EXHIBIT 99.6
EXCHANGE AGREEMENT
dated as of
September 30, 2001
by and between
McLeodUSA Incorporated
and
The Purchasers Listed on the Signature Pages Hereto
EXCHANGE AGREEMENT
EXCHANGE AGREEMENT (this "Agreement"), dated as of September 30,
2001, by and between McLeodUSA Incorporated, a Delaware corporation (the
"Company"), and the entities listed on the signature page hereto under the
caption "Purchasers" (each such entity, a "Purchaser" and collectively, the
"Purchasers").
W I T N E S S E T H :
WHEREAS, pursuant to that certain Stock Purchase Agreement, dated
as of August 30, 1999, by and between the Company and the entities listed
on the signature page thereto, the Company sold to the Purchasers and the
Purchasers purchased from the Company (i) an aggregate of 275,000 shares of
the Company's Series B Preferred Stock, par value $.01 per share (the
"Series B Preferred Stock") and (ii) an aggregate of 125,000 shares of the
Company's Series C Preferred Stock, par value $.01 per share (the "Series C
Preferred Stock" and, collectively with the Series B Preferred Stock, the
"1999 Preferred Shares");
WHEREAS, upon the terms and subject to the conditions set forth
in this Agreement, (i) the Company wishes to issue to the Purchasers (x) an
aggregate of 275,000 shares of the Company's Series D Preferred Stock, par
value $.01 per share (the "Series D Preferred Stock"), in exchange for all
of the outstanding shares of Series B Preferred Stock held by the
Purchasers and (y) an aggregate of 125,000 shares of the Company's Series E
Preferred Stock, par value $.01 per share (the "Series E Preferred Stock"
and, collectively with the Series D Preferred Stock, the "New Preferred
Shares"), in exchange for all of the outstanding shares of the Series C
Preferred Stock held by the Purchasers (each of the foregoing exchanges, an
"Exchange" and, collectively, the "Exchanges"), and (ii) the Purchasers
desire to consummate the Exchanges.
WHEREAS, the Purchasers and the Company desire to provide for the
Exchanges 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 and in the Termination Agreement, the parties hereto agree as
follows:
ARTICLE I
EXCHANGES
1.1. Exchanges. Upon the terms and subject to the conditions set
forth herein, at the Closing (as defined below), (a) the Company shall
issue to the Purchasers (i) an aggregate of 275,000 shares of Series D
Preferred Stock and (ii) an aggregate of 125,000 shares of Series E
Preferred Stock, and (b) the Purchasers shall surrender to the Company, in
exchange therefor, all of the outstanding 1999 Preferred Shares held by the
Purchasers. The number of shares of Series D Preferred Stock and the number
of shares of Series E Preferred Stock issued to each Purchaser, and the
1999 Preferred Shares being surrendered in exchange therefor by each
Purchaser are set forth below such Purchaser's name on the signature page
hereto; provided, that the Purchasers shall have the right to reallocate
among the Purchasers the New Preferred Shares to be issued to 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 New Preferred Shares being issued
hereunder.
1.2. The Closing; Deliveries. (a) The closing of the Exchanges
(the "Closing") shall take place at the offices of Fried, Frank, Harris,
Xxxxxxx & Xxxxxxxx, Xxx Xxx Xxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 at 9:00
a.m. on the fifth business day following the satisfaction or waiver of the
conditions set forth in Article V (other than those conditions that by
their nature are to be satisfied at the Closing, but subject to the
satisfaction or waiver of those conditions) or at such other place, time
and/or date as shall be mutually agreed by the Company and the Purchasers
(the date of the Closing, the "Closing Date").
(b) As promptly as practicable after the filing of the
Certificates of Designation with the Secretary of State of the State of
Delaware, the Company shall deliver to each Purchaser certificates
representing the New Preferred Shares, each registered in the name of such
Purchaser in the respective amounts set forth on the signature pages hereto
or the reallocation notice referred to in Section 1.1, as applicable.
Delivery of such certificates shall be made against receipt by the Company
of the stock certificates representing the 1999 Preferred Shares.
1.3. Cancellation of the 1999 Preferred Shares. The Company shall
take all actions necessary so that, upon receipt of the stock certificates
representing the 1999 Preferred Shares, the 1999 Preferred Shares shall be
retired and assume the status of authorized and unissued shares of the
class of preferred stock undesignated as to series.
1.4. Capitalized Terms. Capitalized terms not otherwise defined
herein shall have the meanings ascribed to such terms in Section 8.1.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Purchaser, as
of the date hereof and as of the Closing, as follows:
2.1. Organization; Subsidiaries. (a) 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.
(b) Except as set forth on Schedule 2.1(b), (i) the Company owns,
either directly or indirectly through one or more Subsidiaries, all of the
capital stock or other equity interests of the Significant Subsidiaries
free and clear of all liens, charges, claims, security interests,
restrictions, options, proxies, voting trusts or other encumbrances
("Encumbrances") and (ii) there are no outstanding subscription rights,
options, warrants, convertible or exchangeable securities or other rights
of any character whatsoever relating to issued or unissued capital stock or
other equity interests of any Significant Subsidiary, or any Commitments of
any character whatsoever relating to issued or unissued capital stock or
other equity interests of any Significant Subsidiary or pursuant to which
any Significant Subsidiary is or may become bound to issue or grant
additional shares of its capital stock or other equity interests or related
subscription rights, options, warrants, convertible or exchangeable
securities or other rights, or to grant preemptive rights. Except for the
Subsidiaries and except as set forth on Schedule 2.1(b), the Company does
not own, directly or indirectly, any interest in any corporation, limited
liability company, partnership, business association or other Person in
excess of 9.9% of the outstanding equity.
