-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U+GXReWIYIZK0kLxQRxFFO27cteBiDJ9WwtH207pgJEe4ramK6bG4IOxq2BloLp1 K/W+KU27EoGBOrSo1TnHCA== 0000895345-01-500678.txt : 20020412 0000895345-01-500678.hdr.sgml : 20020412 ACCESSION NUMBER: 0000895345-01-500678 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20011130 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: KINDRED HEALTHCARE INC CENTRAL INDEX KEY: 0001060009 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-NURSING & PERSONAL CARE FACILITIES [8050] IRS NUMBER: 611323993 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-53977 FILM NUMBER: 1804433 BUSINESS ADDRESS: STREET 1: ONE VENCOR PLACE STREET 2: 680 S FOURTH ST CITY: LOUISVILLE STATE: KY ZIP: 40202 BUSINESS PHONE: 5025967300 MAIL ADDRESS: STREET 1: 3300 AEGON CENTER STREET 2: 400 WEST MARKET ST CITY: LOUISVILLE STATE: KY ZIP: 40202 FORMER COMPANY: FORMER CONFORMED NAME: VENCOR HEALTHCARE INC /DE/ DATE OF NAME CHANGE: 19991124 FORMER COMPANY: FORMER CONFORMED NAME: VENCOR INC /NEW/ DATE OF NAME CHANGE: 19991124 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: APPALOOSA MANAGEMENT LP CENTRAL INDEX KEY: 0001006438 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 223220835 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 26 MAIN ST STREET 2: 1ST FLOOR CITY: CHATHAM STATE: NJ ZIP: 07928 BUSINESS PHONE: 9737017000 MAIL ADDRESS: STREET 1: 26 MAIN ST STREET 2: 1ST FLOOR CITY: CHATAM STATE: NJ ZIP: 07928 SC 13D/A 1 tc13da.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. 6)* XO COMMUNICATIONS, INC. - --------------------------------------------------------------------------- (Name of Issuer) CLASS A COMMON STOCK, PAR VALUE $0.02 PER SHARE - --------------------------------------------------------------------------- (Title of Class of Securities) 65333H707 - --------------------------------------------------------------------------- (CUSIP Number) FRIED, FRANK, HARRIS, FORSTMANN LITTLE & CO. SUBORDINATED SHRIVER & JACOBSON DEBT & EQUITY MANAGEMENT BUYOUT ONE NEW YORK PLAZA PARTNERSHIP-VII, L.P. NEW YORK, NY 10004 FORSTMANN LITTLE & CO. EQUITY ATTN: STEPHEN FRAIDIN, ESQ. PARTNERSHIP-VI, L.P. (212) 859-8000 FL FUND, L.P. THEODORE J. FORSTMANN C/O FORSTMANN LITTLE & CO. 767 FIFTH AVENUE NEW YORK, NY 10153 ATTN: WINSTON W. HUTCHINS (212) 355-5656 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) NOVEMBER 28, 2001 ------------------------------------------ (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13(g), check the following box. [_] NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. Seess.240.13d-7 for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D CUSIP No. 65333H707 1 NAME OF REPORTING PERSON/ S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND EQUITY MANAGEMENT BUYOUT PARTNERSHIP-VIII, L.P. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [X] 3 SEC USE ONLY 4 SOURCE OF FUNDS* 00 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE NUMBER OF 7 SOLE VOTING POWER SHARES 50,183,824** BENEFICIALLY 8 SHARED VOTING POWER OWNED BY EACH 0 REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH 50,183,824** 10 SHARED DISPOSITIVE POWER 0 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 50,183,824** 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ] EXCLUDES CERTAIN SHARES* 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13.2% 14 TYPE OF REPORTING PERSON* PN - --------------------------- ** Section 8(a)(i) of the Amended and Restated Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of Series C Cumulative Convertible Participating Preferred Stock (the "Series C Preferred") and Qualifications, Limitations and Restrictions Thereof (the "Amended and Restated Series C Certificate of Designation") sets forth a formula for determining the number of shares of Class A Common Stock issuable, as at any date, upon conversion of the Series C Preferred. The number of shares referred to in items 7, 9 and 11 above was calculated in accordance with such formula assuming that the Conversion Price and the Net Realizable FMV (each such term as defined in the Amended and Restated Series C Certificate of Designation) equal $17.00. Section 8(a)(i) of the Amended and Restated Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of Series G Cumulative Convertible Participating Preferred Stock (the "Series G Preferred") and Qualifications, Limitations and Restrictions Thereof (the "Amended and Restated Series G Certificate of Designation") sets forth a formula for determining the number of shares of Class A Common Stock issuable, as at any date, upon conversion of the Series G Preferred. The number of shares referred to in items 7, 9 and 11 above was calculated in accordance with such formula assuming that the Conversion Price and the Net Realizable FMV (each such term as defined in the Amended and Restated Series G Certificate of Designation) equal $17.00. SCHEDULE 13D CUSIP No. 65333h707 1 NAME OF REPORTING PERSON/ S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP-VI, L.P. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [X] 3 SEC USE ONLY 4 SOURCE OF FUNDS* 00 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE NUMBER OF 7 SOLE VOTING POWER SHARES 73,301,588** BENEFICIALLY 8 SHARED VOTING POWER OWNED BY EACH 0 REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH 73,301,588** 10 SHARED DISPOSITIVE POWER 0 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 73,301,588** 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ] EXCLUDES CERTAIN SHARES* 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 20.8% 14 TYPE OF REPORTING PERSON* PN - -------------------------- ** Section 8(a)(i) of the Amended and Restated Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of Series D Convertible Participating Preferred Stock (the "Series D Preferred") and Qualifications, Limitations and Restrictions Thereof (the "Amended and Restated Series D Certificate of Designation") sets forth a formula for determining the number of shares of Class A Common Stock issuable, as at any date, upon conversion of the Series D Preferred. A portion of the number of shares referred to in items 7, 9 and 11 above was calculated, with respect to the number of shares of Class A Common Stock issuable upon conversion of the Series D Preferred, in accordance with such formula assuming that the Conversion Price and the Net Realizable FMV (each such term as defined in the Amended and Restated Series D Certificate of Designation) equal $17.00. Section 8(a)(i) of the Amended and Restated Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of Series H Convertible Participating Preferred Stock (the "Series H Preferred") and Qualifications, Limitations and Restrictions Thereof (the "Amended and Restated Series H Certificate of Designation") sets forth a formula for determining the number of shares of Class A Common Stock issuable, as at any date, upon conversion of the Series H Preferred. A portion of the number of shares referred to in items 7, 9 and 11 above was calculated, with respect to the number of shares of Class A Common Stock issuable upon conversion of the Series H Preferred, in accordance with such formula assuming that the Conversion Price and the Net Realizable FMV (each such term as defined in the Amended and Restated Series H Certificate of Designation) equal $17.00. SCHEDULE 13D CUSIP No. 65333h707 1 NAME OF REPORTING PERSON/ S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS FL FUND, L.P. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [X] 3 SEC USE ONLY 4 SOURCE OF FUNDS* 00 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE NUMBER OF 7 SOLE VOTING POWER SHARES 44,000** BENEFICIALLY 8 SHARED VOTING POWER OWNED BY EACH 0 REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH 44,000** 10 SHARED DISPOSITIVE POWER 0 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 44,000** 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ] EXCLUDES CERTAIN SHARES* 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0% 14 TYPE OF REPORTING PERSON* PN - -------------------------------- ** Section 8(a)(i) of the Amended and Restated Series D Certificate of Designation sets forth a formula for determining the number of shares of Class A Common Stock issuable, as at any date, upon conversion of the Series D Preferred. The number of shares referred to in items 7, 9 and 11 above was calculated in accordance with such formula assuming that the Conversion Price and the Net Realizable FMV (each such term as defined in the Amended and Restated Series D Certificate of Designation) equal $17.00. Section 8(a)(i) of the Amended and Restated Series H Certificate of Designation sets forth a formula for determining the number of shares of Class A Common Stock issuable, as at any date, upon conversion of the Series H Preferred. The number of shares referred to in items 7, 9 and 11 above was calculated in accordance with such formula assuming that the Conversion Price and the Net Realizable FMV (each such term as defined in the Amended and Restated Series H Certificate of Designation) equal $17.00. SCHEDULE 13D CUSIP No. 65333h707 1 NAME OF REPORTING PERSON/ S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS THEODORE J. FORSTMANN 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [X] 3 SEC USE ONLY 4 SOURCE OF FUNDS* PF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION UNITED STATES NUMBER OF 7 SOLE VOTING POWER SHARES 800,000 BENEFICIALLY 8 SHARED VOTING POWER OWNED BY EACH 0 REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH 800,000 10 SHARED DISPOSITIVE POWER 0 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 800,000 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ] EXCLUDES CERTAIN SHARES* 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.2% 14 TYPE OF REPORTING PERSON* IN This Amendment No. 6, filed on behalf of Forstmann Little & Co. Subordinated Debt and Equity Management Buyout Partnership-VII, L.P., a Delaware limited partnership ("MBO-VII"), Forstmann Little & Co. Equity Partnership-VI, L.P., a Delaware limited partnership ("Equity-VI"), FL Fund, L.P., a Delaware limited partnership ("FL Fund", and together with MBO-VII and Equity-VI, the "FL Partnerships"), and Theodore J. Forstmann ("Mr. Forstmann" and, collectively with MBO-VII, Equity-VI and FL Fund, the "Reporting Persons"), amends and supplements the Schedule 13D filed on behalf of the FL Partnerships with the Securities and Exchange Commission on January 25, 2000, as amended by Amendment No. 1 filed on May 25, 2000, Amendment No. 2 filed on June 16, 2000, Amendment No. 3 filed on July 10, 2000, Amendment No. 4 filed on May 1, 2001 and Amendment No. 5 filed on June 6, 2001 (the "Schedule 13D"), relating to the Class A Common Stock, par value $0.02 per share, of XO Communications, Inc., a Delaware corporation ("XO"). Forstmann Little & Co. Equity Partnership-VII, L.P., a Delaware limited partnership ("Equity-VII"), and Forstmann Little & Co. Subordinated Debt and Equity Management Buyout Partnership-VIII, L.P., a Delaware limited partnership ("MBO-VIII" and, together with Equity VII, the "FL Investors") and XO have entered into a non-binding Term Sheet, dated November 28, 2001, a copy of which is attached hereto as Exhibit 19. FLC XXXI Partnership, L.P.,a New York limited partnership doing business as Forstmann Little & Co. ("FLC XXXI"), and Telefonos de Mexico, S.A. de C.V., a corporation organized under the laws of the United Mexican States, have entered into a Letter Agreement, dated November 21, 2001, a copy of which is attached hereto as Exhibit 20. FLC XXXII Partnership, L.P., a New York limited partnership ("FLC XXXII"), is the general partner of Equity-VI and Equity-VII. FLC XXXIII Partnership, L.P., a New York limited partnership ("FLC XXXIII"), is the general partner of MBO-VII and MBO-VIII. Mr. Forstmann is a general partner of FLC XXXII and FLC XXXIII and a general partner of the general partners of FLC XXXI.. FLCXXXI is the general partner of FL Fund. