Exhibit 10.4
PLAN OF RECAPITALIZATION
THIS PLAN OF RECAPITALIZATION (this "Agreement"), dated August 6, 2001, is
made by and among US LEC Corp., a Delaware corporation (the "Company"),
Metacomm, LLC, a North Carolina limited liability company ("Metacomm"), Xxxxxxx
X. Aab, a resident of Rochester, New York ("Aab"), Melrich Associates, L.P., a
New York limited partnership ("Melrich"), Xxxxxxx X. Xxxxxxx, a resident of
Charlotte, North Carolina ("Xxxxxxx"), and Super STAR Associates Limited
Partnership, a Georgia limited partnership ("Super STAR") (Aab, Melrich, Xxxxxxx
and Super STAR are referred to collectively as the "Class B Stockholders").
RECITALS
WHEREAS, Metacomm owes the Company approximately $36 million for
commission advances, facilities and services provided to Metacomm by the Company
(the "Principal Amount"), plus interest of approximately $2.5 million that has
accrued on commission advances through March 31, 2001, under the Repayment
Agreement dated as of June 30, 1998, between the Company and Metacomm (the
Principal Amount and the amount of such accrued interest, in the aggregate, are
referred to herein as the "Metacomm Obligation");
WHEREAS, Aab, through RTA Associates, LLC, a New York limited liability
company ("RTA"), indirectly owns all of the outstanding member interests of
Metacomm;
WHEREAS, the Company, solely for financial accounting purposes, reduced
additional paid-in capital by the Principal Amount and treated this amount as a
deemed distribution to Aab in his capacity as a stockholder of the Company in
the first quarter of 2000 (the "First Quarter Book Classification");
WHEREAS, Metacomm, Aab and RTA (collectively, the "Aab Affiliates") and
the Company wish to address certain income tax questions regarding the First
Quarter Book Classification;
WHEREAS, the Company has issued and outstanding 16,059,500 shares of Class
B Common Stock, par value $.01 per share ("Class B Common Stock") and the
Company, the Class B Stockholders and Metacomm, pursuant to the terms of this
Agreement, have agreed to effect a recapitalization of the Company to satisfy
the Metacomm Obligation and to resolve any questions relating to the First
Quarter Book Classification.
NOW THEREFORE, in consideration of the mutual covenants contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Redemption; Conversion; Mutual Release; and Indemnity Agreements.
Subject to the terms and conditions hereof, on the Closing Date:
(a) Aab and/or Melrich shall deliver, directly or through Metacomm,
to the Company for cancellation and retirement 2.0 million shares of the
Company's Class B Common Stock accompanied by the delivery notice attached
as Exhibit A (the "Delivery Notice") and the Class B Stockholders shall
convert, on a one-for-one basis, all of the remaining shares of Class B
Common Stock that they own or control, directly or indirectly, into shares
of the Company's Class A Common Stock, par value $.01 per share (the
"Class A Common Stock") pursuant to the conversion notice attached as
Exhibit B (the "Conversion Notice");
(b) The Company, on the one hand, and the Aab Affiliates, on the
other, agree to release each other from claims arising under the Metacomm
Obligation pursuant to the terms of the Mutual Release attached as Exhibit
C (the "Mutual Release");
(c) The Company agrees to indemnify and hold harmless the Aab
Affiliates from and against any federal, New York and North Carolina
income tax liabilities (including, but not limited to, any tax income
liabilities resulting from such indemnification) resulting from the First
Quarter Book Classification pursuant to the terms of the indemnity
agreement attached as Exhibit D (the "Aab Indemnity Agreement"); and
(d) The Company agrees to indemnify and hold harmless Super STAR and
the partners of Super STAR (collectively, the "Xxxxxxx Affiliates") from
any federal, North Carolina and Georgia income tax liabilities (including,
but not limited to, any income tax liabilities resulting from such
indemnification) resulting from the conversion by Super STAR of all of
Super STAR's shares of Class B Common Stock into shares of Class A Common
Stock pursuant to the terms of the indemnity agreement attached as Exhibit
E (the "Xxxxxxx Indemnity Agreement").
2. Closing. Subject to the terms and conditions hereof, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of the Company at 10:00 a.m., Eastern Standard Time, on August 6,
2001, or at such other time and place as the parties may agree in writing (the
"Closing Date").
3. Conditions to the Obligations of the Company to Close. The obligations
of the Company to issue the Mutual Release, the Aab Indemnity Agreement and the
Xxxxxxx Indemnity Agreement at the Closing shall be subject to the satisfaction
as determined by the Company of the following conditions on or before the
Closing Date:
(a) The Company shall have received on opinion, dated as of the
Closing Date, from Deloitte and Touche LLP that:
(i) The Aab Affiliates should not be required under federal,
New York, or North Carolina income tax laws to recognize any tax
liability as an
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actual or constructive dividend or discharge of indebtedness caused
by the Company's First Quarter Book Classification;
(ii) Under federal, North Carolina and Georgia income tax
laws, the conversion by Super STAR of 3,750,000 shares of Class B
Common Stock into a like number of shares of Class A Common Stock on
the Closing Date pursuant to the elective conversion provisions
applicable to the Class B Common Stock in the Company's Restated
Certificate of Incorporation (the "Super STAR Conversion"):
(A) Should qualify as a tax free "reorganization" under
Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), or a tax free exchange under Section
1036 of the Code, or both;
(B) None of the Xxxxxxx Affiliates should recognize gain
or loss as a result of the Super STAR Conversion;
(C) Super STAR's aggregate basis in the shares of Class
A Common Stock received by it in the Super STAR Conversion
should equal the aggregate basis in the shares of Class B
Common Stock surrendered by it in the Super STAR Conversion;
and
(D) Super STAR's holding period of the shares of Class A
Common Stock received by it in the Super STAR Conversion
should include the holding period for the shares of Class B
Common Stock surrendered by it in the Super STAR Conversion,
assuming that such shares are held as a capital asset.
