<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 18, 1996
REGISTRATION NO. 333-04569
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
INTELCOM GROUP (U.S.A.), INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
INTELCOM GROUP INC.
(REGISTRANT WITH RESPECT TO THE GUARANTY)
<TABLE>
<S> <C> <C>
COLORADO 4813, 4899 84-1128866
CANADA 4813, 4899 NOT APPLICABLE
(State or other jurisdiction of (Primary Standard Industrial Classification (I.R.S. Employer Identification Number)
incorporation or organization) Code Number)
</TABLE>
<TABLE>
<S> <C>
INTELCOM GROUP (U.S.A.), INC. INTELCOM GROUP INC.
9605 E. MAROON CIRCLE UNIT 11
P.O. BOX 6742 1155 SERVICE ROAD WEST
ENGLEWOOD, COLORADO 80155-6742 OAKVILLE, ONTARIO
(303) 572-5960 CANADA, L6M 3E3
(905) 469-0686
(Address, including zip code, and telephone number, including area code, of each registrant's principal executive offices)
</TABLE>
JOHN D. FIELD, EXECUTIVE VICE PRESIDENT
9605 E. MAROON CIRCLE
P.O. BOX 6742
ENGLEWOOD, COLORADO 80155-6742
(303) 572-5960
(Name, address, including zip code, and telephone number, including area code,
of agent for service for each registrant)
WITH A COPY TO:
LEONARD GUBAR, ESQ.
REID & PRIEST LLP
40 WEST 57TH STREET
NEW YORK, NEW YORK 10019
(212) 603-2000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON
AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
IF THE SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED IN
CONNECTION WITH THE FORMATION OF A HOLDING COMPANY AND THERE IS COMPLIANCE WITH
GENERAL INSTRUCTION G, CHECK THE FOLLOWING BOX: [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
<PAGE>
INTELCOM GROUP (U.S.A.), INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K SHOWING
LOCATION IN PROSPECTUS OF
ITEMS OF FORM S-4
<TABLE>
<CAPTION>
A. INFORMATION ABOUT THE TRANSACTION
<S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover page of Prospectus............. Facing Page of Registration Statement; Cross Reference Sheet;
Outside Front Cover Page of Prospectus
2. Risk Factors, Ratio of Earnings to Fixed
Charges, and Other Information..................... Inside Front Cover Page of Prospectus; Outside Back Cover
Page of Prospectus
3. Risk Factors, Ratio of Earnings to Fixed
Charges, and Other Information..................... Prospectus Summary; Risk Factors; Summary Historical and Pro
Forma Financial Information;
4. Terms of the Transaction......................... The Exchange Offer; Description of New Notes; Description of
New Preferred Stock; Certain United States Federal Income Tax
Consequences
5. Pro Forma Financial Information.................. Not Applicable
6. Material Contracts with the Company Being
Acquired........................................... Not Applicable
7. Additional Information Required for Reoffering
by Persons and Parties Deemed to be
Underwriters....................................... Not Applicable
8. Interests of Named Experts and Counsel............. Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities..... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants....... Prospectus Summary; Recent Developments; Description of New
Notes; Description of New Preferred Stock
11. Incorporation of Certain Information by
Reference.......................................... Information Incorporated by Reference
12. Information with Respect to S-2 or S-3
Registrants........................................ Not Applicable
13. Incorporation of Certain Information by
Reference.......................................... Not Applicable
14. Information with Respect to Registrants Other
Than S-3 or S-2 Registrants........................ Not Applicable
C. INFORMATION ABOUT THE COMPANY TO BE ACQUIRED
15. Information with Respect to S-3 Companies......... Not Applicable
16. Information with Respect to S-2 or S-3
Companies.......................................... Not Applicable
17. Information with Respect to Companies Other
Than S-3 or S-2 Companies......................... Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations Are To Be Solicited................. Not Applicable
19. Information if Proxies, Consents or
Authorizations Are Not to Be Solicited or in
an Exchange Offer.................................. Not Applicable
</TABLE>
<PAGE>
SUBJECT TO COMPLETION. DATED JUNE 18, 1996
OFFER TO EXCHANGE
ALL OUTSTANDING
12 1/2% SENIOR DISCOUNT NOTES DUE 2006
FOR
12 1/2% SENIOR EXCHANGE DISCOUNT NOTES DUE 2006
OF
INTELCOM GROUP (U.S.A.), INC.
GUARANTEED BY
INTELCOM GROUP INC.
AND
OFFER TO EXCHANGE
ALL OUTSTANDING
EXCHANGEABLE PREFERRED STOCK
MANDATORILY REDEEMABLE 2007
(EXCHANGEABLE AT THE OPTION OF ICG)
FOR
NEW EXCHANGEABLE PREFERRED STOCK
MANDATORILY REDEEMABLE 2007
(EXCHANGEABLE AT THE OPTION OF ICG)
OF
INTELCOM GROUP (U.S.A.), INC.
---------------------------------
THE EXCHANGE OFFERS
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON _____________, 1996 UNLESS EXTENDED
-------------------------------
IntelCom Group (U.S.A.), Inc., a Colorado corporation ("ICG"), hereby
offers upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), (i) to exchange (the "Note Exchange Offer") its outstanding 12
1/2% Senior Discount Notes due 2006 (the "Old Notes"), of which an aggregate
of $550,300,000 in principal amount is outstanding as of the date hereof for
an equal principal amount of newly issued 12 1/2% Senior Exchange Discount
Notes due 2006 (the "New Notes") and (ii) to exchange (the "Preferred Stock
Exchange Offer") its outstanding Exchangeable Preferred Stock (the "Old
Preferred Stock") for an equal amount of newly issued New Exchangeable
Preferred Stock (the "New Preferred Stock"). The form and terms of the New
Notes will be the same as the form and terms of the Old Notes except that the
New Notes will be registered under the Securities Act of 1933, as amended (the
"Securities Act"), and will not bear legends restricting the transfer thereof.
The form and terms of the New Preferred Stock will be the same as the form and
terms of the Old Preferred Stock except that the New Preferred Stock will be
registered under the Securities Act and will not bear legends restricting the
transfer thereof. The New Preferred Stock will be entitled to the benefits of
the First Amended and Restated Articles of Incorporation of ICG, filed with
the Secretary of State of the State of Colorado on April 29, 1996, governing
the Preferred Stock (the "Amended Articles"). The New Notes will be entitled
to the benefits of the indenture, dated as of April 30, 1996, governing the
Notes (the "Indenture"). The New Notes and the Old Notes are sometimes
referred to herein collectively as the "Notes" or the "Senior Notes." The Old
Notes and the Old Preferred Stock are sometimes referred to herein
collectively as the Old Securities, and the New Notes and the New Preferred
Stock are sometimes referred to herein collectively as the New Securities.
The New Preferred
(Continued on next page)
SEE "RISK FACTORS" AT PAGE 19 FOR A DISCUSSION OF CERTAIN RISKS THAT SHOULD
BE CONSIDERED BY ELIGIBLE HOLDERS IN EVALUATING THE EXCHANGE OFFERS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
Stock and the Old Preferred Stock are sometimes referred to herein as the
"Preferred Stock." The Note Exchange Offer and the Preferred Stock Exchange
Offer are sometimes collectively referred to herein as the "Exchange Offers."
There will not be any payment of interest on the New Notes prior to
November 1, 2001. Interest on the New Notes will be paid in cash at the rate
of 12 1/2% per annum on each May 1 and November 1, commencing November 1,
2001, to holders of record on the immediately preceding April 15 and October
15, respectively. Payment of the New Notes is fully and unconditionally
guaranteed by IntelCom. Prior to these Exchange Offers there has been no
public market for any securities of ICG and there can be no assurance that
such a market will develop. See "Description of New Notes." ICG is a
subsidiary of IntelCom Group Inc., a Canadian federal corporation ("IntelCom";
and together with ICG, the "Company").
On or after May 1, 2001, the New Notes are redeemable, at the option of
the Company, in whole or in part, at the redemption prices set forth herein
plus accrued interest to the date of redemption. Upon a Change of Control (as
herein defined), the Company is required to repurchase all of the outstanding
Notes at 101% of the accreted value thereof plus accrued interest to the date
of repurchase. At March 31, 1996, ICG and IntelCom had, on an unconsolidated
basis, approximately $327.1 million of senior indebtedness, including capital
lease obligations, and $68.5 million of subordinated indebtedness outstanding
(which amounts do not include the New Notes and the Note Guarantee).
Dividends on the New Preferred Stock at a rate of 14 1/4% per annum
will be cumulative from the date of issuance and are payable quarterly in cash
or, on or prior to May 1, 2001, at the option of ICG, in additional shares of
Preferred Stock, on each February 1, May 1, August 1 and November 1,
commencing August 1, 1996. If additional shares of Preferred Stock are issued
in lieu of cash dividends, such shares will be registered under the Securities
Act. If additional shares of Preferred Stock are issued in lieu of cash
dividends, such dividends will be registered under the Securities Act. ICG is
required to redeem the New Preferred Stock at the liquidation preference of
$1,000 per share, plus accrued and unpaid dividends on May 1, 2007. The New
Preferred Stock will be redeemable, in whole or in part, at the option of ICG,
at any time on or after May 1, 2001. The New Preferred Stock will be
exchangeable, in whole but not in part, at the option of ICG, into 14 1/4%
Senior Subordinated Exchange Debentures due 2007 of ICG (the "Exchange
Debentures"). If issued, the Exchange Debentures will be redeemable, in whole
or in part, at the option of ICG, at any time on or after May 1, 2001.
The Company will accept for exchange any and all Old Securities which
are properly tendered in the Exchange Offers prior to 5:00 p.m., New York City
time, on _________________ __, 1996 (if and as extended, the "Expiration
Date"). Tenders of Old Securities may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date. The Exchange Offers are not
conditioned upon any minimum principal amount of Old Notes or number of shares
of Old Preferred Stock being tendered for exchange. Old Notes may be tendered
only in integral multiples of $1,000.
Based on a previous interpretation by the staff of the Securities and
Exchange Commission (the "Commission") set forth in no-action letters to third
parties, the Company believes that the New Securities issued pursuant to the
Exchange Offers may be offered for resale, resold and otherwise transferred by
a holder thereof (other than (i) a broker-dealer who purchases such New
Securities directly from the Company to resell pursuant to Rule 144A or any
other available exemption under the Securities Act or (ii) a person that is an
affiliate of the Company (within the meaning of Rule 405 under the Securities
Act)) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that the holder or any other such
person is acquiring the New Securities in its ordinary course of business and
is not participating, and has no arrangement or understanding with any person
to participate, in the distribution of the New Securities. Holders of Old
Securities wishing to accept the Exchange Offers must represent to the Company
that such conditions have been met.
Each broker-dealer that receives New Securities for its own account
pursuant to the Exchange Offers must acknowledge that it will deliver a
Prospectus in connection with any resale of such New Securities. The Letter
of Transmittal states that by so acknowledging and by delivering a prospectus,
a broker-dealer will not be deemed to admit that it is an "underwriter,"
within the meaning of the Securities Act, in connection with resales of New
Securities received in exchange for Old Securities where such Old Securities
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Company has agreed that, for a period of 90
days after the Expiration Date, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
The Company believes that none of the registered holders of the Old
Securities is an affiliate (as such term is defined in Rule 405 under the
Securities Act) of the Company. Prior to this Exchange Offer, there has been
no public market for the Old Securities. The Company does not intend to list
the New Securities on any securities exchange or to seek approval for
quotation through any automated quotation system. There can be no assurance
that an active market for the New Securities will develop. To the extent that
a market for the New Securities does develop, the market value of the New
Securities will depend on market conditions (including yields on alternative
investments), general economic conditions, the Company's financial condition
and other conditions. Such conditions might cause the New Notes, to the
extent that they are actively traded, to trade at a significant discount from
face value. The Company has not entered into any arrangement or understanding
with any person to distribute the New Securities to be received in the
Exchange Offers.
The Company will not receive any proceeds from the Exchange Offers.
The Company has agreed to bear the expenses of the Exchange Offers. No
underwriter is being used in connection with the Exchange Offers.
The date of this Prospectus is _________, 1996.
-2-
<PAGE>
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE
UPON REQUEST ADDRESSED TO INTELCOM GROUP INC., C/O INTELCOM GROUP
(U.S.A.), INC., 9605 E. MAROON CIRCLE, P.O. BOX 6742 ENGLEWOOD, COLORADO
80112, ATTN: INVESTOR RELATIONS (TELEPHONE NUMBER (303) 572-5960). IN
ORDER TO INSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE
MADE BY ________, 1996.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on
Form S-4 under the Securities Act with respect to the New Securities
offered hereby. As permitted by the rules and regulations of the
Commission, this Prospectus omits certain information, exhibits and
undertakings contained in the Registration Statement. For further
information with respect to the Company and the New Securities offered
hereby, reference is made to the Registration Statement, including the
exhibits thereto and the financial statements, notes and schedules filed
as a part thereof. IntelCom is and has been subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Summary financial information with respect to ICG is
contained in the Exchange Act reports of IntelCom. The Registration
Statement (and the exhibits and schedules thereto), as well as the
periodic reports and other information filed by IntelCom with the
Commission, may be inspected and copied at the Public Reference Section
of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C.20549 and at the regional offices of the Commission
located at 7 World Trade Center, New York, New York 10007 and Suite 1400,
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60661-2511. Copies of such materials may be obtained from the Public
Reference Section of the Commission, Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and its public reference
facilities in New York, New York and Chicago, Illinois at the prescribed
rates. Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete, and in each
instance reference is made to the copy of such contract or document filed
as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference.
No person is authorized in connection with any offering made hereby to
give any information or to make any representation other than as
contained in this Prospectus or the accompanying Letter of Transmittal,
and, if given or made, such information or representation must not be
relied upon as having been authorized by the Company. Neither this
Prospectus nor the accompanying Letter of Transmittal or both together
constitute an offer to sell or a solicitation of an offer to buy any
security other than the New Securities offered hereby, nor does it
constitute an offer to sell or a solicitation of an offer to buy any
securities offered hereby to any person in any jurisdiction in which it
is unlawful to make such offer or solicitation to such person. Neither
the delivery of this Prospectus or the accompanying Letter of Transmittal
or both together, nor any sale made hereunder shall under any
circumstances imply that the information contained herein is correct as
of any date subsequent to the date hereof.
INFORMATION INCORPORATED BY REFERENCE
The following documents have been filed by IntelCom with the Commission
and are hereby incorporated by reference and made a part of this
Prospectus:
1. Annual Report on Form 10-K for the year ended September 30, 1995
(File No. 1-11052).
2. Annual Report on Form 10-K/A for the fiscal year ended September
30, 1995 (File No. 1-11052).
3. Quarterly Report on Form 10-Q for the fiscal quarter ended
December 31, 1995 (File No. 1-11052).
4. Quarterly Report on Form 10-Q/A for the fiscal quarter ended March
31, 1996 (File No. 1-11052).
5. Current Report on Form 8-K dated April 29, 1996 (File No. 1-
11052).
6. Current Report on Form 8-K dated April 11, 1996 (File No. 1-
11052).
-3-
<PAGE>
All documents subsequently filed by the Company or IntelCom with the
Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act, after the date of this Prospectus and prior to the termination of
this offering, shall be deemed to be incorporated by reference into the
Registration Statement of which this Prospectus is a part and to be a
part hereof from the date of such filing. Any statement contained in a
document incorporated or deemed to be incorporated by reference in this
Prospectus shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be
incorporated by reference in this Prospectus modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this
Prospectus.
The Company hereby undertakes to provide without charge to each person
to whom this Prospectus is delivered, upon oral or written request of
such person, a copy of any and all information that has been incorporated
by reference into this Prospectus (not including exhibits to the
information unless such exhibits are specifically incorporated by
reference into such information). Requests for information should be
addressed to: IntelCom Group Inc., c/o IntelCom Group (U.S.A.), Inc.,
9605 E. Maroon Circle, P.O. Box 6742, Englewood, Colorado 80112, Attn:
Investor Relations (telephone number (303) 572-5960).
------------------
Until _________________, 1996 (90 days after the date of the Exchange
Offers), all dealers offering transactions in the New Securities, whether
or not participating in the Exchange Offers, may be required to deliver a
Prospectus.
-4-
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus as well as the information
appearing in the documents incorporated by reference herein. Unless the
context otherwise requires, the term "Company" means the combined business
operations of ICG and its subsidiaries and ICG's parent, IntelCom; the terms
"fiscal" and "fiscal year" refer to IntelCom's fiscal year ending September
30; and all dollar amounts are in U.S. dollars. Industry figures were
obtained from reports published by the Federal Communications Commission
("FCC"), the U.S. Department of Commerce, Connecticut Research (an industry
research organization) and other industry sources, which the Company has not
independently verified. Certain information contained in this Summary and
elsewhere in this Prospectus and information with respect to the Company's
plans and strategy for its business and related financing are forward-looking
statements. For a discussion of important factors that could cause actual
results to differ materially from forward-looking statements, see "Risk
Factors." Investors should carefully consider the information set forth under
the caption "Risk Factors" including the risks relating to historical and
anticipated operating losses and negative cash flow.
THE COMPANY
The Company is one of the largest providers of competitive local access
services in the United States, based on estimates of the industry's 1995
revenue. Competitive local exchange companies ("CLECs"), formerly known as
CAPs (competitive access providers), seek to provide an alternative to the
local exchange telephone company ("LEC") for a full range of
telecommunications services in the newly opened federal regulatory
environment. The Company operates networks in 37 cities with populations in
excess of 100,000, has recently acquired fiber optic facilities in 22 more
cities and has networks under construction in four additional cities. As a
result, the Company now serves more Tier II and Tier III markets with
populations of between 250,000 and 2,000,000 than any other CLEC in the United
States, with a significant presence in regional clusters covering major
metropolitan areas in California, Colorado and the Ohio Valley. The Company
also provides a wide range of network systems integration services and
maritime and international satellite transmission services. As a leading
participant in a rapidly growing industry, the Company has experienced
significant growth, with total revenues increasing from $7.6 million for
fiscal 1992 to $111.6 million for fiscal 1995 and $132.4 million for the 12-
month period ended March 31, 1996.
The Federal Telecommunications Act of 1996 (the "Telecommunications Act")
and several state regulatory initiatives have substantially changed the
telecommunications regulatory environment in the United States. Due to these
regulatory changes, the Company is now permitted to offer all interstate and
intrastate switched services, including local dial tone (which the Company
intends to begin offering in the second half of 1996). In order to take
advantage of the switched services market, the Company has installed 13 high
capacity digital switches that enable the Company to offer these services in
all of its markets.
In response to these regulatory changes, the Company is accelerating the
development of its telecom services business and, in order to facilitate rapid
and cost-effective expansion, is investing significant resources to expand its
network footprint and service offerings and is entering into agreements with
utility companies and other local strategic partners. The Company has entered
into long-term agreements with three utilities, Southern California Edison
Company ("SCE"), City Public Service of San Antonio ("CPS") and a subsidiary
of The Southern Company ("Southern"). Under these agreements, the Company is
licensing fiber optic facilities in Southern California (1,258 miles), San
Antonio (300 miles, 60 of which currently exist) and Birmingham (144 miles, 22
of which currently exist). The Company also has invested in ICG Telecom of
San Diego, L.P., a California limited partnership (formerly known as Linkatel
California, L.P., a California limited partnership) ("ICG Telecom of San
Diego"), which operates a fiber optic network (50 miles) in metropolitan San
Diego. The Company is actively pursuing licensing arrangements with other
utility companies and other strategic partners.
The Company also has entered into a national contract with AT&T Corp.
("AT&T") under which the Company will provide special and switched access
services to AT&T on the Company's networks.
-5-
<PAGE>
TELECOM SERVICES
The Company operates networks in the following markets within its three
regional clusters: California (Sacramento, San Diego and 17 cities in the Los
Angeles and San Francisco metropolitan areas); Colorado (Denver, Colorado
Springs and Boulder); and the Ohio Valley (Akron, Cleveland, Columbus, Dayton
and Louisville). The Company also operates networks in Birmingham, Charlotte,
Phoenix, Melbourne (Florida) and Nashville. The Company has recently acquired
fiber optic facilities in 22 additional cities in the Los Angeles metropolitan
area through its agreement with SCE and is developing networks in Cincinnati,
Greensboro/Winston-Salem and San Antonio. The Company intends to sell its
networks in Melbourne and Phoenix. The Company's operating networks have
grown from approximately 12,000 customer voice grade equivalent circuits
("VGEs") at the end of fiscal 1992 to approximately 430,000 VGEs at the end of
fiscal 1995 and 511,000 VGEs as of March 31, 1996. This has driven
telecom services revenue from $1.1 million for fiscal 1992 to $32.3 million
for fiscal 1995 and $50.6 million for the 12-month period ended March 31,
1996.
STRATEGY
The Company's goal is to become the dominant alternative to the LEC in the
markets it serves. In furtherance of this goal, the Company has developed a
strategy to capitalize on its established customer base of long distance
carriers and to develop its markets within regional clusters. Key elements of
this strategy are:
Market Services Primarily to Long Distance Carriers. The Company believes
there are several advantages to acting as a "carrier's carrier" and marketing
its services primarily to long distance carriers and resellers. Long distance
carriers generally determine who will carry the local segment of a long
distance telephone call, thereby enabling the Company to reduce its marketing
costs by focusing on a few high-volume customers. Also, the continuing
deregulation of local telephone service creates new opportunities for the
Company to work with its long distance carrier customers to develop and
deliver local dial tone and new enhanced products and services. The major
long distance carriers served by the Company operate in all U.S. markets and
provide the Company with information about business opportunities and the
carriers' anticipated needs in markets the Company may enter. The carriers
and resellers served by the Company accounted for approximately 82% of the
Company's telecom services revenue for fiscal 1995. The Company believes that
its "carrier's carrier" strategy reduces the risks associated with significant
network investments because the Company works with long distance carrier
customers, such as AT&T, MCI Communications Corp. ("MCI"), Sprint Corporation
("Sprint") and WorldCom, Inc. ("WorldCom"), to develop new products and
services.
Concentrate Markets in Regional Clusters. The Company's "first to market"
advantage in certain cities has allowed it to concentrate its networks in
regional clusters serving major metropolitan areas in California, Colorado and
the Ohio Valley. The Company believes that by focusing on regional clusters
it will be able to more effectively service its customers' needs and
efficiently develop, operate and control its networks. The Company also is
evaluating the expansion of its existing clusters and the addition of new
regional clusters in which it may seek to acquire, build or license fiber
optic facilities.
Expand Alliances with Utilities. The Company has established, and is
actively pursuing, strategic alliances with utility companies to take
advantage of their existing fiber optic infrastructures. This approach
affords the Company the opportunity to license or lease fiber optic facilities
on a long-term basis throughout a utility's service area in a more timely,
cost-effective manner than constructing facilities. In addition, utilities
possess conduit and rights of way that facilitate the installation of fiber to
extend the existing network in a given market.
Aggressively Pursue Local Dial Tone and Switched Services. With the passage
of the Telecommunications Act, LECs will be allowed to offer long distance
services in competition with the Company's current long distance carrier
customers. As a result, the Company's long distance carrier customers are
seeking to rapidly reduce their reliance on LEC networks. By offering an
array of telecommunications products, including local dial tone and enhanced
services, the Company will be providing a high quality, lower cost alternative
to the LEC. As a result, the Company expects switched services to become a
primary business of the Company as it introduces local dial tone in the second
half of 1996. The Company has established a network of 13 switches in its
markets to offer these
-6-
<PAGE>
services. The Company's switched minutes of use have increased from 10
million minutes in the first quarter of fiscal 1995 to 362 million minutes
in the second quarter of fiscal 1996.
NETWORK SERVICES
Through the Company's wholly owned subsidiary, Fiber Optic Technologies,
Inc. ("FOTI"), the Company supplies information technology services, focusing
on client/server technologies, network design, installation, maintenance and
support for a variety of end users, including large businesses and
telecommunications companies. The Company specializes in the installation and
support of network systems for clients that include Amoco Corporation
("Amoco"), MCI, Intel Corporation ("Intel") and other leading Fortune 1000
firms. Revenue for Network Services has grown from $13.3 million for the 12-
month period ended September 30, 1992 (including revenue prior to the
Company's acquisition of FOTI) to $58.8 million for fiscal 1995 and $59.7
million for the 12-month period ended March 31, 1996.
SATELLITE SERVICES
The Company's Satellite Services operations provide satellite-based voice
and data connectivity to domestic and international customers. The Company
operates a maritime telecommunications business providing satellite telephone
services to major cruise ship lines and the U.S. Navy, a VSAT (very small
aperture terminal) data transmission business and a teleport providing
international voice and data services. The Company also recently acquired 90%
of the outstanding shares of Maritime Cellular Tele-Network, Inc. ("MCN"), a
Florida-based maritime telecommunications operator, which provides satellite
telephone services to smaller vessels and will complement the Company's
existing cruise ship telephone services business. The Company recently sold
four teleports (Atlanta, Denver, Los Angeles and New Jersey) to Vyvx, Inc., a
subsidiary of The Williams Companies ("Vyvx"), for a cash purchase price of
approximately $21.5 million. The Company continues to own and operate one
teleport and has the right to lease capacity on the teleports it sold.
Revenue for the Satellite Services operations (adjusted to reflect the sale of
the teleports) was $11.4 million for fiscal 1995 and $14.9 million for the
12-month period ended March 31, 1996.
RECENT DEVELOPMENTS
NETWORK EXPANSION
In March 1996, the Company and SCE jointly filed an agreement with the
California Public Utilities Commission ("CPUC") under which the Company will
license 1,258 miles of fiber optic cable in Southern California. This
network, which will be operated and maintained by the Company, stretches from
suburban Los Angeles to San Diego. In addition, the agreement allows the
Company to utilize SCE's facilities to install up to 500 additional miles of
fiber optic cable. The Company has identified over 1,300 buildings which,
based upon estimates of building size and telecommunications traffic volumes,
will be targeted by the Company for connection to the network. The Company
believes this agreement is strategically important to enhancing its market
position in California and providing it with a fiber optic infrastructure in a
timely, cost-effective manner.
In March 1996, the Company entered into a national contract with AT&T under
which the Company will provide special and switched access services to AT&T.
The Company and AT&T have initially identified 12 MSAs (metropolitan
statistical areas) in which the Company will provide services and are in
discussions with respect to seven additional MSAs in which the Company may
provide services. The Company believes that this agreement is indicative of a
trend by long distance carriers to shift origination and termination of long
distance traffic away from LEC networks to the facilities of CLECs. Under the
agreement, the Company will work with AT&T to provide special and switched
access services in the Company's other markets and new markets which the
Company may enter.
The Company recently invested $10.0 million to acquire a 60% interest in,
and became the general partner of, ICG Telecom of San Diego, whose other
partners are Linkatel Communications, Inc. and The Copley Press, Inc., the
publisher of The San Diego Union Tribune ("Copley Press"). ICG Telecom of
San Diego operates a 50-mile fiber optic network and is constructing an
additional 110 miles of fiber in metropolitan San Diego. As a result of
-7-
<PAGE>
the ICG Telecom of San Diego acquisition, combined with the Company's
existing California networks and the facilities under agreement with SCE, the
Company now has a network presence in all major metropolitan areas of
California.
In November 1995, the Company entered into a long-term agreement with CPS to
license half of the capacity on a 300-mile fiber optic network (60 of which
currently exist) in greater San Antonio. CPS will construct the remaining
240-mile network in conjunction with the Company. Upon completion, the
network is expected to be able to service 120 buildings. During construction,
the Company will be able to provide services to completed segments of the
network.
In March 1996, the Company entered into a long-term license agreement with a
subsidiary of Southern and Alabama Power Company ("Alabama Power"), for the
right to use 22 miles of fiber and 122 miles of additional Alabama Power
facilities to reach the three major business centers in Birmingham.
In February 1996, the Company entered into a long-term agreement with
WorldCom under which the Company will pay approximately $8.8 million for the
right to use fiber along a 330-mile fiber optic network in Ohio. The network,
which is being constructed by WorldCom in conjunction with the Company, will
provide a direct fiber link between the Company's existing networks in Akron,
Cleveland, Columbus and Dayton and its new network under development in
Cincinnati.
MANAGEMENT
The Company named James D. Grenfell as Executive Vice President, Chief
Financial Officer and Treasurer in November 1995. Mr. Grenfell has been a
financial executive in the telecommunications industry for over 15 years, most
recently with BellSouth Corp.
Accounting Changes. Effective January 1, 1996, the Company changed its
method of accounting for long-term telecom services contracts to recognize
revenue as services are provided. The Company also has shortened the
estimated depreciable lives of substantially all of its fixed assets. The
Company believes this revised accounting method and the changes in estimated
depreciable lives are preferable because they are more consistent with
accounting practices within the telecommunications industry.
United States Incorporation. The Board of Directors of IntelCom has adopted
a plan under which IntelCom will become a subsidiary of a new publicly traded
United States corporation.
FINANCING
In April 1996, ICG completed a private offering (the "Private Offering") of
(i) the Old Notes which are guaranteed on a senior unsecured basis by IntelCom
(the "Note Guarantee"), and (ii) the Old Preferred Stock, for aggregate gross
proceeds of approximately $450.0 million. The Company believes that its
liquidity will be improved because the Notes and the Preferred Stock do not
require the payment of cash interest and of cash dividends, respectively,
prior to 2001.
The Preferred Stock accrues dividends quarterly at an annual rate of 14
1/4% per annum. Dividends are payable quarterly in cash or, on or prior to
May 1, 2001, at the sole option of ICG, in additional shares of Preferred
Stock.
Management believes that the net proceeds from the Private Offering, amounts
expected to be available through vendor financing arrangements and the funds
remaining from the Unit Offering will permit the Company to expand its telecom
services business as currently planned and to fund its operating deficits for
approximately 24 months. Additional sources of cash, including from the
issuance of equity securities, will be required in the near term.
-8-
<PAGE>
THE EXCHANGE OFFERS
The Note Exchange Offer............... The Company is offering to exchange
$1,000 principal amount of New Notes
for each $1,000 principal amount of
Old Notes that are properly tendered
and accepted. The Company will issue
the New Notes on or promptly after
the Expiration Date. The New Notes
will be fully and unconditionally
guaranteed by IntelCom. There are
$550,300,000 aggregate principal
amount of Old Notes outstanding. See
"The Exchange Offers."
The Preferred Stock Exchange
Offer.............................. The Company is offering to exchange
one share of New Preferred Stock for
each share of Old Preferred Stock
that is properly tendered and
accepted. The Company will issue the
New Preferred Stock on or promptly
after the Expiration Date. There are
150,000 shares of Old Preferred Stock
outstanding. See "The Exchange
Offers."
Resale of New Securities.............. Based on an interpretation by the
staff of the Commission set forth in
no-action letters issued to third
parties, including "Exxon Capital
Holdings Corporation" (available May
13, 1988), "Morgan Stanley & Co.
Incorporated" (available June 5,
1991), "Mary Kay Cosmetics, Inc."
(available June 5, 1991) , "Warnaco,
Inc." (available October 11, 1991)
and "K-III Communications Corp."
(available May 14, 1993), the Company
believes that New Securities issued
pursuant to the Exchange Offers in
exchange for Old Securities may be
offered for resale, resold and
otherwise transferred by any holder
thereof (other than any such holder
which is an "affiliate" of the
Company within the meaning of Rule
405 under the Securities Act) without
compliance with the registration and
prospectus delivery provisions of the
Securities Act, provided that such
New Securities are acquired in the
ordinary course of such holder's or
any other such person's business and
that such holder or any other such
person has no arrangement or
understanding with any person to
participate in the distribution of
such New Securities. Under no
circumstances may this Prospectus be
used for an offer to resell or other
retransfer of New Securities. In the
event that the Company's belief is
inaccurate, holders of New Securities
who transfer New Securities in
violation of the prospectus delivery
provisions of the Securities Act and
without an exemption from
registration thereunder may incur
liability thereunder. The Company
does not assume or indemnify holders
against such liability. The Exchange
Offers are not being made to, nor
will the Company accept surrenders
for exchange from, holders of Old
Securities (i) in any jurisdiction in
which the Exchange Offers or the
acceptance thereof would not be in
compliance with the securities or
blue sky laws of such jurisdiction or
(ii) if any holder is engaged or
intends to engage in a distribution
of the New Securities. Each
broker-dealer that receives New
Securities for its own account in
exchange for Old Securities, where
such Old Securities were acquired by
such broker-dealer as a result of
market-making activities or other
trading activities, must acknowledge
that it will deliver a prospectus in
connection with any resale of such
New Securities. The Company has not
entered into any arrangement or
understanding with any person to
distribute the New Securities to be
received in the Exchange Offers. See
"Plan of Distribution."
Expiration Date....................... The Exchange Offers will expire at
5:00 p.m., New York City time, on
________, 1996 unless extended, in
which case the term "Expiration Date"
shall mean the latest date and time
to which the Exchange Offers are
extended. The Company will accept
for exchange any and all Old
Securities which are properly
tendered in the Exchange Offers prior
to 5:00 p.m., New York City time, on
the Expiration Date. The New
Securities issued pursuant
-9-
<PAGE>
to the Exchange Offers will be
delivered on or promptly after the
Expiration Date.
Conditions to the Exchange
Offers............................. The Company may terminate the
Exchange Offers if it determines that
its ability to proceed with the
Exchange Offers could be materially
impaired due to any legal or
governmental action, any new law,
statute, rule or regulation, any
interpretation by the staff of the
Commission of any existing law,
statute, rule or regulation or the
failure to obtain any necessary
approvals of governmental agencies or
holders of the Old Securities. The
Company does not expect any of the
foregoing conditions to occur,
although there can be no assurances
that such conditions will not
occur.
Procedures for Tendering Old Notes
and Old Preferred Stock............ Each holder of Old Securities wishing
to participate in the Exchange Offers
must complete, sign and date the
Letter of Transmittal, or a facsimile
thereof, in accordance with the
instructions contained herein and
therein, and mail or otherwise
deliver such Letter of Transmittal,
or such facsimile, together with such
Old Notes or such Old Preferred
Stock, as the case may be, and any
other required documentation to
Norwest Banks, as exchange agent for
the Notes (the "Exchange Agent"), or
to American Stock Transfer and Trust
Company as transfer agent for the
Preferred Stock (the "Transfer
Agent") at the addresses set forth
herein. By executing the Letter of
Transmittal, each holder will
represent to the Company that, among
other things, the New Securities
acquired pursuant to the Exchange
Offers are being obtained in the
ordinary course of business of the
person receiving such New Securities,
whether or not such person has an
arrangement or understanding with any
person to participate in the
distribution of such New Securities
and that neither the holder nor any
such other person is an "affiliate,"
as defined in Rule 405 under the
Securities Act, of the Company.
Special Procedures for Beneficial
Owners............................. Any beneficial owner whose Old
Securities are registered in the name
of a broker, dealer, commercial bank,
trust company or other nominee and
who wishes to tender such Old
Securities in the Exchange Offers
should contact such registered holder
promptly and instruct such registered
holder to tender on such beneficial
owner's behalf. If such beneficial
owner wishes to tender on such
owner's own behalf, such owner must,
prior to completing and executing the
Letter of Transmittal and delivering
its Old Securities, either make
appropriate arrangements to register
ownership of the Old Securities in
such owner's name or obtain a
properly completed bond power from
the registered holder. The transfer
of registered ownership may take
considerable time and may not be able
to be completed prior to the
Expiration Date.
Guaranteed Delivery
Procedures......................... Holders of Old Securities who wish to
tender their Old Securities and whose
Old Securities are not immediately
available or who cannot deliver their
Old Securities or the Letter of
Transmittal to the Exchange Agent or
the Transfer Agent, as the case may
be, prior to the Expiration Date,
must tender their Old Securities
according to the guaranteed delivery
procedures set forth in "The Exchange
Offer--Guaranteed Delivery
Procedures."
Withdrawal Rights..................... Tenders of Old Securities may be
withdrawn at any time prior to 5:00
p.m., New York City time, on the
Expiration Date.
Certain Federal Income Tax
Considerations.....................
-10-
<PAGE>
For a discussion of certain federal
income tax considerations relating to
the exchange of the New Notes for the
Old Notes and the New Preferred Stock
for the Old Preferred Stock, see
"Certain United States Federal Income
Tax Considerations."
Exchange Agent........................ Norwest Banks is the Exchange Agent.
Its telephone number is (612)
667-4070. The address of the
Exchange Agent is set forth in "The
Exchange Offers--Exchange Agent."
Transfer Agent........................ American Stock Transfer & Company is
the Transfer Agent. Its telephone
number is (212) 936-5100. The
address of the Transfer Agent is as
set forth in the "Exchange
Offers--Transfer Agent."
THE NEW NOTES
Aggregate Amount....................... $550,300,000 principal amount at
maturity ($300,029,063 original issue
price) of 12 1/2% Senior Exchange
Discount Notes due May 1, 2006.
Yield and Interest..................... From and after May 1, 2001, the New
Notes will bear interest, which will
be payable in cash, at a rate of 12
1/2% per annum on each May 1 and
November 1, commencing November 1,
2001.
Optional Redemption................... On or after May 1, 2001, the New
Notes will be redeemable at the
option of ICG, in whole or in part,
at the redemption prices set forth
herein, plus accrued and unpaid
interest to the date of redemption.
See "Description of New
Notes--Optional Redemption."
Optional Redemption Upon Public
Equity Offering................. At any time, or from time to time, on
or prior to May 1, 1999, ICG may, at
its option, redeem New Notes having a
principal amount of up to 35% of the
principal amount of the Old Notes
initially issued, at a redemption
price equal to 112 1/2% of the
Accreted Value of such New Notes on
the date of redemption, with the
proceeds of one or more Public Equity
Offerings. See "Description of New
Notes--Optional Redemption."
Guarantee............................. The New Notes will be guaranteed on a
senior, unsecured basis by IntelCom.
Ranking............................... The New Notes and the Note Guarantee
will be senior, unsecured obligations
of ICG and IntelCom, respectively,
will rank pari passu in right of
payment with all existing and future
unsecured, unsubordinated obligations
and will be senior in right of
payment to all existing and future
subordinated indebtedness of ICG and
IntelCom. At March 31, 1996, ICG
and IntelCom had, on an
unconsolidated basis, approximately
$327.1 million of senior
indebtedness (which amount does not
include the Old Notes and the Note
Guarantee), including capitalized
lease obligations, and $68.5
million of subordinated indebtedness.
IntelCom and ICG are each holding
companies. The New Notes and the Note
Guarantee will be effectively
subordinated to all liabilities
(including trade payables) of the
subsidiaries of ICG and IntelCom and
at March 31, 1996, the
subsidiaries of ICG had approximately
$115.7 million of liabilities
(excluding intercompany payables to
ICG), including $78.0 million of
indebtedness. IntelCom and ICG are
expected to incur substantial amounts
of indebtedness in the future,
subject to compliance with the terms
of the Company's indebtedness,
including the Notes Indenture (as
defined herein), and the Amended
Articles. See "Risk
Factors--Substantial Indebtedness;
Ability to Service Debt"
and
-11-
<PAGE>
"--Holding Company Reliance on
Subsidiaries' Funds; Priority of
Creditors; Subordination of Exchange
Debentures."
Additional Amounts.................... Any payments made by IntelCom
pursuant to the Note Guarantee will
be made without withholding or
deduction for Canadian taxes unless
required by law or the interpretation
or administration thereof, in which
case IntelCom will pay such
additional amounts as may be
necessary so that the net amount
received by the holders after such
withholding or deduction will not be
less than the amount that would have
been received in the absence of such
withholding or deduction. See
"Description of New Notes--Additional
Amounts."
Redemption for Changes in
Canadian Withholding
Taxes.............................. In the event IntelCom becomes
obligated to make payments in respect
of the New Notes pursuant to the Note
Guarantee and if, as a result of
certain changes affecting Canadian
withholding taxes, IntelCom becomes
obligated to pay additional amounts
in accordance with the Notes
Indenture, the New Notes will be
redeemable, as a whole but not in
part, at the option of IntelCom at
any time at 100% of their Accreted
Value plus accrued interest, if any.
See "Description of New
Notes--Optional Redemption."
Certain Covenants..................... The Notes Indenture contains certain
covenants which, among other things,
restrict the ability of IntelCom, ICG
and their Restricted Subsidiaries (as
defined herein) to incur additional
indebtedness; create liens; engage in
sale-leaseback transactions; pay
dividends or make distributions in
respect of their capital stock (other
than with respect to the Preferred
Stock); make investments or make
certain other restricted payments;
sell assets; create restrictions on
the ability of Restricted
Subsidiaries to make certain
payments; issue or sell stock of
certain subsidiaries; enter into
transactions with stockholders or
affiliates; and, with respect to
IntelCom and ICG, consolidate, merge
or sell all or substantially all of
its assets. See "Description of New
Notes--Certain Covenants."
Change of Control..................... Upon a Change of Control (as defined
herein), ICG is required to make an
offer to purchase the New Notes at a
purchase price equal to 101% of their
Accreted Value on the date of
purchase plus accrued interest, if
any. See "Description of New
Notes--Repurchase of New Notes upon a
Change of Control."
THE NEW PREFERRED STOCK
Preferred Stock....................... 150,000 shares of New Exchangeable
Preferred Stock.
Dividends............................. Cumulative at 14 1/4% per annum. All
dividends will be payable quarterly
in cash or, on or prior to May 1,
2001, at the sole option of ICG, in
additional shares of Preferred Stock,
on February 1, May 1, August 1 and
November 1, commencing August 1,
1996. Dividends on the New Preferred
Stock will accrue and be cumulative
from the date of issuance thereof.
For federal income tax purposes,
distributions with respect to the New
Preferred Stock are not expected to
qualify as dividends and will be
treated as a return of capital until
ICG has earnings and profits as
determined under applicable federal
income tax principles. See "Certain
United States Federal Income Tax
Considerations--Tax Consequences to
United States Holders--Dividends on
the New Preferred Stock."
-12-
<PAGE>
Liquidation Preference................ $1,000 per share, plus accrued and
unpaid dividends.
Voting................................ Holders of the New Preferred Stock
will have no voting rights except as
provided by law and as provided in
Amended Articles. In the event that
dividends are not paid for any four
quarters, whether or not consecutive,
or upon certain other events
(including failure to comply with
covenants and failure to pay the
mandatory redemption price when due),
then the number of directors
constituting ICG's Board of Directors
will be adjusted to permit the
holders of the majority of the then
outstanding New Preferred Stock,
voting separately as a class, to
elect two directors. See "Description
of New Preferred Stock--Voting."
Mandatory Redemption.................. ICG is required to redeem the New
Preferred Stock on May 1, 2007
(subject to the legal availability of
funds therefor) at a redemption price
equal to the liquidation preference,
plus accrued and unpaid dividends to
the redemption date. See "Description
of New Preferred Stock--Mandatory
Redemption."
Optional Redemption................... On or after May 1, 2001, the New
Preferred Stock is redeemable, at the
option of ICG, in whole or in part,
at the redemption prices set forth
herein, plus accrued and unpaid
dividends to the redemption date. See
"Description of New Preferred
Stock--Optional Redemption."
Optional Redemption Upon Public
Equity Offering................. At any time, or from time to time, on
or prior to May 1, 1999, ICG may, at
its option, redeem shares of Old
Preferred Stock having an aggregate
liquidation preference of up to 35%
of the aggregate liquidation
preference of all shares of New
Preferred Stock originally issued at
a redemption price equal to 114 1/4%
of the liquidation preference
thereof, plus accrued and unpaid
dividends to the redemption date,
with the proceeds of one or more
Public Equity Offerings. See
"Description of New Preferred
Stock--Optional Redemption."
Ranking............................... The New Preferred Stock will rank (i)
senior to all common stock of ICG and
to all other capital stock of ICG
unless the terms of such stock
expressly provide that it ranks
senior to or on a parity with the New
Preferred Stock; (ii) on a parity
with any capital stock of ICG the
terms of which expressly provide that
it will rank on a parity with the New
Preferred Stock; and (iii) junior to
all capital stock of ICG the terms of
which expressly provide that such
stock will rank senior to the New
Preferred Stock. See "Description of
New Preferred Stock--Ranking."
Optional Exchange Feature............. The New Preferred Stock is
exchangeable into Exchange Debentures
at the option of ICG, in whole but
not in part, subject to (i) such
exchange being permitted by the terms
of the Notes Indenture and the 13
1/2% Notes Indenture (as defined
herein), and (ii) the conditions
described in the Amended Articles
being satisfied. See "Description of
New Preferred Stock--Exchange" and
"Description of Exchange Debentures."
Certain Covenants..................... The Amended Articles contain certain
covenants which, among other things,
restrict the ability of ICG and its
Restricted Subsidiaries to incur
additional indebtedness and issue
preferred stock; create liens; pay
dividends or make distributions in
respect of their capital stock; make
investments or make certain other
restricted payments; sell assets;
create restrictions on the ability of
Restricted Subsidiaries to make
certain payments; issue or sell stock
of Restricted Subsidiaries; enter
into transactions with stockholders
or affiliates; incur senior
subordinated indebtedness; and, with
respect to IntelCom and
-13-
<PAGE>
ICG, consolidate, merge or sell all
or substantially all of its assets.
See "Description of New Preferred
Stock--Certain Covenants."
Change of Control.................... Upon a Change of Control, ICG is
required to make an offer to purchase
the shares of New Preferred Stock at
a purchase price equal to 101% of
their liquidation preference on the
date of purchase, plus accrued and
unpaid dividends to the date of
purchase. See "Description of New
Preferred Stock--Change of Control."
THE EXCHANGE DEBENTURES
Exchange Debentures................... 14 1/4% Subordinated Exchange
Debentures due May 1, 2007 in an
aggregate principal amount equal to
the aggregate liquidation preference
of, and accrued but unpaid dividends
on, the New Preferred Stock
outstanding on the Exchange Date (as
defined herein).
Interest Payment Dates................ May 1 and November 1 of each year,
commencing with the first of such
dates to occur after the Exchange
Date. On or prior to May 1, 2001, the
Company may pay interest on the
Exchange Debentures by issuing
additional Exchange Debentures.
Optional Redemption.................. On or after May 1, 2001, the Exchange
Debentures are redeemable, at the
option of ICG, in whole or in part,
at the redemption prices set forth
herein, plus accrued and unpaid
interest to the redemption date. See
"Description of Exchange
Debentures--Optional Redemption."
Optional Redemption Upon Public
Equity Offering................. At any time, or from time to time, on
or prior to May 1, 1999, ICG may, at
its option, redeem Exchange
Debentures having a principal amount
of up to $52.5 million at a
redemption price equal to 114 1/4% of
the principal amount thereof, plus
accrued and unpaid interest to the
redemption date, with the proceeds of
one or more Public Equity Offerings.
See "Description of Exchange
Debentures--Optional Redemption."
Guarantee............................. IntelCom will guarantee the Exchange
Debentures on a senior subordinated
unsecured basis (the "Debenture
Guarantee").
Ranking............................... The Exchange Debentures will be
senior subordinated Indebtedness of
ICG, subordinated to the prior
payment when due of the principal of,
and premium, if any, and accrued and
unpaid interest on, all existing and
future Senior Indebtedness (as
defined herein) of ICG (including the
New Notes) and senior to the prior
payment when due of the principal and
premium, if any, and accrued and
unpaid interest on, all subordinated
Indebtedness of ICG. IntelCom's
guarantee of the Exchange Debentures
will be senior subordinated
Indebtedness of IntelCom,
subordinated to the prior payment
when due of the principal of, and
premium, if any, and accrued and
unpaid interest on, all existing and
future Senior Guarantor Indebtedness
(as defined herein) of IntelCom
(including the Note Guarantee) and
senior to the prior payment when due
of the principal of, and premium, if
any, and accrued and unpaid interest
on, all subordinated Indebtedness of
IntelCom.
Certain Covenants.................... The Exchange Debenture Indenture (as
defined herein) contains certain
covenants which, among other things,
restricts the ability of IntelCom,
ICG and their Restricted Subsidiaries
to incur additional indebtedness;
create liens; pay dividends or make
distributions in respect of their
capital stock; make investments or
make certain other restricted
payments; sell assets;
-14-
<PAGE>
create restrictions on the ability of
Restricted Subsidiaries to make
certain payments; issue or sell stock
of certain subsidiaries; enter into
transactions with stockholders or
affiliates; incur senior subordinated
indebtedness; and, with respect to
IntelCom and ICG, consolidate, merge
or sell all or substantially all of
their assets. See "Description of
Exchange Debentures--Certain
Covenants."
Registration Requirements............ The Exchange Debentures may not be
issued unless such issuance is
registered under the Securities Act
or is exempt from registration.
Additional Amounts................... Any payments with respect to the
Exchange Debentures made by IntelCom
pursuant to the Debenture Guarantee
will be made without withholding or
deduction for Canadian taxes unless
required by law or the interpretation
or administration thereof, in which
case IntelCom will pay such
additional amounts as may be
necessary so that the net amount
received by the holders after such
withholding or deduction will not be
less than the amount that would have
been received in the absence of such
withholding or deduction. See
"Description of Exchange
Debentures--Additional Amounts."
Redemption for Changes in
Canadian Withholding
Taxes.............................. In the event IntelCom becomes
obligated to make payments in respect
of the Exchange Debentures pursuant
to the Debenture Guarantee and if, as
a result of certain changes affecting
Canadian withholding taxes, IntelCom
becomes obligated to pay additional
amounts in accordance with the
Exchange Debenture Indenture, the
Exchange Debentures will be
redeemable, as a whole but not in
part, at the option of IntelCom at
any time at 100% of their principal
amount plus accrued interest, if any.
See "Description of Exchange
Debentures--Optional Redemption."
Change of Control..................... Upon a Change of Control, ICG is
required to make an offer to purchase
the Exchange Debentures at a purchase
price equal to 101% of their
principal amount on the date of
purchase plus accrued interest, if
any. See "Description of Exchange
Debentures--Change of Control."
RISK FACTORS
For a discussion of certain matters that should be considered by
prospective investors in connection with the Exchange Offers, See "Risk
Factors."
-15-
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA INFORMATION(1)
(IN THOUSANDS, EXCEPT STATISTICAL DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED SEPTEMBER 30, MARCH 31,
---------------------------------------------- ------------------
PRO FORMA PRO FORMA
---------- ---------
1993 1994 1995 1995(3) 1995 1996(2) 1996(3)
---- ---- ---- ------- ---- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(2):
Revenue:
Telecom services......................... $ 4,803 $ 14,854 $ 32,330 $ 32,330 $ $ $ 31,148
$12,833 $31,148
Network services......................... 21,006 36,019 58,778 58,778 28,789 29,691 29,691
Satellite services....................... 3,520 8,121 20,502 11,360 8,934 10,504 8,026
Other.................................... 147 118 -- -- -- -- --
Total revenue........................ 29,476 59,112 111,610 102,468 50,556 71,343 68,865
Operating loss................................... (3,660) (15,266) (46,814) (44,164) (17,289) (31,081) (29,717)
Interest expense................................. (2,523) (8,481) (24,368) (73,994) (6,197) (29,432) (60,081)
Net loss $(4,609) (23,868) (76,181) (157,288) (23,041) (60,554) (111,739)
Preferred Stock Dividend......................... -- -- -- (467) -- (1,027) (1,027)
Net loss attributable to common shareholders..... $(4,609) $(23,868) $(76,648) $(157,695) $(23,041) $(61,581) $(112,766)
======= ======== ======== ========= ======== ======== =========
Loss per common shares........................... $(0.39) $(1.56) $(3.25) $(6.68) $(1.01) $(2.42) $(4.43)
====== ====== ====== ====== ====== ====== ======
Weighted average number of common
shares outstanding.............................. 11,671 15,342 23,604 23,604 22,746 25,471 25,471
OTHER DATA:
EBITDA(4)........................................ (187) (7,068) (30,190) (29,754) (10,182) (18,720) (18,009)
Ratio of earnings to combined fixed charges and
preferred stock dividends(5)............. -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
----------
ENDED
------
YEARS ENDED SEPTEMBER 30, MARCH 31,
------------------------- ---------
1993 1994 1995 1995 1996
------- -------- -------- -------- ---------
STATISTICAL DATA(6):
<S> <C> <C> <C> <C> <C>
Telecom networks:
Cities served............................ 6 30 32 32 37
Buildings connected
On-net.................................. 97 226 280 251 327
Off-net................................. -- -- 1,095 777 1,401
------- -------- -------- -------- --------
Total buildings connected............. 97 226 1,375 1,028 1,728
Customer circuits in service (VGEs)...... 50,044 224,072 430,535 287,167 510,755
Switches operational..................... -- 1 13 6 13
Switched minutes of use (millions)....... -- 2 283 32 362
Fiber route miles(7)
Operational............................. 168 323 627 466 780
Under construction...................... -- -- -- -- 1,921
Fiber strand miles(8)
Operational............................. 8,024 14,959 27,150 21,811 36,310
Under construction...................... -- -- -- -- 52,351
Wireless route miles(9)................. -- 606 568 606 582
Satellite services:
Teleports............................... 1 4 5 5 1
Teleport antennas........................ 15 48 59 58 7
</TABLE>
-16-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Uplink hours(10)......................... 19,949 49,166 141,736 33,158 --
VSATs.................................... -- 810 626 694 658
Maritime installations................... -- -- 27 17 33
Maritime minutes of use (thousands)...... -- -- 1,424 251 1,337
</TABLE>
(Accompanying notes are on the following page)
-17-
<PAGE>
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------
ACTUAL(2) PRO FORMA(3)
--------- ------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital $527,352
$152,936
Total assets 556,567 964,175
Notes payable and current portion of long-term debt and capital lease obligations 9,199 9,199
Long-term debt and capital lease obligations, less current portion 459,096 759,125
Redeemable Preferred Stock of ICG ($30.0 million liquidation value) 19,571 --
Preferred Stock of ICG (redeemable) ($150.0 million liquidation value) -- 144,380
Shareholders' equity 35,513 8,283
- -----------------------------
</TABLE>
(1) The Summary Historical and Pro Forma Financial Information relates to
IntelCom and its subsidiaries. All of IntelCom's business is conducted
through ICG and its subsidiaries.
(2) Effective January 1, 1996, the Company changed its method of accounting
for long-term telecom services contracts to recognize revenue as services
are provided. As required by generally accepted accounting principles, the
Company has restated its results for the three months ended December 31,
1995 to reflect the effects of the change in accounting as if such change
had been adopted as of October 1, 1995. The data presented for the six
months ended, and as of, March 31, 1996 reflect such restatement. The
Company's results for the six months ended March 31, 1996 reflect a charge
of $3.5 million relating to the cumulative effect of this change in
accounting as of October 1, 1995. The effect of this change in accounting
in fiscal year 1996 was to decrease loss before cumulative effect of
change in accounting by approximately $22,000 for the six months ended
March 31, 1996. If the new revenue recognition method had been applied
retroactively, telecom services revenue would have decreased by $2.0
million, $0.5 million and $0.7 million for fiscal 1993, 1994 and 1995,
respectively, and $0.6 million for the six months ended March 31, 1995.
(3) Pro Forma Statement of Operations Data reflects (i) the sale of the
Company's teleports in Atlanta, Denver, Los Angeles and New Jersey, (ii)
the receipt of the net proceeds from the Private Offering and interest
expense on $300.0 million gross proceeds of the Notes and preferred stock
dividends on $150.0 million liquidation preference of Preferred Stock,
without giving effect to any increased interest income on available cash
or the capitalization of any interest associated with construction in
progress, (iii) the redemption of $30.0 million of redeemable preferred
stock, payment of accrued dividends and the related $12.3 million charge
for the excess of the redemption price as of May 1, 1996 over the carrying
amount, (iv) the repurchase of 916,666 redeemable warrants and (v) the
payment with respect to consents to amendments to the 13 1/2% Note
Indenture to permit the Private Offering as if such events had occurred at
the beginning of the periods presented . Pro Forma Balance Sheet Data
reflects the items in (ii) through (v) above as if such events had
occurred on the balance sheet date. The sale of the Company's teleports is
reflected in the actual balance sheet data at March 31, 1996. The charges
described in items (iii) and (v) will be reflected in the Company's
results for the three months ended June 30, 1996.
(4) EBITDA consists of operating loss plus depreciation and amortization.
EBITDA is provided because it is a measure commonly used in the
telecommunications industry. It is presented to enhance an understanding
of the Company's operating results and is not intended to represent cash
flow or results of operations in accordance with generally accepted
accounting principles for the periods indicated.
-18-
<PAGE>
(5) For the fiscal years ended September 30, 1993, 1994 and 1995 and the
six months ended March 31, 1995 and 1996, earnings were insufficient
to cover combined fixed charges and preferred stock dividends by $6.2
million, $24.8 million, $77.3 million, $23.0 million and $63.0 million,
respectively. On a pro forma basis giving effect to the Private Offering,
the redemption of $30.0 million of redeemable preferred stock and the sale
of four of the Company's teleports as if they occurred on October 1, 1994
and without giving effect to any increased interest income on additional
available cash or the capitalization of any interest associated with
construction in progress, earnings would have been insufficient to cover
fixed charges by $158.3 million and $114.2 million for fiscal 1995 and
the six months ended March 31, 1996, respectively. Combined fixed
charges and preferred stock dividends consist of interest charges and
amortization of debt expense and discount or premium related to
indebtedness, whether expensed or capitalized, that portion of rental
expense the Company believes to be representative of interest (i.e., one-
third of rental expense) and preferred stock dividends.
(6) Amounts presented are for 12-month and six-month periods ended, or
as of, September 30 and March 31. The Company sold four teleports in the
quarter ended March 31, 1996. Statistical Data for Satellite Services does
not reflect this sale.
(7) Fiber route miles refers to the number of miles of fiber optic cable,
including leased fiber. Fiber route miles as of September 30, 1993 are
based upon management estimates. As of March 31, 1996, the Company had
780 fiber route miles, of which 178 fiber route miles were leased. Fiber
route miles under construction represents fiber under construction and
fiber which is expected to be operational within six months.
(8) Fiber strand miles refers to the number of fiber route miles, including
leased fiber, along a telecommunications path multiplied by the number of
fiber strands along that path. Fiber strand miles as of September 30, 1993
are based upon management estimates. As of March 31, 1996, the Company had
36,310 fiber strand miles, of which 1,847 fiber strand miles were leased.
Fiber strand miles under construction represents fiber under construction
and fiber which is expected to be operational within six months.
(9) Wireless route miles represents the total distance of the digital
microwave paths between Company transmitters which are used in the
Company's telecom services networks.
(10) Uplink hours represent the number of hours of video, data and voice
communications transmitted by the Company's earth stations.
-19-
<PAGE>
RISK FACTORS
An investment in the New Securities offered hereby involves a high
degree of risk. The following risk factors, together with the other
information set forth in this Prospectus and appearing in the documents
incorporated by reference herein, should be considered when evaluating an
investment in the New Securities.
HISTORICAL AND ANTICIPATED FUTURE OPERATING LOSSES AND NEGATIVE CASH FLOW
The Company has incurred and expects to continue to incur significant
operating and net losses. The Company expects to continue to generate
negative cash flow from operating activities while it emphasizes
development, construction and expansion of its telecom services business
and until the Company establishes a sufficient revenue generating
customer base. Because of the acceleration of the Company's expansion
strategy, the Company's operating losses are expected to increase over
the near term. The Company had net losses and negative EBITDA of
approximately $76.6 million and $30.2 million, respectively, for fiscal
1995 and approximately $61.6 million and $18.7 million, respectively,
for the first six months of fiscal 1996. In addition, the Company had
accumulated deficits of $134.4 million and $196.0 million at September
30, 1995 and March 31, 1996, respectively. There can be no assurance that
the Company will achieve or sustain profitability or positive EBITDA in
the future or at any time have sufficient resources to make payments on
its indebtedness, including the Notes and, if issued, the Exchange
Debentures, or cash dividend payments on the Preferred Stock. See
"Summary Historical and ProForma Information", including the notes
thereto.
SIGNIFICANT CAPITAL REQUIREMENTS
The Company's current plans expansion of existing networks, the
development of new networks, the further development of the Company's
products and services and the continued funding of operating losses may
require an aggregate of approximately $100.0 million of additional cash
from outside sources. The Company's arrangements with utilities require
it to make significant cash payments and the development of these
networks requires significant capital expenditures to add switching
facilities and build out from the utilities' fiber backbone to end user
locations. Due to the number of opportunities arising from changes in
the telecommunications regulatory environment and the cash required to
take advantage of these opportunities, management believes that the net
proceeds from the Private Offering, the funds remaining from the Unit
Offering and amounts expected to be available through vendor financing
arrangements will provide sufficient funds necessary for the Company to
expand its telecom services business as currently planned and to fund its
operating deficits for approximately 24 months. Additional sources of
cash may include public and private equity and debt financings by
IntelCom, ICG or ICG's subsidiaries, sales of non-strategic assets,
capital leases and other financing arrangements. There can be no
assurance that additional financing will be available to the Company or,
if available, that it can be obtained on terms acceptable to the Company.
Failure to obtain such financing could result in the delay or abandonment
of some or all of the Company's acquisition, development and expansion
plans and expenditures, which could have a material adverse effect on its
business prospects and limit the Company's ability to make principal and
interest payments on its indebtedness, including the Notes and, if
issued, the Exchange Debentures, or to make payments of cash dividends
on, or the mandatory redemption price of, the Preferred Stock.
RISKS RELATED TO SWITCHED SERVICES STRATEGY
The Company has installed 13 high capacity digital switches that
enable the Company to offer interstate and intrastate switched and
enhanced services, including local dial tone, in all of its markets. The
Company expects to add three switches in 1996 and additional switches and
switching capacity as demand warrants. The Company began generating
switched services revenue in the fourth quarter of fiscal 1994 and
expects revenue from these services to increase. Currently, the Company
is experiencing negative operating margins, as expected, from the
provision of switched services while its networks are in the development
and construction phases and while the Company relies on LEC networks to
terminate and originate a significant portion of its customers' switched
traffic. The Company expects operating margins for switched services on a
given network to improve when (i) sales efforts result in increased
volumes of traffic carried on the Company's own network in place of LEC
facilities, and (ii) higher margin enhanced services are provided to
customers on the Company's network. In addition, the Company
-20-
<PAGE>
believes that the unbundling of LEC services and the implementation of
local telephone number portability, which are mandated by the
Telecommunications Act, will reduce the Company's costs of providing
switched services and facilitate the marketing of such services. However,
the Company's switched services strategy has not yet been profitable and
may not become profitable due to, among other factors, lack of customer
demand, competition from other CLECs and pricing pressure from the LECs.
In addition, to fully implement its switched services strategy, the
Company must make significant capital expenditures to provide additional
switching capacity, network infrastructure and electronic components. The
Company has limited experience providing switched services and there can
be no assurance that the Company's switched services strategy will be
successful. See "--Regulation."
SUBSTANTIAL INDEBTEDNESS; ABILITY TO SERVICE DEBT
At March 31, 1996 on a pro forma basis giving effect to the
Private Offering, the Company would have had approximately $773.5
million of indebtedness, including capitalized lease obligations. The
accretion of original issue discount on the 13 1/2% Notes and the Notes
will cause an increase in indebtedness of approximately $518.5 million by
May 1, 2001. In addition, the Preferred Stock and, if issued, the
Exchange Debentures may pay dividends or interest through the issuance of
additional shares of Preferred Stock or Exchange Debentures, as the case
may be, through May 1, 2001. The Indenture governing the 13 1/2% Notes,
as amended (the "13 1/2% Notes Indenture"), the Amended Articles and the
Notes Indenture limit, but do not prohibit, the incurrence of additional
indebtedness by IntelCom, ICG and their subsidiaries. The Company
anticipates that IntelCom, ICG and their subsidiaries will incur
substantial additional indebtedness in the future. Although the net
proceeds from the Private Offering are expected to enhance liquidity and
improve the Company's financial flexibility in the near term, the
Company's total indebtedness, interest expense and dividend requirements
will be significantly increased as a result of the Private Offering.
The level of the Company's indebtedness could have important
consequences to holders of the Notes, the Preferred Stock and the
Exchange Debentures, including the following: (i) the debt service
requirements of any additional indebtedness could make it more difficult
for the Company to make payments of interest on the Notes and the
Exchange Debentures and of cash dividends on the Preferred Stock; (ii)
the ability of the Company to obtain any necessary financing in the
future for working capital, capital expenditures, debt service
requirements or other purposes may be limited; (iii) a substantial
portion of the Company's cash flow from operations, if any, must be
dedicated to the payment of principal and interest on its indebtedness
and other obligations (including dividends on the Preferred Stock when
required to be paid in cash) and will not be available for other
purposes; (iv) the Company's level of indebtedness could limit its
flexibility in planning for, or reacting to, changes in its business; (v)
the Company is more highly leveraged than some of its competitors, which
may place it at a competitive disadvantage; and (vi) the Company's high
degree of indebtedness will make it more vulnerable in the event of a
downturn in its business.
The Company has been experiencing substantial negative EBITDA and, on
a pro forma basis giving effect to the Private Offering and the
application of a portion of the net proceeds therefrom to redeem the
Redeemable Preferred Stock and giving effect to the sale of four of the
Company's teleports, the Company's earnings before combined fixed charges
and preferred stock dividend requirements would have been insufficient to
cover combined fixed charges and preferred stock dividend requirements
for fiscal 1995 and the six months ended March 31, 1996 by
approximately $158.3 million and $114.2 million, respectively. In
addition, for the same periods on the same pro forma basis, the Company's
EBITDA minus capital expenditures and interest expense and preferred
stock dividends would have been approximately $224.5 million and
$202.9 million, respectively. There can be no assurance that the
Company will be able to improve its earnings before combined fixed
charges and preferred stock dividends or that the Company will be able to
meet its debt service obligations, including its obligations on the
Notes, the Preferred Stock and the Exchange Debentures. In the event the
Company's cash flow is inadequate to meet its obligations, the Company
could face substantial liquidity problems. If the Company is unable to
generate sufficient cash flow or otherwise obtain funds necessary to make
required payments or, if the Company otherwise fails to comply with the
various covenants in its indebtedness, it would be in default under the
terms thereof, which would permit the holders of such indebtedness to
accelerate the maturity of such indebtedness and could cause defaults
under other indebtedness of the Company. Such defaults could result in a
default on the Notes, the Preferred Stock and the Exchange Debentures and
could delay or preclude payment of interest or principal on the Notes
and
-21-
<PAGE>
the Exchange Debentures and payment of cash dividends on, or the
redemption price of, the Preferred Stock. The ability of the Company to
meet its obligations will be dependent upon the future performance of the
Company, which will be subject to prevailing economic conditions and to
financial, business and other factors, including factors beyond the
control of the Company. See "Description of New Notes," "Description of
New Preferred Stock" and "Description of Exchange Debentures."
HOLDING COMPANY RELIANCE ON SUBSIDIARIES' FUNDS; PRIORITY OF CREDITORS;
SUBORDINATION OF EXCHANGE DEBENTURES
IntelCom and ICG are each holding companies. The sole material asset
of IntelCom consists of the common stock of ICG and the principal asset
of ICG consists of common stock of its subsidiaries. ICG intends to loan
or contribute a substantial portion of the net proceeds from the Private
Offering to certain of its subsidiaries. ICG must rely upon dividends
and other payments from its subsidiaries to generate the funds necessary
to meet its obligations, including the payment of principal and interest
on the Notes and the Exchange Debentures and the payment of cash
dividends on, and the redemption price of, the Preferred Stock. The
subsidiaries are legally distinct from ICG and have no obligation,
contingent or otherwise, to pay amounts due with respect to the Notes,
the Preferred Stock or the Exchange Debentures or to make funds available
for such payments. ICG's subsidiaries will not guarantee the Notes or the
Exchange Debentures. The ability of ICG's subsidiaries to make such
payments to ICG will be subject to, among other things, the availability
of funds, the terms of each subsidiary's indebtedness and applicable
state laws. In particular, several of ICG's subsidiaries have entered
into credit facilities, certain of which are guaranteed by IntelCom
and/or ICG, which prohibit or restrict the payment of dividends by those
subsidiaries to ICG. Claims of creditors of ICG's subsidiaries, including
trade creditors, will generally have priority as to the assets of such
subsidiaries over the claims of ICG and the holders of ICG's and
IntelCom's indebtedness and preferred stock, including the Notes, the
Preferred Stock and the Exchange Debentures. Accordingly, the Notes and
the Exchange Debentures will be effectively subordinated to the
liabilities (including trade payables) of the subsidiaries of ICG and
IntelCom, respectively. At March 31, 1996, the subsidiaries of ICG
had approximately $115.7 million of liabilities (excluding intercompany
payables to ICG), including $78.0 million of indebtedness.
The Exchange Debentures, if issued, would be subordinate in right of
payment to the prior payment in full of the Notes, the 13 1/2% Notes and
all other existing and future senior indebtedness of the Company. As of
March 31, 1996 after giving pro forma effect to the Private Offering,
IntelCom and ICG would have had approximately $626.5 million and
$705.0 million of Senior Guarantor Indebtedness and senior
indebtedness, respectively, outstanding. In the event of a bankruptcy or
similar proceeding of IntelCom and/or ICG, the assets of IntelCom and ICG
will be available to pay obligations on the Exchange Debentures and
IntelCom's guarantee thereof only after all senior indebtedness of
IntelCom and ICG has been satisfied in full, and there may not be
sufficient assets remaining to pay the Exchange Debentures. See
"Description of Exchange Debentures."
The Notes will be unsecured unsubordinated indebtedness of ICG and
guaranteed on an unsecured unsubordinated basis by IntelCom. At March
31, 1996, the Company had an aggregate of approximately [$54.8] million
of secured indebtedness, including capitalized lease obligations. In the
event such secured indebtedness goes into default and the holders thereof
foreclose on the collateral, the holders of secured indebtedness will be
entitled to payment out of the proceeds of their collateral prior to any
holders of general unsecured indebtedness including the Notes,
notwithstanding the existence of any event of default with respect to the
Notes. The Notes Indenture also permits the Company to incur additional
secured indebtedness, to grant additional liens and, on or after May 1,
2001, to pay cash dividends on the Preferred Stock and, if issued, to pay
interest on the Exchange Debentures at any time. See "Description of New
Notes--Covenants." In the event of bankruptcy, liquidation or
reorganization of the Company, holders of secured indebtedness will have
a claim, prior to the claim of the holders of the Notes, on the assets of
the Company securing such indebtedness. In addition, to the extent that
the value of such collateral is insufficient to satisfy such secured
indebtedness, holders of amounts remaining outstanding on such secured
indebtedness (as well as other unsubordinated creditors of the Company,
including holders of the 13 1/2% Notes) would be entitled to share pari
passu with the Notes with respect to any other assets of the Company.
Assets remaining after satisfaction of the claims of holders of secured
indebtedness may not be sufficient to pay amounts due on any or all of
the Notes then outstanding. Payments on the Preferred Stock and the
Exchange Debentures will also be subject to the prior claims of secured
creditors.
-22-
<PAGE>
CERTAIN FINANCIAL AND OPERATING RESTRICTIONS
The 13 1/2% Notes Indenture, the Notes Indenture, the terms of the
Preferred Stock and the Exchange Debenture Indenture and other
indebtedness of the Company impose significant operating and financial
restrictions on the Company. Such restrictions affect, and in certain
cases significantly limit or prohibit, among other things, the ability of
the Company to incur additional indebtedness or create liens on its
assets, pay dividends, sell assets, engage in mergers or acquisitions or
make investments. Failure to comply with such covenants could limit the
availability of borrowings or result in a default thereunder, in which
case the lenders will be able to accelerate the maturity of the
applicable indebtedness. Moreover, the terms governing the Company's
material indebtedness contain cross-default provisions which are usual
and customary for, and generally found in indebtedness of a similar
nature. There can be no assurance that the Company will be able to comply
with such covenants in the future. A default under such indebtedness
could result in an acceleration of the Notes and the Exchange Debentures,
in which case the holders of the Notes and the Exchange Debentures may
not be paid in full.
PAYMENTS DUE ON INDEBTEDNESS PRIOR TO MATURITY AND REDEMPTION OF THE
SECURITIES; REFINANCING RISK
As of March 31, 1996, an aggregate of approximately $62.0
million of capitalized lease obligations was due prior to December 31,
2000, an aggregate principal amount of approximately $68.5 million
(including $0.4 million of accrued interest) was outstanding under
certain convertible subordinated notes and interest notes and an
aggregate accreted value of approximately $326.5 million was
outstanding under the 13 1/2% Notes. As of March 31, 1996, approximately
$12.0 million of the 8% Convertible Subordinated Notes and Interest Notes
are due September 17, 1998 and are convertible at a price of $15.60 per
Common Share. Approximately $56.1 million of the 7% Convertible
Subordinated Notes and Interest Notes are due October 30, 1998 and are
convertible at a price of $18.00 per Common Share. The 13 1/2% Notes
require payments of interest to be made in cash commencing on March 15,
2001 and mature on September 15, 2005. As of March 31, 1996, the
Company had $4.1 million of other indebtedness that matures prior to
December 31, 2000. The Company may also have additional payment
obligations prior to such time, the amount of which cannot presently be
determined. The net proceeds from the Private Offering, the funds
remaining from the Unit Offering and amounts expected to be available
through vendor financing arrangements will provide sufficient funds
necessary for the Company to expand its telecom services business as
currently planned and to fund its operating deficits for approximately
21 months. Additional sources of cash may include public and private
equity and debt financings by IntelCom, ICG or ICG's subsidiaries, sales
of non-strategic assets, capital leases and other financing arrangements.
Accordingly, the Company will have to refinance a substantial amount of
indebtedness and obtain substantial additional funds prior to December
31, 2000. The Company's ability to do so will depend on, among other
things, its financial condition at the time, the restrictions in the
instruments governing its indebtedness, including the 13 1/2% Notes
Indenture, the Notes Indenture, the Preferred Stock and, if applicable,
the Exchange Debenture Indenture, and other factors, including market
conditions, beyond the control of the Company. There can be no assurance
that the Company will be able to refinance such indebtedness, including
such capitalized leases, or obtain such additional funds, and if the
Company is unable to effect such refinancings or obtain additional funds,
the Company's ability to make principal and interest payments on its
indebtedness, including the Notes (and if issued, the Exchange
Debentures), or make payments of cash dividends on, or the mandatory
redemption price of, the Preferred Stock, would be adversely
affected.
RISKS RELATED TO RAPID EXPANSION OF BUSINESS
The continued rapid expansion and development of the Company's
business will depend on, among other things, the Company's ability to
evaluate markets, lease fiber from utilities, design fiber backbone
routes, secure financing, install facilities, acquire rights of way and
building access, obtain any required government authorizations and
implement expanded interconnection and collocation with facilities owned
by LECs, all in a timely manner, at reasonable costs and on satisfactory
terms and conditions. In addition, such expansion may involve
acquisitions which, if made, could divert the resources and management
time of the Company and require integration with the Company's existing
networks and services. The Company's ability to effectively manage its
rapid expansion will require it to continue to implement and improve its
operating, financial and accounting systems and to expand, train and
manage its employee base. The inability to effectively manage its planned
expansion could have a material adverse effect on the Company's business,
growth, financial condition and results of operations.
-23-
<PAGE>
COMPETITION
The Company operates in a highly competitive environment that
historically was dominated by an entrenched monopolist--the Regional Bell
Operating Companies ("RBOCs") and GTE Corporation ("GTE"). The Company's
current competitors include the RBOCs, GTE, other CLECs, network systems
integration service providers, microwave and satellite service providers,
teleport operators, wireless telecommunications providers and private
networks built by large end users. Potential competitors include cable
television companies, utilities, local telephone companies outside their
current local service areas, as well as the local service operations of
long distance carriers. Consolidation of telecommunications companies and
the formation of strategic alliances within the telecommunications
industry as well as the development of new technologies could give rise
to increased competition. One of the primary purposes of the
Telecommunications Act is to promote competition, in particular in the
local telephone market. Since enactment of the Telecommunications Act,
several telecommunications companies have indicated their intention to
enter many areas of the telecommunications industry, including areas and
markets in which the Company participates and expects to participate.
This may result in more participants than can ultimately be successful in
a given market, subjecting the Company to further competition.
As a recent entrant in the telecom services industry, the Company,
like other CLECs, has not achieved a significant market share. The LECs
have long-standing relationships with their customers, have the potential
to subsidize services with revenue from a variety of businesses and have
benefitted from certain state and federal regulations that, until
recently, favored the entrenched monopolist over potential competitors.
Recent legislative and regulatory initiatives provide increased business
opportunities for the Company, allowing CLECs such as the Company to
interconnect with local telephone company facilities and provide all
interstate and intrastate services. These opportunities are expected to
be accompanied by increased pricing flexibility for, and relaxation of
regulatory oversight of, the LECs. If local telephone companies lower
their rates, engage in increased volume and term discount pricing
practices or seek to charge CLECs increased fees for, or seek to delay
implementation of, interconnection to their networks, the Company's
results of operations and financial condition could be adversely
affected. There can be no assurance that the Company will be able to
achieve or maintain adequate market share or revenue, or compete
effectively in any of its markets. In addition, the success of the
Company's strategy of leasing or licensing fiber optic cable from
utilities depends upon the ability to connect end users to the Company's
network. Such connections require significant capital expenditures, time
and effort and, in some cases, end users targeted by the Company may
already be connected to another CLEC. There can be no assurance regarding
the number of end users the Company will be able to connect to its
network.
REGULATION
The Company operates in an industry that is undergoing substantial
deregulation as a result of the passage of the Telecommunications Act.
However, the Company continues to be subject to significant federal,
state and local regulation. On the federal level, the Company is not
subject to price or rate of return regulation and is not required to
obtain FCC authorization for the installation or operation of fiber optic
network facilities. As a non-dominant carrier, the Company must file
tariffs for its interstate services and its rates must be reasonable. In
addition, the FCC may have the authority, which it is not presently
exercising, to impose restrictions on foreign ownership of communications
services providers not utilizing radio facilities. The Company must
obtain and maintain certain FCC authorizations for its satellite and
wireless services. In addition, the Company provides maritime
communication services pursuant to an experimental license that expires
February 1, 1997. There can be no assurance that the Company will be able
to renew this license or that the FCC will not decide to allocate the
radio frequencies currently used by the Company for other purposes. In
addition, the FCC may auction such licenses, requiring the Company to pay
significant amounts to retain its license. State regulatory agencies
regulate competitive access services to the extent that they are used for
intrastate communications. In addition, local authorities control the
Company's access to municipal rights of way.
The Telecommunications Act generally requires LECs to provide
interconnection and nondiscriminatory access to the LEC network on more
favorable terms than have been available in the past. However, such new
agreements are subject to negotiations with each LEC, which may involve
considerable delays, and may not necessarily be
-24-
<PAGE>
obtained on terms and conditions that are acceptable to the Company. In
such instances, the Company may petition the proper state regulatory
agency to arbitrate disputed issues. There can be no assurance that the
Company will be able to negotiate acceptable new interconnection
agreements or that, if state regulatory authorities impose terms and
conditions on the parties in arbitration, such terms will be acceptable
to the Company.
DEPENDENCE ON KEY CUSTOMERS
The Company's five largest customers accounted for approximately 18%
and 22% of the Company's consolidated revenue in fiscal 1994 and 1995,
respectively, and 25% for the six months ended March 31, 1996. No
single customer accounted for more than 10% of the Company's consolidated
revenue during fiscal 1994 or the six months ended March 31, 1996.
For fiscal 1995, revenue from Intel, a Network Services customer,
constituted approximately 11% of the Company's total consolidated
revenue. The Company anticipates that as switched services revenue
represents a larger percentage of the Company's total revenue, the
Company's dependence on its largest telecom services customers will
increase. The loss of, or decrease of business from, one or more of these
customers could have a material adverse effect on the business, financial
condition and results of operations of the Company. While the Company
actively markets its products and services, there can be no assurance
that the Company will be able to attract new customers or retain its
existing customers.
RAPID TECHNOLOGICAL CHANGE
The telecommunications industry is subject to rapid and significant
changes in technology. While the Company believes that, for the
foreseeable future, these changes will neither materially affect the
continued use of fiber optic cable nor materially hinder its ability to
acquire necessary technologies, the effect of technological changes,
including changes relating to emerging wireline and wireless transmission
technologies, on the business of the Company cannot be predicted.
DEPENDENCE ON RIGHTS OF WAY AND OTHER THIRD PARTY AGREEMENTS
The Company must obtain easements, rights of way, franchises and
licenses from various private parties, actual and potential competitors,
and local governments in order to construct and maintain fiber optic
networks. There can be no assurance that the Company will obtain rights
of way and franchise agreements to expand its networks or that these
agreements will be on terms acceptable to the Company, or that current or
potential competitors will not obtain similar rights of way and franchise
agreements that will allow them to compete against the Company. Because
certain of these agreements are short-term or are terminable at will,
there can be no assurance that the Company will continue to have access
to existing rights of way and franchises after the expiration of such
agreements. An important element of the Company's strategy is to enter
into long-term agreements with utilities to take advantage of their
existing easements and rights of way and to license or lease their excess
fiber capacity. The Company has entered into contracts or letters of
intent with several utilities, however other CLECs are seeking to enter
into similar arrangements and have bid and are expected to continue to
bid against the Company for future licenses or leases. Furthermore,
utilities are required by state or local regulators to retain the right
to "reclaim" fiber licensed or leased to the Company if such fiber is
needed for the utility's core business. There can be no assurance that
the Company will be able to obtain additional licenses or leases on
satisfactory terms or that such arrangements will not be subject to
reclamation. If a franchise, license or lease agreement was terminated
and the Company was forced to remove or abandon a significant portion of
its network, such termination could have a material adverse effect on the
Company.
KEY PERSONNEL
The efforts of a small number of key management and operating
personnel will largely determine the Company's success. The success of
the Company also depends in part upon its ability to hire and retain
highly skilled and qualified operating, marketing, financial and
technical personnel. The competition for qualified personnel in the
telecommunications industry is intense and, accordingly, there can be no
assurance that the Company will be able to hire or retain necessary
personnel. The loss of certain key personnel could adversely affect the
Company. The Company has employment agreements with J. Shelby Bryan,
President and Chief Executive Officer, James D.
-25-
<PAGE>
Grenfell, Executive Vice President, Chief Financial Officer and
Treasurer, and William J. Maxwell, Executive Vice President-Telecom and
President of ICG Telecom Group, Inc.
