AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 10, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ICG COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 84-1342022
(State or jurisdiction (I.R.S. Employer
of incorporation Identification No.)
or organization)
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161 INVERNESS DRIVE WEST
ENGLEWOOD, COLORADO 80112
(303) 414-5000
(Address, including zip code, and telephone
number, including area code, of registrant's
principal executive offices)
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with a copy to:
H. DON TEAGUE,
EXECUTIVE VICE PRESIDENT, AUDREY A. ROHAN, ESQ.
GENERAL COUNSEL AND SECRETARY THELEN REID & PRIEST LLP
C/O ICG COMMUNICATIONS, INC. 40 WEST 57TH STREET
161 INVERNESS DRIVE WEST NEW YORK, NEW YORK 10019
ENGLEWOOD, COLORADO 80112 (212) 603-2000
(303) 414-5000
(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 the only securities being registered on this Form are
being offered pursuant to dividend or interest reinvestment
plans, please check the following box. [ ]
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, other than securities
offered only in connection with dividend or interest reinvestment
plans, check the following box. [X]
If this Form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
======================================================================
PROPOSED
MAXIMUM
OFFERING PROPOSED
TITLE OF EACH AMOUNT TO PRICE PER MAXIMUM
CLASS OF BE SECURITY AGGREGATE AMOUNT OF
SECURITIES TO REGISTERED OR PER OFFERING REGISTRATION
BE REGISTERED (1) UNIT(2)(3) PRICE(2)(3) FEE
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COMMON STOCK,
$.01 PAR VALUE
PER SHARE . 145,997 $18.1563 $2,650,765.33 $736.91
======================================================================
(1) Pursuant to Rule 416, this Registration Statement also
covers such indeterminable additional shares of Common Stock
as may become issuable as a result of stock dividends, stock
splits or similar transactions prior to the termination of
this Registration Statement.
(2) Estimated solely for the purpose of calculating the
registration fee.
(3) Calculated pursuant to Rule 457(c), based upon the average
of the high and low prices of the Common Stock on March 3,
1999, as reported on the Nasdaq National Market.
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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 SECURITIES AND
EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
=================================================================
<PAGE>
Information contained in this prospectus is not complete and may
be changed. We may not sell these securities until the
registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell
these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS (SUBJECT TO COMPLETION)
DATED MARCH 10, 1999
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ICG COMMUNICATIONS, INC.
145,997 SHARES OF COMMON STOCK
-----------------------------
Our common stock is listed on the Nasdaq National Market
under the symbol "ICGX". On March 5, 1999, the closing sale
price of the common stock was $18.875, according to the Nasdaq
National Market.
These shares of common stock are being sold by the selling
stockholders listed on page 19. All of the shares were
originally issued by us in connection with our acquisition of
DataChoice Network Services, L.L.C. We will not receive any part
of the proceeds from the sale.
------------------
CONSIDER CAREFULLY THE RISK FACTORS
BEGINNING ON PAGE 7 IN THIS PROSPECTUS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY
STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------------------------
, 1999
<PAGE>
No person has been authorized to provide you with any information
or to make any representations, other than those contained in
this prospectus, in connection with the offering made hereby. If
such information or representations are made to you, you may not
rely on them as having been authorized by ICG Communications,
Inc. Neither the delivery of this prospectus nor any sale made
hereunder implies that there has been no change in the affairs of
ICG Communications since the date of this prospectus. This
prospectus is not an offer to sell securities and is not
soliciting an offer to buy securities in any jurisdiction where
the offer or sale is not permitted.
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TABLE OF CONTENTS
Page
----
Where You Can Find More Information . . . . . . . . . . . . . 3
Forward-Looking Statements . . . . . . . . . . . . . . . . . 3
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . 7
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 19
Selling Holders . . . . . . . . . . . . . . . . . . . . . . . 19
Plan of Distribution . . . . . . . . . . . . . . . . . . . . 20
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . 21
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange
Commission. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New
York and Chicago, Illinois. Please call the SEC at 1-800-SEC-
0330 for further information on the public reference rooms. Our
SEC filings are also available to the public at the SEC's web
site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the
information we file with it, which means we can disclose
important information to you by referring you to those documents.
The information incorporated by reference is considered to be a
part of this prospectus, and later information that we file with
the SEC will automatically update and supersede this information.
We incorporate by reference the documents listed below and any
future filings made with the SEC under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934 until the selling
stockholders sell all the shares. This prospectus is a part of a
registration statement we filed with the SEC.
1. Proxy Statement on Schedule 14A filed May 6, 1998.
2. Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.
3. Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1998.
4. Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1998.
5. Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1998.
6. Current Report on Form 8-K dated February 5, 1998.
7. Current Report on Form 8-K dated February 10, 1998.
8. Current Report on Form 8-K dated February 19, 1998.
9. Current Report on Form 8-K dated February 26, 1998.
10. Current Report on Form 8-K dated April 24, 1998.
11. Current Report on Form 8-K dated June 15, 1998.
12. Current Report on Form 8-K dated August 6, 1998.
13. Current Report on Form 8-K dated November 6, 1998.
14. Current Report on Form 8-K dated January 7, 1999.
15. Current Report on Form 8-K dated February 26, 1999.
16. Current Report on Form 8-K dated March 4, 1999.
17. Annual Report of Employee Stock Purchase Plans on Form
11-K dated June 30, 1998.
18. The description of our common stock contained in our
Registration Statement on Form 8-A filed pursuant to
Section 12 of the Securities Exchange Act and any
amendment or report filed to update this description.
You may request a copy of these filings, at no cost, by
writing or telephoning us at the following address: 161
Inverness Drive West, Englewood, Colorado 80112, Attention:
Investor Relations, telephone number (800) 408-4253.
FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus discuss
our plans and strategies for our business or state other forward-
looking statements, as this term is defined in the Private
Securities Litigation Reform Act. These statements are subject
to risks and uncertainties and, as a result, actual results may
differ materially. For a discussion of important risks of an
investment in our common stock, including factors that could
cause actual results to differ materially from results referred
to in the forward-looking statements, see "Risk Factors." You
should carefully consider the information set forth under the
caption "Risk Factors," including the risks relating to
historical operating losses and negative cash flows.
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PROSPECTUS SUMMARY
THE COMPANY
ICG Communications, through our subsidiary operations, is
one of the nation's leading competitive integrated communications
providers ("ICP"), based upon estimates of the industry's 1998
revenue. We seek to provide an alternative to incumbent local
exchange carriers, long distance carriers and other
communications providers for a full range of communications
services in the increasingly deregulated telecommunications
industry. Through our competitive local exchange carrier
operations, we operate switched fiber-optic networks in regional
clusters covering major metropolitan statistical areas in
California, Colorado, Ohio, Texas and parts of the southeastern
United States. Throughout these regions, we offer local, long
distance, data and enhanced telephony services to business end
users and design and install copper, fiber and wireless
infrastructure for buildings and companies. We also provide a
wide range of network systems integration services consisting of
information technology services and selected networking products,
focusing on network design, installation, maintenance and
support.
Through our subsidiary ICG Satellite Services, Inc. we
provide maritime and international satellite transmission
services consisting of satellite voice, data and video services
to major cruise lines, the U.S. Navy, the offshore oil and gas
industry and other ICPs.
As a complement to the local exchange service offered
to business end users, we market bundled service offerings which
include long distance, enhanced telecommunications services and
data services. Additionally, we own and operate a nationwide
data network with approximately 200 points of presence over which
we have begun providing Internet access and enhanced network
services targeted to Internet services providers ("ISPs"). The
design and architecture of our physical network permits us to
offer highly flexible, reliable high-speed services to our
customers. These services are targeted at our existing ISP
customer and other businesses with substantial data
communications requirements.
RECENT DEVELOPMENTS
In December 1998, we announced our plans to offer new
wholesale network services beginning in early 1999. These
services include Remote Access Service and Expanded Originating
Service.
Remote Access Service and Expanded Originating Service
are services geared specifically for ISPs. Remote Access Service
allows us to provide modem access to ISPs at our own switch
location rather than requiring ISPs to deploy modems physically
at their various points of presence. This service allows us to
act as an aggregator for ISP traffic, with limited capital
investment. We are currently upgrading our switches with a new
product that allows us to provide Remote Access Service.
Through the same technology that allows us to provide
Remote Access Service, we plan to begin offering Expanded
Originating Service in 1999. Expanded Originating Service
enables regional or local ISPs to expand their geographical
coverage outside their current physical locations by carrying the
ISPs' out-of-region traffic on our own data network.
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In developing our telecommunications service offerings,
we continue to invest significant resources to expand our
network. This expansion is being undertaken through a
combination of the following:
( ) constructing our own facilities,
( ) entering into long-term agreements with other
telecommunications carriers,
( ) establishing strategic alliances,
( ) mergers and acquisitions and
( ) establishing new operations.
In addition, to better focus our efforts on our core
telecommunications services, we have sold certain assets which we
believe do not complement our overall business strategy. These
dispositions include the sale of the capital stock of MarineSat
Communications Network, Inc. and Nova-Net Communications, Inc.,
two wholly owned subsidiaries of our Satellite Services
operation, as well as the sale of certain of the operating assets
and liabilities of our ISP, NETCOM On-Line Communication
Services, Inc. ("NETCOM"), now known as ICG PST, Inc.
ADDRESS
Our executive offices are located at 161 Inverness
Drive West, Englewood, Colorado 80112. Our telephone number is
(303) 414-5000.
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THE OFFERING
Common stock offered by selling
stockholders . . . . . . . . . . . . . 145,997 shares
Common stock outstanding as of
December 31, 1998 . . . . . . . . . . 46,360,185 shares
Nasdaq National Market symbol . . . . . ICGX
Use of proceeds . . . . . . . . . . . . We will not receive any
proceeds from the sale of
the common stock being
offered hereby.
The purpose of this offering is to register the resale of common
stock received by the selling stockholders in connection with our
acquisition of DataChoice Network Services in July 1998. Selling
stockholders are required to deliver a copy of this prospectus in
connection with any sale of shares. The selling stockholders are
not required to sell their shares of common stock. Under the
terms of a registration rights agreement, we have agreed to keep
this registration statement effective until July 27, 1999, which
is the first anniversary of the closing date of our acquisition of
DataChoice Network Services.
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER ALL OF THE
INFORMATION IN THIS PROSPECTUS AND, IN PARTICULAR, SHOULD
EVALUATE THE SPECIFIC RISK FACTORS SET FORTH UNDER "RISK FACTORS"
IMMEDIATELY FOLLOWING THIS SECTION.
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RISK FACTORS
An investment in the common stock offered under this
prospectus involves a high degree of risk. You should carefully
consider the following risk factors and the other information in
this prospectus before deciding to invest in the common stock.
OUR BUSINESS HAS SUSTAINED HISTORICAL OPERATING LOSSES, NET
LOSSES AND NEGATIVE OPERATING CASH FLOWS
ICG Communications originated as a satellite
communications company in the mid-1980's. We subsequently
entered a niche segment of the local telephone market in 1991 as
a competitive access provider and began providing competitive
local exchange services in 1997. A substantial portion of our
revenue is derived from local exchange services, special access
enhanced telecommunications services and long distance services,
although many of these services have only been offered for a
short period of time. Consequently, as an investor, you have
only a limited history upon which to evaluate our performance.
Historically, we have incurred significant operating
and net losses and negative operating cash flows. For the 12
months ended September 30, 1998, we had revenue of approximately
$347.0 million, an operating loss of approximately $162.3
million, negative EBITDA of approximately $73.0 million, net cash
used by operating activities of continuing operations of
approximately $104.0 million, interest expense of approximately
$157.2 million and a net loss of approximately $410.4 million.
"EBITDA" stands for earnings before interest expense, income
taxes, depreciation, amortization and certain non-recurring
costs. EBITDA is widely used in the telecommunications industry
as a measure of a company's performance. We do not anticipate
that cash provided by operations will be sufficient to fund
operating activities of continuing operations, the future
expansion of the existing networks or the construction and
acquisition of new networks in the near term.
The growth of our customer base depends upon the
successful implementation of our local, long distance, data and
value-added service strategies. The growth of our customer base
also depends upon the continued development and expansion of our
network infrastructure and increased traffic on our facilities
and upon actions of competitors and regulatory authorities. At
September 30, 1998, we had an accumulated deficit of
approximately $1.1 billion and a stockholders' deficit of
approximately $520.1 million. We cannot assure you that we will
achieve or sustain profitability or positive operating cash flows
in the future or at any time have sufficient resources to meet
our obligations.
WE ARE SUBJECT TO RISKS RELATED TO LOCAL SERVICES STRATEGIES
We entered the competitive local telecommunications
services industry in 1996, and this market has only recently
opened to competition due to the passage of the Federal
Telecommunications Act of 1996 (the "Telecommunications Act").
In addition, we have been providing long distance and data
communications services for only a short time. However, we
believe that offering a full-service portfolio of local, long
distance, data and value-added products is the best method for
gaining market share among business customers and reducing
customer turnover. We are making significant operating and
capital investments and will have to address numerous operating
challenges. We are currently developing new processing and
technical support systems and will need to develop new marketing
initiatives and continue to hire and train a sales force
responsible for selling our services. We will also need to
supplement the billing and collection systems necessary for local
services and integrate these systems with those of our long
distance and data services. We cannot assure you that we can
design, install and coordinate with the incumbent local exchange
carriers regarding necessary processing, billing and customer
management systems in a timely manner to permit us to offer local
exchange, local toll, long distance and/or data communications
services as planned.
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We expect to face significant competition from the
incumbent local exchange carriers whose core business is
providing local dial tone service. We expect the incumbent
carriers, who are the current dominant providers of services in
their markets, to respond aggressively to new entrants such as
ICG Communications. We expect to face significant competitive
product and pricing pressures from the incumbent carriers, as
well as from other newly-formed local exchange carriers. In
addition, with our recent expansion into the long distance
market, we will face many competitors, including AT&T, MCI
WorldCom and Sprint.
OUR FINANCIAL AND OPERATING ACTIVITIES ARE LIMITED BY
RESTRICTIONS CONTAINED IN THE TERMS OF OUR PRIOR FINANCINGS
The terms governing certain of our and our
subsidiaries' senior indebtedness and preferred securities impose
significant operating and financial restrictions on us. These
restrictions may significantly limit or prohibit us from engaging
in certain transactions, including the following:
( ) incurring additional indebtedness,
( ) creating liens on our assets,
( ) paying dividends,
( ) selling assets,
engaging in mergers or acquisitions and
( ) making investments.
Our failure to comply with these covenants could lead to a
default under the terms of those documents, which would enable
the lenders to accelerate the indebtedness and declare all
amounts owed due and payable. Moreover, the instruments
governing our indebtedness contain cross-default provisions that
provide that a default under other indebtedness will be
considered a default under the indebtedness in question. If a
cross-default occurs, the maturity of almost all of our
approximately $1.6 billion of indebtedness at September 30, 1998
would be accelerated and become immediately due and payable. If
that happens, we would not be able to satisfy all of our debt
obligations, which would have a substantial material adverse
effect on the value of our common stock and our ability to
continue as a going concern. We cannot assure you that we will
be able to comply with these restrictions in the future or that
our compliance would not cause us to forego opportunities that
might otherwise be beneficial to us.
WE MAY NEED TO SECURE ADDITIONAL SOURCES OF CASH TO REPAY OUR
INDEBTEDNESS
We have a significant amount of debt outstanding. As of
September 30, 1998, we had, on a consolidated basis, aggregate
indebtedness, including capital lease obligations, of
approximately $1.6 billion. With respect to indebtedness
currently outstanding, we have interest payment obligations of
approximately $113.3 million in 2001, $158.0 million in 2002 and
$212.6 million in 2003. In addition, with respect to the
currently outstanding preferred securities of our subsidiaries,
we have cash dividend obligations of approximately $6.7 million
in 1999, $8.9 million in 2000, $21.5 million in 2001, $57.0
million in 2002 and $70.9 million in 2003. Accordingly, we may
have to refinance a substantial amount of indebtedness and obtain
substantial additional funds prior to March 2001, when our
subsidiary, ICG Holdings, Inc., is required to commence cash
interest payments under its senior indebtedness. Our ability to
obtain additional sources of cash will depend on, among other
things, our financial condition at the time, the restrictions in
the instruments governing our indebtedness and other factors
beyond our control, including market conditions. Additional
sources of cash may include public and private equity and debt
financings by us and our subsidiaries, sales of non-strategic
assets, capital leases and other financing arrangements. We
cannot assure you that we will be able to refinance our
indebtedness, including capitalized leases, or obtain additional
funds. If we are unable to refinance our indebtedness or obtain
additional funds, our ability to make principal and interest
payments on our indebtedness, our ability to continue as a going
concern and the price of our common stock would be adversely
affected.
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WE MAY NEED SIGNIFICANT ADDITIONAL CAPITAL TO FINANCE OUR GROWTH
AND CAPITAL REQUIREMENTS
We expect that we will need a significant amount of
capital to expand existing networks, construct new networks and
further develop our products and services. We currently estimate
that our capital expenditure requirements will be approximately
$380 million in 1999, and we also expect to spend significant
amounts on expansion and development beyond 1999. We may need
additional cash from outside sources, as well, to continue
funding operating losses. Further, we have significant personnel
expenses related to increasing our marketing efforts and offering
new long distance and data transmission services in anticipation
of revenue growth. We also may make strategic acquisitions from
time to time. We anticipate that our substantial cash
requirements will continue into the foreseeable future.
Additional sources of cash may include public and private equity
and debt financings by us and/or our subsidiaries, sales of non-
strategic assets, capital leases and other financing
arrangements. We cannot assure you that additional financing
will be available to us or, if available, that it can be obtained
on acceptable terms. Failure to obtain financing could result in
the delay or abandonment of some or all of our acquisition,
development and expansion plans and expenditures, which could
have a material adverse effect on our business prospects and
limit our ability to meet our debt service requirements.
WE CANNOT ASSURE YOU WE WILL EFFECTIVELY MANAGE OUR RAPID GROWTH
We have experienced rapid growth and we intend to
continue to grow through further expansion of our existing
network service offerings. This expansion is being undertaken
through a combination of the following:
( ) constructing owned facilities,
( ) entering into long-term agreements with other
telecommunications carriers,
( ) establishing strategic alliances,
( ) mergers and acquisitions, including the
acquisitions of NETCOM; CSW/ICG ChoiceCom, L.P.
("ChoiceCom"); DataChoice Network Services;
NikoNET, Inc., CompuFAX Acquisition Corp. and
Enhanced Messaging Services, Inc. (collectively,
"NikoNet"), and
( ) establishing new operations.
Our ability to continue to expand and develop our
business will depend on, among other things, whether we can
successfully do the following in a timely manner, at reasonable
costs and on satisfactory terms and conditions:
( ) implement our sales and marketing strategy,
( ) evaluate markets,
( ) acquire and install necessary equipment and
facilities,
( ) secure financing and
( ) obtain any required government authorizations.
In addition, some acquisitions may divert our resources and
management time and would need to be integrated with our existing
networks and service offerings.
Our ability to manage our anticipated future growth
will depend on our ability to evaluate new markets and
investments, monitor operations, control costs, maintain
effective quality controls and significantly expand our internal
management, technical and accounting systems. Our rapid growth
has placed, and may in the future place, a significant strain on
our business resources. In addition, our ability to acquire and
establish new operations would require us to spend considerable
amounts before we generate related revenue.
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In addition, our acquired and new businesses will need
to be integrated with our existing operations. For acquired
businesses, including ChoiceCom, DataChoice Network Services and
NikoNet, this may entail, among other things, integration of
operational and administrative systems, hardware and software,
some or all of which may be incompatible. Our failure to
effectively integrate acquired businesses could have a material
adverse effect on our business, growth, financial condition and
results of operations and the price of our common stock.
THE TELECOMMUNICATIONS INDUSTRY IS HIGHLY COMPETITIVE
We operate in an increasingly competitive environment.
Our current competitors include:
( ) incumbent local exchange carriers, such as the
regional Bell operating companies and GTE
Corporation,
( ) other newly-formed competitive local exchange
carriers,
( ) other integrated communications providers,
( ) cable television providers, such as Time Warner
Communications, Inc.,
( ) network systems integration service providers,
( ) microwave and satellite service providers,
( ) teleport operators,
( ) wireless telecommunications providers,
( ) private networks of large end users,
( ) local and regional system integrators and
( ) maritime telecommunications providers, such as
COMSAT Corporation.
Potential competitors, using similar or different
technology, include ISPs, utilities, incumbent local exchange
carriers outside their current local service areas and the local
access operations of long distance carriers. The trend toward
business combinations and strategic alliances within the
telecommunications industry could give rise to increased
competition. In addition, the development of new technologies
could also give rise to increased competition. One of the
primary purposes of the Telecommunications Act is to promote
competition, particularly in the local telephone market. Since
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 we
participate and expect to participate. This may result in more
participants than can ultimately be successful in a given market.
We also expect that increased local competition will
result in competitive pricing by the incumbent local exchange
carriers. Some of the competitive local exchange carriers with
which we compete are affiliated with major long distance
carriers. Because providing local exchange services requires a
company to spend a significant amount of money upon entering the
local exchange business, companies which have the resources to
sustain losses for some time, such as those affiliated with major
long distance carriers, have an advantage over those companies
without access to these resources. Increased local competition
could also result in less regulation of the incumbent carriers.
If the incumbent carriers are permitted to engage in discount
pricing practices or charge the competitive local exchange
carriers increased fees for interconnection to their networks, or
if the incumbent carriers seek to delay implementation of
interconnection to their networks, our business could be
adversely affected. We cannot assure you that we will be able to
achieve or maintain adequate market share or revenue or compete
effectively in any of our markets. Any of the foregoing factors
could result in a material decline of the price of our common
stock.
As a recent entrant into the wholesale network services
sector, we face competition from existing providers of our
planned services, primarily UUNet Technologies, Inc. and, once
its network has been sufficiently developed, Level 3
Communications, Inc. Competition will also come from GTE, Sprint
and the regional Bell operating companies that currently offer
similar wholesale network service products to ISPs. We cannot
10
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assure you that sufficient demand will exist for our wholesale
network services in our selected markets, that market prices will
not dramatically decline or that we will be successful in
executing our strategy profitably or at all.
REGULATORY RISKS ARE INHERENT AND SUBSTANTIAL IN OUR BUSINESS
Our services are subject to significant federal, state
and local regulation. Our telecom services are regulated by the
Federal Communications Commission ("FCC"), state regulatory
agencies and municipalities. Our satellite services activities
are regulated by the FCC and international regulatory bodies.
The FCC regulates our provision of interstate and international
common carrier services. State regulatory agencies regulate our
provision of local dial tone and other intrastate common carrier
services. We currently file and maintain tariffs with the FCC as
well as the state regulatory agencies.
The FCC and state regulatory agencies are charged with
implementing the Telecommunications Act, which opened the local
and long distance markets to additional competition, and has had
a substantial impact on our local exchange business. In general,
the Telecommunications Act requires incumbent local exchange
carriers to negotiate agreements to provide interconnection and
nondiscriminatory access to their networks. However, these
negotiations may involve considerable delay and do not always
result in rates, terms and conditions that are desirable to us.
In these instances, we may petition the proper state regulatory
agency to arbitrate disputes and ultimately seek review by the
federal courts. We are currently in the process of renegotiating
and extending the terms of certain of our interconnection
agreements. We cannot assure you that we will be able to
negotiate and/or arbitrate acceptable new interconnection
agreements.
