PURCHASE AGREEMENT
PURCHASE AGREEMENT (this "Agreement"), dated as of
December 3, 2001, by and among McLeodUSA Incorporated, a Delaware
corporation (the "Company"), the entities listed on the signature page
hereto under the caption "Purchasers" (each such entity, a "Purchaser" and,
collectively, the "Purchasers"), and solely for the purposes of Sections
4.5, 4.9, 4.10 and 4.18, the entities listed on the signature page hereto
under the caption "Original FL Purchasers" (each such entity, an "Original
FL Purchaser" and, collectively with the Purchasers, the "FL Purchasers").
W I T N E S S E T H :
WHEREAS, the Company is considering a capital
restructuring substantially on the terms described in Exhibit A (the
"Restructuring");
WHEREAS, upon the terms and subject to the conditions set
forth in this Agreement, the Company wishes to sell to the Purchasers and
the Purchasers wish to purchase from the Company (i) an aggregate of
10,000,000 shares of the Company's Series F Preferred Stock, par value $.01
per share (the "Series F Preferred Stock"); (ii) an aggregate of 10 shares
of the Company's Series G Preferred Stock, par value $.001 per share (the
"Series G Preferred Stock" and, collectively with the Series F Preferred
Stock, the "Preferred Shares") and a warrant or warrants to purchase an
aggregate of 18,937,995 shares of the Company's Class A Common Stock, par
value $.01 per share (the "Warrants" and together with the Preferred
Shares, the "Securities"); and
WHEREAS, the Purchasers and the Company desire to provide
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for the purchase and sale of the Securities and to establish certain rights
and obligations in connection therewith.
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties, covenants and agreements set forth in
this Agreement, the parties hereto agree as follows:
Article I
PURCHASE AND SALE
1.1. Issuance, Purchase and Sale. Upon the terms and
subject to the conditions set forth herein, at the Closing (as defined
below) the Company shall sell to the Purchasers and the Purchasers shall
purchase from the Company the Securities for $100,000,000 (the "Purchase
Price"). The number of shares of Series F Preferred Stock, Series G
Preferred Stock and Warrants being acquired by each Purchaser, and the
portion of the Purchase Price payable therefor is set forth opposite such
Purchaser's name on Schedule 1.1; provided, that the Purchasers shall have
the right to reallocate among the Purchasers the Securities to be purchased
by each Purchaser by delivering written notice of such reallocation to the
Company not less than three days prior to the Closing so long as such
reallocation does not change the total number of Securities being acquired
hereunder or the Purchase Price.
1.2. The Closing; Deliveries. (a) The closing of the
purchase and sale of the Securities (the "Closing") shall take place at the
offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx, LLP, Four Xxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, at 9:30 a.m. on the business day following the date
on which all of the conditions to each party's obligations hereunder (other
than Section 5.1(d)) have been satisfied or waived and on the same date and
at the same time that the Restructuring is occurring, or at such other
place or time as the parties may agree (the date of the Closing, the
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"Closing Date").
(b) At the Closing, the Company shall deliver to
each Purchaser (i) certificates representing the Preferred Shares and (ii)
the Warrants being purchased by such Purchaser, each registered in the name
of such Purchaser in such amounts as such Purchaser shall inform the
Company prior to the Closing. Delivery of such certificates and Warrants
shall be made against receipt by the Company of the portion of the Purchase
Price payable therefor, which shall be paid by wire transfer of immediately
available funds to an account designated by the Company.
1.3. Capitalized Terms. Capitalized terms not otherwise
defined herein shall have the meanings ascribed to such terms in Section
7.1.
Article II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Schedules to that certain
Exchange Agreement, dated as of September 30, 2001, by and among the
Company and the Original FL Purchasers or in Schedule I attached hereto,
the Company hereby represents and warrants to each Purchaser, as of the
date hereof and as of the Closing, as follows:
2.1. Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to
carry on its business as it is now being conducted. The Company is duly
qualified and licensed as a foreign corporation to do business, and is in
good standing (and has paid all relevant franchise or analogous taxes), in
each jurisdiction where the character of its assets owned or held under
lease or the nature of its business makes such qualification necessary,
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except where the failure to so qualify or be licensed would not
individually or in the aggregate have a Material Adverse Effect.
2.2. Due Authorization. The Company has the corporate
power and authority to enter into this Agreement and each of the other
Transaction Documents to which it is a party and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by
the Company of this Agreement and each of the other Transaction Documents
to which it is a party, the issuance and delivery of the Securities by the
Company and the compliance by the Company with each of the provisions of
this Agreement and each of the other Transaction Documents to which it is a
party (including the reservation and issuance of the Conversion Shares and
the consummation by the Company of the transactions contemplated hereby and
thereby) (a) are within the corporate power and authority of the Company,
and (b) have been duly authorized by all necessary corporate action of the
Company. This Agreement has been, and each of the other Transaction
Documents to which the Company is a party when executed and delivered by
the Company will be, duly and validly executed and delivered by the
Company, and this Agreement constitutes, and each of such other Transaction
Documents when executed and delivered by the Company will constitute, a
valid and binding agreement of the Company enforceable against the Company
in accordance with its terms except as such enforcement is limited by
bankruptcy, insolvency and other similar laws affecting the enforcement of
creditors' rights generally and for limitations imposed by general
principles of equity. Prior to the Closing, the Conversion Shares will be
validly reserved for issuance, and upon issuance, will be duly and validly
issued and outstanding, fully paid, and nonassessable. The terms,
designations, powers, preferences and relative participation, optional and
other special rights, qualifications, limitations and restrictions of
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the Series F Preferred Stock and the Series G Preferred Stock will be as set
forth in the Certificate of Designation for the Series F Preferred Stock and
the Certificate of Designation for the Series G Preferred Stock
(collectively, the "Certificates of Designation"), the forms of which are
attached to this Agreement as Exhibits 2.2A and 2.2B. The terms of the
Warrants will be set forth in a Warrant, the form of which is attached to
this Agreement as Exhibit 2.2C. The Securities issued to the Purchasers in
accordance with the terms of the Certificates of Designation or Warrant, as
applicable, when issued and delivered in accordance with the terms of this
Agreement, will be validly issued and outstanding, fully paid and
non-assessable, free and, except as provided in Section 4.9 hereof, clear of
any Encumbrances and not subject to the preemptive or other similar rights of
the stockholders of the Company.
2.3. Consents, No Violations. Neither the execution,
delivery or performance by the Company of this Agreement or any of the
other Transaction Documents to which it is a party nor the consummation of
the transactions contemplated hereby or thereby will (a) conflict with, or
result in a breach or a violation of, any provision of the certificate of
incorporation or by-laws or other organizational documents of the Company
or any of its subsidiaries including, without limitation, any of the
provisions of the Certificate of Designation for the Series A Preferred
Stock of the Company; (b) constitute, with or without notice or the passage
of time or both, a breach, violation or default, create an Encumbrance, or
give rise to any right of termination, modification, cancellation,
prepayment, suspension, limitation, revocation or acceleration, under (i)
any Law or (ii) any provision of any agreement or other instrument to which
the Company or any of its subsidiaries is a party or pursuant to which any
of them or any of their assets or properties is subject, except, with
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respect to the matters set forth in clauses (i) and (ii), for breaches,
violations, defaults, Encumbrances, or rights of termination, modification,
cancellation, prepayment, suspension, limitation, revocation or
acceleration, which, individually or in the aggregate, would not result in
a Material Adverse Effect or (c) except for the filings of the Certificates
of Designation with the Secretary of State of the State of Delaware, any
required filing under the HSR Act, the Exchange Act, the Securities Act,
filings required under the Bankruptcy Code in connection with the
Restructuring and other filings or notifications that are immaterial to the
consummation of the transactions contemplated hereby, require any consent,
approval or authorization of, notification to, filing with, or exemption or
waiver by, any Governmental Entity or any other Person on the part of the
Company or any of its subsidiaries.
2.4. SEC Reports. The Company has timely filed all proxy
statements, reports and other documents required to be filed by it under
the Exchange Act and made available to the Purchasers complete copies of
all annual reports, quarterly reports, proxy statements and other reports
filed by the Company under the Exchange Act, each as filed with the SEC
(collectively, the "SEC Reports"). Each SEC Report was, on the date of its
filing, in compliance in all material respects with the requirements of its
respective report form and the Exchange Act and did not, on the date of its
filing, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
2.5. Financial Statements. The consolidated financial
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statements of the Company (including any related schedules and/or notes)
included in the SEC Reports filed prior to the date hereof have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") consistently followed throughout the periods involved
(except as may be indicated in the notes thereto) and fairly present in
accordance with GAAP the consolidated financial condition, results of
operations, cash flows and changes in stockholders' equity of the Company
and the Subsidiaries as of the respective dates thereof and for the
respective periods then ended (except as may be indicated in the notes
thereto and except, in the case of interim statements, for the absence of
footnotes and as permitted by Form 10-Q and subject to changes resulting
from year-end adjustments, none of which are material in amount or effect).
Except as disclosed in the SEC Reports filed prior to the date hereof,
neither the Company nor any of its subsidiaries has any liability or
obligation (whether accrued, absolute, contingent, unliquidated or
otherwise, whether known or unknown, whether due or to become due and
regardless of when asserted), except (i) liabilities and obligations in the
respective amounts reflected or reserved against in the unaudited
consolidated balance sheet of the Company and its subsidiaries as of
September 30, 2001, (ii) liabilities and obligations incurred in the
ordinary course of business since September 30, 2001 or (iii) liabilities
and obligations which individually or in the aggregate would not have a
Material Adverse Effect.
2.6. Absence of Certain Changes. Except as disclosed in
the SEC Reports filed prior to the date hereof, since September 30, 2001
neither the Company nor any of the Subsidiaries has suffered any change,
event or development or series of changes, events or developments which
individually or in the aggregate would have a Material Adverse Effect.
2.7. Litigation. (a) Except as disclosed in the SEC
Reports filed prior to the date hereof, there is no claim, action, suit,
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investigation or proceeding ("Litigation") pending or, to the knowledge of
the Company, threatened against the Company or any of its Subsidiaries or
involving any of their respective properties or assets by or before any
court, arbitrator or other Governmental Entity which (i) in any manner
challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement or (ii) if resolved adversely
to the Company or any of its subsidiaries would individually or in the
aggregate have a Material Adverse Effect.
(b) Except as disclosed in the SEC Reports filed
prior to the date hereof, neither the Company nor any of its subsidiaries
is in default under or in breach of any order, judgment or decree of any
court, arbitrator or other Governmental Entity, except for defaults or
breaches, which individually or in the aggregate would not have a Material
Adverse Effect.
2.8. Compliance with Laws. Except as disclosed in the SEC
Reports filed prior to the date hereof, the Company and its subsidiaries
are in compliance with all Laws and the Company and its subsidiaries
possess all material licenses, franchise permits, consents, registrations,
certificates, and other governmental or regulatory permits, authorizations
or approvals required for the operation of the business as presently
conducted and for the ownership, lease or operation of the Company's and
its subsidiaries' properties (collectively, "Licenses") except where the
failure to possess such Licenses individually or in the aggregate would not
have a Material Adverse Effect. The Company and its subsidiaries have all
Licenses, and all of such Licenses are valid and in full force and effect,
and the Company and its subsidiaries have duly performed and are in
compliance with all of their obligations under such Licenses except where
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the failure to be so valid, in full force and effect or performed or in
compliance individually or in the aggregate would not have a Material
Adverse Effect.
2.9. Brokers or Finders. Except for Xxxxxxxx Xxxxx Xxxxxx
& Xxxxx and Credit Suisse First Boston, advisors to the special committee,
whose fees will be paid by the Company, upon the consummation of the
transactions contemplated by this Agreement, no agent, broker, investment
banker or other Person is or will be entitled to any broker's or finder's
fee or any other commission or similar fee from the Company or any of its
subsidiaries in connection with any of the transactions contemplated by
this Agreement or the other Transaction Documents.
2.10. Section 203 of the DGCL; Takeover Statute. The
Board of Directors has taken all actions necessary or advisable so that the
restrictions contained in Section 203 of the DGCL applicable to a "business
combination" (as defined in such Section) will not apply to the execution,
delivery or performance of this Agreement or any of the other Transaction
Documents or the consummation of the transactions contemplated hereby or
thereby. The execution, delivery and performance of this Agreement or any
of the other Transaction Documents and the consummation of the transactions
contemplated hereby or thereby will not cause to be applicable to the
Company any "fair price," "moratorium," "control share acquisition" or
other similar antitakeover statute or regulation enacted under state or
federal laws.
Article III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby represents and warrants to the
Company, severally and not jointly, as of the date hereof and as of the
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Closing, as follows:
3.1. Acquisition for Investment. Such Purchaser is
acquiring the Securites, for its own account, for investment and not with a
view to, or for sale in connection with, the distribution thereof within
the meaning of the Securities Act.
3.2. Restricted Securities. Such Purchaser understands
that (i) except as provided in the Registration Rights Agreement, the
Securities and any Conversion Shares that may be issued will not be
registered under the Securities Act or any state securities laws by reason
of their issuance by the Company in a transaction exempt from the
registration requirements thereof and (ii) the Securities and any
Conversion Shares that may be issued may not be sold unless such
disposition is registered under the Securities Act and applicable state
securities laws or is exempt from registration thereunder.
3.3. No Brokers or Finders. No agent, broker, investment
banker or other Person is or will be entitled to any broker's or finder's
fee or any other commission or similar fee from the Purchasers in
connection with the transactions contemplated by this Agreement or the
other Transaction Documents.
3.4. Accredited Investor. Such Purchaser is an
"accredited investor" (as defined in Rule 501(a) under the Securities Act).
Such Purchaser has sufficient knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks of
its investment in the Securities and is capable of bearing the economic
risks of such investment.
3.5. Organization. Such Purchaser is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite power and authority to
carry on its business as it is now being conducted.
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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
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other instrument to which such Purchaser is a party or pursuant to which
the Purchaser or its assets or properties is subject, except, with respect
to the matters set forth in clause (ii), for breaches, violations,
defaults, Encumbrances, or rights of termination, modification,
cancellation, prepayment, suspension, limitation, revocation or
acceleration, which, individually or in the aggregate, would not materially
adversely affect the ability of such Purchaser to consummate the
transactions contemplated by this Agreement or any Transaction Document to
which it is a party; or (c) except for any required filing under the HSR
Act and the filings set forth on Schedule 3.7, require any consent,
approval or authorization of, notification to, filing with, or exemption or
waiver by, any Governmental Entity or any other Person on the part of the
Purchaser.
3.8. Sufficient Funds. As of the date hereof, the
Purchaser has binding commitments for, and as of the Closing, the Purchaser
will have, sufficient funds available (through immediately available cash
or existing credit facilities) to enable it to consummate the transactions
contemplated hereby.
