AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 18, 1997
REGISTRATION NO. 333-
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
---------------
ICG FUNDING, LLC
ICG COMMUNICATIONS, INC.
(Exact name of registrants as specified in their charter
or organizational documents)
DELAWARE 84-1434980
DELAWARE 84-1342022
(State of incorporation (I.R.S. Employer
or organization) Identification Numbers)
---------------
9605 EAST MAROON CIRCLE
P.O. BOX 6742
ENGLEWOOD, COLORADO 80155-6742
(303) 572-5960
(Address, including zip code, and telephone
number, including area code, of registrants'
principal executive offices)
---------------
with a copy to:
H. DON TEAGUE, EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY LEONARD GUBAR, ESQ.
C/O ICG COMMUNICATIONS, INC. AUDREY A. ROHAN, ESQ.
9605 E. MAROON CIRCLE REID & PRIEST LLP
P.O. BOX 6742 40 WEST 57TH STREET
ENGLEWOOD, COLORADO 80155-6742 NEW YORK, NEW YORK 10019
(303) 572-5960 (212) 603-2000
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box.[x]
---------------
CALCULATION OF REGISTRATION FEE
========================================================================
TITLE OF EACH CLASS AMOUNT TO BE PROPOSED PROPOSED AMOUNT OF
OF SECURITIES TO BE REGISTERED MAXIMUM MAXIMUM REGISTRA-
REGISTERED OFFERING AGGREGATE TION FEE
PRICE PER OFFERING
SECURITY PRICE
OR PER
UNIT
------------------------------------------------------------------------
Preferred Securities
of ICG Funding, LLC . 2,645,000 $56.125(1) $148,450,625.00 $44,985.04
------------------------------------------------------------------------
Common Stock, $.01
par value per
share, of ICG
Communications, Inc. 4,786,680(2) - - -
------------------------------------------------------------------------
Common Stock, $.01
par value per
share, of ICG
Communications
Inc. . . . . . . . 200,000(3) $21.625(3) $4,325,000.00 $1,310.61
------------------------------------------------------------------------
Guarantee of the
Preferred Securities
of ICG Funding, LLC
(4) . . . . . . . . . - - - -
------------------------------------------------------------------------
Total - - - $46,295.65
========================================================================
(1) Estimated solely for the purpose of calculating the amount
of the registration fee based on the average of the bid and
asked prices of the Preferred Securities as reported on the
PORTAL Market on November 14, 1997, in accordance with Rule
457(c) under the Securities Act.
(2) The Preferred Securities are exchangeable for the common
stock, par value $.01 per share (the "Common Stock"), of ICG
Communications, Inc. in whole or in part at the holder's
option. The number of shares of Common Stock to be
registered represents the number of shares of Common Stock
that may be issued upon exchange of the Preferred
Securities. Each Preferred Security is initially
exchangeable into 2.0811 shares of Common Stock, subject to
adjustment under certain circumstances. Pursuant to Rule
416, this Registration Statement also registers such
indeterminate number of additional shares of Common Stock as
may be required as a result of an adjustment in the number
of shares of Common Stock issuable upon exchange by reason
of the formula contained in the terms of the Preferred
Securities. Shares of Common Stock issued upon exchange of
the Preferred Securities will be issued without the payment
of additional consideration.
(3) Estimated solely for the purpose of calculating the amount
of the registration fee based on the average of the bid and
asked prices of the Common Stock as reported on the Nasdaq
National Market on November 17, 1997, in accordance with
Rule 457(c) under the Securities Act. Represents shares of
Common Stock to be sold by the Selling Stockholder named
herein.
(4) Pursuant to Rule 457(n) under the Securities Act, no
separate fee is payable for the Guarantee.
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 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
=================================================================
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR
AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES
HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE
ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BY ANY
SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS (SUBJECT TO COMPLETION)
DATED NOVEMBER 18, 1997
_____________________________
2,645,000 6 3/4% EXCHANGEABLE PREFERRED SECURITIES
MANDATORILY REDEEMABLE 2009
(LIQUIDATION AMOUNT $50 PER PREFERRED SECURITY)
ICG FUNDING, LLC
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
AND EXCHANGEABLE INTO THE COMMON STOCK,
$.01 PAR VALUE, OF
ICG COMMUNICATIONS, INC.
200,000 SHARES OF COMMON STOCK OF
ICG COMMUNICATIONS, INC.
_______________________________
This Prospectus relates to the resale by the holders thereof
of the 6 3/4% Exchangeable Limited Liability Company Preferred
Securities (the "Preferred Securities"), liquidation amount $50
per Preferred Security, which represent preferred undivided
beneficial interests in the assets of ICG Funding, LLC, a limited
liability company formed under the laws of the State of Delaware
("Funding"), and the shares of common stock, par value $.01 per
share (the "Common Stock"), of ICG Communications, Inc., a
Delaware corporation ("ICG" and, together with its subsidiaries,
"ICG" or the "Company"), issuable upon exchange of the Preferred
Securities. This Prospectus also relates to the resale by Funding
of up to 200,000 shares of Common Stock. The Preferred
Securities were issued and sold (the "Original Offering") on
September 24, 1997 (the "Original Closing Date") and October 3,
1997 to the Initial Purchasers (as defined herein) and were
simultaneously resold by the Initial Purchasers in transactions
exempt from the Securities Act of 1933, as amended (the
"Securities Act"), in the United States to persons reasonably
believed by the Initial Purchasers to be qualified institutional
buyers as defined in Rule 144A under the Securities Act. The
Preferred Securities are traded in the Private Offering, Resales
and Trading through Automated Linkages ("PORTAL") Market. All of
the beneficial interests in the assets of Funding represented by
common securities of Funding (the "Common Securities" and,
together with the Preferred Securities, the "Funding Securities")
are owned directly by ICG. Funding exists for the exclusive
purposes of issuing the Funding Securities and investing the
proceeds of the sale thereof in the preferred stock of ICG
mandatorily redeemable 2009, par value $.01 per share (the "ICG
Preferred Stock"), and certain U.S. government securities. The
ICG Preferred Stock ranks on a parity with all outstanding
preferred stock of ICG, senior to the common stock of ICG and
subordinate to all indebtedness and other liabilities of ICG. In
the event of a liquidation, dissolution, winding-up or
termination of Funding, the then holders of the Preferred
Securities will have a preference over the holders of the Common
Securities with respect to payments in respect of distributions
and payments upon liquidation, redemption and otherwise. See
"Description of the Preferred Securities - Ranking."
(Continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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.
The date of this Prospectus is XXXXXXXXX XX, 1997
<PAGE>
Each Preferred Security is exchangeable in the manner
described herein at the option of the holder, at any time prior
to the Mandatory Redemption Date (as defined herein), into shares
of Common Stock, at an initial exchange rate of 2.0811 shares of
Common Stock per $50 liquidation preference per Preferred
Security (equivalent to an exchange price of $24.025 per share of
Common Stock), subject to adjustment in certain circumstances.
See "Description of the Preferred Securities - Exchange Rights -
Exchange Rate Adjustments." The Common Stock is quoted on the
Nasdaq National Market under the symbol "ICGX." On November 17,
1997, the last reported sale price of Common Stock was $21.50 per
share.
The Preferred Securities and the Common Stock issuable upon
exchange of the Preferred Securities (the "Offered Securities")
may be offered and sold from time to time by the holders named
herein or by their transferees, pledgees, donees or their
successors (collectively, the "Selling Holders") pursuant to this
Prospectus. The Offered Securities may be sold by the Selling
Holders from time to time directly to purchasers or through
agents, underwriters or dealers. See "Plan of Distribution" and
"Selling Holders." If required, the names of any such agents or
underwriters involved in the sale of the Offered Securities and
the applicable agent's commission, dealer's purchaser price or
underwriter's discount, if any, will be set forth in an
accompanying supplement to this Prospectus (the "Prospectus
Supplement"). The Selling Holders will receive all of the net
proceeds from the sale of the Offered Securities and will pay all
underwriting discounts and selling commissions, if any,
applicable to any such sale. No portion of the net proceeds of
this offering will be received by ICG or Funding. ICG is
responsible for payment of all other expenses incident to the
offer and sale of the Offered Securities. The Selling Holders and
any broker-dealers, agents or underwriters which participate in
the distribution of the Offered Securities may be deemed to be
"underwriters" within the meaning of the Securities Act, and any
commission received by them and any profit on the resale of the
Offered Securities purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
See "Plan of Distribution" for a description of indemnification
arrangements.
Holders of Preferred Securities are entitled to receive
dividends on the Preferred Securities at the rate of 6 3/4% per
annum of the liquidation preference of Preferred Securities,
payable quarterly. All dividends will be cumulative, whether or
not earned or declared, on a daily basis from the Original
Closing Date and will be payable quarterly in arrears on
February 15, May 15, August 15 and November 15 of each year
(each, a "Dividend Payment Date"), commencing on November 15,
1997 (to holders of record at the close of business on
February 1, May 1, August 1 and November 1 immediately preceding
the Dividend Payment Date). Through and including November 15,
2000, dividends on the Preferred Securities will be paid in cash.
Thereafter, dividends on the Preferred Securities may be paid at
Funding's option, in (i) cash, (ii) Common Stock, based upon 90%
of the Average Market Value of the Common Stock or (iii) any
combination of cash or Common Stock; provided that any dividend
payment must be made in cash to the extent ICG shall have
provided Funding with cash (whether through dividends on the ICG
Preferred Stock or otherwise) to make all or any portion of such
dividend payment with respect to the Preferred Securities. The
Indentures (as defined herein) effectively prohibit ICG from
providing cash to Funding (except as a result of Funding selling
Common Stock). If any dividend (or portion thereof) payable in
cash on any Dividend Payment Date is not declared or paid in full
in cash on such Dividend Payment Date, the amount of such
dividend that is payable and that is not paid in cash on such
date will cumulate at the dividend rate, compounding quarterly,
until declared and paid in full. See "Description of the
Preferred Securities - The Guarantee; Lack of Practical Benefit
to Holders from the Guarantee."
Dividends on the Preferred Securities will be paid to the
extent that Funding has funds legally available for the payment
of such dividends. Amounts available to Funding for dividends to
the holders of the Preferred Securities will be limited to shares
of Common Stock received by Funding from ICG as dividends on the
ICG Preferred Stock (and proceeds from any sales of such Common
Stock by Funding) and the interest on and principal of the U.S.
Treasury strips ("Treasury Strips") that are held in the Escrow
Account (as defined herein). See "Description of the Preferred
Securities -- Escrow." The ICG Preferred Stock provides that ICG
shall pay dividends to Funding, payable in Common Stock, in an
amount sufficient to allow Funding to pay dividends on the
Preferred Securities in full. Any such Common Stock received by
Funding may be paid as a dividend to the holders of the Preferred
Securities or sold in the open market and the cash proceeds of
sale would be used to pay cash dividends on the Preferred
Securities. The payment of dividends out of moneys held by
Funding, and payments on liquidation of Funding or the redemption
2
<PAGE>
of Preferred Securities, as set forth below, are guaranteed by
ICG (the "Guarantee") to the extent described herein and under
"Description of the Preferred Securities - The Guarantee; Lack of
Practical Benefit to Holders from the Guarantee." The Guarantee
covers payments of dividends and other payments on the Preferred
Securities only if and to the extent Funding has funds available
therefor, which will not be the case unless ICG has made a
dividend payment or other payments on the ICG Preferred Stock
held by Funding as its sole asset. ICG's obligations under
Guarantee, taken together with its obligations under the ICG
Preferred Stock and the Written Action (as defined herein) and
Certificate of Designation relating to the ICG Preferred Stock
(as defined herein), including its liabilities to pay costs,
expenses, debts and obligations of Funding (other than with
respect to the Funding Securities), constitute a full and
unconditional guarantee by ICG of amounts due on the Preferred
Securities. See "Description of the Preferred Securities - The
Guarantee; Lack of Practical Benefit to Holders from the
Guarantee."
The obligations of ICG under the Guarantee are subordinate
and junior in right of payment to all other liabilities of ICG.
If ICG does not make dividend payments on the ICG Preferred
Stock, Funding will not have sufficient funds to redeem or make
distributions on the Preferred Securities, in which event holders
of the Preferred Securities would not be able to rely on the
Guarantee for payment of such amounts until Funding has
sufficient funds available therefor. The obligations of ICG under
the ICG Preferred Stock are subordinate and junior in right of
payment to all present and future Senior Indebtedness (as defined
herein) of ICG.
Unless earlier redeemed or exchanged, the Preferred
Securities must be redeemed on November 15, 2009, out of funds
legally available therefor, by Funding at redemption prices set
forth herein. See "Description of the Preferred Securities -
Provisional Redemption by Funding."
The Preferred Securities will also be subject to optional
redemption by Funding on or after November 18, 2000 (the "Initial
Redemption Date"). At any time and from time to time on or after
the Initial Redemption Date and until the Mandatory Redemption
Date, Funding will have the right to redeem, in whole or in part,
the Preferred Securities at the redemption prices set forth
herein. See "Description of the Preferred Securities - Optional
Redemption by Funding."
The ICG Preferred Stock is exchangeable into Common Stock at
the option of Funding (upon request by a holder of the Preferred
Securities) at any time prior to the business day immediately
preceding the date of repayment of such ICG Preferred Stock at an
exchange rate based on the exchange rate of the Preferred
Securities. See "Description of the Preferred Securities -
Exchange Rights."
In the event of any voluntary or involuntary liquidation,
dissolution, winding-up or termination of Funding (each a
"Liquidation"), the then holders of the Preferred Securities will
be entitled to receive out of the assets of Funding (which will
include the ICG Preferred Stock, any interest on and principal of
the Treasury Strips that are held in the Escrow Account, any
Common Stock that Funding received from ICG as a dividend (or
otherwise) and has not distributed as a dividend on the Preferred
Securities or sold in the open market, and any other assets of
Funding), after satisfaction of liabilities to creditors, if any,
distributions in an amount equal to the aggregate of the stated
liquidation preference of $50 of Preferred Security plus accrued
and unpaid dividends thereon to the date of payment (the
"Liquidation Distribution"). See "Description of the Preferred
Securities - Liquidation Distribution Upon Dissolution."
If, upon any such Liquidation, the Liquidation Distribution
can be paid only in part because Funding has insufficient assets
available to pay in full the aggregate Liquidation Distribution,
then the amounts payable by Funding on the Preferred Securities
shall be paid on a pro rata basis. ICG will be obligated to pay
dividends, consisting of ICG Preferred Stock, to Funding so that
it will be able to make the Liquidation Distribution in full.
3
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE
HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE
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 ANY SUCH OFFER OR SOLICITATION TO SUCH PERSON. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL
UNDER ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
____________________
TABLE OF CONTENTS
THE REGISTRANTS . . . . . . . . . . . . . . . . . . . . . . . . 5
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . 5
INFORMATION INCORPORATED BY REFERENCE . . . . . . . . . . . . . 5
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . 7
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . 12
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . 25
FINANCIAL INFORMATION REGARDING FUNDING . . . . . . . . . . . 25
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS . . . . . . . . . . . 25
DESCRIPTION OF THE PREFERRED SECURITIES . . . . . . . . . . 26
DESCRIPTION OF ICG PREFERRED STOCK . . . . . . . . . . . . . 35
SELLING HOLDERS . . . . . . . . . . . . . . . . . . . . . . . 37
CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . 39
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . 46
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 47
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4
<PAGE>
THE REGISTRANTS
ICG and Funding have their principal executive offices at
9605 East Maroon Circle, P.O. Box 6742, Englewood, Colorado
80155-6742, and their telephone number is (303) 572-5960.
AVAILABLE INFORMATION
ICG is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and in accordance with the Exchange Act files periodic reports,
proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the
Commission can be inspected and copied (at prescribed rates) at
the Commission's Public Reference Section, Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Regional Offices of the Commission located at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
and 7 World Trade Center, 13th Floor, New York, New York 10048.
Such material may also be accessed electronically by means of the
Commission's home page on the Internet at http://www.sec.gov.
ICG and Funding have filed with the Commission a
registration statement on Form S-3 (the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the securities offered hereby. This
Prospectus, which is part of the Registration Statement, does not
contain all the information set forth in the Registration
Statement and the exhibits and schedules thereto, certain items
of which are omitted in accordance with the rules and regulations
of the Commission. For further information with respect to the
Company and the securities offered hereby, reference is hereby
made to the Registration Statement and such exhibits and
schedules. The Registration Statement, including the exhibits and
schedules thereto, may be inspected at, and copies thereof may be
obtained at prescribed rates from, the public reference
facilities of the Commission set forth above.
No separate financial statements of Funding are included
herein. ICG and Funding do not consider that such financial
statements would be material to holders of the Offered Securities
because Funding is a newly created special purpose entity, has no
operating history and no independent operations and is not
engaged in, and does not propose to engage in, any activity other
than as set forth below. See "Summary - Funding."
The terms "fiscal" and "fiscal year" refer to ICG's fiscal
year ending September 30; and all dollar amounts are in U.S.
dollars. Effective January 1, 1997, ICG changed its fiscal year
end to December 31 from September 30. Industry figures were
obtained from reports published by the Federal Communications
Commission (the "FCC"), the U.S. Department of Commerce,
Connecticut Research (an industry research organization) and
other industry sources, which the Company has not independently
verified.
INFORMATION INCORPORATED BY REFERENCE
The following documents have been filed by the Company with
the Commission (File No. 1-11965) and are hereby incorporated by
reference and made a part of this Prospectus:
1. Proxy Statement on Schedule 14A filed May 16, 1997.
2. Annual Report on Form 10-K for the fiscal year ended
September 30, 1996.
3. Transition Report on Form 10-K/A for the transition
period from October 1, 1996 to December 31, 1996.
4. Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1997.
5. Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1997.
6. Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1997.
7. Current Report on Form 8-K dated February 20, 1997.
5
<PAGE>
8. Current Report on Form 8-K dated February 24, 1997.
9. Current Report on Form 8-K dated September 18, 1997.
10. Current Report on Form 8-K dated September 29, 1997.
11. Current Report on Form 8-K dated October 21, 1997.
12. The description of the Company's Common Stock set forth
in the Company's Registration Statement on Form 8-A
filed pursuant to Section 12 of the Exchange Act and
any amendment or report filed for the purpose of
updating such description.
All documents subsequently filed by the Company 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 the offering of the shares made hereby, 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 East Maroon Circle, P.O. Box 6742,
Englewood, Colorado 80155-6742, Attention: Investor Relations
(telephone number (800) 408-4253).
6
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the
more detailed information and consolidated financial statements,
and notes thereto, 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 ICG Holdings, Inc. ("Holdings"). Certain statements
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 Offered Securities, including factors
that could cause actual results to differ materially from results
referred to in the 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 flows.
THE COMPANY
The Company is one of the largest independent 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 increasingly deregulated
telecommunications industry. As a CLEC, the Company operates
networks in four regional clusters covering major metropolitan
statistical areas in California, Colorado, Ohio and the
Southeast. 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 $59.1 million for fiscal 1994 to $252.5
million for the 12-month period ended September 30, 1997.
The Federal Telecommunications Act of 1996 (the
"Telecommunications Act") and procompetitive 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
competitive local dial tone. The Company is marketing and selling
local dial tone services in major metropolitan areas in the
following regions: California, which began service in late
January 1997, followed by Ohio in February 1997, Colorado in
March 1997 and the Southeast in May 1997. During the nine months
ended September 30, 1997, the Company sold approximately 92,000
local access lines, of which approximately 51,000 were in service
at that date. As a complement to its local exchange services, the
Company has begun marketing bundled service offerings which
include long distance, enhanced telecommunications services and
data services. The Company has 18 operating high capacity digital
voice switches and 15 data communications switches, and plans to
install additional switches as demand warrants. To facilitate the
expansion of its services, the Company has entered into
agreements with Lucent Technologies, Inc. ("Lucent"), Northern
Telecom Inc. ("Nortel") and Cascade Communications, Inc.
("Cascade") to purchase a full range of switching systems, fiber
optic cable, network electronics, software and services. The
Company has signed an Agreement and Plan of Merger (the "Merger
Agreement") with NETCOM On-Line Communication Services, Inc.
("NETCOM"), an Internet service provider, in order to broaden the
Company's product and service offerings. See " --Recent
Developments."
In developing its telecommunications service offerings, the
Company continues to invest significant resources to expand its
network. This expansion is being undertaken through a combination
of constructing owned facilities, entering into long-term
agreements with other telecommunications carriers, establishing
strategic alliances with utility companies and potentially
through acquisitions.
TELECOM SERVICES
The Company operates local exchange networks in the
following markets within its four regional clusters: California
(Sacramento, San Diego and portions of the Los Angeles and San
Francisco metropolitan areas); Colorado (Denver, Colorado Springs
and Boulder); Ohio (Akron, Cleveland, Columbus and Dayton) and
the Southeast (Birmingham, Charlotte, Louisville and Nashville).
The Company plans to build a network in Atlanta in conjunction
with The Southern Company ("Southern"). Through its strategic
alliance with Central and South West Corporation ("CSW"), service
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is expected to be offered in Austin, Corpus Christi, Dallas,
Houston and San Antonio, Texas. See "--Recent Developments." The
Company will continue to expand its network through construction,
leased facilities, strategic joint ventures and potentially
through acquisitions. The Company's operating networks have grown
from 780 fiber route miles at the end of fiscal 1994 to 3,021
fiber route miles as of September 30, 1997. Telecom Services
revenue has increased from $14.9 million for fiscal 1994 to
$158.0 million for the 12-month period ended September 30, 1997.
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
aggressively market its broad range of telecommunications
services to business end users and to leverage its extensive
network footprint and its expertise in the provision of switched
telecommunications services. The 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 end users and wholesale customers within its
service areas, with an emphasis on local exchange 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 bundled into
customized packages, management believes the Company will be
better able to capture business from telecommunications-intensive
commercial accounts. To this end, the Company is complementing
its core competitive local exchange services with local toll and
long distance services tailored to the needs of its customers and
expects to also provide tailored data services.
Market Services to End Users. Management believes an end
user strategy can accelerate its penetration of the local
services market and better leverage the Company's network
investment. In support of this strategy, the Company has
substantially increased its direct sales and marketing staff. The
Company's sales force has grown from 81 and 143 people at
September 30, 1996 and December 31, 1996, respectively, to
approximately 400 people (including sales management, technical
sales support and administrative support) at September 30, 1997.
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, Ohio
and the Southeast. The Company also intends to expand its network
footprint to include Texas (and may also expand to Arkansas,
Louisiana and Oklahoma) through a strategic alliance with CSW.
See "--Recent Developments."
Network Connectivity. Significant amounts of
telecommunications traffic are carried within the Company's
regional clusters. Management believes that integrating these
clusters through the connection of individual networks will
provide significant benefits, including cost advantages. These
cost advantages would result from the Company's ability to carry
regional traffic on-net, thereby improving operating margins by
reducing payments to other carriers for the use of their
facilities. Accordingly, the Company is in the process of
connecting networks within each of its California, Colorado and
Ohio clusters with inter-city fiber optic cable.
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, which is more timely and cost
effective than 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 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
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other large businesses and telecommunications companies. Revenue
from Network Services operations was $66.0 million for the 12-
month period ended September 30, 1997.
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 Satellite Services operations was $28.5 million for
the 12-month period ended September 30, 1997. The Company has
been considering the disposition of its Satellite Services
operations for some time to better focus its efforts on its core
Telecom Services unit, although it has not approved or adopted a
formal plan for such disposition.
RECENT DEVELOPMENTS
Network Expansion. The Company continues to expand its
network footprint through several strategic initiatives with
utility companies and other telecommunications carriers. In
January 1997, the Company announced an agreement with a
subsidiary of Southern that will permit the Company to construct
a 100-mile fiber optic network in the Atlanta metropolitan area.
In June 1997, the Company entered into an indefeasible right of
use ("IRU") agreement with Qwest Communications Corporation for
approximately 1,800 miles of fiber optic network and additional
broadband capacity in California, Colorado, Ohio and the
Southeast. The Company expects this new capacity will be used for
the transmission of local, long distance and data communications
services in and between the Company's markets.
CSW Strategic Alliance. In January 1997, the Company
announced a strategic alliance with CSW which is expected to
develop and market telecommunications services in Austin, Corpus
Christi, Dallas, Houston and San Antonio, Texas. The venture
entity, a limited partnership named CSW/ICG ChoiceCom, L.P.
("ChoiceCom"), is based in Austin, Texas. CSW holds 100% of the
interest in ChoiceCom and the Company has an option to purchase a
50% interest at any time prior to July 1, 2003. Subsequent to
July 1, 1999, if the Company has not exercised its purchase
option, CSW will have the right to sell either 51% or 100% of the
partnership interest in ChoiceCom to the Company. CSW and the
Company each have two representatives on the Management Committee
of the general partner of ChoiceCom. ChoiceCom may eventually
offer local exchange, data communications, long haul and other
services in other cities in Arkansas, Louisiana, Oklahoma and
Texas.
Cascade Agreement. In April 1997, the Company entered into
an agreement with Cascade for the purchase of high-speed frame
relay and asynchronous transfer mode ("ATM") switching products
that will enable the Company to provide high-speed data
connectivity to its customers. In addition, the Company has
obtained turnkey services from Cascade for product planning and
deployment of the product, including program management, network
design, onsite operations support and training.
Acquisition of Communications Buying Group, Inc. On
October 17, 1997, the Company purchased approximately 91% of the
outstanding capital stock of Communications Buying Group, Inc.
("CBG"), an Ohio based local exchange and Centrex reseller (the
"CBG Acquisition"). The remaining approximately 9% will be
purchased on or before March 24, 1998, pursuant to the terms of
the Stock Purchase Agreement governing the CBG Acquisition. The
Company paid total consideration of approximately $46.5 million,
plus the assumption of certain liabilities, and expects to pay
approximately $2.9 million for the purchase of the remaining
approximately 9% interest. Separately, on October 17, 1997, the
Company sold approximately $16.0 million of Common Stock to
certain shareholders of CBG.
CBG currently serves customers in Cleveland, Columbus and
Akron, Ohio as well as in surrounding areas. CBG currently has
approximately 27,000 Centrex lines in service and over 30,000
business lines in service, principally pursuant to various resale
and other agreements with Ameritech Corp. ("Ameritech"), the ILEC
in the markets it serves. CBG focuses its sales and marketing
efforts on small to medium-sized businesses and provides a one-
stop solution for the local and long distance needs of its
customers. For the calendar year 1996 and the nine months ended
September 30, 1997, CBG's revenue was approximately $21.4 million
and $24.1 million, respectively, and EBITDA losses were
approximately $(1.0) million and $(1.3) million, respectively.
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The Company believes that the business strategy of CBG is
closely aligned with that of the Company and that it can
successfully leverage the services offered by CBG to enhance the
Company's offering of similar services in its existing Ohio
markets, including all those currently served by CBG. The
acquisition of CBG has doubled the Company's current sales
presence in Ohio to approximately 60 people. In addition, the
Company believes that its ability to migrate, over time, a
portion of CBG's existing customer base to its fiber optic
facilities offers significant cost savings. The Company believes
that the transaction has significantly furthered its goal of
becoming the dominant alternative to the ILEC in Ohio.
Merger Agreement with NETCOM On-Line Communication Services,
Inc. On October 12, 1997, the Company announced that it had
signed the Merger Agreement with NETCOM. NETCOM is a provider of
Internet connectivity and Web-hosting services and a suite of
software applications. For calendar years 1995, 1996 and the nine
months ended September 30, 1997, NETCOM reported revenue of $52.4
million, $120.5 million and $120.1 million, respectively, and
EBITDA of $(5.8) million, $(5.1) million and $(2.4) million,
respectively. The Company intends to account for the business
combination under the pooling-of-interests method of accounting.
Subject to the approval of the shareholders of ICG and NETCOM and
satisfaction of certain other conditions, the Company anticipates
the merger between ICG and NETCOM (the "NETCOM Merger") to close
during the first quarter of 1998.
At the effective time of the NETCOM Merger (the "Effective
Time"), each outstanding share of NETCOM common stock, $.01 par
value, will be automatically converted into and represent the
right to receive a number of shares of Common Stock equal to the
Exchange Ratio. The Exchange Ratio will equal 0.8628 shares of
Common Stock if the closing price of a share of Common Stock (the
"Closing Price") is greater than or equal to $22.125; provided,
however, that if the Closing Price is greater than or equal to
$19.00 but less than $22.125, the Exchange Ratio will equal a
fraction (rounded to the nearest ten-thousandth) determined by
dividing $19.0625 by the Closing Price; and provided further,
that if the Closing Price is less than $19.00, the Exchange Ratio
will equal 1.0078. Cash will be paid in lieu of fractional
shares.
The Company believes that the NETCOM Merger will create a
full-service business communications company providing a single
source for a complete range of voice, data, Internet, Web-hosting
and other communications services over an extensive fiber optic
network. Currently, approximately one-half of NETCOM's customers
are located in the Company's existing network territory. It is
anticipated that the NETCOM Merger will enable the combined
entity to better utilize ICG's fiber and frame relay networks.
Financings. In March 1997, the Company raised net proceeds
of $192.4 million from the sale of 11 5/8% Senior Discount Notes
due 2007 (the "11 5/8% Notes") of Holdings and 14% Exchangeable
Preferred Stock Mandatorily Redeemable 2008 (the "14% Preferred
Stock") of Holdings. Cash interest on the 11 5/8% Notes accrues at
11 5/8% per annum beginning March 15, 2002 and is payable quarterly,
commencing September 15, 2002. The 14% 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 14%
Preferred Stock. The Company believes that its liquidity was
improved because the 11 5/8% Notes and the 14% Preferred Stock do
not require the payment of cash interest or cash dividends prior
to 2002. The 11 5/8% Notes and the 14% Preferred Stock have been
registered under the Securities Act.
In September and October 1997, Funding, the Company's new
wholly-owned subsidiary, completed a private placement of $132.25
million of Preferred Securities. The Preferred Securities are
mandatorily redeemable November 15, 2009 at the liquidation
preference of $50.00, plus accrued and unpaid dividends.
Dividends on the Preferred Securities will be cumulative at the
rate of 6 3/4% per annum and will be paid in cash through
November 15, 2000 and, thereafter, will be paid in cash and/or
shares of Common Stock. The Preferred Securities are
exchangeable, at the option of the holder, into Common Stock at
an exchange price of $24.025 per share. Funding may, at its
option, redeem the Preferred Securities any time on or after
November 18, 2000. Prior to that time, Funding may redeem the
Preferred Securities if the current market value of Common Stock
equals or exceeds the exchange price, for at least 20 days of any
consecutive 30-day trading period, by 170 percent prior to
November 16, 1998; by 160 percent from November 16, 1998 through
November 16, 1999; and by 150 percent from November 16, 1999
through November 16, 2000.
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FUNDING
Funding is a special purpose limited liability company
formed under the laws of the State of Delaware pursuant to the
filing of a Certificate of Formation with the Delaware Secretary
of State on September 17, 1997 and the entering into of an
Agreement of Limited Liability Company of ICG Funding, LLC, dated
as of September 17, 1997. Funding's purpose is defined in an
Amended and Restated Limited Liability Company Agreement of ICG
Funding, LLC (the "Operating Agreement"), dated as of
September 23, 1997. ICG has acquired all of the Common Securities
of Funding in an aggregate liquidation amount equal to .01% of
all interests in the capital, income, gain, loss, deduction and
credit of Funding at all times. Funding exists for the exclusive
purposes of (i) issuing the Funding Securities, representing
undivided beneficial interests in the assets of Funding, (ii)
investing the proceeds of the sale thereof in the ICG Preferred
Stock and certain U.S. government securities and (iii) engaging
in those other activities necessary or incidental thereto. The
term of Funding will continue until December 31, 2050, unless
dissolved before such date in accordance with the provisions of
the Operating Agreement.
The business and affairs of Funding are conducted by ICG, in
its capacity as manager (the "Manager"). The duties and
obligations of the Manager are governed by the Operating
Agreement. Funding holds title to the ICG Preferred Stock for the
benefit of the holders of the Funding Securities and has the
power to exercise all rights, powers and privileges under the ICG
Preferred Stock. ICG will pay all fees and expenses related to
the offering of the Preferred Securities. The rights of the
holders of the Preferred Securities, including economic rights,
rights to information and voting rights, are as set forth in the
Operating Agreement and the Delaware Limited Liability Company
Act, as amended (the "LLC Act").
RISK FACTORS
SEE "RISK FACTORS," IMMEDIATELY FOLLOWING THIS SUMMARY, FOR
A DISCUSSION OF CERTAIN RISKS THAT SHOULD BE CONSIDERED IN
CONJUNCTION WITH AN INVESTMENT IN THE OFFERED SECURITIES,
INCLUDING RISKS RELATED TO HISTORICAL AND ANTICIPATED OPERATING
LOSSES, NEGATIVE CASH FLOWS AND SUBSTANTIAL INDEBTEDNESS.
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RISK FACTORS
An investment in the Offered Securities offered hereby
involves a high degree of risk. The following risk factors,
together with the other information set forth in this Prospectus
should be considered when evaluating an investment in the
Company. This Prospectus includes certain forward-looking
statements. The discussion set forth below contains cautionary
statements identifying important factors including, but not
limited to, dependence on increased traffic on the Company's
facilities, the successful implementation of the Company's
strategy of offering an integrated telecommunications package of
local, long distance, data communications and value added
services, continued development of the Company's network
infrastructure and actions of competitors and regulatory
authorities, that could cause actual results to differ materially
from the forward-looking statements.
HISTORICAL AND ANTICIPATED FUTURE OPERATING LOSSES, NET LOSSES
AND NEGATIVE CASH FLOWS
The Company has incurred and expects to continue to incur
significant operating and net losses. For the 12 months ended
September 30, 1997, the Company had revenue of approximately
$252.5 million, an operating loss of approximately $161.2
million, negative EBITDA of approximately $112.6 million, cash
used by operating activities of approximately $80.0 million,
interest expense of approximately $106.8 million and a net loss
of approximately $274.2 million. In conjunction with the increase
in its service offerings, the Company will need to spend
significant amounts on sales, marketing, customer service,
engineering and corporate personnel prior to the generation of
appreciable revenue. The Company expects to continue to generate
significant negative cash flows 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. As the Company's
customer base grows, the Company anticipates that operating
margins and cash flows will improve as incremental revenue will
exceed incremental operating expenses. This is dependent upon the
successful implementation of the Company's local dial tone, local
toll, data communications and long distance service strategies,
continued development of the Company's network infrastructure,
increased traffic on the Company's facilities, any or all of
which may not occur, and upon actions of competitors and
regulatory authorities. The Company had an accumulated deficit
and stockholders' deficit of approximately $593.0 million and
$284.5 million, respectively, at September 30, 1997. There can be
no assurance that the Company will achieve or sustain
profitability or positive cash flows in the future or at any time
have sufficient resources to meet its obligations, including
funding the mandatory redemption price of the Offered Securities
by redeeming the ICG Preferred Stock for cash. The Company will
be adversely affected if it does not make substantial progress
toward achieving profitability.
RISKS RELATED TO LOCAL SERVICES AND SWITCHED SERVICES STRATEGIES
The Company is a recent entrant in the competitive local
telecommunications services industry. The local
telecommunications services market has only recently opened to
competition due to the passage of the Telecommunications Act,
state and federal regulatory rulings designed to implement the
Telecommunications Act, and negotiations with ILECs under the
terms of the Telecommunications Act and state rulings. The
Company is 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 to offer long distance services and has not
yet generated any revenue from data services, despite its
offering of these services since the first quarter of 1997. The
Company is making significant operating and capital investments
and will have to address numerous operating complexities
associated primarily with providing local services. The Company
will be required to develop new provisioning and technical
support systems and will need to develop new marketing
initiatives and hire and train a new sales force responsible for
selling its services. The Company will also need to supplement
the necessary billing and collection systems for local services
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and integrate these systems with those of its long distance and
other services, including data services. There can be no
assurance that the Company can design and install, and coordinate
with ILECs regarding, necessary provisioning, billing and
customer management systems in a timely manner to permit the
Company to provision local exchange, local toll, long distance or
data communications services as planned.
The Company expects to face significant competition from
ILECs, whose core business is providing local dial tone service.
The ILECs which 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 expects to face significant competitive product and
pricing pressures from the ILECs in these markets, as well as
from other CLECs.
The Company began generating switched services revenue in
the fourth quarter of fiscal 1994, and substantially all of the
Company's current switched revenue is from wholesale customers.
The Company is experiencing negative operating margins from the
provision of wholesale switched services because it relies on
ILEC networks to terminate and originate customers' switched
traffic. The Company expects overall operating margins from
switched services to improve as local dial tone, local toll, long
distance and data communications services become a relatively
larger portion of its business mix and the Company deemphasizes
its wholesale switched services.
CERTAIN FINANCIAL AND OPERATING RESTRICTIONS
The terms governing certain of Holdings' senior indebtedness
and preferred stock 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 and its subsidiaries to incur
additional indebtedness, create liens on its assets, pay
dividends, sell assets, engage in mergers or acquisitions or make
investments. Failure to comply with such covenants would 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 $940.9 million of indebtedness at
September 30, 1997 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, which would have a
substantial material adverse effect on the value of the Offered
Securities and the Company's ability to continue as a going
concern. There can be no assurance that the Company will be able
to comply with such covenants in the future or that such
compliance would not cause the Company to forego opportunities
that might otherwise be beneficial to the Company.
SUBSTANTIAL INDEBTEDNESS
As of September 30, 1997, the Company had, on a consolidated
basis, aggregate accreted indebtedness, including capitalized
lease obligations, of approximately $940.9 million. With respect
to indebtedness currently outstanding, the Company has interest
payment obligations of approximately $113.3 million in 2001,
$158.0 million in 2002 and $168.1 million in 2003. In addition,
with respect to the Preferred Securities and Holdings' preferred
stock currently outstanding, the Company has cash dividend
obligations of approximately $8.9 million in each of 1998, 1999
and 2000, $21.5 million in 2001, $57.0 million in 2002 and $70.9
million in 2003. Accordingly, the Company may have to refinance a
substantial amount of indebtedness and obtain substantial
additional funds prior to March 2001, when Holdings is required
to commence cash interest payments under its senior indebtedness.
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
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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 payment of cash dividends on, or the mandatory
redemption price of, the Preferred Securities, its ability to
continue as a going concern and the price of the Offered
Securities will be substantially materially adversely affected.
RISKS RELATED TO RAPID EXPANSION OF BUSINESS; INTEGRATION OF
ACQUIRED BUSINESSES
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, design and
build 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. See "--Risks
Related to Local Services and Switched Services Strategies."
The Company has experienced rapid growth. The Company
intends to continue to grow through further expansion of its
existing operations, through acquisitions including the CBG
Acquisition and the NETCOM Merger, and through the establishment
of new operations. The Company constantly evaluates acquisition
opportunities. The Company's ability to manage its anticipated
future growth will depend on its ability to evaluate new markets
and investment vehicles, monitor operations, control costs,
maintain effective quality controls, and significantly expand the
Company's internal management, technical and accounting systems.
The Company's rapid growth has placed, and its planned future
growth will continue to place, a significant strain on the
Company's financial, management and operational resources,
including the identification of acquisition targets and the
negotiation of acquisition agreements. In addition, acquisitions
and the establishment of new operations will entail considerable
expenses in advance of anticipated revenues and may cause
fluctuations in the Company's operating results.
In addition, the Company's acquired and new businesses will
need to be integrated with its existing operations. For acquired
businesses, including CBG and NETCOM, this may entail, among
other things, integration of switching, transmission, technical,
sales, marketing, billing, accounting, quality control,
management, personnel, payroll, regulatory compliance and other
systems and operating hardware and software, some or all of which
may be incompatible. The failure to effectively integrate
acquired businesses could have a material adverse effect on the
Company's business, growth, financial condition and results of
operations and the price of the Offered Securities.
COMPETITION
The Company operates in an increasingly competitive
environment dominated by ILECs such as the Regional Bell
Operating Companies ("RBOCs") and GTE Corporation ("GTE"). The
Company's current competitors include RBOCs, GTE, other
independent ILECs, other CLECs, network systems integration
service providers, microwave and satellite service providers,
teleport operators, wireless telecommunications providers and
private networks of large end users. Potential competitors
include cable television companies, utilities, ILECs outside
their current local service areas and the local access operations
of long distance carriers. Consolidation of telecommunications
companies, including 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
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competition, particularly in the local telephone market. Since
the 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., MCI Communications Corp., Time Warner Communications,
Inc., Texas Utilities Company and other large companies 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 and others by
removing or substantially reducing barriers to local exchange
competition. However, these new competitive opportunities are
accompanied by potential new competitive opportunities for the
ILECs, as the Telecommunications Act provides the conditions for
the removal of previous restrictions on the provision of long
distance services by the RBOCs. 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 for
access services which to date have been more than offset by
increasing network usage. The Company expects to continue to
experience declining 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. Any of the foregoing factors could have a
material adverse effect on the Company and on the price of the
Offered Securities.
In addition, the long distance and data transmission
businesses are extremely competitive and prices have declined
substantially in recent years and are expected to continue to
decline.
Finally, with respect to the NETCOM Merger, when completed,
the Company will experience substantial competition in providing
Internet services.
REGULATION
The Company operates in an industry that is undergoing
substantial regulatory change as a result of the passage of the
Telecommunications Act. The Company's Telecom Services activities
are regulated by the FCC, state regulatory agencies and
municipalities. The Company's Satellite Service activities are
regulated by the FCC and international regulatory bodies.
The FCC regulates the Company's provision of interstate
common carrier services, including long distance and data
services, and the Company's provision of international services.
The Company currently files and maintains tariffs with the FCC.
In addition, the FCC and state regulatory bodies are charged with
implementing the Telecommunications Act, which has a substantial
impact on the development of the Company's local exchange
business. The Telecommunications Act is also subject to actions
of the federal courts, while state regulatory actions are subject
to review and actions of both state and federal courts. 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 commissions prior to the
initiation of intrastate service and is also required to file
tariffs listing the rates, terms and conditions of intrastate
services provided. Several states also impose operating
restrictions on the CLEC industry, covering the ability to raise
and lower prices and restrictions on marketing and sales
activities. In addition, local authorities control the Company's
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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, nondiscriminatory access to ILEC
networks, unbundling of ILEC networks and access to ILEC
operational support systems and network portability. The
Telecommunications Act imposes a variety of new duties on the
ILECs in order to promote network 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 networks. 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 desirable to the Company. In
such instances, the Company has petitioned the proper state
regulatory agency to arbitrate disputed issues. In addition,
following state review either party in the negotiations can
appeal to the federal courts. 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 interconnection provisions of the
Telecommunications Act, which rules, in general, are favorable to
new competitive entrants. The FCC's rules were challenged in the
federal courts of appeals by GTE, the RBOCs, other large
independent ILECs and state regulatory commissions. On July 18,
1997, the U.S. Court of Appeals for the Eighth Circuit (the
"Eighth Circuit Court") issued a ruling that vacated certain of
the FCC's rules and upheld the FCC's rules on other issues.
In the July 18, 1997 decision, the Eighth Circuit Court
ruled that state commissions, not the FCC, have jurisdiction over
the pricing of interconnection, unbundled network elements and
resale services. The Eighth Circuit Court also ruled that the
FCC's interpretation of Section 252(i) of the Telecommunications
Act, the so-called "pick and choose" provision, was incorrect.
The Eighth Circuit Court held that the Telecommunications Act
allows CLECs to adopt whole interconnection agreements negotiated
by other competitors but not to "pick and choose" pieces of
existing agreements.
Because the Eighth Circuit Court held that CLECs cannot
"pick and choose" pieces of other interconnectors' negotiated
interconnection agreements, the Company may be subject to the
risk that other CLECs negotiate more favorable prices, terms or
conditions with the ILECS. The Company's only recourse under such
circumstances may be to adopt other interconnectors' agreements
with an ILEC in whole, though these agreements may include terms
and conditions the Company finds unacceptable. The Eighth Circuit
Court upheld certain of the FCC's rules regarding unbundled
network elements. Moreover, the Eighth Circuit Court's decision
does not alter most of the basic statutory requirements of the
Telecommunications Act, including the statutory requirements that
the ILECs conduct negotiations and enter into interconnection
agreements with competitive carriers.
