Exhibit 4.12
STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement (this "Agreement") is entered into as of
June 14, 1997, and will be effective as of the date the Merger (as defined
below) is consummated (the "Effective Date") by and among McLeodUSA
Incorporated, a Delaware corporation (the "Company"); IES Investments Inc., an
Iowa corporation ("IES"); Midwest Capital Group, Inc. ("MCG"); MWR Investments
Inc. ("MWR"); Clark E. McLeod ("McLeod"); Mary E. McLeod (collectively with
McLeod, the "McLeods"); and Richard A. Lumpkin ("Lumpkin") on behalf of each of
the shareholders of Consolidated Communications Inc. ("CCI") listed in
Schedule I hereto (the "CCI Shareholders"). IES, MCG, MWR, and the McLeods are
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referred to herein collectively as the "Original Principal Stockholders" and
individually as an "Original Principal Stockholder" and IES, MCG, MWR, the
McLeods, Lumpkin and the CCI Shareholders are referred to herein collectively as
the "Principal Stockholders" and individually as a "Principal Stockholder."
WHEREAS, the Original Principal Stockholders and certain other
stockholders of the Company are parties to a certain Investor Agreement, dated
as of April 1, 1996 (the "Original Investor Agreement"), as amended by Amendment
No. 1 to Investor Agreement among the Original Principal Stockholders dated
October 23, 1996 (the "Amendment," and together with the Original Investor
Agreement, the "Investor Agreement");
WHEREAS, upon consummation of the merger of CCI with and into Eastside
Acquisition Co., a newly formed Delaware corporation and a wholly owned
subsidiary of the Company (the "Merger"), Lumpkin and the CCI Shareholders will
become stockholders of the Company and the Principal Stockholders desire to
enter into this Agreement to set forth certain arrangements among the Principal
Stockholders;
WHEREAS, the Company and the Original Principal Stockholders intend
that, as among them, this Agreement will supersede and replace the agreements
contained in Section 1, Section 2, Section 3, Section 7 and Section 8 of the
Original Investor Agreement as amended by the Amendment, as those sections apply
to the Company and the Original Principal Stockholders.
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 a period of three years commencing on the Effective Date, each
Original Principal Stockholder, for so long as such Original Principal
Stockholder beneficially owns at least 10% of the outstanding Class A common
stock, $.01 par value per share, of the Company (the "Class A Common Stock"),
determined on a fully diluted basis (that is, all outstanding Class A Common
Stock and all outstanding options and other securities convertible into, or
exercisable for, Class A Common Stock), and Lumpkin and the CCI Shareholders,
for so long as they collectively beneficially own at least 10% of the
outstanding Class A Common Stock (determined on a fully diluted basis), 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") up to eleven directors;
(b) to cause to be elected to the Board one director designated by
IES, subject to the provisions of Section 1.2, for so long as IES
beneficially owns at least 10% of the outstanding Class A Common
Stock (determined on a fully diluted basis);
(c) to cause to be elected to the Board one director designated by
MWR, subject to the provisions of Section 1.2, for so long as MWR
beneficially owns at least 10% of the outstanding Class A Common
Stock (determined on a fully diluted basis);
(d) to cause Lumpkin to be elected to the Board, for so long as
Lumpkin and the CCI Shareholders collectively beneficially own at
least 10% of the outstanding Class A Common Stock (determined on
a fully diluted basis);
(e) to cause to be elected to the Board three directors who are
executive officers of the Company designated by McLeod, for so
long as the McLeods collectively beneficially own at least 10% of
the outstanding Class A Common Stock (determined on a fully
diluted basis); and
(f) to cause to be elected to the Board four non-employee directors
nominated by the Board of Directors of the Company.
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1.2 Certain Transactions
1.2.1 Company Capital Stock Owned by MWR
In the event IES becomes the Beneficial Owner of 50% or more of the
shares of capital stock of the Company beneficially owned by MWR, (a) the
provisions of Section 1.1(c) shall be null and void and of no further force and
effect, (b) at all meetings or votes, consents or authorizations of the
Company's stockholders through the Expiration Date, IES shall vote, or use its
best efforts to direct the voting of, all Excess Shares beneficially owned by
IES with respect to the election of directors and all other matters either (i)
in accordance with the recommendations of the Board of Directors of the Company
or (ii) for or against or abstaining in the same proportion as the shares owned
by all other stockholders (excluding IES and its Affiliates and Associates) are
voted or abstained from voting with respect to such matter, (c) IES shall cause,
or use its best efforts to cause, all shares of capital stock of the Company
beneficially owned by IES to be represented in person or by proxy at all
meetings of the Company's stockholders through the Expiration Date, and (d) IES
shall not, and shall use its best efforts to cause its Affiliates and Associates
not to, deposit any such shares of capital stock of the Company in a voting
trust or enter into a voting agreement or other agreement of similar effect with
any other person prior to the Expiration Date.
