EXHIBIT 10.57
REGISTRATION RIGHTS AGREEMENT
Dated as of September 30, 2001
between
McLeodUSA INCORPORATED
and
The Purchasers Listed on the Signature Pages Hereto
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REGISTRATION RIGHTS AGREEMENT, dated as of September 30, 2001, between
McLeodUSA Incorporated, a Delaware corporation (the "Company"), and Forstmann
Little & Co. Subordinated Debt and Equity Management Buyout Partnership-VI,
L.P., a Delaware limited partnership ("MBO-VI"), Forstmann Little & Co.
Subordinated Debt and Equity Management Buyout Partnership-VII, L.P., a Delaware
limited partnership ("MBO-VII"), and Forstmann Little & Co. Equity Partnership-
V, L.P., a Delaware limited partnership ("Equity-V" and, collectively with MBO-
VI and MBO-VII, the "Purchasers").
WHEREAS, the Company and the Purchasers have entered into an Exchange
Agreement (the "Exchange Agreement"), dated as of September 30, 2001, pursuant
to which simultaneously herewith, (i) MBO-VI and MBO-VII are exchanging an
aggregate of 275,000 shares of the Company's Series B Preferred Stock, par value
$0.01 per share (the "Series B Preferred Stock"), for an aggregate of 275,000
shares of the Company's Series D Preferred Stock, par value $0.01 per share (the
"Series D Preferred Stock"), and (ii) Equity-V is exchanging an aggregate of
125,000 shares of the Company's Series C Preferred Stock, par value $0.01 per
share (the "Series C Preferred Stock" and, collectively with the Series B
Preferred Stock, the "Old Preferred Shares"), for an aggregate of 125,000 shares
of the Company's Series E Preferred Stock, par value $0.01 per share (the
"Series E Preferred Stock" and, collectively with the Series D Preferred Stock,
the "Preferred Shares").
WHEREAS, as part of, and as consideration for, the exchange by the
Purchasers of the Old Preferred Shares for the Preferred Shares on the date
hereof and from time to time hereafter, the Company agrees to grant to the
Purchasers certain registration and other rights with respect to their shares of
Class A Common Stock.
WHEREAS, in connection with the acquisition by the Purchasers of
shares of Series B Preferred Stock and Series C Preferred Stock, the Company and
the Purchasers entered into that certain Registration Rights Agreement, dated as
of September 15, 1999 (the "Existing Agreement").
WHEREAS, the Company and the Purchasers are entering into this
Agreement to replace and supersede the Existing Agreement in its entirety and to
grant to the Purchasers certain registration and other rights with respect to
their Preferred Shares and their shares of Class A Common Stock, as more fully
set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. As used herein, unless the context otherwise
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requires, the following terms have the following respective meanings:
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"Affiliate" has the meaning ascribed to such term in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.
"Certificate of Incorporation" means the Restated Certificate of
Incorporation of the Company, as amended, as it may be amended or restated
hereafter from time to time.
"Commission" means the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
"Common Stock" means any shares of Class A Common Stock of the
Company, now or hereafter authorized to be issued, and any and all securities of
any kind whatsoever of the Company which may be exchanged for or converted into
Class A Common Stock, 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.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Exchange Act shall include a reference to the
comparable section, if any, of any such similar Federal statute.
"Person" means a corporation, an association, a partnership, an
organization, a business, a trust, an individual, or any other entity or
organization, including a government or political subdivision or an
instrumentality or agency thereof.
"Registrable Securities" means (i) any shares of Common Stock owned by
the Purchasers, (ii) any shares of Common Stock issued or issuable upon the
conversion, exercise or exchange of any Preferred Shares of or any other Common
Stock equivalents at any time held by the Purchasers, and (iii) any shares of
Common Stock issued with respect to the Common Stock referred to in clauses (i)
or (ii) by way of a stock dividend, stock split or reverse stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or otherwise. As to any particular Registrable Securities, such securities
shall cease to be Registrable Securities (a) when a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (b) when such securities shall have been
otherwise transferred or disposed of and new certificates for them not bearing a
legend restricting further transfer shall have been delivered by the Company and
subsequent transfer or distribution of them
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shall not require registration of them under the Securities Act, or (c) when
such securities shall have been sold as permitted by, and in compliance with,
the Securities Act.
