AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 1, 1997
REGISTRATION NO. 333-
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------------
ICG HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ICG COMMUNICATIONS, INC.
(REGISTRANT WITH RESPECT TO THE GUARANTY)
COLORADO 4813, 4899 84-1158866
DELAWARE 4813, 4899 84-1342022
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
ICG HOLDINGS, INC. ICG COMMUNICATIONS, INC.
9605 E. MAROON CIRCLE 9605 E. MAROON CIRCLE
P.O. BOX 6742 P.O. BOX 6742
ENGLEWOOD, COLORADO 80155-6742 ENGLEWOOD, COLORADO 80155-6742
(303) 572-5960 (303) 572-5960
(Address, including zip code, and telephone number, including area code,
of each registrant's principal executive offices)
JAMES D. GRENFELL, EXECUTIVE VICE PRESIDENT
9605 E. MAROON CIRCLE
P.O. BOX 6742
ENGLEWOOD, COLORADO 80155-6742
(303) 572-5960
(Name, address, including zip code, and telephone number, including area code,
of agent for service for each registrant)
WITH A COPY TO:
LEONARD GUBAR, ESQ.
REID & PRIEST LLP
40 WEST 57TH STREET
NEW YORK, NEW YORK 10019
(212) 603-2000
----------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS
SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
IF THE SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED IN
CONNECTION WITH THE FORMATION OF A HOLDING COMPANY AND THERE IS COMPLIANCE
WITH GENERAL INSTRUCTION G, CHECK THE FOLLOWING BOX: []
-----------------------
CALCULATION OF REGISTRATION FEE
=========================================================================
PROPOSED
MAXIMUM PROPOSED
TITLE OF EACH CLASS OFFERING MAXIMUM
OF AMOUNT PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE PER OFFERING REGISTRATION
TO BE REGISTERED REGISTERED SECURITY(1) PRICE(1) FEE
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11 5/8% SENIOR
EXCHANGE DISCOUNT
NOTES DUE 2006 176,000 $567.66 $99,908,160 $30,275.20
-------------------------------------------------------------------------
GUARANTY OF THE
NOTES --- --- --- (2)
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NEW EXCHANGEABLE
PREFERRED STOCK 100,000 $1,000.00 $100,000,000 $30,303.03
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TOTAL --- --- --- $60,578.23
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(1) DETERMINED SOLELY FOR THE PURPOSES OF CALCULATING THE REGISTRATION FEE
IN ACCORDANCE WITH RULE 457(F)(2) PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED.
(2) PURSUANT TO RULE 457(N) UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
NO SEPARATE FEE IS PAYABLE FOR THE GUARANTY.
---------------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
===========================================================================
<PAGE>
ICG HOLDINGS, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING
LOCATION IN PROSPECTUS OF
ITEMS OF FORM S-4
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of the Registration
Statement and Outside Facing Page of Registration Statement;
Front Cover Page Cross Reference Sheet; Outside Front
of Prospectus . . . . . . . . Cover Page of Prospectus
2. Inside Front and Outside
Back Cover Page of Inside Front Cover Page of Prospectus;
Prospectus . . . . . . . . . . Outside Back Cover Page of Prospectus
3. Risk Factors, Ratio Prospectus Summary; Risk Factors;
of Earnings to Fixed Summary Historical and Pro Forma
Charges and Other Information Financial and Statistical Information
4. Terms of the Transaction . . . The Exchange Offers; Description of
New Notes; Description of New
Preferred Stock; Certain United States
Federal Income Tax Considerations
5. Pro Forma Financial
Information . . . . . . . . . Not Applicable
6. Material Contracts with
the Company Being Acquired . . Not Applicable
7. Additional Information
Required for Reoffering
by Persons and Parties
Deemed to Be Underwriters . . Not Applicable
8. Interests of Named Experts
and Counsel . . . . . . . . . Legal Matters; Experts
9. Disclosure of Commission
Position on Indemnification
for Securities Act Liabilities Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect Prospectus Summary; Description of New
to S-3 Registrants . . . . . . Notes; Description of New Preferred
Stock
11. Incorporation of
Certain Information
by Reference . . . . . . . . . Information Incorporated by Reference
12. Information with Respect
to S-2 or S-3
Registrants . . . . . . . . . Not Applicable
13. Incorporation of
Certain Information
by Reference . . . . . . . . . Not Applicable
14. Information with
Respect to Registrants
Other Than S-3 or
S-2 Registrants . . . . . . . Not Applicable
C. INFORMATION ABOUT THE COMPANY TO BE ACQUIRED
15. Information with Respect
to S-3 Companies . . . . . . . Not Applicable
16. Information with Respect
to S-2 or S-3 Companies . . . Not Applicable
17. Information with Respect
to Companies Other
Than S-3 or S-2 Companies . . Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if
Proxies, Consents or
Authorizations Are
to Be Solicited . . . . . . . Not Applicable
19. Information if
Proxies, Consents or
Authorizations Are Not
to Be Solicited or in
an Exchange Offer . . . . . . Not Applicable
<PAGE>
SUBJECT TO COMPLETION. DATED APRIL 1, 1997.
OFFER TO EXCHANGE
ALL OUTSTANDING
11 5/8% SENIOR DISCOUNT NOTES DUE 2007
FOR
11 5/8% SENIOR EXCHANGE DISCOUNT NOTES DUE 2007
OF
ICG HOLDINGS, INC.
GUARANTEED BY
ICG COMMUNICATIONS, INC.
AND
OFFER TO EXCHANGE
ALL OUTSTANDING
EXCHANGEABLE PREFERRED STOCK
MANDATORILY REDEEMABLE 2008
(EXCHANGEABLE AT THE OPTION OF HOLDINGS)
FOR
NEW EXCHANGEABLE PREFERRED STOCK
MANDATORILY REDEEMABLE 2008
(EXCHANGEABLE AT THE OPTION OF HOLDINGS)
OF
ICG HOLDINGS, INC.
----------------------------------
THE EXCHANGE OFFERS
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON __________, 1997 UNLESS EXTENDED
----------------------------------
ICG Holdings, Inc., a Colorado corporation ("Holdings"), hereby offers
upon the terms and subject to the conditions set forth in this Prospectus
and the accompanying Letter of Transmittal (the "Letter of Transmittal"),
(i) to exchange (the "Note Exchange Offer") its outstanding 11 5/8% Senior
Discount Notes due 2007 (the "Old Notes"), of which an aggregate of
$176,000,000 in principal amount at maturity is outstanding as of the date
hereof, for an equal principal amount of newly issued 11 % Senior Exchange
Discount Notes due 2007 (the "New Notes") and (ii) to exchange (the
"Preferred Stock Exchange Offer") its outstanding Exchangeable Preferred
Stock (the "Old Preferred Stock") for an equal amount of newly issued New
Exchangeable Preferred Stock (the "New Preferred Stock"). The form and
terms of the New Notes will be the same as the form and terms of the Old
Notes except that the New Notes will be registered under the Securities Act
of 1933, as amended (the "Securities Act"), and will not bear legends
restricting the transfer thereof. The form and terms of the New Preferred
Stock will be the same as the form and terms of the Old Preferred Stock
except that the New Preferred Stock will be registered under the Securities
Act and will not bear legends restricting the transfer thereof. The New
Preferred Stock will be entitled to the benefits of the Second Amended and
Restated Articles of Incorporation of Holdings, filed with the Secretary of
State of the State of Colorado on March 10, 1997, governing the Preferred
Stock (the "Amended Articles"). The New Notes will be entitled to the
benefits of the Indenture, dated as of March 11, 1997, governing the Notes
(the "Indenture"). The New Notes and the Old Notes are sometimes referred
to herein collectively as the "Notes" or the "Senior Discount Notes." The
Old Notes and the Old Preferred Stock are sometimes referred to herein
collectively as the "Old Securities," and the New Notes and the New
Preferred Stock are sometimes referred to herein collectively as the "New
Securities." The New Preferred Stock and the Old Preferred Stock are
sometimes referred to herein as the "Preferred Stock." The Note Exchange
Offer and the Preferred Stock Exchange Offer are sometimes collectively
referred to herein as the "Exchange Offers."
(Continued on next page)
-----------
SEE "RISK FACTORS" AT PAGE 17 FOR A DISCUSSION OF CERTAIN RISKS THAT SHOULD
BE CONSIDERED BY ELIGIBLE HOLDERS IN EVALUATING THE EXCHANGE OFFERS.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
There will not be any payment of interest on the New Notes prior to
September 15, 2002. Interest on the New Notes will be paid in cash at the
rate of 11 5/8% per annum on each March 15 and September 15, commencing
September 15, 2002, to holders of record on the immediately preceding March
1 and September 1, respectively. Payment of the New Notes is fully and
unconditionally guaranteed (the "Note Guarantee") by ICG Communications,
Inc., a Delaware corporation ("ICG"). Holdings is an indirectly owned
subsidiary of ICG (ICG together with Holdings, the "Company"). Prior to
these Exchange Offers there has been no public market for any securities of
Holdings and there can be no assurance that such a market will develop. See
"Description of New Notes."
On or after March 15, 2002, the New Notes are redeemable, at the
option of Holdings, in whole or in part, at the redemption prices set forth
herein plus accrued and unpaid interest to the date of redemption. Upon a
Change of Control (as herein defined), the Company is required to
repurchase all of the outstanding Notes at 101% of the accreted value
thereof plus accrued interest to the date of repurchase. At December 31,
1996, Holdings and ICG had, on an unconsolidated basis, approximately
$686.4 million of senior indebtedness, including capital lease obligations
(which amounts do not include the New Notes and the Note Guarantee).
Dividends on the New Preferred Stock at a rate of 14% per annum will
be cumulative from the date of issuance and are payable quarterly in cash
or, on or prior to March 15, 2002, at the option of Holdings, in additional
shares of New Preferred Stock, on each March 15, June 15, September 15 and
December 15, commencing June 15, 1997. Holdings is required to redeem the
New Preferred Stock at the liquidation preference of $1,000 per share, plus
accrued and unpaid dividends on March 15, 2008. The New Preferred Stock
will be redeemable, in whole or in part, at the option of Holdings, at any
time on or after March 15, 2002. The New Preferred Stock will be
exchangeable, in whole but not in part, at the option of Holdings, into 14%
Senior Subordinated Exchange Debentures due 2008 of Holdings (the "Exchange
Debentures"). If issued, the Exchange Debentures will be redeemable, in
whole or in part, at the option of Holdings, at any time on or after March
15, 2002.
The Company will accept for exchange any and all Old Securities which
are properly tendered in the Exchange Offers prior to 5:00 p.m., New York
City time, on __________, 1997 (if and as extended, the "Expiration Date").
Tenders of Old Securities may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date. The Exchange Offers are not
conditioned upon any minimum number of shares of Old Preferred Stock being
tendered for exchange. Old Notes may be tendered only in integral multiples
of $1,000.
Based on a previous interpretation by the staff of the Securities and
Exchange Commission (the "Commission") set forth in no-action letters to
third parties, the Company believes that the New Securities issued pursuant
to the Exchange Offers may be offered for resale, resold and otherwise
transferred by a holder thereof (other than (i) a broker-dealer who
purchases such New Securities directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or
(ii) a person that is an affiliate of the Company (within the meaning of
Rule 405 under the Securities Act)) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that the holder or any other such person is acquiring the New
Securities in its ordinary course of business and is not participating, and
has no arrangement or understanding with any person to participate, in the
distribution of the New Securities. Holders of Old Securities wishing to
accept the Exchange Offers must represent to the Company that such
conditions have been met.
Each broker-dealer that receives New Securities for its own account
pursuant to the Exchange Offers must acknowledge that it will deliver a
Prospectus in connection with any resale of such New Securities. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter," within the meaning of the Securities Act, in connection with
resales of New Securities received in exchange for Old Securities where
such Old Securities were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has
agreed that, for a period of 90 days after the Expiration Date, it will
make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
The Company believes that none of the registered holders of the Old
Securities is an affiliate (as such term is defined in Rule 405 under the
Securities Act) of the Company. Prior to this Exchange Offer, there has
been no public market for the Old Securities. The Company does not intend
to list the New Securities on any securities exchange or to seek approval
for quotation through any automated quotation system. There can be no
assurance that an active market for the New Securities will develop. To the
extent that a market for the New Securities does develop, the market value
of the New Securities will depend on market conditions (including yields on
alternative investments), general economic conditions, the Company's
financial condition and other conditions. Such conditions might cause the
New Notes, to the extent that they are actively traded, to trade at a
significant discount from face value. The Company has not entered into any
arrangement or understanding with any person to distribute the New
Securities to be received in the Exchange Offers.
The Company will not receive any proceeds from the Exchange Offers.
The Company has agreed to bear the expenses of the Exchange Offers. No
underwriter is being used in connection with the Exchange Offers.
The date of this Prospectus is ___________, 1997.
<PAGE>
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON
REQUEST ADDRESSED TO ICG COMMUNICATIONS, INC., 9605 E. MAROON CIRCLE, P.O.
BOX 6742, ENGLEWOOD, COLORADO 80155-6742, ATTENTION: INVESTOR RELATIONS
(TELEPHONE NUMBER (800) 408-4253). IN ORDER TO INSURE TIMELY DELIVERY OF
THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY __________, 1997.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on
Form S-4 under the Securities Act with respect to the New Securities
offered hereby. As permitted by the rules and regulations of the
Commission, this Prospectus omits certain information, exhibits and
undertakings contained in the Registration Statement. For further
information with respect to the Company and the New Securities offered
hereby, reference is made to the Registration Statement, including the
exhibits thereto and the financial statements, notes and schedules filed as
a part thereof. ICG is and has been subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Summary financial information with respect to Holdings is
contained in the Exchange Act reports of ICG. The Registration Statement
(and the exhibits and schedules thereto), as well as the periodic reports
and other information filed by ICG with the Commission, may be inspected
and copied at the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the Commission located at 7 World Trade Center, New
York, New York 10007 and Suite 1400, Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661-2511. Copies of such materials may
be obtained from the Public Reference Section of the Commission, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and its
public reference facilities in New York, New York and Chicago, Illinois at
the prescribed rates. Such materials may also be accessed electronically by
means of the Commission's home page on the Internet at http://www.sec.gov.
Statements contained in this Prospectus as to the contents of any contract
or other document are not necessarily complete, and in each instance
reference is made to the copy of such contract or document filed as an
exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference. In addition, reports, proxy statements
and other information concerning the Company can be inspected and copied at
the National Association of Securities Dealers, Inc., 31 Milk Street, 11th
Floor, Boston, Massachusetts 02109.
No person is authorized in connection with any offering made hereby to
give any information or to make any representation other than as contained
in this Prospectus or the accompanying Letter of Transmittal, and, if given
or made, such information or representation must not be relied upon as
having been authorized by the Company. Neither this Prospectus nor the
accompanying Letter of Transmittal or both together constitute an offer to
sell or a solicitation of an offer to buy any security other than the New
Securities offered hereby, nor does it constitute an offer to sell or a
solicitation of an offer to buy any securities offered hereby to any person
in any jurisdiction in which it is unlawful to make such offer or
solicitation to such person. Neither the delivery of this Prospectus or the
accompanying Letter of Transmittal or both together, nor any sale made
hereunder shall under any circumstances imply that the information
contained herein is correct as of any date subsequent to the date hereof.
INFORMATION INCORPORATED BY REFERENCE
The following documents have been filed by ICG with the Commission and
are hereby incorporated by reference and made a part of this Prospectus:
1. Annual Report on Form 10-K for the year ended September 30, 1996
(File No. 1-11052).
2. Transition Report on Form 10-K for the transition period from
October 1, 1996 to December 31, 1996 (File No. 1-11052).
3. Current Report on Form 8-K dated February 21, 1997 (File No. 1-
11052).
4. Current Report on Form 8-K dated February 25, 1997 (File No. 1-
11052).
-2-
<PAGE>
All documents subsequently filed by the Company or ICG with the
Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act, after the date of this Prospectus and prior to the termination of this
offering, shall be deemed to be incorporated by reference into the
Registration Statement of which this Prospectus is a part and to be a part
hereof from the date of such filing. Any statement contained in a document
incorporated or deemed to be incorporated by reference in this Prospectus
shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated
by reference in this Prospectus modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person
to whom this Prospectus is delivered, upon oral or written request of such
person, a copy of any and all information that has been incorporated by
reference into this Prospectus (not including exhibits to the information
unless such exhibits are specifically incorporated by reference into such
information). Requests for information should be addressed to: ICG
Communications, Inc., 9605 E. Maroon Circle, P.O. Box 6742, Englewood,
Colorado 80155-6742, Attention: Investor Relations (telephone number (800)
408-4253).
--------------------
Until ___________, 1997 (90 days after the date of the Exchange
Offers), all dealers offering transactions in the New Securities, whether
or not participating in the Exchange Offers, may be required to deliver a
Prospectus.
-3-
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus as well as the
information appearing in the documents incorporated by reference herein.
Unless the context otherwise requires, the term "Company" means the
combined business operations of ICG and its subsidiaries, including ICG
Holdings (Canada), Inc. ("Holdings (Canada)") and Holdings; the terms
"fiscal" and "fiscal year" refer to ICG's fiscal year ending September 30;
and all dollar amounts are in U.S. dollars. The Company has elected to
change its fiscal year end to December 31 from September 30, effective
January 1, 1997. Industry figures were obtained from reports published by
the Federal Communications Commission ("FCC"), the U.S. Department of
Commerce, Connecticut Research (an industry research organization) and
other industry sources, which the Company has not independently verified.
Certain information contained in this Prospectus with respect to the
Company's plans and strategy for its business and related financing are
forward-looking statements (as such term is defined in the Private
Securities Litigation Reform Act). Such statements are subject to risks and
uncertainties and, as a result, actual results may differ materially from
those expressed in or implied by such forward-looking statements. For a
discussion of important risks of an investment in the New Securities,
including factors that could cause actual results to differ materially from
forward-looking statements, see "Risk Factors." Investors should carefully
consider the information set forth under the caption "Risk Factors"
including the risks relating to historical and anticipated operating losses
and negative cash flow.
THE COMPANY
The Company is one of the largest providers of competitive local
telephone services in the United States, based on estimates of the
industry's 1996 revenue. Competitive local exchange carriers ("CLECs") seek
to provide an alternative to the incumbent local exchange carriers
("ILECs") for a full range of telecommunications services in the newly
opened regulatory environment. As a CLEC, the Company operates networks in
three regional clusters covering major metropolitan statistical areas in
California, Colorado and the Ohio Valley, and in three markets in the
Southeast. The Company is expanding its geographic focus to include Texas
and Oklahoma (and may also expand to Arkansas and Louisiana) through its
recently announced joint venture with Central and South West Corporation
("CSW") that will develop and market telecommunications services, including
local exchange telephone services, in these markets. The Company also
provides a wide range of network systems integration services and maritime
and international satellite transmission services. As a leading participant
in the rapidly growing competitive local telecommunications industry, the
Company has experienced significant growth, with total revenue increasing
from $29.5 million for fiscal 1993 to $190.7 million for the 12-month
period ended December 31, 1996.
The Federal Telecommunications Act of 1996 (the "Telecommunications
Act") and several pro-competitive state regulatory initiatives have
substantially changed the telecommunications regulatory environment in the
United States. Due to these regulatory changes, the Company is now
permitted to offer all interstate and intrastate telephone services,
including local dial tone, and is developing a full set of complementary
services such as long distance and data transmission services. The Company
has begun offering competitive local dial tone services in California,
Colorado, Ohio and Alabama, and intends to begin offering local dial tone
services in most of its other markets during the first half of 1997. The
Company has 14 high capacity digital telephony switches (and one additional
switch located in Phoenix which will be operational through April 1997,
after which it will be relocated) and 11 data communications switches in
operation to support its services, and plans to install additional
telephony and data switches as demand warrants. To facilitate the expansion
of its services, the Company has entered into agreements with Lucent
Technologies, Inc. ("Lucent") and Northern Telecom Inc. ("Nortel"), and has
reached a non-binding agreement in principle with Cascade Communications,
Inc. ("Cascade"), to purchase a full range of switching systems, fiber
optic cable, network electronics, software and services. See "-Recent
Developments."
In conjunction with the increase of its service offerings, the Company
is continuing to invest significant resources to expand its network
footprint. This expansion is being undertaken through a combination of
constructing owned facilities, entering into long-term agreements with
other telecommunications carriers and establishing strategic alliances with
utility companies.
-4-
<PAGE>
TELECOM SERVICES
The Company operates networks in the following markets within its
three regional clusters: California (Sacramento, San Diego and the Los
Angeles and San Francisco metropolitan areas); Colorado (Denver, Colorado
Springs and Boulder); and the Ohio Valley (Akron, Cincinnati, Cleveland,
Columbus, Dayton and Louisville). The Company also operates networks in
Birmingham, Charlotte and Nashville. The Company will continue to expand
its network through construction, leased facilities, and strategic joint
ventures, such as the recently announced joint venture with CSW that will
initially serve Austin and Corpus Christi, Texas and Tulsa, Oklahoma. The
joint venture may also develop business opportunities in other cities in
Texas, Oklahoma, Arkansas and Louisiana. The Company's operating networks
have grown from approximately 168 fiber route miles at the end of fiscal
1993 to approximately 2,385 fiber route miles as of December 31, 1996.
Telecom Services revenue has increased from $4.8 million for fiscal 1993 to
$109.0 million for the 12-month period ended December 31, 1996.
Strategy
The Company's objective is to become the dominant alternative to the
ILEC in the markets it serves. In furtherance of this objective, the
Company has developed strategies to leverage its extensive network
footprint, its considerable expertise in the provision of switched
telecommunications services, and its established customer base of long
distance carriers. In addition, the Company has begun to aggressively
market its broad range of telecommunications services to business end
users. Key elements of this strategy are:
Expand Service Offerings. The Company's focus is to provide a wide
range of local, long distance and data communications services to business
and carrier customers within the Company's service areas, with an emphasis
on local dial tone services. The Company believes that customers are
increasingly demanding a broad, full service approach to providing
telecommunications services. By offering a wide array of services,
management believes the Company will be able to capture high volume
business accounts. To this end, the Company plans to complement its core
competitive local exchange services with competitive local toll, long
distance and data communications services tailored to the needs of its
customers.
Market Services to End Users and Carriers. The Company has
historically marketed its services primarily to long distance carriers and
resellers and its "first to market" advantage has enabled it to establish
relationships with such carriers and resellers. As competition in the
provision of local telephone services increases, these carriers and
resellers are attempting to expand their service offerings by developing
and delivering local telephone services and new enhanced products and
services, which the Company is able to provide its carrier customers for
resale. In addition, the Company is expanding its sales and marketing
efforts to include end user business customers. Management believes a
targeted end user strategy can accelerate its penetration of the local
services market and better leverage the Company's network investment. In
support of this entrance into the end user market, the Company is
substantially expanding its distribution channels through a significant
increase in its direct sales force and marketing personnel.
Concentrate Markets in Regional Clusters. The Company believes that
by focusing on regional clusters it will be able to more effectively
service its customers' needs and efficiently market, operate and control
its networks. As a result, the Company has concentrated its networks in
regional clusters serving major metropolitan areas in California, Colorado
and the Ohio Valley. The Company also operates networks in the Southeast in
Birmingham, Charlotte and Nashville. The Company is currently expanding its
network footprint to include Texas and Oklahoma (and may also expand to
Arkansas and Louisiana) in partnership with CSW.
Expand Alliances with Utilities. The Company has established and is
actively pursuing strategic alliances with utility companies to take
advantage of their existing fiber optic infrastructures and customer
relationships. This approach affords the Company the opportunity to license
or lease fiber optic facilities on a long-term basis in a more timely, cost
effective manner than by constructing facilities. In addition, utilities
possess conduit and other facilities that enable the Company to more easily
install additional fiber to extend existing networks in a given market.
Finally, management expects these strategic alliances to combine the
Company's expertise in providing high quality telecommunications services
-5-
<PAGE>
with the utility's name recognition and customer relationships in marketing
telecommunications products and services to the utility's customer base.
NETWORK SERVICES
Through the Company's wholly owned subsidiary, ICG Fiber Optic
Technologies, Inc. ("FOTI"), the Company supplies information technology
services and selected networking products, focusing on network design,
installation, maintenance and support for a variety of end users, including
Fortune 1000 firms and other large businesses and telecommunications
companies. Revenue from Network Services was $60.4 million for the 12-month
period ended December 31, 1996.
SATELLITE SERVICES
The Company's Satellite Services operations provide satellite voice
and data services to major cruise lines, commercial shipping vessels,
yachts, the U.S. Navy and offshore oil platforms. The Company also owns a
teleport facility which provides international voice and data transmission
services. Revenue for the Satellite Services operations (adjusted to
reflect the sale of certain teleport assets) was $11.4 million for fiscal
1995 and $21.3 million for the 12-month period ended December 31, 1996.
RECENT DEVELOPMENTS
CSW Agreement. In January 1997, the Company announced a joint
venture with CSW which will develop and market telecommunications services
in Texas and Oklahoma (and may also expand to Arkansas and Louisiana). The
new company, CSW/ICG ChoiceCom, L.P. ("ChoiceCom"), will be based in
Austin, Texas and will initially serve Austin and Corpus Christi, Texas and
Tulsa, Oklahoma with local telephone, long distance and data transmission
services. ChoiceCom also expects to develop business opportunities in other
cities in Texas, Oklahoma, Arkansas and Louisiana.
Lucent Agreement. In September 1996, the Company entered into an
equipment purchase agreement with Lucent for advanced telecommunications
products and services. Lucent will provide the Company with a full range of
systems, software and services which will be used by the Company to build
and expand the Company's advanced communications networks, including 5ESS -
2000 switching systems, synchronous optical network equipment, access
equipment, power plants, application software systems, Advanced
Intelligence Network platforms, data networking products and fiber optic
cable. Lucent has also agreed to provide engineering, installation, onsite
technical support and other professional services.
Cascade Agreement. The Company has reached a non-binding agreement
in principle with Cascade for the purchase of data switching components
that will enable the Company to provide high-speed data connectivity to its
customers. The Company expects to execute the agreement shortly. The
agreement also provides for the purchase of high-speed frame relay and
asynchronous transfer mode ("ATM") switching products. In addition, the
Company will utilize turnkey services from Cascade for product planning and
deployment of the initial product launch, including program management,
network design, onsite operations support and training. The Company
recently began offering its data communications services in California and
Colorado and plans to deploy similar networks in its Ohio markets in the
first half of 1997.
Nortel Agreement. In December 1996, the Company entered into an
equipment and software licensing agreement with Nortel under which Nortel
will provide the Company with telecommunications equipment and software.
Network Expansion. The Company continues to expand its network
footprint through several strategic initiatives with utility companies and
others. These include a 30-year agreement and two indefeasible rights of
use ("IRU") agreements with the Los Angeles Department of Water and Power
for 105 miles of fiber optic capacity in Los Angeles, including Century
City, West Los Angeles, Mid-Wilshire and Sherman Oaks; a 15-year agreement
with the City of Burbank, California to lease fiber optic capacity on an
11.5 mile network; and a ten-year agreement and three ten-year IRU
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agreements with the City of Alameda Bureau of Electricity, under which the
Company will have access to approximately seven miles of fiber optic cable.
FINANCING
In April 1996, the Company raised net proceeds of $433.0 million from
the issuance of 12 1/2% Senior Discount Notes due 2006 (the "12 1/2%
Notes") and 14 1/4% Exchangeable Preferred Stock Mandatorily Redeemable
2007 (the "14 1/4% Preferred Stock") of Holdings (the "1996 Offering").
In March 1997, Holdings completed a private offering (the "Private
Offering") of (i) the Old Notes which are guaranteed on a senior unsecured
basis by ICG (the "Note Guarantee"), and (ii) the Old Preferred Stock, for
aggregate gross proceeds of approximately $199.9 million. The Company
believes that its liquidity will be improved because the Notes and the
Preferred Stock do not require the payment of cash interest and of cash
dividends, respectively, prior to 2002.
The Preferred Stock accrues dividends quarterly at an annual rate of
14% per annum. Dividends are payable quarterly in cash or, on or prior to
March 15, 2002, at the sole option of Holdings, in additional shares of
Preferred Stock.
Management believes that the net proceeds from the Private Offering,
amounts expected to be available through vendor financing arrangements and
the funds remaining from the 1996 Offering will permit the Company to
expand its telecom services business as currently planned and to fund its
operating deficits for approximately 19 months.
THE EXCHANGE OFFERS
The Note Exchange
Offer....... The Company is offering to exchange $1,000 principal
amount of New Notes for each $1,000 principal amount of
Old Notes that are properly tendered and accepted. The
Company will issue the New Notes on or promptly after
the Expiration Date. The New Notes will be fully and
unconditionally guaranteed by ICG. There are
$176,000,000 aggregate principal amount at maturity
($99,908,160 original issue price) of Old Notes
outstanding. See "The Exchange Offers."
The Preferred Stock
Exchange Offer... The Company is offering to exchange one share of New
Preferred Stock for each share of Old Preferred Stock
that is properly tendered and accepted. The Company
will issue the New Preferred Stock on or promptly after
the Expiration Date. There are 100,000 shares of Old
Preferred Stock outstanding. See "The Exchange Offers."
Resale of New
Securities...... Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to
third parties, including "Exxon Capital Holdings
Corporation" (available May 13, 1988), "Morgan Stanley
& Co. Incorporated" (available June 5, 1991), "Mary Kay
Cosmetics, Inc." (available June 5, 1991), "Warnaco,
Inc." (available October 11, 1991) and "K-III
Communications Corp." (available May 14, 1993), the
Company believes that New Securities issued pursuant to
the Exchange Offers in exchange for Old Securities may
be offered for resale, resold and otherwise transferred
by any holder thereof (other than any such holder which
is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) without compliance
with the registration and prospectus delivery
provisions of the Securities Act, provided that such
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<PAGE>
New Securities are acquired in the ordinary course of
such holder's or any other such person's business and
that such holder or any other such person has no
arrangement or understanding with any person to
participate in the distribution of such New Securities.
Under no circumstances may this Prospectus be used for
an offer to resell or other retransfer of New
Securities. In the event that the Company's belief is
inaccurate, holders of New Securities who transfer New
Securities in violation of the prospectus delivery
provisions of the Securities Act and without an
exemption from registration thereunder may incur
liability thereunder. The Company does not assume or
indemnify holders against such liability. The Exchange
Offers are not being made to, nor will the Company
accept surrenders for exchange from, holders of Old
Securities (i) in any jurisdiction in which the
Exchange Offers or the acceptance thereof would not be
in compliance with the securities or blue sky laws of
such jurisdiction or (ii) if any holder is engaged or
intends to engage in a distribution of the New
Securities. Each broker-dealer that receives New
Securities for its own account in exchange for Old
Securities, where such Old Securities were acquired by
such broker-dealer as a result of market-making
activities or other trading activities, must
acknowledge that it will deliver a prospectus in
connection with any resale of such New Securities. The
Company has not entered into any arrangement or
understanding with any person to distribute the New
Securities to be received in the Exchange Offers. See
"Plan of Distribution."
Expiration Date.. The Exchange Offers will expire at 5:00 p.m., New York
City time, on __________, 1997 unless extended, in
which case the term "Expiration Date" shall mean the
latest date and time to which the Exchange Offers are
extended. The Company will accept for exchange any and
all Old Securities which are properly tendered in the
Exchange Offers prior to 5:00 p.m., New York City time,
on the Expiration Date. The New Securities issued
pursuant to the Exchange Offers will be delivered on or
promptly after the Expiration Date.
Conditions to the
Exchange Offers.. The Company may terminate the Exchange Offers if it
determines that its ability to proceed with the
Exchange Offers could be materially impaired due to any
legal or governmental action, any new law, statute,
rule or regulation, any interpretation by the staff of
the Commission of any existing law, statute, rule or
regulation or the failure to obtain any necessary
approvals of governmental agencies or holders of the
Old Securities. The Company does not expect any of the
foregoing conditions to occur, although there can be no
assurances that such conditions will not occur.
Procedures for
Tendering Old Notes
and Old Preferred
Stock........... Each holder of Old Securities wishing to participate in
the Exchange Offers must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein and
therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with such Old
Notes or such Old Preferred Stock, as the case may be,
and any other required documentation to Norwest Banks,
as exchange agent for the Notes (the "Exchange Agent"),
or to American Stock Transfer & Trust Company, as
transfer agent for the Preferred Stock (the "Transfer
Agent") at the addresses set forth herein. By executing
the Letter of Transmittal, each holder will represent
to the Company that, among other things, the New
Securities acquired pursuant to the Exchange Offers are
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<PAGE>
being obtained in the ordinary course of business of
the person receiving such New Securities, whether or
not such person has an arrangement or understanding
with any person to participate in the distribution of
such New Securities and that neither the holder nor any
such other person is an "affiliate," as defined in Rule
405 under the Securities Act, of the Company.
Special Procedures
for Beneficial
Owners.......... Any beneficial owner whose Old Securities are
registered in the name of a broker, dealer, commercial
bank, trust company or other nominee and who wishes to
tender such Old Securities in the Exchange Offers
should contact such registered holder promptly and
instruct such registered holder to tender on such
beneficial owner's behalf. If such beneficial owner
wishes to tender on such owner's own behalf, such owner
must, prior to completing and executing the Letter of
Transmittal and delivering its Old Securities, either
make appropriate arrangements to register ownership of
the Old Securities in such owner's name or obtain a
properly completed bond power from the registered
holder. The transfer of registered ownership may take
considerable time and may not be able to be completed
prior to the Expiration Date.
Guaranteed Delivery
Procedures.. Holders of Old Securities who wish to tender their Old
Securities and whose Old Securities are not immediately
available or who cannot deliver their Old Securities or
the Letter of Transmittal to the Exchange Agent or the
Transfer Agent, as the case may be, prior to the
Expiration Date, must tender their Old Securities
according to the guaranteed delivery procedures set
forth in "The Exchange Offer-Guaranteed Delivery
Procedures."
Withdrawal Rights. Tenders of Old Securities may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the
Expiration Date.
Certain Federal
Income Tax
Considerations... For a discussion of certain federal income tax
considerations relating to the exchange of the New
Notes for the Old Notes and the New Preferred Stock for
the Old Preferred Stock, see "Certain United States
Federal Income Tax Considerations."
Exchange Agent... Norwest Banks is the Exchange Agent. Its telephone
number is (612) 667-4070. The address of the Exchange
Agent is set forth in "The Exchange Offers-Exchange
Agent."
Transfer Agent... American Stock Transfer & Trust Company is the Transfer
Agent. Its telephone number is (212) 936-5100. The
address of the Transfer Agent is as set forth in "The
Exchange Offers-Transfer Agent."
THE NEW NOTES
Aggregate Amount. $176,000,000 principal amount at maturity ($99,908,160
original issue price) of 11 5/8% Senior Exchange
Discount Notes due March 15, 2007.
Yield and Interest From and after March 15, 2002, the New Notes will bear
interest, which will be payable in cash, at a rate of
11 5/8% per annum on each March 15 and September 15,
commencing September 15, 2002.
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<PAGE>
Optional Redemption On or after March 15, 2002, the New Notes will be
redeemable at the option of Holdings, in whole or in
part, at the redemption prices set forth herein, plus
accrued and unpaid interest to the date of redemption.
See "Description of New Notes-Optional Redemption."
Optional Redemption
Upon Public Equity
Offering......... At any time, or from time to time, on or prior to March
15, 2000, Holdings may, at its option, redeem New Notes
having a principal amount of up to 35% of the principal
amount of the Old Notes initially issued, at a
redemption price equal to 111 5/8% of the Accreted
Value of such New Notes on the date of redemption, with
the proceeds of one or more Public Equity Offerings.
See "Description of New Notes-Optional Redemption."
Guarantee........ The New Notes will be guaranteed on a senior, unsecured
basis by ICG.
Ranking.......... The New Notes and the Note Guarantee will be senior,
unsecured obligations of Holdings and ICG,
respectively, will rank pari passu in right of payment
with all existing and future unsecured, unsubordinated
obligations and will be senior in right of payment to
all existing and future subordinated indebtedness of
Holdings and ICG. At December 31, 1996, Holdings and
ICG had, on an unconsolidated basis, approximately
$686.4 million of senior indebtedness (which amount
does not include the Old Notes and the Note Guarantee),
including capitalized lease obligations. ICG and
Holdings are each holding companies. The New Notes and
the Note Guarantee will be effectively subordinated to
all liabilities (including trade payables) of the
subsidiaries of ICG and Holdings and at December 31,
1996, the subsidiaries of Holdings had approximately
$162.5 million of liabilities (excluding intercompany
payables), including $104.9 million of indebtedness.
ICG and Holdings are expected to incur substantial
amounts of indebtedness in the future, subject to
compliance with the terms of the Company's
indebtedness, and preferred stock. See "Risk Factors-
Substantial Indebtedness; Ability to Service Debt" and
"-Holding Company Reliance on Subsidiaries' Funds;
Priority of Creditors; Subordination of Exchange
Debentures."
Certain Covenants. The Indenture contains certain covenants which, among
other things, restrict the ability of ICG, Holdings and
their Restricted Subsidiaries (as defined herein) to
incur additional indebtedness; create liens; engage in
sale-leaseback transactions; pay dividends or make
distributions in respect of their capital stock (other
than permitted dividends with respect to the Preferred
Stock and the 14 1/4% Preferred Stock); make
investments or make certain other restricted payments;
sell assets; create restrictions on the ability of
Restricted Subsidiaries to make certain payments; issue
or sell stock of certain subsidiaries; enter into
transactions with stockholders or affiliates; and, with
respect to ICG and Holdings, consolidate, merge or sell
all or substantially all of its assets. See
"Description of New Notes-Covenants."
Change of Control. Upon a Change of Control (as defined herein), Holdings
is required to make an offer to purchase the New Notes
at a purchase price equal to 101% of their Accreted
Value on the date of purchase plus accrued interest, if
any. See "Description of New Notes-Repurchase of New
Notes upon a Change of Control."
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<PAGE>
THE NEW PREFERRED STOCK
Preferred Stock.. 100,000 shares of New Exchangeable Preferred Stock.
Dividends........ Cumulative at 14% per annum. All dividends will be
payable quarterly in cash or, on or prior to March 15,
2002, at the sole option of Holdings, in additional
shares of Preferred Stock, on March 15, June 15,
September 15 and December 15 of each year, commencing
June 15, 1997. Dividends on the New Preferred Stock
will accrue and be cumulative from the date of issuance
thereof. For federal income tax purposes, distributions
with respect to the New Preferred Stock are not
expected to qualify as dividends and will be treated as
a return of capital until Holdings has earnings and
profits as determined under applicable federal income
tax principles. See "Certain United States Federal
Income Tax Considerations-Tax Consequences to United
States Holders-Dividends on the New Preferred Stock."
Liquidation
Preference....... $1,000 per share, plus accrued and unpaid dividends.
Voting........... Holders of the New Preferred Stock will have no voting
rights except as provided by law and as provided in the
Amended Articles. In the event that dividends are not
paid for any four quarters, whether or not consecutive,
or upon certain other events (including failure to
comply with covenants and failure to pay the mandatory
redemption price when due), then the number of
directors constituting Holdings' Board of Directors
will be adjusted to permit the holders of the majority
of the then outstanding New Preferred Stock, voting
separately as a class, to elect two directors. See
"Description of New Preferred Stock-Voting Rights."
Mandatory
Redemption....... Holdings is required to redeem the New Preferred Stock
on March 15, 2008 (subject to the legal availability of
funds therefor) at a redemption price equal to the
liquidation preference, plus accrued and unpaid
dividends to the redemption date. See "Description of
New Preferred Stock-Mandatory Redemption."
Optional Redemption On or after March 15, 2002, the New Preferred Stock is
redeemable, at the option of Holdings, in whole or in
part, at the redemption prices set forth herein, plus
accrued and unpaid dividends to the redemption date.
See "Description of New Preferred Stock-Optional
Redemption."
Optional
Redemption Upon
Public Equity
Offering......... At any time, or from time to time, on or prior to March
15, 2000, Holdings may, at its option, redeem shares of
Old Preferred Stock having an aggregate liquidation
preference of up to 35% of the aggregate liquidation
preference of all shares of New Preferred Stock
originally issued at a redemption price equal to 114%
of the liquidation preference thereof, plus accrued and
unpaid dividends to the redemption date, with the
proceeds of one or more Public Equity Offerings. See
"Description of New Preferred Stock-Optional
Redemption."
Ranking.......... The New Preferred Stock will rank (i) senior to all
common stock of Holdings and to all other capital stock
of Holdings unless the terms of such stock expressly
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<PAGE>
provide that it ranks senior to or on a parity with the
New Preferred Stock; (ii) on a parity with any capital
stock of Holdings the terms of which expressly provide
that it will rank on a parity with the New Preferred
Stock, including the 14 1/4% Preferred Stock; and (iii)
junior to all capital stock of Holdings the terms of
which expressly provide that such stock will rank
senior to the New Preferred Stock. See "Description of
New Preferred Stock-Ranking."
Optional Exchange
Feature.......... The New Preferred Stock is exchangeable into Exchange
Debentures at the option of Holdings, in whole but not
in part, subject to (i) such exchange being permitted
by the terms of the Indenture, the indenture under
which the 12 1/2% Notes were issued (the "12 1/2% Notes
Indenture") and the indenture under which the 13 1/2%
Senior Discount Notes due September 15, 2005 (the "13
1/2 Notes") of Holdings were issued (the "13 1/2%
Notes Indenture"), and (ii) the conditions described
in the Amended Articles being satisfied. See
"Description of New Preferred Stock-Exchange" and
"Description of Exchange Debentures."
Certain Covenants. The Amended Articles contain certain covenants which,
among other things, restrict the ability of Holdings
and its Restricted Subsidiaries to incur additional
indebtedness and issue preferred stock; create liens;
pay dividends or make distributions in respect of their
capital stock (other than permitted dividends with
respect to the Preferred Stock and the 14 1/4%
Preferred Stock); make investments or make certain
other restricted payments; sell assets; create
restrictions on the ability of Restricted Subsidiaries
to make certain payments; issue or sell stock of
Restricted Subsidiaries; enter into transactions with
stockholders or affiliates; incur senior subordinated
indebtedness; and, with respect to each of ICG and
Holdings, consolidate, merge or sell all or
substantially all of its assets. See "Description of
New Preferred Stock-Certain Covenants."
Change of Control Upon a Change of Control, Holdings is required to make
an offer to purchase the shares of New Preferred Stock
at a purchase price equal to 101% of their liquidation
preference on the date of purchase, plus accrued and
unpaid dividends to the date of purchase. See
"Description of New Preferred Stock-Change of Control."
THE EXCHANGE DEBENTURES
Exchange
Debentures....... 14% Senior Subordinated Exchange Debentures due March
15, 2008 in an aggregate principal amount equal to the
aggregate liquidation preference of, and accrued but
unpaid dividends on, the New Preferred Stock
outstanding on the Exchange Date (as defined herein).
Interest Payment
Dates....... March 15 and September 15 of each year, commencing with
the first of such dates to occur after the Exchange
Date. On or prior to March 15, 2002, the Company may
pay interest on the Exchange Debentures by issuing
additional Exchange Debentures.
Optional
Redemption.. On or after March 15, 2002, the Exchange Debentures are
redeemable, at the option of Holdings, in whole or in
part, at the redemption prices set forth herein, plus
accrued and unpaid interest to the redemption date. See
"Description of Exchange Debentures-Optional
Redemption."
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<PAGE>
Optional Redemption
Upon Public
Equity Offering.. At any time, or from time to time, on or prior to March
15, 2000, Holdings may, at its option, redeem Exchange
Debentures having a principal amount equal to 35% of
the liquidation preference of the Preferred Stock
initially issued at a redemption price equal to 114% of
the principal amount thereof, plus accrued and unpaid
interest to the redemption date, with the proceeds of
one or more Public Equity Offerings. See "Description
of Exchange Debentures-Optional Redemption."
Guarantee........ ICG will guarantee the Exchange Debentures on a senior
subordinated unsecured basis (the "Debenture
Guarantee").
Ranking.......... The Exchange Debentures will be senior subordinated
Indebtedness (as defined herein) of Holdings,
subordinated to the prior payment when due of the
principal of, and premium, if any, and accrued and
unpaid interest on, all existing and future Senior
Indebtedness (as defined herein) of Holdings (including
the New Notes) and senior to the prior payment when due
of the principal and premium, if any, and accrued and
unpaid interest on, all subordinated Indebtedness of
Holdings. ICG's guarantee of the Exchange Debentures
will be senior subordinated Indebtedness of ICG,
subordinated to the prior payment when due of the
principal of, and premium, if any, and accrued and
unpaid interest on, all existing and future Senior
Guarantor Indebtedness (as defined herein) of ICG
(including the Note Guarantee) and senior to the prior
payment when due of the principal of, and premium, if
any, and accrued and unpaid interest on, all
subordinated Indebtedness of ICG.
Certain Covenants. The indenture under which the Exchange Debentures will
be issued (the "Exchange Debenture Indenture") will
contain certain covenants which, among other things,
restricts the ability of ICG, Holdings and their
Restricted Subsidiaries to incur additional
indebtedness; create liens; pay dividends or make
distributions in respect of their capital stock; make
investments or make certain other restricted payments;
sell assets; create restrictions on the ability of
Restricted Subsidiaries to make certain payments; issue
or sell stock of certain subsidiaries; enter into
transactions with stockholders or affiliates; incur
senior subordinated indebtedness; and, with respect to
each of ICG and Holdings, consolidate, merge or sell
all or substantially all of their assets. See
"Description of Exchange Debentures-Certain Covenants."
Registration
Requirements..... The Exchange Debentures may not be issued unless such
issuance is registered under the Securities Act or is
exempt from registration.
Change of Control. Upon a Change of Control, Holdings is required to make
an offer to purchase the Exchange Debentures at a
purchase price equal to 101% of their principal amount
on the date of purchase plus accrued interest, if any.
See "Description of Exchange Debentures-Change of
Control."
RISK FACTORS
See "Risk Factors," immediately following this Summary, for a
discussion of certain risks that should be considered by prospective
investors in connection with the Exchange Offers and an investment in the
New Securities, including the risks related to historical and anticipated
operating losses, negative cash flow and substantial indebtedness.
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<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND STATISTICAL INFORMATION(1)
(IN THOUSANDS, EXCEPT STATISTICAL DATA)
YEARS ENDED SEPTEMBER 30,
------------------------------------------
PRO FORMA
1994 1995 1996 1996 (2)
----- ----- ----- ---------
STATEMENT OF OPERATIONS
DATA:(3)
Revenue:
Telecom services . . . . $14,854 32,330 87,681 87,681
Network services . . . . 36,019 58,778 60,116 60,116
Satellite services(4) . . 8,121 20,502 21,297 21,297
Other . . . . . . . . . . 118 - - -
----- ----- ------ ------
Total revenue . . . . . 59,112 111,610 169,094 169,094
Operating loss . . . . . . (15,226) (46,814) (73,252) (73,252)
Interest expense . . . . . (8,481) (24,368) (85,714) (97,708)
Minority interests,
including preferred stock
dividends . . . . . . . . 435 (1,123) (25,306) (39,697)
Net loss . . . . . . . . . $(23,868) (76,648) (184,107) (210,492)
Loss per share. . . . . . . $ (1.56) (3.25) (6.83) (7.81)
Weighted average number
of shares outstanding(5) . 15,342 23,604 26,955 26,955
OTHER DATA:
EBITDA(6) . . . . . . . . . $(7,068) (30,190) (42,884) (42,884)
Capital expenditures(7) . . 54,921 88,495 175,148 175,148
Ratio of earnings to
combined fixed charges
and preferred stock
dividends(8) . . . . . . . - - - -
STATISTICAL DATA:(9)
Telecom services:
Buildings connected:
On-net . . . . . . . . . 226 280 478
Off-net . . . . . . . . - 1,095 1,589
---- ----- ------
Total buildings connected 226 1,375 2,067
Customer circuits in
service (VGEs)(11) . . . 224,072 430,535 630,697
Switches operational . . 1 13 14
Switched minutes of use 2 283 1,635
(in millions) . . . . .
Fiber route miles:(13)
Operational . . . . . . 323 627 2,143
Under construction. . . - - -
Fiber strand miles:(14)
Operational . . . . . . 14,959 27,150 70,067
Under construction. . . - - -
Wireless route miles(15) 606 568 491
Satellite services:
Very small aperture
terminals ("VSATs") . 810 626 835
C-Band
installations(16) . . - 28 48
L-Band
installations(17) . . - - 109
THREE MONTHS ENDED DECEMBER 31,
-------------------------------------
PRO FORMA
1995 1996 1996(2)
----- ----- ---------
STATEMENT OF OPERATIONS
DATA:(3)
Revenue:
Telecom services . . . 13,513 34,787 34,787
Network services . . . 15,718 15,981 15,981
Satellite services(4) . 6,168 6,188 6,188
Other . . . . . . . . . - - -
------- ------- -------
Total revenue . . . 35,399 56,956 56,956
Operating loss . . . . . (15,258) (27,051) (27,051)
Interest expense . . . . (15,215) (24,454) (27,453)
Minority interests,
including preferred
stock dividends . . . . (3,215) (4,988) (8,586)
Net loss . . . . . . . . (34,642) (49,823) (56,420)
Loss per share. . . . . . (1.38) (1.56) (1.77)
Weighted average
number of shares
outstanding(5) . . . . . 25,139 31,840 31,840
OTHER DATA:
EBITDA(6) . . . . . . . . (10,339) (17,226) (17,226)
Capital expenditures(7) . 25,852 78,238 78,238
Ratio of earnings to
combined fixed charges
and preferred stock
dividends(8) . . . . . . - - -
STATISTICAL DATA:(9)
Telecom services:
Buildings connected:
On-net . . . . . . . . 304 522
Off-net . . . . . . . . 1,235 1,547(10)
------- -------
Total buildings
connected . . . . . . 1,539 2,069
Customer circuits in
service (VGEs)(11) . . 488,405 748,528
Switches operational . . 13 14(12)
Switched minutes of use
(in millions) . . . . . 235 607
Fiber route miles:(13)
Operational . . . . . 637 2,385
Under construction . . - 735
Fiber strand
miles:(14)
Operational . . . . . 28,779 75,490
Under construction . . - 33,747
Wireless route
miles(15) . . . . . . 545 506
Satellite services:
Very small aperture
terminals ("VSATs") 633 860
C-Band
installations(16) . . 33 54
L-Band
installations(17) . . - 204
December 31, 1996
------------------
Actual Pro Forma(2)
------- -------------
BALANCE SHEET DATA:
Cash and short-term
investments . . . . . . . . . . . . . . . . $392,535 584,343
Working capital . . . . . . . . . . . . . . . . 361,601 533,409
Property and equipment,
net . . . . . . . . . . . . . . . . . . . . 403,932 403,932
Total assets . . . . . . . . . . . . . . . . . 944,133 1,139,741
Current portion of long-term debt
and capital lease obligations . . . . . . . . 25,500 25,500
Long-term debt and capital
lease obligations, less current portion . . . 761,504 861,412
14 1/4% Preferred Stock of Holdings
(redeemable) ($164.8 million
liquidation value) . . . . . . . . . . . . . 159,120 159,120
Preferred Stock of Holdings
(redeemable) offered hereby
($100.0 million liquidation value) . . . . . . - 95,700
Common Stock and additional paid-in capital . . 302,560 302,560
Accumulated deficit . . . . . . . . . . . . . . (368,640) (368,640)
Stockholders' deficit . . . . . . . . . . . . . $(66,080) (66,080)
(Accompanying notes are on the following page)
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(1) The Summary Historical and Pro Forma Financial and Statistical
Information relates to ICG and its subsidiaries. All of ICG's business
is conducted through Holdings and its subsidiaries.
(2) Pro Forma Statement of Operations and Balance Sheet Data reflects the
receipt of the net proceeds from the Private Offering and interest
expense on $99.9 million gross proceeds of Senior Discount Notes and
preferred stock dividends on $100.0 million liquidation preference of
Preferred Stock, without giving effect to any increased interest
income on available cash or the capitalization of any interest
associated with construction in progress, as if such events had
occurred at the beginning of the periods presented or, for balance
sheet purposes, on the balance sheet date.
(3) During fiscal 1996, the Company changed its method of accounting for
long-term telecom services contracts to recognize revenue as services
are provided. The effect of this change in accounting for the periods
presented was not significant.
(4) Revenue from Satellite Services is generated through the Company's
satellite (voice and data) operations and, after January 1995, also
includes revenue from maritime communications operations. The Company
completed the sale of four of its teleports in March 1996, and has
reported results of operations from these assets through December 31,
1995.
(5) Weighted average number of shares outstanding for fiscal years 1994
and 1995 represents Holdings (Canada) common shares outstanding.
Weighted average number of shares outstanding for fiscal 1996
represents Holdings (Canada) common shares outstanding for the period
October 1, 1995 through August 2, 1996, and represents ICG Common
Stock and Holdings (Canada) Class A common shares (owned by third
parties) outstanding for the period August 5, 1996 through September
30, 1996. Weighted average number of shares outstanding for the
three-month period ended December 31, 1996 represents ICG Common
Stock and Holdings (Canada) Class A common shares (owned by third
parties) outstanding for the period October 1, 1996 through December
31, 1996.
(6) EBITDA consists of operating loss plus depreciation and amortization.
EBITDA is provided because it is a measure commonly used in the
telecommunications industry. EBITDA is presented to enhance an
understanding of the Company's operating results and is not intended
to represent cash flow or results of operations in accordance with
generally accepted accounting principles ("GAAP") for the periods
indicated. EBITDA is not a measurement under GAAP and is not
necessarily comparable with similarly titled measures of other
companies.
(7) Capital expenditures include assets acquired under capital leases and
through the issuance of debt or warrants.
(8) For fiscal 1994, 1995 and 1996 and the three months ended December 31,
1995 and 1996, earnings were insufficient to cover combined fixed
charges and preferred stock dividends by $24.8 million, $77.3 million,
$188.5 million, $31.3 million and $50.6 million, respectively. On a
pro forma basis giving effect to the Private Offering as if it
occurred on October 1, 1995 and without giving effect to any increased
interest income on additional available cash or the capitalization of
any interest associated with construction in progress, earnings would
have been insufficient to cover fixed charges and preferred stock
dividends by $214.9 million and $57.2 million for fiscal 1996 and the
three months ended December 31, 1996, respectively. Combined fixed
charges and preferred stock dividends consist of interest charges and
amortization of debt expense and discount or premium related to
indebtedness, whether expensed or capitalized, that portion of rental
expense the Company believes to be representative of interest (i.e.,
one-third of rental expense) and preferred stock dividends.
(9) Amounts presented are for 12-month and three month periods ended, or
as of, September 30 and December 31, respectively.
(10) Buildings connected off-net declined from September 30, 1996 to
December 31, 1996 due to the sale of the Company's 50% interest in the
Phoenix joint venture.
(11) Customer circuits in service is measured in voice grade equivalents
("VGEs").
(12) The switch located in Melbourne, Florida is in the process of being
relocated and is not included in the statistical data.
(13) Fiber route miles refers to the number of miles of fiber optic cable,
including leased fiber. As of December 31, 1996, the Company had 2,385
fiber route miles, of which 312 fiber route miles were leased under
operating leases. Fiber route miles under construction represents
fiber under construction and fiber which is expected to be operational
within six months.
(14) Fiber strand miles refers to the number of fiber route miles,
including leased fiber, along a telecommunications path multiplied by
the number of fiber strands along that path. As of December 31, 1996,
the Company had 75,490 fiber strand miles, of which 5,936 fiber strand
miles were leased under operating leases. Fiber strand miles under
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construction represents fiber under construction and fiber which is
expected to be operational within six months.
(15) Wireless route miles represents the total distance of the digital
microwave paths between Company transmitters which are used in the
Company's telecom services networks.
(16) C-Band installations service cruise ships, U.S. Navy vessels and
offshore oil platform installations.
(17) L-Band installations service smaller maritime installations, and both
mobile and fixed land-based units.
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RISK FACTORS
An investment in the New Securities offered hereby involves a high
degree of risk. The following risk factors, together with the other
information set forth in this Prospectus and appearing in the documents
incorporated by reference herein, should be considered when evaluating an
investment in the New Securities.
HISTORICAL AND ANTICIPATED FUTURE OPERATING LOSSES AND NEGATIVE CASH FLOW
The Company has incurred and expects to continue to incur significant
operating and net losses. For the 12 months ended December 31, 1996, the
Company had revenue of approximately $190.7 million, an operating loss of
approximately $85.0 million, interest expense of approximately $95.0
million and a net loss of approximately $199.3 million. The Company expects
to continue to generate negative cash flow from operating activities while
it emphasizes development, construction and expansion of its telecom
services business and until the Company establishes a sufficient revenue
generating customer base. The Company's operating loss, interest expense
and net loss are each expected to increase as a result of the continuation
of the Company's expansion strategy. In addition, the Company had an
accumulated deficit of approximately $368.6 million at December 31, 1996.
There can be no assurance that the Company will achieve or sustain
profitability or positive cash flow in the future or at any time have
sufficient resources to make payments on its indebtedness, including the
Notes and, if issued, the Exchange Debentures, or cash dividends on, or the
mandatory redemption price of, the Preferred Stock. See "Summary Historical
and Pro Forma Financial and Statistical Information," including the notes
thereto.
SUBSTANTIAL INDEBTEDNESS; ABILITY TO SERVICE DEBT
The Company is more highly leveraged than its competitors. At December
31, 1996, on a pro forma basis giving effect to the Private Offering, the
Company would have had approximately $891.3 million of indebtedness,
including capitalized lease obligations. The accretion of original issue
discount on the Notes, the 13 1/2% Notes and the 12 1/2% Notes will cause
an increase in indebtedness of approximately $524.8 million by March 15,
2002. In addition, the Preferred Stock and the Exchange Debentures issuable
in exchange for the Preferred Stock may pay dividends or interest,
respectively, through the issuance of additional shares of Preferred Stock
or Exchange Debentures, as the case may be, through March 15, 2002, and the
14 1/4% Preferred Stock and the 14 1/4% Subordinated Exchange Debentures
due May 1, 2007 (the "14 1/4% Exchange Debentures") issuable in exchange
for the 14 1/4% Preferred Stock, may pay dividends or interest through the
issuance of additional shares of 14 1/4% Preferred Stock or 14 1/4%
Exchange Debentures, as the case may be, through May 1, 2001. The
Indenture, the Amended Articles governing the terms of the Preferred Stock
and the 14 1/4% Preferred Stock, the 12 1/2% Notes Indenture and the 13
1/2% Notes Indenture limit, but do not prohibit, the incurrence of
additional indebtedness by ICG, Holdings and their subsidiaries. The
Company anticipates that ICG, Holdings and their subsidiaries will incur
substantial additional indebtedness in the future. Although the net
proceeds from the Private Offering are expected to enhance liquidity and
improve the Company's financial flexibility in the near term, the Company's
total indebtedness, interest expense and dividend requirements will be
significantly increased as a result of the Private Offering.
The level of the Company's indebtedness could have important
consequences to holders of the Notes, the Preferred Stock and the Exchange
Debentures, including the following: (i) the debt service requirements of
any additional indebtedness could make it more difficult for the Company to
make payments on the Notes and to pay cash dividends on, and the mandatory
redemption price of, the Preferred Stock and, if issued, to make payments
on the Exchange Debentures; (ii) the ability of the Company to obtain any
necessary financing in the future for working capital, capital
expenditures, debt service requirements or other purposes may be limited;
(iii) a substantial portion of the Company's cash flow from operations, if
any, must be dedicated to the payment of principal and interest on its
indebtedness and other obligations (including dividends on the Preferred
Stock when required to be paid in cash) and will not be available for other
purposes; (iv) the Company's level of indebtedness could limit its
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flexibility in planning for, or reacting to, changes in its business; (v)
the Company is more highly leveraged than all of its competitors, which may
place it at a competitive disadvantage; and (vi) the Company's high degree
of indebtedness will make it more vulnerable in the event of a downturn in
its business.
The Company has been experiencing substantial negative EBITDA and, on
a pro forma basis after giving effect to the Private Offering, the
Company's earnings before combined fixed charges and preferred stock
dividend requirements would have been insufficient to cover combined fixed
charges and preferred stock dividend requirements for fiscal 1996 and the
three months ended December 31, 1996 by approximately $214.9 million and
$57.2 million, respectively. In addition, for the same periods on the same
pro forma basis, the Company's EBITDA minus capital expenditures and
interest expense and preferred stock dividends would have been
approximately $(339.2) million and $(132.2) million, respectively. There
can be no assurance that the Company will be able to improve its earnings
before combined fixed charges and preferred stock dividends or that the
Company will be able to meet its debt service obligations, including its
obligations on the Notes, the Preferred Stock and, if issued, the Exchange
Debentures. In the event the Company's cash flow is inadequate to meet its
obligations, the Company could face substantial liquidity problems as the
Company has no revolving credit line. If the Company is unable to generate
sufficient cash flow or otherwise obtain funds necessary to make required
payments, or if the Company otherwise fails to comply with the various
covenants in its indebtedness, it would be in default under the terms
thereof, which would permit the holders of such indebtedness to accelerate
the maturity of such indebtedness and could cause defaults under other
indebtedness of the Company. Such defaults could result in a default on the
Notes and, if issued, the Exchange Debentures, and could delay or preclude
payment of interest or principal on the Notes and, if issued, the Exchange
Debentures or the payment of cash dividends on, or the mandatory redemption
price of, the Preferred Stock. The ability of the Company to meet its
obligations will be dependent upon the future performance of the Company,
which will be subject to prevailing economic conditions and to financial,
business and other factors, including factors beyond the control of the
Company. See "Description of New Notes," "Description of New Preferred
Stock" and "Description of Exchange Debentures."
SIGNIFICANT CAPITAL REQUIREMENTS
The Company's current plans for expansion of existing networks, the
development of new networks, the further development of the Company's
products and services and the continued funding of operating losses may
require additional cash from outside sources. The Company's arrangements
with utilities require it to make significant cash payments and the
development of the Company's networks requires significant capital
expenditures for transmission equipment, switching facilities and network
build-out from the utilities' fiber backbone to end user locations. The
Company must also purchase a substantial amount of equipment and other
assets from vendors. The Company anticipates that its substantial cash
requirements will continue into the foreseeable future. Due to the number
of opportunities arising from changes in the telecommunications regulatory
environment and the cash required to take advantage of these opportunities,
management believes that the net proceeds from the Private Offering, cash
on hand and amounts expected to be available through vendor financing
arrangements will provide sufficient funds necessary for the Company to
expand its telecom services business as currently planned and to fund its
operating deficits for approximately 19 months. Additional sources of cash
may include public and private equity and debt financings of ICG, Holdings
or their subsidiaries, sales of non-strategic assets, capitalized leases
and other financing arrangements. There can be no assurance that additional
financing will be available to the Company or, if available, that it can be
obtained on terms acceptable to the Company. Failure to obtain such
financing could result in the delay or abandonment of some or all of the
Company's acquisition, development and expansion plans and expenditures,
which could have a material adverse effect on its business prospects and
limit the Company's ability to make principal and interest payments,
including on the Notes and, if issued, the Exchange Debentures, or to make
payments of cash dividends on, or the mandatory redemption price of, the
Preferred Stock.
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RISKS RELATED TO SWITCHED SERVICES STRATEGY
The Company has 14 high capacity digital telephony switches (and one
additional switch located in Phoenix which will be operational through
April 1997, after which it will be relocated) and 11 data communications
switches in operation to support its services, and plans to install
additional telephony and data switches as demand warrants. The Company
began generating switched services revenue in the fourth quarter of fiscal
1994. Currently, the Company is experiencing negative operating margins
from the provision of switched services while its networks are in the
development and construction phases and while the Company relies on ILEC
networks to terminate and originate a significant portion of its customers'
switched traffic. The Company expects to realize improved operating margins
from switched services on a given network when (i) increased volumes of
traffic are attained and build-out enables such traffic to be carried on
the Company's own network instead of ILEC facilities, and (ii) higher
margin enhanced services are provided to customers on the Company's
network. In addition, the Company believes that the unbundling of ILEC
services and the implementation of local telephone number portability,
which are mandated by the Telecommunications Act, will reduce the Company's
costs of providing switched services and facilitate the marketing of such
services. However, the Company's switched services strategy has not yet
been profitable and may not become profitable due to, among other factors,
lack of customer demand, competition from other CLECs and downward pricing
pressure from the ILECs. In addition, to fully implement its switched
services strategy, the Company must make significant capital expenditures
to provide additional switching capacity, network infrastructure and
electronic components. There can be no assurance that the Company's
switched services strategy will be successful.
RISKS RELATED TO LOCAL SERVICES STRATEGY
The Company is a recent entrant in the newly created competitive local
telecommunications services industry. The local dial tone services market
has only recently opened to competition due to the passage of the
Telecommunications Act and subsequent state and Federal regulatory rulings
designed to implement the Telecommunications Act. The Company is also
initiating the provision of long distance and data communications services.
The Company believes that offering a full-service portfolio of local, long
distance and data products is the best method for gaining market share
among business customers and reducing customer churn. However, the Company
has only recently begun providing local and data communications services
and has not deployed its long distance products. The Company will have to
make significant operating and capital investments in order to provide
local dial tone services. There are numerous operating complexities
associated with providing these services. The Company will be required to
develop new products, services and systems and will need to develop new
marketing initiatives and hire and train a new sales force responsible for
selling these services. The Company will also need to implement the
necessary billing and collecting systems for these services. The Company
may face significant competition from the Regional Bell Operating Companies
("RBOCs"), whose core business is providing local dial tone service. The
RBOCs, who currently are the dominant providers of services in their
markets, are expected to mount a significant competitive response to new
entrants in their market, such as the Company. The Company may face
significant competitive product and pricing pressures from the RBOCs in
these markets, as well as from other CLECs as they enter these markets.
HOLDING COMPANY RELIANCE ON SUBSIDIARIES' FUNDS; PRIORITY OF CREDITORS;
SUBORDINATION OF EXCHANGE DEBENTURES
ICG and Holdings are each holding companies. The sole material asset
of ICG consists of the common stock of Holdings (Canada) and the sole
material asset of Holdings (Canada) consists of the common stock of
Holdings. The principal asset of Holdings consists of common stock of its
subsidiaries. Holdings intends to loan or contribute a substantial portion
of the net proceeds from the Private Offering to certain of its
subsidiaries. Holdings must rely upon dividends and other payments from its
subsidiaries to generate the funds necessary to meet its obligations,
including the payment of principal and interest on the Notes and the
Exchange Debentures and the payment of cash dividends on, and the mandatory
redemption price of, the Preferred Stock. The subsidiaries are legally
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distinct from Holdings and have no obligation, contingent or otherwise, to
pay amounts due with respect to the Notes, the Preferred Stock or, if
issued, the Exchange Debentures or to make funds available for such
payments. Holdings' subsidiaries will not guarantee the Notes or, if
issued, the Exchange Debentures. The ability of Holdings' subsidiaries to
make such payments to Holdings will be subject to, among other things, the
availability of funds, the terms of each subsidiary's indebtedness and
applicable state laws. In particular, several of Holdings' subsidiaries
have entered into credit facilities, certain of which are guaranteed by
ICG, which prohibit or restrict the payment of dividends by those
subsidiaries to Holdings. Claims of creditors of Holdings' subsidiaries,
including trade creditors, will generally have priority as to the assets of
such subsidiaries over the claims of Holdings and the holders of Holdings'
and ICG's indebtedness and Preferred Stock, including the Notes, the
Preferred Stock and, if issued, the Exchange Debentures. Accordingly, the
Notes and, if issued, the Exchange Debentures will be effectively
subordinated to the liabilities (including trade payables) of the
subsidiaries of Holdings. At December 31, 1996, the subsidiaries of
Holdings had approximately $162.5 million of liabilities (excluding
intercompany payables to Holdings), including $104.9 million of
indebtedness. The Exchange Debentures, if issued, would be subordinate in
right of payment to the prior payment in full of the Notes, the 12 1/2%
Notes, the 13 1/2% Notes and all other existing and future senior
indebtedness of the Company. As of December 31, 1996, after giving pro
forma effect to the Private Offering, ICG and Holdings would have had
approximately $785.8 million and $786.3 million of Senior Guarantor
Indebtedness and Senior Indebtedness, respectively, outstanding. In the
event of a bankruptcy or similar proceeding of ICG and/or Holdings, the
assets of ICG and Holdings will be available to pay obligations on the
Exchange Debentures and ICG's guarantee thereof only after all senior
indebtedness of ICG has been satisfied in full, and there may not be
sufficient assets remaining to pay the Exchange Debentures. In addition,
the Exchange Debentures, if issued, will rank pari passu with the 14 1/4%
Exchange Debentures, if issued. See "Description of Exchange Debentures."
The Notes will be unsecured, unsubordinated indebtedness of Holdings
and will be guaranteed on an unsecured unsubordinated basis by ICG. At
December 31, 1996, the Company had, on a consolidated basis, an aggregate
of approximately $105.5 million of secured indebtedness, including
capitalized lease obligations. In the event such secured indebtedness goes
into default and the holders thereof foreclose on the collateral, the
holders of secured indebtedness will be entitled to payment out of the
proceeds of their collateral prior to any holders of general unsecured
indebtedness, including the Notes, notwithstanding the existence of any
event of default with respect to the Notes. The Indenture also permits the
Company to incur additional secured indebtedness, to grant additional liens
and, on or after May 1, 2001, to pay cash dividends on the Preferred Stock,
the 14 1/4% Preferred Stock and, if issued, to pay interest on the Exchange
Debentures and the 14 1/4% Exchange Debentures at any time. See
"Description of New Notes-Covenants." In the event of bankruptcy,
liquidation or reorganization of the Company, holders of secured
indebtedness will have a claim, prior to the claim of the holders of the
Notes, on the assets of the Company securing such indebtedness. In
addition, to the extent that the value of such collateral is insufficient
to satisfy such secured indebtedness, holders of amounts remaining
outstanding on such secured indebtedness (as well as other unsubordinated
creditors of the Company, including holders of the 12 1/2% Notes and the
13 1/2% Notes) would be entitled to share pari passu with the Notes with
respect to any other assets of ICG and Holdings. Assets remaining after
satisfaction of the claims of holders of secured indebtedness may not be
sufficient to pay amounts due on any or all of the Notes then outstanding.
Payments on the Preferred Stock and, if issued, the Exchange Debentures
will also be subject to the prior claims of secured creditors.
CERTAIN FINANCIAL AND OPERATING RESTRICTIONS
The 12 1/2% Notes Indenture, the 13 1/2% Notes Indenture, the
Indenture, the terms of the 14 1/4% Preferred Stock, the terms of the
Preferred Stock, and, if the 14 1/4% Exchange Debentures or the Exchange
Debentures are issued, the 14 1/4% Exchange Debenture Indenture, the
Exchange Debenture Indenture and other indebtedness of the Company impose
significant operating and financial restrictions on the Company. Such
restrictions affect, and in certain cases significantly limit or prohibit,
among other things, the ability of the Company to incur additional
indebtedness or create liens on its assets, pay dividends, sell assets,
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engage in mergers or acquisitions or make investments. Failure to comply
with such covenants could limit the ability of the Company to make other
borrowings or result in a default thereunder, in which case the lenders
will be able to accelerate the maturity of the applicable indebtedness.
Moreover, the instruments governing the Company's material indebtedness
contain cross-default provisions which provide that a default under other
indebtedness will be considered a default under the indebtedness in
question. In the event that a cross-default were triggered, the maturity of
substantially all of the Company's approximately $891.3 million of
indebtedness (at December 31, 1996, on a pro forma basis giving effect to
the Private Offering) would be accelerated and become immediately due and
payable. As a result, the Company would not be able to satisfy all
of its debt obligations. There can be no assurance that the Company
will be able to comply with such covenants in the future. A default under
such indebtedness could result in an acceleration of the Notes and, if
issued, the Exchange Debentures, in which case the holders of the Notes,
the Preferred Stock and the Exchange Debentures may not be paid in full.
PAYMENTS DUE ON INDEBTEDNESS PRIOR TO MATURITY AND REDEMPTION OF THE
SECURITIES; REFINANCING RISK
As of December 31, 1996, an aggregate of approximately $92.8 million
of capitalized lease obligations was due prior to December 31, 2001 and an
aggregate accreted value of approximately $685.8 million was outstanding
under the 12 1/2% Notes and 13 1/2% Notes. The 12 1/2% Notes and 13 1/2%
Notes require payments of interest to be made in cash commencing on
November 1, 2001 and March 15, 2001, respectively, and mature on May 1,
2006 and September 15, 2005, respectively, and the 14 1/4% Preferred Stock
requires payments of dividends to be made in cash commencing August 1,
2001. As of December 31, 1996, the Company had $6.5 million of other
indebtedness that matures prior to December 31, 2001. The Company may also
have additional payment obligations prior to such time, the amount of which
cannot presently be determined. The net proceeds from the Private Offering,
cash on hand and amounts expected to be available through vendor financing
arrangements will provide sufficient funds necessary for the Company to
expand its Telecom Services business as currently planned and to fund its
operating deficits for approximately 19 months. Accordingly, the Company
may have to refinance a substantial amount of indebtedness and obtain
substantial additional funds prior to March 2001. The Company's ability to
obtain additional sources of cash will depend on, among other things, its
financial condition at the time, the restrictions in the instruments
governing its indebtedness and other factors, including market conditions,
beyond the control of the Company. Additional sources of cash may include
public and private equity and debt financings by ICG, Holdings and their
subsidiaries, sales of non-strategic assets, capitalized leases and other
financing arrangements. There can be no assurance that the Company will be
able to refinance such indebtedness, including such capitalized leases, or
obtain such additional funds, and if the Company is unable to effect such
refinancings or obtain additional funds, the Company's ability to make
principal and interest payments on its indebtedness, including the Notes
(and if issued, the Exchange Debentures), or make payments of cash
dividends on, or the mandatory redemption price of, the Preferred Stock,
would be adversely affected.
RISKS RELATED TO RAPID EXPANSION OF BUSINESS
The continued rapid expansion and development of the Company's
business will depend on, among other things, the Company's ability to
successfully implement its sales and marketing strategy, evaluate markets,
lease fiber from utilities, design fiber backbone routes, secure financing,
install facilities, acquire rights of way and building access, obtain any
required government authorizations, implement interconnection to, and
collocation with, facilities owned by ILECs and obtain appropriately priced
unbundled network elements from the ILECs, all in a timely manner, at
reasonable costs and on satisfactory terms and conditions. In addition,
such expansion may involve acquisitions which, if made, could divert the
resources and management time of the Company and require integration with
the Company's existing networks and service offerings. The Company's
ability to effectively manage its rapid expansion will require it to
continue to implement and improve its operating, financial and accounting
systems and to expand, train and manage its employee base. The inability to
effectively manage its planned expansion could have a material adverse
effect on the Company's business, growth, financial condition and results
of operations.
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COMPETITION
The Company operates in an increasingly competitive environment
dominated by ILECs such as the RBOCs and GTE Corporation ("GTE"). The
Company's current competitors include RBOCs, GTE, independent ILECs, other
CLECs, network systems integration service providers, microwave and
satellite service providers, teleport operators, wireless
telecommunications providers and private networks built by large end users.
Potential competitors include cable television companies, utilities, local
telephone companies outside their current local service areas and the local
access operations of long distance carriers. Consolidation of
telecommunications companies, including pending mergers between certain of
the RBOCs, and the formation of strategic alliances within the
telecommunications industry, as well as the development of new
technologies, could give rise to increased competition. One of the primary
purposes of the Telecommunications Act is to promote competition,
particularly in the local telephone market. Since enactment of the
Telecommunications Act, several telecommunications companies have indicated
their intention to aggressively expand their ability to address many
segments of the telecommunications industry, including segments in which
the Company participates and expects to participate. For example, AT&T
Corp. and MCI Communications Corp. are entering the local markets as
competitors of the Company. This may result in more participants than can
ultimately be successful in a given market.
As a recent entrant in the telecom services industry, the Company,
like other CLECs, has not achieved a significant market share. The ILECs
have long-standing relationships with their customers, have the potential
to subsidize services with revenue from a variety of businesses and have
benefitted from certain state and federal regulations that, until recently,
favored the incumbent operator over potential competitors. The
Telecommunications Act, other recent state legislative actions, and current
federal and state regulatory initiatives provide increased business
opportunities for the Company by removing or substantially reducing
barriers to local exchange competition. However, these new competitive
opportunities are expected to be accompanied by new competitive
opportunities for the ILECs, as the Telecommunications Act removes previous
restrictions on the provision of long distance services by the RBOCs and
GTE. It is also expected that increased local competition will result in
increased pricing flexibility for, and relaxation of regulatory oversight
of, the ILECs. If the ILECs are permitted to engage in increased volume and
discount pricing practices or charge CLECs increased fees for
interconnection to their networks, or if the ILECs seek to delay
implementation of interconnection to their networks, the Company's results
of operations and financial condition could be adversely affected. In
addition, the Company has experienced declining access unit prices and
increasing price competition which have been more than offset by increasing
network usage. The Company expects to continue to experience declining
access unit prices for the foreseeable future. There can be no assurance
that the Company will be able to achieve or maintain adequate market share
or revenue, or compete effectively in any of its markets. Certain of the
Company's interconnection agreements do not contain "most favored nation"
pricing clauses. The Company believes it is entitled to "most favored
nation" pricing provisions under federal law, but this issue is being
litigated. If this litigation is finally judicially resolved adversely to
the Company's position, the Company will be subject to the risk that other
CLECs may obtain more favorable pricing terms from ILECs. In addition, the
success of the Company's strategy of leasing or licensing fiber optic cable
from utilities depends upon the ability to connect end users to the
Company's network. Such connections require significant capital
expenditures, time and effort and, in some cases, end users targeted by the
Company may already be connected to another competitor. There can be no
assurance regarding the number of end users the Company will be able to
connect to its network.
REGULATION
The Company operates in an industry that is undergoing substantial
regulatory change as a result of the passage of the Telecommunications Act.
As a non-dominant carrier, the Company must file tariffs for its interstate
services and its rate must be reasonable. Pursuant to authority granted in
the Telecommunications Act, however, the FCC has indicated its intention to
lessen certain regulatory requirements for providers of competitive
services. In addition, the FCC may have the authority, which it is not
presently exercising, to impose restrictions on foreign ownership of
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communications services providers not utilizing radio facilities. The
Company must obtain and maintain certain FCC authorizations for its
satellite and wireless services. The Company currently provides maritime
communication services pursuant to an experimental license and a grant of
Special Temporary Authority ("STA"). The Company's experimental license has
been renewed by the FCC on several occasions. In January 1997, the Company
submitted an application for the modification and renewal of the
experimental license, which was due to expire on February 1, 1997. On
January 30, 1997, the Company was granted the STA. Although the Company
expects that the FCC will issue a permanent license, there can be no
assurance the Company will be granted a permanent license, that the
experimental license currently being used to provide maritime services will
be renewed for a further term or that any license granted by the FCC will
not require substantial payments from the Company.
State regulatory agencies regulate the Company's provision of local
dial tone and other intrastate common carrier services. In general, the
Company is required to obtain certification from the relevant state public
utilities commission prior to the initiation of intrastate service and is
also required to file tariffs listing the rates, terms, and conditions of
intrastate services provided. In addition, local authorities control the
Company's access to municipal rights of way. Any failure to maintain proper
federal and state tariffing or state certification, or noncompliance with
federal, state or local laws or regulations, could have a material adverse
effect on the Company.
The Telecommunications Act generally requires ILECs to provide
interconnection and nondiscriminatory access to ILEC networks on more
favorable terms than were previously available. The Telecommunications Act
imposes a variety of new duties on the ILECs in order to promote
competition in the markets for local exchange and access services,
including the duty to negotiate in good faith with competitors requesting
interconnection to the ILEC network. However, negotiations with each ILEC
have sometimes involved considerable delays and the resulting negotiated
agreements may not necessarily be obtained on terms and conditions that are
acceptable to the Company. In such instances, the Company may petition the
proper state regulatory agency to arbitrate disputed issues. In addition,
following state review either party in the negotiations can appeal to the
FCC or federal court. There can be no assurance that the Company will be
able to negotiate acceptable new interconnection agreements with ILECs or
that if state regulatory authorities impose terms and conditions on the
parties in arbitration, such terms will be acceptable to the Company. On
August 8, 1996, the FCC adopted rules and policies implementing the local
competition provisions of the Telecommunications Act, which rules, in
general, are favorable to new competitive entrants. The FCC's rules have
been challenged in the federal courts of appeals by GTE, RBOCs, large
independent ILECs and state regulatory commissions. On October 15, 1996,
the U.S. Court of Appeals for the Eighth Circuit issued a stay of the
implementation of certain of the FCC's rules, to be in effect until the
Court issues a decision on the merits of the FCC's rules. The Court
stayed implementation of the pricing provisions of the FCC's rules, and
of the "most favored nation" rules, which enable new entrants to "pick and
choose" elements of established interconnection agreements. The Court's
stay does not affect the implementation of the FCC's other interconnection
rules, and does not affect the statutory requirements of the Tele-
communications Act, including the statutory requirements that ILECs
conduct negotiations and enter into interconnection agreements with
competitive carriers. Although the Company believes that the Tele-
communications Act and other state and federal regulatory initiatives
that favor increased competition are advantageous to the Company, there
can be no assurance that changes in current or future state or federal
regulations, including changes that may result from Court review of the
FCC's interconnection rules, or increased competitive opportunities
resulting from such changes, will not have a material adverse effect on
the Company.
DEPENDENCE ON KEY CUSTOMERS
The Company's five largest customers accounted for approximately 28%
of the Company's consolidated revenue in fiscal 1996 and 30% for the three
months ended December 31, 1996. The loss of, or decrease of business from,
one or more of these customers could have a material adverse effect on the
business, financial condition and results of operations of the Company.
While the Company actively markets its products and services, there can be
no assurance that the Company will be able to attract new customers or
retain its existing customers.
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RISKS OF ENTRY INTO LONG DISTANCE BUSINESS
In order to offer its end user customers a complete package of
telecommunications services, the Company expects to begin offering long
distance services in the first half of 1997. Although the Company has
extensive experience in the telecommunications business, including an
executive team with sales, marketing and long distance management
expertise, the Company has no direct experience providing long distance
services. The long distance business is extremely competitive and prices
have declined substantially in recent years and are expected to continue to
decline. As a new entrant in the long distance business, the Company
expects to generate low or negative gross margins and substantial start-up
expenses as it rolls out its long distance service offerings. The Company
does not expect long distance services to generate a material portion of
its revenues over the near term.
Long distance telecommunications services will involve the origination
of traffic from end user customers, either directly connected to the
Company's network or through facilities leased from the ILEC, to the
Company's telecommunications switches. The Company will rely on other
carriers to provide transmission and termination services for a majority of
its long distance traffic and will therefore be dependent on such carriers.
The Company is expected to enter into resale agreements with long distance
carriers to provide it with long distance transmission services. Such
agreements typically provide for the resale of long distance services on a
per minute basis (some with minimum volume commitments). Where the Company
anticipates higher volumes of traffic, it may lease point-to-point circuits
on a monthly or longer term fixed cost basis. The negotiation of these
agreements involves estimates of future supply and demand for long distance
telecommunications transmission capacity as well as estimates of the
calling pattern and traffic levels of the Company's future long distance
customers. Should the Company fail to meet its minimum volume commitments,
if any, pursuant to these resale agreements, it may be obligated to pay
underutilization charges. Likewise, the Company may underestimate its need
for long distance facilities and therefore be required to obtain the
necessary transmission capacity through more expensive means. There can be
no assurance that the Company will acquire long distance capacity on
favorable terms or that the Company can accurately predict long distance
prices and volumes so that it can generate positive gross margins. The
success of the Company's entry into the long distance business will be
dependent upon, among other things, the Company's ability to select new
equipment and software and integrate these into its networks, hire and
train qualified personnel, enhance its billing, back-office and information
systems to accommodate long distance services and the acceptance of
potential customers of the Company's long distance service offerings. If
the Company's long distance transmission business fail to generate positive
gross margins or if the Company fails in any of the foregoing respects,
such failure may have a material adverse effect on the Company's business.
In addition, a majority of the Company's Telecom Services revenue is
derived from long distance carrier customers. The Company is subject to the
risk that its entry into the long distance business will adversely affect
its relationship with its long distance carrier customers.
RISKS OF ENTRY INTO DATA TRANSMISSION BUSINESS
To complement its telecommunications services offerings, the Company
recently began offering data transmission services in California and
Colorado and expects to begin offering data transmission services in
its Ohio markets in the first half of 1997. These services, which include
frame relay and ATM, are targeted at the Company's existing and potential
customers with substantial data communications requirements. Although
the Company has extensive experience in the telecommunications business,
including an executive team with significant telecommunications expertise,
the Company has no direct experience providing data transmission
services. The data transmission business is extremely competitive and
prices have declined substantially in recent years and are expected to
continue to decline. As a new entrant in the data transmission business,
the Company expects to generate low or negative gross margins and
substantial start-up expenses as it rolls out its data transmission
service offerings. The Company does not expect data transmission services
to generate a material portion of its revenues over the near term. In
providing these services, the Company will be dependent upon vendors
for assistance in the planning and deployment of its initial data
product offerings, as well as ongoing training and support. The
success of the Company's entry into the data transmission business will be
dependent upon, among other things, the Company's ability to select new
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equipment and software and integrate these into its networks, hire and
train qualified personnel, enhance its billing, back-office and information
systems to accommodate data transmission services and customer acceptance
of the Company's service offerings. No assurance can be given that the
Company will be successful with respect to these matters. If the Company is
not successful with respect to these matters, there may be a material
adverse effect on the Company's business.
DEPENDENCE ON BILLING, CUSTOMER SERVICE AND INFORMATION SYSTEMS
Sophisticated information and processing systems are vital to the
Company's growth and its ability to monitor costs, bill customers,
provision customer orders and achieve operating efficiencies. Billing and
information systems for the Company's historical lines of business have
been produced largely in-house with partial reliance on third-party
vendors. These systems have generally met the Company's needs due in part
to the Company's low volume of bills. As the Company commences providing
dial tone and long distance services, the need for sophisticated billing
and information systems will increase significantly. The Company's current
dial tone platform billing plans rely on delivery of products and services
by third party vendors. Additionally, the Company is developing customer
service centers to provision orders. Information systems are vital to the
success of these centers, and the information systems for these centers are
largely being developed by third party vendors. The inability of (i) these
vendors to deliver proposed products and services in a timely and effective
manner, (ii) the Company to adequately identify all of its information and
processing needs, or (iii) the Company to upgrade systems as necessary,
could have a material adverse impact on the ability of the Company to reach
its objectives, on its financial condition and results of operations and on
its ability to pay interest and principal on the Notes and cash dividends
on, and the mandatory redemption price of, the Preferred Stock.
RISKS RELATED TO JOINT VENTURES AND STRATEGIC ALLIANCES
The Company has formed a joint venture with CSW and has formed
strategic alliances with utility companies to lease fiber optic facilities.
The Company expects to continue to enter into strategic alliances, joint
ventures and other similar arrangements in the future. The other parties to
such existing arrangements, and to arrangements in which the Company may
subsequently participate, may at any time have economic, business or legal
interests or goals that are inconsistent with those of the strategic
alliance, joint venture or similar arrangement or those of the Company. In
addition, a joint venture partner may be unable to meet its economic or
other obligations to the venture, which, depending upon the nature of such
obligations, could adversely affect the Company.
RAPID TECHNOLOGICAL CHANGE
The telecommunications industry is subject to rapid and significant
changes in technology. The effect of technological changes, including
changes relating to emerging wireline and wireless transmission
technologies, on the business of the Company cannot be predicted.
DEPENDENCE ON RIGHTS OF WAY AND OTHER THIRD PARTY AGREEMENTS
The Company must obtain easements, rights of way, franchises and
licenses from various private parties, including actual and potential
competitors, and local governments in order to construct and maintain fiber
optic networks. There can be no assurance that the Company will obtain
rights of way and franchise agreements to expand its networks or that these
agreements will be on terms acceptable to the Company, or that current or
potential competitors will not obtain similar rights of way and franchise
agreements. Because certain of these agreements are short-term or are
terminable at will, there can be no assurance that the Company will
continue to have access to existing rights of way and franchises after the
expiration of such agreements. An important element of the Company's
strategy is to enter into long-term agreements with utilities to take
advantage of their existing facilities and to license or lease their excess
fiber capacity. The Company has entered into contracts and is negotiating
letters of intent with several utilities, however other CLECs are seeking
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to enter into similar arrangements and have bid and are expected to
continue to bid against the Company for future licenses or leases.
Furthermore, utilities are required by state or local regulators to retain
the right to "reclaim" fiber licensed or leased to the Company if such
fiber is needed for the utility's core business. There can be no assurance
that the Company will be able to obtain additional licenses or leases on
satisfactory terms or that such arrangements will not be subject to
reclamation. If a franchise, license or lease agreement was terminated and
the Company was forced to remove or abandon a significant portion of its
network, such termination could have a material adverse effect on the
Company.
KEY PERSONNEL
The efforts of a small number of key management and operating
personnel will largely determine the Company's success. The success of the
Company also depends in part upon its ability to hire and retain highly
skilled and qualified operating, marketing, financial and technical
personnel. The competition for qualified personnel in the
telecommunications industry is intense and, accordingly, there can be no
assurance that the Company will be able to hire or retain necessary
personnel. The loss of certain key personnel could adversely affect the
Company.
ORIGINAL ISSUE DISCOUNT; POSSIBLE UNFAVORABLE TAX AND OTHER LEGAL
CONSEQUENCES FOR HOLDERS OF NOTES, PREFERRED STOCK AND EXCHANGE DEBENTURES
AND THE COMPANY
The Notes will be issued at a substantial discount from their
principal amount at maturity. Although cash interest will not accrue on the
Notes prior to March 15, 2002, and there will be no periodic payments of
cash interest on the Notes prior to September 15, 2002, original issue
discount ("OID"), which is the difference between the stated redemption
price at maturity and the issue price of the Notes, will accrue from the
issue date of the Notes. OID will be includible as interest income
periodically (including for periods to March 15, 2002) in a U.S.
noteholder's gross income for U.S. federal income tax purposes in advance
of receipt of the cash payments to which the income is attributable.
If a bankruptcy case is commenced by or against Holdings under the
U.S. Bankruptcy Code after the issuance of the Notes, the claim of a holder
of a Note with respect to the principal amount thereof may be limited to an
amount equal to the sum of (i) the initial offering price and (ii) that
portion of the OID that is not deemed to constitute "unmatured interest"
for purposes of the U.S. Bankruptcy Code. Any OID that was not amortized as
of any such bankruptcy filing would constitute "unmatured interest."
The Company does not presently have any current or accumulated
earnings and profits as determined under United States federal income tax
principles and it is unlikely to have current or accumulated earnings and
profits in the foreseeable future. As a result, until such time as the
Company does have earnings and profits, distributions on the Preferred
Stock will be treated as a nontaxable return of capital and will be applied
against and reduce the adjusted tax basis (but not below zero) on the
Preferred Stock in the hands of each holder, thus increasing the amount of
any gain (or reducing the amount of any loss) which would otherwise be
realized by such holder upon the disposition of the Preferred Stock.
Consequently, distributions with respect to the Preferred Stock will not
qualify as dividends for federal income tax purposes and, as a result, will
be treated as a return of capital.
Upon a redemption of Preferred Stock in exchange for Exchange
Debentures, the holder will have capital gain or loss equal to the
difference between the issue price of the Exchange Debentures received and
the holder's adjusted basis in the Preferred Stock redeemed, except to the
extent all or a portion of the Exchange Debentures received is treated as a
dividend payment. Because of Holdings' option through March 15, 2002 to pay
interest on the Exchange Debentures by issuing additional Exchange
Debentures, any Exchange Debentures issued prior to that date will be
treated as issued with OID, unless under special rules for interest
holidays the amount of OID is treated as de minimis. Holders would have to
accrue all such OID into income over the entire term of the Exchange
Debentures, but would not treat the receipt of stated interest on the
Exchange Debentures as interest for federal income tax purposes.
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The Exchange Debentures may be subject to the rules for "applicable
high yield discount obligations," in which case the Company's deduction for
OID on the Exchange Debentures will be substantially deferred, and a
portion of such deduction may be disallowed.
For a discussion of these and other relevant tax issues, see "Certain
United States Federal Income Tax Considerations."
ABSENCE OF PUBLIC MARKET
The Notes and the Preferred Stock are, and the Exchange Debentures, if
issued, will be, new issues of securities for which there is currently no
active trading market. If any such securities are traded after their
initial issuance, they may trade at a discount from their initial offering
price, depending upon prevailing interest rates, the market for similar
securities and other factors, including general economic conditions and the
financial condition, performance of, and prospects for the Company.
THE EXCHANGE OFFERS
PURPOSE AND EFFECT OF THE EXCHANGE OFFERS
The Old Securities were sold by Morgan Stanley & Co. Incorporated (the
"Placement Agent") on March 11, 1997 to a limited number of institutional
investors (the "Purchasers"). In connection with the sale of the Old
Securities, the Company and the Purchasers entered into registration rights
agreements dated March 11, 1997 (collectively the "Registration Rights
Agreements"), which require the Company (i) to cause the Old Securities to
be registered under the Securities Act or (ii) to file with the Commission
a registration statement under the Securities Act with respect to New
Securities identical in all material respects to the Old Securities and to
use its best efforts to cause such registration statement to become
effective under the Securities Act. The Company is further obligated, upon
the effectiveness of that registration statement, to offer the holders of
the Old Securities the opportunity to exchange their Old Notes and Old
Preferred Stock for a like principal amount of New Notes and a like number
of shares of New Preferred Stock, respectively, which will be issued
without a restrictive legend and may be reoffered and resold by the holder
without restrictions or limitations under the Securities Act. Copies of the
Registration Rights Agreements have been filed as exhibits to the
Registration Statement of which this Prospectus is a part. The Exchange
Offers are being made pursuant to the Registration Rights Agreements to
satisfy the Company's obligations thereunder. The term "Holder" with
respect to the Exchange Offers means any person in whose name Old
Securities are registered on the Company's books or any other person who
has obtained a properly completed assignment from the registered holder.
In order to participate in the Exchange Offers, a Holder must
represent to the Company, among other things, that (i) the New Securities
acquired pursuant to the Exchange Offers are being obtained in the ordinary
course of business of the person receiving such New Securities, whether or
not such person is the Holder, (ii) neither the Holder nor any such other
person is engaging in or intends to engage in a distribution of such New
Securities, (iii) neither the Holder nor any such other person has an
arrangement or understanding with any person to participate in the
distribution of such New Securities, and (iv) neither the Holder nor any
such other person is an "affiliate," as defined under Rule 405 promulgated
under the Securities Act, of the Company. In the event that any Holder of
Old Securities cannot make the requisite representations to the Company in
order to participate in the Exchange Offers, such Holder may be entitled to
have such Holder's Old Securities registered in a "shelf" registration
statement on an appropriate form pursuant to Rule 415 under the Securities
Act.
Based on a previous interpretation by the staff of the Commission set
forth in no-action letters issued to third-parties, including "Exxon
Capital Holdings Corporation" (available May 13, 1988), "Morgan Stanley &
Co. Incorporated" (available June 5, 1991), "Mary Kay Cosmetics, Inc."
(available June 5, 1991), "Warnaco, Inc." (available October 11, 1991) and
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"K-III Communications Corp." (available May 14, 1993), the Company believes
that the New Securities issued pursuant to the Exchange Offers may be
offered for resale, resold and otherwise transferred by any Holder of such
New Securities (other than any such Holder which is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Securities are acquired in the
ordinary course of such Holder's business and such Holder has no
arrangement or understanding with any person to participate in the
distribution of such New Securities. Any Holder who tenders in the Exchange
Offers for the purpose of participating in a distribution of the New
Securities cannot rely on such interpretation by the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. Under no circumstances may this Prospectus be used for an
offer to resell, resale or other retransfer of the New Securities. In the
event that the Company's belief is inaccurate, Holders of the New
Securities who transfer New Securities in violation of the prospectus
delivery provisions of the Securities Act and without an exemption from
registration thereunder may incur liability thereunder. The Company does
not assume or indemnify Holders against such liability. The Exchange Offers
are not being made to, nor will the Company accept surrenders for exchange
from, Holders of Old Securities in any jurisdiction in which the Exchange
Offers or the acceptance thereof would not be in compliance with the
securities or blue sky laws of such jurisdiction. Each broker-dealer that
receives New Securities for its own account in exchange for Old Securities,
where such Old Securities were acquired by such broker-dealer as a result
of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Securities. The Company has not entered into any arrangement or
understanding with any person to distribute the New Securities to be
received in the Exchange Offers. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFERS
Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letters of Transmittal, the Company will accept any
and all Old Securities validly tendered and not withdrawn prior to 5:00
p.m., New York City time, on the Expiration Date. The Company will issue
$1,000 principal amount of New Notes in exchange for each $1,000 principal
amount of outstanding Old Notes surrendered pursuant to the Note Exchange
Offer. However, Old Notes may be tendered only in integral multiples of
$1,000.
The form and terms of the New Notes will be the same as the form and
terms of the Old Notes except that the New Notes will be registered under
the Securities Act and hence will not bear legends restricting the transfer
thereof. The New Notes will evidence the same debt as the Old Notes. The
New Notes will be issued under and entitled to the benefits of the
Indenture, which also authorized the issuance of the Old Notes, such that
both series will be treated as a single class of debt securities under the
Indenture. The form and terms of the New Preferred Stock will be the same
as the form and terms of the Old Preferred Stock except that the New
Preferred Stock will be registered under the Securities Act and hence will
not bear legends restricting the transfer thereof. The New Preferred Stock
will evidence the same rights, privileges and obligations as the Old
Preferred Stock. The New Preferred Stock will be issued under and entitled
to the benefits of the Amended Articles which also authorized the issuance
of the Old Preferred Stock, such that both series will be treated as a
single class of equity securities under the Amended Articles.
As of the date of this Prospectus, $176,000,000 aggregate principal
amount at maturity of the Old Notes and 100,000 shares of Old Preferred
Stock are outstanding. This Prospectus, together with the Letter of
Transmittal, is being sent to all registered Holders of the Old Notes and
Old Preferred Stock.
The Company intends to conduct the Exchange Offers in accordance with
the provisions of the Registration Rights Agreements and the applicable
requirements of the Exchange Act, and the rules and regulations of the
Commission thereunder. Old Notes that are not tendered for exchange in the
Note Exchange Offer will remain outstanding and will be entitled to the
rights and benefits such Holders have under the Indenture. Old Preferred
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Stock that is not tendered for exchange under the Preferred Stock Exchange
Offer will remain outstanding and will be entitled to the rights as set
forth in the Amended Articles.
The Company shall be deemed to have accepted validly tendered Old
Securities when, as and if the Company shall have given oral or written
notice thereof to the Exchange Agent or the Transfer Agent, as the case may
be. The Exchange Agent will act as agent for the tendering Holders for the
purposes of receiving the New Notes from the Company and the Transfer Agent
will act as agent for the tendering Holders for the purposes of receiving
the New Preferred Stock from the Company.
If any tendered Old Securities are not accepted for exchange because
of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Old Securities
will be returned, without expense, to the tendering Holder thereof as
promptly as practicable after the Expiration Date.
Holders who tender Old Securities in the Exchange Offers will not be
required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to
the exchange pursuant to the Exchange Offers. The Company will pay all
charges and expenses, other than certain applicable taxes described below,
in connection with the Exchange Offers. See "-Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date," shall mean 5:00 p.m., New York City time
on __________, 1997, unless the Company, in its sole discretion, extends
the Exchange Offers, in which case the term "Expiration Date" shall mean
the latest date and time to which the Exchange Offers are extended.
In order to extend the Exchange Offers, the Company will notify the
Exchange Agent and the Transfer Agent of any extension by oral or written
notice and will mail to the registered Holders an announcement thereof,
prior to 9:00 a.m., New York City time, on the next business day after the
then Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Securities, to extend the Exchange Offers or to terminate
the Exchange Offers if any of the conditions set forth below under "-
Conditions" shall not have been satisfied by giving oral or written notice
of such delay, extension or termination to the Exchange Agent and the
Transfer Agent or (ii) to amend the terms of the Exchange Offers in any
manner. Any such delay in acceptances, extension, termination or amendment
will be followed as promptly as practicable by oral or written notice
thereof to the registered Holders. If either Exchange Offer is amended in a
manner determined by the Company to constitute a material change, the
Company will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered Holders, and the
Company will extend the Exchange Offers for a period of five to ten
business days, depending upon the significance of the amendment and the
manner of disclosure to the registered Holders, if the Exchange Offers
would otherwise expire during such five to ten business day period.
Without limiting the manner in which the Company may choose to make a
public announcement of any delay, extension, amendment or termination of
the Exchange Offers, the Company shall have no obligation to publish,
advertise, or otherwise communicate any such public announcement, other
than by making a timely release to an appropriate news agency.
Upon satisfaction or waiver of all the conditions to the Exchange
Offers, the Company will accept, promptly after the Expiration Date, all
Old Securities properly tendered and will issue the New Securities promptly
after acceptance of the Old Securities. See "-Conditions." For purposes of
the Exchange Offers, the Company shall be deemed to have accepted properly
tendered Old Securities for exchange when, as and if the Company shall have
given oral or written notice thereof to the Exchange Agent or the Transfer
Agent, as the case may be.
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In all cases, issuance of the New Securities for Old Securities that
are accepted for exchange pursuant to the Exchange Offers will be made only
after timely receipt by the Exchange Agent or the Transfer Agent, as the
case may be, of a properly completed and duly executed Letter of
Transmittal and all other required documents; provided, however, that the
Company reserves the absolute right to waive any defects or irregularities
in the tender or conditions of the Exchange Offers. If any tendered Old
Securities are not accepted for any reason set forth in the terms and
conditions of the Exchange Offers or if Old Securities are submitted for a
greater principal amount, or a greater number of shares, respectively, than
the Holder desires to exchange, then such unaccepted or non-exchanged Old
Securities evidencing the unaccepted portion, as appropriate, will be
returned without expense to the tendering Holder thereof as promptly as
practicable after the expiration or termination of the Exchange Offers.
CONDITIONS
Notwithstanding any other term of the Exchange Offers, the Company
will not be required to exchange any New Securities for any Old Securities
and may terminate the Exchange Offers before the acceptance of any Old
Securities for exchange, if:
(a) any action or proceeding is instituted or threatened in any
court or by or before any governmental agency with respect to the Exchange
Offers which, in the Company's reasonable judgment, might materially impair
the ability of the Company to proceed with the Exchange Offers; or
(b) any law, statute, rule or regulation is proposed, adopted or
enacted, or any existing law, statute, rule or regulation is interpreted by
the staff of the Commission, which, in the Company's reasonable judgment,
might materially impair the ability of the Company to proceed with the
Exchange Offers; or
(c) any governmental approval or approval by Holders of the Old
Securities has not been obtained, which approval the Company shall, in its
reasonable judgment, deem necessary for the consummation of the Exchange
Offers as contemplated hereby.
If the Company determines in its sole discretion that any of these
conditions are not satisfied, the Company may (i) refuse to accept any Old
Securities and return all tendered Old Securities to the tendering Holders,
(ii) extend the Exchange Offers and retain all Old Securities tendered
prior to the expiration of the Exchange Offers, subject, however, to the
rights of Holders who tendered such Old Securities to withdraw their
tendered Old Securities or (iii) waive such unsatisfied conditions with
respect to the Exchange Offers and accept all properly tendered Old
Securities which have not been withdrawn. If such waiver constitutes a
material change to the Exchange Offers, the Company will promptly disclose
such waiver by means of a prospectus supplement that will be distributed to
the registered Holders, and the Company will extend the Exchange Offers for
a period of five to ten business days, depending upon the significance of
the waiver and the manner of disclosure to the registered Holders, if the
Exchange Offers would otherwise expire during such five to ten business day
period.
PROCEDURES FOR TENDERING
To tender in the Exchange Offers, a Holder must complete, sign and
date the Letter of Transmittal, or facsimile thereof, have the signatures
thereon guaranteed if required by the Letter of Transmittal, and mail or
otherwise deliver such Letter of Transmittal or such facsimile to the
Exchange Agent, with respect to the Notes, or the Transfer Agent, with
respect to the Preferred Stock prior to the Expiration Date. In addition,
either (i) certificates for such Old Securities must be received by the
Exchange Agent or Transfer Agent, as the case may be, along with the Letter
of Transmittal, or (ii) a timely confirmation of book-entry transfer (a
"Book-Entry Confirmation") of such Old Securities, if such procedure is
available, into the Exchange Agent's or Transfer Agent's account at the
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to
the procedure for book-entry transfer described below must be received by
the Exchange Agent or Transfer Agent, as the case may be, prior to the
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Expiration Date, or (iii) the Holder must comply with the guaranteed
delivery procedures described below. To be tendered effectively, the
Letter of Transmittal and other required documents must be received by the
Exchange Agent or Transfer Agent, as the case may be, at the address set
forth below under "-Exchange Agent; Transfer Agent" prior to the Expiration
Date.
The tender by a Holder which is not withdrawn prior to the Expiration
Date will constitute an agreement between such Holder and the Company in
accordance with the terms and subject to the conditions set forth herein
and in the Letter of Transmittal.
THE METHOD OF DELIVERY OF OLD SECURITIES AND THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT OR TRANSFER AGENT,
AS THE CASE MAY BE, IS AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF
DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND
DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
DELIVERY TO THE EXCHANGE AGENT OR TRANSFER AGENT, AS THE CASE MAY BE,
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD SECURITIES
SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE
BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT
THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Securities are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender should contact the registered Holder promptly and
instruct such registered Holder to tender on such beneficial owner's
behalf. If such beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Old Securities, either make
appropriate arrangements to register ownership of the Old Securities in
such owner's name or obtain a properly completed assignment from the
registered Holder. The transfer of registered ownership may take
considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed by an Eligible Institution (as defined
below) unless the Old Securities tendered pursuant thereto is tendered (i)
by a registered Holder who has not completed the box entitled "Special
Payment Instructions" or "Special Delivery Instructions" on the Letter of
Transmittal or (ii) for the account of an Eligible Institution (as defined
below). In the event that signatures on a Letter of Transmittal or a
notice of withdrawal, as the case may be, are required to be guaranteed,
such guarantor must be a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of
Rule 17Ad-15 under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered Holder of any Old Securities listed therein, such Old Securities
must be endorsed or accompanied by a properly completed bond or stock
power, as the case may be, signed by such registered Holder as such
registered Holder's name appears on such Old Securities.
If the Letter of Transmittal or any Old Securities or bond or stock
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing,
and unless waived by the Company, evidence satisfactory to the Company of
their authority to so act must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Securities and withdrawal of tendered
Old Securities will be determined by the Company in its sole discretion,
which determination will be final and binding. The Company reserves the
absolute right to reject any and all Old Securities not properly tendered
or any Old Securities the Company's acceptance of which would, in the
opinion of counsel for the Company, be unlawful. The Company also reserves
the right to waive any defects, irregularities or conditions of tender as
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to particular Old Securities. The Company's interpretation of the terms and
conditions of the Exchange Offers (including the instructions in the Letter
of Transmittal) will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Old Securities
must be cured within such time as the Company shall determine. Although the
Company intends to notify Holders of defects or irregularities with respect
to tenders of Old Securities, none of the Company, the Exchange Agent, the
Transfer Agent, or any other person shall incur any liability for failure
to give such notification. Tenders of Old Securities will not be deemed to
have been made until such defects or irregularities have been cured or
waived. Any Old Securities received by the Exchange Agent or the Transfer
Agent, as the case may be, that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent, or the Transfer Agent, as the case may be,
to the tendering Holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for any Old Securities that remain outstanding
subsequent to the Expiration Date or, as set forth above under "-
Conditions," to terminate the Exchange Offers and, to the extent permitted
by applicable law, purchase Old Securities in the open market, in privately
negotiated transactions or otherwise. The terms of any such purchases or
offers could differ from the terms of the Exchange Offers.
By tendering, each Holder will represent to the Company that, among
other things, (i) the New Securities acquired pursuant to the Exchange
Offers are being obtained in the ordinary course of business of the Person
receiving such New Securities, whether or not such person is the Holder,
(ii) neither the Holder nor any such other person is engaging in or intends
to engage in a distribution of such New Securities (iii) neither the Holder
nor any such other person has an arrangement or understanding with any
Person to participate in the distribution of such New Securities, and (iv)
neither the Holder nor any such other Person is an "affiliate," as defined
in Rule 405 of the Securities Act, of the Company.
In all cases, issuance of New Securities that are accepted for
exchange pursuant to the Exchange Offers will be made only after timely
receipt by the Exchange Agent or Transfer Agent of certificates for such
Old Securities or a timely Book-Entry Confirmation of such Old Securities
into the Exchange Agent's or Transfer Agent's account at the Book-Entry
Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old
Securities are not accepted for any reason set forth in the terms and
conditions of the Exchange Offers or if Old Securities are submitted for a
greater principal amount or greater number of shares, as the case may be,
than the Holder desires to exchange, such unaccepted or non-exchanged Old
Securities will be returned without expense to the tendering Holder thereof
(or, in the case of Old Securities tendered by book-entry transfer into the
Exchange Agent's or Transfer Agent's account at the Book-Entry Transfer
Facility pursuant to the book-entry transfer procedures described below,
such non-exchanged Old Securities will be credited to an account maintained
with such Book-Entry Transfer Facility) as promptly as practicable after
the expiration or termination of the Exchange Offers.
BOOK-ENTRY TRANSFER
Each of the Exchange Agent and the Transfer Agent each will make a
request to establish an account with respect to the Old Notes and the Old
Preferred Stock, respectively, at the Book-Entry Transfer Facility for
purposes of the Exchange Offers within two business days after the date of
this Prospectus, and any financial institution that is a participant in the
Book-Entry Transfer Facility's systems may make book-entry delivery of Old
Securities by causing the Book-Entry Transfer to transfer such Old Notes or
Old Preferred Stock into the Exchange Agent's or the Transfer Agent's
account, respectively, at the Book-Entry Transfer Facility in accordance
with such Book-Entry Transfer Facility's procedures for transfer. However,
although delivery of Old Securities may be effected through book-entry
transfer at the Book-Entry Transfer Facility, the Letter of Transmittal or
facsimile thereof, with any required signature guarantees and any other
required documents, must, in any case, be transmitted to and received by
the Exchange Agent or the Transfer Agent, as the case may be, at the
address set forth below under "-Exchange Agent; Transfer Agent" "-Transfer
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Agent" on or prior to the Expiration Date or the guaranteed delivery
procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Securities and (i) whose Old
Securities are not immediately available or (ii) who cannot deliver their
Old Securities, the Letter of Transmittal or any other required documents
to the Exchange Agent or the Transfer Agent, as the case may be, or the
Transfer Agent, as the case may be prior to the Expiration Date, may effect
a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent or the
Transfer Agent, as the case may be or the Transfer Agent, as the case may
be, receives from such Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by facsimile transmission, mail or
hand delivery) setting forth the name and address of the Holder, the
certificate number(s) of such Old Notes or Old Preferred Stock and the
principal amount of Old Notes or number of shares of Old Preferred Stock
tendered stating that the tender is being made thereby and guaranteeing
that, within five New York Stock Exchange trading days after the Expiration
Date, the Letter of Transmittal (or facsimile thereof) together with the
certificate(s) representing the Old Notes or Old Preferred Stock and any
other documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent or the Transfer Agent, as
the case may be; and
(c) Such properly completed and executed Letter of Transmittal
(or facsimile thereof), as well as the certificate(s) representing all
tendered Old Notes or Old Preferred Stock in proper form for transfer and
other documents required by the Letter of Transmittal are received by the
Exchange Agent or Transfer Agent, as the case may be, within five New York
Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent or the Transfer Agent, as the case
may be, a Notice of Guaranteed Delivery will be sent to Holders who wish to
tender their Old Notes or Old Preferred Stock according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Securities may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date.
To withdraw a tender of Old Securities in the Exchange Offers, a
written or facsimile transmission notice of withdrawal must be received by
the Exchange Agent or the Transfer Agent, as the case may be, or the
Transfer Agent, as the case may be, at its respective address set forth
herein prior to 5:00 p.m., New York City time, on the Expiration Date. Any
such notice of withdrawal must (i) specify the name of the person having
deposited the Old Securities to be withdrawn (the "Depositor"), (ii)
identify the Old Securities to be withdrawn (including the certificate
number or), (iii) be signed by the Holder in the same manner as the
original signature on the Letter of Transmittal by which such Old
Securities were tendered (including any required signature guarantees) or
be accompanied by documents of transfer sufficient to have the Trustee with
respect to the Old Notes, or the Transfer Agent with respect to the Old
Preferred Stock, register the transfer of such Old Securities in the name
of the person withdrawing the tender and (iv) specify the name in which any
such Old Securities are to be registered, if different from that of the
Depositor. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the
Company, whose determination shall be final and binding on all parties. Any
Old Securities so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offers and no New Securities will be
issued with respect thereto unless the Old Securities so withdrawn are
validly retendered. Any Old Securities which have been tendered but which
are not accepted for payment will be returned to the Holder thereof without
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cost to such Holder as soon as practicable after withdrawal, rejection of
tender or termination of the Exchange Offers. Properly withdrawn Old
Securities may be retendered by following one of the procedures described
above under "-Procedures for Tendering" at any time prior to the Expiration
Date.
EXCHANGE AGENT; TRANSFER AGENT
Norwest Banks has been appointed as Exchange Agent of the Note
Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery with respect to the exchange of
the Old Notes should be directed to the Exchange Agent addressed as
follows:
By Registered Mail or Certified By Overnight Courier:
Mail:
Norwest Banks Norwest Banks
Corporate Trust Section Corporate Trust Section
P.O. Box 1517 NorthStar East Building
Minneapolis, MN 55480-1517 Sixth and Marquette
Avenues
Minneapolis, MN 55479-
0113
By Telephone: By Facsimile:
(612) 667-4070 (612) 667-4972
American Stock Transfer & Trust Company has been appointed Transfer
Agent of the Preferred Stock Exchange Offer. Questions and requests for
assistance, requests for additional copies of this Prospectus or the Letter
of Transmittal and requests for Notice of Guaranteed Delivery with respect
to the Old Preferred Stock should be addressed to the Transfer Agent as
follows:
By Registered Mail, Certified By Telephone:
Mail or Overnight Courier:
(212) 936-5100
American Stock Transfer &
Trust Company By Facsimile:
40 Wall Street
New York, NY 10005 (718) 236-4588
FEES AND EXPENSES
The expenses of soliciting tenders will be paid by the Company. The
principal solicitation is being made by mail; however, additional
solicitation may be made by telecopier, telephone or in person by officers
and regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offers and will not make any payments to brokers-dealers or others
soliciting acceptances of the Exchange Offers. The Company, however, will
pay the Exchange Agent and the Transfer Agent reasonable and customary fees
for their services and will reimburse them for their reasonable
out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange
Offers will be paid by the Company and are estimated in the aggregate to be
approximately $100,000. Such expenses include registration fees, fees and
expenses of the Exchange Agent and the Transfer Agent, accounting and legal
fees and printing costs, among others.
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The Company will pay all transfer taxes, if any, applicable to the
exchange of the Old Securities pursuant to the Exchange Offers. If,
however, certificates representing New Securities for principal amounts or
number of shares not tendered or accepted for exchange are to be delivered
to, or are to be issued in the name of, any person other than the
registered Holder of Old Securities tendered, or if tendered the Old
Securities are registered in the name of, any person other than the person
signing the Letter of Transmittal, or if a transfer tax is imposed for any
reason other than the exchange of the Old Securities pursuant to the
Exchange Offers, then the amount of any such transfer taxes (whether
imposed on the registered Holder or any other persons) will be payable by
the tendering Holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the
amount of such transfer taxes will be billed directly to such tendering
Holder.
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DESCRIPTION OF NEW NOTES
The New Notes are to be issued under an Indenture, dated as of March
11, 1997 (the "Senior Discount Notes Indenture"), among Holdings, as
issuer, ICG, as guarantor (including its successors and assigns, the
"Guarantor"), and Norwest Bank Colorado, National Association, as Trustee
(the "Trustee"). A copy of the Senior Discount Notes Indenture is available
upon request from Holdings. The following summary of certain provisions of
the Senior Discount Notes Indenture does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all the
provisions of the Senior Discount Notes Indenture, including the
definitions of certain terms therein and those terms made a part thereof by
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
Whenever particular defined terms of the Senior Discount Notes Indenture
not otherwise defined herein are referred to, such defined terms are
incorporated herein by reference. References herein to "$" refers to U.S.
dollars.
GENERAL
The New Notes will be unsecured senior obligations of Holdings and
will mature on March 15, 2007. After March 15, 2002, interest on the New
Notes will accrue at the rate of 11 5/8% per annum from the most recent
Interest Payment Date to which interest has been paid or provided for,
payable semiannually (to Holders of record at the close of business on
March 1 or September 1 immediately preceding the Interest Payment Date) on
March 15 and September 15 of each year, commencing September 15, 2002.
Although for U.S. federal income tax purposes a significant amount of
original issue discount, taxable as ordinary income, will be recognized by
a Holder of New Notes as such discount is amortized from the date of
issuance of the New Notes, Holders of New Notes will not receive any cash
payments of interest on the New Notes until September 15, 2002. See
"Certain United States Federal Income Tax Considerations."
Principal of, premium, if any, and interest on the New Notes will be
payable, and the New Notes may be exchanged or transferred, at the office
or agency of Holdings (which initially will be the corporate trust office
of the Trustee at 1740 Broadway, Denver, Colorado); provided that, at the
option of Holdings, payment of interest may be made by check mailed to the
address of the Holders as such address appears in the Security Register.
The New Notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 of principal amount at maturity and any
integral multiple thereof. See "-Book Entry; Delivery and Form." No service
charge will be made for any registration of transfer or exchange of New
Notes, but Holdings may require payment of a sum sufficient to cover any
transfer tax or other similar governmental charge payable in connection
therewith.
Subject to the covenants in their Indebtedness and applicable law,
Holdings and ICG may issue additional New Notes under the Senior Discount
Notes Indenture. The New Notes, together with any New Notes subsequently
issued, will be treated as a single class for all purposes under the Senior
Discount Notes Indenture.
OPTIONAL REDEMPTION
The New Notes will be redeemable, at Holdings' option, in whole or in
part, at any time or from time to time, on or after March 15, 2002 and
prior to maturity, upon not less than 30 nor more than 60 days' prior
notice mailed by first class mail to each Holder's last address as it
appears in the Security Register, at the following Redemption Prices
(expressed in percentages of principal amount at maturity), plus accrued
and unpaid interest, if any, to the Redemption Date (subject to the right
of Holders of record on the relevant Regular Record Date that is on or
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prior to the Redemption Date to receive interest due on an Interest Payment
Date), if redeemed during the 12-month period commencing March 15 of the
years set forth below:
Year Percentage
---- ---------
2002 . . . . . . . . 105.81250%
2003 . . . . . . . . 102.90625%
2004 and thereafter . 100.00000%
In addition, at any time on or prior to March 15, 2000, Holdings may,
at its option from time to time, redeem New Notes having an aggregate
principal amount of up to 35% of the aggregate principal amount of all New
Notes issued in the Private Offering, at a redemption price equal to 111
5/8% of the Accreted Value thereof on the redemption date, with proceeds of
one or more Public Equity Offerings of Common Stock of (A) ICG or (B)
Holdings, provided that (i), with respect to a Public Equity Offering
referred to in clause (A) above, cash proceeds of such Public Equity
Offering in an amount sufficient to effect the redemption of New Notes to
be so redeemed are contributed by ICG to Holdings prior to such redemption
and used by Holdings to effect such redemption and (ii) such redemption
occurs within 180 days after consummation of such Public Equity Offering.
In the case of any partial redemption, selection of the New Notes for
redemption will be made by the Trustee in compliance with the requirements
of the principal national securities exchange, if any, on which the New
Notes are listed or, if the New Notes are not listed on a national
securities exchange, on a pro rata basis or by lot; provided that no New
Note of $1,000 in principal amount at maturity or less shall be redeemed in
part. If any New Note is to be redeemed in part only, the notice of
redemption relating to such New Note shall state the portion of the
principal amount thereof to be redeemed. A new New Note in principal amount
equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original New Note.
GUARANTEE
Holdings' obligations under the New Notes are fully and
unconditionally guaranteed on a senior basis by the Guarantor; provided
that the Note Guarantee shall not be enforceable against the Guarantor in
an amount in excess of the net worth of the Guarantor at the time that
determination of such net worth is, under applicable law, relevant to the
enforceability of such Note Guarantee. Such net worth shall include any
claim of the Guarantor against Holdings for reimbursement.
RANKING
The New Notes and the Note Guarantee will be senior unsecured
indebtedness of Holdings and ICG, respectively, will rank pari passu in
right of payment with all existing and future unsecured, unsubordinated
indebtedness and will be senior in right of payment to all existing and
future subordinated indebtedness of Holdings and ICG. See "Risk Factors-
Substantial Indebtedness; Ability to Service Debt" and "-Holding Company
Reliance on Subsidiaries' Funds; Priority of Creditors; Subordination of
Exchange Debentures."
