AGREEMENT AND PLAN OF MERGER
AND SHARE EXCHANGE AGREEMENT
dated as of
January 9, 2000
by and among
CONCENTRIC NETWORK CORPORATION,
NEXTLINK COMMUNICATIONS, INC.
EAGLE RIVER INVESTMENTS, L.L.C.,
and
NM ACQUISITION CORP.
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TABLE OF CONTENTS
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ARTICLE 1. DEFINITIONS................................................................................ 2
SECTION 1.1. Definitions....................................................................... 2
ARTICLE 2. THE MERGERS................................................................................ 11
SECTION 2.1. The Mergers....................................................................... 11
SECTION 2.2. LHP Share Exchange................................................................ 12
SECTION 2.3. Certificate of Incorporation and Bylaws of the Surviving Corporation.............. 13
SECTION 2.4. Directors and Officers of the Surviving Corporation............................... 13
SECTION 2.5. Alternative Transaction Structure................................................. 13
SECTION 2.6. Closing........................................................................... 15
ARTICLE 3. CONVERSION OF SECURITIES................................................................... 15
SECTION 3.1. Effect on Capital Stock........................................................... 15
SECTION 3.2. Exchange of Certificates.......................................................... 19
SECTION 3.3. Stock Options..................................................................... 23
SECTION 3.4. Withholding Rights................................................................ 25
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF CONCENTRIC............................................... 25
SECTION 4.1. Corporate Existence and Power..................................................... 25
SECTION 4.2. Corporate Authorization........................................................... 25
SECTION 4.3. Governmental Authorization........................................................ 26
SECTION 4.4. Non-contravention................................................................. 26
SECTION 4.5. Capitalization.................................................................... 27
SECTION 4.6. Subsidiaries...................................................................... 28
SECTION 4.7. SEC Filings....................................................................... 29
SECTION 4.8. Financial Statements.............................................................. 29
SECTION 4.9. Information Supplied.............................................................. 29
SECTION 4.10. Absence of Certain Changes........................................................ 30
SECTION 4.11. No Undisclosed Material Liabilities............................................... 30
SECTION 4.12. Compliance with Laws and Court Orders............................................. 31
SECTION 4.13. Litigation........................................................................ 31
SECTION 4.14. Finders' Fees..................................................................... 31
SECTION 4.15. Opinion of Financial Advisor...................................................... 31
SECTION 4.16. Taxes............................................................................. 31
SECTION 4.17. Tax Opinions...................................................................... 32
SECTION 4.18. Employee Benefit Plans and Labor Matters.......................................... 33
SECTION 4.19. Environmental Matters............................................................. 36
SECTION 4.20. Intellectual Property............................................................. 37
SECTION 4.21. Contracts......................................................................... 37
SECTION 4.22. Vote Required..................................................................... 38
SECTION 4.23. Antitakeover Statutes; Rights Agreement........................................... 38
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF NEXTLINK................................................. 39
SECTION 5.1. Corporate Existence and Power..................................................... 39
SECTION 5.2. Corporate Authorization........................................................... 39
SECTION 5.3. Governmental Authorization........................................................ 40
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SECTION 5.4. Non-contravention................................................................. 40
SECTION 5.5. Capitalization.................................................................... 41
SECTION 5.6. Subsidiaries...................................................................... 42
SECTION 5.7. SEC Filings....................................................................... 43
SECTION 5.8. Financial Statements.............................................................. 43
SECTION 5.9. Information Supplied.............................................................. 44
SECTION 5.10. Absence of Certain Changes........................................................ 44
SECTION 5.11. No Undisclosed Material Liabilities............................................... 44
SECTION 5.12. Compliance with Laws and Court Orders............................................. 45
SECTION 5.13. Litigation........................................................................ 45
SECTION 5.14. Finders' Fees..................................................................... 45
SECTION 5.15. Taxes............................................................................. 45
SECTION 5.16. Tax Opinions...................................................................... 46
SECTION 5.17. Environmental Matters............................................................. 46
SECTION 5.18. Intellectual Property............................................................. 47
SECTION 5.19. Contracts......................................................................... 47
SECTION 5.20. Vote Required..................................................................... 48
SECTION 5.21. Reliance of Army on Navy Representations and Warranties........................... 48
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF EAGLE RIVER.............................................. 49
SECTION 6.1. Organization and Authority........................................................ 49
SECTION 6.2. Due Authorization etc............................................................. 49
SECTION 6.3. No Conflicts, etc................................................................. 49
SECTION 6.4. Consents.......................................................................... 49
SECTION 6.5. Title to Contributed Interest, etc................................................ 49
SECTION 6.6. No Actions........................................................................ 50
SECTION 6.7. Brokers, Finders, etc............................................................. 50
