange
offer): 10.1(b), 10.1(c), 10.1(d), 10.1(e), 10.1(f), 10.2(a)(i),
10.2(a)(ii), 10.3(a) and 10.3(b). Newco expressly reserves the
right to waive any such condition, to increase the consideration
payable in the Exchange Offer and to make any other changes in
the terms and conditions of the Exchange Offer which make the
Exchange Offer more favorable to the holders of the issued and
outstanding shares of Concentric Common Stock and Concentric
Series C Preferred Stock than the Mergers and than the
requirements for the Exchange Offer set forth herein.
Notwithstanding the foregoing, no change may be made which
(i) causes the Exchange Offer not to meet the
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requirements of this Section 7.5, (ii) decreases or
changes the Exchange Consideration to be paid in the Exchange
Offer, (iii) reduces the number of shares of Concentric Common
Stock and Concentric Series C Preferred Stock sought to be
purchased in the Exchange Offer, (iv) imposes conditions to
the Exchange Offer other than those permitted by this Section
7.5, (v) extends the expiration date of the Exchange Offer
or (vi) otherwise alters or amends any term of the Exchange
Offer in any manner materially adverse to the holders of shares
of Concentric Common Stock and Concentric Series C Preferred
Stock; provided, however, that subject to the right of the
parties to terminate this Agreement pursuant to
Section 10.1, the Exchange Offer may be extended for any
period to the extent required to satisfy any Exchange Offer
Condition or to the extent required by law or by any rule,
regulation, interpretation or position of the SEC or the staff
thereof, so long as the Exchange Offer shall not extend beyond
the End Date. Newco shall not acquire less than all of the shares
of Concentric Common Stock and Concentric Series C
Preferred Stock or other securities that are tendered pursuant to
the Exchange Offer.
(b) Exchange Offer Documents. As promptly as
practicable after the election by the Newco to commence the
Exchange Offer, Newco shall file with the SEC a registration
statement (together with the amendments thereof or supplements
thereto, the “EXCHANGE REGISTRATION STATEMENT”) in
connection with the registration under the 1933 Act of the Newco
Common Stock and Newco Series F Preferred Stock to be issued
pursuant to the Exchange Offer. Newco shall use all reasonable
efforts to have or cause the Exchange Registration Statement to
become effective as promptly as practicable. As promptly as
practicable (and in any event within five (5) Business Days)
after the Exchange Registration Statement has become effective,
Newco shall commence the Exchange Offer. As promptly as
practicable on the date of commencement of the Exchange Offer,
Newco shall file with the SEC a Tender Exchange Offer Statement
on Schedule 14D-1 promulgated under the 1934 Act (together with
all amendments and supplements thereto, the “SCHEDULE
14D-1”) with respect to the Exchange Offer, and take such
steps as are reasonably necessary to cause the Exchange Offer to
be disseminated to the holders of shares of Concentric Common
Stock and Concentric Series C Preferred Stock as and to the
extent required by applicable federal securities laws. The
Schedule 14D-1 shall contain an offer to exchange (the
“OFFER TO EXCHANGE”) and forms of the related letter of
transmittal and any related summary advertisement (the
Schedule 14D-1, the Exchange Registration Statement, the
Offer to Exchange and such other documents as may be required by
the 1934 Act, Nasdaq, the National Association of Securities
Dealers or any other applicable laws, rules or regulations,
together with all amendments and supplements thereto, the
“EXCHANGE OFFER DOCUMENTS”). Newco shall use its best
efforts to distribute such Exchange Offer Documents, and any
other documents required by law or this Agreement to all holders
of shares of Concentric Common Stock and Concentric Series C
Preferred Stock, in accordance with the requirements of this
Section 7.5. Newco and Concentric shall correct promptly any
information provided by any of them for use in the Exchange
Offer Documents if such information shall contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements contained therein, in light of the circumstances under
which they were made, not misleading, and Newco shall use all
reasonable efforts to cause the Schedule 14D-1 as so
corrected to be filed with the SEC and the other Exchange Offer
Documents as so corrected to be disseminated to holders of shares
of Concentric Common Stock and Concentric Series C
Preferred Stock, in each case as and to the extent required by
applicable federal securities laws and this Section 7.5.
Concentric and its counsel shall be given a reasonable
opportunity to review and comment on the Exchange Offer Documents
prior to their being filed with the SEC, and Newco will provide
Concentric and its counsel with copies of any written comments
that Newco receives from the SEC or its staff with respect to the
Exchange Offer Documents promptly after receipt of any such
comments.
(c) Stock Options. The Exchange Offer will extend to
all shares of Concentric Common Stock which may be issued as a
result of the exercise of outstanding options, warrants and other
rights to purchase or acquire Concentric Common Stock, and will
involve assumption of other options, warrants and rights, to the
same extent as required with respect to the Mergers under
Sections 3.1(k) and 3.1(l).
(d) Concentric Recommendation. On the date the
Schedule 14D-1 is filed with the SEC, Concentric shall file
with the SEC a Solicitation/ Recommendation Statement on
Schedule 14D-9 promulgated under the 1934 Act (together with
all amendments and supplements thereto, the “SCHEDULE
14D-9”)
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containing the recommendation of the Board of Directors of
Concentric for the stockholders of Concentric to accept the
Exchange Offer, except to the extent the Board of Directors would
be permitted to alter its recommendation under
Section 7.2(b) with respect to the Mergers, and shall take
such steps as are necessary to cause the Schedule 14D-9 to
be disseminated to the holders of shares of Concentric Common
Stock and Concentric Series C Preferred Stock as and to the
extent required by the National Association of Securities Dealers
or any other applicable laws, rules and regulations, including,
without limitation, applicable federal securities laws. Newco,
Concentric and NEXTLINK shall amend or correct promptly any
information provided by any of them for use in the
Schedule 14D-9 which shall have become false or misleading,
and Concentric shall take all steps necessary to cause the
Schedule 14D-9 as so amended or corrected to be filed with
the SEC and disseminated to holders of shares of Concentric
Common Stock and Concentric Series C Preferred Stock, in
each case as and to the extent required by applicable federal
securities laws. Newco and its counsel shall be given a
reasonable opportunity to review and comment on the
Schedule 14D-9 prior to its being filed with the SEC, and
Concentric will provide Newco and its counsel with copies of any
written comments that Concentric receives from the SEC or its
staff with respect to the Schedule 14D-9 promptly after receipt
of any such comments.
(e) Stockholder List. In connection with the
Exchange Offer, Concentric shall cause Concentric’s transfer
agent to furnish Newco promptly with mailing labels containing
the names and addresses of all record holders of shares of
Concentric Common Stock and Concentric Series C Preferred
Stock and with security position listings of shares of Concentric
Common Stock and Concentric Series C Preferred Stock held
in stock depositories, each as of a recent date, together with
all other available listings and computer files containing names,
addresses and security position listings of record holders and
beneficial owners of shares of Concentric Common Stock and
Concentric Series C Preferred Stock. Concentric shall
furnish Newco with such additional information, including,
without limitation, updated listings and files of stockholders,
mailing labels and security position listings and such other
assistance as Newco or its representatives may reasonably request
in communicating the Exchange Offer to record and beneficial
holders of shares of Concentric Common Stock and Concentric
Series C Preferred Stock. Subject to the requirements of the
1933 Act, the 1934 Act, Nasdaq, the National Association of
Securities Dealers and any other applicable laws, rules or
regulations, and except for such steps as are necessary to
disseminate the Exchange Offer Documents and any other documents
necessary to consummate the transactions contemplated by this
Agreement, Newco shall hold in confidence the information
contained in such labels, listings and files, shall use such
information only in connection with the transactions contemplated
by this Agreement, and, if this Agreement shall be terminated in
accordance with Section 10, shall deliver to Concentric all
copies of, and any extracts or summaries from, such information
then in its possession or control.
(f) Cooperation. In connection with the Exchange
Offer, Concentric shall furnish Newco with such information
(which will be treated and held in confidence by Newco except to
the extent required to be disclosed pursuant to the Exchange
Offer or this Agreement) and assistance as Newco or its
representatives may reasonably request in connection with the
preparation of the Exchange Offer and communicating the Exchange
Offer to the record and beneficial holders of shares of
Concentric Common Stock and Concentric Series C Preferred
Stock.
(g) Merger Following the Closing of the Exchange Offer.
Prior to the closing of the Exchange Offer, Newco shall
create a wholly owned subsidiary (“NEWCO MERGER SUB”)
and, immediately following the closing of the Exchange Offer,
NEXTLINK shall merge with and into Newco Merger Sub (the
“EXCHANGE OFFER MERGER”) in accordance with Delaware
Law, with NEXTLINK being the surviving corporation of such merger
and the separate corporate existence of Newco Merger Sub shall
cease. In the Exchange Offer Merger, each outstanding share of
capital stock of Newco Merger Sub will be converted into a share
of capital stock of the surviving corporation of the Exchange
Offer Merger, (i) each issued and outstanding share of
NEXTLINK capital stock will be converted into a share of capital
stock of Newco as contemplated for each class and series thereof
by Section 3.1. Immediately following the consummation of
the Exchange Offer Merger and the Exchange Offer, the LHP Share
Exchange shall be consummated as contemplated by
Section 2.2.
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(h) Subsequent Merger. In the event that the
requisite consents for the actions to be taken pursuant to
Section 7.4(a)(i) are obtained following commencement of the
Exchange Offer, Newco will continue with the Exchange Offer
pursuant to this Section 7.5, and promptly following
consummation of the Exchange Offer Newco, NEXTLINK and Concentric
will cause the Mergers to occur, with the Common Stock Ratio
equal to the exchange ratio applicable to the Exchange Offer.
Newco, NEXTLINK and Concentric will make all requisite filings in
connection with the Mergers, including the preparation and
distribution of a registration statement and any required
information statement. If the requisite consents are obtained
after the Solicitation Termination Date but prior to the time the
Exchange Offer is commenced, Newco shall either proceed as set
forth in this paragraph or abandon the Exchange Offer and (by
written notice to Concentric) restore the obligations of the
parties with respect to the Mergers, fully as though the
requisite consents had been obtained prior to commencement of the
Exchange Offer.
ARTICLE 8.
COVENANTS OF NEXTLINK
NEXTLINK agrees that:
SECTION 8.1. Eagle River Consent. NEXTLINK will set
a record date to obtain the written consent of Eagle River to
this Agreement and the consummation of the transactions
contemplated hereunder no later that the date the Registration
Statement is declared effective.
SECTION 8.2. Director and Officer Liability.
(a) From and after the Effective Times, Newco will indemnify
each officer and director of the Concentric Group as of the
Effective Times (each an “INDEMNIFIED PERSON”) to the
fullest extent permitted under applicable law, the Amended and
Restated Certificate of Incorporation and Bylaws of Concentric or
any Concentric subsidiary, as applicable, and any agreement
between the Indemnified Person and Concentric or any Concentric
Subsidiary, as applicable, in each case as in effect as of the
date hereof with respect to any claim, liability, loss, damage,
judgment, fine, penalty, amount paid in settlement or compromise,
cost or expense based in whole or in part on, or arising in
whole or in part out of, the fact that the Indemnified Person was
a director or officer of the Concentric Group at or prior to the
Effective Times. The rights under this Section 8.2 are
contingent upon the occurrence of, and will survive consummation
of, the transactions contemplated hereby and are expressly
intended to benefit each Indemnified Person.
(b) Without limiting the provisions of paragraph (a), after
the Effective Times Newco will indemnify and hold harmless each
Indemnified Person against any costs or expenses (including
reasonable attorneys’ fees), judgments, fines, losses,
claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or
investigative, to the extent arising out of or pertaining to any
action or omission in his or her capacity as a director or
officer of the Concentric Group arising out of or pertaining to
this Agreement or the transactions contemplated by this Agreement
for a period of six years after the Effective Times; provided,
however, that if, at any time prior to the sixth anniversary of
the Effective Times, any Indemnified Person delivers to Newco a
written notice asserting a claim for indemnification under this
Section 8.2, then the claim asserted in such notice shall survive
the sixth anniversary of the Effective Times until such time as
such claim is fully and finally resolved. In the event of any
such claim, action, suit, proceeding or investigation Newco will
pay the reasonable fees and expenses of counsel for the
Indemnified Person promptly after statements therefor are
received (provided that in the event that any Indemnified Person
is not entitled to indemnification hereunder, any amounts
advanced on his or her behalf shall be remitted to NEXTLINK);
provided, however, that Newco will not be liable for any
settlement effected without its express written consent which
consent will not be unreasonably withheld. The Indemnified
Persons as a group may retain only one law firm (in addition to
local counsel) to represent them with respect to any single
action unless there is, under applicable standards of
professional conduct, a conflict on any significant issue between
the positions of any two or more Indemnified Persons.
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(c) For six years after the Effective Times, Newco shall
provide officers’ and directors’ liability insurance in
respect of acts or omissions occurring prior to the Effective
Times (including, without limitation, for acts or omissions
occurring in connection with this Agreement and the consummation
of the transactions contemplated hereby) covering and for the
benefit of each such Indemnified Person currently covered by
Concentric’s officers’ and directors’ liability
insurance policy on terms with respect to coverage and amount
(including with respect to the payment of attorney’s fees)
no less favorable than those of such policy in effect on the date
hereof (which policy has been provided by Concentric to
NEXTLINK); provided that if the aggregate annual premiums
for such insurance during such period shall exceed 200% of the
per annum rate of premium paid by Concentric as of the date
hereof for such insurance, then the Surviving Corporation shall
provide a policy with the best coverage as shall then be
available at 200% of such rate.
(d) The rights of each Indemnified Person and its heirs and
legal representatives under this Section 8.2 shall be in
addition to any rights such Person may have under the certificate
of incorporation or bylaws of Concentric or any Concentric
Subsidiary, or under Delaware Law or any other applicable laws.
These rights shall survive consummation of the Mergers and are
intended to benefit, and shall be enforceable by, each
Indemnified Person and shall be binding on all successors and
assigns.
SECTION 8.3. Quotation of Stock. NEXTLINK shall use
its best efforts to cause (i) the shares of Newco Common
Stock (or NEXTLINK Common Stock, as applicable) to be issued in
connection with the Mergers, (ii) shares of Newco Common
Stock (or NEXTLINK Common Stock, as applicable) reserved for
issuance upon conversion of the Newco Series B Preferred
Stock (or NEXTLINK Common Stock, as applicable) (iii) shares
of Newco Common Stock reserved for issuance in connection with
the Adjusted Options to be approved for quotation on Nasdaq,
subject to official notice of issuance.
(b) NEXTLINK shall use its best efforts to cause the
NEXTLINK 14% Preferred Stock and NEXTLINK 6 1/2% Preferred
Stock to be approved for quotation on Nasdaq prior to the record
date for the Eagle River consent.
