AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 2, 1999
REGISTRATION NO. 333-74167
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
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)
--------------------
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
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PROPOSED
MAXIMUM
OFFERING PROPOSED
TITLE OF EACH PRICE PER MAXIMUM
CLASS OF AMOUNT TO SECURITY AGGREGATE AMOUNT OF
SECURITIES TO BE OR PER OFFERING REGISTRATION
BE REGISTERED REGISTERED UNIT PRICE FEE
----------------------------------------------------------------------
COMMON STOCK,
$.01 PAR VALUE
PER SHARE . 145,997 $18.1563 $2,650,765.33 $736.91(1)
======================================================================
(1) Previously paid.
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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 APRIL 2, 1999
-----------------------------
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 29, 1999, the closing sale
price of the common stock was $18.625, 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.
----------------------
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 Stockholders . . . . . . . . . . . . . . . . . . . . 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, 1998.
3. Current Report on Form 8-K dated January 7, 1999.
4. Current Report on Form 8-K dated February 26, 1999.
5. Current Report on Form 8-K dated March 4, 1999.
6. 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 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 operating cash flows.
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PROSPECTUS SUMMARY
THE COMPANY
ICG Communications is one of the nation's leading competitive
integrated communications providers ("ICP"), based on estimates
of the industry's 1998 revenue. We seek to provide an alternative
to incumbent local exchange carriers, long distance carriers and
other communications service providers for a full range of
communications services in the increasingly deregulated
telecommunications industry. Through our competitive local
exchange carrier operations, we operate fiber-optic networks in
regional clusters covering major metropolitan statistical areas in
California, Colorado, Ohio, the Southeast and Texas, offering local,
long distance, data and enhanced telephony services to business end
users and Internet service providers, or ISPs. Additionally, we
began providing wholesale network services over our nationwide
data network in February 1999. 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 provided
over our regional fiber network which include long distance,
enhanced telecommunications services and data services.
Additionally, we own and operate a nationwide data network with
236 points of presence over which we recently began providing
wholesale Internet access and enhanced network services targeted to
MindSpring Enterprises, Inc., an ISP, and intend to offer similar
service to other ISPs and telecommunications providers in the
future.
RECENT DEVELOPMENTS
In December 1998, we announced our plans to offer new
network services, to be available beginning in early 1999. These
services include remote access service, expanding originating
service and digital subscriber line technology.
Modemless 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 each of their
points of presence. This service will enable us to act as an
aggregator for ISP traffic while limiting the ISP's 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.
In addition, in early 1999, through digital subscriber
line technology, or DSL, we plan to provide high-speed data
transmission services primarily to business end users and ISPs.
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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 and
( ) mergers and acquisitions.
In addition, to better focus our efforts on our core
telecommunications services operations, 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, the sale of all of the operations
of our ISP, NETCOM On-Line Communication Services, Inc.
("NETCOM"), now known as ICG PST, Inc., and the sale of all of
the operations of Zycom Corporation.
ADDRESS AND TELEPHONE NUMBER
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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<PAGE>
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. In 1998, we
had revenue of approximately $397.6 million, an operating loss of
approximately $148.7 million, negative EBITDA (before nonrecurring
charges) of approximately $40.8 million, net cash used by
operating activities of continuing operations of approximately
$105.4 million, interest expense of approximately $170.1 million
and a net loss of approximately $418.3 million. "EBITDA (before
nonrecurring charges)" stands for earnings before interest
expense, income taxes, depreciation, amortization and certain
non-recurring costs. EBITDA (before nonrecurring charges) is
widely used in the telecommunications industry as a measure of
a company's performance. EBITDA (before nonrecurring charges)
should not be used as a substitute for net earnings or cash
flows from operations or any other measure of performance in
accordance with generally accepted accounting principles.