1.2.2 Company Capital Stock Owned by IES
In the event MWR becomes the Beneficial Owner of 50% or more of the
shares of capital stock of the Company beneficially owned by IES, (a) the
provisions of Section 1.1(b) shall be null and void and of no further force and
effect, (b) at all meetings or votes, consents or authorizations of the
Company's stockholders through the Expiration Date, MWR shall vote, or use its
best efforts to direct the voting of, all Excess Shares beneficially owned by
MWR with respect to the election of directors and all other matters either (i)
in accordance with the recommendations of the Board of Directors of the Company
or (ii) for or against or abstaining in the same proportion as the shares owned
by all other stockholders (excluding MWR and its Affiliates and Associates) are
voted or abstained from voting with respect to such matter, (c) MWR shall cause,
or use its best efforts to cause, all shares of capital stock of the Company
beneficially owned by MWR to be represented in person or by proxy at all
meetings of the Company's stockholders through the Expiration Date, and (d) MWR
shall not, and shall use its best efforts to cause its Affiliates and Associates
not to, deposit any such shares of capital stock of the Company in a voting
trust or enter into a voting agreement or other agreement of similar effect with
any other person prior to the Expiration Date.
1.2.3 Company Capital Stock Owned by MWR and IES
In the event a third party becomes the Beneficial Owner of 50% or
more of the shares of capital stock of the Company beneficially owned by IES and
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50% or more of the shares of capital stock of the Company beneficially owned by
MWR, (a) the provisions of Sections 1.1(b) and 1.1(c) shall be null and void and
of no further force and effect, (b) at all meetings or votes, consents or
authorizations of the Company's stockholders through the Expiration Date, IES
and MWR shall vote, or use their respective best efforts to direct the voting
of, all Excess Shares of capital stock of the Company beneficially owned by such
third party with respect to the election of directors and all other matters
either (i) in accordance with the recommendations of the Board of Directors of
the Company or (ii) for or against or abstaining in the same proportion as the
shares owned by all other stockholders (excluding IES, MWR and their respective
Affiliates and Associates) are voted or abstained from voting with respect to
such matter, (c) IES and MWR shall cause, or use their best efforts to cause,
all shares of capital stock of the Company beneficially owned by them to be
represented in person or by proxy at all meetings of the Company's stockholders
through the Expiration Date, and (d) IES and MWR shall not, and shall use their
best efforts to cause their respective Affiliates and Associates not to, deposit
any such shares of capital stock of the Company in a voting trust or enter into
a voting agreement or other agreement of similar effect with any other person
prior to the Expiration Date.
1.2.4 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,
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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) "Excess Shares" shall mean, with respect to the shares of
capital stock of the Company beneficially owned by a
person, any shares of capital stock of the Company
beneficially owned by such person that, when aggregated
with all shares of capital stock of the Company
beneficially owned by such person and any of such person's
Affiliates or Associates, represent more than 25% of the
voting power of the outstanding capital stock of the
Company.
(d) "Expiration Date" shall mean October 23, 1999.
2. STANDSTILL
Each of IES, MWR and MCG (each a "Strategic Investor" and
collectively, the "Strategic Investors") hereby severally agrees that prior to
June 10, 1999, none of such Strategic Investors nor any Affiliate thereof, will
(and each such Strategic Investor 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 Company's Board of Directors, (c) upon
conversion of any Class B common stock, $.01 par value per share, of the Company
into Class A Common Stock pursuant to the terms thereof, (d) with respect to
transfers of equity securities between or among a Strategic Investor and such
party's wholly owned subsidiaries, parent corporation, or other wholly owned
subsidiaries of such parent corporation, (e) in connection with a business
combination between or among Strategic Investors, or (f) in the case of IES (or
any Affiliate thereof), with respect to the grant, vesting or exercise of stock
options.
