Exhibit 10.1
FOURTH FORBEARANCE AGREEMENT
FOURTH FORBEARANCE AGREEMENT, dated as of September 9, 2005
(this
"Agreement"), among (1) McLeodUSA
Incorporated, a Delaware corporation (the
"Borrower"), (2) each of the Subsidiaries
of the Borrower listed on Schedule I
hereto (the "Subsidiary Guarantors"), (3)
the financial institutions named on
the signature pages hereto (together with
their respective successors and
assigns, the "Participant Lenders") and (4)
JPMorgan Chase Bank, N.A., as
agent for the Lenders (the "Administrative
Agent").
WITNESSETH:
A. WHEREAS, the Borrower, certain Participant Lenders, the
Administrative Agent and certain other
financial institutions are parties to a
Credit Agreement dated as of May 31, 2000
(as amended, the "2000 Credit
Agreement");
B. WHEREAS, the Borrower, certain Participant Lenders, the
Administrative Agent and certain other
financial institutions are parties to a
Credit Agreement dated as of April 16, 2002
(as amended, the "2002 Credit
Agreement," together with the 2000 Credit
Agreement, the "Credit Agreements");
C. WHEREAS, the Subsidiary Guarantors and JPMorgan Chase Bank,
N.A.,
as Collateral Agent for the Secured
Parties, are parties to a Subsidiary
Guarantee Agreement dated as of May 31,
2000, as amended and restated as of
April 16, 2002 (the "Guarantee
Agreement");
D. WHEREAS, the Borrower and the Subsidiary Guarantors have
proposed
a restructuring plan that is under
discussion with the Participant Lenders (as
such plan may be modified, the "Plan");
E. WHEREAS, the Borrower has advised the Administrative Agent and
the
Lenders that the Specified Defaults (as
defined in section 1(c) below),
including, without limitation, the failure
to make scheduled amortization
payments under the Credit Agreements and
interest payments under the 2000
Credit Agreement, might occur or continue
occurring during the Prior
Forbearance Periods or the Forbearance
Period (each as defined below);
F. WHEREAS, in order to permit completion of the negotiation of
the
Plan and exploration of other possible
strategic transactions, the Borrower,
the Subsidiary Guarantors, the Participant
Lenders (as defined in the First
Forbearance Agreement) and the
Administrative Agent executed a Forbearance
Agreement, dated as of March 16, 2005 (the
"First Forbearance Agreement"),
pursuant to which the Participant Lenders
(as defined in the First Forbearance
Agreement) and the Administrative Agent
agreed to forbear from exercising
certain default-related remedies against
the Borrower and the Subsidiary
Guarantors on account of the Specified
Defaults (as defined in the First
Forbearance Agreement) for a limited period
of time and upon the terms and
conditions set forth therein;
G. WHEREAS, the Borrower paid to the Administrative Agent, and
has
periodically replenished, an advance of
$1.5 million (the "Advance") in
accordance with section 2(e) of the Prior
Forbearance Agreements, on account
of the Borrower's obligations to pay
expenses and other amounts (including the
fees and expenses of counsel and financial
advisors) under sections 9.03 of
the Credit Agreements;
H. WHEREAS, on March 29, 2005 the Borrower entered into an
engagement
letter (the "A&M Engagement Letter")
with, and retained Alvarez & Marsal, LLC
(the "Restructuring Adviser") as an adviser
of the Borrower to validate and
provide information regarding the Borrower
and its Subsidiaries to the
Lenders, prospective buyers and other
parties, and to assist the Borrower in
developing strategies relating to any
restructuring or other strategic
transactions;
I. WHEREAS, the Forbearance Period under and as defined in the
First
Forbearance Agreement (the "First
Forbearance Period") came to an end on May
23, 2005;
J. WHEREAS, in order to permit completion of the negotiation of
the
Plan and exploration of other possible
strategic transactions, the Borrower,
the Subsidiary Guarantors, the Participant
Lenders (as defined in the Second
Forbearance Agreement) and the
Administrative Agent executed the Second
Forbearance Agreement, dated as of May 23,
2005 (the "Second Forbearance
Agreement"), pursuant to which the
Participant Lenders (as defined in the
Second Forbearance Agreement) and the
Administrative Agent agreed to forbear
from exercising certain default-related
remedies against the Borrower and the
Subsidiary Guarantors on account of the
Specified Defaults (as defined in the
Second Forbearance Agreement) for a limited
period of time and upon the terms
and conditions set forth therein;
K. WHEREAS, the Second Forbearance Period under and as defined in
the
Second Forbearance Agreement (the "Second
Forbearance Period") came to an end
on July 21, 2005;
L. WHEREAS, in order to permit completion of the negotiation of
the
Plan, the Borrower, the Subsidiary
Guarantors, the Participant Lenders (as
defined in the Third Forbearance Agreement)
and the Administrative Agent
executed the Third Forbearance Agreement,
dated as of July 21, 2005 (the
"Third Forbearance Agreement," together
with the First Forbearance Agreement
and the Second Forbearance Agreement, the
"Prior Forbearance Agreements"),
