UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
McLeodUSA Incorporated
- ------------------------------------------------------------------------------
(Name of Issuer)
Class A Common Stock, par value $0.01 per share
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(Title of Class of Securities)
582266 10 2
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(CUSIP Number)
Fried, Frank, Harris, Shriver & Forstmann Little & Co. Subordinated Debt
Jacobson & Equity Management Buyout
One New York Plaza Partnership-VI, L.P.
New York, NY 10004 Forstmann Little & Co. Subordinated
Attn: Robert C. Schwenkel, Esq. Debt & Equity Management Buyout
(212) 859-8000 Partnership-VII, L.P.
Forstmann Little & Co. Equity
Partnership-V, L.P.
c/o Forstmann Little & Co.
767 Fifth Avenue
New York, NY 10153
Attn: Winston W. Hutchins
(212) 355-5656
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
September 15, 1999
----------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of sections 240.13d-1(e), 240.13d-1(f) or
240.13(g), check the following box. [ ]
NOTE: Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See section
240.13d-7(b) for other parties to whom copies are to be sent.
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following box. [ ]
Check the following box if a fee is being paid with the statement |X|. (A
fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent
of the class of securities described in Item 1; and (2) has filed no
amendment subsequent thereto reporting beneficial ownership of five percent
or less of such class.) (See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are
to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of
that section of the Act but shall be subject to all other provisions of the
Act (however, see the Notes).
<PAGE>
SCHEDULE 13D
CUSIP No. 652907106 Page 2 of 23
1 NAME OF REPORTING PERSON/
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND EQUITY MANAGEMENT
BUYOUT PARTNERSHIP-VI, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
NUMBER OF 7 SOLE VOTING POWER
SHARES 5,873,478*
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 0
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 5,873,478*
10 SHARED DISPOSITIVE POWER
0
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
CUSIP No. 652907106 Page 3 of 23
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,873,478*
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
3.7%
14 TYPE OF REPORTING PERSON*
PN
* Section 8(a)(i) of the Certificate of Designation of the Powers,
Preferences and Relative, Participating, Optional and Other Special
Rights of Series B Cumulative Convertible Preferred Stock (the "Series
B Preferred") and Qualifications, Limitations and Restrictions Thereof
(the "Series B Certificate of Designation") sets forth a formula for
determining the number of shares of Class A Common Stock issuable, as
at any date, upon conversion of the Series B Preferred. The number of
shares referred to in items 7, 9 and 11 above was calculated in
accordance with such formula assuming that the Conversion Price and
the Current Market Price (each such term as defined in the Series B
Certificate of Designation) equal $36.50.
<PAGE>
SCHEDULE 13D
CUSIP No. 652907106 Page 4 of 23
1 NAME OF REPORTING PERSON/
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND EQUITY MANAGEMENT
BUYOUT PARTNERSHIP-VII, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
NUMBER OF 7 SOLE VOTING POWER
SHARES 12,962,138*
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 0
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 12,962,138*
10 SHARED DISPOSITIVE POWER
0
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
CUSIP No. 652907106 Page 5 of 23
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
12,962,138*
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.7%
14 TYPE OF REPORTING PERSON*
PN
* Section 8(a)(i) of the Series B Certificate of Designation sets forth
a formula for determining the number of shares of Class A Common Stock
issuable, as at any date, upon conversion of the Series B Preferred.
The number of shares referred to in items 7, 9 and 11 above was
calculated in accordance with such formula assuming that the
Conversion Price and the Current Market Price (each such term as
defined in the Series B Certificate of Designation) equal $36.50.
<PAGE>
SCHEDULE 13D
CUSIP No. 652907106 Page 6 of 23
1 NAME OF REPORTING PERSON/
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP-V, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
NUMBER OF 7 SOLE VOTING POWER
SHARES 8,561,643*
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 0
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 8,561,643*
10 SHARED DISPOSITIVE POWER
0
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
CUSIP No. 652907106 Page 7 of 23
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
8,561,643*
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.2%
14 TYPE OF REPORTING PERSON*
PN
* Section 8(a)(i) of the Certificate of Designation of the Powers,
Preferences and Relative, Participating, Optional and Other Special
Rights of Series C Convertible Preferred Stock (the "Series C
Preferred") and Qualifications, Limitations and Restrictions Thereof
(the "Series C Certificate of Designation") sets forth a formula for
determining the number of shares of Class A Common Stock issuable, as
at any date, upon conversion of the Series C Preferred. The number of
shares referred to in items 7, 9 and 11 above was calculated in
accordance with such formula assumting that the Conversion Price and
the Current Market Price (each such term as defined in the Series C
Certificate of Designation) equal $36.50.
<PAGE>
ITEM 1. Security and Issuer
-------------------
This Statement on Schedule 13D relates to the Class A Common
Stock, par value $0.01 per share (the "Common Stock"), of McLeodUSA
Incorporated, a Delaware corporation ("McLeodUSA"). The principal executive
offices of McLeodUSA are located at 6400 C Street, S.W., P.O. Box 3177,
Cedar Rapids, Iowa 52406-3177.
ITEM 2. Identity and Background
-----------------------
This statement is filed by Forstmann Little & Co.
Subordinated Debt and Equity Management Buyout Partnership-VI, L.P., a
Delaware limited partnership("MBO-VI"), Forstmann Little & Co. Subordinated
Debt and Equity Management Buyout Partnership-VII, L.P., a Delaware limited
partnership ("MBO-VII") and Forstmann Little & Co. Equity Partnership-V,
L.P., a Delaware limited partnership ("Equity-V"; with MBO-VI and MBO-VII,
collectively, the "FL Partnerships").
ITEM 2. (a), (b), (c)
-------------
The FL Partnerships are limited partnerships which are
private investment firms. Information with respect to the identity, address
and background of the general partners of each of the FL Partnerships is
set forth on Schedule I attached hereto.
The address of the principal office of each of the FL
Partnerships is c/o Forstmann Little & Co., 767 Fifth Avenue, New York, New
York 10153.
ITEM 2. (d), (e)
--------
During the last five years, neither MBO-VI, MBO-VII or
Equity-V nor, to the knowledge of MBO-VI, MBO-VII and Equity-V, any person
identified in Schedule I has (i) been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) been a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities
laws or finding any violation with respect to such laws.
ITEM 3. Source and Amount of Funds or Other Consideration
-------------------------------------------------
As more fully described in Item 6 below, on September 15,
1999, the FL Partnerships purchased from McLeodUSA (i) an aggregate of
275,000 shares of McLeodUSA's Series B Preferred Stock, par value $.01 per
share (the "Series B Preferred"), for an aggregate purchase price of
$693,125,000 and (ii) an aggregate of 125,000 shares of McLeodUSA's Series
C Preferred Stock, par value $.01 per share (the "Series C Preferred"; with
the Series B Preferred, collectively, the "Preferred Stock"), for an
aggregate purchase price of $321,875,000. As of September 15, 1999, the
shares of Series B Preferred and Series C Preferred purchased by the FL
Partnerships were convertible into 27,397,259 shares of Common Stock.
The funds used by the FL Partnerships to purchase the
Preferred Stock were obtained from capital contributions made by the
partners of each of the FL Partnerships.
ITEM 4. Purpose of Transaction
----------------------
The FL Partnerships consummated the transactions described
herein in order to acquire an equity interest in McLeodUSA for investment
purposes. The FL Partnerships intend to review continuously their position
in McLeodUSA. Depending upon future evaluations of the business prospects
of McLeodUSA and upon other developments, including, but not limited to,
general economic and business conditions and stock market conditions, the
FL Partnerships may retain or from time to time increase their holdings or
dispose of all or a portion of their holdings, subject to any applicable
legal and contractual restrictions on their ability to do so, including the
terms and conditions of the Stock Purchase Agreement (as defined below).
In addition, the matters set forth in Item 6 below are
incorporated in this Item 4 by reference as if fully set forth herein.
Except as set forth above, neither MBO-VI, MBO-VII or
Equity-V nor, to the knowledge of MBO-VI, MBO-VII or Equity-V, any person
identified in Schedule I, has any plans or proposals which relate to or
would result in the types of transactions set forth in subparagraphs (a)
through (j) of Item 4 of Schedule 13D.
ITEM 5. Interest in Securities of the Issuer
------------------------------------
The following information is as of September 15, 1999:
(i) MBO-VI:
(a) Amount Beneficially Owned:
MBO-VI directly owns 85,752.78 shares of Series B Preferred,
which are convertible into 5,873,478 shares of Common Stock, assuming the
conversion of all Preferred Stock pursuant to Section 8(a)(i) of the
Certificate of Designation of the Powers, Preferences and Relative
Participating, Optional and Other Special Rights of the Series B Preferred
(the "Series B Certificate of Designation"), which sets forth a formula for
determining the number of shares of Class A Common Stock issuable, as at
any date, upon conversion of the Series B Preferred. The number of shares
of Common Stock referred to above was calculated in accordance with such
formula assuming that the Conversion Price and the Current Market Price
(each such term as defined in the Series B Certificate of Designation)
equal $36.50. FLC XXIX Partnership, L.P. ("FLC XXIX"), a New York limited
partnership having its principal business office at the address set forth
in response to Item 2(b) of this statement, is the general partner of
MBO-VI. Theodore J. Forstmann, Nicholas C. Forstmann, Sandra J. Horbach,
Thomas H. Lister, Winston W. Hutchins (each a United States citizen with
his or her principal place of business being at the address set forth in
response to Item 2(b) of this statement), and Tywana LLC, a North Carolina
limited liability company having its principal business office at 201 North
Tryon Street, Suite 2450, Charlotte, N.C. 28202, are the general partners
of FLC XXIX.
The shares of Series B Preferred owned by MBO-VI are
convertible into approximately 3.7% of the Common Stock outstanding, based
on calculations made in accordance with Rule 13d-3(d) of the Securities and
Exchange Act of 1934, as amended, and there being 154,590,393 shares of
Common Stock outstanding as of August 30, 1999.
(b) Assuming conversion of all Preferred Stock, number of
shares as to which MBO-VI has:
(i) sole power to vote or to direct the vote -
5,873,478.
(ii) shared power to vote or to direct the vote --
None.
(iii) sole power to dispose or to direct the
disposition of - 5,873,478.
(iv) shared power to dispose or to direct the
disposition of -- none.
(ii) MBO-VII:
(a) Amount Beneficially Owned:
MBO-VII directly owns 189,247.22 shares of Series B
Preferred, which are convertible into 12,962,138 shares of Common Stock,
assuming the conversion of all Preferred Stock pursuant to Section 8(a)(i)
of the Series B Certificate of Designation, which sets forth a formula for
determining the number of shares of Class A Common Stock issuable, as at
any date, upon conversion of the Series B Preferred. The number of shares
of Common Stock referred to above was calculated in accordance with such
formula assuming that the Conversion Price and the Current Market Price
(each such term as defined in the Series B Certificate of Designation)
equal $36.50. FLC XXXIII Partnership ("FLC XXXIII"), a New York general
partnership having its principal business office at the address set forth
in response to Item 2(b) of this statement, is the general partner of
MBO-VII. Theodore J. Forstmann, Nicholas C. Forstmann, Winston W. Hutchins,
Thomas H. Lister, Sandra J. Horbach (each a United States citizen with his
or her principal place of business being at the address set forth in
response to Item 2(b) of this statement) and Tywana LLC, a North Carolina
limited liability company having its principal business office at the
address set forth in Item 5(i)(a) of this statement, are the general
partners of FLC XXXIII.
The shares of Series B Preferred owned by MBO-VII are
convertible into approximately 7.7% of the Common Stock outstanding, based
on calculations made in accordance with Rule 13d-3(d) of the Exchange Act
and there being 154,590,393 shares of Common Stock outstanding as of August
30, 1999.
(b) Assuming conversion of all Preferred Stock, number of
shares as to which MBO-VII has:
(i) sole power to vote or to direct the vote -
12,962,138.
(ii) shared power to vote or to direct the vote --
None.
(iii) sole power to dispose or to direct the
disposition of - 12,962,138.
(iv) shared power to dispose or to direct the
disposition of -- None.
(iii) Equity-V:
(a) Amount Beneficially Owned:
Equity-V directly owns 125,000 shares of Series C Preferred,
which are convertible into 8,561,643 shares of Common Stock, assuming the
conversion of all Preferred Stock pursuant to Section 8(a)(i) of the
Certificate of Designation of the Powers, Preferences and Relative,
Participating, Optional and Other Special Rights of the Series C Preferred
(the "Series C Certificate of Designation"), which sets forth a formula for
determining the number of shares of Class A Common Stock issuable, as at
any date, upon conversion of the Series C Preferred. The number of shares
of Common Stock referred to above was calculated in accordance with such
formula assuming that the Conversion Price and the Current Market Price
(each such term as defined in the Series C Certificate of Designation)
equal $36.50. FLC XXX Partnership ("FLC XXX"), a New York general
partnership having its principal business office at the address set forth
in response to Item 2(b) of this statement, is the general partner of
Equity-V. Theodore J. Forstmann, Nicholas C. Forstmann, Sandra J. Horbach,
Thomas H. Lister, Winston W. Hutchins (each a United States citizen with
his or her principal place of business being at the address set forth in
response to Item 2(b) of this statement), and Tywana LLC, a North Carolina
limited liability company having its principal business office at the
address set forth in Item 5(i)(a) of this statement, are the general
partners of FLC XXX.
The shares of Series C Preferred owned by Equity-V are
convertible into approximately 5.2% of the Common Stock outstanding, based
on calculations made in accordance with Rule 13d-3(d) of the Exchange Act
and there being 154,590,393 shares of Common Stock outstanding as of August
30, 1999.
(b) Assuming conversion of all Preferred Stock, number of
shares as to which Equity-V has:
(i) sole power to vote or to direct the vote -
8,561,643.
(ii) shared power to vote or to direct the vote --
None.
(iii) sole power to dispose or to direct the
disposition of - 8,561,643.
(iv) shared power to dispose or to direct the
disposition of -- none.
(iv) Except as set forth above, neither MBO-VI, MBO-VII or
Equity-V nor, to the knowledge of MBO-VI, MBO-VII and Equity-V, any person
identified in Schedule I, beneficially owns any shares of Common Stock or
has effected any transactions in shares of Common Stock during the
preceding 60 days.
(v) The right to receive dividends on, and proceeds from the
sale of, the shares of Common Stock beneficially owned by the FL
Partnerships is governed by the limited partnership agreements of each such
entities, and such dividends or proceeds may be distributed with respect to
numerous general and limited partnership interests.
ITEM 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer
-----------------------------------
The responses to Items 3, 4 and 5 of this statement are
incorporated herein by reference.
Stock Purchase Agreement:
------------------------
Pursuant to the Stock Purchase Agreement (the "Stock
Purchase Agreement"), dated as of August 30, 1999 by and between McLeodUSA
Incorporated and the FL Partnerships, MBO-VI acquired 85,752.78 shares of
the Series B Preferred for an aggregate purchase price of $216,135,985;
MBO-VII acquired 189,247.22 shares of the Series B Preferred for an
aggregate purchase price of $476,989,015; and Equity-V acquired 125,000
shares of the Series C Preferred for an aggregate purchase price of
$321,875,000.
Voting Rights. Pursuant to the Stock Purchase Agreement,
MBO-VI and MBO-VII are entitled, subject to the Series B Certificate of
Designation, to designate for election to the Board of Directors of
McLeodUSA (the "Board of Directors") two persons. Pursuant to this
contractual right, MBO-VI and MBO-VII have designated for election Theodore
J. Forstmann and Erskine B. Bowles for election to the Board of Directors.
In addition, Equity-V is entitled, subject to the Series C Certificate of
Designation, to designate one non-voting observer, who will have the same
access to information concerning the business and operations of McLeodUSA
and its subsidiaries as directors of McLeodUSA, and will be entitled to
participate in discussions and consult with the Board of Directors of
McLeodUSA without voting.
Standstill Provisions. Pursuant to the Stock Purchase
Agreement, until the earlier of September 15, 2009 or the occurrence of
certain events, the FL Partnerships may not, subject to certain exceptions,
(i) acquire or become the beneficial owner of or obtain any rights in
respect of any capital stock of McLeodUSA, (ii) solicit proxies or become a
"participant" in a "solicitation" (as such terms are defined in Regulation
14A under the Exchange Act) of proxies with respect to any voting
securities of McLeodUSA, (iii) initiate or become a participant in any
stockholder proposal or election contest with respect to McLeodUSA or
induce others to initiate the same, (iv) propose, solicit or participate in
the solicitation of any person to acquire McLeodUSA or a substantial
portion of its assets or more than 5% of its outstanding capital stock, or
(v) join in or in any way participate in a pooling agreement or other
arrangement with respect to McLeodUSA's voting securities.
Lock-Up Provisions. Pursuant to the Stock Purchase
Agreement, until the earlier of September 15, 2004 or the occurrence of
certain events, the FL Partnerships may not, subject to certain exceptions,
sell, transfer, assign, convey or otherwise dispose of any of the Series B
Preferred, Series C Preferred or Common Stock. In addition, the FL
Partnerships agreed that they may not exercise any conversion rights with
respect to the Preferred Stock until September 15, 2004. Nothing contained
in the Stock Purchase Agreement, however, will be deemed to limit the
ability of the limited partners in the FL Partnerships from transferring,
directly or indirectly, their limited partnership interests in the FL
Partnerships or the general partners of the FL Partnerships from
transferring, directly or indirectly, up to 15% of the equity interests in
the FL Partnerships at any time or from time to time.
Dividends. Pursuant to the Stock Purchase Agreement,
McLeodUSA agreed that it will pay cash dividends on the Series B Preferred
on a current basis so long as it is not precluded from doing so under its
debt instruments, Delaware law or any other laws applicable to McLeodUSA.
In furtherance thereof, McLeodUSA agreed to use its reasonable best efforts
to pay such dividends, including, without limitation, using its reasonable
best efforts to refrain from entering into any agreements which would
preclude such payments and to take whatever actions are necessary,
including revaluing assets, to create surplus for the purpose of paying
such dividends.
The foregoing description of the Stock Purchase Agreement is
not intended to be complete and is qualified in its entirety by the
complete text of the Stock Purchase Agreement, all of which is incorporated
herein by reference. The Stock Purchase Agreement is filed as Exhibit 1
hereto.
Registration Rights Agreement.
-----------------------------
In connection with the purchase of shares of Series B
Preferred and Series C Preferred under the Stock Purchase Agreement,
McLeodUSA and the FL Partnerships entered into a Registration Rights
Agreement, dated as of September 15, 1999 (the "Registration Rights
Agreement"). Pursuant to the Registration Rights Agreement, McLeodUSA
granted to the FL Partnerships three demand rights to cause McLeodUSA to
register under the Securities Act of 1933, as amended, all or part of the
Registrable Securities (as defined below) held by the FL Partnerships.
McLeodUSA has the right to delay any such registration once in any
six-month period for a reasonable period of time (but not exceeding 60
days) under certain circumstances.
In addition, if McLeodUSA proposes to register any of its
securities for the account of any other stockholder (other than in
connection with an employee benefit plan, dividend reinvestment plan,
merger or consolidation), the FL Partnerships may require McLeodUSA to
include all or a portion of their Registrable Securities in such
registration, subject to certain priorities among them and to certain
limitations. All expenses incurred in connection with such registrations
(other than underwriting discounts and commissions) will be borne by
McLeodUSA.
"Registrable Securities" means (i) any shares of Common
Stock owned by the FL Partnerships, (ii) any shares of Common Stock issued
or issuable upon the conversion, exercise or exchange of any Preferred
Stock or of any other Common Stock equivalents at any time held by the FL
Partnerships, and (iii) any shares of Common Stock issued with respect to
the Common Stock referred to in clauses (i), (ii) or (iii) by way of a
stock dividend, stock split or reverse stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or
otherwise.
The foregoing description of the Registration Rights
Agreement is not intended to be complete and is qualified in its entirety
by the complete text of the Registration Rights Agreement, all of which is
incorporated herein by reference. The Registration Rights Agreement is
filed as Exhibit 2 hereto.
Series B Certificate of Designation
-----------------------------------
As contemplated by the Stock Purchase Agreement, immediately
prior to the Closing, McLeodUSA filed the Series B Certificate of
Designation to create the series of Series B Preferred.
Rank. Under the Series B Certificate of Designation, the
Series B Preferred and the Series C Preferred taken together will, with
respect to dividend rights and rights on liquidation and dissolution, rank
(i) senior to all classes of capital stock or series of preferred stock of
McLeodUSA established by the Board of Directors, the terms of which do not
expressly provide that such class or series ranks senior to, or on a parity
with, the Series B Preferred and Series C Preferred (collectively referred
to, together with all classes of Common Stock, as "Junior Securities"),
(ii) on a parity with McLeodUSA's 6.75% Series A Cumulative Convertible
Preferred Stock (the "Series A Preferred") and with each class of capital
stock or series of preferred stock of McLeodUSA established by the Board,
the terms of which expressly provide that such class or series will rank on
a parity with the Preferred Stock (collectively referred to as "Parity
Securities"), and (iii) junior as to each class of capital stock or series
of preferred stock of McLeodUSA established by the Board, the terms of
which expressly provide that such class or series will rank senior to the
Preferred Stock. Creation of McLeodUSA of securities senior to the Series B
Preferred requires the vote of holders of a majority of the outstanding
shares of the Series B Preferred.
Dividends. The holders of Series B Preferred will be
entitled to receive with respect to each share of Series B Preferred, when
and if declared by the Board of Directors, out of funds legally available
for the payment of dividends, dividends per annum equal to $127.23 per
share in cash. Such dividends will be cumulative from the date of issuance
of the Series B Preferred (the "Issue Date") and will be payable quarterly
in arrears. In addition, if at any time from the Issue Date through the
date ending five years thereafter, McLeodUSA pays a dividend in cash or
property other than in shares of capital stock on the Common Stock, then
each share of Series B Preferred will be entitled to receive an amount
equal to the Series B Per Share Participation Amount. The "Series B Per
Share Participation Amount" means, as at any date, 37.5% of the amount of
dividends that would be paid with respect to the Series B Preferred and
Series C Preferred taken together if converted into Common Stock on the
date established as the record date with respect to such dividend on the
Common Stock divided by the number of shares of Series B Preferred then
outstanding.
Liquidation. In the event of any liquidation, dissolution or
winding-up of McLeodUSA, before any payment or distribution of the assets
of McLeodUSA may be made to or set apart for the holders of Junior
Securities, the holders of the shares of Series B Preferred and Series C
Preferred taken together will be entitled to receive an amount in cash
equal to the greater of (x) the aggregate Liquidation Preferences (as
defined below) of the shares of Series B Preferred and Series C Preferred
as of the date of liquidation, or (y) the aggregate amount that would have
been received with respect to the shares of Series B Preferred and Series C
Preferred if such stock had been converted to Common Stock immediately
prior to such liquidation, dissolution or winding-up. If, upon any
liquidation, dissolution or winding-up of the McLeodUSA, the assets of
McLeodUSA, or proceeds thereof, are insufficient to pay in full the amounts
under clause (x) of the preceding sentence and liquidating payments on all
Parity Securities, then such assets, or proceeds thereof, will (i) be
distributed among the shares of Series B Preferred and the Series C
Preferred taken together and all such other Parity Securities ratably in
accordance with the respective amounts that would be payable on such shares
of Preferred Stock and any such other Parity Securities if all amounts
payable thereon were paid in full and (ii) the amount distributable under
clause (i) to the Series B Preferred and Series C Preferred taken together,
will first be distributed to the Series B Preferred until it has received
an amount equal to the aggregate Preference Amounts (as defined in the
Series B Certificate of Designation) of all Series B Preferred Stock
outstanding as of the date of liquidation and thereafter 37.5% to the
Series B Preferred and 62.5% to the Series C Preferred. If, upon any
liquidation, dissolution or winding-up of McLeodUSA, the assets of
McLeodUSA, or proceeds thereof, distributable to the Series B Preferred and
Series C Preferred taken together are sufficient to pay in full the amounts
under clause (x) of the first sentence of this paragraph then such amount
will first be distributed to the Series B Preferred until it has received
an amount equal to the aggregate Preference Amounts of all Series B
Preferred outstanding as of the date of liquidation and thereafter 37.5% to
the Series B Preferred and 62.5% to the Series C Preferred.
"Liquidation Preference" means with respect to a share of
Series B Preferred, as at any date, the sum of $2500.00 plus an amount
generally equal to any accrued and unpaid dividends with respect to such
stock through such date.
Redemption. The Series B Preferred will not be redeemable by
the Company prior to September 15, 2006. On and after September 15, 2006,
to the extent McLeodUSA has funds legally available for such payment,
McLeodUSA may redeem at its option shares of Series B Preferred, at any
time, at a redemption price equal to the Liquidation Preference as of the
date fixed for redemption; provided, however, that McLeodUSA will only be
entitled to redeem the Series B Preferred if the Series C Preferred is also
redeemed on a proportional basis based on the percentage of each class of
shares outstanding at the same time. In addition, to the extent McLeodUSA
has funds legally available therefor, during the 180-day period commencing
on September 15, 2009, the holders of the Series B Preferred will have the
right to cause McLeodUSA to redeem at any time outstanding shares of Series
B Preferred at a redemption price in cash equal to the Liquidation
Preference (the "Mandatory Redemption Obligation").
Conversion. Under the Series B Certificate of Designation,
the holders of shares of Series B Preferred will have the right, generally,
at any time, to convert any or all outstanding shares of Series B Preferred
into fully paid and non-assessable shares of Common Stock; provided that
upon the exercise by any holder of Series B Preferred of the conversion
option, a proportional amount, based on the percentage of each class of
shares outstanding, of the Series C Preferred will automatically convert.