2.2. Due Authorization. The Company has all right, 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 New Preferred
Shares 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. The Conversion Shares
have been 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 D Preferred Stock and the Series E Preferred
Stock will be as set forth in the Certificate of Designation for the Series
D Preferred Stock and the Certificate of Designation for the Series E
Preferred Stock (collectively, the "Certificates of Designation"), the
forms of which are attached to this Agreement as Exhibits 2.2A and 2.2B.
The New Preferred Shares issued to the Purchasers in accordance with the
terms of the Certificates of Designation, 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 clear of any
Encumbrances and not subject to the preemptive or other similar rights of
the stockholders of the Company.
2.3. Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 2,000,000,000 shares of the
Company's Class A Common Stock, par value $.01 per share ("Class A Common
Stock"), of which, as of September 25, 2001, 626,950,228 shares were
issued and outstanding and of which no more than 1,000,000 additional
shares (excluding any shares issued upon exercise of outstanding options
disclosed on Schedule 2.3) have been issued between September 25, 2001 and
the date hereof; (ii) 22,000,000 shares of Class B Common Stock, par value
$0.01 per share (the "Class B Common Stock" and, together with the Class A
Common Stock, the "Common Stock"), of which, as of the date hereof, no
shares are issued and outstanding; (iii) 2,000,000 shares of serial
preferred stock, par value $0.01 per share, of which as of the date hereof
1,149,375 shares are issued and outstanding as 6.75% Series A Cumulative
Convertible Preferred Stock (the "Series A Preferred Stock") and 400,000
are issued and outstanding as the 1999 Preferred Shares; and (iv)
10,000,000 shares of Class II serial preferred stock, par value $.001 per
share, of which, as of the date hereof, no shares are issued and
outstanding. All of the issued and outstanding shares of Class A Common
Stock, Series A Preferred Stock and the 1999 Preferred Shares have been
duly authorized and are validly issued, fully paid and nonassessable.
Except as set forth on Schedule 2.3, no shares of capital stock of the
Company are entitled to preemptive rights. Except as set forth on Schedule
2.3 or as otherwise contemplated by this Agreement, there are no other
outstanding subscription rights, options, warrants, convertible or
exchangeable securities or other rights of any character whatsoever
relating to issued or unissued capital stock of the Company, or any
Commitments of any character whatsoever relating to issued or unissued
capital stock of the Company or pursuant to which the Company is or may
become bound to issue or grant additional shares of its capital stock or
related subscription rights, options, warrants, convertible or exchangeable
securities or other rights, or to grant preemptive rights. Except as set
forth on Schedule 2.3 or as otherwise contemplated by this Agreement, (i)
the Company has not agreed to register any securities under the Securities
Act or under any state securities law or granted registration rights to any
Person or entity and (ii) there are no voting trusts, stockholders
agreements, proxies or other Commitments or understandings in effect to
which the Company is a party or of which it has Knowledge with respect to
the voting or transfer of any of the outstanding shares of Class A Common
Stock, Series A Preferred Stock or 1999 Preferred Shares. To the extent
that any options, warrants or any of the other rights described above are
outstanding, the issuance of the New Preferred Shares and any future
issuance of Conversion Shares will not result in an adjustment of the
exercise or conversion price or number of shares issuable upon the exercise
or conversion of any such options, warrants or other rights.
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 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 set forth on Schedule 2.5 or
disclosed in the SEC Reports, neither the Company nor any Subsidiary 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
audited consolidated balance sheet of the Company and the Subsidiaries as
of December 31, 2000, (ii) liabilities and obligations incurred in the
ordinary course of business since December 31, 2000 or (iii) liabilities
and obligations which individually or in the aggregate would not reasonably
be expected to have or result in a Material Adverse Effect.
2.6. Absence of Certain Changes. Except as set forth on Schedule
2.6 or as disclosed in the SEC Reports, since December 31, 2000 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 has had or would reasonably be expected to have a
Material Adverse Effect or, to the Knowledge of the Company, an adverse
effect on the ability of the Company to perform its obligations under this
Agreement or any of the Transaction Documents to which it is a party.
2.7. Litigation. (a) Except as set forth on Schedule 2.7(a) or as
disclosed in the SEC Reports, 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 the 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 a Subsidiary would reasonably be expected to have a
Material Adverse Effect.
(b) Except as set forth on Schedule 2.7(b) or as disclosed in the
SEC Reports, neither the Company nor any of the 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 reasonably be expected to
have a Material Adverse Effect.
2.8. Consents, No Violations. Except as set forth on Schedule
2.8, 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 the Subsidiaries
including, without limitation, any of the provisions of the Certificate of
Designation for the Series A Preferred Stock; (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 the 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 this 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 reasonably be expected to result in a Material Adverse
Effect or, to the Knowledge of the Company, adversely affect the ability of
the Company to consummate the transactions contemplated by this Agreement
or any Transaction Document to which it is a party; 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 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 the Subsidiaries. Without
limiting the generality of the foregoing (i) no consent or other approval
of the holders of the Series A Preferred Stock is required in connection
with the consummation of the transactions contemplated hereby or the
performance by the Company of any of its obligations under this Agreement
or any Transaction Document to which it is a party, (ii) the issuance of
the New Preferred Shares and any future issuance of Conversion Shares will
not result in any anti-dilution or other adjustment to the conversion price
or the number of shares of Class A Common Stock issuable upon conversion of
the Series A Preferred Stock or (iii) the holders of the Series A Preferred
Stock will not be entitled to exercise any voting rights as a result of any
of the provisions contained in this Agreement or any other Transaction
Documents.
