UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 2)*
MCLEODUSA INCORPORATED
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(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
JACOBSON DEBT & EQUITY MANAGEMENT
ONE NEW YORK PLAZA BUYOUT PARTNERSHIP-VI, L.P.
NEW YORK, NY 10004 FORSTMANN LITTLE & CO. SUBORDINATED
ATTN: STEPHEN FRAIDIN, ESQ. DEBT & EQUITY MANAGEMENT BUYOUT
(212) 859-8000 PARTNERSHIP-VII, L.P.
FORSTMANN LITTLE & CO. EQUITY
PARTNERSHIP-V, L.P.
THEODORE J. FORSTMANN
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)
DECEMBER 3, 2001
----------------------------------
(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 Rule 13d-1(e), 13d-1(f) or 13d-1(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 Rule 13d-7 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).
SCHEDULE 13D
CUSIP No. 582266102
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
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 35,144,582*
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 0
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 35,144,582*
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
35,144,582*
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.3%
14 TYPE OF REPORTING PERSON*
PN
* Section 7(a)(ii) of the Certificate of Designation of the Powers,
Preferences and Relative, Participating, Optional and Other Special
Rights of Series D Convertible Preferred Stock (the "Series D
Preferred") and Qualifications, Limitations and Restrictions Thereof
(the "Series D 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 D 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 Net Realizable FMV (each such term as defined in the Series D
Certificate of Designation) equal $6.10.
*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.
SCHEDULE 13D
CUSIP No. 582266102
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
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 77,560,336*
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 0
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 77,560,336*
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
77,560,336*
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.0%
14 TYPE OF REPORTING PERSON*
PN
* Section 7(a)(ii) of the Series D 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 D 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 Net Realizable FMV (each such term as defined
in the Series D Certificate of Designation) equal $6.10.
*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.
SCHEDULE 13D
CUSIP No. 582266102
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
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 51,229,508*
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 0
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 51,229,508*
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
51,229,508*
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.5%
14 TYPE OF REPORTING PERSON*
PN
* Section 7(a)(ii) of the Certificate of Designation of the Powers,
Preferences and Relative, Participating, Optional and Other Special
Rights of Series E Convertible Preferred Stock (the "Series E
Preferred") and Qualifications, Limitations and Restrictions Thereof
(the "Series E 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 E 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 Net Realizable FMV (each such term as defined in the Series E
Certificate of Designation) equal $6.10.
*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.
SCHEDULE 13D
CUSIP No. 582266102
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
THEODORE J. FORSTMANN
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
UNITED STATES
NUMBER OF 7 SOLE VOTING POWER
SHARES 23,750
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 0
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 23,750
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
23,750
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.0%
14 TYPE OF REPORTING PERSON*
IN
*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.
This Amendment No. 2, filed on behalf of Forstmann Little & Co.
Subordinated Debt & Equity Management Buyout Partnership-VI, L.P.
("MBO-VI"), Forstmann Little & Co. Subordinated Debt & Equity Management
Buyout Partnership-VII, L.P. ("MBO-VII"), Forstmann Little & Co. Equity
Partnership-V, L.P. ("Equity-V", together with MBO-VI and MBO-VII, the "FL
Partnerships") and Theodore J. Forstmann ("Mr. Forstmann" and, collectively
with the FL Partnerships, the "Reporting Persons"), amends and supplements
the Schedule 13D filed on behalf of the FL Partnerships with the Securities
and Exchange Commission on September 22, 1999 (as amended by Amendment No.
1 filed on October 2, 2001, the "Schedule 13D"), relating to the Class A
Common Stock, par value $0.01 per share (the "Common Stock"), of McLeodUSA
Incorporated, a Delaware corporation ("McLeodUSA"). The Reporting Persons
have entered into a Joint Filing Agreement, dated December 3, 2001, a copy
of which is attached hereto as Exhibit 16. Capitalized terms used but not
otherwise defined herein shall have the meanings ascribed to such terms in
the Schedule 13D.
ITEM 2. Identity and Background
-----------------------
Item 2 is hereby amended to add the following:
ITEM 2. (a), (b), (c)
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Mr. Forstmann's present principal occupation is acting as a general
partner of FLC XXXI Partnership, L.P. ("FLC XXXI"), a New York limited
partnership doing business as Forstmann Little & Co. Forstmann Little & Co.
is a private investment partnership. The principal business address of
Forstmann Little & Co. and Mr. Forstmann is c/o Forstmann Little & Co., 767
Fifth Avenue, New York, New York 10153.