(b) The Company shall have received a report from KPMG Consulting,
Inc. ("KPMG Consulting") describing the estimated value range, as of April
2, 2001, of the transactions contemplated by subsection 1(a) to the
Company and the current holders of Class A Common Stock, which report (i)
shall be supported by the analyses that KPMG Consulting considered in
reaching its estimated value range, (ii) shall include an estimated value
within the estimated value range at least equal to the amount of the
Metacomm Obligation, and (iii) shall provide the Company with a specific
value it can record as a contribution to capital upon receipt of 2.0
million shares of Class B Common Stock pursuant to subsection 1(a).
(c) The Company shall have received such consents or waivers as may
be required under the Seconded Amended and Restated Loan and Security
Agreement, dated as of December 20, 1999, to which the Company is a party
as a borrower, as amended from time to time in accordance with the terms
thereof, to consummate the transactions contemplated by this Agreement.
(d) Aab and/or Melrich, directly or through Metacomm, shall have
delivered to the Company for cancellation and retirement 2.0 million
shares of Class B Common
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Stock accompanied by an executed Delivery Notice and the Class B
Stockholders shall have delivered to the Company all of their remaining
shares of Class B Common Stock accompanied by a signed Conversion Notice.
(e) The approval of the Investor Agents in the form attached as
Exhibit F shall have been executed and delivered by the Investor Agents to
the Company.
(f) The Certificate of Amendment to the Company's Certificate of
Designation relating to the Company's Series A Convertible Preferred Stock
in the form attached to Exhibit G shall have been approved by a majority
of the holders of such preferred stock.
(g) The Mutual Release shall have been executed and delivered by the
Aab Affiliates.
(h) The Aab Indemnity Agreement and the Xxxxxxx Indemnity Agreement
shall have been executed and delivered by the parties thereto.
(i) This Agreement and all of the related agreements and instruments
to which the Company is a party shall have been approved by appropriate
resolutions of the Company's Board of Directors.
4. Conditions to the Obligations of Metacomm and the Class B Stockholders
to Close. The obligations of Aab and/or Melrich and Metacomm to deliver 2.0
million shares of Class B Common Stock to the Company at the Closing and the
obligations of the Class B Stockholders to effect the conversion of all the
remaining Shares of Class B Common Stock at the Closing in accordance with
subsection 1(a) shall be subject to the satisfaction as determined by each of
them of the following conditions on or before the Closing Date:
(a) The Mutual Release shall have been executed and delivered by the
Company.
(b) The Aab Indemnity Agreement shall have been executed and
delivered by the parties thereto.
(c) The Xxxxxxx Indemnity Agreement shall have been executed and
delivered by the parties thereto.
(d) The approval of the Investor Agents in the form attached as
Exhibit F shall have been executed and delivered by the Investor Agents to
the Company.
(e) The Amendment to the Voting and Tag Along Agreement in the form
attached as Exhibit H shall have been executed and delivered by the
parties thereto.
(f) The Certificate of Amendment to the Company's Certificate of
Designation relating to the Company's Series A Convertible Preferred Stock
in the form
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attached to Exhibit G shall have been approved by a majority of the
holders of such preferred stock as provided in Exhibit G.
(g) This Agreement and all of the related agreements and instruments
to which the Company is a party shall have been approved by appropriate
resolutions of the Company's Board of Directors.
5. Consent of Xxxxxxx and Super STAR. Effective as of the Closing Date,
Xxxxxxx and Super STAR, as required by Section 3 of the Second Amended and
Restated Stockholders Agreement, dated as of April 10, 2000, by and among the
Class B Stockholders (the "Stockholders Agreement"), consent to the transfer of
2.0 million shares of Class B Common Stock to the Company pursuant to subsection
1(a).
6. Waiver of Certain Rights by class B Stockholders. Effective as of the
Closing Date, the Class B Stockholders waive any and all rights that they may
have under the Stockholders Agreement to notices and rights to purchase any
shares of Class B Common Stock that are converted into Class A Common Stock
pursuant to subsection 1(a).
7. Notices. All notices, requests, claims, demands or other communications
provided for or permitted hereunder by a party hereto or under the Aab Indemnity
Agreement and the Xxxxxxx Indemnity Agreement by any party to such agreements
shall be made in writing and shall be by certified mail, return receipt
requested, addressed to such party at the business address maintained for such
party at the Company's principal executive offices.