In August 1996, the FCC adopted rules and policies
implementing the interconnection provisions of the
Telecommunications Act. These rules, in general, are favorable
to new competitive entrants. The FCC's rules were successfully
challenged in the federal court of appeals by the incumbent local
exchange carriers and state regulatory commissions. In January
1999, the U.S. Supreme Court largely reversed the appellate court
and reestablished the validity of many of the FCC's
interconnection rules, including the FCC's jurisdiction to adopt
pricing guidelines for interconnection, unbundled network
elements and resale services. The Supreme Court did not,
however, evaluate the specific pricing methodologies adopted by
the FCC, and the appellate court will further consider those
methodologies. Other FCC rules upheld by the Supreme Court
include the "pick and choose" rules, which allow carriers to
adopt individual rates and provisions of incumbent
interconnection agreements. However, the Supreme Court vacated
the FCC rule identifying the unbundled network elements that must
be made available by the incumbent carriers. The Court held that
the FCC must provide a stronger rationale to support the degree
of unbundling ordered. We view the Supreme Court decision as a
favorable development, although we cannot predict the ultimate
outcome of the further FCC and court proceedings resulting from
the decision.
The FCC and relevant state public utilities commissions
have the authority to regulate interstate and intrastate
telephone rates, respectively, and the terms and conditions under
which some of our services are provided, although, in general,
neither the FCC nor the relevant state public utilities
commission currently regulate our long distance rates or profit
levels. Federal and state regulations and regulatory trends in
the direction of reduced regulation have had, and are likely to
have, both positive and negative effects on us and our ability to
compete. We cannot assure you that changes in current or future
state or federal regulations, or increased competitive
opportunities resulting from such changes, will not have a
material adverse effect on our business and on the price of our
common stock.
We have recorded revenue of approximately $4.9 million
in 1997 and $32.9 million for the nine months ended September 30,
1998 for reciprocal compensation relating to the transport and
termination of local traffic to ISPs from customers of incumbent
local exchange carriers under various interconnection agreements.
The incumbent carriers have not paid most of the bills they have
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received from us and have disputed substantially all of these
charges based on the belief that such calls are not local traffic
as defined by the various agreements and under state and federal
laws and public policies. As a result, we expect that reciprocal
compensation receivables will continue to increase until these
disputes are resolved.
The resolution of these disputes will be based on
rulings by state public utility commissions and/or by the FCC and
the courts which may review these rulings. To date, there have
been favorable final rulings from 29 states and no unfavorable
rulings by any state public utility commission or reviewing court
that would indicate that calls placed by end users to ISPs are
not subject to reciprocal compensation payments. On February 25,
1999, the FCC issued a decision that ISP-bound traffic is largely
jurisdictionally interstate traffic. The decision emphasizes the
long-standing federal policy that ISP traffic, although
jurisdictionally interstate, is treated as though it is local
traffic for pricing purposes. The decision also emphasizes that,
because there are no federal rules governing inter-carrier
compensation for ISP traffic, the determination as to whether
this traffic is subject to reciprocal compensation under the
terms of carrier interconnection agreements properly is made by
the state commissions. The FCC's decision confirms that carriers
are bound by their interconnection agreements and state
commission decisions mandating the payment of reciprocal
compensation for ISP traffic. The FCC has initiated a rulemaking
proceeding for the adoption of prospective federal rules for
inter-carrier compensation for ISP traffic. In its notice of
rulemaking, the FCC expressed its preference that compensation
rates for this traffic continue to be set by commercial
negotiations between carriers, with disputes resolved by
arbitrations conducted by state commissions.
While we believe that all revenue recorded through
September 30, 1998 is collectible and that future revenue from
transport and termination charges billed under our current
interconnection agreements will be realized, we cannot assure you
that future regulatory and court rulings will be favorable to us,
or that different pricing plans for transport and termination
charges between carriers will not be considered when our
interconnection agreements are renegotiated, beginning in 1999,
or as a result of the FCC's rulemaking proceeding on future
compensation methods.
We recently began offering voice telephony services
over an Internet protocol ("IP") based network. We carry the IP
traffic over our data network and terminate a large portion via
our own points of presence. The regulatory status of voice
telephony services over the Internet is uncertain at this time.
The extent to which current state and federal laws and
regulations governing telecommunications services will be
interpreted to include IP telephony services has not been
determined. We cannot assure you that new laws or regulations,
or the application by regulators of existing laws and regulations
to this service, will not have an adverse effect on our provision
of this service.
THERE ARE SIGNIFICANT RISKS OF ENTRY INTO THE LONG DISTANCE
BUSINESS
Although we have extensive experience in the
telecommunications business, including an executive team with
sales, marketing and long distance management expertise, we have
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. We do not expect long distance services to
generate a material portion of our revenues over the near term.
Although our owned switches have reduced the cost of
obtaining long distance transmission capacity, we still rely on
other carriers to provide transmission services for our long
distance traffic and will therefore be dependent on these
carriers. We have entered into agreements with long distance
carriers to provide us with long distance transmission services.
These agreements typically provide for the resale of long
distance services on a per minute basis (some with minimum volume
commitments). Where we anticipate higher volumes of traffic, we
may lease facilities on a fixed cost basis. In negotiating these
agreements, we may estimate future supply and demand for our long
distance transmission capacity. If we fail to meet our minimum
volume commitments, if any, under these agreements, then we may
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be obligated to pay penalties. Likewise, if we underestimate our
need for long distance facilities, we may then be required to
obtain the necessary transmission capacity through more expensive
means. We cannot assure you that we will acquire long distance
capacity on favorable terms or that we can accurately predict
long distance prices and volumes so that we can operate
profitably.
The success of our entry into the long distance
business will depend upon, among other things, the acceptance of
potential customers of our long distance service offerings and
our ability to select new equipment and software and integrate
them into our networks, hire and train qualified personnel and
enhance our billing, back-office and information systems to
accommodate long distance services. If our long distance
transmission business fails to be profitable or if we fail in any
of these respects, this failure may have a material adverse
effect on our business and the price of the common stock. In
addition, some of our telecommunications services revenue is
derived from long distance carrier customers, and there is a risk
that our entry into the long distance business will adversely
affect our relationship with our long distance carrier customers.
THERE ARE SIGNIFICANT RISKS OF ENTRY INTO DATA TRANSMISSION
BUSINESS
We have been providing data transmission services since
1997. We own and operate a data communications network
consisting of approximately 200 points of presence and 15 hubs.
However, the data transmission business is extremely competitive
and prices have declined substantially in recent years and are
expected to continue to decline. In providing data transmission
services, we will depend upon vendors for assistance in the
planning and deployment of our initial data product offerings as
well as ongoing training and support. The success of our entry
into the data transmission business will depend upon, among other
things, the following factors:
( ) customer acceptance of our data services,
( ) our ability to select new equipment and software
and integrate them into our networks,
( ) our ability to hire and train qualified sales and
processing personnel and
( ) our ability to enhance our billing, back-office
and information systems to accommodate data
services.
We cannot assure you that we will be successful in achieving
these factors and, if not, there may be a material adverse effect
on our business and the price of our common stock.
WE ARE DEPENDENT ON OUR BILLING, CUSTOMER SERVICE AND INFORMATION
SYSTEMS
Sophisticated information and processing systems are
vital to our growth and our ability to monitor costs, bill
customers, process customer orders and achieve operating
efficiencies. Billing and information systems for our historical
lines of business have been produced largely in-house with
partial reliance on outside vendors. These systems have
generally met our needs due in part to our low volume of bills
and orders. However, as we continue providing local, long
distance and data transmission services, we will need more
sophisticated billing and information systems. Our current local
billing platform plans rely on products and services provided by
outside vendors. Additionally, we are developing automated
systems and customer service centers to process orders.
Information systems are vital to the success of these centers,
and the information systems for these centers are being developed
largely by outside vendors. The failure of our vendors to
deliver products and services in a timely and effective manner,
our failure to adequately identify all of our information and
processing needs or our failure to upgrade systems as necessary
could each have a material adverse impact on our business. See
"Our operations could be adversely affected by data processing
failures after December 31, 1999."
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THERE ARE RISKS INVOLVED IN JOINT VENTURES AND STRATEGIC
ALLIANCES
We have formed and may in the future form various
strategic alliances, joint ventures and other similar
arrangements to lease fiber optic facilities. The other parties
to these existing or future arrangements, however, may at times
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 ICG Communications. In
addition, a joint venture partner may be unable to meet its
economic or other obligations to the venture. A disagreement
with our strategic allies or joint venture partners over certain
business actions or the failure of a partner to meet its
obligations to the venture could adversely affect our business
and the price of our common stock.
RAPID TECHNOLOGICAL CHANGE MAY AFFECT OUR INDUSTRY
We cannot predict the effect of technological changes,
including changes in emerging wireline and wireless transmission
technologies, on our business. We cannot assure you that
technological developments in telecommunications will not have a
material adverse effect on our business and financial condition.
WE ARE DEPENDENT ON RIGHTS OF WAY AND OTHER THIRD PARTY
AGREEMENTS
In order to construct and maintain fiber optic
networks, we must reach agreements with various private parties,
including actual and potential competitors, and local governments
to obtain the rights of way necessary for this access. We cannot
assure you that we will obtain rights of way agreements to expand
our networks or that these agreements will be on terms acceptable
to us. Additionally, we cannot assure you that current or
potential competitors will not obtain similar rights of way
agreements. Because some of these agreements are short-term or
are terminable at any time, we cannot assure you that we will
continue to have access to existing rights of way in the future.
An important element of our strategy is to enter into
long-term agreements with utilities to take advantage of their
existing facilities and utilize their excess fiber capacity.
However, other telecommunications providers are seeking to enter
into similar arrangements and have bid, and are expected to
continue to bid, against us to use these facilities in the
future. Furthermore, utilities are required by state or local
regulators to retain the right to "reclaim" fiber we may be using
if this fiber is needed for the utility's core business. We
cannot assure you that we will be able to obtain additional
agreements to use these facilities on satisfactory terms or that
such arrangements will not be subject to reclamation. If an
agreement was terminated and we were forced to remove or abandon
a significant portion of our network, this termination could have
a material adverse effect on us and the price of our common
stock.
OUR SUCCESS DEPENDS UPON OUR ABILITY TO ATTRACT AND RETAIN KEY
PERSONNEL
The efforts of a small number of key management and
operating personnel will largely determine our success because of
our lean senior management structure. Our success also depends
in part upon our ability to hire and retain highly skilled and
qualified operating, marketing, financial and technical
personnel. The competition for qualified personnel in the
telecommunications services industry is intense and, accordingly,
we cannot assure you that we will be able to hire or retain
necessary personnel. If we lose the services of certain key
personnel or if we are unable to attract additional qualified
personnel, our business and the price of our common stock could
be materially and adversely affected.
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WE DO NOT ANTICIPATE PAYING CASH DIVIDENDS ON OUR COMMON STOCK
We do not expect to generate net income from continuing
operations in the near future and, therefore, we do not
anticipate paying cash dividends on our common stock. The
indentures for certain of our subsidiaries' senior indebtedness
effectively prohibit the payment of any future dividends on our
common stock.
THE MARKET PRICE OF OUR COMMON STOCK HAS BEEN AND MAY BE VOLATILE
The market price of our common stock has been, and may
continue to be, highly volatile. The following factors, among
others, may cause the price of our common stock to fluctuate:
( ) legislation or regulation,
( ) variations in our revenue, net losses and cash
flows,
( ) the difference between our actual results and the
results expected by investors and analysts,
( ) announcements of new service offerings, marketing
plans or price reductions by us or our
competitors,
( ) technological innovations and
( ) mergers and acquisitions or strategic alliances.
In addition, the stock markets recently have
experienced significant price and volume fluctuations that have
affected growth companies such as telecommunications companies.
The fluctuations in the market prices of the stocks of many
companies have not been directly related to the operating
performance of those companies. These market fluctuations may
materially adversely affect the price of our common stock.
THE PRICE OF OUR COMMON STOCK MAY DECLINE DUE TO THE POSSIBLE
SALES OF SHARES ELIGIBLE FOR FUTURE SALE
As of December 31, 1998, there were 46,360,185 shares
of our common stock outstanding, all of which are transferable
without restriction or further registration under the Securities
Act of 1933, except for any shares of common stock held by our
affiliates. The shares of common stock held by our affiliates
will be subject to the resale limitations of Rule 144 under the
Securities Act. In addition, we have reserved and registered
under the Securities Act the following 16,549,207 shares of
common stock for future issuance:
( ) 1,852,290 shares of common stock issuable pursuant
to outstanding warrants which have an exercise
price of $12.51,
( ) 6,651,577 shares of common stock issuable pursuant
to outstanding options, with exercise prices
ranging from $2.60 to $46.65 per share,
( ) 256,810 shares of common stock reserved for
issuance under our 401(k) Plan,
( ) 811,671 shares of common stock reserved for
issuance pursuant to our 1996 Employee Stock
Purchase Plan,
( ) 313,639 shares of common stock reserved for
issuance under the 1996 Stock Option Plan,
( ) 1,155,165 shares of common stock reserved for
issuance under the 1998 Stock Option Plan,
( ) 5,504,682 shares of our common stock issuable
pursuant to outstanding 6.75% convertible
preferred securities and
( ) 3,373 shares of our common stock issuable upon
conversion of the interest on 7% convertible
subordinated notes.
In addition, we may issue common stock to our
subsidiary, ICG Funding, LLC, which may sell the common stock to
fund dividends on its preferred securities. Sales or the
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expectation of sales of a substantial amount of our common stock
in the public market could cause the prevailing market price for
our common stock to decline materially.
ANTI-TAKEOVER PROVISIONS LIMIT THE ABILITY OF STOCKHOLDERS TO
EFFECT A CHANGE IN CONTROL OF ICG COMMUNICATIONS
Certain provisions of our Certificate of Incorporation
and the corporate charters and debt instruments of our
subsidiaries may have the effect of deterring transactions
involving a change in control of ICG Communications, including
transactions in which stockholders might receive a premium for
their shares. Our 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 our board of directors.
The staggered board provision increases the likelihood
that, in the event of a takeover of ICG Communications, 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 Communications. The
authorization of preferred shares empowers the board of
directors, without further stockholder 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 our common stock. If issued, the
preferred stock could be used to discourage, delay or prevent a
change of control of ICG Communications. We have no current
plans to issue any preferred stock.
In addition, we are 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
ICG Communications. Furthermore, upon a change of control, the
holders of substantially all of our outstanding indebtedness,
including preferred securities of our subsidiaries, are entitled
at their option to be repaid or redeem their securities in cash.
These provisions may have the effect of delaying or preventing
changes in control or management of ICG Communications. All of
these factors could materially adversely affect the price of our
common stock.
OUR OPERATIONS COULD BE ADVERSELY AFFECTED BY DATA PROCESSING
FAILURES AFTER DECEMBER 31, 1999
Many computer systems, software applications and other
electronics currently in use worldwide are programmed to accept
only two digits in the portion of the date field which designates
the year. The "Year 2000 problem" arises because these systems
and products cannot properly distinguish between a year that
begins with "20" and the familiar "19." If these systems and
products are not modified or replaced, many will fail or create
erroneous results and/or may cause other related systems to fail.
Our failure to correct a material Year 2000 problem could result
in an interruption in or failure of certain of our normal
business operations or activities.
Year 2000 compliance issues are of particular
importance to us since our operations rely heavily upon computer
systems, software applications and other electronics which
contain of date-sensitive embedded technology. Some of these
technologies were internally developed and others are standard
purchased systems which may or may not have been customized for
our particular application. We also rely heavily upon various
vendors and suppliers that are themselves very reliant on
computer systems, software applications and other electronics
which contain date-sensitive embedded technology.
Our approach to addressing the potential impact of Year
2000 compliance issues is focused upon ensuring, to the extent
reasonably possible, the continued, normal operation of our
business and supporting systems. Accordingly, we have developed
a comprehensive plan which we are applying to each segment of our
computer systems and components.
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Through September 30, 1998, costs associated with Year
2000 compliance issues incurred have been less than $0.1 million
and have primarily included miscellaneous costs of reference
materials and other Year 2000 compliance planning materials. We
have also incurred certain internal costs, including salaries and
benefits for employees dedicating various portions of their time
to Year 2000 compliance issues, which costs we believe have not
exceeded $0.5 million through September 30, 1998. We expect that
total future costs of Year 2000 compliance efforts will be
approximately $3.8 million, consisting of $2.3 million in
consulting fees, $1.5 million in replacement hardware and
software and other miscellaneous costs. These anticipated costs
represent approximately 4% of our budgeted expenses for
information technology through December 31, 1999. These cost
estimates are based upon presently available information and may
change as we continue with our Year 2000 compliance plan. We
intend to use cash on hand for Year 2000 compliance costs, as
necessary.
While we rely heavily on our computer systems, software
applications and other electronics containing date-sensitive embedded
technology as part of our business operations, the components upon
which we primarily rely were developed with current state-of-the-art
technology. Accordingly, we have reasonably assumed that our
compliance program will demonstrate that many of our high-priority
systems do not present material Year 2000 compliance issues. For
computer systems, software applications and other electronics
containing date-sensitive embedded technology that have met our
desired level of Year 2000 readiness, we will use our existing
contingency plans to mitigate or eliminate problems we may experience
if an unanticipated system failure were to occur. For components that
have not met our desired level of readiness, we will develop a
specific contingency plan to determine the actions we would take if
such component failed.
At the present time, we are unable to develop a most
reasonably likely worst case scenario if we fail to achieve
adequate Year 2000 compliance. We will be better able to develop
such a scenario once the status of Year 2000 compliance of our
important vendors and suppliers is complete. We will monitor our
vendors and suppliers, particularly the other telecommunications
companies upon which we rely, to determine whether they are
performing and implementing an adequate Year 2000 compliance plan
in a timely manner.
We view the Year 2000 compliance as a process that is
inherently dynamic and will change in response to changing
circumstances. Although we believe that, through execution and
satisfactory completion of our Year 2000 compliance strategy, our
computer systems, software applications and electronics will be
Year 2000 compliant, we cannot assure you until the Year 2000
occurs that all systems and all related technology when running
jointly will function adequately. Additionally, we cannot assure
you that the assumptions we made within our Year 2000 compliance
strategy will prove to be correct, that the strategy will succeed
or that the remedial actions being taken will be able to be
completed by the time necessary to avoid system or component
failures. In addition, disruptions in the computer systems of
vendors or customers, which are outside of our control, could
impair our ability to obtain necessary products or services to
sell to our customers. Disruptions of our computer systems, or
those of our vendors or customers, as well as the cost of
avoiding such disruption, could have a material adverse effect on
our financial condition and results of operations.
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THE ACCURACY OF FORWARD-LOOKING STATEMENTS CONTAINED IN THIS
PROSPECTUS IS UNCERTAIN
This prospectus contains certain "forward-looking
statements," as defined in Section 27A of the Securities Act,
that are based on the beliefs of our management, as well as
assumptions made by, and information currently available to, our
management. The words "anticipates," "believes," "estimates,"
"expects," "plans," "intends" and similar expressions are
intended to identify these forward-looking statements, but are
not the exclusive means of identifying them. These forward-
looking statements reflect the current views of our management;
however, various risks, uncertainties and contingencies could
cause our actual results, performance or achievements to differ
materially from those expressed in, or implied by, these
statements, including the following:
( ) the success or failure of our efforts to implement
our business strategy,
( ) actions of our competitors and our ability to
respond to such actions,
( ) risks inherent in providing telecommunications
services,
( ) the effect of government regulation and
( ) the other factors discussed above under the
heading "Risk Factors" and elsewhere in this
prospectus.
We assume no obligation to update publicly any forward-looking
statements, whether as a result of new information, future events
or otherwise.
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USE OF PROCEEDS
The selling stockholders will receive all of the proceeds
from any sale of our common stock offered under this prospectus.
We will not receive any proceeds from the sale of the common
stock offered under this prospectus.
SELLING HOLDERS
The selling stockholders may from time to time offer and
sell pursuant to this prospectus any or all of the shares of
common stock offered under this prospectus. The selling
stockholders listed below received their shares of ICG
Communications common stock in connection with our acquisition of
DataChoice Network Services in July 1998.
The following table sets forth information with respect to
the selling stockholders of the common stock for whom we are
registering the shares for resale to the public.
Common Stock
Common Stock Owned
Owned Shares After
Selling Stockholders Prior to Offering Offered Offering
-------------------- ----------------- ------- ----------
G. Kelley Allen Trust 106,024 106,024 0
Gordon B. Koch 11,679 11,679 0
Daughters Trust
Michele R.K. Fought 22,337 22,337 0
T & D Consulting 5,957 5,957 0
The Trustee of the G. Kelley Allen Trust is G. Kelley Allen.
Until the acquisition of DataChoice Network Services by ICG
Communications, Mr. Allen was the Managing Member and Treasurer
of DataChoice Network Services. The Trustee of the Gordon B.
Koch Daughters Trust is Carole K. Allen. Ms. Allen is the wife
of Mr. Allen.
As part of the acquisition of DataChoice Network Services,
ICG Communications' subsidiary, ICG Telecom Group, Inc., entered
into an employment agreement with Michele R.K. Fought, and Ms.
Fought currently serves as Director - Sales Support. Prior to
this position, Ms. Fought was the Secretary of DataChoice Network
Services.
T & D Consulting is a Colorado corporation whose
shareholders are Thomas D. Sumbler and David J. Gandini. Mr.
Sumbler is currently employed by ICG Telecom Group as Senior Vice
President - Wholesale Markets Group. Mr. Gandini was employed by
ICG Telecom Group, from February 1997 to November 1998, at which
time he was Senior Vice President - Wholesale Markets Group and
President - Internet Protocol of ICG Telecom Group.
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PLAN OF DISTRIBUTION
The common stock covered by this prospectus may be offered
and sold from time to time by the selling stockholders, including
in one or more of the following transactions:
- on the Nasdaq National Market;
- in the over-the-counter market;
- in transactions other than on the Nasdaq National Market
or in the over-the-counter market;
- in connection with short sales;
- by pledge to secure debts and other obligations;
- in connection with the writing of options, in hedge
transactions and in settlement of other transactions in
standardized or over-the-counter options; or
- in a combination of any of the above transactions.
The selling stockholders may sell their shares at market
prices prevailing at the time of sale, at prices related to
prevailing market prices, at negotiated prices or at fixed
prices. Broker-dealers that are used to sell shares will either
receive discounts or commissions from the selling stockholders or
will receive commissions from the purchasers for whom they acted
as agents.
The sale of common stock by the selling stockholders is
restricted under a registration rights agreement between ICG
Communications and the selling stockholders. ICG Communications
and the selling stockholders have agreed to customary
indemnification obligations regarding the sale of the common
stock by use of this prospectus. ICG Communications has agreed
to keep this prospectus effective until July 27, 1999.
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LEGAL MATTERS
Our counsel, Thelen Reid & Priest LLP of New York, New York,
will issue an opinion to us on certain legal matters relating to
the shares.
EXPERTS
The consolidated financial statements of ICG Communications
and subsidiaries as of September 30, 1996, December 31, 1996 and
December 31, 1997 and for each of the fiscal years ended
September 30, 1995, September 30, 1996, December 31, 1997 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 report of KPMG LLP,
independent certified public accountants, incorporated by
reference herein, and upon authority of said firm as experts in
accounting and auditing. The consolidated financial statements
of NETCOM at December 31, 1996 and 1997, and for each of the
three years in the period ended December 31, 1997 (not presented
separately herein), have been audited by Ernst & Young LLP,
independent auditors.
The reports of KPMG 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
ICG Communications will pay all expenses related to the
offering and sale to the public of the shares being registered,
other than underwriting discounts and commissions. Such expenses
are set forth in the following table. All the amounts shown are
estimates, except the SEC registration fee and Nasdaq National
Market listing fee.
SEC Registration Fee $ 736.91
Accounting Fees and Expenses* 5,000.00
Legal Fees and Expenses* 20,000.00
Miscellaneous* 5,000.00
----------
Total $30,736.91
==========
------------------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Certificate of Incorporation of ICG Communications, Inc.
provides that it 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 to the GCL. ICG Communications' By-laws
contain similar provisions requiring indemnification of ICG
Communications' 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 Communications, 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 Communications, 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 Communications 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 Communications'
Certificate of Incorporation contains a provision limiting the
personal liability of ICG Communications' directors for monetary
damages for certain breaches of their fiduciary duty. ICG
Communications has indemnification insurance under which directors
and officers are insured against certain liability that may incur in
their capacity as such.
