Exhibit 4.49
AMENDED AND RESTATED PURCHASE AGREEMENT
AMENDED AND RESTATED PURCHASE AGREEMENT (this
"Agreement"), dated as of January 30, 2002, by and among McLeodUSA
Incorporated, a Delaware corporation (the "Company"), the entities listed
on the signature page hereto under the caption "Purchasers" (each such
entity, a "Purchaser" and, collectively, the "Purchasers"), and solely for
the purposes of Sections 4.5, 4.9, 4.10, 4.18, 7.3, 7.15 and 7.16 the
entities listed on the signature page hereto under the caption "Original FL
Purchasers" (each such entity, an "Original FL Purchaser" and, collectively
with the Purchasers, the "FL Purchasers").
W I T N E S S E T H :
WHEREAS, the Company and the FL Purchasers are parties to
that certain Purchase Agreement, dated as of December 3, 2001 (the
"Original Purchase Agreement"); and
WHEREAS, the parties hereto desire to amend and restate
the Original Purchase Agreement in its entirety to, among other things,
provide for the sale by the Company to the Purchasers of (i) an aggregate
of 74,027,764 shares of the Company's Class A Common Stock, par value $.01
per share (the "Common Stock"); (ii) an aggregate of 10 shares of the
Company's Series B Preferred Stock, par value $.001 per share (the
"Preferred Stock") and (iii) a warrant or warrants to purchase an aggregate
of 22,159,091 shares of the Company's Class A Common Stock par value $.01
per share (the "Warrants" and together with the Common Stock and the
Preferred Stock, the "Securities").
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties, covenants and agreements set forth in
this Agreement, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1. Issuance, Purchase and Sale. Upon the terms and
subject to the conditions set forth herein, at the Closing (as defined
below) the Company shall sell to the Purchasers and the Purchasers shall
purchase from the Company the Securities for $175,000,000 (the "Purchase
Price"). The number of shares of Common Stock, Preferred Stock and Warrants
being acquired by each Purchaser, and the portion of the Purchase Price
payable therefor is set forth opposite such Purchaser's name on Schedule
1.1; provided, that (i) the Purchasers shall have the right to reallocate
among the Purchasers the Securities to be purchased by each Purchaser by
delivering written notice of such reallocation to the Company not less than
three days prior to the Closing so long as such reallocation does not
change the total number of Securities being acquired hereunder or the
Purchase Price and (ii) the Company shall have the right to increase or
decrease the number of shares of Common Stock and the number of shares of
Class A Common Stock subject to the Warrants by delivering written notice
of such change to the Purchasers not less than 10 days prior to the Closing
so long as (A) the number of shares of Common Stock and the number of
shares of Class A Common Stock subject to the Warrants are determined in
accordance with Exhibit A attached hereto and (B) such change in the number
of shares does not change the Purchase Price.
1.2. The Closing; Deliveries. (a) The closing of the
purchase and sale of the Securities (the "Closing") shall take place at the
offices of Skadden, Arps, Slate, Meagher & Flom, LLP, Four Time Square, New
York, New York 10036, at 9:30 a.m. on the business day following the date
on which all of the conditions to each party's obligations hereunder (other
than Section 5.1(d)) have been satisfied or waived and on the same date and
at the same time that the Restructuring is occurring, or at such other
place or time as the parties may agree (the date of the Closing, the
"Closing Date").
(b) At the Closing, the Company shall deliver to each
Purchaser (i) certificates representing the Common Stock and Preferred
Stock and (ii) the Warrants being purchased by such Purchaser, each
registered in the name of such Purchaser in such amounts as such Purchaser
shall inform the Company prior to the Closing. Delivery of such
certificates and Warrants shall be made against receipt by the Company of
the portion of the Purchase Price payable therefor, which shall be paid by
wire transfer of immediately available funds to an account designated by
the Company.
1.3. Capitalized Terms. Capitalized terms not otherwise
defined herein shall have the meanings ascribed to such terms in Section
7.1.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Schedules to that certain
Exchange Agreement, dated as of September 30, 2001, by and among the
Company and the Original FL Purchasers or in Schedule I attached hereto,
the Company hereby represents and warrants to each Purchaser, as of the
date hereof and as of the Closing, as follows:
2.1. Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to
carry on its business as it is now being conducted. The Company is duly
qualified and licensed as a foreign corporation to do business, and is in
good standing (and has paid all relevant franchise or analogous taxes), in
each jurisdiction where the character of its assets owned or held under
lease or the nature of its business makes such qualification necessary,
except where the failure to so qualify or be licensed would not
individually or in the aggregate have a Material Adverse Effect.
2.2. Due Authorization. The Company has the corporate
power and authority to enter into this Agreement and each of the other
Transaction Documents to which it is a party and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by
the Company of this Agreement and each of the other Transaction Documents
to which it is a party, the issuance and delivery of the Securities by the
Company and the compliance by the Company with each of the provisions of
this Agreement and each of the other Transaction Documents to which it is a
party (including the reservation and issuance of the Conversion Shares and
the consummation by the Company of the transactions contemplated hereby and
thereby) (a) are within the corporate power and authority of the Company,
and (b) have been duly authorized by all necessary corporate action of the
Company. This Agreement has been, and each of the other Transaction
Documents to which the Company is a party when executed and delivered by
the Company will be, duly and validly executed and delivered by the
Company, and this Agreement constitutes, and each of such other Transaction
Documents when executed and delivered by the Company will constitute, a
valid and binding agreement of the Company enforceable against the Company
in accordance with its terms except as such enforcement is limited by
bankruptcy, insolvency and other similar laws affecting the enforcement of
creditors' rights generally and for limitations imposed by general
principles of equity. Prior to the Closing, the Conversion Shares will be
validly reserved for issuance, and upon issuance, will be duly and validly
issued and outstanding, fully paid, and nonassessable. The terms,
designations, powers, preferences and relative participation, optional and
other special rights, qualifications, limitations and restrictions of the
Preferred Stock will be as set forth in the Certificate of Designation for
the Series B Preferred Stock (the "Certificate of Designation"), the form
of which is attached to this Agreement as Exhibit 2.2A. The terms of the
Warrants will be set forth in a Warrant, the form of which is attached to
this Agreement as Exhibit 2.2B. The Securities issued to the Purchasers in
accordance with the terms of this Agreement, the Certificate of Designation
or Warrant, as applicable, when issued and delivered in accordance with the
terms of this Agreement, will be validly issued and outstanding, fully paid
and non-assessable, free and, except as provided in Section 4.9 hereof,
clear of any Encumbrances and not subject to the preemptive or other
similar rights of the stockholders of the Company.
2.3. Consents, No Violations. Neither the execution,
delivery or performance by the Company of this Agreement or any of the
other Transaction Documents to which it is a party nor the consummation of
the transactions contemplated hereby or thereby will (a) conflict with, or
result in a breach or a violation of, any provision of the certificate of
incorporation or by-laws or other organizational documents of the Company
or any of its subsidiaries including, without limitation, any of the
provisions of the Certificate of Designation for the Series A Preferred
Stock of the Company; (b) constitute, with or without notice or the passage
of time or both, a breach, violation or default, create an Encumbrance, or
give rise to any right of termination, modification, cancellation,
prepayment, suspension, limitation, revocation or acceleration, under (i)
any Law or (ii) any provision of any agreement or other instrument to which
the Company or any of its subsidiaries is a party or pursuant to which any
of them or any of their assets or properties is subject, except, with
respect to the matters set forth in clauses (i) and (ii), for breaches,
violations, defaults, Encumbrances, or rights of termination, modification,
cancellation, prepayment, suspension, limitation, revocation or
acceleration, which, individually or in the aggregate, would not result in
a Material Adverse Effect or (c) except for the filings of the Certificate
of Designation with the Secretary of State of the State of Delaware, any
required filing under the HSR Act, the Exchange Act, the Securities Act,
filings and orders required under the Bankruptcy Code in connection with
the Restructuring and other filings or notifications that are immaterial to
the consummation of the transactions contemplated hereby, require any
consent, approval or authorization of, notification to, filing with, or
exemption or waiver by, any Governmental Entity or any other Person on the
part of the Company or any of its subsidiaries.
2.4. SEC Reports. The Company has timely filed all proxy
statements, reports and other documents required to be filed by it under
the Exchange Act and made available to the Purchasers complete copies of
all annual reports, quarterly reports, proxy statements and other reports
filed by the Company under the Exchange Act, each as filed with the SEC
(collectively, the "SEC Reports"). Each SEC Report was, on the date of its
filing, in compliance in all material respects with the requirements of its
respective report form and the Exchange Act and did not, on the date of its
filing, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
2.5. Financial Statements. The consolidated financial
statements of the Company (including any related schedules and/or notes)
included in the SEC Reports filed prior to the date hereof have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") consistently followed throughout the periods involved
(except as may be indicated in the notes thereto) and fairly present in
accordance with GAAP the consolidated financial condition, results of
operations, cash flows and changes in stockholders' equity of the Company
and the Subsidiaries as of the respective dates thereof and for the
respective periods then ended (except as may be indicated in the notes
thereto and except, in the case of interim statements, for the absence of
footnotes and as permitted by Form 10-Q and subject to changes resulting
from year-end adjustments, none of which are material in amount or effect).