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Schedule 13D. Except as specifically provided herein, this Amendment does not modify any of the information previously reported in the Schedule 13D. ITEM 4. Purpose of Transaction ---------------------- Item 4 is hereby amended to add the following: On November 28, 2001, Forstmann Little & Co. Equity Partnership-VII, L.P., a Delaware limited partnership ("Equity-VII"), and Forstmann Little & Co. Subordinated Debt and Equity Management Buyout Partnership-VIII, L.P., a Delaware limited partnership ("MBO-VIII" and, together with Equity VII, sometimes hereinafter referred to as the "FL Investors"), and XO entered into a non-binding Term Sheet, a copy of which is attached hereto as Exhibit 19 (the "Term Sheet"). On November 21, 2001, FLC XXXI (signing as Forstmann Little & Co.) and Telefonos de Mexico, S.A. de C.V., a corporation organized under the laws of the United Mexican States ("Telmex"; Telmex and the FL Investors are sometimes hereinafter referred to as the "Investors" ) entered into a Letter Agreement, a copy of which is attached hereto as Exhibit 20 (the "Letter Agreement"). If the transactions contemplated by the Term Sheet and the Letter Agreement are consummated, the FL Investors, which are under common control with the Reporting Persons, will collectively, following the restructuring of XO described in the Term Sheet (the "Restructuring") become the beneficial owners of 39% of the then outstanding shares of XO common stock. This will occur through their purchase from XO for $400 million in cash of shares of Class A Common Stock and one share of a newly-created class of common stock of XO to be designated "Class D Common Stock". The Class D Common Stock will be identical to the Class A Common Stock in all respects other than certain special voting rights described more fully below and in the Term Sheet. The share of Class D Common Stock to be purchased by the FL Investors will automatically convert into one share of Class A Common Stock under certain circumstances described in the Term Sheet. Additionally, the Term Sheet provides that following the Restructuring Telmex shall purchase from XO shares of a newly-created class of common stock of XO to be designated "Class C Common Stock" for $400 million in cash. Each share of Class C Common Stock will be convertible into one share of Class A Common Stock under certain circumstances described in the Term Sheet. The Term Sheet contemplates that the Class C Common Stock to be purchased by Telmex will be convertible into shares of Class A Common Stock representing 39% of the outstanding shares of XO common stock upon completion of such purchase. The Class C Common Stock will be identical to the Class A Common Stock in all respects other than certain special voting rights more fully described below and in the Term Sheet. The Term Sheet provides that, following the completion of the transactions contemplated thereby, the number of directors on the board of directors of XO shall be fixed at not more than 12. Following completion of the transactions contemplated by the Term Sheet and prior to the date on which no director, officer, employee or other representative of Telmex is a member of the board of directors of an entity that competes directly with XO (the "Board Representation Date"), so long as the FL Investors collectively own at least 10% of the outstanding common stock of XO, the FL Investors shall have the right to appoint or nominate to the board of directors of XO the number of directors equal to the product of (i) the total number of directors on the board of directors of XO times (ii) the percentage of the number of outstanding shares of XO common stock owned by the Investors, rounded up to the nearest whole number. The Term Sheet further contemplates that Telmex will agree to vote its shares of XO common stock for the election of the nominees of the FL Investors to the board of directors of XO. After the Board Representation Date, so long as either the FL Investors or Telmex owns at least 10% of the outstanding XO common stock, such Investor shall have the right to appoint to the board of directors of XO the number of directors equal to the product of (i) the total number of directors on the board of directors of XO times (ii) the percentage of the total number of outstanding shares of XO common stock owned by such Investor, rounded up to the nearest whole number. The Term Sheet further contemplates that the FL Investors and Telmex will agree to vote their shares of XO common stock for the election of the nominees of the other Investor to the board of directors of XO. The Letter Agreement provides that, at any time prior to the Board Representation Date, Telmex shall be entitled to instruct FLC XXXI (referred to in the Letter Agreement as Forstmann Little & Co.) that, in connection with the nomination by Forstmann Little & Co. of directors to the board of directors of XO, Forstmann Little & Co. shall include among its nominees up to that number of individuals identified by Telmex who are independent of, and not affiliated with, either Telmex or XO, equal to the product of (i) the total number of XO directors times (ii) the percentage of the total outstanding XO common stock owned by Telmex at such time, rounded up to the nearest whole number of directors; provided, that the total number of directors nominated at Telmex's instructions may at no time exceed the number of directors appointed or nominated by Forstmann Little & Co. who were not nominated on Telmex's instructions. Forstmann Little & Co. agrees pursuant to the Letter Agreement to vote all shares of Class A Common Stock owned by it in favor of the nominees requested by Telmex. Until the Board Representation Date, Forstmann Little & Co. will meet on a regular basis with Telmex to share information about XO with Telmex to the degree doing so is consistent with applicable law. At the Board Representation Date, the directors nominated or appointed to the board of directors of XO at the instruction of Telmex shall resign from the board and shall be replaced by directors nominated or appointed by Telmex pursuant to the terms of the Term Sheet. The Term Sheet provides for the creation of a five-member XO executive committee (the "Executive Committee") which shall have responsibility for the strategic direction of XO. Prior to the Board Representation Date, the FL Investors shall have the right to have (a) four director designees on the Executive Committee so long as the FL Investors continue to own at least 15% of the outstanding XO common stock or (b) two director designees on the Executive Committee so long as the FL Investors continue to own at least 10% but less than 15% of the outstanding XO common stock. After the Board Representation Date, each Investor shall have the right to have (a) two director designees on the Executive Committee so long as such Investor continues to own at least 15% of the outstanding XO common stock or (b) one director designee on the Executive Committee so long as such Investor continues to own at least 10% but less than 15% of the outstanding XO common stock. The Term Sheet provides that XO shall not take certain significant corporate actions without the approval of at least 2/3 of the members of the Executive Committee. These significant corporate actions include: (a) approving or modifying XO's business plan, adopting a new business plan or taking any action that would constitute a material deviation from the current business plan; (b) approving or recommending a merger, consolidation, reorganization or recapitalization of XO or any sale of all or a substantial portion of the assets of XO and its subsidiaries (a "Major Event"); (c) acquiring any equity interest in or assets of any other person with a value greater than $100 million; (d) with certain limited exceptions, issuing any equity securities or derivative securities with a value in excess of $100 million; (e) purchasing or redeeming any shares of its capital stock; (f) declaring or paying any dividends, or making any distributions in respect of any shares of its capital stock; (g) redeeming, retiring, defeasing, offering to purchase or changing any material term, condition or covenant in respect of outstanding long-term debt; (h) incurring indebtedness for borrowed money in excess of $100 million in aggregate principal amount; (i) making any material change in its accounting principles or practices (other than as required by GAAP or recommended by XO's outside auditors), or removing XO's outside auditors or appointing new auditors, or (j) appointing, terminating or modifying the terms of the employment of any member of XO's senior management. Notwithstanding the foregoing, if any such significant corporate actions are considered by the Executive Committee and are not approved by the requisite 2/3 majority of the Executive Committee and representatives of the Investors have attempted to resolve their differences regarding such action for at least 30 days, any member of the Executive Committee shall be entitled to present such issue to the XO board of directors where the action may be adopted or rejected by a majority vote of the XO board of directors. The Term Sheet also provides that so long as (i) an Investor holds shares of Class A Common Stock representing at least 20% of the outstanding XO common stock and (ii) no Major Event nor any acquisition by any person or any group of persons (as such terms are used for purposes of Schedule 13D under the Securities Exchange Act of 1934) of more than 50% of the total number of outstanding shares of Common Stock shall have occurred, the approval of at least one director designee of such Investor shall be required before XO may take any of the following actions: (a) amend its certificate of incorporation or bylaws; (b) enter into any transaction with any affiliate, officer, director or stockholder; or(c) file any petition for bankruptcy or make any assignment for the benefit of creditors. In addition to the corporate governance rights of the Investors arising out of their participation on the board of directors of XO or on the Executive Committee described above, the Term Sheet also provides that the Investors shall have certain additional governance rights through their ownership of Class C Common Stock and Class D Common Stock. At any time at which there remain outstanding any shares of Class C Common Stock or Class D Common Stock, the affirmative vote of the holders of a majority of the outstanding shares of Class C Common Stock, voting as a separate class, and the affirmative vote of the holder of the share of Class D Common Stock, voting as a separate class, shall be required before XO may consummate a Major Event. In addition, if, at any time prior to the Board Representation Date there are any outstanding shares of Class C Common Stock, the affirmative vote of the holders of a majority of the outstanding shares of Class C Common Stock, voting as a separate class, shall be required before XO may (a) acquire any equity interest in or assets of any other person with a value greater than 20% of XO's net assets, (b) with certain limited exceptions, authorize for issuance or issue any equity securities or derivative securities with a value in excess of $100 million, (c) incur indebtedness for borrowed money in excess of $100 million in