Article IV
COVENANTS
4.1. Conduct of Business by the Company Pending the
Closing. Except as expressly contemplated by this Agreement or as required
in connection with the Restructuring (including in any proceedings required
under the Bankruptcy Code in connection with the Restructuring) or as set
forth on Schedule 4.1, during the period between the date of this Agreement
and the Closing, the Company shall, and shall cause each of its
Subsidiaries to, (i) conduct its business only in the ordinary course and
consistent with past practice, (ii) use reasonable efforts to preserve and
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maintain its assets and properties and its relationships with its
customers, suppliers, advertises, distributors, agents, officers and
employees and other Persons with which it has significant business
relationships, (iii) use reasonable efforts to maintain all of the material
assets it owns or uses in the ordinary course of business consistent with
past practice, (iv) use reasonable efforts to preserve the goodwill and
ongoing operations of its business, (v) maintain its books and records in
the usual, regular and ordinary manner, on a basis consistent with past
practice and (vi) comply in all material respects with applicable Laws:
4.2. Press Releases; Interim Public Filings. The Company
shall, to the extent any such press releases and public filings refer in
any way to the Purchasers and/or their Affiliates, shall give the
Purchasers the reasonable opportunity to review and comment on such
releases and filings, in each case prior to release in the form in which it
will be issued.
4.3. HSR Act. Each of the Purchasers and the Company
shall cooperate in making filings under the HSR Act and shall use its
reasonable efforts to take, or cause to be taken, all actions necessary,
proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement, including
using its reasonable efforts to resolve such objections, if any, as the
Antitrust Division of the Department of Justice or the Federal Trade
Commission or state antitrust enforcement or other Governmental Entities
may assert under antitrust laws with respect to the transactions
contemplated hereby.
4.4. Listing. The Company shall use its reasonable
efforts to continue to have its Class A Common Stock listed on the NASDAQ
National Market System (the "NMS") or a national securities exchange for so
long as any Securities or any shares of Class A Common Stock are
outstanding. Prior to the Closing, the Company shall prepare and submit to
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the NMS a listing application, if applicable, covering the Conversion
Shares and shall obtain approval for the listing of such shares, subject
to, in the case of the Conversion Shares, official notice of issuance.
4.5. Board Representation; VCOC. (a) Section 3 of the
Certificate of Designation for the Series G Preferred Stock provides that
the holders of Series G Preferred Stock shall be entitled to elect two
directors to the Board of Directors subject to the terms set forth therein.
Accordingly, subject to the Certificate of Designation for the Series G
Preferred Stock, the Purchasers as holders of Series G Preferred Stock,
shall be entitled to designate for election to the Board of Directors two
directors (the "Purchasers' Directors"). Xxxxxxxx X. Xxxxxxxxx and Xxxxxx
X. Xxxxxx, each of whom currently serves on the Board of Directors as a
director designee of the Series D Preferred Stock, shall serve as the
initial Purchasers' Directors for purposes of the Series G Preferred Stock.
Thereafter, in connection with any annual meeting of stockholders at which
the term of a Purchasers' Director is to expire, the Company will take all
necessary action to cause a Purchasers' Director to be nominated and use
its reasonable efforts to cause such Purchasers' Director to be elected to
the Board of Directors. In the event a vacancy shall exist in the office of
a Purchasers' Director, the Purchasers shall be entitled to designate a
successor and the Board of Directors shall elect such successor and, in
connection with the meeting of stockholders of the Company next following
such election, nominate such successor for election as director by the
stockholders and use its reasonable efforts to cause the successor to be
elected. Without limiting the generality of the foregoing, the Purchasers'
Directors may inspect all contracts, books, records, personnel, offices and
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other facilities and properties of the Company and, to the extent available
to the Company after the Company uses reasonable efforts to obtain them,
the records of its accountants, including the accountants' work papers, and
the Purchasers' Directors may make such copies and inspections thereof as
the Purchasers' Directors may request. The Company shall furnish the
Purchasers' Directors with such financial and operating data and other
information with respect to the business and properties of the Company as
the Purchasers' Directors may request. The Company shall permit each of the
Purchasers' Directors to discuss the affairs, finances and accounts of the
Company with, and to make proposals and furnish advice with respect
thereto, the principal officers of the Company. Notwithstanding anything
contained in this Section 4.5 to the contrary, the provisions of the
Certificate of Designation shall govern the rights of holders of Series G
Preferred Stock to elect directors (including any Purchasers' Directors).
In the event that the holders of the Series G Preferred Stock shall cease
to be entitled to elect any Purchasers' Director and shall become entitled
to designate a "Board Observer" pursuant to, and as defined in, Section
3(b) thereof, such Board Observer shall the rights set forth in Sections
(d) through (f) of this Section 4.5.
(b) The rights set forth in Section 4.5(a) are
intended to satisfy the requirement of contractual management rights for
purposes of qualifying each of the Purchaser's ownership interests in the
Company as venture capital investments for purposes of the Department of
Labor's "plan assets" regulations, and in the event such rights are not
satisfactory for such purpose as to any such Purchaser, the Company and
such Purchaser shall reasonably cooperate in good faith to agree upon
mutually satisfactory management rights which satisfy such regulations.
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(c) The Company shall promptly reimburse the
Purchasers' Directors for all reasonable expenses incurred by them in
connection with their attendance at meetings and any other activities
undertaken in their capacity as directors or an observer consistent with
the policies of the Company in effect on the date hereof or as such
policies may be modified and generally applied to the Company's Board of
Directors.
(d) In addition, each Original FL Purchaser
shall be entitled to routinely consult with and advise management of the
Company with respect to the Company's business and financial matters,
including management's proposed annual operating plans, and management will
meet regularly during each year with representatives of each Original FL
Purchaser (the "Representatives") at the Company's facilities at mutually
agreeable times for such consultation and advice, including to review
progress in achieving said plans. The Company shall give each Original FL
Purchaser reasonable advance written notice of any significant new
initiatives or material changes to existing operating plans and shall
afford each Original FL Purchaser adequate time to meet with management to
consult on such initiatives or changes prior to implementation. The Company
agrees to give due consideration to the advice given and any proposals made
by each Original FL Purchaser.
(e) Each Original FL Purchaser may inspect all
contracts, books, records, personnel, offices and other facilities and
properties of the Company and, to the extent available to the Company after
the Company uses reasonable efforts to obtain them, the records of its
accountants, including the accountants' work papers, and each Original FL
Purchaser may make such copies and inspections thereof as each Original FL
Purchaser may reasonably request. The Company shall furnish each Original
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FL Purchaser with such financial and operating data and other information
with respect to the business and properties of the Company as each Original
FL Purchaser may reasonably request. The Company shall permit the
Representatives to discuss the affairs, finances and accounts of the
Company with, and to make proposals and furnish advice with respect
thereto, the principal officers of the Company.
(f) The Company shall, after receiving notice
from each Original FL Purchaser as to the identity of any Representative,
(i) permit a Representative to attend all Board meetings and all committees
thereof as an observer, (ii) provide the Representative advance notice of
each such meeting, including such meeting's time and place, at the same
time and in the same manner as such notice is provided to the members of
the Board (or such committee thereof), (iii) provide the Representative
with copies of all materials, including notices, minutes and consents,
distributed to the members of the Board (or such committee thereof) at the
same time as such materials are distributed to such Board (or such
committee thereof) and shall permit the Representative to have the same
access to information concerning the business and operations of the Company
and (iv) permit the Representative to discuss the affairs, finances and
accounts of the Company with, and to make proposals and furnish advice with
respect thereto to, the Board, without voting, and the Board and the
Company's officers shall take such proposals or advice seriously and give
due consideration thereto. Reasonable costs and expenses incurred by the
Representative for the purposes of attending Board (or committee) meetings
and conducting other Company business will be paid by the Company.
(g) The rights set forth in Sections 4.5(d),
4.5(e) and 4.5(f) are intended to satisfy the requirement of contractual
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management rights for purposes of qualifying each of the Original FL
Purchaser's ownership interests in the Company as venture capital
investments for purposes of the Department of Labor's "plan assets"
regulations, and in the event such rights are not satisfactory for such
purpose as to any such Original FL Purchaser, the Company and such Original
FL Purchaser shall reasonably cooperate in good faith to agree upon
mutually satisfactory management rights which satisfy such regulations.
4.6. Certificates of Designation. The Company shall cause
the Certificates of Designation to be filed with the Secretary of State of
the State of Delaware prior to the Closing.
4.7. Cooperation. Each of the Purchasers and the Company
agrees to use its reasonable efforts to take, or cause to be taken, all
such further actions as shall be necessary to make effective and consummate
the transactions contemplated by this Agreement.
4.8. Reserve Shares. After the Closing, the Company will
at all times reserve and keep available, solely for issuance and delivery
upon conversion of the Preferred Share and the exercise of the Warrants,
the number of shares of Class A Common Stock from time to time issuable
upon conversion of all shares of the Preferred Shares or upon the exercise
of the Warrants at the time outstanding. All shares of Class A Common Stock
issuable upon conversion of the Preferred Shares or upon the exercise of
the Warrants shall be duly authorized and, when issued upon such conversion
or exercise, shall be validly issued, fully paid and nonassessable.
4.9. Restrictions on Transfer. (a) Subject to compliance
with applicable securities laws, from and after the Closing, the FL
Purchasers may sell, transfer, assign, convey, gift, mortgage, pledge,
encumber, hypothecate or otherwise dispose of, directly or indirectly
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("Transfer"), any of the Preferred Shares, Warrants, Conversion Shares or
Class A Common Stock owned by them (individually and collectively, "FL
Securities"); provided, that, prior to the Standstill Termination Date (as
defined below), the FL Purchasers shall not make any Transfer of any of
their FL Securities (other than Transfers between FL Purchasers and their
Affiliates who agree in writing to be bound by the terms of this Agreement)
to any Person or group which is, or which Purchaser believes or should
reasonably believe will seek to become, the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act) of more than 50% of the outstanding
voting securities of the Company (such Person or group, a "Disqualified
Person," and such sale to a Disqualified Person, a "Disqualified
Transaction"), unless such Transfer is specifically approved in advance in
writing by the Board of Directors or unless the procedures set forth in
this Section 4.9 have been complied with.
(b) At any time prior to the Standstill
Termination Date, any FL Purchaser may give written notice to the Company
(the "Offer Notice") (which may be joined in by one or more of the other FL
Purchasers, in which event all references hereafter to FL Purchaser shall
be to all of such FL Purchasers who join in the Offer Notice) that it
desires to sell some or all of its FL Securities in a transaction that may
constitute a Disqualified Transaction, and setting forth the minimum price
in cash at which it is prepared to sell such FL Securities. Such notice may
but need not identify a specific purchaser for such FL Securities.
(c) The Company shall have 45 days from the date
of the Offer Notice to enter into or cause a designee of the Company to
enter into a definitive purchase agreement (the "Purchase Agreement") for
the FL Securities which are the subject of the Offer Notice or to advise
Page 19
the FL Purchaser that the Board of Directors has approved or has no
objection to such transaction. If the Company or its designee enters into a
Purchase Agreement for the purchase of the FL Securities which are the
subject of the Offer Notice, then the Company or its designee shall be
obligated to purchase such FL Securities within 90 days following the
execution of the Purchase Agreement. The Purchase Agreement must provide
that it is unconditional (except for receipt of regulatory approvals), that
the purchase price for the FL Securities being purchased shall be paid in
cash (unless the FL Purchaser otherwise agrees in writing), and (in the
case where the purchaser is a designee of the Company) that, in the event
the designee (or an affiliate thereof) acquires all or substantially all of
the remaining shares of the Company within 6 months of the date of the
closing under the Purchase Agreement for a blended average price per share
(which, if in the form of marketable securities, shall be determined based
on a 10-trading day average at the time of the purchase) that is greater
than the price per share received by the FL Purchaser under the Purchase
Agreement, the FL Purchaser shall be entitled to receive from such Person
the amount by which the blended average per share price paid by such Person
for the balance of the outstanding shares of Class A Common Stock exceeds
the per share purchase price paid under the Purchase Agreement multiplied
by the number of FL Securities sold under the Purchase Agreement.
(d) If no definitive agreement is entered into
within 45 days of the Offer Notice, the FL Purchasers shall have the right
for 180 days following the end of such 45 day period to enter into a
definitive agreement for the sale of their FL Securities with any Person,
including a Disqualified Transferee, at a per share price no less than that
specified in the Offer Notice.
Page 20
(e) If the FL Purchaser and the Company or its
designee enter into a Purchase Agreement and the Company or its designee,
as applicable, fails to timely consummate the purchase of the FL Securities
thereunder in accordance with the terms thereof for any reason other than
the breach by the FL Purchaser of the Purchase Agreement, then, in addition
to all other remedies the FL Purchaser may have by reason of such
non-consummation, this Section 4.9 shall be of no further force or effect.
(f) Notwithstanding any other provision of this
Section 4.9, no FL Purchaser shall avoid the provisions of this Section 4.9
by making one or more Transfers to one or more Affiliates and then
disposing of all or any portion of such FL Purchaser's interest in any such
Affiliate. The FL Purchasers shall give the Company notice promptly of any
Transfer. Transfers in violation of the provisions of this Agreement shall
be null and void, and the securities subject to such Transfer shall remain
subject to this Agreement.
(g) Any FL Purchaser, by subsequent written
notice, may, following the giving of an Offer Notice, revoke such notice,
in which event any subsequent sale of FL Securities by the FL Purchaser
shall continue to be subject to this Section 4.9 as if no Offer Notice had
been sent, or change the minimum price or number of FL Securities set forth
in the Offer Notice, in which event the 45-day time period shall recommence
from the date of the giving of the subsequent notice.
(h) For purposes hereof, the term "Standstill
Termination Date" shall mean the close of business on the day preceding the
third anniversary of the Closing Date, or, if earlier, the date Xxxxxxxx X.
Page 21
Forstmann is removed, without his consent, as the Chairman of the Executive
Committee of the Board.
4.10. Standstill Agreement. (a) During the period
commencing on the Closing Date and ending on the Standstill Termination
Date (the "Standstill Period") except as (x) specifically permitted by this
Agreement (including sales made in compliance with the provisions of
Section 4.9) or (y) specifically approved in writing in advance by the
Board of Directors of the Company, the Purchasers shall not, and shall
cause any Affiliates controlled by them to not, in any manner, directly or
indirectly:
(1) acquire, or offer or agree to acquire, or
become the "beneficial owner" (as defined above) of or obtain any
rights in respect of, any capital stock of the Company, except for
any shares of Class A Common Stock that may be issuable upon the
conversion or reclassification of the 2001 Preferred, Preferred
Shares, the Warrants or otherwise as permitted pursuant to this
Agreement, provided, that the foregoing limitation shall not
prohibit the acquisition of securities of the Company or any of
its successors issued as dividends or as a result of stock splits
and similar reclassifications or received in a merger or other
business combination involving the 2001 Preferred, Preferred
Shares, the Warrants or shares of Class A Common Stock (including
any Conversion Shares) held by the FL Purchasers or any of their
Affiliates at the time of such dividend, split or reclassification
or merger or business combination;
(2) solicit proxies or consents or become a
"participant" in a "solicitation" (as such terms are defined or
used in Regulation 14A under the Exchange Act) of proxies or
Page 22
consents with respect to any voting securities of the Company or
any of its successors or initiate or become a participant in any
stockholder proposal or "election contest" with respect to the
Company or any of its successors or induce others to initiate the
same, or otherwise seek to advise or influence any person with
respect to the voting of any voting securities of the Company or
any of its successors (except for activities undertaken by the FL
Purchasers or the FL Purchasers' Directors in connection with
solicitations by the Board of Directors); or
(3) solicit or participate in the solicitation of
any Person or entity to acquire, offer to acquire or agree to
acquire, by merger, tender offer, purchase or otherwise, the
Company or a substantial portion of its assets or more than 50% of
the outstanding capital stock; provided, that, no action taken by
the FL Purchasers or their Affiliates or representatives in
connection with the sale of any of their FL Securities shall
constitute a violation of this clause (3).
