-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BwBTsBCKpPLyr9jfwoMZdN6uMmn1MwWU15gm1eGRGamo30/LdFvWBhBgISvJW+9S iflY0pRdbsyUQYmH7g1yaw== 0000950130-96-002275.txt : 19960620 0000950130-96-002275.hdr.sgml : 19960620 ACCESSION NUMBER: 0000950130-96-002275 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 19960618 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTELCOM GROUP INC CENTRAL INDEX KEY: 0000786343 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION [4922] STATE OF INCORPORATION: A0 FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-04569-01 FILM NUMBER: 96582882 BUSINESS ADDRESS: STREET 1: C/O INTELCOM GROUP (USA) INC STREET 2: 9605 EAST MAROON CIRCLE CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3035725960 MAIL ADDRESS: STREET 1: C/O INTELCOM GROUP (USA) INC STREET 2: PO BOX 6742 CITY: ENGLEWOOD STATE: CO ZIP: 80112 FORMER COMPANY: FORMER CONFORMED NAME: INTERTEL COMMUNICATIONS INC DATE OF NAME CHANGE: 19930107 S-4/A 1 AMENDMENT NO. 1 TO FORM S-4 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) 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)
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)
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. 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
A. INFORMATION ABOUT THE TRANSACTION 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
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. 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- "--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- 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- 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- 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- SUMMARY HISTORICAL AND PRO FORMA INFORMATION(1) (IN THOUSANDS, EXCEPT STATISTICAL DATA)
SIX MONTHS ENDED YEARS ENDED SEPTEMBER 30, MARCH 31, ---------------------------------------------- ------------------ PRO FORMA PRO FORMA ---------- --------- 1993 1994 1995 1995(3) 1995 1996(2) 1996(3) ---- ---- ---- ------- ---- ------- ------ 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)............. -- -- -- -- -- -- --
SIX MONTHS ---------- ENDED ------ YEARS ENDED SEPTEMBER 30, MARCH 31, ------------------------- --------- 1993 1994 1995 1995 1996 ------- -------- -------- -------- --------- STATISTICAL DATA(6): 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
-16- 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
(Accompanying notes are on the following page) -17-
MARCH 31, 1996 -------------------------- ACTUAL(2) PRO FORMA(3) --------- ------------ 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 - -----------------------------
(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- (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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- (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- 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- "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- 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- 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- 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- "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- 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- 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- "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- "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- 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- 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- "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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- "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- 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- "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- "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- 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- 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- "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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- (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- 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- 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- 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- 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- 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- "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- 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- 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- 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- "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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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 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 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 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 (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 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 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 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. EX-4.10 2 FORM OF OLD NOTE 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: 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): $545.21 without giving effect to the additional payments of interest in the event the issuer fails to commence the exchange offer and fails to cause the shelf registration statement to be declared effective, each as referred to on the reverse hereof)
INTELCOM GROUP (U.S.A.), INC., a Colorado corporation (the "Company", which term includes any successor under the Indenture hereinafter referred to), for value received, promises to pay to ___________, or its registered assigns, the principal sum of _________________________ ($___________) 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. 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 [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. 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. 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 described in the Indenture at a purchase price equal to 101% of the Accreted Value thereof plus accrued and unpaid interest, if any, to the date of purchase (the "Change of Control Payment"). A notice of such Change of Control will be mailed within 30 days after any Change of Control occurs to each Holder at his last address as it appears in the Security Register. Notes in original denominations larger than $1,000 may be sold to the Company in part. On and after the date of the Change of Control Payment, interest ceases to accrue on Notes or portions of Notes surrendered for purchase by the Company, unless the Company defaults in the payment of the Change of Control Payment. 