2.9. Compliance with Laws. Except as set forth on Schedule 2.9 or
as disclosed in the SEC Reports, the Company and the Subsidiaries are in
compliance in all material respects with all Laws and the Company and the
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 as set forth on Schedule 2.9, the Company and the Subsidiaries have
all Licenses, and all of such Licenses are valid and in full force and
effect, and the Company and the Subsidiaries have duly performed and are in
compliance in all material respects with all of their obligations under
such Licenses.
2.10. Commitments. Schedule 2.10 sets forth a complete and
correct list of each contract, agreement, understanding, arrangement and
commitment of any nature whatsoever, whether written or oral, including all
amendments thereof and supplements thereto ("Commitments") of the following
types to which the Company or any Subsidiary is a party or by or to which
the Company or any Subsidiary or any of their properties may be bound or
subject, (i) Commitments, to the Knowledge of the Company, containing
covenants purporting to limit the freedom of the Company or any Subsidiary
to compete in any line of business in any geographic area or to hire any
individual or group of individuals, except in connection with or resulting
from acquisitions or potential acquisitions, (ii) Commitments relating to
capital expenditures in excess of $10,000,000, (iii) Commitments relating
to indentures, mortgages, promissory notes, loan agreements, guarantees,
letters of credit or other agreements or instruments of the Company or any
Subsidiary involving amounts in excess of $5,000,000, (iv) Commitments in
respect of any joint venture, partnership or other similar arrangement, (v)
Commitments with any Governmental Entity involving payments in excess of
$5,000,000 and (vi) Commitments relating to interconnection agreements with
local carriers, Commitments with resellers and material Commitments with
customers in each case involving payments in excess of $5,000,000 per year.
2.11. Brokers or Finders. Except for Xxxxxxx, Xxxxx & Co., 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 the Subsidiaries
in connection with any of the transactions contemplated by this Agreement
or the other Transaction Documents.
2.12. 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.
2.13. Offering of the New Preferred Shares. Neither the Company
nor any Person acting on its behalf has taken or will take any action
(including, without limitation, any offering of any securities of the
Company under circumstances which would require, under the Securities Act,
the integration of such offering with the offering of the New Preferred
Shares) which might reasonably be expected to subject the offering or
issuance of the New Preferred Shares to the registration requirements of
Section 5 of the Securities Act.
2.14. Disclosure. Neither this Agreement nor any other
Transaction Document, nor any schedule or exhibit hereto or thereto, nor
any certificate furnished to the Purchasers by or on behalf of the Company
in connection with the transactions contemplated hereby and thereby,
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading (for purposes of the preceding sentence, any
preliminary document or written information shall be disregarded if a final
or updated version of such document or written information was delivered to
the Purchasers by the Company prior to the date hereof). To the Company's
Knowledge the financial forecasts furnished by the Company to the
Purchasers have been reasonably prepared and reflect the best currently
available estimates and judgment of the Company's management as to the
expected future financial performance of the Company and the Subsidiaries.
There is no fact or information relating to the Company and/or any of its
Subsidiaries that, to the Company's Knowledge, would reasonably be expected
to be material to the Company and its Subsidiaries taken as a whole and
that has not been disclosed to the Purchasers.
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
New Preferred Shares, 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 New Preferred
Shares 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 New Preferred Shares 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 New Preferred Shares 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. Ownership of the 1999 Preferred Shares. Such Purchaser is
the lawful owner of the 1999 Preferred Shares set forth opposite such
Purchaser's name on the signature page hereto, which shares are to be
delivered and sold to the Company, and upon delivery and sale of, and
payment for, such shares, as provided for in this Agreement, such Purchaser
will convey to the Company good and marketable title to such shares, free
and clear of all Encumbrances.
3.9. Litigation. There is no Litigation pending or, to the
knowledge of such Purchaser, threatened against such Purchaser or any of
its Affiliates or involving any of its properties or assets by or before
any court, arbitrator or other Governmental Entity which in any manner
challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement.
ARTICLE IV
COVENANTS
4.1. Conduct of Business by the Company Pending the Closing. The
Company covenants and agrees that, during the period from the date of this
Agreement and continuing until the earlier of the termination of this
Agreement or the Closing, except for actions unanimously approved by the
Company's Board of Directors at a duly called and held meeting or unless
the Purchasers otherwise agree in writing, the Company shall, and shall
cause each of the Subsidiaries to, (i) conduct its business only in the
ordinary course and consistent with past practice; (ii) use reasonable best
efforts to preserve and maintain its assets and properties and its
relationships with its customers, suppliers, advertisers, distributors,
agents, officers and employees and other Persons with which it has
significant business relationships; (iii) use reasonable best 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 best 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. Except as expressly contemplated by this
Agreement or as set forth on Schedule 4.1, between the date of this
Agreement and the Closing, the Company shall not, and shall cause each of
the Subsidiaries not to, do any of the following without the prior written
consent of the Purchaser, which consent shall not be unreasonably withheld
or delayed:
(a) (i) issue any debt securities, (ii) incur any additional
indebtedness (other than indebtedness pursuant to the Company's Senior
Secured Credit Facilities), (iii) assume, grant, guarantee or endorse, or
make any other accommodation or arrangement making the Company or any
Subsidiary responsible for, any liabilities or other obligations of any
other Person or (iv) make any loans, advances or capital contributions to,
or investments in, any Person;
(b) change any method of accounting or accounting practice used
by the Company or any Subsidiary, other than such changes required by GAAP;
(c) repurchase, redeem (except pursuant to Section 4.5 of the
Company's Certificate of Incorporation) or otherwise acquire or exchange
any share of Common Stock or other equity interests; except for issuances
of Class A Common Stock pursuant to the exercise of options to purchase
Class A Common Stock outstanding on the date hereof and other issuances of
Class A Common Stock, in each case as listed on Schedule 2.3, issue or sell
any additional shares of the capital stock of, or other equity interests
in, the Company or any Subsidiary, or securities convertible into or
exchangeable for such shares or other equity interests, or issue or grant
any subscription rights, options, warrants or other rights of any character
relating to shares of such capital stock, such other equity interests or
such securities; or declare, set aside, make or pay any dividend, or make
any distribution, in respect of any shares of capital stock of the Company
other than as required with respect to the Series A Preferred Stock;
(d) amend the Company's or any Subsidiary's charter or by-laws or
other organizational documents except with respect to the filing of the
Certificates of Designation;
(e) take any action that is reasonably likely to result in (i)
any of the representations and warranties set forth in Article II becoming
false or inaccurate in any material respect as of the Closing Date or (ii)
any of the conditions to the obligations of the Purchasers set forth in
Section 5.2 not being satisfied; or
(f) agree to take any of the actions restricted by this Section
4.1.
