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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): March 30, 2000
McLEODUSA INCORPORATED
(Exact name of registrant as specified in its charter)
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Delaware 0-20763 42-1407240
(State or Other (Commission (IRS Employer
Jurisdiction of Incorporation) File Number) Identification Number)
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McLeodUSA Technology Park
6400 C Street S.W., P.O. Box 3177
Cedar Rapids, IA 52406-3177
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (319) 364-0000
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INFORMATION TO BE INCLUDED IN THE REPORT
Item 2. Acquisition or Disposition of Assets
On March 30, 2000, McLeodUSA Incorporated, a Delaware corporation
("McLeodUSA"), acquired Splitrock Services, Inc., a Delaware corporation
("Splitrock Services"), by merger with the result that Splitrock Services became
an indirect wholly owned subsidiary of McLeodUSA. Pursuant to the Amended and
Restated Agreement and Plan of Merger by and among McLeodUSA, Southside
Acquisition Corporation, a Delaware corporation and wholly owned subsidiary of
McLeodUSA ("Southside"), Splitrock Services, Splitrock Holdings, Inc., a
Delaware corporation and wholly owned subsidiary of Splitrock Services
("Splitrock Holdings"), and Splitrock Merger Sub, Inc., a Delaware corporation
and wholly owned subsidiary of Splitrock Holdings ("Splitrock Merger Sub"),
dated as of February 11, 2000 (the "Merger Agreement"), the acquisition of
Splitrock Services by McLeodUSA was effected through two separate but related
transactions:
. a holding company reorganization (the "Reorganization"), in which
Splitrock Services became a wholly owned subsidiary of its former
subsidiary, Splitrock Holdings; and
. a merger (the "Merger") of Southside with and into Splitrock Holdings in
which Splitrock Holdings was the surviving corporation and became a
wholly owned subsidiary of McLeodUSA.
In the Reorganization, Splitrock Merger Sub merged with and into Splitrock
Services with Splitrock Services as the surviving corporation. As a result,
Splitrock Services became a wholly owned subsidiary of Splitrock Holdings and
continued its corporate existence under the laws of the State of Delaware. The
separate corporate existence of Splitrock Merger Sub terminated. At the
effective time of the Reorganization, each outstanding share of Splitrock
Services's outstanding common stock, par value $.001 per share ("Splitrock
Services Common Stock"), was converted into the right to receive one share of
Splitrock Holdings common stock, par value $.001 per share ("Splitrock Holdings
Common Stock").
In the Merger, Southside merged with and into Splitrock Holdings with
Splitrock Holdings as the surviving corporation. As a result, Splitrock Holdings
became a direct wholly owned subsidiary of McLeodUSA and continued its corporate
existence under the laws of the State of Delaware under the name "Splitrock
Holdings, Inc." Additionally, Splitrock Services, as a direct subsidiary of
Splitrock Holdings, continued its corporate existence under the laws of the
State of Delaware under the name "Splitrock Services, Inc." and became an
indirect wholly owned subsidiary of McLeodUSA. At the effective time of the
Merger, each right to receive one share of Splitrock Holdings Common Stock was
converted into the right to receive 0.5347 (the "Exchange Ratio") of a share of
Class A common stock, par value $.01 per share ("McLeodUSA Class A Common
Stock"), of McLeodUSA and cash in lieu of fractional shares.
As a result of the Merger, McLeodUSA will issue approximately 31 million
shares of McLeodUSA Class A Common Stock to former holders of Splitrock Services
Common Stock. Furthermore, Splitrock Services' outstanding 11 3/4% Senior Notes
due 2008 ($261 million principal amount) remain outstanding with Splitrock
Services as the obligor under such Senior Notes. In addition, at the effective
time of the Merger, (1) each employee and director option to acquire shares of
Splitrock Services Common Stock that was outstanding and unexercised immediately
prior to the effective time of the Merger was replaced by an option to purchase
shares of McLeodUSA Class A Common Stock and (2) each warrant to purchase shares
of Splitrock Services Common Stock that was outstanding and unexercised
immediately prior to the effective time of the Merger became exercisable to
purchase shares of McLeodUSA Class A Common Stock. In each case, the number
of shares of McLeodUSA Class A Common Stock subject to the new option or
warrant, as the case may be, is equal to the number of shares of Splitrock
Services Common Stock subject to the former option or warrant multiplied by
the Exchange Ratio. The exercise price per share of McLeodUSA Class A Common
Stock subject to the new option or warrant has been adjusted to equal the
aggregate exercise price for the shares of Splitrock Services Common Stock
subject to the old option or warrant divided by the number of whole shares
of McLeodUSA Class A Common Stock subject to such option or warrant.