Except as disclosed in the SEC Reports filed prior to the date hereof,
neither the Company nor any of its subsidiaries has any liability or
obligation (whether accrued, absolute, contingent, unliquidated or
otherwise, whether known or unknown, whether due or to become due and
regardless of when asserted), except (i) liabilities and obligations in the
respective amounts reflected or reserved against in the unaudited
consolidated balance sheet of the Company and its subsidiaries as of
September 30, 2001, (ii) liabilities and obligations incurred in the
ordinary course of business since September 30, 2001 or (iii) liabilities
and obligations which individually or in the aggregate would not have a
Material Adverse Effect.
2.6. Absence of Certain Changes. Except as disclosed in
the SEC Reports filed prior to the date hereof, since September 30, 2001
neither the Company nor any of the Subsidiaries has suffered any change,
event or development or series of changes, events or developments which
individually or in the aggregate would have a Material Adverse Effect.
2.7. Litigation.
(a) Except as disclosed in the SEC Reports filed prior to
the date hereof, there is no claim, action, suit, investigation or
proceeding ("Litigation") pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries or involving any
of their respective properties or assets by or before any court, arbitrator
or other Governmental Entity which (i) in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the transactions contemplated by
this Agreement or (ii) if resolved adversely to the Company or any of its
subsidiaries would individually or in the aggregate have a Material Adverse
Effect.
(b) Except as disclosed in the SEC Reports filed prior to
the date hereof, neither the Company nor any of its subsidiaries is in
default under or in breach of any order, judgment or decree of any court,
arbitrator or other Governmental Entity, except for defaults or breaches,
which individually or in the aggregate would not have a Material Adverse
Effect.
2.8. Compliance with Laws. Except as disclosed in the SEC
Reports filed prior to the date hereof, the Company and its subsidiaries
are in compliance with all Laws and the Company and its subsidiaries
possess all material licenses, franchise permits, consents, registrations,
certificates, and other governmental or regulatory permits, authorizations
or approvals required for the operation of the business as presently
conducted and for the ownership, lease or operation of the Company's and
its subsidiaries' properties (collectively, "Licenses") except where the
failure to possess such Licenses individually or in the aggregate would not
have a Material Adverse Effect. The Company and its subsidiaries have all
Licenses, and all of such Licenses are valid and in full force and effect,
and the Company and its subsidiaries have duly performed and are in
compliance with all of their obligations under such Licenses except where
the failure to be so valid, in full force and effect or performed or in
compliance individually or in the aggregate would not have a Material
Adverse Effect.
2.9. Brokers or Finders. Except for Houlihan Lokey Howard
& Zukin and Credit Suisse First Boston, advisors to the special committee,
whose fees will be paid by the Company, upon the consummation of the
transactions contemplated by this Agreement, no agent, broker, investment
banker or other Person is or will be entitled to any broker's or finder's
fee or any other commission or similar fee from the Company or any of its
subsidiaries in connection with any of the transactions contemplated by
this Agreement or the other Transaction Documents.
2.10. Section 203 of the DGCL; Takeover Statute. The
Board of Directors has taken all actions necessary or advisable so that the
restrictions contained in Section 203 of the DGCL applicable to a "business
combination" (as defined in such Section) will not apply to the execution,
delivery or performance of this Agreement or any of the other Transaction
Documents or the consummation of the transactions contemplated hereby or
thereby. The execution, delivery and performance of this Agreement or any
of the other Transaction Documents and the consummation of the transactions
contemplated hereby or thereby will not cause to be applicable to the
Company any "fair price," "moratorium," "control share acquisition" or
other similar antitakeover statute or regulation enacted under state or
federal laws.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby represents and warrants to the
Company, severally and not jointly, as of the date hereof and as of the
Closing, as follows:
3.1. Acquisition for Investment. Such Purchaser is
acquiring the Securites, for its own account, for investment and not with a
view to, or for sale in connection with, the distribution thereof within
the meaning of the Securities Act.
3.2. Restricted Securities. Such Purchaser understands
that (i) except as provided in the Registration Rights Agreement, the
Securities and any Conversion Shares that may be issued will not be
registered under the Securities Act or any state securities laws by reason
of their issuance by the Company in a transaction exempt from the
registration requirements thereof and (ii) the Securities and any
Conversion Shares that may be issued may not be sold unless such
disposition is registered under the Securities Act and applicable state
securities laws or is exempt from registration thereunder.
3.3. No Brokers or Finders. No agent, broker, investment
banker or other Person is or will be entitled to any broker's or finder's
fee or any other commission or similar fee from the Purchasers in
connection with the transactions contemplated by this Agreement or the
other Transaction Documents.
3.4. Accredited Investor. Such Purchaser is an
"accredited investor" (as defined in Rule 501(a) under the Securities Act).
Such Purchaser has sufficient knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks of
its investment in the Securities and is capable of bearing the economic
risks of such investment.
3.5. Organization. Such Purchaser is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite power and authority to
carry on its business as it is now being conducted.
3.6. Due Authorization. Such Purchaser has all right,
power and authority to enter into this Agreement and each of the other
Transaction Documents to which it is a party and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by
such Purchaser of this Agreement and each of the other Transaction
Documents to which it is a party and the compliance by such Purchaser with
each of the provisions of this Agreement and each of the Transaction
Documents to which it is a party (including the consummation by such
Purchaser of the transactions contemplated hereby and thereby) (a) are
within the power and authority of such Purchaser and (b) have been duly
authorized by all necessary action on the part of such Purchaser. This
Agreement has been, and each of the other Transaction Documents to which it
is a party when executed and delivered by such Purchaser will be, duly and
validly executed and delivered by such Purchaser, and this Agreement
constitutes, and each of such other Transaction Documents when executed and
delivered by such Purchaser will constitute, a valid and binding agreement
of such Purchaser enforceable against such Purchaser in accordance with its
respective terms except as such enforcement is limited by bankruptcy,
insolvency and other similar laws affecting the enforcement of creditors'
rights generally and for limitations imposed by general principles of
equity.
3.7. Consents, No Violations. Neither the execution,
delivery or performance by such Purchaser of this Agreement or any of the
other Transaction Documents to which it is a party nor the consummation of
the transactions contemplated hereby or thereby will (a) conflict with, or
result in a breach or a violation of, any provision of the organizational
documents of such Purchaser; (b) constitute, with or without notice or the
passage of time or both, a breach, violation or default, create an
Encumbrance, or give rise to any right of termination, modification,
cancellation, prepayment, suspension, limitation, revocation or
acceleration, under (i) any law, or (ii) any provision of any agreement or
other instrument to which such Purchaser is a party or pursuant to which
the Purchaser or its assets or properties is subject, except, with respect
to the matters set forth in clause (ii), for breaches, violations,
defaults, Encumbrances, or rights of termination, modification,
cancellation, prepayment, suspension, limitation, revocation or
acceleration, which, individually or in the aggregate, would not materially
adversely affect the ability of such Purchaser to consummate the
transactions contemplated by this Agreement or any Transaction Document to
which it is a party; or (c) except for any required filing under the HSR
Act, require any consent, approval or authorization of, notification to,
filing with, or exemption or waiver by, any Governmental Entity or any
other Person on the part of the Purchaser.
3.8. Sufficient Funds. As of the date hereof, the
Purchaser has binding commitments for, and as of the Closing, the Purchaser
will have, sufficient funds available (through immediately available cash
or existing credit facilities) to enable it to consummate the transactions
contemplated hereby.
ARTICLE IV
COVENANTS
4.1. Conduct of Business by the Company Pending the
Closing. Except as expressly contemplated by this Agreement or as required
in connection with the Restructuring (including in any proceedings required
under the Bankruptcy Code in connection with the Restructuring) or as set
forth on Schedule 4.1, during the period between the date of this Agreement
and the Closing, the Company shall, and shall cause each of its
Subsidiaries to, (i) conduct its business only in the ordinary course and
consistent with past practice, (ii) use reasonable efforts to preserve and
maintain its assets and properties and its relationships with its
customers, suppliers, advertisers, distributors, agents, officers and
employees and other Persons with which it has significant business
relationships, (iii) use reasonable efforts to maintain all of the material
assets it owns or uses in the ordinary course of business consistent with
past practice, (iv) use reasonable efforts to preserve the goodwill and
ongoing operations of its business, (v) maintain its books and records in
the usual, regular and ordinary manner, on a basis consistent with past
practice and (vi) comply in all material respects with applicable Laws.
4.2. Press Releases; Interim Public Filings. The Company
shall, to the extent any such press releases and public filings refer in
any way to the Purchasers and/or their Affiliates, give the Purchasers the
reasonable opportunity to review and comment on such releases and filings,
in each case prior to release in the form in which it will be issued.
