Exhibit 99.12
PURCHASE AGREEMENT
PURCHASE AGREEMENT (this "Agreement"), dated as of December 3,
2001, by and among McLeodUSA Incorporated, a Delaware corporation (the
"Company"), the entities listed on the signature page hereto under the
caption "Purchasers" (each such entity, a "Purchaser" and, collectively,
the "Purchasers"), and solely for the purposes of Sections 4.5, 4.9, 4.10
and 4.18, the entities listed on the signature page hereto under the
caption "Original FL Purchasers" (each such entity, an "Original FL
Purchaser" and, collectively with the Purchasers, the "FL Purchasers").
W I T N E S S E T H :
WHEREAS, the Company is considering a capital restructuring
substantially on the terms described in Exhibit A (the "Restructuring");
WHEREAS, upon the terms and subject to the conditions set forth
in this Agreement, the Company wishes to sell to the Purchasers and the
Purchasers wish to purchase from the Company (i) an aggregate of 10,000,000
shares of the Company's Series F Preferred Stock, par value $.01 per share
(the "Series F Preferred Stock"); (ii) an aggregate of 10 shares of the
Company's Series G Preferred Stock, par value $.001 per share (the "Series
G Preferred Stock" and, collectively with the Series F Preferred Stock, the
"Preferred Shares") and a warrant or warrants to purchase an aggregate of
18,937,995 shares of the Company's Class A Common Stock, par value $.01 per
share (the "Warrants" and together with the Preferred Shares, the
"Securities"); and
WHEREAS, the Purchasers and the Company desire to provide for the
purchase and sale of the Securities and to establish certain rights and
obligations in connection therewith.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
Article I
PURCHASE AND SALE
1.1. Issuance, Purchase and Sale. Upon the terms and subject to
the conditions set forth herein, at the Closing (as defined below) the
Company shall sell to the Purchasers and the Purchasers shall purchase from
the Company the Securities for $100,000,000 (the "Purchase Price"). The
number of shares of Series F Preferred Stock, Series G Preferred Stock and
Warrants being acquired by each Purchaser, and the portion of the Purchase
Price payable therefor is set forth opposite such Purchaser's name on
Schedule 1.1; provided, that the Purchasers shall have the right to
reallocate among the Purchasers the Securities to be purchased by each
Purchaser by delivering written notice of such reallocation to the Company
not less than three days prior to the Closing so long as such reallocation
does not change the total number of Securities being acquired hereunder or
the Purchase Price.
1.2. The Closing; Deliveries. (a) The closing of the purchase and
sale of the Securities (the "Closing") shall take place at the offices of
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇, LLP, Four ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, at 9:30 a.m. on the business day following the date on which
all of the conditions to each party's obligations hereunder (other than
Section 5.1(d)) have been satisfied or waived and on the same date and at
the same time that the Restructuring is occurring, or at such other place
or time as the parties may agree (the date of the Closing, the "Closing
Date").
(b) At the Closing, the Company shall deliver to each
Purchaser (i) certificates representing the Preferred Shares and (ii) the
Warrants being purchased by such Purchaser, each registered in the name of
such Purchaser in such amounts as such Purchaser shall inform the Company
prior to the Closing. Delivery of such certificates and Warrants shall be
made against receipt by the Company of the portion of the Purchase Price
payable therefor, which shall be paid by wire transfer of immediately
available funds to an account designated by the Company.
1.3. Capitalized Terms. Capitalized terms not otherwise defined
herein shall have the meanings ascribed to such terms in Section 7.1.
Article II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Schedules to that certain Exchange
Agreement, dated as of September 30, 2001, by and among the Company and the
Original FL Purchasers or in Schedule I attached hereto, the Company hereby
represents and warrants to each Purchaser, as of the date hereof and as of
the Closing, as follows:
2.1. Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to carry on
its business as it is now being conducted. The Company is duly qualified
and licensed as a foreign corporation to do business, and is in good
standing (and has paid all relevant franchise or analogous taxes), in each
jurisdiction where the character of its assets owned or held under lease or
the nature of its business makes such qualification necessary, except where
the failure to so qualify or be licensed would not individually or in the
aggregate have a Material Adverse Effect.
2.2. Due Authorization. The Company has the corporate power and
authority to enter into this Agreement and each of the other Transaction
Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by the Company
of this Agreement and each of the other Transaction Documents to which it
is a party, the issuance and delivery of the Securities by the Company and
the compliance by the Company with each of the provisions of this Agreement
and each of the other Transaction Documents to which it is a party
(including the reservation and issuance of the Conversion Shares and the
consummation by the Company of the transactions contemplated hereby and
thereby) (a) are within the corporate power and authority of the Company,
and (b) have been duly authorized by all necessary corporate action of the
Company. This Agreement has been, and each of the other Transaction
Documents to which the Company is a party when executed and delivered by
the Company will be, duly and validly executed and delivered by the
Company, and this Agreement constitutes, and each of such other Transaction
Documents when executed and delivered by the Company will constitute, a
valid and binding agreement of the Company enforceable against the Company
in accordance with its terms except as such enforcement is limited by
bankruptcy, insolvency and other similar laws affecting the enforcement of
creditors' rights generally and for limitations imposed by general
principles of equity. Prior to the Closing, the Conversion Shares will be
validly reserved for issuance, and upon issuance, will be duly and validly
issued and outstanding, fully paid, and nonassessable. The terms,
designations, powers, preferences and relative participation, optional and
other special rights, qualifications, limitations and restrictions of the
Series F Preferred Stock and the Series G Preferred Stock will be as set
forth in the Certificate of Designation for the Series F Preferred Stock
and the Certificate of Designation for the Series G Preferred Stock
(collectively, the "Certificates of Designation"), the forms of which are
attached to this Agreement as Exhibits 2.2A and 2.2B. The terms of the
Warrants will be set forth in a Warrant, the form of which is attached to
this Agreement as Exhibit 2.2C. The Securities issued to the Purchasers in
accordance with the terms of the Certificates of Designation or Warrant, as
applicable, when issued and delivered in accordance with the terms of this
Agreement, will be validly issued and outstanding, fully paid and
non-assessable, free and, except as provided in Section 4.9 hereof, clear
of any Encumbrances and not subject to the preemptive or other similar
rights of the stockholders of the Company.
2.3. Consents, No Violations. Neither the execution, delivery or
performance by the Company of this Agreement or any of the other
Transaction Documents to which it is a party nor the consummation of the
transactions contemplated hereby or thereby will (a) conflict with, or
result in a breach or a violation of, any provision of the certificate of
incorporation or by-laws or other organizational documents of the Company
or any of its subsidiaries including, without limitation, any of the
provisions of the Certificate of Designation for the Series A Preferred
Stock of the Company; (b) constitute, with or without notice or the passage
of time or both, a breach, violation or default, create an Encumbrance, or
give rise to any right of termination, modification, cancellation,
prepayment, suspension, limitation, revocation or acceleration, under (i)
any Law or (ii) any provision of any agreement or other instrument to which
the Company or any of its subsidiaries is a party or pursuant to which any
of them or any of their assets or properties is subject, except, with
respect to the matters set forth in clauses (i) and (ii), for breaches,
violations, defaults, Encumbrances, or rights of termination, modification,
cancellation, prepayment, suspension, limitation, revocation or
acceleration, which, individually or in the aggregate, would not result in
a Material Adverse Effect or (c) except for the filings of the Certificates
of Designation with the Secretary of State of the State of Delaware, any
required filing under the HSR Act, the Exchange Act, the Securities Act,
filings required under the Bankruptcy Code in connection with the
Restructuring and other filings or notifications that are immaterial to the
consummation of the transactions contemplated hereby, require any consent,
approval or authorization of, notification to, filing with, or exemption or
waiver by, any Governmental Entity or any other Person on the part of the
Company or any of its subsidiaries.