4.2. Press Releases; Interim Public Filings. The Company shall,
and shall cause each Subsidiary to, deliver to the Purchasers complete and
correct copies of all press releases and public filings made between the
date hereof and the Closing Date, and, 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
best 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 best 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. Consents; Approvals. The Company shall use its reasonable
best 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 its reasonable best 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.
4.5. Listing. The Company shall use its reasonable best 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 New Preferred Shares 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 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.
4.6. Board Representation; Observers, VCOC. (a) Section 8(b)(i)
of the Certificate of Designation for the Series D Preferred Stock provides
that the holders of Series D Preferred Stock shall be entitled to elect two
directors to the Board of Directors subject to the terms set forth therein.
In addition, Section 8(b)(i) of the Certificate of Designation for the
Series E Preferred Stock provides that the holders of Series E Preferred
Stock shall be entitled to designate one non-voting observer to attend and
participate in (but not vote at) all meetings of the Board of Directors
(the "Series E Non-Voting Observer"). Accordingly, subject to the
Certificate of Designation for the Series D Preferred Stock, the Purchasers
set forth on Schedule 4.6(a)(1), as holders of Series D Preferred Stock,
shall be entitled to designate for election to the Board of Directors two
directors (the "Purchasers' Directors") and subject to the Certificate of
Designation for the Series E Preferred Stock, the Purchasers set forth on
Schedule 4.6(a)(2), as holders of Series E Preferred Stock, shall be
entitled to designate the one Series E Non-Voting Observer, in each case as
set forth on the applicable schedule. Xxxxxxxx X. Xxxxxxxxx and Xxxxxxx X.
Xxxxxx, each of whom currently serves on the Board of Directors as a
director designee of the Series B Preferred Stock, shall serve as the
initial Purchasers' Directors for purposes of the Series D Preferred Stock,
and Xxxxxx X. Xxxxxx, who currently serves as the non-voting observer for
the Series C Preferred Stock, shall serve as the initial Series E
Non-Voting Observer. 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 best 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 best efforts to
cause the successor to be elected. The Series E Non-Voting Observer shall
have the same access to information concerning the business and operations
of the Company and its Subsidiaries and at the same time as directors of
the Company, and shall be entitled to participate in discussions and
consult with the Board of Directors without voting. Without limiting the
generality of the foregoing, the Purchasers' Directors and the Series E
Non-Voting Observer 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 accountants' work papers, and the Purchasers' Directors
and the Series E Non-Voting Observer may make such copies and inspections
thereof as the Purchasers' Directors and the Series E Non-Voting Observer
may request. The Company shall furnish the Purchasers' Directors and the
Series E Non-Voting Observer with such financial and operating data and
other information with respect to the business and properties of the
Company as the Purchasers' Directors and the Series E Non-Voting Observer
may request. The Company shall permit each of the Purchasers' Directors and
the Series E Non-Voting Observer 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. The provision of
any such information to the Series E Non-Voting Observer shall be subject
to the receipt by the Company of a confidentiality agreement covering such
information and reasonably acceptable to the Company and the Series E
Non-Voting Observer. Notwithstanding anything contained in this Section 4.6
to the contrary, the provisions of the Certificates of Designation shall
govern the rights of holders of New Preferred Shares to elect directors
(including any Purchasers' Directors).
(b) The rights set forth in Section 4.6(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 and the Series E Non-Voting Observer 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.
4.7. Certificates of Designation. The Company shall, as promptly
as practicable, and in any case no later than 10:00 a.m., on October 1,
2001, cause the Certificates of Designation to be filed with the Secretary
of State of the State of Delaware.
4.8. Cooperation. Each of the Purchasers and the Company agrees
to use its reasonable best 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.
4.9. 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, Commitments
and books and records of the Company and of the Subsidiaries, and to the
outside auditors of the Company and their work papers relating to the
Company and the Subsidiaries. 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.
4.10. Reserve Shares. The Company will at all times reserve and
keep available, solely for issuance and delivery upon conversion of the New
Preferred Shares, the number of shares of Class A Common Stock from time to
time issuable upon conversion of all shares of the New Preferred Shares at
the time outstanding. All shares of Class A Common Stock issuable upon
conversion of the New Preferred Shares shall be duly authorized and, when
issued upon such conversion or exercise, shall be validly issued, fully
paid and nonassessable.