Through the Merger, McLeodUSA acquired a nationwide broadband access
platform with asynchronous transfer mode (ATM) switches in more than 350 points
of presence (POPs) providing coverage to 90% of U.S. businesses and 87% of U.S.
households with a local call. In addition, Splitrock Services has agreed to
acquire the indefeasible rights to use four dark fiber strands in a fiber optic
network currently under construction, with an option to acquire indefeasible
rights to use an additional twelve fibers. This fiber network will cover
approximately 15,000 route miles and will become available in progressive
segments through the first quarter of 2001.
The Splitrock Services' access platform integrates data, video and voice
traffic on a unified platform, enabling a consistent quality of service
nationwide. Splitrock Services' products and services include dial and
dedicated Internet access, VPN and Virtual Internet Service (VIS) to corporate
end users, ISPs, and other telecommunications carriers.
The consideration for the Merger was determined through arm's-length
negotiations between McLeodUSA and Splitrock Services. McLeodUSA will record
the Merger as a purchase for accounting purposes.
Roy A. Wilkens, a member of the board of directors of both McLeodUSA and
Splitrock Services, entered into an employment agreement with McLeodUSA on
January 7, 2000 and became the Chief Technology Officer of McLeodUSA. After the
Merger, Mr. Wilkens became the President and Chief Executive Officer - Data
Network for McLeodUSA.
The foregoing descriptions of the Merger Agreement, the Merger and the
Reorganization do not purport to be complete and are qualified in their entirety
by reference to the Merger Agreement, filed with the Securities and Exchange
Commission on February 11, 2000 as Exhibit 2.1 to the McLeodUSA Registration
Statement on Form S-4, as amended (Registration No. 333-95941). A copy of the
press release, dated April 3, 2000, issued by McLeodUSA, announcing the
completion of the Merger is attached hereto as Exhibit 99.1 and incorporated
herein by reference.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
Due to the impracticability of preparing financial statements within the
prescribed time period for filing this Current Report on Form 8-K, McLeodUSA
will file such financial statements in an amended filing within 60 days of the
date of this Current Report.
Description.
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(c) Exhibits.
2.1 Amended and Restated Agreement and Plan of Merger by and among
McLeodUSA Incorporated, Southside Acquisition Corporation,
Splitrock Services, Inc., Splitrock Holdings, Inc., and Splitrock
Merger Sub, Inc. dated as of February 11, 2000 (Incorporated
herein by reference to the Registration Statement on Form S-4 of
McLeodUSA Incorporated, as amended (Registration No. 333-95941)
filed with the Securities and Exchange Commission on February 2,
2000).
99.1 Press Release, dated April 3, 2000, announcing the completion of
the Splitrock acquisition.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: April 14, 2000 McLEODUSA INCORPORATED
By: /s/ Randall Rings
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Randall Rings
Vice President, Secretary and
General Counsel
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EXHIBIT INDEX
Exhibit 2.1 Amended and Restated Agreement and Plan of Merger by and among
McLeodUSA Incorporated, Southside Acquisition Corporation,
Splitrock Services, Inc., Splitrock Holdings, Inc., and Splitrock
Merger Sub, Inc. dated as of February 11, 2000 (Incorporated
herein by reference to the Registration Statement on Form S-4 of
McLeodUSA Incorporated, as amended (Registration No. 333-95941)
filed with the Securities and Exchange Commission on February 2,
2000).
Exhibit 99.1 Press Release, dated April 3, 2000, announcing the completion of
the Splitrock acquisition.
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Exhibit 99.1
[MCLEODUSA LOGO APPEARS HERE]
McLeodUSA Incorporated
McLeodUSA Technology Park
6400 C Street SW, PO Box 3177
Cedar Rapids, IA 52406-3177
Press & Investor Contact: Bryce Nemitz
Phone: (319) 790-7800
FAX: (319) 790-7767
http://www.mcleodusa.com
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FOR IMMEDIATE RELEASE
McLeodUSA Completes Acquisition of Splitrock
Cedar Rapids, Iowa -- April 3, 2000 -- McLeodUSA Incorporated (Nasdaq: MCLD)
today announced the completion of its acquisition of Splitrock Services, Inc.