8. Denominations; Transfer; Exchange. --------------------------------- The Notes are in registered form without coupons in denominations of $1,000 of principal amount at maturity and multiples of $1,000 in excess thereof. A Holder may register the transfer or exchange of Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer or exchange of any Notes selected for redemption. Also, it need not register the transfer or exchange of any Notes for a period of 15 days before a selection of Notes to be redeemed is made. 9. Persons Deemed Owners. --------------------- A Holder shall be treated as the owner of a Note for all purposes. 10. Unclaimed Money. --------------- If money for the payment of principal, premium, if any, or interest remains unclaimed for two years, the Trustee and the Paying Agent will pay the money back to the Company at its request. After that, Holders entitled to the money must look to the Company for payment, unless an abandoned property law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. 11. Discharge Prior to Redemption or Maturity. ----------------------------------------- If the Company or the Guarantor deposits with the Trustee money or U.S. Government Obligations sufficient to pay the then outstanding principal of, premium, if any, and accrued interest on the Notes (a) to redemption or maturity, the Company will be discharged from the Indenture and the Notes, except in certain circumstances for certain sections thereof, and (b) to the Stated Maturity, the Company and the Guarantor will be discharged from certain covenants set forth in the Indenture. 12. Amendment; Supplement; Waiver. ----------------------------- Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount at maturity of the Notes then outstanding, and any existing default or compliance with any provision may be waived with the consent of the Holders of at least a majority in principal amount at maturity of the Notes then outstanding. Without notice to or the consent of any Holder, the parties thereto may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency and make any change that does not materially and adversely affect the rights of any Holder. 13. Restrictive Covenants. --------------------- The Indenture imposes certain limitations on the ability of the Company and the Guarantor and its Restricted Subsidiaries, among other things, to Incur Indebtedness, make Restricted Payments, use the proceeds from Asset Sales, engage in transactions with Affiliates or, with respect to each of the Company and the Guarantor, merge, consolidate or transfer substantially all of its assets. Within 45 days after the end of each fiscal quarter (90 days after the end of the last fiscal quarter of each year), the Company must report to the Trustee on compliance with such limitations. 14. Successor Persons. ----------------- When a successor person or other entity assumes all the obligations of its predecessor under the Notes and the Indenture, the predecessor person will be released from those obligations. 15. Defaults and Remedies. --------------------- The following events constitute "Events of Default" under the Indenture: (a) default in the payment of principal of (or premium, if any, on) any Note when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise; (b) default in the payment of interest on any Note when the same becomes due and payable, and such default continues for a period of 30 days; (c) the Company or the Guarantor defaults in the performance of or breaches any other covenant or agreement of the Company or the Guarantor in the Indenture or under the Notes and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of 25% or more in aggregate principal amount at maturity of the Notes; (d) there occurs with respect to any issue or issues of Indebtedness of the Company, the Guarantor or any Significant Subsidiary having an outstanding principal amount at maturity of $10 million or more in the aggregate for all such issues of all such Persons, whether such Indebtedness now exists or shall hereafter be created, (I) an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and such Indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days of such acceleration and/or (II) the failure to make a principal payment at the final (but not any interim) fixed maturity and such defaulted payment shall not have been made, waived or extended within 30 days of such payment default; (e) any final judgment or order (not covered by insurance) for the payment of money in excess of $10 million in the aggregate for all such final judgments or orders against all such Persons (treating any deductibles, self-insurance or retention as not so covered) shall be rendered against the Company, the Guarantor or any Significant Subsidiary and shall not be paid or discharged, and there shall be any period of 30 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against all such Persons to exceed $10 million during which a stay of enforcement of such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (f) a court having jurisdiction in the premises enters a decree or order for (A) relief in respect of the Company, the Guarantor or any Significant Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company, the Guarantor or any Significant Subsidiary or for all or substantially all of the property and assets of the Company, the Guarantor or any Significant Subsidiary or (C) the winding up or liquidation of the affairs of the Company, the Guarantor or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 30 consecutive days; or (g) the Company, the Guarantor or any Significant Subsidiary (A) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (B) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company, the Guarantor or any Significant Subsidiary or for all or substantially all of the property and assets of the Company, the Guarantor or any Significant Subsidiary or (C) effects any general assignment for the benefit of creditors. If an Event of Default (other than an Event of Default specified in clause (f) or (g) above that occurs with respect to the Company or the Guarantor) occurs and is continuing under the Indenture, the Trustee or the Holders of at least 25 in aggregate principal amount at maturity of the Notes, then outstanding, by written notice to the Company (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the request of such Holders shall, declare the Accreted Value of, premium, if any, and accrued interest, if any, on the Notes to be immediately due and payable. If an Event of Default, as defined in the Indenture, occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount at maturity of the Notes may declare all the Notes to be due and payable. If a bankruptcy or insolvency default with respect to the Company or any Restricted Subsidiary occurs and is continuing, the Notes automatically become due and payable. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of at least a majority in principal amount at maturity of the Notes then outstanding may direct the Trustee in its exercise of any trust or power. 16. 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. 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 -- [ ] (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 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: _____________________________________ EX-4.11 3 FORM OF NEW NOTE 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: 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): $545.21
