Exhibit 1.4
AGREEMENT
This Agreement (this "Agreement") is dated as of the 5th day of
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July 2002 by and among Level 3 Communications, Inc., a Delaware corporation with
its principal office at 0000 Xxxxxxxx Xxxxxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000 (the
"Company"), and each of the investors named in EXHIBIT A attached hereto (each,
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an "Investor" and collectively, the "Investors").
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WHEREAS, the Company and the Investors have been discussing a potential
investment by the Investors in the Company, the use of proceeds of that
investment is intended for the Company's general corporate purposes, including
potential acquisitions of complementary telecommunications businesses or assets
as a means to act as a catalyst for consolidation in the telecommunications
industry; and
WHEREAS, it was the mutual desire of the Company and the Investors that
the Investors investment in the Company would take the form of a newly issued
series of the Company's preferred stock, which preferred stock would 1) be
mandatorily redeemable on the tenth anniversary of issuance, 2) have a dividend
payable in cash on a quarterly basis at the rate of 9% of the liquidation value
of the preferred stock, 3) be convertible into shares of the Company's common
stock at any time at the option of the holder at a rate that would be agreed to
by the Company and the Investors but would represent an 11% premium to the
closing price of the Company's common stock, par value $.01 per share (the
"Common Stock") on the Nasdaq National Market to be agreed by the parties, and
4) be redeemable at the option of the Company after the fifth anniversary of
issuance beginning at a rate of 104.5% of the liquidation value, declining
ratably to par after the ninth anniversary of issuance (the "Proposed Preferred
Stock"); and
WHEREAS, in connection with the finalization of the terms of the
investment and the form of security that would be issued by the Company to the
Investors to represent that investment, the parties determined that for a
variety of reasons, including state corporate law limitations on the Company's
ability to pay cash dividends and limitations contained in certain of the
Company's existing debt agreements, it would not be possible at this time for
the Company to issue the Proposed Preferred Stock; and
WHEREAS, the Company and the Investors agreed that in order for the
Company to be in a position to pursue its plans for consolidation in the
telecommunications industry as soon as possible that the Company and the
Investors would restructure the nature of the Investors investment in the
Company from the Proposed Preferred Stock to a junior subordinated convertible
note that would have, as nearly as possible, the same economic terms as the
Proposed Preferred Stock (the "New Junior Convertible Debt"); and
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WHEREAS, the Investors have agreed that the terms of the New Junior
Convertible Debt will include a provision that will allow the Company, at its
option, to mandate the conversion of the New Junior Debt to a newly issued
series of the Company's preferred stock that would have the same economic terms
as the Proposed Preferred Stock (the "Preferred Stock") at such time as the
Board of Directors of the Company determines, in its good faith, that the
Company's ability to issue the Preferred Stock and to pay cash dividends for a
reasonably foreseeable period into
Confidential
the future would not be limited by applicable state corporate law or the terms
and conditions of any the Company's then existing debt obligations; and
WHEREAS, the Investors have also agreed that the terms of the New
Junior Convertible Debt will include a provision that states that upon any
liquidation of the Company, the New Junior Convertible Debt will rank senior to
the Company's Common Stock and preferred stock, but will rank junior to all of
the Company's existing indebtedness; and
WHEREAS, the Investors and the Company desire to memorialize their
commitment to explore the issuance to the Investors of alternative non-debt
securities, which securities would be issued in exchange for the New Junior
Convertible Debt.
NOW THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows.
1. Purchase of New Junior Convertible Debt. Pursuant to the Purchase
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Agreement, dated the date hereof and attached as Exhibit B, the Company has
issued and sold to the Investors the New Junior Convertible Debt, which includes
a provision that will allow the Company, at its option, to mandate the
conversion of the New Junior Convertible Debt to a Preferred Stock at such time
as the Board of Directors of the Company determines, in its good faith, among
other things, that the Company's ability to issue the Preferred Stock and to pay
cash dividends for a reasonably foreseeable period into the future is not
prohibited by applicable provisions of law or the terms and provisions of any
agreement of the Company, including any agreement or instrument relating to its
indebtedness or the Company's Certificate of Incorporation or Bylaws, or if the
conversion would constitute a breach thereof, or a default thereunder, or if the
making of the conversion shall be restricted or prohibited by any applicable
law, rule or regulation.