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in
the covenants and other provisions of the Senior Discount Notes Indenture.
Reference is made to the Senior Discount Notes Indenture for the full
definition of all terms as well as any other capitalized term used herein
for which no definition is provided.
"Accreted Value" is defined to mean, for any Specified Date, the
amount calculated pursuant to (i), (ii), (iii) or (iv) for each $1,000
principal amount at maturity of New Notes:
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(i) if the Specified Date occurs on one of the following dates (each a
"Semi-Annual Accrual Date"), the Accreted Value will equal the amount set
forth below for such Semi-Annual Accrual Date:
Accreted
Semi-Annual Accrual Date Value
----------------------- --------
March 11, 1997 . . . . $567.66
September 15, 1997 . . $601.41
March 15, 1998 . . . . $636.36
September 15, 1998 . . $673.35
March 15, 1999 . . . . $712.49
September 15, 1999 . . $753.90
March 15, 2000 . . . . $797.72
September 15, 2000 . . $844.09
March 15, 2001 . . . . $893.15
September 15, 2002 . . $945.07
March 15, 2002 . . . . $1,000.00
(ii) if the Specified Date occurs before the first Semi-Annual Accrual
Date, the Accreted Value will equal the sum of (a) the original issue price
and (b) an amount equal to the product of (1) the Accreted Value for the
first Semi-Annual Accrual Date less the original issue price multiplied by
(2) a fraction, the numerator of which is the number of days from the issue
date of the New Notes to the Specified Date, using a 360-day year of twelve
30-day months, and the denominator of which is the number of days elapsed
from the issue date of the New Notes to the first Semi-Annual Accrual Date,
using a 360-day year of twelve 30-day months;
(iii) if the Specified Date occurs between two Semi-Annual Accrual
Dates, the Accreted Value will equal the sum of (a) the Accreted Value for
the Semi-Annual Accrual Date immediately preceding such Specified Date and
(b) an amount equal to the product of (1) the Accreted Value for the
immediately following Semi-Annual Accrual Date less the Accreted Value for
the immediately preceding Semi-Annual Accrual Date multiplied by (2) a
fraction, the numerator of which is the number of days from the immediately
preceding Semi-Annual Accrual Date to the Specified Date, using a 360-day
year of twelve 30-day months, and the denominator of which is 180; or
(iv) if the Specified Date occurs after the last Semi-Annual Accrual
Date, the Accreted Value will equal $1,000.
"Adjusted Consolidated Net Income" means for any period, the aggregate
net income (or loss) of the Guarantor and its Restricted Subsidiaries for
such period determined in conformity with GAAP; provided that the following
items shall be excluded in computing Adjusted Consolidated Net Income
(without duplication): (i) the net income of any Person (other than net
income attributable to a Restricted Subsidiary) in which any Person (other
than the Guarantor or any of its Restricted Subsidiaries) has a joint
interest and the net income of any Unrestricted Subsidiary, except to the
extent of the amount of dividends or other distributions actually paid to
the Guarantor or any of its Restricted Subsidiaries by such other Person or
such Unrestricted Subsidiary during such period; (ii) solely for the
purposes of calculating the amount of Restricted Payments that may be made
pursuant to clause (C) of the first paragraph of the "Limitation on
Restricted Payments" covenant described below (and in such case, except to
the extent includable pursuant to clause (i) above), the net income (or
loss) of any Person accrued prior to the date it becomes a Restricted
Subsidiary or is merged into or consolidated with the Guarantor or any of
its Restricted Subsidiaries or all or substantially all of the property and
assets of such Person are acquired by the Guarantor or any of its
Restricted Subsidiaries; (iii) the net income of any Restricted Subsidiary
to the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of such net income is not at
the time permitted by the operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Restricted Subsidiary; (iv) any
gains or losses (on an after-tax basis) attributable to Asset Sales; (v)
except for purposes of calculating the amount of Restricted Payments that
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may be made pursuant to clause (C) of the first paragraph of the
"Limitation on Restricted Payments" covenant described below, any amount
paid or accrued as dividends on preferred stock of the Guarantor or any
Restricted Subsidiary owned by Persons other than the Guarantor and any of
its Restricted Subsidiaries; and (vi) all extraordinary gains and
extraordinary losses.
"Adjusted Consolidated Net Tangible Assets" means the total amount of
assets of the Guarantor and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), except to the
extent resulting from write-ups of capital assets (excluding write-ups in
connection with accounting for acquisitions in conformity with GAAP), after
deducting therefrom (i) all current liabilities of the Guarantor and its
Restricted Subsidiaries (excluding intercompany items) and (ii) all
goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other like intangibles, all as set forth on the most recently
available quarterly or annual consolidated balance sheet of the Guarantor
and its Restricted Subsidiaries, prepared in conformity with GAAP.
"Affiliate" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as applied to any Person,
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Asset Acquisition" means (i) an investment by the Guarantor or any of
its Restricted Subsidiaries in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Guarantor or shall be
merged into or consolidated with the Guarantor or any of its Restricted
Subsidiaries; provided that such Person's primary business is related,
ancillary or complementary to the businesses of the Guarantor and its
Restricted Subsidiaries on the date of such investment or (ii) an
acquisition by the Guarantor or any of its Restricted Subsidiaries of the
property and assets of any Person other than the Guarantor or any of its
Restricted Subsidiaries that constitute substantially all of a division or
line of business of such Person; provided that the property and assets
acquired are related, ancillary or complementary to the businesses of the
Guarantor and its Restricted Subsidiaries on the date of such acquisition.
"Asset Sale" means any sale, transfer or other disposition (including
by way of merger, consolidation or sale-leaseback transactions) in one
transaction or a series of related transactions by the Guarantor or any of
its Restricted Subsidiaries to any Person other than the Guarantor or any
of its Restricted Subsidiaries of (i) all or any of the Capital Stock of
any Restricted Subsidiary, (ii) all or substantially all of the property
and assets of an operating unit or business of the Guarantor or any of its
Restricted Subsidiaries or (iii) any other property and assets of the
Guarantor or any of its Restricted Subsidiaries outside the ordinary course
of business of the Guarantor or such Restricted Subsidiary and, in each
case, that is not governed by the provisions of the Senior Discount Notes
Indenture applicable to mergers, consolidations and sales of assets of the
Guarantor; provided that the meaning of "Asset Sale" shall not include (A)
sales or other dispositions of inventory, receivables and other current
assets, and (B) dispositions of assets of the Guarantor or any of its
Restricted Subsidiaries, in substantially simultaneous exchanges for
consideration consisting of any combination of cash, Temporary Cash
Investments and assets that are used or useful in the telecommunications
business of the Guarantor or its Restricted Subsidiaries, if such
consideration has an aggregate fair market value substantially equal to the
fair market value of the assets so disposed of; provided, however, that
fair market value shall be determined in good faith by the Board of
Directors of Holdings, whose determination shall be conclusive and
evidenced by a Board Resolution delivered to the Trustee; and provided
further that any cash or Temporary Cash Investments received by the
Guarantor or any of its Restricted Subsidiaries pursuant to any transaction
described in clause (B) above shall be applied in accordance with clause
(A) or (B) of the first paragraph of the "Limitation on Asset Sales"
covenant.
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"Average Life" means, at any date of determination with respect to any
debt security, the quotient obtained by dividing (i) the sum of the
products of (a) the number of years from such date of determination to the
dates of each successive scheduled principal payment of such debt security
and (b) the amount of such principal payment by (ii) the sum of all such
principal payments.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether now outstanding or
issued after the date of the Senior Discount Notes Indenture, including,
without limitation, all Common Stock and preferred stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present
value of the rental obligations of such Person as lessee, in conformity
with GAAP, is required to be capitalized on the balance sheet of such
Person; and "Capitalized Lease Obligations" means the discounted present
value of the rental obligations under such lease.
"Change of Control" means such time as (i) a "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of Voting Stock having more than 40% of the voting power of
the total Voting Stock of the Guarantor on a fully diluted basis; (ii)
individuals who on the Closing Date constitute the Board of Directors of
the Guarantor (together with any new directors whose election by the Board
of Directors or whose nomination for election by the Guarantor's
stockholders was approved by a vote of at least a majority of the members
of the Board of Directors then in office who either were members of the
Board of Directors on the Closing Date or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the members of the Board of Directors then in office; or (iii)
all of the Common Stock of Holdings is not beneficially owned by the
Guarantor.
"ChoiceCom" means CSW/ICG ChoiceCom, L.P., a Delaware limited
partnership.
"Closing Date" means the date on which the Senior Discount Notes are
originally issued under the Senior Discount Notes Indenture.
"Consolidated EBITDA" means, for any period, the sum of the amounts
for such period of (i) Adjusted Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) income taxes, to the extent such amount was
deducted in calculating Adjusted Consolidated Net Income (other than income
taxes (either positive or negative) attributable to extraordinary and
non-recurring gains or losses or sales of assets), (iv) depreciation
expense, to the extent such amount was deducted in calculating Adjusted
Consolidated Net Income, (v) amortization expense, to the extent such
amount was deducted in calculating Adjusted Consolidated Net Income, and
(vi) all other non-cash items reducing Adjusted Consolidated Net Income
(other than items that will require cash payments and for which an accrual
or reserve is, or is required by GAAP to be, made), less all non-cash items
increasing Adjusted Consolidated Net Income, all as determined on a
consolidated basis for the Guarantor and its Restricted Subsidiaries in
conformity with GAAP; provided that, if any Restricted Subsidiary is not a
Wholly Owned Restricted Subsidiary, Consolidated EBITDA shall be reduced
(to the extent not otherwise reduced in accordance with GAAP) by an amount
equal to (A) the amount of the Adjusted Consolidated Net Income
attributable to such Restricted Subsidiary multiplied by (B) the quotient
of (1) the number of shares of outstanding Common Stock of such Restricted
Subsidiary not owned on the last day of such period by the Guarantor or any
of its Restricted Subsidiaries divided by (2) the total number of shares of
outstanding Common Stock of such Restricted Subsidiary on the last day of
such period.
"Consolidated Interest Expense" means, for any period, the aggregate
amount of interest in respect of Indebtedness (including amortization of
original issue discount on any Indebtedness and the interest portion of any
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deferred payment obligation, calculated in accordance with the effective
interest method of accounting; all commissions, discounts and other fees
and charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and
Indebtedness that is Guaranteed or secured by the Guarantor or any of its
Restricted Subsidiaries) and all but the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be
paid or to be accrued by the Guarantor and its Restricted Subsidiaries
during such period; excluding, however, without duplication, (i) any amount
of such interest of any Restricted Subsidiary if the net income of such
Restricted Subsidiary is excluded in the calculation of Adjusted
Consolidated Net Income pursuant to clause (iii) of the definition thereof
(but only in the same proportion as the net income of such Restricted
Subsidiary is excluded from the calculation of Adjusted Consolidated Net
Income pursuant to clause (iii) of the definition thereof) and (ii) any
premiums, fees and expenses (and any amortization thereof) payable in
connection with the offering of the 13 1/2% Notes and the warrants issued
therewith, the 12 1/2% Notes, the 14 1/4% Preferred Stock, the New Notes
and/or the Preferred Stock, all as determined on a consolidated basis
(without taking into account Unrestricted Subsidiaries) in conformity with
GAAP.
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly
or annual consolidated balance sheet of the Guarantor and its Restricted
Subsidiaries (which shall be as of a date not more than 90 days prior to
the date of such computation, and which shall not take into account
Unrestricted Subsidiaries), less any amounts attributable to Redeemable
Stock or any equity security convertible into or exchangeable for
Indebtedness, the cost of treasury stock and the principal amount of any
promissory notes receivable from the sale of the Capital Stock of the
Guarantor or any of its Restricted Subsidiaries, each item to be determined
in conformity with GAAP (excluding the effects of foreign currency exchange
adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to
protect the Guarantor or any of its Restricted Subsidiaries against
fluctuations in currency values to or under which the Guarantor or any of
its Restricted Subsidiaries is a party or a beneficiary on the Closing Date
or becomes a party or a beneficiary thereafter.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"FOTI" means ICG Fiber Optic Technologies Inc., a Colorado
corporation.
"14 1/4% Preferred Stock" means the 14 1/4% Exchangeable Preferred
Stock mandatorily redeemable May 1, 2007 of Holdings, and any shares of
preferred stock issued as payment in kind dividends thereon.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of August 8, 1995, including, without
limitation, those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as
approved by a significant segment of the accounting profession. All ratios
and computations contained in the Senior Discount Notes Indenture shall be
computed in conformity with GAAP applied on a consistent basis, except that
calculations made for purposes of determining compliance with the terms of
the covenants and with other provisions of the Senior Discount Notes
Indenture shall be made without giving effect to (i) the amortization of
any expenses incurred in connection with the offering of the 13 1/2% Notes
and the warrants issued therewith, the 12 1/2% Notes, the 14 1/4% Preferred
Stock, the New Notes and/or the Preferred Stock and (ii) except as
otherwise provided, the amortization of any amounts required or permitted
by Accounting Principles Board Opinion Nos. 16 and 17.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the
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purchase or payment of) such Indebtedness or other obligation of such other
Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services,
to take-or-pay, or to maintain financial statement conditions or otherwise)
or (ii) entered into for purposes of assuring in any other manner the
obligee of such Indebtedness or other obligation of the payment thereof or
to protect such obligee against loss in respect thereof (in whole or in
part); provided that the term "Guarantee" shall not include endorsements
for collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"Holdings (Canada)" means ICG Holdings (Canada), Inc. and its
successors and assigns.
"ICG" means ICG Communications, Inc., a Delaware corporation, and its
successors and assigns.
"Incur" means, with respect to any Indebtedness, to incur, create,
issue, assume, Guarantee or otherwise become liable for or with respect to,
or become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an Incurrence of Indebtedness by reason of the
acquisition of more than 50% of the Capital Stock of any Person; provided
that neither the accrual of interest nor the accretion of original issue
discount shall be considered an Incurrence of Indebtedness. The term
"Incurrence" has a corresponding meaning.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person
for borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of
such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto), (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, which purchase price is due more than six months
after the date of placing such property in service or taking delivery and
title thereto or the completion of such services, except Trade Payables,
(v) all obligations of such Person as lessee under Capitalized Leases, (vi)
all Indebtedness of other Persons secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person;
provided that the amount of such Indebtedness shall be the lesser of (A)
the fair market value of such asset at such date of determination and (B)
the amount of such Indebtedness, (vii) all Indebtedness of other Persons
Guaranteed by such Person to the extent such Indebtedness is Guaranteed by
such Person and (viii) to the extent not otherwise included in this
definition, obligations under Currency Agreements and Interest Rate
Agreements. The amount of Indebtedness of any Person at any date shall be
the outstanding balance at such date of all unconditional obligations as
described above and, with respect to contingent obligations, the maximum
liability upon the occurrence of the contingency giving rise to the
obligation, provided (i) that the amount outstanding at any time of any
Indebtedness issued with original issue discount is the original issue
price of such Indebtedness and (ii) that Indebtedness shall not include (A)
any amount of money borrowed, at the time of the Incurrence of the related
Indebtedness, for the purpose of pre-funding any interest payable on such
related Indebtedness or (B) any liability for federal, state, local or
other taxes.
"Indebtedness to EBITDA Ratio" means, as at any date of determination,
the ratio of (i) the aggregate amount of Indebtedness of the Guarantor,
Holdings and their Restricted Subsidiaries on a consolidated basis as at
the date of determination to (ii) the Consolidated EBITDA of the Guarantor
for the then most recent four full fiscal quarters for which reports have
been filed pursuant to the "Commission Reports and Reports to Holders"
covenant described below (such four full fiscal quarter period being
referred to herein as the "Four Quarter Period"); provided that (x) pro
forma effect shall be given to any Indebtedness Incurred from the beginning
of the Four Quarter Period through the Transaction Date (including any
Indebtedness Incurred on the Transaction Date), to the extent outstanding
on the Transaction Date, (y) if during the period commencing on the first
day of such Four Quarter Period through the Transaction Date (the
"Reference Period"), the Guarantor, Holdings or any of the Restricted
Subsidiaries shall have engaged in any Asset Sale, Consolidated EBITDA for
such period shall be reduced by an amount equal to the EBITDA (if
positive), or increased by an amount equal to the EBITDA (if negative),
directly attributable to the assets which are the subject of such Asset
Sale and any related retirement of Indebtedness as if such Asset Sale and
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related retirement of Indebtedness had occurred on the first day of such
Reference Period or (z) if during such Reference Period the Guarantor,
Holdings or any of the Restricted Subsidiaries shall have made any Asset
Acquisition, Consolidated EBITDA of the Guarantor shall be calculated on a
pro forma basis as if such Asset Acquisition and any related financing had
occurred on the first day of such Reference Period.
"Investment" in any Person means any direct or indirect advance, loan
or other extension of credit (including, without limitation, by way of
Guarantee or similar arrangement; but excluding advances to customers in
the ordinary course of business that are, in conformity with GAAP, recorded
as accounts receivable on the balance sheet of the Guarantor or its
Restricted Subsidiaries) or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition
of Capital Stock, bonds, notes, debentures or other similar instruments
issued by, such Person and shall include the designation of a Restricted
Subsidiary as an Unrestricted Subsidiary. For purposes of the definition of
"Unrestricted Subsidiary" and the "Limitation on Restricted Payments"
covenant described below, (i) "Investment" shall include the fair market
value of the assets (net of liabilities) of any Restricted Subsidiary of
the Guarantor at the time that such Restricted Subsidiary of the Guarantor
is designated an Unrestricted Subsidiary and shall exclude the fair market
value of the assets (net of liabilities) of any Unrestricted Subsidiary at
the time that such Unrestricted Subsidiary is designated a Restricted
Subsidiary of the Guarantor and (ii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the
time of such transfer, in each case as determined by the Board of Directors
in good faith.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any conditional
sale or other title retention agreement or lease in the nature thereof, any
sale with recourse against the seller or any Affiliate of the seller, or
any agreement to give any security interest).
"MTN" means Maritime Telecommunications Network, Inc., a Colorado
corporation, and its successors.
"Net Cash Proceeds" means (a) with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the
extent corresponding to the principal, but not interest, component thereof)
when received in the form of cash or cash equivalents (except to the extent
such obligations are financed or sold with recourse to the Guarantor or any
Restricted Subsidiary of the Guarantor) and proceeds from the conversion of
other property received when converted to cash or cash equivalents, net of
(i) brokerage commissions and other fees and expenses (including fees and
expenses of counsel and investment bankers) related to such Asset Sale,
(ii) provisions for all taxes (whether or not such taxes will actually be
paid or are payable) as a result of such Asset Sale without regard to the
consolidated results of operations of the Guarantor and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness
or any other obligation outstanding at the time of such Asset Sale that
either (A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale and (iv) appropriate amounts
to be provided by the Guarantor or any Restricted Subsidiary of the
Guarantor as a reserve against any liabilities associated with such Asset
Sale, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such
Asset Sale, all as determined in conformity with GAAP and (b) with respect
to any issuance or sale of Capital Stock, the proceeds of such issuance or
sale in the form of cash or cash equivalents, including payments in respect
of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form
of cash or cash equivalents (except to the extent such obligations are
financed or sold with recourse to the Guarantor or any Restricted
Subsidiary of the Guarantor) and proceeds from the conversion of other
property received when converted to cash or cash equivalents, net of
attorney's fees, accountants' fees, underwriters' or placement agents'
fees, discounts or commissions and brokerage, consultant and other fees
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
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"Offer to Purchase" means an offer to purchase New Notes by Holdings
from the Holders commenced by mailing a notice to the Trustee and each
Holder stating: (i) the covenant pursuant to which the offer is being made
and that all New Notes validly tendered will be accepted for payment on a
pro rata basis; (ii) the purchase price and the date of purchase (which
shall be a Business Day no earlier than 30 days nor later than 60 days from
the date such notice is mailed) (the "Payment Date"); (iii) that any New
Note not tendered will continue to accrue interest pursuant to its terms;
(iv) that, unless Holdings defaults in the payment of the purchase price,
any New Note accepted for payment pursuant to the Offer to Purchase shall
cease to accrue interest on and after the Payment Date; (v) that Holders
electing to have a New Note purchased pursuant to the Offer to Purchase
will be required to surrender the New Note, together with the form entitled
"Option of the Holder to Elect Purchase" on the reverse side of the New
Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the Business Day immediately preceding
the Payment Date; (vi) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than the close of business
on the third Business Day immediately preceding the Payment Date, a
telegram, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of New Notes delivered for purchase and a
statement that such Holder is withdrawing his election to have such New
Notes purchased; and (vii) that Holders whose New Notes are being purchased
only in part will be issued new New Notes equal in principal amount to the
unpurchased portion of the New Notes surrendered; provided that each New
Note purchased and each new New Note issued shall be in a principal amount
of $1,000 or integral multiples thereof. On the Payment Date, Holdings
shall (i) accept for payment on a pro rata basis New Notes or portions
thereof tendered pursuant to an Offer to Purchase; (ii) deposit with the
Paying Agent money sufficient to pay the purchase price of all New Notes or
portions thereof so accepted; and (iii) deliver, or cause to be delivered,
to the Trustee all New Notes or portions thereof so accepted together with
an Officers' Certificate specifying the New Notes or portions thereof
accepted for payment by Holdings. The Paying Agent shall promptly mail to
the Holders of New Notes so accepted payment in an amount equal to the
purchase price, and the Trustee shall promptly authenticate and mail to
such Holders a new New Note equal in principal amount to any unpurchased
portion of the New Note surrendered; provided that each New Note purchased
and each new New Note issued shall be in a principal amount of $1,000 or
integral multiples thereof. Holdings will publicly announce the results of
an Offer to Purchase as soon as practicable after the Payment Date. The
Trustee shall act as the Paying Agent for an Offer to Purchase. Holdings
will comply with Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are
applicable, in the event that Holdings is required to repurchase New Notes
pursuant to an Offer to Purchase.
"Ohio LINX" means ICG Ohio LINX, Inc., an Ohio corporation.
"Permitted Investment" means (i) an Investment in a Restricted
Subsidiary or a Person which will, upon the making of such Investment,
become a Restricted Subsidiary or be merged or consolidated with or into or
transfer or convey all or substantially all its assets to, the Guarantor or
a Restricted Subsidiary; provided that such person's primary business is
related, ancillary or complementary to the businesses of the Guarantor and
its Restricted Subsidiaries on the date of such Investment; (ii) a
Temporary Cash Investment; (iii) payroll, travel and similar advances to
cover matters that are expected at the time of such advances ultimately to
be treated as expenses in accordance with GAAP; (iv) loans or advances to
employees made in the ordinary course of business in accordance with past
practice of the Guarantor or its Restricted Subsidiaries and that do not in
the aggregate exceed $2 million at any time outstanding; (v) stock,
obligations or securities received in satisfaction of judgments; and (vi)
Investments in an amount not to exceed, at any one time outstanding, all of
the net cash proceeds received by the Guarantor from the sale of its Common
Stock (to a Person other than one of its Subsidiaries) after the Closing
Date.
"Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate
legal proceedings promptly instituted and diligently conducted and for
which a reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made; (ii) statutory Liens
of landlords and carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen or other similar Liens arising in the ordinary course of business
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and with respect to amounts not yet delinquent or being contested in good
faith by appropriate legal proceedings promptly instituted and diligently
conducted and for which a reserve or other appropriate provision, if any,
as shall be required in conformity with GAAP shall have been made; (iii)
Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security; (iv) Liens incurred or deposits made to secure
the performance of tenders, bids, leases, statutory or regulatory
obligations, bankers' acceptances, surety and appeal bonds, government
contracts, performance and return-of-money bonds and other obligations of a
similar nature incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (v) easements, rights of
way, municipal and zoning ordinances and similar charges, encumbrances,
title defects or other irregularities that do not materially interfere with
the ordinary course of business of the Guarantor or any of its Restricted
Subsidiaries; (vi) Liens (including extensions and renewals thereof) upon
real or personal property acquired after the Closing Date; provided that
(a) such Lien is created solely for the purpose of securing Indebtedness
Incurred, in accordance with the "Limitation on Indebtedness" covenant
described below, (1) to finance the cost (including the cost of improvement
or construction) of the item of property or assets subject thereto and such
Lien is created prior to, at the time of or within six months after the
later of the acquisition, the completion of construction or the
commencement of full operation of such property or (2) to refinance any
Indebtedness previously so secured, (b) the principal amount of the
Indebtedness secured by such Lien does not exceed 100% of such cost and (c)
any such Lien shall not extend to or cover any property or assets other
than such item of property or assets and any improvements on such item;
(vii) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the Guarantor and its
Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering
property or assets under construction arising from progress or partial
payments by a customer of the Guarantor or its Restricted Subsidiaries
relating to such property or assets; (ix) any interest or title of a lessor
in the property subject to any Capitalized Lease or operating lease; (x)
Liens arising from filing Uniform Commercial Code financing statements
regarding leases; (xi) Liens on property of, or on shares of stock or
Indebtedness of, any corporation existing at the time such corporation
becomes, or becomes a part of, any Restricted Subsidiary; provided that
such Liens do not extend to or cover any property or assets of the
Guarantor or any Restricted Subsidiary other than the property or assets
acquired; (xii) Liens in favor of the Guarantor or any Restricted
Subsidiary; (xiii) Liens arising from the rendering of a final judgment or
order against the Guarantor or any Restricted Subsidiary of the Guarantor
that does not give rise to an Event of Default; (xiv) Liens securing
reimbursement obligations with respect to letters of credit that encumber
documents and other property relating to such letters of credit and the
products and proceeds thereof; (xv) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of customs duties
in connection with the importation of goods; (xvi) Liens encumbering
customary initial deposits and margin deposits, and other Liens that are
either within the general parameters customary in the industry and incurred
in the ordinary course of business, in each case, securing Indebtedness
under Interest Rate Agreements and Currency Agreements and forward
contracts, options, future contracts, futures options or similar agreements
or arrangements designed to protect the Guarantor or any of its Restricted
Subsidiaries from fluctuations in the price of commodities; (xvii) Liens
arising out of conditional sale, title retention, consignment or similar
arrangements for the sale of goods entered into by the Guarantor or any of
its Restricted Subsidiaries in the ordinary course of business in
accordance with the past practices of the Guarantor and its Restricted
Subsidiaries prior to the Closing Date; and (xviii) Liens on or sales of
receivables.
"Preferred stock" or "preferred stock" means, with respect to any
Person, any and all shares, interests, participations or other equivalents
(however designated, whether voting or non-voting) of such Person's
preferred or preference stock, whether now outstanding or issued after the
date of the Senior Discount Notes Indenture, including, without limitation,
all series and classes of such preferred or preference stock.
"Preferred Stock" means the preferred stock of Holdings issued on the
Closing Date and any shares of preferred stock issued as payment in kind
dividends thereon.
"Public Equity Offering" means a bona fide underwritten primary public
offering of Common Stock of ICG or Holdings pursuant to an effective
registration statement under the Securities Act.
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"Redeemable Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior
to the Stated Maturity of the New Notes, (ii) redeemable at the option of
the holder of such class or series of Capital Stock at any time prior to
the Stated Maturity of the New Notes or (iii) convertible into or
exchangeable for Capital Stock referred to in clause (i) or (ii) above or
Indebtedness having a scheduled maturity prior to the Stated Maturity of
the New Notes; provided that any Capital Stock that would not constitute
Redeemable Stock but for provisions thereof giving holders thereof the
right to require such Person to repurchase or redeem such Capital Stock
upon the occurrence of an "asset sale" or "change of control" occurring
prior to the Stated Maturity of the New Notes shall not constitute
Redeemable Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of
such Capital Stock than the provisions contained in "Limitation on Asset
Sales" and "Repurchase of New Notes Upon a Change of Control" covenants
described below and such Capital Stock specifically provides that such
Person will not repurchase or redeem any such stock pursuant to such
provision prior to the Guarantor's repurchase of such New Notes as are
required to be repurchased pursuant to the "Limitation on Asset Sales" and
"Repurchase of New Notes Upon a Change of Control" covenants described
below.
"Restricted Subsidiary" means any Subsidiary of the Guarantor other
than an Unrestricted Subsidiary.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary of the Guarantor that, together with its
Subsidiaries, (i) for the most recent fiscal year of the Guarantor,
accounted for more than 10% of the consolidated revenues of the Guarantor
and its Restricted Subsidiaries or (ii) as of the end of such fiscal year,
was the owner of more than 10% of the consolidated assets of the Guarantor
and its Restricted Subsidiaries, all as set forth on the most recently
available consolidated financial statements of the Guarantor for such
fiscal year.
"Specified Date" means any redemption date, any date of purchase for
any purchase of New Notes pursuant to the "Limitation on Asset Sales" or
"Repurchase of New Notes upon a Change of Control" covenants described
below or any date on which the New Notes are due and payable after an Event
of Default.
"StarCom" means StarCom International Optics Corporation, a British
Columbia corporation, and its subsidiaries.
"Stated Maturity" means, (i) with respect to any debt security, the
date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (ii)
with respect to any scheduled installment of principal of or interest on
any debt security, the date specified in such debt security as the fixed
date on which such installment is due and payable.
"Strategic Investor" means any Person engaged in the
telecommunications business which has a net worth or equity market
capitalization of at least $1 billion.
"Strategic Investor Subordinated Indebtedness" means all Indebtedness
of Holdings owed to a Strategic Investor that is contractually subordinate
in right of payment to the New Notes to at least the following extent: no
payment of principal (or premium, if any) or interest on or otherwise
payable in respect of such Indebtedness may be made (whether as a result of
a default or otherwise) prior to the payment in full of all of the
Guarantor's and Holdings' obligations under the New Notes, provided,
however, that prior to the payment of such obligations, interest on
Strategic Investor Subordinated Indebtedness may be payable solely in kind
or in Common Stock (other than Redeemable Stock) of the Guarantor.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the
outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.
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"Temporary Cash Investment" means any of the following: (i) direct
obligations of the United States of America or any agency thereof or
obligations fully and unconditionally guaranteed by the United States of
America or any agency thereof, (ii) time deposit accounts, certificates of
deposit and money market deposits maturing within 270 days of the date of
acquisition thereof, bankers' acceptances with maturities not exceeding 270
days, and overnight bank deposits, in each case issued by or with a bank or
trust company which is organized under the laws of the United States of
America, any state thereof or any foreign country recognized by the United
States, and which bank or trust company has capital, surplus and undivided
profits aggregating in excess of $100 million (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or such
similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a registered broker
dealer or mutual fund distributor, (iii) repurchase obligations with a term
of not more than 30 days for underlying securities of the types described
in clause (i) above entered into with a bank meeting the qualifications
described in clause (ii) above, (iv) commercial paper, maturing not more
than 180 days after the date of acquisition, issued by a corporation (other
than an Affiliate of the Guarantor) organized and in existence under the
laws of the United States of America, any state thereof or any foreign
country recognized by the United States of America with a rating at the
time as of which any investment therein is made of "P-1" (or higher)
according to Moody's Investors Service, Inc. or "A-1" (or higher) according
to Standard & Poor's Ratings Group, and (v) securities with maturities of
six months or less from the date of acquisition issued or fully and
unconditionally guaranteed by any state, commonwealth or territory of the
United States of America, or by any political subdivision or taxing
authority thereof, and rated at least "A" by Standard & Poor's Ratings
Group or Moody's Investors Service, Inc.
"Trade Payables" means, with respect to any person, any accounts
payable or any other debt or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person or any of its Subsidiaries
arising in the ordinary course of business in connection with the
acquisition of goods or services.
"13 1/2% Notes" means the 13 1/2% Senior Discount Notes due 2005 of
Holdings guaranteed by Holdings (Canada) and ICG on a senior unsecured
basis.
"13 1/2% Notes Indenture" means the Indenture dated as of August 8,
1995, as amended, among Holdings, Holdings (Canada) and the Trustee
pursuant to which Holdings issued the 13 1/2% Notes.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Guarantor or any of its Restricted Subsidiaries, the
date such Indebtedness is to be Incurred and, with respect to any
Restricted Payment, the date such Restricted Payment is to be made.
"12 1/2% Notes" means the 12 1/2% Senior Discount Notes due 2006 of
Holdings guaranteed by Holdings (Canada) and ICG on a senior unsecured
basis.
"12 1/2% Notes Indenture" means the Indenture dated as of April 30,
1996, as amended, among Holdings, Holdings (Canada) and the Trustee
pursuant to which Holdings issued the 12 1/2% Notes.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Guarantor
that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii)
any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may
designate any Restricted Subsidiary of the Guarantor (including any newly
acquired or newly formed Subsidiary of the Guarantor), other than Holdings
or a Subsidiary that has given a Subsidiary Guarantee, to be an
Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of,
or owns or holds any Lien on any property of, the Guarantor or any
Restricted Subsidiary; provided that either (A) the Subsidiary to be so
designated has total assets of $1,000 or less or (B) if such Subsidiary has
assets greater than $1,000, that such designation would be permitted under
the "Limitation on Restricted Payments" covenant described below. The Board
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of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary of the Guarantor; provided that immediately after giving effect
to such designation (x) the Guarantor could Incur $1.00 of additional
Indebtedness under the first paragraph of the "Limitation on Indebtedness"
covenant described below and (y) no Default or Event of Default shall have
occurred and be continuing. Any such designation by the Board of Directors
shall be evidenced to the Trustee by promptly filing with the Trustee a
copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"Voting Stock" means, with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of
directors, managers or other voting members of the governing body of such
Person.
"Wholly Owned" means, with respect to any Subsidiary of any Person,
such Subsidiary if 98% or more of the outstanding Capital Stock in such
Subsidiary (other than any director's qualifying shares or Investments by
foreign nationals mandated by applicable law) is owned by such Person or
one or more Wholly Owned Subsidiaries of such Person.
"Zycom" means Zycom Corporation, an Alberta, Canada corporation.
COVENANTS
Limitation on Indebtedness
(a) Under the terms of the Senior Discount Notes Indenture, the
Guarantor will not, and will not permit any of its Restricted Subsidiaries
to, Incur any Indebtedness (other than the New Notes, the Guarantor's
Guarantee thereof and Indebtedness existing on the Closing Date); provided
that the Guarantor and Holdings may Incur Indebtedness if, after giving
effect to the Incurrence of such Indebtedness and the receipt and
application of the proceeds therefrom, the Indebtedness to EBITDA Ratio
would be greater than zero and less than 5:1.
Notwithstanding the foregoing, the Guarantor and any Restricted
Subsidiary (except as specified below) may Incur each and all of the
following: (i) Indebtedness of the Guarantor or Holdings outstanding at any
time, which Indebtedness generates gross proceeds to the Guarantor or
Holdings of up to $400 million, less the gross proceeds of Indebtedness
permanently repaid as provided under the "Limitation on Asset Sales"
covenant described below; provided that (A) Indebtedness generating gross
proceeds to the Guarantor or Holdings of up to $150 million may be Incurred
under this clause (i) with no additional requirements and (B) prior to, or
contemporaneously with, the Incurrence of Indebtedness generating all or
any part of the remaining $250 million of gross proceeds referred to under
this clause (i), the Guarantor or Holdings shall have issued or shall issue
preferred stock (which has a final stated redemption date later than the
Stated Maturity of the 13 1/2% Notes) generating an amount of gross
proceeds equal to or greater than the amount of Indebtedness so Incurred
and (x) with respect to preferred stock issued on the same date as
Indebtedness Incurred under this clause (i)(B), having a dividend rate of
no more than 2.75 percentage points higher than the interest rate on the
Indebtedness so Incurred, and (y) with respect to preferred stock issued at
any other time which will be applied to satisfy the criteria under this
clause (i)(B), having a secondary market yield, on the same date as the
Indebtedness so Incurred, which a nationally recognized investment banking
firm certifies to the Trustee is no more than 2.75 percentage points higher
than the interest rate on the Indebtedness that is being Incurred pursuant
to this clause (i)(B); (ii) Indebtedness to the Guarantor or any of its
Wholly Owned Restricted Subsidiaries; provided that any subsequent issuance
or transfer of any Capital Stock which results in any such Wholly Owned
Restricted Subsidiary ceasing to be a Wholly Owned Restricted Subsidiary or
any subsequent transfer of such Indebtedness (other than to the Guarantor
or another Wholly Owned Restricted Subsidiary) shall be deemed, in each
case, to constitute an Incurrence of such Indebtedness not permitted by
this clause (ii); (iii) Indebtedness issued in exchange for, or the net
proceeds of which are used to refinance or refund, then outstanding
Indebtedness, other than Indebtedness Incurred under clause (i), (ii), (v),
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(vi), (viii), (ix), (xi) or (xii) of this paragraph, and any refinancings
thereof in an amount not to exceed the amount so refinanced or refunded
(plus premiums, accrued interest, fees and expenses); provided that
Indebtedness the proceeds of which are used to refinance or refund the New
Notes or Indebtedness that is pari passu with, or subordinated in right of
payment to, the New Notes or the Note Guarantee shall only be permitted
under this clause (iii) if (A) in case the New Notes are refinanced in part
or the Indebtedness to be refinanced is pari passu with the New Notes or
the Note Guarantee, such new Indebtedness, by its terms or by the terms of
any agreement or instrument pursuant to which such new Indebtedness is
outstanding, is expressly made pari passu with, or subordinate in right of
payment to, the remaining New Notes or the Note Guarantee, as the case may
be, (B) in case the Indebtedness to be refinanced is subordinated in right
of payment to the New Notes or the Note Guarantee, such new Indebtedness,
by its terms or by the terms of any agreement or instrument pursuant to
which such new Indebtedness is issued or remains outstanding, is expressly
made subordinate in right of payment to the New Notes or the Note
Guarantee, as the case may be, at least to the extent that the Indebtedness
to be refinanced is subordinated to the New Notes or the Note Guarantee, as
the case may be and (C) such new Indebtedness, determined as of the date of
Incurrence of such new Indebtedness, does not mature prior to the Stated
Maturity of the Indebtedness to be refinanced or refunded, and the Average
Life of such new Indebtedness is at least equal to the remaining Average
Life of the Indebtedness to be refinanced or refunded; and provided further
that in no event may Indebtedness of the Guarantor or Holdings be
refinanced by means of any Indebtedness of any Restricted Subsidiary of the
Guarantor or Holdings, as the case may be, pursuant to this clause (iii);
(iv) Indebtedness (A) in respect of performance, surety or appeal bonds
provided in the ordinary course of business, (B) under Currency Agreements
and Interest Rate Agreements; provided that such agreements do not increase
the Indebtedness of the obligor outstanding at any time other than as a
result of fluctuations in foreign currency exchange rates or interest rates
or by reason of fees, indemnities and compensation payable thereunder; and
(C) arising from agreements providing for indemnification, adjustment of
purchase price or similar obligations, or from Guarantees or letters of
credit, surety bonds or performance bonds securing any obligations of
Holdings or any of its Restricted Subsidiaries pursuant to such agreements,
in any case Incurred in connection with the disposition of any business,
assets or Restricted Subsidiary of Holdings (other than Guarantees of
Indebtedness Incurred by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary of Holdings for the purpose of
financing such acquisition), in a principal amount at maturity not to
exceed the gross proceeds actually received by Holdings or any Restricted
Subsidiary in connection with such disposition; (v) Indebtedness of the
Guarantor or, to the extent the proceeds referred to below are contributed
to Holdings, Holdings, not to exceed, at any one time outstanding, twice
the amount of Net Cash Proceeds received by the Guarantor after the Closing
Date from the issuance and sale of its Capital Stock (other than Redeemable
Stock); provided that such Indebtedness does not mature prior to the Stated
Maturity of the New Notes and has an Average Life longer than the New
Notes; (vi) Strategic Investor Subordinated Indebtedness; (vii)
Indebtedness of the Guarantor or Holdings, to the extent the proceeds
thereof are immediately used after the Incurrence thereof to purchase New
Notes, 13 1/2% Notes and/or 12 1/2% Notes tendered in an Offer to Purchase
or an offer to purchase, as the case may be, made as a result of a Change
of Control or a change of control, as the case may be; (viii) Indebtedness
of any Restricted Subsidiary of the Guarantor Incurred pursuant to any
credit agreement (including equipment leasing or financing agreements) of
such Restricted Subsidiary in effect on August 8, 1995 (or any agreement
refinancing Indebtedness under such credit agreement), up to the amount of
the commitment under such credit agreement on August 8, 1995; (ix)
Indebtedness of the Guarantor or Holdings, in an amount not to exceed $100
million at any one time outstanding, consisting of Capitalized Lease
Obligations with respect to assets that are used or useful in the
telecommunications business of the Guarantor or its Restricted
Subsidiaries; (x) Indebtedness Incurred to defease the New Notes; (xi)
Indebtedness of any Person that becomes a Restricted Subsidiary of the
Guarantor after March 31, 1996, which Indebtedness exists or for which
there is a commitment to lend at the time such Person becomes a Restricted
Subsidiary and subsequent Incurrences thereof ("Acquired Indebtedness"), in
an accreted amount not to exceed $50 million at any one time outstanding in
the aggregate for all such Restricted Subsidiaries; provided that such
Acquired Indebtedness does not exceed 65% of the consideration (calculated
by including the Acquired Indebtedness as a part of such consideration) for
the acquisition of such Person; (xii) Indebtedness of the Guarantor or
Holdings, in an amount not to exceed $30 million at any one time
outstanding, consisting of letters of credit and similar arrangements used
to support obligations of the Guarantor or any of its Restricted
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Subsidiaries with respect to the acquisition of (by purchase, lease or
otherwise), construction of, or improvements on, assets that will be used
or useful in the telecommunications business of the Guarantor or its
Restricted Subsidiaries; and (xiii) Indebtedness Incurred to finance the
cost (including the cost of design, development, construction, installation
or integration) of assets, equipment or inventory used or useful in the
telecommunications business of the Guarantor or any of its Restricted
Subsidiaries that is acquired by the Guarantor or any of its Restricted
Subsidiaries after the Closing Date.
(b) For purposes of determining any particular amount of Indebtedness
under this "Limitation on Indebtedness" covenant, Guarantees, Liens or
obligations with respect to letters of credit supporting Indebtedness
otherwise included in the determination of such particular amount shall not
be included. For purposes of determining compliance with this "Limitation
on Indebtedness" covenant, in the event that an item of Indebtedness meets
the criteria of more than one of the types of Indebtedness described in the
above clauses, Holdings, in its sole discretion, shall classify such item
of Indebtedness and only be required to include the amount and type of such
Indebtedness in one of such clauses.
Limitation on Restricted Payments
So long as any of the New Notes are outstanding, the Guarantor will
not, and will not permit any Restricted Subsidiary to, directly or
indirectly, (i) declare or pay any dividend or make any distribution on its
Capital Stock held by Persons other than the Guarantor or any of its
Restricted Subsidiaries (other than dividends or distributions payable
solely in shares of its or such Restricted Subsidiary's Capital Stock
(other than Redeemable Stock) of the same class held by such holders or in
options, warrants or other rights to acquire such shares of Capital Stock
and other than pro rata dividends or distributions on Common Stock of
Restricted Subsidiaries), (ii) purchase, redeem, retire or otherwise
acquire for value any shares of Capital Stock of the Guarantor or any
Restricted Subsidiary (including options, warrants or other rights to
acquire such shares of Capital Stock) held by Persons other than the
Guarantor or any of its Wholly Owned Restricted Subsidiaries (except for
Capital Stock of ChoiceCom, MTN, StarCom, Ohio LINX, FOTI and Zycom to the
extent the consideration therefor consists solely of Common Stock (other
than Redeemable Stock) of the Guarantor transferred in compliance with the
Securities Act), (iii) make any voluntary or optional principal payment, or
voluntary or optional redemption, repurchase, defeasance or other
acquisition or retirement for value, of Indebtedness of Holdings or the
Guarantor that is subordinated in right of payment to the New Notes or the
Note Guarantee, as the case may be, or (iv) make any Investment, other than
a Permitted Investment, in any Person (such payments or any other actions
described in clauses (i) through (iv) being collectively "Restricted
Payments") if, at the time of, and after giving effect to, the proposed
Restricted Payment: (A) a Default or Event of Default shall have occurred
and be continuing, (B) the Guarantor could not Incur at least $1.00 of
Indebtedness under the first paragraph of the "Limitation on Indebtedness"
covenant or (C) the aggregate amount expended for all Restricted Payments
(the amount so expended, if other than in cash, to be determined in good
faith by the Board of Directors, whose determination shall be conclusive
and evidenced by a Board Resolution) after the date of the Senior Discount
Notes Indenture shall exceed the sum of (1) 50% of the aggregate amount of
the Adjusted Consolidated Net Income (or, if the Adjusted Consolidated Net
Income is a loss, minus 100% of such amount) (determined by excluding
income resulting from transfers of assets by the Guarantor or a Restricted
Subsidiary to an Unrestricted Subsidiary) accrued on a cumulative basis
during the period (taken as one accounting period) beginning on the first
day of the fiscal quarter immediately following the Closing Date and ending
on the last day of the last fiscal quarter preceding the Transaction Date
for which reports have been filed pursuant to the "Commission Reports and
Reports to Holders" covenant plus (2) the aggregate Net Cash Proceeds
received by the Guarantor after the Closing Date from the issuance and sale
permitted by the Senior Discount Notes Indenture of its Capital Stock
(other than Redeemable Stock) to a Person who is not a Subsidiary of the
Guarantor, or from the issuance to a Person who is not a Subsidiary of the
Guarantor of any options, warrants or other rights to acquire Capital Stock
of the Guarantor (in each case, exclusive of any Redeemable Stock or any
options, warrants or other rights that are redeemable at the option of the
holder, or are required to be redeemed, prior to the Stated Maturity of the
New Notes) plus (3) an amount equal to the net reduction in Investments
(other than reductions in Permitted Investments) in any Person resulting
from payments of interest on Indebtedness, dividends, repayments of loans
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or advances, or other transfers of assets, in each case to the Guarantor or
any Restricted Subsidiary (except to the extent any such payment is
included in the calculation of Adjusted Consolidated Net Income), or from
redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries
(valued in each case as provided in the definition of "Investments"), not
to exceed the amount of Investments previously made by the Guarantor and
its Restricted Subsidiaries in such Person.
The foregoing provision shall not be violated by reason of: (i) the
payment of any dividend within 60 days after the date of declaration
thereof if, at said date of declaration, such payment would comply with the
foregoing paragraph; (ii) the redemption, repurchase, defeasance or other
acquisition or retirement for value of Indebtedness that is subordinated in
right of payment to the New Notes or the Note Guarantee, as the case may
be, including premium, if any, and accrued and unpaid interest, with the
proceeds of, or in exchange for, Indebtedness Incurred under clause (iii)
of the second paragraph of the "Limitation on Indebtedness" covenant; (iii)
the repurchase, redemption or other acquisition of Capital Stock of the
Guarantor or Holdings (or options, warrants or other rights to acquire such
Capital Stock) and with respect to any preferred stock of Holdings, the
payment of accrued dividends thereon in exchange for, or out of the
proceeds of a substantially concurrent issuance or sale of, shares of
Capital Stock (other than Redeemable Stock) of the Guarantor or Holdings;
provided that the redemption of any preferred stock and the payment of
accrued dividends thereon pursuant to any mandatory redemption feature
thereof and any redemption of any other Capital Stock and with respect to
any preferred stock, the payment of accrued dividends thereon (or options,
warrants or other rights to acquire such Capital Stock) shall be deemed to
be "substantially concurrent" with such issuance and sale if the required
notice with respect to such redemption is irrevocably given by a date which
is no later than five Business Days after receipt of the proceeds of such
issuance and sale and such redemption and payment is consummated within the
period provided for in the documents providing for the redemption of such
preferred stock or the documents governing the redemption of such other
Capital Stock, as the case may be; (iv) the acquisition of Indebtedness of
Holdings or the Guarantor which is subordinated in right of payment to the
New Notes or the Note Guarantee, as the case may be, in exchange for, or
out of the proceeds of, a substantially concurrent offering of, shares of
the Capital Stock of the Guarantor (other than Redeemable Stock); (v)
payments or distributions, in the nature of satisfaction of dissenters'
rights, pursuant to or in connection with a consolidation, merger or
transfer of assets that complies with the provisions of the Senior Discount
Notes Indenture applicable to mergers, consolidations and transfers of all
or substantially all of the property and assets of Holdings or the
Guarantor; (vi) Investments, not to exceed $10 million in the aggregate,
each evidenced by a senior promissory note payable to Holdings that
provides that it will become due and payable prior to (or, in the case of
acceleration, concurrently with) any required repayment (including pursuant
to an Offer to Purchase in connection with a Change of Control) of the New
Notes; (vii) Investments, not to exceed $5 million in the aggregate, that
meet the requirements of clause (vi) above; provided that the Board of
Directors of the Guarantor shall have determined, in good faith, that each
such Investment under this clause (vii) will enable the Guarantor, Holdings
or one of their Restricted Subsidiaries to obtain additional business that
it might not be able to obtain without the making of such Investment;
(viii) with respect to preferred stock permitted to be issued and sold
under the "Limitation on the Issuance of Capital Stock of Restricted
Subsidiaries" covenant, the payment (A) of dividends on such preferred
stock in additional shares of preferred stock and (B) of cash dividends on
such preferred stock and accrued interest on unpaid dividends, in each case
after May 1, 2001; (ix) the repurchase, in the event of a Change of
Control, of preferred stock of Holdings or the Guarantor and Indebtedness
of Holdings or the Guarantor into which such preferred stock has been
exchanged; provided that prior to repurchasing such preferred stock or
Indebtedness, Holdings or the Guarantor, as the case may be, shall have
made a Change of Control Offer to repurchase the New Notes in accordance
with the terms of the Senior Discount Notes Indenture (and an offer to
repurchase other Indebtedness, if required by the terms thereof, in
accordance with the indenture or other document governing such other
Indebtedness) and shall have accepted and paid for any New Notes (and other
Indebtedness) properly tendered in connection with such Change of Control
Offer for the New Notes or change of control offer for such other
Indebtedness; and (x) the issuance of Indebtedness permitted to be issued
under the Senior Discount Notes Indenture in exchange for preferred stock;
provided that the Incurrence of such Indebtedness complies with the
"Limitation on Indebtedness" covenant; provided that, except in the case of
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clauses (i) and (iii), no Default or Event of Default shall have occurred
and be continuing or occur as a consequence of the actions or payments set
forth therein.
Each Restricted Payment permitted pursuant to the preceding paragraph
(other than the Restricted Payment referred to in clauses (ii), (viii)(A)
and (x) thereof), and the Net Cash Proceeds from any issuance of Capital
Stock referred to in clause (iii) or (iv) shall be included in calculating
whether the conditions of clause (C) of the first paragraph of this
"Limitation on Restricted Payments" covenant have been met with respect to
any subsequent Restricted Payments. Notwithstanding the foregoing, in the
event the proceeds of an issuance of Capital Stock of the Guarantor are
used for the redemption, repurchase or other acquisition of the New Notes,
or Indebtedness that is pari passu with the New Notes, then the Net Cash
Proceeds of such issuance shall be included in clause (C) of the first
paragraph of this "Limitation on Restricted Payments" covenant only to the
extent such proceeds are not used for such redemption, repurchase or other
acquisition of such Indebtedness.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
So long as any of the New Notes are outstanding, the Guarantor will
not, and will not permit any Restricted Subsidiary to, create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction of any kind on the ability of any Restricted Subsidiary to (i)
pay dividends or make any other distributions permitted by applicable law
on any Capital Stock of such Restricted Subsidiary owned by the Guarantor
or any other Restricted Subsidiary, (ii) pay any Indebtedness owed to the
Guarantor or any other Restricted Subsidiary, (iii) make loans or advances
to the Guarantor or any other Restricted Subsidiary or (iv) transfer any of
its property or assets to the Guarantor or any other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Closing Date in the Senior Discount Notes
Indenture or any other agreement in effect on the Closing Date, and any
extensions, refinancings, renewals or replacements of such agreements;
provided that the encumbrances and restrictions in any such extensions,
refinancings, renewals or replacements are no less favorable in any
material respect to the Holders than those encumbrances or restrictions
that are then in effect and that are being extended, refinanced, renewed or
replaced; (ii) existing under or by reason of applicable law; (iii)
existing with respect to any Person or the property or assets of such
Person acquired by the Guarantor or any Restricted Subsidiary, existing at
the time of such acquisition and not incurred in contemplation thereof,
which encumbrances or restrictions are not applicable to any Person or the
property or assets of any Person other than such Person or the property or
assets of such Person so acquired; (iv) in the case of clause (iv) of the
first paragraph of this "Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries" covenant, (A) that restrict
in a customary manner the subletting, assignment or transfer of any
property or asset that is a lease, license, conveyance or contract or
similar property or asset, (B) existing by virtue of any transfer of,
agreement to transfer, option or right with respect to, or Lien on, any
property or assets of the Guarantor or any Restricted Subsidiary not
otherwise prohibited by the Senior Discount Notes Indenture or (C) arising
or agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate, detract
from the value of property or assets of the Guarantor or any Restricted
Subsidiary in any manner material to the Guarantor or any Restricted
Subsidiary; (v) with respect to a Restricted Subsidiary and imposed
pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock of, or
property and assets of, such Restricted Subsidiary; or (vi) imposed
pursuant to preferred stock of Holdings issued under clause (vi) of the
"Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries" covenant, or exchange debentures or exchange notes of
Holdings issued in exchange therefor; provided that such restrictions (A)
may include a prohibition (x) on payments on Capital Stock upon
liquidation, winding-up and dissolution of Holdings and (y) on the payment
of dividends on and the making of any distribution on, or the purchase,
redemption, retirement or other acquisition for value of Capital Stock of
Holdings if dividends or other amounts on such preferred stock are unpaid
and (B) any restrictions imposed pursuant to preferred stock of Holdings
other than pursuant to clause (A) shall be no more restrictive than the
restrictions contained in the Senior Discount Notes Indenture (assuming
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that references to the Guarantor in the Senior Discount Notes Indenture
were replaced with references to Holdings). Nothing contained in this
"Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries" covenant shall prevent the Guarantor or any Restricted
Subsidiary from (1) creating, incurring, assuming or suffering to exist any
Liens otherwise permitted in the "Limitation on Liens" covenant or (2)
restricting the sale or other disposition of property or assets of the
Guarantor or any of its Restricted Subsidiaries that secure Indebtedness of
the Guarantor or any of its Restricted Subsidiaries.
Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries
Under the terms of the Senior Discount Notes Indenture, the Guarantor
will not sell, and will not permit any Restricted Subsidiary, directly or
indirectly, to issue or sell, any shares of Capital Stock of a Restricted
Subsidiary (including options, warrants or other rights to purchase shares
of such Capital Stock) except (i) to the Guarantor or a Wholly Owned
Restricted Subsidiary; (ii) issuances or sales to foreign nationals of
shares of Capital Stock of foreign Restricted Subsidiaries, to the extent
required by applicable law; (iii) if, immediately after giving effect to
such issuance or sale, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary; (iv) with respect to Common Stock of
ChoiceCom, MTN, StarCom and Zycom; provided that the proceeds of any such
sale under clause (iv) shall be applied in accordance with clause (A) or
(B) of the first paragraph of the "Limitation on Asset Sales" covenant
described below; (v) with respect to Common Stock of FOTI; provided that
FOTI shall not retain any net proceeds from such sales or issuances in
excess of $10 million in the aggregate and any net proceeds in excess of
such $10 million shall be received by, or paid promptly by FOTI to, the
Guarantor, Holdings or any Wholly Owned Restricted Subsidiary of the
Guarantor; and (vi) with respect to (A) preferred stock of Holdings having
an initial liquidation preference of up to $250 million and (B) any
preferred stock of Holdings issued as dividends on such preferred stock;
provided that such preferred stock does not require the payment of cash
dividends prior to May 1, 2001.
Limitation on Issuances of Guarantees by Restricted Subsidiaries
The Guarantor will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of Holdings or any Indebtedness
of the Guarantor ("Guaranteed Indebtedness"), unless (i) such Restricted
Subsidiary simultaneously executes and delivers a supplemental indenture to
the Senior Discount Notes Indenture providing for a Guarantee (a
"Subsidiary Guarantee") of payment of the New Notes by such Restricted
Subsidiary and (ii) such Restricted Subsidiary waives and will not in any
manner whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the
Guarantor, Holdings or any other Restricted Subsidiary as a result of any
payment by such Restricted Subsidiary under its Subsidiary Guarantee;
provided that this paragraph shall not be applicable to any Guarantee of
any Restricted Subsidiary that (x) existed at the time such Person became a
Restricted Subsidiary and (y) was not Incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary. If the
Guaranteed Indebtedness is (A) pari passu with the New Notes or the Note
Guarantee, then the Guarantee of such Guaranteed Indebtedness shall be pari
passu with, or subordinated to, the Subsidiary Guarantee or (B)
subordinated to the New Notes or the Note Guarantee, then the Guarantee of
such Guaranteed Indebtedness shall be subordinated to the Subsidiary
Guarantee at least to the extent that the Guaranteed Indebtedness is
subordinated to the New Notes or the Note Guarantee, as the case may be.
Notwithstanding the foregoing, any Subsidiary Guarantee by a
Restricted Subsidiary shall provide by its terms that it shall be
automatically and unconditionally released and discharged upon (i) any
sale, exchange or transfer, to any Person not an Affiliate of the Guarantor
of all of Holdings' and each Restricted Subsidiary's Capital Stock in, or
all or substantially all the assets of, such Restricted Subsidiary (which
sale, exchange or transfer is not prohibited by the Senior Discount Notes
Indenture) or (ii) the release or discharge of the Guarantee which resulted
in the creation of such Subsidiary Guarantee, except a discharge or release
by or as a result of payment under such Guarantee.
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Limitation on Transactions with Shareholders and Affiliates
Under the terms of the Senior Discount Notes Indenture, the Guarantor
will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, enter into, renew or extend any transaction (including, without
limitation, the purchase, sale, lease or exchange of property or assets, or
the rendering of any service) with any holder (or any Affiliate of such
holder) of 5% or more of any class of Capital Stock of the Guarantor or
with any Affiliate of the Guarantor or any Restricted Subsidiary, except
upon fair and reasonable terms no less favorable to the Guarantor or such
Restricted Subsidiary than could be obtained, at the time of such
transaction or at the time of the execution of the agreement providing
therefor, in a comparable arm's-length transaction with a Person that is
not such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to (i)
transactions (A) approved by a majority of the disinterested members of the
Board of Directors or (B) for which the Guarantor or a Restricted
Subsidiary delivers to the Trustee a written opinion of a nationally
recognized investment banking firm stating that the transaction is fair to
the Guarantor or such Restricted Subsidiary from a financial point of view;
(ii) any transaction solely between the Guarantor and any of its Wholly
Owned Restricted Subsidiaries or solely between Wholly Owned Restricted
Subsidiaries; (iii) the payment of reasonable and customary regular fees to
directors of the Guarantor, Holdings or Holdings (Canada) who are not
employees of the Guarantor, Holdings or Holdings (Canada); (iv) any
payments or other transactions pursuant to any tax-sharing agreement
between the Guarantor and any other Person with which the Guarantor files a
consolidated tax return or with which the Guarantor is part of a
consolidated group for tax purposes; or (v) any Restricted Payments not
prohibited by the "Limitation on Restricted Payments" covenant.
Notwithstanding the foregoing, any transaction covered by the first
paragraph of this "Limitation on Transactions with Shareholders and
Affiliates" covenant and not covered by clauses (ii) through (iv) of this
paragraph, the aggregate amount of which exceeds $2 million in value, must
be approved or determined to be fair in the manner provided for in clause
(i)(A) or (B) above.
Limitation on Liens
Under the terms of the Senior Discount Notes Indenture, the Guarantor
will not, and will not permit any Restricted Subsidiary to, create, incur,
assume or suffer to exist any Lien on any of its assets or properties of
any character, or any shares of Capital Stock or Indebtedness of any
Restricted Subsidiary, without making effective provision for all of the
New Notes (or, in the case of a Lien on assets or properties of the
Guarantor, the Note Guarantee) and all other amounts due under the Senior
Discount Notes Indenture to be directly secured equally and ratably with
(or, if the obligation or liability to be secured by such Lien is
subordinated in right of payment to the New Notes or the Note Guarantee,
prior to) the obligation or liability secured by such Lien.
The foregoing limitation does not apply to (i) Liens existing on the
Closing Date; (ii) Liens granted after the Closing Date on any assets or
Capital Stock of Holdings (Canada), Holdings or any of their Restricted
Subsidiaries created in favor of the Holders; (iii) Liens with respect to
the assets of a Restricted Subsidiary granted by such Restricted Subsidiary
to the Guarantor or a Wholly Owned Restricted Subsidiary to secure
Indebtedness owing to the Guarantor or such other Restricted Subsidiary;
(iv) Liens securing Indebtedness which is Incurred to refinance secured
Indebtedness which is permitted to be Incurred under clause (iii) of the
second paragraph of the "Limitation on Indebtedness" covenant; provided
that such Liens do not extend to or cover any property or assets of the
Guarantor, Holdings or any Restricted Subsidiary other than the property or
assets securing the Indebtedness being refinanced; (v) Liens with respect
to assets or properties of any Person that becomes a Restricted Subsidiary
after the Closing Date; provided that such Liens do not extend to or cover
any assets or properties of the Guarantor or any of its Restricted
Subsidiaries other than the assets or properties of such Person subject to
such Lien on the date such Person becomes a Restricted Subsidiary; and
provided further that such Liens are not incurred in contemplation of, or
in connection with, such Person becoming a Restricted Subsidiary; (vi)
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Permitted Liens; or (vii) Liens, solely in favor of Acquired Indebtedness,
on Capital Stock of Persons that become Restricted Subsidiaries of the
Guarantor after the Closing Date.
Limitation on Sale-Leaseback Transactions
Under the terms of the Senior Discount Notes Indenture, the Guarantor
will not, and will not permit any Restricted Subsidiary to, enter into any
sale-leaseback transaction involving any of its assets or properties
whether now owned or hereafter acquired, whereby the Guarantor or a
Restricted Subsidiary sells or transfers such assets or properties and then
or thereafter leases such assets or properties or any part thereof or any
other assets or properties which the Guarantor or such Restricted
Subsidiary, as the case may be, intends to use for substantially the same
purpose or purposes as the assets or properties sold or transferred.
The foregoing restriction does not apply to any sale-leaseback
transaction if (i) the lease is for a period, including renewal rights, of
not in excess of three years; (ii) the lease secures or relates to
industrial revenue or pollution control bonds; (iii) the transaction is
between the Guarantor and any Wholly Owned Restricted Subsidiary or between
Wholly Owned Restricted Subsidiaries; or (iv) the Guarantor or such
Restricted Subsidiary, within six months after the sale or transfer of any
assets or properties is completed, applies an amount not less than the net
proceeds received from such sale in accordance with clause (A) or (B) of
the first paragraph of the "Limitation on Asset Sales" covenant described
below.
Limitation on Asset Sales
Under the terms of the Senior Discount Notes Indenture, the Guarantor
will not, and will not permit any Restricted Subsidiary to, consummate any
Asset Sale, unless (i) the consideration received by the Guarantor or such
Restricted Subsidiary is at least equal to the fair market value of the
assets sold or disposed of and (ii) at least 75% of the consideration
received consists of cash or Temporary Cash Investments. In the event and
to the extent that the Net Cash Proceeds received by the Guarantor or its
Restricted Subsidiaries from one or more Asset Sales occurring on or after
the Closing Date in any period of 12 consecutive months exceed 10% of
Adjusted Consolidated Net Tangible Assets (determined as of the date
closest to the commencement of such 12-month period for which a
consolidated balance sheet of Holdings and its Subsidiaries has been
prepared), then the Guarantor shall or shall cause the relevant Restricted
Subsidiary to (i) within six months after the date Net Cash Proceeds so
received exceed 10% of Adjusted Consolidated Net Tangible Assets (A) apply
an amount equal to such excess Net Cash Proceeds to permanently repay
unsubordinated Indebtedness of the Guarantor or Holdings, or Indebtedness
of any Restricted Subsidiary other than Holdings, in each case owing to a
Person other than the Guarantor or any of its Restricted Subsidiaries or
(B) invest an equal amount, or the amount not so applied pursuant to clause
(A) (or enter into a definitive agreement committing to so invest within
six months after the date of such agreement), in property or assets of a
nature or type or that are used in a business (or in a company having
property and assets of a nature or type, or engaged in a business) similar
or related to the nature or type of the property and assets of, or the
business of, the Guarantor and its Restricted Subsidiaries existing on the
date of such investment (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and evidenced by a Board
Resolution) and (ii) apply (no later than the end of the six-month period
referred to in clause (i)) such excess Net Cash Proceeds (to the extent not
applied pursuant to clause (i)) as provided in the following paragraphs of
this "Limitation on Asset Sales" covenant. The amount of such excess Net
Cash Proceeds required to be applied (or to be committed to be applied)
during such six-month period as set forth in clause (i) of the preceding
sentence and not applied as so required by the end of such period shall
constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to
this "Limitation on Asset Sales" covenant totals at least $10 million,
Holdings must commence, not later than the fifteenth Business Day of such
month, and consummate an Offer to Purchase from the Holders on a pro rata
basis an aggregate Accreted Value of New Notes equal to the Excess Proceeds
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on such date, at a purchase price equal to 101% of the Accreted Value of
the New Notes, plus, in each case, accrued interest (if any) to the date of
purchase.
Repurchase of New Notes upon a Change of Control
Holdings must commence, within 30 days of the occurrence of a Change
of Control, and consummate an Offer to Purchase for all New Notes then
outstanding, at a purchase price equal to 101% of the Accreted Value
thereof, plus accrued interest (if any) to the date of purchase. Prior to
the mailing of the notice to Holders commencing such Offer to Purchase, but
in any event within 30 days following any Change of Control, Holdings
covenants to (i) repay in full all indebtedness of Holdings that would
prohibit the repurchase of the New Notes pursuant to such Offer to Purchase
or (ii) obtain any requisite consents under instruments governing any such
indebtedness of Holdings to permit the repurchase of the New Notes.
Holdings shall first comply with the covenant in the preceding sentence
before it shall be required to repurchase New Notes pursuant to this
"Repurchase of New Notes upon a Change of Control" covenant.
If Holdings is unable to repay all of its indebtedness that would
prohibit repurchase of the New Notes or is unable to obtain the consents of
the holders of indebtedness, if any, of Holdings outstanding at the time of
a Change of Control whose consent would be so required to permit the
repurchase of New Notes, then Holdings will have breached such covenant.
This breach will constitute an Event of Default under the Senior Discount
Notes Indenture if it continues for a period of 30 consecutive days after
written notice is given to Holdings by the Trustee or the Holders of at
least 25% in aggregate principal amount of the New Notes outstanding. In
addition, the failure by Holdings to repurchase New Notes at the conclusion
of the Offer to Purchase will constitute an Event of Default without any
waiting period or notice requirements.
There can be no assurance that Holdings will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of New Notes) required by the foregoing covenant (as
well as may be contained in other securities of Holdings which might be
outstanding at the time). The above covenant requiring Holdings to
repurchase the New Notes will, unless the consents referred to above are
obtained, require Holdings to repay all indebtedness then outstanding which
by its terms would prohibit such New Note repurchase, either prior to or
concurrently with such New Note repurchase.
Commission Reports and Reports to Holders
Whether or not Holdings or the Guarantor is required to file reports
with the Commission, if any New Notes are outstanding Holdings and the
Guarantor shall file with the Commission all such reports and other
information as they would be required to file with the Commission by
Sections 13(a) or 15(d) under the Securities Exchange Act of 1934, as
amended. See "Available Information." Holdings shall supply the Trustee and
each Holder, or shall supply to the Trustee for forwarding to each Holder,
without cost to such Holder, copies of such reports or other information.
Events of Default
The following events will be defined as "Events of Default" in the
Senior Discount Notes Indenture: (a) default in the payment of principal of
(or premium, if any, on) any New Note when the same becomes due and payable
at maturity, upon acceleration, redemption or otherwise; (b) default in the
payment of interest on any New Note when the same becomes due and payable,
and such default continues for a period of 30 days; (c) Holdings or the
Guarantor defaults in the performance of or breaches any other covenant or
agreement of Holdings or the Guarantor in the Senior Discount Notes
Indenture or under the New Notes and such default or breach continues for a
period of 30 consecutive days after written notice to Holdings or the
Guarantor by the Trustee or the Holders of 25% or more in aggregate
principal amount at maturity of the New Notes; (d) there occurs with
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respect to any issue or issues of Indebtedness of Holdings, the Guarantor
or any Significant Subsidiary having an outstanding principal amount at
maturity of $10 million or more in the aggregate for all such issues of all
such Persons, whether such Indebtedness now exists or shall hereafter be
created, (I) an event of default that has caused the holder thereof to
declare such Indebtedness to be due and payable prior to its Stated
Maturity and such Indebtedness has not been discharged in full or such
acceleration has not been rescinded or annulled within 30 days of such
acceleration and/or (II) the failure to make a principal payment at the
final (but not any interim) fixed maturity and such defaulted payment shall
not have been made, waived or extended within 30 days of such payment
default; (e) any final judgment or order (not covered by insurance) for the
payment of money in excess of $10 million in the aggregate for all such
final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against Holdings, the Guarantor or any Significant Subsidiary and
shall not be paid or discharged, and there shall be any period of 30
consecutive days following entry of the final judgment or order that causes
the aggregate amount for all such final judgments or orders outstanding and
not paid or discharged against all such Persons to exceed $10 million
during which a stay of enforcement of such final judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect; (f) a
court having jurisdiction in the premises enters a decree or order for (A)
relief in respect of Holdings, the Guarantor or any Significant Subsidiary
in an involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, (B) appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of Holdings, the Guarantor or any Significant Subsidiary or for all or
substantially all of the property and assets of Holdings, the Guarantor or
any Significant Subsidiary or (C) the winding up or liquidation of the
affairs of Holdings, the Guarantor or any Significant Subsidiary and, in
each case, such decree or order shall remain unstayed and in effect for a
period of 30 consecutive days; or (g) Holdings, the Guarantor or any
Significant Subsidiary (A) commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in an involuntary case under
any such law, (B) consents to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of Holdings, the Guarantor or any Significant Subsidiary or for
all or substantially all of the property and assets of Holdings, the
Guarantor or any Significant Subsidiary or (C) effects any general
assignment for the benefit of creditors.
If an Event of Default (other than an Event of Default specified in
clause (f) or (g) above that occurs with respect to Holdings or the
Guarantor) occurs and is continuing under the Senior Discount Notes
Indenture, the Trustee or the Holders of at least 25% in aggregate
principal amount at maturity of the New Notes, then outstanding, by written
notice to Holdings (and to the Trustee if such notice is given by the
Holders), may, and the Trustee at the request of such Holders shall,
declare the Accreted Value of, premium, if any, and accrued interest, if
any, on the New Notes to be immediately due and payable. Upon a declaration
of acceleration, such Accreted Value of, premium, if any, and accrued
interest, if any, shall be immediately due and payable. In the event of a
declaration of acceleration because an Event of Default set forth in clause
(d) above has occurred and is continuing, such declaration of acceleration
shall be automatically rescinded and annulled if the event of default
triggering such Event of Default pursuant to clause (d) shall be remedied
or cured by Holdings, the Guarantor or the relevant Significant Subsidiary
or waived by the holders of the relevant Indebtedness within 60 days after
the declaration of acceleration with respect thereto. If an Event of
Default specified in clause (f) or (g) above occurs with respect to
Holdings or the Guarantor, the Accreted Value of, premium, if any, and
accrued interest, if any, on the New Notes then outstanding shall ipso
facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder. The Holders of at least
a majority in principal amount of the outstanding New Notes by written
notice to Holdings and to the Trustee, may waive all past defaults and
rescind and annul a declaration of acceleration and its consequences if,
among other things, (i) all existing Events of Default, other than the
nonpayment of the Accreted Value of, premium, if any, and accrued interest
on the New Notes that have become due solely by such declaration of
acceleration, have been cured or waived and (ii) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction.
For information as to the waiver of defaults, see "-Modification and
Waiver."
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The Holders of at least a majority in aggregate principal amount of
the outstanding New Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee. However, the
Trustee may refuse to follow any direction that conflicts with law or the
Senior Discount Notes Indenture, that may involve the Trustee in personal
liability, or that the Trustee determines in good faith may be unduly
prejudicial to the rights of Holders of New Notes not joining in the giving
of such direction and may take any other action it deems proper that is not
inconsistent with any such direction received from Holders of New Notes. A
Holder may not pursue any remedy with respect to the Senior Discount Notes
Indenture or the New Notes unless: (i) the Holder gives the Trustee written
notice of a continuing Event of Default; (ii) the Holders of at least 25%
in aggregate principal amount of outstanding New Notes make a written
request to the Trustee to pursue the remedy; (iii) such Holder or Holders
offer the Trustee indemnity satisfactory to the Trustee against any costs,
liability or expense; (iv) the Trustee does not comply with the request
within 60 days after receipt of the request and the offer of indemnity; and
(v) during such 60-day period, the Holders of a majority in aggregate
principal amount of the outstanding New Notes do not give the Trustee a
direction that is inconsistent with the request. However, such limitations
do not apply to the right of any Holder of a New Note to receive payment of
the principal of, premium, if any, or interest on, such New Note or to
bring suit for the enforcement of any such payment, on or after the due
date expressed in the New Notes, which right shall not be impaired or
affected without the consent of the Holder.
The Senior Discount Notes Indenture will require certain officers of
Holdings and the Guarantor to certify, on or before a date not more than 90
days after the end of each fiscal year of the Guarantor, that a review has
been conducted of the activities of Holdings, or the Guarantor, as the case
may be, and its Restricted Subsidiaries and Holdings', or the Guarantor's,
and its Restricted Subsidiaries' performance under the Senior Discount
Notes Indenture and that Holdings and the Guarantor have fulfilled all
obligations thereunder, or, if there has been a default in the fulfillment
of any such obligation, specifying each such default and the nature and
status thereof. Holdings and the Guarantor will also be obligated to notify
the Trustee of any default or defaults in the performance of any covenants
or agreements under the Senior Discount Notes Indenture.
Consolidation, Merger and Sale of Assets
Neither Holdings nor the Guarantor shall consolidate with, merge with
or into, or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets (as an entirety or
substantially an entirety in one transaction or a series of related
transactions) to, any Person (other than a consolidation or merger with or
into a Wholly Owned Restricted Subsidiary with a positive net worth;
provided that, in connection with any such merger or consolidation, no
consideration (other than Common Stock in the surviving Person, Holdings or
the Guarantor) shall be issued or distributed to the stockholders of
Holdings or the Guarantor) or permit any Person to merge with or into
Holdings or the Guarantor unless: (i) Holdings or the Guarantor shall be
the continuing Person, or the Person (if other than Holdings or the
Guarantor) formed by such consolidation or into which Holdings or the
Guarantor is merged or that acquired or leased such property and assets of
Holdings or the Guarantor shall be a corporation organized and validly
existing under the laws of the United States of America or any jurisdiction
thereof and shall expressly assume, by a supplemental indenture, executed
and delivered to the Trustee, all of the obligations of Holdings or the
Guarantor, as the case may be, under the Senior Discount Notes Indenture;
(ii) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing; (iii) immediately
after giving effect to such transaction on a pro forma basis, Holdings or
the Guarantor, as the case may be, or any Person becoming the successor
obligor of the New Notes or the Note Guarantee, as the case may be, shall
have a Consolidated Net Worth equal to or greater than the Consolidated Net
Worth of Holdings or the Guarantor, as the case may be, immediately prior
to such transaction; (iv) immediately after giving effect to such
transaction on a pro forma basis Holdings, or any Person becoming the
successor obligor of the New Notes, as the case may be, could Incur at
least $1.00 of Indebtedness under the first paragraph of the "Limitation on
Indebtedness" covenant; and (v) Holdings delivers to the Trustee an
Officers' Certificate (attaching the arithmetic computations to demonstrate
compliance with clauses (iii) and (iv) above) and an Opinion of Counsel, in
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each case stating that such consolidation, merger or transfer and such
supplemental indenture complies with this provision and that all conditions
precedent provided for herein relating to such transaction have been
complied with; provided, however, that clauses (iii) and (iv) above do not
apply if, in the good faith determination of the Board of Directors of the
Guarantor, whose determination shall be evidenced by a Board Resolution,
the principal purpose of such transaction is part of a plan to change the
jurisdiction of incorporation of Holdings or the Guarantor to a state of
the United States; and provided further that any such transaction shall not
have as one of its purposes the evasion of the foregoing limitations.
DEFEASANCE
Defeasance and Discharge. The Senior Discount Notes Indenture will
provide that Holdings will be deemed to have paid and will be discharged
from any and all obligations in respect of the New Notes on the 123rd day
after the deposit referred to below, and the provisions of the Senior
Discount Notes Indenture will no longer be in effect with respect to the
New Notes (except for, among other matters, certain obligations to register
the transfer or exchange of the New Notes, to replace stolen, lost or
mutilated New Notes, to maintain paying agencies and to hold monies for
payment in trust) if, among other things, (A) Holdings or the Guarantor has
deposited with the Trustee, in trust, money and/or U.S. Government
Obligations that through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of, premium, if any, and accrued interest
on the New Notes on the Stated Maturity of such payments in accordance with
the terms of the Senior Discount Notes Indenture and the New Notes, (B)
Holdings has delivered to the Trustee (i) either (x) an Opinion of Counsel
to the effect that Holders will not recognize income, gain or loss for
federal income tax purposes as a result of Holdings' exercise of its option
under this "Defeasance" provision and will be subject to federal income tax
on the same amount and in the same manner and at the same times as would
have been the case if such deposit, defeasance and discharge had not
occurred, which Opinion of Counsel must be based upon (and accompanied by a
copy of) a ruling of the Internal Revenue Service to the same effect unless
there has been a change in applicable federal income tax law after the date
of the Senior Discount Notes Indenture such that a ruling is no longer
required or (y) a ruling directed to the Trustee received from the Internal
Revenue Service to the same effect as the aforementioned Opinion of Counsel
and (ii) an Opinion of Counsel to the effect that the creation of the
defeasance trust does not violate the Investment Company Act of 1940 and
after the passage of 123 days following the deposit, the trust fund will
not be subject to the effect of Section 547 of the United States Bankruptcy
Code or Section 15 of the New York Debtor and Creditor Law, (C) immediately
after giving effect to such deposit on a pro forma basis, no Event of
Default, or event that after the giving of notice or lapse of time or both
would become an Event of Default, shall have occurred and be continuing on
the date of such deposit or during the period ending on the 123rd day after
the date of such deposit, and such deposit shall not result in a breach or
violation of, or constitute a default under, any other agreement or
instrument to which Holdings or the Guarantor is a party or by which
Holdings or the Guarantor is bound and (D) if at such time the New Notes
are listed on a national securities exchange, Holdings has delivered to the
Trustee an Opinion of Counsel to the effect that the New Notes will not be
delisted as a result of such deposit, defeasance and discharge.
Defeasance of Certain Covenants and Certain Events of Default. The
Senior Discount Notes Indenture further will provide that the provisions of
the Senior Discount Notes Indenture will no longer be in effect with
respect to clauses (iii) and (iv) under "-Consolidation, Merger and Sale of
Assets" and all the covenants described herein under "-Covenants," clause
(c) under "-Events of Default" with respect to such covenants and clauses
(iii) and (iv) under "-Consolidation, Merger and Sale of Assets," and
clauses (d) and (e) under "Events of Default" shall be deemed not to be
Events of Default, upon, among other things, the deposit with the Trustee,
in trust, of money and/or U.S. Government Obligations that through the
payment of interest and principal in respect thereof in accordance with
their terms will provide money in an amount sufficient to pay the principal
of, premium, if any, and accrued interest on the New Notes on the Stated
Maturity of such payments in accordance with the terms of the Senior
Discount Notes Indenture and the New Notes, the satisfaction of the
provisions described in clauses (B)(ii), (C) and (D) of the preceding
paragraph and the delivery by Holdings to the Trustee of an Opinion of
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Counsel to the effect that, among other things, the Holders will not
recognize income, gain or loss for federal income tax purposes as a result
of such deposit and defeasance of certain covenants and Events of Default
and will be subject to federal income tax on the same amount and in the
same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred.
Defeasance and Certain Other Events of Default. In the event Holdings
exercises its option to omit compliance with certain covenants and
provisions of the Senior Discount Notes Indenture with respect to the New
Notes as described in the immediately preceding paragraph and the New Notes
are declared due and payable because of the occurrence of an Event of
Default that remains applicable, the amount of money and/or U.S. Government
Obligations on deposit with the Trustee will be sufficient to pay amounts
due on the New Notes at the time of their Stated Maturity but may not be
sufficient to pay amounts due on the New Notes at the time of the
acceleration resulting from such Event of Default. However, Holdings will
remain liable for such payments and the Note Guarantee with respect to such
payments will remain in effect.
MODIFICATION AND WAIVER
Modifications and amendments of the Senior Discount Notes Indenture
may be made by Holdings, the Guarantor and the Trustee with the consent of
the Holders of not less than a majority in aggregate principal amount at
maturity of the outstanding New Notes; provided, however, that no such
modification or amendment may, without the consent of each Holder affected
thereby, (i) change the Stated Maturity of the principal of, or any
installment of interest on, any New Note, (ii) reduce the principal amount
at maturity of, or premium, if any, payable upon the redemption of, or the
rate of interest on, any New Note, (iii) adversely affect any right of
repayment at the option of any Holder of any New Note, (iv) change the
currency in which principal of, or premium, if any, or interest on, any New
Note is payable, (v) impair the right to institute suit for the enforcement
of any payment on or after the Stated Maturity (or, in the case of a
redemption, on or after the Redemption Date) of any New Note, (vi) waive a
default in the payment of principal of, premium, if any, or interest on the
New Notes, (vii) reduce the percentage in principal amount at maturity of
outstanding New Notes the consent of whose Holders is necessary for waiver
of compliance with certain provisions of the Senior Discount Notes
Indenture or for waiver of certain defaults or (viii) release the Guarantor
from its Note Guarantee.
NO PERSONAL LIABILITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS, DIRECTORS,
OR EMPLOYEES
The Senior Discount Notes Indenture provides that no recourse for the
payment of the principal of, premium, if any, or interest on any of the New
Notes or for any claim based thereon or otherwise in respect thereof, and
no recourse under or upon any obligation, covenant or agreement of Holdings
or the Guarantor in the Senior Discount Notes Indenture, or in any of the
New Notes or because of the creation of any Indebtedness represented
thereby, shall be had against any incorporator, shareholder, officer,
director, employee or controlling person of Holdings or the Guarantor or of
any successor Person thereof. Each Holder, by accepting the New Notes,
waives and releases all such liability.
CONCERNING THE TRUSTEE
The Senior Discount Notes Indenture provides that, except during the
continuance of a Default, the Trustee will not be liable, except for the
performance of such duties as are specifically set forth in such Senior
Discount Notes Indenture. If an Event of Default has occurred and is
continuing, the Trustee will use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
The Senior Discount Notes Indenture and provisions of the Trust
Indenture Act incorporated by reference therein contain limitations on the
rights of the Trustee, should it become a creditor of Holdings or the
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Guarantor, to obtain payment of claims in certain cases or to realize on
certain property received by it in respect of any such claims, as security
or otherwise. The Trustee is permitted to engage in other transactions;
provided, however, that if it acquires any conflicting interest, it must
eliminate such conflict or resign.
BOOK ENTRY; DELIVERY AND FORM
So long as The Depository Trust Company ("DTC"), or its nominee, is
the registered owner or holder of the Global New Note, DTC or such nominee,
as the case may be, will be considered the sole owner or holder of the New
Notes represented by such Global New Note for all purposes under the Senior
Discount Notes Indenture and the New Notes. No beneficial owner of an
interest in the Global New Note will be able to transfer that interest
except in accordance with DTC's applicable procedures, in addition to those
provided for under the Senior Discount Notes Indenture and, if applicable,
those of Euroclear System ("Euroclear") and Cedel Bank S.A. ("Cedel").
Payments of the principal of, and interest on, the Global New Notes
will be made to DTC or its nominee, as the case may be, as the registered
owner thereof. Holdings will have no responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global New Notes or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests.
Holdings expects that DTC or its nominee, upon receipt of any payment
of principal or interest in respect of the Global New Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global New
Note, as shown on the records of DTC or its nominee. Holdings also expects
that payments by participants to owners of beneficial interest in such
Global New Note held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities
held for the accounts of customers registered in the names of nominees for
such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in the ordinary
way in accordance with DTC rules. Transfers between participants in
Euroclear and Cedel will be effected in the ordinary way in accordance with
their respective rules and operating procedures.
Holdings understands that DTC will take any action permitted to be
taken by a holder of New Notes (including the presentation of New Notes for
exchange as described below) only at the direction of one or more
participants to whose account the DTC interests in the Global New Notes is
credited and only in respect of such portion of the aggregate principal
amount of New Notes as to which such participant or participants has or
have given such direction. However, if there is an Event of Default under
the New Notes, DTC will exchange the Global New Notes for Certificated New
Notes, which it will distribute to its participants.
Holdings understands: DTC is a limited purpose trust company organized
under the laws of the State of New York, a "banking organization" within
the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement
of securities transaction between participants through electronic book
entry changes in accounts of its participants, thereby eliminating the need
for physical movement of certificates and certain other organizations.
Indirect access to the DTC system is available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC, Euroclear and Cedel are expected to follow the foregoing
procedures in order to facilitate transfers of interest in the Global New
Notes among participants of DTC, Euroclear and Cedel, they are under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. Holdings will have no
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responsibility for the performance by DTC, Euroclear or Cedel or their
respective participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
Certificated New Notes. If DTC is at any time unwilling or unable to
continue as a depositary for the Global New Note and a successor depositary
is not appointed by Holdings within 90 days, Holdings will issue
Certificated New Notes in exchange for the Global New Note.
DESCRIPTION OF NEW PREFERRED STOCK
The New Preferred Stock will be issued pursuant to the Amended
Articles. The summary contained herein of certain provisions of the New
Preferred Stock does not purport to be complete and is qualified in its
entirety by reference to the provisions of the Amended Articles, a copy of
which is available from Holdings upon request. The definitions of certain
terms used in the Amended Articles and in the following summary are set
forth below. See "-Certain Definitions." References herein to "$" refers to
U.S. dollars.
GENERAL
Holdings is authorized to issue 1,000,000 shares of preferred stock,
without par value. On the date of this Prospectus, 266,647 shares of
preferred stock are outstanding. Holdings' Board of Directors has
authority, without further action by stockholders of Holdings (Canada) or
ICG, to authorize the issuance of classes of such preferred stock of
Holdings from time to time in one or more series, with such designations,
preferences and relative rights within the limits prescribed by the
Colorado Business Corporation Act (the "CBCA"), as may be determined by
Holdings' Board of Directors. The Board of Directors of Holdings has
authorized the issuance of up to 1,000,000 shares of Preferred Stock, which
consist of 150,000 shares of the 14 1/4% Preferred Stock, plus additional
shares of 14 1/4% Preferred Stock which may be used to pay dividends on the
14 1/4% Preferred Stock if Holdings elects to pay dividends in additional
shares of 14 1/4% Preferred Stock and the 100,000 shares of Preferred Stock
issued in the Private Offering, plus additional shares of Preferred Stock
which may be used to pay dividends on the Preferred Stock if Holdings
elects to pay dividends in additional shares of Preferred Stock. Holdings
will file the Amended Articles with the Secretary of State of Colorado as
required by Colorado law. See "-Exchange." The New Preferred Stock, when
issued by Holdings and paid for by the Placement Agent, will be fully paid
and non-assessable, and the holders thereof will not have any subscription
or preemptive rights related thereto. American Stock Transfer & Trust
Company, 40 Wall Street, 46th floor, New York, New York 10005, will be
transfer agent and registrar (the "Transfer Agent") for the New Preferred
Stock.
RANKING
The New Preferred Stock will, with respect to dividend distributions
and distributions upon the liquidation, winding-up and dissolution of
Holdings, rank (i) senior to all classes of common stock of Holdings and to
each other class of capital stock or series of preferred stock established
after the date of this Memorandum by Holdings' Board of Directors the terms
of which do not expressly provide that it ranks senior to or on a parity
with the New Preferred Stock as to dividend distributions and distributions
upon the liquidation, winding-up and dissolution of Holdings (collectively
referred to with the common stock of Holdings as "Junior Securities"); (ii)
on a parity with the 14 1/4% Preferred Stock and any class of capital stock
or series of preferred stock issued by Holdings established after the date
of this Memorandum by Holdings' Board of Directors, the terms of which
expressly provide that such class or series will rank on a parity with the
New Preferred Stock as to dividend distributions and distributions upon the
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liquidation, winding-up and dissolution of Holdings (collectively referred
to as "Parity Securities"); and (iii) subject to certain conditions
described below, junior to each class of capital stock or series of
preferred stock issued by Holdings established after the date of this
Memorandum by Holdings' Board of Directors, the terms of which expressly
provide that such class or series will rank senior to the New Preferred
Stock as to dividend distributions and distributions upon liquidation,
winding-up and dissolution of Holdings (collectively referred to as "Senior
Securities"). The New Preferred Stock will be subject to the issuance of
series of Junior Securities, Parity Securities and Senior Securities;
provided that Holdings may not issue any new class of Senior Securities
without the approval of the holders of at least a majority of the shares of
New Preferred Stock then outstanding, voting or consenting, as the case may
be, separately as one class, except that without the approval of holders of
the New Preferred Stock, Holdings may issue shares of Senior Securities (1)
in exchange for, or the proceeds of which are used to redeem or repurchase,
all, but not less than all, shares of New Preferred Stock then outstanding,
or (2) in exchange for, or the proceeds of which are used to repay, any
outstanding Indebtedness of Holdings.
DIVIDENDS
Holders of New Preferred Stock will be entitled to receive, when, as
and if declared by Holdings' Board of Directors, out of funds legally
available therefor, dividends on the New Preferred Stock, payable
quarterly. All dividends will be cumulative, whether or not earned or
declared, on a daily basis from the date of issuance of the New Preferred
Stock and will be payable quarterly in arrears on March 15, June 15,
September 15 and December 15 of each year, commencing on June 15, 1997. The
Amended Articles provide that on or before March 15, 2002, Holdings may, at
its option, pay dividends in cash or in additional fully paid and
non-assessable shares of New Preferred Stock having an aggregate
liquidation preference equal to the amount of such dividends. However, the
13 1/2% Notes Indenture, the 12 1/2% Notes Indenture and the Senior
Discount Notes Indenture contain limitations on Holdings' ability to pay
dividends in cash prior to May 1, 2001. The Amended Articles provide that
after March 15, 2002, dividends may be paid only in cash. Future agreements
of Holdings, Holdings (Canada) or ICG could restrict the payment of cash
dividends by Holdings. If any dividend (or portion thereof) payable on any
dividend payment date on or before March 15, 2002 is not declared or paid
in full in cash or in shares of New Preferred Stock as described above on
such dividend payment date, the amount of the accrued and unpaid dividend
will bear interest at the dividend rate on the New Preferred Stock,
compounding quarterly from such dividend payment date until paid in full.
If any dividend (or portion thereof) payable on any dividend payment date
after March 15, 2002 is not declared or paid in full in cash on such
dividend payment date, the amount of the accrued and unpaid dividend will
bear interest at the dividend rate on the New Preferred Stock, compounding
quarterly from such dividend payment date until paid in full.
No full dividends may be declared or paid or funds set apart for the
payment of dividends on any Junior Security or Parity Securities for any
period unless full cumulative dividends on the New Preferred Stock shall
have been or contemporaneously are declared and paid in full or declared
and, if payable in cash, a sum in cash set apart for such payment on the
New Preferred Stock. If full dividends are not so paid, the New Preferred
Stock will share dividends pro rata with the Parity Securities.
OPTIONAL REDEMPTION
The New Preferred Stock may be redeemed (subject to contractual and
other restrictions with respect thereto and to the legal availability of
funds therefor) at any time or, from time to time, on or after March 15,
2002, in whole or in part, at the option of Holdings, at the redemption
prices (expressed as a percentage of the liquidation preference thereof)
set forth below, plus an amount in cash equal to all accumulated and unpaid
dividends (including an amount in cash equal to a prorated dividend for the
period from the dividend payment date immediately prior to the redemption
date to the redemption date, subject to the right of holders of preferred
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stock on a record date to receive dividends on a dividend payment date) if
redeemed during the 12-month period beginning March 15 of each of the years
set forth below:
Year Percentage
---- ---------
2002 . . . . . . . 107.0000%
2003 . . . . . . . 104.6667%
2004 . . . . . . . 102.3333%
2005 and thereafter 100.0000%
In addition, on or prior to March 15, 2000, Holdings may, at its
option from time to time, redeem shares of New Preferred Stock having an
aggregate liquidation preference of up to 35% of the aggregate liquidation
preference of all shares of New Preferred Stock issued in the Private
Offering, at a redemption price equal to 114% of the liquidation preference
thereof (subject to the right of holders of New Preferred Stock on relevant
record dates to receive dividends due on relevant dividend payment dates),
plus an amount in cash equal to a prorated dividend for the period from the
dividend payment date immediately prior to the redemption date to the
redemption date, with proceeds of one or more Public Equity Offerings of
Common Stock of (A) Holdings or (B) ICG, provided that (i) with respect to
a Public Equity Offering referred to in clause (B) above, cash proceeds of
such Public Equity Offering in an amount sufficient to effect the
redemption of New Preferred Stock to be so redeemed are contributed by ICG
to Holdings prior to such redemption and used by Holdings to effect such
redemption and (ii) such redemption occurs within 180 days after
consummation of such Public Equity Offering.
No optional redemption may be authorized or made unless prior thereto
full unpaid cumulative dividends shall have been paid or a sum set apart
for such payment on the New Preferred Stock.
In the event of partial redemptions of New Preferred Stock, the shares
to be redeemed will be determined pro rata, except that Holdings may redeem
such shares held by any holder of fewer than 100 shares without regard to
such pro rata redemption requirement. The Senior Discount Notes Indenture,
the 12 1/2% Notes Indenture and the 13 1/2% Notes Indenture restrict the
ability of Holdings to redeem the New Preferred Stock, and future
agreements may contain similar provisions. See "Description of New Notes."
Notice of redemption shall be mailed by first class mail at least 30 but no
more than 60 days before the redemption date to each holder of New
Preferred Stock to be redeemed at its registered address. If any New
Preferred Stock is to be redeemed in part, the notice of redemption that
related to such New Preferred Stock shall state the portion of the
liquidation preference to be redeemed. New shares of New Preferred Stock
having an aggregate liquidation preference equal to the unredeemed portion
will be issued in the name of the holder thereof upon cancellation of the
original share of New Preferred Stock and, unless Holdings fails to pay the
redemption price on the redemption date, after the redemption date
dividends will cease to accrue on the New Preferred Stock called for
redemption.
MANDATORY REDEMPTION
The New Preferred Stock will be subject to mandatory redemption
(subject to the legal availability of funds therefor but without regard to
any contractual or other restriction with respect thereto) in whole on
March 15, 2008 at a price, payable in cash, equal to the liquidation
preference thereof, plus all accumulated and unpaid dividends to the date
of redemption. Future agreements of Holdings, Holdings (Canada) or ICG may
restrict or prohibit Holdings from redeeming the New Preferred Stock, but
Holdings will be required to redeem the New Preferred Stock on March 15,
2008, notwithstanding any such restriction.
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CHANGE OF CONTROL
Upon the occurrence of a Change of Control, Holdings will be required
(subject to any contractual and other restrictions with respect thereto and
to the legal availability of funds therefor) to make an offer (the "Change
of Control Offer") to each holder of New Preferred Stock to repurchase all
or any part of such holder's New Preferred Stock at a cash purchase price
equal to 101% of the liquidation preference thereof, plus an amount in cash
equal to all accumulated and unpaid dividends per share to the date of
purchase (including an amount in cash equal to a prorated dividend from the
dividend payment date immediately preceding the date of purchase to the
date of purchase). The Change of Control Offer must be made within 30 days
following a Change of Control, must remain open for at least 30 and not
more than 40 days and must comply with the requirements of Rule 14e-1 under
the Exchange Act and any other applicable securities laws and regulations.
Notwithstanding the foregoing, Holdings will not be required to make a
Change of Control Offer if any of the New Notes, 12 1/2% Notes or 13 1/2%
Notes are outstanding upon the occurrence of a Change of Control unless all
of the New Notes, 12 1/2% Notes and 13 1/2% Notes tendered pursuant to the
"Change of Control Offers" with respect thereto are repurchased as a result
of such Change of Control, in which case the date on which all New Notes,
12 1/2% Notes and 13 1/2% Notes (and any other Indebtedness or Senior
Securities of Holdings having provisions similar to Section 4.04(x) of the
Senior Discount Notes Indenture) are so repurchased will, under the Amended
Articles, be deemed to be the date on which such Change of Control shall
have occurred.
"Change of Control" means such time as (i) a "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of Voting Stock having more than 40% of the voting power of
the total Voting Stock of ICG on a fully diluted basis; (ii) individuals
who on the Closing Date constitute the Board of Directors of ICG (together
with any new directors whose election by the Board of Directors or whose
nomination for election by ICG's stockholders was approved by a vote of at
least a majority of the members of the Board of Directors then in office
who either were members of the Board of Directors on the Closing Date or
whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the members of the Board of
Directors then in office; or (iii) all of the Common Stock of Holdings is
not beneficially owned, directly or indirectly, by ICG.
None of the provisions in the Amended Articles relating to a purchase
upon a Change of Control can be waived by Holdings' Board of Directors.
Holdings could, in the future, enter into certain transactions, including
certain recapitalizations of Holdings, that would not constitute a Change
of Control, but would increase the amount of indebtedness outstanding at
such time. If a Change of Control were to occur, Holdings would be
obligated to offer to repurchase all of the New Notes, the 12 1/2% Notes
and the 13 1/2% Notes prior to making an offer to repurchase shares of New
Preferred Stock, and there can be no assurance that Holdings would have
sufficient funds to pay the purchase price for all shares of New Preferred
Stock that Holdings is required to purchase. In the event that Holdings
were required to purchase outstanding shares of New Preferred Stock
pursuant to a Change of Control Offer, Holdings expects that it would need
to seek third-party financing, to the extent it does not have available
funds, to meet its purchase obligations. However, there can be no assurance
that Holdings would be able to obtain such financing. In addition,
Holdings' ability to purchase the New Preferred Stock may be limited by
other then-existing agreements and by restrictions imposed by the CBCA.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or
winding-up of Holdings, holders of New Preferred Stock will be entitled to
be paid, out of the assets of Holdings available for distribution, $1,000
per share, plus an amount in cash equal to accumulated and unpaid dividends
thereon to the date fixed for liquidation, dissolution or winding-up
(including an amount equal to a prorated dividend for the period from the
last dividend payment date to the date fixed for liquidation, dissolution
or winding-up), before any distribution is made on any Junior Securities,
including, without limitation, Holdings Common Stock. If, upon any
voluntary or involuntary liquidation, dissolution or winding-up of
Holdings, the amounts payable with respect to the New Preferred Stock and
all other Parity Securities are not paid in full, the holders of the New
Preferred Stock and the Parity Securities will share equally and ratably in
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any distribution of assets of Holdings with respect to the New Preferred
Stock and Parity Securities, in proportion to the full liquidation
preference and accumulated and unpaid dividends to which each is entitled.
After payment of the full amount of the liquidation preferences and
accumulated and unpaid dividends to which they are entitled, the holders of
shares of New Preferred Stock will not be entitled to any further
participation in any distribution of assets of Holdings. However, a merger,
consolidation or sale of substantially all of Holdings' assets that
complies with the provisions described below under the "Mergers,
Consolidation and Sale of Assets" covenant shall be deemed not to be a
liquidation, dissolution or winding up of Holdings.
The Amended Articles do not contain any provision requiring funds to
be set aside to protect the liquidation preference of the New Preferred
Stock. The CBCA provides that no distribution to shareholders of a Colorado
corporation (including a dividend or a purchase, redemption or other
acquisition of shares, but not including the payment of dividends through
the issuance of capital stock), may be made if, after giving effect to such
distribution, (i) the corporation would not be able to pay its debts as
they become due in the usual course of business or (ii) the corporation's
total assets would be less than the sum of its total liabilities plus the
amount that would be needed, if the corporation were to be dissolved at the
time of the distribution, to satisfy the preferential rights upon
dissolution of shareholders whose preferential rights are superior to those
receiving the distribution. A corporation's board of directors may base its
determination that a distribution is not prohibited by the restriction
described in the foregoing sentence either on financial statements prepared
on the basis of accounting practices and principles that are reasonable
under the circumstances or on a fair valuation or other method that is
reasonable under the circumstances.
VOTING RIGHTS
Holders of the New Preferred Stock will have no voting rights with
respect to any matters except as provided by law or as set forth in the
Amended Articles. The Amended Articles provide that if (i) (a) dividends on
the New Preferred Stock are in arrears and have not been paid (or if, after
March 15, 2002, such dividends have not been paid in cash) for four
quarterly periods (whether or not consecutive), (b) Holdings fails to
discharge any redemption obligation with respect to the New Preferred
Stock, (c) a breach or violation by Holdings of the provisions described
below under "-Exchange" occurs, or Holdings fails to exchange Exchange
Debentures for the New Preferred Stock tendered for exchange on the
Exchange Date (as defined below), whether or not Holdings satisfies the
conditions to permit such exchange, (d) Holdings fails to make a Change of
Control Offer or cash payment with respect thereto if required by the
provisions set forth above under "-Change of Control," (e) a breach or
violation of the provisions described below under "-Certain Covenants"
occurs and is not remedied within 30 days after notice thereof to Holdings
by holders of 25% or more of the liquidation preference of the New
Preferred Stock then outstanding, or (f) a default occurs on the obligation
to pay principal of, interest on or any other payment obligation when due
(a "Payment Default") at final maturity, on one or more classes of
Indebtedness of Holdings or any Subsidiary of Holdings, whether such
Indebtedness exists on the Closing Date or is incurred thereafter, having
individually or in the aggregate an outstanding principal amount of $10
million or more, or any other Payment Default occurs on one or more such
classes of Indebtedness and such class or classes of Indebtedness are
declared due and payable prior to their respective maturities, and (ii) in
the case of clauses (e) and (f), such event continues for a period of 180
days or more, then the number of directors' constituting Holdings' Board of
Directors will be adjusted to permit the holders of the majority of the
then outstanding New Preferred Stock, voting separately as a class, to
elect two directors. Such voting rights and the term of office of such
elected directors will continue until such time as (i) all dividends in
arrears on the New Preferred Stock are paid in full (and, in the case of
dividends payable with respect to any period after March 15, 2002, are paid
in cash) and (ii) any failure, breach or default referred to in clause (b),
(c), (d), (e) or (f) is remedied, at which time the term of any directors
elected pursuant to the provisions of this paragraph shall terminate. For
the purpose of determining the number of quarterly periods for which
accrued dividends have not been paid, any accrued and unpaid dividend that
is subsequently paid shall not be treated as unpaid. Each such event
described in clauses (a) through (f) above is referred to herein as a
"Voting Rights Triggering Event." Within 15 days of the time Holdings
becomes aware of the occurrence of any default referred to in clause (f)
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above, Holdings shall give notice thereof to holders of the New Preferred
Stock at their addresses as they appear on the records of the Transfer
Agent.
The Amended Articles provide that upon the occurrence of a Voting
Rights Triggering Event, the number of directors constituting Holdings'
Board of Directors will be increased by two directors, whom the holders of
the New Preferred Stock will be entitled to elect. Whenever the right of
the holders of New Preferred Stock to elect directors shall cease, the
number of directors constituting Holdings' Board of Directors will be
restored to the number of directors constituting Holdings' Board of
Directors prior to the time or event which entitled the holders of New
Preferred Stock to elect directors.
Any vacancy occurring in the office of a director elected by holders
of the New Preferred Stock may be filled by the remaining director elected
by such holders unless and until such vacancy shall be filled by vote of
such holders.
The Amended Articles provide that, except as stated above under "-
Ranking," Holdings will not issue any class of Senior Securities without
the affirmative vote or consent of holders of at least a majority of the
shares of New Preferred Stock then outstanding, voting or consenting, as
the case may be, separately as one class. The Amended Articles also provide
that Holdings may not amend the Amended Articles so as to affect adversely
the specified rights, preferences, privileges or voting rights of holders
of shares of the New Preferred Stock or authorize the issuance of any
additional shares of New Preferred Stock (other than to pay dividends in
kind on New Preferred Stock), without the affirmative vote or consent of
the holders of at least a majority of the outstanding shares of New
Preferred Stock, voting or consenting, as the case may be, separately as
one class; provided, however, that the amendment of the provisions of the
Amended Articles so as to authorize or create, or to increase the
authorized amount of, any of Holdings' Junior Securities or to authorize
the issuance of or to authorize or create any Parity Security (up to the
amount of authorized preferred stock) shall not be deemed to affect
adversely the voting rights, rights, privileges, or preferences of the
holders of shares of New Preferred Stock. The holders of at least a
majority of the outstanding shares of New Preferred Stock, voting or
consenting, as the case may be, separately as one class, may also waive
compliance with any provision of the Amended Articles.
Under Colorado law, holders of New Preferred Stock will be entitled to
vote as a separate voting group upon a proposed amendment to the Amended
Articles that requires a shareholder vote, whether or not entitled to vote
thereon by the Amended Articles, if the amendment would: (i) increase or
decrease the aggregate number of authorized shares of preferred stock; (ii)
effect an exchange or reclassification of all or part of the shares of the
New Preferred Stock into shares of another class or series; (iii) effect an
exchange or reclassification, or create the right of exchange, of all or
part of the shares of another class or series into shares of New Preferred
Stock; (iv) change the designation, preferences, limitations or relative
rights of all or part of the shares of New Preferred Stock; (v) change the
shares of all or part of the New Preferred Stock into a different number of
shares of New Preferred Stock; (vi) create a new class of shares having
rights or preferences with respect to distributions or dissolution that are
prior, superior, or substantially equal to the New Preferred Stock; (vii)
increase the rights, preferences, or number of authorized shares of any
class that, after giving effect to the amendment, have rights or
preferences with respect to distributions or to dissolution that are prior,
superior, or substantially equal to the New Preferred Stock; or (viii)
cancel or otherwise affect rights to distributions or dividends that have
accumulated but have not yet been declared on all or part of the shares of
New Preferred Stock. Under Colorado law, if an amendment that entitles two
or more series of a class of shares to vote as separate voting groups would
affect those two or more series in the same or a substantially similar way,
the shares of all the series so affected are instead required to vote
together as a single voting group rather than as separate voting groups.
In general, except as otherwise provided in the Amended Articles, the
voting rights described in the foregoing paragraph will not apply to an
amendment to the Amended Articles that is approved by Holdings' Board of
Directors, without being subject to any requirement for shareholder action,
establishing the preferences, limitations, and relative rights of any class
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or series of Holdings preferred stock already authorized by the Amended
Articles at the time of such amendment. Under the Amended Articles,
Holdings' Board of Directors has the authority to authorize the issuance of
classes or series of preferred stock up to the 1,000,000 shares authorized
without further action by shareholders, including without any voting by
holders of New Preferred Stock under Colorado law as described in the
preceding paragraph. See "-General." Notwithstanding the foregoing, the
Amended Articles provide that Holdings will not authorize or issue any
class of Senior Securities without the affirmative vote of holders of a
majority of the shares of Preferred Stock then outstanding voting
separately as a class, except as described above under "-Ranking." See "-
Voting Rights."
CERTAIN COVENANTS
Incurrence of Indebtedness and Issuance of New Preferred Stock
(a) Under the terms of the Amended Articles, Holdings will not, and
will not permit any of its Restricted Subsidiaries to, Incur any
Indebtedness (other than the New Notes, the Exchange Debentures and
Indebtedness existing on the Closing Date) or issue any Redeemable Stock;
provided that Holdings may Incur Indebtedness or issue Redeemable Stock if,
after giving effect to the Incurrence of such Indebtedness or the issuance
of such Redeemable Stock and the receipt and application of the proceeds
therefrom, the Indebtedness to EBITDA Ratio would be greater than zero and
less than 5:1.
Notwithstanding the foregoing, Holdings and any Restricted Subsidiary
(except as specified below) may Incur each and all of the following: (i)
Indebtedness of Holdings or any Restricted Subsidiary or Redeemable Stock
of Holdings outstanding at any time, which Indebtedness or Redeemable Stock
generates gross proceeds to Holdings of up to $900 million, less (without
duplication) the gross proceeds of Indebtedness permanently repaid as
provided under the "Limitation on Asset Sales" covenant contained in the 13
1/2% Notes Indenture, the 12 1/2% Notes Indenture and the Senior Discount
Notes Indenture; (ii) Indebtedness to ICG, Holdings or any of Holdings'
Wholly Owned Restricted Subsidiaries; provided that any subsequent issuance
or transfer of any Capital Stock which results in any such Wholly Owned
Restricted Subsidiary ceasing to be a Wholly Owned Restricted Subsidiary or
any subsequent transfer of such Indebtedness (other than to ICG, Holdings
or another Wholly Owned Restricted Subsidiary) shall be deemed, in each
case, to constitute an Incurrence of such Indebtedness not permitted by
this clause (ii); (iii) Indebtedness or Redeemable Stock issued in exchange
for, or the net proceeds of which are used to refinance or refund, then
outstanding Indebtedness or Redeemable Stock, other than Indebtedness
Incurred or Redeemable Stock issued under clause (i), (ii), (v), (vi),
(viii), (ix), (x) or (xi) of this paragraph, and any refinancings thereof
in an amount not to exceed the amount so refinanced or refunded (plus
premiums, accrued interest, accrued dividends, fees and expenses); provided
that such new Indebtedness or Redeemable Stock, determined as of the date
of Incurrence of such new Indebtedness or issuance of Redeemable Stock,
does not mature prior to the Stated Maturity of the Indebtedness or have a
mandatory redemption date prior to the Redeemable Stock to be refinanced or
refunded, and the Average Life of such new Indebtedness is at least equal
to the remaining Average Life of the Indebtedness to be refinanced or
refunded; and provided further that in no event may Indebtedness or
Redeemable Stock of Holdings be refinanced by means of any Indebtedness or
Redeemable Stock of any Restricted Subsidiary of Holdings pursuant to this
clause (iii); (iv) Indebtedness (A) in respect of performance, surety or
appeal bonds provided in the ordinary course of business, (B) under
Currency Agreements and Interest Rate Agreements; provided that such
agreements do not increase the Indebtedness of the obligor outstanding at
any time other than as a result of fluctuations in foreign currency
exchange rates or interest rates or by reason of fees, indemnities and
compensation payable thereunder; and (C) arising from agreements providing
for indemnification, adjustment of purchase price or similar obligations,
or from Guarantees or letters of credit, surety bonds or performance bonds
securing any obligations of Holdings or any of its Restricted Subsidiaries
pursuant to such agreements, in any case Incurred in connection with the
disposition of any business, assets or Restricted Subsidiary of Holdings
(other than Guarantees of Indebtedness Incurred by any Person acquiring all
or any portion of such business, assets or Restricted Subsidiary of
Holdings for the purpose of financing such acquisition), in a principal
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amount at maturity not to exceed the gross proceeds actually received by
Holdings or any Restricted Subsidiary in connection with such disposition;
(v) Indebtedness or Redeemable Stock of Holdings, to the extent the
proceeds referred to below are contributed to Holdings, not to exceed, at
any one time outstanding, twice the amount of Net Cash Proceeds received by
ICG after the Closing Date from the issuance and sale of its Capital Stock
(other than Redeemable Stock); provided that such Indebtedness does not
mature prior to the final mandatory redemption date of the New Preferred
Stock; (vi) Strategic Investor Subordinated Indebtedness; (vii)
Indebtedness or Redeemable Stock of Holdings, to the extent the proceeds
thereof are immediately used after the Incurrence or issuance thereof to
purchase New Preferred Stock or preferred stock, as the case may be,
tendered in a Change of Control Offer or a change of control offer, as the
case may be; (viii) Indebtedness of any Restricted Subsidiary of Holdings
Incurred pursuant to any credit agreement of such Restricted Subsidiary in
effect on August 8, 1995 (or any agreement refinancing Indebtedness under
such credit agreement), up to the amount of the commitment under such
credit agreement (including equipment leasing or financing agreements) on
August 8, 1995; (ix) Indebtedness of Holdings, in an amount not to exceed
$100 million at any one time outstanding, consisting of Capitalized Lease
Obligations with respect to assets that are used or useful in the
telecommunications business of Holdings or its Restricted Subsidiaries; (x)
Indebtedness or Redeemable Stock of any Person that becomes a Restricted
Subsidiary of Holdings after the Closing Date, which Indebtedness exists
or, with respect to such Indebtedness for which there is a commitment to
lend, at the time such Person becomes a Restricted Subsidiary and, with
respect to such Indebtedness, the subsequent incurrence thereof ("Acquired
Indebtedness"), in an accreted amount not to exceed $50 million at any one
time outstanding in the aggregate for all such Restricted Subsidiaries;
provided that such Acquired Indebtedness does not exceed 65% of the
consideration (calculated by including such Acquired Indebtedness as a part
of such consideration) paid by Holdings and its Restricted Subsidiaries for
the acquisition of such Person; (xi) Indebtedness of Holdings, in an amount
not to exceed $30 million at any one time outstanding, consisting of
letters of credit and similar arrangements used to support obligations of
Holdings or any of its Restricted Subsidiaries with respect to the
acquisition of (by purchase, lease or otherwise), construction of, or
improvements on, assets that will be used or useful in the
telecommunications business of Holdings or its Restricted Subsidiaries; and
(xii) Indebtedness Incurred to finance the cost (including the cost of
design, development, construction, installation or integration) of assets,
equipment or inventory used or useful in the telecommunications business of
ICG or any of the Restricted Subsidiaries that is acquired by ICG or any of
its Restricted Subsidiaries after the Closing Date.
(b) For purposes of determining any particular amount of Indebtedness
under this "Incurrence of Indebtedness and Issuance of New Preferred Stock"
covenant, Guarantees, Liens or obligations with respect to letters of
credit supporting Indebtedness otherwise included in the determination of
such particular amount shall not be included. For purposes of determining
compliance with this "Incurrence of Indebtedness and Issuance of New
Preferred Stock" covenant, in the event that an item of Indebtedness or
Redeemable Stock meets the criteria of more than one of the types of
Indebtedness or Redeemable Stock described in the above clauses, Holdings,
in its sole discretion, shall classify such item of Indebtedness or
Redeemable Stock and only be required to include the amount and type of
such Indebtedness or Redeemable Stock in one of such clauses.
Limitation on Restricted Payments
So long as any shares of the New Preferred Stock are outstanding,
Holdings will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, (i) declare or pay any dividend or make any
distribution on Junior Securities held by Persons other than Holdings or
any of its Restricted Subsidiaries (other than dividends or distributions
payable solely in shares of its or such Restricted Subsidiary's Junior
Securities (other than Redeemable Stock) of the same class held by such
holders or in options, warrants or other rights to acquire such shares of
Junior Securities and other than pro rata dividends or distributions on
Common Stock of Restricted Subsidiaries); (ii) purchase, redeem, retire or
otherwise acquire for value any shares of Junior Securities of Holdings or
any Restricted Subsidiary (including options, warrants or other rights to
acquire such shares of Junior Securities) held by Persons other than
Holdings or any of its Wholly Owned Restricted Subsidiaries (except for
Junior Securities of ChoiceCom, MTN, StarCom, Ohio LINX, FOTI and Zycom to
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the extent the consideration therefor consists solely of common stock
(other than Redeemable Stock) of ICG or Junior Securities of Holdings, in
each case, transferred in compliance with the Securities Act); or (iii)
make any Investment, other than a Permitted Investment, in any Person (such
payments or any other actions described in clauses (i) through (iii) being
collectively "Restricted Payments") if, at the time of, and after giving
effect to, the proposed Restricted Payment: (A) an event referred to in
clauses (i)(a) through (i)(f) under "Voting Rights" shall have occurred and
be continuing, (B) Holdings could not Incur at least $1.00 of Indebtedness
under the first paragraph of the "Incurrence of Indebtedness and Issuance
of New Preferred Stock" covenant, (C) the aggregate amount expended for all
Restricted Payments (the amount so expended, if other than in cash, to be
determined in good faith by the Board of Directors, whose determination
shall be conclusive and evidenced by a Board Resolution) after the date of
the Amended Articles shall exceed the sum of (1) 50% of the aggregate
amount of the Adjusted Consolidated Net Income (or, if the Adjusted
Consolidated Net Income is a loss, minus 100% of such amount) (determined
by excluding income resulting from transfers of assets by Holdings or a
Restricted Subsidiary to an Unrestricted Subsidiary) accrued on a
cumulative basis during the period (taken as one accounting period)
beginning on the first day of the fiscal quarter immediately following the
Closing Date and ending on the last day of the last fiscal quarter
preceding the Transaction Date for which reports have been filed pursuant
to the "Reports" covenant plus (2) the aggregate Net Cash Proceeds received
by Holdings after the Closing Date (x) from the issuance and sale,
permitted by the Amended Articles, of Junior Securities (other than
Redeemable Stock) to a Person who is not a Subsidiary of Holdings, or from
the issuance to a Person who is not a Subsidiary of Holdings of any
options, warrants or other rights to acquire Junior Securities of Holdings
(in each case, exclusive of any Redeemable Stock or any options, warrants
or other rights that are redeemable at the option of the holder, or are
required to be redeemed, prior to the Stated Maturity of the New Preferred
Stock) or (y) as a capital contribution from ICG plus (3) an amount equal
to the net reduction in Investments (other than reductions in Permitted
Investments) in any Person resulting from payments of interest on
Indebtedness, dividends, repayments of loans or advances, or other
transfers of assets, in each case to Holdings or any Restricted Subsidiary
(except to the extent any such payment is included in the calculation of
Adjusted Consolidated Net Income), or from redesignations of Unrestricted
Subsidiaries as Restricted Subsidiaries (valued in each case as provided in
the definition of "Investments"), not to exceed the amount of Investments
previously made by Holdings and its Restricted Subsidiaries in such Person
or (D) dividends on the New Preferred Stock shall not have been paid in
full as provided in the Amended Articles.
The foregoing provision shall not be violated by reason of: (i) the
payment of any dividend within 60 days after the date of declaration
thereof if, at said date of declaration, such payment would comply with the
foregoing paragraph; (ii) the repurchase, redemption or other acquisition
of Junior Securities of Holdings (or options, warrants or other rights to
acquire such Junior Securities) and with respect to any Junior Securities,
the payment of accrued dividends thereon, in exchange for, or out of the
proceeds of a substantially concurrent issuance or sale of, shares of
Junior Securities (other than Redeemable Stock) of Holdings; provided that
the redemption of any preferred stock pursuant to any mandatory redemption
feature thereof and any redemption of any other Junior Securities and, in
each case, the payment of accrued dividends thereon (or options, warrants
or other rights to acquire such Junior Securities) and with respect to any
Junior Securities, the payment of accrued dividends thereon, shall be
deemed to be "substantially concurrent" with such issuance and sale if the
required notice with respect to such redemption is irrevocably given by a
date which is no later than five Business Days after receipt of the
proceeds of such issuance and sale and such redemption and payment is
consummated within the period provided for in the document governing such
preferred stock or the documents governing the redemption of such other
Junior Securities, as the case may be; (iii) payments or distributions, in
the nature of satisfaction of dissenters' rights, pursuant to or in
connection with a consolidation, merger or transfer of assets that complies
with the provisions of the Amended Articles applicable to mergers,
consolidations and transfers of all or substantially all of the property
and assets of Holdings; (iv) Investments, not to exceed $10 million in
aggregate, each evidenced by a senior promissory note payable to Holdings
that provides that it will become due and payable prior to any required
repurchase (including pursuant to an Offer to Purchase in connection with a
Change of Control) of the New Preferred Stock; (v) Investments, not to
exceed $5 million in the aggregate, that meet the requirements of clause
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(iv) above; provided that the Board of Directors of Holdings shall have
determined, in good faith, that each such Investment under this clause (v)
will enable Holdings or one of its Restricted Subsidiaries to obtain
additional business that it might not be able to obtain without the making
of such Investment; (vi) with respect to Junior Securities permitted to be
issued and sold by the "Limitation on Issuance and Sale of Capital Stock of
Restricted Subsidiaries" covenant, the payment (A) of dividends on such
Junior Securities in additional shares of Junior Securities and (B) of cash
dividends on such Junior Securities in an amount not to exceed the dividend
rate thereon and accrued interest on unpaid dividends, in each case after
May 1, 2001; (vii) the repurchase, in the event of a Change of Control, of
Junior Securities of Holdings and Indebtedness of Holdings into which such
Junior Securities have been exchanged; provided that prior to repurchasing
such Junior Securities or Indebtedness, Holdings shall have made a Change
of Control Offer to repurchase the shares of New Preferred Stock in
accordance with the terms of the Amended Articles (and an offer to
repurchase other Indebtedness, if required by the terms thereof, in
accordance with the indenture or other document governing such other
Indebtedness) and shall have accepted and paid for any shares of New
Preferred Stock (and other Indebtedness) properly tendered in connection
with such Change of Control Offer for the shares of New Preferred Stock or
change of control offer for such other Indebtedness; and (viii) the
issuance of Indebtedness permitted to be issued under the Amended Articles
in exchange for preferred stock; provided that the Incurrence of such
Indebtedness complies with the "Incurrence of Indebtedness and Issuance of
New Preferred Stock" covenant; provided that, except in the case of clause
(i), no Default or Event of Default shall have occurred and be continuing
or occur as a consequence of the actions or payments set forth therein.