The FCC (and other parties) have announced their intention
to seek Supreme Court review of the Eighth Circuit Court's
decision. Additionally, separate petitions for rehearing were
filed with the Eighth Circuit Court by a group of interexchange
carriers ("IXCs"), two groups of ILECs and a group of CLECs. On
October 14, 1997 the Eighth Circuit Court granted the ILEC
petitions for rehearing, and denied the CLEC and IXC petitions.
The Court's decision on rehearing vacated an additional FCC rule
that addressed the ability of new entrants to purchase ILEC
network elements at cost-based rates on a bundled rather than an
unbundled basis. Management believes the Company could benefit
from a reversal in whole, or in part, of the Eighth Circuit
Court's decision.
Although the Company believes that the Telecommunications
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
further 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 and on the
price of the Offered Securities.
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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. Under the FCC's procedures, the experimental
license has remained valid pending FCC action on the renewal and
modification. On January 30, 1997, the Company was granted the
STA for which the Company filed for a six-month extension on
July 25, 1997. The Company has received a verbal grant of the
extension. 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 by the Company.
The FCC and relevant state public utilities commissions have
the authority to regulate interstate and intrastate telephone
rates, respectively, ownership of transmission facilities and the
terms and conditions under which certain of the Company's
services are provided. Federal and state regulations and
regulatory trends have had, and in the future are likely to have,
both positive and negative effects on the Company and its ability
to compete. The recent trend in both federal and state regulation
of telecommunications service providers has been in the direction
of reduced regulation. In general, neither the FCC nor the
relevant state public utilities commission currently regulate the
Company's long distance rates or profit levels, although either
or both may do so in the future. There can be no assurance that
changes in current or future federal or state regulations or
future judicial changes would not have a material adverse effect
on the Company.
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 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 the expansion of existing networks, construction of new
networks and further development of the Company's products and
services will require capital expenditures of approximately $66.0
million during the last quarter of 1997 and approximately $300.0
million in 1998, and continued significant capital expenditures
thereafter. Further, the Company has significant personnel
expenses related to increasing its marketing efforts and offering
new long distance and planned data transmission services in
anticipation of revenue growth. The Company also plans to make
strategic acquisitions from time to time. The Company anticipates
that its substantial cash requirements will continue into the
foreseeable future. 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 fund the mandatory redemption
price of the Preferred Securities by redeeming the ICG Preferred
Stock for cash.
DEPENDENCE ON KEY CUSTOMERS
The Company's five largest customers accounted for
approximately 28%, 30% and 28% of the Company's consolidated
revenue in fiscal 1996, the three months ended December 31, 1996
and the nine months ended September 30, 1997, respectively. The
loss of, or decrease of business from, one or more of these
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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.
RISKS OF ENTRY INTO LONG DISTANCE BUSINESS
In order to offer its end user customers a complete package
of telecommunications services, the Company recently began
offering long distance services. 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 limited 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. The Company
does not expect long distance services to generate a material
portion of its revenues over the near term.
The Company relies 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 has entered into 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. Should the Company fail
to meet its minimum volume commitments, if any, pursuant to these
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 fails 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 and the
price of the Offered Securities. 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 began offering frame relay services in California,
Colorado and Ohio during the first quarter of 1997. These
services are targeted at the Company's existing customers and
other businesses with substantial data communications
requirements. To date, the Company has not generated any revenue
from these services, despite having offered these services since
the first quarter of 1997. Based on this market experience, the
Company is reevaluating its previous product and customer
strategies, and expects to generate low or negative gross margins
and substantial start-up expenses as it develops and rolls out
its data services. The Company does not expect data transmission
services to generate a material portion of its revenue over the
near term.
Although the Company has extensive experience in the
telecommunications business, the Company has no direct experience
providing data transmission services. Additionally, the data
transmission business is extremely competitive and prices have
declined substantially in recent years and are expected to
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continue to decline. 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 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 data services. 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 and the price of the Offered Securities.
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 and orders. As the Company commences
providing local, long distance and data transmission services,
the need for sophisticated billing and information systems is
increasing significantly. The Company's current local billing
platform plans rely on products and services provided by third
party vendors. Additionally, the Company is developing automated
systems and 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.
San Francisco Consulting Group ("SFCG") has been engaged by
the Company to recommend a long-term customer care and billing
solution, to provide support in development of short to long-term
information systems planning and to facilitate and improve the
provisioning process. The services provided by SFCG focus
primarily on further development of the Company's abilities to
ensure that back-office processes and functions operate at
maximum effectiveness. The failure of (i) the Company's 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, and
on its financial condition and results of operations.
While the Company believes that its software applications
are year 2000 compliant, there can be no assurance until the year
2000 occurs that all systems will then function adequately.
Further, if the software applications of local exchange carriers,
long distance carriers or others on whose services the Company
depends are not year 2000 compliant, it could have a material
adverse effect on the Company's financial condition and results
of operations and the price of the Offered Securities.
RISKS RELATED TO JOINT VENTURES AND STRATEGIC ALLIANCES
The Company has formed a strategic alliance with CSW for the
purpose of providing services, through ChoiceCom, in Austin,
Corpus Christi, Dallas, Houston and San Antonio, Texas. Under the
terms of this arrangement, CSW holds a 100% interest in ChoiceCom
and the Company has an option to purchase a 50% interest. Under
the terms of certain of its indebtedness, the Company is
currently prohibited from making any investment in ChoiceCom
(other than a $15.0 million debt investment that the Company has
committed to make, of which approximately $6.4 million was
advanced as of September 30, 1997) and from purchasing less than
a majority interest in any venture. Unless the terms of certain
of the Company's indebtedness are revised (which could entail
substantial costs), the Company may not be able to exploit
opportunities for joint ventures, which could have an adverse
effect on the Company and the price of the Offered Securities.
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The Company has also 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 and the
price of the Offered Securities.
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 agreements with other utilities.
However, other CLECs are seeking 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 and the price of the Offered Securities.
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 and Internet access
services industries 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 and the price of the Offered
Securities.
NO DIVIDENDS
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The Company does not expect to generate net income in the
near future and, therefore, does not anticipate paying cash
dividends on the Common Stock. The payment of any future
dividends on the Common Stock is effectively prohibited by the
indentures for certain of Holdings' senior indebtedness.
POSSIBLE STOCK PRICE VOLATILITY
The price of the Common Stock has been, and is expected to
continue to be, highly volatile. Factors such as legislation or
regulation, variations in the Company's revenue, earnings and
cash flow, the difference between the Company's actual results
and the results expected by investors and analysts and
announcements of new service offerings, marketing plans or price
reductions by the Company or its competitors, technological
innovations, mergers or strategic alliances, may cause the price
of Common Stock to fluctuate substantially. In addition, the
stock markets recently have experienced significant price and
volume fluctuations that have affected growth companies such as
telecommunications concerns. The fluctuations in the market
prices of the stocks of many companies have not been directly
related to the operating performance of those companies. Such
market fluctuations may materially adversely affect the price of
the Common Stock and the Preferred Securities.
NO OPERATIONS OF FUNDING
The issuer of the Preferred Securities, Funding, is a
special purpose subsidiary of ICG which is a newly formed
Delaware limited liability company with no operations or assets
other than the agreement to purchase ICG Preferred Stock,
Treasury Strips and other government securities purchased with
the proceeds of the Original Offering. Funding will have no other
funds to pay cash dividends. In order to pay subsequent
dividends, Funding will be dependent on ICG to provide it with
cash (which is currently prohibited by the terms of ICG's
indebtedness) or to issue it Common Stock (which is required by
the terms of the ICG Preferred Stock). Funding's assets will
consist almost entirely of its interest in the ICG Preferred
Stock and the Treasury Strips.
NO PRACTICAL BENEFIT TO HOLDERS FROM THE GUARANTEE
ICG will guarantee the payment in full to the holders of the
Preferred Securities of (i) accrued and unpaid dividends on the
Preferred Securities, if and only to the extent Funding has funds
sufficient to make such payment therefor, (ii) the redemption
price with respect to the Preferred Securities redeemed, if and
only to the extent Funding has funds sufficient to make such
payment and (iii) upon a voluntary termination or involuntary
dissolution, winding-up or termination of Funding (other than in
connection with a redemption of all of the Preferred Securities),
the lesser of (a) the aggregate of the liquidation preference and
all accrued and unpaid dividends on the Preferred Securities to
the date of payment, to the extent Funding has funds sufficient
to make such payment, and (b) the amount of assets of Funding
remaining available for distribution to holders of the Preferred
Securities upon liquidation of Funding. Such guarantee will also
be subject to the contractual restrictions contained in the
indentures (the "Indentures") for ICG's outstanding high yield
notes. The Indentures currently effectively prohibit any cash
payment on the Guarantee.
Because the Guarantee is limited to the amount of the funds
held by Funding and is currently limited by the provisions of the
Indentures, the Guarantee is of no practical benefit to holders
of the Preferred Securities.
RANKING OF ICG PREFERRED STOCK; PRIOR PAYMENT OBLIGATIONS OF ICG
The ICG Preferred Stock will be subordinated to all existing
and future indebtedness and other liabilities of ICG and its
subsidiaries, and will, with respect to dividend distributions
and distributions upon the liquidation, winding-up or dissolution
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of ICG, rank senior to all Common Stock and senior to or pari
passu with all other capital stock of ICG. There are no terms in
the ICG Preferred Stock, the Preferred Securities or the
Guarantee that limit ICG's ability to incur additional
indebtedness or issue pari passu or junior preferred stock. As of
September 30, 1997, the Company had approximately $940.9 million
of accreted indebtedness outstanding and approximately $281.9
million of preferred stock of Holdings outstanding. The
outstanding preferred stock of Holdings is effectively senior to
the ICG Preferred Stock. All of such indebtedness and preferred
stock must be repaid or refinanced prior to the mandatory
redemption of the Preferred Securities. Any securities issued to
refinance such indebtedness and preferred stock may prohibit the
redemption of the ICG Preferred Stock for cash, thus effectively
prohibiting the redemption of the Preferred Securities for cash.
See "- Substantial Indebtedness."
ABSENCE OF PUBLIC MARKET FOR THE PREFERRED SECURITIES; VOLATILITY
OF COMMON STOCK PRICE
The Preferred Securities are a new issue of securities for
which there is currently no active trading market. If the
Preferred 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, the market price of Common Stock and other factors,
including general economic conditions and the financial
condition, performance of, and prospects for the Company. Because
the Preferred Securities are being sold pursuant to an exemption
from registration under applicable securities laws and,
therefore, may not be publicly offered, sold or otherwise
transferred in any jurisdiction where such registration may be
required, no public market for such securities will develop. If
an active market for the Preferred Securities fails to develop or
be sustained, the trading price of such Preferred Securities
could be materially adversely affected. If such a market were to
develop, the Preferred Securities could trade at prices that may
be higher or lower than the initial offering price depending on
many factors, including prevailing interest rates, the price of
the Common Stock, the Company's operating results, and the market
for similar securities.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
Partnership Status
Funding's ability to pay dividends on Preferred Securities
depends, in part, on the classification of Funding as a
partnership for federal income tax purposes. Assuming the
accuracy of certain factual matters as to which Funding has made
representations, counsel is of the opinion that, under current
law, Funding will be classified as a partnership for federal
income tax purposes. No ruling from the Internal Revenue Service
(the "IRS") as to classification has been or is expected to be
requested. Instead, Funding intends to rely on such opinion of
counsel (which is not binding on the IRS).
If Funding were classified as an association taxable as a
corporation for federal income tax purposes, Funding would pay
tax on its income at corporate rates (currently a 35% federal
rate), distributions would generally be taxed again to the
holders of Preferred Securities as corporate distributions, and
no income, gains, losses or deductions would flow through to the
holders of Preferred Securities. Because a tax would be imposed
upon Funding as an entity, the cash available for distribution to
the holders of Preferred Securities would be substantially
reduced. Treatment of Funding as an association taxable as a
corporation or otherwise as a taxable entity would result in a
material reduction in the anticipated cash flow and after-tax
return of the holders of Preferred Securities and thus would
likely result in a substantial reduction in the value of
Preferred Securities.
Funding Allocations
It is possible that a holder may receive allocations of
income resulting from deemed distributions to Funding without
matching cash distributions. Furthermore, a holder who disposes
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of Preferred Securities between record dates for dividends will
be required pursuant to Funding's method of allocation to include
its pro rata share of Funding's income (and deductions) through
the end of the month that such disposition occurs in income (and
to add such amount to the adjusted tax basis in the holder's
Preferred Securities) without receiving the dividend for the
quarter in which such disposition occurs. Furthermore, certain
allocation methods of Funding may be challenged by the IRS, which
may result in greater tax liability to holders of Preferred
Securities during their period of ownership or upon disposition.
Disposition of Preferred Securities
A holder who sells Preferred Securities will recognize gain
or loss equal to the difference between the amount realized and
his adjusted tax basis in such Preferred Securities. Thus, prior
Funding distributions in excess of cumulative net taxable income
in respect of Preferred Securities which decreased a holder's tax
basis in such Preferred Securities will, in effect, become
taxable income if the Preferred Securities are sold at a price
greater than the holder's tax basis in such Preferred Securities,
even if the price is less than his original cost. To the extent
the selling price is less than the holder's adjusted tax basis, a
holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary
income for United States federal income tax purposes.
LIMITED VOTING RIGHTS
Generally, holders of the Preferred Securities do not have
any voting rights. However, the vote of a majority of the
Preferred Securities is required to approve any amendment to the
Operating Agreement or any proposed action by Funding that would
(i) have a material adverse effect on the powers, preferences or
special rights of the holders of the Preferred Securities or (ii)
cause the dissolution, winding-up or termination of Funding. The
approval of the holders of a majority of the ICG Preferred Stock
is required to approve any change to ICG's charter or any
proposed action by ICG that would (i) have a material adverse
effect on the powers, preferences or special rights of the holder
of the ICG Preferred Stock or (ii) cause the dissolution,
winding-up or termination of Funding. Funding is expected to be
the sole holder of the ICG Preferred Stock. Funding has agreed
not to grant such approval without the consent of the holders of
a majority of the Offered Securities then outstanding.
COMMON STOCK ELIGIBLE FOR FUTURE SALE
As of September 30, 1997, there were 32,413,010 shares of
Common Stock outstanding, all of which are transferable without
restriction or further registration under the Securities Act,
except for any shares of Common Stock held by affiliates of ICG,
which will be subject to the resale limitations of Rule 144
promulgated under the Securities Act ("Rule 144"). In addition,
ICG has reserved and registered under the Securities Act the
following 9,219,802 shares of Common Stock for future issuance:
(i) 1,981,914 shares of Common Stock issuable pursuant to
Holdings-Canada warrants; (ii) 3,373 shares of Common Stock
issuable upon conversion of the remaining interest on the
Company's 7% Convertible Subordinated Notes; (iii) 4,923,011
shares of Common Stock issuable pursuant to outstanding options,
with exercise prices ranging from $2.92 to $25.00 per share; (iv)
424,511 shares of Common Stock reserved for issuance under ICG's
401(k) Plan; (v) 250,000 shares of Common Stock reserved for
issuance upon the exercise of Series A Warrants, with an exercise
price of $7.94 per share; (vi) 250,000 Shares of Common Stock
reserved for issuance upon the exercise of the Series B Warrants,
with an exercise price of $8.73 per share; (vii) 949,911 shares
of Common Stock reserved for issuance pursuant to ICG's 1996
Employee Stock Purchase Plan, (viii) 405,382 shares of Common
Stock reserved for issuance under the 1996 Stock Option Plan; and
(ix) 31,700 shares of Common Stock which may be issued upon the
exchange of an equal number of shares of Class A Common Shares of
Holdings-Canada. On October 17, 1997, the Company sold 687,221
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shares of Common Stock to certain shareholders of CBG. In
addition, Funding may sell Common Stock to fund dividends on the
Preferred Securities. Further, upon the completion of the NETCOM
Merger, approximately 10.1 million shares of Common Stock,
subject to adjustment and subject to the exercise of options for
NETCOM common stock prior to the effective time of the NETCOM
Merger, and assuming a share exchange ratio of 0.8628, will be
issued to the holders of NETCOM common stock in exchange for
their shares. As of September 30, 1997, NETCOM had outstanding
employee and director stock options, which if outstanding upon
consummation of the NETCOM Merger, and assuming a share exchange
ratio of 0.8628, will convert to options to purchase 1,564,599
shares of Common Stock. Sales or the expectation of sales of
substantial numbers of Common Stock in the public market could
adversely affect the prevailing market prices for the Offered
Securities.
ANTI-TAKEOVER PROVISIONS
Certain provisions of ICG's Certificate of Incorporation and
the corporate charters and debt instruments of its subsidiaries
may have the effect of deterring transactions involving a change
in control of ICG, including transactions in which stockholders
might receive a premium for their shares. ICG's Certificate of
Incorporation provides that directors serve staggered three-year
terms and authorizes the issuance of up to 1,000,000 shares of
preferred stock with such designations, rights and preferences as
may be determined from time to time by ICG's Board of Directors.
In addition, the corporate charter(s) of Holdings and Holdings-
Canada authorize the issuance of up to 1,000,000 and 30,000,000
shares of preferred stock, respectively, with such designations,
rights and preferences as may be determined by the Board of
Directors of Holdings and Holdings-Canada, respectively. The
staggered board provision increases the likelihood that, in the
event of a takeover of ICG, incumbent directors would retain
their positions and, consequently, may have the effect of
discouraging, delaying or preventing a change in control or
management of ICG. The authorization of preferred shares empowers
the Board of Directors, without further shareholder approval, to
issue preferred shares with dividend, liquidation, conversion,
voting or other rights which could adversely affect the voting
power or other rights of the holders of the Common Stock. In the
event of issuance, the preferred shares could be utilized, under
certain circumstances, as a method of discouraging, delaying or
preventing a change of control of ICG. In addition, the Company
is, and will continue to be, subject to the anti-takeover
provisions of the Delaware General Corporation Law, which could
have the effect of delaying or preventing a change of control of
the Company. Furthermore, upon a change of control, the holders
of substantially all of the Company's outstanding indebtedness
are entitled, at their option, to be repaid in cash and the
holders of Holdings' preferred stock may, at their option,
require Holdings to redeem their shares for cash. Such provisions
may have the effect of delaying or preventing changes in control
or management of the Company. All of these factors could
materially adversely affect the price of the Offered Securities.
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<PAGE>
USE OF PROCEEDS
The Selling Holders will receive all of the proceeds from
any sale of the Offered Securities. Neither ICG nor Funding will
receive any proceeds from the sale of the Offered Securities.
FINANCIAL INFORMATION REGARDING FUNDING
Funding's financial statements have been consolidated with
the Company's unaudited consolidated financial statements for the
nine months ended September 30, 1997, which are incorporated by
reference herein. The Preferred Securities are included in the
Company's unaudited consolidated balance sheet as redeemable
preferred securities of subsidiaries. Funding has no liabilities
or operations and its sole assets are the net proceeds from the
offering of the Preferred Securities, which have been invested
entirely in Treasury Strips and U.S. government securities. The
terms of the Preferred Securities require Funding to use the
principal and earnings on the Treasury Strips for the payment of
the first 13 cash dividends on the Preferred Securities and to use
the principal and earnings on the U.S. government securities to
purchase the ICG Preferred Stock on the Funding Date (as defined
herein). See "Description of the Preferred Securities -
Provisional Redemption by Funding."
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth the Company's ratio of
earnings to combined fixed charges and preferred stock dividends
on a historical basis for each fiscal year in the five-year
period ended September 30, 1996, the three-month period ended
December 31, 1996 and the nine-month periods ended September 30,
1996 and 1997.
NINE
THREE MONTHS
MONTHS ENDED
ENDED SEPTEMBER
YEARS ENDED SEPTEMBER 30, DECEMBER 30,
----------------------------- 31, ----------
1992 1993 1994 1995 1996 1996 1996 1997
---- ---- ---- ---- ---- ---- ---- ----
Ratio of earnings
to combined fixed
charges and
preferred stock
dividends(1). - - - - - - - -
(1) For fiscal 1992, 1993, 1994, 1995 and 1996, the three months ended
December 31, 1996, and the nine months ended September 30, 1996 and
1997, earnings were insufficient to cover combined fixed charges and
preferred stock dividends by $3.9 million, $5.9 million, $23.8
million, $75.4 million, $166.3 million, $47.6 million, $138.4 million
and $230.5 million, 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.
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<PAGE>
DESCRIPTION OF THE PREFERRED SECURITIES
The following summary of certain material terms and
provisions of the Preferred Securities does not purport to be
complete and is subject to, and qualified in its entirety by
reference to, the Certificate of Formation, the Operating
Agreement and the Written Action of the Manager of ICG Funding,
LLC, dated as of September 24, 1997 (the "Written Action"), with
respect to the terms of the Preferred Securities, copies of which
are available upon request to ICG. Capitalized terms not
otherwise defined herein have the meanings assigned to them in
the Operating Agreement of Funding.
GENERAL
Funding has issued 2.645 million Preferred Securities. The
Preferred Securities do not have any subscription or preemptive
rights related thereto. American Stock Transfer and Trust
Company, 40 Wall Street, 46th floor, New York, New York 10005, is
transfer agent and registrar (the "Transfer Agent") for the
Preferred Securities.
RANKING
The Preferred Securities, with respect to dividend
distributions and distributions upon the liquidation, winding-up
or dissolution of Funding, rank senior to all classes of common
securities of Funding and to each other class of capital
securities or series of preferred securities of Funding. The
Operating Agreement of Funding does not permit Funding to incur
any indebtedness or liabilities or issue any securities except
for the issuance of the Preferred Securities and obligations to
the holders thereof.
ESCROW
Pursuant to an Escrow Agreement dated as of the Original
Closing Date (the "Escrow Agreement"), among Funding, ICG and
Norwest Bank Colorado, National Association, as escrow agent (the
"Escrow Agent"), on the Original Closing Date, Funding used a
portion of the proceeds from the Original Offering to purchase
Treasury Strips in an amount sufficient to fund the cash payment
of the first 13 dividends. The Treasury Strips were pledged to
the Escrow Agent for the benefit of the holders of the Preferred
Securities pursuant to the Escrow Agreement and will be held by
the Escrow Agent in the Escrow Account (as defined below).
Pursuant to the Escrow Agreement, immediately prior to a Dividend
Payment Date (through and including November 15, 2000) the Escrow
Agent will release from the Escrow Account amounts sufficient to
pay the dividend then due on the Preferred Securities.
Under the Escrow Agreement, once Funding makes the dividend
payments on the Preferred Securities through and including
November 15, 2000 (or, in the event of a Provisional Redemption,
upon the making of the Dividend Make-Whole Payment), all of the
remaining Treasury Strips, if any, will be released from the
Escrow Account. "Escrow Account" means the account established
with the Escrow Agent pursuant to the terms of the Escrow
Agreement for the deposit of the Treasury Strips (and earnings
thereon and proceeds thereof) purchased by Funding with a portion
of the net proceeds from the sale by Funding of the Preferred
Securities. The summary does not purport to be complete and is
subject in all respects to, and is qualified in its entirety by
reference to, the Escrow Agreement, a copy of which is available
from ICG upon request.
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<PAGE>
DIVIDENDS
Holders of Preferred Securities will be entitled to receive
dividends on the Preferred Securities at the rate of 6 3/4% per
annum of the liquidation preference of Preferred Securities,
payable quarterly. All dividends will be cumulative, whether or
not earned or declared, on a daily basis from the Original
Closing Date and will be payable quarterly in arrears on
February 15, May 15, August 15 and November 15 of each year,
commencing on November 15, 1997 (to holders of record at the
close of business on February 1, May 1, August 1 and November 1
immediately preceding the Dividend Payment Date). Through and
including November 15, 2000, dividends on the Preferred
Securities will be paid in cash. Thereafter, dividends on the
Preferred Securities may be paid at Funding's option, in (i)
cash, (ii) Common Stock, based upon 90% of the Average Market
Value of the Common Stock or (iii) any combination of cash or
Common Stock; provided that any dividend payment must be made in
cash to the extent ICG shall have provided Funding with cash
(whether through dividends on the ICG Preferred Stock or
otherwise) to make all or any portion of such dividend payment
with respect to the Preferred Securities. The Indentures
effectively prohibit ICG from providing cash to Funding (except
as a result of Funding selling Common Stock). If any dividend (or
portion thereof) payable in cash on any Dividend Payment Date is
not declared or paid in full in cash on such Dividend Payment
Date, the amount of such dividend that is payable and that is not
paid in cash on such date will cumulate at the dividend rate,
compounding quarterly, until declared and paid in full.
Dividends on the Preferred Securities will be paid to the
extent that Funding has funds legally available for the payment
of such dividends. Amounts available to Funding for dividends to
the holders of the Preferred Securities will be limited to shares
of Common Stock received by Funding from ICG as dividends on the
ICG Preferred Stock (and proceeds from any sales of such Common
Stock by Funding) and the interest on and principal of the
Treasury Strips that are held in the Escrow Account. The ICG
Preferred Stock provides that ICG shall pay dividends to Funding,
payable in Common Stock, in an amount sufficient to allow Funding
to pay dividends on the Preferred Securities in full. Any such
Common Stock received by Funding may be paid as a dividend to the
holders of the Preferred Securities or sold in the open market
and the cash proceeds of sale would be used to pay cash dividends
on the Preferred Securities.
EXCHANGE RIGHTS
General. The Preferred Securities are exchangeable at any
time, in whole or in part, prior to the Mandatory Redemption Date
(unless earlier redeemed), at the option of the holder thereof
and in the manner described below, into shares of Common Stock at
an initial exchange rate of 2.0811 shares of Common Stock for
each Preferred Security (equivalent to an exchange price of
$24.025 per share of Common Stock), subject to adjustment as
described under "--Exchange Rights--Exchange Rate Adjustments"
below, or an aggregate of 4,786,680 shares of Common Stock (based
on the exchange rate on the Original Closing Date).
A holder of a Preferred Security wishing to exercise its
exchange right shall (i) deliver an exchange notice to the
Exchange Agent, (ii) if required, furnish appropriate
endorsements and transfer documents and (iii) if required, pay
all transfer or similar taxes, and the Exchange Agent shall, on
behalf of such holder, exchange such Preferred Securities with
Funding for shares of Common Stock and deliver such shares of
Common Stock to such holder. Generally, such exchange with
Funding, in whole or in part, should not be a taxable event to
the holder. ICG will initially act as Exchange Agent. Holders may
obtain copies of the required form of the exchange notice from
the Exchange Agent.
Holders of Preferred Securities at the close of business on
a dividend record date will be entitled to receive the dividends
payable on such Preferred Securities on the corresponding
Dividend Payment Date notwithstanding the exchange of such
Preferred Securities following such dividend record date but
prior to such Dividend Payment Date. Except as provided in the
immediately preceding sentence, neither Funding nor ICG will
make, or be required to make, any payment, allowance or
adjustment for accumulated and unpaid dividends, whether or not
in arrears, on exchanged Preferred Securities. Each exchange will
be deemed to have been effected immediately prior to the close of
business on the day on which the related exchange notice was
received by the Exchange Agent.
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<PAGE>
No fractional shares of Common Stock will be issued as a
result of exchange, but in lieu thereof such fractional interest
will be paid by Funding in cash based on the last reported sale
price of Common Stock on the date Preferred Securities are
surrendered for exchange. From time to time, Funding will sell
shares of Common Stock in the open market and will use proceeds
from such sales to pay cash on the fractional interests described
in the prior sentence.
Exchange Rate Adjustments. The exchange rate is subject to
adjustment upon certain events occurring after the Original
Closing Date, including (i) the issuance of Common Stock as a
dividend or distribution on the Common Stock; (ii) certain
subdivisions and combinations of the Common Stock; (iii) the
issuance to holders of Common Stock of certain rights or warrants
entitling them to subscribe for or purchase Common Stock at less
than the Average Market Value; (iv) the distribution to all
holders of Common Stock of capital stock (other than Common
Stock) or evidences of indebtedness of ICG or of assets (other
than cash distributions covered by clause (v) below) or rights or
warrants to subscribe for or purchase any of its securities
(excluding rights or warrants to purchase Common Stock referred
to in clause (iii) above); (v) distributions consisting of cash,
excluding any quarterly cash dividend on the Common Stock to the
extent that the aggregate cash dividend per share of Common Stock
in any quarter does not exceed the greater of (x) the amount per
share of Common Stock of the next preceding quarterly dividend on
the Common Stock to the extent that such preceding quarterly
dividend did not require an adjustment of the exchange rate
pursuant to this clause (v) (as adjusted to reflect subdivisions
or combinations of the Common Stock), and (y) 3.75 percent of the
average of the last reported sales price of the Common Stock
during the ten trading days immediately prior to the date for
declaration of such dividend, and excluding any dividend or
distribution in connection with the liquidation, dissolution or
winding up of ICG; (vi) payment in respect of a tender or
exchange offer by ICG or any subsidiary of ICG for the Common
Stock to the extent that the cash and value of any other
consideration included in such payment per share of Common Stock
exceeds the Average Market Value per share of Common Stock on the
Trading Day next succeeding the last date on which tenders or
exchanges may be made pursuant to such tender or exchange offer;
and (vii) payment in respect of a tender offer or exchange offer
by a person other than ICG or any subsidiary of ICG in which, as
of the closing date of the offer, the Board of Directors is not
recommending rejection of the offer. If any adjustment is
required to be made as set forth in clause (v) above as a result
of a distribution that is a quarterly dividend, such adjustment
would be based upon the amount by which such distribution exceeds
the amount of the quarterly cash dividend permitted to be
excluded pursuant to such clause (v). If an adjustment is
required to be made as set forth in clause (v) above as a result
of a distribution that is not a quarterly dividend, such
adjustment would be based upon the full amount of the
distribution. The adjustment referred to in clause (vii) above
will only be made if the tender offer or exchange offer is for an
amount which causes that person's ownership of Common Stock to
exceed 25% of the total shares of Common Stock outstanding and,
if the cash and value of any other consideration included in such
payment per share of Common Stock, exceeds the Average Market
Value per share of Common Stock on the business day next
succeeding the last date on which tenders or exchanges may be
made pursuant to such tender or exchange offer. The adjustment
referred to in clause (vii) above will not be made, however, if,
as of the closing of the offer, the offering documents with
respect to such offer disclose a plan or an intention to cause
ICG to engage in a consolidation or merger of ICG or a sale of
all or substantially all of ICG's assets. Notwithstanding the
foregoing, no adjustment will be required as a result of (a) the
issuance of shares of Common Stock as a result of any of the
following (i) the grant or exercise of employee or director stock
options, (ii) the exercise of outstanding warrants or conversion
or exchange of existing notes and securities (including exchange
of Class A Common Shares of Holdings--Canada), (iii) a
contribution to ICG's 401(k) plan or ICG's 401(k) Wrap Around
Deferred Compensation Plan and (iv) in satisfaction of ICG's
obligations under its Employee Stock Purchase Plan or (b) the
issuance of Common Stock as a dividend on or upon exchange of the
Preferred Securities. Common Stock issued in connection with
acquisitions of businesses or assets from persons that are not
Affiliates of ICG will be deemed to have been issued for a price
at least equal to Average Market Value.
The Certificate of Designation, Rights and Preferences with
respect to the ICG Preferred Stock (the "Certificate of
Designation") provides that if ICG implements a stockholders'
rights plan, such rights plan must provide that upon exchange of
the Preferred Securities into Common Stock the holders will
receive, in addition to the Common Stock issuable upon such
exchange, such rights whether or not such rights have separated
from the Common Stock at the time of such exchange.
No adjustment in the exchange rate will be required unless
such adjustment would require a change of at least one percent in
the exchange rate then in effect; provided that any adjustment
that would otherwise be required to be made shall be carried
forward and taken into account in any subsequent adjustment. ICG
reserves the right to make such increase in the exchange rate in
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<PAGE>
addition to those required in the foregoing provisions as ICG in
its discretion shall determine to be advisable in order that
certain stock-related distributions hereafter made by ICG to its
stockholders shall not be taxable. Except as stated above, the
exchange rate will not be adjusted for the issuance of Common
Stock or any securities convertible into or exchangeable for
Common Stock or carrying the right to purchase any of the
foregoing.
In the case of (i) any reclassification of the Common Stock
(other than changes in par value or resulting from a subdivision
or combination) or (ii) a consolidation or merger involving ICG
or a sale or conveyance to another corporation of the property
and assets of ICG as an entirety or substantially as an entirety,
in each case as a result of which holders of Common Stock shall
be entitled to receive stock, securities, other property or
assets (including cash) with respect to or in exchange for such
Common Stock, the holders of the Preferred Securities then
outstanding will be entitled thereafter to exchange such
Preferred Securities into the kind and amount of shares of stock,
other securities or other property or assets which they would
have owned or been entitled to receive upon such
reclassification, consolidation, merger, sale or conveyance had
such Preferred Securities been exchanged immediately prior to
such reclassification, consolidation, merger, sale or conveyance,
assuming that a holder of Preferred Securities would not have
exercised any rights of election as to the stock, other
securities or other property or assets receivable in connection
therewith.
In the event of a taxable distribution to holders of Common
Stock or in certain other circumstances requiring an adjustment
to the exchange rate, the holders of Preferred Securities may, in
certain circumstances, be deemed to have received a distribution
subject to United States income tax as a dividend.
ICG from time to time may, to the extent permitted by law,
increase the exchange rate (thus increasing the number of shares
of Common Stock that would be issued in exchange for each
Preferred Security) by any amount for any period of at least 20
days, in which case ICG shall give at least 15 days' notice of
such if ICG's Board of Directors has made a determination that
such increase would be in the best interests of ICG, which
determination shall be conclusive. ICG may, at its option, make
such increases in the exchange rate, in addition to those set
forth above, as the Board of Directors deems advisable to avoid
or diminish any income tax to holders of Common Stock resulting
from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes.
ICG does not intend to reduce the exchange price to an amount
below the fair market value of the Common Stock.
MANDATORY REDEMPTION BY FUNDING
Unless earlier redeemed or exchanged, the Preferred
Securities must be redeemed, out of funds legally available
therefor, by Funding at a redemption price of 100% of the
liquidation preference of the Preferred Securities plus accrued
and unpaid dividends, if any, on the Mandatory Redemption Date.
PROVISIONAL REDEMPTION BY FUNDING
The Preferred Securities are subject to redemption by
Funding, in whole or in part, at any time after a date no more
than six months after the Original Closing Date (the "Funding
Date"), and on or prior to November 15, 2000, at a redemption
price of 103% of the liquidation preference of the Preferred
Securities to be redeemed plus accrued and unpaid dividends, if
any, to the date of redemption, in the event that the Current
Market Value of the Common Stock equals or exceeds the following
Trigger Percentages of the exchange price then in effect for at
least 20 trading days in any consecutive 30-day trading period
ending on the trading day prior to the date of mailing of the
notice of Provisional Redemption, if called for redemption in the
12-month period ending on November 15 of the indicated year:
YEAR TRIGGER PERCENTAGES
---- -------------------
1998 170%
1999 160
2000 150
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<PAGE>
Upon any Provisional Redemption, Funding will make a
Dividend Make-Whole Payment with respect to the Preferred
Securities called for redemption in an amount equal to the pro
rata portion of the liquidation proceeds of any remaining
Treasury Strips held by Funding. Funding will be obligated to
make the Dividend Make-Whole Payment on all Preferred Securities
called for Provisional Redemption, regardless of whether such
Preferred Security is exchanged prior to the Provisional
Redemption Date. The Dividend Make-Whole Payment must be paid in
cash.
OPTIONAL REDEMPTION BY FUNDING
The Preferred Securities are also subject to optional
redemption by Funding on or after November 18, 2000 (the "Initial
Redemption Date"). At any time and from time to time on or after
the Initial Redemption Date and until the Mandatory Redemption
Date, Funding will have the right to redeem, in whole or in part,
the Preferred Securities at a redemption price equal to the
percentage of the liquidation preference set forth below,
together with accrued and unpaid dividends, if any, to the
Optional Redemption Date, if redeemed in the 12-month period
beginning on November 15 of the indicated year:
YEAR REDEMPTION PRICE
---- ----------------
2000 102%
2001 101
2002 and thereafter 100
METHOD OF PAYMENT OF REDEMPTION PRICE
The redemption price pursuant to a Provisional Redemption,
an Optional Redemption or the Mandatory Redemption may be paid,
in each case at Funding's option, in (i) cash, (ii) Common Stock,
based upon 90% of the Average Market Value of the Common Stock in
the case of the Provisional Redemption or the Optional Redemption
and 100% of the Average Market Value of the Common Stock in the
case of the Mandatory Redemption, or (iii) any combination of
cash or Common Stock; provided that Funding, in its notice of
such redemption, must state whether the redemption price will be
paid in cash, Common Stock or both, and provided that any payment
must be made in cash to the extent ICG shall have provided
Funding with cash (whether through dividends on the ICG Preferred
Stock or otherwise) to make all or any portion of such payment
with respect to such redemption.
FUNDAMENTAL CHANGE EXCHANGE RATE ADJUSTMENT
If ICG or Funding makes an announcement of the occurrence or
an imminent occurrence of a Fundamental Change (as defined below)
at any time prior to the Mandatory Redemption Date, there will be
an adjustment to the exchange rate of the Preferred Securities
(the "Fundamental Change Exchange Rate") such that such exchange
rate will thereafter equal the liquidation preference of the
Preferred Securities, divided by the Fundamental Change Average
Market Price (as defined below), unless the Fundamental Change
Exchange Rate is lower than the then current exchange rate of the
Preferred Securities as calculated in the manner described in
"--Exchange Rights" (in which case there will be no such
adjustment to the exchange rate).
The term "Fundamental Change" means the occurrence of any
transaction or event in connection with which all or
substantially all of the outstanding Common Stock shall be
exchanged for, converted into, acquired for or constitute the
right to receive stock, securities, other property or assets
(including cash) of another entity or person (whether by means of
an exchange offer, liquidation, tender offer, consolidation,
merger, combination, reclassification, recapitalization or
otherwise). "Fundamental Change Average Market Price" of the
Common Stock means the arithmetic average of the Current Market
Value for the ten trading days ending on the fifth business day
prior to the date of the closing of the Fundamental Change.
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<PAGE>
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation,
dissolution, winding-up or termination of Funding (each a
"Liquidation"), the then holders of the Preferred Securities will
be entitled to receive out of the assets of Funding (which will
include the ICG Preferred Stock, any interest on and principal of
the Treasury Strips that are held in the Escrow Account, any
Common Stock that Funding received from ICG as a dividend (or
otherwise) and has not distributed as a dividend on the Preferred
Securities or sold in the open market, and any other assets of
Funding), after satisfaction of liabilities to creditors, if any,
distributions in an amount equal to the aggregate of the stated
liquidation preference of $50 of Preferred Security plus accrued
and unpaid dividends thereon to the date of payment (the
"Liquidation Distribution").
If, upon any such Liquidation, the Liquidation Distribution
can be paid only in part because Funding has insufficient assets
available to pay in full the aggregate Liquidation Distribution,
then the amounts payable by Funding on the Preferred Securities
shall be paid on a pro rata basis. ICG will be obligated to pay
dividends, consisting of ICG Preferred Stock, to Funding so that
it will be able to make the Liquidation Distribution in full.
VOTING RIGHTS
The holders of Preferred Securities have no voting rights,
except as otherwise required by law and except as set forth
below. The Operating Agreement provides that Funding may not
amend the Operating Agreement so as to affect adversely the
specific rights, preferences, privileges or voting rights of
holders of Preferred Securities, cause the dissolution, winding-
up or termination of Funding, issue any additional securities or
increase the authorized number of Preferred Securities, without
the affirmative vote or consent of the holders of at least a
majority of the outstanding Preferred Securities, voting or
consenting, as the case may be, separately as one class.
Furthermore, the Certificate of Designation provides that ICG may
not, without the approval of the holders of a majority of the ICG
Preferred Stock, amend the Certificate of Incorporation of ICG so
as to have a material adverse effect on the specific rights,
preferences, privileges or voting rights of the holders of the
ICG Preferred Stock with respect to the ICG Preferred Stock, or
cause the dissolution, winding-up or termination of Funding.
Funding will initially be the sole holder of the ICG Preferred
Stock. Funding has agreed not to grant such approval without the
consent of the holders of a majority of the Preferred Securities
then outstanding.
THE GUARANTEE; LACK OF PRACTICAL BENEFIT TO HOLDERS FROM THE
GUARANTEE
Set forth below is a summary of information concerning the
guarantee of the Preferred Securities (the "Guarantee") by ICG
for the benefit of the holders of Preferred Securities. The
summary does not purport to be complete and is subject in all
respects to the respective provisions of, and is qualified in its
entirety by reference to, the Guarantee Agreement between ICG and
Funding, a copy of which is available from ICG upon request.
General. Pursuant to and to the extent set forth in the
Guarantee, ICG has agreed to pay in full to the holders of the
Preferred Securities (except to the extent paid by Funding), as
and when due, regardless of any defense, right of set off or
counterclaim which Funding may have or assert, the following
payments (the "Guarantee Payments"), without duplication: (i) any
accrued and unpaid distributions that are required to be paid on
the Preferred Securities, to the extent Funding has funds
available therefor, (ii) the redemption price, with respect to
any Preferred Securities called for redemption by Funding, to the
extent Funding has funds available therefor and (iii) upon a
voluntary or involuntary dissolution, winding-up or termination
of Funding, the lesser of (a) the aggregate of the liquidation
preference and all accrued and unpaid dividends on the Preferred
Securities to the date of payment to the extent Funding has funds
available therefor and (b) the amount of assets of Funding
remaining available for distribution to holders of Preferred
Securities upon the liquidation of Funding. The Guarantee is also
subject to the contractual restrictions contained in the
Indentures. The Indentures effectively prohibit any cash payment
on the Guarantee.
Because the Guarantee is limited by the amount of the funds
held by Funding and is limited by the provision of the
Indentures, the Guarantee is of no practical benefit to holders
of the Preferred Securities.
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<PAGE>
Amendments and Assignment. Except with respect to any
changes that do not materially adversely affect the rights of
holders of Preferred Securities (in which case no vote will be
required), the Guarantee may be amended only with the prior
approval of the holders of at least a majority in liquidation
preference of all the outstanding Preferred Securities. All
guarantees and agreements contained in the Guarantee shall bind
the successors, assigns, receivers, trustees and representatives
of ICG and shall inure to the benefit of the holders of the
Preferred Securities then outstanding. Except in connection with
any permitted merger or consolidation of ICG with or into another
entity or any permitted sale, transfer or lease of ICG's assets
to another entity, ICG may not assign its rights or delegate its
obligations under the Guarantee without the prior approval of the
holders of at least a majority in liquidation preference of the
Preferred Securities then outstanding.
Termination of the Guarantee. The Guarantee will terminate
as to each holder of the Preferred Securities upon (i) full
payment of the redemption price of all Preferred Securities, (ii)
distribution to the holders of the Preferred Securities of all of
the assets of Funding, including the ICG Preferred Stock, any
interest on and principal of the Treasury Strips that are held in
the Escrow Account and any Common Stock that Funding received
from ICG as dividend (or otherwise) and has not distributed as
dividend on the Preferred Securities or sold in the open market
or (iii) the exchange of all of such holder's Preferred
Securities into Common Stock.
Status of the Guarantee; Subordination. The Guarantee
constitutes an unsecured obligation of ICG and ranks subordinate
and junior to all other liabilities of ICG and senior to the
Common Stock.
Because the Guarantee is limited by the amount of the funds
in Funding, if ICG were to default on its obligation to pay
amounts payable on the ICG Preferred Stock, Funding would lack
available funds for the payment of dividends or amounts payable
on redemption of the Preferred Securities or otherwise, and, in
such event, holders of the Preferred Securities would not be able
to rely upon the Guarantee for payment of such amounts. Instead,
holders of the Preferred Securities would rely upon the
enforcement of Funding's rights as registered holder of the ICG
Preferred Stock against ICG pursuant to the terms of the ICG
Preferred Stock.
PREFERRED SECURITIES BOOK ENTRY; DELIVERY AND FORM
The certificates representing the Preferred Securities were
issued in fully registered form. Preferred Securities sold in
reliance on Rule 144A are represented by a single, permanent
global Preferred Securities certificate, in definitive, fully
registered form (the "Restricted Global Preferred Securities
Certificate") and are deposited with a custodian for DTC and
registered in the name of a nominee of DTC. The Restricted Global
Preferred Securities Certificate is subject to certain
restrictions on transfer set forth therein and bears the legend
regarding such restrictions set forth under "Transfer
Restrictions." Owners of beneficial interests in Restricted
Global Preferred Securities Certificate will generally not be
entitled to receive physical delivery of a physical certificate
for their Preferred Securities ("Certificated Preferred
Securities"). The Preferred Securities are not issuable in bearer
form.