2. Continued Review of Alternative Securities. The Investors and the
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Company agree to continue to analyze, review and consider the issuance to the
Investors by the Company or one of its affiliates (including a wholly owned
subsidiary) of a security that is a preferred equity security and would provide
to the Investors comparable economic terms and conditions. Any such issuance
would only take place if such alternate security would comply with the Company's
existing debt obligations and applicable provisions of law and if the all of the
terms thereof are mutually agreeable to the Company and the Investors, in each
case in their sole discretion.
3. Further Investment. The Investors and the Company agree to discuss,
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from time to time, possible future investments by the Investors in the
securities of the Company in connection with future acquisition opportunities
that the Company may identify. The Company acknowledges that no Investor has
made any commitment to make any such future investment, and that the decision to
make any such future investment is in the sole discretion of each Investor. The
Investors acknowledge that the Company has made no commitment to offer any such
future investment to any Investor, and that the decision to make any such offer
of future investment is in the sole discretion of the Company.
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4. Public Statements or Releases. Neither the Company nor any Investor
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shall make any public announcement with respect to the existence or terms of
this Agreement or the transactions provided for herein without the prior
approval of the other parties, which shall not be unreasonably withheld or
delayed. Notwithstanding the foregoing, nothing in this Section 4 shall prevent
any party from making any public announcement it considers necessary in order to
satisfy its obligations under the law or the rules of any national securities
exchange or market, provided such party, to the extent practicable, provides the
other parties with an opportunity to review and comment on any proposed public
announcement before it is made.
5. Captions. The captions and paragraph headings of this
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Agreement are solely for the convenience of reference and shall not affect
its interpretation.
6. Severability. Should any part or provision of this Agreement be held
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unenforceable or in conflict with the applicable laws or regulations of any
jurisdiction, the invalid or unenforceable part or provisions shall be replaced
with a provision which accomplishes, to the extent possible, the original
business purpose of such part or provision in a valid and enforceable manner,
and the remainder of this Agreement shall remain binding upon the parties
hereto.
7. Governing Law. This Agreement shall be governed by, and
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construed in accordance with, the laws of the State of New York, without
giving effect to conflict of law principles thereof.
8. Counterparts. This Agreement may be signed in one or more
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counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
9. Conflict With Other Agreements. Notwithstanding any other provision
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of this Agreement to the contrary, to the extent that any provision of this
Agreement conflicts with or contradicts any provision in any agreement, document
or instrument that sets forth the terms and conditions, rights, privileges or
preferences of either the 9% Junior Convertible Subordinated Notes due 2012 or
the Series B Convertible Preferred Stock (the "Other Documents") the terms of
the Other Documents shall govern and supersede the provisions of this Agreement.
[Signature page follows]
Confidential
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the day and year first above written.
XXXXX 0 COMMUNICATIONS, INC.
By: /s/ Xxxxxx X. Xxxxxx
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Name: Xxxxxx X. Xxxxxx
Title: Group Vice President
INVESTORS:
LONGLEAF PARTNERS FUND,
a series of Longleaf Partners Funds Trust,
a Massachusetts business trust
By: /s/ O. Xxxxx Xxxxxxx
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Name: O. Xxxxx Xxxxxxx
Title: Chairman of the Board
LONGLEAF PARTNERS SMALL-CAP FUND,
a series of Longleaf Partners Funds Trust,
a Massachusetts business trust
By: /s/ O. Xxxxx Xxxxxxx
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Name: O. Xxxxx Xxxxxxx
Title: Chairman of the Board
XXXX XXXXX SPECIAL INVESTMENT TRUST, INC.
By: Xxxx Xxxxx Funds Management, Inc.
Investment Manager
By: /s/ Xxxx Xxxxx Xxx
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Name: Xxxx Xxxxx Xxx
Title: Senior Vice President
XXXX XXXXX INVESTMENT TRUST, INC.
By: Xxxx Xxxxx Funds Management, Inc.
Investment Manager
By: /s/ Xxxx Xxxxx Xxx
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Name: Xxxx Xxxxx Xxx
Title: Senior Vice President
NATIONAL INDEMNITY CO.
By: /s/ Xxxx X. Hamburg
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Name: Xxxx X. Hamburg
Title: Treasurer