INTELCOM GROUP (U.S.A.), INC., a Colorado corporation (the "Company", which term includes any successor under the Indenture hereinafter referred to), for value received, promises to pay to ____________, or its registered assigns, the principal sum of ______________ Dollars ($____________) 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. 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 [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 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: 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. --------------------------------- The Notes are in registered form without coupons in denominations of $1,000 of principal amount at maturity and multiples of $1,000 in excess thereof. A Holder may register the transfer or exchange of Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer or exchange of any Notes selected for redemption. Also, it need not register the transfer or exchange of any Notes for a period of 15 days before a selection of Notes to be redeemed is made. 9. Persons Deemed Owners. --------------------- A Holder shall be treated as the owner of a Note for all purposes. 10. Unclaimed Money. --------------- If money for the payment of principal, premium, if any, or interest remains unclaimed for two years, the Trustee and the Paying Agent will pay the money back to the Company at its request. After that, Holders entitled to the money must look to the Company for payment, unless an abandoned property law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. 11. Discharge Prior to Redemption or Maturity. ----------------------------------------- If the Company or the Guarantor deposits with the Trustee money or U.S. Government Obligations sufficient to pay the then outstanding principal of, premium, if any, and accrued interest on the Notes (a) to redemption or maturity, the Company will be discharged from the Indenture and the Notes, except in certain circumstances for certain sections thereof, and (b) to the Stated Maturity, the Company and the Guarantor will be discharged from certain covenants set forth in the Indenture. 12. Amendment; Supplement; Waiver. ----------------------------- Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount at maturity of the Notes then outstanding, and any existing default or compliance with any provision may be waived with the consent of the Holders of at least a majority in principal amount at maturity of the Notes then outstanding. Without notice to or the consent of any Holder, the parties thereto may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency and make any change that does not materially and adversely affect the rights of any Holder. 13. Restrictive Covenants. --------------------- The Indenture imposes certain limitations on the ability of the Company and the Guarantor and its Restricted Subsidiaries, among other things, to Incur Indebtedness, make Restricted Payments, use the proceeds from Asset Sales, engage in transactions with Affiliates or, with respect to each of the Company and the Guarantor, merge, consolidate or transfer substantially all of its assets. Within 45 days after the end of each fiscal quarter (90 days after the end of the last fiscal quarter of each year), the Company must report to the Trustee on compliance with such limitations. 14. Successor Persons. ----------------- When a successor person or other entity assumes all the obligations of its predecessor under the Notes and the Indenture, the predecessor person will be released from those obligations. 15. Defaults and Remedies. --------------------- The following events constitute "Events of Default" under the Indenture: (a) default in the payment of principal of (or premium, if any, on) any Note when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise; (b) default in the payment of interest on any Note when the same becomes due and payable, and such default continues for a period of 30 days; (c) the Company or the Guarantor defaults in the performance of or breaches any other covenant or agreement of the Company or the Guarantor in the Indenture or under the Notes and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of 25% or more in aggregate principal amount at maturity of the Notes; (d) there occurs with respect to any issue or issues of Indebtedness of the Company, the Guarantor or any Significant Subsidiary having an outstanding principal amount at maturity of $10 million or more in the aggregate for all such issues of all such Persons, whether such Indebtedness now exists or shall hereafter be created, (I) an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and such Indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days of such acceleration and/or (II) the failure to make a principal payment at the final (but not any interim) fixed maturity and such defaulted payment shall not have been made, waived or extended within 30 days of such payment default; (e) any final judgment or order (not covered by insurance) for the payment of money in excess of $10 million in the aggregate for all such final judgments or orders against all such Persons (treating any deductibles, self-insurance or retention as not so covered) shall be rendered against the Company, the Guarantor or any Significant Subsidiary and shall not be paid or discharged, and there shall be any period of 30 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against all such Persons to exceed $10 million during which a stay of enforcement of such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (f) a court having jurisdiction in the premises enters a decree or order for (A) relief in respect of the Company, the Guarantor or any Significant Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company, the Guarantor or any Significant Subsidiary or for all or substantially all of the property and assets of the Company, the Guarantor or any Significant Subsidiary or (C) the winding up or liquidation of the affairs of the Company, the Guarantor or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 30 consecutive days; or (g) the Company, the Guarantor or any Significant Subsidiary (A) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (B) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company, the Guarantor or any Significant Subsidiary or for all or substantially all of the property and assets of the Company, the Guarantor or any Significant Subsidiary or (C) effects any general assignment for the benefit of creditors. If an Event of Default (other than an Event of Default specified in clause (f) or (g) above that occurs with respect to the Company or the Guarantor) occurs and is continuing under the Indenture, the Trustee or the Holders of at least 25 in aggregate principal amount at maturity of the Notes, then outstanding, by written notice to the Company (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the request of such Holders shall, declare the Accreted Value of, premium, if any, and accrued interest, if any, on the Notes to be immediately due and payable. If an Event of Default, as defined in the Indenture, occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount at maturity of the Notes may declare all the Notes to be due and payable. If a bankruptcy or insolvency default with respect to the Company or any Restricted Subsidiary occurs and is continuing, the Notes automatically become due and payable. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of at least a majority in principal amount at maturity of the Notes then outstanding may direct the Trustee in its exercise of any trust or power. 16. 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. 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. 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. 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: _____________________________________ EX-4.12 4 LETTER OF TRANSMITTAL / NOTES 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 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