"Registration Expenses" means all expenses incident to the
registration and disposition of the Registrable Securities pursuant to Section 2
hereof, including, without limitation, all registration, filing and applicable
national securities exchange fees, all fees and expenses of complying with state
securities or blue sky laws (including fees and disbursements of counsel to the
underwriters or the Purchasers in connection with "blue sky" qualification of
the Registrable Securities and determination of their eligibility for investment
under the laws of the various jurisdictions), all word processing, duplicating
and printing expenses, all messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of "cold comfort" letters or any special
audits required by, or incident to, such registration, all fees and
disbursements of underwriters (other than underwriting discounts and
commissions), all transfer taxes, and all fees and expenses of counsel to the
Purchasers; provided, however, that Registration Expenses shall exclude, and the
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Purchasers shall pay, underwriting discounts and commissions in respect of the
Registrable Securities being registered.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act shall include a reference to the
comparable section, if any, of any such similar Federal statute.
2. Registration Under Securities Act, etc.
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2.1 Registration on Request.
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(a) Request. At any time or from time to time that the
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Purchasers are permitted to transfer Registrable Securities under Section 4.12
of the Exchange Agreement, the Purchasers shall have the right to require the
Company to effect the registration under the Securities Act of all or part of
the Registrable Securities, by delivering a written request therefor to the
Company specifying the number of shares of Registrable Securities and the
intended method of distribution. The Company shall (i) use its reasonable best
efforts to effect the registration under the Securities Act (including by means
of a shelf registration pursuant to Rule 415 under the Securities Act if so
requested in such request and if the Company is then eligible to use such a
registration) of the Registrable Securities which the Company has been so
requested to register by the Purchasers, for distribution in accordance with the
intended method of distribution set forth in the written request delivered by
the Purchasers, such registration to be effected as expeditiously as possible
(but in any event within 90 days of receipt of a
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written request), and (ii) if requested by the Purchasers, use its reasonable
best efforts to obtain acceleration of the effective date of the registration
statement relating to such registration.
(b) Registration of Other Securities. Whenever the Company
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shall effect a registration pursuant to this Section 2.1 in connection with an
underwritten offering by the Purchasers of Registrable Securities, no securities
other than Registrable Securities shall be included among the securities covered
by such registration if inclusion of such other securities would result in a
request by the managing underwriters for a reduction in the number of
Registrable Securities requested to be so registered.
(c) Registration Statement Form. Registrations under this
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Section 2.1 shall be on such appropriate registration form of the Commission as,
subject to clause (a)(i) above, shall be selected by the Company and as shall be
reasonably acceptable to the Purchasers. The Company agrees to include in any
such registration statement all information which, in the opinion of counsel to
the Purchasers and counsel to the Company, is necessary or desirable to be
included therein.
(d) Expenses. The Company shall pay all Registration Expenses
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in connection with any registration requested pursuant to this Section 2.1.
(e) Effective Registration Statement. A registration
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requested pursuant to this Section 2.1 shall not be deemed to have been effected
(including for purposes of paragraph (h) of this Section 2.1) (i) unless a
registration statement with respect thereto has become effective and has been
kept continuously effective for a period of at least 365 days (or such shorter
period which shall terminate when all the Registrable Securities covered by such
registration statement have been sold pursuant thereto), (ii) if after it has
become effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court for any reason not attributable to the Purchasers and has not
thereafter become effective, or (iii) if the conditions to closing specified in
the underwriting agreement, if any, entered into in connection with such
registration are not satisfied or waived.
(f) Selection of Underwriters. The managing underwriters of
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each underwritten offering of the Registrable Securities so to be registered
shall be selected by the Purchasers, subject to the Company's approval, which
approval shall not be unreasonably withheld.
(g) Right to Withdraw. If the managing underwriter of any
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underwritten offering shall advise the Purchasers that the Registrable
Securities covered
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by the registration statement cannot be sold in such offering within a price
range acceptable to the Purchasers, then the Purchasers shall have the right to
notify the Company in writing that they have determined to withdraw their shares
from the registration statement. In the event of such withdrawal, the request
for registration shall not be counted for purposes of the requests for
registration to which the Purchasers are entitled pursuant to this Section 2.1.
(h) Limitations on Registration on Request. The Purchasers
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shall be entitled to require the Company to effect, and the Company shall be
required to effect, three registrations in the aggregate pursuant to this
Section 2.1.
(i) Postponement. The Company shall be entitled once in
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any six-month period to postpone for a reasonable period of time (but not
exceeding 60 days) (the "Postponement Period") the filing of any registration
statement required to be prepared and filed by it pursuant to this Section 2.1
if the Company determines, in its reasonable judgment, that such registration
and offering would materially interfere with any material financing, corporate
reorganization or other material transaction involving the Company or any
subsidiary, or would require premature disclosure thereof, and promptly gives
the Purchasers written notice of such determination, containing a general
statement of the reasons for such postponement and an approximation of the
anticipated delay. If the Company shall so postpone the filing of a registration
statement, (i) the Company shall use its reasonable best efforts to limit the
delay to as short a period as is practicable and (ii) the Purchasers shall have
the right to withdraw the request for registration by giving written notice to
the Company at any time and, in the event of such withdrawal, such request shall
not be counted for purposes of the requests for registration to which the
Purchasers are entitled pursuant to this Section 2.1.