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ITEM 16. EXHIBITS.
The following exhibits are filed as a part of this Registration
Statement:
Exhibit No.: Description
------------ -----------
*2.1: Purchase Agreement, dated as of June 11, 1998, among
ICG D.C. Holdings, Inc., G. Kelley Allen and the
members of DataChoice Network Services, L.L.C.
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: Registration Rights Agreement, dated as of July 27,
1998, between ICG Communications, Inc., and the
Sellers of DataChoice Network Services, L.L.C.
*4.4: Escrow Agreement, dated as of July 27, 1998, among ICG
Communications, Inc., the persons listed on Exhibit A
---------
thereto and Norwest Bank Colorado, National
Association.
+5.1: Opinion of Thelen Reid & Priest LLP.
+23.1: Consent of KPMG LLP.
+23.2: Consent of Ernst & Young LLP.
+23.3: Consent of Thelen Reid & Priest LLP (included in
Exhibit 5.1).
*24.1: Power of Attorney (included on the signature page
hereto).
------------------------
* Filed herewith.
+ To be filed by amendment.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) to include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement; 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, 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 the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act (and, where applicable, each filing of any employee
benefit plan's annual report pursuant to Section 15(d) of the
Securities 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.
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
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and
has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
of Englewood, State of Colorado, on March 9, 1999.
ICG Communications, Inc.
By: /s/ J. Shelby Bryan
-------------------------------
J. Shelby Bryan
President, Chief Executive
Officer and Director
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below under the heading "Signatures" constitutes and
appoints J. Shelby Bryan, Harry R. Herbst and H. Don Teague, each
as his true and lawful attorney-in-fact and agent with full power
of substitution and resubstitution, for him and in his 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 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 March 9, 1999
William J. Laggett
/s/ J. Shelby Bryan President, Chief
--------------------------- Executive Officer
J. Shelby Bryan and Director
(Principal March 9, 1999
Executive Officer)
/s/ Harry R. Herbst Executive Vice
--------------------------- President,
Harry R. Herbst Chief Financial
Officer and March 9, 1999
Director (Principal
Financial Officer)
/s/ Richard Bambach Vice President and
--------------------------- Corporate
Richard Bambach Controller March 9, 1999
(Principal
Accounting Officer)
/s/ Walter Threadgill Director March 9, 1999
---------------------------
Walter Threadgill
/s/ John U. Moorhead II Director March 9, 1999
---------------------------
John U. Moorhead II
/s/ Leontis Teryazos Director March 9, 1999
---------------------------
Leontis Teryazos
II-4
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No.: Description
------------ -----------
2.1: Purchase Agreement, dated as of June 11, 1998, among
ICG D.C. Holdings, Inc., G. Kelley Allen and the
members of DataChoice Network Services, L.L.C.
4.3: Registration Rights Agreement, dated as of July 27,
1998, between ICG Communications, Inc., and the
Sellers of DataChoice Network Services, L.L.C.
4.4: Escrow Agreement, dated as of July 27, 1998, among ICG
Communications, Inc., the persons listed on Exhibit A
---------
thereto and Norwest Bank Colorado, National
Association.
24.1: Power of Attorney (included on the signature page
hereto).
PURCHASE AGREEMENT
AMONG
ICG D.C. HOLDINGS, INC.
AND THE
MEMBERS
OF
DATACHOICE NETWORK SERVICES, L.L.C.
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE I
DEFINITIONS 1
ARTICLE II
PURCHASE AND SALE . . . . . . . . . . 6
SECTION 2.1 Basic Transaction . . . . . . . . . . . . 6
SECTION 2.2 Purchase Price; Payment . . . . . . . . 7
SECTION 2.3 [Intentionally Omitted] . . . . . . . . . 7
SECTION 2.4 Payment of Certain Amounts . . . . . . . 7
SECTION 2.5 [Intentionally omitted.] . . . . . . . . 7
SECTION 2.6 Closing; Closing Date . . . . . . . . . . 7
SECTION 2.7 Deliveries at the Closing . . . . . . . . 7
SECTION 2.8 Waiver of Rights of First Refusal . . . . 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS . . . . 8
SECTION 3.1 Organization, Good Standing, Etc. . . . . 8
SECTION 3.2 Subsidiaries . . . . . . . . . . . . . . 8
SECTION 3.3 Ownership and Capitalization . . . . . . 8
SECTION 3.4 Authority; No Violation . . . . . . . . . 8
SECTION 3.5 Consents and Approvals . . . . . . . . . 9
SECTION 3.6 Financial Statements . . . . . . . . . . 9
SECTION 3.7 Absence of Certain Changes or Events . . 10
SECTION 3.8 Tax Matters . . . . . . . . . . . . . . . 10
SECTION 3.9 Assets and Properties . . . . . . . . . . 11
SECTION 3.10 Lists of Properties, Contracts and Other
Data . . . . . . . . . . . . . . . . . . 12
SECTION 3.11 Litigation; Compliance with Applicable
Laws, Rights and Permits . . . . . . . . 12
SECTION 3.12 Accounts Receivable . . . . . . . . . . . 13
SECTION 3.13 Product Quality, Warranty and Liability . 13
SECTION 3.14 Insurance . . . . . . . . . . . . . . . . 13
SECTION 3.15 Pension and Employee Benefit Matters . . 14
SECTION 3.16 Employees and Labor . . . . . . . . . . . 15
SECTION 3.17 Customer and Supplier Relationships . . . 15
SECTION 3.18 Environmental Matters . . . . . . . . . . 15
SECTION 3.19 Intellectual Property . . . . . . . . . . 16
SECTION 3.20 Brokers' Fees and Commissions . . . . . . 16
SECTION 3.21 Acquisition for Investment . . . . . . . 16
SECTION 3.22 Disclosure . . . . . . . . . . . . . . . 17
-i-
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER . . . . 18
SECTION 4.1 Organization and Qualification, etc. . . 18
SECTION 4.2 Authority Relative to Agreement . . . . . 18
SECTION 4.3 Non-Contravention . . . . . . . . . . . . 18
SECTION 4.4 Government Approvals . . . . . . . . . . 19
SECTION 4.5 Brokers . . . . . . . . . . . . . . . . . 19
SECTION 4.6 Purchase for Investment . . . . . . . . . 19
SECTION 4.7 SEC Reports and Nasdaq Compliance . . . . 19
ARTICLE V
PRE-CLOSING COVENANTS . . . . . . . . . 19
SECTION 5.1 General . . . . . . . . . . . . . . . . . 19
SECTION 5.2 Operation and Preservation of Business . 20
SECTION 5.3 Full Access . . . . . . . . . . . . . . . 20
SECTION 5.4 Notice of Developments . . . . . . . . . 20
SECTION 5.5 Exclusivity . . . . . . . . . . . . . . . 20
SECTION 5.6 Announcements . . . . . . . . . . . . . . 21
SECTION 5.7 Payment By Sellers of Employee Claims and
Other Expenses . . . . . . . . . . . . . 21
SECTION 5.8 Closing Date Liabilities and Distribution 21
SECTION 5.9 Confidentiality . . . . . . . . . . . . . 21
SECTION 5.10 Consents and Approvals. . . . . . . . . 21
ARTICLE VI
POST-CLOSING COVENANTS . . . . . . . . 22
SECTION 6.1 Further Assurances . . . . . . . . . . . 22
SECTION 6.2 Transition . . . . . . . . . . . . . . . 22
SECTION 6.3 Cooperation . . . . . . . . . . . . . . . 22
SECTION 6.4 Confidentiality . . . . . . . . . . . . . 22
SECTION 6.5 Post-Closing Announcements . . . . . . . 22
SECTION 6.6 Financial Statements . . . . . . . . . . 22
SECTION 6.7 Satisfaction of Liabilities . . . . . . . 23
SECTION 6.8 Sales of ICG Shares . . . . . . . . . . . 23
SECTION 6.9 Restriction of Sellers' Activities . . . 23
ARTICLE VII
CONDITIONS TO CLOSING . . . . . . . . . 23
SECTION 7.1 Conditions to Obligation of Buyer . . . . 23
SECTION 7.2 Conditions to Obligation of Sellers . . . 25
-ii-
<PAGE>
ARTICLE VIII
REMEDIES FOR BREACHES OF THIS AGREEMENT . . . . 26
SECTION 8.1 Indemnification Provisions for Benefit of
Buyer and the Company . . . . . . . . . . 26
SECTION 8.2 Indemnification Provisions for Benefit of
Sellers . . . . . . . . . . . . . . . . . 27
SECTION 8.3 Matters Involving Third Parties . . . . . 28
SECTION 8.4 Survival . . . . . . . . . . . . . . . . 29
SECTION 8.5 Limitations . . . . . . . . . . . . . . . 29
SECTION 8.6 Basket and Ceiling . . . . . . . . . . . 29
ARTICLE IX
TERMINATION . . . . . . . . . . . 30
SECTION 9.1 Termination of Agreement . . . . . . . . 30
SECTION 9.2 Effect of Termination . . . . . . . . . . 31
SECTION 9.3 Confidentiality . . . . . . . . . . . . . 31
ARTICLE X
MISCELLANEOUS . . . . . . . . . . . 31
SECTION 10.1 No Third-Party Beneficiaries . . . . . . 31
SECTION 10.2 Entire Agreement . . . . . . . . . . . . 31
SECTION 10.3 Succession and Assignment . . . . . . . . 31
SECTION 10.4 Counterparts . . . . . . . . . . . . . . 31
SECTION 10.5 Headings, Terms . . . . . . . . . . . . . 32
SECTION 10.6 Notices . . . . . . . . . . . . . . . . . 32
SECTION 10.7 Governing Law . . . . . . . . . . . . . . 33
SECTION 10.8 Amendments and Waivers . . . . . . . . . 33
SECTION 10.9 Severability . . . . . . . . . . . . . . 33
SECTION 10.10 Expenses . . . . . . . . . . . . . . . . 33
SECTION 10.11 Arbitration . . . . . . . . . . . . . . . 33
SECTION 10.12 Construction . . . . . . . . . . . . . . 34
SECTION 10.13 Incorporation of Exhibits . . . . . . . . 34
SECTION 10.14 Representations as to Knowledge . . . . . 34
SECTION 10.15 Sellers' Agent . . . . . . . . . . . . . 35
-iii-
<PAGE>
EXHIBITS
Exhibit A Form of Employment Agreement
Exhibit B Escrow Agreement
Exhibit C Form of Noncompetition Agreement
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of Assignment of Interests
SCHEDULES
Schedule 1.1(i) Latest Balance Sheet
Schedule 3.1(a)(i) Qualifications and Authorizations of the
Company
Schedule 3.1(a)(ii) Articles of Organization of the Company
Schedule 3.1(a)(iii)Operating Agreement of the Company
Schedule 3.3 Membership Interests in the Company
Schedule 3.5 Sellers Notices and Consents
Schedule 3.6(a) Audited Financial Statements
Schedule 3.6(b) Unaudited Financial Statements
Schedule 3.7 Changes or Events
Schedule 3.8(c) Tax Returns
Schedule 3.8(e) Asset Bases
Schedule 3.9(a) Ownership of Assets and Equipment Leases
Schedule 3.9(b) Premises
Schedule 3.10(a) Description of Properties, Contracts and
Other Data (to Include All Items on Schedule
3.10(b))
Schedule 3.10(b) Generic List of Properties, Contracts and
Other Data
Schedule 3.11(a) Outstanding Litigation, Etc.
Schedule 3.11(c)(i) Authorizations and Permits
Schedule 3.11(c)(ii)Exceptions to Authorizations and Permits
Schedule 3.12 Accounts Receivable Aging Schedule
Schedule 3.13 Product or Service Liability Claims
Schedule 3.14 Insurance
Schedule 3.15 Employee Benefit and Pension Plans
Schedule 3.15(u) Retired Employees Receiving Uncovered
Payments
Schedule 3.17(a) Principal Customers
Schedule 3.17(b) Principal Suppliers
Schedule 3.19 Intellectual Property
Schedule 4.3 Buyer's Notices and Consents
-iv-
<PAGE>
PURCHASE AGREEMENT
This Purchase Agreement (this "Agreement") is entered into
on June 11, 1998, by and between ICG D.C. Holdings, Inc., a
Colorado corporation ("Buyer"), and G. Kelley Allen ("Allen"),
and the G. Kelley Allen Trust (the "Trust"), and Michele R.K.
Fought ("Fought"), T&D Consulting, Inc. and the Gordon B. Koch
Daughters Trust (collectively with Fought, the "Minority
Members"). Allen, the Trust and the Minority Members are herein
collectively referred to as "Sellers" and individually, as a
"Seller".
RECITALS
A. Sellers (except for Allen) are all of the members of
and own all of the interests in DataChoice Network Services,
L.L.C., a Nevada limited liability company (the "Company").
B. Sellers desire to sell, and Buyer desires to purchase,
all of the interests (the "Interests") in the Company as provided
in this Agreement.
AGREEMENT
The parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 For purposes of this Agreement:
Adverse Consequences means all losses, damages, costs,
--------------------
expenses, fees, Liabilities or other adverse consequences of any
nature, however caused or incurred.
Affiliate means, with respect to any Person, any Person
---------
Controlling, Controlled by or under common Control with such
Person.
Affiliated Group means any affiliated group within the
----------------
meaning of Code Section 1504 or any similar group defined under a
similar provision of state, local or foreign law.
Allen means G. Kelley Allen.
-----
Assets means all right, title and interest of the Company in
------
and to all of the Company's tangible and intangible assets.
Basket Amount has the meaning set forth in Section 8.6(a).
-------------
<PAGE>
Benefit Arrangements has the meaning set forth in Section
--------------------
3.15(c).
Business Day means any day on which commercial banks are
------------
open for business in Denver, Colorado.
Buyer has the meaning set forth in the preamble to this
-----
Agreement.
Closing and Closing Date have the meanings given in Section
------- ------------
2.6.
Closing Date Liabilities means all Liabilities and other
------------------------
amounts for which Sellers are liable under Sections 2.4, 5.7,
and 10.10.
Code means the Internal Revenue Code of 1986, as amended.
----
Company has the meaning set forth in Recital A.
-------
Company Employee Welfare Benefit Plan has the meaning set
-------------------------------------
forth in Section 3.15(a).
Confidential Information means, with respect to any Person,
------------------------
any information concerning such Person or its business, products,
financial condition, prospects and affairs that is not already
generally available to the public.
Control means the power to direct the management or policies
-------
of any Person, through the power to vote shares or other equity
interests, by contract or otherwise.
Documents has the meaning set forth in Section 3.21.
---------
Employee Welfare Benefit Plan has the meaning set forth in
-----------------------------
ERISA Section 3(1).
Employment Agreement means the Employment Agreement between
--------------------
Buyer and Fought, substantially in the form attached as
EXHIBIT A.
---------
Encumbrance means any mortgage, pledge, conditional sale
-----------
agreement, charge, claim, interest of another Person, lien,
security interest, title defect or other encumbrance.
Environmental Obligations means all Legal Requirements and
-------------------------
Permits concerning land use, public health, safety, welfare or
the environment, including, without limitation, the Resource
Conservation and Recovery Act (42 U.S.C. (Section) 6901 et seq.),
-- ---
as amended, and the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. (Section) 9601
et seq.), as amended.
-- ---
ERISA means the Employee Retirement Income Security Act of
-----
1974, as amended, and any regulations, rules or orders
promulgated under the Employee Retirement Income Security Act of
1974, as amended.
-2-
<PAGE>
ERISA Affiliate means any entity that is controlled by, or
---------------
is under common control with, the Company, as determined under
ERISA Section 4001(a)(14).
Escrow Agent means Norwest Bank Colorado, N.A.
------------
Escrow Agreement means the Escrow Agreement among Buyer,
----------------
Sellers and the Escrow Agent in the form of EXHIBIT B.
---------
Escrow Period means the period commencing on the Closing
-------------
Date and ending on the date which is twelve months after the
Closing Date.
Financial Statements has the meaning set forth in Section
--------------------
3.6.
Fought means Michele R.K. Fought.
-----
Free Up Date has the meaning set forth in Section 6.8.
------------
GAAP means generally accepted accounting principles as in
----
effect from time to time in the United States.
Governmental Authority means the United States of America or
----------------------
any foreign jurisdiction, any state, commonwealth, territory or
possession of the United States of America or any such foreign
jurisdiction, any political subdivision of any of them (including
counties, municipalities, home-rule cities and the like), and any
agency, authority or instrumentality of any of the foregoing,
including, without limitation, any court, tribunal, department,
bureau, commission or board.
Hazardous Materials means any material, chemical, compound,
-------------------
mixture, hazardous substance, hazardous waste, pollutant or
contaminant defined, listed, classified or regulated under any
Environmental Obligation.
ICG means ICG Communications, Inc., a Delaware corporation.
---
ICG Shares means the newly-issued shares of common stock of
----------
ICG payable to Sellers under Section 2.2.
Indemnified Party has the meaning set forth in Section
-----------------
8.3(a).
Indemnifying Party has the meaning set forth in Section
------------------
8.3(a).
Intellectual Property means (a) all inventions (whether
---------------------
patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent
applications and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions,
extensions and reexaminations thereof, (b) all trademarks,
-3-
<PAGE>
service marks, trade dress, logos, trade names and corporate
names, including the name "DataChoice Network Services, L.L.C.,"
"DataChoice," and "DataChoice Network," together with all
translations, adaptations, derivations and combinations thereof
and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith,
(c) all copyrightable works, all copyrights and all applications,
registrations and renewals in connection therewith, (d) all mask
works and all applications, registrations and renewals in
connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (f)
all computer software (including data and related documentation),
(g) all other proprietary rights and (h) all copies and tangible
and intangible embodiments thereof (in whatever form or medium).
Interests means all of the membership interests issued by
---------
the Company to all of its members.
Latest Balance Sheet means the unaudited balance sheet of
--------------------
the Company and the related unaudited statements of income,
expense and cash flow dated as of April 30, 1998 and attached as
SCHEDULE 1.1(I).
----------------
Legal Requirement means any constitution, statute,
-----------------
ordinance, code, or other law (including common law), rule,
regulation, Order, notice, standard, procedure or other
requirement enacted, adopted, applied or issued by any
Governmental Authority, including, without limitation, judicial
decisions.
Liability means any liability or obligation (whether known
---------
or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due).
Material Adverse Effect means, with respect to the Company
-----------------------
or its businesses, assets, financial condition, properties or
prospects, any event, fact, circumstance or condition that in the
aggregate may result in an adverse impact to the Company that
would exceed $20,000.
Minority Members has the meaning set forth in the preamble
----------------
to this Agreement.
Nasdaq means the Automated Quotation System of the National
------
Association of Securities Dealers, Inc.
Nasdaq Market means the Nasdaq National Market.
-------------
Noncompetition Agreements means the Noncompetition
-------------------------
Agreements between Buyer and each of Allen and Fought, the form
of each of which is attached as EXHIBIT C.
---------
-4-
<PAGE>
Orders means all judgments, injunctions, orders, rulings,
------
decrees, directives, notices of violation or other requirements
of any Governmental Authority or arbitrator having jurisdiction
in the matter, including a bankruptcy court or trustee.
Other Buyer Agreements means the Escrow Agreement, the
----------------------
Employment Agreements, the Noncompetition Agreements, the
Registration Rights Agreement and the other documents and
instruments executed and delivered by Buyer pursuant to Section
7.2 of this Agreement.
Other Seller Agreements means the Employment Agreement, the
-----------------------
Escrow Agreement, the Noncompetition Agreements, the Registration
Rights Agreement, and other documents and instruments executed
and delivered by Sellers pursuant to Section 7.1 of this
Agreement.
Permits means all permits, licenses, consents, franchises,
-------
authorizations, approvals, privileges, waivers, exemptions,
variances, exclusionary or inclusionary Orders and other
concessions, whether governmental or private, including, without
limitation, those relating to environmental, public health,
welfare or safety matters.
Permitted Liabilities means, with respect to the Company,
---------------------
(a) indebtedness for borrowed money in an amount equal to the
indebtedness incurred and outstanding as of December 31, 1997 as
reflected on the Latest Balance Sheet, (b) all other liabilities
reflected on the Latest Balance Sheet, and (c) current
liabilities consisting of trade payables and current expenses of
the Company incurred in the ordinary course of business since
December 31, 1997, consistent with past practice.
Person means an individual, and a partnership, corporation,
------
association, joint stock company, trust, joint venture, limited
liability company, unincorporated organization, Governmental
Authority or other entity.
Premises means the real property, buildings and improvements
--------
on such real property constituting the business premises of the
Company as described on SCHEDULE 3.9(B).
----------------
Premises Lease means the lease agreement, in form and
--------------
substance satisfactory to Buyer, between Buyer and Southwest
Plaza - GGPLP, as lessor with respect to Premises leased by the
Company in Littleton, Colorado, under which Buyer will lease the
Premises following Closing.
Principal Customers has the meaning set forth in Section
-------------------
3.17(a).
Principal Suppliers has the meaning set forth in Section
-------------------
3.17(b).
Purchase Price means the sum of $5,000,000.
--------------
Registration Rights Agreement means the agreement between
-----------------------------
ICG and Sellers in the form attached as EXHIBIT D.
---------
-5-
<PAGE>
Reply Notice has the meaning set forth in Section 2 of the
------------
Escrow Agreement.
Reply Period has the meaning set forth in Section 2 of the
------------
Escrow Agreement.
Right means any right, property interest, concession,
-----
patent, trademark, trade name, copyright, know-how or other
proprietary right of another Person.
SEC Reports has the meaning set forth in Section 4.7.
-----------
Securities Act means the Securities Act of 1933, as amended,
--------------
and all rules and regulations promulgated thereunder.
Seller Transaction Expenses has the meaning set forth in
---------------------------
Section 10.10.
Sellers' Agent means G. Kelley Allen.
--------------
Seller and Sellers have the meaning set forth in the
------------------
preamble to this Agreement.
Survival Period means, with respect to a representation or
---------------
warranty, the applicable period after the Closing Date during
which such representation or warranty survives pursuant to
Section 8.4.
Tax means any federal, state, local or foreign income, gross
---
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including
taxes under Code Section 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, documentary, personal
property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated or other tax of any kind
whatsoever, or any escheat obligations, including any interest,
penalty or addition, whether disputed or not.
Tax Return means any return, declaration, report, claim for
----------
refund or information return or statement relating to Taxes,
including any schedule or attachment to any of them, and
including any amendment of any of them.
Third Party Claim has the meaning set forth in Section
-----------------
8.3(a).
ARTICLE II
PURCHASE AND SALE
SECTION 2.1 Basic Transaction. Subject to the terms and
-----------------
conditions set forth in this Agreement, Buyer agrees to purchase
from Sellers, and Sellers agree to sell to Buyer, all of the
Interests, free and clear of any Encumbrance or Tax, for the
consideration specified in Section 2.2. Buyer will have no
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<PAGE>
obligation under this Agreement to purchase less than all of the
Interests.
SECTION 2.2 Purchase Price; Payment. The Purchase Price for
-----------------------
the Interests will be payable in the form of (a) $560,000 in
cash, and (b) 145,997 ICG Shares. On the Closing Date Buyer will
(x) pay to Sellers in cash by wire transfer to an account or
accounts designated by Sellers' Agent the amount of $560,000 in
cash, (y) pay to Sellers 129,556 ICG Shares and (z) deposit
16,441 ICG Shares with the Escrow Agent pursuant to the terms of
the Escrow Agreement. In addition to the Purchase Price, at the
Closing Buyer will pay Allen the sum of $250,000 and Fought the
sum of $250,000, each such amount to be payable in cash, in
consideration for Allen's and Fought's obligations under the
Noncompetition Agreements.
SECTION 2.3 [Intentionally Omitted].