(b) Nothing contained in this Section 4.10 (1)
shall prohibit any of the FL Purchasers or their Affiliates from complying
with Rules 13d-1 through 13d-7, as applicable, promulgated under the
Exchange Act or from making such disclosure to the Company's stockholders
or from taking such action which, in their judgment may be required under
applicable law, or (2) shall be deemed to restrict the manner in which the
directors designated by the FL Purchasers pursuant to the Series G
Certificate of Designations participate in deliberations or discussions of
the Board of Directors.
(c) During the Standstill Period, the FL
Purchasers and their Affiliates shall be present, in person or by proxy,
Page 23
and without further action hereby agree that they shall be deemed to be
present, at all meetings of stockholders of the Company so that all voting
securities (including Class A Common Stock) beneficially owned by the FL
Purchasers and their Affiliates shall be counted for purposes of
determining the presence of a quorum at such meetings. During the
Standstill Period, all voting securities (including Class A Common Stock)
beneficially owned by the FL Purchasers and their Affiliates shall be voted
by the FL Purchasers and their Affiliates, in all elections of directors of
the Company in accordance with the bylaws of the Company, such that (i) at
least five members of the Board of Directors are qualified as "Independent
Directors" as defined in the bylaws and (ii) the Chairman, the Chief
Executive Officer, and the Chief Financial Officer of the Company are
elected as members to the Board of Directors as required by the bylaws. The
bylaws of the Company shall be amended to reflect the foregoing
arrangements relating to the directors of the Company. The FL Purchasers
agree to vote their FL Securities for the approval of a bylaw amendment
adopting the board composition described above.
4.11. Consents; Approvals. The Company shall use its
reasonable efforts to obtain all consents, waivers, exemptions, approvals,
authorizations or orders (collectively, "Consents") (including, without
limitation (i) Consents required to avoid any breach, violation, default,
encumbrance or right of termination, modification, cancellation,
prepayment, suspension, limitation, revocation or acceleration of any
material agreement or instrument to which the Company is a party or its
properties or assets are bound, (ii) all Consents pursuant to the Company's
or any Subsidiary's financing documents, including without limitation, all
indentures and credit agreements of the Company or any Subsidiary, and
(iii) all United States and foreign governmental and regulatory rulings and
approvals). The Company also shall use reasonable efforts to obtain all
Page 24
necessary state securities laws or blue sky permits and approvals required
to carry out the transactions contemplated hereby and shall furnish all
information as may be reasonably requested in connection with any such
action.
4.12. Access to Property; Records. Between the date
hereof and the Closing the Company shall afford the Purchasers and their
employees, counsel, accountants, partners, investors, and other authorized
representatives reasonable access upon notice, during normal business
hours, to the assets, properties, offices and other facilities and books
and records of the Company and its subsidiaries, and to the outside
auditors of the Company and their work papers. The parties hereto agree
that no investigation by the Purchasers or their representatives shall
affect or limit the scope of the representations and warranties of the
Company contained in this Agreement or in any other Transaction Document
delivered pursuant hereto or limit the liability for breach of any such
representation or warranty.
4.13. Capitalization Certificate. At the Closing, the
Company shall deliver a certificate of its Chief Operating and Financial
Officer setting forth the capitalization of the Company and containing the
other representations and warranties set forth on Exhibit 4.
4.14. Registration Rights. At the Closing, the Company
shall enter into a registration rights agreement with the Purchasers
substantially identical to the registration rights agreement among the
Original FL Purchasers and the Company (the "Original Registration Rights
Agreement").
4.15. Shareholder Rights Plan. For so long as the FL
Purchasers shall own FL Securities representing at least 60% of the
aggregate amount of FL Securities (each amount calculated on an as
converted basis) owned by them immediately after the Closing (the "Initial
Page 25
Securities"), the Company shall not adopt or implement any stockholders
rights plan or similar plan or device (collectively, a "Rights Plan"). From
and after the earlier of (i) the time that the FL Purchasers shall cease to
own FL Securities representing at least 60% of the amount of Initial
Securities or (ii) the time the FL Purchasers shall complete a sale of FL
Securities in a Disqualified Transaction, the Company may adopt a Rights
Plan, provided, that the percentage that would trigger any rights by the
other stockholders of the Company must be at least one percentage point
greater than the aggregate percentage ownership (on an as converted basis)
of the FL Purchasers in the Company immediately prior to the adoption of
the Rights Plan.
4.16. Section 203 Opt-Out. Prior to the Closing, the
Company shall exercise all authority under applicable law to effect an
amendment to its certificate of incorporation expressly electing not to be
governed by Section 203 of the DGCL.
4.17. Executive Committee Composition. The Company agrees
that the executive committee of the Board of Directors (the "Executive
Committee") shall consist of no more than seven members, including (i) for
so long as the Purchasers are entitled to designate members to the Board of
Directors, the Series G Director Designees or Designee of the Purchasers,
(ii) the Chairman of the Board of Directors, (iii) the Chief Executive
Officer of the Company and (iv) the Chief Operating Officer of the Company.
The bylaws of the Company shall be amended to reflect the composition of
the executive committee. The FL Purchasers agree to vote their FL
Securities for the approval of a bylaw amendment adopting the provisions of
this Section.
4.18. Termination Agreement. At the Closing, the Company
Page 26
shall enter into an agreement with the Original FL Purchasers terminating
the Exchange Agreement, dated as of September 30, 2001, among the Original
FL Purchasers and the Company and confirming that the Original Registration
Rights Agreement shall continue in full force and effect with respect to
the Class A Common Stock to be issued in exchange for the 2001 Preferred in
the Restructuring.
Article V
CONDITIONS
5.1. Conditions to Obligations of the Purchasers and the
Company. The respective obligations of the Purchasers and the Company to
consummate the transactions contemplated hereby are subject to the
satisfaction or waiver at or prior to the Closing of each of the following
conditions:
(a) no statute, rule, regulation, executive
order, decree, or injunction shall have been enacted, entered, promulgated
or enforced by any court or Governmental Entity which prohibits or
restricts the consummation of the transactions contemplated hereby;
(b) any waiting period (and any extension
thereof) under the HSR Act applicable to this Agreement and the
transactions contemplated hereby shall have expired or been terminated;
(c) any material required filings or other
consents, if any, of state regulatory bodies shall have been made or
obtained; and
(d) all conditions precedent to the consummation
of the Restructuring shall have been satisfied and the Restructuring shall
be occurring simultaneously with the Closing with such modifications in the
terms of the Restructuring that do not materially deviate from the terms
Page 27
set forth on Exhibit A.
5.2. Conditions to Obligations of the Purchasers. The
obligations of the Purchasers to consummate the transactions contemplated
hereby shall be subject to the satisfaction or waiver at or prior to the
Closing of each of the following conditions:
(a) Each of the representations and warranties
of the Company contained in this Agreement shall be true and correct when
made and as of the Closing (except to the extent such representations and
warranties are made as of a particular date, in which case such
representations and warranties shall have been true and correct as of such
date), except for failures to be true and correct which individually or in
the aggregate would not have a Material Adverse Effect;
(b) The Company shall have performed, satisfied
and complied in all material respects with all of its covenants and
agreements set forth in this Agreement to be performed, satisfied and
complied with prior to or at the Closing;
(c) The Company shall have executed and
delivered the Registration Rights Agreement and the Termination Agreement
referred to in Sections 4.14 and 4.18, respectively, and each such
agreement shall be in full force and effect;
(d) The Certificates of Designation shall have
been duly filed with the Secretary of State of the State of Delaware in
accordance with the laws of the State of Delaware and the Certificates of
Designation shall be in full force and effect;
(e) The Conversion Shares shall have been duly
authorized and reserved for issuance;
(f) The Company's Certificate of Incorporation
Page 28
shall have been amended to expressly elect not to be governed by Section
203 of the DGCL; and
(g) The Company shall have delivered the
Capitalization Certificate referred to in Section 4.13.
5.3. Conditions to Obligations of the Company. The
obligations of the Company to consummate the transactions contemplated
hereby shall be subject to the satisfaction or waiver at or prior to the
Closing of each of the following conditions:
(a) Each of the representations and warranties
of the Purchasers contained in this Agreement shall be true and correct
when made and as of the Closing (except to the extent such representations
and warranties are made as of a particular date, in which case such
representations and warranties shall have been true and correct as of such
date), except for failures to be true and correct which individually or in
the aggregate would not reasonably be expected to have a material adverse
effect on the Purchasers' ability to perform its obligations under this
Agreement; and
(b) The Purchasers shall have performed,
satisfied and complied in all material respects with all of their covenants
and agreements set forth in this Agreement to be performed, satisfied and
complied with prior to or at the Closing Date.
Article VI
TERMINATION
6.1. Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) by mutual written consent of the Company and
Page 29
the Purchasers;
(b) by the Company or the Purchasers at any time
after August 1, 2002 if the Closing shall not have occurred by such date;
provided, however, that the failure of the transactions contemplated hereby
to occur on or before such date is not the result of the breach of any
covenants or agreements contained herein by the party seeking to terminate
this Agreement; or
(c) by the Company or by the Purchasers, if any
governmental entity of competent jurisdiction shall have issued an order,
decree or ruling or taken other action restraining, enjoining or otherwise
prohibiting the transactions contemplated hereby and such order, decree,
ruling or other action shall have become final and nonappealable.
6.2. Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 6.1, this Agreement shall
forthwith become void and there shall be no liability on the part of any
party hereto (or any stockholder, director, officer, partner, employee,
agent, consultant or representative of such party) except as set forth in
this Section 6.2, provided that nothing contained in this Agreement shall
relieve any party from liability for any willful breach of this Agreement
and provided further that this Section 6.2 and Sections 7.3, 7.14, 7.15 and
7.16 shall survive termination of this Agreement.
Article VII
MISCELLANEOUS
7.1. Defined Terms; Interpretations. The following terms,
as used herein, shall have the following meanings:
Page 30
"2001 Preferred" shall mean the Company's Series D and
Series E Convertible Preferred Stock.
"Affiliate" shall have the meaning ascribed to such term
in Rule 12b-2 of the General Rules and Regulations under the Exchange Act.
"Bankruptcy Code" shall mean Title 11 of the United
States Code.
"Board of Directors" shall mean the Board of Directors of
the Company.
"Class A Common Stock" shall have the meaning the
Company's Class A Common Stock, par value $.01 per share, which meaning
shall include any and all securities of any kind whatsoever of the Company
which may be exchanged for or converted into such Class A Common Stock, and
any and all securities of any kind whatsoever of the Company which may be
issued on or after the date hereof in respect of, in exchange for, or upon
conversion of shares of Class A Common Stock pursuant to a merger,
consolidation, stock split, stock dividend, recapitalization of the Company
or otherwise.
"Conversion Shares" shall mean any shares of Class A
Common Stock issued upon conversion of any Preferred Shares or upon
exercise of the Warrants, any and all securities of any kind whatsoever of
the Company which may be exchanged for or converted into such Class A
Common Stock, and any and all securities of any kind whatsoever of the
Company which may be issued on or after the date hereof in respect of, in
exchange for, or upon conversion of shares of Class A Common Stock pursuant
to a merger, consolidation, stock split, stock dividend, recapitalization
of the Company or otherwise.
"DGCL" shall mean the Delaware General Corporation Law.
Page 31
"Encumbrances" shall have the mean liens, charges,
claims, security interests, restrictions, options, proxies, voting trusts
or other encumbrances.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any successor federal statute, and the rules and
regulations of the SEC thereunder, all as the same shall be in effect at
the time. Reference to a particular section of the Securities Exchange Act
of 1934, as amended, shall include reference to the comparable section, if
any, of any such successor federal statute.
"Governmental Entity" shall mean any supernational,
national, foreign, federal, state or local judicial, legislative,
executive, administrative or regulatory body or authority.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
thereunder.
"Laws" shall include all foreign, federal, state and
local laws, statutes, ordinances, rules, regulations, orders, judgments,
decrees and bodies of law.
"Material Adverse Effect" shall mean a material adverse
effect on the business, operations, results of operations, assets, or
condition (financial or otherwise) of the Company and its Subsidiaries,
taken as whole (a "Company Material Adverse Effect"); provided, that any
adverse effects on or changes in the Company or any of its Subsidiaries
resulting from or relating to (i) the execution of this Agreement and the
announcement of this Agreement and the transactions contemplated hereby or
(ii) the announcement of, and subsequent disclosures related to, the
Restructuring or the commencement or pendency of proceedings under the
Bankruptcy Code by or against Parent and/or its Subsidiaries shall be
Page 32
excluded from the determination of a Company Material Adverse Effect.
"Person" shall mean any individual, firm, corporation,
limited liability company, partnership, company or other entity, and shall
include any successor (by merger or otherwise) of such entity.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933,
as amended, or any successor federal statute, and the rules and regulations
of the SEC thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Act shall include
reference to the comparable section, if any, of such successor federal
statute.
"Transaction Documents" shall mean this Agreement, the
Certificates of Designation, the Warrants, the Registration Rights
Agreement and the Termination Agreement and all other contracts,
agreements, schedules, certificates and other documents being delivered
pursuant to this Agreement or the transactions contemplated hereby.
7.2. Survival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
earlier of (i) termination of this Agreement or (ii) the Closing Date. This
Section 7.2 shall not limit any covenant or agreement of the parties hereto
which by its terms contemplates performance after the Closing Date.
7.3. Fees and Expenses. All costs and expenses incurred
in connection with this Agreement shall be paid by the party incurring such
costs or expense; provided that the Company will reimburse the Purchasers
at Closing for reasonable out-of-pocket fees and expenses paid to third
parties solely in connection with the transactions contemplated hereby.
Page 33
7.4. Public Announcements. The Purchasers and the Company
have consulted with each other and issued a press release with respect to
this Agreement and the transactions contemplated hereby and neither shall
issue any further press release or make any further public statement
without the prior consent of the other, which consent shall not be
unreasonably withheld or delayed; provided, however, that a party may,
without the prior consent of the other party, issue such press release or
make such public statement as may upon the advice of counsel be required by
law, the NMS or any exchange on which the Company's securities are listed
and, to the extent time permits, it has used all reasonable efforts to
consult with the other party prior thereto.
7.5. Restrictive Legends. In addition to the restrictions
set forth in Section 4.11, no Preferred Shares, Warrant or Conversion
Shares may be transferred without registration under the Securities Act and
applicable state securities laws unless counsel to the Company shall advise
the Company that such transfer may be effected without such registration.
