Exhibit 12
AMENDED AND RESTATED LOCK-UP, SUPPORT,
AND VOTING AGREEMENT
This Amended and Restated Lock-Up, Support, and Voting Agreement (this
"Agreement") is made and entered into as of January 30, 2002, by and among
McLeodUSA Incorporated, a Delaware corporation (the "Company") and the
entities listed on the signature page hereto under the caption "Investors"
(collectively, "Investor"). The Company and Investor are collectively
referred to herein as the "Parties" and individually as a "Party."
RECITALS
WHEREAS, the Parties are party to that certain Lock-Up, Support, and
Voting Agreement, dated as of December 3, 2001 (the "Original Agreement");
WHEREAS, since the date of the Original Agreement, the Company and
Investor have engaged in good faith negotiations among themselves and with
the Company's creditors regarding a restructuring of the Company's
obligations and the recapitalization of the Company;
WHEREAS, the Company now intends to file a case (the "Chapter 11
Proceedings") under Chapter 11 of Title 11 of the United States Code, 11
U.S.C. xx.xx. 101, et seq. (the "Bankruptcy Code") in the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") to
implement a Plan of Reorganization on the terms described in Exhibit A (the
"Plan");
WHEREAS, Investor owns or controls the right to vote 100% of (i) that
certain Series D Convertible Preferred Stock issued by the Company and (ii)
that certain Series E Convertible Preferred Stock issued by the Company
(together, the "Series D and E Preferred Stock"); and
WHEREAS, in order to facilitate the implementation of the Plan, the
Parties hereto desire to amend and restate the Original Agreement in its
entirety.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:
1. Voting in Favor of the Plan.
(a) Agreement to Vote. Investor hereby irrevocably agrees, during the
period commencing on the date of this Agreement and continuing until
the termination of this Agreement as provided for in Section 6 hereof,
to vote timely its Series D and E Preferred Stock in favor of the Plan
with such modifications in the terms of the Plan that do not
materially deviate from the terms set forth on Exhibit A, by executing
ballots in favor of the Plan and agrees not to revoke or withdraw such
vote. Investor's agreement to support the Plan is expressly
conditioned upon the terms of the Plan being as set forth on Exhibit A
and the Plan and all related documents being consistent with the terms
set forth on Exhibit A with, in each case, such modifications that do
not materially deviate from the terms of Exhibit A. Investor agrees
that all solicitation materials and ballots prepared in connection
with the Plan may indicate its support of the Plan. Solely for
purposes of this Agreement, a reduction in the equity percentage which
the number of shares of New Common Stock (as defined in Exhibit A) to
be received by each of the Investors upon consummation of the Plan
represents of the fully diluted equity (calculated as set forth on
Exhibit A) from the respective percentages set forth on Exhibit A
shall be deemed to be a modification in the terms of the Plan or
restructuring that materially deviates from the terms set forth on
Exhibit A.
(b) Modifications. Notwithstanding any other provision of this
Agreement, the Company may make such changes and modifications to the
Plan as the Company deems are necessary and appropriate in order to
have the Plan approved or implemented; provided, however, that
Investor will not be required to support any such restructuring that
materially deviates from the terms set forth on Exhibit A unless any
such material deviations have been approved by Investor.
2. Restrictions on Transfer. Investor hereby agrees, so long as this
Agreement remains in effect, not to (i) sell, transfer, assign, pledge, or
otherwise dispose of any of the Series D and E Preferred Stock, in whole or
in part, or any interest therein, or (ii), without limiting the generality
of the Section 2 of this Agreement, grant any proxies, deposit any of the
Series D and E Preferred Stock into a voting trust, or enter into a voting
agreement with respect to any of the Stock.
