<PAGE> 1
EXHIBIT 99.1
EXECUTION COPY
VOTING AND OPTION AGREEMENT
dated as of October 2, 2000 (this
"Agreement"), among MCLEODUSA INCORPORATED,
a Delaware corporation ("Parent"), and the
parties listed on Schedule A attached hereto
(each, a "Shareholder" and, collectively,
the "Shareholders").
WHEREAS Parent, Cactus Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Parent ("Sub"), and CapRock Communications Corp., a
Texas corporation (the "Company"), propose to enter into an Agreement and Plan
of Merger dated as of the date hereof (as the same may be amended or
supplemented, the "Merger Agreement"; terms used but not defined herein shall
have the meanings set forth in the Merger Agreement) providing for, among other
things, the merger of Sub with and into the Company upon the terms and subject
to the conditions set forth in the Merger Agreement;
WHEREAS each Shareholder owns (of record or beneficially) the number of
shares of Company Common Stock set forth opposite such Shareholder's name on
Schedule A hereto (such shares, together with any other shares of capital stock
of the Company or other voting securities of the Company acquired (of record or
beneficially) by the Shareholders after the date hereof and during the term of
this Agreement (including through the exercise of any warrants, stock options or
similar instruments), being collectively referred to herein as the "Subject
Shares");
WHEREAS each Shareholder has agreed to grant Parent an irrevocable option
to purchase such Shareholder's Subject Shares; and
WHEREAS as a condition to its willingness to enter into the Merger
Agreement, Parent has required that each Shareholder enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements set forth herein and in the Merger
Agreement, the parties hereto agree as follows:
SECTION 1. Grant of Option. Each Shareholder hereby grants Parent an
irrevocable option (the "Option") to purchase such Shareholder's Subject Shares
on the terms and subject to the conditions set forth below:
(a) Exercise. At any time or from time to time prior to the termination of
the Option granted hereunder in
<PAGE> 2
2
accordance with the terms of this Agreement, Parent (or a wholly owned
subsidiary of Parent designated by Parent) may exercise the Option, in whole or
in part, if on or after the date hereof:
(i) any corporation, partnership, individual, trust, unincorporated
association, or other entity or person (as defined in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) other
than Parent or any of its affiliates (as defined in the Exchange Act) (a
"Third Party"), shall have:
(A) commenced or announced an intention to commence a bona fide
tender offer or exchange offer for any shares of Company Common Stock,
the consummation of which would result in beneficial ownership (as
defined under Rule 13d-3 of the Exchange Act) by such Third Party
(together with all such Third Party's affiliates and associates (as
such term is defined in the Exchange Act)) of 20% or more of the then
voting equity of the Company (either on a primary or a fully diluted
basis);
(B) filed a Notification and Report Form under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), reflecting an intent to acquire the Company or any assets
or securities of the Company; or
(C) solicited proxies in a solicitation subject to the proxy
rules under the Exchange Act, executed any written consent or become a
participant in any solicitation (as such terms are defined in
Regulation 14A under the Exchange Act), in each case with respect to
the Company Common Stock; or
(ii) the events described in Section 7.01(b)(ii) or (e) of the Merger
Agreement or any other event that would require the Company to pay Parent
the Termination Fee set forth in Section 5.08 of the Merger Agreement
occurs (but without the necessity of Parent having terminated the Merger
Agreement) or, upon a material breach by such Shareholder of the covenants
in Section 3 of this Agreement.
Each of the events described in clauses (i) and (ii) hereof shall be
referred to herein as a "Trigger Event." Such Shareholder shall notify Parent
promptly in
<PAGE> 3
3
writing of the occurrence of any Trigger Event; provided, however, such notice
shall not be a condition to the right of Parent to exercise the Option.
(b) Exercise Procedure. In the event Parent wishes to exercise the
Option, Parent shall deliver to such Shareholder a written notice (an "Exercise
Notice") specifying the total number of such Shareholder's Subject Shares it
wishes to purchase. Provided that the conditions set forth in paragraph (g)
hereof to such Shareholder's obligation to sell its Subject Shares to Parent
hereunder have been satisfied or waived, Parent shall, upon delivery of the
Exercise Notice and tender of the applicable aggregate Exercise Price (as
defined below), immediately be deemed to be the holder of record of such Subject
Shares purchasable upon such exercise, notwithstanding that the stock transfer
books of the Company shall then be closed or that certificates representing such
Subject Shares shall not theretofore have been delivered to Parent. Each closing
of a purchase of such Subject Shares (a "Closing") shall occur at a place, on a
date and at a time designated by Parent in an Exercise Notice delivered at least
two (2) business days prior to the date of the Closing.
(c) Termination of the Option. The Option shall terminate upon the
earliest of: (i) the Effective Time of the Merger; (ii) the termination of the
Merger Agreement for reasons other than those described in clause (iii) below;
and (iii) nine (9) months following the termination of the Merger Agreement
pursuant to Section 7.01(b)(ii) or (e) thereof. Notwithstanding the foregoing,
if the Option cannot be exercised by reason of any applicable judgment, decree,
order, law or regulation, the Option shall remain exercisable and shall not
terminate until the earlier of (x) the date on which such impediment shall
become final and not subject to appeal, and (y) 5:00 p.m. New York City Time, on
the tenth (10th) business day after such impediment shall have been removed.
