Exhibit 1.3
MCLEODUSA INCORPORATED
$300,000,000 8-3/8% Senior Notes Due 2008
PURCHASE AGREEMENT
New York, New York
March 10, 1998
Salomon Brothers Inc
Bear, Xxxxxxx & Co. Inc
Xxxxxx Xxxxxxx & Co. Incorporated
Chase Securities Inc
c/o Salomon Brothers Inc
Seven Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Ladies and Gentlemen:
McLeodUSA Incorporated, a Delaware corporation (the "Company"), proposes to
issue and sell to you (the "Purchasers") $300,000,000 principal amount of its
8-3/8% Senior Notes Due 2008 (the "Securities"), to be issued under an indenture
(the "Indenture") to be dated as of March 16, 1998, between the Company and
United States Trust Company of New York, as trustee (the "Trustee").
The sale of the Securities to you will be made without registration of the
Securities under the Securities Act of 1933, as amended (the "Act"), in reliance
upon the exemption from the registration requirements of the Act provided by
Section 4(2) thereof. You have advised the Company that you will make an
offering of the Securities purchased by you hereunder in accordance with Section
4 hereof on the terms set forth in the Final Memorandum (as defined below), as
soon as you deem advisable after this Agreement has been executed and delivered,
solely to persons who you reasonably believe to be (i) "qualified institutional
buyers" as defined in Rule 144A under the Act ("QIBs") and (ii) persons who are
not "U.S. persons," in offers and sales outside the United States made in
reliance on Regulation S under the Act ("Regulation S"), that make certain
representations and agreements in the form of Exhibit A hereto (each, a "Foreign
Purchaser") (such persons specified in clause (i) and (ii) being referred to
herein as the "Eligible Purchasers").
In connection with the sale of the Securities, the Company has prepared a
final offering memorandum, dated March 10, 1998 (the "Final Memorandum"). The
Final Memorandum sets
forth certain information concerning the Company and the Securities. The
Company hereby confirms that it has authorized the use of the Final Memorandum
in connection with the offering and resale by the Purchasers of the Securities.
Any references herein to the Final Memorandum shall be deemed to include all
exhibits thereto.
1. Representations and Warranties. The Company represents and
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warrants to, and agrees with, the Purchasers as set forth below in this
Section 1.
(a) The Final Memorandum as of its date did not, and the Final
Memorandum (as the same may have been amended or supplemented) as of the
Closing Date (as defined below) will not, contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Company makes no
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representations or warranties as to the information contained in or omitted
from the Final Memorandum (and any amendment or supplement thereof or
thereto) in reliance upon and in conformity with information furnished in
writing to the Company by or on behalf of any Purchaser specifically for
inclusion in the Final Memorandum (and any amendment or supplement thereof
or thereto).
(b) The Company has not taken and will not take, directly or
indirectly, any action prohibited by Regulation M under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), in connection with
the offering of the Securities.
(c) The documents filed by the Company under the Exchange Act at the
time they were filed with the Commission, complied and will comply in all
material respects with the requirements of the Exchange Act and the rules
and regulations of the Commission thereunder and do not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein, in light of the circumstances under which they were
made, or necessary to make the statements therein not misleading.
(d) Neither the Company nor any affiliate (as defined in Rule 501(b)
of Regulation D under the Act ("Regulation D")) of the Company has
directly, or through any agent (provided that no representation is made as
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to the Purchasers or any person acting on their behalf), (i) sold, offered
for sale, solicited offers to buy or otherwise negotiated in respect of,
any security (as defined in the Act) which is or will be integrated with
the sale of the Securities in a manner that would require the registration
of the Securities under the Act or (ii) engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in
connection with the offering of the Securities.
(e) It is not necessary in connection with the offer, sale and
delivery of the Securities to the Purchasers in the manner contemplated by
this Agreement to register the Securities under the Act or to qualify the
Indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act").
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(f) Assuming (i) that the representations and warranties of the
Purchasers in Section 4 are true, and (ii) compliance by the Purchasers
with their covenants set forth in Section 4, it is not necessary in
connection with the initial resale of the Securities by the Purchasers in
the manner contemplated by this Agreement to register the Securities under
the Act.
(g) None of the Company, its affiliates or any person acting on behalf
of the Company or its affiliates has engaged in any directed selling
efforts (as that term is defined in Regulation S) with respect to the
Securities, and the Company and its affiliates and any person acting on its
or their behalf have complied with the offering restrictions requirement of
Regulation S (provided that no representation is made as to the Purchasers
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or any person acting on their behalf).
(h) The Securities satisfy the requirements set forth in Rule
144A(d)(3) under the Act.
(i) Since the date of the most recent financial statements included in
the Final Memorandum (exclusive of any amendment or supplement thereof or
thereto), there has been no material adverse change, or any development
which could reasonably be expected to result in a material adverse change,
in the condition (financial or other), earnings, business, prospects or
properties of the Company and its subsidiaries, whether or not arising
from transactions in the ordinary course of business, except as set forth
in the Final Memorandum (exclusive of any amendment or supplement thereof
or thereto); and, since the respective dates as of which information is
given in the Final Memorandum, there has not been any change in the capital
stock (other than grants of options and issuances of common stock pursuant
to existing employee stock option plans, 401(k) plans, stock ownership
plans or stock purchase plans, repurchases by the Company of its common
stock in the ordinary course of business or conversions of outstanding
convertible securities) of the Company or any of its subsidiaries or long-
term debt (other than changes as a result of borrowings of the Company or
any of its subsidiaries in the ordinary course of business not exceeding
$12,000,000, maturities, regularly scheduled payments and payments
contemplated as a result of the application of proceeds of the offering of
the Securities as described in the Final Memorandum, amortization of debt
discount or currency fluctuations) of the Company or any of its
subsidiaries.