-----------------------
SECTION 2.4 Payment of Certain Amounts. Sellers will pay,
--------------------------
and bear sole liability for, the following costs, expenses,
amounts and claims: (a) all Taxes, fees and charges payable in
respect of or as a result of the sale and transfer of the
Interests to Buyer pursuant to this Agreement; (b) all Seller
Transaction Expenses in excess of $10,000 in the aggregate, and
the amounts described in Section 5.7 and (c) all amounts owing to
employees (other than claims for earned commissions) and other
Persons arising out of events or circumstances occurring prior to
or as a result of the Closing. Upon receipt of evidence
reasonably satisfactory to Buyer of liability therefor on payment
thereof, Buyer will reimburse Sellers, pay, or bear liability
for, as the case may be, all Seller Transaction Expenses in an
amount not to exceed $10,000 in the aggregate.
SECTION 2.5 [Intentionally Omitted].
-----------------------
SECTION 2.6 Closing; Closing Date. The closing of the
---------------------
transactions contemplated by this Agreement (the "Closing") will
take place within five Business Days after the satisfaction or
waiver of all conditions set forth in Sections 7.1 and 7.2, at
the offices of Sherman & Howard L.L.C. in Denver, Colorado, and
all transactions contemplated by this Agreement will be effective
at 12:00 a.m. local time in Denver, Colorado, on the day of the
Closing (such effective time being the "Closing Date").
SECTION 2.7 Deliveries at the Closing. At the Closing, (a)
-------------------------
Sellers will deliver, or cause to be delivered, to Buyer the
certificates, instruments and documents referred to in
Section 7.1, (b) Buyer will deliver to Sellers the certificates,
instruments and documents referred to in Section 7.2, (c) Sellers
will deliver to Buyer assignments of the Interests in the form of
EXHIBIT E, free and clear of any Encumbrances or Taxes and (d)
---------
Buyer will pay and deposit the purchase price in accordance with
Section 2.2.
SECTION 2.8 Waiver of Rights of First Refusal. Sellers
---------------------------------
waive all rights of first refusal arising under Section 10.02 of
the Operating Agreement of the Company effective as of April 25,
1996.
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<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers jointly and severally represent and warrant to Buyer
as follows, as of the date of this Agreement:
SECTION 3.1 Organization, Good Standing, Etc. (a) The
--------------------------------
Company is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of
Nevada, and is qualified and authorized to do business as a
foreign limited liability company and is in good standing in each
of the jurisdictions listed on SCHEDULE 3.1(A)(I), which are the
------------------
only jurisdictions in which the nature of the business conducted
by the Company or the properties leased or operated by it make
such qualification necessary. The Company has all requisite
power and authority to own, lease and operate its properties and
to carry on its business as is now being conducted. The copies
of (i) the articles of organization (certified by the Secretary
of State of its jurisdiction of organization) and (ii) the
operating agreement of the Company, both as amended to date,
which have been delivered to Buyer by Sellers, and are attached
as SCHEDULES 3.1(A)(II) and 3.1(A)(III),
------------------------------------
respectively, are complete and correct, and the Company is not in
default under or in violation of any provision of its articles of
organization or operating agreement. The minute books, which
contain the records of all meetings of or actions by the members
of the Company, and the record books of the Company, copies of
which have been delivered to Buyer by Sellers, are correct and
complete.
SECTION 3.2 Subsidiaries. The Company does not own any
------------
equity or other interest in any other corporation, limited
liability company, partnership or any other Person.
SECTION 3.3 Ownership and Capitalization. The interests
----------------------------
issued by the Company are described on SCHEDULE 3.3 and as of the
------------
date of this Agreement such interests are owned by such Persons
and in such percentages as is set forth on SCHEDULE 3.3. All of
------------
the interests issued by the Company have been validly issued, and
are fully paid and nonassessable, with no personal Liability
attaching to the ownership of such interests. There is no
authorized or outstanding equity interest or security convertible
into or exchangeable for, or any authorized or outstanding
option, warrant or other right to subscribe for or to purchase,
or convert any obligation into, any unissued interests in the
Company and the Company has not agreed to issue any security so
convertible or exchangeable or any such option, warrant or other
right. There are no authorized or outstanding equity
appreciation, phantom equity, profit participation, equity
participation or other similar rights with respect to the
Company. There are no voting trusts, voting agreements, proxies
or other agreements or understanding with respect to any of the
Interests. There are no existing rights of first refusal, buy-
sell arrangements, options, warrants, rights, calls, or other
commitments or restrictions of any character relating to any of
the Interests, except those restrictions on transfer imposed by
the Securities Act and applicable state securities laws.
SECTION 3.4 Authority; No Violation. Sellers (and each of
-----------------------
them individually) have full and absolute right, power, authority
and legal capacity to execute, deliver and perform this Agreement
-8-
<PAGE>
and all Other Seller Agreements to which Sellers are a party, and
assuming the due authorization, execution and delivery by such
other Persons as are parties thereto, this Agreement constitutes,
and the Other Seller Agreements when executed and delivered by
the parties thereto will constitute, the legal, valid and binding
obligations of, and will be enforceable in accordance with their
respective terms against, Sellers (and each of them
individually), except as such enforcement is subject to the
effect of (i) any applicable bankruptcy, insolvency,
reorganization or similar laws relating to or affecting
creditors' rights generally, and (ii) general principles of
equity, including concepts of reasonableness, good faith and fair
dealing, and other similar doctrines affecting the enforceability
of agreements generally (regardless of whether considered in a
proceeding in equity or at law). The execution, delivery and
performance of this Agreement and the Other Seller Agreements and
the consummation of the transactions contemplated by each such
agreement will not (a) violate any Legal Requirement to which the
Company or any Seller is subject or any provision of the articles
of organization or operating agreement of the Company, or (b)
violate, with or without the giving of notice or the lapse of
time or both, or conflict with or result in the breach or
termination of any provision of, or a diminution of the rights of
the Company under, or constitute a default under, or give any
Person the right to accelerate any obligation under, or result in
the creation of any Encumbrance upon any properties, assets or
business of the Company or of any Seller, pursuant to any
indenture, mortgage, deed of trust, lien, lease, license, Permit,
agreement, instrument or other arrangement to which the Company
or any Seller is a party or by which the Company or any Seller,
or any of their respective assets and properties is bound or
subject.
SECTION 3.5 Consents and Approvals. Except as set forth in
----------------------
SCHEDULE 3.5, no filing or registration with, no notice to and no
------------
permit, authorization, consent or approval of any Governmental
Authority or any Person is necessary for the consummation by
Sellers of the transactions contemplated by this Agreement other
than (a) requirements of federal and securities laws, (b) the
authorization of all applicable regulatory agencies necessary or
desirable to consummate the transactions contemplated by this
Agreement and (c) those consents and approvals already obtained
as described on Schedule 3.5.
------------
SECTION 3.6 Financial Statements. Sellers have delivered
--------------------
to Buyer complete and correct copies of the Company's (a)
unaudited balance sheets, income statements and related
statements of cash flow and members' equity for and as of the
year December 31, 1996 and the period May 1, 1996 through
December 31, 1997 and (b) unaudited balance sheets, income
statements and the statements of cash flow for the periods ending
January 31, 1998, February 28, 1998, March 31, 1998 and April 30,
1998, (collectively, the "Financial Statements"). The Financial
Statements are in accordance with the books and records of the
Company, as applicable, and were prepared on a consistent basis
throughout the periods covered and present fairly the Company's
financial position, results of operations and changes in
financial position as of the dates and for the periods indicated.
At the date of the Latest Balance Sheet, the Company had no known
liability or obligation, whether accrued, absolute, fixed or
contingent (including liabilities for taxes or unusual forward or
long-term commitments), that were not fully reflected or reserved
against on the Latest Balance Sheet, business, financial
condition or results of operations of the Company, nor does the
Company have any contingent Liabilities not disclosed on the
-9-
<PAGE>
Financial Statements. Copies of the financial statements
described in clause (a) of this Section 3.6 are attached as
SCHEDULE 3.6(A), and copies of the financial statements
---------------
described in clause (b) of this Section are attached as
SCHEDULE 3.6(B). All balance sheets, statements of revenue and
--------------
expense and other financial statements prepared by or with
respect to the Company after the date of this Agreement will be
prepared in accordance with and on a basis and in a manner
consistent with the Financial Statements.
SECTION 3.7 Absence of Certain Changes or Events. Since
------------------------------------
December 31, 1997, and except as disclosed in SCHEDULE 3.7, the
------------
Company has not: (a) incurred any debt, indebtedness or other
Liability, except Permitted Liabilities; (b) delayed or postponed
the payment of accounts payable or other Liabilities or
accelerated the collection of any receivable beyond stated,
normal terms; (c) sold or otherwise transferred any of its
equipment or other assets or properties that are, individually or
in the aggregate, material to the Company; (d) cancelled,
compromised, settled, released, waived, written-off or expensed
any account or note receivable, right, debt or claim involving
more than $10,000 individually or in the aggregate; (e) changed
in any significant manner the way in which it conducts business;
(f) made or granted any individual wage or salary increase or any
additional benefits of any kind or nature or modified any
commission or compensation arrangement applicable to any employee
of the Company; (g) entered into any contracts or agreements, or
made any commitments, involving more than $10,000 individually or
in the aggregate or accelerated, terminated, delayed, modified or
cancelled any agreement, contract, lease or license (or series of
related agreements, contracts, leases and licenses) involving
more than $10,000 individually or in the aggregate; (h) suffered
any Material Adverse Effect, including to or in its business,
assets, financial condition, prospects or customer or supplier
relationships; (i) made any payment or transfer to or for the
benefit of any Seller or permitted any Person, including, without
limitation, any Seller, to withdraw assets from the Company other
than as disclosed on SCHEDULE 3.7;
------------
(j) suffered any other significant occurrence, event, incident,
action, failure to act or transaction outside the ordinary course
of business consistent with past practice, (k) engaged in any
other activity outside the ordinary course of business consistent
with past practice, or (l) agreed to incur, take, enter into,
make or permit any of the matters described in clauses
(a) through (k).
SECTION 3.8 Tax Matters.
-----------
(a) The Company has timely filed all Tax Returns it was
required to file. All such Tax Returns are correct and complete
in all material respects. All Taxes owed by the Company and by
each Seller (whether or not shown on any Tax Return) have been
paid. The Company is not, and no Seller is, currently the
beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a
jurisdiction where the Company does not file Tax Returns that it
is or may be subject to taxation by that jurisdiction. There are
no Encumbrances on any of the assets of the Company or on those
of any Seller that arose in connection with any failure (or
alleged failure) to pay any Tax.
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<PAGE>
(b) The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, any
Seller or other third party.
(c) There is no known basis for any authority to assess any
additional Taxes for any period for which Tax Returns of the
Company or any Seller have been filed. There is no pending or
threatened dispute or claim concerning any Tax Liability of the
Company or of any Sellers. SCHEDULE 3.8(C) lists all federal,
---------------
state, local and foreign income Tax Returns filed with respect to
the Company and each Seller for taxable periods ended on or after
December 31, 1996. No such Tax Return has ever been audited.
Sellers have delivered to Buyer correct and complete copies of
all federal income Tax Returns, examination reports, and
statements of deficiencies filed or assessed against or agreed to
by the Company since December 31, 1996.
(d) Neither the Company nor any Seller has waived any
statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.
(e) SCHEDULE 3.8(E) sets forth the basis of the Company in
---------------
each of its assets as of December 31, 1997.
(f) All Taxes payable by all present and former members of
the Company in respect of the Company's taxable income have been
paid.
(g) The Company has not made any election to be classified
as a corporation taxable as an association for federal, state or
foreign tax purposes.
SECTION 3.9 Assets and Properties.
---------------------
(a) Except as disclosed on SCHEDULE 3.9(A), as of the date
---------------
of this Agreement, the Company owns all of its Assets, free and
clear of all Encumbrances and the Company has and will have good
and marketable title to (or, in the case of the Assets that are
leased, valid leasehold interests in) all of its Assets. The
Assets consist of the tangible and intangible assets of the
Company in existence as of the date of this Agreement (except for
such changes in accounts receivable in the ordinary course of
business as are not in violation of Section 3.7). The Assets of
the Company are all of the tangible and intangible assets used by
the Company in, or necessary for the conduct of, its business.
The Assets and any property leased by the Company from third
parties encompass all Assets and all property used by the Company
to generate the income reflected in the financial statements
attached as SCHEDULES 3.6(A) AND 3.6(B). SCHEDULE 3.9(A) lists
--------------------------- ---------------
all the equipment leased by the Company as of the date of this
Agreement. The Company does not lease any equipment from any
Seller. All of the tangible Assets of the Company are located on
the Premises.
(b) SCHEDULE 3.9(B) sets forth a description of all of the
---------------
real property, buildings and improvements used by the Company in
its business (the "Premises"). The Premises are supplied with
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<PAGE>
utilities and other services necessary for the operation of the
Premises. The Premises are free from defects, have been
maintained in accordance with normal industry practice, are in
good operating condition and repair and are suitable for the
purposes for which they presently are used. The Premises have
received all approvals of Governmental Authorities (including
Permits) required in connection with the occupation and operation
of the Premises and have been occupied, operated and maintained
in accordance with applicable Legal Requirements. None of
Sellers or the Company has received notice of violation of any
Legal Requirement or Permit relating to its operations or its
leased properties.
(c) No party to any lease with respect to any Premises has
repudiated any provision of such lease, and there are no
disputes, oral agreements or forbearance programs in effect as to
any such lease.
SECTION 3.10 Lists of Properties, Contracts and Other Data.
----------------------------------------------
Attached as SCHEDULE 3.10(B) is a generic list of certain
---------------
properties, contracts and other data. SCHEDULE 3.10(A) is a
----------------
correct and complete description for the Company setting forth
the properties, contracts and other data of the Company as of
March 31, 1998 that are identified on SCHEDULE 3.10(B). True and
----------------
complete copies of the items (or descriptions of such items)
referred to in SCHEDULE 3.10(A) have been delivered to Buyer or
----------------
provided to Buyer for inspection. The contracts, contractual
obligations and other Rights described in SCHEDULE 3.10(A) are
----------------
valid, in full force and effect, enforceable in accordance with
their respective terms for the period stated, and, to the
knowledge of Sellers, no party has repudiated any provision
thereof and no action or claim is pending or threatened to
revoke, modify, terminate or render invalid any of such items.
Neither the Company nor, to the knowledge of Sellers, any Other
Party is in breach or default in performance of any of its
respective obligations under, and no event exists which, with the
giving of notice or lapse of time or both, would constitute a
breach, default or event of default on the part of a party to,
any of the foregoing contracts, contractual obligations or Rights
that is continuing unremedied.
SECTION 3.11 Litigation; Compliance with Applicable Laws,
---------------------------------------------
Rights and Permits.
-------------------
(a) There is no outstanding Order against, nor, except as
set forth on SCHEDULE 3.11(A), is there any litigation,
----------------
proceeding, arbitration or investigation by any Governmental
Authority or other Person pending or threatened against, the
Company, its properties or business or relating to the
transactions contemplated in this Agreement, nor is there any
basis for any such action.
(b) The Company and its Assets (including its Premises,
facilities, machinery and equipment and the use thereof) are not
in violation of any applicable Legal Requirement or right. None
of Sellers or the Company has received notice from any
Governmental Authority or other Person of any violation or
alleged violation of any Legal Requirement or Right, and no
action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand or notice has been filed or commenced or
is pending or threatened against the Company.
-12-
<PAGE>
(c) SCHEDULE 3.11(C)(I) lists all authorizations and
-------------------
Permits held by the Company with respect to the operation of its
business. Each authorization and Permit listed in
SCHEDULE 3.11(C)(I) is valid and effective and the Company is in
-------------------
compliance with all material terms, conditions and requirements
of such authorizations and Permits. Except as set forth in
SCHEDULE 3.11(C)(II), the Company possesses all authorizations,
--------------------
Permits, licenses and Orders required or necessary to conduct its
business and operations in the manner in which such business and
operations are being and historically have been conducted.
SECTION 3.12 Accounts Receivable. The accounts receivable
-------------------
of the Company reflected on SCHEDULE 3.12 have arisen in the
-------------
ordinary course of business; reflect bona fide business
arrangements; no payor has given any Seller or the Company
written notice of any inability to pay such account receivable in
due course or of any claim or defense against payment of such
account receivable; no oral statements to such effect have been
made to any Seller or the Company; no basis exists for any payor
to raise any claim or defense against payment with respect to any
such account receivable; and SCHEDULE 3.12 sets forth a true and
-------------
correct statement regarding the aging of such accounts receivable
as of the date of this Agreement.
SECTION 3.13 Product Quality, Warranty and Liability. All
---------------------------------------
products and services provided or delivered by the Company to
customers on or prior to the date of this Agreement conform to
applicable contractual commitments, express and implied
warranties, product and service specifications and quality
standards, and the Company has no Liability, and to the knowledge
of Sellers there is no basis for any Liability, for additional
service, replacement or repair or other damages in connection
with such products and services. No product or service provided
or delivered by the Company to customers on or prior to the date
of this Agreement is subject to any guaranty, warranty or other
indemnity beyond the applicable standard terms and conditions of
sale, rent or lease. The Company has no Liability and, to the
knowledge of Sellers there is no basis for any Liability, arising
out of any injury to a Person, property or otherwise as a result
of the ownership, possession, provision or use of any product or
service sold, rented, leased, provided or delivered by the
Company on or prior to the date of this Agreement. No product or
service liability claim has been asserted against the Company,
whether covered by insurance or not and whether litigation has
resulted or not, except as listed and summarized on
SCHEDULE 3.13.
--------------
SECTION 3.14 Insurance. The Company has policies of
---------
insurance (a) covering risk of loss on its Assets and (b)
covering products and services liability and liability for fire,
property damage, personal injury, and workers' compensation
coverage, all with responsible and financially sound insurance
carriers in adequate amounts and in compliance with governmental
requirements and in accordance with good industry practice.
SCHEDULE 3.14 sets forth a complete and accurate list of all
-------------
insurance policies of the Company and the annual premiums payable
thereunder. All such insurance policies are valid, in full force
and effect and enforceable in accordance with their respective
terms and no party has repudiated any provision of such policies.
Neither the Company, nor to the knowledge of Sellers, any other
party to any such policy, is in breach or default (including with
respect to the payment of premiums or the giving of notices) in
the performance of any of their respective obligations under any
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<PAGE>
such policy, and, to the knowledge of Sellers, no event exists
which, with the giving of notice or the lapse of time or both,
would constitute a breach, default or event of default, or permit
termination, modification or acceleration under any such policy.
There are no claims, actions, proceedings or suits arising out of
or based upon any of such policies and no basis for any such
claim, action, suit or proceeding exists. All premiums have been
paid on such policies as of the date of this Agreement. The
Company has been covered during its period of existence by
insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during such period. There
have been no claims made during such period with respect to any
insurance coverage of the Company.
SECTION 3.15 Pension and Employee Benefit Matters.
------------------------------------
(a) The Company has not maintained and has no obligation to
contribute to any employee pension benefit plans, as defined in
ERISA Section 3(2), including any multiemployer plan, as defined
in ERISA Section 3(37). The Company has no ERISA Affiliates.
Schedule 3.15 sets forth each Employee Welfare Benefit Plan
-------------
maintained or contributed to by the Company and no such plan is
self-insured or self-funded by the Company, ("Company Employee
Welfare Benefit Plans").
(b) Any Company Employee Welfare Benefit Plan that is a
"Group Health Plan" (as defined in Code Section 5000(b)(I)) has
been administered in accordance with the requirements of Part 6
of Subtitle B of Title I of ERISA and Code Section 4980B, and
nothing done or omitted to be done in connection with maintenance
or administration of any Company Employee Welfare Benefit Plan
that is a Group Health Plan has made or will make the Company
subject to any liability under Title I of ERISA or any excise Tax
Liability under Code Section 4980B or has resulted or will result
in any loss of income exclusion for a participant under Code
Sections 105(h) or 106.
(c) The Company does not maintain, and has never
maintained, and does not contribute, and has never contributed,
and has never been required to contribute, to any employee
benefit plan, as defined in ERISA Section 3(3), providing health
or medical benefits for current or future retired or terminated
employees, their spouses or dependents (other than in accordance
with Code Section 4980B). SCHEDULE 3.15 lists each employment,
-------------
severance or other similar contract, arrangement or policy and
each plan or arrangement (written or oral) providing for
unemployment benefits, vacation benefits, deferred compensation,
bonuses, stock options, stock appreciation rights or other forms
of incentive compensation, reduced interest or interest free
loans, mortgages, relocation assistance, or other benefits that
(i) is not a Company Employee Welfare Benefit Plan; (ii) is
entered into, maintained or contributed to by the Company; and
(iii) covers any employee or former employee of the Company
(collectively, the "Benefit Arrangements"). Copies of each such
Benefit Arrangement (or, if unwritten, a written description of
each such Benefit Arrangement) have been delivered by the Company
to the Buyer.
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<PAGE>
SECTION 3.16 Employees and Labor. No executive or key
-------------------
employee is subject to any agreement, obligation, Order or other
legal hindrance that impedes or might impede such executive or
key employee from devoting his or her full business time to the
affairs of the Company, and, if such person becomes an employee
of Buyer, to the affairs of Buyer after the date of this
Agreement. The Company has, and has had, no pending labor
relations problems or disputes or charges or complaints of unfair
labor practices. There are no threatened or alleged claims,
investigations or requests for investigations or audits against
the Company, nor are there any outstanding orders relating to the
Company or any Seller with respect to any employment matter under
any federal or state employment law or employment practices,
including federal Title VII and related state protections. There
are no federal or state common law actions pending or, to the
knowledge of Sellers, threatened, associated with or relating to
any employee's or former employee's past or present employment
with the Company or termination thereof.
SECTION 3.17 Customer and Supplier Relationships.
-----------------------------------
(a) SCHEDULE 3.17(A) lists each customer that individually
----------------
or with its Affiliates accounted for five percent or more of the
Company's revenues during either the fiscal year ended
December 31, 1997 or the three-month period ended March 31, 1998
(the "Principal Customers").
(b) SCHEDULE 3.17(B) lists each supplier that individually
----------------
or with its affiliates accounted for 10 percent or more of the
Company's purchases of support services, supplies, or products
during either the fiscal year ended December 31, 1997 or the
three-month period ended March 31, 1998 (the "Principal
Suppliers").
(c) The Company has good commercial working relationships
with the Principal Customers and the Principal Suppliers and,
since December 31, 1997, no Principal Customer or Principal
Supplier has cancelled or otherwise terminated its relationship
with the Company, materially decreased or limited its
contribution of revenue to or support services, supplies or
products supplied to, the Company, or threatened to take any such
action. Sellers have no basis to anticipate any problems with
the Company's customer, supplier or business relationships. To
the knowledge of Sellers, no Principal Customer or Principal
Supplier has any plans to reduce its contribution of revenue to
or support services, supplies, or products supplied to the
Company below levels prevailing since December 31, 1997, and the
execution and delivery of this Agreement and the consummation of
the transactions contemplated by this Agreement will not
adversely affect the relationship of Buyer with any Principal
Supplier after the date of this Agreement.
SECTION 3.18 Environmental Matters. The Company has
---------------------
conducted its business and operations, and has occupied, used and
operated the Premises in compliance with all Environmental
Obligations. The Company owns no real property. To the
knowledge of Sellers, all the Company's leased property is in
full compliance with all Environmental Obligations. Neither the
Company nor any Seller on behalf of the Company has ever disposed
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<PAGE>
of any Hazardous Materials except cleaning supplies, and such
cleaning supplies have been disposed of in accordance with all
applicable Environmental Obligations. No Seller is aware of any
claim or order, or notice of claim or order, asserting Liability
of the Company or any Seller related to an Environmental
Obligation. The Company has not owned or used any underground or
aboveground storage tanks.
SECTION 3.19 Intellectual Property. SCHEDULE 3.19 lists
--------------------- -------------
each item of Intellectual Property owned by the Company or which
is used by the Company in the operation of its business. The
Company owns or has the legal right to use each such item of
Intellectual Property, and none of such Intellectual Property is
subject to any Encumbrance. No other individual or entity has
any claim or right to the Intellectual Property except as
specifically allowed by the Company. The Intellectual Property
does not contain any material which may infringe on the
intellectual property or proprietary rights of any third party.