2.4. SEC Reports. The Company has timely filed all proxy
statements, reports and other documents required to be filed by it under
the Exchange Act and made available to the Purchasers complete copies of
all annual reports, quarterly reports, proxy statements and other reports
filed by the Company under the Exchange Act, each as filed with the SEC
(collectively, the "SEC Reports"). Each SEC Report was, on the date of its
filing, in compliance in all material respects with the requirements of its
respective report form and the Exchange Act and did not, on the date of its
filing, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
2.5. Financial Statements. The consolidated financial statements
of the Company (including any related schedules and/or notes) included in
the SEC Reports filed prior to the date hereof have been prepared in
accordance with United States generally accepted accounting principles
("GAAP") consistently followed throughout the periods involved (except as
may be indicated in the notes thereto) and fairly present in accordance
with GAAP the consolidated financial condition, results of operations, cash
flows and changes in stockholders' equity of the Company and the
Subsidiaries as of the respective dates thereof and for the respective
periods then ended (except as may be indicated in the notes thereto and
except, in the case of interim statements, for the absence of footnotes and
as permitted by Form 10-Q and subject to changes resulting from year-end
adjustments, none of which are material in amount or effect). Except as
disclosed in the SEC Reports filed prior to the date hereof, neither the
Company nor any of its subsidiaries has any liability or obligation
(whether accrued, absolute, contingent, unliquidated or otherwise, whether
known or unknown, whether due or to become due and regardless of when
asserted), except (i) liabilities and obligations in the respective amounts
reflected or reserved against in the unaudited consolidated balance sheet
of the Company and its subsidiaries as of September 30, 2001, (ii)
liabilities and obligations incurred in the ordinary course of business
since September 30, 2001 or (iii) liabilities and obligations which
individually or in the aggregate would not have a Material Adverse Effect.
2.6. Absence of Certain Changes. Except as disclosed in the SEC
Reports filed prior to the date hereof, since September 30, 2001 neither
the Company nor any of the Subsidiaries has suffered any change, event or
development or series of changes, events or developments which individually
or in the aggregate would have a Material Adverse Effect.
2.7. Litigation. (a) Except as disclosed in the SEC Reports filed
prior to the date hereof, there is no claim, action, suit, investigation or
proceeding ("Litigation") pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries or involving any
of their respective properties or assets by or before any court, arbitrator
or other Governmental Entity which (i) in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the transactions contemplated by
this Agreement or (ii) if resolved adversely to the Company or any of its
subsidiaries would individually or in the aggregate have a Material Adverse
Effect.
(b) Except as disclosed in the SEC Reports filed prior to
the date hereof, neither the Company nor any of its subsidiaries is in
default under or in breach of any order, judgment or decree of any court,
arbitrator or other Governmental Entity, except for defaults or breaches,
which individually or in the aggregate would not have a Material Adverse
Effect.
2.8. Compliance with Laws. Except as disclosed in the SEC Reports
filed prior to the date hereof, the Company and its subsidiaries are in
compliance with all Laws and the Company and its subsidiaries possess all
material licenses, franchise permits, consents, registrations,
certificates, and other governmental or regulatory permits, authorizations
or approvals required for the operation of the business as presently
conducted and for the ownership, lease or operation of the Company's and
its subsidiaries' properties (collectively, "Licenses") except where the
failure to possess such Licenses individually or in the aggregate would not
have a Material Adverse Effect. The Company and its subsidiaries have all
Licenses, and all of such Licenses are valid and in full force and effect,
and the Company and its subsidiaries have duly performed and are in
compliance with all of their obligations under such Licenses except where
the failure to be so valid, in full force and effect or performed or in
compliance individually or in the aggregate would not have a Material
Adverse Effect.
2.9. Brokers or Finders. Except for ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
and Credit Suisse First Boston, advisors to the special committee, whose
fees will be paid by the Company, upon the consummation of the transactions
contemplated by this Agreement, no agent, broker, investment banker or
other Person is or will be entitled to any broker's or finder's fee or any
other commission or similar fee from the Company or any of its subsidiaries
in connection with any of the transactions contemplated by this Agreement
or the other Transaction Documents.
2.10. Section 203 of the DGCL; Takeover Statute. The Board of
Directors has taken all actions necessary or advisable so that the
restrictions contained in Section 203 of the DGCL applicable to a "business
combination" (as defined in such Section) will not apply to the execution,
delivery or performance of this Agreement or any of the other Transaction
Documents or the consummation of the transactions contemplated hereby or
thereby. The execution, delivery and performance of this Agreement or any
of the other Transaction Documents and the consummation of the transactions
contemplated hereby or thereby will not cause to be applicable to the
Company any "fair price," "moratorium," "control share acquisition" or
other similar antitakeover statute or regulation enacted under state or
federal laws.
Article III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby represents and warrants to the Company,
severally and not jointly, as of the date hereof and as of the Closing, as
follows:
3.1. Acquisition for Investment. Such Purchaser is acquiring the
Securites, for its own account, for investment and not with a view to, or
for sale in connection with, the distribution thereof within the meaning of
the Securities Act.
3.2. Restricted Securities. Such Purchaser understands that (i)
except as provided in the Registration Rights Agreement, the Securities and
any Conversion Shares that may be issued will not be registered under the
Securities Act or any state securities laws by reason of their issuance by
the Company in a transaction exempt from the registration requirements
thereof and (ii) the Securities and any Conversion Shares that may be
issued may not be sold unless such disposition is registered under the
Securities Act and applicable state securities laws or is exempt from
registration thereunder.
3.3. No Brokers or Finders. No agent, broker, investment banker
or other Person is or will be entitled to any broker's or finder's fee or
any other commission or similar fee from the Purchasers in connection with
the transactions contemplated by this Agreement or the other Transaction
Documents.
3.4. Accredited Investor. Such Purchaser is an "accredited
investor" (as defined in Rule 501(a) under the Securities Act). Such
Purchaser has sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of its
investment in the Securities and is capable of bearing the economic risks
of such investment.
3.5. Organization. Such Purchaser is a limited partnership duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite power and authority to carry on its
business as it is now being conducted.
3.6. Due Authorization. Such Purchaser has all right, power and
authority to enter into this Agreement and each of the other Transaction
Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by such
Purchaser of this Agreement and each of the other Transaction Documents to
which it is a party and the compliance by such Purchaser with each of the
provisions of this Agreement and each of the Transaction Documents to which
it is a party (including the consummation by such Purchaser of the
transactions contemplated hereby and thereby) (a) are within the power and
authority of such Purchaser and (b) have been duly authorized by all
necessary action on the part of such Purchaser. This Agreement has been,
and each of the other Transaction Documents to which it is a party when
executed and delivered by such Purchaser will be, duly and validly executed
and delivered by such Purchaser, and this Agreement constitutes, and each
of such other Transaction Documents when executed and delivered by such
Purchaser will constitute, a valid and binding agreement of such Purchaser
enforceable against such Purchaser in accordance with its respective terms
except as such enforcement is limited by bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors' rights generally and
for limitations imposed by general principles of equity.
3.7. Consents, No Violations. Neither the execution, delivery or
performance by such Purchaser of this Agreement or any of the other
Transaction Documents to which it is a party nor the consummation of the
transactions contemplated hereby or thereby will (a) conflict with, or
result in a breach or a violation of, any provision of the organizational
documents of such Purchaser; (b) constitute, with or without notice or the
passage of time or both, a breach, violation or default, create an
Encumbrance, or give rise to any right of termination, modification,
cancellation, prepayment, suspension, limitation, revocation or
acceleration, under (i) any law, or (ii) any provision of any agreement or
other instrument to which such Purchaser is a party or pursuant to which
the Purchaser or its assets or properties is subject, except, with respect
to the matters set forth in clause (ii), for breaches, violations,
defaults, Encumbrances, or rights of termination, modification,
cancellation, prepayment, suspension, limitation, revocation or
acceleration, which, individually or in the aggregate, would not materially
adversely affect the ability of such Purchaser to consummate the
transactions contemplated by this Agreement or any Transaction Document to
which it is a party; or (c) except for any required filing under the HSR
Act and the filings set forth on Schedule 3.7, require any consent,
approval or authorization of, notification to, filing with, or exemption or
waiver by, any Governmental Entity or any other Person on the part of the
Purchaser.