(a) Each certificate representing the Preferred
Shares shall bear legends in substantially the following form:
THE COMPANY IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OR SERIES
OF STOCK. AS REQUIRED UNDER DELAWARE LAW, THE COMPANY SHALL
FURNISH TO ANY HOLDER UPON REQUEST AND WITHOUT CHARGE, A FULL
SUMMARY STATEMENT OF THE DESIGNATIONS, VOTING RIGHTS, PREFERENCES,
LIMITATIONS AND SPECIAL RIGHTS OF THE SHARES OF EACH CLASS OR
SERIES AUTHORIZED TO BE ISSUED BY THE COMPANY SO FAR AS THEY HAVE
BEEN FIXED AND DETERMINED AND THE AUTHORITY OF THE BOARD OF
DIRECTORS TO FIX AND DETERMINE THE DESIGNATIONS, VOTING RIGHTS,
PREFERENCES, LIMITATIONS AND SPECIAL RIGHTS OF THE CLASSES AND
SERIES OF SECURITIES OF THE COMPANY.
Page 34
THE SHARES AND ANY SHARES OF COMMON STOCK ACQUIRED UPON CONVERSION
OF SUCH SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933
ACT"), OR UNDER ANY APPLICABLE STATE LAWS. THE SHARES REPRESENTED
BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE REGISTERED OWNER
HEREOF FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN
CONNECTION WITH ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE
1933 ACT. THE SHARES MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR
ASSIGNED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER THE
PROVISIONS OF THE 1933 ACT OR ANY APPLICABLE STATE SECURITIES
LAWS, OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN A
TRANSACTION OTHERWISE IN COMPLIANCE WITH APPLICABLE FEDERAL AND
STATE SECURITIES LAWS.
THE SALE, PLEDGE, TRANSFER, ASSIGNMENT OR OTHER DISPOSITION OF THE
SHARES REPRESENTED BY THIS CERTIFICATE AND ANY SHARES OF COMMON
STOCK ACQUIRED UPON CONVERSION OF SUCH SHARES IS RESTRICTED BY AND
SUBJECT TO THE PROVISIONS OF A STOCK PURCHASE AGREEMENT DATED AS
OF DECEMBER 3, 2001, A COPY OF WHICH IS AVAILABLE UPON REQUEST FOR
INSPECTION AT THE OFFICES OF THE COMPANY. ANY SUCH REQUEST SHOULD
BE ADDRESSED TO THE SECRETARY OF THE COMPANY.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE SHALL BE REDEEMABLE
AS PROVIDED IN THE CERTIFICATE OF DESIGNATION AND THE COMPANY'S
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION. THE SECURITIES
EVIDENCED BY THIS CERTIFICATE SHALL BE CONVERTIBLE INTO THE
COMPANY'S CLASS A COMMON STOCK IN THE MANNER AND ACCORDING TO THE
TERMS SET FORTH IN THE CERTIFICATE OF DESIGNATION.
(b) Each Warrant shall bear a legend in
substantially the following form:
Page 35
THIS WARRANT AND ANY SHARES OF COMMON STOCK ACQUIRED UPON THE
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY
APPLICABLE STATE LAWS. THIS WARRANT HAS BEEN ACQUIRED BY THE
REGISTERED OWNER HEREOF FOR INVESTMENT AND NOT WITH A VIEW TO OR
FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF WITHIN THE
MEANING OF THE 1933 ACT. THIS WARRANT AND ANY SHARES OF COMMON
STOCK ACQUIRED UPON THE EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT IN A TRANSACTION WHICH IS
EXEMPT UNDER THE PROVISIONS OF THE 1933 ACT OR ANY APPLICABLE
STATE SECURITIES LAWS, OR PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR IN A TRANSACTION OTHERWISE IN COMPLIANCE WITH
APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
THE SALE, PLEDGE, TRANSFER, ASSIGNMENT OR OTHER DISPOSITION OF
THIS WARRANT AND ANY SHARES OF COMMON STOCK ACQUIRED UPON THE
EXERCISE OF THIS WARRANT IS RESTRICTED BY AND SUBJECT TO THE
PROVISIONS OF A PURCHASE AGREEMENT DATED AS OF DECEMBER 3, 2001, A
COPY OF WHICH IS AVAILABLE UPON REQUEST FOR INSPECTION AT THE
OFFICES OF THE COMPANY. ANY SUCH REQUEST SHOULD BE ADDRESSED TO
THE SECRETARY OF THE COMPANY.
(c) Each certificate representing Conversion
Shares shall bear a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933
ACT"), OR UNDER ANY APPLICABLE STATE LAWS. THE SHARES REPRESENTED
BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE REGISTERED OWNER
HEREOF FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN
CONNECTION WITH ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE
1933 ACT. THE SHARES MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR
ASSIGNED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER THE
Page 36
PROVISIONS OF THE 1933 ACT OR ANY APPLICABLE STATE SECURITIES
LAWS, OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN A
TRANSACTION OTHERWISE IN COMPLIANCE WITH APPLICABLE FEDERAL AND
STATE SECURITIES LAWS.
THE SALE, PLEDGE, TRANSFER, ASSIGNMENT OR OTHER DISPOSITION OF THE
SHARES REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY AND
SUBJECT TO THE PROVISIONS OF A STOCK PURCHASE AGREEMENT DATED AS
OF DECEMBER 3, 2001, A COPY OF WHICH IS AVAILABLE UPON REQUEST FOR
INSPECTION AT THE OFFICES OF THE COMPANY. ANY SUCH REQUEST SHOULD
BE ADDRESSED TO THE SECRETARY OF THE COMPANY.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE SHALL BE REDEEMABLE
AS PROVIDED IN THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION.
7.6. Further Assurances. At any time or from time to time
after the Closing, the Company, on the one hand, and the Purchasers, on the
other hand, agree to cooperate with each other, and at the request of the
other party, to execute and deliver any further instruments or documents
and to take all such further action as the other party may reasonably
request in order to evidence or effectuate the consummation of the
transactions contemplated hereby or by the other Transaction Documents and
to otherwise carry out the intent of the parties hereunder or thereunder.
7.7. Successors and Assigns. This Agreement shall bind
and inure to the benefit of the Company and the Purchasers and the
respective successors, permitted assigns, heirs and personal
representatives of the Company and the Purchasers, provided that prior to
the Closing the Company may not assign its rights or obligations under this
Agreement to any Person without the prior written consent of the
Page 37
Purchasers, and provided further that the Purchasers may not assign their
rights or obligations under this Agreement to any Person (other than an
Affiliate) without the prior written consent of the Company. In addition,
and whether or not any express assignment has been made, the provisions of
this Agreement which are for the Purchasers' benefit as purchasers or
holders of Preferred Shares, Warrants or Conversion Shares are also for the
benefit of, and enforceable by, any Affiliates of the Purchasers who hold
such Preferred Shares or Conversion Shares and received such Preferred
Shares or Conversion Shares in accordance with the terms of this Agreement.
7.8. Entire Agreement. This Agreement and the other
Transaction Documents contain the entire agreement between the parties with
respect to the subject matter hereof and supersede all prior and
contemporaneous arrangements or understandings with respect thereto.
7.9. Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by telecopy,
nationally recognized overnight courier or first class registered or
certified mail, return receipt requested, postage prepaid, addressed to
such party at the address set forth below or such other address as may
hereafter be designated in writing by such party to the other parties:
(i) if to the Company, to:
McLeodUSA Incorporated
McLeodUSA Technology Park
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
Page 38
with a copy to (which shall not
constitute notice):
Skadden, Arps, Slate, Xxxxxxx & Xxxx
(Illinois)
000 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxx X. Xxxxx, 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: Xxxxx Xxxxxxx, Esq.
All such notices, requests, consents and other
communications shall be deemed to have been given or made if and when
delivered personally or by overnight courier to the parties at the above
addresses or sent by electronic transmission, with confirmation received,
to the telecopy numbers specified above (or at such other address or
telecopy number for a party as shall be specified by like notice).
7.10. Amendments. The terms and provisions of this
Agreement may be modified or amended, or any of the provisions hereof
waived, temporarily or permanently, in a writing executed and delivered by
the Company and the Purchasers. No waiver of any of the provisions of this
Agreement shall be deemed to or shall constitute a waiver of any other
provision hereof (whether or not similar). No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate
Page 39
as a waiver thereof.
7.11. Counterparts. This Agreement may be executed in any
number of counterparts, and each such counterpart hereof shall be deemed to
be an original instrument, but all such counterparts together shall
constitute but one agreement.
7.12. Headings. The headings of the sections of this
Agreement have been inserted for convenience of reference only and shall
not be deemed to be a part of this Agreement.
7.13. Nouns and Pronouns. Whenever the context may
require, any pronouns used herein shall include the corresponding
masculine, feminine or neuter forms, and the singular form of names and
pronouns shall include the plural and vice versa.
7.14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT
GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW.
7.15. Submission to Jurisdiction. This Agreement shall be
governed by, enforced under and construed in accordance with the laws of the
State of Delaware, without giving effect to any choice or conflict of law
provision or rule thereof. Each of the parties hereto hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the
courts of the State of Delaware and of the United States of America in each
case located in the County of Delaware for any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby (and
agrees not to commence any litigation relating thereto except in such
courts), and further agrees that service of any process, summons, notice or
document by U.S. registered mail to its respective address set forth in
Section 7.9 shall be effective service of process for any litigation brought
against it in any such court. Each of the parties hereto hereby irrevocably
and
Page 40
unconditionally waives any objection to the laying of venue of any
litigation arising out of this Agreement or the transactions contemplated
hereby in the courts of the State of Delaware or of the United States of
America in each case located in the County of Delaware and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in
any such court that any such litigation brought in any such court has been
brought in an inconvenient forum. Notwithstanding the foregoing, in the
event that the Company and/or any of its Subsidiaries commence proceedings
under the Bankruptcy Code, the parties hereto irrevocably and
unconditionally consent to submit to the jurisdiction of the bankruptcy
court in which such proceeding is commenced for any litigation arising out
of or relating to this Agreement and the transactions contemplated thereby
(and agree not to commence any litigation relating thereto except in such
bankruptcy court).
7.16. WAIVER OF JURY TRIAL. THE COMPANY AND THE
PURCHASERS HEREBY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY ACTION, PROCEEDING OR LITIGATION DIRECTLY OR INDIRECTLY
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTION DOCUMENTS.
7.17. Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and
valid, but if any provision of this Agreement is held to be invalid or
unenforceable in any respect, such invalidity or unenforceability shall not
render invalid or unenforceable any other provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed
and delivered this Agreement as of the date first above written.
Page 41
PURCHASERS
FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP-VII, L.P.
By: FLC XXXII 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-VIII, L.P.
By: FLC XXXIII Partnership, L.P.
its general partner
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------------------------
Xxxxxx X. Xxxxxx,
a general partner
ORIGINAL FL PURCHASERS
FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP-V, L.P.
By: FLC XXX Partnership, L.P.
its general partner
By: /s/ 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
Page 42
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
By: /s/ Xxxxx X. Xxxxx
----------------------------------------
Name: Xxxxx X Xxxxx
Title: Chief Operating and Financial Officer
Exhibit 4.14
As of the date hereof, the authorized capital stock of
the Company consists of (i) [_________] shares of the Company's Class A
Common Stock, par value $.01 per share ("Class A Common Stock"), of which,
as of the Closing Date [_________] shares were issued and outstanding; (ii)
[_________] 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) [_________] shares of serial preferred stock, par value
$0.01 per share, of which as of the date hereof [_________] shares are
issued and outstanding as Series F Participating Convertible Preferred
Stock (the "Series F Preferred Stock"); and (iv) 10,000,000 shares of Class
II serial preferred stock, par value $.001 per share, of which, as of the
date hereof, 10 shares are issued and outstanding as Series G Preferred
Page 43
Stock (the "Series G Preferred Stock"). All of the issued and outstanding
shares of Class A Common Stock, Series F Preferred Stock and the Series G
Preferred Stock have been duly authorized and are validly issued, fully
paid and nonassessable. Except as set forth on Schedule I to this Exhibit,
no shares of capital stock of the Company are entitled to preemptive
rights. Except as set forth on Schedule II to this Exhibit or 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, contracts, agreements,
understandings or arrangements 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 III to this Exhibit 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 or Series F Preferred Stock
or the Series G Preferred Stock. 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
Page 44
of shares issuable upon the exercise or conversion of any such options,
warrants or other rights.
Exhibit A
PRINCIPAL TERMS OF RESTRUCTURING
The following is a description of the principal terms for the restructuring
of the Company:
1. The Company will (A) sell its directory publishing business to either
(i) Forstmann Little & Co. or its affiliates for a cash purchase price
of at least $535,000,000 or (ii) such other person that submits a
higher and better all cash offer and (B) use (i) the first
$535,000,000 of the gross cash proceeds of such sale and (ii) at the
Company's option, use the gross cash proceeds in excess of
$560,000,000 to redeem the outstanding Indenture Debt;
2. The FL Standby Purchase Agreement shall not provide for any break-up
fee or any expense reimbursement in favor of the purchaser;
3. In the event that the Restructuring is consummated through the
Out-of-Court Alternative, the Indentures governing the Indenture Debt
will be amended to remove all lien, indebtedness and restrictive
subsidiary agreements restrictions;
4. The outstanding shares of Series A Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock and existing common stock of the
Borrower will be converted to common stock (the "New Common Stock").
5. Forstmann Little & Co. ("Forstmann Little") and its affiliates xxxx
Xxxx 45
make a $100,000,000 all cash investment in a new series of preferred
stock of the restructured Company, $25,000,000 of such investment will
be used to pay the Borrower's Indenture Debt, $35,000,000 of such
investment will be used to prepay the Term Borrowings and $40,000,000
of such investment will be retained by the Borrower and used for
general corporate purposes, including capital expenditures. Such
preferred stock shall be mandatorily convertible into common stock of
the Company within 60 days of the issuance thereof;
6. The Borrower may implement the Restructuring either out-of-court
through an exchange offer for the Indenture Debt and the Borrower's
Series A, D and E Preferred Stock or in-court through a proceeding
under Chapter 11 of the United States Bankruptcy Code, which in either
case shall be consummated on or prior to August 1, 2002;
7. If the Restructuring is accomplished through the In-Court Alternative,
the plan of reorganization for the Restructuring shall be confirmed on
or prior to August 1, 2002 and shall provide that the liens and claims
of the Lenders under the Credit Agreement will be unimpaired within
the meaning of Section 1124 of the Bankruptcy Code;
8. The Company will redeem at least 95% of its outstanding Indenture Debt
for (i) cash in the amount of $560,000,000; (ii) common equity of the
restructured Borrower in an amount acceptable to the Arrangers; and
(iii) at the Borrower's discretion, the excess, if any, of the gross
sales proceeds received by the Borrower in the sale of its directory
publishing business over $560,000,000; and
9. Upon consummation of the Restructuring, (i) Forstmann Little and its
affiliates will be entitled to at least two representatives on the
Page 46
restructured Borrower's Board of Directors; (ii) Forstmann Little and
its affiliates will own common stock and warrants of the restructured
Borrower in an amount representing approximately 40% of the equity
ownership of the restructured Borrower; and (iii) Xxxxxxxx X.
Xxxxxxxxx will be chairman of the Executive Committee of the
restructured Borrower.
