**Exhibit 4.2**

 

FOURTHAMENDMENT dated as of October 3, 2003 (this “Amendment”), to theCredit Agreement dated as of May 31, 2000 (as heretofore amended, the “Credit**Agreement”)among MCLEODUSA INCORPORATED, a Delaware corporation (the “Borrower”),the lenders party thereto (the “Lenders”) and JPMORGAN CHASE BANK(formerly known as The Chase Manhattan Bank), as Administrative Agent (in suchcapacity, the “Administrative Agent”) and Collateral Agent.

 

The Borrowerhas requested that the Lenders agree to amend certain provisions of the CreditAgreement.  The Lenders party hereto arewilling so to amend the Credit Agreement on the terms and subject to theconditions set forth herein.  Capitalizedterms used but not defined herein have the meanings assigned to them in theCredit Agreement, amended hereby.

 

Accordingly,in consideration of the mutual agreements herein contained and other good andvaluable consideration, the receipt and sufficiency of which are herebyacknowledged, the parties hereto agree as follows:

 

# SECTION 1.  Amendment ofCredit Agreement.  Uponeffectiveness of this Amendment in accordance with Section 3 hereof, the CreditAgreement is amended as follows:

 

## (a)           Amendment of Section 5.01.  Section 5.01 of the Credit Agreement isamended by replacing the word “quarterly” in clause (e) with the word“monthly”, deleting the word “and” immediately after the semicolon in clause(f), redesignating clause (g) as clause (h) and adding a new clause (g) to readas follows:

 

“(g) (i) on or prior to October 31, 2003, a financial forecast for theBorrower and its Restricted Subsidiaries covering the periods from(x) October 1, 2003 through December 31, 2003, prepared to showinformation on a monthly basis, and (y) January 1, 2004 throughDecember 31, 2005, prepared to show information on a quarterly basis,(ii) on or prior to January 31, 2004, a financial forecast of theBorrower and its Restricted Subsidiaries covering the period fromJanuary 1, 2004 through December 31, 2004, prepared to showinformation on a monthly basis and (iii)  within 30 days after theend of each fiscal month (or 50 days if such fiscal month is the last month ofa fiscal quarter or 60 days if such fiscal month is the last month of afiscal year) of the Borrower, (A) an unaudited consolidated balance sheet ofthe Borrower and its Restricted Subsidiaries as of the end of such fiscalmonth, setting forth in comparative form (including a column indicatingpercentage variance) the figures as of the end of the

 

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previous fiscal year and the applicable month end as set forth in theapplicable financial forecast delivered pursuant to this clause (g),(B) unaudited consolidated statements of operations and cash flows of theBorrower and its Restricted Subsidiaries for such fiscal month and the thenelapsed portion of such fiscal year, setting forth in each case in comparativeform (including a column indicating percentage variance) the figures for thecorresponding monthly period and year-to-date period of the previous fiscalyear and the applicable monthly and year-to-date figures set forth in theapplicable financial forecast delivered pursuant to this clause (g), (C) areasonably detailed managements’ discussion and analysis, including a narrativediscussion of key balance sheet accounts and key income statement line items(including, but not limited to, a description and discussion of eachsignificant factor contributing to revenue changes), in each case, including acomparison to the relevant accounts and line items included in the applicable financialforecast delivered pursuant to this clause (g) and (D) a reasonablydetailed cash flow discussion and analysis (including operating cash flow,working capital, Capital Expenditures, actual Borrowings hereunder during suchperiod compared to projected Borrowings as set forth in the applicablefinancial forecast delivered pursuant to this clause (g) and unusedRevolving Commitments as of the end of such fiscal month).  The financial statements delivered pursuantto clauses (A) and (B) above shall be certified by one of the Borrower’sFinancial Officers as presenting fairly in all material respects the financialcondition and results of operations of the Borrower and its RestrictedSubsidiaries on a consolidated basis and as having been prepared in accordancewith GAAP consistently applied, subject to normal year-end audit adjustments,regular quarterly adjustments, adjustments resulting from differences inprocedures in the closing of the Borrower’s month-end and quarter-end books(including, but not limited to, accrual of line costs) and the absence offootnotes.  It is understood and agreedthat the Administrative Agent may at any time, upon reasonable advance noticeto the Borrower, elect to have the benchmark for the comparative informationrequired under this clause (g) be the information set forth in the most recentbudget provided under clause (e) above instead of the applicable financialforecast delivered pursuant this clause (g), and that the benchmark forthe comparative information required under this clause (g) for the fiscalyear 2005 and thereafter shall be the information set forth in the budgetprovided under clause (e) for such fiscal year; and”

 

## (b)           Amendment of Section 6.13.  The table set forth in Section 6.13 of theCredit Agreement is amended to read as follows:

 

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| **Period**                                 |   | **Ratio**     |
|--------------------------------------------|--------|---------------|
|                                       |   |          |
| July 1, 2003  through September 30, 2003   |   | 13.00 to 1.00 |
|                                       |   |          |
| October 1,  2003 through December 31, 2003 |   | 15.00 to 1.00 |
|                                       |   |          |
| January 1,  2004 through June 30, 2004     |   | 13.50 to 1.00 |
|                                       |   |          |
| July 1, 2004  through September 30, 2004   |   | 11.00 to 1.00 |
|                                       |   |          |
| October 1,  2004 through December 31, 2004 |   | 8.50 to 1.00  |
|                                       |   |          |
| January 1,  2005 through March 31, 2005    |   | 6.00 to 1.00  |
|                                       |   |          |
| April 1,  2005 to September 30, 2005       |   | 5.00 to 1.00  |
|                                       |   |          |
| October 1,  2005 and thereafter            |   | 4.00 to 1.00  |

 

## (c)           Amendment of Section 6.14.  Section 6.14 of the Credit Agreement isamended to read as follows:

 

## SECTION6.14.  Capital ExpenditureLimitation.  The Borrower shall notpermit the Capital Expenditures of the Borrower and the Restricted Subsidiariesfor any fiscal year of the Borrower to exceed (i) with respect to the fiscalyears ending December 31, 2003 and 2004, $100,000,000 and (ii) with respect tothe fiscal years ending December 31, 2005 and thereafter, $200,000,000 (theapplicable amount under clause (i) or clause (ii), the “Capex Limit”).  The Capex Limit in respect of any fiscalyear commencing with the fiscal year ending on December 31, 2004, shall beincreased (but not decreased) by the amount of unused permitted CapitalExpenditures for the immediately preceding fiscal year (such amount, the “CapexCarryforward”); provided, however, that in no event shall theCapex Limit for any fiscal year be increased by more than $50,000,000.  Any Capex Carryforward that is not permittedto be used in any fiscal year as a result of the proviso to the precedingsentence may, subject to such proviso, be applied to any subsequent fiscalyear.

 

## (d)           Amendment of Section 6.18.  The table set forth in Section 6.18 of theCredit Agreement is amended to read as follows:

 
| **Period**                                |   | **Minimum** |        |
|-------------------------------------------|--------|-------------|-------------|
|                                      |   |        |        |
| July 1, 2003 through September 30, 2003   |   | $           | 900,000,000 |   |
|                                      |   |        |        |
| October 1, 2003 through March 31, 2004    |   | $           | 850,000,000 |   |
|                                      |   |        |        |
| April 1, 2004 through June 30, 2004       |   | $           | 875,000,000 |   |
|                                      |   |        |        |
| July 1, 2004 through September 30, 2004   |   | $           | 900,000,000 |   |
|                                      |   |        |        |
| October 1, 2004 through December 31, 2004 |   | $           | 950,000,000 |   |
|                                      |   |        |        |
| January 1, 2005 and thereafter            |   | no minimum  |        |

 

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# SECTION 2.  Representationsand Warranties.  To induce the otherparties hereto to enter into this Amendment, the Borrower represents to each ofthe Lenders and the Administrative Agent that, as of the Effective Date:

 

## (a)           after giving effect to thisAmendment, the representations and warranties of the Borrower set forth inArticle III of the Credit Agreement are true and correct on and as of theEffective Date with the same effect as if made on and as of the Effective Date,except to the extent such representations and warranties expressly relate to anearlier date, in which case such representations and warranties were true andcorrect as of such earlier date;

 

## (b)           after giving effect to thisAmendment, no Default has occurred and is continuing under the CreditAgreement; and

 

## (c)           this Amendment has been duly executedand delivered by the Borrower and the Credit Agreement, as amended hereby,constitutes a legal, valid and binding obligation of the Borrower, enforceableagainst the Borrower in accordance with its terms, subject to applicablebankruptcy, insolvency, reorganization, moratorium or other similar lawsaffecting creditors’ rights generally and subject to general principles ofequity, regardless of whether considered in a proceeding in equity or at law.