Notwithstanding the termination of the Option, Parent shall be entitled to
purchase the Subject Shares with respect to which Parent had exercised the
Option prior to such termination.
(d) Exercise Price. The purchase price per share of Company Common
Stock purchased pursuant to the Option (the "Exercise Price") shall be (i) an
amount in cash equal to the product of (x) the Exchange Ratio multiplied by (y)
the average closing price of Parent Class A Common Stock for the five (5)
trading days preceding the date the Option is exercised (the "Cash Exercise
Price") or (ii) a number of shares of Parent Class A Common Stock equal to the
Exchange Ratio (the "Stock Exercise Price"); provided, however, that
<PAGE> 4
4
the aggregate Cash Exercise Price paid to such Shareholder when aggregated with
all other cash purchases of Company Common Stock including cash in lieu of
fractional shares by Parent shall be limited to that amount of cash that would
permit any subsequent acquisition of the Company by Parent that occurs to
qualify as a tax free reorganization under the provisions of Section 368(a) of
the Code.
(e) Additional Consideration. Notwithstanding the terms of this Section
1 or any other provision in this Agreement, in the event that (i) Parent
exercises in whole or in part the Option granted in this Agreement and (ii) the
Company thereafter consummates an Alternative Transaction (as defined in Section
4(b) below) within twelve months of the exercise of the Option, Parent shall pay
any Shareholder from whom it purchased Subject Shares in connection with the
exercise of the Option an amount of additional consideration equal to 50% of the
difference between the applicable aggregate Exercise Price previously paid by
Parent to such Shareholder and the aggregate amount received by Parent in the
Alternative Transaction for such Subject Shares. The form of such additional
consideration shall be in the sole discretion of Parent and may be cash,
additional shares of Parent Class A Common Stock or the form of consideration
received by Parent in the Alternative Transaction; provided, however, that
Parent shall not be permitted to pay such additional consideration in the form
of Parent Class A Common Stock if a Material Adverse Change shall have occurred
with respect to Parent.
(f) Pro Rata Exercise. In the event Parent determines to exercise the
Option in whole or in part, Parent hereby covenants and agrees that it will
purchase the aggregate number of shares of Company Common Stock being sought pro
rata from the Shareholders who have entered into this Agreement.
(g) Conditions to Closing. The obligation of such Shareholder to sell
such Shareholder's Subject Shares to Parent hereunder is subject to the
conditions that (i) all waiting periods, if any, under the HSR Act applicable to
the sale of such Subject Shares by Shareholder and the acquisition of such
Subject Shares by Parent hereunder shall have expired or have been terminated;
(ii) all consents, approvals, orders or authorizations of, or registrations,
declarations or filings with, any federal, state or local administrative agency
or commission or other federal, state or local governmental authority or
instrumentality, if any, required in connection with the sale of such Subject
Shares by such Shareholder and the acquisition of such Subject Shares by Parent
hereunder shall
<PAGE> 5
5
have been obtained or made, as the case may be; and (iii) no preliminary or
permanent injunction or other order by any court of competent jurisdiction
prohibiting or otherwise restraining such sale shall be in effect.
(h) Closing. At any Closing,
(i) such Shareholder shall deliver to Parent a certificate or
certificates evidencing such Subject Shares being purchased, duly endorsed
in blank, or with appropriate stock powers, duly executed in blank, in
proper form for transfer, with the signature of such Shareholder thereon
guaranteed, and with all applicable taxes paid or provided for;
(ii) Parent shall deliver to such Shareholder (A) by wire transfer of
immediately available funds to the account or accounts specified in writing
by such Shareholder the aggregate Cash Exercise Price for the Subject
Shares so designated and being purchased for cash, and (B) one or more
certificates representing shares of Parent Class A Common Stock equal to
the aggregate Stock Exercise Price for the Subject Shares so designated and
being purchased by delivery of Parent Class A Common Stock; and
(iii) at which Parent is exercising the Option in part, Parent shall
present and surrender this Agreement to such Shareholder, and such
Shareholder shall deliver to Parent an executed new agreement with the same
terms as this Agreement evidencing the right to purchase the balance of
such Subject Shares purchasable hereunder.
SECTION 2. Representations and Warranties of Each Shareholder. Each
Shareholder hereby represents and warrants to Parent as follows:
(a) Organization; Authority; Execution and Delivery; Enforceability.