SECTION 8.4. NEXTLINK Board of Directors.
Immediately prior to the Effective Times, the Board of Directors
of NEXTLINK will take all necessary action to expand the size of
its Board of Directors by two members and to appoint
Mr. Henry R. Nothhaft (or, in the event Mr. Nothhaft is
unable to serve, such other person as may be designated by
Concentric and reasonably satisfactory to NEXTLINK) and one other
person who is currently serving as a Concentric Director and who
is selected by Concentric and reasonably satisfactory to
NEXTLINK (Mr. Nothhaft and such person, the “NEW
DIRECTORS”) to the NEXTLINK Board of Directors. From the
Effective Times until and including the second annual meeting of
the stockholders of NEXTLINK taking place after the Effective
Times, (i) the Board of Directors of NEXTLINK will nominate
the New Directors for reelection to the NEXTLINK Board of
Directors at each subsequent annual or special meeting of the
stockholders of NEXTLINK at which the New Directors’ terms
expire and (ii) and for so long as Mr. Nothhaft is a
New Director, he will be a Vice Chairman of the Board.
SECTION 8.5. Employee Matters. (a) Newco shall:
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(i) honor the terms of all Concentric Employee Plans and
Concentric Benefit Arrangements in existence at the Effective
Times, and pay the benefits required under the terms of such
plans and arrangements, in each case subject to
Section 8.5(c); and |
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(ii) until December 31, 2000 with respect to employees
of Concentric or any of Concentric Subsidiaries at the Effective
Times (“TRANSFERRED EMPLOYEES”), provide a level of
employee benefits and aggregate compensation which is
substantially comparable in the aggregate to the level of
employee benefits and aggregate compensation provided by
Concentric and Concentric Subsidiaries as of the Effective Times
(other than the benefits provided under any severance or
termination benefit plans and arrangements of Concentric or any
Concentric Subsidiary). |
(b) If Transferred Employees are included in any benefit
plan program or arrangement of the Surviving Corporation,
including without limitation, any plan or arrangement providing
vacation benefits, the Transferred Employees shall receive credit
for service prior to the Effective Times with Concentric and the
Concentric Subsidiaries and their predecessors to the same
extent such service was counted under similar
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Concentric Employee Plans, Concentric Benefit Arrangements and
Concentric International Plans for purposes of determining
eligibility to participate and vesting and benefit accrual
(except that with respect to benefit accrual, such service shall
not be counted to the extent that it would result in a
duplication of benefits). If Transferred Employees or their
dependents are included in any medical, dental, vision or health
plan other than the plan or plans they participated in at the
Effective Times (a “SUCCESSOR PLAN”), any such
Successor Plan shall not include pre-existing condition
exclusions, except to the extent such exclusions were applicable
under any similar Concentric Employee Plan at the Effective
Times.
(c) Except as otherwise specifically set forth above,
nothing contained herein shall be construed as requiring NEXTLINK
or any NEXTLINK Subsidiary to continue any specific Employee
Plan or Benefit Arrangement including any Concentric Employee
Plan or Concentric Benefit Arrangement to continue the employment
of any specific person, provided however that any changes that
Newco may make to any such Employee Plan or Benefit Arrangement
are permitted by the terms of the applicable Employee Plan or
Benefit Arrangement and under any applicable law.
(d) Following the Effective Times, Newco will implement the
performance incentives described in Section 8.5 of the
NEXTLINK Disclosure Schedule for the benefit of the Transferred
Employees.
SECTION 8.6. Assumption of Concentric Stock Option
Plans; Form S-8 Employee Plans.
(a) At the Effective Times, Newco shall assume all
outstanding Concentric Stock Options under existing Concentric
option plans and such Concentric option plans shall be canceled
with respect to future grants thereunder, and shall file, no
later than five days after the Closing, a registration statement
on Form S-8 covering the shares of Newco Common Stock
issuable pursuant to outstanding Concentric Options granted under
the Concentric Option Plans. Concentric shall cooperate with and
assist NEXTLINK in the preparation of such registration
statement prior to the Effective Times.
(b) Immediately prior to the Effective Times, outstanding
purchase rights under Concentric’s 1997 Employee Stock
Purchase Plan (the “ESPP”) shall be exercised in
accordance with the terms of the ESPP and each share of
Concentric Common Stock purchased pursuant to such exercise
shall, without any action on the part of the holder thereof, be
converted into the right to receive a number of shares of
NEXTLINK Common Stock determined according to the Exchange Ratio,
without the issuance of certificates representing issued and
outstanding shares of Concentric Common Stock to ESPP
participants. Concentric agrees that it shall terminate the ESPP
immediately following the aforesaid purchase of shares of
Concentric Common Stock thereunder.
SECTION 8.7. Newco Certificate of Incorporation and
Bylaws. Newco shall, prior to the Effective Times,
(i) file a restated certificate of incorporation
substantially in the form attached hereto as Exhibit E with
the Secretary of State of the State of Delaware and
(ii) adopt restated bylaws substantially in the form
attached hereto as Exhibit F.
ARTICLE 9.
COVENANTS OF NEXTLINK, CONCENTRIC, EAGLE RIVER AND MCCAW
The parties hereto agree that:
SECTION 9.1. Reasonable Efforts. (a) Subject to
the terms and conditions provided in this Agreement, each of the
parties hereto shall use commercially reasonable efforts to take
promptly, or cause to be taken, all actions, and to do promptly,
or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make
effective the transactions contemplated hereby, to obtain all
necessary waivers, consents, tax opinions and approvals and to
effect all necessary registrations and filings and to remove any
injunctions or other impediments or delays, legal or otherwise,
in order to consummate and make effective the transactions
contemplated by this Agreement for the purpose of securing to the
parties hereto the benefits contemplated by this Agreement.
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(b) In furtherance and not in limitation of the foregoing,
each of NEXTLINK and Concentric agrees to (i) make an
appropriate filing of a Notification and Report Form pursuant to
the HSR Act with respect to the transactions contemplated hereby,
(ii) supply as promptly as practicable any additional
information and documentary material that may be requested
pursuant to the HSR Act, (iii) use best efforts to complete
the review process under the HSR Act to permit the consummation
of the Mergers including, but not limited to, causing the
expiration or termination of the applicable waiting periods under
the HSR Act as soon as practicable and use their best efforts to
cooperate in presenting any applicable arguments, presentations
or materials to any governmental agency requesting such
information in connection with this transaction.
(c) Eagle River, McCaw and NEXTLINK hereby covenant for the
benefit of each other to use their commercially reasonable
efforts to terminate Eagle River’s guarantee (the
“INTERNEXT GUARANTEE”), dated as of July 18, 1998,
of the obligations of INTERNEXT under the Level 3 Agreement.
SECTION 9.2. Proxy Statement; Registration Statement.
(a) NEXTLINK, Newco and Concentric shall prepare and
file the Proxy Statement with the SEC, and Newco shall prepare
and file the Registration Statement (in which the Proxy Statement
will be included) with the SEC. Newco, NEXTLINK and Concentric
shall use their reasonable best efforts to cause the Registration
Statement (which Registration Statement shall also register such
other securities issued or assumed in the Merger or the
Alternative Merger, as applicable, as is required by applicable
law) to become effective under the 1933 Act as soon after such
filing as practicable and to keep the Registration Statement
effective as long as is necessary to consummate the Mergers. The
Proxy Statement shall include the recommendation of the Board of
Directors of Concentric in favor of approval and adoption of this
Agreement and the Mergers, except to the extent the Board of
Directors of Concentric shall have withdrawn or modified its
approval or recommendation of this Agreement as permitted by
Section 7.2(b). NEXTLINK shall cause the Proxy Statement to
be mailed to its stockholders, and Concentric shall cause the
Proxy Statement to be mailed to its stockholders, in each case as
promptly as practicable after the Registration Statement becomes
effective. The parties shall promptly provide copies, consult
with each other and prepare written responses with respect to any
written comments received from the SEC with respect to the Proxy
Statement and the Registration Statement and advise one another
of any oral comments received from the SEC. The Registration
Statement and the Proxy Statement shall comply as to form in all
material respects with the rules and regulations promulgated by
the SEC under the 1933 Act and the 1934 Act, respectively.
(b) Newco, NEXTLINK and Concentric shall make all necessary
filings with respect to the Mergers and the transactions
contemplated thereby under the 1933 Act and the 1934 Act and
applicable state blue sky laws and the rules and regulations
thereunder. Each party will advise the other, promptly after it
receives notice thereof, of the time when the Registration
Statement has become effective or any supplement or amendment has
been filed, the issuance of any stop order, the suspension of
the qualification of the Newco Common Stock issuable in
connection with the Mergers for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the
Proxy Statement or the Registration Statement or comments thereon
and responses thereto or requests by the SEC for additional
information. No amendment or supplement to the Proxy Statement or
the Registration Statement, or correspondence with the SEC with
respect thereto, shall be filed without the approval of Newco,
NEXTLINK and Concentric, which approval shall not be unreasonably
withheld or delayed. If at any time prior to the Effective Time,
any information relating to Newco, NEXTLINK or Concentric, or
any of their respective Affiliates, officers or directors, should
be discovered by NEXTLINK or Concentric that should be set forth
in an amendment or supplement to the Registration Statement or
the Proxy Statement, so that such documents would not include any
misstatement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the
party which discovers such information shall promptly notify the
other parties hereto and an appropriate amendment or supplement
describing such information shall be promptly filed with the SEC
and, to the extent required by law, disseminated to the
stockholders of NEXTLINK and Concentric.
SECTION 9.3. Public Announcements. So long as this
Agreement is in effect, (a) Concentric and NEXTLINK will
consult with each other before issuing any press release or
making any public statement with respect to this Agreement or the
transactions contemplated hereby and (b) Eagle River, McCaw
and
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NEXTLINK will consult with each other before issuing any press
release or making any public statement with respect to the LHP
Share Exchange and, except as may be required by applicable law
or any listing agreement with any national securities exchange or
Nasdaq, such parties will not issue any such press release or
make any such public statement without the prior consent of the
other respective party, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, any such press release
or public statement as may be required by applicable law or any
listing agreement with any national securities exchange or Nasdaq
may be issued without such consent, if the party making such
release or statement has used its reasonable efforts to consult
with the other respective party.
SECTION 9.4. Further Assurances. At and after the
Effective Times, the officers and directors of the Surviving
Corporation will be authorized to execute and deliver, in the
name and on behalf of NEXTLINK and Concentric, any deeds, bills
of sale, assignments or assurances and to take and do, in the
name and on behalf of NEXTLINK and Concentric, any other actions
and things to vest, perfect or confirm of record in the Surviving
Corporation any and all right, title and interest in, to and
under any of the rights, properties or assets of NEXTLINK and
Concentric acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Mergers.
SECTION 9.5. Access to Information. From the date
hereof until the Effective Times or earlier termination of this
Agreement and subject to applicable law, each of Concentric and
NEXTLINK shall, and shall cause their respective subsidiaries to
(i) give to the other party and the other party’s
counsel, financial advisors, auditors and other authorized
representatives reasonable access during normal business hours to
the offices, properties, books and records of such party and its
Subsidiaries, (ii) furnish to the other party and the other
party’s counsel, financial advisors, auditors and other
authorized representatives such financial and operating data and
other information as such Persons may reasonably request and
(iii) instruct its employees, counsel, financial advisors,
auditors and other authorized representatives to cooperate with
the other party in such other party’s investigation. Any
investigation pursuant to this Section 9.5 shall be
conducted in such manner as not to interfere unreasonably with
the conduct of the business of the other party. No information or
knowledge obtained in any investigation pursuant to this Section
9.5 shall affect or be deemed to modify any representation or
warranty made by any party hereunder. Each party will hold such
information which is non-public in confidence in accordance with
the provisions of the Confidentiality Agreement.
SECTION 9.6. Notices of Certain Events. Each of
Concentric and NEXTLINK shall promptly notify the other of:
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(a) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement; |
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(b) any notice or other communication from any Governmental
Authority in connection with the transactions contemplated by
this Agreement; |
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(c) the occurrence, or non-occurrence, of any event the
occurrence, or non-occurrence, of which would be reasonably
expected to cause any representation or warranty contained herein
to be untrue or inaccurate in any material respect at any time
during the period commencing on the date hereof and ending at the
Effective Times in a manner such that the conditions set forth
in Section 10.2(a)(i) or Section 10.3(a)(i) would not
be satisfied; |
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(d) any actions or suits commenced, or to the Knowledge of
Concentric or NEXTLINK, threatened with respect to this Agreement
or the transactions contemplated hereby; and |
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(e) any failure of such party to comply with or satisfy any
condition set forth in Article X hereof; provided, however,
that the delivery of any notice pursuant to this
Section 9.6 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice. |
SECTION 9.7. Tax-free Reorganization; Tax-free Exchange.
(a) Prior to the Effective Times, NEXTLINK and
Concentric shall use all commercially reasonable efforts to cause
either (i) the Mergers or the Alternative Merger, as
applicable, to qualify as reorganizations within the meaning of
the provisions of Section 368(a) of the Code (“368
REORGANIZATION”), or (ii) as the case may be, the
Exchange
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Offer, the Exchange Offer Merger, and the LHP Share Exchange,
when taken as a whole (collectively, the “EXCHANGE OFFER
TRANSACTIONS”), to qualify as a transaction described in
Section 351 of the Code (a “351 TRANSACTION”), and
will not take any action reasonably likely to cause the Mergers
or the Exchange Offer Transactions, as the case may be, not to so
qualify.
(b) NEXTLINK and Concentric covenant and agree to (and to
cause any affiliate or successor to their assets or business to)
vigorously and in good faith defend all challenges to the
tax-free status of the Mergers or the Exchange Offer
Transactions, as the case may be.
(c) It is understood and agreed that both Willkie Farr
& Gallagher and Wilson Sonsini Goodrich & Rosati,
Professional Corporation, shall issue to their respective clients
substantially identical opinions to the effect that either (i)
the Mergers or the Alternative Merger, as applicable, will
qualify as reorganizations under Code Section 368(a) and
related matters for description, and inclusion as Exhibits, in
the S-4 Registration Statement and the Proxy Statement or
(ii) the Exchange Offer and the Exchange Offer Merger will
qualify as 351 Transactions and related matters for description,
and inclusion as Exhibits, in the Exchange Registration Statement
and the Proxy Statement.
(d) NEXTLINK and Concentric covenant to each other that
none of NEXTLINK, Concentric or any of their respective
subsidiaries has taken (or will take) any action, including,
without limitation, any such action inconsistent with any
representation, warranty, or covenant made or to be made in
connection with opinions to be delivered pursuant to
Sections 10.2(a)(ii) or 10.3(b) hereof. In addition,
NEXTLINK and Concentric each agree that in the event such party
becomes aware of any such fact or circumstance that is reasonably
likely to prevent the Mergers or the Alternative Merger, as
applicable, from qualifying as a 368 Reorganization or the
Exchange Offer and the Exchange Offer Merger from qualifying as a
351 Transaction, it will promptly notify the other party in
writing.