The outstanding shares of Series B Preferred and Series C Preferred taken
together will be convertible into a number of shares of Common Stock (the
"Aggregate Conversion Shares") equal to the aggregate Liquidation
Preferences of the shares of Series B Preferred and Series C Preferred as
of the date of conversion divided by $36.50, subject to certain
adjustments. The Series B Preferred will be convertible into a number of
shares of Common Stock equal to the sum of (i) the aggregate Preference
Amounts (as defined in the Series B Certificate of Designation) with
respect to all outstanding shares of Series B Preferred divided by the Net
Realizable FMV (as defined in the Series B Certificate of Designation) of a
share of Common Stock at the time of conversion plus (ii) .375 times the
excess, if any, of the Aggregate Conversion Shares over the number
determined pursuant to clause (i).
Voting Rights. Pursuant to the Series B Certificate of
Designation, so long as at least 40% of the shares of Series B Preferred
issued on the Issue Date remain outstanding, the holders of the Series B
Preferred will be entitled to collectively elect two directors to the Board
of Directors; so long as at least 20%, but less than 40%, of the shares of
Series B Preferred issued on the Issue Date remain outstanding, the holders
will be entitled to collectively elect one director to the Board and to
designate a person as a non-voting observer (a "Board Observer") to attend
all meetings of the Board of Directors; and so long as 20% or less (but at
least one) of the shares of Series B Preferred issued on the Issue Date
remain outstanding, the holders will be entitled to designate two Board
Observers. If six quarterly dividends payable on the Series C Preferred
have not been paid in full, McLeodUSA fails to discharge its Mandatory
Redemption Obligation or if it issues securities senior to the Series B
Preferred without the requisite consent of the holders of Series B
Preferred, the total number of directors then constituting the whole Board
automatically will be increased by one and the holders of outstanding
shares of Series B Preferred, voting separately as a single series, will be
entitled to elect one additional director to serve on the Board. Whenever
all arrears in dividends have been paid or declared and set apart for
payment, or McLeodUSA fulfills its Mandatory Redemption Obligation, the
right of the holders of shares of Series B Preferred to elect the
additional director will cease.
The foregoing description of the Series B Certificate of
Designation is not intended to be complete and is qualified in its entirety
by the complete text of the Series B Certificate of Designation, all of
which is incorporated herein by reference. The Series B Certificate of
Designation is filed as Exhibit 3 hereto.
Series C Certificate of Designation
-----------------------------------
As contemplated by the Stock Purchase Agreement, immediately
prior to the Closing, McLeodUSA filed the Series C Certificate of
Designation to create the series of Series C Preferred.
Rank. Under the Series C Certificate of Designation, the
Series B Preferred and the Series C Preferred taken together will, with
respect to dividend rights and rights on liquidation and dissolution, rank
(i) senior to all Junior Securities, (ii) on a parity with the Series A
Preferred and with the Parity Securities, and (iii) junior as to each class
of capital stock or series of preferred stock of McLeodUSA established by
the Board, the terms of which expressly provide that such class or series
will rank senior to the Preferred Stock. Creation of McLeodUSA of
securities senior to the Series C Preferred requires the vote of holders of
a majority of the outstanding shares of the Series C Preferred.
Dividends. If at any time from the date of issuance of the
Series C Preferred through the date ending five years thereafter, McLeodUSA
pays a dividend in cash or property other than in shares of capital stock
on the Common Stock, then each share of Series C Preferred will be entitled
to receive an amount equal to the Series C Per Share Participation Amount.
The "Series C Per Share Participation Amount" means, as at any date, 62.5%
of the amount of dividends that would be paid with respect to the Series B
Preferred and Series C Preferred taken together if converted into Common
Stock on the dividend record date divided by the number of shares of Series
C Preferred then outstanding.
Liquidation. In the event of any liquidation, dissolution or
winding-up of McLeodUSA, before any payment or distribution of the assets
of McLeodUSA may be made to or set apart for the holders of Junior
Securities, the holders of the shares of Series B Preferred and Series C
Preferred taken together will be entitled to receive an amount in cash
equal to the greater of (x) the aggregate Liquidation Preferences (as
defined below) of the shares of Series B Preferred and Series C Preferred
as of the date of liquidation, or (y) the aggregate amount that would have
been received with respect to the shares of Series B Preferred and Series C
Preferred if such stock had been converted to Common Stock immediately
prior to such liquidation, dissolution or winding-up. If, upon any
liquidation, dissolution or winding-up of the McLeodUSA, the assets of
McLeodUSA, or proceeds thereof, are insufficient to pay in full the amounts
under clause (x) of the preceding sentence and liquidating payments on all
Parity Securities, then such assets, or proceeds thereof, will (i) be
distributed among the shares of Series B Preferred and the Series C
Preferred taken together and all such other Parity Securities ratably in
accordance with the respective amounts that would be payable on such shares
of Preferred Stock and any such other Parity Securities if all amounts
payable thereon were paid in full and (ii) the amount distributable under
clause (i) to the Series B Preferred and Series C Preferred taken together,
will first be distributed to the Series B Preferred until it has received
an amount equal to the aggregate Preference Amounts (as defined in the
Series B Certificate of Designation) of all Series B Preferred Stock
outstanding as of the date of liquidation and thereafter 37.5% to the
Series B Preferred and 62.5% to the Series C Preferred. If, upon any
liquidation, dissolution or winding-up of McLeodUSA, the assets of
McLeodUSA, or proceeds thereof, distributable to the Series B Preferred and
Series C Preferred taken together are sufficient to pay in full the amounts
under clause (x) of the first sentence of this paragraph then such amount
will first be distributed to the Series B Preferred until it has received
an amount equal to the aggregate Preference Amounts of all Series B
Preferred outstanding as of the date of liquidation and thereafter 37.5% to
the Series B Preferred and 62.5% to the Series C Preferred.
"Liquidation Preference" means with respect to a share of
Series C Preferred, as at any date, the sum of $2500.00 plus an amount
generally equal to any accrued and unpaid dividends with respect to such
stock through such date.
Redemption. The Series C Preferred will not be redeemable by
the Company prior to September 15, 2006. On and after September 15, 2006,
to the extent McLeodUSA has funds legally available for such payment,
McLeodUSA may redeem at its option shares of Series C Preferred, at any
time, at a redemption price equal to the Liquidation Preference as of the
date fixed for redemption; provided, however, that McLeodUSA will only be
entitled to redeem the Series C Preferred if the Series B Preferred is also
redeemed on a proportional basis based on the percentage of each class of
shares outstanding at the same time. In addition, to the extent the holders
of Series B Preferred choose to exercise their right to cause McLeodUSA to
redeem their shares pursuant to the Mandatory Redemption Obligation,
McLeodUSA will be required to redeem a proportional amount of the Series C
Preferred.
Conversion. Under the Series C Certificate of Designation,
upon the exercise by any holder of Series B Preferred of its conversion
option, a proportional amount, based on the percentage of each class of
shares outstanding, of the Series C Preferred will automatically convert.
The outstanding shares of Series B Preferred and Series C Preferred taken
together will be convertible into the Aggregate Conversion Shares. The
Series C Preferred will be convertible into a number of shares of Common
Stock equal to .625 times the excess, if any, of the sum of (i) the
Aggregate Conversion Shares over (ii) the aggregate Preference Amounts with
respect to all outstanding shares of Series B Preferred divided by the Net
Realizable FMV of a shares of Common Stock at the time of conversion.
Voting Rights. Pursuant to the Series B Certificate of
Designation, so long as any shares of Series C Preferred are outstanding,
the holders of the Series C Preferred will be entitled to designate one
Board Observer to the Board of Directors. If McLeodUSA fails to discharge
its Mandatory Redemption Obligation or if it issues securities senior to
the Series C Preferred without the requisite consent of the holders of
Series C Preferred, the total number of directors then constituting the
whole Board automatically will be increased by one and the holders of
outstanding shares of Series C Preferred, voting separately as a single
series, will be entitled to elect one additional director to serve on the
Board. Whenever McLeodUSA fulfills its Mandatory Redemption Obligation, the
right of the holders of shares of Series C Preferred to elect the
additional director will cease.
The foregoing description of the Series C Certificate of
Designation is not intended to be complete and is qualified in its entirety
by the complete text of the Series C Certificate of Designation, all of
which is incorporated herein by reference. The Series C Certificate of
Designation is filed as Exhibit 4 hereto.
Except as set forth or incorporated by reference herein,
neither MBO-VI, MBO-VII or Equity-V, nor to the knowledge of MBO-VI,
MBO-VII or Equity-V, any person identified in Schedule I, has any
contracts, arrangements, understandings or relationships (legal or
otherwise) with any person with respect to any securities of McLeodUSA.
ITEM 7. Material to be Filed as Exhibits
--------------------------------
1. Stock Purchase Agreement, dated August 30, 1999, among McLeodUSA,
MBO-VI, MBO-VII and Equity-V.
2. Registration Rights Agreement, dated as of September 15, 1999,
among McLeodUSA, MBO-VI, MBO-VII and Equity-V.
3. Certificate of Designation of the Powers, Preferences and
Relative, Participating, Optional and Other Special Rights of
Series B Cumulative Convertible Preferred Stock and
Qualifications, Limitations and Restrictions Thereof.
4. Certificate of Designation of the Powers, Preferences and
Relative, Participating, Optional and Other Special Rights of
Series C Convertible Preferred Stock and Qualifications,
Limitations and Restrictions Thereof.
5. Joint Filing Agreement.
<PAGE>
SIGNATURE
---------
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: September 22, 1999 FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND
EQUITY MANAGEMENT BUYOUT PARTNERSHIP-VI, L.P.
By: FLC XXIX Partnership, L.P.
its general partner
By: /s/ Winston W. Hutchins
--------------------------------
Winston W. Hutchins,
a general partner
FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND
EQUITY MANAGEMENT BUYOUT PARTNERSHIP-VII, L.P.
By: FLC XXXIII Partnership
its general partner
By: /s/ Winston W. Hutchins
--------------------------------
Winston W. Hutchins,
a general partner
FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP-V,
L.P.
By: FLC XXX Partnership, L.P.
its general partner
By: /s/ Winston W. Hutchins
--------------------------------
Winston W. Hutchins,
a general partner
<PAGE>
Schedule I
----------
FLC XXIX Partnership, L.P.:
General Partner of
MBO-VI
------
FLC XXIX Partnership, L.P., a New York limited partnership ("FLC
XXIX"), is the general partner of MBO-VI. Its purpose is to act as general
partner of MBO-VI and other limited partnerships affiliated with MBO-VI.
The address of the principal office of MBO-VI is c/o Forstmann Little &
Co., 767 Fifth Avenue, New York, NY 10153.
General Partners of
FLC XXIX
--------
The following are the general partners of FLC XXIX, the general
partner of MBO-VI. All of the following are general partners of
partnerships affiliated with Forstmann Little & Co., a private investment
firm. The business address of each is 767 Fifth Avenue, New York, NY 10153
and each is a citizen of the United States.
Theodore J. Forstmann
Nicholas C. Forstmann
Tywana LLC
Sandra J. Horbach
Thomas H. Lister
Winston W. Hutchins
FLC XXXIII Partnership:
General Partner of
MBO-VII
-------
FLC XXXIII Partnership, a New York general partnership ("FLC
XXXIII"), is the general partner of MBO-VII. Its purpose is to act as
general partner of MBO-VII and other limited partnerships affiliated with
MBO-VII. The address of the principal office of FLC XXXIII is c/o Forstmann
Little & Co., 767 Fifth Avenue, New York, NY 10153.
<PAGE>
Partners of
FLC XXXIII
----------
The following are the general partners of FLC XXXIII, the general
partner of MBO-VII. All of the following are general partners of
partnerships affiliated with Forstmann Little & Co., a private investment
firm. The business address of each of the following persons is 767 Fifth
Avenue, New York, NY 10153 and each is a citizen of the United States.
Theodore J. Forstmann
Nicholas C. Forstmann
Winston W. Hutchins
Thomas H. Lister
Sandra J. Horbach
Tywana LLC
FLC XXX Partnership, L.P.:
General Partner of
Equity-V
--------
FLC XXX Partnership, L.P., a New York limited partnership ("FLC
XXX"), is the general partner of Equity-V. Its purpose is to act as general
partner of Equity-V and other limited partnerships affiliated with
Equity-V. The address of the principal office of Equity-V is c/o Forstmann
Little & Co., 767 Fifth Avenue, New York, NY 10153.
General Partners of
FLC XXX
-------
The following are the general partners of FLC XXX, the general
partner of Equity-V. All of the following are general partners of
partnerships affiliated with Forstmann Little & Co., a private investment
firm. The business address of each is 767 Fifth Avenue, New York, NY 10153
and each is a citizen of the United States.
Theodore J. Forstmann
Nicholas C. Forstmann
Tywana LLC
Sandra J. Horbach
Thomas H. Lister
Winston W. Hutchins
EXHIBIT 1
STOCK PURCHASE AGREEMENT
dated as of
August 30, 1999
by and between
McLeodUSA Incorporated
and
The Purchasers Listed on the Signature Pages Hereto
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of August
30, 1999, by and between McLeodUSA Incorporated, a Delaware corporation
(the "Company"), and the entities listed on the signature page hereto under
the caption "Purchasers" (each such entity, a "Purchaser" and collectively,
the "Purchasers").
W I T N E S S E T H :
WHEREAS, upon the terms and subject to the conditions set forth
in this Agreement, the Company wishes to sell to the Purchasers and the
Purchasers wish to purchase from the Company (i) an aggregate of 275,000
shares of the Company's Series B Preferred Stock, par value $.01 per share
(the "Series B Preferred Stock") and (ii) an aggregate of 125,000 shares of
the Company's Series C Preferred Stock, par value $.01 per share (the
"Series C Preferred Stock" and, collectively with the Series B Preferred
Stock, the "Preferred Shares"); and
WHEREAS, the Purchasers and the Company desire to provide for the
purchase and sale of the Preferred Shares and to establish certain rights
and obligations in connection therewith.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
ISSUANCE AND SALE OF PREFERRED SHARES
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 (a) an aggregate of 275,000 shares of Series B Preferred Stock
for an aggregate purchase price of $693,125,000 in cash and (b) an
aggregate of 125,000 shares of Series C Preferred Stock for an aggregate
purchase price of $321,875,000 in cash (the cash amounts set forth in (a)
and (b) being collectively referred to herein as, the "Purchase Price").
The number of shares of Series B Preferred Stock and the number of shares
of Series C Preferred Stock being acquired by each Purchaser, and the
portion of the Purchase Price payable therefor is set forth opposite such
Purchaser's name on the signature page hereto; provided, that the
Purchasers shall have the right to reallocate among the Purchasers the
Preferred Shares 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 Preferred Shares being acquired hereunder or the Purchase Price.
1.2. The Closing; Deliveries. (a) The closing of the purchase and
sale of the Preferred Shares hereunder (the "Closing") shall take place at
the offices of Fried, Frank, Harris, Shriver & Jacobson, One New York
Plaza, New York, New York 10004 at 9:00 a.m. on the fifth business day
following the satisfaction or waiver of the conditions set forth in Article
V (other than those conditions that by their nature are to be satisfied at
the Closing, but subject to the satisfaction or waiver of those conditions)
or at such other place, time and/or date as shall be mutually agreed by the
Company and the Purchasers (the date of the Closing, the "Closing Date").
(b) At the Closing, the Company shall deliver to each Purchaser
certificates representing the Preferred Shares 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 shall be made against receipt by the Company of the
portion of the Purchase Price payable therefor (less an amount equal to
$10,389,759, or such other amount not in excess of $15,000,000 as
determined by the Purchasers no later than three days prior to the Closing,
payable to certain of the Purchasers as a special dividend as set forth on
the signature page hereto), which shall be paid by wire transfer to an
account designated at least three business days prior to the Closing Date
by the Company.
1.3. Capitalized Terms. Capitalized terms not otherwise defined
herein shall have the meanings ascribed to such terms in Section 8.1.
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Purchaser, as
of the date hereof and as of the Closing, as follows:
2.1. Organization; Subsidiaries. (a) 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.
(b) Except as set forth on Schedule 2.1(b), (i) the Company owns,
either directly or indirectly through one or more Subsidiaries, all of the
capital stock or other equity interests of the Significant Subsidiaries
free and clear of all liens, charges, claims, security interests,
restrictions, options, proxies, voting trusts or other encumbrances
("Encumbrances") and (ii) there are no outstanding subscription rights,
options, warrants, convertible or exchangeable securities or other rights
of any character whatsoever relating to issued or unissued capital stock or
other equity interests of any Significant Subsidiary, or any Commitments of
any character whatsoever relating to issued or unissued capital stock or
other equity interests of any Significant Subsidiary or pursuant to which
any Significant Subsidiary is or may become bound to issue or grant
additional shares of its capital stock or other equity interests or related
subscription rights, options, warrants, convertible or exchangeable
securities or other rights, or to grant preemptive rights. Except for the
Subsidiaries and except as set forth on Schedule 2.1(b), the Company does
not own, directly or indirectly, any interest in any corporation, limited
liability company, partnership, business association or other Person in
excess of 9.9% of the outstanding equity.
2.2. Due Authorization. The Company has all right, 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, sale and delivery of the Preferred
Shares 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 Shares
upon conversion of the Preferred Stock 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. The Shares have
been 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
Series B Preferred Stock and the Series C Preferred Stock will be as set
forth in the Certificate of Designation for the Series B Preferred Stock
and the Certificate of Designation for the Series C Preferred Stock (the
"Certificates of Designation"), the forms of which are attached to this
Agreement as Exhibits 2.2A and 2.2B. The Preferred Shares issued to the
Purchasers in accordance with the terms of the Certificates of Designation,
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 clear of any Encumbrances and not subject to the preemptive or other
similar rights of the stockholders of the Company.
2.3. Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 250,000,000 shares of Class A
Common Stock, par value $0.01 per share (the "Class A Common Stock"), of
which, as of August 25, 1999, 154,590,393 shares are issued and outstanding
and of which no more than 400,000 additional shares (excluding any shares
issued upon exercise of outstanding options disclosed on Schedule 2.3) have
been issued between August 25, 1999 and the date hereof; (ii) 22,000,000
shares of Class B Common Stock, par value $0.01 per share ("the Class B
Common Stock", and together with the Class A Common Stock, the "Common
Stock"), of which, as of the date hereof no shares are issued and
outstanding; and (iii) 2,000,000 shares of Preferred Stock, par value $0.01
per share, of which as of the date hereof 1,150,000 shares are issued and
outstanding as 6.75% Series A Cumulative Convertible Preferred Stock (the
"Series A Preferred Stock"). All of the issued and outstanding shares of
Class A Common Stock and Series A Preferred Stock have been duly authorized
and are validly issued, fully paid and nonassessable. No shares of capital
stock of the Company are entitled to preemptive rights. Except as set forth
on Schedule 2.3 or as otherwise contemplated by Article 1 of this
Agreement, there are no outstanding subscription rights, options, warrants,
convertible or exchangeable securities or other rights of any character
whatsoever relating to issued or unissued capital stock of the Company, or
any Commitments of any character whatsoever relating to issued or unissued
capital stock of the Company or pursuant to which the Company is or may
become bound to issue or grant additional shares of its capital stock or
related subscription rights, options, warrants, convertible or exchangeable
securities or other rights, or to grant preemptive rights. Except as set
forth on Schedule 2.3 or as otherwise contemplated by Article 1 of this
Agreement, (i) the Company has not agreed to register any securities under
the Securities Act or under any state securities law or granted
registration rights to any Person or entity and (ii) there are no voting
trusts, stockholders agreements, proxies or other Commitments or
understandings in effect to which the Company is a party or of which it has
Knowledge with respect to the voting or transfer of any of the outstanding
shares of Class A Common Stock or Series A Preferred Stock. To the extent
that any options, warrants or any of the other rights described above are
outstanding, neither the issuance and sale of the Preferred Shares nor any
issuance of Shares upon conversion thereof will result in an adjustment of
the exercise or conversion price or number of shares issuable upon the
exercise or conversion of any such options, warrants or other rights.
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 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 set forth on Schedule 2.5 or
disclosed in the SEC Reports, neither the Company nor any Subsidiary 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
audited consolidated balance sheet of the Company and the Subsidiaries as
of December 31, 1998, (ii) liabilities and obligations incurred in the
ordinary course of business since December 31, 1998 or (iii) liabilities
and obligations which individually or in the aggregate would not reasonably
be expected to have or result in a Material Adverse Effect.
2.6. Absence of Certain Changes. Except as set forth on Schedule
2.6 or as disclosed in the SEC Reports, since December 31, 1998 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 has had or would reasonably be expected to have a
Material Adverse Effect or, to the Knowledge of the Company, an adverse
effect on the ability of the Company to perform its obligations under this
Agreement or any of the Transaction Documents to which it is a party.
2.7. Litigation. (a) Except as set forth on Schedule 2.7(a) or as
disclosed in the SEC Reports, 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 the 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 a Subsidiary would reasonably be expected to have a
Material Adverse Effect.
(b) Except as set forth on Schedule 2.7(b) or as disclosed in the
SEC Reports, neither the Company nor any of the 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 reasonably be expected to
have a Material Adverse Effect.
2.8. Consents, No Violations. Except as set forth on Schedule
2.8, 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 the Subsidiaries
including, without limitation, any of the provisions of the Certificate of
Designation for the Series A Preferred Stock; (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 the 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 this 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 reasonably be expected to result in a Material Adverse
Effect or, to the Knowledge of the Company, adversely affect the ability of
the Company to consummate the transactions contemplated by this Agreement
or any Transaction Document to which it is a party; or (c) except for the
filings of the Certificates of Designation with the Secretary of State of
the State of Delaware, any required filing under the HSR Act, the Exchange
Act, the Securities Act 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 the Subsidiaries. Without
limiting the generality of the foregoing (i) no consent or other approval
of the holders of the Series A Preferred Stock is required in connection
with the consummation of the transactions contemplated hereby or the
performance by the Company of any of its obligations under this Agreement
or any Transaction Document to which it is a party, (ii) the issuance of
the Preferred Shares or any Shares upon conversion thereof will not result
in any anti-dilution or other adjustment to the conversion price or the
number of shares of Class A Common Stock issuable upon conversion of the
Series A Preferred Stock or (iii) the holders of the Series A Preferred
Stock will not be entitled to exercise any voting rights as a result of any
of the provisions contained in this Agreement or any other Transaction
Documents.
2.9. Compliance with Laws. Except as set forth on Schedule 2.9 or
as disclosed in the SEC Reports, the Company and the Subsidiaries are in
compliance in all material respects with all Laws and the Company and the
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 as set forth on Schedule 2.9, the Company and the Subsidiaries have
all Licenses, and all of such Licenses are valid and in full force and
effect, and the Company and the Subsidiaries have duly performed and are in
compliance in all material respects with all of their obligations under
such Licenses.
2.10. Commitments. Schedule 2.10 sets forth a complete and
correct list of each contract, agreement, understanding, arrangement and
commitment of any nature whatsoever, whether written or oral, including all
amendments thereof and supplements thereto ("Commitments") of the following
types to which the Company or any Subsidiary is a party or by or to which
the Company or any Subsidiary or any of their properties may be bound or
subject, (i) Commitments, to the Knowledge of the Company, containing
covenants purporting to limit the freedom of the Company or any Subsidiary
to compete in any line of business in any geographic area or to hire any
individual or group of individuals, except in connection with or resulting
from directory acquisitions, (ii) Commitments relating to capital
expenditures in excess of $10,000,000, (iii) Commitments relating to
indentures, mortgages, promissory notes, loan agreements, guarantees,
letters of credit or other agreements or instruments of the Company or any
Subsidiary involving amounts in excess of $1,000,000, (iv) Commitments in
respect of any joint venture, partnership or other similar arrangement, (v)
Commitments with any Governmental Entity involving payments in excess of
$1,000,000 and (vi) Commitments relating to interconnection agreements with
local carriers, Commitments with resellers and material Commitments with
customers in each case involving payments in excess of $1,000,000 per year.
2.11. Brokers or Finders. Except for Salomon Smith Barney Inc.,
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 the
Subsidiaries in connection with any of the transactions contemplated by
this Agreement or the other Transaction Documents.
2.12. 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.
2.13. Offering of Preferred Shares. Neither the Company nor any
Person acting on its behalf has taken or will take any action (including,
without limitation, any offering of any securities of the Company under
circumstances which would require, under the Securities Act, the
integration of such offering with the offering and sale of the Preferred
Shares) which might reasonably be expected to subject the offering,
issuance or sale of the Preferred Shares to the registration requirements
of Section 5 of the Securities Act.
2.14. Disclosure. Neither this Agreement nor any other
Transaction Document, nor any schedule or exhibit hereto or thereto, nor
any certificate furnished to the Purchasers by or on behalf of the Company
in connection with the transactions contemplated hereby and thereby,
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading (for purposes of the preceding sentence, any
preliminary document or written information shall be disregarded if a final
or updated version of such document or written information was delivered to
the Purchasers by the Company prior to the date hereof). To the Company's
Knowledge the financial forecasts furnished by the Company to the
Purchasers have been reasonably prepared and reflect the best currently
available estimates and judgment of the Company's management as to the
expected future financial performance of the Company and the Subsidiaries.
There is no fact or information relating to the Company and/or any of its
Subsidiaries that, to the Company's Knowledge, would reasonably be expected
to be material to the Company and its Subsidiaries taken as a whole and
that has not been disclosed to the Purchasers.
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
Preferred Shares, 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 Preferred
Shares and the Shares 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
Preferred Shares and any Shares issued upon conversion thereof 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. Except for Chase Securities, Inc.,
whose fees will be paid by the Purchasers, 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 Preferred Shares 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 and the filings set forth on Schedule 3.7, require any consent,
approval or authorization of, notification to, filing with, or exemption or
waiver by, any Governmental Entity or any other Person on the part of the
Purchaser.
3.8. Availability of Funds. Such Purchaser has available
sufficient funds to pay its portion of the Purchase Price.
3.9. Litigation. There is no Litigation pending or, to the
knowledge of such Purchaser, threatened against such Purchaser or any of
its Affiliates or involving any of its properties or assets by or before
any court, arbitrator or other Governmental Entity which in any manner
challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement.
