<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period ______________ to ________________
Commission file number 0-20763
McLEODUSA INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 42-1407240
(State of Incorporation) (IRS Employer Identification No.)
McLeodUSA Technology Park
6400 C Street SW
P.O. Box 3177
Cedar Rapids, Iowa 52406-3177
(Address of principal executive office) (Zip Code)
319-364-0000
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of each class of the issuer's common stock as
of May 9, 2000:
Common Stock Class A: ($.01 par value).... 578,213,511 shares
Common Stock Class B: ($.01 par value).... None
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<PAGE>
INDEX
<TABLE>
<CAPTION>
Page
----
PART I. Financial Information
- ------------------------------
<S> <C>
Item 1. Financial Statements................................................................................... 3
Consolidated Balance Sheets, March 31, 2000 (unaudited) and December 31, 1999.......................... 3
Unaudited Consolidated Statements of Operations and Comprehensive Income
for the three months ended March 31, 2000 and 1999.................................................. 4
Unaudited Consolidated Statements of Cash Flows for the three months ended
March 31, 2000 and 1999............................................................................. 5
Notes to Consolidated Financial Statements (unaudited)................................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 11
PART II. Other Information
- --------------------------
Item 2. Changes in Securities and Use of Proceeds.............................................................. 18
Item 4. Submission of Matters to a Vote of Security Holders.................................................... 18
Item 6. Exhibits and Reports on Form 8-K....................................................................... 19
Signatures...................................................................................................... 22
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
McLEODUSA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except shares)
<TABLE>
<CAPTION> March 31, December 31,
2000 1999
--------- ------------
<S> <C> <C>
ASSETS (Unaudited)
Current Assets
Cash and cash equivalents.............................................................. $ 536.8 $ 326.9
Investment in available-for-sale securities............................................ 493.0 934.1
Trade receivables, net................................................................. 231.8 183.8
Inventory.............................................................................. 29.9 27.5
Deferred expenses...................................................................... 37.1 39.2
Prepaid expenses and other............................................................. 68.3 58.0
-------- --------
TOTAL CURRENT ASSETS.................................................................. 1,396.9 1,569.5
-------- --------
Property and Equipment
Land and building...................................................................... 104.4 85.1
Telecommunications networks............................................................ 797.3 635.9
Furniture, fixtures and equipment...................................................... 325.1 267.2
Networks in progress................................................................... 644.3 453.2
Building in progress................................................................... 2.1 1.2
-------- --------
1,873.2 1,442.6
Less accumulated depreciation.......................................................... 243.2 172.6
-------- --------
1,630.0 1,270.0
-------- --------
Investments, Intangible and Other Assets
Other investments...................................................................... 37.3 35.9
Goodwill, net.......................................................................... 3,031.9 957.1
Other intangibles, net................................................................. 332.1 290.2
Other.................................................................................. 101.9 80.4
-------- --------
3,503.2 1,363.6
-------- --------
$6,530.1 $4,203.1
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt................................................... $ 29.7 $ 14.4
Contracts and notes payable............................................................ 0.1 0.1
Accounts payable....................................................................... 132.0 109.6
Accrued payroll and payroll related expenses........................................... 26.7 26.2
Other accrued liabilities.............................................................. 155.8 92.2
Deferred revenue, current portion...................................................... 38.8 24.1
Customer deposits...................................................................... 32.0 30.1
-------- --------
TOTAL CURRENT LIABILITIES............................................................. 415.1 296.7
Long-term Debt, less current maturities................................................. 2,059.9 1,763.8
Deferred Revenue, less current portion.................................................. 15.5 15.8
Other long-term liabilities............................................................. 19.0 18.3
-------- --------
2,509.5 2,094.6
-------- --------
Redeemable convertible preferred stock
Preferred, Series B, redeemable, convertible, $.01 par value, authorized, issued and
outstanding 2000 275,000 shares; 1999 275,000 shares.................................. 687.5 687.5
Preferred, Series C, redeemable, convertible, $.01 par value, authorized, issued and
outstanding 2000 125,000 shares; 1999 125,000 shares.................................. 312.5 312.5
-------- --------
1,000.0 1,000.0
-------- --------
Stockholders' Equity
Capital Stock:
Preferred, Series A, $.01 par value: authorized, issued and outstanding 2000
1,150,000 shares; 1999 1,150,000 shares............................................. --- ---
Common, Class A, $.01 par value; authorized 1,000,000,000 shares;
issued and outstanding 2000 575,494,911 shares; 1999 472,761,036
shares............................................................................... 5.8 4.8
Common, Class B, convertible, $.01 par value; authorized 22,000,000
shares; issued and outstanding 2000 and 1999 none.................................... --- ---
Additional paid-in capital............................................................. 3,487.4 1,523.5
Accumulated deficit.................................................................... (567.3) (494.5)
Accumulated other comprehensive income................................................. 94.7 74.7
-------- --------
3,020.6 1,108.5
-------- --------
$6,530.1 $4,203.1
======== ========
</TABLE>
. Class A common stock and accumulated deficit are presented after giving
effect for the three-for-one stock split effected in the form of a stock
dividend as described in Note 4.
The accompanying notes are an integral part of these consolidated
financial statements
3
<PAGE>
McLEODUSA INCORPORATED AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In millions, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
2000 1999
------ ------
<S> <C> <C>
Revenues:
Telecommunications:
Local and long distance................................. $154.2 $ 81.1
Local exchange services................................. 21.6 17.7
Private line and data................................... 26.2 15.3
Network maintenance and equipment....................... 9.2 8.1
Other telecommunications................................ 7.7 5.8
------ ------
Total telecommunications revenue....................... 218.9 128.0
Directory................................................ 64.8 49.4
Telemarketing............................................ 4.6 3.7
------ ------
TOTAL REVENUES.......................................... 288.3 181.1
Operating expenses:
Cost of service.......................................... 148.1 92.5
Selling, general and administrative...................... 122.2 79.8
Depreciation and amortization............................ 60.6 35.1
------ ------
TOTAL OPERATING EXPENSES................................ 330.9 207.4
------ ------
OPERATING LOSS.......................................... (42.6) (26.3)
Nonoperating income (expense):
Interest income.......................................... 15.3 8.3
Interest (expense)....................................... (31.0) (29.5)
Other income............................................. (.2) --
------ ------
TOTAL NONOPERATING INCOME (EXPENSE)..................... (15.9) (21.2)
------ ------
LOSS BEFORE INCOME TAXES................................ (58.5) (47.5)
Income taxes.............................................. --- ---
------ ------
NET LOSS................................................ $(58.5) $(47.5)
Preferred stock dividend.................................. (13.6) ---
------ ------
NET LOSS APPLICABLE TO COMMON SHARES.................... $(72.1) $(47.5)
====== ======
Loss per common share..................................... $(0.15) $(0.12)
====== ======
Weighted average common shares outstanding................ 479.7 396.7
====== ======
Other comprehensive income (loss), net of tax:
Unrealized gains on securities:
Unrealized holding gains (losses) arising during the
period................................................. 20.0 8.2
Less: reclassification adjustment for gains included in
net income............................................. --- (0.1)
------ ------
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)................. 20.0 (8.1)
------ ------
COMPREHENSIVE LOSS...................................... $(52.1) $(39.4)
====== ======
</TABLE>
* Loss per common share and weighted average common shares outstanding are
presented after giving effect for the three-for-one stock split effected in the
form of a dividend as described in Note 4.
The accompanying notes are an integral part of these consolidated
financial statements
4
<PAGE>
McLEODUSA INCORPORATED AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
<S> <C> <C>
2000 1999
------- -------
Cash Flows from Operating Activities
Net loss............................................................................... $ (72.1) $ (47.5)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Depreciation.......................................................................... 35.1 18.0
Amortization.......................................................................... 25.5 17.1
Accretion of interest on senior discount notes........................................ 10.1 9.3
Changes in assets and liabilities, net of effects of acquisitions:
(Increase) in trade receivables................................................... (35.6) (17.0)
(Increase) in inventory........................................................... (2.4) (5.0)
Decrease in deferred expenses..................................................... 2.2 ---
Decrease in prepaid expenses and other............................................ 31.0 5.6
(Decrease) in deferred line installation costs.................................... (9.0) (2.5)
(Decrease) in accounts payable and accrued expenses............................... (26.0) (29.5)
Increase in deferred revenue...................................................... 14.3 0.7
Increase in customer deposits..................................................... 1.9 2.6
------- -------
NET CASH (USED IN) OPERATING ACTIVITIES......................................... (25.0) (48.2)
------- -------
Cash Flows from Investing Activities
Purchases of property and equipment.................................................... (239.4) (84.9)
Available-for-sale securities:
Purchases............................................................................. (280.6) (262.0)
Sales................................................................................. --- 72.8
Maturities............................................................................ 759.4 55.3
Business Acquisitions.................................................................. (10.9) (128.1)
Other.................................................................................. (2.5) (2.5)
------- -------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 226.0 (349.4)
------- -------
Cash Flows from Financing Activities
Payments on contracts and notes payable................................................ --- (12.8)
Net proceeds from preferred stock - Series B and C..................................... (0.3) ----
Net proceeds from long-term debt....................................................... --- 487.7
Payments on long-term debt............................................................. (8.4) (118.5)
Net proceeds from issuance of common stock............................................. 17.6 1.5
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES...................................... 8.9 357.9
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........................... 209.9 (39.7)
Cash and cash equivalents:
Beginning.............................................................................. 326.9 455.1
------- -------
Ending................................................................................. $ 536.8 $ 415.4
======= =======
Supplemental Disclosure of Cash Flow Information:
Cash payment for interest.............................................................. $43.9 $23.6
===== =====
Supplemental Schedule of Noncash Investing and Financing Activities
Capital leases incurred for the acquisition of property and equipment.................. $ 5.2 $ 2.0
===== =====
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements
5
<PAGE>
McLEODUSA INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of and for the Three Months Ended
March 31, 2000 and 1999 is Unaudited)
Note 1: Basis of Presentation
Interim Financial Information (unaudited): The financial statements and
related notes as of March 31, 2000, and for the three month periods ended March
31, 2000 and 1999, are unaudited, but in the opinion of management include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of our financial position and results of operations. The
operating results for the interim periods are not indicative of the operating
results to be expected for a full year or for other interim periods. Certain
information and footnote disclosure normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to instructions, rules and regulations prescribed
by the Securities and Exchange Commission ("SEC"). Although we believe that the
disclosures provided are adequate to make the information presented not
misleading, we recommend that you read these consolidated condensed financial
statements in conjunction with the audited consolidated financial statements and
the related footnotes included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999, filed with the SEC on March 30, 2000.
Reclassifications: Certain items in the unaudited statement of operations
for the three month period ended March 31, 1999 have been reclassified to be
consistent with the presentation in the March 31, 2000 unaudited financial
statements.
Note 2: Supplemental Asset Data
Cash and cash equivalents: For purposes of reporting cash flows, we
consider all highly liquid debt instruments purchased with a maturity of three
months or less and all certificates of deposit, regardless of maturity, to be
cash equivalents.
Trade Receivables: The composition of trade receivables, net is as follows:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------ ------
(In millions)
<S> <C> <C>
Trade Receivables:
Billed...................................................... $207.1 $165.7
Unbilled.................................................... 72.1 59.5
------ ------
279.2 225.2
Allowance for doubtful accounts and discounts................ (47.4) (41.4)
------ ------
$231.8 $183.8
====== ======
</TABLE>
Inventory: Inventory is carried principally at the lower of average cost
or market and consists primarily of new and reusable parts required to maintain
fiber optic networks and parts and equipment used in the maintenance and
installation of telephone systems.
Goodwill: Goodwill resulting from our acquisitions is being amortized over
a range of 15 to 30 years using the straight-line method and is periodically
reviewed for impairment based upon an assessment of future operations to ensure
that it is appropriately valued. Accumulated amortization on goodwill totaled
$65.7 million and $52.1 million, at March 31, 2000 and December 31, 1999,
respectively.
6
<PAGE>
Other intangibles: Other intangibles consist of customer lists and
noncompete agreements related to our acquisitions, deferred line installation
costs incurred in the establishment of local access lines for customers and
franchise rights to provide cable services to customers in three Illinois
counties and in a Michigan city. The customer lists and noncompete agreements
are being amortized using the straight-line method over periods ranging from 3
to 15 years. The deferred line installation costs are being amortized using the
straight-line method over 36 to 60 months, which approximates the average lives
of residential and business customer contracts. The franchise rights are being
amortized using the straight-line method over periods ranging from 10 to 15
years. Accumulated amortization on the other intangibles totaled $72.8 million
and $60.7 million at March 31, 2000 and December 31, 1999, respectively.
Note 3: Acquisitions
Talking Directories, Inc. (Talking Directories) and Info America Phone
Books, Inc. (Info America): On February 10, 1999, we acquired Talking
Directories in exchange for 15.3 million shares of its Class A common stock, par
value $.01 per share ("Class A common stock") after giving effect to the three-
for-one stock split described in Note 4. In a related and concurrent
transaction, on February 10, 1999, we acquired Info America in exchange for 7.2
million shares of its Class A common stock. We also paid outstanding
obligations of Talking Directories and Info America of approximately $27
million.
Dakota Telecommunications Group, Inc. (DTG): On March 5, 1999, we acquired
DTG in exchange for approximately $5.7 million shares of its Class A common
stock, after giving effect to the three-for-one stock split described in Note 4,
and the assumption of approximately $31 million in DTG debt.
Ovation Communications, Inc. (Ovation): On March 31, 1999, we acquired
Ovation in exchange for approximately 33.6 million shares of its Class A common
stock, after giving effect to the three-for-one stock split described in Note 4,
and the payment of approximately $121.3 million in cash to the stockholders of
Ovation. The total purchase price was approximately $310.2 million based on the
average closing price of our Class A common stock five days before and after the
date of the acquisition agreement. Approximately $105.6 million in Ovation debt
remained outstanding.
Splitrock Services, Inc. ("Splitrock"): On March 30, 2000, we acquired
Splitrock pursuant to the Amended Plan of Merger dated February 11, 2000. The
acquisition of Splitrock was effected through two separate but related
transactions: (1) a holding company reorganization, in which Splitrock Services,
Inc. became a wholly owned subsidiary of its former subsidiary, Splitrock
Holdings; and (2) a merger of Southside Acquisition Corporation, a Delaware
corporation and wholly owned subsidiary of McLeodUSA, with and into Splitrock
Holdings in which Splitrock Holdings was the surviving corporation and became a
wholly owned subsidiary of McLeodUSA.
Pursuant to these transactions, each common stockholder of Splitrock
ultimately received 0.5347 of a share of Class A common stock of McLeodUSA in
exchange for each share of Splitrock common stock owned. We issued
approximately 93.2 million shares of Class A common stock, after giving effect
for the three-for-one stock split described in Note 4. The total purchase price
was approximately $2.3 billion based on the average closing price of our Class A
common stock five days before and after January 6, 2000, the initial date of the
Merger Agreement. Approximately $261 million in Splitrock debt remains
outstanding. The purchase price includes approximately $29.4 million of direct
acquisition costs.
7
<PAGE>
The following table summarizes the purchase price allocations we incurred
for business acquisitions incurred in the three months ended March 31, 2000 and
1999 (in millions):
Transaction Year: 2000 1999
- --------------------- -------- -------
Cash purchase price $ 10.8 $ 128.1
Acquisition costs 41.7 --
Promissory notes 38.4 --
Stock issued 1,832.4 347.1
Option agreements 103.3 --
-------- -------
$2,026.6 $ 475.2
======== =======
Working capital acquired, net $ 15.8 $ (22.4)
Fair value of other assets acquired 184.1 127.0
Intangibles 2,117.4 525.2
Liabilities assumed (290.7) (154.6)
-------- -------
$2,026.6 $ 475.2
======== =======
These acquisitions have been accounted for as purchases and the results of
operations are included in the consolidated financial statements since the dates
of acquisition. All 2000 purchase price allocations are preliminary and subject
to revisions.
The unaudited consolidated results of operations for the three months
ended March 31, 2000 on a pro forma basis as though the above entities had been
acquired as of the beginning of the period is as follows (in millions, except
per share data):
2000
-------
Revenue....................................... $ 323.3
Net loss applicable to common shares.......... (136.5)
Loss per common share......................... (0.24)
The pro forma financial information is presented for informational purposes
only and is not necessarily indicative of the operating results that would have
occurred had the acquisitions been consummated as of the above dates, nor are
such operating results necessarily indicative of future operating results.
Note 4: Common Stock Split
On February 29, 2000, we announced a three-for-one stock split in the form
of a stock dividend on our Class A common stock. The record date for the stock
split was April 4, 2000 and the distribution of the additional shares took place
on April 24, 2000. All share data in the consolidated financial statements and
notes to the financial statements have been adjusted to reflect the stock split.
Note 5: Information by Business Segment
We operate predominantly in the business of providing local, long distance
and related communications services to end users, selling advertising space in
telephone directories and supplying end to end data communications. The three
business segments have separate management teams and infrastructures that offer
different products and services. The principal elements of these segments are to
(1) provide integrated communications services, provide outstanding customer
service, expand fiber optic network, expand intra-city fiber network build, (2)
publish and distribute directories to local area subscribers, and (3) provide
end to end data communications. The acquisition of Splitrock on March 30, 2000
introduced our third business segment: end-to-end data communications services
on the Splitrock network. Since the data segment was part of McLeodUSA for only
one day in the first quarter ended March 31, 2000, operating statement
information for this segment has not been included in the segment information
table below.
We evaluate the performance of our operating segments based on earnings
before interest, taxes, depreciation and amortization, excluding general
corporate expenses ("EBITDA"). The accounting policies of the reportable
segments are the same as those described in Note 1 of our Annual Report on
8
<PAGE>
Form 10-K for the fiscal year ended December 31, 1999. Intersegment transfers
are accounted for on an arm's length pricing basis.
Identifiable assets (excluding intersegment receivables) are our assets
that are identified in each business segment. Corporate assets primarily include
cash and cash equivalents, investments in available-for-sale securities,
administrative headquarters and goodwill recorded primarily as a result of the
acquisition of Consolidated Communications, Inc. in 1997, the acquisitions of
DTG and Ovation in 1999 and the acquisition of Splitrock in 2000.
In the three months ended March 31, 2000 and 1999, no single customer or
group under common control represented 10% or more of our sales.