Such Shareholder (i) is duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, if applicable, and (ii) has
the requisite corporate, company, partnership or other power and authority to
execute and deliver this Agreement, to consummate the transactions contemplated
hereby and to comply with the terms hereof. The execution and delivery by such
Shareholder, the consummation by such Shareholder of the transactions
contemplated hereby and compliance by such Shareholder with the provisions
hereof have been duly authorized by all necessary corporate, company,
partnership or other action on the part of such Shareholder and no other
corporate, company, partnership or
<PAGE> 6
6
other proceedings on the part of such Shareholder are necessary to authorize
this Agreement, to consummate the transactions contemplated hereby or to comply
with the provisions hereof. This Agreement has been duly executed and delivered
by such Shareholder and constitutes a valid and binding obligation of such
Shareholder and, assuming this Agreement constitutes a valid and binding
obligation of Parent, is enforceable against such Shareholder in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other laws affecting the
rights and remedies of creditors generally and general principles of equity
(whether considered in a proceeding in equity or at law). The execution and
delivery of this Agreement, the consummation of the transactions contemplated
hereby and compliance with the provisions hereof do not and will not conflict
with, or result in any violation or breach of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of, or result
in, termination, cancelation or acceleration of any obligation or to loss of a
material benefit under, or result in the creation of any Lien in or upon any of
the properties or assets of such Shareholder under, or give rise to any
increased, additional, accelerated or guaranteed rights or entitlements under,
any provision of (i) any certificate of incorporation or by-laws, partnership
agreement or limited liability company agreement (or similar organizational
documents) of such Shareholder, (ii) any Contract to which such Shareholder is a
party or any of the properties or assets of such Shareholder is subject or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any (A) statute, law, ordinance, rule or regulation or (B)
judgment, order or decree, in each case, applicable to such Shareholder or its
properties or assets, other than, in the case of clauses (ii) and (iii), any
such conflicts, violations, breaches, defaults, rights, losses, Liens or
entitlements that individually or in the aggregate could not reasonably be
expected to impair in any material respect the ability of any Shareholder to
perform its obligations under this Agreement or prevent or materially impede or
delay the consummation of any of the transactions contemplated by this
Agreement. No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to such Shareholder in connection with the execution and delivery of
this Agreement by such Shareholder, the consummation by such Shareholder of the
transactions contemplated hereby or the compliance by such Shareholder with the
provisions hereof, except for (1) filings under the HSR Act and any other
applicable competition, merger control, antitrust or similar law or
<PAGE> 7
7
regulation, (2) filings with the SEC of such reports under the Exchange Act as
may be required in connection with this Agreement and the transactions
contemplated hereby and (3) such other consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made individually or in the aggregate could not reasonably be
expected to impair in any material respect the ability of such Shareholder to
perform its obligations under this Agreement or prevent or materially impede or
delay the consummation of any of the transactions contemplated hereby.
(b) The Subject Shares. (i) Such Shareholder is the record and
beneficial owner of, and has good and marketable title to, the Subject Shares
set forth opposite its name on Schedule A hereto, free and clear of any Liens
except as set forth on Schedule A. As of the date hereof, other than as set
forth on Schedule A hereto, such Shareholder does not own (of record or
beneficially) any shares of capital stock of the Company, and no Shareholder
owns (of record or beneficially) any options, warrants, rights or other similar
instruments to acquire any capital stock or other voting securities of the
Company. Except as set forth on Schedule A, such Shareholder has the sole right
to Transfer (as defined in Section 4(c)) and direct the voting of the Subject
Shares set forth opposite its name on Schedule A hereto, and none of such
Subject Shares is subject to any voting trust or other agreement, arrangement or
restriction with respect to the Transfer or the voting of such Subject Shares,
except as set forth in Sections 1, 4 and 5 of this Agreement.
(ii) In the event Parent exercises its Option pursuant to Section 1,
upon delivery of the Subject Shares covered thereby and payment of the aggregate
Exercise Price therefor as contemplated in Section 1, Parent will receive good
and valid title to such Subject Shares free and clear of any Liens.
(c) Investment Representations of Each Shareholder. Each Shareholder
represents, warrants, and covenants to Parent as follows:
(i) such Shareholder understands that any issuance of Parent Class A
Common Stock to such Shareholder pursuant to this Agreement (the
"Restricted Securities") is intended to be exempt from registration under
the Securities Act by virtue of Section 4(2) of the Securities Act or
Regulation D promulgated thereunder, and that no registration statement
relating to the issuance of the Restricted Securities has been
<PAGE> 8
8
or will be filed with the SEC or any state securities commission;
(ii) such Shareholder intends to acquire the Restricted Securities
solely for its own account, for investment purposes only and not with a
view to the resale or distribution other than pursuant to an effective
resale registration statement;
(iii) such Shareholder agrees not to sell (other than pursuant to an
effective resale registration statement), transfer, exchange, pledge or
otherwise dispose of, or make any offer or agreement relating to the
Restricted Securities and/or any option, right or other interest with
respect to the Restricted Securities that such Shareholder may acquire,
unless: (A) counsel representing such Shareholder, which counsel is
reasonably satisfactory to Parent and Parent's legal counsel, shall have
advised Parent in a written opinion letter satisfactory to Parent and
Parent's legal counsel, and upon which Parent and Parent's legal counsel
may rely, that no registration under the Securities Act would be required
in connection with the proposed sale, transfer, exchange, pledge or other
disposition, and (B) all transferees (and other subsequent transferees) who
receive the Restricted Securities agree to be bound by the investment and
other restrictions to which such Shareholder was subject;
(iv) such Shareholder is an "accredited investor" as defined in Rule
501 of Regulation D under the Securities Act, has the capacity to protect
such Shareholder's interests in connection with this Agreement, and has
such knowledge and experience in financial, tax and business matters to be
capable of evaluating the merits and risks of an investment in the
Restricted Securities and in protecting such Shareholder's interests in
connection with the investment and, in such Shareholder's judgment, has
obtained sufficient information from Parent to evaluate the merits and
risks of an investment in the Restricted Securities;
(v) such Shareholder acknowledges that (A) it has conducted its own
investigation and review of the business and affairs of Parent, (B) it has
not relied on any representations or warranties of Parent concerning the
business and affairs of Parent or an investment in the Subject Shares, (C)
it has had the opportunity to ask questions of and receive information
<PAGE> 9
9
and answers from Parent concerning the terms and conditions of this
Agreement, the Restricted Securities and other matters pertaining to an
investment in the Restricted Securities, and (D) it has been given the
opportunity to verify the information provided to it in order for such
Shareholder to evaluate the merits and risks of an investment in the
Restricted Securities, and all such questions have been answered and all
such information has been provided to the full satisfaction of such
Shareholder;
(vi) such Shareholder further acknowledges, represents, agrees and is
aware that the representations, warranties, agreements, undertakings and
acknowledgments made by such Shareholder in this Agreement are made with
the intent that they be relied upon by Parent in determining the
suitability of such Shareholder as an investor in the Restricted
Securities; and
(vii) such Shareholder undertakes to notify Parent immediately of any
change in any representation, warranty or other information relating to
such Shareholder set forth herein.