(e) Subject to Section 2.5, prior to the Effective
Times, NEXTLINK and Concentric shall take such actions as Eagle
River and/ or McCaw may reasonably request (without material cost
or inconvenience to NEXTLINK or Concentric) to cause the LHP
Share Exchange in conjunction with the Mergers or the Alternative
Merger, as applicable, to qualify as a 351 Transaction. Newco or
NEXTLINK, as applicable, shall grant McCaw registration rights
as set forth in the Registration Rights Agreement, subject to the
limitations set forth therein, with respect to the shares of
NEXTLINK Common Stock or Newco Common Stock received by McCaw in
exchange for the Contributed Interest. None of NEXTLINK,
Concentric or Newco has made any representation or warranty to
Eagle River or McCaw as to whether the LHP Share Exchange will
qualify as a 351 Transaction, and in no event will any of them
have any liability with respect to any failure to so qualify.
Nothing contained in this Section 9.7(e) will limit
NEXTLINK’s right to make an election to proceed with an
Exchange Offer or to proceed with the Alternative Merger.
(f) Neither NEXTLINK or Concentric shall file any tax
return or take any position which would be inconsistent with the
qualification of the LHP Share Exchange in conjunction with the
Mergers as a 351 Transaction. NEXTLINK and Concentric shall make
customary representations and warranties to Ernst & Young LLP
for the purposes of their rendering to McCaw a tax opinion as
the qualification of the LHP Share Exchange in conjunction with
the Mergers, or the Alternative Merger, as applicable as a
tax-free contribution under Section 351 of the Code.
SECTION 9.8. Affiliates. (a) Within 30 days
following the date of the Original Agreement, Concentric shall
have delivered to NEXTLINK a letter identifying all known Persons
who may be deemed affiliates of Concentric under Rule 145
of the 1933 Act (a “CONCENTRIC RULE 145 AFFILIATE”).
Concentric shall use its best efforts to obtain a written
agreement from each Concentric Rule 145 Affiliate as soon as
practicable and, in any event, at least 30 days prior to
the Effective Times, substantially in the form of Exhibit C
hereto.
SECTION 9.9. Certain Other Agreements and
Acknowledgments of NEXTLINK, Eagle River and McCaw Relating to
the LHP Share Exchange.
Eagle River, McCaw and NEXTLINK make the following covenants and
acknowledgments relating to the LHP Share Exchange, which shall
only inure to the benefit of such parties.
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(a) McCaw acknowledges to NEXTLINK that the shares of Newco
Common Stock acquired in connection with the LHP Share Exchange
will not be registered under the 1933 Act, and, therefore, until
such time as such shares are registered under the 1933 Act, such
shares cannot be sold except pursuant to an exemption from such
registration.
(b) McCaw and Eagle River covenant to NEXTLINK that, for a
period of three years commencing on the Closing of the LHP Share
Exchange, neither of them will sell, assign or otherwise transfer
that number of shares of Newco Class B Common Stock
(including any Newco Common Stock issued upon conversion of such
Newco Class B Common Stock) owned by either Eagle River or
McCaw as is equal to the number of the shares of Newco Common
Stock acquired in the LHP Share Exchange(but may sell such shares
of Newco Common Stock free and clear of this restriction),
except:
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(i) in connection with a transaction in which all or
substantially all of the shares of the capital stock of Newco are
sold, assigned or otherwise transferred to a Person which is not
an Affiliate of Newco; and |
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(ii) that such shares of Newco Class B Common Stock
(or Newco Common Stock, as the case may be) may be subject to a
bona fide pledge, and any pledgee of such shares will not be
bound in any way by this restriction. |
(c) Newco will, within ten days of submission of such
expenses to Newco, reimburse Eagle River and McCaw for all their
expenses incident to preparing for, entering into and carrying
out the terms of this Agreement relating to the LHP Share
Exchange, and the consummation of the LHP Share Exchange (and any
registration rights granted pursuant to Section 9.7(e)), up
to a maximum of $200,000. Otherwise, each of NEXTLINK, Eagle
River, and McCaw shall pay their own expenses arising from the
LHP Share Exchange.
(d) In the event that this Agreement terminates or is
terminated prior to the consummation of the Mergers, the
Alternative Merger or the Exchange Offer (other than as a result
of a breach by Eagle River or McCaw of their representations,
warranties, covenants or obligations hereunder, unless waived by
NEXTLINK) McCaw and NEXTLINK shall consummate the LHP Share
Exchange within 20 days of the date of such termination as
follows: McCaw shall exchange LHP limited liability interests (or
LHP shares in the event that LHP is converted into a
corporation) for a number of shares of NEXTLINK Common Stock
determined in accordance with the provisions of
Section 2.2(d) hereof; provided that the obligations of the
parties under this Section 9.9(d) shall be subject to the
satisfaction or waiver of the conditions in Sections 10.2(b)
and 10.4 hereof, as the case may be.
(e) During the period between the date of this Agreement
and the date of the Closing of the LHP Share Exchange,
(i) NEXTLINK shall continue to control the management of LHP
and Internext and (ii) Eagle River shall continue to
advance its proportionate share of payments due to Level 3
pursuant to the Level 3 Agreement, which payments shall be
reimbursed at the Closing of the LHP Share Exchange as provided
in Section 2.2(e) hereof.
(f) In the event that shares of NEXTLINK Common Stock,
instead of Newco Common Stock, are issued to McCaw in the LHP
Share Exchange, references to Newco Common Stock, Newco
Class B Stock and Newco in this Section 9.9 and in
Sections 10.2(b) and 10.4 shall be deemed to be references
to NEXTLINK Common Stock, NEXTLINK Class B Stock or
NEXTLINK, as the case may be.
SECTION 9.10. Subsequent Transaction.
NEXTLINK shall promptly, and in any case within 48 hours after
the entry into any Subsequent Transaction that is material to the
business and financial condition of the NEXTLINK Group taken as
a whole, inform Concentric in writing of the material terms and
conditions of any such Subsequent Transaction (other than with
respect to the transactions noted in the parenthetical in the
definition of “Subsequent Transaction” entered into by
NEXTLINK and shall provide to Concentric a copy of an opinion,
which shall not be deemed to be addressed to Concentric, from a
nationally recognized investment bank, acting as financial
advisor to NEXTLINK, to the effect that, from a financial point
of view, such Subsequent Transaction is fair to NEXTLINK or to
the holders of NEXTLINK Common Stock, as applicable and, if
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applicable, NEXTLINK shall confirm in writing to Concentric the
reasonable belief of NEXTLINK that such Subsequent Transaction
would not cause: (x) the Mergers or the Alternative Merger,
as applicable, to be treated as other than a 368 Reorganization
or a 351 Transaction and the Exchange Offer to be treated as
other than a 351 Transaction, (y) any of the conditions set
forth in Article 10 hereof not to be satisfied, and
(z) any such Subsequent Transaction would not, or would
reasonably not be expected to, prevent, impair or materially
delay the ability of NEXTLINK or Concentric to consummate the
transactions contemplated hereunder or constitute or result in a
NEXTLINK Material Adverse Effect.
NEXTLINK shall be entitled to update the representations and
warranties made by NEXTLINK in this Agreement solely for
informational purposes and solely to the extent required as a
result of the entering into of any such Subsequent Transaction.
ARTICLE 10.
CONDITIONS TO THE MERGERS
SECTION 10.1. Conditions to the Obligations of
Concentric and NEXTLINK to Consummate the Mergers. The
obligations of Concentric and NEXTLINK to consummate the Mergers
or the Alternative Merger, as applicable, are subject to the
satisfaction of the following conditions:
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(a) the Concentric Stockholders’ Approval shall have
been obtained; |
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(b) any applicable waiting period under the HSR Act
relating to the Mergers or the Alternative Merger, as applicable,
shall have expired or been terminated; |
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(c) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the
consummation of the Mergers or the Alternative Merger, as
applicable; provided, however, that each of the parties
shall have used its reasonable efforts to prevent the entry of
any such restraints and to appeal as promptly as possible any
such restraints that may be entered; |
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(d) the Registration Statement shall have been declared
effective and no stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for
such purpose shall be pending before or threatened by the SEC; |
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(e) the shares of Newco Common Stock (or NEXTLINK Common
Stock, as applicable) to be issued in the Mergers or the
Alternative Merger, as applicable, shall have been approved for
quotation on Nasdaq, subject to official notice of issuance; |
SECTION 10.2. Conditions to the Obligations of NEXTLINK.
(a) The obligations of NEXTLINK to consummate the
Mergers or the Alternative Merger, as applicable, are subject to
the satisfaction of the following further conditions:
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(i) (A) Concentric shall have performed in all
material respects all of its obligations hereunder required to be
performed by it at or prior to the Effective Times; provided
that a breach of the covenant of Concentric under
Section 6.1(r) shall not be deemed to be a failure of a
condition hereunder unless such breach is reasonably likely to
have a Concentric Material Adverse Effect, (B) the
representations and warranties of Concentric contained in this
Agreement (as modified or supplemented by the Concentric
Disclosure Schedule), disregarding all qualifications and
exceptions contained therein relating to materiality or a
Concentric Material Adverse Effect or any similar standard or
qualification, shall be true and correct at and as of the
Effective Times, as if made at and as of such times (other than
representations or warranties that address matters only as of a
certain date which shall be true and correct as of such date),
with only such exceptions as, individually or in the aggregate,
have not had and would not be reasonably expected to have
Concentric Material Adverse Effect, and (C) NEXTLINK shall
have received a certificate signed by an executive officer of
Concentric to the foregoing effect; |
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(ii) NEXTLINK shall have received an opinion of Willkie
Farr & Gallagher in form and substance reasonably
satisfactory to NEXTLINK, on the basis of certain facts,
representations and assumptions set forth in such opinion, dated
the Effective Times, to the effect that either (x) the Mergers or
the |
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Alternative Merger, as applicable, will be treated for federal
income tax purposes as a 368 Reorganization and that each of
NEXTLINK, Concentric and Newco will be a party to the
reorganization within the meaning of Section 368(b) of the
Code or (y) the Exchange Offer Transactions will be treated
as a 351 Transaction, as the case may be. In rendering such
opinion, such counsel shall be entitled to rely upon certain
documentation including representations of officers of Concentric
and NEXTLINK. |
(b) The obligations of NEXTLINK and Newco to consummate the
LHP Share Exchange are subject to the satisfaction of the
following further conditions:
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(i) The representations, warranties and covenants of Eagle
River and McCaw contained in Section 6 shall be true and
correct in all material respects, in each case, on the date of
the Original Agreement (with respect to representations and
warranties made by Eagle River) and on the date of this Agreement
(with respect to representations and warranties made by McCaw)
and, in both cases, on and as of the date of the Closing of the
LHP Share Exchange with the same force and effect as though such
representations, warranties and covenants had been made on and as
of such date. |
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(ii) McCaw shall have duly performed and complied in all
material respects with all agreements or obligations of McCaw
contained in this Agreement required to be performed or complied
with by him at or before the Closing. |
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(iii) Eagle River shall have delivered to Newco a
certificate dated the date of the Closing of the LHP Share
Exchange and executed by an authorized senior officer of Eagle
River, in the capacity of such officer, certifying the
fulfillment of the conditions specified in
Section 10.2(b)(i) relating to Eagle River. |
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(iv) The Special Committee shall not have
(i) determined in the exercise of its fiduciary duties to
withdraw its recommendation to the board of directors of NEXTLINK
that the acquisition of the Contributed Interest by Newco upon
the terms and conditions of this Agreement is in the best
interests of NEXTLINK and (ii) so withdrawn such
recommendation. |
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(v) The board of directors of NEXTLINK shall not have (i)
determined in the exercise of its fiduciary duties to revoke its
authorization and approval of the acquisition of the Contributed
Interest by Newco on the terms and conditions of this Agreement
and (ii) so revoked such authorization and approval. |
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(vi) The board of directors of NEXTLINK shall have received
the opinion of Credit Suisse First Boston, in form and substance
satisfactory to the board of directors of NEXTLINK, attesting
that the acquisition of the Contributed Interest on the terms and
subject to the conditions of this Agreement is fair to NEXTLINK
from a financial point of view, which opinion shall not have been
withdrawn or modified, except for modifications which are in
form and substance satisfactory to the Special Committee. |
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(vii) NEXTLINK shall have received from a nationally
recognized expert, an opinion, in form and substance satisfactory
to NEXTLINK, in compliance with Section 1015 of the
Indenture, dated as of April 25, 1996, among NEXTLINK,
NEXTLINK Capital, Inc., and United States Trust Company of New
York, which opinion shall not have been withdrawn or modified,
except for modifications which are in form and substance
satisfactory to NEXTLINK. |
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(viii) NEXTLINK shall have received from its counsel an
opinion, in form and substance reasonably satisfactory to
NEXTLINK, dated as of the date of the Closing of the LHP Share
Exchange, as to the absence of conflicts with NEXTLINK’s
material agreements. |
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(ix) NEXTLINK shall have received from the counsel to Eagle
River and McCaw, an opinion, in form and substance reasonably
satisfactory to NEXTLINK, dated as of the date of the Closing of
the LHP Share Exchange, as to customary matters, including, but
not limited to, the due authorization, execution and delivery of
this Agreement by Eagle River and McCaw and the absence of
conflicts. |
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(x) NEXTLINK shall have received evidence, in form and
substance satisfactory to NEXTLINK, that the Level 3 Agreement is
in full force and effect in the form as originally executed and
will not be subject to any limitation or modifications as a
result of the termination of the INTERNEXT Guarantee. |
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(xi) No action, suit, proceeding, litigation or
investigation shall have been commenced by any Governmental
Authority that questions the validity or legality of the LHP
Share Exchange or any action taken or to be taken in connection
therewith. No injunction or other order issued by a court of
competent jurisdiction restraining or prohibiting the
consummation of the LHP Share Exchange shall be in effect. |
For avoidance of doubt, neither the conditions contained in this
Section 10.2(b) nor consummation of the LHP Share Exchange shall
be conditions to the obligations of NEXTLINK, Concentric or Newco
to consummate the Mergers, the Alternative Merger or the
Exchange Offer.