LEGAL AND ADMINISTRATIVE PROCEEDINGS
Shareholders have filed four putative class action lawsuits based
on the timing and content of certain disclosures concerning FOTI's
suspension and debarment from the performance of federal government
contracts. FOTI's debarment has since been terminated.
ORIGINAL ISSUE DISCOUNT; POSSIBLE UNFAVORABLE TAX AND OTHER LEGAL
CONSEQUENCES FOR HOLDERS OF NOTES, PREFERRED STOCK AND EXCHANGE
DEBENTURES AND THE COMPANY
The Notes were issued at a substantial discount from their principal
amount at maturity. Although cash interest will not accrue on the Notes
prior to May 1, 2001, and there will be no periodic payments of cash
interest on the Notes prior to November 1, 2001, original issue discount
("OID"), which is the difference between the stated redemption price at
maturity and the issue price of the Notes, will accrue from the issue
date of the Notes. OID will be includible as interest income periodically
(including for periods ending prior to May 1, 2001) in a U.S.
noteholder's gross income for U.S. federal income tax purposes in advance
of receipt of the cash payments to which the income is attributable.
Further, the Notes will be subject to the high yield discount
obligation rules. Accordingly, ICG will not be able to deduct the OID
attributable to the Notes until paid in cash or property. If the yield to
maturity of the Notes exceeds the applicable federal rate plus six
percentage points (12.4% for long-term debt instruments issued in April
1996), a portion of the OID attributable to the Notes will not be
deductible at all. Therefore, ICG's after tax cash flow, if any, will be
less than if such OID were deductible in full when accrued. In addition,
as a result of the Note Guarantee, a portion of the interest on the Notes
will not be deductible by ICG.
If a bankruptcy case is commenced by or against ICG under the U.S.
Bankruptcy Code after the issuance of the Notes, the claim of a holder of
a Note with respect to the principal amount thereof may be limited to an
amount equal to the sum of (i) the initial offering price and (ii) that
portion of the OID that is not deemed to constitute "unmatured interest"
for purposes of the Bankruptcy Code. Any OID that was not amortized as of
any such bankruptcy filing would constitute "unmatured interest."
The Company does not presently have any current or accumulated
earnings and profits as determined under United States federal income tax
principles and it is unlikely to have current or accumulated earnings and
profits in the foreseeable future. As a result, until such time as the
Company does have earnings and profits, distributions on the Preferred
Stock will be treated as a nontaxable return of capital and will be
applied against and reduce the adjusted tax basis (but not below zero) on
the Preferred Stock in the hands of each holder, thus increasing the
amount of any gain (or reducing the amount of any loss) which would
otherwise be realized by such holder upon the disposition of the
Preferred Stock. Consequently, distributions with respect to the
Preferred Stock will not qualify as dividends for federal income tax
purposes and, as a result, will be treated as a return of capital.
Upon a redemption of Preferred Stock in exchange for Exchange
Debentures, the holder will have capital gain or loss equal to the
difference between the issue price of the Exchange Debentures received
and the holder's adjusted basis in the Preferred Stock redeemed, except
to the extent all or a portion of the Exchange Debentures received is
treated as a dividend payment. Because of ICG's option through May 1,
2001 to pay interest on the Exchange Debentures by issuing additional
Exchange Debentures, any Exchange Debentures issued prior to that date
will be treated as issued with OID, unless under special rules for
interest holidays the amount of OID is treated as de minimis. Holders
would have to accrue all such OID into income over the entire term of the
Exchange Debenture, but would not treat the receipt of stated interest on
the Exchange Debentures as interest for federal income tax purposes.
-26-
<PAGE>
An Exchange Debenture may be subject to the rules for "applicable high
yield discount obligations," in which case the Company's deduction for
OID on such Exchange Debentures will be substantially deferred, and a
portion of such deduction may be disallowed.
For a discussion of these and other relevant tax issues, see "Certain
United States Federal Income Tax Considerations."
ABSENCE OF PUBLIC MARKET
The Notes and the Preferred Stock are, and the Exchange Debentures, if
issued, will be new issues of securities for which there is currently no
active trading market. If any such securities are traded after their
initial issuance, they may trade at a discount from their initial
offering price, depending upon prevailing interest rates, the market for
similar securities and other factors, including general economic
conditions and the financial condition, performance of, and prospects for
the Company.
THE EXCHANGE OFFERS
PURPOSE AND EFFECT OF THE EXCHANGE OFFERS
The Old Securities were sold by the a Placement Agent on April 30,
1996 to a limited number of institutional investors (the "Purchasers").
In connection with the sale of the Old Securities, the Company and the
Purchasers entered into registration rights agreements dated as of April
30, 1996 (collectively the "Registration Rights Agreements"), which
require the Company (i) to cause the Old Securities to be registered
under the Securities Act or (ii) to file with the Commission a
registration statement under the Securities Act with respect to New
Securities identical in all material respects to the Old Securities and
to use its best efforts to cause such registration statement to become
effective under the Securities Act. The Company is further obligated,
upon the effectiveness of that registration statement, to offer the
holders of the Old Securities the opportunity to exchange their Old Notes
and Old Preferred Stock for a like principal amount of New Notes and a
like number of shares of New Preferred Stock, respectively, which will be
issued without a restrictive legend and may be reoffered and resold by
the holder without restrictions or limitations under the Securities Act.
Copies of the Registration Rights Agreements have been filed as exhibits
to the Registration Statement of which this Prospectus is a part. The
Exchange Offers are being made pursuant to the Registration Rights
Agreements to satisfy the Company's obligations thereunder. The term
"Holder" with respect to the Exchange Offers means any person in whose
name Old Securities are registered on the Company's books or any other
person who has obtained a properly completed assignment from the
registered holder.
In order to participate in the Exchange Offers, a Holder must
represent to the Company, among other things, that (i) the New Securities
acquired pursuant to the Exchange Offers are being obtained in the
ordinary course of business of the person receiving such New Securities,
whether or not such person is the Holder, (ii) neither the Holder nor any
such other person is engaging in or intends to engage in a distribution
of such New Securities, (iii) neither the Holder nor any such other
person has an arrangement or understanding with any person to participate
in the distribution of such New Securities, and (iv) neither the Holder
nor any such other person is an "affiliate," as defined under Rule 405
promulgated under the Securities Act, of the Company. In the event that
any Holder of Old Securities cannot make the requisite representations to
the Company in order to participate in the Exchange Offers, such Holder
may be entitled to have such Holder's Old Securities registered in a
"shelf" registration statement on an appropriate form pursuant to Rule
415 under the Securities Act.
Based on a previous interpretation by the staff of the Commission set
forth in no-action letters issued to third-parties, including "Exxon
Capital Holdings Corporation" (available May 13, 1988), "Morgan Stanley &
Co. Incorporated" (available June 5, 1991), "Mary Kay Cosmetics, Inc."
(available June 5, 1991), "Warnaco, Inc." (available October 11, 1991)
and K-III Communications Corp. (available May 14, 1993), the Company
believes that the New Securities issued pursuant to the Exchange Offers
may be offered for resale, resold and otherwise transferred by any Holder
of such New Securities (other than any such Holder which is an
"affiliate" of the
-27-
<PAGE>
Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such New Securities are acquired in the
ordinary course of such Holder's business and such Holder has no
arrangement or understanding with any person to participate in the
distribution of such New Securities. Any Holder who tenders in the
Exchange Offers for the purpose of participating in a distribution of the
New Securities cannot rely on such interpretation by the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. Under no circumstances may this Prospectus be used for an
offer to resell, resale or other retransfer of the New Securities. In
the event that the Company's belief is inaccurate, Holders of the New
Securities who transfer New Securities in violation of the prospectus
delivery provisions of the Securities Act and without an exemption from
registration thereunder may incur liability thereunder. The Company does
not assume or indemnify Holders against such liability. The Exchange
Offers are not being made to, nor will the Company accept surrenders for
exchange from, Holders of Old Securities in any jurisdiction in which the
Exchange Offers or the acceptance thereof would not be in compliance with
the securities or blue sky laws of such jurisdiction. Each broker-dealer
that receives New Securities for its own account in exchange for Old
Securities, where such Old Securities were acquired by such broker-dealer
as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any
resale of such New Securities. The Company has not entered into any
arrangement or understanding with any person to distribute the New
Securities to be received in the Exchange Offers. See "Plan of
Distribution."
TERMS OF THE EXCHANGE OFFERS
Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letters of Transmittal, the Company will accept any
and all Old Securities validly tendered and not withdrawn prior to 5:00
p.m., New York City time, on the Expiration Date. The Company will issue
$1,000 principal amount of New Notes in exchange for each $1,000
principal amount of outstanding Old Notes surrendered pursuant to the
Note Exchange Offer. However, Old Notes may be tendered only in integral
multiples of $1,000.
The form and terms of the New Notes will be the same as the form and
terms of the Old Notes except that the New Notes will be registered under
the Securities Act and hence will not bear legends restricting the
transfer thereof. The New Notes will evidence the same debt as the Old
Notes. The New Notes will be issued under and entitled to the benefits
of the Indenture, which also authorized the issuance of the Old Notes,
such that both series will be treated as a single class of debt
securities under the Indenture. The form and terms of the New Preferred
Stock will be the same as the form and terms of the Old Preferred Stock
except that the New Preferred Stock will be registered under the
Securities Act and hence will not bear legends restricting the transfer
thereof. The New Preferred Stock will evidence the same rights,
privileges and obligations as the Old Preferred Stock. The New Preferred
Stock will be issued under and entitled to the benefits of the Amended
Articles which also authorized the issuance of the Old Preferred Stock,
such that both series will be treated as a single class of equity
securities under the Amended Articles.
As of the date of this Prospectus, $550,300,000 aggregate principal
amount of the Old Notes and 150,000 shares of Old Preferred Stock are
outstanding. This Prospectus, together with the Letter of Transmittal,
is being sent to all registered Holders of the Old Notes and Old
Preferred Stock.
The Company intends to conduct the Exchange Offers in accordance with
the provisions of the Registration Rights Agreements and the applicable
requirements of the Exchange Act, and the rules and regulations of the
Commission thereunder. Old Notes that are not tendered for exchange in
the Note Exchange Offer will remain outstanding and will be entitled to
the rights and benefits such Holders have under the Note Indenture. Old
Preferred Stock that is not tendered for exchange under the Preferred
Stock Exchange Offer will remain outstanding and will be entitled to the
rights as set forth in the Amended Articles.
The Company shall be deemed to have accepted validly tendered Old
Securities when, as and if the Company shall have given oral or written
notice thereof to the Exchange Agent or the Transfer Agent, as the case
may be. The Exchange Agent will act as agent for the tendering Holders
for the purposes of receiving the New Notes from
-28-
<PAGE>
the Company and the Transfer Agent will act as agent for the tendering
Holders for the purposes of receiving the New Preferred Stock from the
Company.
If any tendered Old Securities are not accepted for exchange because
of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Old Securities
will be returned, without expense, to the tendering Holder thereof as
promptly as practicable after the Expiration Date.
Holders who tender Old Securities in the Exchange Offers will not be
required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to
the exchange pursuant to the Exchange Offers. The Company will pay all
charges and expenses, other than certain applicable taxes described
below, in connection with the Exchange Offers. See "--Fees and
Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date," shall mean 5:00 p.m., New York City time
on _______, 1996, unless the Company, in its sole discretion, extends the
Exchange Offers, in which case the term "Expiration Date" shall mean the
latest date and time to which the Exchange Offers are extended.
In order to extend the Exchange Offers, the Company will notify the
Exchange Agent and the Transfer Agent of any extension by oral or written
notice and will mail to the registered Holders an announcement thereof,
prior to 9:00 a.m., New York City time, on the next business day after
the then Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Securities, to extend the Exchange Offers or to
terminate the Exchange Offers if any of the conditions set forth below
under "--Conditions" shall not have been satisfied by giving oral or
written notice of such delay, extension or termination to the Exchange
Agent and the Transfer Agent or (ii) to amend the terms of the Exchange
Offers in any manner. Any such delay in acceptances, extension,
termination or amendment will be followed as promptly as practicable by
oral or written notice thereof to the registered Holders. If either
Exchange Offer is amended in a manner determined by the Company to
constitute a material change, the Company will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to
the registered Holders, and the Company will extend the Exchange Offers
for a period of five to ten business days, depending upon the
significance of the amendment and the manner of disclosure to the
registered Holders, if the Exchange Offers would otherwise expire during
such five to ten business day period.
Without limiting the manner in which the Company may choose to make a
public announcement of any delay, extension, amendment or termination of
the Exchange Offers, the Company shall have no obligation to publish,
advertise, or otherwise communicate any such public announcement, other
than by making a timely release to an appropriate news agency.
Upon satisfaction or waiver of all the conditions to the Exchange
Offers, the Company will accept, promptly after the Expiration Date, all
Old Securities properly tendered and will issue the New Securities
promptly after acceptance of the Old Securities. See "--Conditions."
For purposes of the Exchange Offers, the Company shall be deemed to have
accepted properly tendered Old Securities for exchange when, as and if
the Company shall have given oral or written notice thereof to the
Exchange Agent or the Transfer Agent, as the case may be.
In all cases, issuance of the New Securities for Old Securities that
are accepted for exchange pursuant to the Exchange Offers will be made
only after timely receipt by the Exchange Agent or the Transfer Agent, as
the case may be, of a properly completed and duly executed Letter of
Transmittal and all other required documents; provided, however, that the
Company reserves the absolute right to waive any defects or
irregularities in the tender or conditions of the Exchange Offers. If
any tendered Old Securities are not accepted for any reason set forth in
the terms and conditions of the Exchange Offers or if Old Securities are
submitted for a greater principal amount, or a greater number of shares,
respectively, than the Holder desires to exchange, then such unaccepted
or non-exchanged Old Securities evidencing the unaccepted portion, as
appropriate, will be returned without expense to the tendering Holder
thereof as promptly as practicable after the expiration or termination of
the Exchange Offers.
-29-
<PAGE>
CONDITIONS
Notwithstanding any other term of the Exchange Offers, the Company
will not be required to exchange any New Securities for any Old
Securities and may terminate the Exchange Offers before the acceptance of
any Old Securities for exchange, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange
Offers which, in the Company's reasonable judgment, might materially
impair the ability of the Company to proceed with the Exchange Offers; or
(b) any law, statute, rule or regulation is proposed, adopted or
enacted, or any existing law, statute, rule or regulation is interpreted
by the staff of the Commission, which, in the Company's reasonable
judgment, might materially impair the ability of the Company to proceed
with the Exchange Offers; or
(c) any governmental approval or approval by Holders of the Old
Securities has not been obtained, which approval the Company shall, in
its reasonable judgment, deem necessary for the consummation of the
Exchange Offers as contemplated hereby.
If the Company determines in its sole discretion that any of these
conditions are not satisfied, the Company may (i) refuse to accept any
Old Securities and return all tendered Old Securities to the tendering
Holders, (ii) extend the Exchange Offers and retain all Old Securities
tendered prior to the expiration of the Exchange Offers, subject,
however, to the rights of Holders who tendered such Old Securities to
withdraw their tendered Old Securities or (iii) waive such unsatisfied
conditions with respect to the Exchange Offers and accept all properly
tendered Old Securities which have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offers, the Company will
promptly disclose such waiver by means of a prospectus supplement that
will be distributed to the registered Holders, and the Company will
extend the Exchange Offers for a period of five to ten business days,
depending upon the significance of the waiver and the manner of
disclosure to the registered Holders, if the Exchange Offers would
otherwise expire during such five to ten business day period.
PROCEDURES FOR TENDERING
To tender in the Exchange Offers, a Holder must complete, sign and
date the Letter of Transmittal, or facsimile thereof, have the signatures
thereon guaranteed if required by the Letter of Transmittal, and mail or
otherwise deliver such Letter of Transmittal or such facsimile to the
Exchange Agent, with respect to the Notes,or the Transfer Agent, with
respect to the Preferred Stock prior to the Expiration Date. In
addition, either (i) certificates for such Old Securities must be
received by the Exchange Agent or Transfer Agent, as the case may be,
along with the Letter of Transmittal, or (ii) a timely confirmation of
book-entry transfer (a "Book-Entry Confirmation") of such Old Securities,
if such procedure is available, into the Exchange Agent's or Transfer
Agent's account at the Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedure for book-entry transfer described
below must be received by the Exchange Agent or Transfer Agent, as the
case may be, prior to the Expiration Date, or (iii) the Holder must
comply with the guaranteed delivery procedures described below. To be
tendered effectively, the Letter of Transmittal and other required
documents must be received by the Exchange Agent or Transfer Agent, as
the case may be, at the address set forth below under "-- Exchange Agent;
Transfer Agent" prior to the Expiration Date.
The tender by a Holder which is not withdrawn prior to the Expiration
Date will constitute an agreement between such Holder and the Company in
accordance with the terms and subject to the conditions set forth herein
and in the Letter of Transmittal.
THE METHOD OF DELIVERY OF OLD SECURITIES AND THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT OR TRANSFER AGENT,
AS THE CASE MAY BE, IS AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD
OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR
HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED
TO ASSURE DELIVERY TO THE
-30-
<PAGE>
EXCHANGE AGENT OR TRANSFER AGENT, AS THE CASE MAY BE, BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD SECURITIES SHOULD BE
SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS,
DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE
ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Securities are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender should contact the registered Holder promptly and
instruct such registered Holder to tender on such beneficial owner's
behalf. If such beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Old Securities, either make
appropriate arrangements to register ownership of the Old Securities in
such owner's name or obtain a properly completed assignment from the
registered Holder. The transfer of registered ownership may take
considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed by an Eligible Institution (as
defined below) unless the Old Securities tendered pursuant thereto is
tendered (i) by a registered Holder who has not completed the box
entitled "Special Payment Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution (as defined below). In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be,
are required to be guaranteed, such guarantor must be a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an
office or correspondent in the United States or an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Exchange Act
(an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered Holder of any Old Securities listed therein, such Old
Securities must be endorsed or accompanied by a properly completed bond
or stock power, as the case may be, signed by such registered Holder as
such registered Holder's name appears on such Old Securities.
If the Letter of Transmittal or any Old Securities or bond or stock
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate
when signing, and unless waived by the Company, evidence satisfactory to
the Company of their authority to so act must be submitted with the
Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Securities and withdrawal of
tendered Old Securities will be determined by the Company in its sole
discretion, which determination will be final and binding. The Company
reserves the absolute right to reject any and all Old Securities not
properly tendered or any Old Securities the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The
Company also reserves the right to waive any defects, irregularities or
conditions of tender as to particular Old Securities. The Company's
interpretation of the terms and conditions of the Exchange Offers
(including the instructions in the Letter of Transmittal) will be final
and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of Old Securities must be cured within such
time as the Company shall determine. Although the Company intends to
notify Holders of defects or irregularities with respect to tenders of
Old Securities, none of the Company, the Exchange Agent, the Transfer
Agent, or any other person shall incur any liability for failure to give
such notification. Tenders of Old Securities will not be deemed to have
been made until such defects or irregularities have been cured or waived.
Any Old Securities received by the Exchange Agent or the Transfer Agent,
as the case may be, that are not properly tendered and as to which the
defects or irregularities have not been cured or waived will be returned
by the Exchange Agent, or the Transfer Agent, as the case may be, to the
tendering Holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for any Old Securities that remain outstanding
subsequent to the Expiration Date or, as set forth above under "--
Conditions," to terminate the Exchange Offers and, to the extent
permitted by applicable law, purchase Old Securities in the open market,
in privately negotiated transactions or otherwise. The terms of any such
purchases or offers could differ from the terms of the Exchange Offers.
-31-
<PAGE>
By tendering, each Holder will represent to the Company that, among
other things, (i) the New Securities acquired pursuant to the Exchange
Offers are being obtained in the ordinary course of business of the
Person receiving such New Securities, whether or not such person is the
Holder, (ii) neither the Holder nor any such other person is engaging in
or intends to engage in a distribution of such New Securities (iii)
neither the Holder nor any such other person has an arrangement or
understanding with any Person to participate in the distribution of such
New Securities, and (iv) neither the Holder nor any such other Person is
an "affiliate," as defined in Rule 405 of the Securities Act, of the
Company.
In all cases, issuance of New Securities that are accepted for
exchange pursuant to the Exchange Offers will be made only after timely
receipt by the Exchange Agent or Transfer Agent of certificates for such
Old Securities or a timely Book-Entry Confirmation of such Old Securities
into the Exchange Agent's or Transfer Agent's account at the Book-Entry
Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old
Securities are not accepted for any reason set forth in the terms and
conditions of the Exchange Offers or if Old Securities are submitted for
a greater principal amount or greater number of shares, as the case may
be, than the Holder desires to exchange, such unaccepted or non-exchanged
Old Securities will be returned without expense to the tendering Holder
thereof (or, in the case of Old Securities tendered by book-entry
transfer into the Exchange Agent's or Transfer Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described below, such non-exchanged Old Securities will be
credited to an account maintained with such Book-Entry Transfer Facility)
as promptly as practicable after the expiration or termination of the
Exchange Offers.
BOOK-ENTRY TRANSFER
Each of the Exchange Agent and the Transfer Agent each will make a
request to establish an account with respect to the Old Securities and
the Old Preferred Stock, respectively, at the Book-Entry Transfer
Facility for purposes of the Exchange Offers within two business days
after the date of this Prospectus, and any financial institution that is
a participant in the Book-Entry Transfer Facility's systems may make
book-entry delivery of Old Securities by causing the Book-Entry Transfer
to transfer such Old Notes or Old Preferred Stock into the Exchange
Agent's or the Transfer Agent's account, respectively, at the Book-Entry
Transfer Facility in accordance with such Book-Entry Transfer Facility's
procedures for transfer. However, although delivery of Old Securities
may be effected through book-entry transfer at the Book-Entry Transfer
Facility, the Letter of Transmittal or facsimile thereof, with any
required signature guarantees and any other required documents, must, in
any case, be transmitted to and received by the Exchange Agent or the
Transfer Agent, as the case may be, at the address set forth below under
"--Exchange Agent; Transfer Agent" "--Transfer Agent" on or prior to the
Expiration Date or the guaranteed delivery procedures described below
must be complied with.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Securities and (i) whose Old
Securities are not immediately available or (ii) who cannot deliver their
Old Securities, the Letter of Transmittal or any other required documents
to the Exchange Agent or the Transfer Agent, as the case may be, or the
Transfer Agent, as the case may be prior to the Expiration Date, may
effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent or the Transfer
Agent, as the case may be or the Transfer Agent, as the case may be,
receives from such Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by facsimile transmission, mail
or hand delivery) setting forth the name and address of the Holder, the
certificate number(s) of such Old Notes or Old Preferred Stock and the
principal amount of Old Notes or number of shares of Old Preferred Stock
tendered stating that the tender is being made thereby and guaranteeing
that, within five New York Stock Exchange trading days after the
Expiration Date, the Letter of Transmittal (or facsimile thereof)
together with the certificate(s) representing the Old Notes or Old
Preferred Stock and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the
Exchange Agent or the Transfer Agent, as the case may be; and
-32-
<PAGE>
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all
tendered Old Notes or Old Preferred Stock in proper form for transfer and
other documents required by the Letter of Transmittal are received by the
Exchange Agent or Transfer Agent, as the case may be, within five New
York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent or the Transfer Agent, as the case
may be, a Notice of Guaranteed Delivery will be sent to Holders who wish
to tender their Old Notes or Old Preferred Stock according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Securities may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date.
To withdraw a tender of Old Securities in the Exchange Offers, a
written or facsimile transmission notice of withdrawal must be received
by the Exchange Agent or the Transfer Agent, as the case may be, or the
Transfer Agent, as the case may be, at its respective address set forth
herein prior to 5:00 p.m., New York City time, on the Expiration Date.
Any such notice of withdrawal must (i) specify the name of the person
having deposited the Old Securities to be withdrawn (the "Depositor"),
(ii) identify the Old Securities to be withdrawn (including the
certificate number or), (iii) be signed by the Holder in the same manner
as the original signature on the Letter of Transmittal by which such Old
Securities were tendered (including any required signature guarantees) or
be accompanied by documents of transfer sufficient to have the Trustee
with respect to the Old Notes, or the Transfer Agent with respect to the
Old Preferred Stock, register the transfer of such Old Securities in the
name of the person withdrawing the tender and (iv) specify the name in
which any such Old Securities are to be registered, if different from
that of the Depositor. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be
determined by the Company, whose determination shall be final and binding
on all parties. Any Old Securities so withdrawn will be deemed not to
have been validly tendered for purposes of the Exchange Offers and no New
Securities will be issued with respect thereto unless the Old Securities
so withdrawn are validly retendered. Any Old Securities which have been
tendered but which are not accepted for payment will be returned to the
Holder thereof without cost to such Holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offers.
Properly withdrawn Old Securities may be retendered by following one of
the procedures described above under "--Procedures for Tendering" at any
time prior to the Expiration Date.
EXCHANGE AGENT; TRANSFER AGENT
Norwest Banks has been appointed as Exchange Agent of the Note
Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery with respect to the exchange
of the Old Notes should be directed to the Exchange Agent addressed as
follows:
By Registered Mail or Certified Mail: By Overnight Courier:
Norwest Banks Norwest Banks
Corporate Trust Section Corporate Trust Section
P.O. Box 1517 NorthStar East Building
Minneapolis, MN 55480-1517 Sixth and Marquette Avenues
Minneapolis, MN 55479-0113
By Telephone: By Facsimile:
(612) 667-4070 (612) 667-4972
-33-
<PAGE>
American Stock Transfer & Trust Company has been appointed Transfer
Agent of the Preferred Stock Exchange Offer. Questions and requests for
assistance, requests for additional copies of this Prospectus or the
Letter of Transmittal and requests for Notice of Guaranteed Delivery with
respect to the Old Preferred Stock should be addressed to the Transfer
Agent as follows:
By Registered Mail, Certified Mail or Overnight By Telephone:
Courier:
(212) 936-5100
American Stock Transfer & Trust Company
40 Wall Street By Facsimile:
New York, NY 10005
(718) 236-4588
FEES AND EXPENSES
The expenses of soliciting tenders will be paid by the Company. The
principal solicitation is being made by mail; however, additional
solicitation may be made by telecopier, telephone or in person by
officers and regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offers and will not make any payments to brokers-dealers or
others soliciting acceptances of the Exchange Offers. The Company,
however, will pay the Exchange Agent and the Transfer Agent reasonable
and customary fees for their services and will reimburse them for their
reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange
Offers will be paid by the Company and are estimated in the aggregate to
be approximately $200,000. Such expenses include registration fees, fees
and expenses of the Exchange Agent and the Transfer Agent, accounting and
legal fees and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the
exchange of the Old Securities pursuant to the Exchange Offers. If,
however, certificates representing New Securities for principal amounts
or number of shares not tendered or accepted for exchange are to be
delivered to, or are to be issued in the name of, any person other than
the registered Holder of Old Securities tendered, or if tendered the Old
Securities are registered in the name of, any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed
for any reason other than the exchange of the Old Securities pursuant to
the Exchange Offers, then the amount of any such transfer taxes (whether
imposed on the registered Holder or any other persons) will be payable by
the tendering Holder. If satisfactory evidence of payment of such taxes
or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such
tendering Holder.
DESCRIPTION OF NEW NOTES
The New Notes are to be issued under an Indenture, dated as of the
April 30, 1996 (the "Notes Indenture"), among ICG, as issuer, IntelCom,
as guarantor (including its successors and assigns, the "Guarantor"), and
Norwest Bank Colorado, National Association, as Trustee (the "Trustee").
A copy of the Notes Indenture is available upon request from ICG. The
following summary of certain provisions of the Notes Indenture does not
purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Notes Indenture,
including the definitions of certain terms therein and those terms made a
part thereof by the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Whenever particular defined terms of the Notes
Indenture not otherwise defined herein are referred to, such defined
terms are incorporated herein by reference. References herein to "$"
refers to U.S. dollars.
IntelCom's Board of Directors has adopted a plan under which IntelCom
will become a subsidiary of a new, publicly traded Delaware corporation
("Newco"). Upon the completion of such transaction, references to
-34-
<PAGE>
"IntelCom" herein shall be deemed to also refer to Newco. In addition,
Newco will fully and unconditionally guarantee ICG's obligations under
the New Notes on a senior basis. Upon completion of the transaction
whereby IntelCom becomes a subsidiary of Newco, references herein to
"Guarantor" shall be deemed to also refer to Newco.
GENERAL
The New Notes will be unsecured senior obligations of ICG, limited to
$550,300,000 aggregate principal amount, and will mature on May 1, 2006.
After May 1, 2001, interest on the New Notes will accrue at the rate of
12 1/2% per annum from the most recent Interest Payment Date to which
interest has been paid or provided for, payable semiannually (to Holders
of record at the close of business on April 15 or October 15 immediately
preceding the Interest Payment Date) on May 1 and November 1 of each
year, commencing November 1, 2001.
Although for U.S. federal income tax purposes a significant amount of
original issue discount, taxable as ordinary income, will be recognized
by a Holder of New Notes as such discount is amortized from the date of
issuance of the New Notes, Holders of New Notes will not receive any cash
payments of interest on the New Notes until November 1, 2001. See
"Certain United States Federal Income Tax Considerations."
Principal of, premium, if any, and interest on the New Notes will be
payable, and the New Notes may be exchanged or transferred, at the office
or agency of ICG (which initially will be the corporate trust office of
the Trustee at 1740 Broadway, Denver, Colorado); provided that, at the
option of ICG, payment of interest may be made by check mailed to the
address of the Holders as such address appears in the Security Register.
The New Notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 of principal amount at maturity and
any integral multiple thereof. See "--Book Entry; Delivery and Form." No
service charge will be made for any registration of transfer or exchange
of New Notes, but ICG may require payment of a sum sufficient to cover
any transfer tax or other similar governmental charge payable in
connection therewith.
OPTIONAL REDEMPTION
The New Notes will be redeemable, at ICG's option, in whole or in
part, at any time or from time to time, on or after May 1, 2001 and prior
to maturity, upon not less than 30 nor more than 60 days' prior notice
mailed by first class mail to each Holder's last address as it appears in
the Security Register, at the following Redemption Prices (expressed in
percentages of principal amount at maturity), plus accrued and unpaid
interest, if any, to the Redemption Date (subject to the right of Holders
of record on the relevant Regular Record Date that is on or prior to the
Redemption Date to receive interest due on an Interest Payment Date), if
redeemed during the 12-month period commencing May 1, of the years set
forth below:
YEAR PERCENTAGE
2001.................... 106.250%
2002.................... 103.125%
2003 and thereafter..... 100.000%
In addition, at any time on or prior to May 1, 1999, ICG may, at its
option from time to time, redeem New Notes having an aggregate principal
amount of up to 35% of the aggregate principal amount of all Old Notes
issued in the Private Offering, at a redemption price equal to 112/1//2%
of the Accreted Value thereof on the redemption date, with proceeds of
one or more Public Equity Offerings of Common Stock of (A) IntelCom or
(B) ICG, provided that (i), with respect to a Public Equity Offering
referred to in clause (A) above, cash proceeds of such Public Equity
Offering in an amount sufficient to effect the redemption of New Notes to
be so redeemed are contributed by IntelCom to ICG prior to such
redemption and used by ICG to effect such redemption and (ii) such
redemption occurs within 180 days after consummation of such Public
Equity Offering.
-35-
<PAGE>
In the case of any partial redemption, selection of the New Notes for
redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on
which the New Notes are listed or, if the New Notes are not listed on a
national securities exchange, on a pro rata basis or by lot; provided
that no New Note of $1,000 in principal amount at maturity or less shall
be redeemed in part. If any New Note is to be redeemed in part only, the
notice of redemption relating to such New Note shall state the portion of
the principal amount thereof to be redeemed. A new New Note in principal
amount equal to the unredeemed portion thereof will be issued in the name
of the Holder thereof upon cancellation of the original New Note.
In the event that (i) IntelCom has become or would become obligated to
pay, on the next date on which any amount would be payable under or with
respect to the New Notes, any Additional Amounts (as defined herein) as a
result of certain changes affecting Canadian withholding tax laws, and
(ii) IntelCom cannot reasonably arrange for another obligor to make such
payment so as to avoid the requirement to pay such Additional Amounts,
then IntelCom may redeem all, but not less than all, the New Notes at any
time at 100% of the Accreted Value thereof on the redemption date,
together with accrued interest thereon, if any, to the redemption date.
See "--Additional Amounts."
GUARANTEE
ICG's obligations under the New Notes are fully and unconditionally
guaranteed on a senior basis by the Guarantor; provided that the Note
Guarantee shall not be enforceable against the Guarantor in an amount in
excess of the net worth of the Guarantor at the time that determination
of such net worth is, under applicable law, relevant to the
enforceability of such Note Guarantee. Such net worth shall include any
claim of the Guarantor against ICG for reimbursement.
RANKING
The New Notes and the Note Guarantee will be senior unsecured
indebtedness of ICG and IntelCom, respectively, will rank pari passu in
right of payment with all existing and future unsecured, unsubordinated
indebtedness and will be senior in right of payment to all existing and
future subordinated indebtedness of ICG and IntelCom. See "Risk Factors-
-Substantial Indebtedness; Ability to Service Debt" and "--Holding
Company Reliance on Subsidiaries' Funds; Priority of Creditors;
Subordination of Exchange Debentures."
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in
the covenants and other provisions of the Notes Indenture. Reference is
made to the Notes Indenture for the full definition of all terms as well
as any other capitalized term used herein for which no definition is
provided.
"Accreted Value" is defined to mean, for any Specified Date, the
amount calculated pursuant to (i), (ii), (iii) or (iv) for each $1,000
principal amount at maturity of New Notes:
(i) if the Specified Date occurs on one of the following dates (each a
"Semi-Annual Accrual Date"), the Accreted Value will equal the amount set
forth below for such Semi-Annual Accrual Date:
SEMI-ANNUAL ACCRETED
ACCRUAL DATE VALUE
- ------------ --------
April 30, 1996.................. $ 545.21
November 1, 1996................ $ 579.48
May 1, 1997..................... $ 615.69
November 1, 1997................ $ 654.18
May 1, 1998..................... $ 695.06
-36-
<PAGE>
November 1, 1998................ $ 738.50
May 1, 1999..................... $ 784.66
November 1, 1999................ $ 833.70
May 1, 2000..................... $ 885.81
November 1, 2000................ $ 941.17
May 1, 2001..................... $1,000.00
(ii) if the Specified Date occurs before the first Semi-Annual
Accrual Date, the Accreted Value will equal the sum of (a) the original
issue price and (b) an amount equal to the product of (1) the Accreted
Value for the first Semi-Annual Accrual Date less the original issue
price multiplied by (2) a fraction, the numerator of which is the number
of days from the issue date of the New Notes to the Specified Date, using
a 360-day year of twelve 30-day months, and the denominator of which is
the number of days elapsed from the issue date of the New Notes to the
first Semi-Annual Accrual Date, using a 360-day year of twelve 30-day
months;
(iii) if the Specified Date occurs between two Semi-Annual Accrual
Dates, the Accreted Value will equal the sum of (a) the Accreted Value
for the Semi-Annual Accrual Date immediately preceding such Specified
Date and (b) an amount equal to the product of (1) the Accreted Value for
the immediately following Semi-Annual Accrual Date less the Accreted
Value for the immediately preceding Semi-Annual Accrual Date multiplied
by (2) a fraction, the numerator of which is the number of days from the
immediately preceding Semi-Annual Accrual Date to the Specified Date,
using a 360-day year of twelve 30-day months, and the denominator of
which is 180; or
(iv) if the Specified Date occurs after the last Semi-Annual Accrual
Date, the Accreted Value will equal $1,000.
"Adjusted Consolidated Net Income" means, for any period, the
aggregate net income (or loss) of the Guarantor and its Restricted
Subsidiaries for such period determined in conformity with GAAP; provided
that the following items shall be excluded in computing Adjusted
Consolidated Net Income (without duplication): (i) the net income of any
Person (other than net income attributable to a Restricted Subsidiary) in
which any Person (other than the Guarantor or any of its Restricted
Subsidiaries) has a joint interest and the net income of any Unrestricted
Subsidiary, except to the extent of the amount of dividends or other
distributions actually paid to the Guarantor or any of its Restricted
Subsidiaries by such other Person or such Unrestricted Subsidiary during
such period; (ii) solely for the purposes of calculating the amount of
Restricted Payments that may be made pursuant to clause (C) of the first
paragraph of the "Limitation on Restricted Payments" covenant described
below (and in such case, except to the extent includable pursuant to
clause (i) above), the net income (or loss) of any Person accrued prior
to the date it becomes a Restricted Subsidiary or is merged into or
consolidated with the Guarantor or any of its Restricted Subsidiaries or
all or substantially all of the property and assets of such Person are
acquired by the Guarantor or any of its Restricted Subsidiaries; (iii)
the net income of any Restricted Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of such net income is not at the time permitted by
the operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary; (iv) any gains or losses (on an
after-tax basis) attributable to Asset Sales; (v) except for purposes of
calculating the amount of Restricted Payments that may be made pursuant
to clause (C) of the first paragraph of the "Limitation on Restricted
Payments" covenant described below, any amount paid or accrued as
dividends on preferred stock of the Guarantor or any Restricted
Subsidiary owned by Persons other than the Guarantor and any of its
Restricted Subsidiaries; and (vi) all extraordinary gains and
extraordinary losses.
"Adjusted Consolidated Net Tangible Assets" means the total amount of
assets of the Guarantor and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), except to the
extent resulting from write-ups of capital assets (excluding write-ups in
connection with accounting for acquisitions in conformity with GAAP),
after deducting therefrom (i) all current liabilities of the Guarantor
and its Restricted Subsidiaries (excluding intercompany items) and (ii)
all goodwill, trade names, trademarks, patents, unamortized
-37-
<PAGE>
debt discount and expense and other like intangibles, all as set forth on
the most recently available quarterly or annual consolidated balance
sheet of the Guarantor and its Restricted Subsidiaries, prepared in
conformity with GAAP.
"Affiliate" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as applied to any
Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract
or otherwise; provided that, with respect to the Guarantor and any of its
Subsidiaries, the term "Affiliate" shall be deemed to include William W.
Becker, Lawrence L. Becker and any person related by blood or marriage to
either of them.
"Asset Acquisition" means (i) an investment by the Guarantor or any of
its Restricted Subsidiaries in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Guarantor or shall be
merged into or consolidated with the Guarantor or any of its Restricted
Subsidiaries; provided that such Person's primary business is related,
ancillary or complementary to the businesses of the Guarantor and its
Restricted Subsidiaries on the date of such investment or (ii) an
acquisition by the Guarantor or any of its Restricted Subsidiaries of the
property and assets of any Person other than the Guarantor or any of its
Restricted Subsidiaries that constitute substantially all of a division
or line of business of such Person; provided that the property and assets
acquired are related, ancillary or complementary to the businesses of the
Guarantor and its Restricted Subsidiaries on the date of such
acquisition.
"Asset Disposition" means the sale or other disposition by the
Guarantor or any of its Restricted Subsidiaries (other than to the
Guarantor or another Restricted Subsidiary of the Guarantor) of (i) all
or substantially all of the Capital Stock of any Restricted Subsidiary of
the Guarantor or (ii) all or substantially all of the assets that
constitute a division or line of business of the Guarantor or any of its
Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition (including
by way of merger, consolidation or sale-leaseback transactions) in one
transaction or a series of related transactions by the Guarantor or any
of its Restricted Subsidiaries to any Person other than the Guarantor or
any of its Restricted Subsidiaries of (i) all or any of the Capital Stock
of any Restricted Subsidiary, (ii) all or substantially all of the
property and assets of an operating unit or business of the Guarantor or
any of its Restricted Subsidiaries or (iii) any other property and assets
of the Guarantor or any of its Restricted Subsidiaries outside the
ordinary course of business of the Guarantor or such Restricted
Subsidiary and, in each case, that is not governed by the provisions of
the Notes Indenture applicable to mergers, consolidations and sales of
assets of the Guarantor; provided that the meaning of "Asset Sale" shall
not include (A) sales or other dispositions of inventory, receivables and
other current assets, and (B) dispositions of assets of the Guarantor or
any of its Restricted Subsidiaries, in substantially simultaneous
exchanges for consideration consisting of any combination of cash,
Temporary Cash Investments and assets that are used or useful in the
telecommunications business of the Guarantor or its Restricted
Subsidiaries, if such consideration has an aggregate fair market value
substantially equal to the fair market value of the assets so disposed
of; provided, however, that fair market value shall be determined in good
faith by the Board of Directors of ICG, whose determination shall be
conclusive and evidenced by a Board Resolution delivered to the Trustee;
and provided further that any cash or Temporary Cash Investments received
by the Guarantor or any of its Restricted Subsidiaries pursuant to any
transaction described in clause (B) above shall be applied in accordance
with clause (A) or (B) of the first paragraph of the "Limitation on Asset
Sales" covenant.
"Average Life" means, at any date of determination with respect to any
debt security, the quotient obtained by dividing (i) the sum of the
products of (a) the number of years from such date of determination to
the dates of each successive scheduled principal payment of such debt
security and (b) the amount of such principal payment by (ii) the sum of
all such principal payments.
-38-
<PAGE>
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated,
whether voting or non-voting) in equity of such Person, whether now
outstanding or issued after the date of the Notes Indenture, including,
without limitation, all Common Stock and preferred stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted
present value of the rental obligations of such Person as lessee, in
conformity with GAAP, is required to be capitalized on the balance sheet
of such Person; and "Capitalized Lease Obligations" means the discounted
present value of the rental obligations under such lease.
"Change of Control" means such time as (i) a "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act) of Voting Stock having more than 40% of the voting
power of the total Voting Stock of the Guarantor on a fully diluted
basis; (ii) individuals who on the Closing Date constitute the Board of
Directors of the Guarantor (together with any new directors whose
election by the Board of Directors or whose nomination for election by
the Guarantor's stockholders was approved by a vote of at least a
majority of the members of the Board of Directors then in office who
either were members of the Board of Directors on the Closing Date or
whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the members of the Board
of Directors then in office; or (iii) all of the Common Stock of ICG is
not beneficially owned by the Guarantor; provided, however, that a Change
of Control shall be deemed not to occur solely as a result of a
Reorganization permitted by the Notes Indenture.
"Closing Date" means the date on which the New Notes are originally
issued under the Notes Indenture.
"Consolidated EBITDA" means, for any period, the sum of the amounts
for such period of (i) Adjusted Consolidated Net Income, (ii)
Consolidated Interest Expense, (iii) income taxes, to the extent such
amount was deducted in calculating Adjusted Consolidated Net Income
(other than income taxes (either positive or negative) attributable to
extraordinary and non-recurring gains or losses or sales of assets), (iv)
depreciation expense, to the extent such amount was deducted in
calculating Adjusted Consolidated Net Income, (v) amortization expense,
to the extent such amount was deducted in calculating Adjusted
Consolidated Net Income, and (vi) all other non-cash items reducing
Adjusted Consolidated Net Income (other than items that will require cash
payments and for which an accrual or reserve is, or is required by GAAP
to be, made), less all non-cash items increasing Adjusted Consolidated
Net Income, all as determined on a consolidated basis for the Guarantor
and its Restricted Subsidiaries in conformity with GAAP; provided that,
if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary,
Consolidated EBITDA shall be reduced (to the extent not otherwise reduced
in accordance with GAAP) by an amount equal to (A) the amount of the
Adjusted Consolidated Net Income attributable to such Restricted
Subsidiary multiplied by (B) the quotient of (1) the number of shares of
outstanding Common Stock of such Restricted Subsidiary not owned on the
last day of such period by the Guarantor or any of its Restricted
Subsidiaries divided by (2) the total number of shares of outstanding
Common Stock of such Restricted Subsidiary on the last day of such
period.
"Consolidated Interest Expense" means, for any period, the aggregate
amount of interest in respect of Indebtedness (including amortization of
original issue discount on any Indebtedness and the interest portion of
any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and
other fees and charges owed with respect to letters of credit and
bankers' acceptance financing; the net costs associated with Interest
Rate Agreements; and Indebtedness that is Guaranteed or secured by the
Guarantor or any of its Restricted Subsidiaries) and all but the
principal component of rentals in respect of Capitalized Lease
Obligations paid, accrued or scheduled to be paid or to be accrued by the
Guarantor and its Restricted Subsidiaries during such period; excluding,
however, without duplication, (i) any amount of such interest of any
Restricted Subsidiary if the net income of such Restricted Subsidiary is
excluded in the calculation of Adjusted Consolidated Net Income pursuant
to clause (iii) of the definition thereof (but only in the same
proportion as the net income of such Restricted Subsidiary is excluded
from the calculation of Adjusted Consolidated Net Income pursuant to
clause (iii) of the definition thereof) and (ii) any premiums, fees and
expenses (and any amortization thereof) payable in connection with the
offering of the 13/1//2% Notes and the warrants issued therewith,
-39-
<PAGE>
the New Notes and/or the Preferred Stock, all as determined on a
consolidated basis (without taking into account Unrestricted
Subsidiaries) in conformity with GAAP.
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity as set forth on the most recently available
quarterly or annual consolidated balance sheet of the Guarantor and its
Restricted Subsidiaries (which shall be as of a date not more than 90
days prior to the date of such computation, and which shall not take into
account Unrestricted Subsidiaries), less any amounts attributable to
Redeemable Stock or any equity security convertible into or exchangeable
for Indebtedness, the cost of treasury stock and the principal amount of
any promissory notes receivable from the sale of the Capital Stock of the
Guarantor or any of its Restricted Subsidiaries, each item to be
determined in conformity with GAAP (excluding the effects of foreign
currency exchange adjustments under Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 52).
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to
protect the Guarantor or any of its Restricted Subsidiaries against
fluctuations in currency values to or under which the Guarantor or any of
its Restricted Subsidiaries is a party or a beneficiary on the Closing
Date or becomes a party or a beneficiary thereafter.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"FOTI" means Fiber Optic Technologies Inc., a Colorado corporation.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of August 8, 1995, including, without
limitation, those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as
approved by a significant segment of the accounting profession. All
ratios and computations contained in the Notes Indenture shall be
computed in conformity with GAAP applied on a consistent basis, except
that calculations made for purposes of determining compliance with the
terms of the covenants and with other provisions of the Notes Indenture
shall be made without giving effect to (i) the amortization of any
expenses incurred in connection with the offering of the 13/1//2% Notes
and the warrants issued therewith, the New Notes and/or the Preferred
Stock and (ii) except as otherwise provided, the amortization of any
amounts required or permitted by Accounting Principles Board Opinion Nos.
16 and 17.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and, without limiting the generality of
the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or other
obligation of such other Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of
assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided that the term
"Guarantee" shall not include endorsements for collection or deposit in
the ordinary course of business. The term "Guarantee" used as a verb has
a corresponding meaning.
"Incur" means, with respect to any Indebtedness, to incur, create,
issue, assume, Guarantee or otherwise become liable for or with respect
to, or become responsible for, the payment of, contingently or otherwise,
such Indebtedness, including an Incurrence of Indebtedness by reason of
the acquisition of more than 50% of the Capital Stock of any Person;
provided that neither the accrual of interest nor the accretion of
original issue discount shall be considered an Incurrence of
Indebtedness. The term "Incurrence" has a corresponding meaning.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person
for borrowed money, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all
obligations of such Person in respect of letters of credit or other
similar instruments (including reimbursement obligations with respect
thereto), (iv) all obligations of such
-40-
<PAGE>
Person to pay the deferred and unpaid purchase price of property or
services, which purchase price is due more than six months after the date
of placing such property in service or taking delivery and title thereto
or the completion of such services, except Trade Payables, (v) all
obligations of such Person as lessee under Capitalized Leases, (vi) all
Indebtedness of other Persons secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person;
provided that the amount of such Indebtedness shall be the lesser of (A)
the fair market value of such asset at such date of determination and (B)
the amount of such Indebtedness, (vii) all Indebtedness of other Persons
Guaranteed by such Person to the extent such Indebtedness is Guaranteed
by such Person and (viii) to the extent not otherwise included in this
definition, obligations under Currency Agreements and Interest Rate
Agreements. The amount of Indebtedness of any Person at any date shall
be the outstanding balance at such date of all unconditional obligations
as described above and, with respect to contingent obligations, the
maximum liability upon the occurrence of the contingency giving rise to
the obligation, provided (i) that the amount outstanding at any time of
any Indebtedness issued with original issue discount is the original
issue price of such Indebtedness and (ii) that Indebtedness shall not
include any liability for federal, state, local or other taxes.
"Indebtedness to EBITDA Ratio" means, as at any date of determination,
the ratio of (i) the aggregate amount of Indebtedness of the Guarantor,
ICG and their Restricted Subsidiaries on a consolidated basis
("Consolidated Indebtedness") as at the date of determination to (ii) the
Consolidated EBITDA of the Guarantor for the then most recent four full
fiscal quarters for which reports have been filed pursuant to the
"Commission Reports and Reports to Holders" covenant described below
(such four full fiscal quarter period being referred to herein as the
"Four Quarter Period"); provided that (x) pro forma effect shall be given
to any Indebtedness Incurred from the beginning of the Four Quarter
Period through the Transaction Date (including any Indebtedness Incurred
on the Transaction Date), to the extent outstanding on the Transaction
Date, (y) if during the period commencing on the first day of such Four
Quarter Period through the Transaction Date (the "Reference Period"), the
Guarantor, ICG or any of the Restricted Subsidiaries shall have engaged
in any Asset Sale, Consolidated EBITDA for such period shall be reduced
by an amount equal to the EBITDA (if positive), or increased by an amount
equal to the EBITDA (if negative), directly attributable to the assets
which are the subject of such Asset Sale and any related retirement of
Indebtedness as if such Asset Sale and related retirement of Indebtedness
had occurred on the first day of such Reference Period or (z) if during
such Reference Period the Guarantor, ICG or any of the Restricted
Subsidiaries shall have made any Asset Acquisition, Consolidated EBITDA
of the Guarantor shall be calculated on a pro forma basis as if such
Asset Acquisition and any related financing had occurred on the first day
of such Reference Period.
"IntelCom" means IntelCom Group Inc. and its successors and assigns.
"Investment" in any Person means any direct or indirect advance, loan
or other extension of credit (including, without limitation, by way of
Guarantee or similar arrangement; but excluding advances to customers in
the ordinary course of business that are, in conformity with GAAP,
recorded as accounts receivable on the balance sheet of the Guarantor or
its Restricted Subsidiaries) or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property
or services for the account or use of others), or any purchase or
acquisition of Capital Stock, bonds, notes, debentures or other similar
instruments issued by, such Person and shall include the designation of a
Restricted Subsidiary as an Unrestricted Subsidiary. For purposes of the
definition of "Unrestricted Subsidiary" and the "Limitation on Restricted
Payments" covenant described below, (i) "Investment" shall include the
fair market value of the assets (net of liabilities) of any Restricted
Subsidiary of the Guarantor at the time that such Restricted Subsidiary
of the Guarantor is designated an Unrestricted Subsidiary and shall
exclude the fair market value of the assets (net of liabilities) of any
Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is
designated a Restricted Subsidiary of the Guarantor and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its
fair market value at the time of such transfer, in each case as
determined by the Board of Directors in good faith.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the
nature thereof, any sale with recourse against the seller or any
Affiliate of the seller, or any agreement to give any security interest).
"MTN" means Maritime Telecommunications Network, Inc., a Colorado
corporation, and its successors.
-41-
<PAGE>
"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the
extent corresponding to the principal, but not interest, component
thereof) when received in the form of cash or cash equivalents (except to
the extent such obligations are financed or sold with recourse to the
Guarantor or any Restricted Subsidiary of the Guarantor) and proceeds
from the conversion of other property received when converted to cash or
cash equivalents, net of (i) brokerage commissions and other fees and
expenses (including fees and expenses of counsel and investment bankers)
related to such Asset Sale, (ii) provisions for all taxes (whether or not
such taxes will actually be paid or are payable) as a result of such
Asset Sale without regard to the consolidated results of operations of
the Guarantor and its Restricted Subsidiaries, taken as a whole, (iii)
payments made to repay Indebtedness or any other obligation outstanding
at the time of such Asset Sale that either (A) is secured by a Lien on
the property or assets sold or (B) is required to be paid as a result of
such sale and (iv) appropriate amounts to be provided by the Guarantor or
any Restricted Subsidiary of the Guarantor as a reserve against any
liabilities associated with such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as
determined in conformity with GAAP and (b) with respect to any issuance
or sale of Capital Stock, the proceeds of such issuance or sale in the
form of cash or cash equivalents, including payments in respect of
deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form
of cash or cash equivalents (except to the extent such obligations are
financed or sold with recourse to the Guarantor or any Restricted
Subsidiary of the Guarantor) and proceeds from the conversion of other
property received when converted to cash or cash equivalents, net of
attorney's fees, accountants' fees, underwriters' or placement agents'
fees, discounts or commissions and brokerage, consultant and other fees
incurred in connection with such issuance or sale and net of taxes paid
or payable as a result thereof.
"Offer to Purchase" means an offer to purchase New Notes by ICG from
the Holders commenced by mailing a notice to the Trustee and each Holder
stating: (i) the covenant pursuant to which the offer is being made and
that all New Notes validly tendered will be accepted for payment on a pro
rata basis; (ii) the purchase price and the date of purchase (which shall
be a Business Day no earlier than 30 days nor later than 60 days from the
date such notice is mailed) (the "Payment Date"); (iii) that any Senior
Discount Note not tendered will continue to accrue interest pursuant to
its terms; (iv) that, unless ICG defaults in the payment of the purchase
price, any Senior Discount Note accepted for payment pursuant to the
Offer to Purchase shall cease to accrue interest on and after the Payment
Date; (v) that Holders electing to have a Senior Discount Note purchased
pursuant to the Offer to Purchase will be required to surrender the
Senior Discount Note, together with the form entitled "Option of the
Holder to Elect Purchase" on the reverse side of the Senior Discount Note
completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the Business Day immediately preceding
the Payment Date; (vi) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than the close of
business on the third Business Day immediately preceding the Payment
Date, a telegram, facsimile transmission or letter setting forth the name
of such Holder, the principal amount of New Notes delivered for purchase
and a statement that such Holder is withdrawing his election to have such
New Notes purchased; and (vii) that Holders whose new New Notes are being
===
purchased only in part will be issued new Notes equal in principal
amount to the unpurchased portion of the New Notes surrendered; provided
that each Senior Discount Note purchased and each new Senior Discount
Note issued shall be in a principal amount of $1,000 or integral
multiples thereof. On the Payment Date, ICG shall (i) accept for payment
on a pro rata basis New Notes or portions thereof tendered pursuant to an
Offer to Purchase; (ii) deposit with the Paying Agent money sufficient to
pay the purchase price of all New Notes or portions thereof so accepted;
and (iii) deliver, or cause to be delivered, to the Trustee all New Notes
or portions thereof so accepted together with an Officers' Certificate
specifying the New Notes or portions thereof accepted for payment by ICG.
The Paying Agent shall promptly mail to the Holders of New Notes so
accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail to such Holders a new Senior
Discount Note equal in principal amount to any unpurchased portion of the
Senior Discount Note surrendered; provided that each Senior Discount Note
purchased and each new Senior Discount Note issued shall be in a
principal amount of $1,000 or integral multiples thereof. ICG will
publicly announce the results of an Offer to Purchase as soon as
practicable after the Payment Date. The Trustee shall act as the Paying
Agent for an Offer to Purchase. ICG will comply with Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable, in the event that
ICG is required to repurchase New Notes pursuant to an Offer to Purchase.
-42-
<PAGE>
"Ohio LINX" means ICG Ohio LINX, Inc., an Ohio corporation.
"Permitted Investment" means (i) an Investment in a Restricted
Subsidiary or a Person which will, upon the making of such Investment,
become a Restricted Subsidiary or be merged or consolidated with or into
or transfer or convey all or substantially all its assets to, the
Guarantor or a Restricted Subsidiary; provided that such person's primary
business is related, ancillary or complementary to the businesses of the
Guarantor and its Restricted Subsidiaries on the date of such Investment;
(ii) a Temporary Cash Investment; (iii) payroll, travel and similar
advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses in accordance with GAAP; (iv) loans
or advances to employees made in the ordinary course of business in
accordance with past practice of the Guarantor or its Restricted
Subsidiaries and that do not in the aggregate exceed $2 million at any
time outstanding; and (v) stock, obligations or securities received in
satisfaction of judgments.
"Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate
legal proceedings promptly instituted and diligently conducted and for
which a reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made; (ii) statutory
Liens of landlords and carriers, warehousemen, mechanics, suppliers,
materialmen, repairmen or other similar Liens arising in the ordinary
course of business and with respect to amounts not yet delinquent or
being contested in good faith by appropriate legal proceedings promptly
instituted and diligently conducted and for which a reserve or other
appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (iii) Liens incurred or deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security; (iv) Liens
incurred or deposits made to secure the performance of tenders, bids,
leases, statutory or regulatory obligations, bankers' acceptances, surety
and appeal bonds, government contracts, performance and return-of-money
bonds and other obligations of a similar nature incurred in the ordinary
course of business (exclusive of obligations for the payment of borrowed
money); (v) easements, rights of way, municipal and zoning ordinances and
similar charges, encumbrances, title defects or other irregularities that
do not materially interfere with the ordinary course of business of the
Guarantor or any of its Restricted Subsidiaries; (vi) Liens (including
extensions and renewals thereof) upon real or personal property acquired
after the Closing Date; provided that (a) such Lien is created solely for
the purpose of securing Indebtedness Incurred, in accordance with the
"Limitation on Indebtedness" covenant described below, (1) to finance the
cost (including the cost of improvement or construction) of the item of
property or assets subject thereto and such Lien is created prior to, at
the time of or within six months after the later of the acquisition, the
completion of construction or the commencement of full operation of such
property or (2) to refinance any Indebtedness previously so secured, (b)
the principal amount of the Indebtedness secured by such Lien does not
exceed 100% of such cost and (c) any such Lien shall not extend to or
cover any property or assets other than such item of property or assets
and any improvements on such item; (vii) leases or subleases granted to
others that do not materially interfere with the ordinary course of
business of the Guarantor and its Restricted Subsidiaries, taken as a
whole; (viii) Liens encumbering property or assets under construction
arising from progress or partial payments by a customer of the Guarantor
or its Restricted Subsidiaries relating to such property or assets; (ix)
any interest or title of a lessor in the property subject to any
Capitalized Lease or operating lease; (x) Liens arising from filing
Uniform Commercial Code financing statements regarding leases; (xi) Liens
on property of, or on shares of stock or Indebtedness of, any corporation
existing at the time such corporation becomes, or becomes a part of, any
Restricted Subsidiary; provided that such Liens do not extend to or cover
any property or assets of the Guarantor or any Restricted Subsidiary
other than the property or assets acquired; (xii) Liens in favor of the
Guarantor or any Restricted Subsidiary; (xiii) Liens arising from the
rendering of a final judgment or order against the Guarantor or any
Restricted Subsidiary of the Guarantor that does not give rise to an
Event of Default; (xiv) Liens securing reimbursement obligations with
respect to letters of credit that encumber documents and other property
relating to such letters of credit and the products and proceeds thereof;
(xv) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods; (xvi) Liens encumbering customary initial deposits
and margin deposits, and other Liens that are either within the general
parameters customary in the industry and incurred in the ordinary course
of business, in each case, securing Indebtedness under Interest Rate
Agreements and Currency Agreements and forward contracts, options, future
contracts, futures options or similar agreements or arrangements designed
to protect the Guarantor or any of its Restricted Subsidiaries from
fluctuations in the price of commodities; (xvii) Liens arising out of
conditional sale, title retention, consignment or similar arrangements
for the sale of goods entered into by the Guarantor or any of
-43-
<PAGE>
its Restricted Subsidiaries in the ordinary course of business in
accordance with the past practices of the Guarantor and its Restricted
Subsidiaries prior to the Closing Date; and (xviii) Liens on or sales of
receivables.
"Preferred stock" or "preferred stock" means, with respect to any
Person, any and all shares, interests, participations or other
equivalents (however designated, whether voting or non-voting) of such
Person's preferred or preference stock, whether now outstanding or issued
after the date of the Notes Indenture, including, without limitation, all
series and classes of such preferred or preference stock.
"Preferred Stock" means the preferred stock of ICG issued on the
Closing Date and any shares of preferred stock issued as payment in kind
dividends thereon.
"Public Equity Offering" means a bona fide underwritten primary public
offering of Common Stock of IntelCom or ICG pursuant to an effective
registration statement under the Securities Act.
"Redeemable Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed
prior to the Stated Maturity of the New Notes, (ii) redeemable at the
option of the holder of such class or series of Capital Stock at any time
prior to the Stated Maturity of the New Notes or (iii) convertible into
or exchangeable for Capital Stock referred to in clause (i) or (ii) above
or Indebtedness having a scheduled maturity prior to the Stated Maturity
of the New Notes; provided that any Capital Stock that would not
constitute Redeemable Stock but for provisions thereof giving holders
thereof the right to require such Person to repurchase or redeem such
Capital Stock upon the occurrence of an "asset sale" or "change of
control" occurring prior to the Stated Maturity of the New Notes shall
not constitute Redeemable Stock if the "asset sale" or "change of
control" provisions applicable to such Capital Stock are no more
favorable to the holders of such Capital Stock than the provisions
contained in "Limitation on Asset Sales" and "Repurchase of New Notes
Upon a Change of Control" covenants described below and such Capital
Stock specifically provides that such Person will not repurchase or
redeem any such stock pursuant to such provision prior to the Guarantor's
repurchase of such New Notes as are required to be repurchased pursuant
to the "Limitation on Asset Sales" and "Repurchase of New Notes Upon a
Change of Control" covenants described below.
"Restricted Subsidiary" means any Subsidiary of the Guarantor other
than an Unrestricted Subsidiary.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary of the Guarantor that, together with its
Subsidiaries, (i) for the most recent fiscal year of the Guarantor,
accounted for more than 10% of the consolidated revenues of the Guarantor
and its Restricted Subsidiaries or (ii) as of the end of such fiscal
year, was the owner of more than 10% of the consolidated assets of the
Guarantor and its Restricted Subsidiaries, all as set forth on the most
recently available consolidated financial statements of the Guarantor for
such fiscal year.
"Specified Date" means any redemption date, any date of purchase for
any purchase of New Notes pursuant to the "Limitation on Asset Sales" or
"Repurchase of New Notes upon a Change of Control" covenants described
below or any date on which the New Notes are due and payable after an
Event of Default.
"StarCom" means StarCom International Optics Corporation, a British
Columbia corporation, and its subsidiaries.
"Stated Maturity" means, (i) with respect to any debt security, the
date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and
(ii) with respect to any scheduled installment of principal of or
interest on any debt security, the date specified in such debt security
as the fixed date on which such installment is due and payable.
"Strategic Investor" means any Person engaged in the
telecommunications business which has a net worth or equity market
capitalization of at least $1 billion.
"Strategic Investor Subordinated Indebtedness" means all Indebtedness
of ICG owed to a Strategic Investor that is contractually subordinate in
right of payment to the New Notes to at least the following extent: no
payment
-44-
<PAGE>
of principal (or premium, if any) or interest on or otherwise payable in
respect of such Indebtedness may be made (whether as a result of a
default or otherwise) prior to the payment in full of all of the
Guarantor's and ICG's obligations under the New Notes, provided, however,
that prior to the payment of such obligations, interest on Strategic
Investor Subordinated Indebtedness may be payable solely in kind or in
Common Stock (other than Redeemable Stock) of the Guarantor.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the
outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.
"Temporary Cash Investment" means any of the following: (i) direct
obligations of the United States of America or any agency thereof or
obligations fully and unconditionally guaranteed by the United States of
America or any agency thereof, (ii) time deposit accounts, certificates
of deposit and money market deposits maturing within 270 days of the date
of acquisition thereof, bankers' acceptances with maturities not
exceeding 270 days, and overnight bank deposits, in each case issued by
or with a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country
recognized by the United States, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $100
million (or the foreign currency equivalent thereof) and has outstanding
debt which is rated "A" (or such similar equivalent rating) or higher by
at least one nationally recognized statistical rating organization (as
defined in Rule 436 under the Securities Act) or any money-market fund
sponsored by a registered broker dealer or mutual fund distributor, (iii)
repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii)
above, (iv) commercial paper, maturing not more than 180 days after the
date of acquisition, issued by a corporation (other than an Affiliate of
the Guarantor) organized and in existence under the laws of the United
States of America, any state thereof or any foreign country recognized by
the United States of America with a rating at the time as of which any
investment therein is made of "P-1" (or higher) according to Moody's
Investors Service, Inc. or "A-1" (or higher) according to Standard &
Poor's Ratings Group, and (v) securities with maturities of six months or
less from the date of acquisition issued or fully and unconditionally
guaranteed by any state, commonwealth or territory of the United States
of America, or by any political subdivision or taxing authority thereof,
and rated at least "A" by Standard & Poor's Ratings Group or Moody's
Investors Service, Inc.
"13 1/2% Notes" means the 13 1/2% Notes due 2005 of ICG guaranteed by
IntelCom on a senior unsecured basis.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Guarantor or any of its Restricted Subsidiaries, the
date such Indebtedness is to be Incurred and, with respect to any
Restricted Payment, the date such Restricted Payment is to be made.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Guarantor
that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and
(ii) any Subsidiary of an Unrestricted Subsidiary. The Board of
Directors may designate any Restricted Subsidiary of the Guarantor
(including any newly acquired or newly formed Subsidiary of the
Guarantor), other than ICG or a Subsidiary that has given a Subsidiary
Guarantee, to be an Unrestricted Subsidiary unless such Subsidiary owns
any Capital Stock of, or owns or holds any Lien on any property of, the
Guarantor or any Restricted Subsidiary; provided that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B)
if such Subsidiary has assets greater than $1,000, that such designation
would be permitted under the "Limitation on Restricted Payments" covenant
described below. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary of the Guarantor; provided that
immediately after giving effect to such designation (x) the Guarantor
could Incur $1.00 of additional Indebtedness under the first paragraph of
the "Limitation on Indebtedness" covenant described below and (y) no
Default or Event of Default shall have occurred and be continuing. Any
such designation by the Board of Directors shall be evidenced to the
Trustee by promptly filing with the Trustee a copy of the Board
Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
-45-
<PAGE>
"Voting Stock" means, with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of
directors, managers or other voting members of the governing body of such
Person.
"Wholly Owned" means, with respect to any Subsidiary of any Person,
such Subsidiary if all of the outstanding Capital Stock in such
Subsidiary (other than any director's qualifying shares or Investments by
foreign nationals mandated by applicable law) is owned by such Person or
one or more Wholly Owned Subsidiaries of such Person.
"Zycom" means Zycom Corporation, an Alberta, Canada corporation.
COVENANTS
LIMITATION ON INDEBTEDNESS
(a) Under the terms of the Notes Indenture, the Guarantor will not,
and will not permit any of its Restricted Subsidiaries to, Incur any
Indebtedness (other than the New Notes, the Guarantor's Guarantee thereof
and Indebtedness existing on the Closing Date); provided that the
Guarantor and ICG may Incur Indebtedness if, after giving effect to the
Incurrence of such Indebtedness and the receipt and application of the
proceeds therefrom, the Indebtedness to EBITDA Ratio would be greater
than zero and less than 5:1.
Notwithstanding the foregoing, the Guarantor and any Restricted
Subsidiary (except as specified below) may Incur each and all of the
following: (i) Indebtedness of the Guarantor or ICG outstanding at any
time, which Indebtedness generates gross proceeds to the Guarantor or ICG
of up to $400 million, less the gross proceeds of Indebtedness
permanently repaid as provided under the "Limitation on Asset Sales"
covenant described below; provided that (A) Indebtedness generating gross
proceeds to the Guarantor or ICG of up to $150 million may be Incurred
under this clause (i) with no additional requirements and (B) prior to,
or contemporaneously with, the Incurrence of Indebtedness generating all
or any part of the remaining $250 million of gross proceeds referred to
under this clause (i), the Guarantor or ICG shall have issued or shall
issue preferred stock (which has a final stated redemption date later
than the Stated Maturity of the 13/1// 2% Notes) generating an amount of
gross proceeds equal to or greater than the amount of Indebtedness so
Incurred and (x) with respect to preferred stock issued on the same date
as Indebtedness Incurred under this clause (i)(B), having a dividend rate
of no more than 2.75 percentage points higher than the interest rate on
the Indebtedness so Incurred, and (y) with respect to preferred stock
issued at any other time which will be applied to satisfy the criteria
under this clause (i)(B), having a secondary market yield, on the same
date as the Indebtedness so Incurred, which a nationally recognized
investment banking firm certifies to the Trustee is no more than 2.75
percentage points higher than the interest rate on the Indebtedness that
is being Incurred pursuant to this clause (i)(B); (ii) Indebtedness to
the Guarantor or any of its Wholly Owned Restricted Subsidiaries;
provided that any subsequent issuance or transfer of any Capital Stock
which results in any such Wholly Owned Restricted Subsidiary ceasing to
be a Wholly Owned Restricted Subsidiary or any subsequent transfer of
such Indebtedness (other than to the Guarantor or another Wholly Owned
Restricted Subsidiary) shall be deemed, in each case, to constitute an
Incurrence of such Indebtedness not permitted by this clause (ii); (iii)
Indebtedness issued in exchange for, or the net proceeds of which are
used to refinance or refund, then outstanding Indebtedness, other than
Indebtedness Incurred under clause (i), (ii), (v), (vi), (viii), (ix),
(xi) or (xii) of this paragraph, and any refinancings thereof in an
amount not to exceed the amount so refinanced or refunded (plus premiums,
accrued interest, fees and expenses); provided that Indebtedness the
proceeds of which are used to refinance or refund the New Notes or
Indebtedness that is pari passu with, or subordinated in right of payment
to, the New Notes or the Senior Discount Note Guarantee shall only be
permitted under this clause (iii) if (A) in case the New Notes are
refinanced in part or the Indebtedness to be refinanced is pari passu
with the New Notes or the Senior Discount Note Guarantee, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is outstanding, is expressly made
pari passu with, or subordinate in right of payment to, the remaining New
Notes or the Senior Discount Note Guarantee, as the case may be, (B) in
case the Indebtedness to be refinanced is subordinated in right of
payment to the New Notes or the Senior Discount Note Guarantee, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is issued or remains outstanding,
is expressly made subordinate in right of payment to the New Notes or the
Senior Discount Note Guarantee, as the case may be, at least to the
extent that the Indebtedness
-46-
<PAGE>
to be refinanced is subordinated to the New Notes or the Senior Discount
Note Guarantee, as the case may be and (C) such new Indebtedness,
determined as of the date of Incurrence of such new Indebtedness, does
not mature prior to the Stated Maturity of the Indebtedness to be
refinanced or refunded, and the Average Life of such new Indebtedness is
at least equal to the remaining Average Life of the Indebtedness to be
refinanced or refunded; and provided further that in no event may
Indebtedness of the Guarantor or ICG be refinanced by means of any
Indebtedness of any Restricted Subsidiary of the Guarantor or ICG, as the
case may be, pursuant to this clause (iii); (iv) Indebtedness (A) in
respect of performance, surety or appeal bonds provided in the ordinary
course of business, (B) under Currency Agreements and Interest Rate
Agreements; provided that such agreements do not increase the
Indebtedness of the obligor outstanding at any time other than as a
result of fluctuations in foreign currency exchange rates or interest
rates or by reason of fees, indemnities and compensation payable
thereunder; and (C) arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or
from Guarantees or letters of credit, surety bonds or performance bonds
securing any obligations of ICG or any of its Restricted Subsidiaries
pursuant to such agreements, in any case Incurred in connection with the
disposition of any business, assets or Restricted Subsidiary of ICG
(other than Guarantees of Indebtedness Incurred by any Person acquiring
all or any portion of such business, assets or Restricted Subsidiary of
ICG for the purpose of financing such acquisition), in a principal amount
at maturity not to exceed the gross proceeds actually received by ICG or
any Restricted Subsidiary in connection with such disposition; (v)
Indebtedness of the Guarantor or, to the extent the proceeds referred to
below are contributed to ICG, ICG, not to exceed, at any one time
outstanding, twice the amount of Net Cash Proceeds received by the
Guarantor after the Closing Date from the issuance and sale of its
Capital Stock (other than Redeemable Stock or preferred stock); provided
that such Indebtedness does not mature prior to the Stated Maturity of
the New Notes, has an Average Life longer than the New Notes and is
subordinated to the New Notes as provided in Schedule I to the Notes
Indenture; (vi) Strategic Investor Subordinated Indebtedness; (vii)
Indebtedness of the Guarantor or ICG, to the extent the proceeds thereof
are immediately used after the Incurrence thereof to purchase New Notes
tendered in an Offer to Purchase made as a result of a Change of Control;
(viii) Indebtedness of any Restricted Subsidiary of the Guarantor
Incurred pursuant to any credit agreement (including equipment leasing or
financing agreements) of such Restricted Subsidiary in effect on August
8, 1995 (or any agreement refinancing Indebtedness under such credit
agreement), up to the amount of the commitment under such credit
agreement on August 8, 1995; (ix) Indebtedness of the Guarantor or ICG,
in an amount not to exceed $100 million at any one time outstanding,
consisting of Capitalized Lease Obligations with respect to assets that
are used or useful in the telecommunications business of the Guarantor or
its Restricted Subsidiaries; (x) Indebtedness Incurred to defease the New
Notes; (xi) Indebtedness of any Person that becomes a Restricted
Subsidiary of the Guarantor after March 31, 1996, which Indebtedness
exists or for which there is a commitment to lend at the time such Person
becomes a Restricted Subsidiary and subsequent Incurrences thereof
("Acquired Indebtedness"), in an accreted amount not to exceed $50
million at any one time outstanding in the aggregate for all such
Restricted Subsidiaries; provided that such Acquired Indebtedness does
not exceed 65% of the consideration (calculated by including the Acquired
Indebtedness as a part of such consideration) for the acquisition of such
Person; and (xii) Indebtedness of the Guarantor or ICG, in an amount not
to exceed $30 million at any one time outstanding, consisting of letters
of credit and similar arrangements used to support obligations of the
Guarantor or any of its Restricted Subsidiaries with respect to the
acquisition of (by purchase, lease or otherwise), construction of, or
improvements on, assets that will be used or useful in the
telecommunications business of the Guarantor or its Restricted
Subsidiaries.
(b) For purposes of determining any particular amount of Indebtedness
under this "Limitation on Indebtedness" covenant, Guarantees, Liens or
obligations with respect to letters of credit supporting Indebtedness
otherwise included in the determination of such particular amount shall
not be included. For purposes of determining compliance with this
"Limitation on Indebtedness" covenant, in the event that an item of
Indebtedness meets the criteria of more than one of the types of
Indebtedness described in the above clauses, ICG, in its sole discretion,
shall classify such item of Indebtedness and only be required to include
the amount and type of such Indebtedness in one of such clauses.
LIMITATION ON RESTRICTED PAYMENTS
So long as any of the New Notes are outstanding, the Guarantor will
not, and will not permit any Restricted Subsidiary to, directly or
indirectly, (i) declare or pay any dividend or make any distribution on
its Capital Stock
-47-
<PAGE>
held by Persons other than the Guarantor or any of its Restricted
Subsidiaries (other than dividends or distributions payable solely in
shares of its or such Restricted Subsidiary's Capital Stock (other than
Redeemable Stock) of the same class held by such holders or in options,
warrants or other rights to acquire such shares of Capital Stock and
other than pro rata dividends or distributions on Common Stock of
Restricted Subsidiaries), (ii) purchase, redeem, retire or otherwise
acquire for value any shares of Capital Stock of the Guarantor or any
Restricted Subsidiary (including options, warrants or other rights to
acquire such shares of Capital Stock) held by Persons other than the
Guarantor or any of its Wholly Owned Restricted Subsidiaries (except for
Capital Stock of MTN, StarCom, Ohio LINX, FOTI and Zycom to the extent
the consideration therefor consists solely of Common Stock (other than
Redeemable Stock) of the Guarantor transferred in compliance with the
Securities Act), (iii) make any voluntary or optional principal payment,
or voluntary or optional redemption, repurchase, defeasance or other
acquisition or retirement for value, of Indebtedness of ICG or the
Guarantor that is subordinated in right of payment to the New Notes or
the Note Guarantee, as the case may be, or (iv) make any Investment,
other than a Permitted Investment, in any Person (such payments or any
other actions described in clauses (i) through (iv) being collectively
"Restricted Payments") if, at the time of, and after giving effect to,
the proposed Restricted Payment: (A) a Default or Event of Default shall
have occurred and be continuing, (B) the Guarantor could not Incur at
least $1.00 of Indebtedness under the first paragraph of the "Limitation
on Indebtedness" covenant or (C) the aggregate amount expended for all
Restricted Payments (the amount so expended, if other than in cash, to be
determined in good faith by the Board of Directors, whose determination
shall be conclusive and evidenced by a Board Resolution) after the date
of the Notes Indenture shall exceed the sum of (1) 50% of the aggregate
amount of the Adjusted Consolidated Net Income (or, if the Adjusted
Consolidated Net Income is a loss, minus 100% of such amount) (determined
by excluding income resulting from transfers of assets by the Guarantor
or a Restricted Subsidiary to an Unrestricted Subsidiary) accrued on a
cumulative basis during the period (taken as one accounting period)
beginning on the first day of the fiscal quarter immediately following
the Closing Date and ending on the last day of the last fiscal quarter
preceding the Transaction Date for which reports have been filed pursuant
to the "Commission Reports and Reports to Holders" covenant plus (2) the
aggregate Net Cash Proceeds received by the Guarantor after the Closing
Date from the issuance and sale permitted by the Notes Indenture of its
Capital Stock (other than Redeemable Stock) to a Person who is not a
Subsidiary of the Guarantor, or from the issuance to a Person who is not
a Subsidiary of the Guarantor of any options, warrants or other rights to
acquire Capital Stock of the Guarantor (in each case, exclusive of any
Redeemable Stock or any options, warrants or other rights that are
redeemable at the option of the holder, or are required to be redeemed,
prior to the Stated Maturity of the New Notes) plus (3) an amount equal
to the net reduction in Investments (other than reductions in Permitted
Investments) in any Person resulting from payments of interest on
Indebtedness, dividends, repayments of loans or advances, or other
transfers of assets, in each case to the Guarantor or any Restricted
Subsidiary (except to the extent any such payment is included in the
calculation of Adjusted Consolidated Net Income), or from redesignations
of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each
case as provided in the definition of "Investments"), not to exceed the
amount of Investments previously made by the Guarantor and its Restricted
Subsidiaries in such Person.
The foregoing provision shall not be violated by reason of: (i) the
payment of any dividend within 60 days after the date of declaration
thereof if, at said date of declaration, such payment would comply with
the foregoing paragraph; (ii) the redemption, repurchase, defeasance or
other acquisition or retirement for value of Indebtedness that is
subordinated in right of payment to the New Notes or the Senior Discount
Note Guarantee, as the case may be, including premium, if any, and
accrued and unpaid interest, with the proceeds of, or in exchange for,
Indebtedness Incurred under clause (iii) of the second paragraph of the
"Limitation on Indebtedness" covenant; (iii) the repurchase, redemption
or other acquisition of Capital Stock of the Guarantor or ICG (or
options, warrants or other rights to acquire such Capital Stock) and with
respect to any Preferred Stock, the payment of accrued dividends thereon
in exchange for, or out of the proceeds of a substantially concurrent
issuance or sale of, shares of Capital Stock (other than Redeemable
Stock) of the Guarantor or ICG; provided that the redemption of any
preferred stock and the payment of accrued dividends thereon pursuant to
any mandatory redemption feature thereof and any redemption of any other
Capital Stock and with respect to any Preferred Stock, the payment of
accrued dividends thereon (or options, warrants or other rights to
acquire such Capital Stock) shall be deemed to be "substantially
concurrent" with such issuance and sale if the required notice with
respect to such redemption is irrevocably given by a date which is no
later than five Business Days after receipt of the proceeds of such
issuance and sale and such redemption and payment is consummated within
the period provided for in the documents providing for the redemption of
such preferred stock or the documents governing the redemption of such
other
-48-
<PAGE>
Capital Stock, as the case may be; (iv) the acquisition of Indebtedness
of ICG or the Guarantor which is subordinated in right of payment to the
New Notes or the Senior Discount Note Guarantee, as the case may be, in
exchange for, or out of the proceeds of, a substantially concurrent
offering of, shares of the Capital Stock of the Guarantor (other than
Redeemable Stock); (v) payments or distributions, in the nature of
satisfaction of dissenters' rights, pursuant to or in connection with a
consolidation, merger or transfer of assets that complies with the
provisions of the Notes Indenture applicable to mergers, consolidations
and transfers of all or substantially all of the property and assets of
ICG or the Guarantor; (vi) Investments, not to exceed $10 million in the
aggregate, each evidenced by a senior promissory note payable to ICG that
provides that it will become due and payable prior to (or, in the case of
acceleration, concurrently with) any required repayment (including
pursuant to an Offer to Purchase in connection with a Change of Control)
of the New Notes; (vii) Investments, not to exceed $5 million in the
aggregate, that meet the requirements of clause (vi) above; provided that
the Board of Directors of the Guarantor shall have determined, in good
faith, that each such Investment under this clause (vii) will enable the
Guarantor, ICG or one of their Restricted Subsidiaries to obtain
additional business that it might not be able to obtain without the
making of such Investment; (viii) with respect to preferred stock
permitted to be issued and sold under the "Limitation on the Issuance of
Capital Stock of Restricted Subsidiaries" covenant, the payment (A) of
dividends on such preferred stock in additional shares of preferred stock
and (B) of cash dividends on such preferred stock and accrued interest on
unpaid dividends, in each case after May 1, 2001; (ix) the repurchase, in
the event of a Change of Control, of preferred stock of ICG or the
Guarantor and Indebtedness of ICG or the Guarantor into which such
preferred stock has been exchanged; provided that prior to repurchasing
such preferred stock or Indebtedness, ICG or the Guarantor, as the case
may be, shall have made a Change of Control Offer to repurchase the New
Notes in accordance with the terms of the Notes Indenture (and an offer
to repurchase other Indebtedness, if required by the terms thereof, in
accordance with the indenture or other document governing such other
Indebtedness) and shall have accepted and paid for any New Notes (and
other Indebtedness) properly tendered in connection with such Change of
Control Offer for the New Notes or change of control offer for such other
Indebtedness; (x) the issuance of preferred stock permitted to be issued
under the Notes Indenture in exchange for Indebtedness; provided that the
Incurrence of such Indebtedness complies with the "Limitation on
Indebtedness" covenant; and (xi) the redemption of the 12% Redeemable
Preferred Stock of ICG and the repurchase of 916,666 warrants to purchase
Common Stock of IntelCom, in each case in accordance with the documents
governing such redemption or repurchase, with a portion of the net
proceeds from the issuance of the Preferred Stock; provided that, except
in the case of clauses (i) and (iii), no Default or Event of Default
shall have occurred and be continuing or occur as a consequence of the
actions or payments set forth therein.