4.3. HSR Act. Each of the Purchasers and the Company
shall cooperate in making filings under the HSR Act and shall use its
reasonable efforts to take, or cause to be taken, all actions necessary,
proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement, including
using its reasonable efforts to resolve such objections, if any, as the
Antitrust Division of the Department of Justice or the Federal Trade
Commission or state antitrust enforcement or other Governmental Entities
may assert under antitrust laws with respect to the transactions
contemplated hereby.
4.4. Listing. The Company shall use its reasonable
efforts to continue to have its Class A Common Stock listed on the NASDAQ
National Market System (the "NMS") or a national securities exchange for so
long as any Securities or any shares of Class A Common Stock are
outstanding. Prior to the Closing, the Company shall prepare and submit to
the NMS a listing application, if applicable, covering the Common Stock and
the Conversion Shares and shall obtain approval for the listing of such
shares, subject to, in the case of the Conversion Shares, official notice
of issuance.
4.5. Board Representation; VCOC.
(a) Section 3 of the Certificate of Designation for the
Preferred Stock provides that the holders of Preferred Stock shall be
entitled to elect two directors to the Board of Directors subject to the
terms set forth therein. Accordingly, subject to the Certificate of
Designation for the Preferred Stock, the Purchasers as holders of Preferred
Stock, shall be entitled to designate for election to the Board of
Directors two directors (the "Purchasers' Directors"). Theodore J.
Forstmann and Thomas H. Lister, each of whom currently serves on the Board
of Directors as a director designee of the Series D Preferred Stock, shall
serve as the initial Purchasers' Directors for purposes of the Preferred
Stock. Thereafter, in connection with any annual meeting of stockholders at
which the term of a Purchasers' Director is to expire, the Company will
take all necessary action to cause a Purchasers' Director to be nominated
and use its reasonable efforts to cause such Purchasers' Director to be
elected to the Board of Directors. In the event a vacancy shall exist in
the office of a Purchasers' Director, the Purchasers shall be entitled to
designate a successor and the Board of Directors shall elect such successor
and, in connection with the meeting of stockholders of the Company next
following such election, nominate such successor for election as director
by the stockholders and use its reasonable efforts to cause the successor
to be elected. Without limiting the generality of the foregoing, the
Purchasers' Directors may inspect all contracts, books, records, personnel,
offices and other facilities and properties of the Company and, to the
extent available to the Company after the Company uses reasonable efforts
to obtain them, the records of its accountants, including the accountants'
work papers, and the Purchasers' Directors may make such copies and
inspections thereof as the Purchasers' Directors may request. The Company
shall furnish the Purchasers' Directors with such financial and operating
data and other information with respect to the business and properties of
the Company as the Purchasers' Directors may request. The Company shall
permit each of the Purchasers' Directors to discuss the affairs, finances
and accounts of the Company with, and to make proposals and furnish advice
with respect thereto, the principal officers of the Company.
Notwithstanding anything contained in this Section 4.5 to the contrary, the
provisions of the Certificate of Designation shall govern the rights of
holders of the Preferred Stock to elect directors (including any
Purchasers' Directors). In the event that the holders of the Preferred
Stock shall cease to be entitled to elect any Purchasers' Director and
shall become entitled to designate a "Board Observer" pursuant to, and as
defined in, Section 3(b) thereof, such Board Observer shall the rights set
forth in Sections (d) through (f) of this Section 4.5.
(b) The rights set forth in Section 4.5(a) are intended
to satisfy the requirement of contractual management rights for purposes of
qualifying each of the Purchasers' ownership interests in the Company as
venture capital investments for purposes of the Department of Labor's "plan
assets" regulations, and in the event such rights are not satisfactory for
such purpose as to any such Purchaser, the Company and such Purchaser shall
reasonably cooperate in good faith to agree upon mutually satisfactory
management rights which satisfy such regulations.
(c) The Company shall promptly reimburse the Purchasers'
Directors for all reasonable expenses incurred by them in connection with
their attendance at meetings and any other activities undertaken in their
capacity as directors or an observer consistent with the policies of the
Company in effect on the date hereof or as such policies may be modified
and generally applied to the Company's Board of Directors.
(d) In addition, each Original FL Purchaser shall be
entitled to routinely consult with and advise management of the Company
with respect to the Company's business and financial matters, including
management's proposed annual operating plans, and management will meet
regularly during each year with representatives of each Original FL
Purchaser (the "Representatives") at the Company's facilities at mutually
agreeable times for such consultation and advice, including to review
progress in achieving said plans. The Company shall give each Original FL
Purchaser reasonable advance written notice of any significant new
initiatives or material changes to existing operating plans and shall
afford each Original FL Purchaser adequate time to meet with management to
consult on such initiatives or changes prior to implementation. The Company
agrees to give due consideration to the advice given and any proposals made
by each Original FL Purchaser.
(e) Each Original FL Purchaser may inspect all contracts,
books, records, personnel, offices and other facilities and properties of
the Company and, to the extent available to the Company after the Company
uses reasonable efforts to obtain them, the records of its accountants,
including the accountants' work papers, and each Original FL Purchaser may
make such copies and inspections thereof as each Original FL Purchaser may
reasonably request. The Company shall furnish each Original FL Purchaser
with such financial and operating data and other information with respect
to the business and properties of the Company as each Original FL Purchaser
may reasonably request. The Company shall permit the Representatives to
discuss the affairs, finances and accounts of the Company with, and to make
proposals and furnish advice with respect thereto, the principal officers
of the Company.
(f) The Company shall, after receiving notice from each
Original FL Purchaser as to the identity of any Representative, (i) permit
a Representative to attend all Board meetings and all committees thereof as
an observer, (ii) provide the Representative advance notice of each such
meeting, including such meeting's time and place, at the same time and in
the same manner as such notice is provided to the members of the Board (or
such committee thereof), (iii) provide the Representative with copies of
all materials, including notices, minutes and consents, distributed to the
members of the Board (or such committee thereof) at the same time as such
materials are distributed to such Board (or such committee thereof) and
shall permit the Representative to have the same access to information
concerning the business and operations of the Company and (iv) permit the
Representative to discuss the affairs, finances and accounts of the Company
with, and to make proposals and furnish advice with respect thereto to, the
Board, without voting, and the Board and the Company's officers shall take
such proposals or advice seriously and give due consideration thereto.
Reasonable costs and expenses incurred by the Representative for the
purposes of attending Board (or committee) meetings and conducting other
Company business will be paid by the Company.
(g) The rights set forth in Sections 4.5(d), 4.5(e) and
4.5(f) are intended to satisfy the requirement of contractual management
rights for purposes of qualifying each of the Original FL Purchasers'
ownership interests in the Company as venture capital investments for
purposes of the Department of Labor's "plan assets" regulations, and in the
event such rights are not satisfactory for such purpose as to any such
Original FL Purchaser, the Company and such Original FL Purchaser shall
reasonably cooperate in good faith to agree upon mutually satisfactory
management rights which satisfy such regulations.
4.6. Certificate of Designation. The Company shall cause
the Certificate of Designation to be filed with the Secretary of State of
the State of Delaware prior to the Closing.
4.7. Cooperation. Each of the Purchasers and the Company
agrees to use its reasonable efforts to take, or cause to be taken, all
such further actions as shall be necessary to make effective and consummate
the transactions contemplated by this Agreement.
4.8. Reserve Shares. After the Closing, the Company will
at all times reserve and keep available, solely for issuance and delivery
upon the exercise of the Warrants, the number of shares of Class A Common
Stock from time to time issuable upon the exercise of the Warrants at the
time outstanding. All shares of Class A Common Stock issuable upon the
exercise of the Warrants shall be duly authorized and, when issued upon
such conversion or exercise, shall be validly issued, fully paid and
nonassessable.
4.9. Restrictions on Transfer.
(a) Subject to compliance with applicable securities
laws, from and after the Closing, the FL Purchasers may sell, transfer,
assign, convey, gift, mortgage, pledge, encumber, hypothecate or otherwise
dispose of, directly or indirectly ("Transfer"), any of the Preferred
Stock, Warrants, Conversion Shares or Class A Common Stock owned by them
(individually and collectively, "FL Securities"); provided, that, prior to
the Standstill Termination Date (as defined below), the FL Purchasers shall
not make any Transfer of any of their FL Securities (other than Transfers
between FL Purchasers and their Affiliates who agree in writing to be bound
by the terms of this Agreement) to any Person or group which is, or which
Purchaser believes or should reasonably believe will seek to become, the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of
more than 50% of the outstanding voting securities of the Company (such
Person or group, a "Disqualified Person," and such sale to a Disqualified
Person, a "Disqualified Transaction"), unless such Transfer is specifically
approved in advance in writing by the Board of Directors or unless the
procedures set forth in this Section 4.9 have been complied with.