Segment information for the three months ended March 31, 2000 and 1999 was as
follows (in millions):
<TABLE>
<CAPTION>
Telecommunications Media Data Corporate Total
------------------- ----- ---- --------- -----
<S> <C> <C> <C> <C> <C>
Three months ended
March 31, 2000
Revenues $ 222.8 $ 65.5 $ -- $ -- $ 288.3
===============================================================================
EBITDA $ 10.3 $ 13.0 $ -- $ (5.3) $ 18.0
Depreciation and amortization (37.0) (7.4) -- (16.2) (60.6)
Interest Revenue 0.4 0.1 -- 14.8 15.3
Interest Expense (1.0) -- -- (30.0) (31.0)
Taxes and Other (2.3) -- -- 2.1 (0.2)
-------------------------------------------------------------------------------
Net Income (Loss) $ (29.6) $ 5.7 $ -- $ (34.6) $ (58.5)
===============================================================================
As of March 31, 2000
Total assets $ 2,065.2 $ 469.9 $264.9 $ 3,730.1 $ 6,530.1
Three months ended
March 31, 2000
Capital expenditures $ 243.0 $ 1.0 $ -- $ 266.1 $ 510.1
</TABLE>
<TABLE>
<CAPTION>
Telecommunications Media Data Corporate Total
------------------- ----- ---- --------- -----
<S> <C> <C> <C> <C> <C>
March 31, 1999
Revenues $ 131.3 $ 49.8 $ -- $ -- $ 181.1
===============================================================================
EBITDA $ 5.8 $ 9.2 $ -- $ (6.2) $ 8.8
Depreciation and amortization (19.5) (9.6) -- (6.0) (35.1)
Interest Revenue 0.3 -- -- 8.0 8.3
Interest Expense (1.4) -- -- (28.1) (29.5)
Taxes and Other 0.3 -- -- (0.3) --
-------------------------------------------------------------------------------
Net Income (Loss) $ (14.5) $ (0.4) $ -- $ (32.6) $ (47.5)
===============================================================================
As of March 31, 1999
Total assets $ 1,034.6 $ 389.9 $ -- $ 1,411.9 $ 2,836.4
Three months ended
March 31, 1999
Capital expenditures $ 210.3 $ 131.1 $ -- $ 197.5 $ 538.9
</TABLE>
Note 6: Subsequent Events
On April 12, 2000 we announced that we received a commitment for $1 billion
of Senior Secured Credit Facilities (together the "Facilities") with a syndicate
of financial institutions. The facilities are currently contemplated to consist
of (1) a seven year Senior Secured Revolving Facility with an aggregate
principal amount of $500 million (the "Revolving Facility), (2) a seven year
Senior Secured Multi-Draw Term Loan Facility with an aggregate principal amount
of $300 million ("Tranche A Term Facility"), and (3) an eight year single draw
Senior Secured Term Loan with an aggregate principal amount of $200 million
("Tranche B Term Facility"). The Tranche A Term Facility is expected to provide
for multiple ($50 million minimum) draws for the first 24 months of the
agreement at which time any undrawn commitments expire.
The Facilities are to be secured by 1) a first priority pledge of all the
capital stock owned by us and by each subsidiary, and 2) a perfected first
priority security interest in substantially all our tangible
9
<PAGE>
and intangible assets and, to the extent of $100 million, by each subsidiary. In
addition, telecommunications assets acquired with proceeds from the facilities
will serve as collateral.
Interest on the Facilities is payable quarterly and variable at LIBOR plus
1% to LIBOR plus 3.25% based on the Company's debt rating. At our current debt
rating, interest rates contemplated are LIBOR plus 2.25% on the Revolving
Facility and Tranche A Term Facility, and LIBOR plus 3.00% on the Tranche B Term
Facility. A commitment fee of 0.5% to 1.0% will be charged on the undrawn
portion of the commitment relating to the Revolving Facility and the Tranche A
Term Facility. We will be expected to maintain certain financial covenants
requiring minimum access lines, debt to capital and debt to EBITDA ratios.
In connection with the Splitrock acquisition, approximately $261 million in
Splitrock debt remains outstanding. The merger constituted a change of control
as defined in the Indenture for the Splitrock Senior Notes payable. Therefore,
Splitrock was required under the Indenture to make an offer within 30 days of
the change of control to repurchase all of the Splitrock Senior Notes properly
tendered at a price equal to 101% of the principal amount plus accrued and
unpaid interest to the date of repurchase. On April 12, 2000, Splitrock mailed
the appropriate notice to the holders of the Senior Notes. The note holders had
until May 12, 2000 to exercise their rights under this notice. Security holders
with a principal amount of $100,000 exercised their option rights under this
notice and have until May 16, 2000 to revoke any such election.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Statements included in this discussion relating, but not limited, to future
revenues, operating expenses, capital requirements, growth rates, cash flows,
operational performance, sources and uses of funds, acquisitions, technological
changes and development of a PCS system, are forward-looking statements that
involve certain risks and uncertainties. Factors that may cause the actual
results, performance, achievements or investments expressed or implied by such
forward-looking statements to differ materially from any future results,
performance, achievements or investments expressed or implied by such forward-
looking statements include, among other things, the availability of financing
and regulatory approvals, the number of potential customers in a target market,
the existence of strategic alliances and relationships, technological,
regulatory or other developments in the Company's business, the ability of the
Company and its third party vendors to maintain Year 2000 readiness in computer
systems, changes in the competitive climate in which the Company operates and
the emergence of future opportunities and other factors more fully described
under the caption "Business--Risk Factors" in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999, filed with the Securities
and Exchange Commission on March 30, 2000 and which section is incorporated
herein by reference.
Unless otherwise indicated, all dollar amounts in the following
Management's Discussion and Analysis of Financial Condition and Results of
Operations that exceed $1 million have been rounded to one decimal place and all
dollar amounts less than $1 million have been rounded to the nearest thousand.
All share data in the consolidated financial statements and notes to the
financial statements have been adjusted to reflect the April 24, 2000 three-for-
one stock split of our Class A common stock.
Overview
We derive most of our revenue from:
. our core business of providing local, long distance and related
communications services to end users, typically in a bundled package
. the sale of advertising space in telephone directories
. traditional local telephone company services through the operations of
Illinois Consolidated Telephone Company ("ICTC") in east central
Illinois and Dakota Telecommunications Group, Inc. in southeast South
Dakota
. communications facilities and services dedicated for a particular
customer's use
We also derive revenue from:
. communications network maintenance services
. telephone equipment sales, leasing, service and installation
. video services
. telemarketing services
. computer networking services
. other communications services, including cellular, operator, payphone,
and paging services
The table set forth below summarizes our percentage of revenues from these
sources:
11
<PAGE>
Quarter Ended March 31,
------------------------
2000 1999
---- ----
Local and long distance communications services..... 53% 45%
Telephone directory advertising..................... 22 27
Traditional local telephone company services........ 8 10
Special access, private line and data services...... 9 8
Network maintenance and equipment services.......... 3 5
Telemarketing services.............................. 2 3
Other communications services....................... 3 2
---- ----
100% 100%
==== ====
We began offering local and long distance services to business customers in
January 1994. In June 1996, we began marketing and providing to residential
customers in Cedar Rapids, Iowa and Iowa City, Iowa an integrated package of
communications services that includes local and long distance service, voice
mail, Internet access and travel card services. Since June 1996, we have
expanded the states in which we offer service to business customers to include
Iowa, Illinois, Indiana, Michigan, Minnesota, Nebraska, Wisconsin, North Dakota,
South Dakota, Colorado, Missouri, Utah, Washington, Ohio and Wyoming. We also
expanded our residential service to additional cities in Iowa and Illinois and
began offering the service to customers in North Dakota, South Dakota,
Wisconsin, Wyoming, Colorado, and Michigan. We plan to continue our efforts to
market and provide local, long distance and other communications services to
business customers and market our service to residential customers.
Our principal operating expenses consist of cost of service; selling,
general and administrative expenses ("SG&A"); and depreciation and amortization.
Cost of service primarily includes local services purchased from the MegaBells,
costs to terminate the long distance calls of our customers through long
distance carriers, costs of printing and distributing telephone directories and
costs associated with maintaining the Iowa Communications Network. The Iowa
Communications Network is a fiber optic communications network that links many
schools, libraries and other public buildings in the state of Iowa. SG&A
consist of sales and marketing, customer service and administrative expenses,
including the costs associated with operating our communications network.
Depreciation and amortization include depreciation of our telecommunications
network and equipment; amortization of goodwill and other intangibles related to
our acquisitions, amortization expense related to the excess of estimated fair
market value in aggregate of options over the aggregate exercise price of such
options granted to some of our officers, other employees and directors; and
amortization of one-time installation costs associated with transferring
customers' local line service from the regional Bell operating companies to our
local telecommunications service.
As we expand into new markets, both cost of service and SG&A will increase.
We expect to incur cost of service and SG&A expenses before achieving
significant revenues in new markets. Fixed costs related to leasing of central
office facilities needed to provide telephone services must be incurred prior to
generating revenue in new markets, while significant levels of marketing
activity may be necessary in the new markets in order for us to build a customer
base large enough to generate sufficient revenue to offset such fixed costs and
marketing expenses.
We have experienced operating losses since our inception as a result of
efforts to build our customer base, develop and construct our communications
network infrastructure, build our internal staffing, develop our systems and
expand into new markets. We expect to continue to focus on increasing our
customer base and geographic coverage and bringing our customer base onto our
communications network. Accordingly, we expect that our cost of service, SG&A
and capital expenditures will continue to increase significantly, all of which
may have a negative impact on operating results.
In addition, our projected increases in capital expenditures will continue
to generate negative cash flows from construction activities during the next
several years while we install and expand our fiber optic communications network
and develop wireless services. We may also be forced to change our pricing
policies to respond to a changing competitive environment, and we cannot assure
you that we will be able to maintain our operating margin. We cannot assure you
that growth in our revenue or customer base will continue or that we will be
able to achieve or sustain profitability or positive cash flows.
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We have generated net operating losses since our inception and,
accordingly, have incurred no income tax expense. We have reduced the net
deferred tax assets generated by these losses by a valuation allowance which
offsets the net deferred tax asset due to the uncertainty of realizing the
benefit of the tax loss carry forwards. We will reduce the valuation allowance
when, based on the weight of available evidence, it is more likely than not that
some portion or all of the deferred tax assets will be realized.
Three Months Ended March 31, 2000 Compared with Three Months Ended March 31,
1999
Total revenue increased from $181.1 million for the three months ended
March 31, 1999 to $288.3 million for the three months ended March 31, 2000,
representing an increase of $107.2 million or 59%. The increase was due to the
acquisitions completed in 1999 as well as the increase in local and long
distance customers. Revenue from the sale of local and long distance
telecommunications services accounted for $73.1 million of the increase,
including $44.2 million contributed by Dakota Telecommunications Group, Inc.
("DTG"), Ovation Communications, Inc. ("Ovation"), and Access Communications
Holding, Inc. and S.J. Investments Holdings, Inc. (together, "Access") which we
acquired on March 5, 1999, March 31, 1999 and August 13, 1999, respectively.
Local exchange services generated $3.9 million in additional revenues over the
same period in 1999, including $2.5 million contributed by DTG. Private line
and data revenues accounted for $10.9 million of increased revenues over 1999,
including $9.2 million contributed by DTG, Ovation and Access. Network
maintenance and equipment revenue increased $1.1 million over 1999, including
$0.5 million contributed by DTG. Other telecommunications revenue increased
$1.9 million when compared to the same period in 1999, which was primarily
attributable to the DTG, Ovation and Access acquisitions. Directory revenues
increased $15.4 million from the first quarter of 1999 to the first quarter of
2000 due mainly to revenues from new directories acquired in 1999.
Telemarketing revenues in the first quarter of 2000 increased $0.9 million when
compared to the same period in 1999.
Cost of service increased from $92.5 million for the three months ended
March 31, 1999, to $148.1 million for the three months ended March 31, 2000,
representing an increase of $55.6 million or 60%. This increase in cost of
service was due primarily to the growth in our local and long distance
telecommunications and to the acquisitions of DTG, Ovation and Access which
contributed an aggregate of $25.7 million to the increase. Cost of service as a
percentage of revenue remained consistent at 51% for the three months ended
March 31, 1999 and for the three months ended March 31, 2000.
SG&A increased from $79.8 million for the three months ended March 31, 1999
to $122.2 million for the three months ended March 31, 2000, an increase of
$42.4 million or 53%. Our acquisitions of Talking Directories Inc. and Info
America Phone Books, Inc. (together, "Talking Directories"), DTG, Ovation and
Access contributed to the increase. Also contributing to this increase were
increased costs related primarily to expansion of selling, customer support and
administrative activities to support our growth.
Depreciation and amortization expenses increased from $35.1 million for the
three months ended March 31, 1999 to $60.6 million for the three months ended
March 31, 2000, representing an increase of $25.5 million or 73%. This increase
related to the acquisitions of Talking Directories, DTG, Ovation and Access and
to the growth of our network.
Interest income increased from $8.3 million for the three month period
ended March 31, 1999, to $15.3 million for the same period in 2000. This
increase resulted from a higher average investment balance during 2000.
Gross interest expense increased from $33.7 million for the first quarter
of 1999 to $41.2 million for the first quarter of 2000. This increase was
primarily a result of an increase in the accretion of interest on our 10 1/2%
senior discount notes of $1.0 million and an increase of interest of $5.9
million primarily as the result of the issuance of our 8 1/8% senior notes in
February 1999. Interest expense of approximately $10.2 and $4.2 million was
capitalized as part of our construction of fiber optic network during the first
quarter of 2000 and 1999, respectively.
Net loss applicable to common shares increased from $47.5 million for the
three months ended March 31, 1999 to $72.1 million for the three months ended
March 31, 2000, an increase of $24.6 million. This increase resulted primarily
from the following four factors: (1) the expansion of our local and long
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distance services, which requires significant expenditures, a substantial
portion of which is incurred before the realization of revenues; (2) the
increased depreciation expense related to the construction and expansion of our
communications networks and amortization of intangibles related to acquisitions;
(3) net interest expense on indebtedness to fund market expansion, network
development and acquisitions, and (4) dividends on preferred stock issued.
Liquidity and Capital Resources
Our total assets increased from $4.2 billion at December 31, 1999 to $6.5
billion at March 31, 2000. The increase is primarily due to the acquisition
related intangibles of approximately $2.1 billion resulting from the acquisition
of Splitrock. At March 31, 2000, our current assets of $1,396.9 million
exceeded our current liabilities of $415.1 million, providing working capital of
$981.8 million, which represents a decrease in working capital of $291.0 million
compared to December 31, 1999. At December 31, 1999, our current assets of
$1,569.5 million exceeded current liabilities of $296.7 million, providing
working capital of $1,272.8 million.
The net cash used in operating activities totaled $25.0 million for the
three months ended March 31, 2000 and $48.2 million for the three months ended
March 31, 1999. During the three months ended March 31, 2000, cash used in
operating activities was used primarily to fund our net loss of $72.1 million
for such period. Primarily as a result of the expansion of our local and long
distance communications services, we also required cash to fund:
. growth in trade receivables of $35.6 million
. growth in inventory of $2.4 million
. decreases in deferred line installation costs of $9.0 million
. decreases in accounts payable and accrued expenses of $26.0 million
These amounts were partially offset by:
. decreases in prepaid and other expenses of $31.0 million
. decreases in deferred expenses of $2.2 million
. increases in deferred revenue of $14.3 million
. increases in customer deposits of $1.9 million
. cumulative non-cash expenses of $70.7 million
During the three months ended March 31, 1999, cash for operating activities was
used primarily to fund our net loss of $47.5 million for such period. We also
required cash to fund the growth in trade receivables, inventory and deferred
line installation costs of $17.0 million, $5.0 million and $2.5 million,
respectively, and to decrease accounts payable and accrued expenses of $29.5
million. These uses of cash for operating activities during the three months
ended March 31, 1999, were offset by a decrease in prepaid expenses of $5.6
million and increases in deferred revenue and customer deposits of $0.7 million
and $2.6 million, respectively, and cumulative non-cash expenses of $44.4
million.
Our investing activities provided cash of $226.0 million during the three
months ended March 31, 2000 and used cash of $349.4 million during the three
months ended March 31, 1999. The equipment required for the expansion of our
local and long distance telecommunications services, our development and
construction of fiber optic telecommunications network and other capital
expenditures resulted in purchases of equipment and fiber optic cable and other
property and equipment totaling $239.4 million and $84.9 million during the
three months ended March 31, 2000 and 1999, respectively. We also used cash of
$280.6 million and $262.0 million to acquire available-for-sale securities
during the first three months of 2000 and 1999, respectively, offset by proceeds
from sales and maturities of available-for-sale securities of $759.4 million and
$128.1 million, respectively, during those periods.
During the three months ended March 31, 2000 and March 31, 1999, we used
aggregate cash of $10.9 million and $128.1 million, respectively, to acquire
various directories and other telecommunication businesses.
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Net cash received from financing activities was $8.9 million during the
three months ended March 31, 2000. Net cash received from financing activities
during the three months ended March 31, 1999 was $357.9 million and was
primarily obtained from our offering of our 8 1/8% senior notes in February
1999.
On February 22, 1999, we completed an offering of $500.0 million aggregate
principal amount of our 8 1/8% senior notes in which we received net proceeds of
approximately $485.8 million. Interest on the 8 1/8% senior notes is payable in
cash semi-annually in arrears on February 15 and August 15.
Our 10 1/2% senior discount notes, 9 1/4% senior notes, 8 3/8% senior
notes, 9 1/2% senior notes and 8 1/8% senior notes are senior unsecured
obligations of McLeodUSA Incorporated, the parent company, ranking pari passu in
right of payment with all other existing and future senior unsecured obligations
of McLeodUSA and senior to all existing and future subordinated debt of
McLeodUSA. The 10 1/2% senior discount notes, 9 1/4% senior notes, 8 3/8%
senior notes, 9 1/2% senior notes and 8 1/8% senior notes are effectively
subordinated to all existing and future secured indebtedness of McLeodUSA and
our subsidiaries to the extent of the value of the assets securing such
indebtedness. The 10 1/2% senior discount notes, 9 1/4% senior notes, 8 3/8%
senior notes, 9 1/2% senior notes and 8 1/8% senior notes also are effectively
subordinated to all existing and future third-party indebtedness and other
liabilities of our subsidiaries.