(j) Each of (a) the Company, (b) McLeodUSA Telecommunications
Services, Inc., McLeodUSA Network Services, Inc., McLeodUSA Publishing
Company, McLeodUSA Media Group, Inc., McLeodUSA Diversified, Inc., Xxxxxxx,
Xxxx & Associates, Inc., Consolidated Communications Inc., Illinois
Consolidated Telephone Company, Consolidated Communications Directories,
Inc., Consolidated Communication Telecom Services Inc., Consolidated
Communications Systems & Services Inc., Consolidated Communications
Operator Services Inc., Consolidated Market Response Inc., Consolidated
Communications Public Services Inc., Xxxxxx County Partners, Inc., and
CCD/Scripps, L.L.C. (individually a "Subsidiary" and collectively the
"Subsidiaries") has
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been duly incorporated or organized and is validly existing as a
corporation or, as applicable, limited liability company in good standing
under the laws of the jurisdiction in which it is chartered or organized,
with full corporate or organizational power and authority to own its
properties and conduct its business as described in the Final Memorandum,
and is duly qualified to do business as a foreign corporation or, as
applicable, limited liability company and is in good standing under the
laws of each jurisdiction which requires such qualification, except where
the failure to be so qualified could not reasonably be expected to have a
material adverse effect on the Company and the subsidiaries. Except for the
Subsidiaries, the Company has no subsidiaries which, considered in the
aggregate as a single subsidiary, would constitute a "significant
subsidiary" as defined in Rule 1-02(w) of Regulation S-X promulgated under
the Act.
(k) All the outstanding shares of capital stock of each Subsidiary
have been duly and validly authorized and issued and are fully paid and
nonassessable, and, except as otherwise set forth in the Final Memorandum,
all outstanding shares of capital stock of the Subsidiaries are owned by
the Company, either directly or through wholly owned subsidiaries free and
clear of any security interests, claims, liens or encumbrances.
(l) The Company's authorized equity capitalization is as set forth in
the Final Memorandum and the outstanding shares of capital stock of the
Company have been duly and validly authorized and issued and are fully paid
and nonassessable.
(m) Except as disclosed in the Final Memorandum, there is no pending
or, to the Company's knowledge, threatened action, suit or proceeding
before any court or governmental agency, authority or body or any
arbitrator involving the Company or any of its subsidiaries which, if
finally determined adversely to the Company or any of its subsidiaries,
would have a material adverse effect on the condition (financial or other),
earnings, business, prospects or properties of the Company and its
subsidiaries; and the statements in the Final Memorandum under the headings
"Risk Factors - Dependence on Regional Xxxx Operating Companies; US West
Centrex Action," "Risk Factors - Refusal of US WEST to Improve its
Processing of Service Orders" and "Business - Legal Proceedings" fairly
summarize the actions, suits and proceedings therein described and the
statements in the Final Memorandum under the headings "Management -
Investor Agreement and Stockholders' Agreement" and "Management -
Management Agreements" fairly summarize the franchises, contracts or other
documents therein described.
(n) This Agreement has been duly authorized, executed and delivered by
the Company.
(o) The Indenture has been duly authorized, and, when duly executed by
the proper officer of the Company and delivered by the Company (assuming
due execution and delivery thereof by the Trustee), will constitute a valid
and binding agreement of the Company enforceable against the Company in
accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
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other similar laws relating to or affecting creditors' rights generally and
general equitable principles (whether considered in a proceeding in equity
or at law).
(p) The registration agreement, to be dated as of the Closing Date,
between the Company and the Purchasers (the "Registration Agreement") has
been duly authorized and when executed by the proper officer of the Company
and delivered by the Company will be duly executed.
(q) The Securities have been duly authorized and, when executed and
authenticated in accordance with the provisions of the Indenture and
delivered to and paid for by the Purchasers pursuant to this Agreement,
will constitute valid and binding obligations of the Company entitled to
the benefits of the Indenture and will be enforceable in accordance with
their terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally and general equitable principles
(whether considered in a proceeding in equity or at law) and the Securities
are accurately summarized in all material respects in the Final Memorandum.
(r) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the Company
of the transactions contemplated herein, except for the declaration of
effectiveness of the Exchange Offer Registration Statement and/or the Shelf
Registration Statement (as such terms are defined in the Registration
Agreement) and except such as may be required under all applicable state
securities and blue sky laws of any jurisdiction in connection with the
purchase and distribution of the Securities by the Purchasers and such
other approvals as have been obtained.