4.11. [INTENTIONALLY OMITTED]
4.12 Restrictions on Transfer. The Purchasers will not, prior to
the earlier of (a) September 15, 2004 or (b) the occurrence of a
Termination Event (as defined below), sell, transfer, assign, convey, gift,
mortgage, pledge, encumber, hypothecate, or otherwise dispose of, directly
or indirectly, ("Transfer") any of the New Preferred Shares or the
Conversion Shares except for (i) Transfers between and among the Purchasers
and their Affiliates provided such Transfer is done in accordance with the
transfer restrictions applicable to the New Preferred Shares or the
Conversion Shares under federal and state securities laws and the Affiliate
transferee agrees to be bound by the restrictions applicable to such New
Preferred Shares or Conversion Shares, including without limitation the
agreements set forth in this Section 4.12, and (ii) Transfers (w) required
to comply with applicable Law provided that the general partners of the
Purchasers shall not be the party that institutes any proceeding out of
which such Transfer is required by Law, (x) pursuant to a bona fide tender
or exchange offer made pursuant to a merger or other agreement approved by
the Board of Directors to acquire securities of the Company; provided, that
the Purchasers may not tender or exchange in such offer unless at least 50%
of the outstanding securities of the Company have previously been tendered
or exchanged by other holders of the Company's securities in connection
therewith, (y) following any stock merger or other stock business
combination transaction to which the Company is a party if Xxxxx and Xxxx
XxXxxx sell any of the securities beneficially owned and received by them
in such transaction following such transaction and then only in an amount
equal to the product of (A) the percentage that the securities beneficially
owned and sold by Xxxxx and Xxxx XxXxxx represents of the total number of
securities beneficially owned by Xxxxx and Xxxx XxXxxx and (B) the total
number of securities beneficially owned by such Purchasers (determined in
all cases on an as converted basis) and (z) pursuant to any cash merger, or
other business combination transaction to which the Company is a party or
involved in which the Class A Common Stock of the Company's stockholders is
exchanged for cash upon consummation of such merger or other business
combination. Notwithstanding any other provision of this Section 4.12, no
Purchaser shall avoid the provisions of this Section 4.12 by making one or
more Transfers to one or more Affiliates and then disposing of all or any
portion of such Purchaser's interest in any such Affiliate. For purposes of
this Section 4.12, a "Termination Event" shall occur if at any time the
position of Chief Executive Officer of the Company (or any higher position
within the Company) is not occupied by either Xxxxx XxXxxx or Xxxxxxx Xxxx.
Each Purchaser agrees that it may not exercise any conversion rights with
respect to the New Preferred Shares until September 15, 2004; provided that
nothing contained herein shall be deemed to prevent the Purchasers from
exercising their conversion rights with respect to the New Preferred Shares
at any time after September 15, 2004 or at any time prior thereto in
connection with a Termination Event or in connection with a Transfer
permitted pursuant to Section 4.12(b)(ii). Nothing contained herein shall
be deemed to limit the ability of the limited partners in the Purchasers
from transferring, directly or indirectly, their limited partnership
interests in the Purchasers or the general partners of the Purchasers from
transferring, directly or indirectly, up to 15% of the equity interests in
the Purchasers at any time or from time to time.
4.13 Standstill Agreement. (a) During the period commencing on
the date hereof and ending on the earlier of (i) September 15, 2009 (the
"Standstill Period") or (ii) the date these provisions terminate as
provided herein, except as (x) specifically permitted by this Agreement 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:
(i) acquire, or offer or agree to acquire, or become the
beneficial owner 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 of the New Preferred Shares
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 New
Preferred Shares or shares of Class A Common Stock (including any
Conversion Shares) held by the Purchasers or any of their Affiliates
at the time of such dividend, split or reclassification or merger or
business combination;
(ii) 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" (as such term is defined or used in Rule 14a-11 under the
Exchange Act) 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 Purchasers or the Purchasers' Directors
in connection with solicitations by the Board of Directors);
(iii) publicly or privately propose, encourage, 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 5% of the outstanding capital stock (except in
connection with the registration of securities pursuant to the
Registration Rights Agreement); and
(iv) directly or indirectly join in or in any way participate in
a pooling agreement, syndicate, voting trust or other arrangement with
respect to the Company's voting securities or otherwise act in concert
with any other Person (other than Affiliates), for the purpose of
acquiring, holding, voting or disposing of the Company's securities.
(b) Nothing contained in this Section 4.13 shall be deemed to
restrict the manner in which the Purchasers' Directors or the Series E
Non-Voting Observer participate in deliberations or discussions of the
Board of Directors.
(c) The standstill provisions set forth herein shall terminate on
the earliest of (i) the last day of the Standstill Period, (ii) the date
that the position of Chief Executive Officer of the Company (or any higher
position within the Company) is not occupied by either Xxxxx XxXxxx or
Xxxxxxx Xxxx, (iii) upon any breach by the Company in any material respect
of any covenant or agreement contained in this Agreement or in any
Transaction Document, (iv) upon the filing of a voluntary bankruptcy
petition by the Company or on the 60th day following the filing of an
involuntary bankruptcy petition against the Company if such petition is not
discharged with prejudice during such 60-day period or (v) upon the
occurrence of a change in control of the Company if the Purchasers are
permitted to effect a Transfer in accordance with the provisions of Section
4.12(b)(ii)(x), (y) and (z) hereof.