The indentures governing our 10 1/2% senior discount notes, 9 1/4% senior
notes, 8 3/8% senior notes, 9 1/2% senior notes and 8 1/8% senior notes impose
operating and financial restrictions on our subsidiaries and us. These
restrictions affect, and in many cases significantly limit or prohibit, among
other things, our subsidiaries' ability to:
. incur additional indebtedness
. pay dividends or make distributions in respect of our or our
subsidiaries' capital stock
. redeem capital stock
. make other restricted payments
. enter into sale and leaseback transactions
. create liens upon assets
. enter into transactions with affiliates or related persons
. sell assets
. consolidate, merge or sell all or substantially all of our assets
Approximately $261.0 million of public debt at Splitrock remains outstanding
after our acquisition of Splitrock. The Splitrock indenture provides for
redemption of their Senior Notes at any time, in whole or in part, on or after
July 15, 2003 at a premium through July 15, 2005. The Splitrock Senior Note
indenture also restricts Splitrock's ability to incur additional indebtedness,
to create liens or other encumbrances, to make certain payments, investments,
loans and guarantees and to sell or otherwise dispose of a substantial portion
of assets to, or merge or consolidate with, an unaffiliated entity.
We cannot assure you that such covenants in our various indentures will not
adversely affect our ability to finance our future operations or capital needs
or to engage in other business activities that may be in our interests.
As of March 31, 2000 based on our business plan, capital requirements and
growth projections as of that date, we estimated that we would require
approximately $2.0 billion through 2002. Our estimated aggregate capital
requirements include the projected costs of:
. building our fiber optic communications network, including intra-city
fiber optic communications networks
. adding voice and ATM switches
. expanding operations in existing and new markets
. developing wireless services
. funding general corporate expenses
. completing recent acquisitions
15
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. constructing, acquiring, developing or improving telecommunications
assets
The estimated costs and incremental capital needs associated with the
acquisition of Splitrock are included in our estimated aggregate capital
requirements.
We expect to use the following to address our capital needs:
. approximately $1,029.8 million of cash and investments on hand at March
31, 2000
. additional issuance of debt or equity securities, including the
commitment for approximately $1.0 billion in Senior Secured Credit
Facilities as discussed in Note 6 of Part I, Item 1
. projected operating cash flow
Our estimate of future capital requirements is a forward-looking statement
within the meaning of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. The actual amount and timing of our future
capital requirements may differ substantially from our estimate due to factors
such as:
. strategic acquisition costs and effects of acquisitions on our business
plan, capital requirements and growth projections
. unforeseen delays
. cost overruns
. engineering design changes
. changes in demand for our services
. regulatory, technological or competitive developments
. new opportunities
We also expect to evaluate potential acquisitions, joint ventures and
strategic alliances on an ongoing basis. We may require additional financing if
we pursue any of these opportunities. Accordingly, we may need additional
capital to continue to expand our markets, operations, facilities, network and
services.
We may meet any additional capital needs by issuing additional debt or
equity securities or borrowing funds from one or more lenders. We cannot assure
you that we will have timely access to additional financing sources on
acceptable terms.
Failure to generate or raise sufficient funds may require us to delay or
abandon some of our expansion plans or expenditures, which could have a material
adverse effect on our business, results of operations or financial condition.
See "Business--Risk Factors--Failure to Raise Necessary Capital Could Restrict
Our Ability to Develop Our Network and Services and Engage in Strategic
Acquisitions" in our Annual Report on Form 10-K.
Market Risk
At March 31, 2000, we recorded the marketable equity securities that we
hold at a fair value of $108.3 million. These securities have exposure to price
risk. A hypothetical ten percent adverse change in quoted market prices would
amount to a decrease in the recorded value of investments of approximately $10.8
million. We believe our exposure to market price fluctuations on all other
investments is nominal due to the short-term nature of our investment portfolio.
We have no material future earnings or cash flow exposures from changes in
interest rates on our long-term debt obligations, as substantially all of our
long-term debt obligations are fixed rate obligations.
Year 2000 Date Conversion
The Year 2000 conversion issue, which involved the millennial date change
from 1999 to 2000, threatened to impact computer programs and hardware timers
using two digits (rather than four) to define the applicable year. Prior to the
end of 1999, we completed our review of our system readiness for the
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processing of date-sensitive information by our computerized information
systems. Upon the occurrence of the millennial date change, none of our computer
systems appeared to suffer material adverse effects from the Year 2000
conversion.
We incurred costs arising from our Year 2000 readiness process in the
amount of $6.3 million. Our review and related Year 2000 readiness activities
did not cause us to defer or forego, to any material degree, any other critical
Information Technology project.
You should be aware that there is the possibility of latent defects or
issues related to the Year 2000 conversion issue that could result in future
miscalculations or system failures. If we, our major vendors, our material
service providers or our customers fail to identify and address any latent Year
2000 issues in a timely manner, such failure could have a material adverse
effect on our business, results of operations and financial condition. We
depend on local exchange carriers, primarily the MegaBells, to provide most of
our local and some of our long distance services. To the extent US West and
SBC/Ameritech fail to address latent Year 2000 issues which might interfere with
their ability to fulfill their obligations to us, such interference could have a
material adverse effect on our future operations. If other telecommunications
carriers are unable to resolve such issues, it is likely that we will be
affected to a similar degree as others in the telecommunications industry.
Effects of New Accounting Standards
Accounting for Derivative Instruments and Hedging Activities
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities", as amended, is effective for
fiscal years beginning after June 15, 2000. SFAS No. 133 establishes accounting
and reporting standards for derivative instruments and hedging activities by
requiring that entities recognize all derivatives as either assets or
liabilities at fair market value on the balance sheet. The Company does not
expect the impact of the adoption of SFAS No. 133 to be material to its results
of operations as it does not currently hold any derivative instruments or engage
in hedging activities.
Revenue Recognition
The effective date for Staff Accounting Bulletin ("SAB") No. 101, "Revenue
Recognition" has been delayed and is effective beginning in the second quarter
of 2000. SAB No. 101 provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. Management believes that this
statement will not have a material effect on results of operations and financial
position of the Company.
Inflation
We do not believe that inflation has had a significant impact on our
consolidated operations.
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PART II
OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
During the period from January 1, 2000 through March 31, 2000, we issued
and sold the following equity securities not registered under the Securities Act
of 1933, as amended:
(1) On January 5, 2000, we issued 239,475 shares of Class A common stock
in connection with our acquisition of certain assets of Noverr Publishing, Inc.
("Noverr"). We had previously agreed on May 29, 1999 to purchase four
directories and certain assets of Noverr for a total purchase price of $22.3
million, which consisted of 239,475 shares of Class A common stock, after giving
effect for the three-for-one stock split described in Note 4 to the financial
statements, $19.4 million in cash and note payable and an option to purchase
300,000 shares of Class A common stock, after giving effect for the three-for-
one stock split described in Note 4 to the financial statements.
(2) On March 21, 2000, we issued 46,272 shares of Class A common stock
in connection with our acquisition of certain assets of Millennium Group
Telemanagement, LLC ("Millennium"). We had previously agreed on June 8, 1999, to
purchase certain assets of Millennium and assume certain liabilities of
Millennium for a total purchase price of $7.0 million. The purchase price
consisted of $3.5 million in cash and the issuance or commitment to issue
385,590 shares of Class A common stock, after giving effect for the three-for-
one stock split described in Note 4 to the financial statements, of which
208,218 shares were issued June 8, 1999 and 131,100 were issued on September 28,
1999.
(3) On February 25, 2000, we acquired certain assets of University
System Technology in exchange for 103,125 shares of our Class A common stock,
after giving effect for the three-for-one stock split described in Note 4 to the
financial statements.
The issuance of securities described above were made in reliance upon the
exemption from registration provided by Section 4(2) of the Securities Act or
Regulation D promulgated thereunder for transactions by an issuer not involving
any public offering. The recipients of securities in each such transaction
represented their intention to acquire the securities for investment only and
not with a view to or for distribution in connection with such transactions.
All recipients had adequate access to information about us through their
relationship with us or through information about us made available to them.
Item 4. Submission of Matters to a Vote of Security Holders
We held a special meeting of stockholders on March 30, 2000. Both
proposals presented for stockholder consideration were approved at the meeting.
The following is a tabulation of the voting on each proposal presented at the
meeting:
Proposal 1 - Amend the Certificate of Incorporation to Increase the Number of
Authorized Shares of Class A Common Stock to 1,000,000,000
Votes for 406,937,682
Votes Against 3,930,129
Votes Withheld 108,867
Broker Non-Votes 0
Proposal 2 - Approve the Issuance of Shares pursuant to Amended and Restated
Agreement and Plan of Merger with Splitrock Services, Inc.
Votes for 410,746,626
Votes Against 109,269
Votes Withheld 120,786
Broker Non-Votes 0
The votes indicated give effect to the three-for-one stock split described
in Note 4 to the financial statements.
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
- -------
Number Exhibit Description
- ------ -------------------
3.1 Amended and Restated Certificate of Incorporation of McLeod, Inc. Filed as
an exhibit to the McLeodUSA Registration Statement on Form S-1, file no.
333-3112, and incorporated herein by reference.
3.3 Certificate of Amendment of Amended and Restated Certificate of
Incorporation of McLeod, Inc. Filed as an exhibit to the McLeodUSA
Registration Statement on Form S-4, file no. 333-27647, and incorporated
herein by reference.
3.4 Certificate of Change of Registered Agent and Registered Office of
McLeodUSA Incorporated. Filed as an exhibit to the McLeodUSA Annual Report
on Form 10-K, file no. 0-20763, filed with the SEC on March 6, 1998 and
incorporated herein by reference.
3.5 Certificate of Designations of the 6.75% Series A preferred stock. Filed
as an exhibit to the McLeodUSA Current Report on Form 8-K, file no. 0-
20763, filed with the SEC on August 9, 1999 and incorporated herein by
reference.
3.6 Certificate of Designations of the Series B preferred stock. Filed as an
exhibit to the McLeodUSA Registration Statement on Form S-4, file no. 333-
95941, and incorporated herein by reference.
3.7 Certificate of Designations of the Series C preferred stock. Filed as an
exhibit to the McLeodUSA Registration Statement on Form S-4, file no. 333-
95941, and incorporated herein by reference.
3.8 Amendment dated March 30, 2000 to Amended and Restated Certificate of
Incorporation of McLeodUSA Incorporated.
4.26 Stockholders' Agreement dated as of March 30, 2000 by and among McLeodUSA,
Kwok Li and Linsang Partners, LLC.
4.27 Third Amended and Restated November 1998 Stockholders' Agreement dated as
of March 10, 2000 by and among certain Alliant Entities, Clark and Mary
McLeod, Richard Lumpkin and certain CCI Shareholders.
4.28 Third Amended and Restated January 1999 Stockholders' Agreement dated as
of March 10, 2000 by and among certain Alliant Entities, Clark and Mary
McLeod, Richard Lumpkin, certain CCI Shareholders and the M/C
Stockholders.
4.29 Indenture dated as of July 24, 1998 between Harris Trust Company of New
York (formerly Bank of Montreal Trust Company) and Splitrock Services,
Inc. relating to 11 3/4% Senior Notes due 2008. Filed as an exhibit to
Splitrock's Registration Statement on Form S-4, file no. 333-61293, and
incorporated herein by reference.
4.30 Specimen 11 3/4% Senior Note due 2008. Filed as an exhibit to Splitrock's
Registration Statement on Form S-4, file no. 333-61293, and incorporated
herein by reference.
4.31 First Supplemental Indenture dated as of November 24, 1999 between Harris
Trust Company of New York and Splitrock relating to 11 3/4% Senior Notes
due 2008. Filed as an exhibit to Splitrock's Post-effective Amendment on
Form S-3 to its Registration Statement on Form S-1, file no. 333-63001,
and incorporated herein by reference.
4.32 Second Supplemental Indenture dated as of December 22, 1999 between Harris
Trust Company of New York, Splitrock and Splitrock Leasing, LLC relating
to 11 3/4% Senior Notes due 2008. Filed as an exhibit to Splitrock's Post-
effective Amendment on Form S-3 to its Registration Statement on Form S-1,
file no. 333-63001, and incorporated herein by reference.
4.33 Third Supplemental Indenture dated as of February 11, 2000 between Harris
Trust Company of New York, Splitrock and Splitrock Leasing, LLC relating
to 11 3/4% Senior Notes due 2008. Filed as an exhibit to Splitrock's Post-
effective Amendment on Form S-3 to its Registration Statement on Form S-1,
file no. 333-63001, and incorporated herein by reference.
4.34 Warrant Agreement dated as of July 29, 1998 by and between Harris Trust
Company of New York (formerly Bank of Montreal Trust Company) and
Splitrock Services, Inc. Filed as an exhibit to Splitrock's Registration
Statement on Form S-4, file no. 333-61293, and incorporated herein by
reference.
4.35 Form of Splitrock Warrant. Filed as an exhibit to Splitrock's
Registration Statement on Form S-4, file no. 333-61293, and incorporated
herein by reference.
4.36 First Supplemental Warrant Agreement by and between Splitrock Services,
Inc. and Harris Trust Company of New York, dated as of February 24, 2000.
Filed as an exhibit to Splitrock's Post-effective Amendment on Form S-3 to
its Registration Statement on Form S-1, file no. 333-63001, and
incorporated herein by reference.
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4.37 Second Supplemental Warrant Agreement by and between Splitrock Services,
Inc., Splitrock Holdings, Inc. and Harris Trust Company of New York, dated
as of March 30, 2000.
4.38 Third Supplemental Warrant Agreement by and between Splitrock Services,
Inc., Splitrock Holdings, Inc., McLeodUSA Incorporated and Harris Trust
Company of New York, dated as of March 30, 2000.
10.58 Splitrock Full Service Agreement dated as of June 24, 1997 by and between
Splitrock and Prodigy Services Corporation. Filed as an exhibit to
Splitrock's Registration Statement on Form S-4, file no. 333-61293, and
incorporated herein by reference. *
10.59 Amendment to Full Service Agreement between Splitrock and Prodigy dated
May 18, 1999. Filed as an exhibit to Splitrock's Registration Statement on
Form S-1, file no. 333-97707, and incorporated herein by reference. *
10.60 Amended and Restated Full Service Agreement between Splitrock and Prodigy
dated as of February 16, 2000. Filed as an exhibit to Splitrock's
Quarterly Report on Form 10-Q, file no. 000-26827, filed with the SEC on
May 15, 2000 and incorporated herein by reference. *
10.61 Cost Sharing National IRU Agreement effective April 26, 1999 by and
between Level 3 Communications, LLC and Splitrock. Filed as an exhibit to
Splitrock's Registration Statement on Form S-1, file no. 333-97707, and
incorporated herein by reference. *
10.62 First Amendment to Cost Sharing National IRU Agreement by and between
Level 3 Communications, LLC and Splitrock. Filed as an exhibit to
Splitrock's Registration Statement on Form S-1, file no. 333-97707, and
incorporated herein by reference. *
10.63 Second Amendment to Cost Sharing National IRU Agreement by and between
Level 3 Communications, LLC and Splitrock. Filed as an exhibit to
Splitrock's Quarterly Report on Form 10-Q, file no. 000-26827, filed with
the SEC on May 15, 2000 and incorporated herein by reference. *
10.64 Third Amendment to Cost Sharing National IRU Agreement by and between
Level 3 Communications, LLC and Splitrock. Filed as an exhibit to
Splitrock's Quarterly Report on Form 10-Q, file no. 000-26827, filed with
the SEC on May 15, 2000 and incorporated herein by reference. *
11.1 Statement regarding computation of loss per common share.
27.1 Financial Data Schedule.
- ----------
* Confidential treatment has been requested. The copy filed as an exhibit
omits the information subject to the confidential treatment requested.
(b) Reports on Form 8-K
On January 19, 2000, we filed a Current Report on Form 8-K to announce that
on January 6, 2000 we entered into an agreement and Plan of Merger with
Splitrock Services, Inc., a Delaware corporation.
On January 21, 2000, we filed a Current Report on Form 8-K to make various
slides regarding the proposed acquisition of Splitrock Services, Inc. available.
On February 3, 2000, we filed a Current Report on Form 8-K to report
results for the fourth quarter and fiscal year 1999.
On February 11, 2000, we filed a Current Report on Form 8-K to report that
our chairman and CEO and his wife sold shares of McLeodUSA stock.
On March 14, 2000, we filed a Current Report on Form 8-K to announce that
the Board of Directors had declared a three-for-one stock split of our Class A
common stock to be effected in the form of a stock dividend.
20
<PAGE>
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 thereunto duly authorized.
McLEODUSA INCORPORATED
(registrant)
Date: May 15, 2000 By: /s/ Stephen C. Gray
-------------------
Stephen C. Gray
President and Chief Operating Officer
Date: May 15, 2000 By: /s/ J. Lyle Patrick
-------------------
J. Lyle Patrick
Chief Financial Officer
21
<PAGE>
INDEX TO EXHIBITS
Sequentially
------------
Exhibit Numbered
- --------- ------------
Number Exhibit Description Page
- ------ ------------------- ------------
3.1 Amended and Restated Certificate of Incorporation of McLeod, Inc. Filed as
an exhibit to the McLeodUSA Registration Statement on Form S-1, file no.
333-3112, and incorporated herein by reference.
3.3 Certificate of Amendment of Amended and Restated Certificate of
Incorporation of McLeod, Inc. Filed as an exhibit to the McLeodUSA
Registration Statement on Form S-4, file no. 333-27647, and incorporated
herein by reference.
3.4 Certificate of Change of Registered Agent and Registered Office of
McLeodUSA Incorporated. Filed as an exhibit to the McLeodUSA Annual Report
on Form 10-K, file no. 0-20763, filed with the SEC on March 6, 1998 and
incorporated herein by reference.
3.5 Certificate of Designations of the 6.75% Series A preferred stock. Filed as
an exhibit to the McLeodUSA Current Report on Form 8-K, file no. 0-20763,
filed with the SEC on August 9, 1999 and incorporated herein by reference.
3.6 Certificate of Designations of the Series B preferred stock. Filed as an
exhibit to the McLeodUSA Registration Statement on Form S-4, file no. 333-
95941, and incorporated herein by reference.
3.7 Certificate of Designations of the Series C preferred stock. Filed as an
exhibit to the McLeodUSA Registration Statement on Form S-4, file no. 333-
95941, and incorporated herein by reference.
3.8 Amendment dated March 30, 2000 to Amended and Restated Certificate of
Incorporation of McLeodUSA Incorporated.
4.26 Stockholders' Agreement dated as of March 30, 2000 by and among McLeodUSA,
Kwok Li and Linsang Partners, LLC.
4.27 Third Amended and Restated November 1998 Stockholders' Agreement dated as
of March 10, 2000 by and among certain Alliant Entities, Clark and Mary
McLeod, Richard Lumpkin and certain CCI Shareholders.