The Intellectual Property is not the subject of any claim of
infringement by any third party.
SECTION 3.20 Brokers' Fees and Commissions. None of
-----------------------------
Sellers, the Company nor any of its respective directors,
officers, partners, employees or agents has employed any
investment banker, broker or finder in connection with the
transactions contemplated hereby, and none of Sellers, the
Company nor Buyer will have any liability to any such Persons on
account of any brokerage, finders or similar fee payable with
respect to the transactions contemplated by this Agreement.
SECTION 3.21 Acquisition for Investment. Sellers are
--------------------------
acquiring the ICG Shares pursuant to this Agreement for their own
account as principals, for investment purposes only, and not with
a view to, or for, resale, distribution or fractionalization
thereof, in whole or in part, and no other Person has a direct or
indirect beneficial interest in such ICG Shares. Sellers each
acknowledge and understand that the offering and sale of the ICG
Shares pursuant to this Agreement are intended to be exempt from
registration under the Securities Act by virtue of Section 4(2)
thereof and the provisions of Regulation D promulgated thereunder
and, therefore, cannot be resold unless they are registered under
the Securities Act or unless an exemption from registration is
available. In furtherance thereof, Sellers joint and severally
represent and warrant to and agree with Buyer and each other
Seller that:
(a) each Seller has the financial ability to bear the
economic risk for this investment, has adequate means for
providing for its current needs and contingencies and has no need
for liquidity with respect to the investment in such ICG Shares;
(b) Allen is an "accredited investor" as that term is
defined in Rule 501(a) of Regulation D under the Securities Act;
(c) each Seller has been furnished with a copy of ICG's
Annual Report on Form 10-K for the fiscal years ended
September 30, 1996, and December 31, 1997, Transition Report on
Form 10-K for the period ended December 31, 1996, Forms 10-Q for
the quarters ended March 31, 1997, June 30, 1997, September 30,
1997 and March 31, 1998, proxy statements and Forms 8-K filed in
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1997 and 1998 (collectively, the "Documents") and has evaluated
the risks of acquiring the ICG Shares based on the information
contained therein and in this Agreement;
(d) each Seller has been given the opportunity to ask
questions of, and receive answers from, the management of ICG
concerning the terms, conditions and other matters pertaining to
the investment in the ICG Shares, and has been given the
opportunity to obtain such additional information necessary to
verify the accuracy of the information contained in the Documents
in order for Sellers to evaluate the merits and risks of the
acquisition of such ICG Shares, and has not been furnished with
any other offering literature or prospectus except as described
herein;
(e) none of Sellers has been furnished with any oral or
written representation or oral or written information in
connection with the offering of such ICG Shares that is not
contained in the Documents or this Agreement; and
(f) each Seller has such knowledge and experience in
financial and business matters as to be capable of evaluating the
merits and risks of an acquisition of such ICG Shares and of
making an informed investment decision with respect thereto.
SECTION 3.22 Disclosure.
----------
(a) None of the documents or information provided to Buyer
by the Company, any of Sellers or any agent or employee of the
Company in the course of Buyer's due diligence investigation and
the negotiation of this Agreement and Article III of this
Agreement and the disclosure SCHEDULES referred to in Article III
---------
contains any known untrue statement of any material fact or omits
to state a material fact necessary in order to make the
statements contained in this Agreement or in such documents,
information or SCHEDULES not misleading. There is no known fact or
---------
circumstance which materially adversely affects the business,
prospects, condition, affairs or operations of the Company or any
properties or assets of the Company which has not been set forth in
this Agreement or in such documents, information or SCHEDULES.
---------
(b) Nothing in the disclosure SCHEDULES referred to in
---------
Article III will be deemed adequate to disclose an exception to a
representation or warranty made in this Agreement unless the
applicable disclosure SCHEDULE identifies the exception with
--------
particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the
mere listing (or inclusion of a copy) of a document or other item
will not be deemed adequate to disclose an exception to a
representation or warranty made in this Agreement (unless the
representation or warranty has to do with the existence of the
document or other item itself).
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows, as of
the date of this Agreement:
SECTION 4.1 Organization and Qualification, etc. Buyer is
-----------------------------------
a corporation duly organized, validly existing and in good
standing under the laws of the State of Colorado and has
requisite corporate power and authority to own, lease and operate
its properties and assets and to carry on its business as it is
now being conducted. Buyer is duly qualified to do business and
is in good standing in each jurisdiction where the nature of the
business conducted by it, or the properties leased or operated by
it make such qualification necessary.
SECTION 4.2 Authority Relative to Agreement. Buyer has the
-------------------------------
full and absolute right, corporate power and authority and legal
capacity to execute, deliver and perform this Agreement and all
Other Buyer Agreements, and to consummate the transactions
contemplated on its part by this Agreement and the Other Buyer
Agreements. The execution and delivery of this Agreement by
Buyer, and the consummation by Buyer of the transactions contem-
plated on its part by this Agreement and the Other Buyer
Agreements, have been duly authorized by Buyer's board of
directors. No other corporate approvals on the part of the board
of directors or shareholders of Buyer are necessary to authorize
the execution and delivery of this Agreement, and the Other Buyer
Agreements. This Agreement constitutes, and the Other Buyer
Agreements when executed and delivered by the parties thereto
will constitute, the legal, valid and binding obligations of, and
will be enforceable in accordance with their respective terms
against, Buyer, except as such enforcement is subject to the
effect of (i) any applicable bankruptcy, insolvency,
reorganization or similar laws relating to or affecting
creditors' rights generally, and (ii) general principles of
equity, including concepts of reasonableness, good faith and fair
dealing, and other similar doctrines affecting the enforceability
of agreements generally (regardless of whether considered in a
proceeding in equity or law).
SECTION 4.3 Non-Contravention. Except as set forth on
-----------------
SCHEDULE 4.3, the execution and delivery of this Agreement and
------------
the Other Buyer Agreements and the consummation by Buyer of the
transactions contemplated by this Agreement and by the Other
Buyer Agreements will not, (a) violate any provision of the
Articles of Incorporation or Bylaws of Buyer, or (b) violate, or
result, with the giving of notice or the lapse of time or both,
in a violation of, any provision of, or result in the accelera-
tion of or entitle any party to accelerate (whether after the
giving of notice or lapse of time or both) any obligation under,
or result in the creation or imposition of any encumbrance upon
any of the properties of Buyer pursuant to any provision of any
indenture, mortgage, deed of trust, lien, agreement, Permit,
license or instrument or any arrangement to which Buyer is a
party or by which any of its assets are bound or to which any of
its assets are subject and do not and will not violate or
conflict with any other material restriction of any kind or char-
acter to which Buyer is subject or by which any of its assets may
be bound, or (c) violate in any material respect any Legal
Requirement to which Buyer is subject.
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<PAGE>
SECTION 4.4 Government Approvals. No consent,
--------------------
authorization, order or approval of, or filing or registration
with, any governmental commission, board or other regulatory body
is required for or in connection with the execution and delivery
of this Agreement and the Other Buyer Agreements by Buyer, the
execution and delivery of this Agreement by Buyer, and the
consummation by Buyer of the transactions contemplated by this
Agreement and the Other Buyer Agreements.
SECTION 4.5 Brokers. All negotiations relative to this
-------
Agreement and the transactions contemplated by this Agreement
have been carried out by Buyer directly with Sellers and the
Company, without the intervention of any person on behalf of
Buyer in such manner as to give rise to any valid claim by any
Person against Buyer or any Seller for a finder's fee, brokerage
commission, or similar payment.
SECTION 4.6 Purchase for Investment. Buyer is acquiring
-----------------------
the Interests for its own account for investment purposes and not
with a view to distribution of the Interests. Buyer has such
knowledge and experience in financial and business matters so as
to be capable of evaluating the merits and risks of its
investment in the Interests. Buyer is an "accredited investor"
as that term is defined in Rule 501(a) of Regulation D under the
Securities Act. Buyer will not, directly or indirectly, dispose
of the Interests except in compliance with applicable federal and
state securities laws.
SECTION 4.7 SEC Reports and Nasdaq Compliance. Since
---------------------------------
January 1, 1996, ICG has made in a timely manner all material
filings (the "SEC Reports") required to be made by it under the
Securities Act and the Exchange Act. The SEC Reports, when
filed, complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act and the
securities laws, rules and regulations of any applicable state
and pursuant to any material Legal Requirement and did not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order
to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Buyer
has delivered or made accessible to Sellers true, accurate and
complete copies of the SEC Reports which were filed by ICG with
the SEC since January 1, 1996. Buyer has taken or will take all
necessary actions to ensure the eligibility of the ICG Shares for
trading on the Nasdaq Market.
ARTICLE V
PRE-CLOSING COVENANTS
The parties agree as follows with respect to the period
between the execution of this Agreement and the Closing (or
subsequent thereto, as applicable).
SECTION 5.1 General. Each of the parties will use its
-------
commercially reasonable efforts to take all actions necessary,
proper or advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including the
satisfaction, but not the waiver, of the closing conditions set
forth in Article VII) and the other agreements contemplated
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<PAGE>
hereby. Without limiting the foregoing, Sellers and Buyer will,
and Sellers will cause the Company to, give any notices, make any
filings and obtain any consents, authorizations or approvals
needed to consummate the transactions contemplated by this
Agreement.
SECTION 5.2 Operation and Preservation of Business.
--------------------------------------
Sellers will not cause or permit the Company to: (i) incur or
permit any liability other than a Permitted Liability; (ii)
dispose of any assets that are, individually or in the aggregate,
material to the Company; (iii) engage in any practice, take any
action or enter into any transaction outside the ordinary course
of its business consistent with past practice; (iv) make any
payment or transfer to or for the benefit of any Seller (other
than salaries paid to any Seller in amounts consistent with, and
in all other respects in accordance with, past practice); or (v)
make any distribution or payment in respect of any of the
Interests; provided, however, that in no event will any action be
taken or fail to be taken or any transaction be entered into
which would result in a breach of any representation, warranty or
covenant of any Seller.
SECTION 5.3 Full Access. Sellers will cause the Company to
-----------
permit Buyer and its agents to have full access at all reasonable
times, and in a manner so as not to interfere with the normal
business operations of the Company, to all Premises, properties,
personnel, books, records (including Tax records), contracts and
documents of or pertaining to the Company.
SECTION 5.4 Notice of Developments. Sellers will give
----------------------
prompt written notice to Buyer of any material development which
occurs after the date of this Agreement and affects the business,
Assets, liabilities, financial condition, operations, results of
operations, future prospects, representations, warranties,
covenants or disclosure SCHEDULES of the Company. No such
---------
written notice, however, will be deemed to amend or supplement
any disclosure SCHEDULES or to prevent or cure any
---------
misrepresentation, breach of warranty or breach of covenant;
provided that (a) if such written notice issued to Buyer prior to
the Closing discloses a breach by any Seller of any of Sellers'
representations, warranties or covenants; (b) Buyer waives such
breach under Section 7.1, and (c) the Closing occurs, Sellers
shall have no liability for such breach.
SECTION 5.5 Exclusivity. For a period ending on the
-----------
earlier of (a) the date 60 days after execution of this Agreement
by Buyer and Sellers and (b) 10 Business Days after the date all
regulatory approvals and other third party consents required to
consummate the transactions contemplated by this Agreement are
obtained, no Seller will, and no Seller will cause or permit the
Company to, (x) solicit, initiate or encourage the submission of
any proposal or offer from any Person relating to the acquisition
of any Interests or other equity interests, or any portion of the
assets of, the Company (including any acquisition structured as a
merger, consolidation or share exchange), (y) participate in any
discussions or negotiations regarding, furnish any information
with respect to, assist or participate in or facilitate in any
other manner any effort or attempt by any Person to do or seek
any of the foregoing or (z) provide any information concerning
the Company or its business or assets to any Person in connection
with any of the foregoing. No Seller will vote his Interest in
favor of any such transaction. Seller's Agent will notify Buyer
immediately if any Person makes any proposal, offer, inquiry or
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<PAGE>
contact with respect to any of the foregoing and will provide
Buyer such details of such offer as Buyer may reasonably request.
This Section 5.5 will survive the termination of this Agreement.
SECTION 5.6 Announcements. Prior to the Closing, except as
-------------
may be required by law (including in the case of Buyer,
disclosure requirements under applicable securities laws), no
party shall issue any press release or make any public
announcement relating to the subject matter of this Agreement
without the prior written approval of the other parties.
SECTION 5.7 Payment By Sellers of Employee Claims and Other
-----------------------------------------------
Expenses. Sellers prior to or concurrently with the Closing will
---------
pay in cash all claims (other than claims for earned commissions) of
employees or former employees of the Company arising out of events
or circumstances occurring prior to or as a result of the Closing.
SECTION 5.8 Closing Date Liabilities and Distribution.
-----------------------------------------
Prior to the Closing Date or concurrently with the Closing,
Sellers shall pay in full in cash all known Closing Date
Liabilities, the amount of which is then ascertainable, including
any Seller Transaction Expenses in excess of $10,000 in the
aggregate. Following the Closing, Sellers shall promptly pay in
full all other Closing Date Liabilities (including all Seller
Transaction Expenses in excess of $10,000 in the aggregate) as
such Liabilities become due. Effective as of immediately prior
to the Closing Date, Sellers hereby jointly and severally assume
all Closing Date Liabilities, including all Seller Transaction
Expenses in excess of $10,000 in the aggregate, without further
action by Sellers, the Company or any other Person. To the
extent the Company has paid any Closing Date Liabilities,
including any Seller Transaction Expenses in excess of $10,000 in
the aggregate, which have not been reimbursed by Sellers to the
Company prior to the Closing, Sellers will reimburse such Company
in cash within two Business Days of the Closing Date.
SECTION 5.9 Confidentiality. Buyer, Sellers and the
---------------
Company shall keep, and shall cause their respective employees,
agents, attorneys, accountants and other advisors to keep,
confidential the existence, terms and conditions of this
Agreement and all communications and discussions between or among
Buyer, Sellers and the Company. Without the consent of Buyer and
Sellers' Agent, except as may be required by law (including, in
the case of Buyer, disclosure requirements under applicable
securities laws), neither Buyer, any Seller nor any of the
Company shall make any disclosure of the information described in
this Section 5.9. Nothing contained in this Agreement shall be
construed to prohibit any party from disclosing the information
described in this Section 5.9 or any Confidential Information in
connection with the institution or defense of any claim pursuant
to this Agreement or other claims which may be the subject of
judicial proceedings.
SECTION 5.10 Consents and Approvals. The parties hereto
----------------------
will cooperate with one another and use all commercially
reasonable efforts to prepare all necessary documentation to
effect promptly all necessary filings and to obtain all necessary
Permits, consents, approvals, orders and authorizations of, or
any exemptions by, all third parties and Governmental Authorities
necessary to consummate the transactions contemplated by this
Agreement. Each party will keep the other parties apprised of
the status of any inquiries made of such party by any
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<PAGE>
Governmental Authority or members of their respective staffs with
respect to this Agreement or the transactions contemplated
hereby.
ARTICLE VI
POST-CLOSING COVENANTS
The parties agree as follows with respect to the period
following the Closing.
SECTION 6.1 Further Assurances. In case at any time after
------------------
the Closing any further action is necessary or desirable to carry
out the purposes of this Agreement, each of the parties will take
such further action (including the execution and delivery of such
further instruments and documents) as any Other Party reasonably
may request, all at the sole cost and expense of the requesting
party (unless the requesting party is entitled to indemnification
therefor under Article VIII).
SECTION 6.2 Transition. No Seller will take any action at
----------
any time that is designed or intended to have the effect of
discouraging any customer, supplier, lessor, licensor or other
business associate of the Company from establishing or continuing
a business relationship with the Company or any other Person,
including Buyer, after the Closing.
SECTION 6.3 Cooperation. In the event and for so long as
-----------
any party actively is contesting or defending against any action,
suit, proceeding, hearing, investigation, charge, complaint,
claim or demand in connection with (a) any transactions
contemplated by this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act or
transaction on or prior to the Closing Date involving any of the
Assets of the Company or the Company's business, each of the
other parties will cooperate with such party and its counsel in
the contest or defense, make available their personnel, and
provide such testimony and access to their books and records as
shall be reasonably necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or
defending party (unless the contesting or defending party is
entitled to indemnification therefor under Article VIII).
SECTION 6.4 Confidentiality. Sellers will treat and hold
---------------
as confidential all Confidential Information concerning Buyer and
the Company's business or Assets, refrain from using any such
Confidential Information and deliver promptly to Buyer or
destroy, at the request and option of Buyer, all of such
Confidential Information in its or their possession.
SECTION 6.5 Post-Closing Announcements. Following the
--------------------------
Closing, no Seller will issue any press release or make any
public announcement relating to the subject matter of this
Agreement without the prior written approval of Buyer.
SECTION 6.6 Financial Statements. Sellers will, upon
--------------------
request of Buyer, cooperate on a reasonable basis with Buyer to
produce such historical and on-going financial statements and
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<PAGE>
audits as Buyer may request. Buyer will reimburse Sellers for
any reasonable out-of-pocket costs incurred in providing such
cooperation.
SECTION 6.7 Satisfaction of Liabilities. Promptly
---------------------------
following the Closing, Sellers will pay (and reimburse the
Company, as applicable as provided in Section 5.8) and perform
all Closing Date Liabilities (to the extent not paid at or prior
to the Closing Date) and all Taxes attributable to or arising
from the transactions contemplated by this Agreement.
SECTION 6.8 Sales of ICG Shares. Following the Closing
-------------------
Date, Sellers will not sell any of the ICG Shares issued pursuant
to this Agreement until and after the earlier of the date (the
"Free Up Date") that is (a) the earlier of nine months after the
Closing Date or April 1, 1999, or (b) such earlier date as Buyer
and Sellers mutually agree in writing. Following the Free Up
Date, Sellers shall have no restriction under this Agreement on
the transferability of the ICG Shares.
SECTION 6.9 Restriction of Sellers' Activities. No Seller
----------------------------------
nor any Affiliate or Associate of a Seller will, from the date of
this Agreement until the Free Up Date, engage in the purchase or
sale of, or any other transaction relating to, the common stock
or other securities of Buyer or Buyer's Affiliates; provided that
any such Person shall be permitted to purchase such common stock
or other securities if such purchase is not associated with any
other transaction intended to mitigate such Person's risk of loss
on any other common stock or other securities of Buyer or Buyer's
Affiliates. For purposes of this Agreement, the term Associate
means with respect to any Person, (i) an "associate" of such
person within the meaning of Rule 12(b)-2 under the Securities
Exchange Act of 1934, as amended; and (ii) in the case of a
Person who is a human being, any other human being related to
such Person by consanguinity within the third degree or in a step
or adoptive relationship within such third degree.
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.1 Conditions to Obligation of Buyer. The
---------------------------------
obligation of Buyer to consummate the transactions contemplated
by this Agreement is subject to satisfaction of the following
conditions:
(a) each Seller's representations and warranties shall be
correct and complete at and as of the Closing Date and the
Closing and any written notices delivered to Buyer pursuant to
Section 5.4 and the subject matter thereof shall be satisfactory
to Buyer;
(b) Sellers shall have performed and complied with all of
their covenants hereunder required to be performed or complied
with through the Closing;
(c) Sellers shall have given, or shall have caused the
Company to give, all notices and procured, or shall have caused
the Company to procure, all of the third-party consents,
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<PAGE>
authorizations and approvals (including all consents,
authorizations and approvals by Governmental Authorities)
required to consummate the transactions contemplated by this
Agreement, all in form and substance reasonably satisfactory to
Buyer;
(d) no action, suit or proceeding shall be pending or
threatened before any Governmental Authority or any other Person
wherein an unfavorable Order would (i) prevent consummation of
any of the transactions contemplated by this Agreement (ii) cause
any of the transactions contemplated by this Agreement to be
rescinded following consummation or (iii) affect adversely the
right of Buyer to own all of the Interests of the Company or
conduct the business of the Company, and no such Order shall be
in effect.
(e) there shall have occurred no event, fact or
circumstance that has had or could reasonably be expected to have
(i) a Material Adverse Effect or (ii) an adverse effect on
Buyer's right to own the Interests free of Encumbrances and
Taxes, or to conduct the Company's business substantially as such
businesses were being conducted on March 31, 1998;
(f) Sellers shall have delivered to Buyer (i) a certificate
to the effect that each of the conditions specified above in
Sections 6.1(a) through (e) is satisfied in all respects, and
(ii) good standing certificates, dated within ten days of the
Closing, from the Secretaries of State of the States of Nevada
and Colorado;
(g) the Other Seller Agreements shall have been executed
and delivered by Sellers or other relevant Persons, as
applicable;
(h) Buyer shall have received the resignations, effective
as of the Closing, as requested in writing by Buyer, of each
manager and other officer of the Company;
(i) Upon the written request of Buyer to Seller, Buyer
shall have received from counsel to Seller an opinion in form and
substance reasonably satisfactory to Buyer;
(j) assignments of the Interests in form and substance
satisfactory to Buyer shall have been delivered by Sellers to
Buyer;
(k) Sellers shall have satisfied, in form and substance
satisfactory to Buyer, all liabilities to employees of the
Company with respect to any phantom stock or equity arrangements
relating to the Company, and any outstanding or alleged claim
described in Section 5.7;
(l) Sellers shall have delivered to Buyer evidence,
satisfactory to Buyer, of the termination of all indemnification
agreements between the Company and any Seller;
(m) Sellers have executed (i) an agreement waiving their
rights of first refusal under the Company's operating agreement
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<PAGE>
and (ii) an amendment of the Company's operating agreement
amending the dissolution provisions of such agreement, each in
form and substance satisfactory to Buyer;
(n) The note payable by the Company to Allen shall have
been canceled contemporaneously with the Closing;
(o) Sellers shall have delivered, or caused the Company to
deliver, to Buyer such other instruments, certificates and
documents as are reasonably requested by Buyer in order to
consummate the transactions contemplated by this Agreement, all
in form and substance reasonably satisfactory to Buyer;
(p) Buyer shall have obtained the consent or waiver of
CSW/ICG ChoiceCom, L.P., C3 Communications, Inc., and Central and
Southwest Corporation of their rights with respect to a portion
of the Company's business to be acquired at Closing;
(q) Sellers shall have delivered, or caused the Company to
deliver, to Buyer UCC termination Statements with respect to UCC-
1 financing statements filed by the Company as Debtor and
National Factoring Services, Inc. as secured party filed (i) on
May 14, 1997 as File No. 9708298 in the office of the Secretary
of State of Nevada and (ii) on May 6, 1997 as File No.
19972036585 in the office of the Secretary of State of Colorado;
and
(r) Sellers shall have delivered, or caused the Company to
deliver, to Buyer written termination of the Master Agreement for
Purchase and Assignment of Accounts Receivable dated April 29,
1997, between National Factoring Services, Inc. and the Company,
the Disbursement Agreement dated May 15, 1997 between the
Company, BellSouth Long Distance, Inc. and National Factoring
Services, Inc., and any related agreements.
Buyer in its sole discretion may waive any condition specified in
this Section 7.1 at or prior to the Closing.
SECTION 7.2 Conditions to Obligation of Sellers. The
-----------------------------------
obligation of Sellers to consummate the transactions contemplated
by this Agreement is subject to satisfaction of the following
conditions:
(a) Buyer's representations and warranties shall be correct
and complete at and as of the Closing Date and the Closing;
(b) Buyer shall have performed and complied with all of its
covenants hereunder required to be performed or complied with
through the Closing Date;
(c) no action, suit or proceeding shall be pending or
threatened before any Governmental Authority or any other Person
wherein an unfavorable Order would (i) prevent consummation of
any of the transactions contemplated by this Agreement or
(ii) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation.
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<PAGE>
(d) Buyer shall have delivered to Sellers a certificate to
the effect that each of the conditions specified above in
Sections 7.2(a) through (c) is satisfied in all respects;
(e) the Other Buyer Agreements shall have been executed and
delivered by Buyer;
(f) Buyer shall have paid and deposited the purchase price
for the Interests pursuant to Section 2.2; and
(g) ICG shall have caused the ICG shares to be listed for
trading on the Nasdaq Market.
