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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
NOVEMBER 18, 1998
MCLEODUSA INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-20763 42-1407240
(STATE OR OTHER (COMMISSION (IRS EMPLOYER
JURISDICTION FILE NUMBER) IDENTIFICATION
OF INCORPORATION) NUMBER)
MCLEODUSA TECHNOLOGY PARK 52406-3177
6400 C STREET, S.W., P.O. BOX 3177,
CEDAR RAPIDS, IA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(319) 364-0000
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INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS
On November 18, 1998, McLeodUSA Incorporated (the "Company") entered into a
Stockholders' Agreement (the "Stockholders' Agreement") with IES Investments
Inc., which owns approximately 9,022,600 shares of the outstanding Class A
Common Stock, par value $.01 per share, of the Company (the "Class A Common
Stock"); Clark E. McLeod, Chairman and Chief Executive Officer of the Company,
and Mary E. McLeod (together, the "McLeods") who together own approximately
9,179,582 shares of the outstanding Class A Common Stock; and Richard A.
Lumpkin, Vice Chairman of the Company, Gail G. Lumpkin and certain other
parties affiliated or related thereto (collectively, the "Lumpkins," and
together with IES and the McLeods, the "Principal Stockholders") who
collectively own approximately 6,166,876 shares of the outstanding Class A
Common Stock. 1/
The Stockholders' Agreement provides that until December 31, 2001 (the
"Expiration Date"), the Principal Stockholders will not offer, sell, contract
to sell, grant any option to purchase or otherwise dispose of, directly or
indirectly, ("Transfer"), any equity securities of the Company, or any other
securities convertible into or exercisable for such equity securities,
beneficially owned by such Principal Stockholder without receiving the prior
written consent of the Board of Directors of the Company, except for certain
permitted transfers as provided under the Stockholders' Agreement. The
Stockholders' Agreement further provides that the Board of Directors shall
determine on a quarterly basis commencing with the quarter ending December 31,
1998 and ending on the Expiration Date, the aggregate number, if any, of
shares of Class A Common Stock (not to exceed in the aggregate 150,000 shares
per quarter) that the Principal Stockholders may Transfer during certain
designated trading periods following the release of the Company's quarterly or
annual financial results.
The Stockholders' Agreement provides that to the extent the Board of
Directors grants registration rights to a Principal Stockholder in connection
with a Transfer of securities of the Company by such Principal Stockholder, it
will grant similar registration rights to the other parties as set forth in
the Stockholders' Agreement. In addition, the Stockholders' Agreement provides
that the Board of Directors shall determine on an annual basis commencing with
the year ending December 31, 1999 and ending on the Expiration Date (each such
year, an "Annual Period"), the aggregate number, if any, of shares of Class A
Common Stock (not to exceed in the aggregate on an annual basis a number of
shares equal to 15% of the total number of shares of Class A Common Stock
beneficially owned by the Principal Stockholders as of December 31, 1998) (the
"Registrable Amount"), to be registered by the Company under the Securities
Act of 1933, as amended (the "Securities Act"), for Transfer by the Principal
Stockholders. The Stockholders' Agreement also provides that in any
underwritten primary offering (other than pursuant to a registration statement
on Form S-4 or Form S-8 or any successor forms thereto or other form which
would not permit the inclusion of shares of Class A Common Stock of the
Principal Stockholders), the Company will give written notice of such offering
to the Principal Stockholders and will undertake to register the shares of
Class A Common Stock of such parties up to the Registrable Amount, if any, as
determined by the Board. The Stockholders' Agreement provides that the Company
may subsequently determine not to register any shares of the Principal
Stockholders under the Securities Act and may either not file a registration
statement or otherwise withdraw or abandon a registration statement previously
filed.
The Stockholders' Agreement terminates on the Expiration Date. In addition,
if during any Annual Period the Company has not provided a Principal
Stockholder a reasonable opportunity to Transfer pursuant to the registration
of securities under the Securities Act or pursuant to certain other provisions
of the Stockholders' Agreement on the terms therein specified an aggregate
number of shares of Class A Common Stock equal to not less than 15% of the
total number of shares of Class A Common Stock beneficially owned by such
Principal Stockholder as of December 31, 1998, then such Principal Stockholder
may terminate the Stockholders' Agreement as applied to such Principal
Stockholder within 10 business days following the end of any such Annual
Period.
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1/ The foregoing share ownership information is as of the date of the
Stockholder's Agreement and does not include options held by the parties
exercisable for Class A Common Stock.
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The Company, the Principal Stockholders and certain other stockholders are
parties to a Stockholders' Agreement entered into as of June 14, 1997, as
amended on September 19, 1997 (the "Original Stockholders' Agreement"). The
Original Stockholders' Agreement provides, among other things, that the
parties thereto will undertake certain actions with respect to the designation
and election of directors to the Company's Board of Directors. The
Stockholders' Agreement also contains provisions relating to the designation
and election of directors to the Company's Board of Directors which provisions
take effect on the terms and under the circumstances specified therein.