aggregate principal amount, or (d) amend its certificate of incorporation or bylaws. The Term Sheet provides that each Investor will agree that so long as the other Investor holds at least 20% of the outstanding XO common stock, such Investor will not, without the express written consent of the other Investor, (i) acquire any additional shares of XO common stock, other equity securities of XO or other securities convertible or exchangeable into equity securities of XO, except pursuant to its pre-emptive rights discussed in Item 6 below, (ii) with certain limited exceptions, solicit consents for the election of directors to the board of directors of XO or seek to change the number of directors on the board of directors of XO, (iii) form, encourage or participate in a "person" within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934 for the purpose of taking any actions described in this paragraph, (iv) make any shareholder proposals to XO or (v) propose or commence any mergers, acquisitions, tender offers, asset sale transactions or other business combinations involving XO. Pursuant to the Letter Agreement, Telmex and Forstmann Little agree that until June 30, 2002, they will not (x) solicit or engage in any discussions or negotiations with, or provide any information to, any other person or entity regarding any investment in, or any business combination, other change of control transaction or restructuring involving, XO, or (y) purchase any equity or debt securities of XO, provided, however, that if either party no longer wishes to proceed with the transactions contemplated by the Term Sheet, such party may deliver a written notice to such effect to the other party in which case the party receiving such notice shall no longer be bound by the terms of this "standstill" provision. To the degree that this "standstill" provision is inconsistent with the similar provision in the Term Sheet described in the immediately preceding paragraph, the parties agree that the provision in the Letter Agreement shall prevail. Except for certain limited provisions of the Term Sheet, the Term Sheet is not binding on either the Investors or XO. Neither the Letter Agreement nor the Term Sheet vests in the FL Investors, any Reporting Person, Telmex or any other person any beneficial interest in, or ownership of, any shares of Class A Common Stock or any other securities of XO. Depending on various factors, including, without limitation, XO's financial position and investment strategy, the price levels of the XO common stock, conditions in the securities markets and general economic and industry conditions, each of the Reporting Persons and FL Investors may in the future take such actions with respect to its investment in XO as it deems appropriate, including, without limitation, purchasing additional shares of XO common stock or selling some or all of its XO common stock or taking any actions that might result in any of the matters set forth in subparagraphs (a)-(j) of Item 4. ITEM 5. Interest in Securities of the Issuer ------------------------------------ Item 5 is hereby amended as follows: The following information is as of November 28, 2001: (i) MBO-VII: (a) Amount Beneficially Owned: MBO-VII directly owns 584,375 shares of Series C Preferred, which are convertible into 34,375,000 shares of Class A Common Stock, assuming the conversion of all Series C Preferred and Series D Preferred pursuant to Section 8(a)(i) of the Amended and Restated Series C Certificate of Designation, which sets forth a formula for determining the number of shares of Class A Common Stock issuable, as at any date, upon conversion of the Series C Preferred. The number of shares of Class A Common Stock referred to above was calculated in accordance with such formula assuming that the Conversion Price and the Net Realizable FMV (each such term as defined in the Amended and Restated Series C Certificate of Designation) equal $17.00. MBO-VII directly owns 268,750 shares of Series G Preferred, which are convertible into 15,808,824 shares of Class A Common Stock, assuming the conversion of all Series G Preferred and Series H Preferred pursuant to Section 8(a)(i) of the Amended and Restated Series G Certificate of Designation, which sets forth a formula for determining the number of shares of Class A Common Stock issuable, as at any date, upon conversion of the Series G Preferred. The number of shares of Class A Common Stock referred to above was calculated in accordance with such formula assuming that the Conversion Price and the Net Realizable FMV (each such term as defined in the Amended and Restated Series G Certificate of Designation) equal $17.00. FLC XXXIII, having its principal business office at the address set forth in response to Item 2(b) of this statement, is the general partner of MBO-VII. Mr. Forstmann, Sandra J. Horbach, Thomas H. Lister, Winston W. Hutchins, Jamie C. Nicholls and Gordon A. Holmes (each a United States citizen (other than Mr. Holmes, who is a citizen of the Republic of Ireland)with his or her principal place of business being at the address set forth in response to Item 2(b) of this statement) are the general partners of FLC XXXIII. The shares of Series C Preferred and Series G Preferred beneficially owned by MBO-VII as calculated above are convertible into approximately 13.2% of the Class A Common Stock outstanding, based on calculations made in accordance with Rule 13d-3(d) of the Securities and Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations promulgated thereunder (the "Act"), and there being 329,963,440 shares of Class A Common Stock outstanding as of November 8, 2001, based on XO's quarterly report on Form 10-Q for the period ended September 30, 2001. (b) Assuming conversion of all shares of Series C Preferred and Series G Preferred beneficially owned by MBO-VII, number of shares as to which MBO-VII has: (i) sole power to vote or to direct the vote - 50,183,824. (ii) shared power to vote or to direct the vote -- None. (iii) sole power to dispose or to direct the disposition of - 50,183,824. (iv) shared power to dispose or to direct the disposition of -- None. (ii) Equity-VI: (a) Amount Beneficially Owned: Equity-VI directly owns 265,075 shares of Series D Preferred, which are convertible into 15,592,647 shares of Class A Common Stock, assuming the conversion of all Series C Preferred and Series D Preferred pursuant to Section 8(a)(i) of the Amended and Restated Series D Certificate of Designation, which sets forth a formula for determining the number of shares of Class A Common Stock issuable, as at any date, upon conversion of the Series D Preferred. The number of shares of Class A Common Stock referred to above was calculated in accordance with such formula assuming that the Conversion Price and the Net Realizable FMV (each such term as defined in the Amended and Restated Series D Certificate of Designation) equal $17.00. Equity-VI directly owns 131,052 shares of Series H Preferred, which are convertible into 7,708,941 shares of Class A Common Stock, assuming the conversion of all Series H Preferred and Series G Preferred pursuant to Section 8(a)(i) of the Amended and Restated Series H Certificate of Designation, which sets forth a formula for determining the number of shares of Class A Common Stock issuable, as at any date, upon conversion of the Series H Preferred. The number of shares of Class A Common Stock referred to above was calculated in accordance with such formula assuming that the Conversion Price and the Net Realizable FMV (each such term as defined in the Amended and Restated Series H Certificate of Designation) equal $17.00. Equity-VI directly owns 50,000,000 shares of Class A Common Stock. FLC XXXII, having its principal business office at the address set forth in response to Item 2(b) of this statement, is the general partner of Equity-VI. Mr. Forstmann, Sandra J. Horbach, Thomas H. Lister, Winston W. Hutchins, Jamie C. Nicholls and Gordon A. Holmes (each a United States citizen (other than Mr. Holmes, who is a citizen of the Republic of Ireland) with his or her principal place of business being at the address set forth in response to Item 2(b) of this statement) are the general partners of FLC XXXII. The shares of (i) Series D Preferred and Series H Preferred as calculated above on an as-converted basis and (ii) Common Stock beneficially owned by Equity-VI represent approximately 20.8% of the Class A Common Stock outstanding, based on calculations made in accordance with Rule 13d-3(d) of the Act and there being 329,963,440 shares of Class A Common Stock outstanding as of November 8, 2001, based on XO's quarterly report on Form 10-Q for the period ended September 30, 2001. Assuming conversion of all shares of Series D Preferred and Series H Preferred beneficially owned by Equity-VI, number of shares as to which Equity-VI has: (i) sole power to vote or to direct the vote - 73,301,588. (ii) shared power to vote or to direct the vote -- None. (iii) sole power to dispose or to direct the disposition of - 73,301,588. (iv) shared power to dispose or to direct the disposition of -- None. (iii) FL Fund: (a) Amount Beneficially Owned: FL Fund directly owns 550 shares of Series D Preferred, which are convertible into 32,353 shares of Class A Common Stock, assuming the conversion of all Series C Preferred and Series D Preferred pursuant to Section 8(a)(i) of the Amended and Restated Series D Certificate of Designation, which sets forth a formula for determining the number of shares of Class A Common Stock issuable, as at any date, upon conversion of the Series D Preferred. The number of shares of Class A Common Stock referred to above was calculated in accordance with such formula assuming that the Conversion Price and the Net Realizable FMV (each such term as defined in the Amended and Restated Series D Certificate of Designation) equal $17.00. FL Fund directly owns 198 shares of Series H Preferred, which are convertible into 11,647 shares of Class A Common Stock, assuming the conversion of all Series H Preferred and Series G Preferred pursuant to Section 8(a)(i) of the Amended and Restated Series H Certificate of Designation, which sets forth a formula for determining the number of shares of Class A Common Stock issuable, as at any date, upon conversion of the Series H Preferred. The number of shares of Class A Common Stock referred to above was calculated in accordance with such formula assuming that the Conversion Price and the Net Realizable FMV (each such term as defined in the Amended and Restated Series H Certificate of Designation) equal $17.00. FLC XXXI, having its principal business office at the address set forth in response to Item 2(b) of this statement, is the general partner of FL Fund. FLC XXIX Partnership, L.P. ("FLC XXIX"), a New York limited partnership, and FLC XXXIII are the general partners of FLC XXXI. Mr. Forstmann, Sandra J. Horbach, Thomas H. Lister, Winston W. Hutchins, Jamie C. Nicholls and Gordon A. Holmes (each a United States citizen (other than Mr. Holmes, who is a citizen of the Republic of Ireland) with his or her principal place of business being at the address set forth in response to Item 2(b) of this statement) are the general partners of each of FLC XXIX and FLC XXXIII. The shares of Series D Preferred and Series H Preferred beneficially owned by FL Fund as calculated above are convertible into less than 0.1% of the Class A Common Stock outstanding, based on calculations made in accordance with Rule 13d-3(d) of the Act and there being 329,963,440 shares of Class A Common Stock outstanding as of November 8, 2001, based on XO's quarterly report on Form 10-Q for the period