8. Miscellaneous
(a) This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors and permitted assigns; provided,
however, neither this Agreement nor any of the rights, interests or
obligations of any party may be assigned without the prior written consent
of the other parties.
(b) This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by all the parties.
(c) With respect to all matters of corporate law applicable to the
Company and its outstanding capital stock, the laws of the State of
Delaware (irrespective of its choice of laws, rules or principles) will
govern the validity of this Agreement, the construction of its terms and
the interpretation and enforcement of the rights and duties of the parties
hereto. As to all other matters, the laws of the State of North Carolina
(irrespective of its choice of laws, rules or principles) will govern this
Agreement, the construction of its terms and the interpretation and
enforcement of the rights and duties of the parties hereto.
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(d) This Agreement contains the entire understanding of the parties
with respect to the subject matter hereof, and supersedes all prior
negotiations and understandings between the parties with respect to such
subject matter.
(e) This Agreement may be executed in counterparts, each of which
shall be an original, but which together shall constitute one and the same
agreement.
(f) The section headings herein are for convenience only and shall
not affect the construction or interpretation of this Agreement.
(g) Any dispute, controversy, difference or claim arising out of,
relating to or in connection with this Agreement, any transaction
hereunder, any agreement delivered pursuant to this Agreement, or the
breach hereof, shall be decided by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then
in effect, except as otherwise agreed by the parties. Any such arbitration
shall be conducted on the earliest possible date and conducted in
Charlotte, North Carolina. The arbitrators' award shall be final and
binding on the parties hereto and judgment upon the award may be entered
in any court having jurisdiction thereof. Expenses in the arbitration
shall be apportioned between the parties by the arbitrators.
(h) Notwithstanding subsection (g), any party may, if it believes
that it requires or is entitled to a temporary restraining order or
preliminary injunctive relief to prevent irreparable injury, file a civil
action in any court having jurisdiction seeking a temporary restraining
order or preliminary injunctive relief. Any claim or demand for monetary
damages, a permanent injunction or other relief shall, however, be
governed exclusively by the provisions for arbitration set forth in
subsection (g).
6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
US LEC CORP.
By: /s/ Xxxxxxx Xxxxxxxx
-----------------------------------------
Title: Executive Vice President and Chief
---------------------------------------
Financial Officer
---------------------------------------
METACOMM, LLC
By: /s/ Xxxxxxx X. Aab
-----------------------------------------
Title: Member
---------------------------------------
/s/ Xxxxxxx X. Aab
---------------------------------------------
Xxxxxxx X. Aab, individually
MELRICH ASSOCIATES, L.P.
By: /s/ Xxxxxxx X. Aab
-----------------------------------------
Xxxxxxx X. Aab, General Partner
By: /s/ Xxxxx X. Aab
-----------------------------------------
Xxxxx X. Aab, General Partner
/s/ Xxxxxxx X. Xxxxxxx
---------------------------------------------
Xxxxxxx X. Xxxxxxx, individually
SUPER STAR ASSOCIATES LIMITED PARTNERSHIP
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------------
Xxxxxxx X. Xxxxxxx, General Partner
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Exhibit A
DELIVERY FOR CANCELLATION
OF
SHARES OF CLASS B COMMON STOCK
The undersigned delivers herewith to US LEC Corp. (the "Company") for
cancellation and retirement 2.0 million shares of the Company's Class B Common
Stock, par value $.01 per share, out of Certificate No. B7 for 3,000,000 shares.
The balance of 1,000,000 shares is being converted to the Company's Class A
Common Stock in accordance with the Notice of Conversion of even date herewith.
The undersigned represents and warrants to the Company that the 2,000,000
shares of Class B Common Stock delivered herewith are free and clear of any
liens, encumbrances, security interests, claims or rights of any kind
whatsoever.
This ___ day of ________, 2001.
_______________________________
Xxxxxxx X. Aab
8
Exhibit B
NOTICE OF CONVERSION
Pursuant to Article IV, 2(e)(ii) of the Restated Certificate of
Incorporation of US LEC Corp. (the "Company"), the undersigned hereby elects to
convert _____ shares of the Company's Class B Common Stock into a like number of
shares of the Company's Class A Common Stock and surrenders herewith the
certificates for such shares of Class B Common Stock as follows:
Certificate No. Number of Shares
--------------- ----------------
_______________________ ____________________
_______________________ ____________________
_______________________ ____________________
_______________________ ____________________
Please issue the certificates for the shares of Class A Common Stock in the
denominations set forth below and deliver them to [Name and Address].
_______________________
_______________________
_______________________
_______________________
The undersigned understands and agrees that the certificates for the
shares of Class A Common Stock to be issued pursuant to this election will bear
legends substantially the same as the legends imprinted on the certificates for
the shares of Class B Common Stock surrendered herewith.
This election is effective this ___________ day of ______________, 2001.
___________________________
[Name of Stockholder]
9
Exhibit C
MUTUAL RELEASE
US LEC Corp., a Delaware corporation and US LEC of North Carolina, Inc., a
North Carolina corporation (the successor to US LEC of North Carolina, L.L.C.)
