<PAGE>
As filed with the Securities and Exchange Commission on October 20, 1999
Registration No. 333-_________
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
McLEODUSA INCORPORATED
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 42-1407240
-------- ----------
(State or other jurisdiction (I.R.S. employer identification no.)
of incorporation or organization)
McLeodUSA Technology Park
6400 C Street, SW, P.O. Box 3177
Cedar Rapids, Iowa 52406-3177
-----------------------------
(Address of principal executive offices)
McLeodUSA Incorporated
Second Amended and Restated Directors Stock Option Plan
-------------------------------------------------------
(Full title of the plan)
Clark E. McLeod
Chairman and Chief Executive Officer
McLeodUSA Incorporated
McLeodUSA Technology Park
6400 C Street, SW, P.O. Box 3177
Cedar Rapids, Iowa 52406-3177
(319) 364-0000
- -------------------------------------------------------------------------------
(Name, address and telephone number, including area code, of agent for service)
Copy to:
Joseph G. Connolly, Jr., Esq.
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
(202) 637-5600
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==========================================================================================================
Proposed Proposed
Title of securities Amount to be maximum offering maximum aggregate Amount of
to be registered registered price per share (1) offering price (1) registration fee (1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common
Stock, par value $.01 1,100,000 $ 39.375 $ 43,312,500 $ 12,041
==========================================================================================================
</TABLE>
(1) Estimated pursuant to Rule 457(c) and (h) solely for purposes of
calculating the amount of the registration fee, based on the average of the high
and low prices per share of McLeodUSA Incorporated Class A Common Stock, par
value $.01 per share, on October 12, 1999, as reported on the Nasdaq National
Market.
This Registration Statement incorporates by reference the information contained
in the registration statement on Form S-8 filed by the Registrant with the
Securities and Exchange Commission on July 9, 1996 (Registration No. 333-07809)
relating to, among other plans, the McLeod, Inc. Directors Stock Option Plan, as
amended and restated.
<PAGE>
EXPLANATORY NOTE
As permitted by General Instruction E to the Form S-8, this Registration
Statement incorporates by reference the information contained in the
registration statement on Form S-8 filed by McLeodUSA Incorporated (the
"Company") with the Securities and Exchange Commission on July 9, 1996
(Registration No. 333-07809) relating to, among other plans, the McLeod, Inc.
Directors Stock Option Plan, as amended and restated (the "Directors Plan"),
which was incorporated by reference into that registration statement as Exhibit
4.9.
On December 19, 1997, in order to reflect the Company's name change from
McLeod, Inc. to McLeodUSA Incorporated pursuant to the Company's Amended and
Restated Certificate of Incorporation, the Board of Directors of the Company
(the "Board") amended the Directors Plan to change its title to "McLeodUSA
Incorporated Directors Stock Option Plan" (referred to herein as the "Amended
Directors Plan").
The Company announced on June 30, 1999 that the Board had declared a two-
for-one stock split to be effected in the form of a stock dividend. The record
date for the stock split was July 12, 1999. Stockholders of record at the market
close on that date received one additional share of Class A common stock, par
value $.01 per share (the "Class A Common Stock"), for each share of Class A
Common Stock held. Distribution of the additional shares took place on July 26,
1999. In connection with this stock dividend, the Company made a proportionate
adjustment to the number and exercise price of the options outstanding on July
26, 1999.
On March 25, 1999, the Board approved, subject to stockholder approval at
the Company's 1999 annual meeting of stockholders, certain amendments to the
Amended Directors Plan and renamed the plan the McLeodUSA Incorporated Second
Amended and Restated Directors Stock Option Plan (the "Second Directors Plan").
The Second Directors Plan, among other things,
(i) increased the number of shares of the Company's Class A Common Stock
reserved for purchase pursuant to options grants to an aggregate of
2,200,000 shares of Class A Common Stock;
(ii) modified the formula for the automatic grant of options to provide for the
grant of (x) an initial option to purchase from 20,000 to 40,000 shares of
Class A Common Stock to each eligible director who commences service as a
director, such amount to be determined by the Board in its discretion, (y)
an additional option to purchase up to 20,000 shares of Class A Common
Stock after each subsequent annual meeting of stockholders if the director
continues to be an eligible director, such amount to be determined by the
Board in its discretion, and (z) such discretionary options, in addition
to the foregoing initial options and additional options, to eligible
directors as may be determined by the Board; provided that no more than an
aggregate of 200,000 shares of Class A Common Stock may be granted as
discretionary options under the Second Directors Plan;
(iii) changed the plan administrator from the Chief Financial Officer of the
Company or such other person as is appointed by the Board to the Board
itself, in order to allow the Board the authority to exercise the
discretion granted and to make all determinations required or provided for
by the Second Directors Plan; and
(iv) amended the plan provision covering the determination of the option
exercise prices to provide that such prices not be less than 100 percent
of the fair market value of the Class A Common Stock on the date of grant
of the option.
All shares numbers have been adjusted to reflect the two-for-one stock split
effective July 26, 1999.