Each Restricted Payment permitted pursuant to the preceding paragraph
(other than the Restricted Payments referred to in clauses (vi)(A) and
(viii) thereof), and the Net Cash Proceeds from any issuance of Junior
Securities referred to in clause (ii), shall be included in calculating
whether the conditions of clause (C) of the first paragraph of this
"Limitation on Restricted Payments" covenant have been met with respect to
any subsequent Restricted Payments. Notwithstanding the foregoing, in the
event the proceeds of an issuance of Junior Securities are used for the
redemption, repurchase or other acquisition of the New Preferred Stock, or
Parity Securities, then the Net Cash Proceeds of such issuance shall be
included in clause (C) of the first paragraph of this "Limitation on
Restricted Payments" covenant only to the extent such proceeds are not used
for such redemption, repurchase or other acquisition of New Preferred Stock
or Parity Securities.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
So long as any shares of New Preferred Stock are outstanding, Holdings
will not, and will not permit any Restricted Subsidiary to, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions permitted
by applicable law on any Capital Stock of such Restricted Subsidiary owned
by Holdings or any other Restricted Subsidiary, (ii) pay any Indebtedness
owed to Holdings or any other Restricted Subsidiary, (iii) make loans or
advances to Holdings or any other Restricted Subsidiary or (iv) transfer
any of its property or assets to Holdings or any other Restricted
Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Closing Date in any agreements in effect
on the Closing Date, and any extensions, refinancings, renewals or
replacements of such agreements; provided that the encumbrances and
restrictions in any such extensions, refinancings, renewals or replacements
are no less favorable in any material respect to the holders of the New
Preferred Stock than those encumbrances or restrictions that are then in
effect and that are being extended, refinanced, renewed or replaced; (ii)
existing under or by reason of applicable law; (iii) existing with respect
to any Person or the property or assets of such Person acquired by Holdings
or any Restricted Subsidiary, existing at the time of such acquisition and
not incurred in contemplation thereof, which encumbrances or restrictions
are not applicable to any Person or the property or assets of any Person
other than such Person or the property or assets of such Person so
acquired; (iv) in the case of clause (iv) of the first paragraph of this
"Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries" covenant, (A) that restrict in a customary manner the
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subletting, assignment or transfer of any property or asset that is a
lease, license, conveyance or contract or similar property or asset, (B)
existing by virtue of any transfer of, agreement to transfer, option or
right with respect to, or Lien on, any property or assets of Holdings or
any Restricted Subsidiary not otherwise prohibited by the Amended Articles
or (C) arising or agreed to in the ordinary course of business, not
relating to any Indebtedness, and that do not, individually or in the
aggregate, detract from the value of property or assets of Holdings or any
Restricted Subsidiary in any manner material to Holdings or any Restricted
Subsidiary; or (v) with respect to a Restricted Subsidiary and imposed
pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock of, or
property and assets of, such Restricted Subsidiary. Nothing contained in
this "Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries" covenant shall prevent Holdings or any Restricted
Subsidiary from (1) creating, incurring, assuming or suffering to exist any
Liens otherwise permitted in the "Limitation on Liens" covenant or (2)
restricting the sale or other disposition of property or assets of Holdings
or any of its Restricted Subsidiaries that secure Indebtedness of Holdings
or any of its Restricted Subsidiaries.
Limitation on Issuances and Sale of Capital Stock of Restricted
Subsidiaries
Under the terms of the Amended Articles, Holdings will not sell, and
will not permit any Restricted Subsidiary, directly or indirectly, to issue
or sell, any shares of Capital Stock of a Restricted Subsidiary (including
options, warrants or other rights to purchase shares of such Capital Stock)
except (i) to Holdings or a Wholly Owned Restricted Subsidiary; (ii)
issuances or sales to foreign nationals of shares of Capital Stock of
foreign Restricted Subsidiaries, to the extent required by applicable law;
(iii) if, immediately after giving effect to such issuance or sale, such
Restricted Subsidiary would no longer constitute a Restricted Subsidiary;
(iv) with respect to Common Stock of ChoiceCom, MTN, StarCom and Zycom;
provided that the proceeds of any such sale under clause (iv) shall be
reinvested in the business of Holdings and its Restricted Subsidiaries or
used to repay Indebtedness of Holdings or any of its Restricted
Subsidiaries or Senior Securities; and (v) with respect to Common Stock of
FOTI; provided that FOTI shall not retain any net proceeds from such sales
or issuances in excess of $10 million in the aggregate and any net proceeds
in excess of such $10 million shall be received by, or paid promptly by
FOTI to, Holdings or any Wholly Owned Restricted Subsidiary of Holdings.
Limitation on Transactions with Shareholders and Affiliates
Under the terms of the Amended Articles, Holdings will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter
into, renew or extend any transaction (including, without limitation, the
purchase, sale, lease or exchange of property or assets, or the rendering
of any service) with any holder (or any Affiliate of such holder) of 5% or
more of any class of Capital Stock of Holdings or with any Affiliate of
Holdings or any Restricted Subsidiary, except upon fair and reasonable
terms no less favorable to Holdings or such Restricted Subsidiary than
could be obtained, at the time of such transaction or at the time of the
execution of the agreement providing therefor, in a comparable arm's-length
transaction with a Person that is not such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to (i)
transactions (A) approved by a majority of the disinterested members of the
Board of Directors of Holdings or (B) for which Holdings or a Restricted
Subsidiary delivers to the Transfer Agent a written opinion of a nationally
recognized investment banking firm stating that the transaction is fair to
Holdings or such Restricted Subsidiary from a financial point of view; (ii)
any transaction solely between Holdings and any of its Wholly Owned
Restricted Subsidiaries or solely between Wholly Owned Restricted
Subsidiaries; (iii) the payment of reasonable and customary regular fees to
directors of Holdings who are not employees of Holdings; (iv) any payments
or other transactions pursuant to any tax-sharing agreement (or a similar
agreement that is not materially adverse to the interests of holders of the
New Preferred Stock) between Holdings and any other Person with which
Holdings files a consolidated tax return or with which Holdings is part of
a consolidated group for tax purposes; or (v) any Restricted Payments not
prohibited by the "Limitation on Restricted Payments" covenant.
Notwithstanding the foregoing, any transaction covered by the first
paragraph of this "Limitation on Transactions with Shareholders and
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Affiliates" covenant and not covered by clauses (ii) through (iv) of this
paragraph, the aggregate amount of which exceeds $2 million in value, must
be approved or determined to be fair in the manner provided for in clause
(i)(A) or (B) above.
Limitation on Liens
Under the terms of the Amended Articles, Holdings will not, and will
not permit any Restricted Subsidiary to, create, incur, assume or suffer to
exist any Lien on any of its assets or properties, now or hereafter
acquired, or any shares of Capital Stock of or Indebtedness of any
Restricted Subsidiary.
The foregoing limitation does not apply to (i) Liens existing on the
Closing Date; (ii) Liens granted after the Closing Date on any assets or
Capital Stock of Holdings or its Restricted Subsidiaries created in favor
of the holders of the New Preferred Stock; (iii) Liens with respect to the
assets of a Restricted Subsidiary granted by such Restricted Subsidiary to
Holdings or a Wholly Owned Restricted Subsidiary to secure Indebtedness
owing to Holdings or such other Restricted Subsidiary; (iv) Liens securing
Indebtedness which is Incurred to refinance secured Indebtedness which is
permitted to be Incurred under clause (iii) of the second paragraph of the
"Incurrence of Indebtedness and Issuance of New Preferred Stock" covenant;
provided that such Liens do not extend to or cover any property or assets
of Holdings or any Restricted Subsidiary other than the property or assets
securing the Indebtedness being refinanced; (v) Liens with respect to
assets or properties of any Person that becomes a Restricted Subsidiary
after the Closing Date; provided that such Liens do not extend to or cover
any assets or properties of Holdings or any of its Restricted Subsidiaries
other than the assets or properties of such Person subject to such Lien on
the date such Person becomes a Restricted Subsidiary; and provided further
that such Liens are not incurred in contemplation of, or in connection
with, such Person becoming a Restricted Subsidiary; (vi) Permitted Liens;
and (vii) Liens securing Indebtedness.
Merger, Consolidation and Sale of Assets
Holdings shall not consolidate with, merge with or into, or sell,
convey, transfer, lease or otherwise dispose of all or substantially all of
its property and assets (as an entirety or substantially an entirety in one
transaction or a series of related transactions) to, any Person (other than
a consolidation or merger with or into a Wholly Owned Restricted Subsidiary
with a positive net worth; provided that, in connection with any such
merger or consolidation, no consideration (other than Common Stock in the
surviving Person or Holdings) shall be issued or distributed to the
stockholders of Holdings) or permit any Person to merge with or into
Holdings unless: (i) Holdings shall be the continuing Person, or the Person
(if other than Holdings) formed by such consolidation or into which
Holdings is merged or that acquired or leased such property and assets of
Holdings shall be a corporation organized and validly existing under the
laws of the United States of America or any jurisdiction thereof and the
New Preferred Stock shall be converted into or exchanged for and shall
become shares of such successor company, having in respect of such
successor or resulting company substantially the same powers, preferences
and relative participating, optional or other special rights and the
qualifications, limitations or restrictions thereon that the New Preferred
Stock had immediately prior to such transaction; (ii) immediately after
giving effect to such transaction, no event referred to under clauses (a)
through (e) under "-Voting Rights" or any default, breach or violation that
would become such an event after the giving of notice, the passage of time
or both, shall have occurred and be continuing; (iii) immediately after
giving effect to such transaction on a pro forma basis, Holdings or any
Person becoming the successor issuer of the New Preferred Stock, as the
case may be, shall have a Consolidated Net Worth equal to or greater than
the Consolidated Net Worth of Holdings immediately prior to such
transaction; (iv) immediately after giving effect to such transaction on a
pro forma basis Holdings, or any Person becoming the successor issuer of
the New Preferred Stock, as the case may be, could Incur at least $1.00 of
Indebtedness under the first paragraph of the "Incurrence of Indebtedness
and Issuance of New Preferred Stock" covenant; and (v) Holdings delivers to
the Transfer Agent an Officers' Certificate (attaching the arithmetic
computations to demonstrate compliance with clauses (iii) and (iv) above)
and an Opinion of Counsel, in each case stating that such consolidation,
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merger or transfer complies with this provision and that all conditions
precedent provided for herein relating to such transaction have been
complied with; provided, however, that clauses (iii) and (iv) above do not
apply if, in the good faith determination of the Board of Directors of
Holdings, whose determination shall be evidenced by a Board Resolution, the
principal purpose of such transaction is part of a plan to change the
jurisdiction of incorporation of Holdings to a different state of the
United States; and provided further that any such transaction shall not
have as one of its purposes the evasion of the foregoing limitations.
Senior Subordinated Indebtedness
So long as any shares of New Preferred Stock are outstanding, Holdings
will not Incur any Indebtedness, other than the Exchange Debentures, that
is expressly made subordinated in right of payment to any Senior
Indebtedness (as defined in the Exchange Debenture Indenture) unless such
Indebtedness, by its terms and by the terms of any agreement or instrument
pursuant to which such Indebtedness is outstanding is expressly made pari
passu with, or subordinate in right of payment to, the Exchange Debentures
pursuant to provisions substantially similar to those contained in Article
Eleven of the Exchange Debenture Indenture; provided that the foregoing
limitations shall not apply to distinctions between categories of Senior
Indebtedness that exist by reason of any Liens or Guarantees arising or
created in respect of some but not all Senior Indebtedness.
Reports
So long as any shares of New Preferred Stock are outstanding, Holdings
shall file with the Commission the annual reports, quarterly reports and
the information, documents and other reports required to be filed by
Holdings with the Commission pursuant to Sections 13 or 15 of the Exchange
Act, whether or not Holdings has or is required to have a class of
securities registered under the Exchange Act, at the time it is or would be
required to file the same with the Commission and, within 15 days after
Holdings is or would be required to file such reports, information or
documents with the Commission.
EXCHANGE
Holdings may, at the sole option of the Board of Directors (subject to
the legal availability of funds therefor), exchange all, but not less than
all, of the outstanding shares of New Preferred Stock, including any shares
of New Preferred Stock issued as payment for dividends, into Exchange
Debentures at any time following the date on which such exchange is
permitted by the terms of the Senior Discount Notes Indenture, the 12 1/2%
Notes Indenture and the 13 1/2% Notes Indenture and the terms of all
then-existing Indebtedness of Holdings, and subject to the conditions set
forth in the next succeeding paragraph. Presently, the Exchange of the New
Preferred Stock for Exchange Debentures would be restricted by covenants in
such indentures relating to the incurrence of Indebtedness. There can be no
assurance that the conditions in such covenants for the exchange of New
Preferred Stock for Exchange Debentures will be satisfied or that the
exchange will occur or that future Indebtedness of Holdings would not also
restrict an exchange. See "Description of New Notes." In order to effect
such exchange, Holdings shall (a) if necessary to satisfy the condition set
forth in clause (B) in the following paragraph based upon the written
advice of counsel to Holdings, file a registration statement with the
Commission relating to the exchange, and (b) if a registration statement is
filed with the Commission pursuant to clause (a), use its best efforts to
cause such registration statement to be declared effective as soon as
practicable by the Commission unless the opinion referred to in clause (B)
in the following paragraph shall have been subsequently delivered.
Prior to initiating such exchange, Holdings shall certify, to the
satisfaction of the trustees under the 13 1/2% Notes Indenture, the 12 1/2%
Notes Indenture and the Senior Discount Notes Indenture, that such exchange
is permitted under such respective Indentures. Holdings shall also provide
such Trustees with an Officer's Certificate setting forth with specificity
the basis for Holdings' conclusion that such exchange is so permitted. In
order to effectuate such exchange, Holdings shall send a written notice of
exchange by mail to each holder of record of shares of New Preferred Stock,
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which notice shall state (i) that Holdings is exchanging the New Preferred
Stock into Exchange Debentures pursuant to the Amended Articles and (ii)
the date fixed for exchange (the "Exchange Date"), which date shall not be
less than 15 days nor more than 60 days following the date on which such
notice is mailed (except as provided in the last sentence of this
paragraph). On the Exchange Date, if the conditions set forth in clauses
(A) through (E) below are satisfied and if the exchange is then permitted
under the Senior Discount Notes Indenture, the 12 1/2% Notes Indenture and
the 13 1/2% Notes Indenture, Holdings shall issue Exchange Debentures in
exchange for the New Preferred Stock as provided in the next paragraph,
provided that on the Exchange Date: (A) there shall be legally available
funds sufficient therefor (including, without limitation, legally available
funds sufficient therefor under Section 7-106-401 (or any successor
provision) of the CBCA); (B) a registration statement relating to the
Exchange Debentures shall have been declared effective under the Securities
Act prior to such exchange and shall continue to be effective on the
Exchange Date or Holdings shall have obtained a written opinion of counsel
that an exemption from the registration requirements of the Securities Act
is available for such exchange and that upon receipt of such Exchange
Debentures pursuant to such exchange made in accordance with such
exemption, each holder of an Exchange Debenture that is not an Affiliate of
Holdings will not be subject to any restrictions imposed by the Securities
Act upon the resale of such Exchange Debenture, and such exemption is
relied upon by Holdings for such exchange; (C) the Exchange Debenture
Indenture and the trustee thereunder shall have been qualified under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"); (D)
immediately after giving effect to such exchange, no Default or Event of
Default (each as defined in the Exchange Debenture Indenture) would exist
under the Exchange Debenture Indenture; and (E) Holdings shall have
delivered to the Trustee under the Exchange Debenture Indenture a written
opinion of counsel, dated the date of exchange, regarding the satisfaction
of the conditions set forth in clauses (A), (B) and (C). In the event that
(i) the issuance of the Exchange Debentures is not permitted on the
Exchange Date or (ii) any of the conditions set forth in clause (A) through
(E) of the preceding sentence are not satisfied on the Exchange Date,
Holdings shall use its best efforts to satisfy such conditions and effect
such exchange as soon as practicable.
Upon any exchange pursuant to the preceding paragraph, the holders of
outstanding shares of New Preferred Stock will be entitled to receive a
principal amount of Exchange Debentures for shares of New Preferred Stock,
the liquidation preference of which, plus the amount of accumulated and
unpaid dividends (including a prorated dividend for the period from the
immediately preceding dividend payment date to the date of exchange) with
respect to which, equals such principal amount. The Exchange Debentures
will be issued in registered form, without coupons. Exchange Debentures
issued in exchange for New Preferred Stock will be in principal amounts of
$1,000 and integral multiples thereof to the extent practicable, and will
also be issued in principal amounts less than $1,000 so that each holder of
New Preferred Stock will receive certificates representing the entire
principal amount of Exchange Debentures to which its shares of New
Preferred Stock entitle it, provided that Holdings may, at the sole option
of the Board of Directors, subject to the restrictions in the Senior
Discount Notes Indenture, the 12 1/2% Notes Indenture and the 13 1/2% Notes
Indenture and any of its other then-existing Indebtedness, pay cash in lieu
of issuing an Exchange Debenture in a principal amount less than $1,000. On
and after the date of exchange, dividends will cease to accrue on the
outstanding shares of New Preferred Stock, and all rights of the holders of
New Preferred Stock (except the right to receive the Exchange Debentures,
an amount in cash, to the extent applicable, equal to the accrued and
unpaid dividends to the Exchange Date, and if Holdings so elects, cash in
lieu of any Exchange Debenture which is in an amount that is not an
integral multiple of $1,000) will terminate. The person entitled to receive
the Exchange Debentures issuable upon such exchange will be treated for all
purposes as the registered holder of such Exchange Debentures.
ICG and Holdings will comply with the provisions of Rule 13e-4
promulgated pursuant to the Exchange Act in connection with any exchange,
to the extent applicable.
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NEW PREFERRED STOCK BOOK ENTRY; DELIVERY AND FORM
So long as DTC, or its nominee, is the registered owner or holder of a
Global New Preferred Stock Certificate, DTC or such nominee, as the case
may be, will be considered the sole owner or holder of the New Preferred
Stock represented by such Global New Preferred Stock Certificate for all
purposes under the Amended Articles and the New Preferred Stock. No
beneficial owner of an interest in the Global New Preferred Stock
Certificate will be able to transfer that interest except in accordance
with DTC's applicable procedures, in addition to those provided for under
the Amended Articles.
Payments made with respect to the Global New Preferred Stock
Certificate will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. Holdings will have no responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests in the Global New Preferred Stock or for
maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
Holdings expects that DTC or its nominee, upon receipt of any payments
made with respect to the Global New Preferred Stock, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the amount of such Global New Preferred
Stock as shown on the records of DTC or its nominee. Holdings also expects
that payments by participants to owners of beneficial interest in such
Global New Preferred Stock held through such participants will be governed
by standing instructions and customary practices, as is now the case with
securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of
such participants.
Transfers between participants in DTC will be effected in the ordinary
way in accordance with DTC rules and will be settled in same-day funds.
The Company understands that DTC will take any action permitted to be
taken by a holder of New Preferred Stock (including the presentation of New
Preferred Stock for exchange as described below) only at the direction of
one or more participants to whose account the DTC interests in the Global
New Preferred Stock is credited and only in respect of such portion of the
aggregate liquidation preference of New Preferred Stock as to which such
participant or participants has or have given such direction.
The Company understands: DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement
of securities transaction between participants through electronic book
entry changes in accounts of its participants, thereby eliminating the need
for physical movement of certificates and certain other organizations.
Indirect access to the DTC system is available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC is expected to follow the foregoing procedures in order
to facilitate transfers of interest in the Global New Preferred Stock
Certificate among participants of DTC, it is under no obligation to perform
or continue to perform such procedures, and such procedures may be
discontinued at any time. The Company will have no responsibility for the
performance by DTC or its respective participants or indirect participants
of its respective obligations under the rules and procedures governing
their operations.
CERTIFICATED NEW PREFERRED STOCK
If DTC is at any time unwilling or unable to continue as a depositary
for the Global New Preferred Stock and a successor depositary is not
appointed by Holdings within 90 days, Holdings will issue Certificated New
Preferred Stock in exchange for the Global New Preferred Stock Certificate.
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CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Amended
Articles. Reference is made to the Amended Articles for the full definition
of such terms, as well as any other capitalized terms used herein for which
no definition is provided.
"Adjusted Consolidated Net Income" means, for any period, the
aggregate net income (or loss) of Holdings and its Restricted Subsidiaries
for such period determined in conformity with GAAP; provided that the
following items shall be excluded in computing Adjusted Consolidated Net
Income (without duplication): (i) the net income of any Person (other than
net income attributable to a Restricted Subsidiary) in which any Person
(other than Holdings or any of its Restricted Subsidiaries) has a joint
interest and the net income of any Unrestricted Subsidiary, except to the
extent of the amount of dividends or other distributions actually paid to
Holdings or any of its Restricted Subsidiaries by such other Person or such
Unrestricted Subsidiary during such period; (ii) solely for the purposes of
calculating the amount of Restricted Payments that may be made pursuant to
clause (C) of the first paragraph of the "Limitation on Restricted
Payments" covenant described above (and in such case, except to the extent
includable pursuant to clause (i) above), the net income (or loss) of any
Person accrued prior to the date it becomes a Restricted Subsidiary or is
merged into or consolidated with Holdings or any of its Restricted
Subsidiaries or all or substantially all of the property and assets of such
Person are acquired by Holdings or any of its Restricted Subsidiaries;
(iii) the net income of any Restricted Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of such net income is not at the time permitted by
the operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary; (iv) any gains or losses (on an
after-tax basis) attributable to Asset Sales; (v) except for purposes of
calculating the amount of Restricted Payments that may be made pursuant to
clause (C) of the first paragraph of the "Limitation on Restricted
Payments" covenant described above, any amount paid or accrued as dividends
on preferred stock of Holdings or any Restricted Subsidiary owned by
Persons other than Holdings and any of its Restricted Subsidiaries; and
(vi) all extraordinary gains and extraordinary losses.
"Affiliate" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as applied to any Person,
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Asset Acquisition" means (i) an investment by Holdings or any of its
Restricted Subsidiaries in any other Person pursuant to which such Person
shall become a Restricted Subsidiary of Holdings or shall be merged into or
consolidated with Holdings or any of its Restricted Subsidiaries; provided
that such Person's primary business is related, ancillary or complementary
to the businesses of Holdings and its Restricted Subsidiaries on the date
of such investment or (ii) an acquisition by Holdings or any of its
Restricted Subsidiaries of the property and assets of any Person other than
Holdings or any of its Restricted Subsidiaries that constitutes
substantially all of a division or line of business of such Person;
provided that the property and assets acquired are related, ancillary or
complementary to the businesses of Holdings and its Restricted Subsidiaries
on the date of such acquisition.
"Asset Sale" means any sale, transfer or other disposition (including
by way of merger, consolidation or sale-leaseback transactions) in one
transaction or a series of related transactions by Holdings or any of its
Restricted Subsidiaries to any Person other than Holdings or any of its
Restricted Subsidiaries of (i) all or any of the Capital Stock of any
Restricted Subsidiary, (ii) all or substantially all of the property and
assets of an operating unit or business of Holdings or any of its
Restricted Subsidiaries or (iii) any other property and assets of Holdings
or any of its Restricted Subsidiaries outside the ordinary course of
business of Holdings or such Restricted Subsidiary and, in each case, that
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is not governed by the provisions described under "-Merger, Consolidation
and Sale of Assets;" provided that the meaning of "Asset Sale" shall not
include (A) sales or other dispositions of inventory, receivables and other
current assets, and (B) dispositions of assets of Holdings or any of its
Restricted Subsidiaries, in substantially simultaneous exchanges for
consideration consisting of any combination of cash, Temporary Cash
Investments and assets that are used or useful in the telecommunications
business of Holdings or its Restricted Subsidiaries, if such consideration
has an aggregate fair market value substantially equal to the fair market
value of the assets so disposed of; provided, however, that fair market
value shall be determined in good faith by the Board of Directors of
Holdings, whose determination shall be conclusive and evidenced by a
resolution of the Board of Directors delivered to the Transfer Agent.
"Average Life" means, at any date of determination with respect to any
debt security, the quotient obtained by dividing (i) the sum of the
products of (a) the number of years from such date of determination to the
dates of each successive scheduled principal payment of such debt security
and (b) the amount of such principal payment by (ii) the sum of all such
principal payments.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participation or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether now outstanding or
issued after the date of the Amended Articles, including, without
limitation, all Common Stock and preferred stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present
value of the rental obligations of such Person as lessee, in conformity
with GAAP, is required to be capitalized on the balance sheet of such
Person; and "Capitalized Lease Obligations" means the discounted present
value of the rental obligations under any such Capitalized Lease.
"ChoiceCom" means CSW/ICG ChoiceCom, L.P., a Delaware limited
partnership.
"Closing Date" means the date on which the Preferred Stock is
originally issued under the Amended Articles.
"Consolidated EBITDA" means, for any period, the sum of the amounts
for such period of (i) Adjusted Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) income taxes, to the extent such amount was
deducted in calculating Adjusted Consolidated Net Income (other than income
taxes (either positive or negative) attributable to extraordinary and
non-recurring gains or losses or sales of assets), (iv) depreciation
expense, to the extent such amount was deducted in calculating Adjusted
Consolidated Net Income, (v) amortization expense, to the extent such
amount was deducted in calculating Adjusted Consolidated Net Income, and
(vi) all other non-cash items reducing Adjusted Consolidated Net Income
(other than items that will require cash payments and for which an accrual
or reserve is, or is required by GAAP to be, made), less all non-cash items
increasing Adjusted Consolidated Net Income, all as determined on a
consolidated basis for Holdings and its Restricted Subsidiaries in
conformity with GAAP; provided that, if any Restricted Subsidiary is not a
Wholly Owned Restricted Subsidiary, Consolidated EBITDA shall be reduced
(to the extent not otherwise reduced in accordance with GAAP) by an amount
equal to (A) the amount of the Adjusted Consolidated Net Income
attributable to such Restricted Subsidiary multiplied by (B) the quotient
of (1) the number of shares of outstanding Common Stock of such Restricted
Subsidiary not owned on the last day of such period by Holdings or any of
its Restricted Subsidiaries divided by (2) the total number of shares of
outstanding Common Stock of such Restricted Subsidiary on the last day of
such period.
"Consolidated Interest Expense" means, for any period, the aggregate
amount of interest in respect of Indebtedness (including amortization of
original issue discount on any Indebtedness and the interest portion of any
deferred payment obligation, calculated in accordance with the effective
interest method of accounting; all commissions, discounts and other fees
and charges owed with respect to letters of credit and bankers' acceptance
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financing; the net costs associated with Interest Rate Agreements; and
Indebtedness that is Guaranteed or secured by Holdings or any of its
Restricted Subsidiaries) and all but the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be
paid or to be accrued by Holdings and its Restricted Subsidiaries during
such period; excluding, however, without duplication, (i) any amount of
such interest of any Restricted Subsidiary if the net income of such
Restricted Subsidiary is excluded in the calculation of Adjusted
Consolidated Net Income pursuant to clause (iii) of the definition thereof
(but only in the same proportion as the net income of such Restricted
Subsidiary is excluded from the calculation of Adjusted Consolidated Net
Income pursuant to clause (iii) of the definition thereof) and (ii) any
premiums, fees and expenses (and any amortization thereof) payable in
connection with the offering of the 13 1/2% Notes and the warrants issued
therewith, the 12 1/2% Notes, the 14 1/4% Preferred Stock, the New Notes
and/or the New Preferred Stock, all as determined on a consolidated basis
(without taking into account Unrestricted Subsidiaries) in conformity with
GAAP.
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly
or annual consolidated balance sheet of Holdings and its Restricted
Subsidiaries (which shall be as of a date not more than 90 days prior to
the date of such computation, and which shall not take into account
Unrestricted Subsidiaries), less any amounts attributable to Redeemable
Stock or any equity security convertible into or exchangeable for
Indebtedness, the cost of treasury stock and the principal amount of any
promissory notes receivable from the sale of the Capital Stock of Holdings
or any of its Restricted Subsidiaries, each item to be determined in
conformity with GAAP (excluding the effects of foreign currency exchange
adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to
protect Holdings or any of its Restricted Subsidiaries against fluctuations
in currency values to or under which Holdings or any of its Restricted
Subsidiaries is a party or a beneficiary on the Closing Date or becomes a
party or a beneficiary thereafter.
"Event of Default" means a Voting Rights Triggering Event as defined
above under "-Voting Rights."
"FOTI" means ICG Fiber Optic Technologies Inc., a Colorado
corporation.
"14 1/4% Preferred Stock" means the 14 1/4% Exchangeable Preferred
Stock mandatorily redeemable May 1, 2007 of Holdings, and any shares of
preferred stock issued as payment in kind dividends thereon.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of August 8, 1995, including, without
limitation, those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as
approved by a significant segment of the accounting profession. All ratios
and computations contained in the Indenture shall be computed in conformity
with GAAP applied on a consistent basis, except that calculations made for
purposes of determining compliance with the terms of the covenants and with
other provisions of the Indenture shall be made without giving effect to
(i) the amortization of any expenses incurred in connection with the
offering of the 13 1/2% Notes and the warrants issued therewith, the 12
1/2% Notes, the 14 1/4% Preferred Stock, the New Notes and/or the New
Preferred Stock and (ii) except as otherwise provided, the amortization of
any amounts required or permitted by Accounting Principles Board Opinion
Nos. 16 and 17.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation of such other
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Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services,
to take-or-pay, or to maintain financial statement conditions or otherwise)
or (ii) entered into for purposes of assuring in any other manner the
obligee of such Indebtedness or other obligation of the payment thereof or
to protect such obligee against loss in respect thereof (in whole or in
part); provided that the term "Guarantee" shall not include endorsements
for collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"Holdings" means ICG Holdings, Inc. and its successors and assigns.
"Holdings (Canada)" means ICG Holdings (Canada), Inc. and its
successors and assigns.
"ICG" means ICG Communications, Inc. and its successors and assigns.
"Incur" means, with respect to any Indebtedness, to incur, create,
issue, assume, Guarantee or otherwise become liable for or with respect to,
or become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an Incurrence of Indebtedness by reason of the
acquisition of more than 50% of the Capital Stock of any Person; provided
that neither the accrual of interest nor the accretion of original issue
discount shall be considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person
for borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of
such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto), (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, which purchase price is due more than six months
after the date of placing such property in service or taking delivery and
title thereto or the completion of such services, except Trade Payables,
(v) all obligations of such Person as lessee under Capitalized Leases, (vi)
all Indebtedness of other Persons secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person;
provided that the amount of such Indebtedness shall be the lesser of (A)
the fair market value of such asset at such date of determination and (B)
the amount of such Indebtedness, (vii) all Indebtedness of other Persons
Guaranteed by such Person to the extent such Indebtedness is Guaranteed by
such Person and (viii) to the extent not otherwise included in this
definition, obligations under Currency Agreements and Interest Rate
Agreements. The amount of Indebtedness of any Person at any date shall be
the outstanding balance at such date of all unconditional obligations as
described above and, with respect to contingent obligations, the maximum
liability upon the occurrence of the contingency giving rise to the
obligation, provided (i) that the amount outstanding at any time of any
Indebtedness issued with original issue discount is the original issue
price of such Indebtedness and (ii) that Indebtedness shall not include (A)
any amount of money borrowed, at the time of the Incurrence of the related
Indebtedness, for the purpose of pre-funding any interest payable on such
related Indebtedness or (B) any liability for federal, state, local or
other taxes.
"Indebtedness to EBITDA Ratio" means, as at any date of determination,
the ratio of (i) the aggregate amount of Indebtedness of Holdings and its
Restricted Subsidiaries on a consolidated basis as at the date of
determination (the "Transaction Date") to (ii) the Consolidated EBITDA of
Holdings for the then most recent four full fiscal quarters for which
reports have been filed pursuant to the "Reports" covenant described above
(such four full fiscal quarter period being referred to herein as the "Four
Quarter Period"); provided that (x) pro forma effect shall be given to any
Indebtedness Incurred from the beginning of the Four Quarter Period through
the Transaction Date (including any Indebtedness Incurred on the
Transaction Date), to the extent outstanding on the Transaction Date, (y)
if during the period commencing on the first day of such Four Quarter
Period through the Transaction Date (the "Reference Period"), Holdings or
any of the Restricted Subsidiaries shall have engaged in any Asset Sale,
Consolidated EBITDA for such period shall be reduced by an amount equal to
the EBITDA (if positive), or increased by an amount equal to the EBITDA (if
negative), directly attributable to the assets which are the subject of
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such Asset Sale and any related retirement of Indebtedness as if such Asset
Sale and related retirement of Indebtedness had occurred on the first day
of such Reference Period or (z) if during such Reference Period Holdings or
any of the Restricted Subsidiaries shall have made any Asset Acquisition,
Consolidated EBITDA of Holdings shall be calculated on a pro forma basis as
if such Asset Acquisition and any related financing had occurred on the
first day of such Reference Period. In calculating this ratio for purposes
of the Amended Articles, the amount of outstanding Indebtedness shall be
deemed to include the liquidation preference of any preferred stock then
outstanding.
"Investment" in any Person means any direct or indirect advance, loan
or other extension of credit (including, without limitation, by way of
Guarantee or similar arrangement; but excluding advances to customers in
the ordinary course of business that are, in conformity with GAAP, recorded
as accounts receivable on the balance sheet of Holdings or its Restricted
Subsidiaries) or capital contribution to (by means of any transfer of cash
or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
bonds, notes, debentures or other similar instruments issued by, such
Person and shall include the designation of a Restricted Subsidiary as an
Unrestricted Subsidiary. For purposes of the definition of "Unrestricted
Subsidiary" and the "Limitation on Restricted Payments" covenant described
above, (i) "Investment" shall include the fair market value of the assets
(net of liabilities) of any Restricted Subsidiary of Holdings at the time
that such Restricted Subsidiary of Holdings is designated an Unrestricted
Subsidiary and shall exclude the fair market value of the assets (net of
liabilities) of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary of Holdings
and (ii) any property transferred to or from an Unrestricted Subsidiary
shall be valued at its fair market value at the time of such transfer, in
each case as determined by the Board of Directors in good faith.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any conditional
sale or other title retention agreement or lease in the nature thereof, any
sale with recourse against the seller or any Affiliate of the seller, or
any agreement to give any security interest).
"MTN" means Maritime Telecommunications Network, Inc., a Colorado
corporation, and its successors.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the
extent corresponding to the principal, but not interest, component thereof)
when received in the form of cash or cash equivalents (except to the extent
such obligations are financed or sold with recourse to Holdings or any
Restricted Subsidiary of Holdings) and proceeds from the conversion of
other property received when converted to cash or cash equivalents, net of
(i) brokerage commissions and other fees and expenses (including fees and
expenses of counsel and investment bankers) related to such Asset Sale,
(ii) provisions for all taxes (whether or not such taxes will actually be
paid or are payable) as a result of such Asset Sale without regard to the
consolidated results of operations of Holdings and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness
or any other obligation outstanding at the time of such Asset Sale that
either (A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale and (iv) appropriate amounts
to be provided by Holdings or any Restricted Subsidiary of Holdings as a
reserve against any liabilities associated with such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as
determined in conformity with GAAP and (b) with respect to any issuance or
sale of Capital Stock, the proceeds of such issuance or sale in the form of
cash or cash equivalents, including payments in respect of deferred payment
obligations (to the extent corresponding to the principal, but not
interest, component thereof) when received in the form of cash or cash
equivalents (except to the extent such obligations are financed or sold
with recourse to Holdings or any Restricted Subsidiary of Holdings) and
proceeds from the conversion of other property received when converted to
cash or cash equivalents, net of attorney's fees, accountants' fees,
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underwriters' or placement agents' fees, discounts or commissions and
brokerage, consultant and other fees incurred in connection with such
issuance or sale and net of taxes paid or payable as a result thereof.
"New Notes" means the New Notes Due 2007 of Holdings, guaranteed by
ICG on a senior unsecured basis and issued on the Closing Date.
"Offer to Purchase" means an offer to purchase shares of New Preferred
Stock by Holdings from the Holders commenced by mailing a notice to the
Transfer Agent and each Holder stating: (i) the covenant pursuant to which
the offer is being made and that all shares of New Preferred Stock validly
tendered will be accepted for payment on a pro rata basis; (ii) the
purchase price and the date of purchase (which shall be a Business Day no
earlier than 30 days nor later than 60 days from the date such notice is
mailed) (the "Payment Date"); (iii) that any shares of New Preferred Stock
not tendered will continue to accrue dividends pursuant to its terms; (iv)
that, unless Holdings defaults in the payment of the purchase price, any
shares of New Preferred Stock accepted for payment pursuant to the Offer to
Purchase shall cease to accrue dividends on and after the Payment Date; (v)
that Holders electing to have any shares of New Preferred Stock purchased
pursuant to the Offer to Purchase will be required to surrender the shares
of New Preferred Stock together with a form entitled "Option of the Holder
to Elect Purchase" (the form of which will be mailed with such notice), to
the Paying Agent at the address specified in the notice prior to the close
of business on the Business Day immediately preceding the Payment Date;
(vi) that Holders will be entitled to withdraw their election if the Paying
Agent receives, not later than the close of business on the third Business
Day immediately preceding the Payment Date, a telegram, facsimile
transmission or letter setting forth the name of such Holder, the
liquidation preference of the shares of New Preferred Stock delivered for
purchase and a statement that such Holder is withdrawing his election to
have such shares of New Preferred Stock purchased; and (vii) that Holders
whose shares of New Preferred Stock are being purchased only in part will
be issued new shares of New Preferred Stock equal to the liquidation
preference of the unpurchased portion of the shares of New Preferred Stock
surrendered; provided that each share of New Preferred Stock purchased and
each new share of New Preferred Stock issued shall be in a principal amount
of $1,000 or integral multiples thereof. On the Payment Date, Holdings
shall (i) accept for payment on a pro rata basis shares of New Preferred
Stock or portions thereof tendered pursuant to an Offer to Purchase; (ii)
deposit with the Paying Agent money sufficient to pay the purchase price of
all shares of New Preferred Stock or portions thereof, so accepted; and
(iii) deliver, or cause to be delivered, to the Transfer Agent all shares
of New Preferred Stock or portions thereof, so accepted together with an
Officers' Certificate specifying the shares of New Preferred Stock or
portions thereof accepted for payment by Holdings. The Paying Agent shall
promptly mail to the Holders of shares of New Preferred Stock so accepted,
payment in an amount equal to the purchase price, and the Transfer Agent
shall promptly authenticate and mail to such Holders new shares of New
Preferred Stock equal in liquidation preference to any unpurchased portion
of the shares of New Preferred Stock surrendered; provided that each share
of New Preferred Stock purchased and each new share of New Preferred Stock
issued shall be in a principal amount of $1,000 or integral multiples
thereof. Holdings will publicly announce the results of an Offer to
Purchase as soon as practicable after the Payment Date. The Transfer Agent
shall act as the Paying Agent for an Offer to Purchase. Holdings will
comply with Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable, in the event that Holdings is required to repurchase shares of
New Preferred Stock pursuant to an Offer to Purchase.
"Ohio LINX" means ICG Ohio LINX, Inc., an Ohio corporation.
"Permitted Investment" means (i) an Investment in a Restricted
Subsidiary or a Person which will, upon the making of such Investment,
become a Restricted Subsidiary or be merged or consolidated with or into or
transfer or convey all or substantially all its assets to, Holdings or a
Restricted Subsidiary; provided that such Person's primary business is
related, ancillary or complementary to the businesses of Holdings and its
Restricted Subsidiaries on the date of such Investment; (ii) a Temporary
Cash Investment; (iii) payroll, travel and similar advances to cover
matters that are expected at the time of such advances ultimately to be
treated as expenses in accordance with GAAP; (iv) loans or advances to
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employees made in the ordinary course of business in accordance with past
practice of Holdings or its Restricted Subsidiaries and that do not in the
aggregate exceed $2 million at any time outstanding; (v) stock, obligations
or securities received in satisfaction of judgments; (vi) Indebtedness of
ICG or Holdings (Canada) owed to Holdings, in an amount not to exceed the
reasonable expenses of ICG or Holdings (Canada), as the case may be, as a
holding company that are actually incurred, and paid, by ICG or Holdings
(Canada); provided that such Indebtedness of ICG or Holdings (Canada), as
the case may be, is evidenced by an unsubordinated promissory note that
provides that it will be paid prior to any mandatory redemption of the New
Preferred Stock if such payment would be necessary to effectuate such
redemption; and (vii) Investments in an amount not to exceed, at any one
time outstanding, all of the Net Cash Proceeds received by Holdings from
the sale of Common Stock of ICG (to a person other than one of ICG's
Subsidiaries) after the Closing Date.
"Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate
legal proceedings promptly instituted and diligently conducted and for
which a reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made; (ii) statutory Liens
of landlords and carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen or other similar Liens arising in the ordinary course of business
and with respect to amounts not yet delinquent or being contested in good
faith by appropriate legal proceedings promptly instituted and diligently
conducted and for which a reserve or other appropriate provision, if any,
as shall be required in conformity with GAAP shall have been made; (iii)
Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security; (iv) Liens incurred or deposits made to secure
the performance of tenders, bids, leases, statutory or regulatory
obligations, bankers' acceptances, surety and appeal bonds, government
contracts, performance and return-of-money bonds and other obligations of a
similar nature incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (v) easements, rights of
way, municipal and zoning ordinances and similar charges, encumbrances,
title defects or other irregularities that do not materially interfere with
the ordinary course of business of Holdings or any of its Restricted
Subsidiaries; (vi) Liens (including extensions and renewals thereof) upon
real or personal property acquired after the Closing Date; provided that
(a) such Lien is created solely for the purpose of securing Indebtedness
Incurred, in accordance with the "Incurrence of Indebtedness and Issuance
of New Preferred Stock" covenant described above, (1) to finance the cost
(including the cost of improvement or construction) of the item of property
or assets subject thereto and such Lien is created prior to, at the time of
or within six months after the later of the acquisition, the completion of
construction or the commencement of full operation of such property or (2)
to refinance any Indebtedness previously so secured, (b) the principal
amount of the Indebtedness secured by such Lien does not exceed 100% of
such cost and (c) any such Lien shall not extend to or cover any property
or assets other than such item of property or assets and any improvements
on such item; (vii) leases or subleases granted to others that do not
materially interfere with the ordinary course of business of Holdings and
its Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering
property or assets under construction arising from progress or partial
payments by a customer of Holdings or its Restricted Subsidiaries relating
to such property or assets; (ix) any interest or title of a lessor in the
property subject to any Capitalized Lease or operating lease; (x) Liens
arising from filing Uniform Commercial Code financing statements regarding
leases; (xi) Liens on property of, or on shares of stock or Indebtedness
of, any corporation existing at the time such corporation becomes, or
becomes a part of, any Restricted Subsidiary; provided that such Liens do
not extend to or cover any property or assets of Holdings or any Restricted
Subsidiary other than the property or assets acquired; (xii) Liens in favor
of Holdings or any Restricted Subsidiary; (xiii) Liens arising from the
rendering of a final judgment or order against Holdings or any Restricted
Subsidiary that does not give rise to an Event of Default; (xiv) Liens
securing reimbursement obligations with respect to letters of credit that
encumber documents and other property relating to such letters of credit
and the products and proceeds thereof; (xv) Liens in favor of customs and
revenue authorities arising as a matter of law to secure payment of customs
duties in connection with the importation of goods; (xvi) Liens encumbering
customary initial deposits and margin deposits, and other Liens that are
either within the general parameters customary in the industry and incurred
in the ordinary course of business, in each case, securing Indebtedness
under Interest Rate Agreements and Currency Agreements and forward
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contracts, options, future contracts, futures options or similar agreements
or arrangements designed to protect Holdings or any of its Restricted
Subsidiaries from fluctuations in the price of commodities; (xvii) Liens
arising out of conditional sale, title retention, consignment or similar
arrangements for the sale of goods entered into by Holdings or any of its
Restricted Subsidiaries in the ordinary course of business in accordance
with the past practices of Holdings and its Restricted Subsidiaries prior
to the Closing Date; and (xviii) Liens on or sales of receivables.
"Preferred stock" or "preferred stock" means, with respect to any
Person, any and all shares, interests, participations or other equivalents
(however designated, whether voting or non-voting) of such Person's
preferred or preference stock, whether now outstanding or issued after the
date of the Amended Articles, including, without limitation, all series and
classes of such preferred or preference stock.
"Public Equity Offering" means a bona fide underwritten primary public
offering of Common Stock of ICG or Holdings pursuant to an effective
registration statement under the Securities Act.
"Redeemable Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior
to the mandatory redemption date of the shares of New Preferred Stock, (ii)
redeemable at the option of the holder of such class or series of Capital
Stock at any time prior to the mandatory redemption date of the shares of
New Preferred Stock, or (iii) convertible into or exchangeable for Capital
Stock referred to in clause (i) or (ii) above or Indebtedness having a
scheduled maturity prior to the mandatory redemption date of the shares of
New Preferred Stock; provided that any Capital Stock that would not
constitute Redeemable Stock but for provisions thereof giving holders
thereof the right to require such Person to repurchase or redeem such
Capital Stock upon the occurrence of a "change of control" occurring prior
to the mandatory redemption date of the shares of New Preferred Stock shall
not constitute Redeemable Stock if the "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of
such Capital Stock than the provisions contained in the "Change of Control"
covenant described above and such Capital Stock specifically provides that
such Person will not repurchase or redeem any such stock pursuant to such
provision prior to Holdings' repurchase of New Preferred Stock as described
above under "-Change of Control."
"Restricted Subsidiary" means any Subsidiary of Holdings other than an
Unrestricted Subsidiary.
"Senior Discount Notes Indenture" means the Indenture dated as March
11, 1997 among Holdings, ICG and the Trustee pursuant to which the New
Notes will be issued.
"StarCom" means StarCom International Optics Corporation, a British
Columbia corporation, and its subsidiaries.
"Strategic Investor" means any Person engaged in the
telecommunications business which has a net worth or equity market
capitalization of at least $1 billion.
"Strategic Investor Subordinated Indebtedness" means all Indebtedness
of Holdings owed to a Strategic Investor that is contractually subordinate
in right of payment to the shares of New Preferred Stock to at least the
following extent: no payment of principal (or premium, if any) or interest
on or otherwise payable in respect of such Indebtedness may be made
(whether as a result of a default or otherwise) prior to the payment in
full of all of Holdings' obligations under the shares of New Preferred
Stock; provided, however, that prior to the payment of such obligations,
interest on Strategic Investor Subordinated Indebtedness may be payable
solely in kind or in common stock (other than Redeemable Stock) of ICG or
Holdings.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the
outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.
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"Temporary Cash Investment" means any of the following: (i) direct
obligations of the United States of America or any agency thereof or
obligations fully and unconditionally guaranteed by the United States of
America or any agency thereof, (ii) time deposit accounts, certificates of
deposit and money market deposits maturing within 270 days of the date of
acquisition thereof, bankers' acceptances with maturities not exceeding 270
days, and overnight bank deposits, in each case issued by or with a bank or
trust company which is organized under the laws of the United States of
America, any state thereof or any foreign country recognized by the United
States, and which bank or trust company has capital, surplus and undivided
profits aggregating in excess of $100 million (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or such
similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a registered broker
dealer or mutual fund distributor, (iii) repurchase obligations with a term
of not more than 30 days for underlying securities of the types described
in clause (i) above entered into with a bank meeting the qualifications
described in clause (ii) above, (iv) commercial paper, maturing not more
than 180 days after the date of acquisition, issued by a corporation (other
than an Affiliate of ICG) organized and in existence under the laws of the
United States of America, any state thereof or any foreign country
recognized by the United States of America with a rating at the time as of
which any investment therein is made of "P-1" (or higher) according to
Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard
& Poor's Ratings Group, and (v) securities with maturities of six months or
less from the date of acquisition issued or fully and unconditionally
guaranteed by any state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority thereof, and
rated at least "A" by Standard & Poor's Ratings Group or Moody's Investors
Service, Inc.
"13 1/2% Notes" means the 13 1/2% Senior Discount Notes Due 2005 of
Holdings guaranteed by ICG and Holdings (Canada) on a senior unsecured
basis.
"13 1/2% Notes Indenture" means the Indenture dated as of August 8,
1995, as amended, among Holdings, Holdings (Canada) and the Trustee
pursuant to which Holdings issued the 13 1/2% Notes.
"Trade Payables" means, with respect to any person, any accounts
payable or any other debt or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person or any of its Subsidiaries
arising in the ordinary course of business in connection with the
acquisition of goods or services.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by Holdings or any of its Restricted Subsidiaries or the
issuance of any Redeemable Stock of Holdings, the date such Indebtedness is
to be Incurred or such issuance is to be made and, with respect to any
Restricted Payment, the date such Restricted Payment is to be made.
"12 1/2% Notes" means the 12 1/2% Senior Discount Notes due 2006 of
Holdings guaranteed by ICG and Holdings (Canada) on a senior unsecured
basis.
"12 1/2% Notes Indenture" means the Indenture dated as of April 30,
1996, as amended, among Holdings, Holdings (Canada) and the Trustee
pursuant to which Holdings issued the 12 1/2% Notes.
"Unrestricted Subsidiary" means (i) any Subsidiary of Holdings that at
the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any Subsidiary
of an Unrestricted Subsidiary. The Board of Directors may designate any
Restricted Subsidiary of Holdings (including any newly acquired or newly
formed Subsidiary of Holdings), other than Holdings or a Subsidiary that
has given a Subsidiary Guarantee, to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any
property of, Holdings or any Restricted Subsidiary; provided that either
(A) the Subsidiary to be so designated has total assets of $1,000 or less
or (B) if such Subsidiary has assets greater than $1,000, that such
designation would be permitted under the "Limitation on Restricted
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Payments" covenant described above. The Board of Directors may designate
any Unrestricted Subsidiary to be a Restricted Subsidiary of Holdings;
provided that immediately after giving effect to such designation (x)
Holdings could Incur $1.00 of additional Indebtedness under the first
paragraph of the "Incurrence of Indebtedness and Issuance of New Preferred
Stock" covenant described above and (y) no Default or Event of Default
shall have occurred and be continuing. Any such designation by the Board of
Directors shall be evidenced to the Transfer Agent by promptly filing with
the Transfer Agent a copy of the resolution of the Board of Directors
giving effect to such designation and an Officers' Certificate certifying
that such designation complied with the foregoing provisions.
"Voting Stock" means, with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of
directors, managers or other voting members of the governing body of such
Person.
"Wholly Owned" means, with respect to any Subsidiary of any Person,
such Subsidiary if 98% or more of the outstanding Capital Stock in such
Subsidiary (other than any director's qualifying shares or Investments by
foreign nationals mandated by applicable law) is owned by such Person or
one or more Wholly Owned Subsidiaries of such Person.
"Zycom" means Zycom Corporation, an Alberta, Canada corporation.
DESCRIPTION OF EXCHANGE DEBENTURES
The Exchange Debentures, if issued, will be issued under the Exchange
Debenture Indenture among Holdings, ICG, as guarantor, and Norwest Bank
Colorado, National Association, as trustee or such other trustee as may
qualify under the Trust Indenture Act and be selected by Holdings (the
"Trustee"). A copy of the form of Exchange Debenture Indenture is available
from Holdings upon request. The terms of the Exchange Debentures include
those stated in the Exchange Debenture Indenture and those made part of the
Exchange Debenture Indenture by reference to the Trust Indenture Act.
Prospective holders of the Exchange Debentures are referred to the Exchange
Debenture Indenture and the Trust Indenture Act for a statement of such
terms. The following summary of certain provisions of the Exchange
Debenture Indenture does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, the Trust Indenture Act and
to all of the provisions of the Exchange Debenture Indenture, including the
definitions of certain terms therein and those terms made a part of the
Exchange Debenture Indenture by reference to the Trust Indenture Act. The
definitions of certain terms used in the Exchange Debenture Indenture and
in the following summary are set forth below under "-Certain Definitions."
References herein to "$" refers to U.S. dollars.
GENERAL
The Exchange Debentures will be general unsecured obligations of
Holdings and will be limited in aggregate principal amount to the aggregate
liquidation preference of the New Preferred Stock (including shares of
Preferred Stock issued in payment of dividends), plus accrued and unpaid
dividends, on the date of exchange of the Preferred Stock into Exchange
Debentures (plus any additional Exchange Debentures issued in lieu of cash
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interest as described herein). The Exchange Debentures will be issued in
fully registered form only in denominations of $1,000 and integral
multiples thereof (other than as described in "Description of Preferred
Stock-Exchange" or with respect to additional Exchange Debentures issued in
lieu of cash interest as described herein). The Exchange Debentures will be
senior subordinated obligations of Holdings, subordinated to all existing
and future Senior Indebtedness of Holdings and senior to all subordinated
obligations of Holdings.
Principal of, and premium, if any, and interest on the Exchange
Debentures will be payable, and the Exchange Debentures may be presented
for registration of transfer or exchange, at the office of the Paying Agent
and Registrar. At Holding's option, interest, to the extent paid in cash,
may be paid by check mailed to the registered address of Holders of the
Exchange Debentures as shown on the register for the Exchange Debentures.
The Trustee will initially act as Paying Agent and Registrar. Holdings may
change any Paying Agent and Registrar without prior notice to Holders of
the Exchange Debentures. Holders of the Exchange Debentures must surrender
Exchange Debentures to the Paying Agent to collect principal payments.
The Exchange Debentures will mature on March 15, 2008. Each Exchange
Debenture will bear interest from the Exchange Debenture Issue Date or from
the most recent interest payment date to which interest has been paid or
provided for. Interest will be payable semiannually in cash (or, on or
prior to March 15, 2002, at the option of Holdings, in additional Exchange
Debentures, subject to the restrictions contained in the Senior Discount
Notes Indenture, the 12 1/2% Notes Indenture, the 13 1/2% Notes Indenture
and any other agreement of Holdings, Holdings (Canada) or ICG) in arrears
on each March 15 and September 15 commencing with the first such date after
the Exchange Debenture Issue Date. Interest on the Exchange Debentures will
be computed on the basis of a 360-day year of twelve 30-day months and the
actual number of days elapsed.
Because of Holding's option through March 15, 2002 to pay interest on
the Exchange Debentures by issuing additional Exchange Debentures, any
Exchange Debentures issued prior to that date will be treated as issued
with OID, unless under special rules for interest holidays the amount of
OID is treated as de minimis. See "Certain United States Federal Income Tax
Consequences."
Subject to the covenants in their Indebtedness and applicable law,
Holdings and ICG may issue additional Exchange Debentures under the
Exchange Debenture Indenture. The Exchange Debentures, together with any
Exchange Debentures subsequently issued, will be treated as a single class
for all purposes under
the Exchange Debenture Indenture.
GUARANTEE
Holdings' obligations under the Exchange Debentures will be fully and
unconditionally guaranteed (the "Debenture Guarantee") on a senior
subordinated basis by ICG (in such context, the "Guarantor"); provided that
the Debenture Guarantee shall not be enforceable against the Guarantor in
an amount in excess of the net worth of the Guarantor at the time that
determination of such net worth is, under applicable law, relevant to the
enforceability of such Debenture Guarantee. Such net worth shall include
any claim of the Guarantor against Holdings for reimbursement.
SUBORDINATION AND RANKING
The Exchange Debentures will be senior subordinated Indebtedness of
Holdings, subordinated to the prior payment when due of the principal of,
and premium, if any, and accrued and unpaid interest on, all existing and
future Senior Indebtedness of Holdings and senior to the prior payment when
due of the principal of, and premium, if any, and accrued and unpaid
interest on, all subordinated Indebtedness of Holdings. ICG's guarantee of
the Exchange Debentures will be senior subordinated Indebtedness of ICG,
subordinated to the prior payment when due of the principal of, and
premium, if any, and accrued and unpaid interest on, all existing and
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future Senior Guarantor Indebtedness of ICG and senior to the prior payment
when due of the principal of, and premium, if any and accrued and unpaid
interest on, all subordinated Indebtedness of ICG.
Upon (a) any distribution to creditors of Holdings in a liquidation or
dissolution of Holdings or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to Holdings or its property or
(b) an assignment for the benefit of creditors or any marshalling of
Holdings' assets and liabilities, the holders of Senior Indebtedness shall
be entitled to receive payment in full of all Obligations due in respect of
such Senior Indebtedness (including interest after the commencement of any
such proceeding at the rate specified in the applicable Senior
Indebtedness) before holders of the Exchange Debentures shall be entitled
to receive any payment with respect to the Exchange Debentures. Until all
Obligations with respect to Senior Indebtedness are paid in full, any
distribution to which holders of the Exchange Debentures would be entitled
shall be made to holders of Senior Indebtedness. Notwithstanding the
foregoing, holders of the Exchange Debentures may receive securities that
are subordinated, at least to the same extent as the Exchange Debentures,
to Senior Indebtedness and any securities issued in exchange for Senior
Indebtedness.
In addition, Holdings may not make any payment upon or in respect of
the Exchange Debentures (except in such subordinated securities) if (a) a
default in the payment of any principal, premium, if any, interest or other
Obligations with respect to any Designated Senior Indebtedness occurs and
is continuing beyond any applicable grace period (whether upon maturity, as
a result of acceleration or otherwise) or (b) any other default occurs and
is continuing with respect to any Designated Senior Indebtedness that
permits holders of such Designated Senior Indebtedness to accelerate its
maturity, and Holdings and the Trustee receive a notice of such default (a
"Payment Blockage Notice") from the holders, or from the trustee, agent or
other representative of the holders, of any such Designated Senior
Indebtedness. Payments on the Exchange Debentures may and shall be resumed
upon the earlier of (i) the date upon which the default is cured or waived
or (ii) in the case of a default referred to in clause (b) above, 179 days
after the date on which the applicable Payment Blockage Notice is received,
unless the maturity of any Designated Senior Indebtedness has been
accelerated. No new period of payment blockage may be commenced within 360
days after the receipt by the Trustee of any prior Payment Blockage Notice.
No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice unless such
default shall have been cured or waived for a period of not less than 180
days.
Upon (a) any distribution to creditors of ICG in a liquidation or
dissolution of ICG or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to ICG or its property or (b)
an assignment for the benefit of creditors or any marshalling of ICG's
assets and liabilities, the holders of Senior Guarantor Indebtedness shall
be entitled to receive payment in full of all Obligations due in respect of
such Senior Guarantor Indebtedness (including interest after the
commencement of any such proceeding at the rate specified in the applicable
Senior Guarantor Indebtedness) before holders of the Exchange Debentures
shall be entitled to receive any payment with respect to the Exchange
Debentures. Until all Obligations with respect to Senior Guarantor
Indebtedness are paid in full, any distribution to which holders of the
Exchange Debentures would be entitled shall be made to holders of Senior
Guarantor Indebtedness. Notwithstanding the foregoing, holders of the
Exchange Debentures may receive securities that are subordinated, at least
to the same extent as the Exchange Debentures, to Senior Guarantor
Indebtedness and any securities issued in exchange for Senior Guarantor
Indebtedness.
ICG may not make any payment upon or in respect of its Debenture
Guarantee (except in subordinated securities described in the second
paragraph above) if (a) a default in the payment of any principal, premium,
if any, interest or other Obligations with respect to any Designated Senior
Guarantor Indebtedness occurs and is continuing beyond any applicable grace
period (whether upon maturity, as a result of acceleration or otherwise) or
(b) any other default occurs and is continuing with respect to any
Designated Senior Guarantor Indebtedness that permits holders of such
Designated Senior Guarantor Indebtedness to accelerate its maturity, and
ICG and the Trustee receive a notice of such default (a "Guarantor Payment
Blockage Notice") from the holders, or from the trustee, agent or other
representative of the holders, of any such Designated Senior Guarantor
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Indebtedness. Payments on the Exchange Debentures may and shall be resumed
upon the earlier of (i) the date upon which the default is cured or waived
or (ii) in the case of a default referred to in clause (b) above, 179 days
after the date on which the applicable Guarantor Payment Blockage Notice is
received, unless the maturity of any Designated Senior Guarantor
Indebtedness has been accelerated. No new period of payment blockage may be
commenced within 360 days after the receipt by the Trustee of any prior
Guarantor Payment Blockage Notice. No nonpayment default that existed or
was continuing on the date of delivery of any Guarantor Payment Blockage
Notice to the Trustee shall be, or be made, the basis for a subsequent
Guarantor Payment Blockage Notice unless such default shall have been cured
or waived for a period of not less than 180 days.
The Exchange Debenture Indenture will further require that Holdings
promptly notify holders of Senior Indebtedness if payment on the Exchange
Debentures is accelerated because of an Event of Default.
"Designated Senior Indebtedness" under the Exchange Debenture
Indenture is defined to mean the Indebtedness specified in clause (i)(A) of
the definition of Senior Indebtedness and any Indebtedness constituting
Senior Indebtedness that, at the date of determination, has an aggregate
principal amount of at least $25 million and that is specifically
designated by Holdings in the instrument creating or evidencing such Senior
Indebtedness as "Designated Senior Indebtedness."
"Designated Senior Guarantor Indebtedness" under the Exchange
Debenture Indenture is defined to mean the Indebtedness specified in clause
(i)(A) of the definition of Senior Guarantor Indebtedness and any
Indebtedness constituting Senior Guarantor Indebtedness that, at the date
of determination, has an aggregate principal amount of at least $25 million
and that is specifically designated by the Guarantor in the instrument
creating or evidencing such Senior Guarantor Indebtedness as "Designated
Guarantor Senior Indebtedness."
"Senior Guarantor Indebtedness" means (i) Indebtedness of the
Guarantor under its Guarantee of the New Notes and its Guarantee under the
Senior Discount Notes Indenture, its Guarantee of the 13 1/2% Notes and the
12 1/2% Notes and its Guarantee under the 13 1/2% Notes Indenture and the
12 1/2% Notes Indenture and all fees, expenses and indemnities payable in
connection with any of the foregoing and (ii) all other Indebtedness of the
Guarantor (other than the Debenture Guarantee), including principal and
interest on such Indebtedness, unless such Indebtedness, by its terms or by
the terms of any agreement or instrument pursuant to which such
Indebtedness is issued, is pari passu with, or subordinated in right of
payment to, the Debenture Guarantee; provided that the term "Senior
Guarantor Indebtedness" shall not include (a) any Indebtedness of the
Guarantor that, when Incurred and without respect to any election under
Section 1111(b) of the United States Bankruptcy Code, was without recourse
to the Guarantor, (b) any Indebtedness of the Guarantor to a Subsidiary of
the Guarantor or to a joint venture in which the Guarantor has an interest,
(c) any Indebtedness of the Guarantor, to the extent not permitted by the
"Limitation on Indebtedness" or the "Senior Subordinated Indebtedness"
covenants described below, (d) any repurchase, redemption or other
obligation in respect of Redeemable Stock, (e) any Indebtedness to any
employee of the Guarantor or any of its Subsidiaries, (f) any liability for
federal, state, local or other taxes owed or owing by the Guarantor, (g)
the Guarantor's obligations with respect to the Convertible Subordinated
Notes or (h) any trade payables. Senior Indebtedness will also include
interest accruing subsequent to events of bankruptcy of the Guarantor at
the rate provided for in the document governing such Senior Guarantor
Indebtedness, whether or not such interest is an allowed claim enforceable
against the debtor in a bankruptcy case under federal bankruptcy law.
"Senior Indebtedness" means (i) Indebtedness of Holdings under the New
Notes and the Senior Discount Notes Indenture, the 12 1/2% Notes and the 12
1/2% Notes Indenture, the 13 1/2% Notes and the 13 1/2% Notes Indenture and
all fees, expenses and indemnities payable in connection with any of the
foregoing and (ii) all other Indebtedness of Holdings (other than the
Exchange Debentures), including principal and interest on such
Indebtedness, unless such Indebtedness, by its terms or by the terms of any
agreement or instrument pursuant to which such Indebtedness is issued, is
pari passu with, or subordinated in right of payment to, the Exchange
Debentures; provided that the term "Senior Indebtedness" shall not include
(a) any Indebtedness of Holdings that, when Incurred and without respect to
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any election under Section 1111(b) of the United States Bankruptcy Code,
was without recourse to Holdings, (b) any Indebtedness of Holdings to a
Subsidiary of Holdings or to a joint venture in which Holdings has an
interest, (c) any Indebtedness of Holdings, to the extent not permitted by
the "Limitation on Indebtedness" or the "Senior Subordinated Indebtedness"
covenants described below, (d) any repurchase, redemption or other
obligation in respect of Redeemable Stock, (e) any Indebtedness to any
employee of Holdings or any of its Subsidiaries, (f) any liability for
federal, state, local or other taxes owed or owing by Holdings or (g) any
trade payables. Senior Indebtedness will also include interest accruing
subsequent to events of bankruptcy of Holdings at the rate provided for in
the document governing such Senior Indebtedness, whether or not such
interest is an allowed claim enforceable against the debtor in a bankruptcy
case under federal bankruptcy law.
As a result of the subordination provisions described above, in the
event of a liquidation or insolvency, Holders of the Exchange Debentures
may recover less ratably than other creditors of Holdings or ICG. ICG and
Holdings are expected to incur substantial amounts of additional
indebtedness in the future, subject to compliance with the limitations
contained in the Senior Discount Notes Indenture, the 12 1/2% Notes
Indenture, the 13 1/2% Notes Indenture and the Exchange Debenture
Indenture. See "Risk Factors-Substantial Indebtedness; Ability to Service
Debt" and "-Holding Company Reliance on Subsidiaries' Funds; Priority of
Creditors; Subordination of Exchange Debentures."
OPTIONAL REDEMPTION
The Exchange Debentures will be redeemable at Holdings' option on or
after March 15, 2002. Thereafter, the Exchange Debentures will be subject
to redemption at the option of Holdings, in whole or in part, at any time
upon not less than 30 nor more than 60 days' prior notice mailed by first
class mail to each Holder's last address as it appears in the Security
Register, at the redemption prices (expressed as a percentage of principal
amount) set forth below, plus accrued and unpaid interest, if any, to the
applicable redemption date (subject to the right of Holders of record on
the relevant Regular Record Date that is on or prior to the redemption date
to receive interest due on an Interest Payment Date), if redeemed during
the 12-month period beginning on March 15 of the years indicated below:
Year Percentage
---- ----------
2002 . . . . . 107.0000%
2003 . . . . . 104.6667%
2004 . . . . . 102.3333%
2005 and
thereafter. . . 100.0000%
In addition, at any time on or prior to March 15, 2000, Holdings may,
at its option from time to time, redeem Exchange Debentures having an
aggregate principal amount of up to 35% of the liquidation preference of
the Preferred Stock originally issued at a redemption price equal to 114%
of the principal amount thereof, with proceeds of one or more Public Equity
Offerings of Common Stock of (A) Holdings or (B) ICG, provided that (i)
with respect to the Public Equity Offering referred to in clause (B) above,
cash proceeds of such Public Equity Offering in an amount sufficient to
effect the redemption of Exchange Debentures to be so redeemed are
contributed by ICG to Holdings prior to such redemption and used by
Holdings to effect such redemption and (ii) such redemption occurs within
180 days after consummation of such Public Equity Offering.
If less than all of the Exchange Debentures are to be redeemed at any
time, the Trustee shall select the Exchange Debentures to be redeemed on a
pro rata basis, by lot or in accordance with any other method the Trustee
considers fair and appropriate (and in such manner as complies with
applicable legal and stock exchange requirements, if any); provided that no
Exchange Debentures with a principal amount of $1,000 or less shall be
redeemed in part. Notice of redemption shall be mailed by first class mail
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at least 30 but no more than 60 days before the redemption date to each
Holder of Exchange Debentures to be redeemed at its registered address. If
any Exchange Debenture is to be redeemed in part only the notice of
redemption that related to such Exchange Debenture shall state the portion
of the principal amount to be redeemed. A new Exchange Debenture in
principal amount equal to the unredeemed portion will be issued in the name
of the Holder thereof upon cancellation of the original Exchange Debenture,
and after the redemption date, interest will cease to accrue on the
Exchange Debentures called for redemption.
REPURCHASE OF EXCHANGE DEBENTURES UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, Holdings will be required
(whether or not funds are available therefor) to make an offer (the "Change
of Control Offer") to each holder of Exchange Debentures to repurchase all
or any part of such holder's Exchange Debentures at a cash purchase price
equal to 101% of the aggregate principal amount thereof, plus an amount in
cash equal to accumulated and unpaid interest, if any, accrued to the date
of purchase. The Change of Control Offer must be made within 30 days
following a Change of Control, must remain open for at least 30 and not
more than 40 days and must comply with the requirements of Rule 14e-1 under
the Exchange Act and any other applicable securities laws and regulations.
Notwithstanding the foregoing, Holdings will not be required to make a
Change of Control Offer if any of the New Notes, 12 1/2% Notes or 13 1/2%
Notes are outstanding upon the occurrence of a Change of Control unless all
of the New Notes, 12 1/2% Notes and 13 1/2% Notes tendered pursuant to the
"Change of Control Offers" with respect thereto are repurchased as a result
of such Change of Control, in which case the date on which all New Notes,
12 1/2% Notes and 13 1/2% Notes (and any other Indebtedness of Holdings
having provisions similar to Section 4.04(x) of the Senior Discount Notes
Indenture) are so repurchased will, under the Exchange Indenture, be deemed
to be the date on which such Change of Control shall have occurred.
"Change of Control" means such time as (i) a "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of Voting Stock having more than 40% of the voting power of
the total Voting Stock of ICG on a fully diluted basis; (ii) individuals
who on the Closing Date constitute the Board of Directors of ICG (together
with any new directors whose election by the Board of Directors or whose
nomination for election by ICG's stockholders was approved by a vote of at
least a majority of the members of the Board of Directors then in office
who either were members of the Board of Directors on the Closing Date or
whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the members of the Board of
Directors then in office; or (iii) all of the Common Stock of Holdings is
not beneficially owned by ICG.
None of the provisions in the Exchange Debenture Indenture relating to
a purchase upon a Change of Control are waivable by Holdings' Board of
Directors. Holdings could, in the future, enter into certain transactions,
including certain recapitalizations of Holdings, that would not constitute
a Change of Control, but would increase the amount of indebtedness
outstanding at such time. If a Change of Control were to occur, Holdings
would be obligated to offer to repurchase all of the New Notes, 12 1/2%
Notes and 13 1/2% Notes prior to making an offer to repurchase Exchange
Debentures, and there can be no assurance that Holdings would have
sufficient funds to pay the purchase price for all the Exchange Debentures
that Holdings is required to purchase. In the event that Holdings were
required to purchase outstanding Exchange Debentures pursuant to a Change
of Control Offer, Holdings expects that it would need to seek third-party
financing, to the extent it does not have available funds, to meet its
purchase obligations. However, there can be no assurance that Holdings
would be able to obtain such financing. In addition, Holdings' ability to
purchase Exchange Debentures may be limited by other then-existing
agreements.
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CERTAIN COVENANTS
Limitation on Indebtedness
(a) Under the terms of the Exchange Debenture Indenture, the
Guarantor will not, and will not permit any of its Restricted Subsidiaries
to, Incur any Indebtedness (other than the Exchange Debentures, the
Debenture Guarantee and Indebtedness outstanding on the Exchange Debenture
Issue Date); provided that the Guarantor and Holdings may Incur
Indebtedness if, after giving effect to the Incurrence of such Indebtedness
and the receipt and application of the proceeds therefrom, the Indebtedness
to EBITDA Ratio would be greater than zero and less than 5:1.
Notwithstanding the foregoing, the Guarantor and any Restricted
Subsidiary (except as specified below) may Incur each and all of the
following: (i) Indebtedness of the Guarantor or Holdings outstanding at any
time, which Indebtedness generates gross proceeds to the Guarantor or
Holdings of up to $900 million, less the gross proceeds of Indebtedness
permanently repaid as provided under the "Limitation on Asset Sales"
covenant described below; (ii) Indebtedness to the Guarantor or any of its
Wholly Owned Restricted Subsidiaries; provided that any subsequent issuance
or transfer of any Capital Stock which results in any such Wholly Owned
Restricted Subsidiary ceasing to be a Wholly Owned Restricted Subsidiary or
any subsequent transfer of such Indebtedness (other than to the Guarantor
or another Wholly Owned Restricted Subsidiary) shall be deemed, in each
case, to constitute an Incurrence of such Indebtedness not permitted by
this clause (ii); (iii) Indebtedness issued in exchange for, or the net
proceeds of which are used to refinance or refund, then outstanding
Indebtedness, other than Indebtedness Incurred under clause (i), (ii), (v),
(vi), (viii), (ix), (xi) or (xii) of this paragraph, and any refinancings
thereof in an amount not to exceed the amount so refinanced or refunded
(plus premiums, accrued interest, fees and expenses); provided that
Indebtedness the proceeds of which are used to refinance or refund the
Exchange Debentures or Indebtedness that is pari passu with, or
subordinated in right of payment to, the Exchange Debentures or the
Debenture Guarantee shall only be permitted under this clause (iii) if (A)
in case the Exchange Debentures are refinanced in part or the Indebtedness
to be refinanced is pari passu with the Exchange Debentures or the
Debenture Guarantee, as the case may be, such new Indebtedness, by its
terms or by the terms of any agreement or instrument pursuant to which such
new Indebtedness is outstanding, is expressly made pari passu with, or
subordinate in right of payment to, the remaining Exchange Debentures or
the Debenture Guarantee, as the case may be, (B) in case the Indebtedness
to be refinanced is subordinated in right of payment to the Exchange
Debentures or the Debenture Guarantee, as the case may be, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is issued or remains outstanding,
is expressly made subordinate in right of payment to the Exchange
Debentures or the Debenture Guarantee, as the case may be, at least to the
extent that the Indebtedness to be refinanced is subordinated to the
Exchange Debentures or the Debenture Guarantee, as the case may be and (C)
such new Indebtedness, determined as of the date of Incurrence of such new
Indebtedness, does not mature prior to the Stated Maturity of the
Indebtedness to be refinanced or refunded, and the Average Life of such new
Indebtedness is at least equal to the remaining Average Life of the
Indebtedness to be refinanced or refunded; and provided further that in no
event may Indebtedness of the Guarantor or Holdings be refinanced by means
of any Indebtedness of any Restricted Subsidiary of the Guarantor or
Holdings, as the case may be, pursuant to this clause (iii); (iv)
Indebtedness (A) in respect of performance, surety or appeal bonds provided
in the ordinary course of business, (B) under Currency Agreements and
Interest Rate Agreements; provided that such agreements do not increase the
Indebtedness of the obligor outstanding at any time other than as a result
of fluctuations in foreign currency exchange rates or interest rates or by
reason of fees, indemnities and compensation payable thereunder; and (C)
arising from agreements providing for indemnification, adjustment of
purchase price or similar obligations, or from Guarantees or letters of
credit, surety bonds or performance bonds securing any obligations of
Holdings or any of its Restricted Subsidiaries pursuant to such agreements,
in any case Incurred in connection with the disposition of any business,
assets or Restricted Subsidiary of Holdings (other than Guarantees of
Indebtedness Incurred by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary of Holdings for the purpose of
financing such acquisition), in a principal amount at maturity not to
exceed the gross proceeds actually received by Holdings or any Restricted
Subsidiary in connection with such disposition; (v) Indebtedness of the
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Guarantor or, to the extent the proceeds referred to below are contributed
to Holdings, Holdings, not to exceed, at any one time outstanding, twice
the amount of Net Cash Proceeds received by the Guarantor after the Closing
Date from the issuance and sale of its Capital Stock (other than Redeemable
Stock); provided that such Indebtedness does not mature prior to the Stated
Maturity of the Exchange Debentures and has an Average Life longer than the
Exchange Debentures; (vi) Strategic Investor Subordinated Indebtedness;
(vii) Indebtedness of the Guarantor or Holdings, to the extent the proceeds
thereof are immediately used after the Incurrence thereof to purchase
Exchange Debentures or 14 1/4% Exchange Debentures, as the case may be,
tendered in an Offer to Purchase made as a result of a Change of Control or
a change of control, as the case may be; (viii) Indebtedness of any
Restricted Subsidiary of the Guarantor Incurred pursuant to any credit
agreement (including equipment leasing or financing agreements) of such
Restricted Subsidiary in effect on August 8, 1995 (or any agreement
refinancing Indebtedness under such credit agreement), up to the amount of
the commitment under such credit agreement on August 8, 1995; (ix)
Indebtedness of the Guarantor or Holdings, in an amount not to exceed $100
million at any one time outstanding, consisting of Capitalized Lease
Obligations with respect to assets that are used or useful in the
telecommunications business of the Guarantor or its Restricted
Subsidiaries; (x) Indebtedness incurred to defease the Exchange Debentures;
(xi) Indebtedness of any Person that becomes a Restricted Subsidiary of the
Guarantor after the Closing Date, which Indebtedness exists or for which
there is a commitment to lend at the time such Person becomes a Restricted
Subsidiary, and subsequent Incurrences thereof ("Acquired Indebtedness"),
in an accreted amount not to exceed $50 million at any one time outstanding
in aggregate for all such Restricted Subsidiaries; provided that such
Acquired Indebtedness does not exceed 65% of the consideration (calculated
by including the Acquired Indebtedness as part of such consideration) for
the acquisition of such Person; (xii) Indebtedness of the Guarantor or
Holdings, in an amount not to exceed $30 million at any one time
outstanding, consisting of letters of credit and similar arrangements used
to support obligations of the Guarantor or any of its Restricted
Subsidiaries with respect to the acquisition of (by purchase, lease or
otherwise), construction of, or improvements on, assets that will be used
or useful in the telecommunications business of the Guarantor or its
Restricted Subsidiaries; and (xiii) Indebtedness Incurred to finance the
cost (including the cost of design, development, construction, installation
or integration) of assets, equipment or inventory used or useful in the
telecommunications business of the Guarantor or any of its Restricted
Subsidiaries that is acquired by the Guarantor or any of its Restricted
Subsidiaries after the Closing Date.
(b) For purposes of determining any particular amount of Indebtedness
under this "Limitation on Indebtedness" covenant, Guarantees, Liens or
obligations with respect to letters of credit supporting Indebtedness
otherwise included in the determination of such particular amount shall not
be included. For purposes of determining compliance with this "Limitation
on Indebtedness" covenant, in the event that an item of Indebtedness meets
the criteria of more than one of the types of Indebtedness or Redeemable
Stock described in the above clauses, Holdings, in its sole discretion,
shall classify such item of Indebtedness or Redeemable Stock and only be
required to include the amount and type of such Indebtedness or Redeemable
Stock in one of such clauses.
Limitation on Restricted Payments
So long as any of the Exchange Debentures are outstanding, the
Guarantor will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, (i) declare or pay any dividend or make any
distribution on its Capital Stock (other than dividends or distributions
payable solely in shares of its or such Restricted Subsidiary's Capital
Stock (other than Redeemable Stock) of the same class held by such holders
or in options, warrants or other rights to acquire such shares of Capital
Stock) held by Persons other than the Guarantor or any of its Restricted
Subsidiaries (and other than pro rata dividends or distributions on Common
Stock of Restricted Subsidiaries), (ii) purchase, redeem, retire or
otherwise acquire for value any shares of Capital Stock of the Guarantor or
any Restricted Subsidiary (including options, warrants or other rights to
acquire such shares of Capital Stock) held by Persons other than the
Guarantor or any of its Wholly Owned Restricted Subsidiaries (except for
Capital Stock of ChoiceCom, MTN, StarCom, Ohio LINX, FOTI and Zycom to the
extent the consideration therefor consists solely of Common Stock (other
than Redeemable Stock) of the Guarantor transferred in compliance with the
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Securities Act), (iii) make any voluntary or optional principal payment, or
voluntary or optional redemption, repurchase, defeasance, or other
acquisition or retirement for value, of Indebtedness of Holdings or the
Guarantor that is subordinated in right of payment to the Exchange
Debentures or the Debenture Guarantee, as the case may be; or (iv) make any
Investment, other than a Permitted Investment, in any Person (such payments
or any other actions described in clauses (i) through (iv) being
collectively "Restricted Payments") if, at the time of, and after giving
effect to, the proposed Restricted Payment: (A) a Default or Event of
Default shall have occurred and be continuing, (B) the Guarantor could not
Incur at least $1.00 of Indebtedness under the first paragraph of the
"Limitation on Indebtedness" covenant or (C) the aggregate amount expended
for all Restricted Payments (the amount so expended, if other than in cash,
to be determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution)
after the date of the Exchange Debenture Indenture shall exceed the sum of
(1) 50% of the aggregate amount of the Adjusted Consolidated Net Income
(or, if the Adjusted Consolidated Net Income is a loss, minus 100% of such
amount) (determined by excluding income resulting from transfers of assets
by the Guarantor or a Restricted Subsidiary to an Unrestricted Subsidiary)
accrued on a cumulative basis during the period (taken as one accounting
period) beginning on the first day of the fiscal quarter immediately
following the Closing Date and ending on the last day of the last fiscal
quarter preceding the Transaction Date for which reports have been filed
pursuant to the "Reports" covenant plus (2) the aggregate Net Cash Proceeds
received by the Guarantor after the Closing Date from the issuance and sale
permitted by the Exchange Debenture Indenture of its Capital Stock (other
than Redeemable Stock) to a Person who is not a Subsidiary of the
Guarantor, or from the issuance to a Person who is not a Subsidiary of the
Guarantor of any options, warrants or other rights to acquire Capital Stock
of the Guarantor (in each case, exclusive of any Redeemable Stock or any
options, warrants or other rights that are redeemable at the option of the
holder, or are required to be redeemed, prior to the Stated Maturity of the
Exchange Debentures) plus (3) an amount equal to the net reduction in
Investments (other than reductions in Permitted Investments) in any Person
resulting from payments of interest on Indebtedness, dividends, repayments
of loans or advances, or other transfers of assets, in each case to the
Guarantor or any Restricted Subsidiary (except to the extent any such
payment is included in the calculation of Adjusted Consolidated Net
Income), or from redesignations of Unrestricted Subsidiaries as Restricted
Subsidiaries (valued in each case as provided in the definition of
"Investments"), not to exceed the amount of Investments previously made by
the Guarantor and its Restricted Subsidiaries in such Person.
The foregoing provision shall not be violated by reason of: (i) the
payment of any dividend within 60 days after the date of declaration
thereof if, at said date of declaration, such payment would comply with the
foregoing paragraph; (ii) the redemption, repurchase, defeasance or other
acquisition or retirement for value of Indebtedness that is subordinated in
right of payment to the Exchange Debentures or the Debenture Guarantee, as
the case may be, including premium, if any, and accrued and unpaid
interest, with the proceeds of, or in exchange for, Indebtedness Incurred
under clause (iii) of the second paragraph of the "Limitation on
Indebtedness" covenant; (iii) the repurchase, redemption or other
acquisition of Capital Stock of the Guarantor or Holdings (or options,
warrants or other rights to acquire such Capital Stock) and with respect to
any preferred stock, the payment of accrued dividends thereon, in exchange
for, or out of the proceeds of a substantially concurrent issuance or sale
of, shares of Capital Stock (other than Redeemable Stock) of the Guarantor
or Holdings; provided that the redemption of any preferred stock and the
payment of accrued dividends thereon pursuant to any mandatory redemption
feature thereof and any redemption of any other Capital Stock and with
respect to any preferred stock, the payment of accrued dividends thereon
(or options, warrants or other rights to acquire such Capital Stock) shall
be deemed to be "substantially concurrent" with such issuance and sale if
the required notice with respect to such redemption is irrevocably given by
a date which is no later than five Business Days after receipt of the
proceeds of such issuance and sale and such redemption and payment is
consummated within the period provided for in the documents providing for
the redemption of such preferred stock or the documents governing the
redemption of such other Capital Stock, as the case may be; (iv) the
acquisition of Indebtedness of Holdings or the Guarantor which is
subordinated in right of payment to the Exchange Debentures or the
Debenture Guarantee, as the case may be, in exchange for, or out of the
proceeds of, a substantially concurrent offering of, shares of the Capital
Stock of the Guarantor (other than Redeemable Stock); (v) payments or
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distributions, in the nature of satisfaction of dissenters' rights,
pursuant to or in connection with a consolidation, merger or transfer of
assets that complies with the provisions of the Exchange Debenture
Indenture applicable to mergers, consolidations and transfers of all or
substantially all of the property and assets of Holdings or the Guarantor;
(vi) Investments, not to exceed $10 million in aggregate, each evidenced by
a senior promissory note payable to Holdings that provides that it will
become due and payable prior to (or, in the case of acceleration,
concurrently with) any required repayment (including pursuant to an Offer
to Purchase in connection with a Change of Control) of the Exchange
Debentures; (vii) Investments, not to exceed $5 million in the aggregate,
that meet the requirements of clause (vi) above; provided that the Board of
Directors of the Guarantor shall have determined, in good faith, that each
such Investment under this clause (vii) will enable the Guarantor, Holdings
or one of their Restricted Subsidiaries to obtain additional business that
it might not be able to obtain without the making of such Investment;
(viii) with respect to preferred stock permitted to be issued and sold by
the "Limitation on Issuance and Sale of Capital Stock of Restricted
Subsidiaries" covenant, the payment (A) of dividends on such preferred
stock in additional shares of preferred stock and (B) of cash dividends on
such preferred stock and accrued interest on unpaid dividends, in each case
after May 1, 2001; (ix) the repurchase, in the event of a Change of
Control, of preferred stock of Holdings or the Guarantor and Indebtedness
of Holdings or the Guarantor into which such preferred stock has been
exchanged; provided that prior to repurchasing such preferred stock or
Indebtedness, Holdings or the Guarantor, as the case may be, shall have
made a Change of Control Offer to repurchase the Exchange Debentures in
accordance with the terms of the Exchange Debenture Indenture (and an offer
to repurchase other Indebtedness, if required by the terms thereof, in
accordance with the indenture or other document governing such other
Indebtedness) and shall have accepted and paid for any Exchange Debentures
(and other Indebtedness) properly tendered in connection with such Change
of Control Offer for the Exchange Debentures or change of control offer for
such other Indebtedness; and (x) the issuance of Indebtedness permitted to
be issued under the Exchange Debenture Indenture in exchange for preferred
stock; provided that the Incurrence of such Indebtedness complies with the
"Limitation on Indebtedness" covenant; provided that, except in the case of
clauses (i) and (iii), no Default or Event of Default shall have occurred
and be continuing or occur as a consequence of the actions or payments set
forth therein.
Each Restricted Payment permitted pursuant to the preceding paragraph
(other than the Restricted Payment referred to in clauses (ii), (viii)(A)
and (x) thereof), and the Net Cash Proceeds from any issuance of Capital
Stock referred to in clause (iii) or (iv) shall be included in calculating
whether the conditions of clause (C) of the first paragraph of this
"Limitation on Restricted Payments" covenant have been met with respect to
any subsequent Restricted Payments. Notwithstanding the foregoing, in the
event the proceeds of an issuance of Capital Stock of the Guarantor are
used for the redemption, repurchase or other acquisition of the Exchange
Debentures, or Indebtedness that is pari passu with or senior to the
Exchange Debentures, then the Net Cash Proceeds of such issuance shall be
included in clause (C) of the first paragraph of this "Limitation on
Restricted Payments" covenant only to the extent such proceeds are not used
for such redemption, repurchase or other acquisition of such Indebtedness.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
So long as any of the Exchange Debentures are outstanding, the
Guarantor will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or suffer to exist or become effective any
consensual encumbrance or restriction of any kind on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other distributions
permitted by applicable law on any Capital Stock of such Restricted
Subsidiary owned by the Guarantor or any other Restricted Subsidiary, (ii)
pay any Indebtedness owed to the Guarantor or any other Restricted
Subsidiary, (iii) make loans or advances to the Guarantor or any other
Restricted Subsidiary or (iv) transfer any of its property or assets to the
Guarantor or any other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Exchange Debenture Issue Date in the
Exchange Debenture Indenture or any other agreements in effect on the
Exchange Debenture Issue Date, and any extensions, refinancings, renewals
or replacements of such agreements; provided that the encumbrances and
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restrictions in any such extensions, refinancings, renewals or replacements
are no less favorable in any material respect to the Holders than those
encumbrances or restrictions that are then in effect and that are being
extended, refinanced, renewed or replaced; (ii) existing under or by reason
of applicable law; (iii) existing with respect to any Person or the
property or assets of such Person acquired by the Guarantor or any
Restricted Subsidiary, existing at the time of such acquisition and not
incurred in contemplation thereof, which encumbrances or restrictions are
not applicable to any Person or the property or assets of any Person other
than such Person or the property or assets of such Person so acquired; (iv)
in the case of clause (iv) of the first paragraph of this "Limitation on
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries"
covenant, (A) that restrict in a customary manner the subletting,
assignment or transfer of any property or asset that is a lease, license,
conveyance or contract or similar property or asset, (B) existing by virtue
of any transfer of, agreement to transfer, option or right with respect to,
or Lien on, any property or assets of the Guarantor or any Restricted
Subsidiary not otherwise prohibited by the Exchange Debenture Indenture or
(C) arising or agreed to in the ordinary course of business, not relating
to any Indebtedness, and that do not, individually or in the aggregate,
detract from the value of property or assets of the Guarantor or any
Restricted Subsidiary in any manner material to the Guarantor or any
Restricted Subsidiary; (v) with respect to a Restricted Subsidiary and
imposed pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock of, or
property and assets of, such Restricted Subsidiary; or (vi) imposed
pursuant to preferred stock of Holdings issued pursuant to clause (vi) of
the "Limitation on Issuance and Sale of Capital Stock of Restricted
Subsidiaries" covenant, or exchange debentures or exchange notes of
Holdings issued in exchange therefor; provided that such restrictions (A)
may include a prohibition (x) on payments on Capital Stock upon
liquidation, winding-up and dissolution of Holdings and (y) on the payment
of dividends on and the making of any distribution on, or the purchase,
redemption, retirement or other acquisition for value of, Capital Stock of
Holdings if dividends or other amounts on such preferred stock are unpaid
and (B) any restrictions imposed pursuant to preferred stock of Holdings
other than pursuant to clause (A) shall be no more restrictive than the
restrictions contained in the Exchange Debenture Indenture (assuming that
references to the Guarantor in the Exchange Debenture Indenture were
replaced with references to Holdings). Nothing contained in this
"Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries" covenant shall prevent the Guarantor or any Restricted
Subsidiary from (1) creating, incurring, assuming or suffering to exist any
Liens otherwise permitted in the "Limitation on Liens" covenant or (2)
restricting the sale or other disposition of property or assets of the
Guarantor or any of its Restricted Subsidiaries that secure Indebtedness of
the Guarantor or any of its Restricted Subsidiaries.
Limitation on Issuances and Sale of Capital Stock of Restricted
Subsidiaries
Under the terms of the Exchange Debenture Indenture, the Guarantor
will not sell, and will not permit any Restricted Subsidiary, directly or
indirectly, to issue or sell, any shares of Capital Stock of a Restricted
Subsidiary (including options, warrants or other rights to purchase shares
of such Capital Stock) except (i) to the Guarantor or a Wholly Owned
Restricted Subsidiary; (ii) issuances or sales to foreign nationals of
shares of Capital Stock of foreign Restricted Subsidiaries, to the extent
required by applicable law; (iii) if, immediately after giving effect to
such issuance or sale, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary; (iv) with respect to Common Stock of
ChoiceCom, MTN, StarCom and Zycom; provided that the proceeds of any such
sale under clause (iv) shall be applied in accordance with clause (A) or
(B) of the first paragraph of the "Limitation on Asset Sales" covenant
described below; (v) with respect to Common Stock of FOTI; provided that
FOTI shall not retain any net proceeds from such sales or issuances in
excess of $10 million in the aggregate and any net proceeds in excess of
such $10 million shall be received by, or paid promptly by FOTI to, the
Guarantor, Holdings or any Wholly Owned Restricted Subsidiary of the
Guarantor; and (vi) with respect to (A) preferred stock of Holdings having
an initial liquidation preference of up to $250 million and (B) any
preferred stock of Holdings issued as dividends on such preferred stock;
provided that such preferred stock does not require the payment of cash
dividends prior to May 1, 2001.
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Limitation on Issuances of Guarantees by Restricted Subsidiaries
The Guarantor will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of Holdings or any Indebtedness
of the Guarantor ("Guaranteed Indebtedness"), unless (i) such Restricted
Subsidiary simultaneously executes and delivers a supplemental indenture to
the Exchange Debenture Indenture providing for a Guarantee (a "Subsidiary
Guarantee") of payment of the Exchange Debentures by such Restricted
Subsidiary and (ii) such Restricted Subsidiary waives and will not in any
manner whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the
Guarantor, Holdings or any other Restricted Subsidiary as a result of any
payment by such Restricted Subsidiary under its Subsidiary Guarantee;
provided that this paragraph shall not be applicable to any Guarantee of
any Restricted Subsidiary that (x) existed at the time such Person became a
Restricted Subsidiary and (y) was not Incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary. If the
Guaranteed Indebtedness is (A) pari passu with the Exchange Debentures or
the Debenture Guarantee, then the Guarantee of such Guaranteed Indebtedness
shall be pari passu with, or subordinated to, the Subsidiary Guarantee or
(B) subordinated to the Exchange Debentures or the Debenture Guarantee,
then the Guarantee of such Guaranteed Indebtedness shall be subordinated to
the Subsidiary Guarantee at least to the extent that the Guaranteed
Indebtedness is subordinated to the Exchange Debentures or the Debenture
Guarantee, as the case may be.
If, on or prior to the Exchange Debenture Issue Date, any Restricted
Subsidiary shall have Guaranteed any Guaranteed Indebtedness, the Guarantor
shall cause such Restricted Subsidiary to grant a Subsidiary Guarantee
meeting the requirements of the preceding paragraph. Such Subsidiary
Guarantee shall be granted on the Exchange Debenture Issue Date.
Notwithstanding the foregoing, any Subsidiary Guarantee by a
Restricted Subsidiary shall provide by its terms that it shall be
automatically and unconditionally released and discharged upon (i) any
sale, exchange or transfer, to any Person not an Affiliate of the
Guarantor, of all of Holdings' and each Restricted Subsidiary's Capital
Stock in, or all or substantially all the assets of, such Restricted
Subsidiary (which sale, exchange or transfer is not prohibited by the
Exchange Debenture Indenture) or (ii) the release or discharge of the
Guarantee which resulted in the creation of such Subsidiary Guarantee,
except a discharge or release by or as a result of payment under such
Guarantee.
Limitation on Transactions with Shareholders and Affiliates
Under the terms of the Exchange Debenture Indenture, the Guarantor
will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, enter into, renew or extend any transaction (including, without
limitation, the purchase, sale, lease or exchange of property or assets, or
the rendering of any service) with any holder (or any Affiliate of such
holder) of 5% or more of any class of Capital Stock of the Guarantor or
with any Affiliate of the Guarantor or any Restricted Subsidiary, except
upon fair and reasonable terms no less favorable to the Guarantor or such
Restricted Subsidiary than could be obtained, at the time of such
transaction or at the time of the execution of the agreement providing
therefor, in a comparable arm's-length transaction with a Person that is
not such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to (i)
transactions (A) approved by a majority of the disinterested members of the
Board of Directors or (B) for which the Guarantor or a Restricted
Subsidiary delivers to the Trustee a written opinion of a nationally
recognized investment banking firm stating that the transaction is fair to
the Guarantor or such Restricted Subsidiary from a financial point of view;
(ii) any transaction solely between the Guarantor and any of its Wholly
Owned Restricted Subsidiaries or solely between Wholly Owned Restricted
Subsidiaries; (iii) the payment of reasonable and customary regular fees to
directors of the Guarantor, Holdings (Canada) or Holdings who are not
employees of the Guarantor, Holdings (Canada) or Holdings; (iv) any
payments or other transactions pursuant to any tax-sharing agreement
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between the Guarantor and any other Person with which the Guarantor files a
consolidated tax return or with which the Guarantor is part of a
consolidated group for tax purposes; or (v) any Restricted Payments not
prohibited by the "Limitation on Restricted Payments" covenant.
Notwithstanding the foregoing, any transaction covered by the first
paragraph of this "Limitation on Transactions with Shareholders and
Affiliates" covenant and not covered by clauses (ii) through (iv) of this
paragraph, the aggregate amount of which exceeds $2 million in value, must
be approved or determined to be fair in the manner provided for in clause
(i)(A) or (B) above.
Limitation on Liens
Under the terms of the Exchange Debenture Indenture, the Guarantor
will not, and will not permit any Restricted Subsidiary to, create, incur,
assume or suffer to exist any Lien on any of its assets or properties of
any character, or any shares of Capital Stock or Indebtedness of any
Restricted Subsidiary, without making effective provision for all of the
Exchange Debentures (or, in the case of a Lien on assets or properties of
the Guarantor, the Debenture Guarantee) and all other amounts due under the
Exchange Debenture Indenture to be directly secured equally and ratably
with (or, if the obligation or liability to be secured by such Lien is
subordinated in right of payment to the Exchange Debentures or the
Debenture Guarantee, prior to) the obligation or liability secured by such
Lien.
The foregoing limitation does not apply to (i) Liens existing on the
Closing Date; (ii) Liens granted after the Closing Date on any assets or
Capital Stock of Holdings (Canada), Holdings or any of their Restricted
Subsidiaries created in favor of the Holders; (iii) Liens with respect to
the assets of a Restricted Subsidiary granted by such Restricted Subsidiary
to the Guarantor or a Wholly Owned Restricted Subsidiary to secure
Indebtedness owing to the Guarantor or such other Restricted Subsidiary;
(iv) Liens securing Indebtedness which is Incurred to refinance secured
Indebtedness which is permitted to be Incurred under clause (iii) of the
second paragraph of the "Limitation on Indebtedness" covenant; provided
that such Liens do not extend to or cover any property or assets of the
Guarantor, Holdings or any Restricted Subsidiary other than the property or
assets securing the Indebtedness being refinanced; (v) Liens with respect
to assets or properties of any Person that becomes a Restricted Subsidiary
after the Closing Date; provided that such Liens do not extend to or cover
any assets or properties of the Guarantor or any of its Restricted
Subsidiaries other than the assets or properties of such Person subject to
such Lien on the date such Person becomes a Restricted Subsidiary; and
provided further that such Liens are not incurred in contemplation of, or
in connection with, such Person becoming a Restricted Subsidiary; (vi)
Permitted Liens; (vii) Liens securing Senior Indebtedness or Senior
Guarantor Indebtedness; or (viii) Liens, solely in favor of Acquired
Indebtedness, on Capital Stock of Persons that become Restricted
Subsidiaries of the Guarantor after the Closing Date.
Merger, Consolidation and Sale of Assets
Neither Holdings nor the Guarantor shall consolidate with, merge with
or into, or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets (as an entirety or
substantially an entirety in one transaction or a series of related
transactions) to, any Person (other than a consolidation or merger with or
into a Wholly Owned Restricted Subsidiary with a positive net worth;
provided that, in connection with any such merger or consolidation, no
consideration (other than Common Stock in the surviving Person, Holdings or
the Guarantor) shall be issued or distributed to the stockholders of
Holdings or the Guarantor) or permit any Person to merge with or into
Holdings or the Guarantor unless: (i) Holdings or the Guarantor shall be
the continuing Person, or the Person (if other than Holdings or the
Guarantor) formed by such consolidation or into which Holdings or the
Guarantor is merged or that acquired or leased such property and assets of
Holdings or the Guarantor shall be a corporation organized and validly
existing under the laws of the United States of America or any jurisdiction
thereof and shall expressly assume, by a supplemental indenture, executed
and delivered to the Trustee, all of the obligations of Holdings or the
Guarantor, as the case may be, and under the Exchange Debenture Indenture;
(ii) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing; (iii) immediately
after giving effect to such transaction on a pro forma basis, Holdings or
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the Guarantor, as the case may be, or any Person becoming the successor
obligor of the Exchange Debentures or the Debenture Guarantee, as the case
may be, shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of Holdings or the Guarantor, as the case may be,
immediately prior to such transaction; (iv) immediately after giving effect
to such transaction on a pro forma basis Holdings, or any Person becoming
the successor obligor of the Exchange Debentures, as the case may be, could
Incur at least $1.00 of Indebtedness under the first paragraph of the
"Limitation on Indebtedness" covenant; and (v) Holdings delivers to the
Trustee an Officers' Certificate (attaching the arithmetic computations to
demonstrate compliance with clauses (iii) and (iv) above) and an Opinion of
Counsel, in each case stating that such consolidation, merger or transfer
and such supplemental indenture complies with this provision and that all
conditions precedent provided for herein relating to such transaction have
been complied with; provided, however, that clauses (iii) and (iv) above do
not apply if, in the good faith determination of the Board of Directors of
the Guarantor, whose determination shall be evidenced by a Board
Resolution, the principal purpose of such transaction is part of a plan to
change the jurisdiction of incorporation of Holdings or the Guarantor to a
state of the United States; and provided further that any such transaction
shall not have as one of its purposes the evasion of the foregoing
limitations.
Limitation on Asset Sales
Under the terms of the Exchange Debenture Indenture, the Guarantor
will not, and will not permit any Restricted Subsidiary to, consummate any
Asset Sale, unless (i) the consideration received by the Guarantor or such
Restricted Subsidiary is at least equal to the fair market value of the
assets sold or disposed of and (ii) at least 75% of the consideration
received consists of cash or Temporary Cash Investments. In the event and
to the extent that the Net Cash Proceeds received by the Guarantor or its
Restricted Subsidiaries from one or more Asset Sales occurring on or after
the Closing Date in any period of 12 consecutive months exceed 10% of
Adjusted Consolidated Net Tangible Assets (determined as of the date
closest to the commencement of such 12-month period for which a
consolidated balance sheet of Holdings and its Subsidiaries has been
prepared), then the Guarantor shall or shall cause the relevant Restricted
Subsidiary to (i) within six months after the date Net Cash Proceeds so
received exceed 10% of Adjusted Consolidated Net Tangible Assets (A) apply
an amount equal to such excess Net Cash Proceeds to permanently repay
unsubordinated Indebtedness of the Guarantor or Holdings, or Indebtedness
of any Restricted Subsidiary other than Holdings, in each case owing to a
Person other than the Guarantor or any of its Restricted Subsidiaries or
(B) invest an equal amount, or the amount not so applied pursuant to clause
(A) (or enter into a definitive agreement committing to so invest within
six months after the date of such agreement), in property or assets of a
nature or type or that are used in a business (or in a company having
property and assets of a nature or type, or engaged in a business) similar
or related to the nature or type of the property and assets of, or the
business of, the Guarantor and its Restricted Subsidiaries existing on the
date of such investment (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and evidenced by a Board
Resolution) and (ii) apply (no later than the end of the six-month period
referred to in clause (i)) such excess Net Cash Proceeds (to the extent not
applied pursuant to clause (i)) as provided in the following paragraphs of
this "Limitation on Asset Sales" covenant. The amount of such excess Net
Cash Proceeds required to be applied (or to be committed to be applied)
during such six-month period as set forth in clause (i) of the preceding
sentence and not applied as so required by the end of such period shall
constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to
this "Limitation on Asset Sales" covenant totals at least $10 million,
Holdings must commence, not later than the seventy-fifth Business Day
following the first day of such month, and consummate an Offer to Purchase
from the Holders on a pro rata basis an aggregate principal amount of
Exchange Debentures equal to the Excess Proceeds on such date, at a
purchase price equal to 101% of the aggregate principal amount of the
Exchange Debentures, plus, in each case, accrued interest (if any) to the
date of purchase.
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Senior Subordinated Indebtedness
Neither the Guarantor nor Holdings will incur any Indebtedness, other
than the Exchange Debentures or the Debenture Guarantee, respectively, that
is expressly made subordinated in right of payment to any Senior
Indebtedness or Senior Guarantor Indebtedness, unless such Indebtedness, by
its terms and by the terms of any agreement or instrument pursuant to which
such Indebtedness is outstanding is expressly made pari passu with, or
subordinate in right of payment to, the Exchange Debentures or the
Debenture Guarantee, as the case may be, pursuant to provisions
substantially similar to those contained in Article Eleven of the Exchange
Debenture Indenture; provided that the foregoing limitations shall not
apply to distinctions between categories of Senior Indebtedness that exist
by reason of any Liens or Guarantees arising or created in respect of some
but not all Senior Indebtedness.
Reports
So long as any Exchange Debentures are outstanding, Holdings and the
Guarantor shall file with the Commission the annual reports, quarterly
reports and the information, documents and other reports required to be
filed by Holdings with the Commission pursuant to Sections 13 or 15 of the
Exchange Act, whether or not Holdings has or is required to have a class of
securities registered under the Exchange Act, at the time it is or would be
required to file the same with the Commission and, within 15 days after
Holdings is or would be required to file such reports, information or
documents with the Commission, shall mail such reports, information and
documents to the Trustee and to holders of the Exchange Debentures.
EVENTS OF DEFAULT
The following events will be defined as "Events of Default" in the
Exchange Debenture Indenture: (a) default in the payment of principal of
(or premium, if any, on) any Exchange Debenture when the same becomes due
and payable at maturity, upon acceleration, redemption or otherwise whether
or not such payment is prohibited by Article Eleven of the Exchange
Debenture Indenture; (b) default in the payment of interest on any Exchange
Debenture when the same becomes due and payable, and such default continues
for a period of 30 days whether or not such payment is prohibited by
Article Eleven of the Exchange Debenture Indenture; (c) Holdings or the
Guarantor defaults in the performance of or breaches any other covenant or
agreement of Holdings or the Guarantor in the Exchange Debenture Indenture
or under the Exchange Debentures and such default or breach continues for a
period of 30 consecutive days after written notice to Holdings by the
Trustee or the Holders of 25% or more in aggregate principal amount of the
Exchange Debentures; (d) there occurs with respect to any issue or issues
of Indebtedness of Holdings, the Guarantor or any Significant Subsidiary
having an outstanding principal amount at maturity of $10 million or more
in the aggregate for all such issues of all such Persons, whether such
Indebtedness now exists or shall hereafter be created, (I) an event of
default that has caused the holder thereof to declare such Indebtedness to
be due and payable prior to its Stated Maturity and such Indebtedness has
not been discharged in full or such acceleration has not been rescinded or
annulled within 30 days of such acceleration and/or (II) the failure to
make a principal payment at the final (but not any interim) fixed maturity
and such defaulted payment shall not have been made, waived or extended
within 30 days of such payment default; (e) any final judgment or order
(not covered by insurance) for the payment of money in excess of $10
million in the aggregate for all such final judgments or orders against all
such Persons (treating any deductibles, self-insurance or retention as not
so covered) shall be rendered against Holdings, the Guarantor or any
Significant Subsidiary and shall not be paid or discharged, and there shall
be any period of 30 consecutive days following entry of the final judgment
or order that causes the aggregate amount for all such final judgments or
orders outstanding and not paid or discharged against all such Persons to
exceed $10 million during which a stay of enforcement of such final
judgment or order, by reason of a pending appeal or otherwise, shall not be
in effect; (f) a court having jurisdiction in the premises enters a decree
or order for (A) relief in respect of Holdings, the Guarantor or any
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Significant Subsidiary in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, (B)
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of Holdings, the Guarantor or any
Significant Subsidiary or for all or substantially all of the property and
assets of Holdings, the Guarantor or any Significant Subsidiary or (C) the
winding up or liquidation of the affairs of Holdings, the Guarantor or any
Significant Subsidiary and, in each case, such decree or order shall remain
unstayed and in effect for a period of 30 consecutive days; or (g)
Holdings, the Guarantor or any Significant Subsidiary (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (B) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of Holdings, the
Guarantor or any Significant Subsidiary or for all or substantially all of
the property and assets of Holdings, the Guarantor or any Significant
Subsidiary or (C) effects any general assignment for the benefit of
creditors.
If an Event of Default (other than an Event of Default specified in
clause (f) or (g) above that occurs with respect to Holdings or the
Guarantor) occurs and is continuing under the Exchange Debenture Indenture,
the Trustee or the Holders of at least 25% in aggregate principal amount of
the Exchange Debentures, then outstanding, by written notice to Holdings
(and to the Trustee if such notice is given by the Holders), may, and the
Trustee at the request of such Holders shall, declare the principal amount
of, premium, if any, and accrued interest, if any, on the Exchange
Debentures to be immediately due and payable. Upon a declaration of
acceleration, such principal amount, premium, if any, and accrued interest,
if any, shall be immediately due and payable. In the event of a declaration
of acceleration because an Event of Default set forth in clause (d) above
has occurred and is continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the event of default triggering
such Event of Default pursuant to clause (d) shall be remedied or cured by
Holdings, the Guarantor or the relevant Significant Subsidiary or waived by
the holders of the relevant Indebtedness within 60 days after the
declaration of acceleration with respect thereto. If an Event of Default
specified in clause (f) or (g) above occurs with respect to Holdings or the
Guarantor, the principal amount of, premium, if any, and accrued interest,
if any, on the Exchange Debentures then outstanding shall ipso facto become
and be immediately due and payable without any declaration or other act on
the part of the Trustee or any Holder. The Holders of at least a majority
in principal amount of the outstanding Exchange Debentures by written
notice to Holdings and to the Trustee, may waive all past defaults and
rescind and annul a declaration of acceleration and its consequences if,
among other things, (i) all existing Events of Default, other than the
nonpayment of the principal of, premium, if any, and accrued interest on
the Exchange Debentures that have become due solely by such declaration of
acceleration, have been cured or waived and (ii) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction.
For information as to the waiver of defaults, see "-Modification and
Waiver."
The Holders of at least a majority in aggregate principal amount of
the outstanding Exchange Debentures may direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee. However, the
Trustee may refuse to follow any direction that conflicts with law or the
Exchange Debenture Indenture, that may involve the Trustee in personal
liability, or that the Trustee determines in good faith may be unduly
prejudicial to the rights of Holders of Exchange Debentures not joining in
the giving of such direction and may take any other action it deems proper
that is not inconsistent with any such direction received from Holders of
Exchange Debentures. A Holder may not pursue any remedy with respect to the
Exchange Debenture Indenture or the Exchange Debentures unless: (i) the
Holder gives the Trustee written notice of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of
outstanding Exchange Debentures make a written request to the Trustee to
pursue the remedy; (iii) such Holder or Holders offer the Trustee indemnity
satisfactory to the Trustee against any costs, liability or expense; (iv)
the Trustee does not comply with the request within 60 days after receipt
of the request and the offer of indemnity; and (v) during such 60-day
period, the Holders of a majority in aggregate principal amount of the
outstanding Exchange Debentures do not give the Trustee a direction that is
inconsistent with the request. However, such limitations do not apply to
the right of any Holder of an Exchange Debenture to receive payment of the
principal of, premium, if any, or accrued interest on, such Exchange
Debenture or to bring suit for the enforcement of any such payment, on or
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after the due date expressed in the Exchange Debentures, which right shall
not be impaired or affected without the consent of the Holder.
The Exchange Debenture Indenture will require certain officers of
Holdings and the Guarantor to certify, on or before a date not more than 90
days after the end of each fiscal year of the Guarantor, that a review has
been conducted of the activities of Holdings, or the Guarantor, as the case
may be, and its Restricted Subsidiaries and Holdings', or the Guarantor's,
and its Restricted Subsidiaries' performance under the Exchange Debenture
Indenture and that Holdings and the Guarantor have fulfilled all
obligations thereunder, or, if there has been a default in the fulfillment
of any such obligation, specifying each such default and the nature and
status thereof. Holdings and the Guarantor will also be obligated to notify
the Trustee of any default or defaults in the performance of any covenants
or agreements under the Exchange Debenture Indenture.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Holdings may, at its option and at any time, elect to have its
obligations discharged with respect to the outstanding Exchange Debentures
("legal defeasance"). Such legal defeasance means that Holdings shall be
deemed to have paid and discharged the entire indebtedness represented by
the outstanding Exchange Debentures, except for (a) the rights of Holders
of outstanding Exchange Debentures to receive payments in respect of the
principal of, and premium, if any, and interest on, such Exchange
Debentures when such payments are due, or on the redemption date, as the
case may be, (b) Holdings' obligations with respect to the Exchange
Debentures concerning issuing temporary Exchange Debentures, registration
of Exchange Debentures, mutilated, destroyed, lost or stolen Exchange
Debentures and the maintenance of an office or agency for payment and money
for security payments held in trust, (c) the rights, powers, trust, duties
and immunities of the Trustee, and Holdings' obligations in connection
therewith and (d) the legal defeasance provisions of the Exchange Debenture
Indenture. In addition, Holdings may, at its option and at any time, elect
to have the obligations of Holdings released with respect to certain
covenants that are described in the Exchange Debenture Indenture ("covenant
defeasance") and thereafter any omission to comply with such obligations
shall not constitute a Default or Event of Default with respect to the
Exchange Debentures. In the event covenant defeasance occurs, certain
events (not including non-payment, bankruptcy, receivership, rehabilitation
and insolvency events) described under "Events of Default" will no longer
constitute an Event of Default with respect to the Exchange Debentures.
In order to exercise either legal defeasance or covenant defeasance,
(i) Holdings must irrevocably deposit with the Trustee, in trust, for the
benefit of the holders of the Exchange Debentures, cash in U.S. dollars,
non-callable U.S. government obligations, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants selected by the Trustee, to pay the
principal of, and premium, if any, and interest on, the outstanding
Exchange Debentures on the stated maturity or on the applicable optional
redemption date, as the case may be, of such principal or installment of
principal of, or premium, if any, or interest on, the outstanding Exchange
Debentures; (ii) in the case of legal defeasance, Holdings shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that (A) Holdings has
received from, or there has been published by, the Internal Revenue Service
a ruling or (B) since the Preferred Stock Issue Date, there has been a
change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion of counsel shall confirm that,
the holders of the outstanding Exchange Debentures will not recognize
income, gain or loss for federal income tax purposes as a result of such
legal defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such legal defeasance had not occurred; (iii) in the case of
covenant defeasance, Holdings shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the
Trustee confirming that the holders of the outstanding Exchange Debentures
will not recognize income, gain or loss for federal income tax purposes as
a result of such covenant defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would
have been the case if such covenant defeasance had not occurred; (iv) no
Default or Event of Default shall have occurred and be continuing on the
date of such deposit or, insofar as Events of Default from bankruptcy or
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insolvency events are concerned, at any time in the period ending on the
123rd day after the date of deposit; (v) such legal defeasance or covenant
defeasance shall not result in a breach or violation of, or constitute a
default under, the Exchange Debenture Indenture or any other material
agreement or instrument to which Holdings is a party or by which Holdings
is bound; (vi) Holdings shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by Holdings with the
intent of preferring the holders of Exchange Debentures over the other
creditors of Holdings or with the intent of defeating, hindering, delaying
or defrauding creditors of the Company or others; and (vii) Holdings shall
have delivered to the Trustee an Officers' Certificate and an opinion of
counsel, each stating that all conditions precedent relating to the legal
defeasance or the covenant defeasance have been complied with.
MODIFICATION AND WAIVER
Modifications and amendments of the Exchange Debenture Indenture may
be made by Holdings, the Guarantor and the Trustee with the consent of the
Holders of not less than a majority in aggregate principal amount of the
outstanding Exchange Debentures; provided, however, that no such
modification or amendment may, without consent of each Holder affected
thereby, (i) change the Stated Maturity of the principal of, or any
installment of interest on, any Exchange Debenture, (ii) reduce the
principal amount of, or any premium, if any, payable upon the redemption
of, or the rate of interest on, any Exchange Debenture, (iii) adversely
affect the right of repayment at the option of any Holder of any Exchange
Debenture, (iv) change the currency in which principal of, or premium, if
any, or interest on, any Exchange Debenture is payable, (v) impair the
right to institute suit for the enforcement of any payment on or after the
Stated Maturity (or, in the case of a redemption, on or after the
Redemption Date) of any Exchange Debenture, (vi) waive a default in the
payment of principal of, premium, if any, or interest on the Exchange
Debenture, (vii) reduce the percentage in principal amount of outstanding
Exchange Debentures the consent of whose Holders is necessary for waiver of
compliance with certain provisions of the Exchange Debenture Indenture or
for waiver of certain defaults, (viii) release the Guarantor from its
Debenture Guarantee or (ix) modify any of the provisions of Article Eleven
of the Exchange Debenture Indenture in a manner adverse to the Holders.
NO PERSONAL LIABILITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS, DIRECTORS,
OR EMPLOYEES
The Exchange Debenture Indenture provides that no recourse for the
payment of the principal of, premium, if any, or interest on any of the
Exchange Debentures or for any claim based thereon or otherwise in respect
thereof, and no recourse under or upon any obligation, covenant or
agreement of Holdings or the Guarantor in the Exchange Debenture Indenture,
or in any of the Exchange Debentures or because of the creation of any
Indebtedness represented thereby, shall be had against any incorporator,
shareholder, officer, director, employee or controlling person of Holdings
or the Guarantor or of any successor Person thereof. Each Holder, by
accepting the Exchange Debentures, waives and releases all such liability.
CONCERNING THE TRUSTEE
The Exchange Debenture Indenture provides that, except during the
continuance of a Default, the Trustee will not be liable, except for the
performance of such duties as are specifically set forth in such Exchange
Debenture Indenture. If an Event of Default has occurred and is continuing,
the Trustee will use the same degree of care and skill in its exercise as a
prudent person would exercise under the circumstances in the conduct of
such person's own affairs.
The Exchange Debenture Indenture and provisions of the Trust Indenture
Act of 1939, as amended, incorporated by reference therein contain
limitations on the rights of the Trustee, should it become a creditor of
Holdings or the Guarantor, to obtain payment of claims in certain cases or
to realize on certain property received by it in respect of any such
claims, as security or otherwise. The Trustee is permitted to engage in
other transactions; provided, however, that if it acquires any conflicting
interest, it must eliminate such conflict or resign.
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CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Exchange
Debenture Indenture. Reference is made to the Exchange Debenture Indenture
for the full definition of such terms, as well as any other capitalized
terms used herein for which no definition is provided.
"Adjusted Consolidated Net Income" means, for any period, the
aggregate net income (or loss) of the Guarantor and its Restricted
Subsidiaries for such period determined in conformity with GAAP; provided
that the following items shall be excluded in computing Adjusted
Consolidated Net Income (without duplication): (i) the net income of any
Person (other than net income attributable to a Restricted Subsidiary) in
which any Person (other than the Guarantor or any of its Restricted
Subsidiaries) has a joint interest and the net income of any Unrestricted
Subsidiary, except to the extent of the amount of dividends or other
distributions actually paid to the Guarantor or any of its Restricted
Subsidiaries by such other Person or such Unrestricted Subsidiary during
such period; (ii) solely for the purposes of calculating the amount of
Restricted Payments that may be made pursuant to clause (C) of the first
paragraph of the "Limitation on Restricted Payments" covenant described
above (and in such case, except to the extent includable pursuant to clause
(i) above), the net income (or loss) of any Person accrued prior to the
date it becomes a Restricted Subsidiary or is merged into or consolidated
with the Guarantor or any of its Restricted Subsidiaries or all or
substantially all of the property and assets of such Person are acquired by
the Guarantor or any of its Restricted Subsidiaries; (iii) the net income
of any Restricted Subsidiary to the extent that the declaration or payment
of dividends or similar distributions by such Restricted Subsidiary of such
net income is not at the time permitted by the operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to such Restricted Subsidiary;
(iv) any gains or losses (on an after-tax basis) attributable to Asset
Sales; (v) except for purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the first paragraph of
the "Limitation on Restricted Payments" covenant described above, any
amount paid or accrued as dividends on preferred stock of the Guarantor or
any Restricted Subsidiary owned by Persons other than the Guarantor and any
of its Restricted Subsidiaries; and (vi) all extraordinary gains and
extraordinary losses.
"Adjusted Consolidated Net Tangible Assets" means the total amount of
assets of the Guarantor and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), except to the
extent resulting from write-ups of capital assets (excluding write-ups in
connection with accounting for acquisitions in conformity with GAAP), after
deducting therefrom (i) all current liabilities of the Guarantor and its
Restricted Subsidiaries (excluding intercompany items) and (ii) all
goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other like intangibles, all as set forth on the most recently
available quarterly or annual consolidated balance sheet of the Guarantor
and its Restricted Subsidiaries, prepared in conformity with GAAP.