(together, the "Company"), hereby fully and unconditionally release and forever
discharge Metacomm, LLC, a North Carolina limited liability company
("Metacomm"), Xxxxxxx X. Aab ("Aab") and RTA Associates, LLC, a New York limited
liability company ("RTA"), from any obligation to pay (a) the Company for any of
the facilities and services billed to Metacomm by the Company in the approximate
amount of $15,000,000 (the "Facilities and Services Charges"), and (b)
$21,107,446 of commission advances made to Metacomm by the Company, plus accrued
interest thereon. Further, the Company hereby fully and unconditionally releases
Metacomm from any and all obligations under the Repayment Agreement and Security
Agreement between the Company and Metacomm, each dated June 30, 1998, which
agreements are hereby deemed by the Company to be satisfied in full.
Metacomm, Aab and RTA hereby fully and unconditionally release and forever
discharge the Company from any and all claims, whether known or unknown, legal
or equitable, relating to the rates billed by the Company to Metacomm for
facilities and services and the total amount of the Facilities and Service
Charges billed to Metacomm by the Company.
The laws of the State of North Carolina (irrespective of its choice of
laws, rules or principles) will govern the validity of this Mutual Release, the
construction of its terms and the interpretation and enforcement of the rights
of the parties hereto.
This Mutual Release shall be binding upon the parties hereto, and their
respective heirs, legal representatives, successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Mutual Release this
______ day ______ of _____, 2001. ___________
US LEC CORP. RTA ASSOCIATES, LLC
By: ______________________________ By: ______________________________
Title: ___________________________ Title: ___________________________
__________________________________
Xxxxxxx X. Aab, individually
US LEC OF NORTH CAROLINA, INC. METACOMM, LLC
By: ______________________________ By: ______________________________
Title: ___________________________ Title: ___________________________
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Exhibit D
AAB INDEMNITY AGREEMENT
This Indemnity Agreement is made this _____ day of ______, 2001, by and
among US LEC Corp., a Delaware corporation (the "Company"), Metacomm, LLC, a
North Carolina limited liability company ("Metacomm"), RTA Associates, LLC, a
New York limited liability company ("RTA"), Xxxxxxx X. Aab ("Aab") and Xxxxx X.
Aab.
RECITALS
WHEREAS, the Company, Metacomm, Aab, Melrich Associates, L.P. a New York
limited partnership ("Melrich"), Xxxxxxx X. Xxxxxxx ("Xxxxxxx") and Super STAR
Associates Limited Partnership, a Georgia limited partnership ("Super STAR")
entered into a Plan of Recapitalization on _______, 2001 (the "Agreement").
WHEREAS, the Company, solely for financial accounting purposes in its
first fiscal quarter of 2000, reduced additional paid-in capital by $36 million
representing amounts due from Metacomm to the Company for services, facilities
and commission advances and treated this amount as a deemed distribution to Aab
in his capacity as a stockholder of the Company (the "First Quarter Book
Classification"); and
WHEREAS, in consideration of the performance by Metacomm, Aab, and Melrich
of their respective obligations under the Agreement, the Company has agreed to
indemnify and hold harmless Metacomm, RTA, Aab and Xxxxx X. Aab (each, a
"Covered Person") from and against certain tax liabilities, if any, caused by
the First Quarter Book Classification;
NOW, THEREFORE, in consideration of the performance by Metacomm, Aab, and
Melrich of their respective obligations under the Agreement, the parties hereto
agree as follows:
1. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Covered
Person from and against any tax liability (including interest and
penalties), including any tax liability arising from any amounts paid to a
Covered Person pursuant to this Indemnity Agreement, under federal, New
York and North Carolina income tax laws if a Covered Person is required to
recognize an actual or constructive dividend or a discharge of
indebtedness caused by the First Quarter Book Classification.
(b) If the Company is required to indemnify a Covered Person
pursuant to subsection (a), the amount of the indemnity will be equal to
(i) the Covered Person's Tax Amount (as defined below) for the years 2000
and 2001, minus (ii) the Covered Person's Tax Amount for the years 2000
and 2001 that would have applied if the Company had never made the
accounting entries for the First Quarter Book Classification. For purposes
of these calculations, any 2001 capital loss carryforwards will be valued
at the tax savings that would have resulted if they were fully utilized in
2001 to offset capital gains, and any 2001 net operating loss
carryforwards will be valued at the
11
tax savings that would have resulted if they were fully utilized in 2001
to offset ordinary income. The term "Tax "Amount" means the sum of a
Covered Person's federal, New York and North Carolina income tax
liabilities (including interest and penalties) for a specified year, plus
any income tax liabilities resulting from the payment of amounts to a
Covered Person pursuant to this Indemnity Agreement for any year in which
the payment is made.
2. Notice and Defense. In case any audit or other proceeding shall be
instituted by a federal, New York or North Carolina taxing authority involving
any Covered Person in respect of which indemnity may be sought pursuant to
Section 1, such Covered Person shall notify the Company in writing within thirty
(30) days of the commencement of any such proceeding and the Company, upon
request of the Covered Person, shall retain counsel reasonably satisfactory to
the Covered Person to represent the Covered Person in such proceeding and shall
pay the fees and disbursements of such counsel related to such proceeding. In
any such proceeding, any Covered Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Covered Person. The failure of a Covered Person to provide the Company with
the thirty (30) day written notice required by this Section 2 shall relieve the
Company of any obligations to any Covered Person under this Agreement.