The Company's stockholders approved the amendments to the Amended
Directors Plan at the annual meeting of stockholders held on June 2, 1999.
Accordingly, as amended, the total number of shares of Class A Common Stock
available under the Amended Directors Plan is 2,200,000, of
-2-
<PAGE>
which 1,100,000 were previously registered (550,000 originally registered and
550,000 deemed registered pursuant to Rule 416 under the Securities Act of 1933)
and 1,100,000 shares are being registered hereunder.
Except for the foregoing amendments, the Amended Directors Plan remains
unchanged.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 8. Exhibits.
Exhibit
-------
Number Description
------ -----------
4.1 McLeod, Inc. Directors Stock Option Plan, as amended and restated,
n/k/a the McLeodUSA Incorporated Second Amended and Restated Stock
Option Plan.
5.1 Opinion of Hogan & Hartson L.L.P.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
-3-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Cedar Rapids, State of Iowa, on October 19,
1999.
McLEODUSA INCORPORATED
By: /s/ Clark E. McLeod
____________________________________
Clark E. McLeod
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Clark E. McLeod and Stephen C. Gray, jointly and
severally, each in his own capacity, as true and lawful attorneys-in-fact, with
full power of substitution, for him and in his name, place and stead, in any and
all capacities, to sign any and all amendments to this registration statement
(including post-effective amendments), and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact, or their substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons, in the
capacities indicated below, on October 19, 1999.
Signature Title
--------- -----
/s/ Clark E. McLeod
________________________________ Chairman, Chief Executive Officer
Clark E. McLeod and Director (Principal Executive
Officer)
/s/ Richard A. Lumpkin
________________________________ Vice Chairman and Director
Richard A. Lumpkin
/s/ Stephen C. Gray
________________________________ President, Chief Operating Officer and
Stephen C. Gray Director
/s/ Blake O. Fisher, Jr.
________________________________ Group Vice President and Director
Blake O. Fisher, Jr.
/s/ J. Lyle Patrick
________________________________ Group Vice President, Chief Financial
J. Lyle Patrick Officer and Treasurer (Principal
Financial Officer and Principal
Accounting Officer)
-4-
<PAGE>
________________________________ Director
Anne K. Bingaman
/s/ Erskine B. Bowles
________________________________ Director
Erskine B. Bowles
/s/ Peter H.O. Claudy
________________________________ Director
Peter H.O. Claudy
/s/ Thomas M. Collins
________________________________ Director
Thomas M. Collins
/s/ Robert J. Currey
________________________________ Director
Robert J. Currey
/s/ Theodore R. Forstmann
________________________________ Director
Theodore R. Forstmann
/s/ Lee Liu
________________________________ Director
Lee Liu
/s/ Paul D. Rhines
________________________________ Director
Paul D. Rhines
/s/ Roy A. Wilkens
________________________________ Director
Roy A. Wilkens
-5-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page Number
- ------ ----------- -----------
<S> <C> <C>
4.1 McLeod, Inc. Directors Stock Option Plan, as amended and restated,
n/k/a the McLeodUSA Incorporated Second Amended and Restated Stock
Option Plan.
5.1 Opinion of Hogan & Hartson L.L.P.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
</TABLE>
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<PAGE>
EXHIBIT 4.1
McLEODUSA INCORPORATED
SECOND AMENDED AND RESTATED
DIRECTORS STOCK OPTION PLAN
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. PURPOSE................................................................ A-1
2. DEFINITIONS............................................................ A-1
3. ADMINISTRATION......................................................... A-2
4. STOCK SUBJECT TO THE PLAN.............................................. A-2
5. ELIGIBILITY............................................................ A-3
6. OPTION PRICE........................................................... A-3
7. NUMBER OF SHARES AND GRANT DATES....................................... A-3
8. VESTING OF OPTIONS..................................................... A-4
9. OPTION PERIOD.......................................................... A-4
10. TIMING AND METHOD OF EXERCISE.......................................... A-4
11. SERVICE TERMINATION.................................................... A-5
12. RIGHTS IN THE EVENT OF DEATH, DISABILITY OR RETIREMENT................. A-5
13. NO STOCKHOLDER RIGHTS UNDER OPTION..................................... A-6
14. CONTINUATION OF SERVICE................................................ A-6
15. STOCK OPTION AGREEMENT................................................. A-6
16. WITHHOLDING............................................................ A-6
17. NON-TRANSFERABILITY OF OPTIONS......................................... A-6
18. USE OF PROCEEDS........................................................ A-6
19. ADOPTION, AMENDMENT, SUSPENSION AND TERMINATION........................ A-6
20. SECURITIES LAWS........................................................ A-7
21. INDEMNIFICATION........................................................ A-7
22. GOVERNING LAW.......................................................... A-8
</TABLE>
<PAGE>
McLEODUSA INCORPORATED
SECOND AMENDED AND RESTATED
DIRECTORS STOCK OPTION PLAN
McLEODUSA INCORPORATED, a Delaware corporation (the "Corporation"), sets
forth herein the terms of the Second Amended and Restated Directors Stock
Option Plan (the "Plan") as follows:
1. PURPOSE
The Plan is a further amendment and restatement of the McLeodUSA
Incorporated Amended and Restated Directors Stock Option Plan and is intended
to attract and retain the best possible members of the Board and to provide
additional incentives to those directors to promote the success of the
Corporation. The Plan provides Eligible Directors an opportunity to purchase
shares of the Stock pursuant to Options. Options granted under the Plan shall
not constitute "incentive stock options" within the meaning of Section 422 of
the Code.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including Stock
Option Agreements), the following definitions shall apply:
2.1. "Additional Option" means any Option other than an Initial Option.