(s) Neither the issue and sale of the Securities, the execution and
performance of the Indenture or the Registration Agreement, the
consummation of any other of the transactions herein or therein
contemplated nor the fulfillment of the terms hereof, in each case by the
Company, will conflict with, result in a breach or violation of, or
constitute a default under the charter or by-laws of the Company or the
terms of any indenture or other agreement or instrument to which the
Company or any of its Subsidiaries is a party or bound or (assuming
compliance with all applicable state securities and blue sky laws and that
the Exchange Offer Registration Statement and/or Shelf Registration
Statement has been declared effective) any law, rule or regulation
applicable to the Company or any of the Subsidiaries or any judgement,
order or decree applicable to the Company or any of its Subsidiaries of any
court, regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over the Company or any of its Subsidiaries.
(t) Xxxxxx Xxxxxxxx LLP, who are reporting upon the audited financial
statements included in the Final Memorandum, are independent public
accountants within the meaning of the Act and the rules and regulations of
the Securities and Exchange Commission (the "Commission") thereunder.
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(u) The consolidated financial statements of the Company and of
certain Subsidiaries included in the Final Memorandum present fairly the
financial position of the Company and its subsidiaries and such
Subsidiaries as of the dates indicated and the consolidated results of the
operations and cash flows of the Company and its subsidiaries and such
Subsidiaries for the periods specified. Such financial statements (except
as disclosed in the notes thereto or otherwise stated therein) have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the entire period involved. The
financial statement schedules, if any, included in the Final Memorandum
present fairly the information stated therein. The selected financial data
included in the Final Memorandum present fairly the information shown
therein and have been compiled on a basis consistent with that of the
audited consolidated financial statements included in the Final Memorandum.
The pro forma financial statements and other pro forma financial
information included in the Final Memorandum present fairly the information
shown therein, have been prepared in accordance with the Commission's rules
and guidelines with respect to pro forma financial statements, have been
properly compiled on the pro forma bases described therein, and, in the
opinion of the Company, the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give effect
to the transactions or circumstances referred to therein.
(v) Neither the Company nor any of the Subsidiaries is in violation of
its charter or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any indenture or
other agreement or instrument to which the Company or any of the
Subsidiaries is a party or by which it or any of them may be bound, or to
which any of the property or assets of the Company or any of the
Subsidiaries is subject, other than defaults (considered in the aggregate)
which could not reasonably be expected to have a material adverse effect on
the condition (financial or other), earnings, business, prospects or
properties of the Company and its subsidiaries.
(w) The Company and the Subsidiaries possess adequate certificates,
authorities or permits issued by the appropriate state, federal or foreign
regulatory agencies or bodies necessary to conduct the business now
operated by them and are in compliance in all material respects with all
such certificates, authorities and permits. Neither the Company nor any of
its subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such certificate, authority or permit,
other than any such revocation or modification that could not reasonably be
expected to, singly or in the aggregate, have a material adverse effect on
the condition (financial or other), earnings, business, prospects or
properties of the Company and its subsidiaries.
(x) The Company and its subsidiaries have timely filed all United
States federal income tax returns and all other material tax returns which
are required to be filed by them and have paid all taxes due and payable
(other than taxes, the payment of which are being contested in good faith),
and no tax liens have been filed and no claims are being asserted with
respect to any such taxes, which could reasonably be expected to have a
material adverse effect on the condition (financial or other), earnings,
business, prospects or
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properties of the Company and its subsidiaries. The provisions for taxes on
the books of the Company are adequate in all material respects for all open
years and for its current fiscal period.
(y) The Company and the Subsidiaries (A) are in compliance with all
applicable federal, state, local and foreign and other laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (B) have received all permits, licenses and other
approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (C) are in compliance with all terms and
conditions of any such permit, license and approval, except, in each case,
where such noncompliance with Environmental Law, failure to receive
required permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals could not
reasonably be expected, singly or in the aggregate, to have a material
adverse effect on the condition (financial or other), earnings, business,
prospects or properties of the Company and its subsidiaries.
(z) The Company and the Subsidiaries have good and marketable title to
all real property and good and valid title to all personal property owned
by them, in each case free and clear of all liens, encumbrances and
defects, and any real property and buildings held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases, except, in each case, for such exceptions as are set
forth in the Final Memorandum or which could not reasonably be expected to
have a material adverse effect on the condition (financial or other),
earnings, business, prospects or properties of the Company and its
subsidiaries.
(aa) The Company together with its subsidiaries own and possess all
right, title and interest in and to, or have duly licensed from third
parties a valid, enforceable right to use, all patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and
other unpatented or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks and trade names currently
employed by the Company and its subsidiaries in connection with the
business conducted by them (collectively, "Patent and Proprietary Rights")
and neither the Company nor any of its subsidiaries has received notice of
infringement or misappropriation of or conflict with asserted rights of
others with respect to any Patent and Proprietary Rights, or of any facts
which would render any Patent and Proprietary Rights invalid or inadequate
to protect the interest of the Company or of its subsidiaries therein, and
which infringement, misappropriation or conflict or invalidity or
inadequacy, individually or in the aggregate, could reasonably be expected
to result in a material adverse effect on the condition (financial or
other), earnings, business, prospects or properties of the Company and its
subsidiaries.
(bb) The Company has complied with all provisions of Section 1 of Laws
of Florida, Chapter 92-198 Securities-Business with Cuba.