2.2 Incidental Registration.
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(a) Right to Include Registrable Securities. If the
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Company at any time proposes to register any of its securities for the account
of any other stockholder under the Securities Act by registration on Form ▇-▇,
▇-▇ or S-3 or any successor or similar form(s) (except registrations on any such
Form or similar form(s) solely for registration of securities in connection with
an employee benefit plan or dividend reinvestment plan or a merger or
consolidation) and provided that the Purchasers are permitted to transfer
Registrable Securities under Section 4.12 of the Exchange Agreement, the Company
will each such time give prompt written notice to the Purchasers of its
intention to do so and of the Purchasers' rights under this Section 2.2. Upon
the written request of the Purchasers (which request shall specify the maximum
number of Registrable Securities intended to be disposed of by the Purchasers),
made as promptly as practicable and in any event within 30 days after the
receipt of any such notice (10 days if the Company states in such written notice
or gives telephonic notice to
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the Purchasers, with written confirmation to follow promptly thereafter, stating
that (i) such registration will be on Form S-3 and (ii) such shorter period of
time is required because of a planned filing date), the Company shall use its
reasonable best efforts to effect the registration under the Securities Act of
all Registrable Securities which the Company has been so requested to register
by the Purchasers; provided, however, that if, at any time after giving written
notice of its intention to register any securities and prior to the effective
date of the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register or to delay
registration of such securities, the Company shall give written notice of such
determination and its reasons therefor to the Purchasers and (i) in the case of
a determination not to register, shall be relieved of its obligation to register
any Registrable Securities in connection with such registration (but not from
any obligation of the Company to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights of the Purchasers to
request that such registration be effected as a registration under Section 2.1
and (ii) in the case of a determination to delay registering, shall be permitted
to delay registering any Registrable Securities, for the same period as the
delay in registering such other securities. No registration effected under this
Section 2.2 shall relieve the Company of its obligation to effect any
registration upon request under Section 2.1. The Company will pay all
Registration Expenses in connection with any registration of Registrable
Securities requested pursuant to this Section 2.2.
(b) Right to Withdraw. The Purchasers shall have the right
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to withdraw its request for inclusion of its Registrable Securities in any
registration statement pursuant to this Section 2.2 at any time prior to the
execution of an underwriting agreement with respect thereto by giving written
notice to the Company of its request to withdraw.
(c) Priority in Incidental Registrations. If the managing
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underwriter of any underwritten offering shall inform the Company by letter of
its belief that the number of Registrable Securities requested to be included in
such registration, when added to the number of other securities to be offered in
such registration, would materially adversely affect such offering, then the
Company shall include in such registration, to the extent of the number and type
which the Company is so advised can be sold in (or during the time of) such
offering without so materially adversely affecting such offering (the "Section
2.2 Sale Amount"), (i) all of the securities proposed by the other stockholders
triggering such incidental registration rights; and (ii) thereafter, to the
extent the Section 2.2 Sale Amount is not exceeded, the Registrable Securities
requested by the Purchasers to be included in such registration pursuant to
Section 2.2(a) and any other securities of the Company requested to be included
in such registration by any holder having the right to include securities on a
pro rata basis, including, in the case where such registration is to be effected
as a result of the exercise by a holder of the
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Company's securities of such holder's right to cause such securities to be so
registered, the securities of such holder with the amount of securities of the
Purchasers and each such holder to be included based on the pro rata amount of
shares of Common Stock held, or obtainable by exercise or conversion of other
securities of the Company, by the Purchasers or such holder.
(d) Plan of Distribution. Any participation by holders of
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Registrable Securities in a registration by the Company shall be in accordance
with the Company's plan of distribution, provided that the Purchasers shall have
the right to select the co-managing underwriter.