2.2. "Board" means the board of directors of the Corporation.
2.3. "Code" means the Internal Revenue Code of 1986, as amended.
2.4. "Commencement of Service" means the date of election of the Eligible
Director to his or her first term as a Director.
2.5. "Corporation" means McLeodUSA Incorporated, a Delaware corporation.
2.6. "Effective Date" means the date of adoption of the second amendment
and restatement of the Plan by the Board.
2.7. "Eligible Director" means a member of the Board who is not an
officer or employee of the Corporation or any of its subsidiaries and is
not Robert J. Currey.
2.8. "Exchange Act" means the Securities Exchange Act of 1934, as now in
effect or hereafter amended.
2.9. "Exercise Price" means the Option Price multiplied by the number of
shares of Stock purchased pursuant to exercise of an Option.
2.10. "Expiration Date" means the tenth anniversary of the Grant Date or,
if earlier, the termination of the Option pursuant to Section 4.2(c)
hereof.
2.11. "Fair Market Value" means the value of each share of Stock subject
to the Plan determined as follows: If on the Grant Date or other
determination date the Stock is listed on an established national or
regional stock exchange, is admitted to quotation on the National
Association of Securities Dealers Automated Quotation System, or otherwise
is publicly traded on an established securities market, the Fair Market
Value of the Stock shall be the closing price of the Stock on such exchange
or in such market (the highest such closing price if there is more than one
such exchange or market) on the trading day immediately preceding the Grant
Date or other determination date (or, if there is no such reported closing
price, the Fair Market Value shall be the mean between the highest bid and
lowest asked prices or between the high and low sale prices on such trading
day), or, if no sale of the Stock is reported for such trading day, on the
next preceding day on which any sale shall have been reported. If the Stock
is not listed on such an exchange, quoted on such system or traded on such
a market, Fair Market Value shall be determined by the Board in good faith.
A-1
<PAGE>
2.12. "Grant Date" means the date on which an Option grant takes effect
pursuant to Section 7 hereof.
2.13. "Initial Option" means an Option received by an Eligible Director
as of such Eligible Director's Commencement of Service.
2.14. "Option" means any option to purchase one or more shares of Stock
pursuant to the Plan, including both Initial Options and Additional
Options.
2.15. "Optionee" means an Eligible Director who holds an Option.
2.16. "Option Period" means the period during which Options may be
exercised as defined in Section 9 hereof.
2.17. "Option Price" means the purchase price for each share of Stock
subject to an Option.
2.18. "Retirement" means a Service Termination (as defined in Section 11)
on or after age 62 if the Optionee has at least three years of service as
an Eligible Director.
2.19. "Securities Act" means the Securities Act of 1933, as now in effect
or as hereafter amended.
2.20. "Stock" means the Class A common stock, par value $0.01 per share,
of the Corporation.
2.21. "Stock Option Agreement" means the written agreement evidencing the
grant of an Option hereunder.
3. ADMINISTRATION
3.1. The Plan shall be administered by the Board which shall have the full
power and authority to take all actions and to make all determinations
required or provided for under the Plan or any Option granted or Option
Agreement entered into hereunder and all such other actions and determinations
not inconsistent with the specific terms and provisions of the Plan deemed by
the Board to be necessary or appropriate to the administration of the Plan or
any Option granted or Option Agreement entered into hereunder. The
interpretation and construction by the Board of any provision of the Plan or
of any Option granted or Option Agreement entered into hereunder shall be
final and conclusive.
3.2. No member of the Board shall be liable for any action or determination
made, or any failure to take or make an action or determination, in good faith
with respect to the Plan or any Option granted or Option Agreement entered
into hereunder.
4. STOCK SUBJECT TO THE PLAN
4.1. Options to purchase not more than 1,100,000 shares of the Stock may be
granted under the Plan. If any Option expires, terminates or is terminated or
canceled for any reason before it is exercised in full, the shares of Stock
that were subject to the unexercised portion of the Option shall be available
for future Options granted under the Plan.
