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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): January 6, 2000
McLEODUSA INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 0-20763 42-1407240
(State or Other (Commission (IRS Employer
Jurisdiction of Incorporation) File Number) Identification Number)
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 5. Other Events.
Agreement to Acquire Splitrock Services, Inc.
On January 6, 2000, McLeodUSA Incorporated (the "Company") entered into
an Agreement and Plan of Merger (the " Merger Agreement") with Splitrock
Services, Inc., a Delaware corporation ("Splitrock"), pursuant to which a newly
formed, wholly owned subsidiary of the Company will be merged with and into
Splitrock (the "Merger"). As a result of the Merger, each share of Splitrock's
common stock will be converted into the right to receive .5347 of a share of the
Company's Class A common stock (the "Exchange Ratio"). The Company estimates
that it will be required to issue approximately 31 million shares of its Class A
common stock pursuant to the Merger. The Company has agreed to register under
the Securities Act of 1933 the shares of its Class A common stock to be issued
in the Merger. The Company also will assume approximately $261 million in
Splitrock debt. Under the terms of the Merger Agreement, each outstanding option
to purchase Splitrock common stock issued under Splitrock's stock option plans
will become or be replaced by an option to purchase a number of shares of the
Company's Class A common stock equal to the number of shares of Splitrock common
stock that could have been purchased (assuming full vesting) under the Splitrock
stock option multiplied by the Exchange Ratio. In addition, each outstanding
warrant to purchase shares of Splitrock common stock issued pursuant to the
Warrant Agreement dated June 24, 1998 between Splitrock and Bank of Montreal
Trust Company, as warrant agent, will be replaced by a warrant to purchase a
number of shares of the Company's Class A common stock equal to the number of
shares of Splitrock common stock that could have been purchased under the
Splitrock warrant multiplied by the Exchange Ratio.
Consummation of the Merger is subject to the satisfaction of certain
conditions, including (i) approval of the Merger Agreement and the Merger by the
stockholders of Splitrock, (ii) approval by the stockholders of the Company of
both the issuance of the Company's Class A common stock pursuant to the Merger
Agreement and an amendment to the Company's certificate of incorporation to
increase its authorized number of shares of Class A common stock, (iii)
effectiveness of the registration statement registering the shares of the
Company's Class A common stock to be issued in the Merger, (iv) compliance with
all applicable provisions of the Hart-Scott-Rodino Antitrust Improvements Act of
1976 and the expiration of all applicable waiting periods thereunder, and (v)
certain other customary conditions. Certain stockholders and executive officers
of both Splitrock and the Company have entered into voting agreements pursuant
to which, among
other things, they have agreed to vote their shares of Splitrock
common stock and Company Class A common stock, as the case may be, in favor of
the matters related to the Merger to be submitted for approval at the respective
meetings of the stockholders. Certain stockholders of Splitrock owning in excess
of fifty percent of the outstanding shares of Splitrock common stock have also
granted to the Company an option to purchase their shares under certain
circumstances at a price equal to the value that they would receive in the
Merger. A break-up fee of $68 million will be payable by Splitrock to the
Company under certain circumstances and both the Company and Splitrock may
terminate the Merger Agreement if the Merger has not been consummated by July
30, 2000. In connection with the execution of the Merger Agreement, the Company
facilitated and participated in Splitrock obtaining $115 million in financing to
support its operations and entered into two operating arrangements with
Splitrock to purchase up to $105 million in services. In addition, certain
stockholders of Splitrock also agreed to enter into a Stockholders' Agreement
(the "Stockholders' Agreement") with the Company pursuant to which, among other
things, such Splitrock stockholders will agree to certain restrictions on their
ability to transfer certain of the shares of the Company's Class A common stock
that they will receive in the Merger.
Headquartered near Houston, Texas, Splitrock owns and operates a
nationwide broadband access platform that places ATM switches in hundreds of
points of presence (POPs) providing ubiquitous coverage of US businesses and
households. Splitrock's "carry anything, anywhere" business strategy is
implemented on this "ATM-to-the-Edge/TM/" 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.
The foregoing description of the Merger Agreement, and the transactions
contemplated thereby, does not purport to be complete and is qualified in its
entirety by reference to the Merger Agreement, a copy of which is attached
hereto as Exhibit 2.1, and incorporated herein by reference. A copy of the press
release, dated January 7, 2000, issued by the Company regarding the above-
described transactions is attached as Exhibit 99.1 hereto and incorporated
herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
Description.
(c) Exhibits.
2.1 Agreement and Plan of Merger, dated as of January 6, 2000,
by and among McLeodUSA Incorporated, Southside Acquisition
Corporation and Splitrock Services, Inc.
99.1 Press Release, dated January 7, 2000, announcing the
Company's execution of a definitive agreement to acquire
Splitrock Services, Inc.
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: January 18, 2000 McLEODUSA INCORPORATED
By: /s/ Randall Rings
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Randall Rings
Vice President, Secretary and
General Counsel
EXHIBIT INDEX
2.1 Agreement and Plan of Merger, dated as of January 6, 2000,
by and among McLeodUSA Incorporated, Southside Acquisition
Corporation and Splitrock Services, Inc.
99.1 Press Release, dated January 7, 2000, announcing the
Company's execution of a definitive agreement to acquire
Splitrock Services, Inc.