2.3 Registration Procedures. If and whenever the Company is
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required to use its reasonable best efforts to effect the registration of any
Registrable Securities under the Securities Act as provided in Sections 2.1 and
2.2 hereof, the Company shall as expeditiously as possible:
(a) prepare and file with the Commission as soon as
practicable the requisite registration statement to effect such
registration (and shall include all financial statements required by
the Commission to be filed therewith) and thereafter use its
reasonable best efforts to cause such registration statement to become
effective; provided, however, that before filing such registration
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statement (including all exhibits) or any amendment or supplement
thereto or comparable statements under securities or blue sky laws of
any jurisdiction, the Company shall as promptly as practicable furnish
such documents to the Purchasers and each underwriter, if any,
participating in the offering of the Registrable Securities and their
respective counsel, which documents will be subject to the review and
comments of the Purchasers, each underwriter and their respective
counsel; and provided, further, however, that the Company may
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discontinue any registration of its securities which are not
Registrable Securities at any time prior to the effective date of the
registration statement relating thereto;
(b) notify the Purchasers of the Commission's requests for
amending or supplementing the registration statement and the
prospectus, and prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities covered by such registration statement for such period as
shall be required for the disposition of all of such Registrable
Securities in accordance with the intended method of distribution
thereof; provided, that except with respect to any such
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registration statement filed pursuant to Rule 415 under the Securities
Act, such period need not exceed 365 days;
(c) furnish, without charge, to the Purchasers and each
underwriter such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each
case including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each preliminary
prospectus and any summary prospectus) and any other prospectus filed
under Rule 424 under the Securities Act, in conformity with the
requirements of the Securities Act, and such other documents, as the
Purchasers and such underwriters may reasonably request;
(d) use its reasonable best efforts (i) to register or
qualify all Registrable Securities and other securities covered by
such registration statement under such securities or blue sky laws of
such States of the United States of America where an exemption is not
available and as the Purchasers or any managing underwriter shall
reasonably request, (ii) to keep such registration or qualification in
effect for so long as such registration statement remains in effect,
and (iii) to take any other action which may be reasonably necessary
or advisable to enable the Purchasers to consummate the disposition in
such jurisdictions of the securities to be sold by the Purchasers,
except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this
subsection (d) be obligated to be so qualified or to consent to
general service of process in any such jurisdiction;
(e) use its reasonable best efforts to cause all Registrable
Securities covered by such registration statement to be registered
with or approved by such other federal or state governmental agencies
or authorities as may be necessary in the opinion of counsel to the
Company and counsel to the Purchasers to consummate the disposition of
such Registrable Securities;
(f) furnish to the Purchasers and each underwriter, if any,
participating in the offering of the securities covered by such
registration statement, a signed counterpart of (i) an opinion of
counsel for the Company, and (ii) a "comfort" letter signed by the
independent public accountants who have certified the Company's or any
other entity's financial statements included or incorporated by
reference in such registration statement, covering substantially the
same matters with respect to such registration statement (and the
prospectus included therein) and, in the case
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of the accountants' comfort letter, with respect to events subsequent
to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' comfort letters
delivered to the underwriters in underwritten public offerings of
securities (and dated the dates such opinions and comfort letters are
customarily dated);
(g) promptly notify the Purchasers and each managing
underwriter, if any, participating in the offering of the securities
covered by such registration statement (i) when such registration
statement, any pre-effective amendment, the prospectus or any
prospectus supplement related thereto or post-effective amendment to
such registration statement has been filed, and, with respect to such
registration statement or any post-effective amendment, when the same
has become effective; (ii) of any request by the Commission for
amendments or supplements to such registration statement or the
prospectus related thereto or for additional information; (iii) of the
issuance by the Commission of any stop order suspending the
effectiveness of such registration statement or the initiation of any
proceedings for that purpose; (iv) of the receipt by the Company of
any notification with respect to the suspension of the qualification
of any of the Registrable Securities for sale under the securities or
blue sky laws of any jurisdiction or the initiation of any proceeding
for such purpose; (v) at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, upon discovery
that, or upon the happening of any event as a result of which, the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, in the light of the circumstances
under which they were made, and in the case of this clause (v), at the
request of the Purchasers promptly prepare and furnish to the
Purchasers and each managing underwriter, if any, participating in the
offering of the Registrable Securities, a reasonable number of copies
of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an 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 not misleading in
the light of the circumstances under which they were made; and (vi) at
any time when the representations and warranties of the Company
contemplated by Section 2.4(a) or (b) hereof cease to be true and
correct;
(h) otherwise comply with all applicable rules and
regulations of the Commission, and make available to its security
holders, as soon as
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reasonably practicable, an earnings statement covering the period of
at least twelve months beginning with the first full calendar month
after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of
the Securities Act and Rule 158 promulgated thereunder, and promptly
furnish to the Purchasers a copy of any amendment or supplement to
such registration statement or prospectus;
(i) provide and cause to be maintained a transfer agent and
registrar (which, in each case, may be the Company) for all
Registrable Securities covered by such registration statement from and
after a date not later than the effective date of such registration;
(j) (i) use its reasonable best efforts to cause all
Registrable Securities covered by such registration statement to be
listed on the NASDAQ "national market system" or the principal
securities exchange on which similar securities issued by the Company
are then listed (if any), if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (ii)
if no similar securities are then so listed, use its reasonable best
efforts to (x) cause all such Registrable Securities to be listed on a
national securities exchange or (y) failing that, secure designation
of all such Registrable Securities as a NASDAQ "national market system
security" within the meaning of Rule 11Aa2-1 of the Commission or (z)
failing that, to secure NASDAQ authorization for such shares and,
without limiting the generality of the foregoing, to arrange for at
least two market makers to register as such with respect to such
shares with the National Association of Securities Dealers, Inc.;
(k) deliver promptly to counsel to the Purchasers and each
underwriter, if any, participating in the offering of the Registrable
Securities, copies of all correspondence between the Commission and
the Company, its counsel or auditors and all memoranda relating to
discussions with the Commission or its staff with respect to such
registration statement;
(l) use its reasonable best efforts to obtain the withdrawal
of any order suspending the effectiveness of the registration
statement;
(m) provide a CUSIP number for all Registrable Securities, no
later than the effective date of the registration statement; and
(n) make available its senior executive officers and chairman
and otherwise provide reasonable assistance to the underwriters
(taking into
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account the needs of the Company's business) in their marketing of
Registrable Securities.