4.2(a). If the outstanding shares of Stock are increased or decreased or
changed into or exchanged for a different number or kind of shares or other
securities of the Corporation by reason of any recapitalization,
reclassification, stock split-up, combination of shares, exchange of shares,
stock dividend or other distribution payable on capital stock, or other
increase or decrease in such shares effected without receipt of consideration
by the Corporation, occurring after the Effective Date, the number and kinds
of shares for the purchase of which Options may be granted under the Plan
shall be adjusted proportionately and accordingly by the Corporation. In
addition, the number and kind of shares for which Options are outstanding
shall be adjusted proportionately and accordingly so that the proportionate
interest of the holder of the Option immediately following such event shall,
to the extent practicable, be the same as immediately prior to such event. Any
such adjustment in outstanding Options shall not change the aggregate Option
Price payable with respect to shares subject to the unexercised portion of the
Option outstanding but shall include a corresponding proportionate adjustment
in the Option Price per share.
A-2
<PAGE>
4.2(b). Subject to Section 4.2(c) hereof, if the Corporation shall be the
surviving corporation in any reorganization, merger or consolidation of the
Corporation with one or more other corporations, any Option theretofore
granted pursuant to the Plan shall pertain to and apply to the securities to
which a holder of the number of shares of Stock subject to such Option would
have been entitled immediately following such reorganization, merger or
consolidation, with a corresponding proportionate adjustment of the Option
Price per share so that the aggregate Option Price thereafter shall be the
same as the aggregate Option Price of the shares remaining subject to the
Option immediately prior to such reorganization, merger or consolidation.
4.2(c). Upon the dissolution or liquidation of the Corporation, or upon a
merger, consolidation or reorganization of the Corporation with one or more
other corporations in which the Corporation is not the surviving corporation,
or upon a sale of substantially all of the assets of the Corporation to
another corporation, or upon any transaction (including, without limitation, a
merger or reorganization in which the Corporation is the surviving
corporation) approved by the Board which results in any person or entity
owning 80 percent or more of the combined voting power of all classes of stock
of the Corporation, the Plan and all Options outstanding hereunder shall
terminate, except to the extent provision is made in writing in connection
with such transaction for the continuation of the Plan, the assumption of the
Options theretofore granted, or for the substitution for such Options of new
options covering the stock of a successor corporation, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kinds of
shares and exercise prices, in which event the Plan (if applicable) and
Options theretofore granted shall continue in the manner and under the terms
so provided; except that all such Options shall be fully vested and
exercisable. In the event of any such termination of the Plan and Options,
each individual holding an Option shall have the right immediately prior to
the occurrence of such termination and during such period occurring prior to
such termination as the Board in its sole discretion shall determine and
designate, to exercise such Option whether or not such Option was otherwise
exercisable at the time such termination occurs. The Corporation shall send
written notice of an event that will result in such a termination to all
individuals who hold Options not later than the time at which the Corporation
gives notice thereof to its stockholders.
4.2(d). Adjustments under this Section 4.2 related to stock or securities of
the Corporation shall be made by the Board, whose determination in that
respect shall be final and conclusive. No fractional shares of Stock or units
of other securities shall be issued pursuant to any such adjustment, and any
fractions resulting from any such adjustment shall be eliminated in each case
by rounding downward to the nearest whole share or unit.
4.2(e). The grant of an Option pursuant to the Plan shall not affect or
limit in any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve or liquidate, or to sell or
transfer all or any part of its business or assets.
5. ELIGIBILITY
Eligibility under the Plan is limited to Eligible Directors.
6. OPTION PRICE
The Option Price of the Stock covered by each Option granted under the Plan
shall be not less than the Fair Market Value of such Stock on the Grant Date.
The Option Price shall be subject to adjustment as provided in Section 4.2
hereof.
7. NUMBER OF SHARES AND GRANT DATES
7.1. Each Eligible Director whose Commencement of Service is on or after the
Effective Date shall be granted an Initial Option to purchase from 10,000 to
20,000 shares of Stock as of the date of the Eligible Director's Commencement
of Service, such amount to be determined by the Board in its discretion.
7.2. Each Eligible Director also shall be granted an Additional Option to
purchase up to 10,000 shares of Stock after each subsequent annual meeting of
the Corporation's stockholders if the Eligible Director continues to be an
Eligible Director at such time, such amount to be determined by the Board in
its discretion.
A-3
<PAGE>
7.3. In addition, the Board may make discretionary grants of Options to
Eligible Directors to the extent such grants are determined to be in the best
interests of the Corporation by the Board. The maximum number of shares of
Stock subject to Options that can be awarded under the Plan, other than
pursuant to Sections 7.1 and 7.2 above, is 100,000.
8. VESTING OF OPTIONS
8.1 The Optionee may exercise the Option (subject to the limitations on
exercise set forth in this Plan or in the Option Agreement relating to such
Option), in installments as follows: on the first anniversary of the Grant
Date of the Option, as set forth in Section 7 above, the Option shall be
exercisable in respect of 25 percent of the number of shares specified in
Section 7 above, and the Option shall be exercisable in respect of an
additional 25 percent of the number of shares specified in Section 7 above on
each of the next three anniversaries of the Grant Date, as set forth in
Section 7 above. The foregoing installments, to the extent not exercised,
shall accumulate and be exercisable, in whole or in part, at any time and from
time to time, after becoming exercisable and prior to the termination of the
Option; provided, that no single exercise of the Option shall be for less than
100 shares, unless the number of shares purchased is the total number at the
time available for purchase under this Option.