ended September 30, 2001. (b) Assuming conversion of all shares of Series D Preferred and Series H Preferred beneficially owned by FL Fund, number of shares as to which FL Fund has: (i) sole power to vote or to direct the vote - 44,000. (ii) shared power to vote or to direct the vote -- None. (iii) sole power to dispose or to direct the disposition of - 44,000. (iv) shared power to dispose or to direct the disposition of -- None. (iv) Theodore J. Forstmann: (a) Amount Beneficially Owned: Mr. Forstmann directly owns 800,000 shares of Class A Common Stock. The shares of Class A Common Stock beneficially owned by Mr. Forstmann represents 0.2% of the Class A Common Stock outstanding, based on calculations made in accordance with Rule 13d-3(d) of the Act and there being 329,963,440 shares of Class A Common Stock outstanding as of November 8, 2001, based on XO's quarterly report on Form 10-Q for the period ended September 30, 2001. (b) Number of shares as to which Mr. Forstmann has: (i) sole power to vote or to direct the vote - 800,000. (ii) shared power to vote or to direct the vote -- None. (iii) sole power to dispose or to direct the disposition of - 800,000. (iv) shared power to dispose or to direct the disposition of -- None. (v) Except as set forth above, none of the Reporting Persons nor, to the knowledge of any of the Reporting Persons, any person identified in Schedule I, beneficially owns any shares of Class A Common Stock or has effected any transactions in shares of Class A Common Stock during the preceding 60 days. (vi) The right to receive dividends on, and proceeds from the sale of, the shares of Class A Common Stock beneficially owned by the FL Partnerships is governed by the limited partnership agreements of each such entity, and such dividends or proceeds may be distributed with respect to numerous general and limited partnership interests. ITEM 6. Contracts, Arrangements, Understandings or Relationships with ------------------------------------------------------------- Respect to Securities of the Issuer ----------------------------------- Item 6 is hereby amended to add the following: Term Sheet ---------- On November 28, 2001, Equity VII, MBO VIII and XO entered into the Term Sheet. If the transactions contemplated by the Term Sheet and the Letter Agreement are consummated, the FL Investors, which are under common control with the Reporting Persons, will collectively, following the Restructuring become the beneficial owners of 39% of the then outstanding shares of Class A Common Stock. This will occur through their purchase from XO for $400 million in cash of shares of Class A Common Stock and one share of Class D Common Stock. The Class D Common Stock will be identical to the Class A Common Stock in all respects other than certain special voting rights described more fully below and in the Term Sheet. The share of Class D Common Stock to be purchased by the FL Investors will automatically convert into one share of Class A Common Stock under certain circumstances described in the Term Sheet. Additionally, pursuant to the Term Sheet, following the Restructuring Telmex may purchase from XO shares of Class C Common Stock for $400 million in cash. Each share of Class C Common Stock will be convertible into one share of Class A Common Stock under certain circumstances described in the Term Sheet. The Term Sheet contemplates that the Class C Common Stock to be purchased by Telmex will be convertible into 39% of the outstanding shares of Class A Common Stock upon completion of such purchase. The Class C Common Stock will be identical to the Class A Common Stock in all respects other than certain special voting rights more fully described below and in the Term Sheet. The Term Sheet provides that, following the completion of the transactions contemplated thereby, the number of directors on the board of directors of XO shall be fixed at not more than 12. Following completion of the transactions contemplated by the Term Sheet and prior to the Board Representation Date, so long as the FL Investors own at least 10% of the outstanding common stock of XO, the FL Investors shall have the right to appoint or nominate to the board of directors of XO the number of directors equal to the product of (i) the total number of directors on the board of directors of XO times (ii) the percentage of the number of outstanding shares of XO common stock owned by the Investors, rounded up to the nearest whole number. The Term Sheet further contemplates that Telmex will agree to vote its shares of XO common stock for the election of the nominees of the FL Investors to the board of directors of XO. After the Board Representation Date, so long as either the FL Investors or Telmex owns at least 10% of the outstanding XO common stock, the Investors shall have the right to appoint to the board of directors of XO the number of directors equal to the product of (i) the total number of directors on the board of directors of XO times (ii) the percentage of the total number of outstanding shares of XO common stock owned by such Investor, rounded up to the nearest whole number. The Term Sheet further contemplates that the FL Investors and Telmex will agree to vote their shares of XO common stock for the election of the nominees of the other Investor to the board of directors of XO. The Term Sheet provides that, prior to the fourth anniversary of the completion of the purchases of common stock by the Investors, the shares of XO common stock acquired by each Investor pursuant to the transactions contemplated by the Term Sheet shall be transferable only to affiliates of such Investor. The Term Sheet provides that each Investor shall have a pre-emptive right to purchase its pro rata percentage of any subsequent issuances of equity securities (or equivalents or derivatives thereof) or debt securities by XO. So long as there remain outstanding any shares of Class C Common Stock, Telmex shall have the right to purchase shares of Class C Common Stock in the exercise of its pre-emptive rights and Forstmann Little shall have the right to purchase shares of Class D Common Stock in the exercise of its pre-emptive rights. The Term Sheet provides that XO and each of its directors and officers and each holder of more than 5% of XO's equity securities (including the Investors) shall be prohibited, directly or indirectly, from issuing, selling or otherwise distributing any equity securities of XO or any securities convertible or exchangeable into such equity securities for a period of one year following completion of the purchase of common stock by the Investors contemplated by the Term Sheet. The Term Sheet provides that each Investor agrees that so long as the other Investor holds at least 20% of the outstanding XO common stock, such Investor will not, without the express written consent of the other Investor, (i) acquire any additional shares of XO common stock, other equity securities of XO or other securities convertible or exchangeable into equity securities of XO, except pursuant to its pre-emptive rights discussed above, (ii) with certain limited exceptions, solicit consents for the election of directors to the board of directors of XO or seek to change the number of directors on the board of directors of XO, (iii) form, encourage or participate in a "person" within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934 for the purpose of taking any actions described in this paragraph, (iv) make any shareholder proposals to XO or (v) propose or commence any mergers, acquisitions, tender offers, asset sale transactions or other business combinations involving XO. The Term Sheet contemplates that concurrently with the execution of a definitive stock purchase agreement in connection with the purchase of XO common stock by the Investors, the Investors and XO shall enter into a registration rights agreement (the ("Registration Rights Agreement"), which shall be effective upon completion of the purchase of XO common stock by the Investors contemplated by the Term Sheet. The Term Sheet provides that the Registration Rights Agreement will contain customary terms and conditions that are more fully described in the Term Sheet. Except for certain limited provisions of the Term Sheet, the Term Sheet is not binding on either the Investors or XO. The foregoing description of the Term Sheet is not intended to be complete and is qualified in its entirety by the complete text of the Term Sheet, which is incorporated herein by reference. The Term Sheet is filed as Exhibit 19 hereto. Telmex Letter Agreements ------------------------ On November 21, 2001, FLC XXXI (signing as Forstmann Little & Co.) and Telmex entered into the Letter Agreement. Pursuant to the Letter Agreement, among other things, Telmex acknowledges that it is the "Investor/Partner" identified in the Term Sheet and agreed to be bound by the terms of the Term Sheet once it was executed. The Term Sheet was executed on November 28, 2001 and also on that date, Telmex executed and delivered a letter (the "Telmex Confirmation") addressed to Forstmann Little & Co. confirming that the Term Sheet was acceptable to Telmex. The Letter Agreement provides that, at any time prior to the Board Representation Date, Telmex shall be entitled to instruct Forstmann Little & Co. that, in connection with the nomination by Forstmann Little & Co. of directors to the board of directors of XO, Forstmann Little & Co. shall include among their nominees up to that number of individuals identified by Telmex who are independent of, and not affiliated with, either Telmex or XO that represent the percentage of total XO directors equal to the product of (i) the total number of directors on the board of directors of XO times (ii) the percentage of the number of outstanding shares of XO common stock owned by the Investors, rounded up to the nearest whole number; provided, that the total number of directors nominated at Telmex's instructions may at no time exceed the number of directors appointed or nominated by Forstmann Little & Co. who were not nominated on Telmex's instructions. Pursuant to the Letter Agreement, Forstmann Little & Co. will vote all shares of Class A Common Stock owned by it in favor of the nominees requested by Telmex. Until the Board Representation Date, Forstmann Little & Co. will meet on a regular basis with Telmex to discuss the business of XO to the degree doing so is consistent with applicable law. At the Board Representation Date, the directors nominated or appointed to the board of directors of XO at the instruction of Telmex shall resign from the board and shall be replaced by directors nominated or appointed by Telmex pursuant to the terms of the Term Sheet. The Letter Agreement further provides that, from and after the fourth anniversary of the closing of the transactions contemplated by the Term Sheet, if XO receives a proposal regarding a significant transaction such as a merger or other business combination transaction, Forstmann Little & Co. and Telmex will engage in good faith discussions regarding the desirability and timing of such proposal. If the parties cannot agree during these discussions, the party that opposes the proposal may present a competing proposal to the XO board of directors. If such competing proposal is at least equal, in the good faith judgment of the XO board, to the original proposal, such competing proposal will be accepted. Pursuant to the Letter Agreement, the parties also agree that until June 30, 2002, they will not (x) solicit or engage in any discussions or negotiations with, or provide any information to, any other person or entity regarding any investment in, or any business combination, other change of control transaction or restructuring involving XO, or (y) purchase any equity or debt securities of XO; provided, however, that if either party no longer wishes to proceed with the transactions contemplated by the Term Sheet, such party may deliver a written notice to such effect to the other party in which case the party receiving such notice shall no longer be bound by the terms of this "standstill" provision. To the degree that this "standstill" provision is inconsistent with the similar provision in the Term Sheet, the parties agree that the provision in the Letter Agreement shall prevail. The Letter Agreement permits Telmex to structure its investment in XO in a manner that is economically equivalent to the purchase of XO common stock contemplated by the Term Sheet, but that takes into account any applicable regulatory matters and to transfer such investment to any of its majority-owned subsidiaries. The foregoing description of the Letter Agreement and the Confirmatory Letter is not intended to be complete and is qualified in its entirety by the complete text of the Letter Agreement and the Confirmatory Letter, each of which is incorporated herein by reference. The Letter Agreement is filed as Exhibit 20 hereto and the Confirmatory Letter is filed as Exhibit 21 hereto. ITEM 7. Material to be Filed as Exhibits -------------------------------- Item 7 is hereby amended as follows: 1. Stock Purchase Agreement, dated December 7, 1999, among XO (f/k/a NEXTLINK), MBO-VII and Equity-VI.