4.28 Third Amended and Restated January 1999 Stockholders' Agreement dated as of
March 10, 2000 by and among certain Alliant Entities, Clark and Mary
McLeod, Richard Lumpkin, certain CCI Shareholders and the M/C Stockholders.
4.29 Indenture dated as of July 24, 1998 between Harris Trust Company of New
York (formerly Bank of Montreal Trust Company) and Splitrock Services, Inc.
relating to 11 3/4% Senior Notes due 2008. Filed as an exhibit to
Splitrock's Registration Statement on Form S-4, file no. 333-61293, and
incorporated herein by reference.
4.30 Specimen 11 3/4% Senior Note due 2008. Filed as an exhibit to Splitrock's
Registration Statement on Form S-4, file no. 333-61293, and incorporated
herein by reference.
4.31 First Supplemental Indenture dated as of November 24, 1999 between Harris
Trust Company of New York and Splitrock relating to 11 3/4% Senior Notes
due 2008. Filed as an exhibit to Splitrock's Post-effective Amendment on
Form S-3 to its Registration Statement on Form S-1, file no. 333-63001, and
incorporated herein by reference.
4.32 Second Supplemental Indenture dated as of December 22, 1999 between Harris
Trust Company of New York, Splitrock and Splitrock Leasing, LLC relating to
11 3/4% Senior Notes due 2008. Filed as an exhibit to Splitrock's Post-
effective Amendment on Form S-3 to its Registration Statement on Form S-1,
file no. 333-63001, and incorporated herein by reference.
4.33 Third Supplemental Indenture dated as of February 11, 2000 between Harris
Trust Company of New York, Splitrock and Splitrock Leasing, LLC relating to
11 3/4% Senior Notes due 2008. Filed as an exhibit to Splitrock's Post-
effective Amendment on Form S-3 to its Registration Statement on Form S-1,
file no. 333-63001, and incorporated herein by reference.
4.34 Warrant Agreement dated as of July 29, 1998 by and between Harris Trust
Company of New York (formerly Bank of Montreal Trust Company) and Splitrock
Services, Inc. Filed as an exhibit to Splitrock's Registration Statement on
Form S-4, file no. 333-61293, and incorporated herein by reference.
4.35 Form of Splitrock Warrant. Filed as an exhibit to Splitrock's Registration
Statement on Form S-4, file no. 333-61293, and incorporated herein by
reference.
4.36 First Supplemental Warrant Agreement by and between Splitrock Services,
Inc. and Harris Trust Company of New York, dated as of February 24, 2000.
Filed as an exhibit to Splitrock's Post-effective Amendment on Form S-3 to
its Registration Statement on Form S-1, file no. 333-63001, and
incorporated herein by reference.
22
<PAGE>
4.37 Second Supplemental Warrant Agreement by and between Splitrock Services,
Inc., Splitrock Holdings, Inc. and Harris Trust Company of New York, dated
as of March 30, 2000.
4.38 Third Supplemental Warrant Agreement by and between Splitrock Services,
Inc., Splitrock Holdings, Inc., McLeodUSA Incorporated and Harris Trust
Company of New York, dated as of March 30, 2000.
10.58 Splitrock Full Service Agreement dated as of June 24, 1997 by and between
Splitrock and Prodigy Services Corporation. Filed as an exhibit to
Splitrock's Registration Statement on Form S-4, file no. 333-61293, and
incorporated herein by reference. *
10.59 Amendment to Full Service Agreement between Splitrock and Prodigy dated
May 18, 1999. Filed as an exhibit to Splitrock's Registration Statement on
Form S-1, file no. 333-97707, and incorporated herein by reference. *
10.60 Amended and Restated Full Service Agreement between Splitrock and Prodigy
dated as of February 16, 2000. Filed as an exhibit to Splitrock's
Quarterly Report on Form 10-Q, file no. 000-26827, filed with the SEC on
May 15, 2000 and incorporated herein by reference. *
10.61 Cost Sharing National IRU Agreement effective April 26, 1999 by and
between Level 3 Communications, LLC and Splitrock. Filed as an exhibit to
Splitrock's Registration Statement on Form S-1, file no. 333-97707, and
incorporated herein by reference. *
10.62 First Amendment to Cost Sharing National IRU Agreement by and between
Level 3 Communications, LLC and Splitrock. Filed as an exhibit to
Splitrock's Registration Statement on Form S-1, file no. 333-97707, and
incorporated herein by reference. *
10.63 Second Amendment to Cost Sharing National IRU Agreement by and between
Level 3 Communications, LLC and Splitrock. Filed as an exhibit to
Splitrock's Quarterly Report on Form 10-Q, file no. 000-26827, filed with
the SEC on May 15, 2000 and incorporated herein by reference. *
10.64 Third Amendment to Cost Sharing National IRU Agreement by and between
Level 3 Communications, LLC and Splitrock. Filed as an exhibit to
Splitrock's Quarterly Report on Form 10-Q, file no. 000-26827, filed with
the SEC on May 15, 2000 and incorporated herein by reference. *
11.1 Statement regarding computation of loss per common share.
27.1 Financial Data Schedule.
- --------------
* Confidential treatment has been requested. The copy filed as an exhibit
omits the information subject to the confidential treatment requested.
23
<PAGE>
Exhibit 3.8
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
McLEODUSA INCORPORATED
McLeodUSA Incorporated, a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), hereby certifies as follows:
FIRST: Pursuant to Sections 141 and 242 of the General Corporation
Law of the State of Delaware (the "DGCL") and in accordance with the Certificate
of Incorporation and the By-laws of the Corporation, the Board of Directors of
the Corporation, at a meeting duly called and held on January 6, 2000, adopted
resolutions proposing and declaring advisable and in the best interests of the
Corporation the following amendment to the Certificate of Incorporation:
Section 4.1 of the Certificate of Incorporation is hereby amended and
restated as follows:
"4.1. Authorized Shares
The total number of shares of stock that the Corporation shall be
authorized to issue is 1,024,000,000 shares, divided into three classes as
follows: (i) 1,000,000,000 shares of Class A common stock having a par
value of $.01 per share ("Class A Common Stock"); (ii) 22,000,000 shares of
Class B common stock having a par value of $.01 per share ("Class B Common
Stock"); and (iii) 2,000,000 shares of serial preferred stock, having a par
value of $.01 per share ("Preferred Stock")."
SECOND: The foregoing amendment to the Certificate of Incorporation
was approved at the Corporation's special meeting of stockholders held on March
30, 2000, by the holders of at least a majority of the outstanding stock
entitled to vote thereon and a majority of the outstanding stock of each class
entitled to vote thereon as a class.
THIRD: The foregoing amendment to the Certificate of Incorporation
was duly adopted and approved in accordance with the requirements of Sections
141 and 242 of the DGCL.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be executed by its duly authorized officer, as of the 30th day of
March, 2000.
McLEODUSA INCORPORATED
By: /s/ Stephen C. Gray
-----------------------------
Stephen C. Gray
President and Chief Operating
Officer
2
<PAGE>
Exhibit 4.26
STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement (this "Agreement") is entered into as of
March 30, 2000, by and among McLeodUSA Incorporated, a Delaware corporation (the
"Company"), Kwok Li, a resident of Texas ("Li"), and Linsang Partners, LLC, a
Delaware limited liability company ("Linsang" and together with Li, the
"Stockholders").
WHEREAS, the Company, Southside Acquisition Corporation, a Delaware
corporation and wholly owned subsidiary of the Company ("Southside"), Splitrock
Services, Inc., a Delaware corporation ("Splitrock"), Splitrock Holdings, Inc.,
a Delaware corporation and wholly owned subsidiary of Splitrock ("Holdco"), and
Splitrock Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary
of Holdco, are parties to an Amended and Restated Agreement and Plan of Merger,
dated as of February 11, 2000 (the "Merger Agreement");
WHEREAS, Li is Chairman and Manager of Linsang and owns a majority of
the membership interests of Linsang;
WHEREAS, in order to induce the Company and Southside to enter into
the Merger Agreement, each of the Stockholders entered into an Amended and
Restated Voting Agreement, dated as of February 11, 2000 (the "Voting
Agreement");
WHEREAS, pursuant to Section 17 of the Voting Agreement, each of the
Stockholders has agreed to enter into this Agreement on or prior to the closing
of the transactions contemplated by the Merger Agreement;
WHEREAS, pursuant to Section 7.02(l) of the Merger Agreement, it is a
condition to the obligation of each of the Company and Southside to close that
the Stockholders enter into this Agreement on or prior to the closing of the
transactions contemplated by the Merger Agreement;
WHEREAS, each of the Stockholders is a significant stockholder of
Splitrock, and upon the closing of the transactions contemplated by the Merger
Agreement, each of the Stockholders will become a stockholder of the Company;
and
WHEREAS, each of the Stockholders will be greatly benefited by the
closing of the transactions contemplated by the Merger Agreement;
NOW, THEREFORE, for and in consideration of the foregoing and of the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:
<PAGE>
1. 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:
(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.
(c) "Class A Common Stock" shall mean the Class A common stock, par
value $.01 per share, of the Company.
(d) "Covered Securities" shall mean (i) 2,438,549 shares of Class A
Common Stock owned beneficially and of record by Li as a result
of the Merger (excluding any shares described in clauses (ii),
(iii) and (iv) below), (ii) 6,824,453 shares of Class A Common
Stock owned beneficially and of record by Linsang as a result of
the Merger (excluding (x) the warrants described in clause (iii)
below, (y) the Excluded McLeodUSA
2
<PAGE>
Financing Shares (as defined below), and (z) any shares described
in clause (iv) below), (iii) warrants to purchase 33,528 shares
of Class A Common Stock owned beneficially and of record by
Linsang and (iv) Securities issued or issuable upon exercise of
the warrants described in clause (iii) above and Securities
issued or issuable with respect to the Securities referred to in
clauses (i), (ii) and (iii) above by way of a stock dividend or
stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
(e) "Excluded McLeodUSA Financing Shares" shall mean 1,069,400 shares
of Class A Common Stock owned beneficially and of record by
Linsang in connection with the exchange of 2,000,000 shares of
common stock, par value $.001 per share, of Splitrock in
connection with the consummation of the Merger.
(f) "Expiration Date" shall mean December 31, 2002.
(g) "Merger" shall mean the merger of Southside with and into Holdco
pursuant to the terms and conditions of the Merger Agreement.
(h) "Securities" shall mean any equity securities of the Company or
any other securities convertible into or exercisable for such
equity securities.
2. TRANSFERS OF COVERED SECURITIES
2.1 Restrictions on Transfers
(a) Except as otherwise provided in this Section 2.1 or Section 2.2,
the Stockholders hereby agree that until the Expiration Date, the Stockholders
will not offer, sell, contract to sell, grant any option to purchase, or
otherwise dispose of, directly or indirectly, ("Transfer"), any Covered
Securities without submitting a written request to, and receiving the prior
written consent of, the Board of Directors of the Company (the "Board of
Directors" or the "Board").
(b) For the period commencing for the quarter ending December 31,
2000 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
each such financial reporting quarter during such period, the aggregate number,
if any, of shares of Class A Common Stock which are Covered Securities (not to
exceed in the aggregate one hundred thousand (100,000) shares of Class A Common
Stock per
3
<PAGE>
quarter, subject to adjustment pursuant to Section 4.1) that may be Transferred
by the 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 2.1(a), the
Stockholders shall be entitled to Transfer during each Transfer Period, provided
such Transfer is effected in accordance with all applicable laws (including
without limitation applicable federal and state securities laws), a number of
shares of Class A Common Stock which are Covered Securities equal to the
Transfer Amount, if any, for such Transfer Period. In no event shall any portion
of a Transfer Amount that is not utilized by the Stockholders during a Transfer
Period be reallocated or otherwise credited to any subsequent Transfer Periods.
The allocation between Li and Linsang of the Transfer Amount, if any, shall be
determined by Li as the Representative pursuant to Section 4.9.
(c) For the period commencing for the quarter ending December 31,
2000 and ending on the Expiration Date, the Company shall give the Stockholders
prompt written notice (in any event no later than fifty (50) days prior to the
beginning of the applicable Transfer Period) of its determination of any
Transfer Amount. Within seven (7) days of receipt of such notice, the
Stockholders shall provide written notice to the Company of the number of shares
of Class A Common Stock which are Covered Securities that the Stockholders
desire to Transfer pursuant to Section 2.1(b).
(d) At any time following the date hereof, (i) Linsang may pledge to
a nationally recognized financial institution (the "Pledgee") up to the
aggregate number of Covered Securities required by such Pledgee in order to
secure financing for Linsang of the difference between $100 million and the
amount of financing received with respect to, or to the extent not received,
reasonably available with respect to, the Excluded McLeodUSA Financing Shares
(such difference being referred to as the "Financing"); provided, however, (x)
-------- -------
such pledge complies with all applicable laws (including without limitation
applicable federal and state securities laws) and (y) the Pledgee takes such
shares subject to the restrictions on Transfer of this Agreement and agrees to
be bound by the terms hereof (as this Agreement may be amended or amended and
restated from time to time) and to become a party hereto with respect to the
Covered Securities being pledged pursuant to this Section 2.1(d), and (ii) Li
may pledge to a Pledgee up to the aggregate number of Covered Securities
required by such Pledgee in order to secure financing for the purchase of a
Gulfstream IV or other similarly priced aircraft; provided, however, (x) such
-------- -------
pledge complies with all applicable laws (including without limitation
applicable federal and state securities laws) and (y) the Pledgee takes such
shares subject to the restrictions on Transfer of this Agreement and agrees to
be bound by the terms hereof (as this Agreement may be amended or amended and
restated from time to
4
<PAGE>
time) and to become a party hereto with respect to the Covered Securities being
pledged pursuant to this Section 2.1(d).
2.2 Registration Rights
(a) For the period commencing on January 1, 2001 and ending on the
Expiration Date, in the event the Company proposes to register any shares of
Class A Common Stock under the Securities Act of 1933, as amended (the
"Securities Act") pursuant to an 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 the shares
of Class A Common Stock of the Stockholders), the Company, as determined by the
Board of Directors, shall give written notice to the 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 which are Covered Securities (not to exceed in
the aggregate on a per year basis a number of shares of Class A Common Stock
equal to 1,394,480, subject to adjustment pursuant to Section 4.1) to be
registered by the Company under the Securities Act (the "Registrable Amount")
for Transfer by the Stockholders in connection with such offering during such
period. If the Board determines to register shares of Class A Common Stock
which are Covered Securities pursuant to this Section 2.2(a), the Company will
promptly give written notice of such determination to the Stockholders, and
thereupon the Company will use commercially reasonable efforts to effect the
registration of that portion of the Registrable Amount that the Stockholders
indicate a desire to register. The allocation between Li and Linsang of the
Registrable Amount, if any, shall be determined by Li as the Representative
pursuant to Section 4.9. 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 the Stockholders shall be customary taking
into account, among other things, the nature of the offering and the
Stockholders' 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 Stockholders, which underwriting discounts and commissions shall be the
responsibility of the Stockholders.
(b) In addition to the registration rights granted pursuant to
Section 2.2(a), no more frequently than once during each of the calendar years
ending December 31, 2001 and 2002 (each such year, an "Annual Period), and upon
either (i) the receipt of a written request of the 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 Stockholders. If the Board
determines to register shares of Class A Common Stock which are Covered
Securities pursuant to this Section 2.2(b), the Company will promptly give
written notice of such
5
<PAGE>
determination to the Stockholders, and thereupon the Company will use
commercially reasonable efforts to effect the registration of that portion of
the Registrable Amount that the Stockholders indicate a desire to register. The
allocation between Li and Linsang of the Registrable Amount, if any, shall be
determined by Li as the Representative pursuant to Section 4.9. 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
the Stockholders shall be customary taking into account, among other things, the
nature of the offering and the Stockholders' 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 Stockholders, which underwriting discounts and
commissions shall be the responsibility of the Stockholders.
(c) Notwithstanding any other provision of this Agreement, to the
extent the Company has undertaken to register Covered Securities of the
Stockholders pursuant to this Section 2.2, 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.
3. REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Linsang
Linsang hereby represents and warrants, as of the date of this
Agreement, to the Company as follows:
3.1.1 Authorization
Linsang has taken all action necessary for it to enter into this
Agreement and to consummate the transactions contemplated hereby.
3.1.2 Binding Obligation
This Agreement constitutes a valid and binding obligation of Linsang,
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 Linsang pursuant hereto, when executed and delivered in accordance
with the provisions hereof, shall be a valid and binding obligation of Linsang,
enforceable in accordance with its terms (with the aforesaid exceptions).
6
<PAGE>
3.2 Representations and Warranties of Li
Li hereby represents and warrants, as of the date of this Agreement,
to the Company as follows:
3.2.1 Power and Authority
Li has the legal capacity and all other power and authority necessary
to enter into this Agreement and to consummate the transactions contemplated
hereby.
3.2.2 Binding Obligation
This Agreement constitutes a valid and binding obligation of Li,
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 Li pursuant hereto, when executed and delivered in accordance with
the provisions hereof, shall be a valid and binding obligation of Li,
enforceable in accordance with its terms (with the aforesaid exceptions).
3.3 Representations and Warranties of the Company
The Company hereby represents and warrants, as of the date of this
Agreement, to each of Li and Linsang as follows:
3.3.1 Authorization
The Company has taken all corporate action necessary for it to enter
into this Agreement and to consummate the transactions contemplated hereby.
3.3.2 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).
7
<PAGE>
4. MISCELLANEOUS
4.1 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
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.
4.2 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.
4.3 Entire Agreement; Amendment
This Agreement constitutes the entire agreement among the parties
hereto as of the date hereof with respect to the specific matters contemplated
herein, and it supersedes all prior oral or written agreements, commitments or
understandings with respect to the matters provided herein (other than with
respect to the foregoing the letter by and among the parties hereto dated as of
the date hereof). No amendment, modification or discharge of this Agreement
shall be valid or binding unless set forth in writing and duly executed by the
Company and the Stockholders.
4.4 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.
4.5 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
8
<PAGE>
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 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.
4.6 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).
4.7 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:
McLeodUSA Incorporated
McLeodUSA Technology Park
6400 C Street, SW, P.O. Box 3177
Cedar Rapids, IA 52406-3177
Attention: Randall Rings, Esq.
Facsimile: (319) 790-7901
(ii) If to either of the Stockholders:
Linsang Partners, LLC
8301 Professional Place
Landover, Maryland 20285
Attention: Kwok Li
Facsimile: (301) 809-4525
with a copy to:
Shea & Gardner
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036
Attention: Martin J. Flynn, Esq.
Facsimile: (202) 828-2195
9
<PAGE>
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.