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2. Purchase and Sale. Subject to the terms and conditions and in
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reliance upon the representations and warranties herein set forth, the Company
agrees to sell to the Purchasers, and the Purchasers agree to purchase from the
Company, at a purchase price of 97.583% of the principal amount thereof, plus
accrued interest, if any, from March 16, 1998 to the Closing Date, the principal
amount of the Securities.
3. Delivery and Payment. Delivery of and payment for the Securities
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shall be made at 10:00 AM, New York City time, on March 16, 1998, or such later
date (not later than March 20, 1998) as the Purchasers designate, which date and
time may be postponed by agreement between the Purchasers and the Company or as
provided in Section 9 hereof (such date and time of delivery and payment for the
Securities being herein called the "Closing Date"). Delivery of the Securities
shall be made to the Purchasers against payment by the Purchasers of the
purchase price thereof to or upon the order of the Company by certified or
official bank check or checks drawn on or by a New York Clearing House bank and
payable in same day funds or by wire transfer of same day funds to an account or
accounts specified by the Company at least one business day prior to the Closing
Date. Delivery of the Securities shall be made at such location as the
Purchasers shall reasonably designate at least one business day in advance of
the Closing Date and payment for the Securities shall be made at the office of
Xxxxx & Xxxxxxx L.L.P., 000 Xxxxxxxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000.
Certificates for the Securities shall be registered in such names and in such
denominations as the Purchasers may request not less than two business days in
advance of the Closing Date.
The Company agrees to have the Securities available for inspection,
checking and packaging by the Purchasers in New York, New York, not later than
1:00 PM on the business day prior to the Closing Date.
4. Offering of Securities; Restrictions on Transfer. (a) The
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Purchasers acknowledge that they are purchasing the Securities pursuant to
a private sale exemption from registration under the Act, and that the
Securities have not been registered under the Act and may not be offered or
sold within the United States or to, or for the account or benefit of, U.S.
persons except pursuant to an exemption from the registration requirements
of the Act. Each Purchaser represents and warrants to and agrees with the
Company that (i) it, its affiliates and any person acting on its or its
affiliates behalf, have not solicited and will not solicit any offer to
buy or offer to sell the Securities by means of any form of general
solicitation or general advertising (within the meaning of Regulation D) or
in any manner involving a public offering within the meaning of Section
4(2) of the Act or, with respect to Securities to be sold in reliance on
Regulation S, by means of any directed selling efforts and (ii) it has
solicited and will solicit offers to buy the Securities only from, and has
offered and will offer, sell or deliver the Securities only to, (A) persons
who it reasonably believes to be QIBs or, if any such person is buying for
one or more institutional accounts for which such person is acting as
fiduciary or agent, only when such person has represented to it that each
such account is a QIB, to whom notice has been given that such sale or
delivery is being made in reliance on Rule 144A, and, in each case, in
transactions under Rule 144A and (B) Foreign Purchasers to whom, and under
circumstances which, it reasonably believes offers
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and sales of Securities may be made without registration of the Securities
under the Act in reliance upon Regulation S thereunder and who provide to
it a letter (a "Regulation S Letter") in the form of Exhibit A hereto. Each
Purchaser agrees, with respect to resales made in reliance on Rule 144A,
other than through the National Association of Securities Dealers, Inc.
PORTAL Market, of any Securities purchased from the Company hereunder, to
deliver either with the confirmation of such resale or otherwise prior to
settlement of such resale a notice to the effect that the resale of such
Securities has been made in reliance upon the exemption from the
registration requirements of the Act provided by Rule 144A. Each Purchaser
agrees, with respect to resales made in reliance on Regulation S, to
deliver either with the confirmation of such resale or otherwise prior to
settlement of such resale a notice substantially to the following effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act") and may not
be offered and sold within the United States or to, or for the account
or benefit of, U.S. persons (i) as part of the distribution thereof at
any time or (ii) otherwise until 40 days after the later of the date
of commencement of the offering and the latest closing date, except in
either case in accordance with Regulation S under the Securities Act.
Terms used above have the meaning given them by Regulation S."
(b) The Purchasers represent and warrant that (i) they have not
offered or sold, and will not offer or sell, in the United Kingdom, by
means of any document, any Securities other than to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in
an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995; (ii) they have complied and
will comply with all applicable provisions of the Financial Services Xxx
0000 and the Public Offers of Securities Regulations of 1995 of the United
Kingdom with respect to anything done by them in relation to the Securities
in, from or otherwise involving the United Kingdom and (iii) they have only
issued or passed on, and will only issue or pass on, in the United Kingdom
any document received by them in connection with the issue of the
Securities to a person who is of the kind described in Article 11(3) of the
Financial Services Xxx 0000 (Investment Advertisements) (Exemptions) Order
1996 or is a person to whom the document may otherwise lawfully be issued
or passed on.
(c) Each Purchaser represents and warrants that it is a QIB and that
it will offer the Securities for resale only upon the terms and conditions
set forth in this Agreement and in the Final Memorandum.
5. Agreements. The Company agrees with the Purchasers that:
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(a) The Company will furnish to the Purchasers, without charge, during
the period mentioned in paragraph (c) below, as many copies of the Final
Memorandum and any
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supplements and amendments thereof or thereto as the Purchasers may
reasonably request. The Company will pay the expenses of printing or other
production of all documents relating to the offering.
(b) The Company will not amend or supplement the Final Memorandum
without prior consent of Salomon Brothers Inc, which consent shall not be
unreasonably withheld.