3. Support of the Plan. As long as this Agreement remains in effect, the
Company will (i) use its reasonable best efforts to obtain confirmation of
the Plan in accordance with the Bankruptcy Code as expeditiously as
possible and (ii) use its reasonable best efforts to achieve confirmation
including, upon approval of the disclosure statement, recommending to the
holders of impaired claims and interests that they vote to approve the
Plan. As long as this Agreement remains in effect, neither Party shall (a)
object to confirmation of the Plan or otherwise commence any proceeding to
oppose or alter the Plan or any other reorganization related documents or
agreements (all such documents and agreements, the "Plan Documents"), so
long as such documents conform to the terms hereof and set forth in Exhibit
A, (b) vote for, consent to, support or participate in the formulation of
any other plan of reorganization or liquidation proposed or filed or to be
proposed or filed in any Chapter 11 or Chapter 7 case commenced in respect
of the Company, (c) directly or indirectly seek, solicit, support or
encourage any other plan, sale, proposal or offer of dissolution, winding
up, liquidation, reorganization, merger or restructuring of the Company or
any of its subsidiaries that could reasonably be expected to prevent, delay
or impede the successful restructuring of the Company as contemplated by
the Plan or the Plan Documents, (d) object to the disclosure statement or
the solicitation of consents to the Plan, or (e) take any other action that
is inconsistent with, or that would delay confirmation of, the Plan;
provided, however, the Investors' obligations pursuant to this Section 3
shall be conditioned upon (i) the Company's filing of the Plan, (ii) the
Company's not withdrawing the Plan or modifying the Plan in a manner that
materially deviates from the terms set forth on Exhibit A and (iii) the
Bankruptcy Court's not rejecting or denying confirmation of the Plan, in
each case with such modifications to the Plan that do not materially
deviate from the term of Exhibit A.
4. Acknowledgment. This Agreement is not and shall not be deemed to be a
solicitation for consents to the Plan. The acceptances of Investor will not be
solicited until it has received the applicable solicitation materials and/or
disclosure statement and related ballots.
5. Termination of Agreement. At any time after August 1, 2002, the Company
and Investor may terminate their obligations hereunder and Investor may
rescind its vote on the Plan (which vote shall be null and void and have no
further force and effect), by giving prior written notice thereof to the
other party.
6. Representations and Warranties. Each Investor represents and warrants
that the following statements are true, correct and complete as of the date
hereof:
(a) Corporate Power and Authority. It is duly organized, validly
existing, and in good standing under the laws of the state of its
organization, and has all requisite corporate, partnership or LLC
power and authority to enter into this Agreement and to carry out the
transactions contemplated by, and perform its respective obligations
under, this Agreement.
(b) Authorization. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been
duly and validly authorized by all required actions on the part of
Investor and no other proceedings on the part of such Investor are
necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by such Investor and, assuming this
Agreement has been duly authorized, executed and delivered by the
Company, constitutes a valid and binding agreement of such Investor.
(c) No Conflicts. Neither the execution and delivery of this Agreement
by such Investor nor the consummation by such Investor of the
transactions contemplated hereby nor compliance by such Investor with
any of the provisions hereof will (a) conflict with or result in any
breach of any provision of the charter or by-laws or similar
organization documents of such Investor, (b) result in a violation or
breach of, or constitute (with or without due notice or lapse of time
or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or
provisions of any material note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation to which such
Investor or any of its subsidiaries is a party or by which any of them
or any of their properties or assets may be bound or (c) violate any
order, writ, injunction, decree, statute, rule or regulation
applicable to such Investor, any of its subsidiaries or any of their
properties or assets.
(d) Governmental Consents. The execution, delivery and performance by
it of this Agreement do not and shall not require any registration or
filing with consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or
regulatory body, other than the approval of the Bankruptcy Court with
respect to the Plan.
(e) Owner of Stock. It is the beneficial owner of, or holder of
investment authority over, the Series D and E Preferred Stock that it
has agreed to vote in favor of the Plan, and beneficially owns, or has
investment authority over, no other interests in the Company.
7. Further Acquisition of Interests. This Agreement shall in no way be
construed to preclude Investor from acquiring additional interests in the
Company. However, any such additional interests so acquired shall
automatically be deemed to be subject to the terms of this Agreement.
8. Amendments. This Agreement may not be modified, amended or supplemented
without the prior written consent of the Company and Investor.
9. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware,
without regard to any conflicts of law provision which would require the
application of the law of any other jurisdiction. By its execution and
delivery of this Agreement, each of the Parties hereto hereby irrevocably
and unconditionally agrees for itself that any legal action, suit or
proceeding against it with respect to any matter under or arising out of or
in connection with this Agreement or for recognition or enforcement of any
judgment rendered in any such action, suit or proceeding, may be brought in
the United States District Court for the District of Delaware. By execution
and delivery of this Agreement, each of the Parties hereto irrevocably
accepts and submits itself to the nonexclusive jurisdiction of such court,
generally and unconditionally, with respect to any such action, suit or
proceeding. Notwithstanding the foregoing consent to jurisdiction, upon the
commencement of any Chapter 11 Proceedings, each of the Parties hereto
hereby agrees that the Bankruptcy Court shall have exclusive jurisdiction
of all matters arising out of or in connection with this Agreement.