"Affiliate" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as applied to any Person,
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Asset Acquisition" means (i) an investment by the Guarantor or any of
its Restricted Subsidiaries in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Guarantor or shall be
merged into or consolidated with the Guarantor or any of its Restricted
Subsidiaries; provided that such Person's primary business is related,
ancillary or complementary to the businesses of the Guarantor and its
Restricted Subsidiaries on the date of such investment or (ii) an
acquisition by the Guarantor or any of its Restricted Subsidiaries of the
property and assets of any Person other than the Guarantor or any of its
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Restricted Subsidiaries that constitute substantially all of a division or
line of business of such Person; provided that the property and assets
acquired are related, ancillary or complementary to the businesses of the
Guarantor and its Restricted Subsidiaries on the date of such acquisition.
"Asset Sale" means any sale, transfer or other disposition (including
by way of merger, consolidation or sale-leaseback transactions) in one
transaction or a series of related transactions by the Guarantor or any of
its Restricted Subsidiaries to any Person other than the Guarantor or any
of its Restricted Subsidiaries of (i) all or any of the Capital Stock of
any Restricted Subsidiary, (ii) all or substantially all of the property
and assets of an operating unit or business of the Guarantor or any of its
Restricted Subsidiaries or (iii) any other property and assets of the
Guarantor or any of its Restricted Subsidiaries outside the ordinary course
of business of the Guarantor or such Restricted Subsidiary and, in each
case, that is not governed by the provisions of the Exchange Debenture
Indenture applicable to mergers, consolidations and sales of assets of the
Guarantor; provided that the meaning of "Asset Sale" shall not include (A)
sales or other dispositions of inventory, receivables and other current
assets, and (B) dispositions of assets of the Guarantor or any of its
Restricted Subsidiaries, in substantially simultaneous exchanges for
consideration consisting of any combination of cash, Temporary Cash
Investments and assets that are used or useful in the telecommunications
business of the Guarantor or its Restricted Subsidiaries, if such
consideration has an aggregate fair market value substantially equal to the
fair market value of the assets so disposed of; provided, however, that
fair market value shall be determined in good faith by the Board of
Directors of ICG, whose determination shall be conclusive and evidenced by
a Board Resolution delivered to the Trustee; and provided further that any
cash or Temporary Cash Investments received by the Guarantor or any of its
Restricted Subsidiaries pursuant to any transaction described in clause (B)
above shall be applied in accordance with clause (A) or (B) of the first
paragraph of the "Limitation on Asset Sales" covenant described above.
"Average Life" means, at any date of determination with respect to any
debt security, the quotient obtained by dividing (i) the sum of the
products of (a) the number of years from such date of determination to the
dates of each successive scheduled principal payment of such debt security
and (b) the amount of such principal payment by (ii) the sum of all such
principal payments.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participation or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether now outstanding or
issued after the date of the Exchange Debenture Indenture, including,
without limitation, all Common Stock and preferred stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present
value of the rental obligations of such Person as lessee, in conformity
with GAAP, is required to be capitalized on the balance sheet of such
Person; and "Capitalized Lease Obligations" means the discounted present
value of the rental obligations under such lease.
"ChoiceCom" means CSW/ICG ChoiceCom, L.P., a Delaware limited
partnership.
"Closing Date" means the date on which the Preferred Stock is
originally issued under the Amended Articles.
"Consolidated EBITDA" means, for any period, the sum of the amounts
for such period of (i) Adjusted Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) income taxes, to the extent such amount was
deducted in calculating Adjusted Consolidated Net Income (other than income
taxes (either positive or negative) attributable to extraordinary and
non-recurring gains or losses or sales of assets), (iv) depreciation
expense, to the extent such amount was deducted in calculating Adjusted
Consolidated Net Income, (v) amortization expense, to the extent such
amount was deducted in calculating Adjusted Consolidated Net Income, and
(vi) all other non-cash items reducing Adjusted Consolidated Net Income
(other than items that will require cash payments and for which an accrual
or reserve is, or is required by GAAP to be, made), less all non-cash items
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increasing Adjusted Consolidated Net Income, all as determined on a
consolidated basis for the Guarantor and its Restricted Subsidiaries in
conformity with GAAP; provided that, if any Restricted Subsidiary is not a
Wholly Owned Restricted Subsidiary, Consolidated EBITDA shall be reduced
(to the extent not otherwise reduced in accordance with GAAP) by an amount
equal to (A) the amount of the Adjusted Consolidated Net Income
attributable to such Restricted Subsidiary multiplied by (B) the quotient
of (1) the number of shares of outstanding Common Stock of such Restricted
Subsidiary not owned on the last day of such period by the Guarantor or any
of its Restricted Subsidiaries divided by (2) the total number of shares of
outstanding Common Stock of such Restricted Subsidiary on the last day of
such period.
"Consolidated Interest Expense" means, for any period, the aggregate
amount of interest in respect of Indebtedness (including amortization of
original issue discount on any Indebtedness and the interest portion of any
deferred payment obligation, calculated in accordance with the effective
interest method of accounting; all commissions, discounts and other fees
and charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and
Indebtedness that is Guaranteed or secured by the Guarantor or any of its
Restricted Subsidiaries) and all but the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be
paid or to be accrued by the Guarantor and its Restricted Subsidiaries
during such period; excluding, however, without duplication, (i) any amount
of such interest of any Restricted Subsidiary if the net income of such
Restricted Subsidiary is excluded in the calculation of Adjusted
Consolidated Net Income pursuant to clause (iii) of the definition thereof
(but only in the same proportion as the net income of such Restricted
Subsidiary is excluded from the calculation of Adjusted Consolidated Net
Income pursuant to clause (iii) of the definition thereof) and (ii) any
premiums, fees and expenses (and any amortization thereof) payable in
connection with the offering of the 13 1/2% Notes and the warrants issued
therewith, the 12 1/2% Notes, the 14 1/4% Preferred Stock, the New Notes
and/or the Preferred Stock, all as determined on a consolidated basis
(without taking into account Unrestricted Subsidiaries) in conformity with
GAAP.
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly
or annual consolidated balance sheet of the Guarantor and its Restricted
Subsidiaries (which shall be as of a date not more than 90 days prior to
the date of such computation, and which shall not take into account
Unrestricted Subsidiaries), less any amounts attributable to Redeemable
Stock or any equity security convertible into or exchangeable for
Indebtedness, the cost of treasury stock and the principal amount of any
promissory notes receivable from the sale of the Capital Stock of the
Guarantor or any of its Restricted Subsidiaries, each item to be determined
in conformity with GAAP (excluding the effects of foreign currency exchange
adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
"Convertible Subordinated Notes" means the 8% Convertible Subordinated
Notes and the 7% Convertible Subordinated Notes of Holdings (Canada).
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to
protect the Guarantor or any of its Restricted Subsidiaries against
fluctuations in currency values to or under which the Guarantor or any of
its Restricted Subsidiaries is a party or a beneficiary on the date of the
Exchange Debenture Indenture or becomes a party or a beneficiary
thereafter.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Exchange Debenture Issue Date" means the date the Exchange Debentures
are originally issued under the Exchange Debenture Indenture.
"FOTI" means ICG Fiber Optic Technologies Inc., a Colorado
corporation.
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"14 1/4% Exchange Debentures" means the 14 1/4% Senior Subordinated
Exchange Debentures due 2007 of Holdings which may be issued upon exchange
of the 14 1/4% Preferred Stock by Holdings.
"14 1/4% Preferred Stock" means the 14 1/4% Exchangeable Preferred
Stock mandatorily redeemable May 1, 2007 of Holdings, and any shares of
preferred stock issued as payment in kind dividends thereon.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of August 8, 1995, including, without
limitation, those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as
approved by a significant segment of the accounting profession. All ratios
and computations contained in the Exchange Debenture Indenture shall be
computed in conformity with GAAP applied on a consistent basis, except that
calculations made for purposes of determining compliance with the terms of
the covenants and with other provisions of the Exchange Debenture Indenture
shall be made without giving effect to (i) the amortization of any expenses
incurred in connection with the offering of the 13 1/2% Notes and the
warrants issued therewith, the 12 1/2% Notes, the 14 1/4% Preferred Stock,
the New Notes and/or the Preferred Stock and (ii) except as otherwise
provided, the amortization of any amounts required or permitted by
Accounting Principles Board Opinion Nos. 16 and 17.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation of such other
Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services,
to take-or-pay, or to maintain financial statement conditions or otherwise)
or (ii) entered into for purposes of assuring in any other manner the
obligee of such Indebtedness or other obligation of the payment thereof or
to protect such obligee against loss in respect thereof (in whole or in
part); provided that the term "Guarantee" shall not include endorsements
for collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"Holdings (Canada)" means ICG Holdings (Canada), Inc. and its
successors and assigns.
"Incur" means, with respect to any Indebtedness, to incur, create,
issue, assume, Guarantee or otherwise become liable for or with respect to,
or become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an Incurrence of Indebtedness by reason of the
acquisition of more than 50% of the Capital Stock of any Person; provided
that neither the accrual of interest nor the accretion of original issue
discount shall be considered an Incurrence of Indebtedness. The term
"Incurrence" has a corresponding meaning.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person
for borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of
such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto), (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, which purchase price is due more than six months
after the date of placing such property in service or taking delivery and
title thereto or the completion of such services, except Trade Payables,
(v) all obligations of such Person as lessee under Capitalized Leases, (vi)
all Indebtedness of other Persons secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person;
provided that the amount of such Indebtedness shall be the lesser of (A)
the fair market value of such asset at such date of determination and (B)
the amount of such Indebtedness, (vii) all Indebtedness of other Persons
Guaranteed by such Person to the extent such Indebtedness is Guaranteed by
such Person and (viii) to the extent not otherwise included in this
definition, obligations under Currency Agreements and Interest Rate
Agreements. The amount of Indebtedness of any Person at any date shall be
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the outstanding balance at such date of all unconditional obligations as
described above and, with respect to contingent obligations, the maximum
liability upon the occurrence of the contingency giving rise to the
obligation, provided (i) that the amount outstanding at any time of any
Indebtedness issued with original issue discount is the original issue
price of such Indebtedness and (ii) that Indebtedness shall not include (A)
any amount of money borrowed, at the time of the Incurrence of the related
Indebtedness, for the purpose of pre-funding any interest payable on such
related Indebtedness or (B) any liability for federal, state, local or
other taxes.
"Indebtedness to EBITDA Ratio" means, as at any date of determination,
the ratio of (i) the aggregate amount of Indebtedness of the Guarantor,
Holdings and their Restricted Subsidiaries on a consolidated basis as at
the Transaction Date to (ii) the Consolidated EBITDA of the Guarantor for
the then most recent four full fiscal quarters for which reports have been
filed pursuant to the "Reports" covenant described above (such four full
fiscal quarter period being referred to herein as the "Four Quarter
Period"); provided that (x) pro forma effect shall be given to any
Indebtedness Incurred from the beginning of the Four Quarter Period through
the Transaction Date (including any Indebtedness Incurred on the
Transaction Date), to the extent outstanding on the Transaction Date, (y)
if during the period commencing on the first day of such Four Quarter
Period through the Transaction Date (the "Reference Period"), the
Guarantor, Holdings or any of the Restricted Subsidiaries shall have
engaged in any Asset Sale, Consolidated EBITDA for such period shall be
reduced by an amount equal to the EBITDA (if positive), or increased by an
amount equal to the EBITDA (if negative), directly attributable to the
assets which are the subject of such Asset Sale and any related retirement
of Indebtedness as if such Asset Sale and related retirement of
Indebtedness had occurred on the first day of such Reference Period or (z)
if during such Reference Period the Guarantor, Holdings or any of the
Restricted Subsidiaries shall have made any Asset Acquisition, Consolidated
EBITDA of the Guarantor shall be calculated on a pro forma basis as if such
Asset Acquisition and any related financing had occurred on the first day
of such Reference Period. In calculating this ratio for purposes of the
Amended Articles, the amount of outstanding Indebtedness shall be deemed to
include the liquidation preference of any preferred stock then outstanding.
"Investment" in any Person means any direct or indirect advance, loan
or other extension of credit (including, without limitation, by way of
Guarantee or similar arrangement; but excluding advances to customers in
the ordinary course of business that are, in conformity with GAAP, recorded
as accounts receivable on the balance sheet of the Guarantor or its
Restricted Subsidiaries) or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition
of Capital Stock, bonds, notes, debentures or other similar instruments
issued by, such Person and shall include the designation of a Restricted
Subsidiary as an Unrestricted Subsidiary. For purposes of the definition of
"Unrestricted Subsidiary" and the "Limitation on Restricted Payments"
covenant described above, (i) "Investment" shall include the fair market
value of the assets (net of liabilities) of any Restricted Subsidiary of
the Guarantor at the time that such Restricted Subsidiary of the Guarantor
is designated an Unrestricted Subsidiary and shall exclude the fair market
value of the assets (net of liabilities) of any Unrestricted Subsidiary at
the time that such Unrestricted Subsidiary is designated a Restricted
Subsidiary of the Guarantor and (ii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the
time of such transfer, in each case as determined by the Board of Directors
in good faith.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any conditional
sale or other title retention agreement or lease in the nature thereof, any
sale with recourse against the seller or any Affiliate of the seller, or
any agreement to give any security interest).
"MTN" means Maritime Telecommunications Network, Inc., a Colorado
corporation, and its successors.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the
extent corresponding to the principal, but not interest, component thereof)
when received in the form of cash or cash equivalents (except to the extent
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such obligations are financed or sold with recourse to the Guarantor or any
Restricted Subsidiary of the Guarantor) and proceeds from the conversion of
other property received when converted to cash or cash equivalents, net of
(i) brokerage commissions and other fees and expenses (including fees and
expenses of counsel and investment bankers) related to such Asset Sale,
(ii) provisions for all taxes (whether or not such taxes will actually be
paid or are payable) as a result of such Asset Sale without regard to the
consolidated results of operations of the Guarantor and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness
or any other obligation outstanding at the time of such Asset Sale that
either (A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale and (iv) appropriate amounts
to be provided by the Guarantor or any Restricted Subsidiary of the
Guarantor as a reserve against any liabilities associated with such Asset
Sale, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such
Asset Sale, all as determined in conformity with GAAP and (b) with respect
to any issuance or sale of Capital Stock, the proceeds of such issuance or
sale in the form of cash or cash equivalents, including payments in respect
of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form
of cash or cash equivalents (except to the extent such obligations are
financed or sold with recourse to the Guarantor or any Restricted
Subsidiary of the Guarantor) and proceeds from the conversion of other
property received when converted to cash or cash equivalents, net of
attorney's fees, accountants' fees, underwriters' or placement agents'
fees, discounts or commissions and brokerage, consultant and other fees
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"New Notes" means the New Notes Due 2007 of Holdings, guaranteed by
ICG on a senior unsecured basis and issued on the Closing Date.
"Offer to Purchase" means an offer to purchase Exchange Debentures by
Holdings from the Holders commenced by mailing a notice to the Trustee and
each Holder stating: (i) the covenant pursuant to which the offer is being
made and that all Exchange Debentures validly tendered will be accepted for
payment on a pro rata basis; (ii) the purchase price and the date of
purchase (which shall be a Business Day no earlier than 30 days nor later
than 60 days from the date such notice is mailed) (the "Payment Date");
(iii) that any Exchange Debenture not tendered will continue to accrue
interest pursuant to its terms; (iv) that, unless Holdings defaults in the
payment of the purchase price, any Exchange Debenture accepted for payment
pursuant to the Offer to Purchase shall cease to accrue interest on and
after the Payment Date; (v) that Holders electing to have an Exchange
Debenture purchased pursuant to the Offer to Purchase will be required to
surrender the Exchange Debenture, together with the form entitled "Option
of the Holder to Elect Purchase" on the reverse side of the Exchange
Debenture completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Business Day immediately
preceding the Payment Date; (vi) that Holders will be entitled to withdraw
their election if the Paying Agent receives, not later than the close of
business on the third Business Day immediately preceding the Payment Date,
a telegram, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Exchange Debentures delivered for purchase
and a statement that such Holder is withdrawing his election to have such
Exchange Debentures purchased; and (vii) that Holders whose Exchange
Debentures are being purchased only in part will be issued new Exchange
Debentures equal in principal amount to the unpurchased portion of the
Exchange Debentures surrendered; provided that each Exchange Debenture
purchased and each new Exchange Debenture issued shall be in a principal
amount of $1,000 or integral multiples thereof. On the Payment Date,
Holdings shall (i) accept for payment on a pro rata basis Exchange
Debentures or portions thereof tendered pursuant to an Offer to Purchase;
(ii) deposit with the Paying Agent money sufficient to pay the purchase
price of all Exchange Debentures or portions thereof, so accepted; and
(iii) deliver, or cause to be delivered, to the Trustee or Transfer Agent,
as the case may be, all Exchange Debentures or portions thereof, so
accepted together with an Officers' Certificate specifying the Exchange
Debentures or portions thereof accepted for payment by Holdings. The Paying
Agent shall promptly mail to the Holders of Exchange Debentures so
accepted, payment in an amount equal to the purchase price, and the Trustee
shall promptly authenticate and mail to such Holders a new Exchange
Debenture equal in principal amount to any unpurchased portion of the
Exchange Debenture surrendered; provided that each Exchange Debenture
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purchased and each new Exchange Debenture issued shall be in a principal
amount of $1,000 or integral multiples thereof. Holdings will publicly
announce the results of an Offer to Purchase as soon as practicable after
the Payment Date. The Trustee shall act as the Paying Agent for an Offer to
Purchase. Holdings will comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable, in the event that Holdings is required
to repurchase Exchange Debentures pursuant to an Offer to Purchase.
"Ohio LINX" means ICG Ohio LINX, Inc., an Ohio corporation.
"Permitted Investment" means (i) an Investment in a Restricted
Subsidiary or a Person which will, upon the making of such Investment,
become a Restricted Subsidiary or be merged or consolidated with or into or
transfer or convey all or substantially all its assets to, the Guarantor or
a Restricted Subsidiary; provided that such person's primary business is
related, ancillary or complementary to the businesses of the Guarantor and
its Restricted Subsidiaries on the date of such Investment; (ii) a
Temporary Cash Investment; (iii) payroll, travel and similar advances to
cover matters that are expected at the time of such advances ultimately to
be treated as expenses in accordance with GAAP; (iv) loans or advances to
employees made in the ordinary course of business in accordance with past
practice of the Guarantor or its Restricted Subsidiaries and that do not in
the aggregate exceed $2 million at any time outstanding; (v) stock,
obligations or securities received in satisfaction of judgments; and (vi)
Investments in an amount not to exceed, at any one time outstanding, all of
the net cash proceeds received by the Guarantor from the sale of its Common
Stock (to a Person other than one of its Subsidiaries) after the Closing
Date.
"Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate
legal proceedings promptly instituted and diligently conducted and for
which a reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made; (ii) statutory Liens
of landlords and carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen or other similar Liens arising in the ordinary course of business
and with respect to amounts not yet delinquent or being contested in good
faith by appropriate legal proceedings promptly instituted and diligently
conducted and for which a reserve or other appropriate provision, if any,
as shall be required in conformity with GAAP shall have been made; (iii)
Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security; (iv) Liens incurred or deposits made to secure
the performance of tenders, bids, leases, statutory or regulatory
obligations, bankers' acceptances, surety and appeal bonds, government
contracts, performance and return-of-money bonds and other obligations of a
similar nature incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (v) easements, rights of
way, municipal and zoning ordinances and similar charges, encumbrances,
title defects or other irregularities that do not materially interfere with
the ordinary course of business of the Guarantor or any of its Restricted
Subsidiaries; (vi) Liens (including extensions and renewals thereof) upon
real or personal property acquired after the Closing Date; provided that
(a) such Lien is created solely for the purpose of securing Indebtedness
Incurred, in accordance with the "Limitation on Indebtedness" covenant
described above, (1) to finance the cost (including the cost of improvement
or construction) of the item of property or assets subject thereto and such
Lien is created prior to, at the time of or within six months after the
later of the acquisition, the completion of construction or the
commencement of full operation of such property or (2) to refinance any
Indebtedness previously so secured, (b) the principal amount of the
Indebtedness secured by such Lien does not exceed 100% of such cost and (c)
any such Lien shall not extend to or cover any property or assets other
than such item of property or assets and any improvements on such item;
(vii) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the Guarantor and its
Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering
property or assets under construction arising from progress or partial
payments by a customer of the Guarantor or its Restricted Subsidiaries
relating to such property or assets; (ix) any interest or title of a lessor
in the property subject to any Capitalized Lease or operating lease; (x)
Liens arising from filing Uniform Commercial Code financing statements
regarding leases; (xi) Liens on property of, or on shares of stock or
Indebtedness of, any corporation existing at the time such corporation
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becomes, or becomes a part of, any Restricted Subsidiary; provided that
such Liens do not extend to or cover any property or assets of the
Guarantor or any Restricted Subsidiary other than the property or assets
acquired; (xii) Liens in favor of the Guarantor or any Restricted
Subsidiary; (xiii) Liens arising from the rendering of a final judgment or
order against the Guarantor or any Restricted Subsidiary of the Guarantor
that does not give rise to an Event of Default; (xiv) Liens securing
reimbursement obligations with respect to letters of credit that encumber
documents and other property relating to such letters of credit and the
products and proceeds thereof; (xv) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of customs duties
in connection with the importation of goods; (xvi) Liens encumbering
customary initial deposits and margin deposits, and other Liens that are
either within the general parameters customary in the industry and incurred
in the ordinary course of business, in each case, securing Indebtedness
under Interest Rate Agreements and Currency Agreements and forward
contracts, options, future contracts, futures options or similar agreements
or arrangements designed to protect the Guarantor or any of its Restricted
Subsidiaries from fluctuations in the price of commodities; (xvii) Liens
arising out of conditional sale, title retention, consignment or similar
arrangements for the sale of goods entered into by the Guarantor or any of
its Restricted Subsidiaries in the ordinary course of business in
accordance with the past practices of the Guarantor and its Restricted
Subsidiaries prior to the Closing Date; and (xviii) Liens on or sales of
receivables.
"Preferred stock" or "preferred stock" means, with respect to any
Person, any and all shares, interests, participations or other equivalents
(however designated, whether voting or non-voting) of such Person's
preferred or preference stock, whether now outstanding or issued after the
date of the Exchange Debenture Indenture, including, without limitation,
all series and classes of such preferred or preference stock.
"Public Equity Offering" means a bona fide underwritten primary public
offering of Common Stock of Holdings or ICG pursuant to an effective
registration statement under the Securities Act.
"Redeemable Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior
to the Stated Maturity of the Exchange Debentures, (ii) redeemable at the
option of the holder of such class or series of Capital Stock at any time
prior to the Stated Maturity of the Exchange Debentures, or (iii)
convertible into or exchangeable for Capital Stock referred to in clause
(i) or (ii) above or Indebtedness having a scheduled maturity prior to the
Stated Maturity of the Exchange Debentures; provided that any Capital Stock
that would not constitute Redeemable Stock but for provisions thereof
giving holders thereof the right to require such Person to repurchase or
redeem such Capital Stock upon the occurrence of an "asset sale" or "change
of control" occurring prior to the Stated Maturity of the Exchange
Debentures shall not constitute Redeemable Stock if the "asset sale" or
"change of control" provisions applicable to such Capital Stock are no more
favorable to the holders of such Capital Stock than the provisions
contained in "Limitation on Asset Sales" and "Repurchase of Exchange
Debentures upon a Change of Control" covenants described above and such
Capital Stock specifically provides that such Person will not repurchase or
redeem any such stock pursuant to such provision prior to the Guarantor's
or Holdings' repurchase of such Exchange Debentures, as are required to be
repurchased pursuant to the "Limitation on Asset Sales" and "Repurchase of
Exchange Debentures upon a Change of Control" covenants described above.
"Restricted Subsidiary" means any Subsidiary of the Guarantor other
than an Unrestricted Subsidiary.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary of the Guarantor that, together with its
Subsidiaries, (i) for the most recent fiscal year of the Guarantor,
accounted for more than 10% of the consolidated revenues of the Guarantor
and its Restricted Subsidiaries or (ii) as of the end of such fiscal year,
was the owner of more than 10% of the consolidated assets of the Guarantor
and its Restricted Subsidiaries, all as set forth on the most recently
available consolidated financial statements of the Guarantor for such
fiscal year.
"StarCom" means StarCom International Optics Corporation, a British
Columbia corporation, and its subsidiaries.
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"Stated Maturity" means, (i) with respect to any debt security, the
date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (ii)
with respect to any scheduled installment of principal of or interest on
any debt security, the date specified in such debt security as the fixed
date on which such installment is due and payable.
"Strategic Investor" means any Person engaged in the
telecommunications business which has a net worth or equity market
capitalization of at least $1 billion.
"Strategic Investor Subordinated Indebtedness" means all Indebtedness
of Holdings owed to a Strategic Investor that is contractually subordinate
in right of payment to the Exchange Debentures to at least the following
extent: no payment of principal (or premium, if any) or interest on or
otherwise payable in respect of such Indebtedness may be made (whether as a
result of a default or otherwise) prior to the payment in full of all of
the Guarantor's and Holdings' obligations under the Exchange Debentures;
provided, however, that prior to the payment of such obligations, interest
on Strategic Investor Subordinated Indebtedness may be payable solely in
kind or in Common Stock (other than Redeemable Stock) of the Guarantor.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the
outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.
"Temporary Cash Investment" means any of the following: (i) direct
obligations of the United States of America or any agency thereof or
obligations fully and unconditionally guaranteed by the United States of
America or any agency thereof, (ii) time deposit accounts, certificates of
deposit and money market deposits maturing within 270 days of the date of
acquisition thereof, bankers' acceptances with maturities not exceeding 270
days, and overnight bank deposits, in each case issued by or with a bank or
trust company which is organized under the laws of the United States of
America, any state thereof or any foreign country recognized by the United
States, and which bank or trust company has capital, surplus and undivided
profits aggregating in excess of $100 million (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or such
similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a registered broker
dealer or mutual fund distributor, (iii) repurchase obligations with a term
of not more than 30 days for underlying securities of the types described
in clause (i) above entered into with a bank meeting the qualifications
described in clause (ii) above, (iv) commercial paper, maturing not more
than 180 days after the date of acquisition, issued by a corporation (other
than an Affiliate of the Guarantor) organized and in existence under the
laws of the United States of America, any state thereof or any foreign
country recognized by the United States of America with a rating at the
time as of which any investment therein is made of "P-1" (or higher)
according to Moody's Investors Service, Inc. or "A-1" (or higher) according
to Standard & Poor's Ratings Group, and (v) securities with maturities of
six months or less from the date of acquisition issued or fully and
unconditionally guaranteed by any state, commonwealth or territory of the
United States of America, or by any political subdivision or taxing
authority thereof, and rated at least "A" by Standard & Poor's Ratings
Group or Moody's Investors Service, Inc.
"13 1/2% Notes" means the 13 1/2% Senior Discount Notes Due 2005 of
Holdings guaranteed by Holdings (Canada) and ICG on a senior unsecured
basis.
"13 1/2% Notes Indenture" means the Indenture dated as of August 8,
1995, as amended, among Holdings, Holdings (Canada) and the Trustee
pursuant to which Holdings issued the 13 1/2% Notes.
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"Trade Payables" means, with respect to any person, any accounts
payable or any other debt or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person or any of its Subsidiaries
arising in the ordinary course of business in connection with the
acquisition of goods or services.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Guarantor or any of its Restricted Subsidiaries, the
date such Indebtedness is to be Incurred and, with respect to any
Restricted Payment, the date such Restricted Payment is to be made.
"12 1/2% Notes" means the 12 1/2% Senior Discount Notes due 2006 of
Holdings guaranteed by Holdings (Canada) and ICG on a senior unsecured
basis.
"12 1/2% Notes Indenture" means the Indenture dated as of April 30,
1996, as amended, among Holdings, Holdings (Canada) and the Trustee
pursuant to which Holdings issued the 12 1/2% Notes.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Guarantor
that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii)
any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may
designate any Restricted Subsidiary of the Guarantor (including any newly
acquired or newly formed Subsidiary of the Guarantor), other than Holdings
or a Subsidiary that has given a Subsidiary Guarantee, to be an
Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of,
or owns or holds any Lien on any property of, the Guarantor or any
Restricted Subsidiary; provided that either (A) the Subsidiary to be so
designated has total assets of $1,000 or less or (B) if such Subsidiary has
assets greater than $1,000, that such designation would be permitted under
the "Limitation on Restricted Payments" covenant described above. The Board
of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary of the Guarantor; provided that immediately after giving effect
to such designation (x) the Guarantor could Incur $1.00 of additional
Indebtedness under the first paragraph of the "Limitation on Indebtedness"
covenant described above and (y) no Default or Event of Default shall have
occurred and be continuing. Any such designation by the Board of Directors
shall be evidenced to the Trustee by promptly filing with the Trustee a
copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"Voting Stock" means, with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of
directors, managers or other voting members of the governing body of such
Person.
"Wholly Owned" means, with respect to any Subsidiary of any Person,
such Subsidiary if 98% or more of the outstanding Capital Stock in such
Subsidiary (other than any director's qualifying shares or Investments by
foreign nationals mandated by applicable law) is owned by such Person or
one or more Wholly Owned Subsidiaries of such Person.
"Zycom" means Zycom Corporation, an Alberta, Canada corporation.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
Reid & Priest LLP, counsel to the Company, has advised the Company
that the following summary as to legal matters expresses their opinion as
to the material anticipated federal income tax consequences of the
purchase, ownership and disposition of the New Notes, the New Preferred
Stock and the Exchange Debentures. Except where noted, it deals only with
New Notes, New Preferred Stock and Exchange Debentures held as capital
assets by United States Holders and does not deal with special situations,
such as those of dealers in securities or currencies, financial
institutions, life insurance companies, persons holding New Notes, New
Preferred Stock or Exchange Debentures as a part of a hedging or conversion
transaction or a straddle or United States Holders whose "functional
currency" is not the U.S. dollar. Furthermore, the discussion below is
based upon the provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), and regulations, including final Treasury regulations
addressing debt instruments issued with original issue discount (the "OID
Regulations"), rulings and judicial decisions thereunder as of the date
hereof, and such authorities may be repealed, revoked or modified so as to
result in federal income tax consequences different from those discussed
below. In addition, the discussion below includes certain matters as to
which Holdings has made determinations which it believes are accurate. ALL
PROSPECTIVE PURCHASERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF THE NEW NOTES, THE NEW PREFERRED
STOCK OR THE EXCHANGE DEBENTURES.
EXCHANGE OF NEW PREFERRED STOCK OR NEW NOTES
An exchange of the New Preferred Stock for the Old Preferred Stock, or
the New Notes for the Old Notes should not constitute a taxable event for
U.S. federal income tax purposes because the New Preferred Stock should not
be considered to differ materially in kind or extent from the Old Preferred
Stock and the New Notes should not be considered to differ materially in
kind or extent from the Old Notes. Rather, the New Preferred Stock received
by a holder should be treated as a continuation of the Old Preferred Stock
in the hands of such holder and the New Notes should be treated as a
continuation of the Old Notes in the hands of such holder. As a result,
holders who exchange their Old Preferred Stock for New Preferred Stock or
their Old Notes for New Notes should not recognize any income, gain or loss
for U.S. federal income tax purposes with respect to such exchange. The
following discussion assumes that an exchange of New Preferred Stock for
Old Preferred Stock or an exchange of New Notes for Old Notes will not be
treated as an exchange for federal income tax purposes.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
As used herein, a "United States Holder" means a beneficial owner that
is a citizen or resident of the United States, a corporation, partnership
or other entity created or organized in or under the laws of the United
States or any political subdivision thereof, an estate the income of which
is subject to United States federal income taxation regardless of its
source, or a trust the administration of which is subject to the primary
supervision of a court within the United States and for which one or more
fiduciaries have the authority to control all substantial decisions. An
individual may, subject to certain exceptions, be deemed to be a resident
(as opposed to a non-resident alien) of the United States by virtue of
being present in the United States on at least 31 days in the calendar year
and for an aggregate of at least 183 days during a three-year period ending
in the current calendar year (counting for such purposes all of the days
present in the current year, one-third of the days present in the
immediately preceding year, and one-sixth of the days present in the second
preceding year). A "Non-United States Holder" is a holder that is not a
United States Holder.
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DIVIDENDS ON THE NEW PREFERRED STOCK
Distributions of cash or of additional New Preferred Stock on the New
Preferred Stock will be treated as dividends to United States Holders to
the extent of Holdings' current and accumulated earnings and profits as
determined under federal income tax principles. The amount of Holdings'
earnings and profits at any time will depend upon the future actions and
financial performance of Holdings. The amount of a distribution of
additional New Preferred Stock will equal the fair market value New
Preferred Stock distributed on the date of the distribution.
Holdings believes that it does not presently have any current or
accumulated earnings and profits. Consequently, unless Holdings generates
earnings and profits in the future, distributions with respect to the New
Preferred Stock may not qualify as dividends for federal income tax
purposes. To the extent that the amount of a distribution on the New
Preferred Stock exceeds Holdings' current and accumulated earnings and
profits, such distributions will be treated as a nontaxable return of
capital and will be applied against and reduce the adjusted tax basis of
the New Preferred Stock in the hands of each United States Holder (but not
below zero), thus increasing the amount of any gain (or reducing the amount
of any loss) which would otherwise be realized by such United States Holder
upon the sale or other taxable disposition of such New Preferred Stock. The
amount of any such distribution which exceeds the adjusted tax basis of the
New Preferred Stock in the hands of the United States Holder will be
treated as capital gain and will be either long-term or short-term capital
gain depending on the United States Holder's holding period for the New
Preferred Stock.
Under Section 243 of the Code, corporate United States Holders
generally will be able to deduct 70% of the amount of any distribution
qualifying as a dividend. There are, however, many exceptions and
restrictions relating to the availability of such dividends-received
deduction. Section 246A of the Code reduces the dividends-received
deduction allowed to a corporate United States Holder that has incurred
indebtedness "directly attributable" to its investment in portfolio stock.
Section 246(c) of the Code requires that, in order to be eligible for the
dividends-received deduction, a corporate United States Holder must
generally hold the shares of New Preferred Stock for a 46-day minimum
holding period or a 91-day period in certain circumstances. A taxpayer's
holding period for these purposes is suspended during any period in which a
United States Holder has certain options or contractual obligations with
respect to substantially identical stock or holds one or more other
positions with respect to substantially identical stock that diminishes the
risk of loss from holding the New Preferred Stock. A proposal in President
Clinton's fiscal 1998 budget plan would (i) reduce the dividends-received
deduction from 70% to 50%, and (ii) modify the manner in which the 46 or 91
-day minimum holding period is determined. In addition, another proposal in
President Clinton's fiscal 1998 budget plan would eliminate the dividends
received deduction for certain limited term preferred stock such as the New
Preferred Stock. It is unclear whether and in what form such proposals will
be enacted.
Under Section 1059 of the Code a corporate United States Holder is
required to reduce its tax basis (but not below zero) in the New Preferred
Stock by the nontaxed portion of any "extraordinary dividend" if such stock
has not been held for more than two years before the earliest of the date
such dividend is declared, announced or agreed to. Generally, the nontaxed
portion of an extraordinary dividend is the amount excluded from income by
operation of the dividends-received deduction provisions of Section 243 of
the Code. An extraordinary dividend on the New Preferred Stock generally
would be a dividend that (i) equals or exceeds 5% of the corporate United
States Holder's adjusted tax basis in the New Preferred Stock, treating all
dividends having ex-dividend dates within an 85-day period as one dividend
or (ii) exceeds 20% of the corporate United States Holder's adjusted tax
basis in such stock, treating all dividends having ex-dividend dates within
a 365-day period as one dividend. In determining whether a dividend paid on
the New Preferred Stock is an extraordinary dividend, a corporate United
States Holder may elect to substitute the fair market value of the New
Preferred Stock for such United States Holder's tax basis for purposes of
applying these tests, provided such fair market value is established to the
satisfaction of the Secretary of Treasury as of the day before the ex-
dividend date. An extraordinary dividend also currently includes any amount
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treated as a dividend in the case of a redemption that is either non-pro
rata as to all stockholders or in partial liquidation of Holdings,
regardless of the stockholder's holding period and regardless of the size
of the dividend, including a redemption pursuant to Holdings' right to
redeem the New Preferred Stock for cash or exchange the New Preferred Stock
for Exchange Debentures. If any part of the nontaxed portion of an
extraordinary dividend is not applied to reduce the corporate United States
Holder's tax basis as a result of the limitation on reducing such basis
below zero, such part will be treated as gain upon sale or exchange of the
New Preferred Stock. However, a proposal in President Clinton's fiscal 1998
budget plan would require gain on the nontaxed portion of an extraordinary
dividend to be recognized at the time when the extraordinary dividend is
paid rather than at the time of the sale or exchange of the New Preferred
Stock to the extent the basis of the New Preferred Stock with respect to
which any extraordinary dividend is received would be reduced below zero.
It is unclear whether and in what form such legislation will be enacted.
Special rules exist with respect to extraordinary dividends for "qualified
preferred dividends." A qualified preferred dividend is any fixed dividend
payable with respect to any share of stock which (i) provides for fixed
preferred dividends payable not less frequently than annually and (ii) is
not in arrears as to dividends at the time the United States Holder
acquires such stock. A qualified preferred dividend does not include any
dividend payable with respect to any share of stock if the actual rate of
return of such stock exceeds 15%. Section 1059 does not apply to qualified
preferred dividends if the corporate United States Holder holds such stock
for more than five years. If the United States Holder disposes of such
stock before it has been held for more than five years, the amount subject
to extraordinary dividend treatment with respect to qualified preferred
dividends is limited to the excess of the actual rate of return over the
stated rate of return. Actual or stated rates of return are the actual or
stated dividends expressed as a percentage of the lesser of (1) the United
States Holder's tax basis in such stock or (2) the liquidation preference
of such stock. CORPORATE UNITED STATES HOLDERS ARE URGED TO CONSULT THEIR
TAX ADVISORS WITH RESPECT TO THE POSSIBLE APPLICATION OF SECTION 1059 TO
THEIR OWNERSHIP AND DISPOSITION OF THE NEW PREFERRED STOCK.
A corporate United States Holder's liability for alternative minimum
tax may be affected by the portion of the dividends received which such
corporate United States Holder deducts in computing taxable income. This
results from the fact that corporate stockholders are required to increase
alternative minimum taxable income by 75% of the excess of current earnings
and profits (with certain adjustments) over alternative minimum taxable
income (determined without regard to earnings and profit adjustments or the
alternative tax net operating loss deduction).
REDEMPTION PREMIUM
Under Section 305(c) of the Code and the applicable Treasury
regulations thereunder, if the redemption price of New Preferred Stock
exceeds its issue price, the difference ("redemption premium") may be
taxable as a constructive distribution of additional New Preferred Stock to
the United States Holder (treated as a dividend to the extent of Holdings'
current and accumulated earnings and profits and otherwise subject to the
treatment described above for distributions) over a certain period. Because
the New Preferred Stock provides for an optional right of redemption by
Holdings at a price in excess of the issue price, United States Holders
could be required to recognize such redemption premium under a constant
interest rate method similar to that described below for accruing OID (see
"-Original Issue Discount") if, based on all of the facts and
circumstances, the optional redemption is more likely than not to occur. If
stock may be redeemed at more than one time, the time and price at which
such redemption is most likely to occur must be determined based on all of
the facts and circumstances. Applicable Treasury regulations provide a
"safe harbor" under which a right to redeem will not be treated as more
likely than not to occur if (i) the issuer and the United States Holder are
not related within the meaning of the Treasury regulations; (ii) there are
no plans, arrangements or agreements that effectively require or are
intended to compel the issuer to redeem the stock (disregarding, for this
purpose, a separate mandatory redemption) and (iii) exercise of the right
to redeem would not reduce the yield of the stock, as determined under the
Treasury regulations. Further, the Treasury regulations provide that such
redemption premium is not taxable as a constructive distribution if it is
solely in the nature of a penalty for premature redemption. A redemption
premium is solely in the nature of a penalty for premature redemption if it
is paid as a result of changes in economic or market conditions over which
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neither the issuer nor the holder have control. Regardless of whether the
optional redemption is more likely than not to occur or whether the
redemption premium is solely in the nature of a penalty for premature
redemption, constructive dividend treatment will not result if the
redemption premium does not exceed a de minimis amount. Based on the
Treasury regulations, Holdings intends to take the position that the
existence of Holdings' optional redemption right does not result in a
constructive distribution to the United States Holders.
REDEMPTION AND EXCHANGE FOR EXCHANGE DEBENTURES
A redemption of shares of the New Preferred Stock for cash or an
exchange of the New Preferred Stock for Exchange Debentures will be a
taxable transaction on which a United States Holder will generally
recognize capital gain or loss (except to the extent of amounts received on
the exchange that are attributable to declared dividends, which will be
treated in the same manner as distributions described above) provided that
the redemption (i) results in complete termination of the holder's stock
interest in Holdings or (ii) results in a "meaningful reduction" in a
United States Holder's stock interest in Holdings. Whether a redemption
will result in a meaningful reduction depends on the particular holder's
facts and circumstances. In determining whether a United States Holder's
interest in Holdings has been reduced or terminated, the holder is deemed,
under the constructive ownership rules of Section 302(c) of the Code, to
own any shares of Holdings' stock that are owned, or deemed owned, by
certain related persons and entities and any shares that such holder, or
related person or entity, has the right to acquire by exercise of an
option. If the redemption of the New Preferred Stock does not result in a
complete termination or meaningful reduction, as described above, the
transaction would be treated as a distribution of cash or Exchange
Debentures, as the case may be. Such distribution will be treated in the
same manner as distributions described above. However, corporate holders
should be aware that to the extent such distribution is treated as a
dividend it would be an extraordinary dividend under Section 1059 of the
Code. If the redemption of the New Preferred Stock does result in a
complete termination or meaningful reduction, the gain or loss recognized
on such exchange will generally be equal to the difference between the
amount realized by the United States Holder of the New Preferred Stock and
such United States Holder's adjusted tax basis in the New Preferred Stock
surrendered in the redemption.
In the case of a redemption for cash, the amount realized will be the
cash received on the redemption. In the case of an exchange of New
Preferred Stock for Exchange Debentures, the amount realized on receipt of
the Exchange Debenture would be equal to the "issue price" of the Exchange
Debenture. Thus, the amount realized on the exchange will be equal to the
issue price of the Exchange Debentures plus any cash received on the
exchange (other than cash received with respect to declared dividends). The
issue price of an Exchange Debenture would be equal to its fair market
value if as of the exchange date the Exchange Debentures or the New
Preferred Stock are traded on an established securities market on or at any
time during the 60-day period ending 30 days after the exchange date. If
neither the New Preferred Stock nor the Exchange Debentures are so traded,
the issue price of the Exchange Debentures would be the stated principal
amount of the Exchange Debentures provided that the yield on the Exchange
Debentures is equal to or greater than the "applicable federal rate" in
effect at the time the Exchange Debenture is issued. If the yield on the
Exchange Debentures is less than such applicable federal rate, its issue
price under Section 1274 of the Code would be equal to the present value as
of the issue date of all payments to be made on the Exchange Debentures,
discounted at the applicable federal rate. It cannot be determined at the
present time whether the New Preferred Stock or the Exchange Debentures
will be, at the relevant time, traded on an established securities market
within the meaning of the OID Regulations.
Depending upon a United States Holder's particular circumstances, the
tax consequences of holding Exchange Debentures may be less advantageous
than the tax consequences of holding New Preferred Stock because, for
example, payments of interest on the Exchange Debentures will not be
eligible for any dividends-received deduction that may be available to
corporate United States Holders and because, as discussed below, the
Exchange Debentures may be issued with OID.
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PAYMENTS OF INTEREST ON THE NEW NOTES AND EXCHANGE DEBENTURES
The stated interest on a New Note and, if issued with OID, an Exchange
Debenture will not be treated as interest for federal income tax purposes,
but instead will be subject to the OID rules described below. If the
Exchange Debentures are not issued with OID, then interest on an Exchange
Debenture generally will be includible in a United States Holder's income
as ordinary income under the Holder's method of accounting.
In the event ICG makes interest payments to a United States Holder
pursuant to the Note Guarantee or the Debenture Guarantee, such Holder will
be required to include in income, as ordinary income, any such amounts.
ORIGINAL ISSUE DISCOUNT
The New Notes were, and the Exchange Debentures, if issued in exchange
for New Preferred Stock, may be, issued with OID, as further discussed
below. United States Holders of New Notes or Exchange Debentures issued
with OID will be subject to special tax accounting rules, as described in
greater detail below. Holders of such New Notes or Exchange Debentures
should be aware that they generally must include OID in gross income for
federal income tax purposes on an annual basis under a constant yield
accrual method. As a result, Holders will include OID in income in advance
of the receipt of cash attributable to that income. However, United States
Holders of New Notes or Exchange Debentures issued with OID generally will
not be required to include separately in income cash payments received on
such Notes or Debentures, even if denominated as interest, to the extent
such payments do not constitute qualified stated interest (as defined
below). The New Notes and Exchange Debentures issued with OID will be
referred to as "Original Issue Discount Debentures." Holdings will report
to United States Holders of New Notes on a timely basis the reportable
amount of OID and interest income based on its understanding of applicable
law and, if any Exchange Debentures are issued with OID, Holdings will
report such amounts to United States Holders of such Debentures.
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
CONSEQUENCES OF OWNING EXCHANGE DEBENTURES.
The amount of OID, if any, on a debt instrument is the excess of its
"stated redemption price at maturity" over its "issue price," subject to a
statutorily defined de minimis exception. The "issue price" of a debt
instrument issued for cash is equal to the first price (excluding sales to
bond houses and brokers) at which price a substantial amount of such debt
instruments are sold. The "stated redemption price at maturity" of a debt
instrument is the sum of its principal amount plus all other payments
required thereunder, other than payments of "qualified stated interest"
(defined generally as stated interest that is unconditionally payable in
cash or in property (other than the debt instruments of the issuer), at
least annually at a single fixed rate that appropriately takes into account
the length of intervals between payments).
Because interest on the New Notes is not payable until September 15,
2002, the stated interest on the New Notes will not be treated as qualified
stated interest. In addition, the New Notes were issued at a price that was
less than their stated principal amount. As a result, the New Notes will be
treated as having been issued with OID equal to the excess of their stated
redemption price at maturity (which will be equal to the sum of the
principal amount plus all payments of stated interest) over the issue price
of the Old Notes (which will be equal to the initial price at which a
substantial amount of Old Notes were sold (excluding sales to bond houses
and brokers)).
Because Holdings has the option through March 15, 2002 to pay interest
on the Exchange Debentures by issuing additional Exchange Debentures, if
any Exchange Debentures are issued on or prior to that date none of the
stated interest on the Exchange Debentures would be treated as qualified
stated interest unless under special rules for interest holidays the amount
of OID is treated as de minimis. Any Exchange Debentures so issued would be
treated as having been issued with OID equal to the excess of their stated
redemption price at maturity (which will be equal to the sum of the
principal amount plus all payments of stated interest) over their issue
price (which will be as described under the "-Redemption and Exchange for
Exchange Debentures", above). Any additional Exchange Debentures issued in
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lieu of cash would not be treated as debt instruments separate from the
Exchange Debentures upon which they were issued, but instead are aggregated
with such Exchange Debentures.
The right to issue additional Exchange Debentures in lieu of paying
cash interest through March 15, 2002 is treated for purposes of the
original issue discount provisions of the Code as an option to defer the
interest payments on the Exchange Debentures until maturity. Treasury
regulations provide that in the case of a debt instrument that provides the
issuer with an unconditional option or options exercisable during the term
of the debt instrument that, if exercised, require payments to be made on
the debt instrument under an alternative payment schedule, the yield and
maturity of such debt instrument for purposes of calculating OID are
determined by assuming the issuer exercises or does not exercise the option
in a manner that minimizes the yield on the debt instrument.
If the issue price of the Exchange Debentures is equal to their
principal amount, the yield to maturity of the Exchange Debentures if the
option to pay interest with additional Exchange Debentures is exercised
will be equal to the yield to maturity if the option is not exercised.
Accordingly, for purposes of calculating OID, it would be assumed that
Holdings will not exercise the option because exercise of the option
will not minimize the yield. If the option was in fact subsequently
exercised and additional Exchange Debentures were issued by Holdings in
lieu of cash, such additional Exchange Debentures would be aggregated
with the Exchange Debentures upon which they were issued, and OID would
be calculated for the remainder of the term of the Exchange Debentures
based upon an adjusted issue price which includes the principal amount
of the additional Exchange Debentures. As a result of such exercise,
United States Holders of Exchange Debentures would include OID in income
in advance of the receipt of cash, regardless of such Holders' regular
methods of accounting.
If the issue price of the Exchange Debentures is less than their
principal amount, the yield to maturity of the Exchange Debentures, if the
option to pay interest with additional Exchange Debentures is exercised,
will be less than the yield to maturity if the option is not exercised.
Accordingly, for purposes of calculating OID, it would be assumed that
Holdings will exercise the option because to do so will minimize the yield.
If Holdings does in fact exercise its option and issues additional Exchange
Debentures in lieu of cash, United States Holders of Exchange Debentures
will include OID in income in advance of the receipt of cash, regardless of
such Holders' regular methods of accounting. If Holdings subsequently makes
a cash payment instead of exercising its option and issuing an additional
Exchange Debenture, the cash payment made will be treated as a prepayment
of the Exchange Debentures, partially retiring such Exchange Debentures on
a pro rata basis on the date of such payment. Such retirement would be a
taxable exchange to the Holder of the Exchange Debenture.
If the Exchange Debentures are issued after March 15, 2002, Holdings
would not have the option to pay interest with additional Exchange
Debentures. In such event, (i) all interest payments on any Exchange
Debenture issued will be qualified stated interest, (ii) the redemption
price at maturity of any Exchange Debenture will be equal to its principal
amount, and (iii) any Exchange Debenture will therefore be issued with OID
only to the extent its principal amount exceeds its issue price (provided
that such excess is not de minimis).
The amount of OID includible in income by the initial United States
Holder of an Original Issue Discount Debenture is the sum of the "daily
portions" of OID with respect to the Original Issue Discount Debenture for
each day during the taxable year or portion of the taxable year in which
such United States Holder held such Debenture ("accrued OID"). The daily
portion is determined by allocating to each day in any "accrual period" a
pro rata portion of the OID allocable to that accrual period. The "accrual
period" for an Original Issue Discount Debenture may be of any length and
may vary in length over the term of the Original Issue Discount Debenture,
provided that each accrual period is no longer than one year and each
scheduled payment of principal or interest occurs on the first day or the
final day of an accrual period. The amount of OID allocable to any accrual
period is an amount equal to the excess, if any, of (a) the product of the
Original Issue Discount Debenture's adjusted issue price at the beginning
of such accrual period and its yield to maturity (determined on the basis
of compounding at the close of each accrual period and properly adjusted
for the length of the accrual period) over (b) the sum of any qualified
stated interest allocable to the accrual period. OID allocable to a final
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accrual period is the difference between the amount payable at maturity
(other than a payment of qualified stated interest) and the adjusted issue
price at the beginning of the final accrual period. The yield of a New Note
is, rounded to two decimal places, 11.62%. Special rules will apply for
calculating OID for an initial short accrual period. The "adjusted issue
price" of an Original Issue Discount Debenture at the beginning of any
accrual period is equal to its issue price increased by the accrued OID for
each prior accrual period (determined without regard to the amortization of
any acquisition or bond premium, as described below) and reduced by any
payments made on such Debenture (other than qualified stated interest) on
or before the first day of the accrual period.
Both the New Notes and the Exchange Debentures may be redeemed prior
to their Stated Maturity at the option of Holdings. For purposes of
computing the yield of such instrument, Holdings will be deemed to exercise
or not exercise its option to redeem the Original Issue Discount Debentures
in a manner that minimizes the yield on the Original Issue Discount
Debentures. It is not anticipated that Holdings' ability to redeem prior to
stated maturity would affect the yield of such instrument.
In the event of a change of control, Holdings will be required to
offer to repurchase all of the New Notes and the Exchange Debentures. The
right of holders to require repurchase upon a Change of Control will not
affect the yield or maturity date of the New Notes or the Exchange
Debentures provided that, based on all the facts and circumstances as of
the issue date, the payment schedule on such Notes or Exchange Debentures
that does not reflect a change of control is significantly more likely than
not to occur. Holdings does not intend to treat the change of control
provisions of the New Notes or the Exchange Debentures as affecting the
computation of the yield to maturity of any New Notes or Exchange
Debentures.
United States Holders may elect to treat all interest on any New Note
or Exchange Debenture as OID and calculate the amount includible in gross
income under the constant yield method described above. For the purposes of
this election, interest includes stated interest, acquisition discount,
OID, de minimis OID, market discount, de minimis market discount and
unstated interest, as adjusted by any amortizable bond premium or
acquisition premium. The election is to be made for the taxable year in
which the United States Holder acquired the New Note or Exchange Debenture,
and may not be revoked without the consent of the Internal Revenue Service
(the "IRS"). UNITED STATES HOLDERS SHOULD CONSULT WITH THEIR OWN TAX
ADVISORS ABOUT THIS ELECTION.
MARKET DISCOUNT ON RESALE OF NEW NOTES OR EXCHANGE DEBENTURES
If a United States Holder purchases an Exchange Debenture (other than
an Original Issue Discount Debenture) for an amount less than its stated
redemption price at maturity or, in the case of an Original Issue Discount
Debenture, for an amount that is less than its adjusted issue price, the
amount of the difference will be treated as "market discount" for federal
income tax purposes, unless such difference is less than a specified de
minimis amount. However, with respect to a United States Holder who
purchased a New Note at original issuance, such instrument will not be
treated as issued with market discount unless it is purchased for less than
its issue price and the difference between the purchase price and the issue
price is greater than a specified de minimis amount. Under the market
discount rules, a United States Holder will be required to treat any
principal payment on a New Note or an Exchange Debenture, or any gain on
the sale, exchange, retirement or other disposition of a New Note or an
Exchange Debenture as ordinary income to the extent of the market discount
which has not previously been included in income and is treated as having
accrued on such New Note or Exchange Debenture at the time of such payment
or disposition. In addition, the United States Holder may be required to
defer, until the maturity of the New Note or the Exchange Debenture or its
earlier disposition in a taxable transaction, the deduction of all or a
portion of the interest expense on any indebtedness incurred or continued
to purchase or carry such New Note or Exchange Debenture.
Any market discount will be considered to accrue ratably during the
period from the date of acquisition to the maturity date of the New Note or
the Exchange Debenture, unless the United States Holder elects to accrue on
a constant interest method. A United States Holder of a New Note or the
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Exchange Debenture may elect to include market discount in income currently
as it accrues (on either a ratable or constant interest method), in which
case the rule described above regarding deferral of interest deductions
will not apply. This election to include market discount in income
currently, once made, applies to all market discount obligations acquired
on or after the first taxable year to which the election applies and may
not be revoked without the consent of the IRS.
ACQUISITION PREMIUM; AMORTIZABLE BOND PREMIUM
A United States Holder that purchases a New Note or an Exchange
Debenture for an amount that is greater than its adjusted issue price but
equal to or less than the sum of all amounts payable on the New Note or
Exchange Debenture after the purchase date, other than qualified stated
interest, will be considered to have purchased such New Note or Exchange
Debenture at an "acquisition premium." Under the acquisition premium rules,
the amount of OID, if any, which such United States Holder must include in
its gross income with respect to such New Note or Exchange Debenture for
any taxable year will be reduced by the portion of such acquisition premium
properly allocable to such year.
If at the time the New Preferred Stock is exchanged for Exchange
Debentures or at the time a subsequent United States Holder purchases
Exchange Debentures, the United States Holder's tax basis in any such
Exchange Debenture exceeds the sum of all amounts payable on the Exchange
Debenture after the exchange date or purchase date, other than qualified
stated interest, such excess may constitute "premium" and such United
States Holder will not be required to include any OID in income. A United
States Holder generally may elect to amortize bond premium over the
remaining term of the Exchange Debenture on a constant yield method. The
amount amortized in any year will be treated as a reduction of the United
States Holder's interest income from the Exchange Debenture. Bond premium
on an Exchange Debenture held by a United States Holder that does not make
such an election will decrease the gain or increase the loss otherwise
recognized on disposition of the Exchange Debenture. The election to
amortize bond premium on a constant yield method once made applies to all
debt obligations held or subsequently acquired by the electing United
States Holder on or after the first day of the first taxable year to which
the election applies and may not be revoked without the consent of the IRS.
REDEMPTION, SALE OR EXCHANGE OF NEW NOTES OR EXCHANGE DEBENTURES
The adjusted tax basis of a United States Holder who receives Exchange
Debentures in exchange for New Preferred Stock will, in general, be equal
to the issue price of such Exchange Debentures, increased by OID and market
discount previously included in income by the United States Holder and
reduced by any amortized premium and any cash payments on the Exchange
Debentures other than qualified stated interest. A United States Holder's
tax basis in a New Note will, in general, be the United States Holder's
cost therefor, increased by OID and market discount previously included in
income by the United States Holder and reduced by any cash payments on the
New Notes. Upon the redemption, sale, exchange or retirement of a New Note
or Exchange Debenture, a United States Holder will recognize gain or loss
equal to the difference between the amount realized upon the redemption,
sale, exchange or retirement (less any accrued qualified stated interest,
not previously taken into account, which will be taxable as such) and the
adjusted tax basis of the New Note or Exchange Debenture. Such gain or loss
will be capital gain or loss and will be long-term capital gain or loss if
at the time of redemption, sale, exchange or retirement the New Note or
Exchange Debenture has been held for more than one year.
APPLICABLE HIGH YIELD DISCOUNT OBLIGATIONS
If the yield to maturity on Original Issue Discount Debentures equals
or exceeds the sum of (x) the "applicable federal rate" (as determined
under Section 1274(d) of the Code) in effect for the month in which the
Original Issue Discount Debentures are issued (the "AFR") and (y) 5% and
the OID on such Original Issue Discount Debentures is "significant," the
Original Issue Discount Debentures will be considered "applicable high
yield discount obligations" ("AHYDOs") under Section 163(i) of the Code and
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will be subject to special rules that will defer Holdings' deduction for
interest (including OID) until such interest is actually paid. The
"applicable federal rate" is 6.75% for long-term debt instruments issued in
March 1997.
Moreover, if the yield to maturity on the Original Issue Discount
Debenture exceeds the sum of (x) the AFR and (y) 6% (such excess shall be
referred to hereinafter as the "Disqualified Yield"), the deduction for
interest (including OID) accrued on the Original Issue Discount Debentures
will be permanently disallowed (regardless of whether the Company actually
pays such interest or OID in cash or in other property) for U.S. federal
income tax purposes to the extent such interest or OID is attributable to
the Disqualified Yield on the Original Issue Discount Debentures
("Dividend-Equivalent Interest"). For purposes of the dividends-received
deduction, such Dividend-Equivalent Interest will be treated as a dividend
to the extent it is deemed to have been paid out of the Company's current
or accumulated earnings and profits.
Due to their maturity date, yield to maturity, and amount of OID, the
New Notes will not be subject to the applicable high yield discount
obligation rules described above. Because the amount of OID, if any,
attributable to the Exchange Debentures will be determined at such time
such Exchange Debentures are issued and the AFR at the time such Exchange
Debentures are issued in exchange for New Preferred Stock is not
predictable, it is impossible to determine at the present time whether an
Exchange Debenture will be treated as an AHYDO.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of dividends, principal, interest, OID, and premium and to the
proceeds of sales of New Notes, Exchange Debentures and New Preferred Stock
made to United States Holders other than certain exempt recipients (such as
corporations). A 31% backup withholding tax will apply to such payments if
the United States Holder fails to provide a taxpayer identification number
or certification of foreign or other exempt status or fails to report in
full dividend and interest income.
Any amounts withheld under the backup withholding rules will be
allowed as a refund or a credit against such United States Holder's U.S.
federal income tax liability provided the required information is furnished
to the IRS.
TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
DIVIDENDS ON THE NEW PREFERRED STOCK
Although, as discussed above (see "Tax Consequences to United States
Holders--Dividends on the New Preferred Stock"), distributions on the New
Preferred Stock will only be treated as dividends for United States federal
income tax purposes to the extent of Holdings' current or accumulated
earnings and profits (as determined under United States tax principles),
distributions paid to a Non-United States Holder of New Preferred Stock
generally will be subject to withholding of United States federal income
tax at a 30% rate or such lower rate as may be specified by an applicable
income tax treaty. However, dividends that are effectively connected with
the conduct of a trade or business by the Non-United States Holder within
the United States or, if a tax treaty applies, are attributable to a United
States permanent establishment of the Non-United States Holder, are not
subject to the withholding tax, but instead are subject to United States
federal income tax on a net income basis at applicable graduated individual
or corporate rates. Any such effectively connected dividends received by a
foreign corporation may, under certain circumstances, be subject to an
additional "branch profits tax" at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.
Under current United States Treasury regulations, dividends paid to an
address outside the United States are presumed to be paid to a resident of
such country (unless the payor has knowledge to the contrary) for purposes
of the withholding discussed above and for purposes of determining the
applicability of a tax treaty rate. Under proposed United States Treasury
regulations not currently in effect, however, in the case of dividends paid
after December 31, 1997 (December 31, 1999 in the case of dividends paid to
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accounts in existence on or before the date that is 60 days after the
proposed United States Treasury regulations are published as final
regulations), a Non-United States Holder of New Preferred Stock who wishes
to claim the benefit of an applicable treaty rate would be required to
satisfy applicable certification and other requirements. Currently, certain
certification and disclosure requirements must be complied with in order to
be exempt from the withholding under the effectively connected income
exemption discussed above.
If it is subsequently determined that some or all of the distribution
on the New Preferred Stock should be treated as a return of capital, a Non-
United States Holder may obtain a refund of some or all of the tax withheld
by filing an appropriate claim for refund with the IRS. A Non-United States
Holder of New Preferred Stock eligible for a reduced rate of United States
withholding tax pursuant to an income tax treaty may obtain a refund of any
excess amounts withheld by filing an appropriate claim for refund with the
IRS.
INTEREST AND OID ON NEW NOTES AND EXCHANGE DEBENTURES
Subject to the discussion below concerning backup withholding, no
withholding of United States federal income tax will be required with
respect to the payment by the Company or any paying agent of principal or
interest (which for purposes of this discussion includes OID) on a New Note
or an exchange Debenture owned by a Non-United States Holder, provided (i)
that the beneficial owner does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of Holdings
entitled to vote within the meaning of Section 871(h)(3) of the Code and
the regulations thereunder, (ii) the beneficial owner is not a controlled
foreign corporation that is related to Holdings through stock ownership,
(iii) the beneficial owner is not a bank whose receipt of interest on a New
Note or an Exchange Debenture is described in Section 881(c)(3)(A) of the
Code and (iv) the beneficial owner satisfies the statement requirement
(described generally below) set forth in Section 871(h) and Section 881(c)
of the Code and the regulations thereunder.
To satisfy the requirement referred to in (iv) above, the beneficial
owner of such New Note or an Exchange Debenture, or a financial institution
holding the New Note or an Exchange Debenture on behalf of such owner, must
provide, in accordance with specified procedures, Holdings or its paying
agent with a statement to the effect that the beneficial owner is not a
U.S. person. These requirements will be met if (1) the beneficial owner
provides his name and address, and certifies, under penalties of perjury,
that he is not a U.S. person (which certification may be made on an IRS
Form W-8 (or successor form)) or (2) a financial institution holding the
New Note or an Exchange Debenture on behalf of the beneficial owner
certifies, under penalties of perjury, that such statement has been
received by it and furnishes a paying agent with a copy thereof.
Holdings will not withhold federal income tax on interest paid to a
Non-United States Holder if it receives IRS Form 4224 from that Non-United
States Holder, establishing that such income is effectively connected with
the conduct of a trade or business in the United States, unless Holdings
has knowledge to the contrary. Interest (including OID) or redemption
premium paid to a Non-United States Holder (other than a partnership) that
is effectively connected with the conduct by the holder of a trade or
business in the United States is generally taxed at the graduated rates
that are applicable to United States persons. In the case of a Non-United
States Holder that is a corporation, such effectively connected income may
also be subject to the United States federal branch profits tax (which is
generally imposed on a foreign corporation on the deemed repatriation from
the United States of effectively connected earnings and profits) at a 30%
rate (unless the rate is reduced or eliminated by an applicable income tax
treaty and the holder is a qualified resident of the treaty country). In
the case of a partnership that has foreign partners (i.e., persons who
would be Non-United States Holders if they held the New Notes or Exchange
Debentures directly), such effectively connected income allocable to the
foreign partner would generally be subject to United States federal
withholding tax (regardless of whether such income is, in fact, distributed
to such foreign partner) at a 35% rate, if the foreign partner is a
corporation, or at a 39.6% rate, if the foreign partner is not a
corporation. Any foreign partner of such a partnership would be entitled to
a credit against his United States federal income tax for his share of the
withholding tax paid by the partnership.
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SALE, EXCHANGE, REDEMPTION OR OTHER DISPOSITION OF NEW NOTES, EXCHANGE
DEBENTURES AND NEW PREFERRED STOCK
A Non-United States Holder will generally not be subject to United
States federal income tax with respect to gain recognized on a sale,
exchange, redemption or other disposition of New Notes, Exchange Debentures
or New Preferred Stock unless (i) the gain is effectively connected with a
trade or business of the Non-United States Holder in the United States,
(ii) in the case of a Non-United States Holder who is an individual and
holds the New Notes Exchange Debentures or New Preferred Stock as a capital
asset, such holder is present in the United States for 183 or more days in
the taxable year of the sale or other disposition and certain other
conditions are met, (iii) the Non-United States Holder is subject to tax
pursuant to certain provisions of the Code applicable to United States
expatriates, or (iv) in the case of the New Preferred Stock, Holdings is or
has been a "U.S. real property holding corporation" for United States
federal income tax purposes at any time within the shorter of the five-year
period preceding such disposition or the period such Non-United States
Holder held the New Preferred Stock. Holdings believes that it has not been
and is not, and it does not anticipate becoming, a "U.S. real property
holding corporation" for United States federal income tax purposes.
Unless shares of a United States corporation are treated as regularly
traded on an established securities market (as defined in applicable
Treasury regulations), or another exemption applies, upon a sale or other
disposition of such shares by a Non-United States Holder, the transferee of
such shares would be required to withhold 10% of the proceeds of such sale
or disposition if the United States corporation does not provide
certification that it is not (and has not been during a specified period) a
"U.S. real property holding corporation" for United States federal income
tax purposes. Amounts withheld with respect to stock of a United States
corporation that is not a "U.S. real property holding corporation" for
United States federal income tax purposes may be refunded to a Non-United
States Holder who files an appropriate claim for refund with the IRS. It is
anticipated that the New Preferred Stock will not be treated as publicly
traded for purposes of applicable Treasury regulations.
Gains derived by a Non-United States Holder (other than a partnership)
from the sale or other disposition of New Notes, Exchange Debentures or New
Preferred Stock that are effectively connected with the conduct by the
holder of a trade or business in the United States are generally taxed at
the graduated rates that are applicable to United States persons. In the
case of a Non-United States Holder that is a corporation, such effectively
connected income may also be subject to the United States branch profits
tax (which is generally imposed on a foreign corporation on the deemed
repatriation from the United States of effectively connected earnings and
profits) at a 30% rate (unless the rate is reduced or eliminated by an
applicable income tax treaty and the holder is a qualified resident of the
treaty country). In the case of a partnership that has foreign partners
(i.e., persons who would be Non-United States Holders if they held the New
Notes, Exchange Debentures or New Preferred Stock, directly), such
effectively connected income allocable to the foreign partner would
generally be subject to United States federal withholding tax (regardless
of whether such income is, in fact, distributed to such foreign partner) at
a 35% rate, if the foreign partner is a corporation, or at a 39.6% rate, if
the foreign partner is not a corporation. Any foreign partner of such a
partnership would be entitled to a credit against his United States federal
income tax for his share of the withholding tax paid by the partnership. If
an individual Non-United States Holder falls under clause (ii) above, he
will be subject to a flat 30% tax on the gain derived from the sale or
other disposition, which may be offset by United States capital losses
recognized within the same taxable year as such sale or other disposition
(notwithstanding the fact that he is not considered a resident of the
United States).
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FEDERAL ESTATE AND GIFT TAX
New Preferred Stock held by an individual Non-United States Holder at
the time of death will be included in such holder's gross estate for United
States federal estate tax purposes, unless an applicable estate tax treaty
provides otherwise.
A New Note or Exchange Debenture beneficially owned by an individual
who at the time of death is a Non-United States Holder will not be subject
to United States federal estate tax as a result of such individual's death,
provided that such individual does not actually or constructively own 10%
or more of the total combined voting power of all classes of stock of the
Company entitled to vote within the meaning of Section 871(h)(3) of the
Code and provided that the interest payments with respect to such New Note
or Exchange Debenture would not have been, if received at the time of such
individual's death, effectively connected with the conduct of a United
States trade or business by such individual.
Any Non-United States Holder will not be subject to United States
federal gift tax on a transfer of New Notes, Exchange Debentures or New
Preferred Stock, unless such person is an individual who is a domiciliary
of the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
No information reporting or backup withholding will be required with
respect to payments made by Holdings or any paying agent to Non-United
States Holders if a statement described in (iv) under "Tax Consequences to
Non-United States Holders-Interest and OID on New Notes and Exchange
Debentures" has been received and the payor does not have actual knowledge
that the beneficial owner is a United States person. United States
information reporting and backup withholding generally will not apply under
current law to dividends paid to a Non-United States Holder at an address
outside of the United States that is subject to the 30% withholding
discussed above (or that is not so subject because a tax treaty applies
that reduces or eliminates such 30% withholding); provided the payor does
not have definite knowledge that the payee is a United States person.
However, under proposed United States Treasury regulations, in the case of
dividends paid after December 31, 1997 (December 31, 1999 in the case of
dividends paid to accounts in existence on or before the date that is 60
days after the proposed United States Treasury regulations are published as
final regulations), a Non-United States Holder generally would be subject
to backup withholding at a 31% rate, unless certain certification
procedures are complied with, either directly or through an intermediary.
In addition, backup withholding and information reporting will not
apply if payments of interest or OID on a New Note or Exchange Debenture
are paid or collected by a foreign office of a foreign custodian, nominee
or other foreign agent on behalf of the beneficial owner of such New Note
or Exchange Debenture, or if a foreign office of a foreign broker (as
defined in applicable Treasury regulations) pays the proceeds of the sale
of a New Note, an Exchange Debenture or New Preferred Stock to the owner
thereof. If, however, such nominee, custodian, agent or broker is, for
United States federal income tax purposes, a U.S. person, a controlled
foreign corporation or a foreign person that derives 50% or more of
its gross income for certain periods from the conduct of a trade or
business in the United States, such payments will not be subject to
backup withholding but will be subject to information reporting, unless
(1) such custodian, nominee, agent or broker has documentary evidence in
its records that the beneficial owner is not a U.S. person and certain
other conditions are met or (2) the beneficial owner otherwise
establishes an exemption. Temporary Treasury regulations provide that
the Treasury is considering whether backup withholding will apply
with respect to such payments of interest or the proceeds of a sale
that are not subject to backup withholding under the current regulations.
Under proposed United States Treasury regulations not currently in effect,
backup withholding will not apply to such payments absent actual knowledge
that the payee is a United States person.
The IRS recently proposed regulations (the "Proposed Regulations")
addressing certain withholding, certification, and information rules (some
of which have been mentioned above) which could affect the treatment of the
-125-
<PAGE>
payment of the amounts described above. The Proposed Regulations would
require, in the case of Exchange Debentures and New Notes held by foreign
partnerships, that (i) the certification described in clause (iv) under
"Interest and OID on New Notes and Exchange Debentures" above be provided
by the partners rather than by the foreign partnership and (ii) the
partnership provide certain information, including a United States taxpayer
identification number. A look-through rule would apply in the case of
tiered partnerships. The Proposed Regulations are proposed to be effective
for payments made after December 31, 1997. There can be no assurance that
the Proposed Regulations will be adopted or as to the provisions they will
include if and when adopted in temporary or final form. Non-United States
Holders should consult their tax advisors regarding the application of
these rules to their particular situations, the availability of an
exemption therefrom, the procedure for obtaining such an exemption, if
available, and the possible application of the proposed United States
Treasury regulations addressing the withholding and information reporting
rules.
Payments of dividends, interest or OID on a New Note, Exchange
Debenture or New Preferred Stock, paid to the beneficial owner of a New
Note, Exchange Debenture or New Preferred Stock by a United States office
of a custodian, nominee or agent, or the payment by the United States
office of a broker of the proceeds of sale of a New Note, Exchange
Debenture or New Preferred Stock will be subject to both backup withholding
and information reporting unless the beneficial owner provides the
statement referred to in (iv) under "Tax Consequences to Non-United States
Holders-Interest and OID on New Notes and Exchange Debentures" and the
payor does not have actual knowledge that the beneficial owner is a United
States person or otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be
allowed as a refund or a credit against such Holder's U.S. federal income
tax liability provided the required information is furnished to the IRS.
-126-
<PAGE>
PLAN OF DISTRIBUTION
Except as described below, a broker-dealer may not participate in the
Exchange Offers in connection with a distribution of the New Notes or the
New Preferred Stock. Each broker-dealer that receives New Notes or New
Preferred Stock for its own account pursuant to the Exchange Offers must
acknowledge that it will deliver a prospectus in connection with any resale
of such New Notes or New Preferred Stock. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of New Notes or New Preferred Stock received in
exchange for Old Notes or Old Preferred Stock where such Old Notes or Old
Preferred Stock were acquired as a result of market-making activities or
other trading activities. The Company has agreed that for a period of 90
days after the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any
such resale. In addition, until ____________ __, 1997 all dealers effecting
transactions in the New Notes or New Preferred Stock may be required to
deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes
or New Preferred Stock by broker-dealers. New Notes or New Preferred Stock
received by broker-dealers for their own account pursuant to the Exchange
Offers may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the New Notes or New Preferred Stock or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
New Notes or New Preferred Stock. Any broker-dealer that resells New Notes
that were received by it for its own account pursuant to the Exchange
Offers and any broker or dealer that participates in a distribution of such
New Notes or New Preferred Stock may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale
of New Notes or New Preferred Stock and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation
under the Securities Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the Exchange
Offers other than commissions or concessions of any brokers or dealers and
expenses of counsel for the holders of the New Notes or New Preferred Stock
and will indemnify the holders of the New Notes and the New Preferred Stock
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
The validity of the New Notes, the New Note Guarantee and the New
Preferred Stock offered hereby will be passed upon by Reid & Priest LLP,
New York, New York.
EXPERTS
The consolidated financial statements of the Company as of September
30, 1995 and 1996 and December 31, 1996, and for each of the years in the
three-year period ended September 30, 1996 and for the three month period
ended December 31, 1996, have been incorporated by reference herein and in
the Registration Statement, in reliance upon the reports of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in
accounting and auditing.
-127-
<PAGE>
The reports of KPMG Peat Marwick LLP relating to the Company's
financial statements as of September 30, 1995 and 1996 and December
31, 1996 and for each of the three years in the three year-period
ended September 30, 1996, and the three-month period ended December
31, 1996, and related schedule, refer to a change in the Company's
method of accounting for long-term telecom services contracts during
the year ended September 30, 1996.
-128-
<PAGE>
===========================================================================
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and, if
given or made, such information or representations must not be relied upon
as having been authorized. This Prospectus does not constitute an offer to
sell or the solicitation of an offer to buy any securities other than the
securities to which it related or any offer to sell or the solicitation of
an offer to buy such securities in any circumstances in which such offer or
solicitation is unlawful. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Company since the date
hereof or that the information contained herein is correct as of any time
subsequent to its date.
TABLE OF CONTENTS
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 2
INFORMATION INCORPORATED BY REFERENCE . . . . . . . . . . . . . . . 2
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . 4
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
THE EXCHANGE OFFERS . . . . . . . . . . . . . . . . . . . . . . . . 27
DESCRIPTION OF NEW NOTES . . . . . . . . . . . . . . . . . . . . . 36
DESCRIPTION OF NEW PREFERRED STOCK . . . . . . . . . . . . . . . . 62
DESCRIPTION OF EXCHANGE DEBENTURES . . . . . . . . . . . . . . . . 86
CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . 114
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . 127
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
---------------------------------------------------------------------------
==========================================================================
ICG HOLDINGS, INC.
ICG COMMUNICATIONS, INC.
------------
PROSPECTUS
------------
__________, 1997
----------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 7-3-101.5 of the Colorado Corporation Code
(the "Colorado Code"), Holdings' Second Amended and Restated Articles of
Incorporation provide that Holdings shall indemnify any and all officers,
directors, or employees against expenses incurred by them, in connection
with the defense of any legal proceedings or threatened legal proceedings
to which such persons are made a party because of such positions if:
(I) He conducted himself in good faith;
(II) He reasonably believed;
(A) In the case of conduct in his official capacity with the
corporation, that his conduct was in the corporation's best
interest; or
(B) In all other cases, that his conduct was at least not
opposed to the corporation's best interests; and
(III) In the case of any criminal proceeding, he had no reasonable
cause to believe his conduct was unlawful.
Holdings' By-laws contain a similar provision requiring
indemnification of Holdings' directors and officers to the fullest extent
authorized by the Colorado Code.
ICG's Certificate of Incorporation provides that ICG will to the
fullest extent permitted by the General Corporation Law of the State of
Delaware, as amended from time to time (the "GCL"), indemnify all persons
whom it may indemnify pursuant thereto. ICG's By-laws contain a similar
provision requiring indemnification of ICG's directors and officers to the
fullest extent authorized by the GCL. The GCL permits a corporation to
indemnify its directors and officers (among others) against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by them in connection with any
action, suit or proceeding brought (or threatened to be brought) by third
parties, if such directors or officers acted in good faith and in a manner
they reasonably believe to be in or not opposed to the best interests of
the corporation and, with respect to any criminal action or proceeding, had
no reasonable cause to believe their conduct was unlawful. In a derivative
action, i.e., one by or in the right of the corporation, indemnification
may be made for expenses (including attorneys' fees) actually and
reasonably incurred by directors and officers in connection with the
defense or settlement of such action if they had acted in good faith and in
a manner they reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have
been adjudged liable to the corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity of such expenses. The GCL
further provides that, to the extent any director or officer has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in this paragraph, or in defense of any claim, issue
or matter therein, such person shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith. In addition, ICG's Certificate of Incorporation
contains a provision limiting the personal liability of ICG's directors for
monetary damages for certain breaches of their fiduciary duty. ICG has
indemnification insurance under which directors and officers are insured
against certain liability that may incur in their capacity as such.
See Item 22 of this Registration Statement regarding the position of
the Securities and Exchange Commission on indemnification for liabilities
arising under the Securities Act.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(1) Underwriting Agreement. Not Applicable.
----------------------
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or
----------------------------------------------------------------
Succession. None
----------
II-1
<PAGE>
(3) Articles of Incorporation.
-------------------------
3.1: Second Amended and Restated Articles of Incorporation of ICG
Holdings, Inc.
(4) Instruments defining the rights of security holders, including
---------------------------------------------------------------
indentures.
-----------
4.1: Note Purchase Agreement, dated September 16, 1993 [Incorporated
by reference to Annual Report on Form 20-F for the year ended
September 30, 1993, as filed on March 31, 1994].
4.2: Note Purchase Agreement, dated October 27, 1993 [Incorporated by
reference to Annual Report on Form 20-F for the year ended
September 30, 1993, as filed on March 31, 1994].
4.3: Form of Indenture between IntelCom Group Inc. and Bankers Trust
Company for 7% Convertible Subordinated Redeemable Notes due 1998
[Incorporated by reference to Exhibit 4.3 to Registration
Statement on Form S-1, File No. 33-75636].
4.4: Form of Indenture between IntelCom Group Inc. and Bankers Trust
Company for 7% Simple Interest Convertible Subordinated
Redeemable Notes due 1998 [Incorporated by reference to Exhibit
4.4 to Registration Statement on Form S-1, File No. 33-75636].
4.5: Note Purchase Agreement, dated as of July 14, 1995, among
IntelCom Group (U.S.A.), Inc., IntelCom Group Inc., Morgan
Stanley Group Inc. ("MS Group") (the "Initial Purchaser"),
Princes Gate Investors, L.P., Acorn Partnership I, L.P., PGI
Investments Limited, PGI Sweden AB, and Gregor von Opel
(collectively, together with the Initial Purchaser, the
"Committed Purchasers") and MS Group, as agent for the Purchasers
(as such term is defined therein) [Incorporated by reference to
Exhibit 4.1 to Form 8-K, as filed on August 2, 1995].
4.6: Warrant Agreement, dated as of July 14, 1995, among the
Registrant, the Committed Purchasers, and IntelCom Group
(U.S.A.), Inc., as Warrant Agent [Incorporated by reference to
Exhibit 4.2 to Form 8-K, as filed on August 2, 1995].
4.7: Indenture, dated as of August 8, 1995, among IntelCom Group
(U.S.A.), Inc., IntelCom Group Inc. and Norwest Bank Colorado,
National Association [Incorporated by reference to Exhibit 4.1 to
Quarterly Report on Form 10-Q for the quarter ended June 30,
1995, as filed on August 10, 1995].
4.8: Warrant Agreement, dated as of August 8, 1995 between IntelCom
Group Inc. and Norwest Bank Colorado, National Association
[Incorporated by reference to Exhibit 4.3 to Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995, as filed on August
10, 1995].
4.9: Warrant Agreement Amendment, dated as of August 8, 1995 among
IntelCom Group Inc., Morgan Stanley Group, Inc., Princes Gate
Investors, L.P., IntelCom Group (U.S.A.), Inc., and certain
subsidiaries of IntelCom Group (U.S.A.), Inc. [Incorporated by
reference to Exhibit 4.4 to Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995, as filed on August 10, 1995].
4.10: Indenture, dated as of April 30, 1996, among IntelCom Group
(U.S.A.), Inc., IntelCom Group Inc. and Norwest Bank
Colorado, National Association [Incorporated by reference to
Exhibit 4.13 to Registration Statement on Form S-4, File No.
333-04569].
4.11: Registration Rights Agreement, dated April 30, 1996, among
IntelCom Group (U.S.A.), Inc., IntelCom Group Inc. and
Morgan Stanely & Co. Incorporated [Incorporated by reference
to Exhibit 4.14 to Registration Statement on Form S-4, File
No. 333-04569].
4.12: Form of Old Note.
4.13: Form of New Note.*
4.14: Form of Letter of Transmittal with respect to the Note
Exchange Offer.*
II-2
<PAGE>
4.15: Indenture, dated as of March 11, 1997, among ICG Holdings,
Inc., ICG Communications, Inc. and Norwest Bank Colorado,
National Association.
4.16: Registration Rights Agreement, dated March 11, 1997, among
ICG Holdings, Inc., ICG Communications, Inc. and Morgan
Stanley & Co. Incorporated with respect to the Senior
Discount Notes.
4.17: Registration Rights Agreement, dated March 11, 1997, among
ICG Holdings, Inc. and Morgan Stanley & Co. Incorporated
with respect to the Preferred Stock.
4.18: Form of Old Preferred Stock Certificate.
4.19: Form of New Preferred Stock Certificate.*
4:20: Form of Letter of Transmittal with respect to the Preferred
Stock Exchange Offer.*
(5) Opinion regarding legality.
---------------------------
5.1: Opinion of Reid & Priest LLP.*
(8) Opinion regarding tax matters.
------------------------------
8.1: Opinion of Reid & Priest LLP.*
(10) Material Contracts. Not Applicable.
------------------
(12) Statement re Computation of Ratios. Not Applicable.
----------------------------------
(15) Letter re Unaudited Interim Financial Statements. Not Applicable.
------------------------------------------------
(23) Consents.
--------
23.1: Consent of KPMG Peat Marwick LLP.
23.2: Consent of Reid & Priest LLP (included in Exhibit 5.1).*
23.3: Consent of Connecticut Research [Incorporated by reference
to Annual Report on Form 10-K for the year ended September
30, 1994, as filed on December 27, 1994].
(24) Power of Attorney.
-----------------
24.1 Power of Attorney with respect to ICG Holdings, Inc. (included on
the signature page hereto).
24.2 Power of Attorney with respect to ICG Communications, Inc.
(included on the signature page hereto).
(25) Statement of Eligibility of Trustee.
------------------------------------
25.1: Form T-1 Statement of Eligibility and Qualification under
the Trust Indenture Act of 1939 of Norwest Bank Colorado,
National Association.*
______________________
* To be filed by amendment.
II-3
<PAGE>
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director,
officer or controlling person of the Company in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned Registrants hereby undertake:
(1) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or
13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of
the Registration Statement through the date of responding to the
request;
(2) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the
registration statement when it became effective;
(3) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
(4) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(5) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering;
(6) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual
report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d)
of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Act, the Registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City and County of Denver,
State of Colorado, on March 31, 1997.
ICG HOLDINGS, INC.
By: /s/ J. Shelby Bryan
-------------------------------------
J. Shelby Bryan
Chairman of the Board, President
and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below under the heading "Signature" constitutes and appoints J.
Shelby Bryan and James D. Grenfell, or either of them, his true and lawful
attorney-in-fact and agent with full power of substitution and re-
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting said attorney-in-fact and
agent, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in connection
with the above premises, as fully for all intents and purposes as he might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
---------- ----- ------
/s/ J. Shelby Bryan
--------------------------- Chairman of the March 31, 1997
J. Shelby Bryan Board, President
and Chief Executive
Officer (Principal
executive officer)
/s/ James D. Grenfell
-------------------------- Executive Vice March 31, 1997
James D. Grenfell President,
Chief Financial
Officer, Treasurer
and Director
(Principal
financial officer)
/s/ Richard Bambach
-------------------------- Vice President and March 31, 1997
Richard Bambach Corporate
Controller
(Principal
accounting officer)
/s/ William J. Maxwell
-------------------------- Director March 31, 1997
William J. Maxwell
-------------------------- Director March , 1997
Marc E. Maassen
/s/ Mark S. Helwege
-------------------------- Director March 31, 1997
Mark S. Helwege
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City and
County of Denver, State of Colorado, on March 31, 1997.
ICG COMMUNICATIONS, INC.
By: /s/ J. Shelby Bryan
----------------------------
J. Shelby Bryan
President, Chief Executive
Officer and Director
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below under the heading "Signature" constitutes and appoints J.
Shelby Bryan and James D. Grenfell, or either of them, his true and lawful
attorney-in-fact and agent with full power of substitution and re-
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting said attorney-in-fact and
agent, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in connection
with the above premises, as fully for all intents and purposes as he might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ------ -----
/s/ William J. Laggett Chairman of the
-------------------------------- Board of Directors March 31, 1997
William J. Laggett
/s/ J. Shelby Bryan President, Chief
--------------------------------- Executive Officer March 31, 1997
J. Shelby Bryan and Director
(Principal executive
officer)
/s/ James D. Grenfell
-------------------------------- Executive Vice
James D. Grenfell President, Chief March 31, 1997
Financial Officer
and Treasurer
(Principal financial
officer)
/s/ Richard Bambach Vice President and March 31, 1997
--------------------------------- Corporate Controller
Richard Bambach (Principal
accounting officer)
--------------------------------- Director March , 1997
Harry R. Herbst
/s/ Jay E. Ricks
--------------------------------- Director March 31, 1997
Jay E. Ricks
/s/ Stan McLelland
--------------------------------- Director March 31, 1997
Stan McLelland
/s/ Leontis Teryazos
--------------------------------- Director March 31, 1997
Leontis Teryazos
II-6
<PAGE>
Exhibit Index
-------------
(3) Articles of Incorporation.
--------------------------
3.1: Second Amended Articles of Incorporation of ICG Holdings, Inc.
(4) Instruments defining the rights of security holders, including
---------------------------------------------------------------
indentures.
-----------
4.12: Form of Old Note.
4.15: Indenture, dated as of March 11, 1997, among ICG Holdings,
Inc., ICG Communications, Inc. and Norwest Bank Colorado,
National Association.
4.16: Registration Rights Agreement, dated March 11, 1997, among
ICG Holdings, Inc., ICG Communications, Inc. and Morgan
Stanley & Co. Incorporated with respect to the Senior
Discount Notes.
4.17: Registration Rights Agreement, dated March 11, 1997, among
ICG Holdings, Inc. and Morgan Stanley & Co. Incorporated
with respect to the Preferred Stock.
4.18: Form of Old Preferred Stock Certificate.
(23) Consents.
---------
23.1: Consent of KPMG Peat Marwick LLP.
(24) Power of Attorney.
------------------
24.1: Power of Attorney with respect to ICG Holdings, Inc.
(included in the signature page hereto).
24.2: Power of Attorney with respect to ICG Communications, Inc.
(included in the signature page hereto).
Exhibit 3.1
SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
ICG HOLDINGS, INC.
Pursuant to the provisions of the Colorado Business
Corporation Act, ICG Holdings, Inc. (the "Corporation") adopts
the following Second Amended and Restated Articles of
Incorporation. These articles correctly set forth the provisions
of the Articles of Incorporation, as amended, and supersede the
original Articles of Incorporation and all amendments thereto.
ARTICLE I
---------
The name of the Corporation is ICG HOLDINGS, INC.
ARTICLE II
-----------
The period of its duration is perpetual.
ARTICLE III
------------
3.1 Purposes.
--------- The nature, objects and purposes of the
business to be transacted shall be as follows:
(a) To own and operate.
------------------ To own and operate domestic
and international telecommunications companies and
telecommunications facilities, including, but not limited to,
earth satellite stations, channels of communications, orbital
satellite stations, satellite transponders, very small aperture
satellite terminals ("VSAT") and systems, microwave radio
transmission systems, fiber optic transmission systems,
telecommunications cable, telecommunications conduits, telephone
systems, and telecommunications systems of any kind.
(b) To acquire business.
-------------------- To acquire (whether for
cash or in exchange for its assets or securities, or otherwise),
operate and deal in other businesses of all types and interests
therein.
(c) To engage in other lawful business.
---------------------------------- To engage in
any other lawful business or activity for which corporations may
be incorporated under the laws of Colorado.
ARTICLE IV
-----------
The aggregate number of shares of stock the Corporation is
authorized to issue is 40,000 shares of a class designated as
common stock, no par value per share, and 1,000,000 shares of a
class designated as preferred stock, no par value per share, and
the relative rights of the shares of each class are as follows:
4.1 Common Stock.
-------------
(a) The holders of common stock shall have and possess
all rights as shareholders of the Corporation except as such
rights may be limited by the preferences, privileges and voting
powers, and the restrictions and limitations of the preferred
stock. All common stock, when duly issued, shall be fully paid
and nonassessable. The holders of common stock shall be entitled
to receive such dividends as may be declared from time to time by
the Board of Directors. The holders of the common stock shall
also be entitled to receive their pro rata share of the net
assets of the Corporation upon dissolution.
(b) The shares of such class of common stock shall
have unlimited voting rights and shall constitute the sole voting
group of the Corporation, except to the extent that any
additional voting group or groups have been or may hereafter be
established in accordance with the Colorado Business Corporation
Act and except to the extent of the voting rights of the holders
of preferred stock under Article IV.
(c) Each shareholder of record shall have one vote for
each share of common stock standing in his name on the books of
the Corporation and entitled to vote, except that in the election
of directors each shareholder shall have as many votes for each
share held by him as there are directors to be elected and for
whose election the shareholder has a right to vote. Cumulative
voting shall not be permitted in the election of directors or
otherwise.
4.2 Preferred Stock, Generally.
---------------------------
The Corporation may divide and issue the preferred
stock in series. The preferred shares of each series when issued
shall be designated to distinguish them from the shares of all
other series. The Board of Directors hereby is expressly vested
with authority to divide the class of preferred stock into one or
more series and to fix and determine by resolution the relative
rights, limitations and preferences of the shares of any such
series so established to the full extent permitted by these
Second Amended and Restated Articles of Incorporation and the
laws of the State of Colorado in respect of the following:
(a) The number of shares to constitute such series,
and the distinctive designations thereof;
(b) The rate and preference of any dividends and the
time of payment of any dividends, whether dividends are
cumulative or noncumulative and the date from which any dividend
shall accrue;
(c) Whether shares may be redeemed and, if so, the
redemption price and the terms and conditions of redemption;
(d) The amount payable with respect to shares in the
event of involuntary liquidation;
(e) The amount payable with respect to shares in the
event of voluntary liquidation;
(f) Sinking fund or other provisions, if any, for the
redemption or purchase of shares;
(g) The terms and conditions on which shares may be
converted, if the shares of any series are issued with the
privilege of conversion;
(h) Voting rights, if any; and
(i) Any other relative rights and preferences of
shares of such series, including without limitation any
restriction on an increase in the number of shares of any series
theretofore authorized and any limitations or restrictions of
rights or powers to which shares of any future series shall be
subject.
4.2.1 Cumulative Exchangeable Redeemable Preferred
--------------------------------------------
Stock; Statement of Designation of Preferences and Rights.
----------------------------------------------------------
A series of preferred stock of the Corporation has been
created with the designation and amount thereof and the voting
powers, preferences and relative, optional and other special
rights of the shares of such series, and the qualifications,
limitations, or restrictions thereof, as follows:
1. Certain Definitions:
------------------- Set forth below are certain
defined terms used in this Section 4.2.1.
"Adjusted Consolidated Net Income" means, for any period,
the aggregate net income (or loss) of the Corporation and its
Restricted Subsidiaries for such period determined in conformity
with GAAP; provided that the following items shall be excluded in
computing Adjusted Consolidated Net Income (without duplication):
(i) the net income of any Person (other than net income
attributable to a Restricted Subsidiary) in which any Person
(other than the Corporation or any of its Restricted
Subsidiaries) has a joint interest and the net income of any
Unrestricted Subsidiary, except to the extent of the amount of
dividends or other distributions actually paid to the Corporation
or any of its Restricted Subsidiaries by such other Person or
such Unrestricted Subsidiary during such period; (ii) solely for
the purposes of calculating the amount of Restricted Payments
that may be made pursuant to paragraph 11(b)(i)(3) of this
Section 4.2.1 (and in such case, except to the extent includable
pursuant to clause (i) above), the net income (or loss) of any
Person accrued prior to the date it becomes a Restricted
Subsidiary or is merged into or consolidated with the Corporation
or any of its Restricted Subsidiaries or all or substantially all
of the property and assets of such Person are acquired by the
Corporation or any of its Restricted Subsidiaries; (iii) the net
income of any Restricted Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by
such Restricted Subsidiary of such net income is not at the time
permitted by the operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Restricted Subsidiary;
(iv) any gains or losses (on an after-tax basis) attributable to
Asset Sales; (v) except for purposes of calculating the amount of
Restricted Payments that may be made pursuant to paragraph
11(b)(i)(3) of this Section 4.2.1, any amount paid or accrued as
dividends on preferred stock of the Corporation or any Restricted
Subsidiary owned by Persons other than the Corporation and any of
its Restricted Subsidiaries; and (vi) all extraordinary gains and
extraordinary losses.
"Affiliate" means, as applied to any Person, any other
Person directly or indirectly controlling, controlled by, or
under direct or indirect common control with, such Person. For
purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means
the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by
contract or otherwise; provided that, with respect to the
Corporation and any of its Subsidiaries, the term "Affiliate"
shall be deemed to include Mr. William Becker, Mr. Lawrence
Becker and any person related by blood or marriage to either of
them.
"Asset Acquisition" means (i) an investment by the
Corporation or any of its Restricted Subsidiaries in any other
Person pursuant to which such Person shall become a Restricted
Subsidiary of the Corporation or shall be merged into or
consolidated with the Corporation or any of its Restricted
Subsidiaries; provided that such Person's primary business is
related, ancillary or complementary to the businesses of the
Corporation and its Restricted Subsidiaries on the date of such
investment or (ii) an acquisition by the Corporation or any of
its Restricted Subsidiaries of the property and assets of any
Person other than the Corporation or any of its Restricted
Subsidiaries that constitute substantially all of a division or
line of business of such Person; provided that the property and
assets acquired are related, ancillary or complementary to the
businesses of the Corporation and its Restricted Subsidiaries on
the date of such acquisition.
"Asset Sale" means any sale, transfer or other disposition
(including by way of merger, consolidation or sale-leaseback
transactions) in one transaction or a series of related
transactions by the Corporation or any of its Restricted
Subsidiaries to any Person other than the Corporation or any of
its Restricted Subsidiaries of (i) all or any of the Capital
Stock of any Restricted Subsidiary, (ii) all or substantially all
of the property and assets of an operating unit or business of
the Corporation or any of its Restricted Subsidiaries or (iii)
any other property and assets of the Corporation or any of its
Restricted Subsidiaries outside the ordinary course of business
of the Corporation or such Restricted Subsidiary and, in each
case, that is not governed by the provisions of paragraph 11(g)
of this Section 4.2.1; provided that the meaning of "Asset Sale"
shall not include (A) sales or other dispositions of inventory,
receivables and other current assets, and (B) dispositions of
assets of the Corporation or any of its Restricted Subsidiaries,
in substantially simultaneous exchanges for consideration
consisting of any combination of cash, Temporary Cash Investments
and assets that are used or useful in the telecommunications
business of the Corporation or its Restricted Subsidiaries, if
such consideration has an aggregate fair market value
substantially equal to the fair market value of the assets so
disposed of; provided, however, that fair market value shall be
determined in good faith by the Board of Directors of the
Corporation, whose determination shall be conclusive and
evidenced by a resolution of the Board of Directors delivered to
the Transfer Agent.
"Average Life" means, at any date of determination with
respect to any debt security, the quotient obtained by dividing
(i) the sum of the products of (a) the number of years from such
date of determination to the dates of each successive scheduled
principal payment of such debt security and (b) the amount of
such principal payment by (ii) the sum of all such principal
payments.
"Business Day" means any day except a Saturday, Sunday, or
other day on which commercial banks in the City of New York, or
in the city of the Transfer Agent Office, are authorized by law
to close.
"Capital Stock" means, with respect to any Person, any and
all shares, interests, participations or other equivalents
(however designated, whether voting or non-voting) in equity of
such Person, whether now outstanding or issued after April 29,
1996, including, without limitation, all common stock and
preferred stock.
"Capitalized Lease" means, as applied to any Person, any
lease of any property (whether real, personal or mixed) of which
the discounted present value of the rental obligations of such
Person as lessee, in conformity with GAAP, is required to be
capitalized on the balance sheet of such Person; and "Capitalized
Lease Obligations" means the discounted present value of the
rental obligations under any such Capitalized Lease.
"Change of Control" means such time as (i) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Exchange Act) becomes the ultimate "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act) of Voting Stock having more
than 40% of the voting power of the total Voting Stock of
Holdings on a fully diluted basis; (ii) individuals who on the
Closing Date constitute the Board of Directors of Holdings
(together with any new directors whose election by the Board of
Directors or whose nomination for election by Holdings'
stockholders was approved by a vote of at least a majority of the
members of the Board of Directors then in office who either were
members of the Board of Directors on the Closing Date or whose
election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the members of
the Board of Directors then in office; or (iii) all of the common
stock of the Corporation is not beneficially owned by Holdings;
provided, however, that a Change of Control shall be deemed not
to occur solely as a result of a Reorganization.
"Closing Date" means the date on which the Exchangeable
Preferred is originally issued.
"Consolidated EBITDA" means, for any period, the sum of the
amounts for such period of (i) Adjusted Consolidated Net Income,
(ii) Consolidated Interest Expense, (iii) income taxes, to the
extent such amount was deducted in calculating Adjusted
Consolidated Net Income (other than income taxes (either positive
or negative) attributable to extraordinary and non-recurring
gains or losses on sales of assets), (iv) depreciation expense,
to the extent such amount was deducted in calculating Adjusted
Consolidated Net Income, (v) amortization expense, to the extent
such amount was deducted in calculating Adjusted Consolidated Net
Income, and (vi) all other non-cash items reducing Adjusted
Consolidated Net Income (other than items that will require cash
payments and for which an accrual or reserve is, or is required
by GAAP to be, made), less all non-cash items increasing Adjusted
Consolidated Net Income, all as determined on a consolidated
basis for the Corporation and its Restricted Subsidiaries in
conformity with GAAP; provided that, if any Restricted Subsidiary
is not a Wholly Owned Restricted Subsidiary, Consolidated EBITDA
shall be reduced (to the extent not otherwise reduced in
accordance with GAAP) by an amount equal to (A) the amount of the
Adjusted Consolidated Net Income attributable to such Restricted
Subsidiary multiplied by (B) the quotient of (1) the number of
shares of outstanding common stock of such Restricted Subsidiary
not owned on the last day of such period by the Corporation or
any of its Restricted Subsidiaries divided by (2) the total
number of shares of outstanding common stock of such Restricted
Subsidiary on the last day of such period.
"Consolidated Interest Expense" means, for any period, the
aggregate amount of interest in respect of Indebtedness
(including amortization of original issue discount on any
Indebtedness and the interest portion of any deferred payment
obligation, calculated in accordance with the effective interest
method of accounting; all commissions, discounts and other fees
and charges owed with respect to letters of credit and bankers'
acceptance financing; the net costs associated with Interest Rate
Agreements; and Indebtedness that is Guaranteed or secured by the
Corporation or any of its Restricted Subsidiaries) and all but
the principal component of rentals in respect of Capitalized
Lease Obligations paid, accrued or scheduled to be paid or to be
accrued by the Corporation and its Restricted Subsidiaries during
such period; excluding, however, without duplication, (i) any
amount of such interest of any Restricted Subsidiary if the net
income of such Restricted Subsidiary is excluded in the
calculation of Adjusted Consolidated Net Income pursuant to
clause (iii) of the definition thereof (but only in the same
proportion as the net income of such Restricted Subsidiary is
excluded from the calculation of Adjusted Consolidated Net Income
pursuant to clause (iii) of the definition thereof) and (ii) any
premiums, fees and expenses (and any amortization thereof)
payable in connection with the offering of the 13 1/2% Notes and
the warrants issued therewith, the Senior Discount Notes and/or the
Exchangeable Preferred, all as determined on a consolidated basis
(without taking into account Unrestricted Subsidiaries) in
conformity with GAAP.
"Consolidated Net Worth" means, at any date of
determination, stockholders' equity as set forth on the most
recently available quarterly or annual consolidated balance sheet
of the Corporation and its Restricted Subsidiaries (which shall
be as of a date not more than 90 days prior to the date of such
computation, and which shall not take into account Unrestricted
Subsidiaries), less any amounts attributable to Redeemable Stock
or any equity security convertible into or exchangeable for
Indebtedness, the cost of treasury stock and the principal amount
of any promissory notes receivable from the sale of the Capital
Stock of the Corporation or any of its Restricted Subsidiaries,
each item to be determined in conformity with GAAP (excluding the
effects of foreign currency exchange adjustments under Financial
Accounting Standards Board Statement of Financial Accounting
Standards No. 52).
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement
designed to protect the Corporation or any of its Restricted
Subsidiaries against fluctuations in currency values to or under
which the Corporation or any of its Restricted Subsidiaries is a
party or a beneficiary on the Closing Date or becomes a party or
a beneficiary thereafter.
"Default" means any event that is, or after notice or
passage of time or both would be, an Event of Default.
"Event of Default" means a Voting Rights Triggering Event as
defined in paragraph 10(b) of this Section 4.2.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"FOTI" means Fiber Optic Technologies Inc., a Colorado
corporation.
"GAAP" means generally accepted accounting principles in
the United States of America as in effect as of August 8, 1995,
including, without limitation, those set forth in the opinions
and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or
in such other statements by such other entity as approved by a
significant segment of the accounting profession. All ratios and
computations contained in this Section 4.2.1 shall be computed in
conformity with GAAP applied on a consistent basis, except that
calculations made for purposes of determining compliance with the
terms of the covenants and with other provisions of this Section
4.2.1 shall be made without giving effect to (i) the amortization
of any expenses incurred in connection with the offering of the
13 1/2% Notes and the warrants issued therewith, the Senior
Discount Notes and/or the Exchangeable Preferred and (ii) except as
otherwise provided, the amortization of any amounts required or
permitted by Accounting Principles Board Opinion Nos. 16 and 17.
"Guarantee" means any obligation, contingent or otherwise,
of any Person directly or indirectly guaranteeing any
Indebtedness or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct
or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such other
Person (whether arising by virtue of partnership arrangements, or
by agreements to keep-well, to purchase assets, goods, securities
or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of
assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part);
provided that the term "Guarantee" shall not include endorsements
for collection or deposit in the ordinary course of business.
The term "Guarantee" used as a verb has a corresponding meaning.
"Holders" means the registered holders of shares of
Exchangeable Preferred.
"Holdings," as used in this Section 4.2.1, means IntelCom
Group, Inc., a Canadian federal corporation, or any successor
thereto, and, if a Reorganization is completed, shall be deemed
to refer also to "Newco" as defined in the definition of
Reorganization.
"Incur" means, with respect to any Indebtedness, to incur,
create, issue, assume, Guarantee or otherwise become liable for
or with respect to, or become responsible for, the payment of,
contingently or otherwise, such Indebtedness, including an
Incurrence of Indebtedness by reason of the acquisition of more
than 50% of the Capital Stock of any Person; provided that
neither the accrual of interest nor the accretion of original
issue discount shall be considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date
of determination (without duplication), (i) all indebtedness of
such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all obligations of such Person in respect of
letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (iv) all
obligations of such Person to pay the deferred and unpaid
purchase price of property or services, which purchase price is
due more than six months after the date of placing such property
in service or taking delivery and title thereto or the completion
of such services, except trade payables, (v) all obligations of
such Person as lessee under Capitalized Leases, (vi) all
Indebtedness of other Persons secured by a Lien on any asset of
such Person, whether or not such Indebtedness is assumed by such
Person; provided that the amount of such Indebtedness shall be
the lesser of (A) the fair market value of such asset at such
date of determination and (B) the amount of such Indebtedness,
(vii) all Indebtedness of other Persons Guaranteed by such Person
to the extent such Indebtedness is Guaranteed by such Person and
(viii) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate
Agreements. The amount of Indebtedness of any Person at any date
shall be the outstanding balance at such date of all
unconditional obligations as described above and, with respect to
contingent obligations, the maximum liability upon the occurrence
of the contingency giving rise to the obligation, provided (i)
that the amount outstanding at any time of any Indebtedness
issued with original issue discount is the original issue price
of such Indebtedness and (ii) that Indebtedness shall not include
any liability for federal, state, local or other taxes.
"Indebtedness to EBITDA Ratio" means, as at any date of
determination, the ratio of (i) the aggregate amount of
Indebtedness of the Corporation and its Restricted Subsidiaries
on a consolidated basis as at the date of determination (the
"Determination Date") to (ii) the Consolidated EBITDA of the
Corporation for the then most recent four full fiscal quarters
for which reports have been filed pursuant to paragraph 11(i) of
this Section 4.2.1 (such four full fiscal quarter period being
referred to herein as the "Four Quarter Period"); provided that
(x) pro forma effect shall be given to any Indebtedness Incurred
from the beginning of the Four Quarter Period through the
Determination Date (including any Indebtedness Incurred on the
Determination Date), to the extent outstanding on the
Determination Date, (y) if during the period commencing on the
first day of such Four Quarter Period through the Determination
Date (the "Reference Period"), the Corporation or any of the
Restricted Subsidiaries shall have engaged in any Asset Sale,
Consolidated EBITDA for such period shall be reduced by an amount
equal to the EBITDA (if positive), or increased by an amount
equal to the EBITDA (if negative), directly attributable to the
assets which are the subject of such Asset Sale and any related
retirement of Indebtedness as if such Asset Sale and related
retirement of Indebtedness had occurred on the first day of such
Reference Period or (z) if during such Reference Period the
Corporation or any of the Restricted Subsidiaries shall have made
any Asset Acquisition, Consolidated EBITDA of the Corporation
shall be calculated on a pro forma basis as if such Asset
Acquisition and any related financing had occurred on the first
day of such Reference Period. In calculating this ratio for
purposes hereof, the amount of outstanding Indebtedness shall be
deemed to include the liquidation preference of any preferred
stock then outstanding.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge
agreement or other similar agreement or arrangement designed to
protect the Corporation or any of its Restricted Subsidiaries
against fluctuations in interest rates in respect of Indebtedness
to or under which the Corporation or any of its Restricted
Subsidiaries is a party or a beneficiary on the Closing Date or
becomes a party or a beneficiary thereafter; provided that the
notional principal amount thereof does not exceed the principal
amount of the Indebtedness of the Corporation and its Restricted
Subsidiaries that bears interest at floating rates.
"Investment" in any Person means any direct or indirect
advance, loan or other extension of credit (including, without
limitation, by way of Guarantee or similar arrangement; but
excluding advances to customers in the ordinary course of
business that are, in conformity with GAAP, recorded as accounts
receivable on the balance sheet of the Corporation or its
Restricted Subsidiaries) or capital contribution to (by means of
any transfer of cash or other property to others or any payment
for property or services for the account or use of others), or
any purchase or acquisition of Capital Stock, bonds, notes,
debentures or other similar instruments issued by, such Person
and shall include the designation of a Restricted Subsidiary as
an Unrestricted Subsidiary. For purposes of the definition of
"Unrestricted Subsidiary" and paragraph 11(b) of this Section
4.2.1, (i) "Investment" shall include the fair market value of
the assets (net of liabilities) of any Restricted Subsidiary of
the Corporation at the time that such Restricted Subsidiary of
the Corporation is designated an Unrestricted Subsidiary and
shall exclude the fair market value of the assets (net of
liabilities) of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary of
the Corporation and (ii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value
at the time of such transfer, in each case as determined by the
Board of Directors in good faith.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, without
limitation, any conditional sale or other title retention
agreement or lease in the nature thereof, any sale with recourse
against the seller or any Affiliate of the seller, or any
agreement to give any security interest).
"MTN" means Maritime Telecommunications Network, Inc., a
Colorado corporation, and its successors.
"Net Cash Proceeds" means (a) with respect to any Asset
Sale, the proceeds of such Asset Sale in the form of cash or cash
equivalents, including payments in respect of deferred payment
obligations (to the extent corresponding to the principal, but
not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations
are financed or sold with recourse to the Corporation or any
Restricted Subsidiary of the Corporation) and proceeds from the
conversion of other property received when converted to cash or
cash equivalents, net of (i) brokerage commissions and other fees
and expenses (including fees and expenses of counsel and
investment bankers) related to such Asset Sale, (ii) provisions
for all taxes (whether or not such taxes will actually be paid or
are payable) as a result of such Asset Sale without regard to the
consolidated results of operations of the Corporation and its
Restricted Subsidiaries, taken as a whole, (iii) payments made to
repay Indebtedness or any other obligation outstanding at the
time of such Asset Sale that either (A) is secured by a Lien on
the property or assets sold or (B) is required to be paid as a
result of such sale and (iv) appropriate amounts to be provided
by the Corporation or any Restricted Subsidiary as a reserve
against any liabilities associated with such Asset Sale,
including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters
and liabilities under any indemnification obligations associated
with such Asset Sale, all as determined in conformity with GAAP
and (b) with respect to any issuance or sale of Capital Stock,
the proceeds of such issuance or sale in the form of cash or cash
equivalents, including payments in respect of deferred payment
obligations (to the extent corresponding to the principal, but
not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations
are financed or sold with recourse to the Corporation or any
Restricted Subsidiary) and proceeds from the conversion of other
property received when converted to cash or cash equivalents, net
of attorneys' fees, accountants' fees, underwriters' or placement
agents' fees, discounts or commissions and brokerage, consultant
and other fees incurred in connection with such issuance or sale
and net of taxes paid or payable as a result thereof.
"Offer to Purchase" means an offer to purchase shares of
Exchangeable Preferred by the Corporation from the Holders
commenced by mailing a notice to the Transfer Agent and each
Holder stating: (i) the covenant pursuant to which the offer is
being made and that all shares of Exchangeable Preferred validly
tendered will be accepted for payment on a pro rata basis; (ii)
the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from
the date such notice is mailed) (the "Payment Date"); (iii) that
any shares of Exchangeable Preferred not tendered will continue
to accrue dividends pursuant to its terms; (iv) that, unless the
Corporation defaults in the payment of the purchase price, any
shares of Exchangeable Preferred accepted for payment pursuant to
the Offer to Purchase shall cease to accrue dividends on and
after the Payment Date; (v) that Holders electing to have any
shares of Exchangeable Preferred purchased pursuant to the Offer
to Purchase will be required to surrender the shares of
Exchangeable Preferred together with a form entitled "Option of
the Holder to Elect Purchase" (the form of which will be mailed
with such notice) completed, to the paying agent at the address
specified in the notice prior to the close of business on the
Business Day immediately preceding the Payment Date; (vi) that
Holders will be entitled to withdraw their election if the paying
agent receives, not later than the close of business on the third
Business Day immediately preceding the Payment Date, a telegram,
facsimile transmission or letter setting forth the name of such
Holder, the liquidation preference of the shares of Exchangeable
Preferred delivered for purchase and a statement that such Holder
is withdrawing his election to have such shares of Exchangeable
Preferred purchased; and (vii) that Holders whose shares of
Exchangeable Preferred are being purchased only in part will be
issued new shares of Exchangeable Preferred equal in liquidation
preference to the unpurchased portion of the shares of
Exchangeable Preferred surrendered; provided that each share of
Exchangeable Preferred purchased and each new share of
Exchangeable Preferred issued shall be in a principal amount of
$1,000 or integral multiples thereof. On the Payment Date, the
Corporation shall (i) accept for payment on a pro rata basis
shares of Exchangeable Preferred or portions thereof tendered
pursuant to an Offer to Purchase; (ii) deposit with the paying
agent money sufficient to pay the purchase price of all shares of
Exchangeable Preferred or portions thereof so accepted; and (iii)
deliver, or cause to be delivered, to the Transfer Agent all
shares of Exchangeable Preferred or portions thereof so accepted
together with an Officers' Certificate specifying the shares of
Exchangeable Preferred or portions thereof accepted for payment
by the Corporation. The paying agent shall promptly mail to the
Holders of shares of Exchangeable Preferred so accepted, payment
in an amount equal to the purchase price, and the Transfer Agent
shall promptly authenticate and mail to such Holders new shares
of Exchangeable Preferred equal in liquidation preference to any
unpurchased portion of the shares of Exchangeable Preferred
surrendered; provided that each share of Exchangeable Preferred
purchased and each new share of Exchangeable Preferred issued
shall be in a principal amount of $1,000 or integral multiples
thereof. The Corporation will publicly announce the results of
an Offer to Purchase as soon as practicable after the Payment
Date. The Transfer Agent shall act as the paying agent for an
Offer to Purchase. The Corporation will comply with Rule 14e-1
under the Exchange Act and any other securities laws and
regulations thereunder, to the extent such laws and regulations
are applicable, in the event that the Corporation is required to
repurchase shares of Exchangeable Preferred pursuant to an Offer
to Purchase.
"Ohio LINX" means ICG Ohio LINX, Inc., an Ohio corporation.
"Permitted Investment" means (i) an Investment in a
Restricted Subsidiary or a Person which will, upon the making of
such Investment, become a Restricted Subsidiary or be merged or
consolidated with or into or transfer or convey all or
substantially all its assets to, the Corporation or a Restricted
Subsidiary; provided that such Person's primary business is
related, ancillary or complementary to the businesses of the
Corporation and its Restricted Subsidiaries on the date of such
Investment; (ii) a Temporary Cash Investment; (iii) payroll,
travel and similar advances to cover matters that are expected at
the time of such advances ultimately to be treated as expenses in
accordance with GAAP; (iv) loans or advances to employees made in
the ordinary course of business in accordance with past practice
of the Corporation or its Restricted Subsidiaries and that do not
in the aggregate exceed $2 million at any time outstanding; (v)
stock, obligations or securities received in satisfaction of
judgments; and (vi) Indebtedness of Holdings owed to the
Corporation, in an amount not to exceed the reasonable expenses
of Holdings as a holding company that are actually incurred, and
paid, by Holdings; provided that such Indebtedness of Holdings is
evidenced by an unsubordinated promissory note that provides that
it will be paid prior to any mandatory redemption of the
Exchangeable Preferred if such payment would be necessary to
effectuate such redemption.
"Permitted Liens" means (i) Liens for taxes, assessments,
governmental charges or claims that are being contested in good
faith by appropriate legal proceedings promptly instituted and
diligently conducted and for which a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP
shall have been made; (ii) statutory Liens of landlords and
carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen or other similar Liens arising in the ordinary course
of business and with respect to amounts not yet delinquent or
being contested in good faith by appropriate legal proceedings
promptly instituted and diligently conducted and for which a
reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made; (iii)
Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security; (iv) Liens incurred
or deposits made to secure the performance of tenders, bids,
leases, statutory or regulatory obligations, bankers'
acceptances, surety and appeal bonds, government contracts,
performance and return-of-money bonds and other obligations of a
similar nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (v)
easements, rights of way, municipal and zoning ordinances and
similar charges, encumbrances, title defects or other
irregularities that do not materially interfere with the ordinary
course of business of the Corporation or any of its Restricted
Subsidiaries; (vi) Liens (including extensions and renewals
thereof) upon real or personal property acquired after the
Closing Date; provided that (a) such Lien is created solely for
the purpose of securing Indebtedness Incurred, in accordance with
paragraph 11(a) of this Section 4.2.1, (1) to finance the cost
(including the cost of improvement or construction) of the item
of property or assets subject thereto and such Lien is created
prior to, at the time of or within six months after the later of
the acquisition, the completion of construction or the
commencement of full operation of such property or (2) to
refinance any Indebtedness previously so secured, (b) the
principal amount of the Indebtedness secured by such Lien does
not exceed 100% of such cost and (c) any such Lien shall not
extend to or cover any property or assets other than such item of
property or assets and any improvements on such item; (vii)
leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the Corporation
and its Restricted Subsidiaries, taken as a whole; (viii) Liens
encumbering property or assets under construction arising from
progress or partial payments by a customer of the Corporation or
its Restricted Subsidiaries relating to such property or assets;
(ix) any interest or title of a lessor in the property subject to
any Capitalized Lease or operating lease; (x) Liens arising from
filing Uniform Commercial Code financing statements regarding
leases; (xi) Liens on property of, or on shares of stock or
Indebtedness of, any corporation existing at the time such
corporation becomes, or becomes a part of, any Restricted
Subsidiary; provided that such Liens do not extend to or cover
any property or assets of the Corporation or any Restricted
Subsidiary other than the property or assets acquired; (xii)
Liens in favor of the Corporation or any Restricted Subsidiary;
(xiii) Liens arising from the rendering of a final judgment or
order against the Corporation or any Restricted Subsidiary that
does not give rise to an Event of Default; (xiv) Liens securing
reimbursement obligations with respect to letters of credit that
encumber documents and other property relating to such letters of
credit and the products and proceeds thereof; (xv) Liens in favor
of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the
importation of goods; (xvi) Liens encumbering customary initial
deposits and margin deposits, and other Liens that are either
within the general parameters customary in the industry and
incurred in the ordinary course of business, in each case,
securing Indebtedness under Interest Rate Agreements and Currency
Agreements and forward contracts, options, future contracts,
futures options or similar agreements or arrangements designed to
protect the Corporation or any of its Restricted Subsidiaries
from fluctuations in the price of commodities; (xvii) Liens
arising out of conditional sale, title retention, consignment or
similar arrangements for the sale of goods entered into by the
Corporation or any of its Restricted Subsidiaries in the ordinary
course of business in accordance with the past practices of the
Corporation and its Restricted Subsidiaries prior to the Closing
Date; and (xviii) Liens on or sales of receivables.
"Person" means an individual, a corporation, a partnership,
a limited liability company, an association, a trust or any other
entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Preferred stock" or "preferred stock" means, with respect
to any Person, any and all shares, interests, participations or
other equivalents (however designated, whether voting or non-
voting) of such Person's preferred or preference stock, whether
now outstanding or issued after April 29, 1996, including,
without limitation, all series and classes of such preferred or
preference stock.
"Public Equity Offering" means a bona fide underwritten
primary public offering of common stock of Holdings or the
Corporation pursuant to an effective registration statement under
the Securities Act.
"Redeemable Stock" means any class or series of Capital
Stock of any Person that by its terms or otherwise is (i)
required to be redeemed prior to the mandatory redemption date of
the shares of Exchangeable Preferred, (ii) redeemable at the
option of the holder of such class or series of Capital Stock at
any time prior to the mandatory redemption date of the shares of
Exchangeable Preferred, or (iii) convertible into or exchangeable
for Capital Stock referred to in clause (i) or (ii) above or
Indebtedness having a scheduled maturity prior to the mandatory
redemption date of the shares of Exchangeable Preferred; provided
that any Capital Stock that would not constitute Redeemable Stock
but for provisions thereof giving holders thereof the right to
require such Person to repurchase or redeem such Capital Stock
upon the occurrence of a "change of control" occurring prior to
the mandatory redemption date of the shares of Exchangeable
Preferred shall not constitute Redeemable Stock if the "change of
control" provisions applicable to such Capital Stock are no more
favorable to the holders of such Capital Stock than the
provisions contained in the "Change of Control" provisions
contained in paragraph 7(b) of this Section 4.2.1 and such
Capital Stock specifically provides that such Person will not
repurchase or redeem any such stock pursuant to such provision
prior to the Corporation's repurchase of Exchangeable Preferred
as provided in paragraph 7(b) of this Section 4.2.1.
