Proposed Transaction

On January 31, 2001, Parent filed for reorganization relief under Chapter 11 of Title 11 of the United States Code. McLeod has not filed for bankruptcy, and is not part of Parent's bankruptcy proceeding. McLeod expects to continue to operate without interruption.

Pursuant to the transaction, FL-VII and FLDE-VIII will acquire approximately 23% of Parent's common stock, and five-year warrants to purchase an additional 6% of Parent's common stock at a specified price. In addition, FL-V, FLDE-VI, and FLDE-VII's existing preferred stock will be converted to approximately 35% of Parent's common stock. As a result, FL-V, FL-VII, FLDE-VI, FLDE-VII, and FLDE-VIII will collectively own approximately 57% of Parent's common stock. Therefore, FL-V, FL-VII, FLDE-VI, FLDE-VII, and FLDE-VIII will collectively own a controlling interest in Parent and McLeod.

The applicants represent that the transaction will improve Parent's financial structure. This will, in turn, improve McLeod's access to capital from Parent.

The applicants represent that the transaction will be transparent to customers. There will be no change in the name or management of McLeod. Customers will continue to receive service under the same rates, terms, and conditions after the transaction is approved.