ITEM 2. (d), (e), (f)
-------------
During the last five years, Mr. Forstmann has not (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. Mr. Forstmann is a citizen of the United States of America.
Mr. Forstmann has the sole power to direct the vote and disposition of
all of the shares of Common Stock beneficially owned by him. In addition,
Mr. Forstmann is a general partner of (i) FLC XXIX, the general partner of
MBO-VI, (ii) FLC XXXIII, the general partner of MBO-VII and (iii) FLC XXX,
the general partner of Equity-V. Accordingly, Mr. Forstmann is jointly
making this filing with the FL Partnerships because he and the other
Reporting Persons may be deemed to constitute a group within the meaning of
Section 13(d)(3) of the Act. Neither the fact of this filing nor anything
contained herein shall be deemed an admission by the Reporting Persons that
such a group exists, and the existence of any such group is hereby
expressly disclaimed. The FL Partnerships have no beneficial interest in
any shares of Common Stock owned beneficially by Mr. Forstmann and,
accordingly, each of the FL Partnerships hereby expressly disclaims
beneficial ownership in any such shares of Common Stock.
ITEM 3. Source and Amount of Funds or Other Consideration
-------------------------------------------------
Item 3 is hereby amended to add the following:
At various times, McLeodUSA has granted to Mr. Forstmann options to
purchase shares of Common Stock in consideration for his services as a
director of McLeodUSA. As of the date hereof, 23,750 of such options have
vested and become presently exercisable.
ITEM 4. Purpose of Transaction
----------------------
Item 4 is hereby amended to add the following:
On December 3, 2001, the FL Partnerships and McLeodUSA entered into a
Lock-Up, Support and Voting Agreement dated as of December 3, 2001 (the
"Support Agreement") in which the FL Partnerships agreed to support a
comprehensive recapitalization and financial restructuring plan set forth
in the Support Agreement (the "Restructuring"). Under the terms of the
Restructuring, among other things,
(i) the Series D Preferred and Series E Preferred held by the FL
Partnerships would be converted into newly issued common shares
of McLeodUSA (the "New Common Stock") as would the publicly
traded Series A Preferred (together with the Series D Preferred
and the Series E Preferred, the "Preferred Shares") and the
existing Common Stock of McLeodUSA;
(ii) at least 95% of McLeodUSA's publicly traded senior notes and
senior discount notes (the "Senior Notes") would be exchanged
or redeemed for a combination of cash and New Common Stock;
(iii) McLeodUSA's telephone directory publishing business (the
"Publishing Business") would be sold to an entity owned by
Forstmann Little & Co. Subordinated Debt and Equity Management
Buyout Partnership-VIII, L.P., a Delaware limited partnership
("MBO-VIII"), and Forstmann Little & Co. Equity
Partnership-VII, L.P., a Delaware limited partnership
("Equity-VII" and, together with MBO-VIII, the "2001 FL
Partnerships"), both of which are affiliates of the FL
Partnerships, for $535 million in cash, or to another party who
submits a better and higher cash offer, and the proceeds of the
sale would be used to finance the exchange or redemption of the
Senior Notes; and
(iv) The 2001 FL Partnerships would purchase $100 million of new
equity of McLeodUSA, a portion of which would be used to
finance the exchange or redemption of the Senior Notes, a
portion of which would be used to prepay bank indebtedness of
McLeodUSA and the balance of which would be used for general
corporate purposes of McLeodUSA.
The Restructuring would be accomplished either through an out-of-court
alternative pursuant to which McLeodUSA would commence an exchange offer
for the Senior Notes and convene a special meeting of its shareholders to
vote on the conversion of the Preferred Shares or an in-court alternative
by the filing of a voluntary petition for relief under Chapter 11 of the
Bankruptcy Code, where McLeodUSA would solicit acceptances of a Prepackaged
Plan of Reorganization, substantially on the same terms as the
Restructuring, in advance of filing. Under either alternative, the
Restructuring must be consummated by August 1, 2002.