3.8. Sufficient Funds. As of the date hereof, the Purchaser has
binding commitments for, and as of the Closing, the Purchaser will have,
sufficient funds available (through immediately available cash or existing
credit facilities) to enable it to consummate the transactions contemplated
hereby.
Article IV
COVENANTS
4.1. Conduct of Business by the Company Pending the Closing.
Except as expressly contemplated by this Agreement or as required in
connection with the Restructuring (including in any proceedings required
under the Bankruptcy Code in connection with the Restructuring) or as set
forth on Schedule 4.1, during the period between the date of this Agreement
and the Closing, the Company shall, and shall cause each of its
Subsidiaries to, (i) conduct its business only in the ordinary course and
consistent with past practice, (ii) use reasonable efforts to preserve and
maintain its assets and properties and its relationships with its
customers, suppliers, advertises, distributors, agents, officers and
employees and other Persons with which it has significant business
relationships, (iii) use reasonable efforts to maintain all of the material
assets it owns or uses in the ordinary course of business consistent with
past practice, (iv) use reasonable efforts to preserve the goodwill and
ongoing operations of its business, (v) maintain its books and records in
the usual, regular and ordinary manner, on a basis consistent with past
practice and (vi) comply in all material respects with applicable Laws:
4.2. Press Releases; Interim Public Filings. The Company shall,
to the extent any such press releases and public filings refer in any way
to the Purchasers and/or their Affiliates, shall give the Purchasers the
reasonable opportunity to review and comment on such releases and filings,
in each case prior to release in the form in which it will be issued.
4.3. HSR Act. Each of the Purchasers and the Company shall
cooperate in making filings under the HSR Act and shall use its reasonable
efforts to take, or cause to be taken, all actions necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, including using its reasonable
efforts to resolve such objections, if any, as the Antitrust Division of
the Department of Justice or the Federal Trade Commission or state
antitrust enforcement or other Governmental Entities may assert under
antitrust laws with respect to the transactions contemplated hereby.
4.4. Listing. The Company shall use its reasonable efforts to
continue to have its Class A Common Stock listed on the NASDAQ National
Market System (the "NMS") or a national securities exchange for so long as
any Securities or any shares of Class A Common Stock are outstanding. Prior
to the Closing, the Company shall prepare and submit to the NMS a listing
application, if applicable, covering the Conversion Shares and shall obtain
approval for the listing of such shares, subject to, in the case of the
Conversion Shares, official notice of issuance.
4.5. Board Representation; VCOC. (a) Section 3 of the Certificate
of Designation for the Series G Preferred Stock provides that the holders
of Series G Preferred Stock shall be entitled to elect two directors to the
Board of Directors subject to the terms set forth therein. Accordingly,
subject to the Certificate of Designation for the Series G Preferred Stock,
the Purchasers as holders of Series G Preferred Stock, shall be entitled to
designate for election to the Board of Directors two directors (the
"Purchasers' Directors"). ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, each
of whom currently serves on the Board of Directors as a director designee
of the Series D Preferred Stock, shall serve as the initial Purchasers'
Directors for purposes of the Series G Preferred Stock. Thereafter, in
connection with any annual meeting of stockholders at which the term of a
Purchasers' Director is to expire, the Company will take all necessary
action to cause a Purchasers' Director to be nominated and use its
reasonable efforts to cause such Purchasers' Director to be elected to the
Board of Directors. In the event a vacancy shall exist in the office of a
Purchasers' Director, the Purchasers shall be entitled to designate a
successor and the Board of Directors shall elect such successor and, in
connection with the meeting of stockholders of the Company next following
such election, nominate such successor for election as director by the
stockholders and use its reasonable efforts to cause the successor to be
elected. Without limiting the generality of the foregoing, the Purchasers'
Directors may inspect all contracts, books, records, personnel, offices and
other facilities and properties of the Company and, to the extent available
to the Company after the Company uses reasonable efforts to obtain them,
the records of its accountants, including the accountants' work papers, and
the Purchasers' Directors may make such copies and inspections thereof as
the Purchasers' Directors may request. The Company shall furnish the
Purchasers' Directors with such financial and operating data and other
information with respect to the business and properties of the Company as
the Purchasers' Directors may request. The Company shall permit each of the
Purchasers' Directors to discuss the affairs, finances and accounts of the
Company with, and to make proposals and furnish advice with respect
thereto, the principal officers of the Company. Notwithstanding anything
contained in this Section 4.5 to the contrary, the provisions of the
Certificate of Designation shall govern the rights of holders of Series G
Preferred Stock to elect directors (including any Purchasers' Directors).
In the event that the holders of the Series G Preferred Stock shall cease
to be entitled to elect any Purchasers' Director and shall become entitled
to designate a "Board Observer" pursuant to, and as defined in, Section
3(b) thereof, such Board Observer shall the rights set forth in Sections
(d) through (f) of this Section 4.5.
(b) The rights set forth in Section 4.5(a) are intended to
satisfy the requirement of contractual management rights for purposes of
qualifying each of the Purchaser's ownership interests in the Company as
venture capital investments for purposes of the Department of Labor's "plan
assets" regulations, and in the event such rights are not satisfactory for
such purpose as to any such Purchaser, the Company and such Purchaser shall
reasonably cooperate in good faith to agree upon mutually satisfactory
management rights which satisfy such regulations.
(c) The Company shall promptly reimburse the Purchasers'
Directors for all reasonable expenses incurred by them in connection with
their attendance at meetings and any other activities undertaken in their
capacity as directors or an observer consistent with the policies of the
Company in effect on the date hereof or as such policies may be modified
and generally applied to the Company's Board of Directors.
(d) In addition, each Original FL Purchaser shall be
entitled to routinely consult with and advise management of the Company
with respect to the Company's business and financial matters, including
management's proposed annual operating plans, and management will meet
regularly during each year with representatives of each Original FL
Purchaser (the "Representatives") at the Company's facilities at mutually
agreeable times for such consultation and advice, including to review
progress in achieving said plans. The Company shall give each Original FL
Purchaser reasonable advance written notice of any significant new
initiatives or material changes to existing operating plans and shall
afford each Original FL Purchaser adequate time to meet with management to
consult on such initiatives or changes prior to implementation. The Company
agrees to give due consideration to the advice given and any proposals made
by each Original FL Purchaser.
(e) Each Original FL Purchaser may inspect all contracts,
books, records, personnel, offices and other facilities and properties of
the Company and, to the extent available to the Company after the Company
uses reasonable efforts to obtain them, the records of its accountants,
including the accountants' work papers, and each Original FL Purchaser may
make such copies and inspections thereof as each Original FL Purchaser may
reasonably request. The Company shall furnish each Original FL Purchaser
with such financial and operating data and other information with respect
to the business and properties of the Company as each Original FL Purchaser
may reasonably request. The Company shall permit the Representatives to
discuss the affairs, finances and accounts of the Company with, and to make
proposals and furnish advice with respect thereto, the principal officers
of the Company.
