EX-99.A.12 2 dex99a12.htm SUPPLEMENT TO OFFER TO EXCHANGE, DATED MARCH 13, 2006 Supplement to Offer to Exchange, dated March 13, 2006

Exhibit (a)(12)

US LEC Corp.

Supplement to

Offer to Exchange Certain Outstanding Options

for New Options

March 13, 2006

We are providing our employees, including our executive officers, and three of our directors the following supplemental information regarding our offer to exchange their eligible options for new options. You should read this supplement together with the Offer to Exchange dated February 23, 2006 (“Offer to Exchange”) when making your decision whether to accept or reject the Offer.

Except as set forth below, the original terms of the Offer to Exchange remain in effect. The information in this supplement is in addition to and some of it is different from the information contained in the Offer to Exchange. To the extent the information in this supplement is different from the information contained in the Offer to Exchange, the information in this supplement will govern the terms of the Offer. The item numbers, page numbers and section headings listed below refer to the item numbers, page numbers and section headings contained in the Offer to Exchange.

Summary Term Sheet

Page 5.    We are deleting the penultimate sentence in the answer to question 20 and substituting the following: However, we recommend that you consult with your own tax advisor regarding the particular tax consequences of the offer to you.

Page 6.    In the answer to question 25, we are changing “April 24, 2006” to “April 19, 2006.”

Section 4 – Withdrawal Rights; Change of Election

We are changing “April 24, 2006” to “April 19, 2006” in the paragraph in this section under the heading “Voluntary Withdrawal or Change of Election” on page 13.

Section 6 – Conditions of the Offer.

We are modifying subparagraphs (a) and (b) of this section on page 15 to read as follows:

(a) any instituted or pending action or proceeding by any government or governmental, regulatory or administrative agency, authority or tribunal or any other person, domestic or foreign, before any court, authority, agency or tribunal that challenges the making of the offer, the acquisition of some or all of the tendered options pursuant to the offer, the issuance of new options, or otherwise relates in any manner to the offer or that, in our reasonable judgment, could materially and adversely affect the business, condition (financial or other), or results of operations of US LEC or our subsidiaries, or materially impair the benefits that we believe we will receive from the offer;

(b) any action is pending or taken, or any approval is withheld, or any statute, rule, regulation, judgment, order or injunction is sought, promulgated, enacted, entered, amended, enforced or deemed to be applicable to the offer or us or any of our subsidiaries, by any court or any authority, agency or tribunal that, in our reasonable judgment, would;

We are also modifying subparagraph (b)(4) of this section on page 15 to read as follows:

(b)(4) materially and adversely affect the business, condition (financial or other), or results of operations of our subsidiaries, or otherwise materially impair our business or the business of any of our subsidiaries;


In subparagraphs (a) and (b)(3) of this section on page 15, we refer to “benefits” we believe we will receive in this offer. These references to “benefits” refer to the purpose of the offer described in “Section 2-Purposes of the Offer” beginning on page 8. In addition, we are deleting the condition in subparagraph (j) of Section 6 which appears on page 16. Consequently, the only conditions to the offer are listed in subparagraphs (a) through (i) of Section 6. Finally, if there is a question about whether a condition to the offer has been triggered while the offer is pending, we will promptly notify the holders of eligible options as to how we intend to proceed.

Section 12 – Material U.S. Federal Income Tax Consequences.

We are revising the first sentence in this section on page 21 to read as follows: The following summarizes the material U.S. federal income tax consequences of the exchange of options pursuant to this offer.

We are also revising the last sentence of the second paragraph of this section that is in bold type on page 21 to read as follows: We recommend that you consult your own tax advisor regarding the particular federal, state and local tax consequences to you of participating in the offer.

Section 15 – Information Concerning US LEC.

We are adding the following Selected Financial Data at the end of this section on page 23:

 


SELECTED FINANCIAL DATA

The following table sets forth our selected consolidated financial data as of and for the years ended December 31, 2001, 2002, 2003, 2004 and 2005 and certain operating data.