(b) At any time prior to the Standstill Termination Date,
any FL Purchaser may give written notice to the Company (the "Offer
Notice") (which may be joined in by one or more of the other FL Purchasers,
in which event all references hereafter to FL Purchaser shall be to all of
such FL Purchasers who join in the Offer Notice) that it desires to sell
some or all of its FL Securities in a transaction that may constitute a
Disqualified Transaction, and setting forth the minimum price in cash at
which it is prepared to sell such FL Securities. Such notice may but need
not identify a specific purchaser for such FL Securities.
(c) The Company shall have 45 days from the date of the
Offer Notice to enter into or cause a designee of the Company to enter into
a definitive purchase agreement (the "Purchase Agreement") for the FL
Securities which are the subject of the Offer Notice or to advise the FL
Purchaser that the Board of Directors has approved or has no objection to
such transaction. If the Company or its designee enters into a Purchase
Agreement for the purchase of the FL Securities which are the subject of
the Offer Notice, then the Company or its designee shall be obligated to
purchase such FL Securities within 90 days following the execution of the
Purchase Agreement. The Purchase Agreement must provide that it is
unconditional (except for receipt of regulatory approvals), that the
purchase price for the FL Securities being purchased shall be paid in cash
(unless the FL Purchaser otherwise agrees in writing), and (in the case
where the purchaser is a designee of the Company) that, in the event the
designee (or an affiliate thereof) acquires all or substantially all of the
remaining shares of the Company within 6 months of the date of the closing
under the Purchase Agreement for a blended average price per share (which,
if in the form of marketable securities, shall be determined based on a
10-trading day average at the time of the purchase) that is greater than
the price per share received by the FL Purchaser under the Purchase
Agreement, the FL Purchaser shall be entitled to receive from such Person
the amount by which the blended average per share price paid by such Person
for the balance of the outstanding shares of Class A Common Stock exceeds
the per share purchase price paid under the Purchase Agreement multiplied
by the number of FL Securities sold under the Purchase Agreement.
(d) If no definitive agreement is entered into within 45
days of the Offer Notice, the FL Purchasers shall have the right for 180
days following the end of such 45 day period to enter into a definitive
agreement for the sale of their FL Securities with any Person, including a
Disqualified Transferee, at a per share price no less than that specified
in the Offer Notice.
(e) If the FL Purchaser and the Company or its designee
enter into a Purchase Agreement and the Company or its designee, as
applicable, fails to timely consummate the purchase of the FL Securities
thereunder in accordance with the terms thereof for any reason other than
the breach by the FL Purchaser of the Purchase Agreement, then, in addition
to all other remedies the FL Purchaser may have by reason of such
non-consummation, this Section 4.9 shall be of no further force or effect.
(f) Notwithstanding any other provision of this Section
4.9, no FL Purchaser shall avoid the provisions of this Section 4.9 by
making one or more Transfers to one or more Affiliates and then disposing
of all or any portion of such FL Purchaser's interest in any such
Affiliate. The FL Purchasers shall give the Company notice promptly of any
Transfer. Transfers in violation of the provisions of this Agreement shall
be null and void, and the securities subject to such Transfer shall remain
subject to this Agreement.
(g) Any FL Purchaser, by subsequent written notice, may,
following the giving of an Offer Notice, revoke such notice, in which event
any subsequent sale of FL Securities by the FL Purchaser shall continue to
be subject to this Section 4.9 as if no Offer Notice had been sent, or
change the minimum price or number of FL Securities set forth in the Offer
Notice, in which event the 45-day time period shall recommence from the
date of the giving of the subsequent notice.
(h) For purposes hereof, the term "Standstill Termination
Date" shall mean the close of business on the day preceding the third
anniversary of the Closing Date, or, if earlier, the date Theodore J.
Forstmann is removed, without his consent, as the Chairman of the Executive
Committee of the Board.
4.10. Standstill Agreement. (a) During the period
commencing on the Closing Date and ending on the Standstill Termination
Date (the "Standstill Period") except as (x) specifically permitted by this
Agreement (including sales made in compliance with the provisions of
Section 4.9) or (y) specifically approved in writing in advance by the
Board of Directors of the Company, the Purchasers shall not, and shall
cause any Affiliates controlled by them to not, in any manner, directly or
indirectly:
(1) acquire, or offer or agree to acquire, or become the
"beneficial owner" (as defined above) of or obtain any rights in
respect of, any capital stock of the Company, except for any
shares of Class A Common Stock that may be issuable upon the
conversion or reclassification of the 2001 Preferred, the Common
Stock, the Preferred Stock, the Warrants or otherwise as permitted
pursuant to this Agreement, provided, that the foregoing
limitation shall not prohibit the acquisition of securities of the
Company or any of its successors issued as dividends or as a
result of stock splits and similar reclassifications or received
in a merger or other business combination involving the 2001
Preferred, the Preferred Stock, the Warrants or shares of Class A
Common Stock (including any Conversion Shares) held by the FL
Purchasers or any of their Affiliates at the time of such
dividend, split or reclassification or merger or business
combination;
(2) solicit proxies or consents or become a "participant"
in a "solicitation" (as such terms are defined or used in
Regulation 14A under the Exchange Act) of proxies or consents with
respect to any voting securities of the Company or any of its
successors or initiate or become a participant in any stockholder
proposal or "election contest" with respect to the Company or any
of its successors or induce others to initiate the same, or
otherwise seek to advise or influence any person with respect to
the voting of any voting securities of the Company or any of its
successors (except for activities undertaken by the FL Purchasers
or the FL Purchasers' Directors in connection with solicitations
by the Board of Directors); or
(3) solicit or participate in the solicitation of any
Person or entity to acquire, offer to acquire or agree to acquire,
by merger, tender offer, purchase or otherwise, the Company or a
substantial portion of its assets or more than 50% of the
outstanding capital stock; provided, that, no action taken by the
FL Purchasers or their Affiliates or representatives in connection
with the sale of any of their FL Securities shall constitute a
violation of this clause (3).
(b) Nothing contained in this Section 4.10 (1) shall
prohibit any of the FL Purchasers or their Affiliates from complying with
Rules 13d-1 through 13d-7, as applicable, promulgated under the Exchange
Act or from making such disclosure to the Company's stockholders or from
taking such action which, in their judgment may be required under
applicable law, or (2) shall be deemed to restrict the manner in which the
directors designated by the FL Purchasers pursuant to the Certificate of
Designations participate in deliberations or discussions of the Board of
Directors.
(c) During the Standstill Period, the FL Purchasers and
their Affiliates shall be present, in person or by proxy, and without
further action hereby agree that they shall be deemed to be present, at all
meetings of stockholders of the Company so that all voting securities
(including Class A Common Stock) beneficially owned by the FL Purchasers
and their Affiliates shall be counted for purposes of determining the
presence of a quorum at such meetings. During the Standstill Period, all
voting securities (including Class A Common Stock) beneficially owned by
the FL Purchasers and their Affiliates shall be voted by the FL Purchasers
and their Affiliates, in all elections of directors of the Company in
accordance with the bylaws of the Company, such that (i) at least five
members of the Board of Directors are qualified as "Independent Directors"
as defined in the bylaws and (ii) the Chairman, the Chief Executive
Officer, and the Chief Financial Officer of the Company are elected as
members to the Board of Directors as required by the bylaws. The bylaws of
the Company shall be amended to reflect the foregoing arrangements relating
to the directors of the Company. The FL Purchasers agree to vote their FL
Securities for the approval of a bylaw amendment adopting the board
composition described above.
4.11. Consents; Approvals. The Company shall use its
reasonable efforts to obtain all consents, waivers, exemptions, approvals,
authorizations or orders (collectively, "Consents") (including, without
limitation (i) Consents required to avoid any breach, violation, default,
encumbrance or right of termination, modification, cancellation,
prepayment, suspension, limitation, revocation or acceleration of any
material agreement or instrument to which the Company is a party or its
properties or assets are bound, (ii) all Consents pursuant to the Company's
or any Subsidiary's financing documents, including without limitation, all
indentures and credit agreements of the Company or any Subsidiary, and
(iii) all United States and foreign governmental and regulatory rulings and
approvals). The Company also shall use reasonable efforts to obtain all
necessary state securities laws or blue sky permits and approvals required
to carry out the transactions contemplated hereby and shall furnish all
information as may be reasonably requested in connection with any such
action.
4.12. Access to Property; Records. Between the date
hereof and the Closing the Company shall afford the Purchasers and their
employees, counsel, accountants, partners, investors, and other authorized
representatives reasonable access upon notice, during normal business
hours, to the assets, properties, offices and other facilities and books
and records of the Company and its subsidiaries, and to the outside
auditors of the Company and their work papers. The parties hereto agree
that no investigation by the Purchasers or their representatives shall
affect or limit the scope of the representations and warranties of the
Company contained in this Agreement or in any other Transaction Document
delivered pursuant hereto or limit the liability for breach of any such
representation or warranty.
4.13. Capitalization Certificate. At the Closing, the
Company shall deliver a certificate of its Chief Operating and Financial
Officer setting forth the capitalization of the Company and containing the
other representations and warranties set forth on Exhibit 4.13.