Upon consummation of the Restructuring, (i) the FL Partnerships would
be entitled to board observer rights (more fully described below) and their
affiliates would be entitled to at least two representatives on the
restructured McLeodUSA Board of Directors; (ii) the FL Partnerships and
their affiliates would own common stock and warrants of the restructured
McLeodUSA in an amount representing approximately 40% of the equity
ownership of the restructured McLeodUSA; and (iii) Mr. Forstmann would be
the chairman of the Executive Committee of the restructured McLeodUSA.
In the Support Agreement, the FL Partnerships have agreed:
(i) to vote their shares of Series D Preferred and Series E
Preferred in favor of the Restructuring with such modifications
in the terms of the Restructuring that do not materially
deviate from the terms described above, and against any action
that would interfere with or prevent the Restructuring;
(ii) not to dispose of their Series D Preferred or Series E
Preferred; and
(iii) that any alternative restructuring of McLeodUSA that provides
for the FL Partnerships to receive approximately 40% of the
equity of McLeodUSA, and that is supported by the FL
Partnerships, must provide for any consideration that is
payable to the holders of the Series A Preferred, Series D
Preferred, Series E Preferred and the existing Common Stock to
be allocated in the same relative allocations as are set forth
in the Support Agreement (14%, 32.4%, 14.7% and 38.9%,
respectively).
The FL Partnerships' obligation to support a restructuring of
McLeodUSA is subject to the condition that any such restructuring not
materially deviate from the terms of the Restructuring described above. The
Support Agreement may be terminated by any party at any time after August
1, 2002.
The foregoing description of the Support Agreement is not intended to
be complete and is qualified in its entirety by the complete text of the
Support Agreement, which is incorporated herein by reference. The Support
Agreement is filed as Exhibit 11 hereto.
The FL Partnerships are also signatories to a Purchase Agreement,
dated as of December 3, 2001, with McLeodUSA and the 2001 FL Partnerships,
pursuant to which the 2001 FL Partnerships have agreed to purchase $100
million of new equity of McLeodUSA (the "Preferred Stock Purchase
Agreement"). In the Preferred Stock Purchase Agreement, McLeodUSA and the
FL Partnerships agreed as follows:
(i) Following the Restructuring, the FL Partnerships will each be
entitled to designate a representative (collectively, the
"Representatives") to consult with and advise management of
McLeodUSA with respect to McLeodUSA's business and financial
matters, and to attend all Board of Directors and committee
meetings as a non-voting observer. The Representatives will
have the same access to information concerning the business and
operations of McLeodUSA as do the directors of McLeodUSA and
will be entitled to participate in discussions and consult with
the Board of Directors of McLeodUSA without voting. Following
the conversion of the Series D Preferred and Series E Preferred
into New Common Stock in the Restructuring, the FL Partnerships
will no longer be entitled to designate any members of the
Board of Directors.
(ii) Following the Restructuring, the FL Partnerships will be free
to dispose of their shares of New Common Stock, subject only to
compliance with applicable securities laws, except that, during
the "Standstill Period" (defined as the period from the closing
of the Restructuring to the earlier of (x) the third
anniversary of the closing of the Restructuring and (y) the
date on which Mr. Forstmann is removed, without his consent, as
Chairman of the Executive Committee), the FL Partnerships will
not dispose of any of their shares to any person or group which
is, or which the FL Partnerships believe or should reasonably
believe will become, the beneficial owner of more than 50% of
the outstanding voting securities of McLeodUSA (a "Disqualified
Transaction") unless the Board of Directors of McLeodUSA
approves such disposition in advance or unless the FL
Partnerships comply with certain procedures set forth in the
Preferred Stock Purchase Agreement which give McLeodUSA the
opportunity to buy such shares itself or to cause its designee
to buy such shares. The Preferred Stock Purchase Agreement
provides that if McLeodUSA causes a designee to purchase the FL
Partnerships' shares and the designee acquires the remaining
shares of McLeodUSA within six months, thereafter at a blended
average price per share that is higher than that paid to the FL
Partnerships, then the FL Partnerships will be entitled to
receive the difference in purchase price. The foregoing
provisions apply equally to the 2001 FL Partnerships with
respect to sales by them of any of their equity interest in
McLeodUSA.