3. Settlement. The Company shall not be liable for the settlement of any
audit or other proceeding initiated by a taxing authority that is effected
without the Company's written consent, but if settled with the Company's consent
or if there is a final judgment entered in any such proceeding in favor of any
such taxing authority against a Covered Person, the Company agrees to indemnify
the Covered Person from and against any loss or liability by reason of such
settlement or judgment, calculated as provided in Section 1(b). The Company
shall not, without the prior written consent of the Covered Person, effect any
settlement of any pending or threatened proceeding in respect of which any
Covered Person is or could have been a party and indemnity could have been
sought hereunder by such Covered Person, unless such settlement includes an
unconditional release of such Covered Person from all liability for the claims
that are the subject matter of such proceeding.
4. Tax Certificate. Metacomm and Aab represent and warrant to the Company
that the factual statements relating to Metacomm, Aab, RTA and Melrich in the
Tax Certificate of the Aab Affiliates addressed to Deloitte & Touche LLP and
executed in connection with the Agreement are true and correct. If the foregoing
representation and warranty is not true and correct (an "Inaccuracy"), each
Covered Person acknowledges and agrees that the Company shall be relieved of any
obligations to a Covered Person under this Indemnity Agreement; provided that
the Company shall not be relieved of any such obligations if it can be
reasonably shown by a Covered Person that the Inaccuracy was not material to the
imposition of the income tax liability giving rise to a claim for
indemnification hereunder. Metacomm and Aab further warrant and represent to the
Company that neither the Internal Revenue Service nor any state taxing authority
has notified Metacomm, RTA or Aab of any income tax liability claim involving
any of them arising out of or relating to the First Quarter Book Classification.
If this representation and warranty is untrue or incorrect, each Covered Person
acknowledges and
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agrees that the Company shall be relieved of any obligations to a Covered Person
under this Indemnity Agreement.
5. Arbitration.
(a) Any dispute, controversy, difference or claim arising out of,
relating to or in connection with this Indemnity Agreement, any
transaction hereunder, any agreement delivered pursuant to this Indemnity
Agreement, or the breach hereof, shall be decided by arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect, except as otherwise agreed by the
parties. Any such arbitration shall be conducted on the earliest possible
date and conducted in Charlotte, North Carolina. The arbitrators' award
shall be final and binding on the parties hereto and judgment upon the
award may be entered in any court having jurisdiction thereof. Expenses in
the arbitration shall be apportioned between the parties by the
arbitrators.
(b) Notwithstanding subsection (a), any party may, if it believes
that it requires or is entitled to a temporary restraining order or
preliminary injunctive relief to prevent irreparable injury, file a civil
action in any court having jurisdiction seeking a restraining order or
preliminary injunctive relief. Any claim or demand for monetary damages, a
permanent injunction or other relief shall, however, be governed
exclusively by the provisions for arbitration set forth in subsection (a).
6. Binding Effect. This Indemnity Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective heirs, legal representatives, successors and permitted assigns;
provided, however, neither this Indemnity Agreement nor any of the rights,
interests or obligations of any party may be assigned without the prior written
consent of the other parties.
7. Amendment. This Indemnity Agreement may not be modified, amended,
altered or supplemented except upon the execution and delivery of a written
agreement executed by all the parties.
8. Entire Agreement. This Indemnity Agreement contains the entire
understanding of the parties with respect to the subject matter hereof, and
supersedes all prior negotiations and understandings between the parties with
respect to such subject matter.
9. Counterparts. This Indemnity Agreement may be executed in counterparts,
each of which shall be an original, but which together shall constitute one and
the same agreement.
10. Section Headings. The section headings herein are for convenience only
and shall not affect the construction or interpretation of this Indemnity
Agreement.
11. Governing Law. The laws of the State of North Carolina (irrespective
of its choice of laws, rules or principles) will govern the validity of this
Indemnity Agreement, the
13
construction of its terms and the interpretation and enforcement of the rights
and duties of the parties hereto.
IN WITNESS WHEREOF, this Indemnity Agreement has been executed as of the
date first above written.
US LEC Corp.
By: ________________________________
Title: _____________________________
____________________________________
Xxxxxxx X. Aab, individually
____________________________________
Xxxxx X. Aab, individually
Metacomm, LLC
By: ________________________________
Title: _____________________________
RTA Associates, LLC
By: ________________________________
Title: _____________________________
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Exhibit E
XXXXXXX INDEMNITY AGREEMENT
This Indemnity Agreement is made this _____ day of ______________, 2001,
by and between US LEC Corp., a Delaware corporation (the "Company") and Xxxxxxx
X. Xxxxxxx ("Xxxxxxx"), Xxxxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxx (collectively,
the "Xxxxxxx Family") and Super STAR Associates Limited Partnership, a Georgia
limited partnership ("Super STAR")
RECITALS
WHEREAS, the Company, Metacomm, LLC ("Metacomm"), Xxxxxxx X. Aab ("Aab"),
Melrich Associates, L.P. ("Melrich"), Xxxxxxx and Super STAR entered into a Plan
of Recapitalization on ________, 2001 (the "Agreement"); and
WHEREAS, in consideration of the performance by Xxxxxxx and Super STAR of
their respective obligations under the Agreement, the Company has agreed to
indemnify and hold harmless Super STAR and the members of the Xxxxxxx Family
(Super STAR and each such family member is referred to herein as a "Covered
Person") from and against certain tax liabilities, if any, as a result of the
conversion by Super STAR of 3,750,000 shares of the Company's Class B Common
Stock, par value $.01 per share ("Class B Stock"), into a like number of shares
of the Company's Class A Common Stock, par value $.01 per share ("Class A
Stock") as provided in the Agreement.