* 2. Registration Rights Agreement, dated as of January 20, 2000, among XO (f/k/a NEXTLINK), MBO-VII and Equity-VI.* 3. Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of Series C Cumulative Convertible Participating Preferred Stock and Qualifications, Limitations and Restrictions Thereof.* 4. Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of Series D Convertible Participating Preferred Stock and Qualifications, Limitations and Restrictions Thereof.* 5. Assignment and Assumption Agreement, dated January 19, 2000, between Equity-VI and FL Fund.* 6. Joint Filing Agreement.* 7. Stock Purchase Agreement, dated as of June 14, 2000, among XO (f/k/a NEXTLINK), MBO-VII and Equity-VI.* 8. Amended and Restated Registration Rights Agreement, dated as of July 6, 2000, between XO (f/k/a NEXTLINK) and the FL Partnerships.* 9. Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of the Series G Cumulative Convertible Participating Preferred Stock and Qualifications, Limitations and Restrictions Thereof.* 10. Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of Series G Convertible Participating Preferred Stock and Qualifications, Limitations and Restrictions Thereof.* 11. Agreement and Waiver, dated as of June 14, 2000, among XO (f/k/a NEXTLINK), MBO-VII, Equity-VI and FL Fund.* 12. Amendment and Stock Purchase Agreement, dated as of April 25, 2001, by and between XO and the FL Partnerships.* 13. Form of Second Amended and Restated Registration Rights Agreement, dated as of _____, 2001, to be entered into by and between XO and the FL Partnerships.* 14. Form of Amended and Restated Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of the Series C Cumulative Convertible Participating Preferred Stock and Qualifications, Limitations and Restrictions Thereof.* 15. Form of Amended and Restated Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of the Series C Convertible Participating Preferred Stock and Qualifications, Limitations and Restrictions Thereof.* 16. Form of Amended and Restated Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of the Series G Cumulative Convertible Participating Preferred Stock and Qualifications, Limitations and Restrictions Thereof.* 17. Form of Amended and Restated Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of the Series H Convertible Participating Preferred Stock and Qualifications, Limitations and Restrictions Thereof.* 18. Joint Filing Agreement.* 19. Term Sheet, dated November 28, 2001, among Forstmann Little & Co. Equity Partnership-VII, L.P., Forstmann Little & Co. Subordinated Debt and Equity Management Buyout Partnership-VIII, L.P. and XO Communications, Inc. 20. Letter Agreement, dated November 21, 2001, between Telefonos de Mexico, S.A. de C.V. and Forstmann Little & Co. 21. Letter, dated November 28, 2001, from Telefonos de Mexico, S.A. de C.V. to Forstmann Little & Co. - ---------------- * Previously filed. SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: November 30, 2001 FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND EQUITY MANAGEMENT BUYOUT PARTNERSHIP-VII, L.P. By: FLC XXXIII Partnership, L.P. its general partner By: /s/ Winston W. Hutchins ----------------------------------- Winston W. Hutchins, a general partner FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP-VI, L.P. By: FLC XXXII Partnership, L.P. its general partner By: /s/ Winston W. Hutchins ----------------------------------- Winston W. Hutchins, a general partner FL FUND, L.P. By: FLC XXXI Partnership, L.P. its general partner By: FLC XXIX Partnership, L.P. a general partner By: /s/ Winston W. Hutchins ----------------------------------- Winston W. Hutchins, a general partner ----------------------------------- Theodore J. Forstmann Schedule I ---------- FLC XXXIII Partnership: General Partner of MBO-VII ------- FLC XXXIII Partnership, L.P., a New York limited partnership ("FLC XXXIII"), is the general partner of MBO-VII. Its purpose is to act as general partner of MBO-VII and other limited partnerships affiliated with MBO-VII. The address of the principal office of FLC XXXIII is c/o Forstmann Little & Co., 767 Fifth Avenue, New York, NY 10153. Partners of FLC XXXIII ---------- The following are the general partners of FLC XXXIII, the general partner of MBO-VII. All of the persons listed below are general partners of partnerships affiliated with Forstmann Little & Co., a private investment firm. The business address of each is 767 Fifth Avenue, New York, NY 10153 and each is a citizen of the United States other than Mr. Holmes, who is a citizen of the Republic of Ireland Theodore J. Forstmann Sandra J. Horbach Winston W. Hutchins Thomas H. Lister Jamie C. Nicholls Gordon A. Holmes FLC XXXII Partnership, L.P.: General Partner of Equity-VI --------- FLC XXXII Partnership, L.P., a New York limited partnership ("FLC XXXII"), is the general partner of Equity-VI. Its purpose is to act as general partner of Equity-VI and other limited partnerships affiliated with Equity-VI. The address of the principal office of Equity-VI is c/o Forstmann Little & Co., 767 Fifth Avenue, New York, NY 10153. General Partners of FLC XXXII --------- The following are the general partners of FLC XXXII, the general partner of Equity-VI. All of the persons listed below are general partners of partnerships affiliated with Forstmann Little & Co., a private investment firm. The business address of each is 767 Fifth Avenue, New York, NY 10153 and each is a citizen of the United States other than Mr. Holmes, who is a citizen of the Republic of Ireland. Theodore J. Forstmann Sandra J. Horbach Thomas H. Lister Winston W. Hutchins Jamie C. Nicholls Gordon A. Holmes FLC XXXI Partnership, L.P.: General Partner of FL Fund ------- FLC XXXI Partnership, L.P., a New York limited partnership ("FLC XXXI"), is the general partner of FL Fund. Its purpose is to act as general partner of FL Fund and other limited partnerships affiliated with FL Fund. The address of the principal office of FL Fund is c/o Forstmann Little & Co., 767 Fifth Avenue, New York, NY 10153. General Partners of FLC XXXI -------- FLC XXIX Partnership, L.P., a New York limited partnership ("FLC XXIX"), and FLC XXXIII are the general partners of FLC XXXI, the general partner of FL Fund. Their purpose is to act as general partner of FLC XXXI and other limited partnerships affiliated with FLC XXXI. The address of the principal office of each of FLC XXIX and FLC XXXIII is c/o Forstmann Little & Co., 767 Fifth Avenue, New York, NY 10153. General Partners of FLC XXIX and FLC XXXIII ----------------------- The following are the general partners of FLC XXIX and FLC XXXIII, the general partners of FLC XXXI. All of the persons listed below are general partners of partnerships affiliated with Forstmann Little & Co., a private investment firm. The business address of each is 767 Fifth Avenue, New York, NY 10153 and each is a citizen of the United States other than Mr. Holmes, who is a citizen of the Republic of Ireland. Theodore J. Forstmann Sandra J. Horbach Thomas H. Lister Winston W. Hutchins Jamie C. Nicholls Gordon A. Holmes EX-99.1 3 term.txt EXHIBIT 19 TERM SHEET November 28, 2001 ----------------- $800 Million Equity Investment in XO Communications, Inc. --------------------------------------------------- Issuer: XO Communications, Inc., a Delaware corporation (the "Company"). Investors: (1) Forstmann Little & Co. Equity Partnership-VII, L.P., a Delaware limited partnership ("Equity VII"), Forstmann Little & Co. Subordinated Debt and Equity Management Buyout Partnership-VIII, L.P., a Delaware limited partnership ("MBO VIII" and collectively with Equity VII, "Forstmann Little"); and (2) an undisclosed strategic investor (together with its majority owned subsidiaries, "Investor/Partner" and collectively with Forstmann Little, the "Investors"). Investment: Forstmann Little shall invest $400 million in exchange for shares of Class A Common Stock ("Class A Common Stock") of the Company and for one share of a new Class D Common Stock ("Class D Common Stock") equal in the aggregate to 39% of the total outstanding equity securities of the Company on a fully diluted basis. Investor/Partner shall invest $400 million in exchange for shares of a new Class C Common Stock ("Class C Common Stock" together with the Class A Common Stock and Class D Common Stock will hereinafter collectively be called, "Common Stock") of the Company equal to 39% of the total outstanding equity securities of the Company on a fully diluted basis. The investments of Forstmann Little and Investor/Partner referred to above are hereinafter referred to as the "Investments". Certain Defined Terms: For purposes of this term sheet, the following capitalized terms shall have the following meanings: "Major Event" shall mean any merger, consolidation, reorganization or recapitalization of the Company or any sale of all or a substantial portion of the assets of the Company and its subsidiaries; "Acquisition" shall mean the acquisition by any person or any group of persons (as such terms are used for purposes of Schedule 13D under the Securities Exchange Act of 1934) of more than 50% of the total number of outstanding shares of Common Stock; and the "Board Representation Date" shall mean the date when no director, officer, employee or other representative of Investor/Partner is a member of the board of directors of an entity that competes with the Company such that Section 8 of the Clayton Act would be applicable to Investor/Partner with respect to its having representatives on the Company Board (as hereinafter defined). Terms of Common Stock: Each share of Common Stock shall be entitled to one vote. The Class A Common Stock, the Class C Common Stock and the Class D Common Stock shall vote together as a single class on all matters on which holders of Common Stock are entitled to vote. Except for the special voting rights of the Class C Common Stock and the Class D Common Stock set forth below, all Common Stock shall be identical in all respects. Each share of Class C Common Stock shall be convertible, at any time and at the option of the holder thereof, into one share of Class A Common Stock. The share