(iii) During the Standstill Period, the FL Partnerships may not (i)
acquire or become the beneficial owner of or obtain any rights
in respect of any capital stock of McLeodUSA (other than the
shares of New Common Stock issuable in the Restructuring), (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 or initiate or become a participant in any
stockholder proposal or election contest with respect to
McLeodUSA or any of its successors or induce others to initiate
the same (except for activities undertaken by the FL
Partnerships or the 2001 FL Partnerships in connection with
solicitations by the McLeodUSA Board of Directors), or (iii)
solicit or participate in the solicitation of any person to
acquire McLeodUSA or a substantial portion of its assets or
more than 50% of its outstanding capital stock. The foregoing,
however, (1) does not prohibit the FL Purchasers and their
affiliates from complying with Rules 13d-1 through 13d-7, as
applicable, of the Act or from making such disclosure to
McLeodUSA's stockholders or from taking such action which, in
their judgment, may be required under applicable law, and (2)
does not restrict the manner in which the directors designated
by the FL Partnerships participate in the deliberations or
discussions of McLeodUSA's Board of Directors.
(iv) During the Standstill Period, the FL Partnerships will be
present at all shareholders meetings for purposes of
determining whether a quorum exists and that they will vote
their shares of New Common Stock so that at least five members
of the Board of Directors are qualified as "Independent
Directors" and that the Chairman, the Chief Executive Officer
and the Chief Financial Officer of McLeodUSA are elected to the
Board.
The foregoing provisions apply equally to the 2001 FL Partnerships.
In the Preferred Stock Purchase Agreement, McLeodUSA and the FL
Partnerships also agreed that, at the closing of the Restructuring, the
existing restrictions on transfer and standstill provisions applicable to
the Series D Preferred and Series E Preferred would terminate, but that the
2001 Registration Rights Agreement entered into by the FL Partnerships in
connection with their receipt of the Series D Preferred and Series E
Preferred would remain in effect and cover the shares of New Common Stock
into which the Series D Preferred and Series E Preferred will be converted.
In the Preferred Stock Purchase Agreement, McLeodUSA also agreed with
the FL Partnerships and the 2001 FL Partnerships:
(1) that, for so long as the FL Partnerships and 2001 FL Partnerships
own at least 60% of the aggregate amount of securities owned by them
immediately following the closing of the Restructuring (the "Initial
Securities"), McLeodUSA would not adopt or implement any stockholders
rights plan or similar plan or device (a "Rights Plan"); provided, however,
that following the time when (i) the FL Partnerships and the 2001 FL
Partnerships cease to own at least 60% of the Initial Securities or (ii)
the FL Partnerships or the 2001 FL Partnerships sell any of their
securities in a Disqualified Transaction, McLeodUSA may adopt a Rights Plan
so long as the percentage that would trigger any rights by other
stockholders of McLeodUSA is at least one percentage point greater than the
aggregate percentage ownership (on an as converted basis) of the FL
Partnerships and 2001 FL Partnerships in McLeodUSA immediately prior to the
adoption of such Rights Plan; and
(2) that McLeodUSA would exercise all authority under applicable law
to effect an amendment to its certificate of incorporation expressly
electing not to be governed by Section 203 of the General Corporation Law
of the State of Delaware.
In the Preferred Stock Purchase Agreement, the 2001 FL Partnerships
agreed with McLeodUSA to purchase 10 million shares of a series of
preferred stock of McLeodUSA, par value $.001, designated as the Series F
Convertible Preferred Stock (the "Series F Preferred") and 10 shares of a
series of preferred stock of McLeodUSA, par value $.01, designated as the
Series G Convertible Preferred Stock (the "Series G Preferred") as well as
common stock warrants (the "Warrants") to purchase 18,937,995 shares of New
Common Stock, for an aggregate purchase price of $100 million (the "New
Equity Investment").
The foregoing description of the Preferred Stock Purchase Agreement is
not intended to be complete and is qualified in its entirety by the
complete text of the Preferred Stock Purchase Agreement, which is
incorporated herein by reference. The Preferred Stock Purchase Agreement is
filed as Exhibit 12 hereto.
The Series F Preferred has a liquidation preference of $.01 per share
and participates with the New Common Stock in the event of dividends or
liquidation. The Series F Preferred will automatically convert into shares
of New Common Stock 60 days after its issuance. The holder of each share of
Series F Preferred will be entitled upon conversion to that number of
shares of New Common Stock equal to 10 divided by an average of six closing
prices for the New Common Stock randomly selected from the 60 day period
following the issuance of the Series F Preferred (based upon the random
selection of 10 closing prices and the exclusion of the two highest and two
lowest closing prices) (the "Formula Exercise Price").