Enclosed as Exhibit 99.1 to this Current Report on Form 8-K, and
incorporated by reference herein, is the Stockholders' Agreement.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
99.1 Stockholders' Agreement, entered into as of November 18, 1998, by and
among McLeodUSA Incorporated, IES Investments Inc., Clark E. McLeod, Mary
E. McLeod, Richard A. Lumpkin, Gail G. Lumpkin and certain of the former
shareholders of Consolidated Communications Inc. ("CCI") and certain
permitted transferees of the former CCI shareholders in each case who are
listed in Schedule I thereto.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
McLeodUSA Incorporated
Date: November 18, 1998 By: /s/ J. Lyle Patrick
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Name: J. Lyle Patrick
Title:Group Vice President, Chief
Financial Officer and
Treasurer
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EXHIBIT INDEX
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IN SEQUENTIAL
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99.1 Stockholders' Agreement, entered into as of
November 18, 1998, by and among McLeodUSA
Incorporated, IES Investments Inc., Clark E.
McLeod, Mary E. McLeod, Richard A. Lumpkin, Gail
G. Lumpkin and certain of the former
shareholders of Consolidated Communications Inc.
("CCI") and certain permitted transferees of the
former CCI shareholders in each case who are
listed in Schedule I thereto.
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EXHIBIT 99.1
STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement (this "Agreement") is entered into as of
November 18, 1998, by and among McLeodUSA Incorporated, a Delaware corporation
(the "Company"); IES Investments Inc., an Iowa corporation ("IES"); Clark E.
McLeod ("McLeod"); Mary E. McLeod (together with McLeod, the "McLeods"); and
Richard A. Lumpkin ("Lumpkin") and each of the former shareholders of
Consolidated Communications Inc. ("CCI") and certain permitted transferees of
the former CCI shareholders in each case who are listed in Schedule I hereto
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(the "CCI Shareholders"). IES, the McLeods, Lumpkin and the CCI Shareholders
are referred to herein collectively as the "Principal Stockholders" and
individually as a "Principal Stockholder."
WHEREAS, the Company, the Principal Stockholders and certain other
stockholders are parties to a Stockholders' Agreement entered into as of
June 14, 1997, as amended on September 19, 1997 (the "Original Stockholders'
Agreement");
WHEREAS, Section 3 of the Original Stockholders' Agreement has expired
in accordance with its terms and certain other provisions thereof will expire in
accordance with their terms; and
WHEREAS, the Company and the Principal Stockholders deem it to be in
the best interests of the Company and its stockholders to enter into a new
agreement to continue to provide for the continuity and stability of the
business and policies of the Company on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, for and in consideration of the foregoing and of the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:
1. VOTING AGREEMENT
1.1 BOARD OF DIRECTORS
For the period commencing on the Voting Agreement Effective Date (as
defined in Section 1.2) and ending on the Expiration Date (as defined in Section
1.2), each Principal Stockholder, for so long as such Principal Stockholder
beneficially and continuously owns at least four million (4,000,000) shares of
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Company's Class A common stock, $.01 par value per share (the "Class A Common
Stock"), subject to adjustment pursuant to Section 5.1, shall take or cause to
be taken all such action within their respective power and authority as may be
required:
(a) to establish and maintain the authorized size of the Board of Directors of
the Company (the "Board of Directors" or the "Board") at up to eleven (11)
directors;
(b) to cause to be elected to the Board one (1) director designated by IES, for
so long as IES beneficially and continuously owns at least four million
(4,000,000) shares of the Class A Common Stock (subject to adjustment
pursuant to Section 5.1);
(c) to cause Lumpkin to be elected to the Board, for so long as Lumpkin and the
CCI Shareholders collectively beneficially and continuously own at least
four million (4,000,000) shares of the Class A Common Stock (subject to
adjustment pursuant to Section 5.1);
(d) to cause to be elected to the Board three (3) directors who are executive
officers of the Company designated by McLeod, for so long as the McLeods
collectively beneficially and continuously own at least four million
(4,000,000) shares of the Class A Common Stock (subject to adjustment
pursuant to Section 5.1);
(e) to cause to be elected to the Board a director or directors nominated by
the Board to replace a director or directors designated pursuant to
paragraphs (b) through (d) above upon the earlier to occur of such
designated director's or directors' resignation (and the acceptance of such
resignation by the Board) and the expiration of such director's or
directors' term as a result of any party or parties identified in
paragraphs (b) through (d) above no longer beneficially owning at least
four million (4,000,000) shares of the Class A Common Stock (subject to
adjustment pursuant to Section 5.1) at any time during the period
commencing on the Voting Agreement Effective Date and ending on the
Expiration Date; it being understood that within three (3) business days
following such time as the party or parties identified in paragraphs (b)
through (d) above no longer beneficially and continuously own at least four
million (4,000,000) shares
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of the Class A Common Stock (subject to adjustment pursuant to Section 5.1)
during such period, such party or parties shall use its or their respective
best efforts to cause the director or directors designated by such party or
parties to tender their immediate resignation to the Board which the Board
may accept or reject; and
(f) to cause to be elected to the Board, if and as nominated by the Board, up
to six (6) non-employee directors;
provided, however, notwithstanding any other provision of this Agreement, if
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any Principal Stockholder hereto would not be entitled to have a director
elected to the Board with respect to such Principal Stockholder under the
Original Stockholders' Agreement but would be entitled to have a director
elected to the Board with respect to such Principal Stockholder pursuant to
Section 1.1 of this Agreement except that the Voting Agreement Effective Date
hereunder has not occurred, then this Agreement shall be applied with respect to
the election of the director of such Principal Stockholder as if the Voting
Agreement Effective Date has occurred and each party hereto shall act under this
Agreement to cause the election of the director of such Principal Stockholder.