(f) The Company shall, after receiving notice from each
Original FL Purchaser as to the identity of any Representative, (i) permit
a Representative to attend all Board meetings and all committees thereof as
an observer, (ii) provide the Representative advance notice of each such
meeting, including such meeting's time and place, at the same time and in
the same manner as such notice is provided to the members of the Board (or
such committee thereof), (iii) provide the Representative with copies of
all materials, including notices, minutes and consents, distributed to the
members of the Board (or such committee thereof) at the same time as such
materials are distributed to such Board (or such committee thereof) and
shall permit the Representative to have the same access to information
concerning the business and operations of the Company and (iv) permit the
Representative to discuss the affairs, finances and accounts of the Company
with, and to make proposals and furnish advice with respect thereto to, the
Board, without voting, and the Board and the Company's officers shall take
such proposals or advice seriously and give due consideration thereto.
Reasonable costs and expenses incurred by the Representative for the
purposes of attending Board (or committee) meetings and conducting other
Company business will be paid by the Company.
(g) The rights set forth in Sections 4.5(d), 4.5(e) and
4.5(f) are intended to satisfy the requirement of contractual management
rights for purposes of qualifying each of the Original FL Purchaser's
ownership interests in the Company as venture capital investments for
purposes of the Department of Labor's "plan assets" regulations, and in the
event such rights are not satisfactory for such purpose as to any such
Original FL Purchaser, the Company and such Original FL Purchaser shall
reasonably cooperate in good faith to agree upon mutually satisfactory
management rights which satisfy such regulations.
4.6. Certificates of Designation. The Company shall cause the
Certificates of Designation to be filed with the Secretary of State of the
State of Delaware prior to the Closing.
4.7. Cooperation. Each of the Purchasers and the Company agrees
to use its reasonable efforts to take, or cause to be taken, all such
further actions as shall be necessary to make effective and consummate the
transactions contemplated by this Agreement.
4.8. Reserve Shares. After the Closing, the Company will at all
times reserve and keep available, solely for issuance and delivery upon
conversion of the Preferred Share and the exercise of the Warrants, the
number of shares of Class A Common Stock from time to time issuable upon
conversion of all shares of the Preferred Shares or upon the exercise of
the Warrants at the time outstanding. All shares of Class A Common Stock
issuable upon conversion of the Preferred Shares or upon the exercise of
the Warrants shall be duly authorized and, when issued upon such conversion
or exercise, shall be validly issued, fully paid and nonassessable.
4.9. Restrictions on Transfer. (a) Subject to compliance with
applicable securities laws, from and after the Closing, the FL Purchasers
may sell, transfer, assign, convey, gift, mortgage, pledge, encumber,
hypothecate or otherwise dispose of, directly or indirectly ("Transfer"),
any of the Preferred Shares, Warrants, Conversion Shares or Class A Common
Stock owned by them (individually and collectively, "FL Securities");
provided, that, prior to the Standstill Termination Date (as defined
below), the FL Purchasers shall not make any Transfer of any of their FL
Securities (other than Transfers between FL Purchasers and their Affiliates
who agree in writing to be bound by the terms of this Agreement) to any
Person or group which is, or which Purchaser believes or should reasonably
believe will seek to become, the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) of more than 50% of the outstanding voting
securities of the Company (such Person or group, a "Disqualified Person,"
and such sale to a Disqualified Person, a "Disqualified Transaction"),
unless such Transfer is specifically approved in advance in writing by the
Board of Directors or unless the procedures set forth in this Section 4.9
have been complied with.
(b) At any time prior to the Standstill Termination Date,
any FL Purchaser may give written notice to the Company (the "Offer
Notice") (which may be joined in by one or more of the other FL Purchasers,
in which event all references hereafter to FL Purchaser shall be to all of
such FL Purchasers who join in the Offer Notice) that it desires to sell
some or all of its FL Securities in a transaction that may constitute a
Disqualified Transaction, and setting forth the minimum price in cash at
which it is prepared to sell such FL Securities. Such notice may but need
not identify a specific purchaser for such FL Securities.
(c) The Company shall have 45 days from the date of the
Offer Notice to enter into or cause a designee of the Company to enter into
a definitive purchase agreement (the "Purchase Agreement") for the FL
Securities which are the subject of the Offer Notice or to advise the FL
Purchaser that the Board of Directors has approved or has no objection to
such transaction. If the Company or its designee enters into a Purchase
Agreement for the purchase of the FL Securities which are the subject of
the Offer Notice, then the Company or its designee shall be obligated to
purchase such FL Securities within 90 days following the execution of the
Purchase Agreement. The Purchase Agreement must provide that it is
unconditional (except for receipt of regulatory approvals), that the
purchase price for the FL Securities being purchased shall be paid in cash
(unless the FL Purchaser otherwise agrees in writing), and (in the case
where the purchaser is a designee of the Company) that, in the event the
designee (or an affiliate thereof) acquires all or substantially all of the
remaining shares of the Company within 6 months of the date of the closing
under the Purchase Agreement for a blended average price per share (which,
if in the form of marketable securities, shall be determined based on a
10-trading day average at the time of the purchase) that is greater than
the price per share received by the FL Purchaser under the Purchase
Agreement, the FL Purchaser shall be entitled to receive from such Person
the amount by which the blended average per share price paid by such Person
for the balance of the outstanding shares of Class A Common Stock exceeds
the per share purchase price paid under the Purchase Agreement multiplied
by the number of FL Securities sold under the Purchase Agreement.
(d) If no definitive agreement is entered into within 45
days of the Offer Notice, the FL Purchasers shall have the right for 180
days following the end of such 45 day period to enter into a definitive
agreement for the sale of their FL Securities with any Person, including a
Disqualified Transferee, at a per share price no less than that specified
in the Offer Notice.
(e) If the FL Purchaser and the Company or its designee
enter into a Purchase Agreement and the Company or its designee, as
applicable, fails to timely consummate the purchase of the FL Securities
thereunder in accordance with the terms thereof for any reason other than
the breach by the FL Purchaser of the Purchase Agreement, then, in addition
to all other remedies the FL Purchaser may have by reason of such
non-consummation, this Section 4.9 shall be of no further force or effect.
(f) Notwithstanding any other provision of this Section 4.9,
no FL Purchaser shall avoid the provisions of this Section 4.9 by making
one or more Transfers to one or more Affiliates and then disposing of all
or any portion of such FL Purchaser's interest in any such Affiliate. The
FL Purchasers shall give the Company notice promptly of any Transfer.
Transfers in violation of the provisions of this Agreement shall be null
and void, and the securities subject to such Transfer shall remain subject
to this Agreement.
(g) Any FL Purchaser, by subsequent written notice, may,
following the giving of an Offer Notice, revoke such notice, in which event
any subsequent sale of FL Securities by the FL Purchaser shall continue to
be subject to this Section 4.9 as if no Offer Notice had been sent, or
change the minimum price or number of FL Securities set forth in the Offer
Notice, in which event the 45-day time period shall recommence from the
date of the giving of the subsequent notice.
(h) For purposes hereof, the term "Standstill Termination
Date" shall mean the close of business on the day preceding the third
anniversary of the Closing Date, or, if earlier, the date ▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ is removed, without his consent, as the Chairman of the Executive
Committee of the Board.
