Exhibit 99.11
LOCK-UP, SUPPORT, AND VOTING AGREEMENT
This Lock-Up, Support, and Voting Agreement (this "Agreement") is made
and entered into as of December 3, 2001, by and among McLeodUSA
Incorporated, a Delaware corporation (the "Company") and the entities
listed on the signature page hereto under the caption "Investors"
(collectively, "Investor"). The Company and Investor are collectively
referred to herein as the "Parties" and individually as a "Party."
RECITALS
WHEREAS, the Company is obligated (the "Obligations") (i) under that
certain Credit Agreement between the Company, The Chase Manhattan Bank and
certain other lenders (collectively, the "Lenders"), dated as of May 31,
2000, as amended (the "Credit Agreement"), and (ii) those certain 10 1/2%
Senior Discount Notes due March 1, 2007 issued by the Company under that
certain indenture dated March 4, 1997; 9 1/4% Senior Notes due July 15,
2007 issued by the Company under that certain indenture dated July 21,
1997; 8 3/8% Senior Notes due March 15, 2008 issued by the Company under
that certain indenture dated March 16, 1998; 9 1/2% Senior Notes due
November 1, 2008 issued by the Company under that certain indenture dated
October 30, 1998; 9 1/8% Senior Notes due February 15, 2009 issued by the
Company under that certain indenture dated February 22, 1999; 12% Senior
Notes due July 15, 2008 issued by the Company under that certain indenture
dated December 14, 2000; 11 1/2% Senior Notes due May 1, 2009 issued by the
Company under that certain indenture dated December 14, 2000, and the 11
3/8% Senior Notes due January 1, 2009 issued by the Company under that
certain indenture dated January 16, 2001 (collectively, the "Senior
Notes");
WHEREAS, Investor owns or controls the right to vote 100% of (i) that
certain Series D Convertible Preferred Stock issued by the Company and (ii)
that certain Series E Convertible Preferred Stock issued by the Company
(together, the "Series D and E Preferred Stock");
WHEREAS, the Company also has issued that certain 6.75% Series A
Cumulative Preferred Stock held by persons other than Investor (the "Series
A Preferred Stock");
WHEREAS, the Company also has outstanding common stock (the "Existing
Common Stock");
WHEREAS, the Company and Investor have engaged in good faith
negotiations with the objective of reaching an agreement with regard to a
restructuring of the Company's Obligations and the recapitalization of the
Company, including the issuance of new common stock of the Company (the
"New Common Stock");
WHEREAS, the Company and Investor now desire to implement a capital
restructuring substantially on the terms described in Exhibit A (the
"Restructuring");
WHEREAS, pursuant to the Restructuring, Investor has entered into an
investment agreement to purchase $100 million of new, Series F Preferred
Stock and Series G Preferred Stock of the Company (the "New Preferred
Stock") and warrants to purchase New Common Stock (the "New Warrants");
WHEREAS, as part of the Restructuring, the Company has entered into a
Stock Purchase Agreement to sell its directory publishing business
("Pubco") to an affiliate of Investor (the "Purchase Agreement");
WHEREAS, the Company intends to pursue the Restructuring, consistent
with the terms set forth on Exhibit A, via the following two, alternative
mechanisms: (i) an out-of-court alternative (the "Out-of-Court
Alternative") pursuant to which (A) the Company will commence an exchange
offer to exchange shares of the New Common Stock and cash for the Senior
Notes substantially on the terms described in Exhibit A and (B) convene a
special meeting of holders of the Company's Series A Preferred Stock, the
Series D and E Preferred Stock, and the Existing Common Stock
(collectively, the "Stockholders") in order to obtain, among other things,
the approval of such Stockholders of the reclassification of such stock
into New Common Stock substantially on the terms described in Exhibit A,
and, if necessary, (ii) an in-court alternative (the "In-Court
Alternative") pursuant to which the Company is soliciting acceptances of a
Prepackaged Plan of Reorganization substantially on the terms described in
Exhibit A (the "Plan"), and may file a case (the "Chapter 11 Proceedings")
under Chapter 11 of Title 11 of the United States Code, 11 U.S.C. xx.xx.
101, et seq. (the "Bankruptcy Code") in the United States Bankruptcy Court
for the District of Delaware (the "Bankruptcy Court"); and
WHEREAS, in order to facilitate the implementation of the
Restructuring, Investor is prepared, subject to the terms and conditions of
this Agreement, to vote the Series D and E Preferred Stock in favor of the
Restructuring with such modifications in the terms of the Restructuring
that do not materially deviate from the terms set forth on Exhibit A.