The foregoing description of the Series F Preferred is not intended to
be complete and is qualified in its entirety by the complete text of the
Certificate of Designation of the Powers, Preferences and Relative
Participating, Optional and Other Special Rights of Series F Convertible
Preferred Stock and Qualifications, Limitations and Restrictions Thereof
("Form of Series F Certificate of Designation"), which is incorporated
herein by reference. The Form of Series F Certificate of Designation is
filed as Exhibit 13 hereto.
The Series G Preferred has no liquidation preference and is not
entitled to the payment of dividends. The holders of record of shares of
Series G Preferred are entitled to vote with the New Common Stock as a single
class on all matters presented to the holders of New Common Stock for a vote.
Pursuant to the Series G Certificate of Designation, so long as at least
40% of the shares of New Common Stock beneficially owned by the 2001 FL
Partnerships issued on the original date of issuance of the Series G
Preferred (the "Issue Date") remain outstanding, the holders of the Series
G Preferred are entitled to collectively elect two directors to the Board
of Directors; so long as more than 20%, but less than 40%, of the shares of
Common Stock beneficially owned by the 2001 FL Partnerships on the Issue
Date remain outstanding, the holders are 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; so long
as 20% or less (but at least 10%) of the shares of New Common Stock
beneficially owned by the 2001 FL Partnerships on the Issue Date remain
outstanding, the holders are entitled to designate two Board Observers; and
if less than 10% of the shares of New Common Stock beneficially owned by the
2001 FL Partnerships on the Issue Date remain outstanding, the holders are
no longer entitled to designate any Board Observers and the rights of such
Board Observers cease. The Series G Preferred are canceled upon the earlier
of (1) the 2001 FL Partnerships beneficially owning less than 10% of the
shares of New Common Stock beneficially owned by the 2001 FL Partnerships on
the Issue Date or (2) upon a Change of Control (as defined in the Form of
Series G Certificate of Designation).
The foregoing description of the Series G Preferred is not intended to
be complete and is qualified in its entirety by the complete text of the
Certificate of Designation of the Powers, Preferences and Relative
Participating, Optional and Other Special Rights of Series G Convertible
Preferred Stock and Qualifications, Limitations and Restrictions Thereof
("Form of Series G Certificate of Designation"), which is incorporated
herein by reference. The Form of Series G Certificate of Designation is
filed as Exhibit 14 hereto.
The Warrants are exercisable until the fifth anniversary of their
issuance at one hundred fifty percent of the Formula Exercise Price and are
subject to customary anti-dilution provisions.
The foregoing description of the Form of Common Stock Purchase Warrant
is not intended to be complete and is qualified in its entirety by the
complete text of the Form of Common Stock Purchase Warrant, which is
incorporated herein by reference. The Form of Common Stock Purchase Warrant
is filed as Exhibit 15 hereto.
Depending on various factors, including, without limitation, the FL
Partnerships' financial position and investment strategy, the price levels
of the McLeodUSA common stock, conditions in the securities markets and
general economic and industry conditions, each of the Reporting Persons and
the 2001 FL Partnerships may in the future take such actions with respect
to its investment in McLeodUSA as it deems appropriate, including, without
limitation, purchasing additional shares of McLeodUSA common stock or
selling some or all of its McLeodUSA common stock or taking any actions
that might result in any of the matters set forth in subparagraphs (a)-(j)
of Item 4, in each case consistent with their obligations under their
agreements with McLeodUSA.
ITEM 5. Interest in Securities of the Issuer
------------------------------------
Item 5 is hereby amended to add the following:
The following information is as of December 3, 2001:
(i) Theodore J. Forstmann:
(a) Amount Beneficially Owned:
Mr. Forstmann directly owns options to purchase shares of Common
Stock, of which (i) 15,000 have vested and are presently exercisable into
shares of Common Stock at a price of $13.4167 per share and (ii) 8,750 have
vested and are presently exercisable into shares of Common Stock at a price
of 14.50 per share.