<PAGE>
ARTICLE IV
COVENANTS
4.1. Conduct of Business by the Company Pending the Closing. The
Company covenants and agrees that, during the period from the date of this
Agreement and continuing until the earlier of the termination of this
Agreement or the Closing, unless the Purchasers otherwise agree in writing,
the Company shall, and shall cause each of the Subsidiaries to, (i) conduct
its business only in the ordinary course and consistent with past practice;
(ii) use reasonable best 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
best 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 best 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. Except as expressly
contemplated by this Agreement or as set forth on Schedule 4.1, between the
date of this Agreement and the Closing, the Company shall not, and shall
cause each of the Subsidiaries not to, do any of the following without the
prior written consent of the Purchaser, which consent shall not be
unreasonably withheld or delayed:
(a) (i) issue any debt securities, (ii) incur any additional
indebtedness, (iii) assume, grant, guarantee or endorse, or make any other
accommodation or arrangement making the Company or any Subsidiary
responsible for, any liabilities or other obligations of any other Person
or (iv) make any loans, advances or capital contributions to, or
investments in, any Person;
(b) change any method of accounting or accounting practice used
by the Company or any Subsidiary, other than such changes required by GAAP;
(c) repurchase, redeem (except pursuant to Section 4.5 of the
Company's Certificate of Incorporation) or otherwise acquire or exchange
any share of Common Stock or other equity interests; except for issuances
of Class A Common Stock pursuant to the exercise of options to purchase
Class A Common Stock outstanding on the date hereof and other issuances of
Class A Common Stock, in each case as listed on Schedule 2.3, issue or sell
any additional shares of the capital stock of, or other equity interests
in, the Company or any Subsidiary, or securities convertible into or
exchangeable for such shares or other equity interests, or issue or grant
any subscription rights, options, warrants or other rights of any character
relating to shares of such capital stock, such other equity interests or
such securities; or declare, set aside, make or pay any dividend, or make
any distribution, in respect of any shares of capital stock of the Company
other than as required with respect to the Series A Preferred Stock;
(d) amend the Company's or any Subsidiary's charter or by-laws or
other organizational documents except with respect to the filing of the
Certificates of Designation;
(e) take any action that is reasonably likely to result in (i)
any of the representations and warranties set forth in Article II becoming
false or inaccurate in any material respect as of the Closing Date or (ii)
any of the conditions to the obligations of the Purchasers set forth in
Section 5.2 not being satisfied; or
(f) agree to take any of the actions restricted by this Section
4.1.
4.2. Press Releases; Interim Public Filings. The Company shall,
and shall cause each Subsidiary to, deliver to the Purchasers complete and
correct copies of all press releases and public filings made between the
date hereof and the Closing Date, and, to the extent any such press
releases and public filings refer in any way to the Purchasers and/or their
Affiliates, shall give the Purchasers the reasonable opportunity to review
and comment on such releases and filings, in each case prior to release in
the form in which it will be issued.
4.3. HSR Act. Each of the Purchasers and the Company shall
cooperate in making filings under the HSR Act and shall use its reasonable
best 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 best 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. Consents; Approvals. The Company shall use its reasonable
best 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 its reasonable best 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.
4.5. Listing. The Company shall use its reasonable best 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 Preferred Shares or any Shares are outstanding. Prior to the Closing,
the Company shall prepare and submit to the NMS a listing application
covering the shares of Class A Common Stock issuable upon conversion of the
Preferred Shares and shall obtain approval for the listing of such shares,
subject to official notice of issuance.
4.6. Board Representation; Observers, VCOC. (a) Section 9(b)(i)
of the Certificate of Designation for the Series B Preferred Stock provides
that the holders of Series B Preferred Stock shall be entitled to elect two
directors to the Board of Directors subject to the terms set forth therein.
In addition, Section 9(b)(i) of the Certificate of Designation for the
Series C Preferred Stock provides that the holders of Series C Preferred
Stock shall be entitled to designate one non-voting observer to attend and
participate in (but not vote at) all meetings of the Board of Directors
(the "Non-Voting Observer"). Accordingly, subject to the Certificate of
Designation for the Series B Preferred Stock, the Purchasers set forth on
Schedule 4.6(a)(1), as holders of Series B Preferred Stock, shall be
entitled to designate for election to the Board of Directors two directors
(the "Purchasers' Directors") and subject to the Certificate of Designation
for the Series C Preferred Stock, the Purchasers set forth on Schedule
4.6(a)(2), as holders of Series C Preferred Stock, shall be entitled to
designate the one Non-Voting Observer, in each case as set forth on the
applicable schedule. Prior to the Closing, the Company will take all action
necessary for the Purchasers' Directors to be elected to the Board of
Directors. Thereafter, in connection with any annual meeting of
stockholders at which the term of a Purchaser Director is to expire, the
Company will take all necessary action to cause a Purchaser Director to be
nominated and use its reasonable best efforts to cause such Purchaser
Director to be elected to the Board of Directors. In the event a vacancy
shall exist in the office of a Purchaser 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 best efforts to
cause the successor to be elected. The Non-Voting Observer shall have the
same access to information concerning the business and operations of the
Company and its Subsidiaries and at the same time as directors of the
Company, and shall be entitled to participate in discussions and consult
with the Board of Directors without voting. Without limiting the generality
of the foregoing, the Purchasers' Directors and the Non-Voting Observer 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
accountants' work papers, and the Purchasers' Directors and the Non-Voting
Observer may make such copies and inspections thereof as the Purchasers'
Directors and the Non-Voting Observer may request. The Company shall
furnish the Purchasers' Directors and the Non-Voting Observer with such
financial and operating data and other information with respect to the
business and properties of the Company as the Purchasers' Directors and the
Non-Voting Observer may request. The Company shall permit each of the
Purchasers' Directors and the Non-Voting Observer 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.
The provision of any such information to the Non-Voting Observer shall be
subject to the receipt by the Company of a confidentiality agreement
covering such information and reasonably acceptable to the Company and the
Non-Voting Observer. Notwithstanding anything contained in this Section 4.6
to the contrary, the provisions of the Certificates of Designation shall
govern the rights of holders of Preferred Shares to elect directors
(including any Purchasers' Directors).
(b) The rights set forth in Section 4.6(a) are intended to
satisfy the requirement of contractual management rights for purposes of
qualifying each of the Purchaser's ownership interests in the Company as
venture capital investments for purposes of the Department of Labor's "plan
assets" regulations, and in the event such rights are not satisfactory for
such purpose as to any such Purchaser, the Company and such Purchaser shall
reasonably cooperate in good faith to agree upon mutually satisfactory
management rights which satisfy such regulations.
(c) The Company shall promptly reimburse the Purchasers'
Directors and the Non-Voting Observer 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.
4.7. Certificates of Designation. The Company shall, prior to or
concurrently with the Closing, cause the Certificates of Designation to be
filed with the Secretary of State of the State of Delaware.
4.8. Cooperation. Each of the Purchasers and the Company agrees
to use its reasonable best 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.
4.9. 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, Commitments
and books and records of the Company and of the Subsidiaries, and to the
outside auditors of the Company and their work papers relating to the
Company and the Subsidiaries. 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.
4.10. Reserve Shares. The Company will at all times reserve and
keep available, solely for issuance and delivery upon conversion of the
Preferred Shares, the number of shares of Class A Common Stock from time to
time issuable upon conversion of all shares of the Preferred Shares at the
time outstanding. All shares of Class A Common Stock issuable upon
conversion of the Preferred Shares shall be duly authorized and, when
issued upon such conversion or exercise, shall be validly issued, fully
paid and nonassessable.
4.11. Use of Proceeds. The proceeds received by the Company
hereunder shall be used by the Company as set forth on Schedule 4.11.
4.12 Restrictions on Transfer. The Purchasers will not, prior to
the earlier of (a) the fifth anniversary of the Closing Date or (b) the
occurrence of a Termination Event (as defined below), sell, transfer,
assign, convey, gift, mortgage, pledge, encumber, hypothecate, or otherwise
dispose of, directly or indirectly, ("Transfer") any of the Preferred
Shares or the Shares except for (i) Transfers between and among the
Purchasers and their Affiliates provided such Transfer is done in
accordance with the transfer restrictions applicable to the Preferred
Shares or the Shares under federal and state securities laws and the
Affiliate transferee agrees to be bound by the restrictions applicable to
such Preferred Shares or the Shares, including without limitation the
agreements set forth in this Section 4.12, and (ii) Transfers (w) required
to comply with applicable Law provided that the general partners of the
Purchasers shall not be the party that institutes any proceeding out of
which such Transfer is required by Law, (x) pursuant to a bona fide tender
or exchange offer made pursuant to a merger or other agreement approved by
the Board of Directors to acquire securities of the Company; provided, that
the Purchasers may not tender or exchange in such offer unless at least 50%
of the outstanding securities of the Company have previously been tendered
or exchanged by other holders of the Company's securities in connection
therewith, (y) following any stock merger or other stock business
combination transaction to which the Company is a party if Clark and Mary
McLeod sell any of the securities beneficially owned and received by them
in such transaction following such transaction and then only in an amount
equal to the product of (A) the percentage that the securities beneficially
owned and sold by Clark and Mary McLeod represents of the total number of
securities beneficially owned by Clark and Mary McLeod and (B) the total
number of securities beneficially owned by such Purchasers (determined in
all cases on an as converted basis) and (z) pursuant to any cash merger, or
other business combination transaction to which the Company is a party or
involved in which the Class A Common Stock of the Company's stockholders is
exchanged for cash upon consummation of such merger or other business
combination. Notwithstanding any other provision of this Section 4.12, no
Purchaser shall avoid the provisions of this Section 4.12 by making one or
more transfers to one or more Affiliates and then disposing of all or any
portion of such Purchaser's interest in any such Affiliate. For purposes of
this Section 4.12, a "Termination Event" shall occur if at any time Clark
McLeod ceases to act as Chairman of the Board of Directors or Stephen Gray
ceases to act as Chief Operating Officer (or a higher position) of the
Company or neither of them serves as Chief Executive Officer of the
Company. Each Purchaser agrees that it may not exercise any conversion
rights with respect to the Preferred Shares until the fifth anniversary of
the Closing; provided that nothing contained herein shall be deemed to
prevent the Purchasers from exercising their conversion rights with respect
to the Preferred Shares at any time after the fifth anniversary of the
Closing or at any time prior thereto in connection with a Termination Event
or in connection with a Transfer permitted pursuant to Section 4.12(b)(ii).
Nothing contained herein shall be deemed to limit the ability of the
limited partners in the Purchasers from transferring, directly or
indirectly, their limited partnership interests in the Purchasers or the
general partners of the Purchasers from transferring, directly or
indirectly, up to 15% of the equity interests in the Purchasers at any time
or from time to time.
4.13 Standstill Agreement. (a) During the period commencing on
the date hereof and ending on the earlier of (i) the tenth anniversary of
the Closing Date (the "Standstill Period") or (ii) the date these
provisions terminate as provided herein, except as (x) specifically
permitted by this Agreement 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:
(i) acquire, or offer or agree to acquire, or become the
beneficial owner 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 of the Preferred Shares 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 of Preferred Shares or Shares
held by the Purchasers or any of their Affiliates at the time of such
dividend, split or reclassification or merger or business combination;
(ii) 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" (as such term is defined or used in Rule 14a-11 under the
Exchange Act) 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 Purchasers or the Purchasers' Directors
in connection with solicitations by the Board of Directors);
(iii) publicly or privately propose, encourage, 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 5% of the outstanding capital stock (except in
connection with the registration of securities pursuant to the
Registration Rights Agreement); and
(iv) directly or indirectly join in or in any way participate in
a pooling agreement, syndicate, voting trust or other arrangement with
respect to the Company's voting securities or otherwise act in concert
with any other Person (other than Affiliates), for the purpose of
acquiring, holding, voting or disposing of the Company's securities.
(b) Nothing contained in this Section 4.13 shall be deemed to
restrict the manner in which the Purchasers' Directors or the Non-Voting
Observer participate in deliberations or discussions of the Board of
Directors.
(c) The standstill provisions set forth herein shall terminate on
the earliest of (i) the last day of the Standstill Period, (ii) the date
that Clark McLeod ceases to act as Chairman of the Board of Directors or
Stephen Gray ceases to act as Chief Operating Officer (or a higher
position) of the Company or neither of them serves as Chief Executive
Officer of the Company, (iii) upon any breach by the Company in any
material respect of any covenant or agreement contained in this Agreement
or in any Transaction Document, (iv) upon the filing of a voluntary
bankruptcy petition by the Company or on the 60th day following the filing
of an involuntary bankruptcy petition against the Company if such petition
is not discharged with prejudice during such 60-day period or (v) upon the
occurrence of a change in control of the Company if the Purchasers are
permitted to effect a Transfer in accordance with the provisions of Section
4.12(b)(ii)(x), (y) and (z) hereof.
4.14. Incurrence of Debt and Equity. The Company shall comply
with the covenants set forth in Schedule 4.14 hereof.
4.15. Dividends. The Company agrees that it shall pay cash
dividends on the Series B Preferred Stock on a current basis so long as it
is not precluded from doing so under its debt instruments, Delaware law or
any other Laws applicable to the Company. In furtherance thereof, the
Company agrees to use its reasonable best efforts to pay such dividends,
including, without limitation, using its reasonable best efforts to refrain
from entering into any agreements which would preclude such payments and to
take whatever actions are reasonably necessary, including revaluing assets,
to create surplus for the purpose of paying such dividends.
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 or regulation or order of any court or
administrative agency shall be in effect which prohibits 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; and
(c) Any material required filings or other consents, if any, of
state regulatory bodies shall have been made or obtained.
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 in all material respects 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;
(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 delivered to the Purchasers an
officer's certificate certifying as to the Company's compliance with the
conditions set forth in clauses (a) and (b) of this Section 5.2;
(d) The Company shall have executed and delivered a Registration
Rights Agreement in the form of Exhibit 5.2(d) hereto (the "Registration
Rights Agreement"), and the Registration Rights Agreement shall be in full
force and effect;
(e) The Certificates of Designation shall have been duly filed
with the Secretary of State of the State of Delaware in accordance with the
laws of the State of Delaware and the Certificates of Designation shall be
in full force and effect;
(f) The Shares issuable upon conversion of the Preferred Shares
shall have been duly authorized and reserved for issuance and such Shares
shall have been approved for listing on the NMS, subject to official notice
of issuance;
(g) The Purchasers shall have received an opinion reasonably
acceptable to the Purchasers from (i) the General Counsel of the Company,
with respect to good standing, non-contravention and the capitalization of
the Company and (ii) Hogan & Hartson L.L.P., outside counsel to the
Company, with respect to the due incorporation, due authorization, validity
of the Preferred Shares, securities act exemption and the valid and binding
nature of this Agreement and the Registration Rights Agreement; and
(h) There shall not have occurred any event, circumstances,
condition, fact, effect, or other matter which has had or would reasonably
be expected to have a material adverse effect (x) on the business, assets,
financial condition, prospects, or results of operations of the Company and
its Subsidiaries taken as a whole or (y) on the ability of the Company and
such Subsidiaries to perform any material obligation under this Agreement
or to consummate the transactions contemplated hereby.
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 in all material respects 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.
(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;
(c) The Purchasers shall have delivered to the Company an
officer's certificate certifying as to the Purchasers' compliance with the
conditions set forth in clauses (a) and (b) of this Section 5.3; and
(d) The Company shall have received an opinion reasonably
acceptable to the Company from Fried, Frank, Harris, Shriver & Jacobson,
outside counsel to the Purchasers, with respect to non-contravention, due
formation, due authorization, and the valid and binding nature of this
Agreement and the Registration Rights Agreement.
ARTICLE VI
TERMINATION
6.1. Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual written agreement of the Company and the
Purchasers; or
(b) by either the Purchasers or the Company if the Closing shall
not have been consummated on or before October 31, 1999 (provided that the
right to terminate this Agreement under this Section 6.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the Closing
to occur on or before such date); or
(c) by either the Purchasers or the Company if a court of
competent jurisdiction or governmental, regulatory or administrative agency
or commission shall have issued a nonappealable final order, decree or
ruling or taken any other action having the effect of permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement.
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 breach of this Agreement and
provided further that this Section 6.2 and Sections 8.2 (other than the
second sentence thereof), 8.3, 8.13, 8.14 and 8.15 shall survive
termination of this Agreement.
ARTICLE VII
INDEMNIFICATION
7.1. Survival. The representations and warranties of the parties
hereto contained in this Agreement or in any of the other Transaction
Documents shall expire on the 18-month anniversary of the Closing Date,
except that the representations and warranties set forth in Sections
2.1(a), 2.2, 2.3, 3.5 and 3.6 shall survive until the expiration of the
applicable statute of limitations (including any extensions thereof). After
the expiration of such periods, any claim by a party hereto based upon any
such representation or warranty shall be of no further force and effect,
except to the extent a party has asserted a claim in accordance with this
Article VII for breach of any such representation or warranty prior to the
expiration of such period, in which event any representation or warranty to
which such claim relates shall survive with respect to such claim until
such claim is resolved as provided in this Article VII. The covenants and
agreements of the parties hereto contained in this Agreement or in any of
the other Transaction Documents shall survive the Closing until performed
in accordance with their terms.
7.2. Indemnification. (a) The Company shall indemnify, defend and
hold harmless the Purchasers, their Affiliates, and their respective
officers, directors, partners, members, employees, agents, representatives,
successors and assigns (each a "Purchasers Indemnified Person") from and
against all Losses incurred or suffered by a Purchaser Indemnified Person
arising from (i) the breach of any of the representations or warranties
made by the Company in this Agreement or any other Transaction Document or
(ii) the breach of any covenant or agreement made by the Company in this
Agreement or any other Transaction Document. Notwithstanding the foregoing,
(A) no claim may be made against the Company for indemnification pursuant
to Section 7.2(a)(i) unless the aggregate liability of the Company exceeds
$10 million, and the Company shall then only be liable for Losses in excess
of such amount and (B) the Company's maximum liability for indemnification
pursuant to Section 7.2(a)(i) shall not exceed $250,000,000.
(b) The Purchasers shall indemnify, defend and hold harmless the
Company, its Affiliates, and their respective officers, directors,
partners, members, employees, agents, representatives, successors and
assigns (each a "Company Indemnified Person") from and against all Losses
incurred or suffered by a Company Indemnified Person arising from (i) the
breach of any of the representations or warranties made by the Purchasers
in this Agreement or any other Transaction Document or (ii) the breach of
any covenant or agreement made by the Purchasers in this Agreement or any
other Transaction Document. Notwithstanding the foregoing, (A) no claim may
be made against the Purchasers for indemnification pursuant to Section
7.2(b)(i) unless the aggregate liability of the Purchasers exceeds $10
million, and the Purchasers shall then only be liable for Losses in excess
of such amount and (B) the Purchasers' maximum liability for
indemnification pursuant to Section 7.2(b)(i) shall not exceed
$250,000,000.
(c) A party seeking indemnification under this Section 7.2 shall,
promptly upon becoming aware of the facts indicating that a claim for
indemnification may be warranted, give to the party from whom
indemnification is being sought a notice of claim relating to such Loss (a
"Claim Notice"). Each Claim Notice shall specify the nature of the claim,
the applicable provision(s) of this Agreement or other instrument under
which the claim for indemnity arises, and, if possible, the amount or the
estimated amount thereof. No failure or delay in giving a Claim Notice (so
long as the same is given prior to expiration of the representation or
warranty upon which the claim is based) and no failure to include any
specific information relating to the claim (such as the amount or estimated
amount thereof) or any reference to any provision of this Agreement or
other instrument under which the claim arises shall affect the obligation
of the party from whom indemnification is sought.
7.3. Inspections; No Other Representations. The Purchasers are
informed and sophisticated purchasers, and have undertaken such
investigation and have been provided with and have evaluated such documents
and information as they deem necessary to enable them to make an informed
decision with respect to the execution, delivery and performance of this
Agreement. Each Purchaser will undertake prior to the Closing such further
investigation and request such additional documents and information as it
deems necessary. Each Purchaser agrees to accept the Preferred Shares based
upon its own inspection, examination and determination with respect thereto
as to all matters, and without reliance upon any express or implied
representations or warranties of any nature made by or on behalf or imputed
to the Company, except as expressly set forth in this Agreement. Without
limiting the generality of the foregoing, each Purchaser acknowledges that
the Company makes no representation or warranty with respect to any
projections, estimates or budgets delivered to or made available to
Purchasers of future revenues, future results of operations (or any
component thereof), future cash flows or future financial condition (or any
component thereof) of the Company and its Subsidiaries or the future
business and operations of the Company and the Subsidiaries except as
expressly set forth in this Agreement.
7.4. Exclusivity. Except as specifically set forth in this
Agreement and except in the case of fraud, effective as of the Closing,
each party hereby waives any rights and claims such party may have against
the other party hereto, whether in law or in equity, relating to any breach
of any representation or warranty by any party hereunder. After the
Closing, Sections 7.1, 7.2(a) and 7.2(b) will provide the exclusive remedy
for any misrepresentation or breach of warranty, except in the case of
fraud.
ARTICLE VIII
MISCELLANEOUS
8.1. Defined Terms; Interpretations. The following terms, as used
herein, shall have the following meanings:
"Affiliate" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act.
"Agreement" shall have the meaning ascribed thereto in the
preamble.
"Board of Directors" shall mean the Board of Directors of the
Company.
"Certificates of Designation" shall have the meaning ascribed
thereto in Section 2.2.
"Claim Notice" shall have the meaning ascribed thereto in Section
7.2(c).
"Closing" shall have the meaning ascribed thereto in Section
1.2(a).
"Closing Date" shall have the meaning ascribed thereto in Section
1.2(a).
"Commitments" shall have the meaning ascribed thereto in Section
2.11.
"Common Stock" shall have the meaning ascribed thereto in Section
2.3.
"Company" shall have the meaning ascribed thereto in the
preamble.
"Company Indemnified Person" shall have the meaning ascribed
thereto in Section 7.2(b).
"Consents" shall have the meaning ascribed thereto in Section
4.4.
"DGCL" shall mean the Delaware General Corporation Law.
"Encumbrances" shall have the meaning ascribed thereto in Section
2.1(b).
"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.
"GAAP" shall have the meaning ascribed thereto in Section 2.5.
"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.
"Knowledge", with respect to the Company, shall mean the
knowledge of Clark McLeod, Stephen Gray, Lyle Patrick, Albert Ruffalo,
David Conn, William Haas, LeeAnn Benischek and Randy Rings.
"Laws" shall include all foreign, federal, state, and local laws,
statutes, ordinances, rules, regulations, orders, judgments, decrees and
bodies of law.
"Licenses" shall have the meaning ascribed thereto in Section
2.9.
"Litigation" shall have the meaning ascribed thereto in Section
2.7(a).
"Losses" shall mean each and all of the following items: claims,
losses, liabilities, obligations, payments, damages (actual or punitive),
charges, judgments, fines, penalties, amounts paid in settlement, costs and
expenses (including, without limitation, interest which may be imposed in
connection therewith, costs and expenses of investigation, actions, suits,
proceedings, demands, assessments and fees, expenses and disbursements of
counsel, consultants and other experts).
"Material Adverse Effect" shall mean a material adverse effect on
the properties, business, prospects, operations, results of operations,
earnings, assets, liabilities or condition (financial or otherwise) of the
Company and its Subsidiaries taken as a whole.
"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.
"Preferred Shares" shall have the meaning ascribed thereto in the
recitals.
"Purchase Price" shall have the meaning ascribed thereto in
Section 1.1.
"Purchasers" shall have the meaning ascribed thereto in the
preamble.
"Purchasers Indemnified Person" shall have the meaning ascribed
thereto in Section 7.2(a).
"Registration Rights Agreement" shall have the meaning ascribed
thereto in Section 5.2(d).
"SEC" shall mean the Securities and Exchange Commission.
"SEC Reports" shall have the meaning ascribed thereto in Section
2.4.
"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.
"Series A Preferred Stock" shall have the meaning ascribed
thereto in Section 2.3.
"Series B Preferred Stock" shall have the meaning ascribed
thereto in the recitals.
"Series C Preferred Stock" shall have the meaning ascribed
thereto in the recitals.
"Shares" shall mean any shares of Class A Common Stock, par value
$0.01 per share, of the Company, now or hereafter authorized to be issued,
and any and all securities of any kind whatsoever of the Company which may
be exchanged for or converted into Class A Common Stock, 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.
"Significant Subsidiaries" shall mean the entities listed on
Schedule 8.1.
"Subsidiary" shall mean as to the Company, each corporation,
partnership or other entity of which shares of capital stock or other
equity interests having ordinary voting power (other than capital stock or
other equity interests having such power only by reason of the happening of
a contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the time
owned, directly or indirectly, or the management of which is otherwise
controlled, directly or indirectly, or both, by the Company.
"Transaction Documents" shall mean this Agreement, the
Certificates of Designation, the Registration Rights Agreement and all
other contracts, agreements, schedules, certificates and other documents
being delivered pursuant to or in connection with this Agreement or such
other documents or the transactions contemplated hereby or thereby.
8.2. Fees and Expenses. Except as provided in this Section 8.2
all costs and expenses incurred in connection with this Agreement shall be
paid by the party incurring such costs or expense. At the Closing, the
Company shall pay the expenses of the Purchasers listed on Schedule 8.2 in
the amounts set forth therein.
8.3. Public Announcements. The Purchasers and the Company shall
consult with each other before issuing any press release with respect to
this Agreement or the transactions contemplated hereby and neither shall
issue any such press release or make any such 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.
8.4. Restrictive Legends. In addition to the restrictions set
forth in Section 4.12, no Preferred Shares or 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. Each certificate
representing any of the foregoing shall bear legends in substantially the
following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE SHALL BE REDEEMABLE
AS PROVIDED IN THE CERTIFICATE OF DESIGNATION AND THE COMPANY'S
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION. THE SECURITIES
EVIDENCED BY THIS CERTIFICATE SHALL BE CONVERTIBLE INTO THE
COMPANY'S CLASS A COMMON STOCK IN THE MANNER AND ACCORDING TO THE
TERMS SET FORTH IN THE CERTIFICATE OF DESIGNATION.