"Reorganization" means the transaction or series of
transactions in which the Voting Stock of Holdings is changed
into or exchanged for Voting Stock of a corporation organized
under the laws of any State in the United States ("Newco").
"Restricted Subsidiary" means any Subsidiary of the
Corporation other than an Unrestricted Subsidiary.
"Securities Act" means the Securities Act of 1933, as
amended.
"Senior Discount Notes," as used in this Section 4.2.1,
means the Senior Discount Notes Due 2006 of the Corporation,
Guaranteed by Holdings on a senior unsecured basis and issued on
the Closing Date.
"Senior Discount Notes Indenture," as used in this Section
4.2.1, means the Indenture dated as of the Closing Date among the
Corporation, Holdings and the Trustee pursuant to which the
Senior Discount Notes are issued.
"StarCom" means StarCom International Optics Corporation, a
British Columbia corporation, and its Subsidiaries.
"Strategic Investor" means any Person engaged in the
telecommunications business which has a net worth or equity
market capitalization of at least $1 billion.
"Strategic Investor Subordinated Indebtedness" means all
Indebtedness of the Corporation owed to a Strategic Investor that
is contractually subordinate in right of payment to the shares of
Exchangeable Preferred to at least the following extent: no
payment of principal (or premium, if any) or interest on or
otherwise payable in respect of such Indebtedness may be made
(whether as a result of a default or otherwise) prior to the
payment in full of all of the Corporation's obligations under the
shares of Exchangeable Preferred; provided, however, that prior
to the payment of such obligations, interest on Strategic
Investor Subordinated Indebtedness may be payable solely in kind
or in common stock (other than Redeemable Stock) of Holdings or
the Corporation.
"Subsidiary" means, with respect to any Person, any
corporation, association or other business entity of which more
than 50% of the outstanding Voting Stock is owned, directly or
indirectly, by such Person and one or more other Subsidiaries of
such Person.
"Temporary Cash Investment" means any of the following: (i)
direct obligations of the United States of America or any agency
thereof or obligations fully and unconditionally guaranteed by
the United States of America or any agency thereof, (ii) time
deposit accounts, certificates of deposit and money market
deposits maturing within 270 days of the date of acquisition
thereof, bankers' acceptances with maturities not exceeding 270
days, and overnight bank deposits, in each case issued by or with
a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign
country recognized by the United States, and which bank or trust
company has capital, surplus and undivided profits aggregating in
excess of $100 million (or the foreign currency equivalent
thereof) and has outstanding debt which is rated "A" (or such
similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule
436 under the Securities Act) or any money-market fund sponsored
by a registered broker dealer or mutual fund distributor, (iii)
repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above
entered into with a bank meeting the qualifications described in
clause (ii) above, (iv) commercial paper, maturing not more than
180 days after the date of acquisition, issued by a corporation
(other than an Affiliate of Holdings) organized and in existence
under the laws of the United States of America, any state thereof
or any foreign country recognized by the United States of America
with a rating at the time as of which any investment therein is
made of "P-1" (or higher) according to Moody's Investors Service,
Inc. or "A-1" (or higher) according to Standard & Poor's Ratings
Group, and (v) securities with maturities of six months or less
from the date of acquisition issued or fully and unconditionally
guaranteed by any state, commonwealth or territory of the United
States of America, or by any political subdivision or taxing
authority thereof, and rated at least "A" by Standard & Poor's
Ratings Group or Moody's Investors Service, Inc.
"13 1/2% Notes" means the 13 1/2% Senior Discount Notes Due
2005 of the Corporation Guaranteed by Holdings on a senior
unsecured basis.
"13 1/2% Notes Indenture" means the Indenture dated as of
August 8, 1995 among the Corporation, Holdings and the Trustee
pursuant to which the Corporation issued the 13 1/2% Notes.
"Transaction Date" means, with respect to the Incurrence of
any Indebtedness by the Corporation or any of its Restricted
Subsidiaries or the issuance of any Redeemable Stock of the
Corporation, the date such Indebtedness is to be Incurred or such
issuance is to be made and, with respect to any Restricted
Payment, the date such Restricted Payment is to be made.
"Transfer Agent" means American Stock Transfer and Trust
Company, 40 Wall Street, 46th Floor, New York, New York 10005, or
such other Person as may become the transfer agent with respect
to the Exchangeable Preferred.
"Transfer Agent Office" means the principal office of the
Transfer Agent at any particular time, which office is, at the
date hereof, located at 40 Wall Street, 46th Floor, New York, New
York 10005.
"Trustee" means Norwest Bank Colorado, National
Association, or such other Person as may become the trustee under
the Indenture, the Senior Discount Notes Indenture, or the 13
1/2% Notes Indenture, as the context requires.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Corporation that at the time of determination shall be designated
an Unrestricted Subsidiary by the Board of Directors in the
manner provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any Subsidiary
of the Corporation (including any newly acquired or newly formed
Subsidiary of the Corporation), to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or
holds any Lien on any property of, the Corporation or any
Restricted Subsidiary; provided that either (A) the Subsidiary to
be so designated has total assets of $1,000 or less or (B) if
such Subsidiary has assets greater than $1,000, that such
designation would be permitted under paragraph 11(b) of this
Section 4.2.1. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary of the
Corporation; provided that immediately after giving effect to
such designation (x) the Corporation could Incur $1.00 of
additional Indebtedness under paragraph 11(a)(i) of this Section
4.2.1 and (y) no Default or Event of Default shall have occurred
and be continuing. Any such designation by the Board of
Directors shall be evidenced to the Transfer Agent by promptly
filing with the Transfer Agent a copy of the resolution of the
Board of Directors giving effect to such designation and an
Officers' Certificate certifying that such designation complied
with the foregoing provisions.
"Voting Stock" means, with respect to any Person, Capital
Stock of any class or kind ordinarily having the power to vote
for the election of directors, managers or other voting members
of the governing body of such Person.
"Wholly Owned" means, with respect to any Subsidiary of any
Person, such Subsidiary if all of the outstanding Capital Stock
in such Subsidiary (other than any director's qualifying shares
or Investments by foreign nationals mandated by applicable law)
is owned by such Person or one or more Wholly Owned Subsidiaries
of such Person.
"Zycom" means Zycom Corporation, an Alberta, Canada
corporation.
2. Designation Amount.
------------------ The distinctive serial designation
of this series shall be "Cumulative Exchangeable Redeemable
Preferred Stock" (as used in this Section 4.2.1, "Exchangeable
Preferred"). The number of shares of Exchangeable Preferred
shall initially be 150,000, which number may from time to time be
increased (but not above the number that would cause the
aggregate number of all shares of preferred stock of all series
to exceed 1,000,000 shares) or decreased (but not below the
number then outstanding) by the Board of Directors. Shares of
Exchangeable Preferred redeemed, purchased by the Corporation or
exchanged for Exchange Debentures (as defined in paragraph 8(a)
of this Section 4.2.1) shall be canceled and shall revert to
authorized but unissued shares of preferred stock undesignated as
to series; provided, however, that no such issued and reacquired
shares of such series shall be reissued or sold as shares of
Exchangeable Preferred unless reissued as a stock dividend on
outstanding shares of Exchangeable Preferred.
3. Rank.
----- The Exchangeable Preferred shall, with
respect to dividend rights and distribution rights on
liquidation, winding-up and dissolution of the Corporation, rank
(i) senior to all classes of common stock of the Corporation and
to each other class of Capital Stock or series of preferred stock
established after April 25, 1996, by the Board of Directors the
terms of which do not expressly provide that it ranks senior to
or on a parity with the Exchangeable Preferred as to dividend
distributions and distributions upon the liquidation, winding-up
and dissolution of the Corporation (collectively referred to with
the common stock of the Corporation as "Junior Securities"); (ii)
on a parity with any class of Capital Stock or series of
preferred stock issued by the Corporation established after April
25, 1996, by the Board of Directors, the terms of which expressly
provide that such class or series will rank on a parity with the
Exchangeable Preferred as to dividend distributions and
distributions upon the liquidation, winding-up and dissolution of
the Corporation (collectively referred to as "Parity
Securities"); and (iii) subject to certain conditions described
below, junior to each class of Capital Stock or series of
preferred stock issued by the Corporation established after April
25, 1996, by the Board of Directors, the terms of which expressly
provide that such class or series will rank senior to the
Exchangeable Preferred as to dividend distributions and
distributions upon the liquidation, winding-up and dissolution of
the Corporation (collectively referred to as "Senior
Securities"). The Exchangeable Preferred will be subject to the
issuance of series of Junior Securities, Parity Securities and
Senior Securities; provided that the Corporation may not issue
any new class of Senior Securities without the approval of the
Holders of at least a majority of the shares of Exchangeable
Preferred then outstanding, voting or consenting, as the case may
be, separately as one class, except that without such approval of
Holders of the Exchangeable Preferred, the Corporation may issue
shares of Senior Securities (1) in exchange for, or the proceeds
of which are used to redeem or repurchase, all, but not less than
all, shares of Exchangeable Preferred then outstanding, or (2) in
exchange for, or the proceeds of which are used to repay, any
outstanding Indebtedness of the Corporation.
4. Dividends.
---------
(a) The Holders of shares of the Exchangeable
Preferred shall be entitled to receive, when, as and if declared
by the Board of Directors of the Corporation, out of funds
legally available therefor, dividends at the annual rate of 14
1/4% of the liquidation preference per share, subject to the
provisions of paragraph 4(e) below. Such dividends shall be
cumulative, whether or not earned or declared, on a daily basis
from the date of issuance of the Exchangeable Preferred, and
shall be payable quarterly in arrears on February 1, May 1,
August 1, and November 1 of each year commencing on August 1,
1996 (each of such dates being a "dividend payment date"), with
respect to the period commencing with the date of issuance of the
particular shares of Exchangeable Preferred or the immediately
preceding dividend payment date and ending on the day preceding
such respective dividend payment date (each of such periods being
a "dividend period"), to shareholders of record on the preceding
January 15, April 15, July 15, and October 15, respectively
(each, a "regular record date"). Any dividend payments made with
respect to shares of Exchangeable Preferred on or before May 1,
2001, may be made, in the sole discretion of the Board of
Directors, in cash or in such number of additional fully paid and
nonassessable shares of Exchangeable Preferred having an
aggregate liquidation preference equal to the amount of such
dividends, and the issuance of such additional shares of
Exchangeable Preferred shall constitute full payment of such
dividend. All dividends paid with respect to shares of
Exchangeable Preferred pursuant to this paragraph 4(a) shall be
paid pro rata to the Holders entitled thereto. The Corporation
may, at the option of the Board of Directors, elect not to issue
fractions of a share of Exchangeable Preferred ("Fractional
Shares") in payment of any dividend in additional shares of
Exchangeable Preferred. In such event, in lieu of any Fractional
Shares, each record Holder of Exchangeable Preferred otherwise
entitled to receive a Fractional Share shall receive a payment in
cash equal to such Holder's proportionate interest in the net
proceeds from the sale or sales in the open market by the
Transfer Agent or other agent selected by the Corporation, on
behalf of all such Holders of the aggregate of all Fractional
Shares otherwise payable as a dividend. Such sale shall be
effected promptly after the record date fixed for determining the
Holders entitled to payment of the dividend. All shares of
Exchangeable Preferred issued as a dividend with respect to the
Exchangeable Preferred will thereupon be duly authorized, validly
issued, fully paid and nonassessable and free of all liens and
charges. After May 1, 2001, dividends on the Exchangeable
Preferred shall be paid only in cash to the Holders of record at
the close of business on the regular record date with respect to
the applicable dividend payment date.
(b) Accumulated unpaid dividends for any past dividend
periods may be declared by the Board of Directors and paid on any
date fixed by the Board of Directors, whether or not a regular
dividend payment date, to Holders of record on the books of the
Corporation on such record date as may be fixed by the Board of
Directors. Holders of Exchangeable Preferred will not be
entitled to any dividends, whether payable in cash, property or
stock, in excess of full cumulative dividends. If any dividend
(or portion thereof) payable on any dividend payment date on or
before May 1, 2001, is not declared or paid in full in cash or in
shares of Exchangeable Preferred as described in paragraph 4(a)
above on such dividend payment date, the amount of the accrued
and unpaid dividend will bear interest at the dividend rate on
the Exchangeable Preferred, compounding quarterly from such
dividend payment date until paid in full. If any dividend (or
portion thereof) payable on any dividend payment date after May
1, 2001, is not declared or paid in full in cash on such dividend
payment date, the amount of the accrued and unpaid dividend will
bear interest at the dividend rate on the Exchangeable Preferred,
compounding quarterly from such dividend payment date until paid
in full.
(c) So long as any shares of the Exchangeable
Preferred are outstanding, the Corporation shall not (i) declare,
pay or set apart for payment any dividend on any shares of Junior
Securities or Parity Securities or (ii) make any payment on
account of, or set apart for payment money for a sinking or other
similar fund for, the purchase, redemption, retirement or other
acquisition for value of any of, or redeem, purchase, retire or
otherwise acquire for value any of, the Junior Securities or
Parity Securities or any warrants, rights, calls or options
exercisable for or convertible into any of the Junior Securities
or Parity Securities or (iii) make any distribution in respect of
the Junior Securities or Parity Securities or any warrants,
rights, calls or options exercisable for or convertible into any
of the Junior Securities or Parity Securities, in any such case
either directly or indirectly, and whether in cash, obligations
or shares of the Corporation or other property (other than
distributions or dividends of a particular class or series of
Junior Securities to holders of such Junior Securities or
distributions or dividends of a particular class or series of
Parity Securities to holders of such Parity Securities), and
shall not permit any corporation or other entity directly or
indirectly controlled by the Corporation to purchase, redeem or
otherwise acquire for value any of the Junior Securities or
Parity Securities or any warrants, rights, calls or options
exercisable for or convertible into any of the Junior Securities
or Parity Securities, unless, as to any of the actions described
in clauses (i), (ii) or (iii) above, prior to or concurrently
with such declaration, payment, setting apart for payment,
purchase, redemption, other acquisition for value or
distribution, as the case may be, all accrued and unpaid
dividends, if any, on shares of the Exchangeable Preferred not
paid on the dates provided for in paragraphs 4(a) or 4(b) hereof
(including accrued dividends, if any, not paid by reason of the
terms and conditions of paragraph 4(d) hereof) shall have been
paid or shall have been declared and, if payable in cash, a sum
in cash set apart for such payment. If full cumulative dividends
on the Exchangeable Preferred are not so paid, the Exchangeable
Preferred will share dividends pro rata with the Parity
Securities. If full cumulative dividends on the Exchangeable
Preferred have not been so paid, the Exchangeable Preferred may
not be optionally redeemed in part as provided in paragraph 6(d)
of this Section 4.2.1.
(d) Notwithstanding anything contained herein to the
contrary, no cash dividends on shares of Exchangeable Preferred,
or any other shares of Junior Securities or Parity Securities, or
other series of the Corporation's preferred stock, shall be
declared by the Board of Directors or paid or set apart for
payment by the Corporation at such time as the terms and
provisions of any contract or other agreement of the Corporation
or any of its Restricted Subsidiaries entered into or assumed
prior to, on, or after the Closing Date specifically prohibits
such declaration, payment or setting apart for payment or
provides that such declaration, payment or setting apart for
payment would constitute a breach thereof or a default
thereunder; provided, however, that nothing contained in this
paragraph 4(d) shall be construed or deemed to require the Board
of Directors to declare, or the Corporation to pay or set apart
for payment, any cash dividends on shares of the Exchangeable
Preferred, whether permitted by any of such agreements or not.
(e) If, on or prior to November 1, 1996, the
Corporation does not, as more fully provided in the Registration
Rights Agreement with respect to the Exchangeable Preferred dated
the Closing Date, either (i) consummate an offer by the
Corporation to such Holders to exchange the Exchangeable
Preferred for an issue of preferred stock of the Corporation with
terms identical to the Exchangeable Preferred pursuant to an
effective registration statement under the Securities Act with
respect to such exchange offer, or (ii) file and cause to become
effective under the Securities Act a shelf registration statement
with respect to resales of the Exchangeable Preferred, then
dividends, in addition to the dividends described in paragraph
4(a) of this Section 4.2.1, will accrue at the annual rate of
0.5% of the liquidation preference per share on the Exchangeable
Preferred from November 1, 1996, payable in additional shares of
Exchangeable Preferred quarterly in arrears on February 1, May 1,
August 1, and November 1 of each year commencing on February 1,
1997.
5. Liquidation Preference.
-----------------------
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the affairs of the
Corporation, then, before any distribution or payment shall be
made to the holders of any Junior Securities, including common
stock of the Corporation, the Holders of Exchangeable Preferred
then outstanding shall be entitled to be paid, out of the assets
of the Corporation available for distribution to its
shareholders, an amount in cash equal to $1,000 for each share
outstanding (which amount is hereinafter referred to as the
"liquidation preference"), plus an amount in cash equal to all
accrued and unpaid dividends and interest thereon to the date
fixed for liquidation, dissolution or winding-up (including an
amount equal to a prorated dividend for the period from the
dividend payment date immediately preceding the date fixed for
liquidation, dissolution or winding-up to the date fixed for
liquidation, dissolution or winding-up). Except as provided in
the preceding sentence, Holders of Exchangeable Preferred shall
not be entitled to any distribution in the event of liquidation,
dissolution or winding-up of the affairs of the Corporation. If
the assets of the Corporation are not sufficient to pay in full
the liquidation payments payable to the holders of outstanding
shares of the Exchangeable Preferred and all other Parity
Securities, then the holders of all such shares shall share
ratably in any distribution of assets of the Corporation with
respect to the Exchangeable Preferred and Parity Securities in
accordance with the amount that would be payable on such
distribution if the amounts to which the holders of outstanding
shares of Exchangeable Preferred and all other Parity Securities
are entitled were paid in full. After payment of the full amount
of the liquidation preference and accrued and unpaid dividends or
interest to which each Holder is entitled, such Holders of shares
of Exchangeable Preferred will not be entitled to any further
participation in any distribution of the assets of the
Corporation.
(b) For purposes of this paragraph 5, a merger,
consolidation or sale of substantially all of the Corporation's
assets that complies with the provisions of paragraph 11(g) of
this Section 4.2.1 shall not be deemed to be a voluntary or
involuntary liquidation, dissolution or winding-up of the
Corporation.
6. Optional Redemption.
-------------------
(a) Subject to subparagraph (d) of this paragraph 6,
and subject to the legal availability of funds therefor and to
any contractual and other restrictions with respect thereto, at
any time on or after May 1, 2001, the Corporation, at the option
of the Board of Directors, may redeem, in whole or in part, the
shares of Exchangeable Preferred at the time outstanding, at any
time or from time to time, upon notice given as provided in
paragraph 9 of this Section 4.2.1, at the redemption prices
(expressed as a percentage of the liquidation preference thereof)
set forth below, plus an amount in cash equal to all accumulated
and unpaid dividends (including an amount in cash equal to a
prorated dividend for the period from the dividend payment date
immediately prior to the redemption date to the redemption date,
subject to the right of holders of preferred stock on a record
date to receive dividends on a dividend payment date) if redeemed
during the 12-month period beginning May 1 of each of the years
set forth below:
YEAR PERCENTAGE
2001 107.125%
2002 104.750%
2003 102.375%
2004 and thereafter 100.000%
(b) In addition, but subject to subparagraph (d) of
this paragraph 6, on or prior to May 1, 1999, the Corporation
may, at the option of the Board of Directors from time to time,
subject to the legal availability of funds therefor and to any
contractual and other restrictions with respect thereto, redeem
shares of Exchangeable Preferred having an aggregate liquidation
preference of up to 35% of the aggregate liquidation preference
of all shares of Exchangeable Preferred issued on the Closing
Date, at a redemption price equal to 114 1/4% of the liquidation
preference thereof (subject to the right of Holders of
Exchangeable Preferred on relevant record dates to receive
dividends due on relevant dividend payment dates), plus an amount
in cash equal to a prorated dividend for the period from the
dividend payment date immediately prior to the redemption date to
the redemption date, with proceeds of one or more Public Equity
Offerings of common stock of (A) the Corporation or (B) Holdings,
provided that (i) with respect to a Public Equity Offering
referred to in clause (B) above, cash proceeds of such Public
Equity Offering in an amount sufficient to effect the redemption
of Exchangeable Preferred to be so redeemed are contributed by
Holdings to the Corporation prior to such redemption and used by
the Corporation to effect such redemption and (ii) such
redemption occurs within 180 days after consummation of such
Public Equity Offering.
(c) In the event of partial redemptions of
Exchangeable Preferred, the shares to be redeemed will be
determined pro rata, except that the Corporation may redeem such
shares held by any Holder of fewer than 100 shares without regard
to such pro rata redemption requirement.
(d) Notwithstanding the foregoing provisions of
paragraph 6(a) or (b) of this Section 4.2.1, unless the full
cumulative dividends for all past dividend periods on all
outstanding shares of Exchangeable Preferred shall have been paid
or contemporaneously are declared and paid or set apart for
payment (whether in cash or additional shares of Exchangeable
Preferred, as permitted under paragraph 4(a) of this Section
4.2.1), none of the shares of Exchangeable Preferred shall be
redeemed pursuant to paragraph 6(a) or (b) of this Section 4.2.1
unless all outstanding shares of Exchangeable Preferred are
simultaneously redeemed and all such cumulative dividends are
paid in cash contemporaneously with such redemption.
7. Mandatory Redemption.
--------------------
(a) The Exchangeable Preferred will be subject to
mandatory redemption (subject to the legal availability of funds
therefor but without regard to any contractual or other
restriction with respect thereto) in whole on May 1, 2007, at a
price, payable in cash, equal to the liquidation preference
thereof, plus all accumulated and unpaid dividends to the date of
redemption.
(b) Upon the occurrence of a Change of Control, the
Corporation will (subject to any contractual and other
restrictions with respect thereto and to the legal availability
of funds therefor) offer (the "Change of Control Offer") to each
Holder of Exchangeable Preferred to repurchase all or any part of
such Holder's Exchangeable Preferred at a cash purchase price
equal to 101% of the liquidation preference thereof, plus an
amount in cash equal to all accumulated and unpaid dividends per
share to the date of purchase (including an amount in cash equal
to a prorated dividend from the dividend payment date immediately
preceding the date of purchase to the date of purchase). The
Change of Control Offer will be made within 30 days following a
Change of Control, will remain open for at least 30 and not more
than 40 days, and will be made in compliance with the
requirements of Rule 14e-1 under the Exchange Act and any other
applicable securities laws and regulations. Notwithstanding the
foregoing, the Corporation will not make a Change of Control
Offer if any of the Senior Discount Notes or 13 1/2% Notes are
outstanding upon the occurrence of a Change of Control unless all
of the Senior Discount Notes and 13 1/2% Notes tendered pursuant
to the "change of control offers" with respect thereto are
repurchased as a result of such Change of Control, in which case
the date on which all Senior Discount Notes and 13 1/2% Notes
(and any other Indebtedness or Senior Securities of the
Corporation having provisions similar to Section 4.04(x) of the
Senior Discount Notes Indenture) are so repurchased will be
deemed to be the date on which such Change of Control shall have
occurred.
(c) If the Corporation shall fail to discharge its
obligation to redeem all outstanding shares of Exchangeable
Preferred pursuant to paragraph 7(a) or (b) of this Section 4.2.1
(the "Mandatory Redemption Obligation"), the Corporation shall
discharge the Mandatory Redemption Obligation as soon as the
Corporation is able to do so. If and so long as any Mandatory
Redemption Obligation with respect to the Exchangeable Preferred
shall not be fully discharged, the Corporation shall not declare
or pay any dividend or make any distribution on, or, directly or
indirectly, purchase, redeem or satisfy any mandatory redemption,
sinking fund or other similar obligations in respect of, Junior
Securities or Parity Securities (other than as a result of a
reclassification of Junior Securities or Parity Securities, or
the exchange or conversion of one class or series of Junior
Securities for or into another class or series of Junior
Securities, or the exchange or conversion of one class or series
of Parity Securities for or into another class or series of
Parity Securities, or other than through the use of the proceeds
of a substantially contemporaneous sale of other Junior
Securities or Parity Securities and in any case not involving the
payment of cash to holders of such securities) or any warrants,
rights or options exercisable for or convertible into any of the
Junior Securities or Parity Securities.
8. Exchange.
---------
(a) The Corporation may, at the sole option of the
Board of Directors (subject to the legal availability of funds
therefor), exchange all, but not less than all, of the shares of
Exchangeable Preferred then outstanding, including any shares of
Exchangeable Preferred issued as payment for dividends, for a new
series of 14 1/4% Exchange Debentures due May 1, 2007, of the
Corporation (the "Exchange Debentures") to be issued pursuant to
the indenture (the "Indenture") qualified under the Trust
Indenture Act of 1939, as amended, substantially in the form
agreed to on the Closing Date, a copy of which is on file with
and can be obtained from the Secretary of the Corporation on
request, at any time following the date on which such exchange is
permitted by the terms of the Senior Discount Notes Indenture,
the 13 1/2% Notes Indenture, and the terms of all other then-
existing Indebtedness of the Corporation and subject to the
conditions contained in paragraph 8(b) below. The Exchange
Debentures will be issued in registered form, without coupons, be
duly executed, authenticated as of the date on which the exchange
is effective and dated the date of exchange. In the event of an
exchange, Holders of Exchangeable Preferred shall be entitled to
receive on the date of exchange Exchange Debentures having an
aggregate principal amount equal to (i) the total of the
liquidation preference for each share of Exchangeable Preferred
exchanged, plus (ii) an amount equal to all accrued but unpaid
dividends payable on such share (including a prorated dividend
for the period from the immediately preceding dividend payment
date to the date of exchange). In the event such exchange would
result in the issuance of Exchange Debentures in a principal
amount which is less than $1,000 or which is not an integral
multiple of $1,000 (such principal amount less than $1,000 or the
difference between such principal amount and the highest integral
of $1,000 which is less than such principal amount, as the case
may be, is hereinafter referred to as the "Fractional Principal
Amount"), the Corporation may, subject to any restrictions in the
Senior Discount Notes Indenture, the 13 1/2% Notes Indenture, and
the terms of all other then-existing Indebtedness of the
Corporation, at the option of the Board of Directors, pay cash to
each Holder of Exchangeable Preferred in lieu of Fractional
Principal Amounts of Exchange Debentures otherwise issuable upon
exchange of the Exchangeable Preferred. The Person entitled to
receive the Exchange Debentures issuable upon exchange shall be
treated for all purposes as the registered holder of such
Exchange Debentures as of the date of exchange. In accordance
with paragraph 9 of this Section 4.2.1, the Corporation will mail
to each Holder of Exchangeable Preferred written notice of its
intention to exchange no less than 15 nor more than 60 days prior
to the date of exchange.
(b) As a condition of the right of the Corporation to
issue Exchange Debentures in exchange for the Exchangeable
Preferred under paragraph 8(a) of this Section 4.2.1 on the date
of exchange, (A) there shall be legally available funds
sufficient therefor (including, without limitation, legally
available funds sufficient therefor under Section 7-106-401 (or
any successor provision) of the Colorado Business Corporation
Act); (B) a registration statement relating to the Exchange
Debentures shall have been declared effective under the
Securities Act prior to such exchange and shall continue to be
effective on the date of exchange, or the Corporation shall have
obtained a written opinion of its counsel that an exemption from
the registration requirements of the Securities Act is available
for such exchange and that upon receipt of such Exchange
Debentures pursuant to such an exchange made in accordance with
such exemption, each holder of an Exchange Debenture that is not
an Affiliate of the Corporation will not be subject to any
restrictions imposed by the Securities Act upon the resale of
such Exchange Debenture, and such exemption is relied upon by the
Corporation for such exchange; (C) the Indenture and the Trustee
thereunder shall have been qualified under the Trust Indenture
Act of 1939, as amended; (D) immediately after giving effect to
such exchange, no Default or Event of Default would exist; and
(E) the Corporation shall have delivered to the Trustee under the
Indenture a written opinion of counsel, dated the date of
exchange, regarding the satisfaction of the conditions set forth
in clauses (A), (B) and (C). In the event that (i) the issuance
of the Exchange Debentures is not permitted on the exchange date
or (ii) any of the conditions set forth in clauses (A) through
(E) of the preceding sentence are not satisfied on the exchange
date, the Corporation shall use its best efforts to satisfy such
conditions and effect such exchange as soon as practicable.
Prior to initiating the exchange referred to in paragraph (a)
above, the Corporation shall certify, to the satisfaction of the
trustees under the 13 1/2% Notes Indenture and the Senior
Discount Notes Indenture, that such exchange is permitted under
such respective Indentures. The Corporation shall also provide
such trustees with an Officer's Certificate setting forth with
specificity the basis for the Corporation's conclusion that such
exchange is so permitted.
9. Procedures for Redemption or Exchange.
--------------------------------------
(a) In the event that fewer than all the outstanding
shares of Exchangeable Preferred are to be redeemed, the number
of shares to be redeemed shall be determined pro rata, except
that in any redemption of fewer than all the outstanding shares
of Exchangeable Preferred, the Corporation may redeem all shares
held by any Holder of a number of shares of Exchangeable
Preferred not to exceed 100 as may be specified by the
Corporation. In the event of partial redemptions of Exchangeable
Preferred, new shares of Exchangeable Preferred having an
aggregate liquidation preference equal to the unredeemed portion
will be issued in the name of the Holder thereof upon
cancellation of the original share certificate of Exchangeable
Preferred without cost to such Holder. On and after a redemption
date, unless the Corporation defaults in the payment of the
redemption price, dividends will cease to accrue on shares of
Exchangeable Preferred called for redemption and all rights of
Holders of such shares will terminate except for the right to
receive the redemption price. On the date fixed for exchange,
the rights of Holders of the shares of Exchangeable Preferred
exchanged shall cease, except the right to receive Exchange
Debentures in exchange for their Exchangeable Preferred and cash
or additional Exchange Debentures in payment of accrued but
unpaid dividends on such shares to the date of exchange.
(b) In the event that the Corporation shall redeem or
exchange shares of Exchangeable Preferred, notice of every
redemption or exchange of shares of Exchangeable Preferred shall
be mailed by first class mail, postage prepaid, and mailed, in
the case of exchange, not less than 15 nor more than 60 days
prior to the exchange date, and, in the case of redemption, not
less than 30 days nor more than 60 days prior to the redemption
date, addressed to the Holders of record of the shares to be
redeemed or exchanged at their respective last addresses as they
shall appear on the books of the Corporation; provided, however,
that failure to give such notice or any defect therein or in the
mailing thereof shall not affect the validity of the proceeding
for the redemption or exchange of any shares so to be redeemed or
exchanged except as to the Holder to whom the Corporation has
failed to give such notice or to whom notice was defective. Each
such notice shall state: (i) the redemption or exchange date;
(ii) the number of shares of Exchangeable Preferred to be
redeemed or exchanged and, if less than all the shares held by
such Holder are to be redeemed, the number of such shares or
portion of the liquidation preference to be redeemed; (iii) the
redemption price or exchange rate; (iv) the place or places where
certificates for such shares are to be surrendered for payment of
the redemption price or exchanged for the Exchange Debentures;
and (v) that dividends on the shares to be redeemed or exchanged
will cease to accrue on such redemption date or exchange date.
(c) Notice having been mailed as aforesaid and
provided that, on or before the redemption date or exchange date,
as the case may be, specified in such notice, all duly
authenticated and valid Exchange Debentures necessary for any
such exchange shall have been provided by the Corporation and all
funds necessary for such redemption or exchange shall have been
set aside by the Corporation, separate and apart from its other
funds, in trust for the pro rata benefit of the Holders of the
shares so called for redemption or exchange, so as to be and to
continue to be available therefor, then, from and after the
redemption date or exchange date, as the case may be, dividends
on the shares of Exchangeable Preferred so called for redemption
or exchange, as the case may be, shall cease to accrue, and said
shares shall no longer be deemed to be outstanding and shall not
have the status of shares of Exchangeable Preferred, and all
rights of the Holders thereof as shareholders of the Corporation
(except the right to receive from the Corporation the redemption
price or the Exchange Debentures upon exchange and any accrued
and unpaid dividends or the right to receive cash payments in
lieu of fractional securities from the exchange agent or other
agent selected by the Corporation) shall cease. Upon surrender
in accordance with said notice of the certificates for any shares
so redeemed or exchanged (properly endorsed or assigned for
transfer, if the Board of Directors of the Corporation shall so
require and the notice shall so state), such shares shall be
redeemed or exchanged by the Corporation at the redemption price
or exchange rate aforesaid.
(d) If such notice of redemption shall have been duly
given and if, prior to the redemption date, the Corporation shall
have irrevocably deposited the funds by the Corporation with such
bank or trust company in trust for the pro rata benefit of the
holders of the shares called for redemption, then,
notwithstanding that any certificate for shares so called for
redemption shall not have been surrendered for cancellation, from
and after the time of such deposit, Holders of the shares of
Exchangeable Preferred called for redemption shall cease to be
shareholders with respect to such shares and thereafter such
shares shall no longer be transferable on the books of the
Corporation and such holders shall have no interest in or claim
against the Corporation with respect to such shares (including
dividends thereon accrued after such redemption date) except the
right to receive payment of the redemption price (including all
dividends accrued and unpaid to the date fixed for redemption)
upon surrender of their certificates. Any funds deposited and
unclaimed at the end of two years from the date fixed for
redemption shall be repaid to the Corporation upon its request,
after which repayment the Holders of shares called for redemption
shall look only to the Corporation for payment of the redemption
price. The aforesaid bank or trust company shall be organized
and in good standing under the laws of the United States of
America or of the State of Colorado shall have capital, surplus
and undivided profits aggregating at least $100,000,000 according
to its last published statement of condition, and shall be
identified in the notice of redemption. Any interest accrued on
such funds shall be paid to the Corporation from time to time.
10. Voting Rights.
-------------
(a) Except as otherwise provided in this paragraph 10
or as otherwise from time to time provided by law, the Holders of
shares of Exchangeable Preferred shall have no voting rights.
(b) (i) If and whenever (A) (1) dividends on the
Exchangeable Preferred are in arrears and remain unpaid (or if
after May 1, 2001, such dividends have not been paid in cash)
with respect to four quarterly periods (whether or not
consecutive), (2) the Corporation fails to discharge any
redemption obligation with respect to the Exchangeable Preferred,
(3) a breach or violation by the Corporation of the provisions of
paragraph 8 of this Section 4.2.1 occurs, or the Corporation
fails to exchange Debentures for the Exchangeable Preferred
tendered for exchange on the exchange date, whether or not the
Corporation satisfies the conditions to permit such exchange, (4)
the Corporation fails to make a Change of Control Offer or cash
payment with respect thereto if required by the provisions of
paragraph 7(b) of this Section 4.2.1, (5) a breach or violation
of any provision of paragraph 11 of this Section 4.2.1 occurs and
is not remedied within 30 days after notice thereof to the
Corporation by Holders of 25% or more of the liquidation
preference of the Exchangeable Preferred then outstanding, or (6)
a default occurs in the obligation to pay principal of, interest
on or any other payment obligation when due (a "Payment Default")
at final maturity, on one or more classes of Indebtedness of the
Corporation or any Subsidiary of the Corporation, whether such
Indebtedness exists on the Closing Date or is Incurred
thereafter, having individually or in the aggregate an
outstanding principal amount of $10 million or more, or any other
Payment Default occurs on one or more such classes of
Indebtedness and such class or classes of Indebtedness are
declared due and payable prior to their respective maturities,
and (B) in the case of clauses (A)(5) and (6) above, such event
continues for a period of 180 days or more (each such event
referred to as a "Voting Rights Triggering Event"), then the
number of directors then constituting the Board of Directors of
the Corporation shall be increased by two directors and the
Holders of the majority of the then outstanding shares of
Exchangeable Preferred, voting separately as a class, shall be
entitled to elect the two additional directors at any annual
meeting of shareholders or special meeting held in place thereof,
or at a special meeting of the Holders of such shares of
Exchangeable Preferred called as hereinafter provided. For the
purpose of determining the number of quarterly periods for which
accrued dividends have not been paid, any accrued and unpaid
dividend that is subsequently paid shall not be treated as
unpaid. Within 15 days of the time the Corporation becomes aware
of the occurrence of any default referred to in clause (A)(6)
above, the Corporation shall give notice thereof to Holders of
the Exchangeable Preferred at their addresses as they appear on
the records of the Transfer Agent.
(ii) Whenever a Voting Rights Triggering Event
shall have occurred, voting rights of the Holders of shares of
the Exchangeable Preferred may be exercised initially either at a
special meeting of the Holders of Exchangeable Preferred, called
as hereinafter provided, or at any annual meeting of shareholders
held for the purpose of electing directors, and thereafter at
each such annual meeting or by the written consent of the Holders
of Exchangeable Preferred pursuant to Section 7-107-104 of the
Colorado Business Corporation Act. The term of office of any
such elected directors shall expire at the next annual meeting of
shareholders held for the purpose of electing directors, subject
to a new election of two directors by the Holders of shares of
Exchangeable Preferred at each successive annual meeting, but
such voting right and the term of office of any such elected
directors shall expire at such time as (A) all dividends
accumulated on Exchangeable Preferred shall have been paid in
full (and in the case of dividends payable with respect to any
period after May 1, 2001, shall have been paid in full in cash)
and (B) each failure, breach or default referred to in paragraph
10(b)(i)(A)(2), (3), (4), (5), and (6) above is remedied.
(iii) At any time after a Voting Rights
Triggering Event shall have occurred and such voting rights shall
not already have been initially exercised, a proper officer of
the Corporation may, and upon the written request of any Holder
of shares of Exchangeable Preferred (addressed to the Secretary
at the principal office of the Corporation) shall, call a special
meeting of the Holders of shares of Exchangeable Preferred for
the election of the two directors to be elected by them as herein
provided, such call to be made by notice similar to that provided
in the Bylaws for a special meeting of the shareholders or as
required by law.
(iv) Such meeting shall be held at the earliest
practicable date upon the notice required for annual meetings of
shareholders at the place for holding annual meetings of
shareholders of the Corporation or, if none, at a place
designated by the Secretary of the Corporation. If such meeting
shall not be called by a proper officer of the Corporation within
30 days after the personal service of such written request upon
the Secretary of the Corporation, or within 30 days after mailing
the same within the United States, by registered mail, addressed
to the Secretary of the Corporation at its principal office (such
mailing to be evidenced by the registry receipt issued by the
postal authorities), then the Holders of record of 10% of the
shares of Exchangeable Preferred then outstanding may designate
in writing a Holder of Exchangeable Preferred to call such
meeting at the expense of the Corporation, and such meeting may
be called by such person so designated upon the notice required
for annual meetings of shareholders and shall be held at the same
place as is elsewhere provided in this paragraph (10)(b)(iv) or
at such other place as is selected by such person so designated.
Any Holder of Exchangeable Preferred that would be entitled to
vote at any such meeting shall have access to the stock books of
the Corporation for the purpose of causing a meeting of
shareholders to be called pursuant to the provisions of this
paragraph. Notwithstanding the provisions of this paragraph,
however, no such special meeting shall be called during a period
within 90 days immediately preceding the date fixed for the next
annual meeting of shareholders.
(v) At any meeting held for the purpose of
electing directors at which the Holders of Exchangeable Preferred
shall have the right to elect directors as provided herein, the
presence in person or by proxy of the Holders of the lesser of
(A) a majority of the then outstanding shares of Exchangeable
Preferred or (B) a percentage of the then outstanding shares of
Exchangeable Preferred, which percentage is equal to the
percentage of then outstanding shares of common stock then
required to constitute a quorum for the election of directors by
holders of common stock, shall be required and be sufficient to
constitute a quorum of such class for the election of directors
by such class. At any such meeting or adjournment thereof
(x) the absence of a quorum of the Holders of Exchangeable
Preferred shall not prevent the election of directors other than
those to be elected by the Holders of stock of such class and the
absence of a quorum or quorums of the holders of Capital Stock
entitled to elect such other directors shall not prevent the
election of directors to be elected by the Holders of
Exchangeable Preferred and (y) in the absence of a quorum of the
holders of any class of stock entitled to vote for the election
of directors, a majority of the holders present in person or by
proxy of such class shall have the power to adjourn the meeting
for the election of directors which the holders of such class are
entitled to elect, from time to time, without notice (except as
required by law) other than announcement at the meeting, until a
quorum shall be present.
(vi) The term of office of all directors elected
by the Holders of Exchangeable Preferred pursuant to paragraph
(10)(b)(i) of this Section 4.2.1 in office at any time when the
aforesaid voting rights are vested in the Holders of Exchangeable
Preferred shall terminate upon the election of their successors
at any meeting of shareholders for the purpose of electing
directors. Upon any termination of the aforesaid voting rights
in accordance with paragraph (10)(b)(ii) of this Section 4.2.1,
the term of office of all directors elected by the Holders of
Exchangeable Preferred pursuant to paragraph (10)(b)(i) of this
Section 4.2.1 then in office thereupon shall terminate and upon
such termination the number of directors constituting the Board
of Directors shall, without further action, be reduced by two,
subject always to the increase of the number of directors
pursuant to paragraph (10)(b)(i) of this Section 4.2.1 in case of
the future right of the Holders of Exchangeable Preferred to
elect directors as provided herein.
(vii) In case of any vacancy occurring among
the directors so elected, the remaining director who shall have
been so elected may appoint a successor to hold office for the
unexpired term of the director whose place shall be vacant unless
and until such vacancy shall be filled by vote of the Holders
entitled to elect the directors in accordance with paragraph
10(b) of this Section 4.2.1. If all directors so elected by the
Holders of Exchangeable Preferred shall cease to serve as
directors before their terms shall expire, the Holders of
Exchangeable Preferred then outstanding may, at a special meeting
of the Holders called as provided above, elect successors to hold
office for the unexpired terms of the directors whose places
shall be vacant.
(c) In addition to any vote or consent of shareholders
required by law, the consent of the Holders of at least a
majority of the shares of Exchangeable Preferred at the time
outstanding, voting or consenting, as the case may be, separately
as one class given in person or by proxy, either in writing
without a meeting or by vote at any meeting called for the
purpose, shall be necessary for effecting or validating:
(i) Except as provided in paragraph 13 of this
Section 4.2.1, any amendment, alteration or repeal of any of
the provisions of the Second Amended and Restated Articles
of Incorporation, or of the Bylaws of the Corporation, which
affects adversely the voting rights, rights, privileges, or
preferences of the Holders of shares of Exchangeable
Preferred or authorizes the issuance of any additional
shares of Exchangeable Preferred (other than to pay
dividends in kind on Exchangeable Preferred); provided,
however, that the amendment of the provisions of the Second
Amended and Restated Articles of Incorporation so as to
authorize or create, or to increase the authorized amount
of, any of the Corporation's Junior Securities or to
authorize the issuance of or to authorize or create any
Parity Securities (up to the amount of authorized preferred
stock) shall not be deemed to affect adversely the voting
rights, rights, privileges, or preferences of the Holders of
shares of Exchangeable Preferred;
(ii) Any amendment, alteration or repeal of any of
the provisions of the Indenture; provided, however, that no
such consent of the Holders of Exchangeable Preferred shall
be required for such amendments as would be permitted under
the terms of the Indenture without the consent of any of the
holders of the Exchange Debentures; or
(iii) The authorization or creation of, or the
increase in the authorized amount of, any Senior Securities
or shares of any class of any security convertible into
shares of any Senior Securities; provided, however, that on
or after May 1, 2001, no such consent of the Holders of
Exchangeable Preferred shall be required if, at or prior to
the time when such amendment, alteration or repeal is to
take effect or when the issuance of any such Senior
Securities or convertible security is to be made, as the
case may be, provision is made, and funds are set aside, for
the redemption of all shares of Exchangeable Preferred at
the time outstanding.
11. Certain Covenants.
------------------
(a) Incurrence of Indebtedness and Issuance of
Preferred Stock.
(i) The Corporation will not, and will not permit
any of its Restricted Subsidiaries to, Incur any Indebtedness
(other than the Senior Discount Notes, the Exchange Debentures
and Indebtedness existing on the Closing Date) or issue any
Redeemable Stock; provided that the Corporation may Incur
Indebtedness or issue Redeemable Stock if, after giving effect to
the Incurrence of such Indebtedness or the issuance of such
Redeemable Stock and the receipt and application of the proceeds
therefrom, the Indebtedness to EBITDA Ratio would be greater than
zero and less than 5:1.
(ii) Notwithstanding the provisions of paragraph
11(a)(i) above, the Corporation and any Restricted Subsidiary
(except as specified below) may Incur each and all of the
following: (A) Indebtedness of the Corporation or any Restricted
Subsidiary or Redeemable Stock of the Corporation outstanding at
any time, which Indebtedness or Redeemable Stock generates gross
proceeds to the Corporation of up to $900 million, less (without
duplication) the gross proceeds of Indebtedness permanently
repaid as provided under the "Limitation on Asset Sales" covenant
contained in the 13 1/2% Notes Indenture and the Senior Discount
Notes Indenture; (B) Indebtedness to Holdings, the Corporation or
any of the Corporation's Wholly Owned Restricted Subsidiaries;
provided that any subsequent issuance or transfer of any Capital
Stock which results in any such Wholly Owned Restricted
Subsidiary ceasing to be a Wholly Owned Restricted Subsidiary or
any subsequent transfer of such Indebtedness (other than to
Holdings, the Corporation or another Wholly Owned Restricted
Subsidiary) shall be deemed, in each case, to constitute an
Incurrence of such Indebtedness not permitted by this clause (B);
(C) Indebtedness or Redeemable Stock issued in exchange for, or
the net proceeds of which are used to refinance or refund, then
outstanding Indebtedness or Redeemable Stock, other than
Indebtedness Incurred or Redeemable Stock issued under clause
(A), (B), (E), (F), (H), (I), (J) or (K) of this paragraph
11(a)(ii), and any refinancings thereof in an amount not to
exceed the amount so refinanced or refunded (plus premiums,
accrued interest, accrued dividends, fees and expenses); provided
that such new Indebtedness or Redeemable Stock, determined as of
the date of Incurrence of such new Indebtedness or issuance of
Redeemable Stock, does not mature prior to the stated maturity of
the Indebtedness or have a mandatory redemption date prior to the
Redeemable Stock to be refinanced or refunded, and the Average
Life of such new Indebtedness is at least equal to the remaining
Average Life of the Indebtedness to be refinanced or refunded;
and provided further that in no event may Indebtedness or
Redeemable Stock of the Corporation be refinanced by means of any
Indebtedness or Redeemable Stock of any Restricted Subsidiary of
the Corporation pursuant to this clause (C); (D) Indebtedness (1)
in respect of performance, surety or appeal bonds provided in the
ordinary course of business, (2) under Currency Agreements and
Interest Rate Agreements; provided that such agreements do not
increase the Indebtedness of the obligor outstanding at any time
other than as a result of fluctuations in foreign currency
exchange rates or interest rates or by reason of fees,
indemnities and compensation payable thereunder, and (3) arising
from agreements providing for indemnification, adjustment of
purchase price or similar obligations, or from Guarantees or
letters of credit, surety bonds or performance bonds securing any
obligations of the Corporation or any of its Restricted
Subsidiaries pursuant to such agreements, in any case Incurred in
connection with the disposition of any business, assets or
Restricted Subsidiary of the Corporation (other than Guarantees
of Indebtedness Incurred by any Person acquiring all or any
portion of such business, assets or Restricted Subsidiary of the
Corporation for the purpose of financing such acquisition), in a
principal amount at maturity not to exceed the gross proceeds
actually received by the Corporation or any Restricted Subsidiary
in connection with such disposition; (E) Indebtedness or
Redeemable Stock of the Corporation, to the extent the proceeds
referred to below are contributed to the Corporation, not to
exceed, at any one time outstanding, twice the amount of Net Cash
Proceeds received by Holdings after the Closing Date from the
issuance and sale of its Capital Stock (other than Redeemable
Stock or preferred stock); provided that such Indebtedness does
not mature prior to the final mandatory redemption date of the
Exchangeable Preferred; (F) Strategic Investor Subordinated
Indebtedness; (G) Indebtedness or Redeemable Stock of the
Corporation, to the extent the proceeds thereof are immediately
used after the Incurrence or issuance thereof to purchase
Exchangeable Preferred tendered in a Change of Control Offer; (H)
Indebtedness of any Restricted Subsidiary of the Corporation
Incurred pursuant to any credit agreement of such Restricted
Subsidiary in effect on August 8, 1995 (or any agreement
refinancing Indebtedness under such credit agreement), up to the
amount of the commitment under such credit agreement (including
equipment leasing or financing agreements) on August 8, 1995;
(I) Indebtedness of the Corporation, in an amount not to exceed
$100 million at any one time outstanding, consisting of
Capitalized Lease Obligations with respect to assets that are
used or useful in the telecommunications business of the
Corporation or its Restricted Subsidiaries; (J) Indebtedness or
Redeemable Stock of any Person that becomes a Restricted
Subsidiary of the Corporation after the Closing Date, which
Indebtedness exists or, with respect to such Indebtedness for
which there is a commitment to lend, at the time such Person
becomes a Restricted Subsidiary and, with respect to such
Indebtedness, the subsequent Incurrence thereof ("Acquired
Indebtedness"), in an accreted amount not to exceed $50 million
at any one time outstanding in the aggregate for all such
Restricted Subsidiaries; provided that such Acquired Indebtedness
does not exceed 65% of the consideration (calculated by including
such Acquired Indebtedness as a part of such consideration) paid
by the Corporation and its Restricted Subsidiaries for the
acquisition of such Person; and (K) Indebtedness of the
Corporation, in an amount not to exceed $30 million at any one
time outstanding, consisting of letters of credit and similar
arrangements used to support obligations of the Corporation or
any of its Restricted Subsidiaries with respect to the
acquisition of (by purchase, lease or otherwise), construction
of, or improvements on, assets that will be used or useful in the
telecommunications business of the Corporation or its Restricted
Subsidiaries.
(iii) For purposes of determining any
particular amount of Indebtedness under paragraphs 11(a)(i) or
(ii) above, (A) Indebtedness of any Restricted Subsidiary of the
Corporation incurred on or prior to the Closing Date pursuant to
any credit agreement (including equipment leasing or financing
agreements) of such Restricted Subsidiary in effect on August 8,
1995, shall be treated as Incurred pursuant to paragraph
11(a)(ii)(H) of this Section 4.2.1, and (B) Guarantees, Liens or
obligations with respect to letters of credit supporting
Indebtedness otherwise included in the determination of such
particular amount shall not be included. For purposes of
determining compliance with the covenants contained in paragraphs
11(a)(i) and (ii) above, in the event that an item of
Indebtedness or Redeemable Stock meets the criteria of more than
one of the types of Indebtedness or Redeemable Stock described in
such clauses, the Corporation, in its sole discretion, shall
classify such item of Indebtedness or Redeemable Stock and only
be required to include the amount and type of such Indebtedness
or Redeemable Stock in one of such clauses.
(b) Limitation on Restricted Payments.
(i) So long as any shares of the Exchangeable
Preferred are outstanding, the Corporation will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, (A)
declare or pay any dividend or make any distribution on Junior
Securities held by Persons other than the Corporation or any of
its Restricted Subsidiaries (other than dividends or
distributions payable solely in shares of its or such Restricted
Subsidiary's Junior Securities (other than Redeemable Stock) of
the same class held by such holders or in options, warrants or
other rights to acquire such shares of Junior Securities and
other than pro rata dividends or distributions on common stock of
Restricted Subsidiaries); (B) purchase, redeem, retire or
otherwise acquire for value any shares of Junior Securities of
the Corporation or any Restricted Subsidiary (including options,
warrants or other rights to acquire such shares of Junior
Securities) held by Persons other than the Corporation or any of
its Wholly Owned Restricted Subsidiaries (except for Junior
Securities of MTN, StarCom, Ohio LINX, FOTI and Zycom to the
extent the consideration therefor consists solely of common stock
(other than Redeemable Stock) of Holdings or Junior Securities of
the Corporation, in each case transferred in compliance with the
Securities Act); or (C) make any Investment, other than a
Permitted Investment, in any Person (such payments or any other
actions described in clauses (i)(A) through (C) being
collectively "Restricted Payments") if, at the time of, and after
giving effect to, the proposed Restricted Payment: (1) an event
referred to in clauses (1) through (6) of paragraph 10(b)(i)(A)
of this Section 4.2.1 shall have occurred and be continuing, (2)
the Corporation could not Incur at least $1.00 of Indebtedness
under paragraph 11(a)(i) of this Section 4.2.1, (3) the aggregate
amount expended for all Restricted Payments (the amount so
expended, if other than in cash, to be determined in good faith
by the Board of Directors, whose determination shall be
conclusive and evidenced by a board resolution) after April 29,
1996 shall exceed the sum of (aa) 50% of the aggregate amount of
the Adjusted Consolidated Net Income (or, if the Adjusted
Consolidated Net Income is a loss, minus 100% of such amount)
(determined by excluding income resulting from transfers of
assets by the Corporation or a Restricted Subsidiary to an
Unrestricted Subsidiary) accrued on a cumulative basis during the
period (taken as one accounting period) beginning on the first
day of the fiscal quarter immediately following the Closing Date
and ending on the last day of the last fiscal quarter preceding
the Transaction Date for which reports have been filed pursuant
to paragraph 11(i) of this Section 4.2.1 plus (bb) the aggregate
Net Cash Proceeds received by the Corporation after the Closing
Date (x) from the issuance and sale, permitted hereunder, of
Junior Securities (other than Redeemable Stock) to a Person who
is not a Subsidiary of the Corporation, or from the issuance to a
Person who is not a Subsidiary of the Corporation of any options,
warrants or other rights to acquire Junior Securities of the
Corporation (in each case, exclusive of any Redeemable Stock or
any options, warrants or other rights that are redeemable at the
option of the holder, or are required to be redeemed, prior to
the stated maturity of the Exchangeable Preferred) or (y) as a
capital contribution from Holdings plus (cc) an amount equal to
the net reduction in Investments (other than reductions in
Permitted Investments) in any Person resulting from payments of
interest on Indebtedness, dividends, repayments of loans or
advances, or other transfers of assets, in each case to the
Corporation or any Restricted Subsidiary (except to the extent
any such payment is included in the calculation of Adjusted
Consolidated Net Income), or from redesignations of Unrestricted
Subsidiaries as Restricted Subsidiaries (valued in each case as
provided in the definition of "Investments"), not to exceed the
amount of Investments previously made by the Corporation and its
Restricted Subsidiaries in such Person or (4) dividends on the
Exchangeable Preferred shall not have been paid in full as
provided in paragraph 4 of this Section 4.2.1.
(ii) The provisions of paragraph 11(b)(i) above
shall not be violated by reason of: (A) the payment of any
dividend within 60 days after the date of declaration thereof if,
at said date of declaration, such payment would comply with
paragraph 11(b)(i) above; (B) the repurchase, redemption or other
acquisition of Junior Securities of the Corporation (or options,
warrants or other rights to acquire such Junior Securities) and
with respect to any Junior Securities, the payment of accrued
dividends thereon, in exchange for, or out of the proceeds of a
substantially concurrent issuance or sale of, shares of Junior
Securities (other than Redeemable Stock) of the Corporation;
provided that the redemption of any preferred stock pursuant to
any mandatory redemption feature thereof and any redemption of
any other Junior Securities and, in each case, the payment of
accrued dividends thereon (or options, warrants or other rights
to acquire such Junior Securities) and with respect to any Junior
Securities, the payment of accrued dividends thereon, shall be
deemed to be "substantially concurrent" with such issuance and
sale if the required notice with respect to such redemption is
irrevocably given by a date which is no later than five Business
Days after receipt of the proceeds of such issuance and sale and
such redemption and payment is consummated within the period
provided for in the document governing such preferred stock or
the documents governing the redemption of such other Junior
Securities, as the case may be; (C) payments or distributions, in
the nature of satisfaction of dissenters' rights, pursuant to or
in connection with a consolidation, merger or transfer of assets
that complies with the provisions of paragraph 11(g) of this
Section 4.2.1; (D) Investments, not to exceed $10 million in the
aggregate, each evidenced by a senior promissory note payable to
the Corporation that provides that it will become due and payable
prior to any required repurchase (including pursuant to an Offer
to Purchase in connection with a Change of Control) of the
Exchangeable Preferred; (E) Investments, not to exceed $5 million
in the aggregate, that meet the requirements of clause (D) above;
provided that the Board of Directors of the Corporation shall
have determined, in good faith, that each such Investment under
this clause (E) will enable the Corporation or one of its
Restricted Subsidiaries to obtain additional business that it
might not be able to obtain without the making of such
Investment; (F) with respect to Junior Securities permitted to be
issued and sold by the provisions of paragraph 11(d) of this
Section 4.2.1, the payment (1) of dividends on such Junior
Securities in additional shares of Junior Securities and (2) of
cash dividends on such Junior Securities in an amount not to
exceed the dividend rate thereon and accrued interest on unpaid
dividends, in each case after May 1, 2001; (G) the repurchase, in
the event of a Change of Control, of Junior Securities of the
Corporation and Indebtedness of the Corporation into which such
Junior Securities have been exchanged; provided that prior to
repurchasing such Junior Securities or Indebtedness, the
Corporation shall have made a Change of Control Offer to
repurchase the shares of Exchangeable Preferred in accordance
with the terms of paragraph 7(b) of this Section 4.2.1 (and an
offer to repurchase other Indebtedness, if required by the terms
thereof, in accordance with the indenture or other document
governing such other Indebtedness) and shall have accepted and
paid for any shares of Exchangeable Preferred (and other
Indebtedness) properly tendered in connection with such Change of
Control Offer for the shares of Exchangeable Preferred or change
of control offer for such other Indebtedness; (H) the issuance of
Junior Securities permitted to be issued hereunder in exchange
for Indebtedness; provided that the Incurrence of such
Indebtedness complies with the provisions of paragraph 11(a) of
this Section 4.2.1; and (I) (1) the payment of a dividend or
other transfer of funds to Holdings with a portion of the
proceeds of the issuance of the Exchangeable Preferred, in an
amount not to exceed the amount required to repurchase 916,666
warrants to purchase common stock of Holdings and (2) the
redemption of the 12% Redeemable Preferred Stock of Holdings, in
each case, in accordance with the provisions of the documents
governing such repurchase or redemption, provided that, except in
the case of clause (A), no Default or Event of Default shall have
occurred and be continuing or occur as a consequence of the
actions or payments set forth in this paragraph 11(b)(ii).
(iii) Each Restricted Payment permitted
pursuant to paragraph 11(b)(ii) above (other than the Restricted
Payments referred to in clauses (F)(1) and (H) thereof), and the
Net Cash Proceeds from any issuance of Junior Securities referred
to in clause (B) thereof, shall be included in calculating
whether the conditions of clause (3) of paragraph 11(b)(i) of
this Section 4.2.1 have been met with respect to any subsequent
Restricted Payments. Notwithstanding the foregoing, in the event
the proceeds of an issuance of Junior Securities are used for the
redemption, repurchase or other acquisition of the Exchangeable
Preferred, or Parity Securities, then the Net Cash Proceeds of
such issuance shall be included in clause (3) of paragraph
11(b)(i) of this Section 4.2.1 only to the extent such proceeds
are not used for such redemption, repurchase or other acquisition
of Exchangeable Preferred or Parity Securities.
(c) Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries. So long as any
shares of Exchangeable Preferred are outstanding, the Corporation
will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary to (i) pay dividends or make
any other distributions permitted by applicable law on any
Capital Stock of such Restricted Subsidiary owned by the
Corporation or any other Restricted Subsidiary, (ii) pay any
Indebtedness owed to the Corporation or any other Restricted
Subsidiary, (iii) make loans or advances to the Corporation or
any other Restricted Subsidiary or (iv) transfer any of its
property or assets to the Corporation or any other Restricted
Subsidiary. The foregoing provisions shall not restrict any
encumbrances or restrictions: (i) existing on the Closing Date in
any agreements in effect on the Closing Date, and any extensions,
refinancings, renewals or replacements of such agreements;
provided that the encumbrances and restrictions in any such
extensions, refinancings, renewals or replacements are no less
favorable in any material respect to the Holders of the
Exchangeable Preferred than those encumbrances or restrictions
that are then in effect and that are being extended, refinanced,
renewed or replaced; (ii) existing under or by reason of
applicable law; (iii) existing with respect to any Person or the
property or assets of such Person acquired by the Corporation or
any Restricted Subsidiary, existing at the time of such
acquisition and not incurred in contemplation thereof, which
encumbrances or restrictions are not applicable to any Person or
the property or assets of any Person other than such Person or
the property or assets of such Person so acquired; (iv) in the
case of clause (iv) of the first sentence of this paragraph
11(c), (A) that restrict in a customary manner the subletting,
assignment or transfer of any property or asset that is a lease,
license, conveyance or contract or similar property or asset, (B)
existing by virtue of any transfer of, agreement to transfer,
option or right with respect to, or Lien on, any property or
assets of the Corporation or any Restricted Subsidiary not
otherwise prohibited hereunder or (C) arising or agreed to in the
ordinary course of business, not relating to any Indebtedness,
and that do not, individually or in the aggregate, detract from
the value of property or assets of the Corporation or any
Restricted Subsidiary in any manner material to the Corporation
or any Restricted Subsidiary; or (v) with respect to a Restricted
Subsidiary and imposed pursuant to an agreement that has been
entered into for the sale or disposition of all or substantially
all of the Capital Stock of, or property and assets of, such
Restricted Subsidiary. Nothing contained in this paragraph 11(c)
shall prevent the Corporation or any Restricted Subsidiary from
(1) creating, incurring, assuming or suffering to exist any Liens
otherwise permitted pursuant to paragraph 11(f) of this Section
4.2.1 or (2) restricting the sale or other disposition of
property or assets of the Corporation or any of its Restricted
Subsidiaries that secure Indebtedness of the Corporation or any
of its Restricted Subsidiaries.
(d) Limitation on Issuances and Sale of Capital Stock
of Restricted Subsidiaries. The Corporation will not sell, and
will not permit any Restricted Subsidiary, directly or
indirectly, to issue or sell, any shares of Capital Stock of a
Restricted Subsidiary (including options, warrants or other
rights to purchase shares of such Capital Stock) except (i) to
the Corporation or a Wholly Owned Restricted Subsidiary; (ii)
issuances or sales to foreign nationals of shares of Capital
Stock of foreign Restricted Subsidiaries, to the extent required
by applicable law; (iii) if, immediately after giving effect to
such issuance or sale, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary; (iv) with respect to common
stock of MTN, StarCom and Zycom; provided that the proceeds of
any such sale under this clause (iv) shall be reinvested in the
business of the Corporation and its Restricted Subsidiaries or
used to repay Indebtedness of the Corporation or any of its
Restricted Subsidiaries or Senior Securities; and (v) with
respect to common stock of FOTI; provided that FOTI shall not
retain any net proceeds from such sales or issuances in excess of
$10 million in the aggregate and any net proceeds in excess of
such $10 million shall be received by, or paid promptly by FOTI
to, the Corporation or any Wholly Owned Restricted Subsidiary of
the Corporation.
(e) Limitation on Transactions with Shareholders and
Affiliates. The Corporation will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, enter into,
renew or extend any transaction (including, without limitation,
the purchase, sale, lease or exchange of property or assets, or
the rendering of any service) with any holder (or any Affiliate
of such holder) of 5% or more of any class of Capital Stock of
the Corporation or with any Affiliate of the Corporation or any
Restricted Subsidiary, except upon fair and reasonable terms no
less favorable to the Corporation or such Restricted Subsidiary
than could be obtained, at the time of such transaction or at the
time of the execution of the agreement providing therefor, in a
comparable arm's-length transaction with a Person that is not
such a holder or an Affiliate. The foregoing limitation does not
limit, and shall not apply to (i) transactions (A) approved by a
majority of the disinterested members of the Board of Directors
of the Corporation or (B) for which the Corporation or a
Restricted Subsidiary delivers to the Transfer Agent a written
opinion of a nationally recognized investment banking firm
stating that the transaction is fair to the Corporation or such
Restricted Subsidiary from a financial point of view; (ii) any
transaction solely between the Corporation and any of its Wholly
Owned Restricted Subsidiaries or solely between Wholly Owned
Restricted Subsidiaries; (iii) the payment of reasonable and
customary regular fees to directors of the Corporation who are
not employees of the Corporation; (iv) any payments or other
transactions pursuant to any tax-sharing agreement (or a similar
agreement that is not materially adverse to the interests of
Holders of the Exchangeable Preferred) between the Corporation
and any other Person with which the Corporation files a
consolidated tax return or with which the Corporation is part of
a consolidated group for tax purposes; or (v) any Restricted
Payments not prohibited by paragraph 11(b) of this Section 4.2.1.
Notwithstanding the foregoing, any transaction covered by the
first sentence of this paragraph 11(e) and not covered by clauses
(ii) through (iv) of the preceding sentence, the aggregate amount
of which exceeds $2 million in value, must be approved or
determined to be fair in the manner provided for in clause (i)(A)
or (B) of the preceding sentence.
(f) Limitation on Liens. The Corporation will not,
and will not permit any Restricted Subsidiary to, create, incur,
assume or suffer to exist any Lien on any of its assets or
properties, now or hereafter acquired, or any shares of Capital
Stock of or Indebtedness of any Restricted Subsidiary. The
foregoing limitation does not apply to (i) Liens existing on the
Closing Date; (ii) Liens granted after the Closing Date on any
assets or Capital Stock of the Corporation or its Restricted
Subsidiaries created in favor of the Holders of the Exchangeable
Preferred; (iii) Liens with respect to the assets of a Restricted
Subsidiary granted by such Restricted Subsidiary to the
Corporation or a Wholly Owned Restricted Subsidiary to secure
Indebtedness owing to the Corporation or such other Restricted
Subsidiary; (iv) Liens securing Indebtedness which is Incurred to
refinance secured Indebtedness which is permitted to be Incurred
under paragraph 11(a)(ii)(C) of this Section 4.2.1; provided that
such Liens do not extend to or cover any property or assets of
the Corporation or any Restricted Subsidiary other than the
property or assets securing the Indebtedness being refinanced;
(v) Liens with respect to assets or properties of any Person that
becomes a Restricted Subsidiary after the Closing Date; provided
that such Liens do not extend to or cover any assets or
properties of the Corporation or any of its Restricted
Subsidiaries other than the assets or properties of such Person
subject to such Lien on the date such Person becomes a Restricted
Subsidiary; and provided further that such Liens are not incurred
in contemplation of, or in connection with, such Person becoming
a Restricted Subsidiary; (vi) Permitted Liens; and (vii) Liens
securing Indebtedness.
(g) Merger, Consolidation and Sale of Assets. The
Corporation shall not consolidate with, merge with or into, or
sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets (as an entirety or
substantially an entirety in one transaction or a series of
related transactions) to, any Person (other than a consolidation
or merger with or into a Wholly Owned Restricted Subsidiary with
a positive net worth; provided that, in connection with any such
merger or consolidation, no consideration (other than common
stock in the surviving Person or the Corporation) shall be issued
or distributed to the shareholders of the Corporation) or permit
any Person to merge with or into the Corporation unless: (i) the
Corporation shall be the continuing Person, or the Person (if
other than the Corporation) formed by such consolidation or into
which the Corporation is merged or that acquired or leased such
property and assets of the Corporation shall be a corporation
organized and validly existing under the laws of the United
States of America or any jurisdiction thereof and the
Exchangeable Preferred shall be converted into or exchanged for
and shall become shares of such successor company, having in
respect of such successor or resulting company substantially the
same powers, preferences and relative participating, optional or
other special rights and the qualifications, limitations or
restrictions thereon that the Exchangeable Preferred had
immediately prior to such transaction; (ii) immediately after
giving effect to such transaction, no event referred to under
paragraph 10(b)(i)(A)(1) through (5) of this Section 4.2.1 or any
default, breach or violation that would become such an event
after the giving of notice, the passage of time or both, shall
have occurred and be continuing; (iii) immediately after giving
effect to such transaction on a pro forma basis, the Corporation
or any Person becoming the successor issuer of the Exchangeable
Preferred, as the case may be, shall have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of the
Corporation immediately prior to such transaction;
(iv) immediately after giving effect to such transaction on a pro
forma basis the Corporation, or any Person becoming the successor
issuer of the Exchangeable Preferred, as the case may be, could
Incur at least $1.00 of Indebtedness under paragraph 11(a)(i) of
this Section 4.2.1; and (v) the Corporation delivers to the
Transfer Agent an Officers' Certificate (attaching the arithmetic
computations to demonstrate compliance with clauses (iii) and
(iv) above) and an opinion of counsel, in each case stating that
such consolidation, merger or transfer complies with this
provision and that all conditions precedent provided for herein
relating to such transaction have been complied with; provided,
however, that clauses (iii) and (iv) above shall not apply if, in
the good faith determination of the Board of Directors of the
Corporation evidenced by a board resolution, the principal
purpose of such transaction is part of a plan to change the
jurisdiction of incorporation of the Corporation to a different
state of the United States; and provided further that any such
transaction shall not have as one of its purposes the evasion of
the foregoing limitations.
(h) Senior Subordinated Indebtedness. So long as any
shares of Exchangeable Preferred are outstanding, the Corporation
will not Incur any Indebtedness, other than the Exchange
Debentures, that is expressly made subordinated in right of
payment to any Senior Indebtedness (as defined in the Indenture)
unless such Indebtedness, by its terms and by the terms of any
agreement or instrument pursuant to which such Indebtedness is
outstanding is expressly made pari passu with, or subordinate in
right of payment to, the Exchange Debentures pursuant to
provisions substantially similar to those contained in Article
Eleven of the Indenture; provided that the foregoing limitations
shall not apply to distinctions between categories of Senior
Indebtedness that exist by reason of any Liens or Guarantees
arising or created in respect of some but not all Senior
Indebtedness.
(i) Reports. So long as any shares of Exchangeable
Preferred are outstanding, the Corporation shall file with the
Securities and Exchange Commission (the "Commission") the annual
reports, quarterly reports and the information, documents and
other reports required to be filed by the Corporation with the
Commission pursuant to Sections 13 or 15 of the Exchange Act,
whether or not the Corporation has or is required to have a class
of securities registered under the Exchange Act, at the time it
is or would be required to file the same with the Commission and,
within 15 days after the Corporation is or would be required to
file such reports, information or documents with the Commission,
shall mail such reports, information and documents to the
Transfer Agent and to each Holder, or shall supply such reports
to the Transfer Agent for forwarding to each Holder, at such
Holder's address set forth on the register maintained by the
Transfer Agent.
12. Transfer and Legending of Shares.
-------------------------------- No transfer of
shares of the Exchangeable Preferred shall be effective until
such transfer is registered on the books of the Corporation.
Until registered under the Securities Act or the expiration of
the time period referred to in Rule 144(k) (as then in effect)
under the Securities Act, all shares of Exchangeable Preferred
will bear the following legend:
THIS PREFERRED STOCK HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH
IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (B) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS PREFERRED STOCK IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, OR (C) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES
ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR"), (2)
AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD
REFERRED TO UNDER RULE 144(k) UNDER THE SECURITIES ACT
AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS
PREFERRED STOCK, RESELL OR OTHERWISE TRANSFER THIS
PREFERRED STOCK EXCEPT (A) TO INTELCOM GROUP (U.S.A.),
INC. (THE "CORPORATION") OR ANY SUBSIDIARY THEREOF, (B)
TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO
THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE), (E) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRANSFER
AGENT A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS PREFERRED STOCK (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRANSFER
AGENT) OR (F) AFTER REGISTRATION UNDER THE SECURITIES
ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THIS PREFERRED STOCK IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS PREFERRED STOCK
WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER
MUST EXECUTE A LETTER (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRANSFER AGENT) RELATING TO THE
MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO
THE TRANSFER AGENT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT. THE [FIRST] AMENDED AND
RESTATED ARTICLES OF INCORPORATION OF THE CORPORATION
CONTAINS A PROVISION REQUIRING THE TRANSFER AGENT TO
REFUSE TO REGISTER ANY TRANSFER OF THIS PREFERRED STOCK
IN VIOLATION OF THE FOREGOING RESTRICTIONS.
The Corporation shall refuse to register any attempted transfer
of shares of Exchangeable Preferred not in compliance with this
paragraph 12.
13. Amendments and Waivers.
------------------------ Notwithstanding any other
provisions hereof and to the extent allowable from time to time
by applicable law, the Board of Directors may, by duly adopted
resolution, amend any of the provisions of the Second Amended and
Restated Articles of Incorporation, without notice to or any
consent or approval of any of the Holders of Exchangeable
Preferred, for the following purposes:
(1) to cure any ambiguity, defect or inconsistency in
the Second Amended and Restated Articles of Incorporation;
provided that such amendment does not and will not adversely
affect the interests of the Holders of Exchangeable Preferred in
any material respect; or
(2) to make any change that the Board of Directors
determines in good faith does not materially and adversely affect
the rights of any Holder of Exchangeable Preferred.
Except as provided in the preceding sentence, any right,
preference, privilege or power of, or restriction provided for
the benefit of, the Exchangeable Preferred set forth herein may
be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively) only with the written consent of the Corporation
and the affirmative vote or written consent of the Holders of at
least a majority of the shares of Exchangeable Preferred then
outstanding, and any amendment or waiver so effected shall be
binding upon the Corporation and all Holders of the Exchangeable
Preferred.
14. Rules of Construction.
--------------------- The descriptive headings in
this Section 4.2.1 are inserted for convenience of reference only
and are not intended to be part of or affect the meaning or
interpretation of any provision of this Section 4.2.1. Words
used in this Section 4.2.1, regardless of the gender and number
specifically used, shall be deemed and construed to include any
other gender, masculine, feminine, or neuter, and any other
number, singular or plural, as the context requires. As used in
this Section 4.2.1, the word "including" is not limiting, and the
word "or" is not exclusive.
4.2.2 Cumulative Exchangeable Redeemable Preferred
--------------------------------------------
Stock; Statement of Designation of Preferences and Rights.
----------------------------------------------------------
A series of preferred stock of the Corporation has been
created with the designation and amount thereof and the voting
powers, preferences and relative, optional and other special
rights of the shares of such series, and the qualifications,
limitations, or restrictions thereof, as follows:
1. Certain Definitions:
--------------------- Set forth below are certain
defined terms used in this Section 4.2.2.
"Adjusted Consolidated Net Income" means, for any period,
the aggregate net income (or loss) of the Corporation and its
Restricted Subsidiaries for such period determined in conformity
with GAAP; provided that the following items shall be excluded in
computing Adjusted Consolidated Net Income (without duplication):
(i) the net income of any Person (other than net income
attributable to a Restricted Subsidiary) in which any Person
(other than the Corporation or any of its Restricted
Subsidiaries) has a joint interest and the net income of any
Unrestricted Subsidiary, except to the extent of the amount of
dividends or other distributions actually paid to the Corporation
or any of its Restricted Subsidiaries by such other Person or
such Unrestricted Subsidiary during such period; (ii) solely for
the purposes of calculating the amount of Restricted Payments
that may be made pursuant to paragraph 11(b)(i)(3) of this
Section 4.2.2 (and in such case, except to the extent includable
pursuant to clause (i) above), the net income (or loss) of any
Person accrued prior to the date it becomes a Restricted
Subsidiary or is merged into or consolidated with the Corporation
or any of its Restricted Subsidiaries or all or substantially all
of the property and assets of such Person are acquired by the
Corporation or any of its Restricted Subsidiaries; (iii) the net
income of any Restricted Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by
such Restricted Subsidiary of such net income is not at the time
permitted by the operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Restricted Subsidiary;
(iv) any gains or losses (on an after-tax basis) attributable to
Asset Sales; (v) except for purposes of calculating the amount of
Restricted Payments that may be made pursuant to paragraph
11(b)(i)(C)(3) of this Section 4.2.2, any amount paid or accrued
as dividends on preferred stock of the Corporation or any
Restricted Subsidiary owned by Persons other than the Corporation
and any of its Restricted Subsidiaries; and (vi) all
extraordinary gains and extraordinary losses.
"Affiliate" means, as applied to any Person, any other
Person directly or indirectly controlling, controlled by, or
under direct or indirect common control with, such Person. For
purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means
the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by
contract or otherwise.
"Asset Acquisition" means (i) an investment by the
Corporation or any of its Restricted Subsidiaries in any other
Person pursuant to which such Person shall become a Restricted
Subsidiary of the Corporation or shall be merged into or
consolidated with the Corporation or any of its Restricted
Subsidiaries; provided that such Person's primary business is
related, ancillary or complementary to the businesses of the
Corporation and its Restricted Subsidiaries on the date of such
investment or (ii) an acquisition by the Corporation or any of
its Restricted Subsidiaries of the property and assets of any
Person other than the Corporation or any of its Restricted
Subsidiaries that constitutes substantially all of a division or
line of business of such Person; provided that the property and
assets acquired are related, ancillary or complementary to the
businesses of the Corporation and its Restricted Subsidiaries on
the date of such acquisition.
"Asset Sale" means any sale, transfer or other disposition
(including by way of merger, consolidation or sale-leaseback
transactions) in one transaction or a series of related
transactions by the Corporation or any of its Restricted
Subsidiaries to any Person other than the Corporation or any of
its Restricted Subsidiaries of (i) all or any of the Capital
Stock of any Restricted Subsidiary, (ii) all or substantially all
of the property and assets of an operating unit or business of
the Corporation or any of its Restricted Subsidiaries or (iii)
any other property and assets of the Corporation or any of its
Restricted Subsidiaries outside the ordinary course of business
of the Corporation or such Restricted Subsidiary and, in each
case, that is not governed by the provisions of paragraph 11(g)
of this Section 4.2.2; provided that the meaning of "Asset Sale"
shall not include (A) sales or other dispositions of inventory,
receivables and other current assets, and (B) dispositions of
assets of the Corporation or any of its Restricted Subsidiaries,
in substantially simultaneous exchanges for consideration
consisting of any combination of cash, Temporary Cash Investments
and assets that are used or useful in the telecommunications
business of the Corporation or its Restricted Subsidiaries, if
such consideration has an aggregate fair market value
substantially equal to the fair market value of the assets so
disposed of; provided, however, that fair market value shall be
determined in good faith by the Board of Directors of the
Corporation, whose determination shall be conclusive and
evidenced by a resolution of the Board of Directors delivered to
the Transfer Agent.
"Average Life" means, at any date of determination with
respect to any debt security, the quotient obtained by dividing
(i) the sum of the products of (a) the number of years from such
date of determination to the dates of each successive scheduled
principal payment of such debt security and (b) the amount of
such principal payment by (ii) the sum of all such principal
payments.
"Business Day" means any day except a Saturday, Sunday, or
other day on which commercial banks in the City of New York, or
in the city of the Transfer Agent Office, are authorized by law
to close.
"Capital Stock" means, with respect to any Person, any and
all shares, interests, participations or other equivalents
(however designated, whether voting or non-voting) in equity of
such Person, whether now outstanding or issued after the date
hereof, including, without limitation, all common stock and
preferred stock.
"Capitalized Lease" means, as applied to any Person, any
lease of any property (whether real, personal or mixed) of which
the discounted present value of the rental obligations of such
Person as lessee, in conformity with GAAP, is required to be
capitalized on the balance sheet of such Person; and "Capitalized
Lease Obligations" means the discounted present value of the
rental obligations under any such Capitalized Lease.
"Change of Control" means such time as (i) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Exchange Act) becomes the ultimate "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act) of Voting Stock having more
than 40% of the voting power of the total Voting Stock of ICG on
a fully diluted basis; (ii) individuals who on the Closing Date
constitute the Board of Directors of ICG (together with any new
directors whose election by the Board of Directors or whose
nomination for election by ICG's stockholders was approved by a
vote of at least a majority of the members of the Board of
Directors then in office who either were members of the Board of
Directors on the Closing Date or whose election or nomination for
election was previously so approved) cease for any reason to
constitute a majority of the members of the Board of Directors
then in office; or (iii) all of the common stock of the
Corporation is not beneficially owned, directly or indirectly, by
ICG.
"ChoiceCom" means CSW/ICG ChoiceCom, L.P., a Delaware
limited partnership.
"Closing Date" means the date on which the Exchangeable
Preferred is originally issued.
"Consolidated EBITDA" means, for any period, the sum of the
amounts for such period of (i) Adjusted Consolidated Net Income,
(ii) Consolidated Interest Expense, (iii) income taxes, to the
extent such amount was deducted in calculating Adjusted
Consolidated Net Income (other than income taxes (either positive
or negative) attributable to extraordinary and non-recurring
gains or losses or sales of assets), (iv) depreciation expense,
to the extent such amount was deducted in calculating Adjusted
Consolidated Net Income, (v) amortization expense, to the extent
such amount was deducted in calculating Adjusted Consolidated Net
Income, and (vi) all other non-cash items reducing Adjusted
Consolidated Net Income (other than items that will require cash
payments and for which an accrual or reserve is, or is required
by GAAP to be, made), less all non-cash items increasing Adjusted
Consolidated Net Income, all as determined on a consolidated
basis for the Corporation and its Restricted Subsidiaries in
conformity with GAAP; provided that, if any Restricted Subsidiary
is not a Wholly Owned Restricted Subsidiary, Consolidated EBITDA
shall be reduced (to the extent not otherwise reduced in
accordance with GAAP) by an amount equal to (A) the amount of the
Adjusted Consolidated Net Income attributable to such Restricted
Subsidiary multiplied by (B) the quotient of (1) the number of
shares of outstanding common stock of such Restricted Subsidiary
not owned on the last day of such period by the Corporation or
any of its Restricted Subsidiaries divided by (2) the total
number of shares of outstanding common stock of such Restricted
Subsidiary on the last day of such period.
"Consolidated Interest Expense" means, for any period, the
aggregate amount of interest in respect of Indebtedness
(including amortization of original issue discount on any
Indebtedness and the interest portion of any deferred payment
obligation, calculated in accordance with the effective interest
method of accounting; all commissions, discounts and other fees
and charges owed with respect to letters of credit and bankers'
acceptance financing; the net costs associated with Interest Rate
Agreements; and Indebtedness that is Guaranteed or secured by the
Corporation or any of its Restricted Subsidiaries) and all but
the principal component of rentals in respect of Capitalized
Lease Obligations paid, accrued or scheduled to be paid or to be
accrued by the Corporation and its Restricted Subsidiaries during
such period; excluding, however, without duplication, (i) any
amount of such interest of any Restricted Subsidiary if the net
income of such Restricted Subsidiary is excluded in the
calculation of Adjusted Consolidated Net Income pursuant to
clause (iii) of the definition thereof (but only in the same
proportion as the net income of such Restricted Subsidiary is
excluded from the calculation of Adjusted Consolidated Net Income
pursuant to clause (iii) of the definition thereof) and (ii) any
premiums, fees and expenses (and any amortization thereof)
payable in connection with the offering of the 13 1/2% Notes and
the warrants issued therewith, the 12 1/2% Notes, the 14 1/4%
Exchangeable Preferred, the Senior Discount Notes and/or the
Exchangeable Preferred, all as determined on a consolidated basis
(without taking into account Unrestricted Subsidiaries) in
conformity with GAAP.
"Consolidated Net Worth" means, at any date of
determination, stockholders' equity as set forth on the most
recently available quarterly or annual consolidated balance sheet
of the Corporation and its Restricted Subsidiaries (which shall
be as of a date not more than 90 days prior to the date of such
computation, and which shall not take into account Unrestricted
Subsidiaries), less any amounts attributable to Redeemable Stock
or any equity security convertible into or exchangeable for
Indebtedness, the cost of treasury stock and the principal amount
of any promissory notes receivable from the sale of the Capital
Stock of the Corporation or any of its Restricted Subsidiaries,
each item to be determined in conformity with GAAP (excluding the
effects of foreign currency exchange adjustments under Financial
Accounting Standards Board Statement of Financial Accounting
Standards No. 52).
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement
designed to protect the Corporation or any of its Restricted
Subsidiaries against fluctuations in currency values to or under
which the Corporation or any of its Restricted Subsidiaries is a
party or a beneficiary on the Closing Date or becomes a party or
a beneficiary thereafter.
"Default" means any event that is, or after notice or
passage of time or both would be, an Event of Default.
"Event of Default" means a Voting Rights Triggering Event as
defined in paragraph 10(b) of this Section 4.2.2.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"FOTI" means Fiber Optic Technologies Inc., a Colorado
corporation.
"14 1/4% Exchangeable Preferred" means the 14 1/4%
Cumulative Exchangeable Redeemable Preferred Stock mandatorily
redeemable May 1, 2007 of the Corporation, and any shares of
preferred stock issued as payment in kind dividends thereon.
"GAAP" means generally accepted accounting principles in
the United States of America as in effect as of August 8, 1995,
including, without limitation, those set forth in the opinions
and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or
in such other statements by such other entity as approved by a
significant segment of the accounting profession. All ratios and
computations contained in this Section 4.2.2 shall be computed in
conformity with GAAP applied on a consistent basis, except that
calculations made for purposes of determining compliance with the
terms of the covenants and with other provisions of this Section
4.2.2 shall be made without giving effect to (i) the amortization
of any expenses incurred in connection with the offering of the
13 1/2% Notes and the warrants issued therewith, the 12 1/2%
Notes, the 14 1/4% Exchangeable Preferred, the Senior Discount
Notes and/or the Exchangeable Preferred and (ii) except as
otherwise provided, the amortization of any amounts required or
permitted by Accounting Principles Board Opinion Nos. 16 and 17.
"Guarantee" means any obligation, contingent or otherwise,
of any Person directly or indirectly guaranteeing any
Indebtedness or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct
or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such other
Person (whether arising by virtue of partnership arrangements, or
by agreements to keep-well, to purchase assets, goods, securities
or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of
assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part);
provided that the term "Guarantee" shall not include endorsements
for collection or deposit in the ordinary course of business.
The term "Guarantee" used as a verb has a corresponding meaning.
"Holders" means the registered holders of shares of
Exchangeable Preferred.
"Holdings (Canada)" means ICG Holdings (Canada), Inc. and
its successors and assigns.
"ICG" means ICG Communications, Inc. and its successors and
assigns.
"Incur" means, with respect to any Indebtedness, to incur,
create, issue, assume, Guarantee or otherwise become liable for
or with respect to, or become responsible for, the payment of,
contingently or otherwise, such Indebtedness, including an
Incurrence of Indebtedness by reason of the acquisition of more
than 50% of the Capital Stock of any Person; provided that
neither the accrual of interest nor the accretion of original
issue discount shall be considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date
of determination (without duplication), (i) all indebtedness of
such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all obligations of such Person in respect of
letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (iv) all
obligations of such Person to pay the deferred and unpaid
purchase price of property or services, which purchase price is
due more than six months after the date of placing such property
in service or taking delivery and title thereto or the completion
of such services, except Trade Payables, (v) all obligations of
such Person as lessee under Capitalized Leases, (vi) all
Indebtedness of other Persons secured by a Lien on any asset of
such Person, whether or not such Indebtedness is assumed by such
Person; provided that the amount of such Indebtedness shall be
the lesser of (A) the fair market value of such asset at such
date of determination and (B) the amount of such Indebtedness,
(vii) all Indebtedness of other Persons Guaranteed by such Person
to the extent such Indebtedness is Guaranteed by such Person and
(viii) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate
Agreements. The amount of Indebtedness of any Person at any date
shall be the outstanding balance at such date of all
unconditional obligations as described above and, with respect to
contingent obligations, the maximum liability upon the occurrence
of the contingency giving rise to the obligation, provided (i)
that the amount outstanding at any time of any Indebtedness
issued with original issue discount is the original issue price
of such Indebtedness and (ii) that Indebtedness shall not include
(A) any amount of money borrowed, at the time of the Incurrence
of the related Indebtedness, for the purpose of prefunding any
interest payable on such related Indebtedness or (B) any
liability for federal, state, local or other taxes.
"Indebtedness to EBITDA Ratio" means, as at any date of
determination, the ratio of (i) the aggregate amount of
Indebtedness of the Corporation and its Restricted Subsidiaries
on a consolidated basis as at the date of determination (the
"Determination Date") to (ii) the Consolidated EBITDA of the
Corporation for the then most recent four full fiscal quarters
for which reports have been filed pursuant to paragraph 11(i) of
this Section 4.2.2 (such four full fiscal quarter period being
referred to herein as the "Four Quarter Period"); provided that
(x) pro forma effect shall be given to any Indebtedness Incurred
from the beginning of the Four Quarter Period through the
Determination Date (including any Indebtedness Incurred on the
Determination Date), to the extent outstanding on the
Determination Date, (y) if during the period commencing on the
first day of such Four Quarter Period through the Determination
Date (the "Reference Period"), the Corporation or any of the
Restricted Subsidiaries shall have engaged in any Asset Sale,
Consolidated EBITDA for such period shall be reduced by an amount
equal to the EBITDA (if positive), or increased by an amount
equal to the EBITDA (if negative), directly attributable to the
assets which are the subject of such Asset Sale and any related
retirement of Indebtedness as if such Asset Sale and related
retirement of Indebtedness had occurred on the first day of such
Reference Period or (z) if during such Reference Period the
Corporation or any of the Restricted Subsidiaries shall have made
any Asset Acquisition, Consolidated EBITDA of the Corporation
shall be calculated on a pro forma basis as if such Asset
Acquisition and any related financing had occurred on the first
day of such Reference Period. In calculating this ratio for
purposes hereof, the amount of outstanding Indebtedness shall be
deemed to include the liquidation preference of any preferred
stock then outstanding.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge
agreement or other similar agreement or arrangement designed to
protect the Corporation or any of its Restricted Subsidiaries
against fluctuations in interest rates in respect of Indebtedness
to or under which the Corporation or any of its Restricted
Subsidiaries is a party or a beneficiary on the Closing Date or
becomes a party or a beneficiary thereafter; provided that the
notional principal amount thereof does not exceed the principal
amount of the Indebtedness of the Corporation and its Restricted
Subsidiaries that bears interest at floating rates.
"Investment" in any Person means any direct or indirect
advance, loan or other extension of credit (including, without
limitation, by way of Guarantee or similar arrangement; but
excluding advances to customers in the ordinary course of
business that are, in conformity with GAAP, recorded as accounts
receivable on the balance sheet of the Corporation or its
Restricted Subsidiaries) or capital contribution to (by means of
any transfer of cash or other property to others or any payment
for property or services for the account or use of others), or
any purchase or acquisition of Capital Stock, bonds, notes,
debentures or other similar instruments issued by, such Person
and shall include the designation of a Restricted Subsidiary as
an Unrestricted Subsidiary. For purposes of the definition of
"Unrestricted Subsidiary" and paragraph 11(b) of this Section
4.2.2, (i) "Investment" shall include the fair market value of
the assets (net of liabilities) of any Restricted Subsidiary of
the Corporation at the time that such Restricted Subsidiary of
the Corporation is designated an Unrestricted Subsidiary and
shall exclude the fair market value of the assets (net of
liabilities) of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary of
the Corporation and (ii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value
at the time of such transfer, in each case as determined by the
Board of Directors in good faith.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, without
limitation, any conditional sale or other title retention
agreement or lease in the nature thereof, any sale with recourse
against the seller or any Affiliate of the seller, or any
agreement to give any security interest).
"MTN" means Maritime Telecommunications Network, Inc., a
Colorado corporation, and its successors.
"Net Cash Proceeds" means (a) with respect to any Asset
Sale, the proceeds of such Asset Sale in the form of cash or cash
equivalents, including payments in respect of deferred payment
obligations (to the extent corresponding to the principal, but
not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations
are financed or sold with recourse to the Corporation or any
Restricted Subsidiary of the Corporation) and proceeds from the
conversion of other property received when converted to cash or
cash equivalents, net of (i) brokerage commissions and other fees
and expenses (including fees and expenses of counsel and
investment bankers) related to such Asset Sale, (ii) provisions
for all taxes (whether or not such taxes will actually be paid or
are payable) as a result of such Asset Sale without regard to the
consolidated results of operations of the Corporation and its
Restricted Subsidiaries, taken as a whole, (iii) payments made to
repay Indebtedness or any other obligation outstanding at the
time of such Asset Sale that either (A) is secured by a Lien on
the property or assets sold or (B) is required to be paid as a
result of such sale and (iv) appropriate amounts to be provided
by the Corporation or any Restricted Subsidiary as a reserve
against any liabilities associated with such Asset Sale,
including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters
and liabilities under any indemnification obligations associated
with such Asset Sale, all as determined in conformity with GAAP
and (b) with respect to any issuance or sale of Capital Stock,
the proceeds of such issuance or sale in the form of cash or cash
equivalents, including payments in respect of deferred payment
obligations (to the extent corresponding to the principal, but
not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations
are financed or sold with recourse to the Corporation or any
Restricted Subsidiary) and proceeds from the conversion of other
property received when converted to cash or cash equivalents, net
of attorneys' fees, accountants' fees, underwriters' or placement
agents' fees, discounts or commissions and brokerage, consultant
and other fees incurred in connection with such issuance or sale
and net of taxes paid or payable as a result thereof.
"Offer to Purchase" means an offer to purchase shares of
Exchangeable Preferred by the Corporation from the Holders
commenced by mailing a notice to the Transfer Agent and each
Holder stating: (i) the covenant pursuant to which the offer is
being made and that all shares of Exchangeable Preferred validly
tendered will be accepted for payment on a pro rata basis; (ii)
the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from
the date such notice is mailed) (the "Payment Date"); (iii) that
any shares of Exchangeable Preferred not tendered will continue
to accrue dividends pursuant to its terms; (iv) that, unless the
Corporation defaults in the payment of the purchase price, any
shares of Exchangeable Preferred accepted for payment pursuant to
the Offer to Purchase shall cease to accrue dividends on and
after the Payment Date; (v) that Holders electing to have any
shares of Exchangeable Preferred purchased pursuant to the Offer
to Purchase will be required to surrender the shares of
Exchangeable Preferred together with a form entitled "Option of
the Holder to Elect Purchase" (the form of which will be mailed
with such notice) completed, to the paying agent at the address
specified in the notice prior to the close of business on the
Business Day immediately preceding the Payment Date; (vi) that
Holders will be entitled to withdraw their election if the paying
agent receives, not later than the close of business on the third
Business Day immediately preceding the Payment Date, a telegram,
facsimile transmission or letter setting forth the name of such
Holder, the liquidation preference of the shares of Exchangeable
Preferred delivered for purchase and a statement that such Holder
is withdrawing his election to have such shares of Exchangeable
Preferred purchased; and (vii) that Holders whose shares of
Exchangeable Preferred are being purchased only in part will be
issued new shares of Exchangeable Preferred equal to the
liquidation preference of the unpurchased portion of the shares
of Exchangeable Preferred surrendered; provided that each share
of Exchangeable Preferred purchased and each new share of
Exchangeable Preferred issued shall be in a principal amount of
$1,000 or integral multiples thereof. On the Payment Date, the
Corporation shall (i) accept for payment on a pro rata basis
shares of Exchangeable Preferred or portions thereof tendered
pursuant to an Offer to Purchase; (ii) deposit with the paying
agent money sufficient to pay the purchase price of all shares of
Exchangeable Preferred or portions thereof so accepted; and (iii)
deliver, or cause to be delivered, to the Transfer Agent all
shares of Exchangeable Preferred or portions thereof so accepted
together with an Officers' Certificate specifying the shares of
Exchangeable Preferred or portions thereof accepted for payment
by the Corporation. The paying agent shall promptly mail to the
Holders of shares of Exchangeable Preferred so accepted, payment
in an amount equal to the purchase price, and the Transfer Agent
shall promptly authenticate and mail to such Holders new shares
of Exchangeable Preferred equal in liquidation preference to any
unpurchased portion of the shares of Exchangeable Preferred
surrendered; provided that each share of Exchangeable Preferred
purchased and each new share of Exchangeable Preferred issued
shall be in a principal amount of $1,000 or integral multiples
thereof. The Corporation will publicly announce the results of
an Offer to Purchase as soon as practicable after the Payment
Date. The Transfer Agent shall act as the paying agent for an
Offer to Purchase. The Corporation will comply with Rule 14e-1
under the Exchange Act and any other securities laws and
regulations thereunder, to the extent such laws and regulations
are applicable, in the event that the Corporation is required to
repurchase shares of Exchangeable Preferred pursuant to an Offer
to Purchase.
"Ohio LINX" means ICG Ohio LINX, Inc., an Ohio corporation.
"Permitted Investment" means (i) an Investment in a
Restricted Subsidiary or a Person which will, upon the making of
such Investment, become a Restricted Subsidiary or be merged or
consolidated with or into or transfer or convey all or
substantially all its assets to, the Corporation or a Restricted
Subsidiary; provided that such Person's primary business is
related, ancillary or complementary to the businesses of the
Corporation and its Restricted Subsidiaries on the date of such
Investment; (ii) a Temporary Cash Investment; (iii) payroll,
travel and similar advances to cover matters that are expected at
the time of such advances ultimately to be treated as expenses in
accordance with GAAP; (iv) loans or advances to employees made in
the ordinary course of business in accordance with past practice
of the Corporation or its Restricted Subsidiaries and that do not
in the aggregate exceed $2 million at any time outstanding; (v)
stock, obligations or securities received in satisfaction of
judgments; (vi) Indebtedness of ICG or Holdings (Canada) owed to
the Corporation, in an amount not to exceed the reasonable
expenses of ICG or Holdings (Canada), as the case may be, as a
holding company that are actually incurred, and paid, by ICG or
Holdings (Canada); provided that such Indebtedness of ICG or
Holdings (Canada), as the case may be, is evidenced by an
unsubordinated promissory note that provides that it will be paid
prior to any mandatory redemption of the Exchangeable Preferred
if such payment would be necessary to effectuate such redemption;
and (vii) Investments in an amount not to exceed, at any one time
outstanding, all of the Net Cash Proceeds received by the
Corporation from the sale of common stock of ICG (to a person
other than one of ICG's Subsidiaries) after the Closing Date.
"Permitted Liens" means (i) Liens for taxes, assessments,
governmental charges or claims that are being contested in good
faith by appropriate legal proceedings promptly instituted and
diligently conducted and for which a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP
shall have been made; (ii) statutory Liens of landlords and
carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen or other similar Liens arising in the ordinary course
of business and with respect to amounts not yet delinquent or
being contested in good faith by appropriate legal proceedings
promptly instituted and diligently conducted and for which a
reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made; (iii)
Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security; (iv) Liens incurred
or deposits made to secure the performance of tenders, bids,
leases, statutory or regulatory obligations, bankers'
acceptances, surety and appeal bonds, government contracts,
performance and return-of-money bonds and other obligations of a
similar nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (v)
easements, rights of way, municipal and zoning ordinances and
similar charges, encumbrances, title defects or other
irregularities that do not materially interfere with the ordinary
course of business of the Corporation or any of its Restricted
Subsidiaries; (vi) Liens (including extensions and renewals
thereof) upon real or personal property acquired after the
Closing Date; provided that (a) such Lien is created solely for
the purpose of securing Indebtedness Incurred, in accordance with
paragraph 11(a) of this Section 4.2.2, (1) to finance the cost
(including the cost of improvement or construction) of the item
of property or assets subject thereto and such Lien is created
prior to, at the time of or within six months after the later of
the acquisition, the completion of construction or the
commencement of full operation of such property or (2) to
refinance any Indebtedness previously so secured, (b) the
principal amount of the Indebtedness secured by such Lien does
not exceed 100% of such cost and (c) any such Lien shall not
extend to or cover any property or assets other than such item of
property or assets and any improvements on such item; (vii)
leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the Corporation
and its Restricted Subsidiaries, taken as a whole; (viii) Liens
encumbering property or assets under construction arising from
progress or partial payments by a customer of the Corporation or
its Restricted Subsidiaries relating to such property or assets;
(ix) any interest or title of a lessor in the property subject to
any Capitalized Lease or operating lease; (x) Liens arising from
filing Uniform Commercial Code financing statements regarding
leases; (xi) Liens on property of, or on shares of stock or
Indebtedness of, any corporation existing at the time such
corporation becomes, or becomes a part of, any Restricted
Subsidiary; provided that such Liens do not extend to or cover
any property or assets of the Corporation or any Restricted
Subsidiary other than the property or assets acquired; (xii)
Liens in favor of the Corporation or any Restricted Subsidiary;
(xiii) Liens arising from the rendering of a final judgment or
order against the Corporation or any Restricted Subsidiary that
does not give rise to an Event of Default; (xiv) Liens securing
reimbursement obligations with respect to letters of credit that
encumber documents and other property relating to such letters of
credit and the products and proceeds thereof; (xv) Liens in favor
of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the
importation of goods; (xvi) Liens encumbering customary initial
deposits and margin deposits, and other Liens that are either
within the general parameters customary in the industry and
incurred in the ordinary course of business, in each case,
securing Indebtedness under Interest Rate Agreements and Currency
Agreements and forward contracts, options, future contracts,
futures options or similar agreements or arrangements designed to
protect the Corporation or any of its Restricted Subsidiaries
from fluctuations in the price of commodities; (xvii) Liens
arising out of conditional sale, title retention, consignment or
similar arrangements for the sale of goods entered into by the
Corporation or any of its Restricted Subsidiaries in the ordinary
course of business in accordance with the past practices of the
Corporation and its Restricted Subsidiaries prior to the Closing
Date; and (xviii) Liens on or sales of receivables.
"Person" means an individual, a corporation, a partnership,
a limited liability company, an association, a trust or any other
entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Preferred stock" or "preferred stock" means, with respect
to any Person, any and all shares, interests, participations or
other equivalents (however designated, whether voting or non-
voting) of such Person's preferred or preference stock, whether
now outstanding or issued after the date hereof, including,
without limitation, all series and classes of such preferred or
preference stock.
"Public Equity Offering" means a bona fide underwritten
primary public offering of common stock of ICG or the Corporation
pursuant to an effective registration statement under the
Securities Act.
"Redeemable Stock" means any class or series of Capital
Stock of any Person that by its terms or otherwise is (i)
required to be redeemed prior to the mandatory redemption date of
the shares of Exchangeable Preferred, (ii) redeemable at the
option of the holder of such class or series of Capital Stock at
any time prior to the mandatory redemption date of the shares of
Exchangeable Preferred, or (iii) convertible into or exchangeable
for Capital Stock referred to in clause (i) or (ii) above or
Indebtedness having a scheduled maturity prior to the mandatory
redemption date of the shares of Exchangeable Preferred; provided
that any Capital Stock that would not constitute Redeemable Stock
but for provisions thereof giving holders thereof the right to
require such Person to repurchase or redeem such Capital Stock
upon the occurrence of a "change of control" occurring prior to
the mandatory redemption date of the shares of Exchangeable
Preferred shall not constitute Redeemable Stock if the "change of
control" provisions applicable to such Capital Stock are no more
favorable to the holders of such Capital Stock than the
provisions contained in the "Change of Control" provisions
contained in paragraph 7(b) of this Section 4.2.2 and such
Capital Stock specifically provides that such Person will not
repurchase or redeem any such stock pursuant to such provision
prior to the Corporation's repurchase of Exchangeable Preferred
as provided in paragraph 7(b) of this Section 4.2.2.
"Restricted Subsidiary" means any Subsidiary of the
Corporation other than an Unrestricted Subsidiary.
"Securities Act" means the Securities Act of 1933, as
amended.
"Senior Discount Notes," as used in this Section 4.2.2,
means the Senior Discount Notes Due 2007 of the Corporation,
Guaranteed by ICG on a senior unsecured basis and issued on the
Closing Date.
"Senior Discount Notes Indenture," as used in this Section
4.2.2, means the Indenture dated as of the Closing Date among the
Corporation, ICG and the Trustee pursuant to which the Senior
Discount Notes are issued.
"StarCom" means StarCom International Optics Corporation, a
British Columbia corporation, and its Subsidiaries.
"Strategic Investor" means any Person engaged in the
telecommunications business which has a net worth or equity
market capitalization of at least $1 billion.
"Strategic Investor Subordinated Indebtedness" means all
Indebtedness of the Corporation owed to a Strategic Investor that
is contractually subordinate in right of payment to the shares of
Exchangeable Preferred to at least the following extent: no
payment of principal (or premium, if any) or interest on or
otherwise payable in respect of such Indebtedness may be made
(whether as a result of a default or otherwise) prior to the
payment in full of all of the Corporation's obligations under the
shares of Exchangeable Preferred; provided, however, that prior
to the payment of such obligations, interest on Strategic
Investor Subordinated Indebtedness may be payable solely in kind
or in common stock (other than Redeemable Stock) of ICG or the
Corporation.
"Subsidiary" means, with respect to any Person, any
corporation, association or other business entity of which more
than 50% of the outstanding Voting Stock is owned, directly or
indirectly, by such Person and one or more other Subsidiaries of
such Person.
"Temporary Cash Investment" means any of the following: (i)
direct obligations of the United States of America or any agency
thereof or obligations fully and unconditionally guaranteed by
the United States of America or any agency thereof, (ii) time
deposit accounts, certificates of deposit and money market
deposits maturing within 270 days of the date of acquisition
thereof, bankers' acceptances with maturities not exceeding 270
days, and overnight bank deposits, in each case issued by or with
a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign
country recognized by the United States, and which bank or trust
company has capital, surplus and undivided profits aggregating in
excess of $100 million (or the foreign currency equivalent
thereof) and has outstanding debt which is rated "A" (or such
similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule
436 under the Securities Act) or any money-market fund sponsored
by a registered broker dealer or mutual fund distributor, (iii)
repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above
entered into with a bank meeting the qualifications described in
clause (ii) above, (iv) commercial paper, maturing not more than
180 days after the date of acquisition, issued by a corporation
(other than an Affiliate of ICG) organized and in existence under
the laws of the United States of America, any state thereof or
any foreign country recognized by the United States of America
with a rating at the time as of which any investment therein is
made of "P-1" (or higher) according to Moody's Investors Service,
Inc. or "A-1" (or higher) according to Standard & Poor's Ratings
Group, and (v) securities with maturities of six months or less
from the date of acquisition issued or fully and unconditionally
guaranteed by any state, commonwealth or territory of the United
States of America, or by any political subdivision or taxing
authority thereof, and rated at least "A" by Standard & Poor's
Ratings Group or Moody's Investors Service, Inc.
"13 1/2% Notes" means the 13 1/2% Senior Discount Notes Due
2005 of the Corporation Guaranteed by ICG and Holdings (Canada)
on a senior unsecured basis.
"13 1/2% Notes Indenture" means the Indenture dated as of
August 8, 1995, as amended, among the Corporation, Holdings
(Canada) and the Trustee pursuant to which the Corporation issued
the 13 1/2% Notes.
"Trade Payables" means, with respect to any Person, any
accounts payable or any other debt or monetary obligation to
trade creditors created, assumed or Guaranteed by such Person or
any of its Subsidiaries arising in the ordinary course of
business in connection with the acquisition of goods or services.
"Transaction Date" means, with respect to the Incurrence of
any Indebtedness by the Corporation or any of its Restricted
Subsidiaries or the issuance of any Redeemable Stock of the
Corporation, the date such Indebtedness is to be Incurred or such
issuance is to be made and, with respect to any Restricted
Payment, the date such Restricted Payment is to be made.
"Transfer Agent" means American Stock Transfer and Trust
Company, 40 Wall Street, 46th Floor, New York, New York 10005, or
such other Person as may become the transfer agent with respect
to the Exchangeable Preferred.
"Transfer Agent Office" means the principal office of the
Transfer Agent at any particular time, which office is, at the
date hereof, located at 40 Wall Street, 46th Floor, New York, New
York 10005.
"Trustee" means Norwest Bank Colorado, National
Association, or such other Person as may become the trustee under
the Indenture, the Senior Discount Notes Indenture, the 12 1/2%
Notes Indenture or the 13 1/2% Notes Indenture, as the context
requires.
"12 1/2% Notes" means the 12 1/2% Senior Discount Notes due
2006 of the Corporation guaranteed by ICG and Holdings (Canada)
on a senior unsecured basis.
"12 1/2% Notes Indenture" means the Indenture dated as of
April 30, 1996, as amended, among the Corporation, Holdings
(Canada) and the Trustee pursuant to which the Corporation issued
the 12 1/2% Notes.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Corporation that at the time of determination shall be designated
an Unrestricted Subsidiary by the Board of Directors in the
manner provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any Restricted
Subsidiary of the Corporation (including any newly acquired or
newly formed Subsidiary of the Corporation), other than the
Corporation or a Subsidiary that has given a Subsidiary
Guarantee, to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Stock of, or owns or holds any Lien
on any property of, the Corporation or any Restricted Subsidiary;
provided that either (A) the Subsidiary to be so designated has
total assets of $1,000 or less or (B) if such Subsidiary has
assets greater than $1,000, that such designation would be
permitted under paragraph 11(b) of this Section 4.2.2. The Board
of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary of the Corporation; provided that
immediately after giving effect to such designation (x) the
Corporation could Incur $1.00 of additional Indebtedness under
paragraph 11(a)(i) of this Section 4.2.2 and (y) no Default or
Event of Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the
Transfer Agent by promptly filing with the Transfer Agent a copy
of the resolution of the Board of Directors giving effect to such
designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
"Voting Stock" means, with respect to any Person, Capital
Stock of any class or kind ordinarily having the power to vote
for the election of directors, managers or other voting members
of the governing body of such Person.
"Wholly Owned" means, with respect to any Subsidiary of any
Person, such Subsidiary if 98% or more of the outstanding Capital
Stock in such Subsidiary (other than any director's qualifying
shares or Investments by foreign nationals mandated by applicable
law) is owned by such Person or one or more Wholly Owned
Subsidiaries of such Person.
"Zycom" means Zycom Corporation, an Alberta, Canada
corporation.
2. Designation Amount.
------------------ The distinctive serial designation
of this series shall be "Cumulative Exchangeable Redeemable
Preferred Stock" (as used in this Section 4.2.2, "Exchangeable
Preferred"). The number of shares of Exchangeable Preferred
shall initially be 200,000, which number may from time to time be
increased (but not above the number that would cause the
aggregate number of all shares of preferred stock of all series
to exceed 1,000,000 shares) or decreased (but not below the
number then outstanding) by the Board of Directors. Shares of
Exchangeable Preferred redeemed, purchased by the Corporation or
exchanged for Exchange Debentures (as defined in paragraph 8(a)
of this Section 4.2.2) shall be canceled and shall revert to
authorized but unissued shares of preferred stock undesignated as
to series; provided, however, that no such issued and reacquired
shares of such series shall be reissued or sold as shares of
Exchangeable Preferred unless reissued as a stock dividend on
outstanding shares of Exchangeable Preferred.
3. Rank.
---- The Exchangeable Preferred shall, with
respect to dividend rights and distribution rights on
liquidation, winding-up and dissolution of the Corporation, rank
(i) senior to all classes of common stock of the Corporation and
to each other class of Capital Stock or series of preferred stock
established after March 6, 1997, by the Board of Directors the
terms of which do not expressly provide that it ranks senior to
or on a parity with the Exchangeable Preferred as to dividend
distributions and distributions upon the liquidation, winding-up
and dissolution of the Corporation (collectively referred to with
the common stock of the Corporation as "Junior Securities"); (ii)
on a parity with the 14 1/4% Exchangeable Preferred and any class
of Capital Stock or series of preferred stock issued by the
Corporation established after March 6, 1997 by the Corporation's
Board of Directors, the terms of which expressly provide that
such class or series will rank on a parity with the Exchangeable
Preferred as to dividend distributions and distributions upon the
liquidation, winding-up and dissolution of the Corporation
(collectively referred to as "Parity Securities"); and (iii)
subject to certain conditions described below, junior to each
class of Capital Stock or series of preferred stock issued by the
Corporation established after March 6, 1997 by the Corporation's
Board of Directors, the terms of which expressly provide that
such class or series will rank senior to the Exchangeable
Preferred as to dividend distributions and distributions upon the
liquidation, winding-up and dissolution of the Corporation
(collectively referred to as "Senior Securities"). The
Exchangeable Preferred will be subject to the issuance of series
of Junior Securities, Parity Securities and Senior Securities;
provided that the Corporation may not issue any new class of
Senior Securities without the approval of the Holders of at least
a majority of the shares of Exchangeable Preferred then
outstanding, voting or consenting, as the case may be, separately
as one class, except that without such approval of Holders of the
Exchangeable Preferred, the Corporation may issue shares of
Senior Securities (1) in exchange for, or the proceeds of which
are used to redeem or repurchase, all, but not less than all,
shares of Exchangeable Preferred then outstanding, or (2) in
exchange for, or the proceeds of which are used to repay, any
outstanding Indebtedness of the Corporation.
4. Dividends.
---------
(a) The Holders of shares of the Exchangeable
Preferred shall be entitled to receive, when, as and if declared
by the Board of Directors of the Corporation, out of funds
legally available therefor, dividends at the annual rate of 14%
of the liquidation preference per share, subject to the
provisions of paragraph 4(e) below. Such dividends shall be
cumulative, whether or not earned or declared, on a daily basis
from the date of issuance of the Exchangeable Preferred, and
shall be payable quarterly in arrears on March 15, June 15,
September 15, and December 15 of each year commencing on June 15,
1997 (each of such dates being a "dividend payment date"), with
respect to the period commencing with the date of issuance of the
particular shares of Exchangeable Preferred or the immediately
preceding dividend payment date and ending on the day preceding
such respective dividend payment date (each of such periods being
a "dividend period"), to shareholders of record on the preceding
March 1, June 1, September 1, and December 1, respectively (each,
a "regular record date"). Any dividend payments made with
respect to shares of Exchangeable Preferred on or before March
15, 2002, may be made, in the sole discretion of the Board of
Directors of the Corporation, in cash or in such number of
additional fully paid and nonassessable shares of Exchangeable
Preferred having an aggregate liquidation preference equal to the
amount of such dividends, and the issuance of such additional
shares of Exchangeable Preferred shall constitute full payment of
such dividend. All dividends paid with respect to shares of
Exchangeable Preferred pursuant to this paragraph 4(a) shall be
paid pro rata to the Holders entitled thereto. The Corporation
may, at the option of the Board of Directors, elect not to issue
fractions of a share of Exchangeable Preferred ("Fractional
Shares") in payment of any dividend in additional shares of
Exchangeable Preferred. In such event, in lieu of any Fractional
Shares, each record Holder of Exchangeable Preferred otherwise
entitled to receive a Fractional Share shall receive a payment in
cash equal to such Holder's proportionate interest in the net
proceeds from the sale or sales in the open market by the
Transfer Agent or other agent selected by the Corporation, on
behalf of all such Holders of the aggregate of all Fractional
Shares otherwise payable as a dividend. Such sale shall be
effected promptly after the record date fixed for determining the
Holders entitled to payment of the dividend. All shares of
Exchangeable Preferred issued as a dividend with respect to the
Exchangeable Preferred will thereupon be duly authorized, validly
issued, fully paid and nonassessable and free of all liens and
charges. After March 15, 2002, dividends on the Exchangeable
Preferred shall be paid only in cash to the Holders of record at
the close of business on the regular record date with respect to
the applicable dividend payment date.
(b) Accumulated unpaid dividends for any past dividend
periods may be declared by the Board of Directors and paid on any
date fixed by the Board of Directors, whether or not a regular
dividend payment date, to Holders of record on the books of the
Corporation on such record date as may be fixed by the Board of
Directors. Holders of Exchangeable Preferred will not be
entitled to any dividends, whether payable in cash, property or
stock, in excess of full cumulative dividends. If any dividend
(or portion thereof) payable on any dividend payment date on or
before March 15, 2002, is not declared or paid in full in cash or
in shares of Exchangeable Preferred as described in paragraph
4(a) above on such dividend payment date, the amount of the
accrued and unpaid dividend will bear interest at the dividend
rate on the Exchangeable Preferred, compounding quarterly from
such dividend payment date until paid in full. If any dividend
(or portion thereof) payable on any dividend payment date after
March 15, 2002, is not declared or paid in full in cash on such
dividend payment date, the amount of the accrued and unpaid
dividend will bear interest at the dividend rate on the
Exchangeable Preferred, compounding quarterly from such dividend
payment date until paid in full.
(c) So long as any shares of the Exchangeable
Preferred are outstanding, the Corporation shall not (i) declare,
pay or set apart for payment any dividend on any shares of Junior
Securities or Parity Securities or (ii) make any payment on
account of, or set apart for payment money for a sinking or other
similar fund for, the purchase, redemption, retirement or other
acquisition for value of any of, or redeem, purchase, retire or
otherwise acquire for value any of, the Junior Securities or
Parity Securities or any warrants, rights, calls or options
exercisable for or convertible into any of the Junior Securities
or Parity Securities or (iii) make any distribution in respect of
the Junior Securities or Parity Securities or any warrants,
rights, calls or options exercisable for or convertible into any
of the Junior Securities or Parity Securities, in any such case
either directly or indirectly, and whether in cash, obligations
or shares of the Corporation or other property (other than
distributions or dividends of a particular class or series of
Junior Securities to holders of such Junior Securities or
distributions or dividends of a particular class or series of
Parity Securities to holders of such Parity Securities), and
shall not permit any corporation or other entity directly or
indirectly controlled by the Corporation to purchase, redeem or
otherwise acquire for value any of the Junior Securities or
Parity Securities or any warrants, rights, calls or options
exercisable for or convertible into any of the Junior Securities
or Parity Securities, unless, as to any of the actions described
in clauses (i), (ii) or (iii) above, prior to or concurrently
with such declaration, payment, setting apart for payment,
purchase, redemption, other acquisition for value or
distribution, as the case may be, all accrued and unpaid
dividends, if any, on shares of the Exchangeable Preferred not
paid on the dates provided for in paragraphs 4(a) or 4(b) hereof
(including accrued dividends, if any, not paid by reason of the
terms and conditions of paragraph 4(d) hereof) shall have been
paid or shall have been declared and, if payable in cash, a sum
in cash set apart for such payment. If full cumulative dividends
on the Exchangeable Preferred are not so paid, the Exchangeable
Preferred will share dividends pro rata with the Parity
Securities. If full cumulative dividends on the Exchangeable
Preferred have not been so paid, the Exchangeable Preferred may
not be optionally redeemed in part as provided in paragraph 6(d)
of this Section 4.2.2.
(d) Notwithstanding anything contained herein to the
contrary, no cash dividends on shares of Exchangeable Preferred,
or any other shares of Junior Securities or Parity Securities, or
other series of the Corporation's preferred stock, shall be
declared by the Board of Directors or paid or set apart for
payment by the Corporation at such time as the terms and
provisions of any contract or other agreement of the Corporation
or any of its Restricted Subsidiaries entered into or assumed
prior to, on, or after the Closing Date specifically prohibits
such declaration, payment or setting apart for payment or
provides that such declaration, payment or setting apart for
payment would constitute a breach thereof or a default
thereunder; provided, however, that nothing contained in this
paragraph 4(d) shall be construed or deemed to require the Board
of Directors to declare, or the Corporation to pay or set apart
for payment, any cash dividends on shares of the Exchangeable
Preferred, whether permitted by any of such agreements or not.
(e) If, on or prior to September 11, 1997, the
Corporation does not, as more fully provided in the Registration
Rights Agreement with respect to the Exchangeable Preferred dated
the Closing Date, either (i) consummate an offer by the
Corporation to such Holders to exchange the Exchangeable
Preferred for an issue of preferred stock of the Corporation with
terms identical to the Exchangeable Preferred pursuant to an
effective registration statement under the Securities Act with
respect to such exchange offer, or (ii) file and cause to become
effective under the Securities Act a shelf registration statement
with respect to resales of the Exchangeable Preferred, then
dividends, in addition to the dividends described in paragraph
4(a) of this Section 4.2.2, will accrue at the annual rate of
0.5% of the liquidation preference per share on the Exchangeable
Preferred from September 11, 1997, payable in additional shares
of Exchangeable Preferred quarterly in arrears on March 15, June
15, September 15, and December 15 of each year commencing on
December 15, 1997.
5. Liquidation Preference.
-----------------------
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the affairs of the
Corporation, then, before any distribution or payment shall be
made to the holders of any Junior Securities, including common
stock of the Corporation, the Holders of Exchangeable Preferred
then outstanding shall be entitled to be paid, out of the assets
of the Corporation available for distribution to its
shareholders, an amount in cash equal to $1,000 for each share
outstanding (which amount is hereinafter referred to as the
"liquidation preference"), plus an amount in cash equal to all
accrued and unpaid dividends and interest thereon to the date
fixed for liquidation, dissolution or winding-up (including an
amount equal to a prorated dividend for the period from the
dividend payment date immediately preceding the date fixed for
liquidation, dissolution or winding-up to the date fixed for
liquidation, dissolution or winding-up). Except as provided in
the preceding sentence, Holders of Exchangeable Preferred shall
not be entitled to any distribution in the event of liquidation,
dissolution or winding-up of the affairs of the Corporation. If
the assets of the Corporation are not sufficient to pay in full
the liquidation payments payable to the holders of outstanding
shares of the Exchangeable Preferred and all other Parity
Securities, then the holders of all such shares shall share
ratably in any distribution of assets of the Corporation with
respect to the Exchangeable Preferred and Parity Securities in
accordance with the amount that would be payable on such
distribution if the amounts to which the holders of outstanding
shares of Exchangeable Preferred and all other Parity Securities
are entitled were paid in full. After payment of the full amount
of the liquidation preference and accrued and unpaid dividends or
interest to which each Holder is entitled, such Holders of shares
of Exchangeable Preferred will not be entitled to any further
participation in any distribution of the assets of the
Corporation.