NOW, THEREFORE, in consideration of the performance by Xxxxxxx and Super
STAR of their respective obligations under the Agreement, the parties hereto
agree as follows:
1. Indemnification. The Company agrees to indemnify and hold harmless each
Covered Person from and against any tax liability (including interest and
penalties), including any tax liability arising from any amounts paid to a
Covered Person pursuant to this Indemnity Agreement, under federal, North
Carolina and Georgia income tax laws that a Covered Person is required to
recognize as a result of the conversion by Super STAR pursuant to the Agreement
of 3,750,000 shares of Class B Stock into 3,750,000 shares of Class A Stock
pursuant to the elective conversion provisions applicable to the Class B Stock
in the Company's Restated Certificate of Incorporation.
2. Notice and Defense. In case any audit or other proceeding shall be
instituted by a federal or North Carolina taxing authority involving any Covered
Person in respect of which indemnity may be sought pursuant to Section 1, such
Covered Person shall notify the Company in writing within thirty (30) days of
the commencement of any such proceeding and the Company, upon request of the
Covered Person, shall retain counsel reasonably satisfactory to the Covered
Person to represent the Covered Person in such proceeding and shall pay the fees
and disbursements of such counsel related to such proceeding. In any such
proceeding, any Covered Person shall have the right to retain its own counsel,
but the fees and expenses of such counsel shall be at the expense of such
Covered Person. The failure of a Covered Person to provide the
15
Company with the thirty (30)-day written notice required by this Section 2 shall
relieve the Company of any obligations to a Covered Person under this Agreement.
3. Settlement. The Company shall not be liable for the settlement of any
audit or other proceeding initiated by a taxing authority that is effected
without the Company's written consent, but if settled with the Company's consent
or if there is a final judgment entered in any such proceeding in favor of any
such taxing authority against a Covered Person, the Company agrees to indemnify
the Covered Person from and against any loss or liability by reason of such
settlement or judgment. The Company shall not, without the prior written consent
of the Covered Person, effect any settlement of any pending or threatened
proceeding in respect of which any Covered Person is or could have been a party
and indemnity could have been sought hereunder by such Covered Person, unless
such settlement includes an unconditional release of such Covered Person from
all liability for the claims that are the subject matter of such proceeding.
4. Tax Certificate. Xxxxxxx and Super STAR represent and warrant to the
Company that the factual statements relating to Xxxxxxx and Super STAR in the
Tax Certificate of the Xxxxxxx Affiliates addressed to Deloitte & Touche LLP and
executed in connection with the Agreement are true and correct. If this
representation and warranty is not true and correct (an "Inaccuracy"), each
Covered Person acknowledges and agrees that the Company shall be relieved of any
obligations to a Covered Person under this Indemnity Agreement; provided that
the Company shall not be relieved of any such obligations if it can be
reasonable shown by a Covered Person that the inaccuracy was not material to the
imposition of the income tax liability giving rise to a claim for
indemnification hereunder.
5. Arbitration.
(a) Any dispute, controversy, difference or claim arising out of,
relating to or in connection with this Indemnity Agreement, any
transaction hereunder, any agreement delivered pursuant to this Indemnity
Agreement, or the breach hereof, shall be decided by arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect, except as otherwise agreed by the
parties. Any such arbitration shall be conducted on the earliest possible
date and conducted in Charlotte, North Carolina. The arbitrators' award
shall be final and binding on the parties hereto and judgment upon the
award may be entered in any court having jurisdiction thereof. Expenses in
the arbitration shall be apportioned between the parties by the
arbitrators.
(b) Notwithstanding subsection (a), any party may, if it believes
that is requires or is entitled to a temporary restraining order or
preliminary injunctive relief to prevent irreparable injury, file a civil
action in any court having jurisdiction seeking a restraining order or
preliminary injunctive relief. Any claim or demand for monetary damages, a
permanent injunction or other relief shall, however, be governed
exclusively by the provisions for arbitration set forth in subsection (a).
16
6. Binding Effect. This Indemnity Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective heirs, legal representatives, successors and permitted assigns;
provided, however, neither this Indemnity Agreement nor any of the rights,
interests or obligations of any party may be assigned without the prior written
consent of the other parties.
7. Amendment. This Indemnity Agreement may not be modified, amended,
altered or supplemented except upon the execution and delivery of a written
agreement executed by all the parties.
8. Entire Agreement. This Indemnity Agreement contains the entire
understanding of the parties with respect to the subject matter hereof, and
supersedes all prior negotiations and understandings between the parties with
respect to such subject matter.
9. Counterparts. This Indemnity Agreement may be executed in counterparts,
each of which shall be an original, but which together shall constitute one and
the same agreement.