4.14. Registration Rights. At the Closing, the Company
shall enter into a registration rights agreement with the Purchasers
substantially identical to the registration rights agreement among the
Original FL Purchasers and the Company (the "Original Registration Rights
Agreement"), except that the registration rights shall be assignable with
the Company's prior written consent (such consent not to be unreasonably
withheld) to a purchaser or purchasers or other transferees of any of the
Securities.
4.15. Shareholder Rights Plan. For so long as the FL
Purchasers shall own FL Securities representing at least 60% of the
aggregate amount of FL Securities (each amount calculated on an as
converted basis) owned by them immediately after the Closing (the "Initial
Securities"), the Company shall not adopt or implement any stockholders
rights plan or similar plan or device (collectively, a "Rights Plan"). From
and after the earlier of (i) the time that the FL Purchasers shall cease to
own FL Securities representing at least 60% of the amount of Initial
Securities or (ii) the time the FL Purchasers shall complete a sale of FL
Securities in a Disqualified Transaction, the Company may adopt a Rights
Plan, provided, that the percentage that would trigger any rights by the
other stockholders of the Company must be at least one percentage point
greater than the aggregate percentage ownership (on an as converted basis)
of the FL Purchasers in the Company immediately prior to the adoption of
the Rights Plan.
4.16. Section 203 Opt-Out. Prior to the Closing, the
Company shall exercise all authority under applicable law to effect an
amendment to its certificate of incorporation expressly electing not to be
governed by Section 203 of the DGCL.
4.17. Executive Committee Composition. The Company agrees
that the executive committee of the Board of Directors (the "Executive
Committee") shall consist of no more than seven members, including (i) for
so long as the Purchasers are entitled to designate members to the Board of
Directors, the Purchasers' Directors, (ii) the Chairman of the Board of
Directors, (iii) the Chief Executive Officer of the Company and (iv) the
Chief Operating Officer of the Company. The bylaws of the Company shall be
amended to reflect the composition of the executive committee. The FL
Purchasers agree to vote their FL Securities for the approval of a bylaw
amendment adopting the provisions of this Section.
4.18. Termination Agreement. At the Closing, the Company
shall enter into an agreement with the Original FL Purchasers terminating
the Exchange Agreement, dated as of September 30, 2001, among the Original
FL Purchasers and the Company and confirming that the Original Registration
Rights Agreement shall continue in full force and effect with respect to
the Class A Common Stock to be issued in exchange for the 2001 Preferred in
the Restructuring, except that the registration rights shall be assignable
with the Company's prior written consent (such consent not to be
unreasonably withheld) to a purchaser or purchasers or other transferees of
such Class A Common Stock.
ARTICLE V
CONDITIONS
5.1. Conditions to Obligations of the Purchasers and the
Company. The respective obligations of the Purchasers and the Company to
consummate the transactions contemplated hereby are subject to the
satisfaction or waiver at or prior to the Closing of each of the following
conditions:
(a) no statute, rule, regulation, executive order,
decree, or injunction shall have been enacted, entered, promulgated or
enforced by any court or Governmental Entity which prohibits or restricts
the consummation of the transactions contemplated hereby;
(b) any waiting period (and any extension thereof) under
the HSR Act applicable to this Agreement and the transactions contemplated
hereby shall have expired or been terminated;
(c) any material required filings or other consents, if
any, of state regulatory bodies shall have been made or obtained; and
(d) all conditions precedent to the consummation of the
Restructuring shall have been satisfied and the Restructuring shall be
occurring simultaneously with the Closing with such modifications in the
terms of the Restructuring that do not materially deviate from the terms
set forth on Exhibit A. Solely for purposes of this Agreement, a reduction
in the equity percentage which the number of shares of Common Stock being
purchased hereunder at the Closing represents of the fully diluted equity
(calculated as set forth on Exhibit A) or a reduction in the equity
percentage which the number of Conversion Shares represents of the fully
diluted equity (calculated as set forth on Exhibit A) from the respective
percentages set forth on Exhibit A shall be deemed to be a modification in
the terms of the Restructuring that materially deviates from the terms set
forth on Exhibit A.
5.2. Conditions to Obligations of the Purchasers. The
obligations of the Purchasers to consummate the transactions contemplated
hereby shall be subject to the satisfaction or waiver at or prior to the
Closing of each of the following conditions:
(a) Each of the representations and warranties of the
Company contained in this Agreement shall be true and correct when made and
as of the Closing (except to the extent such representations and warranties
are made as of a particular date, in which case such representations and
warranties shall have been true and correct as of such date), except for
failures to be true and correct which individually or in the aggregate
would not have a Material Adverse Effect;
(b) The Company shall have performed, satisfied and
complied in all material respects with all of its covenants and agreements
set forth in this Agreement to be performed, satisfied and complied with
prior to or at the Closing;
(c) The Company shall have executed and delivered the
Registration Rights Agreement and the Termination Agreement referred to in
Sections 4.14 and 4.18, respectively, and each such agreement shall be in
full force and effect;
(d) The Certificate of Designation shall have been duly
filed with the Secretary of State of the State of Delaware in accordance
with the laws of the State of Delaware and the Certificate of Designation
shall be in full force and effect;
(e) The Conversion Shares shall have been duly authorized
and reserved for issuance;
(f) The Company's Certificate of Incorporation shall have
been amended to expressly elect not to be governed by Section 203 of the
DGCL; and
(g) The Company shall have delivered the Capitalization
Certificate referred to in Section 4.13.
5.3. Conditions to Obligations of the Company. The
obligations of the Company to consummate the transactions contemplated
hereby shall be subject to the satisfaction or waiver at or prior to the
Closing of each of the following conditions:
(a) Each of the representations and warranties of the
Purchasers contained in this Agreement shall be true and correct when made
and as of the Closing (except to the extent such representations and
warranties are made as of a particular date, in which case such
representations and warranties shall have been true and correct as of such
date), except for failures to be true and correct which individually or in
the aggregate would not reasonably be expected to have a material adverse
effect on the Purchasers' ability to perform its obligations under this
Agreement; and
(b) The Purchasers shall have performed, satisfied and
complied in all material respects with all of their covenants and
agreements set forth in this Agreement to be performed, satisfied and
complied with prior to or at the Closing Date.
ARTICLE VI
TERMINATION
6.1. Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) by mutual written consent of the Company and the
Purchasers;
(b) by the Company or the Purchasers at any time after
August 1, 2002 if the Closing shall not have occurred by such date;
provided, however, that the failure of the transactions contemplated hereby
to occur on or before such date is not the result of the breach of any
covenants or agreements contained herein by the party seeking to terminate
this Agreement; or
(c) by the Company or by the Purchasers, if any
governmental entity of competent jurisdiction shall have issued an order,
decree or ruling or taken other action restraining, enjoining or otherwise
prohibiting the transactions contemplated hereby and such order, decree,
ruling or other action shall have become final and nonappealable.
6.2. Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 6.1, this Agreement shall
forthwith become void and there shall be no liability on the part of any
party hereto (or any stockholder, director, officer, partner, employee,
agent, consultant or representative of such party) except as set forth in
this Section 6.2, provided that nothing contained in this Agreement shall
relieve any party from liability for any willful breach of this Agreement
and provided further that this Section 6.2 and Sections 7.3, 7.14, 7.15 and
7.16 shall survive termination of this Agreement.
ARTICLE VII
MISCELLANEOUS
7.1. Defined Terms; Interpretations. The following terms,
as used herein, shall have the following meanings:
"2001 Preferred" shall mean the Company's Series D and
Series E Convertible Preferred Stock.
"Affiliate" shall have the meaning ascribed to such term
in Rule 12b-2 of the General Rules and Regulations under the Exchange Act.
"Bankruptcy Code" shall mean Title 11 of the United
States Code.
"Board of Directors" shall mean the Board of Directors of
the Company.
"Class A Common Stock" shall have the meaning the
Company's Class A Common Stock, par value $.01 per share, which meaning
shall include any and all securities of any kind whatsoever of the Company
which may be exchanged for or converted into such Class A Common Stock, and
any and all securities of any kind whatsoever of the Company which may be
issued on or after the date hereof in respect of, in exchange for, or upon
conversion of shares of Class A Common Stock pursuant to a merger,
consolidation, stock split, stock dividend, recapitalization of the Company
or otherwise.
"Conversion Shares" shall mean any shares of Class A
Common Stock issued upon exercise of the Warrants, any and all securities
of any kind whatsoever of the Company which may be exchanged for or
converted into such Class A Common Stock, and any and all securities of any
kind whatsoever of the Company which may be issued on or after the date
hereof in respect of, in exchange for, or upon conversion of shares of
Class A Common Stock pursuant to a merger, consolidation, stock split,
stock dividend, recapitalization of the Company or otherwise.
"DGCL" shall mean the Delaware General Corporation Law.