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3. TRANSFERS OF SECURITIES
3.1 Restrictions on Transfers
(a) Each Principal Stockholder hereby severally agrees that until
the earlier of (i) the first anniversary of the Effective Date and (ii) March
31, 1999, 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 (or, in the case of a Principal
Stockholder that is a trust, the trustee thereof) without the prior written
consent of the Company provided, however that any CCI Shareholder may transfer
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Securities to any other CCI Shareholder (or a trust for the primary benefit of
any CCI Shareholder), or, in the case of a CCI Shareholder that is a trust, to
any beneficiary of such trust (or a trust for the primary benefit of such
beneficiary), in each case provided that (i) such transfer is done in accordance
with the transfer restrictions applicable to such Securities under federal and
state securities laws and (ii) the transferee agrees to be bound by the terms
hereof as a Principal Stockholder, and any such transfer shall not constitute a
"Transfer" for purposes of this Agreement.
(b) In the event that the Company consents to any Transfer of
Securities by a Principal Stockholder (a "Transferring Stockholder"), each other
Principal Stockholder shall, notwithstanding the provisions of Section 3.1(a),
have the right to Transfer a percentage of the total amount of Securities
beneficially owned by such Principal Stockholder (or, in the case of a Principal
Stockholder that is a trust, the trustee thereof) equal to the percentage of the
total number of Securities beneficially owned by the Transferring Stockholder
that the Company has consented may be Transferred by such Transferring
Stockholder.
(c) For purposes of this Section 3.1, MWR and MCG shall be deemed
to be a single Principal Stockholder, and Lumpkin and all of the CCI
Shareholders shall be deemed to be a single Principal Stockholder.
3.2 Registration Rights
(a) In the event that the Company pursuant to Section 3.1 grants a
Transferring Stockholder the opportunity to register Securities for Transfer
under the Securities Act of 1933, as amended (the "Securities Act"), the Company
shall grant each other Principal Stockholder, notwithstanding Section 3.1(a),
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 amount of Securities beneficially owned by such Principal Stockholder
(or, in the case of a Principal Stockholder that is a trust, the trustee
thereof) 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
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the Securities Act, on the same terms and conditions as the Transferring
Stockholder (such Transferring Stockholder and any Principal Stockholder
registering any Securities for Transfer under the Securities Act pursuant hereto
being a "Registering Transferor").
(b) If the Board establishes a committee (a "Pricing Committee") to
authorize and approve the price and any other terms of any Transfer of
Securities registered under the Securities Act pursuant to this Section 3.2 in
which Lumpkin or any CCI Shareholder is participating as a Registering
Transferor, the Company will use its best efforts to cause Lumpkin to be
nominated to such Pricing Committee.
(c) For purposes of this Section 3.2, MWR and MCG shall be deemed
to be a single Principal Stockholder, and Lumpkin and all of the CCI
Shareholders shall be deemed to be a single Principal Stockholder.
4. REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Non-individual Stockholders.
Each non-individual Principal Stockholder hereby represents and
warrants, as of the date of this Agreement, to the Company and to each other
Principal Stockholder as follows:
4.1.1 Authorization
Such Principal Stockholder has taken all action necessary for it to
enter into this Agreement and to consummate the transactions contemplated
hereby.
4.1.2. Binding Obligation
This Agreement constitutes a valid and binding obligation of such
Principal Stockholder, enforceable in accordance with its terms, except to the
extent that such enforceability may be limited by bankruptcy, insolvency, and
similar laws affecting the rights and remedies of creditors generally, and by
general principles of equity and public policy; and each document and instrument
to be executed by such Stockholder pursuant hereto, when executed and delivered
in accordance with the provisions hereof, shall be a valid and binding
obligation of such Principal Stockholder, enforceable in accordance with its
terms (with the aforesaid exceptions).
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4.2 Representations and Warranties of Individual Stockholders
Each Principal Stockholder who is an individual hereby represents and
warrants, as of the date of this Agreement, to the Company and to each other
Principal Stockholder as follows:
4.2.1. Power and Authority
Such Principal Stockholder has the legal capacity and all other
necessary power and authority necessary to enter into this Agreement and to
consummate the transactions contemplated hereby.