8.2 In the event of a "Change of Control", all non-vested Options
outstanding under the Plan shall become immediately exercisable. For purposes
of this Plan, "Change of Control" means:
(a) execution by the Corporation of an agreement for the merger of the
Corporation into or with another corporation, the result of which would be
that the stockholders of the Corporation at the time of execution of such
agreement would own less than 50% of the total equity of the corporation
surviving the merger; or
(b) the sale of assets of the Corporation having an aggregate book value
of 40% or more of the total book value of all assets of the Corporation as
shown on the then most recent annual audited financial statement of the
Corporation; or
(c) a change of control of a nature that would be required to be reported
in response to Item 5(f) of Schedule 14A of Regulation 14A promulgated
under the Exchange Act, provided that, without limitation, such a change of
control shall be deemed to have occurred if any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Corporation representing 50%
of the Corporation's then outstanding securities; and provided further that
no such change of control shall be deemed to have occurred as a result of
the execution in (i) March 1996 of an Investor Agreement, among the
Corporation, IES Investments Inc., Midwest Capital Group, Inc., MWR
Investments, Inc., Clark and Mary McLeod, and certain other stockholders,
(ii) June 1997 of a Stockholders' Agreement, as amended, among the
Corporation, IES Investments Inc., Midwest Capital Group, Inc., MWR
Investments, Inc., Clark and Mary McLeod, and certain former stockholders
of Consolidated Communications Inc., (iii) November 1998 of a Stockholders'
Agreement, among the Corporation, IES Investments Inc., Clark and Mary
McLeod, and certain former stockholders of Consolidated Communications Inc.
and certain permitted transferees thereof, or (iv) January 1999 of a
Stockholders' Agreement, among the Corporation, IES Investments Inc., Clark
and Mary McLeod, certain former stockholders of Consolidated Communications
Inc. and certain permitted transferees thereof, M/C Investors L.L.C. and
Media/Communications Partners III Limited Partnership.
9. OPTION PERIOD
An Option shall be exercisable only during the Option Period. The Option
Period shall commence twelve months after the Grant Date, or earlier, if
subject to Sections 4.2(c), 8.2 or 12, and shall end at the close of business
on the Expiration Date.
10. TIMING AND METHOD OF EXERCISE
Subject to Sections 8 and 9 hereof, an Option that is exercisable hereunder
may be exercised by delivery to the Corporation on any business day, at its
principal office addressed to the attention of the Chief Financial Officer, of
written notice of exercise, which notice shall specify the number of shares
for which the Option is
A-4
<PAGE>
being exercised, and shall be accompanied by payment in full of the Option
Price of the shares for which the Option is being exercised. Payment of the
Option Price for the shares of Stock purchased pursuant to the exercise of an
Option shall be made (a) in cash or by certified check payable to the order of
the Corporation; (b) through the tender to the Corporation of shares of Stock,
which shares shall be valued, for purposes of determining the extent to which
the Option Price has been paid thereby, at their Fair Market Value on the date
of exercise; or (c) by a combination of the methods described in (a) and (b)
hereof. Payment in full of the Option Price need not accompany the written
notice of exercise provided the notice directs that the Stock certificate or
certificates for the shares for which the Option is exercised be delivered to
a licensed broker acceptable to the Corporation as the agent for the
individual exercising the Option and, at the time such Stock certificate or
certificates are delivered, the broker tenders to the Corporation cash (or
cash equivalents acceptable to the Corporation) equal to the Option Price plus
the amount (if any) of federal and/or other taxes which the Corporation may,
in its judgment, be required to withhold with respect to the exercise of the
Option. An attempt to exercise any Option granted hereunder other than as set
forth above shall be invalid and of no force and effect. Promptly after the
exercise of an Option and the payment in full of the Option Price of the
shares of Stock covered thereby, the individual exercising the Option shall be
entitled to the issuance of a Stock certificate or certificates evidencing
such individual's ownership of such shares.
11. SERVICE TERMINATION
Upon the termination of service (a "Service Termination") of the Optionee in
all capacities as an employee and/or director of the Corporation and all of
its affiliated companies, other than by reason of the death, permanent and
total disability or Retirement of such Optionee, any unvested Option granted
to an Optionee pursuant to the Plan shall terminate, and such Optionee shall
have no further right to purchase shares of Stock pursuant to such Option. The
Optionee may exercise the Optionee's outstanding vested Options at any time
until the date on which such outstanding Options expire according to their
terms.