The Company shall be entitled to amend the terms of this Exhibit A without
the consent of Forstmann Little provided that the terms of the amended
Exhibit A do not materially deviate from the terms set forth above.
ANNEX
DEFINITIONS
"Arrangers" means JPMorgan Chase Bank, Bank of America, N.A. and
Citicorp USA, Inc.
"FL Standby Purchase Agreement" means the standby purchase
agreement entered into among Forstmann Little, certain of its affiliates
and the Borrower on or about the Third Amendment Effective Date and each
other agreement, document, certificate or instrument delivered or to be
delivered in connection therewith, pursuant to which Forstmann Little or
any of such affiliates will, in the event that the Borrower has not
received and accepted a higher and better all cash offer for the sale of
the Publishing Assets on or prior to the Restructuring Date, purchase the
Publishing Assets for cash consideration of $535,000,000 on or prior to the
Restructuring Date.
"FL New Preferred Stock Purchase Agreement" means the stock
purchase agreement entered into among Forstmann Little, certain of its
Page 47
affiliates and the Borrower on or about the Third Amendment Effective Date
and each other agreement, document, certificate or instrument delivered or
to be delivered in connection therewith, pursuant to which Forstmann Little
and such affiliates will make an investment in a new series of preferred
stock (the "New Preferred Stock") of the restructured Borrower as described
in Exhibit A.
"Forstmann Little" is defined in Exhibit A.
"Indenture Debt" means the outstanding Indebtedness of the
Borrower under the Indentures.
"New Common Stock" is defined in Exhibit A.
Page 48
Exhibit 2.2A
MCLEODUSA INCORPORATED
CERTIFICATE OF DESIGNATION OF THE POWERS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF
SERIES F CONVERTIBLE PREFERRED STOCK AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS THEREOF
------------------------------------------------------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
------------------------------------------------------------------------------
McLeodUSA Incorporated (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that, pursuant to authority conferred upon
the board of directors of the Corporation (the "Board of Directors") by the
Corporation's Amended and Restated Certificate of Incorporation, as amended
(the "Restated Certificate of Incorporation"), and the authority delegated
by the Board of Directors to a Special Committee of the Board of Directors
in accordance with the provisions of Section 141(c) of the General
Corporation Law of the State of Delaware and Section 3.7 of the Amended and
Restated Bylaws of the Corporation and pursuant to the provisions of
Section 151 of the General Corporation Law of the State of Delaware, said
Special Committee of the Board of Directors is authorized to issue
Preferred Stock of the Corporation in one or more series and the Special
Committee of the Board of Directors has approved and adopted the following
resolution on ______________, 2001 (the "Resolution"):
RESOLVED that, the Special Committee of the Board of
Directors hereby creates, authorizes and provides for the issuance
of a series of the Class II Preferred Stock of the Corporation,
Page 1
par value $.001 per share, designated as the "Series F Convertible
Preferred Stock," consisting of 10,000,000 shares and having the
powers, designation, preferences and relative, participating,
optional and other special rights and the qualifications,
limitations and restrictions thereof that are set forth in the
Restated Certificate of Incorporation and in this Resolution as
follows:
1. Number and Designation. 10,000,000 shares of the Preferred
Stock of the Corporation shall constitute a series designated as "Series F
Convertible Preferred Stock" (the "Series F Preferred Stock").
2. Definitions. Unless the context otherwise requires, when used
herein the following terms shall have the meaning indicated.
"Board of Directors" means the Board of Directors of the
Corporation.
"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in
New York City, New York generally are authorized or required by law or
other governmental actions to close.
"Capital Stock" means, with respect to any person, any and all
shares, interests, participations, rights in, or other equivalents (however
designated and whether voting and/or non-voting) of such person's capital
stock, whether outstanding on the Issue Date or issued after the Issue
Date, and any and all rights (other than any evidence of indebtedness),
warrants or options exchangeable for or convertible into such capital
stock.
"Class A Common Stock" means any shares of the Corporation's Class
A common stock, par value $.01 per share, now or hereafter authorized to be
issued, any and all securities of any kind whatsoever of the Corporation
Page 2
which may be exchanged for or converted into Class A Common Stock, and any
and all securities of any kind whatsoever of the Corporation 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
Corporation or otherwise.
"Common Stock" means the Corporation's Class A Common Stock, and
any other common stock of the Corporation.
"Issue Date" means the original date of issuance of shares of
Series F Preferred Stock.
"Liquidation Preference" with respect to a share of Series F
Preferred Stock means $.01.
"Market Price" means, with respect to the Common Stock, on any
given day, (i) the price of the last trade, as reported on the Nasdaq
National Market, not identified as having been reported late to such
system, or (ii) if the Common Stock is so traded, but not so quoted, the
average of the last bid and ask prices, as those prices are reported on the
Nasdaq National Market, or (iii) if the Common Stock is not listed or
authorized for trading on the Nasdaq National Market or any comparable
system, the average of the closing bid and asked prices as furnished by two
members of the National Association of Securities Dealers, Inc. selected
from time to time by the Corporation for that purpose. If the Common Stock
is not listed and traded in a manner that the quotations referred to above
are available for the period required hereunder, the Market Price per share
of Common Stock shall be deemed to be the fair value per share of such
security as determined in good faith by the Board of Directors of the
Corporation.
3. Rank. (a) The Series F Preferred Stock will, with respect to
rights on liquidation, winding-up and dissolution, rank (i) senior to
Page 3
all classes of Common Stock and to each other class of Capital Stock of the
Corporation or series of Preferred Stock of the Corporation established
hereafter by the Board of Directors of the Corporation the terms of which
do not expressly provide that such class or series ranks senior to, or on a
parity with, the Series F Preferred Stock as to rights on liquidation,
winding-up and dissolution of the Corporation (collectively referred to,
together with all classes of Common Stock of the Corporation, as "Junior
Securities"); (ii) on a parity with each class of Capital Stock of the
Corporation or series of Preferred Stock of the Corporation established
hereafter by the Board of Directors of the Corporation, the terms of which
expressly provide that such class or series will rank on a parity with the
Series F Preferred Stock as to rights on liquidation, winding-up and
dissolution (collectively referred to as "Parity Securities"); and (iii)
junior to each class of Capital Stock of the Corporation or series of
Preferred Stock of the Corporation established hereafter by the Board of
Directors of the Corporation, the terms of which expressly provide that
such class or series will rank senior to the Series F Preferred Stock as to
rights on liquidation, winding-up and dissolution of the Corporation
(collectively referred to as "Senior Securities").
(b) The respective definitions of Junior Securities, Parity
Securities and Senior Securities shall also include any warrants, rights or
options or other securities exercisable or exchangeable for or convertible
into any of the Junior Securities, Parity Securities and Senior Securities,
as the case may be.
(c) The Series F Preferred Stock shall be subject to the creation
of Junior Securities and Parity Securities.
4. Dividends. For so long as any shares of Series F Preferred
Page 4
Stock are outstanding, if the Corporation pays a dividend on the Common
Stock, then at the same time the Corporation shall declare and pay a
dividend on each share of Series F Preferred Stock equal to the dividend
paid on a share of Common Stock.
5. Liquidation Preference. In the event of any liquidation,
dissolution or winding-up of the Corporation, whether voluntary or
involuntary (a "liquidation"), before any payment or distribution of the
assets of the Corporation (whether capital or surplus) shall be made to or
set apart for the holders of Junior Securities, the holders of the
outstanding shares of Series F Preferred Stock shall be entitled to receive
an amount per share in cash equal to the greater of (i) the Liquidation
Preference or (ii) the amount per share that a share of Common Stock would
receive if each share of Series F Preferred Stock were converted into one
share of Common Stock immediately prior to such liquidation, dissolution or
winding up. For the purposes of this Section 5, neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets
of the Corporation nor the consolidation or merger of the Corporation with
or into one or more other entities shall be deemed to be a liquidation,
dissolution or winding-up of the Corporation.
6. Conversion. (a) Subject to the provisions of this Section 6,
each share of Series F Preferred Stock shall be converted on the sixtieth
(60th) day following the Issue Date into a number of fully paid and
non-assessable shares of Class A Common Stock equal to (x) $10 divided by
(y) a fraction, the numerator of which will be the sum of the closing
prices per share of the Class A Common Stock for six business days derived
by selecting ten (10) Business Days within such sixty (60) day period
selected randomly and excluding the two (2) highest and two (2) lowest
closing prices from such ten days, and the denominator of which is 6
Page 5
(the "Conversion Price").
(b) In order to effect the conversion, the Corporation shall give
notice of such event by first class mail, postage prepaid, mailed within
five (5) Business Days, to each holder of record of shares of Series F
Preferred Stock at such holder's address as the same appears on the stock
register of the Corporation. Such notice shall set forth (A) the
calculation of the Conversion Price (including the trading days utilized in
making the calculation) and (B) the place or places where certificates for
such shares are to be surrendered.
(i) Unless the shares issuable on conversion are to be
issued in the same name as the name in which such shares of Series F
Preferred Stock are registered, each share surrendered for conversion shall
be accompanied by instruments of transfer, in form satisfactory to the
Corporation, duly executed by the holder or the holder's duly authorized
attorney, and an amount sufficient to pay any transfer or similar tax.
(ii) As promptly as practicable after the surrender by
the holder of the certificates for shares of Series F Preferred Stock as
aforesaid, the Corporation shall issue and shall deliver to such holder, or
on the holder's written order to the holder's transferee, (x) a certificate
or certificates for the whole number of shares of Class A Common Stock
issuable upon the conversion of such shares in accordance with the
provisions of this Section 6 and (y) any cash adjustment required pursuant
to Section 6(e).
(iii) The conversion of shares of Series F Preferred
Stock pursuant to Section 6(a) shall be deemed to have been effected
immediately prior to the close of business on the first trading day after
the Issue Date, and the person in whose name or names any certificate or
certificates for shares of Class A Common Stock shall be issuable upon
Page 6
any such conversion shall be deemed to have become the holder of record of
the shares of Class A Common Stock represented thereby at such time on such
date and such conversion shall be into a number of whole shares of Class A
Common Stock in respect of the shares of Series F Preferred Stock being
converted as determined in accordance with this Section 6 at such time on
such date. All shares of Class A Common Stock delivered upon conversion of
the Series F Preferred Stock will upon delivery be duly and validly issued
and fully paid and non-assessable, free of all liens and charges and not
subject to any preemptive rights. Upon the surrender of certificates
representing the shares of Series F Preferred Stock to be converted, the
shares to be so converted shall no longer be deemed to be outstanding and all
rights of a holder with respect to such shares surrendered for conversion
shall immediately terminate except the right to receive the Class A Common
Stock and other amounts payable pursuant to this Section 6.
(c) (i) The Corporation covenants that it will at all times
reserve and keep available, free from preemptive rights, such number of its
authorized but unissued shares of Class A Common Stock as shall be required
for the purpose of effecting the conversion of the Series F Preferred
Stock.
(ii) Prior to the delivery of any securities which the
Corporation shall be obligated to deliver upon conversion of the Series F
Preferred Stock, the Corporation shall comply with all applicable federal
and state laws and regulations which require action to be taken by the
Corporation.
(d) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery
of shares of Class A Common Stock on conversion of the Series F Preferred
Page 7
Stock pursuant hereto; provided that the Corporation shall not be required
to pay any tax which may be payable in respect of any transfer involved in
the issue or delivery of shares of Class A Common Stock in a name other
than that of the holder of the Series F Preferred Stock to be converted and
no such issue or delivery shall be made unless and until the person
requesting such issue or delivery has paid to the Corporation the amount of
any such tax or has established, to the satisfaction of the Corporation,
that such tax has been paid.
(e) In connection with the conversion of the Series F Preferred
Stock, no fractions of shares of Class A Common Stock shall be required to
be issued to the holder of such shares of Series F Preferred Stock, but in
lieu thereof the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to such fractional interest
multiplied by the Market Price per share of Class A Common Stock on the
Business Day next preceding the date of conversion.
7. Voting Rights. The holders of record of shares of Series F
Preferred Stock shall not be entitled to any voting rights except as
hereinafter provided in this Section 7 or as otherwise provided by law.
(a) Without the written consent of holders of a majority of the
outstanding shares of Series F Preferred Stock or the affirmative vote of
holders of a majority of the outstanding shares of Series F Preferred Stock
at a meeting of the holders of Series F Preferred Stock called for such
purpose, the Corporation will not amend, alter or repeal any provision of
the Restated Certificate of Incorporation or this Certificate of
Designation so as to adversely affect the preferences, rights or powers of
the Series F Preferred Stock or to authorize the issuance of, or to issue
Page 8
any, additional shares of Series F Preferred Stock; provided that any such
amendment that changes any dividend or other amount payable on or the
Liquidation Preference of the Series F Preferred Stock shall require the
written consent of holders of two-thirds of the outstanding shares of
Series F Preferred Stock or the affirmative vote of holders of two-thirds
of the outstanding shares of Series F Preferred Stock at a meeting of the
holders of Series F Preferred Stock called for such purpose.
(b) Without the written consent of holders of a majority of the
outstanding shares of Series F Preferred Stock or the affirmative vote of
holders of a majority of the outstanding shares of Series F Preferred Stock
at a meeting of such holders called for such purpose, the Corporation will
not create, authorize or issue any Senior Securities.
(c) The Corporation may, without the consent of the holders of the
Series F Preferred Stock, or any one of them, consolidate with or merge
with or into, or convey, transfer or lease all or substantially all its
assets as an entirety to, any Person, provided that: (1) the successor,
transferee or lessee (if not the Corporation) is organized and existing
under the laws of the United States of America or any State thereof or the
District of Columbia and the Series F Preferred Stock shall be converted
into or exchanged for and shall become shares of, or interests in, such
successor, transferee or lessee, having in respect of such successor,
transferee, or lessee substantially the same powers, preferences and
relative, participating, optional or other special rights and the
qualifications, limitations or restrictions thereof, that the Series F
Preferred Stock has immediately prior to such transaction; and (2) the
Corporation delivers to the transfer agent an officers' certificate and an
opinion of counsel stating that such consolidation, merger, conveyance,
Page 9
transfer or lease complies with this Certificate of Designation. In the
event of any consolidation or merger or conveyance, transfer or lease of
all or substantially all of the assets of the Corporation that is permitted
pursuant to this Section 7(c), the successor resulting from such
consolidation or into which the Corporation is merged or the transferee or
lessee to which such conveyance, transfer or lease is made, will succeed
to, and be substituted for, and may exercise every right and power of, the
Corporation with respect to the Series F Preferred Stock (or the shares or
interests into, or for which, the Series F Preferred Stock is converted or
exchanged), and thereafter, except in the case of a lease, the predecessor
(if still in existence) shall be released from its obligations and
covenants with respect to the Series F Preferred Stock. Where consent is
required by this Section 7(c), such consent shall be given by the
affirmative vote or written consent of the holders of a majority of the
outstanding shares of Series F Preferred Stock or the affirmative vote of
holders of a majority of the outstanding shares of Series F Preferred Stock
at a meeting of the holders of Series F Preferred Stock called for such
purpose.
(d) Each share of Series F Preferred Stock shall vote with Common
Stock on all matters submitted to a vote of stockholders of the
Corporation. Except as otherwise provided herein or by law, the holders of
Series F Preferred Stock and the holders of Common Stock shall vote
together as one class on all matters submitted to a vote of stockholders of
the Corporation.