AGREEMENT
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NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:
1. Voting in Favor of the Restructuring.
(a) Agreement to Vote. Investor hereby irrevocably agrees,
during the period commencing on the date of this Agreement and
continuing until the termination of this Agreement as provided for in
Section 6 hereof (the "Voting Expiration Time"), to vote timely its
Series D and E Preferred Stock in favor of the Restructuring with such
modifications in the terms of the Restructuring that do not materially
deviate from the terms set forth on Exhibit A, whether the Company
pursues the Restructuring under the In-Court Alternative or the
Out-of-Court Alternative, including, (i) with respect to the
Out-of-Court Alternative, at any meeting of the Stockholders, however
called, or in connection with any written consent of the Stockholders,
voting or causing to be voted, the Series D and E Preferred Stock held
of record or beneficially owned by Investor, whether owned on the date
hereof of hereafter acquired, (A) in favor of such Restructuring, all
transactions contemplated thereby, and all actions required in
furtherance thereof, and (B) against any action or agreement that is
intended, or could reasonably be expected, to impede, interfere with,
or prevent such Restructuring, and (ii) with respect to the In-Court
Alternative, by executing ballots in favor of the Plan, and in each of
cases (i) and (ii), agrees not to revoke or withdraw such vote.
Investor's agreement to support the Restructuring is expressly
conditioned upon the terms of the Restructuring being as set forth on
Exhibit A and the Plan and all related documents being consistent with
the terms set forth on Exhibit A with, in each case, such
modifications that do not materially deviate from the terms of Exhibit
A. Investor agrees that all solicitation materials and ballots
prepared in connection with the Restructuring will indicate its
support of the Restructuring, including the Plan.
(b) Modifications. Notwithstanding any other provision of
this Agreement, the Company may make such changes and modifications to
the Restructuring or the Plan as the Company deems are necessary and
appropriate in order to have the Restructuring or the Plan approved or
implemented; provided, however, that Investor will not be required to
support any such restructuring that materially deviates from the terms
set forth on Exhibit A unless any such material deviations have been
approved by Investor.
2. Restrictions on Transfer. Investor hereby agrees, so long as this
Agreement remains in effect, not to (i) sell, transfer, assign, pledge, or
otherwise dispose of any of the Series D and E Preferred Stock, in whole or
in part, or any interest therein, or (ii), without limiting the generality
of the Section 2 of this Agreement, grant any proxies, deposit any of the
Series D and E Preferred Stock into a voting trust, or enter into a voting
agreement with respect to any of the Stock.
3. Investor Allocation Agreement. Investor agrees that, with respect
to any restructuring of the Company supported by Investor in which the
Investor and its affiliates would receive approximately 40% or more of the
equity ownership of the Company, whether consistent with terms set forth on
Exhibit A or otherwise, such restructuring must include an allocation of
consideration attributable to the holders of the Series A Preferred Stock,
Series D and E Preferred Stock, and Existing Common Stock, respectively, in
the same relative allocations (the "Approved Allocation") as set forth
below:
Series A Preferred Stock - 14%
Series D Preferred Stock - 32.4%
Series E Preferred Stock - 14.7%
Existing Common Stock - 38.9%
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100.0%
4. Acknowledgment. This Agreement is not and shall not be deemed to be
a solicitation for consents to the Restructuring or any Plan. The
acceptances of Investor will not be solicited until it has received the
applicable solicitation materials and/or disclosure statement and related
ballots.
5. Termination of Agreement. At any time after August 1, 2002, the
Company and Investor may terminate their obligations hereunder and Investor
may rescind its vote on the Restructuring, including the Plan (which vote
shall be null and void and have no further force and effect), by giving
prior written notice thereof to the other party.
6. Representations and Warranties. Each Investor represents and
warrants that the following statements are true, correct and complete as of
the date hereof:
(a) Corporate Power and Authority. It is duly organized,
validly existing, and in good standing under the laws of the state of
its organization, and has all requisite corporate, partnership or LLC
power and authority to enter into this Agreement and to carry out the
transactions contemplated by, and perform its respective obligations
under, this Agreement.
(b) Authorization. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all required actions on the
part of Investor and no other proceedings on the part of such Investor
are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by such Investor and, assuming this
Agreement has been duly authorized, executed and delivered by the
Company, constitutes a valid and binding agreement of such Investor.