4.8 Termination
(a) If during any Annual Period the Board of Directors has not
provided the Stockholders a reasonable opportunity to Transfer shares of Class A
Common Stock which are Covered Securities pursuant to Section 2.2, or consented
to the written request of the Stockholders or otherwise provided the
Stockholders a reasonable opportunity to Transfer shares of Class A Common Stock
which are Covered Securities pursuant to Section 2.1(a), an aggregate of not
less than 1,394,480 shares of Class A Common Stock which are Covered Securities,
subject to adjustment pursuant to Section 4.1, then the Stockholders may
terminate this Agreement by providing written notice of termination to the
Company not 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.
(b) Unless otherwise previously terminated by the Stockholders
pursuant to Section 4.8(a), this Agreement shall terminate on the Expiration
Date, such that all rights and obligations hereunder shall cease, and this
Agreement shall be of no further force or effect.
4.9 Appointment of Representative
Linsang hereby appoints Li, 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 Linsang agrees 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 Linsang, as
fully as if Linsang was acting on its own behalf, including, without limitation,
dealing with the Company 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 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
Linsang.
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4.10 Publicity
The Stockholders will use their reasonable best efforts to consult
with the Company prior to issuing any press release, making any filing with any
governmental entity or national securities exchange or making any other public
dissemination of information by the Stockholders within which this Agreement or
the contents hereof are referenced or described.
4.11 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.
11
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed and delivered this
Stockholders' Agreement, or have caused this Stockholders' Agreement to be duly
executed and delivered on their behalf, as of the day and year first hereinabove
set forth.
McLEODUSA INCORPORATED
By: /s/ J. Lyle Patrick
-------------------------------
Name: J. Lyle Patrick
Title: Group Vice President
STOCKHOLDERS
LINSANG PARTNERS, LLC
By: /s/ Kwok Li
-------------------------------
Name: Kwok Li
Title: Chairman and Manager
/s/ Kwok Li
-----------------------------------
Kwok Li
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Exhibit 4.27
THIRD AMENDED AND RESTATED
NOVEMBER 1998 STOCKHOLDERS' AGREEMENT
This Third Amended and Restated November 1998 Stockholders' Agreement
(this "Agreement") is entered into as of March 10, 2000, by and among McLeodUSA
Incorporated, a Delaware corporation (the "Company"); Alliant Energy
Corporation, a Wisconsin corporation ("AEC"); Alliant Energy Investments, Inc.,
an Iowa corporation and indirect wholly owned subsidiary of AEC ("AEI");
Heartland Properties, Inc., a Wisconsin corporation and indirect wholly owned
subsidiary of AEC ("Heartland"); LNT Communications LLC, an Iowa limited
liability company and indirect wholly owned subsidiary of AEC ("LNT"); Alliant
Energy Foundation, Inc., a Wisconsin corporation (non-profit) ("AEF" and
together with AEC, AEI, Heartland and LNT, the "AEC Entities"); Clark E. McLeod
("McLeod"); Mary E. McLeod (together with McLeod, the "McLeods"); Richard A.
Lumpkin ("Lumpkin") and certain of the former shareholders of Consolidated
Communications Inc. ("CCI") and certain permitted transferees of certain of the
former CCI shareholders in each case who are listed in Schedule I hereto (the
----------
"Principal CCI Shareholders"); and for purposes of Sections 4, 5.6, 5.8(b), 5.11
and the first and second sentences of Section 5.3 only, certain of the other
former CCI shareholders and certain permitted transferees of certain of the
other former CCI shareholders in each case who are listed in Schedule II hereto
-----------
(the "Other CCI Shareholders"). The AEC Entities, the McLeods, and Lumpkin and
the Principal CCI Shareholders are referred to herein collectively as the
"Principal Stockholders" and individually as a "Principal Stockholder."
WHEREAS, the Company, AEC, AEI, Heartland, AEF, the McLeods, Lumpkin,
the Principal CCI Shareholders and the Other CCI Shareholders are parties to a
Second Amended and Restated November 1998 Stockholders' Agreement, entered into
as of December 17, 1999 (the "Second Amended and Restated November 1998
Stockholders' Agreement");
WHEREAS, the Company, AEC, AEI, Heartland, AEF, the McLeods, Lumpkin
and the Principal CCI Shareholders desire to add LNT as a party to this
Agreement as a result of the transfer of certain shares of the Company's Class A
common stock, par value $.01 per share (the "Class A Common Stock"), by an
Affiliate (as defined in Section 1.2) of AEC to LNT;
WHEREAS, the Other CCI Shareholders no longer desire to be parties to
this Agreement and the Company and the Principal Stockholders desire to
terminate the Other CCI Shareholders as parties to this Agreement;
<PAGE>
WHEREAS, the Company and the Principal Stockholders deem it to be in
the best interests of the Company and its stockholders to provide for the
continuity and stability of the business and policies of the Company on the
terms and conditions hereinafter set forth;
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Company, the Principal Stockholders, the Other CCI Shareholders
and certain other stockholders of the Company are entering into an amendment and
restatement of the Second Amended and Restated January 1999 Stockholders'
Agreement, entered into as of December 17, 1999; and
WHEREAS, the Company and the Principal Stockholders desire to amend
and restate the Second Amended and Restated November 1998 Stockholders'
Agreement in its entirety with 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 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 each such Principal Stockholder
beneficially and continuously owns at least two million five hundred thousand
(2,500,000) shares of 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 thirteen (13) directors;
(b) to cause to be elected to the Board one (1) director designated
by the AEC Entities, for so long as the AEC Entities collectively
beneficially and continuously own at least two million five
hundred thousand (2,500,000) shares of Class A Common Stock
(subject to adjustment pursuant to Section 5.1);
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(c) to cause Lumpkin to be elected to the Board, for so long as
Lumpkin and the Principal CCI Shareholders collectively
beneficially and continuously own at least two million five
hundred thousand (2,500,000) shares of 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 two million five hundred thousand (2,500,000) shares
of 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 collectively beneficially and
continuously owning at least two million five hundred thousand
(2,500,000) shares of Class A Common Stock (subject to adjustment
pursuant to Section 5.1) at any time during the period commencing
on the Effective Date and ending on the Expiration Date; it being
understood that within three (3) business days following such
time that the party or parties identified in paragraphs (b)
through (d) above no longer collectively beneficially and
continuously own at least two million five hundred thousand
(2,500,000) shares of 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 eight (8) non-employee directors.
For purposes of Section 1.1, (i) the McLeods shall be deemed to be a
single Principal Stockholder, (ii) Lumpkin and all of the Principal CCI
Shareholders shall be deemed to be a single Principal Stockholder, and the
Principal CCI Shareholders shall be deemed to own shares "continuously" as long
as the shares of
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<PAGE>
the Principal CCI Shareholders are owned by the Principal CCI Shareholders or a
CCI Permitted Transferee (as defined in Section 3.1), and (iii) the AEC Entities
shall be deemed to be a single Principal Stockholder, and the AEC Entities shall
be deemed to own shares "continuously" as long as the shares of the AEC Entities
are owned by the AEC Entities or an AEC 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:
(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.
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<PAGE>
For purposes of the definition of "beneficial owner" and
"beneficially own," the terms "agreement," "arrangement" and
"understanding" shall not include this Agreement or the Third
Amended and Restated January 1999 Stockholders' Agreement (as
defined in Section 1.2).
(c) "Effective Date" shall mean March 10, 2000.
(d) "Expiration Date" shall mean December 31, 2001.
(e) "Original Stockholders' Agreement" shall mean the
Stockholders' Agreement, entered into as of June 14, 1997, as
amended on September 19, 1997, by and among the Company, AEI, the
McLeods, Lumpkin and certain other stockholders.
(f) "Stock Split" shall mean that certain two-for-one stock split
in the form of a stock dividend paid on July 26, 1999 to
stockholders of record on July 12, 1999 effected by the Company
with respect to its Class A Common Stock.
(g) "Subsidiary" or "Subsidiaries" shall mean a corporation,
partnership, joint venture or other entity of which AEC owns,
directly or indirectly, one hundred percent (100%) of the
outstanding securities or other interests the holders of which
are generally entitled to vote for the election of the board of
directors or other governing body.
(h) "Third Amended and Restated January 1999 Stockholders'
Agreement" shall mean the Third Amended and Restated January 1999
Stockholders' Agreement, entered into as of March 10, 2000, by
and among the Company, the Principal Stockholders, the Other CCI
Shareholders, M/C Investors L.L.C. and Media/Communications
Partners III Limited Partnership.
2. STANDSTILL
AEC hereby agrees that, prior to the Expiration Date, neither AEC nor
any Affiliate of AEC will (and AEC will not assist or encourage others to),
directly or 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
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<PAGE>
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 AEC
and AEC's Subsidiaries consistent with the terms and conditions of this
Agreement, 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 (including distributions of
Securities with respect to such Securities and Securities acquired as a result
of a stock split with respect to such Securities) without submitting a written
request to, and receiving the prior written consent of, the Board of Directors,
provided, however, that (i) the AEC Entities may transfer Securities to or among
- -------- -------
any Subsidiary or Subsidiaries of AEC, and (ii) any Principal CCI Shareholder
may transfer Securities to any other Principal CCI Shareholder, the spouse of a
Principal CCI Shareholder, or a lineal descendant of a Principal CCI Shareholder
(or a trust for the primary benefit of any one or more of a Principal CCI
Shareholder, the spouse of a Principal CCI Shareholder, or a lineal descendant
of a Principal CCI Shareholder or a partnership or limited liability company
owned and managed solely by one or more Principal CCI Shareholders, spouses of
Principal CCI Shareholders and lineal descendants of Principal CCI
Shareholders), or, in the case of a Principal 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 Principal CCI Shareholders, spouses of Principal CCI
Shareholders and lineal descendants of Principal CCI Shareholders), in each case
with respect to clause (i) and clause (ii), provided that (x) such transfer is
done in accordance with the transfer restrictions applicable to such Securities
under federal and state securities laws and (y) the transferee agrees to be
bound by the terms hereof (as this Agreement may be amended or amended and
restated from time to time) as a Principal Stockholder with respect to the
shares being transferred pursuant to this Section (any such AEC Entity
transferee pursuant to the foregoing proviso, an "AEC Permitted Transferee" and
any such Principal CCI Shareholder transferee pursuant to the foregoing proviso,
a "CCI Permitted Transferee"), and any such transfer shall not constitute a
"Transfer" for purposes of this Agreement. Notwithstanding the foregoing, no
party hereto shall avoid the provisions of this Agreement by making one or more
transfers to one or more AEC Permitted Transferees or CCI Permitted Transferees,
as the case may be, and then at any time directly or indirectly disposing of all
or any
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portion of such party's interest in any such AEC Permitted Transferee or
CCI Permitted Transferee, as the case may be. In the event that the Board of
Directors consents to any Transfer of Securities by a Principal Stockholder
pursuant to this Section 3.1(a) upon the written request of such Principal
Stockholder (the "Transferring Stockholder") and except as otherwise provided in
Section 3.1(b) and Section 3.2, each other Principal Stockholder shall,
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), for the period
commencing for the quarter ending March 31, 2000 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 each such financial reporting
quarter during such period, the aggregate number, if any, of shares of Class A
Common Stock (not to exceed in the aggregate three hundred thousand (300,000)
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.
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<PAGE>
(c) For the period commencing for the quarter ending March 31, 2000
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 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 of Class A Common Stock that such
Principal Stockholder desires to Transfer pursuant to Section 3.1(b). 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, the McLeods shall be deemed to
be a single Principal Stockholder, Lumpkin and all of the Principal CCI
Shareholders shall be deemed to be a single Principal Stockholder and the AEC
Entities 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
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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 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 (and which, in the aggregate for
Lumpkin and all of the Principal CCI Shareholders (based on the termination of
the Other CCI Shareholders as parties to this Agreement) on a pre-Stock Split
basis, is fifteen percent (15%) of 2,755,651 shares of Class A Common Stock),
subject to appropriate and proportionate adjustment as a result of the Stock
Split and 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
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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.
(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, 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
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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 Principal CCI Shareholder is participating as a Registering
Transferor, the Company will use its best efforts to cause Lumpkin to be
nominated to such Pricing 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, the McLeods shall be deemed to
be a single Principal Stockholder, Lumpkin and all of the Principal CCI
Shareholders shall be deemed to be a single Principal Stockholder and the AEC
Entities 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 party to this Agreement hereby represents and
warrants, as of the date of this Agreement, to the Company and to each other
party as follows:
4.1.1 Authorization
Such party 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
party, 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 party pursuant hereto, when executed and delivered in
accordance with the provisions
-11-
<PAGE>
hereof, shall be a valid and binding obligation of such party, enforceable in
accordance with its terms (with the aforesaid exceptions).
4.2 Representations and Warranties of Individual Stockholders
Each party to this Agreement who is an individual hereby represents
and warrants, as of the date of this Agreement, to the Company and to each other
party as follows:
4.2.1 Power and Authority
Such party has the legal capacity and all other 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
party, 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 party pursuant hereto, when executed and delivered in
accordance with the provisions hereof, shall be a valid and binding obligation
of such party, 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 party 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
-12-
<PAGE>
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
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 Date.
5.3 Entire Agreement; Termination of Original Stockholders' Agreement;
Amendment
Other than the Third Amended and Restated January 1999 Stockholders'
Agreement with respect to the parties thereto and as set forth therein, this
Agreement constitutes the entire agreement among the parties hereto as of the
date hereof with respect to the specific matters contemplated herein, and it
supersedes all prior oral or written agreements, commitments or understandings
with respect to the matters provided for herein. The parties hereto further
agree, confirm and acknowledge that the Original Stockholders' Agreement is
terminated and of no force or effect. No amendment, modification or discharge
of this Agreement shall be valid or binding unless set forth in writing and duly
executed by the Company and 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
-13-
<PAGE>
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 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) 790-7901
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<PAGE>
(ii) If to the AEC Entities:
Alliant Energy Investments, Inc.
200 1st Street SE
Cedar Rapids, IA 52401
Attention: James E. Hoffman
Facsimile: (319) 398-4204
(iii) If to Lumpkin or any Principal CCI Shareholder:
P.O. Box 1234
Mattoon, IL 61938
Attention: Richard A. Lumpkin
Facsimile: (217) 234-9934
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
(a) 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 Principal CCI Shareholder to a CCI
Permitted Transferee and other than a transfer by the AEC Entities to an AEC
Permitted Transferee) pursuant to Section 3.1(a) an aggregate number of shares
of Class A Common Stock equal to not less than fifteen (15%) of the total number
of shares of Class A
-15-
<PAGE>
Common Stock beneficially owned by such Principal Stockholder as of December 31,
1998 (and which, in the aggregate for Lumpkin and all of the Principal CCI
Shareholders (based on the termination of the Other CCI Shareholders as parties
to this Agreement) on a pre-Stock Split basis, is fifteen percent (15%) of
2,755,651 shares of Class A Common Stock), subject to appropriate and
proportionate adjustment as a result of the Stock Split and 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 the Company and the other Principal
Stockholders 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(a), this Agreement shall terminate on
the Expiration Date. For purposes of this Section 5.8(a), the McLeods shall be
deemed to be a single Principal Stockholder, Lumpkin and all of the Principal
CCI Shareholders shall be deemed to be a single Principal Stockholder and the
AEC Entities shall be deemed to be a single Principal Stockholder.
(b) This Agreement is hereby terminated with respect to each of the
Other CCI Shareholders, such that all rights and obligations hereunder shall
cease, and this Agreement shall be of no further force or effect, with respect
to each of the Other CCI Shareholders.
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 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 Principal 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 Principal 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 Principal CCI
Shareholders, as fully as if each of the Principal 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
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<PAGE>
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
Principal 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.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed and delivered
this Third Amended and Restated November 1998 Stockholders' Agreement, or have
caused this Third Amended and Restated November 1998 Stockholders' Agreement to
be duly executed and delivered on their behalf, as of the day and year first
hereinabove set forth.
McLEODUSA INCORPORATED
By: /s/ J. Lyle Patrick
------------------------------------
Name: J. Lyle Patrick
Title: Group Vice President/CFO
/s/ Clark E. McLeod /s/ Mary E. McLeod
- ---------------------------------------- -------------------------------
Clark E. McLeod Mary E. McLeod
ALLIANT ENERGY CORPORATION
By: /s/ James E. Hoffman
-----------------------------------
Name: James E. Hoffman
Title: Executive Vice President
Business Development
ALLIANT ENERGY FOUNDATION, INC.
By: /s/ Edward M. Gleason
-----------------------------------
Name: Edward M. Gleason
Title: Treasurer
-18-
<PAGE>
ALLIANT ENERGY INVESTMENTS, INC.
By: /s/ James E. Hoffman
-----------------------------------------
Name: James E. Hoffman
Title: President, Alliant Energy Resources
HEARTLAND PROPERTIES, INC.