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 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
- ----------------------------------------------------------------------------------------------------- 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)/*/ - ----------------------------------------------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- 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. - ------------------------------------------------------------------------------------------------------------
[_] 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- [_] 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) ___________ - ------------------------------------------------------ ------------------------------------------------------ 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 - ------------------------------------------------------ ------------------------------------------------------
-3- 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- 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- 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- 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- 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- 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- 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 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
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 ____________________ ________________________________________________________________________________ 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- EX-4.16 5 FORM OF OLD PREFERRED STOCK CERTIFICATE 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 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. EX-4.17 6 FORM OF NEW PREFERRED STOCK CERTIFICATE 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 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 ____________________________________ _______________________________ EX-4.18 7 FORM OF LETTER TRANSMITTAL / PREFERRED STOCK 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 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
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- 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
- ---------------------------------------------------------------------------------------------------- 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/*/ - ---------------------------------------------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- 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. - ----------------------------------------------------------------------------------------------------
[_] 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- [_] 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) ____________________
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 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 - ----------------------------------------------------- -----------------------------------------------------
-3- 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- 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- 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- 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- 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- 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- 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 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
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 _______________________ ________________________________________________________________________________ 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- EX-5.1 8 OPINION OF REID & PRIEST 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, 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 EX-5.2 9 OPINION OF TUPPER, JOHNSON & YEADON 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 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 EX-8.1 10 OPINION OF REID & PRIEST 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 -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 -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 EX-23.1 11 CONSENT OF KPMG PEAT MARWICK 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 EX-25.1 12 FORM T-1 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) __________ 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. 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: 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 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. 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. 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 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 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. 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 - 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 - 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: _____________________________ 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
Legal Name Prior to April 27, 1982 Charter # Legal Name Effective April 27, 1992 - ---------------------------------- --------- ----------------------------------- 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
[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 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. 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 - 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 - 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 - 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 - 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 - 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 - 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 - 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
FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 ------------------ (Year-to-date) 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
- ------------------------ (1) Includes interest income on time certificates of deposit not held for trading.
FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 ------------------ (Year-to-date) 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
- ------------------------ * Described on Schedule RI-E--Explanations. -2- SCHEDULE RI -- INCOME STATEMENT (CONTINUED)
FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 ------------------ (Year-to-date) 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)
- ------------------------ * Described on Schedule RI-E--Explanations. -3- SCHEDULE RI -- INCOME STATEMENT (CONTINUED)
FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 ------------------ (Year-to-date) c. Other (noninterest) allocations.................................................. 0 10. Credit losses on off-balance sheet derivatives (see instructions)................. 0
-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-A--CHANGES IN EQUITY CAPITAL
FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 (Year-to-date) ------------------ 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
- ------------------------ (*) Describe on Schedule RI-E--Explanations. -5- 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.
(COLUMN A) (COLUMN B) CHARGE-OFFS RECOVERIES ----------- ---------- (Calendar year-to-date) ------------------------ 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 ======= =======
-6- 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
(COLUMN A) (COLUMN B) CHARGE-OFFS RECOVERIES ----------- ---------- (Calendar year-to-date) ------------------------ 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
PART II. CHANGES IN ALLOWANCE FOR LOAN AND LEASE LOSSES
FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 ------------------ (Year-to-date) 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 =========
SCHEDULE RI-C--APPLICABLE INCOME TAXES BY TAXING AUTHORITY 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
- ------------------------ (*) Describe on Schedule RI-E--Explanations. -7- 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.
FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 ------------------ (Year-to-date) 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
-8- 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
FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 ------------------ (Year-to-date) 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
-9- 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.)
FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 ------------------ (Year-to-date) 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.
-10-
For the period January 1, 1996 to March 31, 1996 -------------------- (Year-to-date) 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):
-11- 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.
FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 (Year-to-date) ------------------ 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 ==========
- ------------------------ (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held for trading. -12-
FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 -------------------- (Year-to-date) 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 ==========
- ------------------------ /1/ Includes total demand deposits and noninterest-bearing time and savings deposits. -13- 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- 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.
(COLUMN A) (COLUMN B) CONSOLIDATED BANK DOMESTIC OFFICES ------------------------------------- (Calendar year-to-date) ------------------------------------- 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
-15- 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.
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) --------------------------------------------------------------- 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):
- ------------------------ (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-
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) --------------------------------------------------------------- (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
FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 ------------------- (Year-to-date) 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
- ------------------------ (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-
SCHEDULE RC-B--SECURITIES (CONTIUED) FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 -------------------- (Year-to-date) (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
- ------------------------ /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- 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.
(COLUMN A) (COLUMN B) CONSOLIDATED BANK DOMESTIC OFFICES ------------------------------------ (Calendar year-to-date) ------------------------------------ 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 --
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(COLUMN A) (COLUMN B) CONSOLIDATED BANK DOMESTIC OFFICES ------------------------------------ (Calendar year-to-ate) ------------------------------------ 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 ===========
- ---------------------- (1) Memorandum item 3 is not applicable to savings banks that must complete supplemental Schedule RC-J. -20-
(COLUMN A) (COLUMN B) CONSOLIDATED BANK DOMESTIC OFFICES ------------------------------------ (Calendar year-to-date) ------------------------------------ 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 ==========
- ----------------------- (2) Exclude loans secured by real estate that are included in Schedule RC-C, part I, item 1, column A. -21- 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).
FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 ------------------------------------ (Year-to-date) 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 ===
-22- 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
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: 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 ============ ============ =========== Memorandum FOR THE PERIOD - ---------- JANUARY 1, 1996 TO MARCH 31, 1996 ------------------------ (Calendar year-to-date) 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
-23- SCHEDULE OF RC-E -- DEPOSIT LIABILITIES (CONTINUED)
FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 --------------------- Memorandum (Calendar Year-to-date) - ------------------------------------------------------------------------------------- (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
- ------------------------ (1) Memorandum items 5 and 6 are not applicable to savings banks that must complete supplemental Schedule RC-J. -24- SCHEDULE RC-E -- DEPOSIT LIABILITIES (CONTINUED)
FOR THE PERIOD JANUARY 1, 1996 TO Memorandum MARCH 31, 1996 - ------------------------------------------------- ------------------------ (Calendar year-to-date) 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
-25-
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) 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 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
SCHEDULE RC-G--OTHER LIABILITIES
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
- ------------------------ /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-
SCHEDULE RC-E -- DEPOSIT LIABILITIES (CONTINUED) 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
-27- 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
FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 ----------------------- (Year-to-date) 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
-28- 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.
FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 ------------------ (Year-to-date) 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)........................................................................
SCHEDULE RC-K--QUARTERLY AVERAGES/2/
FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 ------------------ (Year-to-date) 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
- ------------------------ /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- SCHEDULE RC-K -- QUARTERLY AVERAGES
FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 ------------------ (Year-to-date) 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
- ------------------------ /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- 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.
FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 ------------------ (Year-to-date) 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
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SCHEDULE RC-L--OFF-BALANCE SHEET ITEMS (CONTINUED) FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 ----------------------- (YEAR-TO-DATE) 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.
(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 - ------------------------------------------- 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
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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 ------------------------------------------------------------- - ----------------------------------------- 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
FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 ------------------- (Year-to-date) Memoranda - -------------------------------------------------------------------------------------- 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
-33- 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
FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 ----------------- (Year-to-date) 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
- ------------------------ /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-
SCHEDULE RC-M (CONTINUED) FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 ----------------------- (Year-to-Date) 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
-35- 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.
(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) ----------------------------------------------------------------- 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
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(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) --------------------------------------------------------------------- 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 (COLUMN A) (COLUMN B) PAST DUE 30 PAST DUE 90 THROUGH 89 DAYS DAYS OR MORE ------------------------------------------------- (Calendar year-to-date) ------------------------------------------------- 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
-37- 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
FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 ------------------- (Year-to-date) 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 --------
- ------------------------ (1) For FDIC insurance assessment purposes, "time and savings deposits" consists of nontransaction accounts and all transaction accounts other than demand deposits. -38- SCHEDULE RC-O (continued)
FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 ------------------- (Year-to-date) 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
-39- 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.
(COLUMN A) SUBORDINATED DEBT(1) AND (COLUMN B) INTERMEDIATE TERM OTHER LIMITED-LIFE PREFERRED STOCK CAPITAL INSTRUMENTS ---------------------------------------- (Calendar year-to-date) ---------------------------------------- 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
- ------------------------ (1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7. -40-
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) -------------------------------------- 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 -- ========== ==========
- ------------------------------ (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- SCHEDULE RC-R -- REGULATORY CAPITAL (CONTINUED)
FOR THE PERIOD JANUARY 1, 1996 TO MARCH 31, 1996 ---------------------- (Year-to-date) Memoranda - ------------------------------------------ 1. Current credit exposure across all off-balance sheet derivative contracts covered by the risk-based capital standards.............................................. 0
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) ------------------------------------------------- 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
- ------------------------ (3) Exclude foreign exchange contracts with an original maturity of 14 days or less and all futures contracts. -42- -----END PRIVACY-ENHANCED MESSAGE-----