SECTION 6.8. Acquisition for Investment........................................................ 50
ARTICLE 7. COVENANTS OF CONCENTRIC.................................................................... 50
SECTION 7.1. Marine Interim Operations......................................................... 50
SECTION 7.2. Marine Stockholders' Meeting; Proxy Material...................................... 54
SECTION 7.3. No Solicitation................................................................... 55
SECTION 7.4. Bondholder and Preferred Consent.................................................. 56
SECTION 7.5. The Exchange Offer................................................................ 57
ARTICLE 8. COVENANTS OF NEXTLINK...................................................................... 62
SECTION 8.1. Army Consent...................................................................... 62
SECTION 8.2. Director and Officer Liability.................................................... 62
SECTION 8.3. Quotation of Stock................................................................ 63
SECTION 8.4. Navy Board of Directors........................................................... 64
SECTION 8.5. Employee Matters.................................................................. 64
SECTION 8.6. Assumption of Marine Stock Option Plans; Form S-8 Employee Plans.................. 65
ARTICLE 9. COVENANTS OF NEXTLINK, CONCENTRIC AND EAGLE RIVER.......................................... 66
SECTION 9.1. Reasonable Efforts................................................................ 66
SECTION 9.2. Proxy Statement; Registration Statement........................................... 66
SECTION 9.3. Public Announcements.............................................................. 67
SECTION 9.4. Further Assurances................................................................ 68
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SECTION 9.5. Access to Information............................................................ 68
SECTION 9.6. Notices of Certain Events........................................................ 69
SECTION 9.7. Tax-free Reorganization.......................................................... 69
SECTION 9.8. Affiliates....................................................................... 70
SECTION 9.9. Certain Other Agreements and Acknowledgments of Navy and Army Relating to the LHP
Share Exchange.................................................................. 71
ARTICLE 10. CONDITIONS TO THE MERGERS................................................................. 73
SECTION 10.1. Conditions to the Obligations of Marine and Navy to Consummate the Mergers....... 73
SECTION 10.2. Conditions to the Obligations of Navy............................................ 73
SECTION 10.3. Conditions to the Obligations of Marine.......................................... 76
SECTION 10.4. Conditions to the Obligations of Army............................................ 77
SECTION 10.5. Waiver of NEXTLINK and Eagle River Conditions.................................... 78
ARTICLE 11. TERMINATION............................................................................... 78
SECTION 11.1. Termination...................................................................... 78
SECTION 11.2. Effect of Termination............................................................ 80
SECTION 11.3. Fees and Expenses................................................................ 80
SECTION 11.4. Termination of LHP Share Exchange................................................ 81
SECTION 11.5. Survival of Navy and Army Representations and Warranties Relating to the LHP Share
Exchange; Indemnification....................................................... 83
ARTICLE 12. MISCELLANEOUS............................................................................. 83
SECTION 12.1. Notices.......................................................................... 83
SECTION 12.2. Survival of Representations and Warranties....................................... 84
SECTION 12.3. Amendments; No Waivers........................................................... 84
SECTION 12.4. Successors and Assigns........................................................... 85
SECTION 12.5. Governing Law.................................................................... 85
SECTION 12.6. Jurisdiction..................................................................... 85
SECTION 12.7. WAIVER OF JURY TRIAL............................................................. 85
SECTION 12.8. Counterparts; Effectiveness...................................................... 86
SECTION 12.9. Entire Agreement................................................................. 86
SECTION 12.10. Captions......................................................................... 86
SECTION 12.11. Severability..................................................................... 86
SECTION 12.12. Specific Performance............................................................. 86
SECTION 12.13. Schedules........................................................................ 87
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EXHIBITS
Exhibit A -- Form of NEXTLINK Voting Agreement
Exhibit B -- Form of Concentric Voting Agreement
Exhibit C -- Form of Concentric Rule 145 Affiliate Letter
Exhibit D -- Form of Eagle River Registration Rights Agreement
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AGREEMENT AND PLAN OF MERGER AND SHARE EXCHANGE AGREEMENT
AGREEMENT AND PLAN OF MERGER AND SHARE EXCHANGE AGREEMENT dated as of
January 9, 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") and NM Acquisition Corp., a Delaware
corporation ("NEWCO").
WHEREAS, the respective Boards of Directors of NEXTLINK and Concentric
have approved this Agreement, and 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
this Agreement, concurrently with the execution and delivery of this Agreement,
Concentric and Eagle River are entering 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 this
Agreement, concurrently with the execution and delivery of this Agreement,
NEXTLINK, Concentric and the Concentric stockholders parties thereto are
entering into the Voting Agreements in the form attached hereto as Exhibit B
(the "CONCENTRIC VOTING AGREEMENT");
WHEREAS, Eagle River and NEXTLINK together own 100% of the limited
liability company interests in LHP, L.L.C., a Washington limited liability
company ("LHP") and LHP owns 100% of the limited liability company interests in
INTERNEXT, L.L.C., a Delaware limited liability company ("INTERNEXT");
WHEREAS, immediately after the closing of the Mergers, Eagle River 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 Eagle River (the "CONTRIBUTED INTEREST") in consideration of the
issuance by Newco of shares of Newco Common Stock (as hereinafter defined) to
Eagle River as set forth herein (the "LHP SHARE EXCHANGE"); and
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;
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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,
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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.