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 AUGUST 30, 1999, A COPY OF WHICH IS AVAILABLE UPON REQUEST FOR
INSPECTION AT THE OFFICE'S OF THE CORPORATION. ANY SUCH REQUEST
SHOULD BE ADDRESSED TO THE SECRETARY OF THE CORPORATION.
8.5. 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.
8.6. 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 Preferred Stock or
Shares are also for the benefit of, and enforceable by, any Affiliates of
the Purchasers who hold such Preferred Shares or Shares and received such
Preferred Shares or Shares in accordance with the terms of this Agreement.
8.7. 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.
8.8. 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.
Vice President, General Counsel and
Secretary
with a copy to (which shall not constitute notice):
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Telecopy No.: (202) 637-5910
Attention: Joseph G. Connolly, Jr., 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 Lister
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Telecopy: (212) 859-8587
Attention: Robert C. Schwenkel, 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).
8.9. 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.
8.10. 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.
8.11. 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.
8.12. 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.
8.13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW.
8.14. Submission to Jurisdiction. Each of the parties hereto
hereby irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of New York and of the United
States of America, in each case located in the County of New York, for any
Litigation arising out of or relating to this Agreement or the other
Transaction Documents and the transactions contemplated hereby and thereby
(and agrees not to commence any Litigation relating hereto or thereto
except in such courts), and further agrees that service of any process,
summons, notice or document by U.S. registered mail to its respective
address set forth in this Agreement 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 New York
or the United States of America, in each case located in the County of New
York, 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.
8.15. 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.
8.16. 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.
<PAGE>
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 V, L.P.
By: /s/ Sandra Horbach
-------------------------------------
Numbers of Series B Number of Series C Amount of
Preferred Shares Preferred Shares Purchase Price Closing Dividend
- ------------------- ------------------ -------------- ----------------
0 125,000 $321,875,000 0
FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND EQUITY
MANAGEMENT BUYOUT PARTNERSHIP VI, L.P.
By: /s/ Thomas H. Lister
-------------------------------------
Numbers of Series B Number of Series C Amount of
Preferred Shares Preferred Shares Purchase Price Closing Dividend
- ------------------- ------------------ -------------- ----------------
85,752.78 Shares $216,135,985 $3,235,287
0
FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND EQUITY
MANAGEMENT BUYOUT PARTNERSHIP VII, L.P.
By: /s/ Thomas H. Lister
-------------------------------------
Numbers of Series B Number of Series C Amount of
Preferred Shares Preferred Shares Purchase Price Closing Dividend
- ------------------- ------------------ -------------- ----------------
189,247.22 Shares $476,989,015 $7,154,472
0
McLEODUSA INCORPORATED
By:/s/ J. Lyle Patrick
----------------------
Name: Group Vice President and
Title: Chief Financial Officer
EXHIBIT 2
REGISTRATION RIGHTS AGREEMENT
Dated as of September 15, 1999
between
McLeodUSA INCORPORATED
and
The Purchasers Listed on the Signature Pages Hereto
<PAGE>
REGISTRATION RIGHTS AGREEMENT, dated as of September 15, 1999
between McLeodUSA Incorporated, a Delaware corporation (the "Company") and
the entities listed on the signature pages hereto under the caption
"Purchasers" (each a "Purchaser" and, collectively, the "Purchasers").
The Company and the Purchasers have entered it into a Stock
Purchase Agreement (the "Purchase Agreement") dated, as of August 30, 1999
pursuant to which simultaneously herewith, the Purchasers are purchasing
(i) an aggregate of 275,000 shares of the Company's Series B Preferred
Stock, par value $0.01 per share (the "Series B Preferred Stock") and (ii)
an aggregate of 125,000 shares of the Company's Series C Preferred Stock,
par value $0.01 per share (the "Series C Preferred Stock" and, collectively
with the Series B Preferred Stock, the "Preferred Shares").
As part of, and as consideration for, the acquisition of the
Preferred Shares by the Purchasers from the Company on the date hereof and
from time to time hereafter, the Company hereby grants to the Purchasers
certain registration and other rights with respect to their shares of Class
A common stock, par value $0.01 per share (the "Class A Common Stock"), as
more fully set forth herein.
Accordingly, the parties hereto agree as follows:
1. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
"Certificate of Incorporation" means the Restated Certificate of
Incorporation of the Company, as amended, as it may be amended or restated
hereafter from time to time.
"Commission" means the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
"Common Stock" means any shares of Class A Common Stock of the
Company, now or hereafter authorized to be issued, and any and all
securities of any kind whatsoever of the Company which may be exchanged for
or converted into Class A Common Stock, 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.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Exchange Act shall include a
reference to the comparable section, if any, of any such similar Federal
statute.
"Person" means a corporation, an association, a partnership, an
organization, a business, a trust, an individual, or any other entity or
organization, including a government or political subdivision or an
instrumentality or agency thereof.
"Registrable Securities" means (i) any shares of Common Stock
owned by the Purchasers, (ii) any shares of Common Stock issued or issuable
upon the conversion, exercise or exchange of any Preferred Shares of or any
other common stock equivalents at any time held by the Purchasers, and
(iii) any shares of Common Stock issued with respect to the Common Stock
referred to in clauses (i), (ii) or (iii) by way of a stock dividend, stock
split or reverse stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or otherwise. As to any particular
Registrable Securities, such securities shall cease to be Registrable
Securities (a) when a registration statement with respect to the sale of
such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such
registration statement, (b) when such securities shall have been otherwise
transferred or disposed of and, new certificates for them not bearing a
legend restricting further transfer shall have been delivered by the
Company and subsequent transfer or distribution of them shall not require
registration of them under the Securities Act, or (c) when such securities
shall have been sold as permitted by, and in compliance with, the
Securities Act.
"Registration Expenses" means all expenses incident to the
registration and disposition of the Registrable Securities pursuant to
Section 2 hereof, including, without limitation, all registration, filing
and applicable national securities exchange fees, all fees and expenses of
complying with state securities or blue sky laws (including fees and
disbursements of counsel to the underwriters or the Purchasers in
connection with "blue sky" qualification of the Registrable Securities and
determination of their eligibility for investment under the laws of the
various jurisdictions), all word processing, duplicating and printing
expenses, all messenger and delivery expenses, the fees and disbursements
of counsel for the Company and of its independent public accountants,
including the expenses of "cold comfort" letters or any special audits
required by, or incident to, such registration, all fees and disbursements
of underwriters (other than underwriting discounts and commissions), all
transfer taxes, and all fees and expenses of counsel to the Purchasers;
provided, however, that Registration Expenses shall exclude, and the
Purchasers shall pay, underwriting discounts and commissions in respect of
the Registrable Securities being registered.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
References to a particular section of the Securities Act shall include a
reference to the comparable section, if any, of any such similar Federal
statute.
2. Registration Under Securities Act, etc.
2.1 Registration on Request.
(a) Request. At any time or from time to time that the
Purchasers are permitted to transfer Registrable Securities under Section
4.12 of the Purchase Agreement, the Purchasers shall have the right to
require the Company to effect the registration under the Securities Act of
all or part of the Registrable Securities, by delivering a written request
therefor to the Company specifying the number of shares of Registrable
Securities and the intended method of distribution. The Company shall (i)
use its reasonable best efforts to effect the registration under the
Securities Act (including by means of a shelf registration pursuant to Rule
415 under the Securities Act if so requested in such request and if the
Company is then eligible to use such a registration) of the Registrable
Securities which the Company has been so requested to register by the
Purchasers, for distribution in accordance with the intended method of
distribution set forth in the written request delivered by the Purchasers,
such registration to be effected as expeditiously as possible (but in any
event within 90 days of receipt of a written request), and (ii) if
requested by the Purchasers, use its reasonable best efforts to obtain
acceleration of the effective date of the registration statement relating
to such registration.
(b) Registration of Other Securities. Whenever the Company
shall effect a registration pursuant to this Section 2.1 in connection with
an underwritten offering by the Purchasers of Registrable Securities, no
securities other than Registrable Securities shall be included among the
securities covered by such registration if inclusion of such other
securities would result in a request by the managing underwriters for a
reduction in the number of Registrable Securities requested to be so
registered.
(c) Registration Statement Form. Registrations under this
Section 2.1 shall be on such appropriate registration form of the
Commission as, subject to clause (a)(i) above, shall be selected by the
Company and as shall be reasonably acceptable to the Purchasers. The
Company agrees to include in any such registration statement all
information which, in the opinion of counsel to the Purchasers and counsel
to the Company, is necessary or desirable to be included therein.
(d) Expenses. The Company shall pay all Registration
Expenses in connection with any registration requested pursuant to this
Section 2.1.
(e) Effective Registration Statement. A registration
requested pursuant to this Section 2.1 shall not be deemed to have been
effected (including for purposes of paragraph (h) of this Section 2.1) (i)
unless a registration statement with respect thereto has become effective
and has been kept continuously effective for a period of at least 365 days
(or such shorter period which shall terminate when all the Registrable
Securities covered by such registration statement have been sold pursuant
thereto), (ii) if after it has become effective, such registration is
interfered with by any stop order, injunction or other order or requirement
of the Commission or other governmental agency or court for any reason not
attributable to the Purchasers and has not thereafter become effective, or
(iii) if the conditions to closing specified in the underwriting agreement,
if any, entered into in connection with such registration are not satisfied
or waived.
(f) Selection of Underwriters. The managing underwriters
of each underwritten offering of the Registrable Securities so to be
registered shall be selected by the Purchasers, subject to the Company's
approval, which approval shall not be unreasonably withheld.
(g) Right to Withdraw. If the managing underwriter of any
underwritten offering shall advise the Purchasers that the Registrable
Securities covered by the registration statement cannot be sold in such
offering within a price range acceptable to the Purchasers, then the
Purchasers shall have the right to notify the Company in writing that they
have determined to withdraw their shares from the registration statement.
In the event of such withdrawal, the request for registration shall not be
counted for purposes of the requests for registration to which the
Purchasers are entitled pursuant to this Section 2.1.
(h) Limitations on Registration on Request. The Purchasers
shall be entitled to require the Company to effect, and the Company shall
be required to effect, three registrations in the aggregate pursuant to
this Section 2.1.
(i) Postponement. The Company shall be entitled once in
any six-month period to postpone for a reasonable period of time (but not
exceeding 60 days) (the "Postponement Period") the filing of any
registration statement required to be prepared and filed by it pursuant to
this Section 2.1 if the Company determines, in its reasonable judgment,
that such registration and offering would materially interfere with any
material financing, corporate reorganization or other material transaction
involving the Company or any subsidiary, or would require premature
disclosure thereof, and promptly gives the Purchasers written notice of
such determination, containing a general statement of the reasons for such
postponement and an approximation of the anticipated delay. If the Company
shall so postpone the filing of a registration statement, (i) the Company
shall use its reasonable best efforts to limit the delay to as short a
period as is practicable and (ii) the Purchasers shall have the right to
withdraw the request for registration by giving written notice to the
Company at any time and, in the event of such withdrawal, such request
shall not be counted for purposes of the requests for registration to which
the Purchasers are entitled pursuant to this Section 2.1.
2.2 Incidental Registration.
(a) Right to Include Registrable Securities. If the
Company at any time proposes to register any of its securities for the
account of any other stockholder under the Securities Act by registration
on Form S-1, S-2 or S-3 or any successor or similar form(s) (except
registrations on any such Form or similar form(s) solely for registration
of securities in connection with an employee benefit plan or dividend
reinvestment plan or a merger or consolidation) and provided that the
Purchasers are permitted to transfer Registrable Securities under Section
4.12 of the Purchase Agreement, the Company will each such time give prompt
written notice to the Purchasers of its intention to do so and of the
Purchasers' rights under this Section 2.2. Upon the written request of the
Purchasers (which request shall specify the maximum number of Registrable
Securities intended to be disposed of by the Purchasers), made as promptly
as practicable and in any event within 30 days after the receipt of any
such notice (10 days if the Company states in such written notice or gives
telephonic notice to the Purchasers, with written confirmation to follow
promptly thereafter, stating that (i) such registration will be on Form S-3
and (ii) such shorter period of time is required because of a planned
filing date), the Company shall use its reasonable best efforts to effect
the registration under the Securities Act of all Registrable Securities
which the Company has been so requested to register by the Purchasers;
provided, however, that if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the
Company shall determine for any reason not to register or to delay
registration of such securities, the Company shall give written notice of
such determination and its reasons therefor to the Purchasers and (i) in
the case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from any obligation of the Company to pay the
Registration Expenses in connection therewith), without prejudice, however,
to the rights of the Purchasers to request that such registration be
effected as a registration under Section 2.1 and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering
any Registrable Securities, for the same period as the delay in registering
such other securities. No registration effected under this Section 2.2
shall relieve the Company of its obligation to effect any registration upon
request under Section 2.1. The Company will pay all Registration Expenses
in connection with any registration of Registrable Securities requested
pursuant to this Section 2.2.
(b) Right to Withdraw. The Purchasers shall have the right
to withdraw its request for inclusion of its Registrable Securities in any
registration statement pursuant to this Section 2.2 at any time prior to
the execution of an underwriting agreement with respect thereto by giving
written notice to the Company of its request to withdraw.
(c) Priority in Incidental Registrations. If the managing
underwriter of any underwritten offering shall inform the Company by letter
of its belief that the number of Registrable Securities requested to be
included in such registration, when added to the number of other securities
to be offered in such registration, would materially adversely affect such
offering, then the Company shall include in such registration, to the
extent of the number and type which the Company is so advised can be sold
in (or during the time of) such offering without so materially adversely
affecting such offering (the "Section 2.2 Sale Amount"), (i) all of the
securities proposed by the other stockholders triggering such incidental
registration rights; and (ii) thereafter, to the extent the Section 2.2
Sale Amount is not exceeded, the Registrable Securities requested by the
Purchasers to be included in such registration pursuant to Section 2.2(a)
and any other securities of the Company requested to be included in such
registration by any holder having the right to include securities on a pro
rata basis, including, in the case where such registration is to be
effected as a result of the exercise by a holder of the Company's
securities of such holder's right to cause such securities to be so
registered, the securities of such holder with the amount of securities of
the Purchasers and each such holder to be included based on the pro rata
amount of shares of Common Stock held, or obtainable by exercise or
conversion of other securities of the Company, by the Purchasers or such
holder.
(d) Plan of Distribution. Any participation by holders of
Registrable Securities in a registration by the Company shall be in
accordance with the Company's plan of distribution, provided that the
Purchasers shall have the right to select the co-managing underwriter.
2.3 Registration Procedures. If and whenever the Company is
required to use its reasonable best efforts to effect the registration of
any Registrable Securities under the Securities Act as provided in Sections
2.1 and 2.2 hereof, the Company shall as expeditiously as possible:
(a) prepare and file with the Commission as soon as
practicable the requisite registration statement to effect such
registration (and shall include all financial statements required
by the Commission to be filed therewith) and thereafter use its
reasonable best efforts to cause such registration statement to
become effective; provided, however, that before filing such
registration statement (including all exhibits) or any amendment
or supplement thereto or comparable statements under securities
or blue sky laws of any jurisdiction, the Company shall as
promptly as practicable furnish such documents to the Purchasers
and each underwriter, if any, participating in the offering of
the Registrable Securities and their respective counsel, which
documents will be subject to the review and comments of the
Purchasers, each underwriter and their respective counsel; and
provided, further, however, that the Company may discontinue any
registration of its securities which are not Registrable
Securities at any time prior to the effective date of the
registration statement relating thereto;
(b) notify the Purchasers of the Commission's requests for
amending or supplementing the registration statement and the
prospectus, and prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to
keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the disposition
of all Registrable Securities covered by such registration
statement for such period as shall be required for the
disposition of all of such Registrable Securities in accordance
with the intended method of distribution thereof; provided, that
except with respect to any such registration statement filed
pursuant to Rule 415 under the Securities Act, such period need
not exceed 365 days;
(c) furnish, without charge, to the Purchasers and each
underwriter such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the
prospectus contained in such registration statement (including
each preliminary prospectus and any summary prospectus) and any
other prospectus filed under Rule 424 under the Securities Act,
in conformity with the requirements of the Securities Act, and
such other documents, as the Purchasers and such underwriters may
reasonably request;
(d) use its reasonable best efforts (i) to register or
qualify all Registrable Securities and other securities covered
by such registration statement under such securities or blue sky
laws of such States of the United States of America where an
exemption is not available and as the Purchasers or any managing
underwriter shall reasonably request, (ii) to keep such
registration or qualification in effect for so long as such
registration statement remains in effect, and (iii) to take any
other action which may be reasonably necessary or advisable to
enable the Purchasers to consummate the disposition in such
jurisdictions of the securities to be sold by the Purchasers,
except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not but for the
requirements of this subsection (d) be obligated to be so
qualified or to consent to general service of process in any such
jurisdiction;
(e) use its reasonable best efforts to cause all
Registrable Securities covered by such registration statement to
be registered with or approved by such other federal or state
governmental agencies or authorities as may be necessary in the
opinion of counsel to the Company and counsel to the Purchasers
to consummate the disposition of such Registrable Securities;
(f) furnish to the Purchasers and each underwriter, if
any, participating in the offering of the securities covered by
such registration statement, a signed counterpart of (i) an
opinion of counsel for the Company, and (ii) a "comfort" letter
signed by the independent public accountants who have certified
the Company's or any other entity's financial statements included
or incorporated by reference in such registration statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and,
in the case of the accountants' comfort letter, with respect to
events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in
accountants' comfort letters delivered to the underwriters in
underwritten public offerings of securities (and dated the dates
such opinions and comfort letters are customarily dated);
(g) promptly notify the Purchasers and each managing
underwriter, if any, participating in the offering of the
securities covered by such registration statement (i) when such
registration statement, any pre-effective amendment, the
prospectus or any prospectus supplement related thereto or
post-effective amendment to such registration statement has been
filed, and, with respect to such registration statement or any
post-effective amendment, when the same has become effective;
(ii) of any request by the Commission for amendments or
supplements to such registration statement or the prospectus
related thereto or for additional information; (iii) of the
issuance by the Commission of any stop order suspending the
effectiveness of such registration statement or the initiation of
any proceedings for that purpose; (iv) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of any of the Registrable Securities for sale under
the securities or blue sky laws of any jurisdiction or the
initiation of any proceeding for such purpose; (v) at any time
when a prospectus relating thereto is required to be delivered
under the Securities Act, upon discovery that, or upon the
happening of any event as a result of which, the prospectus
included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to
make the statements therein not misleading, in the light of the
circumstances under which they were made, and in the case of this
clause (v), at the request of the Purchasers promptly prepare and
furnish to the Purchasers and each managing underwriter, if any,
participating in the offering of the Registrable Securities, a
reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus
shall not include an 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 not misleading in the
light of the circumstances under which they were made; and (vi)
at any time when the representations and warranties of the
Company contemplated by Section 2.4(a) or (b) hereof cease to be
true and correct;
(h) otherwise comply with all applicable rules and
regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months beginning with the
first full calendar month after the effective date of such
registration statement, which earnings statement shall satisfy
the provisions of Section 11(a) of the Securities Act and Rule
158 promulgated thereunder, and promptly furnish to the
Purchasers a copy of any amendment or supplement to such
registration statement or prospectus;
(i) provide and cause to be maintained a transfer agent
and registrar (which, in each case, may be the Company) for all
Registrable Securities covered by such registration statement
from and after a date not later than the effective date of such
registration;
(j) (i) use its reasonable best efforts to cause all
Registrable Securities covered by such registration statement to
be listed on the NASDAQ "national market system" or the principal
securities exchange on which similar securities issued by the
Company are then listed (if any), if the listing of such
Registrable Securities is then permitted under the rules of such
exchange, or (ii) if no similar securities are then so listed,
use its reasonable best efforts to (x) cause all such Registrable
Securities to be listed on a national securities exchange or (y)
failing that, secure designation of all such Registrable
Securities as a NASDAQ "national market system security" within
the meaning of Rule 11Aa2-1 of the Commission or (z) failing
that, to secure NASDAQ authorization for such shares and, without
limiting the generality of the foregoing, to arrange for at least
two market makers to register as such with respect to such shares
with the National Association of Securities Dealers, Inc.;
(k) deliver promptly to counsel to the Purchasers and each
underwriter, if any, participating in the offering of the
Registrable Securities, copies of all correspondence between the
Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission or its
staff with respect to such registration statement;
(l) use its reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of the
registration statement;
(m) provide a CUSIP number for all Registrable Securities,
no later than the effective date of the registration statement;
and
(n) make available its senior executive officers and
chairman and otherwise provide reasonable assistance to the
underwriters (taking into account the needs of the Company's
business) in their marketing of Registrable Securities.
The Company may require the Purchasers to furnish the Company such
information regarding the Purchasers and the distribution of the
Registrable Securities as the Company may from time to time reasonably
request in writing.
The Purchasers agree that upon receipt of any notice from the
Company of the happening of any event of the kind described in paragraph
(g)(iii), (iv) or (v) of this Section 2.3, the Purchasers will, to the
extent appropriate, discontinue their disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable
Securities until, in the case of paragraph (g)(v) of this Section 2.3,
their receipt of the copies of the supplemented or amended prospectus
contemplated by paragraph (g)(v) of this Section 2.3 and, if so directed by
the Company, will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in its possession, of the
prospectus relating to such Registrable Securities current at the time of
receipt of such notice. If the disposition by the Purchasers of their
securities is discontinued pursuant to the foregoing sentence, the Company
shall extend the period of effectiveness of the registration statement by
the number of days during the period from and including the date of the
giving of notice to and including the date when the Purchasers shall have
received copies of the supplemented or amended prospectus contemplated by
paragraph (g)(v) of this Section 2.3; and, if the Company shall not so
extend such period, the Purchasers' request pursuant to which such
registration statement was filed shall not be counted for purposes of the
requests for registration to which the Purchasers are entitled pursuant to
Section 2.1 hereof.
2.4 Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by the
underwriters for any underwritten offering by the Purchasers pursuant to a
registration requested under Section 2.1, the Company shall enter into a
customary underwriting agreement (in the form of underwriting agreement
used at such time by the managing underwriter(s)) with a managing
underwriter or underwriters selected by the Purchasers. Such underwriting
agreement shall be satisfactory in form and substance to the Purchasers and
shall contain such representations and warranties by, and such other
agreements on the part of, the Company and such other terms as are
generally prevailing in agreements of the managing underwriter(s),
including, without limitation, their customary provisions relating to
indemnification and contribution. The Purchasers shall be party to such
underwriting agreement and may, at their option, require that any or all of
the representations and warranties by, and the other agreements on the part
of, the Company to and for the benefit of such underwriters shall also be
made to and for the benefit of the Purchasers and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of the
Purchasers. The Purchasers shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding
the Purchasers, their ownership of and title to the Registrable Securities,
and their intended method of distribution; and any liability of the
Purchasers to any underwriter or other person under such underwriting
agreement shall be limited to liability arising from breach of their
representations and warranties and shall be limited to an amount equal to
the proceeds (net of expenses and underwriting discounts and commissions)
that they derive from such registration.
(b) Incidental Underwritten Offerings. In the case of a
registration pursuant to Section 2.2 hereof, if the Company shall have
determined to enter into any underwriting agreements in connection
therewith, all of the Registrable Securities to be included in such
registration shall be subject to such underwriting agreements. The
Purchasers may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of,
the Company to and for the benefit of such underwriters shall also be made
to and for the benefit of the Purchasers and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of the
Purchasers. The Purchasers shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding
the Purchasers, their ownership of and title to the Registrable Securities,
and their intended method of distribution; and any liability of the
Purchasers to any underwriter or other Person under such underwriting
agreement shall be limited to liability arising from breach of their
representations and warranties and shall be limited to an amount equal to
the proceeds (net of expenses and underwriting discounts and commissions)
that they derive from such registration.
2.5 Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company will give the
Purchasers, their underwriters, if any, and their respective counsel,
accountants and other representatives and agents the opportunity to
participate in the preparation of such registration statement, each
prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and give each of them such access
to its books and records and such opportunities to discuss the business of
the Company with its officers and employees and the independent public
accountants who have certified its financial statements, and supply all
other information reasonably requested by each of them, as shall be
necessary or appropriate, in the opinion of the Purchasers and such
underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
2.6 Indemnification.
(a) Indemnification by the Company. The Company agrees
that in the event of any registration of any Registrable Securities of the
Company under this Registration Rights Agreement the Company shall, and
hereby does, indemnify and hold harmless the Purchasers, their respective
directors, officers, members, partners, agents and affiliates and each
other Person who participates as an underwriter in the offering or sale of
such securities and each other Person, if any, who controls the Purchasers
or any such underwriter within the meaning of the Securities Act, against
any losses, claims, damages, or liabilities, joint or several, to which the
Purchasers or any such director, officer, member, partner, agent or
affiliate or underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities, joint or several (or actions or proceedings, whether commenced
or threatened, in respect thereof), arise out of or are based upon (i) any
untrue statement or alleged untrue statement of any material fact contained
in any registration statement under which such securities were registered
under the Securities Act, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement
thereto, (ii) any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not
misleading, or (iii) any violation by the Company of any federal, state or
common law rule or regulation applicable to the Company and relating to
action required of or inaction by the Company in connection with any such
registration, and the Company shall reimburse the Purchasers and each such
director, officer, member, partner, agent or affiliate, underwriter and
controlling Person for any legal or any other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided that the Company shall not be
liable in any such case to the Purchasers or any such director, officer,
member, partner, agent, affiliate, or controlling person to the extent that
any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by or on behalf of the Purchasers, specifically
stating that it is for use in the preparation thereof. Such indemnity shall
remain in full force regardless of any investigation made by or on behalf
of the Purchasers or any such director, officer, member, partner, agent,
affiliate, underwriter or controlling Person and shall survive the transfer
of such securities by the Purchasers.