The parties hereto agree that Section 1.1 and Section 1.2 of the
Original Stockholders' Agreement shall terminate and be of no force or effect
with respect to the rights and obligations of the parties hereto amongst each
other as of the Voting Agreement Effective Date. For purposes of Section 1.1,
Lumpkin and all of the CCI Shareholders shall be deemed to be a single Principal
Stockholder, and a CCI Shareholder shall be deemed to own shares "continuously"
as long as the shares of such CCI Shareholder are owned by such CCI Shareholder
or by a CCI Permitted Transferee (as defined in Section 3.1).
1.2 DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
indicated:
(a) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
(b) A person shall be deemed the "Beneficial Owner" of and shall
be deemed to "beneficially own" any securities:
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(i) which such person or any of such person's Affiliates or
Associates, directly or indirectly, has the right to
acquire (whether such right is exercisable immediately or
only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not
in writing), or upon the exercise of conversion rights,
exchange rights, other rights, warrants or options, or
otherwise;
(ii) which such person or any of such person's Affiliates or
Associates, directly or indirectly, has the right to vote
or dispose of or has "beneficial ownership" of (as
determined pursuant to Rule 13d-3 under the Exchange
Act), including pursuant to any agreement, arrangement or
understanding, whether or not in writing; or
(iii) which are beneficially owned, directly or indirectly,
by any other person (or any Affiliate or Associate
thereof) with which such person or any of such person's
Affiliates or Associates has any agreement, arrangement
or understanding (whether or not in writing), for the
purpose of acquiring, holding, voting or disposing of any
voting securities of the Company.
For purposes of the definition of "Beneficial Owner" and
"beneficially own," the terms "agreement," "arrangement" and
"understanding" shall not include this Agreement or the Original
Stockholders' Agreement.
(c) "Expiration Date" shall mean December 31, 2001.
(d) "Voting Agreement Effective Date" shall mean the date which
falls on the earliest to occur of (i) the termination of the
Original Stockholders' Agreement, (ii) the expiration of Section
1.1 of the Original Stockholders' Agreement in accordance with
its terms and (iii) MWR Investments Inc. ("MWR") no longer being
entitled to have a director designated by MWR elected to the
Board in accordance with the terms and conditions of Section 1.1
of the Original Stockholders' Agreement.
2. STANDSTILL
IES hereby agrees that, prior to the Expiration Date, neither IES nor
any Affiliate of IES will (and IES will not assist or encourage others to),
directly or
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indirectly, acquire or agree, offer, seek or propose to acquire, or
cause to be acquired, ownership (including, but not limited to, beneficial
ownership) of any securities issued by the Company or any of its subsidiaries,
or any rights or options to acquire such ownership (including from a third
party), except (a) to the extent expressly set forth in this Agreement, (b) as
consented prior thereto in writing by the Board of Directors, (c) upon
conversion of any Class B common stock, $.01 par value per share, of the Company
into Class A Common Stock pursuant to the terms thereof, (d) with respect to
transfers of equity securities between or among IES and IES's wholly owned
subsidiaries, parent corporation, or other wholly owned subsidiaries of such
parent corporation, or (e) with respect to the grant, vesting or exercise of
stock options.
3. TRANSFERS OF SECURITIES
3.1 RESTRICTIONS ON TRANSFERS
(a) Except as otherwise provided in this Section 3.1 or Section 3.2,
each Principal Stockholder hereby severally agrees that until the Expiration
Date, such Principal Stockholder will not offer, sell, contract to sell, grant
any option to purchase, or otherwise dispose of, directly or indirectly,
("Transfer"), any equity securities of the Company or any other securities
convertible into or exercisable for such equity securities ("Securities")
beneficially owned by such Principal Stockholder without submitting a written
request to, and receiving the prior written consent of, the Board of Directors,
provided, however, that any CCI Shareholder may transfer Securities to any other
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CCI Shareholder, the spouse of a CCI Shareholder, or a lineal descendant of a
CCI Shareholder (or a trust for the primary benefit of any one or more of a CCI
Shareholder, the spouse of a CCI Shareholder, or a lineal descendant of a CCI
Shareholder or a partnership or limited liability company owned and managed
solely by one or more CCI Shareholders, spouses of CCI Shareholders and lineal
descendants of CCI Shareholders), or, in the case of a CCI Shareholder that is a
trust, to any beneficiary of such trust (or a trust for the primary benefit of
such beneficiary or a partnership or limited liability company owned and managed
solely by one or more CCI Shareholders, spouses of CCI Shareholders and lineal
descendants of CCI Shareholders), in each case provided that (i) such transfer
is done in accordance with the transfer restrictions applicable to such
Securities under federal and state securities laws and (ii) the transferee
agrees to be bound by the terms hereof as a Principal Stockholder with respect
to the shares being transferred pursuant to this Section, and any such transfer
shall not constitute a "Transfer" for purposes of this Agreement (any such CCI
transferee pursuant to this proviso, a "CCI Permitted Transferee"). In the
event that the Board of Directors consents to any Transfer of Securities by a
Principal Stockholder pursuant to the written request of such Principal
Stockholder (a "Transferring Stockholder") and except as otherwise provided in
Section 3.1(b) and Section 3.2, each other Principal Stockholder shall,
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notwithstanding the provisions of this Section 3.1(a), have the right to
Transfer a percentage of the total number of Securities beneficially owned by
such Principal Stockholder equal to the percentage of the total number of
Securities beneficially owned by the Transferring Stockholder that the Board of
Directors has consented may be Transferred by such Transferring Stockholder.