By: /s/ Henry Wertheimer
----------------------------------------
Name: Henry Wertheimer
Title: Vice President/Treasurer
LNT COMMUNICATIONS LLC
By: Alliant Energy Resources, Inc., its sole member
By: /s/ James E. Hoffman
----------------------------------------
Name: James E. Hoffman
Title: President
/s/ Richard A. Lumpkin /s/ Gail G. Lumpkin
------------------------------------------- ------------------------
Richard A. Lumpkin Gail G. Lumpkin
-19-
<PAGE>
The two trusts created under the The two trusts created under the
Mary Green Lumpkin Gallo Trust Richard Adamson Lumpkin
Agreement dated December 29, Grandchildren's Trust dated
1989, one for the benefit of each of: September 5, 1980, one for the benefit
Benjamin Iverson Lumpkin of each of:
Elizabeth Arabella Lumpkin Benjamin Iverson Lumpkin
Elizabeth Arabella Lumpkin
United States Trust Company United States Trust Company
of New York, Trustee of New York, Trustee
By: /s/ Loraine B. Tsavaris By: /s/ Loraine B. Tsavaris
----------------------------- --------------------------
Name: Loraine B. Tsavaris Name: Loraine B. Tsavaris
Title: Managing Director Title: Managing Director
The trust established by Richard The two 1990 Personal Income Trusts
Adamson Lumpkin under the Trust established by Richard A. Lumpkin,
Agreement dated February 6, 1970, dated April 20, 1990, one for the
for the benefit of Richard Anthony benefit of each of:
Lumpkin Benjamin Iverson Lumpkin
Elizabeth Arabella Lumpkin
United States Trust Company
of New York, Trustee /s/ David R. Hodgman
--------------------------------------
David R. Hodgman, Trustee
By: /s/ Loraine B. Tsavaris /s/ Steven L. Grissom
----------------------------- --------------------------------------
Name: Loraine B. Tsavaris Steven L. Grissom, Trustee
Title: Managing Director
-20-
<PAGE>
FOR PURPOSES OF SECTIONS 4, 5.6, 5.8(b), 5.11 AND THE FIRST AND SECOND SENTENCES
OF SECTION 5.3 ONLY:
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/ Steven L. Grissom
---------------------------------------
Steven L. Grissom, as Trustee
/s/ Mary Lee Sparks
- ----------------------------------
Mary Lee Sparks
The ten trusts created under the The ten trusts created under the
Mary Green Lumpkin Gallo Trust Richard Adamson Lumpkin
Agreement dated December 29, Grandchildren's Trust dated
1989, 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,
Anne Romayne Sparks, Susan Tamara Keon DeWyngaert,
Barbara Lee Sparks, Anne Romayne Sparks,
Christina Louise Sparks, and Barbara Lee Sparks,
John Woodruff Sparks Christina Louise Sparks, and
John Woodruff Sparks
United States Trust Company United States Trust Company
of New York, Trustee of New York, Trustee
By: /s/ Loraine B. Tsavaris By: /s/ Loraine B. Tsavaris
---------------------------- ------------------------------
Name: Loraine B. Tsavaris Name: Loraine B. Tsavaris
Title: Managing Director Title: Managing Director
-21-
<PAGE>
The two trusts established by Richard The ten 1990 Personal Income Trusts
Adamson Lumpkin under the Trust established by Margaret L. Keon and
Agreement dated February 6, 1970, Mary Lee Sparks, each dated April 20,
one for the benefit of each of: 1990, one for the benefit of each of:
Margaret Anne Keon, and Joseph John Keon III,
Mary Lee Sparks Katherine Stoddert Keon,
Lisa Anne Keon,
United States Trust Company Margaret Lynley Keon,
of New York, Trustee Pamela Keon Vitale,
Susan Tamara Keon DeWyngaert,
Anne Romayne Sparks,
Barbara Lee Sparks,
By: /s/ Loraine B. Tsavaris Christina Louise Sparks, and
------------------------------ John Woodruff Sparks
Name: Loraine B. Tsavaris
Title: Managing Director
/s/ David R. Hodgman
----------------------------------
David R. Hodgman, Trustee
/s/ Steven L. Grissom
----------------------------------
Steven L. Grissom, Trustee
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<PAGE>
SCHEDULE I
Richard A. Lumpkin
Gail G. Lumpkin
United States Trust Company of New York, as Trustee of two trusts created under
the Mary Green Lumpkin Gallo Trust Agreement dated December 29, 1989, one for
the benefit of each of Benjamin Iverson Lumpkin and Elizabeth Arabella Lumpkin.
United States Trust Company of New York, as Trustee of two trusts created under
the Richard Adamson Lumpkin Grandchildren's Trust dated September 5, 1980, one
for the benefit of each of Benjamin Iverson Lumpkin and Elizabeth Arabella
Lumpkin.
United States Trust Company of New York, as Trustee of the trust established by
Richard Adamson Lumpkin under the Trust Agreement dated February 6, 1970, for
the benefit of Richard Anthony Lumpkin.
David R. Hodgman and Steven L. Grissom, as Trustees of two 1990 Personal Income
Trusts established by Richard A. Lumpkin, each dated April 20, 1990, one for the
benefit of each of Benjamin Iverson Lumpkin and Elizabeth Arabella Lumpkin.
<PAGE>
SCHEDULE II
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.
Mary Lee Sparks
United States Trust Company of New York, as Trustee of ten 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,
Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John
Woodruff Sparks.
United States Trust Company of New York, as Trustee of ten 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, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks,
and John Woodruff Sparks.
United States Trust Company of New York, as Trustee of two trusts established by
Richard Adamson Lumpkin under the Trust Agreement dated February 6, 1970, one
for the benefit of each of Margaret Anne Keon and Mary Lee Sparks.
David R. Hodgman and Steven L. Grissom, as Trustees of ten 1990 Personal Income
Trusts established by Margaret L. Keon and Mary Lee Sparks, 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, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise
Sparks, and John Woodruff Sparks.
<PAGE>
Exhibit 4.28
THIRD AMENDED AND RESTATED
JANUARY 1999 STOCKHOLDERS' AGREEMENT
This Third Amended and Restated January 1999 Stockholders' Agreement
(this "Agreement") is entered into as of March 10, 2000, by and among McLeodUSA
Incorporated, a Delaware corporation (the "Company"); Alliant Energy
Corporation, a Wisconsin corporation ("AEC"); Alliant Energy Investments, Inc.,
an Iowa corporation and indirect wholly owned subsidiary of AEC ("AEI");
Heartland Properties, Inc., a Wisconsin corporation and indirect wholly owned
subsidiary of AEC ("Heartland"); LNT Communications LLC, an Iowa limited
liability company and indirect wholly owned subsidiary of AEC ("LNT"); Alliant
Energy Foundation, Inc., a Wisconsin corporation (non-profit) ("AEF" and
together with AEC, AEI, Heartland and LNT, the "AEC Entities"); Clark E. McLeod
("McLeod"); Mary E. McLeod (together with McLeod, the "McLeods"); M/C Investors
L.L.C., a Delaware limited liability company ("M/C Investors");
Media/Communications Partners III Limited Partnership, a Delaware limited
partnership ("M/C Partners" and together with M/C Investors, the "M/C
Stockholders"); Richard A. Lumpkin ("Lumpkin") and certain of the former
shareholders of Consolidated Communications Inc. ("CCI") and certain permitted
transferees of certain of the former CCI shareholders in each case who are
listed in Schedule I hereto (the "Principal CCI Shareholders"); and for purposes
----------
of Sections 4, 5.6, 5.8(d), 5.11 and the first sentence of Section 5.3 only,
certain of the other former CCI shareholders and certain permitted transferees
of certain of the other former CCI shareholders in each case who are listed in
Schedule II hereto (the "Other CCI Shareholders"). The AEC Entities, the
- -----------
McLeods, Lumpkin and the Principal CCI Shareholders are referred to herein
collectively as the "Original Stockholders" and individually as an "Original
Stockholder."
WHEREAS, the Company, AEC, AEI, Heartland, AEF, the McLeods, the M/C
Stockholders, Lumpkin, the Principal CCI Shareholders and the Other CCI
Shareholders are parties to a Second Amended and Restated January 1999
Stockholders' Agreement, entered into as of December 17, 1999 (the "Second
Amended and Restated January 1999 Stockholders' Agreement");
WHEREAS, the Company, AEC, AEI, Heartland, AEF, the McLeods, the M/C
Stockholders, Lumpkin and the Principal CCI Shareholders desire to add LNT as a
party to this Agreement as a result of the transfer of certain shares of the
Company's Class A common stock, par value $.01 per share (the "Class A Common
Stock"), by an Affiliate (as defined in Section 2.2) of AEC to LNT;
<PAGE>
WHEREAS, the Other CCI Shareholders no longer desire to be parties to
this Agreement and the Company, the M/C Stockholders and the Original
Stockholders desire to terminate the Other CCI Shareholders as parties to this
Agreement;
WHEREAS, the Company, the Original Stockholders and the M/C
Stockholders deem it to be in the best interests of the Company and its
stockholders to provide for the continuity and stability of the business and
policies of the Company on the terms and conditions hereinafter set forth;
WHEREAS, concurrently with execution and delivery of this Agreement,
the Company, the Original Stockholders and the Other CCI Shareholders are
entering into an amendment and restatement of the Second Amended and Restated
November 1998 Stockholders' Agreement, entered into as of December 17, 1999; and
WHEREAS, the Company, the Original Stockholders and the M/C
Stockholders desire to amend and restate the Second Amended and Restated January
1999 Stockholders' Agreement in its entirety with 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. [INTENTIONALLY DELETED]
2. VOTING AGREEMENT
2.1 Board of Directors
For the period commencing on the Effective Date (as defined in Section 2.2)
and ending on the Expiration Date (as defined in Section 2.2), each Original
Stockholder and the M/C Stockholders, for so long as each such Original
Stockholder and the M/C Stockholders beneficially and continuously owns at least
two million five hundred thousand (2,500,000) shares of 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 thirteen (13) directors;
-2-
<PAGE>
(b) to cause to be elected to the Board one (1) director designated
by the AEC Entities, for so long as the AEC Entities collectively
beneficially and continuously own at least two million five
hundred thousand (2,500,000) shares of 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 Principal CCI Shareholders collectively
beneficially and continuously own at least two million five
hundred thousand (2,500,000) shares of 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 two million five hundred thousand (2,500,000) shares
of Class A Common Stock (subject to adjustment pursuant to
Section 5.1);
(e) to cause to be elected to the Board one (1) director designated
by the M/C Stockholders, for so long as the M/C Stockholders
collectively beneficially and continuously own at least two
million five hundred thousand (2,500,000) shares of Class A
Common Stock (subject to adjustment pursuant to Section 5.1);
(f) 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 (e) 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 (e) above no longer collectively beneficially and
continuously owning at least two million five hundred thousand
(2,500,000) shares of Class A Common Stock (subject to adjustment
pursuant to Section 5.1) at any time during the period commencing
on the Effective Date and ending on the Expiration Date; it being
understood that within three (3) business days following such
time that the party or parties identified in paragraphs (b)
through (e) above no longer collectively beneficially and
continuously own at least two million five hundred thousand
(2,500,000)
-3-
<PAGE>
shares of 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
(g) to cause to be elected to the Board, if and as nominated by the
Board, up to seven (7) non-employee directors.
For purposes of this Section 2.1, (i) the McLeods shall be deemed to
be a single Original Stockholder of the Company, (ii) the M/C Stockholders shall
be deemed to be a single stockholder of the Company, and the M/C Stockholders
shall be deemed to own shares "continuously" as long as the shares of the M/C
Stockholders are owned by the M/C Stockholders or an M/C Stockholder Permitted
Transferee (as defined in Section 3.1), (iii) Lumpkin and all of the Principal
CCI Shareholders shall be deemed to be a single Original Stockholder of the
Company, and the Principal CCI Shareholders shall be deemed to own shares
"continuously" as long as the shares of the Principal CCI Shareholders are owned
by the Principal CCI Shareholders or a CCI Permitted Transferee (as defined in
the Third Amended and Restated November 1998 Stockholders' Agreement (as defined
in Section 2.2)), and (iv) the AEC Entities shall be deemed to be a single
Original Stockholder of the Company, and the AEC Entities shall be deemed to own
shares "continuously" as long as the shares of the AEC Entities are owned by the
AEC Entities or an AEC Permitted Transferee (as defined in the Third Amended and
Restated November 1998 Stockholders' Agreement).
2.2 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:
(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
-4-
<PAGE>
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 Third
Amended and Restated November 1998 Stockholders' Agreement.
(c) "Effective Date" shall mean March 10, 2000.
(d) "Expiration Date" shall mean December 31, 2001.
(e) "Merger" shall mean the merger of Ovation Communications,
Inc. with and into Bravo Acquisition Corporation pursuant to the
terms and conditions of the Merger Agreement.
(f) "Merger Agreement" shall mean the Agreement and Plan of
Merger, dated as of January 7, 1999, by and among the Company,
Bravo Acquisition Corporation, Ovation Communications, Inc. and
certain of the stockholders of Ovation Communications, Inc.
(g) "Stock Split" shall mean that certain two-for-one stock
split in the form of a stock dividend paid on July 26, 1999 to
stockholders of record on July 12, 1999 effected by the Company
with respect to its Class A Common Stock.
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(h) "Third Amended and Restated November 1998 Stockholders'
Agreement" shall mean the Third Amended and Restated November
1998 Stockholders' Agreement, entered into as of March 10, 2000
by and among the Company, the Original Stockholders and the Other
CCI Shareholders.
3. TRANSFERS OF SECURITIES
3.1 Restrictions on Transfers
(a) Except as otherwise provided in this Section 3.1 or Section 3.2,
the M/C Stockholders hereby agree that until the Expiration Date, the M/C
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 ("Securities") beneficially owned by such
M/C Stockholders as a result of the Merger (including distributions of
Securities with respect to such Securities and Securities acquired as a result
of a stock split with respect to such Securities) without submitting a written
request to, and receiving the prior written consent of, the Board of Directors;
provided, however, that the M/C Stockholders may transfer Securities to any
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beneficial owner or Affiliate of the M/C Stockholders, 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 this Agreement may be
amended or amended and restated from time to time) as an M/C Stockholder with
respect to the shares being transferred pursuant to this Section (any such M/C
Stockholder transferee pursuant to the foregoing proviso, an "M/C Stockholder
Permitted Transferee"), and any such transfer shall not constitute a "Transfer"
for purposes of this Agreement. Notwithstanding the foregoing, no party hereto
shall avoid the provisions of this Agreement by making one or more transfers to
one or more M/C Stockholder Permitted Transferees and then at any time directly
or indirectly disposing of all or any portion of such party's interest in any
such M/C Stockholder Permitted Transferee. In the event that the Board of
Directors consents to any Transfer of Securities by a Principal Stockholder (for
purposes of this Agreement, the term "Principal Stockholder" shall have the same
meaning as ascribed to such term in the Third Amended and Restated November 1998
Stockholders' Agreement) pursuant to Section 3.1(a) of the Third Amended and
Restated November 1998 Stockholders' Agreement upon the written request of such
Principal Stockholder (the "Transferring Principal Stockholder") and except as
otherwise provided in Section 3.1(b) and Section 3.2 of this Agreement, the M/C
Stockholders shall, 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 the M/C Stockholders equal to the percentage of the total
number of Securities beneficially owned by the Transferring Principal
Stockholder that the Board of
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Directors has consented may be Transferred by such Transferring Principal
Stockholder. In the event the Board of Directors consents to any Transfer of
Securities by the M/C Stockholders pursuant to this Section 3.1(a) upon the
written request of the M/C Stockholders (the "Transferring M/C Stockholders"),
and except as otherwise provided in Section 3.1(b) and Section 3.2 of the Third
Amended and Restated November 1998 Stockholders' Agreement, each Principal
Stockholder shall, notwithstanding the provisions of Section 3.1(a) of the Third
Amended and Restated November 1998 Stockholders' Agreement, 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 M/C Stockholders that the
Board of Directors has consented may be Transferred by such Transferring M/C
Stockholders.
(b) In addition to the provisions of Section 3.1(a), for the period
commencing for the quarter ending March 31, 2000 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 each such financial reporting
quarter during such period, the aggregate number, if any, of shares of Class A
Common Stock (not to exceed in the aggregate one hundred thousand (100,000)
shares of Class A Common Stock per quarter, subject to adjustment pursuant to
Section 5.1) that may be Transferred by the M/C 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), the M/C Stockholders 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 the Transfer Amount, if any, for such Transfer
Period. In no event shall any portion of a Transfer Amount that is not utilized
by the M/C Stockholders during a Transfer Period be reallocated or otherwise
credited to any subsequent Transfer Periods. Notwithstanding the foregoing
provisions of this Section 3.1(b), to the extent that the Company permits the
Principal Stockholders the opportunity to Transfer shares of Class A Common
Stock pursuant to Section 3.1(b) of the Third Amended and Restated November 1998
Stockholders' Agreement, the Company shall grant the M/C Stockholders the
opportunity to Transfer on the same terms and conditions a number of shares of
Class A Common Stock equal to the number of shares which each Principal
Stockholder is entitled to Transfer pursuant to such Section 3.1(b), without
considering those provisions of Section 3.1(b) of the Third Amended and Restated
November 1998 Stockholders' Agreement relating to the reallocation of amounts
among the Principal Stockholders. To the extent the Board determines a Transfer
Amount with respect to the M/C Stockholders for any particular quarter pursuant
to this Section 3.1(b), the Board shall determine an equal Transfer Amount for
such quarter with respect to each Principal Stockholder pursuant to
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Section 3.1(b) of the Third Amended and Restated November 1998 Stockholders'
Agreement.
(c) For the period commencing for the quarter ending March 31, 2000
and ending on the Expiration Date, the Company shall give the M/C Stockholders
prompt written notice (in any event no later than fifty (50) days prior to the
beginning of the applicable Transfer Period) of its determination of any
Transfer Amount. Within seven (7) days of receipt of such notice, the M/C
Stockholders shall provide written notice to the Company of the number of shares
of Class A Common Stock that the M/C Stockholders desire to Transfer pursuant to
Section 3.1(b).
(d) For purposes of this Section 3.1, the M/C Stockholders shall be
deemed to be a single stockholder of the Company, the McLeods shall be deemed to
be a single Principal Stockholder of the Company, Lumpkin and all of the
Principal CCI Shareholders shall be deemed to be a single Principal Stockholder
of the Company and the AEC Entities shall be deemed to be a single Principal
Stockholder of the Company.
3.2 Registration Rights
(a) In the event that the Board of Directors consents pursuant to
Section 3.1(a) of the Third Amended and Restated November 1998 Stockholders'
Agreement 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 the M/C Stockholders 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 the M/C Stockholders equal to the percentage of the total
number of Securities beneficially owned by the Transferring Principal
Stockholder that such Transferring Principal Stockholder is registering for
Transfer under the Securities Act, on the same terms and conditions as the
Transferring Principal Stockholder. In the event that the Board of Directors
consents pursuant to Section 3.1(a) of this Agreement to the M/C Stockholders'
request for a Transfer, and in connection therewith the Company agrees to
register Securities with respect to such Transfer under the Securities Act, the
Company shall grant each Principal Stockholder pursuant to Section 3.1(a) of the
Third Amended and Restated November 1998 Stockholders' Agreement 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 M/C Stockholders that such Transferring M/C Stockholders are
registering under the Securities Act, on the same terms and conditions as the
Transferring M/C Stockholders.
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<PAGE>
(b) To the extent that the Company grants pursuant to Section 3.1(b)
of the Third Amended and Restated November 1998 Stockholders' Agreement a
Principal Stockholder the opportunity to register shares of Class A Common Stock
for Transfer under the Securities Act, the Company shall grant the M/C
Stockholders 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, without considering those provisions of Section 3.1(b) of the Third
Amended and Restated November 1998 Stockholders' Agreement relating to the
reallocation of amounts among the Principal Stockholders. To the extent that
the Company grants pursuant to Section 3.1(b) of this Agreement the M/C
Stockholders the opportunity to register shares of Class A Common Stock for
Transfer under the Securities Act, the Company shall grant each Principal
Stockholder pursuant to Section 3.1(b) of the Third Amended and Restated
November 1998 Stockholders' Agreement 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 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 M/C Stockholders), the
Company, as determined by the Board of Directors, shall give written notice to
the M/C 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 M/C
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 M/C
Stockholders as of the Effective Time (as defined in the Merger Agreement) in
connection with the consummation of the Merger, subject to appropriate and
proportionate adjustment as a result of the Stock Split and 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 M/C Stockholders
in connection with such offering during such period. If the Board determines to
register shares of Class A Common Stock held by the M/C Stockholders pursuant to
this Section 3.2(c), the Company will promptly give written notice of such
determination to the M/C Stockholders, and thereupon the Company will use
commercially reasonable efforts to effect the registration of that portion of
the Registrable Amount that the M/C Stockholders indicate a desire to register.