10. Section Headings. The section headings herein are for convenience only
and shall not affect the construction or interpretation of this Indemnity
Agreement.
11. Governing Law. The laws of the State of North Carolina (irrespective
of its choice of laws, rules or principles) will govern the validity of this
Indemnity Agreement, the construction of its terms and the interpretation and
enforcement of the rights and duties of the parties hereto.
17
IN WITNESS WHEREOF, this Indemnity Agreement has been executed as of the
date first above written.
US LEC Corp.
By: ________________________________
Title: _____________________________
Super STAR Associates Limited Partnership
By:_________________________________
Xxxxxxx X. Xxxxxxx,
General Partner
____________________________________
Xxxxxxx X. Xxxxxxx
____________________________________
Xxxxxxxx X. Xxxxxxx
____________________________________
Xxxxxx X. Xxxxxxx
18
Exhibit F
APPROVAL OF INVESTOR AGENTS
The undersigned, being the Investor Agents with authority to approve
certain transactions pursuant to Section 3.2 of the Corporate Governance
Agreement, entered into on April 11, 2000 by US LEC Corp. (the "Company") and
those persons whose names are set forth on Schedule I thereto (the "Corporate
Governance Agreement"), hereby approve, in connection with the satisfaction by
Metacomm, LLC of certain obligations owed by it to the Company and its
subsidiary, US LEC of North Carolina, Inc., (a) the redemption and retirement of
2,000,000 shares of the Company's Class B Common Stock, par value $0.01 per
share ("Class B Common Stock") delivered to the Company by Xxxxxxx X. Aab and/or
Melrich Associates, L.P., directly or through Metacomm, LLC, (b) the issuance by
the Company of a release of Metacomm, LLC, Xxxxxxx X. Aab and RTA Associates,
LLC (collectively, the "Aab Affiliates"), (c) the issuance by the Company of an
indemnity agreement in favor of the Aab Affiliates and Xxxxx X. Aab, and (d) the
issuance by the Company of an indemnity agreement in favor of Xxxxxxx X.
Xxxxxxx, Sarbalen X. Xxxxxxx, Xxxxxx X. Xxxxxxx and Super STAR Associates
Limited Partnership, all as more particularly described in the Plan of
Recapitalization, dated _______________, 2001, by and among the Company,
Metacomm, LLC, Xxxxxxx X. Aab, Melrich Associates L.P., Tansukha X. Xxxxxxx and
Super STAR Associates Limited Partnership.
Nothing in this approval shall be deemed to be a waiver of any right which
the Purchasers may have under the Preferred Stock Purchase Agreement dated as of
April 11, 2000 among the Company and the Purchasers party thereto, including,
without limitation, any rights which the Purchasers may have as a result of any
breach of the representations and warranties set forth in the Purchase
Agreement.
This action is effective as of the ___ day of ___________________, 2001.
INVESTOR AGENTS:
____________________________________
Xxxxxxx X. Xxxxxx
____________________________________
Xxxxxxx X. XxXxxx
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Exhibit G
APPROVAL OF CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF DESIGNATION
OF
US LEC CORP.
Pursuant to Section 9 of the US LEC Corp. Certificate of Designation
Relating to Series A Preferred Stock (the "Certificate of Designation"), the
undersigned, being the holders of at least a majority of the outstanding shares
of US LEC Corp.'s Series A Preferred Stock, do hereby consent to and approve the
Certificate of Amendment to the Certificate of Designation attached hereto.
This action is effective this _____________ day of_______________ , 2001.
XXXX CAPITAL CLEC INVESTORS, L.L.C.
By: Xxxx Capital Fund VI, L.P.,
its Administrative Member
By: Xxxx Capital Partners VI, L.P.,
its General Partner
By: Xxxx Capital Investors VI, Inc.,
its general partner
By:___________________________________
Name: Xxxxxxx X. Xxxxxx
Title: Managing Director
XXXXXX X. XXX EQUITY FUND IV, L.P.
By: THL Equity Advisors IV, LLC,
its general partner
By:___________________________________
Name: Xxxxxxx X. XxXxxx
Title: Managing Director
20
XXXXXX X. XXX FOREIGN FUND IV-B, L.P.
By: THL Equity Advisors IV, LLC,
its general partner
By:___________________________________
Name: Xxxxxxx X. XxXxxx
Title: Managing Director
XXXXXX X. XXX FOREIGN FUND IV, L.P.
By: THL Equity Advisors IV, LLC,
its general partner
By:___________________________________
Title: Managing Director
21
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF DESIGNATION
OF
US LEC CORP.