Each Restricted Payment permitted pursuant to the preceding paragraph
(other than the Restricted Payment referred to in clauses (ii), (viii)(A)
and (x) thereof), and the Net Cash Proceeds from any issuance of Capital
Stock referred to in clause (iii) or (iv) shall be included in
calculating whether the conditions of clause (C) of the first paragraph
of this "Limitation on Restricted Payments" covenant have been met with
respect to any subsequent Restricted Payments. Notwithstanding the
foregoing, in the event the proceeds of an issuance of Capital Stock of
the Guarantor are used for the redemption, repurchase or other
acquisition of the New Notes, or Indebtedness that is pari passu with the
New Notes, then the Net Cash Proceeds of such issuance shall be included
in clause (C) of the first paragraph of this "Limitation on Restricted
Payments" covenant only to the extent such proceeds are not used for such
redemption, repurchase or other acquisition of such Indebtedness.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES
So long as any of the New Notes are outstanding, the Guarantor will
not, and will not permit any Restricted Subsidiary to, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions permitted
by applicable law on any Capital Stock of such Restricted Subsidiary
owned by the Guarantor or any other Restricted Subsidiary, (ii) pay any
Indebtedness owed to the Guarantor or any other Restricted Subsidiary,
(iii) make loans or advances to the Guarantor or any other Restricted
Subsidiary or (iv) transfer any of its property or assets to the
Guarantor or any other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Closing Date in the Notes Indenture or
any other agreement in effect on the Closing Date, and any extensions,
refinancings,
-49-
<PAGE>
renewals or replacements of such agreements; provided that the
encumbrances and restrictions in any such extensions, refinancings,
renewals or replacements are no less favorable in any material respect to
the Holders than those encumbrances or restrictions that are then in
effect and that are being extended, refinanced, renewed or replaced; (ii)
existing under or by reason of applicable law; (iii) existing with
respect to any Person or the property or assets of such Person acquired
by the Guarantor or any Restricted Subsidiary, existing at the time of
such acquisition and not incurred in contemplation thereof, which
encumbrances or restrictions are not applicable to any Person or the
property or assets of any Person other than such Person or the property
or assets of such Person so acquired; (iv) in the case of clause (iv) of
the first paragraph of this "Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries" covenant, (A) that
restrict in a customary manner the subletting, assignment or transfer of
any property or asset that is a lease, license, conveyance or contract or
similar property or asset, (B) existing by virtue of any transfer of,
agreement to transfer, option or right with respect to, or Lien on, any
property or assets of the Guarantor or any Restricted Subsidiary not
otherwise prohibited by the Notes Indenture or (C) arising or agreed to
in the ordinary course of business, not relating to any Indebtedness, and
that do not, individually or in the aggregate, detract from the value of
property or assets of the Guarantor or any Restricted Subsidiary in any
manner material to the Guarantor or any Restricted Subsidiary; (v) with
respect to a Restricted Subsidiary and imposed pursuant to an agreement
that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock of, or property and assets of,
such Restricted Subsidiary; or (vi) imposed pursuant to preferred stock
of ICG issued under clause (vi) of the "Limitation on the Issuance and
Sale of Capital Stock of Restricted Subsidiaries" covenant, or exchange
debentures or exchange notes of ICG issued in exchange therefor; provided
that such restrictions (A) may include a prohibition (x) on payments on
Capital Stock upon liquidation, winding-up and dissolution of ICG and (y)
on the payment of dividends on and the making of any distribution on, or
the purchase, redemption, retirement or other acquisition for value of
Capital Stock of ICG if dividends or other amounts on such preferred
stock are unpaid and (B) any restrictions imposed pursuant to preferred
stock of ICG other than pursuant to clause (A) shall be no more
restrictive than the restrictions contained in the Notes Indenture
(assuming that references to the Guarantor in the Notes Indenture were
replaced with references to ICG). Nothing contained in this "Limitation
on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries" covenant shall prevent the Guarantor or any Restricted
Subsidiary from (1) creating, incurring, assuming or suffering to exist
any Liens otherwise permitted in the "Limitation on Liens" covenant or
(2) restricting the sale or other disposition of property or assets of
the Guarantor or any of its Restricted Subsidiaries that secure
Indebtedness of the Guarantor or any of its Restricted Subsidiaries.
LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES
Under the terms of the Notes Indenture, the Guarantor will not sell,
and will not permit any Restricted Subsidiary, directly or indirectly, to
issue or sell, any shares of Capital Stock of a Restricted Subsidiary
(including options, warrants or other rights to purchase shares of such
Capital Stock) except (i) to the Guarantor or a Wholly Owned Restricted
Subsidiary; (ii) issuances or sales to foreign nationals of shares of
Capital Stock of foreign Restricted Subsidiaries, to the extent required
by applicable law; (iii) if, immediately after giving effect to such
issuance or sale, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary; (iv) with respect to Common Stock of MTN, StarCom
and Zycom; provided that the proceeds of any such sale under clause (iv)
shall be applied in accordance with clause (A) or (B) of the first
paragraph of the "Limitation on Asset Sales" covenant described below;
(v) with respect to Common Stock of FOTI; provided that FOTI shall not
retain any net proceeds from such sales or issuances in excess of $10
million in the aggregate and any net proceeds in excess of such $10
million shall be received by, or paid promptly by FOTI to, the Guarantor,
ICG or any Wholly Owned Restricted Subsidiary of the Guarantor; and (vi)
with respect to (A) preferred stock of ICG having an initial liquidation
preference of up to $250 million and (B) any preferred stock of ICG
issued as dividends on such preferred stock; provided that such preferred
stock does not require the payment of cash dividends prior to May 1,
2001.
LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED SUBSIDIARIES
The Guarantor will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of ICG or any Indebtedness of
the Guarantor ("Guaranteed Indebtedness"), unless (i) such Restricted
Subsidiary simultaneously executes and delivers a supplemental indenture
to the Notes Indenture providing for a Guarantee (a "Subsidiary
Guarantee") of payment of the New Notes by such Restricted Subsidiary and
(ii) such Restricted
-50-
<PAGE>
Subsidiary waives and will not in any manner whatsoever claim or take the
benefit or advantage of, any rights of reimbursement, indemnity or
subrogation or any other rights against the Guarantor, ICG or any other
Restricted Subsidiary as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guarantee; provided that this paragraph
shall not be applicable to any Guarantee of any Restricted Subsidiary
that (x) existed at the time such Person became a Restricted Subsidiary
and (y) was not Incurred in connection with, or in contemplation of, such
Person becoming a Restricted Subsidiary. If the Guaranteed Indebtedness
is (A) pari passu with the New Notes or a Senior Discount Note Guarantee,
then the Guarantee of such Guaranteed Indebtedness shall be pari passu
with, or subordinated to, the Subsidiary Guarantee or (B) subordinated to
the New Notes or a Senior Discount Note Guarantee, then the Guarantee of
such Guaranteed Indebtedness shall be subordinated to the Subsidiary
Guarantee at least to the extent that the Guaranteed Indebtedness is
subordinated to the New Notes or the Senior Discount Note Guarantee, as
the case may be.
Notwithstanding the foregoing, any Subsidiary Guarantee by a
Restricted Subsidiary shall provide by its terms that it shall be
automatically and unconditionally released and discharged upon (i) any
sale, exchange or transfer, to any Person not an Affiliate of the
Guarantor of all of ICG's and each Restricted Subsidiary's Capital Stock
in, or all or substantially all the assets of, such Restricted Subsidiary
(which sale, exchange or transfer is not prohibited by the Notes
Indenture) or (ii) the release or discharge of the Guarantee which
resulted in the creation of such Subsidiary Guarantee, except a discharge
or release by or as a result of payment under such Guarantee.
LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES
Under the terms of the Notes Indenture, the Guarantor will not, and
will not permit any Restricted Subsidiary to, directly or indirectly,
enter into, renew or extend any transaction (including, without
limitation, the purchase, sale, lease or exchange of property or assets,
or the rendering of any service) with any holder (or any Affiliate of
such holder) of 5% or more of any class of Capital Stock of the Guarantor
or with any Affiliate of the Guarantor or any Restricted Subsidiary,
except upon fair and reasonable terms no less favorable to the Guarantor
or such Restricted Subsidiary than could be obtained, at the time of such
transaction or at the time of the execution of the agreement providing
therefor, in a comparable arm's-length transaction with a Person that is
not such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to (i)
transactions (A) approved by a majority of the disinterested members of
the Board of Directors or (B) for which the Guarantor or a Restricted
Subsidiary delivers to the Trustee a written opinion of a nationally
recognized investment banking firm stating that the transaction is fair
to the Guarantor or such Restricted Subsidiary from a financial point of
view; (ii) any transaction solely between the Guarantor and any of its
Wholly Owned Restricted Subsidiaries or solely between Wholly Owned
Restricted Subsidiaries; (iii) the payment of reasonable and customary
regular fees to directors of the Guarantor or ICG who are not employees
of the Guarantor or ICG; (iv) any payments or other transactions pursuant
to any tax-sharing agreement between the Guarantor and any other Person
with which the Guarantor files a consolidated tax return or with which
the Guarantor is part of a consolidated group for tax purposes; or (v)
any Restricted Payments not prohibited by the "Limitation on Restricted
Payments" covenant. Notwithstanding the foregoing, any transaction
covered by the first paragraph of this "Limitation on Transactions with
Shareholders and Affiliates" covenant and not covered by clauses (ii)
through (iv) of this paragraph, the aggregate amount of which exceeds $2
million in value, must be approved or determined to be fair in the manner
provided for in clause (i)(A) or (B) above.
LIMITATION ON LIENS
Under the terms of the Notes Indenture, the Guarantor will not, and
will not permit any Restricted Subsidiary to, create, incur, assume or
suffer to exist any Lien on any of its assets or properties of any
character, or any shares of Capital Stock or Indebtedness of any
Restricted Subsidiary, without making effective provision for all of the
New Notes (or, in the case of a Lien on assets or properties of the
Guarantor, the Senior Discount Note Guarantee) and all other amounts due
under the Notes Indenture to be directly secured equally and ratably with
(or, if the obligation or liability to be secured by such Lien is
subordinated in right of payment to the New Notes or the Senior Discount
Note Guarantee, prior to) the obligation or liability secured by such
Lien.
-51-
<PAGE>
The foregoing limitation does not apply to (i) Liens existing on the
Closing Date; (ii) Liens granted after the Closing Date on any assets or
Capital Stock of ICG or its Restricted Subsidiaries created in favor of
the Holders; (iii) Liens with respect to the assets of a Restricted
Subsidiary granted by such Restricted Subsidiary to the Guarantor or a
Wholly Owned Restricted Subsidiary to secure Indebtedness owing to the
Guarantor or such other Restricted Subsidiary; (iv) Liens securing
Indebtedness which is Incurred to refinance secured Indebtedness which is
permitted to be Incurred under clause (iii) of the second paragraph of
the "Limitation on Indebtedness" covenant; provided that such Liens do
not extend to or cover any property or assets of the Guarantor, ICG or
any Restricted Subsidiary other than the property or assets securing the
Indebtedness being refinanced; (v) Liens with respect to assets or
properties of any Person that becomes a Restricted Subsidiary after the
Closing Date; provided that such Liens do not extend to or cover any
assets or properties of the Guarantor or any of its Restricted
Subsidiaries other than the assets or properties of such Person subject
to such Lien on the date such Person becomes a Restricted Subsidiary; and
provided further that such Liens are not incurred in contemplation of, or
in connection with, such Person becoming a Restricted Subsidiary; (vi)
Permitted Liens; or (vii) Liens, solely in favor of Acquired
Indebtedness, on Capital Stock of Persons that become Restricted
Subsidiaries of the Guarantor after the Closing Date.
LIMITATION ON SALE-LEASEBACK TRANSACTIONS
Under the terms of the Notes Indenture, the Guarantor will not, and
will not permit any Restricted Subsidiary to, enter into any sale-
leaseback transaction involving any of its assets or properties whether
now owned or hereafter acquired, whereby the Guarantor or a Restricted
Subsidiary sells or transfers such assets or properties and then or
thereafter leases such assets or properties or any part thereof or any
other assets or properties which the Guarantor or such Restricted
Subsidiary, as the case may be, intends to use for substantially the same
purpose or purposes as the assets or properties sold or transferred.
The foregoing restriction does not apply to any sale-leaseback
transaction if (i) the lease is for a period, including renewal rights,
of not in excess of three years; (ii) the lease secures or relates to
industrial revenue or pollution control bonds; (iii) the transaction is
between the Guarantor and any Wholly Owned Restricted Subsidiary or
between Wholly Owned Restricted Subsidiaries; or (iv) the Guarantor or
such Restricted Subsidiary, within six months after the sale or transfer
of any assets or properties is completed, applies an amount not less than
the net proceeds received from such sale in accordance with clause (A) or
(B) of the first paragraph of the "Limitation on Asset Sales" covenant
described below.
LIMITATION ON ASSET SALES
Under the terms of the Notes Indenture, the Guarantor will not, and
will not permit any Restricted Subsidiary to, consummate any Asset Sale,
unless (i) the consideration received by the Guarantor or such Restricted
Subsidiary is at least equal to the fair market value of the assets sold
or disposed of and (ii) at least 75% of the consideration received
consists of cash or Temporary Cash Investments. In the event and to the
extent that the Net Cash Proceeds received by the Guarantor or its
Restricted Subsidiaries from one or more Asset Sales occurring on or
after the Closing Date in any period of 12 consecutive months exceed 10%
of Adjusted Consolidated Net Tangible Assets (determined as of the date
closest to the commencement of such 12-month period for which a
consolidated balance sheet of ICG and its Subsidiaries has been
prepared), then the Guarantor shall or shall cause the relevant
Restricted Subsidiary to (i) within six months after the date Net Cash
Proceeds so received exceed 10% of Adjusted Consolidated Net Tangible
Assets (A) apply an amount equal to such excess Net Cash Proceeds to
permanently repay unsubordinated Indebtedness of the Guarantor or ICG, or
Indebtedness of any Restricted Subsidiary other than ICG, in each case
owing to a Person other than the Guarantor or any of its Restricted
Subsidiaries or (B) invest an equal amount, or the amount not so applied
pursuant to clause (A) (or enter into a definitive agreement committing
to so invest within six months after the date of such agreement), in
property or assets of a nature or type or that are used in a business (or
in a company having property and assets of a nature or type, or engaged
in a business) similar or related to the nature or type of the property
and assets of, or the business of, the Guarantor and its Restricted
Subsidiaries existing on the date of such investment (as determined in
good faith by the Board of Directors, whose determination shall be
conclusive and evidenced by a Board Resolution) and (ii) apply (no later
than the end of the six-month period referred to in clause (i)) such
excess Net Cash Proceeds (to the extent not
-52-
<PAGE>
applied pursuant to clause (i)) as provided in the following paragraphs
of this "Limitation on Asset Sales" covenant. The amount of such excess
Net Cash Proceeds required to be applied (or to be committed to be
applied) during such six-month period as set forth in clause (i) of the
preceding sentence and not applied as so required by the end of such
period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant
to this "Limitation on Asset Sales" covenant totals at least $10 million,
ICG must commence, not later than the fifteenth Business Day of such
month, and consummate an Offer to Purchase from the Holders on a pro rata
basis an aggregate Accreted Value of New Notes equal to the Excess
Proceeds on such date, at a purchase price equal to 101% of the Accreted
Value of the New Notes, plus, in each case, accrued interest (if any) to
the date of purchase.
REPURCHASE OF NEW NOTES UPON A CHANGE OF CONTROL
ICG must commence, within 30 days of the occurrence of a Change of
Control, and consummate an Offer to Purchase for all New Notes then
outstanding, at a purchase price equal to 101% of the Accreted Value
thereof, plus accrued interest (if any) to the date of purchase. Prior
to the mailing of the notice to Holders commencing such Offer to
Purchase, but in any event within 30 days following any Change of
Control, ICG covenants to (i) repay in full all indebtedness of ICG that
would prohibit the repurchase of the New Notes pursuant to such Offer to
Purchase or (ii) obtain any requisite consents under instruments
governing any such indebtedness of ICG to permit the repurchase of the
New Notes. ICG shall first comply with the covenant in the preceding
sentence before it shall be required to repurchase New Notes pursuant to
this "Repurchase of New Notes upon a Change of Control" covenant.
If ICG is unable to repay all of its indebtedness that would prohibit
repurchase of the New Notes or is unable to obtain the consents of the
holders of indebtedness, if any, of ICG outstanding at the time of a
Change of Control whose consent would be so required to permit the
repurchase of New Notes, then ICG will have breached such covenant. This
breach will constitute an Event of Default under the Notes Indenture if
it continues for a period of 30 consecutive days after written notice is
given to ICG by the Trustee or the Holders of at least 25% in aggregate
principal amount of the New Notes outstanding. In addition, the failure
by ICG to repurchase New Notes at the conclusion of the Offer to Purchase
will constitute an Event of Default without any waiting period or notice
requirements.
There can be no assurance that ICG will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of New Notes) required by the foregoing covenant
(as well as may be contained in other securities of ICG which might be
outstanding at the time). The above covenant requiring ICG to repurchase
the New Notes will, unless the consents referred to above are obtained,
require ICG to repay all indebtedness then outstanding which by its terms
would prohibit such Senior Discount Note repurchase, either prior to or
concurrently with such Senior Discount Note repurchase.
COMMISSION REPORTS AND REPORTS TO HOLDERS
Whether or not ICG or the Guarantor is required to file reports with
the Commission, if any New Notes are outstanding ICG and the Guarantor
shall file with the Commission all such reports and other information as
they would be required to file with the Commission by Sections 13(a) or
15(d) under the Securities Exchange Act of 1934, as amended. See
"Available Information." ICG shall supply the Trustee and each Holder, or
shall supply to the Trustee for forwarding to each Holder, without cost
to such Holder, copies of such reports or other information.
EVENTS OF DEFAULT
The following events will be defined as "Events of Default" in the
Notes Indenture: (a) default in the payment of principal of (or premium,
if any, on) any Senior Discount Note when the same becomes due and
payable at maturity, upon acceleration, redemption or otherwise; (b)
default in the payment of interest on any Senior Discount
-53-
<PAGE>
Note when the same becomes due and payable, and such default continues
for a period of 30 days; (c) ICG or the Guarantor defaults in the
performance of or breaches any other covenant or agreement of ICG or the
Guarantor in the Notes Indenture or under the New Notes and such default
or breach continues for a period of 30 consecutive days after written
notice to ICG or the Guarantor by the Trustee or the Holders of 25% or
more in aggregate principal amount at maturity of the New Notes; (d)
there occurs with respect to any issue or issues of Indebtedness of ICG,
the Guarantor or any Significant Subsidiary having an outstanding
principal amount at maturity of $10 million or more in the aggregate for
all such issues of all such Persons, whether such Indebtedness now exists
or shall hereafter be created, (I) an event of default that has caused
the holder thereof to declare such Indebtedness to be due and payable
prior to its Stated Maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or
annulled within 30 days of such acceleration and/or (II) the failure to
make a principal payment at the final (but not any interim) fixed
maturity and such defaulted payment shall not have been made, waived or
extended within 30 days of such payment default; (e) any final judgment
or order (not covered by insurance) for the payment of money in excess of
$10 million in the aggregate for all such final judgments or orders
against all such Persons (treating any deductibles, self-insurance or
retention as not so covered) shall be rendered against ICG, the Guarantor
or any Significant Subsidiary and shall not be paid or discharged, and
there shall be any period of 30 consecutive days following entry of the
final judgment or order that causes the aggregate amount for all such
final judgments or orders outstanding and not paid or discharged against
all such Persons to exceed $10 million during which a stay of enforcement
of such final judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; (f) a court having jurisdiction in the
premises enters a decree or order for (A) relief in respect of ICG, the
Guarantor or any Significant Subsidiary in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, (B) appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of ICG, the
Guarantor or any Significant Subsidiary or for all or substantially all
of the property and assets of ICG, the Guarantor or any Significant
Subsidiary or (C) the winding up or liquidation of the affairs of ICG,
the Guarantor or any Significant Subsidiary and, in each case, such
decree or order shall remain unstayed and in effect for a period of 30
consecutive days; or (g) ICG, the Guarantor or any Significant Subsidiary
(A) commences a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or consents
to the entry of an order for relief in an involuntary case under any such
law, (B) consents to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of ICG, the Guarantor or any Significant Subsidiary or
for all or substantially all of the property and assets of ICG, the
Guarantor or any Significant Subsidiary or (C) effects any general
assignment for the benefit of creditors.
If an Event of Default (other than an Event of Default specified in
clause (f) or (g) above that occurs with respect to ICG or the Guarantor)
occurs and is continuing under the Notes Indenture, the Trustee or the
Holders of at least 25% in aggregate principal amount at maturity of the
New Notes, then outstanding, by written notice to ICG (and to the Trustee
if such notice is given by the Holders), may, and the Trustee at the
request of such Holders shall, declare the Accreted Value of, premium, if
any, and accrued interest, if any, on the New Notes to be immediately due
and payable. Upon a declaration of acceleration, such Accreted Value of,
premium, if any, and accrued interest, if any, shall be immediately due
and payable. In the event of a declaration of acceleration because an
Event of Default set forth in clause (d) above has occurred and is
continuing, such declaration of acceleration shall be automatically
rescinded and annulled if the event of default triggering such Event of
Default pursuant to clause (d) shall be remedied or cured by ICG, the
Guarantor or the relevant Significant Subsidiary or waived by the holders
of the relevant Indebtedness within 60 days after the declaration of
acceleration with respect thereto. If an Event of Default specified in
clause (f) or (g) above occurs with respect to ICG or the Guarantor, the
Accreted Value of, premium, if any, and accrued interest, if any, on the
New Notes then outstanding shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of the
Trustee or any Holder. The Holders of at least a majority in principal
amount of the outstanding New Notes by written notice to ICG and to the
Trustee, may waive all past defaults and rescind and annul a declaration
of acceleration and its consequences if, among other things, (i) all
existing Events of Default, other than the nonpayment of the Accreted
Value of, premium, if any, and accrued interest on the New Notes that
have become due solely by such declaration of acceleration, have been
cured or waived and (ii) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction. For information
as to the waiver of defaults, see "--Modification and Waiver."
-54-
<PAGE>
The Holders of at least a majority in aggregate principal amount of
the outstanding New Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee. However, the
Trustee may refuse to follow any direction that conflicts with law or the
Notes Indenture, that may involve the Trustee in personal liability, or
that the Trustee determines in good faith may be unduly prejudicial to
the rights of Holders of New Notes not joining in the giving of such
direction and may take any other action it deems proper that is not
inconsistent with any such direction received from Holders of New Notes.
A Holder may not pursue any remedy with respect to the Notes Indenture or
the New Notes unless: (i) the Holder gives the Trustee written notice of
a continuing Event of Default; (ii) the Holders of at least 25% in
aggregate principal amount of outstanding New Notes make a written
request to the Trustee to pursue the remedy; (iii) such Holder or Holders
offer the Trustee indemnity satisfactory to the Trustee against any
costs, liability or expense; (iv) the Trustee does not comply with the
request within 60 days after receipt of the request and the offer of
indemnity; and (v) during such 60-day period, the Holders of a majority
in aggregate principal amount of the outstanding New Notes do not give
the Trustee a direction that is inconsistent with the request. However,
such limitations do not apply to the right of any Holder of a Senior
Discount Note to receive payment of the principal of, premium, if any, or
interest on, such Senior Discount Note or to bring suit for the
enforcement of any such payment, on or after the due date expressed in
the New Notes, which right shall not be impaired or affected without the
consent of the Holder.
The Notes Indenture will require certain officers of ICG and the
Guarantor to certify, on or before a date not more than 90 days after the
end of each fiscal year of the Guarantor, that a review has been
conducted of the activities of ICG, or the Guarantor, as the case may be,
and its Restricted Subsidiaries and ICG's, or the Guarantor's, and its
Restricted Subsidiaries' performance under the Notes Indenture and that
ICG and the Guarantor have fulfilled all obligations thereunder, or, if
there has been a default in the fulfillment of any such obligation,
specifying each such default and the nature and status thereof. ICG and
the Guarantor will also be obligated to notify the Trustee of any default
or defaults in the performance of any covenants or agreements under the
Notes Indenture.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Neither ICG nor the Guarantor shall consolidate with, merge with or
into, or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets (as an entirety or
substantially an entirety in one transaction or a series of related
transactions) to, any Person (other than a consolidation or merger with
or into a Wholly Owned Restricted Subsidiary with a positive net worth;
provided that, in connection with any such merger or consolidation, no
consideration (other than Common Stock in the surviving Person, ICG or
the Guarantor) shall be issued or distributed to the stockholders of ICG
or the Guarantor) or permit any Person to merge with or into ICG or the
Guarantor unless: (i) ICG or the Guarantor shall be the continuing
Person, or the Person (if other than ICG or the Guarantor) formed by such
consolidation or into which ICG or the Guarantor is merged or that
acquired or leased such property and assets of ICG or the Guarantor shall
be a corporation organized and validly existing under the laws of the
United States of America or any jurisdiction thereof and shall expressly
assume, by a supplemental indenture, executed and delivered to the
Trustee, all of the obligations of ICG or the Guarantor, as the case may
be, under the Notes Indenture; (ii) immediately after giving effect to
such transaction, no Default or Event of Default shall have occurred and
be continuing; (iii) immediately after giving effect to such transaction
on a pro forma basis, ICG or the Guarantor, as the case may be, or any
Person becoming the successor obligor of the New Notes or the Senior
Discount Note Guarantee, as the case may be, shall have a Consolidated
Net Worth equal to or greater than the Consolidated Net Worth of ICG or
the Guarantor, as the case may be, immediately prior to such transaction;
(iv) immediately after giving effect to such transaction on a pro forma
basis ICG, or any Person becoming the successor obligor of the New Notes,
as the case may be, could Incur at least $1.00 of Indebtedness under the
first paragraph of the "Limitation on Indebtedness" covenant; and (v) ICG
delivers to the Trustee an Officers' Certificate (attaching the
arithmetic computations to demonstrate compliance with clauses (iii) and
(iv) above) and an Opinion of Counsel, in each case stating that such
consolidation, merger or transfer and such supplemental indenture
complies with this provision and that all conditions precedent provided
for herein relating to such transaction have been complied with;
provided, however, that clauses (iii) and (iv) above do not apply if, in
the good faith determination of the Board of Directors of the Guarantor,
whose determination shall be evidenced by a Board Resolution, the
principal purpose of such transaction is part of a plan to change the
jurisdiction of
-55-
<PAGE>
incorporation of ICG or the Guarantor to a state of the United States;
and provided further that any such transaction shall not have as one of
its purposes the evasion of the foregoing limitations.
DEFEASANCE
Defeasance and Discharge. The Notes Indenture will provide that ICG
will be deemed to have paid and will be discharged from any and all
obligations in respect of the New Notes on the 123rd day after the
deposit referred to below, and the provisions of the Notes Indenture will
no longer be in effect with respect to the New Notes (except for, among
other matters, certain obligations to register the transfer or exchange
of the New Notes, to replace stolen, lost or mutilated New Notes, to
maintain paying agencies and to hold monies for payment in trust) if,
among other things, (A) ICG or the Guarantor has deposited with the
Trustee, in trust, money and/or U.S. Government Obligations that through
the payment of interest and principal in respect thereof in accordance
with their terms will provide money in an amount sufficient to pay the
principal of, premium, if any, and accrued interest on the New Notes on
the Stated Maturity of such payments in accordance with the terms of the
Notes Indenture and the New Notes, (B) ICG has delivered to the Trustee
(i) either (x) an Opinion of Counsel to the effect that Holders will not
recognize income, gain or loss for federal income tax purposes as a
result of ICG's exercise of its option under this "Defeasance" provision
and will be subject to federal income tax on the same amount and in the
same manner and at the same times as would have been the case if such
deposit, defeasance and discharge had not occurred, which Opinion of
Counsel must be based upon (and accompanied by a copy of) a ruling of the
Internal Revenue Service to the same effect unless there has been a
change in applicable federal income tax law after the date of the Notes
Indenture such that a ruling is no longer required or (y) a ruling
directed to the Trustee received from the Internal Revenue Service to the
same effect as the aforementioned Opinion of Counsel and (ii) an Opinion
of Counsel to the effect that the creation of the defeasance trust does
not violate the Investment Company Act of 1940 and after the passage of
123 days following the deposit, the trust fund will not be subject to the
effect of Section 547 of the United States Bankruptcy Code or Section 15
of the New York Debtor and Creditor Law, (C) immediately after giving
effect to such deposit on a pro forma basis, no Event of Default, or
event that after the giving of notice or lapse of time or both would
become an Event of Default, shall have occurred and be continuing on the
date of such deposit or during the period ending on the 123rd day after
the date of such deposit, and such deposit shall not result in a breach
or violation of, or constitute a default under, any other agreement or
instrument to which ICG or the Guarantor is a party or by which ICG or
the Guarantor is bound and (D) if at such time the New Notes are listed
on a national securities exchange, ICG has delivered to the Trustee an
Opinion of Counsel to the effect that the New Notes will not be delisted
as a result of such deposit, defeasance and discharge.
Defeasance of Certain Covenants and Certain Events of Default. The
Notes Indenture further will provide that the provisions of the Notes
Indenture will no longer be in effect with respect to clauses (iii) and
(iv) under "--Consolidation, Merger and Sale of Assets" and all the
covenants described herein under "--Covenants," clause (c) under "--
Events of Default" with respect to such covenants and clauses (iii) and
(iv) under "--Consolidation, Merger and Sale of Assets," and clauses (d)
and (e) under "Events of Default" shall be deemed not to be Events of
Default, upon, among other things, the deposit with the Trustee, in
trust, of money and/or U.S. Government Obligations that through the
payment of interest and principal in respect thereof in accordance with
their terms will provide money in an amount sufficient to pay the
principal of, premium, if any, and accrued interest on the New Notes on
the Stated Maturity of such payments in accordance with the terms of the
Notes Indenture and the New Notes, the satisfaction of the provisions
described in clauses (B)(ii), (C) and (D) of the preceding paragraph and
the delivery by ICG to the Trustee of an Opinion of Counsel to the effect
that, among other things, the Holders will not recognize income, gain or
loss for federal income tax purposes as a result of such deposit and
defeasance of certain covenants and Events of Default and will be subject
to federal income tax on the same amount and in the same manner and at
the same times as would have been the case if such deposit and defeasance
had not occurred.
Defeasance and Certain Other Events of Default. In the event ICG
exercises its option to omit compliance with certain covenants and
provisions of the Notes Indenture with respect to the New Notes as
described in the immediately preceding paragraph and the New Notes are
declared due and payable because of the occurrence of an Event of Default
that remains applicable, the amount of money and/or U.S. Government
Obligations on deposit with the Trustee will be sufficient to pay amounts
due on the New Notes at the time of their Stated Maturity but may not be
sufficient to pay amounts due on the New Notes at the time of the
acceleration resulting from such Event
-56-
<PAGE>
of Default. However, ICG will remain liable for such payments and the
Senior Discount Note Guarantee with respect to such payments will remain
in effect.
MODIFICATION AND WAIVER
Modifications and amendments of the Notes Indenture may be made by
ICG, the Guarantor and the Trustee with the consent of the Holders of not
less than a majority in aggregate principal amount at maturity of the
outstanding New Notes; provided, however, that no such modification or
amendment may, without the consent of each Holder affected thereby, (i)
change the Stated Maturity of the principal of, or any installment of
interest on, any Senior Discount Note, (ii) reduce the principal amount
at maturity of, or premium, if any, payable upon the redemption of, or
the rate of interest on, any Senior Discount Note, (iii) adversely affect
any right of repayment at the option of any Holder of any Senior Discount
Note, (iv) change the currency in which principal of, or premium, if any,
or interest on, any Senior Discount Note is payable, (v) impair the right
to institute suit for the enforcement of any payment on or after the
Stated Maturity (or, in the case of a redemption, on or after the
Redemption Date) of any Senior Discount Note, (vi) waive a default in the
payment of principal of, premium, if any, or interest on the New Notes,
(vii) reduce the percentage in principal amount at maturity of
outstanding New Notes the consent of whose Holders is necessary for
waiver of compliance with certain provisions of the Notes Indenture or
for waiver of certain defaults or (viii) release the Guarantor from its
Senior Discount Note Guarantee.
NO PERSONAL LIABILITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS,
DIRECTORS, OR EMPLOYEES
The Notes Indenture provides that no recourse for the payment of the
principal of, premium, if any, or interest on any of the New Notes or for
any claim based thereon or otherwise in respect thereof, and no recourse
under or upon any obligation, covenant or agreement of ICG or the
Guarantor in the Notes Indenture, or in any of the New Notes or because
of the creation of any Indebtedness represented thereby, shall be had
against any incorporator, shareholder, officer, director, employee or
controlling person of ICG or the Guarantor or of any successor Person
thereof. Each Holder, by accepting the New Notes, waives and releases
all such liability.
CONCERNING THE TRUSTEE
The Notes Indenture provides that, except during the continuance of a
Default, the Trustee will not be liable, except for the performance of
such duties as are specifically set forth in such Notes Indenture. If an
Event of Default has occurred and is continuing, the Trustee will use the
same degree of care and skill in its exercise as a prudent person would
exercise under the circumstances in the conduct of such person's own
affairs.
The Notes Indenture and provisions of the Trust Indenture Act of 1939,
as amended, incorporated by reference therein contain limitations on the
rights of the Trustee, should it become a creditor of ICG or the
Guarantor, to obtain payment of claims in certain cases or to realize on
certain property received by it in respect of any such claims, as
security or otherwise. The Trustee is permitted to engage in other
transactions; provided, however, that if it acquires any conflicting
interest, it must eliminate such conflict or resign.
ADDITIONAL AMOUNTS
Any payments made by IntelCom under or with respect to the New Notes
pursuant to the Note Guarantee will be made free and clear of and without
withholding or deduction for or on account of any present or future tax,
duty, levy, impost, assessment or other governmental charge (including
penalties, interest and other liabilities related thereto) imposed or
levied by or on behalf of the Government of Canada or of any province or
territory thereof or by any authority or agency therein or thereof having
power to tax (hereinafter "Taxes"), unless IntelCom is required to
withhold or deduct Taxes by law or by the interpretation or
administration thereof. If IntelCom is required to withhold or deduct
any amount for or on account of Taxes from any payment made under or with
respect to the New Notes, IntelCom will pay such additional amounts
("Additional Amounts") as may be necessary, so that the net amount
received by each Holder of New Notes (including Additional Amounts) after
such withholding or deduction will not be less than the amount such
Holder would have received if such Taxes had not been withheld or
deducted; provided, however, that no Additional Amounts will be payable
with respect to a payment made to a
-57-
<PAGE>
Holder (an "Excluded Holder") (i) with which IntelCom does not deal at
arm's length (within the meaning of the Income Tax Act (Canada)) at the
time of making such payment, or (ii) which is subject to such Taxes by
reason of its being connected with Canada or any province or territory
thereof otherwise than solely by reason of the Holder's activity in
connection with purchasing the New Notes, by the mere holding of New
Notes or by reason of the receipt of payments thereunder. IntelCom will
upon written request of any Holder (other than an Excluded Holder),
reimburse such Holder, for the amount of (i) any Taxes so levied or
imposed and paid by such Holder as a result of payments made under or
with respect to the New Notes and (ii) any Taxes so levied or imposed
with respect to any reimbursement under the foregoing clause (i), but
excluding any such Taxes on such Holder's net income so that the net
amount received by such Holder after such reimbursement will not be less
than the net amount the Holder would have received if Taxes on such
reimbursement had not been imposed.
At least 30 days prior to each date on which any payment under or with
respect to the Senior Discount Notes is due and payable, if IntelCom will
be obligated to pay Additional Amounts with respect to such payment,
IntelCom will deliver to the Trustee an Officers' Certificate stating the
fact that such Additional Amounts will be payable and the amounts so
payable and will set forth such other information necessary to enable the
Trustee to pay such Additional Amounts to Holders on the payment date.
Whenever either in the Notes Indenture, the New Notes or in this
Memorandum there is mentioned, in any context, the payment of principal
(and premium, if any), Redemption Price, interest or any other amount
payable under or with respect to any Senior Discount Note, such mention
shall be deemed to include mention of the payment of Additional Amounts
to the extent that, in such context, Additional Amounts are, were or
would be payable in respect thereof. See "--Optional Redemption."
CONSENT TO JURISDICTION AND SERVICE
IntelCom will appoint ICG as its agent for service of process in any
suit, action or proceeding with respect to the Notes Indenture or the New
Notes and for actions brought under federal or state securities laws
brought in any federal or state court located in the City of New York and
will agree to submit to such jurisdiction.
BOOK ENTRY; DELIVERY AND FORM
So long as DTC, or its nominee, is the registered owner or holder of
the Global New Note, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the New Notes represented by such
Global New Note for all purposes under the Notes Indenture and the New
Notes. No beneficial owner of an interest in the Global New Note will be
able to transfer that interest except in accordance with DTC's applicable
procedures, in addition to those provided for under the Notes Indenture
and, if applicable, those of Euroclear and Cedel.
Payments of the principal of, and interest on, the Global New Notes
will be made to DTC or its nominee, as the case may be, as the registered
owner thereof. ICG will have no responsibility or liability for any
aspect of the records relating to or payments made on account of
beneficial ownership interests in the Global New Notes or for
maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
ICG expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of the Global New Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global
New Note, as shown on the records of DTC or its nominee. ICG also
expects that payments by participants to owners of beneficial interest in
such Global New Note held through such participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of
such participants.
Transfers between participants in DTC will be effected in the ordinary
way in accordance with DTC rules. Transfers between participants in
Euroclear and Cedel will be effected in the ordinary way in accordance
with their respective rules and operating procedures.
ICG understands that DTC will take any action permitted to be taken by
a holder of New Notes (including the presentation of New Notes for
exchange as described below) only at the direction of one or more
participants
-58-
<PAGE>
to whose account the DTC interests in the Global New Notes is credited
and only in respect of such portion of the aggregate principal amount of
New Notes as to which such participant or participants has or have given
such direction. However, if there is an Event of Default under the New
Notes, DTC will exchange the Global New Notes for Certificated New Notes,
which it will distribute to its participants.
ICG understands: DTC is a limited purpose trust company organized
under the laws of the State of New York, a "banking organization" within
the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and
settlement of securities transaction between participants through
electronic book entry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates and certain
other organizations. Indirect access to the DTC system is available to
others such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a participant, either
directly or indirectly ("indirect participants").
Although DTC, Euroclear and Cedel are expected to follow the foregoing
procedures in order to facilitate transfers of interest in the Global New
Notes among participants of DTC, Euroclear and Cedel, they are under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. ICG will have no
responsibility for the performance by DTC, Euroclear or Cedel or their
respective participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
Certificated New Notes. If DTC is at any time unwilling or unable to
continue as a depositary for the Global New Note and a successor
depositary is not appointed by ICG within 90 days, ICG will issue
Certificated New Notes in exchange for the Global New Note.
DESCRIPTION OF NEW PREFERRED STOCK
The New Preferred Stock will be issued pursuant to the Amended
Articles. The summary contained herein of certain provisions of the New
Preferred Stock does not purport to be complete and is qualified in its
entirety by reference to the provisions of the Amended Articles, a copy
of which is available from ICG upon request. The definitions of certain
terms used in the Amended Articles and in the following summary are set
forth below. See "--Certain Definitions." References herein to "$"
refers to U.S. dollars.
IntelCom's Board of Directors has adopted a plan under which IntelCom
will become a subsidiary of a new, publicly traded Delaware corporation
("Newco"). Upon the completion of such transaction, references to
"IntelCom" herein shall be deemed to also refer to Newco.
GENERAL
ICG is authorized to issue 1,000,000 shares of preferred stock,
without par value. ICG's Board of Directors has authority, without
further action by stockholders of IntelCom, to authorize the issuance of
classes of preferred stock of ICG from time to time in one or more
series, with such designations, preferences and relative rights within
the limits prescribed by the Colorado Business Corporation Act (the
"CBCA"), as may be determined by ICG's Board of Directors. The Board of
Directors of ICG has authorized the issuance of up to 1,000,000 shares of
Preferred Stock, which consist of the 150,000 shares of Preferred Stock
issued in the Private Offering, plus additional shares of Preferred Stock
which may be used to pay dividends on the Preferred Stock if ICG elects
to pay dividends in additional shares of New Preferred Stock. The New
Preferred Stock, when issued by ICG and paid for by the Placement Agent,
will be fully paid and non-assessable, and the holders thereof will not
have any subscription or preemptive rights related thereto. American
Stock Transfer and Trust Company, 40 Wall Street, 46th floor, New York,
New York 10005, will be transfer agent and registrar for the New
Preferred Stock.
-59-
<PAGE>
RANKING
The New Preferred Stock will, with respect to dividend distributions
and distributions upon the liquidation, winding-up and dissolution of
ICG, rank (i) senior to all classes of common stock of ICG and to each
other class of capital stock or series of preferred stock established
after the date of this Memorandum by ICG's Board of Directors the terms
of which do not expressly provide that it ranks senior to or on a parity
with the New Preferred Stock as to dividend distributions and
distributions upon the liquidation, winding-up and dissolution of ICG
(collectively referred to with the common stock of ICG as "Junior
Securities"); (ii) on a parity with any class of capital stock or series
of preferred stock issued by ICG established after the date of this
Memorandum by ICG's Board of Directors, the terms of which expressly
provide that such class or series will rank on a parity with the New
Preferred Stock as to dividend distributions and distributions upon the
liquidation, winding-up and dissolution of ICG (collectively referred to
as "Parity Securities"); and (iii) subject to certain conditions
described below, junior to each class of capital stock or series of
preferred stock issued by ICG established after the date of this
Memorandum by ICG's Board of Directors, the terms of which expressly
provide that such class or series will rank senior to the New Preferred
Stock as to dividend distributions and distributions upon liquidation,
winding-up and dissolution of ICG (collectively referred to as "Senior
Securities"). The New Preferred Stock will be subject to the issuance of
series of Junior Securities, Parity Securities and Senior Securities;
provided that ICG may not issue any new class of Senior Securities
without the approval of the holders of at least a majority of the shares
of New Preferred Stock then outstanding, voting or consenting, as the
case may be, separately as one class, except that without the approval of
holders of the New Preferred Stock, ICG may issue shares of Senior
Securities (1) in exchange for, or the proceeds of which are used to
redeem or repurchase, all, but not less than all, shares of New Preferred
Stock then outstanding, or (2) in exchange for, or the proceeds of which
are used to repay, any outstanding Indebtedness of ICG.
DIVIDENDS
Holders of New Preferred Stock will be entitled to receive, when, as
and if declared by ICG's Board of Directors, out of funds legally
available therefor, dividends on the New Preferred Stock at a rate per
annum equal to 14 1/4% of the liquidation preference per share of New
Preferred Stock, payable quarterly. All dividends will be cumulative,
whether or not earned or declared, on a daily basis from the date of
issuance of the New Preferred Stock and will be payable quarterly in
arrears on February 1, May 1, August 1 and November 1 of each year,
commencing on August 1, 1996. The Amended Articles provide that on or
before May 1, 2001, ICG may, at its option, pay dividends in cash or in
additional fully paid and non-assessable shares of New Preferred Stock
having an aggregate liquidation preference equal to the amount of such
dividends. However, the 13 1/2% Notes Indenture and Notes Indenture
contain limitations on ICG's ability to pay dividends in cash prior to
May 1, 2001. After May 1, 2001, dividends may be paid only in cash.
Future agreements of ICG or IntelCom could restrict the payment of cash
dividends by ICG. If any dividend (or portion thereof) payable on any
dividend payment date on or before May 1, 2001 is not declared or paid in
full in cash or in shares of New Preferred Stock as described above on
such dividend payment date, the amount of the accrued and unpaid dividend
will bear interest at the dividend rate on the New Preferred Stock,
compounding quarterly from such dividend payment date until paid in full.
If any dividend (or portion thereof) payable on any dividend payment date
after May 1, 2001 is not declared or paid in full in cash on such
dividend payment date, the amount of the accrued and unpaid dividend will
bear interest at the dividend rate on the New Preferred Stock,
compounding quarterly from such dividend payment date until paid in full.
No full dividends may be declared or paid or funds set apart for the
payment of dividends on any Parity Securities for any period unless full
cumulative dividends on the New Preferred Stock shall have been or
contemporaneously are declared and paid in full or declared and, if
payable in cash, a sum in cash set apart for such payment on the New
Preferred Stock. If full dividends are not so paid, the New Preferred
Stock will share dividends pro rata with the Parity Securities.
OPTIONAL REDEMPTION
The New Preferred Stock may be redeemed (subject to contractual and
other restrictions with respect thereto and to the legal availability of
funds therefor) at any time on or after May 1, 2001, in whole or in part,
at the option
-60-
<PAGE>
of ICG, at the redemption prices (expressed as a percentage of the
liquidation preference thereof) set forth below, plus an amount in cash
equal to all accumulated and unpaid dividends (including an amount in
cash equal to a prorated dividend for the period from the dividend
payment date immediately prior to the redemption date to the redemption
date, subject to the right of holders of preferred stock on a record date
to receive dividends on a dividend payment date) if redeemed during the
12-month period beginning May 1 of each of the years set forth below:
YEAR PERCENTAGE
2001................. 107.125%
2002................. 104.750%
2003................. 102.375%
2004 and thereafter.. 100.000%
In addition, on or prior to May 1, 1999, ICG may, at its option from
time to time, redeem shares of New Preferred Stock having an aggregate
liquidation preference of up to 35% of the aggregate liquidation
preference of all shares of New Preferred Stock issued in the Private
Offering, at a redemption price equal to 114 1/4% of the liquidation
preference thereof (subject to the right of holders of New Preferred
Stock on relevant record dates to receive dividends due on relevant
dividend payment dates), plus an amount in cash equal to a prorated
dividend for the period from the dividend payment date immediately prior
to the redemption date to the redemption date, with proceeds of one or
more Public Equity Offerings of Common Stock of (A) ICG or (B) IntelCom,
provided that (i) with respect to a Public Offering referred to in clause
(B) above, cash proceeds of such Public Equity Offering in an amount
sufficient to effect the redemption of New Preferred Stock to be so
redeemed are contributed by IntelCom to ICG prior to such redemption and
used by ICG to effect such redemption and (ii) such redemption occurs
within 180 days after consummation of such Public Equity Offering.
No optional redemption may be authorized or made unless prior thereto
full unpaid cumulative dividends shall have been paid or a sum set apart
for such payment on the New Preferred Stock.
In the event of partial redemptions of New Preferred Stock, the shares
to be redeemed will be determined pro rata, except that ICG may redeem
such shares held by any holder of fewer than 100 shares without regard to
such pro rata redemption requirement. The Notes Indenture and the
13 1/2% Notes Indenture restrict the ability of ICG to redeem the New
Preferred Stock, and future agreements may contain similar provisions.
See "Description of New Notes." Notice of redemption shall be mailed by
first class mail at least 30 but no more than 60 days before the
redemption date to each holder of New Preferred Stock to be redeemed at
its registered address. If any New Preferred Stock is to be redeemed in
part, the notice of redemption that related to such New Preferred Stock
shall state the portion of the liquidation preference to be redeemed.
New shares of New Preferred Stock having an aggregate liquidation
preference equal to the unredeemed portion will be issued in the name of
the holder thereof upon cancellation of the original share of New
Preferred Stock and, unless ICG fails to pay the redemption price on the
redemption date, after the redemption date dividends will cease to accrue
on the New Preferred Stock called for redemption.
MANDATORY REDEMPTION
The New Preferred Stock will be subject to mandatory redemption
(subject to the legal availability of funds therefor) in whole on May 1,
2007 at a price, payable in cash, equal to the liquidation preference
thereof, plus all accumulated and unpaid dividends to the date of
redemption. Future agreements of ICG or IntelCom may restrict or
prohibit ICG from redeeming the New Preferred Stock, but ICG will be
required to redeem the New Preferred Stock on May 1, 2007,
notwithstanding any such restriction.
CHANGE OF CONTROL
-61-
<PAGE>
Upon the occurrence of a Change of Control ICG will be required
(subject to the legal availability of funds therefor) to make an offer
(the "Change of Control Offer") to each holder of New Preferred Stock to
repurchase all or any part of such holder's New Preferred Stock at a cash
purchase price equal to 101% of the liquidation preference thereof, plus
an amount in cash equal to all accumulated and unpaid dividends per share
to the date of purchase. The Change of Control Offer must be made within
30 days following a Change of Control, must remain open for at least 30
and not more than 40 days and must comply with the requirements of Rule
14e-1 under the Exchange Act and any other applicable securities laws and
regulations. Notwithstanding the foregoing, ICG has agreed not to make a
Change of Control Offer if any of the New Notes or 13 1/2% Notes are
outstanding upon the occurrence of a Change of Control unless all of the
New Notes and 13 1/2% Notes tendered pursuant to the "Change of Control
Offers" with respect thereto are repurchased as a result of such Change
of Control, in which case the date on which all New Notes and 13 1/2%
Notes (and any other Indebtedness or Senior Securities of ICG having
provisions similar to Section 4.04(x) of the Notes Indenture) are so
repurchased will, under the Amended Articles, be deemed to be the date on
which such Change of Control shall have occurred.
"Change of Control" means such time as (i) a "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act) of Voting Stock having more than 40% of the voting
power of the total Voting Stock of IntelCom on a fully diluted basis;
(ii) individuals who on the Closing Date constitute the Board of
Directors of IntelCom (together with any new directors whose election by
the Board of Directors or whose nomination for election by IntelCom's
stockholders was approved by a vote of at least a majority of the members
of the Board of Directors then in office who either were members of the
Board of Directors on the Closing Date or whose election or nomination
for election was previously so approved) cease for any reason to
constitute a majority of the members of the Board of Directors then in
office; or (iii) all of the Common Stock of ICG is not beneficially owned
by IntelCom; provided, however, that a Change of Control shall be deemed
not to occur as a result of a Reorganization permitted by the Amended
Articles.
None of the provisions in the Amended Articles relating to a purchase
upon a Change of Control can be waived by ICG's Board of Directors. ICG
could, in the future, enter into certain transactions, including certain
recapitalizations of ICG, that would not constitute a Change of Control,
but would increase the amount of indebtedness outstanding at such time.
If a Change of Control were to occur, ICG would be obligated to offer to
repurchase all of the New Notes and 13 1/2% Notes prior to making an
offer to repurchase shares of New Preferred Stock, and there can be no
assurance that ICG would have sufficient funds to pay the purchase price
for all shares of New Preferred Stock that ICG is required to purchase.
In the event that ICG were required to purchase outstanding shares of New
Preferred Stock pursuant to a Change of Control Offer, ICG expects that
it would need to seek third-party financing, to the extent it does not
have available funds, to meet its purchase obligations. However, there
can be no assurance that ICG would be able to obtain such financing. In
addition, ICG's ability to purchase the New Preferred Stock may be
limited by other then-existing agreements and by restrictions imposed by
the CBCA.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding-
up of ICG, holders of New Preferred Stock will be entitled to be paid,
out of the assets of ICG available for distribution, $1,000 per share,
plus an amount in cash equal to accumulated and unpaid dividends thereon
to the date fixed for liquidation, dissolution or winding-up (including
an amount equal to a prorated dividend for the period from the last
dividend payment date to the date fixed for liquidation, dissolution or
winding-up), before any distribution is made on any Junior Securities,
including, without limitation, ICG Common Stock. If, upon any voluntary
or involuntary liquidation, dissolution or winding-up of ICG, the amounts
payable with respect to the New Preferred Stock and all other Parity
Securities are not paid in full, the holders of the New Preferred Stock
and the Parity Securities will share equally and ratably in any
distribution of assets of ICG with respect to the New Preferred Stock and
Parity Securities, in proportion to the full liquidation preference and
accumulated and unpaid dividends to which each is entitled. After
payment of the full amount of the liquidation preferences and accumulated
and unpaid dividends to which they are entitled, the holders of shares of
New Preferred Stock will not be entitled to any further participation in
any distribution of assets of ICG. However, a merger, consolidation or
sale of substantially all of ICG's assets that complies with the
-62-
<PAGE>
provisions described below under the "Mergers, Consolidation and Sale of
Assets" covenant shall be deemed not to be a liquidation, dissolution or
winding up of ICG.
The Amended Articles do not contain any provision requiring funds to
be set aside to protect the liquidation preference of the New Preferred
Stock. The CBCA provides that no distribution to shareholders of a
Colorado corporation (including a dividend or a purchase, redemption or
other acquisition of shares) may be made if, after giving effect to such
distribution, (i) the corporation would not be able to pay its debts as
they become due in the usual course of business or (ii) the corporation's
total assets would be less than the sum of its total liabilities plus the
amount that would be needed, if the corporation were to be dissolved at
the time of the distribution, to satisfy the preferential rights upon
dissolution of shareholders whose preferential rights are superior to
those receiving the distribution. A corporation's board of directors may
base its determination that a distribution is not prohibited by the
restriction described in the foregoing sentence either on financial
statements prepared on the basis of accounting practices and principles
that are reasonable under the circumstances or on a fair valuation or
other method that is reasonable under the circumstances.
VOTING RIGHTS
Holders of the New Preferred Stock will have no voting rights with
respect to any matters except as provided by law or as set forth in the
Amended Articles. The Amended Articles provide that if (i) (a) dividends
on the New Preferred Stock are in arrears and have not been paid (or if,
after May 1, 2001, such dividends have not been paid in cash) for four
quarterly periods (whether or not consecutive), (b) ICG fails to
discharge any redemption obligation with respect to the New Preferred
Stock, (c) a breach or violation by ICG of the provisions described below
under "--Exchange" occurs, or ICG fails to exchange Exchange Debentures
for the New Preferred Stock tendered for exchange on the Exchange Date
(as defined below), whether or not ICG satisfies the conditions to permit
such exchange, (d) ICG fails to make a Change of Control Offer or cash
payment with respect thereto if required by the provisions set forth
above under "--Change of Control," (e) a breach or violation of the
provisions described below under "--Certain Covenants" occurs and is not
remedied within 30 days after notice thereof to ICG by holders of 25% or
more of the liquidation preference of the New Preferred Stock then
outstanding, or (f) a default occurs on the obligation to pay principal
of, interest on or any other payment obligation when due (a "Payment
Default") at final maturity, on one or more classes of Indebtedness of
ICG or any Subsidiary of ICG, whether such Indebtedness exists on the
Closing Date or is incurred thereafter, having individually or in the
aggregate an outstanding principal amount of $10 million or more, or any
other Payment Default occurs on one or more such classes of Indebtedness
and such class or classes of Indebtedness are declared due and payable
prior to their respective maturities, and (ii) in the case of clauses (e)
and (f), such event continues for a period of 180 days or more, then the
number of directors constituting ICG's Board of Directors will be
adjusted to permit the holders of the majority of the then outstanding
New Preferred Stock, voting separately as a class, to elect two
directors. Such voting rights and the term of office of such elected
directors will continue until such time as (i) all dividends in arrears
on the New Preferred Stock are paid in full (and, in the case of
dividends payable with respect to any period after May 1, 2001, are paid
in cash) and (ii) any failure, breach or default referred to in clause
(b), (c), (d), (e) or (f) is remedied, at which time the term of any
directors elected pursuant to the provisions of this paragraph shall
terminate. For the purpose of determining the number of quarterly periods
for which accrued dividends have not been paid, any accrued and unpaid
dividend that is subsequently paid shall not be treated as unpaid. Each
such event described in clauses (a) through (f) above is referred to
herein as a "Voting Rights Triggering Event." Within 15 days of the time
ICG becomes aware of the occurrence of any default referred to in clause
(f) above, ICG shall give notice thereof o holders of the New Preferred
Stock at their addresses as they appear on the records of the Transfer
Agent.
The Amended Articles provide that upon the occurrence of a Voting
Rights Triggering Event, the number of directors constituting ICG's Board
of Directors will be increased by two directors, whom the holders of the
New Preferred Stock will be entitled to elect. Whenever the right of the
holders of New Preferred Stock to elect directors shall cease, the number
of directors constituting ICG's Board of Directors will be restored to
the number of directors constituting ICG's Board of Directors prior to
the time or event which entitled the holders of New Preferred Stock to
elect directors.
-63-
<PAGE>
Any vacancy occurring in the office of a director elected by holders
of the New Preferred Stock may be filled by the remaining director
elected by such holders unless and until such vacancy shall be filled by
vote of such holders.
The Amended Articles provide that, except as stated above under "--
Ranking," ICG will not authorize any class of Senior Securities without
the affirmative vote or consent of holders of at least a majority of the
shares of New Preferred Stock then outstanding, voting or consenting, as
the case may be, separately as one class. The Amended Articles also
provide that ICG may not amend the Amended Articles so as to affect
adversely the specified rights, preferences, privileges or voting rights
of holders of shares of the New Preferred Stock or authorize the issuance
of any additional shares of New Preferred Stock (other than to pay
dividends in kind on New Preferred Stock), without the affirmative vote
or consent of the holders of at least a majority of the outstanding
shares of New Preferred Stock, voting or consenting, as the case may be,
separately as one class. The holders of at least a majority of the
outstanding shares of New Preferred Stock, voting or consenting, as the
case may be, separately as one class, may also waive compliance with any
provision of the Amended Articles.
Under Colorado law, holders of New Preferred Stock will be entitled to
vote as a separate voting group upon a proposed amendment to the Amended
Articles that requires a shareholder vote, whether or not entitled to
vote thereon by the Amended Articles, if the amendment would: (i)
increase or decrease the aggregate number of authorized shares of
preferred stock; (ii) effect an exchange or reclassification of all or
part of the shares of the New Preferred Stock into shares of another
class or series; (iii) effect an exchange or reclassification, or create
the right of exchange, of all or part of the shares of another class or
series into shares of New Preferred Stock; (iv) change the designation,
preferences, limitations or relative rights of all or part of the shares
of New Preferred Stock; (v) change the shares of all or part of the New
Preferred Stock into a different number of shares of New Preferred Stock;
(vi) create a new class of shares having rights or preferences with
respect to distributions or dissolution that are prior, superior, or
substantially equal to the New Preferred Stock; (vii) increase the
rights, preferences, or number of authorized shares of any class or
series that, after giving effect to the amendment, have rights or
preferences with respect to distributions or to dissolution that are
prior, superior, or substantially equal to the New Preferred Stock; or
(viii) cancel or otherwise affect rights to distributions or dividends
that have accumulated but have not yet been declared on all or part of
the shares of New Preferred Stock. Under Colorado law, if an amendment
that entitles two or more series of a class of shares to vote as separate
voting groups would affect those two or more series in the same or a
substantially similar way, the shares of all the series so affected are
instead required to vote together as a single voting group rather than as
separate voting groups.
In general, except as otherwise provided in the Amended Articles, the
voting rights described in the foregoing paragraph will not apply to an
amendment to the Amended Articles that is approved by ICG's Board of
Directors, without being subject to any requirement for shareholder
action, establishing the preferences, limitations, and relative rights of
any class or series of ICG preferred stock already authorized by the
Amended Articles at the time of such amendment. Under the Amended
Articles, ICG's Board of Directors has the authority to authorize the
issuance of classes or series of preferred stock up to the 1,000,000
shares authorized without further action by shareholders, including
without any voting by holders of New Preferred Stock under Colorado law
as described in the preceding paragraph. See "--General." Notwithstanding
the foregoing, the Amended Articles provide that ICG will not authorize
or issue any class of Senior Securities without the affirmative vote of
holders of a majority of the shares of New Preferred Stock then
outstanding voting separately as a class, except as described above under
"--Ranking." See "--Voting Rights."
CERTAIN COVENANTS
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF NEW PREFERRED STOCK
(a) Under the terms of the Amended Articles, ICG will not, and will
not permit any of its Restricted Subsidiaries to, Incur any Indebtedness
(other than the New Notes, the Exchange Debentures and Indebtedness
existing on the Closing Date) or issue any Redeemable Stock; provided
that ICG may Incur Indebtedness or issue Redeemable Stock if, after
giving effect to the Incurrence of such Indebtedness or the issuance of
such Redeemable
-64-
<PAGE>
Stock and the receipt and application of the proceeds therefrom, the
Indebtedness to EBITDA Ratio would be greater than zero and less than
5:1.
Notwithstanding the foregoing, ICG and any Restricted Subsidiary
(except as specified below) may Incur each and all of the following: (i)
Indebtedness of ICG or any Restricted Subsidiary or Redeemable Stock of
ICG outstanding at any time, which Indebtedness or Redeemable Stock
generates gross proceeds to ICG of up to $900 million, less (without
duplication) the gross proceeds of Indebtedness permanently repaid as
provided under the "Limitation on Asset Sales" covenant contained in the
13/1//2% Notes Indenture and the Notes Indenture; (ii) Indebtedness to
IntelCom, ICG or any of ICG's Wholly Owned Restricted Subsidiaries;
provided that any subsequent issuance or transfer of any Capital Stock
which results in any such Wholly Owned Restricted Subsidiary ceasing to
be a Wholly Owned Restricted Subsidiary or any subsequent transfer of
such Indebtedness (other than to IntelCom, ICG or another Wholly Owned
Restricted Subsidiary) shall be deemed, in each case, to constitute an
Incurrence of such Indebtedness not permitted by this clause (ii); (iii)
Indebtedness or Redeemable Stock issued in exchange for, or the net
proceeds of which are used to refinance or refund, then outstanding
Indebtedness or Redeemable Stock, other than Indebtedness Incurred or
Redeemable Stock issued under clause (i), (ii), (v), (vi), (viii), (ix),
(x) or (xi) of this paragraph, and any refinancings thereof in an amount
not to exceed the amount so refinanced or refunded (plus premiums,
accrued interest, accrued dividends, fees and expenses); provided that
such new Indebtedness or Redeemable Stock, determined as of the date of
Incurrence of such new Indebtedness or issuance of Redeemable Stock, does
not mature prior to the Stated Maturity of the Indebtedness or have a
mandatory redemption date prior to the Redeemable Stock to be refinanced
or refunded, and the Average Life of such new Indebtedness is at least
equal to the remaining Average Life of the Indebtedness to be refinanced
or refunded; and provided further that in no event may Indebtedness or
Redeemable Stock of ICG be refinanced by means of any Indebtedness or
Redeemable Stock of any Restricted Subsidiary of ICG pursuant to this
clause (iii); (iv) Indebtedness (A) in respect of performance, surety or
appeal bonds provided in the ordinary course of business, (B) under
Currency Agreements and Interest Rate Agreements; provided that such
agreements do not increase the Indebtedness of the obligor outstanding at
any time other than as a result of fluctuations in foreign currency
exchange rates or interest rates or by reason of fees, indemnities and
compensation payable thereunder; and (C) arising from agreements
providing for indemnification, adjustment of purchase price or similar
obligations, or from Guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of ICG or any of its
Restricted Subsidiaries pursuant to such agreements, in any case Incurred
in connection with the disposition of any business, assets or Restricted
Subsidiary of ICG (other than Guarantees of Indebtedness Incurred by any
Person acquiring all or any portion of such business, assets or
Restricted Subsidiary of ICG for the purpose of financing such
acquisition), in a principal amount at maturity not to exceed the gross
proceeds actually received by ICG or any Restricted Subsidiary in
connection with such disposition; (v) Indebtedness or Redeemable Stock of
ICG, to the extent the proceeds referred to below are contributed to ICG,
not to exceed, at any one time outstanding, twice the amount of Net Cash
Proceeds received by IntelCom after the Closing Date from the issuance
and sale of its Capital Stock (other than Redeemable Stock or preferred
stock); provided that such Indebtedness does not mature prior to the
final mandatory redemption date of the New Preferred Stock; (vi)
Strategic Investor Subordinated Indebtedness; (vii) Indebtedness or
Redeemable Stock of ICG, to the extent the proceeds thereof are
immediately used after the Incurrence or issuance thereof to purchase New
Preferred Stock tendered in a Change of Control Offer; (viii)
Indebtedness of any Restricted Subsidiary of ICG Incurred pursuant to any
credit agreement of such Restricted Subsidiary in effect on August 8,
1995 (or any agreement refinancing Indebtedness under such credit
agreement), up to the amount of the commitment under such credit
agreement (including equipment leasing or financing agreements) on August
8, 1995; (ix) Indebtedness of ICG, in an amount not to exceed $100
million at any one time outstanding, consisting of Capitalized Lease
Obligations with respect to assets that are used or useful in the
telecommunications business of ICG or its Restricted Subsidiaries; (x)
Indebtedness or Redeemable Stock of any Person that becomes a Restricted
Subsidiary of ICG after the Closing Date, which Indebtedness exists
or, with respect to such Indebtedness for which there is a commitment to
lend, at the time such Person becomes a Restricted Subsidiary and, with
respect to such Indebtedness, the subsequent incurrence thereof
("Acquired Indebtedness"), in an accreted amount not to exceed $50
million at any one time outstanding in the aggregate for all such
Restricted Subsidiaries; provided that such Acquired Indebtedness does
not exceed 65% of the consideration (calculated by including such
Acquired Indebtedness as a part of such consideration) paid by ICG and
its Restricted Subsidiaries for the acquisition of such Person; and (xi)
Indebtedness of ICG, in an amount not to exceed $30 million at any one
time outstanding, consisting of letters of credit and similar
arrangements used to support obligations of ICG or any
-65-
<PAGE>
of its Restricted Subsidiaries with respect to the acquisition of (by
purchase, lease or otherwise), construction of, or improvements on,
assets that will be used or useful in the telecommunications business of
ICG or its Restricted Subsidiaries.
(b) For purposes of determining any particular amount of Indebtedness
under this "Incurrence of Indebtedness and Issuance of New Preferred
Stock" covenant, Guarantees, Liens or obligations with respect to letters
of credit supporting Indebtedness otherwise included in the determination
of such particular amount shall not be included. For purposes of
determining compliance with this "Incurrence of Indebtedness and Issuance
of New Preferred Stock" covenant, in the event that an item of
Indebtedness or Redeemable Stock meets the criteria of more than one of
the types of Indebtedness or Redeemable Stock described in the above
clauses, ICG, in its sole discretion, shall classify such item of
Indebtedness or Redeemable Stock and only be required to include the
amount and type of such Indebtedness or Redeemable Stock in one of such
clauses.
LIMITATION ON RESTRICTED PAYMENTS
So long as any shares of the New Preferred Stock are outstanding, ICG
will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, (i) declare or pay any dividend or make any distribution on
Junior Securities held by Persons other than ICG or any of its Restricted
Subsidiaries (other than dividends or distributions payable solely in
shares of its or such Restricted Subsidiary's Junior Securities (other
than Redeemable Stock) of the same class held by such holders or in
options, warrants or other rights to acquire such shares of Junior
Securities and other than pro rata dividends or distributions on Common
Stock of Restricted Subsidiaries); (ii) purchase, redeem, retire or
otherwise acquire for value any shares of Junior Securities of ICG or any
Restricted Subsidiary (including options, warrants or other rights to
acquire such shares of Junior Securities) held by Persons other than ICG
or any of its Wholly Owned Restricted Subsidiaries (except for Junior
Securities of MTN, StarCom, Ohio LINX, FOTI and Zycom to the extent the
consideration therefor consists solely of common stock (other than
Redeemable Stock) of IntelCom or Junior Securities of ICG, in each case,
transferred in compliance with the Securities Act); or (iii) make any
Investment, other than a Permitted Investment, in any Person (such
payments or any other actions described in clauses (i) through (iii)
being collectively "Restricted Payments") if, at the time of, and after
giving effect to, the proposed Restricted Payment: (A) an event referred
to in clauses (i)(a) through (i)(f) under "Voting Rights" shall have
occurred and be continuing, (B) ICG could not Incur at least $1.00 of
Indebtedness under the first paragraph of the "Incurrence of Indebtedness
and Issuance of New Preferred Stock" covenant, (C) the aggregate amount
expended for all Restricted Payments (the amount so expended, if other
than in cash, to be determined in good faith by the Board of Directors,
whose determination shall be conclusive and evidenced by a Board
Resolution) after the date of the Amended Articles shall exceed the sum
of (1) 50% of the aggregate amount of the Adjusted Consolidated Net
Income (or, if the Adjusted Consolidated Net Income is a loss, minus 100%
of such amount) (determined by excluding income resulting from transfers
of assets by ICG or a Restricted Subsidiary to an Unrestricted
Subsidiary) accrued on a cumulative basis during the period (taken as one
accounting period) beginning on the first day of the fiscal quarter
immediately following the Closing Date and ending on the last day of the
last fiscal quarter preceding the Transaction Date for which reports have
been filed pursuant to the "Reports" covenant plus (2) the aggregate Net
Cash Proceeds received by ICG after the Closing Date (x) from the
issuance and sale, permitted by the Amended Articles, of Junior
Securities (other than Redeemable Stock) to a Person who is not a
Subsidiary of ICG, or from the issuance to a Person who is not a
Subsidiary of ICG of any options, warrants or other rights to acquire
Junior Securities of ICG (in each case, exclusive of any Redeemable Stock
or any options, warrants or other rights that are redeemable at the
option of the holder, or are required to be redeemed, prior to the Stated
Maturity of the New Preferred Stock) or (y) as a capital contribution
from IntelCom plus (3) an amount equal to the net reduction in
Investments (other than reductions in Permitted Investments) in any
Person resulting from payments of interest on Indebtedness, dividends,
repayments of loans or advances, or other transfers of assets, in each
case to ICG or any Restricted Subsidiary (except to the extent any such
payment is included in the calculation of Adjusted Consolidated Net
Income), or from redesignations of Unrestricted Subsidiaries as
Restricted Subsidiaries (valued in each case as provided in the
definition of "Investments"), not to exceed the amount of Investments
previously made by ICG and its Restricted Subsidiaries in such Person or
(D) dividends on the New Preferred Stock shall not have been paid in full
as provided in the Amended Articles.
-66-
<PAGE>
The foregoing provision shall not be violated by reason of: (i) the
payment of any dividend within 60 days after the date of declaration
thereof if, at said date of declaration, such payment would comply with
the foregoing paragraph; (ii) the repurchase, redemption or other
acquisition of Junior Securities of ICG (or options, warrants or other
rights to acquire such Junior Securities) and with respect to any Junior
Securities, the payment of accrued dividends thereon, in exchange for, or
out of the proceeds of a substantially concurrent issuance or sale of,
shares of Junior Securities (other than Redeemable Stock) of ICG;
provided that the redemption of any preferred stock pursuant to any
mandatory redemption feature thereof and any redemption of any other
Junior Securities and, in each case, the payment of accrued dividends
thereon (or options, warrants or other rights to acquire such Junior
Securities) and with respect to any Junior Securities, the payment of
accrued dividends thereon, shall be deemed to be "substantially
concurrent" with such issuance and sale if the required notice with
respect to such redemption is irrevocably given by a date which is no
later than five Business Days after receipt of the proceeds of such
issuance and sale and such redemption and payment is consummated within
the period provided for in the document governing such preferred stock or
the documents governing the redemption of such other Junior Securities,
as the case may be; (iii) payments or distributions, in the nature of
satisfaction of dissenters' rights, pursuant to or in connection with a
consolidation, merger or transfer of assets that complies with the
provisions of the Amended Articles applicable to mergers, consolidations
and transfers of all or substantially all of the property and assets of
ICG; (iv) Investments, not to exceed $10 million in aggregate, each
evidenced by a senior promissory note payable to ICG that provides that
it will become due and payable prior to any required repurchase
(including pursuant to an Offer to Purchase in connection with a Change
of Control) of the New Preferred Stock; (v) Investments, not to exceed $5
million in the aggregate, that meet the requirements of clause (iv)
above; provided that the Board of Directors of ICG shall have determined,
in good faith, that each such Investment under this clause (v) will
enable ICG or one of its Restricted Subsidiaries to obtain additional
business that it might not be able to obtain without the making of such
Investment; (vi) with respect to Junior Securities permitted to be issued
and sold by the "Limitation on Issuance and Sale of Capital Stock of
Restricted Subsidiaries" covenant, the payment (A) of dividends on such
Junior Securities in additional shares of Junior Securities and (B) of
cash dividends on such Junior Securities in an amount not to exceed the
dividend rate thereon and accrued interest on unpaid dividends, in each
case after May 1, 2001; (vii) the repurchase, in the event of a Change of
Control, of Junior Securities of ICG and Indebtedness of ICG into which
such Junior Securities have been exchanged; provided that prior to
repurchasing such Junior Securities or Indebtedness, ICG shall have made
a Change of Control Offer to repurchase the shares of New Preferred Stock
in accordance with the terms of the Amended Articles (and an offer to
repurchase other Indebtedness, if required by the terms thereof, in
accordance with the indenture or other document governing such other
Indebtedness) and shall have accepted and paid for any shares of New
Preferred Stock (and other Indebtedness) properly tendered in connection
with such Change of Control Offer for the shares of New Preferred Stock
or change of control offer for such other Indebtedness; (viii) the
issuance of Junior Securities permitted to be issued under the Amended
Articles in exchange for Indebtedness; provided that the Incurrence of
such Indebtedness complies with the "Incurrence of Indebtedness and
Issuance of New Preferred Stock" covenant and (ix) (A) the payment of a
dividend or other transfer of funds to IntelCom, with a portion of the
proceeds of the issuance of the New Preferred Stock in an amount not to
exceed the amount required to repurchase 916,666 warrants to purchase
Common Stock of IntelCom and (B) the redemption of the 12% Redeemable New
Preferred Stock of ICG, in each case, in accordance with the provisions
of the documents governing such repurchase or redemption, provided that,
except in the case of clause (i), no Default or Event of Default shall
have occurred and be continuing or occur as a consequence of the actions
or payments set forth therein.
Each Restricted Payment permitted pursuant to the preceding paragraph
(other than the Restricted Payments referred to in clauses (vi)(A) and
(viii) thereof), and the Net Cash Proceeds from any issuance of Junior
Securities referred to in clause (ii), shall be included in calculating
whether the conditions of clause (C) of the first paragraph of this
"Limitation on Restricted Payments" covenant have been met with respect
to any subsequent Restricted Payments. Notwithstanding the foregoing, in
the event the proceeds of an issuance of Junior Securities are used for
the redemption, repurchase or other acquisition of the New Preferred
Stock, or Parity Securities, then the Net Cash Proceeds of such issuance
shall be included in clause (C) of the first paragraph of this
"Limitation on Restricted Payments" covenant only to the extent such
proceeds are not used for such redemption, repurchase or other
acquisition of New Preferred Stock or Parity Securities.
-67-
<PAGE>
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES
So long as any shares of New Preferred Stock are outstanding, ICG will
not, and will not permit any Restricted Subsidiary to, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions permitted
by applicable law on any Capital Stock of such Restricted Subsidiary
owned by ICG or any other Restricted Subsidiary, (ii) pay any
Indebtedness owed to ICG or any other Restricted Subsidiary, (iii) make
loans or advances to ICG or any other Restricted Subsidiary or (iv)
transfer any of its property or assets to ICG or any other Restricted
Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Closing Date in any agreements in
effect on the Closing Date, and any extensions, refinancings, renewals or
replacements of such agreements; provided that the encumbrances and
restrictions in any such extensions, refinancings, renewals or
replacements are no less favorable in any material respect to the holders
of the New Preferred Stock than those encumbrances or restrictions that
are then in effect and that are being extended, refinanced, renewed or
replaced; (ii) existing under or by reason of applicable law; (iii)
existing with respect to any Person or the property or assets of such
Person acquired by ICG or any Restricted Subsidiary, existing at the time
of such acquisition and not incurred in contemplation thereof, which
encumbrances or restrictions are not applicable to any Person or the
property or assets of any Person other than such Person or the property
or assets of such Person so acquired; (iv) in the case of clause (iv) of
the first paragraph of this "Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries" covenant, (A) that
restrict in a customary manner the subletting, assignment or transfer of
any property or asset that is a lease, license, conveyance or contract or
similar property or asset, (B) existing by virtue of any transfer of,
agreement to transfer, option or right with respect to, or Lien on, any
property or assets of ICG or any Restricted Subsidiary not otherwise
prohibited by the Amended Articles or (C) arising or agreed to in the
ordinary course of business, not relating to any Indebtedness, and that
do not, individually or in the aggregate, detract from the value of
property or assets of ICG or any Restricted Subsidiary in any manner
material to ICG or any Restricted Subsidiary; or (v) with respect to a
Restricted Subsidiary and imposed pursuant to an agreement that has been
entered into for the sale or disposition of all or substantially all of
the Capital Stock of, or property and assets of, such Restricted
Subsidiary. Nothing contained in this "Limitation on Dividend and Other
Payment Restrictions Affecting Restricted Subsidiaries" covenant shall
prevent ICG or any Restricted Subsidiary from (1 creating, incurring,
assuming or suffering to exist any Liens otherwise permitted in the
"Limitation on Liens" covenant or (2) restricting the sale or other
disposition of property or assets of ICG or any of its Restricted
Subsidiaries that secure Indebtedness of ICG or any of its Restricted
Subsidiaries.
LIMITATION ON ISSUANCES AND SALE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES
Under the terms of the Amended Articles, ICG will not sell, and will
not permit any Restricted Subsidiary, directly or indirectly, to issue or
sell, any shares of Capital Stock of a Restricted Subsidiary (including
options, warrants or other rights to purchase shares of such Capital
Stock) except (i) to ICG or a Wholly Owned Restricted Subsidiary; (ii)
issuances or sales to foreign nationals of shares of Capital Stock of
foreign Restricted Subsidiaries, to the extent required by applicable
law; (iii) if, immediately after giving effect to such issuance or sale,
such Restricted Subsidiary would no longer constitute a Restricted
Subsidiary; (iv) with respect to Common Stock of MTN, StarCom and Zycom;
provided that the proceeds of any such sale under clause (iv) shall be
reinvested in the business of ICG and its Restricted Subsidiaries or used
to repay Indebtedness of ICG or any of its Restricted Subsidiaries or
Senior Securities; and (v) with respect to Common Stock of FOTI; provided
that FOTI shall not retain any net proceeds from such sales or issuances
in excess of $10 million in the aggregate and any net proceeds in excess
of such $10 million shall be received by, or paid promptly by FOTI to,
ICG or any Wholly Owned Restricted Subsidiary of ICG.
LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES
Under the terms of the Amended Articles, ICG will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, enter into,
renew or extend any transaction (including, without limitation, the
purchase, sale, lease or exchange of property or assets, or the rendering
of any service) with any holder (or any Affiliate of such
-68-
<PAGE>
holder) of 5% or more of any class of Capital Stock of ICG or with any
Affiliate of ICG or any Restricted Subsidiary, except upon fair and
reasonable terms no less favorable to ICG or such Restricted Subsidiary
than could be obtained, at the time of such transaction or at the time of
the execution of the agreement providing therefor, in a comparable arm's-
length transaction with a Person that is not such a holder or an
Affiliate.
The foregoing limitation does not limit, and shall not apply to (i)
transactions (A) approved by a majority of the disinterested members of
the Board of Directors of ICG or (B) for which ICG or a Restricted
Subsidiary delivers to the Transfer Agent a written opinion of a
nationally recognized investment banking firm stating that the
transaction is fair to ICG or such Restricted Subsidiary from a financial
point of view; (ii) any transaction solely between ICG and any of its
Wholly Owned Restricted Subsidiaries or solely between Wholly Owned
Restricted Subsidiaries; (iii) the payment of reasonable and customary
regular fees to directors of ICG who are not employees of ICG; (iv) any
payments or other transactions pursuant to any tax-sharing agreement (or
a similar agreement that is not materially adverse to the interests of
holders of the New Preferred Stock) between ICG and any other Person with
which ICG files a consolidated tax return or with which ICG is part of a
consolidated group for tax purposes; or (v) any Restricted Payments not
prohibited by the "Limitation on Restricted Payments" covenant.
Notwithstanding the foregoing, any transaction covered by the first
paragraph of this "Limitation on Transactions with Shareholders and
Affiliates" covenant and not covered by clauses (ii) through (iv) of this
paragraph, the aggregate amount of which exceeds $2 million in value,
must be approved or determined to be fair in the manner provided for in
clause (i)(A) or (B) above.
LIMITATION ON LIENS
Under the terms of the Amended Articles, ICG will not, and will not
permit any Restricted Subsidiary to, create, incur, assume or suffer to
exist any Lien on any of its assets or properties, now or hereafter
acquired, or any shares of Capital Stock of or Indebtedness of any
Restricted Subsidiary.
The foregoing limitation does not apply to (i) Liens existing on the
Closing Date; (ii) Liens granted after the Closing Date on any assets or
Capital Stock of ICG or its Restricted Subsidiaries created in favor of
the holders of the New Preferred Stock; (iii) Liens with respect to the
assets of a Restricted Subsidiary granted by such Restricted Subsidiary
to ICG or a Wholly Owned Restricted Subsidiary to secure Indebtedness
owing to ICG or such other Restricted Subsidiary; (iv) Liens securing
Indebtedness which is Incurred to refinance secured Indebtedness which is
permitted to be Incurred under clause (iii) of the second paragraph of
the "Incurrence of Indebtedness and Issuance of New Preferred Stock"
covenant; provided that such Liens do not extend to or cover any property
or assets of ICG or any Restricted Subsidiary other than the property or
assets securing the Indebtedness being refinanced; (v) Liens with respect
to assets or properties of any Person that becomes a Restricted
Subsidiary after the Closing Date; provided that such Liens do not extend
to or cover any assets or properties of ICG or any of its Restricted
Subsidiaries other than the assets or properties of such Person subject
to such Lien on the date such Person becomes a Restricted Subsidiary; and
provided further that such Liens are not incurred in contemplation of, or
in connection with, such Person becoming a Restricted Subsidiary; (vi)
Permitted Liens; and (vii) Liens securing Indebtedness.