Sellers in their sole discretion may waive any condition
specified in this Section 7.2 at or prior to the Closing.
ARTICLE VIII
REMEDIES FOR BREACHES OF THIS AGREEMENT
SECTION 8.1 Indemnification Provisions for Benefit of Buyer
-----------------------------------------------
and the Company.
---------------
(a) If any Seller breaches (or if any Person other than
Buyer alleges facts that, if true, would mean any Seller has
breached) (i) any of the representations or warranties of any
Seller contained herein and Buyer gives notice thereof to
Sellers' Agent within the applicable Survival Period, or (ii) any
covenants or agreements of any Seller contained herein or any
agreements, representations, warranties or covenants of any
Seller contained in any Other Seller Agreement and Buyer gives
notice thereof to Sellers' Agent, then, subject to Section 8.6,
Allen and the Trust jointly and severally, and the Minority
Members severally, will indemnify and hold harmless Buyer and the
Company from and against any Adverse Consequences Buyer or the
Company may suffer resulting from, arising out of, relating to or
caused by any of the foregoing regardless of whether the Adverse
Consequences are suffered during or after any applicable Survival
Period; provided, however, that the maximum amount with respect
to which any Minority Seller shall be required to indemnify Buyer
under this Article VIII shall not exceed an amount equal to the
product of (i) the amount of such Adverse Consequences suffered
by Buyer multiplied by (ii) a fraction, the numerator of which is
the Interests owned by such Minority Seller as reflected on
SCHEDULE 3.3 and the denominator of which is 27.38. In
------------
determining solely the amount of Adverse Consequences suffered by
Buyer or the Company for purposes of this Section 8.1, the
representations and warranties of Sellers will not be qualified
by "material," "materiality," "in all material respects," "best
knowledge," "best of knowledge" or "knowledge" or words of
similar import, or by any phrase using any such terms or words.
If any dispute arises concerning whether any indemnification is
owing which cannot be resolved by negotiation among the parties
within 30 days of notice of claim for indemnification from the
party claiming indemnification to the party against whom such
claim is asserted, the dispute will be resolved by arbitration
pursuant to this Agreement.
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<PAGE>
(b) Amounts needed to cover any indemnification claims
resolved in favor of Buyer or the Company against any Seller
during the Escrow Period will be paid to Buyer out of the ICG
Shares escrowed pursuant to the Escrow Agreement, to the extent
thereof. For purposes of calculating the number of ICG Shares to
be paid to Buyer to cover such indemnification claims, in each
case the per share value of each ICG Share will be the volume
weighted average price of the ICG Common Stock quoted on the
Nasdaq Market for the five trading days ending two trading days
prior to the date of expiration of the Reply Period or receipt of
the Reply Notice, whichever is applicable. Allen and the Trust
will have joint and several Liability, and the Minority Members
will be severally liable, pro rata according to their Interests,
for any additional amounts needed to cover such claims, which
amounts will be paid directly to Buyer. At the end of the Escrow
Period ICG Shares (valued as provided in this Section 8.1(b) as
of the last Business Day falling within the Escrow Period) that
may be needed to cover pending indemnification claims made by
Buyer (such amounts to be determined by Buyer based upon the
reasonable exercise of its business judgment) will be retained in
the Escrow Account until such claims are resolved, and any excess
of such retained ICG Shares on deposit in the Escrow Account will
be distributed to Sellers upon the resolution of all such pending
indemnification claims. Nothing in this Section 8.1(b) will be
construed to limit Buyer's right to indemnification to the ICG
Shares on deposit in the Escrow Account. Buyer and Sellers'
Agent shall jointly give instructions to the Escrow Agent to
carry out the intent of this Section 8.1(b). Any disputes
concerning the escrowed property will be settled by arbitration
as provided in this Agreement. Buyer will be responsible for the
fees, charges and expenses payable to the Escrow Agent pursuant
to Section 5(d) of the Escrow Agreement.
SECTION 8.2 Indemnification Provisions for Benefit of
-----------------------------------------
Sellers.
-------
If (a) Buyer breaches (or if any Person other than a Seller
alleges facts that, if true, would mean Buyer has breached) any
of its representations or warranties contained herein, and
Seller's Agent gives notice of a claim for indemnification
against Buyer within the applicable Survival Period, or (b) Buyer
breaches (or if any Person other than a Seller alleges facts
that, if true, would mean Buyer has breached) any of its
covenants or agreements contained herein or any of its
agreements, representations, warranties or covenants contained in
any Other Buyer Agreement and Seller's Agent gives notice thereof
to Buyer, then Buyer will indemnify and hold harmless Sellers
from and against any Adverse Consequences Sellers may suffer
which result from, arise out of, relate to, or are caused by the
breach or alleged breach, regardless of whether the Adverse
Consequences are suffered during or after the applicable Survival
Period. In determining solely the amount of Adverse Consequences
suffered by Sellers for purposes of this Section 8.2, the
representations and warranties of Buyer shall not be qualified by
"material," "materiality," "in all material respects," "best
knowledge," "best of knowledge" or "knowledge" or words of
similar import, or by any phrase using any such terms or words.
If any dispute arises concerning whether any indemnification is
owing which cannot be resolved by negotiation among the parties
within 30 days of notice of claim for indemnification from the
party claiming indemnification to the party against whom such
claim is asserted, the dispute will be resolved by arbitration
pursuant to this Agreement.
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SECTION 8.3 Matters Involving Third Parties.
-------------------------------
(a) If any Person not a party to this Agreement (including,
without limitation, any Governmental Authority) notifies any
party (the "Indemnified Party") with respect to any matter (a
"Third Party Claim") which may give rise to a claim for
indemnification against any other party (the "Indemnifying
Party"), then the Indemnified Party will notify each Indemnifying
Party thereof in writing within 15 days after receiving such
notice. No delay on the part of the Indemnified Party in
notifying any Indemnifying Party will relieve the Indemnifying
Party from any obligation hereunder unless (and then solely to
the extent) the Indemnifying Party thereby is prejudiced by such
delay.
(b) Any Indemnifying Party will have the right, at its sole
cost and expense, to defend the Indemnified Party against the
Third Party Claim with counsel of its choice satisfactory to the
Indemnified Party so long as (i) the Indemnifying Party notifies
the Indemnified Party in writing within 10 days after the
Indemnified Party has given notice of the Third Party Claim that
the Indemnifying Party will indemnify the Indemnified Party from
and against the entirety of any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of,
relating to or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend
against the Third Party Claim and fulfill its indemnification
obligations hereunder, (iii) the Third Party Claim involves only
money damages and does not seek an injunction or other equitable
relief, (iv) settlement of, or an adverse judgment with respect
to, the Third Party Claim is not, in the good faith judgment of
the Indemnified Party, likely to establish a precedential custom
or practice materially adverse to the continuing business
interests of the Indemnified Party, and (v) the Indemnifying
Party conducts the defense of the Third Party Claim actively and
diligently. If the Indemnifying Party does not assume control of
the defense or settlement of any Third Party Claim in the manner
described above, it will be bound by the results obtained by the
Indemnified Party with respect to the Third Party Claim. In the
event the Third Party Claim does seek an injunction or other
equitable relief, this Section 8.3(b) will not apply.
(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with
Section 8.3(b) above, (i) the Indemnified Party may retain
separate co-counsel at its sole cost and expense and participate
in the defense of the Third Party Claim, (ii) the Indemnified
Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without
obtaining (A) an entry of dismissal, with prejudice, or an entry
of dismissal, without prejudice and a covenant not to sue (if
legal action is instituted), (B) the full and unconditional
release of the Indemnifying Party from all liability in respect
of such Third Party Claim and (C) the prior written consent of
the Indemnifying Party (not to be withheld unreasonably), and
(iii) the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third
Party Claim without obtaining (A) an entry of dismissal, with
prejudice, or an entry of dismissal, without prejudice and a
covenant not to sue (if legal action is instituted), (B) the full
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<PAGE>
and unconditional release of the Indemnified Party from all
liability in respect of such Third Party Claim and (C) the prior
written consent of the Indemnified Party (not to be withheld
unreasonably).
(d) In the event any of the conditions in Section 8.3(b) is
or becomes unsatisfied, or if Section 8.3(b) does not apply,
(i) the Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with respect
to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or
obtain any consent from, any Indemnifying Party in connection
therewith), (ii) the Indemnifying Party will reimburse the
Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable
attorneys' fees and expenses), and (iii) the Indemnifying Party
will remain responsible for any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of,
relating to or caused by the Third Party Claim to the fullest
extent provided in this Article VIII.
SECTION 8.4 Survival. The representations and warranties
--------
made in this Agreement or in any other agreement referred to in
this Agreement, or in any certificate or other document delivered
pursuant to this Agreement or in connection with this Agreement
will survive the Closing Date for a period of two years from the
Closing Date, except that (a) the representations and warranties
of Sellers in Sections 3.1, 3.3 and 3.4, and of Buyer in Sections
4.1 and 4.2, will survive forever and (b) the representations and
warranties of Sellers in Sections 3.8, 3.15, and 3.18 will
survive until the expiration of all applicable statutes of
limitations with respect to any such claims that could be brought
regarding such matters (including any extensions of any statutes
of limitations), plus a period of 60 days. No party will have
any obligation to indemnify any person pursuant to this Agreement
with respect to any breach of a representation or warranty unless
a specific claim has been validly made under this Agreement on or
prior to the expiration of the applicable period set forth above.
The covenants and agreements of Sellers and Buyer made in this
Agreement will survive the Closing Date indefinitely.
SECTION 8.5 Limitations.
-----------
(a) The indemnification provisions of this Article will
constitute the exclusive remedy by either party against the other
arising by virtue of a breach of any agreement, representation,
warranty, or covenant under this Agreement, absent fraud.
(b) The Company will not have any duty to indemnify any
Seller or contribute funds for the benefit of any Seller. Each
Seller waives any right to indemnification or contribution from
the Company.
SECTION 8.6 Basket and Ceiling.
------------------
(a) Except as provided in the last sentence of this Section
8.6(a) and in Section 8.6(c), Buyer (and the Company, as
applicable) will not be entitled to indemnification from Sellers
under Section 8.1 or Section 8.3 unless and until, and then
solely to the extent that, the aggregate amount of Adverse
Consequences with respect to which Buyer or the Company would
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<PAGE>
otherwise be entitled to assert under Section 8.1 or Section 8.3,
whichever is applicable, exceeds $50,000 (the "Basket Amount").
When the aggregate amount of such Adverse Consequences exceeds
the Basket Amount, Buyer (and the Company, as applicable) will be
entitled to indemnification under Section 8.1 or Section 8.3, as
applicable, for all Adverse Consequences in excess of the Basket
Amount.
(b) Sellers will be required to indemnify Buyer under this
Article VIII for all Adverse Consequences suffered as a result of
the breach of any of the representations, warranties or covenants
set forth in Article III or elsewhere in this Agreement, other
than the representations, warranties and covenants set forth in
Sections 3.1, 3.3, 3.4, 3.8, 3.15 and 3.18, only in an amount, in
the aggregate for all or any of such breaches, not in excess of
$1,500,000.
(c) Except as provided in the second sentence of this
Section 8.6(c), Sellers will be required to indemnify Buyer
without limitation under this Article VIII for all Adverse
Consequences suffered as a result of one or more breaches of the
representations and warranties set forth in Sections 3.1, 3.3,
3.4, 3.8, 3.15 and 3.18, and there shall be no monetary
limitation on the amount of such indemnification payable by
Sellers nor shall Section 8.6(a) (relating to the Basket Amount)
apply to such breaches. Buyer agrees, however, that the
aggregate amount of such indemnification shall in no event exceed
the amount of the Purchase Price payable by Buyer to Sellers
under this Agreement in consideration of the Interests.
ARTICLE IX
TERMINATION
SECTION 9.1 Termination of Agreement. The parties may
------------------------
terminate this Agreement as provided below:
(a) Buyer and Sellers' Agent may terminate this Agreement
by mutual written consent at any time prior to the Closing;
(b) Buyer may terminate this Agreement by giving written
notice to Sellers' Agent at any time prior to the Closing (i) in
the event any Seller has materially breached any agreement,
representation, warranty or covenant contained in this Agreement,
Buyer has notified Sellers' Agent of the breach, and the breach
has not been cured within 10 days after the notice of breach; or
(ii) if the Closing has not occurred on or before the date that
is 60 days after the date of this Agreement because of the
failure of any condition precedent to Buyer's obligations to
consummate the Closing (unless the failure results primarily from
Buyer breaching any agreement, representation, warranty or
covenant contained in this Agreement in any material way);
(c) Sellers may terminate this Agreement by Seller's Agent
giving written notice to Buyer at any time prior to the Closing
(i) if Buyer has breached any agreement, representation, warranty
or covenant contained in this Agreement, Sellers' Agent has
notified Buyer of the breach, and the breach has not been cured
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<PAGE>
within 10 days after the notice of breach, or (ii) if the Closing
has not occurred on or before the date that is 60 days after the
date of this Agreement because of the failure of any condition
precedent to Sellers' obligations to consummate the Closing
(unless the failure results primarily from any Seller breaching
any agreement, representation, warranty or covenant contained in
this Agreement in any material way), or (iii) if the Closing has
not occurred on or before the date that is 60 days after the date
of this Agreement because of the failure of the condition
precedent to Buyer's obligations to consummate the Closing set
forth in Section 7.1(p).
SECTION 9.2 Effect of Termination. The termination of this
---------------------
Agreement by a party pursuant to Section 9.1 will in no way limit
any obligation or liability of any other party based on or
arising from a breach or default by such other party with respect
to any of its agreements, representations, warranties or
covenants contained in this Agreement, and the terminating party
will be entitled to seek all relief to which it is entitled under
applicable law. The obligations of Sellers set forth in Section
5.5 will survive the termination of this Agreement.
SECTION 9.3 Confidentiality. If this Agreement is
---------------
terminated, each party will treat and hold as confidential all
Confidential Information concerning the other parties which it
acquired from such other parties in connection with this
Agreement and the transactions contemplated hereby, and upon the
request of Buyer or Sellers' Agent, as applicable, Buyer and
Sellers will return to the other all such Confidential
Information within its possession.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 No Third-Party Beneficiaries. This Agreement
----------------------------
will not confer any rights or remedies upon any Person other than
the parties and their respective successors and permitted
assigns.
SECTION 10.2 Entire Agreement. This Agreement (including
----------------
the EXHIBITS, SCHEDULES and documents referred to herein)
-------------------
constitutes the entire agreement among the parties and supersedes
any prior understandings, agreements or representations by or
among the parties, written or oral, and the letter agreement
dated April 20, 1998 between Allen on behalf of Sellers and the
Company, on the one hand, and Buyer, on the other, to the extent
they relate in any way to the subject matter hereof.
SECTION 10.3 Succession and Assignment. This Agreement
-------------------------
will be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns. Neither
Seller nor Buyer may assign this Agreement or any of his or her
rights, interests or obligations hereunder without the prior
written approval of the other.
SECTION 10.4 Counterparts. This Agreement may be executed
------------
in any number of counterparts, each of which shall be deemed an
original and all of which together shall be deemed to be one and
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<PAGE>
the same instrument. The execution of a counterpart of the
signature page to this Agreement will be deemed the execution of
a counterpart of this Agreement. The delivery of this Agreement
may be made by facsimile, and facsimile signatures shall be
treated as original signatures for all applicable purposes.
SECTION 10.5 Headings, Terms. The section headings
---------------
contained in this Agreement are inserted for convenience only and
will not affect in any way the meaning or interpretation of this
Agreement. Terms used with initial capital letters will have the
meanings specified, applicable to both singular and plural forms,
for all purposes of this Agreement. All pronouns (and any
variation) will be deemed to refer to the masculine, feminine or
neuter, as the identity of the Person may require. The singular
or plural includes the other, as the context requires or permits.
The word include (and any variation) is used in an illustrative
sense rather than a limiting sense. The word day means a
calendar day.
SECTION 10.6 Notices. All notices, requests, demands,
-------
claims, and other communications hereunder will be in writing.
Any notice, request, demand, claim, or other communication
hereunder shall be deemed duly given if it is sent by registered
or certified mail, return receipt requested, postage prepaid, or
by courier, telecopy or facsimile, and addressed to the intended
recipient as set forth below:
If to
Sellers: Copy to:
Addressed to the Olona & Associates, P.C.
Sellers' Agent at: Attention: Richard G. Olona, Esq.
G. Kelley Allen 621 Seventeenth Street, Suite 2540
5485 South Hoyt Street Denver, Colorado 80293
Littleton, Colorado 80123 Telecopy: (303) 297-2927
Telecopy: (303) 973-7316
If to Buyer: Copy to:
ICG Telecom Group, Inc. Sherman & Howard L.L.C.
161 Inverness Drive West 633 Seventeenth St., Suite 3000
Englewood, Colorado 80112 Denver, Colorado 80202
Attn: H. Don Teague, Esq. Attn: Robert Mintz, Esq.
Executive Vice President, Telecopy: (303) 298-0940
General Counsel and Secretary
Telecopy: (303) 414-8884
Notices will be deemed given seven days after mailing if sent by
certified mail, when delivered if sent by courier, and upon
receipt of confirmation by person or machine if sent by telecopy
or facsimile transmission. Any party may change the address to
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<PAGE>
which notices, requests, demands, claims and other communications
hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
SECTION 10.7 GOVERNING LAW. THIS AGREEMENT WILL BE
-------------
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF
THE STATE OF COLORADO WITHOUT GIVING EFFECT TO ANY CHOICE OR
CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
COLORADO OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE
APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE
OF COLORADO.
SECTION 10.8 Amendments and Waivers. No amendment of any
----------------------
provision of this Agreement shall be valid unless the same is in
writing and signed by Buyer and Sellers' Agent. No waiver by any
party of any default, misrepresentation or breach of warranty or
covenant hereunder, whether intentional or not, will be deemed to
extend to any prior or subsequent default, misrepresentation or
breach of warranty or covenant hereunder or affect in any way any
rights arising by virtue of any prior or subsequent such
occurrence, and no waiver will be effective unless set forth in
writing and signed by the party against whom such waiver is
asserted.
SECTION 10.9 Severability. Any term or provision of this
------------
Agreement that is invalid or unenforceable in any situation in
any jurisdiction shall not affect the validity or enforceability
of the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
SECTION 10.10 Expenses. Except as otherwise provided in
--------
Section 9.2, (a) Buyer shall bear its own costs and expenses
(including, without limitation, legal fees and expenses) incurred
either before or after the date of this Agreement in connection
with this Agreement or the transactions contemplated hereby, and
all filing fees payable to any Governmental Authority in
connection with the transaction, and upon receipt of evidence,
reasonably satisfactory to Buyer, of liability therefor or
payment thereof, Buyer shall reimburse Sellers, pay, or bear
liability for, as the case may be, all Seller Transaction
Expenses not to exceed $10,000 in the aggregate; and (b) Sellers
will bear all costs and expenses (including, without limitation,
all legal, accounting and tax related fees and expenses, all
fees, commissions, expenses and other amounts payable to any
broker, finder or agent) incurred by the Company prior to the
Closing or by any Seller either before or after the date of this
Agreement in connection with this Agreement or the transactions
contemplated hereby (collectively, "Seller Transaction
Expenses"); provided that Sellers shall pay or have liability for
Seller Transaction Expenses only to the extent such Seller
Transaction Expenses exceed $10,000 in the aggregate. Any Seller
Transaction Expenses payable by Sellers under this Agreement
relating to amounts incurred by the Company prior to the Closing
shall be reimbursed in cash by Sellers to the Company.
SECTION 10.11 Arbitration. Any disputes arising under or
-----------
in connection with this Agreement, including, without limitation,
those involving claims for specific performance or other
equitable relief, will be submitted to binding arbitration under
the Commercial Arbitration Rules of the American Arbitration
Association under the authority of federal and state arbitration
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<PAGE>
statutes, and shall not be the subject of litigation in any
forum. EACH PARTY, BY SIGNING THIS AGREEMENT, VOLUNTARILY,
KNOWINGLY AND INTELLIGENTLY WAIVES ANY RIGHTS SUCH PARTY MAY
OTHERWISE HAVE TO SEEK REMEDIES IN COURT OR OTHER FORUMS,
INCLUDING THE RIGHT TO JURY TRIAL. The arbitration will be
conducted only in Denver, Colorado, before a single arbitrator
selected by the parties or, if they are unable to agree on an
arbitrator, before a panel of three arbitrators, one selected by
Buyer, one selected by Sellers' Agent and the third selected by
the other two arbitrators. The arbitrators shall have full
authority to order specific performance and award damages and
other relief available under this Agreement or applicable law,
but shall have no authority to add to, detract from, change or
amend the terms of this Agreement or existing law. All
arbitration proceedings, including settlements and awards, shall
be confidential. The decision of the arbitrators will be final
and binding, and judgment on the award by the arbitrators may be
entered in any court of competent jurisdiction. THIS SUBMISSION
AND AGREEMENT TO ARBITRATE WILL BE SPECIFICALLY ENFORCEABLE. The
arbitrator will have no power to award punitive or exemplary
damages, to ignore or vary the terms of this Agreement or any
Other Buyer Agreement or Other Seller Agreement, and will be
bound to apply controlling law. The party who prevails on entry
of the award of judgment will be entitled to his or its costs and
expenses, including reasonable attorney's fees incurred in
connection with the arbitration. A judgment upon the award may
be entered in any court having jurisdiction.
SECTION 10.12 Construction. The parties have participated
------------
jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation
arises, this Agreement will be construed as if drafted jointly by
the parties and no presumption or burden of proof will arise
favoring or disfavoring any party by virtue of the authorship of
any of the provisions of this Agreement. The parties intend that
each representation, warranty and covenant contained herein will
have independent significance. If any party breaches any
representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation,
warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the
party has not breached will not detract from or mitigate the fact
that the party is in breach of the first representation, warranty
or covenant.
SECTION 10.13 Incorporation of Exhibits. The EXHIBITS and
------------------------- --------
SCHEDULES identified in this Agreement are incorporated herein by
---------
reference and made a part hereof.
SECTION 10.14 Representations as to Knowledge. The
-------------------------------
representations and warranties contained in Article III of this
Agreement will, in each and every case where a statement to the
"knowledge" is required on behalf of any party to this Agreement,
or where something is "known" by a party, be deemed to require
that such statement be in good faith after reasonable
investigation (including, in the case of Sellers, inquiry of the
applicable employees of the Company), with due diligence, in the
best efforts of such party. Any reference to the "knowledge" of,
or "known" by, Sellers shall refer to the knowledge of each of
Sellers individually.
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<PAGE>
SECTION 10.15 Sellers' Agent. Each Seller hereby
--------------
authorizes and appoints Sellers' Agent as its, his or her
exclusive agent and attorney-in-fact to act on behalf of each of
them with respect to all matters which are the subject of this
Agreement, including, without limitation, (a) receiving or giving
all notices, instructions, other communications, consents or
agreements that may be necessary, required or given hereunder and
(b) asserting, settling, compromising, or defending, or
determining not to assert, settle, compromise or defend, (i) any
claims which any Seller may assert, or have the right to assert,
against Buyer, or (ii) any claims which Buyer may assert, or have
the right to assert, against any Seller. Sellers' Agent hereby
accepts such authorization and appointment. Upon the receipt of
written evidence satisfactory to Buyer to the effect that
Sellers' Agent has been substituted as agent of Sellers by reason
of his death, disability or resignation, Buyer shall be entitled
to rely on such substituted agent to the same extent as it was
theretofore entitled to rely upon Sellers' Agent with respect to
the matters covered by this Section 10.15. No Seller shall act
with respect to any of the matters which are the subject of this
Agreement except through Sellers' Agent. Sellers acknowledge and
agree that Buyer may deal exclusively with Sellers' Agent in
respect of such matters, that the enforceability of this
Section 10.15 is material to Buyer, and that Buyer has relied
upon the enforceability of this Section 10.15 in entering into
this Agreement. In the event Sellers' Agent declines to represent
Sellers with respect to any matter delegated to Sellers' Agent
under this Agreement, Sellers agree that the affirmative written
determination of those Sellers holding more than 50 percent of
the number of Interests held by all of Sellers, as set forth on
SCHEDULE 3.3, will constitute the action of all of Sellers, and
------------
each Seller agrees that in such event it will be bound by the
determination of such majority of Sellers and will not seek to
challenge any such determination in any forum.