The Company may require the Purchasers to furnish the Company such information
regarding the Purchasers and the distribution of the Registrable Securities as
the Company may from time to time reasonably request in writing.
The Purchasers agree that upon receipt of any notice from the Company
of the happening of any event of the kind described in paragraph (g)(iii), (iv)
or (v) of this Section 2.3, the Purchasers will, to the extent appropriate,
discontinue their disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities until, in the
case of paragraph (g)(v) of this Section 2.3, their receipt of the copies of the
supplemented or amended prospectus contemplated by paragraph (g)(v) of this
Section 2.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in its
possession, of the prospectus relating to such Registrable Securities current at
the time of receipt of such notice. If the disposition by the Purchasers of
their securities is discontinued pursuant to the foregoing sentence, the Company
shall extend the period of effectiveness of the registration statement by the
number of days during the period from and including the date of the giving of
notice to and including the date when the Purchasers shall have received copies
of the supplemented or amended prospectus contemplated by paragraph (g)(v) of
this Section 2.3; and, if the Company shall not so extend such period, the
Purchasers' request pursuant to which such registration statement was filed
shall not be counted for purposes of the requests for registration to which the
Purchasers are entitled pursuant to Section 2.1 hereof.
2.4 Underwritten Offerings.
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(a) Requested Underwritten Offerings. If requested by the
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underwriters for any underwritten offering by the Purchasers pursuant to a
registration requested under Section 2.1, the Company shall enter into a
customary underwriting agreement (in the form of underwriting agreement used at
such time by the managing underwriter(s)) with a managing underwriter or
underwriters selected by the Purchasers. Such underwriting agreement shall be
satisfactory in form and substance to the Purchasers and shall contain such
representations and warranties by, and such other agreements on the part of, the
Company and such other terms as are generally prevailing in agreements of the
managing underwriter(s), including, without limitation, their customary
provisions relating to indemnification and contribution. The Purchasers shall
be party to such underwriting agreement and may, at their option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of the Purchasers and that any or all of the
conditions precedent to the obligations
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of such underwriters under such underwriting agreement be conditions precedent
to the obligations of the Purchasers. The Purchasers shall not be required to
make any representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding the
Purchasers, their ownership of and title to the Registrable Securities, and
their intended method of distribution; and any liability of the Purchasers to
any underwriter or other person under such underwriting agreement shall be
limited to liability arising from breach of their representations and warranties
and shall be limited to an amount equal to the proceeds (net of expenses and
underwriting discounts and commissions) that they derive from such registration.
(b) Incidental Underwritten Offerings. In the case of a
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registration pursuant to Section 2.2 hereof, if the Company shall have
determined to enter into any underwriting agreements in connection therewith,
all of the Registrable Securities to be included in such registration shall be
subject to such underwriting agreements. The Purchasers may, at their option,
require that any or all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of the Purchasers and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to the
obligations of the Purchasers. The Purchasers shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding the
Purchasers, their ownership of and title to the Registrable Securities, and
their intended method of distribution; and any liability of the Purchasers to
any underwriter or other Person under such underwriting agreement shall be
limited to liability arising from breach of their representations and warranties
and shall be limited to an amount equal to the proceeds (net of expenses and
underwriting discounts and commissions) that they derive from such registration.