SECTION 3. Representations and Warranties of Parent. Parent hereby
represents and warrants to each Shareholder as follows:
(a) Organization; Authority; Execution and Delivery; Enforceability.
Parent (i) is duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation and (ii) has all requisite corporate
power and authority to execute and deliver this Agreement, to consummate the
transactions contemplated hereby and to comply with the terms hereof. The
execution and delivery of this Agreement by Parent, the consummation by Parent
of the transactions contemplated hereby and compliance by Parent with the
provisions hereof have been duly authorized by all necessary corporate action on
the part of Parent and no other corporate proceedings on the part of Parent are
necessary to authorize this Agreement, to consummate the transactions
contemplated hereby or to comply with the provisions hereof. This Agreement has
been duly executed and delivered by Parent and, assuming due execution by each
Shareholder, constitutes a valid and binding obligation of Parent enforceable
against Parent in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other laws affecting the rights and remedies of creditors
generally and general
<PAGE> 10
10
principles of equity (whether considered in a proceeding in equity or at law).
The execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby and compliance with the provisions hereof do
not and will not conflict with, or result in any violation or breach of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of, or result in, termination, cancelation or acceleration of any
obligation or to loss of a material benefit under, or result in the creation of
any Lien in or upon any of the properties or assets of Parent under, or give
rise to any increased, additional, accelerated or guaranteed rights or
entitlements under, any provision of (i) the Amended and Restated Certificate of
Incorporation or Amended and Restated By-laws of Parent, (ii) any Contract to
which Parent is a party or any of its properties or assets is subject or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any (A) statute, law, ordinance, rule or regulation or (B)
judgment, order or decree, in each case, applicable to Parent or its properties
or assets, other than, in the case of clauses (ii) and (iii), any such
conflicts, violations, breaches, defaults, rights, losses, Liens or entitlements
that individually or in the aggregate could not reasonably be expected to impair
in any material respect the ability of Parent to perform its obligations under
this Agreement or prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Parent in connection with the execution
and delivery of this Agreement by Parent, the consummation by Parent of the
transactions contemplated hereby or compliance by Parent with the provisions
hereof, except for (1) filings under the HSR Act and any other applicable
competition, merger control, antitrust or similar law or regulation, (2) filings
with the SEC of such reports under the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated hereby and (3)
such other consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made
individually or in the aggregate could not reasonably be expected to impair in
any material respect the ability of Parent to perform its obligations under this
Agreement or prevent or materially delay the consummation of any of the
transactions contemplated hereby.