The options directly owned by Mr. Forstmann are presently exercisable
into less than 0.1% of the Common Stock outstanding, based on calculations
made in accordance with Rule 13d-3(d) of the Exchange Act and there being
627,734,497 shares of Common Stock outstanding as of November 5, 2001, as
disclosed in McLeodUSA's quarterly report on Form 10-Q for the quarterly
period ended September 30, 2001.
(b) Assuming exercise of the options, the number of shares as to which
Mr. Forstmann has:
(i) sole power to vote or to direct the vote - 23,750.
(ii) shared power to vote or to direct the vote -- None.
(iii) sole power to dispose or to direct the disposition of - 23,750.
(iv) shared power to dispose or to direct the disposition of --
None.
(v) Except as set forth above, none of the Reporting Persons nor,
to the knowledge of any of the Reporting Persons, 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.
ITEM 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer
-----------------------------------
Item 6 is hereby amended to add the following as the penultimate paragraph
of Item 6:
The responses to Items 3, 4 and 5 are incorporated herein by
reference.
ITEM 7. Material to be Filed as Exhibits
--------------------------------
Item 7 is hereby amended as follows:
1. Stock Purchase Agreement, dated August 30, 1999, among McLeodUSA and
the FL Partnerships.*
2. Registration Rights Agreement, dated as of September 15, 1999, among
McLeodUSA and the FL Partnerships.*
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, dated September 22, 1999.*
6. Exchange Agreement, dated as of September 30, 2001, by and between
McLeodUSA and the FL Partnerships.*
7. Termination Agreement, dated as of September 30, 2001, by and between
McLeodUSA and the FL Partnerships.*
8. Registration Rights Agreement, dated as of September 30, 2001, by and
between McLeodUSA and the FL Partnerships.*
9. Certificate of Designation of the Powers, Preferences and Relative,
Participating, Optional and Other Special Rights of Series D
Convertible Preferred Stock and Qualifications, Limitations and
Restrictions Thereof.*
10. Certificate of Designation of the Powers, Preferences and Relative,
Participating, Optional and Other Special Rights of Series E
Convertible Preferred Stock and Qualifications, Limitations and
Restrictions Thereof.*
11. Lock-Up, Support and Voting Agreement, dated as of December 3, 2001,
by and among McLeodUSA and the FL Partnerships.
12. Preferred Stock Purchase Agreement, dated as of December 3, 2001, by
and between McLeodUSA and the 2001 FL Partnerships.
13. Form of Certificate of Designation of the Powers, Preferences and
Relative, Participating, Optional and Other Special Rights of Series F
Convertible Preferred Stock and Qualifications, Limitations and
Restrictions Thereof.
14. Form of Certificate of Designation of the Powers, Preferences and
Relative, Participating, Optional and Other Special Rights of Series G
Convertible Preferred Stock and Qualifications, Limitations and
Restrictions Thereof.
15. Form of Common Stock Purchase Warrant.
16. Joint Filing Agreement, dated December 6, 2001.
----------------
* Previously filed.
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: December 6, 2001
FORSTMANN LITTLE & CO. SUBORDINATED DEBT
AND EQUITY MANAGEMENT BUYOUT
PARTNERSHIP-VI, L.P.
By: FLC XXIX Partnership, L.P.
its general partner
By:
-----------------------------------
Winston W. Hutchins,
a general partner
FORSTMANN LITTLE & CO. SUBORDINATED DEBT
AND EQUITY MANAGEMENT BUYOUT
PARTNERSHIP-VII, L.P.
By: FLC XXXIII Partnership, L.P.
its general partner
By:
-----------------------------------
Winston W. Hutchins,
a general partner
FORSTMANN LITTLE & CO. EQUITY
PARTNERSHIP-V, L.P.
By: FLC XXX Partnership, L.P.
its general partner
By:
-----------------------------------
Winston W. Hutchins,
a general partner
------------------------------------
Theodore J. Forstmann
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
Sandra J. Horbach
Thomas H. Lister
Winston W. Hutchins
Jamie C. Nicholls
Gordon Holmes
FLC XXXIII Partnership, L.P.:
General Partner of
MBO-VII
-------
FLC XXXIII Partnership, L.P., a New York limited 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.
General 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
Sandra J. Horbach
Thomas H. Lister
Winston W. Hutchins
Jamie C. Nicholls
Gordon Holmes
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
Sandra J. Horbach
Thomas H. Lister
Winston W. Hutchins