MERGER, CONSOLIDATION AND SALE OF ASSETS
ICG shall not consolidate with, merge with or into, or sell, convey,
transfer, lease or otherwise dispose of all or substantially all of its
property and assets (as an entirety or substantially an entirety in one
transaction or a series of related transactions) to, any Person (other
than a consolidation or merger with or into a Wholly Owned Restricted
Subsidiary with a positive net worth; provided that, in connection with
any such merger or consolidation, no consideration (other than Common
Stock in the surviving Person or ICG) shall be issued or distributed to
the stockholders of ICG) or permit any Person to merge with or into ICG
unless: (i) ICG shall be the continuing Person, or the Person (if other
than ICG) formed by such consolidation or into which ICG is merged or
that acquired or leased such property and assets of ICG shall be a
corporation organized and validly existing under the laws of the United
States of America or any jurisdiction thereof and the New Preferred Stock
shall be converted into or exchanged for and shall become shares of such
successor company, having in respect of such successor or resulting
company substantially the same powers, preferences and relative
participating, optional or other special rights and
-69-
<PAGE>
the qualifications, limitations or restrictions thereon that the New
Preferred Stock had immediately prior to such transaction; (ii)
immediately after giving effect to such transaction, no event referred to
under clauses (a) through (e) under "--Voting Rights" or any default,
breach or violation that would become such an event after the giving of
notice, the passage of time or both, shall have occurred and be
continuing; (iii) immediately after giving effect to such transaction on
a pro forma basis, ICG or any Person becoming the successor issuer of the
New Preferred Stock, as the case may be, shall have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of ICG
immediately prior to such transaction; (iv) immediately after giving
effect to such transaction on a pro forma basis ICG, or any Person
becoming the successor issuer of the New Preferred Stock, as the case may
be, could Incur at least $1.00 of Indebtedness under the first paragraph
of the "Incurrence of Indebtedness and Issuance of New Preferred Stock"
covenant; and (v) ICG delivers to the Transfer Agent an Officers'
Certificate (attaching the arithmetic computations to demonstrate
compliance with clauses (iii) and (iv) above) and an Opinion of Counsel,
in each case stating that such consolidation, merger or transfer complies
with this provision and that all conditions precedent provided for herein
relating to such transaction have been complied with; provided, however,
that clauses (iii) and (iv) above do not apply if, in the good faith
determination of the Board of Directors of ICG, whose determination shall
be evidenced by a Board Resolution, the principal purpose of such
transaction is part of a plan to change the jurisdiction of incorporation
of ICG to a different state of the United States; and provided further
that any such transaction shall not have as one of its purposes the
evasion of the foregoing limitations.
SENIOR SUBORDINATED INDEBTEDNESS
So long as any shares of New Preferred Stock are outstanding, ICG will
not Incur any Indebtedness, other than the Exchange Debentures, that is
expressly made subordinated in right of payment to any Senior
Indebtedness (as defined in the Exchange Debenture Indenture) unless such
Indebtedness, by its terms and by the terms of any agreement or
instrument pursuant to which such Indebtedness is outstanding is
expressly made pari passu with, or subordinate in right of payment to,
the Exchange Debentures pursuant to provisions substantially similar to
those contained in Article Eleven of the Exchange Debenture Indenture;
provided that the foregoing limitations shall not apply to distinctions
between categories of Senior Indebtedness that exist by reason of any
Liens or Guarantees arising or created in respect of some but not all
Senior Indebtedness.
REPORTS
So long as any shares of New Preferred Stock are outstanding, ICG
shall file with the Commission the annual reports, quarterly reports and
the information, documents and other reports required to be filed by ICG
with the Commission pursuant to Sections 13 or 15 of the Exchange Act,
whether or not ICG has or is required to have a class of securities
registered under the Exchange Act, at the time it is or would be required
to file the same with the Commission and, within 15 days after ICG is or
would be required to file such reports, information or documents with the
Commission.
EXCHANGE
ICG may exchange all, but not less than all, of the outstanding shares
of New Preferred Stock, including any shares of New Preferred Stock
issued as payment for dividends, into Exchange Debentures at any time
following the date on which such exchange is permitted by the terms of
the Notes Indenture and the 13/1//2% Notes Indenture. Presently, the
Exchange of the New Preferred Stock for Exchange Debentures would be
restricted by covenants in such indentures relating to the incurrence of
Indebtedness. There can be no assurance that the conditions in such
covenants for the exchange of New Preferred Stock for Exchange Debentures
will be satisfied or that the exchange will occur or that future
Indebtedness of ICG would not also restrict an exchange. See
"Description of New Notes". In order to effect such exchange, ICG shall
(a) if necessary to satisfy the condition set forth in clause (B) in the
following paragraph based upon the written advice of counsel to ICG, file
a registration statement with the Commission relating to the exchange,
and (b) if a registration statement is filed with the Commission pursuant
to clause (a), use its best efforts to cause such registration statement
to be declared effective as soon as practicable by the Commission unless
the opinion referred to in clause (B) in the following paragraph shall
have been subsequently delivered.
-70-
<PAGE>
Prior to initiating such exchange, ICG shall certify, to the
satisfaction of the trustees under the 13/1//2% Notes Indenture and the
Notes Indenture, that such exchange is permitted under such respective
Indentures. ICG shall also provide such Trustees with an Officer's
Certificate setting forth with specificity the basis for ICG's conclusion
that such exchange is so permitted. In order to effectuate such
exchange, ICG shall send a written notice of exchange by mail to each
holder of record of shares of New Preferred Stock, which notice shall
state (i) that ICG is exchanging the New Preferred Stock into Exchange
Debentures pursuant to the Amended Articles and (ii) the date fixed for
exchange (the "Exchange Date"), which date shall not be less than 15 days
nor more than 60 days following the date on which such notice is mailed
(except as provided in the last sentence of this paragraph). On the
Exchange Date, if the conditions set forth in clauses (A) through (E)
below are satisfied and if the exchange is then permitted under the Notes
Indenture and the 13/1//2% Notes Indenture, ICG shall issue Exchange
Debentures in exchange for the New Preferred Stock as provided in the
next paragraph, provided that on the Exchange Date: (A) there shall be
legally available funds sufficient therefor (including, without
limitation, legally available funds sufficient therefor under Section 7-
106-401 (or any successor provision) of the CBCA); (B) a registration
statement relating to the Exchange Debentures shall have been declared
effective under the Securities Act prior to such exchange and shall
continue to be effective on the Exchange Date or ICG shall have obtained
a written opinion of counsel that an exemption from the registration
requirements of the Securities Act is available for such exchange and
that upon receipt of such Exchange Debentures pursuant to such exchange
made in accordance with such exemption, each holder of an Exchange
Debenture that is not an Affiliate of ICG will not be subject to any
restrictions imposed by the Securities Act upon the resale of such
Exchange Debenture, and such exemption is relied upon by ICG for such
exchange; (C) the Exchange Debenture Indenture and the trustee thereunder
shall have been qualified under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"); (D) immediately after giving effect
to such exchange, no Default or Event of Default (each as defined in the
Exchange Debenture Indenture) would exist under the Exchange Debenture
Indenture; and (E) ICG shall have delivered to the Trustee under the
Exchange Debenture Indenture a written opinion of counsel, dated the date
of exchange, regarding the satisfaction of the conditions set forth in
clauses (A), (B) and (C). In the event that (i) the issuance of the
Exchange Debentures is not permitted on the Exchange Date or (ii) any of
the conditions set forth in clause (A) through (E) of the preceding
sentence are not satisfied on the Exchange Date, ICG shall use its best
efforts to satisfy such conditions and effect such exchange as soon as
practicable.
Upon any exchange pursuant to the preceding paragraph, the holders of
outstanding shares of New Preferred Stock will be entitled to receive a
principal amount of Exchange Debentures for shares of New Preferred
Stock, the liquidation preference of which, plus the amount of
accumulated and unpaid dividends (including a prorated dividend for the
period from the immediately preceding dividend payment date to the date
of exchange) with respect to which, equals such principal amount. The
Exchange Debentures will be issued in registered form, without coupons.
Exchange Debentures issued in exchange for New Preferred Stock will be in
principal amounts of $1,000 and integral multiples thereof to the extent
practicable, and will also be issued in principal amounts less than
$1,000 so that each holder of New Preferred Stock will receive
certificates representing the entire principal amount of Exchange
Debentures to which its shares of New Preferred Stock entitle it,
provided that ICG may, subject to the restrictions in the Notes Indenture
and the 13/1//2% Notes Indenture and any of its other then-existing
Indebtedness, pay cash in lieu of issuing an Exchange Debenture in a
principal amount less than $1,000. On and after the date of exchange,
dividends will cease to accrue on the outstanding shares of New Preferred
Stock, and all rights of the holders of New Preferred Stock (except the
right to receive the Exchange Debentures, an amount in cash, to the
extent applicable, equal to the accrued and unpaid dividends to the
Exchange Date, and if ICG so elects, cash in lieu of any Exchange
Debenture which is in an amount that is not an integral multiple of
$1,000) will terminate. The person entitled to receive the Exchange
Debentures issuable upon such exchange will be treated for all purposes
as the registered holder of such Exchange Debentures.
IntelCom and ICG will comply with the provisions of Rule 13e-4
promulgated pursuant to the Exchange Act in connection with any exchange,
to the extent applicable.
NEW PREFERRED STOCK BOOK ENTRY; DELIVERY AND FORM
So long as DTC, or its nominee, is the registered owner or holder of a
Global New Preferred Stock Certificate, DTC or such nominee, as the case
may be, will be considered the sole owner or holder of the New
-71-
<PAGE>
Preferred Stock represented by such Global New Preferred Stock
Certificate for all purposes under the Amended Articles and the New
Preferred Stock. No beneficial owner of an interest in the Global New
Preferred Stock Certificate will be able to transfer that interest except
in accordance with DTC's applicable procedures, in addition to those
provided for under the Amended Articles.
Payments made with respect to the Global New Preferred Stock
Certificate will be made to DTC or its nominee, as the case may be, as
the registered owner thereof. ICG will have no responsibility or
liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in the Global New Preferred
Stock or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests.
ICG expects that DTC or its nominee, upon receipt of any payments made
with respect to the Global New Preferred Stock, will credit participants'
accounts with payments in amounts proportionate to their respective
beneficial interests in the amount of such Global New Preferred Stock as
shown on the records of DTC or its nominee. ICG also expects that
payments by participants to owners of beneficial interest in such Global
New Preferred Stock held through such participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of
such participants.
Transfers between participants in DTC will be effected in the ordinary
way in accordance with DTC rules and will be settled in same-day funds.
The Company understands that DTC will take any action permitted to be
taken by a holder of New Preferred Stock (including the presentation of
New Preferred Stock for exchange as described below) only at the
direction of one or more participants to whose account the DTC interests
in the Global New Preferred Stock is credited and only in respect of such
portion of the aggregate liquidation preference of New Preferred Stock as
to which such participant or participants has or have given such
direction.
The Company understands: DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking
organization" within the meaning of New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of
the Uniform Commercial Code and a "Clearing Agency" registered pursuant
to the provisions of Section 17A of the Exchange Act. DTC was created to
hold securities for its participants and facilitate the clearance and
settlement of securities transaction between participants through
electronic book entry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates and certain
other organizations. Indirect access to the DTC system is available to
others such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a participant, either
directly or indirectly ("indirect participants").
Although DTC is expected to follow the foregoing procedures in order
to facilitate transfers of interest in the Global New Preferred Stock
Certificate among participants of DTC, it is under no obligation to
perform or continue to perform such procedures, and such procedures may
be discontinued at any time. The Company will have no responsibility for
the performance by DTC or its respective participants or indirect
participants of its respective obligations under the rules and procedures
governing their operations.
CERTIFICATED NEW PREFERRED STOCK
If DTC is at any time unwilling or unable to continue as a depositary
for the Global New Preferred Stock and a successor depositary is not
appointed by ICG within 90 days, ICG will issue Certificated New
Preferred Stock in exchange for the Global New Preferred Stock
Certificate.
CERTAIN DEFINITIONS
-72-
<PAGE>
Set forth below are certain defined terms used in the Amended
Articles. Reference is made to the Amended Articles for the full
definition of such terms, as well as any other capitalized terms used
herein for which no definition is provided.
"Adjusted Consolidated Net Income" means, for any period, the
aggregate net income (or loss) of ICG and its Restricted Subsidiaries for
such period determined in conformity with GAAP; provided that the
following items shall be excluded in computing Adjusted Consolidated Net
Income (without duplication): (i) the net income of any Person (other
than net income attributable to a Restricted Subsidiary) in which any
Person (other than ICG or any of its Restricted Subsidiaries) has a joint
interest and the net income of any Unrestricted Subsidiary, except to the
extent of the amount of dividends or other distributions actually paid to
ICG or any of its Restricted Subsidiaries by such other Person or such
Unrestricted Subsidiary during such period; (ii) solely for the purposes
of calculating the amount of Restricted Payments that may be made
pursuant to clause (C) of the first paragraph of the "Limitation on
Restricted Payments" covenant described above (and in such case, except
to the extent includable pursuant to clause (i) above), the net income
(or loss) of any Person accrued prior to the date it becomes a Restricted
Subsidiary or is merged into or consolidated with ICG or any of its
Restricted Subsidiaries or all or substantially all of the property and
assets of such Person are acquired by ICG or any of its Restricted
Subsidiaries; (iii) the net income of any Restricted Subsidiary to the
extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of such net income is not at
the time permitted by the operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Restricted Subsidiary; (iv)
any gains or losses (on an after-tax basis) attributable to Asset Sales;
(v) except for purposes of calculating the amount of Restricted Payments
that may be made pursuant to clause (C) of the first paragraph of the
"Limitation on Restricted Payments" covenant described above, any amount
paid or accrued as dividends on preferred stock of ICG or any Restricted
Subsidiary owned by Persons other than ICG and any of its Restricted
Subsidiaries; and (vi) all extraordinary gains and extraordinary losses.
"Adjusted Consolidated Net Tangible Assets" means the total amount of
assets of ICG and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), except to the
extent resulting from write-ups of capital assets (excluding write-ups in
connection with accounting for acquisitions in conformity with GAAP),
after deducting therefrom (i) all current liabilities of ICG and its
Restricted Subsidiaries (excluding intercompany items) and (ii) all
goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other like intangibles, all as set forth on the most recently
available quarterly or annual consolidated balance sheet of ICG and its
Restricted Subsidiaries, prepared in conformity with GAAP.
"Affiliate" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as applied to any
Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract
or otherwise; provided that, with respect to ICG and any of its
Subsidiaries, the term "Affiliate" shall be deemed to include Mr. William
Becker, Mr. Lawrence Becker and any person related by blood or marriage
to either of them.
"Asset Acquisition" means (i) an investment by ICG or any of its
Restricted Subsidiaries in any other Person pursuant to which such Person
shall become a Restricted Subsidiary of ICG or shall be merged into or
consolidated with ICG or any of its Restricted Subsidiaries; provided
that such Person's primary business is related, ancillary or
complementary to the businesses of ICG and its Restricted Subsidiaries on
the date of such investment or (ii) an acquisition by ICG or any of its
Restricted Subsidiaries of the property and assets of any Person other
than ICG or any of its Restricted Subsidiaries that constitute
substantially all of a division or line of business of such Person;
provided that the property and assets acquired are related, ancillary or
complementary to the businesses of ICG and its Restricted Subsidiaries on
the date of such acquisition.
"Asset Disposition" means the sale or other disposition by ICG or any
of its Restricted Subsidiaries (other than to ICG or another Restricted
Subsidiary of ICG) of (i) all or substantially all of the Capital Stock
of any Restricted Subsidiary of ICG or (ii) all or substantially all of
the assets that constitute a division or line of business of ICG or any
of its Restricted Subsidiaries.
-73-
<PAGE>
"Asset Sale" means any sale, transfer or other disposition (including
by way of merger, consolidation or sale-leaseback transactions) in one
transaction or a series of related transactions by ICG or any of its
Restricted Subsidiaries to any Person other than ICG or any of its
Restricted Subsidiaries of (i) all or any of the Capital Stock of any
Restricted Subsidiary, (ii) all or substantially all of the property and
assets of an operating unit or business of ICG or any of its Restricted
Subsidiaries or (iii) any other property and assets of ICG or any of its
Restricted Subsidiaries outside the ordinary course of business of ICG or
such Restricted Subsidiary and, in each case, that is not governed by the
provisions described under "--Merger, Consolidation and Sale of Assets,"
provided that the meaning of "Asset Sale" shall not include (A) sales or
other dispositions of inventory, receivables and other current assets,
and (B) dispositions of assets of ICG or any of its Restricted
Subsidiaries, in substantially simultaneous exchanges for consideration
consisting of any combination of cash, Temporary Cash Investments and
assets that are used or useful in the telecommunications business of ICG
or its Restricted Subsidiaries, if such consideration has an aggregate
fair market value substantially equal to the fair market value of the
assets so disposed of; provided, however, that fair market value shall be
determined in good faith by the Board of Directors of ICG, whose
determination shall be conclusive and evidenced by a Board Resolution
delivered to the Transfer Agent.
"Average Life" means, at any date of determination with respect to any
debt security, the quotient obtained by dividing (i) the sum of the
products of (a) the number of years from such date of determination to
the dates of each successive scheduled principal payment of such debt
security and (b) the amount of such principal payment by (ii) the sum of
all such principal payments.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated,
whether voting or non-voting) in equity of such Person, whether now
outstanding or issued after the date of the Amended Articles, including,
without limitation, all Common Stock and preferred stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted
present value of the rental obligations of such Person as lessee, in
conformity with GAAP, is required to be capitalized on the balance sheet
of such Person; and "Capitalized Lease Obligations" means the discounted
present value of the rental obligations under such lease.
"Closing Date" means the date the New Preferred Stock is originally
issued under the Amended Articles.
"Consolidated EBITDA" means, for any period, the sum of the amounts
for such period of (i) Adjusted Consolidated Net Income, (ii)
Consolidated Interest Expense, (iii) income taxes, to the extent such
amount was deducted in calculating Adjusted Consolidated Net Income
(other than income taxes (either positive or negative) attributable to
extraordinary and non-recurring gains or losses or sales of assets), (iv)
depreciation expense, to the extent such amount was deducted in
calculating Adjusted Consolidated Net Income, (v) amortization expense,
to the extent such amount was deducted in calculating Adjusted
Consolidated Net Income, and (vi) all other non-cash items reducing
Adjusted Consolidated Net Income (other than items that will require cash
payments and for which an accrual or reserve is, or is required by GAAP
to be, made), less all non-cash items increasing Adjusted Consolidated
Net Income, all as determined on a consolidated basis for ICG and its
Restricted Subsidiaries in conformity with GAAP; provided that, if any
Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary,
Consolidated EBITDA shall be reduced (to the extent not otherwise reduced
in accordance with GAAP) by an amount equal to (A) the amount of the
Adjusted Consolidated Net Income attributable to such Restricted
Subsidiary multiplied by (B) the quotient of (1) the number of shares of
outstanding Common Stock of such Restricted Subsidiary not owned on the
last day of such period by ICG or any of its Restricted Subsidiaries
divided by (2) the total number of shares of outstanding Common Stock of
such Restricted Subsidiary on the last day of such period.
"Consolidated Interest Expense" means, for any period, the aggregate
amount of interest in respect of Indebtedness (including amortization of
original issue discount on any Indebtedness and the interest portion of
any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and
other fees and charges owed with respect to letters of credit and
bankers' acceptance financing; the net costs associated with Interest
Rate Agreements; and Indebtedness that is Guaranteed or secured by ICG or
any of its Restricted Subsidiaries) and all but the principal component
of rentals in respect of Capitalized
-74-
<PAGE>
Lease Obligations paid, accrued or scheduled to be paid or to be accrued
by ICG and its Restricted Subsidiaries during such period; excluding,
however, without duplication, (i) any amount of such interest of any
Restricted Subsidiary if the net income of such Restricted Subsidiary is
excluded in the calculation of Adjusted Consolidated Net Income pursuant
to clause (iii) of the definition thereof (but only in the same
proportion as the net income of such Restricted Subsidiary is excluded
from the calculation of Adjusted Consolidated Net Income pursuant to
clause (iii) of the definition thereof) and (ii) any premiums, fees and
expenses (and any amortization thereof) payable in connection with the
offering of the 13/1//2% Notes and the warrants issued therewith, the New
Notes and/or the New Preferred Stock, all as determined on a consolidated
basis (without taking into account Unrestricted Subsidiaries) in
conformity with GAAP.
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity as set forth on the most recently available
quarterly or annual consolidated balance sheet of ICG and its Restricted
Subsidiaries (which shall be as of a date not more than 90 days prior to
the date of such computation, and which shall not take into account
Unrestricted Subsidiaries), less any amounts attributable to Redeemable
Stock or any equity security convertible into or exchangeable for
Indebtedness, the cost of treasury stock and the principal amount of any
promissory notes receivable from the sale of the Capital Stock of ICG or
any of its Restricted Subsidiaries, each item to be determined in
conformity with GAAP (excluding the effects of foreign currency exchange
adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to
protect ICG or any of its Restricted Subsidiaries against fluctuations in
currency values to or under which ICG or any of its Restricted
Subsidiaries is a party or a beneficiary on the Closing Date or becomes a
party or a beneficiary thereafter.
"FOTI" means Fiber Optic Technologies Inc., a Colorado corporation.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of August 8, 1995, including, without
limitation, those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as
approved by a significant segment of the accounting profession. All
ratios and computations contained in the Indenture shall be computed in
conformity with GAAP applied on a consistent basis, except that
calculations made for purposes of determining compliance with the terms
of the covenants and with other provisions of the Indenture shall be made
without giving effect to (i) the amortization of any expenses incurred in
connection with the offering of the 13/1// 2% Notes and the warrants
issued therewith, the New Notes and/or the New Preferred Stock and (ii)
except as otherwise provided, the amortization of any amounts required or
permitted by Accounting Principles Board Opinion Nos. 16 and 17.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and, without limiting the generality of
the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or other
obligation of such other Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of
assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided that the term
"Guarantee" shall not include endorsements for collection or deposit in
the ordinary course of business. The term "Guarantee" used as a verb has
a corresponding meaning.
"Incur" means, with respect to any Indebtedness, to incur, create,
issue, assume, Guarantee or otherwise become liable for or with respect
to, or become responsible for, the payment of, contingently or otherwise,
such Indebtedness, including an Incurrence of Indebtedness by reason of
the acquisition of more than 50% of the Capital Stock of any Person;
provided that neither the accrual of interest nor the accretion of
original issue discount shall be considered an Incurrence of
Indebtedness.
-75-
<PAGE>
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person
for borrowed money, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all
obligations of such Person in respect of letters of credit or other
similar instruments (including reimbursement obligations with respect
thereto), (iv) all obligations of such Person to pay the deferred and
unpaid purchase price of property or services, which purchase price is
due more than six months after the date of placing such property in
service or taking delivery and title thereto or the completion of such
services, except Trade Payables, (v) all obligations of such Person as
lessee under Capitalized Leases, (vi) all Indebtedness of other Persons
secured by a Lien on any asset of such Person, whether or not such
Indebtedness is assumed by such Person; provided that the amount of such
Indebtedness shall be the lesser of (A) the fair market value of such
asset at such date of determination and (B) the amount of such
Indebtedness, (vii) all Indebtedness of other Persons Guaranteed by such
Person to the extent such Indebtedness is Guaranteed by such Person and
(viii) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate Agreements. The
amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above
and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation, provided
(i) that the amount outstanding at any time of any Indebtedness issued
with original issue discount is the original issue price of such
Indebtedness and (ii) that Indebtedness shall not include any liability
for federal, state, local or other taxes.
"Indebtedness to EBITDA Ratio" means, as at any date of determination,
the ratio of (i) the aggregate amount of Indebtedness of ICG and its
Restricted Subsidiaries on a consolidated basis ("Consolidated
Indebtedness") as at the date of determination (the "Transaction Date")
to (ii) the Consolidated EBITDA of ICG for the then most recent four full
fiscal quarters for which reports have been filed pursuant to the
"Reports" covenant described above (such four full fiscal quarter period
being referred to herein as the "Four Quarter Period"); provided that (x)
pro forma effect shall be given to any Indebtedness Incurred from the
beginning of the Four Quarter Period through the Transaction Date
(including any Indebtedness Incurred on the Transaction Date), to the
extent outstanding on the Transaction Date, (y) if during the period
commencing on the first day of such Four Quarter Period through the
Transaction Date (the "Reference Period"), ICG or any of the Restricted
Subsidiaries shall have engaged in any Asset Sale, Consolidated EBITDA
for such period shall be reduced by an amount equal to the EBITDA (if
positive), or increased by an amount equal to the EBITDA (if negative),
directly attributable to the assets which are the subject of such Asset
Sale and any related retirement of Indebtedness as if such Asset Sale and
related retirement of Indebtedness had occurred on the first day of such
Reference Period or (z) if during such Reference Period ICG or any of the
Restricted Subsidiaries shall have made any Asset Acquisition,
Consolidated EBITDA of ICG shall be calculated on a pro forma basis as if
such Asset Acquisition and any related financing had occurred on the
first day of such Reference Period. In calculating this ratio for
purposes of the Amended Articles, the amount of outstanding Indebtedness
shall be deemed to include the liquidation preference of any preferred
stock then outstanding.
"IntelCom" means IntelCom Group Inc. and its successors and assigns.
"Investment" in any Person means any direct or indirect advance, loan
or other extension of credit (including, without limitation, by way of
Guarantee or similar arrangement; but excluding advances to customers in
the ordinary course of business that are, in conformity with GAAP,
recorded as accounts receivable on the balance sheet of ICG or its
Restricted Subsidiaries) or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property
or services for the account or use of others), or any purchase or
acquisition of Capital Stock, bonds, notes, debentures or other similar
instruments issued by, such Person and shall include the designation of a
Restricted Subsidiary as an Unrestricted Subsidiary. For purposes of the
definition of "Unrestricted Subsidiary" and the "Limitation on Restricted
Payments" covenant described above, (i) "Investment" shall include the
fair market value of the assets (net of liabilities) of any Restricted
Subsidiary of ICG at the time that such Restricted Subsidiary of ICG is
designated an Unrestricted Subsidiary and shall exclude the fair market
value of the assets (net of liabilities) of any Unrestricted Subsidiary
at the time that such Unrestricted Subsidiary is designated a Restricted
Subsidiary of ICG and (ii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the
time of such transfer, in each case as determined by the Board of
Directors in good faith.
-76-
<PAGE>
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the
nature thereof, any sale with recourse against the seller or any
Affiliate of the seller, or any agreement to give any security interest).
"MTN" means Maritime Telecommunications Network, Inc., a Colorado
corporation, and its successors.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the
extent corresponding to the principal, but not interest, component
thereof) when received in the form of cash or cash equivalents (except to
the extent such obligations are financed or sold with recourse to ICG or
any Restricted Subsidiary of ICG) and proceeds from the conversion of
other property received when converted to cash or cash equivalents, net
of (i) brokerage commissions and other fees and expenses (including fees
and expenses of counsel and investment bankers) related to such Asset
Sale, (ii) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale without
regard to the consolidated results of operations of ICG and its
Restricted Subsidiaries, taken as a whole, (iii) payments made to repay
Indebtedness or any other obligation outstanding at the time of such
Asset Sale that either (A) is secured by a Lien on the property or assets
sold or (B) is required to be paid as a result of such sale and (iv)
appropriate amounts to be provided by ICG or any Restricted Subsidiary of
ICG as a reserve against any liabilities associated with such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities
under any indemnification obligations associated with such Asset Sale,
all as determined in conformity with GAAP and (b) with respect to any
issuance or sale of Capital Stock, the proceeds of such issuance or sale
in the form of cash or cash equivalents, including payments in respect of
deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form
of cash or cash equivalents (except to the extent such obligations are
financed or sold with recourse to ICG or any Restricted Subsidiary of
ICG) and proceeds from the conversion of other property received when
converted to cash or cash equivalents, net of attorney's fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees incurred in
connection with such issuance or sale and net of taxes paid or payable as
a result thereof.
"Offer to Purchase" means an offer to purchase shares of New Preferred
Stock by ICG from the Holders commenced by mailing a notice to the
Transfer Agent and each Holder stating: (i) the covenant pursuant to
which the offer is being made and that all shares of New Preferred Stock
validly tendered will be accepted for payment on a pro rata basis; (ii)
the purchase price and the date of purchase (which shall be a Business
Day no earlier than 30 days nor later than 60 days from the date such
notice is mailed) (the "Payment Date"); (iii) that any shares of New
Preferred Stock not tendered will continue to accrue dividends pursuant
to its terms; (iv) that, unless ICG defaults in the payment of the
purchase price, any shares of New Preferred Stock accepted for payment
pursuant to the Offer to Purchase shall cease to accrue dividends on and
after the Payment Date; (v) that Holders electing to have an shares of
New Preferred Stock purchased pursuant to the Offer to Purchase will be
required to surrender the shares of New Preferred Stock together with the
form entitled "Option of the Holder to Elect Purchase" on the reverse
side of the shares of New Preferred Stock completed, to the Paying Agent
at the address specified in the notice prior to the close of business on
the Business Day immediately preceding the Payment Date; (vi) that
Holders will be entitled to withdraw their election if the Paying Agent
receives, not later than the close of business on the third Business Day
immediately preceding the Payment Date, a telegram, facsimile
transmission or letter setting forth the name of such Holder, the
liquidation preference of the shares of New Preferred Stock delivered for
purchase and a statement that such Holder is withdrawing his election to
have such shares of New Preferred Stock purchased; and (vii) that Holders
whose shares of New Preferred Stock are being purchased only in part will
be issued new shares of New Preferred Stock equal in the liquidation
preference of the shares of New Preferred Stock surrendered; provided
that each share of New Preferred Stock purchased and each new share of
New Preferred Stock issued shall be in a principal amount of $1,000 or
integral multiples thereof. On the Payment Date, ICG shall (i) accept
for payment on a pro rata basis shares of New Preferred Stock or portions
thereof tendered pursuant to an Offer to Purchase; (ii) deposit with the
Paying Agent money sufficient to pay the purchase price of all shares of
New Preferred Stock or portions thereof, so accepted; and (iii) deliver,
or cause to be delivered, to the Transfer Agent all shares of New
Preferred Stock or portions thereof, so accepted together with an
Officers' Certificate specifying the shares of New Preferred Stock or
portions thereof accepted for payment by ICG. The Paying Agent
-77-
<PAGE>
shall promptly mail to the Holders of shares of New Preferred Stock so
accepted, payment in an amount equal to the purchase price, and the
Transfer Agent shall promptly authenticate and mail to such Holders new
shares of New Preferred Stock equal in liquidation preference to any
unpurchased portion of the shares of New Preferred Stock surrendered;0
provided that each share of New Preferred Stock purchased and each new
share of New Preferred Stock issued shall be in a principal amount of
$1,000 or integral multiples thereof. ICG will publicly announce the
results of an Offer to Purchase as soon as practicable after the Payment
Date. The Transfer Agent shall act as the Paying Agent for an Offer to
Purchase. ICG will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws
and regulations are applicable, in the event that ICG is required to
repurchase shares of New Preferred Stock pursuant to an Offer to
Purchase.
"Ohio LINX" means ICG Ohio LINX, Inc., an Ohio corporation.
"Permitted Investment" means (i) an Investment in a Restricted
Subsidiary or a Person which will, upon the making of such Investment,
become a Restricted Subsidiary or be merged or consolidated with or into
or transfer or convey all or substantially all its assets to, ICG or a
Restricted Subsidiary; provided that such person's primary business is
related, ancillary or complementary to the businesses of ICG and its
Restricted Subsidiaries on the date of such Investment; (ii) a Temporary
Cash Investment; (iii) payroll, travel and similar advances to cover
matters that are expected at the time of such advances ultimately to be
treated as expenses in accordance with GAAP; (iv) loans or advances to
employees made in the ordinary course of business in accordance with past
practice of ICG or its Restricted Subsidiaries and that do not in the
aggregate exceed $2 million at any time outstanding; (v) stock,
obligations or securities received in satisfaction of judgments; and (vi)
Indebtedness of IntelCom owed to ICG, in an amount not to exceed the
reasonable expenses of IntelCom as a holding company that are actually
incurred, and paid, by IntelCom; provided that such Indebtedness of
IntelCom is evidenced by an unsubordinated promissory note that provides
that it will be paid prior to any mandatory redemption of the New
Preferred Stock if such payment would be necessary to effectuate such
redemption.
"Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate
legal proceedings promptly instituted and diligently conducted and for
which a reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made; (ii) statutory
Liens of landlords and carriers, warehousemen, mechanics, suppliers,
materialmen, repairmen or other similar Liens arising in the ordinary
course of business and with respect to amounts not yet delinquent or
being contested in good faith by appropriate legal proceedings promptly
instituted and diligently conducted and for which a reserve or other
appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (iii) Liens incurred or deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security; (iv) Liens
incurred or deposits made to secure the performance of tenders, bids,
leases, statutory or regulatory obligations, bankers' acceptances, surety
and appeal bonds, government contracts, performance and return-of-money
bonds and other obligations of a similar nature incurred in the ordinary
course of business (exclusive of obligations for the payment of borrowed
money); (v) easements, rights of way, municipal and zoning ordinances and
similar charges, encumbrances, title defects or other irregularities that
do not materially interfere with the ordinary course of business of ICG
or any of its Restricted Subsidiaries; (vi) Liens (including extensions
and renewals thereof) upon real or personal property acquired after the
Closing Date; provided that (a) such Lien is created solely for the
purpose of securing Indebtedness Incurred, in accordance with the
"Incurrence of Indebtedness and Issuance of New Preferred Stock" covenant
described above, (1) to finance the cost (including the cost of
improvement or construction) of the item of property or assets subject
thereto and such Lien is created prior to, at the time of or within six
months after the later of the acquisition, the completion of construction
or the commencement of full operation of such property or (2) to
refinance any Indebtedness previously so secured, (b) the principal
amount of the Indebtedness secured by such Lien does not exceed 100% of
such cost and (c) any such Lien shall not extend to or cover any property
or assets other than such item of property or assets and any improvements
on such item; (vii) leases or subleases granted to others that do not
materially interfere with the ordinary course of business of ICG and its
Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering
property or assets under construction arising from progress or partial
payments by a customer of ICG or its Restricted Subsidiaries relating to
such property or assets; (ix) any interest or title of a lessor in the
property subject to any Capitalized Lease or operating lease; (x) Liens
arising from filing Uniform Commercial Code financing statements
regarding leases; (xi) Liens on property of, or on shares of
-78-
<PAGE>
stock or Indebtedness of, any corporation existing at the time such
corporation becomes, or becomes a part of, any Restricted Subsidiary;
provided that such Liens do not extend to or cover any property or assets
of ICG or any Restricted Subsidiary other than the property or assets
acquired; (xii) Liens in favor of ICG or any Restricted Subsidiary;
(xiii) Liens arising from the rendering of a final judgment or order
against ICG or any Restricted Subsidiary of ICG that does not give rise
to an Event of Default; (xiv) Liens securing reimbursement obligations
with respect to letters of credit that encumber documents and other
property relating to such letters of credit and the products and proceeds
thereof; (xv) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection with
the importation of goods; (xvi) Liens encumbering customary initial
deposits and margin deposits, and other Liens that are either within the
general parameters customary in the industry and incurred in the ordinary
course of business, in each case, securing Indebtedness under Interest
Rate Agreements and Currency Agreements and forward contracts, options,
future contracts, futures options or similar agreements or arrangements
designed to protect ICG or any of its Restricted Subsidiaries from
fluctuations in the price of commodities; (xvii) Liens arising out of
conditional sale, title retention, consignment or similar arrangements
for the sale of goods entered into by ICG or any of its Restricted
Subsidiaries in the ordinary course of business in accordance with the
past practices of ICG and its Restricted Subsidiaries prior to the
Closing Date; and (xviii) Liens on or sales of receivables.
"Preferred stock" or "preferred stock" means, with respect to any
Person, any and all shares, interests, participations or other
equivalents (however designated, whether voting or non-voting) of such
Person's preferred or preference stock, whether now outstanding or issued
after the date of the Amended Articles, including, without limitation,
all series and classes of such preferred or preference stock.
"Public Equity Offering" means a bona fide underwritten primary public
offering of Common Stock of IntelCom or ICG pursuant to an effective
registration statement under the Securities Act.
"Redeemable Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed
prior to the mandatory redemption date of the shares of New Preferred
Stock, (ii) redeemable at the option of the holder of such class or
series of Capital Stock at any time prior to the mandatory redemption
date of the shares of New Preferred Stock, or (iii) convertible into or
exchangeable for Capital Stock referred to in clause (i) or (ii) above or
Indebtedness having a scheduled maturity prior to the mandatory
redemption date of the shares of New Preferred Stock; provided that any
Capital Stock that would not constitute Redeemable Stock but for
provisions thereof giving holders thereof the right to require such
Person to repurchase or redeem such Capital Stock upon the occurrence of
a "change of control" occurring prior to the mandatory redemption date of
the shares of New Preferred Stock shall not constitute Redeemable Stock
if the "change of control" provisions applicable to such Capital Stock
are no more favorable to the holders of such Capital Stock than the
provisions contained in the "Change of Control" covenant described above
and such Capital Stock specifically provides that such Person will not
repurchase or redeem any such stock pursuant to such provision prior to
ICG's repurchase of New Preferred Stock as described above under "--
Change of Control."
"Restricted Subsidiary" means any Subsidiary of ICG other than an
Unrestricted Subsidiary.
"New Notes" means the New Notes Due 2006 of ICG, guaranteed by
IntelCom on a senior unsecured basis and issued on the Closing Date.
"Notes Indenture" means the Indenture dated as of the Closing Date
among ICG, IntelCom and the Trustee pursuant to which the New Notes are
issued.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary of ICG that, together with its Subsidiaries, (i)
for the most recent fiscal year of ICG, accounted for more than 10% of
the consolidated revenues of ICG and its Restricted Subsidiaries or (ii)
as of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of ICG and its Restricted Subsidiaries, all as set
forth on the most recently available consolidated financial statements of
ICG for such fiscal year.
-79-
<PAGE>
"StarCom" means StarCom International Optics Corporation, a British
Columbia corporation, and its subsidiaries.
"Strategic Investor" means any Person engaged in the
telecommunications business which has a net worth or equity market
capitalization of at least $1 billion.
"Strategic Investor Subordinated Indebtedness" means all Indebtedness
of ICG owed to a Strategic Investor that is contractually subordinate in
right of payment to the shares of New Preferred Stock to at least the
following extent: no payment of principal (or premium, if any) or
interest on or otherwise payable in respect of such Indebtedness may be
made (whether as a result of a default or otherwise) prior to the payment
in full of all of ICG's obligations under the shares of New Preferred
Stock; provided, however, that prior to the payment of such obligations,
interest on Strategic Investor Subordinated Indebtedness may be payable
solely in kind or in common stock (other than Redeemable Stock) of
IntelCom or ICG.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the
outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.
"Temporary Cash Investment" means any of the following: (i) direct
obligations of the United States of America or any agency thereof or
obligations fully and unconditionally guaranteed by the United States of
America or any agency thereof, (ii) time deposit accounts, certificates
of deposit and money market deposits maturing within 270 days of the date
of acquisition thereof, bankers' acceptances with maturities not
exceeding 270 days, and overnight bank deposits, in each case issued by
or with a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country
recognized by the United States, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $100
million (or the foreign currency equivalent thereof) and has outstanding
debt which is rated "A" (or such similar equivalent rating) or higher by
at least one nationally recognized statistical rating organization (as
defined in Rule 436 under the Securities Act) or any money-market fund
sponsored by a registered broker dealer or mutual fund distributor, (iii)
repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii)
above, (iv) commercial paper, maturing not more than 180 days after the
date of acquisition, issued by a corporation (other than an Affiliate of
the Guarantor) organized and in existence under the laws of the United
States of America, any state thereof or any foreign country recognized by
the United States of America with a rating at the time as of which any
investment therein is made of "P-1" (or higher) according to Moody's
Investors Service, Inc. or "A-1" (or higher) according to Standard &
Poor's Ratings Group, and (v) securities with maturities of six months or
less from the date of acquisition issued or fully and unconditionally
guaranteed by any state, commonwealth or territory of the United States
of America, or by any political subdivision or taxing authority thereof,
and rated at least "A" by Standard & Poor's Ratings Group or Moody's
Investors Service, Inc.
"13 1/2% Notes" means the 13 1/2% Notes Due 2005 of ICG guaranteed by
IntelCom on a senior unsecured basis.
"13 1/2% Notes Indenture" means Indenture dated as of August 8, 1995
among ICG, the Guarantor and the Trustee pursuant to which ICG issued the
13 1/2% Notes.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by ICG or any of its Restricted Subsidiaries or the Issuance
of any Redeemable Stock of ICG, the date such Indebtedness is to be
Incurred and, with respect to any Restricted Payment, the date such
Restricted Payment is to be made.
"Unrestricted Subsidiary" means (i) any Subsidiary of ICG that at the
time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may
designate any Restricted Subsidiary of ICG (including any newly acquired
or newly formed Subsidiary of ICG), other than ICG or a Subsidiary that
has given a Subsidiary Guarantee, to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns or holds
-80-
<PAGE>
any Lien on any property of, ICG or any Restricted Subsidiary; provided
that either (A) the Subsidiary to be so designated has total assets of
$1,000 or less or (B) if such Subsidiary has assets greater than $1,000,
that such designation would be permitted under the "Limitation on
Restricted Payments" covenant described above. The Board of Directors
may designate any Unrestricted Subsidiary to be a Restricted Subsidiary
of ICG; provided that immediately after giving effect to such designation
(x) ICG could Incur $1.00 of additional Indebtedness under the first
paragraph of the "Incurrence of Indebtedness and Issuance of New
Preferred Stock" covenant described above and (y) no Default or Event of
Default shall have occurred and be continuing. Any such designation by
the Board of Directors shall be evidenced to the Transfer Agent by
promptly filing with the Transfer Agent a copy of the Board Resolution
giving effect to such designation and an Officers' Certificate certifying
that such designation complied with the foregoing provisions.
"Voting Stock" means, with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of
directors, managers or other voting members of the governing body of such
Person.
"Wholly Owned" means, with respect to any Subsidiary of any Person,
such Subsidiary if all of the outstanding Capital Stock in such
Subsidiary (other than any director's qualifying shares or Investments by
foreign nationals mandated by applicable law) is owned by such Person or
one or more Wholly Owned Subsidiaries of such Person.
"Zycom" means Zycom Corporation, an Alberta, Canada corporation.
-81-
<PAGE>
DESCRIPTION OF EXCHANGE DEBENTURES
The Exchange Debentures, if issued, will be issued under the Exchange
Debenture Indenture among ICG, IntelCom, as guarantor, and Norwest Bank
Colorado, National Association, as trustee or such other trustee as may
qualify under the Trust Indenture Act and be selected by ICG (the
"Trustee"). A copy of the form of Exchange Debenture Indenture is
available from the Company upon request. The terms of the Exchange
Debentures include those stated in the Exchange Debenture Indenture and
those made part of the Exchange Debenture Indenture by reference to the
Trust Indenture Act. Prospective holders of the Exchange Debentures are
referred to the Exchange Debenture Indenture and the Trust Indenture Act
for a statement of such terms. The following summary of certain
provisions of the Exchange Debenture Indenture does not purport to be
complete and is subject to, and is qualified in its entirety by reference
to, the Trust Indenture Act and to all of the provisions of the Exchange
Debenture Indenture, including the definitions of certain terms therein
and those terms made a part of the Exchange Debenture Indenture by
reference to the Trust Indenture Act. The definitions of certain terms
used in the Exchange Debenture Indenture and in the following summary are
set forth below under "--Certain Definitions." References herein to "$"
refers to U.S. dollars.
IntelCom's Board of Directors has adopted a plan under which IntelCom
will become a subsidiary of a new, publicly traded Delaware corporation
("Newco"). If such transaction is completed, references to "IntelCom"
herein shall be deemed to also refer to Newco. In addition, Newco will
fully and unconditionally guarantee ICG's obligations under the Exchange
Debentures on a senior subordinated basis. Upon completion of the
transaction whereby IntelCom becomes a subsidiary of Newco, references
herein to "Guarantor" shall be deemed to also refer to Newco.
GENERAL
The Exchange Debentures will be general unsecured obligations of ICG
and will be limited in aggregate principal amount to the aggregate
liquidation preference of the New Preferred Stock (including shares of
New Preferred Stock issued in payment of dividends), plus accrued and
unpaid dividends, on the date of exchange of the New Preferred Stock into
Exchange Debentures (plus any additional Exchange Debentures issued in
lieu of cash interest as described herein). The Exchange Debentures will
be issued in fully registered form only in denominations of $1,000 and
integral multiples thereof (other than as described in "Description of
New Preferred Stock--Exchange" or with respect to additional Exchange
Debentures issued in lieu of cash interest as described herein). The
Exchange Debentures will be senior subordinated obligations of ICG,
subordinated to all existing and future Senior Indebtedness of ICG and
senior to all subordinated obligations of ICG.
Principal of, and premium, if any, and interest on the Exchange
Debentures will be payable, and the Exchange Debentures may be presented
for registration of transfer or exchange, at the office of the Paying
Agent and Registrar. At ICG's option, interest, to the extent paid in
cash, may be paid by check mailed to the registered address of Holders of
the Exchange Debentures as shown on the register for the Exchange
Debentures. The Trustee will initially act as Paying Agent and
Registrar. ICG may change any Paying Agent and Registrar without prior
notice to Holders of the Exchange Debentures. Holders of the Exchange
Debentures must surrender Exchange Debentures to the Paying Agent to
collect principal payments.
The Exchange Debentures will mature on May 1, 2007. Each Exchange
Debenture will bear interest at the rate of 14/1//4% per annum from the
Exchange Debenture Issue Date or from the most recent interest payment
date to which interest has been paid or provided for. Interest will be
payable semiannually in cash (or, on or prior to May 1, 2001, at the
option of ICG, in additional Exchange Debentures, subject to the
restrictions contained in the Notes Indenture, the 13/1//2% Notes
Indenture and any other agreement of ICG or IntelCom) in arrears on each
of May 1 and November 1 commencing with the first such date after the
Exchange Debenture Issue Date. Interest on the Exchange Debentures will
be computed on the basis of a 360-day year of twelve 30-day months and
the actual number of days elapsed.
Because of ICG's option through May 1, 2001 to pay interest on the
Exchange Debentures by issuing additional Exchange Debentures, any
Exchange Debentures issued prior to that date will be treated as issued
with
-82-
<PAGE>
OID, unless under special rules for interest holidays the amount of OID
is treated as de minimis. See "Certain United States Federal Income Tax
Consequences."
GUARANTEE
ICG's obligations under the Exchange Debentures will be fully and
unconditionally guaranteed (the "Debenture Guarantee") on a senior
subordinated basis by IntelCom (in such context, the "Guarantor");
provided that the Debenture Guarantee shall not be enforceable against
the Guarantor in an amount in excess of the net worth of the Guarantor at
the time that determination of such net worth is, under applicable law,
relevant to the enforceability of such Debenture Guarantee. Such net
worth shall include any claim of the Guarantor against ICG for
reimbursement.
ADDITIONAL AMOUNTS
Any payments made by IntelCom under or with respect to the Exchange
Debentures pursuant to the Debenture Guarantee will be made free and
clear of and without withholding or deduction for or on account of any
present or future tax, duty, levy, impost, assessment or other
governmental charge (including penalties, interest and other liabilities
related thereto) imposed or levied by or on behalf of the Government of
Canada or of any province or territory thereof or by any authority or
agency therein or thereof having power to tax (hereinafter, "Taxes"),
unless IntelCom is required to withhold or deduct Taxes by law or by the
interpretation or administration thereof. If IntelCom is required to
withhold or deduct any amount for or on account of Taxes from any payment
made under or with respect to the Exchange Debentures, IntelCom will pay
such additional amounts ("Additional Amounts") as may be necessary, so
that the net amount received by each Holder of Exchange Debentures
(including Additional Amounts) after such withholding or deduction will
not be less than the amount such Holder would have received if such Taxes
had not been withheld or deducted; provided, however, that no Additional
Amounts will be payable with respect to a payment made to a Holder (an
"Excluded Holder") (i) with which IntelCom does not deal at arm's length
(within the meaning of the Income Tax Act (Canada)) at the time of making
such payment, or (ii) which is subject to such Taxes by reason of its
being connected with Canada or any province or territory thereof
otherwise than solely by reason of the Holder's activity in connection
with purchasing the Exchange Debentures, by the mere holding of Exchange
Debentures or by reason of the receipt of payments thereunder. IntelCom
will upon written request of any Holder (other than an Excluded Holder),
reimburse such Holder, for the amount of (i) any Taxes so levied or
imposed and paid by such Holder as a result of payments made under or
with respect to the Exchange Debentures and (ii) any Taxes so levied or
imposed with respect to any reimbursement under the foregoing clause (i),
but excluding any such Taxes on such Holder's net income so that the net
amount received by such Holder after such reimbursement will not be less
than the net amount the Holder would have received if Taxes on such
reimbursement had not been imposed.
At least 30 days prior to each date on which any payment under or with
respect to the Exchange Debentures is due and payable, if IntelCom will
be obligated to pay Additional Amounts with respect to such payment,
IntelCom will deliver to the Trustee an Officers' Certificate stating the
fact that such Additional Amounts will be payable and the amounts so
payable and will set forth such other information necessary to enable the
Trustee to pay such Additional Amounts to Holders on the payment date.
Whenever either in the Exchange Debenture Indenture, any Exchange
Debenture or in this Memorandum there is mentioned, in any context, the
payment of principal (and premium, if any), Redemption Price, interest or
any other amount payable under or with respect to any Exchange Debenture,
such mention shall be deemed to include mention of the payment of
Additional Amounts to the extent that, in such context, Additional
Amounts are, were or would be payable in respect thereof.
In the event that (i) IntelCom has become or would become obligated to
pay, on the next date on which any amount would be payable under or with
respect to the Exchange Debentures, any Additional Amounts as a result of
certain changes affecting Canadian withholding tax laws, and (ii)
IntelCom cannot reasonably arrange for another obligor to make such
payment so as to avoid the requirement to pay such Additional Amounts,
then IntelCom may redeem all, but not less than all, the Exchange
Debentures at any time at 100% of the principal amount thereof, together
with accrued interest thereon, if any, to the redemption date. See "--
Optional Redemption."
-83-
<PAGE>
SUBORDINATION AND RANKING
The Exchange Debentures will be senior subordinated Indebtedness of
ICG, subordinated to the prior payment when due of the principal of, and
premium, if any, and accrued and unpaid interest on, all existing and
future Senior Indebtedness of ICG and senior to the prior payment when
due of the principal of, and premium, if any, and accrued and unpaid
interest on, all subordinated Indebtedness of ICG. IntelCom's guarantee
of the Exchange Debentures will be senior subordinated Indebtedness of
IntelCom, subordinated to the prior payment when due of the principal of,
and premium, if any, and accrued and unpaid interest on, all existing and
future Senior Guarantor Indebtedness of IntelCom and senior to the prior
payment when due of the principal of, and premium, if any and accrued and
unpaid interest on, all subordinated Indebtedness of IntelCom.
Upon (a) any distribution to creditors of ICG in a liquidation or
dissolution of ICG or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to ICG or its property or (b)
an assignment for the benefit of creditors or any marshalling of ICG's
assets and liabilities, the holders of Senior Indebtedness shall be
entitled to receive payment in full of all Obligations due in respect of
such Senior Indebtedness (including interest after the commencement of
any such proceeding at the rate specified in the applicable Senior
Indebtedness) before holders of the Exchange Debentures shall be entitled
to receive any payment with respect to the Exchange Debentures. Until
all Obligations with respect to Senior Indebtedness are paid in full, any
distribution to which holders of the Exchange Debentures would be
entitled shall be made to holders of Senior Indebtedness.
Notwithstanding the foregoing, holders of the Exchange Debentures may
receive securities that are subordinated, at least to the same extent as
the Exchange Debentures, to Senior Indebtedness and any securities issued
in exchange for Senior Indebtedness.
In addition, ICG may not make any payment upon or in respect of the
Exchange Debentures (except in such subordinated securities) if (a) a
default in the payment of any principal, premium, if any, interest or
other Obligations with respect to any Designated Senior Indebtedness
occurs and is continuing beyond any applicable grace period (whether upon
maturity, as a result of acceleration or otherwise) or (b) any other
default occurs and is continuing with respect to any Designated Senior
Indebtedness that permits holders of such Designated Senior Indebtedness
to accelerate its maturity, and ICG and the Trustee receive a notice of
such default (a "Payment Blockage Notice") from the holders, or from the
trustee, agent or other representative of the holders, of any such
Designated Senior Indebtedness. Payments on the Exchange Debentures may
and shall be resumed upon the earlier of (i) the date upon which the
default is cured or waived or (ii) in the case of a default referred to
in clause (b) above, 179 days after the date on which the applicable
Payment Blockage Notice is received, unless the maturity of any
Designated Senior Indebtedness has been accelerated. No new period of
payment blockage may be commenced within 360 days after the receipt by
the Trustee of any prior Payment Blockage Notice. No nonpayment default
that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice unless such default shall have been
cured or waived for a period of not less than 180 days.
Upon (a) any distribution to creditors of IntelCom in a liquidation or
dissolution of IntelCom or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to IntelCom or its property
or (b) an assignment for the benefit of creditors or any marshalling of
IntelCom's assets and liabilities, the holders of Senior Guarantor
Indebtedness shall be entitled to receive payment in full of all
Obligations due in respect of such Senior Guarantor Indebtedness
(including interest after the commencement of any such proceeding at the
rate specified in the applicable Senior Guarantor Indebtedness) before
holders of the Exchange Debentures shall be entitled to receive any
payment with respect to the Exchange Debentures. Until all Obligations
with respect to Senior Guarantor Indebtedness are paid in full, any
distribution to which holders of the Exchange Debentures would be
entitled shall be made to holders of Senior Guarantor Indebtedness.
Notwithstanding the foregoing, holders of the Exchange Debentures may
receive securities that are subordinated, at least to the same extent as
the Exchange Debentures, to Senior Guarantor Indebtedness and any
securities issued in exchange for Senior Guarantor Indebtedness.
IntelCom may not make any payment upon or in respect of its Debenture
Guarantee (except in subordinated securities described in the second
paragraph above) if (a) a default in the payment of any principal,
premium, if any,
-84-
<PAGE>
interest or other Obligations with respect to any Designated Senior
Guarantor Indebtedness occurs and is continuing beyond any applicable
grace period (whether upon maturity, as a result of acceleration or
otherwise) or (b) any other default occurs and is continuing with respect
to any Designated Senior Guarantor Indebtedness that permits holders of
such Designated Senior Guarantor Indebtedness to accelerate its maturity,
and IntelCom and the Trustee receive a notice of such default (a
"Guarantor Payment Blockage Notice") from the holders, or from the
trustee, agent or other representative of the holders, of any such
Designated Senior Guarantor Indebtedness. Payments on the Exchange
Debentures may and shall be resumed upon the earlier of (i) the date upon
which the default is cured or waived or (ii) in the case of a default
referred to in clause (b) above, 179 days after the date on which the
applicable Guarantor Payment Blockage Notice is received, unless the
maturity of any Designated Senior Guarantor Indebtedness has been
accelerated. No new period of payment blockage may be commenced within
360 days after the receipt by the Trustee of any prior Guarantor Payment
Blockage Notice. No nonpayment default that existed or was continuing on
the date of delivery of any Guarantor Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Guarantor
Payment Blockage Notice unless such default shall have been cured or
waived for a period of not less than 180 days.
The Exchange Debenture Indenture will further require that ICG
promptly notify holders of Senior Indebtedness if payment on the Exchange
Debentures is accelerated because of an Event of Default.
"Designated Senior Indebtedness" under the Exchange Debenture
Indenture is defined to mean the Indebtedness specified in clause (i)(A)
of the definition of Senior Indebtedness and any Indebtedness
constituting Senior Indebtedness that, at the date of determination, has
an aggregate principal amount of at least $25 million and that is
specifically designated by ICG in the instrument creating or evidencing
such Senior Indebtedness as "Designated Senior Indebtedness."
"Designated Senior Guarantor Indebtedness" under the Exchange
Debenture Indenture is defined to mean the Indebtedness specified in
clause (i)(A) of the definition of Senior Guarantor Indebtedness and any
Indebtedness constituting Senior Guarantor Indebtedness that, at the date
of determination, has an aggregate principal amount of at least $25
million and that is specifically designated by the Guarantor in the
instrument creating or evidencing such Senior Guarantor Indebtedness as
"Designated Guarantor Senior Indebtedness."
"Senior Guarantor Indebtedness" means (i) Indebtedness of the
Guarantor under its Guarantee of the New Notes and its Guarantee under
the Notes Indenture, its Guarantee of the 13/1//2% Notes and its
Guarantee under the 13/1//2% Notes Indenture and all fees, expenses and
indemnities payable in connection with any of the foregoing and (ii) all
other Indebtedness of the Guarantor (other than the Debenture Guarantee),
including principal and interest on such Indebtedness, unless such
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such Indebtedness is issued, is pari passu with, or
subordinated in right of payment to, the Debenture Guarantee; provided
that the term "Senior Guarantor Indebtedness" shall not include (a) any
Indebtedness of the Guarantor that, when Incurred and without respect to
any election under Section 1111(b) of the United States Bankruptcy Code,
was without recourse to the Guarantor, (b) any Indebtedness of the
Guarantor to a Subsidiary of the Guarantor or to a joint venture in which
the Guarantor has an interest, (c) any Indebtedness of the Guarantor, to
the extent not permitted by the "Limitation on Indebtedness" or the
"Senior Subordinated Indebtedness" covenants described below, (d) any
repurchase, redemption or other obligation in respect of Redeemable
Stock, (e) any Indebtedness to any employee of the Guarantor or any of
its Subsidiaries, (f) any liability for federal, state, local or other
taxes owed or owing by the Guarantor, (g) the Guarantor's obligations
with respect to the Convertible Subordinated Notes or (h) any trade
payables. Senior Indebtedness will also include interest accruing
subsequent to events of bankruptcy of the Guarantor at the rate provided
for in the document governing such Senior Guarantor Indebtedness, whether
or not such interest is an allowed claim enforceable against the debtor
in a bankruptcy case under federal bankruptcy law.
"Senior Indebtedness" means (i) Indebtedness of ICG under the New
Notes and the Notes Indenture, the 13/1//2% Notes and the 13/1//2 % Notes
Indenture and all fees, expenses and indemnities payable in connection
with any of the foregoing and (ii) all other Indebtedness of ICG (other
than the Exchange Debentures), including principal and interest on such
Indebtedness, unless such Indebtedness, by its terms or by the terms of
any agreement or instrument pursuant to which such Indebtedness is
issued, is pari passu with, or subordinated in right of payment
-85-
<PAGE>
to, the Exchange Debentures; provided that the term "Senior Indebtedness"
shall not include (a) any Indebtedness of ICG that, when Incurred and
without respect to any election under Section 1111(b) of the United
States Bankruptcy Code, was without recourse to ICG, (b) any Indebtedness
of ICG to a Subsidiary of ICG or to a joint venture in which ICG has an
interest, (c) any Indebtedness of ICG, to the extent not permitted by the
"Limitation on Indebtedness" or the "Senior Subordinated Indebtedness"
covenants described below, (d) any repurchase, redemption or other
obligation in respect of Redeemable Stock, (e) any Indebtedness to any
employee of ICG or any of its Subsidiaries, (f) any liability for
federal, state, local or other taxes owed or owing by ICG or (g) any
trade payables. Senior Indebtedness will also include interest accruing
subsequent to events of bankruptcy of ICG at the rate provided for in the
document governing such Senior Indebtedness, whether or not such interest
is an allowed claim enforceable against the debtor in a bankruptcy case
under federal bankruptcy law.
As a result of the subordination provisions described above, in the
event of a liquidation or insolvency, Holders of the Exchange Debentures
may recover less ratably than other creditors of ICG or IntelCom.
IntelCom and ICG are expected to incur substantial amounts of additional
indebtedness in the future, subject to compliance with the limitations
contained in the Notes Indenture, the 13/1//2% Notes Indenture and the
Exchange Debenture Indenture. See "Risk Factors--Substantial
Indebtedness; Ability to Service Debt" and "--Holding Company Reliance on
Subsidiaries' Funds; Priority of Creditors; Subordination of Exchange
Debentures."
OPTIONAL REDEMPTION
The Exchange Debentures will be redeemable at ICG's option on or after
May 1, 2001. Thereafter, the Exchange Debentures will be subject to
redemption at the option of ICG, in whole or in part, at any time upon
not less than 30 nor more than 60 days' prior notice mailed by first
class mail to each Holder's last address as it appears in the Security
Register, at the redemption prices (expressed as a percentage of
principal amount) set forth below, plus accrued and unpaid interest, if
any, to the applicable redemption date (subject to the right of Holders
of record on the relevant Regular Record Date that is on or prior to the
redemption date to receive interest due on an Interest Payment Date), if
redeemed during the 12-month period beginning on May 1 of the years
indicated below:
YEAR PERCENTAGE
2001.................. 107.125%
2002.................. 104.750%
2003.................. 102.375%
2004 and thereafter... 100.000%
In addition, at any time on or prior to May 1, 1999, ICG may, at its
option from time to time, redeem Exchange Debentures having an aggregate
principal amount of up to $52.5 million at a redemption price equal to
114 1/4% of the principal amount thereof, with proceeds of one or more
Public Equity Offerings of Common Stock of (A) ICG or (B) IntelCom,
provided that (i) with respect to the Public Equity Offering referred to
in clause (B) above, cash proceeds of such Public Equity Offering in an
amount sufficient to effect the redemption of Exchange Debentures to be
so redeemed are contributed by IntelCom to ICG prior to such redemption
and used by ICG to effect such redemption and (ii) such redemption occurs
within 180 days after consummation of such Public Equity Offering.
If less than all of the Exchange Debentures are to be redeemed at any
time, the Trustee shall select the Exchange Debentures to be redeemed on
a pro rata basis, by lot or in accordance with any other method the
Trustee considers fair and appropriate (and in such manner as complies
with applicable legal and stock exchange requirements, if any); provided
that no Exchange Debentures with a principal amount of $1,000 or less
shall be redeemed in part. Notice of redemption shall be mailed by first
class mail at least 30 but no more than 60 days before the redemption
date to each Holder of Exchange Debentures to be redeemed at its
registered address. If any Exchange Debenture is to be redeemed in part
only the notice of redemption that related to such Exchange Debenture
shall state the portion of the principal amount to be redeemed. A new
Exchange Debenture in principal
-86-
<PAGE>
amount equal to the unredeemed portion will be issued in the name of the
Holder thereof upon cancellation of the original Exchange Debenture, and
after the redemption date, interest will cease to accrue on the Exchange
Debentures called for redemption.
REPURCHASE OF EXCHANGE DEBENTURES UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control ICG will be required
(whether or not funds are available therefor) to make an offer (the
"Change of Control Offer") to each holder of Exchange Debentures to
repurchase all or any part of such holder's Exchange Debentures at a cash
purchase price equal to 101% of the aggregate principal amount thereof,
plus an amount in cash equal to accumulated and unpaid interest, if any,
accrued to the date of purchase. The Change of Control Offer must be
made within 30 days following a Change of Control, must remain open for
at least 30 and not more than 40 days and must comply with the
requirements of Rule 14e-1 under the Exchange Act and any other
applicable securities laws and regulations. Notwithstanding the
foregoing, ICG has agreed not to make a Change of Control Offer if any of
the New Notes or 13/1//2% Notes are outstanding upon the occurrence of a
Change of Control unless all of the New Notes and 13/1//2% Notes tendered
pursuant to the "Change of Control Offers" with respect thereto are
repurchased as a result of such Change of Control, in which case the date
on which all New Notes and 13/1 //2% Notes (and any other Indebtedness of
ICG having provisions similar to Section 4.04(x) of the Notes Indenture)
are so repurchased will, under the Exchange Indenture, be deemed to be
the date on which such Change of Control shall have occurred.
"Change of Control" means such time as (i) a "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act) of Voting Stock having more than 40% of the voting
power of the total Voting Stock of IntelCom on a fully diluted basis;
(ii) individuals who on the Closing Date constitute the Board of
Directors of IntelCom (together with any new directors whose election by
the Board of Directors or whose nomination for election by IntelCom's
stockholders was approved by a vote of at least a majority of the members
of the Board of Directors then in office who either were members of the
Board of Directors on the Closing Date or whose election or nomination
for election was previously so approved) cease for any reason to
constitute a majority of the members of the Board of Directors then in
office; or (iii) all of the Common Stock of ICG is not beneficially owned
by IntelCom; provided, however, that a Change of Control shall be deemed
not to occur solely as a result of a Reorganization permitted by the
Exchange Debenture Indenture.
None of the provisions in the Exchange Debenture Indenture relating to
a purchase upon a Change of Control are waivable by ICG's Board of
Directors. ICG could, in the future, enter into certain transactions,
including certain recapitalizations of ICG, that would not constitute a
Change of Control, but would increase the amount of indebtedness
outstanding at such time. If a Change of Control were to occur, ICG
would be obligated to offer to repurchase all of the New Notes and
13/1//2% Notes prior to making an offer to repurchase Exchange
Debentures, and there can be no assurance that ICG would have sufficient
funds to pay the purchase price for all the Exchange Debentures that ICG
is required to purchase. In the event that ICG were required to purchase
outstanding Exchange Debentures pursuant to a Change of Control Offer,
ICG expects that it would need to seek third-party financing, to the
extent it does not have available funds, to meet its purchase
obligations. However, there can be no assurance that ICG would be able
to obtain such financing. In addition, ICG's ability to purchase
Exchange Debentures may be limited by other then-existing agreements.
CERTAIN COVENANTS
LIMITATION ON INDEBTEDNESS
(a) Under the terms of the Exchange Debenture Indenture, the
Guarantor will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness (other than the Exchange
Debentures, the Debenture Guarantee and Indebtedness outstanding on the
Exchange Debenture Issue Date); provided that the Guarantor and ICG may
Incur Indebtedness if, after giving effect to the Incurrence of such
Indebtedness and the receipt and application of the proceeds therefrom,
the Indebtedness to EBITDA Ratio would be greater than zero and less than
5:1.
-87-
<PAGE>
Notwithstanding the foregoing, the Guarantor and any Restricted
Subsidiary (except as specified below) may Incur each and all of the
following: (i) Indebtedness of the Guarantor or ICG outstanding at any
time, which Indebtedness generates gross proceeds to the Guarantor or ICG
of up to $900 million, less the gross proceeds of Indebtedness
permanently repaid as provided under the "Limitation on Asset Sales"
covenant described below; (ii) Indebtedness to the Guarantor or any of
its Wholly Owned Restricted Subsidiaries; provided that any subsequent
issuance or transfer of any Capital Stock which results in any such
Wholly Owned Restricted Subsidiary ceasing to be a Wholly Owned
Restricted Subsidiary or any subsequent transfer of such Indebtedness
(other than to the Guarantor or another Wholly Owned Restricted
Subsidiary) shall be deemed, in each case, to constitute an Incurrence of
such Indebtedness not permitted by this clause (ii); (iii) Indebtedness
issued in exchange for, or the net proceeds of which are used to
refinance or refund, then outstanding Indebtedness, other than
Indebtedness Incurred under clause (i), (ii), (v), (vi), (viii), (ix),
(xi) or (xii) of this paragraph, and any refinancings thereof in an
amount not to exceed the amount so refinanced or refunded (plus premiums,
accrued interest, fees and expenses); provided that Indebtedness the
proceeds of which are used to refinance or refund the Exchange Debentures
or Indebtedness that is pari passu with, or subordinated in right of
payment to, the Exchange Debentures or the Debenture Guarantee shall only
be permitted under this clause (iii) if (A) in case the Exchange
Debentures are refinanced in part or the Indebtedness to be refinanced is
pari passu with the Exchange Debentures or the Debenture Guarantee, as
the case may be, such new Indebtedness, by its terms or by the terms of
any agreement or instrument pursuant to which such new Indebtedness is
outstanding, is expressly made pari passu with, or subordinate in right
of payment to, the remaining Exchange Debentures or the Debenture
Guarantee, as the case may be, (B) in case the Indebtedness to be
refinanced is subordinated in right of payment to the Exchange Debentures
or the Debenture Guarantee, as the case may be, such new Indebtedness, by
its terms or by the terms of any agreement or instrument pursuant to
which such new Indebtedness is issued or remains outstanding, is
expressly made subordinate in right of payment to the Exchange Debentures
or the Debenture Guarantee, as the case may be, at least to the extent
that the Indebtedness to be refinanced is subordinated to the Exchange
Debentures or the Debenture Guarantee, as the case may be and (C) such
new Indebtedness, determined as of the date of Incurrence of such new
Indebtedness, does not mature prior to the Stated Maturity of the
Indebtedness to be refinanced or refunded, and the Average Life of such
new Indebtedness is at least equal to the remaining Average Life of the
Indebtedness to be refinanced or refunded; and provided further that in
no event may Indebtedness of the Guarantor or ICG be refinanced by means
of any Indebtedness of any Restricted Subsidiary of the Guarantor or ICG,
as the case may be, pursuant to this clause (iii); (iv) Indebtedness (A)
in respect of performance, surety or appeal bonds provided in the
ordinary course of business, (B) under Currency Agreements and Interest
Rate Agreements; provided that such agreements do not increase the
Indebtedness of the obligor outstanding at any time other than as a
result of fluctuations in foreign currency exchange rates or interest
rates or by reason of fees, indemnities and compensation payable
thereunder; and (C) arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or
from Guarantees or letters of credit, surety bonds or performance bonds
securing any obligations of ICG or any of its Restricted Subsidiaries
pursuant to such agreements, in any case Incurred in connection with the
disposition of any business, assets or Restricted Subsidiary of ICG
(other than Guarantees of Indebtedness Incurred by any Person acquiring
all or any portion of such business, assets or Restricted Subsidiary of
ICG for the purpose of financing such acquisition), in a principal amount
at maturity not to exceed the gross proceeds actually received by ICG or
any Restricted Subsidiary in connection with such disposition; (v)
Indebtedness of the Guarantor or, to the extent the proceeds referred to
below are contributed to ICG, ICG, not to exceed, at any one time
outstanding, twice the amount of Net Cash Proceeds received by the
Guarantor after the Closing Date from the issuance and sale of its
Capital Stock (other than Redeemable Stock or preferred stock); provided
that such Indebtedness does not mature prior to the Stated Maturity of
the Exchange Debenture and has an Average Life longer than the Exchange
Debentures; (vi) Strategic Investor Subordinated Indebtedness; (vii)
Indebtedness of the Guarantor or ICG, to the extent the proceeds thereof
are immediately used after the Incurrence thereof to purchase Exchange
Debentures tendered in an Offer to Purchase made as a result of a Change
of Control; (viii) Indebtedness of any Restricted Subsidiary of the
Guarantor Incurred pursuant to any credit agreement (including equipment
leasing or financing agreements) of such Restricted Subsidiary in effect
on August 8, 1995 (or any agreement refinancing Indebtedness under such
credit agreement), up to the amount of the commitment under such credit
agreement on August 8, 1995; (ix) Indebtedness of the Guarantor or ICG,
in an amount not to exceed $100 million at any one time outstanding,
consisting of Capitalized Lease Obligations with respect to assets that
are used or useful in the telecommunications business of the Guarantor or
its Restricted Subsidiaries; (x) Indebtedness incurred to defease the
Exchange Debentures; (xi) Indebtedness of any Person that becomes a
Restricted Subsidiary of the Guarantor after the Closing
-88-
<PAGE>
Date, which Indebtedness exists or for which there is a commitment to
lend at the time such Person becomes a Restricted Subsidiary, and
subsequent Incurrences thereof ("Acquired Indebtedness"), in an accreted
amount not to exceed $50 million at any one time outstanding in aggregate
for all such Restricted Subsidiaries; provided that such Acquired
Indebtedness does not exceed 65% of the consideration (calculated by
including the Acquired Indebtedness as part of such consideration) for
the acquisition of such Person; and (xii) Indebtedness of the Guarantor
or ICG, in an amount not to exceed $30 million at any one time
outstanding, consisting of letters of credit and similar arrangements
used to support obligations of the Guarantor or any of its Restricted
Subsidiaries with respect to the acquisition of (by purchase, lease or
otherwise), construction of, or improvements on, assets that will be used
or useful in the telecommunications business of the Guarantor or its
Restricted Subsidiaries.
(b) For purposes of determining any particular amount of Indebtedness
under this "Limitation on Indebtedness" covenant, Guarantees, Liens or
obligations with respect to letters of credit supporting Indebtedness
otherwise included in the determination of such particular amount shall
not be included. For purposes of determining compliance with this
"Limitation on Indebtedness" covenant, in the event that an item of
Indebtedness meets the criteria of more than one of the types of
Indebtedness or Redeemable Stock described in the above clauses, ICG, in
its sole discretion, shall classify such item of Indebtedness or
Redeemable Stock and only be required to include the amount and type of
such Indebtedness Redeemable Stock in one of such clauses.
LIMITATION ON RESTRICTED PAYMENTS
So long as any of the Exchange Debentures are outstanding, the
Guarantor will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, (i) declare or pay any dividend or make any
distribution on its Capital Stock (other than dividends or distributions
payable solely in shares of its or such Restricted Subsidiary's Capital
Stock (other than Redeemable Stock) of the same class held by such
holders or in options, warrants or other rights to acquire such shares of
Capital Stock) held by Persons other than the Guarantor or any of its
Restricted Subsidiaries (and other than pro rata dividends or
distributions on Common Stock of Restricted Subsidiaries), (ii) purchase,
redeem, retire or otherwise acquire for value any shares of Capital Stock
of the Guarantor or any Restricted Subsidiary (including options,
warrants or other rights to acquire such shares of Capital Stock) held by
Persons other than the Guarantor or any of its Wholly Owned Restricted
Subsidiaries (except for Capital Stock of MTN, StarCom, Ohio LINX, FOTI
and Zycom to the extent the consideration therefor consists solely of
Common Stock (other than Redeemable Stock) of the Guarantor transferred
in compliance with the Securities Act), (iii) make any voluntary or
optional principal payment, or voluntary or optional redemption,
repurchase, defeasance, or other acquisition or retirement for value, of
Indebtedness of ICG or the Guarantor that is subordinated in right of
payment to the Exchange Debentures or the Debenture Guarantee, as the
case may be; or (iv) make any Investment, other than a Permitted
Investment, in any Person (such payments or any other actions described
in clauses (i) through (iv) being collectively "Restricted Payments") if,
at the time of, and after giving effect to, the proposed Restricted
Payment: (A) a Default or Event of Default shall have occurred and be
continuing, (B) the Guarantor could not Incur at least $1.00 of
Indebtedness under the first paragraph of the "Limitation on
Indebtedness" covenant or (C) the aggregate amount expended for all
===
Restricted Payments (the amount so expended, if other than in cash, to be
determined in good faith by the Board of Directors, whose determination
shall be conclusive and evidenced by a Board Resolution) after the date
of the Exchange Debenture Indenture shall exceed the sum of (1) 50% of
the aggregate amount of the Adjusted Consolidated Net Income (or, if the
Adjusted Consolidated Net Income is a loss, minus 100% of such amount)
(determined by excluding income resulting from transfers of assets by the
Guarantor or a Restricted Subsidiary to an Unrestricted Subsidiary)
accrued on a cumulative basis during the period (taken as one accounting
period) beginning on the first day of the fiscal quarter immediately
following the Closing Date and ending on the last day of the last fiscal
quarter preceding the Transaction Date for which reports have been filed
pursuant to the "Reports" covenant plus (2) the aggregate Net Cash
Proceeds received by the Guarantor after the Closing Date from the
issuance and sale permitted by the Exchange Debenture Indenture of its
Capital Stock (other than Redeemable Stock) to a Person who is not a
Subsidiary of the Guarantor, or from the issuance to a Person who is not
a Subsidiary of the Guarantor of any options, warrants or other rights to
acquire Capital Stock of the Guarantor (in each case, exclusive of any
Redeemable Stock or any options, warrants or other rights that are
redeemable at the option of the holder, or are required to be redeemed,
prior to the Stated Maturity of the Exchange Debentures) plus (3) an
amount equal to the net reduction in Investments (other than reductions
in Permitted Investments) in any Person resulting from payments of
interest on Indebtedness, dividends, repayments of loans or
-89-
<PAGE>
advances, or other transfers of assets, in each case to the Guarantor or
any Restricted Subsidiary (except to the extent any such payment is
included in the calculation of Adjusted Consolidated Net Income), or from
redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries
(valued in each case as provided in the definition of "Investments"), not
to exceed the amount of Investments previously made by the Guarantor and
its Restricted Subsidiaries in such Person.
The foregoing provision shall not be violated by reason of: (i) the
payment of any dividend within 60 days after the date of declaration
thereof if, at said date of declaration, such payment would comply with
the foregoing paragraph; (ii) the redemption, repurchase, defeasance or
other acquisition or retirement for value of Indebtedness that is
subordinated in right of payment to the Exchange Debentures or the
Debenture Guarantee, as the case may be, including premium, if any, and
accrued and unpaid interest, with the proceeds of, or in exchange for,
Indebtedness Incurred under clause (iii) of the second paragraph of the
"Limitation on Indebtedness" covenant; (iii) the repurchase, redemption
or other acquisition of Capital Stock of the Guarantor or ICG (or
options, warrants or other rights to acquire such Capital Stock) and with
respect to any New Preferred Stock, the payment of accrued dividends
thereon, in exchange for, or out of the proceeds of a substantially
concurrent issuance or sale of, shares of Capital Stock (other than
Redeemable Stock) of the Guarantor or ICG; provided that the redemption
of any preferred stock and the payment of accrued dividends thereon
pursuant to any mandatory redemption feature thereof and any redemption
of any other Capital Stock and with respect to any New Preferred Stock,
the payment of accrued dividends thereon (or options, warrants or other
rights to acquire such Capital Stock) shall be deemed to be
"substantially concurrent" with such issuance and sale if the required
notice with respect to such redemption is irrevocably given by a date
which is no later than five Business Days after receipt of the proceeds
of such issuance and sale and such redemption and payment is consummated
within the period provided for in the documents providing for the
redemption of such preferred stock or the documents governing the
redemption of such other Capital Stock, as the case may be; (iv) the
acquisition of Indebtedness of ICG or the Guarantor which is subordinated
in right of payment to the Exchange Debentures or the Debenture
Guarantee, as the case may be, in exchange for, or out of the proceeds
of, a substantially concurrent offering of, shares of the Capital Stock
of the Guarantor (other than Redeemable Stock); (v) payments or
distributions, in the nature of satisfaction of dissenters' rights,
pursuant to or in connection with a consolidation, merger or transfer of
assets that complies with the provisions of the Exchange Debenture
Indenture applicable to mergers, consolidations and transfers of all or
substantially all of the property and assets of ICG or the Guarantor;
(vi) Investments, not to exceed $10 million in aggregate, each evidenced
by a senior promissory note payable to ICG that provides that it will
become due and payable prior to (or, in the case of acceleration,
concurrently with) any required repayment (including pursuant to an Offer
to Purchase in connection with a Change of Control) of the Exchange
Debentures; (vii) Investments, not to exceed $5 million in the aggregate,
that meet the requirements of clause (vi) above; provided that the Board
of Directors of the Guarantor shall have determined, in good faith, that
each such Investment under this clause (vii) will enable the Guarantor,
ICG or one of their Restricted Subsidiaries to obtain additional business
that it might not be able to obtain without the making of such
Investment; (viii) with respect to preferred stock permitted to be issued
and sold by the "Limitation on Issuance and Sale of Capital Stock of
Restricted Subsidiaries" covenant, the payment (A) of dividends on such
preferred stock in additional shares of preferred stock and (B) of cash
dividends on such preferred stock and accrued interest on unpaid
dividends, in each case after May 1, 2001; (ix) the repurchase, in the
event of a Change of Control, of preferred stock of ICG or the Guarantor
and Indebtedness of ICG or the Guarantor into which such preferred stock
has been exchanged; provided that prior to repurchasing such preferred
stock or Indebtedness, ICG or the Guarantor, as the case may be, shall
have made a Change of Control Offer to repurchase the Exchange Debentures
in accordance with the terms of the Exchange Debenture Indenture (and an
offer to repurchase other Indebtedness, if required by the terms thereof,
in accordance with the indenture or other document governing such other
Indebtedness) and shall have accepted and paid for any Exchange
Debentures (and other Indebtedness) properly tendered in connection with
such Change of Control Offer for the Exchange Debentures or change of
control offer for such other Indebtedness; and (x) the issuance of
preferred stock permitted to be issued under the Exchange Debenture
Indenture in exchange for Indebtedness; provided that the Incurrence of
such Indebtedness complies with the "Limitation on Indebtedness"
covenant; provided that, except in the case of clauses (i) and (iii), no
Default or Event of Default shall have occurred and be continuing or
occur as a consequence of the actions or payments set forth therein.