(e) In exercising the voting rights set forth in this Section 7,
each share of Series F Preferred Stock shall have one vote per share.
Except as otherwise required by applicable law or as set forth herein, the
Page 10
shares of Series F Preferred Stock shall not have any relative,
participating, optional or other special voting rights and powers and the
consent of the holders thereof shall not be required for the taking of any
corporate action.
8. General Provisions.(a) The term "person" as used herein means
any corporation, limited liability company, partnership, trust,
organization, association, other entity or individual.
(b) The term "outstanding", when used with reference to shares of
stock, shall mean issued shares, excluding shares held by the Corporation
or a subsidiary of the Corporation.
(c) The headings of the sections, paragraphs, subparagraphs,
clauses and subclauses of this Certificate of Designation are for
convenience of reference only and shall not define, limit or affect any of
the provisions hereof.
IN WITNESS WHEREOF, said McLeodUSA Incorporated has caused this
Certificate of Designations to be signed by ______________, its
______________ this __ day of ________, 2001.
McLEODUSA INCORPORATED
By:
Name:
Title:
Page 11
Exhibit 2.2B
MCLEODUSA INCORPORATED
CERTIFICATE OF DESIGNATION OF THE POWERS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF
SERIES G CONVERTIBLE PREFERRED STOCK AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS THEREOF
------------------------------------------------------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
------------------------------------------------------------------------------
McLeodUSA Incorporated (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that, pursuant to authority conferred upon
the board of directors of the Corporation (the "Board of Directors") by the
Corporation's Amended and Restated Certificate of Incorporation, as amended
(the "Restated Certificate of Incorporation"), and the authority delegated
by the Board of Directors to a Special Committee of the Board of Directors
in accordance with the provisions of Section 141(c) of the General
Corporation Law of the State of Delaware and Section 3.7 of the Amended and
Restated Bylaws of the Corporation and pursuant to the provisions of
Section 151 of the General Corporation Law of the State of Delaware, said
Special Committee of the Board of Directors is authorized to issue
Preferred Stock of the Corporation in one or more series and the Special
Committee of the Board of Directors has approved and adopted the following
resolution on _________________, 2001 (the "Resolution"):
RESOLVED that, the Special Committee of the Board of
Directors hereby creates, authorizes and provides for the issuance
of a series of the preferred stock of the Corporation, par value
Page 1
$.01 per share, designated as the "Series G Convertible Preferred
Stock," consisting of 10 shares and having the powers,
designation, preferences and relative, participating, optional and
other special rights and the qualifications, limitations and
restrictions thereof that are set forth in the Restated
Certificate of Incorporation and in this Resolution as follows:
1. Number and Designation. 10 shares of the Preferred Stock of the
Corporation shall constitute a series designated as "Series G Convertible
Preferred Stock" (the "Series G Preferred Stock").
2. Definitions. Unless the context otherwise requires, when used
herein the following terms shall have the meaning indicated.
"Board of Directors" means the Board of Directors of the
Corporation.
"Change of Control" shall be deemed to have occurred if (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended), other than a trustee or other
fiduciary holding securities under an employee benefit plan of the
Corporation or a corporation owned directly or indirectly by the
stockholders of the Corporation in substantially the same proportions as
their ownership of stock of the Corporation, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under said Act), directly or indirectly,
of securities of the Corporation representing 50% or more of the total
voting power represented by the Corporation's then outstanding Voting
Securities, or (ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of Directors of
the Corporation and any new director whose election by the Board of
Directors or nomination for election by the Corporation's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then still
Page 2
in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for
any reason to constitute a majority thereof, or (iii) the stockholders of
the Corporation approve a merger or consolidation of the Corporation with
any other corporation, other than a merger or consolidation which would
result in the Voting Securities of the Corporation outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or
by being converted into Voting Securities of the surviving entity) at least
80% of the total voting power represented by the Voting Securities of the
Corporation or such surviving entity outstanding immediately after such
merger or consolidation, or the stockholders of the Corporation approve a
plan of complete liquidation of the Corporation or an agreement for the
sale or disposition by the Corporation of (in one transaction or a series
of transactions) all or substantially all the Corporation's assets.
"Class A Common Stock" means any shares of the Corporation's Class
A common stock, par value $.01 per share, now or hereafter authorized to be
issued, any and all securities of any kind whatsoever of the Corporation
which may be exchanged for or converted into Class A Common Stock, and any
and all securities of any kind whatsoever of the Corporation 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
Corporation or otherwise.
"Common Stock" means the Corporation's Class A Common Stock, and
any other common stock of the Corporation.
Page 3
"Initial Holders" means the recipients of the original issuance of
the Series G Preferred Stock on the Issue Date as shown in the stock record
book of the Corporation.
"Issue Date" means the original date of issuance of shares of
Series G Preferred Stock.
"Voting Securities" means any securities of the Company which vote
generally in the election of directors.
3. Voting Rights. (a) The Initial Holders shall not be entitled to
any voting rights except as hereinafter provided in this Section 8 or as
otherwise provided by law.
(b) From and after the Issue Date, the Initial Holders shall be
entitled to designate two directors (the "Two Designees," who shall be
designated specifically as the "First Designee" and the "Second Designee,"
respectively) for election to the Board of Directors of the Corporation
and, voting separately as a series, shall have the exclusive right to vote
for the election of such designees to the Board of Directors; provided
that, notwithstanding the foregoing, (A) the Initial Holders shall continue
to be entitled to designate two directors for election to the Board of
Directors and, voting separately as a series, shall continue to have the
exclusive right to vote for the election of such designees to the Board of
Directors, for as long as, and only for as long as, the Initial Holders
beneficially own at least 40% of the shares of Common Stock beneficially
owned by the Initial Holders on the Issue Date; (B) the entitlement of the
Initial Holders to designate two directors for election to the Board of
Directors, and the exclusive right of the Initial Holders to vote,
separately as a series, for the election of such designees to the Board of
Directors, shall cease immediately upon the Initial Holders beneficially
Page 4
owning less than 40% of the shares of Common Stock beneficially owned by
the Initial Holders on the Issue Date, and the Initial Holders shall be
entitled to designate one director (the "Single Designee," who initially
shall be the Second Designee continuing as a director) for election to the
Board of Directors and, voting separately as a series, shall have the
exclusive right to vote for the election of such designee to the Board of
Directors, and to designate one Board Observer (as hereinafter defined),
for as long as, and only for so long as, the Initial Holders beneficially
own less than 40% but more than 20% of the shares of Common Stock
beneficially owned by the Initial Holders on the Issue Date; (C) the
entitlement of the Initial Holders to designate one director for election
to the Board of Directors, and the exclusive right of the Initial Holders
to vote, separately as a series, for the election of such designee to the
Board of Directors, and the exclusive right of the Initial Holders to
designate one Board Observer, and the rights of such Board Observer, shall
cease immediately upon the Initial Holders beneficially owning less than
40% of the shares of Common Stock beneficially owned by the Initial Holders
on the Issue Date, and the Initial Holders shall be entitled to designate
two Board Observers for as long as, and only for as long as, the Initial
Holders beneficially own 20% or less (but at least 10%) of the shares of
Common Stock beneficially owned by the Initial Holders on the Issue Date;
(D) immediately upon the Initial Holders beneficially owning less than 10%
of the shares of Common Stock beneficially owned by the Initial Holders on
the Issue Date, the entitlement of the Initial Holders to designate two
Board Observers, and the rights of such Board Observers, shall cease; (E)
immediately upon the Initial Holders beneficially owning less than 40%
Page 5
but more than 20% of the shares of Common Stock beneficially owned by the
Initial Holders on the Issue Date, the Board of Directors shall cause the
total number of directors then constituting the whole Board of Directors to
be decreased by one, and the term of office of the First Designee shall
terminate; and (F) immediately upon the Initial Holders beneficially owning
20% or less of the shares of Common Stock beneficially owned by the Initial
Holders on the Issue Date, the Board of Directors shall cause the total
number of directors then constituting the whole Board of Directors to be
decreased by one, and the term of office of the Single Designee shall
terminate. Any or all of the Two Designees and the Single Designee may be
removed with or without cause by the Initial Holders. "Board Observer" means
a person who shall not be a member of the Board of Directors and who shall
have the rights as agreed to with the Corporation.
(c) Without the written consent of the Initial Holders, the
Corporation will not amend, alter or repeal any provision of the Restated
Certificate of Incorporation or this Certificate of Designation so as to
adversely affect the preferences, rights or powers of the Series G
Preferred Stock or to authorize the issuance of, or to issue any,
additional shares of Series G Preferred Stock; provided that any such
amendment that changes any dividend or other amount payable on or the
Liquidation Preference of the Series G Preferred Stock shall require the
written consent of the Initial Holders.
(d) Each share of Series G Preferred Stock shall vote with Common
Stock on all matters submitted to a vote of stockholders of the
Corporation. Except as otherwise provided herein or by law, the holders of
Series G Preferred Stock and the holders of Common Stock shall vote
together as one class on all matters submitted to a vote of stockholders of
the Corporation.
(e) In exercising the voting rights set forth in this Section
Page 6
7, each share of Series G Preferred Stock shall have one vote per share.
4. Cancellation. All then outstanding shares of Series G Preferred
Stock shall be deemed to be and shall be cancelled in full and shall no
longer be issued or outstanding and shall no longer constitute an
obligation of the Corporation in any way upon the occurrence of the earlier
of (a) the Initial Holders beneficially owning less than 10% of the shares
of Common Stock beneficially owned by the Initial Holders on the Issue Date
or (b) upon a Change of Control.
5. Other Rights and Powers. Except as set forth herein, the shares
of Series G Preferred Stock shall not have any relative, participating,
optional or other special rights and powers and the consent of the holders
thereof shall not be required for the taking of any corporate action.
6. Restrictions on Transfer. Notwithstanding anything to the
contrary contained herein or in the Restated Certificate of Incorporation,
any share(s) of Series G Preferred Stock not beneficially owned by the
Initial Holders shall, immediately upon the occurrence of the event which
effected the transfer or other disposition of such share(s), be deemed to
be and shall be cancelled in full and shall no longer be issued or
outstanding and shall no longer constitute an obligation of the Corporation
in any way.
7. General Provisions. (a) The term "person" as used herein means
any corporation, limited liability company, partnership, trust,
organization, association, other entity or individual.
(b) The headings of the sections, paragraphs, subparagraphs,
clauses and subclauses of this Certificate of Designation are for
convenience of reference only and shall not define, limit or affect any of
the provisions hereof.
Page 7
IN WITNESS WHEREOF, said McLeodUSA Incorporated has caused this
Certificate of Designations to be signed by ______________, its
______________ this __ day of ________, 2001.
McLEODUSA INCORPORATED
By:__________________________
Name:
Title:
Page 8
Exhibit 2.2C
THIS WARRANT AND ANY SHARES OF COMMON STOCK ACQUIRED UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER ANY APPLICABLE STATE LAWS. THIS WARRANT HAS
BEEN ACQUIRED BY THE REGISTERED OWNER HEREOF FOR INVESTMENT AND NOT WITH A
VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF WITHIN THE
MEANING OF THE 1933 ACT. THIS WARRANT AND ANY SHARES OF COMMON STOCK
ACQUIRED UPON THE EXERCISE OF THIS WARRANT MAY NOT BE SOLD, PLEDGED,
TRANSFERRED OR ASSIGNED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER THE
PROVISIONS OF THE 1933 ACT OR ANY APPLICABLE STATE SECURITIES LAWS, OR
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN A TRANSACTION
OTHERWISE IN COMPLIANCE WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
THE SALE, PLEDGE, TRANSFER, ASSIGNMENT OR OTHER DISPOSITION OF THIS WARRANT
AND ANY SHARES OF COMMON STOCK ACQUIRED UPON THE EXERCISE OF THIS WARRANT
IS RESTRICTED BY AND SUBJECT TO THE PROVISIONS OF A PURCHASE AGREEMENT
DATED AS OF _______________, 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.
Void After November ______, 2001
______, 2006
McLEODUSA INCORPORATED
Common Stock Purchase Warrant
McLeodUSA Incorporated, a Delaware corporation (the
"Corporation"), hereby certifies that for value received [ ] ("[ ]"), or
its assigns, is entitled to purchase, subject to the terms and conditions
hereinafter set forth, an aggregate of ____________ ( ) shares (subject to
adjustment as hereinafter provided) of Common Stock, par value $.01 per
Page 1
share (the "Common Stock"), of the Corporation at a purchase price equal to
One Hundred Fifty Percent (150%) of the conversion price of the Series F
Preferred Stock of the Corporation as determined pursuant to Section 6(a)
of the Certificate of Designations pursuant to which the Series F Preferred
Stock was issued (subject to adjustment as set forth herein, the "Exercise
Price"), payable as hereinafter provided.
SECTION 1. Warrant Expiration Date. As used herein, the term
"Warrant Expiration Date" shall mean 5:00 p.m., Eastern Time, on
____________ ___, 200__[insert date which is 5 years from date of
issuance]; provided that if such date shall in the State of New York be a
holiday or a day on which banks are authorized to close, then 5:00 p.m.,
Eastern Time, on the next following day which in the State of New York is
not a holiday or a day on which banks are authorized to close.
SECTION 2. Notice. In case at any time: (a) the Corporation shall
pay any dividend or make any distribution (other than regular cash
dividends from earnings or earned surplus paid at an established rate) to
the holders of its Common Stock; (b) the Corporation shall offer for
subscription pro rata to the holders of its Common Stock any additional
shares of stock of any class or other rights; (c) there shall be any
capital reorganization or reclassification of the capital stock of the
Corporation or consolidation or merger of the Corporation with or sale of
all or substantially all of its assets to another corporation; (d) there
shall be a voluntary, involuntary or deemed dissolution, liquidation or
winding-up of the Corporation; or (e) the Corporation (or any subsidiary
thereof) shall commence a tender offer for all or a portion of the
Corporation's outstanding shares of Common Stock; then, in any one or more
of such cases, the Corporation shall give written notice, by first class
mail, postage prepaid, addressed to the registered holder of this Warrant
Page 2
at the address of such registered holder as shown on the books of the
Corporation of the date on which (i) the books of the Corporation shall
close or a record date shall be fixed for determining the stockholders
entitled to such dividend, distribution or subscription rights, or (ii)
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation, winding-up, conversion, redemption or other event
shall take place, as the case may be. Such notice shall also provide
reasonable details of the proposed transaction and specify the date as of
which the holders of Common Stock of record shall participate in such
dividend, distribution or subscription rights, or shall be entitled to
exchange their Common Stock for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation, winding-up, conversion, redemption, tender offer
or other event, as the case may be. Such written notice shall be given at
least 10 business days prior to the action in question and not less than 10
business days prior to the record date or the date on which the
Corporation's transfer books are closed in respect thereto.
SECTION 3. EXERCISE.