Upon the issuance of the Restricted Global Preferred
Securities Certificate, DTC or its custodian credited, on its
internal system, the respective liquidation preference of the
individual beneficial interests represented by Restricted Global
Preferred Securities Certificate, to the accounts of persons who
have accounts with such depositary. Such accounts initially are
designated by or on behalf of Morgan Stanley & Co. Incorporated
("Morgan Stanley") and Deutsche Morgan Grenfell Inc. ("DMG," and
together with Morgan Stanley, the "Initial Purchasers").
Ownership of beneficial interests in the Restricted Global
Preferred Securities Certificate are limited to persons who have
accounts with DTC ("participants") or persons who hold interests
through participants. Ownership of beneficial interests in the
Restricted Global Preferred Securities Certificate is shown on,
and the transferor of that ownership is effected only through,
records maintained by DTC or its nominee (with respect to
interests of participants) and the records of participants (with
respect to interests of persons other than participants).
"Qualified institutional buyers," as defined in Rule 144A under
the Securities Act, may hold their interests in the Restricted
Global Preferred Securities Certificate directly through DTC if
they are participants in such system, or indirectly through
organizations that are participants in such system.
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So long as DTC, or its nominee, is the registered owner or
holder of the Restricted Global Preferred Securities Certificate,
DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Preferred Securities represented by
the Restricted Global Preferred Securities Certificate for all
purposes under the Operating Agreement of Funding and the
Preferred Securities. No beneficial owner of an interest in a
Global Preferred Securities Certificate will be able to transfer
that interest except in accordance with DTC's applicable
procedures, in addition to those provided for under the Operating
Agreement of Funding.
Payments made with respect to the Restricted Global
Preferred Securities Certificate will be made to DTC or its
nominee, as the case may be, as the registered owner thereof.
Neither Funding, ICG nor the Initial Purchasers will have any
responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership
interests in the Restricted Global Preferred Securities
Certificate or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
Funding and ICG expect that DTC or its nominee, upon receipt
of any payments made with respect to the Restricted Global
Preferred Securities Certificate, will credit participants'
accounts with payments in amounts proportionate to their
respective beneficial interests in the amount of the Restricted
Global Preferred Securities Certificate as shown on the records
of DTC or its nominee. Funding and ICG also expect that payments
by 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.
Funding and ICG understand that DTC will take any action
permitted to be taken by a holder of Preferred Securities only at
the direction of one or more participants to whose account the
DTC interests in the Restricted Global Preferred Securities
Certificate are credited and only in respect of such portion of
the aggregate liquidation preference of Preferred Securities as
to which such participant or participants has or have given such
direction.
Funding and ICG understand: 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 Restricted
Global Preferred Securities 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. Neither ICG, Funding nor the Initial Purchasers will have
any 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.
MERGER, CONSOLIDATION OR SALE OF ASSETS OF FUNDING
Funding may not consolidate with, merge with or into, or be
replaced by, or convey, transfer or lease its properties and
assets as an entirety or substantially as an entirety to, any
entity, except as described below. Funding may, in order to avoid
federal income tax or Investment Company Act of 1940 (the "1940
Act") considerations adverse to ICG or Funding or the holders of
the Preferred Securities, without the consent of the holders of
the Preferred Securities, consolidate with, merge with or into,
or be replaced by a limited partnership or trust organized as
such under the laws of any state of the United States of America,
provided that (i) such successor entity either (x) expressly
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assumes all of the obligations of Funding under the Preferred
Securities or (y) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred
Securities (the "Successor Securities") so long as the Successor
Securities rank, with respect to participation in the profits or
assets of the successor entity, at least as high as the Preferred
Securities rank with respect to payment of dividends and
distribution of assets upon the liquidation, dissolution or
winding-up of Funding, (ii) ICG expressly acknowledges such
successor entity as the holder of the ICG Preferred Stock and its
obligations under the Guarantee with respect to the Successor
Securities, (iii) such merger, consolidation or replacement does
not cause the Preferred Securities (or any Successor Securities)
to be delisted by any national securities exchange or other
organization on which the Preferred Securities are then listed,
(iv) such merger, consolidation or replacement does not cause the
Preferred Securities (or any Successor Securities) to be
downgraded by any nationally recognized statistical rating
organization, (v) such merger, consolidation or replacement does
not adversely affect the powers, preferences and other special
rights of the holders of the Preferred Securities (or any
Successor Securities) in any material respect (other than with
respect to any dilution of the holders' interest in the new
entity), and (vi) prior to such merger, consolidation or
replacement, ICG has received an opinion of nationally recognized
independent counsel to Funding experienced in such matters to the
effect that (x) such successor entity will be treated as a
partnership or as a trust, as appropriate, for federal income tax
purposes, (y) following such merger, consolidation or
replacement, ICG and such successor entity will be in compliance
with the 1940 Act without registering thereunder as an investment
company and (z) such merger, consolidation or replacement will
not adversely affect the limited liability of the holders of the
Preferred Securities or Successor Securities.
MISCELLANEOUS
The manager of Funding is authorized and directed to conduct
its affairs and to operate in such a way that Funding will not be
deemed to be an "investment company" required to be registered
under the 1940 Act or taxed as a corporation for federal income
tax purposes. In this connection, the manager of Funding is
authorized to take any action not inconsistent with applicable
law or the Operating Agreement that does not adversely affect the
interests of the holders of the Preferred Securities and that the
manager of Funding determines in its discretion to be necessary
or desirable for such purposes.
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DESCRIPTION OF ICG PREFERRED STOCK
General. ICG is authorized to issue 1,000,000 shares of
preferred stock, $.01 par value per share. On the date of this
Prospectus, no shares of preferred stock are outstanding. The
board of directors of ICG has authorized the issuance of up to
50,000 shares of a series of exchangeable preferred stock (the
"Exchangeable Preferred Stock") and ICG has filed a Certificate
of Designation with the Secretary of State of Delaware as
required by Delaware law reflecting the authorization of such
series of preferred stock. The Exchangeable Preferred Stock will
be issued by ICG on or before February 15, 1998 and, when so
issued and paid for by Funding, will be fully paid and
nonassessable, and the holders thereof will not have any
subscription or preemptive rights related thereto. The
Exchangeable Preferred Stock will be issued without coupons, in
denominations of $10,000 liquidation preference and any integral
multiple thereof. Each share of Exchangeable Preferred Stock will
have a liquidation preference at maturity of $10,000.
Ranking. The Exchangeable Preferred Stock will rank, with
respect to dividend distributions and distributions upon the
liquidation, winding-up and dissolution of ICG, (i) senior to all
classes of common stock of ICG and to each other class of capital
stock or series of preferred stock established after
September 24, 1997 by ICG's board of directors, the terms of
which do not expressly provide that it ranks senior to or on a
parity with the Exchangeable Preferred Stock as to dividend
distributions and distributions upon the liquidation, winding-up
and dissolution of ICG (collectively referred to with the common
stock of ICG as "ICG Junior Securities"); (ii) on a parity with
any class of capital stock or series of preferred stock issued by
ICG established after September 24, 1997 by ICG's board of
directors, the terms of which expressly provide that such class
or series will rank on a parity with the Exchangeable Preferred
Stock as to dividend distributions and distributions upon the
liquidation, winding-up and dissolution of ICG (collectively
referred to as "ICG Parity Securities") and (iii) junior to each
class of capital stock or series of preferred stock issued by ICG
established after September 24, 1997 by ICG's board of directors,
the terms of which expressly provide that such class or series
will rank senior to the Exchangeable Preferred Stock as to
dividend distributions and distributions upon liquidation,
winding-up and dissolution of ICG (collectively referred to as
"ICG Senior Securities"). The Exchangeable Preferred Stock will
be subject to the issuance of series of ICG Junior Securities,
ICG Parity Securities and ICG Senior Securities; provided that
ICG may not issue any new class of ICG Senior Securities without
the approval of the holders of at least a majority of the shares
of Exchangeable Preferred Stock then outstanding, voting or
consenting, as the case may be, separately as one class.
Dividends. Dividends on the Exchangeable Preferred Stock
will be payable quarterly. Until November 15, 2000, the dividends
will be payable in additional shares of Exchangeable Preferred
Stock. From November 15, 2000, the dividends will be payable in
shares of Common Stock (or in cash or any combination of cash and
Common Stock) such that the number of shares of Common Stock
(plus any cash) paid as dividends will (i) enable Funding to
transfer such shares to the holders of the Preferred Securities
in payment of dividends on the Preferred Securities or (ii) be
sufficient, when sold in the open market by Funding, for Funding
to make its dividend payments on the Preferred Securities on the
relevant Dividend Payment Date, which is February 15, May 15,
August 15 and November 15 of each year (each, a "Dividend Payment
Date"). However, the indentures for ICG's outstanding high yield
notes (the "Indentures") effectively prohibit the payment of cash
dividends by ICG, and future agreements may provide for
restrictions on the payment of cash dividends.
Voting Rights. The holders of shares of Exchangeable
Preferred Stock will have no voting rights, except as otherwise
required by law and except as set forth below. The Certificate of
Designation governing the Exchangeable Preferred Stock provides
that ICG may not, without the approval of the holders of a
majority of the Exchangeable Preferred Stock, amend the
Certificate of Designation or the Certificate of Incorporation of
ICG so as to have a material adverse effect on the specific
rights, preferences, privileges or voting rights of holders of
shares of Exchangeable Preferred Stock, or cause the dissolution,
winding-up or termination of Funding. Funding is expected to be
the sole holder of the Exchangeable Preferred Stock. Funding will
not grant such approval without the consent of the holders of a
majority of the shares of the Preferred Securities then
outstanding.
Exchange of the Exchangeable Preferred Stock. The
Exchangeable Preferred Stock will be exchangeable into Common
Stock at the option of Funding (upon request by a holder of the
Preferred Securities) at any time prior to the business day
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immediately preceding the date of repayment of such Exchangeable
Preferred Stock at an initial exchange rate of 416.22 shares of
Common Stock for each Exchangeable Preferred Stock, subject to
certain adjustments.
Liquidation Preference. Upon any voluntary or involuntary
liquidation, dissolution or winding-up of ICG, holders of
Exchangeable Preferred Stock will be entitled to be paid, out of
the assets of ICG available for distribution, $10,000 per share
of Exchangeable Preferred Stock, 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 ICG Junior
Securities, including, without limitation, Common Stock. If, upon
any voluntary or involuntary liquidation, dissolution or winding-
up of ICG, the amounts payable with respect to the Exchangeable
Preferred Stock and all other ICG Parity Securities are not paid
in full, the holders of the Exchangeable Preferred Stock and the
ICG Parity Securities will share equally and ratably in any
distribution of assets of ICG with respect to the Exchangeable
Preferred Stock and ICG Parity Securities, in proportion to the
full liquidation preference and accumulated and unpaid dividends
to which 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 Exchangeable
Preferred Stock will not be entitled to any further participation
in any distribution of assets of ICG.
Mandatory Redemption by ICG. The Exchangeable Preferred
Stock must be redeemed by ICG at a redemption price of 100% of
the liquidation preference of the Exchangeable Preferred Stock
plus accrued and unpaid dividends, if any, two business days
prior to November 15, 2009, which is the Mandatory Redemption
Date for the Exchangeable Preferred Stock.
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SELLING HOLDERS
SELLING PREFERRED SECURITYHOLDERS
The Selling Holders may from time to time offer and sell
pursuant to this Prospectus any or all of the Preferred
Securities and shares of Common Stock issued upon exchange
thereof. The term "Selling Preferred Securityholder" includes the
holders listed below and the beneficial owners of the Preferred
Securities and their transferees, pledgees, donees or other
successors.
The following table sets forth information with respect to
the Selling Preferred Securityholders of the Preferred Securities
and the respective number of Preferred Securities beneficially
owned by each Selling Preferred Securityholder that may be
offered pursuant to this Prospectus. Such information has been
obtained from the Selling Preferred Securityholders.
Selling Preferred
----------------- Number of
Securityholders Preferred Securities
--------------- --------------------
BANK OF NEW YORK (THE) 295,950
BANKERS TRUST COMPANY 128,165
BEAR, STEARNS SECURITIES CORP. 392,000
BOSTON SAFE DEPOSIT AND TRUST COMPANY 261,475
CITIBANK, N.A. 41,700
CORESTATES BANK, N.A. 49,300
CREDIT SUISSE FIRST BOSTON CORPORATION 145,000
DEUTSCHE MORGAN GRENFELL INC.(1) 52,000
DONALDSON, LUFKIN AND JENRETTE SECURITIES CORPORATION 203,400
FIRST CHICAGO CAPITAL CORPORATION/FNBC 20,000
FIRST NATIONAL BANK OF MARYLAND 3,000
FIRST UNION NATIONAL BANK 2,000
GOLDMAN, SACHS & CO. 5,000
HSBC SECURITIES, INC. 30,000
INVESTORS BANK & TRUST/MF CUSTODY 2,600
MERCANTILE SAFE DEPOSIT & TRUST 57,500
MERRILL LYNCH PROFESSIONAL CLEARING CORP. 70,000
MERRILL LYNCH, PIERCE FENNER & SMITH SAFEKEEPING 69,000
MORGAN STANLEY & CO. INCORPORATED(1) 479,000
NATIONAL FINANCIAL SERVICES CORPORATION 1,000
NATWEST SECURITIES CORPORATION 50,000
NORWEST BANK MINNESOTA N.A. 3,135
PAX CLEARING COMPANY LIMITED PARTNERSHIP 18,000
PNC BANK, NATIONAL ASSOCIATION 2,075
SBC WARBURG DILLON READ INC. 9,000
SSB - CUSTODIAN 254,700
---------------------
(1) Within the past three years, each of Morgan Stanley & Co.
Incorporated and Deutsche Morgan Grenfell Inc., or one of their
respective affiliates, was the manager or co-manager of one or
more private placements of securities of the Company and/or has
performed other banking services for which it has received a fee.
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SELLING STOCKHOLDER
The Selling Stockholder of the Common Stock is Funding, a
Delaware limited liability company. ICG owns all of the common
limited liability company securities of Funding, and ICG is the
manager of Funding. Funding is offering up to an aggregate of
200,000 shares of Common Stock, all of which may be offered
pursuant to this Prospectus.
The Selling Preferred Securityholders and the Selling
Stockholder may be referred to herein individually and
collectively, as the case may be, as the "Selling Holders."
Except as set forth above and in the following sentence, none of
the Selling Holders has, or within the past three years has had,
any position, office or other material relationship with Funding
or ICG or any of their predecessors or affiliates. From time to
time, certain broker-dealers and their affiliates in the ordinary
course of business may have acquired or disposed of, or may in
the future acquire or dispose of, certain securities of ICG and
Funding or their affiliates, for their own accounts or for the
accounts of others. Because the Selling Holders may, pursuant to
this Prospectus, offer all or some portion of the Preferred
Securities, the ICG Preferred Stock or the Common Stock issuable
upon exchange of the Preferred Securities, no estimate can be
given as to the amount of the Preferred Securities, the ICG
Preferred Stock or the Common Stock issuable upon exchange of
Preferred Securities that will be held by the Selling Holders
upon termination of any such sales. In addition, the Selling
Holders identified above may have sold, transferred or otherwise
disposed of all or a portion of their Preferred Securities since
the date on which they provided the information regarding their
Preferred Securities included herein in transactions exempt from
the registration requirements of the Securities Act. See "Plan of
Distribution."
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the material anticipated
United States federal income tax consequences of the purchase,
ownership and disposition of the Preferred Securities. Except
where noted, it deals only with Preferred Securities 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,
foreign corporations, persons who are not citizens or residents
of the United States or persons who hold Preferred Securities as
a part of a hedging or conversion transaction or a straddle. In
addition, the following discussion does not address the tax
consequences of the laws of any state, locality or foreign
jurisdiction. Furthermore, the discussion below is based upon the
provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), and 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 ICG 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
PREFERRED SECURITIES.
As used herein, a "United States Holder" means a beneficial
owner of Preferred Securities 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 United States fiduciaries have the
authority to control all substantial decisions. A foreign
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).
PARTNERSHIP STATUS OF FUNDING
A partnership is not a taxable entity and incurs no federal
income tax liability. Instead, each partner is required to take
into account its allocable share of items of income, gain, loss
and deduction of the partnership in computing the partner's
federal income tax liability, regardless of whether cash
distributions are made. Distributions by a partnership to a
partner are generally not taxable unless the amount of any cash
distributed is in excess of the partner's adjusted tax basis in
its partnership interest.
No ruling has been or will be sought from the IRS as to the
status of Funding as a partnership for federal income tax
purposes. Instead Funding has relied on the opinion of Reid &
Priest LLP that it will be classified as a partnership for United
States federal income tax purposes. Such opinion is based upon
the Code, the regulations thereunder, published revenue rulings
and court decisions and upon Funding's representations that (i)
it will not earn income other than from the ICG Preferred Stock
and from the Treasury Strips and (ii) it will not elect to be
treated as a corporation.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
Flow-through of Taxable Income
No federal income tax will be paid by Funding. Instead, each
Preferred Securityholder will be required to report on its income
tax return its allocable share of the income, gains, losses and
deductions of Funding without regard to whether corresponding
cash distributions are received by such Preferred Securityholder.
Consequently, a Preferred Securityholder may be allocated income
from Funding even if such Preferred Securityholder has not
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received a cash distribution. Each Preferred Securityholder will
be required to include in income its allocable share of income,
gains, losses and deduction of Funding for the taxable year of
Funding ending with or within the taxable year of the Preferred
Securityholder. The taxable income of Funding will generally be
dividend income from, and capital gains recognized with respect
to, the ICG Preferred Stock and interest income on, and capital
gain recognized with respect to, the Treasury Strips.
The Preferred Securityholders will first be allocated income
and gain of Funding in an amount so that all cumulative
allocations of taxable income and gain equals all cumulative
dividend distributions to the Preferred Securityholders. Any
remaining taxable income and gain generally will then be
allocated to ICG (except for deemed dividends resulting from the
optional redemption or because of the adjustment in the exchange
rate, which dividends will generally be allocated to the
Preferred Securityholders). These allocation provisions are
designed to reconcile tax allocations to economic allocations.
However, these allocations do not comply with the technical
requirements set forth in the Treasury regulations. Consequently,
no assurance can be given that the IRS will not challenge these
allocations. If theses allocations are successfully challenged by
the IRS, the amount of taxable income or loss allocated to
Preferred Securityholders for federal income tax purposes may be
increased and/or reduced or the character of such income may be
modified.
Funding does not presently intend to make an election under
Section 754 of the Code. As a result, a purchaser of Preferred
Securities will not be permitted to adjust its taxable income
from Funding to reflect any difference between its purchase price
for the Preferred Securities and Funding's underlying tax basis
for its assets.
Treatment of Distributions by Funding
Distributions by Funding to a Preferred Securityholder
generally will not be taxable to the Preferred Securityholder for
federal income tax purposes to the extent of such Preferred
Securityholder's tax basis in its Preferred Securities
immediately before the distribution. Cash distributions in excess
of a Preferred Securityholder's tax basis in its Preferred
Securities generally will be considered to be gain from the sale
or exchange of the Preferred Securities, taxable in accordance
with the rules described under "--Disposition of Preferred
Securities" below. To the extent Funding distributes Common Stock
other than in liquidation of such Preferred Securities, the
Preferred Securityholder will recognize no gain or loss and will
have a tax basis in such stock equal to the lesser of (i) tax
basis of such stock in the hands of Funding or (ii) such
Preferred Securityholder's tax basis in its Preferred Securities
reduced by the amount of any cash distributed in the non-
liquidating distribution. If the Common Stock distribution is in
liquidation of such Preferred Securities, the Preferred
Securityholder will recognize no gain or loss and will have a tax
basis in the Common Stock received equal to its tax basis in its
Preferred Securities reduced by the amount of any cash
distributed in liquidation of its Preferred Securities.
Tax Basis of Preferred Securities
A Preferred Securityholder's initial tax basis for its
Preferred Securities will be the amount it paid for the Preferred
Securities. That basis generally will be increased by its share
of Funding's income and generally will be decreased (but not
below zero) by distributions from Funding and by the Preferred
Securityholder's share of Funding's losses, if any. Non-
liquidating distributions of Common Stock by Funding will reduce
the Preferred Securityholder's tax basis in the Preferred
Securities (but not below zero) by the amount of Funding's tax
basis in such distributed stock. In addition, pursuant to Section
1059 of the Code, a Preferred Securityholder's tax basis in its
Preferred Securities may be reduced by its share of any
"extraordinary" dividends received by Funding. See "--Dividends
on the ICG Preferred Stock" below.
Interest on Treasury Strips
Funding will purchase interest portions of stripped United
States Treasury Obligations which are treated as bonds that were
originally issued at a discount ("original issue discount").
Original issue discount represents interest for federal income
tax purposes and can generally be defined as the difference
between the price at which a bond was issued and its stated
redemption price at maturity. For purposes of the preceding
sentence, stripped obligations, such as the Treasury Strips,
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which consist of a right to receive interest, will be treated by
Funding as originally issued on their purchase date at an issue
price equal to their respective purchase prices thereof. Original
issue discount on stripped Treasury Obligations (which were
issued or treated as issued on or after July 2, 1982) is deemed
earned based on a compounded, constant yield to maturity over the
life of such obligation, taking into account the compounding of
accrued interest at least annually, resulting in an increasing
amount of original issue discount includible in income each year.
If the stripped Treasury Obligation has a maturity of one year or
less, the original issue discount may, in certain circumstances,
be treated as interest income upon maturity or disposition rather
than over the term of the obligation. Each Preferred
Securityholder is required to include in income its allocable
share of original issue discount which accrues each year.
Dividends on the ICG Preferred Stock
Distributions of cash or of additional ICG Preferred Stock
or Common Stock on the ICG Preferred Stock will be treated as
dividends to Funding (and, in turn, to the Preferred
Securityholders) to the extent of ICG's current and accumulated
earnings and profits as determined under United States federal
income tax principles. The amount of ICG's earnings and profits
at any time will depend upon the future actions and financial
performance of ICG. The amount of a distribution of additional
ICG Preferred Stock or Common Stock will equal the fair market
value of the additional ICG Preferred Stock or Common Stock
distribution on the date of the distribution.
ICG believes that it does not presently have any current or
accumulated earnings and profits. Consequently, unless ICG
generates earnings and profits in the future, distributions with
respect to the ICG Preferred Stock will exceed ICG's current and
accumulated earnings and profits. Such distributions will be
treated as a nontaxable return of capital and will be applied
against and reduce (by the then fair market value of the
distributed ICG Preferred Stock or Common Stock) the tax basis of
the ICG Preferred Stock in the hands of Funding with respect to
which such distributions are made (but not below zero), thus
increasing the amount of any gain or reducing any loss which
would otherwise be realized by Funding upon a redemption or other
disposition of such ICG Preferred Stock. The amount of any such
distribution which exceeds the tax basis of the ICG Preferred
Stock in the hands of Funding will be treated as capital gain to
Funding (and, in turn, to the Preferred Securityholders) and
should be either long-term or short-term capital gain depending
on Funding's holding period in the ICG Preferred Stock. The ICG
Preferred Stock or Common Stock received by Funding as a dividend
will have a tax basis to Funding equal to its fair market value
on the date of distribution.
Under Section 243 of the Code, corporate Preferred
Securityholders generally will be able to deduct 70% of the
amount of their pro-rata share of any dividends received by
Funding. 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 stockholder 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 stockholder must generally hold the share of 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 stockholder 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 stock. The IRS may take the position that these
restrictions relating to the availability of the dividends-
received deduction apply to a Preferred Securityholder who
indirectly owns the ICG Preferred Stock held by Funding by
applying these restrictions based on the Preferred
Securityholder's holding period in the Preferred Securities
(rather than upon Funding's holding period in the ICG Preferred
Stock).
Under Section 1059 of the Code, a corporate stockholder is
required to reduce its tax basis (but not below zero) in 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. A dividend on the ICG Preferred Stock generally would be an
extraordinary dividend if it (i) equals or exceeds 5% of the
corporate stockholder's adjusted tax basis in the ICG Preferred
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Stock, treating all dividends having ex-dividend dates within an
85-day period as one dividend or (ii) exceeds 20% of the
corporate stockholder'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
preferred stock is an extraordinary dividend, a corporate
stockholder may elect to substitute the fair market value of the
preferred stock for such stockholder's tax basis for purposes of
applying these tests, provided that 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 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 ICG, regardless of the
stockholder's holding period and regardless of the size of the
dividend. Section 1059, if applicable, is applied to Funding by
treating each Preferred Securityholder as the owner of its share
of the ICG Preferred Stock held by Funding and thereby having
Funding adjust its tax basis in the ICG Preferred Stock and
having each Preferred Securityholder make a corresponding
adjustment to its tax basis in the Preferred Securities. If any
part of the nontaxed portion of an extraordinary dividend is not
applied to reduce the corporate Preferred Securityholder's tax
basis as a result of the limitation on reducing such basis below
zero, such part will be treated as gain at the time when the
extraordinary dividend is paid.
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 on such stock exceeds 15%. Section 1059 does not
apply to qualified preferred dividend if the corporate
stockholder holds such stock for more than five years. If the
stockholder 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 stockholder's tax basis in such stock or (2)
the liquidation preference of such stock. CORPORATE PREFERRED
SECURITYHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE POSSIBLE APPLICATION OF SECTION 1059 TO THEIR
OWNERSHIP AND DISPOSITION OF THE PREFERRED SECURITIES.
A corporate Preferred Securityholder's liability for
alternative minimum tax may be affected by the portion of the
dividends received which such corporate Preferred Securityholder
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 profits
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 ICG Preferred
Stock exceeds its issue price, the difference ("redemption
premium") may be taxable as a constructive distribution of
additional ICG Preferred Stock to Funding (treated as a dividend
to the extent of ICG's current and accumulated earnings and
profits and otherwise subject to the treatment described above
for distributions) over a certain period. Because the ICG
Preferred Stock provides for an optional right of redemption by
ICG at a price in excess of the issue price, Funding could be
required to recognize such redemption premium under a constant
interest rate method 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 (i.e., ICG) and the stockholder
(i.e., Funding) 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
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as a result of changes in economic or market conditions over
which neither the issuer nor the holder has 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,
ICG intends to take the position that the existence of ICG's
optional redemption right will not result in a constructive
distribution to Funding. If the IRS were to successfully assert
that a constructive distribution occurred, any resulting income
would be allocated to the Preferred Securityholders without the
receipt of any cash related thereto.
Adjustment of Exchange Rate
Treasury Regulations promulgated under Section 305 of the
Code would treat Funding as having received a constructive
distribution from ICG in the event the exchange ratio for the ICG
Preferred Stock is adjusted if (i) as a result of such
adjustment, the proportionate interest (measured by the quantum
of Common Stock into which the ICG Preferred Stock is
exchangeable) of Funding in the assets or earnings and profits of
ICG is increased, and (ii) the adjustment is not made pursuant to
a bona fide and reasonable antidilution formula. An adjustment in
the exchange rate would not be considered made pursuant to such
formula if the adjustment is made to compensate for certain
taxable distributions with respect to the Common Stock. Thus,
under certain circumstances, an adjustment in the exchange rate
of the ICG Preferred Stock, may result in deemed dividend income
to Funding to the extent of the current or accumulated earnings
and profits of ICG. Funding (and, in turn, the Preferred
Securityholders) would be required to include such deemed
dividend income in gross income but would not receive any cash
related thereto.
Redemption of ICG Preferred Stock
A redemption of the ICG Preferred Stock, in whole or in
part, for cash will be a taxable transaction on which Funding
(and, in turn, the Preferred Securityholders) will generally
recognize capital gain or loss equal to the difference between
the cash received and its adjusted tax basis in the redeemed
stock (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).
Such gain or loss will be long term if Funding's holding period
in the ICG Preferred Stock exceeds one year. To the extent that
ICG redeems the ICG Preferred Stock, in whole or in part,
utilizing Common Stock plus cash, Funding (and, in turn, the
Preferred Securityholders) should recognize gain equal to the
lesser of (i) the gain that would have been recognized if only
cash had been utilized in the redemption (as described above) and
(ii) the amount of cash actually utilized in such redemption. If
only Common Stock is utilized by ICG in the redemption, no gain
or loss should be recognized by Funding. Funding should have a
tax basis in the Common Stock received equal to its tax basis in
the ICG Preferred Stock redeemed increased by any gain recognized
as a result of any cash given in the redemption and decreased by
the amount of cash received. The holding period in the ICG
Preferred Stock should be tacked to the Common Stock received.
The tax effect of the resulting redemption of the Preferred
Securities is discussed below under "--Disposition of Preferred
Securities."
To the extent that either ICG exercises its right to redeem
the ICG Preferred Stock, in whole or in part, pursuant to a
Provisional Redemption, or a holder of Preferred Securities
exercises its Exchange Right, ICG will redeem from Funding ICG
Preferred Stock in exchange for Common Stock and exchange Common
Stock for a portion of the Treasury Strips held by Funding. The
tax consequences associated with the redemption of ICG Preferred
Stock for Common Stock are described above. The tax consequences
associated with liquidating distribution by Funding of Common
Stock to a Preferred Securityholder are described above. See
"--Treatment of Distributions by Funding." The exchange by Funding
of Treasury Strips for Common Stock should constitute a taxable
purchase of such shares by Funding. Funding and, in turn, the
Preferred Securityholders should recognize gain on such purchase
to the extent that the fair market value of the Treasury Strips
exceeds the tax basis allocable to that portion of the Treasury
Strips being redeemed and should recognize loss to the extent the
tax basis allocable to that portion of the Treasury Strips
exceeds the fair market value of the Treasury Strips being
redeemed. In addition, the Common Stock acquired through the
exchange of Treasury Strips should have a tax basis equal to its
fair market value on the date of such exchange.
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Disposition of Preferred Securities
Gain or loss will be recognized on a sale of Preferred
Securities, including a redemption for cash (but not including an
exchange with Funding of Preferred Securities for Common Stock),
equal to the difference between the amount realized and the
Preferred Securityholder's tax basis for the Preferred Securities
sold. The Preferred Securityholder's adjusted tax basis in its
Preferred Securities will be adjusted prior to the sale to
reflect such holder's pro-rata share of Funding's income, gains,
losses or deductions that flowed through prior to such
disposition (including gain or loss resulting from a redemption
of the ICG Preferred Stock). Gain or loss recognized by a
Preferred Securityholder on the sale or exchange of Preferred
Securities held for more than one year will generally be taxable
as long-term capital gain or loss. Generally, the maximum
effective United States federal corporate income tax rate for all
types of income, including dividends (after the application of
the dividends-received deduction), interest income and capital
gains, is 35%. The maximum effective United States federal
individual income tax rate applicable (i) to interest and
dividend income is 39.6% and (ii) to gains resulting from the
sale of capital assets held for longer than one year but less
than 18 months is 28%. The maximum effective United States
federal individual income tax rate on long-term capital gains
will decrease to 20% if the Preferred Securities are held for
more than 18 months. Beginning in the year 2006, capital assets
held for more than five years will qualify for an 18% maximum
effective United States federal individual income tax rate.
A Preferred Securityholder should not recognize gain or loss
upon the exchange with Funding of Preferred Securities for Common
Stock (whether pursuant to an exchange initiated by the holder or
following redemption by ICG of the ICG Preferred Stock) except to
the extent the holder receives cash or to the extent of a gain or
loss realized by Funding on its resulting exchange of its
Treasury Strips for Common Stock. A Preferred Securityholder
should only recognize gain upon the receipt of cash to the extent
such cash received exceeds the Preferred Securityholder's tax
basis in its Preferred Securities. See "--Treatment of
Distributions by Funding." A Preferred Securityholder's tax basis
in the Common Stock received upon exchange would be equal to such
holder's tax basis in the Preferred Securities delivered for
exchange reduced by any cash which is received upon such
exchange. Inasmuch as a Preferred Securityholder who exchanges
its Preferred Securities prior to a redemption remains entitled
to receive a Dividend Make-Whole Payment (to the extent of a
subsequent Provisional Redemption by Funding on or before
November 15, 2000) it is unclear how such holder should allocate
its tax basis in the Preferred Security exchanged to the Common
Stock received. Funding intends to take the position that the
contingent right to receive Dividend Make-Whole Payments does not
affect the calculation of its tax basis in the Common Stock (as
described above). Consequently, based on this position, to the
extent such exchanging holder subsequently receives a Dividend
Make-Whole Payment, such payment should result in capital gain of
an equal amount. A Preferred Securityholder's holding period in
the Common Stock received upon exchange should include the
Preferred Securityholder's holding period in the Preferred
Securities delivered.
Preferred Securityholders should be aware that the tax
treatment of the exchange feature of the Preferred Securities is
not entirely clear and that the IRS might argue that, for tax
purposes, Funding's exchange of ICG Preferred Stock into Common
Stock (and Funding's subsequent distribution of such stock to a
holder) should be treated as an exchange by the Preferred
Securityholder of its Preferred Securities against ICG directly
for Common Stock. While unlikely, if this argument were asserted
and sustained, the conversion of the Preferred Securities by a
Preferred Securityholder for Common Stock would be a taxable
transaction in which a Preferred Securityholder would recognize
capital gain or loss.
Allocations Between Transferors and Transferees
In general, Funding's taxable income and losses will be
determined annually, will be prorated on a monthly basis and will
be subsequently apportioned among the holders of the Preferred
Securities in proportion to the number of Preferred Securities
owned by each of them as of the first business day of such month.
As a result, a holder of Preferred Securities may be allocated
income, gain, loss and deduction accrued after the date of
transfer.
The use of this method may not be permitted under existing
Treasury Regulations. Accordingly, counsel is unable to opine on
the validly of this method of allocating income and deductions
between the transferors and the transferees of Preferred
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Securities. If this method is not allowed under the Treasury
Regulations (or only applies to transfers of less than all of the
holder's interest), taxable income or losses of Funding might be
reallocated among the holders of the Preferred Securities
(including transferors and transferees). Funding is authorized to
revise its method of allocation between transferors and
transferees (as well as among partners whose interests otherwise
vary during a taxable period) to conform to a method permitted
under future Treasury Regulations.
A holder who owns Preferred Securities at any time during a
quarter and who disposes of such Preferred Securities prior to
the record date set for a cash distribution with respect to such
quarter will be allocated items of Partnership income, gain, loss
and deductions attributable to such quarter but will not be
entitled to receive that cash distribution.
INFORMATION TO SECURITYHOLDERS AND AUDIT REQUIREMENTS
Funding will furnish each Preferred Securityholder with an
information statement each year setting forth such Preferred
Securityholder's allocable share of income for the prior calendar
year. Funding is required to furnish this statement as soon as
practicable following the end of the year, but in any event prior
to March 31.
Any person who holds Preferred Securities as a nominee for
another person is required to furnish to Funding (a) the name,
address and taxpayer identification number of the beneficial
owner and the nominee; (b) information as to whether the
beneficial owner is (i) a person that is not a United States
person, (ii) a foreign government, an international organization
or any wholly-owned agency or instrumentality of either of the
foregoing or (iii) a tax-exempt entity; (c) the amount and
description of Preferred Securities held, acquired or transferred
for the beneficial owner; and (d) certain information including
the dates of acquisitions and transfers, means of acquisitions
and transfers and acquisition cost for purchases, as well as the
amount of net proceeds from sales. Brokers and financial
institutions are required to furnish additional information,
including whether they are United States person and certain
information on Preferred Securities they acquire, hold or
transfer for their own accounts. A penalty of $50 per failure (up
to a maximum of $100,000 per calendar year) is imposed by the
Code for the failure to report such information to Funding. The
nominee is required to supply the beneficial owners of the
Preferred Securities with the information furnished to Funding.
ICG, as the tax matters partner, will be responsible for
representing the Preferred Securityholders in any dispute with
the IRS. The Code provides for administrative examination of a
partnership as if the partnership were a separate and distinct
taxpayer. Generally, the statute of limitations for partnership
items does not expire before three years since the later of the
filing or the last date for filing of the partnership information
return. Any adverse determination following an audit of the
return of Funding by the appropriate tax authorities could result
in an adjustment of the returns of the Preferred Securityholders,
and, under certain circumstances, a Preferred Securityholder may
be precluded from separately litigating a proposed adjustment to
the items of Funding. An adjustment could also result in an audit
of a Preferred Securityholder's return and adjustments of items
not related to the income and losses of Funding.
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PLAN OF DISTRIBUTION
The Offered Securities may be sold from time to time to
purchasers directly by the Selling Holders. Alternatively, the
Selling Holders may from time to time offer the Offered
Securities to or through underwriters, broker-dealers or agents,
which may receive compensation in the form of underwriting
discounts, concessions or commissions from the Selling Holders or
the purchasers of such securities for whom they may act as
agents. The Selling Holders, and any underwriters, broker-dealers
or agents that participate in the distribution of Offered
Securities, may be deemed to be "underwriters" within the meaning
of the Securities Act, and any profit on the sale of such
securities and any discounts, concessions, commissions or other
compensation received by any such underwriter, broker-dealer or
agent may be deemed to be underwriting discounts and commissions
under the Securities Act.
The Offered Securities may be sold from time to time in one
or more transactions at fixed prices, at prevailing market prices
at the time of sale, at varying prices determined at the time of
sale or at negotiated prices. The sale of the Offered Securities
may be effected in transactions (which may involve crosses or
block transactions) (i) on any national securities exchange or
quotation service on which the Offered Securities may be listed
or quoted at the time of sale, (ii) in the over-the-counter
market, (iii) in transactions otherwise than on such exchanges or
in the over-the-counter market or (iv) through the writing of
options. At the time a particular offering of the Offered
Securities is made, a Prospectus Supplement, if required, will be
distributed which will set forth the aggregate amount and type of
Offered Securities being offered and the terms of the offering,
including the name or names of any underwriters, broker-dealers
or agents, any discounts, commissions and other terms
constituting compensation from the Selling Holders and any
discounts, commissions, or concessions allowed or reallowed or
paid to broker-dealers.
To comply with the securities laws of certain jurisdictions,
if applicable, the Offered Securities will be offered or sold in
such jurisdictions only through registered or licensed brokers or
dealers. In addition, in certain jurisdictions the Offered
Securities may not be offered or sold unless they have been
registered or qualified for sale in such jurisdictions or any
exemption from registration or qualification is available and is
complied with.
The Selling Holders will be subject to applicable provisions
of the Exchange Act and the rules and regulations thereunder,
which provisions may limit the timing of purchases and sales of
any of the Offered Securities by the Selling Holders. The
foregoing may affect the marketability of such securities.
Pursuant to the Registration Rights Agreement, the Company
shall bear all reasonable fees and expenses customarily borne by
issuers in a non-underwritten secondary offering by selling
security holders or in an underwritten offering, as the case may
be, incurred in connection with the performance of its
obligations under the Registration Rights Agreement; provided,
however, that the Selling Holders will pay all underwriting
discounts and selling commissions, if any. The Selling Holders
will be indemnified by the Company and Funding, jointly and
severally, against certain civil liabilities, including certain
liabilities under the Securities Act, or will be entitled to
contribution in connection therewith.
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LEGAL MATTERS
The validity of the Preferred Securities, the ICG Preferred
Stock, the Guarantee and the Common Stock offered hereby and
certain tax matters will be passed upon for the Company 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
the three-month period ended December 31, 1996, and the related
schedule, 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 authority of said firm
as experts in accounting and auditing.
The reports of KPMG Peat Marwick LLP covering the
September 30, 1996 consolidated financial statements and schedule
refer to a change in the method of accounting for long-term
telecom services contracts.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses payable by the
Registrants in connection with the issuance and distribution of
the securities to be registered, other than underwriting
discounts and commissions. All the amounts shown are estimates,
except the SEC registration fee and Nasdaq National Market
listing fee.
SEC Registration Fee $ 46,295.65
Nasdaq NMS Fee 17,500.00
Accounting Fees and Expenses* 3,000.00
Blue Sky Fees and Expenses* 1,000.00
Legal Fees and Expenses* 30,000.00
Printing and Engraving Expenses* 4,000.00
Miscellaneous* 5,000.00
Total $106,795.65
===========
________________________
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
INDEMNIFICATION BY ICG OF ITS DIRECTORS AND OFFICERS
The Certificate of Incorporation of ICG Communications, Inc.
("ICG") provides that ICG will to the fullest extent permitted by
the General Corporation Law of the State of Delaware (the "GCL"),
as amended from time to time, indemnify all persons whom it may
indemnify pursuant thereof. ICG's By-laws contain a similar
provisions 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 ICG 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 ICG, 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 ICG 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 for 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.
II-1
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INDEMNIFICATION BY FUNDING OF ITS MANAGER
ICG is the Manager of Funding and, therefore, officers and
directors of ICG engaging in activities on behalf of Funding
would be entitled to benefits of the indemnification rights of
ICG described above.
Pursuant to the Operating Agreement of Funding, the Manager
will be entitled to indemnification from Funding to the fullest
extent permitted by applicable law, for any loss, damage or claim
incurred by the Manager by reason of any act or omission
performed or omitted by the Manager in good faith on behalf of
Funding and in a manner reasonably believed to be within the
scope of authority conferred on the Manager by the Operating
Agreement; provided, however, that any indemnity under Section
16.7 of the Operating Agreement will be provided out of and to
the extent of Funding's assets only, and no member of Funding
will have any personal liability on account thereof. The right of
indemnification pursuant to Section 16.7 of the Operating
Agreement will include the right to be paid, in advance, or
reimbursed by Funding for the reasonable expenses incurred by the
Manager who was, is, or is threatened to be made a named
defendant or respondent in a proceeding.
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ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits: The following exhibits are filed as a part of
this Registration Statement:
Exhibit No.: Description of Exhibits
------------ -----------------------
1.1: Form of Underwriting Agreement. To be filed as an
exhibit to a report on Form 8-K.
4.1: Certificate of Incorporation of ICG
Communications, Inc. dated April 11, 1996
[Incorporated by reference to Exhibit 3.1 to
Registration Statement on Form S-4, File No. 333-
4226].
4.2: By-Laws of ICG Communications, Inc. [Incorporated
by reference to Exhibit 3.2 to Registration
Statement on Form S-4, File No. 333-4226].
*4.3: Certificate of Formation of ICG Funding, LLC filed
September 17, 1997 with the Secretary of State of
the State of Delaware.
*4.4: Amended and Restated Limited Liability Company
Agreement of ICG Funding, LLC, dated as of
September 23, 1997.
*4.5: Registration Rights Agreement, dated September 24,
1997, among ICG Communications, Inc., ICG Funding,
LLC, Morgan Stanley & Co. Incorporated and
Deutsche Morgan Grenfell Inc. with respect to the
6 3/4% Exchangeable Limited Liability Company
Preferred Securities.
*4.6: Guarantee Agreement, dated September 24, 1997,
between ICG Communications, Inc. and ICG Funding,
LLC.
*4.7: Escrow and Security Agreement, dated September 24,
1997, among ICG Communications, Inc., ICG Funding,
LLC and Norwest Bank Colorado, National
Association.
*4.8: Written Action of the Manager of ICG Funding, LLC,
dated as of September 24, 1997, with respect to
the terms of the 6 3/4% Exchangeable Limited
Liability Company Preferred Securities.
*4.9: Certificate of Designation, Rights and Preferences
of the Preferred Stock Mandatorily Redeemable 2009
of ICG Communications, Inc. filed September 25,
1997 with the Secretary of State of the State of
Delaware.
*5.1: Opinion of Reid & Priest LLP.
*8.1: Opinion of Reid & Priest LLP as to certain tax
matters.
*23.1: Consent of KPMG Peat Marwick LLP.
*23.2: Consents of Reid & Priest LLP (included in
Exhibits 5.1 and 8.1).
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].
*24.1: Power of Attorney with respect to ICG
Communications, Inc. (included on the signature
page hereto).
*24.2: Power of Attorney with respect to ICG Funding, LLC
(included on the signature page hereto).
(b) Financial Statement Schedules:
All schedules are omitted because they are either not
applicable or the required information is included in the
consolidated financial statements or notes thereto.