4.10. Standstill Agreement. (a) During the period commencing on
the Closing Date and ending on the Standstill Termination Date (the
"Standstill Period") except as (x) specifically permitted by this Agreement
(including sales made in compliance with the provisions of Section 4.9) or
(y) specifically approved in writing in advance by the Board of Directors
of the Company, the Purchasers shall not, and shall cause any Affiliates
controlled by them to not, in any manner, directly or indirectly:
(1) acquire, or offer or agree to acquire, or become the
"beneficial owner" (as defined above) of or obtain any rights in
respect of, any capital stock of the Company, except for any shares of
Class A Common Stock that may be issuable upon the conversion or
reclassification of the 2001 Preferred, Preferred Shares, the Warrants
or otherwise as permitted pursuant to this Agreement, provided, that
the foregoing limitation shall not prohibit the acquisition of
securities of the Company or any of its successors issued as dividends
or as a result of stock splits and similar reclassifications or
received in a merger or other business combination involving the 2001
Preferred, Preferred Shares, the Warrants or shares of Class A Common
Stock (including any Conversion Shares) held by the FL Purchasers or
any of their Affiliates at the time of such dividend, split or
reclassification or merger or business combination;
(2) solicit proxies or consents or become a "participant" in
a "solicitation" (as such terms are defined or used in Regulation 14A
under the Exchange Act) of proxies or consents with respect to any
voting securities of the Company or any of its successors or initiate
or become a participant in any stockholder proposal or "election
contest" with respect to the Company or any of its successors or
induce others to initiate the same, or otherwise seek to advise or
influence any person with respect to the voting of any voting
securities of the Company or any of its successors (except for
activities undertaken by the FL Purchasers or the FL Purchasers'
Directors in connection with solicitations by the Board of Directors);
or
(3) solicit or participate in the solicitation of any Person
or entity to acquire, offer to acquire or agree to acquire, by merger,
tender offer, purchase or otherwise, the Company or a substantial
portion of its assets or more than 50% of the outstanding capital
stock; provided, that, no action taken by the FL Purchasers or their
Affiliates or representatives in connection with the sale of any of
their FL Securities shall constitute a violation of this clause (3).
(b) Nothing contained in this Section 4.10 (1) shall
prohibit any of the FL Purchasers or their Affiliates from complying with
Rules 13d-1 through 13d-7, as applicable, promulgated under the Exchange
Act or from making such disclosure to the Company's stockholders or from
taking such action which, in their judgment may be required under
applicable law, or (2) shall be deemed to restrict the manner in which the
directors designated by the FL Purchasers pursuant to the Series G
Certificate of Designations participate in deliberations or discussions of
the Board of Directors.
(c) During the Standstill Period, the FL Purchasers and
their Affiliates shall be present, in person or by proxy, and without
further action hereby agree that they shall be deemed to be present, at all
meetings of stockholders of the Company so that all voting securities
(including Class A Common Stock) beneficially owned by the FL Purchasers
and their Affiliates shall be counted for purposes of determining the
presence of a quorum at such meetings. During the Standstill Period, all
voting securities (including Class A Common Stock) beneficially owned by
the FL Purchasers and their Affiliates shall be voted by the FL Purchasers
and their Affiliates, in all elections of directors of the Company in
accordance with the bylaws of the Company, such that (i) at least five
members of the Board of Directors are qualified as "Independent Directors"
as defined in the bylaws and (ii) the Chairman, the Chief Executive
Officer, and the Chief Financial Officer of the Company are elected as
members to the Board of Directors as required by the bylaws. The bylaws of
the Company shall be amended to reflect the foregoing arrangements relating
to the directors of the Company. The FL Purchasers agree to vote their FL
Securities for the approval of a bylaw amendment adopting the board
composition described above.
4.11. Consents; Approvals. The Company shall use its reasonable
efforts to obtain all consents, waivers, exemptions, approvals,
authorizations or orders (collectively, "Consents") (including, without
limitation (i) Consents required to avoid any breach, violation, default,
encumbrance or right of termination, modification, cancellation,
prepayment, suspension, limitation, revocation or acceleration of any
material agreement or instrument to which the Company is a party or its
properties or assets are bound, (ii) all Consents pursuant to the Company's
or any Subsidiary's financing documents, including without limitation, all
indentures and credit agreements of the Company or any Subsidiary, and
(iii) all United States and foreign governmental and regulatory rulings and
approvals). The Company also shall use reasonable efforts to obtain all
necessary state securities laws or blue sky permits and approvals required
to carry out the transactions contemplated hereby and shall furnish all
information as may be reasonably requested in connection with any such
action.
4.12. Access to Property; Records. Between the date hereof and
the Closing the Company shall afford the Purchasers and their employees,
counsel, accountants, partners, investors, and other authorized
representatives reasonable access upon notice, during normal business
hours, to the assets, properties, offices and other facilities and books
and records of the Company and its subsidiaries, and to the outside
auditors of the Company and their work papers. The parties hereto agree
that no investigation by the Purchasers or their representatives shall
affect or limit the scope of the representations and warranties of the
Company contained in this Agreement or in any other Transaction Document
delivered pursuant hereto or limit the liability for breach of any such
representation or warranty.
4.13. Capitalization Certificate. At the Closing, the Company
shall deliver a certificate of its Chief Operating and Financial Officer
setting forth the capitalization of the Company and containing the other
representations and warranties set forth on Exhibit 4.
4.14. Registration Rights. At the Closing, the Company shall
enter into a registration rights agreement with the Purchasers
substantially identical to the registration rights agreement among the
Original FL Purchasers and the Company (the "Original Registration Rights
Agreement").
4.15. Shareholder Rights Plan. For so long as the FL Purchasers
shall own FL Securities representing at least 60% of the aggregate amount
of FL Securities (each amount calculated on an as converted basis) owned by
them immediately after the Closing (the "Initial Securities"), the Company
shall not adopt or implement any stockholders rights plan or similar plan
or device (collectively, a "Rights Plan"). From and after the earlier of
(i) the time that the FL Purchasers shall cease to own FL Securities
representing at least 60% of the amount of Initial Securities or (ii) the
time the FL Purchasers shall complete a sale of FL Securities in a
Disqualified Transaction, the Company may adopt a Rights Plan, provided,
that the percentage that would trigger any rights by the other stockholders
of the Company must be at least one percentage point greater than the
aggregate percentage ownership (on an as converted basis) of the FL
Purchasers in the Company immediately prior to the adoption of the Rights
Plan.
4.16. Section 203 Opt-Out. Prior to the Closing, the Company
shall exercise all authority under applicable law to effect an amendment to
its certificate of incorporation expressly electing not to be governed by
Section 203 of the DGCL.
4.17. Executive Committee Composition. The Company agrees that
the executive committee of the Board of Directors (the "Executive
Committee") shall consist of no more than seven members, including (i) for
so long as the Purchasers are entitled to designate members to the Board of
Directors, the Series G Director Designees or Designee of the Purchasers,
(ii) the Chairman of the Board of Directors, (iii) the Chief Executive
Officer of the Company and (iv) the Chief Operating Officer of the Company.
The bylaws of the Company shall be amended to reflect the composition of
the executive committee. The FL Purchasers agree to vote their FL
Securities for the approval of a bylaw amendment adopting the provisions of
this Section.
4.18. Termination Agreement. At the Closing, the Company shall
enter into an agreement with the Original FL Purchasers terminating the
Exchange Agreement, dated as of September 30, 2001, among the Original FL
Purchasers and the Company and confirming that the Original Registration
Rights Agreement shall continue in full force and effect with respect to
the Class A Common Stock to be issued in exchange for the 2001 Preferred in
the Restructuring.
Article V
CONDITIONS
5.1. Conditions to Obligations of the Purchasers and the Company.
The respective obligations of the Purchasers and the Company to consummate
the transactions contemplated hereby are subject to the satisfaction or
waiver at or prior to the Closing of each of the following conditions:
(a) no statute, rule, regulation, executive order, decree,
or injunction shall have been enacted, entered, promulgated or enforced by
any court or Governmental Entity which prohibits or restricts the
consummation of the transactions contemplated hereby;
(b) any waiting period (and any extension thereof) under the
HSR Act applicable to this Agreement and the transactions contemplated
hereby shall have expired or been terminated;
(c) any material required filings or other consents, if any,
of state regulatory bodies shall have been made or obtained; and
(d) all conditions precedent to the consummation of the
Restructuring shall have been satisfied and the Restructuring shall be
occurring simultaneously with the Closing with such modifications in the
terms of the Restructuring that do not materially deviate from the terms
set forth on Exhibit A.