(a) Manner of Exercise. This Warrant may be exercised at any time
or from time to time, but no earlier than sixty (60) days after the date of
issuance hereof, on any day which is not a Saturday, Sunday or holiday
under the laws of the State of New York, for all or any part of the number
of shares of Common Stock purchasable upon its exercise; provided, however,
that this Warrant shall be void and all rights represented hereby shall
cease unless exercised before the Warrant Expiration Date. In order to
exercise this Warrant, in whole or in part, the holder hereof shall deliver
to the Corporation at its principal place of business, or at such other
office as the Corporation may designate by notice in writing, (i) this
Page 3
Warrant and (ii) a written notice of such holder's election to exercise
this Warrant substantially in the form of Exhibit A attached hereto and
shall pay to the Corporation, by cashier's check made payable to the order
of the Corporation or wire transfer of funds to an account designated by
the Corporation, an amount equal to the aggregate purchase price for all
shares of Common Stock as to which this Warrant is exercised.
(b) Issuance of Common Stock. Upon receipt of the documents and
payments or shares described in Section 3(a), the Corporation shall, as
promptly as practicable, and in any event within 10 business days
thereafter, execute or cause to be executed, and deliver to such holder a
certificate or certificates representing the aggregate number of full
shares of Common Stock issuable upon such exercise, together with an amount
in cash in lieu of any fraction of a share, as hereinafter provided. The
stock certificate or certificates so delivered shall be in the denomination
specified in said notice and shall be registered in the name of the holder
hereof. This Warrant shall be deemed to have been exercised and a
certificate or certificates for shares of Common Stock shall be deemed to
have been issued, and the holder hereof or any other person so designated
to be named therein shall be deemed to have become a holder of record of
such shares for all purposes as of the date said notice, together with this
Warrant and the documents and payments or shares described in Section 3(a),
is received by the Corporation as aforesaid. If this Warrant shall have
been exercised in part, the Corporation shall, at the time of delivery of
said certificate or certificates, deliver to the holder hereof a new
Warrant evidencing the rights of such holder to purchase the unpurchased
shares of Common Stock called for by this Warrant, which new Warrant shall
Page 4
in all other respects be identical with this Warrant. The Corporation shall
pay all expenses and any and all United States federal, state and local
taxes and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under this Section 3,
except that the Corporation shall not be required to pay any tax which may
be payable in respect of any transfer involved in the issue and delivery of
the shares of Common Stock issuable upon exercise in a name other than that
of the holder who shall have surrendered the same in exercise of the
subscription right evidenced thereby. The Corporation covenants that all
shares of Common Stock issued upon exercise of this Warrant will, upon
payment (or deemed payment in the case of cashless exercise) of the
Exercise Price, be duly authorized and validly issued, fully paid and
nonassessable, free of preemptive rights and, except for any tax payable by
the holder pursuant to the preceding sentence, free from all taxes, liens,
charges and security interests with respect to the issue thereof. The
Corporation shall from time to time use its reasonable best efforts to take
all action which may be necessary to obtain and keep effective any and all
permits, consents and approvals of governmental agencies and authorities
and securities act filings under federal and state laws which may be or
become required in connection with the issuance, sale, transfer and
delivery of this Warrant, the exercise of this Warrant, and the issuance,
sale, transfer and delivery of the shares of Common Stock issued upon
exercise of this Warrant.
SECTION 4. Reservation of Shares. The Corporation covenants that
it will at all times until the Warrant Expiration Date reserve and keep
available, free of pre-emptive rights, out of its authorized and unissued
Common Stock, solely for the purpose of issue upon exercise of this
Warrant, such number of shares of Common Stock as shall then be issuable
upon the exercise of this Warrant.
Page 5
SECTION 5. Negotiability. This Warrant is issued upon the
following terms, to all of which each holder or owner hereof by the taking
hereof consents and agrees:
(a) Subject to compliance with federal and applicable state
securities laws and the terms of this Warrant, title to this Warrant may be
transferred by endorsement (by the holder hereof executing the form of
assignment attached hereto as Exhibit B) and delivery in the same manner as
in the case of a negotiable instrument transferable by endorsement and
delivery;
(b) Subject to compliance with federal and applicable state
securities laws and the terms of this Warrant, any person in possession of
this Warrant properly endorsed is authorized to represent himself as
absolute owner hereof and is empowered to transfer absolute title hereto by
endorsement and delivery hereof to a bona fide purchaser hereof for value;
each prior taker or owner waives and renounces all of his equities or
rights in this Warrant in favor of each such bona fide purchaser, and each
such bona fide purchaser shall acquire absolute title hereto and to all
rights represented hereby; and
(c) Until this Warrant is transferred on the books of the
Corporation, the Corporation may treat the registered holder hereof as the
absolute owner hereof for all purposes, notwithstanding any notice to the
contrary, and any transfer in violation of the terms hereof shall be void
and of no effect.
SECTION 6. Loss or Mutilation. Upon receipt of evidence
satisfactory to the Corporation of the loss, theft, destruction or
mutilation of this Warrant (including a reasonably detailed affidavit with
respect to the circumstances of any loss, theft or destruction of such
Warrant) and, if requested in the case of any such loss, theft or
destruction, upon delivery of an indemnity bond or other agreement or
security reasonably satisfactory to the Corporation, or, in the case of any
Page 6
such mutilation, upon surrender and cancellation of this Warrant, the
Corporation at its expense will execute and deliver, in lieu hereof, a new
Warrant of like tenor.
SECTION 7. Consolidation, Merger, etc. If any consolidation or
merger of the Corporation with another corporation or other entity or the
sale of all or substantially all of its assets to another corporation or
other entity (each an "Extraordinary Event") shall be effected, then, as a
condition of such Extraordinary Event, the Corporation shall cause lawful
and adequate provision to be made whereby the registered holder of this
Warrant shall thereafter have the right to receive, upon exercise hereof
and the payment of the Exercise Price, in lieu of the shares of Common
Stock of the Corporation immediately theretofore receivable upon the
exercise of this Warrant, such shares of stock, securities or property
(including cash) as may be issued or payable with respect to or in exchange
for a number of shares of Common Stock of the Corporation immediately
theretofore receivable upon the exercise of this Warrant had such
Extraordinary Event not taken place, and in any such case appropriate
provision shall be made with respect to the rights and interests of the
holder of this Warrant to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the number of shares
purchasable upon the exercise of this Warrant) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock,
securities or property thereafter deliverable upon the exercise hereof. The
foregoing provisions shall similarly apply to successive Extraordinary
Events. The Corporation shall not effect any such consolidation, merger or
sale of all or substantially all of its assets unless, prior to the
consummation thereof, the successor corporation or other entity (if other
than the Corporation) resulting from such consolidation or merger or the
corporation or other entity purchasing such assets shall assume by written
instrument executed and mailed to the registered holder of this Warrant, at
Page 7
the last address of such registered holder appearing on the books of the
Corporation, the obligation to deliver to such registered holder such
shares of stock, securities or property as, in accordance with the
foregoing provisions, such registered holder may be entitled to purchase or
receive.
SECTION 8. ANTIDILUTION PROTECTION.
(a) If at any time or from time to time after the date hereof, the
Corporation issues or sells, or is deemed by the express provisions of this
subsection (a) to have issued or sold, any Additional Shares of Common
Stock (as defined in subsection (g) below), other than as a dividend or
other distribution on any class of stock as provided in clause (d) below
and other than a subdivision or combination of shares of Common Stock as
provided in clause (e) below, without consideration or for an Effective
Price (as defined in subsection (g) below) less than the Fair Market Value
per share of Common Stock immediately prior to the time of such issue or
sale, the then effective Exercise Price shall be reduced, as of the opening
of business on the date of such issue or sale, to the price equal to the
quotient obtained by dividing: (A) the product of (x) such Exercise Price
multiplied by (y) the sum of (i) the total number of shares of Common Stock
outstanding (including any shares of Common Stock deemed to have been
issued pursuant to Section 7 or this Section 8) immediately prior to such
issuance, and (ii) a number of shares of Common Stock calculated by
dividing the consideration received by the Corporation from such issuance
by the Fair Market Value per Share of the Common Stock; by (B) the total
number of shares of Common Stock outstanding (including any shares of
Common Stock deemed to have been issued pursuant to Section 7 and this
Section 8) immediately after such issuance of the Additional Shares of
Common Stock. No adjustment of the Exercise Price, however, shall be made
Page 8
in an amount less than $0.01 per share, and any such lesser adjustment
shall be carried forward and shall be made at the time and together with
the next subsequent adjustment which together with any adjustments so
carried forward shall amount to $0.01 per share or more. Upon any such
reduction in the Exercise Price, the total number of shares issuable upon
exercise of this Warrant shall be proportionately increased so that the
total amount payable upon exercise in whole of this Warrant shall not be
modified.
(b) For the purpose of making any adjustment required under this
Section 8, the consideration received by the Corporation for any issue or
sale of securities shall (i) to the extent it consists of cash, be computed
at the gross amount of cash received by the Corporation before deduction of
any underwriting or similar commissions, compensation or concessions paid
or allowed by the Corporation in connection with such issue or sale and
without deduction of any expenses payable by the Corporation, (ii) to the
extent it consists of property other than cash, be computed at the fair
market value of that property as determined in good faith by the Board of
Directors of the Corporation, and (iii) if Additional Shares of Common
Stock, Convertible Securities (as defined in subsection (c) below) or
Options (as defined in subsection (c) below) to purchase either Additional
Shares of Common Stock or Convertible Securities are issued or sold
together with other stock or securities or other assets of the Corporation
for a consideration which covers both, be computed as the portion of the
consideration so received that may be reasonably determined in good faith
by the Board of Directors to be allocable to such Additional Shares of
Common Stock, Convertible Securities or Options.
(c) For the purpose of the adjustment required under this Section
Page 9
8, if the Corporation issues or sells any (i) stock or other securities
convertible into or exercisable or exchangeable for Additional Shares of
Common Stock (such convertible, exercisable or exchangeable stock or
securities being herein referred to as "Convertible Securities") or (ii)
rights, options or warrants for the purchase of Additional Shares of Common
Stock or Convertible Securities (such rights, options or warrants being
referred to herein as "Options"), and if the Effective Price of such
Additional Shares of Common Stock is less than the Fair Market Value of a
share of Common Stock immediately prior to the time of the granting of such
Convertible Securities or Options, the Corporation shall be deemed to have
issued at the time of the issuance of such Options or Convertible
Securities the maximum number of Additional Shares of Common Stock issuable
upon exercise, conversion or exchange thereof and to have received as
consideration for the issuance of such shares an amount equal to the total
amount of the consideration, if any, received by the Corporation for the
issuance of such Options or Convertible Securities, plus, in the case of
such Options, the minimum amounts of consideration, if any, payable to the
Corporation upon the exercise of such Options, plus, in the case of
Convertible Securities, the minimum amounts of consideration, if any,
payable to the Corporation (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) upon the conversion,
exercise or exchange thereof; provided that if in the case of Convertible
Securities the minimum amounts of such consideration cannot be ascertained,
but are a function of antidilution or similar protective clauses, the
Corporation shall be deemed to have received the minimum amounts of
consideration without reference to such clauses; provided further that if
the minimum amount of consideration payable to the Corporation upon the
exercise, conversion or exchange of Options or Convertible Securities is
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reduced over time or on the occurrence or non-occurrence of specified
events other than by reason of antidilution adjustments, the Effective
Price shall be recalculated using the figure to which such minimum amount
of consideration is reduced; provided further that if the minimum amount of
consideration payable to the Corporation upon the exercise, conversion or
exchange of such Options or Convertible Securities is subsequently
increased, the Effective Price shall be again recalculated using the
increased minimum amount of consideration payable to the Corporation upon
the exercise, conversion or exchange of such Options or Convertible
Securities. No further adjustment of the Exercise Price, as adjusted upon
the issuance of such Options or Convertible Securities, shall be made as a
result of the actual issuance of Additional Shares of Common Stock on the
exercise of any such Options or the conversion, exercise or exchange of any
such Convertible Securities. If any such Options or the conversion
privilege represented by any such Convertible Securities shall expire
without having been exercised, the Exercise Price, as adjusted upon the
issuance of such Options or Convertible Securities, shall be readjusted at
the time of such expiration to the Exercise Price which would have been in
effect had an adjustment been made on the basis that the only Additional
Shares of Common Stock so issued were the Additional Shares of Common
Stock, if any, actually issued or sold on the exercise of such Options or
rights of conversion of such Convertible Securities, and such Additional
Shares of Common Stock, if any, were issued or sold for the consideration
actually received by the Corporation upon such exercise, plus the
consideration, if any, actually received by the Corporation for the
granting of all such Options, whether or not exercised, plus the
consideration received for issuing or selling the Convertible Securities
actually converted, exercised or exchanged, plus the consideration, if any,
actually received by the Corporation (other than by cancellation of
liabilities or obligations evidenced by such Convertible Securities) on the
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conversion, exercise or exchange of such Convertible Securities.
(d) In case the Corporation shall declare a dividend or make any
other distribution upon any stock of the Corporation payable in Common
Stock, Options or Convertible Securities (other than rights or warrants
distributed to all holders of such stock, which shall be treated in
accordance with Section 8(c)), any Common Stock, Options or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without
consideration, and the Exercise Price then in effect immediately prior to
such dividend declaration or distribution shall be reduced as if the
Corporation had subdivided its outstanding shares of Common Stock into a
greater number of shares as provided in clause (e) of this Section 8.
(e) If the Corporation at any time subdivides (by any stock split,
stock dividend, recapitalization or otherwise) its outstanding shares of
Common Stock into a greater number of shares, the number of shares issuable
upon exercise of this Warrant will be proportionately increased and the
Exercise Price will be proportionately decreased, and if the Corporation at
any time combines (by reverse stock split, recapitalization or otherwise)
its outstanding shares of Common Stock into a smaller number of shares, the
number of shares issuable upon exercise of this Warrant will be
proportionately decreased and the Exercise Price will be proportionately
increased.
(f) Other Distributions. Other than ordinary cash dividends or
distributions paid out of the Corporation's current earnings in amounts
consistent with the Corporation's ordinary practice as in effect from time
to time, which are specifically excluded from the provisions of this clause
(f), in the event the Corporation shall fix a record date for the making of
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a dividend or distribution on its Common Stock payable in cash, Common
Stock of the Corporation, securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets or warrants
or rights not referred to in clauses (d) or (e) of this Section 8 (the
"Other Distribution"), then, in each such case, at the election of the
Corporation, either (i) the number of shares of Common Stock issuable after
such record date upon exercise of this Warrant shall be adjusted by
multiplying the number of shares of Common Stock issuable upon the exercise
of this Warrant immediately prior to such record date by a fraction, the
numerator of which shall be the then Fair Market Value per share of Common
Stock on the record date for such distribution and the denominator of which
shall be the then Fair Market Value per share of Common Stock on the record
date for such distribution less an amount equal to the then fair market
value (as determined in good faith by the Board of Directors of the
Corporation) of the Other Distribution applicable to one share of Common
Stock, or (ii) adequate provision shall be made so that the holder of this
Warrant shall have the right to receive, in addition to shares of Common
Stock upon the exercise of this Warrant, at the election of the Company,
either (A) the Other Distribution to which such holder would have been
entitled as a holder of Common Stock if such holder had exercised this
Warrant immediately prior to the record date for such distribution or (B)
the cash equivalent of such Other Distribution.