"COMMON STOCK RATIO" means the quotient (rounded to the nearest
1/10,000) determined by dividing $45.00 by the Weighted
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Average Sale Price; provided that the Common Stock Ratio shall not be less than
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.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.
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"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.
"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.
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"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
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under any conditional sale agreement, capital lease or other title retention
agreement relating to such property or asset.
"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 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 in accordance with Section 8.6 hereof.
"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 in accordance with Section 8.6 hereof.
"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 in accordance with Section 8.6 hereof.
"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 in accordance with Section 8.6 hereof.
"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 in accordance with Section
8.6 hereof.
"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 in accordance with Section
8.6 hereof.
"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.
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"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.
"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.
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"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
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with any item described in (i) or (ii) or otherwise, (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
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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 of,
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, for the twenty trading day period
ending on third trading day prior to the Effective Times, the average (rounded
to the nearest 1/10,000) of the
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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.
(b) Each of the following terms is defined in the Section
set forth opposite such term:
TERM SECTION
---- -------
Adjusted Option............................................ 3.3(a)
Alternative Merger......................................... 2.5
Certificates............................................... 3.2(b)
Certificates of Merger..................................... 2.1(b)
Closing.................................................... 2.6
Closing Date............................................... 2.6
Code....................................................... Preamble
Common Stock Consideration................................. 3.1(c)
Concentric................................................. Preamble
Concentric Benefit Arrangements............................ 1.1(a)
Concentric Employee Plan................................... 1.1(a)
Concentric Intellectual Property........................... 4.20
Concentric Rule 145 Affiliate.............................. 9.8
Concentric SEC Documents................................... 4.7(a)
Concentric Series B Consideration.......................... 3.1(h)
Concentric Series C Consideration.......................... 3.1(i)
Concentric Stockholders' Meeting........................... 4.9
Concentric Stockholders' Approval.......................... 4.22
Concentric Stock Option.................................... 3.3(a)
Concentric Voting Agreement................................ Preamble
Confidentiality Agreement.................................. 7.3(a)
Contributed Interest....................................... Preamble
Eagle River................................................ Preamble
Effective Times............................................ 2.1(b)
End Date................................................... 11.1(b)
Exchange Agent............................................. 3.2(a)
Exchange Consideration..................................... 7.5(a)
Exchange Fund.............................................. 3.2(a)
Exchange Offer............................................. 7.5(a)
Exchange Offer Conditions.................................. 7.5(a)
Exchange Offer Documents................................... 7.5(b)
Exchange Offer Merger...................................... 7.5(g)
Exchange Offer Transactions................................ 9.7(a)
Exchange Registration Statement............................ 7.5(b)
GAAP....................................................... 4.8
Governmental Authority..................................... 4.3
Indemnified Person......................................... 8.2(a)
INTERNEXT.................................................. Preamble
INTERNEXT Guarantee........................................ 9.1(c)
IRS........................................................ 4.16
LHP........................................................ Preamble
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TERM SECTION
---- -------
LHP Consideration.......................................... 2.2(a)
LHP Share Exchange......................................... Preamble
Merger Consideration....................................... 3.1(i)
Mergers.................................................... 2.1(a)
Newco...................................................... Preamble
New Directors.............................................. 8.4
New Directors Committee.................................... 8.4
NEXTLINK................................................... Preamble
NEXTLINK 6 1/2% Preferred Consideration.................... 3.1(e)
NEXTLINK 14% Preferred
Consideration............................................ 3.1(d)
NEXTLINK Benefit Arrangements.............................. 1.1(a)
NEXTLINK Employee Plan..................................... 1.1(a)
NEXTLINK Intellectual Property............................. 5.18
NEXTLINK SEC Documents..................................... 5.7(a)
NEXTLINK Securities........................................ 5.5(c)
NEXTLINK Series C Preferred
Consideration............................................ 3.1(f)
NEXTLINK Series D Preferred
Consideration............................................ 3.1(g)
NEXTLINK Stock Options..................................... 3.3(b)
NEXTLINK Subsidiary........................................ 1.1(a)
Offer to Exchange.......................................... 7.5(c)
Proxy Statement............................................ 4.9
Registration Statement..................................... 4.9
Schedule 14D-1............................................. 7.5(b)
Schedule 14D-9............................................. 7.5(d)
Standstill Agreement....................................... 7.3(a)
Stockholders' Meetings..................................... 4.9
Successor Plan............................................. 8.5(b)
Surviving Corporation...................................... 2.1(a)
Taxes...................................................... 4.16
Tax Return................................................. 4.16
Termination Fee............................................ 11.3(b)
Third Party................................................ 7.3(a)
Transferred Employees...................................... 8.5(a)