[SIGNATURE PAGE FOLLOWS.]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
BUYER:
ICG D.C. HOLDINGS, INC.
By:
Name:
Title:
SELLERS:
G. Kelley Allen
G. Kelley Allen Trust u/a/d 1/14/93
By: G. Kelley Allen, Trustee
Michele R. K. Fought
Gordon B. Koch Daughters Trust
By: Carole K. Allen, Trustee
By: G. Kelley Allen, Attorney-in-Fact
T & D Consulting, Inc.
By:
Name: Thomas Sumbler
Title:
By:
Name: David Gandini
Title:
[SIGNATURE PAGE TO PURCHASE AGREEMENT]
<PAGE>
SCHEDULE 3.10(b)
----------------
LIST OF PROPERTIES, CONTRACTS AND OTHER DATA
1. All items of equipment, machinery and other tangible
personal property of the Company (including that which, as of the
date of this Agreement, has no book value), and the original
cost, depreciation and current book value of all such items which
are included in the Latest Balance Sheet.
2. All guaranty, warranty and indemnity agreements with
respect to products or services provided or delivered by the
Company.
3. All contracts or agreements for the purchase, sale,
rental, rental/purchase or sale, lease or lease/purchase or sale
or similar arrangement of materials, supplies, products or other
personal property or the furnishing or receipt of services by the
Company.
4. All claims, deposits, causes of action, choses in
action, rights of recovery, rights of setoff and rights of
recoupment of the Company.
5. All franchises, approvals, Permits, licenses, Orders,
registrations, certificates, variances and similar rights of the
Company.
6. All other contracts, agreements, instruments,
guarantees and commitments (including confidentiality and
noncompetition agreements, mortgages, deeds of trust, indentures,
loan agreements and credit agreements) to which the Company is a
party or by which assets are bound.
7. The names and annual rates of compensation as of March
31, 1998 (which rates have remained the same through the date of
this Agreement) of all employees of the Company.
8. All notes or accounts receivable relating to accounts
with the Company, or advances by the Company, to any Seller,
officer, director, employee or consultant of the Company, and all
contracts or agreements for the purchase or lease of materials,
supplies, products or other personal property or for the
furnishing or receipt of services which are with any Seller,
officer, director, employee or consultant of the Company.
9. Each item of Intellectual Property owned by the Company
or which is used by the Company in its business and, in each case
where the Company is not the owner, the owner of the Intellectual
Property.
10. The name of each bank or other financial institution or
entity in which the Company has an account or safe deposit box
(with the identifying account number or symbol) and the names of
all persons authorized to draw on such account or to have access
to such safe deposit box.
Schedule 3.10(b) - 1
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement"), dated
as of July 27, 1998, is made by and between the undersigned
members (the "Sellers") of DataChoice Network Services, L.L.C., a
Nevada limited liability company ("DataChoice"), and ICG
Communications, Inc., a Delaware corporation (the "Company").
RECITALS
A. The Sellers and ICG D.C. Holdings, Inc. have entered
into a Purchase Agreement dated as of June 11, 1998, as amended
by an Amendment dated July 27, 1998 (as the same may be amended
from time to time, the "Purchase Agreement"), providing for the
purchase by the Company of all the Sellers' interests in
DataChoice.
B. Upon consummation of the transactions contemplated by
the Purchase Agreement, the Sellers will be entitled to receive
from the Company 145,997 ICG Shares (collectively, the "Shares"),
in consideration of the purchase price of the interests in
DataChoice.
C. It is a condition to the Closing of the transactions
contemplated by the Purchase Agreement that the Company and the
Sellers enter into this Agreement.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the
receipt, sufficiency and adequacy of which are hereby
acknowledged, the parties to this Agreement agree as follows:
1. Defined Terms. Capitalized terms used in this Agreement and
-------------
not otherwise defined herein have the meanings assigned to them
in the Purchase Agreement.
2. Registration Rights.
-------------------
(a) Registration. The Company shall be obligated to
------------
register under the Securities Act, a number of shares of ICG
Common Stock sufficient to permit the resale by the Sellers of
any and all ICG Shares issued pursuant to the Purchase Agreement
(the "Registrable Shares"). The Company shall use commercially
reasonable efforts to prepare and file with the Securities and
Exchange Commission (the "Commission") a registration statement
under the Securities Act covering the Registrable Shares issued
at the Closing (the "Registration Statement") and use its best
efforts to cause the Registration Statement to become effective
on or before the date that is the earlier of (i) April 1, 1999,
and (ii) nine months after the Closing Date (or if such date is
not a Business Day, the next Business Day). Subject to the
terms and conditions of this Agreement, the Company agrees to
maintain the effectiveness of the Registration Statement until
the close of business on July 27, 1999 (the first anniversary of
the Closing Date).
<PAGE>
(b) Withdrawal from Registration. The Sellers may, before
----------------------------
a Registration Statement becomes effective, withdraw their
Registrable Shares from sale, should the terms of sale not be
satisfactory to the Sellers; provided however that should the
Sellers so withdraw, such registration shall be deemed to have
occurred for the purposes of Section 2(a) hereof.
(c) Limitations on Registration Rights. Notwithstanding
----------------------------------
the provisions of Section 2(a) hereof, the Company shall not be
required to effect any registration pursuant hereto if the
Company, in order to comply with such request, would be required
to (i) undergo a special interim audit or (ii) prepare and file
with the Commission, sooner than would otherwise be required, pro
forma or other financial statements relating to any proposed or
probable transaction. Notwithstanding the provisions of this
Section 2, the Company shall not be required to effect any
registration pursuant to this Section 2 , or to maintain the
effectiveness of any Registration Statement filed hereunder, if
the Sellers could sell the number of Registrable Shares then
issued without registration under the Securities Act (whether
under Rule 144 promulgated under the Securities Act or any
successor to such rule or otherwise) and without an adverse
effect on the market price of the Registrable Shares. Without
limiting the generality of the foregoing, the Company shall not
be required to maintain the effectiveness of any Registration
Statement filed pursuant to this Agreement after July 27, 1999
(the first anniversary of the Closing Date).
(d) Obligations with Respect to Preparation and Filing of
-----------------------------------------------------
Registration Statement. In connection with its obligation
----------------------
pursuant to this Agreement to effect a registration of
Registrable Shares, the Company shall, as soon as practicable:
(i) furnish, before filing any Registration Statement,
a draft of the prospectus to be included therein ("Prospectus")
and any amendments or supplements relating to such Registration
Statement or Prospectus and copies of all other documents
proposed to be filed, to the Sellers;
(ii) use commercially reasonable efforts to
prepare and file with the Commission any amendments and
supplements to the Registration Statement and to the Prospectus
included therein as may be necessary to keep the Registration
Statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Shares covered by the Registration Statement for the period
required to effect the distribution of such Registrable Shares
but in no event shall the Company be required to do so after the
earlier to occur of (A) July 27, 1999 (the first anniversary of
the Closing Date) and (B) the date on which all of the
Registrable Shares have been sold by Sellers;
(iii) furnish, at the Company's expense, to the
Sellers such number of copies of the Prospectus, including a
preliminary Prospectus, in conformity with the requirements of
the Securities Act and the rules and regulations promulgated
thereunder, as may reasonably be required in order to facilitate
the disposition of the Registrable Shares covered by a
Registration Statement, but only during the period the Company is
required under the provisions of this Agreement to cause such
Registration Statement to remain effective;
-2-
<PAGE>
(iv) use commercially reasonable efforts to register or
qualify the Registrable Shares covered by a Registration
Statement under the securities or blue sky laws of such
jurisdictions in the United States as the Sellers reasonably
request, and do any and all other acts and things which may be
necessary to enable the Sellers to consummate the disposition of
such Registrable Shares in such jurisdictions; provided however,
that the Company shall in no event be required to qualify to do
business as a foreign corporation or a dealer in any jurisdiction
where it is not so qualified, to execute or file any general
consent or become subject to service of process under the laws of
any jurisdiction, or subject itself to taxation in any
jurisdiction where it has not been so subject;
(v) use commercially reasonable efforts to cause the
Registrable Shares to be registered with or approved by such
other governmental agencies or authorities as may be necessary by
virtue of the business and operations of the Company to enable
the Sellers to consummate the disposition of the Registrable
Shares;
(vi) notify each Seller at any time when a Prospectus
relating to the Registrable Shares is required to be delivered
under the Securities Act within the appropriate period mentioned
in clause (iii) of this Section 2(d) of the happening of any
event as a result of which the Prospectus included in any such
Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then
existing and, at the request of such Seller, prepare and furnish
to such Seller a reasonable number of copies of a supplement to
or an amendment of such Prospectus as may be necessary so that,
as thereafter delivered to the offerees of such Registrable
Shares, such Prospectus shall not include an untrue statement of
a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing; and
(vii) use commercially reasonable efforts to cause
the Registrable Shares to be listed on any national securities
exchange on which any shares of the ICG Common Stock are then
listed.
(e) Blackout Rights. Notwithstanding any other provision
---------------
of this Agreement to the contrary, if the Company determines, in
its reasonable business judgment, that the registration and
offering to be effected pursuant to any Registration Statement
could interfere with or otherwise adversely affect any financing,
acquisition, corporate reorganization, sale, merger,
consolidation or other material transaction or development
involving the Company or any of its affiliates or require the
Company to disclose any matter that otherwise would not be
required to be disclosed at such time, then the Company may, upon
written notice to Sellers' Agent (i) postpone the filing of a
Registration Statement for a reasonable period of time, but in no
event in excess of 60 days after receipt of the initial request
for registration or (ii) if a Registration Statement has become
effective, require the Sellers to suspend the distribution of any
of the Registrable Shares by giving notice to the Sellers. Any
such notice need not specify the reasons for such suspension if
the Company determines, in its reasonable judgment, that doing so
-3-
<PAGE>
would interfere with or adversely affect such transaction or
development or would result in the disclosure of material non-
public information. Subject to the following sentence, until the
Company has determined, in its reasonable judgment, that such
postponement or suspension is no longer necessary and has given
notice of that determination to the Sellers, the Company's
obligations to use commercially reasonable efforts to cause a
Registration Statement to become or remain effective and the
Sellers' right to sell Registrable Shares under the Registration
Statement shall be suspended. The Company may exercise its right
to suspend the Seller's registration rights pursuant to this
subparagraph (e) on four occasions and then for a period not to
exceed 60 days per occasion, and the period during which the
Company is required to cause the Registration Statement to remain
effective shall be extended by a period equal to the period of
such suspension.
3. Information and Compliance with Legal Requirements. The
--------------------------------------------------
Sellers agree to cooperate fully with the Company in the
preparation and filing of the Registration Statements pursuant to
this Agreement and further covenant that all information supplied
or to be supplied in writing to the Company by the Sellers or any
of the Sellers' representatives expressly for inclusion in the
Registration Statements, any Prospectus and any amendment or
supplement thereto will not contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading.
4. Expenses. The Company shall be responsible for all expenses
--------
incurred by the Company in complying with Section 2, including,
without limitation, all registration and filing fees, fees and
expenses of complying with securities and blue sky laws, printing
expenses and fees and expenses of the Company s counsel and
accountants. The Sellers shall be responsible for all
underwriting or broker's discounts and commissions and transfer
taxes, if any, relating to the resale by the Sellers of the
Registrable Shares, as well as all fees and expenses of counsel
and of any other advisor to the Sellers.
5. Indemnification.
---------------
(a) Indemnification by The Company, The Company agrees to
------------------------------
indemnify and hold harmless the Sellers and each Person (if any)
who controls any Seller within the meaning of either the
Securities Act or the Exchange Act (collectively, the "Seller
Indemnified Parties") from and against any losses, claims,
damages or liabilities (collectively "Losses"), joint or several,
to which such Seller Indemnified Parties may become subject,
insofar as such Losses (or actions in respect thereof) are based
upon any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or any
Prospectus, or any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading; and, subject to Section
5(c), the Company shall reimburse such Seller Indemnified Parties
for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such Losses;
provided, however, that the Company shall not indemnify or hold
--------
harmless any Seller Indemnified Party from or against any such
-4-
<PAGE>
Losses (i) that arise out of or are based upon any violation of
any federal or state securities laws, rules or regulations
committed by any of the Seller Indemnified Parties (or any Person
who controls any of them or any agent, broker-dealer or
underwriter engaged by them) or in the case of a non-underwritten
offering, any failure by such Sellers to give any purchaser of
Registrable Shares, at or prior to the written confirmation of
such sale, a copy of the most recent Prospectus or (ii) if the
untrue statement, omission or allegation thereof upon which such
Losses or expenses are based (x) was made in reliance upon and in
conformity with the information provided by or on behalf of any
Seller Indemnified Party specifically for use or inclusion in any
Registration Statement or any Prospectus, or (y) was made in any
Prospectus used after such time as the Company advised such
Seller that the filing of a post-effective amendment or
supplement thereto was required, except the Prospectus as so
amended or supplemented, or (z) was made in any Prospectus used
after such time as the obligation of the Company hereunder to
keep such Registration Statement effective and current has
expired or been suspended hereunder.
(b) Indemnification by Sellers. The Sellers, severally and
--------------------------
not jointly, agree to indemnify and hold harmless the Company,
its directors and officers and each person, if any, who controls
the Company within the meaning of either the Securities Act or
the Exchange Act (the "Company Indemnified Parties"), from and
against any Losses, joint or several, to which the Company
Indemnified Parties may become subject, insofar as such Losses
(or actions in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or any
Prospectus, or any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading, if the statement or omission
was made in reliance upon and in conformity with the information
provided by or on behalf of a Seller or any Person who controls such
Seller specifically for use or inclusion in the Registration
Statements or any Prospectus, (ii) the use of any Prospectus after
such time as the Company has advised a Seller that the filing of a
post-effective amendment or supplement thereto is required, except
the Prospectus as so amended or supplemented, (iii) the use of any
Prospectus after such time as the obligation of the Company hereunder
to keep such Registration Statement effective and current has expired
or been suspended hereunder or (iv) any violation by a Seller or
any Person who controls such Seller within the meaning of either
the Securities Act or the Exchange Act (or any agent, broker-dealer
or underwriter engaged by such Seller or any such controlling person)
of any federal or state securities law or rule or regulation
thereunder or any failure by such Seller to give any purchaser of
Registrable Shares at or prior to the written confirmation of such
sale a copy of the most recent Prospectus; and, subject to Section
5(c), such Seller shall reimburse such the Company Indemnified
Parties for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such Losses.
For purposes of this Agreement, including but not limited to clause
(i) of the preceding sentence and clause (ii) of the proviso set
forth in Section 5(a), any information concerning any Seller
Indemnified Party or plan of distribution included in any
Registration Statement or Prospectus that is provided to a Seller for
his review within a reasonable period before filing or use thereof
and as to which such Seller has not promptly provided written notice
of objection or correction to the Company shall be deemed to have
been provided by such Seller specifically for use in such
Registration Statement or Prospectus.
-5-
<PAGE>
(c) Indemnification Procedure. Each party entitled to
-------------------------
indemnification under this Section 5 (the "Indemnified Party") shall
give notice to the party required to provide indemnification (the
"Indemnifying Party") promptly after such Indemnified Party has
actual knowledge of any claim as to which indemnity may be sought, and
the Indemnifying Party may participate at its own expense in the
defense, or if it so elects, to assume the defense of any such claim
and any action or proceeding resulting therefrom, including the
employment of counsel and the payment of all expenses. The failure of
any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party from its obligations to indemnify
such Indemnified Party, except to the extent the Indemnified Party's
failure so to notify actually prejudices the Indemnifying Party's
ability to defend against such claim, action or proceeding. If the
Indemnifying Party elects to assume the defense in any action or
proceeding, the Indemnified Party shall have the right to employ
separate counsel in any such action or proceeding and to participate
in the defense thereof, but the fees and expenses of such separate
counsel shall be such Indemnified Party's expense unless (i) the
Indemnifying Party has agreed to pay such fees and expenses or (ii)
the named parties to any such action or proceeding (including any
impleaded parties) include an Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel
that there may be a conflict of interest between such Indemnified
Party and the Indemnifying Party in the conduct of the defense of such
action (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate
counsel at the expense of the Indemnifying Party, the Indemnifying
Party shall not assume the defense of such action or proceeding on
such Indemnified Party's behalf, it being understood, however, that
the Indemnifying Party shall not, in connection with any one such
action or proceeding or separate but substantially similar or related
actions or proceedings arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more
than one separate firm of attorneys at any time for all Indemnified
Parties, which firm will be designated in writing by the Seller or
the Company, as the case may be). No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the
consent of the Indemnified Party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to such
claim or litigation. The Indemnifying Party shall not be liable for
any settlement of any such action or proceeding effected without its
written consent, but if settled with its written consent, or if there
be a final judgment for the plaintiff in any such action or
proceeding, the Indemnifying Party shall indemnify and hold harmless
the Indemnified Party from and against any loss or liability by reason
of such settlement or judgment.
(d) Allocation and Contribution. If the indemnification
---------------------------
provided for under this Section 5 is unavailable to or
insufficient to hold the Indemnified Party harmless in respect of any
Losses referred to in Section 5(a) or (b) above for any reason other
than as specified therein, then the Indemnifying Party shall
contribute to the amount paid or payable by such Indemnified Party as
a result of such Losses (i) in such proportion as is appropriate to
reflect the relative benefits received by the Indemnifying Party on
the one hand and such Indemnified Party on the other from the
subject offering or distribution or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
-6-
<PAGE>
referred to in clause (i) above but also the relative fault of the
Indemnifying Party on the one hand and such Indemnified Party on the
other in connection with the statements or omissions which resulted
in such Losses as well as any other relevant equitable considerations.
The relative benefits received by the Indemnifying Party on the one
hand and the Indemnified Party on the other hand shall be deemed to
be in the same proportion as the net proceeds of the offering or
other distribution (after deducting expenses) received by the
Indemnifying Party bears to the net proceeds of the offering or other
distribution (after deducting expenses) received by the Indemnified
Party. The relative fault 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 (or omitted to be
supplied by) the Company or the Sellers, the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission, the relative benefits received by
each party from the sale of the Registrable Shares and any other
equitable considerations appropriate under the circumstances. The
amount paid or payable by an Indemnified Party as a result of the
Losses referred to above in this Section 5(d) shall be deemed to
include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any
such action or claim. No person who was guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
6. Further Assurances. After the Closing Date, the Sellers shall
------------------
take such other actions and enter into such other agreements as may be
deemed reasonably necessary or advisable by the Company in connection
with any resale by the Sellers of the Shares.
7. Miscellaneous.
-------------
(a) Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties with respect to the subject matter
hereof and supersedes all prior written and oral, and all
contemporaneous oral, agreements and understandings with respect to
the subject matter of this Agreement.
(b) Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given when
delivered in person, by telecopy, or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties
as follows:
If to the Company: ICG Communications, Inc.
9605 East Maroon Circle
Englewood, Colorado 80112
Telecopy: (303) 575-6278
Attention: H. Don Teague, Esq.
Executive Vice President,
Secretary and General Counsel
-7-
<PAGE>
With a copy to: Sherman & Howard L.L.C.
633 Seventeenth Street, Suite 3000
Denver, Colorado 80202
Telecopy: (303) 298-0940
Attention: Robert Mintz, Esq.
If to the Sellers: G. Kelley Allen
5485 South Hoyt Street
Littleton, Colorado 80123
Telecopy: (303) 973-7316
with a copy to:
Olona & Associates, P.C.
Attention: Richard G. Olona, Esq.
621 Seventeenth Street, Suite 2540
Denver, Colorado 80293
Telecopy: (303) 297-2927
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth
above. Any notice or communication delivered in person shall be
deemed effective on delivery. Any notice or communication sent by
telecopy shall be deemed effective when confirmed. Any notice or
communication sent by registered or certified mail, return receipt
requested, shall be deemed effective when received, as evidenced by
the return receipt.
(c) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
-------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE
REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER PRINCIPLES OF
CONFLICTS OF LAWS APPLICABLE THERETO.
(d) Rules of Construction. The descriptive headings in this
---------------------
Agreement are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of
this Agreement. Words used in this Agreement, regardless of the
gender and number specifically used, shall be deemed and construed to
include any other gender, masculine, feminine, or neuter, and any
other number, singular or plural, as the context requires. As used in
this Agreement, the word "including" is used in an illustrative sense
rather than a limiting sense, and the word "or" is not exclusive.
(e) Parties in Interest. This Agreement shall be binding
-------------------
upon and inure solely to the benefit of the parties to this Agreement
and their legal successors-in-interest, and nothing in this
Agreement, express or implied, is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
-8-
<PAGE>
(f) Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement. This Agreement
may be delivered by facsimile and facsimile signatures will be treated
as original signatures for all applicable purposes.
(g) Assignment. This Agreement may not be assigned by either
----------
party to this Agreement.
(h) Amendment. This Agreement may not be amended except by
---------
an instrument in writing signed on behalf of both the parties.
(i) Extension; Waiver. Either party to this Agreement may
-----------------
(a) agree to extend the time for the performance of any of the
obligations or other acts of the other party to this Agreement, (b)
waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document, certificate, or
writing delivered pursuant to this Agreement by the other party, or
(c) waive compliance by the other party with any of the agreements or
conditions contained herein or any breach thereof. Any agreement on
the part of either party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf
of such party.
(j) Legal Fees; Costs. If either party to this Agreement
-----------------
institutes any action or proceeding, whether before a court or
arbitrator, to enforce any provision of this Agreement, the prevailing
party therein shall be entitled to receive from the losing party
reasonable attorneys' fees and costs incurred in such action or
proceeding, whether or not such action or proceeding is prosecuted to
judgment.
(k) Arbitration. Any disputes arising under or in connection
-----------
with this Agreement, including, without limitation, those involving
claims for specific performance or other equitable relief, will be
submitted to binding arbitration under the Commercial Arbitration
Rules of the American Arbitration Association under the authority of
federal and state arbitration statutes, and will not be the subject
of litigation in any forum. EACH PARTY, BY SIGNING THIS AGREEMENT,
VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY WAIVES ANY RIGHTS SUCH
PARTY MAY OTHERWISE HAVE TO SEEK REMEDIES IN COURT OR OTHER FORUMS,
INCLUDING THE RIGHT TO JURY TRIAL. The arbitration will be conducted
only in Denver, Colorado, or another location mutually agreed by the
Sellers and the Company, before a single arbitrator selected by the
parties or, if they are unable to agree on an arbitrator, before a
panel of three arbitrators, one selected by Sellers, one selected
by the Company and the third selected by the other two arbitrators.
The arbitrators will have full authority to order specific
performance and award damages and other relief available under this
Agreement or applicable law, but will have no authority to add to,
detract from, change or amend the terms of this Agreement or existing
law. All arbitration proceedings, including settlements and awards,
will be confidential. The decision of the arbitrators will be final
and binding, and judgment on the award by the arbitrators may be
entered in any court of competent jurisdiction. THIS SUBMISSION AND
AGREEMENT TO ARBITRATE WILL BE
-9-
<PAGE>
SPECIFICALLY ENFORCEABLE. The arbitrator will have no power to award
punitive or exemplary damages, to ignore or vary the terms of this
Agreement, and will be bound to apply controlling law. The party who
prevails on entry of the award of judgment will be entitled to his or
its costs and expenses, including reasonable attorney's fees incurred
in connection with the arbitration. A judgment upon the award may be
entered in any court having jurisdiction.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
ICG COMMUNICATIONS, INC.