of Class D Common Stock shall automatically convert into Class A Common Stock simultaneously with the conversion of all shares of Class C Common Stock into Class A Common Stock. Each share of Class C Common Stock shall convert into one share of Class A Common Stock at any time such share of Class C Common Stock has been transferred to any person other than Investor/Partner or a majority-owned subsidiary of Investor/Partner. In addition, all shares of Class C Common Stock shall automatically convert into Class A Common Stock under the following circumstances: o At any time if Investor/Partner and its majority-owned subsidiaries own Class C Common Stock representing less than 10% of the total number of outstanding shares of Common Stock; or o Upon the fourth anniversary of the Closing. Major Events: At any time at which there shall remain outstanding any shares of Class C Common Stock or Class D Common Stock, the affirmative vote of the holders of a majority of the outstanding shares of Class C Common Stock, voting as a separate class, and the affirmative vote of the holder of the share of Class D Common Stock, voting as a separate class, shall be required before the Company may consummate a Major Event. In addition, if, at any time prior to the Board Representation Date there are any outstanding shares of Class C Common Stock, the affirmative vote of the holders of a majority of the outstanding shares of Class C Common Stock voting as a separate class, shall be required before the Company may: o Acquire, by merger, purchase or otherwise, any equity interest in or assets of any other person with a value greater than 20% of the Company's net assets; o Authorize for issuance or issue any equity securities or derivative securities with a value in excess of $100 million (other than to key employees in the ordinary course of business consistent with a plan approved by the Company's Compensation Committee and Board of Directors); o Incur indebtedness for borrowed money in excess of $100 million in aggregate principal amount; or o Amend its certificate of incorporation or bylaws. Use of Proceeds: $600 million to fund continued development of the Company's network and for general working capital purposes and $200 million to be used in the Restructuring described below. Restructuring: It shall be a condition to the obligation of each Investor to consummate the Investment that the Company shall have completed a restructuring (the "Restructuring") which results in the revised capitalization set forth on Exhibit A hereto (the "New Capitalization"). In order to effectuate the Restructuring, the Company shall (A) undertake (i) an exchange offer pursuant to which the Company will offer to exchange all of its outstanding senior notes, subordinated notes and preferred stock for Class A Common Stock and (ii) a related consent solicitation with respect to the approval of a Chapter 11 plan of reorganization in respect of the New Capitalization or (B) if the Company determines that it is not feasible to implement the New Capitalization through an exchange offer or such exchange offer fails to result in the Company having the New Capitalization but the Company has received the consents necessary to confirm a Chapter 11 plan of reorganization in respect of the New Capitalization, the Company shall commence a Chapter 11 case and file the Chapter 11 plan of reorganization that implements the terms of a Restructuring that results in the New Capitalization with the appropriate bankruptcy court and will seek to obtain an order confirming such plan as expeditiously as possible; provided, that, notwithstanding the foregoing, the Company may, if it has obtained such number of consents to be specified in the SPA, commence a case under Chapter 11 of title 11, United States Code, and file a pre-negotiated Chapter 11 plan contemplating the New Capitalization with the appropriate bankruptcy court and seek to obtain an order confirming such plan as expeditiously as possible. Share Purchase Agreement: The Investors will make their respective investments and acquire their shares of Common Stock pursuant to a Share Purchase Agreement (the "SPA") between the Investors and the Company to be entered into as soon as practicable following the date hereof, but in no event later than December 14, 2001. The SPA will have customary representations and warranties, covenants and closing conditions, including the closing conditions discussed below. Shareholders Agreement: Concurrently with the execution of the SPA, the Investors and the Company shall enter into a shareholders agreement (the "Shareholders Agreement"), which shall be effective upon the date of the Closing of the Investment (the "Closing"). Corporate Governance: Before the Board Representation Date: The number of directors of the Company shall be fixed at not more than 12. Investor/Partner shall be entitled to vote its shares of Class C Common Stock generally for the election of directors. So long as Forstmann Little holds at least 10% of the outstanding Common Stock, Forstmann Little shall have the right to appoint or nominate to the board of directors of the Company (the "Company Board") such number of directors equal to the product of (i) the total number of directors on the Company Board times (ii) the percentage of the total number of outstanding shares of Common Stock owned by both Forstmann Little and Investor/Partner, rounded up to the nearest whole number. Pursuant to the Shareholders Agreement, Investor/Partner will agree to vote its shares of Class C Common Stock for the election of the nominees of Forstmann Little to the Company Board. The composition of the Company Board shall be adjusted annually in accordance with the foregoing provisions. The remaining members of the Company Board shall include the CEO and that number of independent directors required for the Company to continue to be listed on Nasdaq. Prior to the Board Representation Date and so long as Investor/Partner holds at least 10% of the outstanding Common Stock, Investor/Partner shall have the right to designate up to 2 non-voting observers to the Company Board. Such observers shall be provided notice of all meetings of the Company Board and actions taken in lieu of meeting and shall have the right to attend all meetings of the Company Board. Prior to the Board Representation Date and so long as Investor/Partner holds at least 10% of the outstanding Common Stock, at least one observer designee of Investor/Partner shall be entitled to receive notice of and attend meetings of each committee of the Company Board. The Board Representation Date will not occur prior to the Closing, and will be subject to all necessary regulatory approvals, including, without limitation FCC approval. After the Board Representation Date: The number of directors of the Company shall be fixed at not more than 12. So long as each Investor holds at least 10% of the outstanding Common Stock, such Investor shall have the right to appoint or nominate to the Company Board such number of directors equal to the product of (i) the total number of directors on the Company Board times (ii) the percentage of the total number of outstanding shares of Class A Common Stock owned by such Investor, rounded up to the nearest whole number. Pursuant to the Shareholders Agreement, the Investors will agree to vote their shares of Common Stock for the election of the nominees of the other Investor to the Company Board. The composition of the Company Board shall be adjusted annually in accordance with the foregoing provisions. The remaining members of the Company Board shall include the CEO and that number of independent directors required for the Company to continue to be listed on Nasdaq. Subject to the rules and regulations of the Securities and Exchange Commission and Nasdaq, so long as an Investor holds at least 20% of the outstanding Class A Common Stock, at least one designee of such Investor shall be entitled to sit on each committee of the Company Board other than the Executive Committee, which is specifically dealt with below. In addition to Audit and Compensation Committees, the Company Board shall establish and maintain a five-member Executive Committee which shall have responsibility for the strategic direction of the Company. The CEO shall be a member of the Executive Committee. Prior to the Board Representation Date, Forstmann Little shall have the right to have (a) four director designees on the Executive Committee so long as Forstmann Little continues to own at least 15% of the outstanding Common Stock or (b) two director designees on the Executive Committee so long as Forstmann Little continues to own at least 10% but less than 15% of the outstanding Common Stock. After the Board Representation Date, each Investor shall have the right to have (a) two director designees on the Executive Committee so long as such Investor continues to own at least 15% of the outstanding Common Stock or (b) one director designee on the Executive Committee so long as such Investor continues to own at least 10% but less than 15% of the outstanding Common Stock. Thus, initially the Executive Committee shall consist of the CEO and four designees of Forstmann Little. In furtherance of the responsibilities set forth above, the Company shall not take any of the following actions without the approval of at least 2/3 of the members of the Executive Committee: o Approve or modify the business plan, adopt a new business plan or take any action that would constitute a material deviation from the current business plan; o Approve or recommend a Major Event; o Acquire, by merger, purchase or otherwise, any equity interest in or assets of any other person with a value greater than $100 million; o Authorize for issuance or issue any equity securities or derivative securities with a value in excess of $100 million (other than to key employees in the ordinary course of business consistent with a plan approved by the Company's Compensation Committee and Board of Directors); o Purchase or redeem any shares of its capital stock; o Declare or pay any dividends, or make any distributions in respect of any shares of its capital stock; o Redeem, retire, defease, offer to purchase or change any material term, condition or covenant in respect of outstanding long-term debt; o Incur indebtedness for borrowed money in excess of $100 million in aggregate principal amount; o Make any material change in its accounting principles or practices (other than as required by GAAP or recommended by the Company's outside auditors), or remove the Company's outside auditors or appoint new auditors; and o Appoint or terminate or modify the terms of the employment of any member of the Company's senior management. Notwithstanding the foregoing, if any of the matters referred to above under the heading "After the Board Representation Date" are not approved by the requisite 2/3 majority of the Executive Committee and representatives of the Investors have attempted to resolve their differences regarding the matter for at least 30 days, any member of the Executive Committee shall be entitled to present such issue to the Company Board where the issue may be adopted or rejected by a majority vote of the Company Board. Veto Rights: So long as (i) an Investor holds shares of Class A Common Stock representing at least 20% of the outstanding Common Stock and (ii) no Major Event or Acquisition has occurred, the approval of at least one director designee of such Investor shall be required before the Company may take any of the following actions: o Amend its certificate of incorporation or bylaws, it being understood and agreed that the