(c) If, at any time prior to the completion of the sale of the
Securities by the Purchasers, any event occurs as a result of which the
Final Memorandum as then amended or supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein in the light of the circumstances under
which they were made not misleading, or if it shall be necessary to amend
or supplement the Final Memorandum to comply with applicable law, the
Company promptly will notify the Purchasers of the same and will prepare
and provide to the Purchasers pursuant to paragraph (a) of this Section 5
an amendment or supplement which will correct such statement or omission or
effect such compliance.
(d) The Company will use its best efforts to qualify the Securities
for sale under the laws of such jurisdictions as the Purchasers may
reasonably designate, will use its best efforts to maintain such
qualifications in effect so long as required for the sale of the Securities
and will arrange for the determination of the legality of the Securities
for purchase by institutional investors under the laws of such
jurisdictions as the Purchasers may reasonably request. The Company will
promptly advise the Purchasers of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose. Notwithstanding the foregoing, the
Company shall not be obligated to qualify as a foreign corporation in any
jurisdiction in which it is not so qualified or to file a general consent
to service of process in any jurisdiction.
(e) Neither the Company nor any affiliate (as defined in Rule 501(b)
of Regulation D) of the Company will solicit any offer to buy or offer or
sell the Securities by means of any form of general solicitation or general
advertising (within the meaning of Regulation D).
(f) None of the Company, its affiliates nor any person acting on
behalf of the Company or its affiliates will engage in any directed selling
efforts with respect to the Securities within the meaning of Regulation S,
and the Company, its affiliates and each such person acting on its or
their behalf will comply with the offering restrictions requirement of
Regulation S.
(g) The Company shall, during any period in the two years after the
Closing Date in which the Company is not subject to Section 13 or 15(d) of
the Exchange Act, make available, upon request, to any holder of such
Securities in connection with any sale thereof
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and any prospective purchaser of Securities from such holder the
information ("Rule 144A Information") specified in Rule 144A(d)(4) under
the Act.
(h) The Company will not, and will not permit any of its affiliates
(as defined in Rule 501(b) of Regulation D) to, resell any Securities which
constitute "restricted securities" under Rule 144 that have been acquired
by any of them, otherwise than pursuant to an effective registration
statement under the Act.
(i) Neither the Company nor any affiliate (as defined in Rule 501(b)
of Regulation D) will sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) the
offering of which security will be integrated with the sale of the
Securities in a manner which would require the registration of the
Securities under the Act.
(j) The Company shall use its best efforts in cooperation with the
Purchasers to permit the Securities to be eligible for clearance and
settlement through The Depository Trust Company.
(k) The Company will not, for a period of 90 days following the date
and time that this Agreement is executed and delivered by the parties
hereto (the "Execution Time"), without prior written consent of Salomon
Brothers Inc, offer, sell or contract to sell, or otherwise dispose of,
directly or indirectly, or announce the offering of, any debt securities
issued or guaranteed by the Company (other than the securities offered
pursuant to an Exchange Offer Registration Statement for the Securities).
(l) The Company shall include information substantially in the form
set forth in Exhibit B in each Final Memorandum.
6. Conditions to the Obligations of the Purchasers. The obligations
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of the Purchasers to purchase the Securities shall be subject to the accuracy of
the representations and warranties on the part of the Company contained herein
as of the Execution Time and the Closing Date, to the accuracy of the statements
of the Company made in any certificates pursuant to the provisions hereof, to
the performance by the Company of its obligations hereunder and to the following
additional conditions:
(a) The Company shall have furnished to the Purchasers the opinion of
counsel for the Company, dated the Closing Date, substantially in the form
of Exhibit C.
(b) The Company shall have furnished to the Purchasers the opinion of
Xxxxxxx & Berlin, special counsel to the Company on regulatory matters,
dated the Closing Date, to the effect that:
(i) the statements in the Final Memorandum under the headings
"Summary - Business Strategy," "Risk Factors - Wireline Competition,"
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"Risk Factors - Wireless Competition," "Risk Factors - PCS System
Implementation Risks," "Risk Factors- Relocation of Fixed Microwave
Licensees," "Risk Factors - Regulation," "Business - Business
Strategy," "Business - Market Potential," "Business - Expansion of
Certain Facilities-based Services," "Business - Wireless Services,"
"Business - Competition" and "Business - Regulation" fairly and
accurately summarize the laws, case law, rules, regulations and orders
of the Federal Communications Commission ("FCC") and the comparable
state regulatory agencies or bodies with direct regulatory
jurisdiction over telecommunications matters in the states in which
the Company and any of the Subsidiaries provide intrastate services
(the "State Regulatory Agencies") and, to the best knowledge of such
counsel, the statements in the Final Memorandum under the headings
"Risk Factors - Dependence on Regional Xxxx Operating Companies; US
West Centrex Action," "Risk Factors - Refusal of US West to Improve
its Processing of Service Orders," "Business- Current Products and
Services" and "Business - Legal Proceedings" fairly and accurately
summarize the legal proceedings set forth therein with respect to the
US West Centrex Action (as defined in the Final Memorandum) and the
action against US West Communications, Inc. concerning the processing
of orders;
(ii) the Company and the Subsidiaries possess all material
certificates, authorities and permits required by the FCC and State
Regulatory Agencies for the provision of the telecommunications
services currently provided by the Company and the Subsidiaries,
except where the failure to possess such certificates, authorities or
permits could not reasonably be expected to have a material adverse
effect on the Company and its subsidiaries; and the Company and the
Subsidiaries are in compliance in all material respects with such
certificates, authorities and permits;
(iii) to the best knowledge of such counsel, neither the Company
nor any of the Subsidiaries is subject to any pending or threatened
action, suit or proceeding before the FCC or any State Regulatory
Agency or (with respect to federal or state telecommunications laws)
any court which could reasonably be expected to have a material
adverse effect on the Company and its subsidiaries, except as
disclosed in the Final Memorandum;
(iv) no consent, approval, authorization or order of the FCC or
any State Regulatory Agency is required for the issuance and sale of
the Securities or the consummation of the transactions contemplated
hereby; and
(v) neither the issuance and sale of the Securities nor the
consummation of the transactions contemplated hereby will result in a
breach or violation of any law, rule, regulation, judgment, order or
decree of the FCC or any State Regulatory Agency applicable to the
Company or any of the Subsidiaries.