The parties acknowledge that any Transfer pursuant to this Section 3.1(a) to
which the Board of Directors has consented may be in connection with, or as part
of, a private placement by the Company of, or other transaction involving, its
Securities.
(b) In addition to the provisions of Section 3.1(a), commencing for
the quarter ending December 31, 1998 and ending on the Expiration Date, the
Board shall determine prior to the public release of the Company's consolidated
financial results with respect to the end of each financial reporting quarter,
the aggregate number, if any, of shares of Class A Common Stock (not to exceed
in the aggregate one hundred fifty thousand (150,000) shares of Class A Common
Stock per quarter, subject to adjustment pursuant to Section 5.1) that may be
Transferred by the Principal Stockholders (the "Transfer Amount") during the
period commencing on the third (3rd) business day and ending on the twenty-third
(23rd) business day following such public release of the Company's quarterly or
annual financial results or such other trading period designated or permitted by
the Board with respect to the purchase and sale of its Securities (each such
period, a "Transfer Period"). Notwithstanding the provisions of Section 3.1(a),
each Principal Stockholder shall be entitled to Transfer during each Transfer
Period, provided such Transfer is effected in accordance with all applicable
federal and state securities laws, a number of shares of Class A Common Stock
equal to thirty-three and one-third percent (33 1/3%) of the Transfer Amount, if
any, for such Transfer Period (rounding down in the case of any fractional
amount). Any portion of any Principal Stockholder's share of the Transfer
Amount that such Principal Stockholder elects not to transfer during a Transfer
Period shall be reallocated equally among the remaining Principal Stockholders
who intend to Transfer shares of Class A Common Stock during such Transfer
Period, and such remaining Principal Stockholders shall be entitled to Transfer
such additional shares of Class A Common Stock during the Transfer Period,
provided such Transfer is effected in accordance with all applicable federal and
state securities laws. In no event shall any portion of a Transfer Amount that
is not utilized by a Principal Stockholder during a Transfer Period be
reallocated or otherwise credited to any subsequent Transfer Periods. The
parties acknowledge that the Company has determined that the Transfer Amount
that may be Transferred by the Principal Stockholders during the Transfer Period
for the quarter ended September 30, 1998 pursuant to this Section 3.1(b) shall
be an aggregate of one hundred fifty thousand (150,000) shares of Class A Common
Stock.
(c) Commencing for the quarter ending December 31, 1998 and ending on
the Expiration Date, the Company shall give each Principal Stockholder prompt
written notice (in any event no later than fifty (50) days prior to the
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beginning of the applicable Transfer Period) of its determination of any
Transfer Amount. Within seven (7) days of receipt of such notice, any Principal
Stockholder that desires to Transfer shares of Class A Common Stock during such
Transfer Period pursuant to Section 3.1(b) shall provide written notice to the
Company of the number of shares such Principal Stockholder desires to Transfer.
Not later than seven (7) days after receipt of such responses, the Company shall
notify all remaining Principal Stockholders of any Principal Stockholder's
election not to Transfer the total number of shares of Class A Common Stock that
such Principal Stockholder is entitled to Transfer during such Transfer Period.
Any Principal Stockholder that desires to Transfer additional shares of Class A
Common Stock equal to all or part of the remaining Transfer Amount shall notify
the Company within seven (7) days of receipt of the Company's second notice.
The Company shall allocate the remaining Transfer Amount in accordance with the
provisions of Section 3.1(b) and shall notify the appropriate Principal
Stockholders of such allocation no later than ten (10) days prior to the
beginning of the Transfer Period.
(d) For purposes of this Section 3.1, Lumpkin and all of the CCI
Shareholders shall be deemed to be a single Principal Stockholder.
3.2 REGISTRATION RIGHTS
(a) In the event that the Board of Directors consents pursuant to
Section 3.1(a) to a Principal Stockholder's request for a Transfer and in
connection therewith, the Company agrees to register Securities with respect to
such Transfer under the Securities Act of 1933, as amended (the "Securities
Act"), the Company shall grant each other Principal Stockholder the opportunity
(subject to reduction in the event the registered Transfer is underwritten) to
register for Transfer under the Securities Act a percentage of the total number
of Securities beneficially owned by such Principal Stockholder equal to the
percentage of the total number of Securities beneficially owned by the
Transferring Stockholder that such Transferring Stockholder is registering for
Transfer under the Securities Act, on the same terms and conditions as the
Transferring Stockholder (each Principal Stockholder registering, or indicating
a desire to register, any Securities for Transfer under the Securities Act
pursuant to this Section 3.2 being a "Registering Transferor").
(b) To the extent that the Company grants pursuant to Section 3.1(b) a
Principal Stockholder the opportunity to register shares of Class A Common Stock
for Transfer under the Securities Act, the Company shall grant each other
Principal Stockholder the opportunity (subject to reduction in the event the
registered Transfer is underwritten) to register an equal number of shares of
Class A Common Stock for Transfer under the Securities Act on the same terms and
conditions.
(c) In the event the Company proposes to register any shares of Class
A Common Stock under the Securities Act pursuant to an underwritten
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primary offering (other than pursuant to a registration statement on Form S-4 or
Form S-8 or any successor forms thereto or other form which would not permit the
inclusion of the shares of Class A Common Stock of the Principal Stockholders),
the Company, as determined by the Board of Directors, shall give written notice
to all Principal Stockholders of its intention to effect such a registration.