10. Specific Performance. It is understood and agreed by each of the
Parties hereto that money damages would not be a sufficient remedy for any
breach of this Agreement by any Party and each non-breaching Party shall be
entitled to specific performance and injunctive or other equitable relief
as a remedy of any such breach.
11. Headings. The headings of the sections, paragraphs and subsections of
this Agreement are inserted for convenience only and shall not affect the
interpretation hereof.
12. Successors and Assigns. This Agreement is intended to bind and inure to
the benefit of the Parties and their respective successors, assigns, heirs,
executors, administrators and representatives.
13. Prior Negotiations. This Agreement and Exhibit A supersede all prior
negotiations with respect to the subject matter hereof. Without limiting
the generality of the foregoing, this Agreement supercedes the Original
Agreement.
14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
shall constitute one and the same Agreement.
15. No Third-Party Beneficiaries. Unless expressly stated herein, this
Agreement shall be solely for the benefit of the Parties hereto and no
other person or entity shall be a third-party beneficiary hereof.
16. Consideration. It is hereby acknowledged by the Parties hereto that no
consideration shall be due or paid to Investor for its agreement to vote to
accept the Plan in accordance with the terms and conditions of this
Agreement other than the Company's agreement to use its reasonable best
efforts to obtain approval of any disclosure statement and reasonable best
efforts to confirm the Plan in accordance with the terms and conditions of
this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered by its duly authorized officer as of
the date first above written.
McLEODUSA INCORPORATED
By: /s/ Xxxxx Xxxxx
-------------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Operating and Financial Officer
INVESTORS:
FORSTMANN LITTLE & CO. EQUITY
PARTNERSHIP-V, L.P.
By: FLC XXX Partnership, L.P.
its general partner
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------------
Xxxxxx X. Xxxxxx,
a general partner
FORSTMANN LITTLE & CO. SUBORDINATED
DEBT AND EQUITY MANAGEMENT BUYOUT
PARTNERSHIP-VI, L.P.
By: FLC XXIX Partnership, L.P.
its general partner
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------------
Xxxxxx X. Xxxxxx,
a general partner
FORSTMANN LITTLE & CO. SUBORDINATED DEBT
AND EQUITY MANAGEMENT BUYOUT
PARTNERSHIP-VII, L.P.
By: FLC XXXIII Partnership, L.P.
its general partner
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------------
Xxxxxx X. Xxxxxx,
a general partner
MCLEODUSA INCORPORATED EXHIBIT A
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SUMMARY TERM SHEET
Company McLeodUSA Incorporated (the "Company").
Parties Subject to Restructure The Company; Forstmann Little & Company,
its affiliates and its co-investors, if
any, (collectively, "FL" or the
"Sponsor"); the banks participating in
the senior credit agreement (the "Bank
Group"); holders ("Noteholders") of the
Company's unsecured notes including (a)
11.375% Senior Notes due 2009; (b)
10.500% Senior Discount Notes due 2007;
(c) 9.250% Senior Notes due 2007; (d)
8.375% Senior Notes due 2008; (e) 9.500%
Senior Notes due 2008; (f) 8.125% Senior
Notes due 2009; (g) 11.500% Senior Notes
due 2009; and (h) 12.000% Senior Notes
due 2008 (collectively, the "Notes");
preferred equity holders ("Preferred
Holders") of the Company's class A, D,
and E preferred stock (collectively, the
"Old Preferred Stock"); and the holders
of the Company's current common stock
("Old Equity").
Overview The Company will restructure its balance
sheet (the "Transaction" or the
"Recapitalization") through, among other
things, exchange of the Notes for (i)
cash, (ii) a senior convertible
preferred stock (the "New Convertible
Preferred Stock"), and (iii) five-year
warrants (the "New Noteholder Warrants")
to purchase newly issued new common
stock ("New Common Stock"); the exchange
of the Existing Preferred Stock and the
Existing Common Stock for New Common
Stock; and new investment by FL for New
Common Stock and warrants identical to
the New Noteholder Warrants (the "New FL
Warrants," and together with the New
Noteholder Warrants, the "Warrants"),
through a pre-negotiated Chapter 11
Plan. Pursuant to the Transaction:
o The Noteholders will receive the
following:
- $670 million, subject to
adjustment described below, from:
(a) Pubco Proceeds: $570 million
from the Pubco sale, unless the
sale of Pubco closes after April
30, 2002 in which case the
proceeds from the Pubco sale (and
the amount payable to the
Noteholders) shall be reduced
$200,000 per day from May 1, 2002
through the earlier of (i) the
date of closing or (ii) August 1,
2002; and
(b) FL Investment: $100 million
from the FL investment, described
below.