(b) Indemnification by the Purchasers. As a condition to
including any Registrable Securities in any registration statement, the
Company shall have received an undertaking reasonably satisfactory to it
from the Purchasers so including any Registrable Securities to indemnify
and hold harmless (in the same manner and to the same extent as set forth
in paragraph (a) of this Section 2.6) the Company, and each director of the
Company, each officer of the Company and each other Person, if any, who
controls the Company within the meaning of the Securities Act, with respect
to any statement or alleged statement in or omission or alleged omission
from such registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, but only to the extent such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by the Purchasers specifically stating that it is
for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided, however, that the liability of any such indemnifying party under
this Section 2.6(b) shall be limited to the amount of proceeds (net of
expenses and underwriting discounts and commissions) received by such
indemnifying party in the offering giving rise to such liability. Such
indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling Person and shall survive the transfer of such
securities by the Purchasers.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subsections of this Section
2.6, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to the latter of
the commencement of such action or proceeding; provided, however, that the
failure of any indemnified party to give notice as provided herein shall
not relieve the indemnifying party of its obligations under the preceding
subsections of this Section 2.6, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice, and shall not
relieve the indemnifying party from any liability which it may have to the
indemnified party otherwise than under this Section 2.6. In case any such
action or proceeding is brought against an indemnified party, the
indemnifying party shall be entitled to participate therein and, unless in
the opinion of outside counsel to the indemnified party a conflict of
interest between such indemnified and indemnifying parties may exist in
respect of such claim, to assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that it may wish,
with counsel reasonably satisfactory to such indemnified party; provided,
however, that if the defendants in any such action or proceeding include
both the indemnified party and the indemnifying party and if in the opinion
of outside counsel to the indemnified party there may be legal defenses
available to such indemnified party and/or other indemnified parties which
are different from or in addition to those available to the indemnifying
party, the indemnified party or parties shall have the right to select
separate counsel to defend such action or proceeding on behalf of such
indemnified party or parties, provided, however, that the indemnifying
party shall be obligated to pay for only one counsel and one local counsel
for all indemnified parties. After notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof and
approval by the indemnified party of such counsel, the indemnifying party
shall not be liable to such indemnified party for any legal expenses
subsequently incurred by the latter in connection with the defense thereof
other than reasonable costs of investigation (unless the first proviso in
the preceding sentence shall be applicable). No indemnifying party shall be
liable for any settlement of any action or proceeding effected without its
written consent. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release
from all liability in respect to such claim or litigation.
(d) Contribution. If the indemnification provided for in
this Section 2.6 shall for any reason be held by a court to be unavailable
to an indemnified party under subsection (a) or (b) hereof in respect of
any loss, claim, damage or liability, or any action in respect thereof,
then, in lieu of the amount paid or payable under subsection (a) or (b)
hereof, the indemnified party and the indemnifying party under subsection
(a) or (b) hereof shall contribute to the aggregate losses, claims, damages
and liabilities (including legal or other expenses reasonably incurred in
connection with investigating the same), (i) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the
one hand, and the indemnified party on the other, with respect to the
statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant
equitable considerations, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law or if the allocation provided in
this clause (ii) provides a greater amount to the indemnified party than
clause (i) above, in such proportion as shall be appropriate to reflect not
only the relative fault but also the relative benefits received by the
indemnifying party and the indemnified party from the offering of the
securities covered by such registration statement as well as any other
relevant equitable considerations. The parties hereto agree that it would
not be just and equitable if contributions pursuant to this Section 2.6(d)
were to be determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to in the preceding sentence of this Section 2.6(d). No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. In addition, no
Person shall be obligated to contribute hereunder any amounts in payment
for any settlement of any action or claim effected without such Person's
consent, which consent shall not be unreasonably withheld. Notwithstanding
anything in this subsection (d) to the contrary, no indemnifying party
(other than the Company) shall be required to contribute any amount in
excess of the proceeds (net of expenses and underwriting discounts and
commissions) received by such party from the sale of the Registrable
Securities in the offering to which the losses, claims, damages or
liabilities of the indemnified parties relate.
(e) Other Indemnification. Indemnification and
contribution similar to that specified in the preceding subsections of this
Section 2.6 (with appropriate modifications) shall be given by the Company
and the Purchasers with respect to any required registration or other
qualification of securities under any federal, state or blue sky law or
regulation of any governmental authority other than the Securities Act. The
indemnification agreements contained in this Section 2.6 shall be in
addition to any other rights to indemnification or contribution which any
indemnified party may have pursuant to law or contract and shall remain
operative and in full force and effect regardless of any investigation made
by or on behalf of any indemnified party and shall survive the transfer of
any of the Registrable Securities by the Purchasers.
(f) Indemnification Payments. The indemnification and
contribution required by this Section 2.6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or expense, loss, damage or
liability is incurred.
2.7 Unlegended Certificates. In connection with the offering
of any Registrable Securities registered pursuant to this Section 2, the
Company shall (i) facilitate the timely preparation and delivery to the
Purchasers and the underwriters, if any, participating in such offering, of
unlegended certificates representing ownership of such Registrable
Securities being sold in such denominations and registered in such names as
requested by the Purchasers or such underwriters and (ii) instruct any
transfer agent and registrar of such Registrable Securities to release any
stop transfer orders with respect to any such Registrable Securities.
2.8 Limitation on Sale of Securities. The Company hereby
agrees that if it shall previously have received a request for registration
pursuant to Section 2.1 or 2.2 hereof, and if such previous registration
shall not have been withdrawn or abandoned, the Company shall not effect
any public or private offer, sale or distribution of its securities or
effect any registration of any of its equity securities under the
Securities Act whether or not for sale for its own account, until a period
of 90 days (or such shorter period as the Purchasers shall be advised by
their managing underwriter) shall have elapsed from the effective date of
such previous registration, and the Company shall so provide in any
registration rights agreements hereafter entered into with respect to any
of its securities provided, however, that during this 90 day period the
Company may (i) offer, sell and distribute its equity securities in
connection with acquisitions or any Company employee or director benefit or
stock purchase or stock option plans, (ii) grant or award Common Stock,
options to purchase Common Stock in connection with acquisitions or under
such Company plans and (iii) take any other actions necessary in connection
with any of the foregoing in order to register such Common Stock with the
Commission.
2.9 No Required Sale. Nothing in this Agreement shall be
deemed to create an independent obligation on the part of the Purchasers to
sell any Registrable Securities pursuant to any effective registration
statement.
3. Rule 144. Without limiting in any way the provisions of
Section 4.12 of the Purchase Agreement, the Company shall take all actions
reasonably necessary to enable holders of Registrable Securities to sell
such securities without registration under the Securities Act within the
limitation of the exemptions provided by (i) Rule 144, or (ii) any similar
rule or regulation hereafter adopted by the Commission including, without
limiting the generality of the foregoing, filing on a timely basis all
reports required to be filed by the Exchange Act. Upon the request of the
Purchasers, the Company will deliver to such holder a written statement as
to whether it has complied with such requirements.
4. Amendments and Waivers. This Agreement may be amended,
modified or supplemented only by written agreement of the party against
whom enforcement of such amendment, modification or supplement is sought.
5. [INTENTIONALLY OMITTED]
6. Notice. All notices and other communications hereunder shall
be in writing and, unless otherwise provided herein, shall be deemed to
have been given when received by the party to whom such notice is to be
given at its address set forth below, or such other address for the party
as shall be specified by notice given pursuant hereto:
(a) If to the Purchasers, to:
c/o Forstmann Little & Co.
767 Fifth Avenue
New York, NY 10153
Attention: Thomas Lister
With a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Robert C. Schwenkel, Esq.
(b) If to the Company, to it at:
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.
Vice President, General Counsel and Secretary
with a copy to (which shall not constitute notice):
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Telecopy No.: (202) 637-5910
Attention: Joseph G. Connolly, Jr., Esq.
7. Assignment; Third Party Beneficiaries. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors and permitted assigns. This
Agreement may not be assigned by the Company, without the prior written
consent of the Purchasers. This Agreement may not be assigned by any of the
Purchasers, without the prior written consent of the Company; provided,
however, the Purchasers may, at their election, at any time or from time to
time, assign their rights under this Agreement, in whole or in part, to any
Affiliates of the Purchasers; provided further, however, that any rights to
withdraw shares from inclusion in a registration statement pursuant to
Section 2 shall be made only by the Purchasers for themselves and all such
Affiliates.
8. Remedies. The parties hereto agree that money damages or other
remedy at law would not be sufficient or adequate remedy for any breach or
violation of, or a default under, this Agreement by them and that, in
addition to all other remedies available to them, each of them shall be
entitled to an injunction restraining such breach, violation or default or
threatened breach, violation or default and to any other equitable relief,
including without limitation specific performance, without bond or other
security being required. In any action or proceeding brought to enforce any
provision of this Agreement (including the indemnification provisions
thereof), the successful party shall be entitled to recover reasonable
attorneys' fees in addition to its costs and expenses and any other
available remedy.
9. No Inconsistent Agreements. The Company will not, on or after
the date of this Agreement, enter into any agreement with respect to its
securities which is inconsistent with the rights granted to the Purchasers
in this Agreement or otherwise conflicts with the provisions hereof. The
Company further represents and warrants that the rights granted to the
Purchasers hereunder do not in any way conflict with and are not
inconsistent with any other agreements to which the Company is a party or
by which it is bound. The Company further agrees that if any other
registration rights agreement entered into after the date of this Agreement
with respect to any of its securities contains terms which are more
favorable to, or less restrictive on, the other party thereto than the
terms and conditions contained in this Agreement are (insofar as they are
applicable) with respect to the Purchasers, then the terms and conditions
of this Agreement shall immediately be deemed to have been amended without
further action by the Company or the Purchasers so that the Purchasers
shall be entitled to the benefit of any such more favorable or less
restrictive terms or conditions.
10. Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only
and shall not control or otherwise affect the meaning hereof.
11. Governing Law. This Agreement shall be construed and enforced
in accordance with, and the rights and obligations of the parties hereto
shall be governed by, the laws of the State of New York, without giving
effect to the conflicts of law principles thereof. Each of the parties
hereto hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the courts of the State of New York and the
United States of America located in the County of New York for any action
or proceeding arising out of or relating to this Agreement and the
transactions contemplated hereby (and agrees not to commence any action or
proceeding 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 6 hereof shall be effective
service of process for any action or proceeding brought against it in any
such court. Each of the parties hereto hereby irrevocably and
unconditionally waives any objection to the laying of venue of any action
or proceeding arising out of this Agreement or the transactions
contemplated hereby in the courts of the State of New York or the United
States of America located in the County of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in
any such court that any such action or proceeding brought in any such court
has been brought in an inconvenient forum.
12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
13. Invalidity of Provision. The invalidity or unenforceability
of any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of this Agreement, including
that provision, in any other jurisdiction. If any restriction or provision
of this Agreement is held unreasonable, unlawful or unenforceable in any
respect, such restriction or provision shall be interpreted, revised or
applied in a manner that renders it lawful and enforceable to the fullest
extent possible under law.
14. Further Assurances. Each party hereto shall do and perform or
cause to be done and performed all further acts and things and shall
execute and deliver all other agreements, certificates, instruments, and
documents as any other party hereto reasonably may request in order to
carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
15. Entire Agreement; Effectiveness. This Agreement constitutes
the entire agreement, and supersedes all prior agreements and
understandings, oral and written, between the parties hereto with respect
to the subject matter hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly
authorized.
McLEODUSA INCORPORATED
By: /s/ Stephen C. Gray
-------------------------
Name: Stephen C. Gray
Title: President and Chief
Operating Officer
FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP
V, L.P.
By: /s/ Winston W. Hutchins
--------------------------
Name: Winston W. Hutchins
Title: General Partner
FORSTMANN LITTLE & CO. SUBORDINATED DEBT
AND EQUITY MANAGEMENT BUYOUT PARTNERSHIP
VI, L.P.
By: /s/ Winston W. Hutchins
--------------------------
Name: Winston W. Hutchins
Title: General Partner
FORSTMANN LITTLE & CO. SUBORDINATED DEBT
AND EQUITY MANAGEMENT BUYOUT PARTNERSHIP
VII, L.P.
By: /s/ Winston W. Hutchins
--------------------------
Name: Winston W. Hutchins
Title: General Partner
EXHIBIT 3
McLEODUSA INCORPORATED
CERTIFICATE OF DESIGNATION OF THE POWERS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF SERIES B CUMULATIVE
CONVERTIBLE PREFERRED STOCK AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS THEREOF
- ------------------------------------------------------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
- ------------------------------------------------------------------------------
McLeodUSA Incorporated (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that, pursuant to authority conferred upon
the board of directors of the Corporation (the "Board of Directors") by the
Corporation's Amended and Restated Certificate of Incorporation, as amended
(the "Restated Certificate of Incorporation"), and pursuant to the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, said Board of Directors is authorized to issue Preferred Stock of
the Corporation in one or more series and the Board of Directors has
approved and adopted the following resolution on September 13, 1999 (the
"Resolution"):
RESOLVED that, the Board of Directors hereby creates,
authorizes and provides for the issuance of a series of the preferred
stock of the Corporation, par value $.01 per share (such preferred
stock designated as the "Series B Cumulative Convertible Preferred
Stock"), consisting of 275,000 shares and having the powers,
designation, preferences, relative, participating, optional and other
special rights and the qualifications, limitations and restrictions
thereof that are set forth in the Restated Certificate of
Incorporation and in this Resolution as follows:
1. Number and Designation. 275,000 shares of the Preferred Stock
of the Corporation shall constitute a series designated as "Series B
Cumulative Convertible Preferred Stock" (the "Series B Preferred Stock").
2. Definitions. Unless the context otherwise requires, when used
herein the following terms shall have the meaning indicated.
"Board of Directors" means the Board of Directors of the
Corporation.
"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in
New York City, New York generally are authorized or required by law or
other governmental actions to close.
"Capital Stock" means, with respect to any person, any and all
shares, interests, participations, rights in, or other equivalents (however
designated and whether voting and/or non-voting) of such person's capital
stock, whether outstanding on the Issue Date or issued after the Issue
Date, and any and all rights (other than any evidence of indebtedness),
warrants or options exchangeable for or convertible into such capital
stock.
"Class A Common Stock" means any shares of the Corporation's
Class A common stock, par value $.01 per share, now or hereafter authorized
to be issued, and any and all securities of any kind whatsoever of the
Corporation which may be exchanged for or converted into Class A Common
Stock, any and all securities of any kind whatsoever of the Corporation
which may be issued on or after the date hereof in respect of, in exchange
for, or upon conversion of shares of Class A Common Stock pursuant to a
merger, consolidation, stock split, stock dividend, recapitalization of the
Corporation or otherwise.
"Common Stock" means the Corporation's Class A Common Stock, and
any other common stock of the Corporation.
"Current Market Price" means the average of the daily Market
Prices of the Common Stock for ten consecutive trading days immediately
preceding the date for which such value is to be computed.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute, and the rules and regulations
promulgated thereunder.
"Issue Date" means the original date of issuance of shares of
Series B Preferred Stock.
"Liquidation Preference" with respect to a share of Series B
Preferred Stock means, as at any date, the sum of (i) $2,500.00 plus (ii)
any Special Amount with respect to such share plus (iii) an amount equal to
any accrued and unpaid Preferred Dividends (as defined in paragraph 4(a)
below) with respect to such share from the last Dividend Payment Date
through such date.
"Market Price" means, with respect to the Common Stock, on any
given day, (i) the price of the last trade, as reported on the Nasdaq
National Market, not identified as having been reported late to such
system, or (ii) if the Common Stock is so traded, but not so quoted, the
average of the last bid and ask prices, as those prices are reported on the
Nasdaq National Market, or (iii) if the Common Stock is not listed or
authorized for trading on the Nasdaq National Market or any comparable
system, the average of the closing bid and asked prices as furnished by two
members of the National Association of Securities Dealers, Inc. selected
from time to time by the Corporation for that purpose. If the Common Stock
is not listed and traded in a manner that the quotations referred to above
are available for the period required hereunder, the Market Price per share
of Common Stock shall be deemed to be the fair value per share of such
security as determined in good faith by the Board of Directors of the
Corporation.
"Net Realizable FMV" means, with respect to a share of Common
Stock, if calculable, the amount of gross proceeds net of underwriters'
discounts, commissions or other selling expenses received by or to be
received by the holder in connection with the sale of such share of Common
Stock on a when issued basis or immediately after the conversion or, in all
other cases, an amount equal to 97% of the Current Market Price of the
Common Stock.
"Preference Amount" with respect to a share of Series B Preferred
Stock means, as at any date, the sum of (i) $1818.182 plus (ii) any Special
Amount, whether or not declared, with respect to such share plus (iii) an
amount equal to any accrued and unpaid Preferred Dividends with respect to
such share from the last Dividend Payment Date through such date.
"Series C Designation" means the Certificate of Designation for
the Series C Preferred Stock.
"Series C Preferred Stock" means the Series C Convertible
Preferred Stock, par value $.01 per share, of the Corporation.
"Special Amount" with respect to a share of Series B Preferred
Stock shall mean all dividends and other amounts which have become payable
in respect of such share under paragraph 4(a) but which have not been paid.
The Special Amount with respect to any such share shall be reduced by the
amount of any such dividends and other amounts actually paid in respect of
such share under paragraph 4(c).
"Voting Stock" means, with respect to any person, the Capital
Stock of any class or kind ordinarily having the power to vote for the
election of directors or other members of the governing body of such
person.
3. Rank. (a) The Series B Preferred Stock and Series C Preferred
Stock each will, with respect to dividend rights and rights on liquidation,
winding-up and dissolution, rank (i) senior to all classes of Common Stock
and to each other class of Capital Stock of the Corporation or series of
Preferred Stock of the Corporation established hereafter by the Board of
Directors of the Corporation the terms of which do not expressly provide
that such class or series ranks senior to, or on a parity with, the Series
B Preferred Stock and Series C Preferred Stock as to dividend rights and
rights on liquidation, winding-up and dissolution of the Corporation
(collectively referred to, together with all classes of Common Stock of the
Corporation, as "Junior Securities"); (ii) on a parity with the
Corporation's 6.75% Series A Cumulative Convertible Preferred Stock, par
value $.01 per share, and with each class of Capital Stock of the
Corporation or series of Preferred Stock of the Corporation established
hereafter by the Board of Directors of the Corporation, the terms of which
expressly provide that such class or series will rank on a parity with the
Series B Preferred Stock and Series C Preferred Stock as to dividend rights
and rights on liquidation, winding-up and dissolution (collectively
referred to as "Parity Securities"); and (iii) junior to each class of
Capital Stock of the Corporation or series of Preferred Stock of the
Corporation established hereafter by the Board of Directors of the
Corporation, the terms of which expressly provide that such class or series
will rank senior to the Series B Preferred Stock and Series C Preferred
Stock as to dividend rights and rights on liquidation, winding-up and
dissolution of the Corporation (collectively referred to as "Senior
Securities"); provided that the relative powers, rights and preferences of
the Series B Preferred Stock and Series C Preferred Stock vis-a-vis the
other shall be as set forth herein and in the Series C Designation.
(b) The respective definitions of Junior Securities, Parity
Securities and Senior Securities shall also include any warrants, rights or
options or other securities exercisable or exchangeable for or convertible
into any of the Junior Securities, Parity Securities and Senior Securities,
as the case may be.
(c) The Series B Preferred Stock shall be subject to the creation
of Junior Securities and Parity Securities.
4. Dividends. (a) The holders of shares of Series B Preferred
Stock shall be entitled to receive with respect to each share of Series B
Preferred Stock, when, as and if declared by the Board of Directors, out of
funds legally available for the payment of dividends, dividends per annum
equal to $127.273 per share in cash (the "Preferred Dividend"). Preferred
Dividends shall accrue and shall be cumulative whether or not declared from
the Issue Date and shall be payable quarterly in arrears on March 31, June
30, September 30 and December 31 of each year (unless such day is not a
Business Day, in which event such dividends shall be payable on the next
succeeding Business Day) (each such date being a "Dividend Payment Date"
and each such quarterly period being a "Dividend Period"), commencing on
December 31, 1999. Each such dividend shall be payable to the holders of
record of shares of the Series B Preferred Stock as they appear on the
stock register of the Corporation at the close of business on the
corresponding Record Date. As used herein, the term "Record Date" means,
with respect to the dividend payable on March 31, June 30, September 30 and
December 31, respectively, of each year, the preceding March 15, June 15,
September 15 and December 15, or such other date, not more than 60 days or
less than 10 days preceding the payment dates thereof, as shall be fixed as
the record date by the Board of Directors.
(b) The amount of Preferred Dividends payable for each full
Dividend Period for each outstanding share of Series B Preferred Stock
shall be computed by dividing $127.273 by four. The amount of Preferred
Dividends payable on the initial Dividend Payment Date, or in respect of
any period shorter or longer than a full Dividend Period, on the Series B
Preferred Stock shall be computed on the basis of twelve 30-day months and
a 360-day year. No interest, or sum or money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the Series B
Preferred Stock that may be in arrears.
(c) Accrued and unpaid Special Amounts for any past Dividend
Periods may be declared and paid on any subsequent Dividend Payment Date,
to holders of record on the corresponding Record Date.
(d) So long as any shares of the Series B Preferred Stock are
outstanding, no dividend, except as described in the last sentence of
Section 4(e) below and except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on any Parity
Securities, nor shall any Parity Securities be redeemed, purchased or
otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any shares of any such
stock) by the Corporation, directly or indirectly (except by conversion
into or exchange for Parity Securities or Junior Securities), unless in
each case all Special Amounts have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof is set
apart for such payment on the Series B Preferred Stock for all Dividend
Periods terminating on or prior to the date of payment of the dividend on,
or the date of redemption, purchase, or acquisition for consideration of,
such Parity Securities. When Special Amounts are not paid in full or a sum
sufficient for such payment is not set apart, as aforesaid, all Special
Amounts and additional amounts declared upon shares of the Series B
Preferred Stock and all dividends and additional amounts declared upon any
other Parity Securities shall be declared ratably in proportion to the
respective amounts of Special Amounts and additional amounts accumulated
and unpaid on the Series B Preferred Stock and dividends and additional
amounts accumulated and unpaid on such Parity Securities.
(e) So long as any shares of the Series B Preferred Stock are
outstanding, no dividends shall be declared or paid or set apart for
payment and no other distribution shall be declared or made upon Junior
Securities, nor shall any Junior Securities be redeemed, purchased or
otherwise acquired (any such dividend, distribution, redemption, purchase
or acquisition being hereinafter referred to as a "Junior Securities
Distribution") for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any shares of any such
stock) by the Corporation, directly or indirectly (except by conversion
into or exchange for Junior Securities), unless in each case (i) all
Special Amounts and additional amounts on all outstanding shares of the
Series B Preferred Stock and accrued and unpaid dividends and additional
amounts on any other Parity Securities shall have been paid or set apart
for payment for all past Dividend Periods with respect to the Series B
Preferred Stock and all past dividend periods with respect to such Parity
Securities and (ii) sufficient funds shall have been paid or set apart for
the payment of the dividend for the current Dividend Period with respect to
the Series B Preferred Stock and the current dividend period with respect
to such Parity Securities. Notwithstanding anything in this Certificate of
Designation to the contrary, the Corporation may declare and pay dividends
on Parity Stock which are payable solely in additional shares of, or by the
increase in the liquidation value of, Parity Stock or on Junior Stock which
are payable in additional shares of, or by the increase in the liquidation
value of, Junior Stock, as applicable, or repurchase, redeem or otherwise
acquire Junior Stock in exchange for Junior Stock, and Parity Stock in
exchange for Parity Stock or Junior Stock.
(f) If at any time from the Issue Date through the date ending
five years thereafter, the Corporation pays a dividend in cash or property
other than in shares of Capital Stock on the Common Stock then at the same
time the Corporation shall declare and pay a dividend on each share of
Series B Preferred Stock in an amount equal to the Series B Per Share
Participation Amount. The "Series B Per Share Participation Amount" means,
as at any date, 37.5% of the amount of dividends that would be paid with
respect to the Series B Preferred Stock and Series C Preferred Stock taken
together if converted into Common Stock on the date established as the
record date with respect to such dividend on the Common Stock divided by
the number of shares of Series B Preferred Stock then outstanding.
5. Liquidation Preference. (a) In the event of any liquidation,
dissolution or winding-up of the Corporation, whether voluntary or
involuntary, before any payment or distribution of the assets of the
Corporation (whether capital or surplus) shall be made to or set apart for
the holders of Junior Securities, the holders of the shares of Series B
Preferred Stock and Series C Preferred Stock taken together shall be
entitled to receive an amount in cash equal to the greater of (x) the
aggregate Liquidation Preferences (as set forth herein and in the Series C
Designation) of the shares of Series B Preferred Stock and Series C
Preferred Stock as of the date of liquidation, or (y) the aggregate amount
that would have been received with respect to the shares of Series B
Preferred Stock and Series C Preferred Stock if such stock had been
converted to Common Stock immediately prior to such liquidation,
dissolution or winding-up. If, upon any liquidation, dissolution or
winding-up of the Corporation, the assets of the Corporation, or proceeds
thereof, shall be insufficient to pay in full the aforesaid amounts under
clause (x) of the preceding sentence and liquidating payments on all Parity
Securities, then such assets, or proceeds thereof, shall (i) be distributed
among the shares of Series B Preferred Stock and the Series C Preferred
Stock taken together and all such other Parity Securities ratably in
accordance with the respective amounts that would be payable on such shares
of Preferred Stock and any such other Parity Securities if all amounts
payable thereon were paid in full and (ii) the amount distributable under
clause (i) to the Series B Preferred Stock and Series C Preferred Stock
taken together, shall first be distributed to the Series B Preferred Stock
until it has received an amount equal to the aggregate Preference Amounts
of all Series B Preferred Stock outstanding as of the date of liquidation
and thereafter 37.5% to the Series B Preferred Stock and 62.5% to the
Series C Preferred Stock. If, upon any liquidation, dissolution or
winding-up of the Corporation, the assets of the Corporation, or proceeds
thereof, distributable to the Series B Preferred Stock and Series C
Preferred Stock taken together shall be sufficient to pay in full the
aforesaid amounts under clause (x) of the first sentence of this subsection
5(a) then such amount shall first be distributed to the Series B Preferred
Stock until it has received an amount equal to the aggregate Preference
Amounts of all Series B Preferred Stock outstanding as of the date of
liquidation and thereafter 37.5% to the Series B Preferred Stock and 62.5%
to the Series C Preferred Stock. Any amounts distributed with respect to
the Series B Preferred Stock pursuant to this paragraph 5(a) shall be
allocated pro rata among the shares of Series B Preferred Stock. For the
purposes of this paragraph 5, neither the sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or other consideration) of
all or substantially all of the property or assets of the Corporation nor
the consolidation or merger of the Corporation with or into one or more
other entities shall be deemed to be a liquidation, dissolution or
winding-up of the Corporation.