12. RIGHTS IN THE EVENT OF DEATH, DISABILITY OR RETIREMENT
12.1. If an Optionee dies while in service as a director of the Corporation,
the executors or administrators or legatees or distributees of such Optionee's
estate shall have the right (subject to the general limitations on exercise
set forth in Section 9 above), at any time within 180 days after the date of
such Optionee's death and prior to termination of the Option pursuant to
Section 9 above, to exercise any Option held by such Optionee at the date of
such Optionee's death, whether or not such Option was exercisable immediately
prior to such Optionee's death; provided, however, that the Board may provide
by inclusion of appropriate language in any Option Agreement that, in the
event of the death of an Optionee, the executors, administrators, legatees or
distributees of such Optionee's estate may exercise an Option (subject to the
general limitations on exercise set forth in Section 9 hereof), in whole or in
part, at any time subsequent to such Optionee's death and prior to termination
of the Option pursuant to Section 9 hereof.
12.2. If there is a Service Termination by reason of the permanent and total
disability of the Optionee, then such Optionee shall have the right (subject
to the general limitations on exercise set forth in Section 9 above), at any
time within 180 days after such Service Termination and prior to termination
of the Option pursuant to Section 9 above, to exercise, in whole or in part,
any Option held by such Optionee at the date of such Service Termination,
whether or not such Option was exercisable immediately prior to such Service
Termination; provided, however, that the Board may provide, by inclusion of
appropriate language in any Option Agreement, that an Optionee may (subject to
the general limitations on exercise set forth in Section 9 hereof), in the
event of the termination of service of the Optionee with the Corporation or a
Subsidiary by reason of the "permanent and total disability" (within the
meaning of Section 22(e)(3) of the Code) of such Optionee, exercise an Option,
in whole or in part, at any time subsequent to such termination of service and
prior to termination of the Option pursuant to Section 9 hereof. Whether a
Service Termination is to be considered by reason of permanent and total
disability for purposes of this Plan shall be determined by the Board, which
determination shall be final and conclusive.
12.3 If there is a Service Termination by reason of the Retirement of the
Optionee, then such Optionee shall continue to vest in any outstanding Options
for two years and any Options which will not vest in such two year period
shall terminate. The Optionee shall have the right (subject to the general
limitations on exercise set
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forth in Section 9 above) to exercise the Optionee's outstanding vested
Options at any time until the date on which such outstanding Options expire
according to their terms.
13. NO STOCKHOLDER RIGHTS UNDER OPTION
Neither an Optionee nor any person entitled to exercise an Optionee's rights
in the event of an Optionee's death shall have any of the rights of a
stockholder with respect to the shares of Stock subject to an Option except to
the extent the certificates for such shares shall have been issued upon the
exercise of the Option.
14. CONTINUATION OF SERVICE
Nothing in the Plan shall confer upon any person any right to continue as a
member of the Board or interfere in any way with the right of the Corporation
to terminate such relationship.
15. STOCK OPTION AGREEMENT
Each Option granted pursuant to the Plan shall be evidenced by a written
Stock Option Agreement, or by a written Notice of Option Grant given by the
Corporation to the Optionee (which need not be signed by either the
Corporation or the Optionee), notifying the Optionee of the grant and
incorporating the terms of the Plan. The Stock Option Agreement shall be
executed by the Corporation and the Optionee.
16. WITHHOLDING
The Corporation shall have the right to withhold, or require an Optionee to
remit to the Corporation, an amount sufficient to satisfy any applicable
federal, state or local withholding tax requirements imposed with respect to
exercise of Options. To the extent permissible under applicable tax,
securities and other laws, the Optionee may satisfy a tax withholding
requirement by directing the Corporation to apply shares of Stock to which the
Optionee is entitled as a result of the exercise of an Option to satisfy
withholding requirements under this Section 16.
17. NON-TRANSFERABILITY OF OPTIONS
Each Option granted pursuant to the Plan shall, during Optionee's lifetime,
be exercisable only by Optionee, and neither the Option nor any right
thereunder shall be transferable by the Optionee by operation of law or
otherwise other than by will or the laws of descent and distribution, and
shall not be pledged or hypothecated (by operation of law or otherwise) or
subject to execution, attachment or similar processes.
18. USE OF PROCEEDS
The proceeds received by the Corporation from the sale of Stock pursuant to
Options granted under the Plan shall constitute general funds of the
Corporation.
19. ADOPTION, AMENDMENT, SUSPENSION AND TERMINATION
19.1. The Plan, as amended and restated, shall be effective as of the date
of adoption by the Board, subject to stockholder approval of the Plan within
one year of the Effective Date by a majority of the votes cast at a duly held
meeting of the stockholders of the Corporation at which a quorum representing
a majority of all outstanding stock is present, either in person or by proxy,
and voting on the matter, or by written consent in accordance with applicable
state law and the Certificate of Incorporation and Bylaws of the Corporation;
provided, however, that upon approval of the Plan by the stockholders of the
Corporation, all Options granted under the Plan on or after the Effective Date
shall be fully effective as if the stockholders of the Corporation had
approved the Plan on the Effective Date. If the stockholders fail to approve
the Plan within one year of the Effective Date, any Options granted hereunder
on or after the Effective Date shall be null, void and of no effect.