- $175 million of New Convertible
Preferred Stock, convertible into
15.0000% of the New Common Stock
on a fully diluted basis at
closing (after giving effect to
the Recapitalization, but prior
to the exercise of the Warrants
and management options), the
terms set on the term sheet
attached hereto as Exhibit A (the
"Preferred Term Sheet"). It being
understood that as of the closing
of the Recapitalization, the
conversion price of the New
Convertible Preferred Stock will
be calculated as follows:
where:
X = the aggregate number of
shares of New Common Stock
issuable upon conversion of
the New Convertible Preferred
Stock;
CS = the actual number of
shares of New Common Stock
outstanding (excluding New
Common Stock underlying New
Convertible Preferred Stock,
Warrants and management
options); and
LP = the aggregate liquidation
preference of the New
Convertible Preferred Stock
(i.e., $175 million)
the number of shares of New
Common Stock issuable upon
conversion of the New
Convertible Preferred Stock is
determined as follows:
X = 15% x ( X + CS)
and the conversion price on a
per share basis of the New
Convertible Preferred Stock
(CP) is determined as follows:
X = LP / CP
and therefore:
CP = LP / X
As an example, where the
Company has 850,000 shares of
New Common Stock actually
outstanding (excluding New
Common Stock underlying New
Convertible Preferred Stock,
Warrants and management
options), the New Convertible
Preferred Stock will convert
into 150,000 shares of New
Common Stock (150,000 = 15% x
(150,000 + 850,000)) and the
conversion price will be
$1,166.667 ($1,166.667 = $175
million / 150,000).
- New Noteholder Warrants to
purchase an aggregate of 6.0000%
of the shares of New Common Stock
on a fully diluted basis at
closing (after giving effect to
the Recapitalization and the
exercise of the Warrants, but
prior to the exercise of any
management options) exercisable
for five years for aggregate
consideration payable to the
Company of $30 million.
o FL Investment: FL will invest $175
million for (i) 22.7778% of the New
Common Stock on a fully diluted
basis at closing (after giving
effect to the Recapitalization and
the shares of New Common Stock
underlying the New Convertible
Preferred Stock, but prior to the
exercise of the Warrants and
management options) and (ii) New FL
Warrants, in an amount and with
terms identical to the New
Noteholder Warrants.
o Series A preferred stock will
receive 10.3682% of the New Common
Stock on a fully diluted basis at
closing (after giving effect to the
Recapitalization and the shares of
New Common Stock underlying the New
Convertible Preferred Stock, but
prior to the exercise of the
Warrants and management options).
o Series D preferred stock will
receive 24.0625% of the New Common
Stock on a fully diluted basis at
closing (after giving effect to the
Recapitalization and the shares of
New Common Stock underlying the New
Convertible Preferred Stock, but
prior to the exercise of the
Warrants and management options).
o Series E preferred stock will
receive 10.9375% of the New Common
Stock on a fully diluted basis at
closing (after giving effect to the
Recapitalization and the shares of
New Common Stock underlying the New
Convertible Preferred Stock, but
prior to the exercise of the
Warrants and management options).
o Existing Common Stock will receive
16.8540% of the New Common Stock on
a fully diluted basis at closing
(after giving effect to the
Recapitalization and the shares of
New Common Stock underlying the New
Convertible Preferred Stock, but
prior to the exercise of the
Warrants and management options).
Additional Noteholder Rights The Company shall agree to list the New
Common Stock and New Convertible
Preferred Stock on a national securities
exchange or the Nasdaq Stock Market and
shall make periodic filings under the
Exchange Act.
Corporate Governance The new Board of Directors will
initially consist of 15 members and will
include 1 member nominated by the
Noteholders. In connection with the
Transaction, the Company shall cause to
be appointed or shall nominate for
election the designee of the
Noteholders. The Noteholders' initial
representative on the Board of Directors
shall be reasonably acceptable to the
Company. Thereafter, the holders of the
New Convertible Preferred Stock shall be
entitled to select a member of the Board
of Directors to the extent provided
under "Special Voting Rights" on Exhibit
A.
Management Incentive Plan The new Board of Directors will develop
and implement the McLeodUSA 2001 Omnibus
Equity Plan (the "Management Incentive
Plan") as described in the Offering
Memorandum dated December 7, 2001.