The two companies had announced the transaction on January 7.
At separate shareholder meetings held last week, stockholders of both firms
approved the transaction. The acquisition adds a nationwide, next generation
data services company -- Splitrock, to one of the fastest growing facilities-
based integrated communications providers in the country -- McLeodUSA.
As announced January 7, McLeodUSA has added Roy A. Wilkens to head its Data
Network operations which now includes the Houston-based Splitrock team. Wilkens
has been named CEO of Data Network operations as well as Chief Technology
Officer at McLeodUSA. An announcement listing Wilkens' new senior management
team is expected later this week. "I am very excited about bringing these two
great companies together," stated Wilkens. "Splitrock and McLeodUSA were very
strong individually, but the real power is in the combination of the two."
"Splitrock is our most important acquisition to date," said McLeodUSA Chairman
and CEO Clark McLeod. "The combination of people, assets and Internet peering
relationships positions us to become a major player in the data communications
industry."
"We believe this transaction is significant on two fronts," said Steve Gray,
McLeodUSA President and CEO of Local Services. "First, it will enhance the
profile of our local services operations by accelerating and broadening our in-
region data services. Simultaneously, it will expand our overall opportunity by
providing the vehicle to address the national data market. Simply stated, this
single acquisition will accelerate our penetration in-region, while increasing
our total addressable market three fold."
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Holders of Splitrock stock are receiving 0.5347 of one share of newly issued
McLeodUSA Class A common stock for each Splitrock share. After receiving shares
of McLeodUSA Class A common stock, Splitrock shareholders will also receive
additional shares as a result of the three-for-one stock split in the form of a
stock dividend announced by McLeodUSA on February 29. Splitrock shares have
ceased trading on The Nasdaq Stock Market(R).
About McLeodUSA
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McLeodUSA is a provider of integrated telecommunications services to customers
in 14 Midwest and Rocky Mountain states, with 7 additional expansion states to
be added this year. McLeodUSA is a facilities-based telecommunications provider
with 27 switches, 679,000 local lines, 8,100 employees, and over 10,000 route
miles of fiber optic network. In the next 12 months, the Company's publishing
subsidiaries plan to distribute more than 25 million white and yellow page
directories in 23 states, expected to reach 43 million people.
About Splitrock
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Headquartered near Houston, Texas, Splitrock owns and operates a nationwide
broadband access platform that places ATM switches in more than 350 points of
presence (POPs) providing coverage to 90 percent of US businesses and
households. Splitrock's "carry anything, anywhere" business strategy is
implemented on this "ATM-to-the-Edge" access platform, which integrates data,
video and voice traffic on one platform. Because of the unified nature of the
network platform, Splitrock offers the same level and quality of service
nationwide. Splitrock's products and services include dial and dedicated
Internet access, VPN and Virtual Internet Service (VIS) to corporate end users,
ISPs, and other telecommunications carriers.
Some of the statements contained in this press release discuss future
expectations, contain projections of results of operations or financial
condition or state other forward-looking information. Those statements are
subject to known and unknown risks, uncertainties and other factors that could
cause the actual results to differ materially from those contemplated by the
statements. The "forward-looking" information is based on various factors and
was derived using numerous assumptions. In some cases, you can identify these
so-called forward-looking statements by words like "may," "will," "should,"
"expects," "plans," "intends," "projects," "anticipates," "believes,"
"estimates," "predicts," "potential," or "continue" or the negative of those
words and other comparable words. You should be aware that those statements
only reflect the predictions of McLeodUSA. Actual events or results may differ
substantially. Important factors that could cause actual results of McLeodUSA
to be materially different from the forward-looking statements include
availability of financing and regulatory approvals, the number of potential
customers in a target market, the existence of strategic alliances or
relationships, technological, regulatory or other developments in the industry,
changes in the competitive climate in which McLeodUSA operates and the emergence
of future opportunities. These and other applicable risks are summarized under
the caption "Risk Factors" in the McLeodUSA Annual Report on Form 10-K for the
fiscal year ended December 31, 1999, which is filed with the Securities and
Exchange Commission.
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