Company's certificate of incorporation and bylaws shall not contain any super-majority voting provisions for Major Events; O Enter into any transaction with any affiliate, officer, director or stockholder; o File any petition for bankruptcy or make any assignment for the benefit of creditors. Transferability: Prior to the fourth anniversary of the Closing of the Investment, the shares of Common Stock acquired by each Investor pursuant to the SPA shall be transferable only to affiliates of such Investor. Following such fourth anniversary, such shares shall be freely transferable without restriction under the SPA or otherwise and shall, following such date, be subject to a registration rights agreement (the "Registration Rights Agreement"), the terms of which are summarized below. Standstill: Each Investor will agree that, so long as the other Investor holds at least 20% of the outstanding Common Stock, it will not, without the express written consent of the other Investor, (i) acquire any additional shares of Common Stock, other equity securities of the Company or other securities convertible or exchangeable into equity securities of the Company, except pursuant to its pre-emptive rights discussed below, (ii) solicit consents for the election of directors to the Company Board (other than as expressly permitted by the Shareholders Agreement) or seek to change the number of directors on the Company Board, (iii) form, encourage or participate in a "person" within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934 for the purpose of taking any actions described in this paragraph, (iv) make any shareholder proposals to the Company or (v) propose or commence any mergers, acquisitions, tender offers, asset sale transactions or other business combinations involving the Company. Shareholder Agreement Termination: The Shareholders Agreement shall terminate when either Investor holds less than 10% of the outstanding Common Stock. Pre-emptive Rights: Each Investor shall have a pre-emptive right to purchase its pro rata percentage of any subsequent issuances of equity securities (or equivalents or derivatives thereof) or debt securities by the COMPANY. So long as there remain outstanding any shares of Class C Common Stock, Investor/Partner shall have the right to purchase shares of Class C Common Stock in the exercise of its pre-emptive rights and Forstmann Little shall have the right to purchase shares of Class D Common Stock in the exercise, of its pre-emptive rights. Lock-Up: The Company and each of its directors and officers and each holder of more than 5% of the Company's equity securities (including the Investors) shall be prohibited, directly or indirectly, from issuing, selling or otherwise distributing any equity securities of the Company or any securities convertible or exchangeable into equity securities of the Company for a period of one year following the Closing. Representations, Warranties and Covenants: The SPA will contain standard representations and warranties customary in similar transactions for companies in similar financial positions. The Company will covenant to conduct its business prior to the Closing only in the ordinary course (other than with respect to the Restructuring) and will make other customary pre-Closing covenants, including without limitation: o No issuances of common stock, options, warrants or rights to acquire common stock or securities convertible or exchangeable into common stock, except pursuant to one of the Company's stock option plans or the Restructuring. o No additional repurchases of the Company's outstanding debt and equity securities, except pursuant to the Restructuring. o No cash interest payments or cash dividend payments will be paid by the Company after November 30, 2001 with respect to any series or class of the Company's outstanding senior notes, subordinated notes, preferred stock and common stock. Indemnification: The Company will indemnify the Investors, their directors, officers, employees, agents and affiliates against all losses, liabilities, or damages arising out of or in connection with the transactions contemplated by this term sheet. Conditions to Closing: In addition to the consummation of the Restructuring, the SPA will contain standard closing conditions for similar transactions, including the following, each of which shall be fulfilled to the satisfaction of, or waived by, each Investor: o All shares of Class B Common Stock ("Class B Common Stock") shall have been converted into shares of Class A Common Stock in accordance with the New Capitalization. o Receipt of all regulatory approvals (including those of the SEC and FCC, DOJ, FTC and state and foreign regulatory authorities, if any) and third party consents. o Approval from the Nasdaq Stock Market of continued listing of the Class A Common Stock after the Restructuring. o A restructuring of the Company's bank credit facilities on terms acceptable to the Investors, including without limitation, covenant waivers, covenant amendments, rescheduling of principal repayments and increases in the size of the credit facility. o All transaction documents, including without limitation the Company's Amended and Restated Certificate of Incorporation and bylaws, shall be in form and substance reasonably acceptable to each Investor. o All court orders necessary to consummate the Restructuring shall have been obtained and have become final and non-appealable. o There shall not have occurred any material adverse change in the business, operations, financial condition or prospects of the Company and its subsidiaries, taken as a whole. o There shall not exist any material litigation, including, but not limited to actions seeking injunctive relief, regarding the transactions contemplated by this term sheet or that would otherwise have a material adverse effect upon the business, operations, financial condition or prospects of the Company and its subsidiaries, taken as a whole (an "MAE"). ] o There shall not exist any injunction or other order or decree the effect of which would prevent the consummation of the transactions contemplated by this term sheet or that would otherwise have an MAE. o Execution of the Shareholders Agreement. o Execution of the Registration Rights Agreement. o Retention of senior management of the Company to the satisfaction of, and upon economic terms acceptable to, each Investor. Due Diligence: The Investors expect and intend to have substantially completed a due diligence investigation of the Company within two weeks following the execution of this term sheet, subject to "bring down" due diligence for events subsequent to that two-week period. The SPA will not contain a due diligence condition. Right to Assume Obligations: If either Investor elects to terminate the SPA with respect to its investment based on the failure of one or more of the foregoing conditions to be satisfied, the other Investor may waive such condition(s), assume the obligations of such Investor and consummate the Investment. Termination: Each Investor may terminate the SPA (i) for any material breach by the Company or the other Investor of its representations and warranties or covenants contained in the SPA, (ii) if the Restructuring has not been consummated on terms acceptable to the Investors within 8 months from the earlier of (x) the date of execution of the SPA and (y) December 14, 2001; provided, however, that such period shall be extended for up to 4 months if all conditions to Closing other than regulatory approvals shall have been satisfied; and provided, further, that such period shall be further extended for up to an additional 30 days as contemplated under the heading "Expected Closing" below. Termination Fee: The Company will pay to each Investor a fee equal to 1% of the "pre-money valuation" of the Company (which fee, the parties acknowledge and agree, as of the date hereof would be $15 million per Investor) upon the termination by the Company of the SPA for the purpose of permitting a third party to make an investment in the Company or in connection with a proposed Major Event or Acquisition. When the Company commences a Chapter 11 case in order to effectuate its Chapter 11 plan in respect of the New Capitalization, the Company shall immediately thereafter, but in no event later than three business days after the commencement of the case, seek court approval of the foregoing payments, together with the expense reimbursement set forth below, as break-up fees payable to the Investors. With respect to the immediately preceding sentence, time is of the essence; if the court approval referred to in that sentence is not obtained promptly, the Investors shall be entitled to terminate the SPA. Expected Closing: Subject to the satisfaction or waiver by the Investors of the closing conditions set forth above, the purchase of Common Stock contemplated by this term sheet will close on a date mutually satisfactory which is not more than 30 days after the later of (i) the date upon which the order of the bankruptcy court confirming the pre-negotiated bankruptcy plan filed pursuant to the terms hereof becomes final and non-appealable and (ii) the date upon which all regulatory approvals necessary to consummate the transactions contemplated by this term sheet have been obtained. Expenses: The Company shall reimburse each Investor for all its reasonable, documented, out-of-pocket costs and expenses (including, without limitation, the fees and expenses of counsel, advisors and accountants) incurred in connection with the transactions contemplated hereby up to a maximum amount per Investor of $3.75 million if the SPA is not executed or $5 million if the SPA is executed, in any case, regardless of whether the Investment is consummated, it being specifically understood and agreed that neither Forstmann Little nor any of its affiliates will receive any fee in connection with the transactions contemplated hereby. Certain Information: The directors designated by the Series C and Series D Preferred Stock shall be permitted to participate in all meetings and votes of the Company Board (other than with respect to transactions where Forstmann Little is a party), and shall receive all information provided to other members of the Company Board, regarding the status and terms of any proposals, discussions, negotiations and agreements concerning any proposed investment in, or business combination, other change of control transaction or restructuring involving, the Company. These directors shall be permitted to provide any and all such information to Forstmann Little and Investor/Partner and their respective attorneys, advisors and accountants. Successors and Assigns: Each Investor can assign its respective rights and remedies under the SPA and the Shareholders Agreement to one of its controlled affiliates which shall agree to be bound by the terms thereof. Publicity: The Investors and the Company agree to consult with each other prior to issuing any public announcement relating to this term sheet or the transactions contemplated hereby. Governing Law: New York REGISTRATION RIGHTS AGREEMENT Concurrently with the execution of the SPA, the Investors and the Company shall enter into a Registration Rights Agreement (the "Registration Rights Agreement"), which shall be effective upon the Closing and contain the following material terms: Securities Covered: All Class A Common Stock acquired pursuant to the transactions contemplated by this term sheet. Demand Rights: Investor/Partner and Forstmann Little will each have five demand registrations, subject to 90-day blackout periods and standard cut-back rights. The minimum size of a demand registration