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19.2. Subject to the limitation of Section 19.4 hereof, the Board may at any
time suspend or terminate the Plan, and may amend it from time to time in such
respects as the Board may deem advisable, which approval may be made subject
to approval by the Corporation's stockholders.
19.3. No Option may be granted during any suspension or after the
termination of the Plan, and no amendment, suspension or termination of the
Plan shall, without the Optionee's consent, adversely alter or otherwise
impair any rights or obligations under any Stock Option Agreement previously
entered into under the Plan. The Plan shall terminate ten years after the
Effective Date unless previously terminated pursuant to Section 4.2 hereof or
by the Board pursuant to this Section 19.
19.4. Notwithstanding the provisions of Section 19.2 hereof, the Plan shall
not be amended more than once in any six-month period other than to comport
with changes in the Code, the Employee Retirement Income Security Act of 1974,
or the rules promulgated thereunder.
20. SECURITIES LAWS
20.1. The Corporation shall not be required to sell or issue any shares of
Stock under any Option if the sale or issuance of such shares would constitute
a violation by the individual exercising the Option or the Corporation of any
provisions of any law or regulation of any governmental authority, including
without limitation any federal or state securities laws or regulations.
Specifically in connection with the Securities Act, upon exercise of any
Option, unless a registration statement under the Securities Act is in effect
with respect to the shares of Stock covered by such Option, the Corporation
shall not be required to sell or issue such shares unless the Corporation has
received evidence satisfactory to the Corporation that the holder of such
Option may acquire such shares pursuant to an exemption from registration
under the Securities Act. Any determination in this connection by the Board
shall be final and conclusive. The Corporation may, but shall in no event be
obligated to, register any securities covered hereby pursuant to the
Securities Act. The Corporation shall not be obligated to take any affirmative
action in order to cause the exercise of an Option or the issuance of shares
pursuant thereto to comply with any law or regulation of any governmental
authority. As to any jurisdiction that expressly imposes the requirement that
an Option shall not be exercisable unless and until the shares of Stock
covered by such Option are registered or are subject to an available exemption
from registration, the exercise of such Option (under circumstances in which
the laws of such jurisdiction apply) shall be deemed conditioned upon the
effectiveness of such registration or the availability of such an exemption.
20.2. The intent of the Plan is to qualify for the exemption provided by
Rule 16b-3 under the Exchange Act. To the extent any provision of the Plan
does not comply with the requirements of Rule 16b-3, it shall be deemed
inoperative and shall not affect the validity of the Plan. In the event Rule
16b-3 is revised or replaced, the Board of Directors may exercise discretion
to modify the Plan in any respect necessary to satisfy the requirements of the
revised exemption or its replacement.
21. INDEMNIFICATION
21.1. To the extent permitted by applicable law, each member of the Board
shall be indemnified and held harmless by the Corporation against and from any
and all loss, cost, liability or expense that may be imposed upon or
reasonably incurred by the member in connection with or resulting from any
claim, action, suit or proceeding to which the member of the Board may be a
party or in which the member of the Board may be involved by reason of any
action taken or failure to act under the Plan, and against and from any and
all amounts paid by the member of the Board (with the Corporation's written
approval) in the settlement thereof, or paid by the member of the Board in
satisfaction of a judgment in any such action, suit or proceeding except a
judgment in favor of the Corporation; subject, however, to the condition that
upon the institution of any claim, action, suit or proceeding against the
member of the Board, the member shall give the Corporation an opportunity in
writing, at its own expense, to handle and defend the same before the member
of the Board undertakes to handle and defend it on the member's own behalf.
The foregoing right of indemnification shall not be exclusive of any other
right to which such person may be entitled as a matter of law or otherwise, or
any power the Corporation may have to indemnify the member of the Board or
hold the member of the Board harmless.
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<PAGE>
21.2. The members of the Board and each officer and employee of the
Corporation shall be fully justified in reasonably relying or acting upon any
information furnished in connection with the administration of the Plan by the
Corporation or any employee of the Corporation. In no event shall any person
who is or shall have been a member of the Board, or an officer or employee of
the Corporation, be liable for any determination made or other action taken or
any omission to act in reliance upon any such information, or for any action
(including furnishing of information) taken or any failure to act, if in good
faith.
22. GOVERNING LAW
The validity, interpretation and effect of the Plan, and the rights of all
persons hereunder, shall be governed by and determined in accordance with the
laws of Delaware, other than the choice of law rules thereof.
The first amendment and restatement of the Plan was duly adopted and
approved by the Board on March 28, 1996 and was duly approved by the
stockholders of the Corporation on April 30, 1996 and was further amended by
the Board on December 19, 1997. The second amendment and restatement of the
Plan was duly adopted and approved by the Board on March 25, 1999.