2.5 Preparation; Reasonable Investigation. In connection with the
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preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the Purchasers, their
underwriters, if any, and their respective counsel, accountants and other
representatives and agents the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and give each of
them such access to its books and records and such opportunities to discuss the
business of the Company with its officers and employees and the independent
public accountants who have certified its financial statements, and supply all
other information reasonably requested by each of them, as shall be necessary or
appropriate, in
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the opinion of the Purchasers and such underwriters' respective counsel, to
conduct a reasonable investigation within the meaning of the Securities Act.
2.6 Indemnification.
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(a) Indemnification by the Company. The Company agrees that
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in the event of any registration of any Registrable Securities of the Company
under this Registration Rights Agreement the Company shall, and hereby does,
indemnify and hold harmless the Purchasers, their respective directors,
officers, members, partners, agents and affiliates and each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls the Purchasers or any such underwriter
within the meaning of the Securities Act, against any losses, claims, damages,
or liabilities, joint or several, to which the Purchasers or any such director,
officer, member, partner, agent or affiliate or underwriter or controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities, joint or several (or actions or
proceedings, whether commenced or threatened, in respect thereof), arise out of
or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, (ii) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not misleading, or
(iii) any violation by the Company of any federal, state or common law rule or
regulation applicable to the Company and relating to action required of or
inaction by the Company in connection with any such registration, and the
Company shall reimburse the Purchasers and each such director, officer, member,
partner, agent or affiliate, underwriter and controlling Person for any legal or
any other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, liability, action or proceeding; provided
--------
that the Company shall not be liable in any such case to the Purchasers or any
such director, officer, member, partner, agent, affiliate, or controlling person
to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by or on behalf of the Purchasers, specifically stating
that it is for use in the preparation thereof. Such indemnity shall remain in
full force regardless of any investigation made by or on behalf of the
Purchasers or any such director, officer, member, partner, agent, affiliate,
underwriter or controlling Person and shall survive the transfer of such
securities by the Purchasers.
14
(b) Indemnification by the Purchasers. As a condition to
---------------------------------
including any Registrable Securities in any registration statement, the Company
shall have received an undertaking reasonably satisfactory to it from the
Purchasers so including any Registrable Securities to indemnify and hold
harmless (in the same manner and to the same extent as set forth in paragraph
(a) of this Section 2.6) the Company, and each director of the Company, each
officer of the Company and each other Person, if any, who controls the Company
within the meaning of the Securities Act, with respect to any statement or
alleged statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, but only to the
extent such statement or alleged statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company through an instrument duly executed by the Purchasers specifically
stating that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement; provided, however, that the liability of any such indemnifying party
-------- -------
under this Section 2.6(b) shall be limited to the amount of proceeds (net of
expenses and underwriting discounts and commissions) received by such
indemnifying party in the offering giving rise to such liability. Such indemnity
shall remain in full force and effect, regardless of any investigation made by
or on behalf of the Company or any such director, officer or controlling Person
and shall survive the transfer of such securities by the Purchasers.
(c) Notices of Claims, etc. Promptly after receipt by an
----------------------
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subsections of this Section 2.6,
such indemnified party shall, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action or proceeding; provided, however, that the failure
-------- -------
of any indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subsections of this
Section 2.6, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice, and shall not relieve the
indemnifying party from any liability which it may have to the indemnified party
otherwise than under this Section 2.6. In case any such action or proceeding is
brought against an indemnified party, the indemnifying party shall be entitled
to participate therein and, unless in the opinion of outside counsel to the
indemnified party a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party; provided, however, that if the defendants in any such action
-------- -------
or proceeding include both the indemnified party and the indemnifying party and
if in the opinion of outside counsel to the indemnified party there may be legal
defenses available to such indemnified party and/or other indemnified
15
parties which are different from or in addition to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to defend such action or proceeding on behalf of such
indemnified party or parties, provided, however, that the indemnifying party
-------- -------
shall be obligated to pay for only one counsel and one local counsel for all
indemnified parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and approval
by the indemnified party of such counsel, the indemnifying party shall not be
liable to such indemnified party for any legal expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable costs of
investigation (unless the first proviso in the preceding sentence shall be
applicable). No indemnifying party shall be liable for any settlement of any
action or proceeding effected without its written consent. No indemnifying party
shall, without the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation.
(d) Contribution. If the indemnification provided for in this
------------
Section 2.6 shall for any reason be held by a court to be unavailable to an
indemnified party under subsection (a) or (b) hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under subsection (a) or (b) hereof, the indemnified
party and the indemnifying party under subsection (a) or (b) hereof shall
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating the
same), (i) in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand, and the indemnified party on the other,
with respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations, or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law or if the allocation provided in this clause
(ii) provides a greater amount to the indemnified party than clause (i) above,
in such proportion as shall be appropriate to reflect not only the relative
fault but also the relative benefits received by the indemnifying party and the
indemnified party from the offering of the securities covered by such
registration statement as well as any other relevant equitable considerations.