<PAGE> 11
11
(b) Investment Representations of Parent. Parent represents, warrants,
and covenants to the Shareholder as follows (except as contemplated by this
Agreement and the Merger Agreement and the transactions contemplated thereby):
(i) Parent does not now have, and as of any Closing will not have, any
present plan or intention to sell, transfer, exchange, pledge or otherwise
dispose of, or to effect any other transaction which would result in a
reduction in the risk of ownership of, the Subject Shares;
(ii) Parent understands that any sale of the Subject Shares hereunder
is intended to be exempt from registration, and that no registration
statement relating to the sale of the Subject Shares in connection with
this Agreement has been or will be filed with the SEC or any state
securities commission;
(iii) Parent intends to acquire the Subject Shares solely for its own
account, for investment purposes only and not with a view to the resale or
distribution thereof;
(iv) Parent agrees not to sell, transfer, exchange, pledge or
otherwise dispose of, or make any offer or agreement relating to the
Subject Shares and/or any option, right or other interest with respect to
the Subject Shares that Parent may acquire, unless: (A) counsel
representing Parent, which counsel is reasonably satisfactory to the
Company and the Company's legal counsel, shall have advised the Company in
a written opinion letter satisfactory to the Company and the Company's
legal counsel, and upon which the Company and the Company's legal counsel
may rely, that no registration under the Securities Act would be required
in connection with the proposed sale, transfer, exchange, pledge or other
disposition, and (B) all transferees (and other subsequent transferees) who
receive the Subject Shares agree to be bound by the investment and other
restrictions to which Parent was subject;
(v) Parent is an "accredited investor" as defined in Rule 501 of
Regulation D under the Securities Act, has the capacity to protect such
Parent's interests in connection with this Agreement, and has such
knowledge and experience in financial, tax and business matters to be
capable of evaluating the merits and risks of an investment in the Subject
Shares and in protecting Parent's interests in connection with the
investment
<PAGE> 12
12
and, in Parent's judgment, has obtained sufficient information from the
Company to evaluate the merits and risks of an investment in the Subject
Shares;
(vi) Parent acknowledges that (A) it has conducted its own
investigation and review of the business and affairs of the Company, (B) it
has not relied on any representations or warranties of the Company
concerning the business and affairs of the Company or an investment in the
Subject Shares, (C) it has had the opportunity to ask questions of and
receive information and answers from the Company concerning the terms and
conditions of this Agreement, the Subject Shares and other matters
pertaining to an investment in the Subject Shares, and (D) it has been
given the opportunity to verify the information provided to it in order for
Parent to evaluate the merits and risks of an investment in the Subject
Shares, and all such questions have been answered and all such information
has been provided to the full satisfaction of Parent;
(vii) Parent further acknowledges, represents, agrees and is aware
that the representations, warranties, agreements, undertakings and
acknowledgments made by Parent in this Agreement are made with the intent
that they be relied upon by such Shareholder and the Company in determining
the suitability of Parent as an investor in the Subject Shares; and
(viii) Parent undertakes to notify the Company immediately of any
change in any representation, warranty or other information relating to
Parent set forth herein.
SECTION 4. Covenants of Each Shareholder. Each Shareholder covenants
and agrees as follows:
(a) At any meeting of the shareholders of the Company called to vote
upon the Merger Agreement, the Merger or any of the other transactions
contemplated by the Merger Agreement, or at any adjournment or postponement
thereof, or in any other circumstances upon which a vote, consent, adoption or
other approval (including by written consent solicitation) with respect to the
Merger Agreement, the Merger or any of the other transactions contemplated by
the Merger Agreement is sought, such Shareholder shall vote (or cause to be
voted) all the Subject Shares of such Shareholder (owned of record or
beneficially) in favor of, and shall consent in writing to (or cause to be
consented in writing to), the approval of the Merger Agreement and the
<PAGE> 13
13
terms thereof and of the Merger and each of the other transactions contemplated
by the Merger Agreement.
(b) At any meeting of the shareholders of the Company, or at any
adjournment or postponement thereof, or in any other circumstances upon which a
vote, consent, adoption or other approval (including by written consent
solicitation) is sought, such Shareholder shall vote (or cause to be voted) all
the Subject Shares of such Shareholder (owned of record or beneficially)
against, and shall not consent in writing to (and shall cause not to be
consented in writing to), any of the following (or any agreement to enter into,
effect, facilitate or support any of the following): (i) any Company Takeover
Proposal or transaction or occurrence that if proposed and offered to the
Company or its shareholders (or any of them) would constitute a Company Takeover
Proposal (collectively, "Alternative Transactions") or (ii) any amendment of the
Company's Articles of Incorporation or By-laws or other proposal, action or
transaction involving the Company or any of its Subsidiaries or any of its
shareholders, which amendment or other proposal, action or transaction could
reasonably be expected to prevent or materially impede or delay the consummation
of the Merger or the other transactions contemplated by the Merger Agreement or
the consummation of the transactions contemplated by this Agreement or to
deprive Parent of any material portion of the benefits anticipated by Parent to
be received from the consummation of the Merger or the other transactions
contemplated by the Merger Agreement or this Agreement, or change in any manner
the voting rights of the Company Common Stock (collectively, "Frustrating
Transactions").
(c) Other than pursuant to this Agreement, such Shareholder shall not
(i) sell, transfer, pledge, assign or otherwise dispose of (including by gift)
(collectively, "Transfer"), or consent to or permit any Transfer of, any Subject
Shares of such Shareholder or any interest therein, or enter into any Contract,
option or other arrangement (including any profit sharing arrangement) with
respect to the Transfer of, or the creation or offer of any derivative security
in respect of, any Subject Shares of such Shareholder, to or with any person or
(ii) enter into any voting arrangement, whether by proxy, voting agreement or
otherwise, with respect to any Subject Shares of such Shareholder, and shall not
commit or agree to take any of the foregoing actions. Such Shareholder shall
not, nor shall such Shareholder permit any entity under such Shareholder's
control to, deposit any Subject Shares of such Shareholder in a voting trust.