Following any such notice, the Board of Directors shall undertake to determine
the aggregate number, if any, of shares of Class A Common Stock held by the
Principal Stockholders (not to exceed in the aggregate on a per year basis a
number of shares of Class A Common Stock equal to fifteen percent (15%) of the
total number of shares of Class A Common Stock beneficially owned by the
Principal Stockholders as of December 31, 1998, subject to adjustment pursuant
to Section 5.1) to be registered by the Company under the Securities Act (the
"Registrable Amount") for Transfer by the Principal Stockholders in connection
with such offering. If the Board determines to register shares of Class A Common
Stock held by the Principal Stockholders pursuant to this Section 3.2(c), the
Company will promptly give written notice of such determination to all Principal
Stockholders, and thereupon the Company will use commercially reasonable efforts
to effect the registration of that portion of the Registrable Amount that the
Registering Transferors indicate a desire to register. In the event the
Registering Transferors indicate a desire to register a number of shares of
Class A Common Stock that, in the aggregate, exceeds the Registrable Amount, the
number of shares of Class A Common Stock that each Registering Transferor shall
be entitled to register shall be reduced to the extent such number exceeds such
Registering Transferor's pro rata share of the Registrable Amount based upon the
ratio of the total number of Securities beneficially owned by such Registering
Transferor to the total number of Securities beneficially owned by all Principal
Shareholders. To the extent any portion of the Registrable Amount remains
unallocated after such reductions, each Registering Transferor who has indicated
a desire to register additional shares of Class A Common Stock shall be entitled
to register an additional amount of Class A Common Stock equal to such
Registering Transferor's pro rata portion of the remaining Registrable Amount
based upon the ratio of the total number of Securities beneficially owned by
such Registering Transferor to the total number of Securities beneficially owned
by all Registering Transferors who have indicated a desire to register
additional shares of Class A Common Stock. The reallocation procedure described
in the preceding sentence shall be repeated until the entire Registrable Amount
is allocated. All terms, conditions and rights with respect to such registration
(including but not limited to any determination to reduce the Registrable
Amount) shall be determined by the Board, provided that (i) the representations
and warranties of a Principal Stockholder shall be customary taking into
account, among other things, the nature of the offering and such Principal
Stockholder's relationship with the Company, and (ii) the Company shall be
responsible for all expenses with respect to such registration other than
underwriting discounts and commissions allocable to the Class A Common Stock of
the Registering Transferors, which underwriting discounts and commissions shall
be the responsibility of the Registering Transferors.
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(d) In addition to the registration rights granted pursuant to
Sections 3.2(a), (b) and (c), no more frequently than once during each of the
calendar years ending December 31, 1999, 2000 and 2001 (each such year, an
"Annual Period"), and upon either (i) the receipt of a written request of one or
more Principal Stockholders or (ii) a determination by the Board of Directors,
the Board shall undertake to determine the Registrable Amount, if any, for
Transfer by the Principal Stockholders. If the Board determines to register
shares of Class A Common Stock held by the Principal Stockholders pursuant to
this Section 3.2(d), the Company will promptly give written notice of such
determination to all Principal Stockholders, and thereupon the Company will use
commercially reasonable efforts to effect the registration of that portion of
the Registrable Amount that the Registering Transferors indicate a desire to
register. In the event the Registering Transferors indicate a desire to
register a number of shares of Class A Common Stock that, in the aggregate,
exceeds the Registrable Amount, the number of shares of Class A Common Stock
that each Registering Transferor shall be entitled to register shall be reduced
to the extent such number exceeds such Registering Transferor's pro rata share
of the Registrable Amount based upon the ratio of the total number of Securities
beneficially owned by such Registering Transferor to the total number of
Securities beneficially owned by all Principal Stockholders. To the extent any
portion of the Registrable Amount remains unallocated after such reductions,
each Registering Transferor who has indicated a desire to register additional
shares of Class A Common Stock shall be entitled to register an additional
amount of Class A Common Stock equal to such Registering Transferor's pro rata
portion of the remaining Registrable Amount based upon the ratio of the total
number of Securities beneficially owned by such Registering Transferor to the
total number of Securities beneficially owned by all Registering Transferors who
have indicated a desire to register additional shares of Class A Common Stock.
The reallocation procedure described in the preceding sentence shall be repeated
until the entire Registrable Amount is allocated. All terms, conditions and
rights with respect to such registration (including but not limited to any
determination to reduce the Registrable Amount) shall be determined by the
Board, provided that (i) the representations and warranties of a Principal
Stockholder shall be customary taking into account, among other things, the
nature of the offering and such Principal Stockholder's relationship with the
Company, and (ii) the Company shall be responsible for all expenses with respect
to such registration other than underwriting discounts and commissions, which
underwriting discounts and commissions shall be the responsibility of the
Registering Transferors.
(e) If the Board establishes a committee (a "Pricing Committee") to
authorize and approve the price and any other terms of any Transfer of
Securities registered under the Securities Act pursuant to this Section 3.2 in
which Lumpkin or any CCI Shareholder is participating as a Registering
Transferor, the Company will use its best efforts to cause Lumpkin to be
nominated to such Pricing
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Committee. Notwithstanding any other provision of this Agreement, to the extent
the Company has undertaken to register Securities of the Principal Stockholders
pursuant to this Section 3.2, the Company may subsequently determine not to
register such Securities and may either not file a registration statement or
otherwise withdraw or abandon a registration statement previously filed with
respect to the registration of such Securities.
(f) For purposes of this Section 3.2, Lumpkin and all of the CCI
Shareholders shall be deemed to be a single Principal Stockholder.
4. REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF NON-INDIVIDUAL STOCKHOLDERS
Each non-individual Principal Stockholder hereby represents and
warrants, as of the date of this Agreement, to the Company and to each other
Principal Stockholder as follows:
4.1.1 AUTHORIZATION
Such Principal Stockholder has taken all action necessary for it to
enter into this Agreement and to consummate the transactions contemplated
hereby.
4.1.2 BINDING OBLIGATION
This Agreement constitutes a valid and binding obligation of such
Principal Stockholder, enforceable in accordance with its terms, except to the
extent that such enforceability may be limited by bankruptcy, insolvency, and
similar laws affecting the rights and remedies of creditors generally, and by
general principles of equity and public policy; and each document and instrument
to be executed by such Principal Stockholder pursuant hereto, when executed and
delivered in accordance with the provisions hereof, shall be a valid and binding
obligation of such Principal Stockholder, enforceable in accordance with its
terms (with the aforesaid exceptions).
4.2 REPRESENTATIONS AND WARRANTIES OF INDIVIDUAL STOCKHOLDERS
Each Principal Stockholder who is an individual hereby represents and
warrants, as of the date of this Agreement, to the Company and to each other
Principal Stockholder as follows:
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4.2.1 POWER AND AUTHORITY
Such Principal Stockholder has the legal capacity and all other
necessary power and authority necessary to enter into this Agreement and to
consummate the transactions contemplated hereby.
4.2.2 BINDING OBLIGATION
This Agreement constitutes a valid and binding obligation of such
Principal Stockholder, enforceable in accordance with its terms, except to the
extent that such enforceability may be limited by bankruptcy, insolvency, and
similar laws affecting the rights and remedies of creditors generally, and by
general principles of equity and public policy; and each document and instrument
to be executed by such Principal Stockholder pursuant hereto, when executed and
delivered in accordance with the provisions hereof, shall be a valid and binding
obligation of such Principal Stockholder, enforceable in accordance with its
terms (with the aforesaid exceptions).
4.3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants, as of the date of this
Agreement, to each Principal Stockholder as follows:
4.3.1 AUTHORIZATION
The Company has taken all corporate action necessary for it to enter
into this Agreement and to consummate the transactions contemplated hereby.
4.3.2 BINDING OBLIGATION
This Agreement constitutes a valid and binding obligation of the
Company, enforceable in accordance with its terms, except to the extent that
such enforceability may be limited by bankruptcy, insolvency, and similar laws
affecting the rights and remedies of creditors generally, and by general
principles of equity and public policy; and each document and instrument to be
executed by the Company pursuant hereto, when executed and delivered in
accordance with the provisions hereof, shall be a valid and binding obligation
of the Company, enforceable in accordance with its terms (with the aforesaid
exceptions).
5. MISCELLANEOUS
5.1 EFFECT OF CHANGES IN CAPITALIZATION
All share amounts of the Company's capital stock referred to in this
Agreement shall be appropriately and proportionally adjusted for any
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recapitalization, reclassification, stock split-up, combination of shares,
exchange of shares, stock dividend or other distribution payable in capital
stock, or other increase or decrease in such shares effected without receipt of
consideration by the Company, occurring after the date of this Agreement.
5.2 ADDITIONAL ACTIONS AND DOCUMENTS
Each of the parties hereto hereby agrees to take or cause to be taken
such further actions, to execute, deliver and file or cause to be executed,
delivered and filed such further documents and instruments, and to obtain such
consents, as may be necessary or as may be reasonably requested in order to
fully effectuate the purposes, terms and conditions of this Agreement, whether
before, at or after the effective time of this Agreement.
5.3 ENTIRE AGREEMENT; AMENDMENT
This Agreement constitutes the entire agreement among the parties
hereto as of the date hereof with respect to the matters contemplated herein,
except with respect to Sections 1.1, 1.2.1, 1.2.2, 1.2.3 and to the extent
applicable Section 1.2.4 of the Original Stockholders' Agreement which Sections
shall be superseded on the terms contemplated hereby with respect to the rights
and obligations of the parties hereto amongst each other as of the Voting
Agreement Effective Date. No amendment, modification or discharge of this
Agreement shall be valid or binding unless set forth in writing and duly
executed by the party against whom enforcement of the amendment, modification,
or discharge is sought.
5.4 LIMITATION ON BENEFIT
It is the explicit intention of the parties hereto that no person or
entity other than the parties hereto is or shall be entitled to bring any action
to enforce any provision of this Agreement against any of the parties hereto,
and the covenants, undertakings and agreements set forth in this Agreement shall
be solely for the benefit of, and shall be enforceable only by, the parties
hereto or their respective successors, heirs, executors, administrators, legal
representatives and permitted assigns.
5.5 BINDING EFFECT; SPECIFIC PERFORMANCE
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors, heirs, executors,
administrators, legal representatives and permitted assigns. No party shall
assign this Agreement without the written consent of the other parties hereto;
and such consent shall not be unreasonably withheld. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance
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with the terms hereof and that the parties shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at law or in
equity.
5.6 GOVERNING LAW
This Agreement, the rights and obligations of the parties hereto, and
any claims or disputes relating thereto, shall be governed by and construed in
accordance with the laws of Delaware (excluding the choice of law rules
thereof).