"Encumbrances" shall mean liens, charges, claims,
security interests, restrictions, options, proxies, voting trusts or other
encumbrances.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any successor federal statute, and the rules and
regulations of the SEC thereunder, all as the same shall be in effect at
the time. Reference to a particular section of the Securities Exchange Act
of 1934, as amended, shall include reference to the comparable section, if
any, of any such successor federal statute.
"Governmental Entity" shall mean any supernational,
national, foreign, federal, state or local judicial, legislative,
executive, administrative or regulatory body or authority.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
thereunder.
"Laws" shall include all foreign, federal, state and
local laws, statutes, ordinances, rules, regulations, orders, judgments,
decrees and bodies of law.
"Material Adverse Effect" shall mean a material adverse
effect on the business, operations, results of operations, assets, or
condition (financial or otherwise) of the Company and its Subsidiaries,
taken as whole (a "Company Material Adverse Effect"); provided, that any
adverse effects on or changes in the Company or any of its Subsidiaries
resulting from or relating to (i) the execution of this Agreement and the
announcement of this Agreement and the transactions contemplated hereby or
(ii) the announcement of, and subsequent disclosures related to, the
Restructuring or the commencement or pendency of proceedings under the
Bankruptcy Code by or against Parent and/or its Subsidiaries shall be
excluded from the determination of a Company Material Adverse Effect.
"Person" shall mean any individual, firm, corporation,
limited liability company, partnership, company or other entity, and shall
include any successor (by merger or otherwise) of such entity.
"Restructuring" shall mean the capital restructuring of
the Company on the terms described in Exhibit A.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933,
as amended, or any successor federal statute, and the rules and regulations
of the SEC thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Act shall include
reference to the comparable section, if any, of such successor federal
statute.
"Transaction Documents" shall mean this Agreement, the
Certificate of Designation, the Warrants, the Registration Rights Agreement
and the Termination Agreement and all other contracts, agreements,
schedules, certificates and other documents being delivered pursuant to
this Agreement or the transactions contemplated hereby.
7.2. Survival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
earlier of (i) termination of this Agreement or (ii) the Closing Date. This
Section 7.2 shall not limit any covenant or agreement of the parties hereto
which by its terms contemplates performance after the Closing Date.
7.3. Fees and Expenses. All costs and expenses incurred
in connection with this Agreement shall be paid by the party incurring such
costs or expense; provided that the Company will reimburse the FL
Purchasers at Closing for reasonable out-of-pocket fees and expenses paid
to third parties solely in connection with the transactions contemplated
hereby.
7.4. Public Announcements. The Purchasers and the Company
have consulted with each other and issued a press release with respect to
this Agreement and the transactions contemplated hereby and neither shall
issue any further press release or make any further public statement
without the prior consent of the other, which consent shall not be
unreasonably withheld or delayed; provided, however, that a party may,
without the prior consent of the other party, issue such press release or
make such public statement as may upon the advice of counsel be required by
law, the NMS or any exchange on which the Company's securities are listed
and, to the extent time permits, it has used all reasonable efforts to
consult with the other party prior thereto.
7.5. Restrictive Legends. In addition to the restrictions
set forth in Section 4.11, no Common Stock, Preferred Stock, Warrant or
Conversion Shares may be transferred without registration under the
Securities Act and applicable state securities laws unless counsel to the
Company shall advise the Company that such transfer may be effected without
such registration.
(a) Each certificate representing the Common Stock shall
bear legends in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933
ACT"), OR UNDER ANY APPLICABLE STATE LAWS. THE SHARES REPRESENTED
BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE REGISTERED OWNER
HEREOF FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN
CONNECTION WITH ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE
1933 ACT. THE SHARES MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR
ASSIGNED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER THE
PROVISIONS OF THE 1933 ACT OR ANY APPLICABLE STATE SECURITIES
LAWS, OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN A
TRANSACTION OTHERWISE IN COMPLIANCE WITH APPLICABLE FEDERAL AND
STATE SECURITIES LAWS.
THE SALE, PLEDGE, TRANSFER, ASSIGNMENT OR OTHER DISPOSITION OF THE
SHARES REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY AND
SUBJECT TO THE PROVISIONS OF A STOCK PURCHASE AGREEMENT DATED AS
OF JANUARY 30, 2002, A COPY OF WHICH IS AVAILABLE UPON REQUEST FOR
INSPECTION AT THE OFFICES OF THE COMPANY. ANY SUCH REQUEST SHOULD
BE ADDRESSED TO THE SECRETARY OF THE COMPANY.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE SHALL BE REDEEMABLE
AS PROVIDED IN THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION.
(b) Each certificate representing the Preferred Stock
shall bear legends in substantially the following form:
THE COMPANY IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OR SERIES
OF STOCK. AS REQUIRED UNDER DELAWARE LAW, THE COMPANY SHALL
FURNISH TO ANY HOLDER UPON REQUEST AND WITHOUT CHARGE, A FULL
SUMMARY STATEMENT OF THE DESIGNATIONS, VOTING RIGHTS, PREFERENCES,
LIMITATIONS AND SPECIAL RIGHTS OF THE SHARES OF EACH CLASS OR
SERIES AUTHORIZED TO BE ISSUED BY THE COMPANY SO FAR AS THEY HAVE
BEEN FIXED AND DETERMINED AND THE AUTHORITY OF THE BOARD OF
DIRECTORS TO FIX AND DETERMINE THE DESIGNATIONS, VOTING RIGHTS,
PREFERENCES, LIMITATIONS AND SPECIAL RIGHTS OF THE CLASSES AND
SERIES OF SECURITIES OF THE COMPANY.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933
ACT"), OR UNDER ANY APPLICABLE STATE LAWS. THE SHARES REPRESENTED
BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE REGISTERED OWNER
HEREOF FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN
CONNECTION WITH ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE
1933 ACT. THE SHARES MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR
ASSIGNED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER THE
PROVISIONS OF THE 1933 ACT OR ANY APPLICABLE STATE SECURITIES
LAWS, OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN A
TRANSACTION OTHERWISE IN COMPLIANCE WITH APPLICABLE FEDERAL AND
STATE SECURITIES LAWS.
THE SALE, PLEDGE, TRANSFER, ASSIGNMENT OR OTHER DISPOSITION OF THE
SHARES REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY AND
SUBJECT TO THE PROVISIONS OF A STOCK PURCHASE AGREEMENT DATED AS
OF JANUARY 30, 2002, A COPY OF WHICH IS AVAILABLE UPON REQUEST FOR
INSPECTION AT THE OFFICES OF THE COMPANY. ANY SUCH REQUEST SHOULD
BE ADDRESSED TO THE SECRETARY OF THE COMPANY.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE SHALL BE REDEEMABLE
AS PROVIDED IN THE CERTIFICATE OF DESIGNATION AND THE COMPANY'S
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION.
(c) Each Warrant shall bear a legend in substantially the
following form:
THIS WARRANT AND ANY SHARES OF COMMON STOCK ACQUIRED UPON THE
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY
APPLICABLE STATE LAWS. THIS WARRANT HAS BEEN ACQUIRED BY THE
REGISTERED OWNER HEREOF FOR INVESTMENT AND NOT WITH A VIEW TO OR
FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF WITHIN THE
MEANING OF THE 1933 ACT. THIS WARRANT AND ANY SHARES OF COMMON
STOCK ACQUIRED UPON THE EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT IN A TRANSACTION WHICH IS
EXEMPT UNDER THE PROVISIONS OF THE 1933 ACT OR ANY APPLICABLE
STATE SECURITIES LAWS, OR PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR IN A TRANSACTION OTHERWISE IN COMPLIANCE WITH
APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
THE SALE, PLEDGE, TRANSFER, ASSIGNMENT OR OTHER DISPOSITION OF
THIS WARRANT AND ANY SHARES OF COMMON STOCK ACQUIRED UPON THE
EXERCISE OF THIS WARRANT IS RESTRICTED BY AND SUBJECT TO THE
PROVISIONS OF A PURCHASE AGREEMENT DATED AS OF JANUARY 30, 2002, A
COPY OF WHICH IS AVAILABLE UPON REQUEST FOR INSPECTION AT THE
OFFICES OF THE COMPANY. ANY SUCH REQUEST SHOULD BE ADDRESSED TO
THE SECRETARY OF THE COMPANY.
(d) Each certificate representing Conversion Shares shall
bear a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933
ACT"), OR UNDER ANY APPLICABLE STATE LAWS. THE SHARES REPRESENTED
BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE REGISTERED OWNER
HEREOF FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN
CONNECTION WITH ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE
1933 ACT. THE SHARES MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR
ASSIGNED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER THE
PROVISIONS OF THE 1933 ACT OR ANY APPLICABLE STATE SECURITIES
LAWS, OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN A
TRANSACTION OTHERWISE IN COMPLIANCE WITH APPLICABLE FEDERAL AND
STATE SECURITIES LAWS.