(b) Subject to the rights of the holders of any Parity
Securities, after payment shall have been made in full to the holders of
the Series B Preferred Stock and the Series C Preferred Stock taken
together, as provided in this paragraph 5, any other series or class or
classes of Junior Securities shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all
assets remaining to be paid or distributed, and the holders of the Series B
Preferred Stock, Series C Preferred Stock and any Parity Securities shall
not be entitled to share therein.
6. Redemption. (a) The Series B Preferred Stock shall not be
redeemable by the Corporation prior to the seventh anniversary of the Issue
Date. On and after the seventh anniversary of the Issue Date, to the extent
the Corporation shall have funds legally available for such payment, and
subject to the rights of the holders pursuant to Section 8 hereof, the
Corporation may redeem at its option shares of Series B Preferred Stock, at
any time in whole or from time to time in part, at a redemption price per
share equal to the Liquidation Preference as of the date fixed for
redemption, without interest; provided that the Corporation shall only be
entitled to redeem shares of the Series B Preferred Stock if shares of the
Series C Preferred Stock are also redeemed on a proportional basis based on
the percentage of each series of shares outstanding at such time.
(b) To the extent the Corporation shall have funds legally
available therefor, during the 180-day period commencing on the tenth
anniversary of the Issue Date, the holders of the Series B Preferred Stock
shall have the right to cause the Corporation to redeem at any time in
whole or from time to time in part outstanding shares of Series B Preferred
Stock, if any, at a redemption price per share in cash equal to the
Liquidation Preference, without interest; provided that upon any such
election the Corporation shall be required to redeem a proportional amount
of the Series C Preferred Stock.
(c) Shares of Series B Preferred Stock which have been issued and
reacquired by the Corporation in any manner, including shares purchased or
redeemed, shall (upon compliance with any applicable provisions of the laws
of the State of Delaware) be retired and have the status of authorized and
unissued shares of the class of Preferred Stock undesignated as to series
and may be redesignated and reissued as part of any series of the Preferred
Stock; provided that no such issued and reacquired shares of Series B
Preferred Stock shall be reissued or sold as Series B Preferred Stock.
(d) If the Corporation is unable or shall fail to discharge its
obligation to redeem outstanding shares of Series B Preferred Stock
pursuant to paragraph 6(b) (the "Mandatory Redemption Obligation"), the
Mandatory Redemption Obligation shall be discharged as soon as the
Corporation is able to discharge such Mandatory Redemption Obligation. If
and so long as any Mandatory Redemption Obligation with respect to the
Series B Preferred Stock shall not be fully discharged, the Corporation
shall not (i) directly or indirectly, redeem, purchase, or otherwise
acquire any Parity Security or discharge any mandatory or optional
redemption, sinking fund or other similar obligation in respect of any
Parity Securities or (ii) declare or make any Junior Securities
Distribution, or, directly or indirectly, discharge any mandatory or
optional redemption, sinking fund or other similar obligation in respect of
any Junior Securities.
7. Procedure for Redemption. (a) In the event that fewer than all
the outstanding shares of Series B Preferred Stock are to be redeemed, in
the case of Section 6(a), the number of shares to be redeemed shall be
determined by the Board of Directors and the shares to be redeemed shall be
selected pro rata (with any fractional shares being rounded to the nearest
whole shares). Notwithstanding anything in Section 6 to the contrary, the
Corporation shall only redeem shares of Series B Preferred Stock pursuant
to Section 6(a) or 6(b) on a proportional basis based on the percentage of
each series of shares outstanding at such time.
(b) In the event the Corporation shall redeem shares of Series B
Preferred Stock pursuant to Section 6(a), notice of such redemption shall
be given by first class mail, postage prepaid, mailed not less than 30 days
nor more than 60 days prior to the redemption date, to each holder of
record of the shares to be redeemed at such holder's address as the same
appears on the stock register of the Corporation; provided that neither the
failure to give such notice nor any defect therein shall affect the
validity of the giving of notice for the redemption of any share of Series
B Preferred Stock to be redeemed except as to the holder to whom the
Corporation has failed to give said notice or except as to the holder whose
notice was defective. Each such notice shall state: (i) the redemption
date; (ii) the number of shares of Series B Preferred Stock to be redeemed
and, if fewer than all the shares held by such holder are to be redeemed,
the number of shares to be redeemed from such holder; (iii) the redemption
price; (iv) the place or places where certificates for such shares are to
be surrendered for payment of the redemption price; and (v) that dividends
on the shares to be redeemed will cease to accrue on such redemption date.
(c) Notice having been mailed as aforesaid, if applicable, from
and after the redemption date, dividends on the shares of Series B
Preferred Stock so called for redemption shall cease to accrue, and all
rights of the holders thereof as stockholders of the Corporation (except
the right to receive from the Corporation the redemption price and except
the right to convert shares so called for redemption prior to the close of
business on the date immediately preceding the date fixed for such
redemption) shall cease. Upon surrender in accordance with said notice, if
applicable, of the certificates for any shares so redeemed (properly
endorsed or assigned for transfer, if the Board of Directors shall so
require and the notice shall so state), such shares shall be redeemed by
the Corporation at the redemption price aforesaid. In case fewer than all
the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares without cost
to the holder thereof.
8. Conversion. (a) (i) Subject to the provisions of this Section
8, the holders of shares of Series B Preferred Stock shall have the right,
at any time in whole and from time to time in part, at such holders'
option, to convert any or all outstanding shares (and fractional shares) of
Series B Preferred Stock held by such holders into fully paid and
non-assessable shares of Class A Common Stock; provided that upon the
exercise by any holder of Series B Preferred Stock of this conversion
option, a proportional amount, based on the percentage of each series of
shares outstanding, of the Series C Preferred Stock shall automatically
convert in accordance with the terms of the Series C Designation. At any
time and from time to time the outstanding shares of Series B Preferred
Stock and Series C Preferred Stock taken together shall be convertible into
a number of shares of Class A Common Stock (the "Aggregate Conversion
Shares") equal to the aggregate Liquidation Preferences of the shares of
the Series B Preferred Stock and the Series C Preferred Stock as set forth
herein and in the Series C Designation as of the date of conversion divided
by $36.50, subject to adjustment from time to time pursuant to paragraph
8(g) hereof (the "Conversion Price"). The Series B Preferred Stock shall be
convertible into a number of shares of Class A Common Stock (the "Aggregate
Series B Conversion Shares") equal to the sum of (A) the aggregate
Preference Amounts with respect to all outstanding shares of Series B
Preferred Stock divided by the Net Realizable FMV of a share of Class A
Common Stock at the time of conversion plus (B) .375 times the excess, if
any, of the Aggregate Conversion Shares over the number determined pursuant
to clause (A). Each share of Series B Preferred Stock being converted shall
convert into a number of shares of Class A Common Stock equal to the
Aggregate Series B Conversion Shares divided by the number of shares of
Series B Preferred Stock then outstanding. Notwithstanding any call for
redemption pursuant to Section 6(a), the right to convert shares so called
for redemption shall terminate at the close of business on the date
immediately preceding the date fixed for such redemption unless the
Corporation shall default in making payment of the amount payable upon such
redemption.
(ii) In the case of any partial conversion of Series B
Preferred Stock by the holders thereof, selection of the Series C Preferred
Stock for automatic conversion will be made by the Corporation in
compliance with the requirements of the principal national securities
exchange, if any, on which the Series C Preferred Stock is listed, or if
the Series C Preferred Stock is not listed on a national securities
exchange, on a pro rata basis, by lot or such other method as the
Corporation, in its sole discretion, shall deem fair and appropriate;
provided, however, that the Corporation may redeem all the shares held by
holders of fewer than 5 shares of Series C Preferred Stock (or all of the
shares held by the holders who would hold less than 5 shares of Series C
Preferred Stock as a result of such redemption) as may be determined by the
Corporation.
(b) (i) In order to exercise the conversion privilege, the holder
of the shares of Series B Preferred Stock to be converted shall surrender
the certificate representing such shares at the principal executive offices
of the Corporation, with a written notice of election to convert completed
and signed, specifying the number of shares to be converted. Unless the
shares issuable on conversion are to be issued in the same name as the name
in which such shares of Series B Preferred Stock are registered, each share
surrendered for conversion shall be accompanied by instruments of transfer,
in form satisfactory to the Corporation, duly executed by the holder or the
holder's duly authorized attorney, and an amount sufficient to pay any
transfer or similar tax.
(ii) As promptly as practicable after the surrender by the
holder of the certificates for shares of Series B Preferred Stock as
aforesaid, the Corporation shall issue and shall deliver to such holder, or
on the holder's written order to the holder's transferee, (x) a certificate
or certificates for the whole number of shares of Class A Common Stock
issuable upon the conversion of such shares in accordance with the
provisions of this paragraph 8, (y) any cash adjustment required pursuant
to Section 8(f), and (z) in the event of a conversion in part, a
certificate or certificates for the whole number of shares of Series B
Preferred Stock not being so converted.
(iii) Each conversion of shares of Series B Preferred Stock
pursuant to paragraph 8(a) shall be deemed to have been effected
immediately prior to the close of business on the date on which the
certificates for shares of Series B Preferred Stock shall have been
surrendered and such notice received by the Corporation as aforesaid, and
the person in whose name or names any certificate or certificates for
shares of Class A Common Stock shall be issuable upon such conversion shall
be deemed to have become the holder of record of the shares of Class A
Common Stock represented thereby at such time on such date and such
conversion shall be into a number of whole shares of Class A Common Stock
in respect of the shares of Series B Preferred Stock being converted as
determined in accordance with this Section 8 at such time on such date. All
shares of Class A Common Stock delivered upon conversion of the Series B
Preferred Stock will upon delivery be duly and validly issued and fully
paid and non-assessable, free of all liens and charges and not subject to
any preemptive rights. Upon the surrender of certificates representing the
shares of Series B Preferred Stock to be converted, the shares to be so
converted shall no longer be deemed to be outstanding and all rights of a
holder with respect to such shares surrendered for conversion shall
immediately terminate except the right to receive the Class A Common Stock
and other amounts payable pursuant to this paragraph 8 and a certificate or
certificates representing the shares of Series B Preferred Stock not
converted.
(c) (i) Upon delivery to the Corporation by a holder of shares of
Series B Preferred Stock of a notice of election to convert, the right of
the Corporation to redeem such shares of Series B Preferred Stock shall
terminate, regardless of whether a notice of redemption has been mailed as
aforesaid.
(ii) If a holder of Series B Preferred Stock delivers to the
Corporation a certificate therefor and a notice of election to convert, the
Series B Preferred Stock to be converted shall cease to accrue dividends
pursuant to paragraph 4 but shall continue to be entitled to receive pro
rata dividends for the period from the last Dividend Payment Date to the
date of delivery of the notice of election to convert in preference to and
in priority over any dividends on any Junior Securities.
(iii) Except as provided above and in paragraph 8(g), the
Corporation shall make no payment or adjustment for accrued and unpaid
dividends on shares of Series B Preferred Stock, whether or not in arrears,
on conversion of such shares or for dividends theretofore paid on the
shares of Class A Common Stock.
(d) (i) The Corporation covenants that it will at all times
reserve and keep available, free from preemptive rights, such number of its
authorized but unissued shares of Class A Common Stock as shall be required
for the purpose of effecting conversions of the Series B Preferred Stock.
(ii) Prior to the delivery of any securities which the
Corporation shall be obligated to deliver upon conversion of the Series B
Preferred Stock, the Corporation shall comply with all applicable federal
and state laws and regulations which require action to be taken by the
Corporation.
(e) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery
of shares of Class A Common Stock on conversion of the Series B Preferred
Stock pursuant hereto; provided that the Corporation shall not be required
to pay any tax which may be payable in respect of any transfer involved in
the issue or delivery of shares of Class A Common Stock in a name other
than that of the holder of the Series B Preferred Stock to be converted and
no such issue or delivery shall be made unless and until the person
requesting such issue or delivery has paid to the Corporation the amount of
any such tax or has established, to the satisfaction of the Corporation,
that such tax has been paid.
(f) In connection with the conversion of any shares of Series B
Preferred Stock, no fractions of shares of Class A Common Stock shall be
required to be issued to the holder of such shares of Series B Preferred
Stock, but in lieu thereof the Corporation shall pay a cash adjustment in
respect of such fractional interest in an amount equal to such fractional
interest multiplied by the Market Price per share of Class A Common Stock
on the business day next preceding the business day on which such shares of
Series B Preferred Stock are deemed to have been converted.
(g) (i) In case the Corporation shall at any time after the Issue
Date (A) declare a dividend or make a distribution on Common Stock payable
in Common Stock, (B) subdivide or split the outstanding Common Stock, (C)
combine or reclassify the outstanding Common Stock into a smaller number of
shares, (D) issue any shares of its Capital Stock in a reclassification of
Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Corporation is the continuing
corporation), or (E) consolidate with, or merge with or into, any other
person, the Conversion Price in effect at the time of the record date for
such dividend or distribution or on the effective date of such subdivision,
split, combination, consolidation, merger or reclassification shall be
adjusted so that the conversion of the Series B Preferred Stock after such
time shall entitle the holder to receive the aggregate number of shares of
Common Stock or other securities of the Corporation (or other securities
into which such shares of Common Stock have been converted, exchanged,
combined, consolidated, merged or reclassified pursuant to clause
8(g)(i)(C), 8(g)(i)(D) or 8(g)(i)(E) above) which, if the Series B
Preferred Stock had been converted immediately prior to such time, such
holder would have owned upon such conversion and been entitled to receive
by virtue of such dividend, distribution, subdivision, split, combination,
consolidation, merger or reclassification. Such adjustment shall be made
successively whenever an event listed above shall occur.
(ii) In case the Corporation shall issue or sell any Common
Stock (or rights, options, warrants or other securities convertible into or
exercisable or exchangeable for shares of Common Stock) without
consideration or for a consideration per share (or having a conversion,
exchange or exercise price per share) less than the Conversion Price on the
date of such issuance (or, in the case of convertible or exchangeable or
exercisable securities, less than the Conversion Price as of the date of
issuance of the rights, options, warrants or other securities in respect of
which shares of Common Stock were issued) then, and in each such case, the
Conversion Price shall be reduced to an amount determined by multiplying
(A) the Conversion Price in effect on the day immediately prior to such
date by (B) a fraction, the numerator of which shall be the sum of (1) the
number of shares of Common Stock outstanding immediately prior to such sale
or issuance multiplied by the then applicable Conversion Price (such then
applicable Conversion Price being the "Adjustment Price") and (2) the
aggregate consideration receivable by the Corporation for the total number
of shares of Common Stock so issued (or into or for which the rights,
options, warrants or other securities are convertible, exercisable or
exchangeable), and the denominator of which shall be the sum of (x) the
total number of shares of Common Stock outstanding immediately prior to
such sale or issue and (y) the number of additional shares of Common Stock
issued (or into or for which the rights, options, warrants or other
securities may be converted, exercised or exchanged), multiplied by the
Adjustment Price. In case any portion of the consideration to be received
by the Corporation shall be in a form other than cash, the fair market
value of such noncash consideration shall be utilized in the foregoing
computation. Such fair market value shall be determined in good faith by
the Board of Directors.
(iii) In case the Corporation shall fix a record date for
the issuance on a pro rata basis of rights, options or warrants to the
holders of its Common Stock or other securities entitling such holders to
subscribe for or purchase shares of Common Stock (or securities convertible
into or exercisable or exchangeable for shares of Common Stock) at a price
per share of Common Stock (or having a conversion, exercise or exchange
price per share of Common Stock, in the case of a security convertible
into, or exerciseable or exchangeable for, shares of Common Stock) less
than the Conversion Price on such record date, the maximum number of shares
of Common Stock issuable upon exercise of such rights, options or warrants
(or conversion of such convertible securities) shall be deemed to have been
issued and outstanding as of such record date and the Conversion Price
shall be adjusted pursuant to paragraph 8(g)(ii) hereof, as though such
maximum number of shares of Common Stock had been so issued for an
aggregate consideration payable by the holders of such rights, options,
warrants or other securities prior to their receipt of such shares of
Common Stock. In case any portion of such consideration shall be in a form
other than cash, the fair market value of such noncash consideration shall
be determined as set forth in paragraph 8(g)(ii) hereof. Such adjustment
shall be made successively whenever such record date is fixed; and in the
event that such rights, options or warrants are not so issued or expire in
whole or in part unexercised, or in the event of a change in the number of
shares of Common Stock to which the holders of such rights, options or
warrants are entitled (other than pursuant to adjustment provisions therein
comparable to those contained in this paragraph 8(g)), the Conversion Price
shall again be adjusted as follows: (A) in the event that all of such
rights, options or warrants expire unexercised, the Conversion Price shall
be the Conversion Price that would then be in effect if such record date
had not been fixed; (B) in the event that less than all of such rights,
options or warrants expire unexercised, the Conversion Price shall be
adjusted pursuant to paragraph 8(g)(ii) to reflect the maximum number of
shares of Common Stock issuable upon exercise of such rights, options or
warrants that remain outstanding (without taking into effect shares of
Common Stock issuable upon exercise of rights, options or warrants that
have lapsed or expired); and (C) in the event of a change in the number of
shares of Common Stock to which the holders of such rights, options or
warrants are entitled, the Conversion Price shall be adjusted to reflect
the Conversion Price which would then be in effect if such holder had
initially been entitled to such changed number of shares of Common Stock.
Notwithstanding anything herein to the contrary, no further adjustment to
the Conversion Price shall be made upon the issuance or sale of Common
Stock upon the exercise of any rights, options or warrants to subscribe for
or purchase Common Stock, if any adjustment in the Conversion Price was
made or required to be made upon the record date for the issuance or sale
of such rights, options or warrants under this clause 8(g)(iii).
(iv) In case the Corporation shall fix a record date for the
making of a distribution to all holders of any class of Common Stock
(including any such distribution made in connection with a consolidation or
merger in which the Corporation is the continuing corporation) of evidences
of indebtedness, assets or other property, the Conversion Price to be in
effect after such record date shall be determined by multiplying the
Conversion Price in effect immediately prior to such record date by a
fraction, (A) the numerator of which shall be the Conversion Price
immediately prior to such distributions less the fair market value
(determined as set forth in paragraph 8(g)(ii) hereof) of the portion of
the assets, other property or evidence of indebtedness so to be distributed
which is applicable to one share of Common Stock and (B) the denominator of
which shall be the Conversion Price immediately prior to such
distributions. Such adjustments shall be made successively whenever such a
record date is fixed; and in the event that such distribution is not so
made, the Conversion Price shall again be adjusted to be the Conversion
Price which would then be in effect if such record date had not been fixed.
An adjustment to the Conversion Price also shall be made in respect of
dividends and distributions paid exclusively in cash to all holders of any
class of Common Stock (excluding any dividend or distribution in connection
with the liquidation, dissolution or winding-up of the Corporation, whether
voluntary or involuntary, and any cash that is distributed upon a merger,
consolidation or other transaction for which an adjustment pursuant to
paragraph 8(g)(i) is made) where the sum of (1) all such cash dividends and
distributions made within the preceding 12 months in respect of which no
adjustment has been made and (2) any cash and the fair market value
(determined as set forth in paragraph 8(g)(ii) hereof) of other
consideration paid in respect of any repurchases of Common Stock by the
Corporation or any of its subsidiaries within the preceding 12 months in
respect of which no adjustment has been made, exceeds 2% of the
Corporation's market capitalization (being the product of the then Current
Market Price of the Common Stock times the aggregate number of shares of
Common Stock then outstanding on the record date for such distribution).
The Conversion Price to be in effect after such adjustment shall be
determined by subtracting from the Conversion Price in effect prior to such
adjustment an amount equal to the quotient of (A) the sum of clause (1) and
clause (2) above and (B) the number of shares of Common Stock outstanding
on the date such adjustment is to be determined.
(v) No adjustment to the Conversion Price pursuant to (a)
paragraphs 8(g)(ii), 8(g)(iii) or 8(g)(iv) above shall be required unless
such adjustment would require an increase or decrease of at least $.50 in
the Conversion Price or (b) paragraph 8(g)(ii) above shall be required with
respect to rights, options, warrants or other securities outstanding on the
Issue Date or issued pursuant to the Company's employee benefit plans in
effect on the Issue Date or reserved for issuance thereunder as of the
Issue Date; provided, however, that any adjustments which by reason of
paragraph 8(g)(v)(a) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under
this paragraph 8(g) shall be made by the Corporation and shall be made to
the nearest four decimal points.
(vi) In the event that, at any time as a result of the
provisions of this paragraph 8(g), a holder of Series B Preferred Stock
upon subsequent conversion shall become entitled to receive any shares of
Capital Stock of the Corporation other than Common Stock, the number of
such other shares so receivable upon conversion of Series B Preferred Stock
shall thereafter be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions contained
herein.
(vii) If, as a result of the operation of paragraphs
8(g)(ii), 8(g)(iii) or 8(g)(iv) above and corresponding provisions in the
Series C Designation, the cumulative number of shares of Class A Common
Stock issued or issuable upon conversion of the Series B Preferred Stock
and Series C Preferred Stock, after giving effect to (x) the adjustments
described in such paragraphs and corresponding provisions in the Series C
Designation and (y) all prior conversions of the Series B Preferred Stock
and Series C Preferred Stock, would equal or exceed a number (the
"Threshold Number") equal to 20% of the outstanding shares of Class A
Common Stock as of the Issue Date and if the Company receives a written
opinion of its outside counsel that the issuance of such shares in excess
of the Threshold Number would violate the rules of the Nasdaq National
Market or any other exchange on which the Class A Common Stock is then
quoted or traded, then until and unless the Corporation obtains the
approval of its common stockholders for the issuance of any such shares of
Class A Common Stock in excess of the Threshold Number, the holders shall
only be entitled to exercise their conversion rights with respect to a
maximum number of Series B and Series C Preferred Stock that would not
result in an amount of shares of Class A Common Stock being issued in
excess of the Threshold Number, but in any case, the Conversion Price shall
be adjusted as provided in such paragraphs. If, as a result of the
operation of the preceding sentence, the conversion rights of the holders
of Series B Preferred Stock are limited by operation thereof because
appropriate stockholder approval has not been obtained, the Corporation
agrees for the benefit of the holders of Series B Preferred Stock and
Series C Preferred Stock to use its reasonable best efforts to seek, as
promptly as reasonably practicable, the requisite approval of its common
stockholders (and shall seek such approval as often as necessary to obtain
such approval), and will recommend to its stockholders that they vote in
favor of a resolution providing for such approval, for the amount of shares
of Class A Common Stock that would be issued or issuable upon conversion in
full of all outstanding Series B and Series C Preferred Stock.
Notwithstanding anything to the contrary set forth above, the holders of
Series B Preferred Stock and Series C Preferred Stock shall be entitled to
exercise such holders' conversion rights in full (after giving effect to
any and all anti-dilution adjustments resulting from operation of
paragraphs 8(g)(ii), 8(g)(iii) or 8(g)(iv)) in connection with any merger,
consolidation or other transaction in which such Series B Preferred Stock,
Series C Preferred Stock or Class A Common Stock is being converted into or
exchanged for cash, securities or other property in connection with such
merger, consolidation or other transaction. In the event that the
Corporation elects to redeem the shares of Series B Preferred Stock and
Series C Preferred Stock at a time when the holders' right to convert such
shares into Class A Common Stock is limited as provided in this paragraph
(g), and such holders seek to exercise such conversion rights prior to the
date fixed for redemption in accordance with this Section 8 (the
"Redemption Date"), then if the total number of shares of Class A Common
Stock issued or issuable upon conversion of such shares, after giving
effect to any adjustments provided under the first sentence of this section
(the "Cumulative Number"), would exceed the Threshold Number, the holders
shall be entitled to convert such number of shares of Series B Preferred
Stock and Series C Preferred Stock into a number of shares of Class A
Common Stock up to the Threshold Number, and with respect to the balance of
such shares, the Corporation shall cancel such shares and shall pay the
holders in lieu thereof an amount in cash equal to (a)(i) the Cumulative
Number minus (ii) the Threshold Number multiplied by (b) the Market Price
per share of Class A Common Stock on the business day next preceding the
business day which is deemed the Redemption Date.
(h) All adjustments pursuant to this paragraph 8 shall be
notified to the holders of the Series B Preferred Stock and such notice
shall be accompanied by a schedule of computations of the adjustments.
9. Voting Rights. (a) The holders of record of shares of Series B
Preferred Stock shall not be entitled to any voting rights except as
hereinafter provided in this Section 9 or as otherwise provided by law.