In rendering such opinion, such counsel may rely as to matters of fact, to
the extent they deem proper and reasonable, on certificates of public
officials and responsible officers of the
12
Company, including certificates that define the scope of the
telecommunications services provided by the Company and the Subsidiaries.
(c) The Purchasers shall have received from Xxxxx, Xxxxx & Xxxxx,
counsel for the Purchasers, such opinion or opinions, dated the Closing
Date, with respect to the issuance and sale of the Securities, the
Indenture, the Final Memorandum (together with any amendment or supplement
thereof or thereto) and other related matters as the Purchasers may
reasonably require, and the Company shall have furnished to such counsel
such documents as they request for the purpose of enabling them to pass
upon such matters.
(d) The Company shall have furnished to the Purchasers a certificate
of the Company, signed by the Chairman of the Board or the President and
the principal financial or accounting officer of the Company, dated the
Closing Date, to the effect that the signers of such certificate have
carefully examined the Final Memorandum, any amendment or supplement to the
Final Memorandum and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date
and the Company has complied with all the agreements and satisfied all
the conditions on its part to be performed or satisfied at or prior to
the Closing Date; and
(ii) since the date of the most recent financial statements
included in the Final Memorandum (exclusive of any amendment or
supplement thereof or thereto), there has been no material adverse
change in the condition (financial or other), earnings, business or
properties of the Company and its subsidiaries, whether or not arising
from transactions in the ordinary course of business, except as set
forth in or contemplated in the Final Memorandum (exclusive of any
amendment or supplement thereof or thereto).
(e) At the Execution Time and at the Closing Date, Xxxxxx Xxxxxxxx LLP
shall have furnished to the Purchasers a letter or letters, dated
respectively as of the Execution Time and as of the Closing Date, in form
and substance satisfactory to the Purchasers, confirming that they are
independent accountants within the meaning of the Act and the Rules of
Conduct of the American Institute of Certified Public Accountants and
stating in effect that:
(i) in their opinion the audited financial statements and
financial statement schedules, if any included in the Final Memorandum
and reported on by them, as applicable, comply in form in all material
respects with the applicable accounting requirements of the Act and
the Exchange Act and the related published rules and regulations;
13
(ii) on the basis of a reading of the latest unaudited financial
statements made available by the Company and its subsidiaries;
carrying out certain specified procedures (but not an examination in
accordance with generally accepted auditing standards) which would not
necessarily reveal matters of significance with respect to the
comments set forth in such letter; a reading of the minutes of the
meetings of the stockholders, directors and the Audit and Compensation
Committee of the Company and the Subsidiaries; and inquiries of
certain officials of the Company who have responsibility for financial
and accounting matters of the Company and its subsidiaries as to
transactions and events subsequent to December 31, 1997, nothing came
to their attention which caused them to believe that:
(1) to the extent applicable, any unaudited financial
statements included in the Final Memorandum do not comply in form
in all material respects with applicable accounting requirements
and with the published rules and regulations of the Commission
with respect to financial statements included or incorporated in
quarterly reports on Form 10-Q under the Exchange Act; and said
unaudited financial statements are not in conformity with
generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial
statements included in the Final Memorandum; or
(2) with respect to the period subsequent to December 31,
1997, there were any changes, at a specified date not more than
five business days prior to the date of the letter, in the long-
term debt of the Company and its subsidiaries or capital stock
of the Company or decreases in the stockholders' equity of the
Company and its subsidiaries as compared with the amounts shown
on the December 31, 1997 consolidated balance sheet included in
the Final Memorandum, or for the period from January 1, 1998 to
such specified date as compared with the corresponding period in
the preceding year, there were any decreases in revenue or
increases in operating loss or net loss of the Company and its
subsidiaries, except in all instances for changes, decreases or
increases set forth in such letter, in which case the letter
shall be accompanied by an explanation by the Company as to the
significance thereof unless said explanation is not deemed
necessary by the Purchasers;
(iii) they have performed certain other specified procedures as
a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company and its subsidiaries) set
forth in the Final Memorandum, including the information set forth
under the captions "Selected Consolidated Financial Data", "Pro Forma
Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Final Memorandum, agrees
with the accounting records of the
14
Company and its subsidiaries, excluding any questions of legal
interpretation; and
(iv) on the basis of a reading of the unaudited pro forma
financial statements included in the Final Memorandum (the "pro forma
financial statements"); carrying out certain specified procedures;
inquiries of certain officials of the Company who have responsibility
for financial and accounting matters; and proving the arithmetic
accuracy of the application of the pro forma adjustments to the
historical amounts in the pro forma financial statements, nothing came
to their attention which caused them to believe that the pro forma
financial statements do not comply in form in all material respects
with the applicable accounting requirements of Rule 11-02 of
Regulation S-X or that the pro forma adjustments have not been
properly applied to the historical amounts in the compilation of such
statements.