The parties hereto agree that it would not be just and equitable if
contributions pursuant to this Section 2.6(d) were to be determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the preceding sentence of this
Section 2.6(d). No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. In addition, no Person shall be obligated to contribute
hereunder any amounts in payment for any settlement of any action or claim
effected without such
16
Person's consent, which consent shall not be unreasonably withheld.
Notwithstanding anything in this subsection (d) to the contrary, no indemnifying
party (other than the Company) shall be required to contribute any amount in
excess of the proceeds (net of expenses and underwriting discounts and
commissions) received by such party from the sale of the Registrable Securities
in the offering to which the losses, claims, damages or liabilities of the
indemnified parties relate.
(e) Other Indemnification. Indemnification and
---------------------
contribution similar to that specified in the preceding subsections of this
Section 2.6 (with appropriate modifications) shall be given by the Company and
the Purchasers with respect to any required registration or other qualification
of securities under any federal, state or blue sky law or regulation of any
governmental authority other than the Securities Act. The indemnification
agreements contained in this Section 2.6 shall be in addition to any other
rights to indemnification or contribution which any indemnified party may have
pursuant to law or contract and shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any indemnified
party and shall survive the transfer of any of the Registrable Securities by the
Purchasers.
(f) Indemnification Payments. The indemnification and
------------------------
contribution required by this Section 2.6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills are received or expense, loss, damage or liability is incurred.
2.7 Unlegended Certificates. In connection with the offering
-----------------------
of any Registrable Securities registered pursuant to this Section 2, the Company
shall (i) facilitate the timely preparation and delivery to the Purchasers and
the underwriters, if any, participating in such offering, of unlegended
certificates representing ownership of such Registrable Securities being sold in
such denominations and registered in such names as requested by the Purchasers
or such underwriters and (ii) instruct any transfer agent and registrar of such
Registrable Securities to release any stop transfer orders with respect to any
such Registrable Securities.
2.8 Limitation on Sale of Securities. The Company hereby
--------------------------------
agrees that if it shall previously have received a request for registration
pursuant to Section 2.1 or 2.2 hereof, and if such previous registration shall
not have been withdrawn or abandoned, the Company shall not effect any public or
private offer, sale or distribution of its securities or effect any registration
of any of its equity securities under the Securities Act whether or not for sale
for its own account, until a period of 90 days (or such shorter period as the
Purchasers shall be advised by their managing underwriter) shall have elapsed
from the effective date of such previous registration, and the Company shall so
provide in any registration rights agreements hereafter entered into with
respect to any of its securities provided, however, that during this 90 day
period the Company may
17
(i) offer, sell and distribute its equity securities in connection with
acquisitions or any Company employee or director benefit or stock purchase or
stock option plans, (ii) grant or award Common Stock, options to purchase Common
Stock in connection with acquisitions or under such Company plans and (iii) take
any other actions necessary in connection with any of the foregoing in order to
register such Common Stock with the Commission.
2.9 No Required Sale. Nothing in this Agreement shall be
----------------
deemed to create an independent obligation on the part of the Purchasers to sell
any Registrable Securities pursuant to any effective registration statement.
3. Rule 144. Without limiting in any way the provisions of Section
--------
4.12 of the Exchange Agreement, the Company shall take all actions reasonably
necessary to enable holders of Registrable Securities to sell such securities
without registration under the Securities Act within the limitation of the
exemptions provided by (i) Rule 144, or (ii) any similar rule or regulation
hereafter adopted by the Commission including, without limiting the generality
of the foregoing, filing on a timely basis all reports required to be filed by
the Exchange Act. Upon the request of the Purchasers, the Company will deliver
to such holder a written statement as to whether it has complied with such
requirements.
4. Amendments and Waivers. This Agreement may be amended, modified
----------------------
or supplemented only by written agreement of the party against whom enforcement
of such amendment, modification or supplement is sought.
5. [INTENTIONALLY OMITTED]
6. Notice. All notices and other communications hereunder shall be
------
in writing and, unless otherwise provided herein, shall be deemed to have been
given when received by the party to whom such notice is to be given at its
address set forth below, or such other address for the party as shall be
specified by notice given pursuant hereto:
(a) If to the Purchasers, to:
c/o Forstmann Little & Co.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
With a copy to:
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
(b) If to the Company, to it at:
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):
▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
Columbia Square
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., Esq.