4.2.2. Binding Obligation
This Agreement constitutes a valid and binding obligation of such
Principal Stockholder, enforceable in accordance with its terms, except to the
extent that such enforceability may be limited by bankruptcy, insolvency, and
similar laws affecting the rights and remedies of creditors generally, and by
general principles of equity and public policy; and each document and instrument
to be executed by such Principal Stockholder pursuant hereto, when executed and
delivered in accordance with the provisions hereof, shall be a valid and binding
obligation of such Principal Stockholder, enforceable in accordance with its
terms (with the aforesaid exceptions).
4.3 Representations and Warranties of the Company
The Company hereby represents and warrants, as of the date of this
Agreement, to each Principal Stockholder as follows:
4.3.1. Authorization
The Company has taken all corporate action necessary for it to enter
into this Agreement and to consummate the transactions contemplated hereby.
4.3.2. Binding Obligation
This Agreement constitutes a valid and binding obligation of the
Company, enforceable in accordance with its terms, except to the extent that
such enforceability may be limited by bankruptcy, insolvency, and similar laws
affecting the rights and remedies of creditors generally, and by general
principles of equity and public policy; and each document and instrument to be
executed by the Company pursuant hereto, when executed and delivered in
accordance with the provisions hereof, shall be a valid and binding obligation
of the Company, enforceable in accordance with its terms (with the aforesaid
exceptions).
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5. MISCELLANEOUS
5.1 Additional Actions and Documents
Each of the parties hereto hereby agrees to take or cause to be taken
such further actions, to execute, deliver and file or cause to be executed,
delivered and filed such further documents and instruments, and to obtain such
consents, as may be necessary or as may be reasonably requested in order to
fully effectuate the purposes, terms and conditions of this Agreement, whether
before, at or after the effective time of this Agreement.
5.2 Entire Agreement; Amendment
This Agreement constitutes the entire agreement among the parties
hereto as of the date hereof with respect to the matters contemplated herein,
and it supersedes all prior oral or written agreements, commitments or
understandings with respect to the matters provided for herein (including the
agreements, commitments or understandings with respect to the matters provided
for herein in the Investor Agreement). No amendment, modification or discharge
of this Agreement shall be valid or binding unless set forth in writing and duly
executed by the party against whom enforcement of the amendment, modification,
or discharge is sought.
5.3 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.
5.4 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.
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5.5 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).
5.6 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: Casey D. Mahon
Facsimile: (319) 298-7901
(ii) If to IES:
IES Investments Inc.
200 1st Street SE
Cedar Rapids, IA 52401
Attention: Peter W. Dietrich
Facsimile: (319) 398-4483
(iii) If to MWR:
MWR Investments Inc.
666 Grand Avenue
P. O. Box 657
Des Moines, IA 50306-9244
Attention: Alan Wells, President
Facsimile: (515) 242-4038
(iv) If to Lumpkin:
5 Lafayette Avenue
Mattoon, Il 61938
Facsimile:
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(v) If to any CCI Shareholder:
c/o Mr. Richard A. Lumpkin
5 Lafayette Avenue
Mattoon, Il 61938
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.
5.7 Execution in Counterparts
To facilitate execution, this Agreement may be executed in as many
counterparts as may be required; and it shall not be necessary that the
signatures of, or on behalf of, each party, or that the signatures of all
persons required to bind any party, appear on each counterpart; but it shall be
sufficient that the signature of, or on behalf of, each party, or that the
signatures of the persons required to bind any party, appear on one or more of
the counterparts. All counterparts shall collectively constitute a single
agreement. It shall not be necessary in making proof of this Agreement to
produce or account for more than a number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
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IN WITNESS WHEREOF, the undersigned have duly executed this Agreement,
or have caused this Agreement to be duly executed on their behalf, as of the day
and year first hereinabove set forth.
MCLEODUSA INCORPORATED MWR INVESTMENTS INC.
By: /s/ Clark E. McLeod By: /s/ Alan Wells
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Name: Name: Alan Wells
Title: Title: President
MIDWEST CAPITAL
IES INVESTMENTS INC. GROUP, INC.
By: /s/ Stephen W. Southwick By: /s/ Alan Wells
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Name: Stephen W. Southwick Name: Alan Wells
Title: Secretary Title: President
/s/ Clark E. McLeod /s/ Mary E. McLeod
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Clark E. McLeod Mary E. McLeod
/s/ Richard A. Lumpkin Richard A. Lumpkin
---------------------- By and on Behalf of Each
Richard A. Lumpkin of the Shareholders Named on
Schedule I hereto
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/s/ Richard A. Lumpkin
----------------------
Name:
Title:
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