If the Corporation elects to adjust the number of shares
of Common Stock issuable upon the exercise of this Warrant pursuant to
clause (i) above, such adjustment shall be made whenever any such
distribution is made and shall become effective on the date of distribution
retroactive to the record date for the determination of stockholders of the
Corporation entitled to receive such distribution; provided however, that
the Corporation shall deliver to the holder who exercises this Warrant
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after any such record date, but prior to the related distribution, a due
xxxx or other appropriate instrument evidencing such holder's right to
receive such distribution upon its occurrence.
Notwithstanding the foregoing, the Corporation shall not
elect the adjustment provided for in clause (i) above if the then fair
market value (as determined in good faith by the Board of Directors of the
Corporation) of the Other Distribution applicable to one share of Common
Stock is equal to or greater than the then Fair Market Value per share of
Common Stock on the record date of such distribution.
(g) "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Corporation or deemed to be issued pursuant to
this Section 8 (whether or not subsequently reacquired or retired by the
Corporation), other than Excluded Stock. "Excluded Stock" shall mean (i)
Common Stock and/or options, warrants or other Common Stock purchase rights
and the Common Stock issued pursuant to such options, warrants or other
rights to employees, officers or directors of, or consultants or advisors
to, the Corporation or any subsidiary pursuant to stock purchase or stock
option plans or other arrangements that are approved by the Board of
Directors; (ii) Common Stock issued pursuant to the exercise of options,
warrants or convertible securities outstanding as of the date hereof,
including, without limitation, the Series F Preferred Stock of the
Corporation; (iii) Common Stock issued in connection with the acquisition
of any person or entity whether by merger or otherwise; (iv) Common Stock
issued pursuant to a transaction for which an adjustment is made pursuant
to Section 7 or clause (d) or (e) of this Section 8 hereof; and (v) shares
of Common Stock issued for cash in a registered underwritten offering bona
fide offered and sold to the public. The "Effective Price" of Additional
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Shares of Common Stock shall mean the quotient determined by dividing the
total number of Additional Shares of Common Stock issued or sold, or deemed
to have been issued or sold by the Corporation under this Section 8, into
the aggregate consideration received, or deemed to have been received by
the Corporation for such issue under this Section 8, for such Additional
Shares of Common Stock.
(h) No adjustment pursuant to this Section 8 need be made for the
adoption of a plan commonly referred to as a "Stockholders' Rights Plan"
which provides for the issuance of rights to acquire shares of capital
stock upon the occurrence of some event that is not within the control of
the rights holders, or the issuance of rights under such plan; provided
that the issuance of capital stock pursuant to such rights shall require
adjustment to the Exercise Price and number of shares of Common Stock
purchasable upon the exercise hereof.
SECTION 9. No Dilution or Impairment. If any event shall occur as
to which the provisions of Section 7 or 8 hereof are not strictly
applicable but the failure to make any adjustment would adversely affect
the purchase rights represented by this Warrant in a way that is contrary
to the manifest and essential intent and principles of Sections 7 and 8
hereof, then, in each such case, the Board of Directors of the Corporation
shall provide for an adjustment, if applicable, on a basis consistent with
the manifest and essential intent and principles established in Sections 7
and 8 hereof, necessary to preserve, without dilution, the purchase rights
represented by this Warrant.
SECTION 10. Notice of Adjustment. Upon any adjustment or other
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change relating to the Exercise Price or the securities purchasable upon
the exercise of this Warrant, then, and in each such case, the Corporation
shall (a) cause to be issued to the Corporation a certificate of a firm of
independent public accountants (who may be the regular accountants employed
by the Corporation) setting forth the Exercise Price and number of shares
of Common Stock issuable upon exercise of the Warrant after such adjustment
and setting forth a statement of the facts requiring such adjustment and
showing in reasonable detail the manner of computing the same and (b)
promptly give written notice thereof, by first class mail, postage prepaid,
addressed to the registered holder of this Warrant at the address of such
registered holder as shown on the books of the Corporation, which notice
shall state the increase or decrease in the number or other denominations
of securities purchasable upon the exercise of this Warrant and a copy of
the certificate referred to in clause (a) above.
SECTION 11. Fractional Shares. If the number of shares of Common
Stock purchasable upon the exercise of this Warrant is adjusted pursuant to
provisions hereof, the Corporation shall nevertheless not be required to
issue fractions of shares, upon exercise of this Warrant or otherwise, or
to distribute certificates that evidence fractional shares. Whether or not
fractional shares are issuable upon exercise of this Warrant shall be
determined on the basis of the total number of shares of Common Stock the
holder is at the time acquiring and the number of shares of Common Stock
issuable upon such aggregate exercise. With respect to any fraction of a
share called for upon any exercise hereof, the Corporation shall pay to the
holder hereof an amount in cash equal to such fraction multiplied by the
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current Fair Market Value of one share of Common Stock.
SECTION 12. Information. Each holder of this Warrant, and each
holder of shares of Common Stock acquired upon the exercise of this
Warrant, by acceptance hereof and thereof, agrees to furnish to the
Corporation such information concerning such holder as may be requested by
the Corporation which is necessary in connection with any registration or
qualification of shares of Common Stock purchasable hereunder.
SECTION 13. Warrant Holder Not Deemed Stockholder. The holder of
this Warrant shall not, as such, be entitled to any rights as a stockholder
of the Corporation, except for those conferred pursuant to this Warrant,
nor shall the holder of this Warrant have any liabilities to purchase any
securities hereunder or as a stockholder of the Corporation whether such
liabilities are asserted by the Corporation or by creditors or stockholders
of the Corporation or otherwise.
SECTION 14. Transfer Restrictions. Each Warrant (including each
Warrant issued upon the transfer of any Warrant) shall be stamped or
otherwise imprinted with a legend in substantially the following form:
THIS WARRANT AND ANY SHARES OF COMMON STOCK ACQUIRED UPON
THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933
ACT"), OR UNDER ANY APPLICABLE STATE LAWS. THIS WARRANT
HAS BEEN ACQUIRED BY THE REGISTERED OWNER HEREOF FOR
INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN
CONNECTION WITH ANY DISTRIBUTION THEREOF WITHIN THE
MEANING OF THE 1933 ACT. THIS WARRANT AND ANY SHARES OF
COMMON STOCK ACQUIRED UPON THE EXERCISE OF THIS WARRANT
MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT
Page 17
IN A TRANSACTION WHICH IS EXEMPT UNDER THE PROVISIONS OF
THE 1933 ACT OR ANY APPLICABLE STATE SECURITIES LAWS, OR
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN A
TRANSACTION OTHERWISE IN COMPLIANCE WITH APPLICABLE
FEDERAL AND STATE SECURITIES LAWS.
THE SALE, PLEDGE, TRANSFER, ASSIGNMENT OR OTHER
DISPOSITION OF THIS WARRANT AND ANY SHARES OF COMMON
STOCK ACQUIRED UPON THE EXERCISE OF THIS WARRANT IS
RESTRICTED BY AND SUBJECT TO THE PROVISIONS OF A PURCHASE
AGREEMENT DATED AS OF _______________, 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.
Each certificate for Common Stock issued upon the exercise of any Warrant,
and each certificate issued upon the transfer of any such Common Stock,
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT"), OR UNDER ANY APPLICABLE STATE LAWS. THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
BY THE REGISTERED OWNER HEREOF FOR INVESTMENT AND NOT
WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE 1933 ACT.
THE SHARES MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR
ASSIGNED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER
THE PROVISIONS OF THE 1933 ACT OR ANY APPLICABLE STATE
SECURITIES LAWS, OR PURSUANT TO AN EFFECTIVE REGISTRATION
Page 18
STATEMENT OR IN A TRANSACTION OTHERWISE IN COMPLIANCE
WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
THE SALE, PLEDGE, TRANSFER, ASSIGNMENT OR OTHER
DISPOSITION OF THE SHARES REPRESENTED BY THIS CERTIFICATE
IS RESTRICTED BY AND SUBJECT TO THE PROVISIONS OF A STOCK
PURCHASE AGREEMENT DATED AS OF _______________, 2001, A
COPY OF WHICH IS AVAILABLE UPON REQUEST FOR INSPECTION AT
THE OFFICES OF THE COMPANY. ANY SUCH REQUEST SHOULD BE
ADDRESSED TO THE SECRETARY OF THE COMPANY.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE SHALL BE
REDEEMABLE AS PROVIDED IN THE COMPANY'S AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION.
Subject to the foregoing, the shares of Common Stock issuable upon exercise
of this Warrant are freely transferable at any time.
SECTION 15. Rights of Action; Remedies. All rights of action with
respect to this Warrant are vested in the holder of this Warrant, and the
holder may enforce against the Corporation its right to exercise this
Warrant for the purchase of shares of Common Stock in the manner provided
in this Warrant. The Corporation stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by
the Corporation in the performance of or compliance with any of the terms
of this Warrant are not and will not be adequate, and that such terms may
be specifically enforced by a decree for the specific performance of any
agreement contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
SECTION 16. Modification of Warrant. This Warrant shall not be
Page 19
modified, supplemented or altered in any respect except with the consent in
writing of the holder hereof and the Corporation; and no change in the
number or nature of the securities purchasable upon the exercise of this
Warrant, or the exercise price therefor, or the acceleration of the Warrant
Expiration Date, shall be made without the consent in writing of the holder
hereof, other than such changes as are specifically prescribed by this
Warrant as originally executed.
SECTION 17. Miscellaneous. This Warrant shall be governed by, and
construed and enforced in accordance with, the laws of State of Delaware,
without regard to its principles of conflicts of laws. The headings in this
Warrant are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof. This Warrant is being executed as an
instrument under seal. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision. This Warrant, the Registration Rights Agreement and the Purchase
Agreement, dated as of __________ ___, ____, among ___________ embody the
entire agreement and understanding between the parties hereto and
supersedes all prior agreements and understandings relating to the subject
matter hereof.
SECTION 18. Descriptive Headings. The headings in this Warrant are
for purposes of reference only and shall not limit or otherwise affect the
meaning hereof.
SECTION 19. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT
GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW.
SECTION 20. Submission to Jurisdiction. Each of the parties hereto
Page 20
hereby irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of Delaware and of the United
States of America, located in Delaware, for any Litigation arising out of
or relating to this Warrant and the transactions contemplated hereby and
thereby (and agrees not to commence any proceeding 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 in accordance
with Section ___shall be effective service of process for any proceeding
brought against it in any such court. Each of the parties hereto hereby
irrevocably and unconditionally waives any objection to the laying of venue
of any proceeding arising out of this Warrant or the transactions
contemplated hereby in the courts of the State of Delaware or the United
States of America, located in Delaware, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court
that any such proceeding brought in any such court has been brought in an
inconvenient forum.
SECTION 21. 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 WARRANT.
SECTION 22. Successors. All the covenants and provisions of this
Warrant shall bind and inure to the benefit of the successors and permitted
transferees of the holder and the successors of the Corporation.
SECTION 23. Exchange Listing. The Corporation will from time to time take
all action that may be necessary so that the shares of Common Stock
issuable upon exercise of this Warrant, as soon as reasonably practicable
following their issuance upon the exercise of this Warrant, will be listed
Page 21
on the principal securities exchanges, automated quotation systems or other
markets within the United States of America, if any, on which the shares of
Common Stock are then listed (but, in any event, such listing shall be
effected by the Corporation within the time frame required by any such
exchanges, quotation systems or other markets).
SECTION 24. Definitions. For purposes of this Warrant, the
following terms have the following respective meanings:
"Average Price" means, with respect to any shares of stock or
securities, including the Common Stock, on any date of
determination, the average for the five (5) Trading Days preceding
and including such date of determination of the reported last sale
prices per share on a national securities exchange or admitted to
unlisted trading privileges on such exchange or quoted in the
NASDAQ System, or if not listed or admitted to unlisted trading
privileges, the average for the five (5) Trading Days preceding
and including the date of determination of the average of the last
reported bid and asked prices per share or security reported by
the National Quotation Bureau.
"Fair Market Value" means, with respect to any shares of stock or
other securities, (i) if such stock or securities are listed or
admitted to trading on a national securities exchange or admitted
to unlisted trading privileges on such exchange or quoted in the
NASDAQ System, the Average Price per share or security, as the
case may be, at the close of trading on the Trading Day on which
the relevant determination is to be made (the date of exercise of
the Warrant, in the case of any such determination to be made with
respect to such exercise) or, if such day is not a Trading Day,
Page 22
the Trading Day immediately preceding such day and (ii) if such
stock or security is not so listed or admitted to unlisted trading
privileges, the current fair market value of such stock or
security as determined in good faith by the Board of Directors of
the Corporation.
"Trading Day" means (i) if the relevant stock or security is
listed or admitted for trading on the New York Stock Exchange or
any other national securities exchange, a day on which such
exchange is open for business; (ii) if the relevant stock or
security is quoted on the NASDAQ National Market or any other
system of automated dissemination of quotations of securities
prices, a day on which trades may be effected through such system;
or (iii) if the relevant stock or security is not listed or
admitted for trading on any national securities exchange or quoted
on the NASDAQ National Market or any other system of automated
dissemination of quotation of securities prices, a day on which
the relevant stock or security is traded regular way in the
over-the-counter market and for which a closing bid and a closing
asked price for such stock or security are available.
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be
duly executed as of the date first written above.
McLEODUSA INCORPORATED
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
Page 23
EXHIBIT A
EXERCISE FORM
(To be signed only on exercise of Warrant)
McLeodUSA Incorporated
------------------
------------------
------------------
The undersigned hereby irrevocably elects to exercise the right to
purchase represented by the within Warrant for, and to purchase thereunder,
_______ shares of the stock provided for therein, and requests that
certificates for such shares be issued in the name of:
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
(Please print name, address and social security number)
and, if said number of shares shall not be all the shares purchasable
thereunder, that a new Warrant for the balance remaining of the shares
purchasable under the within Warrant be registered in the name of the
undersigned holder of the within Warrant or his Assignee as below indicated
and delivered to the address stated below.
Page 24
NAME OF HOLDER OR ASSIGNEE:_____________________________________________
(Please print)
ADDRESS OF HOLDER
OR ASSIGNEE:_______________________________________________________________
SIGNATURE OF HOLDER:_____________________________________________________
DATED:__________________
Note: The above signature must correspond with the name exactly as written
upon the face of the within Warrant in every particular, without alteration
or enlargement or any change whatever, unless the within Warrant has been
assigned.
EXHIBIT B
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns and
transfers unto _____________________________ the right represented by the
within Warrant to purchase __________________ shares of Common Stock of
McLeodUSA Incorporated to which the within Warrant relates, and appoints
______________________ attorney to transfer such rights on the books of
McLeodUSA Incorporated with full power of substitution in the premises.
NAME OF HOLDER:__________________________________________________________
(Please print)
ADDRESS:__________________________________________________________________
Page 25
SIGNATURE OF HOLDER:____________________________________________________
DATED:__________________
Note: The above signature must correspond with the name exactly as written
upon the face of the within Warrant in every particular, without alteration
or enlargement or any change whatever, unless the within Warrant has been
assigned.
SIGNED IN THE PRESENCE OF:
-----------------------------
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