<PAGE> 14
14
(d) Such Shareholder shall not, nor shall such Shareholder permit any
of its Subsidiaries to, nor shall it authorize or permit any director, officer,
employee or partner of such Shareholder or any of its Subsidiaries or any
Representative of such Shareholder or any of its Subsidiaries to, directly or
indirectly, (i) solicit, initiate or encourage, or take any other action
designed to facilitate, any Alternative Transaction or Frustrating Transaction,
(ii) enter into any agreement with respect to any Alternative Transaction or
Frustrating Transaction or (iii) except to the extent the Company shall have
previously done so in accordance with Section 4.02(a) of the Merger Agreement,
enter into, continue or otherwise participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or
otherwise cooperate in any way with, or assist or participate in any effort or
attempt by any person with respect to, any Alternative Transaction or
Frustrating Transaction.
(e) Such Shareholder shall use its commercially reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, and to
assist and cooperate with the other parties in doing all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the transactions contemplated by this Agreement and the
Merger Agreement. Such Shareholder shall not commit or agree to take any action
inconsistent with the transactions contemplated by this Agreement or the
transactions contemplated by the Merger Agreement.
(f) Such Shareholder shall not, nor shall such Shareholder permit any
of its Subsidiaries to, nor shall it authorize or permit any director, officer,
employee or partner of such Shareholder or any of its Subsidiaries or any
Representative of such Shareholder or any of its Subsidiaries to, directly or
indirectly, issue any press release or make any other public statement with
respect to the Merger Agreement, this Agreement, the voting agreement dated the
date hereof among Parent and certain shareholders of the Company (the "Voting
Agreement"), the Merger or any of the other transactions contemplated by the
Merger Agreement, the Voting Agreement or this Agreement, without the prior
written consent of Parent, except as may be required by applicable law.
(g) Notwithstanding anything to the contrary contained herein, nothing
in this Section 4 shall prohibit any Shareholder from, in his capacity as an
officer and/or director of the Company, taking any actions, on behalf of
<PAGE> 15
15
the Company, that the Company is permitted to take under Section 4.02 of the
Merger Agreement.
SECTION 5. Grant of Proxy; Appointment of Proxy. (a) Each Shareholder
hereby agrees to, promptly upon Parent's request, grant to, and appoint, Parent
and persons designated by the board of directors of Parent, in their respective
capacities as designees of Parent, and any individual who shall hereafter
succeed to any office of Parent held by such individual, and each of them
individually, such Shareholder's proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of such Shareholder, to vote
all such Shareholder's Subject Shares (owned of record or beneficially), or
grant a consent or approval in respect of such Subject Shares, (i) in favor of
the approval of the Merger Agreement and the terms thereof and of the Merger and
each of the other transactions contemplated by the Merger Agreement and (ii)
against any Alternative Transaction or any Frustrating Transaction.
(b) Each Shareholder represents that any proxies heretofore given in
respect of such Shareholder's Subject Shares are not irrevocable, and that all
such proxies are hereby revoked.
(c) Each Shareholder hereby affirms that the agreement to grant a
proxy set forth in this Section 5 is given in connection with the execution of
the Merger Agreement and that such agreement is given to secure the performance
of the duties of such Shareholder under this Agreement. Each Shareholder hereby
further affirms that any such proxy will be coupled with an interest and may
under no circumstances be revoked unless and until this Agreement is terminated
in accordance with Section 9 of this Agreement. Each Shareholder hereby ratifies
and confirms all that such proxy may lawfully do or cause to be done by virtue
hereof. Each such proxy shall be executed in accordance with the provisions of
Article 2.29 of the TBCA.
SECTION 6. Further Assurances. Each Shareholder shall from time to
time execute and deliver, or cause to be executed and delivered, such additional
or further consents, documents and other instruments as Parent may request for
the purpose of effectuating the matters covered by this Agreement, including the
grant of proxies set forth in Section 5.
SECTION 7. Certain Events. (a) Each Shareholder agrees that this
Agreement and the obligations hereunder shall attach to such Shareholder's
Subject Shares and shall
<PAGE> 16
16
be binding upon any person or entity to which legal or beneficial ownership of
such Subject Shares shall pass, whether by operation of law or otherwise,
including such Shareholder's heirs, guardians, administrators or successors, and
such Shareholder further agrees to take all actions necessary to effectuate the
foregoing. Each Shareholder agrees that each certificate representing the
Subject Shares of such Shareholder shall be inscribed with the legend required
by Section 7(b). In the event of any stock split, stock dividend,
reclassification, merger, reorganization, recapitalization or other change in
the capital structure of the Company affecting the capital stock of the Company,
the number of Subject Shares listed on Schedule A hereto opposite the name of
each Shareholder shall be adjusted appropriately. In the event of any change in
the Company Common Stock or Parent Class A Common Stock by reason of stock
dividends, stock splits, mergers (other than the Mergers), recapitalizations,
combinations, exchange of shares or the like, the type and number of shares or
securities subject to the Option, and the purchase price per share provided in
Section 1(d) hereof, shall be adjusted appropriately, and proper provision shall
be made in the agreements governing such transaction so that Parent shall
receive, upon exercise of the Option, the number and class of shares or other
securities or property that Parent would have received in respect of the Company
Common Stock if the Option had been exercised immediately prior to such event or
the record date therefor, as applicable. In addition, in the event of any other
acquisition of additional shares of capital stock of the Company or other voting
securities of the Company by any Shareholder (including through the exercise of
any warrants, stock options or similar instruments), the number of Subject
Shares listed on Schedule A hereto opposite the name of such Shareholder shall
be adjusted appropriately. This Agreement and the representations, warranties,
covenants, agreements and obligations hereunder shall attach to any additional
shares of capital stock of the Company or other voting securities of the Company
issued to or acquired by any Shareholder directly or indirectly (including
through the exercise of any warrants, stock options or similar instruments).