THE SALE, PLEDGE, TRANSFER, ASSIGNMENT OR OTHER DISPOSITION OF THE
SHARES REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY AND
SUBJECT TO THE PROVISIONS OF A STOCK PURCHASE AGREEMENT DATED AS
OF JANUARY 30, 2002, A COPY OF WHICH IS AVAILABLE UPON REQUEST FOR
INSPECTION AT THE OFFICES OF THE COMPANY. ANY SUCH REQUEST SHOULD
BE ADDRESSED TO THE SECRETARY OF THE COMPANY.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE SHALL BE REDEEMABLE
AS PROVIDED IN THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION.
7.6. Further Assurances. At any time or from time to time
after the Closing, the Company, on the one hand, and the Purchasers, on the
other hand, agree to cooperate with each other, and at the request of the
other party, to execute and deliver any further instruments or documents
and to take all such further action as the other party may reasonably
request in order to evidence or effectuate the consummation of the
transactions contemplated hereby or by the other Transaction Documents and
to otherwise carry out the intent of the parties hereunder or thereunder.
7.7. Successors and Assigns. This Agreement shall bind
and inure to the benefit of the Company and the Purchasers and the
respective successors, permitted assigns, heirs and personal
representatives of the Company and the Purchasers, provided that prior to
the Closing the Company may not assign its rights or obligations under this
Agreement to any Person without the prior written consent of the
Purchasers, and provided further that the Purchasers may not assign their
rights or obligations under this Agreement to any Person (other than an
Affiliate) without the prior written consent of the Company. In addition,
and whether or not any express assignment has been made, the provisions of
this Agreement which are for the Purchasers' benefit as purchasers or
holders of the Common Stock, Preferred Stock, Warrants or Conversion Shares
are also for the benefit of, and enforceable by, any Affiliates of the
Purchasers who hold such Common Stock, Preferred Stock or Conversion Shares
and received such Common Stock, Preferred Stock or Conversion Shares in
accordance with the terms of this Agreement.
7.8. Entire Agreement. This Agreement and the other
Transaction Documents contain the entire agreement between the parties with
respect to the subject matter hereof and supersede all prior and
contemporaneous arrangements or understandings with respect thereto.
Without limiting the generality of the foregoing, this Agreement supercedes
the Original Purchase Agreement.
7.9. Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by telecopy,
nationally recognized overnight courier or first class registered or
certified mail, return receipt requested, postage prepaid, addressed to
such party at the address set forth below or such other address as may
hereafter be designated in writing by such party to the other parties:
(i) if to the Company, to:
McLeodUSA Incorporated
McLeodUSA Technology Park
6400 C Street SW
PO Box 3177
Cedar Rapids, Iowa 52406-3177
Telecopy No.: (319) 790-7901
Attention: Randall Rings, Esq.
Group Vice President and Chief
Legal Officer
with a copy to (which shall not constitute
notice):
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
Telecopy No.: (312) 407-0411
Attention: Peter C. Krupp, Esq.
(ii) if to the Purchasers, to:
c/o Forstmann Little & Co.
767 Fifth Avenue
New York, NY 10153
Telecopy No.: (212) 759-9059
Attention: Thomas H. Lister
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Telecopy No.: (212) 859-4000
Attention: Aviva Diamant, Esq.
All such notices, requests, consents and other
communications shall be deemed to have been given or made if and when
delivered personally or by overnight courier to the parties at the above
addresses or sent by electronic transmission, with confirmation received,
to the telecopy numbers specified above (or at such other address or
telecopy number for a party as shall be specified by like notice).
7.10. Amendments. The terms and provisions of this
Agreement may be modified or amended, or any of the provisions hereof
waived, temporarily or permanently, in a writing executed and delivered by
the Company and the Purchasers. No waiver of any of the provisions of this
Agreement shall be deemed to or shall constitute a waiver of any other
provision hereof (whether or not similar). No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof.
7.11. Counterparts. This Agreement may be executed in any
number of counterparts, and each such counterpart hereof shall be deemed to
be an original instrument, but all such counterparts together shall
constitute but one agreement.
7.12. Headings. The headings of the sections of this
Agreement have been inserted for convenience of reference only and shall
not be deemed to be a part of this Agreement.
7.13. Nouns and Pronouns. Whenever the context may
require, any pronouns used herein shall include the corresponding
masculine, feminine or neuter forms, and the singular form of names and
pronouns shall include the plural and vice versa.
7.14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT
GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW.
7.15. Submission to Jurisdiction. This Agreement shall be
governed by, enforced under and construed in accordance with the laws of
the State of Delaware, without giving effect to any choice or conflict of
law provision or rule thereof. Each of the parties hereto hereby
irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of Delaware and of the United
States of America in each case located in the County of Delaware for any
litigation arising out of or relating to this Agreement and the
transactions contemplated hereby (and agrees not to commence any litigation
relating thereto except in such courts), and further agrees that service of
any process, summons, notice or document by U.S. registered mail to its
respective address set forth in Section 7.9 shall be effective service of
process for any litigation brought against it in any such court. Each of
the parties hereto hereby irrevocably and unconditionally waives any
objection to the laying of venue of any litigation arising out of this
Agreement or the transactions contemplated hereby in the courts of the
State of Delaware or of the United States of America in each case located
in the County of Delaware and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court
that any such litigation brought in any such court has been brought in an
inconvenient forum. Notwithstanding the foregoing, in the event that the
Company and/or any of its Subsidiaries commence proceedings under the
Bankruptcy Code, the parties hereto irrevocably and unconditionally consent
to submit to the jurisdiction of the bankruptcy court in which such
proceeding is commenced for any litigation arising out of or relating to
this Agreement and the transactions contemplated thereby (and agree not to
commence any litigation relating thereto except in such bankruptcy court).
7.16. WAIVER OF JURY TRIAL. THE COMPANY AND THE
PURCHASERS HEREBY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY ACTION, PROCEEDING OR LITIGATION DIRECTLY OR INDIRECTLY
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTION DOCUMENTS.
7.17. Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and
valid, but if any provision of this Agreement is held to be invalid or
unenforceable in any respect, such invalidity or unenforceability shall not
render invalid or unenforceable any other provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed
and delivered this Agreement as of the date first above written.
PURCHASERS
FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP-VII, L.P.
By: FLC XXXII Partnership, L.P.
its general partner
By: /s/Thomas H. Lister
----------------------------------------
Thomas H. Lister,
a general partner
FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND EQUITY
MANAGEMENT BUYOUT PARTNERSHIP-VIII, L.P.
By: FLC XXXIII Partnership, L.P.
its general partner
By: /s/Thomas H. Lister
----------------------------------------
Thomas H. Lister,
a general partner
ORIGINAL FL PURCHASERS
FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP-V, L.P.
By: FLC XXX Partnership, L.P.
its general partner
By: /s/Thomas H. Lister
----------------------------------------
Thomas H. Lister,
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/Thomas H. Lister
---------------------------------------
Thomas H. Lister,
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/Thomas H. Lister
--------------------------------------------
Thomas H. Lister,
a general partner
McLEODUSA INCORPORATED
By: /s/Chris A. Davis
----------------------------------------
Name: Chris A. Davis
Title: Chief Operating and Financial Officer
McLeodUSA Incorporated EXHIBIT A
- -------------------------------------------------------------------------------
SUMMARY TERM SHEET
Company McLeodUSA Incorporated (the "Company").
Parties Subject to Restructure The Company; Forstmann Little &
Company, its affiliates and its
co-investors, if any, (collectively,
"FL" or the "Sponsor"); the banks
participating in the senior credit
agreement (the "Bank Group");
holders ("Noteholders") of the
Company's unsecured notes including
(a) 11.375% Senior Notes due 2009;
(b) 10.500% Senior Discount Notes
due 2007; (c) 9.250% Senior Notes
due 2007; (d) 8.375% Senior Notes
due 2008; (e) 9.500% Senior Notes
due 2008; (f) 8.125% Senior Notes
due 2009; (g) 11.500% Senior Notes
due 2009; and (h) 12.000% Senior
Notes due 2008 (collectively, the
"Notes"); preferred equity holders
("Preferred Holders") of the
Company's class A, D, and E
preferred stock (collectively, the
"Old Preferred Stock"); and the
holders of the Company's current
common stock ("Old Equity").
Overview The Company will restructure its
balance sheet (the "Transaction" or
the "Recapitalization") through,
among other things, exchange of the
Notes for (i) cash, (ii) a senior
convertible preferred stock (the
"New Convertible Preferred Stock"),
and (iii) five-year warrants (the
"New Noteholder Warrants") to
purchase newly issued new common
stock ("New Common Stock"); the
exchange of the Existing Preferred
Stock and the Existing Common Stock
for New Common Stock; and new
investment by FL for New Common
Stock and warrants identical to the
New Noteholder Warrants (the "New FL
Warrants," and together with the New
Noteholder Warrants, the
"Warrants"), through a
pre-negotiated Chapter 11 Plan.