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 or regulation or order of any court or
administrative agency shall be in effect which prohibits 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; and
(c) Any material required filings or other consents, if any, of
state regulatory bodies shall have been made or obtained.
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 in all material respects 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;
(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 delivered to the Purchasers an
officer's certificate certifying as to the Company's compliance with the
conditions set forth in clauses (a) and (b) of this Section 5.2;
(d) The Company shall have executed and delivered a Registration
Rights Agreement in the form of Exhibit 5.2(d) hereto (the "Registration
Rights Agreement"), and the Registration Rights Agreement shall be in full
force and effect;
(e) The Company shall have executed and delivered a Termination
Agreement in the form of Exhibit 5.2(e) hereto (the "Termination
Agreement"), and the Termination Agreement shall be in full force and
effect;
(f) 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;
(g) The Conversion Shares shall have been duly authorized and
reserved for issuance and such Conversion Shares shall have been approved
for listing on the NMS, subject to official notice of issuance;
(h) The Purchasers shall have received an opinion from (i) the
General Counsel of the Company, with respect to good standing,
non-contravention and the capitalization of the Company and (ii) Xxxxx &
Xxxxxxx L.L.P., outside counsel to the Company, with respect to the due
incorporation, due authorization, validity of the New Preferred Shares,
Securities Act of 1933 exemption and the valid and binding nature of this
Agreement, the Termination Agreement and the Registration Rights Agreement,
in the form of Exhibit 5.2(h)(i) and Exhibit 5.2(h)(ii), respectively;
(i) The Purchasers shall have received an opinion from Xxxxxxx
Xxxx & Xxxxxxxxx, outside counsel to the Company, in the form of Exhibit
5.2(i) hereto;
(j) There shall not have occurred any event, circumstances,
condition, fact, effect or other matter which has had or would reasonably
be expected to have a material adverse effect (x) on the business, assets,
financial condition, prospects, or results of operations of the Company and
its Subsidiaries taken as a whole or (y) on the ability of the Company and
such Subsidiaries to perform any material obligation under this Agreement
or to consummate the transactions contemplated hereby.
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 in all material respects 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;
(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;
(c) The Purchasers shall have delivered to the Company an
officer's certificate certifying as to the Purchasers' compliance with the
conditions set forth in clauses (a) and (b) of this Section 5.3;
(d) The Company shall have received an opinion from Fried, Frank,
Harris, Xxxxxxx & Xxxxxxxx, outside counsel to the Purchasers, with respect
to non-contravention, due formation, due authorization, and the valid and
binding nature of this Agreement, the Termination Agreement and the
Registration Rights Agreement in the form of Exhibit 5.3(d) hereto; and
(e) The Purchasers shall have executed and delivered the
Termination Agreement, and the Termination Agreement shall be in full force
and effect.
ARTICLE VI
TERMINATION
6.1. Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual written agreement of the Company and the
Purchasers; or
(b) by either the Purchasers or the Company if the Closing shall
not have been consummated on or before October 31, 2001 (provided that the
right to terminate this Agreement under this Section 6.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the Closing
to occur on or before such date); or
(c) by either the Purchasers or the Company if a court of
competent jurisdiction or governmental, regulatory or administrative agency
or commission shall have issued a nonappealable final order, decree or
ruling or taken any other action having the effect of permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement.
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 breach of this Agreement and
provided further that this Section 6.2 and Sections 8.2 (other than the
second sentence thereof), 8.3, 8.13, 8.14 and 8.15 shall survive
termination of this Agreement.
ARTICLE VII
INDEMNIFICATION
7.1. Survival. The representations and warranties of the parties
hereto contained in this Agreement or in any of the other Transaction
Documents shall expire on the 18-month anniversary of the Closing Date,
except that the representations and warranties set forth in Sections
2.1(a), 2.2, 2.3, 3.5 and 3.6 shall survive until the expiration of the
applicable statute of limitations (including any extensions thereof). After
the expiration of such periods, any claim by a party hereto based upon any
such representation or warranty shall be of no further force and effect,
except to the extent a party has asserted a claim in accordance with this
Article VII for breach of any such representation or warranty prior to the
expiration of such period, in which event any representation or warranty to
which such claim relates shall survive with respect to such claim until
such claim is resolved as provided in this Article VII. The covenants and
agreements of the parties hereto contained in this Agreement or in any of
the other Transaction Documents shall survive the Closing until performed
in accordance with their terms.
7.2. Indemnification. (a) The Company shall indemnify, defend and
hold harmless the Purchasers, their Affiliates, and their respective
officers, directors, partners, members, employees, agents, representatives,
successors and assigns (each a "Purchasers Indemnified Person") from and
against all Losses incurred or suffered by a Purchaser Indemnified Person
arising from (i) the breach of any of the representations or warranties
made by the Company in this Agreement or any other Transaction Document or
(ii) the breach of any covenant or agreement made by the Company in this
Agreement or any other Transaction Document. Notwithstanding the foregoing,
(A) no claim may be made against the Company for indemnification pursuant
to Section 7.2(a)(i) unless the aggregate liability of the Company exceeds
$10 million, and the Company shall then only be liable for Losses in excess
of such amount and (B) the Company's maximum liability for indemnification
pursuant to Section 7.2(a)(i) shall not exceed $250,000,000.