SECTION 10.3. Conditions to the Obligations of
Concentric. The obligations of Concentric to consummate the
Mergers or the Alternative Merger, as applicable, are subject to
the satisfaction of the following further conditions:
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(a) (i) NEXTLINK shall have performed in all material
respects all of its obligations hereunder required to be
performed by it at or prior to the Effective Times, (ii) the
representations and warranties of NEXTLINK contained in this
Agreement (as modified or supplemented by the NEXTLINK Disclosure
Schedule) disregarding all qualifications and exceptions
contained therein relating to materiality or NEXTLINK Material
Adverse Effect or any similar standard or qualification shall be
true at and as of the Effective Times as if made at and as of
such times (other than representations and warranties that
address matters only as of a certain date, which shall be true as
of such date), with only such exceptions as, individually or in
the aggregate, have not had and would not be reasonably expected
to have a NEXTLINK Material Adverse Effect and
(iii) Concentric shall have received a certificate signed by
an executive officer of NEXTLINK to the foregoing effect; |
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(b) Concentric shall have received an opinion of Wilson
Sonsini Goodrich & Rosati, Professional Corporation in form
and substance reasonably satisfactory to Concentric, on the basis
of certain facts, representations and assumptions set forth in
such opinion, dated the Effective Times, to the effect that
either (x) the Mergers or the Alternative Merger, as
applicable, will be treated for federal income tax purposes as a
368 Reorganization and that each of NEXTLINK, Concentric and
Newco will be a party to the reorganization within the meaning of
Section 368(b) of the Code or (y) the Exchange Offer
will be treated as a 351 Transaction, as the case may be. In
rendering such opinion, such counsel shall be entitled to rely
upon certain documentation including representations of officers
of Concentric and NEXTLINK and each of Concentric and NEXTLINK
agree to make such reasonable representations as may be requested
by tax counsel in connection with rendering such opinions; |
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(c) Notwithstanding anything to the contrary contained in
Section 10.3(a)(ii) or anywhere else in this Agreement, NEXTLINK
may enter into a Subsequent Transaction, and the state of facts
resulting from any such Subsequent Transaction shall not be
deemed to be a breach of any representation or warranty of
NEXTLINK contained in this Agreement; provided, in each
case, that any such Subsequent Transaction would not cause:
(x) the Mergers or the Alternative Merger, as applicable, to
be treated as other than a 368 Reorganization and the Exchange
Offer Transactions to be treated as other than a 351 Transaction,
(y) any of the conditions set forth in Article 10
hereof not to be satisfied, and (z) any such Subsequent
Transaction would not, or would reasonably not be expected to,
prevent, impair or materially delay the ability of NEXTLINK or
Concentric to consummate the transactions contemplated hereunder
or constitute or result in a NEXTLINK Material Adverse Effect;
and |
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(d) The failure of the LHP Share Exchange to be consummated
or the breach by any of NEXTLINK or Eagle River of any
representation, warrant, agreement or obligation relating to the
LHP Share Exchange shall not give rise to any right or claim on
the part of Concentric. |
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SECTION 10.4. Conditions to the Obligations of McCaw.
The obligations of McCaw to consummate the LHP Share Exchange
are subject to the satisfaction of the following further
conditions:
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(a) The representations, warranties and covenants of
NEXTLINK contained in Section 5.21 shall be true and correct
in all material respects, in each case, on the date of the
Original Agreement and on and as of the date of the Closing of
the LHP Share Exchange with the same force and effect as though
such representations, warranties and covenants had been made on
and as of such date. |
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(b) NEXTLINK shall have duly performed and complied in all
material respects with all agreements or obligations of NEXTLINK
contained in this Agreement relating to the LHP Share Exchange
required to be performed or complied with by it at or before the
Closing; provided that McCaw shall not be relieved of his
obligations to consummate the LHP Share Exchange due to the
termination of this Agreement by Concentric or the failure of
Concentric and NEXTLINK to consummate the Mergers. |
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(c) NEXTLINK shall have delivered to McCaw a certificate
dated the date of the Closing of the LHP Share Exchange and
executed by an authorized senior officer of NEXTLINK, in the
capacity of such officer, certifying the fulfillment of the
conditions specified in Sections 10.4 (a) and (b). |
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(d) Eagle River shall have received evidence reasonably
satisfactory to Eagle River to the effect that the INTERNEXT
Guarantee has been terminated, effective as of the Closing. |
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(e) Newco shall have delivered to McCaw the certificate
representing the shares of Newco Common Stock in payment of the
LHP Consideration. |
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(f) McCaw shall have received from the counsel to NEXTLINK,
an opinion, in form and substance reasonably satisfactory to
McCaw, dated as of the date of the Closing of the LHP Share
Exchange, as to customary matters, including, but not limited to,
the due authorization, execution and delivery of this Agreement
by NEXTLINK and Newco and the absence of conflicts (it being
understood by the parties that such opinion shall not include any
opinion regarding tax treatment of the LHP Share Exchange). |
SECTION 10.5. Waiver of NEXTLINK and McCaw Conditions.
The conditions to each of NEXTLINK’s and McCaw’s
obligations to consummate the LHP Share Exchange are for the sole
benefit of such parties and may be waived by any such party in
whole or in part to the extent permitted by applicable law;
provided that the waiver of any such conditions by NEXTLINK
requires the consent of the Special Committee.
ARTICLE 11.
TERMINATION
SECTION 11.1. Termination. This Agreement may be
terminated and the Mergers or the Alternative Merger, as
applicable, may be abandoned at any time prior to the Effective
Times (notwithstanding any approval of this Agreement by the
stockholders of Concentric):
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(a) by mutual written agreement of Concentric and NEXTLINK; |
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(b) by either Concentric or NEXTLINK, if: |
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(i) the Mergers or the Alternative Merger has not been
consummated on or before August 31, 2000 (the “END
DATE”); provided that the right to terminate this Agreement
pursuant to this Section 10.1(b)(i) shall not be available
to any party whose breach of any provision of this Agreement
results in the failure of the Mergers or the Alternative Merger
to be consummated by the End Date; |
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(ii) (A) there shall be any law or regulation that
makes consummation of the Mergers or the Alternative Merger, as
applicable, illegal or otherwise prohibited or (B) any
judgment, injunction, order or decree of any court or other
Governmental Authority having competent jurisdiction |
A-51
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enjoining Concentric and NEXTLINK from consummating the Mergers
is entered and such judgment, injunction, judgment or order shall
have become final and non-appealable; or |
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(iii) Concentric Stockholders’ Approval shall not have
been obtained at the Concentric Stockholders’ Meeting (or
any adjournment or postponement thereof); |
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(i) the Board of Directors of Concentric shall have failed
to recommend or shall have withdrawn, or modified in a manner
adverse to NEXTLINK, its approval or recommendation of this
Agreement and the Mergers, or shall have materially breached its
obligation to call the Concentric Stockholders’ Meeting in
accordance with Section 7.2(a) (or the Board of Directors of
Concentric resolves to do any of the foregoing); |
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(ii) Concentric shall have willfully and materially
breached any of its obligations under Sections 7.2(b) or
7.3; or |
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(iii) a breach of any representation, warranty, covenant or
agreement on the part of Concentric set forth in this Agreement
shall have occurred that would cause any of the conditions set
forth in Section 10.2(a)(i) not to be satisfied, and such
condition shall be incapable of being satisfied by the End Date. |
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(i) Eagle River shall have materially breached the Voting
Agreement; |
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(ii) a breach of any representation, warranty, covenant or
agreement on the part of NEXTLINK set forth in this Agreement
shall have occurred that would cause the condition set forth in
Section 10.3(a) not to be satisfied, and such condition
shall be incapable of being satisfied by the End Date; or |
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(iii) (A) the Board of Directors of Concentric
authorizes Concentric, subject to complying with the terms of
this Agreement, to enter into a binding written agreement
concerning a transaction that constitutes a Superior Proposal and
Concentric notifies NEXTLINK in writing that it intends to enter
into such an agreement, attaching the most current version of
such agreement to such notice (which version shall be updated on
a current basis as subsequent versions are delivered by the
proposed parties); (B) NEXTLINK does not make, within five
days of receipt of Concentric’s written notification of its
intention to enter into a binding agreement for a Superior
Proposal, an offer that the Board of Directors of Concentric
determines, in good faith after consultation with its financial
advisors, is at least as favorable to the stockholders of
Concentric as the Superior Proposal; (C) Concentric, prior
to or contemporaneous with such termination pursuant to this
clause (iii), pays to NEXTLINK in immediately available funds the
fees required to be paid pursuant to Section 11.3(b); and
(D) Concentric shall have complied with Section 7.3(a).
Concentric agrees to notify NEXTLINK promptly if its intention
to enter into a written agreement referred to in its notification
shall change at any time after giving such notification. |
The party desiring to terminate this Agreement pursuant to this
Section 11.1 (other than pursuant to Section 11.1(a))
shall give notice of such termination to the other party.
SECTION 11.2. Effect of Termination. If this
Agreement is terminated pursuant to Section 11.1, this
Agreement shall become void and of no effect without liability of
any party (or any stockholder, director, officer, employee,
agent, consultant or representative of such party) to the other
parties hereto, except that (a) the agreements contained in
this Section 11.2, in Section 11.3 and in the
Confidentiality Agreement shall survive the termination hereof,
(b) the LHP Share Exchange shall be consummated pursuant to
Section 9.9(d) and (c) no such termination shall
relieve any party of any liability or damages resulting from any
willful breach by such party of this Agreement or the Voting
Agreement.
SECTION 11.3. Fees and Expenses. (a) Except as
otherwise provided in this Section 11.3, Section 7.4
and in Section 9.9(c), all costs and expenses incurred in
connection with this Agreement shall be paid by the
A-52
party incurring such cost or expense whether or not the Mergers
are consummated; provided that Concentric and NEXTLINK shall
share equally all fees and expenses, other than attorneys’
and accounting fees and expenses, incurred in relation to the
printing and filing of the Registration Statement and the Proxy
Statement other than those paid by Eagle River pursuant to
Section 9.9(c).
(b) If this Agreement is terminated pursuant to
Sections 11.1(c)(i) and Section 11.1(c)(ii), Concentric
shall pay to NEXTLINK a cash termination fee (the
“TERMINATION FEE”) equal to the sum of $110,000,000 and
the amount of any fees or other inducements theretofore paid by
NEXTLINK pursuant to Section 7.4(a)(i).
(c) If (A) this Agreement is terminated pursuant to
Section 11.1(b)(iii), (B) prior to the Concentric
Stockholders’ Meeting, an Acquisition Proposal is made by
any Person and not withdrawn prior to such meeting and
(C) within one year of the Concentric Stockholders’
Meeting, either (1) Concentric or any Concentric Subsidiary
enters into an agreement with any Person with respect to an
Acquisition Proposal which provides for (x) transfer or issuance
of securities representing more than 50% of the equity or voting
interests in Concentric, (y) a Merger, consolidation,
recapitalization or another transaction resulting in the issuance
of cash or securities of any Person (other than a
reincorporation or a holding company Merger that results in the
Concentric stockholders owning all of the equity interests in the
surviving corporation) to Concentric stockholders in exchange
for more than 50% of the equity or voting interests in
Concentric, or (z) transfer of assets, securities or ownership
interests representing more than 50% of the consolidated assets
or earning power of the Concentric Group, or (2) any Person
commences a tender offer that results or would result in the
acquisition by the Person making the tender offer of a majority
of the Concentric Common Stock, then Concentric shall pay to
NEXTLINK the Termination Fee.
(d) Any payment of the Termination Fee pursuant to this
Section 11.3 shall be made within one Business Day after
termination of this Agreement except that (i) any payment of
the Termination Fee pursuant to Section 11.3(c) shall be
paid within one Business Day after it becomes payable. Any
payment of the Termination Fee shall be made by wire transfer of
immediately available funds. If one party fails to pay to the
other promptly any fee or expense due hereunder (including the
Termination Fee), the defaulting party shall pay the costs and
expenses (including legal fees and expenses) in connection with
any action, including the prosecution of any lawsuit or other
legal action, taken to collect payment, together with interest on
the amount of any unpaid fee at the publicly announced prime
rate of The Bank of New York in New York City from the date such
fee was required to be paid to the date it is paid.
SECTION 11.4. Termination of LHP Share Exchange.
(a) The LHP Share Exchange (and the provisions of this
Agreement relating thereto) may be terminated at any time prior
to the consummation of the LHP Share Exchange by an agreement in
writing signed by NEXTLINK and McCaw with the concurrence of the
Special Committee.
(b) Either NEXTLINK or McCaw (and in the case of NEXTLINK,
with the concurrence of the Special Committee) may terminate this
Agreement as it relates to the LHP Share Exchange (and the
provisions of this Agreement relating thereto) prior to the
consummation of the LHP Share Exchange if:
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(i) any court of competent jurisdiction in the United
States or other Governmental Authority issues an order, decree or
ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated
by this Agreement with respect solely to the LHP Share Exchange
obligations, and such order, decree, ruling or other action is
final and non-appealable; or |
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(ii) the Closing of the LHP Share Exchange does not occur
by the 21st day after the End Date, provided that the
right to terminate this Agreement pursuant to this
Section 11.4(b) will not be available to either NEXTLINK or
McCaw if such party fails to fulfill any of its obligations under
this Agreement which failure results in the failure of the
Closing of the LHP Share Exchange to occur on or before such
date. |
A-53
(c) NEXTLINK (with the concurrence of the Special
Committee) may terminate this Agreement with respect solely to
the LHP Share Exchange obligations if:
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(i) McCaw fails to perform, in any material respect, any of
its material obligations under this Agreement, which failure to
perform is not cured by the Closing of the LHP Share Exchange,
provided that notice of such failure to perform shall have
been given by NEXTLINK to McCaw; or |
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(ii) there is a material breach of any of Eagle
River’s or McCaw’s representations, warranties and
covenants contained in this Agreement. |
(d) McCaw may terminate this Agreement with respect solely
to the LHP Share Exchange obligations if:
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(i) NEXTLINK fails to perform, in any material respect, any
of its material obligations under this Agreement, which failure
to perform is not cured by the Closing of the LHP Share Exchange,
provided that notice of such failure to perform shall
have been given by Eagle River to NEXTLINK; or |
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(ii) there is a material breach of any of NEXTLINK’s
representations, warranties and covenants contained in this
Agreement. |
(e) If the LHP Share Exchange is terminated pursuant to
this Section 11.4, such termination will be without
liability on the part of NEXTLINK, McCaw or Eagle River, or any
shareholder, partner, member, director, officer, employer, agent,
consultant or representative of any such party, or to the other
parties, other than the provisions of this Section 11.4, and
Sections 9.9 and 11.5; provided that nothing in this
Section 11.4 shall be deemed to release any such party from
any liability for any breach by such party of the
representations, warranties or covenants of such party, or other
terms, contained in this Agreement.
SECTION 11.5. Survival of NEXTLINK, Eagle River and
McCaw Representations and Warranties Relating to the LHP Share
Exchange; Indemnification.
(a) All representations, warranties and covenants of
NEXTLINK, Eagle River and McCaw pertaining to the LHP Share
Exchange contained in this Agreement will survive the execution
and delivery of this Agreement and the Closing.