of the Investors shall be the lesser of 20% of the shares obtained by such Investor pursuant to this term sheet or $50 million unless the amount of Class A Common Stock acquired pursuant to this term sheet which is still subject to registration is less than the lower of such amounts, in which case such minimum shall be the amount of Class A Common Stock still subject to registration. Piggyback Rights: The Investors shall have unlimited "piggyback" rights with respect to registered public offerings by the Company, subject to standard underwriters' cutback provisions with priority given to the Company. Expenses of Registration: The Company will pay the registration expenses of any registration including, without limitation, the SEC and NASD registration fees and the reasonable fees and expenses of counsel for the Investors (but not including underwriters' discounts and commissions). Indemnification: The Company will indemnify the Investors, the underwriters and their respective affiliates and control persons against liabilities arising out of misstatements or omissions or alleged misstatements or omissions in the registration statement and prospectus. The Investors will indemnify the Company, the underwriters and their respective affiliates and control persons against liabilities arising out of misstatements or omissions in the registration statement and prospectus, but only with respect to misstatements or omissions made in reliance upon and in conformity with written information furnished to the Company by the Investors expressly for use in such registration statement and prospectus. Rule 144 Information: The Company will ensure that there is adequate public information regarding the Company at all times to permit sales of securities pursuant to Rule 144 under the Securities Act of 1933. NON-BINDING EFFECT OF TERM SHEET; THIRD-PARTY BENEFICIARY Except for the provisions regarding (i) the expense reimbursement provided for herein, (ii) publicity and (iii) the matters set forth under the heading "Certain Information", this summary of proposed terms shall not constitute a legally binding agreement among the Investors and the Company, but is intended to serve as the basis for the preparation of the SPA, the Registration Rights Agreement, the Shareholders Agreement and other documents related to the transactions contemplated by this term sheet, and accordingly, except as expressly provided in the first clause of this sentence, no legally binding agreement shall arise until the SPA, in mutually satisfactory form, has been duly authorized, executed and delivered by the Company and the Investors. The Company and Forstmann Little acknowledge that Investor/Partner is a third-party beneficiary with respect to the binding provisions of this term sheet. The identity of Investor/Partner will be disclosed to the Company upon the execution by the Company of this term sheet. Forstmann Little & Co. Equity Partnership-VII, L.P. By:/s/ Sandra J. Horbach ----------------------------------------- Name: Sandra J. Horbach Forstmann Little & Co. Subordinated Debt and Equity Management Buyout Partnership Partnership-VIII, L.P. By:/s/ Sandra J. Horbach ----------------------------------------- Name: Sandra J. Horbach XO Communications, Inc. By:/s/ Daniel F. Akerson ----------------------------------------- Name: Daniel F. Akerson Title: Chairman and CEO November 28, 2001 EXHIBIT A NEW CAPITALIZATION Set forth below is a summary of the proposed New Capitalization.
AMOUNT OWNERSHIP OF THE COMPANY Unrestricted Cash to be discussed --- Aggregate Indebtedness(1) Not to exceed $1 billion --- Forstmann Little's New Equity (Class A $400 million 39% Common and Class D Common) Investor/Partner's New Equity (Class C $400 million 39% Common) Management Equity (Class A Common) $41 million(2) 4% Other Equity Holders (Class A Common) $185 million(3) 18% - ----------------------------- 1 Excludes any capitalized leases. 2 To the extent management equity includes options, such options are valued at their implied valuation before taking into account exercise price. 3 Implied valuation.
EX-99.2 4 sideltr.txt EXHIBIT 20 EXECUTION COPY -------------- November 21, 2001 Mr. Javier Mondragon Alarcon General Counsel Telefonos de Mexico, S.A. de C.V. Parque Via 190, Piso 10 Col. Cuauhtemoc 06599 Mexico, D.F. Dear Mr. Mondragon Alarcon: In connection with our proposed joint investment (the "Investment") in XO Communications, Inc. (the "Company"), Forstmann Little & Co. ("Forstmann Little") and Telefonos de Mexico, S.A. de C.V. ("Telmex"), hereby agree and acknowledge as follows: 1. Attached hereto as Exhibit A is a draft term sheet (the "Term Sheet") among certain funds controlled by Forstmann Little and the Company regarding the terms of the Investment. Telmex acknowledges that it has reviewed and approves of the Term Sheet, it is the "Investor/Partner" referred to therein and it understands that the Term Sheet will be presented to the Company in connection with the Investment. Forstmann Little agrees to keep Telmex apprised of all material developments in the negotiations between Forstmann Little and the Company regarding the Term Sheet and to consult with Telmex regarding any material changes thereto. Forstmann Little acknowledges that Telmex will not be bound by any provision of the Term Sheet that differs materially from the draft of the Term Sheet attached hereto. At the time of execution of the Term Sheet by the Company, Forstmann Little shall disclose to the Company the identity of the Investor/Partner. 2. At any time prior to the Board Representation Date (as defined in the Term Sheet), Telmex shall be entitled to instruct Forstmann Little that, in connection with Forstmann Little's nomination of directors to the board of directors of the Company (the "Company Board"), Forstmann Little shall include among its nominees up to the Maximum Number (as defined below) of individuals identified by Telmex who are independent of, and not affiliated with, either Telmex or the Company ("Telmex Independent Designees"). "Maximum Number" means the product of (i) the total number of directors on the Company Board times (ii) the percentage of the total number of outstanding shares of Common Stock owned by Telmex, rounded up to the nearest whole number, provided that in no event shall the Maximum Number exceed the number of directors on the Company Board appointed or nominated by Forstmann Little (excluding the Telmex Independent Designees). Pursuant to the Shareholders Agreement, Forstmann Little shall agree to vote its shares of Class A Common Stock for the election of the Telmex Independent Designees to the Company Board. At the Board Representation Date, the Telmex Independent Designees shall resign from the Company Board and shall be replaced by the number of persons designated by Telmex that Telmex is then entitled to designate to the Company Board. Prior to the Board Representation Date, Forstmann Little shall consult with representatives of Telmex at least monthly regarding the business, finances and prospects of the Company, including, without limitation, the matters the Term Sheet provides are to be considered by the Executive Committee (as defined in the Term Sheet) and the matters referred to under the heading "Veto Rights" in the Term Sheet; provided that the information provided to Telmex in connection with such consultations shall not include information that Forstmann Little's antitrust counsel has determined should not be the subject of such consultations. 3. From and after the fourth anniversary of the Closing (as defined in the Term Sheet), if the Company receives a proposal regarding a Major Event (as defined in the Term Sheet), then Forstmann Little and Telmex shall, as soon as reasonably practicable, engage in good faith discussions regarding the desirability and timing of such possible Major Event. If Forstmann Little and Telmex do not reach agreement regarding such Major Event, then the Investor which does not support the Major Event shall be entitled to present a competing Major Event to the Company Board and if such competing Major Event is in the good faith judgment of the Company Board, after consulting with its legal counsel and financial advisors, at least equal in all material respects to the previously proposed Major Event, the Major Event proposed by the Investor shall be accepted. To the extent the terms of this letter are inconsistent with the terms of the Term Sheet under the heading "Standstill", the terms of this letter shall prevail. 4. Each party hereto acknowledges and agrees that until June 30, 2002, such party and its affiliates shall not, (x) solicit or engage in any discussions or negotiations with, or provide any information to, any other person or entity regarding any investment in, or any business combination, other change of control transaction or restructuring involving, the Company, or (y) purchase any equity or debt securities of the Company, provided, however, that if either party hereto no longer wishes to proceed with the Investment, such party shall deliver a written notice to such effect to the other party hereto (the "Notified Party"), in which event the Notified Party and its affiliates shall no longer be bound by the terms of this paragraph 2. Until a party hereto is no longer bound by the terms of the preceding sentence, such party shall notify the other party promptly upon receipt of any other proposal regarding any investment in, or any business combination, other change of control transaction or restructuring involving, the Company. 5. Telmex shall be entitled to structure its portion of the Investment in such a manner that is economically equivalent to the investment in Class C Common Stock described in the Term Sheet but that takes into consideration any relevant regulatory matters. 6. Telmex shall be entitled to transfer its Investment, including any rights and interests of Telmex in the Investment and any shares of Common Stock or other equity or debt securities of the Company that Telmex may acquire as part of or in connection with the Investment, to any majority-owned subsidiary of Telmex. If the foregoing is acceptable to you, please sign and date this letter on the appropriate spaces below, whereupon this letter agreement will become a binding agreement between the parties hereto. Sincerely, FORSTMANN LITTLE & CO. By:/s/ Sandra J. Horbach ------------------------------------- Name: Sandra J. Horbach Agreed to and accepted this 21st day of November, 2001 TELEFONOS DE MEXICO, S.A. DE C.V. By:/s/ Javier Mondragon Alarcon --------------------------------- Name: Javier Mondragon Alarcon Title: General Counsel EX-99.3 5 confirm.txt EXHIBIT 21 [LETTERHEAD OF] TELEFONOS DE MEXICO, S.A. DE C.V. November 28, 2001 Forstmann Little & Co. 267 Fifth Avenue New York, New York 10153 Attention: Sandra Horbach Dear Ms. Horbach: We are in receipt of an execution version of a term sheet (the "Term Sheet"), sent via electronic mail to Latham & Watkins at 4:35 pm on November 28, 2001, between certain investment funds controlled by Forstmann Little & Co. ("Forstmann Little") and XO Communications, Inc. Pursuant to that certain letter agreement, dated November 21, 2001, between Forstmann Little and Telefonos de Mexico, S.A. de C.V. ("Telmex"), Telmex hereby approves the Term Sheet and agrees to be bound by the provisions of the Term Sheet that are binding upon the "Investor/Partner" as set forth in the Term Sheet. Sincerely, TELEFONOS DE MEXICO, S.A. DE C.V. By: /s/ Sergio Rodriquez Molleda ----------------------------------- Name: Sergio Rodriquez Molleda Title: Assistant General Counsel -----END PRIVACY-ENHANCED MESSAGE-----