(c) No Conflicts. Neither the execution and delivery of this
Agreement by such Investor nor the consummation by such Investor of
the transactions contemplated hereby nor compliance by such Investor
with any of the provisions hereof will (a) conflict with or result in
any breach of any provision of the charter or by-laws or similar
organization documents of such Investor, (b) result in a violation or
breach of, or constitute (with or without due notice or lapse of time
or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or
provisions of any material note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation to which such
Investor or any of its subsidiaries is a party or by which any of them
or any of their properties or assets may be bound or (c) violate any
order, writ, injunction, decree, statute, rule or regulation
applicable to such Investor, any of its subsidiaries or any of their
properties or assets.
(d) Governmental Consents. The execution, delivery and
performance by it of this Agreement do not and shall not require any
registration or filing with consent or approval of, or notice to, or
other action to, with or by, any federal, state or other governmental
authority or regulatory body, other than the approval of the
Bankruptcy Court with respect to the In-Court Alternative.
(e) Owner of Stock. It is the beneficial owner of, or holder
of investment authority over, the Series D and E Preferred Stock that
it has agreed to vote in favor of the Restructuring and the Plan, and
beneficially owns, or has investment authority over, no other
interests in the Company.
7. Further Acquisition of Interests. This Agreement shall in no way be
construed to preclude Investor from acquiring additional interests in the
Company. However, any such additional interests so acquired shall
automatically be deemed to be subject to the terms of this Agreement.
8. Amendments. This Agreement may not be modified, amended or
supplemented without the prior written consent of the Company and Investor.
9. Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of
Delaware, without regard to any conflicts of law provision which would
require the application of the law of any other jurisdiction. By its
execution and delivery of this Agreement, each of the Parties hereto hereby
irrevocably and unconditionally agrees for itself that any legal action,
suit or proceeding against it with respect to any matter under or arising
out of or in connection with this Agreement or for recognition or
enforcement of any judgment rendered in any such action, suit or
proceeding, may be brought in the United States District Court for the
District of Delaware. By execution and delivery of this Agreement, each of
the Parties hereto irrevocably accepts and submits itself to the
nonexclusive jurisdiction of such court, generally and unconditionally,
with respect to any such action, suit or proceeding. Notwithstanding the
foregoing consent to jurisdiction, upon the commencement of any Chapter 11
Proceedings, each of the Parties hereto hereby agrees that the Bankruptcy
Court shall have exclusive jurisdiction of all matters arising out of or in
connection with this Agreement.
10. Specific Performance. It is understood and agreed by each of the
Parties hereto that money damages would not be a sufficient remedy for any
breach of this Agreement by any Party and each non-breaching Party shall be
entitled to specific performance and injunctive or other equitable relief
as a remedy of any such breach.
11. Headings. The headings of the sections, paragraphs and subsections
of this Agreement are inserted for convenience only and shall not affect
the interpretation hereof.
12. Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of the Parties and their respective successors,
assigns, heirs, executors, administrators and representatives.
13. Prior Negotiations. This Agreement and Exhibit A supersede all
prior negotiations with respect to the subject matter hereof.
14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
shall constitute one and the same Agreement.
15. No Third-Party Beneficiaries. Unless expressly stated herein, this
Agreement shall be solely for the benefit of the Parties hereto and no
other person or entity shall be a third-party beneficiary hereof.
16. Consideration. It is hereby acknowledged by the Parties hereto
that no consideration shall be due or paid to Investor for its agreement to
vote to accept the Restructuring and the Plan in accordance with the terms
and conditions of this Agreement other than the Company's agreement to use
its best efforts to obtain approval of any disclosure statement and best
efforts to confirm the Plan in accordance with the terms and conditions of
this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered by its duly authorized officer as of
the date first above written.
McLEODUSA INCORPORATED
By: /s/ Xxxxx X. Xxxxx
---------------------------------
Name: Xxxxx Xxxxx
Title: Chief Operating and
Financial Officer
INVESTORS:
FORSTMANN LITTLE & CO. EQUITY
PARTNERSHIP-V, L.P.
By: FLC XXX Partnership, L.P.
its general partner
By: /s/ Xxxxxx Xxxxxx
---------------------------------
Xxxxxx X. Xxxxxx,
a general partner
FORSTMANN LITTLE & CO. SUBORDINATED
DEBT AND EQUITY MANAGEMENT BUYOUT
PARTNERSHIP-VI, L.P.
By: FLC XXIX Partnership, L.P.
its general partner
By: /s/ Xxxxxx Xxxxxx
---------------------------------
Xxxxxx X. Xxxxxx,
a general partner
FORSTMANN LITTLE & CO. SUBORDINATED
DEBT AND EQUITY MANAGEMENT BUYOUT
PARTNERSHIP-VII, L.P.