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
the M/C Stockholders shall be customary taking into account, among other things,
the nature of the offering and the M/C Stockholders' relationship with
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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 M/C Stockholders, which
underwriting discounts and commissions shall be the responsibility of the M/C
Stockholders. Notwithstanding the foregoing provisions of this Section 3.2(c),
to the extent that the Company grants pursuant to Section 3.2(c) of the Third
Amended and Restated November 1998 Stockholders' Agreement the Principal
Stockholders the opportunity to register shares of Class A Common Stock for
Transfer under the Securities Act, the Company shall grant the M/C Stockholders
the opportunity to register shares of Class A Common Stock on a substantially
similar basis. To the extent that the Company grants pursuant to Section 3.2(c)
of this Agreement the M/C Stockholders the opportunity to register shares of
Class A Common Stock for Transfer under the Securities Act, the Company shall
grant each Principal Stockholder pursuant to Section 3.2(c) of the Third Amended
and Restated November 1998 Stockholders' Agreement the opportunity to register
shares of Class A Common Stock on a substantially similar basis.
(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, 2000 and 2001 (each such year, an "Annual
Period"), and upon either (i) the receipt of a written request of the M/C
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 M/C
Stockholders. If the Board determines to register shares of Class A Common
Stock held by the M/C Stockholders pursuant to this Section 3.2(d), the Company
will promptly give written notice of such determination to the M/C Stockholders,
and thereupon the Company will use commercially reasonable efforts to effect the
registration of that portion of the Registrable Amount that the M/C Stockholders
indicate a desire to register. 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 the M/C Stockholders shall be customary taking
into account, among other things, the nature of the offering and the M/C
Stockholders' 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 M/C Stockholders, which underwriting discounts and commissions shall be the
responsibility of the M/C Stockholders. Notwithstanding the foregoing
provisions of this Section 3.2(d), to the extent that the Company grants
pursuant to Section 3.2(d) of the Third Amended and Restated November 1998
Stockholders' Agreement the Principal Stockholders the opportunity to register
shares of Class A Common Stock for Transfer under the Securities Act, the
Company shall grant the M/C Stockholders the opportunity to register shares of
Class A Common Stock on a substantially similar basis. To the extent that the
Company grants pursuant to Section 3.2(d) of this Agreement the M/C Stockholders
the opportunity to register shares of Class A Common Stock for
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Transfer under the Securities Act, the Company shall grant each Principal
Stockholder pursuant to Section 3.2(d) of the Third Amended and Restated
November 1998 Stockholders' Agreement the opportunity to register shares of
Class A Common Stock on a substantially similar basis.
(e) For purposes of this Section 3.2, the M/C Stockholders shall be
deemed to be a single stockholder of the Company, the McLeods shall be deemed to
be a single Principal Stockholder of the Company, Lumpkin and all of the
Principal CCI Shareholders shall be deemed to be a single Principal Stockholder
of the Company and the AEC Entities shall be deemed to be a single Principal
Stockholder of the Company.
(f) Notwithstanding any other provision of this Agreement, to the
extent the Company has undertaken to register Securities of the M/C 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; provided that to the extent the
Principal Stockholders are also participating in such registration, the M/C
Stockholders and the Principal Stockholders will be treated on a substantially
similar basis with respect to any such determination not to register Securities
or the withdrawal or abandonment of a registration statement previously filed as
contemplated by this Section 3.2(f).
4. REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Non-individual Stockholders
Each non-individual party to this Agreement hereby represents and
warrants, as of the date of this Agreement, to the Company and to each other
party as follows:
4.1.1 Authorization
Such party 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
party, 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 party
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<PAGE>
pursuant hereto, when executed and delivered in accordance with the provisions
hereof, shall be a valid and binding obligation of such party, enforceable in
accordance with its terms (with the aforesaid exceptions).
4.2 Representations and Warranties of Individual Stockholders
Each party to this Agreement who is an individual hereby represents
and warrants, as of the date of this Agreement, to the Company and to each other
party as follows:
4.2.1 Power and Authority
Such party has the legal capacity and all other 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
party, 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 party pursuant hereto, when executed and delivered in
accordance with the provisions hereof, shall be a valid and binding obligation
of such party, 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 party 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
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<PAGE>
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
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 Date.
5.3 Entire Agreement; Amendment
Other than the Third Amended and Restated November 1998 Stockholders'
Agreement with respect to the parties thereto and as set forth therein, this
Agreement constitutes the entire agreement among the parties hereto as of the
date hereof with respect to the specific matters contemplated herein, and it
supersedes all prior oral or written agreements, commitments or understandings
with respect to the matters provided for herein. No amendment, modification or
discharge of this Agreement shall be valid or binding unless set forth in
writing and duly executed by the Company and by the party against whom
enforcement of the amendment, modification or discharge is sought. Any
amendment, modification or discharge of this Agreement to be enforced against
the M/C Stockholders shall be valid and binding with respect to all M/C
Stockholders if such amendment, modification or discharge is executed by those
M/C Stockholders holding a majority of the shares of Class A Common Stock issued
to the M/C Stockholders in the Merger (including distributions of Securities
with respect to such Securities and Securities acquired as a result of a stock
split with respect to such Securities).
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<PAGE>
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 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) 790-7901
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(ii) If to the AEC Entities:
Alliant Energy Investments, Inc.
200 1st Street SE
Cedar Rapids, IA 52401
Attention: James E. Hoffman
Facsimile: (319) 398-4204
(iii) If to Lumpkin or any Principal CCI Shareholder:
P.O. Box 1234
Mattoon, IL 61938
Attention: Richard A. Lumpkin
Facsimile: (217) 234-9934
with a copy to :
Schiff Hardin & Waite
6600 Sears Tower
Chicago, IL 60606
Attention: David R. Hodgman, Esq.
Facsimile: (312) 258-5600
(iv) If to the M/C Stockholders:
c/o Media/Communications Partners III
Limited Partnership
75 State Street
Boston, MA 02109
Attention: James F. Wade
Facsimile: (617) 345-7201
with a copy to:
Edwards & Angell, LLP
101 Federal Street
Boston, MA 02110
Attention: Stephen O. Meredith, Esq.
Facsimile: (617) 439-4170
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
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<PAGE>
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
(a) This Agreement shall terminate and be of no further force or
effect as to an Original Stockholder (and not as to the Company and the M/C
Stockholders) at such time as the Third Amended and Restated November 1998
Stockholders' Agreement shall terminate and be of no further force or effect
with respect to such Original Stockholder.
(b) If (i) during any Annual Period the Board of Directors has not
provided the M/C Stockholders a reasonable opportunity to Transfer shares of
Class A Common Stock pursuant to the registration of such shares under the
Securities Act pursuant to Section 3.2 in an aggregate amount equal to not less
than fifteen percent (15%) of the total number of shares of Class A Common Stock
beneficially owned by the M/C Stockholders as of the Effective Time in
connection with the consummation of the Merger, subject to appropriate and
proportionate adjustment as a result of the Stock Split and subject to
adjustment pursuant to Section 5.1 or (ii) the Third Amended and Restated
November 1998 Stockholders' Agreement has been terminated by all parties
thereto, then the M/C Stockholders may terminate this Agreement by providing
written notice of termination to the Company and the Original Stockholders (x)
in the case of clause (b)(i) above, no later than thirty (30) days following the
end of such Annual Period and (y) in the case of clause (b)(ii) above, at any
time following such termination, such that all rights and obligations hereunder
shall cease, and this Agreement shall be of no further force or effect.
(c) Unless otherwise previously terminated by the M/C Stockholders
pursuant to Section 5.8(b), this Agreement shall terminate on the Expiration
Date.
(d) This Agreement is hereby terminated with respect to each of the
Other CCI Shareholders, such that all rights and obligations hereunder shall
cease, and this Agreement shall be of no further force or effect, with respect
to each of the Other CCI Shareholders.
(e) For purposes of this Section 5.8, the M/C Stockholders shall be
deemed to be a single stockholder of the Company, the McLeods shall be deemed to
be a single Original Stockholder of the Company, Lumpkin and all of the
Principal CCI Shareholders shall be deemed to be a single Original Stockholder
of the Company, and the AEC Entities shall be deemed to be a single Original
Stockholder of the Company.
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5.9 Publicity
The M/C Stockholders will use their reasonable best efforts to
consult with the Company prior to issuing any press release, making any filing
with any governmental entity or national securities exchange or making any other
public dissemination of information by the M/C Stockholders within which this
Agreement or the contents hereof are referenced or described.
5.10 Appointment of Representative
(a) Each of the M/C Stockholders hereby appoints M/C Partners, 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 "M/C Representative"). The M/C Representative shall
take, and the M/C Stockholders agree that the M/C Representative shall take, any
and all actions which the M/C Representative believes are necessary or advisable
under this Agreement for and on behalf of each of the M/C Stockholders, as fully
as if each of the M/C Stockholders was 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 M/C 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 M/C Representative pursuant to this Agreement,
all of which actions or omissions shall be legally binding upon each of the M/C
Stockholders.
(b) Each of the Principal 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 "CCI Representative"). The CCI Representative
shall take, and the Principal CCI Shareholders agree that the CCI Representative
shall take, any and all actions which the CCI Representative believes are
necessary or advisable under this Agreement for and on behalf of each of the
Principal CCI Shareholders, as fully as if each of the Principal CCI
Shareholders was 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 CCI 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 CCI Representative pursuant to this Agreement,
all of which actions or omissions shall be legally binding upon each of the
Principal CCI Shareholders.
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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.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the undersigned have duly executed and delivered
this Third Amended and Restated January 1999 Stockholders' Agreement, or have
caused this Third Amended and Restated January 1999 Stockholders' Agreement to
be duly executed and delivered on their behalf, as of the day and year first
hereinabove set forth.
McLEODUSA INCORPORATED
By: /s/ J. Lyle Patrick
-------------------------
Name: J. Lyle Patrick
Title: Group Vice President/CFO
/s/ Clark E. McLeod /s/ Mary E. McLeod
- --------------------------------- ----------------------------------
Clark E. McLeod Mary E. McLeod
M/C INVESTORS L.L.C.
By: /s/ Peter H.O. Claudy
---------------------------
Name: Peter H.O. Claudy
Title: Manager
MEDIA/COMMUNICATIONS PARTNERS III LIMITED PARTNERSHIP
By: M/C III L.L.C., its General Partner
By: /s/ Peter H.O. Claudy
----------------------------
Name: Peter H.O. Claudy
Title: Manager
-19-
<PAGE>
ALLIANT ENERGY CORPORATION, INC.
By: /s/ James E. Hoffman
-----------------------------
Name: James E. Hoffman
Title: Executive Vice President
Business Development
ALLIANT ENERGY FOUNDATION
By: /s/ Edward M. Gleason
---------------------------
Name: Edward M. Gleason
Title: Treasurer
ALLIANT ENERGY INVESTMENTS, INC.
By: /s/ James E. Hoffman
-----------------------------
Name: James E. Hoffman
Title: President, Alliant Energy Resources
HEARTLAND PROPERTIES, INC.
By: /s/ Henry Wertheimer
---------------------------
Name: Henry Wertheimer
Title: Vice President/Treasurer
LNT COMMUNICATIONS LLC
By: Alliant Energy Resources, Inc., its sole member
By: /s/ James E. Hoffman
---------------------------
Name: James E. Hoffman
Title: President
/s/ Richard A. Lumpkin /s/ Gail G. Lumpkin
- ------------------------------------- ---------------------------------
Richard A. Lumpkin Gail G. Lumpkin
-20-
<PAGE>
The two trusts created under the Mary The two trusts created under the Richard
Green Lumpkin Gallo Trust Agreement Adamson Lumpkin Grandchildren's Trust
dated December 29, 1989, one for the dated September 5, 1980, one for the
benefit of each of: benefit of each of:
Benjamin Iverson Lumpkin Benjamin Iverson Lumpkin
Elizabeth Arabella Lumpkin Elizabeth Arabella Lumpkin
United States Trust Company United States Trust Company
of New York, Trustee of New York, Trustee
By: /s/ Loraine B. Tsavaris By: /s/ Loraine B. Tsavaris
--------------------------- ---------------------------
Name: Loraine B. Tsavaris Name: Loraine B. Tsavaris
Title: Managing Director Title: Managing Director
The trust established by Richard The two 1990 Personal Income Trusts
Adamson Lumpkinunder the Trust established by Richard A. Lumpkin, dated
Agreement dated February 6, 1970, April 20, 1990, one for the benefit of
for the benefit of Richard Anthony each of:
Lumpkin. Benjamin Iverson Lumpkin
Elizabeth Arabella Lumpkin
United States Trust Company
of New York, Trustee /s/ David R. Hodgman
----------------------------------------
David R. Hodgman, Trustee
By: /s/ Loraine B. Tsavaris /s/ Steven L. Grissom
--------------------------- ----------------------------------------
Name: Loraine B. Tsavaris Steven L. Grissom, Trustee
Title: Managing Director
-21-
<PAGE>
FOR PURPOSES OF SECTIONS 4, 5.6, 5.8(d), 5.11 AND THE FIRST SENTENCE OF SECTION
5.3 ONLY:
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/ Steven L. Grissom
---------------------------------
Steven L. Grissom, as Trustee
/s/ Mary Lee Sparks
- ------------------------------------
Mary Lee Sparks
The ten trusts created under the The ten trusts created under the
Mary Green Lumpkin Gallo Trust Richard Adamson Lumpkin
Agreement dated December 29, Grandchildren's Trust dated
1989, 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,
Anne Romayne Sparks, Susan Tamara Keon DeWyngaert,
Barbara Lee Sparks, Anne Romayne Sparks,
Christina Louise Sparks, and Barbara Lee Sparks,
John Woodruff Sparks Christina Louise Sparks, and
John Woodruff Sparks
United States Trust Company United States Trust Company of
of New York, Trustee New York, Trustee
By: /s/ Loraine B. Tsavaris
By: /s/ Loraine B. Tsavaris -----------------------------
-------------------------------- Name: Loraine B. Tsavaris
Name: Loraine B. Tsavaris Title: Managing Director
Title: Managing Director
-22-
<PAGE>
The two trusts established by Richard The ten 1990 Personal Income Trusts
Adamson Lumpkin under the Trust established by Margaret L. Keon and
Agreement dated February 6, 1970, Mary Lee Sparks, each dated April 20,
one for the benefit of each of: 1990, one for the benefit of each of:
Margaret Anne Keon, and
Mary Lee Sparks Joseph John Keon III,
Katherine Stoddert Keon,
Lisa Anne Keon,
Margaret Lynley Keon,
United States Trust Company Pamela Keon Vitale,
of New York, Trustee Susan Tamara Keon DeWyngaert,
Anne Romayne Sparks,
Barbara Lee Sparks,
Christina Louise Sparks, and
By: /s/ Loraine B. Tsavaris John Woodruff Sparks
------------------------------
Name: Loraine B. Tsavaris /s/ David R. Hodgman
Title: Managing Director --------------------------------------
David R. Hodgman, Trustee
/s/ Steven L. Grissom
--------------------------------------
Steven L. Grissom, Trustee
-23-
<PAGE>
SCHEDULE I
Richard A. Lumpkin
Gail G. Lumpkin
United States Trust Company of New York, as Trustee of two trusts created under
the Mary Green Lumpkin Gallo Trust Agreement dated December 29, 1989, one for
the benefit of each of Benjamin Iverson Lumpkin and Elizabeth Arabella Lumpkin.
United States Trust Company of New York, as Trustee of two trusts created under
the Richard Adamson Lumpkin Grandchildren's Trust dated September 5, 1980, one
for the benefit of each of Benjamin Iverson Lumpkin and Elizabeth Arabella
Lumpkin.
United States Trust Company of New York, as Trustee of the trust established by
Richard Adamson Lumpkin under the Trust Agreement dated February 6, 1970, for
the benefit of Richard Anthony Lumpkin.
David R. Hodgman and Steven L. Grissom, as Trustees of two 1990 Personal Income
Trusts established by Richard A. Lumpkin, each dated April 20, 1990, one for the
benefit of each of Benjamin Iverson Lumpkin and Elizabeth Arabella Lumpkin.
<PAGE>
SCHEDULE II
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.
Mary Lee Sparks
United States Trust Company of New York, as Trustee of ten 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,
Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks, and John
Woodruff Sparks.
United States Trust Company of New York, as Trustee of ten 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, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise Sparks,
and John Woodruff Sparks.
United States Trust Company of New York, as Trustee of two trusts established by
Richard Adamson Lumpkin under the Trust Agreement dated February 6, 1970, one
for the benefit of each of Margaret Anne Keon and Mary Lee Sparks.
David R. Hodgman and Steven L. Grissom, as Trustees of ten 1990 Personal Income
Trusts established by Margaret L. Keon and Mary Lee Sparks, 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, Anne Romayne Sparks, Barbara Lee Sparks, Christina Louise
Sparks, and John Woodruff Sparks.
<PAGE>
Exhibit 4.37
SECOND SUPPLEMENTAL WARRANT AGREEMENT
This Second Supplemental Warrant Agreement (the "Agreement") is made as of
March 30, 2000 by and among Splitrock Services, Inc., a Delaware corporation
(the "Company"), Splitrock Holdings, Inc., a Delaware corporation ("Holdings"),
and Harris Trust and Savings Bank, a New York trust company (formerly, Bank of
Montreal Trust Company), as Warrant Agent (the "Warrant Agent").