References to the Final Memorandum in this paragraph (e) include any
amendment or supplement thereof or thereto at the date of the letter.
(f) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Final Memorandum (exclusive of any
amendment or supplement thereof or thereto), there shall not have been (i)
any change or decrease specified in the letter or letters referred to in
paragraph (e)(ii)(2) of this Section 6 or (ii) any change, or any
development involving a prospective change, in or affecting the business or
properties of the Company and its subsidiaries the effect of which, in any
case referred to in clause (i) or (ii) above, is, in the judgment of the
Purchasers, so material and adverse as to make it impractical or
inadvisable to market the Securities as contemplated by the Final
Memorandum (exclusive of any amendment or supplement thereof or thereto).
(g) As of the Closing Date the Securities shall be rated not lower
than B by Standard & Poor's Corporation and B-3 by Xxxxx'x Investors
Service, Inc. Subsequent to the Execution Time, there shall not have been
any decrease in the rating of any of the Company's debt securities by any
"nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Act) or any notice given of any intended
or potential decrease in any such rating or of a possible change in any
such rating that does not indicate the direction of the possible change.
(h) Prior to the Closing Date, the Company shall have furnished to the
Purchasers such further information, certificates and documents as the
Purchasers may reasonably request.
If any of the conditions specified in this Section 6 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or if
any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Purchasers and counsel for the Purchasers, this Agreement
and all obligations of the Purchasers hereunder may be canceled at, or at any
time prior to, the
15
Closing Date by the Purchasers. Notice of such cancellation shall be given to
the Company in writing or by telephone or telegraph confirmed in writing.
The documents required to be delivered by this Section 6 shall be delivered
at the office of Xxxxx & Xxxxxxx L.L.P., Columbia Square, 000 Xxxxxxxxxx Xxxxxx,
X.X., Xxxxxxxxxx, XX 00000, counsel for the Company, at 9:00 a.m., on the
Closing Date.
7. Reimbursement of Purchasers' Expenses. If the sale of the
-------------------------------------
Securities provided for herein is not consummated because any condition to the
obligations of the Purchasers set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 9(i) hereof due to suspension of
trading in the Company's class A common stock or because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or comply with any provision hereof other than by reason of a default by the
Purchasers, the Company will reimburse the Purchasers upon demand for all out-
of-pocket expenses (including reasonable fees and disbursements of counsel) that
shall have been incurred by it in connection with the proposed purchase and sale
of the Securities.
8. Indemnification and Contribution. (a) The Company agrees to
--------------------------------
indemnify and hold harmless the Purchasers, the directors, officers,
employees and agents of each Purchaser and each person who controls any
Purchaser within the meaning of either the Act or the Exchange Act against
any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Act, the Exchange
Act or other Federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Final Memorandum or any Rule 144A Information provided by the Company to
any holder or prospective purchaser of Securities pursuant to Section 5(g),
or in any amendment thereof or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and agrees to reimburse each such indemnified
party, as incurred, for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will not
-------- -------
be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made in the Final
Memorandum, or in any amendment thereof or supplement thereto, in reliance
upon and in conformity with written information furnished to the Company by
or on behalf of the Purchasers specifically for inclusion therein; and
provided, further, that the foregoing indemnity agreement with respect to
-------- -------
the Final Memorandum shall not inure to the benefit of the Purchasers from
whom the person asserting or causing any such losses, claims, damages or
liabilities purchased Securities (or to the benefit of any person
controlling any Purchaser or any directors, officers, employees and agents
of any Purchaser), if a copy of the Final Memorandum (or the Final
Memorandum as amended or supplemented) (if the Company shall have timely
furnished the Purchasers with sufficient copies thereof) was not sent or
given by or on behalf
16
of the Purchasers to such person at or prior to the written confirmation of
the sale of the Securities to such person and if the Final Memorandum (or
the Final Memorandum as amended or supplemented) would have cured the
defect giving rise to such loss, claim, damage or liability. This indemnity
agreement will be in addition to any liability which the Company may
otherwise have.