 

# SECTION 3.  Conditions toEffectiveness; Condition to Continuing Effectiveness*.*

 

## (a)           This Amendment shall become effectiveas of the date (the “Effective Date”) on which each of the followingconditions has been satisfied:

 

## (i)            the Administrative Agent shall havereceived counterparts of this Amendment that, when taken together, bear thesignatures of the Borrower and the Required Lenders;

 

## (ii)           the Administrative Agent shall havereceived a certificate of a Financial Officer of the Borrower, dated theEffective Date, to the effect that the representations and warranties set forthin Section 2 hereof are true and correct;

 

## (iii)          the Borrower shall have paid to theAdministrative Agent, in immediately available funds, for the account of eachof the Lenders entitled thereto, the Amendment Fee referred to inSection 4 hereof; and

 

## (iv)          the Borrower’s Credit Agreement datedas of April 16, 2002 (the “Exit Credit Agreement”) shall havebeen

 

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## amended toeffect modifications to the covenants therein equivalent to those effected tothe Credit Agreement by this Amendment, and all conditions to the effectivenessof such amendment shall have been satisfied on the Effective Date.

 

## (b)           Notwithstanding the occurrence of theEffective Date, if at any time during the period from October 1, 2003through December 31, 2003, the total Revolving Exposure (as defined in the ExitCredit Agreement), under the Exit Credit Agreement shall exceed $50,000,000 (orif at any time during such period the total outstanding Loans (as defined inthe Exit Credit Agreement) exceed $40,000,000) then the modifications to thecovenants contained in the Credit Agreement effected by Sections 1(b) and1(d) of this Amendment shall thereupon terminate and be of no further force andeffect, and the covenants contained in Sections 6.13 and 6.18 of the CreditAgreement (as in effect immediately prior to the Effective Date) shallthereupon apply and continue in full force and effect.

 

# SECTION 4.  Amendment Fee.  The Borrower agrees to pay to theAdministrative Agent, for the account of each Lender that delivers (includingby fax) an executed counterpart of this Amendment prior to 12:00 p.m., New YorkCity time, on October 15, 2003, an amendment fee (the “Amendment Fee”)in an amount equal to .40% of the sum of such Lender’s outstanding Loans.

 

# SECTION 5.  Effect ofAmendment.  Except as expressly setforth herein, this Amendment shall not by implication or otherwise limit,impair, constitute a waiver of, amend, or otherwise affect the rights andremedies of the Lenders or the Administrative Agent under the Credit Agreementor any other Loan Document and shall not alter, modify, amend or in any wayaffect any of the terms, conditions, obligations, covenants or agreements containedin the Credit Agreement or any other Loan Document, all of which are ratifiedand affirmed in all respects and shall continue in full force and effect.  This Amendment shall apply and be effectivewith respect only to the matters expressly referred to herein, and nothingherein shall be deemed to entitle the Borrower to a consent to, or a waiver,amendment, modification or other change of, any of the terms, conditions,obligations, covenants or agreements contained in the Credit Agreement or anyother Loan Document in similar or different circumstances.  The modifications to the covenants effectedby this Amendment shall apply retroactively to the periods covered thereby, andthe Lenders hereby waive any Default or Event of Default that may have arisenunder the Credit Agreement (absent such retroactive modification) to theextent, but only to the extent, that such Default or Event of Default would be,and is, cured solely as a result of such retroactive modifications.  This Amendment shall constitute a “LoanDocument” for all purposes of the Credit Agreement.

 

# SECTION 6.  **Applicable Law.  THIS  AMENDMENT SHALL BEGOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEWYORK.**

 

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# SECTION 7.  Counterparts.  This Amendment may be executed in any numberof counterparts and by different parties hereto in separate counterparts, eachof which when so executed and delivered shall be deemed an original but all ofwhich when taken together shall constitute but one and the sameinstrument.  Delivery of an executedsignature page of this Amendment by facsimile transmission shall be effectiveas delivery of a manually executed counterpart hereof.

 

# SECTION 8.  Costs andExpenses.  The Borrower agrees to reimbursethe Administrative Agent for its reasonable out-of-pocket expenses inconnection with this Amendment, including the reasonable fees, charges anddisbursements of counsel for the Administrative Agent.

 

# SECTION 9.  Headings.  The headings of this Amendment are forpurposes of reference only and shall not limit or otherwise affect the meaninghereof.

 

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# IN WITNESS WHEREOF, the parties hereto have caused this Amendment to beduly executed by their authorized officers as of the day and year first writtenabove.

 
|   | MCLEODUSA INCORPORATED,                   |
|--------|-------------------------------------------|
|   |
|   |
|   | by:                                       |
|   |                                      | /s/ G. Kenneth Burckhardt |
|   |                                      | Name: | G. Kenneth Burckhardt |
|   |                                      | Title: | Executive Vice President and  Chief Financial Officer |
|   |
|   |
|   | JPMORGAN CHASE BANK,                      |
|   | individually and as Administrative Agent, |
|   |
|   |
|   | by:                                       |
|   |                                      | /s/ John Kowalczuk |
|   |                                      | Name: | John Kowalczuk |
|   |                                      | Title: | Vice President |
|        |                                           |  |  |  |

 

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