5.2. Conditions to Obligations of the Purchasers. The obligations
of the Purchasers to consummate the transactions contemplated hereby shall
be subject to the satisfaction or waiver at or prior to the Closing of each
of the following conditions:
(a) Each of the representations and warranties of the
Company contained in this Agreement shall be true and correct when made and
as of the Closing (except to the extent such representations and warranties
are made as of a particular date, in which case such representations and
warranties shall have been true and correct as of such date), except for
failures to be true and correct which individually or in the aggregate
would not have a Material Adverse Effect;
(b) The Company shall have performed, satisfied and complied
in all material respects with all of its covenants and agreements set forth
in this Agreement to be performed, satisfied and complied with prior to or
at the Closing;
(c) The Company shall have executed and delivered the
Registration Rights Agreement and the Termination Agreement referred to in
Sections 4.14 and 4.18, respectively, and each such agreement shall be in
full force and effect;
(d) The Certificates of Designation shall have been duly
filed with the Secretary of State of the State of Delaware in accordance
with the laws of the State of Delaware and the Certificates of Designation
shall be in full force and effect;
(e) The Conversion Shares shall have been duly authorized
and reserved for issuance;
(f) The Company's Certificate of Incorporation shall have
been amended to expressly elect not to be governed by Section 203 of the
DGCL; and
(g) The Company shall have delivered the Capitalization
Certificate referred to in Section 4.13.
5.3. Conditions to Obligations of the Company. The obligations of
the Company to consummate the transactions contemplated hereby shall be
subject to the satisfaction or waiver at or prior to the Closing of each of
the following conditions:
(a) Each of the representations and warranties of the
Purchasers contained in this Agreement shall be true and correct when made
and as of the Closing (except to the extent such representations and
warranties are made as of a particular date, in which case such
representations and warranties shall have been true and correct as of such
date), except for failures to be true and correct which individually or in
the aggregate would not reasonably be expected to have a material adverse
effect on the Purchasers' ability to perform its obligations under this
Agreement; and
(b) The Purchasers shall have performed, satisfied and
complied in all material respects with all of their covenants and
agreements set forth in this Agreement to be performed, satisfied and
complied with prior to or at the Closing Date.
Article VI
TERMINATION
6.1. Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual written consent of the Company and the
Purchasers;
(b) by the Company or the Purchasers at any time after
August 1, 2002 if the Closing shall not have occurred by such date;
provided, however, that the failure of the transactions contemplated hereby
to occur on or before such date is not the result of the breach of any
covenants or agreements contained herein by the party seeking to terminate
this Agreement; or
(c) by the Company or by the Purchasers, if any governmental
entity of competent jurisdiction shall have issued an order, decree or
ruling or taken other action restraining, enjoining or otherwise
prohibiting the transactions contemplated hereby and such order, decree,
ruling or other action shall have become final and nonappealable.
6.2. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 6.1, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto
(or any stockholder, director, officer, partner, employee, agent,
consultant or representative of such party) except as set forth in this
Section 6.2, provided that nothing contained in this Agreement shall
relieve any party from liability for any willful breach of this Agreement
and provided further that this Section 6.2 and Sections 7.3, 7.14, 7.15 and
7.16 shall survive termination of this Agreement.
Article VII
MISCELLANEOUS
7.1. Defined Terms; Interpretations. The following terms, as used
herein, shall have the following meanings:
"2001 Preferred" shall mean the Company's Series D and Series E
Convertible Preferred Stock.
"Affiliate" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act.
"Bankruptcy Code" shall mean Title 11 of the United States Code.
"Board of Directors" shall mean the Board of Directors of the
Company.
"Class A Common Stock" shall have the meaning the Company's Class
A Common Stock, par value $.01 per share, which meaning shall include any
and all securities of any kind whatsoever of the Company which may be
exchanged for or converted into such Class A Common Stock, and any and all
securities of any kind whatsoever of the Company which may be issued on or
after the date hereof in respect of, in exchange for, or upon conversion of
shares of Class A Common Stock pursuant to a merger, consolidation, stock
split, stock dividend, recapitalization of the Company or otherwise.
"Conversion Shares" shall mean any shares of Class A Common Stock
issued upon conversion of any Preferred Shares or upon exercise of the
Warrants, any and all securities of any kind whatsoever of the Company
which may be exchanged for or converted into such Class A Common Stock, and
any and all securities of any kind whatsoever of the Company which may be
issued on or after the date hereof in respect of, in exchange for, or upon
conversion of shares of Class A Common Stock pursuant to a merger,
consolidation, stock split, stock dividend, recapitalization of the Company
or otherwise.
"DGCL" shall mean the Delaware General Corporation Law.
"Encumbrances" shall have the mean liens, charges, claims,
security interests, restrictions, options, proxies, voting trusts or other
encumbrances.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of
the SEC thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934,
as amended, shall include reference to the comparable section, if any, of
any such successor federal statute.
"Governmental Entity" shall mean any supernational, national,
foreign, federal, state or local judicial, legislative, executive,
administrative or regulatory body or authority.
"HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended, and the rules and regulations thereunder.
"Laws" shall include all foreign, federal, state and local laws,
statutes, ordinances, rules, regulations, orders, judgments, decrees and
bodies of law.
"Material Adverse Effect" shall mean a material adverse effect on
the business, operations, results of operations, assets, or condition
(financial or otherwise) of the Company and its Subsidiaries, taken as
whole (a "Company Material Adverse Effect"); provided, that any adverse
effects on or changes in the Company or any of its Subsidiaries resulting
from or relating to (i) the execution of this Agreement and the
announcement of this Agreement and the transactions contemplated hereby or
(ii) the announcement of, and subsequent disclosures related to, the
Restructuring or the commencement or pendency of proceedings under the
Bankruptcy Code by or against Parent and/or its Subsidiaries shall be
excluded from the determination of a Company Material Adverse Effect.
"Person" shall mean any individual, firm, corporation, limited
liability company, partnership, company or other entity, and shall include
any successor (by merger or otherwise) of such entity.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of
the SEC thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Act shall include
reference to the comparable section, if any, of such successor federal
statute.
"Transaction Documents" shall mean this Agreement, the
Certificates of Designation, the Warrants, the Registration Rights
Agreement and the Termination Agreement and all other contracts,
agreements, schedules, certificates and other documents being delivered
pursuant to this Agreement or the transactions contemplated hereby.
7.2. Survival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
earlier of (i) termination of this Agreement or (ii) the Closing Date. This
Section 7.2 shall not limit any covenant or agreement of the parties hereto
which by its terms contemplates performance after the Closing Date.
7.3. Fees and Expenses. All costs and expenses incurred in
connection with this Agreement shall be paid by the party incurring such
costs or expense; provided that the Company will reimburse the Purchasers
at Closing for reasonable out-of-pocket fees and expenses paid to third
parties solely in connection with the transactions contemplated hereby.
7.4. Public Announcements. The Purchasers and the Company have
consulted with each other and issued a press release with respect to this
Agreement and the transactions contemplated hereby and neither shall issue
any further press release or make any further public statement without the
prior consent of the other, which consent shall not be unreasonably
withheld or delayed; provided, however, that a party may, without the prior
consent of the other party, issue such press release or make such public
statement as may upon the advice of counsel be required by law, the NMS or
any exchange on which the Company's securities are listed and, to the
extent time permits, it has used all reasonable efforts to consult with the
other party prior thereto.
7.5. Restrictive Legends. In addition to the restrictions set
forth in Section 4.11, no Preferred Shares, Warrant or Conversion Shares
may be transferred without registration under the Securities Act and
applicable state securities laws unless counsel to the Company shall advise
the Company that such transfer may be effected without such registration.