________________________
* Filed herewith.
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ITEM 17. UNDERTAKINGS.
The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are
being made of the securities registered hereby, a post-effective
amendment of this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933, as amended (the "Securities Act");
(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; and
(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;
provided, however, that paragraphs (1)(i) and (1)(ii) do not
apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic
reports filed by the Registrants pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, 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.
(3) 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.
(4) That, for the purpose of determining any liability under the
Securities Act, each filing of ICG's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act (and, where
applicable, each filing of any employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) 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.
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Registrants pursuant to the provisions
described in Item 15 (other than the provisions relating to
insurance), or otherwise, the Registrants have been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy expressed in the
Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
than the payment by the Registrants of expenses incurred or paid
by a director, officer or controlling person of the Registrants
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 Registrants
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.
II-4
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1993, the Registrants
certify that they have reasonable grounds to believe that they meet all of
the requirements for filing on Form S-3 and have duly caused this
Registration Statement to be signed on their behalf by the undersigned,
thereunto duly authorized, in the City of Englewood, State of Colorado on
November 17, 1997.
ICG Communications, Inc.
By: /s/ J. Shelby Bryan
---------------------------
J. Shelby Bryan
President, Chief Executive
Officer and Director
ICG Funding, LLC
By: ICG Communications, Inc.,
its manager
By: /s/ J. Shelby Bryan
---------------------
J. Shelby Bryan
President, Chief Executive
Officer and Director
KNOW ALL MEN BY THESE PRESENTS, that each persons whose signature appears
below under the heading "Signatures" constitutes and appoints J. Shelby
Bryan, James D. Grenfell and H. Don Teague, each as his or her true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities, to sign any or all amendments (including post-
effective amendments) and supplements to this Registration Statement and
any related Registration Statement filed pursuant to Rule 462(b) of the
Securities Act of 1933, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and to 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 attorneys-in-
fact and agents, or any of them, or his, her or their 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 November 17, 1997
William J. Laggett
/s/ J. Shelby Bryan President, Chief
----------------------- Executive Officer
J. Shelby Bryan and Director
(Principal
Executive Officer
of each Registrant) November 17, 1997
/s/ James D. Grenfell Executive Vice
----------------------- President,
James D. Grenfell Chief Financial
Officer (Principal
Financial Officer
of each Registrant) November 17, 1997
/s/ Richard Bambach Vice President and
----------------------- Corporate Controller
Richard Bambach (Principal
Accounting Officer
of each Registrant) November 17, 1997
/s/ Harry R. Herbst
----------------------- Director November 17, 1997
Harry R. Herbst
/s/ Stan McLelland Director November 17, 1997
-----------------------
Stan McLelland
/s/ Kathryn Proffitt Director November 17, 1997
-----------------------
Kathryn Proffitt
/s/ Leontis Teryazos Director November 17, 1997
-----------------------
Leontis Teryazos
II-5
<PAGE>
EXHIBIT INDEX
Exhibit Description
------- -----------
1.1: Form of Underwriting Agreement. To be filed as an
exhibit to a report on Form 8-K.
4.1: Certificate of Incorporation of ICG
Communications, Inc. dated April 11, 1996
[Incorporated by reference to Exhibit 3.1 to
Registration Statement on Form S-4, File No. 333-
4226].
4.2: By-Laws of ICG Communications, Inc. [Incorporated
by reference to Exhibit 3.2 to Registration
Statement on Form S-4, File No. 333-4226].
*4.3: Certificate of Formation of ICG Funding, LLC filed
September 17, 1997 with the Secretary of State of
the State of Delaware.
*4.4: Amended and Restated Limited Liability Company
Agreement of ICG Funding, LLC, dated as of
September 23, 1997.
*4.5: Registration Rights Agreement, dated September 24,
1997, among ICG Communications, Inc., ICG Funding,
LLC, Morgan Stanley & Co. Incorporated and
Deutsche Morgan Grenfell Inc. with respect to the
6 3/4% Exchangeable Limited Liability Company
Preferred Securities.
*4.6: Guarantee Agreement, dated September 24, 1997,
between ICG Communications, Inc. and ICG Funding,
LLC.
*4.7: Escrow and Security Agreement, dated September 24,
1997, among ICG Communications, Inc., ICG Funding,
LLC and Norwest Bank Colorado, National
Association.
*4.8: Written Action of the Manager of ICG Funding, LLC,
dated as of September 24, 1997, with respect to
the terms of the 6 3/4% Exchangeable Limited
Liability Company Preferred Securities.
*4.9: Certificate of Designation, Rights and Preferences
of the Preferred Stock Mandatorily Redeemable 2009
of ICG Communications, Inc. filed September 25,
1997 with the Secretary of State of the State of
Delaware.
*5.1: Opinion of Reid & Priest LLP.
*8.1: Opinion of Reid & Priest LLP as to certain tax
matters.
*23.1: Consent of KPMG Peat Marwick LLP.
*23.2: Consents of Reid & Priest LLP (included in
Exhibits 5.1 and 8.1).
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].
*24.1: Power of Attorney with respect to ICG
Communications, Inc. (included on the signature
page hereto).
*24.2: Power of Attorney with respect to ICG Funding, LLC
(included on the signature page hereto).
________________________
* Filed herewith.
Exhibit 4.3
CERTIFICATE OF FORMATION
OF
ICG FUNDING, LLC
This Certificate of Formation of ICG Funding, LLC (the
"LLC") dated September 17, 1997, is being duly executed and filed
by ICG Communications, Inc., as an authorized person, to form a
limited liability company under the Delaware Limited Liability
Company Act, 6 Del. C. Section 18-101, et seq.
-- ----
FIRST: The name of the LLC formed hereby is:
ICG Funding, LLC
SECOND: The address of the registered office of the LLC in the
State of Delaware is:
1013 Centre Road
New Castle County
Wilmington, Delaware 19805
THIRD: The name and address of the registered agent for
service of process on the LLC in the State of Delaware
are:
Corporation Service Company
1013 Centre Road
New Castle County
Wilmington, Delaware 19805
IN WITNESS WHEREOF, the undersigned has caused this
Certificate of Formation to be executed as of the date first
above written.
ICG COMMUNICATIONS, INC.,
An Authorized person
By: /s/ J. Shelby Bryan
-----------------------------
Name: J. Shelby Bryan
Title: President and Chief
Executive Officer
Exhibit 4.4
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
ICG FUNDING, LLC
DATED AS OF SEPTEMBER 23, 1997
<PAGE>
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT OF
ICG FUNDING, LLC
This Amended and Restated Limited Liability Company
Agreement of ICG Funding, LLC (the "Company") is made as of
September 23, 1997, among ICG Communications, Inc. ("ICG") and
James D. Grenfell ("Grenfell"), as current Members (as defined
below) of the Company and the Persons (as defined below) who
become Members of the Company in accordance with the provisions
hereof.
WHEREAS, ICG and Grenfell have heretofore formed a
limited liability company pursuant to the Delaware Limited
Liability Company Act. 6 Del. C. Section 18-101, et seq., as
amended from time to time (the "Delaware Act"), by filing a
Certificate of Formation of the Company with the office of the
Secretary of State of the State of Delaware on September 17,
1997, and entering into a Limited Liability Company Agreement of
the Company dated as of September 17, 1997 (the "Original Limited
Liability Company Agreement");
WHEREAS, the Members desire to continue the Company as
a limited liability company under the Delaware Act and to amend
and restate the Original Limited Liability Company Agreement in
its entirety;
WHEREAS, it is a condition to closing under the
Placement Agreement dated September 18, 1997, among ICG and
certain other parties to so amend and restate the Original
Limited Liability Company Agreement in its entirety; and
WHEREAS, Grenfell desires to resign as the provisional
Member of the Company.
NOW, THEREFORE, in consideration of the agreements and
obligations set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Members hereby amend and restate the Original
Limited Liability Company Agreement, as amended, in its entirety
and agree as follows:
ARTICLE I
DEFINED TERMS
SECTION 1.1. DEFINITIONS. The terms defined in this
Article I shall, for the purposes of this Agreement, have the
meanings herein specified.
"Adjusted Capital Account" means the Capital Account
established for a Member, as the same is specially computed to
reflect the adjustments required or permitted by the Treasury
Regulations under Section 704(b) of the Code to be taken into
account in applying the second sentence of section
1.704-1(b)(2)(ii)(d) of the Treasury Regulations.
"Affiliate" means with respect to a specified Person,
any Person that directly or indirectly controls, is controlled
by, or is under common control with, the specified Person. As
used in this definition, the term "control" means the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether
through ownership of voting securities, by contract or otherwise.
"Agreement" means this Amended and Restated Limited
Liability Company Agreement of the Company, as amended, modified,
supplemented or restated from time to time.
"Capital Account" shall have the meaning set forth in
Section 4.5.
"Certificate" means the Certificate of Formation
referred to in the first recital of this Agreement and any and
all amendments thereto and restatements thereof filed on behalf
of the Company with the office of the Secretary of State of the
State of Delaware pursuant to the Delaware Act.
"Closing Date" shall have the meaning set forth in
Article III.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time, or any corresponding federal tax
statute enacted after the date of this Agreement. A reference to
a specific section (Section) of the Code refers not only to such
specific section but also to any corresponding provision of any
federal tax statute enacted after the date of this Agreement, as
such specific section or corresponding provision is in effect on
the date of application of the provisions of this Agreement
containing such reference.
"Common Member" means a Member that holds one or more
Common Securities.
"Common Securities" means the Interests in the Company
which represent common limited liability company interests in the
Company and are described in this Agreement.
"Company Dividend Junior Securities" shall have the
meaning set forth in Section 9.3 of this Agreement.
"Company Dividend Parity Securities" shall have the
meaning set forth in Section 9.3 of this Agreement.
"Company Liquidation Parity Securities" shall have the
meaning set forth in Section 15.5 of this Agreement.
"Covered Person" means the Manager, any Affiliate of
the Manager or any officers, directors, managers, shareholders,
partners, members, employees, representatives or agents of the
Manager, or any employee or agent of the Company or its
Affiliates.
"Dividend Payment Date" has the meaning set forth in
Section 9.1(c) of this Agreement.
"Escrow Account" shall have the meaning set forth in
Section 4.4.
"Escrow Agreement" shall have the meaning set forth in
Section 4.4.
"Exchange Agent" means ICG Communications, Inc.
"Fiscal Period" means a calendar month.
"Funding Date" shall have the meaning set forth in
Section 3.1.
"Guarantee" means the Guarantee Agreement to be entered
into between ICG and the Company for the benefit of the Preferred
Members, as amended from time to time.
"ICG Common Stock" means the Common Stock, $.01 par
value per share, of ICG.
"ICG Preferred Stock" means the Preferred Stock
Mandatorily Redeemable 2009, $.01 par value per share, of ICG.
"Indemnified Person" means the Common Member, any
Affiliate of the Common Member or any officers, directors,
managers, shareholders, partners, members, employees,
representatives or agents of the Common Member, or any employee
or agent of the Company or its Affiliates.
"Interest" means a limited liability company interest
in the Company, including the right of the holder thereof to any
and all benefits to which a Member may be entitled as provided in
this Agreement, together with the obligations of a Member to
comply with all of the terms and provisions of this Agreement.
"Liquidation Distribution" shall have the meaning set
forth in Section 15.5 of this Agreement.
"LP Act" means the Delaware Revised Uniform Limited
Partnership Act. 6 Del C. Section 17-101, et seq., as amended
from time to time.
"Majority in Liquidation Preference" means Preferred
Members who are the record owners of Preferred Securities whose
aggregate liquidation preferences represent more than 50% of the
aggregate liquidation preference of all Preferred Securities of
any particular series or all series, as the context requires,
then outstanding.
"Manager" means ICG, in its capacity as the manager of
the Company and as the Member that holds Common Securities.
"Member" means any Person that holds an Interest in the
Company and is admitted as a member of the Company pursuant to
the provisions of this Agreement, in its capacity as a member of
the Company. For purposes of the Delaware Act, the Common Member
and the Preferred Members shall constitute separate classes or
groups of Members.
"Net Income" and "Net Loss", respectively, for any
Fiscal Period means the income and loss, respectively, of the
Company for such Fiscal Period as determined in accordance with
the method of accounting followed by the Company for federal
income tax purposes, including, for all purposes, any tax-exempt
income and any expenditures of the Company which are described in
Section 705(a)(2)(B) of the Code (or treated as so described
under Section 1.704-1(b)(2)(iv)(i) of the Treasury Regulations);
provided, however, that any item allocated under Section 4.7
shall be excluded from the computation of Net Income and Net
Loss.
"Notice of Exchange" means a notice to the Exchange
Agent given by a Preferred Member of such Member's desire to
exercise its exchange right under the Preferred Securities
Designation.
"Offering" shall have the meaning set forth in Section
3.1.
"Person" means any individual, corporation,
association, partnership (general or limited), joint venture,
trust, estate, limited liability company, or other legal entity
or organization.
"Preferred Certificate" means a certificate evidencing
the Preferred Securities held by a Preferred Member.
"Preferred Member" means a Member that holds one or
more Preferred Securities.
"Preferred Securities" means the Interests which
represent preferred limited liability company interests in the
Company and are described in this Agreement.
"Preferred Securities Designation" means any written
action of the Manager pursuant to Section 7.1(b) of this
Agreement providing for the issue of a series of Preferred
Securities.
"Tax Matters Partner" means the Manager designated as
such in Section 11.1(b) of this Agreement.
"Third Party Creditors" shall have the meaning set
forth in Section 13.1 of this Agreement.
"U.S. Government Securities" mean instruments which
evidence any security issued or guaranteed as to principal or
interest by the United States, or by a person controlled or
supervised by and acting as an instrumentality of the government
of the United States pursuant to authority granted by the
Congress of the United States, or any certificate of deposit for
any of the foregoing.
SECTION 1.2. HEADINGS. The headings and subheadings in this
Agreement are included for convenience and identification only
and are in no way intended to describe, interpret, define or
limit the scope, extent or intent of this Agreement or any
provision hereof.
ARTICLE II
CONTINUATION AND TERM; ADMISSION OF MEMBERS
SECTION 2.1. CONTINUATION; WITHDRAWAL OF MEMBER.
(a) The Members hereby agree to continue the Company
as a limited liability company under and pursuant to the
provisions of the Delaware Act and agree that the rights, duties
and liabilities of the Members shall be as provided in the
Delaware Act, except as otherwise provided herein.
(b) Upon the execution of this Agreement, ICG shall
continue to be a Member and shall be designated as the Common
Member and shall be the holder of all of the Common Securities
and Grenfell shall resign and withdraw as a provisional Member of
the Company upon the admission of any other Member in the Company
and, at such time, all of Grenfell's interest in the Company
shall be cancelled. Grenfell shall not be entitled to any
distribution upon his withdrawal and resignation.
(c) The Manager, as an authorized person within the
meaning of the Delaware Act, shall execute, deliver and file any
and all amendments to and restatements of the Certificate.
SECTION 2.2. NAME. The name of the Company heretofore
formed and continued hereby is ICG Funding, LLC. The business of
the Company may be conducted upon compliance with all applicable
laws under any other name designated by the Manager.
SECTION 2.3. TERM. The term of the Company commenced on the
date the Certificate was filed in the office of the Secretary of
State of the State of Delaware and the Original Limited Liability
Company Agreement was entered into, and shall continue until
December 31, 2050, unless dissolved before such date in
accordance with the provisions of this Agreement.
SECTION 2.4. REGISTERED AGENT AND OFFICE. The Company's
registered agent and office in Delaware shall be Corporation
Service Company, 1013 Centre Street, Wilmington, New Castle
County, Delaware 19805. At any time, the Manager may designate
another registered agent and/or registered office.
SECTION 2.5. PRINCIPAL PLACE OF BUSINESS. The principal
place of business of the Company shall be at 9605 East Maroon
Circle, Englewood, Colorado 80112. The Manager may change the
location of the Company's principal place of business.
SECTION 2.6. QUALIFICATION IN OTHER JURISDICTIONS. The
Manager shall cause the Company to be qualified, formed or
registered under assumed or fictitious name statutes or similar
laws in any jurisdiction in which the Company conducts business
and in which such qualification, formation or registration is
required by law or deemed advisable by the Manager. The Manager,
as an authorized person within the meaning of the Delaware Act,
shall execute, deliver and file any certificates (and any
amendments and/or restatements thereof) necessary for the Company
to qualify to do business in a jurisdiction in which the Company
may wish to conduct business.
SECTION 2.7. ADMISSION OF MEMBERS.
(a) A Person shall be admitted as a Member and shall
become bound by the terms of this Agreement, without execution of
this Agreement, if such Person (or a representative authorized by
such Person orally, in writing or by other action such as payment
for an Interest) complies with the conditions for becoming a
Member as set forth in Section 2.7(b) and requests (which request
shall be deemed to have been made upon acquisition of an Interest
directly from the Company or upon an assignment of an Interest
from another Person) that the records of the Company reflect such
admission. The Company shall be promptly notified of any
assignment of an Interest.
The Company will reflect the admission of a Member in
the records of the Company as soon as is reasonably practicable
after either of the following events: (i) in the case of a Person
acquiring an Interest directly from the Company, at the time of
payment therefor, and (ii) in the case of an assignment, upon
notification thereof (the Company being entitled to assume, in
the absence of knowledge to the contrary, that proper payment has
been made by the assignee).
(b) Subject to the restrictions on transfer of Common
Securities set forth in Sections 7.1(e) and 14.1 of this
Agreement, whether acquiring an Interest directly from the
Company or by assignment, a Person shall be admitted as a Member
upon the acquisition or assignment, as the case may be, of such
Interest and the reflection of such Person's admission as a
Member on the registration books maintained by or on behalf of
the Company. The consent of any other Member or the Manager shall
not be required for the admission of a Member.
SECTION 2.8. MERGER, CONSOLIDATION, ETC. OF THE COMPANY.
The Company may not consolidate with, merge with or into, or be
replaced by, or convey, transfer or lease its properties and
assets as an entirety or substantially as an entirety to any
Person, except with the prior approval of Preferred Members
holding not less than a Majority in Liquidation Preference of the
outstanding Preferred Securities of each series or except as set
forth in this Section 2.8. The Company may, without the consent
of Preferred Members, consolidate with, merge with or into, or be
replaced by, or convey, transfer or lease its assets as an
entirety or substantially as an entirety to, a limited liability
company, limited partnership or trust organized as such under the
laws of any state of the United States of America or the District
of Columbia, provided that (i) such successor entity either (x)
expressly assumes all of the obligations of the Company under the
Preferred Securities or (y) substitutes for the Preferred
Securities of each series other securities having substantially
the same terms as such Preferred Securities of each series (the
"Successor Securities") so long as the Successor Securities rank,
with respect to participation in the profits or assets of the
successor entity, at least as high as the Preferred Securities of
the related series rank with respect to payment of dividends and
distribution of assets upon the liquidation, dissolution or
winding-up of the Company, (ii) ICG expressly acknowledges such
successor entity as the holder of the ICG Preferred Stock
relating to such Preferred Securities and its obligations under
the Guarantee with respect to the Successor Securities, (iii)
such merger, consolidation, replacement, conveyance, transfer or
lease does not cause the Preferred Securities or the Successor
Securities, if any, to be delisted (or, in the case of any
Successor Securities, to fail to be listed) by any national
securities exchange or other organization on which such Preferred
Securities are then listed, (iv) such merger, consolidation,
replacement, conveyance, transfer or lease does not cause the
Preferred Securities or Successor Securities, if any, to be
downgraded (or put on a "watch list" for possible downgrading) by
any "nationally recognized statistical rating organization," as
that term is defined by the Securities and Exchange Commission
for purposes of Rule 436(g)(2) under the Securities Act of 1933,
as amended, (v) such merger, consolidation, replacement,
conveyance, transfer or lease does not adversely affect the
powers, preferences and other special rights of Preferred Members
or the holders of the Successor Securities, if any, in any
material respect (other than with respect to any dilution of the
holders' interest in the new entity) and (vi) prior to such
merger, consolidation, replacement, conveyance, transfer or
lease, ICG has received an opinion of nationally recognized
independent legal counsel to the Company experienced in such
matters to the effect that (x) such successor entity will be
treated as a partnership or as a grantor trust, as appropriate,
for federal income tax purposes, (y) following such merger,
consolidation, replacement, conveyance, transfer or lease, ICG
and such successor entity will be in compliance with the
Investment Company Act of 1940, as amended, without registering
thereunder as an investment company and (z) such merger,
consolidation, replacement, conveyance, transfer or lease will
not adversely affect the limited liability of the Preferred
Members or the holders of the Successor Securities, if any, or
result in federal income tax liability to such Preferred Members
or holders other than with respect to any fractional share
interests converted into cash.
ARTICLE III
PURPOSE AND POWERS OF THE COMPANY
The purposes of the Company are (a) to issue Interests
and to use at least 85% all of the proceeds from the issuance
thereof (the "Offering") and the related capital contributions to
purchase shares of ICG Preferred Stock from ICG, (b) to invest up
to 15% of such proceeds in Treasury strips and other U.S.
Government Securities and (c) except as otherwise limited herein,
to enter into, make and perform all contracts and other
undertakings, and to take any and all actions necessary,
appropriate, proper, advisable, incidental or convenient to or
for the furtherance of the purpose of the Company as set forth
herein. On the closing date of the issuance of the Preferred
Securities (the "Closing Date"), the Manager, on behalf of the
Company, shall purchase, and place in escrow, Treasury strips in
an amount sufficient to fund the cash payment of the first 13
dividends on the Preferred Securities. From the Closing Date to
a date selected by the Manager, on behalf of the Company (the
"Funding Date"), that is no more than six months after the
Closing Date, the entire proceeds of the Offering, less the
amount used to purchase Treasury strips, shall be invested by the
Manager, on behalf of the Company, in U.S. Government Securities.
On the Funding Date, the Manager, on behalf of the Company, shall
use the earnings of and principal of such U.S. Government
Securities to pay $97.75 million to ICG as consideration for ICG
Preferred Stock. In the event such earnings and principal do not
equal $97.75 million, the Company shall receive a distribution on
the ICG Preferred Stock from ICG of shares of ICG Common Stock in
a number that will be sufficient, when sold by the Company in the
open market, to eliminate such cash shortfall. Dividends on the
ICG Preferred Stock will, at the option of ICG, be payable either
in cash or in shares of ICG Common Stock. Such shares may, at
the option of the Manager, on behalf of the Company, be used to
pay dividends on the Preferred Securities or sold to raise funds
to pay cash dividends on the Preferred Securities. The Company
may not conduct any other business or operations or voluntarily
incur any obligations except as contemplated by this Agreement.
ARTICLE IV
CAPITAL CONTRIBUTIONS, ALLOCATIONS AND DISTRIBUTIONS
SECTION 4.1. FORM OF CONTRIBUTION. The contribution of a
Member to the Company may, as determined by the Manager in its
discretion, be in cash, a promissory note or other legal
consideration.
SECTION 4.2. CONTRIBUTION BY THE COMMON MEMBER. The Common
Member shall make an initial contribution to the Company in
connection with the purchase of one Common Security so as to
cause its Common Security to be entitled to .01% of all interests
in the capital, income, gain, loss, deduction and credit of the
Company at all times, provided, however, that in no event shall
-------- -------
total cash contributions by the Common Member be an amount in
excess of $1.00 in the aggregate.
SECTION 4.3. CONTRIBUTIONS BY THE PREFERRED MEMBERS. The
Preferred Members shall make contributions to the Company in
accordance with the applicable terms of Section 7.1 of this
Agreement. Preferred Members, in their capacity as Members of the
Company, shall not be required to make any additional
contributions to the Company and shall have no additional
liability solely by reason of being Preferred Members (subject to
their obligation to return distributions wrongfully distributed
to them as required by applicable law).
SECTION 4.4. INVESTMENT OF CAPITAL CONTRIBUTIONS. On the
Closing Date, the Manager shall establish an escrow account (the
"Escrow Account") with Norwest Bank Colorado, National
Association, as escrow agent (the "Escrow Agent") pursuant to the
terms of an Escrow Agreement, dated the Closing Date, between the
Company and the Escrow Agent. The Manager shall deposit with the
Escrow Agent, in accordance with the Escrow Agreement, the
Treasury strips purchased pursuant to Article III and the Manager
on behalf of the Company shall pledge the Treasury strips to the
Escrow Agent for the benefit of the Preferred Members pursuant to
the terms of the Escrow Agreement.
SECTION 4.5. CAPITAL ACCOUNTS. An individual capital
account (a "Capital Account") shall be established and maintained
on the books of the Company for each Member in compliance with
Treasury Regulation Sections 1.704-1(b)(2)(iv) and 1.704-2, as
amended. Subject to the preceding sentence, each Capital Account
will be increased by the amount of the capital contributions made
by, and the Net Income allocated to, such Member and reduced by
the amount of distributions made by the Company and Net Losses
allocated to the Member. In addition, a Member's Capital Account
shall be increased or decreased, as the case may be, for any
items specially allocated to such Member under Section 4.7 of
this Agreement.
SECTION 4.6. GENERAL ALLOCATIONS. After giving effect to
the special allocations set forth in Section 4.7 of this
Agreement:
(a) Except as provided in Sections 4.6(c) and (d), the
Company's Net Income for each Fiscal Period shall be
allocated, as of the close of business on the last day of
such Fiscal Period, as follows:
(i) First, to the Preferred Members, in
proportion to the number of Preferred Securities held
by each such Member, in an amount equal to the excess
of (x) the amount of all dividends accrued on such
Preferred Member's Preferred Securities from the
issuance of such Preferred Securities through the close
of business on the last day of such Fiscal Period
(whether or not paid), over (y) the amount of Net
Income allocated to such Preferred Member (and his
predecessors in interest) in respect of such Preferred
Securities pursuant to this Section 4.6(a)(i) for all
prior Fiscal Periods.
(ii) Second, to each Preferred Member, in an
amount equal to the excess of (x) the amount of all Net
Losses allocated to such Preferred Member from the date
of issuance of such Preferred Member's Preferred
Securities through the close of business for such
Fiscal Period pursuant to Section 4.6(b)(ii) over (y)
the amount of Net Income allocated to such Preferred
Member (and his predecessors in interest) in respect of
such Preferred Securities pursuant to this Section
4.6(a)(ii) for all prior Fiscal Periods.
(iii) Any remaining Net Income shall be
allocated to the Common Member.
(b) Except as provided in Section 4.6(d), the
Company's Net Loss for each Fiscal Period shall be
allocated, as of the close of business on the record date
for such Fiscal Period, as follows:
(i) First, to the Common Member until the balance
of the Common Member's Adjusted Capital Account is
reduced to zero.
(ii) Second, to the Preferred Members (in
proportion to their respective aggregate Adjusted
Capital Account balances) until their Adjusted Capital
Account balances are reduced to zero.
(iii) Any remaining Net Loss shall be
allocated to the Common Member.
(c) Notwithstanding any other allocation provided for
in this Agreement, any gain realized on an exchange or
disposition of ICG Preferred Stock or U.S. Government Securities
(whether pursuant to a redemption or otherwise) shall be
allocated to the Preferred Members in proportion to the number of
Preferred Securities owned by each such member.
(d) The Manager may make such changes to the
allocations in Sections 4.6(a), 4.6(b) and 4.6(c) as it
deems reasonably necessary so that, immediately prior to the
Company's liquidation (or the exchange of Preferred
Securities for shares of ICG Common Stock), the positive
balances in the Capital Accounts of the Preferred Members
shall, to the maximum extent possible, equal their
respective Liquidation Distributions; provided, however,
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that no allocation pursuant to this Section 4.6(c) may
result in the Manager being required to make a capital
contribution pursuant to this Agreement or otherwise, other
than that set forth in Section 4.2.
(e) Notwithstanding any other provision of this
Agreement to the contrary, the allocation of Net Losses to any
Preferred Member shall not reduce the Liquidation Distribution of
the Preferred Securities held by such Preferred Member.
SECTION 4.7. SPECIAL ALLOCATIONS.
(a) If a Preferred Member delivers a Notice of
Exchange to the Exchange Agent pursuant to the appropriate
Preferred Securities Designation, which instructs the Exchange
Agent to exchange Preferred Securities for shares of ICG Common
Stock, such Preferred Member shall be allocated its pro rata
share of any dividend income accruing on a daily basis on the ICG
Preferred Stock pursuant to Section 305(c) of the Code or
original issue discount accruing on a daily basis until the date
of such exchange, but only to the extent such income was not
previously allocated to the Members in a prior Fiscal Period
under Section 4.6 of this Agreement or this Section 4.7.
(b) If the Exchange Agent exchanges all of the
Preferred Securities of a particular series for shares of ICG
Common Stock, pursuant to the appropriate Preferred Securities
Designation, the Preferred Members of such series shall be
allocated (in proportion to the liquidation preferences of such
Preferred Securities held by each such Preferred Member) any
dividend income accruing on a daily basis on the ICG Preferred
Stock pursuant to Section 305(c) of the Code or original issue
discount accruing on a daily basis so exchanged until the date of
such exchange, but only to the extent such income was not
previously allocated to the Members in prior Fiscal Periods under
Section 4.6 of this Agreement or this Section 4.7.
(c) If the Company is deemed to receive a dividend
under Section 305(c) of the Code with respect to any series of
ICG Preferred Stock or original issue discount with respect to
debt obligations it is holding, the Preferred Members holding
Preferred Securities of the related series shall be allocated (in
proportion to the liquidation preferences of such Preferred
Securities held by each such Preferred Member) such income.
(d) All items of loss and deduction in respect of
expenses incurred by or on behalf of the Company and paid by the
Common Member (or out of the Common Member's share of
distributions) shall be allocated entirely to the Common Member.
(e) For purposes of determining the Net Income, Net
Loss or any other items allocable to any Fiscal Period, Net
Income, Net Loss and any such other items shall be determined on
a daily, monthly or other basis, as determined by the Manager
using any method that is permissible under Section 706 of the
Code and the Treasury Regulations promulgated thereunder. Unless
otherwise specified, such Net Income, Net Loss or other items
shall be determined for each Fiscal Period.
(f) Notwithstanding anything to the contrary that may
be expressed or implied in this Article IV, the interest of the
Common Member, in the aggregate, in each item of income, gain,
loss, deduction and credit will be equal to at least (i) at any
time that aggregate capital contributions to the Company are
equal to or less than $50,000,000, 1% of each such item and (ii)
at any time that aggregate capital contributions to the Company
are greater than $50,000,000, at least 1% multiplied by a
fraction (not exceeding one and not less than 0.2), the numerator
of which is $50,000,000 and the denominator of which is the
lesser of the aggregate balances of the Capital Accounts of all
Members at such time and the aggregate capital contributions to
the Company of all Members at such time.
(g) Notwithstanding any other provision of this
Agreement to the contrary, the allocation of Net Losses to any
Preferred Member shall not reduce the Liquidation Distribution of
the Preferred Securities held by such Preferred Member.
SECTION 4.8. ALLOCATIONS FOR INCOME TAX PURPOSES. The
income, gains, losses, deductions and credits of the Company
shall be allocated in the same manner as the items entering into
the computation of Net Income and Net Loss are allocated under
Section 4.6 of this Agreement or as such items are otherwise
allocated under Section 4.7 of this Agreement; provided, however,
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that solely for federal, state and local income and franchise tax
purposes, but not for book or Capital Account purposes, income,
gain, loss and deductions with respect to any property properly
carried on the Company's books at a value other than the tax
basis of such property shall be allocated in a manner determined
in the Manager's discretion, so as to take into account
(consistently with the principles of Section 704(c) of the Code)
the difference between such property's book value and its tax
basis.
SECTION 4.9. WITHHOLDING. The Manager, on behalf of the
Company, shall comply with withholding requirements under
federal, state and local law and shall remit amounts withheld to
and file required forms with applicable jurisdictions. To the
extent that the Company is required to withhold and pay over any
amounts to any authority with respect to distributions or
allocations to any Member, the amount withheld shall be deemed to
be a distribution in the amount of the withholding to the Member.
In the event of any claimed over-withholding, Members shall be
limited to an action against the applicable jurisdiction. If the
amount withheld was not withheld from actual distributions, the
Manager, on behalf of the Company, may reduce subsequent
distributions by the amount of such withholding. Each Member
agrees to furnish the Company with such representations and forms
as shall reasonably be requested by the Company to assist it in
determining the extent of, and in fulfilling, its withholding
obligations.
SECTION 4.10. ALLOCATION OF DISTRIBUTIONS. The
distributions of the Company shall, subject to the applicable
terms of Sections 7.1, 9.1, 9.2, 9.3, 15.4 and 15.5 of this
Agreement and of any series of Preferred Securities (including
the preferential allocation of distributions, if any), be
allocated entirely to the Common Member.
SECTION 4.11. INTERESTS AS PERSONAL PROPERTY. Each Member
hereby agrees that its Interest shall for all purposes be
personal property. A Member has no interest in specific Company
property.
ARTICLE V
MEMBERS
SECTION 5.1. POWERS OF MEMBERS. The Members shall have the
power to exercise any and all rights or powers granted to the
Members pursuant to the express terms of this Agreement and the
terms of the interests held by such Members.
SECTION 5.2. PARTITION. Each Member waives any and all
rights that it may have to maintain an action for partition of
the Company's property.
SECTION 5.3. RESIGNATION. The Common Member shall have no
right to withdraw from the Company. Any other Member may withdraw
from the Company prior to the liquidation, dissolution or winding
up of the Company only upon the assignment of its Interest
(including any redemption, repurchase, exchange or other
acquisition by the Company of such Interest) in accordance with
the provisions of this Agreement. A withdrawing Member shall not
be entitled to receive any distribution and shall not otherwise
be entitled to receive the fair value of its Interest except as
otherwise expressly provided for in this Agreement.
ARTICLE VI
MANAGEMENT
SECTION 6.1. MANAGEMENT OF THE COMPANY. Except as otherwise
provided herein, the business and affairs of the Company shall be
managed, and all actions required under this Agreement shall be
determined, solely and exclusively by the Manager, which shall
have all rights and powers on behalf and in the name of the
Company to perform all acts necessary and desirable to the
objects and purposes of the Company (subject to Article III).
Without limiting the generality of the foregoing, the Manager, in
its capacity as the Common Member and not by virtue of any
delegation of management power from any Member, shall have
(subject to Article III) the power on behalf of the Company to:
(a) authorize and engage in transactions and dealings
on behalf of the Company, including transactions and dealings
with any Member (including the Common Member) or any Affiliate of
any Member;
(b) call meetings of Members or any class or series
thereof;
(c) issue Interests, including Common Securities,
Preferred Securities and classes and series thereof, in
accordance with this Agreement;
(d) pay all expenses incurred in forming the Company;
(e) lend money, with or without security, to ICG or
any Affiliate thereof;
(f) determine and make distributions (hereinafter
sometimes referred to as "dividends"), in cash or otherwise, on
Interests, in accordance with the provisions of this Agreement,
the Delaware Act and, if applicable, each Preferred Securities
Designation;
(g) establish a record date with respect to all
actions to be taken hereunder that require a record date to be
established, including with respect to allocations, dividends and
voting rights;
(h) redeem, repurchase or exchange, on behalf of the
Company, Interests which may be so redeemed, repurchased or
exchanged;
(i) appoint (and dismiss from appointment) attorneys
and agents on behalf of the Company, and employ (and dismiss from
employment) any and all persons providing legal, accounting or
financial services to the Company, or such other employees or
agents as the Manager deems necessary or desirable for the
management and operation of the Company, including, without
limitation, any Member (including the Common Member) or any
Affiliate of any Member;
(j) open accounts and deposit, maintain and withdraw
funds in the name of the Company in banks, savings and loan
associations, brokerage firms or other financial institutions;
(k) effect a dissolution of the Company and act as
liquidating trustee or the Person winding up the Company's
affairs, all in accordance with the provisions of this Agreement,
the Delaware Act and, if applicable, each Preferred Securities
Designation;
(l) bring and defend on behalf of the Company actions
and proceedings at law or equity before any court or
governmental, administrative or other regulatory agency, body or
commission or otherwise;
(m) prepare and cause to be prepared reports,
statements and other relevant information for distribution to
Members as may be required or determined to be necessary or
desirable by the Manager from time to time;
(n) prepare and file all necessary returns and
statements and pay all taxes, assessments and other impositions
applicable to the assets of the Company; and
(o) execute all other documents or instruments,
perform all duties and powers and do all things for and on behalf
of the Company in all matters necessary or desirable or
incidental to the foregoing.
The Manager is authorized and directed to conduct its
affairs and to operate the Company in such a way that the Company
will not be deemed to be an "investment company" required to be
registered under the Investment Company Act of 1940, as amended.
In this connection, the Manager is authorized to take any action
not inconsistent with applicable law, this Agreement and the
applicable Preferred Securities Designation and that the Manager
determines in its discretion to be necessary or desirable for
such purposes.
The expression of any power or authority of the Manager
in this Agreement shall not in any way limit or exclude any other
power or authority which is not specifically or expressly set
forth in this Agreement.
SECTION 6.2. RELIANCE BY THIRD PARTIES. Persons dealing
with the Company are entitled to rely conclusively upon the power
and authority of the Manager herein set forth.
SECTION 6.3. NO MANAGEMENT BY ANY PREFERRED MEMBERS OR ICG.
Except as otherwise expressly provided herein, no Preferred
Member shall take part in the day-to-day management, operation or
control of the business and affairs of the Company. Neither the
Preferred Members, in their capacity as Preferred Members of the
Company, nor ICG, in its capacity as the Common Member, shall be
agents of the Company or have any right, power or authority to
transact any business in the name of the Company or to act for or
on behalf of or to bind the Company.
SECTION 6.4. BUSINESS TRANSACTIONS OF THE MANAGER WITH THE
COMPANY. The Manager or its Affiliates may lend money to, act as
surety, guarantor or endorser for, guarantee or assume one or
more obligations of, provide collateral for, and transact other
business with, the Company and, subject to applicable law, shall
have the same rights and obligations with respect to any such
matter as a Person who is not the Manager or an Affiliate
thereof.
SECTION 6.5. OUTSIDE BUSINESSES. Any Member and/or the
Manager in its capacity as same may possess an interest in other
business ventures of any nature or description, independently or
with others, similar or dissimilar to the business of the
Company, and the Company and the Members shall have no rights by
virtue of this Agreement in and to such independent ventures or
the income or profits derived therefrom, and the pursuit of any
such venture, even if competitive with the business of the
Company, shall not be deemed wrongful or improper. No Member or
Affiliate thereof shall be obligated to present any particular
investment opportunity to the Company even if such opportunity is
of a character that, if presented to the Company, could be taken
by the Company, and any Member or Affiliate thereof shall have
the right to take for its own account (individually or as a
partner or fiduciary) or to recommend to others any such
particular investment opportunity.
ARTICLE VII
COMMON SECURITIES AND PREFERRED SECURITIES
SECTION 7.1. COMMON SECURITIES AND PREFERRED SECURITIES.
(a) The Interests in the Company shall initially be
divided into two classes, Common Securities and Preferred
Securities.
(b) The Preferred Securities may be issued from time
to time in one or more series with such relative rights, powers,
preferences, limitations and restrictions as may from time to
time be established in a written action or actions of the Manager
providing for the issue of such series of Preferred Securities as
hereinafter provided. Authority is hereby expressly granted to
the Manager, subject to the provisions of this Agreement, to
authorize the issue of one or more series of Preferred Securities
and to establish each such series by a written action or actions
(including without limitation an amendment of this Agreement)
providing for the issue of such series:
(i) the number of Preferred Securities to constitute
such series and the distinctive designation thereof;
(ii) whether the Preferred Securities of such series
shall have voting rights in addition to those set forth in this
Agreement or required by law and, if so, the terms of such voting
rights;
(iii) the annual dividend rate (or method of
calculation thereof), if any, on the Preferred Securities of such
series, the conditions and dates upon which such dividends shall
be payable and the ability of the Company, if any, to defer the
dividend payment period for the Preferred Securities of such
series, the dates from which such dividends shall accrue, the
preference or relation, if other than pari passu, which such
dividends have with respect to dividends payable on any other
class or classes of Interests or on any other series of Preferred
Securities, and whether such dividends shall be cumulative or
noncumulative;
(iv) whether the Preferred Securities of such series
shall be subject to redemption by the Company, and, if made
subject to redemption, the times and other terms and conditions
of such redemption (including the mandatory or optional nature of
such redemption, whether such redemption shall be in whole and/or
in part, and the amount and kind of consideration to be received
upon such redemption);
(v) the amount or amounts which shall be paid out of
the assets of the Company to Preferred Members holding the
Preferred Securities of such series upon voluntary or involuntary
liquidation, dissolution or winding up of the Company, and any
rights in addition to those set forth in this Agreement of the
Preferred Members that hold Preferred Securities of such series
upon the liquidation, dissolution or winding up of the Company;
(vi) whether or not the Preferred Securities of such
series shall be subject to the operation of a retirement or
sinking fund, and, if so, the extent to and manner in which any
such retirement or sinking fund shall be applied to the purchase
or redemption of the Preferred Securities of such series for
retirement and the terms and provisions relative to the operation
thereof;
(vii) whether or not the Preferred Securities of
such series shall be convertible into, or exchangeable for,
Interests of any other class or classes, or of any other series
of Preferred Securities, or securities of any other kind,
including those issued by ICG or any of its Affiliates, and if so
convertible or exchangeable, the terms and conditions of such
conversion or exchange, including the price or prices or the rate
or rates of conversion or exchange; the method, if any, of
adjusting the same and the terms of any right to terminate such
conversion or exchange privilege;
(viii) any limitations and restrictions in addition
to those set forth in this Agreement to be effective while any
Preferred Securities of such series are outstanding upon the
payment of dividends or other distributions on, and upon the
purchase, redemption or other acquisition by the Company of,
Common Securities or any other series of Preferred Securities;
(ix) any conditions or restrictions in addition to
those set forth in this Agreement upon the issue of any
additional Interests (including additional Preferred Securities
of such series or Interests of any other series ranking pari
passu with or senior to the Preferred Securities of such series
as to the payment of dividends or distribution of assets on
dissolution);
(x) the times, prices and other terms and conditions
for the offering of the Preferred Securities of such series; and
(xi) any other relative rights, powers, preferences,
limitations and restrictions as shall not be inconsistent with
this Section 7.1.
In connection with the foregoing and without limiting
the generality thereof, the Manager is hereby expressly
authorized, without the vote or approval of any other Member, to
take any action to create under the provisions of this Agreement
a series of Preferred Securities that was not previously
outstanding. Without the vote or approval of any other Member,
the Manager may execute, swear to, acknowledge, deliver, file and
record whatever documents may be required in connection with the
issue from time to time of Preferred Securities in one or more
series as shall be necessary, convenient or desirable to reflect
the issue of such series. The Manager shall do all things it
deems to be appropriate or necessary to comply with the Delaware
Act and is authorized and directed to do all things it may deem
to be necessary or permissible in connection with any future
issuance, including compliance with any statute, rule, regulation
or guideline of any federal, state or other governmental agency
or any securities exchange.
Any action or actions taken by the Manager pursuant to
the provisions of this paragraph (b) shall be deemed an amendment
and supplement to and part of this Agreement.
(c) All Preferred Securities shall rank senior to the
Common Securities in respect of the right to receive dividends
and the right to receive payments out of the assets of the
Company upon voluntary or involuntary liquidation, dissolution or
winding up of the Company. All Preferred Securities redeemed,
purchased or otherwise acquired by the Company (including
Preferred Securities surrendered for conversion or exchange)
shall be cancelled and thereupon restored to the status of
authorized but unissued Preferred Securities undesignated as to
series.
(d) No Member shall be entitled as a matter of right
to subscribe for or purchase, or have any preemptive right with
respect to, any part of any new or additional issue of Common
Securities or Preferred Securities of any series whatsoever, or
of securities convertible into any Common Securities or Preferred
Securities of any series whatsoever, whether now or hereafter
authorized and whether issued for cash or other consideration or
by way of dividend.
(e) Common Securities shall not be evidenced by any
certificate or other written instrument, but shall only be
evidenced by this Agreement. Common Securities shall be
non-assignable and non-transferable, and may only be issued to
and held by ICG (or a successor of ICG in accordance with the
provisions of the Guarantee). Any transfer or purported transfer
of any Common Security shall be null and void. Preferred
Securities shall be freely assignable and transferable.