pursuant to which the Participant Lenders
(as defined in the Third Forbearance
Agreement) and the Administrative Agent
agreed to forbear from exercising
certain default-related remedies against
the Borrower and the Subsidiary
Guarantors on account of the Specified
Defaults (as defined in the Third
Forbearance Agreement) for a limited period
of time and upon the terms and
conditions set forth therein;
M. WHEREAS, on August 12 the A&M Engagement Letter was amended
and
restated to provide for, among other
things, the appointment of Stan Springel,
a Managing Director of Alvarez &
Marsal, LLC, to serve as Chief Restructuring
Officer (the "Chief Restructuring Officer")
of the Borrower;
N. WHEREAS, the Forbearance Period under and as defined in the
Third
Forbearance Agreement (the "Third
Forbearance Period," together with the First
Forbearance Period and the Second
Forbearance Period, the "Prior Forbearance
Periods") was to expire on September 9,
2005; and
O. WHEREAS, in order to permit completion of the negotiation of
the
Plan, the Borrower and the Subsidiary
Guarantors have asked the Participant
Lenders, and the Participant Lenders are
willing, to continue to forbear from
exercising certain default-related remedies
against the Borrower and the
Subsidiary Guarantors on account of the
Specified Defaults for a further
limited period of time and upon the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, the covenants
and
conditions contained herein and other good
and valuable consideration, the
receipt and sufficiency of which are hereby
acknowledged, the parties hereto
agree as follows:
Section 1. Defined Terms. Unless otherwise specifically defined
herein, each term used herein which is
defined in the Credit Agreements has
the meaning assigned to such term in the
Credit Agreements. As used in this
Agreement, the following terms have the
meanings specified below:
(a) "Forbearance Period" means the period beginning on the date
hereof and ending on the earliest to occur
of (any such occurrence being a
"Termination Event"):
(i) September 30, 2005;
(ii) the occurrence of any Event of Default other than a
Specified Default;
(iii) any holder of Indebtedness or other obligations of $7
million or more of the Borrower or any of its Subsidiaries shall
take
any action to collect or enforce any claim or to create or
enforce
any lien against the Borrower or any of its Subsidiaries,
excluding
the making of a demand or the assertion of a claim by a vendor
or
customer that is disputed in good faith by the Borrower or such
Subsidiary in the ordinary course of business and with respect
to
which such vendor or customer has not obtained a lien or
otherwise
obtained the ability to collect or enforce such claim; and
(iv) a breach of any term, condition or representation
contained in this Agreement by the Borrower or the Subsidiary
Guarantors, including without limitation, any failure by the
Borrower
or Subsidiary Guarantors to comply with the undertakings in Section
2
hereof.
(b) "Other Assets" means all assets of the Borrower and the
Subsidiary Guarantors other than Guaranteed
Obligations Collateral (as defined
in the Security Agreement).
(c) "Specified Defaults" means existing or anticipated Events
of
Default, as listed (i) on Schedule II to
the First Forbearance Agreement that
occurred during the First Forbearance
Period, (ii) on Schedule II to the
Second Forbearance Agreement that occurred
during the Second Forbearance
Period, (iii) on Schedule II to the Third
Forbearance Agreement that occurred
during the Third Forbearance Period or (iv)
on Schedule II hereto that might
occur or continue during the Forbearance
Period (as defined in section 1(a)).
(d) "Steering Committee Members" means those Lenders who are
members
of the informal steering committee of
Lenders whose names have been provided
to the Borrower in a letter from the
Administrative Agent dated May 23, 2005,
as amended from time to time.
Section 2. Acknowledgements and Undertakings.
(a) The Borrower and the Subsidiary Guarantors agree and
acknowledge
that certain of the Specified Defaults (as
defined in the First Forbearance
Agreement, the Second Forbearance Agreement
and the Third Forbearance
Agreement) occurred during the First
Forbearance Period, the Second
Forbearance Period and the Third
Forbearance Period, respectively, and that
the Specified Defaults (as defined in
section 1(c) hereof) might occur or
continue during the Forbearance Period (as
defined in section 1(a) hereof) and
that certain of the Specified Defaults (as
defined in the Prior Forbearance
Agreements) constituted, and the Specified
Defaults (as defined in section
1(c) hereof) should they occur will
constitute material Events of Default.
(b) In addition to the information required to be furnished under
the
Loan Documents to the Administrative Agent
and the Lenders (and without
prejudice to sections 5.01 or any other
provision of the Credit Agreements),
the Borrower shall, as promptly as
practicable, provide to the Administrative
Agent and the Steering Committee Members
any information reasonably requested
by the Administrative Agent or the Lenders.