Further, the method of calculating EBITDA (before nonrecurring
charges) used by the Company may be different from the methods
used by other companies. We do not anticipate that cash provided
by operations will be sufficient to fund operating activities,
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
December 31, 1998, we had an accumulated deficit of
approximately $1.2 billion and a stockholders' deficit of
approximately $631.2 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 December 31, 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
December 31, 1998, we had, on a consolidated basis, aggregate
indebtedness, including capital lease obligations, of
approximately $1.7 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
remaining 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.
8
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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.
9
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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 incumbent local exchange carriers,
( ) other competitive local exchange carriers,
( ) other integrated communications providers,
( ) network systems integration service providers,
( ) microwave and satellite service providers,
( ) teleport operators,
( ) wireless telecommunications providers,
( ) private networks built by large end users,
( ) local and regional system integrators and
( ) maritime telecommunications providers, such as
COMSAT Corporation.
Potential competitors, using similar or different
technology, include cable television companies, utilities, IPSs,
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 PSI Inc.,
and, ultimately, Level 3 Communications, Inc. and Qwest Communications
International, Inc., once their networks have been sufficiently
developed. Other competitors include GTE, AT&T, Sprint Corporation
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 in time to meet new competitors or at all.
REGULATORY RISKS ARE INHERENT AND SUBSTANTIAL IN OUR BUSINESS
Our services are subject to significant federal, state
and local regulation. We are operating in an industry that is
undergoing substantial change as a result of the passage of the
Telecommunications Act. The Telecomunications Act opened the
local and long distance markets to additional competition and
changed the division of oversight between federal and state
regulators. Now, both federal and state regulators, including
the Federal Communications Commission ("FCC"), share responsibility
for implementing and enforcing the pro-competitive policies and
the provisions of the Telecommunications Act.
The Telecommunications Act generally requires incumbent
local exchange carriers to negotiate agreements to provide
interconnection and nondiscriminatory access to their networks on
more favorable terms than were previously available. However, these
negotiations may involve considerable delay and do not always
result in 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 under the Telecommunications Act. The Supreme
Court did not, however, evaluate the specific pricing methodologies
adopted by the FCC, and the appellate court will further consider
those methodologies. The Supreme Court also upheld the "pick and
choose" rules, which allow competitive local exchange carriers to
adopt individual rates and provisions from agreements an incumbent
carrier has with other carriers. Additionally, the Supreme Court
vacated the FCC rules defining the network elements that must be
unbundled and made available to the competitive local exchange
carriers by the incumbent carriers. The Court held that the FCC
must provide a stronger rationale to support the degree of
unbundling ordered. As a result, the FCC will likely soon hold
a rulemaking proceeding to revise its rules on unbundled network
elements. We view the Supreme Court decision as a favorable
development for the competitive local exchange carrier industry,
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 $58.3 million in 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
11
<PAGE>
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 resolutions of these disputes will be
based on rulings by state public utility commissions and/or by the
FCC.
While we believe that all revenue recorded through
December 31, 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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<PAGE>
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 236 points of presence and 13 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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<PAGE>
Through December 31, 1998, costs associated with Year
2000 compliance issues incurred were approximately $0.5 million
consisting of approximately $0.4 million of replacement hardware
and software and approximately $0.1 million of consulting fees and
other 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 December 31, 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 STOCKHOLDERS
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,
Inc. and subsidiaries as of December 31, 1997 and 1998, and for
the fiscal year ended September 30, 1996, the three months ended
December 31, 1996 and the fiscal years ended December 31, 1997
and 1998, and the related schedule, have been incorporated by
reference herein and in the registration statement in reliance
upon the reports of KPMG LLP, independent certified public
accountants, incorporated by reference herein. Their reports on the
consolidated financial statements as of December 31, 1997 and for the
fiscal years ended December 31, 1996 and 1997 and the three month
period ended December 31, 1996 are based in part on the reports
of Ernst & Young LLP, independent auditors. The consolidated
financial statements referred to above are included in reliance upon
such reports given on the authority of such firms as experts in
accounting and auditing.
The reports of KPMG LLP covering the September 30, 1996
consolidated financial statements and schedule refer to a change
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.
II-1
<PAGE>
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).
------------------------
* Previously filed.
+ Filed herewith.