(f) Any Person purchasing Preferred Securities
(whether from the Company or upon assignment) shall be admitted
to the Company as a Preferred Member upon compliance with Section
2.7 of this Agreement.
SECTION 7.2. PERSONS DEEMED PREFERRED MEMBERS. The Company
may treat the Person in whose name any Preferred Certificate
shall be registered on the books and records of the Company as a
Preferred Member and the sole holder of such Preferred
Certificate for purposes of receiving dividends and for all other
purposes whatsoever and, accordingly, shall not be bound to
recognize any equitable or other claims to or interest in such
Preferred Certificate on the part of any other Person, whether or
not the Company shall have actual or other notice thereof.
ARTICLE VIII
VOTING AND MEETINGS
SECTION 8.1. VOTING RIGHTS OF HOLDERS OF PREFERRED
SECURITIES.
(a) Except as shall be otherwise provided in this
Agreement, including without limitation, Section 16.1 hereof, or
in the Preferred Securities Designation for any series of
Preferred Securities and except as otherwise required by the
Delaware Act, the Preferred Members holding Preferred Securities
shall have, with respect to such Preferred Securities, no right
or power to vote on any question or matter or in any proceeding
or to be represented at, or to receive notice of, any meeting of
Members.
(b) If any proposed amendment to this Agreement or the
Preferred Securities Designation for any series of Preferred
Securities provides for, or the Manager otherwise proposes to
effect:
(i) any action that would have a material adverse
effect on the powers, preferences or special rights of the
Preferred Securities of such series, whether by way of
amendment of this Agreement, such Preferred Securities
Designation or otherwise (including, without limitation, the
authorization or issuance of any Interests in the Company
purporting to rank, as to payment of dividends or
distribution of assets upon liquidation, dissolution or
winding up of the Company, senior to the Preferred
Securities of such series), or
(ii) the liquidation, dissolution or winding up of
the Company (in any case other than in connection with the
exchange of Preferred Securities of such series for other
securities pursuant to the terms of such series of Preferred
Securities),
then the Preferred Members holding outstanding Preferred
Securities of such series, together with, if any such amendment
or action described in clause (i) above would materially
adversely affect the powers, preferences or special rights of any
Company Dividend Parity Securities or any Company Liquidation
Parity Securities, the holders of such Company Dividend Parity
Securities or such Company Liquidation Parity Securities, as the
case may be, or, with respect to any such amendment or action
described in clause (ii) above, the holders of all Company
Liquidation Parity Securities, will be entitled to vote together
as a class on such resolution or action of the Manager (but not
any other resolution or action) and such amendment or action
shall not be effective except with the approval of the Preferred
Members holding at least a Majority in Liquidation Preference of
such outstanding securities including, if applicable the holders
of either or both of the Company Dividend Parity Securities and
the Company Liquidation Party Securities, as the case may be;
provided, however, that no such approval shall be required if (1)
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the liquidation, dissolution or winding-up of the Company is
proposed or initiated upon the occurrence of any of the events
specified in Section 15.2 (except Section 15.2(c)) or (2) this
Agreement is amended pursuant to Section 16.1.
The Manager shall not, without the approval of the
holders of at least a Majority in Liquidation Preference of the
Preferred Securities, vote such ICG Preferred Stock with respect
to proposed actions that would have an adverse effect on the
specific rights, preferences, privileges or voting rights of the
Company with respect to the ICG Preferred Stock, or cause the
dissolution, winding-up or termination of the Company.
Notwithstanding any other provision of this Agreement to the
contrary, the Preferred Members shall be entitled to vote in
connection with any solicitation by the Manager for the consent
of the Preferred Members to the voting by the Manager of the
Company's ICG Preferred Stock. The powers, preferences or
special rights of the Preferred Securities of any series will be
deemed not to be adversely affected by the creation or issuance
of, and no vote will be required for the creation or issuance of,
any further Interests in the Company ranking junior to or pari
passu with the Preferred Securities of such series with respect
to voting rights or rights to payment of dividends or
distribution of assets upon liquidation, dissolution or
winding-up of the Company.
(c) Notwithstanding any provision to the contrary
herein, the first sentence of Section 14.1 of this Agreement may
only be amended with the consent of each Preferred Member;
provided that, to the fullest extent permitted by applicable law,
any such amendment shall not permit the Preferred Members to
approve any transferee of Common Securities.
(d) Notwithstanding that Preferred Members holding
Preferred Securities of any series are entitled to vote or
consent under any of the circumstances described in this
Agreement, any of the Preferred Securities of any series that are
owned by ICG or by any entity more than 50% of which is owned by
ICG, either directly or indirectly, shall not be entitled to vote
or consent and shall, for the purposes of such vote or consent,
be treated as if they were not outstanding.
SECTION 8.2. VOTING RIGHTS OF HOLDER OF COMMON SECURITIES.
Except as otherwise provided herein or in the Preferred
Securities Designation for any series of Preferred Securities and
except as otherwise required by the Delaware Act, all voting
rights of the Company shall be vested exclusively in the Common
Member. The Common Securities shall entitle the Common Member to
vote upon all matters upon which the Common Member has the right
to vote. The Common Member shall have the right to vote
separately as a class on any matter on which the Common Member
has the right to vote regardless of the voting rights of any
other Member.
SECTION 8.3. MEETINGS OF THE MEMBERS.
(a) Meetings of the Members of any class or series or
of all classes or series of Interests may be called at any time
by the Manager or as provided by any applicable Preferred
Securities Designation. Except to the extent otherwise provided,
the following provisions shall apply to meetings of Members.
(b) Members may vote in person or by proxy at such
meeting. Whenever a vote, consent or approval of Members is
permitted or required under this Agreement or any applicable
Preferred Securities Designation, such vote, consent or approval
may be given at a meeting of Members or by written consent.
(c) Each Member may authorize any Person to act for it
by proxy on all matters in which a Member is entitled to vote,
including waiving notice of any meeting, or voting or
participating at a meeting. Every proxy must be signed by the
Member or its attorney-in-fact and shall be revocable at the
pleasure of the Member executing it at any time before it is
voted.
(d) Each meeting of Members shall be conducted by the
Manager or by such other Person that the Manager may designate.
(e) Any required approval of Preferred Members holding
Preferred Securities of a series may be given at a separate
meeting of such Preferred Members convened for such purpose or at
a meeting of Members of the Company or pursuant to written
consents. The Manager will cause a notice of any meeting at which
Preferred Members holding Preferred Securities of a series are
entitled to vote, or of any matter upon which action by written
consent of such Preferred Members is to be taken, to be mailed to
each Preferred Member holding Preferred Securities of such
series. Each such notice will include a statement setting forth
(i) the date of such meeting or the date by which such action is
to be taken, (ii) a description of any matter on which such
Preferred Members are entitled to vote or of such matter upon
which written consent is sought and (iii) instructions for the
delivery of proxies or consents.
(f) Subject to Section 8.3(e) and the applicable
Preferred Securities Designation, the Manager, in its sole
discretion, shall establish all other provisions relating to
meetings of Members, including notice of the time, place or
purpose of any meeting at which any matter is to be voted on by
any Members, waiver of any such notice, action by consent without
a meeting, the establishment of a record date, quorum
requirements (but in no event higher than a Majority in
Liquidation Preference of the Preferred Securities of any
series), voting in person or by proxy or any other matter with
respect to the exercise of any such right to vote.
ARTICLE IX
DIVIDENDS
SECTION 9.1. DIVIDENDS.
(a) Preferred Members shall receive periodic dividends,
if any, in accordance with the Preferred Securities Designation
for the Preferred Securities of any particular series, as and
when declared by the Manager, and the Common Member shall receive
periodic dividends, subject to Section 9.3 of this Agreement, the
applicable terms of any series of Preferred Securities and the
provisions of the Delaware Act, as and when declared by the
Manager, in its discretion out of funds of the Company legally
available therefor.
(b) Dividends on the Preferred Securities shall be
declared by the Manager to the extent that the Manager reasonably
anticipates that at the time of payment the Company will have,
and must be paid by the Company to the extent that at the time of
proposed payment it has funds legally available for the payment
of such dividends.
(c) A Preferred Member shall not be entitled to
receive any dividend with respect to the Preferred Securities of
any series, irrespective of whether such dividend has been
declared by the Manager, prior to the date on which such dividend
is payable as set forth in the Preferred Securities Designation
(the "Dividend Payment Date") and until such time as the Company
has received the dividend payment on the ICG Preferred Stock of
the related series for the dividend payment date corresponding to
such Divided Payment Date and such monies are available for
distribution to the Preferred Member pursuant to the terms of
this Agreement and the Delaware Act.
SECTION 9.2. LIMITATIONS ON DISTRIBUTIONS. Notwithstanding
any provision to the contrary contained in this Agreement, the
Company shall not make a distribution (including a dividend) to
any Member on account of its Interest if such distribution would
violate Section 18-607 or 18-804 of the Delaware Act or other
applicable law.
SECTION 9.3. CERTAIN RESTRICTIONS ON THE PAYMENT OF
DIVIDENDS. If accumulated dividends have not been paid in full on
the Preferred Securities of any series then outstanding, the
Company shall not:
(i) pay, or declare and set aside for payment, any
dividends on the Preferred Securities of any other series or
any other Interests in the Company ranking pari passu with
the Preferred Securities of such series as to the payment of
dividends ("Company Dividend Parity Securities"), unless the
amount of any dividends declared on such Company Dividend
Parity Securities is paid on such Company Dividend Parity
Securities and the Preferred Securities of such series on a
pro rata basis on the date such dividends are paid on such
Company Dividend Parity Securities, so that the ratio of
(x) (A) the aggregate amount paid as dividends
on the Preferred Securities of such series to (B) the
aggregate amount paid as dividends on the Company
Dividend Parity Securities is the same as the ratio of
(y) (A) the aggregate amount of all accumulated
arrears of unpaid dividends on the Preferred Securities
of such series to (B) the aggregate amount of all
accumulated arrears of unpaid dividends on the Company
Dividend Parity Securities;
(ii) pay, or declare and set aside for payment, any
dividends on any Interests in the Company ranking junior to
the Preferred Securities of such series as to the payment of
dividends ("Company Dividend Junior Securities"); or
(iii) redeem, purchase or otherwise acquire any
Company Dividend Parity Securities or Company Dividend
Junior Securities (other than purchases or acquisitions
resulting from the reclassification of such Securities or
the exchange or conversion of any Company Dividend Parity
Security or Company Dividend Junior Security pursuant to the
terms thereof or the purchase of fractional interests
therein upon such conversion or exchange);
until, in each case, such time as all accumulated and unpaid
dividends on all of the Preferred Securities of such series
shall have been paid in full or have been irrevocably set
aside for payment in full for all dividend periods
terminating on or prior to, in the case of clauses (i) and
(ii), the date of such payment, and in the case of clause
(iii), the date of such redemption, purchase or other
acquisition.
ARTICLE X
BOOKS AND RECORDS
SECTION 10.1. BOOKS AND RECORDS; ACCOUNTING. The Manager
shall keep or cause to be kept at the address of the Manager (or
at such other place as the Manager shall advise the other Members
in writing) true and full books and records regarding the status
of the business and financial condition of the Company.
SECTION 10.2. FISCAL YEAR. The fiscal year of the Company
for federal income tax and accounting purposes shall, except as
otherwise required in accordance with the Code, end on December
31 of each year.
SECTION 10.3. LIMITATION ON ACCESS TO RECORDS.
Notwithstanding any provision of this Agreement, the Manager may,
to the maximum extent permitted by law, keep confidential from
the Preferred Members any information the disclosure of which the
Manager reasonably believes is not in the best interest of the
Company or could damage the Company or its business or which the
Company or the Manager is required by law or by an agreement with
any Person to keep confidential.
ARTICLE XI
TAX MATTERS
SECTION 11.1. COMPANY TAX RETURNS.
(a) The Manager shall cause to be prepared and timely
filed all tax returns required to be filed for the Company. The
Manager may, in its discretion, make or refrain from making any
federal, state or local income or other tax elections for the
Company that it deems necessary or advisable, including, without
limitation, any election under Section 754 of the Code or any
successor provision.
(b) The Manager is hereby designated as the Company's
"Tax Matters Partner" under Code Section 6231(a)(7) and shall
have all the powers and responsibilities of such position as
provided in the Code. The Manager is specifically directed and
authorized to take whatever steps the Manager, in its discretion,
deems necessary or desirable to perfect such designation,
including filing any forms or documents with the Internal Revenue
Service and taking such other action as may from time to time be
required under the regulations issued under the Code. Expenses
incurred by the Tax Matters Partner, in its capacity as such,
will be borne by the Company.
SECTION 11.2. TAX REPORTS. The Manager shall, as promptly
as practicable and in any event within 90 days after the end of
each fiscal year, cause to be prepared and mailed to each
Preferred Member of record federal income tax form K-1 and any
other forms which are necessary or advisable.
SECTION 11.3. TAXATION AS PARTNERSHIP. The Members
recognize that the Company will be treated as a partnership for
U.S. federal income tax purposes, and the Manager shall operate
the Company in such a manner and will take all necessary action
as will preserve its treatment as a partnership for U.S. federal
income tax purposes.
SECTION 11.4 INVESTMENT PARTNERSHIP. The Manager shall
cause the Company not to "engage in a trade or business" or make
any investments or take any action that would cause the Company
to fail to qualify as an "investment partnership" as such term is
defined in Section 731(c)(3)(C) of the Code.
ARTICLE XII
EXPENSES
Except as otherwise provided in this Agreement, the
Company shall be responsible for and shall pay all expenses out
of funds of the Company determined by the Manager to be available
for such purpose, provided that such expenses or obligations are
those of the Company or are otherwise incurred by the Manager in
connection with this Agreement, including, without limitation:
(a) all costs and expenses related to the business of
the Company and all routine administrative expenses of the
Company, including the maintenance of books and records of
the Company, the preparation and dispatch to the Members of
checks, financial reports, tax returns and notices required
pursuant to this Agreement and the holding of any meetings
of the Members;
(b) all expenses incurred in connection with any
litigation involving the Company (including the cost of any
investigation and preparation) and the amount of any
judgment or settlement paid in connection therewith (other
than expenses incurred by the Manager in connection with any
litigation brought by or on behalf of any Member against the
Manager);
(c) all expenses for indemnity or contribution payable
by the Company to any Person;
(d) all expenses incurred in connection with the
collection of amounts due to the Company from any Person;
(e) all expenses incurred in connection with the
preparation of amendments to this Agreement; and
(f) all expenses incurred in connection with the
liquidation, dissolution or winding-up of the Company.
ARTICLE XIII
LIABILITY
SECTION 13.1. LIABILITY OF COMMON MEMBER. The Common
Member, by acquiring its Interest and being admitted to the
Company as the Common Member, shall be liable to the creditors of
the Company (other than to Members holding other classes or
series of Interests, in their capacity as Members) (hereinafter
referred to individually as a "Third Party Creditor," and
collectively as the "Third Party Creditors") to the same extent
that a general partner of a limited partnership formed under the
LP Act is liable under Section 17-403(b) of the LP Act to
creditors of the limited partnership (other than the other
partners in their capacity as partners), as if the Company were a
limited partnership formed under the LP Act and the Common Member
was a general partner of the limited partnership. In furtherance
but not in limitation of the generality of the foregoing, the
Common Member is liable for any and all debts, obligations and
other liabilities of the Company, whether arising under contract
or by tort, statute, operation of law or otherwise, all of which
shall be enforceable directly and absolutely against the Common
Member by each Third Party Creditor.
SECTION 13.2. LIABILITY OF PREFERRED MEMBERS.
(a) Except as otherwise provided by the Delaware Act,
(i) the debts, obligations and liabilities of the Company,
whether arising by contract, tort, statute, operation of law
or otherwise, shall be solely the debts, obligations and
liabilities of the Company and, to the extent set forth in
Section 13.1 of this Agreement, the Common Member and (ii)
no Preferred Member shall be obligated personally for any
such debt, obligation or liability of the Company solely by
reason of being a Preferred Member of the Company.
(b) A Preferred Member, in its capacity as such, shall
have no liability in excess of (i) the amount of its capital
contributions, (ii) its share of any assets and
undistributed profits of the Company, (iii) any amounts
required to be paid by such Preferred Member in the
Preferred Securities Designation for the series of Preferred
Securities held by such Preferred Member and (iv) the amount
of any distributions wrongfully distributed to the extent
required by Section 18-607 of the Delaware Act or other
applicable law.
ARTICLE XIV
ASSIGNMENT OF INTERESTS
SECTION 14.1. ASSIGNMENT OF INTERESTS. Notwithstanding
anything to the contrary in this Agreement, after the date hereof
Common Securities shall be non-assignable and non-transferable
(other than pursuant to a merger or consolidation of the Common
Member), and may only be issued to and held by ICG or its
successor. Preferred Securities shall be freely assignable and
transferable, subject to the provisions of Section 2.7 of this
Agreement.
SECTION 14.2. RIGHT OF ASSIGNEE TO BECOME A MEMBER. An
assignee of a Preferred Security shall become a Preferred Member
upon compliance with the provisions of Section 2.7 of this
Agreement.
SECTION 14.3. EVENTS OF CESSATION OF MEMBERSHIP. A Person
shall cease to be a Member upon (i) the assignment of its
Interests in accordance with this Agreement, such assignment to
be effective immediately after the admission of its transferee,
(ii) any redemption, exchange or other repurchase by the Company
or the Common Member; or (iii) as otherwise provided herein.
ARTICLE XV
DISSOLUTION, LIQUIDATION AND TERMINATION
SECTION 15.1. NO DISSOLUTION. The Company shall not be
dissolved by the admission of Members in accordance with the
terms of this Agreement. Except as provided in Sections 15.2(b)
of this Agreement, the death, retirement, resignation, expulsion,
bankruptcy or dissolution of a Member, or the occurrence of any
other event which terminates the continued membership of a Member
in the Company, shall not cause the Company to be dissolved and
its affairs wound up so long as the Company at all times has at
least two Members. Upon the occurrence of any such event, the
business of the Company shall be continued without dissolution.
SECTION 15.2. EVENTS CAUSING DISSOLUTION. The Company shall
be dissolved and its affairs shall be wound up upon the earliest
to occur of any of the following events:
(a) the expiration of the term of the Company, as
provided in Section 2.3 of this Agreement;
(b) the dissolution, winding-up or liquidation of the
Common Member or the occurrence of any other event that
terminates the continued membership of the Common Member
under the Delaware Act;
(c) the decision made by the Manager (subject to the
voting rights of Preferred Members set forth in Section 8.1
of this Agreement) to dissolve the Company;
(d) the entry of a decree of judicial dissolution of
the Company under Section 18-802 of the Delaware Act;
(e) the election of the Manager, in connection with
the exchange of all series of Preferred Securities
outstanding (in accordance with the Preferred Securities
Designation for such series of Preferred Securities) for the
ICG Common Stock or the redemption of all series of
Preferred Securities outstanding (in accordance with the
Preferred Securities Designation for such series of
Preferred Securities); or
(f) the written consent of all Members.
SECTION 15.3. NOTICE OF DISSOLUTION. Upon the dissolution
of the Company, the Manager shall promptly notify the Members of
such dissolution.
SECTION 15.4. LIQUIDATION. Upon dissolution of the Company,
the Manager or, in the event that the dissolution is caused by an
event described in Section 15.2(b) or (c) and there is no
Manager, a Person or Persons who may be approved by the Preferred
Members holding a Majority in Liquidation Preference of the
Preferred Securities, as liquidating trustees, shall immediately
commence to wind-up the Company's affairs; provided, however,
that a reasonable time shall be allowed for the orderly
liquidation of the assets of the Company and the satisfaction of
liabilities to creditors so as to enable the Members to minimize
the normal losses attendant upon a liquidation. The proceeds of
liquidation shall be distributed, as realized, in the manner
provided in Section 18-804 of the Delaware Act, subject (after
compliance with Section 18.804(a)(i) of the Delaware Act) to the
Preferred Securities Designation for any series of Preferred
Securities and Section 15.5 of this Agreement.
SECTION 15.5. CERTAIN RESTRICTIONS ON LIQUIDATION PAYMENTS.
In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Company other than in connection
with the exchange of all series of Preferred Securities
outstanding (in accordance with the Preferred Securities
Designation for each such series of Preferred Securities) for the
ICG Common Stock, Preferred Members holding Preferred Securities
of each series at the time outstanding will be entitled to
receive out of the assets of the Company legally available for
distribution to Members, before any distribution of assets is
made to the Common Member or Members holding any other class of
Interests in the Company ranking junior to the Preferred
Securities of such series as to the distribution of assets upon
liquidation, dissolution or winding-up of the Company, but
together with Preferred Members holding Preferred Securities of
any other series or any other Interests in the Company then
outstanding ranking pari passu with the Preferred Securities of
such series as to the distribution of assets upon liquidation,
dissolution or winding-up of the Company ("Company Liquidation
Parity Securities"), an amount equal to the aggregate liquidation
preference for Preferred Securities of such series as set forth
in the applicable Preferred Securities Designation plus all
accumulated and unpaid dividends (whether or not earned or
declared), to the date of payment (the "Liquidation
Distribution"). If, upon any such liquidation, dissolution or
winding-up, the Liquidation Distributions can be paid only in
part because the Company has insufficient assets available to pay
in full the aggregate Liquidation Distributions and the aggregate
maximum liquidation distributions on the Company Liquidation
Parity Securities, then the amounts payable by the Company on the
Preferred Securities of such series and on such Company
Liquidation Parity Securities shall be paid on a pro rata basis,
so that the ratio of
(i) (x) the aggregate amount paid as Liquidation
Distributions on the Preferred Securities of such series to
(y) the aggregate amount paid as Liquidation Distributions
on the Company Liquidation Parity Securities, is the same as
the ratio of
(ii) (x) the aggregate Liquidation Distributions on
the Preferred Securities of such series to (y) the aggregate
maximum Liquidation Distributions on the Company Liquidation
Parity Securities.
SECTION 15.6. TERMINATION. The Company shall terminate when
all of the assets of the Company have been distributed in the
manner provided for in this Article XV, and the Certificate shall
have been cancelled in the manner required by the Delaware Act.
ARTICLE XVI
MISCELLANEOUS
SECTION 16.1. AMENDMENTS. Except as otherwise provided in
this Agreement, this Agreement may be amended by a written
instrument executed by the Common Member if, in the opinion of
independent counsel, such amendment does not materially adversely
affect the rights, powers and preferences of the Preferred
Members; if, however, in the opinion of such counsel, such
amendment would materially adversely affect the rights, powers
and preferences of the Preferred Members, such amendment shall
require the consent of the Majority in Liquidation Preference of
such Preferred Members.
SECTION 16.2. SUCCESSORS; COUNTERPARTS. This Agreement (a)
shall be binding as to the executors, administrators, estates,
heirs and legal successors, or nominees or representatives, of
the Members and (b) may be executed in several counterparts with
the same effect as if the parties executing the several
counterparts had all executed one counterpart. No person other
than the Members and their respective executors, administrators,
estates, heirs and legal successors, or their nominees or
representatives, shall obtain any rights by virtue of this
Agreement.
SECTION 16.3. GOVERNING LAW; SEVERABILITY. This Agreement
shall be governed by and construed in accordance with the laws of
the State of Delaware. In particular, this Agreement shall be
construed to the maximum extent possible to comply with all of
the terms and conditions of the Delaware Act. If, nevertheless,
it shall be determined by a court of competent jurisdiction that
any provisions or wording of this Agreement shall be invalid or
unenforceable under the Delaware Act or other applicable law,
such invalidity or unenforceability shall not invalidate the
entire Agreement. In that case, this Agreement shall be construed
so as to limit any term or provision so as to make it enforceable
or valid within the requirements of applicable law, and, in the
event such term or provisions cannot be so limited, this
Agreement shall be construed to omit such invalid or
unenforceable provisions. If it shall be determined by a court of
competent jurisdiction that any provision relating to the
distributions and allocations of the Company or to any fee
payable by the Company is invalid or unenforceable, this
Agreement shall be construed or interpreted so as (a) to make it
enforceable or valid and (b) to make the distributions and
allocations as closely equivalent to those set forth in this
Agreement as is permissible under applicable law.
SECTION 16.4. FILINGS. Following the execution and
delivery of this Agreement, the Manager shall promptly prepare
any documents required to be filed and recorded under the
Delaware Act, and the Manager shall promptly cause each such
document to be filed and recorded in accordance with the Delaware
Act and, to the extent required by local law, to be filed and
recorded or notice thereof to be published in the appropriate
place in each jurisdiction in which the Company may hereafter
establish a place of business. The Manager shall also promptly
cause to be filed, recorded and published such statements or
other instruments required by any provision of any applicable law
of the United States or any state or other jurisdiction which
governs the conduct of its business from time to time.
SECTION 16.5. POWER OF ATTORNEY. Each Preferred Member does
hereby constitute and appoint the Manager as its true and lawful
representative and attorney-in-fact, in its name, place and stead
to make, execute, sign, deliver and file (a) any amendment of the
Certificate required because of an amendment to this Agreement or
in order to effectuate any change in the membership of the
Company, (b) any amendment to this Agreement made in accordance
with the terms hereof and (c) all such other instruments,
documents and certificates which may from time to time be
required by the laws of the United States of America, the State
of Delaware or any other jurisdiction, or any political
subdivision of agency thereof, to effectuate, implement and
continue the valid and subsisting existence of the Company or to
dissolve the Company or for any other purpose consistent with
this Agreement and the transactions contemplated hereby.
The power of attorney granted hereby is coupled with an
interest and shall (a) survive and not be affected by the
subsequent death, incapacity, disability, dissolution,
termination or bankruptcy of the Preferred Member granting the
same or the transfer of all or any portion of such Preferred
Member's Interest and (b) extend to such Preferred Member's
successors, assigns and legal representatives.
SECTION 16.6. EXCULPATION.
(a) No Covered Person shall be liable to the Company
or any Member for any loss, damage or claim incurred by reason of
any act or omission performed or omitted by such Covered Person
in good faith on behalf of the Company and in a manner reasonably
believed to be within the scope of authority conferred on such
Covered Person by this Agreement.
(b) A Covered Person shall be fully protected in relying in
good faith upon the records of the Company and upon such
information, opinions, reports or statements presented to the
Company by any Person as to matters the Covered Person reasonably
believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or
on behalf of the Company, including information, opinions,
reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the
existence and amount of assets from which distributions to
Members might properly be paid.
SECTION 16.7. INDEMNIFICATION. To the fullest extent
permitted by applicable law, an Indemnified Person shall be
entitled to indemnification from the Company for any loss, damage
or claim incurred by such Indemnified Person by reason of any act
or omission performed or omitted by such Indemnified Person in
good faith on behalf of the Company and in a manner reasonably
believed to be within the scope of authority conferred on such
Indemnified Person by this Agreement; provided, however, that any
indemnity under this Section 16.7 shall be provided out of and to
the extent of Company assets only, and no Member shall have any
personal liability on account thereof. The right of
indemnification pursuant to this Section 16.7 shall include the
right to be paid, in advance, or reimbursed by the Company for
the reasonable expenses incurred by an Indemnified Person who
was, is, or is threatened to be made a named defendant or
respondent in a proceeding.
SECTION 16.8. ADDITIONAL DOCUMENTS. Each Preferred Member,
upon the request of the Manager, agrees to perform all further
acts and execute, acknowledge and deliver any documents that may
be reasonably necessary to carry out the provisions of this
Agreement.
SECTION 16.9. NOTICES. All notices provided for in this
Agreement shall be in writing, duly signed by the party giving
such notice, and shall be delivered, telecopied or mailed by
registered or certified mail, as follows:
(i) If given to the Company, in care of Manager
at the Company's mailing address set forth below:
c/o ICG Communications, Inc.
9605 East Maroon Circle
P.O. Box 6742
Englewood, Colorado 80155-6742
Facsimile No.: (303) 799-6985
Attention: Executive Vice President and
Chief Financial Officer
with copies to:
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Attention: Audrey A. Rohan, Esq.
(ii) If given to any Member, at the address set
forth on the registration books maintained by or on
behalf of the Company.
Each such notice, request or other communication shall be
effective (a) if given by telecopier, when transmitted to the
number specified in such registration books and the appropriate
confirmation is received, (b) if given by mail, 72 hours after
such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid, or (c) if given by any
other means, when delivered at the address specified in such
registration books.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above stated.
COMMON MEMBER AND MANAGER:
ICG COMMUNICATIONS, INC.
By: /s/ J. Shelby Bryan
----------------------------
J. Shelby Bryan
President and
Chief Executive Officer
WITHDRAWING PROVISIONAL MEMBER:
/s/ James D. Grenfell
------------------------------
JAMES D. GRENFELL
Exhibit 4.5
-----------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated September 24, 1997
among
ICG COMMUNICATIONS, INC.,
ICG FUNDING, INC.
and
MORGAN STANLEY & CO. INCORPORATED
DEUTSCHE MORGAN GRENFELL INC.
-----------------------------------------------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is
made and entered into September 24, 1997, among ICG FUNDING, LLC,
a Delaware limited liability company ("Funding"), ICG
COMMUNICATIONS, INC., a Delaware corporation ("ICG"), and MORGAN
STANLEY & CO. INCORPORATED and DEUTSCHE MORGAN GRENFELL INC. (the
"Placement Agents").
This Agreement is made pursuant to the Placement
Agreement dated September 18, 1997, among Funding, ICG and the
Placement Agents (the "Placement Agreement"), which provides for
the sale by Funding and ICG to the Placement Agents of an
aggregate of 2,300,000 of Funding's 6 % Exchangeable Limited
Liability Company Preferred Securities, liquidation preference
$50 per preferred security (the "Preferred Securities").
Pursuant to the Placement Agreement, Funding and ICG also propose
to issue and sell to the Placement Agents not more than an
additional 345,000 Preferred Securities, if and to the extent
that the Placement Agents shall have determined to exercise the
right to purchase such additional Preferred Securities granted to
the Placement Agents. In order to induce the Placement Agents to
enter into the Placement Agreement, Funding and ICG have agreed
to provide to (i) the Placement Agents and (ii) the holders from
time to time of the Preferred Securities and the shares of the
Common Stock, par value $.01 per share ("ICG Common Stock"), of
ICG issuable upon exchange of the Preferred Securities (together
with the Preferred Securities, the "Securities") the registration
rights 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:
"Average Market Value" of the ICG Common Stock shall
--------------------
mean the average of the Current Market Value for the ten
trading days ending on the second business day prior to the
applicable date of payment.
"Closing Date" shall mean the Closing Date as defined
------------
in the Placement Agreement.
"Current Market Value" of the ICG Common Stock shall
--------------------
mean (i) the Volume Weighted Average Price, as reported on
the Nasdaq National Market or (ii) the average of the high
and low sales prices of the ICG Common Stock, if reported on
any other national securities exchange.
"Funding" shall have the meaning set forth in the
-------
preamble and shall also include Funding's successors.
"Holder" shall mean the Placement Agent, for so long as
------
it owns any Registrable Securities, and the holders from
time to time of the Registrable Securities.
"ICG" shall have the meaning set forth in the preamble
---
and shall also include ICG's successors.
"ICG Common Stock" shall have the meaning set forth in
----------------
the preamble.
"LLC Agreement" shall mean the LLC Agreement as defined
-------------
in the Placement Agreement.
"Majority Holders" shall mean the Holders of a majority
----------------
of the aggregate principal amount of outstanding Registrable
Securities; provided that whenever the consent or approval
--------
of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities
held by ICG or Funding or any of their affiliates (as such
term is defined in Rule 405 under the 1933 Act) (other than
the Placement Agents or subsequent holders of Registrable
Securities if such subsequent holders are deemed to be such
affiliates solely by reason of their holding of such
Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of
such required percentage or amount.
"Morgan Stanley" shall mean Morgan Stanley & Co.
--------------
Incorporated.
"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.
"Person" shall mean an individual, partnership,
------
corporation, trust or unincorporated organization, or a
government or agency or political subdivision thereof.
"Placement Agents" shall have the meaning set forth in
----------------
the preamble.
"Placement Agreement" shall have the meaning set forth
-------------------
in the preamble.
"Preferred Securities" shall have the meaning set forth
--------------------
in the preamble.
"Prospectus" shall mean the prospectus included in a
----------
Shelf Registration Statement, including any preliminary
prospectus, and any such prospectus as amended or
supplemented by any prospectus supplement, and by all other
amendments and supplements to such prospectus, and in each
case including all material incorporated by reference
therein.
"Registrable Securities" shall mean the Securities;
----------------------
provided, however, that the Securities shall cease to be
-------- -------
Registrable Securities (i) when a Shelf Registration
Statement with respect to such Securities shall have been
declared effective under the 1933 Act and such Securities
shall have been disposed of pursuant to such Shelf
Registration Statement, (ii) when such Securities 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 Securities shall have ceased to be
outstanding.
"Registration Expenses" shall mean any and all expenses
---------------------
incident to performance of or compliance by Funding 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
Registrable Securities), (iii) all expenses of any Persons
in preparing or assisting in preparing, word processing,
printing and distributing any Shelf 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 the Transfer Agent
and its counsel, if any, (vi) the fees and disbursements of
counsel for Funding and ICG and 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 Agents) and (vii) the fees and
disbursements of the independent public accountants of
Funding 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
(other than as set forth in clause (vi) above) and
underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of Registrable
Securities by a Holder.
"SEC" shall mean the Securities and Exchange
---
Commission.
"Securities" shall have the meaning set forth in the
----------
preamble.
"Shelf Registration" shall mean a registration effected
------------------
pursuant to Section 2(a) hereof.
"Shelf Registration Statement" shall mean a "shelf"
----------------------------
registration statement of ICG and Funding pursuant to the
provisions of Section 2(a) of this Agreement which covers
all of the Registrable Securities 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.
"Underwriters" shall have the meaning set forth in
------------
Section 3 hereof.
"Underwritten Registration" or "Underwritten Offering"
------------------------- ---------------------
shall mean a registered offering in which Registrable
Securities are sold to an Underwriter for reoffering to the
public.
2. Registration Under the 1933 Act.
-------------------------------
(a) Funding and ICG shall, within 90 days following
the Closing Date, file with the SEC a Shelf Registration
Statement relating to the offer and sale of the Registrable
Securities by the Holders from time to time in accordance with
the methods of distribution elected by such Holders and set forth
in such Shelf Registration Statement and, thereafter, shall each
use their best efforts to cause such Shelf Registration Statement
to be declared effective under the 1933 Act within 180 calendar
days following the Closing Date. Each of ICG and Funding agrees
to use its best efforts to keep the Shelf Registration Statement
continuously effective until November 15, 2009 (or, if, in the
written opinion, satisfactory in form and substance to the
Placement Agents, of counsel to ICG and Funding, which counsel
shall be reasonably satisfactory to the Placement Agents, all
outstanding Registrable Securities held by persons which are not
affiliates of ICG or Funding may be resold at an earlier date
without registration under the 1933 Act pursuant to Rule 144(k)
under the 1933 Act or any successor provision thereof, then until
such earlier date) or such shorter period that will terminate
when all of the Registrable Securities covered by the Shelf
Registration Statement have been sold pursuant to a Shelf
Registration Statement. ICG and Funding 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 ICG and Funding 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 thereafter practicable.
ICG and Funding agree to furnish to the Holders of Registrable
Securities copies of any such supplement or amendment promptly
after its being used or filed with the SEC.
(b) ICG shall pay all Registration Expenses in
connection with the registration pursuant to Section 2(a). 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 Securities pursuant to the Shelf
Registration Statement.
(c) A Shelf Registration Statement pursuant to Section
2(a) hereof will not be deemed to have become effective unless it
has been declared effective by the SEC; provided, however, that,
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if, after it has been declared effective, the offering of
Registrable Securities 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 Shelf Registration Statement will be deemed not to
have become effective during the period of such interference
until the offering of Registrable Securities pursuant to such
Shelf Registration Statement may legally resume. As provided in
the LLC Agreement, if on or prior to the 90th day following the
Closing Date, the Shelf Registration Statement has not been
filed, dividends payable on the Preferred Securities (in addition
to the dividends otherwise payable on the Preferred Securities)
will accrue at an annual rate of 0.25% of the liquidation
preference thereof until the Shelf Registration Statement is
filed, and if on or prior to the 180th day following the Closing
Date, the Shelf Registration Statement is not declared effective,
dividends payable on the Preferred Securities (in addition to the
dividends otherwise payable on the Preferred Securities) will
accrue at an additional annual rate of 0.25% of the liquidation
preference thereof until the Shelf Registration Statement is
declared effective, in each case payable in (i) cash, (ii) shares
of ICG Common Stock, valued at 90% of the Average Market Value of
the ICG Common Stock, or (iii) any combination of cash or ICG
Common Stock (provided that such payment must be made in cash to
the extent ICG shall have provided Funding with cash to make all
or any portion of such payment).
(d) Without limiting the remedies available to the
Placement Agents and the Holders, ICG and Funding acknowledge
that any failure by ICG and Funding to comply with their
respective obligations under Section 2(a) hereof may result in
material irreparable injury to the Placement Agents 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 Agents or any Holder may obtain such relief as may be
required to specifically enforce ICG's and Funding's obligations
under Section 2(a) hereof.
3. Registration Procedures.
-----------------------
In connection with the obligations of ICG and Funding
with respect to the Shelf Registration Statements pursuant to
Section 2(a) hereof, ICG and Funding shall as expeditiously as
possible:
(a) prepare and file with the SEC a Shelf Registration
Statement on the appropriate form under the 1933 Act, which
form (x) shall be selected by ICG and Funding and (y) shall
be available for the sale of the Registrable Securities 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 Shelf 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 a Shelf Registration Statement
as may be necessary to keep such Shelf 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
Securities;
(c) furnish to each Holder of Registrable Securities,
to counsel for the Placement Agents, to counsel for the
Holders and to each Underwriter of an Underwritten Offering
of Registrable Securities, 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 Securities; and ICG and
Funding 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
Securities and any such Underwriters in connection with the
offering and sale of the Registrable Securities 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 the
Registrable Securities under all applicable state securities
or "blue sky" laws of such jurisdictions as any Holder of
Registrable Securities covered by a Shelf Registration
Statement shall reasonably request in writing by the time
the Shelf Registration Statement is declared effective by
the SEC, to cooperate with such Holders 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
Securities owned by such Holder; provided, however, that
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neither ICG nor Funding 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) notify each Holder of Registrable Securities,
counsel for the Holders and counsel for the Placement Agents
promptly and, if requested by any such Holder or counsel,
confirm such advice in writing (i) when a Shelf 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 Shelf Registration
Statement and Prospectus or for additional information after
the Shelf 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 Shelf
Registration Statement or the initiation of any proceedings
for that purpose, (iv) if, between the effective date of a
Shelf Registration Statement and the closing of any sale of
Registrable Securities covered thereby, the representations
and warranties of ICG and Funding 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 ICG and
Funding receive any notification with respect to the
suspension of the qualification of the Registrable
Securities 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 Shelf
Registration Statement or the related Prospectus untrue in
any material respect or which requires the making of any
changes in such Shelf Registration Statement or Prospectus
in order to make the statements therein not misleading and
(vi) of any determination by ICG and Funding that a post-
effective amendment to a Shelf Registration Statement would
be appropriate;
(f) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of a
Shelf Registration Statement at the earliest possible moment
and provide immediate notice to each Holder of the
withdrawal of any such order;
(g) furnish to each Holder of Registrable Securities,
without charge, at least one conformed copy of each Shelf
Registration Statement and any post-effective amendment
thereto (without documents incorporated therein by reference
or exhibits thereto, unless requested);
(h) cooperate with the selling Holders of Registrable
Securities to facilitate the timely preparation and delivery
of certificates representing Registrable Securities to be
sold and not bearing any restrictive legends and enable such
Registrable Securities to be in such denominations
(consistent with the provisions of the LLC Agreement) 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 Securities;
(i) upon the occurrence of any event contemplated by
Section 3(e)(v) hereof, use their best efforts to prepare
and file with the SEC a supplement or post-effective
amendment to a Shelf 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 Securities,
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. ICG and Funding
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 ICG and Funding have amended or
supplemented the Prospectus to correct such misstatement or
omission;
(j) within a reasonable time prior to the filing of
any Shelf Registration Statement, any Prospectus, any
amendment to a Shelf Registration Statement or amendment or
supplement to a Prospectus or any document which is to be
incorporated by reference into a Shelf Registration
Statement or a Prospectus after initial filing of a Shelf
Registration Statement, provide copies of such document to
the Placement Agents and their counsel and the Holders and
their counsel and make such representatives of ICG or
Funding as shall be reasonably requested by the Placement
Agents or their counsel and the Holders or their counsel,
available for discussion of such document, and shall not at
any time file or make any amendment to a Shelf Registration
Statement, any Prospectus or any amendment of or supplement
to a Shelf Registration Statement or a Prospectus or any
document which is to be incorporated by reference into a
Shelf Registration Statement or a Prospectus, of which the
Placement Agents and their counsel and the Holders and their
counsel shall not have previously been advised and furnished
a copy or to which the Placement Agents or their counsel and
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 Agents and their
counsel and the Holders and their counsel) which counsel to
ICG and Funding shall advise ICG and Funding, in the form of
a written legal opinion, is required in order to comply with
applicable law;
(k) obtain a CUSIP number for all Registrable
Securities not later than the effective date of a Shelf
Registration Statement;
(l) make available for inspection by a representative
of the Holders of the Registrable Securities, any
Underwriter participating in any disposition pursuant to a
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 ICG and Funding, and
cause the respective officers, directors and employees of
ICG and Funding to supply all information reasonably
requested by any such representative, Underwriter, attorney
or accountant in connection with a Shelf Registration
Statement;
(m) use their best efforts to cause all shares of ICG
Common Stock issuable upon exchange of or payable as
dividends on the Preferred Securities to be listed on the
Nasdaq National Market;
(n) use their best efforts to cause all Preferred
Securities to be listed on any securities exchange or any
automated quotation system on which similar securities
issued by ICG or Funding are then listed if requested by the
Majority Holders, to the extent such Preferred Securities
satisfy applicable listing requirements;
(o) if reasonably requested by any Holder of
Registrable Securities covered by a Shelf 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 ICG and Funding have received notification of the
matters to be incorporated in such filing; and
(p) 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
Securities being sold) in order to expedite or facilitate
the disposition of such Registrable Securities 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 Securities with respect to
the business of ICG and Funding and their subsidiaries, the
Shelf 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 ICG and
Funding (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 Securities, covering the matters customarily
covered in opinions requested in underwritten offerings,
(iii) obtain "cold comfort" letters from the independent
certified public accountants of ICG and Funding (and, if
applicable, any other certified public accountant of any
subsidiary of ICG and Funding, or of any business acquired
by ICG or Funding for which financial statements and
financial data are or are required to be included in the
Shelf Registration Statement) addressed to each selling
Holder and Underwriter of Registrable Securities, 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 of the Registrable
Securities being sold or the Underwriters, and which are
customarily delivered in underwritten offerings, to evidence
the continued validity of the representations and warranties
of ICG and Funding made pursuant to clause (i) above and to
evidence compliance with any customary conditions contained
in an underwriting agreement.
ICG and Funding may require each Holder of Registrable
Securities to furnish to ICG and Funding such information
regarding the Holder and the proposed distribution by such Holder
of such Registrable Securities as ICG and Funding may from time
to time reasonably request in writing.
Each Holder agrees that, upon receipt of any notice
from ICG and Funding of the happening of any event of the kind
described in Section 3(e)(v) hereof, such Holder will forthwith
discontinue disposition of Registrable Securities pursuant to a
Shelf 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 ICG and Funding, such
Holder will deliver to ICG and Funding (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 Securities current at the time of receipt of such
notice. If ICG and Funding shall give any such notice to suspend
the disposition of Registrable Securities pursuant to a Shelf
Registration Statement, ICG and Funding shall extend the period
during which such Shelf 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 Securities covered by a
Shelf Registration Statement who desire to do so may sell such
Registrable Securities 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 Securities included in such offering.
4. Indemnification and Contribution.
--------------------------------
(a) Each of Funding and ICG, jointly and severally,
agrees to indemnify and hold harmless each Placement Agent, each
Holder and each person, if any, who controls any 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, any 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 any 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 Shelf Registration Statement (or any
amendment thereto) pursuant to which Registrable Securities 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 ICG and Funding 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 any Placement Agent
or any Holder furnished to ICG and Funding in writing by any
Placement Agent through Morgan Stanley or any selling Holder
expressly for use therein. In connection with any Underwritten
Offering permitted by Section 3 of this Agreement, each of ICG
and Funding, jointly and severally, 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 a Shelf Registration Statement.