Pursuant to the Transaction:
o The Noteholders will receive
the following:
- $670 million, subject to
adjustment described below, from:
(a) Pubco Proceeds: $570
million from the Pubco sale,
unless the sale of Pubco
closes after April 30, 2002 in
which case the proceeds from
the Pubco sale (and the amount
payable to the Noteholders)
shall be reduced $200,000 per
day from May 1, 2002 through
the earlier of (i) the date of
closing or (ii) August 1,
2002; and
(b) FL Investment: $100
million from the FL
investment, described below.
- $175 million of New
Convertible Preferred Stock,
convertible into 15.0000% of
the New Common Stock on a
fully diluted basis at closing
(after giving effect to the
Recapitalization, but prior to
the exercise of the Warrants
and management options), the
terms set on the term sheet
attached hereto as Exhibit A
(the "Preferred Term Sheet").
It being understood that as of
the closing of the
Recapitalization, the
conversion price of the New
Convertible Preferred Stock
will be calculated as follows:
where:
X = the aggregate number of
shares of New Common
Stock issuable upon
conversion of the New
Convertible Preferred
Stock;
CS = the actual number of
shares of New Common
Stock outstanding
(excluding New Common
Stock underlying New
Convertible Preferred
Stock, Warrants and
management options);
and
LP = the aggregate
liquidation preference
of the New Convertible
Preferred Stock (i.e.,
$175 million)
the number of shares of New
Common Stock issuable upon
conversion of the New
Convertible Preferred Stock is
determined as follows:
X = 15% x ( X + CS)
and the conversion price on a
per share basis of the New
Convertible Preferred Stock
(CP) is determined as follows:
X = LP / CP
and therefore:
CP = LP / X
As an example, where the
Company has 850,000 shares of
New Common Stock actually
outstanding (excluding New
Common Stock underlying New
Convertible Preferred Stock,
Warrants and management
options), the New Convertible
Preferred Stock will convert
into 150,000 shares of New
Common Stock (150,000 = 15% x
(150,000 + 850,000)) and the
conversion price will be
$1,166.667 ($1,166.667 = $175
million / 150,000).
- New Noteholder Warrants to
purchase an aggregate of
6.0000% of the shares of New
Common Stock on a fully
diluted basis at closing
(after giving effect to the
Recapitalization and the
exercise of the Warrants, but
prior to the exercise of any
management options)
exercisable for five years for
aggregate consideration
payable to the Company of $30
million.
o FL Investment: FL will invest
$175 million for (i) 22.7778%
of the New Common Stock on a
fully diluted basis at closing
(after giving effect to the
Recapitalization and the
shares of New Common Stock
underlying the New Convertible
Preferred Stock, but prior to
the exercise of the Warrants
and management options) and
(ii) New FL Warrants, in an
amount and with terms
identical to the New
Noteholder Warrants.
o Series A preferred stock will
receive 10.3682% of the New
Common Stock on a fully
diluted basis at closing
(after giving effect to the
Recapitalization and the
shares of New Common Stock
underlying the New Convertible
Preferred Stock, but prior to
the exercise of the Warrants
and management options).
o Series D preferred stock will
receive 24.0625% of the New
Common Stock on a fully
diluted basis at closing
(after giving effect to the
Recapitalization and the
shares of New Common Stock
underlying the New Convertible
Preferred Stock, but prior to
the exercise of the Warrants
and management options).
o Series E preferred stock will
receive 10.9375% of the New
Common Stock on a fully
diluted basis at closing
(after giving effect to the
Recapitalization and the
shares of New Common Stock
underlying the New Convertible
Preferred Stock, but prior to
the exercise of the Warrants
and management options).
o Existing Common Stock will
receive 16.8540% of the New
Common Stock on a fully
diluted basis at closing
(after giving effect to the
Recapitalization and the
shares of New Common Stock
underlying the New Convertible
Preferred Stock, but prior to
the exercise of the Warrants
and management options).
Additional Noteholder Rights The Company shall agree to list the
New Common Stock and New Convertible
Preferred Stock on a national
securities exchange or the Nasdaq
Stock Market and shall make periodic
filings under the Exchange Act.
Corporate Governance The new Board of Directors will
initially consist of 15 members and
will include 1 member nominated by
the Noteholders. In connection with
the Transaction, the Company shall
cause to be appointed or shall
nominate for election the designee
of the Noteholders. The Noteholders'
initial representative on the Board
of Directors shall be reasonably
acceptable to the Company.
Thereafter, the holders of the New
Convertible Preferred Stock shall be
entitled to select a member of the
Board of Directors to the extent
provided under "Special Voting
Rights" on Exhibit A.
Management Incentive Plan The new Board of Directors will
develop and implement the McLeodUSA
2001 Omnibus Equity Plan (the
"Management Incentive Plan") as
described in the Offering Memorandum
dated December 7, 2001.
Other Conditions The Company agrees to pay for all
reasonable costs and expenses of the
Noteholders (including fees and
expenses for one counsel and one
financial advisor, which shall not
be duplicative of the fees and
expenses to be paid to the advisors
for the unsecured creditors
committee).
The Company will provide cooperation
to the financial advisor and counsel
in due diligence inquiries.
The Company shall use reasonable
efforts to cause FL to execute any
and all documents necessary or
appropriate to allow the Company to
perform all of its obligations
provided in this Term Sheet and
otherwise in connection with the
Company's restructuring.
Other Provisions The Plan of Reorganization shall be
substantially similar to the terms
and provisions of the Plan of
Reorganization included in the
Offering Memorandum dated December
7, 2001 with such modifications
necessary (a) to incorporate the
terms hereof, and (b) to add the
members and advisors of the ad hoc
bondholder committee and any
official creditors committee as
beneficiaries of the Plan of
Reorganization's release provisions.
Exhibit A
NEW CONVERTIBLE PREFERRED TERM SHEET
Note: Capitalized terms not defined herein have the meanings ascribed to
them in the term sheet to which this Preferred Term Sheet is an exhibit.
Issuer McLeodUSA Incorporated.
Liquidation Preference $175 million in the aggregate, plus
accrued and unpaid dividends.
Dividend Rate Cumulative dividends at the
rate of 2.5% per annum. Dividends
cumulate whether or not declared by
the Board (the senior credit
agreement prohibits payment of cash
dividends).
Conversion Convertible at the option of the
holder at any time into a number of
shares of New Common Stock equal to
(a) the Liquidation Preference of
the shares of New Convertible
Preferred Stock being converted
divided by (b) the conversion price
of the New Convertible Preferred
Stock as calculated in accordance
with the above example under
"Overview" at the time of the
closing of the Recapitalization.
Mandatory Conversion Upon a Mandatory Conversion Event
(defined below), then, at the option
of the Company, the New Convertible
Preferred Stock shall be converted
in whole or in part on a pro rata
basis at the then-effective
Conversion Price into shares of New
Common Stock.
"Mandatory Conversion Event" means
any such time following the fourth
anniversary of the issuance of the
New Convertible Preferred Stock that
the closing price of New Common
Stock has equaled or exceeded 135%
of the conversion price of the New
Convertible Preferred Stock for at
least 20 out of any 30 consecutive
trading days.
Mandatory Redemption On the ten-year anniversary of the
Closing Date.
Merger, Consolidation Upon the merger, consolidation or
other sale of the Company, the
Preferred Stock shall be converted
into the same consideration such
preferred stock would have received
had such preferred stock been
converted into New Common Stock
immediately prior to such merger,
consolidation or other sale of the
Company.
Voting Rights The New Convertible Preferred Stock
would be entitled to vote with New
Common Stock as a single class on an
"as converted" basis.
Special Voting Rights The holders of the New Convertible
Preferred Stock will have the right
to elect one member to the Company's
Board of Directors so long as not
less than 33% of the New Convertible
Preferred Stock issued on the
closing of the Transaction remains
outstanding.
Ranking Junior to all existing and future
debt obligations; senior to all
classes of common stock and each
other class of capital stock or
series of preferred stock of the
Company.
Anti-Dilution (i) Customary anti-dilution
protection for stock splits, reverse
splits, and extraordinary dividends
and (ii) customary weighted average
anti-dilution protection for other
issuances below the then market
value of the New Common Stock.
Registration and Other Rights The Company will grant to the
holders of the New Convertible
Preferred Stock customary
information and inspection rights
and, if required, limited, shelf
registration rights to facilitate
resales by any holder of the New
Convertible Preferred Stock who may
be deemed to be an affiliate of the
Company upon the consummation of the
Transaction or as a result of a
holder having a representative on
the Board of Directors of the
Company.
The Company will further grant the
holders of the New Convertible
Preferred Stock the right, for the
period beginning on the closing of
the Recapitalization until the
eighteen month anniversary of such
closing, to participate, on a pro
rata basis, in any purchase by FL,
any affiliate of FL or any person or
entity acting in concert with FL in
one or more series of related
transactions of greater than either
(x) an aggregate of $50,000,000 of
equity securities of the Company or
(y) 10% of the New Common Stock of
the Company on a fully-diluted
basis. The Company may provide this
co-investment right to holders of
the New Convertible Preferred Stock
either simultaneously with FL's
investment or as soon as practicable
following the closing of such
investment as determined by the
Company.