* * * *
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Exhibit 5.1
[Hogan & Hartson Letterhead]
October 18, 1999
Board of Directors
McLeodUSA Incorporated
McLeodUSA Technology Park
6400 C Street SW, P.O. Box 3177
Cedar Rapids, IA 52406-3177
Ladies and Gentlemen:
We are acting as special counsel to McLeodUSA Incorporated, a Delaware
corporation (the "Company"), in connection with its registration statement on
Form S-8, as amended (the "Registration Statement"), filed with the Securities
and Exchange Commission relating to the proposed offering of up to 1,100,000
shares of the Company's Class A common stock, par value $.01 per share, all of
which shares (the "Shares") are issuable upon the exercise of options granted
under the McLeodUSA Incorporated Second Amended and Restated Directors Stock
Option Plan (the "Plan"). This opinion letter is furnished to you at your
request to enable you to fulfill the requirements of Item 601(b)(5) of
Regulation S-K, 17 C.F.R. Section 229.601(b)(5), in connection with the
Registration Statement.
For purposes of this opinion letter, we have examined copies of the
following documents:
1. An executed copy of the Registration Statement.
2. A copy of the Plan, as certified by the Secretary of the Company
on the date hereof as then being complete, accurate and in
effect.
3. The Amended and Restated Certificate of Incorporation of the
Company, as certified by the Secretary of State of the State of
Delaware on October 18, 1999 (the "Amended and Restated
Certificate"), the Certificate of Amendment of Amended and
Restated Certificate of Incorporation of the Company, as
certified by the Secretary of State of the State of Delaware on
October 18, 1999 (the "Certificate of Amendment"), the
Certificate of Change of Registered Agent and Registered Office
of the Company, as certified by the Secretary of State of the
State of Delaware on October 18, 1999 (the "Certificate of
<PAGE>
October 18, 1999
Page 2
Change of Registered Agent"), and the Certificates of Designation
for the Company's Series A preferred stock, $.01 par value per
share, Series B preferred stock, $.01 par value per share, and
Series C preferred stock, $.01 par value per share, as certified
by the Secretary of State of the State of Delaware on October 18,
1999 (together with the Amended and Restated Certificate, the
Certificate of Amendment and the Certificate of Change of
Registered Agent, the "Certificate of Incorporation"), as
certified by the Secretary of the Company on the date hereof as
being complete, accurate and in effect .
4. The Amended and Restated Bylaws of the Company, as certified by
the Secretary of the Company on the date hereof as being
complete, accurate and in effect (the "Bylaws").
5. Resolutions of the Board of Directors of the Company adopted at a
meeting held on March 25, 1999, as certified by the Secretary of
the Company on the date hereof as being complete, accurate and in
effect, relating to the issuance of the Shares.
6. Resolutions of the stockholders of the Company adopted at a
meeting held on June 2, 1999, as certified by the Secretary of
the Company on the date hereof as being complete, accurate and in
effect, relating to the issuance of the Shares.
In our examination of the aforesaid documents, we have assumed the
genuineness of all signatures, the legal capacity of all natural persons, the
accuracy and completeness of all documents submitted to us, the authenticity of
all original documents, and the conformity to authentic original documents of
all documents submitted to us as copies (including telecopies). This opinion
letter is given, and all statements herein are made, in the context of the
foregoing.
This opinion letter is based as to matters of law solely on Delaware
corporate law. We express no opinion herein as to any other laws, statutes,
ordinances, rules or regulations.
Based upon, subject to and limited by the foregoing, we are of the
opinion that following (i) effectiveness of the Registration Statement, (ii)
issuance of the Shares pursuant to the terms of the Plan, and (iii) receipt by
the Company of the consideration for the Shares specified in the resolutions of
the Board of
<PAGE>
October 18, 1999
Page 3
Directors or a committee of the Board of Directors authorizing the issuance
thereof, the Shares will be validly issued, fully paid, and nonassessable.
This opinion letter has been prepared for your use in connection with
the Registration Statement and speaks as of the date hereof. We assume no
obligation to advise you of any changes in the foregoing subsequent to the
delivery of this opinion letter.
We hereby consent to the filing of this opinion letter as Exhibit 5.1
to the Registration Statement. In giving this consent, we do not thereby admit
that we are an "expert" within the meaning of the Securities Act of 1933, as
amended.
Very truly yours,
/s/ Hogan & Hartson
HOGAN & HARTSON L.L.P.
<PAGE>
Exhibit 23.1
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Form S-8 Registration Statement of our McLeodUSA Incorporated
reports dated January 27, 1999 (except with respect to the matter discussed in
Note 16, as to which the date is March 5, 1999) and to all references to our
Firm included in or made a part of this Registration Statement.
/s/ Arthur Andersen LLP
Chicago, Illinois
October 18, 1999
<PAGE>
Exhibit 23.2
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement on
Form S-8 pertaining to the McLeodUSA Incorporated Second Amended and Restated
Directors Stock Option Plan of our report dated February 26, 1999, with respect
to the consolidated financial statements of Ovation Communications, Inc. as of
December 31, 1998 and 1997 and for the period from March 27, 1997 (inception) to
December 31, 1997 and the year ended December 31, 1998, included in the
Registration Statement on Form S-4 (No. 333-71811) of McLeodUSA Incorporated
filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
October 19, 1999