US LEC Corp., a Delaware corporation (the "Corporation") hereby executes
and certifies this Certificate of Amendment for the purposes of amending its
Certificate of Designation relating to its Series A Convertible Preferred Stock,
filed with the office of the Delaware Secretary of State on April 11, 2000,
under the General Corporation Law of the State of Delaware:
1. The name of the corporation is US LEC Corp.
2. A majority of the Corporation's Series A Preferred Stockholders
approved the following amendment to the Corporation's Certificate of
Designation as of the ___ day of _____, 2001, in the manner
prescribed by law, for the purpose of amending the definition of
"Change of Control" contained in ARTICLE 11 of the Certificate of
Designation, so that, as amended, clause such definition shall be
and read as follows:
"Change of Control" means (i) the failure of Xxxxxxx X. Aab
("Aab") and Xxxxxxx X. Xxxxxxx ("Xxxxxxx"), in the aggregate,
to own or control, directly or indirectly, stock of the
Corporation representing at least 50% of the total number of
shares of voting capital stock of the Corporation (as adjusted
for the events described in Section 4.3) that they, in the
aggregate, own or control, directly or indirectly, as of the
Initial Issue Date after reducing the number of such shares as
of the Initial Issue Date by 2.0 million, (ii) the failure of
Aab and Xxxxxxx, in the aggregate, to own or control, directly
or indirectly, more shares of the voting capital stock of the
Corporation than any other Person or group (other than a
Permitted Owner or group of the Permitted Owners and their
Affiliates), within the meaning of Regulation 13D under the
Securities Exchange Act of 1934 or (iii) a Change of Board
shall occur; provided, however, that if, upon the simultaneous
death of Aab and Xxxxxxx or upon the death of the last to
survive of Aab and Xxxxxxx, all of the Class A Common Stock
owned or controlled, directly or indirectly, by Aab and
Xxxxxxx is held by Permitted Transferees (as defined in the
Certificate of Incorporation) of Aab and Xxxxxxx, such Class A
Common Stock shall be deemed to be controlled by Aab and
Xxxxxxx for purposes of clauses (i) and (ii) so long as such
Class A Common Stock is held by such Permitted Transferees.
22
In all other respects, Article 11 and all other provisions of the
Certificate of Designation shall remain the same.
3. The foregoing amendment to the Certificate of Designation herein
certified was duly adopted in accordance with the applicable provisions of
Sections 228 and 242 of the General Corporation Law of the State of Delaware.
Signed on the ______ day of _____, 2001.
US LEC CORP.
By: ________________________________
Xxxxxxx X. Xxxxxxxx
Executive Vice President
and Chief Financial Officer
23
Exhibit H
AMENDMENT
TO
VOTING AND TAG ALONG AGREEMENT
THIS AMENDMENT (this "Amendment") to the Voting and Tag Along Agreement
(the "Tag Along Agreement"), dated as of April 11, 2000, by and among the Class
B Stockholders and Investors who are parties thereto, is made and entered into
as of ____, 2001, by and among the persons whose names appear on the signature
page of this Amendment.
W I T N E S S E T H :
WHEREAS, the parties to the Tag Along Agreement have agreed to amend it as
provided in Section 7(c) thereof in connection with the satisfaction by
Metacomm, LLC of obligations owed by it to US LEC Corp., a Delaware corporation;
NOW, THEREFORE, in consideration of the foregoing premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree to the following:
Section 1. Defined Terms. Capitalized terms used, but not otherwise
defined herein, have the meanings set forth in the Tag Along Agreement.
Section 2. Amendments. As of the date hereof, the Tag Along Agreement is
amended by deleting Section 5(f)(iii) thereof in its entirety and inserting in
lieu thereof the following language:
"(iii) if, after giving effect to such Sale, the Class B
Stockholders and their Permitted Transferees will continue to own in the
aggregate not less than 85% of the shares of Subject Common Stock held by
the Class B Stockholders as of April 11, 2000, after reducing the number
of such shares held by the Class B Stockholders as of April 11, 2000 by
2.0 million shares.
Section 3. Execution in Counterparts. This Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same instrument.
Section 4. Governing Law. This Amendment shall be governed by and
construed and enforced in accordance with the law of the State of Delaware.
24
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment
as of the date first above written.
CLASS B STOCKHOLDERS:
_________________________________________
Xxxxxxx X. Aab
MELRICH ASSOCIATES, L.P.
By: _____________________________________
Xxxxxxx X. Aab, General Partner
By: _____________________________________
Xxxxx X. Aab, General Partner
_________________________________________
Xxxxxxx X. Xxxxxxx
SUPER STAR ASSOCIATES LIMITED PARTNERSHIP
By: _____________________________________
Xxxxxxx X. Xxxxxxx, General Partner
XXXX CAPITAL CLEC INVESTORS, L.L.C.
By: Xxxx Capital Fund VI, L.P.,
its Administrative Member
By: Xxxx Capital Partners VI, L.P.,
its General Partner
By: Xxxx Capital Investors VI, Inc.,
its general partner
By: _____________________________________
Name: Xxxxxxx X. Xxxxxx
Title: Managing Director
25
XXXXXX X. XXX EQUITY FUND IV, L.P.
By: THL Equity Advisors IV, LLC,
its general partner
By: _____________________________________
Name: Xxxxxxx X. XxXxxx
Title: Managing Director
XXXXXX X. XXX FOREIGN FUND IV-B, L.P.
By: THL Equity Advisors IV, LLC,
its general partner
By: _____________________________________
Name: Xxxxxxx X. XxXxxx
Title: Managing Director
XXXXXX X. XXX FOREIGN FUND IV, L.P.
By: THL Equity Advisors IV, LLC,
its general partner
By: _____________________________________
Name: Xxxxx X. Xxxxxxxx
Title: Managing Director
26