(b) Eagle River and McCaw jointly and severally agree to
indemnify NEXTLINK and hold NEXTLINK harmless from and against,
and pay and reimburse NEXTLINK for, any and all demands, claims,
actions, losses, damages, liabilities, obligations, out-of-pocket
costs and expenses (including reasonable consultants’ and
attorneys’ fees), whether or not resulting from third-party
claims, including interest and penalties with respect thereto,
asserted against or incurred or sustained by NEXTLINK as a result
of or arising out of any breach or inaccuracy of any
representation or warranty of Eagle River or McCaw contained in
Section 6, or any covenant made by Eagle River in this
Agreement.
(c) NEXTLINK agrees to indemnify Eagle River and McCaw and
hold Eagle River and McCaw harmless from and against, and pay and
reimburse Eagle River and McCaw for, any and all demands,
claims, actions, losses, damages, liabilities, obligations,
out-of-pocket costs and expenses (including reasonable
consultants’ and attorneys’ fees), whether or not
resulting from third-party claims, including interest and
penalties with respect thereto, asserted against or incurred or
sustained by Eagle River or McCaw as a result of or arising out
of any breach or inaccuracy of any representation or warranty of
NEXTLINK made to Eagle River and McCaw and contained in
Section 5.21, or any covenant made by NEXTLINK for the
benefit of Eagle River and McCaw in this Agreement.
A-54
ARTICLE 12.
MISCELLANEOUS
SECTION 12.1. Notices. All notices, requests and
other communications to any party hereunder shall be in writing
(including facsimile transmission) and shall be given,
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NEXTLINK Communications, Inc.,
1505 Farm Credit Drive
McLean, VA 22102
Attention: General Counsel
Fax: (703) 547-2025 |
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Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Attention: Bruce R. Kraus, Esq.
Fax: (212) 728-8111 |
if to Concentric, to:
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Concentric Network Corporation
1400 Parkmoor Avenue
San Jose, CA 95126
Attention: Michael Anthofer
Fax: (408) 817-2876 |
with a copy to:
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Wilson Sonsini Goodrich, Rosati,
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304
Attention: David J. Segre, Esq.
Fax: 650-493-6811 |
if to Eagle River or Craig McCaw, to:
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2300 Carillon Point
Kirkland, WA 98033
Attention: C. James Judson, Esq.
Fax: (425) 828-8061 |
or such other address or facsimile number as such party may
hereafter specify for the purpose by notice to the other parties
hereto. All such notices, requests and other communications shall
be deemed received on the date of receipt by the recipient
thereof if received prior to 5 p.m. on a Business Day, in the
place of receipt. Otherwise, any such notice, request or
communication shall be deemed not to have been received until the
next succeeding Business Day in the place of receipt.
SECTION 12.2. Survival of Representations and
Warranties. The representations and warranties contained
herein and in any certificate or other writing delivered pursuant
hereto shall not survive the Effective Times or the termination
of this Agreement, except as provided under Section 11.2 and
11.5.
SECTION 12.3. Amendments; No Waivers.
(a) Subject to applicable law, any provision of this
Agreement may be amended or waived prior to the Effective Times
if, but only if, such amendment or waiver is in writing and is
signed, in the case of an amendment, by each party to this
Agreement or, in the case of a
A-55
waiver, by each party against whom the waiver is to be effective;
provided that, after the adoption of this Agreement by the
stockholders of Concentric, no such amendment or waiver shall be
made or given that requires the approval of the stockholders of
Concentric unless the required approval is obtained.
(b) No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
(c) References to “party” in this
Section 12.3 shall, with respect to any amendment or waiver
relating solely to the Mergers, the Alternative Merger or the
Exchange Offer, refer only to NEXTLINK, Concentric and Newco and
shall, with respect to any amendment or waiver relating to solely
to the LHP Share Exchange, refer only to NEXTLINK, Newco, Eagle
River and McCaw.
SECTION 12.4. Successors and Assigns. The provisions
of this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and
assigns; provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto.
SECTION 12.5. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Delaware, without regard to the conflicts of law rules
of such State.
SECTION 12.6. Jurisdiction. Any suit, action or
proceeding seeking to enforce any provision of, or based on any
matter arising out of or in connection with, this Agreement or
the transactions contemplated hereby shall be brought in any
federal court located in the State of Delaware or any Delaware
state court, and each of the parties hereby consents to the
exclusive jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent
permitted by law, any objection that it may now or hereafter have
to the laying of the venue of any such suit, action or
proceeding in any such court or that any such suit, action or
proceeding brought in any such court has been brought in an
inconvenient form. Process in any such suit, action or proceeding
may be served on any party anywhere in the world, whether within
or without the jurisdiction of any such court. Without limiting
the foregoing, each party agrees that service of process on such
party as provided in Section 12.1 shall be deemed effective
service of process on such party.
SECTION 12.7. WAIVER OF JURY TRIAL. EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 12.8. Counterparts; Effectiveness. This
Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other
parties hereto. No provision of this Agreement is intended to
confer any rights, benefits, remedies, obligations or liabilities
hereunder upon any Person other than the parties hereto and
their respective successors and assigns except as provided in
Sections 7.3, 7.5 and 7.6.
SECTION 12.9. Entire Agreement. This Agreement,
together with the Voting Agreements, the Concentric Disclosure
Schedule, the NEXTLINK Disclosure Schedule (which Disclosure
Schedules shall be deemed part of this Agreement) and the
Confidentiality Agreement, constitutes the entire agreement
between the parties with respect to the subject matter of this
Agreement and supersedes the Original Agreement and all other
prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter of this
Agreement.
SECTION 12.10. Captions. The captions herein are
included for convenience of reference only and shall be ignored
in the construction or interpretation hereof.
A-56
SECTION 12.11. Severability. If any term, provision,
covenant or restriction of this Agreement is held by a court of
competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants
and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially
adverse to any party. Upon such a determination, the parties
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 so that the transactions contemplated
hereby be consummated as originally contemplated to the fullest
extent possible.
SECTION 12.12. Specific Performance. The parties
hereto agree that irreparable damage would occur if any provision
of this Agreement were not performed in accordance with the
terms hereof and that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement
or to enforce specifically the performance of the terms and
provisions hereof in any federal court located in the State of
Delaware or any Delaware state court, in addition to any other
remedy to which they are entitled at law or in equity.
SECTION 12.13. Schedules. Each of Concentric and
NEXTLINK has set forth information in its respective Disclosure
Schedule in a section thereof that corresponds to the section of
this Agreement to which it relates. Such information will qualify
other sections hereof only to the extent that such applicability
is manifestly evident on the face of such disclosures. The fact
that any item of information is disclosed in a Disclosure
Schedule to this Agreement shall not be construed to mean that
such information is required to be disclosed by this Agreement.
[Signature page follows]
A-57
IN WITNESS WHEREOF, the parties hereto have caused this Amended
and Restated Agreement and Plan of Merger and Share Exchange
Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
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CONCENTRIC NETWORK CORPORATION |
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Name: Henry Nothhaft |
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Title: President and Chief Executive Officer |
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NEXTLINK COMMUNICATIONS, INC. |
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By: |
/s/ DANIEL F. AKERSON |
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Name: Daniel F. Akerson |
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Title: Chairman and Chief Executive Officer |
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EAGLE RIVER INVESTMENTS, LLC |
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Name: C. James Judson |
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Title: Vice President |
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NM ACQUISITION CORP. |
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Name: Gary D. Begeman |
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Title: Vice President |
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/s/ CRAIG O. MCCAW |
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Craig O. McCaw |
[EXHIBITS OMITTED]
A-58
APPENDIX B
FAIRNESS OPINION OF BEAR, STEARNS & CO. INC.
[BEAR STEARNS LOGO]
January 8, 2000
Board of Directors
Concentric Network Corporation
1400 Parkmoor Avenue
San Jose, California 95126
Members of the Board:
We understand that Concentric Network Corporation
(“Concentric”), NEXTLINK Communications, Inc.
(“NEXTLINK”), Eagle River Investments, L.L.C. and
NM Acquisition Corp. (“Newco”) propose to enter
into an Agreement and Plan of Merger and Share Exchange
Agreement, dated as of January 9, 2000 (the
“Agreement”), which provides for, among other things,
the mergers of Concentric and NEXTLINK with and into Newco (the
“Mergers”), with Newco being the surviving corporation.
The terms and conditions of the Mergers (as well as of an
Alternative Merger and an Exchange Offer and a related Exchange
Offer Merger) are more fully set forth in the Agreement, a copy
of which has been provided to us. All capitalized terms not
otherwise defined herein shall have the same meaning as defined
in the Agreement.
Pursuant to the Agreement, (i) each outstanding share of
Concentric Common Stock shall be converted into the right to
receive a certain number of shares of Newco Common Stock equal to
the quotient determined by dividing $45.00 by the Weighted
Average Sale Price, provided that such quotient shall not be less
than 0.4950 or greater than 0.6500 (the “Common Stock
Ratio”), (ii) each share of Concentric Series B
Preferred Stock shall be converted into the right to receive one
share of Newco Series E Preferred Stock having terms as set
forth in Section 3.1(h) of the Agreement, which terms are
substantially identical to those of the Concentric Series B
Preferred Stock and (iii) each share of Concentric
Series C Preferred Stock shall be converted into the right
to receive one share of Newco Series F Preferred Stock
having terms as set forth in Section 3.1(i) of the
Agreement, which terms are substantially identical to those of
the Concentric Series C Preferred Stock, provided that each
share of Newco Series F Preferred Stock shall be convertible
into a number of shares of Newco Common Stock adjusted to
reflect the Common Stock Ratio. Outstanding options and warrants
to purchase shares of Concentric Common Stock shall be converted
into options and warrants to purchase shares of Newco Common
Stock subject to adjustment based on the Common Stock Ratio.
In addition, each outstanding share of NEXTLINK Common Stock
shall be converted into one share of Newco Common Stock and each
outstanding share of NEXTLINK Class B Common Stock shall be
converted into one share of Newco Class B Common Stock.
Furthermore, each share of NEXTLINK 14.0% Preferred Stock,
(ii) NEXTLINK 6.50% Preferred Stock, (iii) NEXTLINK
Series C Preferred Stock and (iv) NEXTLINK
Series D Preferred Stock (collectively, the “NEXTLINK
Preferred Stock”) shall be converted into one share of
(w) Newco Series A Preferred Stock, (x) Newco
Series B Preferred Stock, (y) Newco Series C
Preferred Stock, and (z) Newco Series D Preferred Stock
(collectively, the “Newco Preferred Stock”),
respectively, with each series of Newco Preferred Stock having
terms substantially identical to those of its respective series
of NEXTLINK Preferred Stock. Outstanding options and warrants to
purchase shares of NEXTLINK Common Stock shall be converted into
options and warrants to purchase shares of Newco Common Stock in
accordance with the terms of such options and warrants.
B-1
Concentric Network Corporation
January 8, 2000
Page 2
You have asked us to render our opinion as to whether the Common
Stock Ratio is fair, from a financial point of view, to the
holders of shares of Concentric Common Stock. In the course of
performing our review and analyses for rendering this opinion, we
have:
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reviewed the Agreement; |
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reviewed Concentric’s and NEXTLINK’s
(i) respective Annual Reports to Stockholders and Annual
Reports on Form 10-K for the years ended December 31,
1997 and 1998, (ii) respective Quarterly Reports on
Form 10-Q for the periods ended March 31, June 30
and September 30, 1999 and (iii) respective Current
Reports on Form 8-K filed during calendar years ended
December 31, 1997, 1998 and 1999 and through January 8,
2000; |
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reviewed certain operating and financial information relating to
Concentric’s business and prospects on a standalone basis,
including certain projections, all of which was prepared and
provided to us by Concentric’s management; |
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reviewed certain operating and financial information relating to
NEXTLINK’s business and prospects on a standalone basis,
which was prepared and provided to us by NEXTLINK’s
management, and certain projections, which were prepared and
provided to us by Concentric’s management based on extensive
verbal guidance from NEXTLINK’s management; |
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reviewed certain estimates of revenue enhancements, cost savings
and other combination benefits expected to result from the
Mergers, prepared and provided to us by Concentric’s
management; |
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met with certain members of Concentric’s and NEXTLINK’s
senior management to discuss each company’s respective
business, operations, historical and projected financial results
and future prospects; |
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reviewed the historical prices, trading multiples and trading
volumes of the shares of Concentric Common Stock and NEXTLINK
Common Stock; |
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reviewed publicly available financial data, stock market
performance data and trading multiples of companies which we
deemed generally comparable to Concentric and NEXTLINK; |
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reviewed the terms of recent precedent mergers and acquisitions
involving companies which we deemed generally comparable to
Concentric; |
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performed discounted cash flow analyses relating to Concentric
and NEXTLINK on a standalone basis and on a pro forma combined
basis, both including and excluding the estimated combination
benefits; |
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reviewed the financial condition and capitalization of Newco
giving effect to the Mergers; and |
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conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate. |
We have relied upon and assumed, without independent
verification, the accuracy and completeness of the financial and
other information provided to us by Concentric and NEXTLINK,
including without limitation certain projections and estimated
combination benefits expected to result from the Mergers. With
respect to such projections and estimated combination benefits
that could be achieved upon consummation of the Mergers, we have
assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments
of the senior managements of Concentric and NEXTLINK as to the
expected future performance of Concentric, NEXTLINK and Newco. We
have not assumed any responsibility for the independent
verification of any such information or of the projections and
combination benefits provided to us, and we have further relied
upon the assurances of the senior managements of Concentric and
NEXTLINK that they are unaware of any facts that would make the
information, projections and synergy estimates provided to us
incomplete or misleading.
B-2
Concentric Network Corporation
January 8, 2000
Page 3
In arriving at our opinion, we have not performed or obtained any
independent appraisal of the assets or liabilities of
Concentric, NEXTLINK or Newco, nor have we been furnished with
any such appraisals. We have assumed that the Mergers will
qualify as a tax-free “reorganization” within the
meaning of Section 368 (in the event that either the Mergers
are effected or the Alternative Merger is effected) or
Section 351 (in the event that the Exchange Offer and the
Exchange Offer Merger are effected) of the Internal Revenue Code.
Our opinion is necessarily based on economic, market and other
conditions, and the information made available to us, as of the
date hereof.
We do not express any opinion as to the price or range of prices
at which the shares of Concentric Common Stock or NEXTLINK Common
Stock may trade subsequent to the announcement of the Mergers or
as to the price or range of prices at which the shares of Newco
Common Stock may trade subsequent to the consummation of the
Mergers.
We have acted as a financial advisor to Concentric in connection
with the Mergers and will receive a fee for such services. Bear
Stearns has been previously engaged by Concentric to provide
certain investment banking and financial advisory services for
which we received customary compensation. In the ordinary course
of business, Bear Stearns may actively trade the equity and debt
securities of Concentric and NEXTLINK for our own account and for
the account of our customers and, accordingly, may at any time
hold a long or short position in such securities.