(b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless ICG, Funding, each Placement Agent
and the other selling Holders, and each of their respective
directors, officers who sign a Shelf Registration Statement and
each Person, if any, who controls ICG or Funding, any 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 ICG and Funding to
the Placement Agents and the Holders, but only with reference to
information relating to such Holder furnished to ICG and Funding
in writing by such Holder expressly for use in a Shelf
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 Agents
and all Persons, if any, who control the Placement Agents 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 ICG and Funding,
ICG's directors, their officers who sign the Shelf Registration
Statement and each Person, if any, who controls ICG or Funding
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 Agents and Persons who
control any Placement Agent, such firm shall be designated in
writing by Morgan Stanley. 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 ICG, Funding 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 ICG and Funding 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
4(d) are several in proportion to the respective number of
Registrable Securities of such Holder that were registered
pursuant to a Shelf Registration Statement.
(e) ICG, Funding and each Holder agree that it would
not be just or equitable if contribution pursuant to this Section
4 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 4, no Holder shall be required to
contribute any amount in excess of the amount by which the total
price at which Registrable Securities 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 4 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) The indemnity and contribution provisions
contained in this Section 4 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 Agents, any Holder or any Person controlling any
Placement Agent or any Holder, or by or on behalf of ICG,
Funding, their officers or ICG's directors or any Person
controlling ICG or Funding and (iii) any sale of Registrable
Securities pursuant to a Shelf Registration Statement.
5. Miscellaneous.
-------------
(a) No Inconsistent Agreements. Neither ICG nor
--------------------------
Funding 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 Securities 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 ICG's or
Funding'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 ICG
and Funding have obtained the written consent of Holders of at
least a majority in aggregate liquidation preference of the
outstanding Preferred Securities 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 4 hereof shall be
effective as against any Holder of Registrable Securities 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 ICG and
Funding by means of a notice given in accordance with the
provisions of this Section 5(c), which address initially is, with
respect to the Placement Agents, the address set forth in the
Placement Agreement; and (ii) if to ICG or Funding, initially at
ICG's or Funding's addresses set forth in the Placement Agreement
and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 5(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.
(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 Securities in violation of the terms
of the Placement Agreement. If any transferee of any Holder
shall acquire Registrable Securities, in any manner, whether by
operation of law or otherwise, such Registrable Securities shall
be held subject to all of the terms of this Agreement, and by
taking and holding such Registrable Securities 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 Agents (solely in their capacity as Placement
Agents) shall have no liability or obligation to ICG or Funding
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 Securities. ICG and
---------------------------------
Funding 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
Securities.
(f) Third Party Beneficiary. The Holders shall be
-----------------------
third party beneficiaries to the agreements made hereunder
between ICG and Funding, on the one hand, and the Placement
Agents, 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. This
-----------------------------------------
Agreement shall be governed by and construed in accordance with
the laws of the State of New York. Each of ICG and Funding
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 COMMUNICATIONS, INC.
By /s/ J. Shelby Bryan
-------------------------------
Name: J. Shelby Bryan
Title: President and Chief
Executive Officer
ICG FUNDING, LLC
By ICG Communications, Inc.,
its Manager
By /s/ J. Shelby Bryan
-------------------------------
Name: J. Shelby Bryan
Title: President and Chief
Executive Officer
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
DEUTSCHE MORGAN GRENFELL INC.
By /s/ James F. Miller
------------------------------
Name: James F. Miller
Title: Managing Director
Exhibit 4.6
GUARANTEE AGREEMENT
THIS GUARANTEE AGREEMENT (this "Guarantee"), dated as
of September 24, 1997, is executed and delivered by ICG
Communications, Inc., a corporation organized under the laws of
the State of Delaware ("ICG"), and ICG Funding, LLC, a limited
liability company organized under the laws of the State of
Delaware "Funding") for the benefit of the Holders (as
hereinafter defined) from time to time of the Preferred
Securities (as hereinafter defined) of Funding.
WHEREAS, Funding intends to issue and sell exchangeable
limited liability company preferred securities ("Preferred
Securities"), and, it is required for the closing of such
issuance that ICG issue this Guarantee for the benefit of the
Holders of the Preferred Securities, as provided herein; and
WHEREAS, Funding will purchase the ICG Preferred Stock
(as hereinafter defined) with an amount equal to 85% of the
proceeds from the issuance and sale of the Preferred Securities
and its other common limited liability company interests (the
"Common Securities"); and
WHEREAS, ICG, for its own reasons, desires hereby to
unconditionally and irrevocably guarantee, to the extent set
forth herein, the payment in full to the Holders of the Guarantee
Payments (as hereinafter defined) and the performance of the
other obligations set forth herein.
NOW, THEREFORE, in consideration of the purchase by
each Holder of the Preferred Securities, which purchase ICG
hereby agrees shall benefit ICG, ICG executes and delivers this
Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS
As used in this Guarantee, the terms set forth below shall,
unless the context otherwise requires, have the following
meanings. Capitalized terms used herein but not otherwise
defined herein shall have the meanings ascribed to such terms in
the Amended and Restated Limited Liability Company Agreement of
Funding, dated as of September 23, 1997 (the "LLC Agreement").
1.1 "Exchange Agent" shall mean ICG and its successors (or
such substitute entity as may be designated from time to time by
the Manager (as hereinafter defined), acting as agent of the
Holders in effecting the exchange of the Preferred Securities
into ICG Common Stock in such manner as may be set forth in the
LLC Agreement and the Declaration with respect to such series of
Preferred Securities.
1.2 "Declaration" shall mean the written action adopted by
the Manager pursuant to the LLC Agreement relating to the
Preferred Securities.
1.3 "Dividends" shall mean, with respect to the Preferred
Securities, the cumulative distributions from Funding with
respect to the Preferred Securities, accruing and payable in the
manner set forth in the Declaration with respect to such series
of Preferred Securities.
1.4 "Guarantee Payments" shall mean, the following
payments, without duplication, to the extent not paid by Funding:
(i) any accrued and unpaid distributions that are required to be
paid on the Preferred Securities, to the extent Funding has funds
available therefor, (ii) the Redemption Price (as herein
defined), with respect to any Preferred Securities called for
redemption by Funding, to the extent Funding has funds available
therefor and (iii) upon a voluntary or involuntary dissolution,
winding-up or termination of Funding, the lesser of (a) the
aggregate of the liquidation preference and all accrued and
unpaid dividends on the Preferred Securities to the date of
payment to the extent Funding has funds available therefor and
(b) the amount of assets of Funding remaining available for
distribution to holders of Preferred Securities upon the
liquidation of Funding.
1.5 "Holder" shall mean the registered holder from time to
time of Preferred Securities.
1.6 "ICG Common Stock" shall mean the common stock of ICG,
par value $.01 per share.
1.7 "ICG Preferred Stock" shall mean the preferred stock
mandatorily redeemable 2009 of ICG, par value $.01 per share.
1.8 "Manager" means ICG, in its capacity as the manager of
Funding, or any permitted successor manager of Funding admitted
as such pursuant to the applicable provisions of the LLC
Agreement.
1.9 "Redemption Price" shall mean, (i) with respect to a
mandatory redemption by Funding, 100% of the liquidation
preference of the Preferred Securities plus accumulated and
unpaid dividends (whether or not earned or declared), to the date
fixed for redemption thereof, (ii) with respect to a provisional
redemption by Funding on or prior to November 15, 2000, 103% of
the liquidation preference of the Preferred Securities plus
accumulated and unpaid dividends (whether or not earned or
declared) to the date fixed for redemption thereof, and (iii)
with respect to an optional redemption by Funding on or after
November 18, 2000, (a) 102% of the liquidation preference, if
redeemed from November 18, 2000 to November 14, 2001, (b) 101% of
the liquidation preferred, if redeemed from November 15, 2001 to
November 14, 2002, or (c) 100% of the liquidation preference, if
redeemed on or after November 15, 2002, of the Preferred
Securities plus accumulated and unpaid dividends (whether or not
earned or declared) to the date fixed for redemption.
ARTICLE II
GUARANTEE
2.1 GENERAL. ICG irrevocably and unconditionally agrees to
pay in full to the Holders of the Preferred Securities the
Guarantee Payments with respect to the Preferred Securities, as
and when due (except to the extent previously paid by Funding),
regardless of any defense, right of set-off or counterclaim which
Funding may have or assert. ICG's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required
amounts by ICG to the Holders of the Preferred Securities or by
causing Funding to pay such amounts to such Holders.
2.2 WAIVER OF CERTAIN RIGHTS. ICG hereby waives, to the
fullest extent permitted by applicable law, notice of acceptance
of this Guarantee and of any liability to which it applies or may
apply, presentment, demand for payment, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all
other notices and demands.
2.3 OBLIGATIONS NOT AFFECTED. The obligations, covenants,
agreements and duties of ICG under this Guarantee shall in no way
be affected or impaired by reason of the happening from time to
time of any of the following:
(a) the release or waiver, by operation of law or
otherwise, of the performance or observance by Funding of
any express or implied agreement, covenant, term of
condition relating to the Preferred Securities to be
performed or observed by Funding;
(b) the extension of time for the payment by Funding
of all or any portion of the Dividends, Redemption Price,
liquidation distribution or any other sums payable under the
terms of the Preferred Securities or the extension of time
for the performance of any other obligation under, arising
out of, or in connection with, the Preferred Securities;
(c) any failure, omission, delay or lack of diligence
on the part of the Holders of Preferred Securities to
enforce, assert or exercise any right, privilege, power or
remedy conferred on such Holders pursuant to the terms of
the Preferred Securities, or any action on the part of
Funding granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation,
dissolution, winding-up, sale of any collateral,
receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement,
composition or readjustment of debt of, or other similar
proceedings affecting, Funding or any of the assets of
Funding;
(e) any invalidity of, or defect or deficiency in, any
of the Preferred Securities;
(f) the settlement or compromise of any obligation
guaranteed hereby or hereby incurred; or
(g) to the fullest extent permitted by applicable law,
any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a
guarantor.
There shall be no obligation of any Holders of Preferred
Securities to give notice to, or obtain any consent of, ICG with
respect to the happening of any of the foregoing.
2.4 PROCEEDING DIRECTLY AGAINST ICG. This Guarantee is a
guarantee of payment and not of collection. A Holder of
Preferred Securities may enforce this Guarantee with respect to
the Preferred Securities directly against ICG, and ICG waives any
right or remedy to require that any action be brought against
Funding or any other person or entity before proceeding against
ICG. Subject to Section 2.5 hereof, all waivers herein contained
shall be without prejudice to the right of a Holder, at its
option, to proceed against Funding,whether by separate action or
by joinder. ICG agrees that this Guarantee shall not be
discharged except by payment of the Guarantee Payments in full
(to the extent not previously paid by Funding) and by complete
performance of all obligations under this Guarantee.
2.5 SUBROGATION. ICG shall be subrogated to all (if any)
rights of the Holders of Preferred Securities against ICG in
respect of any amounts paid to such Holders by ICG under this
Guarantee and shall have the right to waive payment by Funding of
any amount of Dividends in respect of which payment has been made
to the Holders by it pursuant to Section 2.1 hereof; provided,
however, that ICG shall not (except to the extent required by
mandatory provisions of law) exercise any rights which it may
acquire by way of subrogation or any indemnity, reimbursement or
other agreement, in all cases as a result of a payment under this
Guarantee, if, at the time of any such payment, any amounts are
due and unpaid under this Guarantee. If any amount shall be paid
to ICG in violation of the preceding sentence, ICG agrees to hold
such amount in trust for the Holders and to pay over such amount
promptly to the Holders.
2.6 INDEPENDENT OBLIGATIONS. ICG acknowledges that its
obligations hereunder are independent of the obligations of
Funding with respect to the Preferred Securities and that ICG
shall be liable as principal and sole debtor under this Guarantee
to make Guarantee Payments in full pursuant to the terms of this
Guarantee notwithstanding the occurrence of any event referred to
in subsections (a) through (g), inclusive, of Section 2.3 hereof.
2.7 TERMINATION. This Guarantee shall terminate and be of
no further force and effect as to the Preferred Securities of any
series upon (a) full payment of the Redemption Price of all
outstanding Preferred Securities, or (b) the exchange (in the
manner provided in the LLC Agreement and the Declaration) of all
of the Preferred Securities for ICG Common Stock. In
addition,this Guarantee will terminate completely upon the
distribution to the holders of the Preferred Securities of all of
the assets of Funding, including the ICG Preferred Stock, any
interest on and principal of the Treasury Strips that are held in
the Escrow Account and any ICG Common Stock that Funding received
from ICG as a dividend (or otherwise) and has not distributed on
the Preferred Securities or sold in the open market.
Notwithstanding the foregoing, this Guarantee shall continue to
be effective or, to the fullest extent permitted by applicable
law, shall be reinstated, as the case may be, with respect to the
Preferred Securities if at any time any Holder of such Preferred
Securities must restore payment of any sums recovered on account
of, or must redeliver any securities received on account of, such
Preferred Securities or under this Guarantee for any reason
whatsoever.
2.8 SUBJECT TO INDENTURES. The obligations of ICG under
this Guarantee shall not be enforceable except to the extent
permitted under the provisions of the indenture pursuant to which
the 13 1/2% Senior Discount Notes due 2005 were issued, the
indenture pursuant to which the 12 1/2% Senior Discount Notes due
2006 were issued and the indenture pursuant to which the 11 5/8%
Senior Discount Notes due 2007 were issued.
ARTICLE III
CERTAIN COVENANTS OF ICG
3.1 COVENANTS. So long as the Preferred Securities remain
outstanding, ICG shall: (a) not cause or permit any Common
Securities to be transferred (other than in connection with a
merger or consolidation); (b) maintain direct or indirect
ownership of all outstanding Common Securities and any other
limited liability company interests in Funding other than the
Preferred Securities (except as may be permitted in the LLC
Agreement); (c) not voluntarily liquidate, dissolve or wind-up
itself (other than in connection with a merger or consolidation)
or cause Funding (other than in connection with or after an
exchange of all outstanding Preferred Securities) to liquidate,
dissolve or wind-up; (e) to remain the Manager and to timely
perform all of its duties as Manager (including the duty to cause
Funding to declare and pay dividends on all outstanding Preferred
Securities to the extent set forth in the LLC Agreement and the
Declaration) and (f) subject to the terms of the Preferred
Securities, use reasonable efforts to cause Funding to remain a
Delaware limited liability company and otherwise continue to be
treated as a partnership for United States federal income tax
purposes.
ARTICLE IV
STATUS
4.1 STATUS. This Guarantee constitutes an unsecured
obligation of ICG ranking subordinate and junior in right of
payment to all other liabilities of ICG and senior to ICG Common
Stock.
ARTICLE V
EXCHANGE OF PREFERRED SECURITIES
5.1 ISSUANCE OF ICG COMMON STOCK. ICG shall reserve and
keep available out of its authorized and unissued ICG Common
Stock (solely for issuance upon the exchange of the Preferred
Securities), free of any preemptive or other similar rights, the
number of full shares of ICG Common Stock deliverable to the
Holders upon the exchange of all outstanding Preferred Securities
not theretofore converted by the Holders.
5.2 VALIDITY OF ICG COMMON STOCK. All shares of ICG Common
Stock delivered by ICG upon such exchange will be duly
authorized, validly issued and fully paid and nonassessable.
ARTICLE VI
MISCELLANEOUS
6.1 THIRD PARTY BENEFICIARIES. All of ICG's obligations
under this Guarantee shall be directly enforceable by the Holders
from time to time of the Preferred Securities. Each Holder of
Preferred Securities is an intended third-party beneficiary of
this Guarantee.
6.2 SUCCESSORS AND ASSIGNS. All provisions contained in
this Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of ICG and shall inure to the
benefit of the Holders. Except in connection with any permitted
merger or consolidation of ICG with or into another entity or any
permitted sale, transfer or lease of ICG's assets to another
entity, ICG may not assign its rights or delegate its obligations
under this Guarantee without the prior approval of the holders of
at least a majority in liquidation preference of the Preferred
Securities then outstanding.
6.3 AMENDMENTS. Except with respect to any changes which
do not have a material adverse effect on the rights of any
Holders of Preferred Securities (in which case no vote will be
required, provided that the board of directors of ICG makes a
determination, evidenced by resolution, that such change will not
have a material adverse effect on the holders of Preferred
Securities), this Guarantee may be amended with respect to the
Preferred Securities only with the prior approval (obtained in
the manner set forth in the LLC Agreement and the applicable
Declaration) of the Holders of not less than a majority of the
aggregate liquidation preference of the outstanding Preferred
Securities.
6.4 NOTICE. Any notice, request of other communication
required or permitted to be given hereunder shall be given in
writing by delivering the same against receipt therefor by
registered mail, hand delivery, facsimile transmission (confirmed
by registered mail)or telex, addressed to ICG, as follows (and if
so given, shall be deemed given when mailed; upon receipt of
facsimile confirmation, if sent by facsimile transmission; or
upon receipt of an answer-back, if sent by telex):
ICG Communications, Inc.
9605 E. Maroon Circle
Englewood, CO 80112
Attention: General Counsel
Telecopy (303) 575-6278
ICG Funding, LLC
9605 E. Maroon Circle
Englewood, CO 80112
Attention: General Counsel
Telecopy (303) 575-6278
6.5 GENDERS. The masculine and neuter genders used here
shall include the masculine, feminine and neuter genders.
6.6 GUARANTEE NOT SEPARATELY TRANSFERABLE. This Guarantee
is solely from the benefit of the Holders and is not separately
transferable from the Preferred Securities.
6.7 GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK.
6.8 SEVERABILITY. In case any provision of this Guarantee
shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not
in any way be affected or impaired.
6.9 HEADINGS. The Article and section headings herein are
for convenience only and shall not affect the construction
hereof.
<PAGE>
IN WITNESS WHEREOF, ICG has caused this Agreement to be duly
executed as of the day and year first above written.
ICG Communications, Inc.
By: /s/ J. Shelby Bryan
--------------------------------
Name: J. Shelby Bryan
Title: President and
Chief Executive Officer
ATTEST:
/s/ Audrey Rohan
-----------------------------
Asst. Secretary
ICG Funding, LLC
By: ICG Communications, Inc., its
manager
By: /s/ J. Shelby Bryan
--------------------------------
Name: J. Shelby Bryan
Title: President and
Chief Executive Officer
ATTEST:
/s/ Audrey Rohan
-----------------------------
Asst. Secretary
Exhibit 4.7
ESCROW AND SECURITY AGREEMENT
This ESCROW AND SECURITY AGREEMENT (this "Escrow
------
Agreement") is made and entered into as of September 24, 1997
---------
among ICG FUNDING, LLC, a Delaware limited liability company (the
"Issuer"), ICG COMMUNICATIONS, INC. ("ICG"), a Delaware
------ ---
corporation, and NORWEST BANK COLORADO, NATIONAL ASSOCIATION, as
escrow agent (the "Escrow Agent") for the holders (the "Holders")
------------ -------
of the Preferred Securities (as defined herein) issued by the
Issuer under the LLC Agreement referred to below.
W I T N E S S E T H
WHEREAS, pursuant to the Placement Agreement (the
"Placement Agreement") dated September 18, 1997, among the
-------------------
Issuer, ICG and Morgan Stanley & Co. Incorporated and Deutsche
Morgan Grenfell Inc. (the "Placement Agents"), the Issuer and ICG
----------------
have agreed to sell to the Placement Agents, 2,300,000 of
Issuer's 6 % Exchangeable Limited Liability Company Preferred
Securities, liquidation preference $50 per preferred security
(the "Firm Preferred Securities" and, together with the
-------------------------
Additional Preferred Securities (as defined herein), the
"Preferred Securities"), which will be mandatorily redeemable on
--------------------
November 15, 2009;
WHEREAS, pursuant to the Placement Agreement, the
Issuer and ICG propose to issue and sell to the Placement Agents
not more than an additional 345,000 Preferred Securities (the
"Additional Preferred Securities"), if and to the extent that the
-------------------------------
Placement Agents shall have determined to exercise the right to
purchase such additional Preferred Securities granted to the
Placement Agents;
WHEREAS, the Issuer hereby agrees to (i) purchase or
cause the purchase of Pledged Securities (as defined herein) in
an amount that will be sufficient upon receipt of scheduled
interest and principal payments in respect thereof to provide for
the payment of the first thirteen cash dividends due on the
Preferred Securities through and including November 15, 2000 and
(ii) place such Pledged Securities (as defined herein) (or cause
them to be placed) in an account held by the Escrow Agent for the
benefit of Holders of the Preferred Securities; and
WHEREAS, to secure the obligations of the Issuer under
the LLC Agreement to pay in cash the first thirteen dividends on
the Preferred Securities through and including November 15, 2000
(the "Obligations"), the Issuer has agreed to (i) pledge to the
-----------
Escrow Agent for its benefit and the ratable benefit of the
Holders of the Preferred Securities, a security interest in the
Pledged Securities (as defined herein) and related collateral and
(ii) execute and deliver this Escrow Agreement in order to secure
the payment and performance by the Issuer of all the Obligations.
Capitalized terms used herein and not otherwise defined herein
shall have the meanings given to such terms in the Agreement of
Limited Liability Company of the Issuer (as amended, restated,
supplemented or otherwise modified from time to time, the "LLC
---
Agreement") or the Preferred Securities Designation. Unless
---------
otherwise defined herein or in the LLC Agreement, terms used in
Articles 8 or 9 of the Uniform Commercial Code ("UCC") as in
---
effect in the State of New York are used herein as therein
defined and terms used in Revised Article 8, as such term is
defined in 31 C.F.R. Section 357.2, as modified by the amendments
promulgated at 61 Fed. Reg. 43,628 (Aug. 23, 1996) ("Revised
-------
Article 8"), are used herein as therein defined.
---------
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises
herein contained, and in order to induce the Holders of the
Preferred Securities to purchase the Preferred Securities and as
a condition to the Closing of the offering of the Preferred
Securities, the Issuer hereby agrees with the Escrow Agent, for
the benefit of the Escrow Agent and for the ratable benefit of
the Holders of the Preferred Securities, as follows:
SECTION 1. Pledge and Grant of Security Interest.
-------------------------------------
(a) The Issuer hereby pledges to the Escrow Agent for its benefit
and for the ratable benefit of the Holders of the Preferred
Securities, and grants to the Escrow Agent for its benefit and
for the ratable benefit of the Holders of the Preferred
Securities, a continuing first priority security interest in and
to all of the Issuer's right, title and interest in, to and under
the following (hereinafter collectively referred to as the
"Collateral"), whether characterized as investment property,
----------
general intangibles or otherwise: (a) the United States Treasury
securities identified in Annex 1 to Exhibit A to this Escrow
Agreement (the "Firm Pledged Securities" and, together with the
-----------------------
Additional Pledged Securities, the "Pledged Securities"), (b) the
------------------
United States Treasury securities, if any, to be purchased
pursuant to Section 1(b), (c) any and all applicable security
entitlements to the Pledged Securities, (d) the Norwest Bank
Colorado, National Association account in the name of "Norwest
Bank Colorado, National Association, as Escrow Agent for the
benefit of the holders of the 6 % Exchangeable Limited Liability
Company Preferred Securities mandatorily redeemable 2009 of ICG
Funding, LLC Collateral Escrow Account", Administrative Account
No. 1185943909 (the "Escrow Account") established and maintained
--------------
by the Escrow Agent pursuant to this Escrow Agreement, (e) any
and all related securities accounts in which security
entitlements to the Pledged Securities are carried, and (f) all
proceeds of any and all of the foregoing Collateral (including,
without limitation, proceeds that constitute property of the
types described in clauses (a) - (e) of this Section 1) and, to
the extent not otherwise included, all cash.
(b) In the event the Placement Agents shall decide to
exercise the right to purchase the Additional Preferred
Securities pursuant to the Placement Agreement, the Issuer
shall use a portion of the proceeds from such purchase by
the Placement Agents to purchase and deliver to the Escrow
Agent additional United States Treasury securities (the
"Additional Pledged Securities") in such amount as will be
-----------------------------
sufficient upon receipt of scheduled interest and/or
principal payments of all Pledged Securities thereafter held
in the Pledged Account to provide payment for the first
thirteen cash dividends due on the Preferred Securities.
The Additional Pledged Securities shall be pledged by the
Issuer to the Escrow Agent for the benefit of the Holders
and shall be held by the Escrow Agent in the Pledged
Account.
(c) In the event the Shelf Registration Statement (as
defined in the Registration Rights Agreement dated as of
September 24, 1997 among ICG, the Issuer and Morgan Stanley
& Co. Incorporated and Deutsche Morgan Grenfell Inc. (the
"Registration Rights Agreement")) has not been filed on or
-----------------------------
prior to December 22, 1997 and the dividends payable on the
Preferred Securities (in addition to the dividends otherwise
payable on the Preferred Securities) accrue at an additional
annual rate of .25% of the liquidation preference thereof
and/or the Shelf Registration Statement is not declared
effective on or prior to March 22, 1998 and the dividends
payable on the Preferred Securities (in addition to the
dividends otherwise payable on the Preferred Securities)
accrue at an additional annual rate of .25% of the
liquidation preference thereof as required by the
Registration Rights Agreement, ICG shall pay a special
dividend in shares of Common Stock, par value $.01 per share
("ICG Common Stock"), of ICG to the Issuer as the holder of
----------------
ICG's preferred stock, par value $.01 per share, which will
be mandatorily redeemable on November 15, 2009, in such
number that when the Issuer sells such shares of Common
Stock, the Issuer will have sufficient funds to purchase and
deliver to the Escrow Agent additional Pledged Securities in
such amount as will be sufficient upon receipt of scheduled
interest and/or principal payments of all Pledged Securities
thereafter held in the Pledged Account to provide payment
for the first thirteen cash dividends due on the Preferred
Securities (assuming the additional annual rate of .25% or
.5%, as the case may be, of the liquidation preference
remains in effect through November 15, 2000). The
additional Pledged Securities pursuant to this Section 1(c)
shall be pledged by the Issuer to the Escrow Agent for the
benefit of the Holders and shall be held by the Escrow Agent
in the Pledged Account.
SECTION 2. Security for Obligation. This Escrow
-----------------------
Agreement and the pledge of Collateral hereunder secures the
prompt and complete payment and performance when due (whether at
stated maturity, by acceleration or otherwise) of all the
Obligations.
SECTION 3. Delivery of Collateral; Escrow Account;
---------------------------------------
Interest. (a) The Pledged Securities shall be pledged and
--------
transferred to the Escrow Agent and the Escrow Agent shall become
the holder of a security entitlement to the Pledged Securities,
through action by the Federal Reserve Bank of New York ("FRBNY")
-----
or another securities intermediary, as confirmed (in writing or
electronically or otherwise in accordance with standard industry
practice) to the Escrow Agent by FRBNY or such other securities
intermediary (i) indicating by book-entry that the Pledged
Securities or a security entitlement thereto has been credited to
the Escrow Agent's account, or (ii) acquiring the Pledged
Securities or a security entitlement thereto for the Escrow Agent
and accepting the same for credit to a securities account of the
Escrow Agent.
(b) Prior to or concurrently with the execution and
delivery hereof and prior to the transfer to the Escrow
Agent of the Pledged Securities (or acquisition by the
Escrow Agent of any security entitlement thereto), as
provided in subsection (a) of this Section 3, the Escrow
Agent shall establish the Escrow Account on its books as an
account segregated from all other custodial or collateral
accounts at its office at 1740 Broadway, Denver, Colorado
80274 Attention: Corporate Trust and Escrow Securities.
Upon transfer of the Pledged Securities to the Escrow Agent
(or the Escrow Agent's acquisition of a security entitlement
thereto), as confirmed to the Escrow Agent by FRBNY or
another securities intermediary, the Escrow Agent shall make
appropriate book entries indicating that the Pledged
Securities and/or such security entitlement have been
credited to and are held in the Escrow Account. Subject to
the other terms and conditions of this Escrow Agreement, all
funds or other property held by the Escrow Agent pursuant to
this Escrow Agreement shall be held in the Escrow Account
subject (except as expressly provided in Sections 4(a), (b)
and (c) hereof) to the exclusive dominion and control of the
Escrow Agent and exclusively for the benefit of the Escrow
Agent and for the ratable benefit of the Holders of the
Preferred Securities and segregated from all other funds or
other property otherwise held by the Escrow Agent.
(c) All Collateral shall be retained in the Escrow
Account pending disbursement pursuant to the terms hereof.
(d) Concurrently with the execution and delivery of
this Escrow Agreement the Escrow Agent is delivering to the
Issuer and the Placement Agents a duly executed certificate,
in the form of Exhibit A hereto, of an officer of the Escrow
---------
Agent, confirming the Escrow Agent's establishment and
maintenance of the Escrow Account and its receipt and
holding of the Firm Pledged Securities or a security
entitlement thereto and the crediting of the Firm Pledged
Securities or such security entitlement to the Escrow
Account, all in accordance with this Escrow Agreement.
(e) In the event the Placement Agents shall decide to
exercise the right to purchase the Additional Preferred
Securities pursuant to the Placement Agreement, the Escrow
Agent shall deliver, on the Option Closing Date (as defined
in the Placement Agreement), to the Issuer and the Placement
Agents a duly executed certificate, substantially in the
form of Exhibit A hereto, with respect to the Additional
---------
Pledged Securities, of an officer of the Escrow Agent,
confirming the Escrow Agent's maintenance of the Escrow
Account and its receipt and holding of the Additional
Pledged Securities or a security entitlement thereto and the
crediting of the Additional Pledged Securities or such
security entitlement to the Escrow Account, all in
accordance with this Escrow Agreement.
(f) Concurrently with the execution and delivery of
this Escrow Agreement, the Issuer is delivering to the
Escrow Agent acknowledgement copies or stamped receipt
copies of proper financing statements, duly filed on or
before the Closing Date (as defined in the LLC Agreement)
under the UCC of the State of Colorado, covering the
Collateral described in this Escrow Agreement.
SECTION 4. Disbursements. (a) Three business days
prior to the date of any of the first thirteen scheduled dividend
payments on the Preferred Securities, the Issuer shall, pursuant
to written instructions given by the Issuer to the Escrow Agent
(an "Issuer Order"), direct the Escrow Agent to release from the
------------
Escrow Account and pay to the Holders of the Preferred Securities
proceeds sufficient to provide for payment in full of such
dividend payment then due on the Preferred Securities. Upon
receipt of an Issuer Order, the Escrow Agent will release funds
in an amount sufficient to provide for the payment of the
dividend on the Preferred Securities in accordance with the
Issuer Order and the payment provisions of the LLC Agreement to
the Holders of the Preferred Securities from (and to the extent
of) proceeds of the Pledged Securities in the Escrow Account.
(b) If the Issuer makes any dividend payment or
portion of a dividend payment for which the Collateral is
security from a source of funds other than the Escrow
Account ("Issuer Funds"), the Issuer may, after payment in
------------
full of such dividend payment, direct the Escrow Agent
pursuant to an Issuer Order to release to the Issuer or to
another party at the direction of the Issuer (the "Issuer's
--------
Designee") proceeds from the Escrow Account in an amount
--------
less than or equal to the amount of Issuer Funds applied to
such dividend payment. Upon receipt by the Escrow Agent of
such Issuer Order and provided the Escrow Agent has received
such dividend payment, the Escrow Agent shall pay over to
the Issuer or the Issuer's Designee, as the case may be, the
requested amount from proceeds in the Escrow Account as soon
as practicable.
(c) Upon (i) payment in full of the first thirteen
scheduled dividend payments on the Preferred Securities or
(ii) exchange of all of the Preferred Securities into shares
of ICG Common Stock, the security interest in the Collateral
(except, with respect to subsection (ii) in this Section
4(c), the Class of Pledged Securities (as defined below), if
any, that will mature within 15 days from the date of such
exchange) evidenced by this Escrow Agreement and held in the
Escrow Account will automatically terminate and be of no
further force and effect and the Collateral (except, with
respect to subsection (ii) in this Section 4(c), the Class
of Pledged Securities, if any, that will mature within 15
days from the date of such exchange) shall promptly be paid
over and transferred to the Issuer. Furthermore, upon the
release of any Collateral from the Escrow Account in
accordance with the terms of this Escrow Agreement, whether
upon release of Collateral to Holders as payment of
dividends or otherwise, the security interest evidenced by
this Escrow Agreement in such released Collateral will
automatically terminate and be of no further force and
effect.
(d) At least three Business Days prior to the due date
of each of the first thirteen scheduled dividend payments on
the Preferred Securities, the Issuer shall give the Escrow
Agent notice (by Issuer Order) as to whether such dividend
payment will be made pursuant to Section 4(a) or 4(b) and
the respective amounts of the dividend that will be paid
from the Escrow Account and from Issuer Funds. Any Issuer
Funds to be used to make any dividend payment shall be
delivered to the Escrow Agent, in immediately available
funds, prior to 10 a.m. one business day prior to such
dividend payment date. If no such notice is given or such
Issuer Funds have not been so delivered, the Escrow Agent
will act pursuant to Section 4(a) as if it had received an
Issuer Order pursuant thereto for the payment in full of the
dividend then due from the Escrow Account.
(e) Upon any Provisional Redemption, the Escrow Agent,
pursuant to a written instruction given by the Issuer to the
Escrow Agent, shall release from the Escrow Account and pay
the Holders whose Preferred Securities are being redeemed
pursuant to such Provisional Redemption, such Holders' pro
rata share of the entire Collateral.
(f) The Escrow Agent shall liquidate Collateral in the
Escrow Account (pursuant to written instructions from
Issuer) in order to make any scheduled payment of dividends
or payment pursuant to Section 4(e) above unless there are
sufficient funds in the Escrow Account on such dividend
payment date.
(g) In the event that, prior to November 15, 2000, a
holder of the Preferred Securities exchanges such Preferred
Securities with the Issuer for shares of ICG Common Stock in
accordance with the LLC Agreement, the Escrow Agent,
pursuant to a written notice of the Issuer, shall release
from the Escrow Account an amount of each Class of Pledged
Securities (other than the Class of Pledged Securities, if
any, that will mature within 15 days from the date of such
exchange) that are then held in the Escrow Account equal to
all of the Pledged Securities in such Class of Pledged
Securities multiplied by a fraction, the numerator of which
is the number of Preferred Securities which are being
exchanged and the denominator of which is all of the
outstanding Preferred Securities; provided however, that the
Escrow Agent shall only release each such Class of Pledged
Securities to the extent that it receives from an officer of
the Issuer a written notice stating that it is his/her
reasonable opinion that after such release, the Pledged
Securities remaining in the Escrow Account will be
sufficient upon receipt of scheduled interest and/or
principal payment of all remaining Pledged Securities
thereafter held in the Pledged Account to provide payment
for the remaining cash dividends due on the Preferred
Securities. Each group of Pledged Securities that will
mature on or about a dividend payment date with respect to
the Preferred Securities shall be considered, for purposes
of this Section 4, a "Class of Pledged Securities".
(h) Nothing contained in this Escrow Agreement shall
(i) afford the Issuer any right to issue entitlement orders
with respect to any security entitlement to the Pledged
Securities or any securities account in which any such
security entitlement may be carried, or otherwise afford the
Issuer control of any such security entitlement or (ii)
otherwise give rise to any rights of the Issuer with respect
to the Pledged Securities, any security entitlement thereto
or any securities account in which any such security
entitlement may be carried, other than the Issuer's rights
under this Escrow Agreement as the beneficial owner of
Collateral pledged to and subject to the exclusive dominion
and control (except as expressly provided in Sections 4(a),
(b), (c), (e) and (g) hereof) of the Escrow Agent in its
capacity as such (and not as a securities intermediary).
The Issuer acknowledges, confirms and agrees that the Escrow
Agent is an entitlement holder of the security entitlements
to the Pledged Securities solely as Escrow Agent for the
Holders of the Preferred Securities and not as a securities
intermediary.
SECTION 5. Representations and Warranties. The
------------------------------
Issuer hereby represents and warrants that:
(a) The execution and delivery by the Issuer of, and
the performance by the Issuer of its obligations under, this
Escrow Agreement will not contravene any provision of
applicable law or the Certificate of Formation of the Issuer
or any material agreement or other material instrument
binding upon the Issuer or any of its subsidiaries or any
judgment, order or decree of any governmental body, agency
or court having jurisdiction over the Issuer or any of its
subsidiaries, or result in the creation or imposition of any
lien on any assets of the Issuer, except for the security
interests granted under this Escrow Agreement; no consent,
approval, authorization or order of, or qualification with,
any governmental body or agency is required (i) for the
performance by the Issuer of its obligations under this
Escrow Agreement, (ii) for the pledge by the Issuer of the
Collateral pursuant to this Escrow Agreement or (iii) except
for any such consents, approvals, authorizations or orders
required to be obtained by the Escrow Agent (or the Holders)
for reasons other than the consummation of this transaction,
for the exercise by the Escrow Agent of the rights provided
for in this Escrow Agreement or the remedies in respect of
the Collateral pursuant to this Escrow Agreement.
(b) The Issuer is the beneficial owner of the
Collateral, free and clear of any Lien or claims of any
person or entity (except for the security interests granted
under this Escrow Agreement). No financing statement
covering the Issuer's interest in the Pledged Securities is
on file in any public office, other than the financing
statements filed pursuant to this Escrow Agreement.
(c) This Escrow Agreement has been duly authorized,
validly executed and delivered by the Issuer and constitutes
a valid and binding agreement of the Issuer, enforceable
against the Issuer in accordance with its terms, except as
(i) the enforceability hereof may be limited by bankruptcy,
insolvency, fraudulent conveyance, preference,
reorganization, moratorium or similar laws now or hereafter
in effect relating to or affecting creditors' rights or
remedies generally, (ii) the availability of equitable
remedies may be limited by equitable principles of general
applicability, (iii) the exculpation provisions and rights
to indemnification hereunder may be limited by U.S. federal
and state securities laws and public policy considerations
and (iv) the waiver of rights and defenses contained in
Section 11(b), Section 14.11 and Section 14.15 hereof may be
limited by applicable law.
(d) Upon the transfer to the Escrow Agent of the
Pledged Securities and the acquisition by the Escrow Agent
of a security entitlement thereto, in accordance with
Section 3, the pledge of and grant of a security interest in
the Collateral securing the payment of the Obligations for
the benefit of the Escrow Agent and the Holders of the
Preferred Securities will constitute a perfected security
interest in such Collateral with first priority against all
creditors of the Issuer (and any persons purporting to
purchase any of the Collateral from the Issuer).
(e) There are no legal or governmental proceedings
pending or, to the best of the Issuer's knowledge,
threatened to which the Issuer or any of its subsidiaries is
a party or to which any of the properties of the Issuer or
any such subsidiary is subject that would materially
adversely affect the power or ability of the Issuer to
perform its obligations under this Escrow Agreement or to
consummate the transactions contemplated hereby.
(f) The pledge of the Collateral pursuant to this
Escrow Agreement is not prohibited by law or governmental
regulation (including, without limitation, Regulations G, T,
U and X of the Board of Governors of the Federal Reserve
System) applicable to the Issuer.
(g) No Event of Default exists.
SECTION 6. Further Assurances. The Issuer will,
------------------
promptly upon request by the Escrow Agent, execute and deliver or
cause to be executed and delivered, or use its reasonable best
efforts to procure, all assignments, instruments and other
documents, all in form and substance reasonably satisfactory to
the Escrow Agent, deliver any instruments to the Escrow Agent and
take any other actions that are necessary or, in the reasonable
opinion of the Escrow Agent, desirable to perfect, continue the
perfection of, or protect the first priority of the Escrow
Agent's security interest in and to the Collateral, to protect
the Collateral against the rights, claims, or interests of third
persons (other than any such rights, claims or interests created
by or arising through the Escrow Agent) or to effect the purposes
of this Escrow Agreement including those contemplated by the
Offering Memorandum dated September 18, 1997 relating to the
Preferred Securities. The Issuer also hereby authorizes the
Escrow Agent to file any financing or continuation statements in
the United States with respect to the Collateral without the
signature of the Issuer (to the extent permitted by applicable
law). The Issuer will promptly pay all reasonable costs incurred
in connection with any of the foregoing within 45 days of receipt
of an invoice therefor. The Issuer also agrees, whether or not
requested by the Escrow Agent, to take all actions that are
necessary to perfect or continue the perfection of, or to protect
the first priority of, the Escrow Agent's security interest in
and to the Collateral, including the filing of all necessary
financing and continuation statements, and to protect the
Collateral against the rights, claims or interests of third
persons (other than any such rights, claims or interests created
by or arising through the Escrow Agent).
SECTION 7. Covenants. The Issuer covenants and agrees
---------
with the Escrow Agent and the Holders of the Preferred Securities
that from and after the date of this Escrow Agreement until the
earlier of payment in full in cash of the Obligations:
(a) that (i) it will not (and will not purport to)
sell or otherwise dispose of, or grant any option or warrant
with respect to, any of the Collateral or its beneficial
interest therein, and (ii) it will not create or permit to
exist any Lien or other adverse interest in or with respect
to its beneficial interest in any of the Collateral (except
for the security interests granted under this Escrow
Agreement); and
(b) that it will not (i) enter into any agreement or
understanding that restricts or inhibits or purports to
restrict or inhibit the Escrow Agent's rights or remedies
hereunder, including, without limitation, the Escrow Agent's
right to sell or otherwise dispose of the Collateral or (ii)
fail to pay or discharge any tax, assessment or levy of any
nature with respect to its beneficial interest in the
Collateral not later than five days prior to the date of any
proposed sale under any judgment, writ or warrant of
attachment with respect to such beneficial interest.
SECTION 8. Power of Attorney. In addition to all
-----------------
of the powers granted to the Escrow Agent pursuant to the LLC
Agreement, the Issuer hereby appoints and constitutes the Escrow
Agent as the Issuer's attorney-in-fact (with full power of
substitution) to exercise to the fullest extent permitted by law
all of the following powers upon and at any time after the
occurrence and during the continuance of an Event of Default:
(a) collection of proceeds of any Collateral; (b) conveyance of
any item of Collateral to any purchaser thereof; (c) giving of
any notices or recording of any Liens under Section 6 hereof; and
(d) paying or discharging taxes or Liens levied or placed upon
the Collateral, the legality or validity thereof and the amounts
necessary to discharge the same to be determined by the Escrow
Agent in its sole reasonable discretion, and such payments made
by the Escrow Agent to become part of the Obligations of the
Issuer to the Escrow Agent, due and payable immediately upon
demand. The Escrow Agent's authority under this Section 8 shall
include, without limitation, the authority to endorse and
negotiate any checks or instruments representing proceeds of
Collateral in the name of the Issuer, execute and give receipt
for any certificate of ownership or any document constituting
Collateral, transfer title to any item of Collateral, sign the
Issuer's name on all financing statements (to the extent
permitted by applicable law) or any other documents deemed
necessary or appropriate by the Escrow Agent to preserve, protect
or perfect the security interest in the Collateral and to file
the same, prepare, file and sign the Issuer's name on any notice
of Lien, and to take any other actions arising from or incident
to the powers granted to the Escrow Agent in this Escrow
Agreement. This power of attorney is coupled with an interest
and is irrevocable by the Issuer.
SECTION 9. No Assumption of Duties; Reasonable Care.
----------------------------------------
The rights and powers granted to the Escrow Agent hereunder are
being granted in order to preserve and protect the security
interest of the Escrow Agent and the Holders of the Preferred
Securities in and to the Collateral granted hereby and shall not
be interpreted to, and shall not impose any duties on the Escrow
Agent in connection therewith other than those expressly provided
herein or imposed under applicable law. Except as provided by
applicable law or by the LLC Agreement, the Escrow Agent shall be
deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that
which the Escrow Agent accords similar property held by the
Escrow Agent for similar accounts, it being understood that the
Escrow Agent in its capacity as such shall not have any
responsibility for (a) ascertaining or taking action with respect
to calls, conversions, exchanges, maturities or other matters
relative to any Collateral, whether or not the Escrow Agent has
or is deemed to have knowledge of such matters, (b) taking any
necessary steps to preserve rights against any parties with
respect to any Collateral or (c) investing or reinvesting any of
the Collateral or any loss on any investment. The Escrow Agent
may reasonably rely on the written instructions of the Issuer
without any further investigation on its part. Furthermore, the
Escrow Agent assumes no responsibility for the validity of the
Pledged Securities nor the sufficiency of such Pledged Securities
to cover the first thirteen dividend payments on the Preferred
Securities.