(b) For purposes of this paragraph 5, a merger,
consolidation or sale of substantially all of the Corporation's
assets that complies with the provisions of paragraph 11(g) of
this Section 4.2.2 shall not be deemed to be a voluntary or
involuntary liquidation, dissolution or winding-up of the
Corporation.
6. Optional Redemption.
--------------------
(a) Subject to subparagraph (d) of this paragraph 6,
and subject to the legal availability of funds therefor and to
any contractual and other restrictions with respect thereto, at
any time on or after March 15, 2002, the Corporation, at the
option of the Board of Directors, may redeem, in whole or in
part, the shares of Exchangeable Preferred at the time
outstanding, at any time or from time to time, upon notice given
as provided in paragraph 9 of this Section 4.2.2, at the
redemption prices (expressed as a percentage of the liquidation
preference thereof) set forth below, plus an amount in cash equal
to all accumulated and unpaid dividends (including an amount in
cash equal to a prorated dividend for the period from the
dividend payment date immediately prior to the redemption date to
the redemption date, subject to the right of holders of preferred
stock on a record date to receive dividends on a dividend payment
date) if redeemed during the 12-month period beginning March 15
of each of the years set forth below:
YEAR PERCENTAGE
2002 107.0000%
2003 104.6667%
2004 102.3333%
2005 and thereafter 100.0000%
(b) In addition, but subject to subparagraph (d) of
this paragraph 6, on or prior to March 15, 2000, the Corporation
may, at the option of the Board of Directors from time to time,
subject to the legal availability of funds therefor and to any
contractual and other restrictions with respect thereto, redeem
shares of Exchangeable Preferred having an aggregate liquidation
preference of up to 35% of the aggregate liquidation preference
of all shares of Exchangeable Preferred issued on the Closing
Date, at a redemption price equal to 114% of the liquidation
preference thereof (subject to the right of Holders of
Exchangeable Preferred on relevant record dates to receive
dividends due on relevant dividend payment dates), plus an amount
in cash equal to a prorated dividend for the period from the
dividend payment date immediately prior to the redemption date to
the redemption date, with proceeds of one or more Public Equity
Offerings of common stock of (A) the Corporation or (B) ICG,
provided that (i) with respect to a Public Equity Offering
referred to in clause (B) above, cash proceeds of such Public
Equity Offering in an amount sufficient to effect the redemption
of Exchangeable Preferred to be so redeemed are contributed by
ICG to the Corporation prior to such redemption and used by the
Corporation to effect such redemption and (ii) such redemption
occurs within 180 days after consummation of such Public Equity
Offering.
(c) In the event of partial redemptions of
Exchangeable Preferred, the shares to be redeemed will be
determined pro rata, except that the Corporation may redeem such
shares held by any Holder of fewer than 100 shares without regard
to such pro rata redemption requirement.
(d) Notwithstanding the foregoing provisions of
paragraph 6(a) or (b) of this Section 4.2.2, unless the full
cumulative dividends for all past dividend periods on all
outstanding shares of Exchangeable Preferred shall have been paid
or contemporaneously are declared and paid or set apart for
payment (whether in cash or additional shares of Exchangeable
Preferred, as permitted under paragraph 4(a) of this Section
4.2.2), none of the shares of Exchangeable Preferred shall be
redeemed pursuant to paragraph 6(a) or (b) of this Section 4.2.2
unless all outstanding shares of Exchangeable Preferred are
simultaneously redeemed and all such cumulative dividends are
paid in cash contemporaneously with such redemption.
7. Mandatory Redemption.
---------------------
(a) The Exchangeable Preferred will be subject to
mandatory redemption (subject to the legal availability of funds
therefor but without regard to any contractual or other
restriction with respect thereto) in whole on March 15, 2008, at
a price, payable in cash, equal to the liquidation preference
thereof, plus all accumulated and unpaid dividends to the date of
redemption.
(b) Upon the occurrence of a Change of Control, the
Corporation will (subject to any contractual and other
restrictions with respect thereto and to the legal availability
of funds therefor) offer (the "Change of Control Offer") to each
Holder of Exchangeable Preferred to repurchase all or any part of
such Holder's Exchangeable Preferred at a cash purchase price
equal to 101% of the liquidation preference thereof, plus an
amount in cash equal to all accumulated and unpaid dividends per
share to the date of purchase (including an amount in cash equal
to a prorated dividend from the dividend payment date immediately
preceding the date of purchase to the date of purchase). The
Change of Control Offer will be made within 30 days following a
Change of Control, will remain open for at least 30 and not more
than 40 days, and will be made in compliance with the
requirements of Rule 14e-1 under the Exchange Act and any other
applicable securities laws and regulations. Notwithstanding the
foregoing, the Corporation will not be required to make a Change
of Control Offer if any of the Senior Discount Notes, 12 1/2%
Notes or 13 1/2% Notes are outstanding upon the occurrence of a
Change of Control unless all of the Senior Discount Notes, 12
1/2% Notes and 13 1/2% Notes tendered pursuant to the "change of
control offers" with respect thereto are repurchased as a result
of such Change of Control, in which case the date on which all
Senior Discount Notes, 12 1/2% Notes and 13 1/2% Notes (and any
other Indebtedness or Senior Securities of the Corporation having
provisions similar to Section 4.04(x) of the Senior Discount
Notes Indenture) are so repurchased will be deemed to be the date
on which such Change of Control shall have occurred.
(c) If the Corporation shall fail to discharge its
obligation to redeem all outstanding shares of Exchangeable
Preferred pursuant to paragraph 7(a) or (b) of this Section 4.2.2
(the "Mandatory Redemption Obligation"), the Corporation shall
discharge the Mandatory Redemption Obligation as soon as the
Corporation is able to do so. If and so long as any Mandatory
Redemption Obligation with respect to the Exchangeable Preferred
shall not be fully discharged, the Corporation shall not declare
or pay any dividend or make any distribution on, or, directly or
indirectly, purchase, redeem or satisfy any mandatory redemption,
sinking fund or other similar obligations in respect of, Junior
Securities or Parity Securities (other than as a result of a
reclassification of Junior Securities or Parity Securities, or
the exchange or conversion of one class or series of Junior
Securities for or into another class or series of Junior
Securities, or the exchange or conversion of one class or series
of Parity Securities for or into another class or series of
Parity Securities, or other than through the use of the proceeds
of a substantially contemporaneous sale of other Junior
Securities or Parity Securities and in any case not involving the
payment of cash to holders of such securities) or any warrants,
rights or options exercisable for or convertible into any of the
Junior Securities or Parity Securities.
8. Exchange.
---------
(a) The Corporation may, at the sole option of the
Board of Directors (subject to the legal availability of funds
therefor), exchange all, but not less than all, of the shares of
Exchangeable Preferred then outstanding, including any shares of
Exchangeable Preferred issued as payment for dividends, for a new
series of 14% Exchange Debentures due March 15, 2008, of the
Corporation (the "Exchange Debentures") to be issued pursuant to
the indenture (the "Indenture") qualified under the Trust
Indenture Act of 1939, as amended, substantially in the form
agreed to on the Closing Date, a copy of which is on file with
and can be obtained from the Secretary of the Corporation on
request, at any time following the date on which such exchange is
permitted by the terms of the Senior Discount Notes Indenture,
the 12 1/2% Notes Indenture, the 13 1/2% Notes Indenture, and the
terms of all other then-existing Indebtedness of the Corporation
and subject to the conditions contained in paragraph 8(b) below.
The Exchange Debentures will be issued in registered form,
without coupons, be duly executed, authenticated as of the date
on which the exchange is effective and be dated the date of
exchange. In the event of an exchange, Holders of Exchangeable
Preferred shall be entitled to receive on the date of exchange
Exchange Debentures having an aggregate principal amount equal to
(i) the total of the liquidation preference for each share of
Exchangeable Preferred exchanged, plus (ii) an amount equal to
all accrued but unpaid dividends payable on such share (including
a prorated dividend for the period from the immediately preceding
dividend payment date to the date of exchange). In the event
such exchange would result in the issuance of Exchange Debentures
in a principal amount which is less than $1,000 or which is not
an integral multiple of $1,000 (such principal amount less than
$1,000 or the difference between such principal amount and the
highest integral of $1,000 which is less than such principal
amount, as the case may be, is hereinafter referred to as the
"Fractional Principal Amount"), the Corporation may, subject to
any restrictions in the Senior Discount Notes Indenture, the 12
1/2% Notes Indenture, the 13 1/2% Notes Indenture, and the terms
of all other then-existing Indebtedness of the Corporation, at
the option of the Board of Directors, pay cash to each Holder of
Exchangeable Preferred in lieu of Fractional Principal Amounts of
Exchange Debentures otherwise issuable upon exchange of the
Exchangeable Preferred. The Person entitled to receive the
Exchange Debentures issuable upon exchange shall be treated for
all purposes as the registered holder of such Exchange Debentures
as of the date of exchange. In accordance with paragraph 9 of
this Section 4.2.2, the Corporation will mail to each Holder of
Exchangeable Preferred written notice of its intention to
exchange no less than 15 nor more than 60 days prior to the date
of exchange.
(b) As a condition of the right of the Corporation to
issue Exchange Debentures in exchange for the Exchangeable
Preferred under paragraph 8(a) of this Section 4.2.2 on the date
of exchange, (A) there shall be legally available funds
sufficient therefor (including, without limitation, legally
available funds sufficient therefor under Section 7-106-401 (or
any successor provision) of the Colorado Business Corporation
Act); (B) a registration statement relating to the Exchange
Debentures shall have been declared effective under the
Securities Act prior to such exchange and shall continue to be
effective on the date of exchange, or the Corporation shall have
obtained a written opinion of its counsel that an exemption from
the registration requirements of the Securities Act is available
for such exchange and that upon receipt of such Exchange
Debentures pursuant to such an exchange made in accordance with
such exemption, each holder of an Exchange Debenture that is not
an Affiliate of the Corporation will not be subject to any
restrictions imposed by the Securities Act upon the resale of
such Exchange Debenture, and such exemption is relied upon by the
Corporation for such exchange; (C) the Indenture and the Trustee
thereunder shall have been qualified under the Trust Indenture
Act of 1939, as amended; (D) immediately after giving effect to
such exchange, no Default or Event of Default would exist; and
(E) the Corporation shall have delivered to the Trustee under the
Indenture a written opinion of counsel, dated the date of
exchange, regarding the satisfaction of the conditions set forth
in clauses (A), (B) and (C). In the event that (i) the issuance
of the Exchange Debentures is not permitted on the exchange date
or (ii) any of the conditions set forth in clauses (A) through
(E) of the preceding sentence are not satisfied on the exchange
date, the Corporation shall use its best efforts to satisfy such
conditions and effect such exchange as soon as practicable.
Prior to initiating the exchange referred to in paragraph (a)
above, the Corporation shall certify, to the satisfaction of the
trustees under the 13 1/2% Notes Indenture, the 12 1/2% Notes
Indenture and the Senior Discount Notes Indenture, that such
exchange is permitted under such respective Indentures. The
Corporation shall also provide such trustees with an Officer's
Certificate setting forth with specificity the basis for the
Corporation's conclusion that such exchange is so permitted.
9. Procedures for Redemption or Exchange.
--------------------------------------
(a) In the event that fewer than all the outstanding
shares of Exchangeable Preferred are to be redeemed, the number
of shares to be redeemed shall be determined pro rata, except
that in any redemption of fewer than all the outstanding shares
of Exchangeable Preferred, the Corporation may redeem all shares
held by any Holder of a number of shares of Exchangeable
Preferred not to exceed 100 as may be specified by the
Corporation. In the event of partial redemptions of Exchangeable
Preferred, new shares of Exchangeable Preferred having an
aggregate liquidation preference equal to the unredeemed portion
will be issued in the name of the Holder thereof upon
cancellation of the original share certificate of Exchangeable
Preferred without cost to such Holder. On and after a redemption
date, unless the Corporation defaults in the payment of the
redemption price, dividends will cease to accrue on shares of
Exchangeable Preferred called for redemption and all rights of
Holders of such shares will terminate except for the right to
receive the redemption price. On the date fixed for exchange,
the rights of Holders of the shares of Exchangeable Preferred
exchanged shall cease, except the right to receive Exchange
Debentures in exchange for their Exchangeable Preferred and cash
or additional Exchange Debentures in payment of accrued but
unpaid dividends on such shares to the date of exchange.
(b) In the event that the Corporation shall redeem or
exchange shares of Exchangeable Preferred, notice of every
redemption or exchange of shares of Exchangeable Preferred shall
be mailed by first class mail, postage prepaid, and mailed, in
the case of exchange, not less than 15 nor more than 60 days
prior to the exchange date, and, in the case of redemption, not
less than 30 days nor more than 60 days prior to the redemption
date, addressed to the Holders of record of the shares to be
redeemed or exchanged at their respective last addresses as they
shall appear on the books of the Corporation; provided, however,
that failure to give such notice or any defect therein or in the
mailing thereof shall not affect the validity of the proceeding
for the redemption or exchange of any shares so to be redeemed or
exchanged except as to the Holder to whom the Corporation has
failed to give such notice or to whom notice was defective. Each
such notice shall state: (i) the redemption or exchange date;
(ii) the number of shares of Exchangeable Preferred to be
redeemed or exchanged and, if less than all the shares held by
such Holder are to be redeemed, the number of such shares or
portion of the liquidation preference to be redeemed; (iii) the
redemption price or exchange rate; (iv) the place or places where
certificates for such shares are to be surrendered for payment of
the redemption price or exchanged for the Exchange Debentures;
and (v) that dividends on the shares to be redeemed or exchanged
will cease to accrue on such redemption date or exchange date.
(c) Notice having been mailed as aforesaid and
provided that, on or before the redemption date or exchange date,
as the case may be, specified in such notice, all duly
authenticated and valid Exchange Debentures necessary for any
such exchange shall have been provided by the Corporation and all
funds necessary for such redemption or exchange shall have been
set aside by the Corporation, separate and apart from its other
funds, in trust for the pro rata benefit of the Holders of the
shares so called for redemption or exchange, so as to be and to
continue to be available therefor, then, from and after the
redemption date or exchange date, as the case may be, dividends
on the shares of Exchangeable Preferred so called for redemption
or exchange, as the case may be, shall cease to accrue, and said
shares shall no longer be deemed to be outstanding and shall not
have the status of shares of Exchangeable Preferred, and all
rights of the Holders thereof as shareholders of the Corporation
(except the right to receive from the Corporation the redemption
price or the Exchange Debentures upon exchange and any accrued
and unpaid dividends or the right to receive cash payments in
lieu of fractional securities from the exchange agent or other
agent selected by the Corporation) shall cease. Upon surrender
in accordance with said notice of the certificates for any shares
so redeemed or exchanged (properly endorsed or assigned for
transfer, if the Board of Directors of the Corporation shall so
require and the notice shall so state), such shares shall be
redeemed or exchanged by the Corporation at the redemption price
or exchange rate aforesaid.
(d) If such notice of redemption shall have been duly
given and if, prior to the redemption date, the Corporation shall
have irrevocably deposited the funds by the Corporation with such
bank or trust company in trust for the pro rata benefit of the
holders of the shares called for redemption, then,
notwithstanding that any certificate for shares so called for
redemption shall not have been surrendered for cancellation, from
and after the time of such deposit, Holders of the shares of
Exchangeable Preferred called for redemption shall cease to be
shareholders with respect to such shares and thereafter such
shares shall no longer be transferable on the books of the
Corporation and such holders shall have no interest in or claim
against the Corporation with respect to such shares (including
dividends thereon accrued after such redemption date) except the
right to receive payment of the redemption price (including all
dividends accrued and unpaid to the date fixed for redemption)
upon surrender of their certificates. Any funds deposited and
unclaimed at the end of two years from the date fixed for
redemption shall be repaid to the Corporation upon its request,
after which repayment the Holders of shares called for redemption
shall look only to the Corporation for payment of the redemption
price. The aforesaid bank or trust company shall be organized
and in good standing under the laws of the United States of
America or of the State of Colorado shall have capital, surplus
and undivided profits aggregating at least $100,000,000 according
to its last published statement of condition, and shall be
identified in the notice of redemption. Any interest accrued on
such funds shall be paid to the Corporation from time to time.
10. Voting Rights.
--------------
(a) Except as otherwise provided in this paragraph 10
or as otherwise from time to time provided by law, the Holders of
shares of Exchangeable Preferred shall have no voting rights.
(b) (i) If and whenever (A) (1) dividends on the
Exchangeable Preferred are in arrears and remain unpaid (or if
after March 15, 2002, such dividends have not been paid in cash)
with respect to four quarterly periods (whether or not
consecutive), (2) the Corporation fails to discharge any
redemption obligation with respect to the Exchangeable Preferred,
(3) a breach or violation by the Corporation of the provisions of
paragraph 8 of this Section 4.2.2 occurs, or the Corporation
fails to exchange Debentures for the Exchangeable Preferred
tendered for exchange on the exchange date, whether or not the
Corporation satisfies the conditions to permit such exchange, (4)
the Corporation fails to make a Change of Control Offer or cash
payment with respect thereto if required by the provisions of
paragraph 7(b) of this Section 4.2.2, (5) a breach or violation
of any provision of paragraph 11 of this Section 4.2.2 occurs and
is not remedied within 30 days after notice thereof to the
Corporation by Holders of 25% or more of the liquidation
preference of the Exchangeable Preferred then outstanding, or (6)
a default occurs in the obligation to pay principal of, interest
on or any other payment obligation when due (a "Payment Default")
at final maturity, on one or more classes of Indebtedness of the
Corporation or any Subsidiary of the Corporation, whether such
Indebtedness exists on the Closing Date or is Incurred
thereafter, having individually or in the aggregate an
outstanding principal amount of $10 million or more, or any other
Payment Default occurs on one or more such classes of
Indebtedness and such class or classes of Indebtedness are
declared due and payable prior to their respective maturities,
and (B) in the case of clauses (A)(5) and (6) above, such event
continues for a period of 180 days or more (each such event
referred to as a "Voting Rights Triggering Event"), then the
number of directors then constituting the Board of Directors of
the Corporation shall be increased by two directors and the
Holders of the majority of the then outstanding shares of
Exchangeable Preferred, voting separately as a class, shall be
entitled to elect the two additional directors at any annual
meeting of shareholders or special meeting held in place thereof,
or at a special meeting of the Holders of such shares of
Exchangeable Preferred called as hereinafter provided. For the
purpose of determining the number of quarterly periods for which
accrued dividends have not been paid, any accrued and unpaid
dividend that is subsequently paid shall not be treated as
unpaid. Within 15 days of the time the Corporation becomes aware
of the occurrence of any default referred to in clause (A)(6)
above, the Corporation shall give notice thereof to Holders of
the Exchangeable Preferred at their addresses as they appear on
the records of the Transfer Agent.
(ii) Whenever a Voting Rights Triggering Event
shall have occurred, voting rights of the Holders of shares of
the Exchangeable Preferred may be exercised initially either at a
special meeting of the Holders of Exchangeable Preferred, called
as hereinafter provided, or at any annual meeting of shareholders
held for the purpose of electing directors, and thereafter at
each such annual meeting or by the written consent of the Holders
of Exchangeable Preferred pursuant to Section 7-107-104 of the
Colorado Business Corporation Act. The term of office of any
such elected directors shall expire at the next annual meeting of
shareholders held for the purpose of electing directors, subject
to a new election of two directors by the Holders of shares of
Exchangeable Preferred at each successive annual meeting, but
such voting right and the term of office of any such elected
directors shall expire at such time as (A) all dividends
accumulated on Exchangeable Preferred shall have been paid in
full (and in the case of dividends payable with respect to any
period after March 15, 2002, shall have been paid in full in
cash) and (B) each failure, breach or default referred to in
paragraph 10(b)(i)(A)(2), (3), (4), (5), and (6) above is
remedied.
(iii) At any time after a Voting Rights
Triggering Event shall have occurred and such voting rights shall
not already have been initially exercised, a proper officer of
the Corporation may, and upon the written request of any Holder
of shares of Exchangeable Preferred (addressed to the Secretary
at the principal office of the Corporation) shall, call a special
meeting of the Holders of shares of Exchangeable Preferred for
the election of the two directors to be elected by them as herein
provided, such call to be made by notice similar to that provided
in the Bylaws for a special meeting of the shareholders or as
required by law.
(iv) Such meeting shall be held at the earliest
practicable date upon the notice required for annual meetings of
shareholders at the place for holding annual meetings of
shareholders of the Corporation or, if none, at a place
designated by the Secretary of the Corporation. If such meeting
shall not be called by a proper officer of the Corporation within
30 days after the personal service of such written request upon
the Secretary of the Corporation, or within 30 days after mailing
the same within the United States, by registered mail, addressed
to the Secretary of the Corporation at its principal office (such
mailing to be evidenced by the registry receipt issued by the
postal authorities), then the Holders of record of 10% of the
shares of Exchangeable Preferred then outstanding may designate
in writing a Holder of Exchangeable Preferred to call such
meeting at the expense of the Corporation, and such meeting may
be called by such person so designated upon the notice required
for annual meetings of shareholders and shall be held at the same
place as is elsewhere provided in this paragraph (10)(b)(iv) or
at such other place as is selected by such person so designated.
Any Holder of Exchangeable Preferred that would be entitled to
vote at any such meeting shall have access to the stock books of
the Corporation for the purpose of causing a meeting of
shareholders to be called pursuant to the provisions of this
paragraph. Notwithstanding the provisions of this paragraph,
however, no such special meeting shall be called during a period
within 90 days immediately preceding the date fixed for the next
annual meeting of shareholders.
(v) At any meeting held for the purpose of
electing directors at which the Holders of Exchangeable Preferred
shall have the right to elect directors as provided herein, the
presence in person or by proxy of the Holders of the lesser of
(A) a majority of the then outstanding shares of Exchangeable
Preferred or (B) a percentage of the then outstanding shares of
Exchangeable Preferred, which percentage is equal to the
percentage of then outstanding shares of common stock then
required to constitute a quorum for the election of directors by
holders of common stock, shall be required and be sufficient to
constitute a quorum of such class for the election of directors
by such class. At any such meeting or adjournment thereof
(x) the absence of a quorum of the Holders of Exchangeable
Preferred shall not prevent the election of directors other than
those to be elected by the Holders of stock of such class and the
absence of a quorum or quorums of the holders of Capital Stock
entitled to elect such other directors shall not prevent the
election of directors to be elected by the Holders of
Exchangeable Preferred and (y) in the absence of a quorum of the
holders of any class of stock entitled to vote for the election
of directors, a majority of the holders present in person or by
proxy of such class shall have the power to adjourn the meeting
for the election of directors which the holders of such class are
entitled to elect, from time to time, without notice (except as
required by law) other than announcement at the meeting, until a
quorum shall be present.
(vi) The term of office of all directors elected
by the Holders of Exchangeable Preferred pursuant to paragraph
(10)(b)(i) of this Section 4.2.2 in office at any time when the
aforesaid voting rights are vested in the Holders of Exchangeable
Preferred shall terminate upon the election of their successors
at any meeting of shareholders for the purpose of electing
directors. Upon any termination of the aforesaid voting rights
in accordance with paragraph (10)(b)(ii) of this Section 4.2.2,
the term of office of all directors elected by the Holders of
Exchangeable Preferred pursuant to paragraph (10)(b)(i) of this
Section 4.2.2 then in office thereupon shall terminate and upon
such termination the number of directors constituting the Board
of Directors shall, without further action, be reduced by two,
subject always to the increase of the number of directors
pursuant to paragraph (10)(b)(i) of this Section 4.2.2 in case of
the future right of the Holders of Exchangeable Preferred to
elect directors as provided herein.
(vii) In case of any vacancy occurring among
the directors so elected, the remaining director who shall have
been so elected may appoint a successor to hold office for the
unexpired term of the director whose place shall be vacant unless
and until such vacancy shall be filled by vote of the Holders
entitled to elect the directors in accordance with paragraph
10(b) of this Section 4.2.2. If all directors so elected by the
Holders of Exchangeable Preferred shall cease to serve as
directors before their terms shall expire, the Holders of
Exchangeable Preferred then outstanding may, at a special meeting
of the Holders called as provided above, elect successors to hold
office for the unexpired terms of the directors whose places
shall be vacant.
(c) In addition to any vote or consent of shareholders
required by law, the consent of the Holders of at least a
majority of the shares of Exchangeable Preferred at the time
outstanding, voting or consenting, as the case may be, separately
as one class given in person or by proxy, either in writing
without a meeting or by vote at any meeting called for the
purpose, shall be necessary for effecting or validating:
(i) Except as provided in paragraph 13 of this
Section 4.2.2, any amendment, alteration or repeal of any of
the provisions of the Second Amended and Restated Articles
of Incorporation, or of the Bylaws of the Corporation, which
affects adversely the voting rights, rights, privileges, or
preferences of the Holders of shares of Exchangeable
Preferred or authorizes the issuance of any additional
shares of Exchangeable Preferred (other than to pay
dividends in kind on Exchangeable Preferred); provided,
however, that the amendment of the provisions of the Second
Amended and Restated Articles of Incorporation so as to
authorize or create, or to increase the authorized amount
of, any of the Corporation's Junior Securities or to
authorize the issuance of or to authorize or create any
Parity Securities (up to the amount of authorized preferred
stock) shall not be deemed to affect adversely the voting
rights, rights, privileges, or preferences of the Holders of
shares of Exchangeable Preferred;
(ii) Any amendment, alteration or repeal of any of
the provisions of the Indenture; provided, however, that no
such consent of the Holders of Exchangeable Preferred shall
be required for such amendments as would be permitted under
the terms of the Indenture without the consent of any of the
holders of the Exchange Debentures; or
(iii) The authorization or creation of, or the
increase in the authorized amount of, any Senior Securities
or shares of any class of any security convertible into
shares of any Senior Securities; provided, however, that on
or after March 15, 2002, no such consent of the Holders of
Exchangeable Preferred shall be required if, at or prior to
the time when such amendment, alteration or repeal is to
take effect or when the issuance of any such Senior
Securities or convertible security is to be made, as the
case may be, provision is made, and funds are set aside, for
the redemption of all shares of Exchangeable Preferred at
the time outstanding.
11. Certain Covenants.
-----------------
(a) Incurrence of Indebtedness and Issuance of
Preferred Stock.
(i) The Corporation will not, and will not permit
any of its Restricted Subsidiaries to, Incur any Indebtedness
(other than the Senior Discount Notes, the Exchange Debentures
and Indebtedness existing on the Closing Date) or issue any
Redeemable Stock; provided that the Corporation may Incur
Indebtedness or issue Redeemable Stock if, after giving effect to
the Incurrence of such Indebtedness or the issuance of such
Redeemable Stock and the receipt and application of the proceeds
therefrom, the Indebtedness to EBITDA Ratio would be greater than
zero and less than 5:1.
(ii) Notwithstanding the provisions of paragraph
11(a)(i) above, the Corporation and any Restricted Subsidiary
(except as specified below) may Incur each and all of the
following: (A) Indebtedness of the Corporation or any Restricted
Subsidiary or Redeemable Stock of the Corporation outstanding at
any time, which Indebtedness or Redeemable Stock generates gross
proceeds to the Corporation of up to $900 million, less (without
duplication) the gross proceeds of Indebtedness permanently
repaid as provided under the "Limitation on Asset Sales" covenant
contained in the 13 1/2% Notes Indenture, the 12 1/2% Notes
Indenture and the Senior Discount Notes Indenture; (B)
Indebtedness to ICG, the Corporation or any of the Corporation's
Wholly Owned Restricted Subsidiaries; provided that any
subsequent issuance or transfer of any Capital Stock which
results in any such Wholly Owned Restricted Subsidiary ceasing to
be a Wholly Owned Restricted Subsidiary or any subsequent
transfer of such Indebtedness (other than to ICG, the Corporation
or another Wholly Owned Restricted Subsidiary) shall be deemed,
in each case, to constitute an Incurrence of such Indebtedness
not permitted by this clause (B); (C) Indebtedness or Redeemable
Stock issued in exchange for, or the net proceeds of which are
used to refinance or refund, then outstanding Indebtedness or
Redeemable Stock, other than Indebtedness Incurred or Redeemable
Stock issued under clause (A), (B), (E), (F), (H), (I), (J) or
(K) of this paragraph 11(a)(ii), and any refinancings thereof in
an amount not to exceed the amount so refinanced or refunded
(plus premiums, accrued interest, accrued dividends, fees and
expenses); provided that such new Indebtedness or Redeemable
Stock, determined as of the date of Incurrence of such new
Indebtedness or issuance of Redeemable Stock, does not mature
prior to the stated maturity of the Indebtedness or have a
mandatory redemption date prior to the Redeemable Stock to be
refinanced or refunded, and the Average Life of such new
Indebtedness is at least equal to the remaining Average Life of
the Indebtedness to be refinanced or refunded; and provided
further that in no event may Indebtedness or Redeemable Stock of
the Corporation be refinanced by means of any Indebtedness or
Redeemable Stock of any Restricted Subsidiary of the Corporation
pursuant to this clause (C); (D) Indebtedness (1) in respect of
performance, surety or appeal bonds provided in the ordinary
course of business, (2) under Currency Agreements and Interest
Rate Agreements; provided that such agreements do not increase
the Indebtedness of the obligor outstanding at any time other
than as a result of fluctuations in foreign currency exchange
rates or interest rates or by reason of fees, indemnities and
compensation payable thereunder, and (3) arising from agreements
providing for indemnification, adjustment of purchase price or
similar obligations, or from Guarantees or letters of credit,
surety bonds or performance bonds securing any obligations of the
Corporation or any of its Restricted Subsidiaries pursuant to
such agreements, in any case Incurred in connection with the
disposition of any business, assets or Restricted Subsidiary of
the Corporation (other than Guarantees of Indebtedness Incurred
by any Person acquiring all or any portion of such business,
assets or Restricted Subsidiary of the Corporation for the
purpose of financing such acquisition), in a principal amount at
maturity not to exceed the gross proceeds actually received by
the Corporation or any Restricted Subsidiary in connection with
such disposition; (E) Indebtedness or Redeemable Stock of the
Corporation, to the extent the proceeds referred to below are
contributed to the Corporation, not to exceed, at any one time
outstanding, twice the amount of Net Cash Proceeds received by
ICG after the Closing Date from the issuance and sale of its
Capital Stock (other than Redeemable Stock or preferred stock);
provided that such Indebtedness does not mature prior to the
final mandatory redemption date of the Exchangeable Preferred;
(F) Strategic Investor Subordinated Indebtedness;
(G) Indebtedness or Redeemable Stock of the Corporation, to the
extent the proceeds thereof are immediately used after the
Incurrence or issuance thereof to purchase Exchangeable Preferred
or preferred stock, as the case may be, tendered in a Change of
Control Offer or a change of control offer, as the case may be;
(H) Indebtedness of any Restricted Subsidiary of the Corporation
Incurred pursuant to any credit agreement of such Restricted
Subsidiary in effect on August 8, 1995 (or any agreement
refinancing Indebtedness under such credit agreement), up to the
amount of the commitment under such credit agreement (including
equipment leasing or financing agreements) on August 8, 1995;
(I) Indebtedness of the Corporation, in an amount not to exceed
$100 million at any one time outstanding, consisting of
Capitalized Lease Obligations with respect to assets that are
used or useful in the telecommunications business of the
Corporation or its Restricted Subsidiaries; (J) Indebtedness or
Redeemable Stock of any Person that becomes a Restricted
Subsidiary of the Corporation after the Closing Date, which
Indebtedness exists or, with respect to such Indebtedness for
which there is a commitment to lend, at the time such Person
becomes a Restricted Subsidiary and, with respect to such
Indebtedness, the subsequent Incurrence thereof ("Acquired
Indebtedness"), in an accreted amount not to exceed $50 million
at any one time outstanding in the aggregate for all such
Restricted Subsidiaries; provided that such Acquired Indebtedness
does not exceed 65% of the consideration (calculated by including
such Acquired Indebtedness as a part of such consideration) paid
by the Corporation and its Restricted Subsidiaries for the
acquisition of such Person; (K) Indebtedness of the Corporation,
in an amount not to exceed $30 million at any one time
outstanding, consisting of letters of credit and similar
arrangements used to support obligations of the Corporation or
any of its Restricted Subsidiaries with respect to the
acquisition of (by purchase, lease or otherwise), construction
of, or improvements on, assets that will be used or useful in the
telecommunications business of the Corporation or its Restricted
Subsidiaries; and (L) Indebtedness Incurred to finance the cost
(including the cost of design, development, construction,
installation or integration) of assets, equipment or inventory
used or useful in the telecommunications business of ICG or any
of the Restricted Subsidiaries that is acquired by ICG or any of
its Restricted Subsidiaries after the Closing Date.
(iii) For purposes of determining any
particular amount of Indebtedness under paragraphs 11(a)(i) or
(ii) above, (A) Indebtedness of any Restricted Subsidiary of the
Corporation incurred on or prior to the Closing Date pursuant to
any credit agreement (including equipment leasing or financing
agreements) of such Restricted Subsidiary in effect on August 8,
1995, shall be treated as Incurred pursuant to paragraph
11(a)(ii)(H) of this Section 4.2.2, and (B) Guarantees, Liens or
obligations with respect to letters of credit supporting
Indebtedness otherwise included in the determination of such
particular amount shall not be included. For purposes of
determining compliance with the covenants contained in paragraphs
11(a)(i) and (ii) above, in the event that an item of
Indebtedness or Redeemable Stock meets the criteria of more than
one of the types of Indebtedness or Redeemable Stock described in
such clauses, the Corporation, in its sole discretion, shall
classify such item of Indebtedness or Redeemable Stock and only
be required to include the amount and type of such Indebtedness
or Redeemable Stock in one of such clauses.
(b) Limitation on Restricted Payments.
(i) So long as any shares of the Exchangeable
Preferred are outstanding, the Corporation will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, (A)
declare or pay any dividend or make any distribution on Junior
Securities held by Persons other than the Corporation or any of
its Restricted Subsidiaries (other than dividends or
distributions payable solely in shares of its or such Restricted
Subsidiary's Junior Securities (other than Redeemable Stock) of
the same class held by such holders or in options, warrants or
other rights to acquire such shares of Junior Securities and
other than pro rata dividends or distributions on common stock of
Restricted Subsidiaries); (B) purchase, redeem, retire or
otherwise acquire for value any shares of Junior Securities of
the Corporation or any Restricted Subsidiary (including options,
warrants or other rights to acquire such shares of Junior
Securities) held by Persons other than the Corporation or any of
its Wholly Owned Restricted Subsidiaries (except for Junior
Securities of ChoiceCom, MTN, StarCom, Ohio LINX, FOTI and Zycom
to the extent the consideration therefor consists solely of
common stock (other than Redeemable Stock) of ICG or Junior
Securities of the Corporation, in each case transferred in
compliance with the Securities Act); or (C) make any Investment,
other than a Permitted Investment, in any Person (such payments
or any other actions described in clauses (i)(A) through (C)
being collectively "Restricted Payments") if, at the time of, and
after giving effect to, the proposed Restricted Payment: (1) an
event referred to in clauses (1) through (6) of paragraph
10(b)(i)(A) of this Section 4.2.2 shall have occurred and be
continuing, (2) the Corporation could not Incur at least $1.00 of
Indebtedness under paragraph 11(a)(i) of this Section 4.2.2, (3)
the aggregate amount expended for all Restricted Payments (the
amount so expended, if other than in cash, to be determined in
good faith by the Board of Directors, whose determination shall
be conclusive and evidenced by a board resolution) after the date
hereof shall exceed the sum of (aa) 50% of the aggregate amount
of the Adjusted Consolidated Net Income (or, if the Adjusted
Consolidated Net Income is a loss, minus 100% of such amount)
(determined by excluding income resulting from transfers of
assets by the Corporation or a Restricted Subsidiary to an
Unrestricted Subsidiary) accrued on a cumulative basis during the
period (taken as one accounting period) beginning on the first
day of the fiscal quarter immediately following the Closing Date
and ending on the last day of the last fiscal quarter preceding
the Transaction Date for which reports have been filed pursuant
to paragraph 11(i) of this Section 4.2.2 plus (bb) the aggregate
Net Cash Proceeds received by the Corporation after the Closing
Date (x) from the issuance and sale, permitted hereunder, of
Junior Securities (other than Redeemable Stock) to a Person who
is not a Subsidiary of the Corporation, or from the issuance to a
Person who is not a Subsidiary of the Corporation of any options,
warrants or other rights to acquire Junior Securities of the
Corporation (in each case, exclusive of any Redeemable Stock or
any options, warrants or other rights that are redeemable at the
option of the holder, or are required to be redeemed, prior to
the stated maturity of the Exchangeable Preferred) or (y) as a
capital contribution from ICG plus (cc) an amount equal to the
net reduction in Investments (other than reductions in Permitted
Investments) in any Person resulting from payments of interest on
Indebtedness, dividends, repayments of loans or advances, or
other transfers of assets, in each case to the Corporation or any
Restricted Subsidiary (except to the extent any such payment is
included in the calculation of Adjusted Consolidated Net Income),
or from redesignations of Unrestricted Subsidiaries as Restricted
Subsidiaries (valued in each case as provided in the definition
of "Investments"), not to exceed the amount of Investments
previously made by the Corporation and its Restricted
Subsidiaries in such Person or (4) dividends on the Exchangeable
Preferred shall not have been paid in full as provided in
paragraph 4 of this Section 4.2.2.
(ii) The provisions of paragraph 11(b)(i) above
shall not be violated by reason of: (A) the payment of any
dividend within 60 days after the date of declaration thereof if,
at said date of declaration, such payment would comply with
paragraph 11(b)(i) above; (B) the repurchase, redemption or other
acquisition of Junior Securities of the Corporation (or options,
warrants or other rights to acquire such Junior Securities) and
with respect to any Junior Securities, the payment of accrued
dividends thereon, in exchange for, or out of the proceeds of a
substantially concurrent issuance or sale of, shares of Junior
Securities (other than Redeemable Stock) of the Corporation;
provided that the redemption of any preferred stock pursuant to
any mandatory redemption feature thereof and any redemption of
any other Junior Securities and, in each case, the payment of
accrued dividends thereon (or options, warrants or other rights
to acquire such Junior Securities) and with respect to any Junior
Securities, the payment of accrued dividends thereon, shall be
deemed to be "substantially concurrent" with such issuance and
sale if the required notice with respect to such redemption is
irrevocably given by a date which is no later than five Business
Days after receipt of the proceeds of such issuance and sale and
such redemption and payment is consummated within the period
provided for in the document governing such preferred stock or
the documents governing the redemption of such other Junior
Securities, as the case may be; (C) payments or distributions, in
the nature of satisfaction of dissenters' rights, pursuant to or
in connection with a consolidation, merger or transfer of assets
that complies with the provisions of paragraph 11(g) of this
Section 4.2.2; (D) Investments, not to exceed $10 million in the
aggregate, each evidenced by a senior promissory note payable to
the Corporation that provides that it will become due and payable
prior to any required repurchase (including pursuant to an Offer
to Purchase in connection with a Change of Control) of the
Exchangeable Preferred; (E) Investments, not to exceed $5 million
in the aggregate, that meet the requirements of clause (D) above;
provided that the Board of Directors of the Corporation shall
have determined, in good faith, that each such Investment under
this clause (E) will enable the Corporation or one of its
Restricted Subsidiaries to obtain additional business that it
might not be able to obtain without the making of such
Investment; (F) with respect to Junior Securities permitted to be
issued and sold by the provisions of paragraph 11(d) of this
Section 4.2.2, the payment (1) of dividends on such Junior
Securities in additional shares of Junior Securities and (2) of
cash dividends on such Junior Securities in an amount not to
exceed the dividend rate thereon and accrued interest on unpaid
dividends, in each case after May 1, 2001; (G) the repurchase, in
the event of a Change of Control, of Junior Securities of the
Corporation and Indebtedness of the Corporation into which such
Junior Securities have been exchanged; provided that prior to
repurchasing such Junior Securities or Indebtedness, the
Corporation shall have made a Change of Control Offer to
repurchase the shares of Exchangeable Preferred in accordance
with the terms of paragraph 7(b) of this Section 4.2.2 (and an
offer to repurchase other Indebtedness, if required by the terms
thereof, in accordance with the indenture or other document
governing such other Indebtedness) and shall have accepted and
paid for any shares of Exchangeable Preferred (and other
Indebtedness) properly tendered in connection with such Change of
Control Offer for the shares of Exchangeable Preferred or change
of control offer for such other Indebtedness; and (H) the
issuance of Indebtedness permitted to be issued hereunder in
exchange for preferred stock; provided that the Incurrence of
such Indebtedness complies with the provisions of paragraph 11(a)
of this Section 4.2.2; provided that, except in the case of
clause (A), no Default or Event of Default shall have occurred
and be continuing or occur as a consequence of the actions or
payments set forth in this paragraph 11(b)(ii).
(iii) Each Restricted Payment permitted
pursuant to paragraph 11(b)(ii) above (other than the Restricted
Payments referred to in clauses (F)(1) and (H) thereof), and the
Net Cash Proceeds from any issuance of Junior Securities referred
to in clause (B) thereof, shall be included in calculating
whether the conditions of clause (3) of paragraph 11(b)(i) of
this Section 4.2.2 have been met with respect to any subsequent
Restricted Payments. Notwithstanding the foregoing, in the event
the proceeds of an issuance of Junior Securities are used for the
redemption, repurchase or other acquisition of the Exchangeable
Preferred, or Parity Securities, then the Net Cash Proceeds of
such issuance shall be included in clause (3) of paragraph
11(b)(i)(C) of this Section 4.2.2 only to the extent such
proceeds are not used for such redemption, repurchase or other
acquisition of Exchangeable Preferred or Parity Securities.
(c) Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries. So long as any
shares of Exchangeable Preferred are outstanding, the Corporation
will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary to (i) pay dividends or make
any other distributions permitted by applicable law on any
Capital Stock of such Restricted Subsidiary owned by the
Corporation or any other Restricted Subsidiary, (ii) pay any
Indebtedness owed to the Corporation or any other Restricted
Subsidiary, (iii) make loans or advances to the Corporation or
any other Restricted Subsidiary or (iv) transfer any of its
property or assets to the Corporation or any other Restricted
Subsidiary. The foregoing provisions shall not restrict any
encumbrances or restrictions: (i) existing on the Closing Date in
any agreements in effect on the Closing Date, and any extensions,
refinancings, renewals or replacements of such agreements;
provided that the encumbrances and restrictions in any such
extensions, refinancings, renewals or replacements are no less
favorable in any material respect to the Holders of the
Exchangeable Preferred than those encumbrances or restrictions
that are then in effect and that are being extended, refinanced,
renewed or replaced; (ii) existing under or by reason of
applicable law; (iii) existing with respect to any Person or the
property or assets of such Person acquired by the Corporation or
any Restricted Subsidiary, existing at the time of such
acquisition and not incurred in contemplation thereof, which
encumbrances or restrictions are not applicable to any Person or
the property or assets of any Person other than such Person or
the property or assets of such Person so acquired; (iv) in the
case of clause (iv) of the first sentence of this paragraph
11(c), (A) that restrict in a customary manner the subletting,
assignment or transfer of any property or asset that is a lease,
license, conveyance or contract or similar property or asset, (B)
existing by virtue of any transfer of, agreement to transfer,
option or right with respect to, or Lien on, any property or
assets of the Corporation or any Restricted Subsidiary not
otherwise prohibited hereunder or (C) arising or agreed to in the
ordinary course of business, not relating to any Indebtedness,
and that do not, individually or in the aggregate, detract from
the value of property or assets of the Corporation or any
Restricted Subsidiary in any manner material to the Corporation
or any Restricted Subsidiary; or (v) with respect to a Restricted
Subsidiary and imposed pursuant to an agreement that has been
entered into for the sale or disposition of all or substantially
all of the Capital Stock of, or property and assets of, such
Restricted Subsidiary. Nothing contained in this paragraph 11(c)
shall prevent the Corporation or any Restricted Subsidiary from
(1) creating, incurring, assuming or suffering to exist any Liens
otherwise permitted pursuant to paragraph 11(f) of this Section
4.2.2 or (2) restricting the sale or other disposition of
property or assets of the Corporation or any of its Restricted
Subsidiaries that secure Indebtedness of the Corporation or any
of its Restricted Subsidiaries.
(d) Limitation on Issuances and Sale of Capital Stock
of Restricted Subsidiaries. The Corporation will not sell, and
will not permit any Restricted Subsidiary, directly or
indirectly, to issue or sell, any shares of Capital Stock of a
Restricted Subsidiary (including options, warrants or other
rights to purchase shares of such Capital Stock) except (i) to
the Corporation or a Wholly Owned Restricted Subsidiary; (ii)
issuances or sales to foreign nationals of shares of Capital
Stock of foreign Restricted Subsidiaries, to the extent required
by applicable law; (iii) if, immediately after giving effect to
such issuance or sale, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary; (iv) with respect to common
stock of ChoiceCom, MTN, StarCom and Zycom; provided that the
proceeds of any such sale under this clause (iv) shall be
reinvested in the business of the Corporation and its Restricted
Subsidiaries or used to repay Indebtedness of the Corporation or
any of its Restricted Subsidiaries or Senior Securities; and (v)
with respect to common stock of FOTI; provided that FOTI shall
not retain any net proceeds from such sales or issuances in
excess of $10 million in the aggregate and any net proceeds in
excess of such $10 million shall be received by, or paid promptly
by FOTI to, the Corporation or any Wholly Owned Restricted
Subsidiary of the Corporation.
(e) Limitation on Transactions with Shareholders and
Affiliates. The Corporation will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, enter into,
renew or extend any transaction (including, without limitation,
the purchase, sale, lease or exchange of property or assets, or
the rendering of any service) with any holder (or any Affiliate
of such holder) of 5% or more of any class of Capital Stock of
the Corporation or with any Affiliate of the Corporation or any
Restricted Subsidiary, except upon fair and reasonable terms no
less favorable to the Corporation or such Restricted Subsidiary
than could be obtained, at the time of such transaction or at the
time of the execution of the agreement providing therefor, in a
comparable arm's-length transaction with a Person that is not
such a holder or an Affiliate. The foregoing limitation does not
limit, and shall not apply to (i) transactions (A) approved by a
majority of the disinterested members of the Board of Directors
of the Corporation or (B) for which the Corporation or a
Restricted Subsidiary delivers to the Transfer Agent a written
opinion of a nationally recognized investment banking firm
stating that the transaction is fair to the Corporation or such
Restricted Subsidiary from a financial point of view; (ii) any
transaction solely between the Corporation and any of its Wholly
Owned Restricted Subsidiaries or solely between Wholly Owned
Restricted Subsidiaries; (iii) the payment of reasonable and
customary regular fees to directors of the Corporation who are
not employees of the Corporation; (iv) any payments or other
transactions pursuant to any tax-sharing agreement (or a similar
agreement that is not materially adverse to the interests of
Holders of the Exchangeable Preferred) between the Corporation
and any other Person with which the Corporation files a
consolidated tax return or with which the Corporation is part of
a consolidated group for tax purposes; or (v) any Restricted
Payments not prohibited by paragraph 11(b) of this Section 4.2.2.
Notwithstanding the foregoing, any transaction covered by the
first sentence of this paragraph 11(e) and not covered by clauses
(ii) through (iv) of the preceding sentence, the aggregate amount
of which exceeds $2 million in value, must be approved or
determined to be fair in the manner provided for in clause (i)(A)
or (B) of the preceding sentence.
(f) Limitation on Liens. The Corporation will not,
and will not permit any Restricted Subsidiary to, create, incur,
assume or suffer to exist any Lien on any of its assets or
properties, now or hereafter acquired, or any shares of Capital
Stock of or Indebtedness of any Restricted Subsidiary. The
foregoing limitation does not apply to (i) Liens existing on the
Closing Date; (ii) Liens granted after the Closing Date on any
assets or Capital Stock of the Corporation or its Restricted
Subsidiaries created in favor of the Holders of the Exchangeable
Preferred; (iii) Liens with respect to the assets of a Restricted
Subsidiary granted by such Restricted Subsidiary to the
Corporation or a Wholly Owned Restricted Subsidiary to secure
Indebtedness owing to the Corporation or such other Restricted
Subsidiary; (iv) Liens securing Indebtedness which is Incurred to
refinance secured Indebtedness which is permitted to be Incurred
under paragraph 11(a)(ii)(C) of this Section 4.2.2; provided that
such Liens do not extend to or cover any property or assets of
the Corporation or any Restricted Subsidiary other than the
property or assets securing the Indebtedness being refinanced;
(v) Liens with respect to assets or properties of any Person that
becomes a Restricted Subsidiary after the Closing Date; provided
that such Liens do not extend to or cover any assets or
properties of the Corporation or any of its Restricted
Subsidiaries other than the assets or properties of such Person
subject to such Lien on the date such Person becomes a Restricted
Subsidiary; and provided further that such Liens are not incurred
in contemplation of, or in connection with, such Person becoming
a Restricted Subsidiary; (vi) Permitted Liens; and (vii) Liens
securing Indebtedness.
(g) Merger, Consolidation and Sale of Assets. The
Corporation shall not consolidate with, merge with or into, or
sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets (as an entirety or
substantially an entirety in one transaction or a series of
related transactions) to, any Person (other than a consolidation
or merger with or into a Wholly Owned Restricted Subsidiary with
a positive net worth; provided that, in connection with any such
merger or consolidation, no consideration (other than common
stock in the surviving Person or the Corporation) shall be issued
or distributed to the shareholders of the Corporation) or permit
any Person to merge with or into the Corporation unless: (i) the
Corporation shall be the continuing Person, or the Person (if
other than the Corporation) formed by such consolidation or into
which the Corporation is merged or that acquired or leased such
property and assets of the Corporation shall be a corporation
organized and validly existing under the laws of the United
States of America or any jurisdiction thereof and the
Exchangeable Preferred shall be converted into or exchanged for
and shall become shares of such successor company, having in
respect of such successor or resulting company substantially the
same powers, preferences and relative participating, optional or
other special rights and the qualifications, limitations or
restrictions thereon that the Exchangeable Preferred had
immediately prior to such transaction; (ii) immediately after
giving effect to such transaction, no event referred to under
paragraph 10(b)(i)(A)(1) through (5) of this Section 4.2.2 or any
default, breach or violation that would become such an event
after the giving of notice, the passage of time or both, shall
have occurred and be continuing; (iii) immediately after giving
effect to such transaction on a pro forma basis, the Corporation
or any Person becoming the successor issuer of the Exchangeable
Preferred, as the case may be, shall have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of the
Corporation immediately prior to such transaction;
(iv) immediately after giving effect to such transaction on a pro
forma basis the Corporation, or any Person becoming the successor
issuer of the Exchangeable Preferred, as the case may be, could
Incur at least $1.00 of Indebtedness under paragraph 11(a)(i) of
this Section 4.2.2; and (v) the Corporation delivers to the
Transfer Agent an Officers' Certificate (attaching the arithmetic
computations to demonstrate compliance with clauses (iii) and
(iv) above) and an opinion of counsel, in each case stating that
such consolidation, merger or transfer complies with this
provision and that all conditions precedent provided for herein
relating to such transaction have been complied with; provided,
however, that clauses (iii) and (iv) above shall not apply if, in
the good faith determination of the Board of Directors of the
Corporation evidenced by a board resolution, the principal
purpose of such transaction is part of a plan to change the
jurisdiction of incorporation of the Corporation to a different
state of the United States; and provided further that any such
transaction shall not have as one of its purposes the evasion of
the foregoing limitations.
(h) Senior Subordinated Indebtedness. So long as any
shares of Exchangeable Preferred are outstanding, the Corporation
will not Incur any Indebtedness, other than the Exchange
Debentures, that is expressly made subordinated in right of
payment to any Senior Indebtedness (as defined in the Indenture)
unless such Indebtedness, by its terms and by the terms of any
agreement or instrument pursuant to which such Indebtedness is
outstanding is expressly made pari passu with, or subordinate in
right of payment to, the Exchange Debentures pursuant to
provisions substantially similar to those contained in Article
Eleven of the Indenture; provided that the foregoing limitations
shall not apply to distinctions between categories of Senior
Indebtedness that exist by reason of any Liens or Guarantees
arising or created in respect of some but not all Senior
Indebtedness.
(i) Reports. So long as any shares of Exchangeable
Preferred are outstanding, the Corporation shall file with the
Securities and Exchange Commission (the "Commission") the annual
reports, quarterly reports and the information, documents and
other reports required to be filed by the Corporation with the
Commission pursuant to Sections 13 or 15 of the Exchange Act,
whether or not the Corporation has or is required to have a class
of securities registered under the Exchange Act, at the time it
is or would be required to file the same with the Commission and,
within 15 days after the Corporation is or would be required to
file such reports, information or documents with the Commission,
shall mail such reports, information and documents to the
Transfer Agent and to each Holder, or shall supply such reports
to the Transfer Agent for forwarding to each Holder, at such
Holder's address set forth on the register maintained by the
Transfer Agent.
12. Transfer and Legending of Shares.
-------------------------------- No transfer of
shares of the Exchangeable Preferred shall be effective until
such transfer is registered on the books of the Corporation.
Until registered under the Securities Act or the expiration of
the time period referred to in Rule 144(k) (as then in effect)
under the Securities Act, all shares of Exchangeable Preferred
will bear the following legend:
THIS PREFERRED STOCK HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH
IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (B) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS PREFERRED STOCK IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, OR (C) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES
ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR"), (2)
AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD
REFERRED TO UNDER RULE 144(k) UNDER THE SECURITIES ACT
AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS
PREFERRED STOCK, RESELL OR OTHERWISE TRANSFER THIS
PREFERRED STOCK EXCEPT (A) TO ICG HOLDINGS, INC. (THE
"CORPORATION") OR ANY SUBSIDIARY THEREOF, (B) TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE), (E) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRANSFER
AGENT A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS PREFERRED STOCK (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRANSFER
AGENT) OR (F) AFTER REGISTRATION UNDER THE SECURITIES
ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THIS PREFERRED STOCK IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS PREFERRED STOCK
WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER
MUST EXECUTE A LETTER (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRANSFER AGENT) RELATING TO THE
MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO
THE TRANSFER AGENT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT. THE SECOND AMENDED AND
RESTATED ARTICLES OF INCORPORATION OF THE CORPORATION
CONTAINS A PROVISION REQUIRING THE TRANSFER AGENT TO
REFUSE TO REGISTER ANY TRANSFER OF THIS PREFERRED STOCK
IN VIOLATION OF THE FOREGOING RESTRICTIONS.
The Corporation shall refuse to register any attempted transfer
of shares of Exchangeable Preferred not in compliance with this
paragraph 12.
13. Amendments and Waivers.
----------------------- Notwithstanding any other
provisions hereof and to the extent allowable from time to time
by applicable law, the Board of Directors may, by duly adopted
resolution, amend any of the provisions of the Second Amended and
Restated Articles of Incorporation, without notice to or any
consent or approval of any of the Holders of Exchangeable
Preferred, for the following purposes:
(1) to cure any ambiguity, defect or inconsistency in
the First Amended and Restated Articles of Incorporation;
provided that such amendment does not and will not adversely
affect the interests of the Holders of Exchangeable Preferred in
any material respect; or
(2) to make any change that the Board of Directors
determines in good faith does not materially and adversely affect
the rights of any Holder of Exchangeable Preferred.
Except as provided in the preceding sentence, any right,
preference, privilege or power of, or restriction provided for
the benefit of, the Exchangeable Preferred set forth herein may
be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively) only with the written consent of the Corporation
and the affirmative vote or written consent of the Holders of at
least a majority of the shares of Exchangeable Preferred then
outstanding, and any amendment or waiver so effected shall be
binding upon the Corporation and all Holders of the Exchangeable
Preferred.
14. Rules of Construction.
--------------------- The descriptive headings in
this Section 4.2.2 are inserted for convenience of reference only
and are not intended to be part of or affect the meaning or
interpretation of any provision of this Section 4.2.2. Words
used in this Section 4.2.2, regardless of the gender and number
specifically used, shall be deemed and construed to include any
other gender, masculine, feminine, or neuter, and any other
number, singular or plural, as the context requires. As used in
this Section 4.2.2, the word "including" is not limiting, and the
word "or" is not exclusive.
ARTICLE V
----------
Cumulative voting of shares of stock is not permitted.
Shareholders shall not have preemptive rights to acquire
additional unissued or treasury shares of the Corporation. The
Corporation may issue and sell shares of its stock to its
officers, directors or employees without first offering such
shares to its shareholders for such consideration and upon such
terms and conditions as shall be approved by the Board of
Directors and without approval by the shareholders of the
Corporation.
ARTICLE VI
-----------
The Board of Directors may cause any shares issued by the
Corporation to be issued subject to such lawful restrictions,
qualifications, limitations or special rights as they deem fit,
which restrictions, qualifications, limitations or special rights
shall be created by provisions in the Bylaws of the Corporation
or in the duly adopted resolutions of the Board of Directors;
provided that notice of such special restrictions,
qualifications, limitations or special rights must appear on the
certificate evidencing ownership of such shares.
ARTICLE VII
------------
Subject to the provisions of Sections 4.2.1 and 4.2.2 of
Article IV, meetings of shareholders may be held at such time and
place as the Bylaws shall provide. A majority of the shares
entitled to vote represented in person or by proxy shall
constitute a quorum at any meeting of the shareholders.
ARTICLE VIII
------------
Subject to the provisions of Sections 4.2.1 and 4.2.2 of
Article IV, the number of directors to be elected at the annual
meeting of shareholders or at a special meeting called for the
election of directors shall not be less than three, nor more than
nine, the exact number to be fixed by the Bylaws; provided,
however, that there need be only as many directors as there are
shareholders in the event that the outstanding shares are held of
record by fewer than three shareholders.
ARTICLE IX
----------
A director of this Corporation shall not be personally
liable to the Corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director except that
this provision shall not limit the liability of a director to the
Corporation or to its shareholders for monetary damages for:
(i) any breach of the director's duty of loyalty to the
Corporation or to its shareholders; (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing
violation of law; (iii) acts specified in Section 7-108-403 of
the Colorado Business Corporation Act as the same may be amended
from time to time; or (iv) any transaction from which the
director derived an improper personal benefit. If the Colorado
Business Corporation Act is amended to authorize corporate
actions further limiting or eliminating the personal liability of
directors, then the liability of a director of the Corporation
shall be limited or eliminated to the fullest extent permitted by
the Colorado Business Corporation Act, as so amended.
Any repeal or modification of the foregoing Article IX by
the shareholders of the Corporation shall not adversely affect
any right or protection of a director of the Corporation existing
at the time of such repeal or modification.
ARTICLE X
----------
The officers, directors and other members of management of
this Corporation shall be subject to the doctrine of corporate
opportunities only insofar as it applies to business
opportunities in which this Corporation has expressed an interest
as determined from time to time by the Corporation's Board of
Directors as evidenced by resolutions appearing in the
Corporation's Minutes. When such areas of interest are
delineated, all such business opportunities within such areas of
interest which come to the attention of the officers, directors
and other members of management of this Corporation shall be
disclosed promptly to this Corporation and made available to it.
The Board of Directors may reject any business opportunity
presented to it and thereafter any officer, director or other
member of management may avail himself/herself of such
opportunity. Until such time as this Corporation, through its
Board of Directors, has designated an area of interest, the
officers, directors and other members of management of this
Corporation shall be free to engage in such areas of interest on
their own and this doctrine shall not limit the rights of any
officer, director or other member of management of this
Corporation to continue a business existing prior to the time
that such area of interest is designated by this Corporation.
This provision shall not be construed to release any employee of
the Corporation (other than an officer, director or member of
management) from any duties which he/she may have to the
Corporation.
ARTICLE XI
----------
Any of the directors or officers of this Corporation shall
not, in the absence of fraud, be disqualified by his/her office
from dealing or contracting with this Corporation whether as
vendor, purchaser or otherwise, nor shall any firm, association,
or Corporation of which he/she shall be a member, or in which
he/she may be pecuniarily interested in any manner be
disqualified. No director or officer, nor any firm, association
or corporation with which he/she is connected as aforesaid shall
be liable to account to this Corporation or its shareholders for
any profit realized by him/her from or through any such
transaction or contract; it being the express purpose and intent
of this Article to permit this Corporation to buy from, sell to,
or otherwise deal with partnerships, firms or corporations of
which the directors and officers of this Corporation, or any one
or more of them, may be members, directors, or officers, or in
which they or any of them have pecuniary interests; and the
contracts of this Corporation, in the absence of fraud, shall not
be void or voidable or affected in any manner by reason of any
such membership. The interested director or directors may be
counted in determining the presence of a quorum at a meeting of
the Board of Directors or a committee thereof authorizing,
approving, or ratifying any such contract or transaction.
Further, the vote of any such interested director at a meeting of
the Board of Directors or committee thereof authorizing,
approving or ratifying any such contract or transaction may be
counted if his/her relationship or interest with respect to any
such contract or transaction (i) is disclosed and such
transaction or contract is authorized, approved or ratified by a
majority of the directors without counting the vote or consent of
such interested director, or (ii) is disclosed to the
shareholders of the Corporation and authorized, approved or
ratified by the shareholders by vote or written consent, or
(iii) such contract or transaction is fair and reasonable to the
Corporation.
ARTICLE XII
------------
When with respect to any action to be taken by shareholders
of this Corporation, the Colorado Business Corporation Act
requires the vote or concurrence of the holders of two-thirds of
the outstanding shares entitled to vote thereon, or of any class
or series, such action may be taken by the vote or concurrence of
a majority of such shares or class or series thereof.
ARTICLE XIII
------------
Subject to repeal by action of the shareholders, the Board
of Directors of this Corporation is authorized to adopt, confirm,
ratify, alter, amend, rescind and repeal Bylaws or any portion
thereof from time to time.
ARTICLE XIV
-----------
The address of the Corporation's registered office is 9605
E. Maroon Circle, Englewood, Colorado 80112 and the name of the
registered agent at such address is James D. Grenfell.
Exhibit 4.12
[FACE OF NOTE]
ICG HOLDINGS, INC.
11 5/8% Senior Discount Note Due 2007
[CUSIP] [CINS]
----------
No. $_________
The following information is supplied for purposes of Sections
1273 and 1275 of the Internal Revenue Code:
Issue Date: March 11, 1997
Yield to maturity for period from Issue Date to March 15, 2007: 11.62%
(rounded to two decimal places), compounded semiannually on March 15 and
September 15 commencing March 11, 1997 (computed without giving effect to
the additional payments of interest in the event the issuer fails to
commence the exchange offer and fails to cause the shelf registration
statement to be declared effective, each as referred to on the reverse
hereof)
Original issue discount under Section 1273 of the Internal Revenue Code
(for each $1,000 principal amount at maturity): $1,013.59
Issue Price (for each $1,000 principal amount at maturity): $567.66
ICG HOLDINGS, INC., a Colorado corporation (the "Company", which
term includes any successor under the Indenture hereinafter referred to),
for value received, promises to pay to [ ], or its registered
------------
assigns, the principal sum of [ ] ($[ ]) on March 15, 2007.
----- -----
Interest Payment Dates: March 15 and September 15, commencing
September 15, 2002.
Regular Record Dates: March 1 and September 1.
<PAGE>
Reference is hereby made to the further provisions of this Note
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Date: [ ] ICG HOLDINGS, INC.
---------------
By:
--------------------------------
Name:
Title:
Attest:
Name:
Title:
(Form of Trustee's Certificate of Authentication)
This is one of the 11 5/8% Senior Discount Notes due 2007 described in the
within-mentioned Indenture.
NORWEST BANK COLORADO,
NATIONAL ASSOCIATION, as Trustee
By:
--------------------------------
Authorized Signatory
<PAGE>
[REVERSE SIDE OF NOTE]
ICG HOLDINGS, INC.
11 5/8% Senior Discount Note due 2007
1. Principal and Interest.
----------------------
The Company will pay the principal of this 11 5/8% Senior
Discount Note due 2007 (the "Note") on March 15, 2007.
The Company promises to pay interest on the principal amount of
this Note on each Interest Payment Date, as set forth below, at the rate
per annum shown above.
Interest will be payable semiannually (to the holders of record
of the Notes at the close of business on the March 1 or September 1
immediately preceding the Interest Payment Date) on each Interest Payment
Date, commencing September 15, 2002; provided that no interest shall accrue
on the principal amount of this Note prior to March 15, 2002 and no
interest shall be paid on this Note prior to September 15, 2002, except as
provided in the next paragraph.
If an exchange offer registered under the Securities Act is not
consummated, and a shelf registration statement under the Securities Act
with respect to resales of the Notes is not declared effective by the
Commission, on or before September 11, 1997 in accordance with the terms of
the Registration Rights Agreement dated March 11, 1997 among the Company,
the Guarantor and Morgan Stanley & Co. Incorporated, interest (in addition
to the accrual of original discount during the period ending March 15, 2002
and in addition to the interest otherwise due on the Notes after such date)
will accrue, at an annual rate of 0.5% of the Accreted Value on the
preceding Semi-Annual Accrual Date on the Notes, from September 11, 1997,
payable in cash semiannually, in arrears, on each March 15 and
September 15, commencing March 15, 1998. The Holder of this Note is
entitled to the benefits of such Registration Rights Agreement.
From and after March 15, 2002, interest on the Notes will accrue
from the most recent date to which interest has been paid or, if no
interest has been paid, from March 15, 2002; provided that, if there is no
existing default in the payment of interest and this Note is authenticated
between a Regular Record Date referred to on the face hereof and the next
succeeding Interest Payment Date, interest shall accrue from such Interest
Payment Date. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
The Company shall pay interest on overdue principal and premium,
if any, and interest on overdue installments of interest, to the extent
lawful, at a rate per annum that is 2% in excess of the rate otherwise
payable.
2. Method of Payment.
-----------------
The Company will pay principal as provided above and interest
(except defaulted interest) on the principal amount of the Notes as
provided above on each March 15 and September 15 to the persons who are
Holders (as reflected in the Security Register at the close of business on
such March 1 and September 1, immediately preceding the Interest Payment
Date), in each case, even if the Note is cancelled on registration of
transfer or registration of exchange after such record date; provided that,
with respect to the payment of principal, the Company will not make payment
to the Holder unless this Note is surrendered to a Paying Agent.
The Company will pay principal, premium, if any, and as provided
above, interest in money of the United States that at the time of payment
is legal tender for payment of public and private debts. However, the
Company may pay principal, premium, if any, and interest by its check
payable in such money. It may mail an interest check to a Holder's
registered address (as reflected in the Security Register). If a payment
date is a date other than a Business Day at a place of payment, payment may
be made at that place on the next succeeding day that is a Business Day and
no interest shall accrue for the intervening period.
3. Paying Agent and Registrar.
--------------------------
Initially, the Trustee will act as authenticating agent, Paying
Agent and Registrar. The Company may change any authenticating agent,
Paying Agent or Registrar without notice. The Company, any Subsidiary or
any Affiliate of any of them may act as Paying Agent, Registrar or
co-Registrar.
4. Indenture; Issuance of Additional Notes.
---------------------------------------
The Company issued the Notes under an Indenture dated as of
March 11, 1997 (the "Indenture"), among the Company, ICG Communications,
Inc., a Delaware corporation (the "Guarantor"), and Norwest Bank Colorado,
National Association, as trustee (the "Trustee"). Capitalized terms herein
are used as defined in the Indenture unless otherwise indicated. The terms
of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act. The Notes are
subject to all such terms, and Holders are referred to the Indenture and
the Trust Indenture Act for a statement of all such terms. To the extent
permitted by applicable law, in the event of any inconsistency between the
terms of this Note and the terms of the Indenture, the terms of the
Indenture shall control.
The Notes are general unsecured obligations of the Company. The
Indenture provides for an initial original issuance of an aggregate
principal amount at maturity of Notes of $176,000,000, plus any Exchange
Securities that may be issued pursuant to the Registration Rights
Agreement, and, subject to Article Four of the Indenture, the issuance from
time to time of additional Notes under the Indenture.
5. Redemption.
----------
The Notes will be redeemable, at the Company's option, in whole
or in part, at any time and from time to time on or after March 15, 2002
and prior to maturity, upon not less than 30 nor more than 60 days' prior
notice mailed by first-class mail to each Holder's last address as it
appears in the Security Register, at the following Redemption Prices
(expressed in percentages of their principal amount at maturity), plus
accrued and unpaid interest, if any, to the Redemption Date (subject to the
right of Holders of record on the relevant Regular Record Date that is on
or prior to the Redemption Date to receive interest due on an Interest
Payment Date that is on or prior to the Redemption Date) if redeemed during
the 12-month period commencing on March 15 of the applicable year set forth
below:
Redemption
Year Price
---- -------------
2002 105.81250%
2003 102.90625
2004 and thereafter 100.00000
In addition, at any time on or prior to March 15, 2000, the
Company may, at its option from time to time, redeem Securities having an
aggregate principal amount of up to 35% of the aggregate principal amount
of all Securities issued, at a redemption price equal to 111 5/8% of the
Accreted Value thereof on the Redemption Date, with proceeds of one or more
Public Equity Offerings of Common Stock of (A) the Guarantor or (B) the
Company, provided that (i) with respect to a Public Equity Offering
referred to in clause (A) above, cash proceeds of such Public Equity
Offering in an amount sufficient to effect the redemption of Securities to
be so redeemed are contributed by the Guarantor to the Company prior to
such redemption and used by the Company to effect such redemption and
(ii) such redemption occurs within 180 days after consummation of such
Public Equity Offering.
6. Notice of Redemption.
--------------------
Notice of any optional redemption will be mailed at least 30 days
but not more than 60 days before the Redemption Date to each Holder of
Notes to be redeemed at his last address as it appears in the Security
Register. Notes in original denominations larger than $1,000 may be
redeemed in part. On and after the Redemption Date, interest ceases to
accrue on Notes or portions of Notes called for redemption, unless the
Company defaults in the payment of the Redemption Price.
7. Repurchase upon Change in Control.
---------------------------------
Upon the occurrence of any Change of Control, each Holder shall
have the right to require the repurchase of its Notes by the Company in
cash pursuant to the offer described in the Indenture at a purchase price
equal to 101% of the Accreted Value thereof plus accrued and unpaid
interest, if any, to the date of purchase (the "Change of Control
Payment").
A notice of such Change of Control will be mailed within 30 days
after any Change of Control occurs to each Holder at his last address as it
appears in the Security Register. Notes in original denominations larger
than $1,000 may be sold to the Company in part. On and after the date of
the Change of Control Payment, interest ceases to accrue on Notes or
portions of Notes surrendered for purchase by the Company, unless the
Company defaults in the payment of the Change of Control Payment.
8. Denominations; Transfer; Exchange.
---------------------------------
The Notes are in registered form without coupons in denominations
of $1,000 of principal amount at maturity and multiples of $1,000 in excess
thereof. A Holder may register the transfer or exchange of Notes in
accordance with the Indenture. The Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents
and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer or exchange of any
Notes selected for redemption. Also, it need not register the transfer or
exchange of any Notes for a period of 15 days before a selection of Notes
to be redeemed is made.
9. Persons Deemed Owners.
---------------------
A Holder shall be treated as the owner of a Note for all
purposes.
10. Unclaimed Money.
---------------
If money for the payment of principal, premium, if any, or
interest remains unclaimed for two years, the Trustee and the Paying Agent
will pay the money back to the Company at its request. After that, Holders
entitled to the money must look to the Company for payment, unless an
abandoned property law designates another Person, and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
11. Discharge Prior to Redemption or Maturity.
-----------------------------------------
If the Company or the Guarantor deposits with the Trustee money
or U.S. Government Obligations sufficient to pay the then outstanding
principal of, premium, if any, and accrued interest on the Notes (a) to
redemption or maturity, the Company will be discharged from the Indenture
and the Notes, except in certain circumstances for certain sections
thereof, and (b) to the Stated Maturity, the Company and the Guarantor will
be discharged from certain covenants set forth in the Indenture.
12. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented with the consent of the Holders of at least a
majority in principal amount at maturity of the Notes then outstanding, and
any existing default or compliance with any provision may be waived with
the consent of the Holders of at least a majority in principal amount at
maturity of the Notes then outstanding. Without notice to or the consent
of any Holder, the parties thereto may amend or supplement the Indenture or
the Notes to, among other things, cure any ambiguity, defect or
inconsistency and make any change that does not materially and adversely
affect the rights of any Holder.
13. Restrictive Covenants.
---------------------
The Indenture imposes certain limitations on the ability of the
Company and the Guarantor and its Restricted Subsidiaries, among other
things, to Incur Indebtedness, make Restricted Payments, use the proceeds
from Asset Sales, engage in transactions with Affiliates or, with respect
to each of the Company and the Guarantor, merge, consolidate or transfer
substantially all of its assets. Within 45 days after the end of each
fiscal quarter (90 days after the end of the last fiscal quarter of each
year), the Company must report to the Trustee on compliance with such
limitations.
14. Successor Persons.
-----------------
When a successor person or other entity assumes all the
obligations of its predecessor under the Notes and the Indenture, the
predecessor person will be released from those obligations.
15. Defaults and Remedies.
---------------------
The following events constitute "Events of Default" under the
Indenture: (a) default in the payment of principal of (or premium, if any,
on) any Note when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise; (b) default in the payment of
interest on any Note when the same becomes due and payable, and such
default continues for a period of 30 days; (c) the Company or the Guarantor
defaults in the performance of or breaches any other covenant or agreement
of the Company or the Guarantor in the Indenture or under the Notes and
such default or breach continues for a period of 30 consecutive days after
written notice by the Trustee or the Holders of 25% or more in aggregate
principal amount at maturity of the Notes; (d) there occurs with respect to
any issue or issues of Indebtedness of the Company, the Guarantor or any
Significant Subsidiary having an outstanding principal amount at maturity
of $10 million or more in the aggregate for all such issues of all such
Persons, whether such Indebtedness now exists or shall hereafter be
created, (I) an event of default that has caused the holder thereof to
declare such Indebtedness to be due and payable prior to its Stated
Maturity and such Indebtedness has not been discharged in full or such
acceleration has not been rescinded or annulled within 30 days of such
acceleration and/or (II) the failure to make a principal payment at the
final (but not any interim) fixed maturity and such defaulted payment shall
not have been made, waived or extended within 30 days of such payment
default; (e) any final judgment or order (not covered by insurance) for the
payment of money in excess of $10 million in the aggregate for all such
final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against the Company, the Guarantor or any Significant Subsidiary
and shall not be paid or discharged, and there shall be any period of 30
consecutive days following entry of the final judgment or order that causes
the aggregate amount for all such final judgments or orders outstanding and
not paid or discharged against all such Persons to exceed $10 million
during which a stay of enforcement of such final judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect; (f) a
court having jurisdiction in the premises enters a decree or order for (A)
relief in respect of the Company, the Guarantor or any Significant
Subsidiary in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (B) appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Company, the Guarantor or any Significant
Subsidiary or for all or substantially all of the property and assets of
the Company, the Guarantor or any Significant Subsidiary or (C) the winding
up or liquidation of the affairs of the Company, the Guarantor or any
Significant Subsidiary and, in each case, such decree or order shall remain
unstayed and in effect for a period of 30 consecutive days; or (g) the
Company, the Guarantor or any Significant Subsidiary (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (B) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company, the
Guarantor or any Significant Subsidiary or for all or substantially all of
the property and assets of the Company, the Guarantor or any Significant
Subsidiary or (C) effects any general assignment for the benefit of
creditors.
If an Event of Default (other than an Event of Default specified
in clause (f) or (g) above that occurs with respect to the Company or the
Guarantor) occurs and is continuing under the Indenture, the Trustee or the
Holders of at least 25% in aggregate principal amount at maturity of the
Notes, then outstanding, by written notice to the Company (and to the
Trustee if such notice is given by the Holders), may, and the Trustee at
the request of such Holders shall, declare the Accreted Value of, premium,
if any, and accrued interest, if any, on the Notes to be immediately due
and payable.
If an Event of Default, as defined in the Indenture, occurs and
is continuing, the Trustee or the Holders of at least 25% in principal
amount at maturity of the Notes may declare all the Notes to be due and
payable. If a bankruptcy or insolvency default with respect to the Company
or any Restricted Subsidiary occurs and is continuing, the Notes
automatically become due and payable. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. The Trustee
may require indemnity satisfactory to it before it enforces the Indenture
or the Notes. Subject to certain limitations, Holders of at least a
majority in principal amount at maturity of the Notes then outstanding may
direct the Trustee in its exercise of any trust or power.
16. Guarantee.
---------
The Company's obligations under the Notes are fully and
irrevocably guaranteed by the Guarantor.
17. Trustee Dealings with Company or Guarantor.
------------------------------------------
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from and perform services for
the Company, the Guarantor or their Affiliates and may otherwise deal with
the Company, the Guarantor or their Affiliates as if it were not the
Trustee.
18. No Recourse Against Others.
--------------------------
No incorporator or any past, present or future partner,
shareholder, other
equity holder, officer, director, employee or controlling person as such,
of the Company or the Guarantor or of any successor Person shall have any
liability for any obligations of the Company or the Guarantor under the
Notes or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder by accepting a
Note waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Notes.
19. Authentication.
--------------
This Note shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on the other side of this
Note.
20. Abbreviations.
-------------
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not
as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to
Minors Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to ICG
Holdings, Inc., 9605 East Maroon Circle, P.O. Box 6742, Englewood,
Colorado, 80155-6742, Attention: Chief Financial Officer.
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
----------------------------------
-----------------------------------------------------------------------
---------------------------------
Please print or typewrite name and address including zip code of assignee
---------------------------------------------------------------------------
-----------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting
and appointing
----------------------------------------------------------
attorney to transfer said Note on the books of the Company with
-------
full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL SECURITIES OTHER THAN EXCHANGE SECURITIES,
UNLEGENDED OFFSHORE GLOBAL SECURITIES AND
UNLEGENDED OFFSHORE PHYSICAL SECURITIES]
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of an effective Registration or
(ii) the end of the period referred to in Rule 144(k) under the Securities
Act, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
---------
[ ] (a) this Note is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended,
provided by Rule 144A thereunder.
or
--
[ ] (b) this Note is being transferred other than in accordance with
(a) above and documents are being furnished which comply with the
conditions of transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other Registrar
shall not be obligated to register this Note in the name of any Person
other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 2.08 of the
Indenture shall have been satisfied.
Date:
---------------------------------------------------------------------
NOTICE: The signature to this assignment must
correspond with the name as written upon the face
of the within-mentioned instrument in every
particular, without alteration or any change
whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities
Act of 1933, as amended, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant
to Rule 144A or has determined not to request such information and that it
is aware that the transferor is relying upon the undersigned's foregoing
representations in order to claim the exemption from registration provided
by Rule 144A.
Dated:
--------------------------------------------------------------------
NOTICE: To be executed by an executive
officer
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant
to Section 4.11 or Section 4.12 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 4.11 or Section 4.12 of the Indenture, state
the amount (in principal amount at maturity): $ .
-------------------
Date:
-----------------
Your Signature:
-----------------------------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
------------------------------
Exhibit 4.15
ICG HOLDINGS, INC.,
as Issuer
ICG COMMUNICATIONS, INC.,
as Guarantor
and
NORWEST BANK COLORADO, NATIONAL ASSOCIATION,
as Trustee
------------------------
Indenture
Dated as of March 11, 1997
-------------------------
11 5/8% Senior Discount Notes due 2007
<PAGE>
CROSS-REFERENCE TABLE
---------------------
TIA Sections Indenture Sections
------------ ------------------
<Section> 310(a)(1) . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . 7.08
<Section> 313(c) . . . . . . . . . . . 7.06; 11.02
<Section> 314(a) . . . . . . . . . . . 4.18; 11.02
(a)(4) . . . . . . . . . . . . . . 4.17; 11.02
(c)(1) . . . . . . . . . . . . . . 11.03
(c)(2) . . . . . . . . . . . . . . 11.03
(e) . . . . . . . . . . . . . . . . 11.04
<Section> 315(b) . . . . . . . . . . . 7.05; 11.02
<Section> 316(a)(1)(A) . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . 6.04
(b) . . . . . . . . . . . . . . . . 6.07
<Section> 317(a)(1) . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . 6.09
<Section> 318(a) . . . . . . . . . . . 11.01
(c) . . . . . . . . . . . . . . . . 11.01
Note: The Cross-Reference Table shall not for any purpose be deemed to
be a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
RECITALS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act . . 22
SECTION 1.03. Rules of Construction . . . . . . . . . . . . . . . . 22
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating . . . . . . . . . . . . . . . . . . . 23
SECTION 2.02. Restrictive Legends . . . . . . . . . . . . . . . . . 24
SECTION 2.03. Execution, Authentication and Denominations . . . . . 26
SECTION 2.04. Registrar and Paying Agent . . . . . . . . . . . . . . 28
SECTION 2.05. Paying Agent to Hold Money in Trust . . . . . . . . . 28
SECTION 2.06. Transfer and Exchange . . . . . . . . . . . . . . . . 29
SECTION 2.07. Book-Entry Provisions for Global Securities . . . . . 30
SECTION 2.08. Special Transfer Provisions . . . . . . . . . . . . . 32
SECTION 2.09. Replacement Securities . . . . . . . . . . . . . . . . 34
SECTION 2.10. Outstanding Securities . . . . . . . . . . . . . . . . 35
SECTION 2.11. Temporary Securities . . . . . . . . . . . . . . . . . 36
SECTION 2.12. Cancellation . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.13. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.14. Defaulted Interest . . . . . . . . . . . . . . . . . . 36
ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of Redemption . . . . . . . . . . . . . . . . . 37
SECTION 3.02. Notices to Trustee . . . . . . . . . . . . . . . . . . 37
SECTION 3.03. Selection of Securities to Be Redeemed . . . . . . . . 38
SECTION 3.04. Notice of Redemption . . . . . . . . . . . . . . . . . 38
SECTION 3.05. Effect of Notice of Redemption . . . . . . . . . . . . 39
SECTION 3.06. Deposit of Redemption Price . . . . . . . . . . . . . 39
SECTION 3.07. Payment of Securities Called for Redemption . . . . . 40
SECTION 3.08. Securities Redeemed in Part . . . . . . . . . . . . . 40
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities . . . . . . . . . . . . . . . . 40
SECTION 4.02. Maintenance of Office or Agency . . . . . . . . . . . 41
SECTION 4.03. Limitation on Indebtedness . . . . . . . . . . . . . . 41
SECTION 4.04. Limitation on Restricted Payments . . . . . . . . . . 45
SECTION 4.05. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries . . . . . . . . . . . 48
SECTION 4.06. Limitation on the Issuances and Sale of Capital Stock of
Restricted Subsidiaries . . . . . . . . . . . . . . . . 50
SECTION 4.07. Limitation on Issuances of Guarantees by Restricted
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.08. Limitation on Transactions with Shareholders and
Affiliates . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 4.09. Limitation on Liens . . . . . . . . . . . . . . . . . 52
SECTION 4.10. Limitation on Sale-Leaseback Transactions . . . . . . 53
SECTION 4.11. Limitation on Asset Sales . . . . . . . . . . . . . . 54
SECTION 4.12. Repurchase of Securities upon a Change of Control . . 55
SECTION 4.13. Existence . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 4.14. Payment of Taxes and Other Claims . . . . . . . . . . 55
SECTION 4.15. Maintenance of Properties and Insurance . . . . . . . 55
SECTION 4.16. Notice of Defaults . . . . . . . . . . . . . . . . . . 56
SECTION 4.17. Compliance Certificates . . . . . . . . . . . . . . . 56
SECTION 4.18. Commission Reports and Reports to Holders . . . . . . 57
SECTION 4.19. Waiver of Stay, Extension or Usury Laws . . . . . . . 57
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company and Guarantor May Merge, Etc. . . . . . . 58
SECTION 5.02. Successor Substituted . . . . . . . . . . . . . . . . 59
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . 59
SECTION 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . 61
SECTION 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . 61
SECTION 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . . 62
SECTION 6.05. Control by Majority . . . . . . . . . . . . . . . . . 62
SECTION 6.06. Limitation on Suits . . . . . . . . . . . . . . . . . 62
SECTION 6.07. Rights of Holders to Receive Payment . . . . . . . . . 63
SECTION 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . 63
SECTION 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . 63
SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . 64
SECTION 6.12. Restoration of Rights and Remedies . . . . . . . . . . 64
SECTION 6.13. Rights and Remedies Cumulative . . . . . . . . . . . . 65
SECTION 6.14. Delay or Omission Not Waiver . . . . . . . . . . . . . 65
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. General . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 7.02. Certain Rights of Trustee . . . . . . . . . . . . . . 65
SECTION 7.03. Individual Rights of Trustee . . . . . . . . . . . . . 67
SECTION 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . 67
SECTION 7.05. Notice of Default . . . . . . . . . . . . . . . . . . 67
SECTION 7.06. Reports by Trustee to Holders . . . . . . . . . . . . 67
SECTION 7.07. Compensation and Indemnity . . . . . . . . . . . . . . 67
SECTION 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . 68
SECTION 7.09. Successor Trustee by Merger, Etc. . . . . . . . . . . 69
SECTION 7.10. Eligibility . . . . . . . . . . . . . . . . . . . . . 69
SECTION 7.11. Money Held in Trust . . . . . . . . . . . . . . . . . 69
SECTION 7.12. Withholding Taxes . . . . . . . . . . . . . . . . . . 69
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations . . . . . . . . . 70
SECTION 8.02. Defeasance and Discharge of Indenture . . . . . . . . 71
SECTION 8.03. Defeasance of Certain Obligations . . . . . . . . . . 73
SECTION 8.04. Application of Trust Money . . . . . . . . . . . . . . 75
SECTION 8.05. Repayment to Company . . . . . . . . . . . . . . . . . 75
SECTION 8.06. Reinstatement . . . . . . . . . . . . . . . . . . . . 75
SECTION 8.07. Insiders . . . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders . . . . . . . . . . . . . . 76
SECTION 9.02. With Consent of Holders . . . . . . . . . . . . . . . 77
SECTION 9.03. Revocation and Effect of Consent . . . . . . . . . . . 78
SECTION 9.04. Notation on or Exchange of Securities . . . . . . . . 78
SECTION 9.05. Trustee to Sign Amendments, Etc. . . . . . . . . . . . 79
SECTION 9.06. Conformity with Trust Indenture Act . . . . . . . . . 79
ARTICLE TEN
GUARANTEE OF SECURITIES
SECTION 10.01. Security Guarantee . . . . . . . . . . . . . . . . . 79
SECTION 10.02. Obligations Unconditional . . . . . . . . . . . . . . 80
SECTION 10.03. Notice to Trustee . . . . . . . . . . . . . . . . . . 81
SECTION 10.04. This Article Not to Prevent Events of Default . . . . 81
SECTION 10.05. Net Worth Limitation . . . . . . . . . . . . . . . . 81
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act of 1939 . . . . . . . . . . . . . 81
SECTION 11.02. Notices . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 11.03. Certificate and Opinion as to Conditions Precedent . 83
SECTION 11.04. Statements Required in Certificate or Opinion . . . . 83
SECTION 11.05. Rules by Trustee, Paying Agent or Registrar . . . . . 84
SECTION 11.06. Payment Date Other Than a Business Day . . . . . . . 84
SECTION 11.07. Governing Law; Submission to Jurisdiction . . . . . . 84
SECTION 11.08. No Adverse Interpretation of Other Agreements . . . . 84
SECTION 11.09. No Recourse Against Others . . . . . . . . . . . . . 84
SECTION 11.10. Successors . . . . . . . . . . . . . . . . . . . . . 85
SECTION 11.11. Duplicate Originals . . . . . . . . . . . . . . . . . 85
SECTION 11.12. Separability . . . . . . . . . . . . . . . . . . . . 85
SECTION 11.13. Table of Contents, Headings, Etc. . . . . . . . . . . 85
EXHIBIT A Form of Security . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B Form of Certificate . . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C Form of Certificate to Be Delivered in Connection with
Transfers Pursuant to Regulation S . . . . . . . . . . C-1
EXHIBIT D Form of Certificate to Be Delivered in Connection with
Transfers to Non-QIB Accredited Investors . . . . . . . D-1
----------------------------
Note: The Table of Contents shall not for any purposes be deemed to
be a part of the Indenture.
<PAGE>
INDENTURE, dated as of March 11, 1997, among ICG HOLDINGS, INC.,
a Colorado corporation, as Issuer (the "Company"), ICG COMMUNICATIONS,
-------
INC., a Delaware corporation, as Guarantor (the "Guarantor"), and NORWEST
---------
BANK COLORADO, NATIONAL ASSOCIATION, as Trustee (the "Trustee").
-------
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery
of this Indenture to provide for the initial original issuance of
$176,000,000 aggregate principal amount at maturity of the Company's 11
5/8% Senior Discount Notes due 2007 (the "Securities"), and the issuance
----------
from time to time of additional Securities, issuable as provided in this
Indenture. All things necessary to make this Indenture a valid agreement
of the Company and the Guarantor, in accordance with its terms, have been
done, and the Company and the Guarantor have done all things necessary to
make the Securities, when executed by the Company and the Guarantor and
authenticated and delivered by the Trustee hereunder and duly issued by the
Company, the valid obligations of the Company and the Guarantor as
hereinafter provided.
This Indenture will, upon the effectiveness of the registration
statement provided for under the Registration Rights Agreement, be subject
to, and governed by, the provisions of the Trust Indenture Act of 1939, as
amended, that are required to be a part of and to govern indentures
qualified under the Trust Indenture Act of 1939, as amended.
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed,
for the equal and proportionate benefit of all Holders, as follows.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
-----------
"Accreted Value" means, for any Specified Date, the amount
provided below for each $1,000 principal amount at maturity of Securities:
(i) if the Specified Date occurs on one of the following dates
(each a "Semi-Annual Accrual Date"), the Accreted Value will equal the
------------------------
amount set forth below for such Semi-Annual Accrual Date:
SEMI-ANNUAL ACCRUAL DATE ACCRETED VALUE
------------------------ ---------------
March 11, 1997 $567.660
September 15, 1997 $601.410
March 15, 1998 $636.366
September 15, 1998 $673.355
March 15, 1999 $712.493
September 15, 1999 $753.907
March 15, 2000 $797.727
September 15, 2000 $844.095
March 15, 2001 $893.157
September 15, 2001 $945.072
March 15, 2002 $1,000.000
(ii) if the Specified Date occurs before the first Semi-Annual
Accrual Date, the Accreted Value will equal the sum of (a) the
original issue price and (b) an amount equal to the product of (1) the
Accreted Value for the first Semi-Annual Accrual Date less the
original issue price multiplied by (2) a fraction, the numerator of
which is the number of days from the issue date of the Securities to
the Specified Date, using a 360-day year of twelve 30-day months, and
the denominator of which is the number of days elapsed from the issue
date of the Securities to the first Semi-Annual Accrual Date, using a
360-day year of twelve 30-day months;
(iii) if the Specified Date occurs between two Semi-Annual
Accrual Dates, the Accreted Value will equal the sum of (a) the
Accreted Value for the Semi-Annual Accrual Date immediately preceding
such Specified Date and (b) an amount equal to the product of (1) the
Accreted Value for the immediately following Semi-Annual Accrual Date
less the Accreted Value for the immediately preceding Semi-Annual
Accrual Date multiplied by (2) a fraction, the numerator of which is
the number of days from the immediately preceding Semi-Annual Accrual
Date to the Specified Date, using a 360-day year of twelve 30-day
months, and the denominator of which is 180; or
(iv) if the Specified Date occurs after the last Semi-Annual
Accrual Date, the Accreted Value will equal $1,000.
"Acquired Indebtedness" has the meaning provided in
Section 4.03(a).
"Adjusted Consolidated Net Income" means, for any period, the
aggregate net income (or loss) of the Guarantor and its Restricted
Subsidiaries for such period determined in conformity with GAAP; provided
that the following items shall be excluded in computing Adjusted
Consolidated Net Income (without duplication): (i) the net income of any
Person (other than net income attributable to a Restricted Subsidiary) in
which any Person (other than the Guarantor or any of its Restricted
Subsidiaries) has a joint interest and the net income of any Unrestricted
Subsidiary, except to the extent of the amount of dividends or other
distributions actually paid to the Guarantor or any of its Restricted
Subsidiaries by such other Person or such Unrestricted Subsidiary during
such period; (ii) solely for the purposes of calculating the amount of
Restricted Payments that may be made pursuant to clause (C) of the first
paragraph of Section 4.04 (and in such case, except to the extent
includable pursuant to clause (i) above), the net income (or loss) of any
Person accrued prior to the date it becomes a Restricted Subsidiary or is
merged into or consolidated with the Guarantor or any of its Restricted
Subsidiaries or all or substantially all of the property and assets of such
Person are acquired by the Guarantor or any of its Restricted Subsidiaries;
(iii) the net income of any Restricted Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of such net income is not at the time permitted by
the operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary; (iv) any gains or losses (on an
after-tax basis) attributable to Asset Sales; (v) except for purposes of
calculating the amount of Restricted Payments that may be made pursuant to
clause (C) of the first paragraph of Section 4.04, any amount paid or
accrued as dividends on preferred stock of the Guarantor or any Restricted
Subsidiary owned by Persons other than the Guarantor and any of its
Restricted Subsidiaries; and (vi) all extraordinary gains and extraordinary
losses.
"Adjusted Consolidated Net Tangible Assets" means the total
amount of assets of the Guarantor and its Restricted Subsidiaries (less
applicable depreciation, amortization and other valuation reserves), except
to the extent resulting from write-ups of capital assets (excluding write-
ups in connection with accounting for acquisitions in conformity with
GAAP), after deducting therefrom (i) all current liabilities of the
Guarantor and its Restricted Subsidiaries (excluding intercompany items)
and (ii) all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangibles, all as set forth on the
most recently available quarterly or annual consolidated balance sheet of
the Guarantor and its Restricted Subsidiaries, prepared in conformity with
GAAP.
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as applied
to any Person, means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agent" means any Registrar, Paying Agent, authenticating agent
or co-Registrar.
"Agent Members" has the meaning provided in Section 2.07(a).
"Asset Acquisition" means (i) an investment by the Guarantor or
any of its Restricted Subsidiaries in any other Person pursuant to which
such Person shall become a Restricted Subsidiary of the Guarantor or shall
be merged into or consolidated with the Guarantor or any of its Restricted
Subsidiaries; provided that such Person's primary business is related,
ancillary or complementary to the businesses of the Guarantor and its
Restricted Subsidiaries on the date of such investment or (ii) an
acquisition by the Guarantor or any of its Restricted Subsidiaries of the
property and assets of any Person other than the Guarantor or any of its
Restricted Subsidiaries that constitute substantially all of a division or
line of business of such Person; provided that the property and assets
acquired are related, ancillary or complementary to the businesses of the
Guarantor and its Restricted Subsidiaries on the date of such acquisition.
"Asset Sale" means any sale, transfer or other disposition
(including by way of merger, consolidation or sale-leaseback transactions)
in one transaction or a series of related transactions by the Guarantor or
any of its Restricted Subsidiaries to any Person other than the Guarantor
or any of its Restricted Subsidiaries of (i) all or any of the Capital
Stock of any Restricted Subsidiary, (ii) all or substantially all of the
property and assets of an operating unit or business of the Guarantor or
any of its Restricted Subsidiaries or (iii) any other property and assets
of the Guarantor or any of its Restricted Subsidiaries outside the ordinary
course of business of the Guarantor or such Restricted Subsidiary and, in
each case, that is not governed by the provisions of Article Five; provided
that the meaning of "Asset Sale" shall not include (A) sales or other
dispositions of inventory, receivables and other current assets, and (B)
dispositions of assets of the Guarantor or any of its Restricted
Subsidiaries, in substantially simultaneous exchanges for consideration
consisting of any combination of cash, Temporary Cash Investments and
assets that are used or useful in the telecommunications business of the
Guarantor or its Restricted Subsidiaries, if such consideration has an
aggregate fair market value substantially equal to the fair market value of
the assets so disposed of; provided, however, that fair market value shall
be determined in good faith by the Board of Directors of the Company, whose
determination shall be conclusive and evidenced by a Board Resolution
delivered to the Trustee; and provided further that any cash or Temporary
Cash Investments received by the Guarantor or any of its Restricted
Subsidiaries pursuant to any transaction described in clause (B) above
shall be applied in accordance with clause (A) or (B) of the first
paragraph of Section 4.11.
"Average Life" means, at any date of determination with respect
to any debt security, the quotient obtained by dividing (i) the sum of the
products of (a) the number of years from such date of determination to the
dates of each successive scheduled principal payment of such debt security
and (b) the amount of such principal payment by (ii) the sum of all such
principal payments.
"Board of Directors" means the Board of Directors of the Company
or the Guarantor as required by the context or any committee of such Board
of Directors duly authorized to act under this Indenture.
"Board Resolution" means a copy of a resolution, certified by the
Secretary or Assistant Secretary of the Company or the Guarantor as
required by the context to have been duly adopted by the Board of Directors
and to be in full force and effect on the date of such certification, and
delivered to the Trustee.
"Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in The City of New York, or in the city of
the Corporate Trust Office of the Trustee, are authorized by law to close.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) in equity of such Person, whether now
outstanding or issued after the date of this Indenture, including, without
limitation, all Common Stock and preferred stock.
"Capitalized Lease" means, as applied to any Person, any lease of
any property (whether real, personal or mixed) of which the discounted
present value of the rental obligations of such Person as lessee, in
conformity with GAAP, is required to be capitalized on the balance sheet of
such Person; and "Capitalized Lease Obligations" means the discounted
present value of the rental obligations under such lease.
"Change of Control" means such time as (i) a "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of Voting Stock having more than 40% of the voting power of
the total Voting Stock of the Guarantor on a fully diluted basis; (ii)
individuals who on the Closing Date constitute the Board of Directors of
the Guarantor (together with any new directors whose election by the Board
of Directors or whose nomination for election by the Guarantor's
stockholders was approved by a vote of at least a majority of the members
of the Board of Directors then in office who either were members of the
Board of Directors on the Closing Date or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the members of the Board of Directors then in office; or (iii)
all of the Common Stock of the Company is not beneficially owned by the
Guarantor.
"Change of Control Offer" has the meaning provided in Section
4.04(ix).
"ChoiceCom" means CSW/ICG ChoiceCom, L.P., a Delaware limited
partnership.
"Closing Date" means the date on which the Securities are
originally issued under this Indenture.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act or, if at any
time after the execution of this instrument such Commission is not existing
and performing the duties now assigned to it under the TIA, then the body
performing such duties at such time.
"Common Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's common equity interests,
whether now outstanding or issued after the date of this Indenture,
including, without limitation, all series and classes of such common equity
interests, but excluding all equity interests entitled to a preference with
respect to dividends or distributions or upon liquidation.
"Company" means the party named as such in the first paragraph of
this Indenture until a successor replaces it pursuant to Article Five of
this Indenture and thereafter means the successor.
"Company Order" means a written request or order signed in the
name of the Company (i) by its Chairman, a Vice Chairman, its President or
a Vice President and (ii) by its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary and delivered to the Trustee; provided,
however, that such written request or order may be signed by any two of the
officers or directors listed in clause (i) above in lieu of being signed by
one of such officers or directors listed in such clause (i) and one of the
officers listed in clause (ii) above.
"Consolidated EBITDA" means, for any period, the sum of the
amounts for such period of (i) Adjusted Consolidated Net Income, (ii)
Consolidated Interest Expense, (iii) income taxes, to the extent such
amount was deducted in calculating Adjusted Consolidated Net Income (other
than income taxes (either positive or negative) attributable to
extraordinary and non-recurring gains or losses or sales of assets), (iv)
depreciation expense, to the extent such amount was deducted in calculating
Adjusted Consolidated Net Income, (v) amortization expense, to the extent
such amount was deducted in calculating Adjusted Consolidated Net Income,
and (vi) all other non-cash items reducing Adjusted Consolidated Net Income
(other than items that will require cash payments and for which an accrual
or reserve is, or is required by GAAP to be, made), less all non-cash items
increasing Adjusted Consolidated Net Income, all as determined on a
consolidated basis for the Guarantor and its Restricted Subsidiaries in
conformity with GAAP; provided that, if any Restricted Subsidiary is not a
Wholly Owned Restricted Subsidiary, Consolidated EBITDA shall be reduced
(to the extent not otherwise reduced in accordance with GAAP) by an amount
equal to (A) the amount of the Adjusted Consolidated Net Income
attributable to such Restricted Subsidiary multiplied by (B) the quotient
of (1) the number of shares of outstanding Common Stock of such Restricted
Subsidiary not owned on the last day of such period by the Guarantor or any
of its Restricted Subsidiaries divided by (2) the total number of shares of
outstanding Common Stock of such Restricted Subsidiary on the last day of
such period.
"Consolidated Indebtedness" means the aggregate amount of
Indebtedness of the Guarantor, the Company and their Restricted
Subsidiaries on a consolidated basis.
"Consolidated Interest Expense" means, for any period, the
aggregate amount of interest in respect of Indebtedness (including
amortization of original issue discount on any Indebtedness and the
interest portion of any deferred payment obligation, calculated in
accordance with the effective interest method of accounting; all
commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing; the net costs
associated with Interest Rate Agreements; and Indebtedness that is
Guaranteed or secured by the Guarantor or any of its Restricted
Subsidiaries) and all but the principal component of rentals in respect of
Capitalized Lease Obligations paid, accrued or scheduled to be paid or to
be accrued by the Guarantor and its Restricted Subsidiaries during such
period; excluding, however, without duplication, (i) any amount of such
interest of any Restricted Subsidiary if the net income of such Restricted
Subsidiary is excluded in the calculation of Adjusted Consolidated Net
Income pursuant to clause (iii) of the definition thereof (but only in the
same proportion as the net income of such Restricted Subsidiary is excluded
from the calculation of Adjusted Consolidated Net Income pursuant to clause
(iii) of the definition thereof) and (ii) any premiums, fees and expenses
(and any amortization thereof) payable in connection with the offering of
the 13 1/2% Notes and the warrants issued therewith, the 12 1/2% Notes, the
14 1/4% Preferred Stock, the Securities and/or the Exchangeable Preferred
Stock, all as determined on a consolidated basis (without taking into
account Unrestricted Subsidiaries) in conformity with GAAP.
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly
or annual consolidated balance sheet of the Guarantor and its Restricted
Subsidiaries (which shall be as of a date not more than 90 days prior to
the date of such computation, and which shall not take into account
Unrestricted Subsidiaries), less any amounts attributable to Redeemable
Stock or any equity security convertible into or exchangeable for
Indebtedness, the cost of treasury stock and the principal amount of any
promissory notes receivable from the sale of the Capital Stock of the
Guarantor or any of its Restricted Subsidiaries, each item to be determined
in conformity with GAAP (excluding the effects of foreign currency exchange
adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
"Corporate Trust Office" means the office of the Trustee at which
the corporate trust business of the Trustee shall, at any particular time,
be principally administered, which office is, at the date of this
Indenture, located at 1740 Broadway, Denver, Colorado 80274-8693,
Attention: Corporate Trust and Escrow Services.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed
to protect the Guarantor or any of its Restricted Subsidiaries against
fluctuations in currency values to or under which the Guarantor or any of
its Restricted Subsidiaries is a party or a beneficiary on the date of this
Indenture or becomes a party or a beneficiary thereafter.
"Default" means any event that is, or after notice or passage of
time or both would be, an Event of Default.
"Depositary" shall mean The Depository Trust Company, its
nominees, and their respective successors.
"Event of Default" has the meaning provided in Section 6.01.
"Excess Proceeds" has the meaning provided in Section 4.11.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Securities" means any securities of the Company
containing terms identical to the Securities (except that such Exchange
Securities (i) shall be registered under the Securities Act, (ii) will not
provide for an increase in the rate of interest (other than with respect to
overdue amounts) and (iii) will not contain terms with respect to transfer
restrictions) that are issued and exchanged for the Securities pursuant to
the Registration Rights Agreement and this Indenture.
"Exchangeable Preferred Stock" means the Preferred Stock of the
Company issued on the Closing Date and any shares of Preferred Stock issued
as payment in kind dividends thereon.
"FOTI" means Fiber Optic Technologies Inc., a Colorado
corporation.
"14 1/4% Preferred Stock" means the 14 1/4% Exchangeable
Preferred Stock mandatorily redeemable May 1, 2007 of the Company, and any
shares of preferred stock issued as payment in kind dividends thereon.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of August 8, 1995, including,
without limitation, those set forth in the opinions and pronouncements of
the Accounting Principles Board of the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity
as approved by a significant segment of the accounting profession. All
ratios and computations contained in this Indenture shall be computed in
conformity with GAAP applied on a consistent basis, except that
calculations made for purposes of determining compliance with the terms of
the covenants and with other provisions of this Indenture shall be made
without giving effect to (i) the amortization of any expenses incurred in
connection with the offering of the 13 1/2% Notes and the warrants issued
therewith, the 12 1/2% Notes, the 14 1/4% Preferred Stock, the Securities
and/or the Exchangeable Preferred Stock and (ii) except as otherwise
provided, the amortization of any amounts required or permitted by
Accounting Principles Board Opinion Nos. 16 and 17.
"Global Securities" has the meaning provided in Section 2.01.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation of such other
Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services,
to take-or-pay, or to maintain financial statement conditions or otherwise)
or (ii) entered into for purposes of assuring in any other manner the
obligee of such Indebtedness or other obligation of the payment thereof or
to protect such obligee against loss in respect thereof (in whole or in
part); provided that the term "Guarantee" shall not include endorsements
for collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"Guaranteed Indebtedness" has the meaning provided in Section
4.07.
"Guarantor" means the party named as such in the first paragraph
of this Indenture until a successor replaces it pursuant to Article Five of
this Indenture and thereafter means the successor.
"Holder" or "Securityholder" means the registered holder of any
Security.
"Holdings (Canada)" means ICG Holdings (Canada), Inc. and its
successors and assigns.
"Incur" means, with respect to any Indebtedness, to incur,
create, issue, assume, Guarantee or otherwise become liable for or with
respect to, or become responsible for, the payment of, contingently or
otherwise, such Indebtedness, including an Incurrence of Indebtedness by
reason of the acquisition of more than 50% of the Capital Stock of any
Person; provided that neither the accrual of interest nor the accretion of
original issue discount shall be considered an Incurrence of Indebtedness.
The term "Incurrence" has a corresponding meaning.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person
for borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of
such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto), (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, which purchase price is due more than six months
after the date of placing such property in service or taking delivery and
title thereto or the completion of such services, except Trade Payables,
(v) all obligations of such Person as lessee under Capitalized Leases, (vi)
all Indebtedness of other Persons secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person;
provided that the amount of such Indebtedness shall be the lesser of (A)
the fair market value of such asset at such date of determination and (B)
the amount of such Indebtedness, (vii) all Indebtedness of other Persons
Guaranteed by such Person to the extent such Indebtedness is Guaranteed by
such Person and (viii) to the extent not otherwise included in this
definition, obligations under Currency Agreements and Interest Rate
Agreements. The amount of Indebtedness of any Person at any date shall be
the outstanding balance at such date of all unconditional obligations as
described above and, with respect to contingent obligations, the maximum
liability upon the occurrence of the contingency giving rise to the
obligation, provided (i) that the amount outstanding at any time of any
Indebtedness issued with original issue discount is the original issue
price of such Indebtedness and (ii) that Indebtedness shall not include (A)
any amount of money borrowed, at the time of the Incurrence of the related
Indebtedness, for the purpose of pre-funding any interest payable on such
related Indebtedness or (B) any liability for federal, state, local or
other taxes.
"Indebtedness to EBITDA Ratio" means, as at any date of
determination, the ratio of (i) the Consolidated Indebtedness as at the
Transaction Date to (ii) the Consolidated EBITDA of the Guarantor for the
then most recent four full fiscal quarters for which reports have been
filed pursuant to Section 4.18 (such four full fiscal quarter period being
referred to herein as the "Four Quarter Period"); provided that (x) pro
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forma effect shall be given to any Indebtedness Incurred from the beginning
of the Four Quarter Period through the Transaction Date (including any
Indebtedness Incurred on the Transaction Date), to the extent outstanding
on the Transaction Date, (y) if during the period commencing on the first
day of such Four Quarter Period through the Transaction Date (the
"Reference Period"), the Guarantor, the Company or any of the Restricted
----------------
Subsidiaries shall have engaged in any Asset Sale, Consolidated EBITDA for
such period shall be reduced by an amount equal to the EBITDA (if
positive), or increased by an amount equal to the EBITDA (if negative),
directly attributable to the assets which are the subject of such Asset
Sale and any related retirement of Indebtedness as if such Asset Sale and
related retirement of Indebtedness had occurred on the first day of such
Reference Period or (z) if during such Reference Period the Guarantor, the
Company or any of the Restricted Subsidiaries shall have made any Asset
Acquisition, Consolidated EBITDA of the Guarantor shall be calculated on a
pro forma basis as if such Asset Acquisition and any related financing had
occurred on the first day of such Reference Period.
"Indenture" means this Indenture as originally executed or as it
may be amended or supplemented from time to time by one or more indentures
supplemental to this Indenture entered into pursuant to the applicable
provisions of this Indenture.
"Institutional Accredited Investor" shall mean an institution
that is an "accredited investor" as that term is defined in Rule 501(a)(1),
(2), (3) or (7) of Regulation D under the Securities Act.
"Interest Payment Date" means each semiannual interest payment
date on March 15 and September 15 of each year, commencing September 15,
2002.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate
collar agreement, interest rate hedge agreement or other similar agreement
or arrangement designed to protect the Guarantor or any of its Restricted
Subsidiaries against fluctuations in interest rates in respect of
Indebtedness to or under which the Guarantor or any of its Restricted
Subsidiaries is a party or a beneficiary on the date of this Indenture or
becomes a party or a beneficiary hereafter; provided that the notional
principal amount thereof does not exceed the principal amount of the
Indebtedness of the Guarantor and its Restricted Subsidiaries that bears
interest at floating rates.
"Investment" in any Person means any direct or indirect advance,
loan or other extension of credit (including, without limitation, by way of
Guarantee or similar arrangement; but excluding advances to customers in
the ordinary course of business that are, in conformity with GAAP, recorded
as accounts receivable on the balance sheet of the Guarantor or its
Restricted Subsidiaries) or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition
of Capital Stock, bonds, notes, debentures or other similar instruments
issued by, such Person and shall include the designation of a Restricted
Subsidiary as an Unrestricted Subsidiary. For purposes of the definition
of "Unrestricted Subsidiary" and Section 4.04, (i) "Investment" shall
include the fair market value of the assets (net of liabilities) of any
Restricted Subsidiary of the Guarantor at the time that such Restricted
Subsidiary of the Guarantor is designated an Unrestricted Subsidiary and
shall exclude the fair market value of the assets (net of liabilities) of
any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary
is designated a Restricted Subsidiary of the Guarantor and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued
at its fair market value at the time of such transfer, in each case as
determined by the Board of Directors in good faith.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof, any sale with recourse against the seller or any Affiliate of the
seller, or any agreement to give any security interest).
"MTN" means Maritime Telecommunications Network, Inc., a Colorado
corporation, and its successors.
"Net Cash Proceeds" means (a) with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the
extent corresponding to the principal, but not interest, component thereof)
when received in the form of cash or cash equivalents (except to the extent
such obligations are financed or sold with recourse to the Guarantor or any
Restricted Subsidiary of the Guarantor) and proceeds from the conversion of
other property received when converted to cash or cash equivalents, net of
(i) brokerage commissions and other fees and expenses (including fees and
expenses of counsel and investment bankers) related to such Asset Sale,
(ii) provisions for all taxes (whether or not such taxes will actually be
paid or are payable) as a result of such Asset Sale without regard to the
consolidated results of operations of the Guarantor and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness
or any other obligation outstanding at the time of such Asset Sale that
either (A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale and (iv) appropriate amounts
to be provided by the Guarantor or any Restricted Subsidiary of the
Guarantor as a reserve against any liabilities associated with such Asset
Sale, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such
Asset Sale, all as determined in conformity with GAAP and (b) with respect
to any issuance or sale of Capital Stock, the proceeds of such issuance or
sale in the form of cash or cash equivalents, including payments in respect
of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form
of cash or cash equivalents (except to the extent such obligations are
financed or sold with recourse to the Guarantor or any Restricted
Subsidiary of the Guarantor) and proceeds from the conversion of other
property received when converted to cash or cash equivalents, net of
attorney's fees, accountants' fees, underwriters' or placement agents'
fees, discounts or commissions and brokerage, consultant and other fees
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Non-U.S. Person" means a person who is not a U.S. person, as
defined in Regulation S.
"Offer to Purchase" means an offer to purchase Securities by the
Company from the Holders commenced by mailing a notice to the Trustee and
each Holder stating: (i) the covenant pursuant to which the offer is being
made and that all Securities validly tendered will be accepted for payment
on a pro rata basis; (ii) the purchase price and the Payment Date; (iii)
that any Security not tendered will continue to accrue interest pursuant to
its terms; (iv) that, unless the Company defaults in the payment of the
purchase price, any Security accepted for payment pursuant to the Offer to
Purchase shall cease to accrue interest on and after the Payment Date; (v)
that Holders electing to have a Security purchased pursuant to the Offer to
Purchase will be required to surrender the Security, together with the form
entitled "Option of the Holder to Elect Purchase" on the reverse side of
the Security completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Business Day immediately
preceding the Payment Date; (vi) that Holders will be entitled to withdraw
their election if the Paying Agent receives, not later than the close of
business on the third Business Day immediately preceding the Payment Date,
a telegram, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Securities delivered for purchase and a
statement that such Holder is withdrawing his election to have such
Securities purchased; and (vii) that Holders whose Securities are being
purchased only in part will be issued new Securities equal in principal
amount to the unpurchased portion of the Securities surrendered; provided
that each Security purchased and each new Security issued shall be in a
principal amount of $1,000 or integral multiples thereof. On the Payment
Date, the Company shall (i) accept for payment on a pro rata basis
Securities or portions thereof tendered pursuant to an Offer to Purchase;
(ii) deposit with the Paying Agent money sufficient to pay the purchase
price of all Securities or portions thereof so accepted; and (iii) deliver,
or cause to be delivered, to the Trustee all Securities or portions thereof
so accepted together with an Officers' Certificate specifying the
Securities or portions thereof accepted for payment by the Company. The
Paying Agent shall promptly mail to the Holders of Securities so accepted
payment in an amount equal to the purchase price, and the Trustee shall
promptly authenticate and mail to such Holders a new Security equal in
principal amount to any unpurchased portion of the Security surrendered;
provided that each Security purchased and each new Security issued shall be
in a principal amount of $1,000 or integral multiples thereof. The Company
will publicly announce the results of an Offer to Purchase as soon as
practicable after the Payment Date. The Trustee shall act as the Paying
Agent for an Offer to Purchase. The Company will comply with Rule 14e-1
under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable, in the
event that the Company is required to repurchase Securities pursuant to an
Offer to Purchase.
"Officer" means, with respect to the Company or the Guarantor,
(i) the Chairman of the Board, the President, any Vice President or the
Chief Financial Officer and (ii) the Treasurer or any Assistant Treasurer,
or the Secretary or any Assistant Secretary.
"Officers' Certificate" means a certificate signed by one Officer
listed in clause (i) of the definition thereof and one Officer listed in
clause (ii) of the definition thereof; provided, however, that any such
certificate may be signed by any two of the Officers listed in clause (i)
of the definition thereof in lieu of being signed by one Officer listed in
clause (i) of the definition thereof and one Officer listed in clause (ii)
of the definition thereof. Each Officers' Certificate (other than
certificates provided pursuant to TIA Section 314(a)(4)) shall include the
statements provided for in TIA Section 314(e).
"Offshore Global Security" has the meaning provided in Section
2.01.
"Offshore Physical Securities" has the meaning provided in
Section 2.01.
"Ohio LINX" means ICG Ohio LINX, Inc., an Ohio corporation.
"Opinion of Counsel" means a written opinion signed by legal
counsel who may be an employee of or counsel to the Company. Each such
Opinion of Counsel shall include the statements provided for in TIA Section
314(e).
"Outstanding Securities" has the meaning provided in
Section 2.10.
"Paying Agent" has the meaning provided in Section 2.04, except
that, for the purposes of Article Eight, the Paying Agent shall not be the
Company or a Subsidiary of the Company or an Affiliate of any of them. The
term "Paying Agent" includes any additional Paying Agent.
"Payment Date" means the date of purchase, which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date a
notice is mailed pursuant to an Offer to Purchase.
"Permitted Investment" means (i) an Investment in a Restricted
Subsidiary or a Person which will, upon the making of such Investment,
become a Restricted Subsidiary or be merged or consolidated with or into or
transfer or convey all or substantially all its assets to, the Guarantor or
a Restricted Subsidiary; provided that such person's primary business is
related, ancillary or complementary to the businesses of the Guarantor and
its Restricted Subsidiaries on the date of such Investment; (ii) a
Temporary Cash Investment; (iii) payroll, travel and similar advances to
cover matters that are expected at the time of such advances ultimately to
be treated as expenses in accordance with GAAP; (iv) loans or advances to
employees made in the ordinary course of business in accordance with past
practice of the Guarantor or its Restricted Subsidiaries and that do not in
the aggregate exceed $2 million at any time outstanding; (v) stock,
obligations or securities received in satisfaction of judgments; and (vi)
Investments in an amount not to exceed, at any one time outstanding, all of
the net cash proceeds received by the Guarantor from the sale of its Common
Stock (to a Person other than one of its Subsidiaries) after the Closing
Date.
"Permitted Liens" means (i) Liens for taxes, assessments,
governmental charges or claims that are being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted
and for which a reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made; (ii) statutory Liens
of landlords and carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen or other similar Liens arising in the ordinary course of business
and with respect to amounts not yet delinquent or being contested in good
faith by appropriate legal proceedings promptly instituted and diligently
conducted and for which a reserve or other appropriate provision, if any,
as shall be required in conformity with GAAP shall have been made; (iii)
Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security; (iv) Liens incurred or deposits made to secure
the performance of tenders, bids, leases, statutory or regulatory
obligations, bankers' acceptances, surety and appeal bonds, government
contracts, performance and return-of-money bonds and other obligations of a
similar nature incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (v) easements, rights of
way, municipal and zoning ordinances and similar charges, encumbrances,
title defects or other irregularities that do not materially interfere with
the ordinary course of business of the Guarantor or any of its Restricted
Subsidiaries; (vi) Liens (including extensions and renewals thereof) upon
real or personal property acquired after the Closing Date; provided that
(a) such Lien is created solely for the purpose of securing Indebtedness
Incurred, in accordance with Section 4.03, (1) to finance the cost
(including the cost of improvement or construction) of the item of property
or assets subject thereto and such Lien is created prior to, at the time of
or within six months after the later of the acquisition, the completion of
construction or the commencement of full operation of such property or (2)
to refinance any Indebtedness previously so secured, (b) the principal
amount of the Indebtedness secured by such Lien does not exceed 100% of
such cost and (c) any such Lien shall not extend to or cover any property
or assets other than such item of property or assets and any improvements
on such item; (vii) leases or subleases granted to others that do not
materially interfere with the ordinary course of business of the Guarantor
and its Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering
property or assets under construction arising from progress or partial
payments by a customer of the Guarantor or its Restricted Subsidiaries
relating to such property or assets; (ix) any interest or title of a lessor
in the property subject to any Capitalized Lease or operating lease; (x)
Liens arising from filing Uniform Commercial Code financing statements
regarding leases; (xi) Liens on property of, or on shares of stock or
Indebtedness of, any corporation existing at the time such corporation
becomes, or becomes a part of, any Restricted Subsidiary; provided that
such Liens do not extend to or cover any property or assets of the
Guarantor or any Restricted Subsidiary other than the property or assets
acquired; (xii) Liens in favor of the Guarantor or any Restricted
Subsidiary; (xiii) Liens arising from the rendering of a final judgment or
order against the Guarantor or any Restricted Subsidiary of the Guarantor
that does not give rise to an Event of Default; (xiv) Liens securing
reimbursement obligations with respect to letters of credit that encumber
documents and other property relating to such letters of credit and the
products and proceeds thereof; (xv) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of customs duties
in connection with the importation of goods; (xvi) Liens encumbering
customary initial deposits and margin deposits, and other Liens that are
either within the general parameters customary in the industry and incurred
in the ordinary course of business, in each case, securing Indebtedness
under Interest Rate Agreements and Currency Agreements and forward
contracts, options, future contracts, futures options or similar agreements
or arrangements designed to protect the Guarantor or any of its Restricted
Subsidiaries from fluctuations in the price of commodities; (xvii) Liens
arising out of conditional sale, title retention, consignment or similar
arrangements for the sale of goods entered into by the Guarantor or any of
its Restricted Subsidiaries in the ordinary course of business in
accordance with the past practices of the Guarantor and its Restricted
Subsidiaries prior to the Closing Date; and (xviii) Liens on or sales of
receivables.