It is understood that this letter is intended for the benefit and
use of the Board of Directors of Concentric and does not
constitute a recommendation to the Board of Directors of
Concentric or any holders of shares of Concentric Common Stock as
to how to vote in connection with the Mergers. This opinion does
not address Concentric’s underlying business decision to
pursue the Mergers. This letter is not to be used for any other
purpose, or be reproduced, disseminated, quoted from or referred
to at any time, in whole or in part, without our prior written
consent; provided, however, that this letter may be included in
its entirety in any joint proxy statement/prospectus to be
distributed to the holders of shares of Concentric Common Stock
in connection with the Mergers.
Based on and subject to the foregoing, it is our opinion that, as
of the date hereof, the Common Stock Ratio is fair, from a
financial point of view, to holders of shares of Concentric
Common Stock.
Very truly yours,
/s/ J. ROBERT BURTON
BEAR, STEARNS & CO. INC.
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APPENDIX C
FAIRNESS OPINION OF MERRILL LYNCH & CO.
January 9, 2000
Board of Directors
NEXTLINK Communications, Inc.
1505 Farm Credit Drive
McLean, VA 22102
Gentlemen:
NEXTLINK Communications, Inc. (“NEXTLINK”), Concentric
Network Corporation (“Concentric”), NM Acquisition
Corp., a newly formed corporation (“Newco”), and the
other parties signatories thereto have entered into an Agreement
and Plan of Merger and Share Exchange Agreement, dated as of
January 9, 2000 (the “Agreement”), pursuant to
which Concentric and NEXTLINK will each be merged with Newco in a
transaction (the “Merger”) in which each outstanding
share of Concentric’s common stock, par value $0.001 per
share (the “Concentric Common Stock”), will be
converted into the right to receive the number of shares of
Class A common stock, par value of $0.02 per share, of Newco
(the “Newco Common Stock”) equal to the quotient of
$45.00 divided by the Weighted Average Sales Price (as defined in
the Agreement) of NEXTLINK Common Stock (as defined below) (the
“Exchange Ratio”); provided that the Exchange Ratio
will not be less than 0.495 nor greater than 0.650; each
outstanding share of NEXTLINK’s Class A common stock,
par value $0.02 per share (the “NEXTLINK Common
Stock”), shall be converted into one share of Newco Common
Stock; and each outstanding share of NEXTLINK’s Class B
common stock, par value $0.02 per share, shall be converted into
one share of Class B common stock, par value $0.02 per
share, of Newco, all as described more fully in the Agreement.
Under circumstances specified in the Agreement, in lieu of the
Merger, pursuant to the Agreement, Concentric will be merged with
NEXTLINK in a transaction (the “Alternative Merger”)
in which each outstanding share of Concentric Common Stock will
be converted into the right to receive the number of shares of
NEXTLINK Common Stock equal to the Exchange Ratio; provided that
the Exchange Ratio will not be less than 0.495 nor greater than
0.650. Also pursuant to the Agreement, Newco, in the case of the
Merger, or NEXTLINK, in the case of the Alternative Merger, will
acquire 50% of the limited liability company interests in (or, in
the event it is converted into a corporation, the capital stock
of) LHP, L.L.C. (“LHP”) from Eagle River Investments,
L.L.C. (“Eagle River”), an affiliate of NEXTLINK (the
“LHP Transaction”), in exchange for a number of shares
of, in the case of the Merger, Newco Common Stock, or, in the
case of the Alternative Merger, NEXTLINK Common Stock, determined
as set forth in the Agreement. Currently, NEXTLINK owns 50% of
the limited liability company interests in LHP. Neither the
consummation of the Merger nor the consummation of the
Alternative Merger is conditioned upon the consummation of the
LHP Transaction, and the consummation of the LHP Transaction is
not conditioned upon the consummation of either the Merger or the
Alternative Merger.
You have asked us whether, in our opinion, the Exchange Ratio, in
the context of the Merger and the Alternative Merger, is fair
from a financial point of view to NEXTLINK.
In arriving at the opinion set forth below, we have, among other
things:
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(1) Reviewed certain publicly available business and
financial information relating to Concentric and NEXTLINK that
we deemed to be relevant; |
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(2) Reviewed certain information, including
financial forecasts, relating to the business, earnings, cash
flow, assets, liabilities and prospects of Concentric and
NEXTLINK furnished to us by Concentric and NEXTLINK,
respectively, as well as the amount and timing of the cost
savings and related expenses and synergies expected to result
from the Merger or the Alternative Merger (the “Expected
Synergies”) furnished to us by NEXTLINK; |
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(3) Conducted discussions with members of senior
management and representatives of Concentric and NEXTLINK
concerning the matters described in clauses 1 and 2 above, as
well as their respective businesses and prospects before and
after giving effect to the Merger or the Alternative Merger, and
the Expected Synergies; |
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(4) Reviewed the market prices and valuation
multiples of the Concentric Common Stock and the NEXTLINK Common
Stock and compared them with those of certain publicly traded
companies that we deemed to be relevant; |
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(5) Reviewed the results of operations of Concentric
and NEXTLINK and compared them with those of certain publicly
traded companies that we deemed to be relevant; |
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(6) Compared the proposed financial terms of the
Merger and the Alternative Merger with the financial terms of
certain other transactions that we deemed to be relevant; |
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(7) Participated in certain discussions and
negotiations among representatives of Concentric and NEXTLINK and
their financial and legal advisors; |
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(8) Reviewed the potential pro forma impact of the
Merger and the Alternative Merger; |
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(9) Reviewed the Agreement; and |
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(10) Reviewed such other financial studies and analyses and
took into account such other matters as we deemed necessary,
including our assessment of general economic, market and monetary
conditions. |
In preparing our opinion, we have assumed and relied on the
accuracy and completeness of all information supplied or
otherwise made available to us, discussed with or reviewed by or
for us, or publicly available, and we have not assumed any
responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the
assets or liabilities of Concentric or NEXTLINK or been furnished
with any such evaluation or appraisal. In addition, we have not
assumed any obligation to conduct any physical inspection of the
properties or facilities of Concentric or NEXTLINK. With respect
to the financial forecast information and the Expected Synergies
furnished to or discussed with us by Concentric or NEXTLINK, we
have assumed that they have been reasonably prepared and reflect
the best currently available estimates and judgement of
Concentric’s or NEXTLINK’s management as to the
expected future financial performance of Concentric or NEXTLINK,
as the case may be, and the Expected Synergies. We have also
assumed that all pending acquisition transactions by Concentric
and NEXTLINK and the LHP Transaction will be successfully
completed on the terms and conditions as known as of the date of
this letter. We have further assumed that the Merger and the
Alternative Merger will qualify as a tax-free reorganization for
U.S. federal income tax purposes.
Our opinion is necessarily based upon market, economic and other
conditions as they exist and can be evaluated on, and on the
information made available to us as of, the date hereof. We have
assumed that in the course of obtaining the necessary regulatory
or other consents or approvals (contractual or otherwise) for the
Merger or the Alternative Merger, no restrictions, including any
divestiture requirements or amendments or modifications, will be
imposed that will have a material adverse effect on the
contemplated benefits of the Merger or the Alternative Merger.
We are acting as financial advisor to NEXTLINK in connection with
the Merger/ Alternative Merger and will receive a fee from
NEXTLINK for our services, a significant portion of which is
contingent upon the consummation of the Merger or the Alternative
Merger. In addition, NEXTLINK has agreed to indemnify us for
certain liabilities arising out of our engagement. We are
currently, and have in the past, provided financial advisory and
financing services to NEXTLINK and/ or its affiliates, including
Eagle River, and may continue to do so and have received, and may
receive, fees for the rendering of such services. In addition,
in the ordinary course of our business, we may actively trade the
Concentric Common Stock and other securities of Concentric, as
well as the NEXTLINK Common Stock and other securities of
NEXTLINK, for our own
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account and for the accounts of customers and, accordingly, may
at any time hold a long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors
of NEXTLINK. Our opinion does not address the merits of the
underlying decision by NEXTLINK to engage in the Merger or the
Alternative Merger and does not constitute a recommendation to
any shareholder of NEXTLINK as to how such shareholder should
vote on the proposed Merger or the Alternative Merger or any
matter related thereto. This opinion also does not address any
aspect of the LHP Transaction, including, without limitation, the
consideration proposed to be paid to Eagle River.
We are not expressing any opinion herein as to the prices at
which the Newco Common Stock or the NEXTLINK Common Stock, as the
case may be, will trade following the announcement or
consummation of the Merger or the Alternative Merger.
On the basis of and subject to the foregoing, we are of the
opinion that, as of the date hereof, the Exchange Ratio, in the
context of the Merger and the Alternative Merger, is fair from a
financial point of view to NEXTLINK.
Very truly yours,
MERRILL LYNCH,PIERCE,FENNER & SMITH
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APPENDIX D
DELAWARE CODE ANNOTATED
SECTION 262. APPRAISAL RIGHTS
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER OR CONSOLIDATION
8 DEL.
SECTION 262. Appraisal Rights. Any stockholder of a
corporation of this State who holds shares of stock on the date
of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such
shares through the effective date of the merger or
consolidation, who has otherwise complied with subsection
(d) of this section and who has neither voted in favor of
the merger or consolidation nor consented thereto in writing
pursuant to section 228 of this title shall be entitled to an
appraisal by the Court of Chancery of the fair value of the
stockholder’s shares of stock under the circumstances
described in subsections (b) and (c) of this section.
As used in this section, the word stockholder means a holder of
record of stock in a stock corporation and also a member of
record of a non-stock corporation; the words stock and share mean
and include what is ordinarily meant by those words and also
membership or membership interest of a member of a non-stock
corporation; and the words depository receipt mean a receipt or
other instrument issued by a depository representing an interest
in one or more shares’ or fractions thereof, solely of stock
of a corporation, which stock is deposited with the depository.
Appraisal rights shall be available for the shares of any class
or series of stock of a constituent corporation in a merger or
consolidation to be effected pursuant to section 251 (other than
a merger effected pursuant to section 251(g) of this title),
section 252, section 254, section 257, section 258, section 263
or section 264 of this title:
Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of
stock, which stock, or depository receipts in respect thereof, at
the record date fixed to determine the stockholders entitled to
receive notice of and to vote at the meeting of stockholders to
act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated
as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or
(ii) held of record by more than 2,000 holders; and further
provided that no appraisal rights shall be available for any
shares of stock of the constituent corporation surviving a merger
if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in
subsection (f) of section 251 of this title.
Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of
any class or series of stock of a constituent corporation if the
holders thereof are required by the terms of an agreement of
merger or consolidation pursuant to section 251, 252, 254, 257,
258, 263 and 264 of this title to accept for such stock anything
except:
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(a) Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof; |
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(b) Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts at
the effective date of the merger or consolidation will be either
listed on a national securities exchange or designated as a
national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or
held of record by more than 2,000 holders; |
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(c) Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or |
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(d) Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph. |
In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under section 253 of this
title is not owned by the parent corporation immediately prior to
the merger, appraisal rights shall be available for the shares
of the subsidiary Delaware corporation.
Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for
the shares of any class or series of its stock as a result of an
amendment to its certificate of incorporation, any merger or
consolidation in which the corporation is a constituent
corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains
such a provision, the procedures of this section, including
those set forth in subsections (d) and (e) of this
section, shall apply as nearly as is practicable.
Appraisal rights shall be perfected as follows:
If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval
at a meeting of stockholders, the corporation, not less than
20 days prior to the meeting, shall notify each of its
stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal
rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy
of this section. Each stockholder electing to demand the
appraisal of his shares shall deliver to the corporation, before
the taking of the vote on the merger or consolidation, a written
demand for appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of his shares. A proxy or vote
against the merger or consolidation shall not constitute such a
demand. A stockholder electing to take such action must do so by
a separate written demand as herein provided. Within 10 days
after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder
of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the
merger or consolidation of the date that the merger or
consolidation has become effective; or
If the merger or consolidation was approved pursuant to section
228 or section 253 of this title, each constituent corporation,
either before the effective date of the merger or consolidation
or within ten days thereafter, shall notify each of the holders
of any class or series of stock of such constituent corporation
who are entitled to appraisal rights of the approval of the
merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy
of this section; provided that, if the notice is given on or
after the effective date or the merger or consolidation, such
notice shall be given by the surviving or resulting corporation
to all such holders of any class or series of stock of a
constituent corporation that are entitled to appraisal rights.
Such notice may, and, if given on or after the effective date of
the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days
after the date of mailing of such notice, demand in writing from
the surviving or resulting corporation the appraisal of such
holder’s shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand
the appraisal of such holder’s shares. If such notice did
not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation
shall send a second notice before the effective date of the
merger or consolidation notifying each of the holders of any
class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger
or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders
on or within 10 days after such effective date; provided,
however, that if such second notice is sent more than
20 days following the sending of the first notice, such
second notice need only be sent to each stockholder who is
entitled to appraisal rights and who has demanded appraisal of
such holder’s shares in accordance with this subsection. An
affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of
fraud, be prima facie evidence of the facts stated therein. For
purposes of determining the stockholders entitled to receive
either notice, each
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constituent corporation may fix, in advance, a record date that
shall be not more than 10 days prior to the date the notice
is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date
shall be such effective date. If no record date is fixed and the
notice is given prior to the effective date, the record date
shall be the close of business on the day next preceding the day
on which the notice is given.
Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any
stockholder who has complied with subsections (a) and
(d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days
after the effective date of the merger or consolidation, any
stockholder shall have the right to withdraw his demand for
appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied
with the requirements of subsections (a) and (d) hereof,
upon written request, shall be entitled to receive from the
corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of
shares not voted in favor of the merger or consolidation and with
respect to which demands for appraisal have been received and
the aggregate number of holders of such shares. Such written
statement shall be mailed to the stockholder within 10 days
after his written request for such a statement is received by the
surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal
under subsection (d) hereof, whichever is later.
Upon the filing of any such petition by a stockholder, service of
a copy thereof shall be made upon the surviving or resulting
corporation, which shall within 20 days after such service
file in the office of the Register in Chancery in which the
petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares
have not been reached by the surviving or resulting corporation.
If the petition shall be filed by the surviving or resulting
corporation, the petition shall be accompanied by such a duly
verified list. The Register in Chancery, if so ordered by the
Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the
surviving or resulting corporation and to the stockholders shown
on the list at the addresses therein stated. Such notice shall
also be given by 1 or more publications at least 1 week
before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the
notices by mail and by publication shall be approved by the
Court, and the costs thereof shall be borne by the surviving or
resulting corporation.
At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have
become entitled to appraisal rights. The Court may require the
stockholders who have demanded an appraisal for their shares and
who hold stock represented by certificates to submit their
certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Court may
dismiss the proceedings as to such stockholder.