(b) Each Shareholder shall cause the certificated Subject Shares held
by him to have a legend placed conspicuously on such certificate to the
following effect:
The shares of common stock evidenced by this certificate are subject to a
Voting and Option Agreement dated October 2, 2000, entered into by the
record owner of such shares and McLeodUSA Incorporated.
<PAGE> 17
17
For all uncertificated Subject Shares, each Shareholder shall request that the
Company send notice of such voting agreement as required by Article 2.19(D) of
the TBCA. Each Shareholder shall cause a counterpart of this Agreement to be
deposited with the Company at its principal place of business or registered
office where it shall be subject to the same right of examination by a
shareholder of the Company, in person or by agent or attorney, as are the books
and records of the Company.
SECTION 8. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise, by any of the parties hereto without the
prior written consent of the other parties hereto, except that Parent may
assign, in its sole discretion, any of or all its rights, interests and
obligations under this Agreement to any of its direct or indirect wholly owned
Subsidiaries, provided that no such assignment shall relieve Parent of any of
its obligations under this Agreement. Any purported assignment in violation of
this Section 8 shall be void. Subject to the preceding sentences of this Section
8, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by, the parties hereto and their respective successors and assigns.
SECTION 9. Termination. Except as set forth below, this Agreement
shall terminate at the time when the Option would otherwise expire under Section
1(c); provided, however, that the provisions of Sections 4(a), 4(b), 4(d), 4(e)
and 5 shall terminate upon the earliest of (i) the Effective Time and (ii) the
termination of the Merger Agreement in accordance with its terms. In the event
of the termination of this Agreement pursuant to this Section 9, except as set
forth herein, this Agreement shall forthwith become null and void, there shall
be no liability on the part of any of the parties, and except as set forth in
this Section 9 all rights and obligations of each party hereto shall cease;
provided, however, that no such termination of this Agreement shall relieve any
party hereto from any liability for any willful and material breach of any
provision of this Agreement prior to termination.
SECTION 10. General Provisions. (a) Amendments. This Agreement may not
be amended except by an instrument in writing signed by all of the parties
hereto.
(b) Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered person ally, telecopied (with confirmation) or sent by
overnight or
<PAGE> 18
18
same-day courier (providing proof of delivery) to Parent in accordance with
Section 8.02 of the Merger Agreement and to the Shareholders at their respective
addresses set forth on Schedule A hereto (or at such other address for a party
as shall be specified by like notice).
(c) Interpretation. When a reference is made in this Agreement to a
Section or a Schedule, such reference shall be to a Section of, or a Schedule
to, this Agreement unless otherwise indicated. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. The term "or" is not exclusive. The definitions contained in this
Agreement are applicable to the singular as well as the plural forms of such
terms. Any agreement or instrument defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement or
instrument as from time to time amended, modified or supplemented. References to
a person are also to its permitted successors and assigns.
(d) Counterparts; Effectiveness. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to the other party. The
effectiveness of this Agreement shall be conditioned upon the execution and
delivery of the Merger Agreement by each of the parties thereto.
(e) Entire Agreement; No Third-Party Beneficiaries. This Agreement
and the Merger Agreement (including the documents and instruments referred to
herein) (i) constitute the entire agreement and supersede all prior agreements
and understandings, both written and oral, among the parties hereto with respect
to the subject matter of this Agreement and (ii) are not intended to confer upon
any person other than the parties hereto (and the persons specified as proxies
in Section 5) any rights or remedies.
(f) Governing Law. This agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without regard to its
principles of conflicts of laws (except to the extent that the provisions
<PAGE> 19
19
of the TBCA shall be mandatorily applicable to this Agreement).
(g) Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner and to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 11. Enforcement. The parties agree that irreparable damage
would occur and that the parties will not have any adequate remedy at law in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in any Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (i) consents to submit itself to the
personal jurisdiction of any court of the United States located in the State of
Delaware or of any Delaware state court in the event any dispute arises out of
this Agreement or the transactions contemplated by this Agreement, (ii) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court, (iii) agrees that it will not
bring any action relating to this Agreement or the transactions contemplated by
this Agreement in any court other than a court of the United States located in
the State of Delaware or a Delaware state court and (iv) waives any right to
trial by jury with respect to any claim or proceeding related to or arising out
of this Agreement or any transaction contemplated by this Agreement.
SECTION 12. Agent for Service of Process. Each Shareholder hereby
appoints the Company, with offices on the date hereof as provided for in Section
8.02 of the Merger Agreement, as its authorized agent (the "Authorized Agent"),
upon whom process may be served in any suit, action or proceeding arising out of
or relating to this Agreement or any transaction contemplated by this Agreement
that may be
<PAGE> 20
20
instituted in any court described in Section 11. Each Shareholder agrees to take
any and all action, including the filing of any and all documents, that may be
necessary to establish and continue such appointment in full force and effect as
aforesaid. Each Shareholder agrees that service of process upon the Authorized
Agent shall be, in every respect, effective service of process upon such
Shareholder.