7. Assignment; Third Party Beneficiaries. This Agreement shall be
-------------------------------------
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors and permitted assigns. This Agreement
may not be assigned by the Company, without the prior written consent of the
Purchasers. This Agreement may not be assigned by any of the Purchasers,
without the prior written consent of the Company; provided however, the
Purchasers may, at their election, at any time or from time to time, assign
their rights under this Agreement, in whole or in part, to any Affiliates of the
Purchasers; provided further, however, that any rights to withdraw shares from
inclusion in a registration statement pursuant to Section 2 shall be made only
by the Purchasers for themselves and all such Affiliates.
8. Remedies. The parties hereto agree that money damages or other
--------
remedy at law would not be sufficient or adequate remedy for any breach or
violation of, or a default under, this Agreement by them and that, in addition
to all other remedies available to them, each of them shall be entitled to an
injunction restraining such breach, violation or default or threatened breach,
violation or default and to any other equitable relief, including without
limitation specific performance, without bond or other security being required.
In any action or proceeding brought to enforce any provision of this
19
Agreement (including the indemnification provisions thereof), the successful
party shall be entitled to recover reasonable attorneys' fees in addition to its
costs and expenses and any other available remedy.
9. No Inconsistent Agreements. The Company will not, on or after the
--------------------------
date of this Agreement, enter into any agreement with respect to its securities
which is inconsistent with the rights granted to the Purchasers in this
Agreement or otherwise conflicts with the provisions hereof. The Company
further represents and warrants that the rights granted to the Purchasers
hereunder do not in any way conflict with and are not inconsistent with any
other agreements to which the Company is a party or by which it is bound. The
Company further agrees that if any other registration rights agreement entered
into after the date of this Agreement with respect to any of its securities
contains terms which are more favorable to, or less restrictive on, the other
party thereto than the terms and conditions contained in this Agreement are
(insofar as they are applicable) with respect to the Purchasers, then the terms
and conditions of this Agreement shall immediately be deemed to have been
amended without further action by the Company or the Purchasers so that the
Purchasers shall be entitled to the benefit of any such more favorable or less
restrictive terms or conditions.
10. Descriptive Headings. The descriptive headings of the several
--------------------
sections and paragraphs of this Agreement are inserted for reference only and
shall not control or otherwise affect the meaning hereof.
11. Governing Law. This Agreement shall be construed and enforced in
-------------
accordance with, and the rights and obligations of the parties hereto shall be
governed by, the laws of the State of New York, without giving effect to the
conflicts of law principles thereof. Each of the parties hereto hereby
irrevocably and unconditionally consents to submit to the exclusive jurisdiction
of the courts of the State of New York and the United States of America located
in the County of New York for any action or proceeding arising out of or
relating to this Agreement and the transactions contemplated hereby (and agrees
not to commence any action or proceeding 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
6 hereof shall be effective service of process for any action or proceeding
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 action or proceeding arising out of this Agreement or the transactions
contemplated hereby in the courts of the State of New York or the United States
of America located in the County of New York, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action or proceeding brought in any such court has been brought in an
inconvenient forum.
20
12. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
13. Invalidity of Provision. The invalidity or unenforceability of
-----------------------
any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of this Agreement, including that
provision, in any other jurisdiction. If any restriction or provision of this
Agreement is held unreasonable, unlawful or unenforceable in any respect, such
restriction or provision shall be interpreted, revised or applied in a manner
that renders it lawful and enforceable to the fullest extent possible under law.
14. Further Assurances. Each party hereto shall do and perform or
------------------
cause to be done and performed all further acts and things and shall execute and
deliver all other agreements, certificates, instruments, and documents as any
other party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
15. Termination of Existing Agreement; Entire Agreement;
----------------------------------------------------
Effectiveness. This Agreement replaces and supersedes in its entirety the
-------------
Existing Agreement. The Existing Agreement is hereby terminated and shall be of
no further force and effect. Each party hereto agrees and confirms that there
are no unsatisfied obligations of any of the parties hereto under the Existing
Agreement. This Agreement constitutes the entire agreement, and supersedes all
prior agreements and understandings, oral and written, between the parties
hereto with respect to the subject matter hereof.
21
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized.
McLEODUSA INCORPORATED
By:
---------------------------------
Name:
Title:
FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP-V, L.P.
By: FLC XXX Partnership, L.P.
its general partner
By:
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
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:
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
a general partner
22
FORSTMANN LITTLE & CO.
SUBORDINATED DEBT AND EQUITY
MANAGEMENT BUYOUT PARTNERSHIP-
VII, L.P.
By: FLC XXXIII Partnership, L.P.
its general partner
By:
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
a general partner
23