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-3
<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 30, 1999.
ICG Communications, Inc.
By: *
-------------------------------
J. Shelby Bryan
President, Chief Executive
Officer and Director
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
--------- ----- ----
* Chairman of the
--------------------------- Board of Directors March 30, 1999
William J. Laggett
* President, Chief
--------------------------- Executive Officer
J. Shelby Bryan and Director
(Principal March 30, 1999
Executive Officer)
* Executive Vice
--------------------------- President,
Harry R. Herbst Chief Financial
Officer and March 30, 1999
Director (Principal
Financial Officer)
* Vice President and
--------------------------- Corporate
Richard Bambach Controller March 30, 1999
(Principal
Accounting Officer)
* Director March 30, 1999
---------------------------
Walter Threadgill
* Director March 30, 1999
---------------------------
John U. Moorhead II
* Director March 30, 1999
---------------------------
Leontis Teryazos
* /s/ H. Don Teague
---------------------------------
H. Don Teague, Attorney-in-Fact
II-4
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Description
------- -----------
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)
THELEN REID & PRIEST LLP
40 West 57th Street
New York, NY 10019
March 30, 1999
ICG Communications, Inc.
161 Inverness Drive West
Englewood, Colorado 80112
Re: ICG Communications, Inc.;
Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
We have acted as counsel to ICG Communications,
Inc., a Delaware corporation (the "Registrant"), in
connection with the preparation and filing with the
Securities and Exchange Commission (the "Commission") of
the above-captioned Registration Statement on Form S-3 (the
"Registration Statement") under the Securities Act of 1933,
as amended (the "Act"), relating to the resale by the
holders named therein (the "Selling Stockholders") of up to
an aggregate of 145,997 shares of common stock, $.01 par
value per share, of the Registrant (the "Shares").
In connection therewith, we have examined the
Certificate of Incorporation and the By-Laws of the
Registrant, resolutions of the Board of Directors of the
Registrant and the Registration Statement. We also have
made such inquiries and have examined originals or copies
of other instruments as we have deemed necessary or
appropriate for the purpose of this opinion. For purposes
of such examination, we have assumed the genuineness of all
signatures on and the authenticity of all documents
submitted to us as originals, and the conformity to the
originals of all documents submitted to us as certified or
photostatic copies.
Based upon the foregoing, we are of the opinion
that the Shares are duly authorized, validly issued, fully
paid and non-assessable shares of common stock of the
Registrant.
<PAGE>
ICG Communications, Inc.
Page -2-
March 30, 1999
We hereby consent to the filing of this opinion
as Exhibit 5.1 to the Registration Statement and to the
reference therein to our firm under the caption "Legal
Matters." In giving the foregoing consent, we do not
thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Act or the rules
and regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ Thelen Reid & Priest LLP
THELEN REID & PRIEST LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
ICG Communications, Inc.:
We consent to the use of our reports incorporated herein by
reference and to the reference to our firm under the heading
"Experts" in the propectus.
/s/ KPMG LLP
Denver, Colorado
March 30, 1999
EXHIBIT 23.2
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption
"Experts" in the Registration Statement (Form S-3) and related
Prospectus of ICG Communications, Inc. for the registration of
145,997 shares of its common stock and to the incorporation by
reference therein of our reports (a) dated February 13, 1998 with
respect to the consolidated balance sheet of NETCOM On-Line
Communication Services, Inc. as of December 31, 1997 and the
related statement of operations, stockholders' equity and cash
flows for each of the two years in the period ended December 31,
1997 (not presented separately therein) and (b) dated April 16,
1998 with respect to the consolidated balance sheet of NETCOM On-
Line Communication Services, Inc. as of December 31, 1996 and the
related statements of operations, stockholders' equity and cash
flows for the three months then ended (not presented separately
therein), included in the Annual Report (Form 10-K) of ICG
Communications, Inc., ICG Holdings (Canada) Co. and ICG Holdings,
Inc. for the year ended December 31, 1998 filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
San Jose, California
March 26, 1999