(b) The Purchasers shall indemnify, defend and hold harmless the
Company, its Affiliates, and their respective officers, directors,
partners, members, employees, agents, representatives, successors and
assigns (each a "Company Indemnified Person") from and against all Losses
incurred or suffered by a Company Indemnified Person arising from (i) the
breach of any of the representations or warranties made by the Purchasers
in this Agreement or any other Transaction Document or (ii) the breach of
any covenant or agreement made by the Purchasers in this Agreement or any
other Transaction Document. Notwithstanding the foregoing, (A) no claim may
be made against the Purchasers for indemnification pursuant to Section
7.2(b)(i) unless the aggregate liability of the Purchasers exceeds $10
million, and the Purchasers shall then only be liable for Losses in excess
of such amount and (B) the Purchasers' maximum liability for
indemnification pursuant to Section 7.2(b)(i) shall not exceed
$250,000,000.
(c) A party seeking indemnification under this Section 7.2 shall,
promptly upon becoming aware of the facts indicating that a claim for
indemnification may be warranted, give to the party from whom
indemnification is being sought a notice of claim relating to such Loss (a
"Claim Notice"). Each Claim Notice shall specify the nature of the claim,
the applicable provision(s) of this Agreement or other instrument under
which the claim for indemnity arises, and, if possible, the amount or the
estimated amount thereof. No failure or delay in giving a Claim Notice (so
long as the same is given prior to expiration of the representation or
warranty upon which the claim is based) and no failure to include any
specific information relating to the claim (such as the amount or estimated
amount thereof) or any reference to any provision of this Agreement or
other instrument under which the claim arises shall affect the obligation
of the party from whom indemnification is sought.
7.3. Inspections; No Other Representations. The Purchasers are
informed and sophisticated purchasers, and have undertaken such
investigation and have been provided with and have evaluated such documents
and information as they deem necessary to enable them to make an informed
decision with respect to the execution, delivery and performance of this
Agreement. Each Purchaser will undertake prior to the Closing such further
investigation and request such additional documents and information as it
deems necessary. Each Purchaser agrees to accept the New Preferred Shares
based upon its own inspection, examination and determination with respect
thereto as to all matters, and without reliance upon any express or implied
representations or warranties of any nature made by or on behalf of or imputed
to the Company, except as expressly set forth in this Agreement. Without
limiting the generality of the foregoing, each Purchaser acknowledges that
the Company makes no representation or warranty with respect to any
projections, estimates or budgets delivered to or made available to
Purchasers of future revenues, future results of operations (or any
component thereof), future cash flows or future financial condition (or any
component thereof) of the Company and its Subsidiaries or the future
business and operations of the Company and the Subsidiaries except as
expressly set forth in this Agreement.
7.4. Exclusivity. Except as specifically set forth in this
Agreement and except in the case of fraud, effective as of the Closing,
each party hereby waives any rights and claims such party may have against
the other party hereto, whether in law or in equity, relating to any breach
of any representation or warranty by any party hereunder. After the
Closing, Sections 7.1, 7.2(a) and 7.2(b) will provide the exclusive remedy
for any misrepresentation or breach of warranty, except in the case of
fraud.
ARTICLE VIII
MISCELLANEOUS
8.1. Defined Terms; Interpretations. The following terms, as used
herein, shall have the following meanings:
"Affiliate" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act.
"Agreement" shall have the meaning ascribed thereto in the
preamble.
"Board of Directors" shall mean the Board of Directors of the
Company.
"Certificates of Designation" shall have the meaning ascribed
thereto in Section 2.2.
"Claim Notice" shall have the meaning ascribed thereto in Section
7.2(c).
"Class A Common Stock" shall have the meaning ascribed thereto in
Section 2.3, 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.
"Closing" shall have the meaning ascribed thereto in Section
1.2(a).
"Closing Date" shall have the meaning ascribed thereto in Section
1.2(a).
"Commitments" shall have the meaning ascribed thereto in Section
2.10.
"Common Stock" shall have the meaning ascribed thereto in Section
2.3.
"Company" shall have the meaning ascribed thereto in the
preamble.
"Company Indemnified Person" shall have the meaning ascribed
thereto in Section 7.2(b).
"Consents" shall have the meaning ascribed thereto in Section
4.4.
"Conversion Shares" shall mean any shares of Class A Common Stock
issued upon conversion of any New Preferred Shares, 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 meaning ascribed thereto in Section
2.1(b).
"Exchange" shall have the meaning ascribed thereto in the
recitals.
"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.
"GAAP" shall have the meaning ascribed thereto in Section 2.5.
"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 Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended, and the rules and regulations thereunder.
"Knowledge", with respect to the Company, shall mean the
knowledge of Xxxxx XxXxxx, Xxxxxxx Xxxx, Xxxxx X. Xxxxxx, Xx. and Xxxxxxx
Rings.
"Laws" shall include all foreign, federal, state, and local laws,
statutes, ordinances, rules, regulations, orders, judgments, decrees and
bodies of law.
"Licenses" shall have the meaning ascribed thereto in Section
2.9.
"Litigation" shall have the meaning ascribed thereto in Section
2.7(a).
"Losses" shall mean each and all of the following items: claims,
losses, liabilities, obligations, payments, damages (actual or punitive),
charges, judgments, fines, penalties, amounts paid in settlement, costs and
expenses (including, without limitation, interest which may be imposed in
connection therewith, costs and expenses of investigation, actions, suits,
proceedings, demands, assessments and fees, expenses and disbursements of
counsel, consultants and other experts).
"Material Adverse Effect" shall mean a material adverse effect on
the properties, business, prospects, operations, results of operations,
earnings, assets, liabilities or condition (financial or otherwise) of the
Company and its Subsidiaries taken as a whole.
"New Preferred Shares" shall have the meaning ascribed thereto in
the recitals.
"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.