5.7 NOTICES
All notices, demands, requests, or other communications which may be
or are required to be given, served, or sent by any party to any other party
pursuant to this Agreement shall be in writing and shall be hand-delivered or
mailed by first-class, registered or certified mail, return receipt requested,
postage prepaid, or transmitted by telegram, telecopy, facsimile transmission or
telex, addressed as follows:
(i) If to the Company or to the McLeods:
McLeodUSA Incorporated
McLeodUSA Technology Park
6400 C Street, SW, P.O. Box 3177
Cedar Rapids, IA 52406-3177
Attention: Randall Rings
Facsimile: (319) 298-7901
(ii) If to IES:
IES Investments Inc.
200 1st Street SE
Cedar Rapids, IA 52401
Attention: James E. Hoffman
Facsimile: (319) 398-4204
(iii) If to Lumpkin or any CCI Shareholder:
P.O. Box 1234
Mattoon, IL 61938
Attention: Richard A. Lumpkin
Facsimile: (217) 234-9934
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<PAGE>
with a copy to :
Schiff Hardin & Waite
6600 Sears Tower
Chicago, Illinois 60606
Attention: David R. Hodgman, Esq.
Facsimile: (312) 258-5600
Each party may designate by notice in writing a new address to which
any notice, demand, request or communication may thereafter be so given, served
or sent. Each notice, demand, request, or communication which shall be hand-
delivered, mailed, transmitted, telecopied or telexed in the manner described
above, or which shall be delivered to a telegraph company, shall be deemed
sufficiently given, served, sent, received or delivered for all purposes at such
time as it is delivered to the addressee (with the return receipt, the delivery
receipt, or the answerback being deemed conclusive, but not exclusive, evidence
of such delivery) or at such time as delivery is refused by the addressee upon
presentation.
5.8 TERMINATION
Notwithstanding any other provision of this Agreement, if during any
Annual Period the Board of Directors has not provided a Principal Stockholder a
reasonable opportunity to Transfer Securities pursuant to Section 3.2 or
consented to the written request of such Principal Stockholder or otherwise
provided such Principal Stockholder a reasonable opportunity to Transfer (other
than a transfer by a CCI Shareholder to a CCI Permitted Transferee) pursuant to
Section 3.1(a) an aggregate number of shares of Class A Common Stock equal to
not less than fifteen percent (15%) of the total number of shares of Class A
Common Stock beneficially owned by such Principal Stockholder as of December 31,
1998, subject to adjustment pursuant to Section 5.1, then such Principal
Stockholder may terminate this Agreement as it applies to such terminating party
by providing written notice of termination to all other parties no later than
ten (10) business days following the end of such Annual Period, such that all
rights and obligations hereunder shall cease, and this Agreement shall be of no
further force or effect, with respect to the terminating party. Unless
otherwise previously terminated by the Principal Stockholders pursuant to this
Section 5.8, this Agreement shall terminate on the Expiration Date. For
purposes of this Section 5.8, Lumpkin and all of the CCI Shareholders shall be
deemed to be a single Principal Stockholder.
5.9 PUBLICITY
Each of the Principal Stockholders will use its reasonable best
efforts to consult with the Company prior to issuing any press release, making
any filing
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with any governmental entity or national securities exchange or making any other
public dissemination of information by such Principal Stockholder within which
this Agreement or the contents hereof are referenced or described.
5.10 APPOINTMENT OF REPRESENTATIVE
Each of the CCI Shareholders hereby appoints Lumpkin, with power of
substitution, as its exclusive agent to act on its behalf with respect to any
and all actions to be taken under or amendments or modifications to be made to
this Agreement (the "Representative"). The Representative shall take, and the
CCI Shareholders agree that the Representative shall take, any and all actions
which the Representative believes are necessary or advisable under this
Agreement for and on behalf of each of the CCI Shareholders, as fully as if each
of the CCI Shareholders were acting on its own behalf, including, without
limitation, dealing with the Company and the other parties hereto with respect
to all matters arising under this Agreement, entering into any amendment or
modification to this Agreement deemed advisable by the Representative and taking
any and all other actions specified in or contemplated by this Agreement. The
Company and the other parties hereto shall have the right to rely upon all
actions taken or not taken by the Representative pursuant to this Agreement, all
of which actions or omissions shall be legally binding upon each of the CCI
Shareholders.
5.11 EXECUTION IN COUNTERPARTS
To facilitate execution, this Agreement may be executed in as many
counterparts as may be required; and it shall not be necessary that the
signatures of, or on behalf of, each party, or that the signatures of all
persons required to bind any party, appear on each counterpart; but it shall be
sufficient that the signature of, or on behalf of, each party, or that the
signatures of the persons required to bind any party, appear on one or more of
the counterparts. All counterparts shall collectively constitute a single
agreement. It shall not be necessary in making proof of this Agreement to
produce or account for more than a number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
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IN WITNESS WHEREOF, the undersigned have duly executed and delivered
this Agreement, or have caused this Agreement to be duly executed and delivered
on their behalf, as of the day and year first hereinabove set forth.
MCLEODUSA INCORPORATED IES INVESTMENTS INC.