Without limiting the generality of
the foregoing, the Borrower shall promptly
provide to the Administrative Agent
and the Steering Committee Members, in a
form acceptable to the Administrative
Agent,
(i) on Tuesday of each week, a detailed forecast of receipts
and disbursements for the Borrower and the Subsidiary
Guarantors
providing, on a weekly basis, the Borrower's good faith estimate
of
projected receipts and disbursements for the 13 weeks commencing
with
the immediately following week, together with a reconciliation
of
such forecast against the forecast delivered the previous week and
a
reasonably detailed explanation of any variance between the
current
forecast and such previously delivered forecast;
(ii) not later than the tenth day following the end of each
calendar month, an operational report, including management's
good
faith estimate of receipts and disbursements for such month, the
cash
balances of the Borrower and Subsidiary Guarantors as of the end
of
such calendar month, and an analysis of performance against
projected
performance as set forth in the phased business plan dated March
9,
2005 previously delivered to the Participant Lenders;
(iii) on Tuesday of each week, a written or oral (in the
sole discretion of the Borrower) update, and at any time on
request
of the Administrative Agent, a written update, addressed to the
financial advisor of the Administrative Agent regarding the status
of
the Borrower's restructuring activities, including the
Borrower's
efforts to sell any material assets or to sell all or any portion
of
its business, including, without limitation, a list of all
contacts
made with potential purchasers (including the identities of
those
contacted and the dates of such contacts), copies (if in writing)
or
descriptions (if not in writing) of any proposals, offers or
indications of interest received by the Borrower or its attorneys
or
financial advisors, and any responses thereto by the Borrower or
any
such attorney or financial advisor;
(iv) all material information (except for information
previously provided by the Borrower to the Administrative Agent
and
the Steering Committee Members) that the Borrower proposes or
intends
to disclose to the public as far in advance of such disclosure
as
practicable; and
(v) direct access to the officers and employees, and books
and records of the Borrower and its Subsidiaries (including the
Chief
Restructuring Officer and the Restructuring Adviser) to obtain
such
information as the Participant Lenders deem reasonably necessary
to
evaluate, negotiate and implement any restructuring plan and to
verify and analyze to the reasonable satisfaction of the
Participant
Lenders the matters referred to in subparagraphs (i), (ii), (iii)
and
(iv) above.
(c) The Chief Restructuring Officer (and the Restructuring
Advisor)
shall continue to be actively employed by
the Borrower at all times during the
Forbearance Period and shall have direct
access to all information, personnel
and other resources necessary to the
performance of his duties.
(d) The Borrower shall make all scheduled interest payments under
the
2002 Credit Agreement at the non-default
contract rate.
(e) The Administrative Agent has been paid and shall continue
to
retain the Advance as an advance payment in
respect of the Borrower's
obligations to pay expenses and other
amounts under sections 9.03 of the
Credit Agreements, and shall continue to be
entitled to pay such amounts
(including sums payable in respect of
expenses or other liabilities incurred
or paid by the Administrative Agent prior
to the date hereof) as they come
due, including, without limitation, (i) the
reasonable fees and expenses of
counsel and financial advisors (including
FTI Consulting, Inc.) provided for
in such sections and (ii) travel and other
incidental expenses of Lenders
actively participating with the
Administrative Agent in restructuring
discussions with the Borrower. The Borrower
shall from time to time, within
three Business Days following the receipt
of a demand from the Administrative
Agent, make further advances to the
Administrative Agent in order to restore
the balance of the Advance held by the
Administrative Agent to $1.5 million.
(f) The Borrower shall furnish to the Administrative Agent
prompt
written notice of the occurrence of a
Termination Event.
(g) The Borrower and the Subsidiary Guarantors acknowledge and
agree
that, under the Credit Agreements, as
amended, they are not currently entitled
to request any new Loans or Letters of
Credit.
(h) Notwithstanding anything to the contrary in any Loan
Document,
the Borrower and the Subsidiary Guarantors,
as applicable, shall not, unless
the Required Lenders under each Credit
Agreement give their written consent,
sell, transfer or otherwise dispose of any
Other Assets, except for sales,
transfers or dispositions entered into (i)
in the ordinary course of business
or (ii) with Net Proceeds totaling up to $2
million in the aggregate,
calculated from May 23, 2005; provided that
the Borrower may sell the Citation
III airplane (tail number 890 MC) without
consent provided that (x) the Net
Proceeds from such sale are at least $4
million and (y) the Net Proceeds are
deposited in an account with the Collateral
Agent (or, if the Required Lenders
under each Credit Agreement request in
writing, applied first, to prepay
Borrowings (as defined in the 2002 Credit
Agreement) in an aggregate amount
equal to such Net Proceeds and second, to
the extent of any remaining Net
Proceeds, as required by section 2.11(c) of
the 2000 Credit Agreement). The
Net Proceeds from the sale of such airplane
shall not be included for the
purpose of calculating the $2 million
amount referred to in section 2(h)(ii).
(i) The Required Lenders under each Credit Agreement may,
without
prejudice to the rights of the Required
Lenders under each Credit Agreement to
refu