"Person" means an individual, a corporation, a partnership, a
limited liability company, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency
or instrumentality thereof.
"Physical Securities" has the meaning provided in Section 2.01.
"Preferred stock" or "preferred stock" means, with respect to any
Person, any and all shares, interests, participations or other equivalents
(however designated, whether voting or non-voting) of such Person's
preferred or preference stock, whether now outstanding or issued after the
date of this Indenture, including, without limitation, all series and
classes of such preferred or preference stock.
"principal" of a debt security, including the Securities, means
the principal amount due on the Stated Maturity as shown on such debt
security.
"Private Placement Legend" means the legend initially set forth
on the Securities in the form set forth in Section 2.02.
"Public Equity Offering" means a bona fide underwritten primary
public offering of Common Stock of the Guarantor or the Company pursuant to
an effective registration statement under the Securities Act.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Redeemable Stock" means any class or series of Capital Stock of
any Person that by its terms or otherwise is (i) required to be redeemed
prior to the Stated Maturity of the Securities, (ii) redeemable at the
option of the holder of such class or series of Capital Stock at any time
prior to the Stated Maturity of the Securities or (iii) convertible into or
exchangeable for Capital Stock referred to in clause (i) or (ii) above or
Indebtedness having a scheduled maturity prior to the Stated Maturity of
the Securities; provided that any Capital Stock that would not constitute
Redeemable Stock but for provisions thereof giving holders thereof the
right to require such Person to repurchase or redeem such Capital Stock
upon the occurrence of an "asset sale" or "change of control" occurring
prior to the Stated Maturity of the Securities shall not constitute
Redeemable Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of
such Capital Stock than the provisions contained in Sections 4.11 and 4.12
and such Capital Stock specifically provides that such Person will not
repurchase or redeem any such stock pursuant to such provision prior to the
Guarantor's repurchase of such Securities as are required to be repurchased
pursuant to the provisions of Sections 4.11 and 4.12.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which such Security is to be redeemed pursuant
to this Indenture.
"Registrar" has the meaning provided in Section 2.04.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated March 11, 1997, among the Company, the Guarantor and
Morgan Stanley & Co. Incorporated relating to the Securities.
"Registration Statement" means the Registration Statement as
defined and described in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the March 1 or September 1 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Responsible Officer", when used with respect to the Trustee,
means the chairman or any vice chairman of the board of directors, the
chairman or any vice chairman of the executive committee of the board of
directors, the chairman of the trust committee, the president, any vice
president, any assistant vice president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, any trust officer or assistant trust officer, the
controller or any assistant controller or any other officer of the Trustee
customarily performing functions similar to those performed by any of the
above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his or her knowledge of and familiarity with the particular
subject.
"Restricted Payments" has the meaning provided in Section 4.04.
"Restricted Subsidiary" means any Subsidiary of the Guarantor
other than an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities" means any of the securities, as defined in the first
paragraph of the recitals hereof, that are authenticated and delivered
under this Indenture. For all purposes of this Indenture, the term
"Securities" shall include any Exchange Securities to be issued and
exchanged for any Securities pursuant to the Registration Rights Agreement
and this Indenture and, for purposes of this Indenture, all Securities and
Exchange Securities shall vote together as one series of Securities under
this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Guarantee" means the unconditional guarantee of the
Securities by the Guarantor, as set forth in Article 10.
"Security Register" has the meaning provided in Section 2.04.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary of the Guarantor that, together with its
Subsidiaries, (i) for the most recent fiscal year of the Guarantor,
accounted for more than 10% of the consolidated revenues of the Guarantor
and its Restricted Subsidiaries or (ii) as of the end of such fiscal year,
was the owner of more than 10% of the consolidated assets of the Guarantor
and its Restricted Subsidiaries, all as set forth on the most recently
available consolidated financial statements of the Guarantor for such
fiscal year.
"Specified Date" means any redemption date, any date of purchase
for any purchase of Securities pursuant to Section 4.11 or 4.12 or any date
on which the Securities are due and payable after an Event of Default.
"StarCom" means StarCom International Optics Corporation, a
British Columbia corporation, and its subsidiaries.
"Stated Maturity" means, (i) with respect to any debt security,
the date specified in such debt security as the fixed date on which the
final installment of principal of such debt security is due and payable and
(ii) with respect to any scheduled installment of principal of or interest
on any debt security, the date specified in such debt security as the fixed
date on which such installment is due and payable.
"Strategic Investor" means any Person engaged in the
telecommunications business which has a net worth or equity market
capitalization of at least $1 billion.
"Strategic Investor Subordinated Indebtedness" means all
Indebtedness of the Company owed to a Strategic Investor that is
contractually subordinate in right of payment to the Securities to at least
the following extent: no payment of principal (or premium, if any) or
interest on or otherwise payable in respect of such Indebtedness may be
made (whether as a result of a default or otherwise) prior to the payment
in full of all of the Guarantor's and the Company's obligations under the
Securities, provided, however, that prior to the payment of such
obligations, interest on Strategic Investor Subordinated Indebtedness may
be payable solely in kind or in Common Stock (other than Redeemable Stock)
of the Guarantor.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the
outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.
"Subsidiary Guarantee" has the meaning provided in Section 4.07.
"Temporary Cash Investment" means any of the following: (i)
direct obligations of the United States of America or any agency thereof or
obligations fully and unconditionally guaranteed by the United States of
America or any agency thereof, (ii) time deposit accounts, certificates of
deposit and money market deposits maturing within 270 days of the date of
acquisition thereof, bankers' acceptances with maturities not exceeding 270
days, and overnight bank deposits, in each case issued by or with a bank or
trust company which is organized under the laws of the United States of
America, any state thereof or any foreign country recognized by the United
States, and which bank or trust company has capital, surplus and undivided
profits aggregating in excess of $100 million (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or such
similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a registered broker
dealer or mutual fund distributor, (iii) repurchase obligations with a term
of not more than 30 days for underlying securities of the types described
in clause (i) above entered into with a bank meeting the qualifications
described in clause (ii) above, (iv) commercial paper, maturing not more
than 180 days after the date of acquisition, issued by a corporation (other
than an Affiliate of the Guarantor) organized and in existence under the
laws of the United States of America, any state thereof or any foreign
country recognized by the United States of America with a rating at the
time as of which any investment therein is made of "P-1" (or higher)
according to Moody's Investors Service, Inc. or "A-1" (or higher) according
to Standard & Poor's Ratings Group, and (v) securities with maturities of
six months or less from the date of acquisition issued or fully and
unconditionally guaranteed by any state, commonwealth or territory of the
United States of America, or by any political subdivision or taxing
authority thereof, and rated at least "A" by Standard & Poor's Ratings
Group or Moody's Investors Service, Inc.
"13 1/2% Notes" means the 13 1/2% Senior Discount Notes due 2005
of the Company guaranteed by Holdings (Canada) and the Guarantor on a
senior unsecured basis.
"TIA" or "Trust Indenture Act" means the Trust Indenture Act of
1939, as amended (15 U.S. Code <Section><Section> 77aaa-77bbb), as in
effect on the date this Indenture was executed, except as provided in
Section 9.06.
"Trade Payables" means, with respect to any Person, any accounts
payable or any other debt or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person or any of its Subsidiaries
arising in the ordinary course of business in connection with the
acquisition of goods or services.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Guarantor or any of its Restricted Subsidiaries, the
date such Indebtedness is to be Incurred and, with respect to any
Restricted Payment, the date such Restricted Payment is to be made.
"Trustee" means the party named as such in the first paragraph of
this Indenture until a successor replaces it in accordance with the
provisions of Article Seven of this Indenture and thereafter means such
successor.
"12 1/2% Notes" means the 12 1/2% Senior Discount Notes due 2006
of the Company guaranteed by Holdings (Canada) and the Guarantor on a
senior unsecured basis.
"United States Bankruptcy Code" means the Bankruptcy Reform Act
of 1978, as amended and as codified in Title 11 of the United States Code,
as amended from time to time hereafter, or any successor federal bankruptcy
law.
"U.S. Global Security" has the meaning provided in Section 2.01.
"U.S. Government Obligations" means securities that are (i)
direct obligations of the United States of America for the payment of which
its full faith and credit is pledged or (ii) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of
the United States of America the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, which, in either case, are not callable or redeemable at the
option of the issuer thereof at any time prior to the Stated Maturity of
the Securities, and shall also include a depository receipt issued by a
bank or trust company as custodian with respect to any such U.S. Government
Obligation or a specific payment of interest on or principal of any such
U.S. Government Obligation held by such custodian for the account of the
holder of a depository receipt; provided that (except as required by law)
such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received
by the custodian in respect of the U.S. Government Obligation or the
specific payment of interest on or principal of the U.S. Government
Obligation evidenced by such depository receipt.
"U.S. Person" has the meaning ascribed thereto in Rule 902 under
the Securities Act.
"U.S. Physical Securities" has the meaning provided in Section
2.01.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Guarantor that at the time of determination shall be designated an
Unrestricted Subsidiary by the Board of Directors in the manner provided
below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of
Directors may designate any Restricted Subsidiary of the Guarantor
(including any newly acquired or newly formed Subsidiary of the Guarantor),
other than the Company or a Subsidiary that has given a Subsidiary
Guarantee, to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the
Guarantor or any Restricted Subsidiary; provided that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if
such Subsidiary has assets greater than $1,000, that such designation would
be permitted under Section 4.04. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary of the Guarantor;
provided that immediately after giving effect to such designation (x) the
Guarantor could Incur $1.00 of additional Indebtedness under the first
paragraph of Section 4.03(a) and (y) no Default or Event of Default shall
have occurred and be continuing. Any such designation by the Board of
Directors shall be evidenced to the Trustee by promptly filing with the
Trustee a copy of the Board Resolution giving effect to such designation
and an Officers' Certificate certifying that such designation complied with
the foregoing provisions.
"Voting Stock" means, with respect to any Person, Capital Stock
of any class or kind ordinarily having the power to vote for the election
of directors, managers or other voting members of the governing body of
such Person.
"Wholly Owned" means, with respect to any Subsidiary of any
Person, such Subsidiary if 98% or more of the outstanding Capital Stock in
such Subsidiary (other than any director's qualifying shares or Investments
by foreign nationals mandated by applicable law) is owned by such Person or
one or more Wholly Owned Subsidiaries of such Person.
"Zycom" means Zycom Corporation, an Alberta, Canada corporation.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
-------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder or a Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
and
"obligor" on the indenture securities means the Company, the
Guarantor or any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by a rule
of the Commission and not otherwise defined herein have the meanings
assigned to them therein.
SECTION 1.03. Rules of Construction. Unless the context
---------------------
otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words in the
plural include the singular;
(v) provisions apply to successive events and transactions;
(vi) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article,
Section or other subdivision; and
(vii) all references to Sections or Articles refer to
Sections or Articles of this Indenture unless otherwise indicated.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating. The Securities and the Trustee's
---------------
certificate of authentication shall be substantially in the form annexed
hereto as Exhibit A. The Securities may have such appropriate insertions,
omissions, substitutions and other variations as are required or permitted
by the Indenture and may have letters, notations, legends or endorsements
required by law, stock exchange agreements to which the Company is subject
or usage. Any portion of the text of any Security may be set forth on the
reverse thereof, with an appropriate reference thereto on the face of the
Security. The Company shall approve the form of the Securities and any
notation, legend or endorsement on the Securities. Each Security shall be
dated the date of its authentication.
The terms and provisions contained in the form of the Securities
annexed hereto as Exhibit A shall constitute, and are hereby expressly
made, a part of this Indenture. Each of the Company, the Guarantor and the
Trustee, by its execution and delivery of this Indenture, expressly agrees
to the terms and provisions of the Securities applicable to it and to be
bound thereby.
Securities offered and sold in reliance on Rule 144A shall be
issued in the form of one or more permanent global Securities in registered
form, substantially in the form set forth in Exhibit A (the "U.S. Global
------------
Security"), deposited with the Trustee, as custodian for the Depositary,
--------
duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount at maturity of a U.S.
Global Security may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the
Depositary or its nominee, as hereinafter provided.
Securities offered and sold in offshore transactions in reliance
on Regulation S shall be issued in the form of one or more single permanent
global Securities in registered form substantially in the form set forth in
Exhibit A (the "Offshore Global Security") deposited with the Trustee, as
------------------------
custodian for the Depositary, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate
principal amount at maturity of an Offshore Global Security may from time
to time be increased or decreased by adjustments made in the records of the
Trustee, as custodian for the Depositary or its nominee, as herein
provided.
Securities which are offered and sold to Institutional Accredited
Investors which are not QIBs (excluding Non-U.S. Persons) shall be issued
in the form of permanent certificated Securities in registered form in
substantially the form set forth in Exhibit A (the "U.S. Physical
--------------
Securities"). Securities issued pursuant to Section 2.07 in exchange for
----------
interests in a U.S. Global Security or an Offshore Global Security shall be
in the form of U.S. Physical Securities or in the form of permanent
certificated Securities in registered form substantially in the form set
forth in Exhibit A (the "Offshore Physical Securities"), respectively.
----------------------------
The Offshore Physical Securities and U.S. Physical Securities are
sometimes collectively herein referred to as the "Physical Securities".
-------------------
U.S. Global Securities and Offshore Global Securities are sometimes
referred to as the "Global Securities".
-----------------
The definitive Securities shall be typed, printed, lithographed
or engraved or produced by any combination of these methods or may be
produced in any other manner permitted by the rules of any securities
exchange on which the Securities may be listed, all as determined by the
officers executing such Securities, as evidenced by their execution of such
Securities.
SECTION 2.02. Restrictive Legends. Unless and until a Security
-------------------
is exchanged for an Exchange Security or otherwise disposed of in
connection with an effective Registration Statement pursuant to the
Registration Rights Agreement, (i) each U.S. Global Security and each U.S.
Physical Security shall bear the legend, set forth below on the face
thereof and (ii) each Offshore Physical Security and the Offshore Global
Security shall bear the legend set forth below on the face thereof until at
least 41 days after the Closing Date and receipt by the Company and the
Trustee of a certificate substantially in the form of Exhibit B hereto.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT), (B) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT, OR (C) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7)
OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR"), (2) AGREES THAT IT WILL NOT, WITHIN THE TIME
PERIOD REFERRED TO IN RULE 144(k) UNDER THE SECURITIES ACT AS IN
EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), (E) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND IF SUCH
TRANSFER IS IN RESPECT OF AN ACCRETED VALUE OF NOTES AT THE TIME OF
TRANSFER OF LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES
ACT OR (F) AFTER REGISTRATION UNDER THE SECURITIES ACT, AND (3) AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH
ANY TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD REFERRED TO ABOVE,
THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE
HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO THE TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE
CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
Each Global Security, whether or not an Exchange Security, shall
also bear the following legend on the face thereof:
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY OR SUCH OTHER REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.08
OF THE INDENTURE.
SECTION 2.03. Execution, Authentication and Denominations. The
-------------------------------------------
initial original issuance under this Indenture shall be an amount equal to
$176,000,000 aggregate principal amount at maturity, and, subject to
Article Four, the Company may from time to time issue additional
Securities, the aggregate principal amount of which additional Securities
that may be authenticated and delivered under this Indenture is unlimited.
The Securities shall be executed by an Officer of the Company
listed in clause (i) of the definition of Officer herein and attested by an
Officer of the Company listed in clause (i) or clause (ii) of the
definition of Officer herein. The signature of any of these Officers on
the Securities may be by facsimile or manual signature in the name and on
behalf of the Company.
If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee or authenticating agent authenticates
the Security, the Security shall be valid nevertheless.
A Security shall not be valid until the Trustee or authenticating
agent manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
Pursuant to and based upon a Company Order, the Trustee or an
authenticating agent shall authenticate for original issue Securities
registered in the name of the Depositary or the nominee of the Depositary
or other Person, as specified in the Company Order, and shall deliver such
Global Securities to the Depositary or pursuant to the Depositary's
instructions or to such other Person; provided that the Trustee shall be
entitled to receive an Officers' Certificate and an Opinion of Counsel of
the Company in connection with such authentication of Securities. The
Opinion of Counsel shall, if requested by the Trustee, be to the effect
that:
(a) the form and terms of such Securities have been established
by or pursuant to a Board Resolution or an indenture supplemental
hereto in conformity with the provisions of this Indenture;
(b) such supplemental indenture, if any, when executed and
delivered by the Company, the Guarantor and the Trustee, will
constitute a valid and binding obligation of the Company and the
Guarantor;
(c) such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid
and binding obligations of the Company in accordance with their terms
and will be entitled to the benefits of this Indenture, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles; and
(d) the Company has been duly incorporated in, and is a validly
existing corporation in good standing under the laws of, the State of
Colorado.
Such Company Order shall specify the amount of Securities to be
authenticated and the date on which the original issue of Securities is to
be authenticated. The aggregate principal amount at maturity of Securities
outstanding at any time may not exceed the amount set forth above except
for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to
Section 2.06, 2.09, 2.10 or 2.11.
The Trustee may appoint an authenticating agent to authenticate
Securities. An authenticating agent may authenticate Securities whenever
the Trustee may do so. Each reference in this Indenture to authentication
by the Trustee includes authentication by such authenticating agent. An
authenticating agent has the same rights as an Agent to deal with the
Company or an Affiliate of the Company.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 in principal amount at maturity
and any integral multiple of $1,000 in excess thereof.
SECTION 2.04. Registrar and Paying Agent. The Company shall
--------------------------
maintain an office or agency where Securities may be presented for
registration of transfer or for exchange (the "Registrar"), an office or
---------
agency where Securities may be presented for payment (the "Paying Agent")
------------
and an office or agency where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served, which shall be
in the Borough of Manhattan, The City of New York. The Company shall cause
the Registrar to keep a register of the Securities and of their transfer
and exchange (the "Security Register"). The Company may have one or more
-----------------
co-Registrars and one or more additional Paying Agents.
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall
give prompt written notice to the Trustee of the name and address of any
such Agent and any change in the address of such Agent. If the Company
fails to maintain a Registrar, Paying Agent and/or agent for service of
notices and demands, the Trustee shall act as such Registrar, Paying Agent
and/or agent for service of notices and demands for so long as such failure
shall continue. The Company may remove any Agent upon written notice to
such Agent and the Trustee; provided that no such removal shall become
effective until (i) the acceptance of an appointment by a successor Agent
to such Agent as evidenced by an appropriate agency agreement entered into
by the Company and such successor Agent and delivered to the Trustee or
(ii) notification to the Trustee that the Trustee shall serve as such Agent
until the appointment of a successor Agent in accordance with clause (i) of
this proviso. The Company, any Subsidiary of the Company, or any Affiliate
of any of them may act as Paying Agent, Registrar or co-Registrar, and/or
agent for service of notice and demands; provided, however, that neither
the Company, a Subsidiary of the Company nor an Affiliate of any of them
shall act as Paying Agent in connection with the defeasance of the
Securities or the discharge of this Indenture under Article Eight.
The Company initially appoints the Trustee as Registrar, Paying
Agent, authenticating agent and agent for service of notice and demands.
If, at any time, the Trustee is not the Registrar, the Registrar shall make
available to the Trustee on or before each Interest Payment Date and at
such other times as the Trustee may reasonably request, the names and
addresses of the Holders as they appear in the Security Register.
SECTION 2.05. Paying Agent to Hold Money in Trust. Not later
-----------------------------------
than 10:00 a.m. New York City time on each due date of the principal of,
premium, if any, and interest on any Securities, the Company shall deposit
with the Paying Agent money in immediately available funds sufficient to
pay such principal, premium, if any, and interest so becoming due. The
Company shall require each Paying Agent, if any, other than the Trustee to
agree in writing that such Paying Agent shall hold in trust for the benefit
of the Holders or the Trustee all money held by the Paying Agent for the
payment of principal of, premium, if any, and interest on the Securities
(whether such money has been paid to it by the Company or any other obligor
on the Securities), and that such Paying Agent shall promptly notify the
Trustee of any default by the Company (or any other obligor on the
Securities) in making any such payment. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee and
account for any funds disbursed, and the Trustee may at any time during the
continuance of any payment default, upon written request to a Paying Agent,
require such Paying Agent to pay all money held by it to the Trustee and to
account for any funds disbursed. Upon doing so, the Paying Agent shall
have no further liability for the money so paid over to the Trustee. If
the Company or any Subsidiary of the Company or any Affiliate of any of
them acts as Paying Agent, it will, on or before each due date of any
principal of, premium, if any, or interest on the Securities, segregate and
hold in a separate trust fund for the benefit of the Holders a sum of money
sufficient to pay such principal, premium, if any, or interest so becoming
due until such sum of money shall be paid to such Holders or otherwise
disposed of as provided in this Indenture, and will promptly notify the
Trustee of its action or failure to act as required by this Section 2.05.
SECTION 2.06. Transfer and Exchange. The Securities are
---------------------
issuable only in registered form. A Holder may transfer a Security by
written application to the Registrar stating the name of the proposed
transferee and otherwise complying with the terms of this Indenture. No
such transfer shall be effected until, and such transferee shall succeed to
the rights of a Holder only upon registration of the transfer by the
Registrar in the Security Register. Prior to the registration of any
transfer by a Holder as provided herein, the Company, the Trustee, and any
agent of the Company shall treat the person in whose name the Security is
registered as the owner thereof for all purposes whether or not the
Security shall be overdue, and neither the Company, the Trustee, nor any
such agent shall be affected by notice to the contrary. Furthermore, any
Holder of a Global Security shall, by acceptance of such Global Security,
agree that transfers of beneficial interests in such Global Security may be
effected only through a book-entry system maintained by the Depositary (or
its agent), and that ownership of a beneficial interest in the Security
shall be required to be reflected in a book entry. When Securities are
presented to the Registrar or a co-Registrar with a request to register the
transfer or to exchange them for an equal principal amount at maturity of
Securities of other authorized denominations (including on exchange of
Securities for Exchange Securities), the Registrar shall register the
transfer or make the exchange as requested if its requirements for such
transactions are met; provided that no exchanges of Securities for Exchange
Securities shall occur until a Registration Statement shall have been
declared effective by the Commission and that any Securities that are
exchanged for Exchange Securities shall be cancelled by the Trustee. To
permit registrations of transfers and exchanges in accordance with the
terms, conditions and restrictions hereof, the Company shall execute and
the Trustee shall authenticate Securities at the Registrar's request. No
service charge shall be made to any Holder for any registration of transfer
or exchange or redemption of the Securities, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or other similar governmental charge payable upon transfers,
exchanges or redemptions pursuant to Section 2.11, 3.08, 4.11, 4.12 or
9.04).
The Registrar shall not be required (i) to issue, register the
transfer of or exchange any Security during a period beginning at the
opening of business 15 days before the day of the mailing of a notice of
redemption of Securities selected for redemption under Section 3.03 or
Section 3.08 and ending at the close of business on the day of such
mailing, or (ii) to register the transfer of or exchange any Security so
selected for redemption in whole or in part, except the unredeemed portion
of any Security being redeemed in part.
SECTION 2.07. Book-Entry Provisions for Global Securities.
-------------------------------------------
(a) Each U.S. Global Security and Offshore Global Security initially
shall (i) be registered in the name of the Depositary for such Global
Securities or the nominee of such Depositary, (ii) be delivered to the
Trustee as custodian for such Depositary and (iii) bear legends as set
forth in Section 2.02.
Members of, or participants in, the Depositary ("Agent Members")
-------------
shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depositary, or the Trustee as its
custodian, or under any Global Security, and the Depositary may be treated
by the Company, the Guarantor, the Trustee and any agent of the Company,
the Guarantor or the Trustee as the absolute owner of such Global Security
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Guarantor, the Trustee or any agent of the
Company, the Guarantor or the Trustee, from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or
impair, as between the Depositary and its Agent Members, the operation of
customary practices governing the exercise of the rights of a beneficial
owner of any Security.
(b) Transfers of a Global Security shall be limited to transfers
of such Global Security in whole, but not in part, to the Depositary, its
successors or their respective nominees. Interests of beneficial owners in
a Global Security may be transferred in accordance with the applicable
rules and procedures of the Depositary and the provisions of Section 2.08.
In addition, Offshore Physical Securities shall be transferred to all
beneficial owners in exchange for their beneficial interests in a U.S.
Global Securities or an Offshore Global Security, respectively, if (i) the
Depositary notifies the Company that it is unwilling or unable to continue
as Depositary for the U.S. Global Securities or the Offshore Global
Securities, as the case may be, and a successor depositary is not appointed
by the Company within 90 days of such notice or (ii) an Event of Default
has occurred and is continuing and the Registrar has received a request to
the foregoing effect from the Depositary.
(c) Any beneficial interest in one of the Global Securities that
is transferred to a person who takes delivery in the form of an interest in
the other Global Security will, upon transfer, cease to be an interest in
such Global Security and become an interest in the other Global Security
and, accordingly, will thereafter be subject to all transfer restrictions,
if any, and other procedures applicable to beneficial interests in such
other Global Security for as long as it remains such an interest.
(d) In connection with any transfer pursuant to paragraph (b) of
this Section of a portion of the beneficial interests in a U.S. Global
Security to beneficial owners who are required to hold U.S. Physical
Securities, the Registrar shall reflect on its books and records the date
and a decrease in the principal amount at maturity of such U.S. Global
Security in an amount equal to the principal amount at maturity of the
beneficial interest in such U.S. Global Security to be transferred, and the
Company shall execute, and the Trustee shall authenticate and deliver, one
or more U.S. Physical Securities of like tenor and amount.
(e) In connection with the transfer of the entire set of U.S.
Global Securities or Offshore Global Securities to beneficial owners
pursuant to paragraph (b) of this Section, the U.S. Global Securities or
Offshore Global Securities, as the case may be, shall be deemed to be
surrendered to the Trustee for cancellation, and the Company shall execute,
and the Trustee shall authenticate and deliver, to each beneficial owner
identified by the Depositary in exchange for its beneficial interest in the
U.S. Global Securities or Offshore Global Securities, as the case may be,
an equal aggregate principal amount at maturity of U.S. Physical Securities
or Offshore Physical Securities, as the case may be, of authorized
denominations.
(f) Any U.S. Physical Security delivered in exchange for an
interest in a U.S. Global Security pursuant to paragraph (b) or (d) of this
Section shall, except as otherwise provided by paragraph (f)(i)(x) and
paragraph (d) of Section 2.08, bear the legend regarding transfer
restrictions applicable to the U.S. Physical Security set forth in
Section 2.02.
(g) The registered holder of a Global Security may grant proxies
and otherwise authorize any person, including Agent Members and persons
that may hold interests through Agent Members, to take any action which a
Holder is entitled to take under this Indenture or the Securities.
(h) QIBs that are beneficial owners of interests in a Global
Security may receive Physical Securities (which shall bear the Private
Placement Legend if required by Section 2.02) in accordance with the
procedures of the Depositary. In connection with the execution,
authentication and delivery of such Physical Securities, the Registrar
shall reflect on its books and records a decrease in the principal amount
of the relevant Global Security equal to the principal amount of such
Physical Securities and the Company shall execute and the Trustee shall
authenticate and deliver one or more Physical Securities having an equal
aggregate principal amount.
SECTION 2.08. Special Transfer Provisions. Unless and until a
---------------------------
Security is exchanged for an Exchange Security in connection with an
effective Registration Statement pursuant to the Registration Rights
Agreement, the following provisions shall apply:
(a) Transfers to QIBs. The following provisions shall apply
-----------------
with respect to the registration of any proposed transfer of a U.S.
Physical Security or an interest in a U.S. Global Security to a QIB
(excluding Non-U.S. Persons):
(i) If the Security to be transferred consists of (x) U.S.
Physical Securities, the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the
box provided for on the form of Security stating, or has otherwise
advised the Company and the Registrar in writing, that the sale has
been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on the form
of Security stating, or has otherwise advised the Company and the
Registrar in writing, that it is purchasing the Security for its own
account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within
the meaning of Rule 144A, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as it has requested pursuant to
Rule 144A or has determined not to request such information and that
it is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration
provided by Rule 144A or (y) an interest in a U.S. Global Security,
the transfer of such interest may be effected only through the book
entry system maintained by the Depositary.
(ii) If the proposed transferor is an Agent Member, and the
Security to be transferred consists of U.S. Physical Securities, upon
receipt by the Registrar of the documents referred to in clause (i)
and instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount at maturity
of such U.S. Global Security in an amount equal to the principal
amount at maturity of the U.S. Physical Securities to be transferred,
and the Trustee shall cancel the Physical Security so transferred.
(b) Transfers of Interests in Offshore Global Securities or
--------------------------------------------------------
Offshore Physical Securities to U.S. Persons. The following provisions
--------------------------------------------
shall apply with respect to any transfer of interests in Offshore Global
Securities or Offshore Physical Securities to U.S. Persons:
(i) prior to the removal of the Private Placement Legend from
Offshore Global Securities or Offshore Physical Securities pursuant to
Section 2.02, the Registrar shall refuse to register such transfer;
and
(ii) after such removal, the Registrar shall register the
transfer of any such Security without requiring any additional
certification.
(c) Transfers to Non-U.S. Persons at Any Time. The following
-----------------------------------------
provisions shall apply with respect to any transfer of a Security to a Non-
U.S. Person:
(i) The Registrar shall register any proposed transfer to any
Non-U.S. Person if the Security to be transferred is a U.S. Physical
Security or an interest in a U.S. Global Security only upon receipt of
a certificate substantially in the form of Exhibit C from the proposed
transferor.
(ii) (a) If the proposed transferor is an Agent Member holding a
beneficial interest in a U.S. Global Security, upon receipt by the
Registrar of (x) the documents required by paragraph (i) and
(y) instructions in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and a decrease in the principal amount at maturity of
such U.S. Global Security in an amount equal to the principal amount
at maturity of the beneficial interest in the U.S. Global Security to
be transferred, and (b) if the proposed transferee is an Agent Member,
upon receipt by the Registrar of instructions given in accordance with
the Depositary's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and an increase in the
principal amount at maturity of such Offshore Global Security in an
amount equal to the principal amount at maturity of the U.S. Physical
Securities or the U.S. Global Securities, as the case may be, to be
transferred, and the Trustee shall cancel the Physical Security, if
any, so transferred or decrease the amount of the U.S. Global
Securities.
(d) Private Placement Legend. Upon the transfer, exchange or
------------------------
replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing
the Private Placement Legend, the Registrar shall deliver only Securities
that bear the Private Placement Legend unless either (i) the Private
Placement Legend is no longer required by Section 2.02, (ii) there is
delivered to the Registrar an Opinion of Counsel reasonably satisfactory to
the Company and the Trustee to the effect that neither such legend nor the
related restrictions on transfer are required in order to maintain
compliance with the provisions of the Securities Act or (iii) the Private
Placement Legend is no longer required by Section 2.02.
(e) General. By its acceptance of any Security bearing the
-------
Private Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture and
in the Private Placement Legend and agrees that it will transfer such
Security only as provided in this Indenture. The Registrar shall not
register a transfer of any Security unless such transfer complies with the
restrictions on transfer of such Security set forth in this Indenture. In
connection with any transfer of Securities to an Institutional Accredited
Investor, each Holder agrees by its acceptance of the Securities to furnish
the Registrar or the Company such certifications, legal opinions or other
information as either of them may reasonably require to confirm that such
transfer is being made pursuant to an exemption from, or a transaction not
subject to, the registration requirements of the Securities Act; provided
that the Registrar shall not be required to determine (but may rely on a
determination made by the Company with respect to) the sufficiency of any
such certifications, legal opinions or other information.
(f) Transfers to Non-QIB Institutional Accredited Investors.
-------------------------------------------------------
The following provisions shall apply with respect to the registration of
any proposed transfer of a Security to any Institutional Accredited
Investor which is not a QIB (excluding Non-U.S. Persons):
(i) The Registrar shall register the transfer of any Security,
whether or not such Security bears the Private Placement Legend, if
(x) the requested transfer is after the time period referred to in
Rule 144(k) under the Securities Act as in effect with respect to such
transfer or (y) the proposed transferee has delivered to the Registrar
(A) a certificate substantially in the form of Exhibit D hereto and
(B) if the aggregate Accreted Value of the Securities being
transferred is less than $250,000 at the time of such transfer, an
Opinion of Counsel acceptable to the Company that such transfer is in
compliance with the Securities Act.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in a U.S. Global Security, upon receipt by the
Registrar of (x) the documents, if any, required by paragraph (i) and
(y) instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and a decrease in the principal amount of such U.S.
Global Security in an amount equal to the principal amount of the
beneficial interest in the U.S. Global Security to be transferred, and
the Company shall execute, and the Trustee shall authenticate and
deliver, one or more U.S. Physical Securities of like tenor and
amount.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.07 or this
Section 2.08. The Company shall have the right to inspect and make copies
of all such letters, notices or other written communications at any
reasonable time upon the giving of reasonable written notice to the
Registrar.
SECTION 2.09. Replacement Securities. If a mutilated Security
----------------------
is surrendered to the Trustee or if the Holder claims that the Security has
been lost, destroyed or wrongfully taken, the Company shall issue and the
Trustee shall authenticate a replacement Security of like tenor and
principal amount and bearing a number not contemporaneously outstanding;
provided that the requirements of the second paragraph of Section 2.10 are
met. If required by the Trustee or the Company, an indemnity bond must be
furnished that is sufficient in the judgment of both the Trustee and the
Company to protect the Company, the Trustee or any Agent from any loss that
any of them may suffer if a Security is replaced. The Company may charge
such Holder for its expenses and the expenses of the Trustee in replacing a
Security. In case any such mutilated, lost, destroyed or wrongfully taken
Security has become or is about to become due and payable, the Company in
its discretion may pay such Security instead of issuing a new Security in
replacement thereof.
Every replacement Security is an additional obligation of the
Company and shall be entitled to the benefits of this Indenture.
SECTION 2.10. Outstanding Securities. Securities outstanding at
----------------------
any time are all Securities that have been authenticated by the Trustee
except for those cancelled by it, those delivered to it for cancellation
and those described in this Section 2.10 as not outstanding (the
"Outstanding Securities").
----------------------
If a Security is replaced pursuant to Section 2.09, it ceases to
be outstanding unless and until the Trustee and the Company receive proof
reasonably satisfactory to them that the replaced Security is held by a
bona fide purchaser.
If the Paying Agent (other than the Company or an Affiliate of
the Company) holds on the maturity date money sufficient to pay Securities
payable on that date, then on and after that date such Securities cease to
be outstanding and interest on them shall cease to accrue.
A Security does not cease to be outstanding because the Company
or one of its Affiliates holds such Security, provided, however, that, in
determining whether the Holders of the requisite principal amount at
maturity of the outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities
owned by the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor shall be disregarded and
deemed not to be outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which
the Trustee knows to be so owned shall be so disregarded. Securities so
owned which have been pledged in good faith may be regarded as outstanding
if the pledgee establishes to the satisfaction of the Trustee the pledgee's
right so to act with respect to such Securities and that the pledgee is not
the Company or any other obligor upon the Securities or any Affiliate of
the Company or of such other obligor.
SECTION 2.11. Temporary Securities. Until definitive Securities
--------------------
are ready for delivery, the Company may prepare and the Trustee shall
authenticate temporary Securities. Temporary Securities shall be
substantially in the form of definitive Securities but may have insertions,
substitutions, omissions and other variations determined to be appropriate
by the Officers executing the temporary Securities, as evidenced by their
execution of such temporary Securities. If temporary Securities are
issued, the Company will cause definitive Securities to be prepared without
unreasonable delay. After the preparation of definitive Securities, the
temporary Securities shall be exchangeable for definitive Securities upon
surrender of the temporary Securities at the office or agency of the
Company designated for such purpose pursuant to Section 4.02, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount at
maturity of definitive Securities of authorized denominations. Until so
exchanged, the temporary Securities shall be entitled to the same benefits
under this Indenture as definitive Securities.
SECTION 2.12. Cancellation. The Company at any time may deliver
------------
to the Trustee for cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee for cancellation any Securities
previously authenticated hereunder which the Company has not issued and
sold. The Registrar and the Paying Agent shall forward to the Trustee any
Securities surrendered to them for transfer, exchange or payment. The
Trustee shall cancel all Securities surrendered for transfer, exchange,
payment or cancellation and shall destroy them in accordance with its
normal procedure. The Company shall not issue new Securities to replace
Securities it has paid in full or delivered to the Trustee for
cancellation.
SECTION 2.13. CUSIP Numbers. The Company in issuing the
-------------
Securities may use "CUSIP" and "CINS" numbers (if then generally in use),
and the Trustee shall use CUSIP numbers or CINS numbers, as the case may
be, in notices of redemption or exchange as a convenience to Holders;
provided that any such notice shall state that no representation is made as
to the correctness of such numbers either as printed on the Securities or
as contained in any notice of redemption or exchange and that reliance may
be placed only on the other identification numbers printed on the
Securities.
SECTION 2.14. Defaulted Interest. If the Company defaults in a
------------------
payment of interest on the Securities, it shall pay, or shall deposit with
the Paying Agent money in immediately available funds sufficient to pay the
defaulted interest, plus (to the extent lawful) interest on the defaulted
interest, to the Persons who are Holders on a subsequent special record
date. A special record date, as used in this Section 2.14 with respect to
the payment of any defaulted interest, shall mean the 15th day next
preceding the date fixed by the Company for the payment of defaulted
interest, whether or not such day is a Business Day. At least 15 days
before the subsequent special record date, the Company shall mail to each
Holder and to the Trustee a notice that states the subsequent special
record date, the payment date and the amount of defaulted interest to be
paid.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of Redemption. (a) The Securities may be
-------------------
redeemed at the election of the Company, in whole or in part, at any time
and from time to time on or after March 15, 2002 and prior to maturity,
upon not less than 30 nor more than 60 days' prior notice mailed by first-
class mail to each Holder's last address as it appears in the Security
Register, at the following Redemption Prices (expressed in percentages of
their principal amount at maturity), plus accrued and unpaid interest, if
any, to the Redemption Date (subject to the right of Holders of record on
the relevant Regular Record Date that is on or prior to the Redemption Date
to receive interest due on an Interest Payment Date that is on or prior to
the Redemption Date) if redeemed during the 12-month period commencing on
March 15 of the applicable year set forth below:
Redemption
Year Price
---- -------------
2002 105.81250%
2003 102.90625
2004 and thereafter 100.00000
(b) In addition, at any time on or prior to March 15, 2000, the
Company may, at its option from time to time, redeem Securities having an
aggregate principal amount of up to 35% of the aggregate principal amount
of all issued Securities, at a redemption price equal to 111 5/8% of the
Accreted Value thereof on the Redemption Date, with proceeds of one or more
Public Equity Offerings of Common Stock of (A) the Guarantor or (B) the
Company, provided that (i) with respect to a Public Equity Offering
referred to in clause (A) above, cash proceeds of such Public Equity
Offering in an amount sufficient to effect the redemption of Securities to
be so redeemed are contributed by the Guarantor to the Company prior to
such redemption and used by the Company to effect such redemption and
(ii) such redemption occurs within 180 days after consummation of such
Public Equity Offering.
SECTION 3.02. Notices to Trustee. If the Company elects to
------------------
redeem Securities pursuant to Section 3.01, it shall notify the Trustee in
writing of the Redemption Date and the principal amount at maturity of
Securities to be redeemed.
The Company shall give each notice provided for in this Section
3.02 in an Officers' Certificate at least 60 days before the Redemption
Date (unless a shorter period shall be satisfactory to the Trustee).
SECTION 3.03. Selection of Securities to Be Redeemed. If less
--------------------------------------
than all of the Securities are to be redeemed at any time, the Trustee
shall select the Securities to be redeemed in compliance with the
requirements, as certified to it by the Company, of the principal national
securities exchange, if any, on which the Securities are listed or, if the
Securities are not listed on a national securities exchange, on a pro rata
basis or by lot; provided that no Securities of $1,000 in principal amount
at maturity or less shall be redeemed in part.
The Trustee shall make the selection from the Securities
outstanding and not previously called for redemption. Securities in
denominations of $1,000 in principal amount at maturity may only be
redeemed in whole. The Trustee may select for redemption portions (equal
to $1,000 in principal amount at maturity or any integral multiple thereof)
of Securities that have denominations larger than $1,000 in principal
amount at maturity. Provisions of this Indenture that apply to Securities
called for redemption also apply to portions of Securities called for
redemption. The Trustee shall notify the Company and the Registrar
promptly in writing of the Securities or portions of Securities to be
called for redemption.
SECTION 3.04. Notice of Redemption. With respect to any
--------------------
redemption of Securities pursuant to Section 3.01, at least 30 days but not
more than 60 days before a Redemption Date, the Company shall mail a notice
of redemption by first class mail to each Holder whose Securities are to be
redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the name and address of the Paying Agent;
(iv) that Securities called for redemption must be surrendered to
the Paying Agent in order to collect the Redemption Price;
(v) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue
on and after the Redemption Date and the only remaining right of the
Holders is to receive payment of the Redemption Price plus accrued
interest to the Redemption Date upon surrender of the Securities to
the Paying Agent;
(vi) that, if any Security is being redeemed in part, the portion
of the principal amount at maturity (equal to $1,000 in principal
amount at maturity or any integral multiple thereof) of such Security
to be redeemed and that, on and after the Redemption Date, upon
surrender of such Security, a new Security or Securities in principal
amount at maturity equal to the unredeemed portion thereof will be
reissued; and
(vii) that, if any Security contains a CUSIP number as
provided in Section 2.13, no representation is being made as to the
correctness of the CUSIP number either as printed on the Securities or
as contained in the notice of redemption and that reliance may be
placed only on the other identification numbers printed on the
Securities.
At the Company's request (which request may be revoked by the
Company at any time prior to the time at which the Trustee shall have given
such notice to the Holders), made in writing to the Trustee at least
60 days (or such shorter period as shall be satisfactory to the Trustee)
before a Redemption Date, the Trustee shall give the notice of redemption
in the name and at the expense of the Company. If, however, the Company
gives such notice to the Holders, the Company shall concurrently deliver to
the Trustee an Officers' Certificate stating that such notice has been
given.
SECTION 3.05. Effect of Notice of Redemption. Once notice of
------------------------------
redemption is mailed, Securities called for redemption become due and
payable on the Redemption Date and at the Redemption Price. Upon surrender
of any Securities to the Paying Agent, such Securities shall be paid at the
Redemption Price, plus accrued interest, if any, to the Redemption Date.
Notice of redemption shall be deemed to be given when mailed,
whether or not the Holder receives the notice. In any event, failure to
give such notice, or any defect therein, shall not affect the validity of
the proceedings for the redemption of Securities held by Holders to whom
such notice was properly given.
SECTION 3.06. Deposit of Redemption Price. On or prior to any
---------------------------
Redemption Date, the Company shall deposit with the Paying Agent (or, if
the Company is acting as its own Paying Agent, shall segregate and hold in
trust as provided in Section 2.05) money sufficient to pay the Redemption
Price of and accrued interest on all Securities to be redeemed on that date
other than Securities or portions thereof called for redemption on that
date that have been delivered by the Company to the Trustee for
cancellation.
SECTION 3.07. Payment of Securities Called for Redemption. If
-------------------------------------------
notice of redemption has been given in the manner provided above, the
Securities or portion of Securities specified in such notice to be redeemed
shall become due and payable on the Redemption Date at the Redemption Price
stated therein, together with accrued interest to such Redemption Date, and
on and after such date (unless the Company shall default in the payment of
such Securities at the Redemption Price and accrued interest to the
Redemption Date, in which case the principal, until paid, shall bear
interest from the Redemption Date at the rate prescribed in the
Securities), such Securities shall cease to accrue interest. Upon
surrender of any Security for redemption in accordance with a notice of
redemption, such Security shall be paid and redeemed by the Company at the
Redemption Price, together with accrued interest, if any, to the Redemption
Date; provided that installments of interest whose Stated Maturity is on or
prior to the Redemption Date shall be payable to the Holders registered as
such at the close of business on the relevant Regular Record Date.
SECTION 3.08. Securities Redeemed in Part. Upon surrender of
---------------------------
any Security that is redeemed in part, the Company shall execute and the
Trustee shall authenticate and deliver to the Holder a new Security equal
in principal amount at maturity to the unredeemed portion of such
surrendered Security.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities. The Company shall pay the
---------------------
principal of, premium, if any, and interest on the Securities on the dates
and in the manner provided in the Securities and this Indenture. An
installment of principal, premium, if any, or interest shall be considered
paid on the date due if the Trustee or Paying Agent (other than the
Company, a Subsidiary of the Company, or any Affiliate of any of them)
holds on that date money designated for and sufficient to pay the
installment. If the Company or any Subsidiary of the Company or any
Affiliate of any of them, acts as Paying Agent, an installment of
principal, premium, if any, or interest shall be considered paid on the due
date if the entity acting as Paying Agent complies with the last sentence
of Section 2.05. As provided in Section 6.09, upon any bankruptcy or
reorganization procedure relative to the Company, the Trustee shall serve
as the Paying Agent and conversion agent, if any, for the Securities.
The Company shall pay interest on overdue principal, premium, if
any, and interest on overdue installments of interest, to the extent
lawful, at the rate per annum specified in the Securities.
SECTION 4.02. Maintenance of Office or Agency. The Company will
-------------------------------
maintain in the Borough of Manhattan, the City of New York an office or
agency where Securities may be surrendered for registration of transfer or
exchange or for presentation for payment and where notices and demands to
or upon the Company in respect of the Securities and this Indenture may be
served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at
any time the Company shall fail to maintain any such required office or
agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 11.02.
The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented or
surrendered for any or all such purposes and may from time to time rescind
such designations; provided that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or
agency in the Borough of Manhattan, the City of New York for such purposes.
The Company will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such
other office or agency.
The Company hereby initially designates the Corporate Trust
Office of the Trustee, located in the Borough of Manhattan, the City of New
York, as such office of the Company in accordance with Section 2.04.
SECTION 4.03. Limitation on Indebtedness. (a) The Guarantor
--------------------------
will not, and will not permit any of its Restricted Subsidiaries to, Incur
any Indebtedness (other than the Securities, the Guarantor's Guarantee
thereof and Indebtedness existing on the Closing Date); provided that the
Guarantor and the Company may Incur Indebtedness if, after giving effect to
the Incurrence of such Indebtedness and the receipt and application of the
proceeds therefrom, the Indebtedness to EBITDA Ratio would be greater than
zero and less than 5:1.
Notwithstanding the foregoing, the Guarantor and any Restricted
Subsidiary (except as specified below) may Incur each and all of the
following:
(i) Indebtedness of the Guarantor or the Company outstanding at
any time, which Indebtedness generates gross proceeds to the Guarantor
or the Company of up to $400 million, less the gross proceeds of
Indebtedness permanently repaid as provided under Section 4.11;
provided that (A) Indebtedness generating gross proceeds to the
Guarantor or the Company of up to $150 million may be Incurred under
this clause (i) with no additional requirements and (B) prior to, or
contemporaneously with, the Incurrence of Indebtedness generating all
or any part of the remaining $250 million of gross proceeds referred
to under this clause (i), the Guarantor or the Company shall have
issued or shall issue preferred stock (which has a final stated
redemption date later than the Stated Maturity of the 13 1/2% Notes)
generating an amount of gross proceeds equal to or greater than the
amount of Indebtedness so Incurred and (x) with respect to preferred
stock issued on the same date as Indebtedness Incurred under this
clause (a)(i)(B), having a dividend rate of no more than 2.75
percentage points higher than the interest rate on the Indebtedness so
Incurred, and (y) with respect to preferred stock issued at any other
time which will be applied to satisfy the criteria under this clause
(a)(i)(B), having a secondary market yield, on the same date as the
Indebtedness so Incurred, which a nationally recognized investment
banking firm certifies to the Trustee is no more than 2.75 percentage
points higher than the interest rate on the Indebtedness that is being
Incurred pursuant to this clause (a)(i)(B);
(ii) Indebtedness to the Guarantor or any of its Wholly Owned
Restricted Subsidiaries; provided that any subsequent issuance or
transfer of any Capital Stock which results in any such Wholly Owned
Restricted Subsidiary ceasing to be a Wholly Owned Restricted
Subsidiary or any subsequent transfer of such Indebtedness (other than
to the Guarantor or another Wholly Owned Restricted Subsidiary) shall
be deemed, in each case, to constitute an Incurrence of such
Indebtedness not permitted by this clause (ii);
(iii) Indebtedness issued in exchange for, or the net
proceeds of which are used to refinance or refund, then outstanding
Indebtedness, other than Indebtedness Incurred under clause (i), (ii),
(v), (vi), (viii), (ix), (xi) or (xii) of this paragraph, and any
refinancings thereof in an amount not to exceed the amount so
refinanced or refunded (plus premiums, accrued interest, fees and
expenses); provided that Indebtedness the proceeds of which are used
to refinance or refund the Securities or Indebtedness that is pari
passu with, or subordinated in right of payment to, the Securities or
the Security Guarantee shall only be permitted under this clause (iii)
if (A) in case the Securities are refinanced in part or the
Indebtedness to be refinanced is pari passu with the Securities or the
Security Guarantee, as the case may be, such new Indebtedness, by its
terms or by the terms of any agreement or instrument pursuant to which
such new Indebtedness is outstanding, is expressly made pari passu
with, or subordinate in right of payment to, the remaining Securities
or the Security Guarantee, as the case may be, (B) in case the
Indebtedness to be refinanced is subordinated in right of payment to
the Securities or the Security Guarantee, as the case may be, such new
Indebtedness, by its terms or by the terms of any agreement or
instrument pursuant to which such new Indebtedness is issued or
remains outstanding, is expressly made subordinate in right of payment
to the Securities or the Security Guarantee, as the case may be, at
least to the extent that the Indebtedness to be refinanced is
subordinated to the Securities or the Security Guarantee, as the case
may be and (C) such new Indebtedness, determined as of the date of
Incurrence of such new Indebtedness, does not mature prior to the
Stated Maturity of the Indebtedness to be refinanced or refunded, and
the Average Life of such new Indebtedness is at least equal to the
remaining Average Life of the Indebtedness to be refinanced or
refunded; and provided further that in no event may Indebtedness of
the Guarantor or the Company be refinanced by means of any
Indebtedness of any Restricted Subsidiary of the Guarantor or the
Company, as the case may be, pursuant to this clause (iii);
(iv) Indebtedness (A) in respect of performance, surety or appeal
bonds provided in the ordinary course of business, (B) under Currency
Agreements and Interest Rate Agreements; provided that such agreements
do not increase the Indebtedness of the obligor outstanding at any
time other than as a result of fluctuations in foreign currency
exchange rates or interest rates or by reason of fees, indemnities and
compensation payable thereunder, and (C) arising from agreements
providing for indemnification, adjustment of purchase price or similar
obligations, or from Guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of the Company or any of
its Restricted Subsidiaries pursuant to such agreements, in any case
Incurred in connection with the disposition of any business, assets or
Restricted Subsidiary of the Company (other than Guarantees of
Indebtedness Incurred by any Person acquiring all or any portion of
such business, assets or Restricted Subsidiary of the Company for the
purpose of financing such acquisition), in a principal amount at
maturity not to exceed the gross proceeds actually received by the
Company or any Restricted Subsidiary in connection with such
disposition;
(v) Indebtedness of the Guarantor or, to the extent the proceeds
referred to below are contributed to the Company, the Company not to
exceed, at any one time outstanding, twice the amount of Net Cash
Proceeds received by the Guarantor after the Closing Date from the
issuance and sale of its Capital Stock (other than Redeemable Stock);
provided that such Indebtedness does not mature prior to the Stated
Maturity of the Securities and has an Average Life longer than the
Securities;
(vi) Strategic Investor Subordinated Indebtedness;
(vii) Indebtedness of the Guarantor or the Company, to the
extent the proceeds thereof are immediately used after the Incurrence
thereof to purchase Securities, 13 1/2% Notes and/or 12 1/2% Notes
tendered in an Offer to Purchase or an offer to purchase, as the case
may be, made as a result of a Change of Control or a change of
control, as the case may be;
(viii) Indebtedness of any Restricted Subsidiary of the
Guarantor Incurred pursuant to any credit agreement (including
equipment leasing or financing agreements) of such Restricted
Subsidiary in effect on August 8, 1995 (or any agreement refinancing
Indebtedness under such credit agreement), up to the amount of the
commitment under such credit agreement on August 8, 1995;
(ix) Indebtedness of the Guarantor or the Company, in an amount
not to exceed $100 million at any one time outstanding, consisting of
Capitalized Lease Obligations with respect to assets that are used or
useful in the telecommunications business of the Guarantor or its
Restricted Subsidiaries;
(x) Indebtedness Incurred to defease the Securities;
(xi) Indebtedness of any Person that becomes a Restricted
Subsidiary of the Guarantor after March 31, 1996, which Indebtedness
exists or for which there is a commitment to lend at the time such
Person becomes a Restricted Subsidiary and subsequent Incurrences
thereof ("Acquired Indebtedness"), in an accreted amount not to exceed
---------------------
$50 million at any one time outstanding in the aggregate for all such
Restricted Subsidiaries; provided that such Acquired Indebtedness does
not exceed 65% of the consideration (calculated by including the
Acquired Indebtedness as a part of such consideration) for the
acquisition of such Person;
(xii) Indebtedness of the Guarantor or the Company, in an
amount not to exceed $30 million at any one time outstanding,
consisting of letters of credit and similar arrangements used to
support obligations of the Guarantor or any of its Restricted
Subsidiaries with respect to the acquisition of (by purchase, lease or
otherwise), construction of, or improvements on, assets that will be
used or useful in the telecommunications business of the Guarantor or
its Restricted Subsidiaries; and
(xiii) Indebtedness Incurred to finance the cost (including
the cost of design, development, construction, installation or
integration) of assets, equipment or inventory used or useful in the
telecommunications business of the Guarantor or any of its Restricted
Subsidiaries that is acquired by the Guarantor or any of its
Restricted Subsidiaries after the Closing Date.
(b) For purposes of determining any particular amount of
Indebtedness under this Section 4.03, (1) Indebtedness of any Restricted
Subsidiary of the Guarantor Incurred on or prior to the Closing Date
pursuant to any credit agreement (including equipment leasing or financing
agreements) of such Restricted Subsidiary in effect on the Closing Date
shall be treated as Incurred pursuant to Section 4.03(a)(viii), (2) any
Liens granted pursuant to the equal and ratable provisions referred to in
the first paragraph of Section 4.09 shall not be treated as Indebtedness
and (3) Guarantees, Liens or obligations with respect to letters of credit
supporting Indebtedness otherwise included in the determination of such
particular amount shall not be included. For purposes of determining
compliance with this Section 4.03, in the event that an item of
Indebtedness meets the criteria of more than one of the types of
Indebtedness described in clauses (i) through (xiii) of Section 4.03(a),
the Company, in its sole discretion, shall classify such item of
Indebtedness and only be required to include the amount and type of such
Indebtedness in one of such clauses.
Notwithstanding any other provision of this Section 4.03, (i) the
maximum amount of Indebtedness that the Guarantor or any Restricted
Subsidiary may Incur pursuant to this Section 4.03 shall not be deemed to
be exceeded due solely to fluctuations in the exchange rates of currencies
and (ii) the Guarantor and the Company may not Incur any Indebtedness that
is expressly subordinated to any other Indebtedness of the Guarantor or the
Company, as the case may be, unless such Indebtedness, by its terms or the
terms of any agreement or instrument pursuant to which such Indebtedness is
outstanding, is also expressly made subordinate to the Security Guarantee
or the Securities, as the case may be, at least to the extent that such
Indebtedness is subordinated to such other Indebtedness; provided that the
limitation in this clause (ii) shall not apply to distinctions between
categories of unsubordinated Indebtedness which exist by reason of (a) any
liens or other encumbrances arising or created in respect of some but not
all unsubordinated Indebtedness, (b) intercreditor agreements between
holders of different classes of unsubordinated Indebtedness or (c)
different maturities or prepayment provisions.
SECTION 4.04. Limitation on Restricted Payments. So long as any
---------------------------------
of the Securities are outstanding, the Guarantor will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, (i) declare or
pay any dividend or make any distribution on its Capital Stock held by
Persons other than the Guarantor or any of its Restricted Subsidiaries
(other than dividends or distributions payable solely in shares of its or
such Restricted Subsidiary's Capital Stock (other than Redeemable Stock) of
the same class held by such holders or in options, warrants or other rights
to acquire such shares of Capital Stock and other than pro rata dividends
or distributions on Common Stock of Restricted Subsidiaries), (ii)
purchase, redeem, retire or otherwise acquire for value any shares of
Capital Stock of the Guarantor or any Restricted Subsidiary (including
options, warrants or other rights to acquire such shares of Capital Stock)
held by Persons other than the Guarantor or any of its Wholly Owned
Restricted Subsidiaries (except for Capital Stock of ChoiceCom, MTN,
StarCom, Ohio LINX, FOTI and Zycom to the extent the consideration therefor
consists solely of Common Stock (other than Redeemable Stock) of the
Guarantor transferred in compliance with the Securities Act), (iii) make
any voluntary or optional principal payment, or voluntary or optional
redemption, repurchase, defeasance or other acquisition or retirement for
value, of Indebtedness of the Company or the Guarantor that is subordinated
in right of payment to the Securities or the Security Guarantee, as the
case may be, or (iv) make any Investment, other than a Permitted
Investment, in any Person (such payments or any other actions described in
clauses (i) through (iv) being collectively "Restricted Payments") if, at
-------------------
the time of, and after giving effect to, the proposed Restricted Payment:
(A) a Default or Event of Default shall have occurred and be continuing,
(B) the Guarantor could not Incur at least $1.00 of Indebtedness under the
first paragraph of Section 4.03(a) or (C) the aggregate amount expended for
all Restricted Payments (the amount so expended, if other than in cash, to
be determined in good faith by the Board of Directors, whose determination
shall be conclusive and evidenced by a Board Resolution) after the date of
this Indenture shall exceed the sum of (1) 50% of the aggregate amount of
the Adjusted Consolidated Net Income (or, if the Adjusted Consolidated Net
Income is a loss, minus 100% of such amount) (determined by excluding
income resulting from transfers of assets by the Guarantor or a Restricted
Subsidiary to an Unrestricted Subsidiary) accrued on a cumulative basis
during the period (taken as one accounting period) beginning on the first
day of the fiscal quarter immediately following the Closing Date and ending
on the last day of the last fiscal quarter preceding the Transaction Date
for which reports have been filed pursuant to Section 4.18 plus (2) the
aggregate Net Cash Proceeds received by the Guarantor after the Closing
Date from the issuance and sale permitted by this Indenture of its Capital
Stock (other than Redeemable Stock) to a Person who is not a Subsidiary of
the Guarantor, or from the issuance to a Person who is not a Subsidiary of
the Guarantor of any options, warrants or other rights to acquire Capital
Stock of the Guarantor (in each case, exclusive of any Redeemable Stock or
any options, warrants or other rights that are redeemable at the option of
the holder, or are required to be redeemed, prior to the Stated Maturity of
the Securities) plus (3) an amount equal to the net reduction in
Investments (other than reductions in Permitted Investments) in any Person
resulting from payments of interest on Indebtedness, dividends, repayments
of loans or advances, or other transfers of assets, in each case to the
Guarantor or any Restricted Subsidiary (except to the extent any such
payment is included in the calculation of Adjusted Consolidated Net
Income), or from redesignations of Unrestricted Subsidiaries as Restricted
Subsidiaries (valued in each case as provided in the definition of
"Investments"), not to exceed the amount of Investments previously made by
the Guarantor and its Restricted Subsidiaries in such Person.
The foregoing provision shall not be violated by reason of:
(i) the payment of any dividend within 60 days after the date of
declaration thereof if, at said date of declaration, such payment
would comply with the foregoing paragraph;
(ii) the redemption, repurchase, defeasance or other acquisition
or retirement for value of Indebtedness that is subordinated in right
of payment to the Securities or the Security Guarantee, as the case
may be, including premium, if any, and accrued and unpaid interest,
with the proceeds of, or in exchange for, Indebtedness Incurred under
clause (iii) of the second paragraph of Section 4.03(a);
(iii) the repurchase, redemption or other acquisition of
Capital Stock of the Guarantor or the Company (or options, warrants or
other rights to acquire such Capital Stock) and with respect to any
preferred stock of the Company, the payment of accrued dividends
thereon in exchange for, or out of the proceeds of a substantially
concurrent issuance or sale of, shares of Capital Stock (other than
Redeemable Stock) of the Guarantor or the Company; provided that the
redemption of any preferred stock and the payment of accrued dividends
thereon pursuant to any mandatory redemption feature thereof and any
redemption of any other Capital Stock and with respect to any
preferred stock, the payment of accrued dividends thereon (or options,
warrants or other rights to acquire such Capital Stock) shall be
deemed to be "substantially concurrent" with such issuance and sale if
the required notice with respect to such redemption is irrevocably
given by a date which is no later than five Business Days after
receipt of the proceeds of such issuance and sale and such redemption
and payment is consummated within the period provided for in the
documents providing for the redemption of such preferred stock or the
documents governing the redemption of such other Capital Stock, as the
case may be;
(iv) the acquisition of Indebtedness of the Company or the
Guarantor which is subordinated in right of payment to the Securities
or the Security Guarantee, as the case may be, in exchange for, or out
of the proceeds of, a substantially concurrent offering of, shares of
the Capital Stock of the Guarantor (other than Redeemable Stock);
(v) payments or distributions, in the nature of satisfaction of
dissenters' rights, pursuant to or in connection with a consolidation,
merger or transfer of assets that complies with the provisions of this
Indenture applicable to mergers, consolidations and transfers of all
or substantially all of the property and assets of the Company or the
Guarantor;
(vi) Investments, not to exceed $10 million in the aggregate,
each evidenced by a senior promissory note payable to the Company that
provides that it will become due and payable prior to (or, in the case
of acceleration, concurrently with) any required repayment (including
pursuant to an Offer to Purchase in connection with a Change of
Control) of the Securities;
(vii) Investments, not to exceed $5 million in the aggregate,
that meet the requirements of clause (vi) of this Section 4.04;
provided that the Board of Directors of the Guarantor shall have
determined, in good faith, that each such Investment under this clause
(vii) will enable the Guarantor, the Company or one of their
Restricted Subsidiaries to obtain additional business that it might
not be able to obtain without the making of such Investment;
(viii) with respect to preferred stock permitted to be issued
and sold under Section 4.06 of this Indenture, the payment (A) of
dividends on such preferred stock in additional shares of preferred
stock and (B) of cash dividends on such preferred stock and accrued
interest on unpaid dividends, in each case after May 1, 2001;
(ix) the repurchase, in the event of a Change of Control, of
preferred stock of the Company or the Guarantor and Indebtedness of
the Company or the Guarantor into which such preferred stock has been
exchanged; provided that prior to repurchasing such preferred stock or
Indebtedness, the Company or the Guarantor, as the case may be, shall
have made an offer (the "Change of Control Offer") to repurchase the
-----------------------
Securities in accordance with the terms of this Indenture (and an
offer to repurchase other Indebtedness, if required by the terms
thereof, in accordance with the indenture or other document governing
such other Indebtedness) and shall have accepted and paid for any
Securities (and other Indebtedness) properly tendered in connection
with such Change of Control Offer for the Securities or change of
control offer for such other Indebtedness; and
(x) the issuance of Indebtedness permitted to be issued under
this Indenture in exchange for preferred stock; provided that the
Incurrence of such Indebtedness complies with Section 4.03;
provided that, except in the case of clauses (i) and (iii), no Default or
Event of Default shall have occurred and be continuing or occur as a
consequence of the actions or payments set forth therein.
Each Restricted Payment permitted pursuant to the preceding
paragraph (other than the Restricted Payment referred to in clauses (ii),
(viii)(A) and (x) thereof), and the Net Cash Proceeds from any issuance of
Capital Stock referred to in clause (iii) or (iv) shall be included in
calculating whether the conditions of clause (C) of the first paragraph of
this Section 4.04 have been met with respect to any subsequent Restricted
Payments. Notwithstanding the foregoing, in the event the proceeds of an
issuance of Capital Stock of the Guarantor are used for the redemption,
repurchase or other acquisition of the Securities, or Indebtedness that is
pari passu with the Securities, then the Net Cash Proceeds of such issuance
shall be included in clause (C) of the first paragraph of this Section 4.04
only to the extent such proceeds are not used for such redemption,
repurchase or other acquisition of such Indebtedness.
SECTION 4.05. Limitation on Dividend and Other Payment
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Restrictions Affecting Restricted Subsidiaries. So long as any Securities
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are outstanding, the Guarantor will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary to (i) pay dividends or make any other
distributions permitted by applicable law on any Capital Stock of such
Restricted Subsidiary owned by the Guarantor or any other Restricted
Subsidiary, (ii) pay any Indebtedness owed to the Guarantor or any other
Restricted Subsidiary, (iii) make loans or advances to the Guarantor or any
other Restricted Subsidiary or (iv) transfer any of its property or assets
to the Guarantor or any other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions:
(i) existing on the Closing Date in this Indenture or any other
agreement in effect on the Closing Date, and any extensions,
refinancings, renewals or replacements of such agreements; provided
that the encumbrances and restrictions in any such extensions,
refinancings, renewals or replacements are no less favorable in any
material respect to the Holders than those encumbrances or
restrictions that are then in effect and that are being extended,
refinanced, renewed or replaced;
(ii) existing under or by reason of applicable law;
(iii) existing with respect to any Person or the property or
assets of such Person acquired by the Guarantor or any Restricted
Subsidiary, existing at the time of such acquisition and not incurred
in contemplation thereof, which encumbrances or restrictions are not
applicable to any Person or the property or assets of any Person other
than such Person or the property or assets of such Person so acquired;
(iv) in the case of clause (iv) of the first paragraph of this
Section 4.05, (A) that restrict in a customary manner the subletting,
assignment or transfer of any property or asset that is a lease,
license, conveyance or contract or similar property or asset, (B)
existing by virtue of any transfer of, agreement to transfer, option
or right with respect to, or Lien on, any property or assets of the
Guarantor or any Restricted Subsidiary not otherwise prohibited by
this Indenture or (C) arising or agreed to in the ordinary course of
business, not relating to any Indebtedness, and that do not,
individually or in the aggregate, detract from the value of property
or assets of the Guarantor or any Restricted Subsidiary in any manner
material to the Guarantor or any Restricted Subsidiary;
(v) with respect to a Restricted Subsidiary and imposed pursuant
to an agreement that has been entered into for the sale or disposition
of all or substantially all of the Capital Stock of, or property and
assets of, such Restricted Subsidiary; or
(vi) imposed pursuant to preferred stock of the Company issued
under clause (vi) of Section 4.06, or exchange debentures or exchange
notes of the Company issued in exchange therefor; provided that
(A) such restrictions may include a prohibition (x) on payments on
Capital Stock upon liquidation, winding-up and dissolution of the
Company and (y) on the payment of dividends on and the making of any
distribution on, or the purchase, redemption, retirement or other
acquisition for value of Capital Stock of the Company if dividends or
other amounts on such preferred stock are unpaid and (B) any
restrictions imposed pursuant to preferred stock of the Company other
than pursuant to clause (A) shall be no more restrictive than the
restrictions contained in this Indenture (assuming that references to
the Guarantor in this Indenture were replaced with references to the
Company).
Nothing contained in this Section 4.05 shall prevent the
Guarantor or any Restricted Subsidiary from (1) creating, incurring,
assuming or suffering to exist any Liens otherwise permitted in Section
4.09 or (2) restricting the sale or other disposition of property or assets
of the Guarantor or any of its Restricted Subsidiaries that secure
Indebtedness of the Guarantor or any of its Restricted Subsidiaries.
SECTION 4.06. Limitation on the Issuances and Sale of Capital
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Stock of Restricted Subsidiaries. The Guarantor will not sell, and will
--------------------------------
not permit any Restricted Subsidiary, directly or indirectly, to issue or
sell, any shares of Capital Stock of a Restricted Subsidiary (including
options, warrants or other rights to purchase shares of such Capital Stock)
except (i) to the Guarantor or a Wholly Owned Restricted Subsidiary; (ii)
issuances or sales to foreign nationals of shares of Capital Stock of
foreign Restricted Subsidiaries, to the extent required by applicable law;
(iii) if, immediately after giving effect to such issuance or sale, such
Restricted Subsidiary would no longer constitute a Restricted Subsidiary;
(iv) with respect to Common Stock of ChoiceCom, MTN, StarCom and Zycom;
provided that the proceeds of any such sale under clause (iv) shall be
applied in accordance with clause (A) or (B) of the first paragraph of
Section 4.11; (v) with respect to Common Stock of FOTI; provided that FOTI
shall not retain any net proceeds from such sales or issuances in excess of
$10 million in the aggregate and any net proceeds in excess of such $10
million shall be received by, or paid promptly by FOTI to, the Guarantor,
the Company or any Wholly Owned Restricted Subsidiary of the Guarantor; and
(vi) with respect to (A) preferred stock of the Company having an initial
liquidation preference of up to $250 million and (B) any preferred stock of
the Company issued as dividends on such preferred stock; provided that such
preferred stock does not require the payment of cash dividends prior to May
1, 2001.
SECTION 4.07. Limitation on Issuances of Guarantees by
-----------------------------------------
Restricted Subsidiaries. The Guarantor will not permit any Restricted
-----------------------
Subsidiary, directly or indirectly, to Guarantee any Indebtedness of the
Company or any Indebtedness of the Guarantor ("Guaranteed Indebtedness"),
-----------------------
unless (i) such Restricted Subsidiary simultaneously executes and delivers
a supplemental indenture to this Indenture providing for a Guarantee (a
"Subsidiary Guarantee") of payment of the Securities by such Restricted
--------------------
Subsidiary and (ii) such Restricted Subsidiary waives and will not in any
manner whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the
Guarantor, the Company or any other Restricted Subsidiary as a result of
any payment by such Restricted Subsidiary under its Subsidiary Guarantee;
provided that this paragraph shall not be applicable to any Guarantee of
any Restricted Subsidiary that (x) existed at the time such Person became a
Restricted Subsidiary and (y) was not Incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary. If the
Guaranteed Indebtedness is (A) pari passu with the Securities or the
Security Guarantee, then the Guarantee of such Guaranteed Indebtedness
shall be pari passu with, or subordinated to, the Subsidiary Guarantee or
(B) subordinated to the Securities or the Security Guarantee, then the
Guarantee of such Guaranteed Indebtedness shall be subordinated to the
Subsidiary Guarantee at least to the extent that the Guaranteed
Indebtedness is subordinated to the Securities or the Security Guarantee,
as the case may be.
Notwithstanding the foregoing, any Subsidiary Guarantee by a
Restricted Subsidiary shall provide by its terms that it shall be
automatically and unconditionally released and discharged upon (i) any
sale, exchange or transfer, to any Person not an Affiliate of the Guarantor
of all of the Company's and each Restricted Subsidiary's Capital Stock in,
or all or substantially all the assets of, such Restricted Subsidiary
(which sale, exchange or transfer is not prohibited by this Indenture) or
(ii) the release or discharge of the Guarantee which resulted in the
creation of such Subsidiary Guarantee, except a discharge or release by or
as a result of payment under such Guarantee.
SECTION 4.08. Limitation on Transactions with Shareholders and
-------------------------------------------------
Affiliates. The Guarantor will not, and will not permit any Restricted
----------
Subsidiary to, directly or indirectly, enter into, renew or extend any
transaction (including, without limitation, the purchase, sale, lease or
exchange of property or assets, or the rendering of any service) with any
holder (or any Affiliate of such holder) of 5% or more of any class of
Capital Stock of the Guarantor or with any Affiliate of the Guarantor or
any Restricted Subsidiary, except upon fair and reasonable terms no less
favorable to the Guarantor or such Restricted Subsidiary than could be
obtained, at the time of such transaction or at the time of the execution
of the agreement providing therefor, in a comparable arm's-length
transaction with a Person that is not such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to:
(i) transactions (A) approved by a majority of the
disinterested members of the Board of Directors or (B) for which the
Guarantor or a Restricted Subsidiary delivers to the Trustee a written
opinion of a nationally recognized investment banking firm stating
that the transaction is fair to the Guarantor or such Restricted
Subsidiary from a financial point of view;
(ii) any transaction solely between the Guarantor and any of its
Wholly Owned Restricted Subsidiaries or solely between Wholly Owned
Restricted Subsidiaries;
(iii) the payment of reasonable and customary regular fees to
directors of the Guarantor, the Company or Holdings (Canada) who are
not employees of the Guarantor, the Company or Holdings (Canada);
(iv) any payments or other transactions pursuant to any tax-
sharing agreement between the Guarantor and any other Person with
which the Guarantor files a consolidated tax return or with which the
Guarantor is part of a consolidated group for tax purposes; or
(v) any Restricted Payments not prohibited by Section 4.04.
Notwithstanding the foregoing, any transaction covered by the
first paragraph of this Section 4.08 and not covered by clauses (ii)
through (iv) of this paragraph, the aggregate amount of which exceeds $2
million in value, must be approved or determined to be fair in the manner
provided for in clause (i)(A) or (B) of this Section 4.08.
SECTION 4.09. Limitation on Liens. The Guarantor will not, and
-------------------
will not permit any Restricted Subsidiary to, create, incur, assume or
suffer to exist any Lien on any of its assets or properties of any
character, or any shares of Capital Stock or Indebtedness of any Restricted
Subsidiary, without making effective provision for all of the Securities
(or, in the case of a Lien on assets or properties of the Guarantor, the
Security Guarantee) and all other amounts due under this Indenture to be
directly secured equally and ratably with (or, if the obligation or
liability to be secured by such Lien is subordinated in right of payment to
the Securities or the Security Guarantee, prior to) the obligation or
liability secured by such Lien.
The foregoing limitation does not apply to:
(i) Liens existing on the Closing Date;
(ii) Liens granted after the Closing Date on any assets or
Capital Stock of Holdings (Canada), the Company or any of their
Restricted Subsidiaries created in favor of the Holders;
(iii) Liens with respect to the assets of a Restricted
Subsidiary granted by such Restricted Subsidiary to the Guarantor or a
Wholly Owned Restricted Subsidiary to secure Indebtedness owing to the
Guarantor or such other Restricted Subsidiary;
(iv) Liens securing Indebtedness which is Incurred to refinance
secured Indebtedness which is permitted to be Incurred under clause
(iii) of the second paragraph of Section 4.03(a); provided that such
Liens do not extend to or cover any property or assets of the
Guarantor, the Company or any Restricted Subsidiary other than the
property or assets securing the Indebtedness being refinanced;
(v) Liens with respect to assets or properties of any Person
that becomes a Restricted Subsidiary after the Closing Date; provided
that such Liens do not extend to or cover any assets or properties of
the Guarantor or any of its Restricted Subsidiaries other than the
assets or properties of such Person subject to such Lien on the date
such Person becomes a Restricted Subsidiary; and provided further that
such Liens are not incurred in contemplation of, or in connection
with, such Person becoming a Restricted Subsidiary;
(vi) Permitted Liens; or
(vii) Liens, solely in favor of Acquired Indebtedness, on
Capital Stock of Persons that become Restricted Subsidiaries of the
Guarantor after the Closing Date.
SECTION 4.10. Limitation on Sale-Leaseback Transactions. The
-----------------------------------------
Guarantor will not, and will not permit any Restricted Subsidiary to, enter
into any sale-leaseback transaction involving any of its assets or
properties whether now owned or hereafter acquired, whereby the Guarantor
or a Restricted Subsidiary sells or transfers such assets or properties and
then or thereafter leases such assets or properties or any part thereof or
any other assets or properties which the Guarantor or such Restricted
Subsidiary, as the case may be, intends to use for substantially the same
purpose or purposes as the assets or properties sold or transferred.
The foregoing restriction does not apply to any sale-leaseback
transaction if:
(i) the lease is for a period, including renewal rights, of not
in excess of three years;
(ii) the lease secures or relates to industrial revenue or
pollution control bonds;
(iii) the transaction is between the Guarantor and any Wholly
Owned Restricted Subsidiary or between Wholly Owned Restricted
Subsidiaries; or
(iv) the Guarantor or such Restricted Subsidiary, within six
months after the sale or transfer of any assets or properties is
completed, applies an amount not less than the net proceeds received
from such sale in accordance with clause (A) or (B) of the first
paragraph of Section 4.11.
SECTION 4.11. Limitation on Asset Sales. The Guarantor will
-------------------------
not, and will not permit any Restricted Subsidiary to, consummate any Asset
Sale, unless (i) the consideration received by the Guarantor or such
Restricted Subsidiary is at least equal to the fair market value of the
assets sold or disposed of and (ii) at least 75% of the consideration
received consists of cash or Temporary Cash Investments. In the event and
to the extent that the Net Cash Proceeds received by the Guarantor or its
Restricted Subsidiaries from one or more Asset Sales occurring on or after
the Closing Date in any period of 12 consecutive months exceed 10% of
Adjusted Consolidated Net Tangible Assets (determined as of the date
closest to the commencement of such 12-month period for which a
consolidated balance sheet of the Company and its Subsidiaries has been
prepared), then the Guarantor shall or shall cause the relevant Restricted
Subsidiary to (i) within six months after the date Net Cash Proceeds so
received exceed 10% of Adjusted Consolidated Net Tangible Assets (A) apply
an amount equal to such excess Net Cash Proceeds to permanently repay
unsubordinated Indebtedness of the Guarantor or the Company, or
Indebtedness of any Restricted Subsidiary other than the Company, in each
case owing to a Person other than the Guarantor or any of its Restricted
Subsidiaries or (B) invest an equal amount, or the amount not so applied
pursuant to clause (A) (or enter into a definitive agreement committing to
so invest within six months after the date of such agreement), in property
or assets of a nature or type or that are used in a business (or in a
company having property and assets of a nature or type, or engaged in a
business) similar or related to the nature or type of the property and
assets of, or the business of, the Guarantor and its Restricted
Subsidiaries existing on the date of such investment (as determined in good
faith by the Board of Directors, whose determination shall be conclusive
and evidenced by a Board Resolution) and (ii) apply (no later than the end
of the six-month period referred to in clause (i)) such excess Net Cash
Proceeds (to the extent not applied pursuant to clause (i)) as provided in
the following paragraphs of this Section 4.11. The amount of such excess
Net Cash Proceeds required to be applied (or to be committed to be applied)
during such six-month period as set forth in clause (i) of the preceding
sentence and not applied as so required by the end of such period shall
constitute "Excess Proceeds."
---------------
If, as of the first day of any calendar month, the aggregate
amount of Excess Proceeds not theretofore subject to an Offer to Purchase
pursuant to this Section 4.11 totals at least $10 million, the Company must
commence, not later than the fifteenth Business Day of such month, and
consummate an Offer to Purchase from the Holders on a pro rata basis an
aggregate Accreted Value of Securities equal to the Excess Proceeds on such
date, at a purchase price equal to 101% of the Accreted Value of the
Securities, plus, in each case, accrued interest (if any) to the date of
purchase.
SECTION 4.12. Repurchase of Securities upon a Change of Control.
-------------------------------------------------
The Company must commence, within 30 days of the occurrence of a Change of
Control, and consummate an Offer to Purchase for all Securities then
outstanding, at a purchase price equal to 101% of the Accreted Value
thereof, plus accrued interest (if any) to the date of purchase. Prior to
the mailing of the notice to Holders commencing such Offer to Purchase, but
in any event within 30 days following any Change of Control, the Company
covenants to (i) repay in full all indebtedness of the Company that would
prohibit the repurchase of the Securities pursuant to such Offer to
Purchase or (ii) obtain any requisite consents under instruments governing
any such indebtedness of the Company to permit the repurchase of the
Securities. The Company shall first comply with the covenant in the
preceding sentence before it shall be required to repurchase the Securities
pursuant to this Section 4.12.
SECTION 4.13. Existence. Subject to Articles Four and Five of
---------
this Indenture, the Guarantor will do or cause to be done all things
necessary to preserve and keep in full force and effect its existence and
the existence of each of its Restricted Subsidiaries in accordance with the
respective organizational documents of the Guarantor and each such
Subsidiary and the rights (whether pursuant to charter, partnership
certificate, agreement, statute or otherwise), material licenses and
franchises of the Guarantor and each such Subsidiary; provided that the
Guarantor shall not be required to preserve any such right, license or
franchise, or the existence of any Restricted Subsidiary (other than itself
and the Company), if the maintenance or preservation thereof is no longer
desirable in the conduct of the business of the Guarantor and its
Restricted Subsidiaries taken as a whole. In addition, the Guarantor
agrees to take such actions, within a reasonable time after the Closing
Date (and in any event prior to any proceeding initiated regarding the
dissolution of the Guarantor), as may be necessary to ensure that it shall
be in good standing under the laws of the jurisdiction of its
incorporation.
SECTION 4.14. Payment of Taxes and Other Claims. The Guarantor
---------------------------------
will pay or discharge and shall cause each of its Subsidiaries to pay or
discharge, or cause to be paid or discharged, before the same shall become
delinquent (i) all material taxes, assessments and governmental charges
levied or imposed upon (a) the Guarantor or any such Subsidiary, (b) the
income or profits of any such Subsidiary which is a corporation or (c) the
property of the Guarantor or any such Subsidiary and (ii) all material
lawful claims for labor, materials and supplies that, if unpaid, might by
law become a lien upon the property of the Guarantor or any such
Subsidiary; provided that the Guarantor shall not be required to pay or
discharge, or cause to be paid or discharged, any such tax, assessment,
charge or claim the amount, applicability or validity of which is being
contested in good faith by appropriate proceedings and for which adequate
reserves have been established.
SECTION 4.15. Maintenance of Properties and Insurance. The
---------------------------------------
Guarantor will cause all properties used or useful in the conduct of its
business or the business of any of its Restricted Subsidiaries, to be
maintained and kept in good condition, repair and working order and
supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Guarantor may be necessary so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided that nothing in this
Section 4.15 shall prevent the Guarantor or any such Subsidiary from
discontinuing the use, operation or maintenance of any of such properties
or disposing of any of them, if such discontinuance or disposal is, in the
judgment of the Guarantor, desirable in the conduct of the business of the
Guarantor or such Subsidiary.
The Guarantor will provide or cause to be provided, for itself
and its Restricted Subsidiaries, insurance (including appropriate self-
insurance) against loss or damage of the kinds customarily insured against
by corporations similarly situated and owning like properties, including,
but not limited to, products liability insurance and public liability
insurance, with reputable insurers or with the government of the United
States of America, or an agency or instrumentality thereof, in such
amounts, with such deductibles and by such methods as shall be customary
for corporations similarly situated in the industry in which the Guarantor
or such Restricted Subsidiary, as the case may be, is then conducting
business.
SECTION 4.16. Notice of Defaults. In the event that the Company
------------------
or the Guarantor becomes aware of any Default or Event of Default the
Company or the Guarantor, as the case may be, promptly after it becomes
aware thereof, will give written notice thereof to the Trustee.
SECTION 4.17. Compliance Certificates. (a) Each of the Company
-----------------------
and the Guarantor shall deliver to the Trustee, within 90 days after the
end of the Guarantor's fiscal year, an Officers' Certificate stating
whether or not the signers know of any Default or Event of Default that
occurred during such fiscal year. Such certificates shall contain a
certification from the principal executive officer, principal financial
officer or principal accounting officer of the Company or the Guarantor, as
the case may be, that a review has been conducted of the activities of the
Company, the Guarantor and the Restricted Subsidiaries and the Company's,
the Guarantor's and the Restricted Subsidiaries' performance under this
Indenture and that the Guarantor and the Company have complied with all
conditions and covenants under this Indenture. For purposes of this
Section 4.17, such compliance shall be determined without regard to any
period of grace or requirement of notice provided under this Indenture. If
they do know of such a Default or Event of Default, the certificate shall
describe any such Default or Event of Default and its status.
(b) The Guarantor shall deliver to the Trustee, within 90 days
after the end of its fiscal year, a certificate signed by the Guarantor's
independent certified public accountants stating (i) that their audit
examination has included a review of the terms of this Indenture and the
Securities as they relate to accounting matters, (ii) that they have read
the most recent Officers' Certificate delivered to the Trustee pursuant to
paragraph (a) of this Section 4.17 and (iii) whether, in connection with
their audit examination, anything came to their attention that caused them
to believe that the Company or Guarantor, as the case may be, was not in
compliance with any of the terms, covenants, provisions or conditions of
Article Four and Section 5.01 of this Indenture as they pertain to
accounting matters and, if any Default or Event of Default has come to
their attention, specifying the nature and period of existence thereof;
provided that such independent certified public accountants shall not be
liable in respect of such statement by reason of any failure to obtain
knowledge of any such Default or Event of Default that would not be
disclosed in the course of an audit examination conducted in accordance
with generally accepted auditing standards in effect at the date of such
examination.
(c) Within 90 days of the end of each of the Guarantor's fiscal
years, the Guarantor shall deliver to the Trustee a list of all Significant
Subsidiaries. The Trustee shall have no duty with respect to any such list
except to keep it on file and available for inspection by the Holders.
SECTION 4.18. Commission Reports and Reports to Holders.
-----------------------------------------
Whether or not the Company or the Guarantor is required to file reports
with the Commission, if any Securities are outstanding, the Company and the
Guarantor shall file with the Commission all such reports and other
information as they would be required to file with the Commission by
Section 13(a) or 15(d) under the Exchange Act. The Company shall supply
the Trustee and each Holder, or shall supply to the Trustee for forwarding
to each Holder, without cost to such Holder, copies of such reports or
other information.
SECTION 4.19. Waiver of Stay, Extension or Usury Laws. Each of
---------------------------------------
the Company and the Guarantor covenants (to the extent that it may lawfully
do so) that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension
law or any usury law or other law that would prohibit or forgive the
Company or the Guarantor, as the case may be, from paying all or any
portion of the principal of, premium, if any, or interest on the Securities
as contemplated herein, wherever enacted, now or at any time hereafter in
force, or that may affect the covenants or the performance of this
Indenture; and (to the extent that it may lawfully do so) each of the
Company and the Guarantor hereby expressly waives all benefit or advantage
of any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been
enacted.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company and Guarantor May Merge, Etc.
-----------------------------------------
Neither the Company nor the Guarantor shall consolidate with, merge with or
into, or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets (as an entirety or
substantially an entirety in one transaction or a series of related
transactions) to, any Person (other than a consolidation or merger with or
into a Wholly Owned Restricted Subsidiary with a positive net worth;
provided that, in connection with any such merger or consolidation, no
consideration (other than Common Stock in the surviving Person, the Company
or the Guarantor) shall be issued or distributed to the stockholders of the
Company or the Guarantor) or permit any Person to merge with or into the
Company or the Guarantor unless:
(i) the Company or the Guarantor shall be the continuing Person,
or the Person (if other than the Company or the Guarantor) formed by
such consolidation or into which the Company or the Guarantor is
merged or that acquired or leased such property and assets of the
Company or the Guarantor shall be a corporation organized and validly
existing under the laws of the United States of America or any
jurisdiction thereof and shall expressly assume, by a supplemental
indenture, executed and delivered to the Trustee, all of the
obligations of the Company or the Guarantor, as the case may be, under
this Indenture;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction on
a pro forma basis, the Company or the Guarantor, as the case may be,
or any Person becoming the successor obligor of the Securities or the
Security Guarantee, as the case may be, shall have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of the
Company or the Guarantor, as the case may be, immediately prior to
such transaction;
(iv) immediately after giving effect to such transaction on a pro
forma basis the Company, or any Person becoming the successor obligor
of the Securities, as the case may be, could Incur at least $1.00 of
Indebtedness under the first paragraph of Section 4.03(a); and
(v) the Company delivers to the Trustee an Officers' Certificate
(attaching the arithmetic computations to demonstrate compliance with
clauses (iii) and (iv) of this Section 5.01) and an Opinion of
Counsel, in each case stating that such consolidation, merger or
transfer and such supplemental indenture complies with this provision
and that all conditions precedent provided for herein relating to such
transaction have been complied with;
provided, however, that clauses (iii) and (iv) of this Section 5.01 do not
apply if, in the good faith determination of the Board of Directors of the
Guarantor, whose determination shall be evidenced by a Board Resolution,
the principal purpose of such transaction is part of a plan to change the
jurisdiction of incorporation of the Company or the Guarantor to a state of
the United States; and provided further that any such transaction shall not
have as one of its purposes the evasion of the foregoing limitations.
SECTION 5.02. Successor Substituted. Upon any consolidation or
---------------------
merger, or any sale, conveyance, transfer or other disposition of all or
substantially all of the property and assets of the Company or the
Guarantor in accordance with Section 5.01 of this Indenture, the successor
Person formed by such consolidation or into which the Company or the
Guarantor is merged or to which such sale, conveyance, transfer or other
disposition is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company or the Guarantor, as the
case may be, under this Indenture with the same effect as if such successor
Person had been named as the Company or the Guarantor, as the case may be,
herein.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default. An "Event of Default" shall
----------------- ----------------
occur with respect to the Securities if:
(a) the Company defaults in the payment of the principal of (or
premium, if any, on) any Security when the same becomes due and
payable at maturity, upon acceleration, redemption or otherwise;
(b) the Company defaults in the payment of interest on any
Security when the same becomes due and payable, and such default
continues for a period of 30 days;
(c) the Company or the Guarantor defaults in the performance of
or breaches any other covenant or agreement of the Company or the
Guarantor in this Indenture or under the Securities and such default
or breach continues for a period of 30 consecutive days after written
notice to the Company or the Guarantor by the Trustee or the Holders
of 25% or more in aggregate principal amount at maturity of the
Securities;
(d) there occurs with respect to any issue or issues of
Indebtedness of the Company, the Guarantor or any Significant
Subsidiary having an outstanding principal amount at maturity of $10
million or more in the aggregate for all such issues of all such
Persons, whether such Indebtedness now exists or shall hereafter be
created, (I) an event of default that has caused the holder thereof to
declare such Indebtedness to be due and payable prior to its Stated
Maturity and such Indebtedness has not been discharged in full or such
acceleration has not been rescinded or annulled within 30 days of such
acceleration and/or (II) the failure to make a principal payment at
the final (but not any interim) fixed maturity and such defaulted
payment shall not have been made, waived or extended within 30 days of
such payment default;
(e) any final judgment or order (not covered by insurance) for
the payment of money in excess of $10 million in the aggregate for all
such final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against the Company, the Guarantor or any Significant
Subsidiary and shall not be paid or discharged, and there shall be any
period of 30 consecutive days following entry of the final judgment or
order that causes the aggregate amount for all such final judgments or
orders outstanding and not paid or discharged against all such Persons
to exceed $10 million during which a stay of enforcement of such final
judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect;
(f) a court having jurisdiction in the premises enters a decree
or order for (A) relief in respect of the Company, the Guarantor or
any Significant Subsidiary in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in
effect, (B) appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company,
the Guarantor or any Significant Subsidiary or for all or
substantially all of the property and assets of the Company, the
Guarantor or any Significant Subsidiary or (C) the winding up or
liquidation of the affairs of the Company, the Guarantor or any
Significant Subsidiary and, in each case, such decree or order shall
remain unstayed and in effect for a period of 30 consecutive days; or
(g) the Company, the Guarantor or any Significant Subsidiary
(A) commences a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in an involuntary case
under any such law, (B) consents to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company, the Guarantor or any
Significant Subsidiary or for all or substantially all of the property
and assets of the Company, the Guarantor or any Significant Subsidiary
or (C) effects any general assignment for the benefit of creditors.
SECTION 6.02. Acceleration. If an Event of Default (other than
------------
an Event of Default specified in clause (f) or (g) of Section 6.01 that
occurs with respect to the Company or the Guarantor) occurs and is
continuing under this Indenture, the Trustee or the Holders of at least 25%
in aggregate principal amount at maturity of the Securities, then
outstanding, by written notice to the Company (and to the Trustee if such
notice is given by the Holders), may, and the Trustee at the request of
such Holders shall, declare the Accreted Value of, premium, if any, and
accrued interest, if any, on the Securities to be immediately due and
payable. Upon a declaration of acceleration, such Accreted Value of,
premium, if any, and accrued interest, if any, shall be immediately due and
payable. In the event of a declaration of acceleration because an Event of
Default set forth in clause (d) of Section 6.01 has occurred and is
continuing, such declaration of acceleration shall be automatically
rescinded and annulled if the event of default triggering such Event of
Default pursuant to clause (d) shall be remedied or cured by the Company,
the Guarantor or the relevant Significant Subsidiary or waived by the
holders of the relevant Indebtedness within 60 days after the declaration
of acceleration with respect thereto. If an Event of Default specified in
clause (f) or (g) of Section 6.01 occurs with respect to the Company or the
Guarantor, the Accreted Value of, premium, if any, and accrued interest, if
any, on the Securities then outstanding shall ipso facto become and be
immediately due and payable without any declaration or other act on the
part of the Trustee or any Holder.
At any time after such a declaration of acceleration, but before
a judgment or decree for the payment of the money due has been obtained by
the Trustee, the Holders of at least a majority in principal amount at
maturity of the outstanding Securities by written notice to the Company and
to the Trustee may waive all past Defaults and rescind and annul such
declaration of acceleration and its consequences if (a) the Company or the
Guarantor has paid or deposited with the Trustee a sum sufficient to pay
(i) all sums paid or advanced by the Trustee hereunder and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel, (ii) all overdue interest on all Securities, (iii) the
principal of and premium, if any, on any Securities that have become due
otherwise than by such declaration or occurrence of acceleration and
interest thereon at the rate prescribed therefor by such Securities, and
(iv) to the extent that payment of such interest is lawful, interest upon
overdue interest at the rate prescribed therefor by such Securities,
(b) all existing Events of Default, other than the non-payment of the
Accreted Value of, premium, if any, and accrued interest on the Securities
that have become due solely by such declaration of acceleration, have been
cured or waived and (c) the rescission would not conflict with any judgment
or decree of a court of competent jurisdiction.
SECTION 6.03. Other Remedies. If an Event of Default occurs and
--------------
is continuing, the Trustee may pursue any available remedy by proceeding at
law or in equity to collect the payment of principal of, premium, if any,
or interest on the Securities or to enforce the performance of any
provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding.
SECTION 6.04. Waiver of Past Defaults. Subject to Sections
-----------------------
6.02, 6.07 and 9.02, the Holders of at least a majority in principal amount
at maturity of the outstanding Securities, by notice to the Trustee, may
waive an existing Default or Event of Default and its consequences, except
a Default in the payment of the Accreted Value of, premium, if any, or
accrued interest on any Security as specified in clause (a) or (b) of
Section 6.01 or in respect of a covenant or provision of this Indenture
which cannot be modified or amended without the consent of the holder of
each outstanding Security affected. Upon any such waiver, such Default
shall cease to exist, and any Event of Default arising therefrom shall be
deemed to have been cured, for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other Default or Event of Default
or impair any right consequent thereto.
SECTION 6.05. Control by Majority. The Holders of at least a
-------------------
majority in aggregate principal amount at maturity of the outstanding
Securities may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on the Trustee; provided that the Trustee may refuse to
follow any direction that conflicts with law or this Indenture, that may
involve the Trustee in personal liability, or that the Trustee determines
in good faith may be unduly prejudicial to the rights of Holders not
joining in the giving of such direction; and provided further that the
Trustee may take any other action it deems proper that is not inconsistent
with any directions received from Holders of Securities pursuant to this
Section 6.05.
SECTION 6.06. Limitation on Suits. A Holder may not institute
-------------------
any proceeding, judicial or otherwise, with respect to this Indenture or
the Securities, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:
(i) such Holder has previously given to the Trustee written
notice of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount at
maturity of outstanding Securities shall have made written request to
the Trustee to institute proceedings in respect of such Event of
Default in its own name as Trustee hereunder;
(iii) such Holder or Holders have offered to the Trustee
indemnity reasonably satisfactory to the Trustee against any costs,
liabilities or expenses to be incurred in compliance with such
request;
(iv) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(v) during such 60-day period, the Holders of a majority in
aggregate principal amount at maturity of the outstanding Securities
have not given the Trustee a direction that is inconsistent with such
written request.
For purposes of Section 6.05 of this Indenture and this Section
6.06, the Trustee shall comply with TIA Section 316(a) in making any
determination of whether the Holders of the required aggregate principal
amount at maturity of outstanding Securities have concurred in any request
or direction of the Trustee to pursue any remedy available to the Trustee
or the Holders with respect to this Indenture or the Securities or
otherwise under the law.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other
Holder.
SECTION 6.07. Rights of Holders to Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security to receive payment of principal of, premium, if any,
or interest accrued on such Holder's Security on or after the respective
due dates expressed on such Security, or to bring suit for the enforcement
of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of
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Default in payment of principal, premium or interest specified in clause
(a), (b) or (c) of Section 6.01 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against
the Company or any other obligor of the Securities for the whole amount of
principal, premium, if any, and accrued interest remaining unpaid, together
with interest on overdue principal, premium, if any, and, to the extent
that payment of such interest is lawful, interest on overdue installments
of interest, in each case at the rate specified in the Securities, and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may
--------------------------------
file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07) and the Holders allowed in any judicial
proceedings relative to the Company (or any other obligor of the
Securities), its creditors or its property and shall be entitled and
empowered to collect and receive any monies, securities or other property
payable or deliverable upon conversion or exchange of the Securities or
upon any such claims and to distribute the same, and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar
official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agent and counsel, and any other amounts due the Trustee under Section
7.07. Nothing herein contained shall be deemed to empower the Trustee to
authorize or consent to, or accept or adopt on behalf of any Holder, any
plan of reorganization, arrangement, adjustment or composition affecting
the Securities or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. Priorities. If the Trustee collects any money
----------
pursuant to this Article Six, it shall pay out the money in the following
order:
First: to the Trustee for all amounts due under Section 7.07;
Second: to Holders for amounts then due and unpaid for principal
of, premium, if any, and interest on the Securities in respect of
which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal, premium, if
any, and interest, respectively; and
Third: to the Company or any other obligors of the Securities,
as their interests may appear, or as a court of competent jurisdiction
may direct.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Holders pursuant to this
Section 6.10.
SECTION 6.11. Undertaking for Costs. In any suit for the
---------------------
enforcement of any right or remedy under this Indenture or in any suit
against the Trustee for any action taken or omitted by it as Trustee, a
court may require any party litigant in such suit to file an undertaking to
pay the costs of the suit, and the court may assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in the
suit having due regard to the merits and good faith of the claims or
defenses made by the party litigant. This Section 6.11 does not apply to a
suit by the Trustee, a suit by a Holder pursuant to Section 6.07 of this
Indenture, or a suit by Holders of more than 10% in principal amount at
maturity of the outstanding Securities.
SECTION 6.12. Restoration of Rights and Remedies. If the
----------------------------------
Trustee or any Holder has instituted any proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee
or to such Holder, then, and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Company, the
Trustee and the Holders shall continue as though no such proceeding had
been instituted.
SECTION 6.13. Rights and Remedies Cumulative. Except as
------------------------------
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or wrongfully taken Securities in Section 2.09, no right or
remedy herein conferred upon or reserved to the Trustee or to the Holders
is intended to be exclusive of any other right or remedy, and every right
and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not
prevent the concurrent assertion or employment of any other appropriate
right or remedy.
SECTION 6.14. Delay or Omission Not Waiver. No delay or
----------------------------
omission of the Trustee or of any Holder to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article Six or by law to the
Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. General. The duties and responsibilities of the
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Trustee shall be as provided by the TIA and as set forth herein.
Notwithstanding the foregoing, no provision of this Indenture shall require
the Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder, or
in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it. Whether or
not therein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this
Article Seven.
SECTION 7.02. Certain Rights of Trustee. Subject to TIA
-------------------------
Sections 315(a) through (d):
(i) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper person. The Trustee need not investigate
any fact or matter stated in the document and may in good faith
conclusively rely as to the truth of the statements and the
correctness of the opinions therein;
(ii) before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel, which shall
conform to Section 11.04. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such
certificate, opinion and/or an accountants' certificate if required
under the TIA;
(iii) the Trustee may act through its attorneys and agents
and shall not be responsible for the misconduct or negligence of any
agent appointed with due care;
(iv) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders, unless such Holders shall have
offered to the Trustee security or indemnity reasonably satisfactory
to it against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction;
(v) the Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or
within its rights or powers or for any action it takes or omits to
take in accordance with the direction of the Holders of a majority in
principal amount at maturity of the Outstanding Securities relating to
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Indenture; provided that the Trustee's
conduct does not constitute gross negligence or bad faith;
(vi) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a making be proved or established prior
to taking, suffering or omitting any action hereunder, the Trustee
(unless other evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, rely upon an Officer's Certificate;
and
(vii) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company
personally or by agent or attorney.
SECTION 7.03. Individual Rights of Trustee. The Trustee, in its
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individual or any other capacity, may become the owner or pledgee of
Securities and may otherwise deal with the Company or its Affiliates with
the same rights it would have if it were not the Trustee. Any Agent may do
the same with like rights. However, the Trustee is subject to TIA Sections
310(b) and 311.
SECTION 7.04. Trustee's Disclaimer. The Trustee (i) makes no
--------------------
representation as to the validity or adequacy of this Indenture or the
Securities, (ii) shall not be accountable for the Company's use or
application of the proceeds from the Securities and (iii) shall not be
responsible for any statement in the Securities other than its certificate
of authentication.
SECTION 7.05. Notice of Default. If any Default or any Event of
-----------------
Default occurs and is continuing and if such Default or Event of Default is
known to a trust officer of the Trustee, the Trustee shall mail to each
Holder in the manner and to the extent provided in TIA Section 313(c)
notice of the Default or Event of Default within 90 days after it occurs,
unless such Default or Event of Default has been cured; provided, however,
that, except in the case of a default in the payment of the principal of,
premium, if any, or interest on any Security, the Trustee shall be
protected in withholding such notice if and so long as the board of
directors, the executive committee or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determine that the
withholding of such notice is in the interest of the Holders.
SECTION 7.06. Reports by Trustee to Holders. Within 60 days
-----------------------------
after each May 15, beginning with May 15, 1997, the Trustee shall mail to
each Holder as provided in TIA Section 313(c) a brief report that complies
with TIA Section 313(a) dated as of such May 15, if required by TIA Section
313(a).
SECTION 7.07. Compensation and Indemnity. The Company shall pay
--------------------------
to the Trustee such compensation as shall be agreed upon in writing for its
services. The compensation of the Trustee shall not be limited by any law
on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket
expenses and advances incurred or made by the Trustee. Such expenses shall
include the reasonable compensation and expenses of the Trustee's agents
and counsel.
The Company shall indemnify the Trustee for, and hold it harmless
against, any loss or liability or expense incurred by it without negligence
or bad faith on its part in connection with the acceptance or
administration of this Indenture and its duties under this Indenture and
the Securities, including the costs and expenses of defending itself
against any claim or liability and of complying with any process served
upon it or any of its officers in connection with the exercise or
performance of any of its powers or duties under this Indenture and the
Securities.
To secure the Company's payment obligations in this Section 7.07,
the Trustee shall have a lien prior to the Securities on all money or
property held or collected by the Trustee, in its capacity as Trustee,
except money or property held in trust to pay principal of, premium, if
any, and interest on particular Securities.
If the Trustee incurs expenses or renders services after the
occurrence of an Event of Default specified in clause (f) or (g) of Section
6.01, the expenses and the compensation for the services will be intended
to constitute expenses of administration under Title 11 of the United
States Bankruptcy Code or any applicable federal or state law for the
relief of debtors.
SECTION 7.08. Replacement of Trustee. A resignation or removal
----------------------
of the Trustee and appointment of a successor Trustee shall become
effective only upon the successor Trustee's acceptance of appointment as
provided in this Section 7.08.
The Trustee may resign at any time by so notifying the Company in
writing at least 30 days prior to the date of the proposed resignation.
The Holders of a majority in principal amount at maturity of the
outstanding Securities may remove the Trustee by so notifying the Trustee
in writing and may appoint a successor Trustee with the consent of the
Company. The Company may at any time remove the Trustee, by Company Order
given at least 30 days prior to the date of the proposed removal.
If the Trustee resigns or is removed, or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes
office, the Holders of a majority in principal amount at maturity of the
outstanding Securities may appoint a successor Trustee to replace the
successor Trustee appointed by the Company. If the successor Trustee does
not deliver its written acceptance required by the next succeeding
paragraph of this Section 7.08 within 30 days after the retiring Trustee
resigns or is removed, the retiring Trustee, the Company or the Holders of
a majority in principal amount at maturity of the outstanding Securities
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after
the delivery of such written acceptance, subject to the lien provided in
Section 7.07, (i) the retiring Trustee shall transfer all property held by
it as Trustee to the successor Trustee, (ii) the resignation or removal of
the retiring Trustee shall become effective and (iii) the successor Trustee
shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Holder.
If the Trustee is no longer eligible under Section 7.10, any
Holder who satisfies the requirements of TIA Section 310(b) may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
The Company shall give notice of any resignation and any removal
of the Trustee and each appointment of a successor Trustee to all Holders.
Each notice shall include the name of the successor Trustee and the address
of its Corporate Trust Office.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligation under Section 7.07 shall continue
for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc. If the Trustee
--------------------------------
consolidates with, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation
or national banking association, the resulting, surviving or transferee
corporation or national banking association without any further act shall
be the successor Trustee with the same effect as if the successor Trustee
had been named as the Trustee herein.
SECTION 7.10. Eligibility. This Indenture shall always have a
-----------
Trustee who satisfies the requirements of TIA Section 310(a)(1). The
Trustee shall have a combined capital and surplus of at least $25,000,000
as set forth in its most recent published annual report of condition.
SECTION 7.11. Money Held in Trust. The Trustee shall not be
-------------------
liable for interest on any money received by it except as the Trustee may
agree with the Company. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law and except
for money held in trust under Article Eight of this Indenture.
SECTION 7.12. Withholding Taxes. The Trustee, as agent for the
-----------------
Company, shall exclude and withhold from each payment of principal and
interest and other amounts due hereunder or under the Securities any and
all withholding taxes applicable thereto as required by law. The Trustee
agrees to act as such withholding agent and, in connection therewith,
whenever any present or future taxes or similar charges are required to be
withheld with respect to any amounts payable in respect of the Securities,
to withhold such amounts and timely pay the same to the appropriate
authority in the name of and on behalf of the holders of the Securities,
that it will file any necessary withholding tax returns or statements when
due, and that, as promptly as possible after the payment thereof, it will
deliver to each holder of a Security appropriate documentation showing the
payment thereof, together with such additional documentary evidence as such
holders may reasonably request from time to time.
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations. Except as
------------------------------------
otherwise provided in this Section 8.01, the Company may terminate its
obligations under the Securities and this Indenture if:
(i) all Securities previously authenticated and delivered (other
than destroyed, lost or stolen Securities that have been replaced or
Securities that are paid pursuant to Section 4.01 or Securities for
whose payment money or securities have theretofore been held in trust
and thereafter repaid to the Company, as provided in Section 8.05)
have been delivered to the Trustee for cancellation and the Company
has paid all sums payable by it hereunder; or
(ii) (A) the Securities mature within one year or all of them are
to be called for redemption within one year under arrangements
satisfactory to the Trustee for giving the notice of redemption,
(B) the Company or the Guarantor irrevocably deposits in trust with
the Trustee during such one-year period, under the terms of an
irrevocable trust agreement in form and substance satisfactory to the
Trustee, as trust funds solely for the benefit of the Holders for that
purpose, money or U.S. Government Obligations sufficient (in the
opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee), without consideration of any reinvestment of any
interest thereon, to pay principal, premium, if, any, and interest on
the Securities to maturity or redemption, as the case may be, and to
pay all other sums payable by it hereunder, (C) no Default or Event of
Default with respect to the Securities shall have occurred and be
continuing on the date of such deposit, (D) such deposit will not
result in a breach or violation of, or constitute a default under,
this Indenture or any other agreement or instrument to which the
Company or the Guarantor is a party or by which it is bound and (E)
the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel, in each case stating that all conditions
precedent provided for herein relating to the satisfaction and
discharge of this Indenture have been complied with.
With respect to the foregoing clause (i), the Company's
obligations under Section 7.07 shall survive. With respect to the
foregoing clause (ii), the Company's obligations in Sections 2.02, 2.03,
2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.04,
8.05 and 8.06 shall survive until the Securities are no longer outstanding.
Thereafter, only the Company's obligations in Sections 7.07, 8.05 and 8.06
shall survive. After any such irrevocable deposit, the Trustee upon
request shall acknowledge in writing the discharge of the Company's
obligations, as the case may be, under the Securities and this Indenture
except for those surviving obligations specified above.
SECTION 8.02. Defeasance and Discharge of Indenture. The
-------------------------------------
Company will be deemed to have paid and will be discharged from any and all
obligations in respect of the Securities on the 123rd day (or, to the
extent applicable under clause (D) below, one year) after the date of the
deposit referred to in clause (A) of this Section 8.02 if:
(A) with reference to this Section 8.02, the Company or the
Guarantor has irrevocably deposited or caused to be irrevocably
deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.10 of this Indenture) and conveyed all
right, title and interest for the benefit of the Holders, under the
terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee as trust funds in trust, specifically
pledged to the Trustee for the benefit of the Holders as security for
payment of the principal of, premium, if any, and interest, if any, on
the Securities, and dedicated solely to, the benefit of the Holders,
in and to (1) money in an amount, (2) U.S. Government Obligations
that, through the payment of interest, premium, if any, and principal
in respect thereof in accordance with their terms, will provide, not
later than one day before the due date of any payment referred to in
this clause (A), money in an amount or (3) a combination thereof in an
amount sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, without
consideration of the reinvestment of such interest and after payment
of all federal, state and local taxes or other charges and assessments
in respect thereof payable by the Trustee, the principal of, premium,
if any, and accrued interest on the outstanding Securities at the
Stated Maturity of such principal or interest; provided that the
Trustee shall have been irrevocably instructed to apply such money or
the proceeds of such U.S. Government Obligations to the payment of
such principal, premium, if any, and interest with respect to the
Securities;
(B) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company or the Guarantor is a party or by
which it is bound;
(C) immediately after giving effect to such deposit on a pro
forma basis, no Default or Event of Default shall have occurred and be
continuing on the date of such deposit; and no Default or Event of
Default shall occur during the period ending on the 123rd day (or one
year) after such date of deposit and such deposit shall not result in
a breach or violation of, or constitute a default under, any other
agreement to which the Company or the Guarantor is a party or by which
the Company or the Guarantor is bound;
(D) the Company shall have delivered to the Trustee (1) either
(x) a ruling directed to the Trustee received from the Internal
Revenue Service to the effect that the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of
the Company's exercise of its option under this Section 8.02 and will
be subject to federal income tax on the same amount and in the same
manner and at the same times as would have been the case if such
option had not been exercised or (y) an Opinion of Counsel to the same
effect as the ruling described in clause (x) above accompanied by a
ruling to that effect published by the Internal Revenue Service,
unless there has been a change in the applicable federal income tax
law since the date of this Indenture such that a ruling from the
Internal Revenue Service is no longer required and (2) an Opinion of
Counsel to the effect that (x) the creation of the defeasance trust
does not violate the Investment Company Act of 1940 and (y) after the
passage of 123 days following the deposit (except, with respect to any
trust funds for the account of any Holder who may be deemed to be an
"insider" for purposes of the United States Bankruptcy Code, after one
year following the deposit), the trust funds will not be subject to
the effect of Section 547 of the United States Bankruptcy Code or
Section 15 of the New York Debtor and Creditor Law in a case commenced
by or against the Company or the Guarantor under either such statute,
and either (I) the trust funds will no longer remain the property of
the Company or the Guarantor (and therefore will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally) or (II) if a court
were to rule under any such law in any case or proceeding that the
trust funds remained property of the Company or the Guarantor
(a) assuming such trust funds remained in the possession of the
Trustee prior to such court ruling to the extent not paid to the
Holders, the Trustee will hold, for the benefit of the Holders, a
valid and perfected security interest in such trust funds that is not
avoidable in bankruptcy or otherwise except for the effect of Section
552(b) of the United States Bankruptcy Code on interest on the trust
funds accruing after the commencement of a case under such statute and
(b) the Holders will be entitled to receive adequate protection of
their interests in such trust funds if such trust funds are used in
such case or proceeding;
(E) if the Securities are then listed on a national securities
exchange, the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that such deposit defeasance and discharge
will not cause the Securities to be delisted; and
(F) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.02 have been complied with.
Notwithstanding the foregoing, prior to the end of the 123-day
(or one year) period referred to in clause (D)(2)(y) of this Section 8.02,
none of the Company's obligations under this Indenture shall be discharged.
Subsequent to the end of such 123-day (or one year) period with respect to
this Section 8.02, the Company's obligations in Sections 2.02, 2.03, 2.04,
2.05, 2.06, 2.07, 2.08, 2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.05 and 8.06
shall survive until the Securities are no longer outstanding. Thereafter,
only the Company's obligations in Sections 7.07, 8.05 and 8.06 shall
survive. If and when a ruling from the Internal Revenue Service or an
Opinion of Counsel referred to in clause (D)(1) of this Section 8.02 may be
provided specifically without regard to, and not in reliance upon, the
continuance of the Company's obligations under Section 4.01, then the
Company's obligations under such Section 4.01 shall cease upon delivery to
the Trustee of such ruling or Opinion of Counsel and compliance with the
other conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.02.
After any such irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Company's and the
Guarantor's obligations under the Securities and this Indenture except for
those surviving obligations in the immediately preceding paragraph.
SECTION 8.03. Defeasance of Certain Obligations. The Company
---------------------------------
and the Guarantor may omit to comply with any term, provision or condition
set forth in clauses (iii) and (iv) of Section 5.01 and Sections 4.03
through 4.18, and clause (c) of Section 6.01 with respect to clauses (iii)
and (iv) of Section 5.01 and Sections 4.03 through 4.18, and clauses (d)
and (e) of Section 6.01 shall be deemed not to be Events of Default, in
each case with respect to the outstanding Securities if:
(i) with reference to this Section 8.03, the Company or the
Guarantor has irrevocably deposited or caused to be irrevocably
deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.10) and conveyed all right, title and
interest to the Trustee for the benefit of the Holders, under the
terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee as trust funds in trust, specifically
pledged to the Trustee for the benefit of the Holders as security for
payment of the principal of, premium, if any, and interest, if any, on
the Securities, and dedicated solely to, the benefit of the Holders,
in and to (A) money in an amount, (B) U.S. Government Obligations
that, through the payment of interest and principal in respect thereof
in accordance with their terms, will provide, not later than one day
before the due date of any payment referred to in this clause (i),
money in an amount or (C) a combination thereof in an amount
sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, without
consideration of the reinvestment of such interest and after payment
of all federal, state and local taxes or other charges and assessments
in respect thereof payable by the Trustee, the principal of, premium,
if any, and accrued interest on the outstanding Securities on the
Stated Maturity of such principal or interest; provided that the
Trustee shall have been irrevocably instructed to apply such money or
the proceeds of such U.S. Government Obligations to the payment of
such principal, premium, if any, and interest with respect to the
Securities;
(ii) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company or the Guarantor is a party or by
which it is bound;
(iii) no Default or Event of Default shall have occurred and
be continuing on the date of such deposit;
(iv) the Company has delivered to the Trustee an Opinion of
Counsel to the effect that (A) the creation of the defeasance trust
does not violate the Investment Company Act of 1940, (B) the Holders
have a valid first-priority security interest in the trust funds, (C)
the Holders will not recognize income, gain or loss for federal income
tax purposes as a result of such deposit and the defeasance of the
obligations referred to in the first paragraph of this Section 8.03
and will be subject to federal income tax on the same amount and in
the same manner and at the same times as would have been the case if
such deposit and defeasance had not occurred and (D) after the passage
of 123 days following the deposit (except, with respect to any trust
funds for the account of any Holder who may be deemed to be an
"insider" for purposes of the United States Bankruptcy Code, after one
year following the deposit), the trust funds will not be subject to
the effect of Section 547 of the United States Bankruptcy Code or
Section 15 of the New York Debtor and Creditor Law in a case commenced
by or against the Company or the Guarantor under either such statute,
and either (1) the trust funds will no longer remain the property of
the Company or the Guarantor (and therefore will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally) or (2) if a court
were to rule under any such law in any case or proceeding that the
trust funds remained property of the Company or the Guarantor
(x) assuming such trust funds remained in the possession of the
Trustee prior to such court ruling to the extent not paid to the
Holders, the Trustee will hold, for the benefit of the Holders, a
valid and perfected security interest in such trust funds that is not
avoidable in bankruptcy or otherwise (except for the effect of Section
552(b) of the United States Bankruptcy Code on interest on the trust
funds accruing after the commencement of a case under such statute),
(y) the Holders will be entitled to receive adequate protection of
their interests in such trust funds if such trust funds are used in
such case or proceeding and (z) no property, rights in property or
other interests granted to the Trustee or the Holders in exchange for,
or with respect to, such trust funds will be subject to any prior
rights of holders of other Indebtedness of the Company or the
Guarantor or any of its Subsidiaries;
(v) if the Securities are then listed on a national securities
exchange, the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that such deposit defeasance and discharge
will not cause the Securities to be delisted; and
(vi) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.03 have been complied with.
SECTION 8.04. Application of Trust Money. Subject to Section
--------------------------
8.06, the Trustee or Paying Agent shall hold in trust money or U.S.
Government Obligations deposited with it pursuant to Section 8.01, 8.02 or
8.03, as the case may be, and shall apply the deposited money and the money
from U.S. Government Obligations in accordance with the Securities and this
Indenture to the payment of principal of, premium, if any, and interest on
the Securities; but such money need not be segregated from other funds
except to the extent required by law.
SECTION 8.05. Repayment to Company. Subject to Sections 7.07,
--------------------
8.01, 8.02 and 8.03, the Trustee and the Paying Agent shall promptly pay to
the Company upon request set forth in an Officers' Certificate any excess
money held by them at any time and thereupon shall be relieved from all
liability with respect to such money. The Trustee and the Paying Agent
shall pay to the Company upon request any money held by them for the
payment of principal, premium, if any, or interest that remains unclaimed
for two years; provided that the Trustee or such Paying Agent before being
required to make any payment may cause to be published at the expense of
the Company once in a newspaper of general circulation in the City of New
York or mail to each Holder entitled to such money at such Holder's address
(as set forth in the Security Register) notice that such money remains
unclaimed and that after a date specified therein (which shall be at least
30 days from the date of such publication or mailing) any unclaimed balance
of such money then remaining will be repaid to the Company. After payment
to the Company, Holders entitled to such money must look to the Company for
payment as general creditors unless an applicable law designates another
Person, and all liability of the Trustee and such Paying Agent with respect
to such money shall cease.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
-------------
unable to apply any money or U.S. Government Obligations in accordance with
Section 8.01, 8.02 or 8.03, as the case may be, by reason of any legal
proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's and the Guarantor's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.01, 8.02 or 8.03, as the case
may be, until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with
Section 8.01, 8.02 or 8.03, as the case may be; provided that, if the
Company or the Guarantor has made any payment of principal of, premium, if
any, or interest on any Securities because of the reinstatement of its
obligations, the Company or the Guarantor, as the case may be, shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money or U.S. Government Obligations held by the Trustee
or Paying Agent.
SECTION 8.07. Insiders. With respect to the determination of
--------
the Persons constituting beneficial owners of Securities and whether any
such Person is an "insider" for purposes of Sections 8.02(D)(2)(y) and
8.03(iv)(D), the Trustee may rely on an Officers' Certificate.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders. The Company, the
--------------------------
Guarantor, when authorized by resolutions of their Boards of Directors, and
the Trustee may amend or supplement this Indenture or the Securities
without notice to or the consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency in this
Indenture; provided that such amendments or supplements shall not
adversely affect the interests of the Holders in any material respect;
(2) to comply with Article Five;
(3) to comply with any requirements of the Commission in
connection with the qualification of this Indenture under the TIA;
(4) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee; or
(5) to make any change that, in the opinion of the Board of
Directors of the Company evidenced by a Board Resolution, does not
materially and adversely affect the rights of any Holder.
SECTION 9.02. With Consent of Holders. Subject to Sections 6.04
-----------------------
and 6.07 and without prior notice to the Holders, the Company, the
Guarantor, when authorized by their Boards of Directors (as evidenced by a
Board Resolution), and the Trustee may amend this Indenture and the
Securities with the written consent of the Holders of a majority in
principal amount at maturity of the Securities then outstanding, and the
Holders of a majority in principal amount at maturity of the Securities
then outstanding by written notice to the Trustee may waive future
compliance by the Company or the Guarantor with any provision of this
Indenture or the Securities.