By: /s/ J. Lyle Patrick By: /s/ James E. Hoffman
------------------------------- -----------------------------
Name: J. Lyle Patrick Name: James E. Hoffman
Title: Group Vice President, Title: President
Chief Financial Officer
and Treasurer
/s/ Clark E. McLeod /s/ Mary E. McLeod
- ---------------------------------- --------------------------------
Clark E. McLeod Mary E. McLeod
/s/ Richard A. Lumpkin /s/ Gail G. Lumpkin
- ---------------------------------- --------------------------------
Richard A. Lumpkin Gail G. Lumpkin
Margaret Lumpkin Keon Trust Mary Lee Sparks Trust
dated May 13, 1978 dated May 13, 1978
/s/ Margaret Lumpkin Keon /s/ Mary Lee Sparks
- ---------------------------------- --------------------------------
Margaret Lumpkin Keon, as Trustee Mary Lee Sparks, as Trustee
/s/ Steve L. Grissom
--------------------------------
Steven L. Grissom, as Trustee
/s/ Mary Lee Sparks
- ----------------------------------
Mary Lee Sparks
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<TABLE>
<S> <C>
The twelve trusts created under the The twelve trusts created under the
Mary Green Lumpkin Gallo Trust Richard Adamson Lumpkin
Agreement dated December 29, 1989 Grandchildren's Trust dated
one for the benefit of each of: September 5, 1980, one for the benefit
Joseph John Keon III, of each of:
Katherine Stoddert Keon, Joseph John Keon III,
Lisa Anne Keon, Katherine Stoddert Keon,
Margaret Lynley Keon, Lisa Anne Keon,
Pamela Keon Vitale, Margaret Lynley Keon,
Susan Tamara Keon DeWyngaert, Pamela Keon Vitale,
Benjamin Iverson Lumpkin, Susan Tamara Keon DeWyngaert,
Elizabeth Arabella Lumpkin, Benjamin Iverson Lumpkin,
Anne Romayne Sparks, Elizabeth Arabella Lumpkin,
Barbara Lee Sparks, Anne Romayne Sparks,
Christina Louise Sparks, and Barbara Lee Sparks,
John Woodruff Sparks Christina Louise Sparks, and
John Woodruff Sparks
Bank One, Texas, N.A., Trustee Bank One, Texas, N.A., Trustee
/s/ Frank A. Glispin /s/ Frank A. Glispin
- ------------------------------------ ------------------------------------
By: Frank A. Glispin, Vice President By: Frank A. Glispin, Vice President
--------------------------------- ---------------------------------
</TABLE>
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<TABLE>
<S> <C>
The three trusts established by The twelve 1990 Personal Income
Richard Adamson Lumpkin under Trusts established by Margaret L.
Trust Agreement dated February 6, Keon, Mary Lee Sparks, and
1970, one for the benefit of each of: Richard A. Lumpkin, each dated
Richard Anthony Lumpkin, April 20, 1990, one for the benefit of
Margaret Anne Keon, and each of:
Mary Lee Sparks Joseph John Keon III,
Katherine Stoddert Keon,
Lisa Anne Keon,
Bank One, Texas, N.A., Trustee Margaret Lynley Keon,
Pamela Keon Vitale,
/s/ Frank A. Glispin Susan Tamara Keon DeWyngaert,
- -------------------------------------- Benjamin Iverson Lumpkin,
Elizabeth Arabella Lumpkin,
By: Frank A. Glispin, Vice President Anne Romayne Sparks,
----------------------------------- Barbara Lee Sparks,
Christina Louise Sparks, and
John Woodruff Sparks
/s/ David R. Hodgman
---------------------------
David R. Hodgman, Trustee
/s/ Steve L. Grissom
---------------------------
Steven L. Grissom, Trustee
</TABLE>
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SCHEDULE I
Richard A. Lumpkin
Gail G. Lumpkin
Margaret Lumpkin Keon, as Trustee under the Margaret Lumpkin Keon Trust dated
May 13, 1978
Mary Lee Sparks and Steven L. Grissom, as Trustees of the Mary Lee Sparks Trust
dated May 13, 1978
Bank One, Texas, N.A., as Trustee of the twelve trusts created under the Mary
Green Lumpkin Gallo Trust Agreement dated December 29, 1989, one for the benefit
of each of Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne Keon,
Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert, Benjamin
Iverson Lumpkin, Elizabeth Arabella Lumpkin, Anne Romayne Sparks, Barbara Lee
Sparks, Christina Louise Sparks, and John Woodruff Sparks
Bank One, Texas, N.A., as Trustee of the twelve trusts created under the Richard
Adamson Lumpkin Grandchildren's Trust dated September 5, 1980, one for the
benefit of each of Joseph John Keon III, Katherine Stoddert Keon, Lisa Anne
Keon, Margaret Lynley Keon, Pamela Keon Vitale, Susan Tamara Keon DeWyngaert,
Benjamin Iverson Lumpkin, Elizabeth Arabella Lumpkin, Anne Romayne Sparks,
Barbara Lee Sparks, Christina Louise Sparks, and John Woodruff Sparks
Bank One, Texas, N.A., as Trustee of the three trusts established by Richard
Adamson Lumpkin under the Trust Agreement dated February 6, 1970, one for the
benefit of each of Richard Anthony Lumpkin, Margaret Anne Keon, and Mary Lee
Sparks
David R. Hodgman and Steven L. Grissom, as Trustees of the twelve 1990 Personal
Income Trusts established by Margaret L. Keon, Mary Lee Sparks, and Richard A.
Lumpkin, each dated April 20, 1990, one for the benefit of each of Joseph John
Keon III, Katherine Stoddert Keon, Lisa Anne Keon, Margaret Lynley Keon, Pamela
Keon Vitale, Susan Tamara Keon DeWyngaert, Benjamin Iverson Lumpkin, Elizabeth
Arabella Lumpkin, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise
Sparks, and John Woodruff Sparks
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