By: --------------------------------------
Name: --------------------------------
Title: -------------------------------
SELLERS:
G. Kelley Allen Trust
By: --------------------------------------
G. Kelley Allen, Trustee
GORDON B. KOCH DAUGHTERS TRUST
By: --------------------------------------
Carole K. Allen, Trustee
By: G. Kelley Allen,
as attorney in fact
--------------------------------------
Michele R.K. Fought
T&D CONSULTING, INC.
By: ----------------------------------------
David Gandini
-10-
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement"), is made and
entered on the 27th day of July, 1998, by and among ICG
Communications, Inc., a Colorado corporation ("Buyer"), the
persons listed on Exhibit A (collectively, "Sellers"), and
-------
Norwest Bank Colorado, N.A. ("Escrow Agent"), together, the "Parties."
RECITALS
--------
A. Buyer and Sellers have executed a Purchase Agreement
dated as of June 11, 1998 (the "Purchase Agreement") pursuant to
which Buyer has agreed to purchase all of the interests in
DataChoice Network Services, L.L.C., a Nevada limited liability
company (the "Company"), held by Sellers. Article VII of the
Purchase Agreement provides that on or prior to the Closing Date,
each of the Sellers, as a group, and Buyer shall have delivered
to the other this Agreement, duly and properly executed.
B. Section 2.2 of the Purchase Agreement provides that at
the Closing (as defined in the Purchase Agreement), Buyer shall
deposit with the Escrow Agent 16,441 ICG Shares (as defined in
the Purchase Agreement), representing a portion of the Purchase
Price, such amount so paid to be held pursuant to this Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, and for other good and
valuable consideration, the receipt, adequacy and sufficiency of
which is hereby acknowledged, the Parties hereby agree as
follows:
1. Escrow.
------
a. Upon delivery of this Agreement properly executed by
the Parties, Buyer shall tender 16,441 in ICG Shares (the
"Escrowed Amount") to the Escrow Agent, to be held by the Escrow
Agent in trust upon the express terms and conditions, with the
powers and limitations, and for the exclusive purpose set forth
herein. The ICG Shares shall be issued and held in the names of
Sellers, in proportion to their ownership of the Company,
accompanied with stock powers duly executed in blank by Sellers.
Such Escrowed Amount and all proceeds of such Escrowed Amount now
or hereafter subject to this Agreement are hereinafter referred
to as the "Escrow Assets." The Parties agree that the Escrow
Assets are the sole property of Sellers held by the Escrow Agent
for the sole purpose of securing the indemnification obligations
of Sellers pursuant to Article VIII of the Purchase Agreement.
The Sellers shall have the right to vote the ICG Shares held in
the Escrow Account, and all dividends paid on the ICG Shares
shall be held in the Escrow Account pursuant to this Agreement
for the benefit of Sellers.
<PAGE>
b. The Escrow Agent shall hold and safeguard the Escrow
Assets separate and apart from the assets of the Escrow Agent.
The Escrow Agent represents that the Escrow Assets shall not at
any time, including in the event of the bankruptcy, dissolution
or insolvency of the Escrow Agent or otherwise, be or be deemed
to be assets of the Escrow Agent.
c. Sellers, as a group, and Buyer shall each execute a
certificate of incumbency substantially in the form of Exhibit B
---------
for the purpose of establishing the identity of the
representative(s) of each party entitled to issue instructions or
directions to the Escrow Agent pursuant to Paragraph 2 herein on
behalf of such party (each such person being referred to herein
as "Authorized Representative"). Sellers shall designate
Sellers' Agent as their Authorized Representative.
d. Each Seller and Buyer shall furnish to the Escrow Agent
a Form W-8 or Form W-9, as applicable.
2. Claims. If, prior to July 27, 1999 (the first anniversary
------
of the Closing Date (the "Termination Date")), the Escrow Agent
receives from an Authorized Representative of Buyer one or more
notices addressed to Escrow Agent and to Sellers' Agent (each, a
"Demand Notice") requesting payment to Buyer of a specified
amount of the Escrow Assets ("Claimed Amount"), the Escrow Agent
shall, within three Business Days (as such term is defined in the
Purchase Agreement) of receipt of such Demand Notice, send a copy
of the Demand Notice to Sellers' Agent via courier or facsimile,
with a cover letter indicating the date such Demand Notice was
received by the Escrow Agent. If, within five Business Days of
the date the Escrow Agent received such Demand Notice ("Reply
Period"), the Escrow Agent receives written notice from the
Authorized Representative of Sellers ("Reply Notice") requesting
the Escrow Agent to continue to hold all or a portion of the
Claimed Amount ("Disputed Amount"), the Escrow Agent shall
continue to hold the Disputed Amount until the Escrow Agent
receives (1) a written agreement signed by an Authorized
Representative of both Sellers and Buyer to pay the Disputed
Amount, or a portion thereof, as directed in such written
agreement; or (2) until such time as the Escrow Agent has
received an order of a court of competent jurisdiction directing
the Escrow Agent to pay such Disputed Amount, or portion thereof,
according to such order. If the Escrow Agent does not receive a
Reply Notice within the Reply Period or if the Escrow Agent
receives a Reply Notice requesting that the Escrow Agent hold a
Disputed Amount which is less than all of the Claimed Amount, the
Escrow Agent shall pay to Buyer the Claimed Amount specified in
such Demand Notice less any Disputed Amount ("Agreed Amount"),
such payment to be made as follows: within two Business Days of
expiration of the Reply Period or the receipt of the Reply
Notice, whichever is applicable, the Escrow Agent shall (a) send
to the transfer agent for the ICG Shares (the "Transfer Agent")
the certificates representing the ICG Shares held by the Escrow
Agent, and (b) request the Transfer Agent to cancel the number of
ICG Shares equal to the Agreed Amount and issue to Sellers and
deliver to the Escrow Agent certificates representing a number of
ICG Shares equal to the difference between the number of ICG
Shares delivered to the Escrow Agent pursuant to this sentence
and the number of ICG Shares representing the Agreed Amount. The
calculation of the number of ICG Shares representing the Agreed
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Amount to be cancelled in favor of Buyer and the number of ICG
Shares to be reissued to Sellers and delivered to the Escrow
Agent pursuant to this Section 2 shall be made pursuant to
Section 4.
3. Payment of Escrow Assets Upon Termination.
-----------------------------------------
a. The Escrow Agent shall pay to Sellers, in accordance
with Paragraph 2, within two Business Days following the
Termination Date the Excess Amount (as hereinafter defined). As
used in this Agreement, "Excess Amount" shall mean the amount by
which any Escrowed Amount held by the Escrow Agent on the
Termination Date exceeds the Disputed Amount, if any, taking into
account all Demand Notices issued during the Escrow Period.
b. Following the Termination Date, as claims for Disputed
Amounts are fully and finally resolved or at any time any Excess
Amount exists, the Escrow Agent shall release the Excess Amount
to Sellers in accordance with Paragraph 2.
c. Notwithstanding anything to the contrary in this
Agreement, the Escrow Agent shall promptly disburse all or any
part of the Escrow Assets as agreed in writing and signed by an
Authorized Representative of Buyer and Sellers or upon receipt
of, and in accordance with, an order or decree or final and non-
appealable judgment of a court of competent jurisdiction.
4. Calculation and Payment of Amounts Payable by Escrow Agent.
------------------------------------------------------------
For purposes of calculating the number of ICG Shares representing
the Agreed Amount, the Disputed Amount or the Excess Amount, as
applicable under Paragraphs 2 and 3, the per share value of the
ICG Shares, calculated as of any applicable date of
determination, shall be the average of the volume weighted
average price of the shares of common stock of ICG
Communications, Inc. on the five trading days ending two trading
days prior to the date that the Escrow Agent makes a payment (or
is deemed to make a payment) of any amount out of the Escrow
Account on account of any indemnification claim or attributable
to any Excess Amount, as the case may be. Buyer and Sellers will
cooperate in good faith to determine the number of ICG Shares
representing the Agreed Amount, the Disputed Amount and the
Excess Amount, as applicable, and shall execute written
instructions to the Transfer Agent with respect to the issuance
of certificates representing ICG Shares to be canceled in favor
of Buyer, or delivered to Sellers or the Escrow Agent in
accordance with Paragraphs 2 and 3.
5. Further Provisions Relating to Escrow. Notwithstanding any
-------------------------------------
provision contained herein to the contrary, the Escrow Agent,
including its officers, directors, employees and agents, agrees
to the following:
a. The Escrow Agent shall not be liable for any action
taken or omitted under this Agreement so long as it shall have
acted in good faith and without negligence or willful misconduct
on its part. The Escrow Agent shall have no responsibility to
inquire into or determine the genuineness, authenticity or
sufficiency of any securities, checks or other documents or
instruments submitted to it in connection with its duties
hereunder; provided, however, that nothing herein shall be
construed to relieve the Escrow Agent of its obligations to
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exercise such care under the circumstances as comports with
reasonable commercial practices in its examination of written
communications and instruments furnished hereunder, except with
respect to verifying the genuineness of signatures and in
accordance with Paragraph 6.b. below.
b. The Escrow Agent shall be entitled to deem the
signatures on any documents or instruments submitted to it
hereunder as being those of persons purported to be authorized to
sign such documents or instruments on behalf of the Parties
hereto and shall be entitled to rely upon the genuineness of the
signatures of such signatories without inquiry and without
requiring substantiating evidence of any kind.
c. The Escrow Agent shall have no responsibility or
liability for any diminution in value of any assets held
hereunder.
d. The Escrow Agent shall be entitled to compensation for
its services hereunder in accordance with Exhibit C, which is
---------
attached hereto and made a part hereof, to be paid by Buyer;
e. The Escrow Agent shall be under no obligation to invest
the Escrowed Funds until it has received a Form W-9 or W-8, as
applicable, from Buyer and each of the Sellers, regardless of
whether any party is exempt from reporting or withholding
requirements under the Internal Revenue Code of 1986, as amended.
f. The Escrow Agent shall be, and hereby is, jointly and
severally indemnified and saved harmless by Buyer and Sellers
from all losses, costs and expenses, including reasonable outside
counsel fees, which may be incurred by it as a result of its
acceptance of the Escrow Assets or arising from the performance
of its duties hereunder, unless the Escrow Agent shall have been
adjudged to have acted in bad faith or to have been negligent.
Such indemnification shall survive the resignation or removal of
the Escrow Agent or the termination of this Agreement, until
extinguished by any applicable statute of limitations;
g. In the event any dispute shall arise between Buyer and
Sellers with respect to the disposition or disbursement of any of
the assets held hereunder, the Escrow Agent shall be permitted to
institute an arbitration proceeding under Paragraph 17 and to
interplead all of the assets held hereunder into such arbitration
proceeding and thereafter shall be fully relieved from any and
all liability or obligation with respect to such interpleaded
assets. Buyer and Sellers further agree to pursue any redress or
recourse in connection with such a dispute, without making the
Escrow Agent a party to same.
h. The Escrow Agent shall only have those duties as are
specifically provided herein, which shall be deemed purely
ministerial in nature, and shall under no circumstance be deemed
a fiduciary for any of Buyer or Sellers. The Escrow Agent shall
not be responsible for the performance by Buyer or Sellers under
any other agreement, instrument or document between Buyer or
Sellers, in connection herewith, including, without limitation,
the Purchase Agreement. This Agreement sets forth all matters
pertinent to the escrow contemplated hereunder, and no additional
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<PAGE>
obligations of the Escrow Agent shall be inferred from the terms
of this Agreement or any other Agreement. IN NO EVENT SHALL THE
ESCROW AGENT BE LIABLE, DIRECTLY OR INDIRECTLY, FOR ANY: (i)
DAMAGES OR EXPENSES ARISING OUT OF THE SERVICES PROVIDED
HEREUNDER, OTHER THAN DAMAGES WHICH RESULT FROM THE ESCROW
AGENT'S FAILURE TO ACT IN ACCORDANCE WITH THE REASONABLE
COMMERCIAL STANDARDS OF THE BANKING BUSINESS IN FULFILLING ITS
OBLIGATIONS HEREUNDER OR ITS BREACH OF ITS OBLIGATIONS HEREUNDER;
OR (ii) SPECIAL OR CONSEQUENTIAL DAMAGES, EVEN IF THE ESCROW
AGENT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
i. The Escrow Agent shall have the right at its sole
expense, but not the obligation, to consult with counsel of its
choice, and the Escrow Agent shall not be liable for action taken
by it or omitted to be taken in good faith, either in accordance
with the advice of such counsel or in accordance with any opinion
of counsel to either Buyer or Sellers addressed and delivered to
the Escrow Agent.
j. The Escrow Agent shall have the right to perform any of
its duties hereunder though agents, custodians or nominees.
k. The Escrow Agent shall not be required by any provision
of this Agreement to expend or risk its own funds in the
performance of its duties if it shall have reasonable grounds for
believing that repayment of such funds is not reasonably assured
to it.
Any banking association or corporation into which the Escrow
Agent (or substantially all of its corporate trust business) is
merged or converted or with which the Escrow Agent is
consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Escrow Agent shall be a
party, shall succeed to all the Escrow Agent's rights,
obligations and immunities hereunder without the execution or
filing of any paper or any further act on the part of any of
Buyer or Sellers, anything herein to the contrary
notwithstanding.
6. Resignation or Removal of Escrow Agent. The Escrow Agent
----------------------------------------
may resign as such following the giving of 30 days' prior written
notice to the other Parties hereto. Similarly, the Escrow Agent
may be removed and replaced by the other Parties hereto following
the giving of 30 days' prior written notice to the Escrow Agent
by an Authorized Representative of each of Buyer and Sellers. In
either event, the duties of the Escrow Agent shall terminate 30
days after receipt of such notice (or as of such earlier date as
may be mutually agreeable), at which time the Escrow Agent shall
deliver the balance of the moneys or assets then in its
possession to a successor escrow agent as shall be appointed by
Buyer and Sellers in a written notice signed by an Authorized
Agent of both Buyer and Sellers and filed with the Escrow Agent.
If Buyer and Sellers are unable to agree upon a successor
escrow agent or fail to appoint a successor escrow agent prior to
the expiration of 30 days following receipt of the notice of
resignation or removal, any of the Parties hereto may petition
any court of competent jurisdiction for the appointment of a
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<PAGE>
successor escrow agent or for other appropriate relief, and any
such resulting appointment shall be binding upon all Parties
hereto.
7. Termination of Escrow Agent's Liability. The Escrow Agent's
---------------------------------------
responsibilities and liabilities hereunder shall terminate upon
payment by the Escrow Agent of all the Escrow Assets in
accordance with the provisions of this Agreement.
8. No Third-Party Beneficiaries. This Agreement will not
------------------------------
confer any rights or remedies upon any person other than the Parties
and their respective successors and permitted assigns.
9. Entire Agreement. This Agreement, together with its
-----------------
Exhibits, constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements or representations
by or among the Parties, written or oral, to the extent they relate
in any way to the subject matter hereof.
10. Succession and Assignment. This Agreement will be binding
-------------------------
upon and inure to the benefit of the Parties and their respective
heirs, executors, administrators, personal representatives,
successors and assigns.
11. Counterparts. This Agreement may be executed in any number
of ------------
counterparts, each of which shall be deemed an original and all
of which together shall be deemed to be one and the same
instrument. The execution of a counterpart of the signature page
to this Agreement will be deemed the execution of a counterpart
of this Agreement. The delivery of this Agreement may be made by
facsimile, and facsimile signatures shall be treated as original
signatures for all applicable purposes.
12. Headings, Terms. The section headings contained in this
---------------
Agreement are inserted for convenience only and will not affect
in any way the meaning or interpretation of this Agreement.
Unless otherwise defined in this Agreement, terms used with
initial capital letters will have the meanings ascribed to them
in the Purchase Agreement, applicable to both singular and plural
forms, for all purposes of this Agreement. All pronouns (and any
variation) will be deemed to refer to the masculine, feminine or
neuter, as the identity of the person may require. The singular
or plural includes the other, as the context requires or permits.
The word "include" (and any variation) is used in an illustrative
sense rather than a limiting sense. The word "day" means a
calendar day.
13. Notices. All notices, requests, demands, claims and other
-------
communications hereunder will be in writing. Any notice,
request, demand, claim, payment or other communication hereunder
shall be deemed duly given if it is sent by registered or
certified mail, return receipt requested, postage prepaid, or by
courier, telecopy or facsimile, and addressed to the intended
recipient as set forth below:
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<PAGE>
If to Sellers: Copy to:
Addressed to Sellers' Agent at: Olona & Associates, P.C.
5485 South Hoyt Street 621 Seventeenth Street, Suite 2540
Littleton, Colorado 80123 Denver, Colorado 80202
Telecopy: (303) 973-7316 Telecopy: (303) 297-2927
Attention: G. Kelley Allen Attention: Richard G. Olona, Esq.
If to Buyer: Copy to:
ICG Communications, Inc. Sherman & Howard L.L.C.
161 Inverness Drive West 633 Seventeenth Street, Suite 3000
Englewood, Colorado 80112 Denver, Colorado 80202
Attn: H. Don Teague, Esq. Attention: Robert Mintz, Esq.
Executive Vice President
General Counsel and Secretary
Telecopy: (303) 414-8884 Telecopy: (303) 298-0940
If to Escrow Agent: Copy to:
Norwest Bank Colorado, N.A.
1740 Broadway
Denver, Colorado 80274
Attn: Corporate Trust and Escrow
Services Department
Notices will be deemed given seven days after mailing if sent by
certified mail, when delivered if sent by courier, and upon
receipt of confirmation by person or machine if sent by telecopy
or facsimile transmission. Any party may change the address to
which notices, requests, demands, claims and other communications
hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
14. Governing Law. This Agreement will be governed by and
-------------
construed in accordance with the domestic laws of the State of
Colorado without giving effect to any choice or conflict of law
provision or rule (whether of the State of Colorado or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Colorado.
15. Amendments and Waivers. No amendment of any provision of
-----------------------
this Agreement shall be valid unless the same is in writing and
signed by the Parties. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder,
whether intentional or not, will be deemed to extend to any prior
or subsequent default, misrepresentation or breach of warranty or
covenant hereunder or affect in any way any rights arising by
virtue of any prior or subsequent such occurrence, and no waiver
will be effective unless set forth in writing and signed by the
party against whom such waiver is asserted.
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<PAGE>
16. Severability. Any term or provision of this Agreement that
------------
is invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining
terms and provisions hereof or the validity or enforceability of
the offending term or provision in any other situation or in any
other jurisdiction.
17. Arbitration. Any disputes arising under or in connection
-----------
with this Agreement, including, without limitation, those involving
claims for specific performance or other equitable relief, will
be submitted to binding arbitration under the Commercial
Arbitration Rules of the American Arbitration Association under
the authority of federal and state arbitration statutes, and
shall not be the subject of litigation in any forum. EACH PARTY,
BY SIGNING THIS AGREEMENT, VOLUNTARILY, KNOWINGLY AND
INTELLIGENTLY WAIVES ANY RIGHTS SUCH PARTY MAY OTHERWISE HAVE TO
SEEK REMEDIES IN COURT OR OTHER FORUMS, INCLUDING THE RIGHT TO
JURY TRIAL. The arbitration will be conducted only in Denver,
Colorado before a single arbitrator selected by the parties or,
if they are unable to agree on an arbitrator, before a panel of
three arbitrators, one selected by Buyer, one selected by
Sellers' Agent and the third selected by the other two
arbitrators. The arbitrators shall have full authority to order
specific performance and award damages and other relief available
under this Agreement or applicable law, but shall have no
authority to add to, detract from, change or amend the terms of
this Agreement or existing law. All arbitration proceedings,
including settlements and awards, shall be confidential. The
decision of the arbitrators will be final and binding, and
judgment on the award by the arbitrators may be entered in any
court of competent jurisdiction. THIS SUBMISSION AND AGREEMENT
TO ARBITRATE WILL BE SPECIFICALLY ENFORCEABLE. The arbitrator
will have no power to award punitive or exemplary damages, to
ignore or vary the terms of this Agreement or any Other Buyer
Agreement or Other Seller Agreement, and will be bound to apply
controlling law. The party who prevails on entry of the award of
judgment will be entitled to his or its costs and expenses,
including reasonable attorney's fees incurred in connection with
the arbitration. A judgment upon the award may be entered in any
court having jurisdiction.
18. Construction. The Parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this
Agreement will be construed as if drafted jointly by the Parties
and no presumption or burden of proof will arise favoring or
disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. The Parties intend that each
representation, warranty and covenant contained herein will have
independent significance. If any Party breaches any
representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation,
warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the
Party has not breached will not detract from or mitigate the fact
that the Party is in breach of the first representation, warranty
or covenant.
19. Incorporation. The Exhibits identified in this Agreement
------------- --------
are incorporated herein by reference and made a part hereof.
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<PAGE>
20. Sellers' Agent. Each Seller hereby authorizes and appoints
--------------
Sellers' Agent as its, his or her exclusive agent and attorney-
in-fact to act on behalf of each of them with respect to all
matters which are the subject of this Agreement, including,
without limitation, (a) receiving or giving all notices,
instructions, other communications, consents or agreements that
may be necessary, required or given hereunder and (b) asserting,
settling, compromising, or defending, or determining not to
assert, settle, compromise or defend, (i) any claims which any
Seller or Escrow Agent may assert, or have the right to assert,
against Buyer or Escrow Agent, or (ii) any claims which Buyer or
Escrow Agent may assert, or have the right to assert, against any
Seller or Escrow Agent. Sellers' Agent hereby accepts such
authorization and appointment, provided that Sellers' Agent shall
have no duty or liability whatsoever to Buyer in his capacity at
Sellers' Agent. Upon the receipt of written evidence
satisfactory to Buyer to the effect that Sellers' Agent has been
substituted as agent of Sellers by reason of his death,
disability or resignation, Buyer shall be entitled to rely on
such substituted agent to the same extent as it was theretofore
entitled to rely upon Sellers' Agent with respect to the matters
covered by this Section 20. No Seller shall act with respect to
any of the matters which are the subject of this Agreement except
through Sellers' Agent. Sellers acknowledge and agree that Buyer
may deal exclusively with Sellers' Agent in respect of such
matters, that the enforceability of this Section 20 is material
to Buyer, and that Buyer has relied upon the enforceability of
this Section 20 in entering into this Agreement. In the event
Sellers' Agent declines to represent Sellers with respect to any
matter delegated to Sellers' Agent under this Agreement, Sellers
agree that the affirmative written determination those Sellers
holding more than 50 percent of the interests held by all Sellers
as set forth on Schedule 3.3 of the Purchase Agreement
------------
will constitute the action of all Sellers, and each Seller agrees
that in such event it will be bound by the determination of such
majority of Sellers and will not seek to challenge any such
determination in any forum.
21. Specific Performance. If any Party fails to perform its
--------------------
obligations under this Article, the other Parties shall be
entitled to specific performance in addition to any other rights
and remedies available at law or in equity.
22. Modification. This Agreement may not be amended, modified
------------
or supplemented except by a written instrument signed by each of the
Parties or their respective authorized officers or
representatives.
IN WITNESS WHEREOF, the Parties have executed this Agreement
as of the date first above written.
BUYER:
ICG COMMUNICATIONS, INC.
By:
Title:
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SELLERS:
G. Kelley Allen Trust
By:
G. Kelley Allen, Trustee
Michele R. K. Fought
T & D CONSULTING, INC.
By:
David Gandini
GORDON B. KOCH DAUGHTERS TRUST
By:
Carole K. Allen, Trustee
By G. Kelley Allen as attorney in fact
ESCROW AGENT:
NORWEST BANK COLORADO, N.A.
By:
Its:
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EXHIBIT A
---------
LIST OF SELLERS
G. Kelley Allen Trust
Gordon B. Koch Daughters Trust
Michele R. K. Fought
T & D Consulting
<PAGE>
EXHIBIT B
---------
CERTIFICATE OF INCUMBENCY
<PAGE>
EXHIBIT C
---------
ESCROW AGENT FEES, CHARGES AND OTHER COMPENSATION