-90-
<PAGE>
Each Restricted Payment permitted pursuant to the preceding paragraph
(other than the Restricted Payment referred to in clauses (ii), (viii)(A)
and (x) thereof), and the Net Cash Proceeds from any issuance of Capital
Stock referred to in clause (iii) or (iv) shall be included in
calculating whether the conditions of clause (C) of the first paragraph
of this "Limitation on Restricted Payments" covenant have been met with
respect to any subsequent Restricted Payments. Notwithstanding the
foregoing, in the event the proceeds of an issuance of Capital Stock of
the Guarantor are used for the redemption, repurchase or other
acquisition of the Exchange Debentures, or Indebtedness that is pari
passu with or senior to the Exchange Debentures, then the Net Cash
Proceeds of such issuance shall be included in clause (C) of the first
paragraph of this "Limitation on Restricted Payments" covenant only to
the extent such proceeds are not used for such redemption, repurchase or
other acquisition of such Indebtedness.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES
So long as any of the Exchange Debentures are outstanding, the
Guarantor will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or suffer to exist or become effective any
consensual encumbrance or restriction of any kind on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other
distributions permitted by applicable law on any Capital Stock of such
Restricted Subsidiary owned by the Guarantor or any other Restricted
Subsidiary, (ii) pay any Indebtedness owed to the Guarantor or any other
Restricted Subsidiary, (iii) make loans or advances to the Guarantor or
any other Restricted Subsidiary or (iv) transfer any of its property or
assets to the Guarantor or any other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Exchange Debenture Issue Date in the
Exchange Debenture Indenture or any other agreements in effect on the
Exchange Debenture Issue Date, and any extensions, refinancings, renewals
or replacements of such agreements; provided that the encumbrances and
restrictions in any such extensions, refinancings, renewals or
replacements are no less favorable in any material respect to the Holders
than those encumbrances or restrictions that are then in effect and that
are being extended, refinanced, renewed or replaced; (ii) existing under
or by reason of applicable law; (iii) existing with respect to any Person
or the property or assets of such Person acquired by the Guarantor or any
Restricted Subsidiary, existing at the time of such acquisition and not
incurred in contemplation thereof, which encumbrances or restrictions are
not applicable to any Person or the property or assets of any Person
other than such Person or the property or assets of such Person so
acquired; (iv) in the case of clause (iv) of the first paragraph of this
"Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries" covenant, (A) that restrict in a customary
manner the subletting, assignment or transfer of any property or asset
that is a lease, license, conveyance or contract or similar property or
asset, (B) existing by virtue of any transfer of, agreement to transfer,
option or right with respect to, or Lien on, any property or assets of
the Guarantor or any Restricted Subsidiary not otherwise prohibited by
the Exchange Debenture Indenture or (C) arising or agreed to in the
ordinary course of business, not relating to any Indebtedness, and that
do not, individually or in the aggregate, detract from the value of
property or assets of the Guarantor or any Restricted Subsidiary in any
manner material to the Guarantor or any Restricted Subsidiary; (v) with
respect to a Restricted Subsidiary and imposed pursuant to an agreement
that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock of, or property and assets of,
such Restricted Subsidiary; or (vi) imposed pursuant to preferred stock
of ICG issued pursuant to clause (vi) of the "Limitation on Issuance and
Sale of Capital Stock of Restricted Subsidiaries" covenant, or exchange
debentures or exchange notes of ICG issued in exchange therefor; provided
that such restrictions (A) may include a prohibition (x) on payments on
Capital Stock upon liquidation, winding-up and dissolution of ICG and (y)
on the payment of dividends on and the making of any distribution on, or
the purchase, redemption, retirement or other acquisition for value of,
Capital Stock of ICG if dividends or another amounts on such preferred
stock are unpaid and (B) any restrictions imposed pursuant to preferred
stock of ICG other than pursuant to clause (A) shall be no more
restrictive than the restrictions contained in the Exchange Debenture
Indenture (assuming that references to the Guarantor in the Exchange
Debenture Indenture were replaced with references to ICG). Nothing
contained in this "Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries" covenant shall prevent the Guarantor
or any Restricted Subsidiary from (1) creating, incurring, assuming or
suffering to exist any Liens otherwise permitted in the "Limitation on
Liens" covenant or (2) restricting the sale or other disposition of
property or assets of the Guarantor or any of its Restricted Subsidiaries
that secure Indebtedness of the Guarantor or any of its Restricted
Subsidiaries.
-91-
<PAGE>
LIMITATION ON ISSUANCES AND SALE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES
Under the terms of the Exchange Debenture Indenture, the Guarantor
will not sell, and will not permit any Restricted Subsidiary, directly or
indirectly, to issue or sell, any shares of Capital Stock of a Restricted
Subsidiary (including options, warrants or other rights to purchase
shares of such Capital Stock) except (i) to the Guarantor or a Wholly
Owned Restricted Subsidiary; (ii) issuances or sales to foreign nationals
of shares of Capital Stock of foreign Restricted Subsidiaries, to the
extent required by applicable law; (iii) if, immediately after giving
effect to such issuance or sale, such Restricted Subsidiary would no
longer constitute a Restricted Subsidiary; (iv) with respect to Common
Stock of MTN, StarCom and Zycom; provided that the proceeds of any such
sale under clause (iv) shall be applied in accordance with clause (A) or
(B) of the first paragraph of the "Limitation on Asset Sales" covenant
described below; (v) with respect to Common Stock of FOTI; provided that
FOTI shall not retain any net proceeds from such sales or issuances in
excess of $10 million in the aggregate and any net proceeds in excess of
such $10 million shall be received by, or paid promptly by FOTI to, the
Guarantor, ICG or any Wholly Owned Restricted Subsidiary of the
Guarantor; and (vi) with respect to (A) preferred stock of ICG having an
initial liquidation preference of up to $250 million and (B) any
preferred stock of ICG issued as dividends on such preferred stock;
provided that such preferred stock does not require the payment of cash
dividends prior to May 1, 2001.
LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED SUBSIDIARIES
The Guarantor will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of ICG or any Indebtedness of
the Guarantor ("Guaranteed Indebtedness"), unless (i) such Restricted
Subsidiary simultaneously executes and delivers a supplemental indenture
to the Exchange Debenture Indenture providing for a Guarantee (a
"Subsidiary Guarantee") of payment of the Exchange Debentures by such
Restricted Subsidiary and (ii) such Restricted Subsidiary waives and will
not in any manner whatsoever claim or take the benefit or advantage of,
any rights of reimbursement, indemnity or subrogation or any other rights
against the Guarantor, ICG or any other Restricted Subsidiary as a result
of any payment by such Restricted Subsidiary under its Subsidiary
Guarantee; provided that this paragraph shall not be applicable to any
Guarantee of any Restricted Subsidiary that (x) existed at the time such
Person became a Restricted Subsidiary and (y) was not Incurred in
connection with, or in contemplation of, such Person becoming a
Restricted Subsidiary. If the Guaranteed Indebtedness is (A) pari passu
with the Exchange Debentures or the Debenture Guarantee, then the
Guarantee of such Guaranteed Indebtedness shall be pari passu with, or
subordinated to, the Subsidiary Guarantee or (B) subordinated to the
Exchange Debentures or the Debenture Guarantee, then the Guarantee of
such Guaranteed Indebtedness shall be subordinated to the Subsidiary
Guarantee at least to the extent that the Guaranteed Indebtedness is
subordinated to the Exchange Debentures or the Debenture Guarantee, as
the case may be.
If, on or prior to the Exchange Debenture Issue Date, any Restricted
Subsidiary shall have Guaranteed any Guaranteed Indebtedness, the
Guarantor shall cause such Restricted Subsidiary to grant a Subsidiary
Guarantee meeting the requirements of the preceding paragraph. Such
Subsidiary Guarantee shall be granted on the Exchange Debenture Issue
Date.
Notwithstanding the foregoing, any Subsidiary Guarantee by a
Restricted Subsidiary shall provide by its terms that it shall be
automatically and unconditionally released and discharged upon (i) any
sale, exchange or transfer, to any Person not an Affiliate of the
Guarantor, of all of ICG's and each Restricted Subsidiary's Capital Stock
in, or all or substantially all the assets of, such Restricted Subsidiary
(which sale, exchange or transfer is not prohibited by the Exchange
Debenture Indenture) or (ii) the release or discharge of the Guarantee
which resulted in the creation of such Subsidiary Guarantee, except a
discharge or release by or as a result of payment under such Guarantee.
LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES
Under the terms of the Exchange Debenture Indenture, the Guarantor
will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, enter into, renew or extend any transaction (including,
without limitation, the purchase, sale, lease or exchange of property or
assets, or the rendering of any service) with any holder (or any
Affiliate of such holder) of 5% or more of any class of Capital Stock of
the Guarantor or with any
-92-
<PAGE>
Affiliate of the Guarantor or any Restricted Subsidiary, except upon fair
and reasonable terms no less favorable to the Guarantor or such
Restricted Subsidiary than could be obtained, at the time of such
transaction or at the time of the execution of the agreement providing
therefor, in a comparable arm's-length transaction with a Person that is
not such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to (i)
transactions (A) approved by a majority of the disinterested members of
the Board of Directors or (B) for which the Guarantor or a Restricted
Subsidiary delivers to the Trustee a written opinion of a nationally
recognized investment banking firm stating that the transaction is fair
to the Guarantor or such Restricted Subsidiary from a financial point of
view; (ii) any transaction solely between the Guarantor and any of its
Wholly Owned Restricted Subsidiaries or solely between Wholly Owned
Restricted Subsidiaries; (iii) the payment of reasonable and customary
regular fees to directors of the Guarantor or ICG who are not employees
of the Guarantor or ICG; (iv) any payments or other transactions pursuant
to any tax-sharing agreement between the Guarantor and any other Person
with which the Guarantor files a consolidated tax return or with which
the Guarantor is part of a consolidated group for tax purposes; or (v)
any Restricted Payments not prohibited by the "Limitation on Restricted
Payments" covenant. Notwithstanding the foregoing, any transaction
covered by the first paragraph of this "Limitation on Transactions with
Shareholders and Affiliates" covenant and not covered by clauses (ii)
through (iv) of this paragraph, the aggregate amount of which exceeds $2
million in value, must be approved or determined to be fair in the manner
provided for in clause (i)(A) or (B) above.
LIMITATION ON LIENS
Under the terms of the Exchange Debenture Indenture, the Guarantor
will not, and will not permit any Restricted Subsidiary to, create,
incur, assume or suffer to exist any Lien on any of its assets or
properties of any character, or any shares of Capital Stock or
Indebtedness of any Restricted Subsidiary, without making effective
provision for all of the Exchange Debentures (or, in the case of a Lien
on assets or properties of the Guarantor, the Debenture Guarantee) and
all other amounts due under the Exchange Debenture Indenture to be
directly secured equally and ratably with (or, if the obligation or
liability to be secured by such Lien is subordinated in right of payment
to the Exchange Debentures or the Debenture Guarantee, prior to) the
obligation or liability secured by such Lien.
The foregoing limitation does not apply to (i) Liens existing on the
Closing Date; (ii) Liens granted after the Closing Date on any assets or
Capital Stock of ICG or its Restricted Subsidiaries created in favor of
the Holders; (iii) Liens with respect to the assets of a Restricted
Subsidiary granted by such Restricted Subsidiary to the Guarantor or a
Wholly Owned Restricted Subsidiary to secure Indebtedness owing to the
Guarantor or such other Restricted Subsidiary; (iv) Liens securing
Indebtedness which is Incurred to refinance secured Indebtedness which is
permitted to be Incurred under clause (iii) of the second paragraph of
the "Limitation on Indebtedness" covenant; provided that such Liens do
not extend to or cover any property or assets of the Guarantor, ICG or
any Restricted Subsidiary other than the property or assets securing the
Indebtedness being refinanced; (v) Liens with respect to assets or
properties of any Person that becomes a Restricted Subsidiary after the
Closing Date; provided that such Liens do not extend to or cover any
assets or properties of the Guarantor or any of its Restricted
Subsidiaries other than the assets or properties of such Person subject
to such Lien on the date such Person becomes a Restricted Subsidiary; and
provided further that such Liens are not incurred in contemplation of, or
in connection with, such Person becoming a Restricted Subsidiary; (vi)
Permitted Liens; (vii) Liens securing Senior Indebtedness or Senior
Guarantor Indebtedness; or (viii) Liens, solely in favor of Acquired
Indebtedness, on Capital Stock of Persons that become Restricted
Subsidiaries of the Guarantor after the Closing Date.
MERGER, CONSOLIDATION AND SALE OF ASSETS
Neither ICG nor the Guarantor shall consolidate with, merge with or
into, or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets (as an entirety or
substantially an entirety in one transaction or a series of related
transactions) to, any Person (other than a consolidation or merger with
or into a Wholly Owned Restricted Subsidiary with a positive net worth;
provided that, in connection with any such merger or consolidation, no
consideration (other than Common Stock in the surviving Person, ICG or
the Guarantor) shall be issued or distributed to the stockholders of ICG
or the Guarantor) or permit any Person to merge with or into
-93-
<PAGE>
ICG or the Guarantor unless: (i) ICG or the Guarantor shall be the
continuing Person, or the Person (if other than ICG or the Guarantor)
formed by such consolidation or into which ICG or the Guarantor is merged
or that acquired or leased such property and assets of ICG or the
Guarantor shall be a corporation organized and validly existing under the
laws of the United States of America or any jurisdiction thereof and
shall expressly assume, by a supplemental indenture, executed and
delivered to the Trustee, all of the obligations of ICG or the Guarantor,
as the case may be, and under the Exchange Debenture Indenture; (ii)
immediately after giving effect to such transaction, no Default or Event
of Default shall have occurred and be continuing; (iii) immediately after
giving effect to such transaction on a pro forma basis, ICG or the
Guarantor, as the case may be, or any Person becoming the successor
obligor of the Exchange Debentures or the Debenture Guarantee, as the
case may be, shall have a Consolidated Net Worth equal to or greater than
the Consolidated Net Worth of ICG or the Guarantor, as the case may be,
immediately prior to such transaction; (iv) immediately after giving
effect to such transaction on a pro forma basis ICG, or any Person
becoming the successor obligor of the Exchange Debentures, as the case
may be, could Incur at least $1.00 of Indebtedness under the first
paragraph of the "Limitation on Indebtedness" covenant; and (v) ICG
delivers to the Trustee an Officers' Certificate (attaching the
arithmetic computations to demonstrate compliance with clauses (iii) and
(iv) above) and an Opinion of Counsel, in each case stating that such
consolidation, merger or transfer and such supplemental indenture
complies with this provision and that all conditions precedent provided
for herein relating to such transaction have been complied with;
provided, however, that clauses (iii) and (iv) above do not apply if, in
the good faith determination of the Board of Directors of the Guarantor,
whose determination shall be evidenced by a Board Resolution, the
principal purpose of such transaction is part of a plan to change the
jurisdiction of incorporation of ICG or the Guarantor to a state of the
United States; and provided further that any such transaction shall not
have as one of its purposes the evasion of the foregoing limitations.
LIMITATION ON ASSET SALES
Under the terms of the Exchange Debenture Indenture, the Guarantor
will not, and will not permit any Restricted Subsidiary to, consummate
any Asset Sale, unless (i) the consideration received by the Guarantor or
such Restricted Subsidiary is at least equal to the fair market value of
the assets sold or disposed of and (ii) at least 75% of the consideration
received consists of cash or Temporary Cash Investments. In the event
and to the extent that the Net Cash Proceeds received by the Guarantor or
its Restricted Subsidiaries from one or more Asset Sales occurring on or
after the Closing Date in any period of 12 consecutive months exceed 10%
of Adjusted Consolidated Net Tangible Assets (determined as of the date
closest to the commencement of such 12-month period for which a
consolidated balance sheet of ICG and its Subsidiaries has been
prepared), then the Guarantor shall or shall cause the relevant
Restricted Subsidiary to (i) within six months after the date Net Cash
Proceeds so received exceed 10% of Adjusted Consolidated Net Tangible
Assets (A) apply an amount equal to such excess Net Cash Proceeds to
permanently repay unsubordinated Indebtedness of the Guarantor or ICG, or
Indebtedness of any Restricted Subsidiary other than ICG, in each case
owing to a Person other than the Guarantor or any of its Restricted
Subsidiaries or (B) invest an equal amount, or the amount not so applied
pursuant to clause (A) (or enter into a definitive agreement committing
to so invest within six months after the date of such agreement), in
property or assets of a nature or type or that are used in a business (or
in a company having property and assets of a nature or type, or engaged
in a business) similar or related to the nature or type of the property
and assets of, or the business of, the Guarantor and its Restricted
Subsidiaries existing on the date of such investment (as determined in
good faith by the Board of Directors, whose determination shall be
conclusive and evidenced by a Board Resolution) and (ii) apply (no later
than the end of the six-month period referred to in clause (i)) such
excess Net Cash Proceeds (to the extent not applied pursuant to clause
(i)) as provided in the following paragraphs of this "Limitation on Asset
Sales" covenant. The amount of such excess Net Cash Proceeds required to
be applied (or to be committed to be applied) during such six-month
period as set forth in clause (i) of the preceding sentence and not
applied as so required by the end of such period shall constitute "Excess
Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant
to this "Limitation on Asset Sales" covenant totals at least $10 million,
ICG must commence, not later than the seventy-fifth Business Day
following the first day of such month, and consummate an Offer to
Purchase from the Holders on a pro rata basis an aggregate principal
amount of Exchange Debentures equal to the Excess Proceeds on such date,
at a purchase price equal to 101% of the aggregate principal amount of
the Exchange Debentures, plus, in each case, accrued interest (if any) to
the date of purchase.
-94-
<PAGE>
SENIOR SUBORDINATED INDEBTEDNESS
Neither the Guarantor nor ICG will incur any Indebtedness, other than
the Exchange Debentures or the Debenture Guarantee, respectively, that is
expressly made subordinated in right of payment to any Senior
Indebtedness or Senior Guarantor Indebtedness, unless such Indebtedness,
by its terms and by the terms of any agreement or instrument pursuant to
which such Indebtedness is outstanding is expressly made pari passu with,
or subordinate in right of payment to, the Exchange Debentures or the
Debenture Guarantee, as the case may be, pursuant to provisions
substantially similar to those contained in Article Eleven of the
Exchange Debenture Indenture; provided that the foregoing limitations
shall not apply to distinctions between categories of Senior Indebtedness
that exist by reason of any Liens or Guarantees arising or created in
respect of some but not all Senior Indebtedness.
REPORTS
So long as any Exchange Debentures are outstanding, ICG and the
Guarantor shall file with the Commission the annual reports, quarterly
reports and the information, documents and other reports required to be
filed by ICG with the Commission pursuant to Sections 13 or 15 of the
Exchange Act, whether or not ICG has or is required to have a class of
securities registered under the Exchange Act, at the time it is or would
be required to file the same with the Commission and, within 15 days
after ICG is or would be required to file such reports, information or
documents with the Commission, shall mail such reports, information and
documents to the Trustee and to holders of the Exchange Debentures.
EVENTS OF DEFAULT
The following events will be defined as "Events of Default" in the
Exchange Debenture Indenture: (a) default in the payment of principal of
(or premium, if any, on) any Exchange Debenture when the same becomes due
and payable at maturity, upon acceleration, redemption or otherwise
whether or not such payment is prohibited by Article Eleven of the
Exchange Debenture Indenture; (b) default in the payment of interest on
any Exchange Debenture when the same becomes due and payable, and such
default continues for a period of 30 days whether or not such payment is
prohibited by Article Eleven of the Exchange Debenture Indenture; (c) ICG
or the Guarantor defaults in the performance of or breaches any other
covenant or agreement of ICG or the Guarantor in the Exchange Debenture
Indenture or under the Exchange Debentures and such default or breach
continues for a period of 30 consecutive days after written notice to ICG
by the Trustee or the Holders of 25% or more in aggregate principal
amount of the Exchange Debentures; (d) there occurs with respect to any
issue or issues of Indebtedness of ICG, the Guarantor or any Significant
Subsidiary having an outstanding principal amount at maturity of $10
million or more in the aggregate for all such issues of all such Persons,
whether such Indebtedness now exists or shall hereafter be created, (I)
an event of default that has caused the holder thereof to declare such
Indebtedness to be due and payable prior to its Stated Maturity and such
Indebtedness has not been discharged in full or such acceleration has not
been rescinded or annulled within 30 days of such acceleration and/or
(II) the failure to make a principal payment at the final (but not any
interim) fixed maturity and such defaulted payment shall not have been
made, waived or extended within 30 days of such payment default; (e) any
final judgment or order (not covered by insurance) for the payment of
money in excess of $10 million in the aggregate for all such final
judgments or orders against all such Persons (treating any deductibles,
self-insurance or retention as not so covered) shall be rendered against
ICG, the Guarantor or any Significant Subsidiary and shall not be paid or
discharged, and there shall be any period of 30 consecutive days
following entry of the final judgment or order that causes the aggregate
amount for all such final judgments or orders outstanding and not paid or
discharged against all such Persons to exceed $10 million during which a
stay of enforcement of such final judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; (f) a court having
jurisdiction in the premises enters a decree or order for (A) relief in
respect of ICG, the Guarantor or any Significant Subsidiary in an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, (B) appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of ICG, the Guarantor or any Significant Subsidiary or for all
or substantially all of the property and assets of ICG, the Guarantor or
any Significant Subsidiary or (C) the winding up or liquidation of the
affairs of ICG, the Guarantor or any Significant Subsidiary and, in each
case, such decree or order shall remain unstayed and in effect for a
period of 30 consecutive days; or
-95-
<PAGE>
(g) ICG, the Guarantor or any Significant Subsidiary (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an
order for relief in an involuntary case under any such law, (B) consents
to the appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of ICG,
the Guarantor or any Significant Subsidiary or for all or substantially
all of the property and assets of ICG, the Guarantor or any Significant
Subsidiary or (C) effects any general assignment for the benefit of
creditors.
If an Event of Default (other than an Event of Default specified in
clause (f) or (g) above that occurs with respect to ICG or the Guarantor)
occurs and is continuing under the Exchange Debenture Indenture, the
Trustee or the Holders of at least 25% in aggregate principal amount of
the Exchange Debentures, then outstanding, by written notice to ICG (and
to the Trustee if such notice is given by the Holders), may, and the
Trustee at the request of such Holders shall, declare the principal
amount of, premium, if any, and accrued interest, if any, on the Exchange
Debentures to be immediately due and payable. Upon a declaration of
acceleration, such principal amount, premium, if any, and accrued
interest, if any, shall be immediately due and payable. In the event of
a declaration of acceleration because an Event of Default set forth in
clause (d) above has occurred and is continuing, such declaration of
acceleration shall be automatically rescinded and annulled if the event
of default triggering such Event of Default pursuant to clause (d) shall
be remedied or cured by ICG, the Guarantor or the relevant Significant
Subsidiary or waived by the holders of the relevant Indebtedness within
60 days after the declaration of acceleration with respect thereto. If
an Event of Default specified in clause (f) or (g) above occurs with
respect to ICG or the Guarantor, the principal amount of, premium, if
any, and accrued interest, if any, on the Exchange Debentures then
outstanding shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any
Holder. The Holders of at least a majority in principal amount of the
outstanding Exchange Debentures by written notice to ICG and to the
Trustee, may waive all past defaults and rescind and annul a declaration
of acceleration and its consequences if, among other things, (i) all
existing Events of Default, other than the nonpayment of the principal
of, premium, if any, and accrued interest on the Exchange Debentures that
have become due solely by such declaration of acceleration, have been
cured or waived and (ii) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction. For information
as to the waiver of defaults, see "--Modification and Waiver."
The Holders of at least a majority in aggregate principal amount of
the outstanding Exchange Debentures may direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee. However, the
Trustee may refuse to follow any direction that conflicts with law or the
Exchange Debenture Indenture, that may involve the Trustee in personal
liability, or that the Trustee determines in good faith may be unduly
prejudicial to the rights of Holders of Exchange Debentures not joining
in the giving of such direction and may take any other action it deems
proper that is not inconsistent with any such direction received from
Holders of Exchange Debentures. A Holder may not pursue any remedy with
respect to the Exchange Debenture Indenture or the Exchange Debentures
unless: (i) the Holder gives the Trustee written notice of a continuing
Event of Default; (ii) the Holders of at least 25% in aggregate principal
amount of outstanding Exchange Debentures make a written request to the
Trustee to pursue the remedy; (iii) such Holder or Holders offer the
Trustee indemnity satisfactory to the Trustee against any costs,
liability or expense; (iv) the Trustee does not comply with the request
within 60 days after receipt of the request and the offer of indemnity;
and (v) during such 60-day period, the Holders of a majority in aggregate
principal amount of the outstanding Exchange Debentures do not give the
Trustee a direction that is inconsistent with the request. However, such
limitations do not apply to the right of any Holder of an Exchange
Debenture to receive payment of the principal of, premium, if any, or
accrued interest on, such Exchange Debenture or to bring suit for the
enforcement of any such payment, on or after the due date expressed in
the Exchange Debentures, which right shall not be impaired or affected
without the consent of the Holder.
The Exchange Debenture Indenture will require certain officers of ICG
and the Guarantor to certify, on or before a date not more than 90 days
after the end of each fiscal year of the Guarantor, that a review has
been conducted of the activities of ICG, or the Guarantor, as the case
may be, and its Restricted Subsidiaries and ICG's, or the Guarantor's,
and its Restricted Subsidiaries' performance under the Exchange Debenture
Indenture and that ICG and the Guarantor have fulfilled all obligations
thereunder, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default and the nature and status
thereof. ICG and the Guarantor will also
-96-
<PAGE>
be obligated to notify the Trustee of any default or defaults in the
performance of any covenants or agreements under the Exchange Debenture
Indenture.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
ICG may, at its option and at any time, elect to have its obligations
discharged with respect to the outstanding Exchange Debentures ("legal
defeasance"). Such legal defeasance means that ICG shall be deemed to
have paid and discharged the entire indebtedness represented by the
outstanding Exchange Debentures, except for (a) the rights of Holders of
outstanding Exchange Debentures to receive payments in respect of the
principal of, and premium, if any, and interest on, such Exchange
Debentures when such payments are due, or on the redemption date, as the
case may be, (b) ICG's obligations with respect to the Exchange
Debentures concerning issuing temporary Exchange Debentures, registration
of Exchange Debentures, mutilated, destroyed, lost or stolen Exchange
Debentures and the maintenance of an office or agency for payment and
money for security payments held in trust, (c) the rights, powers, trust,
duties and immunities of the Trustee, and ICG's obligations in connection
therewith and (d) the legal defeasance provisions of the Exchange
Debenture Indenture. In addition, ICG may, at its option and at any
time, elect to have the obligations of ICG released with respect to
certain covenants that are described in the Exchange Debenture Indenture
("covenant defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with
respect to the Exchange Debentures. In the event covenant defeasance
occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with
respect to the Exchange Debentures.
In order to exercise either legal defeasance or covenant defeasance,
(i) ICG must irrevocably deposit with the Trustee, in trust, for the
benefit of the holders of the Exchange Debentures, cash in U.S. dollars,
non-callable U.S. government obligations, or a combination thereof, in
such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants selected by the
Trustee, to pay the principal of, and premium, if any, and interest on,
the outstanding Exchange Debentures on the stated maturity or on the
applicable optional redemption date, as the case may be, of such
principal or installment of principal of, or premium, if any, or interest
on, the outstanding Exchange Debentures; (ii) in the case of legal
defeasance, ICG shall have delivered to the Trustee an opinion of counsel
in the United States reasonably acceptable to the Trustee confirming that
(A) ICG has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the New Preferred Stock Issue Date,
there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel
shall confirm that, the holders of the outstanding Exchange Debentures
will not recognize income, gain or loss for federal income tax purposes
as a result of such legal defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times
as would have been the case if such legal defeasance had not occurred;
(iii) in the case of covenant defeasance, ICG shall have delivered to the
Trustee an opinion of counsel in the United States reasonably acceptable
to the Trustee confirming that the holders of the outstanding Exchange
Debentures will not recognize income, gain or loss for federal income tax
purposes as a result of such covenant defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such covenant defeasance had
not occurred; (iv) no Default or Event of Default shall have occurred and
be continuing on the date of such deposit or, insofar as Events of
Default from bankruptcy or insolvency events are concerned, at any time
in the period ending on the 123rd day after the date of deposit; (v) such
legal defeasance or covenant defeasance shall not result in a breach or
violation of, or constitute a default under, the Exchange Debenture
Indenture or any other material agreement or instrument to which ICG is a
party or by which ICG is bound; (vi) ICG shall have delivered to the
Trustee an Officers' Certificate stating that the deposit was not made by
ICG with the intent of preferring the holders of Exchange Debentures over
the other creditors of ICG or with the intent of defeating, hindering,
delaying or defrauding creditors of the Company or others; and (vii) ICG
shall have delivered to the Trustee an Officers' Certificate and an
opinion of counsel, each stating that all conditions precedent relating
to the legal defeasance or the covenant defeasance have been complied
with.
MODIFICATION AND WAIVER
-97-
<PAGE>
Modifications and amendments of the Exchange Debenture Indenture may
be made by ICG, the Guarantor and the Trustee with the consent of the
Holders of not less than a majority in aggregate principal amount of the
outstanding Exchange Debentures; provided, however, that no such
modification or amendment may, without consent of each Holder affected
thereby, (i) change the Stated Maturity of the principal of, or any
installment of interest on, any Exchange Debenture, (ii) reduce the
principal amount of, or any premium, if any, payable upon the redemption
of, or the rate of interest on, any Exchange Debenture, (iii) adversely
affect the right of repayment at the option of any Holder of any Exchange
Debenture, (iv) change the currency in which principal of, or premium, if
any, or interest on, any Exchange Debenture is payable, (v) impair the
right to institute suit for the enforcement of any payment on or after
the Stated Maturity (or, in the case of a redemption, on or after the
Redemption Date) of any Exchange Debenture, (vi) waive a default in the
payment of principal of, premium, if any, or interest on the Exchange
Debenture, (vii) reduce the percentage in principal amount of outstanding
Exchange Debentures the consent of whose Holders is necessary for waiver
of compliance with certain provisions of the Exchange Debenture Indenture
or for waiver of certain defaults, (viii) release the Guarantor from its
Debenture Guarantee or (ix) modify any of the provisions of Article
Eleven of the Exchange Debenture Indenture in a manner adverse to the
Holders.
NO PERSONAL LIABILITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS,
DIRECTORS, OR EMPLOYEES
The Exchange Debenture Indenture provides that no recourse for the
payment of the principal of, premium, if any, or interest on any of the
Exchange Debentures or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant
or agreement of ICG or the Guarantor in the Exchange Debenture Indenture,
or in any of the Exchange Debentures or because of the creation of any
Indebtedness represented thereby, shall be had against any incorporator,
shareholder, officer, director, employee or controlling person of ICG or
the Guarantor or of any successor Person thereof. Each Holder, by
accepting the Exchange Debentures, waives and releases all such
liability.
CONCERNING THE TRUSTEE
The Exchange Debenture Indenture provides that, except during the
continuance of a Default, the Trustee will not be liable, except for the
performance of such duties as are specifically set forth in such Exchange
Debenture Indenture. If an Event of Default has occurred and is
continuing, the Trustee will use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in
the conduct of such person's own affairs.
The Exchange Debenture Indenture and provisions of the Trust Indenture
Act of 1939, as amended, incorporated by reference therein contain
limitations on the rights of the Trustee, should it become a creditor of
ICG or the Guarantor, to obtain payment of claims in certain cases or to
realize on certain property received by it in respect of any such claims,
as security or otherwise. The Trustee is permitted to engage in other
transactions; provided, however, that if it acquires any conflicting
interest, it must eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Exchange
Debenture Indenture. Reference is made to the Exchange Debenture
Indenture for the full definition of such terms, as well as any other
capitalized terms used herein for which no definition is provided.
"Adjusted Consolidated Net Income" means, for any period, the
aggregate net income (or loss) of the Guarantor and its Restricted
Subsidiaries for such period determined in conformity with GAAP; provided
that the following items shall be excluded in computing Adjusted
Consolidated Net Income (without duplication): (i) the net income of any
Person (other than net income attributable to a Restricted Subsidiary) in
which any Person (other than the Guarantor or any of its Restricted
Subsidiaries) has a joint interest and the net income of any Unrestricted
Subsidiary, except to the extent of the amount of dividends or other
distributions actually paid to the Guarantor or any of its Restricted
Subsidiaries by such other Person or such Unrestricted Subsidiary during
such period; (ii) solely for the purposes of calculating the amount of
Restricted Payments that may be made pursuant to clause (C) of the first
paragraph of the "Limitation on Restricted Payments" covenant described
above (and in such case, except to
-98-
<PAGE>
the extent includable pursuant to clause (i) above), the net income (or
loss) of any Person accrued prior to the date it becomes a Restricted
Subsidiary or is merged into or consolidated with the Guarantor or any of
its Restricted Subsidiaries or all or substantially all of the property
and assets of such Person are acquired by the Guarantor or any of its
Restricted Subsidiaries; (iii) the net income of any Restricted
Subsidiary to the extent that the declaration or payment of dividends or
similar distributions by such Restricted Subsidiary of such net income is
not at the time permitted by the operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Restricted Subsidiary; (iv)
any gains or losses (on an after-tax basis) attributable to Asset Sales;
(v) except for purposes of calculating the amount of Restricted Payments
that may be made pursuant to clause (C) of the first paragraph of the
"Limitation on Restricted Payments" covenant described above, any amount
paid or accrued as dividends on preferred stock of the Guarantor or any
Restricted Subsidiary owned by Persons other than the Guarantor and any
of its Restricted Subsidiaries; and (vi) all extraordinary gains and
extraordinary losses.
"Adjusted Consolidated Net Tangible Assets" means the total amount of
assets of the Guarantor and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), except to the
extent resulting from write-ups of capital assets (excluding write-ups in
connection with accounting for acquisitions in conformity with GAAP),
after deducting therefrom (i) all current liabilities of the Guarantor
and its Restricted Subsidiaries (excluding intercompany items) and (ii)
all goodwill, trade names, trademarks, patents, unamortized debt discount
and expense and other like intangibles, all as set forth on the most
recently available quarterly or annual consolidated balance sheet of the
Guarantor and its Restricted Subsidiaries, prepared in conformity with
GAAP.
"Affiliate" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as applied to any
Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract
or otherwise; provided that, with respect to the Guarantor and any of its
Subsidiaries, the term "Affiliate" shall be deemed to include William W.
Becker, Lawrence L. Becker and any person related by blood or marriage to
either of them.
"Asset Acquisition" means (i) an investment by the Guarantor or any of
its Restricted Subsidiaries in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Guarantor or shall be
merged into or consolidated with the Guarantor or any of its Restricted
Subsidiaries; provided that such Person's primary business is related,
ancillary or complementary to the businesses of the Guarantor and its
Restricted Subsidiaries on the date of such investment or (ii) an
acquisition by the Guarantor or any of its Restricted Subsidiaries of the
property and assets of any Person other than the Guarantor or any of its
Restricted Subsidiaries that constitute substantially all of a division
or line of business of such Person; provided that the property and assets
acquired are related, ancillary or complementary to the businesses of the
Guarantor and its Restricted Subsidiaries on the date of such
acquisition.
"Asset Disposition" means the sale or other disposition by the
Guarantor or any of its Restricted Subsidiaries (other than to the
Guarantor or another Restricted Subsidiary of the Guarantor) of (i) all
or substantially all of the Capital Stock of any Restricted Subsidiary of
the Guarantor or (ii) all or substantially all of the assets that
constitute a division or line of business of the Guarantor or any of its
Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition (including
by way of merger, consolidation or sale-leaseback transactions) in one
transaction or a series of related transactions by the Guarantor or any
of its Restricted Subsidiaries to any Person other than the Guarantor or
any of its Restricted Subsidiaries of (i) all or any of the Capital Stock
of any Restricted Subsidiary, (ii) all or substantially all of the
property and assets of an operating unit or business of the Guarantor or
any of its Restricted Subsidiaries or (iii) any other property and assets
of the Guarantor or any of its Restricted Subsidiaries outside the
ordinary course of business of the Guarantor or such Restricted
Subsidiary and, in each case, that is not governed by the provisions of
the Exchange Debenture Indenture applicable to mergers, consolidations
and sales of assets of the Guarantor; provided that the meaning of "Asset
Sale"
-99-
<PAGE>
shall not include (A) sales or other dispositions of inventory,
receivables and other current assets, and (B) dispositions of assets of
the Guarantor or any of its Restricted Subsidiaries, in substantially
simultaneous exchanges for consideration consisting of any combination of
cash, Temporary Cash Investments and assets that are used or useful in
the telecommunications business of the Guarantor or its Restricted
Subsidiaries, if such consideration has an aggregate fair market value
substantially equal to the fair market value of the assets so disposed
of; provided, however, that fair market value shall be determined in good
faith by the Board of Directors of ICG, whose determination shall be
conclusive and evidenced by a Board Resolution delivered to the Trustee;
and provided further that any cash or Temporary Cash Investments received
by the Guarantor or any of its Restricted Subsidiaries pursuant to any
transaction described in clause (B) above shall be applied in accordance
with clause (A) or (B) of the first paragraph of the "Limitation on Asset
Sales" covenant described above.
"Average Life" means, at any date of determination with respect to any
debt security, the quotient obtained by dividing (i) the sum of the
products of (a) the number of years from such date of determination to
the dates of each successive scheduled principal payment of such debt
security and (b) the amount of such principal payment by (ii) the sum of
all such principal payments.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated,
whether voting or non-voting) in equity of such Person, whether now
outstanding or issued after the date of the Exchange Debenture Indenture,
including, without limitation, all Common Stock and preferred stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted
present value of the rental obligations of such Person as lessee, in
conformity with GAAP, is required to be capitalized on the balance sheet
of such Person; and "Capitalized Lease Obligations" means the discounted
present value of the rental obligations under such lease.
"Closing Date" means the date the New Preferred Stock is originally
issued under the Amended Articles.
"Consolidated EBITDA" means, for any period, the sum of the amounts
for such period of (i) Adjusted Consolidated Net Income, (ii)
Consolidated Interest Expense, (iii) income taxes, to the extent such
amount was deducted in calculating Adjusted Consolidated Net Income
(other than income taxes (either positive or negative) attributable to
extraordinary and non-recurring gains or losses or sales of assets), (iv)
depreciation expense, to the extent such amount was deducted in
calculating Adjusted Consolidated Net Income, (v) amortization expense,
to the extent such amount was deducted in calculating Adjusted
Consolidated Net Income, and (vi) all other non-cash items reducing
Adjusted Consolidated Net Income (other than items that will require cash
payments and for which an accrual or reserve is, or is required by GAAP
to be, made), less all non-cash items increasing Adjusted Consolidated
Net Income, all as determined on a consolidated basis for the Guarantor
and its Restricted Subsidiaries in conformity with GAAP; provided that,
if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary,
Consolidated EBITDA shall be reduced (to the extent not otherwise reduced
in accordance with GAAP) by an amount equal to (A) the amount of the
Adjusted Consolidated Net Income attributable to such Restricted
Subsidiary multiplied by (B) the quotient of (1) the number of shares of
outstanding Common Stock of such Restricted Subsidiary not owned on the
last day of such period by the Guarantor or any of its Restricted
Subsidiaries divided by (2) the total number of shares of outstanding
Common Stock of such Restricted Subsidiary on the last day of such
period.
"Consolidated Interest Expense" means, for any period, the aggregate
amount of interest in respect of Indebtedness (including amortization of
original issue discount on any Indebtedness and the interest portion of
any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and
other fees and charges owed with respect to letters of credit and
bankers' acceptance financing; the net costs associated with Interest
Rate Agreements; and Indebtedness that is Guaranteed or secured by the
Guarantor or any of its Restricted Subsidiaries) and all but the
principal component of rentals in respect of Capitalized Lease
Obligations paid, accrued or scheduled to be paid or to be accrued by the
Guarantor and its Restricted Subsidiaries during such period; excluding,
however, without duplication, (i) any amount of such interest of any
Restricted Subsidiary if the net income of such Restricted Subsidiary is
excluded in the calculation of
-100-
<PAGE>
Adjusted Consolidated Net Income pursuant to clause (iii) of the
definition thereof (but only in the same proportion as the net income of
such Restricted Subsidiary is excluded from the calculation of Adjusted
Consolidated Net Income pursuant to clause (iii) of the definition
thereof) and (ii) any premiums, fees and expenses (and any amortization
thereof) payable in connection with the offering of the 13/1//2% Notes
and the warrants issued therewith, the New Notes and/or the New Preferred
Stock, all as determined on a consolidated basis (without taking into
account Unrestricted Subsidiaries) in conformity with GAAP.
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity as set forth on the most recently available
quarterly or annual consolidated balance sheet of the Guarantor and its
Restricted Subsidiaries (which shall be as of a date not more than 90
days prior to the date of such computation, and which shall not take into
account Unrestricted Subsidiaries), less any amounts attributable to
Redeemable Stock or any equity security convertible into or exchangeable
for Indebtedness, the cost of treasury stock and the principal amount of
any promissory notes receivable from the sale of the Capital Stock of the
Guarantor or any of its Restricted Subsidiaries, each item to be
determined in conformity with GAAP (excluding the effects of foreign
currency exchange adjustments under Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 52).
"Convertible Subordinated Notes" means the 8% Convertible Subordinated
Notes and the 7% Convertible Subordinated Notes of IntelCom.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to
protect the Guarantor or any of its Restricted Subsidiaries against
fluctuations in currency values to or under which the Guarantor or any of
its Restricted Subsidiaries is a party or a beneficiary on the date of
the Exchange Debenture Indenture or becomes a party or a beneficiary
thereafter.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Exchange Debenture Issue Date" means the date the Exchange Debentures
are originally issued under the Exchange Debenture Indenture.
"FOTI" means Fiber Optic Technologies Inc., a Colorado corporation.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of August 8, 1995, including, without
limitation, those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as
approved by a significant segment of the accounting profession. All
ratios and computations contained in the Exchange Debenture Indenture
shall be computed in conformity with GAAP applied on a consistent basis,
except that calculations made for purposes of determining compliance with
the terms of the covenants and with other provisions of the Exchange
Debenture Indenture shall be made without giving effect to (i) the
amortization of any expenses incurred in connection with the offering of
the 13/1//2% Notes and the warrants issued therewith, the New Notes
and/or the New Preferred Stock and (ii) except as otherwise provided, the
amortization of any amounts required or permitted by Accounting
Principles Board Opinion Nos. 16 and 17.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and, without limiting the generality of
the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or other
obligation of such other Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of
assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided that the term
"Guarantee" shall not include endorsements for collection or deposit in
the ordinary course of business. The term "Guarantee" used as a verb has
a corresponding meaning.
-101-
<PAGE>
"Incur" means, with respect to any Indebtedness, to incur, create,
issue, assume, Guarantee or otherwise become liable for or with respect
to, or become responsible for, the payment of, contingently or otherwise,
such Indebtedness, including an Incurrence of Indebtedness by reason of
the acquisition of more than 50% of the Capital Stock of any Person;
provided that neither the accrual of interest nor the accretion of
original issue discount shall be considered an Incurrence of
Indebtedness. The term "Incurrence" has a corresponding meaning.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person
for borrowed money, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all
obligations of such Person in respect of letters of credit or other
similar instruments (including reimbursement obligations with respect
thereto), (iv) all obligations of such Person to pay the deferred and
unpaid purchase price of property or services, which purchase price is
due more than six months after the date of placing such property in
service or taking delivery and title thereto or the completion of such
services, except Trade Payables, (v) all obligations of such Person as
lessee under Capitalized Leases, (vi) all Indebtedness of other Persons
secured by a Lien on any asset of such Person, whether or not such
Indebtedness is assumed by such Person; provided that the amount of such
Indebtedness shall be the lesser of (A) the fair market value of such
asset at such date of determination and (B) the amount of such
Indebtedness, (vii) all Indebtedness of other Persons Guaranteed by such
Person to the extent such Indebtedness is Guaranteed by such Person and
(viii) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate Agreements. The
amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above
and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation, provided
(i) that the amount outstanding at any time of any Indebtedness issued
with original issue discount is the original issue price of such
Indebtedness and (ii) that Indebtedness shall not include any liability
for federal, state, local or other taxes.
"Indebtedness to EBITDA Ratio" means, as at any date of determination,
the ratio of (i) the aggregate amount of Indebtedness of the Guarantor,
ICG and their Restricted Subsidiaries on a consolidated basis
("Consolidated Indebtedness") as at the Transaction Date to (ii) the
Consolidated EBITDA of the Guarantor for the then most recent four full
fiscal quarters for which reports have been filed pursuant to the
"Reports" covenant described above (such four full fiscal quarter period
being referred to herein as the "Four Quarter Period"); provided that (x)
pro forma effect shall be given to any Indebtedness Incurred from the
beginning of the Four Quarter Period through the Transaction Date
(including any Indebtedness Incurred on the Transaction Date), to the
extent outstanding on the Transaction Date, (y) if during the period
commencing on the first day of such Four Quarter Period through the
Transaction Date (the "Reference Period"), the Guarantor, ICG or any of
the Restricted Subsidiaries shall have engaged in any Asset Sale,
Consolidated EBITDA for such period shall be reduced by an amount equal
to the EBITDA (if positive), or increased by an amount equal to the
EBITDA (if negative), directly attributable to the assets which are the
subject of such Asset Sale and any related retirement of Indebtedness as
if such Asset Sale and related retirement of Indebtedness had occurred on
the first day of such Reference Period or (z) if during such Reference
Period the Guarantor, ICG or any of the Restricted Subsidiaries shall
have made any Asset Acquisition, Consolidated EBITDA of the Guarantor
shall be calculated on a pro forma basis as if such Asset Acquisition and
any related financing had occurred on the first day of such Reference
Period. In calculating this ratio for purposes of the Amended Articles,
the amount of outstanding Indebtedness shall be deemed to include the
liquidation preference of any preferred stock then outstanding.
"IntelCom" means IntelCom Group Inc. and its successors and assigns.
"Investment" in any Person means any direct or indirect advance, loan
or other extension of credit (including, without limitation, by way of
Guarantee or similar arrangement; but excluding advances to customers in
the ordinary course of business that are, in conformity with GAAP,
recorded as accounts receivable on the balance sheet of the Guarantor or
its Restricted Subsidiaries) or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property
or services for the account or use of others), or any purchase or
acquisition of Capital Stock, bonds, notes, debentures or other similar
instruments issued by, such Person and shall include the designation of a
Restricted Subsidiary as an Unrestricted Subsidiary. For purposes of the
definition of "Unrestricted Subsidiary" and the "Limitation on Restricted
Payments" covenant described above, (i) "Investment" shall include the
fair market value of the assets (net of liabilities) of any Restricted
Subsidiary of the Guarantor at
-102-
<PAGE>
the time that such Restricted Subsidiary of the Guarantor is designated
an Unrestricted Subsidiary and shall exclude the fair market value of the
assets (net of liabilities) of any Unrestricted Subsidiary at the time
that such Unrestricted Subsidiary is designated a Restricted Subsidiary
of the Guarantor and (ii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the
time of such transfer, in each case as determined by the Board of
Directors in good faith.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the
nature thereof, any sale with recourse against the seller or any
Affiliate of the seller, or any agreement to give any security interest).
"MTN" means Maritime Telecommunications Network, Inc., a Colorado
corporation, and its successors.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the
extent corresponding to the principal, but not interest, component
thereof) when received in the form of cash or cash equivalents (except to
the extent such obligations are financed or sold with recourse to the
Guarantor or any Restricted Subsidiary of the Guarantor) and proceeds
from the conversion of other property received when converted to cash or
cash equivalents, net of (i) brokerage commissions and other fees and
expenses (including fees and expenses of counsel and investment bankers)
related to such Asset Sale, (ii) provisions for all taxes (whether or not
such taxes will actually be paid or are payable) as a result of such
Asset Sale without regard to the consolidated results of operations of
the Guarantor and its Restricted Subsidiaries, taken as a whole, (iii)
payments made to repay Indebtedness or any other obligation outstanding
at the time of such Asset Sale that either (A) is secured by a Lien on
the property or assets sold or (B) is required to be paid as a result of
such sale and (iv) appropriate amounts to be provided by the Guarantor or
any Restricted Subsidiary of the Guarantor as a reserve against any
liabilities associated with such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as
determined in conformity with GAAP and (b) with respect to any issuance
or sale of Capital Stock, the proceeds of such issuance or sale in the
form of cash or cash equivalents, including payments in respect of
deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form
of cash or cash equivalents (except to the extent such obligations are
financed or sold with recourse to the Guarantor or any Restricted
Subsidiary of the Guarantor) and proceeds from the conversion of other
property received when converted to cash or cash equivalents, net of
attorney's fees, accountants' fees, underwriters' or placement agents'
fees, discounts or commissions and brokerage, consultant and other fees
incurred in connection with such issuance or sale and net of taxes paid
or payable as a result thereof.
"Offer to Purchase" means an offer to purchase Exchange Debentures by
ICG from the Holders commenced by mailing a notice to the Trustee and
each Holder stating: (i) the covenant pursuant to which the offer is
being made and that all Exchange Debentures validly tendered will be
accepted for payment on a pro rata basis; (ii) the purchase price and the
date of purchase (which shall be a Business Day no earlier than 30 days
nor later than 60 days from the date such notice is mailed) (the "Payment
Date"); (iii) that any Exchange Debenture not tendered will continue to
accrue interest pursuant to its terms; (iv) that, unless ICG defaults in
the payment of the purchase price, any Exchange Debenture accepted for
payment pursuant to the Offer to Purchase shall cease to accrue interest
on and after the Payment Date; (v) that Holders electing to have an
Exchange Debenture purchased pursuant to the Offer to Purchase will be
required to surrender the Exchange Debenture, together with the form
entitled "Option of the Holder to Elect Purchase" on the reverse side of
the Exchange Debenture completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the Business
Day immediately preceding the Payment Date; (vi) that Holders will be
entitled to withdraw their election if the Paying Agent receives, not
later than the close of business on the third Business Day immediately
preceding the Payment Date, a telegram, facsimile transmission or letter
setting forth the name of such Holder, the principal amount of Exchange
Debentures delivered for purchase and a statement that such Holder is
withdrawing his election to have such Exchange Debentures purchased; and
(vii) that Holders whose Exchange Debentures are being purchased only in
part will be issued new Exchange Debentures equal in principal amount to
the unpurchased portion of the Exchange Debentures surrendered; provided
that each Exchange Debenture purchased and each new Exchange Debenture
issued shall be in a principal amount of $1,000 or integral multiples
thereof. On the Payment Date, ICG shall (i) accept for payment on a pro
-103-
<PAGE>
rata basis Exchange Debentures or portions thereof tendered pursuant to
an Offer to Purchase; (ii) deposit with the Paying Agent money sufficient
to pay the purchase price of all Exchange Debentures or portions thereof,
so accepted; and (iii) deliver, or cause to be delivered, to the Trustee
or Transfer Agent, as the case may be, all Exchange Debentures or
portions thereof, so accepted together with an Officers' Certificate
specifying the Exchange Debentures or portions thereof accepted for
payment by ICG. The Paying Agent shall promptly mail to the Holders of
Exchange Debentures so accepted, payment in an amount equal to the
purchase price, and the Trustee shall promptly authenticate and mail to
such Holders a new Exchange Debenture equal in principal amount to any
unpurchased portion of the Exchange Debenture surrendered; provided that
each Exchange Debenture purchased and each new Exchange Debenture issued
shall be in a principal amount of $1,000 or integral multiples thereof.
ICG will publicly announce the results of an Offer to Purchase as soon as
practicable after the Payment Date. The Trustee shall act as the Paying
Agent for an Offer to Purchase. ICG will comply with Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable, in the event that
ICG is required to repurchase Exchange Debentures pursuant to an Offer to
Purchase.
"Ohio LINX" means ICG Ohio LINX, Inc., an Ohio corporation.
"Permitted Investment" means (i) an Investment in a Restricted
Subsidiary or a Person which will, upon the making of such Investment,
become a Restricted Subsidiary or be merged or consolidated with or into
or transfer or convey all or substantially all its assets to, the
Guarantor or a Restricted Subsidiary; provided that such person's primary
business is related, ancillary or complementary to the businesses of the
Guarantor and its Restricted Subsidiaries on the date of such Investment;
(ii) a Temporary Cash Investment; (iii) payroll, travel and similar
advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses in accordance with GAAP; (iv) loans
or advances to employees made in the ordinary course of business in
accordance with past practice of the Guarantor or its Restricted
Subsidiaries and that do not in the aggregate exceed $2 million at any
time outstanding; and (v) stock, obligations or securities received in
satisfaction of judgments.
"Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate
legal proceedings promptly instituted and diligently conducted and for
which a reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made; (ii) statutory
Liens of landlords and carriers, warehousemen, mechanics, suppliers,
materialmen, repairmen or other similar Liens arising in the ordinary
course of business and with respect to amounts not yet delinquent or
being contested in good faith by appropriate legal proceedings promptly
instituted and diligently conducted and for which a reserve or other
appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (iii) Liens incurred or deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security; (iv) Liens
incurred or deposits made to secure the performance of tenders, bids,
leases, statutory or regulatory obligations, bankers' acceptances, surety
and appeal bonds, government contracts, performance and return-of-money
bonds and other obligations of a similar nature incurred in the ordinary
course of business (exclusive of obligations for the payment of borrowed
money); (v) easements, rights of way, municipal and zoning ordinances and
similar charges, encumbrances, title defects or other irregularities that
do not materially interfere with the ordinary course of business of the
Guarantor or any of its Restricted Subsidiaries; (vi) Liens (including
extensions and renewals thereof) upon real or personal property acquired
after the Closing Date; provided that (a) such Lien is created solely for
the purpose of securing Indebtedness Incurred, in accordance with the
"Limitation on Indebtedness" covenant described above, (1) to finance the
cost (including the cost of improvement or construction) of the item of
property or assets subject thereto and such Lien is created prior to, at
the time of or within six months after the later of the acquisition, the
completion of construction or the commencement of full operation of such
property or (2) to refinance any Indebtedness previously so secured, (b)
the principal amount of the Indebtedness secured by such Lien does not
exceed 100% of such cost and (c) any such Lien shall not extend to or
cover any property or assets other than such item of property or assets
and any improvements on such item; (vii) leases or subleases granted to
others that do not materially interfere with the ordinary course of
business of the Guarantor and its Restricted Subsidiaries, taken as a
whole; (viii) Liens encumbering property or assets under construction
arising from progress or partial payments by a customer of the Guarantor
or its Restricted Subsidiaries relating to such property or assets; (ix)
any interest or title of a lessor in the property subject to any
Capitalized Lease or operating lease; (x) Liens arising from filing
Uniform Commercial Code financing statements regarding leases; (xi) Liens
on property of, or on shares of stock
-104-
<PAGE>
or Indebtedness of, any corporation existing at the time such corporation
becomes, or becomes a part of, any Restricted Subsidiary; provided that
such Liens do not extend to or cover any property or assets of the
Guarantor or any Restricted Subsidiary other than the property or assets
acquired; (xii) Liens in favor of the Guarantor or any Restricted
Subsidiary; (xiii) Liens arising from the rendering of a final judgment
or order against the Guarantor or any Restricted Subsidiary of the
Guarantor that does not give rise to an Event of Default; (xiv) Liens
securing reimbursement obligations with respect to letters of credit that
encumber documents and other property relating to such letters of credit
and the products and proceeds thereof; (xv) Liens in favor of customs and
revenue authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods; (xvi) Liens
encumbering customary initial deposits and margin deposits, and other
Liens that are either within the general parameters customary in the
industry and incurred in the ordinary course of business, in each case,
securing Indebtedness under Interest Rate Agreements and Currency
Agreements and forward contracts, options, future contracts, futures
options or similar agreements or arrangements designed to protect the
Guarantor or any of its Restricted Subsidiaries from fluctuations in the
price of commodities; (xvii) Liens arising out of conditional sale, title
retention, consignment or similar arrangements for the sale of goods
entered into by the Guarantor or any of its Restricted Subsidiaries in
the ordinary course of business in accordance with the past practices of
the Guarantor and its Restricted Subsidiaries prior to the Closing Date;
and (xviii) Liens on or sales of receivables.
"Preferred stock" or "preferred stock" means, with respect to any
Person, any and all shares, interests, participations or other
equivalents (however designated, whether voting or non-voting) of such
Person's preferred or preference stock, whether now outstanding or issued
after the date of the Exchange Debenture Indenture, including, without
limitation, all series and classes of such preferred or preference stock.
"Public Equity Offering" means a bona fide underwritten primary public
offering of Common Stock of ICG or IntelCom pursuant to an effective
registration statement under the Securities Act.
"Redeemable Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed
prior to the Stated Maturity of the Exchange Debentures, (ii) redeemable
at the option of the holder of such class or series of Capital Stock at
any time prior to the Stated Maturity of the Exchange Debentures, or
(iii) convertible into or exchangeable for Capital Stock referred to in
clause (i) or (ii) above or Indebtedness having a scheduled maturity
prior to the Stated Maturity of the Exchange Debentures; provided that
any Capital Stock that would not constitute Redeemable Stock but for
provisions thereof giving holders thereof the right to require such
Person to repurchase or redeem such Capital Stock upon the occurrence of
an "asset sale" or "change of control" occurring prior to the Stated
Maturity of the Exchange Debentures shall not constitute Redeemable Stock
if the "asset sale" or "change of control" provisions applicable to such
Capital Stock are no more favorable to the holders of such Capital Stock
than the provisions contained in "Limitation on Asset Sales" and
"Repurchase of Exchange Debentures upon a Change of Control" covenants
described above and such Capital Stock specifically provides that such
Person will not repurchase or redeem any such stock pursuant to such
provision prior to the Guarantor's or ICG's repurchase of such Exchange
Debentures, as are required to be repurchased pursuant to the "Limitation
on Asset Sales" and "Repurchase of Exchange Debentures upon a Change of
Control" covenants described above.
"Restricted Subsidiary" means any Subsidiary of the Guarantor other
than an Unrestricted Subsidiary.
"New Notes" means the New Notes Due 2006 of ICG, guaranteed by
IntelCom on a senior unsecured basis and issued on the Closing Date.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary of the Guarantor that, together with its
Subsidiaries, (i) for the most recent fiscal year of the Guarantor,
accounted for more than 10% of the consolidated revenues of the Guarantor
and its Restricted Subsidiaries or (ii) as of the end of such fiscal
year, was the owner of more than 10% of the consolidated assets of the
Guarantor and its Restricted Subsidiaries, all as set forth on the most
recently available consolidated financial statements of the Guarantor for
such fiscal year.
"StarCom" means StarCom International Optics Corporation, a British
Columbia corporation, and its subsidiaries.
-105-
<PAGE>
"Stated Maturity" means, (i) with respect to any debt security, the
date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and
(ii) with respect to any scheduled installment of principal of or
interest on any debt security, the date specified in such debt security
as the fixed date on which such installment is due and payable.
"Strategic Investor" means any Person engaged in the
telecommunications business which has a net worth or equity market
capitalization of at least $1 billion.
"Strategic Investor Subordinated Indebtedness" means all Indebtedness
of ICG owed to a Strategic Investor that is contractually subordinate in
right of payment to the Exchange Debentures to at least the following
extent: no payment of principal (or premium, if any) or interest on or
otherwise payable in respect of such Indebtedness may be made (whether as
a result of a default or otherwise) prior to the payment in full of all
of the Guarantor's and ICG's obligations under the Exchange Debentures;
provided, however, that prior to the payment of such obligations,
interest on Strategic Investor Subordinated Indebtedness may be payable
solely in kind or in Common Stock (other than Redeemable Stock) of the
Guarantor.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the
outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.
"Temporary Cash Investment" means any of the following: (i) direct
obligations of the United States of America or any agency thereof or
obligations fully and unconditionally guaranteed by the United States of
America or any agency thereof, (ii) time deposit accounts, certificates
of deposit and money market deposits maturing within 270 days of the date
of acquisition thereof, bankers' acceptances with maturities not
exceeding 270 days, and overnight bank deposits, in each case issued by
or with a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country
recognized by the United States, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $100
million (or the foreign currency equivalent thereof) and has outstanding
debt which is rated "A" (or such similar equivalent rating) or higher by
at least one nationally recognized statistical rating organization (as
defined in Rule 436 under the Securities Act) or any money-market fund
sponsored by a registered broker dealer or mutual fund distributor, (iii)
repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii)
above, (iv) commercial paper, maturing not more than 180 days after the
date of acquisition, issued by a corporation (other than an Affiliate of
the Guarantor) organized and in existence under the laws of the United
States of America, any state thereof or any foreign country recognized by
the United States of America with a rating at the time as of which any
investment therein is made of "P-1" (or higher) according to Moody's
Investors Service, Inc. or "A-1" (or higher) according to Standard &
Poor's Ratings Group, and (v) securities with maturities of six months or
less from the date of acquisition issued or fully and unconditionally
guaranteed by any state, commonwealth or territory of the United States
of America, or by any political subdivision or taxing authority thereof,
and rated at least "A" by Standard & Poor's Ratings Group or Moody's
Investors Service, Inc.
"13 1/2% Notes" means the 13 1/2% Notes Due 2005 of ICG guaranteed by
IntelCom on a senior unsecured basis.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Guarantor or any of its Restricted Subsidiaries, the
date such Indebtedness is to be Incurred and, with respect to any
Restricted Payment, the date such Restricted Payment is to be made.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Guarantor
that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and
(ii) any Subsidiary of an Unrestricted Subsidiary. The Board of
Directors may designate any Restricted Subsidiary of the Guarantor
(including any newly acquired or newly formed Subsidiary of the
Guarantor), other than ICG or a Subsidiary that has given a Subsidiary
Guarantee, to be an Unrestricted Subsidiary unless such Subsidiary owns
any Capital Stock of, or owns or holds any Lien on any property of, the
Guarantor or any Restricted Subsidiary;
-106-
<PAGE>
provided that either (A) the Subsidiary to be so designated has total
assets of $1,000 or less or (B) if such Subsidiary has assets greater
than $1,000, that such designation would be permitted under the
"Limitation on Restricted Payments" covenant described above. The Board
of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary of the Guarantor; provided that immediately after giving
effect to such designation (x) the Guarantor could Incur $1.00 of
additional Indebtedness under the first paragraph of the "Limitation on
Indebtedness" covenant described above and (y) no Default or Event of
Default shall have occurred and be continuing. Any such designation by
the Board of Directors shall be evidenced to the Trustee by promptly
filing with the Trustee a copy of the Board Resolution giving effect to
such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
"Voting Stock" means, with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of
directors, managers or other voting members of the governing body of such
Person.
"Wholly Owned" means, with respect to any Subsidiary of any Person,
such Subsidiary if all of the outstanding Capital Stock in such
Subsidiary (other than any director's qualifying shares or Investments by
foreign nationals mandated by applicable law) is owned by such Person or
one or more Wholly Owned Subsidiaries of such Person.
"Zycom" means Zycom Corporation, an Alberta, Canada corporation.
-107-
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
Reid & Priest LLP, counsel to the Company, has advised the Company
that the following summary expresses their opinion as to the material
anticipated federal income tax consequences of the purchase, ownership
and disposition of the New Notes, the New Preferred Stock and the
Exchange Debentures. Except where noted, it deals only with New Notes,
New Preferred Stock and Exchange Debentures held as capital assets by
United States Holders and does not deal with special situations, such as
those of dealers in securities or currencies, financial institutions,
life insurance companies, persons holding New Notes, New Preferred Stock
or Exchange Debentures as a part of a hedging or conversion transaction
or a straddle or United States Holders whose "functional currency" is not
the U.S. dollar. It does not describe any federal income tax
consequences of the purchase, ownership or disposition of the New
Preferred Stock or the Exchange Debentures by Non-United States Holders,
as defined below, because the Old Preferred Stock and Exchange Debentures
were not sold in the Private Offering to persons other than United States
Holders. Furthermore, the discussion below is based upon the provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), and
regulations, including final Treasury regulations addressing debt
instruments issued with original issue discount (the "OID Regulations"),
rulings and judicial decisions thereunder as of the date hereof, and such
authorities may be repealed, revoked or modified so as to result in
federal income tax consequences different from those discussed below.
ALL PROSPECTIVE PURCHASERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF THE NEW NOTES, THE NEW PREFERRED
STOCK OR THE EXCHANGE DEBENTURES.
EXCHANGE OF NEW PREFERRED STOCK OR NEW NOTES
An exchange of the New Preferred Stock for the Old Preferred Stock, or
the New Notes for the Old Notes should not constitute a taxable event for
federal income tax purposes because the New Preferred Stock should not be
considered to differ materially in kind or extent from the Old Preferred
Stock and the New Notes should not be considered to differ materially in
kind or extent from the Old Notes. Rather, the New Preferred Stock
received by a holder should be treated as a continuation of the Old
Preferred Stock in the hands of such holder and the New Notes should be
treated as a continuation of the Old Notes in the hands of such holder.
As a result, holders who exchange their Old Preferred Stock for New
Preferred Stock or their Old Notes for New Notes should not recognize any
income, gain or loss for federal income tax purposes with respect to such
exchange. The following discussion assumes that an exchange of New
Preferred Stock for Old Preferred Stock or an exchange of New Notes for
Old Notes will not be treated as an exchange for federal income tax
purposes.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
As used herein, a "United States Holder" means a beneficial owner that
is a citizen or resident of the United States, a corporation, partnership
or other entity created or organized in or under the laws of the United
States or any political subdivision thereof, or an estate or trust the
income of which is subject to United States federal income taxation
regardless of its source. An individual may, subject to certain
exceptions, be deemed to be a resident (as opposed to a non-resident
alien) of the United States by virtue of being present in the United
States on at least 31 days in the calendar year and for an aggregate of
at least 183 days during a three-year period ending in the current
calendar year (counting for such purposes all of the days present in the
current year, one-third of the days present in the immediately preceding
year, and one-sixth of the days present in the second preceding year). A
"Non-United States Holder" is a holder that is not a United States
Holder.
DIVIDENDS ON THE NEW PREFERRED STOCK
Distributions of cash or of additional New Preferred Stock on the New
Preferred Stock will be treated as dividends to United States Holders to
the extent of the Company's current and accumulated earnings and profits
as determined under federal income tax principles. The amount of the
Company's earnings and profits at any time will depend upon the future
actions and financial performance of the Company. The amount of a
distribution of additional New Preferred Stock will equal the fair market
value New Preferred Stock distributed on the date of the distribution.
The Company believes that it does not presently have any current or
accumulated earnings and profits.
-108-
<PAGE>
Consequently, unless the Company generates earnings and profits in the
future, distributions with respect to the New Preferred Stock may not
qualify as dividends for federal income tax purposes. To the extent that
the amount of a distribution on the New Preferred Stock exceeds the
Company's current and accumulated earnings and profits, such
distributions will be treated as a nontaxable return of capital and will
be applied against and reduce the adjusted tax basis of the New Preferred
Stock in the hands of each United States Holder (but not below zero),
thus increasing the amount of any gain (or reducing the amount of any
loss) which would otherwise be realized by such United States Holder upon
the sale or other taxable disposition of such New Preferred Stock. The
amount of any such distribution which exceeds the adjusted tax basis of
the New Preferred Stock in the hands of the United States Holder will be
treated as capital gain and will be either long-term or short-term
capital gain depending on the United States Holder's holding period for
the New Preferred Stock.
Under Section 243 of the Code, corporate United States Holders
generally will be able to deduct 70% of the amount of any distribution
qualifying as a dividend. There are, however, many exceptions and
restrictions relating to the availability of such dividends-received
deduction. Section 246A of the Code reduces the dividends-received
deduction allowed to a corporate United States Holder that has incurred
indebtedness "directly attributable" to its investment in portfolio
stock. Section 246(c) of the Code requires that, in order to be eligible
for the dividends-received deduction, a corporate United States Holder
must generally hold the shares of New Preferred Stock for a 46-day
minimum holding period or a 91-day period in certain circumstances. A
taxpayer's holding period for these purposes is suspended during any
period in which a United States Holder has certain options or contractual
obligations with respect to substantially identical stock or holds one or
more other positions with respect to substantially identical stock that
diminishes the risk of loss from holding the New Preferred Stock. A
recent legislative proposal would (i) reduce the dividends-received
deduction from 70% to 50%, and (ii) modify the manner in which the 46- or
91-day minimum holding period is determined. It is unclear whether and
in what form such proposal will be enacted.
Under Section 1059 of the Code a corporate United States Holder is
required to reduce its tax basis (but not below zero) in the New
Preferred Stock by the nontaxed portion of any "extraordinary dividend"
if such stock has not been held for more than two years before the
earliest of the date such dividend is declared, announced or agreed to.
Generally, the nontaxed portion of an extraordinary dividend is the
amount excluded from income by operation of the dividends-received
deduction provisions of Section 243 of the Code. An extraordinary
dividend on the New Preferred Stock generally would be a dividend that
(i) equals or exceeds 5% of the corporate United States Holder's adjusted
tax basis in the New Preferred Stock, treating all dividends having ex-
dividend dates within an 85-day period as one dividend or (ii) exceeds
20% of the corporate United States Holder's adjusted tax basis in such
stock, treating all dividends having ex-dividend dates within a 365-day
period as one dividend. In determining whether a dividend paid on the
New Preferred Stock is an extraordinary dividend, a corporate United
States Holder may elect to substitute the fair market value of the New
Preferred Stock for such United States Holder's tax basis for purposes of
applying these tests, provided such fair market value is established to
the satisfaction of the Secretary of Treasury (the "Secretary") as of the
day before the ex-dividend date. An extraordinary dividend also
currently includes any amount treated as a dividend in the case of a
redemption that is either non-pro rata as to all stockholders or in
partial liquidation of the Company, regardless of the stockholder's
holding period and regardless of the size of the dividend, including a
redemption pursuant to ICG's right to redeem the New Preferred Stock for
cash or exchange the New Preferred Stock for Exchange Debentures. If any
part of the nontaxed portion of an extraordinary dividend is not applied
to reduce the corporate United States Holder's tax basis as a result of
the limitation on reducing such basis below zero, such part will be
treated as gain upon sale or exchange of the New Preferred Stock.
However, recently introduced legislation would require gain on the
nontaxed portion of an extraordinary dividend to be recognized at the
time when the extraordinary dividend is paid rather than at the time of
the sale or exchange of the New Preferred Stock. It is unclear whether
and in what form such legislation will be enacted. Special rules exist
with respect to extraordinary dividends for "qualified preferred
dividends." A qualified preferred dividend is any fixed dividend payable
with respect to any share of stock which (i) provides for fixed preferred
dividends payable not less frequently than annually and (ii) is not in
arrears as to dividends at the time the United States Holder acquires
such stock. A qualified preferred dividend does not include any dividend
payable with respect to any share of stock if the actual rate of return
of such stock exceeds 15%. Section 1059 does not apply to qualified
preferred dividends if the corporate United States Holder holds such
stock for more than five years. If the United States Holder disposes of
such stock before it has been held for more than five years, the
-109-
<PAGE>
amount subject to extraordinary dividend treatment with respect to
qualified preferred dividends is limited to the excess of the actual rate
of return over the stated rate of return. Actual or stated rates of
return are the actual or stated dividends expressed as a percentage of
the lesser of (1) the United States Holder's tax basis in such stock or
(2) the liquidation preference of such stock. CORPORATE UNITED STATES
HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE
POSSIBLE APPLICATION OF SECTION 1059 TO THEIR OWNERSHIP AND DISPOSITION
OF THE NEW PREFERRED STOCK.
A corporate United States Holder's liability for alternative minimum
tax may be affected by the portion of the dividends received which such
corporate United States Holder deducts in computing taxable income. This
results from the fact that corporate stockholders are required to
increase alternative minimum taxable income by 75% of the excess of
current earnings and profits (with certain adjustments) over alternative
minimum taxable income (determined without regard to earnings and profit
adjustments or the alternative tax net operating loss deduction).
REDEMPTION PREMIUM
Under Section 305(c) of the Code and the applicable Treasury
regulations thereunder, if the redemption price of New Preferred Stock
exceeds its issue price, the difference ("redemption premium") may be
taxable as a constructive distribution of additional New Preferred Stock
to the United States Holder (treated as a dividend to the extent of the
Company's current and accumulated earnings and profits and otherwise
subject to the treatment described above for distributions) over a
certain period. Because the New Preferred Stock provides for an optional
right of redemption by the Company at a price in excess of the issue
price, United States Holders could be required to recognize such
redemption premium under a constant interest rate method similar to that
described below for accruing OID (see "--Original Issue Discount") if,
based on all of the facts and circumstances, the optional redemption is
more likely than not to occur. If stock may be redeemed at more than one
time, the time and price at which such redemption is most likely to occur
must be determined based on all of the facts and circumstances.
Applicable Treasury regulations provide a "safe harbor" under which a
right to redeem will not be treated as more likely than not to occur if
(i) the issuer and the United States Holder are not related within the
meaning of the Treasury regulations; (ii) there are no plans,
arrangements or agreements that effectively require or are intended to
compel the issuer to redeem the stock (disregarding, for this purpose, a
separate mandatory redemption) and (iii) exercise of the right to redeem
would not reduce the yield of the stock, as determined under the Treasury
regulations. Further, the Treasury regulations provide that such
redemption premium is not taxable as a constructive distribution if it is
solely in the nature of a penalty for premature redemption. A redemption
premium is solely in the nature of a penalty for premature redemption if
it is paid as a result of changes in economic or market conditions over
which neither the issuer nor the holder have control. Regardless of
whether the optional redemption is more likely than not to occur or
whether the redemption premium is solely in the nature of a penalty for
premature redemption, constructive dividend treatment will not result if
the redemption premium does not exceed a de minimis amount. Based on the
Treasury regulations, the Company intends to take the position that the
existence of the Company's optional redemption right does not result in a
constructive distribution to the United States Holders.
REDEMPTION AND EXCHANGE FOR EXCHANGE DEBENTURES
A redemption of shares of the New Preferred Stock for cash or an
exchange of the New Preferred Stock for Exchange Debentures will be a
taxable transaction on which a United States Holder will generally
recognize capital gain or loss (except to the extent of amounts received
on the exchange that are attributable to declared dividends, which will
be treated in the same manner as distributions described above) provided
that the redemption (i) results in complete termination of the holder's
stock interest in ICG or (ii) results in a "meaningful reduction" in a
United States Holder's stock interest in the Company. Whether a
redemption will result in a meaningful reduction depends on the
particular holder's facts and circumstances. In determining whether a
United States Holder's interest in ICG has been reduced or terminated,
the holder is deemed, under the constructive ownership rules of Section
302(c) of the Code, to own any shares of ICG stock that are owned, or
deemed owned, by certain related persons and entities and any shares that
such holder, or related person or entity, has the right to acquire by
exercise of an option. If the redemption of the New Preferred Stock does
not result in a complete termination or meaningful reduction, as
described above, the transaction would be treated as a distribution of
cash or Exchange Debentures, as the case may be. Such distribution will
be treated in the same manner as distributions described above. However,
corporate
-110-
<PAGE>
holders should be aware that to the extent such distribution is treated
as a dividend it would be an extraordinary dividend under Section 1059 of
the Code. If the redemption of the New Preferred Stock does result in a
complete termination or meaningful reduction, the gain or loss recognized
on such exchange will generally be equal to the difference between the
amount realized by the United States Holder of the New Preferred Stock
and such United States Holder's adjusted tax basis in the New Preferred
Stock surrendered in the redemption.
In the case of a redemption for cash, the amount realized will be the
cash received on the redemption. In the case of an exchange of New
Preferred Stock for Exchange Debentures, the amount realized on receipt
of the Exchange Debenture would be equal to the "issue price" of the
Exchange Debenture. Thus, the amount realized on the exchange will be
equal to the issue price of the Exchange Debentures plus any cash
received on the exchange (other than cash received with respect to
declared dividends). The issue price of an Exchange Debenture would be
equal to its fair market value if as of the exchange date the Exchange
Debentures or the New Preferred Stock are traded on an established
securities market on or at any time during the 60-day period ending 30
days after the exchange date. If neither the New Preferred Stock nor the
Exchange Debentures are so traded, the issue price of the Exchange
Debentures would be the stated principal amount of the Exchange
Debentures provided that the yield on the Exchange Debentures is equal to
or greater than the "applicable federal rate" in effect at the time the
Exchange Debenture is issued. If the yield on the Exchange Debentures is
less than such applicable federal rate, its issue price under Section
1274 of the Code would be equal to the present value as of the issue date
of all payments to be made on the Exchange Debentures, discounted at the
applicable federal rate. It cannot be determined at the present time
whether the New Preferred Stock or the Exchange Debentures will be, at
the relevant time, traded on an established securities market within the
meaning of the Proposed Regulations.
Depending upon a United States Holder's particular circumstances, the
tax consequences of holding Exchange Debentures may be less advantageous
than the tax consequences of holding New Preferred Stock because, for
example, payments of interest on the Exchange Debentures will not be
eligible for any dividends-received deduction that may be available to
corporate United States Holders and because, as discussed below, the
Exchange Debentures will be issued with OID.
PAYMENTS OF INTEREST ON THE NEW NOTES AND EXCHANGE DEBENTURES
The stated interest on a New Note and, if issued with OID, an Exchange
Debenture will not be treated as interest for federal income tax
purposes, but instead will be subject to the OID rules described below.
If the Exchange Debentures are not issued with OID, then interest on an
Exchange Debenture generally will be includible in a United States
Holder's income as ordinary income under the Holder's method of
accounting.
In the event IntelCom makes payments to a United States Holder
pursuant to the Note Guarantee or the Debenture Guarantee, such Holder
will be required to include in income, as ordinary income, not only
amounts received but also any additional amounts payable for Canadian
withholding taxes.
ORIGINAL ISSUE DISCOUNT
The New Notes were, and the Exchange Debentures, if issued in exchange
for New Preferred Stock, may be, issued with OID, as further discussed
below. United States Holders of New Notes or Exchange Debentures issued
with OID will be subject to special tax accounting rules, as described in
greater detail below. Holders of such New Notes or Exchange Debentures
should be aware that they generally must include OID in gross income for
federal income tax purposes on an annual basis under a constant yield
accrual method. As a result, Holders will include OID in income in
advance of the receipt of cash attributable to that income. However,
United States Holders of New Notes or Exchange Debentures issued with OID
generally will not be required to include separately in income cash
payments received on such Notes or Debentures, even if denominated as
interest, to the extent such payments do not constitute qualified stated
interest (as defined below). The New Notes and Exchange Debentures
issued with OID will be referred to as "Original Issue Discount
Debentures." The Company will report to United States Holders of New
Notes on a timely basis the reportable amount of OID and interest income
based on its understanding of applicable law and, if any Exchange
Debentures are issued with OID, the Company will report such amounts to
-111-
<PAGE>
United States Holders of such Debentures. STOCKHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS AS TO THE CONSEQUENCES OF OWNING EXCHANGE
DEBENTURES.
The amount of OID, if any, on a debt instrument is the excess of its
"stated redemption price at maturity" over its "issue price," subject to
a statutorily defined de minimis exception. The "issue price" of a debt
instrument issued for cash is equal to the first price (excluding sales
to bond houses and brokers) at which price a substantial amount of such
debt instruments was sold. The "stated redemption price at maturity" of
a debt instrument is the sum of its principal amount plus all other
payments required thereunder, other than payments of "qualified stated
interest" (defined generally as stated interest that is unconditionally
payable in cash or in property (other than the debt instruments of the
issuer), at least annually at a single fixed rate that appropriately
takes into account the length of intervals between payments).
Because interest on the New Notes is not payable until November 1,
2001, the stated interest on the New Notes will not be treated as
qualified stated interest. In addition, the New Notes were issued at a
price that was less than the stated principal amount. As a result, the
New Notes will be treated as having been issued with OID equal to the
excess of their stated redemption price at maturity (which will be equal
to the sum of the principal amount plus all payments of stated interest)
over the issue price of the Old Notes (which will be equal to the initial
price at which a substantial amount of Old Notes were sold (excluding
sales to bond houses and brokers)).
In the event that an exchange offer is not consummated or shelf
==
registration is not declared effective prior to the date that is six
months after the Closing Date then, as liquidated damages, additional
interest payable in cash ("Additional Interest") shall become payable
with respect to the New Notes. Treasury regulations provide that in the
case of a debt instrument such as a New Note that provides for an
alternative payment schedule applicable upon the occurrence of one or
more contingencies, the yield and maturity of such debt instrument for
purposes of calculating the amount of OID are determined by assuming that
the payments will be made according to the stated payment schedule of the
debt instrument unless, based on all the facts and circumstances as of
the closing date, it is more likely than not that payments will not be
made in accordance with the stated payment schedule of the debt
instrument. ICG has determined that it is more likely than not that
Additional Interest will not be required to be paid. As a result, ICG
will calculate OID with respect to the New Notes by assuming that no
Additional Interest will be paid. This determination by ICG is generally
binding on all holders of New Notes, unless a Holder explicitly discloses
on a statement attached to such Holder's timely filed United States
federal income tax return for the taxable year that includes the
acquisition date of the Note that its determination of yield and maturity
is different from that of ICG. The yield to maturity of the New Notes
is, rounded to two decimal places, 12.50%, based on the issue price and
computed on the basis of semiannual compounding. The above yield does
not take into account any Additional Interest. There can be no assurance
that forthcoming regulations will not require that such amounts be
included in computing the yield to maturity. If Additional Interest does
become payable, then solely for purposes of the accrual of OID, the yield
and maturity of the New Notes will be redetermined by treating the New
Notes as reissued on the date the exchange offer requirement is not met
for an amount equal to its adjusted issue price on that date.
Because ICG has the option through May 1, 2001 to pay interest on the
Exchange Debentures by issuing additional Exchange Debentures, if any
Exchange Debentures are issued on or prior to that date none of the
stated interest on the Exchange Debentures would be treated as qualified
stated interest unless under special rules for interest holidays the
amount of OID is treated as de minimis. Any Exchange Debentures so
issued would be treated as having been issued with OID equal to the
excess of their stated redemption price at maturity (which will be equal
to the sum of the principal amount plus all payments of stated interest)
over their issue price (which will be as described under the "--
Redemption and Exchange for Exchange Debenture", above). Any additional
Exchange Debentures issued in lieu of cash would not be treated as debt
instruments separate from the Exchange Debentures upon which they were
issued, but instead are aggregated with such Exchange Debentures.
The right to issue additional Exchange Debentures in lieu of paying
cash interest through May 1, 2001 is treated for purposes of the original
issue discount provisions of the Code as an option to defer the interest
payments on the Exchange Debentures until maturity. Treasury regulations
provide that in the case of a debt instrument that provides the issuer
with an unconditional option or options exercisable during the term of
the debt instrument that,
-112-
<PAGE>
if exercised, require payments to be made on the debt instrument under an
alternative payment schedule, the yield and maturity of such debt
instrument for purposes of calculating OID are determined by assuming the
issuer exercises or does not exercise the option in a manner that
minimizes the yield on the debt instrument.
If the issue price of the Exchange Debentures is equal to their
principal amount, the yield to maturity of the Exchange Debentures if the
option to pay interest with additional Exchange Debentures is exercised
will be equal to the yield to maturity if the option is not exercised.