WHEREAS, the Company and the Warrant Agent are parties to a Warrant
Agreement, dated as of July 24, 1998, as amended by the First Supplemental
Warrant Agreement, dated as of February 22, 2000 (collectively, the "Warrant
Agreement"), pursuant to which the Company issued certain warrants to purchase
shares of the Company's Common Stock, par value $.001 per share (the
"Warrants");
WHEREAS, the Company is a party to that certain Amended and Restated
Agreement and Plan of Merger, dated as of February 11, 2000 (the "Merger
Agreement") by and among the Company, Holdings, Splitrock Merger Sub, Inc., a
Delaware corporation ("Merger Sub"), McLeodUSA, Inc., a Delaware corporation
("McLeod"), and Southside Acquisition Corporation, also a Delaware corporation
("Southside"), that provides for, among other things, the merger of Merger Sub,
a wholly-owned subsidiary of Holdings, with and into the Company with the
Company as both the surviving corporation and a wholly-owned subsidiary of
Holdings;
WHEREAS, pursuant to the Merger Agreement, at the Holdco Effective Time (as
defined in the Merger Agreement), (i) each issued and outstanding share of
Common Stock, par value $.001 per share, of the Company (the "Company Common
Stock") will be converted into the right to receive one share of Common Stock,
par value $.001 per share, of Holdings (the "Holdings Common Stock"), and (ii)
each outstanding Warrant will become a warrant to purchase a number of whole
shares of Holdings Common Stock equal to the number of shares of Company Common
Stock subject to such Warrant at the same exercise price;
WHEREAS, the Company and the Warrant Agent hereby amend the Warrant
Agreement pursuant to its terms to add Holdings as a party thereto and each of
the Company, Holdings and the Warrant Agent are entering into this Agreement as
required by Section 4.05(a) of the Warrant Agreement in order to evidence the
assumption by Holdings of all of the Company's obligations with respect to the
Warrants and to confirm the rights of the holders of the Warrants to receive
shares of Holdings Common Stock upon exercise of such Warrants.
NOW, THEREFORE, in consideration of the promises and the mutual agreements
contained herein and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged by the parties, the parties, intending
to be legally bound, hereby agree as follows:
<PAGE>
1. Defined Terms. Terms defined in the recitals to this Agreement have
-------------
the meanings ascribed to them thereto. All capitalized terms not defined herein
have the meanings assigned to such terms in the Warrant Agreement.
2. Assumption of Warrants. Pursuant to Section 4.05(a) of the Warrant
----------------------
Agreement and Section 1A.06(d) of the Merger Agreement, Holdings hereby assumes,
effective as of the Holdco Effective Time, all of the Company's obligations with
respect to the Warrants, including, without limitation, the Company's
obligations under Article V and Section 7.01 of the Warrant Agreement. Holdings
will comply with Section 4.09 of the Warrant Agreement as promptly as
practicable following the Holdco Effective Time.
3. Shares Issuable Upon Exercise of Warrants. At the Holdco Effective Time,
-----------------------------------------
each outstanding warrant shall become a warrant to purchase the same number of
whole shares of Holdings Common Stock equal to the number of shares of Company
Common Stock subject to such Warrant.
4. Warrant Price. As provided in Section 1A.06(d) of the Merger Agreement,
-------------
at the Holdco Effective Time, the Exercise Price per share of Holdings Common
Stock shall be the same Exercise Price as for a share of Company Common Stock
immediately prior to the Holdco Merger unless the Custodian Shares have been
issued pursuant to Section 2A.01 in which case the Exercise Price shall remain
zero.
5. Adjustments. Pursuant to the terms of the Warrant Agreement and
-----------
until the Exercise Price has not been reduced to zero pursuant to Section
2A.01(d), the Exercise Price provided in Section 3 above shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions of Article IV of the Warrant Agreement with
respect to the Company Common Stock. Pursuant to the terms of the Warrant
Agreement, the provisions of Article III of the Warrant Agreement with respect
to Company Common Stock shall apply on like terms to the shares of Holdings
Common Stock issuable upon exercise of the Warrants.
6. Liability for Certain Obligations. Holdco agrees that it shall be and
---------------------------------
become jointly and severally liable with the Company to the Warrant Agent for
the performance of the obligations of the Company under Sections 5.05, 5.07 and
6.05 of the Warrant Agreement.
7. Rights and Obligations of the Warrant Agent. All of the provisions of
-------------------------------------------
the Warrant Agreement with respect to the rights, privileges, immunities, powers
and duties of the Warrant Agent shall be applicable in respect of this Agreement
as fully and with the same effect as if set forth herein in full.
8. Effect of Execution and Delivery of this Agreement. From and after the
--------------------------------------------------
execution and delivery of this Agreement, (i) the Warrant Agreement shall be
deemed to be amended and modified as provided herein, (ii) this Agreement shall
form a part of the Warrant Agreement to which Holdings shall be a party, (iii)
except as modified and amended by this Agreement, the Warrant Agreement shall
continue in full force and effect, and (iv) each Holder of a Warrant
(irrespective of whether such Warrant has been
<PAGE>
heretofore or is hereafter executed, countersigned and delivered under the
Warrant Agreement) shall be bound by this Agreement.
9. Effectiveness. This Agreement shall not become effective unless and
-------------
until the Holdco Effective Time shall have occurred.
10. Counterparts. This Agreement may be executed simultaneously in one or
------------
more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
11. Benefits of This Agreement. Nothing in this Agreement, the Warrant
--------------------------
Agreement, or the Warrants, express or implied, shall give to any Person, other
than the parties hereto and thereto and their successors hereunder and
thereunder, and the Holders, any benefit of any legal or equitable right, remedy
or claim under the Warrant Agreement, this Agreement or the Warrants.
12. No Third Party Rights. Nothing in this Agreement shall be deemed
---------------------
to create any right in any creditor or other person or entity other than the
Holders of the Warrants and this Agreement shall not be construed in any respect
to be a contract in whole or in part for the benefit of any other third party.
13. Severability. Each of the provisions contained in this Agreement is
------------
distinct and severable and a declaration of invalidity or unenforceability of
any such provision or part thereof by a court of competent jurisdiction shall
not affect the validity or enforceability of any other provision hereof. The
parties agree to replace such invalid or unenforceable provision of this
Agreement with a valid and enforceable provision that shall achieve, to the
extent possible, the economic, business and other purposes of such invalid or
unenforceable provision.
14. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
--------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF. This Agreement shall be governed and
construed in accordance with the applicable terms and provisions of the Warrant
Agreement as amended hereby, which terms and provisions are incorporated herein
by reference, as if this Agreement were the "Warrant Agreement" referred to
therein.
15. Entire Agreement. This Agreement and the Warrant Agreement, as
----------------
amended by the First Supplemental Warrant Agreement, set forth all of the
promises, agreements, conditions, understandings, warranties and representations
between the Company, Holdings, and the Warrant Agent with respect to the
transactions contemplated hereby, and supersede all prior agreements,
arrangements and understandings between the Company, Holdings and the Warrant
Agent, whether written, oral or otherwise. There are no promises, agreements,
conditions, understandings, warranties or representations, oral or written,
express or implied, between any of the Company, Holdings and the Warrant Agent
concerning the subject matter hereof except as set forth herein.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first above written.
SPLITROCK SERVICES, INC.
By:______________________
Name: William R. Wilson
Title: President
SPLITROCK HOLDINGS, INC.
By: ______________________
Name: William R. Wilson
Title: President
HARRIS TRUST AND SAVINGS BANK,
as Warrant Agent
By: ______________________
Name:
Title:
<PAGE>
Exhibit 4.38
THIRD SUPPLEMENTAL WARRANT AGREEMENT
This Third Supplemental Warrant Agreement (the "Agreement") is made as of
March 30, 2000 by and among Splitrock Services, Inc., a Delaware corporation
(the "Company"), Splitrock Holdings, Inc., a Delaware corporation ("Holdings"),
McLeodUSA Incorporated, a Delaware corporation ("McLeodUSA"), and Harris Trust
and Savings Bank, a New York trust company (formerly Bank of Montreal Trust
Company), as Warrant Agent (the "Warrant Agent").
WHEREAS, the Company, Holdings, and the Warrant Agent are parties to a
Warrant Agreement, dated as of July 24, 1998, as amended by the First
Supplemental Warrant Agreement, dated as of February 22, 2000 and the Second
Supplemental Warrant Agreement, dated as of March 30, 2000 (collectively, the
"Warrant Agreement"), pursuant to which the Company issued certain warrants to
purchase shares of the Company's Common Stock, par value $.001 per share (the
"Warrants");
WHEREAS, the Company is a party to that certain Amended and Restated
Agreement and Plan of Merger, dated as of February 11, 2000 (the "Merger
Agreement"), by and among the Company, Holdings, Splitrock Merger Sub, Inc.,
McLeodUSA and Southside Acquisition Corporation ("Southside"), all Delaware
corporations, that provides for, among other things, the merger of Southside
with and into Holdings with Holdings as both the surviving corporation and a
wholly-owned subsidiary of McLeodUSA;
WHEREAS, pursuant to the Merger Agreement, at the Effective Time (as
defined in the Merger Agreement), (i) each issued and outstanding share of
Common Stock, par value $.001 per share, of Holdings (the "Holdings Common
Stock") will be converted into the right to receive 0.5347 of a share of Class A
Common Stock, par value $0.01 per share, of McLeodUSA (the "McLeodUSA Common
Stock"), and (ii) each outstanding Warrant will become a warrant to purchase a
number of whole shares of McLeodUSA Common Stock equal to the product of 0.5347
(the "Exchange Ratio") and the number of shares of Holdings Common Stock subject
to such Warrant at a price per share equal to the aggregate exercise price for
the shares of Holdings Common Stock subject to such Warrant divided by the
number of whole shares of McLeodUSA Common Stock purchasable upon exercise of
such Warrant;
WHEREAS, the Company, Holdings, and the Warrant Agent hereby amend the
Warrant Agreement pursuant to its terms to add McLeodUSA as a party thereto and
each of the Company, Holdings, McLeodUSA and the Warrant Agent are entering into
this Agreement as required by Section 4.05(a) of the Warrant Agreement and
Section 2.05 of the Merger Agreement, in order to evidence the assumption by
McLeodUSA of all of Holdings' obligations with respect to the Warrants and to
confirm the rights of the holders of the Warrants to receive shares of McLeodUSA
Common Stock upon exercise of such Warrants.
<PAGE>
NOW, THEREFORE, in consideration of the promises and the mutual agreements
contained herein and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged by the parties, the parties, intending
to be legally bound, hereby agree as follows:
1. Defined Terms. Terms defined in the recitals to this Agreement have
-------------
the meanings ascribed to them thereto. All capitalized terms not defined herein
have the meanings assigned to such terms in the Warrant Agreement.
2. Assumption of Warrants. Pursuant to Section 4.05(a) of the Warrant
----------------------
Agreement and Section 2.05 of the Merger Agreement, McLeodUSA hereby assumes,
effective as of the Effective Time, all of Holdings' obligations with respect to
the Warrants, including, without limitation, Holdings' obligations under Article
V and Section 7.01 of the Warrant Agreement and the obligation to issue shares
of McLeodUSA Common Stock into custody pursuant to Section 2A.03. McLeodUSA
will cause the Company to comply with Section 4.09 of the Warrant Agreement as
promptly as practicable following the Effective Time.
3. Shares Issuable Upon Exercise of Warrants. At the Effective Time, each
-----------------------------------------
outstanding warrant shall become a warrant to purchase a number of whole shares
of McLeodUSA Common Stock equal to the product of the Exchange Ratio and the
number of shares of Holdings Common Stock subject to such Warrant (rounding any
fractional share up to the nearest whole share). Pursuant to the terms of the
Merger Agreement, McLeodUSA shall issue shares of McLeodUSA Common Stock to the
Warrant Agent in exchange for shares of Company Common Stock (which at the
Effective Time will represent the right to receive shares of Holdings Common
Stock) held by the Warrant Agent as Custodian Shares and such shares of
McLeodUSA Common Stock shall constitute "Custodian Shares" following their
receipt by the Warrant Agent. The issuance of such shares of McLeodUSA Common
Stock to the Warrant Agent shall satisfy any obligation of McLeodUSA to reserve
the same number of shares of McLeodUSA Common Stock under Section 3.07 of the
Warrant Agreement.
4. Warrant Price. As provided in Section 2.05 of the Merger Agreement, at
-------------
the Effective Time, the Exercise Price per share of McLeodUSA Common Stock
subject to each Warrant shall be equal to the aggregate exercise price for the
shares of Holdings Common Stock subject to the Warrant immediately prior to the
Merger, divided by the number of whole shares of McLeodUSA Common Stock
purchasable pursuant to such Warrant, as assumed by McLeodUSA at the Effective
Time unless the Custodian Shares have been issued pursuant to Section 2A.01 in
which case the Exercise Price shall remain zero.
5. Adjustments. Pursuant to the terms of the Warrant Agreement and until
-----------
the Exercise Price has not been reduced to zero pursuant to Section 2A.01(d),
the Exercise Price provided in Section 3 above shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as practicable
to the provisions of Article IV of the Warrant Agreement with respect to
Holdings Common Stock. Pursuant to the terms of the Warrant Agreement, the
provisions of Article III of the Warrant
2
<PAGE>
Agreement with respect to Holdings Common Stock shall apply on like terms to the
shares of McLeodUSA Common Stock issuable upon exercise of the Warrants.
6. Liability for Certain Obligations. McLeodUSA agrees that it shall be
---------------------------------
and become jointly and severally liable with the Company to the Warrant Agent
for the performance of the obligations of the Company under Sections 5.05, 5.07
and 6.05 of the Warrant Agreement.
7. Rights and Obligations of the Warrant Agent. All of the provisions of
-------------------------------------------
the Warrant Agreement with respect to the rights, privileges, immunities, powers
and duties of the Warrant Agent shall be applicable in respect of this Agreement
as fully and with the same effect as if set forth herein in full.
8. Effect of Execution and Delivery of this Agreement. From and after the
--------------------------------------------------
execution and delivery of this Agreement, (i) the Warrant Agreement shall be
deemed to be amended and modified as provided herein, (ii) this Agreement shall
form a part of the Warrant Agreement to which McLeodUSA shall be a party, (iii)
except as modified and amended by this Agreement, the Warrant Agreement shall
continue in full force and effect, and (iv) each Holder of a Warrant
(irrespective of whether such Warrant has been heretofore or is hereafter
executed, countersigned and delivered under the Warrant Agreement) shall be
bound by this Agreement.
9. Effectiveness. This Agreement shall not become effective unless and
-------------
until the Effective Time shall have occurred.
10. Counterparts. This Agreement may be executed simultaneously in one or
------------
more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
11. Benefits of This Agreement. Nothing in this Agreement, the Warrant
--------------------------
Agreement, or the Warrants, express or implied, shall give to any Person, other
than the parties hereto and thereto and their successors hereunder and
thereunder, and the Holders, any benefit of any legal or equitable right, remedy
or claim under the Warrant Agreement, this Agreement or the Warrants.
12. No Third Party Rights. Nothing in this Agreement shall be deemed to
---------------------
create any right in any creditor or other person or entity other than the
Holders of the Warrants and this Agreement shall not be construed in any respect
to be a contract in whole or in part for the benefit of any other third party.
13. Severability. Each of the provisions contained in this Agreement is
------------
distinct and severable and a declaration of invalidity or unenforceability of
any such provision or part thereof by a court of competent jurisdiction shall
not affect the validity or enforceability of any other provision hereof. The
parties agree to replace such invalid or unenforceable provision of this
Agreement with a valid and enforceable provision that shall achieve, to the
extent possible, the economic, business and other purposes of such invalid or
unenforceable provision.
3
<PAGE>
14. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
--------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF. This Agreement shall be governed and
construed in accordance with the applicable terms and provisions of the Warrant
Agreement as amended hereby, which terms and provisions are incorporated herein
by reference, as if this Agreement were the "Warrant Agreement" referred to
therein.
15. Entire Agreement. This Agreement and the Warrant Agreement, set forth
----------------
all of the promises, agreements, conditions, understandings, warranties and
representations between the Company, Holdings, McLeodUSA, and the Warrant Agent
with respect to the transactions contemplated hereby, and supersede all prior
agreements, arrangements and understandings between the Company, Holdings,
McLeodUSA and the Warrant Agent, whether written, oral or otherwise. There are
no promises, agreements, conditions, understandings, warranties or
representations, oral or written, express or implied, between any of the
Company, Holdings, McLeodUSA and the Warrant Agent concerning the subject matter
hereof except as set forth herein.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
SPLITROCK SERVICES, INC.
By:______________________
Name: William R. Wilson
Title: President
SPLITROCK HOLDINGS, INC.
By:______________________
Name: William R. Wilson
Title: President
MCLEODUSA INCORPORATED
By: ______________________
Name:
Title:
HARRIS TRUST AND SAVINGS BANK,
as Warrant Agent
By: ______________________
Name:
Title:
5
<PAGE>
EXHIBIT 11.1
McLEODUSA INCORPORATED
COMPUTATION OF LOSS PER COMMON SHARE
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
Three Months Ended
March 31,
--------------------
2000 1999
------ ------
Computation of weighted average number of
common shares outstanding:
Common shares, Class A, outstanding at the
beginning of the period................................. 472.8 382.1
Common shares, Class B, outstanding at the
beginning of the period (A)............................. --- ---
Weighted average number of shares issued
during the period....................................... 6.9 14.6
------ ------
Weighted average number of common shares................. 479.7 396.7
====== ======
Net loss................................................. $(72.1) $(47.5)
====== ======
Loss per common share.................................... $(0.15) $(0.12)
====== ======
(A) All shares have been adjusted to give effect to the three-for-one stock
split effected in the form of a stock dividend effective April 24, 2000.
(B) The Class B common stock, $.01 par value per share is convertible on a one-
for-one basis at any time at the option of the holder into Class A common
stock. As of March 31, 2000, all shares of Class B common stock have been
converted into shares of Class A common stock.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated financial statements of McLeodUSA Incorporated and
subsidiaries for the three months ended March 31, 2000 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 536,800
<SECURITIES> 493,000
<RECEIVABLES> 279,200
<ALLOWANCES> 47,400
<INVENTORY> 29,900
<CURRENT-ASSETS> 1,396,900
<PP&E> 1,873,200
<DEPRECIATION> 243,200
<TOTAL-ASSETS> 6,530,100
<CURRENT-LIABILITIES> 415,100
<BONDS> 2,059,900
1,000,000
12
<COMMON> 5,800
<OTHER-SE> 3,014,800
<TOTAL-LIABILITY-AND-EQUITY> 6,530,100
<SALES> 288,300
<TOTAL-REVENUES> 288,300
<CGS> 148,100
<TOTAL-COSTS> 148,100
<OTHER-EXPENSES> 175,700
<LOSS-PROVISION> 7,100
<INTEREST-EXPENSE> 31,000
<INCOME-PRETAX> (58,500)
<INCOME-TAX> 0
<INCOME-CONTINUING> (58,500)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,500)
<EPS-BASIC> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