351 Transaction............................................ 9.7(a)
368 Reorganization......................................... 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").
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(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 certificate 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 after the
------------------
Effective Times, Eagle River shall contribute to Newco, and Newco shall accept
from Eagle River all of Eagle River'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 Eagle River against, any
and all of the conditions, covenants and obligations of Eagle River 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 Eagle River shall
cease to be a member of LHP.
(c) At the Closing, immediately after the Effective Times, Eagle
River 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 Eagle River representing:
(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
(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. 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 changing the name of Newco to NEXTLINK
Communications, Inc. and further amended so as to contain the substantive
provisions of the NEXTLINK certificate of incorporation in effect immediately
prior to the Effective Time of such Merger, provided, that the number of
--------
authorized shares of Newco Common Stock and Newco Class B Common Stock shall be
two times the number of authorized shares of NEXTLINK Common Stock and NEXTLINK
Class B Common Stock, respectively, and the NEXTLINK Preferred Stock shall be
redesignated as provided herein. 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 further amended to provide
for the designation of series of Newco Preferred Stock issuable upon the
conversion of Concentric Preferred Stock as provided herein. The bylaws of
NEXTLINK in effect at the Effective Time shall be the bylaws of the Surviving
Corporation until amended in accordance with applicable law.
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
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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
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
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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 (xi) 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
9 (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.
ARTICLE 3.
CONVERSION OF SECURITIES
SECTION 3.1. Effect on Capital Stock. As of the Effective Time, 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:
(a) NEXTLINK Common Stock. Each share of NEXTLINK Common Stock issued
---------------------
and outstanding immediately prior to the
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Effective Time (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 Time shall be
deemed to represent the same number of shares of Newco Common Stock.
(b) NEXTLINK Class B Common Stock. Each share of NEXTLINK Class B
-----------------------------
Common Stock issued and outstanding immediately prior to the Effective Time
(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 Time shall be
deemed to represent the same number of shares of Newco Class B Common Stock.
(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 Time, 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).
(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 Time 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
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on Newco Series A Preferred Stock shall accrue from the date of the last
dividend paid on NEXTLINK 14% Preferred Stock.
(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 Time 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, (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.
(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 Time 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.
(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 Time 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
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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.
(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 Time 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.
(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 Time 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 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
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Concentric Series C Preferred Stock in effect immediately prior to the Effective
Time multiplied by (y) the Common Stock Ratio.
(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.
(k) Options. At the Effective Time, 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.
(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.
(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.
(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 Time shall from and after the Effective Time
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.
SECTION 3.2. Exchange of Certificates.
------------------------
(a) Exchange Agent. Prior to the Effective Time, 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 Time, NEXTLINK shall cause Newco
to
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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 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 Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
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 Time
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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 Time 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 Time 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 Time 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, however, to the Surviving
Corporation's obligation to pay any dividends or make any other distributions
with a record date prior to the Effective Time 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 Time. The stock transfer books of
NEXTLINK relating to the NEXTLINK Common Stock and NEXTLINK Class B Common Stock
immediately prior to the Effective Time shall be the stock
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transfer books of Newco at the Effective Time with respect to Newco Common Stock
and Newco Class B Common Stock. If, after the Effective Time, 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.
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(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 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 Time, 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 Time, each Concentric Stock Option
outstanding immediately prior to the Effective Time 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 Time, 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.
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(b) After the Effective Time, 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 Time.
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 Time. 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 Time,
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 Time 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 NEXTLINK Stock
Options remain outstanding. With respect to those individuals, if any, who,
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subsequent to the Effective Time, 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
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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, 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
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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
$.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
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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.
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.
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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.
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
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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:
(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
(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:
(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;
(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 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
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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
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relating to Concentric or, to the Knowledge of Concentric, that would prevent
Wilson Sonsini Goodrich & Rosati,
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Professional Corporation from delivering the opinion referred to in Section
10.3(b) as of the date hereof.
SECTION 4.18. Employee Benefit Plans and Labor Matters. Except as
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have not had and would not be reasonably expected to have, individually or in
the aggregate, a Concentric Material Adverse Effect:
(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.
(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.
(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.
(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.
(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.
(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.
(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 or any other failure to act or comply in
connection with the administration or investment of the assets of any Employee
Benefit Plan.
(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.
(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.
(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