(b) (i) On the Issue Date, the Board of Directors shall cause the
total number of directors then constituting the whole Board of Directors to
be increased by two and the holders of the outstanding shares of Series B
Preferred Stock shall be entitled to designate two directors (the "Two
Designees," who shall be designated specifically as the "First Designee"
and the "Second Designee," respectively) for election to the Board of
Directors of the Corporation and, voting separately as a series, shall have
the exclusive right to vote for the election of such designees to the Board
of Directors; provided that, notwithstanding the foregoing, after the Issue
Date, (i) the holders of the outstanding shares of the Series B Preferred
Stock shall continue to be entitled to designate two directors for election
to the Board of Directors and, voting separately as a series, shall
continue to have the exclusive right to vote for the election of such
designees to the Board of Directors, for as long as, and only for as long
as, at least 40% of the shares of Series B Preferred Stock issued on the
Issue Date remains outstanding; (ii) the entitlement of the holders of
outstanding shares of Series B Preferred Stock to designate two directors
for election to the Board of Directors, and the exclusive right of the
holders of outstanding shares of Series B Preferred Stock to vote,
separately as a series, for the election of such designees to the Board of
Directors, shall cease immediately upon less than 40% of the shares of
Series B Preferred Stock issued on the Issue Date being outstanding, and
the holders of the outstanding shares of the Series B Preferred Stock shall
be entitled to designate one director (the "Single Designee," who initially
shall be the Second Designee continuing as a director) for election to the
Board of Directors and, voting separately as a series, shall have the
exclusive right to vote for the election of such designee to the Board of
Directors, and to designate one Board Observer (as hereinafter defined),
for as long as, and only for so long as, less than 40% but more than 20% of
the shares of Series B Preferred Stock issued on the Issue Date remains
outstanding; (iii) the entitlement of the holders of outstanding shares of
Series B Preferred Stock to designate one director for election to the
Board of Directors, and the exclusive right of the holders of outstanding
shares of Series B Preferred Stock to vote, separately as a series, for the
election of such designee to the Board of Directors, and the exclusive
right of the holders of outstanding shares of Series B Preferred Stock to
designate one Board Observer, and the rights of such Board Observer, shall
cease immediately upon 20% or less of the shares of Series B Preferred
Stock issued on the Issue Date being outstanding, and the holders of the
outstanding shares of Series B Preferred Stock shall be entitled to
designate two Board Observers for as long as, and only for as long as, 20%
or less (but at least one) of the shares of Series B Preferred Stock issued
on the Issue Date remains outstanding; (iv) immediately upon no shares of
Series B Preferred Stock issued on the Issue Date being outstanding, the
entitlement of the holders of outstanding shares of Series B Preferred
Stock to designate two Board Observers, and the rights of such Board
Observers, shall cease; (v) immediately upon less than 40% but more than
20% of the shares of Series B Preferred Stock issued on the Issue Date
being outstanding, the Board of Directors shall cause the total number of
directors then constituting the whole Board of Directors to be decreased by
one, and the term of office of the First Designee shall terminate; and (vi)
immediately upon 20% or less of the shares of Series B Preferred Stock
issued on the Issue Date being outstanding, the Board of Directors shall
cause the total number of directors then constituting the whole Board of
Directors to be decreased by one, and the term of office of the Single
Designee shall terminate. Any or all of the Two Designees and the Single
Designee may be removed with or without cause by the holders of the shares
of Series B Preferred Stock. "Board Observer" means a person who shall not
be a member of the Board of Directors and who shall have the rights as
agreed to with the Corporation.
(ii) If and whenever six quarterly dividends payable on the
Series B Preferred Stock have not been paid in full or if the Corporation
shall have failed to discharge its Mandatory Redemption Obligation or the
Corporation shall have failed to comply with Section 9(d) hereof, the total
number of directors then constituting the whole Board of Directors
automatically shall be increased by one and the holders of outstanding
shares of Series B Preferred Stock, voting separately as a single series,
shall be entitled to elect one additional director to serve on the Board of
Directors at any annual meeting of stockholders or special meeting held in
place thereof, or at a special meeting of the holders of the Series B
Preferred Stock called as hereinafter provided. Whenever all arrears in
dividends and Special Amounts on the Series B Preferred Stock then
outstanding shall have been paid and dividends thereon for the current
quarterly dividend period shall have been paid or declared and set apart
for payment, or the Company shall have fulfilled its Mandatory Redemption
Obligation, as the case may be, then the right of the holders of
outstanding shares of Series B Preferred Stock to elect such additional
director shall cease (but subject always to the same provisions for the
vesting of such voting rights in the case of any similar future arrearage
in six quarterly dividends or failure to fulfill any Mandatory Redemption
Obligation), and the term of office of any person elected as director by
the holders of outstanding shares of Series B Preferred Stock pursuant to
this subparagraph (b)(ii) shall forthwith terminate and the total number of
directors then constituting the whole Board of Directors automatically
shall be reduced by one. At any time after voting power to elect one
additional director shall have become vested and be continuing in the
holders of outstanding shares of Series B Preferred Stock pursuant to this
subparagraph (b)(ii), or if a vacancy shall exist in the office of a
director elected by the holders of outstanding shares of Series B Preferred
Stock pursuant to this subparagraph (b)(ii), a proper officer of the
Corporation may, and upon the written request of the holders of record of
at least twenty-five percent (25%) of the shares of Series B Preferred
Stock then outstanding addressed to the Secretary of the Corporation shall,
call a special meeting of the holders of Series B Preferred Stock, for the
purpose of electing the one additional director which such holders are
entitled to elect pursuant to this subparagraph (b)(ii). If such meeting
shall not be called by a proper officer of the Corporation within twenty
(20) days after personal service of said written request upon the Secretary
of the Corporation, or within twenty (20) days after mailing the same
within the United States by certified mail, addressed to the Secretary of
the Corporation at its principal executive offices, then the holders of
record of at least twenty-five percent (25%) of the outstanding shares of
Series B Preferred Stock may designate in writing one of their number to
call such meeting at the expense of the Corporation, and such meeting may
be called by the person so designated upon the notice required for the
annual meeting of stockholders of the Corporation and shall be held at the
place for holding the annual meetings of stockholders. Any holder of Series
B Preferred Stock so designated shall have, and the Corporation shall
provide, access to the lists of stockholders to be called pursuant to the
provisions hereof.
(c) Without the written consent of holders of a majority of the
outstanding shares of Series B Preferred Stock or the affirmative vote of
holders of a majority of the outstanding shares of Series B Preferred Stock
at a meeting of the holders of Series B Preferred Stock called for such
purpose, the Corporation will not amend, alter or repeal any provision of
the Restated Certificate of Incorporation or this Certificate of
Designation so as to adversely affect the preferences, rights or powers of
the Series B Preferred Stock or to authorize the issuance of, or to issue
any, additional shares of Series B Preferred Stock; provided that any such
amendment that changes any dividend or other amount payable on or the
liquidation preference of the Series B Preferred Stock shall require the
written consent of holders of two-thirds of the outstanding shares of
Series B Preferred Stock or the affirmative vote of holders of two-thirds
of the outstanding shares of Series B Preferred Stock at a meeting of the
holders of Series B Preferred Stock called for such purpose.
(d) Without the written consent of holders of a majority of the
outstanding shares of Series B Preferred Stock or the affirmative vote of
holders of a majority of the outstanding shares of Series B Preferred Stock
at a meeting of such holders called for such purpose, the Corporation will
not create, authorize or issue any Senior Securities.
(e) The Corporation may, without the consent of any holder of
Series B Preferred Stock, consolidate with or merge with or into, or
convey, transfer or lease all or substantially all its assets as an
entirety to, any Person, provided that: (1) the successor, transferee or
lessee (if not the Corporation) is organized and existing under the laws of
the United States of America or any State thereof or the District of
Columbia and the Series B Preferred Stock shall be converted into or
exchanged for and shall become shares of, or interests in, such successor,
transferee or lessee, having in respect of such successor, transferee, or
lessee substantially the same powers, preferences and relative,
participating, optional or other special rights and the qualifications,
limitations or restrictions thereof, that the Series B Preferred Stock has
immediately prior to such transaction; and (2) the Corporation delivers to
the transfer agent an officers' certificate and an opinion of counsel
stating that such consolidation, merger, conveyance, transfer or lease
complies with this Certificate of Designation. In the event of any
consolidation or merger or conveyance, transfer or lease of all or
substantially all of the assets of the Corporation that is permitted
pursuant to this paragraph (e), the successor resulting from such
consolidation or into which the Corporation is merged or the transferee or
lessee to which such conveyance, transfer or lease is made, will succeed
to, and be substituted for, and may exercise every right and power of, the
Corporation with respect to the Series B Preferred Stock (or the shares or
interests into, or for which, the Series B Preferred Stock is converted or
exchanged), and thereafter, except in the case of a lease, the predecessor
(if still in existence) shall be released from its obligations and
covenants with respect to the Series B Preferred Stock.
(f) In exercising the voting rights set forth in this paragraph
9, each share of Series B Preferred Stock shall have one vote per share.
Except as otherwise required by applicable law or as set forth herein, the
shares of Series B Preferred Stock shall not have any relative,
participating, optional or other special voting rights and powers and the
consent of the holders thereof shall not be required for the taking of any
corporate action.
10. Reports. So long as any of the Series B Preferred Stock is
outstanding, in the event the Corporation is not required to file quarterly
and annual financial reports with the Securities and Exchange Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act, the
Corporation will furnish the holders of the Series B Preferred Stock with
reports containing the same information as would be required in such
reports.
11. General Provisions. (a) The term "person" as used herein
means any corporation, limited liability company, partnership, trust,
organization, association, other entity or individual.
(b) The term "outstanding", when used with reference to shares of
stock, shall mean issued shares, excluding shares held by the Corporation
or a subsidiary of the Corporation.
(c) The headings of the sections, paragraphs, subparagraphs,
clauses and subclauses of this Certificate of Designation are for
convenience of reference only and shall not define, limit or affect any of
the provisions hereof.
<PAGE>
IN WITNESS WHEREOF, said McLeodUSA Incorporated has caused this
Certificate of Designations to be signed by Stephen C. Gray, its President
and Chief Operating Officer this 13th day of September, 1999.
McLEODUSA INCORPORATED
By: /s/ Stephen C. Gray
------------------------------
Name: Stephen C. Gray
Title: President and Chief
Operating Officer
EXHIBIT 4
McLEODUSA INCORPORATED
CERTIFICATE OF DESIGNATION OF THE POWERS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF SERIES C CONVERTIBLE
PREFERRED STOCK AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
- ------------------------------------------------------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
- ------------------------------------------------------------------------------
McLeodUSA Incorporated (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that, pursuant to authority conferred upon
the board of directors of the Corporation (the "Board of Directors") by the
Corporation's Amended and Restated Certificate of Incorporation, as amended
(the "Restated Certificate of Incorporation") and pursuant to the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, said Board of Directors is authorized to issue Preferred Stock of
the Corporation in one or more series and the Board of Directors has
approved and adopted the following resolution on September 13, 1999 (the
"Resolution"):
RESOLVED that, the Board of Directors hereby creates,
authorizes and provides for the issuance of a series of preferred
stock of the Corporation, par value $.01 per share (such preferred
stock designated as the "Series C Convertible Preferred Stock"),
consisting of 125,000 shares and having the powers, designation,
preferences, relative, participating, optional and other special
rights and the qualifications, limitations and restrictions thereof
that are set forth in the Restated Certificate of Incorporation and in
this Resolution as follows:
1. Number and Designation. 125,000 shares of the Preferred Stock
of the Corporation shall constitute a series designated as "Series C
Convertible Preferred Stock" (the "Series C Preferred Stock").
2. Definitions. Unless the context otherwise requires, when used
herein the following terms shall have the meaning indicated.
"Board of Directors" means the Board of Directors of the
Corporation.
"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in
New York City, New York generally are authorized or required by law or
other governmental actions to close.
"Capital Stock" means, with respect to any person, any and all
shares, interests, participations, rights in, or other equivalents (however
designated and whether voting and/or non-voting) of such person's capital
stock, whether outstanding on the Issue Date or issued after the Issue
Date, and any and all rights (other than any evidence of indebtedness),
warrants or options exchangeable for or convertible into such capital
stock.
"Class A Common Stock" means the Corporation's Class A common
stock, par value $.01 per share, now or hereafter authorized to be issued,
and any and all securities of any kind whatsoever of the Corporation which
may be exchanged for or converted into Class A Common Stock, any and all
securities of any kind whatsoever of the Corporation which may be issued on
or after the date hereof in respect of, in exchange for, or upon conversion
of shares of Class A Common Stock pursuant to a merger, consolidation,
stock split, stock dividend, recapitalization of the Corporation or
otherwise.
"Common Stock" means the Corporation's Class A Common Stock and
any other common stock of the Corporation.
"Current Market Price" means the average of the daily Market
Prices of the Common Stock for ten consecutive trading days immediately
preceding the date for which such value is to be computed.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute, and the rules and regulations
promulgated thereunder.
"Issue Date" means the original date of issuance of shares of
Series C Preferred Stock.
"Liquidation Preference" with respect to a share of Series C
Preferred Stock means, as at any date, $2,500.00 plus an amount equal to
any accrued and unpaid dividends with respect to such share through such
date.
"Market Price" means, with respect to the Common Stock, on any
given day, (i) the price of the last trade, as reported on the Nasdaq
National Market, not identified as having been reported late to such
system, or (ii) if the Common Stock is so traded, but not so quoted, the
average of the last bid and ask prices, as those prices are reported on the
Nasdaq National Market, or (iii) if the Common Stock is not listed or
authorized for trading on the Nasdaq National Market or any comparable
system, the average of the closing bid and asked prices as furnished by two
members of the National Association of Securities Dealers, Inc. selected
from time to time by the Corporation for that purpose. If the Common Stock
is not listed and traded in a manner that the quotations referred to above
are available for the period required hereunder, the Market Price per share
of Common Stock shall be deemed to be the fair value per share of such
security as determined in good faith by the Board of Directors of the
Corporation.
"Net Realizable FMV" means, with respect to a share of Common
Stock, if calculable, the amount of gross proceeds net of underwriters'
discounts, commissions or other selling expenses received by or to be
received by the holder in connection with the sale of such share of Common
Stock on a when issued basis or immediately after the conversion or, in all
other cases, an amount equal to 97% of the Current Market Price of the
Common Stock.
"Series B Designation" means the Certificate of Designation for
the Series B Preferred Stock.
"Series B Preferred Stock" means the Series B Cumulative
Convertible Preferred Stock, par value $.01 per share, of the Corporation.
"Voting Stock" means, with respect to any person, the Capital
Stock of any class or kind ordinarily having the power to vote for the
election of directors or other members of the governing body of such
person.
3. Rank. (a) The Series B Preferred Stock and Series C Preferred
Stock each will, with respect to dividend rights and rights on liquidation,
winding-up and dissolution, rank (i) senior to all classes of Common Stock
and to each other class of Capital Stock of the Corporation or series of
Preferred Stock of the Corporation established hereafter by the Board of
Directors of the Corporation the terms of which do not expressly provide
that such class or series ranks senior to, or on a parity with, the Series
B Preferred Stock and Series C Preferred Stock as to dividend rights and
rights on liquidation, winding-up and dissolution of the Corporation
(collectively referred to, together with all classes of Common Stock of the
Corporation, as "Junior Securities"); (ii) on a parity with the
Corporation's 6.75% Series A Cumulative Convertible Preferred Stock, par
value $.01 per share, and with each class of Capital Stock of the
Corporation or series of Preferred Stock of the Corporation established
hereafter by the Board of Directors of the Corporation, the terms of which
expressly provide that such class or series will rank on a parity with the
Series B Preferred Stock and Series C Preferred Stock as to dividend rights
and rights on liquidation, winding-up and dissolution (collectively
referred to as "Parity Securities"); and (iii) junior to each class of
Capital Stock of the Corporation or series of Preferred Stock of the
Corporation established hereafter by the Board of Directors of the
Corporation, the terms of which expressly provide that such class or series
will rank senior to the Series B Preferred Stock and Series C Preferred
Stock as to dividend rights and rights on liquidation, winding-up and
dissolution of the Corporation (collectively referred to as "Senior
Securities"); provided that the relative powers, rights and preferences of
the Series B Preferred Stock and Series C Preferred Stock vis-a-vis the
other shall be as set forth herein and in the Series B Designation.
(b) The respective definitions of Junior Securities, Parity
Securities and Senior Securities shall also include any warrants, rights,
options or other securities exercisable or exchangeable for or convertible
into any of the Junior Securities, Parity Securities and Senior Securities,
as the case may be.
(c) The Series C Preferred Stock shall be subject to the creation
of Junior Securities and Parity Securities.
4. Dividends. If at any time from the Issue Date through the date
ending five years thereafter, the Corporation pays a dividend in cash or
property other than in shares of Capital Stock on the Common Stock then at
the same time the Corporation shall declare and pay a dividend on each
share of Series C Preferred Stock an amount equal to the Series C Per Share
Participation Amount. The "Series C Per Share Participation Amount" means,
as at any date, 62.5% of the amount of dividends that would be paid with
respect to the Series B Preferred Stock and Series C Preferred Stock taken
together if converted into Common Stock on the date established as the
record date with respect to such dividend on the Common Stock divided by
the number of shares of Series C Preferred Stock then outstanding.
5. Liquidation Preference. (a) In the event of any liquidation,
dissolution or winding-up of the Corporation, whether voluntary or
involuntary, before any payment or distribution of the assets of the
Corporation (whether capital or surplus) shall be made to or set apart for
the holders of Junior Securities, the holders of the shares of Series B
Preferred Stock and Series C Preferred Stock taken together shall be
entitled to receive an amount in cash equal to the greater of (x) the
aggregate Liquidation Preferences (as set forth herein and in the Series B
Designation) of the shares of Series B Preferred Stock and Series C
Preferred Stock as of the date of liquidation, or (y) the aggregate amount
that would have been received with respect to the shares of Series B
Preferred Stock and Series C Preferred Stock if such stock had been
converted to Common Stock immediately prior to such liquidation,
dissolution or winding-up. If, upon any liquidation, dissolution or
winding-up of the Corporation, the assets of the Corporation, or proceeds
thereof, shall be insufficient to pay in full the aforesaid amounts under
clause (x) of the preceding sentence and liquidating payments on all Parity
Securities, then such assets, or proceeds thereof, shall (i) be distributed
among the shares of Series B Preferred Stock and the Series C Preferred
Stock taken together and all such other Parity Securities ratably in
accordance with the respective amounts that would be payable on such shares
of Preferred Stock and any such other Parity Securities if all amounts
payable thereon were paid in full and (ii) the amount distributable under
clause (i) to the Series B Preferred Stock and Series C Preferred Stock
taken together, shall first be distributed to the Series B Preferred Stock
until it has received an amount equal to the aggregate Preference Amounts
(as defined in the Series B Designation) of all Series B Preferred Stock
outstanding as of the date of liquidation and thereafter 37.5% to the
Series B Preferred Stock and 62.5% to the Series C Preferred Stock. If,
upon any liquidation, dissolution or winding-up of the Corporation, the
assets of the Corporation, or proceeds thereof, distributable to the Series
B Preferred Stock and Series C Preferred Stock taken together shall be
sufficient to pay in full the aforesaid amounts under clause (x) of the
first sentence of this subsection 5(a) then such amount shall first be
distributed to the Series B Preferred Stock until it has received an amount
equal to the aggregate Preference Amounts (as defined in the Series B
Designation) of all Series B Preferred Stock outstanding as of the date of
liquidation and thereafter 37.5% to the Series B Preferred Stock and 62.5%
to the Series C Preferred Stock. Any amounts distributed with respect to
the Series C Preferred Stock pursuant to this paragraph 5(a) shall be
allocated pro rata among the shares of Series C Preferred Stock. For the
purposes of this paragraph 5, neither the sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or other consideration) of
all or substantially all of the property or assets of the Corporation nor
the consolidation or merger of the Corporation with or into one or more
other entities shall be deemed to be a liquidation, dissolution or
winding-up of the Corporation.
(b) Subject to the rights of the holders of any Parity
Securities, after payment shall have been made in full to the holders of
the Series B Preferred Stock and the Series C Preferred Stock taken
together, as provided in this paragraph 5, any other series or class or
classes of Junior Securities shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all
assets remaining to be paid or distributed, and the holders of the Series C
Preferred Stock, Series B Preferred Stock and any Parity Securities shall
not be entitled to share therein.
6. Redemption. (a) The Series C Preferred Stock shall not be
redeemable by the Corporation prior to the seventh anniversary of the Issue
Date. On and after the seventh anniversary of the Issue Date, to the extent
the Corporation shall have funds legally available for such payment, and
subject to the rights of the holders pursuant to Section 8 hereof, the
Corporation may redeem at its option shares of Series C Preferred Stock, at
any time in whole or from time to time in part, at a redemption price per
share equal to the Liquidation Preference as of the date fixed for
redemption, without interest; provided that the Corporation shall only be
entitled to redeem shares of the Series C Preferred Stock if shares of the
Series B Preferred Stock are also redeemed on a proportional basis based on
the percentage of each series of shares outstanding at such time.
(b) Pursuant to the Series B Designation, to the extent the
Corporation shall have funds legally available therefor, during the 180-day
period commencing on the tenth anniversary of the Issue Date, the holders
of the Series B Preferred Stock shall have the right to cause the
Corporation to redeem at any time in whole or from time to time in part
outstanding shares of Series B Preferred Stock, if any, at a redemption
price per share in cash equal to the Liquidation Preference (as set forth
in the Series B Designation), without interest; provided that upon any such
election the Corporation shall be required to redeem a proportional amount
of the Series C Preferred Stock.
(c) Shares of Series C Preferred Stock which have been issued and
reacquired by the Corporation in any manner, including shares purchased or
redeemed, shall (upon compliance with any applicable provisions of the laws
of the State of Delaware) be retired and have the status of authorized and
unissued shares of the class of Preferred Stock undesignated as to series
and may be redesignated and reissued as part of any series of the Preferred
Stock; provided that no such issued and reacquired shares of Series C
Preferred Stock shall be reissued or sold as Series C Preferred Stock.
(d) If the Corporation is unable or shall fail to discharge its
obligation to redeem outstanding shares of Series B Preferred Stock and
Series C Preferred Stock pursuant to paragraph 6(b) (the "Mandatory
Redemption Obligation"), the Mandatory Redemption Obligation shall be
discharged as soon as the Corporation is able to discharge such Mandatory
Redemption Obligation. If and so long as any Mandatory Redemption
Obligation with respect to the Series B Preferred Stock and Series C
Preferred Stock shall not be fully discharged, the Corporation shall not
(i) directly or indirectly, redeem, purchase, or otherwise acquire any
Parity Security or discharge any mandatory or optional redemption, sinking
fund or other similar obligation in respect of any Parity Securities or
(ii) declare or make any Junior Securities Distribution (as defined in the
Series B Designation), or, directly or indirectly, discharge any mandatory
or optional redemption, sinking fund or other similar obligation in respect
of any Junior Securities.
7. Procedure for Redemption. (a) In the event that fewer than all
the outstanding shares of Series C Preferred Stock are to be redeemed, in
the case of Section 6(a), the number of shares to be redeemed shall be
determined by the Board of Directors and the shares to be redeemed shall be
selected pro rata (with any fractional shares being rounded to the nearest
whole shares). Notwithstanding anything in Section 6 to the contrary, the
Corporation shall only redeem shares of Series C Preferred Stock pursuant
to Section 6(a) or 6(b) on a proportional basis based on the percentage of
each series of shares outstanding at such time.
(b) In the event the Corporation shall redeem shares of Series C
Preferred Stock pursuant to Section 6(a), notice of such redemption shall
be given by first class mail, postage prepaid, mailed not less than 30 days
nor more than 60 days prior to the redemption date, to each holder of
record of the shares to be redeemed at such holder's address as the same
appears on the stock register of the Corporation; provided that neither the
failure to give such notice nor any defect therein shall affect the
validity of the giving of notice for the redemption of any share of Series
C Preferred Stock to be redeemed except as to the holder to whom the
Corporation has failed to give said notice or except as to the holder whose
notice was defective. Each such notice shall state: (i) the redemption
date; (ii) the number of shares of Series C Preferred Stock to be redeemed
and, if fewer than all the shares held by such holder are to be redeemed,
the number of shares to be redeemed from such holder; (iii) the redemption
price; (iv) the place or places where certificates for such shares are to
be surrendered for payment of the redemption price; and (v) that dividends
on the shares to be redeemed will cease to accrue on such redemption date.
(c) Notice having been mailed as aforesaid, if applicable, from
and after the redemption date, dividends on the shares of Series C
Preferred Stock so called for redemption shall cease to accrue, and all
rights of the holders thereof as stockholders of the Corporation (except
the right to receive from the Corporation the redemption price and except
the right to convert shares so called for redemption prior to the close of
business on the date immediately preceding the date fixed for such
redemption) shall cease. Upon surrender in accordance with said notice, if
applicable, of the certificates for any shares so redeemed (properly
endorsed or assigned for transfer, if the Board of Directors shall so
require and the notice shall so state), such shares shall be redeemed by
the Corporation at the redemption price aforesaid. In case fewer than all
the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares without cost
to the holder thereof.
8. Conversion. (a) (i) Pursuant to the provisions of the Series B
Designation, the holders of shares of Series B Preferred Stock have the
right, at any time in whole and from time to time in part, at such holders'
option, to convert any or all outstanding shares (and fractional shares) of
Series B Preferred Stock held by such holders into fully paid and
non-assessable shares of Class A Common Stock. Upon the exercise by any
holder of Series B Preferred Stock of its conversion option, a proportional
amount, based on the percentage of each series of shares outstanding, of
the Series C Preferred Stock shall automatically convert into fully paid
and non-assessable shares of Class A Common Stock, subject to the
provisions of this Section 8. At any time and from time to time the
outstanding shares of Series B Preferred Stock and Series C Preferred Stock
taken together shall be convertible into a number of shares of Class A
Common Stock (the "Aggregate Conversion Shares") equal to the aggregate
Liquidation Preferences of the shares of the Series B Preferred Stock and
the Series C Preferred Stock as set forth herein and in the Series B
Designation as of the date of conversion divided by $36.50, subject to
adjustment from time to time pursuant to paragraph 8(g) hereof (the
"Conversion Price"). The Series C Preferred Stock shall be convertible into
a number of shares of Class A Common Stock (the "Aggregate Series C
Conversion Shares") equal to .625 times the excess, if any, of (A) the
Aggregate Conversion Shares over (B) the aggregate Preference Amounts (as
defined in the Series B Designation) with respect to all outstanding shares
of Series B Preferred Stock divided by the Net Realizable FMV of a share of
Class A Common Stock at the time of conversion. Each share of Series C
Preferred Stock being converted shall convert into a number of shares of
Class A Common Stock equal to the Aggregate Series C Conversion Shares
divided by the number of shares of Series C Preferred Stock then
outstanding. Notwithstanding any call for redemption pursuant to Section
6(a), the holders' right to convert shares so called for redemption shall
terminate at the close of business on the date immediately preceding the
date fixed for such redemption unless the Corporation shall default in
making payment of the amount payable upon such redemption.