"Purchasers" shall have the meaning ascribed thereto in the
preamble.
"Purchasers Indemnified Person" shall have the meaning ascribed
thereto in Section 7.2(a).
"Registration Rights Agreement" shall have the meaning ascribed
thereto in Section 5.2(d).
"SEC" shall mean the Securities and Exchange Commission.
"SEC Reports" shall have the meaning ascribed thereto in Section
2.4.
"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.
"Senior Secured Credit Facilities" shall mean the Company's $1.3
billion of senior secured credit facilities that were entered into on May
31, 2000 with a syndicate of financial institutions, as currently in
effect.
"Series A Preferred Stock" shall have the meaning ascribed
thereto in Section 2.3.
"Series B Preferred Stock" shall have the meaning ascribed
thereto in the recitals.
"Series C Preferred Stock" shall have the meaning ascribed
thereto in the recitals.
"Series D Preferred Stock" shall have the meaning ascribed
thereto in the recitals.
"Series E Preferred Stock" shall have the meaning ascribed
thereto in the recitals.
"Significant Subsidiaries" shall mean the entities listed on
Schedule 8.1.
"Subsidiary" shall mean as to the Company, each corporation,
partnership or other entity of which shares of capital stock or other
equity interests having ordinary voting power (other than capital stock or
other equity interests having such power only by reason of the happening of
a contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the time
owned, directly or indirectly, or the management of which is otherwise
controlled, directly or indirectly, or both, by the Company.
"Termination Agreement" shall have the meaning ascribed thereto
in Section 5.2(e).
"Transaction Documents" shall mean this Agreement, the
Termination Agreement, the Certificates of Designation, the Registration
Rights Agreement and all other contracts, agreements, schedules,
certificates and other documents being delivered pursuant to or in
connection with this Agreement or such other documents or the transactions
contemplated hereby or thereby.
8.2. Fees and Expenses. All costs and expenses incurred in
connection with this Agreement shall be paid by the party incurring such
costs or expense.
8.3. 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.
8.4. Restrictive Legends. In addition to the restrictions set
forth in Section 4.12, no New Preferred 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. Each certificate representing
any of the foregoing 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 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 AN EXCHANGE AGREEMENT DATED AS OF
SEPTEMBER 30, 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.
In addition, each certificate representing New Preferred Shares shall bear
a legend in substantially the following form:
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.
and each certificate representing Conversion Shares shall bear a legend in
substantially the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE SHALL BE
REDEEMABLE AS PROVIDED IN THE COMPANY'S AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION.
8.5. 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.
8.6. 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 New Preferred Shares or
Conversion Shares are also for the benefit of, and enforceable by, any
Affiliates of the Purchasers who hold such New Preferred Shares or
Conversion Shares and received such New Preferred Shares or Conversion
Shares in accordance with the terms of this Agreement.
8.7. 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.
8.8. 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
0000 X Xxxxxx XX
XX Xxx 0000
Xxxxx Xxxxxx, Xxxx 00000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx Rings, Esq.
Group Vice President and Chief Legal Officer
with a copy to (which shall not constitute notice):
Xxxxx & Xxxxxxx L.L.P.
Columbia Square
000 Xxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, Xx., Esq.
(ii) if to the Purchasers, to:
c/o Forstmann Little & Co.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
with a copy to:
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx, 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).
8.9. 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.
8.10. 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.
8.11. 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.
8.12. 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.
8.13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW.
8.14. Submission to Jurisdiction. 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 of the United
States of America, in each case located in the County of New York, for any
Litigation arising out of or relating to this Agreement or the other
Transaction Documents and the transactions contemplated hereby and thereby
(and agrees not to commence any Litigation relating hereto or 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 this Agreement 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 New York
or the United States of America, in each case 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 Litigation brought in any
such court has been brought in an inconvenient forum.
8.15. 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.
8.16. 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-V, L.P.
By: FLC XXX Partnership, L.P.
its general partner
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Xxxxxxx X. Xxxxxxxx,
a general partner
SECURITIES TO BE SURRENDERED NEW SECURITIES TO BE ISSUED
No. of Series B No. of Series C No. of Series D No. of Series E
Preferred Shares Preferred Shares Preferred Shares Preferred Shares
------------------ ------------------ ------------------ -----------------
0 125,000 0 125,000
FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND EQUITY
MANAGEMENT BUYOUT PARTNERSHIP-VI, L.P.
By: FLC XXIX Partnership, L.P.
its general partner
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Xxxxxxx X. Xxxxxxxx,
a general partner
SECURITIES TO BE SURRENDERED NEW SECURITIES TO BE ISSUED
No. of Series B No. of Series C No. of Series D No. of Series E
Preferred Shares Preferred Shares Preferred Shares Preferred Shares
------------------ ------------------ ------------------ -----------------
85,752.78 0 85,752.78 0
FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND EQUITY
MANAGEMENT BUYOUT PARTNERSHIP-VII, L.P.
By: FLC XXXIII Partnership, L.P.
its general partner
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Xxxxxxx X. Xxxxxxxx,
a general partner
SECURITIES TO BE SURRENDERED NEW SECURITIES TO BE ISSUED
No. of Series B No. of Series C No. of Series D No. of Series E
Preferred Shares Preferred Shares Preferred Shares Preferred Shares
------------------ ------------------ ------------------ -----------------
189,247.22 0 189,247.22 0
MCLEODUSA INCORPORATED
By: /s/ Xxxxxxx X. Xxxx
----------------------------------------
Name: Xxxxxxx X. Xxxx
Title: President and Chief Executive Officer