SECTION 10. Indemnity. The Issuer shall indemnify,
---------
hold harmless and defend the Escrow Agent and its directors,
officers, agents and employees, from and against any and all
claims, actions, obligations, liabilities and expenses, including
reasonable defense costs, reasonable investigative fees and
costs, and reasonable legal fees and damages arising from the
Escrow Agent's performance as Escrow Agent under this Escrow
Agreement, except to the extent that such claim, action,
obligation, liability or expense is directly attributable to the
bad faith, gross negligence or wilful misconduct of such
indemnified person.
SECTION 11. Remedies Upon Event of Default. If any
------------------------------
Event of Default under the LLC Agreement or default hereunder
(any such Event of Default or default being referred to in this
Escrow Agreement as an "Event of Default") shall have occurred
----------------
and be continuing:
(a) The Escrow Agent and the Holders of the Preferred
Securities shall have, in addition to all other rights given
by law or by this Escrow Agreement or the LLC Agreement, all
of the rights and remedies with respect to the Collateral of
a secured party under the UCC in effect in the State of New
York at that time. In addition, with respect to any
Collateral that shall then be in or shall thereafter come
into the possession or custody of the Escrow Agent, the
Escrow Agent may sell or cause the same to be sold at any
broker's board or at public or private sale, in one or more
sales or lots, at such price or prices as the Escrow Agent
may deem best, for cash or on credit or for future delivery,
without assumption of any credit risk. The purchaser of any
or all Collateral so sold shall thereafter hold the same
absolutely, free from any claim, encumbrance or right of any
kind whatsoever created by or through the Issuer. Unless
any of the Collateral threatens, in the reasonable judgment
of the Escrow Agent, to decline speedily in value or is or
becomes of a type sold on a recognized market, the Escrow
Agent will give the Issuer reasonable notice of the time and
place of any public sale thereof, or of the time after which
any private sale or other intended disposition is to be
made. Any sale of the Collateral conducted in conformity
with reasonable commercial practices of banks, insurance
companies, commercial finance companies, or other financial
institutions disposing of property similar to the Collateral
shall be deemed to be commercially reasonable. Any
requirements of reasonable notice shall be met if such
notice is mailed to the Issuer as provided in Section 14.1
hereof at least ten (10) days before the time of the sale or
disposition. The Escrow Agent or any Holder of Preferred
Securities may, in its own name or in the name of a designee
or nominee, buy any of the Collateral at any public sale
and, if permitted by applicable law, at any private sale.
All expenses (including court costs and reasonable
attorneys' fees, expenses and disbursements) of, or incident
to, the enforcement of any of the provisions hereof shall be
recoverable from the proceeds of the sale or other
disposition of the Collateral.
(b) The Issuer further agrees to use its reasonable
best efforts to do or cause to be done all such other acts
as may be necessary to make such sale or sales of all or any
portion of the Collateral pursuant to this Section 11 valid
and binding and in compliance with any and all other
applicable requirements of law. The Issuer further agrees
that a breach of any of the covenants contained in this
Section 11 will cause irreparable injury to the Escrow Agent
and the Holders of the Preferred Securities, that the Escrow
Agent and the Holders of the Preferred Securities have no
adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this
Section 11 shall be specifically enforceable against the
Issuer, and the Issuer hereby waives and agrees not to
assert any defenses against an action for specific
performance of such covenants except for a defense that no
Event of Default has occurred.
SECTION 12. Expenses. The Issuer will upon demand pay
--------
to the Escrow Agent the amount of any and all reasonable
expenses, including, without limitation, the reasonable fees,
expenses and disbursements of its counsel, experts and agents
retained by the Escrow Agent, that the Escrow Agent may incur in
connection with (a) the review, negotiation and administration of
this Escrow Agreement, (b) the custody or preservation of, or the
sale of, collection from, or other realization upon, any of the
Collateral, (c) the exercise or enforcement of any of the rights
of the Escrow Agent and the Holders of the Preferred Securities
hereunder or (d) the failure by the Issuer to perform or observe
any of the provisions hereof.
SECTION 13. Security Interest Absolute. All rights of
--------------------------
the Escrow Agent and the Holders of the Preferred Securities and
security interests hereunder, and all obligations of the Issuer
hereunder, shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the LLC
Agreement or any other agreement or instrument relating
thereto;
(b) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Obligations,
or any other amendment or waiver of or any consent to any
departure from the LLC Agreement;
(c) any exchange, surrender, release or non-perfection
of any Liens on any other collateral for all or any of the
Obligations; or
(d) to the extent permitted by applicable law, any
other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Issuer in
respect of the Obligations or of this Escrow Agreement.
SECTION 14. Miscellaneous Provisions.
------------------------
Section 14.1. Notices. Any notice or communication
-------
given hereunder shall be sufficiently given if in writing and
delivered in person or mailed by first class mail, commercial
courier service or telecopier communication, addressed as
follows:
if to the Issuer:
----------------
ICG Funding, LLC
9605 East Maroon Circle
Englewood, CO 80112
Fax: (303) 799-6985
Attention: Executive Vice President and
Chief Financial Officer
with copy to:
Reid & Priest LLP
40 West 57th Street
New York, NY 10019
Fax: (212) 603-2001
Attention: Audrey Rohan
if to ICG:
---------
ICG Communications, Inc.
9605 East Maroon Circle
Englewood, CO 80112
Fax: (303) 799-6985
Attention: Executive Vice President and
Chief Financial Officer
with copy to:
Reid & Priest LLP
40 West 57th Street
New York, NY 10019
Fax: (212) 603-2001
Attention: Audrey Rohan
if to the Escrow Agent:
----------------------
Norwest Bank Colorado, National Association
1740 Broadway
Denver, CO 80274
Fax: (303) 863-5645
Attention: Corporate Trust and Escrow Services
Section 14.2. No Adverse Interpretation of Other
----------------------------------
Agreements. This Escrow Agreement may not be used to interpret
----------
another pledge, security or debt agreement of the Issuer. No
such pledge, security or debt agreement (other than the LLC
Agreement) may be used to interpret this Escrow Agreement.
Section 14.3. Severability. The provisions of this
------------
Escrow Agreement are severable, and if any clause or provision
shall be held invalid, illegal or unenforceable in whole or in
part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such
clause or provision, or part thereof, and shall not in any manner
affect such clause or provision in any other jurisdiction or any
other clause or provision of this Escrow Agreement in any
jurisdiction.
Section 14.4. Headings. The headings in this Escrow
--------
Agreement 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 or provisions hereof.
Section 14.5. Counterpart Originals. This Escrow
---------------------
Agreement may be signed in two or more counterparts, each of
which shall be deemed an original, but all of which shall
together constitute one and the same agreement.
Section 14.6. No Third Party Beneficiaries. Nothing
----------------------------
in this Escrow Agreement, express or implied, shall give to any
person, other than the parties hereto and their successors
hereunder, and the Holders of the Preferred Securities, any
benefit or any legal or equitable right, remedy or claim under
this Escrow Agreement.
Section 14.7. Amendments, Waivers and Consents. Any
--------------------------------
amendment or waiver of any provision of this Escrow Agreement and
any consent to any departure by the Issuer from any provision of
this Escrow Agreement shall be effective only if made or duly
given in compliance with all of the terms and provisions of the
LLC Agreement, and neither the Escrow Agent nor any Holder of
Preferred Securities shall be deemed, by any act, delay,
indulgence, omission or otherwise, to have waived any right or
remedy hereunder or to have acquiesced in any Event of Default or
in any breach of any of the terms and conditions hereof. Failure
of the Escrow Agent or any Holder of Preferred Securities to
exercise, or delay in exercising, any right, power or privilege
hereunder shall not preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
A waiver by the Escrow Agent or any Holder of Preferred
Securities of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy that the
Escrow Agent or such Holder of Preferred Securities would
otherwise have on any future occasion. The rights and remedies
herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any rights or remedies
provided by law.
Section 14.8. Interpretation of Agreement. To the
---------------------------
extent a term or provision of this Escrow Agreement conflicts
with the LLC Agreement, the LLC Agreement shall control with
respect to the subject matter of such term or provision.
Acceptance of or acquiescence in a course of performance rendered
under this Escrow Agreement shall not be relevant to determine
the meaning of this Escrow Agreement even though the accepting or
acquiescing party had knowledge of the nature of the performance
and opportunity for objection.
Section 14.9. Continuing Security Interest;
-----------------------------
Termination. (a) This Escrow Agreement shall create a
-----------
continuing security interest in and to the Collateral and shall,
unless otherwise provided in this Escrow Agreement, remain in
full force and effect until the payment in full in cash of the
Obligations. This Escrow Agreement shall be binding upon the
Issuer, its transferees, successors and assigns, and shall inure,
together with the rights and remedies of the Escrow Agent
hereunder, to the benefit of the Escrow Agent, the Holders of the
Preferred Securities and their respective successors, transferees
and assigns.
(b) This Escrow Agreement (other than Issuer's
obligations under Sections 10 and 12) shall terminate upon
the payment in full in cash of the Obligations. At such
time, the Escrow Agent shall, pursuant to an Issuer Order,
reassign and redeliver to the Issuer all of the Collateral
hereunder that has not been sold, disposed of, retained or
applied by the Escrow Agent in accordance with the terms of
this Escrow Agreement and the LLC Agreement and take all
actions that are necessary to release the security interest
created by this Escrow Agreement in and to the Collateral,
including the execution and delivery of all termination
statements necessary to terminate any financing or
continuation statements filed with respect to the
Collateral. Such reassignment and redelivery shall be
without warranty by or recourse to the Escrow Agent in its
capacity as such, except as to the absence of any Liens on
the Collateral created by or arising through the Escrow
Agent, and shall be at the reasonable expense of the Issuer.
Section 14.10. Survival of Representations and
-------------------------------
Covenants. All representations, warranties and covenants of the
---------
Issuer contained herein shall survive the execution and delivery
of this Escrow Agreement, and shall terminate only upon the
termination of this Escrow Agreement.
Section 14.11. Waivers. The Issuer waives presentment
-------
and demand for payment of any of the Obligations, protest and
notice of dishonor or default with respect to any of the
Obligations, and all other notices to which the Issuer might
otherwise be entitled, except as otherwise expressly provided
herein or in the LLC Agreement.
Section 14.12. Authority of the Escrow Agent. (a)
-----------------------------
The Escrow Agent shall have and be entitled to exercise all
powers hereunder that are specifically granted to the Escrow
Agent by the terms hereof, together with such powers as are
reasonably incident thereto. The Escrow Agent may perform any of
its duties hereunder or in connection with the Collateral by or
through agents or employees and shall be entitled to retain
counsel and to act in reliance upon the advice of counsel
concerning all such matters. Except as otherwise expressly
provided in this Pledge Agreement or the LLC Agreement, neither
the Escrow Agent nor any director, officer, employee, attorney or
agent of the Escrow Agent shall be liable to the Issuer for any
action taken or omitted to be taken by the Escrow Agent, in its
capacity as Escrow Agent, hereunder, except for its own bad
faith, gross negligence or willful misconduct, and the Escrow
Agent shall not be responsible for the validity, effectiveness or
sufficiency hereof or of any document or security furnished
pursuant hereto. The Escrow Agent and its directors, officers,
employees, attorneys and agents shall be entitled to rely on any
communication, instrument or document believed by it or them to
be genuine and correct and to have been signed or sent by the
proper person or persons.
(b) The Issuer acknowledges that the rights and
responsibilities of the Escrow Agent under this Escrow
Agreement with respect to any action taken by the Escrow
Agent or the exercise or non-exercise by the Escrow Agent of
any option, right, request, judgment or other right or
remedy provided for herein or resulting or arising out of
this Escrow Agreement shall, as between the Escrow Agent and
the Holders of the Preferred Securities, be governed by the
LLC Agreement and by such other agreements with respect
thereto as may exist from time to time among them, but, as
between the Escrow Agent and the Issuer, the Escrow Agent
shall be conclusively presumed to be acting as agent for the
Holders of the Preferred Securities with full and valid
authority so to act or refrain from acting, and the Issuer
shall not be obligated or entitled to make any inquiry
respecting such authority.
Section 14.13. Rights of Holders of the Preferred
----------------------------------
Securities. No Holder of Preferred Securities shall have any
----------
independent rights hereunder other than those rights granted to
individual Holders of the Preferred Securities pursuant to the
LLC Agreement; provided that nothing in this subsection shall
limit any rights granted to the Escrow Agent under the Preferred
Securities or the LLC Agreement.
Section 14.14. GOVERNING LAW; SUBMISSION TO
----------------------------
JURISDICTION; WAIVER OF JURY TRIAL; WAIVER OF DAMAGES. (A) THIS
-----------------------------------------------------
ESCROW AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED UNDER THE
LAWS OF THE STATE OF NEW YORK. NOTWITHSTANDING THE FOREGOING:
THE MATTERS IDENTIFIED IN 31 C.F.R. PART 357, 61 FED. REG. 43626
AUG. 23, 1996), INCLUDING REVISED ARTICLE 8, SHALL BE GOVERNED
SOLELY BY THE LAWS SPECIFIED THEREIN.
(B) THE ISSUER HAS APPOINTED ICG COMMUNICATIONS, INC.,
9605 EAST MAROON CIRCLE, ENGLEWOOD, CO 80112 AS ITS AGENT FOR
SERVICE OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT
TO THIS ESCROW AGREEMENT AND FOR ACTIONS BROUGHT UNDER U.S.
FEDERAL OR STATE SECURITIES LAWS BROUGHT IN ANY FEDERAL OR STATE
COURT LOCATED IN THE CITY OF NEW YORK AND AGREES TO SUBMIT TO THE
JURISDICTION OF ANY SUCH COURT.
(C) THE ISSUER AGREES THAT THE ESCROW AGENT SHALL, IN
ITS CAPACITY AS ESCROW AGENT OR IN THE NAME AND ON BEHALF OF ANY
HOLDER OF PREFERRED SECURITIES, HAVE THE RIGHT, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE ISSUER OR THE
COLLATERAL IN A COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD
FAITH (AND HAVING PERSONAL OR IN REM JURISDICTION OVER THE ISSUER
OR THE COLLATERAL, AS THE CASE MAY BE) TO ENABLE THE ESCROW AGENT
TO REALIZE ON SUCH COLLATERAL, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER ENTERED IN FAVOR OF THE ESCROW AGENT. THE ISSUER
AGREES THAT IT WILL NOT ASSERT ANY COUNTERCLAIMS, SETOFFS OR
CROSSCLAIMS IN ANY PROCEEDING BROUGHT BY THE ESCROW AGENT TO
REALIZE ON SUCH PROPERTY OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF THE ESCROW AGENT, EXCEPT FOR SUCH
COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS WHICH, IF NOT ASSERTED IN
ANY SUCH PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR ASSERTED.
THE ISSUER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION
OF THE COURT IN THE CITY OF NEW YORK ONCE THE ESCROW AGENT HAS
COMMENCED A PROCEEDING DESCRIBED IN THIS PARAGRAPH INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED
ON THE GROUNDS OF FORUM NON CONVENIENS.
(D) THE ISSUER AGREES THAT NEITHER ANY HOLDER OF
PREFERRED SECURITIES NOR (EXCEPT AS OTHERWISE PROVIDED IN THIS
ESCROW AGREEMENT OR THE LLC AGREEMENT) THE ESCROW AGENT IN ITS
CAPACITY AS ESCROW AGENT SHALL HAVE ANY LIABILITY TO THE ISSUER
(WHETHER ARISING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES
SUFFERED BY THE ISSUER IN CONNECTION WITH, ARISING OUT OF, OR IN
ANY WAY RELATED TO, THE TRANSACTIONS CONTEMPLATED AND THE
RELATIONSHIP ESTABLISHED BY THIS ESCROW AGREEMENT, OR ANY ACT,
OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS
DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OF A COURT THAT
IS BINDING ON THE ESCROW AGENT OR SUCH HOLDER OF PREFERRED
SECURITIES, AS THE CASE MAY BE, THAT SUCH LOSSES WERE THE RESULT
OF ACTS OR OMISSIONS ON THE PART OF THE ESCROW AGENT OR SUCH
HOLDERS OF PREFERRED SECURITIES, AS THE CASE MAY BE, CONSTITUTING
BAD FAITH, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(E) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
ISSUER WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF THE
ESCROW AGENT OR ANY HOLDER OF PREFERRED SECURITIES IN CONNECTION
WITH ANY JUDICIAL PROCESS OR PROCEEDING TO ENFORCE ANY JUDGMENT
OR OTHER COURT ORDER PERTAINING TO THIS ESCROW AGREEMENT OR ANY
RELATED AGREEMENT OR DOCUMENT ENTERED IN FAVOR OF THE ESCROW
AGENT OR ANY HOLDER OF PREFERRED SECURITIES, OR TO ENFORCE BY
SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER OR PRELIMINARY
OR PERMANENT INJUNCTION, THIS ESCROW AGREEMENT OR ANY RELATED
AGREEMENT OR DOCUMENT BETWEEN THE ISSUER ON THE ONE HAND AND THE
ESCROW AGENT AND/OR THE HOLDERS OF THE PREFERRED SECURITIES ON
THE OTHER HAND.
<PAGE>
IN WITNESS WHEREOF, the Issuer, ICG and the Escrow
Agent have each caused this Escrow Agreement to be duly executed
and delivered as of the date first above written.
Issuer:
ICG FUNDING, LLC
By ICG Communications, Inc.,
its manager
By: /s/ J. Shelby Bryan
-------------------------------
Name: J. Shelby Bryan
Title: President and
Chief Executive Officer
Escrow Agent:
NORWEST BANK COLORADO,
NATIONAL ASSOCIATION,
as Escrow Agent
By: /s/ Amy E. Buck
------------------------------
Name: Amy E. Buck
Title: Vice President
ICG:
ICG COMMUNICATIONS, INC.
By: /s/ J. Shelby Bryan
------------------------------
Name: J. Shelby Bryan
Title: President and Chief
Executive Officer
<PAGE>
EXHIBIT A
NORWEST BANK COLORADO, NATIONAL ASSOCIATION
OFFICER'S CERTIFICATE
Pursuant to Section 3(d) of the Escrow and Security
Agreement (the "Escrow Agreement") dated as of September 24, 1997
among ICG Funding, LLC (the "Issuer"), ICG Communications, Inc.
("ICG") and Norwest Bank Colorado, National Association as escrow
agent (the "Escrow Agent") for the holders of the Issuer's 6 %
Exchangeable Limited Liability Company Preferred Securities,
liquidation preference $50 per preferred security, which will be
mandatorily redeemable on November 15, 2009, the undersigned
officer of the Escrow Agent, on behalf of the Escrow Agent, makes
the following certifications to the Issuer, ICG, Morgan Stanley &
Co. Incorporated and Deutsche Morgan Grenfell Inc. Capitalized
terms used and not defined in this Officer's Certificate have the
meanings set forth or referred to in the Escrow Agreement.
1. Substantially contemporaneously with the execution
and delivery of this Officer's Certificate, the Escrow Agent has
established a securities account in the name of "Norwest Bank
Colorado, National Association, as Escrow Agent for the benefit
of the holders of the 6 % Exchangeable Limited Liability Company
Preferred Securities mandatorily redeemable 2009 of ICG Funding,
LLC Collateral Escrow Account", Administrative Account No.
1185943909 with respect to which the Escrow Agent is the
entitlement holder and through which the Escrow Agent has
acquired a security entitlement to the United States Treasury
securities identified in Annex 1 to this Officer's Certificate
-------
(the "Pledged Securities") and has made appropriate book entries
in its records establishing that the Pledged Securities and the
Escrow Agent's securities entitlement thereto have been credited
to and are held in the Norwest Bank Colorado, National
Association's Administrative Account No. 1185943909 entitled
"Norwest Bank Colorado, National Association, as Escrow Agent for
the benefit of the holders of the 6 % Exchangeable Limited
Liability Company Preferred Securities mandatorily redeemable
2009 of ICG Funding, LLC Collateral Escrow Account" (the "Escrow
Account").
2. The Escrow Agent has established and maintained and
will maintain the Escrow Account and all securities entitlements
and other positions carried in the Escrow Account solely in its
capacity as Escrow Agent and has not asserted and will not assert
any claim to or interest in the Escrow Account or any such
securities entitlements or other positions except in such
capacity.
3. The Escrow Agent has acquired its security
entitlement to the Pledged Securities for value and without
notice to an officer of the Escrow Agent of any adverse claim
thereto. Without limiting the generality of the foregoing, the
Pledged Securities are not and the Escrow Agent's security
entitlement to the Pledged Securities is not, to the Escrow
Agent's knowledge, subject to any lien granted by the Escrow
Agent in favor of any securities intermediary (including, without
limitation, the Federal Reserve Bank of New York) through which
the Escrow Agent derives its security entitlement to the Pledged
Securities.
4. The Escrow Agent has not caused or permitted the
Pledged Securities or its security entitlement thereto to become
subject to any Lien created by or arising through the Escrow
Agent.
<PAGE>
IN WITNESS WHEREOF, the undersigned officer has
executed this Officer's Certificate on behalf of Norwest Bank
Colorado, National Association as Escrow Agent this 24th day of
September, 1997.
---------------------------------
Name:
Title:
Exhibit 4.8
TERMS OF THE EXCHANGEABLE LIMITED LIABILITY COMPANY
PREFERRED SECURITIES
DATED AS OF SEPTEMBER 24, 1997
WRITTEN ACTION OF THE MANAGER
PURSUANT TO SECTION 7.1 OF THE AMENDED
AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF ICG FUNDING, LLC
The undersigned Manager of ICG Funding, LLC, a Delaware
limited liability company (the "Company"), pursuant to Section
7.1(b) of the Amended and Restated Limited Liability Company
Agreement of the Company (the "Agreement") dated as of
September 24, 1997 by and among ICG Communications, Inc. ("ICG"),
James D. Grenfell, the Manager and the Persons who become Members
of the Company in accordance with the provisions thereof, does
hereby authorize the issue of, and establish the relative rights,
powers, preferences, limitations and restrictions of, a series of
Preferred Securities as follows:
1. Definitions. All terms defined in the Agreement
-----------
and not otherwise defined herein shall have for purposes hereof
the meanings provided for therein. The following additional
terms have the respective meanings specified below:
"Average Market Value" of the ICG Common Stock means
the average of the Current Market Value for the Ten Trading days
ending on the second Business Day prior to the applicable date of
payment.
"Book-Entry Interest" means a beneficial interest in
the global certificates representing Preferred Securities,
ownership and transfers of which shall be made through the
book-entry system of a Clearing Agency as described in Section
11.
"Business Day" means any day other than a Saturday,
Sunday or other day on which banking institutions in The City of
New York are authorized or obligated by law or executive order to
close.
"Clearing Agency" means an organization registered as a
"Clearing Agency" pursuant to Section 17A of the Securities
Exchange Act of 1934, as amended, that is acting as depositary
for the Preferred Securities and in whose name (or nominee's
name) shall be registered one or more global certificates
representing Preferred Securities and which shall undertake to
effect book-entry transfers and pledges of interests in the
Preferred Securities.
"Clearing Agency Participant" means a broker, dealer,
bank, other financial institution or other Person for whom from
time to time a Clearing Agency effects book-entry transfers and
pledges of interests in securities deposited with the Clearing
Agency.
"Closing Date" shall mean September 24, 1997.
"Commission" has the meaning set forth in Section 4(d)
hereof.
"Current Market Value" of the ICG Common Stock means
(i) the Volume Weighted Average Price, as reported on the Nasdaq
National Market, or (ii) the average of the high and low sale
prices of the ICG Common Stock, if reported on any other national
securities exchange.
"Distributed Securities" has the meaning set forth in
Section 5(b) hereof.
"Dividend Payment Date" has the meaning set forth in
Section 4(a) hereof.
"Escrow Agreement" means the Escrow and Security
Agreement dated as of September 24, 1997 among ICG, the Company
and Norwest Bank Colorado, National Association, for the ratable
benefit of holders of the Preferred Securities.
"Exchange Agent" has the meaning set forth in Section
5(a) hereof.
"Exchange Price" means $50 divided by the Exchange
Rate.
"Exchange Rate" has the meaning set forth in Section 5
hereof
"Guarantee" means the Guarantee Agreement dated as of
September 24, 1997, executed and delivered between and the
Company and ICG for the benefit of the holders from time to time
of the Preferred Securities, as amended from time to time.
"Holder(s)" means the registered holders of the
Preferred Securities as they appear on the books and records of
the Company.
"ICG Common Stock" means the Common Stock, $.01 par
value per share, of ICG.
"ICG Preferred Stock" means the Preferred Stock, $.01
par value per share, of ICG with such terms and provisions as set
forth in the Certificate of Designation, Rights and Preferences
of the Preferred Stock Mandatorily Redeemable 2009 of ICG.
"Initial Redemption Date" has the meaning set forth in
Section 6(c) hereof.
"Liquidation Distribution" has the meaning set forth in
Section 8 hereof.
"Mandatory Redemption" has the meaning set forth in
Section 6(a) hereof.
"Mandatory Redemption Date" means November 15, 2009.
"Notice of Redemption" has the meaning set forth in
Section 6(a) hereof.
"Optional Redemption" has the meaning set forth in
Section 6(c) hereof.
"Preferred Securities" has the meaning set forth in
Section 2 hereof.
"Provisional Redemption" has the meaning set forth in
Section 6(b) hereof.
"Provisional Redemption Date" has the meaning set forth
in Section 6(b) hereof.
"Registration Rights Agreement" means the registration
rights agreement among the Company, ICG, Morgan Stanley & Co.
Incorporated and Deutsche Morgan Grenfell Inc. dated as of the
Closing Date.
"Securities" shall be a collective reference to the
Preferred Securities and the ICG Common Stock issuable upon
exchange of the Preferred Securities pursuant to the terms of
this Written Action.
"Securities Act" means the Securities Act of 1933, as
amended.
"Shelf Registration Statement" has the meaning set
forth in Section 4(d) hereof.
"Trigger Event" has the meaning set forth in Section
5(b)(viii).
"Trading Day" means, with respect to any security
listed or admitted to trading on the NYSE, any day on which such
securities are traded on the NYSE, or, if such security is not
listed or admitted to trading on the NYSE, on the principal
national securities exchange on which such security is listed or
admitted to trading, or, if such security is not listed or
admitted to trading on a national securities exchange, on the
National Market System of the National Association of Securities
Dealers, Inc., or, if such security is not quoted or admitted to
trading on such quotation system, on the principal quotation
system on which such security is listed or admitted to trading or
quoted, or, if not listed or admitted to trading or quoted on any
national securities exchange or quotation system, in the
over-the-counter market.
"Written Action" shall mean this written action of the
Manager.
2. Designation and Ranking. A total of 2,645,000
-----------------------
securities with a liquidation preference of $50.00 per security
are hereby authorized and designated as "Exchangeable Limited
Liability Preferred Securities" (collectively, the "Preferred
Securities", and, individually, a "Preferred Security"). The
Preferred Securities will, with respect to dividend distributions
and distributions upon the liquidation, winding-up or dissolution
of the Company, rank senior to all classes of common securities
of the Company and to each other class of capital securities or
series of preferred securities of the Company.
3. Voting. Except as otherwise required in the
------
Delaware Limited Liability Company Act, 6 Del. C. Section 18-101,
et seq., as amended, the Agreement (including, without
limitation, Section 8.1 thereof) or this Written Action, Holders
shall have, with respect to such Preferred Securities, no right
or power to vote on any question or matter or in any proceeding
or to be represented at, or to receive notice of, any meeting of
Members.
4. Dividends. (a) The Holders shall be entitled to
---------
receive, out of funds legally available therefor, cumulative cash
dividends at a rate per annum of 6 3/4% of the liquidation
preference of $50 per Preferred Security. The amount of
dividends payable for a full monthly dividend period shall be
computed on a daily basis. Dividends shall accrue from September
24, 1997, and shall be payable quarterly in arrears on
February 15, May 15, August 15 and November 15 of each year (each
a "Dividend Payment Date") commencing November 15, 1997 to
Holders of record at the close of business on February 1, May 1,
August 1 and November 1 immediately preceding the Dividend
Payment Date. Dividends shall accrue and be cumulative from
September 24, 1997 whether or not they have been earned or
declared and whether or not there are funds of the Company
legally available for the payment of dividends. In the event
that any date on which dividends are payable on the Preferred
Securities is not a Business Day, then payment of the dividend
payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other
payment in respect of any such delay), except that if such
Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day,
in each case with the same force and effect as if made on such
date.
(b) Dividends on the Preferred Securities will be paid
to the extent that the Company has funds legally available for
the payment of such dividends. Amounts available to the Company
for dividends to the holders of the Preferred Securities will be
limited to shares of ICG Common Stock received by the Company
from ICG as dividends on the ICG Preferred Stock (and proceeds
from any sales of such ICG Common Stock by the Company) and the
interest on and principal of the Treasury strips that are held in
the Escrow Account. Any such ICG Common Stock received by the
Company may be paid as a dividend to the holders of the Preferred
Securities (only after November 15, 2000) or sold in the open
market and the cash proceeds of sale used to pay cash dividends
on the Preferred Securities.
(c) Through and including November 15, 2000, dividends
on the Preferred Securities shall be paid in cash. Thereafter,
dividends on the Preferred Securities may be paid, at the
Company's option, in (i) cash, (ii) ICG Common Stock, valued at
90% of the Average Market Value of the ICG Common Stock, or
(iii) any combination of cash or ICG Common Stock; provided that
any dividend payment must be made in cash to the extent ICG shall
have provided the Company with cash (whether through dividends on
the ICG Preferred Stock or otherwise) to make all or any portion
of such dividend payment. If any dividend (or portion thereof)
payable on any Dividend Payment Date is not paid in full on such
Dividend Payment Date, the amount of such dividend that is
payable and that is not paid on such date shall cumulate at the
dividend rate, compounding quarterly, until paid in full.
(d) ICG and the Company shall enter into a
registration rights agreement with the placement agents (the
"Registration Rights Agreement") pursuant to which ICG and the
Company will, at ICG's expense, for the benefit of the holders of
the Securities (i) use their best efforts to file with the
Securities and Exchange Commission (the "Commission") within 90
days after the Closing Date, a registration statement (the "Shelf
Registration Statement") covering resales of the Securities, (ii)
use their best efforts to cause the Shelf Registration Statement
covering resales of the Securities to be declared effective by
the Commission under the Securities Act within 180 days after the
Closing Date and (iii) use their best efforts to keep effective
the Shelf Registration Statement until two years (or for such
longer period as may be provided for in the Registration Rights
Agreement) after the Closing Date or such earlier date as all of
the Securities shall have been disposed of pursuant to the Shelf
Registration Statement or on which all Securities held by persons
that are not affiliates of ICG or the Company may be resold
without registration pursuant to Rule 144(k) under the Securities
Act.
If, on or prior to the 90th day following the Closing
Date, the Shelf Registration Statement has not been filed with
the Commission, additional dividends will accrue at an annual
rate of 0.25% of the liquidation preference thereof until the
Shelf Registration Statement is filed, and if on or prior to the
180th day following the Closing Date, the Shelf Registration
Statement is not declared effective, additional dividends shall
accrue at an additional annual rate of 0.25% of the liquidation
preference thereof until the Shelf Registration Statement is
declared effective, payable on each Dividend Payment Date in (i)
cash, (ii) ICG Common Stock, based upon 90% of the Average Market
Value of the ICG Common Stock or (iii) any combination of cash or
ICG Common Stock (provided that such payment must be made in cash
to the extent ICG shall have provided the Company with cash
(whether through dividends on the ICG Preferred Stock or
otherwise)) to make all or any portion of such payment.
5. Exchange. (a) The Preferred Securities shall be
--------
exchangeable with the Company at any time, in whole or in part,
prior to November 15, 2009 (the "Mandatory Redemption Date")
(unless earlier redeemed), at the option of the holder thereof
and in the manner described below, into shares of ICG Common
Stock at an exchange rate (the "Exchange Rate") which shall
initially be equal to 2.0811 shares of ICG Common Stock for each
Preferred Security, subject to adjustment as described below.
A holder of a Preferred Security wishing to exercise
its exchange right shall (i) deliver an exchange notice to ICG
(in such capacity, the "Exchange Agent"), (ii) if required,
furnish appropriate endorsements and transfer documents and
(iii) if required, pay all transfer or similar taxes, and the
Exchange Agent shall, on behalf of such holder, exchange such
Preferred Securities with the Company for shares of ICG Common
Stock and deliver such shares of ICG Common Stock to such holder.
The Company shall obtain such shares of ICG Common Stock by
exchanging shares of the ICG Preferred Stock it holds with ICG
for ICG Common Stock, pursuant to the terms of the ICG Preferred
Stock.
Holders of Preferred Securities at the close of
business on a dividend record date shall be entitled to receive
the dividends payable on such Preferred Securities on the
corresponding Dividend Payment Date notwithstanding the exchange
of such Preferred Securities following such dividend record date
but prior to such Dividend Payment Date. Except as provided in
the immediately preceding sentence, neither the Company nor ICG
will make, or be required to make, any payment, allowance or
adjustment for accumulated and unpaid dividends, whether or not
in arrears, on exchanged Preferred Securities. Each exchange
will be deemed to have been effected immediately prior to the
close of business on the day on which the related exchange notice
was received by the Exchange Agent.
No fractional shares of ICG Common Stock shall be
issued as a result of exchange, but in lieu thereof such
fractional interest shall be paid by the Company in cash based on
the last reported sale price of ICG Common Stock on the date the
affected Preferred Securities are surrendered for exchange.
(b) The Exchange Rate shall be adjusted from time to
time by the Company as follows:
(i) In case ICG shall pay a dividend or make a
distribution, in shares of ICG Common Stock, on ICG Common
Stock, the Exchange Rate in effect at the opening of
business on the date following the date fixed for the
determination of stockholders entitled to receive such
dividend or other distribution shall be increased by
multiplying such Exchange Rate by a fraction of which the
denominator shall be the number of shares of ICG Common
Stock outstanding at the close of business on the date fixed
for such determination and the numerator shall be the sum of
such number of shares and the total number of shares
constituting such dividend or other distribution, such
increase to become effective immediately after the opening
of business on the day following the date fixed for such
determination. ICG will not pay any dividend or make any
distribution on shares of ICG Common Stock held in the
treasury of ICG. If any dividend or distribution of the
type described in this Section 5(b)(i) is declared but is
not so paid or made and not required to be so paid or made,
the Exchange Rate shall again be adjusted to the Exchange
Rate which would then be in effect if such dividend or
distribution had not been declared.
(ii) In case ICG shall issue rights or warrants to all
holders of ICG Common Stock entitling them (for a period
expiring within 45 days after the date fixed for
determination of stockholders entitled to receive such
rights or warrants) to subscribe for or purchase ICG Common
Stock at a price per share less than the Average Market
Value per share at the record date for the determination of
stockholders entitled to receive such rights or warrants,
the Exchange Rate in effect immediately prior thereto shall
be adjusted so that the same shall equal the rate determined
by multiplying the Exchange Rate in effect immediately prior
to the date fixed for determination of stockholders entitled
to receive such rights or warrants by a fraction the
denominator of which shall be the number of shares of ICG
Common Stock outstanding at the close of business on the
date fixed for determination of stockholders entitled to
receive such rights or warrants plus the number of shares
which the aggregate offering price of the total number of
shares so offered would purchase at such Average Market
Value and the numerator of which shall be the number of
shares of ICG Common Stock outstanding on the date fixed for
determination of stockholders entitled to receive such
rights or warrants plus the number of additional shares of
ICG Common Stock offered for subscription or purchase. Such
adjustment shall be made successively whenever any such
rights or warrants are issued, and shall become effective
immediately after the opening of business on the day
following the record date for the determination of the
stockholders entitled to receive such rights or warrants.
In determining whether any rights or warrants entitle the
holders to subscribe for or purchase shares of ICG Common
Stock at less than such Average Market Value, and in
determining the aggregate offering price of such shares of
ICG Common Stock, there shall be taken into account any
consideration received by the ICG for such rights or
warrants, the value of such consideration, if other than
cash, to be determined by the board of directors. To the
extent that shares of ICG Common Stock are not delivered or
required to be delivered after the expiration of such rights
or warrants, the Exchange Rate shall be readjusted to the
Exchange Rate which would then be in effect had the
adjustments made upon the issuance of such rights or
warrants been made on the basis of delivery of only the
number of shares of ICG Common Stock actually delivered. If
such rights or warrants are not so issued and not required
to be so issued, the Exchange Rate shall again be adjusted
to be the Exchange Rate which would then be in effect if
such record date for the determination of stockholders
entitled to receive such rights or warrants had not been
fixed.
(iii) In case outstanding shares of ICG Common
Stock shall be subdivided into a greater number of shares of
ICG Common Stock, the Exchange Rate in effect at the opening
of business on the day following the day upon which such
subdivision becomes effective shall be proportionately
increased, and conversely, in case outstanding shares of ICG
Common Stock shall be combined into a smaller number of
shares of ICG Common Stock, the Exchange Rate in effect at
the opening of business on the day following the day upon
which such combination becomes effective shall be
proportionately reduced, such reduction or increase, as the
case may be, to become effective immediately after the
opening of business on the day following the day upon which
such subdivision or combination becomes effective.
(iv) In case ICG shall distribute to all holders of ICG
Common Stock any shares of any class of capital stock of ICG
(other than ICG Common Stock) or evidences of its
indebtedness or assets (excluding cash dividends or other
distributions to the extent paid from retained earnings of
ICG) or rights or warrants to subscribe for or purchase any
of its securities (excluding those referred to in
subsection (c) above) (any of the foregoing hereinafter in
this subsection the "Distributed Securities"), then in each
such case the Exchange Rate shall be adjusted so that the
same shall equal the rate determined by multiplying the
Exchange Rate in effect on the record date with respect to
such distribution by a fraction of which the denominator
shall be the Average Market Value on such record date less
the fair market value on such record date (as determined by
the board of directors of ICG, whose determination shall be
conclusive) of the Distributed Securities applicable to one
share of ICG Common Stock and the numerator of which shall
be the Average Market Value per share on the record date for
the determination of shareholders entitled to receive such
distribution; such adjustment shall become effective
immediately prior to the opening of business on the day
following such record date. Notwithstanding the foregoing,
in the event the then fair market value (as so determined)
of the portion of the Distributed Securities applicable to
one share of ICG Common Stock is equal to or greater than
the Average Market Value on the relevant record date, in
lieu of the foregoing adjustment, adequate provision shall
be made so that each Holder shall have the right to receive
upon exchange the amount of Distributed Securities such
holder would have received had such holder exchanged each
Preferred Security on such record date. In the event that
such distribution is not so paid or made, the Exchange Rate
shall again be adjusted to the Exchange Rate which would
then be in effect if such distribution had not been
declared. If the board of directors of ICG determines the
fair market value of any distribution for purposes of this
subsection by reference to the actual or when issued trading
market for any securities, it must in doing so consider the
prices in such market over the same period used in computing
the Average Market Value.
Notwithstanding the foregoing provisions of this
subsection, no adjustment shall be made hereunder for any
distribution of Distributed Securities if ICG makes proper
provision so that each Holder who exchanges a Preferred
Security (or any portion thereof) after the record date for
such distribution shall be entitled to receive upon such
exchange, in addition to the shares of ICG Common Stock
issuable upon such exchange, the amount and kind of
Distributed Securities that such holder would have been
entitled to receive if such holder had, immediately prior to
such record date, exchanged such Preferred Security for ICG
Common Stock, provided that, with respect to any Distributed
--------
Securities that are convertible, exchangeable or
exercisable, the foregoing provision shall only apply to the
extent (and so long as) the Distributed Securities
receivable upon exchange of such Preferred Security would be
convertible, exchangeable or exercisable, as applicable,
without any loss of rights or privileges for a period of at
least 60 days following exchange of such Preferred Security.
(v) In case ICG shall, by dividend or otherwise,
distribute to all holders of ICG Common Stock cash
(excluding (x) any quarterly cash dividend on the ICG Common
Stock to the extent the aggregate cash dividend per share of
ICG Common Stock in any fiscal quarter does not exceed the
greater of (A) the amount per share of ICG Common Stock of
the next preceding quarterly cash dividend on the ICG Common
Stock to the extent such preceding quarterly dividend did
not require any adjustment of the Exchange Rate pursuant to
this subsection (as adjusted to reflect subdivisions or
combinations of the ICG Common Stock), and (B) 3.75% of the
average of the last reported sales price of the ICG Common
Stock (determined as provided below) during the ten Trading
Days next preceding the date of declaration of such dividend
and (y) any dividend or distribution in connection with the
liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary), then, in such case,
unless ICG elects to reserve such cash for distribution to
the Holders upon the exchange of the Preferred Securities so
that any such Holder exchanging Preferred Securities will
receive upon such exchange, in addition to the shares of ICG
Common Stock to which such Holder is entitled, the amount of
cash which such holder would have received if such Holder
had, immediately prior to the record date for such
distribution of cash, exchanged its Preferred Securities for
ICG Common Stock, the Exchange Rate shall be adjusted so
that the same shall equal the rate determined by multiplying
the Exchange Rate in effect immediately prior to the close
of business on such record date by a fraction of which the
denominator shall be such Average Market Value on the record
date less the amount of cash so distributed (and not
excluded as provided above) applicable to one share of ICG
Common Stock and the numerator of which shall be the Average
Market Value on such record date; such adjustment to be
effective immediately prior to the opening of business on
the day following the record date; provided, however, that
-------- -------
in the event the portion of the cash so distributed
applicable to one share of ICG Common Stock is equal to or
greater than the Average Market Value on the record date, in
lieu of the foregoing adjustment, adequate provision shall
be made so that each Holder shall have the right to receive
upon exchange the amount of cash such Holder would have
received had such Holder exchanged each Preferred Security
on the record date. If such dividend or distribution is not
so paid or made, the Exchange Rate shall again be adjusted
to be the Exchange Rate which would then be in effect if
such dividend or distribution had not been declared.
If any adjustment is required to be made as set forth
in this subsection as a result of a distribution that is a
quarterly dividend, such adjustment shall be based upon the
amount by which such distribution exceeds the amount of the
quarterly cash dividend permitted to be excluded pursuant
hereto. If an adjustment is required to be made as set
forth in this subsection above as a result of a distribution
that is not a quarterly dividend, such adjustment shall be
based upon the full amount of the distribution.
(vi) In case a tender or exchange offer made by ICG or
any subsidiary of ICG for all or any portion of the ICG
Common Stock shall expire and such tender or exchange offer
shall involve the payment by ICG or such subsidiary of
consideration per share of ICG Common Stock having a fair
market value (as determined by the board of directors of ICG
or, to the extent permitted by applicable law, a duly
authorized committee thereof, whose determination shall be
conclusive, and described in a resolution of the board of
directors of ICG or such duly authorized committee thereof,
as the case may be), at the last time (the "Expiration
Time") tenders or exchanges may be made pursuant to such
tender or exchange offer (as it shall have been amended),
that exceeds the Average Market Value on the Trading Day
next succeeding the Expiration Time, the Exchange Rate shall
be adjusted so that the same shall equal the rate determined
by multiplying the Exchange Rate in effect immediately prior
to the Expiration Time by a fraction of which the
denominator shall be the number of shares of ICG Common
Stock outstanding (including any tendered or exchanged
shares) on the Expiration Time multiplied by the Average
Market Value on the Trading Day next succeeding the
Expiration Time and the numerator of which shall be the sum
of (x) the fair market value (determined as aforesaid) of
the aggregate consideration payable to stockholders based on
the acceptance (up to any maximum specified in the terms of
the tender or exchange offer) of all shares validly tendered
or exchanged and not withdrawn as of the Expiration Time
(the shares deemed so accepted up to any such maximum, being
referred to in this subsection as the "Purchased Shares")
and (y) the product of the number of shares of ICG Common
Stock outstanding (less any Purchased Shares) on the
Expiration Time and the Average Market Value on the Trading
Day next succeeding the Expiration Time; such adjustment to
become effective immediately prior to the opening of
business on the day following the Expiration Time. If ICG
is obligated to purchase shares pursuant to any such tender
or exchange offer, but ICG is permanently prevented by
applicable law from effecting any such purchases or all such
purchases are rescinded, the Exchange Rate shall again be
adjusted to be the Exchange Rate which would then be in
effect if such tender or exchange offer had not been made.