(a) Each certificate representing the Preferred Shares shall
bear legends in substantially the following form:
THE COMPANY IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OR SERIES OF
STOCK. AS REQUIRED UNDER DELAWARE LAW, THE COMPANY SHALL FURNISH TO
ANY HOLDER UPON REQUEST AND WITHOUT CHARGE, A FULL SUMMARY STATEMENT
OF THE DESIGNATIONS, VOTING RIGHTS, PREFERENCES, LIMITATIONS AND
SPECIAL RIGHTS OF THE SHARES OF EACH CLASS OR SERIES AUTHORIZED TO BE
ISSUED BY THE COMPANY SO FAR AS THEY HAVE BEEN FIXED AND DETERMINED
AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO FIX AND DETERMINE THE
DESIGNATIONS, VOTING RIGHTS, PREFERENCES, LIMITATIONS AND SPECIAL
RIGHTS OF THE CLASSES AND SERIES OF SECURITIES OF THE COMPANY.
THE SHARES AND ANY SHARES OF COMMON STOCK ACQUIRED UPON CONVERSION OF
SUCH SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR
UNDER ANY APPLICABLE STATE LAWS. THE SHARES REPRESENTED BY THIS
CERTIFICATE HAVE BEEN ACQUIRED BY THE REGISTERED OWNER HEREOF FOR
INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE 1933 ACT. THE SHARES
MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT IN A
TRANSACTION WHICH IS EXEMPT UNDER THE PROVISIONS OF THE 1933 ACT OR
ANY APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR IN A TRANSACTION OTHERWISE IN COMPLIANCE
WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
THE SALE, PLEDGE, TRANSFER, ASSIGNMENT OR OTHER DISPOSITION OF THE
SHARES REPRESENTED BY THIS CERTIFICATE AND ANY SHARES OF COMMON STOCK
ACQUIRED UPON CONVERSION OF SUCH SHARES IS RESTRICTED BY AND SUBJECT
TO THE PROVISIONS OF A STOCK PURCHASE AGREEMENT DATED AS OF DECEMBER
3, 2001, A COPY OF WHICH IS AVAILABLE UPON REQUEST FOR INSPECTION AT
THE OFFICES OF THE COMPANY. ANY SUCH REQUEST SHOULD BE ADDRESSED TO
THE SECRETARY OF THE COMPANY.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE SHALL BE REDEEMABLE AS
PROVIDED IN THE CERTIFICATE OF DESIGNATION AND THE COMPANY'S AMENDED
AND RESTATED CERTIFICATE OF INCORPORATION. THE SECURITIES EVIDENCED BY
THIS CERTIFICATE SHALL BE CONVERTIBLE INTO THE COMPANY'S CLASS A
COMMON STOCK IN THE MANNER AND ACCORDING TO THE TERMS SET FORTH IN THE
CERTIFICATE OF DESIGNATION.
(b) Each Warrant shall bear a legend in substantially the
following form:
THIS WARRANT AND ANY SHARES OF COMMON STOCK ACQUIRED UPON THE EXERCISE
OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR UNDER ANY APPLICABLE STATE LAWS. THIS
WARRANT HAS BEEN ACQUIRED BY THE REGISTERED OWNER HEREOF FOR
INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE 1933 ACT. THIS WARRANT
AND ANY SHARES OF COMMON STOCK ACQUIRED UPON THE EXERCISE OF THIS
WARRANT MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT IN A
TRANSACTION WHICH IS EXEMPT UNDER THE PROVISIONS OF THE 1933 ACT OR
ANY APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR IN A TRANSACTION OTHERWISE IN COMPLIANCE
WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
THE SALE, PLEDGE, TRANSFER, ASSIGNMENT OR OTHER DISPOSITION OF THIS
WARRANT AND ANY SHARES OF COMMON STOCK ACQUIRED UPON THE EXERCISE OF
THIS WARRANT IS RESTRICTED BY AND SUBJECT TO THE PROVISIONS OF A
PURCHASE AGREEMENT DATED AS OF DECEMBER 3, 2001, A COPY OF WHICH IS
AVAILABLE UPON REQUEST FOR INSPECTION AT THE OFFICES OF THE COMPANY.
ANY SUCH REQUEST SHOULD BE ADDRESSED TO THE SECRETARY OF THE COMPANY.
(c) Each certificate representing Conversion Shares shall
bear a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR
UNDER ANY APPLICABLE STATE LAWS. THE SHARES REPRESENTED BY THIS
CERTIFICATE HAVE BEEN ACQUIRED BY THE REGISTERED OWNER HEREOF FOR
INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE 1933 ACT. THE SHARES
MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT IN A
TRANSACTION WHICH IS EXEMPT UNDER THE PROVISIONS OF THE 1933 ACT OR
ANY APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR IN A TRANSACTION OTHERWISE IN COMPLIANCE
WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
THE SALE, PLEDGE, TRANSFER, ASSIGNMENT OR OTHER DISPOSITION OF THE
SHARES REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY AND SUBJECT TO
THE PROVISIONS OF A STOCK PURCHASE AGREEMENT DATED AS OF DECEMBER 3,
2001, A COPY OF WHICH IS AVAILABLE UPON REQUEST FOR INSPECTION AT THE
OFFICES OF THE COMPANY. ANY SUCH REQUEST SHOULD BE ADDRESSED TO THE
SECRETARY OF THE COMPANY.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE SHALL BE REDEEMABLE AS
PROVIDED IN THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION.
7.6. Further Assurances. At any time or from time to time after
the Closing, the Company, on the one hand, and the Purchasers, on the other
hand, agree to cooperate with each other, and at the request of the other
party, to execute and deliver any further instruments or documents and to
take all such further action as the other party may reasonably request in
order to evidence or effectuate the consummation of the transactions
contemplated hereby or by the other Transaction Documents and to otherwise
carry out the intent of the parties hereunder or thereunder.
7.7. Successors and Assigns. This Agreement shall bind and inure
to the benefit of the Company and the Purchasers and the respective
successors, permitted assigns, heirs and personal representatives of the
Company and the Purchasers, provided that prior to the Closing the Company
may not assign its rights or obligations under this Agreement to any Person
without the prior written consent of the Purchasers, and provided further
that the Purchasers may not assign their rights or obligations under this
Agreement to any Person (other than an Affiliate) without the prior written
consent of the Company. In addition, and whether or not any express
assignment has been made, the provisions of this Agreement which are for
the Purchasers' benefit as purchasers or holders of Preferred Shares,
Warrants or Conversion Shares are also for the benefit of, and enforceable
by, any Affiliates of the Purchasers who hold such Preferred Shares or
Conversion Shares and received such Preferred Shares or Conversion Shares
in accordance with the terms of this Agreement.
7.8. Entire Agreement. This Agreement and the other Transaction
Documents contain the entire agreement between the parties with respect to
the subject matter hereof and supersede all prior and contemporaneous
arrangements or understandings with respect thereto.
7.9. Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by telecopy,
nationally recognized overnight courier or first class registered or
certified mail, return receipt requested, postage prepaid, addressed to
such party at the address set forth below or such other address as may
hereafter be designated in writing by such party to the other parties:
(i) if to the Company, to:
McLeodUSA Incorporated
McLeodUSA Technology Park
▇▇▇▇ ▇ ▇▇▇▇▇▇ ▇▇
▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ Rings, Esq.
Group Vice President and
Chief Legal Officer
with a copy to (which shall not constitute notice):
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ (Illinois)
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
(ii) if to the Purchasers, to:
c/o Forstmann Little & Co.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
All such notices, requests, consents and other communications
shall be deemed to have been given or made if and when delivered personally
or by overnight courier to the parties at the above addresses or sent by
electronic transmission, with confirmation received, to the telecopy
numbers specified above (or at such other address or telecopy number for a
party as shall be specified by like notice).