Accordingly, for purposes of calculating OID, it would be assumed that
ICG will not exercise the option because exercise of the option will not
minimize the yield. If the option was in fact subsequently exercised and
additional Exchange Debentures were issued by ICG in lieu of cash, such
additional Exchange Debentures would be aggregated with the Exchange
Debentures upon which they were issued, and OID would be calculated for
the remainder of the term of the Exchange Debentures based upon an
adjusted issue price which includes the principal amount of the
additional Exchange Debentures. As a result of such exercise, United
States Holders of Exchange Debentures would include OID in income in
advance of the receipt of cash, regardless of such Holders' regular
methods of accounting.
If the issue price of the Exchange Debentures is less than their
principal amount, the yield to maturity of the Exchange Debentures, if
the option to pay interest with additional Exchange Debentures is
exercised, will be less than the yield to maturity if the option is not
exercised. Accordingly, for purposes of calculating OID, it would be
assumed that ICG will exercise the option because to do so will minimize
the yield. If ICG does in fact exercise its option and issues additional
Exchange Debentures in lieu of cash, United States Holders of Exchange
Debentures will include OID in income in advance of the receipt of cash,
regardless of such Holders' regular methods of accounting. If ICG
subsequently makes a cash payment instead of exercising its option and
issuing an additional Exchange Debenture, the cash payment made will be
treated as a prepayment of the Exchange Debentures, partially retiring
such Exchange Debentures on a pro rata basis on the date of such payment.
Such retirement would be a taxable exchange to the Holder of the Exchange
Debenture.
If the Exchange Debentures are issued after May 1, 2001, ICG would not
have the option to pay interest with additional Exchange Debentures. In
such event, (i) all interest payments on any Exchange Debenture issued
will be qualified stated interest, (ii) the redemption price at maturity
of any Exchange Debenture will be equal to its principal amount, and
(iii) any Exchange Debenture will therefore be issued with OID only to
the extent its principal amount exceeds its issue price (provided that
such excess is not de minimis).
The amount of OID includible in income by the initial United States
Holder of an Original Issue Discount Debenture is the sum of the "daily
portions" of OID with respect to the Original Issue Discount Debenture
for each day during the taxable year or portion of the taxable year in
which such United States Holder held such Debenture ("accrued OID"). The
daily portion is determined by allocating to each day in any "accrual
period" a pro rata portion of the OID allocable to that accrual period.
The "accrual period" for an Original Issue Discount Debenture may be of
any length and may vary in length over the term of the Original Issue
Discount Debenture, provided that each accrual period is no longer than
one year and each scheduled payment of principal or interest occurs on
the first day or the final day of an accrual period. The amount of OID
allocable to any accrual period is an amount equal to the excess, if any,
of (a) the product of the Original Issue Discount Debenture's adjusted
issue price at the beginning of such accrual period and its yield to
maturity (determined on the basis of compounding at the close of each
accrual period and properly adjusted for the length of the accrual
period) over (b) the sum of any qualified stated interest allocable to
the accrual period. OID allocable to a final accrual period is the
difference between the amount payable at maturity (other than a payment
of qualified stated interest) and the adjusted issue price at the
beginning of the final accrual period. The yield of a New Note is,
rounded to two decimal places, 12.50%. Special rules will apply for
calculating OID for an initial short accrual period. The "adjusted issue
price" of an Original Issue Discount Debenture at the beginning of any
accrual period is equal to its issue price increased by the accrued OID
for each prior accrual period (determined without regard to the
amortization of any acquisition or bond premium, as described below) and
reduced by any payments made on such Debenture (other than qualified
stated interest) on or before the first day of the accrual period.
Both the New Notes and the Exchange Debentures may be redeemed prior
to their Stated Maturity at the option of the Company. For purposes of
computing the yield of such instrument, ICG will be deemed to exercise
-113-
<PAGE>
or not exercise its option to redeem the Original Issue Discount
Debentures in a manner that minimizes the yield on the Original Issue
Discount Debentures. It is not anticipated that ICG's ability to redeem
prior to stated maturity would affect the yield of such instrument.
In the event of a change of control, ICG will be required to offer to
repurchase all of the New Notes and the Exchange Debentures. The right
of holders to require repurchase upon a Change of Control will not affect
the yield or maturity date of (i) the New Notes or any Exchange
Debentures issued before August 13, 1996 unless, based on all the facts
and circumstances as of the issue date, it is more likely than not that
such an event giving rise to the repurchase will occur or (ii) any
Exchange Debentures issued on or after August 13, 1996, provided that,
based on all the facts and circumstances as of the issue date, the
payment schedule on such Exchange Debentures that does not reflect a
change of control is significantly more likely than not to occur.
ICG does not intend to treat the change of control provisions of the New
Notes or the Exchange Debentures as affecting the computation of the
yield to maturity of any New Notes or Exchange Debentures.
United States Holders may elect to treat all interest on any New Note
or Exchange Debenture as OID and calculate the amount includible in gross
income under the constant yield method described above. For the purposes
of this election, interest includes stated interest, acquisition
discount, OID, de minimis OID, market discount, de minimis market
discount and unstated interest, as adjusted by any amortizable bond
premium or acquisition premium. The election is to be made for the
taxable year in which the United States Holder acquired the New Note or
Exchange Debenture, and may not be revoked without the consent of the
Internal Revenue Service (the "IRS"). UNITED STATES HOLDERS SHOULD
CONSULT WITH THEIR OWN TAX ADVISORS ABOUT THIS ELECTION.
MARKET DISCOUNT ON RESALE OF NEW NOTES OR EXCHANGE DEBENTURES
If a United States Holder purchases an Exchange Debenture (other than
an Original Issue Discount Debenture) for an amount less than its stated
redemption price at maturity or, in the case of an Original Issue
Discount Debenture, for an amount that is less than its adjusted issue
price, the amount of the difference will be treated as "market discount"
for federal income tax purposes, unless such difference is less than a
specified de minimis amount. However, with respect to a United States
Holder who purchases a New Note at original issuance, such instrument
will not be treated as issued with market discount unless it is purchased
for less than its issue price and the difference between the purchase
price and the issue price is greater than a specified de minimis amount.
Under the market discount rules, a United States Holder will be required
to treat any principal payment on a New Note or an Exchange Debenture, or
any gain on the sale, exchange, retirement or other disposition of, a New
Note or an Exchange Debenture as ordinary income to the extent of the
market discount which has not previously been included in income and is
treated as having accrued on such New Note or Exchange Debenture at the
time of such payment or disposition. In addition, the United States
Holder may be required to defer, until the maturity of the New Note or
the Exchange Debenture or its earlier disposition in a taxable
transaction, the deduction of all or a portion of the interest expense on
any indebtedness incurred or continued to purchase or carry such New Note
or Exchange Debenture.
Any market discount will be considered to accrue ratably during the
period from the date of acquisition to the maturity date of the New Note
or the Exchange Debenture, unless the United States Holder elects to
accrue on a constant interest method. A United States Holder of a New
Note or the Exchange Debenture may elect to include market discount in
income currently as it accrues (on either a ratable or constant interest
method), in which case the rule described above regarding deferral of
interest deductions will not apply. This election to include market
discount in income currently, once made, applies to all market discount
obligations acquired on or after the first taxable year to which the
election applies and may not be revoked without the consent of the IRS.
-114-
<PAGE>
ACQUISITION PREMIUM; AMORTIZABLE BOND PREMIUM
A United States Holder that purchases a New Note or an Exchange
Debenture for an amount that is greater than its adjusted issue price but
equal to or less than the sum of all amounts payable on the New Note or
Exchange Debenture after the purchase date, other than qualified stated
interest, will be considered to have purchased such New Note or Exchange
Debenture at an "acquisition premium." Under the acquisition premium
rules, the amount of OID, if any, which such United States Holder must
include in its gross income with respect to such New Note or Exchange
Debenture for any taxable year will be reduced by the portion of such
acquisition premium properly allocable to such year.
If at the time the New Preferred Stock is exchanged for Exchange
Debentures or at the time a subsequent United States Holder purchases
Exchange Debentures, the United States Holder's tax basis in any such
Exchange Debenture exceeds the sum of all amounts payable on the Exchange
Debenture after the exchange date or purchase date, other than qualified
stated interest, such excess may constitute "premium" and such United
States Holder will not be required to include any OID in income. A
United States Holder generally may elect to amortize bond premium over
the remaining term of the Exchange Debenture on a constant yield method.
The amount amortized in any year will be treated as a reduction of the
United States Holder's interest income from the Exchange Debenture. Bond
premium on an Exchange Debenture held by a United States Holder that does
not make such an election will decrease the gain or increase the loss
otherwise recognized on disposition of the Exchange Debenture. The
election to amortize bond premium on a constant yield method once made
applies to all debt obligations held or subsequently acquired by the
electing United States Holder on or after the first day of the first
taxable year to which the election applies and may not be revoked without
the consent of the IRS.
REDEMPTION, SALE OR EXCHANGE OF NEW NOTES OR EXCHANGE DEBENTURES
The adjusted tax basis of a United States Holder who receives Exchange
Debentures in exchange for New Preferred Stock will, in general, be equal
to the issue price of such Exchange Debentures, increased by OID and
market discount previously included in income by the United States Holder
and reduced by any amortized premium and any cash payments on the
Exchange Debentures other than qualified stated interest. A United
States Holder's tax basis in a New Note will, in general, be the United
States Holder's cost therefor, increased by market discount previously
included in income by the United States Holder and reduced by any
amortized premium and any cash payments on the New Notes. Upon the
redemption, sale, exchange or retirement of a New Note or Exchange
Debenture, a United States Holder will recognize gain or loss equal to
the difference between the amount realized upon the redemption, sale,
exchange or retirement (less any accrued qualified stated interest, not
previously taken into account, which will be taxable as such) and the
adjusted tax basis of the New Note or Exchange Debenture. Such gain or
loss will be capital gain or loss and will be long-term capital gain or
loss if at the time of redemption, sale, exchange or retirement the New
Note or Exchange Debenture has been held for more than one year.
APPLICABLE HIGH YIELD DISCOUNT OBLIGATIONS
If the yield to maturity on Original Issue Discount Debentures equals
or exceeds the sum of (x) the "applicable federal rate" (as determined
under Section 1274(d) of the Code) in effect for the month in which the
Original Issue Discount Debentures are issued (the "AFR") and (y) 5% and
the OID on such Original Issue Discount Debentures is "significant," the
Original Issue Discount Debentures will be considered "applicable high
yield discount obligations" ("AHYDOs") under Section 163(i) of the Code.
The "applicable federal rate" is 6.4% for long-term debt instruments
issued in April 1996. Consequently, the Company will not be allowed to
take a deduction for interest (including OID) accrued on the Original
Issue Discount Debentures for U.S. federal income tax purposes until such
time as the Company actually pays such interest (including OID) in cash
or in other property (other than stock or debt of the Company or a person
deemed to be related to the Company under Section 453(f)(1) of the Code).
Moreover, if the yield to maturity on the Original Issue Discount
Debenture exceeds the sum of (x) the AFR and (y) 6% (such excess shall be
referred to hereinafter as the "Disqualified Yield"), the deduction for
interest (including OID) accrued on the Original Issue Discount
Debentures will be permanently disallowed (regardless of
-115-
<PAGE>
whether the Company actually pays such interest or OID in cash or in
other property) for U.S. federal income tax purposes to the extent such
interest or OID is attributable to the Disqualified Yield on the Original
Issue Discount Debentures ("Dividend-Equivalent Interest"). For purposes
of the dividends-received deduction, such Dividend-Equivalent Interest
will be treated as a dividend to the extent it is deemed to have been
paid out of the Company's current or accumulated earnings and profits.
Due to their maturity date, yield to maturity, and amount of OID, the
New Notes will be subject to the applicable high yield discount
obligation rules described above. As a result, ICG will not be permitted
to deduct any OID on such New Notes until such OID is paid. In addition,
with respect to corporate United States Holders, the Dividend Equivalent
Interest will be treated as a dividend for purposes of the dividends-
received deduction under Section 243 of the Code to the extent of ICG's
current and accumulated earnings and profits and will not be deductible
by ICG. To the extent that ICG's earnings and profits are insufficient,
any portion of the Dividend Equivalent Interest that would have otherwise
been treated as a dividend for purposes of the dividends-received
deduction will continue to be taxed as OID income in accordance with the
rules described above under the heading "Original Issue Discount."
Because the amount of OID, if any, attributable to the Exchange
Debentures will be determined at such time such Exchange Debentures are
issued and the AFR at the time such Exchange Debentures are issued in
exchange for New Preferred Stock is not predictable, it is impossible to
determine at the present time whether an Exchange Debenture will be
treated as an AHYDO.
ADDITIONAL LIMITATION ON DEDUCTION OF INTEREST BY ICG
Under Section 163(j) of the Code, no deduction is allowed for
"disqualified interest" paid or accrued by a corporation during a taxable
year if (i) such corporation has "excess interest expense" (as defined by
the Code generally to mean the excess, if any, of the corporation's net
interest expense over 50% of the "adjusted taxable income" of the
corporation) for the taxable year, and (ii) the ratio of debt to equity
of such corporation exceeds 1.5:1. "Disqualified Interest" includes any
interest paid or accrued by a corporation with respect to debt that is
guaranteed by a foreign person that is related to such corporation to the
extent that no gross basis United States tax is imposed with respect to
such interest. ICG expects that Section 163(j) of the Code may apply, at
least initially, to interest paid or accrued by ICG with respect to the
New Notes because (1) the New Notes are guaranteed by IntelCom (a foreign
person that is related to ICG and its Subsidiaries), (2) it is
anticipated that there will be no gross basis U.S. tax imposed on
interest paid or accrued with respect to the New Notes, and (3) the ratio
of debt to equity of ICG presently exceeds 1.5:1. As a result, the
ability of ICG to deduct interest paid or accrued with respect to the New
Notes may be substantially limited by Section 163(j) of the Code.
Because the Exchange Debentures are not being issued currently, it is
impossible to determine at the present time whether an Exchange Debenture
will be subject to the limitation of Section 163(j).
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of dividends, principal, interest, OID, and premium and to the
proceeds of sales of New Notes, Exchange Debentures and New Preferred
Stock made to United States Holders other than certain exempt recipients
(such as corporations). A 31% backup withholding tax will apply to such
payments if the United States Holder fails to provide a taxpayer
identification number or certification of foreign or other exempt status
or fails to report in full dividend and interest income.
Any amounts withheld under the backup withholding rules will be
allowed as a refund or a credit against such United States Holder's U.S.
federal income tax liability provided the required information is
furnished to the IRS.
-116-
<PAGE>
TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
INTEREST AND OID ON NEW NOTES
Subject to the discussion below concerning backup withholding, no
withholding of United States federal income tax will be required with
respect to the payment by the Company or any paying agent of principal or
interest (which for purposes of this discussion includes OID) on a New
Note owned by a Non-United States Holder, provided (i) that the
beneficial owner does not actually or constructively own 10% or more of
the total combined voting power of all classes of stock of the Company
entitled to vote within the meaning of Section 871(h)(3) of the Code and
the regulations thereunder, (ii) the beneficial owner is not a controlled
foreign corporation that is related to the Company through stock
ownership, (iii) the beneficial owner is not a bank whose receipt of
interest on a New Note is described in Section 881(c)(3)(A) of the Code
and (iv) the beneficial owner satisfies the statement requirement
(described generally below) set forth in Section 871(h) and Section
881(c) of the Code and the regulations thereunder.
To satisfy the requirement referred to in (iv) above, the beneficial
owner of such New Note, or a financial institution holding the New Note
on behalf of such owner, must provide, in accordance with specified
procedures, the Company or its paying agent with a statement to the
effect that the beneficial owner is not a U.S. person. These
requirements will be met if (1) the beneficial owner provides his name
and address, and certifies, under penalties of perjury, that he is not a
U.S. person (which certification may be made on an Internal Revenue
Service Form W-8 (or successor form)) or (2) a financial institution
holding the New Note on behalf of the beneficial owner certifies, under
penalties of perjury, that such statement has been received by it and
furnishes a paying agent with a copy thereof.
The Company will not withhold federal income tax on interest paid to a
Non-United States Holder if it receives the Service's Form 4224 from that
Non-United States Holder, establishing that such income is effectively
connected with the conduct of a trade or business in the United States,
unless the Company has knowledge to the contrary. Interest (including
OID) or redemption premium paid to a Non-United States Holder (other than
a partnership) that is effectively connected with the conduct by the
holder of a trade or business in the United States is generally taxed at
the graduated rates that are applicable to United States persons. In the
case of a Non-United States Holder that is a corporation, such
effectively connected income may also be subject to the United States
federal branch profits tax (which is generally imposed on a foreign
corporation on the deemed repatriation from the United States of
effectively connected earnings and profits) at a 30% rate (unless the
rate is reduced or eliminated by an applicable income tax treaty and the
holder is a qualified resident of the treaty country). In the case of a
partnership that has foreign partners (i.e., persons who would be Non-
United States Holders if they held the New Notes directly), such
effectively connected income allocable to the foreign partner would
generally be subject to United States federal withholding tax (regardless
of whether such income is, in fact, distributed to such foreign partner)
at a 35% rate, if the foreign partner is a corporation, or at a 39.6%
rate, if the foreign partner is not a corporation. Any foreign partner
of such a partnership would be entitled to a credit against his United
States federal income tax for his share of the withholding tax paid by
the partnership.
SALE, EXCHANGE, REDEMPTION OR OTHER DISPOSITION OF NEW NOTES
A Non-United States Holder will generally not be subject to United
States federal income tax with respect to gain recognized on a sale,
exchange, redemption or other disposition of New Notes unless (i) the
gain is effectively connected with a trade or business of the Non-United
States Holder in the United States, or (ii) in the case of a Non-United
States Holder who is an individual and holds the New Notes as a capital
asset, such holder is present in the United States for 183 or more days
in the taxable year of the sale or other disposition and certain other
conditions are met.
Gains derived by a Non-United States Holder (other than a partnership)
from the sale or other disposition of New Notes that are effectively
connected with the conduct by the holder of a trade or business in the
United States are generally taxed at the graduated rates that are
applicable to United States persons. In the case of a Non-United States
Holder that is a corporation, such effectively connected income may also
be subject to the United States
-117-
<PAGE>
federal branch profits tax (which is generally imposed on a foreign
corporation on the deemed repatriation from the United States of
effectively connected earnings and profits) at a 30% rate (unless the
rate is reduced or eliminated by an applicable income tax treaty and the
holder is a qualified resident of the treaty country). In the case of a
partnership that has foreign partners (i.e., persons who would be Non-
United States Holders if they held the New Notes, directly), such
effectively connected income allocable to the foreign partner would
generally be subject to United States federal withholding tax (regardless
of whether such income is, in fact, distributed to such foreign partner)
at a 35% rate, if the foreign partner is a corporation, or at a 39.6%
rate, if the foreign partner is not a corporation. Any foreign partner
of such a partnership would be entitled to a credit against his United
States federal income tax for his share of the withholding tax paid by
the partnership. If an individual Non-United States Holder falls under
clause (ii) above, he will be subject to a flat 30% tax on the gain
derived from the sale or other disposition, which may be offset by United
States capital losses recognized within the same taxable year as such
sale or other disposition (notwithstanding the fact that he is not
considered a resident of the United States).
FEDERAL ESTATE AND GIFT TAX
A New Note beneficially owned by an individual who at the time of
death is a Non-United States Holder will not be subject to United States
federal estate tax as a result of such individual's death, provided that
such individual does not actually or constructively own 10% or more of
the total combined voting power of all classes of stock of the Company
entitled to vote within the meaning of Section 871(h)(3) of the Code and
provided that the interest payments with respect to such New Note would
not have been, if received at the time of such individual's death,
effectively connected with the conduct of a United States trade or
business by such individual.
Any Non-United States Holder will not be subject to United States
federal gift tax on a transfer of New Notes, unless such person is an
individual who is a domiciliary of the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
No information reporting or backup withholding will be required with
respect to payments made by the Company or any paying agent to Non-United
States Holders if a statement described in (iv) under "Non-United States
Holders--Interest and OID on New Notes" has been received and the payor
does not have actual knowledge that the beneficial owner is a United
States person.
In addition, backup withholding and information reporting will not
apply if payments of principal, interest, OID or premium on a New Note
are paid or collected by a foreign office of a custodian, nominee or
other foreign agent on behalf of the beneficial owner of such New Note,
or if a foreign office of a broker (as defined in applicable Treasury
regulations) pays the proceeds of the sale of a New Note to the owner
thereof. If, however, such nominee, custodian, agent or broker is, for
United States federal income tax purposes, a U.S. person, a controlled
foreign corporation or a foreign person that derives 50% or more of its
gross income for certain periods from the conduct of a trade or business
in the United States, such payments will not be subject to backup
withholding but will be subject to information reporting, unless (I) such
custodian, nominee, agent or broker has documentary evidence in its
records that the beneficial owner is not a U.S. person and certain other
conditions are met or (2) the beneficial owner otherwise establishes an
exemption. Temporary Treasury regulations provide that the Treasury is
considering whether backup withholding will apply with respect to such
payments of principal, interest or the proceeds of a sale that are not
subject to backup withholding under the current regulations.
Payments of principal, interest, OID and premium on a New Note, paid
to the beneficial owner of a New Note by a United States office of a
custodian, nominee or agent, or the payment by the United States office
of a broker of the proceeds of sale of a New Note will be subject to both
backup withholding and information reporting unless the beneficial owner
provides the statement referred to in (iv) under "Non-United States
Holders--Interest and OID on New Notes" and the payor does not have
actual knowledge that the beneficial owner is a United States person or
otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be
allowed as a refund or a credit against such Holder's U.S. federal income
tax liability provided the required information is furnished to the IRS.
-118-
<PAGE>
PLAN OF DISTRIBUTION
Except as described below, a broker-dealer may not participate in the
Exchange Offers in connection with a distribution of the New Notes or the
New Preferred Stock. Each broker-dealer that receives New Notes or New
Preferred Stock for its own account pursuant to the Exchange Offers must
acknowledge that it will deliver a prospectus in connection with any
resale of such New Notes or New Preferred Stock. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes or New Preferred
Stock received in exchange for Old Notes or Old Preferred Stock where
such Old Notes or Old Preferred Stock were acquired as a result of
market-making activities or other trading activities. The Company has
agreed that for a period of 90 days after the Expiration Date, it will
make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition,
until ____________ __, 1996 all dealers effecting transactions in the New
Notes or New Preferred Stock may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes
or New Preferred Stock by broker-dealers. New Notes or New Preferred
Stock received by broker-dealers for their own account pursuant to the
Exchange Offers may be sold from time to time in one or more transactions
in the over-the-counter market, in negotiated transactions, through the
writing of options on the New Notes or New Preferred Stock or a
combination of such methods of resale, at market prices prevailing at the
time of resale, at prices related to such prevailing market prices or
negotiated prices. Any such resale may be made directly to purchasers or
to or through brokers or dealers who may receive compensation in the form
of commissions or concessions from any such broker-dealer and/or the
purchasers of any such New Notes or New Preferred Stock. Any broker-
dealer that resells New Notes that were received by it for its own
account pursuant to the Exchange Offers and any broker or dealer that
participates in a distribution of such New Notes or New Preferred Stock
may be deemed to be an "underwriter" within the meaning of the Securities
Act and any profit on any such resale of New Notes or New Preferred Stock
and any commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The
Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities
Act.
The Company has agreed to pay all expenses incident to the Exchange
Offers other than commissions or concessions of any brokers or dealers
and expenses of counsel for the holders of the New Notes or New Preferred
Stock and will indemnify the holders of the New Notes and the New
Preferred Stock (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the New Notes and the New Preferred Stock offered
hereby will be passed upon by Reid & Priest LLP, New York, New York. The
validity of the New Note Guarantee will be passed upon by Tupper Jonsson
& Yeadon, Vancouver, British Columbia, Canada.
EXPERTS
The consolidated financial statements and financial statement
schedules of IntelCom as of September 30, 1995 and 1994, and for each of
the years in the three-year period ended September 30, 1995, have been
incorporated by reference herein and in the Registration Statement, in
reliance upon the reports of KPMG Peat Marwick LLP, independent certified
public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
-119-
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and, if given or
made, such information or representations must not be relied upon as having been
authorized. This Prospectus does not constitute an offer to sell or the
solicitation of an offer to buy any securities other than the securities to
which it related or any offer to sell or the solicitation of an offer to buy
such securities in any circumstances in which such offer or solicitation is
unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to its date.
TABLE OF CONTENTS
AVAILABLE INFORMATION.................. -4-
INFORMATION INCORPORATED BY REFERENCE.. -4-
PROSPECTUS SUMMARY..................... -6-
RISK FACTORS........................... -21-
THE EXCHANGE OFFERS.................... -28-
DESCRIPTION OF NEW NOTES............... -36-
DESCRIPTION OF NEW PREFERRED STOCK..... -60-
DESCRIPTION OF EXCHANGE DEBENTURES..... -83-
PLAN OF DISTRIBUTION...................-120-
LEGAL MATTERS..........................-120-
EXPERTS................................-120-
INTELCOM GROUP (U.S.A.), INC.
INTELCOM GROUP INC.
-------------
PROSPECTUS
-------------
__________ ___, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 7-3-101.5 of the Colorado Corporation Code, ICG's
First Amended and Restated Articles of Incorporation provide that ICG shall
indemnify any and all officers, directors, or employees against expenses
incurred by them, in connection with the defense of any legal proceedings or
threatened legal proceedings to which such persons are made a party because of
such positions if:
(I) He conducted himself in good faith;
(II) He reasonably believed;
(A) In the case of conduct in his official capacity with the corporation,
that his conduct was in the corporation's best interest; or
(B) In all other cases, that his conduct was at least not opposed to the
corporation's best interests; and
(III) In the case of any criminal proceeding, he had no reasonable cause to
believe his conduct was unlawful.
The IntelCom Bylaws, as amended, contain a provision limiting the liability
of directors of IntelCom to the fullest extent permitted under the laws of the
Canada Business Corporations Act (the "CBCA"). The CBCA allows IntelCom, with
court approval, to indemnify a Director or former Director of IntelCom against
all costs, charges and expenses, actually and reasonably incurred by him,
including an amount paid to settle an action or satisfy a judgment in civil,
criminal or administrative action or proceeding to which he is made a party by
reason of being or having been a Director, including an action brought by
IntelCom if:
a) he acted honestly and in good faith with the view to the best interest of
the company; and
b) in the case of criminal or administrative action or proceeding that is
enforced by a monetary penalty, he had reasonable grounds for believing
that his conduct was lawful.
IntelCom's Bylaws also allow the Directors to cause IntelCom to indemnify
any officer, employee or agent of IntelCom against all costs, charges and
expenses incurred by him resulting from his acting as officer, employee or
agent of the company. See Part 7 of IntelCom's Bylaws for a description of the
indemnification provisions of IntelCom's Bylaws.
See Item 22 of this Registration Statement regarding the position of the
Securities and Exchange Commission on indemnification for liabilities arising
under the Securities Act.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(1) Underwriting Agreement. Not Applicable
----------------------
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or
----------------------------------------------------------------
Succession. None
----------
(3) Articles of Incorporation.
-------------------------
3.1: First Amended and Restated Articles of Incorporation of IntelCom
(U.S.A.), Inc.+
(4) Instruments defining the rights of security holders, including indentures.
-------------------------------------------------------------------------
4.1: Note Purchase Agreement, dated September 16, 1993 [Incorporated by
reference to Annual Report on Form 20-F for the year ended September
30, 1993, as filed on March 31, 1994].
4.2: Note Purchase Agreement, dated October 27, 1993 [Incorporated by
reference to Annual Report on Form 20-F for the year ended September
30, 1993, as filed on March 31, 1994].
II-1
<PAGE>
4.3: Form of Indenture between IntelCom Group Inc. and Bankers Trust
Company for 7% Convertible Subordinated Redeemable Notes due 1998
[Incorporated by reference to Exhibit 4.3 to Registration Statement
on Form S-1, File No. 33-75636].
4.4: Form of Indenture between IntelCom Group Inc. and Bankers Trust
Company for 7% Simple Interest Convertible Subordinated Redeemable
Notes due 1998 [Incorporated by reference to Exhibit 4.4 to
Registration Statement on Form S-1, File No. 33-75636].
4.4: Note Purchase Agreement, dated as of July 14, 1995, among IntelCom
Group (U.S.A.), Inc., IntelCom Group Inc., Morgan Stanley Group Inc.
("MS Group") (the "Initial Purchaser"), Princes Gate Investors,
L.P., Acorn Partnership I, L.P., PGI Investments Limited, PGI Sweden
AB, and Gregor von Opel (collectively, together with the Initial
Purchaser, the "Committed Purchasers") and MS Group, as agent for
the Purchasers (as such term is defined therein) [Incorporated by
reference to Exhibit 4.1 to Form 8-K, as filed on August 2, 1995].
4.5: Warrant Agreement, dated as of July 14, 1995, among the Registrant,
the Committed Purchasers, and IntelCom Group (U.S.A.), Inc., as
Warrant Agent [Incorporated by reference to Exhibit 4.2 to Form 8-K,
as filed on August 2, 1995].
4.6: Indenture, dated as of August 8, 1995, among IntelCom Group
(U.S.A.), Inc., IntelCom Group Inc. and Norwest Bank Colorado,
National Association [Incorporated by reference to Exhibit 4.1 to
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995,
as filed on August 10, 1995].
4.7: Registration Rights Agreement, dated as of August 8, 1995 among
IntelCom Group Inc., IntelCom Group (U.S.A.), Inc. and Morgan
Stanley & Co. Incorporated [Incorporated by reference to Exhibit 4.2
to Quarterly Report on Form 10-Q for the quarter ended June 30,
1995, as filed on August 10, 1995].
4.8: Warrant Agreement, dated as of August 8, 1995 between IntelCom
Group Inc. and Norwest Bank Colorado, National Association
[Incorporated by reference to Exhibit 4.3 to Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995, as filed on August
10, 1995].
4.9: Warrant Agreement Amendment, dated as of August 8, 1995 among
IntelCom Group Inc., Morgan Stanley Group, Inc., Princes Gate
Investors, L.P., IntelCom Group (U.S.A.), Inc., and certain
subsidiaries of IntelCom Group (U.S.A.), Inc. [Incorporated by
reference to Exhibit 4.4 to Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995, as filed on August 10, 1995].
4.10: Form of Old Note
4.11: Form of New Note
4.12: Form of Letter of Transmittal with respect to the Note Exchange
Offer
4.13: Indenture, dated as of April 30, 1996, among IntelCom Group
(U.S.A.), Inc., IntelCom Group Inc. and Norwest Bank Colorado,
National Association.+
4.14: Registration Rights Agreement, dated April 30, 1996, among
IntelCom Group (U.S.A.), Inc., IntelCom Group Inc. and Norwest Bank
Colorado, National Association, with respect to the Preferred
Stock.+
4.15: Registration Rights Agreement dated April 30, 1996, among
IntelCom Group (U.S.A.), Inc., IntelCom Group Inc. and Norwest Bank
Colorado, National Association, with respect to the Senior Discount
Notes.+
4.16: Form of Old Preferred Stock Certificate
4.17: Form of New Preferred Stock Certificate
4:18: Form of Letter of Transmittal with respect to the Preferred
Stock Exchange Offer.
(5) Opinion regarding legality.
--------------------------
5.1: Opinion of Reid & Priest LLP
II-2
<PAGE>
5.2: Opinion of Tupper, Jonsson & Yeadon
(8) Opinion regarding tax matters.
-----------------------------
8.1: Opinion of Reid & Priest LLP
(10) Material Contracts. Not Applicable
------------------
(12) Statement re Computation of Ratios. Not Applicable
----------------------------------
(15) Letter regarding Unaudited Interim Financial Statements. Not
-------------------------------------------------------
Applicable
(23) Consents.
--------
23.1: Consent of KPMG Peat Marwick LLP
23.2: Consent of Reid & Priest LLP (included in Exhibit 5.1)
23.3: Consent of Tupper, Jonsson & Yeadon (included in Exhibit 5.2)
23.2: Consent of Connecticut Research [Incorporated by reference to
Annual Report on Form 10-K for the year ended September 30, 1994,
as filed on December 27, 1994].
(24) Power of Attorney.
-----------------
24.1 Power of Attorney with respect to IntelCom Group (U.S.A.), Inc.+
24.2 Power of Attorney with respect to IntelCom Group, Inc.+
(25) Statement of Eligibility of Trustee.
-----------------------------------
25.1: Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 of Norwest Bank Colorado, National
Association.
______________________
+ Previously filed
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
The undersigned Registrants hereby undertake:
(1) To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form,
within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through
the date of responding to the request;
II-3
<PAGE>
(2) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement
when it became effective;
(3) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(4) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(5) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering;
(6) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Act, the Registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City and County of Denver,
State of Colorado, on June 17, 1996.
INTELCOM GROUP (U.S.A.), INC.
By: *
------------------------
J. Shelby Bryan
Chairman of the Board, 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, June 17, 1996
- ---------------------------- President,
J. Shelby Bryan Chief Executive Officer and
Director (Principal executive
officer)
/s/ John D. Field Executive Vice President and June 17, 1996
- ---------------------------- Director
John D. Field
* Executive Vice President, June 17, 1996
- ---------------------------- Chief Financial Officer and
James D. Grenfell Director (Principal accounting
officer)
* Director June 17, 1996
- ----------------------------
William J. Maxwell
* Director June 17, 1996
- ----------------------------
Marc E. Maassen
- ---------------------------
By: /s/ John D. Field
-----------------------------------------
John D. Field
Attorney-in-Fact
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City and County
of Denver, State of Colorado, on June 17, 1996.
INTELCOM GROUP 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 June , 1996
William J. Laggett Board of Directors
* President, Chief Executive June 17, 1996
- ---------------------- Officer and Director
J. Shelby Bryan
* Executive Vice President June 17, 1996
- -------------------- and Chief Financial Officer
James D. Grenfell
* Director June 17, 1996
- --------------------
Harry R. Herbst
- -------------------- Director June , 1996
William W. Becker
* Director June 17, 1996
- --------------------
Jay E. Ricks
* Director June 17, 1996
- --------------------
Gregory C.K. Smith
* Director June 17, 1996
- --------------------
Leontis Teryazos
- ---------------------------
By: /s/ John D. Field
-----------------------------------------
John D. Field
Attorney-in-Fact
II-6
<PAGE>
Exhibit Index Page No.
------------- --------
4.10: Form of Old Note
4.11: Form of New Note
4.12: Form of Letter of Transmittal with respect to the Note
Exchange Offer
4.16: Form of Old Preferred Stock Certificate
4.17 Form of New Preferred Stock Certificate
4.18 Form of Letter Transmittal with respect to the Preferred Stock
Exchange Offer
(5) Opinion regarding legality.
--------------------------
5.1: Opinion of Reid & Priest LLP
5.2: Opinion of Tupper, Jonsson & Yeadon
(8) Opinion regarding tax matters.
-----------------------------
8.1: Opinion of Reid & Priest LLP
(23) Consents.
--------
23.1: Consent of KPMG Peat Marwick LLP
23.2: Consent of Reid & Priest LLP (included in Exhibit 5.1)
23.3: Consent of Tupper, Jonsson & Yeadon (included in Exhibit 5.2)
(25) Statement of Eligibility of Trustee.
-----------------------------------
25.1: Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 of Norwest Bank Colorado, National
Association.
<PAGE>
EXHIBIT 4.10
INTELCOM GROUP (U.S.A.), INC.
12 1/2% Senior Discount Note Due 2006
CUSIP 45814VAC6
No. 1 $_______________
The following information is supplied for purposes of Sections 1273 and
1275 of the Internal Revenue Code:
<TABLE>
<S> <C>
Issue Date: April 30, 1996 Original issue discount under Section
1273 of the Internal Revenue Code (for
Yield to maturity for period from Issue each $1,000 principal amount at
Date to May 1, 2006: 12.50% (rounded to maturity): $1079.79
two decimal places), compounded
semiannually on May 1 and November 1 Issue Price (for each $1,000 principal
commencing April 30, 1996 (computed amount at maturity): $545.21
without giving effect to the additional
payments of interest in the event the issuer
fails to commence the exchange offer and
fails to cause the shelf registration
statement to be declared effective, each as
referred to on the reverse hereof)
</TABLE>
INTELCOM GROUP (U.S.A.), INC., a Colorado corporation (the "Company",
which term includes any successor under the Indenture hereinafter referred to),
for value received, promises to pay to ___________, or its registered assigns,
the principal sum of _________________________ ($___________) on May 1, 2006.
Interest Payment Dates: May 1 and November 1, commencing November 1,
2001.
Regular Record Dates: April 15 and October 15.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Date: April 30, 1996 INTELCOM GROUP (U.S.A.), INC.
By:
_______________________________
John D. Field
Executive Vice President
By:
_______________________________
James D. Grenfell
Chief Financial Officer &
Executive Vice President
(Form of Trustee's Certificate of Authentication)
This is one of the 12 1/2% Senior Discount Notes due 2006 described in the
within-mentioned Indenture.
NORWEST BANK COLORADO.
NATIONAL ASSOCIATION, as Trustee
By:
_______________________________
Authorized Signatory
<PAGE>
[REVERSE Side OF NOTE]
INTELCOM GROUP (U.S.A.), INC.
12 1/2% Senior Discount Note due 2006
1. Principal and Interest.
----------------------
The Company will pay the principal of this Note on May 1, 2006.
The Company promises to pay interest on the principal amount of this
Note on each Interest Payment Date, as set forth below, at the rate per annum
shown above.
Interest will be payable semiannually (to the holders of record of the
Notes at the close of business on the April 15 or October 15 immediately
preceding the Interest Payment Date) on each Interest Payment Date, commencing
November 1, 2001; provided that no interest shall accrue on the principal amount
of this Note prior to May 1, 2001 and no interest shall be paid on this Note
prior to November 1, 2001, except as provided in the next paragraph.
If an exchange offer registered under the Securities Act is not
consummated, and a shelf registration statement under the Securities Act with
respect to resales of the Notes is not declared effective by the Commission, on
or before November 1, 1996 in accordance with the terms of the Registration
Rights Agreement dated April 30, 1996 among the Company, the Guarantor and
Morgan Stanley & Co. Incorporated, interest (in addition to the accrual of
original discount during the period ending May 1, 2001 and in addition to the
interest otherwise due on the Notes after such date) will accrue, at an annual
rate of 0.5% of the Accreted Value on the preceding Semi-Annual Accrual Date on
the Notes, from November 1, 1996, payable in cash semiannually, in arrears, on
each May 1 and November 1, commencing May 1, 1997. The Holder of this Note is
entitled to the benefits of such Registration Rights Agreement.
From and after May 1, 2001, interest on the Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from May 1, 2001; provided that, if there is no existing default in the
payment of interest and this Note is authenticated between a Regular Record Date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such Interest Payment Date. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and premium, if
any, and interest on overdue installments of interest, to the extent lawful, at
a rate per annum that is 2% in excess of the rate otherwise payable.
<PAGE>
2. Method of Payment.
-----------------
The Company will pay principal as provided above and interest (except
defaulted interest) on the principal amount of the Notes as provided above on
each May 1 and November 1 to the persons who are Holders (as reflected in the
Security Register at the close of business on such April 15 and October 15,
immediately preceding the Interest Payment Date), in each case, even if the Note
is cancelled on registration of transfer or registration of exchange after such
record date; provided that, with respect to the payment of principal, the
Company will not make payment to the Holder unless this Note is surrendered to a
Paying Agent.
The Company will pay principal, premium, if any, and as provided
above, interest in money of the United States that at the time of payment is
legal tender for payment of public and private debts. However, the Company may
pay principal, premium, if any, and interest by its check payable in such money.
It may mail an interest check to a Holder's registered address (as reflected in
the Security Register). If a payment date is a date other than a Business Day
at a place of payment, payment may be made at that place on the next succeeding
day that is a Business Day and no interest shall accrue for the intervening
period.
3. Paying Agent and Registrar.
--------------------------
Initially, the Trustee will act as authenticating agent, Paying Agent
and Registrar. The Company may change any authenticating agent, Paying Agent or
Registrar without notice. The Company, any Subsidiary or any Affiliate of any
of them may act as Paying Agent, Registrar or co-Registrar.
4. Indenture; Limitations.
----------------------
The Company issued the Notes under an Indenture dated as of April 30,
1996 (the "Indenture"), among the Company, IntelCom Group Inc., a Canadian
federal corporation (the "Guarantor"), and Norwest Bank Colorado, National
Association, as trustee (the "Trustee"). Capitalized terms herein are used as
defined in the Indenture unless otherwise indicated. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act. The Notes are subject to all such terms,
and Holders are referred to the Indenture and the Trust Indenture Act for a
statement of all such terms. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Note and the terms of the
Indenture, the terms of the Indenture shall control.
The Notes are general unsecured obligations of the Company. The
Indenture limits the original aggregate principal amount at maturity of the
Notes to $550,300,000 plus any Exchange Securities that may be issued pursuant
to the Registration Rights Agreement.
<PAGE>
5. Redemption.
----------
The Notes will be redeemable, at the Company's option, in whole or in
part, at any time and from time to time on or after May 1, 2001 and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first-class mail to each Holders' last address as it appears in the Security
Register, at the following Redemption Prices (expressed in percentages of their
principal amount at maturity), plus accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date that is on or prior to the Redemption Date to receive
interest due on an Interest Payment Date that is on or prior to the Redemption
Date) if redeemed during the 12-month period commencing on May 1 of the
applicable year set forth below:
Redemption
Year Price
---- ----------
2001 106.250%
2002 103.125
2003 and thereafter 100.000
In addition, at any time on or prior to May 1, 1999, the Company may,
at its option from time to time, redeem Securities having an aggregate principal
amount of up to 35% of the aggregate principal amount of all Securities issued,
at a redemption price equal to 112 1/2% of the Accreted Value thereof on the
Redemption Date, with proceeds of one or more Public Equity Offerings of Common
Stock of (A) the Guarantor or (B) the Company, provided that (i) with respect to
a Public Equity Offering referred to in clause (A) above, cash proceeds of such
Public Equity Offering in an amount sufficient to effect the redemption of
Securities to be so redeemed are contributed by the Guarantor to the Company
prior to such redemption and used by the Company to effect such redemption and
(ii) such redemption occurs within 180 days after consummation of such Public
Equity Offering.
6. Notice of Redemption.
--------------------
Notice of any optional redemption will be mailed at least 30 days but
not more than 60 days before the Redemption Date to each Holder of Notes to be
redeemed at his last address as it appears in the Security Register. Notes in
original denominations larger than $1,000 may be redeemed in part. On and after
the Redemption Date, interest ceases to accrue on Notes or portions of Notes
called for redemption, unless the Company defaults in the payment of the
Redemption Price.
7. Repurchase upon Change in Control.
---------------------------------
Upon the occurrence of any Change of Control, each Holder shall have
the right to require the repurchase of its Notes by the Company in cash pursuant
to the offer
<PAGE>
described in the Indenture at a purchase price equal to 101% of the Accreted
Value thereof plus accrued and unpaid interest, if any, to the date of purchase
(the "Change of Control Payment").
A notice of such Change of Control will be mailed within 30 days after
any Change of Control occurs to each Holder at his last address as it appears in
the Security Register. Notes in original denominations larger than $1,000 may
be sold to the Company in part. On and after the date of the Change of Control
Payment, interest ceases to accrue on Notes or portions of Notes surrendered for
purchase by the Company, unless the Company defaults in the payment of the
Change of Control Payment.
8. Denominations; Transfer; Exchange.
---------------------------------
The Notes are in registered form without coupons in denominations of
$1,000 of principal amount at maturity and multiples of $1,000 in excess
thereof. A Holder may register the transfer or exchange of Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
register the transfer or exchange of any Notes selected for redemption. Also,
it need not register the transfer or exchange of any Notes for a period of 15
days before a selection of Notes to be redeemed is made.
9. Persons Deemed Owners.
---------------------
A Holder shall be treated as the owner of a Note for all purposes.
10. Unclaimed Money.
---------------
If money for the payment of principal, premium, if any, or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company at its request. After that, Holders entitled to the
money must look to the Company for payment, unless an abandoned property law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
11. Discharge Prior to Redemption or Maturity.
-----------------------------------------
If the Company or the Guarantor deposits with the Trustee money or
U.S. Government Obligations sufficient to pay the then outstanding principal of,
premium, if any, and accrued interest on the Notes (a) to redemption or
maturity, the Company will be discharged from the Indenture and the Notes,
except in certain circumstances for certain sections thereof, and (b) to the
Stated Maturity, the Company and the Guarantor will be discharged from certain
covenants set forth in the Indenture.
<PAGE>
12. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount at maturity of the Notes then outstanding, and any existing
default or compliance with any provision may be waived with the consent of the
Holders of at least a majority in principal amount at maturity of the Notes then
outstanding. Without notice to or the consent of any Holder, the parties
thereto may amend or supplement the Indenture or the Notes to, among other
things, cure any ambiguity, defect or inconsistency and make any change that
does not materially and adversely affect the rights of any Holder.
13. Restrictive Covenants.
---------------------
The Indenture imposes certain limitations on the ability of the
Company and the Guarantor and its Restricted Subsidiaries, among other things,
to Incur Indebtedness, make Restricted Payments, use the proceeds from Asset
Sales, engage in transactions with Affiliates or, with respect to each of the
Company and the Guarantor, merge, consolidate or transfer substantially all of
its assets. Within 45 days after the end of each fiscal quarter (90 days after
the end of the last fiscal quarter of each year), the Company must report to the
Trustee on compliance with such limitations.
14. Successor Persons.
-----------------
When a successor person or other entity assumes all the obligations of
its predecessor under the Notes and the Indenture, the predecessor person will
be released from those obligations.
15. Defaults and Remedies.
---------------------
The following events constitute "Events of Default" under the
Indenture: (a) default in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable at maturity, upon acceleration,
redemption or otherwise; (b) default in the payment of interest on any Note when
the same becomes due and payable, and such default continues for a period of 30
days; (c) the Company or the Guarantor defaults in the performance of or
breaches any other covenant or agreement of the Company or the Guarantor in the
Indenture or under the Notes and such default or breach continues for a period
of 30 consecutive days after written notice by the Trustee or the Holders of 25%
or more in aggregate principal amount at maturity of the Notes; (d) there occurs
with respect to any issue or issues of Indebtedness of the Company, the
Guarantor or any Significant Subsidiary having an outstanding principal amount
at maturity of $10 million or more in the aggregate for all such issues of all
such Persons, whether such Indebtedness now exists or shall hereafter be
created, (I) an event of default that has caused the holder thereof to declare
such Indebtedness to be due and payable prior to its Stated Maturity and such
Indebtedness
<PAGE>
has not been discharged in full or such acceleration has not been
rescinded or annulled within 30 days of such acceleration and/or (II) the
failure to make a principal payment at the final (but not any interim) fixed
maturity and such defaulted payment shall not have been made, waived or extended
within 30 days of such payment default; (e) any final judgment or order (not
covered by insurance) for the payment of money in excess of $10 million in the
aggregate for all such final judgments or orders against all such Persons
(treating any deductibles, self-insurance or retention as not so covered) shall
be rendered against the Company, the Guarantor or any Significant Subsidiary and
shall not be paid or discharged, and there shall be any period of 30 consecutive
days following entry of the final judgment or order that causes the aggregate
amount for all such final judgments or orders outstanding and not paid or
discharged against all such Persons to exceed $10 million during which a stay of
enforcement of such final judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; (f) a court having jurisdiction in the
premises enters a decree or order for (A) relief in respect of the Company, the
Guarantor or any Significant Subsidiary in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company, the Guarantor or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Company, the Guarantor or any Significant Subsidiary or (C) the
winding up or liquidation of the affairs of the Company, the Guarantor or any
Significant Subsidiary and, in each case, such decree or order shall remain
unstayed and in effect for a period of 30 consecutive days; or (g) the Company,
the Guarantor or any Significant Subsidiary (A) commences a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consents to the entry of an order for relief in an involuntary case
under any such law, (B) consents to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Company, the Guarantor or any Significant Subsidiary or for all
or substantially all of the property and assets of the Company, the Guarantor or
any Significant Subsidiary or (C) effects any general assignment for the benefit
of creditors. If an Event of Default (other than an Event of Default specified
in clause (f) or (g) above that occurs with respect to the Company or the
Guarantor) occurs and is continuing under the Indenture, the Trustee or the
Holders of at least 25 in aggregate principal amount at maturity of the Notes,
then outstanding, by written notice to the Company (and to the Trustee if such
notice is given by the Holders), may, and the Trustee at the request of such
Holders shall, declare the Accreted Value of, premium, if any, and accrued
interest, if any, on the Notes to be immediately due and payable.
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount at
maturity of the Notes may declare all the Notes to be due and payable. If a
bankruptcy or insolvency default with respect to the Company or any Restricted
Subsidiary occurs and is continuing, the Notes automatically become due and
payable. Holders may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee may require indemnity satisfactory to it before
it enforces the Indenture or the Notes. Subject to certain limitations, Holders
of at
<PAGE>
least a majority in principal amount at maturity of the Notes then outstanding
may direct the Trustee in its exercise of any trust or power.
16. Additional Amounts
------------------
Any payments by the Guarantor under or with respect to the Notes may
require the payment of Additional Amounts as may become payable under Section
4.20 of the Indenture.
17. Redemption for Changes in Withholding Taxes.
-------------------------------------------
The Notes may be redeemed at the election of the Guarantor, as a
whole, but not in part, at 100% of their Accreted Value on the Redemption Date,
together with accrued interest thereon, if any, to the Redemption Date, if (a)
the Guarantor has become or would become obligated to pay, on the next date on
which any amount would be payable with respect to the Notes, any Additional
Amounts as a result of a change in the laws (including any regulations
promulgated thereunder) of Canada (or any political subdivision or taxing
authority thereof or therein), or any change in any official position regarding
the application or interpretation of such laws or regulations, which change is
announced or becomes effective on or after April 25, 1996, and (b) the Guarantor
cannot reasonably arrange for another obligor to make such payment so as to
avoid the requirement to pay such Additional Amounts.
18. Guarantee.
---------
The Company's obligations under the Notes are fully and irrevocably
guaranteed by the Guarantor.
19. Trustee Dealings with Company or Guarantor.
------------------------------------------
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from and perform services for the
Company, the Guarantor or their Affiliates and may otherwise deal with the
Company, the Guarantor or their Affiliates as if it were not the Trustee.
20. No Recourse Against Others.
--------------------------
No incorporator or any past, present or future partner, shareholder,
other equity holder, officer, director, employee or controlling person as such,
of the Company or the Guarantor or of any successor Person shall have any
liability for any obligations of the Company or the Guarantor under the Notes or
the Indenture or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
<PAGE>
21. Authentication.
--------------
This Note shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on the other side of this Note.
22. Abbreviations.
-------------
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to IntelCom Group
(U.S.A.), Inc., 9605 East Maroon Circle, P.O. Box 6742, Englewood, Colorado,
80155-6742, Attention: Chief Financial Officer.
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- ----------------------------------
- --------------------------------------------------------------------------------
Please print or typewrite name and address including zip code of assignee
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing __________________________________________ attorney to transfer
said Note on the books of the Company with full power of substitution in the
premises.
In connection with any transfer of this Note occurring prior to the date
which is the earlier of (i) the date of an effective Registration or (ii) the
end of the period referred to in Rule 144(k) under the Securities Act, the
undersigned confirms that without utilizing any general solicitation or general
advertising that:
[Check One]
[ ](a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act of 1933, as amended. provided by
Rule 144A thereunder.
or
--
<PAGE>
[ ] (b) this Note is being transferred other than in accordance with (a) above
and documents are being furnished which comply with the conditions of
transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Note in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.08 of the Indenture shall have
been satisfied.
Date:_____________ _____________________________________________________
NOTICE: The signature to this assignment must
correspond with the name as written upon the face of
the within-mentioned instrument in every particular,
without alteration or any change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Note for
its own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a "qualified institutional buyer"
within the meaning of Rule-144A under the Securities Act of 1933, as amended,
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Date:_____________ _____________________________________________________
NOTICE: To be executed by an executive officer
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 4.11 or Section 4.12 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.11 or Section 4.12 of the Indenture, state the amount (in
principal amount at maturity): $_________________________________.
Date: ________________
Your Signature: ______________________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee: _____________________________________
<PAGE>
Exhibit 4.11
INTELCOM GROUP (U.S.A.), INC.
12 1/2% Senior Exchange Discount Note Due 2006
CUSIP 45814VAE2
No. 1 $______________
The following information is supplied for purposes of Sections 1273
and 1275 of the Internal Revenue Code:
<TABLE>
<S> <C>
Issue Date: April 30, 1996 Original issue discount under Section
1273
Yield to maturity for period from Issue of the Internal Revenue Code (for each
Date to May 1, 2006: 12.50% (rounded to $1,000 principal amount at maturity):
two decimal places), compounded $1079.79
semiannually on May 1 and November 1
commencing April 30, 1996 Issue Price (for each $1,000 principal
amount at maturity): $545.21
</TABLE>
INTELCOM GROUP (U.S.A.), INC., a Colorado corporation (the "Company",
which term includes any successor under the Indenture hereinafter referred to),
for value received, promises to pay to ____________, or its registered assigns,
the principal sum of ______________ Dollars ($____________) on May 1, 2006.
Interest Payment Dates: May 1 and November 1, commencing November 1,
2001.
Regular Record Dates: April 15 and October 15.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Date: April 30, 1996 INTELCOM GROUP (U.S.A.), INC.
By:
____________________________
John D. Field
Executive Vice President
By:
____________________________
James D. Grenfell
Chief Financial Officer &
Executive Vice President
(Form of Trustee's Certificate of Authentication)
This is one of the 12 1/2% Senior Exchange Discount Notes due 2006 described in
the within-mentioned Indenture.
NORWEST BANK COLORADO.
NATIONAL ASSOCIATION, as Trustee
By:
____________________________
Authorized Signatory
<PAGE>
[REVERSE SIDE OF NOTE]
INTELCOM GROUP (U.S.A.), INC.
12 1/2% Senior Exchange Discount Note due 2006
1. Principal and Interest.
----------------------
The Company will pay the principal of this Note on May 1, 2006.
The Company promises to pay interest on the principal amount of this
Note on each Interest Payment Date, as set forth below, at the rate per annum
shown above.
Interest will be payable semiannually (to the holders of record of the
Notes at the close of business on the April 15 or October 15 immediately
preceding the Interest Payment Date) on each Interest Payment Date, commencing
November 1, 2001; provided that no interest shall accrue on the principal amount
of this Note prior to May 1, 2001 and no interest shall be paid on this Note
prior to November 1, 2001.
From and after May 1, 2001, interest on the Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from May 1, 2001; provided that, if there is no existing default in the
payment of interest and this Note is authenticated between a Regular Record Date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such Interest Payment Date. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and premium, if
any, and interest on overdue installments of interest, to the extent lawful, at
a rate per annum that is 2% in excess of the rate otherwise payable.
2. Method of Payment.
-----------------
The Company will pay principal as provided above and interest (except
defaulted interest) on the principal amount of the Notes as provided above on
each May 1 and November 1 to the persons who are Holders (as reflected in the
Security Register at the close of business on such April 15 and October 15,
immediately preceding the Interest Payment Date), in each case, even if the Note
is cancelled on registration of transfer or registration of exchange after such
record date; provided that, with respect to the payment of principal, the
Company will not make payment to the Holder unless this Note is surrendered to a
Paying Agent.
The Company will pay principal, premium, if any, and as provided
above, interest in money of the United States that at the time of payment is
legal tender for payment
<PAGE>
of public and private debts. However, the Company may pay principal, premium, if
any, and interest by its check payable in such money. It may mail an interest
check to a Holder's registered address (as reflected in the Security Register).
If a payment date is a date other than a Business Day at a place of payment,
payment may be made at that place on the next succeeding day that is a Business
Day and no interest shall accrue for the intervening period.
3. Paying Agent and Registrar.
--------------------------
Initially, the Trustee will act as authenticating agent, Paying Agent
and Registrar. The Company may change any authenticating agent, Paying Agent or
Registrar without notice. The Company, any Subsidiary or any Affiliate of any
of them may act as Paying Agent, Registrar or co-Registrar.
4. Indenture; Limitations.
----------------------
The Company issued the Notes under an Indenture dated as of April 30,
1996 (the "Indenture"), among the Company, IntelCom Group Inc., a Canadian
federal corporation (the "Guarantor"), and Norwest Bank Colorado, National
Association, as trustee (the "Trustee"). Capitalized terms herein are used as
defined in the Indenture unless otherwise indicated. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act. The Notes are subject to all such terms,
and Holders are referred to the Indenture and the Trust Indenture Act for a
statement of all such terms. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Note and the terms of the
Indenture, the terms of the Indenture shall control.
The Notes are general unsecured obligations of the Company. The
Indenture limits the original aggregate principal amount at maturity of the
Notes to $550,300,000 plus any Exchange Securities that may be issued pursuant
to the Registration Rights Agreement.
5. Redemption.
----------
The Notes will be redeemable, at the Company's option, in whole or in
part, at any time and from time to time on or after May 1, 2001 and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first-class mail to each Holders' last address as it appears in the Security
Register, at the following Redemption Prices (expressed in percentages of their
principal amount at maturity), plus accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date that is on or prior to the Redemption Date to receive
interest due on an Interest Payment Date that is on or prior to the Redemption
Date) if redeemed during the 12-month period commencing on May 1 of the
applicable year set forth below:
<PAGE>
Redemption
Year Price
---- ----------
2001 106.250%
2002 103.125
2003 and thereafter 100.000
In addition, at any time on or prior to May 1, 1999, the Company may,
at its option from time to time, redeem Securities having an aggregate principal
amount of up to 35% of the aggregate principal amount of all Securities issued,
at a redemption price equal to 112 1/2% of the Accreted Value thereof on the
Redemption Date, with proceeds of one or more Public Equity Offerings of Common
Stock of (A) the Guarantor or (B) the Company, provided that (i) with respect to
a Public Equity Offering referred to in clause (A) above, cash proceeds of such
Public Equity Offering in an amount sufficient to effect the redemption of
Securities to be so redeemed are contributed by the Guarantor to the Company
prior to such redemption and used by the Company to effect such redemption and
(ii) such redemption occurs within 180 days after consummation of such Public
Equity Offering.
6. Notice of Redemption.
--------------------
Notice of any optional redemption will be mailed at least 30 days but
not more than 60 days before the Redemption Date to each Holder of Notes to be
redeemed at his last address as it appears in the Security Register. Notes in
original denominations larger than $1,000 may be redeemed in part. On and after
the Redemption Date, interest ceases to accrue on Notes or portions of Notes
called for redemption, unless the Company defaults in the payment of the
Redemption Price.
7. Repurchase upon Change in Control.
---------------------------------
Upon the occurrence of any Change of Control, each Holder shall have
the right to require the repurchase of its Notes by the Company in cash pursuant
to the offer described in the Indenture at a purchase price equal to 101% of the
Accreted Value thereof plus accrued and unpaid interest, if any, to the date of
purchase (the "Change of Control Payment").
A notice of such Change of Control will be mailed within 30 days after
any Change of Control occurs to each Holder at his last address as it appears in
the Security Register. Notes in original denominations larger than $1,000 may
be sold to the Company in part. On and after the date of the Change of Control
Payment, interest ceases to accrue on Notes or portions of Notes surrendered for
purchase by the Company, unless the Company defaults in the payment of the
Change of Control Payment.
8. Denominations; Transfer; Exchange.
---------------------------------
<PAGE>
The Notes are in registered form without coupons in denominations of
$1,000 of principal amount at maturity and multiples of $1,000 in excess
thereof. A Holder may register the transfer or exchange of Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
register the transfer or exchange of any Notes selected for redemption. Also,
it need not register the transfer or exchange of any Notes for a period of 15
days before a selection of Notes to be redeemed is made.
9. Persons Deemed Owners.
---------------------
A Holder shall be treated as the owner of a Note for all purposes.
10. Unclaimed Money.
---------------
If money for the payment of principal, premium, if any, or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company at its request. After that, Holders entitled to the
money must look to the Company for payment, unless an abandoned property law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
11. Discharge Prior to Redemption or Maturity.
-----------------------------------------
If the Company or the Guarantor deposits with the Trustee money or
U.S. Government Obligations sufficient to pay the then outstanding principal of,
premium, if any, and accrued interest on the Notes (a) to redemption or
maturity, the Company will be discharged from the Indenture and the Notes,
except in certain circumstances for certain sections thereof, and (b) to the
Stated Maturity, the Company and the Guarantor will be discharged from certain
covenants set forth in the Indenture.
12. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount at maturity of the Notes then outstanding, and any existing
default or compliance with any provision may be waived with the consent of the
Holders of at least a majority in principal amount at maturity of the Notes then
outstanding. Without notice to or the consent of any Holder, the parties
thereto may amend or supplement the Indenture or the Notes to, among other
things, cure any ambiguity, defect or inconsistency and make any change that
does not materially and adversely affect the rights of any Holder.
13. Restrictive Covenants.
---------------------
<PAGE>
The Indenture imposes certain limitations on the ability of the
Company and the Guarantor and its Restricted Subsidiaries, among other things,
to Incur Indebtedness, make Restricted Payments, use the proceeds from Asset
Sales, engage in transactions with Affiliates or, with respect to each of the
Company and the Guarantor, merge, consolidate or transfer substantially all of
its assets. Within 45 days after the end of each fiscal quarter (90 days after
the end of the last fiscal quarter of each year), the Company must report to the
Trustee on compliance with such limitations.
14. Successor Persons.
-----------------
When a successor person or other entity assumes all the obligations of
its predecessor under the Notes and the Indenture, the predecessor person will
be released from those obligations.
15. Defaults and Remedies.
---------------------
The following events constitute "Events of Default" under the
Indenture: (a) default in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable at maturity, upon acceleration,
redemption or otherwise; (b) default in the payment of interest on any Note when
the same becomes due and payable, and such default continues for a period of 30
days; (c) the Company or the Guarantor defaults in the performance of or
breaches any other covenant or agreement of the Company or the Guarantor in the
Indenture or under the Notes and such default or breach continues for a period
of 30 consecutive days after written notice by the Trustee or the Holders of 25%
or more in aggregate principal amount at maturity of the Notes; (d) there occurs
with respect to any issue or issues of Indebtedness of the Company, the
Guarantor or any Significant Subsidiary having an outstanding principal amount
at maturity of $10 million or more in the aggregate for all such issues of all
such Persons, whether such Indebtedness now exists or shall hereafter be
created, (I) an event of default that has caused the holder thereof to declare
such Indebtedness to be due and payable prior to its Stated Maturity and such
Indebtedness has not been discharged in full or such acceleration has not been
rescinded or annulled within 30 days of such acceleration and/or (II) the
failure to make a principal payment at the final (but not any interim) fixed
maturity and such defaulted payment shall not have been made, waived or extended
within 30 days of such payment default; (e) any final judgment or order (not
covered by insurance) for the payment of money in excess of $10 million in the
aggregate for all such final judgments or orders against all such Persons
(treating any deductibles, self-insurance or retention as not so covered) shall
be rendered against the Company, the Guarantor or any Significant Subsidiary and
shall not be paid or discharged, and there shall be any period of 30 consecutive
days following entry of the final judgment or order that causes the aggregate
amount for all such final judgments or orders outstanding and not paid or
discharged against all such Persons to exceed $10 million during which a stay of
enforcement of such final judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; (f) a court having jurisdiction in the
premises enters a decree or order for (A) relief in respect of the Company, the
Guarantor or any Significant Subsidiary in an
<PAGE>
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, (B) appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the Company,
the Guarantor or any Significant Subsidiary or for all or substantially all of
the property and assets of the Company, the Guarantor or any Significant
Subsidiary or (C) the winding up or liquidation of the affairs of the Company,
the Guarantor or any Significant Subsidiary and, in each case, such decree or
order shall remain unstayed and in effect for a period of 30 consecutive days;
or (g) the Company, the Guarantor or any Significant Subsidiary (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or consents to the entry of an order for relief in
an involuntary case under any such law, (B) consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company, the Guarantor or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Company, the Guarantor or any Significant Subsidiary or (C)
effects any general assignment for the benefit of creditors. If an Event of
Default (other than an Event of Default specified in clause (f) or (g) above
that occurs with respect to the Company or the Guarantor) occurs and is
continuing under the Indenture, the Trustee or the Holders of at least 25 in
aggregate principal amount at maturity of the Notes, then outstanding, by
written notice to the Company (and to the Trustee if such notice is given by the
Holders), may, and the Trustee at the request of such Holders shall, declare the
Accreted Value of, premium, if any, and accrued interest, if any, on the Notes
to be immediately due and payable.
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount at
maturity of the Notes may declare all the Notes to be due and payable. If a
bankruptcy or insolvency default with respect to the Company or any Restricted
Subsidiary occurs and is continuing, the Notes automatically become due and
payable. Holders may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee may require indemnity satisfactory to it before
it enforces the Indenture or the Notes. Subject to certain limitations, Holders
of at least a majority in principal amount at maturity of the Notes then
outstanding may direct the Trustee in its exercise of any trust or power.
16. Additional Amounts
------------------
Any payments by the Guarantor under or with respect to the Notes may
require the payment of Additional Amounts as may become payable under Section
4.20 of the Indenture.
17. Redemption for Changes in Withholding Taxes.
-------------------------------------------
The Notes may be redeemed at the election of the Guarantor, as a
whole, but not in part, at 100% of their Accreted Value on the Redemption Date,
together with accrued interest thereon, if any, to the Redemption Date, if (a)
the Guarantor has become or would become obligated to pay, on the next date on
which any amount would be payable with
<PAGE>
respect to the Notes, any Additional Amounts as a result of a change in the laws
(including any regulations promulgated thereunder) of Canada (or any political
subdivision or taxing authority thereof or therein), or any change in any
official position regarding the application or interpretation of such laws or
regulations, which change is announced or becomes effective on or after April
25, 1996, and (b) the Guarantor cannot reasonably arrange for another obligor to
make such payment so as to avoid the requirement to pay such Additional Amounts.
18. Guarantee.
---------
The Company's obligations under the Notes are fully and irrevocably
guaranteed by the Guarantor.
19. Trustee Dealings with Company or Guarantor.
------------------------------------------
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from and perform services for the
Company, the Guarantor or their Affiliates and may otherwise deal with the
Company, the Guarantor or their Affiliates as if it were not the Trustee.
20. No Recourse Against Others.
--------------------------
No incorporator or any past, present or future partner, shareholder,
other equity holder, officer, director, employee or controlling person as such,
of the Company or the Guarantor or of any successor Person shall have any
liability for any obligations of the Company or the Guarantor under the Notes or
the Indenture or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
21. Authentication.
--------------
This Note shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on the other side of this Note.
22. Abbreviations.
-------------
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to IntelCom Group
(U.S.A.), Inc.,
<PAGE>
9605 East Maroon Circle, P.O. Box 6742, Englewood, Colorado, 80155-6742,
Attention: Chief Financial Officer.
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- ----------------------------------
- --------------------------------------------------------------------------------
Please print or typewrite name and address including zip code of assignee
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing __________________________________________ attorney to transfer
said Note on the books of the Company with full power of substitution in the
premises.
Date:_____________
_____________________________________________________
NOTICE: The signature to this assignment must
correspond with the name as written upon the face of
the within-mentioned instrument in every particular,
without alteration or any change whatsoever.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 4.11 or Section 4.12 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.11 or Section 4.12 of the Indenture, state the amount (in
principal amount at maturity): $_________________________________.
Date: ________________
Your Signature:
________________________________________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee: _____________________________________
<PAGE>
Exhibit 4.12
LETTER OF TRANSMITTAL
OFFER TO EXCHANGE
12 1/2% SENIOR EXCHANGE DISCOUNT NOTES DUE 2006
FOR ANY AND ALL OUTSTANDING
12 1/2% SENIOR DISCOUNT NOTES DUE 2006
OF
INTELCOM GROUP (U.S.A.), INC.
GUARANTEED BY
INTELCOM GROUP INC.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1996
UNLESS EXTENDED (THE "EXPIRATION DATE").
- --------------------------------------------------------------------------------
Deliver To:
Norwest Banks, Exchange Agent
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Facsimile: By Hand or Overnight Courier:
Norwest Banks (612) 667-4972 Norwest Banks
Corporate Trust Section Corporate Trust Section
P.O. Box 1517 Confirm by NorthStar East Building
Minneapolis MN 55480-1515 Telephone: Sixth and Marquette Avenues
(612) 667-4070 Minneapolis MN 55479-0113
</TABLE>
Delivery of this instrument to an address other than as set forth above or
transmission of instructions via a facsimile number other than the one listed
above will not constitute a valid delivery. The instructions accompanying this
Letter of Transmittal should be read carefully before this Letter of Transmittal
is completed.
The undersigned acknowledges that he or she has received and reviewed the
Prospectus dated June ___, 1996 (the "Prospectus") of IntelCom Group (U.S.A.),
Inc. (the "Issuer") and this Letter of Transmittal (the "Letter of
Transmittal"), which together constitute (i) the Issuer's offer (the "Exchange
Offer") to exchange up to $550,300,000 principal amount of its 12 1/2% Senior
Exchange Discount Notes due 2006 (the "New Notes") which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to
a Registration Statement of which the Prospectus is a part, for a like principal
amount of its outstanding 12 1/2% Senior Discount Notes due 2006 (the "Old
Notes"). Old Notes may be tendered only in integral multiples of $1,000. Other
capitalized terms used but not defined herein have the meaning given to them in
the Prospectus.
This Letter of Transmittal is to be completed by a holder of Old Notes
either if certificates are to be forwarded herewith or if a tender of
certificates for Old Notes, if available, is to be made by book-entry transfer
to the account maintained by the Exchange Agent at the Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedures set forth in
"The Exchange Offer--Book-Entry Transfer" section of the Prospectus. Holders of
Old Notes whose certificates are not immediately available, or who are unable to
deliver their certificates or confirmation of the book-entry tender of their Old
Notes into the Exchange Agent's account at
<PAGE>
the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and all other
documents required by this Letter of Transmittal to the Exchange Agent on or
prior to the Expiration Date, must tender their Old Notes according to the
guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed
Delivery Procedures" section of the Prospectus. See Instruction 1. Delivery of
Documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
The term "Holder" with respect to the Exchange Offer means any person in
whose name Old Notes are registered on the books of the Issuer or any other
person who has obtained a properly completed bond power from the registered
holder. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this letter in its entirety.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOX
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
DESCRIPTION OF 12 1/2% SENIOR DISCOUNT NOTES DUE 2005
- -----------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
AGGREGATE TENDERED
PRINCIPAL (MUST BE IN
NAMES AND ADDRESS(ES) OF AMOUNT INTEGRAL
REGISTERED HOLDERS CERTIFICATE REPRESENTED BY MULTIPLES OF
(PLEASE FILL IN, IF BLANK) NUMBER(S) CERTIFICATE(S) $1,000)/*/
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
TOTAL
- -----------------------------------------------------------------------------------------------------
/*/ Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of 12 1/2% Senior Discount Notes due 2006 will be deemed
to have tendered the entire aggregate principal amount represented by the
column labeled "Aggregate Principal Amount Represented by Certificate(s)."
If the space provided above is inadequate, list the certificate numbers and
principal amounts on a separate signed schedule and affix the list to this
Letter of Transmittal.
The minimum permitted tender is $1,000 in principal amount of 12 1/2%
Senior Discount Notes due 2006. All other tenders must be in integral
multiples of $1,000.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
[_] CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS (AS HEREINAFTER DEFINED)
ONLY):
Name of Tendering Institution __________________________________
Account Number _________________________________________________
Transaction Code Number ________________________________________
-2-
<PAGE>
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING (FOR
USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered Old Noteholder(s) ________________________
Date of Execution of Notice of Guaranteed Delivery _____________
Window Ticket Number (if available) ____________________________
Name of Institution which Guaranteed Delivery __________________
Account Number (if delivered by book-entry transfer) ___________
<TABLE>
<S> <C>
- ------------------------------------------------------ ------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 4, 5 and 6) (See Instructions 4, 5 and 6)
To be completed ONLY (i) if certificates for Old To be completed ONLY if certificates for Old
Notes not tendered, or New Notes issued in Notes not tendered, or New Notes issued in
exchange for Old Notes accepted for exchange, are exchange for Old Notes accepted for exchange, are
to be issued in the name of someone other than the to be sent to someone other than the undersigned,
undersigned, or (ii) if Old Notes tendered by book- or to the undersigned at an address other than that
entry transfer which are not exchanged are to be shown above.
returned by credit to an account maintained at
Depository Trust Company ("DTC"). Mail to:
Name ________________________________________________
Issue certificate(s) to: (Please Print)
Name _________________________________________________ Address _____________________________________________
(Please Print)
Address _____________________________________________ ----------------------------------------------------
(Include Zip Code)
- ------------------------------------------------------
(Include Zip Code)
----------------------------------------------------
(Tax Identification or Social Security No.)
- ------------------------------------------------------
(Tax Identification or Social Security No.)
Credit Old Notes not exchanged and delivered by
book-entry transfer to the DTC account set forth
below:
- --------------------------------------------
DTC Account Number
- ------------------------------------------------------ ------------------------------------------------------
</TABLE>
-3-
<PAGE>
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Issuer the principal amount of Old Notes indicated above.
Subject to and effective upon the acceptance for exchange of the principal
amount of Old Notes tendered in accordance with this Letter of Transmittal, the
undersigned sells, assigns and transfers to, or upon the order of, the Issuer
all right, title and interest in and to the Old Notes tendered hereby. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent its
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Issuer) with respect to the tendered Old Notes with
full power of substitution to (i) deliver certificates for such Old Notes, or
transfer ownership of such Old Notes on the account books maintained by DTC, to
the Issuer and deliver all accompanying evidences of transfer and authenticity
to, or upon the order of, the Issuer and (ii) present such Old Notes for
transfer on the books of the Issuer and receive all benefits and otherwise
exercise all rights of beneficial ownership of such Old Notes, all in accordance
with the terms of the Exchange Offer. The power of attorney granted in this
paragraph shall be deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full power
and authority to tender, sell, assign and transfer the Old Notes tendered hereby
and that the Issuer will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim, when the same are acquired by the Issuer. The undersigned
hereby further represents that (i) any New Notes acquired in exchange for Old
Notes tendered hereby will have been acquired in the ordinary course of business
of the person receiving such New Notes, whether or not the undersigned, (ii)
neither the undersigned nor any such other person is engaging in or intends to
engage in a distribution of the New Notes, (iii) neither the Holder nor any such
other person has an arrangement or understanding with any person to participate
in the distribution of such New Notes and (iv) neither the Holder nor any such
other person is an "affiliate," as defined in Rule 405 under the Securities Act,
of the Issuer.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance upon interpretations contained in letters issued to third parties by
the staff of the Securities and Exchange Commission (the "SEC") that the New
Notes issued in exchange for the Old Notes pursuant to the Exchange Offer may be
offered for resale, resold and otherwise transferred by holders thereof (other
than any such holder that is an "affiliate" of the Issuer within the meaning of
Rule 405 under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holders' business and such
holders are not engaging in and do not intend to engage in a distribution of the
New Notes and have no arrangement or understanding with any person to
participate in distribution of such New Notes. If the undersigned is not a
broker-dealer, the undersigned represents that it is not engaged in, and does
not intend to engage in, a distribution of New Notes. If the undersigned is a
broker-dealer that will receive New Notes for its own account in exchange for
Old Notes that were acquired as a result of market-making activities or other
trading activities, it acknowledges that it will deliver a prospectus in
connection with any resale of such New Notes; however, by so acknowledging and
by delivering a prospectus, the undersigned will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Issuer to be necessary or
desirable to complete the assignment, transfer and purchase of the Old Notes
tendered hereby.
For purposes of the Exchange Offer, the Issuer shall be deemed to have
accepted validly tendered Old Notes when, as and if the Issuer has given oral or
written notice thereof to the Exchange Agent.
If any tendered Old Notes are not accepted for exchange pursuant to the
Exchange Offer for any reason, certificates for any such unaccepted Old Notes
will be returned, without expense, to the undersigned at the address shown below
or at a different address as may be indicated herein under "Special Delivery
Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
-4-
<PAGE>
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering Old Notes" in the Prospectus and in the instructions hereto will
constitute a binding agreement between the undersigned and the Issuer upon the
terms and subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the certificates representing the New Notes issued in exchange for the Old
Notes accepted for exchange and return any Old Notes not tendered or not
exchanged, in the name(s) of the undersigned. Similarly, unless otherwise
indicated under "Special Delivery Instructions," please send the certificates
representing the New Notes issued in exchange for the Old Notes accepted for
exchange and any certificates for Old Notes not tendered or not exchanged (and
accompanying documents, as appropriate) to the undersigned at the address shown
below the undersigned's signature(s). In the event that both "Special Payment
Instructions" and "Special Delivery Instructions" are completed, please issue
the certificates representing the New Notes issued in exchange for the Old Notes
accepted for exchange in the name(s) of, and return any Old Notes not tendered
or not exchanged and send said certificates to, the person(s) so indicated. The
undersigned recognizes that the Issuer has no obligation pursuant to the
"Special Payment Instructions" and "Special Delivery Instructions" to transfer
any Old Notes from the name of the registered holder(s) thereof if the Issuer
does not accept for exchange any of the Old Notes so tendered.
Holders of Old Notes who wish to tender their Old Notes and (i) whose Old
Notes are not immediately available, or (ii) who cannot deliver their Old Notes,
this Letter of Transmittal or any other documents required hereby to the
Exchange Agent prior to the Expiration Date (or who cannot comply with the book-
entry transfer procedure on a timely basis), may tender their Old Notes
according to the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See
Instruction 1 regarding the completion of this Letter of Transmittal, printed
below.
-5-
<PAGE>
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
X
- ------------------------------------ --------------------
Date
X
- ------------------------------------ --------------------
Signature(s) of Registered Holder(s) Date
or Authorized Signatory
Area Code and Telephone Number: ____________________
The above lines must be signed by the registered holder(s) of Old
Notes as their name(s) appear(s) on the Old Notes or by person(s) authorized to
become registered holder(s) by a properly completed bond power from the
registered holder(s), a copy of which must be transmitted with this Letter of
Transmittal. If Old Notes to which this Letter of Transmittal relate are held
of record by two or more joint holders, then all such holders must sign this
Letter of Transmittal. If signature is by trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, then such person must (i) set forth his or
her full title below and (ii) unless waived by the Issuers, submit evidence
satisfactory to the Issuers of such person's authority so to act. See
Instruction 4 regarding the completion of this Letter of Transmittal, printed
below.
Name(s):
_______________________________________________________________________
_______________________________________________________________________
(Please Print)
Capacity:
_______________________________________________________________________
Address:
_______________________________________________________________________
_______________________________________________________________________
(Include Zip Code)
Signature(s) Guaranteed by an Eligible Institution (as hereinafter
defined):
(If required by Instruction 4)
---------------------------------------------------------------------
(Authorized Signature)
---------------------------------------------------------------------
(Title)
---------------------------------------------------------------------
(Name of Firm)
Dated: _________________, 1996
-6-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES. The tendered
Old Notes or any confirmation of a book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof and any other documents required by
this Letter of Transmittal must be received by the Exchange Agent at its address
set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date.
The method of delivery of the tendered Old Notes, this Letter of Transmittal and
all other required documents to the Exchange Agent is at the election and risk
of the Holder and, except as otherwise provided below, the delivery will be
deemed made only when actually received or confirmed by the Exchange Agent.
Instead of delivery by mail, it is recommended that the Holder use an overnight
or hand delivery service. In all cases, sufficient time should be allowed to
assure delivery to the Exchange Agent before the Expiration Date. No Letter of
Transmittal or Old Notes should be sent to the Issuer.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, this Letter
of Transmittal or any other documents required hereby to the Exchange Agent
prior to the Expiration Date or (iii) who are unable to complete the procedure
for book-entry transfer on a timely basis, must tender their Old Notes according
to the guaranteed delivery procedures set forth in the Prospectus. Pursuant to
such procedure: (i) such tender must be made by or through an Eligible
Institution; (ii) prior to the Expiration Date, the Exchange Agent must have
received from the Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder of the Old Notes, the
certificate number or numbers of such Old Notes and the principal amount of Old
Notes tendered, stating that the tender is being made thereby and guaranteeing
that, within five New York Stock Exchange trading days after the Expiration
Date, this Letter of Transmittal (or facsimile hereof) together with the
certificate(s) representing the Old Notes (or a Book-Entry Confirmation) and any
other required documents will be deposited by the Eligible Institution (as
hereinafter defined) with the Exchange Agent; and (iii) such properly completed
and executed Letter of Transmittal (or facsimile hereof), as well as all other
documents required by this Letter of Transmittal and the certificates(s)
representing all tendered Old Notes (or a Book-Entry Confirmation) in proper
form for transfer, must be received by the Exchange Agent within five New York
Stock Exchange trading days after the Expiration Date, all as provided in the
Prospectus under the caption "The Exchange Offer--Guaranteed Delivery
Procedures." Any Holder of Old Notes who wishes to tender his Old Notes
pursuant to the guaranteed delivery procedures described above must ensure that
the Exchange Agent receives the Notice of Guaranteed Delivery prior to 5:00
p.m., New York City time, on the Expiration Date. Upon request of the Exchange
Agent, a Notice of Guaranteed Delivery will be sent to Holders who wish to
tender their Old Notes according to the guaranteed delivery procedures set forth
above.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Issuer in its sole discretion, which determination
will be final and binding. The Issuer reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Issuer's acceptance
of which would, in the opinion of counsel for the Issuer, be unlawful. The
Issuer also reserves the right to waive any irregularities or conditions of
tender as to particular Old Notes. The Issuer's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in this Letter of
Transmittal) shall be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Issuer shall determine. Neither the Issuer, the
Exchange Agent nor any other person shall be under any duty to give notification
of defects or irregularities with respect to tenders of Old Notes, nor shall any
of them incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holders of Old Notes, unless otherwise provided in this
Letter of Transmittal, as soon as practicable following the Expiration Date.
-7-
<PAGE>
2. TENDER BY HOLDER. Only a Holder of Old Notes may tender such Old
Notes in the Exchange Offer. Any beneficial holder of Old Notes who is not the
registered holder and who wishes to tender should arrange with the registered
holder to execute and deliver this Letter of Transmittal on his behalf or must,
prior to completing and executing this Letter of Transmittal and delivering his
Old Notes, either make appropriate arrangements to register ownership of the Old
Notes in such holder's name or obtain a properly completed bond power from the
registered holder.
3. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Old Notes is tendered, the tendering Holder should fill in the principal amount
tendered in the third column of the box entitled "Description of 12 1/2% Senior
Discount Notes due 2006" above. The entire principal amount of Old Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. If the entire principal amount of all Old Notes is not
tendered, then Old Notes for the principal amount of Old Notes not tendered and
a certificate or certificates representing New Notes issued in exchange for any
Old Notes accepted will be sent to the Holder at his or her registered address,
unless a different address is provided in the appropriate box on this Letter of
Transmittal, promptly after the Old Notes are accepted for exchange.
4. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or facsimile hereof) is
signed by the record Holder(s) of the Old Notes tendered hereby, the signature
must correspond with the name(s) as written on the face of the Old Notes without
alteration, enlargement or any change whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered holder or holders of Old Notes tendered and the certificate or
certificates for New Notes issued in exchange therefor is to be issued (or any
untendered principal amount of Old Notes is to be reissued) to the registered
holder, the said holder need not and should not endorse any tendered Old Notes,
nor provide a separate bond power. In any other case, such holder must either
properly endorse the Old Notes tendered or transmit a properly completed
separate bond power with this Letter of Transmittal, with the signatures on the
endorsement or bond power guaranteed by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered holder or holders of any Old Notes listed, such Old
Notes must be endorsed or accompanied by appropriate bond powers, in each case
signed as the name of the registered holder or holders appears on the Old Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, or officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing, and,
unless waived by the Issuers, evidence satisfactory to the Issuers of their
authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 4 must be guaranteed by an Eligible Institution.
Except as otherwise provided below, all signatures on this Letter of
Transmittal must be guaranteed by a participant in a Recognized Signature
Guarantee Medallion Program (an "Eligible Institution"). Signatures on this
Letter of Transmittal need not be guaranteed if (a) this Letter of Transmittal
is signed by the registered Holder(s) of the Old Notes tendered herewith and
such Holder(s) have not completed the box set forth herein entitled "Special
Payment Instructions" or the box entitled "Special Delivery Instructions," or
(b) if such Old Notes are tendered for the account of an Eligible Institution.
5. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. Tendering Holders should
indicate, in the applicable box or boxes, the name and address to which New
Notes or substitute Old Notes for principal amounts not tendered or not accepted
for exchange are to be issued or sent, if different from the name and address of
the person signing this Letter of Transmittal. In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated.
-8-
<PAGE>
6. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes or Old Notes for principal amounts
not tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered holder
of the Old Notes tendered hereby, or if tendered Old Notes are registered in the
name of any person other than the person signing this Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or on any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with this Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
7. WAIVER OF CONDITIONS. The Issuer reserves the absolute right to
amend, waive or modify specified conditions in the Exchange Offer in the case of
any Old Notes tendered.
8. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any tendering Holder
whose Old Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated herein for further instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at the address
specified in the Prospectus. Holders may also contact their broker, dealer,
commercial bank, trust company or other nominee for assistance concerning the
Exchange Offer.
(DO NOT WRITE IN SPACE BELOW)
===================================
CERTIFICATE OLD NOTES OLD NOTES
SURRENDERED TENDERED ACCEPTED
-----------------------------------
-----------------------------------
===================================
Delivery Prepared by ____________ Checked By ______________ Date ___________
-9-
<PAGE>
NOTICE OF GUARANTEED DELIVERY FOR
INTELCOM GROUP (U.S.A.), INC.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of IntelCom Group (U.S.A.), Inc. (the "Issuer") made pursuant to
the Prospectus, dated June ___, 1996 (the "Prospectus"), if certificates for Old
Notes of the Issuer are not immediately available or if the procedure for book-
entry transfer cannot be completed on a timely basis or time will not permit all
required documents to reach the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date of the Exchange Offer. Such form may be delivered
or transmitted by telegram, telex, facsimile transmission, mail or hand delivery
to Norwest Banks (the "Exchange Agent") as set forth below. In addition, in
order to utilize the guaranteed delivery procedure to tender Old Notes pursuant
to the Exchange Offer, a completed, signed and dated Letter of Transmittal (or
facsimile thereof) must also be received by the Exchange Agent prior to 5:00
p.m., New York City time, on the Expiration Date. Capitalized terms not defined
herein are defined in the Prospectus.
Deliver To:
Norwest Banks, Exchange Agent
<TABLE>
<S> <C> <C>
By Registered Mail or Certified Mail: By Facsimile: By Hand or Overnight Courier:
Norwest Banks (612) 667-4972 Norwest Banks
Corporate Trust Section Corporate Trust Section
P.O. Box 1517 Confirm by NorthStar East Building
Minneapolis MN 55480-1515 Telephone: Sixth and Marquette Avenues
(612) 667-4070 Minneapolis MN 55479-0113
</TABLE>
Delivery of this instrument to an address other than as set forth above, or
transmission of instructions via facsimile other than as set forth above, will
not constitute a valid delivery.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the Issuer
the principal amount at maturity of Old Notes set forth below, pursuant to the
guaranteed delivery procedure described in "The Exchange Offer--Guaranteed
Delivery Procedures" section of the Prospectus. By so tendering, the
undersigned hereby does make, at and as of the date hereof, the representations
and warranties of a tendering holder of Old Notes set forth in the Letter of
Transmittal.
Principal Amount of Old Notes If Old Notes will be delivered by
Tendered: book-entry transfer to Depository
Trust Company, provide account number.
$ ______________________________
Certificate Nos. (if available):
________________________________
Total Principal Amount Represented by
Old Notes Certificate(s):
$ ______________________________ Account Number ____________________
________________________________________________________________________________
<PAGE>
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE
DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED
HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS
AND ASSIGNS OF THE UNDERSIGNED.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
X ___________________________________ ______________
X ___________________________________ ______________
Signatures of Owner(s) Date
or Authorized Signatory
Area Code and Telephone
Number: __________________________
Must be signed by the holder(s) of Old Notes as their name(s) appear(s) on
certificates for Old Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below.
Please print name(s) and address(es)
Name(s):
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Capacity: ______________________________________________________________________
Address(es): ___________________________________________________________________
______________________________________________________________________
______________________________________________________________________
GUARANTEE
The undersigned, a member of a registered national securities exchange, or
a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an officer or correspondent in the
United States, hereby guarantees that the certificates representing the
principal amount of Old Notes tendered hereby in proper form or transfer, or
timely confirmation of the book-entry transfer of such Old Notes into the
Exchange Agent's account at Depository Trust Company pursuant to the procedures
set forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of the
Prospectus, together with a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof) with any required signature
guarantee and any other documents required by the Letter of Transmittal, will be
received by the Exchange Agent at the address set forth above, no later than
five New York Stock Exchange trading days after the date of execution hereof.
- ---------------------------------- ---------------------------------
Name of Firm Authorized Signature
- ---------------------------------- ---------------------------------
Address Title
- ---------------------------------- Name:
Zip Code ---------------------------
(Please Type or Print)
Area Code and Tel. No. Dated:
----------- -------------------------
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR
OLD NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
-2-
<PAGE>
EXHIBIT 4.16
CUSIP 45814V201
State of Colorado
INTELCOM GROUP (U.S.A.), INC.
Cumulative Exchangeable Redeemable Preferred Stock
This Certifies that [specimen] is the registered
-------------------------------------
holder of xxxxxxxxxxxxxxxxxxxx Exchangeable Preferred (no par value)
----------------------------------------------------------------------
Shares transferable only on the books of the Corporation by the holder hereof in
person or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this 30th day of April A.D. 96
-------------- --------------------- ----
- ------------------------------- ------------------------------
Vice President Secretary
<PAGE>
THIS PREFERRED STOCK HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT, (B) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THIS PREFERRED STOCK IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, OR (C) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR
(7) OR REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED
INVESTOR"), (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO
UNDER RULE 144(k) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE
TRANSFER OF THIS PREFERRED STOCK, RESELL OR OTHERWISE TRANSFER THIS PREFERRED
STOCK EXCEPT (A) TO INTELCOM GROUP (U.S.A.), INC (THE "CORPORATION") OR ANY
SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144a UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT
TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE), (E) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRANSFER AGENT A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS PREFERRED STOCK (THE FORM OF WHICH LETTER CAN
BE OBTAINED FROM THE TRANSFER AGENT) OR (F) AFTER REGISTRATION UNDER THE
SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
PREFERRED STOCK IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND IN CONNECTION WITH ANY TRANSFER OF THIS PREFERRED STOCK WITHIN THE TIME
PERIOD REFERRED TO ABOVE, THE HOLDER MUST EXECUTE A LETTER (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE TRANSFER AGENT) RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRANSFER AGENT. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE FIRST
AMENDED AND RESTATED ARTICLES OF INCORPORATION OF THE CORPORATION CONTAINS A
PROVISION REQUIRING THE TRANSFER AGENT TO REFUSE TO REGISTER ANY TRANSFER OF
THIS PREFERRED STOCK IN VIOLATION OF THE FOREGOING RESTRICTIONS.
THE CORPORATION WILL FURNISH TO THE SHAREHOLDER, WITHOUT CHARGE, A SUMMARY OF
THE DESIGNATIONS, PREFERENCES, LIMITATIONS AND RELATION RIGHTS APPLICABLE TO
THIS PREFERRED STOCK UPON WRITTEN REQUEST TO THE CORPORATION.
For Value Received, _____ hereby sell, assign and transfer unto
Shares represented by the within Certificate and do hereby irrevocably
constitute and appoint ___________________
______________________________________________ Attorney to transfer the said
Shares on the books of the within named Corporation with full power of
substitution in the premises.
Dated ____________________ _______
In presence of
_________________________________ ___________________________
NOTICE, THE SIGNATURE OF THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
<PAGE>
EXHIBIT 4.17
CUSIP 45814V409
State of Colorado
INTELCOM GROUP (U.S.A.), INC.
Cumulative Exchangeable Redeemable Preferred Stock
This Certifies that [specimen] is the registered
-------------------------------------
holder of xxxxxxxxxxxxxxxxxxxx Series B Exchangeable Preferred (no par
---------------------------------------------------------------------
value) Shares transferable only on the books of the Corporation by the
- ---------------
holder hereof in person or by Attorney upon surrender of this Certificate
properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this 30th day of April A.D. 96
-------------- --------------------- ----
- ------------------------------- --------------------------------
Vice President Secretary
<PAGE>
For Value Received, _____ hereby sell, assign and transfer unto
___________________________________________________________________________
Shares represented by the within Certificate and do hereby irrevocably
constitute and appoint ___________________
_________________________________________________ Attorney to transfer the
said Shares on the books of the within named Corporation with full power of
substitution in the premises.
Dated ___________________________ _________
In presence of
____________________________________ _______________________________
<PAGE>
Exhibit 4.18
LETTER OF TRANSMITTAL
OFFER TO EXCHANGE ITS
NEW EXCHANGEABLE PREFERRED STOCK
MANDATORILY REDEEMABLE 2007
(EXCHANGEABLE AT THE OPTION OF THE ISSUER)
WHICH HAS BEEN REGISTERED UNDER THE SECURITIES ACT
FOR ANY AND ALL OUTSTANDING
EXCHANGEABLE PREFERRED STOCK
MANDATORILY REDEEMABLE 2007
(EXCHANGEABLE AT THE OPTION OF THE ISSUER)
of
IntelCom Group (U.S.A.), Inc.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
_____________, 1996 UNLESS EXTENDED (THE "EXPIRATION DATE").
- --------------------------------------------------------------------------------
Deliver To:
Norwest Banks, Exchange Agent
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Facsimile: By Hand or Overnight Courier:
Norwest Banks (612) 667-4972 Norwest Banks
Corporate Trust Section Corporate Trust Section
P.O. Box 1517 Confirm by NorthStar East Building
Minneapolis MN 55480-1515 Telephone: Sixth and Marquette Avenues
(612) 667-4070 Minneapolis MN 55479-0113
</TABLE>
Delivery of this instrument to an address other than as set forth above or
transmission of instructions via a facsimile number other than the one listed
above will not constitute a valid delivery. The instructions accompanying this
Letter of Transmittal should be read carefully before this Letter of Transmittal
is completed.
The undersigned acknowledges that he or she has received and reviewed the
Prospectus dated June __, 1996 (the "Prospectus") of IntelCom Group (U.S.A.),
Inc. (the "Issuer") and this Letter of Transmittal (the "Letter of
Transmittal"), which together constitute (i) the Issuer's offer (the "Exchange
Offer") to exchange its newly issued New Exchangeable Preferred Stock (the "New
Preferred Stock") which has been registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to a Registration Statement of which
the Prospectus is a part, for its outstanding Exchangeable Preferred Stock (the
"Old Preferred Stock") of which 150,000 shares are issued and outstanding, on a
share for share basis. Other capitalized terms used but not defined herein have
the meaning given to them in the Prospectus.
This Letter of Transmittal is to be completed by a holder of Old
Preferred Stock either if certificates are to be forwarded herewith or if a
tender of certificates for Old Preferred Stock, if available, is to be made by
book-
<PAGE>
entry transfer to the account maintained by the Exchange Agent at the Depository
Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures
set forth in "The Exchange Offer--Book-Entry Transfer" section of the
Prospectus. Holders of Old Preferred Stock whose certificates are not
immediately available, or who are unable to deliver their certificates or
confirmation of the book-entry tender of their Old Preferred Stock into the
Exchange Agent's account at the Book-Entry Transfer Facility (a "Book-Entry
Confirmation") and all other documents required by this Letter of Transmittal to
the Exchange Agent on or prior to the Expiration Date, must tender their Old
Preferred Stock according to the guaranteed delivery procedures set forth in
"The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus.
See Instruction 1. Delivery of Documents to the Book-Entry Transfer Facility
does not constitute delivery to the Exchange Agent.
The term "Holder" with respect to the Exchange Offer means any person
in whose name Old Preferred Stock is registered on the books of the Issuer or
any other person who has obtained a properly completed stock power from the
registered holder. The undersigned has completed, executed and delivered this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer. Holders who wish to tender their Old
Preferred Stock must complete this letter in its entirety.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOX
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
DESCRIPTION OF EXCHANGEABLE PREFERRED STOCK
- ----------------------------------------------------------------------------------------------------
AGGREGATE
NAMES AND ADDRESS(ES) OF NUMBER OF SHARES NUMBER OF
REGISTERED HOLDERS CERTIFICATE REPRESENTED BY SHARES
(PLEASE FILL IN, IF BLANK) NUMBER(S) CERTIFICATE(S) TENDERED/*/
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
TOTAL
- ----------------------------------------------------------------------------------------------------
/*/ Unless indicated in the column labeled "Number of Shares Tendered," any
tendering Holder of Exchangeable Preferred Stock will be deemed to have
tendered the entire aggregate number of shares represented by the column
labeled "Aggregate Number of Shares Represented by Certificate(s)."
If the space provided above is inadequate, list the certificate numbers and
number of shares on a separate signed schedule and affix the list to this
Letter of Transmittal.
- ----------------------------------------------------------------------------------------------------
</TABLE>
[_] CHECK HERE IF TENDERED OLD PREFERRED STOCK IS ENCLOSED HEREWITH.
[_] CHECK HERE IF TENDERED OLD PREFERRED STOCK IS BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS (AS HEREINAFTER
DEFINED) ONLY):
Name of Tendering Institution ___________________________________
Account Number __________________________________________________
Transaction Code Number _________________________________________
-2-
<PAGE>
[_] CHECK HERE IF TENDERED OLD PREFERRED STOCK IS BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING
(FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered Old Preferred Stockholder(s) ______________________
Date of Execution of Notice of Guaranteed Delivery ______________________
Window Ticket Number (if available) _____________________________________
Name of Institution which Guaranteed Delivery ___________________________
Account Number (if delivered by book-entry transfer) ____________________
<TABLE>
<CAPTION>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 4, 5 and 6) (See Instructions 4, 5 and 6)
- ----------------------------------------------------- -----------------------------------------------------
<S> <C>
To be completed ONLY (i) if certificates for Old To be completed ONLY if certificates for Old
Preferred Stock not tendered, or New Preferred Preferred Stock not tendered, or New Preferred
Stock issued in exchange for Old Preferred Stock Stock issued in exchange for Old Preferred Stock
accepted for exchange, is to be issued in the name accepted for exchange, is to be sent to someone
of someone other than the undersigned, or (ii) if other than the undersigned, or to the undersigned
Old Preferred Stock tendered by book-entry at an address other than that shown above.
transfer which is not exchanged is to be returned
by credit to an account maintained at Depository Mail to:
Trust Company ("DTC").
Name ___________________________________________
(Please Print)
Issue certificate(s) to:
Address ________________________________________
Name ________________________________________
(Please Print)
--------------------------------------------------
Address _____________________________________________ (Include Zip Code)
- -----------------------------------------------------
(Include Zip Code) --------------------------------------------------
(Tax Identification or Social Security No.)
- -----------------------------------------------------
(Tax Identification or Social Security No.)
Credit Old Preferred Stock not exchanged and
delivered by book-entry transfer to the DTC
account set forth below:
- -------------------------------------
DTC Account Number
- ----------------------------------------------------- -----------------------------------------------------
</TABLE>
-3-
<PAGE>
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Issuer the number of shares of Old Preferred Stock
indicated above. Subject to and effective upon the acceptance for exchange of
the number of shares of Old Preferred Stock tendered in accordance with this
Letter of Transmittal, the undersigned sells, assigns and transfers to, or upon
the order of, the Issuer all right, title and interest in and to the Old
Preferred Stock tendered hereby. The undersigned hereby irrevocably constitutes
and appoints the Exchange Agent its agent and attorney-in-fact (with full
knowledge that the Exchange Agent also acts as the agent of the Issuer) with
respect to the tendered Old Preferred Stock with full power of substitution to
(i) deliver certificates for such Old Preferred Stock, or transfer ownership of
such Old Preferred Stock on the account books maintained by DTC, to the Issuer
and deliver all accompanying evidences of transfer and authenticity to, or upon
the order of, the Issuer and (ii) present such Old Preferred Stock for transfer
on the books of the Issuer and receive all benefits and otherwise exercise all
rights of beneficial ownership of such Old Preferred Stock, all in accordance
with the terms of the Exchange Offer. The power of attorney granted in this
paragraph shall be deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full power
and authority to tender, sell, assign and transfer the Old Preferred Stock
tendered hereby and that the Issuer will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim, when the same are acquired by the Issuer. The
undersigned hereby further represents that (i) any New Preferred Stock acquired
in exchange for Old Preferred Stock tendered hereby will have been acquired in
the ordinary course of business of the person receiving such New Preferred
Stock, whether or not the undersigned, (ii) neither the undersigned nor any such
other person is engaging in or intends to engage in a distribution of the New
Preferred Stock, (iii) neither the Holder nor any such other person has an
arrangement or understanding with any person to participate in the distribution
of such New Preferred Stock and (iv) neither the Holder nor any such other
person is an "affiliate," as defined in Rule 405 under the Securities Act, of
the Issuer.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance upon interpretations contained in letters issued to third parties by
the staff of the Securities and Exchange Commission (the "SEC") that the New
Preferred Stock issued in exchange for the Old Preferred Stock pursuant to the
Exchange Offer may be offered for resale, resold and otherwise transferred by
holders thereof (other than any such holder that is an "affiliate" of the Issuer
within the meaning of Rule 405 under the Securities Act), without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided that such New Preferred Stock are acquired in the ordinary course of
such holders' business and such holders are not engaging in and do not intend to
engage in a distribution of the New Preferred Stock and have no arrangement or
understanding with any person to participate in distribution of such New
Preferred Stock. If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of New Preferred Stock. If the undersigned is a broker-dealer that
will receive New Preferred Stock for its own account in exchange for Old
Preferred Stock that were acquired as a result of market-making activities or
other trading activities, it acknowledges that it will deliver a prospectus in
connection with any resale of such New Preferred Stock; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Issuer to be necessary or
desirable to complete the assignment, transfer and purchase of the Old Preferred
Stock tendered hereby.
For purposes of the Exchange Offer, the Issuer shall be deemed to have
accepted validly tendered Old Preferred Stock when, as and if the Issuer has
given oral or written notice thereof to the Exchange Agent.
If any tendered Old Preferred Stock are not accepted for exchange pursuant to
the Exchange Offer for any reason, certificates for any such unaccepted Old
Preferred Stock will be returned, without expense, to the undersigned at the
address shown below or at a different address as may be indicated herein under
"Special Delivery Instructions" as promptly as practicable after the Expiration
Date.
-4-
<PAGE>
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned understands that tenders of Old Preferred Stock pursuant to
the procedures described under the caption "The Exchange Offer--Procedures for
Tendering Old Preferred Stock" in the Prospectus and in the instructions hereto
will constitute a binding agreement between the undersigned and the Issuer upon
the terms and subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the certificates representing the New Preferred Stock issued in exchange
for the Old Preferred Stock accepted for exchange and return any Old Preferred
Stock not tendered or not exchanged, in the name(s) of the undersigned.
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please send the certificates representing the New Preferred Stock issued in
exchange for the Old Preferred Stock accepted for exchange and any certificates
for Old Preferred Stock not tendered or not exchanged (and accompanying
documents, as appropriate) to the undersigned at the address shown below the
undersigned's signature(s). In the event that both "Special Payment
Instructions" and "Special Delivery Instructions" are completed, please issue
the certificates representing the New Preferred Stock issued in exchange for the
Old Preferred Stock accepted for exchange in the name(s) of, and return any Old
Preferred Stock not tendered or not exchanged and send said certificates to, the
person(s) so indicated. The undersigned recognizes that the Issuer has no
obligation pursuant to the "Special Payment Instructions" and "Special Delivery
Instructions" to transfer any Old Preferred Stock from the name of the
registered holder(s) thereof if the Issuer does not accept for exchange any of
the Old Preferred Stock so tendered.
Holders of Old Preferred Stock who wish to tender their Old Preferred Stock
and (i) whose Old Preferred Stock is not immediately available, or (ii) who
cannot deliver their Old Preferred Stock, this Letter of Transmittal or any
other documents required hereby to the Exchange Agent prior to the Expiration
Date (or who cannot comply with the book-entry transfer procedure on a timely
basis), may tender their Old Preferred Stock according to the guaranteed
delivery procedures set forth in the Prospectus under the caption "The Exchange
Offer--Guaranteed Delivery Procedures." See Instruction 1 regarding the
completion of this Letter of Transmittal, printed below.
-5-
<PAGE>
PLEASE SIGN HERE WHETHER OR NOT
OLD PREFERRED STOCK IS BEING PHYSICALLY TENDERED HEREBY
X
- ------------------------------------ ---------------------------
Date
X
- ------------------------------------ ---------------------------
Signature(s) of Registered Holder(s) Date
or Autorrized Signatory
Area Code and Telephone Number: ___________
The above lines must be signed by the registered holder(s) of Old
Preferred Stock as their name(s) appear(s) on the Old Preferred Stock or by
person(s) authorized to become registered holder(s) by a properly completed bond
power from the registered holder(s), a copy of which must be transmitted with
this Letter of Transmittal. If Old Preferred Stock to which this Letter of
Transmittal relate is held of record by two or more joint holders, then all such
holders must sign this Letter of Transmittal. If signature is by trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, then such person
must (i) set forth his or her full title below and (ii) unless waived by the
Issuers, submit evidence satisfactory to the Issuers of such person's authority
so to act. See Instruction 4 regarding the completion of this Letter of
Transmittal, printed below.
Name(s):
_______________________________________________________________________
________________________________________________________________________________
(Please Print)
Capacity:
______________________________________________________________________
Address:
______________________________________________________________________
______________________________________________________________________
(Include Zip Code)
Signature(s) Guaranteed by an Eligible Institution (as hereinafter
defined):
(If required by Instruction 4)
---------------------------------------------------------------------
(Authorized Signature)
---------------------------------------------------------------------
(Title)
---------------------------------------------------------------------
(Name of Firm)
Dated: _________________, 1996
-6-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD PREFERRED STOCK. The
tendered Old Preferred Stock or any confirmation of a book-entry transfer (a
"Book-Entry Confirmation"), as well as a properly completed and duly executed
copy of this Letter of Transmittal or facsimile hereof and any other documents
required by this Letter of Transmittal must be received by the Exchange Agent at
its address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. The method of delivery of the tendered Old Preferred Stock,
this Letter of Transmittal and all other required documents to the Exchange
Agent is at the election and risk of the Holder and, except as otherwise
provided below, the delivery will be deemed made only when actually received or
confirmed by the Exchange Agent. Instead of delivery by mail, it is recommended
that the Holder use an overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure delivery to the Exchange Agent
before the Expiration Date. No Letter of Transmittal or Old Preferred Stock
should be sent to the Issuer.
Holders who wish to tender their Old Preferred Stock and (i) whose Old
Preferred Stock is not immediately available, or (ii) who cannot deliver their
Old Preferred Stock, this Letter of Transmittal or any other documents required
hereby to the Exchange Agent prior to the Expiration Date or (iii) who are
unable to complete the procedure for book-entry transfer on a timely basis, must
tender their Old Preferred Stock according to the guaranteed delivery procedures
set forth in the Prospectus. Pursuant to such procedure: (i) such tender must
be made by or through an Eligible Institution; (ii) prior to the Expiration
Date, the Exchange Agent must have received from the Eligible Institution a
properly completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
Holder of the Old Preferred Stock, the certificate number or numbers of such Old
Preferred Stock and the number of shares of Old Preferred Stock tendered,
stating that the tender is being made thereby and guaranteeing that, within five
New York Stock Exchange trading days after the Expiration Date, this Letter of
Transmittal (or facsimile hereof) together with the certificate(s) representing
the Old Preferred Stock (or a Book-Entry Confirmation) and any other required
documents will be deposited by the Eligible Institution (as hereinafter defined)
with the Exchange Agent; and (iii) such properly completed and executed Letter
of Transmittal (or facsimile hereof), as well as all other documents required by
this Letter of Transmittal and the certificates(s) representing all tendered Old
Preferred Stock (or a Book-Entry Confirmation) in proper form for transfer, must
be received by the Exchange Agent within five New York Stock Exchange trading
days after the Expiration Date, all as provided in the Prospectus under the
caption "The Exchange Offer--Guaranteed Delivery Procedures." Any Holder of Old
Preferred Stock who wishes to tender his Old Preferred Stock pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York
City time, on the Expiration Date. Upon request of the Exchange Agent, a Notice
of Guaranteed Delivery will be sent to Holders who wish to tender their Old
Preferred Stock according to the guaranteed delivery procedures set forth above.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Preferred Stock and withdrawal of tendered
Old Preferred Stock will be determined by the Issuer in its sole discretion,
which determination will be final and binding. The Issuer reserves the absolute
right to reject any and all Old Preferred Stock not properly tendered or any Old
Preferred Stock the Issuer's acceptance of which would, in the opinion of
counsel for the Issuer, be unlawful. The Issuer also reserves the right to
waive any irregularities or conditions of tender as to particular Old Preferred
Stock. The Issuer's interpretation of the terms and conditions of the Exchange
Offer (including the instructions in this Letter of Transmittal) shall be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Preferred Stock must be cured within such time as
the Issuer shall determine. Neither the Issuer, the Exchange Agent nor any
other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Old Preferred Stock, nor shall any of
them incur any liability for failure to give such notification. Tenders of Old
Preferred Stock will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Preferred Stock received by
the Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holders of Old Preferred Stock, unless otherwise provided
in this Letter of Transmittal, as soon as practicable following the Expiration
Date.
-7-
<PAGE>
2. TENDER BY HOLDER. Only a Holder of Old Preferred Stock may tender
such Old Preferred Stock in the Exchange Offer. Any beneficial holder of Old
Preferred Stock who is not the registered holder and who wishes to tender should
arrange with the registered holder to execute and deliver this Letter of
Transmittal on his behalf or must, prior to completing and executing this Letter
of Transmittal and delivering his Old Preferred Stock, either make appropriate
arrangements to register ownership of the Old Preferred Stock in such holder's
name or obtain a properly completed bond power from the registered holder.
3. PARTIAL TENDERS. If less than the entire number of shares of any Old
Preferred Stock certificate is tendered, the tendering Holder should fill in the
number of shares tendered in the third column of the box entitled "Description
of Exchangeable Preferred Stock" above. The entire number of shares of Old
Preferred Stock set forth on the certificate delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated. If the entire
number of shares of all Old Preferred Stock is not tendered, then an Old
Preferred Stock certificate for the number of shares of Old Preferred Stock not
tendered and a certificate or certificates representing New Preferred Stock
issued in exchange for any Old Preferred Stock accepted will be sent to the
Holder at his or her registered address, unless a different address is provided
in the appropriate box on this Letter of Transmittal, promptly after the Old
Preferred Stock is accepted for exchange.
4. SIGNATURES ON THE LETTER OF TRANSMITTAL; STOCK POWERS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or
facsimile hereof) is signed by the record Holder(s) of the Old Preferred Stock
tendered hereby, the signature must correspond with the name(s) as written on
the face of the Old Preferred Stock without alteration, enlargement or any
change whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered holder or holders of Old Preferred Stock tendered and the certificate
or certificates for New Preferred Stock issued in exchange therefor is to be
issued (or any untendered shares of Old Preferred Stock is to be reissued) to
the registered holder, the said holder need not and should not endorse any
tendered Old Preferred Stock, nor provide a separate stock power. In any other
case, such holder must either properly endorse the Old Preferred Stock tendered
or transmit a properly completed separate stock power with this Letter of
Transmittal, with the signatures on the endorsement or stock power guaranteed by
an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered holder or holders of any Old Preferred Stock listed,
such Old Preferred Stock must be endorsed or accompanied by appropriate stock
powers, in each case signed as the name of the registered holder or holders
appears on the Old Preferred Stock.
If this Letter of Transmittal (or facsimile hereof) or any Old Preferred
Stock or stock powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, or officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and, unless waived by the Issuers, evidence satisfactory to the Issuers
of their authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Old Preferred Stock or signatures on stock powers required
by this Instruction 4 must be guaranteed by an Eligible Institution.
Except as otherwise provided below, all signatures on this Letter of
Transmittal must be guaranteed by a participant in a Recognized Signature
Guarantee Medallion Program (an "Eligible Institution"). Signatures on this
Letter of Transmittal need not be guaranteed if (a) this Letter of Transmittal
is signed by the registered Holder(s) of the Old Preferred Stock tendered
herewith and such Holder(s) have not completed the box set forth herein entitled
"Special Payment Instructions" or the box entitled "Special Delivery
Instructions," or (b) if such Old Preferred Stock is tendered for the account of
an Eligible Institution.
5. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. Tendering Holders should
indicate, in the applicable box or boxes, the name and address to which New
Preferred Stock or substitute Old Preferred Stock for shares not tendered or not
accepted for exchange are to be issued or sent, if different from the name and
address of the person
-8-
<PAGE>
signing this Letter of Transmittal. In the case of issuance in a different
name, the taxpayer identification or social security number of the person named
must also be indicated.
6. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any,
applicable to the exchange of Old Preferred Stock pursuant to the Exchange
Offer. If, however, certificates representing New Preferred Stock or Old
Preferred Stock for shares not tendered or accepted for exchange are to be
delivered to, or are to be registered or issued in the name of, any person other
than the registered holder of the Old Preferred Stock tendered hereby, or if
tendered Old Preferred Stock are registered in the name of any person other than
the person signing this Letter of Transmittal, or if a transfer tax is imposed
for any reason other than the exchange of Old Preferred Stock pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or on any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with this Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Old Preferred Stock listed in this
Letter of Transmittal.
7. WAIVER OF CONDITIONS. The Issuer reserves the absolute right to
amend, waive or modify specified conditions in the Exchange Offer in the case of
any Old Preferred Stock tendered.
8. MUTILATED, LOST, STOLEN OR DESTROYED OLD PREFERRED STOCK. Any
tendering Holder whose Old Preferred Stock has been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated herein for
further instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at the address
specified in the Prospectus. Holders may also contact their broker, dealer,
commercial bank, trust company or other nominee for assistance concerning the
Exchange Offer.
(DO NOT WRITE IN SPACE BELOW)
=====================================
OLD OLD
CERTIFICATE PREFERRED PREFERRED
SURRENDERED STOCK STOCK
TENDERED ACCEPTED
-------------------------------------
-------------------------------------
=====================================
Delivery Prepared by _________ Checked By ______________ Date ____________
-9-
<PAGE>
NOTICE OF GUARANTEED DELIVERY FOR
INTELCOM GROUP (U.S.A.), INC.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of IntelCom Group (U.S.A.), Inc. (the "Issuer") made pursuant to
the Prospectus, dated June ___, 1996 (the "Prospectus"), if certificates for Old
Preferred Stock of the Issuer are not immediately available or if the procedure
for book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach the Exchange Agent prior to 5:00 p.m.,
New York City time, on the Expiration Date of the Exchange Offer. Such form may
be delivered or transmitted by telegram, telex, facsimile transmission, mail or
hand delivery to Norwest Banks (the "Exchange Agent") as set forth below. In
addition, in order to utilize the guaranteed delivery procedure to tender Old
Preferred Stock pursuant to the Exchange Offer, a completed, signed and dated
Letter of Transmittal (or facsimile thereof) must also be received by the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
Capitalized terms not defined herein are defined in the Prospectus.
Deliver To:
Norwest Banks, Exchange Agent
<TABLE>
<S> <C> <C>
By Registered Mail or Certified Mail: By Facsimile: By Hand or Overnight Courier:
Norwest Banks (612) 667-4972 Norwest Banks
Corporate Trust Section Corporate Trust Section
P.O. Box 1517 Confirm by NorthStar East Building
Minneapolis MN 55480-1515 Telephone: Sixth and Marquette Avenues
(612) 667-4070 Minneapolis MN 55479-0113
</TABLE>
Delivery of this instrument to an address other than as set forth above, or
transmission of instructions via facsimile other than as set forth above, will
not constitute a valid delivery.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the Issuer
the number of shares of Old Preferred Stock set forth below, pursuant to the
guaranteed delivery procedure described in "The Exchange Offer--Guaranteed
Delivery Procedures" section of the Prospectus. By so tendering, the
undersigned hereby does make, at and as of the date hereof, the representations
and warranties of a tendering holder of Old Preferred Stock set forth in the
Letter of Transmittal.
Number of Shares of Old Preferred If Old Preferred Stock will be
Stock Tendered: delivered by book-entry transfer to
Depository Trust Company, provide
__________________________________ account number.
Certificate Nos. (if available):
__________________________________
Total Number of Shares Represented by
Old Preferred Stock Certificate(s):
__________________________________ Account Number _______________________
________________________________________________________________________________
<PAGE>
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE
DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED
HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS
AND ASSIGNS OF THE UNDERSIGNED.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
X ___________________________________ ______________
X ___________________________________ ______________
Signatures of Owner(s) Date
or Authorized Signatory
Area Code and Telephone
Number: __________________________
Must be signed by the holder(s) of Old Preferred Stock as their name(s)
appear(s) on certificates for Old Preferred Stock or on a security position
listing, or by person(s) authorized to become registered holder(s) by
endorsement and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by a trustee, executor, administrator, guardian, attorney-in-
fact, officer or other person acting in a fiduciary or representative capacity,
such person must set forth his or her full title below.
Please print name(s) and address(es)
Name(s):
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Capacity:
______________________________________________________________________
Address(es):
______________________________________________________________________
______________________________________________________________________
GUARANTEE
The undersigned, a member of a registered national securities exchange, or
a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an officer or correspondent in the
United States, hereby guarantees that the certificates representing the number
of shares of Old Preferred Stock tendered hereby in proper form or transfer, or
timely confirmation of the book-entry transfer of such Old Preferred Stock into
the Exchange Agent's account at Depository Trust Company pursuant to the
procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures"
section of the Prospectus, together with a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile thereof) with any required
signature guarantee and any other documents required by the Letter of
Transmittal, will be received by the Exchange Agent at the address set forth
above, no later than five New York Stock Exchange trading days after the date of
execution hereof.
____________________________________ ____________________________________
Name of Firm Authorized Signature
____________________________________ ____________________________________
Address Title
____________________________________ Name:________________________________
Zip Code (Please Type or Print)
Area Code and Tel. No. _____________ Dated: ______________________________
NOTE: DO NOT SEND CERTIFICATES FOR OLD PREFERRED STOCK WITH THIS FORM.
CERTIFICATES FOR OLD PREFERRED STOCK SHOULD ONLY BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
-2-
<PAGE>
Exhibit 5.1
REID & PRIEST LLP
(212) 603-2000
New York, New York
June 17, 1996
IntelCom Group (U.S.A.), Inc.
9605 East Maroon Circle
Englewood, CO 80112
IntelCom Group Inc.
#11-1155 North Service Road West
Oakville, Ontario,
Canada L6M 3E3
Re: IntelCom Group (U.S.A.), Inc.
IntelCom Group Inc.
Registration Statement on Form S-4
Registration No. 333-04569
------------------------------------
Dear Sirs:
As counsel for IntelCom Group (U.S.A.), Inc., a Colorado
corporation (the "Company"), we have been requested to furnish our opinion as
to matters hereinafter set forth in connection with the proposed issuance by
the Company of (i) $550,300,000 in aggregate principal amount of its 12 1/2%
Senior Exchange Discount Notes due 2006 (the "Exchange Notes"), under an
Indenture dated April 30, 1996, among IntelCom Group Inc., a Canadian federal
corporation, the Company and Norwest Bank Colorado, National Association (the
"Trustee"), in exchange for its outstanding 12 1/2% Senior Discount Notes due
2006 (the "Note Exchange Offer"), and (ii) 150,000 shares of New Exchangeable
Preferred Stock (the "New Preferred Stock") in exchange for its outstanding
Exchangeable Preferred Stock (the "Preferred Stock Exchange Offer"). The
issuance of the Exchange Notes pursuant to the Note Exchange Offer and the
issuance of the New Preferred Stock under the Preferred Stock Exchange Offer
will be registered under the Securities Act of 1933, as amended (the "Act"),
pursuant to a registration statement on Form S-4,
<PAGE>
as amended, (Registration No. 333-04569) (the "Registration Statement"),
which Registration Statement sets forth the terms and conditions of the Note
Exchange Offer and the Preferred Stock Exchange Offer. In connection
herewith, we have examined the First Amended and Restated Articles of
Incorporation (and all amendments thereto) and By-Laws of the Company and the
minutes of the Board of Directors of the Company with respect to the filing
of the Registration Statement, the issuance of the Exchange Notes and the New
Preferred Stock. We have also examined such other documents, records,
certificates of public officials and such matters of law as we have deemed
necessary or appropriate for the purpose of rendering this opinion.
We are members of the bar of the State of New York and are not
licensed or admitted to practice law in any other jurisdiction. Accordingly,
we have not reviewed and we express no opinion with respect to the laws of
any jurisdiction other than the State of New York and the Federal laws of the
United States.
Based upon the foregoing, we are of the opinion that:
The Exchange Notes have been duly authorized. When the Exchange
Notes have been duly executed by the Corporation and authenticated by the
Trustee in accordance with the terms of the Indenture and issued in
accordance with the terms of the Note Exchange Offer, the Exchange Notes will
have been legally issued and will constitute valid and binding obligations of
the Company.
The New Preferred Stock has been duly authorized. When the New
Preferred Stock is issued in accordance with the terms of the Preferred Stock
Exchange Offer, the New Preferred Stock will be validly issued, fully paid
and non-assessable shares of preferred stock of the Company.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and to the reference to this firm appearing in the
Prospectus under the heading "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 Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Reid & Priest LLP
<PAGE>
EXHIBIT 5.2
TUPPER JONSSON & YEADON
Gregory C. Smith
June 14, 1996
INTELCOM GROUP (U.S.A.), INC.
Executive Offices
9605 East Maroon Circle
Englewood, Colorado
80112
INTELCOM GROUP INC.
#11-1155 North Service Road West
Oakville, Ontario
LM6 3E3
Dear Sirs:
RE: INTELCOM GROUP (U.S.A.), INC.
INTELCOM GROUP INC.
REGISTRATION STATEMENT ON FORM S-4
REGISTRATION NO. 333-04569
---------------------------------------
As counsel for IntelCom Group Inc., a Canadian federal corporation (the
"Company"), we have been requested to furnish our opinion as to matters
hereinafter set forth in connection with the proposed issuance by IntelCom Group
(U.S.A.), Inc., a Colorado corporation ("ICG") of $550,330,000 in aggregate
principal amount of its 12 1/2% Senior Exchange Discount Notes due 2006 (the
"Exchange Notes"), under an Indenture dated April 30, 1996 between the Company,
ICG and Norwest Bank Colorado, National Association (the "Trustee"), in exchange
for its outstanding 12 1/2% Senior Discount Notes due 2006 (the "Exchange
Offer"). The issuance of the Exchange Notes pursuant to the Exchange Offer will
be registered under the Securities Act of 1933, as amended (the "Act"), pursuant
to the registration statement on Form S-4, as amended (Registration No. 333-
04569) (the "Registration Statement"), which Registration Statement sets forth
the terms and conditions of the Exchange Offer. The Exchange Notes will be
fully and unconditionally guaranteed by IntelCom (the "Guarantee"). The
Guarantee will also be registered under the Act pursuant to the Registration
Statement. In connection herewith, we have examined the Certificate of
Incorporation (and all amendments thereto) and By-laws of the Company and the
minutes of the Board of Directors of the Company with respect to the filing of
the Registration Statement and the issuance of the Guarantee. We have also
examined such other
<PAGE>
documents, records, certificates of public officials and such matters of law as
we have deemed necessary or appropriate for the purpose of rendering this
opinion.
We are qualified to practice law only in the Province of British Columbia and
our opinions below are expressed only in respect of the laws of such province
and the laws of Canada applicable therein and we express no opinion with respect
to the laws of any other jurisdiction.
Based upon the foregoing, we are of the opinion that:
The Guarantee has been duly authorized. When the Exchange Notes are legally
issued, the Guarantee will have been legally issued and will constitute the
valid and binding obligation of IntelCom.
We hereby consent to the filing of this Opinion as an exhibit to the
Registration Statement and to the reference to this firm appearing in the
Prospectus under the heading "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 Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder.
Yours truly,
TUPPER JONSSON & YEADON
/s/
GREGORY C. SMITH
<PAGE>
Exhibit 8.1
REID & PRIEST LLP
New York, New York
June 17, 1996
IntelCom Group (U.S.A.), Inc.
IntelCom Group Inc.
9605 E. Maroon Circle
Englewood, CO 80112
Gentlemen:
You have requested our opinion that the U.S. tax consequences
described in the "Certain United States Federal Income Tax Considerations"
section of the Prospectus, issued by IntelCom Group (U.S.A.), Inc.
("Intelcom"), dated June 18, 1996 (the "Prospectus") in connection with (i)
the exchange of Intelcom's outstanding 12.5% Senior Discount Notes Due 2006
(the "Old Notes") for an equal principal amount of newly issued 12.5% Senior
Exchange Discount Notes Due 2006 (the "New Notes"), and (ii) the exchange of
its outstanding Exchangeable Preferred Stock (the "Old Preferred Stock") for
an equal amount of newly issued New Exchangeable Preferred Stock (the "New
Preferred Stock"), correctly sets forth the material U.S. federal income tax
consequences of the purchase, ownership and disposition of New Notes and New
Preferred Stock. Unless otherwise defined herein, capitalized terms shall
have the meanings ascribed to them in the Prospectus.
The opinion expressed herein is based solely upon current law,
including the Internal Revenue Code of 1986, as amended (the "Code"),
applicable Treasury Regulations promulgated or proposed thereunder, current
positions of the Internal Revenue Service contained in published Revenue
Rulings and Revenue Procedures, other current administrative positions of the
Internal Revenue Service and existing judicial decisions, all of which are
subject to change or modification at any time. This opinion will not apply
to Holders that do not hold New Notes, New
<PAGE>
-2-
Preferred Stock and Exchange Debentures as capital assets, or to Holders that
are subject to special treatment under the U.S. federal income tax laws,
including dealers in securities or currencies, financial institutions, life
insurance companies, persons holding New Notes or New Preferred Stock or
Exchange Debentures as part of a hedging or conversion transaction or a
straddle or United States Holders whose "functional currency" is not the U.S.
dollar. It does not address any federal income tax consequences of the
purchase, ownership or disposition of the New Preferred Stock or Exchange
Debentures by Non-United States Holders, because the Old Preferred Stock and
Exchange Debentures were not sold in the Private Offering to persons other
than United States Holders.
In connection with the rendering of this opinion, we have reviewed
the Prospectus and other materials as we deemed relevant to the rendering of
our opinion. In addition, we have relied upon the assumption that all
documents we have reviewed are true and accurate, accurately reflect the
originals and have been or will be properly executed, and that actions in
connection with the transactions contemplated in the Prospectus have been and
will be conducted in the manner provided in such document.
We are members of the bar of the State of New York and are not
admitted to practice law in any other jurisdiction. Accordingly, we express
no opinion with respect to the laws of any other jurisdiction other than the
federal laws of the United States of America in respect of the opinions set
forth herein.
Based on and subject to the foregoing, it is our opinion that the
U.S. tax consequences described in the "Certain United States Federal Income
Tax Considerations" section of the Prospectus correctly sets forth the
material U.S. federal income tax consequences of the purchase, ownership and
disposition of the New Notes and the New Preferred Stock.
This opinion is solely for your information and is not to be quoted
in whole or in part, summarized or otherwise referred to, nor is it to be
filed with or supplied to or relied upon by any governmental agency or other
person without our written consent. We hereby consent to the filing of this
opinion with the Securities and Exchange Commission in connection with
Amendment No. 1
<PAGE>
-3-
on Form S-4 Registration Statement [Commission File No. 333-04569].
This opinion is as of the date hereof. We disclaim any
responsibility to update or supplement this opinion to reflect any events or
state of facts which may hereafter come to our attention, or any changes in
statutes or regulations or any court decisions which may hereafter occur.
Very truly yours,
/s/ Reid & Priest LLP
REID & PRIEST LLP
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
-------------------------------
THE BOARD OF DIRECTORS
INTELCOM GROUP INC.:
We consent to the incorporation by reference in the registration statement on
Form S-4 of IntelCom Group (U.S.A.), Inc. and IntelCom Group Inc. of our reports
dated December 8, 1995, relating to the consolidated balance sheets of IntelCom
Group Inc. and subsidiaries as of September 30, 1995 and 1994, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the years in the three-year period ended September 30, 1995, and related
schedule, which reports appear in the September 30, 1995 annual report on Form
10-K/A of IntelCom Group Inc. and to the reference to our firm under the heading
"Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Denver, Colorado
June 14, 1996
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an application to determine eligibility of a
Trustee pursuant to Section 305(b)(2)____
___________________
NORWEST BANK COLORADO, N.A.
(Exact name of trustee as specified in its charter)
NOT APPLICABLE 84-0187632
------------------
(Jurisdiction of incorporation or (I.R.S. Employer
Organization if not a U.S. national bank) Identification No.)
1740 BROADWAY
DENVER, COLORADO 80274-8693
(Address of principal executive office) (Zip Code)
NORWEST BANK COLORADO, N.A.
ATTN: CORPORATE TRUST DEPARTMENT
1740 BROADWAY
DENVER, CO 80274-8693
303-863-6247
(Name, address and telephone number of agent for service)
__________________________
INTELCOM GROUP (U.S.A.), INC.
(Exact name of obligor as specified in its charter)
COLORADO 84-1128866
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No)
9605 E. MAROON CIRCLE
P.O. Box 6742 80155-6742
Englewood, CO (Zip Code)
(Address of principal executive office)
__________
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Name Address
---- -------
Comptroller of the Currency Washington, D.C.
Federal Reserve Bank of Denver Denver, Colorado
Federal Deposit Insurance Corporation Dallas, Texas
National Bank Examiners - Western District Denver, Colorado
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the Obligor is an affiliate of the trustee, describe such affiliation.
None.
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
(a) Furnish the following information as to each class of voting
securities of the trustee.
AS OF MAY 20, 1996
------------
(WITHIN 31 DAYS)
Col. A Col. B
- ------ ------
Title of Class Amount Outstanding
- -------------- ------------------
Not Applicable
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
If the trustee is a trustee under another indenture under which any other
securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, furnish the following
information:
(a) Title of the securities outstanding under each such other indenture.
Intelcom Group (U.S.A.), Inc. 13.5% Senior Discount Notes Due
September 15, 2005 and Warrants
(b) A brief statement of the facts relied upon as a basis for the claim
that no conflicting interest within the meaning of Section 310(b)(1)
of the Act arises as a result of the trusteeship under any such other
indentures, including a statement as to how the indenture securities
will rank as compared with the securities under such other indentures.
Not applicable, neither bond issue is in default.
<PAGE>
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR OR
UNDERWRITERS.
If the trustee or any of the directors or executive officers of the
trustee is a director, officer, partner, employee, appointee, or
representative of the obligor or of any underwriter for the obligor,
identify each such person having any such connection and state the
nature of each such connection.
Not applicable.
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS.
Furnish the following information as to the voting securities of the
trustee owned beneficially by the obligor and each director, partner
and executive officer of the obligor:
AS OF MAY 20, 1996
------------
(WITHIN 31 DAYS)
Col. A Col. B Col. C Col. D
- ------------- -------------- ------------ ---------------
Percentage of
Voting
Securities
Represented
Amount Owned by Amount Given
Name of Owner Title of Class Beneficially In Col. C
- ------------- -------------- ------------ ---------------
None
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE UNDERWRITERS OR THEIR
OFFICIALS.
Furnish the following information as to the voting securities of the
trustee owned beneficially by each underwriter for the obligor and each
director, partner, and executive officer of each such underwriter:
AS OF MAY 20, 1996
------------
(WITHIN 31 DAYS)
Col. A Col. B Col. C Col. D
- ------------- -------------- ------------ ---------------
Percentage of
Voting
Securities
Represented
Amount Owned by Amount Given
Name of Owner Title of Class Beneficially In Col. C
- ------------- -------------- ------------ ---------------
None
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
Furnish the following information as to securities of the obligor owned
beneficially or held as collateral security for obligations in default by
the trustee:
<PAGE>
AS OF MAY 20, 1996
------------
(WITHIN 31 DAYS)
Col. A Col. B Col. C Col. D
- -------------- -------------- ---------------------- ----------------
Whether the Amount Owned Percentage of
Securities are Beneficially or Held Class Securities
Voting or as Collateral Security Represented by
Nonvoting For Obligations in Amount Given
Title of Class Securities Default by Trustee In Col. C
- -------------- -------------- ---------------------- ----------------
None
ITEM 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of an underwriter for the obligor,
furnish the following information as to each class of securities of such
underwriter, any of which are so owned or held by the trustee:
AS OF MAY 20, 1996
------------
(WITHIN 31 DAYS)
Col. A Col. B Col. C Col. D
- -------------- ----------- ---------------------- ----------------
Percentage of
Amount Owned Voting
Beneficially or Held Securities
Name of as Collateral Security Represented
Issuer and Amount For Obligations in by Amount Given
Title of Class Outstanding Default by Trustee In Col. C
- -------------- ----------- ---------------------- ----------------
None
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
If the trustee owns beneficially or holds as collateral security for
obligations in default any voting securities of a person who, to the
knowledge of the trustee (I ) owns 10 percent or more of the voting
securities of the obligor or (2) is an affiliate, other than a subsidiary,
of the obligor, furnish the following information as to the voting
securities of such person:
AS OF MAY 20, 1996
------------
(WITHIN 31 DAYS)
Col. A Col. B Col. C Col. D
- -------------- ----------- ---------------------- ----------------
Amount Owned Percentage of
Beneficially or Held Class Securities
Name of as Collateral Security Represented by
Issuer and Amount For Obligations in Amount Given
Title of Class Outstanding Default by Trustee In Col. C
- -------------- ----------- ---------------------- ----------------
None
<PAGE>
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON
OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
If the Trustee owns beneficially or holds as collateral security for obligations
in default any securities of a person who, to the knowledge of the trustee, owns
50 percent or more of the voting securities of the obligor, furnish the
following information as to each class of securities of such person, any of
which are so owned or held by the trustee:
AS OF MAY 20, 1996
------------
(WITHIN 31 DAYS)
Col. A Col. B Col. C Col. D
- -------------- ----------- ---------------------- ----------------
Amount Owned Percentage of
Beneficially or Held Class Securities
Name of as Collateral Security Represented by
Issuer and Amount For Obligations in Amount Given
Title of Class Outstanding Default by Trustee In Col. C
- -------------- ----------- ---------------------- ----------------
None
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
Except as noted in the instructions, if the obligor is indebted to the
trustee, furnish the following information:
Col. A Col. B Col. C
- ------ ------ ------
Nature of Indebtedness Amount Outstanding Date Due
- -------------------------- ------------------ --------
Standby Letter of Credit $417,000.00 December 31, 1996
Equipment Finance Lease $134,000.00 July 24, 1998
ITEM 13. DEFAULTS BY THE OBLIGOR.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such
default.
None.
(b) If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any
other securities, of the obligor are outstanding, or is trustee for
more than one outstanding series of securities under the indenture,
state whether there has been a default under any such indenture or
series, identify the indenture or series affected, and explain the
nature of any such default.
None.
<PAGE>
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
If any underwriter is an affiliate of the trustee, describe each such
affiliation.
Not applicable.
ITEM 15. FOREIGN TRUSTEE.
Identify the order or rule pursuant to which the foreign trustee is
authorized to act as sole trustee under indentures qualified or to be
qualified under the Act.
Not applicable.
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as a part of this statement of eligibility.
1. A copy of the articles of association of the trustee as now in effect.
2. A copy of the authorization of the trustee to exercise corporate trust
powers.
3. A copy of the existing bylaws of the trustee, or instruments
corresponding thereto.
4. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trustee Indenture Act of 1939 the
trustee, Norwest Bank Colorado, N.A., organized and existing under the laws of
the United States of America, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City and County of Denver, and State of Colorado on the 20th day of May,
1996.
NORWEST BANK COLORADO, N.A.
By: /s/ Amy E. Buck
---------------
Amy E. Buck
Vice President
<PAGE>
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321 (b) of the Trust Indenture Act of
1939, in connection with the issue of IntelCom Group (U.S.A.), Inc. 12.5% Senior
Discount Notes due 2006 we hereby consent that reports of examinations by
Federal, State, Territorial, or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon request therefore.
NORWEST BANK COLORADO, N.A.
By:/s/ Amy E. Buck
---------------
Amy E. Buck
Vice President
Dated: May 20, 1996
<PAGE>
EXHIBIT 1
ARTICLES OF ASSOCIATION
OF
NORWEST BANK COLORADO, NATIONAL ASSOCIATION
FIRST. The title of this Association shall be Norwest Bank Colorado,
National Association; the Association in conjunction with its said legal name
may also use Norwest Bank Colorado, N.A.
SECOND. The main office of this Association shall be in the City of
Denver, County of Denver, State of Colorado. The general business of the
Association shall be conducted at its main office and its branches, if any.
THIRD. The Board of Directors of this Association shall consist of not
less than five nor more than twenty-five persons, the exact number to be fixed
and determined from time to time by resolution of a majority of the full Board
of Directors or by resolution of the shareholders at any annual or special
meeting thereof
Each director, during the full term of his or her directorship, shall own
a minimum of $1,000 par value of stock of this Association or an equivalent
interest, as determined by the Comptroller of the Currency, in any company which
has control over this Association within the meaning of Section 2 of the Bank
Holding Company Act of 1956.
The Board of Directors, by the vote of a majority of the full Board, may,
between annual meetings of shareholders, fill vacancies created by the death,
incapacity or resignation of any director and by the vote of a majority of the
full Board may also, between annual meetings of shareholders, increase the
membership of the Board by not more than four members and by like vote appoint
qualified persons to fill the vacancies created thereby; provided, however, that
at no time shall there be more than twenty-five directors of this Association;
and provided further, however, that not more than two members may be added to
the Board of Directors in the event that the total number of directors last
elected by shareholders was fifteen or less.
FOURTH. The annual meeting of the shareholders for the election of
directors and the transaction of whatever other business may be brought before
said meeting shall be held at the main office, or such other place as the Board
of Directors may designate, on the day of each year specified therefor in the
Bylaws, but if no election is held on that day, it may be held on any subsequent
day according to the provisions of law; and all elections shall be held
according to such lawful regulations as may be prescribed by the Board of
Directors.
FIFTH. The amount of capital stock of this Association shall be One
Hundred Million Dollars ($100,000,000), divided into 1,000,000 shares of common
stock of the par value of One Hundred Dollars ($100.00) each; but said capital
stock may be increased or decreased from time to time, in accordance with the
provisions of the laws of the United States.
No holder of shares of the capital stock of any class of this Association
shall have any preemptive or preferential right of subscription to any shares of
any class of stock of this Association, whether now or hereafter authorized, or
to any obligations convertible into stock of this Association, issued or sold,
nor any right of subscription to any thereof other than such, if any, as the
Board of Directors, in its discretion, may from time to time determine and at
such price as the Board of Directors may from time to time fix.
The Association, at any time and from time to time, may authorize and
issue debt obligations, whether or nor subordinated, without the approval of the
shareholders.
<PAGE>
SIXTH. The Board of Directors shall appoint one of its members President
of this Association, who shall act as Chairman of the Board, unless the Board
appoints another director to act as Chairman. In the event the Board of
Directors shall appoint a President and a Chairman, the Board shall designate
which person shall act as the chief executive officer of this Association. The
Board of Directors shall have the power to appoint one or more Vice Presidents
and to appoint a Cashier and such other officers and employees as may be
required to transact the business of this Association.
The Board of Directors shall have the power to define the duties of the
officers and employees of this Association; to fix the salaries to be paid to
them; to dismiss them; to require bonds from them and to fix the penalty
thereof, to regulate the manner in which the increase of the capital of this
Association shall be made; to manage and administer the business and affairs of
this Association; to make all Bylaws that it may be lawful for them to make; and
generally to do and perform all acts that it may be legal for a Board of
Directors to do and perform.
SEVENTH. The Board of Directors shall have the power to change the
location of the main office to any other place within the limits of the City of
Denver, without the approval of the shareholders but subject to the approval of
the Comptroller of the Currency; and shall have the power to establish or change
the location of any branch or branches of this Association to any other
location, without the approval of the shareholders but subject to the approval
of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH. The Board of Directors, the Chairman, the President, or any one or
more shareholders owning, in the aggregate, not less than 25 percent of the
stock of this Association, may call a special meeting of shareholders at any
time. Unless otherwise provided by the laws of the United States, a notice of
the time, place, and purpose of every annual and special meeting of the
shareholders shall be given by first-class mail, postage prepaid, mailed at
least ten days prior to the date of such meeting to each shareholder of record
at his or her address as shown upon the books of this Association. Any action
required or permitted to be taken at an annual or special meeting of the
shareholders of the Association may be taken without prior written notice and
without any meeting if such action is taken by written action, containing a
waiver of notice, signed by all of the shareholders entitled to vote on that
action.
TENTH. To the extent permitted by applicable law and regulation:
(a) Elimination of Certain Liability of Directors. A director of the
---------------------------------------------
Association shall not be personally liable to the Association or its
shareholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Association or its shareholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit.
(b)(l) Right to Indemnification. Each person who was or is made a party or
------------------------
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the Association or is or was serving at the request of the Association as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
or inaction in an official capacity as a director, officer, employee, or agent
or in any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the Association to the fullest
extent authorized by the Delaware General Corporation Law, as the
- 2 -
<PAGE>
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Association to provide
broader indemnification rights than said law permitted the Association to
provide prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement except to the extent prohibited by
12 CFR 7.5217(b)) reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit of
his or her heirs, executors and administrators; provided, however, that the
Association shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only if
such proceeding (or part thereof) was authorized by the Board of Directors of
the Association. The right to indemnification conferred in this paragraph (b)
shall be a contract right and shall include the right to be paid by the
Association the expenses incurred in defending any such proceeding in advance of
its final disposition; provided, however, that, if the Delaware General
Corporation Law requires, the payment of such expenses incurred by a director of
officer in his or her capacity as a director or officer (and not in any other
capacity in which service was or is rendered by such person while a director or
officer, including, without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding, shall be made only upon
delivery to the Association of an undertaking, by or on behalf of such director
or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director of officer is not entitled to be indemnified under
this paragraph (b) or otherwise. The Association may, by action of its Board of
Directors, provide indemnification to employees and agents of the Association
with the same scope and effect as the foregoing indemnification of directors and
officers.
(2) Non-Exclusivity of Rights. The right to indemnification and the
-------------------------
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this paragraph (b) shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the Articles of Association, by-law, agreement, vote of
shareholders or disinterested directors or otherwise.
(3) Insurance. Except to the extent prohibited by 12 CFR 7.5217(d), the
---------
Association may maintain insurance, at its expense, to protect itself and any
director, officer, employee or agent of the Association or another corporation,
partnership, joint venture, trust or other enterprise against any such expense,
liability or loss, whether or not the Association would have the power to
indemnify such person against such expense, liability or loss under the Delaware
General Corporation Law.
ELEVENTH. These Articles of Association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of a
greater amount of stock is required by law, and in that case by the vote of
holders of such greater amount.
- 3 -
<PAGE>
EXHIBIT 2
CERTIFICATION OF FIDUCIARY POWERS
---------------------------------
I, Dean E. Miller, Deputy Comptroller for Trust and Securities, do hereby
certify that the records in this Office evidence that the United Bank of Denver
National Association, Denver, Colorado, was granted, under the hand and seal of
the Comptroller, the right to act in all fiduciary capacities authorized under
the provisions of the Act of Congress approved September 28, 1962, 76 Stat. 668,
12 USC 92a. I further certify that the authority so granted remains in full
force and effect.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused the seal of
Office of the Comptroller of the Currency to
be affixed to these presents at the Treasury
Department, in the City of Washington and
District of Columbia this second day of
October, 1984.
Dean E. Miller
Deputy Comptroller
for Trust and Securities
By: _____________________________
<PAGE>
CERTIFICATE
-----------
I, Stephen R. Steinbrink, Acting Comptroller of the Currency, do hereby certify
that:
1. The Comptroller of the Currency, pursuant to Revised Statutes 324, et
seq., as amended, 12 U.S.C. 1, et seq., as amended, has possession, custody and
control of all records pertaining to the chartering, regulation and supervision
of all National Banking Associations.
2. Effective April 27, 1992 the titles of the attached Thirty Seven National
Banking Associations, located in the State of Colorado were changed as shown on
the attached Exhibit A.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
office to be affixed to these presents at
the Treasury Department, in the City of
Washington and District of Columbia, this
14th day of May, 1992.
__/s/___________________________
Acting Comptroller of the Currency
<PAGE>
<TABLE>
<CAPTION>
Legal Name Prior to April 27, 1982 Charter # Legal Name Effective April 27, 1992
- ---------------------------------- --------- -----------------------------------
<S> <C> <C>
United Bank of Academy Place National Association 17891 Norwest Bank of Academy Place, National Association
United Bank of Arapahoe National Association 17017 Norwest Bank of Arapahoe, National Association
United Bank of Arvada National Association 16747 Norwest Bank of Arvada, National Association
United Bank of Aurora National Association 21822 Norwest Bank of Aurora, National Association
United Bank of Aurora-City Center National Association 18034 Norwest Bank of Aurora-City Center, National Association
United Bank of Aurora-South National Association 21824 Norwest Bank of Aurora-South, National Association
United Bank of Bear Valley National Association 15332 Norwest Bank of Bear Valley, National Association
United Bank of Boulder National Association 2355 Norwest Bank of Boulder, National Association
United Bank of Brighton National Association 21831 Norwest Bank, of Brighton, National Association
United Bank of Broomfield National Association 21825 Norwest Bank of Broomfield, National Association
United Bank of Buckingham Square National Association 16244 Norwest Bank of Buckingham Square, National Association
United Bank of Cherry Creek National Association 17361 Norwest Bank of Cherry Creek, National Association
United Bank of Colorado Springs National Association 8572 Norwest Bank of Colorado Springs, National Association
United Bank of Colorado Springs-East National Association 15378 Norwest Bank of Colorado Springs-East, National Association
United Bank of Delta National Association 15321 Norwest Bank of Delta, National Association
United Bank of Denver National Association 3269 Norwest Bank of Denver, National Association
United Bank of Durango National Association 18761 Norwest Bank of Durango, National Association
United Bank of Fort Collins National Association 7837 Norwest Bank of Fort Collins, National Association
United Bank of Fort Collins-South National Association 16909 Norwest Bank of Fort Collins-South, National Association
United Bank of Garden of the Gods National Association 18762 Norwest Bank of Garden of the Gods, National Association
United Bank of Grand Junction National Association 15317 Norwest Bank of Grand Junction, National Association
United Bank of Grand Junction-Downtown National Association 18749 Norwest Bank of Grand Junction-Downtown, National Association
United Bank of Greeley National Association 3148 Norwest Bank of Greeley, National Association
United Bank of Highlands Ranch National Association 17887 Norwest Bank of Highlands Ranch, National Association
United Bank of Lakewood National Association 15079 Norwest Bank of Lakewood, National Association
United Bank of LaSalle National Association 15275 Norwest Bank of LaSalle, National Association
United Bank of Littleton National Association 21829 Norwest Bank of Littleton, National Association
United Bank of Longmont National Association 17481 Norwest Bank of Longmont, National Association
United Bank of Monaco National Association 16475 Norwest Bank of Monaco, National Association
United Bank of Montrose National Association 4007 Norwest Bank of Montrose, National Association
United Bank of Northglenn National Association 15203 Norwest Bank of Northglenn, National Association
United Bank of Pueblo National Association 21776 Norwest Bank of Pueblo, National Association
United Bank of Southglenn National Association 15433 Norwest Bank of Southglenn, National Association
United Bank of Southwest Plaza National Association 17088 Norwest Bank of Southwest Plaza, National Association
United Bank of Steamboat Springs National Association 14400 Norwest Bank of Steamboat Springs, National Association
United Bank of Sterling National Association 21827 Norwest Bank of Sterling, National Association
United Bank of Sunset Park National Association 15003 Norwest Bank of Sunset Park, National Association
</TABLE>
<PAGE>
[Comptroller of the Currency I hereby certify that this is a
Administrator of National Banks True and Correct copy of the
Midwestern District Office foregoing instrument which is
2345 Grand Avenue, Suite 700 still in force and effect.
Kansas City, Missouri 64108]
January 3, 1994 NORWEST BANK COLORADO, N.A.
Mr. Terence W. Chase By: /s/________________________
Manager, External Reporting
Norwest Corporation
Sixth and Marquette
Minneapolis, Minnesota 55479
Dear Mr. Chase:
This letter is the official certification of the Office of the Comptroller of
the Currency (OCC) to consolidate Norwest Bank Arapahoe, National Association,
Englewood, CO (Charter No. 17017); Norwest Bank Arvada, National Association,
Arvada CO (Charter No. 16747); Norwest Bank Aurora, National Association,
Aurora, CO (Charter No. 21822); Norwest Bank Aurora-City Center, National
Association, Aurora, CO (Charter No. 18034); Norwest Bank Aurora-South, National
Association, Aurora, CO (Charter No. 21824); Norwest Bank Bear Valley, National
Association, Denver, CO (Charter No. 15332); Norwest Bank Broomfield, National
Association, Broomfield, CO (Charter No. 21825); Norwest Bank Buckingham Square,
National Association, Aurora, CO (Charter No. 16244); Norwest Bank Cherry Creek,
National Association, Denver, CO (Charter No. 17361); Norwest Bank Highlands
Ranch, National Association, Highlands Ranch, CO (Charter No. 17887); Norwest
Bank Lakewood, National Association, Lakewood, CO (Charter No. 15079); Norwest
Bank Littleton, National Association, Littleton, CO (Charter No. 21829); Norwest
Bank Monaco, National Association, Denver, CO (Charter No. 16475); Norwest Bank
Northglenn, National Association, Northglenn, CO (Charter No. 15203); Norwest
Bank Southglenn, National Association, Littleton, CO (Charter No. 15433);
Norwest Bank Southwest Plaza, National Association, Littleton, CO (Charter No.
17088) into Norwest Bank Denver, National Association, Denver, CO, effective
January 1, 1994. The resulting bank title is "Norwest Bank Colorado, National
Association" and the Charter Number is 3269.
This letter is also the official OCC certification for Norwest Bank Colorado,
National Association to increase its common stock to $50,000,000 as of January
1, 1994.
Sincerely,
Ellen Tanner Shepherd
Corporate Manager
<PAGE>
EXHIBIT 3
NORWEST BANK COLORADO, NATIONAL ASSOCIATION
[Bank Certification]
BY-LAWS
-------
ARTICLE I
---------
MEETINGS OF SHAREHOLDERS
------------------------
SECTION 1.1 ANNUAL MEETING. The regular anual meeting of the
--------------
shareholders for the election of directors and the transaction of whatever other
business may properly come before the meeting shall be held on the third
thursday of January of each year at such time and place as the Board of
Directors may designate. If for any cause the annual meeting of shareholders
for the election of directors is not held on the date fixed in this by-law, such
meeting may be held on some other day, notice thereof having been given in
accordance with the requirements of Section 5149, United States Revised
Statutes, and the meeting conducted according to the provisions of these by-
laws.
SECTION 1.2 SPECIAL MEETING. Except as otherwise specifically provided
---------------
by statute, special meetings of shareholders may be called for any purpose at
any time by the Board of Directors, by the Chief Executive Officer, by the
President, or by any one or more shareholders owning in the aggregate not less
than 25 percent of the then outstanding shares, as provided in Article Ninth of
the Articles of Association.
SECTION 1.3 NOTICE OF MEETINGS. A notice of each annual or special
------------------
shareholders' meeting, setting forth the time, place, and purpose of the
meeting, shall be given, by first-class mail, postage prepaid, to each
shareholder of record at least ten days prior to the date on which such meeting
is to be held; but any failure to mail such notice of any annual meeting, or any
irregularity therein, shall not affect the validity of such annual meeting or of
any of the proceedings thereat. Notwithstanding anything in these by-laws to
the contrary, a valid shareholders' meeting may be held without notice whenever
notice thereof shall be waived in writing by all shareholders, or whenever all
shareholders shall be present or represented at the meeting.
SECTION 1.4 QUORUM. The holders of a majority of the stock issued and
------
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the shareholders for the
transaction of business, and may transact any business except such as may, under
the provisions of law, the Articles of Association, or these by-laws, require
the vote of holders of a greater number of shares. If, however, such majority
shall not be present or represented at any meeting of the shareholders, the
shareholders entitled to vote thereat, present in person or by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until such time as the Board of Directors may
determine.
SECTION 1.5 PROXIES AND VOTING RIGHTS. At each meeting of the
-------------------------
shareholders each shareholder having the right to vote shall be entitled to vote
in person or by proxy appointed by an instrument in writing subscribed by such
shareholder, which proxy shall be valid for that meeting or any adjournments
thereof, shall be dated, and shall be filed with the records of the meeting. No
officer or employee of this Association may act as proxy. Each shareholder
shall have one vote for each share of stock having voting power which is
registered in his name on the books of the Association. Voting for the election
of directors and voting upon any other matter which may be brought before any
shareholders' meeting may, but need not, be by ballot, unless voting by ballot
be requested by shareholder present at the meeting.
<PAGE>
SECTION 1.6 PROCEEDINGS AND RECORDS. The Chairman of the Board shall
-----------------------
preside at all meetings of the shareholders or, in case of his absence or
inability to act, the President or, in case of the absence or inability to act
of both of them, any Executive Vice President may preside at any such meeting.
The presiding officer shall appoint a person to act as secretary of each
shareholders' meeting; provided, however, that the shareholders may appoint some
other person to preside at their meetings or to act as secretary thereof. A
record of all business transacted shall be made o feach shareholders meeting
showing, among other things, the names of the shareholders present and the
number of shares of stock held by each, the names of the shareholders
represented by proxy and the number of shares held by each, the names of the
proxies, the number of shares voted on each motion or resolution and the number
of shares voted for each candidate for director. This record shall be entered
in the minute book of the Association and shall be subscribed by the secretary
of the meeting.
ARTICLE II
----------
Directors
---------
SECTION 2.1 BOARD OF DIRECTORS. The Board of Directors (hereinafter
------------------
referred to as the "Board") shall have power to manage and administer the
business and affairs of the Association. Except as expressly limited by law,
all corporate powers of the Association shall be vested in and may be exercised
by the Board.
SECTION 2.2 NUMBER AND QUALIFICATIONS. The Board shall consist of not
-------------------------
less than five nor more than twenty-five persons, the exact number within such
minimum and maximum limits to be fixed and determined from time to time by
resolution of a majority of the full Board or by resolution of the shareholders
at any meeting thereof; provided, however, that a majority of the full Board may
not increase the number of directors to a number with (i) exceeds by more than
two the number of directors last elected by shareholders where such number was
fifteen or less; and (ii) exceeds by more than four the number of directors last
elected by shareholders where such number was sixteen or more, but in no event
shall the number of directors exceed twenty-five.
Each director shall, during the full term of his directorship, be a
citizen of the United States, and at least two-thirds of the directors shall
have resided in the State of Colorado, or within one hundred miles of the
location of the office of the Association, for at least one year immediately
preceding their election, and shall be residents of such state or within a one-
hundred-mile territory of the location of the Association during their
continuance in office. Each director, during the full term of his directorship,
shall own a minimum of $1,000 par value of stock of this Association or an
equivalent interest, as determined by the Comptroller of the Currency, in any
company which has control over this Association within the meaning of Section 2
of the Bank Holding Company Act of 1956, as amended.
SECTION 2.3 ORGANIZATION MEETING. A meeting of the newly elected board
--------------------
shall be held at the main office of this Association, without notice,
immediately following the adjournment of the annual meeting of the shareholders,
or at such other time and at such other place to which said meeting may be
adjourned. No business shall be transacted at any such meeting until a majority
of the directors elected shall have taken an oath of office as prescribed by
law, and no director elected shall participate in the business transacted at any
such meeting of the Board until he shall have taken said oath. If at any such
meeting there is not a quorum of the directors present who shall have taken the
oath of office, the members present may adjourn the meeting from time to time
until a quorum is secured. At such meeting of the newly elected Board, if a
quorum is present, the directors may elect officers for the ensuing year and
transact any and all business which may be brought before them.
- 2 -
<PAGE>
SECTION 2.4 REGULAR MEETINGS. The regular meetings of the Board shall be
----------------
held, without notice other than by this by-law, on the third Thursday of ever
other month, at such time and place as the Board may designate. If the day
fixed for a regular meeting falls upon a bank or legal holiday, the meeting
shall be held on the next succeeding banking business day or on such other date
specified by the Board, in which case notice shall be given to each director as
provided in Section 2.6.
SECTION 2.5 SPECIAL MEETINGS. Special meetings of the Board may be
----------------
called by the Chairman of the Board, the President, or the Secretary, and shall
be called at the request of one-third or more of the directors.
SECTION 2.6 NOTICE OF MEETINGS. Each member of the Board shall be given
------------------
not less than one day's notice by telephone, telegram, letter, or in person,
stating the time and place of any regular or special meeting; such notice may,
but need not, state the purpose of said meeting. Notwithstanding anything in
these by-laws to the contrary, a valid directors' meeting may be held without
notice whenever notice thereof shall be waived in writing by all of the
directors, or whenever all of the directors are present at the meeting.
SECTION 2.7 QUORUM AND VOTING. A majority of the directors shall
-----------------
constitute a quorum at all directors' meetings. Except where the vote of a
greater number of directors is required by the articles of Association, these
by-laws or under provisions of law, the vote of a majority of the directors at a
meeting at which a quorum is present shall be sufficient to transact business.
SECTION 2.8 PROCEEDINGS AND RECORD. The Chairman of the Board, if such
----------------------
officer shall have been designated by the Board, shall preside at all meetings
thereof, and in his absence or inability to act (or if there shall be no
Chairman of the Board) the President, and in his absence or inability to act,
any other director appointed chairman of the meeting pro tempore, shall preside
at meetings of the directors. The Secretary, any Assistant Secretary, or any
other person appointed by the Board, shall act as secretary of the Board and
shall keep accurate minutes of all meetings.
SECTION 2.9 VACANCIES. Any vacancy in the Board may be filled by
---------
appointment at any regular or special meeting of the Board by the remaining
directors in accordance with the laws of the United States, and any director so
appointed shall hold his place until the next election.
ARTICLE III
-----------
COMMITTEES OF THE BOARD
-----------------------
SECTION 3.1 EXECUTIVE COMMITTEE. The Board may appoint annually or more
-------------------
often an Executive Committee consisting of three or more directors. In the
event an Executive Committee is appointed, the Executive Committee shall have
the power to approve, review, and delegate authority to make loans and otherwise
extend credit and to purchase and sell bills, notes, bonds, debentures and other
legal investments and to establish and review general loan and investment
policies. In addition, when the Board is not in session, the Executive
Committee shall have the power to exercise all powers of the Board, except those
that cannot legally be delegated by the Board. The Executive Committee shall
keep minutes of its meetings, and such minutes shall be submitted at the next
regular meeting of the Board at which a quorum is present.
SECTION 3.2 TRUST COMMITTEES. The Board shall appoint a Trust Audit
----------------
Committee, whose members shall be directors of the Association who have no
direct or indirect responsibility for the trust function. This Committee shall,
at least once during each calendar year and within fifteen months of the last
such audit, make suitable audits of the Trust Department or cause suitable
audits to be made by auditors responsible only to the Board and at such time
shall ascertain and report to the Board whether said Department has been
administered in accordance with applicable laws and regulations and sound
fiduciary principles. Every report to the Board
- 3 -
<PAGE>
under this section, together with the action taken thereon, shall be noted in
the minutes of the Board. The Board shall from time to time appoint such other
committees of such membership and with such powers and duties as it is required
to appoint under the provisions of Regulation 9 issued by the Comptroller of the
Currency relating to the trust powers of national banks, or any amendments
thereto, and may appoint such other committees of such membership and with such
powers and duties as the Board may provide and as are permitted by said
Regulation 9, or any amendments thereto.
SECTION 3.3 OTHER COMMITTEES. The Board, by a majority vote of the whole
----------------
Board, may create from its own members or (to the extent permitted by applicable
statutes, laws and regulations) from its own members and/or officers or
employees of the Association such other committees as it may from time to time
deem necessary, and may designate the name and term of existence and prescribe
the duties thereof.
SECTION 3.4 PROCEEDINGS AND RECORD. Each committee appointed by the Board
----------------------
may hold regular meetings at such time or times as may be fixed by the Board or
by the committee itself. Special meetings of any committee may be called by the
chairman or vice chairman or any two members thereof. The Board may, at the
time of the appointment of any committee, designate alternate or advisory
members, designate its chairman, vice chairman, and secretary, or any one or
more thereof, and the committee itself may appoint such of said officers as have
not been so designated by the Board if they deem such appointment necessary or
advisable. The secretary may but need not be a member of the committee. The
Board may at any time prescribe or change the number of members whose presence
is required to constitute a quorum at any or all meetings of a committee. The
quorum so prescribed need not be a majority of the members of the committee. If
no quorum is prescribed by the Board, the presence of a majority of the members
of the committee shall be required to constitute a quorum. Each committee shall
keep such records of its meetings and proceedings as may be required by law or
applicable regulations and may keep such additional records of its meetings and
proceedings as it deems necessary or advisable, and each committee may make such
rules of procedure for the conduct of its own meetings and the method of
discharge of its duties as it deems advisable. Each committee appointed by the
Board may appoint subcommittees composed of its own members or other persons and
may rely on information furnished to it by such subcommittees or by statistical
or other fact-finding departments or employees of this Association, provided
that final action shall be taken in each case by the committee.
ARTICLE IV
----------
OFFICERS AND EMPLOYEES
----------------------
SECTION 4.1 APPOINTMENT OF OFFICERS. The Board shall appoint a
-----------------------
President, one or more Executive Vice Presidents, one or more office Presidents,
one or more Senior Vice Presidents, one or more Vice Presidents, and a
Secretary, and may appoint a Chairman of the Board and such other officers as
from time to time may appear to the Board to be required or desirable to
transact the business of the Association. Only directors shall be eligible for
appointment as President or Chairman of the Board. If a director other than the
President is appointed Chairman of the Board, the Board shall designate either
of these two officers as the chief executive officer of this Association. The
chief executive officer may appoint other officers below the rank of Vice
President by filing a written notice of such officer appointments with the
Secretary.
SECTION 4.2 TENURE OF OFFICE. Officers shall hold their respective
----------------
offices for the current year for which they are appointed unless they resign,
become disqualified or are removed. Any officer appointed by the Board may be
removed at any time by the affirmative vote of a majority of the full Board or
in accordance to with authority granted by the Board. During the year between
its organization meetings, the Board may appoint additional officers and shall
promptly fill any vacancy occurring in any office required to be filled.
- 4 -
<PAGE>
SECTION 4.3 CHIEF EXECUTIVE OFFICER. The chief executive officer shall
-----------------------
supervise the carrying out of policies adopted or approved by the Board, shall
have general executive powers as well as the specific powers conferred by these
by-laws; and shall also have and may exercise such further powers and duties as
from time to time may be conferred upon or assigned to him by the Board.
SECTION 4.4 SECRETARY OR ASSISTANT SECRETARY. The Secretary or any
--------------------------------
Assistant Secretary shall attend to the giving of all notices required by these
by-laws to be given; shall be custodian of the corporate seal, records,
documents and papers of the Association; shall provide for the keeping of proper
records of all transactions of the Association, shall have and may exercise any
and all other powers and duties pertaining by law, regulation or practice, to
the Office of Secretary, or imposed by these by-laws; and shall also perform
such other duties as may be assigned from time to time by the Board.
SECTION 4.5 GENERAL AUTHORITY AND DUTIES. Officers shall have the
----------------------------
general powers and duties customarily vested in the office of such officers of a
corporation and shall also exercise such powers and perform such duties as may
be prescribed by the Articles of Association, by these by-laws, or by the laws
or regulations governing the conduct of the business of national banking
associations, and shall exercise such other powers and perform such other duties
not inconsistent with the Articles of Association, these by-laws or laws or
regulations as may be conferred upon or assigned to them by the Board or the
chief executive officer.
SECTION 4.6 EMPLOYEES AND AGENTS. Subject to the authority of the Board,
--------------------
the chief executive officer, or any other officer of the Association authorized
by him, may appoint or dismiss all or any employees and agents and prescribe
their duties and the conditions of their employment, and from time to time fix
their compensation.