(ii) In the case of any partial conversion of Series B
Preferred Stock by the holders thereof, selection of the Series C Preferred
Stock for automatic conversion will be made by the Corporation in
compliance with the requirements of the principal national securities
exchange, if any, on which the Series C Preferred Stock is listed, or if
the Series C Preferred Stock is not listed on a national securities
exchange, on a pro rata basis, by lot or such other method as the
Corporation, in its sole discretion, shall deem fair and appropriate;
provided, however, that the Corporation may redeem all the shares held by
holders of fewer than 5 shares of Series C Preferred Stock (or all of the
shares held by the holders who would hold less than 5 shares of Series C
Preferred Stock as a result of such redemption) as may be determined by the
Corporation. The Corporation shall provide prompt written notice (including
the number of shares so converted) of the automatic conversion of shares of
Series C Preferred Stock pursuant to this paragraph 8 to the holders of
record of the shares so converted.
(b) (i) Promptly upon receipt of notice of automatic conversion
of shares of Series C Preferred Stock pursuant to paragraph 8(a) (including
the number of shares to be so converted), the holder of the shares of
Series C Preferred Stock so converted shall surrender the certificate
representing such shares at the principal executive offices of the
Corporation. Unless the shares issuable on conversion are to be issued in
the same name as the name in which such shares of Series C Preferred Stock
are registered, each certificate so surrendered shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly
executed by the holder or the holder's duly authorized attorney, and an
amount sufficient to pay any transfer or similar tax.
(ii) As promptly as practicable after the surrender by the
holder of the certificates for shares of Series C Preferred Stock as
aforesaid, the Corporation shall issue and shall deliver to such holder, or
on the holder's written order to the holder's transferee, (x) a certificate
or certificates for the whole number of shares of Class A Common Stock
issuable upon the conversion of such shares in accordance with the
provisions of this paragraph 8, (y) any cash adjustment required pursuant
to Section 8(f), and (z) in the event of a conversion in part, a
certificate or certificates for the whole number of shares of Series C
Preferred Stock not being so converted.
(iii) Each conversion of shares of Series C Preferred Stock
pursuant to paragraph 8(a) shall be deemed to have been effected
immediately prior to the close of business on the date on which the
certificates for shares of Series B Preferred Stock shall have been
surrendered and the notice of election to convert received by the
Corporation in accordance with the procedures set forth in Section 8 of the
Series B Designation, and the person in whose name or names any certificate
or certificates for shares of Class A Common Stock shall be issuable upon
such conversion shall be deemed to have become the holder of record of the
shares of Class A Common Stock represented thereby at such time on such
date and such conversion shall be into a number of whole shares of Class A
Common Stock in respect of the shares of Series C Preferred Stock being
converted as determined in accordance with this Section 8 at such time on
such date. All shares of Class A Common Stock delivered upon conversion of
the Series C Preferred Stock will upon delivery be duly and validly issued
and fully paid and non-assessable, free of all liens and charges and not
subject to any preemptive rights. Upon automatic conversion of shares of
Series C Preferred Stock, the shares so converted shall no longer be deemed
to be outstanding and all rights of a holder with respect to such converted
shares shall immediately terminate except the right to receive the Class A
Common Stock and other amounts payable pursuant to this paragraph 8 and a
certificate or certificates representing the shares of Series C Preferred
Stock not converted.
(c) (i) Upon delivery to the Corporation by a holder of shares of
Series B Preferred Stock of a notice of election to convert, the right of
the Corporation to redeem the applicable shares of Series C Preferred Stock
shall terminate, regardless of whether a notice of redemption has been
mailed as aforesaid.
(ii) If a holder of Series B Preferred Stock delivers to the
Corporation a certificate therefor and a notice of election to convert, the
Series C Preferred Stock to be converted shall cease to accrue dividends
pursuant to paragraph 4.
(iii) Except as provided above and in paragraph 8(g), the
Corporation shall make no payment or adjustment for accrued and unpaid
dividends on shares of Series C Preferred Stock, whether or not in arrears,
on conversion of such shares or for dividends theretofore paid on the
shares of Class A Common Stock.
(d) (i) The Corporation covenants that it will at all times
reserve and keep available, free from preemptive rights, such number of its
authorized but unissued shares of Class A Common Stock as shall be required
for the purpose of effecting conversions of the Series C Preferred Stock.
(ii) Prior to the delivery of any securities which the
Corporation shall be obligated to deliver upon conversion of the Series C
Preferred Stock, the Corporation shall comply with all applicable federal
and state laws and regulations which require action to be taken by the
Corporation.
(e) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery
of shares of Class A Common Stock on conversion of the Series C Preferred
Stock pursuant hereto; provided that the Corporation shall not be required
to pay any tax which may be payable in respect of any transfer involved in
the issue or delivery of shares of Class A Common Stock in a name other
than that of the holder of the Series C Preferred Stock to be converted and
no such issue or delivery shall be made unless and until the person
requesting such issue or delivery has paid to the Corporation the amount of
any such tax or has established, to the satisfaction of the Corporation,
that such tax has been paid.
(f) In connection with the conversion of any shares of Series C
Preferred Stock, no fractions of shares of Class A Common Stock shall be
required to be issued to the holder of such shares of Series C Preferred
Stock, but in lieu thereof the Corporation shall pay a cash adjustment in
respect of such fractional interest in an amount equal to such fractional
interest multiplied by the Market Price per share of Class A Common Stock
on the business day next preceding the business day on which such shares of
Series C Preferred Stock are deemed to have been converted.
(g) (i) In case the Corporation shall at any time after the Issue
Date (A) declare a dividend or make a distribution on Common Stock payable
in Common Stock, (B) subdivide or split the outstanding Common Stock, (C)
combine or reclassify the outstanding Common Stock into a smaller number of
shares, (D) issue any shares of its Capital Stock in a reclassification of
Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Corporation is the continuing
corporation), or (E) consolidate with, or merge with or into, any other
person, the Conversion Price in effect at the time of the record date for
such dividend or distribution or on the effective date of such subdivision,
split, combination, consolidation, merger or reclassification shall be
adjusted so that the conversion of the Series C Preferred Stock after such
time shall entitle the holder to receive the aggregate number of shares of
Common Stock or other securities of the Corporation (or other securities
into which such shares of Common Stock have been converted, exchanged,
combined, consolidated, merged or reclassified pursuant to clause
8(g)(i)(C), 8(g)(i)(D) or 8(g)(i)(E) above) which, if the Series C
Preferred Stock had been converted immediately prior to such time, such
holder would have owned upon such conversion and been entitled to receive
by virtue of such dividend, distribution, subdivision, split, combination,
consolidation, merger or reclassification. Such adjustment shall be made
successively whenever an event listed above shall occur.
(ii) In case the Corporation shall issue or sell any Common
Stock (or rights, options, warrants or other securities convertible into or
exercisable or exchangeable for shares of Common Stock) without
consideration or for a consideration per share (or having a conversion,
exercise or exchange price per share) less than the Conversion Price on the
date of such issuance (or, in the case of convertible or exchangeable or
exercisable securities, less than the Conversion Price as of the date of
issuance of the rights, options, warrants or other securities in respect of
which shares of Common Stock were issued), then, and in each such case, the
Conversion Price shall be reduced to an amount determined by multiplying
(A) the Conversion Price in effect on the day immediately prior to such
date by (B) a fraction, the numerator of which shall be the sum of (1) the
number of shares of Common Stock outstanding immediately prior to such sale
or issuance multiplied by the then applicable Conversion Price (such then
applicable Conversion Price being the "Adjustment Price") and (2) the
aggregate consideration receivable by the Corporation for the total number
of shares of Common Stock so issued (or into or for which the rights,
options, warrants or other securities are convertible, exercisable or
exchangeable), and the denominator of which shall be the sum of (x) the
total number of shares of Common Stock outstanding immediately prior to
such sale or issue and (y) the number of additional shares of Common Stock
issued (or into or for which the rights, options, warrants or other
securities may be converted, exercised or exchanged), multiplied by the
Adjustment Price. In case any portion of the consideration to be received
by the Corporation shall be in a form other than cash, the fair market
value of such noncash consideration shall be utilized in the foregoing
computation. Such fair market value shall be determined in good faith by
the Board of Directors.
(iii) In case the Corporation shall fix a record date for
the issuance on a pro rata basis of rights, options or warrants to the
holders of its Common Stock or other securities entitling such holders to
subscribe for or purchase shares of Common Stock (or securities convertible
into or exercisable or exchangeable for shares of Common Stock) at a price
per share of Common Stock (or having a conversion, exercise or exchange
price per share of Common Stock, in the case of a security convertible
into, or exerciseable or exchangeable for, shares of Common Stock) less
than the Conversion Price on such record date, the maximum number of shares
of Common Stock issuable upon exercise of such rights, options or warrants
(or conversion of such convertible securities) shall be deemed to have been
issued and outstanding as of such record date and the Conversion Price
shall be adjusted pursuant to paragraph 8(g)(ii) hereof, as though such
maximum number of shares of Common Stock had been so issued for an
aggregate consideration payable by the holders of such rights, options,
warrants or other securities prior to their receipt of such shares of
Common Stock. In case any portion of such consideration shall be in a form
other than cash, the fair market value of such noncash consideration shall
be determined as set forth in paragraph 8(g)(ii) hereof. Such adjustment
shall be made successively whenever such record date is fixed; and in the
event that such rights, options or warrants are not so issued or expire in
whole or in part unexercised, or in the event of a change in the number of
shares of Common Stock to which the holders of such rights, options or
warrants are entitled (other than pursuant to adjustment provisions therein
comparable to those contained in this paragraph 8(g)), the Conversion Price
shall again be adjusted as follows: (A) in the event that all of such
rights, options or warrants expire unexercised, the Conversion Price shall
be the Conversion Price that would then be in effect if such record date
had not been fixed; (B) in the event that less than all of such rights,
options or warrants expire unexercised, the Conversion Price shall be
adjusted pursuant to paragraph 8(g)(ii) to reflect the maximum number of
shares of Common Stock issuable upon exercise of such rights, options or
warrants that remain outstanding (without taking into effect shares of
Common Stock issuable upon exercise of rights, options or warrants that
have lapsed or expired); and (C) in the event of a change in the number of
shares of Common Stock to which the holders of such rights, options or
warrants are entitled, the Conversion Price shall be adjusted to reflect
the Conversion Price which would then be in effect if such holder had
initially been entitled to such changed number of shares of Common Stock.
Notwithstanding anything herein to the contrary, no further adjustment to
the Conversion Price shall be made upon the issuance or sale of Common
Stock upon the exercise of any rights, options or warrants to subscribe for
or purchase Common Stock, if any adjustment in the Conversion Price was
made or required to be made upon the record date for the issuance or sale
of such rights, options or warrants under this clause 8(g)(iii).
(iv) In case the Corporation shall fix a record date for the
making of a distribution to all holders of any class of Common Stock
(including any such distribution made in connection with a consolidation or
merger in which the Corporation is the continuing corporation) of evidences
of indebtedness, assets or other property, the Conversion Price to be in
effect after such record date shall be determined by multiplying the
Conversion Price in effect immediately prior to such record date by a
fraction, (A) the numerator of which shall be the Conversion Price
immediately prior to such distribution less the fair market value
(determined as set forth in paragraph 8(g)(ii) hereof) of the portion of
the assets, other property or evidence of indebtedness so to be distributed
which is applicable to one share of Common Stock, and (B) the denominator
of which shall be the Conversion Price immediately prior to such
distribution. Such adjustments shall be made successively whenever such a
record date is fixed; and in the event that such distribution is not so
made, the Conversion Price shall again be adjusted to be the Conversion
Price which would then be in effect if such record date had not been fixed.
An adjustment to the Conversion Price also shall be made in respect of
dividends and distributions paid exclusively in cash to all holders of
Common Stock (excluding any dividend or distribution in connection with the
liquidation, dissolution or winding-up of the Corporation, whether
voluntary or involuntary, and any cash that is distributed upon a merger,
consolidation or other transaction for which an adjustment pursuant to
paragraph 8(g)(i) is made) where the sum of (1) all such cash dividends and
distributions made within the preceding 12 months in respect of which no
adjustment has been made and (2) any cash and the fair market value
(determined as set forth in paragraph 8(g)(ii) hereof) of other
consideration paid in respect of any repurchases of Common Stock by the
Corporation or any of its subsidiaries within the preceding 12 months in
respect of which no adjustment has been made, exceeds 2% of the
Corporation's market capitalization (being the product of the then Current
Market Price of the Common Stock times the aggregate number of shares of
Common Stock then outstanding on the record date for such distribution).
The Conversion Price to be in effect after such adjustment shall be
determined by subtracting from the Conversion Price in effect prior to such
adjustment an amount equal to the quotient of (A) the sum of clause (1) and
clause (2) above and (B) the number of shares of Common Stock outstanding
on the date such adjustment is to be determined.
(v) No adjustment to the Conversion Price pursuant to (a)
paragraphs 8(g)(ii), 8(g)(iii) or 8(g)(iv) above shall be required unless
such adjustment would require an increase or decrease of at least $.50 in
the Conversion Price or (b) paragraph 8(g)(ii) above shall be required with
respect to rights, options, warrants or other securities outstanding on the
Issue Date or issued pursuant to the Company's employee benefit plans in
effect on the Issue Date or reserved for issuance thereunder as of the
Issue Date; provided, however, that any adjustments which by reason of this
paragraph 8(g)(v)(a) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under
this paragraph 8(g) shall be made by the Corporation and shall be made to
the nearest four decimal points.
(vi) In the event that, at any time as a result of the
provisions of this paragraph 8(g), a holder of Series C Preferred Stock
upon subsequent conversion shall become entitled to receive any shares of
Capital Stock of the Corporation other than Common Stock, the number of
such other shares so receivable upon conversion of Series C Preferred Stock
shall thereafter be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions contained
herein.
(vii) If, as a result of the operation of paragraphs
8(g)(ii), 8(g)(iii) or 8(g)(iv) above and corresponding provisions in the
Series B Designation, the cumulative number of shares of Class A Common
Stock issued or issuable upon conversion of the Series B Preferred Stock
and Series C Preferred Stock, after giving effect to (x) the adjustments
described in such paragraphs and corresponding provisions in the Series B
Designation and (y) all prior conversions of Series B Preferred Stock and
Series C Preferred Stock, would equal or exceed a number (the "Threshold
Number") equal to 20% of the outstanding shares of Class A Common Stock as
of the Issue Date and if the Company receives a written opinion of its
outside counsel that the issuance of such shares in excess of the Threshold
Number would violate the rules of the Nasdaq National Market or any other
exchange on which the Class A Common Stock is then quoted or traded, then
until and unless the Corporation obtains the approval of its common
stockholders for the issuance of any such shares of Class A Common Stock in
excess of the Threshold Number, the holders shall only be entitled to
exercise their conversion rights with respect to a maximum number of Series
B and Series C Preferred Stock that would not result in an amount of shares
of Class A Common Stock being issued in excess of the Threshold Number, but
in any case, the Conversion Price shall be adjusted as provided in such
paragraphs. If, as a result of the operation of the preceding sentence, the
conversion rights of the holders of Series C Preferred Stock are limited by
operation thereof because appropriate stockholder approval has not been
obtained, the Corporation agrees for the benefit of the holders of Series B
Preferred Stock and Series C Preferred Stock to use its reasonable best
efforts to seek, as promptly as reasonably practicable, the requisite
approval of its common stockholders (and shall seek such approval as often
as necessary to obtain such approval), and will recommend to its
stockholders that they vote in favor of a resolution providing for such
approval, for the amount of shares of Class A Common Stock that would be
issued or issuable upon conversion in full of all outstanding Series B and
Series C Preferred Stock. Notwithstanding anything to the contrary set
forth above, the holders of Series B Preferred Stock and Series C Preferred
Stock shall be entitled to exercise such holders' conversion rights in full
(after giving effect to any and all anti-dilution adjustments resulting
from operation of paragraphs 8(g)(ii), 8(g)(iii) or 8(g)(iv)) in connection
with any merger, consolidation or other transaction in which such Series B
Preferred Stock, Series C Preferred Stock or Class A Common Stock is being
converted into or exchanged for cash, securities or other property in
connection with such merger, consolidation or other transaction. In the
event that the Corporation elects to redeem the shares of Series B
Preferred Stock and Series C Preferred Stock at a time when the holders'
right to convert such shares into Class A Common Stock is limited as
provided in this paragraph (g), and such holders seek to exercise such
conversion rights prior to the date fixed for redemption in accordance with
this Section 8 (the "Redemption Date"), then if the total number of shares
of Class A Common Stock issued or issuable upon conversion of such shares,
after giving effect to any adjustments provided under the first sentence of
this section (the "Cumulative Number"), would exceed the Threshold Number,
the holders shall be entitled to convert such number of shares of Series B
Preferred Stock and Series C Preferred Stock into a number of shares of
Class A Common Stock up to the Threshold Number, and with respect to the
balance of such shares, the Corporation shall cancel such shares and shall
pay the holders in lieu thereof an amount in cash equal to (a)(i) the
Cumulative Number minus (ii) the Threshold Number multiplied by (b) the
Market Price per share of Class A Common Stock on the business day next
preceding the business day which is deemed the Redemption Date.
(h) All adjustments pursuant to this paragraph 8 shall be
notified to the holders of the Series C Preferred Stock and such notice
shall be accompanied by a schedule of computations of the adjustments.
9. Voting Rights. (a) The holders of record of shares of Series C
Preferred Stock shall not be entitled to any voting rights except as
hereinafter provided in this Section 9 or as otherwise provided by law.
(b) (i) So long as any shares of Series C Preferred Stock are
issued and outstanding, the holders of the Series C Preferred Stock shall
be entitled to designate one Board Observer. "Board Observer" means a
person who shall not be a member of the Board of Directors and who shall
have the rights as agreed to with the Corporation.
(ii) If and whenever the Corporation shall have failed to
discharge its Mandatory Redemption Obligation or the Corporation shall have
failed to comply with Section 9(d) hereof, the total number of directors
then constituting the whole Board of Directors automatically shall be
increased by one and the holders of outstanding shares of Series C
Preferred Stock, voting separately as a single series, shall be entitled to
elect one additional director to serve on the Board of Directors at any
annual meeting of stockholders or special meeting held in place thereof, or
at a special meeting of the holders of the Series C Preferred Stock called
as hereinafter provided. Whenever the Corporation shall have fulfilled its
Mandatory Redemption Obligation, then the right of the holders of the
outstanding shares of the Series C Preferred Stock to elect such additional
director shall cease (but subject always to the same provisions for the
vesting of such voting rights in the case of any future failure to fulfill
any Mandatory Redemption Obligation), and the term of office of any person
elected as director by the holders of outstanding shares of Series C
Preferred Stock pursuant to this subparagraph (b)(ii) shall forthwith
terminate and the total number of directors then constituting the whole
Board of Directors automatically shall be reduced by one. At any time after
voting power to elect one additional director shall have become vested and
be continuing in the holders of outstanding shares of Series C Preferred
Stock pursuant to this subparagraph (b)(ii), or if a vacancy shall exist in
the office of a director elected by the holders of outstanding shares of
Series C Preferred Stock pursuant to this subparagraph (b)(ii), a proper
officer of the Corporation may, and upon the written request of the holders
of record of at least twenty-five percent (25%) of the shares of Series C
Preferred Stock then outstanding addressed to the Secretary of the
Corporation shall, call a special meeting of the holders of Series C
Preferred Stock, for the purpose of electing the one additional director
which such holders are entitled to elect pursuant to this subparagraph
(b)(ii). If such meeting shall not be called by a proper officer of the
Corporation within twenty (20) days after personal service of said written
request upon the Secretary of the Corporation, or within twenty (20) days
after mailing the same within the United States by certified mail,
addressed to the Secretary of the Corporation at its principal executive
offices, then the holders of record of at least twenty-five percent (25%)
of the outstanding shares of Series C Preferred Stock may designate in
writing one of their number to call such meeting at the expense of the
Corporation, and such meeting may be called by the person so designated
upon the notice required for the annual meeting of stockholders of the
Corporation and shall be held at the place for holding the annual meetings
of stockholders. Any holder of Series C Preferred Stock so designated shall
have, and the Corporation shall provide, access to the lists of
stockholders to be called pursuant to the provisions hereof.
(c) Without the written consent of holders of a majority of the
outstanding shares of Series C Preferred Stock or the affirmative vote of
holders of a majority of the outstanding shares of Series C Preferred Stock
at a meeting of the holders of Series C Preferred Stock called for such
purpose, the Corporation will not amend, alter or repeal any provision of
the Restated Certificate of Incorporation or this Certificate of
Designation so as to adversely affect the preferences, rights or powers of
the Series C Preferred Stock or to authorize the issuance of, or to issue
any, additional shares of Series C Preferred Stock; provided that any such
amendment that changes any dividend or other amount payable on or the
liquidation preference of the Series C Preferred Stock shall require the
written consent of holders of two-thirds of the outstanding shares of
Series C Preferred Stock or the affirmative vote of holders of two-thirds
of the outstanding shares of Series C Preferred Stock at a meeting of the
holders of Series C Preferred Stock called for such purpose.
(d) Without the written consent of holders of a majority of the
outstanding shares of Series C Preferred Stock or the affirmative vote of
holders of a majority of the outstanding shares of Series C Preferred Stock
at a meeting of such holders called for such purpose, the Corporation will
not create, authorize or issue any Senior Securities.
(e) The Corporation may, without the consent of any holder of
Series C Preferred Stock, consolidate with or merge with or into, or
convey, transfer or lease all or substantially all its assets as an
entirety to, any Person, provided that: (1) the successor, transferee or
lessee (if not the Corporation) is organized and existing under the laws of
the United States of America or any State thereof or the District of
Columbia and the Series C Preferred Stock shall be converted into or
exchanged for and shall become shares of, or interests in, such successor,
transferee or lessee, having in respect of such successor, transferee, or
lessee substantially the same powers, preferences and relative,
participating, optional or other special rights and the qualifications,
limitations or restrictions thereof, that the Series C Preferred Stock has
immediately prior to such transaction; and (2) the Corporation delivers to
the transfer agent an officers' certificate and an opinion of counsel
stating that such consolidation, merger, conveyance, transfer or lease
complies with this Certificate of Designation. In the event of any
consolidation or merger or conveyance, transfer or lease of all or
substantially all of the assets of the Corporation that is permitted
pursuant to this paragraph (e), the successor resulting from such
consolidation or into which the Corporation is merged or the transferee or
lessee to which such conveyance, transfer or lease is made, will succeed
to, and be substituted for, and may exercise every right and power of, the
Corporation with respect to the Series C Preferred Stock (or shares or
interests into, or for which, the Series C Preferred Stock is converted or
exchanged), and thereafter, except in the case of a lease, the predecessor
(if still in existence) shall be released from its obligations and
covenants with respect to the Series C Preferred Stock.
(f) In exercising the voting rights set forth in this paragraph
9, each share of Series C Preferred Stock shall have one vote per share.
Except as otherwise required by applicable law or as set forth herein, the
shares of Series C Preferred Stock shall not have any relative,
participating, optional or other special voting rights and powers and the
consent of the holders thereof shall not be required for the taking of any
corporate action.
10. Reports. So long as any of the Series C Preferred Stock is
outstanding, in the event the Corporation is not required to file quarterly
and annual financial reports with the Securities and Exchange Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act, the
Corporation will furnish the holders of the Series C Preferred Stock with
reports containing the same information as would be required in such
reports.
11. General Provisions. (a) The term "person" as used herein
means any corporation, limited liability company, partnership, trust,
organization, association, other entity or individual.
(b) The term "outstanding", when used with reference to shares of
stock, shall mean issued shares, excluding shares held by the Corporation
or a subsidiary of the Corporation.
(c) The headings of the sections, paragraphs, subparagraphs,
clauses and subclauses of this Certificate of Designation are for
convenience of reference only and shall not define, limit or affect any of
the provisions hereof.
<PAGE>
IN WITNESS WHEREOF, said McLeodUSA Incorporated has caused this
Certificate of Designations to be signed by Stephen C. Gray, its President
and Chief Operating Officer this 13th day of September, 1999.
McLEODUSA INCORPORATED
By: /s/ Stephen C. Gray
----------------------------
Name: Stephen C. Gray
Title: President and Chief
Operating Officer
EXHIBIT 5
JOINT FILING AGREEMENT
The undersigned acknowledge and agree that the foregoing
statement on Schedule 13D is filed on behalf of each of the undersigned and
that all subsequent amendments to this statement shall be filed on behalf
of each of the undersigned without the necessity of filing additional joint
filing agreements. The undersigned acknowledge that each shall be
responsible for the timely filing of such amendments, and for the
completeness and accuracy of the information concerning it contained
therein, but shall not be responsible for the completeness and accuracy of
the information concerning the others, except to the extent that it knows
or has reason to believe that such information is inaccurate.
This Agreement may be executed counterparts and each of such
counterparts taken together shall constitute one and the same instrument.
Dated: September 22, 1999
FORSTMANN LITTLE & CO.
SUBORDINATED DEBT AND EQUITY
MANAGEMENT BUYOUT PARTNERSHIP-VI, L.P.
By: FLC XXIX Partnership, L.P.
its general partner
By: /s/ Winston W. Hutchins
--------------------------------
Winston W. Hutchins,
a general partner
<PAGE>
FORSTMANN LITTLE & CO.
SUBORDINATED DEBT AND EQUITY
MANAGEMENT BUYOUT PARTNERSHIP-VII, L.P.
By: FLC XXXIII Partnership
its general partner
By: /s/ Winston W. Hutchins
--------------------------------
Winston W. Hutchins,
a general partner
FORSTMANN LITTLE & CO. EQUITY
PARTNERSHIP-V, L.P.
By: FLC XXX Partnership, L.P.
its general partner
By: /s/ Winston W. Hutchins
--------------------------------
Winston W. Hutchins,
a general partner