SECTION 13. Shareholder Capacity. No person executing this Agreement
who is or becomes during the term hereof a director or officer of the Company
makes any agreement or understanding herein in his or her capacity as such
director or officer. Each Shareholder signs solely in his or her capacity as the
record holder and beneficial owner of, or the trustee of a trust whose
beneficiaries are the beneficial owners of, such Shareholder's Subject Shares
and nothing herein shall limit or affect any actions taken by a Shareholder in
its capacity as an officer or director of the Company to the extent specifically
permitted by the Merger Agreement.
<PAGE> 21
IN WITNESS WHEREOF, Parent has caused this Agreement to be signed by
its officer thereunto duly authorized and each Shareholder has caused this
Agreement to be signed by its officer thereunto duly authorized, all as of
the date first written above.
MCLEODUSA INCORPORATED,
by /s/ BLAKE O. FISHER, JR.
-----------------------------------
Name: Blake O. Fisher, Jr.
Title: Group Vice President and
Chief Planning and
Development Officer
<PAGE> 22
SHAREHOLDERS:
/s/ JERE W. THOMPSON
----------------------------------------
Jere W. Thompson
WILLIAMSBURG CORPORATION,
by: /s/ JERE W. THOMPSON
-------------------------------------
Name: Jere W. Thompson
---------------------------------
Title: President
---------------------------------
/s/ MARGARET D. THOMPSON
----------------------------------------
Margaret D. Thompson
/s/ JERE W. THOMPSON
----------------------------------------
Jere W. Thompson, Jr.
GREENWAY HOLDINGS, LTD.,
by: /s/ JERE W. THOMPSON, JR.
------------------------------------
Name: Jere W. Thompson, Jr.
----------------------------------
Title: President
----------------------------------
CAPROCK SYSTEMS INC.,
by: /s/ JERE W. THOMPSON, JR.
------------------------------------
Name: Jere W. Thompson, Jr.
----------------------------------
Title: President
----------------------------------
<PAGE> 23
SHAREHOLDERS:
/s/ MARK LANGDALE
---------------------------------------
Mark Langdale
/s/ MARK LANGDALE
---------------------------------------
Mark Langdale, as trustee for
Mark Langdale 1999 Trust
u/a/d April 12, 1999
/s/ MARK LANGDALE
---------------------------------------
Mark Langdale, as trustee for
Patricia Langdale 1999 Trust
u/a/d April 12, 1999
<PAGE> 24
SHAREHOLDERS:
CAPROCK INVESTORS,
by: /s/ JERE W. THOMPSON, JR.
------------------------------------
Jere W. Thompson, Jr.
Managing Joint Venturer
<PAGE> 25
SHAREHOLDERS:
/s/ TIMOTHY W. ROGERS
---------------------------------------
Timothy W. Rogers
<PAGE> 26
SCHEDULE A
<TABLE>
<CAPTION>
Name and Address of Number of Subject Shares
Shareholder Owned of Record
------------------- -------------------------
<S> <C>
Jere W. Thompson 1,167,705
Two Turtle Creek Village
3838 Oaklawn Avenue
Suite 1850
Dallas, TX 75219
Williamsburg Corporation 1,032,403
Two Turtle Creek Village
3838 Oaklawn Avenue
Suite 1850
Dallas, TX 75219
Margaret Thompson 234,077
Two Turtle Creek Village
3838 Oaklawn Avenue
Suite 1850
Dallas, TX 75219
Jere W. Thompson, Jr. 3,263,962(1)
15601 Dallas Parkway
Suite 700
Dallas, TX 75001
Greenway Holdings, Ltd. 2,014,082
15601 Dallas Parkway
Suite 700
Dallas, TX 75001
CapRock Systems Inc. 108,932
15601 Dallas Parkway
Suite 700
Dallas, TX 75001
Mark Langdale 1,607,000
5950 Berkshire
Suite 990
Dallas, TX 75225
</TABLE>
-----------
(1) Includes 2,246,181 shares not subject to the Option which are
beneficially owned by Mr. Thompson pursuant to a voting agreement, dated the
date hereof, among Jere W. Thompson, Jr., Ignatius W. Leonards, John P.
Thompson, The Hayden Company, Joe C. Thompson, Jr., The Florida Company, Patrick
J. Thompson and David E. Thompson.
<PAGE> 27
2
<TABLE>
<S> <C>
Mark Langdale Trust 628,064
5950 Berkshire
Suite 990
Dallas, TX 75225
Patricia Langdale Trust 628,064
5950 Berkshire
Suite 990
Dallas, TX 75225
CapRock Investors 4,320,981
15601 Dallas Parkway
Suite 700
Dallas, TX 75001
Timothy W. Rogers 2,264,640
15601 Dallas Parkway
Suite 7000
Dallas, TX 75001
Total -----------
17,269,910
</TABLE>