SECTION 4.7 BONDS OF OFFICERS AND EMPLOYEES. The officers and employees
-------------------------------
of this Association shall give bond with security to be approved by the Board in
such penal sum as the Board shall require, conditioned for the faithful and
honest discharge of their respective duties and for the faithful application and
accounting of all monies, funds and other property which may come into their
possession or may be entrusted to their care or placed in their hands. In the
discretion of the Board in lieu of having individual bonds for each officer and
employee, there may be substituted for the bonds provided for herein a blanket
bond covering all officers and employees providing coverage in such amounts and
containing such conditions and stipulations as shall be approved by the chief
executive officer of this Association but subject to the supervision and control
of the Board.
ARTICLE V
---------
STOCK AND STOCK CERTIFICATES
----------------------------
SECTION 5.1 TRANSFERS. Shares of stock shall be transferable only on the
---------
books of the Association upon surrender of the certificate for cancellation, and
a transfer book shall be kept in which all transfers of stock shall be recorded.
SECTION 5.2 STOCK CERTIFICATES. Certificates of stock shall be signed by
------------------
the chief executive officer, the President, or any Executive Vice President and
the Secretary, or any Assistant Secretary, or any other officer appointed by the
Board for that purpose, and shall be sealed with the corporate seal. Each
certificate shall recite on its face that the stock represented thereby is
transferable only upon the books of the Association properly endorsed, and shall
meet the requirements of Section 5139, United States Revised Statutes, as
amended.
- 5 -
<PAGE>
SECTION 5.3 DIVIDENDS. Transfers of stock shall not be suspended
---------
preparatory to the declaration of dividends and, unless an agreement to the
contrary shall be expressed in the assignments, dividends shall be paid to the
shareholders in whose name the stock shall stand at the time of the declaration
of the dividends or on such record date as may be fixed by the Board.
SECTION 5.4 LOST CERTIFICATES. In the event of loss or destruction of a
-----------------
certificate of stock, a new certificate may be issued in its place upon proof of
such loss or destruction and upon receipt of an acceptable bond or agreement of
indemnity as maybe required by the Board.
ARTICLE VI
----------
CORPORATE SEAL
--------------
SECTION 6.1 FORM. The corporate seal of the Association shall have
-----
inscribed thereon the name of the Association.
SECTION 6.2 AUTHORITY TO IMPRESS. The chief executive officer, the
---------------------
President, the Secretary, any Assistant Secretary, or other officer designated
by the Board, shall have authority to impress or affix the corporate seal to any
document requiring such seal, and to attest the same.
ARTICLE VII
-----------
MISCELLANEOUS PROVISIONS
------------------------
SECTION 7.1 BANKING HOURS. The days and hours during which this
--------------
Association shall be open for business shall be fixed from time to time by the
Board, the chief executive officer, or the President, consistent with national
and state laws governing banking and business transactions.
SECTION 7.2 EXECUTION OF WRITTEN INSTRUMENTS. All instruments,
---------------------------------
documents, or agreements relating to or affecting the property or business and
affairs of this Association, or of this Association when acting in any
representative or fiduciary capacity, shall be executed, acknowledged, verified,
delivered or accepted in behalf of this Association by the chief executive
officer, the President, any Executive Vice President, any office President, any
Senior Vice President, any Vice President, the Secretary, any Assistant Vice
President, any Assistant Secretary,or by such other officer, officers,
employees, or designated signers, as the Board may from time to time direct.
SECTION 7.3 RECORDS. The Articles of Association, these by-laws, and any
--------
amendments thereto, and the proceedings of all regular and special meetings of
the directors and of the shareholders shall be recorded in appropriate minute
books provided for the purpose. The minutes of each meeting shall be signed by
the person appointed to act as secretary of the meeting.
SECTION 7.4 FISCAL YEAR. The fiscal year of the Association shall be the
------------
calendar year.
- 6 -
<PAGE>
ARTICLE VIII
------------
BY-LAWS
-------
SECTION 8.1 INSPECTION. A copy of these by-laws, with all amendments
-----------
thereto, shall at all times be kept in a convenient place at the main office of
the Association, and shall be open for inspection to all shareholders during
banking hours.
SECTION 8.2 AMENDMENTS. These by-laws may be changed or amended at
-----------
any regular or special meeting of the Board by a vote of a majority of the full
Board or at any regular or special meeting of shareholders by the vote of the
holders of a majority of the stock issued and outstanding and entitled to vote
thereat.
- 7 -
<PAGE>
NORWEST BANK COLORADO, NATIONAL ASSOCIATION
MARCH 16, 1995 MEETING OF THE BOARD OF DIRECTORS
ACTION: APPROVE AMENDMENT TO BYLAWS
-----------------------------------
ARTICLE II
----------
DIRECTORS
---------
SECTION 2.10 MEETINGS BY TELEPHONE. Unless otherwise provided by the
----------------------
articles of association, one or more members of the board of directors may
participate in a meeting of the board by teleconference or by similar
communications equipment by which all persons participating in the meeting can
hear each other at the same time. Such participation shall constitute presence
in person at the meeting.
SECTION 2.11 ACTION WITHOUT A MEETING. Any action required or permitted
-------------------------
to be taken at a meeting of the directors may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all of
the directors. Such consent (which may be signed in counterparts) shall have
the same force and effect as a unanimous vote of the directors and may be stated
as such in any document. Unless the consent specifies a different effective
date, action taken herein is effective when all directors have signed the
consent. All consents signed pursuant to this Section 2.11 shall be delivered
to the secretary of the bank for inclusion in the minutes or for filing with the
bank records.
- 8 -
<PAGE>
EXHIBIT 4
CONSOLIDATED REPORT OF INCOME
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE
BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RI--INCOME STATEMENT
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
------------------
(Year-to-date)
<S> <C>
1. Interest income:
a. Interest and fee income on loans:
(1) In domestic offices:
(a) Loans secured by real estate............................................... $ 27,738
(b) Loans to depository institutions........................................... 2,431
(c) Loans to finance agricultural production and other loans to 2,082
farmers........................................................................
(d) Commercial and industrial loans............................................ 19,576
(e) Acceptances of other banks................................................. 9
(f) Loans to individuals for household, family, and other personal
expenditures:
(1) Credit cards and related plans.......................................... 1,797
(2) Other................................................................... 15,541
(g) Loans to foreign governments and official institutions..................... 0
(h) Obligations (other than securities and leases) of states and political
subdivisions in the U.S.:
(1) Taxable obligations..................................................... 0
(2) Tax-exempt obligations.................................................. 291
(i) All other loans in domestic offices........................................ 2
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs................ 0
b. Income from lease financing receivables:
(1) Taxable leases............................................................... 13
(2) Tax-exempt leases............................................................ 0
c. Interest income on balances due from depository institutions:(1)
(1) In domestic offices.......................................................... 3
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs................ 0
d. Interest and dividend income on securities:
(1) U.S. Treasury securities and U.S. Government agency and corporation
obligations...................................................................... 46,214
(2) Securities issued by states and political subdivisions in the U.S.:
(a) Taxable securities......................................................... 68
(b) Tax-exempt securities...................................................... 775
(3) Other domestic debt securities............................................... 268
(4) Foreign debt securities...................................................... 0
(5) Equity securities (including investments in mutual funds).................... 125
e. Interest income from trading assets.............................................. 0
</TABLE>
- ------------------------
(1) Includes interest income on time certificates of deposit not held for
trading.
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
------------------
(Year-to-date)
<S> <C>
f. Interest income on federal funds sold and securities purchased under
agreements to resell in domestic offices of the bank and of its Edge and
Agreement subsidiaries, and in IBFs................................................. 3,738
g. Total interest income (sum of items 1.a through 1.f)............................. 120,671
2. Interest expense:
a. Interest on deposits:
(1) Interest on deposits in domestic offices:
(a) Transaction accounts (NOW accounts, ATS accounts, and
telephone and preauthorized transfer accounts)................................. 5,186
(b) Nontransaction accounts:
(1) Money market deposit accounts (MMDAs)................................... 10,668
(2) Other savings deposits.................................................. 3,240
(3) Time certificates of deposit of $100,000 or more........................ 3,444
(4) All other time deposits................................................. 14,776
(2) Interest on deposits in foreign offices, edge and agreement
subsidiaries, and IBFS........................................................... 641
b. Expense of federal funds purchased and securities sold under agreements to
repurchase in domestic offices of the bank and of its edge and agreement
subsidiaries, and in IBFs........................................................... 1,460
c. Interest on demand notes issued to the U.S. Treasury, trading liabilities,
and other borrowed money............................................................ 0
d. Interest on mortgage indebtedness and obligations under capitalized leases....... 40
e. Interest on subordinated notes and debentures.................................... 0
----------
f. Total interest expense (sum of items 2.a through 2.e)............................ 39,455
==========
3. Net interest income (item 1.g minus 2.f)........................................... 81,216
==========
4. Provisions:
a. Provision for loan and lease losses.............................................. 1,029
b. Provision for allocated transfer risk............................................ 0
5. Noninterest income:
a. Income from fiduciary activities................................................. 7,388
b. Service charges on deposit accounts in domestic offices.......................... 13,760
c. Trading revenue (must equal Schedule RI, sum of Memorandum items 8.a
through 8.d)........................................................................ 10
d. Other foreign transaction gains (losses)......................................... 63
e. Not applicable................................................................... --
f. Other noninterest income:
(1) Other fee income............................................................. 5,897
(2) All other noninterest income/*/.............................................. 1,404
g. Total noninterest income (sum of items 5.a through 5.f).......................... 28,522
6. a. Realized gains (losses) on held-to maturity securities......................... 0
b. Realized gains (losses) on available-for-sale securities......................... 4,318
</TABLE>
- ------------------------
* Described on Schedule RI-E--Explanations.
-2-
<PAGE>
SCHEDULE RI -- INCOME STATEMENT (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
------------------
(Year-to-date)
<S> <C>
7. Noninterest expense:
a. Salaries and employee benefits................................................... 33,009
b. Expenses of premises and fixed assets (net of rental income) (excluding
salaries and employee benefits and mortgage interest)............................... 12,241
c. Other noninterest expense/*/..................................................... 38,983
---------
d. Total noninterest expense (sum of items 7.a through 7.c)......................... 84,233
=========
8. Income (loss) before income taxes and extraordinary items and other
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a., 6.b, and 7.d)......... 28,794
9. Applicable income taxes (on item 8)................................................ 9,927
---------
10. Income (loss) before extraordinary items and other adjustments
(item 8 minus 9)..................................................................... 18,867
11. Extraordinary items and other adjustments:
a. Extraordinary items and other adjustments, gross of income taxes*................ 0
b. Applicable income taxes (on item 11.a)*.......................................... 0
c. Extraordinary items and other adjustments, net of income taxes (item 11.a
minus 11.b)......................................................................... 0
12. Net income (loss) (sum of items 10 and 11.c)...................................... 18,867
=========
Memoranda
- ---------------------------------------------------------------------------------------
1. Interest expense incurred to carry tax-exempt securities, loans, and leases
acquired after August 7, 1986, that is not deductible for federal income tax
purposes.............................................................................. 171
2. Income from the sale and servicing of mutual funds and annuities in domestic
offices (included in Schedule RI, item 8)............................................. 107
3.-4. Not applicable.................................................................. --
5. Number of full-time equivalent employees on payroll at end of current period (Number)
(round to nearest whole number)....................................................... 3,431
6. Not applicable..................................................................... --
7. If the reporting bank has restated its balance sheet as a result of applying push MM DD YY
down accounting this calendar year, report the date of the bank's acquisition......... 00/00/00
8. Trading revenue (from cash instruments and off-balance sheet derivative
instruments) (sum of Memorandum items 8.a through 8.d must equal Schedule
RI, item 5.c):
a. Interest rate exposures.......................................................... 0
b. Foreign exchange exposures....................................................... 10
c. Equity security and index exposures.............................................. 0
d. Commodity and other exposures.................................................... 0
9. Impact on income of off-balance sheet derivatives held for purposes other than
trading:
a. Net increase (decrease) to interest income....................................... 0
b. Net (increase) decrease to interest expense...................................... (5,059)
</TABLE>
- ------------------------
* Described on Schedule RI-E--Explanations.
-3-
<PAGE>
SCHEDULE RI -- INCOME STATEMENT (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
------------------
(Year-to-date)
<S> <C>
c. Other (noninterest) allocations.................................................. 0
10. Credit losses on off-balance sheet derivatives (see instructions)................. 0
</TABLE>
-4-
<PAGE>
CONSOLIDATED REPORT OF INCOME
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE
BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RI-A--CHANGES IN EQUITY CAPITAL
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
(Year-to-date)
------------------
<S> <C>
Indicate decreases and losses in parentheses.
1. Total equity capital originally reported in the December 31, 1995, Reports of
Condition and Income.................................................................. $375,906
2. Equity capital adjustments from amended Reports of Income, net(*).................. 0
3. Amended balance end of previous calendar year (sum of items 1 and 2)............... 375,906
4. Net income (loss) (must equal Schedule RI, item 12)................................ 18,867
5. Sale, conversion, acquisition, or retirement of capital stock, net................. 4,479
6. Changes incident to business combinations, net..................................... 0
7. LESS: Cash dividends declared on preferred stock.................................. 0
8. LESS: Cash dividends declared on common stock..................................... 19,000
9. Cumulative effect of changes in accounting principles from prior years* (see
instructions for this schedule)....................................................... 0
10. Corrections of material accounting errors from prior years* (see instructions
for this schedule).................................................................... 0
11. Change in net unrealized holding gains (losses) on available-for-sale securities.. (27,920)
12. Foreign currency translation adjustments.......................................... 0
13. Other transactions with parent holding company* (not included in items 5, 7,
or 8 above)........................................................................... 0
14. Total equity capital end of current period (sum of items 3 through 13) (must
equal Schedule RC, item 28)........................................................... $352,332
</TABLE>
- ------------------------
(*) Describe on Schedule RI-E--Explanations.
-5-
<PAGE>
CONSOLIDATED REPORT OF INCOME
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE
BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RI-B--CHARGE-OFFS AND RECOVERIES AND CHANGES IN ALLOWANCE FOR LOAN AND
LEASE LOSSES
PART I. CHARGE-OFFS AND RECOVERIES ON LOANS AND LEASES
Part I excludes charge-offs and recoveries through the allocated transfer risk
reserve.
<TABLE>
<CAPTION>
(COLUMN A) (COLUMN B)
CHARGE-OFFS RECOVERIES
----------- ----------
(Calendar year-to-date)
------------------------
<S> <C> <C>
1. Loans secured by real estate:
a. To U.S. addresses (domicile)....................................... $0,224 $0,854
b. To non-U.S. addresses (domicile)................................... 0 0
2. Loans to depository institutions and acceptances of other banks:
a. To U.S. banks and other U.S. depository institutions............... 0 0
b. To foreign banks................................................... 0 0
3. Loans to finance agricultural production and other loans to farmers.. 62 4
4. Commercial and industrial loans:
a. To U.S. addresses (domicile)....................................... 263 322
b. To non-U.S. addresses (domicile)................................... 0 0
5. Loans to individuals for household, family, and other personal
expenditures:
a. Credit cards and related plans..................................... 334 70
b. Other (includes single payment, installment, and all student
loans)................................................................ 2,953 645
6. Loans to foreign governments and official institutions............... 0 0
7. All other loans...................................................... 216 105
8. Lease financing receivables: 0 0
a. Of U.S. addresses (domicile).......................................
b. Of non-U.S. addresses (domicile)................................... 0 0
------- -------
9. Total (sum of items 1 through 8)..................................... $4,052 $2,000
======= =======
</TABLE>
-6-
<PAGE>
CONSOLIDATED REPORT OF INCOME
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE
BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RI-B--CONTINUED
PART I. CONTINUED
<TABLE>
<CAPTION>
(COLUMN A) (COLUMN B)
CHARGE-OFFS RECOVERIES
----------- ----------
(Calendar year-to-date)
------------------------
<S> <C> <C>
Memoranda
- -------------------------------------
1.-3. Not applicable................................................ $ -- $ --
4. Loans to finance commercial real estate, construction, and land
development activities (not secured by real estate) included in
Schedule RI-B, part I, items 4 and 7, above...................... 0 0
5. Loans secured by real estate in domestic offices (included in
Schedule RI-B, part I, item 1 above):
a. Construction and land development.............................. 3 184
b. Secured by farmland............................................ 0 8
c. Secured by 1-4 family residential properties:
(1) Revolving, open-end loans secured by 1-4 family
residential properties and extended under lines of credit...... 45 8
(2) All other loans secured by 1-4 family residential
properties..................................................... 135 209
d. Secured by multifamily (5 or more) residential properties...... 0 0
e. Secured by nonfarm nonresidential properties................... 41 445
</TABLE>
PART II. CHANGES IN ALLOWANCE FOR LOAN AND LEASE LOSSES
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
------------------
(Year-to-date)
<S> <C>
1. Balance originally reported in the December 31, 1995, Reports of Condition
and Income..................................................................... $81,711
2. Recoveries (must equal part I, item 9, column B above)......................... 2,000
3. LESS: Charge-offs (must equal part I, item 9, column A above)................. 4,052
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a)......... 1,029
5. Adjustments(*) (see instructions for this schedule)............................ 6,103
---------
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule
RC, item 4.b).................................................................. $86,791
=========
</TABLE>
SCHEDULE RI-C--APPLICABLE INCOME TAXES BY TAXING AUTHORITY
<TABLE>
<S> <C>
1. Federal N/A
2. State and local................................................................ N/A
3. Foreign........................................................................ N/A
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and
11.b).......................................................................... N/A
5. Deferred portion of item 4..................................................... N/A
</TABLE>
- ------------------------
(*) Describe on Schedule RI-E--Explanations.
-7-
<PAGE>
CONSOLIDATED REPORT OF INCOME
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE
BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RI-D--INCOME FROM INTERNATIONAL OPERATIONS
PART I. ESTIMATED INCOME FROM INTERNATIONAL OPERATIONS
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs
where international operations account for more than 10 percent of total
revenues, total assets, or net income.
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
------------------
(Year-to-date)
<S> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement
subsidiaries, and IBFs:
a. Interest income booked........................................................... N/A
b. Interest expense booked.......................................................... N/A
c. Net interest income booked at foreign offices, Edge and Agreement
subsidiaries, and IBFs (item 1.a minus 1.b)......................................... N/A
2. Adjustments for booking location of international operations:
a. Net interest income attributable to international operations booked at
domestic offices.................................................................... N/A
b. Net interest income attributable to domestic business booked at foreign
offices............................................................................. N/A
c. Net booking location adjustment (item 2.a minus 2.b)............................. N/A
3. Noninterest income and expense attributable to international operations:
a. Noninterest income attributable to international operations...................... N/A
b. Provision for loan and lease losses attributable to international
operations........................................................................ N/A
c. Other noninterest expense attributable to international operations............... N/A
d. Net noninterest income (expense) attributable to international operations
(item 3.a minus 3.b and 3.c)........................................................ N/A
4. Estimated pretax income attributable to international operations before capital
allocation adjustment (sum of items 1.c, 2.c, and 3.d)................................ N/A
5. Adjusted to pretax income for internal allocations to international operations to
reflect the effects of equity capital on overall bank funding costs................... N/A
6. Estimated pretax income attributable to international operations after capital
allocation adjustment (sum of items 4 and 5).......................................... N/A
7. Income taxes attributable to income from international operations as estimated
in item 6............................................................................. N/A
8. Estimated net income attributable to international operations (item 6 minus 7)..... N/A
Memorandum
- ---------------------------------------------------------------------------------------
1. Intracompany interest income included in item 1.a above............................ N/A
2. Intracompany interest expense included in item 1.b above........................... N/A
</TABLE>
-8-
<PAGE>
CONSOLIDATED REPORT OF INCOME
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE
BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RI-D--CONTINUED
PART II. SUPPLEMENTARY DETAILS ON INCOME FROM INTERNATIONAL OPERATIONS
REQUIRED BY THE DEPARTMENTS OF COMMERCE AND TREASURY FOR PURPOSES OF THE U.S.
INTERNATIONAL ACCOUNTS AND THE U.S. NATIONAL INCOME AND PRODUCT ACCOUNTS
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
------------------
(Year-to-date)
<S> <C>
1. Interest income booked at IBFs.................................................. N/A
2. Interest expense booked at IBFs................................................. N/A
3. Noninterest income attributable to international operations booked at domestic
offices (excluding IBFs):
a. Gains (losses) and extraordinary items........................................ N/A
b. Fees and other noninterest income............................................. N/A
4. Provision for loan and lease losses attributable to international operations
booked at domestic offices (excluding IBFs)........................................ N/A
5. Other noninterest expense attributable to international operations booked at
domestic offices (excluding IBFs).................................................. N/A
</TABLE>
-9-
<PAGE>
CONSOLIDATED REPORT OF INCOME
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE
BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RI-E--EXPLANATIONS
Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.
Detail all adjustments in Schedule RI-A and RI-B, all extraordinary items and
other adjustments in Schedule RI, and all significant items of other noninterest
income and other noninterest expense in Schedule RI. (See instructions for
details.)
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
------------------
(Year-to-date)
<S> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2))
Report amounts that exceed 10% of Schedule RI, item 5.f.(2):
a. Net gains on other real estate owned......................................... $ 0
b. Net gains on sales of loans.................................................. 0
c. Net gains on sales of premises and fixed assets.............................. 0
d. Safe Deposit Rental 510
e.
f.
2. Other noninterest expense (from Schedule RI, item 7.c):
a. Amortization expense of intangible assets.................................... 0
Report amounts that exceed 10% of Schedule RI, item 7.c:
b. Net losses on other real estate owned........................................ 0
c. Net losses on sales of loans................................................. 0
d. Net losses on sales of premises and fixed assets............................. 0
Itemize and describe the three largest other amounts that exceed 10% of
Schedule RI, item 7.c:
e. Computer Center processing fees.............................................. 4,120
f.
g.
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and
applicable income tax effect (from Schedule RI, item 11.b) (itemize and
describe all extraordinary items and other adjustments):
a. (1)
(2)
b. (1)
(2)
c. (1)
(2)
4. Equity capital adjustments from amended Reports of Income (from Schedule
RI-A, item 2)
(itemize and describe all adjustments):
a.
b.
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
For the period
January 1, 1996 to
March 31, 1996
--------------------
(Year-to-date)
<S> <C>
5. Cumulative effect of changes in accounting principles from prior years (from
Schedule RI-A, item 9) (itemize and describe all changes in accounting
principles):
a.
b.
6. Corrections of material accounting errors from prior years (from Schedule RI-
A, item 10)
(itemize and describe all corrections):
a.
b.
7. Other transactions with parent holding company (from Schedule RI-A, item 13)
(itemize and describe all such transactions):
a.
b.
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part
II, item 5) (itemize and describe all such transactions):
a. Merge of assets from affiliate 1/96.......................................... 6,103
b................................................................................
9. Other explanations (the space below is provided for the bank to briefly
describe, at its option, any other significant items affecting the Report of
Income):
No comment
Other explanations (please type or print clearly):
</TABLE>
-11-
<PAGE>
CONSOLIDATED REPORT OF INCOME
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE
BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RC-C--BALANCE SHEET
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR MARCH 31, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
(Year-to-date)
------------------
<S> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A):
a. Noninterest-bearing balances and currency and coin/*/............................. $0,723,980
b. Interest-bearing balances/*/...................................................... 0
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A)........................ 0
b. Available-for-sale securities (from Schedule RC-B, column D)...................... 2,662,756
3. Federal funds sold and securities purchased under agreements to resell in
domestic offices of the bank and of its Edge and Agreement subsidiaries, and
in IBFs:
a. Federal funds sold................................................................ 305,200
b. Securities purchased under agreements to resell................................... 0
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule RC-C) 3,208,497
b. LESS: Allowance for loan and lease losses........................................ 86,791
c. LESS: Allocated transfer risk reserve............................................ 0
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus 4.b and 4.c)................................ 3,131,706
5. Trading assets (from Schedule RC-D)................................................. 4
6. Premises and fixed assets (including capitalized leases)............................ 108,489
7. Other real estate owned (from Schedule RC-M)........................................ 434
8. Investments in unconsolidated subsidiaries and associated companies (from 0
Schedule RC-M)......................................................................
9. Customers' liability to this bank on acceptances outstanding........................ 1,677
10. Intangible assets (from Schedule RC-M)............................................. 62
11. Other assets (from Schedule RC-F).................................................. 172,190
----------
12. Total assets (sum of items 1 through 11)........................................... $7,096,498
==========
</TABLE>
- ------------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
-12-
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
--------------------
(Year-to-date)
<S> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C from Schedule RC-
E, part I)........................................................................... $6,262,948
(1) Noninterest-bearing/1/........................................................ 1,886,374
(2) Interest-bearing.............................................................. 4,376,574
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from
Schedule RC-E,
part II).......................................................................... 74,307
(1) Noninterest-bearing........................................................... 0
(2) Interest-bearing.............................................................. 74,307
14. Federal funds purchased and securities sold under agreements to repurchase in
domestic offices of the bank and of its Edge and Agreement subsidiaries, and
in IBFs:
a. Federal funds purchased........................................................... 136,460
b. Securities sold under agreements to repurchase.................................... 25,197
15. a. Demand notes issued to the U.S. Treasury....................................... 0
b. Trading liabilities (from Schedule RC-D).......................................... 2
16. Other borrowed money:
a. With a remaining maturity of one year or less..................................... 10,700
b. With a remaining maturity of more than one year................................... 0
17. Mortgage indebtedness and obligations under capitalized leases..................... 1,111
18. Bank's liability on acceptances executed and outstanding........................... 1,677
19. Subordinated notes and debentures.................................................. 0
20. Other liabilities (from Schedule RC-G)............................................. 231,764
----------
21. Total liabilities (sum of items 13 through 20)..................................... $6,744,166
==========
22. Limited-life preferred stock and related surplus................................... $ 0
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus...................................... 0
24. Common stock....................................................................... 100,000
25. Surplus (exclude all surplus related to preferred stock)........................... 203,082
26. a. Undivided profits and capital reserves......................................... 56,347
b. Net unrealized holding gains (losses) on available-for-sale securities............ (7,097)
27. Cumulative foreign currency translation adjustments................................ 0
----------
28. Total equity capital (sum of items 23 through 27).................................. 352,332
==========
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items
21, 22, and 28)........................................................................ $7,096,498
==========
</TABLE>
- ------------------------
/1/ Includes total demand deposits and noninterest-bearing time and savings
deposits.
-13-
<PAGE>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
-------------------
(Year-to-date)
Memorandum
- -------------------------------------------------------
TO BE REPORTED ONLY WITH THE MARCH REPORT OF CONDITION.
1. Indicate in the box at the right the number of
the statement below that best describes the most
comprehensive level of auditing work performed for the
bank by independent external auditors as of any date Number
during 1995............................................ 8
1 = Independent audit of the bank
conducted in accordance
with generally accepted
auditing standards by a certified
public accounting firm which submits
a report on the bank
2 = Independent audit of the bank's
parent holding company conducted
in accordance with generally
accepted auditing standards by a
certified public accounting firm
which submits a report on the
consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the
bank conducted in accordance
with generally accepted auditing
standards by a certified public
accounting firm (may be required
by state chartering authority)
4 = Directors' examination of the bank
performed by other external auditors (may
be required by state chartering authority)
5 = Review of the bank's financial
statements by external auditors
6 = Compilation of the bank's financial
statements by external auditors
7 = Other audit procedures (excluding tax
preparation work)
8 = No external audit work
-14-
<PAGE>
CONSOLIDATED REPORT OF INCOME
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE
BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RC-A--CASH AND BALANCES DUE FROM DEPOSITORY INSTITUTIONS
Exclude assets held for trading.
<TABLE>
<CAPTION>
(COLUMN A) (COLUMN B)
CONSOLIDATED BANK DOMESTIC OFFICES
-------------------------------------
(Calendar year-to-date)
-------------------------------------
<S> <C> <C>
1. Cash items in process of collection, unposted debits, and currency
and coin............................................................ $559,632 $000,000
a. Cash items in process of collection and unposted debits........... -- 449,296
b. Currency and coin................................................. -- 110,336
2. Balances due from depository institutions in the U.S................ -- 1,722
a. U.S. branches and agencies of foreign banks (including their
IBFs)............................................................. 0 --
b. Other commercial banks in the U.S. and other depository
institutions in the U.S. (including their IBFs)................... 1,722 --
3. Balances due from banks in foreign countries and foreign central
banks............................................................... -- 764
a. Foreign branches of other U.S. banks.............................. 0 --
b. Other banks in foreign countries and foreign central banks........ 764 --
4. Balances due from Federal Reserve Banks............................. 161,862 161,862
---------- ---------
5. Total (sum of items 1 through 4) (total of column A must equal
Schedule RC, sum of items 1.a and 1.b).............................. $723,980 $723,980
========== =========
Memorandum
- -----------------------------------------------------------
1. Noninterest-bearing balances due from commercial banks in the U.S.
(included in item 2, column B above)................................ 1,722
</TABLE>
-15-
<PAGE>
CONSOLIDATED REPORT OF INCOME
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE
BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RC-B--SECURITIES
Exclude assets held for trading.
<TABLE>
<CAPTION>
HELD-TO-MATURITY AVAILABLE-FOR-SALE
---------------------------------------------------------------
(COLUMN A) (COLUMN B) (COLUMN C) (COLUMN D)
AMORTIZED COST FAIR VALUE AMORTIZED COST FAIR VALUE(1)
---------------------------------------------------------------
(Calendar year-to-date)
---------------------------------------------------------------
<S> <C> <C> <C> <C>
1. U.S. Treasury securities............. $0 $0 $ 36,193 $ 36,322
2. U.S. Government agency and
corporation obligations (exclude
mortgage-backed securities):
a. Issued by U.S. Government
agencies/2/........................ 0 0 0 0
b. Issued by U.S. Government-
sponsored agencies/3/............. 0 0 7,317 7,237
3. Securities issued by states and
political subdivisions in the U.S.:
a. General obligations................ 0 0 30,628 31,449
b. Revenue obligations................ 0 0 19,009 19,292
c. Industrial development and
similar obligations................... 0 0 0 0
4. Mortgage-backed securities (MBS):
a. Pass-through securities:
(1) Guaranteed by GNMA............. 0 0 239,374 241,546
(2) Issued by FNMA and
FHLMC.............................. 0 0 2,297,738 2,289,563
(3) Other pass-through
securities......................... 0 0 5,056 5,054
b. Other mortgage-backed securities
(include CMOs, REMICs, and
stripped MBS):
</TABLE>
- ------------------------
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates,"
U.S. Maritime Administration obligations for Export-Import Bank
participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the
Farm Credit System, the Federal Home Loan Bank System, the Federal Home
Loan Mortgage Corporation, the Federal National Mortgage Association, the
Financing Corporation, Resolution Funding Corporation, the Student Loan
Marketing Association, and the Tennessee Valley Authority.
-16-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE RC-B--SECURITIES (CONTINUED)
HELD-TO-MATURITY AVAILABLE-FOR-SALE
---------------------------------------------------------------
(COLUMN A) (COLUMN B) (COLUMN C) (COLUMN D)
AMORTIZED COST FAIR VALUE AMORTIZED COST FAIR VALUE(1)
---------------------------------------------------------------
(Calendar year-to-date)
---------------------------------------------------------------
<S> <C> <C> <C> <C>
(1) Issued or guaranteed by
FNMA, FHLMC, or
GNMA........................... 0 0 13,280 13,226
(2) Collateralized by MBS
issued or guaranteed by
FNMA, FHLMC, or
GNMA........................... 0 0 1,686 1,735
(3) All other mortgage-backed
securities..................... 0 0 751 746
5. Other debt securities:
a. Other domestic debt securities..... 0 0 7,504 7,464
b. Foreign debt securities............ 0 0 0 0
6. Equity securities:
a. Investments in mutual funds........ 0 0
b. Other equity securities with
readily determinable fair values... 0 0
c. All other equity securities........ -- -- 9,122 9,122
--------- -----------
7. Total (sum of items 1 through 6)
(total of column A must equal
Schedule RC, item 2.a) (total of
column D must equal Schedule RC,
item 2.b)............................ $0 $0 $2,667,658 $2,662,756
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
-------------------
(Year-to-date)
<S> <C>
Memoranda
1. Pledged securities .................. $153,186
2. Maturity and repricing data for debt securities(2), (3), (4) (excluding
those in nonaccrual status):
a. Fixed rate debt securities with a remaining maturity of:
(1) Three months or less........... 3,083
</TABLE>
- ------------------------
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
(2) Includes held-to-maturity securities at amortized cost and available-for-
sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(4) Memorandum items 2 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
-17-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE RC-B--SECURITIES (CONTIUED)
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
--------------------
(Year-to-date)
<S> <C>
(2) Over three months through 12 months............................................ 22,209
(3) Over one year through five years............................................... 65,719
(4) Over five years................................................................ 2,238,136
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1)
through 2.a.(4)................................................................ 2,329,147
b. Floating rate debt securities with a repricing frequency of:
(1) Quarterly or more frequently................................................... 149,052
(2) Annually or more frequently, but less frequently than quarterly................ 174,213
(3) Every five years or more frequently, but less frequently than annually......... 1,222
(4) Less frequently than every five years.......................................... 0
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1)
through 2.b.(4))............................................................... 324,487
----------
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5))
(must equal total debt securities from Schedule RC-B, sum of items 1
through 5, columns A and D, minus nonaccrual debt securities included in
Schedule RC-N, item 9, column C)................................................... 2,653,634
===========
3. Not applicable....................................................................... --
4. Held-to-maturity debt securities restructured and in compliance with modified
terms (included in Schedule RC-B, items 3 through 5, column A, above)................ 0
5. Not applicable....................................................................... --
6. Floating rate debt securities with a remaining maturity of one year or less
/2/, /4/ (included in Memorandum items 2.b.(1) through 2.b.(4) above)................ 501
7. Amortized cost of held-to-maturity securities sold or transferred to available-
for-sale or trading securities during the calendar year-to-date (report the
amortized cost at date of sale or transfer).......................................... 0
8. High-risk mortgage securities (included in the held-to-maturity and available-
for-sale accounts in Schedule RC-B, item 4.b):
a. Amortized cost..................................................................... 1,096
b. Fair value......................................................................... 1,111
9. Structured notes (included in the held-to-maturity and available-for-sale
accounts in Schedule RC-B, items 2, 3 and 5):
a. Amortized cost..................................................................... 3,530
b. Fair value......................................................................... 3,483
</TABLE>
- ------------------------
/2/ Includes held-to-maturity securities at amortized cost and available-for-
sale securities at fair value.
/4/ Memorandum items 2 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
-18-
<PAGE>
CONSOLIDATED REPORT OF INCOME
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE
BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RC-C--LOANS AND LEASE FINANCING RECEIVABLES
PART I. LOANS AND LEASES
Do not deduct the allowance for loan and lease losses from amounts reported in
this schedule. Report total loans and leases, net of unearned income. Exclude
assets held for trading.
<TABLE>
<CAPTION>
(COLUMN A) (COLUMN B)
CONSOLIDATED BANK DOMESTIC OFFICES
------------------------------------
(Calendar year-to-date)
------------------------------------
<S> <C> <C>
1. Loans secured by real estate............................................ $1,404,776 --
a. Construction and land development..................................... -- 177,513
b. Secured by farmland (including farm residential and other
improvements)......................................................... -- 28,644
c. Secured by 1-4 family residential properties:
(1) Revolving, open-end loans secured by 1-4 family
residential properties and extended under lines of credit............. -- 92,014
(2) All other loans secured by 1-4 family residential
properties:
(a) Secured by first liens.......................................... -- 441,894
(b) Secured by junior liens......................................... -- 213,240
d. Secured by multifamily (5 or more) residential properties............. -- 25,509
e. Secured by nonfarm nonresidential properties.......................... -- 425,962
2. Loans to depository institutions:
a. To commercial banks in the U.S........................................ -- 274,516
(1) To U.S. branches and agencies of foreign banks.................... 0 --
(2) To other commercial banks in the U.S.............................. 274,516 --
b. To other depository institutions in the U.S........................... 5,300 5,300
c. To banks in foreign countries......................................... -- 541
(1) To foreign branches of other U.S. banks........................... 541 --
(2) To other banks in foreign countries............................... 0 --
3. Loans to finance agricultural production and other loans to farmers..... 81,274 81,274
4. Commercial and industrial loans:
a. To U.S. addresses (domicile).......................................... 653,623 653,623
b. To non-U.S. addresses (domicile)...................................... 38 38
5. Acceptances of other banks:
a. Of U.S. banks......................................................... 0 0
b. Of foreign banks...................................................... 0 0
6. Loans to individuals for household, family, and other personal
expenditures (i.e., consumer loans) (includes purchased paper).......... -- 740,630
a. Credit cards and related plans (includes check credit and other 31,185 --
revolving credit plans)...............................................
b. Other (includes single payment, installment, and all student
loans)................................................................ 709,445 --
</TABLE>
-19-
<PAGE>
<TABLE>
<CAPTION>
(COLUMN A) (COLUMN B)
CONSOLIDATED BANK DOMESTIC OFFICES
------------------------------------
(Calendar year-to-ate)
------------------------------------
<S> <C> <C>
7. Loans to foreign governments and official institutions (including
foreign central banks).................................................. 0 0
8. Obligations (other than securities and leases) of states and political
subdivisions in the U.S. (includes nonrated industrial development
obligations)............................................................ 14,770 14,770
9. Other loans............................................................. 36,642 --
a. Loans for purchasing or carrying securities (secured and
unsecured)............................................................ -- 3,075
b. All other loans (exclude consumer loans).............................. -- 33,567
10. Lease financing receivables (net of unearned income)................... -- 317
a. Of U.S. addressees (domicile)......................................... 317 --
b. Of non-U.S. addressees (domicile)..................................... 0 --
--------- -----------
11. LESS: Any unearned income on loans reflected in items 1-9
above................................................................. 3,930 3,930
--------- -----------
12. Total loans and leases, net of unearned income (sum of items 1
through 10 minus item 11) (total of column A must equal Schedule
RC, item 4.a)......................................................... $3,208,497 $3,208,497
=========== ============
Memorandum
1. Commercial paper included in Schedule RC-C, part I, above.............. $ 0 $ 0
2. Loans and leases restructured and in compliance with modified
terms (included in Schedule RC-C, part I, above and not reported
as past due or nonaccrual in Schedule RC-N, Memorandum item 1):
a. Loans secured by real estate:
(1) To U.S. addressees (domicile)..................................... 0
(2) To non-U.S. addressees (domicile)................................. 0
b. All other loans and all lease financing receivables (exclude
loans to individuals for household, family, and other personal
expenditures)......................................................... 0
c. Commercial and industrial loans to and lease financing
receivables of non-U.S. addressees (domicile) included in
Memorandum item 2.b above............................................. 0
3. Maturity and repricing data for loans and leases(1) (excluding
those in nonaccrual status):
a. Fixed rate loans and leases with a remaining maturity of:
(1) Three months or less.............................................. $ ,233,694
(2) Over three months through 12 months............................... 207,694
(3) Over one year through five years.................................. 1,211,464
(4) Over five years................................................... 507,687
-----------
(5) Total fixed rate loans and leases (sum of Memorandum
items 3.a.(1) through 3.a.(4))........................................ $2,160,539
===========
</TABLE>
- ----------------------
(1) Memorandum item 3 is not applicable to savings banks that must complete
supplemental Schedule RC-J.
-20-
<PAGE>
<TABLE>
<CAPTION>
(COLUMN A) (COLUMN B)
CONSOLIDATED BANK DOMESTIC OFFICES
------------------------------------
(Calendar year-to-date)
------------------------------------
<S> <C> <C>
b. Floating rate loans with a repricing frequency of:
(1) Quarterly or more frequently...................................... $1,018,431
(2) Annually or more frequently, but less frequently than
quarterly......................................................... 29,477
(3) Every five years or more frequently, but less frequently
than annually..................................................... 13
(4) Less frequently than every five years............................. 0
-----------
(5) Total floating rate loans (sum of Memorandum items
3.b.(1) through 3.b.(4)).......................................... $1,047,921
===========
c. Total loans and leases (sum of Memorandum items 3.a.(5) and
3.b.(5)) (must equal the sum of total loans and leases, net,
from Schedule RC-C, part I, item 12, plus unearned income
from Schedule RC-C, part I, item 11 minus total nonaccrual
loans and leases from Schedule RC-N, sum of items 1 through
8, column C).......................................................... $3,208,460
===========
d. Floating rate loans with a remaining maturity of one year or
less (included in Memorandum items 3.b.(1) through 3.b.(4)
above)................................................................ $ 536,806
===========
4. Loans to finance commercial real estate, construction, and land
development activities (not secured by real estate) included in
Schedule RC-C, part I, items 4 and 9, column A, page RC-6(2)............ $ 0
5. Loans and leases held for sale (included in Schedule RC-C, part I,
above).................................................................. 6
6. Adjustable rate closed-end loans secured by first liens on 1-4
family residential properties (included in Schedule RC-C, part I,
item 1.c.(2)(a), column B, page RC-6)................................... $ ,140,152
==========
</TABLE>
- -----------------------
(2) Exclude loans secured by real estate that are included in Schedule RC-C,
part I, item 1, column A.
-21-
<PAGE>
CONSOLIDATED REPORT OF INCOME
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE
BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RC-D--TRADING ASSETS AND LIABILITIES
Schedule RC-D is to be completed only by banks with $1 billion or more in total
assets or with $2 billion or more in par/notional amount of off-balance sheet
derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e,
columns A through D).
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
------------------------------------
(Year-to-date)
<S> <C>
ASSETS
1. U.S. Treasury securities in domestic offices...................................... $0
2. U.S. Government agency and corporation obligations in domestic offices
(exclude mortgage-backed securities).............................................. 0
3. Securities issued by states and political subdivisions in the U.S. in domestic
offices........................................................................... 0
4. Mortgage-backed securities (MBS) in domestic offices:
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or
GNMA............................................................................ 0
b. Other mortgage-backed securities issued or guaranteed by FNMA,
FHLMC, or GNMA (include CMOs, REMICs, and stripped MBS)......................... 0
c. All other mortgage-backed securities............................................ 0
5. Other debt securities in domestic offices......................................... 0
6. Certificates of deposit in domestic offices....................................... 0
7. Commercial paper in domestic offices.............................................. 0
8. Bankers acceptances in domestic offices........................................... 0
9. Other trading assets in domestic offices.......................................... 0
10. Trading assets in foreign offices................................................ 0
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity
and equity contracts:
a. In domestic offices............................................................. 4
b. In foreign offices.............................................................. 0
---
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC,
item 5).......................................................................... $ 4
===
LIABILITIES
13. Liability for short positions.................................................... 0
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity
and equity contracts............................................................. 2
---
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC,
item 15.b)....................................................................... $2
===
</TABLE>
-22-
<PAGE>
CONSOLIDATED REPORT OF INCOME
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE
BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RC-E--DEPOSIT LIABILITIES
PART I. DEPOSITS IN DOMESTIC OFFICES
<TABLE>
<CAPTION>
TRANSACTION ACCOUNTS NONTRANSACTION
ACCOUNTS
----------------------------------------------------------------------------
(COLUMN A) (COLUMN B) (COLUMN C)
TOTAL TRANSACTION ACCOUNTS MEMO: TOTAL DEMAND TOTAL NON-TRANSACTION
(INCLUDING TOTAL DEMAND DEPOSITS (INCLUDED IN ACCOUNTS (INCLUDING
DEPOSITS) COLUMN A) MMDAS)
----------------------------------------------------------------------------
(Calendar year-to-date)
----------------------------------------------------------------------------
Deposits of:
<S> <C> <C> <C>
1. Individuals, partnerships, and
corporations.......................... $2,641,616 $1,532,072 $3,020,623
2. U.S. Government....................... 22,612 22,612 0
3. States and political subdivisions in
the U.S............................... 152,716 92,831 92,830
4. Commercial banks in the U.S........... 167,115 167,115 0
5. Other depository institutions in the
U.S................................... 1,634 1,634 0
6. Banks in foreign countries............ 12,614 12,614 0
7. Foreign governments and official
institutions (including foreign central
banks)................................ 0 0 93,692
8. Certified and official checks......... 57,496 57,496 --
----------- ----------- ----------
9. Total (sum of items 1 through 8)
(sum of columns A and C must equal
Schedule RC, item 13.a)............... $3,055,803 $1,886,374 $3,207,145
============ ============ ===========
<CAPTION>
Memorandum FOR THE PERIOD
- ---------- JANUARY 1, 1996 TO
MARCH 31, 1996
------------------------
(Calendar year-to-date)
<S> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C):
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan Accounts 243,322
b. Total brokered deposits............. 1,970
c. Fully insured brokered deposits (included in Memorandum item 1.b
above):
(1) Issued in denominations of less than $100,000 0
(2) Issued either in denominations of $100,000 or in denominations
greater than $100,000 and participated out by the broker in share of
$100,000 or less.................... 0
d. Maturity data for brokered deposits:
(1) Brokered deposits issued in denominations of less than $100,000 with
a remaining maturity of one year or less (included in Memorandum
item 1.c.(1) above.................. 0
</TABLE>
-23-
<PAGE>
SCHEDULE OF RC-E -- DEPOSIT LIABILITIES (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
---------------------
Memorandum (Calendar Year-to-date)
- -------------------------------------------------------------------------------------
<S> <C>
(2) Brokered deposits issued in denominations of $100,000 or more with a
remaining maturity of one year or less (included in Memorandum item
1.b above)...................... 1,970
e. Preferred deposits (uninsured deposits of states and political subdivisions in
the U.S. reported in item 3 above which are secured or collateralized as
required under state law)........... 245,546
2. Components of total nontransaction accounts (sum of Memorandum items 2.a
through 2.d must equal item 9, column C above):
a. Savings deposits:
(1) Money market deposit accounts (MMDAs) 1,336,684
(2) Other savings deposits (excludes MMDAs) 487,729
b. Total time deposits of less than $100,000 1,055,238
c. Time certificates of $100,000 or more 233,802
d. Open-account time deposits of $100,000 or more 93,692
3. All NOW accounts (included in column A above) 1,168,520
4. Not applicable........................ --
5. Maturity and repricing data for time deposits of less than $100,000 (sum of
Memorandum items 5.a.(1) through 5.b.(3) must equal Memorandum item 2.b
above):(1)
a. Fixed rate time deposits of less than $100,000 with a remaining maturity
of:
(1) Three months or less............ 226,192
(2) Over three months through 12 months 454,198
(3) Over one year................... 374,848
b. Floating rate time deposits of less than $100,000 with a repricing
frequency of:
(1) Quarterly or more frequently.... 0
(2) Annually or more frequently, but less frequently than quarterly 0
(3) Less frequently than annually... 0
c. Floating rate time deposits of less than $100,000 with a remaining maturity
of one year or less (included in Memorandum items 5.b.(1) through 5.b.(3)
above).............................. 0
6. Maturity and repricing data for time deposits of $100,000 or more (i.e., time
certificate of deposit of $100,000 or more and open-account time deposits of
$100,000 or more) (sum of Memorandum items 6.a.(1) through 6.b.(4) must
equal the sum of Memorandum items 2.c and 2.d above):(1)
a. Fixed rate time deposits of $100,000 or more with a remaining maturity
of:
(1) Three months or less............ 194,473
(2) Over three months through 12 months 93,637
(3) Over one year through five years 38,556
(4) Over five years................. 828
</TABLE>
- ------------------------
(1) Memorandum items 5 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
-24-
<PAGE>
SCHEDULE RC-E -- DEPOSIT LIABILITIES (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
Memorandum MARCH 31, 1996
- ------------------------------------------------- ------------------------
(Calendar year-to-date)
<S> <C>
b. Floating rate time deposits of $100,000 or more with a repricing frequency
of:
(1) Quarterly or more frequently.... 0
(2) Annually or more frequently, but less frequently than quarterly 0
(3) Every five years or more frequently, but less frequently than
annually........................ 0
(4) Less frequently than every five years 0
c. Floating rate time deposits of $100,000 ore more with a remaining
maturity of one year or less (included in Memorandum items 6.b.(1)
through 6.b.(4) above).............. 0
</TABLE>
-25-
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED REPORT OF INCOME
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RC-E--DEPOSIT LIABILITIES
PART II. DEPOSITS IN FOREIGN OFFICES (INCLUDING EDGE AND AGREEMENT SUBSIDIARIES AND IBFS)
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
--------------------
(Year-to-date)
<S> <C>
1. Individuals, partnerships, and corporations...................................... $74,307
2. U.S. banks (including IBFs and foreign branches of U.S. banks)................... 0
3. Foreign banks (including U.S. branches and agencies of foreign banks,
including their IBFs)............................................................ 0
4. Foreign governments and official institutions (including foreign central banks).. 0
5. Certified and official checks.................................................... 0
6. All other deposits............................................................... 0
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b)............. $74,307
Memorandum
- -------------------------------------------------------------------------------------
1. Time deposits with a remaining maturity of one year or less (included in Part
II, item 7 above)................................................................ 0
SCHEDULE RC-F--OTHER ASSETS
<CAPTION>
<S> <C>
1. Income earned, not collected on loans........................................... $018,773
2. Net deferred tax assets/1/...................................................... 37,271
3. Excess residential mortgage servicing fees receivable........................... 0
4. Other (itemize and describe amounts that exceed 25% of this item)............... 116,146
a. Trade date accounting - security sale......................................... 69,182
b.
c.
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11).............. $172,190
Memorandum
- -------------------------------------------------------------------------------------
1. Deferred tax assets disallowed for regulatory capital purposes.................. 0
</TABLE>
SCHEDULE RC-G--OTHER LIABILITIES
<TABLE>
<CAPTION>
<S> <C>
1. a. Interest accrued and unpaid on deposits in domestic offices/2/.............. $ 18,206
b. Other expenses accrued and unpaid (includes accrued income taxes
payable).................................................................... 65,998
2. Net deferred tax liabilities(1)................................................. 0
3. Minority interest in consolidated subsidiaries.................................. 0
4. Other (itemize and describe amounts that exceed 25% of this item)............... 147,560
</TABLE>
- ------------------------
/1/ See discussion of deferred income taxes in Glossary entry on "income
taxes."
/2/ For savings banks, include "dividends" accrued and unpaid on deposits.
-26-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE RC-E -- DEPOSIT LIABILITIES (CONTINUED)
<S> <C>
a. Trade date accounting - security purchase....................... $ 99,679
b.
c.
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20).. $231,764
</TABLE>
-27-
<PAGE>
CONSOLIDATED REPORT OF INCOME
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE
BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RC-H--SELECTED BALANCE SHEET ITEMS FOR DOMESTIC OFFICES
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
-----------------------
(Year-to-date)
<S> <C>
1. Customers' liability to this bank on acceptances outstanding........................ 1,677
2. Bank's liability on acceptances executed and outstanding............................ 1,677
3. Federal funds sold and securities purchased under agreements to resell.............. 305,200
4. Federal funds purchased and securities sold under agreements to repurchase.......... 161,657
5. Other borrowed money................................................................ 10,700
EITHER
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs......... N/A
OR
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs........... 74,307
8. Total assets (excludes net due from foreign offices, Edge and Agreement
subsidiaries, and IBFs)............................................................. $7,096,498
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement
subsidiaries, and IBFs)............................................................. $6,528,306
ITEMS 10-17 INCLUDE HELD-TO-MATURITY AND AVAILABLE-FOR-SALE SECURITIES IN
DOMESTIC OFFICES.
10. U.S. Treasury securities........................................................... 36,322
11. U.S. Government agency and corporation obligations (exclude mortgage-backed
securities)........................................................................ 7,237
12. Securities issued by states and political subdivisions in the U.S.................. 50,741
13. Mortgage-backed securities (MBS):
a. Pass-through securities:
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA.............................. 2,531,109
(2) Other pass-through securities............................................. 5,054
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped
MBS):
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA............................... 13,226
(2) All other mortgage-backed securities....................................... 2,481
14. Other domestic debt securities..................................................... 7,464
15. Foreign debt securities............................................................ 0
16. Equity securities:
a. Investments in mutual funds.................................................... 0
b. Other equity securities with readily determinable fair values.................. 0
c. All other equity securities.................................................... 9,122
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through
16)................................................................................ $2,662,756
Memorandum (to be completed only by banks with IBFs and other "foreign"
offices)
EITHER
1. Net due from the IBF of the domestic offices of the reporting bank.................. 397
OR
2. Net due to the IBF of the domestic offices of the reporting bank.................... N/A
</TABLE>
-28-
<PAGE>
CONSOLIDATED REPORT OF INCOME
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE
BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RC-I--SELECTED ASSETS AND LIABILITIES OF IBFS
To be completed only by banks with IBFs and other "foreign" offices.
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
------------------
(Year-to-date)
<S> <C>
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12).... 0
2. Total IBF loans and lease financing receivables (component of Schedule RC-C,
part I, item 12, column A)....................................................... 0
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, 0
item 4, column A)................................................................
4. Total IBF liabilities (component of Schedule RC, item 21)........................ 397
5. IBF deposit liabilities due to banks, including other IBFs (component of
Schedule RC-E, part II, items 2 and 3)........................................... 0
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 0
5, and 6)........................................................................
</TABLE>
SCHEDULE RC-K--QUARTERLY AVERAGES/2/
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
------------------
(Year-to-date)
<S> <C>
1. Interest-bearing balances due from depository institutions....................... $0,000,175
2. U.S. Treasury securities and U.S. Government agency and corporation
obligations/2/................................................................... 2,585,809
3. Securities issued by states and political subdivisions in the U.S.(2)............ 70
4. a. Other debt securities(2)..................................................... 16,029
b. Equity securities/2/ (includes investments in mutual funds and Federal
Reserve stock)............................................................... 8,177
5. Federal funds sold and securities purchased under agreements to resell in
domestic offices of the bank and of its Edge and Agreement subsidiaries, and
in IBFs.......................................................................... 274,568
6. Loans:
a. Loans in domestic offices:
(1) Total loans............................................................. 3,137,185
(2) Loans secured by real estate............................................ 1,445,114
(3) Loans to finance agricultural production and other loans to farmers..... 88,485
(4) Commercial and industrial loans......................................... 703,635
(5) Loans to individuals for household, family, and other personal
expenditures............................................................ 695,711
</TABLE>
- ------------------------
/1/ For all items, banks have the option of reporting either (1) an average of
daily figures for the quarter, or (2) an average of weekly figures (i.e.,
the Wednesday of each w3eek of the quarter).
/2/ quarterly averages for all debt securities should be based on amortized
cost.
/3/ Quarterly averages for all equity securities should be based on historical
cost.
-29-
<PAGE>
SCHEDULE RC-K -- QUARTERLY AVERAGES
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
------------------
(Year-to-date)
<S> <C>
b. Total loans in foreign offices, Edge and Agreement subsidiaries,
and IBFs..................................................................... 0
7. Trading assets................................................................... 4
8. Lease financing receivables (net of unearned income)............................. 367
---------------
9. Total assets/4/.................................................................. $6,867,475
===============
LIABILITIES
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS
accounts, and telephone and preauthorized transfer accounts) (exclude demand
deposits)....................................................................... 1,162,702
11. Nontransaction accounts in domestic offices:
a. Money market deposit accounts (MMDAs)....................................... 1,340,961
b. Other savings deposits...................................................... 487,443
c. Time certificates of deposits of $100,000 or more........................... 214,351
d. All other time deposits..................................................... 1,219,409
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries,
and IBFs........................................................................ 59,133
13. Federal funds purchased and securities sold under agreements to repurchase in
domestic offices of the bank and of its Edge and Agreement subsidiaries, and
in IBFs......................................................................... 125,669
14. Other borrowed money............................................................ 6,347
</TABLE>
- ------------------------
/4/ The quarterly average for total assets should reflect all debt securities
(not held for trading) at amortized cost, equity securities with readily
determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.
-30-
<PAGE>
CONSOLIDATED REPORT OF INCOME
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE
BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RC-L--OFF-BALANCE SHEET ITEMS
Please read carefully the instructions for the preparation of Schedule RC-L.
Some of the amounts reported in Schedule RC-L are regarded as volume indicators
and not necessarily as measures of risk.
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
------------------
(Year-to-date)
<S> <C>
1. Unused comments:
a. Revolving, open-end lines secured by 1-4 family residential properties,
e.g., home equity lines................................................................. 108,629
b. Credit card lines....................................................................... 0
c. Commercial real estate, construction, and land development:
(1) Commitments to fund loans secured by real estate.................................... 98,465
(2) Commitments to fund loans not secured by real estate................................ 487
d. Securities underwriting................................................................. 0
e. Other unused commitments................................................................ 1,304,529
2. Financial standby letters of credit and foreign office guarantees........................... 72,774
a. Amount of financial standby letters of credit conveyed to others........................ 0
3. Performance standby letters of credit and foreign office guarantees......................... 15,731
a. Amount of performance standby letters of credit conveyed to others...................... 0
4. Commercial and similar letters of credit.................................................... 52
5. Participations in acceptances (as described in the instructions) conveyed to
others by the reporting bank................................................................ 0
6. Participations in acceptances (as described in the instructions) acquired by the
reporting (nonaccepting) bank............................................................... 0
7. Securities borrowed......................................................................... 304,811
8. Securities lent (including customers' securities lent where the customer is
indemnified against loss by the reporting bank)............................................. 1,216,291
9. Loans transferred (i.e., sold or swapped) with recourse that have been treated
as sold for Call Report purposes:
a. FNMA and FHLMC residential mortgage loan pools:
(1) Outstanding principal balance of mortgages transferred as of the report
date............................................................................... 0
(2) Amount of recourse exposure on these mortgages as of the report date............... 0
b. Private (nongovernment-issued or -guaranteed) residential mortgage loan
pools:
(1) Outstanding principal balance of mortgages transferred as of the report
date............................................................................... 0
(2) Amount of recourse exposure on these mortgages as of the report date............... 0
c. Farmer Mac agricultural mortgage loan pools:
(1) Outstanding principal balance of mortgages transferred as of the report
date............................................................................... 0
(2) Amount of recourse exposure on these mortgages as of the report date............... 0
d. Small business obligations transferred with recourse under Section 208 of
the Riegle Community Development and Regulatory Improvement Act of
1994:
(1) Outstanding principal balance of small business obligations transferred
as of the report date.............................................................. 0
(2) Amount of retained recourse on these obligations as of the report date............. 0
</TABLE>
-31-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE RC-L--OFF-BALANCE SHEET ITEMS (CONTINUED)
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
-----------------------
(YEAR-TO-DATE)
<S> <C>
10. When-issued securities:
a. Gross commitments to purchase....................................................... 0
b. Gross commitments to sell........................................................... 0
11. Spot foreign exchange contracts......................................................... 349
12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives).........
(itemize and describe each component of this item over 25% of Schedule RC,
item 28, "Total equity capital")........................................................ 0
a.
b.
c.
d.
13. All other off-balance sheet assets (exclude off-balance sheet derivatives)
(itemize and describe each component of this item over 25% of Schedule RC,
item 28, "Total equity capital")........................................................ 0
a.
b.
c.
d.
</TABLE>
<TABLE>
<CAPTION>
(COLUMN B) (COLUMN C)
(COLUMN A) FOREIGN EQUITY (COLUMN D)
INTEREST RATE EXCHANGE DERIVATIVE COMMODITY AND
CONTRACTS CONTRACTS CONTRACTS OTHER CONTRACTS
------------- ----------- ------------ ----------------
(Calendar year-to-date)
Off-balance Sheet Derivatives --------------------------------------------------------------
Position Indicators
- -------------------------------------------
<S> <S> <S> <S> <S>
14. Gross amounts (e.g., notional
amounts) (for each column, sum of
items 14.a through 14.e must equal
sum of items 15, 16.a, and 16.b):
a. Futures contracts................. 0 0 0 0
b. Forward contracts................. 256,332 67 0 0
c. Exchange-traded option
contracts:
(1) Written options.............. 0 0 0 0
(2) Purchased options............ 0 0 0 0
d. Over-the-counter option
contracts:
(1) Written options.............. 0 0 0 0
(2) Purchased options............ 0 0 0 0
e. Swaps............................. 0 0 0 0
15. Total gross notional amount of
derivative contracts held for trading. 256,332 67 0 0
16. Total gross notional amount of
derivative contracts held for purposes
other than trading:
a. Contracts marked to market........ 0 0 0 0
b. Contracts not marked to market.... 0 0 0 0
</TABLE>
-32-
<PAGE>
<TABLE>
<CAPTION>
SCHEUDLE RC-L--OFF-BALANCE SHEET ITEMS (CONTINUED)
(COLUMN B) (COLUMN C)
(COLUMN A) FOREIGN EQUITY (COLUMN D)
INTEREST RATE EXCHANGE DERIVATIVE COMMODITY AND
CONTRACTS CONTRACTS CONTRACTS OTHER CONTRACTS
--------------- ------------ ------------- -----------------
Off-balance Sheet Derivatives (Calendar year-to-date)
Position Indicators -------------------------------------------------------------
- -----------------------------------------
<S> <C> <C> <C> <C>
17. Gross fair values of derivative
contracts:
a. Contracts held for trading:
(1) Gross positive fair value.... 0 4 0 0
(2) Gross negative fair value.... 0 2 0 0
b. Contracts held for purposes
other than trading that are
marked to market:
(1) Gross positive fair value.... 0 0 0 0
(2) Gross negative fair value.... 6,651 0 0 0
c. Contracts held for purposes
other than trading that are not
marked to market:
(1) Gross positive fair value.... 0 0 0 0
(2) Gross negative fair value.... 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
-------------------
(Year-to-date)
Memoranda
- --------------------------------------------------------------------------------------
<S> <C>
1.-2. Not applicable................................................................. --
3. Unused commitments with an original maturity exceeding one year that are
reported in Schedule RC-L, items 1.a through 1.e, above (report only the
unused portions of commitments that are fee paid or otherwise legally binding) 751,087
a. Participations in commitments with an original maturity exceeding one year
conveyed to others............................................................ 94,986
4. To be completed only by banks with $1 billion or more in total assets:
Standby letters of credit and foreign office guarantees (both financial and
performance) issued to non-U.S. addressees (domicile) included in Schedule
RC-L, items 2 and 3, above........................................................ 0
5. Installment loans to individuals for household, family, and other personal
expenditures that have been securitized and sold without recourse (with
servicing retained), amounts outstanding by type of loan:
a. Loans to purchase private passenger automobiles (to be completed for the
September report only).......................................................... N/A
b. Credit cards and related plans (TO BE COMPLETED QUARTERLY) 66,893
c. All other consumer installment credit (including mobile home loans) (to be
completed for the September report only)........................................ N/A
</TABLE>
-33-
<PAGE>
CONSOLIDATED REPORT OF INCOME
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE
BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RC-M--MEMORANDA
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
-----------------
(Year-to-date)
<S> <C>
1. Extensions of credit by the reporting bank to its executive officers, directors,
principal shareholders, and their related interests as of the report date:
a. Aggregate amount of all extensions of credit to all executive officers,
directors, principal shareholders, and their related interests................ $ 3,934
b. Number of executive officers, directors, and principal shareholders to
whom the amount of all extensions of credit by the reporting bank
(including extensions of credit to related interests) equals or exceeds the
lesser of $500,000 or 5 percent of total capital as defined for this purpose Number
in agency regulations.......................................................... 2
2. Federal funds sold and securities purchased under agreements to resell with
U.S. branches and agencies of foreign banks/1/ (included in Schedule RC,
items 3.a and 3.b)................................................................ 0
3. Not applicable.................................................................... --
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced
for others (include both retained servicing and purchased servicing):
a. Mortgages serviced under a GNMA contract...................................... 0
b. Mortgages serviced under a FHLMC contract:
(1) Serviced with recourse to servicer....................................... 0
(2) Serviced without recourse to servicer.................................... 0
c. Mortgages serviced under a FNMA contract:
(1) Serviced under a regular option contract................................. 0
(2) Serviced under a special option contract................................. 0
d. Mortgages serviced under other servicing contracts............................ 0
5. To be completed only by banks with $1 billion or more in total assets:
Customers' liability to this bank on acceptances outstanding (sum of items 5.a
and 5.b must equal Schedule RC, item 9):
a. U.S. addressees (domicile).................................................... 1,677
b. Non-U.S. addressees (domicile)................................................ 0
6. Intangible assets:
a. Mortgage servicing rights..................................................... 0
b. Other identifiable intangible assets:
(1) Purchased credit card relationships...................................... 0
(2) All other identifiable intangible assets................................. 0
c. Goodwill...................................................................... 62
d. Total (sum of items 6.a through 6.c ) (must equal Schedule RC, item 10)....... 62
e. Amount of intangible assets (included in item 6.b.(2) above) that have been
grandfathered or are otherwise qualifying for regulatory capital purposes..... 0
</TABLE>
- ------------------------
/1/ Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.
-34-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE RC-M (CONTINUED)
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
-----------------------
(Year-to-Date)
<S> <C>
7. Mandatory convertible debt, net of common or perpetual preferred stock 0
dedicated to redeem the debt....................................................
8. a. Other real estate owned: 0
(1) Direct and indirect investments in real estate ventures................
(2) All other real estate owned: 0
(a) Construction and land development in domestic offices.............
(b) Farmland in domestic offices...................................... 0
(c) 1-4 family residential properties in domestic offices............. 434
(d) Multifamily (5 or more) residential properties in domestic offices 0
(e) Nonfarm nonresidential properties in domestic office.............. 0
(f) In foreign offices................................................ 0
---------
(3) Total (sum of items 8.a.(1) and 8.a.(2) (must equal Schedule RC,
item 7)................................................................ 434
b. Investments in unconsolidated subsidiaries and associated companies: =========
(1) Direct and indirect investments in real estate ventures................ 0
(2) All other investments in unconsolidated subsidiaries and associated
companies.............................................................. 0
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC,
item 8)................................................................ 0
---------
c. Total assets of unconsolidated subsidiaries and associated companies.......... 0
=========
9. Noncumulative perpetual preferred stock and related surplus included in
Schedule RC, item 23, "Perpetual preferred stock and related surplus"........... 0
10. Mutual fund and annuity sales in domestic offices during the quarter (include
proprietary, private label, and third party products):
a. Money market funds.......................................................... 1,040,764
b. Equity securities funds..................................................... 0
c. Debt securities funds....................................................... 0
d. Other mutual funds.......................................................... 27,696
e. Annuities................................................................... 8,034
f. Sales of proprietary mutual funds and annuities (included in items 10.a
through 10.e above)......................................................... 845,269
Memorandum
- ------------------------------------------------------------------------------------
1. Interbank holdings of capital instruments (to be completed for the December
report only):
a. Reciprocal holdings of banking organizations' capital instruments........... N/A
b. Nonreciprocal holdings of banking organizations' capital instruments........ N/A
</TABLE>
-35-
<PAGE>
CONSOLIDATED REPORT OF INCOME
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE
BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RC-N--PAST DUE AND NONACCRUAL LOANS, LEASES, AND OTHER ASSETS
The FFIEC regards the information reported in all of Memorandum item 1, in items
1 through 10, column A, and in Memorandum items 2 through 4, column A, as
confidential.
<TABLE>
<CAPTION>
(COLUMN A)
PAST DUE (COLUMN B)
30 THROUGH 89 DAYS AND PAST DUE 90 DAYS OR (COLUMN C)
STILL ACCRUING MORE AND STILL ACCRUING NONACCRUAL
---------------------- ----------------------- ------------
(Calendar year-to-date)
-----------------------------------------------------------------
<S> <C> <C> <C>
1. Loans secured by real estate:
a. To U.S. addressees (domicile)........ $18,762 $1,264 $3,266
b. To non-U.S. addressees
(domicile)........................... 0 0 0
2. Loans to depository institutions and
acceptance of other banks:
a. To U.S. banks and other U.S.
depository institutions.............. 0 0 0
b. To foreign banks..................... 0 0 0
3. Loans to finance agricultural
production and other loans to farmers.... 2,135 729 195
4. Commercial and industrial loans:
a. To U.S. addressees (domicile)........ 14,579 915 502
b. To non-U.S. addressees
(domicile)........................... 0 0 0
5. Loans to individuals for household,
family, and other personal
expenditures:
a. Credit cards and related plans....... 1,179 1,353 0
b. Other (includes single payment,
installment, and all student
loans)............................... 8,755 1,494 4
6. Loans to foreign governments and
official institutions.................... 0 0 0
7. All other loans.......................... 760 0 0
8. Lease financing receivables:
a. Of U.S. addressees (domicile)........ 0 0 0
b. Of non-U.S. addressees
(domicile)........................... 0 0 0
9. Debt securities and other assets
(exclude other real estate owned and
other repossessed assets)................ 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Amounts reported in items 1 through 8 above include guaranteed
and unguaranteed portions of past due and nonaccrual loans
and leases. Report in item 10 below certain guaranteed loans
and leases that have already been included in the amounts
reported in items 1 through 8.
10. Loans and leases reported in items 1
through 8 above which are wholly or
partially guaranteed by the U.S.
Government.............................. 0 0 0
a. Guaranteed portion of loans and
leases included in item 10 above.... 0 0 0
</TABLE>
-36-
<PAGE>
<TABLE>
<CAPTION>
(COLUMN A)
PAST DUE (COLUMN B)
30 THROUGH 89 DAYS AND PAST DUE 90 DAYS OR (COLUMN C)
STILL ACCRUING MORE AND STILL ACCRUING NONACCRUAL
---------------------------------------------------------------------
(Calendar year-to-date)
---------------------------------------------------------------------
<S> <C> <C> <C>
Memoranda
- ------------------------------------------------
1. Restructured loans and leases
included in Schedule RC-N, items 1
through 8, above (and not reported
in Schedule RC-C, part I,
Memorandum item 2).......................... 0 0 0
2. Loans to finance commercial real
estate, construction, and land
development activities (not secured
by real estate) included in
Schedule RC-N, items 4 and 7,
above....................................... 0 0 0
3. Loans secured by real estate in
domestic offices (included in
Schedule RC-N, item 1 above):
a. Construction and land
development............................. 8,880 233 1,017
b. Secured by farmland..................... 150 542 0
c. Secured by 1-4 family residential
properties:
(1) Revolving, open-end loans
secured by 1-4 family
residential properties and
extended under lines of
credit............................. 490 120 97
(2) All other loans secured by
1-4 family residential
properties......................... 3,417 324 949
d. Secured by multifamily (5 or
more) residential properties............ 37 0 68
e. Secured by nonfarm
nonresidential properties............... 5,788 35 1,135
<CAPTION>
(COLUMN A) (COLUMN B)
PAST DUE 30 PAST DUE 90
THROUGH 89 DAYS DAYS OR MORE
-------------------------------------------------
(Calendar year-to-date)
-------------------------------------------------
<S> <C> <C>
4. Interest rate, foreign exchange rate,
and other commodity and equity
contracts:
a. Book value of amounts carried
as assets............................... 0 0
b. Replacement cost of contracts
with a positive replacement cost........ 0 0
</TABLE>
-37-
<PAGE>
CONSOLIDATED REPORT OF INCOME
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE
BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RC-O--OTHER DATA FOR DEPOSIT INSURANCE ASSESSMENTS
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
-------------------
(Year-to-date)
<S> <C>
1. Unposted debits (see instructions):
a. Actual amount of all unposted debits......................................... 19
OR
b. Separate amount of unposted debits:
(1) Actual amount of unposted debits to demand deposits..................... N/A
(2) Actual amount of unposted debits to time and savings deposits(1)........ N/A
2. Unposted credits (see instructions):
a. Actual amount of all unposted credits........................................ 0
OR
b. Separate amount of unposted credits:
(1) Actual amount of unposted debits to demand deposits..................... N/A
(2) Actual amount of unposted credits to time and savings deposits(1........ N/A
3. Uninvested trust funds (cash) held in bank's own trust department (not included
in total deposits in domestic offices............................................ 0
4. Deposits of consolidated subsidiaries in domestic offices and in insured
branches in Puerto Rico and U.S. territories and possessions (not included in
total deposits:
a. Demand deposits of consolidated subsidiaries................................. 697
b. Time and savings deposits(1) of consolidated subsidiaries.................... 0
c. Interest accrued and unpaid on deposits of consolidated subsidiaries......... 0
5. Deposits in insured branches in Puerto Rico and U.S. territories and
possessions:
a. Demand deposits in insured branches (included in Schedule RC-E, Part II)..... 0
b. Time and savings deposits(1) in insured branches (included in
Schedule RC-E, Part II)...................................................... 0
c. Interest accrued and unpaid on deposits in insured branches (included in
Schedule RC-G, item 1.b)..................................................... 0
Item 6 is not applicable to state nonmember banks that have not been authorized by
the Federal Reserve to act as pass-through correspondents.
6. Reserve balances actually passed through to the Federal Reserve by the
reporting bank on behalf of its respondent depository institutions that are also
reflected as deposit liabilities of the reporting bank:
a. Amount reflected in demand deposits (included in Schedule RC-E, item 4
or 5, column B............................................................... 0
b. Amount reflected in time and savings deposits(1) (included in
Schedule RC-E, item 4 or 5, column A or C, but not column B)................. 0
7. Unamortized premiums and discounts on time and savings deposits:(1)
a. Unamortized premiums......................................................... 0
b. Unamortized discounts........................................................ 0
--------
</TABLE>
- ------------------------
(1) For FDIC insurance assessment purposes, "time and savings deposits"
consists of nontransaction accounts and all transaction accounts other
than demand deposits.
-38-
<PAGE>
SCHEDULE RC-O (continued)
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
-------------------
(Year-to-date)
<S> <C>
8. To be completed by banks with "Oakar deposits."
Total "Adjusted Attributable Deposits" of all institutions acquired under
Section 5(d)(3) of the Federal Deposit Insurance Act (from most recent FDIC
Oakar Transaction Worksheet(s)).................................................. 1,363,792
9. Deposits in lifeline accounts.................................................... --
10. Benefit-responsive "Depository Institution Investment Contracts" (included in
total deposits in domestic offices).............................................. 0
11. Adjustments to demand deposits in domestic offices reported in Schedule RC-E
for certain reciprocal demand balances:
a. Amount by which demand deposits would be reduced if reciprocal demand
balances between the reporting bank and savings associations were reported
on a net basis rather than a gross basis in Schedule RC-E................... 0
b. Amount by which demand deposits would be increased if reciprocal
demand balances between the reporting bank and U.S. branches and
agencies of foreign banks were reported on a gross basis rather than a net
basis in Schedule RC-E...................................................... 0
c. Amount by which demand deposits would be reduced if cash items in
process of collection were included in the calculation of net reciprocal
demand balances between the reporting bank and the domestic offices of
U.S. banks and savings associations in Schedule RC-E........................ 0
Memoranda (to be completed each quarter except as noted)
- -------------------------------------------------------------------------------------
1. Total deposits in domestic offices of the bank (sum of Memorandum
items 1.a.(1) and 1.b.(1) must equal Schedule RC, item 13.a):
a. Deposit accounts of $100,000 or less:
(1) Amount of deposit accounts of $100,000 or less.......................... 3,715,418
(2) Number of deposit accounts of $100,000 or less (to be completed for Number
the June report only)................................................... N/A
b. Deposit accounts of more than $100,000:
(1) Amount of deposit accounts of more than $100,000........................ 2,547,530
Number
(2) Number of deposit accounts of more than $100,000........................ 6,396
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by
multiplying the number of deposit accounts of more than $100,000
reported in Memorandum item 1.b.(2) above by $100,000 and subtracting
the result from the amount of deposit accounts of more than $100,000
reported in Memorandum item 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a YES NO
method or procedure for determining a better estimate of uninsured
deposits than the estimate described above................................... [X]
b. If the box marked YES has been checked, report the estimate of uninsured
deposits determined by using your bank's method or procedures................. N/A
</TABLE>
-39-
<PAGE>
CONSOLIDATED REPORT OF INCOME
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE
BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RC-R--REGULATORY CAPITAL
This schedule must be completed by all banks as follows: Banks that reported
total assets of $1 billion or more in Schedule RC, item 12, for June 30, 1995,
must complete items 2 through 9 and Memoranda items 1 and 2. Banks with assets
of less than $1 billion must complete items 1 through 3 below or Schedule RC-R
in its entirety, depending on their response to item 1 below.
1. Test for determining the extent to which Schedule RC-R must be completed. To
be completed only by banks with total assets of less than $1 billion.
Indicate in the appropriate box at the right whether the bank has total
capital greater than or equal to eight percent of adjusted total assets
For purposes of this test, adjusted total assets equals total assets less
cash, U.S. Treasuries, U.S. Government agency obligations, and 80 percent of
U.S. Government-sponsored agency obligations plus the allowance for loan and
lease losses and selected off-balance sheet items as reported on Schedule RC-
L (see instructions).
If the box marked YES has been checked, then the bank only has to complete
items 2 and 3 below. If the box marked NO has been checked, the bank must
complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual
risk-based capital ratio is less than eight percent or that the bank is not
in compliance with the risk-based capital guidelines.
ITEMS 2 AND 3 ARE TO BE COMPLETED BY ALL BANKS.
<TABLE>
<CAPTION>
(COLUMN A)
SUBORDINATED
DEBT(1) AND (COLUMN B)
INTERMEDIATE TERM OTHER LIMITED-LIFE
PREFERRED STOCK CAPITAL INSTRUMENTS
----------------------------------------
(Calendar year-to-date)
----------------------------------------
<S> <C> <C>
2. Subordinated debt(1) and other limited-life capital instruments
(original weighted average maturity of at least vie years) with a
remaining maturity of:
a. One year or less............................................... 0 0
b. Over one year through two years................................ 0 0
c. Over two years through three years............................. 0 0
d. Over three years through four years............................ 0 0
e. Over four years through five years............................. 0 0
f. Over five years................................................ 0 0
3. Amounts used in calculating regulatory capital ratios (report
amounts determined by the bank for its own internal regulatory
capital analyses):
a. Tier 1 capital................................................. -- 359,429
b. Tier 2 capital................................................. -- 52,203
c. Total risk-based capital....................................... -- 411,633
d. Excess allowance for loan and lease losses..................... -- 34,587
e. Risk-weighted assets........................................... -- 4,176,305
f. "Average total assets"......................................... -- 6,904,255
</TABLE>
- ------------------------
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
-40-
<PAGE>
<TABLE>
<CAPTION>
Items 4-9 and Memoranda items 1 and 2 are to be completed by banks (COLUMN B)
that answered NO to item 1 above and by banks with total assets of $1 CREDIT
billion or more. (COLUMN A) EQUIVALENT
ASSETS RECORDED AMOUNT OF OFF-
ON BALANCE SHEET
THE BALANCE SHEET ITEMS(1)
------------------- -----------------
(Calendar year-to-date)
--------------------------------------
<S> <C> <C>
4. Assets and credit equivalent amounts of off-balance sheet items
assigned to the Zero percent risk category:
a. Assets recorded on the balance sheet:
(1) Securities issued by, other claims on, and claims
unconditionally guaranteed by, the U.S. Government and
its agencies and other OECD central governments............... 284,691 --
(2) All other..................................................... 272,198 --
b. Credit equivalent amount of off-balance sheet items............... -- 0
5. Assets and credit equivalent amounts of off-balance sheet items
assigned to the 20 percent risk category:
a. Assets recorded on the balance sheet:
(1) Claims conditionally guaranteed by the U.S. Government
and its agencies and other OECD central governments........... 41,647 --
(2) Claims collateralized by securities issued by the U.S.
Government and its agencies and other OECD central
governments; by securities issued by U.S. Government-
sponsored agencies; and by cash on deposit.................... 40,290 --
(3) All other..................................................... 3,456,215 --
b. Credit equivalent amount of off-balance sheet items............... -- 1,264,247
6. Assets and credit equivalent amounts of off-balance sheet items
assigned to the 50 percent risk category:
a. Assets recorded on the balance sheet.............................. 478,716 --
b. Credit equivalent amount of off-balance sheet items............... -- 17,229
7. Assets and credit equivalent amounts of off-balance sheet items
assigned to the 100 percent risk category:
a. Assets recorded on the balance sheet.............................. 2,616,629 --
8. On-balance sheet asset values excluded from the calculation of the
risk-based capital ratio(2) ........................................ (7,097) --
---------- ----------
9. Total assets recorded on the balance sheet (sum of items 4.a, 5.a,
6.a, 7.a, and 8, column (A) (must equal Schedule RC, item 12
plus items 4.b and 4.c)............................................. 7,183,289 --
========== ==========
</TABLE>
- ------------------------------
(1) Do not report in column B the risk-weighted amount of assets reported in
column A.
(2) Include the difference between the fair value and the amortized cost of
available-for-sale securities in item 8 and report the amortized cost of
these securities in items 4 through 7 above. Item 8 also includes on-
balance sheet asset values portions thereof) of off-balance sheet interest
rate, foreign exchange rate, and commodity contracts and those contract
futures contracts) not subject to risk-based capital. Exclude from item 8
margin accounts and accrued receivables as of any portion of the allowance
for loan and lease losses in excess of the amount that may be included in
Tier 2 capital.
-41-
<PAGE>
SCHEDULE RC-R -- REGULATORY CAPITAL (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 TO
MARCH 31, 1996
----------------------
(Year-to-date)
Memoranda
- ------------------------------------------
<S> <C>
1. Current credit exposure across all off-balance sheet derivative contracts covered
by the risk-based capital standards.............................................. 0
</TABLE>
<TABLE>
<CAPTION>
WITH A REMAINING MATURITY OF
-------------------------------------------------
(COLUMN B)
OVER ONE
YEAR
(COLUMN A) THROUGH FIVE (COLUMN C)
ONE YEAR OR LESS YEARS OVER FIVE YEARS
-------------------------------------------------
(Calendar year-to-date)
-------------------------------------------------
<S> <C> <C> <C>
2. Notional principal amounts of off-
balance sheet derivative contracts:
a. Interest rate contracts(3)........ 0 0 0
b. Foreign exchange contracts........ 0 0 0
c. Gold contracts.................... 0 0 0
d. Other precious metals contracts... 0 0 0
e. Other commodity contracts......... 0 0 0
f. Equity derivative contracts....... 0 0 0
</TABLE>
- ------------------------
(3) Exclude foreign exchange contracts with an original maturity of 14 days or
less and all futures contracts.
-42-