After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value
exclusive of any element of value arising from the accomplishment
or expectation of the merger or consolidation, together with a
fair rate of interest, if any, to be paid upon the amount
determined to be the fair value. In determining such fair value,
the Court shall take into account all relevant factors. In
determining the fair rate of interest, the Court may consider all
relevant factors, including the rate of interest which the
surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon
application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding,
the Court may, in its discretion, permit discovery or other
pretrial proceedings and may-proceed to trial upon the appraisal
prior to the final determination of the stockholder entitled to
an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is
finally determined that he is not entitled to appraisal rights
under this section.
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The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Interest may be simple or compound, as the Court may direct.
Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Court’s decree may be enforced as other decrees in the
Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any
state.
The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the
circumstances. Upon application of a stockholder, the Court may
order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorney’s fees
and the fees and expenses of experts, to be charged pro rata
against the value of all the shares entitled to an appraisal.
From and after the effective date of the merger or consolidation,
no stockholder who has demanded his appraisal rights as provided
in subsection (d) of this section shall be entitled to vote such
stock for any purpose or to receive payment of dividends or
other distributions on the stock (except dividends or other
distributions payable to stockholders of record at a date which
is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be
filed within the time provided in subsection (e) of this
section, or if such stockholder shall deliver to the surviving or
resulting corporation a written withdrawal of his demand for an
appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger
or consolidation as provided in subsection (e) of this
section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval
may be conditioned upon such terms as the Court deems just.
The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted
had they assented to the merger or consolidation shall have the
status of authorized and unissued shares of the surviving or
resulting corporation.
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APPENDIX E
FORM OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NM ACQUISITION CORP.
Pursuant to Section 102 of the General Corporation Law of
Delaware, the undersigned does hereby submit this Certificate of
Incorporation for the purpose of forming a business corporation.
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1. Name. The name of the corporation is: |
NM ACQUISITION CORP.
NM Acquisition Corp. is referred to as the
“Corporation” hereafter in this Certificate of
Incorporation.
2. Purpose. The nature of the business or purpose to
be conducted or promoted by the Corporation is to engage in any
lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
3. Shares. The Corporation shall have authority to
issue One Billion One Hundred Twenty Million (1,120,000,000)
shares of common stock (the “Common Stock”), which
shall be divided into two classes, One Billion (1,000,000,000)
shares of Class A Common Stock, par value $0.02 per share
(the “Class A Common Stock”), and One Hundred
Twenty Million (120,000,000) shares of Class B Common Stock,
par value $0.02 per share (the “Class B Common
Stock”). The Corporation shall have authority to issue
Twenty-Five Million (25,000,000) shares of preferred stock, par
value $.01 per share (the “Preferred Stock”).
The Class A and Class B Common Stock are entitled to
vote on all matters which come before the stockholders. Subject
to the differential voting power hereafter described in this
paragraph 3, all Common Stock shall vote together as a single
class. Each share of Class A Common Stock shall have one
(1) vote and each share of Class B Common Stock shall
have ten (10) votes on all matters on which holders of
Common Stock are entitled to vote. Each share of Class B
Common Stock may be converted, at any time and at the option of
the holder, into one share of Class A Common Stock. Each
share of Class B Common Stock may also be converted, at the
option of the Corporation as determined in the sole discretion of
its Board of Directors, into one share of Class A Common
Stock at any time such Class B Common Stock is transferred,
or is presented to the Corporation for transfer on the
Corporation’s records by the holder of such Class B
Common Stock, whether such transfer results from a contractual
obligation of the holder, by operation of law, by a change in
control of the holder, by testamentary disposition or gift, or
for any other reason.
Pursuant to Section 242(b)(2) of the Delaware General
Corporation Law, an affirmative vote of the majority of the
outstanding shares of Class A Common Stock and Class B
Common Stock voting together as a single class shall be
sufficient to increase or decrease the aggregate number of
authorized shares of any such class.
Except with regard to the differential voting power hereinbefore
described in this paragraph 3, the Class A Common Stock and
the Class B Common Stock shall carry identical
characteristics, rights, preferences, and limitations, including
but not limited to participating equally in any dividends when
and as declared by the Directors out of funds lawfully available
therefor and in any distribution resulting from a liquidation or
distribution of assets, whether voluntary or involuntary, in each
case subject to any preferential rights granted to any series of
Preferred Stock that may be then outstanding.
Shares of Preferred Stock of the Corporation may be issued from
time to time in one or more classes or series, each of which
class or series shall have such distinctive designation or title
as shall be fixed by the
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Board of Directors of the Corporation (the “Board of
Directors”) and recorded in a Certificate of Designations
adopted and filed as required by Section 151 of the General
Corporation Law of Delaware prior to the issuance of any shares
thereof. Each such class or series of Preferred Stock shall have
such voting powers, full or limited, or no voting powers, and
such preferences and relative participating, option or other
special rights and such qualifications, limitations or
restrictions thereof, as shall be stated in such resolution or
resolutions providing for the issue of such class or series of
Preferred Stock as may be adopted from time to time by the Board
of Directors prior to the issuance of any shares thereof pursuant
to the authority hereby expressly vested in it, all in
accordance with the laws of the State of Delaware.
4. Bylaws. In furtherance and not in limitation of
the powers conferred by statute, the bylaws of the Corporation
may be made, altered, amended or repealed by the stockholders or
by a majority of the entire Board of Directors.
5. Registered Agent and Office. The name of the
initial registered agent of this corporation and the address of
its initial registered office are as follows:
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The Corporation Trust Company |
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1209 Orange Street
Wilmington, DE 19801 |
8. Directors. The number of directors of this
corporation shall be determined in the manner specified by the
Bylaws and may be increased or decreased from time to time in the
manner provided therein. The initial Board of Directors shall
consist of one director and his name and address are as follows:
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Gary D. Begeman |
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NM Acquisition Corp.
1505 Farm Credit Drive
McLean, VA 22102 |
The term of the initial directors shall be until the first annual
meeting of the stockholders or until their successors are
elected and qualified, unless removed in accordance with the
provisions of the Bylaws. Elections of directors need not be by
written ballot.
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9. Incorporator. The name and mailing address of the
incorporator are as follows: |
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Tony O. Thompson |
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Willkie Farr & Gallagher |
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787 Seventh Avenue |
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New York, NY 10019 |
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10. Indemnification. |
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(a) The Corporation shall indemnify to the fullest extent
permitted under and in accordance with the laws of the State of
Delaware any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he or she is or was a
director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director,
officer, trustee, employee or agent of or in any other capacity
with another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys’
fees and costs), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with
such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. |
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(b) Expenses incurred in defending a civil or criminal
action, suit or proceeding shall (in the case of any action, suit
or proceeding against a director of the Corporation) or may (in
the case of any action, suit or proceeding against an officer,
trustee, employee or agent) be paid by the Corporation in advance |
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of the final disposition of such action, suit or proceeding as
authorized by the Board of Directors upon receipt of an
undertaking by or on behalf of the indemnified person to repay
such amount if it shall ultimately be determined that he or she
is not entitled to be indemnified by the Corporation as
authorized in this paragraph 10. |
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(c) The indemnification and other rights set forth in this
paragraph 10 shall not be exclusive of any provisions with
respect thereto in the bylaws or any other contract or agreement
between the Corporation and any officer, director, employee or
agent of the Corporation. |
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(d) Neither the amendment nor repeal of this paragraph 10,
subparagraph (a), (b) or (c), nor the adoption of any
provision of this Certificate of Incorporation inconsistent with
this paragraph 10, subparagraph (a), (b) or (c), shall
eliminate or reduce the effect of this paragraph 10,
subparagraphs (a), (b) and (c), in respect of any matter
occurring before such amendment, repeal or adoption of an
inconsistent provision or in respect of any cause of action, suit
or claim relating to any such matter which would have given rise
to a right of indemnification or right to receive expenses
pursuant to this paragraph 10, subparagraph (a), (b) or (c),
if such provision had not been so amended or repealed or if a
provision inconsistent therewith had not been so adopted. |
11. Limitation of Director Liability. A director
shall have no liability to the corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director,
except for any breach of the director’s duty of loyalty to
the corporation or its stockholders, acts or omissions not in
good faith or which involve intentional misconduct or a knowing
violation of law by the director, conduct violating
Section 174 of the General Corporation Law of Delaware, or
for any transaction from which the director will personally
receive a benefit in money, property or services to which the
director is not legally entitled. If the General Corporation Law
of Delaware is hereafter amended to authorize corporate action
further eliminating or limiting the personal liability of
directors, then the liability of a director shall be eliminated
or limited to the full extent permitted by the General
Corporation Law of Delaware, as so amended. Any repeal or
modification of this Article shall not adversely affect any right
or protection of a director of the corporation existing at the
time of such repeal or modification for or with respect to an act
or omission of such director occurring prior to such repeal or
modification.
THE UNDERSIGNED, being the incorporator hereinbefore named, for
the purpose of forming a Corporation pursuant to the General
Corporation Law of Delaware, executes this Certificate, hereby
declaring and certifying that this is his act and deed and the
facts herein stated are true and, accordingly, has hereunto set
his hand this day of June, 2000.
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APPENDIX F
FORM OF
RESTATED
BYLAWS
OF
NM ACQUISITION CORP.
These Bylaws are intended to conform to the mandatory
requirements of the General Corporation Law of Delaware (the
“Act”). Any ambiguity arising between these Bylaws and
the discretionary provisions of the Act shall be resolved in
favor of the application of the Act.
ARTICLE I.
STOCKHOLDERS
SECTION 1. Place.
Stockholders meetings shall be held at the registered office of
the Corporation unless a different place shall be designated by
the Board of Directors.
SECTION 2. Annual Meeting.
The annual meeting of the Stockholders shall be held on the date
and time designated by the Board of Directors. The meeting shall
be held for the purpose of electing Directors and for the
transaction of such other business as may come before the
meeting, whether stated in the notice of meeting or not, except
as otherwise expressly stated in the Certificate of
Incorporation. If the election of Directors shall not be held on
the day designated herein, the Board of Directors shall cause the
election to be held at a special meeting of the Stockholders on
the next convenient day.
SECTION 3. Special Meetings.
Special meetings of the Stockholders may be called by the
President or the Board of Directors for any purpose at any time,
and shall be called by the President at the request of the
holders of shares entitled to cast at least 25% of votes eligible
to be cast. Special meetings shall be held at such place or
places within or without the state of Delaware as shall be
designated by the Board of Directors and stated in the notice of
such meeting. At a special meeting no business shall be
transacted and no corporate action shall be taken other than that
stated in the notice of the meeting.
SECTION 4. Notice.
Written or printed notice stating the place, hour and day of the
meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not
less than ten (10) days nor more than sixty (60) days
before the date of the meeting, either personally or by mail, by
or at the direction of the President, the Secretary, or the
officer or persons calling the meeting to each Stockholder of
record entitled to vote at such meeting, or for such other notice
period as may be required by the Act. Such notice and the
effective date thereof shall be determined as provided in the
Act.
SECTION 5. Quorum.
A majority of votes entitled to be cast by the shares issued,
outstanding and entitled to vote upon the subject matter at the
time of the meeting, represented in person or by proxy, shall
constitute a quorum for the transaction of business at any
meeting of the Stockholders.
SECTION 6. Adjourned Meetings.
If there is no quorum present at any annual or special meeting
the Stockholders present may adjourn to such time and place as
may be decided upon by the holders of the majority of the shares
present, in person or by proxy, and notice of such adjournment
shall be given in accordance with Section 4 of this Article,
but if a
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quorum is present, adjournment may be taken from day to day or to
such time and place as may be decided and announced by a
majority of the Stockholders present, and subject to the
requirements of the Act, no notice of such adjournment need be
given. At any such adjourned meeting at which a quorum is
present, any business may be transacted which could have been
transacted at the meeting originally called.
SECTION 7. Voting.
Each Stockholder entitled to vote on the subject matter shall be
entitled to that number of votes provided in the Certificate of
Incorporation for each share of stock standing in the name of the
Stockholder on the books of the Corporation at the time of the
closing of the Transfer Books for said meeting, whether
represented and present in person or by proxy. The affirmative
vote of the holders of a majority of the shares of each class
represented at the meeting and entitled to vote on the subject
matter shall be the act of the Stockholders. The Stockholders
present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of
enough Stockholders to leave less than a quorum.
The secretary shall prepare and make, at least ten days before
every election of directors, a complete list of the Stockholders
entitled to vote, arranged in alphabetical order and showing the
address of each Stockholder and the number of shares of each
Stockholder. Such list shall be open at the offices of the
Corporation for said ten days, to the examination of any
Stockholder, and shall be produced and kept at the time and place
of election during the whole time thereof, and subject to the
inspection of any Stockholder who may be present.
SECTION 8. Proxies.
At all meetings of Stockholders, a Stockholder may vote in person
or by proxy executed in writing by the Stockholder or by his
duly authorized attorney in fact. No proxy shall be valid after
eleven (11) months from the date of its execution, unless
otherwise provided in the proxy.
SECTION 9. Record Date.
The Board of Directors is authorized to fix in advance a date not
exceeding sixty days nor less than ten days preceding the date
of any meeting of the Stockholders, or the date for the payment
of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock
shall go into effect, or a date in connection with obtaining the
consent Stockholders for any purposes, as a record date for the
determination of the Stockholders entitled to notice of, and to
vote at, any such meeting, and any adjournment thereof, or
entitled to receive payment of any such dividend, or to any such
allotment of rights, or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, or to give
such consent, and, in such case, such Stockholders and only such
Stockholders as shall be Stockholders of record on the date so
fixed shall be entitled to such notice of, and to vote at, such
meeting, and any adjournment thereof, or to receive payment of
such dividend, or to receive such allotment of rights, or to
exercise such rights, or to give such consent, as the case may
be, notwithstanding any transfer of any stock on the books of the
Corporation, after such record date fixed pursuant to this
Section.
SECTION 10. Conduct of Meetings.
The Chairman of the Board of Directors or, in his absence the
Chief Executive Officer, President, or the Vice-President
designated by the Chairman of the Board, shall preside at all
regular or special meetings of Stockholders. To the maximum
extent permitted by law, such presiding person shall have the
power to set procedural rules, including but not limited to rules
respecting the time allotted to Stockholders to speak, governing
all aspects of the conduct of such meetings.
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ARTICLE II.
DIRECTORS
SECTION 1. In General.
The business and affairs of the Corporation shall be managed by a
Board of Directors initially consisting of one (1) director, and
thereafter shall consist of such number as may be fixed from
time to time by resolution of the Board of Directors. The member
of the first Board of Directors shall hold office until the first
annual meeting of the Stockholders and until his successor(s)
shall have been elected and qualified. Thereafter, the term of
the Directors shall begin upon each Director’s election by
the Stockholders as provided in Article I, Section 7
above, and shall continue until his successor shall have been
elected and qualified.