 

     2001     2002     2003     2004     2005  
    (Dollars in thousands, except per share data)  

Statement of Operations:

         

Revenue

  $ 178,602     $ 250,363     $ 310,825     $ 356,181     $ 387,738  

Network Expenses

    90,298       121,127       148,699       171,292       186,924  

Depreciation and Amortization

    35,103       45,062       48,374       49,851       50,668  

Selling, General and Administrative

    114,898       112,878       126,267       139,231       148,902  

Provision (Recovery) for Doubtful Accounts Related to WorldCom

    —         9,500       (5,867 )     —         —    

Provision (Recovery) for Disputed Receivables

    (7,042 )     —         —         —         —    

Charge Related to Carrier Access Disputes

    —         —         —         —         23,292  
                                       

Loss from Operations

    (54,655 )     (38,204 )     (6,648 )     (4,193 )     (22,048 )

Charges Related to Early Extinguishment of Debt

    —         —         —         (4,416 )     —    

Other Income

    —         —         267       —         202  

Net Interest Expense

    (8,699 )     (7,688 )     (8,159 )     (11,153 )     (16,802 )
                                       

Net Loss

    (63,354 )     (45,892 )     (14,540 )     (19,762 )     (38,648 )

Less: Dividends on Preferred Stock

    12,810       13,596       14,431       15,316       16,256  

         Accretion of Preferred Stock Issuance Cost

    491       521       553       587       623  
                                       

Net Loss Attributable to Common Stockholders

  $ (76,655 )   $ (60,009 )   $ (29,524 )   $ (35,665 )   $ (55,527 )
                                       

Net Loss Attributable to Common Shareholders Per Share-Basic

  $ (2.83 )   $ (2.26 )   $ (1.08 )   $ (1.19 )   $ (1.83 )

Net Loss Attributable to Common Shareholders Per Share-Diluted

  $ (2.83 )   $ (2.26 )   $ (1.08 )   $ (1.19 )   $ (1.83 )

Weighted Average Number of Shares Outstanding-Basic

    27,108       26,546       27,392       29,927       30,399  

Weighted Average Number of Shares Outstanding-Diluted

    27,108       26,546       27,392       29,927       30,399  

Other Financial Data:

         

Cash Capital Expenditures

  $ 40,425     $ 32,029     $ 35,767     $ 33,395     $ 34,954  

Net Cash Flow Provided by (Used in) Operating Activities

    (5,971 )     (5,645 )     55,333       25,219       17,736  

Net Cash Flow Used in Investing Activities

    (40,425 )     (31,809 )     (42,202 )     (35,724 )     (34,638 )

Net Cash Flow Provided by (Used in) Financing Activities

    21,077       (17,333 )     4,280       15,611       (626 )

Operating Data (1):

         

Number of States Served with All Services (including Washington, DC)

    13       14       16       16       17  

Number of Local Switch Locations

    26       26       27       27       27  

Number of Business Class Customers

    6,823       10,290       16,814       22,324       26,225  

Number of Employees

    892       911       1,016       1,065       1,128  

Number of Sales and Sales Support Employees

    365       367       412       460       485  

Balance Sheet Data:

         

Cash and Cash Equivalents

  $ 80,502     $ 25,715     $ 43,126     $ 48,232     $ 30,704  

Working Capital

    59,972       26,620       12,574       32,605       10,889  

Accounts Receivable, Net

    42,972       57,989       48,294       60,745       49,841  

Current Assets

    135,644       96,030       101,622       119,721       89,901  

Property and Equipment, Net

    188,436       178,810       165,793       158,617       144,350  

Total Assets

    333,313       285,314       285,299       298,311       252,352  

Long-Term Debt (including current portion)

    150,000       130,617       125,818       149,288       149,438  

Series A Redeemable Convertible Preferred Stock

    216,155       230,272       245,255       261,158       278,037  

Total Stockholders' Deficiency

  $ (97,325 )   $ (153,991 )   $ (171,161 )   $ (205,304 )   $ (260,014 )

(1) Amounts presented are as of the end of the period.


Section 16 – Additional Information.

We are adding the following subparagraph (h) to this section on page 24:

 

  (h) Our Annual Report on Form 10-K for the year ended December 31, 2005.

We are also revising the address for the SEC’s Public Reference Room on page 24 to read: 100 F Street, N.E., Washington, D.C. 20549.

Section 17 – Forward-Looking Statements.

This section, which begins on page 24, is deleted in its entirety. Any “forward-looking statements,” as defined in the Private Securities Litigation Reform Act of 1995, in the offer are not entitled to the safe-harbor protection under that law.

Letter of Transmittal

In the third paragraph on page 5 of the Instructions to the Letter of Transmittal that accompanies the Offer to Exchange, dated February 23, 2006, we are changing “April 24, 2006” to “April 19, 2006.”