By: FLC XXXIII Partnership, L.P.
its general partner
By: /s/ Xxxxxx Xxxxxx
---------------------------------
Xxxxxx X. Xxxxxx,
a general partner
EXHIBIT A
PRINCIPAL TERMS OF RESTRUCTURING
The following is a description of the principal terms for the restructuring
of the Company:
1. The Company will (A) sell its directory publishing business to either
(i) Forstmann Little & Co. or its affiliates for a cash purchase price
of at least $535,000,000 or (ii) such other person that submits a
higher and better all cash offer and (B) use (i) the first
$535,000,000 of the gross cash proceeds of such sale and (ii) at the
Company's option, use the gross cash proceeds in excess of
$560,000,000 to redeem the outstanding Indenture Debt;
2. The FL Standby Purchase Agreement shall not provide for any break-up
fee or any expense reimbursement in favor of the purchaser;
3. In the event that the Restructuring is consummated through the
Out-of-Court Alternative, the Indentures governing the Indenture Debt
will be amended to remove all lien, indebtedness and restrictive
subsidiary agreements restrictions;
4. The outstanding shares of Series A Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock and existing common stock of the
Borrower will be converted to common stock (the "New Common Stock").
5. Forstmann Little & Co. ("Forstmann Little") and its affiliates will
make a $100,000,000 all cash investment in a new series of preferred
stock of the restructured Company, $25,000,000 of such investment will
be used to pay the Borrower's Indenture Debt, $35,000,000 of such
investment will be used to prepay the Term Borrowings and $40,000,000
of such investment will be retained by the Borrower and used for
general corporate purposes, including capital expenditures. Such
preferred stock shall be mandatorily convertible into common stock of
the Company within 60 days of the issuance thereof
6. The Borrower may implement the Restructuring either out-of-court
through an exchange offer for the Indenture Debt and the Borrower's
Series A, D and E Preferred Stock or in-court through a proceeding
under Chapter 11 of the United States Bankruptcy Code, which in either
case shall be consummated on or prior to August 1, 2002;
7. If the Restructuring is accomplished through the In-Court Alternative,
the plan of reorganization for the Restructuring shall be confirmed on
or prior to august 1, 2002 and shall provide that the liens and claims
of the Lenders under the Credit Agreement will be unimpaired within
the meaning of Section 1124 of the Bankruptcy Code;
8. The Company will redeem at least 95% of its outstanding Indenture Debt
for (i) cash in the amount of $560,000,000; (ii) common equity of the
restructured Borrower in an amount acceptable to the Arrangers; and
(iii) at the Borrower's discretion, the excess, if any, of the gross
sales proceeds received by the Borrower in the sale of its directory
publishing business over $560,000,000; and
9. Upon consummation of the Restructuring, (i) Forstmann Little and its
affiliates will be entitled to at least two representatives on the
restructured Borrower's Board of Directors; (ii) Forstmann Little and
its affiliates will own common stock and warrants of the restructured
Borrower in an amount representing approximately 40% of the equity
ownership of the restructured Borrower; and (iii) Xxxxxxxx X.
Xxxxxxxxx will be chairman of the Executive Committee of the
restructured Borrower.
The Company shall be entitled to amend the terms of this Exhibit A without
the consent of Forstmann Little provided that the terms of the amended
Exhibit A do not materially deviate from the terms set forth above.
ANNEX
DEFINITIONS
"Arrangers" means JPMorgan Chase Bank, Bank of America, N.A. and
Citicorp USA, Inc.
"FL Standby Purchase Agreement" means the standby purchase agreement
entered into among Forstmann Little, certain of its affiliates and the
Borrower on or about the Third Amendment Effective Date and each other
agreement, document, certificate or instrument delivered or to be delivered
in connection therewith, pursuant to which Forstmann Little or any of such
affiliates will, in the event that the Borrower has not received and
accepted a higher and better all cash offer for the sale of the Publishing
Assets on or prior to the Restructuring Date, purchase the Publishing
Assets for cash consideration of $535,000,000 on or prior to the
Restructuring Date.
"FL New Preferred Stock Purchase Agreement" means the stock purchase
agreement entered into among Forstmann Little, certain of its affiliates
and the Borrower on or about the Third Amendment Effective Date and each
other agreement, document, certificate or instrument delivered or to be
delivered in connection therewith, pursuant to which Forstmann Little and
such affiliates will make an investment in a new series of preferred stock
(the "New Preferred Stock") of the restructured Borrower as described in
Exhibit A.
"Forstmann Little" is defined in Exhibit A.
"Indenture Debt" means the outstanding Indebtedness of the Borrower
under the Indentures.
"New Common Stock" is defined in Exhibit A.