SECTION 2. Powers.
The corporate powers, business, property and interests of the
Corporation shall be exercised, conducted and controlled by the
Board of Directors, which shall have all power necessary to
conduct, manage and control its affairs, and to make such rules
and regulations as it may deem necessary as provided by the Act;
to appoint and remove all officers, agents and employees; to
prescribe their duties and fix their compensation; to call
special meetings of Stockholders whenever it is deemed necessary
by the Board, to incur indebtedness and to give securities, notes
and mortgages for same. It shall be the duty of the Board to
cause a complete record to be kept of all the minutes, acts, and
proceedings of its meetings.
SECTION 3. Vacancies.
Vacancies in the Board of Directors may be temporarily filled by
the affirmative vote of a majority of the remaining Directors
even though less than a quorum of the Board of Directors. Such
temporary Director or Directors shall hold office until the first
meeting of the Stockholders held thereafter, at which time such
vacancy or vacancies shall be permanently filled by election
according to the procedure specified in Section 1 of this
Article II.
SECTION 4. Annual Meeting.
There shall be an annual meeting of the Board of Directors which
shall be held immediately after the annual meeting of the
Stockholders and at the same place.
SECTION 5. Special Meeting.
Special meetings may be called from time to time by the President
or any one of the Directors. Any business may be transacted at
any special meeting.
SECTION 6. Quorum.
A majority of the Directors shall constitute a quorum. The act of
a majority of the Directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors. If
less than a quorum is present at a meeting, a majority of the
Directors present may adjourn the meeting from time to time
without further notice, other than announcement at the meeting,
until a quorum shall be present. Interested Directors may be
counted for quorum purposes.
SECTION 7. Notice and Place of Meetings.
Notice of all Directors’ meetings shall be given in
accordance with the Act. No notice need be given of any annual
meeting of the Board of Directors. One day prior notice shall be
given for all special meetings of the Board, but the purpose of
special meetings need not be stated in the notice.
Meetings of the Board of Directors may be held at the principal
office of the corporation, or at such other place as shall be
stated in the notice of such meeting. Members of the Board of
Directors, or any committee designated by the Board of Directors,
shall, except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, have the power to participate in a
meeting of the Board of Directors, or any committee, by means of
a conference telephone or similar communications equipment by
means of which all
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persons participating in the meeting can hear each other, and
such participation shall constitute presence in person at this
meeting.
SECTION 8. Compensation.
By resolution of the Board of Directors, each Director may either
be reimbursed for his expenses, if any, for attending each
meeting of the Board of Directors or may be paid a fixed fee for
attending each meeting of the Board of Directors, or both. No
such payment shall preclude any Director from serving the
Corporation in any other capacity and receiving compensation
therefor.
SECTION 9. Removal or Resignation of Directors.
Any Director may resign by delivering written notice of the
resignation to the Board of Directors or an officer of the
Corporation. All or any number of the Directors may be removed,
with or without cause, at a meeting expressly called for that
purpose by a vote of the holders of the majority of the shares
then entitled to vote at an election of Directors.
SECTION 10. Presumption of Assent.
A Director of the Corporation who is present at a meeting of the
Board of Directors at which action on any corporate matter is
taken shall be presumed to have assented to the action taken,
unless his dissent shall be manifested in the manner required by
the Act. Such right to dissent shall not apply to a Director who
voted in favor of such action.
SECTION 11. Committees.
The Board of Directors may, by resolution passed by a majority of
the whole Board, designate two or more of their number to
constitute an Executive Committee to hold office at the pleasure
of the Board, which committee shall, during the intervals between
meetings of the Board of Directors, have and exercise all of the
powers of the Board of Directors in the management of the
business and affairs of the Corporation, subject only to such
restrictions or limitations as the Board of Directors may from
time to time specify, or as limited by the Act. Any member of the
Executive Committee may be removed at any time, with or without
cause, by a resolution of a majority of the whole Board of
Directors. Any vacancy in the Executive Committee may be filled
from among the directors by a resolution of a majority of the
whole Board of Directors. Other committees of two or more
Directors, may be appointed by the Board of Directors or the
Executive Committee, which committees shall hold office for such
time and have such powers and perform such duties as may from
time to time be assigned to them by the Board of Directors or the
Executive Committee.
ARTICLE III.
OFFICERS AND AGENTS — GENERAL PROVISIONS
SECTION 1. Number, Election and Term.
Officers of the Corporation shall be a President, Secretary, and
Treasurer. Officers shall be elected by the Board of Directors at
its first meeting, and at each regular annual meeting of the
Board of Directors thereafter. Each officer shall hold office
until the next succeeding annual meeting of the Directors and
until his successor shall be elected and qualified. Any one
person may hold more than one office if it is deemed advisable by
the Board of Directors.
SECTION 2. Additional Officers and Agents.
The Board of Directors may appoint and create such other officers
and agents as may be deemed advisable and prescribe their
duties.
SECTION 3. Resignation or Removal.
Any officer or agent of the Corporation may resign from such
position by delivering written notice of the resignation to the
Board of Directors, but such resignation shall be without
prejudice to the contract rights, if any, of the Corporation. Any
officer or agent elected or appointed by the Board of Directors
may be removed
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by the Board of Directors whenever in its judgment the best
interests of the Corporation would be served thereby, but such
removal shall be without prejudice to the contract rights, if
any, of the person so removed. Election or appointment of an
officer or agent shall not of itself create contract rights.
SECTION 4. Vacancies.
Vacancies in any office caused by any reason shall be filled by
the Board of Directors at any meeting by selecting a suitable and
qualified person to act during the unexpired term.
SECTION 5. Salaries.
The salaries of all the officers, agents and other employees of
the Corporation shall be fixed by the Board of Directors and may
be changed from time to time by the Board, and no officer shall
be prevented from receiving such salary by reason of the fact
that he or she is also a Director of the Corporation. All
Directors, including interested Directors, are specifically
authorized to participate in the voting of such compensation
irrespective of their interest.
ARTICLE IV.
DUTIES OF THE OFFICERS
SECTION 1. Chairman of the Board.
The Chairman of the Board, if any, shall be a member of the Board
of Directors and, subject to Sections 2 and 3 of this
Article IV, shall preside at all meetings of the
Stockholders and Directors; perform all duties required by the
Bylaws of the Corporation, and as may be assigned from time to
time by the Board of Directors; and shall make such reports to
the Board of Directors and Stockholders as may be required.
SECTION 2. Chief Executive Officer.
The Chief Executive Officer, if any, shall have general charge
and control of the affairs of the Corporation subject to the
direction of the Board of Directors; sign as President all
Certificates of Stock of the Corporation; perform all duties
required by the Bylaws of the Corporation, and as may be assigned
from time to time by the Board of Directors; and shall make such
reports to the Board of Directors and Stockholders as may be
required. In addition, if no Chairman of the Board is elected by
the Board or if the Chairman is unavailable, the Chief Executive
Officer shall perform all the duties required of such officer by
these Bylaws.
SECTION 3. President.
The President shall, if no Chief Executive Officer shall have
been appointed or if the Chief Executive Officer is unavailable,
perform all of the duties of the Chief Executive Officer. If a
Chief Executive Officer shall have been appointed, the President
shall perform such duties as shall be assigned by the Board of
Directors, and in the case of absence, death or disability of the
Chief Executive Officer, shall perform and be vested with all of
the duties and powers of the Chief Executive Officer, until the
Chief Executive Officer shall have resumed such duties or the
Chief Executive Officer’s successor shall have been
appointed.
SECTION 4. Vice President.
The Vice President, or any of them, shall perform such duties as
shall be assigned by the Board of Directors, and in the case of
absence, disability or death of the President, the Vice President
shall perform and be vested with all the duties and powers of
the President, until the President shall have resumed such duties
or the President’s successor is elected. In the event there
is more than one Vice President, the Board of Directors may
designate one or more of the Vice Presidents as Executive Vice
Presidents, who, in the event of the absence, disability or death
of the President shall perform such duties as shall be assigned
by the Board of Directors.
SECTION 5. Secretary.
The Secretary shall keep a record of the proceedings at the
meetings of the Stockholders and the Board of Directors and shall
give notice as required in these Bylaws of all such meetings;
have custody of all the books,
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records and papers of the Corporation, except such as shall be in
charge of the Treasurer or some other person authorized to have
custody or possession thereof by the Board of Directors; sign all
Certificates of Stock of the Corporation; from time to time make
such reports to the officers, Board of Directors and
Stockholders as may be required and shall perform such other
duties as the Board of Directors may from time to time delegate.
In addition, if no Treasurer is elected by the Board, the
Secretary shall perform all the duties required of the office of
Treasurer by the Act and these Bylaws.
SECTION 6. Treasurer.
The Treasurer shall keep accounts of all monies of the
Corporation received or disbursed; from time to time make such
reports to the officers, Board of Directors and Stockholders as
may be required, perform such other duties as the Board of
Directors may from time to time delegate.
SECTION 7. Assistant Secretary.
The Assistant Secretary, if any, shall assist the Secretary in
all duties of the office of Secretary. In the case of absence,
disability or death of the Secretary, the Assistant Secretary
shall perform and be vested with all the duties and powers of the
Secretary, until the Secretary shall have resumed such duties or
the Secretary’s successor is elected.
SECTION 8. Assistant Treasurer.
The Assistant Treasurer, if any, shall assist the Treasurer in
all duties of the office of Treasurer. In the case of absence,
disability or death of the Treasurer, the Assistant Treasurer
shall perform and be vested with all the duties and powers of the
Secretary, until the Treasurer shall have resumed such duties or
the Treasurer’s successor is elected.
ARTICLE V.
STOCK
SECTION 1. Certificates.
The shares of stock of the Corporation shall be evidenced by an
entry in stock transfer records of the Corporation, and may be
represented by stock certificates in a form adopted by the Board
of Directors and every person who shall become a Stockholder
shall be entitled, upon request, to a certificate of stock. All
certificates shall be consecutively numbered by class.
Certificates, if any, shall be signed by the Chairman of the
Board of Directors, the President or one of the Vice Presidents,
and the Secretary or an Assistant Secretary or the Treasurer or
an Assistant Treasurer, provided, however, that where such
certificates are signed by a transfer agent or an assistant
transfer agent or by a transfer clerk acting on behalf of the
corporation and a registrar, the signature of any such officer
may be facsimile.
SECTION 2. Transfer of Certificates.
Any certificates of stock transferred by endorsement shall be
surrendered, canceled and new certificates issued to the
purchaser or assignee.
SECTION 3. Transfer of Shares.
Shares of stock shall be transferred only on the books of the
Corporation by the holder thereof, in person or by his attorney,
and no transfers of certificates of stock shall be binding upon
the Corporation until this Section and, with respect to
certificated shares, Section 2 of this Article are met to
the satisfaction of the Secretary of the Corporation.
The Board of Directors may make other and further rules and
regulations concerning the transfer and registration of shares of
the Corporation, and may appoint a transfer agent or registrar
or both and may require all certificates of stock to bear the
signature of either or both.
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The stock ledgers of the Corporation, containing the names and
addresses of the stockholders and the number of shares held by
them respectively, shall be kept at the principal offices of the
Corporation or at the offices of the transfer agent of the
Corporation.
SECTION 4. Lost Certificates.
In the case of loss, mutilation or destruction of a certificate
of stock, a duplicate certificate may be issued upon such terms
as the Board of Directors shall prescribe.
SECTION 5. Dividends.
The Board of Directors may from time to time declare, and the
Corporation may then pay, dividends on its outstanding shares in
the manner and upon the terms and conditions provided by the Act
and in its Certificate of Incorporation.
SECTION 6. Working Capital.
Before the payment of any dividends or the making of any
distributions of the net profits, the Board of Directors may set
aside out of the net profits of the Corporation such sum or sums
as in their discretion they think proper, as a working capital or
as a reserve fund to meet contingencies. The Board of Directors
may increase, diminish or vary the capital of such reserve fund
in their discretion.
ARTICLE VI.
SEAL
There shall be no corporate seal.
ARTICLE VII.
WAIVER OF NOTICE
Whenever any notice is required to be given to any Stockholder or
Director of the Corporation, a waiver signed by the person or
persons entitled to such notice, whether before or after the time
stated therein, shall be equivalent to the giving of such
notice.
ARTICLE VIII.
ACTION BY STOCKHOLDERS OR DIRECTORS
WITHOUT A MEETING
Any action required to be taken at a meeting of the Stockholders
of the Corporation, or any other action which may be taken at a
meeting of the Stockholders, may be taken without a meeting, if a
consent in writing setting forth the actions so taken shall be
signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to
vote thereon were present and voted with respect to the subject
matter thereof. Such consent shall have the same effect and force
as a vote of said Stockholders.
Any action required to be taken at a meeting of the Board of
Directors of the Corporation, or any other action which may be
taken at a meeting of the Board of Directors, or any committee
thereof, may be taken without a meeting if a consent in writing
setting forth the actions so taken shall be signed by all of the
members of the Board of Directors or committee, as the case may
be. Such consent shall have the same effect and force as a
unanimous vote of said Directors or committee.
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ARTICLE IX.
MISCELLANEOUS
SECTION 1. Fiscal Year.
The fiscal year of the Corporation shall be fixed, and may be
changed, by resolution of the Board of Directors.
SECTION 2. Notices.
Except as otherwise expressly provided, any notice required by
these Bylaws to be given shall be sufficient if given as provided
in the General Corporation Law of Delaware.
SECTION 3. Waiver of Notice.
Any Stockholder or director may at any time, by writing or by
fax, waive any notice required to be given under these Bylaws,
and if any Stockholder or director shall be present at any
meeting his presence shall constitute a waiver of such notice.
SECTION 4. Voting Stock of Other Corporations.
Except as otherwise ordered by the Board of Directors, the
Chairman of the Board, Chief Executive Officer, President,
Secretary or Treasurer, or any Vice President, Assistant
Secretary or Assistant Treasurer, shall have full power and
authority on behalf of the Corporation to attend and to act and
to vote at any meeting of the stockholders of any corporation of
which the Corporation is a stockholder and to execute a proxy to
any other person to represent the Corporation at any such
meeting, and at any such meeting such person shall possess and
may exercise any and all rights and powers incident to ownership
of such stock and which, as owner thereof, the Corporation might
have possessed and exercised if present.
ARTICLE X.
AMENDMENTS
Any and all of these Bylaws may be altered, amended, repealed or
suspended by the affirmative vote of a majority of the Directors
at any meeting of the Directors. New Bylaws may be adopted in
like manner.
IDENTIFICATION
I hereby certify that I was the Secretary of the first
Directors’ meeting of NM Acquisition Corp. and that the
foregoing Bylaws in twelve typewritten pages numbered
consecutively from 1 to
,
were and are the Bylaws adopted by the Directors of the
Corporation at that meeting.
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