7.10. Amendments. The terms and provisions of this Agreement may
be modified or amended, or any of the provisions hereof waived, temporarily
or permanently, in a writing executed and delivered by the Company and the
Purchasers. No waiver of any of the provisions of this Agreement shall be
deemed to or shall constitute a waiver of any other provision hereof
(whether or not similar). No delay on the part of any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof.
7.11. Counterparts. This Agreement may be executed in any number
of counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute
but one agreement.
7.12. Headings. The headings of the sections of this Agreement
have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
7.13. Nouns and Pronouns. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice versa.
7.14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT
GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW.
7.15. Submission to Jurisdiction. This Agreement shall be
governed by, enforced under and construed in accordance with the laws of
the State of Delaware, without giving effect to any choice or conflict of
law provision or rule thereof. Each of the parties hereto hereby
irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of Delaware and of the United
States of America in each case located in the County of Delaware for any
litigation arising out of or relating to this Agreement and the
transactions contemplated hereby (and agrees not to commence any litigation
relating thereto except in such courts), and further agrees that service of
any process, summons, notice or document by U.S. registered mail to its
respective address set forth in Section 7.9 shall be effective service of
process for any litigation brought against it in any such court. Each of
the parties hereto hereby irrevocably and unconditionally waives any
objection to the laying of venue of any litigation arising out of this
Agreement or the transactions contemplated hereby in the courts of the
State of Delaware or of the United States of America in each case located
in the County of Delaware and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court
that any such litigation brought in any such court has been brought in an
inconvenient forum. Notwithstanding the foregoing, in the event that the
Company and/or any of its Subsidiaries commence proceedings under the
Bankruptcy Code, the parties hereto irrevocably and unconditionally consent
to submit to the jurisdiction of the bankruptcy court in which such
proceeding is commenced for any litigation arising out of or relating to
this Agreement and the transactions contemplated thereby (and agree not to
commence any litigation relating thereto except in such bankruptcy court).
7.16. WAIVER OF JURY TRIAL. THE COMPANY AND THE PURCHASERS HEREBY
WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION,
PROCEEDING OR LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR THE TRANSACTION DOCUMENTS.
7.17. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid,
but if any provision of this Agreement is held to be invalid or
unenforceable in any respect, such invalidity or unenforceability shall not
render invalid or unenforceable any other provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first above written.
PURCHASERS
FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP-VII, L.P.
By: FLC XXXII Partnership, L.P.
its general partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
a general partner
FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND EQUITY
MANAGEMENT BUYOUT PARTNERSHIP-VIII, L.P.
By: FLC XXXIII Partnership, L.P.
its general partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
a general partner
ORIGINAL FL PURCHASERS
FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP-V, L.P.
By: FLC XXX Partnership, L.P.
its general partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
a general partner
FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND EQUITY
MANAGEMENT BUYOUT PARTNERSHIP-VI, L.P.
By: FLC XXIX Partnership, L.P.
its general partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
a general partner
FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND EQUITY
MANAGEMENT BUYOUT PARTNERSHIP-VII, L.P.
By: FLC XXXIII Partnership, L.P.
its general partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
a general partner
McLEODUSA INCORPORATED
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
Name ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Operating and Financial Officer
EXHIBIT A
PRINCIPAL TERMS OF RESTRUCTURING
The following is a description of the principal terms for the restructuring
of the Company:
1. The Company will (A) sell its directory publishing business to either
(i) Forstmann Little & Co. or its affiliates for a cash purchase price
of at least $535,000,000 or (ii) such other person that submits a
higher and better all cash offer and (B) use (i) the first
$535,000,000 of the gross cash proceeds of such sale and (ii) at the
Company's option, use the gross cash proceeds in excess of
$560,000,000 to redeem the outstanding Indenture Debt;
2. The FL Standby Purchase Agreement shall not provide for any break-up
fee or any expense reimbursement in favor of the purchaser;
3. In the event that the Restructuring is consummated through the
Out-of-Court Alternative, the Indentures governing the Indenture Debt
will be amended to remove all lien, indebtedness and restrictive
subsidiary agreements restrictions;
4. The outstanding shares of Series A Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock and existing common stock of the
Borrower will be converted to common stock (the "New Common Stock").
5. Forstmann Little & Co. ("Forstmann Little") and its affiliates will
make a $100,000,000 all cash investment in a new series of preferred
stock of the restructured Company, $25,000,000 of such investment will
be used to pay the Borrower's Indenture Debt, $35,000,000 of such
investment will be used to prepay the Term Borrowings and $40,000,000
of such investment will be retained by the Borrower and used for
general corporate purposes, including capital expenditures. Such
preferred stock shall be mandatorily convertible into common stock of
the Company within 60 days of the issuance thereof
6. The Borrower may implement the Restructuring either out-of-court
through an exchange offer for the Indenture Debt and the Borrower's
Series A, D and E Preferred Stock or in-court through a proceeding
under Chapter 11 of the United States Bankruptcy Code, which in either
case shall be consummated on or prior to August 1, 2002;
7. If the Restructuring is accomplished through the In-Court Alternative,
the plan of reorganization for the Restructuring shall be confirmed on
or prior to august 1, 2002 and shall provide that the liens and claims
of the Lenders under the Credit Agreement will be unimpaired within
the meaning of Section 1124 of the Bankruptcy Code;
8. The Company will redeem at least 95% of its outstanding Indenture Debt
for (i) cash in the amount of $560,000,000; (ii) common equity of the
restructured Borrower in an amount acceptable to the Arrangers; and
(iii) at the Borrower's discretion, the excess, if any, of the gross
sales proceeds received by the Borrower in the sale of its directory
publishing business over $560,000,000; and
9. Upon consummation of the Restructuring, (i) Forstmann Little and its
affiliates will be entitled to at least two representatives on the
restructured Borrower's Board of Directors; (ii) Forstmann Little and
its affiliates will own common stock and warrants of the restructured
Borrower in an amount representing approximately 40% of the equity
ownership of the restructured Borrower; and (iii) ▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ will be chairman of the Executive Committee of the
restructured Borrower.
The Company shall be entitled to amend the terms of this Exhibit A without
the consent of Forstmann Little provided that the terms of the amended
Exhibit A do not materially deviate from the terms set forth above.
ANNEX
DEFINITIONS
"Arrangers" means JPMorgan Chase Bank, Bank of America, N.A. and
Citicorp USA, Inc.
"FL Standby Purchase Agreement" means the standby purchase agreement
entered into among Forstmann Little, certain of its affiliates and the
Borrower on or about the Third Amendment Effective Date and each other
agreement, document, certificate or instrument delivered or to be delivered
in connection therewith, pursuant to which Forstmann Little or any of such
affiliates will, in the event that the Borrower has not received and
accepted a higher and better all cash offer for the sale of the Publishing
Assets on or prior to the Restructuring Date, purchase the Publishing
Assets for cash consideration of $535,000,000 on or prior to the
Restructuring Date.
"FL New Preferred Stock Purchase Agreement" means the stock purchase
agreement entered into among Forstmann Little, certain of its affiliates
and the Borrower on or about the Third Amendment Effective Date and each
other agreement, document, certificate or instrument delivered or to be
delivered in connection therewith, pursuant to which Forstmann Little and
such affiliates will make an investment in a new series of preferred stock
(the "New Preferred Stock") of the restructured Borrower as described in
Exhibit A.
"Forstmann Little" is defined in Exhibit A.
"Indenture Debt" means the outstanding Indebtedness of the Borrower
under the Indentures.
"New Common Stock" is defined in Exhibit A.