(b) The Purchasers agree to indemnify and hold harmless the Company,
its directors, its officers, and each person who controls the Company
within the meaning of either the Act or the Exchange Act, to the same
extent as the foregoing indemnity from the Company to the Purchasers, but
only with reference to written information relating to the Purchasers
furnished to the Company by or on behalf of the Purchasers specifically for
inclusion in the Final Memorandum or in any amendment thereof or supplement
thereto. This indemnity agreement will be in addition to any liability
which the Purchasers may otherwise have. The Company acknowledges that the
statements set forth in the last paragraph of the cover page and under the
heading "Plan of Distribution" (excluding the fourth paragraph immediately
following the table contained under the heading "Plan of Distribution") in
the Final Memorandum constitute the only information furnished in writing
by or on behalf of the Purchasers for inclusion in the Final Memorandum.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party
(i) will not relieve it from liability under paragraph (a) or (b) above
unless and to the extent it did not otherwise learn of such action and such
failure results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than
the indemnification obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel of the indemnifying
party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in
which case the indemnifying party shall not thereafter be responsible for
the fees and expenses of any separate counsel retained by the indemnified
party or parties except as set forth below); provided, however, that such
-------- -------
counsel shall be reasonably satisfactory to the indemnified party.
Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall
have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses
of such separate counsel if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, (iii) the indemnifying party
shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after
17
notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the
expense of the indemnifying party. An indemnifying party will not, without
the prior written consent of the indemnified parties, settle or compromise
or consent to the entry of any judgment with respect to any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or
action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising
out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Purchasers agree to
contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to which the
Company and the Purchasers may be subject in such proportion as is
appropriate to reflect the relative benefits received by the Company and by
the Purchasers from the offering of the Securities; provided, however, that
-------- -------
in no case shall the Purchasers be responsible for any amount in excess of
the purchase discount or commission applicable to the Securities purchased
by the Purchasers hereunder. If the allocation provided by the immediately
preceding sentence is unavailable for any reason, the Company and the
Purchasers shall contribute in such proportion as is appropriate to reflect
not only such relative benefits but also the relative fault of the Company
and of the Purchasers in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be
equal to the total net proceeds from the offering (before deducting
expenses), and benefits received by the Purchasers shall be deemed to be
equal to the total purchase discounts and commissions, in each case as set
forth on the cover page of the Final Memorandum. Relative fault shall be
determined by reference to whether any alleged untrue statement or omission
relates to information provided by the Company or the Purchasers. The
Company and the Purchasers agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this paragraph (d),
no person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 8, each person who controls any Purchaser within the meaning
of either the Act or the Exchange Act and each director, officer, employee
and agent of any Purchaser shall have the same rights to contribution as
each Purchaser, and each person who controls the Company within the meaning
of either the Act or the Exchange Act and each officer and director of the
Company shall have the same rights to contribution as the Company, subject
in each case to the applicable terms and conditions of this paragraph (d).
9. Termination. This Agreement shall be subject to termination in
-----------
the absolute discretion of the Purchasers, by notice given to the Company prior
to delivery of and payment for
18
the Securities, if prior to such time (i) trading in the Company's class A
common stock shall have been suspended by the Commission or the Nasdaq National
Market or trading in securities generally on the New York Stock Exchange shall
have been suspended or limited or minimum prices shall have been established on
either of such Exchange or Market, (ii) a banking moratorium shall have been
declared either by Federal or New York State authorities or (iii) there shall
have occurred any outbreak or escalation of hostilities, declaration by the
United States of a national emergency or war or other calamity or crisis the
effect of which on financial markets is such as to make it, in the judgment of
the Purchasers, impracticable or inadvisable to proceed with the offering or
delivery of the Securities as contemplated by the Final Memorandum (exclusive of
any amendment or supplement thereof or thereto).
10. Representations and Indemnities to Survive. The respective
------------------------------------------
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Purchasers set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of the Purchasers or the Company or any of
the officers, directors or controlling persons referred to in Section 8 hereof,
and will survive delivery of and payment for the Securities. The provisions of
Sections 7 and 8 hereof shall survive the termination or cancellation of this
Agreement.
11. Notices. All communications hereunder will be in writing and
-------
effective only on receipt, and, if sent to the Purchasers, will be mailed,
delivered or sent by facsimile transmission and confirmed to them at Salomon
Brothers Inc, Xxxxx Xxxxx Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000; or, if sent
to the Company, will be mailed, delivered or sent by facsimile transmission and
confirmed to it at McLeodUSA Incorporated, McLeodUSA Technology Park, 0000 X
Xxxxxx, XX, X.X. Xxx 0000, Xxxxx Xxxxxx, Xxxx 00000, attention legal
department.
12. Successors. This Agreement will inure to the benefit of and be
----------
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and no
other person will have any right or obligation hereunder.
13. Applicable Law. This Agreement will be governed by and construed
--------------
in accordance with the laws of the State of New York.
19
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement between the
Company and the Purchasers.
Very truly yours,
MCLEODUSA INCORPORATED
By: /s/ Xxxxxx Xxxxxxxx
-----------------------------
Name: Xxxxxx Xxxxxxxx
Title: Vice President
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Salomon Brothers Inc
By: /s/ W. Xxxxxxx Xxxxx
--------------------------------
Name: W. Xxxxxxx Xxxxx
Title: Associate
Bear, Xxxxxxx & Co. Inc.
By: /s/ Xxxxxx X. Xxxxxxx Xx.
--------------------------------
Name: Xxxxxx X. Xxxxxxx Xx.
Title: Senior Managing Director
Xxxxxx Xxxxxxx & Co. Incorporated
By: /s/ [Signature is illegible]
--------------------------------
Name:
Title:
Chase Securities Inc.
By: /s/ Xxxxxxx Xxxxx
--------------------------------
Name: Xxxxxxx Xxxxx
Title: Managing Director
20