Notwithstanding the provisions of this Section 9.02, without the
consent of each Holder affected, an amendment or waiver, including a waiver
pursuant to Section 6.04, may not:
(i) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal
amount at maturity thereof or the rate of interest thereon or any
premium payable upon the redemption thereof, or adversely affect any
right of repayment at the option of any Holder of any Security, or the
currency in which, any Security or any premium or the interest thereon
is payable, or impair the right to institute suit for the enforcement
of any such payment on or after the Stated Maturity thereof (or, in
the case of redemption, on or after the Redemption Date);
(ii) reduce the percentage in principal amount at maturity of
outstanding Securities the consent of whose Holders is required for
any such supplemental indenture, for any waiver of compliance with
certain provisions of this Indenture or certain Defaults and their
consequences provided for in this Indenture;
(iii) waive a Default in the payment of principal of,
premium, if any, or interest on, any Security;
(iv) release the Guarantor from its Security Guarantee; or
(v) modify any of the provisions of this Section 9.02, except to
increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each outstanding Security affected thereby.
It shall not be necessary for the consent of the Holders under
this Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves
the substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. The Company
will mail supplemental indentures to Holders upon request. Any failure of
the Company to mail such notice, or any defect therein, shall not, however,
in any way impair or affect the validity of any such supplemental indenture
or waiver.
SECTION 9.03. Revocation and Effect of Consent. Until an
--------------------------------
amendment or waiver becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder of a Security
or portion of a Security that evidences the same debt as the Security of
the consenting Holder, even if notation of the consent is not made on any
Security. However, any such Holder or subsequent Holder may revoke the
consent as to its Security or portion of its Security. Such revocation
shall be effective only if the Trustee receives the notice of revocation
before the date the amendment, supplement or waiver becomes effective. An
amendment, supplement or waiver shall become effective on receipt by the
Trustee of written consents from the Holders of the requisite percentage in
principal amount at maturity of the outstanding Securities.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then,
notwithstanding the last two sentences of the immediately preceding
paragraph, those persons who were Holders at such record date (or their
duly designated proxies) and only those persons shall be entitled to
consent to such amendment, supplement or waiver or to revoke any consent
previously given, whether or not such persons continue to be Holders after
such record date. No such consent shall be valid or effective for more
than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Holder unless it is of the type described in any of
clauses (i) through (v) of Section 9.02. In case of an amendment or waiver
of the type described in clauses (i) through (v) of Section 9.02, the
amendment or waiver shall bind each Holder who has consented to it and
every subsequent Holder of a Security that evidences the same indebtedness
as the Security of the consenting Holder.
SECTION 9.04. Notation on or Exchange of Securities. If an
-------------------------------------
amendment, supplement or waiver changes the terms of a Security, the
Trustee may require the Holder to deliver it to the Trustee. The Trustee
may place an appropriate notation on the Security about the changed terms
and return it to the Holder and the Trustee may place an appropriate
notation on any Security thereafter authenticated. Alternatively, if the
Company or the Trustee so determines, the Company in exchange for the
Security shall issue and the Trustee shall authenticate a new Security that
reflects the changed terms.
SECTION 9.05. Trustee to Sign Amendments, Etc. The Trustee
-------------------------------
shall be entitled to receive, and shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of any amendment,
supplement or waiver authorized pursuant to this Article Nine is authorized
or permitted by this Indenture. Subject to the preceding sentence, the
Trustee shall sign such amendment, supplement or waiver if the same does
not adversely affect the rights of the Trustee. The Trustee may, but shall
not be obligated to, execute any such amendment, supplement or waiver that
affects the Trustee's own rights, duties or immunities under this Indenture
or otherwise.
SECTION 9.06. Conformity with Trust Indenture Act. Every
-----------------------------------
supplemental indenture executed pursuant to this Article Nine shall conform
to the requirements of the TIA as then in effect.
ARTICLE TEN
GUARANTEE OF SECURITIES
SECTION 10.01. Security Guarantee. Subject to the provisions of
------------------
this Article Ten, the Guarantor hereby fully, unconditionally and
irrevocably guarantees to each Holder and to the Trustee on behalf of the
Holders: (i) the due and punctual payment of the principal of, premium, if
any, on and interest on each Security, when and as the same shall become
due and payable, whether at maturity, by acceleration or otherwise, the due
and punctual payment of interest on the overdue principal of and interest,
if any, on the Securities, to the extent lawful, and the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee, all in accordance with the terms of such Security and this
Indenture and (ii) in the case of any extension of time of payment or
renewal of any Securities or any of such other obligations, that the same
will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, at Stated Maturity, by acceleration or
otherwise. The Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of merger or bankruptcy
of the Company, any right to require a proceeding first against the
Company, the benefit of discussion, protest or notice with respect to any
such Security or the debt evidenced thereby and all demands whatsoever, and
covenants that this Security Guarantee will not be discharged as to any
such Security except by payment in full of the principal thereof and
interest thereon and as provided in Section 8.01 and Section 8.02 (subject
to Section 8.06). The maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Six for the purposes of this Article
Ten. In the event of any declaration of acceleration of such obligations
as provided in Article Six, such obligations (whether or not due and
payable) shall forthwith become due and payable by the Guarantor for the
purpose of this Article Ten. In addition, without limiting the foregoing
provisions, upon the effectiveness of an acceleration under Article Six,
the Trustee shall promptly make a demand for payment on the Securities
under the Security Guarantee provided for in this Article Ten.
If the Trustee or the Holder of any Security is required by any
court or otherwise to return to the Company or the Guarantor, or any
custodian, receiver, liquidator, trustee, sequestrator or other similar
official acting in relation to the Company or the Guarantor, any amount
paid to the Trustee or such Holder in respect of a Security, this Security
Guarantee, to the extent theretofore discharged, shall be reinstated in
full force and effect. The Guarantor further agrees, to the fullest extent
that it may lawfully do so, that, as between it, on the one hand, and the
Holders and the Trustee, on the other hand, the maturity of the obligations
guaranteed hereby may be accelerated as provided in Article Six hereof for
the purposes of this Security Guarantee, notwithstanding any stay,
injunction or other prohibition extant under any applicable bankruptcy law
preventing such acceleration in respect of the obligations Guaranteed
hereby.
The Guarantor hereby irrevocably waives any claim or other rights
which it may now or hereafter acquire against the Company that arise from
the existence, payment, performance or enforcement of its obligations under
this Security Guarantee and this Indenture, including, without limitation,
any right of subrogation, reimbursement, exoneration, contribution,
indemnification, any right to participate in any claim or remedy of the
Holders against the Company or any collateral which any such Holder or the
Trustee on behalf of such Holder hereafter acquires, whether or not such
claim, remedy or right arises in equity, or under contract, statute or
common law, including, without limitation, the right to take or receive
from the Company, directly or indirectly, in cash or other property or by
set-off or in any other manner, payment or security on account of such
claim or other rights. If any amount shall be paid to the Guarantor in
violation of the preceding sentence and the principal of, premium, if any,
and accrued interest on the Securities shall not have been paid in full,
such amount shall be deemed to have been paid to the Guarantor for the
benefit of, and held in trust for the benefit of, the Holders, and shall
forthwith be paid to the Trustee for the benefit of the Holders to be
credited and applied upon the principal of, premium, if any, and accrued
interest on the Securities. The Guarantor acknowledges that it will
receive direct and indirect benefits from the issuance of the Securities
pursuant to this Indenture and that the waivers set forth in this Section
10.01 are knowingly made in contemplation of such benefits.
The Security Guarantee set forth in this Section 10.01 shall not
be valid or become obligatory for any purpose with respect to a Security
until the certificate of authentication on such Security shall have been
signed by or on behalf of the Trustee.
SECTION 10.02. Obligations Unconditional. Subject to Section
-------------------------
10.05, nothing contained in this Article Ten or elsewhere in this Indenture
or in the Securities is intended to or shall impair, as among the Guarantor
and the holders of the Securities, the obligation of the Guarantor, which
is absolute and unconditional, upon failure by the Company, to pay to the
holders of the Securities the principal of, premium, if any, and interest
on the Securities as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the holders of the Securities and creditors of the Guarantor, nor
shall anything herein or therein prevent the holder of any Security or the
Trustee on their behalf from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture.
Without limiting the foregoing, nothing contained in this Article
Ten will restrict the right of the Trustee or the holders of the Securities
to take any action to declare the Security Guarantee to be due and payable
prior to the Stated Maturity of the Securities pursuant to Section 6.02 or
to pursue any rights or remedies hereunder.
SECTION 10.03. Notice to Trustee. The Guarantor shall give
-----------------
prompt written notice to the Trustee of any fact known to the Guarantor
which would prohibit the making of any payment to or by the Trustee in
respect of the Security Guarantee pursuant to the provisions of this
Article Ten.
SECTION 10.04. This Article Not to Prevent Events of Default.
---------------------------------------------
The failure to make a payment on account of principal of, premium, if any,
or interest on the Securities by reason of any provision of this Article
will not be construed as preventing the occurrence of an Event of Default.
SECTION 10.05. Net Worth Limitation. Notwithstanding any other
--------------------
provision of this Indenture or the Securities, the Security Guarantee shall
not be enforceable against the Guarantor in an amount in excess of the net
worth of the Guarantor at the time that determination of such net worth is,
under applicable law, relevant to the enforceability of the Security
Guarantee. Such net worth shall include any claim of the Guarantor against
the Company for reimbursement and any claim against any grantor of a
Subsidiary Guarantee for contribution.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act of 1939. Prior to the
---------------------------
effectiveness of the Registration Statement, this Indenture shall
incorporate and be governed by the provisions of the TIA that are required
to be part of and to govern indentures qualified under the TIA. After the
effectiveness of the Registration Statement, this Indenture shall be
subject to the provisions of the TIA that are required to be a part of this
Indenture and shall, to the extent applicable, be governed by such
provisions.
SECTION 11.02. Notices. Any notice or communication shall be
-------
sufficiently given if in writing and delivered in person or mailed by first
class mail addressed as follows:
if to the Company:
-----------------
ICG Holdings, Inc.
9605 East Maroon Circle
P.O. Box 6742
Englewood, Colorado 80155-6742
Attention: President
if to the Guarantor:
-------------------
ICG Communications, Inc.
9605 East Maroon Circle
P.O. Box 6742
Englewood, Colorado 80155-6742
Attention: President
if to the Trustee:
-----------------
Norwest Bank Colorado, National Association
1740 Broadway
Denver, Colorado 80274-8693
Attention: Corporate Trust and Escrow Services
The Company, the Guarantor or the Trustee by notice to the other
may designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Holder shall be mailed to
him at his address as it appears on the Security Register by first class
mail and shall be sufficiently given to him if so mailed within the time
prescribed. Copies of any such communication or notice to a Holder shall
also be mailed to the Trustee and each Agent at the same time.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other
Holders. Except for a notice to the Trustee, which is deemed given only
when received, and except as otherwise provided in this Indenture, if a
notice or communication is mailed in the manner provided in this Section
11.02, it is duly given, whether or not the addressee receives it.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed
with the Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the
Trustee shall constitute a sufficient notification for every purpose
hereunder.
SECTION 11.03. Certificate and Opinion as to Conditions
-----------------------------------------
Precedent. Upon any request or application by the Company or the Guarantor
---------
to the Trustee to take any action under this Indenture, the Company or the
Guarantor shall furnish to the Trustee:
(i) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(ii) an Opinion of Counsel stating that, in the opinion of such
Counsel, all such conditions precedent have been complied with.
SECTION 11.04. Statements Required in Certificate or Opinion.
---------------------------------------------
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(i) a statement that each person signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinion
contained in such certificate or opinion is based;
(iii) a statement that, in the opinion of each such person,
he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(iv) a statement as to whether or not, in the opinion of each
such person, such condition or covenant has been complied with;
provided, however, that, with respect to matters of fact, an Opinion
of Counsel may rely on an Officers' Certificate or certificates of
public officials.
SECTION 11.05. Rules by Trustee, Paying Agent or Registrar. The
-------------------------------------------
Trustee may make reasonable rules for action by or at a meeting of Holders.
The Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 11.06. Payment Date Other Than a Business Day. If an
--------------------------------------
Interest Payment Date, Redemption Date, Change of Control Payment Date,
Excess Proceeds Payment Date, Stated Maturity or date of maturity of any
Security shall not be a Business Day, then payment of principal of,
premium, if any, or interest on such Security, as the case may be, need not
be made on such date, but may be made on the next succeeding Business Day
with the same force and effect as if made on the Interest Payment Date,
Change of Control Payment Date, Excess Proceeds Payment Date, or Redemption
Date, or at the Stated Maturity or date of maturity of such Security;
provided that no interest shall accrue for the period from and after such
Interest Payment Date, Change of Control Payment Date, Excess Proceeds
Payment Date, Redemption Date, Stated Maturity or date of maturity, as the
case may be.
SECTION 11.07. Governing Law; Submission to Jurisdiction. The
-----------------------------------------
laws of the State of New York applicable to contracts to be performed
entirely in that state shall govern this Indenture and the Securities.
Each of the Guarantor and the Company agrees to submit to the jurisdiction
of any federal or state court located in the City of New York in any suit,
action or proceeding with respect to this Indenture or the Securities and
for actions brought under the U.S. federal or state securities laws brought
in any such court.
SECTION 11.08. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company, the Guarantor or any Subsidiary of the Guarantor.
Any such indenture, loan or debt agreement may not be used to interpret
this Indenture.
SECTION 11.09. No Recourse Against Others. No recourse for the
--------------------------
payment of the principal of, premium, if any, or interest on any of the
Securities, or for any claim based thereon or otherwise in respect thereof,
and no recourse under or upon any obligation, covenant or agreement of the
Company or the Guarantor contained in this Indenture, or in any of the
Securities, or because of the creation of any Indebtedness represented
thereby, shall be had against any incorporator or against any past, present
or future partner, shareholder, other equityholder, officer, director,
employee or controlling person, as such, of the Company or the Guarantor or
of any successor Person, either directly or through the Company or the
Guarantor or any successor Person, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty
or otherwise; it being expressly understood that all such liability is
hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue of the
Securities.
SECTION 11.10. Successors. All agreements of the Company in
----------
this Indenture and the Securities shall bind its successors. All
agreements of the Guarantor in this Indenture and the Securities shall bind
its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
SECTION 11.11. Duplicate Originals. The parties may sign any
-------------------
number of copies of this Indenture. Each signed copy shall be an original,
but all of them together represent the same agreement.
SECTION 11.12. Separability. In case any provision in this
------------
Indenture or in the Securities shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall
not in any way be affected or impaired thereby.
SECTION 11.13. Table of Contents, Headings, Etc. The Table of
--------------------------------
Contents, Cross-Reference Table and headings of the Articles and Sections
of this Indenture have been inserted for convenience of reference only, are
not to be considered a part hereof and shall in no way modify or restrict
any of the terms and provisions hereof.
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed, all as of the date first written above.
ICG HOLDINGS, INC.
By: /s/ James D. Grenfell
---------------------------------
Name: James D. Grenfell
Title: Executive Vice President,
Chief Financial Officer
and Treasurer
ICG COMMUNICATIONS, INC.
By: /s/ James D. Grenfell
----------------------------------
Name: James D. Grenfell
Title: Executive Vice President,
Chief Financial Officer
and Treasurer
NORWEST BANK COLORADO,
NATIONAL ASSOCIATION
By: /s/ Amy E. Buck
--------------------------------
Name: Amy E. Buck
Title: Vice President
<PAGE>
EXHIBIT A
---------
[FACE OF NOTE]
ICG HOLDINGS, INC.
11 5/8% Senior Discount Note Due 2007
[CUSIP] [CINS]
----------
No. $_________
The following information is supplied for purposes of Sections
1273 and 1275 of the Internal Revenue Code:
Issue Date: March 11, 1997
Yield to maturity for period from Issue Date to March 15, 2007: 11.62%
(rounded to two decimal places), compounded semiannually on March 15 and
September 15 commencing March 11, 1997 (computed without giving effect to
the additional payments of interest in the event the issuer fails to
commence the exchange offer and fails to cause the shelf registration
statement to be declared effective, each as referred to on the reverse
hereof)
Original issue discount under Section 1273 of the Internal Revenue Code
(for each $1,000 principal amount at maturity): $1,013.59
Issue Price (for each $1,000 principal amount at maturity): $567.66
ICG HOLDINGS, INC., a Colorado corporation (the "Company", which
term includes any successor under the Indenture hereinafter referred to),
for value received, promises to pay to [ ], or its registered
------------
assigns, the principal sum of [ ] ($[ ]) on March 15, 2007.
----- -----
Interest Payment Dates: March 15 and September 15, commencing
September 15, 2002.
Regular Record Dates: March 1 and September 1.
<PAGE>
Reference is hereby made to the further provisions of this Note
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Date: [ ] ICG HOLDINGS, INC.
---------------
By:
--------------------------------
Name:
Title:
Attest:
Name:
Title:
(Form of Trustee's Certificate of Authentication)
This is one of the 11 5/8% Senior Discount Notes due 2007 described in the
within-mentioned Indenture.
NORWEST BANK COLORADO,
NATIONAL ASSOCIATION, as Trustee
By:
--------------------------------
Authorized Signatory
<PAGE>
[REVERSE SIDE OF NOTE]
ICG HOLDINGS, INC.
11 5/8% Senior Discount Note due 2007
1. Principal and Interest.
----------------------
The Company will pay the principal of this 11 5/8% Senior
Discount Note due 2007 (the "Note") on March 15, 2007.
The Company promises to pay interest on the principal amount of
this Note on each Interest Payment Date, as set forth below, at the rate
per annum shown above.
Interest will be payable semiannually (to the holders of record
of the Notes at the close of business on the March 1 or September 1
immediately preceding the Interest Payment Date) on each Interest Payment
Date, commencing September 15, 2002; provided that no interest shall accrue
on the principal amount of this Note prior to March 15, 2002 and no
interest shall be paid on this Note prior to September 15, 2002, except as
provided in the next paragraph.
If an exchange offer registered under the Securities Act is not
consummated, and a shelf registration statement under the Securities Act
with respect to resales of the Notes is not declared effective by the
Commission, on or before September 11, 1997 in accordance with the terms of
the Registration Rights Agreement dated March 11, 1997 among the Company,
the Guarantor and Morgan Stanley & Co. Incorporated, interest (in addition
to the accrual of original discount during the period ending March 15, 2002
and in addition to the interest otherwise due on the Notes after such date)
will accrue, at an annual rate of 0.5% of the Accreted Value on the
preceding Semi-Annual Accrual Date on the Notes, from September 11, 1997,
payable in cash semiannually, in arrears, on each March 15 and
September 15, commencing March 15, 1998. The Holder of this Note is
entitled to the benefits of such Registration Rights Agreement.
From and after March 15, 2002, interest on the Notes will accrue
from the most recent date to which interest has been paid or, if no
interest has been paid, from March 15, 2002; provided that, if there is no
existing default in the payment of interest and this Note is authenticated
between a Regular Record Date referred to on the face hereof and the next
succeeding Interest Payment Date, interest shall accrue from such Interest
Payment Date. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
The Company shall pay interest on overdue principal and premium,
if any, and interest on overdue installments of interest, to the extent
lawful, at a rate per annum that is 2% in excess of the rate otherwise
payable.
2. Method of Payment.
-----------------
The Company will pay principal as provided above and interest
(except defaulted interest) on the principal amount of the Notes as
provided above on each March 15 and September 15 to the persons who are
Holders (as reflected in the Security Register at the close of business on
such March 1 and September 1, immediately preceding the Interest Payment
Date), in each case, even if the Note is cancelled on registration of
transfer or registration of exchange after such record date; provided that,
with respect to the payment of principal, the Company will not make payment
to the Holder unless this Note is surrendered to a Paying Agent.
The Company will pay principal, premium, if any, and as provided
above, interest in money of the United States that at the time of payment
is legal tender for payment of public and private debts. However, the
Company may pay principal, premium, if any, and interest by its check
payable in such money. It may mail an interest check to a Holder's
registered address (as reflected in the Security Register). If a payment
date is a date other than a Business Day at a place of payment, payment may
be made at that place on the next succeeding day that is a Business Day and
no interest shall accrue for the intervening period.
3. Paying Agent and Registrar.
--------------------------
Initially, the Trustee will act as authenticating agent, Paying
Agent and Registrar. The Company may change any authenticating agent,
Paying Agent or Registrar without notice. The Company, any Subsidiary or
any Affiliate of any of them may act as Paying Agent, Registrar or
co-Registrar.
4. Indenture; Issuance of Additional Notes.
---------------------------------------
The Company issued the Notes under an Indenture dated as of
March 11, 1997 (the "Indenture"), among the Company, ICG Communications,
Inc., a Delaware corporation (the "Guarantor"), and Norwest Bank Colorado,
National Association, as trustee (the "Trustee"). Capitalized terms herein
are used as defined in the Indenture unless otherwise indicated. The terms
of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act. The Notes are
subject to all such terms, and Holders are referred to the Indenture and
the Trust Indenture Act for a statement of all such terms. To the extent
permitted by applicable law, in the event of any inconsistency between the
terms of this Note and the terms of the Indenture, the terms of the
Indenture shall control.
The Notes are general unsecured obligations of the Company. The
Indenture provides for an initial original issuance of an aggregate
principal amount at maturity of Notes of $176,000,000, plus any Exchange
Securities that may be issued pursuant to the Registration Rights
Agreement, and, subject to Article Four of the Indenture, the issuance from
time to time of additional Notes under the Indenture.
5. Redemption.
----------
The Notes will be redeemable, at the Company's option, in whole
or in part, at any time and from time to time on or after March 15, 2002
and prior to maturity, upon not less than 30 nor more than 60 days' prior
notice mailed by first-class mail to each Holder's last address as it
appears in the Security Register, at the following Redemption Prices
(expressed in percentages of their principal amount at maturity), plus
accrued and unpaid interest, if any, to the Redemption Date (subject to the
right of Holders of record on the relevant Regular Record Date that is on
or prior to the Redemption Date to receive interest due on an Interest
Payment Date that is on or prior to the Redemption Date) if redeemed during
the 12-month period commencing on March 15 of the applicable year set forth
below:
Redemption
Year Price
---- -------------
2002 105.81250%
2003 102.90625
2004 and thereafter 100.00000
In addition, at any time on or prior to March 15, 2000, the
Company may, at its option from time to time, redeem Securities having an
aggregate principal amount of up to 35% of the aggregate principal amount
of all Securities issued, at a redemption price equal to 111 5/8% of the
Accreted Value thereof on the Redemption Date, with proceeds of one or more
Public Equity Offerings of Common Stock of (A) the Guarantor or (B) the
Company, provided that (i) with respect to a Public Equity Offering
referred to in clause (A) above, cash proceeds of such Public Equity
Offering in an amount sufficient to effect the redemption of Securities to
be so redeemed are contributed by the Guarantor to the Company prior to
such redemption and used by the Company to effect such redemption and
(ii) such redemption occurs within 180 days after consummation of such
Public Equity Offering.
6. Notice of Redemption.
--------------------
Notice of any optional redemption will be mailed at least 30 days
but not more than 60 days before the Redemption Date to each Holder of
Notes to be redeemed at his last address as it appears in the Security
Register. Notes in original denominations larger than $1,000 may be
redeemed in part. On and after the Redemption Date, interest ceases to
accrue on Notes or portions of Notes called for redemption, unless the
Company defaults in the payment of the Redemption Price.
7. Repurchase upon Change in Control.
---------------------------------
Upon the occurrence of any Change of Control, each Holder shall
have the right to require the repurchase of its Notes by the Company in
cash pursuant to the offer described in the Indenture at a purchase price
equal to 101% of the Accreted Value thereof plus accrued and unpaid
interest, if any, to the date of purchase (the "Change of Control
Payment").
A notice of such Change of Control will be mailed within 30 days
after any Change of Control occurs to each Holder at his last address as it
appears in the Security Register. Notes in original denominations larger
than $1,000 may be sold to the Company in part. On and after the date of
the Change of Control Payment, interest ceases to accrue on Notes or
portions of Notes surrendered for purchase by the Company, unless the
Company defaults in the payment of the Change of Control Payment.
8. Denominations; Transfer; Exchange.
---------------------------------
The Notes are in registered form without coupons in denominations
of $1,000 of principal amount at maturity and multiples of $1,000 in excess
thereof. A Holder may register the transfer or exchange of Notes in
accordance with the Indenture. The Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents
and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer or exchange of any
Notes selected for redemption. Also, it need not register the transfer or
exchange of any Notes for a period of 15 days before a selection of Notes
to be redeemed is made.
9. Persons Deemed Owners.
---------------------
A Holder shall be treated as the owner of a Note for all
purposes.
10. Unclaimed Money.
---------------
If money for the payment of principal, premium, if any, or
interest remains unclaimed for two years, the Trustee and the Paying Agent
will pay the money back to the Company at its request. After that, Holders
entitled to the money must look to the Company for payment, unless an
abandoned property law designates another Person, and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
11. Discharge Prior to Redemption or Maturity.
-----------------------------------------
If the Company or the Guarantor deposits with the Trustee money
or U.S. Government Obligations sufficient to pay the then outstanding
principal of, premium, if any, and accrued interest on the Notes (a) to
redemption or maturity, the Company will be discharged from the Indenture
and the Notes, except in certain circumstances for certain sections
thereof, and (b) to the Stated Maturity, the Company and the Guarantor will
be discharged from certain covenants set forth in the Indenture.
12. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented with the consent of the Holders of at least a
majority in principal amount at maturity of the Notes then outstanding, and
any existing default or compliance with any provision may be waived with
the consent of the Holders of at least a majority in principal amount at
maturity of the Notes then outstanding. Without notice to or the consent
of any Holder, the parties thereto may amend or supplement the Indenture or
the Notes to, among other things, cure any ambiguity, defect or
inconsistency and make any change that does not materially and adversely
affect the rights of any Holder.
13. Restrictive Covenants.
---------------------
The Indenture imposes certain limitations on the ability of the
Company and the Guarantor and its Restricted Subsidiaries, among other
things, to Incur Indebtedness, make Restricted Payments, use the proceeds
from Asset Sales, engage in transactions with Affiliates or, with respect
to each of the Company and the Guarantor, merge, consolidate or transfer
substantially all of its assets. Within 45 days after the end of each
fiscal quarter (90 days after the end of the last fiscal quarter of each
year), the Company must report to the Trustee on compliance with such
limitations.
14. Successor Persons.
-----------------
When a successor person or other entity assumes all the
obligations of its predecessor under the Notes and the Indenture, the
predecessor person will be released from those obligations.
15. Defaults and Remedies.
---------------------
The following events constitute "Events of Default" under the
Indenture: (a) default in the payment of principal of (or premium, if any,
on) any Note when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise; (b) default in the payment of
interest on any Note when the same becomes due and payable, and such
default continues for a period of 30 days; (c) the Company or the Guarantor
defaults in the performance of or breaches any other covenant or agreement
of the Company or the Guarantor in the Indenture or under the Notes and
such default or breach continues for a period of 30 consecutive days after
written notice by the Trustee or the Holders of 25% or more in aggregate
principal amount at maturity of the Notes; (d) there occurs with respect to
any issue or issues of Indebtedness of the Company, the Guarantor or any
Significant Subsidiary having an outstanding principal amount at maturity
of $10 million or more in the aggregate for all such issues of all such
Persons, whether such Indebtedness now exists or shall hereafter be
created, (I) an event of default that has caused the holder thereof to
declare such Indebtedness to be due and payable prior to its Stated
Maturity and such Indebtedness has not been discharged in full or such
acceleration has not been rescinded or annulled within 30 days of such
acceleration and/or (II) the failure to make a principal payment at the
final (but not any interim) fixed maturity and such defaulted payment shall
not have been made, waived or extended within 30 days of such payment
default; (e) any final judgment or order (not covered by insurance) for the
payment of money in excess of $10 million in the aggregate for all such
final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against the Company, the Guarantor or any Significant Subsidiary
and shall not be paid or discharged, and there shall be any period of 30
consecutive days following entry of the final judgment or order that causes
the aggregate amount for all such final judgments or orders outstanding and
not paid or discharged against all such Persons to exceed $10 million
during which a stay of enforcement of such final judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect; (f) a
court having jurisdiction in the premises enters a decree or order for (A)
relief in respect of the Company, the Guarantor or any Significant
Subsidiary in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (B) appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Company, the Guarantor or any Significant
Subsidiary or for all or substantially all of the property and assets of
the Company, the Guarantor or any Significant Subsidiary or (C) the winding
up or liquidation of the affairs of the Company, the Guarantor or any
Significant Subsidiary and, in each case, such decree or order shall remain
unstayed and in effect for a period of 30 consecutive days; or (g) the
Company, the Guarantor or any Significant Subsidiary (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (B) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company, the
Guarantor or any Significant Subsidiary or for all or substantially all of
the property and assets of the Company, the Guarantor or any Significant
Subsidiary or (C) effects any general assignment for the benefit of
creditors.
If an Event of Default (other than an Event of Default specified
in clause (f) or (g) above that occurs with respect to the Company or the
Guarantor) occurs and is continuing under the Indenture, the Trustee or the
Holders of at least 25% in aggregate principal amount at maturity of the
Notes, then outstanding, by written notice to the Company (and to the
Trustee if such notice is given by the Holders), may, and the Trustee at
the request of such Holders shall, declare the Accreted Value of, premium,
if any, and accrued interest, if any, on the Notes to be immediately due
and payable.
If an Event of Default, as defined in the Indenture, occurs and
is continuing, the Trustee or the Holders of at least 25% in principal
amount at maturity of the Notes may declare all the Notes to be due and
payable. If a bankruptcy or insolvency default with respect to the Company
or any Restricted Subsidiary occurs and is continuing, the Notes
automatically become due and payable. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. The Trustee
may require indemnity satisfactory to it before it enforces the Indenture
or the Notes. Subject to certain limitations, Holders of at least a
majority in principal amount at maturity of the Notes then outstanding may
direct the Trustee in its exercise of any trust or power.
16. Guarantee.
---------
The Company's obligations under the Notes are fully and
irrevocably guaranteed by the Guarantor.
17. Trustee Dealings with Company or Guarantor.
------------------------------------------
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from and perform services for
the Company, the Guarantor or their Affiliates and may otherwise deal with
the Company, the Guarantor or their Affiliates as if it were not the
Trustee.
18. No Recourse Against Others.
--------------------------
No incorporator or any past, present or future partner,
shareholder, other
equity holder, officer, director, employee or controlling person as such,
of the Company or the Guarantor or of any successor Person shall have any
liability for any obligations of the Company or the Guarantor under the
Notes or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder by accepting a
Note waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Notes.
19. Authentication.
--------------
This Note shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on the other side of this
Note.
20. Abbreviations.
-------------
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not
as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to
Minors Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to ICG
Holdings, Inc., 9605 East Maroon Circle, P.O. Box 6742, Englewood,
Colorado, 80155-6742, Attention: Chief Financial Officer.
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
----------------------------------
--------------------------------------------------------------------------
---------------------------------
Please print or typewrite name and address including zip code of assignee
---------------------------------------------------------------------------
-----------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting
and appointing
------------------------------------------------------------
attorney to transfer said Note on the books of the Company with
-------
full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL SECURITIES OTHER THAN EXCHANGE SECURITIES,
UNLEGENDED OFFSHORE GLOBAL SECURITIES AND
UNLEGENDED OFFSHORE PHYSICAL SECURITIES]
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of an effective Registration or
(ii) the end of the period referred to in Rule 144(k) under the Securities
Act, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
---------
[ ] (a) this Note is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended,
provided by Rule 144A thereunder.
or
--
[ ] (b) this Note is being transferred other than in accordance with
(a) above and documents are being furnished which comply with the
conditions of transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other Registrar
shall not be obligated to register this Note in the name of any Person
other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 2.08 of the
Indenture shall have been satisfied.
Date:
---------------------------------------------------------------------
NOTICE: The signature to this assignment must
correspond with the name as written upon the face
of the within-mentioned instrument in every
particular, without alteration or any change
whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities
Act of 1933, as amended, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant
to Rule 144A or has determined not to request such information and that it
is aware that the transferor is relying upon the undersigned's foregoing
representations in order to claim the exemption from registration provided
by Rule 144A.
Dated:
--------------------------------------------------------------------
NOTICE: To be executed by an executive
officer
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant
to Section 4.11 or Section 4.12 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 4.11 or Section 4.12 of the Indenture, state
the amount (in principal amount at maturity): $ .
-------------------
Date:
-----------------
Your Signature:
-----------------------------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
------------------------------
<PAGE>
EXHIBIT B
---------
Form of Certificate
-------------------
Norwest Bank Colorado, N.A. , 19
---------- -- --
1740 Broadway
Denver, Colorado 80274-8693
Attention: Corporate Trust and Escrow Services
Re: ICG Holdings, Inc. (the "Company")
11 5/8% Senior Discount Notes
due 2007 (the "Securities")
----------------------------------------
Ladies and Gentlemen:
This letter relates to U.S. $ principal amount
---------------
at maturity of Securities represented by a Note (the "Legended Note") which
bears a legend outlining restrictions upon transfer of such Legended Note.
Pursuant to Section 2.02 of the Indenture (the "Indenture") dated as of
March 11, 1997 relating to the Securities, we hereby certify that we are
(or we will hold such Securities on behalf of) a person outside the United
States to whom the Securities could be transferred in accordance with Rule
904 of Regulation S promulgated under the U.S. Securities Act of 1933, as
amended. Accordingly, you are hereby requested to exchange the legended
certificate for an unlegended certificate representing an identical
principal amount at maturity of Securities, all in the manner provided for
in the Indenture.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:
------------------------------------
Authorized Signature
<PAGE>
EXHIBIT C
---------
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
-----------------------------------
Norwest Bank Colorado, N.A. , 19
---------- -- --
1740 Broadway
Denver, Colorado 80274-8693
Attention: Corporate Trust and Escrow Services
Re: ICG Holdings, Inc. (the "Company")
11 5/8% Senior Discount Notes
due 2007 (the "Securities")
---------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of U.S.$
------------
aggregate principal amount at maturity of the Securities, we confirm that
such sale has been effected pursuant to and in accordance with Regulation S
under the Securities Act of 1933, as amended, and, accordingly, we
represent that:
(1) the offer of the Securities was not made to a person in
the United States;
(2) at the time the buy order was originated, the transferee
was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the
United States;
(3) no directed selling efforts have been made by us in the
United States in contravention of the requirements of Rule 903(b)
or Rule 904(b) of Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the U.S. Securities Act of 1933.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
----------------------------
Authorized Signature
<PAGE>
EXHIBIT D
---------
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
Norwest Bank Colorado, N.A. , 19
---------- -- --
1740 Broadway
Denver, Colorado 80274-8693
Attention: Corporate Trust and Escrow Services
Re: ICG Holdings, Inc. (the "Company")
11 5/8% Senior Discount Notes
due 2007 (the "Securities")
---------------------------------------
Dear Sirs:
In connection with our proposed purchase of $
-----------
aggregate principal amount of the Securities, we confirm that:
1. We understand that any subsequent transfer of the
Securities is subject to certain restrictions and conditions set
forth in the Indenture dated as of March 11, 1997 relating to the
Securities (the "Indenture") and the undersigned agrees to be
bound by, and not to resell, pledge or otherwise transfer the
Securities except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the
"Securities Act").
2. We understand that the offer and sale of the Securities
have not been registered under the Securities Act, and that the
Securities may not be offered or sold except as permitted in the
following sentence. We agree, on our own behalf and on behalf of
any accounts for which we are acting as hereinafter stated, that
if we should sell any Securities, we will do so only (A) to the
Company or any subsidiary thereof, (B) in accordance with
Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (C) to an institutional "accredited
investor" (as defined below) that, prior to such transfer,
furnishes (or has furnished on its behalf by a U.S. broker-dealer)
to you and to the Company a signed letter substantially in the
form of this letter, (D) outside the United States in accordance
with Rule 904 of Regulation S under the Securities Act, (E)
pursuant to the provisions of Rule 144 under the Securities Act,
or (F) pursuant to an effective registration statement under the
Securities Act, and we further agree to provide to any person
purchasing any of the Securities from us a notice advising such
purchaser that resales of the Securities are restricted as stated
herein.
3. We understand that, on any proposed resale of any
Securities, we will be required to furnish to you and the Company
such certifications, legal opinions and other information as you
and the Company may reasonably require to confirm that the
proposed sale complies with the foregoing restrictions. We
further understand that the Securities purchased by us will bear a
legend to the foregoing effect.
4. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under
the Securities Act) and have such knowledge and experience in
financial and business matters as to be capable of evaluating the
merits and risks of our investment in the Securities, and we and
any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
5. We are acquiring the Securities purchased by us for our
own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we
exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
----------------------------
Authorized Signature
Exhibit 4.16
-----------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated March 11, 1997
among
ICG COMMUNICATIONS, INC.,
ICG HOLDINGS, INC.
and
MORGAN STANLEY & CO. INCORPORATED
-----------------------------------------------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is
made and entered into March 11, 1997, among ICG HOLDINGS, INC., a
Colorado corporation ("Holdings"), ICG COMMUNICATIONS, INC., a
Delaware corporation ("ICG"), and MORGAN STANLEY & CO.
INCORPORATED (the "Placement Agent").
This Agreement is made pursuant to the Placement
Agreement dated March 6, 1997, among Holdings, ICG and the
Placement Agent (the "Placement Agreement"), which provides for
the sale by Holdings and ICG to the Placement Agent
of (i) 100,000 shares of Holdings' 14% Exchangeable Preferred
Stock, which will be mandatorily redeemable in 2008 (the
"Shares"), as set forth in the Second Amended and Restated
Articles of Incorporation of Holdings and will be exchangeable,
at the option of Holdings, in whole but not in part, into Senior
Subordinated Exchange Debentures due 2008 (the "Exchange
Debentures") to be issued, if applicable, pursuant to an
Indenture to be dated as of the date of such exchange (the
"Exchange Indenture") and (ii) $176,000,000 million aggregate
principal amount at maturity of 11 % Senior Discount Notes due
2007 of Holdings (the "Notes") issued pursuant to the provisions
of an Indenture to be dated as of the date hereof (the
"Indenture") among Holdings, ICG and Norwest Bank Colorado,
National Association, as trustee (in such capacity, the
"Trustee"). The obligations of Holdings under the Notes and the
Indenture, and under the Exchange Debentures and the Exchange
Indenture when issued, will be guaranteed by ICG on a senior
unsecured basis and a senior subordinated unsecured basis,
respectively, pursuant to the terms of the Indenture (the "Note
Guarantee") and the Exchange Indenture, respectively. In order
to induce the Placement Agent to enter into the Placement
Agreement, Holdings and ICG have agreed to provide to the
Placement Agent and its direct and indirect transferees the
registration rights with respect to the Notes and the Note
Guarantee set forth in this Agreement. The execution of this
Agreement is a condition to the closing under the Placement
Agreement.
In consideration of the foregoing, the parties hereto
agree as follows:
1. Definitions.
-----------
As used in this Agreement, the following capitalized
defined terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as
--------
amended from time to time.
"1934 Act" shall mean the Securities Exchange Act of
--------
1934, as amended from time to time.
"Accreted Value" shall have the meaning set forth in
--------------
the Indenture.
"Closing Date" hall mean the Closing Date as defined in
------------
the Placement Agreement.
"Exchange Offer" shall mean the exchange offer by
--------------
Holdings of Exchange Notes for Registrable Notes pursuant to
Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration
---------------------------
under the 1933 Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an
-------------------------------------
exchange offer registration statement on Form S-4 (or, if
applicable, on another appropriate form) and all amendments
and supplements to such registration statement, in each case
including the Prospectus contained therein, all exhibits
thereto and all material incorporated by reference therein.
"Exchange Notes" shall mean securities issued by
--------------
Holdings and guaranteed by ICG under the Indenture
containing terms identical to the Notes (except that
(i) interest thereon shall accrue from the last date on
which interest was paid on the Notes or, if no such interest
has been paid, from March 15, 2002 and (ii) the Exchange
Notes will not provide for an increase in the rate of
interest and will not contain terms with respect to transfer
restrictions) and to be offered to Holders of Notes in
exchange for Notes pursuant to the Exchange Offer.
"Holder" shall mean the Placement Agent, for so long as
------
it owns any Registrable Notes, and each of its successors,
assigns and direct and indirect transferees who become
registered owners of Registrable Notes under the Indenture;
provided that for purposes of Sections 4 and 5 of this
--------
Agreement, the term "Holder" shall include Participating
Broker-Dealers (as defined in Section 4(a)).
"Holdings" shall have the meaning set forth in the
--------
preamble and shall also include Holdings' successors.
"ICG" shall have the meaning set forth in the preamble
---
and shall also include ICG's successors.
"Indenture" shall have the meaning set forth in the
---------
preamble.
"Majority Holders" shall mean the Holders of a majority
----------------
of the aggregate principal amount of outstanding Registrable
Notes; provided that whenever the consent or approval of
--------
Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by Holdings or
any of its affiliates (as such term is defined in Rule 405
under the 1933 Act) (other than the Placement Agent or
subsequent holders of Registrable Notes if such subsequent
holders are deemed to be such affiliates solely by reason of
their holding of such Registrable Notes) shall not be
counted in determining whether such consent or approval was
given by the Holders of such required percentage or amount.
"Person" shall mean an individual, partnership,
------
corporation, trust or unincorporated organization, or a
government or agency or political subdivision thereof.
"Placement Agent" shall have the meaning set forth in
---------------
the preamble.
"Placement Agreement" shall have the meaning set forth
-------------------
in the preamble.
"Prospectus" shall mean the prospectus included in a
----------
Registration Statement, including any preliminary
prospectus, and any such prospectus as amended or
supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Notes covered by
a Shelf Registration Statement, and by all other amendments
and supplements to such prospectus, and in each case
including all material incorporated by reference therein.
"Registrable Notes" shall mean the Notes; provided,
----------------- --------
however, that the Notes shall cease to be Registrable Notes
-------
(i) when a Registration Statement with respect to such Notes
shall have been declared effective under the 1933 Act and
such Notes shall have been disposed of pursuant to such
Registration Statement, (ii) when such Notes have been sold
to the public pursuant to Rule 144(k) (or any similar
provision then in force, but not Rule 144A) under the 1933
Act or (iii) when such Notes shall have ceased to be
outstanding.
"Registration Expenses" shall mean any and all expenses
---------------------
incident to performance of or compliance by Holdings and ICG
with this Agreement, including without limitation: (i) all
SEC, stock exchange or National Association of Securities
Dealers, Inc. registration and filing fees, (ii) all fees
and expenses incurred in connection with compliance with
state securities or blue sky laws (including reasonable fees
and disbursements of counsel for any Underwriters or Holders
in connection with blue sky qualification of any of the
Exchange Notes or Registrable Notes), (iii) all expenses of
any Persons in preparing or assisting in preparing, word
processing, printing and distributing any Registration
Statement, any Prospectus, any amendments or supplements
thereto, any underwriting agreements, securities sales
agreements and other documents relating to the performance
of and compliance with this Agreement, (iv) all rating
agency fees, if any, (v) all fees and disbursements relating
to the qualification of the Indenture under applicable
securities laws, (vi) the fees and disbursements of the
Trustee and its counsel, (vii) the fees and disbursements of
counsel for Holdings and ICG and, in the case of a Shelf
Registration Statement, the fees and disbursements of one
counsel for the Holders (which counsel shall be selected by
the Majority Holders and which counsel may also be counsel
for the Placement Agent) and (viii) the fees and
disbursements of the independent public accountants of
Holdings and ICG, including the expenses of any special
audits or "cold comfort" letters required by or incident to
such performance and compliance, but excluding fees and
expenses of counsel to the Underwriters (other than fees and
expenses set forth in clause (ii) above) or the Holders and
underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of Registrable
Notes by a Holder.
"Registration Statement" shall mean any registration
----------------------
statement of Holdings and ICG that covers any of the
Exchange Notes or Registrable Notes pursuant to the
provisions of this Agreement and all amendments and
supplements to any such Registration Statement, including
post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange
---
Commission.
"Shelf Registration" shall mean a registration effected
------------------
pursuant to Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf"
----------------------------
registration statement of Holdings and ICG pursuant to the
provisions of Section 2(b) of this Agreement which covers
all of the Registrable Notes on an appropriate form under
Rule 415 under the 1933 Act, or any similar rule that may be
adopted by the SEC, and all amendments and supplements to
such registration statement, including post-effective
amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated
by reference therein.
"Trustee" shall have the meaning set forth in the
-------
preamble.
"Underwriters" shall have the meaning set forth in
------------
Section 3 hereof.
"Underwritten Registration" or "Underwritten Offering"
------------------------- ---------------------
shall mean a registered offering in which Registrable Notes
are sold to an Underwriter for reoffering to the public.
2. Registration Under the 1933 Act.
-------------------------------
(a) To the extent not prohibited by any applicable law
or applicable interpretation of the Staff of the SEC, Holdings
and ICG shall cause to be filed an Exchange Offer Registration
Statement covering the offer by Holdings and ICG to the Holders
to exchange all of the Registrable Notes for Exchange Notes, to
have such Registration Statement declared effective by the SEC
and remain effective until the closing of the Exchange Offer and
to consummate the Exchange Offer on or prior to September 11,
1997. Holdings and ICG shall commence the Exchange Offer
promptly after the Exchange Offer Registration Statement has been
declared effective by the SEC and use their best efforts to have
the Exchange Offer consummated on or prior to September 11, 1997.
Holdings and ICG shall commence the Exchange Offer by mailing the
related exchange offer Prospectus and accompanying documents to
each Holder stating, in addition to such other disclosures as are
required by applicable law:
(i) that the Exchange Offer is being made pursuant to
this Agreement and that all Registrable Notes validly
tendered will be accepted for exchange;
(ii) the dates of acceptance for exchange (which shall
be a period of at least 30 days from the date such notice is
mailed) (the "Exchange Dates");
(iii) that any Registrable Note not tendered will
remain outstanding and continue to accrete in value (until
March 15, 2002 and thereafter will accrue interest), but
will not retain any rights under this Agreement;
(iv) that Holders electing to have a Registrable Note
exchanged pursuant to the Exchange Offer will be required to
surrender such Registrable Note, together with the enclosed
letters of transmittal, to the institution and at the
address (located in the Borough of Manhattan, The City of
New York) specified in the notice prior to the close of
business on the last Exchange Date; and
(v) that Holders will be entitled to withdraw their
election, not later than the close of business on the last
Exchange Date, by sending to the institution and at the
address (located in the Borough of Manhattan, The City of
New York) specified in the notice a telegram, telex,
facsimile transmission or letter setting forth the name of
such Holder, the principal amount of Registrable Notes
delivered for exchange and a statement that such Holder is
withdrawing his election to have such Notes exchanged.
As soon as practicable after the last Exchange Date,
Holdings shall:
(i) accept for exchange Registrable Notes or portions
thereof tendered and not validly withdrawn pursuant to the
Exchange Offer; and
(ii) deliver, or cause to be delivered, to the Trustee
for cancellation all Registrable Notes or portions thereof
so accepted for exchange by Holdings and issue, and cause
the Trustee to promptly authenticate and mail to each
Holder, an Exchange Note equal in principal amount to the
principal amount of the Registrable Notes surrendered by
such Holder.
Holdings and ICG shall use their best efforts to complete the
Exchange Offer as provided above and shall comply with the
applicable requirements of the 1933 Act, the 1934 Act and other
applicable laws and regulations in connection with the Exchange
Offer. The Exchange Offer shall not be subject to any
conditions, other than that the Exchange Offer does not violate
applicable law or any applicable interpretation of the Staff of
the SEC. Holdings shall inform the Placement Agent of the names
and addresses of the Holders to whom the Exchange Offer is made,
and the Placement Agent shall have the right, subject to
applicable law, to contact such Holders and otherwise facilitate
the tender of Registrable Notes in the Exchange Offer.
(b) In the event that (i) Holdings and ICG determine
that the Exchange Offer Registration provided for in Section 2(a)
above is not available or may not be consummated as soon as
practicable after the last Exchange Date because it would violate
applicable law or the applicable interpretations of the Staff of
the SEC, (ii) the Exchange Offer is not for any other reason
consummated on or prior to September 11, 1997 or (iii) in the
opinion of counsel for the Placement Agent a Registration
Statement must be filed and a Prospectus must be delivered by the
Placement Agent in connection with any offering or sale of
Registrable Notes, Holdings and ICG shall use their best efforts
to cause to be filed as soon as practicable after such
determination, date or notice of such opinion of counsel is given
to Holdings and ICG, as the case may be, a Shelf Registration
Statement providing for the sale by the Holders of all of the
Registrable Notes and to have such Shelf Registration Statement
declared effective by the SEC. In the event Holdings and ICG are
required to file a Shelf Registration Statement solely as a
result of the matters referred to in clause (iii) of the
preceding sentence, Holdings and ICG shall file and have declared
effective by the SEC both an Exchange Offer Registration
Statement pursuant to Section 2(a) with respect to all
Registrable Notes and a Shelf Registration Statement (which may
be a combined Registration Statement with the Exchange Offer
Registration Statement) with respect to offers and sales of
Registrable Notes held by the Placement Agent after completion of
the Exchange Offer. Holdings and ICG agree to use their best
efforts to keep the Shelf Registration Statement continuously
effective until the period referred to in Rule 144(k) or until
all of the Registrable Notes covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration
Statement. Holdings and ICG further agree to supplement or amend
the Shelf Registration Statement if required by the rules,
regulations or instructions applicable to the registration form
used by Holdings and ICG for such Shelf Registration Statement or
by the 1933 Act or by any other rules and regulations thereunder
for shelf registration or if reasonably requested by a Holder
with respect to information relating to such Holder, and to use
their best efforts to cause any such amendment to become
effective and such Shelf Registration Statement to become usable
as soon as practicable thereafter. Holdings and ICG agree to
furnish to the Holders of Registrable Notes copies of any such
supplement or amendment promptly after its being used or filed
with the SEC.
(c) Holdings and ICG shall pay all Registration
Expenses in connection with the registration pursuant to Section
2(a) or Section 2(b). Each Holder shall pay all underwriting
discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of such Holder's Registrable Notes
pursuant to the Shelf Registration Statement.
(d) An Exchange Offer Registration Statement pursuant
to Section 2(a) hereof or a Shelf Registration Statement pursuant
to Section 2(b) hereof will not be deemed to have become
effective unless it has been declared effective by the SEC;
provided, however, that, if, after it has been declared
-------- -------
effective, the offering of Registrable Notes pursuant to a Shelf
Registration Statement is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other
governmental agency or court, such Registration Statement will be
deemed not to have become effective during the period of such
interference until the offering of Registrable Notes pursuant to
such Registration Statement may legally resume. As provided for
in the Indenture, in the event the Exchange Offer is not
consummated and the Shelf Registration Statement is not declared
effective on or prior to September 11, 1997, interest (in
addition to the accrual of original issue discount during the
period ending March 15, 2002 and in addition to the interest
otherwise due on the Notes after such date) will accrue, at an
annual rate of 0.5% of Accreted Value on the preceding semiannual
payment date, on the Notes from September 11, 1997, payable in
cash semiannually in arrears on each March 15 and September 15,
commencing March 15, 1998; provided that if a Shelf Registration
--------
Statement is required solely by the matters referred to in clause
(iii) of the first sentence of Section 2(b), such increase in
interest rate shall be payable only to the Placement Agent, with
respect to Notes held by it, and only with respect to any period
(after September 11, 1997) during which such Shelf Registration
Statement is not effective.
(e) Without limiting the remedies available to the
Placement Agent and the Holders, Holdings and ICG acknowledge
that any failure by Holdings and ICG to comply with their
respective obligations under Section 2(a) and Section 2(b) hereof
may result in material irreparable injury to the Placement Agent
or the Holders for which there is no adequate remedy at law, that
it will not be possible to measure damages for such injuries
precisely and that, in the event of any such failure, the
Placement Agent or any Holder may obtain such relief as may be
required to specifically enforce Holdings' and ICG's obligations
under Section 2(a) and Section 2(b) hereof.
3. Registration Procedures.
-----------------------
In connection with the obligations of Holdings and ICG
with respect to the Registration Statements pursuant to
Section 2(a) and Section 2(b) hereof, Holdings and ICG shall as
expeditiously as possible:
(a) prepare and file with the SEC a Registration
Statement on the appropriate form under the 1933 Act, which
form (x) shall be selected by Holdings and ICG and
(y) shall, in the case of a Shelf Registration, be available
for the sale of the Registrable Notes by the selling Holders
thereof and (z) shall comply as to form in all material
respects with the requirements of the applicable form and
include all financial statements required by the SEC to be
filed therewith, and use their best efforts to cause such
Registration Statement to become effective and remain
effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as
may be necessary to keep such Registration Statement
effective for the applicable period and cause each
Prospectus to be supplemented by any required prospectus
supplement and, as so supplemented, to be filed pursuant to
Rule 424 under the 1933 Act; to keep each Prospectus current
during the period described under Section 4(3) and Rule 174
under the 1933 Act that is applicable to transactions by
brokers or dealers with respect to the Registrable Notes or
Exchange Notes;
(c) in the case of a Shelf Registration, furnish to
each Holder of Registrable Notes, to counsel for the
Placement Agent, to counsel for the Holders and to each
Underwriter of an Underwritten Offering of Registrable
Notes, if any, without charge, as many copies of each
Prospectus, including each preliminary Prospectus, and any
amendment or supplement thereto and such other documents as
such Holder or Underwriter may reasonably request, in order
to facilitate the public sale or other disposition of the
Registrable Notes; and Holdings and ICG consent to the use
of such Prospectus and any amendment or supplement thereto
in accordance with applicable law by each of the selling
Holders of Registrable Notes and any such Underwriters in
connection with the offering and sale of the Registrable
Notes covered by and in the manner described in such
Prospectus or any amendment or supplement thereto in
accordance with applicable law;
(d) use their best efforts to register or qualify, by
the time the applicable Registration Statement is declared
effective by the SEC, the Registrable Notes under all
applicable state securities or "blue sky" laws of such
jurisdictions as any Holder of Registrable Notes covered by
a Registration Statement shall reasonably request in
writing, to cooperate with such Holder in connection with
any filings required to be made with the National
Association of Securities Dealers, Inc. and do any and all
other acts and things which may be reasonably necessary or
advisable to enable such Holder to consummate the
disposition in each such jurisdiction of such Registrable
Notes owned by such Holder; provided, however, that neither
-------- -------
Holdings nor ICG shall be required to (i) qualify as a
foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), (ii) file any general
consent to service of process or (iii) subject itself to
taxation in any such jurisdiction if it is not otherwise so
subject;
(e) in the case of a Shelf Registration, notify each
Holder of Registrable Notes, counsel for the Holders and
counsel for the Placement Agent promptly and, if requested
by any such Holder or counsel, confirm such advice in
writing (i) when a Registration Statement has become
effective and when any post-effective amendment thereto has
been filed and becomes effective, (ii) of any request by the
SEC or any state securities authority for amendments and
supplements to a Registration Statement and Prospectus or
for additional information after the Registration Statement
has become effective, (iii) of the issuance by the SEC or
any state securities authority of any stop order suspending
the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (iv) if,
between the effective date of a Registration Statement and
the closing of any sale of Registrable Notes covered
thereby, the representations and warranties of Holdings and
ICG contained in any underwriting agreement, securities
sales agreement or other similar agreement, if any, relating
to the offering cease to be true and correct in all material
respects or if Holdings and ICG receive any notification
with respect to the suspension of the qualification of the
Registrable Notes for sale in any jurisdiction or the
initiation of any proceeding for such purpose, (v) of the
happening of any event during the period a Shelf
Registration Statement is effective which makes any
statement made in such Registration Statement or the related
Prospectus untrue in any material respect or which requires
the making of any changes in such Registration Statement or
Prospectus in order to make the statements therein not
misleading and (vi) of any determination by Holdings and ICG
that a post-effective amendment to a Registration Statement
would be appropriate;
(f) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of a
Registration Statement at the earliest possible moment and
provide immediate notice to each Holder of the withdrawal of
any such order;
(g) in the case of a Shelf Registration, furnish to
each Holder of Registrable Notes, without charge, at least
one conformed copy of each Registration Statement and any
post-effective amendment thereto (without documents
incorporated therein by reference or exhibits thereto,
unless requested);
(h) in the case of a Shelf Registration, cooperate
with the selling Holders of Registrable Notes to facilitate
the timely preparation and delivery of certificates
representing Registrable Notes to be sold and not bearing
any restrictive legends and enable such Registrable Notes to
be in such denominations (consistent with the provisions of
the Indenture) and registered in such names as the selling
Holders may reasonably request at least two business days
prior to the closing of any sale of Registrable Notes;
(i) in the case of a Shelf Registration, upon the
occurrence of any event contemplated by Section 3(e)(v)
hereof, use their best efforts to prepare a supplement or
post-effective amendment to a Registration Statement or the
related Prospectus or any document incorporated therein by
reference or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable
Notes, such Prospectus will not contain any untrue statement
of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Holdings and ICG agree to notify the Holders to suspend use
of the Prospectus as promptly as practicable after the
occurrence of such an event, and the Holders hereby agree to
suspend use of the Prospectus until Holdings and ICG have
amended or supplemented the Prospectus to correct such
misstatement or omission;
(j) within a reasonable time prior to the filing of
any Registration Statement, any Prospectus, any amendment to
a Registration Statement or amendment or supplement to a
Prospectus or any document which is to be incorporated by
reference into a Registration Statement or a Prospectus
after initial filing of a Registration Statement, provide
copies of such document to the Placement Agent and its
counsel (and, in the case of a Shelf Registration Statement,
the Holders and their counsel) and make such representatives
of Holdings and ICG as shall be reasonably requested by the
Placement Agent or its counsel (and, in the case of a Shelf
Registration Statement, the Holders or their counsel)
available for discussion of such document, and shall not at
any time file or make any amendment to the Registration
Statement, any Prospectus or any amendment of or supplement
to a Registration Statement or a Prospectus or any document
which is to be incorporated by reference into a Registration
Statement or a Prospectus, of which the Placement Agent and
its counsel (and, in the case of a Shelf Registration
Statement, the Holders and their counsel) shall not have
previously been advised and furnished a copy or to which the
Placement Agent or its counsel (and, in the case of a Shelf
Registration Statement, the Holders or their counsel) shall
object, except for any amendment or supplement or document
(a copy of which has been previously furnished to the
Placement Agent and its counsel (and, in the case of a Shelf
Registration Statement, the Holders and their counsel))
which counsel to Holdings and ICG shall advise Holdings and
ICG, in the form of a written legal opinion, is required in
order to comply with applicable law; the Placement Agent
agrees that, if it receives timely notice and drafts under
this clause (j), it will not take actions or make objections
pursuant to this clause (j) such that Holdings and ICG are
unable to comply with their obligations under Section 2(a);
(k) obtain a CUSIP number and, if applicable, a CINS
number, for all Exchange Notes or Registrable Notes, as the
case may be, not later than the first effective date of a
Registration Statement;
(l) cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended (the "TIA"), in
connection with the registration of the Exchange Notes or
Registrable Notes, as the case may be, cooperate with the
Trustee and the Holders to effect such changes to the
Indenture as may be required for the Indenture to be so
qualified in accordance with the terms of the TIA and
execute, and use their best efforts to cause the Trustee to
execute, all documents as may be required to effect such
changes and all other forms and documents required to be
filed with the SEC to enable the Indenture to be so
qualified in a timely manner;
(m) in the case of a Shelf Registration, make
available for inspection by a representative of the Holders
of the Registrable Notes, any Underwriter participating in
any disposition pursuant to such Shelf Registration
Statement, and attorneys and accountants designated by the
Holders, at reasonable times and in a reasonable manner, all
financial and other records, pertinent documents and
properties of Holdings and ICG, and cause the respective
officers, directors and employees of Holdings and ICG to
supply all information reasonably requested by any such
representative, Underwriter, attorney or accountant in
connection with a Shelf Registration Statement;
(n) in the case of a Shelf Registration, use their
best efforts to cause all Registrable Notes to be listed on
any securities exchange or any automated quotation system on
which similar securities issued by Holdings and ICG are then
listed if requested by the Majority Holders, to the extent
such Registrable Notes satisfy applicable listing
requirements;
(o) use their best efforts to cause the Exchange Notes
or Registrable Notes, as the case may be, to be rated by two
nationally recognized statistical rating organizations (as
such term is defined in Rule 436(g)(2) under the 1933 Act);
(p) if reasonably requested by any Holder of
Registrable Notes covered by a Registration Statement, (i)
promptly incorporate in a Prospectus supplement or post-
effective amendment such information with respect to such
Holder as such Holder reasonably requests to be included
therein and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment as
soon as Holdings and ICG have received notification of the
matters to be incorporated in such filing; and
(q) in the case of a Shelf Registration, enter into
such customary agreements and take all such other actions in
connection therewith (including those requested by the
Holders of a majority of the Registrable Notes being sold)
in order to expedite or facilitate the disposition of such
Registrable Notes including, but not limited to, an
Underwritten Offering and in such connection, (i) to the
extent possible, make such representations and warranties to
the Holders and any Underwriters of such Registrable Notes
with respect to the business of Holdings, ICG and their
subsidiaries, the Registration Statement, Prospectus and
documents incorporated by reference or deemed incorporated
by reference, if any, in each case, in form, substance and
scope as are customarily made by issuers to underwriters in
underwritten offerings and confirm the same if and when
requested, (ii) obtain opinions of counsel to Holdings and
ICG (which counsel and opinions, in form, scope and
substance, shall be reasonably satisfactory to the Holders
and such Underwriters and their respective counsel)
addressed to each selling Holder and Underwriter of
Registrable Notes, covering the matters customarily covered
in opinions requested in underwritten offerings,
(iii) obtain "cold comfort" letters from the independent
certified public accountants of Holdings and ICG (and, if
applicable, any other certified public accountant of any
business acquired by Holdings or ICG for which financial
statements and financial data are or are required to be
included in the Registration Statement) addressed to each
selling Holder and Underwriter of Registrable Notes, such
letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters in
connection with underwritten offerings, and (iv) deliver
such documents and certificates as may be reasonably
requested by the Holders of a majority in principal amount
of the Registrable Notes being sold or the Underwriters, and
which are customarily delivered in underwritten offerings,
to evidence the continued validity of the representations
and warranties of Holdings and ICG made pursuant to clause
(i) above and to evidence compliance with any customary
conditions contained in an underwriting agreement.
In the case of a Shelf Registration Statement, Holdings
and ICG may require each Holder of Registrable Notes to furnish
to Holdings and ICG such information regarding the Holder and the
proposed distribution by such Holder of such Registrable Notes as
Holdings and ICG may from time to time reasonably request in
writing.
In the case of a Shelf Registration Statement, each
Holder agrees that, upon receipt of any notice from Holdings and
ICG of the happening of any event of the kind described in
Section 3(e)(v) hereof, such Holder will forthwith discontinue
disposition of Registrable Notes pursuant to a Registration
Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(i)
hereof, and, if so directed by Holdings and ICG, such Holder will
deliver to Holdings and ICG (at its expense) all copies in its
possession, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Registrable
Notes current at the time of receipt of such notice. If Holdings
and ICG shall give any such notice to suspend the disposition of
Registrable Notes pursuant to a Registration Statement, Holdings
and ICG shall extend the period during which the Registration
Statement shall be maintained effective pursuant to this
Agreement by the number of days during the period from and
including the date of the giving of such notice to and including
the date when the Holders shall have received copies of the
supplemented or amended Prospectus necessary to resume such
dispositions.
The Holders of Registrable Notes covered by a Shelf
Registration Statement who desire to do so may sell such
Registrable Notes in an Underwritten Offering. In any such
Underwritten Offering, the investment banker or investment
bankers and manager or managers (the "Underwriters") that will
administer the offering will be selected by the Majority Holders
of the Registrable Notes included in such offering.
4. Participation of Broker-Dealers in Exchange Offer.
-------------------------------------------------
(a) The Staff of the SEC has taken the position that
any broker-dealer that receives Exchange Notes for its own
account in the Exchange Offer in exchange for Notes that were
acquired by such broker-dealer as a result of market-making or
other trading activities (a "Participating Broker-Dealer"), may
be deemed to be an "underwriter" within the meaning of the 1933
Act and must deliver a prospectus meeting the requirements of the
1933 Act in connection with any resale of such Exchange Notes.
Holdings and ICG understand that it is the Staff's
position that if the Prospectus contained in the Exchange Offer
Registration Statement includes a plan of distribution containing
a statement to the above effect and the means by which
Participating Broker-Dealers may resell the Exchange Notes,
without naming the Participating Broker-Dealers or specifying the
amount of Exchange Notes owned by them, such Prospectus may be
delivered by Participating Broker-Dealers to satisfy their
prospectus delivery obligation under the 1933 Act in connection
with resales of Exchange Notes for their own accounts, so long as
the Prospectus otherwise meets the requirements of the 1933 Act.
(b) In light of the above, notwithstanding the other
provisions of this Agreement, Holdings and ICG agree that the
provisions of this Agreement as they relate to a Shelf
Registration shall also apply to an Exchange Offer Registration
to the extent, and with such reasonable modifications thereto as
may be, reasonably requested by the Placement Agent or by one or
more Participating Broker-Dealers, in each case as provided in
clause (ii) below, in order to expedite or facilitate the
disposition of any Exchange Notes by Participating Broker-Dealers
consistent with the positions of the Staff recited in
Section 4(a) above; provided that:
--------
(i) Holdings and ICG shall not be required to amend or
supplement the Prospectus contained in the Exchange Offer
Registration Statement, as would otherwise be contemplated
by Section 3(i) of this Agreement, for a period exceeding 60
days after the last Exchange Date (as such period may be
extended pursuant to the penultimate paragraph of Section 3
of this Agreement) and Participating Broker-Dealers shall
not be authorized by Holdings and ICG to deliver and shall
not deliver such Prospectus after such period in connection
with the resales contemplated by this Section 4; and
(ii) the application of the Shelf Registration
procedures set forth in Section 3 of this Agreement to an
Exchange Offer Registration, to the extent not required by
the positions of the Staff of the SEC or the 1933 Act and
the rules and regulations thereunder, will be in conformity
with the reasonable request to Holdings and ICG by the
Placement Agent or with the reasonable request in writing to
Holdings and ICG by one or more broker-dealers who certify
to the Placement Agent, Holdings and ICG in writing that
they anticipate that they will be Participating Broker-
Dealers; and provided further that, in connection with such
-------- -------
application of the Shelf Registration procedures set forth
in Section 3 of this Agreement to an Exchange Offer
Registration, Holdings and ICG shall be obligated (x) to
deal only with one entity representing the Participating
Broker-Dealers, which shall be the Placement Agent unless it
elects not to act as such representative, (y) to pay the
fees and expenses of only one counsel representing the
Participating Broker-Dealers, which shall be counsel to the
Placement Agent unless such counsel elects not to so act and
(z) to cause to be delivered only one, if any, "cold
comfort" letter with respect to the Prospectus in the form
existing on the last Exchange Date and with respect to each
subsequent amendment or supplement, if any, effected during
the period specified in clause (i) above.
(c) The Placement Agent shall have no liability to
Holdings, ICG or any Holder with respect to any request that it
may make pursuant to Section 4(b) above.
5. Indemnification and Contribution.
--------------------------------
(a) Each of Holdings and ICG agrees, jointly and
severally, to indemnify and hold harmless the Placement Agent,
each Holder and each Person, if any, who controls the Placement
Agent or any Holder within the meaning of either Section 15 of
the 1933 Act or Section 20 of the 1934 Act, or is under common
control with, or is controlled by, the Placement Agent or any
Holder, from and against all losses, claims, damages and
liabilities (including, without limitation, any legal or other
expenses reasonably incurred by the Placement Agent, any Holder
or any such controlling or affiliated Person in connection with
defending or investigating any such action or claim) caused by
any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement (or any amendment
thereto) pursuant to which Exchange Notes or Registrable Notes
were registered under the 1933 Act, including all documents
incorporated therein by reference, or caused by any omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or caused by any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (as
amended or supplemented if Holdings and ICG shall have furnished
any amendments or supplements thereto), or caused by any omission
or alleged omission to state therein a material fact necessary to
make the statements therein in light of the circumstances under
which they were made not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or
omission based upon information relating to the Placement Agent
or any Holder furnished to Holdings and ICG in writing by the
Placement Agent or any selling Holder expressly for use therein.
In connection with any Underwritten Offering permitted by Section
3 of this Agreement, Holdings and ICG will also indemnify the
Underwriters, if any, selling brokers, dealers and similar
securities industry professionals participating in the
distribution, their officers and directors and each Person who
controls such Persons (within the meaning of the 1933 Act and the
1934 Act) to the same extent as provided above with respect to
the indemnification of the Holders, if requested in connection
with any Registration Statement.
(b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless Holdings, ICG, the Placement Agent
and the other selling Holders, and each of their respective
directors, officers who sign the Registration Statement and each
Person, if any, who controls Holdings, ICG, the Placement Agent
and any other selling Holder within the meaning of either Section
15 of the 1933 Act or Section 20 of the 1934 Act to the same
extent as the foregoing indemnity from Holdings and ICG to the
Placement Agent and the Holders, but only with reference to
information relating to such Holder furnished to Holdings and ICG
in writing by such Holder expressly for use in any Registration
Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto).
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any Person in
respect of which indemnity may be sought pursuant to either
paragraph (a) or paragraph (b) above, such Person (the
"indemnified party") shall promptly notify the Person against
whom such indemnity may be sought (the "indemnifying party") in
writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory
to the indemnified party to represent the indemnified party and
any others the indemnifying party may designate in such
proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any
indemnified party shall have the right to retain its own counsel,
but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and
the indemnified party shall have mutually agreed to the retention
of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual
or potential differing interests between them. It is understood
that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be
liable for (a) the fees and expenses of more than one separate
firm (in addition to any local counsel) for the Placement Agent
and all Persons, if any, who control the Placement Agent within
the meaning of either Section 15 of the 1933 Act or Section 20 of
the 1934 Act, (b) the fees and expenses of more than one separate
firm (in addition to any local counsel) for Holdings and ICG,
their directors, their officers who sign the Registration
Statement and each Person, if any, who controls Holdings or ICG
within the meaning of either such Section and (c) the fees and
expenses of more than one separate firm (in addition to any local
counsel) for all Holders and all Persons, if any, who control any
Holders within the meaning of either such Section, and that all
such fees and expenses shall be reimbursed as they are incurred.
In such case involving the Placement Agent and Persons who
control the Placement Agent, such firm shall be designated in
writing by the Placement Agent. In such case involving the
Holders and such Persons who control Holders, such firm shall be
designated in writing by the Majority Holders. In all other
cases, such firm shall be designated by ICG. The indemnifying
party shall not be liable for any settlement of any proceeding
effected without its written consent but, if settled with such
consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from
and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party
to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this
paragraph, the indemnifying party agrees that it shall be liable
for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request
and (ii) such indemnifying party shall not have reimbursed the
indemnified party for such fees and expenses of counsel in
accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement
of any pending or threatened proceeding in respect of which such
indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the
subject matter of such proceeding.
(d) If the indemnification provided for in paragraph
(a) or paragraph (b) of this Section 4 is unavailable to an
indemnified party or insufficient in respect of any losses,
claims, damages or liabilities, then each indemnifying party
under such paragraph, in lieu of indemnifying such indemnified
party thereunder, shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to
reflect the relative fault of the indemnifying party or parties
on the one hand and of the indemnified party or parties on the
other hand in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative
fault of Holdings, ICG and the Holders shall be determined by
reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied
by Holdings and ICG or by the Holders and the parties' relative
intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Holders'
respective obligations to contribute pursuant to this Section
5(d) are several in proportion to the respective principal amount
of Registrable Notes of such Holder that were registered pursuant
to a Registration Statement.
(e) Holdings, ICG and each Holder agree that it would
not be just or equitable if contribution pursuant to this Section
5 were determined by pro rata allocation or by any other method
--- ----
of allocation that does not take account of the equitable
considerations referred to in paragraph (d) above. The amount
paid or payable by an indemnified party as a result of the
losses, claims, damages and liabilities referred to in paragraph
(d) above shall be deemed to include, subject to the limitations
set forth above, any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the
provisions of this Section 5, no Holder shall be required to
contribute any amount in excess of the amount by which the total
price at which Registrable Notes were sold by such Holder exceeds
the amount of any damages that such Holder has otherwise been
required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f)
of the 1933 Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
The remedies provided for in this Section 5 are not exclusive and
shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
(f) Survival. The indemnity and contribution
--------
provisions contained in this Section 5 shall remain operative and
in full force and effect regardless of (i) any termination of
this Agreement, (ii) any investigation made by or on behalf of
the Placement Agent, any Holder or any person controlling the
Placement Agent or any Holder, or by or on behalf of Holdings,
ICG, their officers or directors or any Person controlling
Holdings or ICG, (iii) acceptance of any of the Exchange Notes
and (iv) any sale of Registrable Notes pursuant to a Shelf
Registration Statement.
6. Miscellaneous.
-------------
(a) No Inconsistent Agreements. Neither Holdings nor
--------------------------
ICG has entered into, and on or after the date of this Agreement
will not enter into, any agreement which is inconsistent with the
rights granted to the Holders of Registrable Notes in this
Agreement or otherwise conflicts with the provisions hereof. The
rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to
the holders of Holdings' or ICG's other issued and outstanding
securities under any such agreements.
(b) Amendments and Waivers. The provisions of this
----------------------
Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given unless
Holdings and ICG have obtained the written consent of Holders of
at least a majority in aggregate principal amount of the
outstanding Registrable Notes affected by such amendment,
modification, supplement, waiver or consent; provided, however,
-------- -------
that no amendment, modification, supplement, waiver or consents
to any departure from the provisions of Section 5 hereof shall be
effective as against any Holder of Registrable Notes unless
consented to in writing by such Holder.
(c) Notices. All notices and other communications
-------
provided for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, telex, telecopier, or
any courier guaranteeing overnight delivery (i) if to a Holder,
at the most current address given by such Holder to Holdings and
ICG by means of a notice given in accordance with the provisions
of this Section 6(c), which address initially is, with respect to
the Placement Agent, the address set forth in the Placement
Agreement; (ii) if to Holdings, initially at Holdings' address
set forth in the Indenture and thereafter at such other address,
notice of which is given in accordance with the provisions of
this Section 6(c); and if to ICG, initially at ICG's address set
forth in the Indenture and thereafter at such other address,
notice of which is given in accordance with the provisions of
this Section 6(c).
All such notices and communications shall be deemed to
have been duly given: at the time delivered by hand, if
personally delivered; five business days after being deposited in
the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt is acknowledged, if telecopied; and on the
next business day if timely delivered to an air courier
guaranteeing overnight delivery.
Copies of all such notices, demands, or other
communications shall be concurrently delivered by the person
giving the same to the Trustee, at the address specified in the
Indenture.
(d) Successors and Assigns. This Agreement shall
----------------------
inure to the benefit of and be binding upon the successors,
assigns and transferees of each of the parties, including,
without limitation and without the need for an express
assignment, subsequent Holders; provided that nothing herein
--------
shall be deemed to permit any assignment, transfer or other
disposition of Registrable Notes in violation of the terms of the
Placement Agreement. If any transferee of any Holder shall
acquire Registrable Notes, in any manner, whether by operation of
law or otherwise, such Registrable Notes shall be held subject to
all of the terms of this Agreement, and by taking and holding
such Registrable Notes such person shall be conclusively deemed
to have agreed to be bound by and to perform all of the terms and
provisions of this Agreement and such person shall be entitled to
receive the benefits hereof. The Placement Agent (solely in its
capacity as Placement Agent) shall have no liability or
obligation to Holdings or ICG with respect to any failure by a
Holder to comply with, or any breach by any Holder of, any of the
obligations of such Holder under this Agreement.
(e) Purchases and Sales of Notes. Holdings and ICG
----------------------------
shall not, and shall use their best efforts to cause their
affiliates (as defined in Rule 405 under the 1933 Act) not to,
purchase and then resell or otherwise transfer any Notes.
(f) Third Party Beneficiary. The Holders shall be
-----------------------
third party beneficiaries to the agreements made hereunder
between Holdings and ICG, on the one hand, and the Placement
Agent, on the other hand, and each Holder shall have the right to
enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights or the
rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed
------------
manually or by facsimile in any number of counterparts, each of
which when so executed shall be deemed to be an original and all
of which taken together shall constitute one and the same
agreement.
(h) Headings. The headings in this Agreement are for
--------
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(i) Governing Law; Submission to Jurisdiction. The
-----------------------------------------
laws of the State of New York applicable to contracts to be
performed entirely in that state shall govern this Agreement.
Each of ICG and Holdings agrees to submit to the jurisdiction of
any federal or state court located in the City of New York in any
suit, action or proceeding with respect to this Agreement and for
actions brought under the U.S. federal or state securities laws
brought in any such court.
(j) Severability. In the event that any one or more
------------
of the provisions contained herein, or the application thereof in
any circumstance, is held invalid, illegal or unenforceable, the
validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
ICG HOLDINGS, INC.
By /s/ James D. Grenfell
----------------------------------
Name: James D. Grenfell
Title: Executive Vice President,
Chief Financial Officer
and Treasurer
ICG COMMUNICATIONS, INC.
By /s/ James D. Grenfell
---------------------------------
Name: James D. Grenfell
Title: Executive Vice President,
Chief Financial Officer
and Treasurer
Confirmed and accepted as of
the date first above written:
MORGAN STANLEY & CO.
INCORPORATED
By /s/ James B. Avery
------------------------------
Name: James B. Avery
Title: Vice President
Exhibit 4.17
----------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated March 11, 1997
between
ICG HOLDINGS, INC.
and
MORGAN STANLEY & CO. INCORPORATED
----------------------------------------------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is
made and entered into March 11, 1997, between ICG HOLDINGS, INC.,
a Colorado corporation ("Holdings"), and MORGAN STANLEY & CO.
INCORPORATED (the "Placement Agent").
This Agreement is made pursuant to the Placement
Agreement dated March 6, 1997, among Holdings, ICG and the
Placement Agent (the "Placement Agreement"), which provides for
the sale by Holdings and ICG to the Placement Agent of
(i) 100,000 shares of Holdings' 14% Exchangeable Preferred Stock,
which will be mandatorily redeemable in 2008 (the "Shares"), as
set forth in the Second Amended and Restated Articles of
Incorporation of Holdings (the "Amended Articles"), and will be
exchangeable, at the option of Holdings, in whole but not in
part, into Senior Subordinated Exchange Debentures due 2008 (the
"Exchange Debentures") to be issued, if applicable, pursuant to
an Indenture to be dated as of the date of such exchange (the
"Exchange Indenture") and (ii) $176,000,000 million aggregate
principal amount at maturity of 11 5/8% Senior Discount Notes due
2007 of Holdings (the "Notes") issued pursuant to the provisions
of an Indenture to be dated as of the date hereof (the
"Indenture") among Holdings, ICG and Norwest Bank Colorado,
National Association, as trustee. The obligations of Holdings
under the Notes and the Indenture, and under the Exchange
Debentures and the Exchange Indenture when issued, will be
guaranteed by ICG on a senior unsecured basis and a senior
subordinated unsecured basis, respectively, pursuant to the terms
of the Indenture and the Exchange Indenture, respectively. In
order to induce the Placement Agent to enter into the Placement
Agreement, Holdings has agreed to provide to the Placement Agent
and its direct and indirect transferees the registration rights
with respect to the Shares set forth in this Agreement. The
execution of this Agreement is a condition to the closing under
the Placement Agreement.
In consideration of the foregoing, the parties hereto
agree as follows:
1. Definitions.
-----------
As used in this Agreement, the following capitalized
defined terms shall have the following meanings:
"1933 Act"
--------- shall mean the Securities Act of 1933,
as amended from time to time.
"1934 Act"
-------- shall mean the Securities Exchange Act
of 1934, as amended from time to time.
"Amended Articles"
----------------- shall have the meaning set forth in
the preamble.
"Closing Date"
------------ shall mean the Closing Date as defined
in the Placement Agreement.
"Exchange Debentures"
------------------- shall have the meaning set
forth in the preamble.
"Exchange Indenture"
------------------ shall have the meaning set forth in
the preamble.
"Exchange Offer"
--------------- shall mean the exchange offer by
Holdings of Exchange Shares for Registrable Shares pursuant
to Section 2(a) hereof.
"Exchange Offer Registration"
--------------------------- shall mean a registration
under the 1933 Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement"
------------------------------------- shall mean an
exchange offer registration statement on Form S-4 (or, if
applicable, on another appropriate form) and all amendments
and supplements to such registration statement, in each case
including the Prospectus contained therein, all exhibits
thereto and all material incorporated by reference therein.
"Exchange Shares"
--------------- shall mean securities issued by
Holdings containing terms identical to the Shares (except
that such Exchange Shares shall bear no legend and shall be
free from restrictions on transfers), to be offered to
Holders of Shares in exchange for Shares pursuant to the
Exchange Offer.
"Holder"
------ shall mean the Placement Agent, for so long
as it owns any Registrable Shares, and each of its
successors, assigns and direct and indirect transferees who
become registered owners of Registrable Shares under the
Amended Articles; provided that for purposes of Sections 4
-------- and 5 of this Agreement, the
term "Holder" shall include Participating Broker-Dealers (as
defined in Section 4(a)).
"Holdings"
-------- shall have the meaning set forth in the
preamble and shall also include Holdings' successors.
"ICG"
---- shall mean ICG Communications, Inc., a
Delaware corporation and its successors.
"Majority Holders"
---------------- shall mean the Holders of a
majority of the aggregate liquidation preference of
outstanding Registrable Shares; provided that whenever the
-------- consent or approval
of Holders of a specified percentage of Registrable Shares
is required hereunder, Registrable Shares held by Holdings
or any of its affiliates (as such term is defined in Rule
405 under the 1933 Act) (other than the Placement Agent or
subsequent holders of Registrable Shares if such subsequent
holders are deemed to be such affiliates solely by reason of
their holding of such Registrable Shares) shall not be
counted in determining whether such consent or approval was
given by the Holders of such required percentage or amount.
"Person"
------ shall mean an individual, partnership,
corporation, trust or unincorporated organization, or a
government or agency or political subdivision thereof.
"Placement Agent"
--------------- shall have the meaning set forth in
the preamble.
"Placement Agreement"
------------------- shall have the meaning set
forth in the preamble.
"Prospectus"
---------- shall mean the prospectus included in a
Registration Statement, including any preliminary
prospectus, and any such prospectus as amended or
supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Shares covered by
a Shelf Registration Statement, and by all other amendments
and supplements to such prospectus, and in each case
including all material incorporated by reference therein.
"Registrable Shares"
------------------ shall mean the Shares, including
any additional Shares paid as dividends; provided, however,
-------- -------
that the Shares shall cease to be Registrable Shares (i)
when a Registration Statement with respect to such Shares
shall have been declared effective under the 1933 Act and
such Shares shall have been disposed of pursuant to such
Registration Statement, (ii) when such Shares have been sold
to the public pursuant to Rule 144(k) (or any similar
provision then in force, but not Rule 144A) under the 1933
Act or (iii) when such Shares shall have ceased to be
outstanding.
"Registration Expenses"
--------------------- shall mean any and all
expenses incident to performance of or compliance by
Holdings with this Agreement, including without limitation:
(i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees, (ii)
all fees and expenses incurred in connection with compliance
with state securities or blue sky laws (including reasonable
fees and disbursements of counsel for any Underwriters or
Holders in connection with blue sky qualification of any of
the Exchange Shares or Registrable Shares), (iii) all
expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any
Registration Statement, any Prospectus, any amendments or
supplements thereto, any underwriting agreements, securities
sales agreements and other documents relating to the
performance of and compliance with this Agreement, (iv) all
rating agency fees, if any, (v) the fees and disbursements
of counsel for Holdings and, in the case of a Shelf
Registration Statement, the fees and disbursements of one
counsel for the Holders (which counsel shall be selected by
the Majority Holders and which counsel may also be counsel
for the Placement Agent) and (vi) the fees and disbursements
of the independent public accountants of Holdings, including
the expenses of any special audits or "cold comfort" letters
required by or incident to such performance and compliance,
but excluding fees and expenses of counsel to the
Underwriters (other than fees and expenses set forth in
clause (ii) above) or the Holders and underwriting discounts
and commissions and transfer taxes, if any, relating to the
sale or disposition of Registrable Shares by a Holder.
"Registration Statement"
---------------------- shall mean any registration
statement of Holdings that covers any of the Exchange Shares
or Registrable Shares pursuant to the provisions of this
Agreement and all amendments and supplements to any such
Registration Statement, including post-effective amendments,
in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference
therein.
"SEC"
--- shall mean the Securities and Exchange Commission.
"Shelf Registration"
------------------ shall mean a registration effected
pursuant to Section 2(b) hereof.
"Shelf Registration Statement"
---------------------------- shall mean a "shelf"
registration statement of Holdings pursuant to the
provisions of Section 2(b) of this Agreement which covers
all of the Registrable Shares on an appropriate form under
Rule 415 under the 1933 Act, or any similar rule that may be
adopted by the SEC, and all amendments and supplements to
such registration statement, including post-effective
amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated
by reference therein.
"Transfer Agent"
-------------- shall mean American Stock Transfer
and Trust Company.
"Trustee"
------- shall mean the trustee with respect to the
Exchange Debentures under the Exchange Indenture.
"Underwriters"
------------ shall have the meaning set forth in
Section 3 hereof.
"Underwritten Registration" or "Underwritten Offering"
------------------------- -------------------
shall mean a registered offering in which Registrable Shares
are sold to an Underwriter for reoffering to the public.
2. Registration Under the 1933 Act.
-------------------------------
(a) To the extent not prohibited by any applicable law
or applicable interpretation of the Staff of the SEC, Holdings
shall cause to be filed an Exchange Offer Registration Statement
covering the offer by Holdings to the Holders to exchange all of
the Registrable Shares for Exchange Shares, to have such
Registration Statement declared effective by the SEC and remain
effective until the closing of the Exchange Offer and to
consummate the Exchange Offer on or prior to September 11, 1997.
Holdings shall commence the Exchange Offer promptly after the
Exchange Offer Registration Statement has been declared effective
by the SEC and use its best efforts to have the Exchange Offer
consummated on or prior to September 11, 1997. Holdings shall
commence the Exchange Offer by mailing the related exchange offer
Prospectus and accompanying documents to each Holder stating, in
addition to such other disclosures as are required by applicable
law:
(i) that the Exchange Offer is being made pursuant to
this Agreement and that all Registrable Shares validly
tendered will be accepted for exchange;
(ii) the dates of acceptance for exchange (which shall
be a period of at least 30 days from the date such notice is
mailed) (the "Exchange Dates");
(iii) that any Registrable Shares not tendered will
remain outstanding and shall accumulate dividends at the
initial rate borne by the Registrable Shares and, other than
Registrable Shares referred to in Section 2(b)(iii) below,
will not retain any rights under this Agreement;
(iv) that Holders electing to have Registrable Shares
exchanged pursuant to the Exchange Offer will be required to
surrender such Registrable Shares, together with the
enclosed letters of transmittal, to the institution and at
the address (located in the Borough of Manhattan, The City
of New York) specified in the notice prior to the close of
business on the last Exchange Date; and
(v) that Holders will be entitled to withdraw its
election, not later than the close of business on the last
Exchange Date, by sending to the institution and at the
address (located in the Borough of Manhattan, The City of
New York) specified in the notice a telegram, telex,
facsimile transmission or letter setting forth the name of
such Holder, the principal amount of Registrable Shares
delivered for exchange and a statement that such Holder is
withdrawing his election to have such Registrable Shares
exchanged.
As soon as practicable after the last Exchange Date,
Holdings shall:
(i) accept for exchange Registrable Shares or portions
thereof tendered and not validly withdrawn pursuant to the
Exchange Offer; and
(ii) deliver, or cause to be delivered, to the Transfer
Agent for cancellation all Registrable Shares or portions
thereof so accepted for exchange by Holdings and issue, and
cause the Transfer Agent to promptly authenticate and mail
to each Holder, an Exchange Share equal in principal amount
to the principal amount of the Registrable Shares
surrendered by such Holder.
Holdings shall use its best efforts to complete the Exchange
Offer as provided above and shall comply with the applicable
requirements of the 1933 Act, the 1934 Act and other applicable
laws and regulations in connection with the Exchange Offer. The
Exchange Offer shall not be subject to any conditions, other than
that the Exchange Offer does not violate applicable law or any
applicable interpretation of the Staff of the SEC. Holdings
shall inform the Placement Agent of the names and addresses of
the Holders to whom the Exchange Offer is made, and the Placement
Agent shall have the right, subject to applicable law, to contact
such Holders and otherwise facilitate the tender of Registrable
Shares in the Exchange Offer.
(b) In the event that (i) Holdings determines that the
Exchange Offer Registration provided for in Section 2(a) above is
not available or may not be consummated as soon as practicable
after the last Exchange Date because it would violate applicable
law or the applicable interpretations of the Staff of the SEC,
(ii) the Exchange Offer is not for any other reason consummated
on or prior to September 11, 1997 or (iii) in the opinion of
counsel for the Placement Agent a Registration Statement must be
filed and a Prospectus must be delivered by the Placement Agent
in connection with any offering or sale of Registrable Shares,
Holdings shall use its best efforts to cause to be filed as soon
as practicable after such determination, date or notice of such
opinion of counsel is given to Holdings, a Shelf Registration
Statement providing for the sale by the Holders of all of the
Registrable Shares and to have such Shelf Registration Statement
declared effective by the SEC. In the event Holdings is required
to file a Shelf Registration Statement solely as a result of the
matters referred to in clause (iii) of the preceding sentence,
Holdings shall file and have declared effective by the SEC both
an Exchange Offer Registration Statement pursuant to Section 2(a)
with respect to all Registrable Shares and a Shelf Registration
Statement (which may be a combined Registration Statement with
the Exchange Offer Registration Statement) with respect to offers
and sales of Registrable Shares held by the Placement Agent after
completion of the Exchange Offer. Holdings agrees to use its
best efforts to keep the Shelf Registration Statement
continuously effective until the period referred to in Rule
144(k) or until all of the Registrable Shares covered by the
Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement. Holdings further agrees to supplement or
amend the Shelf Registration Statement if required by the rules,
regulations or instructions applicable to the registration form
used by Holdings for such Shelf Registration Statement or by the
1933 Act or by any other rules and regulations thereunder for
shelf registration or if reasonably requested by a Holder with
respect to information relating to such Holder, and to use its
best efforts to cause any such amendment to become effective and
such Shelf Registration Statement to become usable as soon as
practicable thereafter. Holdings agrees to furnish to the
Holders of Registrable Shares copies of any such supplement or
amendment promptly after its being used or filed with the SEC.
(c) Holdings shall pay all Registration Expenses in
connection with the registration pursuant to Section 2(a) or
Section 2(b). Each Holder shall pay all underwriting discounts
and commissions and transfer taxes, if any, relating to the sale
or disposition of such Holder's Registrable Shares pursuant to
the Shelf Registration Statement.
(d) An Exchange Offer Registration Statement pursuant
to Section 2(a) hereof or a Shelf Registration Statement pursuant
to Section 2(b) hereof will not be deemed to have become
effective unless it has been declared effective by the SEC;
provided, however, that if, after it has been declared effective,
-------- ------- the offering of Registrable Shares pursuant to
a Shelf Registration Statement is interfered with by any stop
order, injunction or other order or requirement of the SEC or any
other governmental agency or court, such Registration Statement
will be deemed not to have become effective during the period of
such interference until the offering of Registrable Shares
pursuant to such Registration Statement may legally resume. As
provided for in the Amended Articles, in the event the Exchange
Offer is not consummated and the Shelf Registration Statement is
not declared effective on or prior to September 11, 1997,
dividends will accrue, at an annual rate of 0.5% of the
liquidation preference thereof, on the Shares from September 11,
1997, payable in additional Shares quarterly in arrears on each
March 15, June 15, September 15 and December 15, commencing
December 15, 1997; provided that if a Shelf Registration
-------- Statement is required solely as a
result of the matters referred to in clause (iii) of the first
sentence of Section 2(b), such increase in dividends shall be
payable only to the Placement Agent, with respect to Shares held
by it, and only with respect to any period (after September 11,
1997) during which such Shelf Registration Statement is not
effective.
(e) Without limiting the remedies available to the
Placement Agent and the Holders, Holdings acknowledges that any
failure by Holdings to comply with its obligations under
Section 2(a) and Section 2(b) hereof may result in material
irreparable injury to the Placement Agent or the Holders for
which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that,
in the event of any such failure, the Placement Agent or any
Holder may obtain such relief as may be required to specifically
enforce Holdings' obligations under Section 2(a) and Section 2(b)
hereof.
3. Registration Procedures.
------------------------
In connection with the obligations of Holdings with
respect to the Registration Statements pursuant to Section 2(a)
and Section 2(b) hereof, Holdings shall as expeditiously as
possible:
(a) prepare and file with the SEC a Registration
Statement on the appropriate form under the 1933 Act, which
form (x) shall be selected by Holdings and (y) shall, in the
case of a Shelf Registration, be available for the sale of
the Registrable Shares by the selling Holders thereof and
(z) shall comply as to form in all material respects with
the requirements of the applicable form and include all
financial statements required by the SEC to be filed
therewith, and use its best efforts to cause such
Registration Statement to become effective and remain
effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as
may be necessary to keep such Registration Statement
effective for the applicable period and cause each
Prospectus to be supplemented by any required prospectus
supplement and, as so supplemented, to be filed pursuant to
Rule 424 under the 1933 Act; to keep each Prospectus current
during the period described under Section 4(3) and Rule 174
under the 1933 Act that is applicable to transactions by
brokers or dealers with respect to the Registrable Shares or
Exchange Shares;
(c) in the case of a Shelf Registration, furnish to
each Holder of Registrable Shares, to counsel for the
Placement Agent, to counsel for the Holders and to each
Underwriter of an Underwritten Offering of Registrable
Shares, if any, without charge, as many copies of each
Prospectus, including each preliminary Prospectus, and any
amendment or supplement thereto and such other documents as
such Holder or Underwriter may reasonably request, in order
to facilitate the public sale or other disposition of the
Registrable Shares; and Holdings consents to the use of such
Prospectus and any amendment or supplement thereto in
accordance with applicable law by each of the selling
Holders of Registrable Shares and any such Underwriters in
connection with the offering and sale of the Registrable
Shares covered by and in the manner described in such
Prospectus or any amendment or supplement thereto in
accordance with applicable law;
(d) use its best efforts to register or qualify, by
the time the applicable Registration Statement is declared
effective by the SEC, the Registrable Shares under all
applicable state securities or "blue sky" laws of such
jurisdictions as any Holder of Registrable Shares covered by
a Registration Statement shall reasonably request in
writing, to cooperate with such Holder in connection with
any filings required to be made with the National
Association of Securities Dealers, Inc. and do any and all
other acts and things which may be reasonably necessary or
advisable to enable such Holder to consummate the
disposition in each such jurisdiction of such Registrable
Shares owned by such Holder; provided, however, that
-------- ------- Holdings
shall not be required to (i) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction
where it would not otherwise be required to qualify but for
this Section 3(d), (ii) file any general consent to service
of process or (iii) subject itself to taxation in any such
jurisdiction if it is not otherwise so subject;
(e) in the case of a Shelf Registration, notify each
Holder of Registrable Shares, counsel for the Holders and
counsel for the Placement Agent promptly and, if requested
by any such Holder or counsel, confirm such advice in
writing (i) when a Registration Statement has become
effective and when any post-effective amendment thereto has
been filed and becomes effective, (ii) of any request by the
SEC or any state securities authority for amendments and
supplements to a Registration Statement and Prospectus or
for additional information after the Registration Statement
has become effective, (iii) of the issuance by the SEC or
any state securities authority of any stop order suspending
the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (iv) if,
between the effective date of a Registration Statement and
the closing of any sale of Registrable Shares covered
thereby, the representations and warranties of Holdings
contained in any underwriting agreement, securities sales
agreement or other similar agreement, if any, relating to
the offering cease to be true and correct in all material
respects or if Holdings receives any notification with
respect to the suspension of the qualification of the
Registrable Shares for sale in any jurisdiction or the
initiation of any proceeding for such purpose, (v) of the
happening of any event during the period a Shelf
Registration Statement is effective which makes any
statement made in such Registration Statement or the related
Prospectus untrue in any material respect or which requires
the making of any changes in such Registration Statement or
Prospectus in order to make the statements therein not
misleading and (vi) of any determination by Holdings that a
post-effective amendment to a Registration Statement would
be appropriate;
(f) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of a
Registration Statement at the earliest possible moment and
provide immediate notice to each Holder of the withdrawal of
any such order;
(g) in the case of a Shelf Registration, furnish to
each Holder of Registrable Shares, without charge, at least
one conformed copy of each Registration Statement and any
post-effective amendment thereto (without documents
incorporated therein by reference or exhibits thereto,
unless requested);
(h) in the case of a Shelf Registration, cooperate
with the selling Holders of Registrable Shares to facilitate
the timely preparation and delivery of certificates
representing Registrable Shares to be sold and not bearing
any restrictive legends and enable such Registrable Shares
to be in such denominations (consistent with the provisions
of the Amended Articles) and registered in such names as the
selling Holders may reasonably request at least two business
days prior to the closing of any sale of Registrable Shares;
(i) in the case of a Shelf Registration, upon the
occurrence of any event contemplated by Section 3(e)(v)
hereof, use its best efforts to prepare a supplement or
post-effective amendment to a Registration Statement or the
related Prospectus or any document incorporated therein by
reference or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable
Shares, such Prospectus will not contain any untrue
statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of
the circumstances under which they were made, not
misleading. Holdings agrees to notify the Holders to
suspend use of the Prospectus as promptly as practicable
after the occurrence of such an event, and the Holders
hereby agree to suspend use of the Prospectus until Holdings
has amended or supplemented the Prospectus to correct such
misstatement or omission;
(j) within a reasonable time prior to the filing of
any Registration Statement, any Prospectus, any amendment to
a Registration Statement or amendment or supplement to a
Prospectus or any document which is to be incorporated by
reference into a Registration Statement or a Prospectus
after initial filing of a Registration Statement, provide
copies of such document to the Placement Agent and its
counsel (and, in the case of a Shelf Registration Statement,
the Holders and its counsel) and make such representatives
of Holdings as shall be reasonably requested by the
Placement Agent or its counsel (and, in the case of a Shelf
Registration Statement, the Holders or its counsel)
available for discussion of such document, and shall not at
any time file or make any amendment to the Registration
Statement, any Prospectus or any amendment of or supplement
to a Registration Statement or a Prospectus or any document
which is to be incorporated by reference into a Registration
Statement or a Prospectus, of which the Placement Agent and
its counsel (and, in the case of a Shelf Registration
Statement, the Holders and its counsel) shall not have
previously been advised and furnished a copy or to which the
Placement Agent or its counsel (and, in the case of a Shelf
Registration Statement, the Holders or its counsel) shall
object, except for any amendment or supplement or document
(a copy of which has been previously furnished to the
Placement Agent and its counsel (and, in the case of a Shelf
Registration Statement, the Holders and its counsel)) which
counsel to Holdings shall advise Holdings, in the form of a
written legal opinion, is required in order to comply with
applicable law; the Placement Agent agrees that, if it
receives timely notice and drafts under this clause (j), it
will not take actions or make objections pursuant to this
clause (j) such that Holdings is unable to comply with its
obligations under Section 2(a);
(k) obtain a CUSIP number and, if applicable, a CINS
number, for all Exchange Shares or Registrable Shares, as
the case may be, not later than the first effective date of
a Registration Statement;
(l) cause the Exchange Indenture to be qualified under
the Trust Indenture Act of 1939, as amended (the "TIA"), in
connection with the registration of the Exchange Shares or
Registrable Shares, as the case may be, cooperate with the
Trustee and the Holders to effect such changes to the
Exchange Indenture as may be required for the Exchange
Indenture to be so qualified in accordance with the terms of
the TIA and execute, and use its best efforts to cause the
Trustee to execute, all documents as may be required to
effect such changes and all other forms and documents
required to be filed with the SEC to enable the Exchange
Indenture to be so qualified in a timely manner;
(m) in the case of a Shelf Registration, make
available for inspection by a representative of the Holders
of the Registrable Shares, any Underwriter participating in
any disposition pursuant to such Shelf Registration
Statement, and attorneys and accountants designated by the
Holders, at reasonable times and in a reasonable manner, all
financial and other records, pertinent documents and
properties of Holdings, and cause the officers, directors
and employees of Holdings to supply all information
reasonably requested by any such representative,
Underwriter, attorney or accountant in connection with a
Shelf Registration Statement;
(n) in the case of a Shelf Registration, use its best
efforts to cause all Registrable Shares to be listed on any
securities exchange or any automated quotation system on
which similar securities issued by Holdings are then listed
if requested by the Majority Holders, to the extent such
Registrable Shares satisfy applicable listing requirements;
(o) use its best efforts to cause the Exchange Shares
or Registrable Shares, as the case may be, to be rated by
two nationally recognized statistical rating organizations
(as such term is defined in Rule 436(g)(2) under the 1933
Act);
(p) if reasonably requested by any Holder of
Registrable Shares covered by a Registration Statement, (i)
promptly incorporate in a Prospectus supplement or post-
effective amendment such information with respect to such
Holder as such Holder reasonably requests to be included
therein and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment as
soon as Holdings has received notification of the matters to
be incorporated in such filing; and
(q) in the case of a Shelf Registration, enter into
such customary agreements and take all such other actions in
connection therewith (including those requested by the
Holders of a majority of the Registrable Shares being sold)
in order to expedite or facilitate the disposition of such
Registrable Shares including, but not limited to, an
Underwritten Offering and in such connection, (i) to the
extent possible, make such representations and warranties to
the Holders and any Underwriters of such Registrable Shares
with respect to the business of Holdings and its
subsidiaries, the Registration Statement, Prospectus and
documents incorporated by reference or deemed incorporated
by reference, if any, in each case, in form, substance and
scope as are customarily made by issuers to underwriters in
underwritten offerings and confirm the same if and when
requested, (ii) obtain opinions of counsel to Holdings
(which counsel and opinions, in form, scope and substance,
shall be reasonably satisfactory to the Holders and such
Underwriters and its counsel) addressed to each selling
Holder and Underwriter of Registrable Shares, covering the
matters customarily covered in opinions requested in
underwritten offerings, (iii) obtain "cold comfort" letters
from the independent certified public accountants of
Holdings (and, if applicable, any other certified public
accountant of any business acquired by Holdings for which
financial statements and financial data are or are required
to be included in the Registration Statement) addressed to
each selling Holder and Underwriter of Registrable Shares,
such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in
connection with underwritten offerings, and (iv) deliver
such documents and certificates as may be reasonably
requested by the Holders of a majority in principal amount
of the Registrable Shares being sold or the Underwriters,
and which are customarily delivered in underwritten
offerings, to evidence the continued validity of the
representations and warranties of Holdings made pursuant to
clause (i) above and to evidence compliance with any
customary conditions contained in an underwriting agreement.
In the case of a Shelf Registration Statement, Holdings
may require each Holder of Registrable Shares to furnish to
Holdings such information regarding the Holder and the proposed
distribution by such Holder of such Registrable Shares as
Holdings may from time to time reasonably request in writing.
In the case of a Shelf Registration Statement, each
Holder agrees that, upon receipt of any notice from Holdings of
the happening of any event of the kind described in Section
3(e)(v) hereof, such Holder will forthwith discontinue
disposition of Registrable Shares pursuant to a Registration
Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(i)
hereof, and, if so directed by Holdings, such Holder will deliver
to Holdings (at its expense) all copies in its possession, other
than permanent file copies then in such Holder's possession, of
the Prospectus covering such Registrable Shares current at the
time of receipt of such notice. If Holdings shall give any such
notice to suspend the disposition of Registrable Shares pursuant
to a Registration Statement, Holdings shall extend the period
during which the Registration Statement shall be maintained
effective pursuant to this Agreement by the number of days during
the period from and including the date of the giving of such
notice to and including the date when the Holders shall have
received copies of the supplemented or amended Prospectus
necessary to resume such dispositions.
The Holders of Registrable Shares covered by a Shelf
Registration Statement who desire to do so may sell such
Registrable Shares in an Underwritten Offering. In any such
Underwritten Offering, the investment banker or investment
bankers and manager or managers (the "Underwriters") that will
administer the offering will be selected by the Majority Holders
of the Registrable Shares included in such offering.
4. Participation of Broker-Dealers in Exchange Offer.
--------------------------------------------------
(a) The Staff of the SEC has taken the position that
any broker-dealer that receives Exchange Shares for its own
account in the Exchange Offer in exchange for Shares that were
acquired by such broker-dealer as a result of market-making or
other trading activities (a "Participating Broker-Dealer"), may
be deemed to be an "underwriter" within the meaning of the 1933
Act and must deliver a prospectus meeting the requirements of the
1933 Act in connection with any resale of such Exchange Shares.
Holdings understands that it is the Staff's position
that if the Prospectus contained in the Exchange Offer
Registration Statement includes a plan of distribution containing
a statement to the above effect and the means by which
Participating Broker-Dealers may resell the Exchange Shares,
without naming the Participating Broker-Dealers or specifying the
amount of Exchange Shares owned by them, such Prospectus may be
delivered by Participating Broker-Dealers to satisfy their
prospectus delivery obligation under the 1933 Act in connection
with resales of Exchange Shares for their own accounts, so long
as the Prospectus otherwise meets the requirements of the 1933
Act.
(b) In light of the above, notwithstanding the other
provisions of this Agreement, Holdings agrees that the provisions
of this Agreement as they relate to a Shelf Registration shall
also apply to an Exchange Offer Registration to the extent, and
with such reasonable modifications thereto as may be, reasonably
requested by the Placement Agent or by one or more Participating
Broker-Dealers, in each case as provided in clause (ii) below, in
order to expedite or facilitate the disposition of any Exchange
Shares by Participating Broker-Dealers consistent with the
positions of the Staff recited in Section 4(a) above; provided
--------
that:
(i) Holdings shall not be required to amend or
supplement the Prospectus contained in the Exchange Offer
Registration Statement, as would otherwise be contemplated
by Section 3(i) of this Agreement, for a period exceeding 60
days after the last Exchange Date (as such period may be
extended pursuant to the penultimate paragraph of Section 3
of this Agreement) and Participating Broker-Dealers shall
not be authorized by Holdings to deliver and shall not
deliver such Prospectus after such period in connection with
the resales contemplated by this Section 4; and
(ii) the application of the Shelf Registration
procedures set forth in Section 3 of this Agreement to an
Exchange Offer Registration, to the extent not required by
the positions of the Staff of the SEC or the 1933 Act and
the rules and regulations thereunder, will be in conformity
with the reasonable request to Holdings by the Placement
Agent or with the reasonable request in writing to Holdings
by one or more broker-dealers who certify to the Placement
Agent and Holdings in writing that they anticipate that they
will be Participating Broker-Dealers; and provided further
-------- -------
that, in connection with such application of the Shelf
Registration procedures set forth in Section 3 of this
Agreement to an Exchange Offer Registration, Holdings shall
be obligated (x) to deal only with one entity representing
the Participating Broker-Dealers, which shall be the
Placement Agent unless it elects not to act as such
representative, (y) to pay the fees and expenses of only one
counsel representing the Participating Broker-Dealers, which
shall be counsel to the Placement Agent unless such counsel
elects not to so act and (z) to cause to be delivered only
one, if any, "cold comfort" letter with respect to the
Prospectus in the form existing on the last Exchange Date
and with respect to each subsequent amendment or supplement,
if any, effected during the period specified in clause (i)
above.
(c) The Placement Agent shall have no liability to
Holdings or any Holder with respect to any request that it may
make pursuant to Section 4(b) above.
5. Indemnification and Contribution.
--------------------------------
(a) Holdings agrees to indemnify and hold harmless the
Placement Agent, each Holder and each Person, if any, who
controls the Placement Agent or any Holder within the meaning of
either Section 15 of the 1933 Act or Section 20 of the 1934 Act,
or is under common control with, or is controlled by, the
Placement Agent or any Holder, from and against all losses,
claims, damages and liabilities (including, without limitation,
any legal or other expenses reasonably incurred by the Placement
Agent, any Holder or any such controlling or affiliated Person in
connection with defending or investigating any such action or
claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement (or
any amendment thereto) pursuant to which Exchange Shares or
Registrable Shares were registered under the 1933 Act, including
all documents incorporated therein by reference, or caused by any
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or caused by any untrue statement or
alleged untrue statement of a material fact contained in any
Prospectus (as amended or supplemented if Holdings shall have
furnished any amendments or supplements thereto), or caused by
any omission or alleged omission to state therein a material fact
necessary to make the statements therein in light of the
circumstances under which they were made not misleading, except
insofar as such losses, claims, damages or liabilities are caused
by any such untrue statement or omission or alleged untrue
statement or omission based upon information relating to the
Placement Agent or any Holder furnished to Holdings in writing by
the Placement Agent or any selling Holder expressly for use
therein. In connection with any Underwritten Offering permitted
by Section 3 of this Agreement, Holdings will also indemnify the
Underwriters, if any, selling brokers, dealers and similar
securities industry professionals participating in the
distribution, their officers and directors and each Person who
controls such Persons (within the meaning of the 1933 Act and the
1934 Act) to the same extent as provided above with respect to
the indemnification of the Holders, if requested in connection
with any Registration Statement.
(b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless Holdings, the Placement Agent and the
other selling Holders, and each of their directors, officers who
sign the Registration Statement and each Person, if any, who
controls Holdings, the Placement Agent and any other selling
Holder within the meaning of either Section 15 of the 1933 Act or
Section 20 of the 1934 Act to the same extent as the foregoing
indemnity from Holdings to the Placement Agent and the Holders,
but only with reference to information relating to such Holder
furnished to Holdings in writing by such Holder expressly for use
in any Registration Statement (or any amendment thereto) or any
Prospectus (or any amendment or supplement thereto).
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any Person in
respect of which indemnity may be sought pursuant to either
paragraph (a) or paragraph (b) above, such Person (the
"indemnified party") shall promptly notify the Person against
whom such indemnity may be sought (the "indemnifying party") in
writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory
to the indemnified party to represent the indemnified party and
any others the indemnifying party may designate in such
proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any
indemnified party shall have the right to retain its own counsel,
but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and
the indemnified party shall have mutually agreed to the retention
of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual
or potential differing interests between them. It is understood
that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be
liable for (a) the fees and expenses of more than one separate
firm (in addition to any local counsel) for the Placement Agent
and all Persons, if any, who control the Placement Agent within
the meaning of either Section 15 of the 1933 Act or Section 20 of
the 1934 Act, (b) the fees and expenses of more than one separate
firm (in addition to any local counsel) for Holdings, its
directors, its officers who sign the Registration Statement and
each Person, if any, who controls Holdings within the meaning of
either such Section and (c) the fees and expenses of more than
one separate firm (in addition to any local counsel) for all
Holders and all Persons, if any, who control any Holders within
the meaning of either such Section, and that all such fees and
expenses shall be reimbursed as they are incurred. In such case
involving the Placement Agent and Persons who control the
Placement Agent, such firm shall be designated in writing by the
Placement Agent. In such case involving the Holders and such
Persons who control Holders, such firm shall be designated in
writing by the Majority Holders. In all other cases, such firm
shall be designated by Holdings. The indemnifying party shall
not be liable for any settlement of any proceeding effected
without its written consent but, if settled with such consent or
if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel
as contemplated by the second and third sentences of this
paragraph, the indemnifying party agrees that it shall be liable
for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request
and (ii) such indemnifying party shall not have reimbursed the
indemnified party for such fees and expenses of counsel in
accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement
of any pending or threatened proceeding in respect of which such
indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the
subject matter of such proceeding.
(d) If the indemnification provided for in paragraph
(a) or paragraph (b) of this Section 4 is unavailable to an
indemnified party or insufficient in respect of any losses,
claims, damages or liabilities, then each indemnifying party
under such paragraph, in lieu of indemnifying such indemnified
party thereunder, shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to
reflect the relative fault of the indemnifying party or parties
on the one hand and of the indemnified party or parties on the
other hand in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative
fault of Holdings and the Holders shall be determined by
reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied
by Holdings or by the Holders and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Holders' obligations to
contribute pursuant to this Section 5(d) are several in
proportion to the principal amount of Registrable Shares of such
Holder that were registered pursuant to a Registration Statement.
(e) Holdings and each Holder agree that it would not
be just or equitable if contribution pursuant to this Section 5
were determined by pro rata allocation or by any other method of
--- ---- allocation that does not take account
of the equitable considerations referred to in paragraph (d)
above. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages and liabilities referred to
in paragraph (d) above shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5, no Holder shall
be required to contribute any amount in excess of the amount by
which the total price at which Registrable Shares were sold by
such Holder exceeds the amount of any damages that such Holder
has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any Person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this
Section 5 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any indemnified
party at law or in equity.
(f) Survival.
--------- The indemnity and contribution
provisions contained in this Section 5 shall remain operative and
in full force and effect regardless of (i) any termination of
this Agreement, (ii) any investigation made by or on behalf of
the Placement Agent, any Holder or any person controlling the
Placement Agent or any Holder, or by or on behalf of Holdings,
its officers or directors or any Person controlling Holdings,
(iii) acceptance of any of the Exchange Shares and (iv) any sale
of Registrable Shares pursuant to a Shelf Registration Statement.
6. Miscellaneous.
--------------
(a) No Inconsistent Agreements.
-------------------------- Holdings has not
entered into, and on or after the date of this Agreement will not
enter into, any agreement which is inconsistent with the rights
granted to the Holders of Registrable Shares in this Agreement or
otherwise conflicts with the provisions hereof. The rights
granted to the Holders hereunder do not in any way conflict with
and are not inconsistent with the rights granted to the holders
of Holdings' other issued and outstanding securities under any
such agreements.
(b) Amendments and Waivers.
---------------------- The provisions of this
Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given unless
Holdings has obtained the written consent of Holders of at least
a majority in aggregate principal amount of the outstanding
Registrable Shares affected by such amendment, modification,
supplement, waiver or consent; provided, however, that no
-------- ------- amendment,
modification, supplement, waiver or consents to any departure
from the provisions of Section 5 hereof shall be effective as
against any Holder of Registrable Shares unless consented to in
writing by such Holder.
(c) Notices.
-------- All notices and other communications
provided for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, telex, telecopier, or
any courier guaranteeing overnight delivery (i) if to a Holder,
at the most current address given by such Holder to Holdings by
means of a notice given in accordance with the provisions of this
Section 6(c), which address initially is, with respect to the
Placement Agent, the address set forth in the Placement
Agreement; (ii) if to Holdings, initially at 9605 East Maroon
Circle, P.O. Box 6742, Englewood, Colorado 80155-6742 and
thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 6(c).
All such notices and communications shall be deemed to
have been duly given: at the time delivered by hand, if
personally delivered; five business days after being deposited in
the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt is acknowledged, if telecopied; and on the
next business day if timely delivered to an air courier
guaranteeing overnight delivery.
Copies of all such notices, demands, or other
communications shall be concurrently delivered by the person
giving the same to the Transfer Agent, at 40 Wall Street, 46th
Floor, New York, New York 10005.
(d) Successors and Assigns.
---------------------- This Agreement shall
inure to the benefit of and be binding upon the successors,
assigns and transferees of each of the parties, including,
without limitation and without the need for an express
assignment, subsequent Holders; provided that nothing herein
-------- shall be deemed to
permit any assignment, transfer or other disposition of
Registrable Shares in violation of the terms of the Placement
Agreement. If any transferee of any Holder shall acquire
Registrable Shares, in any manner, whether by operation of law or
otherwise, such Registrable Shares shall be held subject to all
of the terms of this Agreement, and by taking and holding such
Registrable Shares such person shall be conclusively deemed to
have agreed to be bound by and to perform all of the terms and
provisions of this Agreement and such person shall be entitled to
receive the benefits hereof. The Placement Agent (solely in its
capacity as Placement Agent) shall have no liability or
obligation to Holdings with respect to any failure by a Holder to
comply with, or any breach by any Holder of, any of the
obligations of such Holder under this Agreement.
(e) Purchases and Sales of Shares.
------------------------------ Holdings shall
not, and shall use its best efforts to cause its affiliates (as
defined in Rule 405 under the 1933 Act) not to, purchase and then
resell or otherwise transfer any Shares.
(f) Third Party Beneficiary.
----------------------- The Holders shall be
third party beneficiaries to the agreements made hereunder
between Holdings, on the one hand, and the Placement Agent, on
the other hand, and each Holder shall have the right to enforce
such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights or the rights of
Holders hereunder.
(g) Counterparts.
------------- This Agreement may be executed
manually or by facsimile in any number of counterparts, each of
which when so executed shall be deemed to be an original and all
of which taken together shall constitute one and the same
agreement.
(h) Headings.
--------- The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(i) Governing Law; Submission to Jurisdiction.
----------------------------------------- The
laws of the State of New York applicable to contracts to be
performed entirely in that state shall govern this Agreement.
Holdings agrees to submit to the jurisdiction of any federal or
state court located in The City of New York in any suit, action
or proceeding with respect to this Agreement and for actions
brought under the U.S. federal or state securities laws brought
in any such court.
(j) Severability.
------------ In the event that any one or more
of the provisions contained herein, or the application thereof in
any circumstance, is held invalid, illegal or unenforceable, the
validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
ICG HOLDINGS, INC.
By /s/ James D. Grenfell
-------------------------
Name: James D. Grenfell
Title: Executive Vice
President, Chief
Financial Officer
and Treasurer
Confirmed and accepted as of
the date first above written:
MORGAN STANLEY & CO.
INCORPORATED
By /s/ James B. Avery
------------------------------
Name: James B. Avery
Title: Vice President
Exhibit 4.18
CUSIP 449247303
State of Colorado
ICG HOLDINGS, INC.
Cumulative Exchangeable Redeemable Preferred Stock
THIS CERTIFIES THAT [specimen] is
--------------------------------------
the registered holder of xxxxxxxxxxxxxxxxxxxx Exchangeable
----------------------------------------
Preferred (no par value) Shares transferable only on the
---------------------------------
books of the Corporation by the holder hereof in person or by
Attorney upon surrender of this Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this
Certificate to be signed by its duly authorized officers and its
Corporate Seal to be hereunto affixed this 11th day of
-------------
March A.D. 1997
-------------------- -------
_____________________________ _____________________________
Executive Vice President Secretary
Countersigned and Registered: American Stock Transfer and Trust
Company
Transfer Agent
By:_______________________________________
Authorized Officer
<PAGE>
THIS PREFERRED STOCK HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS
SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT, (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
PREFERRED STOCK IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT, OR (C) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) OR REGULATION D UNDER THE SECURITIES
ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR"), (2) AGREES THAT IT
WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k)
UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER
OF THIS PREFERRED STOCK, RESELL OR OTHERWISE TRANSFER THIS
PREFERRED STOCK EXCEPT (A) TO ICG HOLDINGS, INC OR ANY SUBSIDIARY
THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT (IF
AVAILABLE), (E) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO
THE TRANSFER AGENT A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THIS PREFERRED STOCK (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRANSFER AGENT) OR (F) AFTER REGISTRATION UNDER
THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THIS PREFERRED STOCK IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH
ANY TRANSFER OF THIS PREFERRED STOCK WITHIN THE TIME PERIOD
REFERRED TO ABOVE, THE HOLDER MUST EXECUTE A LETTER (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE TRANSFER AGENT) RELATING TO
THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE
TRANSFER AGENT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT. THE SECOND AMENDED AND
RESTATED ARTICLES OF INCORPORATION CONTAINS A PROVISION REQUIRING
THE TRANSFER AGENT TO REFUSE TO REGISTER ANY TRANSFER OF THIS
PREFERRED STOCK IN VIOLATION OF THE FOREGOING RESTRICTIONS.
UPON WRITTEN REQUEST, ICG HOLDINGS, INC. WILL FURNISH TO THE
SHAREHOLDER, WITHOUT CHARGE, A SUMMARY OF THE DESIGNATIONS,
PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS APPLICABLE TO THIS
PREFERRED STOCK.
For Value Received, _____ hereby sell, assign and transfer
unto ____________________________ Shares represented by the
within Certificate and do hereby irrevocably constitute and
appoint ________________________________________________
Attorney to transfer the said Shares on the books of the within
named Corporation with full power of substitution in the
premises.
Dated __________________________ 19____
In presence of
______________________________ ______________________________
NOTICE, THE SIGNATURE OF THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
THE BOARD OF DIRECTORS
ICG COMMUNICATIONS, INC.:
We consent to incorporation by reference in the registration
statement on Form S-4 of ICG Communications, Inc., of our reports
relating to the consolidated balance sheets of ICG
Communications, Inc. and subsidiaries as of September 30, 1995
and 1996 and December 31, 1996, and the related consolidated
statements of operations, stockholders' equity (deficit), and
cash flows for each of the years in the three-year period ended
September 30, 1996, and the three-month period ended December 31,
1996, and the related financial statement schedule, and to the
reference to our firm under the heading "Experts" in the
prospectus.
Our report refers to a change during the year ended September 30,
1996 in the Company's method of accounting for long-term telecom
services contracts.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Denver, Colorado
March 31, 1997