(vii) The "fair market value" shall mean the amount
which a willing buyer under no compulsion to buy would pay a
willing seller under no compulsion to sell in an arm's
length transaction. The "record date" shall mean, with
respect to any dividend, distribution or other transaction
or event in which the holders of ICG Common Stock have the
right to receive any cash, securities or other property or
in which the ICG Common Stock (or other applicable security)
is exchanged for or converted into any combination of cash,
securities or other property, the date fixed for
determination of stockholders entitled to receive such cash,
securities or other property (whether such date is fixed by
the board of directors of ICG or by statute, contract or
otherwise).
(viii) Rights or warrants distributed by ICG to all
holders of ICG Common Stock entitling the holders thereof to
subscribe for or purchase shares of ICG's capital stock
(either initially or under certain circumstances), which
rights or warrants, until the occurrence of a specified
event or events ("Trigger Event"):
(i) are deemed to be transferred with such shares
of ICG Common Stock,
(ii) are not exercisable, and
(iii) are also issued in respect of future
issuances of ICG Common Stock,
shall not be deemed distributed for purposes of this
Section 5 until the occurrence of the earliest Trigger
Event. In addition, in the event of any distribution of
rights or warrants, or any Trigger Event with respect
thereto, that shall have resulted in an adjustment to the
Exchange Rate under this Section 5, (1) in the case of any
such rights or warrants which shall all have been redeemed
or repurchased without exercise by any holders thereof, the
Exchange Rate shall be readjusted upon such final redemption
or repurchase to give effect to such distribution or Trigger
Event, as the case may be, as though it were a cash
distribution, equal to the per share redemption or
repurchase price received by a holder of ICG Common Stock
with respect to such rights or warrants (assuming such
holder had retained such rights or warrants), made to all
holders of ICG Common Stock as of the date of such
redemption or repurchase, and (2) in the case of any such
rights or warrants all of which shall have expired without
exercise by any holder thereof, the Exchange Rate shall be
readjusted as if such issuance had not occurred.
(ix) No adjustment to the Exchange Rate shall be
required unless such adjustment would require an increase or
decrease of at least 1% in such rate; provided, however,
-------- -------
that any adjustments which by reason of this subsection (i)
are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All
calculations under this Section 5 shall be made by the
Company and shall be made to the nearest cent or to the
nearest one hundredth of a share, as the case may be.
Anything in this Section 5 to the contrary notwithstanding,
the Company and ICG shall be entitled to make such increases
in the Exchange Rate, in addition to those required by this
Section 5, as they in their discretion shall determine to be
advisable in order that any stock dividends, subdivision of
shares, distribution of rights to purchase stock or
securities, or any distribution of securities convertible
into or exchangeable for stock hereafter made by the Company
to its stockholders shall not be taxable. To the extent
permitted by applicable law, the Company and ICG from time
to time may increase the Exchange Rate by any amount for any
period of time if the period is at least 20 days, the
increase is irrevocable during the period and the board of
directors of ICG shall have made a determination that such
increase would be in the best interests of the Company and
ICG, which determination shall be conclusive. Whenever the
Exchange Rate is so increased, the Company shall mail to
Holders a notice of the increase. The Company shall mail
the notice at least 15 days before the date the increased
Exchange Rate takes effect. The notice shall state the
increased Exchange Rate and the period it will be in effect.
(x) Whenever the Exchange Rate is adjusted, as herein
provided, ICG shall promptly prepare an officers'
certificate setting forth the Exchange Rate after such
adjustment and setting forth a brief statement of the facts
requiring such adjustment. Promptly after the preparation
of such certificate, shall prepare a notice of such
adjustment of the Exchange Rate setting forth the adjusted
Exchange Rate and the date on which such adjustment becomes
effective and shall mail such notice of such adjustment of
the Exchange Rate to each Holder.
(xi) In any case in which this Section 5 provides that
an adjustment shall become effective immediately after a
record date for an event, the Company may defer until the
occurrence of such event (i) issuing to any Holder of a
Preferred Security exchanged after such record date and
before the occurrence of such event the additional shares of
ICG Common Stock issuable upon such exchange by reason of
the adjustment required by such event over and above the ICG
Common Stock issuable upon such exchange before giving
effect to such adjustment and (ii) paying to such holder any
amount in cash or additional shares in lieu of any
fractional share.
(xii) In case of a tender or exchange offer made by
a person other than ICG or any subsidiary for an amount
which increases the offeror's ownership of ICG Common Stock
to more than 25% of the ICG Common Stock outstanding and
shall involve the payment by such person of consideration
per share of ICG Common Stock having a fair market value (as
determined by the board of directors of ICG, whose
determination shall be conclusive, and described in a
resolution of the board of directors of ICG) at the last
time (the "Expiration Time") tenders or exchanges may be
made pursuant to such tender or exchange offer (as it shall
have been amended) that exceeds the Average Market Value on
the Trading Day next succeeding the Expiration Time, and in
which, as of the Expiration Time the board of directors of
ICG is not recommending rejection of the offer, the Exchange
Rate shall be increased so that the same shall equal the
price determined by multiplying the Exchange Rate in effect
immediately prior to the Expiration Time by a fraction of
which the denominator shall be the number of shares of ICG
Common Stock outstanding (including any tendered or exchange
shares) on the Expiration Time multiplied by the Average
Market Value on the Trading Day next succeeding the
Expiration Time and the numerator shall be the sum of (x)
the fair market value (determined as aforesaid) of the
aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the
tender or exchange offer) of all shares validly tendered or
exchanged and not withdrawn as of the Expiration Time (the
shares deemed so accepted, up to any such maximum, being
referred to in this subsection as the "Purchased Shares")
and (y) the product of the number of shares of ICG Common
Stock outstanding (less any Purchased Shares) on the
Expiration Time and the Average Market Value on the Trading
Day next succeeding the Expiration Time, such increase to
become effective immediately prior to the opening of
business on the day following the Expiration Time. In the
event that such person is obligated to purchase shares
pursuant to any such tender or exchange offer, but such
person is permanently prevented by applicable law from
effecting any such purchases or all such purchases are
rescinded, the Exchange Rate shall again be adjusted to be
the Exchange Rate which would then be in effect if such
tender or exchange offer had not been made. Notwithstanding
the foregoing, the adjustment described in this Section
5(b)(xii) shall not be made if, as of the Expiration Time,
the offering documents with respect to such offer disclose a
plan or intention to cause the Company to engage in a
consolidation or merger of ICG or a sale of substantially
all of ICG's assets.
5A. Effect of Reclassification, Consolidation, Merger
-------------------------------------------------
or Sale. If any of the following events occur, namely (i) any
-------
reclassification or change of outstanding shares of ICG Common
Stock (other than a change in par value, or from par value to no
par value, or from no par value to par value, or as a result of a
subdivision or combination), (ii) any consolidation, merger or
combination of ICG with another person as a result of which
holders of ICG Common Stock shall be entitled to receive stock,
securities or other property or assets (including cash) with
respect to or in exchange for such ICG Common Stock, or (iii) any
sale or conveyance of the properties and assets of ICG as, or
substantially as, an entirety to any other person as a result of
which holders of ICG Common Stock shall be entitled to receive
stock, securities or other property or assets (including cash)
with respect to or in exchange for such ICG Common Stock, then
the Manager or the successor or purchasing person, as the case
may be, shall prepare and execute a supplement to this Written
Action providing that each Preferred Security shall be exchanged
for the kind and amount of shares of stock and other securities
or property or assets (including cash) receivable upon such
reclassification, change, consolidation, merger, combination,
sale or conveyance by a holder of a number of shares of ICG
Common Stock issuable upon exchange of Preferred Securities
immediately prior to such reclassification, change,
consolidation, merger, combination, sale or conveyance. Such
supplement shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for
in Section 5 hereof. The Company shall cause notice of the
execution of such supplement to be mailed to each Holder. The
above provisions of this Section shall similarly apply to
successive reclassifications, consolidations, mergers,
combinations, and sales.
5B. Taxes on Shares Issued. The issuance of stock
----------------------
certificates on exchanges of Preferred Securities shall be made
without charge to the exchanging holder for any U.S. tax in
respect of the issue thereof. The Company shall not, however, be
required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of stock in any name
other than that of a Holder, and the Company shall not be
required to issue or deliver any such stock certificate unless
and until the person or persons requesting the issue thereof
shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax
has been paid.
If ICG implements a stockholders' rights plan, such
rights plan must provide that upon exchange of the Preferred
Securities into ICG Common Stock the holders will receive, in
addition to the ICG Common Stock issuable upon such exchange,
such rights whether or not such rights have separated from the
ICG Common Stock at the time of such exchange.
5C. Fundamental Change. Notwithstanding the
------------------
foregoing, but not in addition to the adjustments set forth
elsewhere herein, if ICG or the Company makes an announcement of
the occurrence or an imminent occurrence of a Fundamental Change
at any time prior to the Mandatory Redemption Date, there will be
an adjustment to the exchange rate of the Preferred Securities
(the "Fundamental Change Exchange Rate") such that the exchange
rate will thereafter equal the liquidation preference of the
Preferred Securities, divided by the Fundamental Change Average
Market Price, unless the Fundamental Change Exchange Rate is
lower than the then current exchange rate of the Preferred
Securities as calculated in the manner described above (in which
case there will be no such adjustment to the exchange rate).
The term "Fundamental Change" means the occurrence of
any transaction or event in connection with which all or
substantially of all of the outstanding shares of ICG Common
Stock shall be exchanged for, converted into, acquired for or
constitute the right to receive stock, securities, other property
or assets (including cash) of another entity or person (whether
by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification,
recapitalization or otherwise).
"Fundamental Change Average Market Value" of the ICG
Common Stock means the arithmetic average of the Current Market
Value for the ten trading days ending on the fifth business day
prior to the date of the closing of the Fundamental Change.
5D. No Adjustments. Notwithstanding anything herein
--------------
to the contrary, no adjustment will be required as a result of
(a) the issuance of shares of ICG Common Stock as a result of any
of the following (i) the grant or exercise of employee or
director stock options (ii) the exercise of outstanding warrants
or conversion or exchange of existing notes and securities
(including exchange of Class A Common Shares of ICG Holdings
(Canada), Inc.), (iii) a contribution to ICG's 401(k) plan or
ICG's 401(k) Wrap Around Deferred Compensation Plan and (iv) in
satisfaction of ICG's obligations under its Employee Stock
Purchase Plan or (b) the issuance of ICG Common Stock as a
dividend on or upon exchange of the Preferred Securities. ICG
Common Stock issued in connection with acquisitions of businesses
or assets from persons that are not affiliates of ICG will be
deemed to have been issued for a price at least equal to Average
Market Value.
6. Redemption. (a) Unless earlier redeemed or
----------
exchanged, the Preferred Securities must be redeemed (the
"Mandatory Redemption"), out of funds legally available therefor,
by the Company at a redemption price of 100% of the liquidation
preference of the Preferred Securities plus accrued and unpaid
dividends, if any, on the Mandatory Redemption Date.
(b) The Preferred Securities are subject to redemption
by the Company, in whole or in part, at any time after the
Closing Date and on or prior to November 15, 2000 (a "Provisional
Redemption"), at a redemption price of 103% of the liquidation
preference of the Preferred Securities to be redeemed plus
accrued and unpaid dividends, if any, to the date of redemption
(the "Provisional Redemption Date"), in the event that the
Average Market Value equals or exceeds the following Trigger
Percentages of the Exchange Price then in effect for at least 20
Trading Days in any consecutive 30-day Trading Day period ending
on the Trading Day prior to the date of mailing of the notice of
Provisional Redemption, if called for redemption in the 12-month
period ending on November 15 of the indicated year:
YEAR TRIGGER PERCENTAGES
---- -------------------
1998 170%
1999 160
2000 150
Upon any Provisional Redemption, the Company will make
an additional payment in cash (the "Dividend Make-Whole Payment")
with respect to the Preferred Securities called for redemption in
an amount equal to the pro rata portion of the liquidation
proceeds of any remaining Treasury strips held pursuant to the
Escrow Agreement. The Company will be obligated to make the
Dividend Make-Whole Payment on all Preferred Securities called
for Provisional Redemption, regardless of whether such Preferred
Security is exchanged prior to the Provisional Redemption Date.
The Dividend Make-Whole Payment must be paid in cash.
(c) The Preferred Securities are subject to optional
redemption (an "Optional Redemption") on or after November 18,
2000 (the "Initial Redemption Date"). At any time and from time
to time on or after the Initial Redemption Date and until the
Mandatory Redemption Date, the Company will have the right to
redeem, in whole or in part, the Preferred Securities at a
redemption price equal to the percentage of the liquidation
preference set forth below, together with accrued and unpaid
dividends, if any, to the date of redemption, if redeemed in the
12-month period beginning on November 15 of the indicated year:
YEAR TRIGGER PERCENTAGES
---- -------------------
2000 102%
2001 101%
2002 and thereafter 100%
(d) The redemption price pursuant to a Provisional
Redemption, an Optional Redemption or the Mandatory Redemption
may be paid, in each case at the Company's option, in (i) cash,
(ii) ICG Common Stock, valued at 90% of the Average Market Value
of the ICG Common Stock in the case of the Provisional Redemption
or the Optional Redemption and 100% of the Average Market Value
of the ICG Common Stock in the case of the Mandatory Redemption,
or (iii) any combination of cash or ICG Common Stock; provided
that the Company, in its notice of such redemption, must state
whether the redemption price will be paid in cash, ICG Common
Stock or a combination thereof, and provided that any payment
must be made in cash to the extent ICG shall have provided the
Company with cash (whether through dividends on the ICG Preferred
Stock or otherwise) to make all or any portion of such payment
with respect to such redemption.
7. Redemption and Exchange Procedures. (a) Notice
----------------------------------
of any redemption (optional or mandatory) of the Preferred
Securities (a "Notice of Redemption") shall be irrevocable and
shall be given by the Company by mail not fewer than 30 nor more
than 60 calendar days prior to the date fixed for redemption
thereof to ICG and to each Holder of Preferred Securities that
are being redeemed. For purposes of the calculation of the date
of redemption and the date on which notices are given pursuant to
this Section 7(a), a Notice of Redemption shall be deemed to be
given on the day such notice is first mailed by first-class mail,
postage prepaid, to each appropriate Holder of Preferred
Securities. A Notice of Redemption shall be addressed to each
appropriate Holder of Preferred Securities at the address of such
Holder appearing in the books and records of the Company. If all
of the Preferred Securities are represented by Book-Entry
Interests, Notices of Redemption shall be sent to the Clearing
Agency. No defect in the Notice of Redemption or in the mailing
thereof with respect to any Preferred Security shall affect the
validity of the redemption proceedings with respect to any other
Preferred Security. If fewer than all the Preferred Securities
are being redeemed, then any redemption shall be on a pro rata
basis.
(b) If the Preferred Securities are represented by
Book-Entry Interests, the Company shall irrevocably deposit
sufficient funds on the date fixed for redemption with the
Clearing Agency and give the Clearing Agency irrevocable
instructions and authority to pay the redemption price to the
Holders of the Preferred Securities to be redeemed, and if the
Preferred Securities are not represented by Book-Entry Interests,
the Company shall irrevocably deposit such funds with the
transfer agent for the Preferred Securities and give such
transfer agent such irrevocable instructions and authority to pay
the redemption price to the Holders of the Preferred Securities
to be redeemed. If a Notice of Redemption shall have been given
and sufficient funds irrevocably deposited as required, then
immediately prior to the close of business on the date of such
deposit, all rights of the Holders of such Preferred Securities
so called for redemption will cease, except the right of such
Holders to receive the redemption price, but without additional
interest from and after such redemption date. In the event that
any date fixed for redemption of Preferred Securities is not a
Business Day, then payment of the redemption price payable on
such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in
respect of any such delay), except that if such Business Day
falls in the next calendar year, such payment will be made on the
immediately preceding Business Day. In the event that payment of
the redemption price is improperly withheld or refused and not
paid either by the Company or by ICG (pursuant to the Guarantee),
dividends on the Preferred Securities called for redemption will
continue to accumulate at the then applicable rate to the date
that the redemption price is actually paid and the Holders of
such Preferred Securities may exercise all of their rights as
Holders thereof.
8. Liquidation Rights. In the event of any voluntary
------------------
or involuntary liquidation, dissolution, winding-up or
termination of the Company (each a "Liquidation"), the then
holders of the Preferred Securities shall be entitled to receive
out of the assets of the Company (which will include the ICG
Preferred Stock, any interest on and principal of the Treasury
Strips that are held in the Escrow Account, any ICG Common Stock
that the Company received from ICG as a dividend (or otherwise)
and have not distributed as a dividend on the Preferred
Securities or sold in the open market, and any other assets of
the Company), after satisfaction of liabilities to creditors, if
any, distributions in an amount equal to the aggregate of the
stated liquidation preference of $50 of Preferred Security plus
accrued and unpaid dividends thereon to the date of payment (the
"Liquidation Distribution").
If, upon any such Liquidation, the Liquidation
Distribution can be paid only in part because the Company has
insufficient assets available to pay in full the aggregate
Liquidation Distribution, then the amounts payable by the Company
on the Preferred Securities shall be paid on a pro rata basis.
ICG is obligated to pay dividends, consisting of ICG Preferred
Stock, to the Company so that it will be able to make the
Liquidation Distribution in full.
9. Sinking Fund. The Preferred Securities shall not
------------
be subject to the operation of a retirement or sinking fund.
10. Guarantee of Liabilities. It shall be a condition
------------------------
precedent to the issuance of the Preferred Securities that ICG
execute and deliver to the Company the Guarantee.
11. Book-Entry Issuance. (a) The Depository Trust
-------------------
Company, New York, New York ("DTC"), will initially act as the
Clearing Agency. The Preferred Securities will be issued only as
fully-registered securities and will be initially registered in
the name of Cede & Co. (DTC's partnership nominee).
(b) DTC may discontinue providing its services as
Clearing Agency with respect to the Preferred Securities by
giving reasonable notice to the Company as provided in the
agreement between the Company and DTC. Under such circumstances,
if a successor Clearing Agency is not obtained, ICG at its
expense shall cause certificates for Preferred Securities to be
printed and delivered as promptly as practicable. If the ICG
decides to discontinue use of the system of book-entry transfers
through DTC (or a successor Clearing Agency), ICG at its expense
shall cause certificates for Preferred Securities to be printed
and delivered to the beneficial owners of the Preferred
Securities as promptly as practicable.
(c) In the event that the Preferred Securities do not
remain in book-entry-only form, the following provisions will
apply:
(i) Registration of transfers of Preferred
Securities will be effected without charge by or on behalf
of the Company, but upon payment (and/or the giving of such
indemnity as the Company or the Manager may require) in
respect of any tax or other governmental charges which may
be imposed in connection therewith.
(ii) Exchanges of Preferred Securities for shares
of ICG Common Stock shall be effected without charge by or
on behalf of the Company, but upon payment (and/or the
giving of such indemnity as the Company or the Manager may
require) in respect of any tax or other governmental charges
which may be imposed in connection with the issuance of any
shares of ICG Common Stock in the name of any person other
than the Holder of the Preferred Security for which it is
being exchanged or for any reason other than such exchange.
(iii) The Company shall not be required to
register or cause to be registered the transfer of Preferred
Securities after such Preferred Securities have been called
for redemption.
12. Registrar and Transfer Agent. The Company hereby
----------------------------
appoints American Stock Transfer & Trust Company as its initial
registrar, transfer agent and paying agent for the Preferred
Securities. The Company may at any time designate an additional
or substitute registrar, transfer agent and paying agent for the
Preferred Securities and shall promptly notify the Holders of the
Preferred Securities of any such designation.
13. Transfer Restrictions. The Preferred Securities
---------------------
have not been registered under the Securities Act and may not be
offered or sold within the United States or to, or for the
account or benefit of U.S. persons except pursuant to an
exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act. Accordingly,
the Preferred Securities are being offered and sold only (i) to
"qualified institutional buyers" (as defined in Rule 144A under
the Securities Act) in compliance with Rule 144A and (ii) to
Institutional Accredited Investors.
By its purchase of Preferred Securities, each purchaser
of Preferred Securities will be deemed to:
1. represent that it is purchasing the Preferred
Securities for its own account or an account with respect to
which it exercises sole investment discretion and that it and any
such account is (i) a QIB, and it is aware that the sale to it is
being made in reliance on Rule 144A or (ii) an Institutional
Accredited Investor;
2. acknowledge that the Securities have not been
registered under the Securities Act and 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 below;
3. if it is a person other than a foreign purchaser
outside the United States, agree that if it should resell or
otherwise transfer any of the Securities within the period
referred to in Rule 144(k) under the Securities Act after the
original issuance of such Securities, it will do so only (i) to
ICG or any subsidiary thereof, (ii) to a QIB in compliance with
Rule 144A, (iii) outside the United States in compliance with
Rule 904 under the Securities Act, (iv) pursuant to the exemption
from registration provided by Rule 144 under the Securities Act
(if available), (v) 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 the Securities (the form of which letter can be
obtained from the Transfer Agent), and, if such transfer is in
respect of an aggregate liquidation preference of Preferred
Securities at the time of transfer of less than $250,000 or any
other Securities, an opinion of counsel acceptable to the Company
that such transfer is in compliance with the Securities Act or
(vi) pursuant to an effective registration statement with the
Securities Act. Each Institutional Accredited Investor that is
not a QIB and that is an original purchaser of the Preferred
Securities will be required to sign an agreement to the foregoing
effect. Prior to any proposed transfer of any Securities (other
than pursuant to an effective registration statement within the
period referred to in Rule 144(k) under the Securities Act after
the original issuance of such Securities, the holder thereof must
check the appropriate box set forth on the reverse of its
Certificate relating to the manner of such transfer and submit
the certificate to the transfer agent;
4. agree that it will deliver to each person to whom
it transfers any of the Preferred Securities notice of any
restrictions on transfer of such Preferred Securities;
5. if it is a QIB, understand that the Preferred
Securities will be represented by the restricted global Preferred
Securities certificate. Before any interest in the restricted
global Preferred Securities certificate may be offered, sold,
pledged or otherwise transferred to a person who is not a QIB,
the transferee will be required to provide the transfer agent
with a written certification (the form of which certification can
be obtained from the transfer agent) as to compliance with the
transfer restriction referred to above;
6. understand that, until registered under the
Securities Act, the Securities (other than those issued to
foreign purchasers after appropriate certification or in
substitution or exchange therefor) will bear a legend to the
following effect (as applicable) unless otherwise agreed by the
Company and the holder thereof;
Each certificate representing a Preferred Security will
bear the following legend:
THIS PREFERRED SECURITY 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 SECURITY 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 SECURITY, RESELL OR OTHERWISE TRANSFER THIS
PREFERRED SECURITY EXCEPT (A) TO ICG COMMUNICATIONS, 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 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 SECURITY (THE FORM OF WHICH LETTER CAN
BE OBTAINED FROM THE TRANSFER AGENT) AND, IF SUCH TRANSFER IS IN
RESPECT OF AN AGGREGATE LIQUIDATION PREFERENCE OF PREFERRED
SECURITIES AT THE TIME OF TRANSFER OF LESS THAN $250,000 OR ANY
OTHER SECURITIES, AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER
THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT OR
(F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THIS PREFERRED SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH
ANY TRANSFER OF THIS PREFERRED SECURITY WITHIN THE TIME PERIOD
REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET
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 TRANSFER AGENT.
IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
TRANSFER AGENT AND ICG FUNDING, LLC 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 IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, AS USED HEREIN,
THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATIONS S UNDER
THE SECURITIES ACT. THE OPERATING AGREEMENT CONTAINS A PROVISION
REQUIRING THE TRANSFER AGENT TO REFUSE TO REGISTER ANY TRANSFER
OF THE PREFERRED SECURITIES IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
Each stock certificate representing any ICG Common
stock issuable upon exchange will bear the following legend
(unless the resale of such ICG Common Stock is not subject to the
registration requirements of the Securities Act):
THE COMMON STOCK EVIDENCED HEREBY 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. THE
HOLDER HEREOF AGREES THAT UNTIL THE EXPIRATION OF THE TIME PERIOD
REFERRED TO IN RULE 144(K), (1) IT WILL NOT RESELL OR OTHERWISE
TRANSFER THE COMMON STOCK EVIDENCED HEREBY EXCEPT (A) TO ICG
COMMUNICATIONS, INC. OR ANY SUBSIDIARY THEREOF, (B) TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER
THE SECURITIES ACT, (C) 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 OR TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY
(THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRANSFER
AGENT), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904
UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT, (2) PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER
PURSUANT TO CLAUSE (F) ABOVE), IT WILL FURNISH TO THE TRANSFER
AGENT OR ICG COMMUNICATIONS, INC. SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND (3) IT WILL DELIVER TO
EACH PERSON TO WHOM THE COMMON STOCK EVIDENCED HEREBY IS
TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE (F) ABOVE)
A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS LEGEND
WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE COMMON
STOCK EVIDENCED HEREBY PURSUANT TO CLAUSE (F) ABOVE OR THE
EXPIRATION OF ICG COMMUNICATIONS, INC. AND THE TRANSFER AGENT
THAT THE COMMON STOCK HAS BEEN OR IS BEING OFFERED AND SOLD IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, AS USED
HEREIN, THE TERMS "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
7. and acknowledge that ICG, the Company and the
placement agents and others will rely upon the truth and accuracy
of the foregoing acknowledgements, represents and agreements, and
agrees that if any of the acknowledgments, representations or
warranties deemed to have been made by it by its purchase of
Preferred Securities are no longer accurate, it shall promptly
notify ICG, the Company and the placement agents. If it is
acquiring Preferred Securities as a fiduciary or agent for one or
more investor accounts, it represents that it has sole investment
discretion with respect to each such account and it has full
power to make the foregoing acknowledgments, representations and
agreements on behalf of each such account.
14. Governing Law. This Written Action shall be
-------------
governed by and construed in accordance with the laws of the
State of Delaware without giving effect to the principles of
conflict of laws thereof.
<PAGE>
IN WITNESS WHEREOF, the undersigned Manager of the
Company has caused this Written Action to be executed.
ICG COMMUNICATIONS, INC.
By: /s/ J. Shelby Bryan
-------------------------------
Name: J. Shelby Bryan
Title: President and Chief
Executive Officer
Exhibit 4.9
CERTIFICATE OF DESIGNATION, RIGHTS AND PREFERENCES
OF THE
PREFERRED STOCK MANDATORILY REDEEMABLE 2009
OF
ICG COMMUNICATIONS, INC.
-----------------------------------------------------------------
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
-----------------------------------------------------------------
ICG COMMUNICATIONS, INC. (the "Corporation"), a
-----------
corporation organized and existing under the General Corporation
Law of the State of Delaware, does hereby certify that pursuant
to authority conferred upon the Board of Directors of the
Corporation by its Certificate of Incorporation and pursuant to
the provisions of Section 151 of the General Corporation Law of
the State of Delaware, said Board of Directors duly approved and
adopted the following resolution:
"RESOLVED, that pursuant to the authority vested in the
Board of Directors of the Corporation by its Certificate of
Incorporation (hereinafter referred to as the "Certificate of
--------------
Incorporation"), the Board of Directors does hereby create,
-------------
authorize and provide for the issue of a Preferred Stock
Mandatorily Redeemable 2009, par value $.01 per share, with a
stated value of $10,000 per share, consisting of 13,225 shares,
having the designation, preferences and relative, participating,
optional and other special rights and the qualifications,
limitations and restrictions thereof that are set forth in the
Certificate of Incorporation and in this Resolution as follows:
1. DESIGNATION AND AMOUNT. The distinctive designation
----------------------
of such series is "Preferred Stock Mandatorily Redeemable 2009"
(hereinafter in this Resolution called the "Preferred Stock"), and
---------------
the number of shares constituting such series shall be 13,225.
2. RANK. The Preferred Stock shall, with respect to
----
dividend rights and rights of liquidation, winding up and
dissolution, 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 the date of this
Resolution by the Board of Directors the terms of which do not
expressly provide that it ranks senior to or on a parity with the
Preferred Stock as to dividend distributions and distributions
upon the liquidation, winding-up or 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 the date of this Resolution by
the Board of Directors, the terms of which expressly provide that
such class or series will rank on a parity with the Preferred
Stock as to dividend distributions and distributions upon the
liquidation, winding-up or dissolution of the Corporation
(collectively referred to as "Parity Securities"); and (iii)
junior to each class of capital stock or series of preferred
stock issued by the Corporation established after the date of
this Resolution by the Board of Directors, the terms of which
expressly provide that such class or series will rank senior to
the Preferred Stock as to dividend distributions and
distributions upon liquidation, winding-up or dissolution of the
Corporation (collectively referred to as "Senior Securities").
The Preferred Stock 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 Preferred Stock then outstanding,
voting or consenting, as the case may be, separately as one
class.
3. DIVIDENDS. The registered holder ("Holder") of
---------
shares of the Preferred Stock 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 5.95% of the liquidation preference per share through and
including November 15, 2000, and thereafter as described below.
Such dividends shall be cumulative, whether or not earned or
declared, on a daily basis from the date of issuance of the
Preferred Stock, and shall be payable quarterly in arrears on or
prior to February 15, May 15, August 15, and November 15 of each
year commencing on February 15, 1998 (each of such dates being a
"dividend payment date"), with respect to the period commencing
with the date of issuance of the Preferred Stock 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 stockholders of record on
the preceding February 1, May 1, August 1, and November 1,
respectively (each, a "regular record date"). Any dividend
payments made with respect to shares of Preferred Stock on or
before November 15, 2000, shall be made in such number of
additional fully paid and nonassessable shares of Preferred Stock
having an aggregate liquidation preference equal to the amount of
such dividends, and the issuance of such additional shares of
Preferred Stock shall constitute full payment of such dividend.
All shares of Preferred Stock issued as a dividend with respect
to the Preferred Stock will thereupon be duly authorized, validly
issued, fully paid and nonassessable and free of all liens and
charges. After November 15, 2000, dividends on the Preferred
Stock may be paid, in the sole discretion of the Board of
Directors of the Corporation, in cash or in shares of common
stock, $.01 par value per share of the Corporation ("Common
Stock"), in an amount that will enable the Holder (i) to transfer
such Common Stock to the holders of the Holder's Exchangeable
Limited Liability Company Preferred Securities (the "Funding
Preferred Securities") in full payment of dividends on the
Funding Preferred Securities, valued at 90% of the Average Market
Value (as defined below) of the Common Stock, or (ii) to sell
such shares of Common Stock in the open market in order for the
Holder to make full dividend payments on the Funding Preferred
Securities in cash, in each case for the corresponding dividend
period with respect to the Funding Preferred Securities. At any
time and from time to time after the issuance of the Preferred
Stock, the Corporation may, as, when and if declared by the Board
of Directors, declare additional dividends to the Holder in
shares of Common Stock, in such amounts in order for the Holder
to have sufficient funds in cash, following a sale thereof by the
Holder, to satisfy all obligations with respect to the Funding
Preferred Securities.
If on or prior to the 90th day following the
Closing Date the shelf registration statement with respect to,
among other things, the Funding Preferred Securities (the "Shelf
Registration Statement") has not been filed by the Corporation
and Funding with the Securities and Exchange Commission (the
"Commission"), dividends will accrue at an additional annual rate
of 0.25% of the liquidation preference thereof until the Shelf
Registration Statement is filed, and if on or prior to the 180th
day following the Closing Date, the Shelf Registration Statement
has not been declared effective by the Commission, dividends will
accrue at an additional annual rate of 0.25% of the liquidation
preference thereof until the Shelf Registration Statement is
declared effective by the Commission, payable on each Dividend
Payment Date in (i) cash, (ii) shares of Common Stock, valued at
90% of the Average Market Value of the Common Stock or (iii) any
combination of cash or Common Stock. "Closing Date" means
September 24, 1997. "Average Market Value" of the Common Stock
means the average of the Current Market Value for the ten trading
days ending on the second business day prior to the applicable
date of payment. "Current Market Value" of the Common Stock
means (i) the Volume Weighted Average Price, as reported on the
Nasdaq National Market or (ii) the average of the high and low
sales prices of the Common Stock, if reported on any other
national securities exchange.
4. LIQUIDATION PREFERENCE.
----------------------
Upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, holders of
Preferred Stock will be entitled to be paid, out of the assets of
the Corporation available for distributions, $10,000 per share of
Preferred Stock, 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, Common Stock. If, upon any
voluntary or involuntary liquidation, dissolution or winding-up
of the Corporation, the amounts payable with respect to the
Preferred Stock and all other Parity Securities are not paid in
full, the holders of the Preferred Stock and the Parity
Securities will share equally and ratably in any distribution of
assets of the Corporation with respect to the Preferred Stock and
the 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 will not be entitled to any further
participation in any distribution of assets of the Corporation.
5. MANDATORY REDEMPTION.
--------------------
All of the shares of Preferred Stock shall be
subject to mandatory redemption by the Corporation (the
"Mandatory Redemption"), at a redemption price equal to 100% of
the liquidation preference per share, together with accrued and
unpaid dividends thereon to the redemption date, in cash out of
funds legally available therefor without interest, two (2)
business days prior to November 15, 2009. Upon the Mandatory
Redemption, ICG will declare and pay a special dividend in an
amount equal to the shortfall, if any, in the assets of the
Holder necessary for Holder to complete its mandatory redemption
of the Funding Preferred Securities.
6. PROVISIONAL REDEMPTION.
----------------------
The Preferred Stock shall be subject to redemption
by the Corporation (an "ICG Provisional Redemption") in whole or
in part, at any time prior to November 15, 2000, at a redemption
price equal to 103% of the liquidation preference of the
Preferred Stock to be redeemed plus accrued and unpaid dividends,
if any, to the date of redemption. Upon any ICG Provisional
Redemption, ICG will declare and pay a special dividend in an
amount equal to the shortfall, if any, in the assets of the
Holder necessary for the Holder to complete its provisional
redemption of the Funding Preferred Securities.
7. OPTIONAL REDEMPTION BY THE CORPORATION.
--------------------------------------
The Preferred Stock will also be subject to
optional redemption by the Corporation (an "ICG Optional
Redemption") on or after November 18, 2000. In such event, the
Corporation shall redeem, in whole or in part, the Preferred
Stock at a redemption price equal to the percentage of the
liquidation preference set forth below, together with accrued and
unpaid dividends, if any, to the redemption date, if redeemed in
the 12-month period beginning on November 15 of the indicated
year:
REDEMPTION
YEAR PRICE
---- ----------
2000 102%
2001 101%
2002 and thereafter 100%
Upon any ICG Optional Redemption, ICG will declare
and pay a special dividend in an amount equal to the shortfall,
if any, in the assets of the Holder necessary for Holder to
complete its optional redemption of the Funding Preferred
Securities.
8. METHOD OF PAYMENT OF REDEMPTION PRICE.
-------------------------------------
All payments pursuant to an ICG Provisional
Redemption, an ICG Optional Redemption or the Mandatory
Redemption may be paid, in each case at the Corporation's option,
in (i) cash, (ii) shares of Common Stock, valued at 90% of the
Average Market Value of the Common Stock in the case of the an
ICG Provisional Redemption or an ICG Optional Redemption and 100%
of the Average Market Value of the Common Stock in the case of
the Mandatory Redemption, or (iii) any combination of cash or
Common Stock.
9. EXCHANGE OF PREFERRED STOCK.
---------------------------
The Preferred Stock is exchangeable into Common
Stock at the option of the Holder, upon the Holder's receipt of a
request from a holder of Funding Preferred Securities to exchange
such Funding Preferred Securities for Common Stock, at an initial
exchange rate of 416.23304 shares of Common Stock for each share
of Preferred Stock, subject to the same adjustments that are made
to the exchange rate of the Funding Preferred Securities.
Notwithstanding the foregoing, the number of shares of Common
Stock issuable to the Holder upon exchange of the ICG Preferred
Stock shall equal the number of shares of Common Stock issuable
by the Holder upon exchange of the Funding Preferred Securities
In the event a holder of the Funding Preferred
Securities wishes to exchange such Preferred Securities with the
Holder prior to November 15, 2000, the Holder shall deliver to
the Company (i) a number of shares of Preferred Stock equal to
all of the outstanding Preferred Stock multiplied by a fraction,
the numerator of which is the number of Funding Preferred
Securities which are presented to the Holder for exchange and the
denominator of which is all of the outstanding Funding Preferred
Securities (the "Ratio"), and (ii) an amount of each Class of
Treasury Strips (other than the Class of Treasury Strips, if any,
that will mature within 15 days from the date of such exchange)
then held by Funding or an escrow agent equal to all of the
Treasury Strips in such Class multiplied by the Ratio.
"Treasury Strips" means the U.S. Treasury strips
held by Funding or an escrow agent to secure the first 13
dividend payments on the Funding Preferred Securities. Each
group of Treasury Strips that is payable on or about a dividend
payment date shall be considered, for purposes of this paragraph,
a "Class of Treasury Strips."
If the Corporation implements a stockholders'
rights plan, such rights plan must provided that upon exchange of
Preferred Stock for Common Stock the Holder will receive, in
addition to the Common Stock issuable upon such exchange, such
rights whether or not such rights have separated from the Common
Stock at the time of such exchange.
10. VOTING RIGHTS. The holders of record of shares of
-------------
Preferred Stock shall not be entitled to any voting rights except
as otherwise provided herein or required by law. Without the
affirmative vote of the holders of more than 50% of the then
outstanding shares of Preferred Stock, voting as a single class,
the Corporation may not:
(i) amend the Certificate of Incorporation
so as have an adverse effect the voting powers or other
rights or preferences of shares of the Preferred Stock;
or
(ii) authorize, issue or create any class of
capital stock that is pari passu with or senior with
---- -----
respect to dividends or liquidation rights to the
Preferred Stock. Notwithstanding the foregoing, the
Corporation may amend the Certificate of Incorporation
without prior notice to or consent of the Holder or the
holders of the Funding Preferred Securities, when
authorized by the Board of Directors, if (a) the Board
of Directors determines that such action would not
materially and adversely affect the rights of the
Holder or any holder of the Funding Preferred
Securities and (b) the Corporation delivers to the
Holder a legal opinion of independent counsel to the
effect that the requirements of clause (a) have been
satisfied.
11. EXCLUSIVITY. Except as expressly set forth herein,
-----------
the holders of the Preferred Stock shall have no rights other
than those provided by law.
"RESOLVED FURTHER, that, before the Corporation shall
issue any shares of the Preferred Stock, a certificate pursuant
to Section 151 of the General Corporation Law of the State of
Delaware shall be made, executed, acknowledged, filed and
recorded in accordance with the provisions of Sections 103 and
151 thereof, and the proper officers of the Corporation are
hereby authorized and directed to do all acts and things which
may be necessary or proper in their opinion to carry into effect
the purposes and intent of this and the foregoing resolutions."
<PAGE>
IN WITNESS WHEREOF, ICG Communications, Inc. has caused
this Certificate of Designation, Rights and Preferences to be
signed by James D. Grenfell, its Executive Vice President, and
attested by Audrey A. Rohan, its Assistant Secretary, on this
24th day of September, 1997.
ICG COMMUNICATIONS, INC.
By: /s/ James D. Grenfell
--------------------------------
James D. Grenfell
Executive Vice President
Attest:
/s/ Audrey Rohan
------------------------------
Audrey A. Rohan
Assistant Secretary
Exhibit 5.1
REID & PRIEST LLP
40 West 57th Street
New York, NY 10019-4097
Telephone 212 603-2000
Fax 212 603-2001
New York, New York
November 17, 1997
ICG Communications, Inc.
9605 E. Maroon Circle
P.O. Box 6742
Englewood, Colorado 80112-6742
ICG Funding, LLC
9605 E. Maroon Circle
P.O. Box 6742
Englewood, Colorado 80112-6742
Re: Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
We have acted as counsel to ICG Communications, Inc., a
Delaware corporation ("ICG"), and ICG Funding, LLC, a Delaware
limited liability company ("Funding," and, together with ICG, the
"Registrants") in connection with the preparation and filing with
the Securities and Exchange Commission (the "Commission") of the
above-referenced Registration Statement on Form S-3 (the
"Registration Statement") under the Securities Act of 1933, as
amended (the "Act"), relating to the resale (i) by the holders
named therein of up to an aggregate of 2,645,000 6 3/4%
Exchangeable Limited Liability Company Preferred Securities, $50
liquidation preference per Preferred Security (the "Preferred
Securities), of Funding, (ii) of 4,786,680 shares of ICG common
stock, par value $.01 per share (the "Common Stock"), issuable
upon exchange of the Preferred Securities (the "Exchange Common
Shares") and (iii) by Funding of up to an aggregate of 200,000
shares of Common Stock (the "Distribution Shares"). The
Preferred Securities are fully and unconditionally guaranteed by
ICG (the "Guarantee") as set forth in the Prospectus, which
constitutes part of the Registration Statement. The Registration
Statement also registers the Guarantee.
In connection therewith, we have examined the
Certificate of Incorporation and the By-Laws of ICG, resolutions
of the Board of Directors of ICG and the Registration Statement.
We also have examined the Certificate of Formation and the
Amended and Restated Limited Liability Company Agreement of
Funding, and the written action of the Manager of Funding. In
addition, we have made such inquiries and have examined originals
or copies of other instruments as we have deemed necessary or
appropriate for the purpose of this opinion. For purposes of
such examination, we have assumed the genuineness of all
signatures on and the authenticity of all documents submitted to
us as originals, and the conformity to the originals of all
documents submitted to us as certified or photostatic copies.
Based upon the foregoing, we are of the opinion (i)
that the Preferred Securities are validly issued and fully paid
preferred limited liability company interests of Funding, (ii)
that the Distribution Shares, and when issued in accordance with
the authorization, will be validly issued, fully paid and non-
assessable shares of common stock of ICG, (iii) the Exchange
Common Shares, when issued in accordance with the procedures set
forth in the Prospectus, will be validly issued, fully paid
and non-assessable shares of Common Stock and (iv) that the
Guarantee has been duly authorized, legally issued and constitutes
the valid and binding obligation of ICG.
We hereby consent to the filing of this opinion as
Exhibit 5.1 to the Registration Statement and to the reference
therein to our firm under the caption "Legal Matters." In giving
the foregoing consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of
the Act or the rules and regulations of the Commission
promulgated thereunder.
Very truly yours,
/s/ Reid & Priest LLP
REID & PRIEST LLP
Exhibit 8.1
REID & PRIEST LLP
40 West 57th Street
Nw York, NY 10019-4097
Telephone 212 603-2000
Fax 212 603-2001
New York, New York
November 17, 1997
ICG Communications, Inc.
9605 E. Maroon Circle
P.O. Box 6742
Englewood, Colorado 80112-6742
ICG Funding, LLC
9605 E. Maroon Circle
P.O. Box 6742
Englewood, Colorado 80112-6742
Re: Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
Reference is made to the prospectus, (the
"Prospectus"), which constitutes part of the registration
statement on Form S-3 ("Registration Statement"), to be filed by
ICG Communications, Inc. and ICG Funding, LLC ("Funding") with
the Securities and Exchange Commission on or about the date
hereof pursuant to the Securities Act of 1933, as amended, for
the registration of, among other things, Exchangeable Limited
Liability Company Preferred Securities ("Preferred Securities")
of Funding.
We are of the opinion that the statements set forth
under the caption "Certain United States Federal Income Tax
Consequences" in the Prospectus constitute an accurate
description, in general terms, of certain United States federal
income tax considerations that may be relevant to the prospective
purchasers of the Preferred Securities.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and to the references to us
in the Prospectus under the caption "Certain United States
Federal Income Tax Consequences.
Very truly yours,
/s/ Reid & Priest LLP
REID & PRIEST LLP
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
ICG Communications, Inc.:
We consent to the use of our reports on 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 schedule,
incorporated by reference herein and to the reference to our firm
under the heading "Experts" in the Prospectus.
Our reports refer to a change in the method of accounting
for long-term telecom services contracts during the year ended
September 30, 1996.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Denver, Colorado
November 14, 1997