Other Conditions The Company agrees to pay for all
reasonable costs and expenses of the
Noteholders (including fees and expenses
for one counsel and one financial
advisor, which shall not be duplicative
of the fees and expenses to be paid to
the advisors for the unsecured creditors
committee).
The Company will provide cooperation to
the financial advisor and counsel in due
diligence inquiries.
The Company shall use reasonable efforts
to cause FL to execute any and all
documents necessary or appropriate to
allow the Company to perform all of its
obligations provided in this Term Sheet
and otherwise in connection with the
Company's restructuring.
Other Provisions The Plan of Reorganization shall be
substantially similar to the terms and
provisions of the Plan of Reorganization
included in the Offering Memorandum
dated December 7, 2001 with such
modifications necessary (a) to
incorporate the terms hereof, and (b) to
add the members and advisors of the ad
hoc bondholder committee and any
official creditors committee as
beneficiaries of the Plan of
Reorganization's release provisions.
EXHIBIT A
NEW CONVERTIBLE PREFERRED TERM SHEET
Note: Capitalized terms not defined herein have the meanings ascribed to
them in the term sheet to which this Preferred Term Sheet is an exhibit.
Issuer McLeodUSA Incorporated.
Liquidation Preference $175 million in the aggregate, plus
accrued and unpaid dividends.
Dividend Rate Cumulative dividends at the rate of 2.5%
per annum. Dividends cumulate whether or
not declared by the Board (the senior
credit agreement prohibits payment of
cash dividends).
Conversion Convertible at the option of the holder
at any time into a number of shares of
New Common Stock equal to (a) the
Liquidation Preference of the shares of
New Convertible Preferred Stock being
converted divided by (b) the conversion
price of the New Convertible Preferred
Stock as calculated in accordance with
the above example under "Overview" at
the time of the closing of the
Recapitalization.
Mandatory Conversion Upon a Mandatory Conversion Event
(defined below), then, at the option of
the Company, the New Convertible
Preferred Stock shall be converted in
whole or in part on a pro rata basis at
the then-effective Conversion Price into
shares of New Common Stock.
"Mandatory Conversion Event" means any
such time following the fourth
anniversary of the issuance of the New
Convertible Preferred Stock that the
closing price of New Common Stock has
equaled or exceeded 135% of the
conversion price of the New Convertible
Preferred Stock for at least 20 out of
any 30 consecutive trading days.
Mandatory Redemption On the ten-year anniversary of the
Closing Date.
Merger, Consolidation Upon the merger, consolidation or other
sale of the Company, the Preferred Stock
shall be converted into the same
consideration such preferred stock would
have received had such preferred stock
been converted into New Common Stock
immediately prior to such merger,
consolidation or other sale of the
Company.
Voting Rights The New Convertible Preferred Stock
would be entitled to vote with New
Common Stock as a single class on an "as
converted" basis.
Special Voting Rights The holders of the New Convertible
Preferred Stock will have the right to
elect one member to the Company's Board
of Directors so long as not less than
33% of the New Convertible Preferred
Stock issued on the closing of the
Transaction remains outstanding.
Ranking Junior to all existing and future debt
obligations; senior to all classes of
common stock and each other class of
capital stock or series of preferred
stock of the Company.
Anti-Dilution (i) Customary anti-dilution protection
for stock splits, reverse splits, and
extraordinary dividends and (ii)
customary weighted average anti-dilution
protection for other issuances below the
then market value of the New Common
Stock.
Registration and Other Rights The Company will grant to the holders of
the New Convertible Preferred Stock
customary information and inspection
rights and, if required, limited, shelf
registration rights to facilitate
resales by any holder of the New
Convertible Preferred Stock who may be
deemed to be an affiliate of the Company
upon the consummation of the Transaction
or as a result of a holder having a
representative on the Board of Directors
of the Company.
The Company will further grant the
holders of the New Convertible Preferred
Stock the right, for the period
beginning on the closing of the
Recapitalization until the eighteen
month anniversary of such closing, to
participate, on a pro rata basis, in any
purchase by FL, any affiliate of FL or
any person or entity acting in concert
with FL in one or more series of related
transactions of greater than either (x)
an aggregate of $50,000,000 of equity
securities of the Company or (y) 10% of
the New Common Stock of the Company on a
fully-diluted basis. The Company may
provide this co-investment right to
holders of the New Convertible Preferred
Stock either simultaneously with FL's
investment or as soon as practicable
following the closing of such investment
as determined by the Company.
